Opinion
No. 4237.
December 22, 1932. Rehearing Denied January 5, 1933.
Appeal from District Court, Rusk County; R. T. Brown, Judge.
Action by Mrs. Lelia M. Ashby, individually and as representative of her insane husband, B. H. Ashby, against the Standard Pipe Supply Company and others. Judgment for defendants, and plaintiff appeals.
Affirmed.
The appellant, in her individual capacity and as representative of her insane spouse, brought the suit against the Standard Pipe Supply Company and J. R. Shoupe and his wife, in trespass to try title to certain oil royalty interests or mineral estate in several described tracts of land, and to remove cloud cast upon the title by certain conveyances specified. The appellant specially alleged, in substance, that the royalty interest as specifically described was purchased and paid for by her husband with money of the community of herself and husband, and the conveyances thereto were at the instance of her husband taken and placed in the name of the Okla-Tex Royalty Corporation in the purpose and intention of only holding the estate so vested as his trustee; that the Okla-Tex Royalty Corporation without any lawful authority had transferred and conveyed such oil royalty interests and rights therein; that the defendants acquired the royalty interests with notice of plaintiff's rights therein; that her husband had been adjudicated a person of unsound mind; that the Standard Pipe Supply Company and the Okla-Tex Royalty Corporation conspired together to effectuate the transfer of the royalty interests and to deprive B. H. Ashby and the community estate of this interest.
The defendant, Standard Pipe Supply Company, answered by general denial and plea of not guilty. The defendants, J. R. Shoupe and wife, answered by general denial and plea of not guilty, of estoppel, and of innocent purchaser.
After hearing the evidence, the court peremptorily instructed the jury to return a verdict in favor of the defendants, and judgment was accordingly entered in conformity with the verdict as returned by the jury. The appeal is by the plaintiffs to revise the ruling of the court.
The controlling facts proven are substantially as here set out. In the year 1929, M. M. Miller and B. H. Ashby, residing in Dallas, Tex., and having offices together in the Marvin building, were both engaged, though not as partners, in procuring leases on land for oil production and in buying oil royalties. In April, 1929, M. M. Miller and B. H. Ashby promoted a corporation for the purpose of buying and selling oil royalties. A charter was applied for, and the corporation was created under the laws of the state of Delaware. The charter granted was of date April 16, 1929. The name of the corporation was "Okla-Tex Royalty Corporation." The directors for the first year were named at the first meeting held in the Marvin building in Dallas, Tex., on April 22, 1929, and by-laws were adopted. At that meeting officers were elected to serve "for one year and until their successors are elected and qualified," namely: "B. H. Ashby, President, M. M. Miller, Vice-President and Secretary, and T. H. Hirschfield, Treasurer." The minutes further show: "Messrs. B. H. Ashby and M. M. Miller were appointed members of the executive committee with full authority to act for the Board of Directors in all matters pertaining to the purchase and sale of royalty interests and other matters pertaining to the operation of the Corporation's business." The by-laws provide: "The Board of Directors shall have the power to * * * determine by whom and in what manner the corporation's contracts or other documents shall be signed, and to delegate any of its powers to any committee or officer or agent, and to grant the power to re-delegate." From the time of the creation of the corporation and up to the trial, no capital stock of the corporation had been sold and no capital had been paid into the corporation. The corporation "never had a permit to do business in Texas," but an office was opened up in the Mervin building in Dallas, Tex., and on the door was painted, "Okla-Tex Royalty Corporation."
The evidence shows that B. H. Ashby and M. M. Miller each had bought, and himself had paid for, a number of oil royalties in the year 1929, and in the early part of 1930, and had taken the conveyances therefor in his own name. However, on March 17, 1930, B. H. Ashby was shown to have bought from C. M. Joiner, trustee, and to have given his own personal check to C. M. Joiner in full payment, some nine different oil royalties, and on March 20, 1930, had the several conveyances thereto executed by C. M. Joiner, trustee, in the name of the Okla-Tex Royalty Corporation. The conveyances are in the form, purely, of a simple bargain and sale with general warranty. There are no words employed expressive of an intention to create a trust, or an agreement of special direction to hold or use the mineral estate or oil royalty for the benefit of B. H. Ashby. The intention and purpose of the conveyance as to a trust estate rests entirely in parol evidence independent of the conveyances. The evidence goes to conclusively show that these oil royalties were bought by Mr. B. H. Ashby for his own individual property and was paid for by his own money. These conveyances as made in the name of the Okla-Tex Royalty Corporation were duly registered in the county clerk's office on the date of execution. The evidence reflects that Mr. B. H. Ashby had the conveyances of the oil royalties made in the name of the royalty corporation instead of his own in order "that they might be handled by the Corporation" in case B. H. Ashby by reason of sickness should become incapacitated to attend to business. Mr. Ashby was then in bad health, and feared he might become ill and unable to properly attend to the details of his business. Shortly after the conveyances were executed by C. M. Joiner, trustee, he complained to B. H. Ashby of a certain excess or a mistake as to the portion of oil royalty conveyed. C. M. Joiner testified that: "After the assignments were made out (to the Okla-Tex Royalty Corporation) in the next day or two I noticed that I had given him too much, and called his attention (Ashby's) to it. He called Mr. Miller in to confer with him. Looking over the papers in closing the deal I found I had in the several tracts of the conveyances assigned him too much of my portion of the royalty interests. In three of them there was assigned as much as all of my royalty in the tracts instead of half of it. I called his (Ashby's) attention to the errors and he took it up with Mr. Miller. Ashby said to M. M. Miller, `I know it is an error and he has to have it back.'"
A meeting was then called of the directors of the Okla-Tex Royalty Corporation, and the minutes show the following:
"Minutes of the Special Meeting of the Directors of Okla-Tex Royalty Corporation.
"Pursuant to a call issued by the President, Directors of Okla-Tex Royalty Corporation, met in special session in the company's offices 802 Marvin Building, Dallas, Texas, at 3 o'clock, P. M., on Friday, April 11th, 1930, with the following present:
"B. H. Ashby, M. M. Miller, and C. D. Miller, constituting the full membership of the Board of Directors.
"B. H. Ashby, President, presided at the meeting and explained the purpose to be to consider a request of C. M. Joiner, Trustee, for the reconveyance to him of certain royalty interests in Rusk County, Texas, which were deeded by him to the Okla-Tex Royalty Corporation in error on March 19th, 1930. Mr. Ashby stated that the interests were conveyed in error and as a matter of right, authority should be granted for the reconveyance to C. M. Joiner, Trustee.
"M. M. Miller moved that the President be empowered and instructed to execute and deliver to C. M. Joiner, Trustee, assignments without warranty of an undivided one-sixty-fourth royalty interest in and to the C. D. Ashby 100 acres; and undivided one-sixty-fourth interest in and to the Wilson 100 acres and an undivided one-sixty-fourth interest in and to the Joe Lee 100 acres, all in Rusk County, Texas.
"The motion was seconded by C. D. Miller and unanimously adopted.
"The meeting of the Directors, upon motion and second, was thereupon adjourned.
"M. M. Miller, Secretary.
"Attest: B. H. Ashby, President."
It appears that reconveyance was made to C. M. Joiner, trustee, of the excess conveyance of his royalty interest. Mr. Joiner testified:
"Q. State whether or not Mr. Miller delivered to you the assignment in conformity with the order (of the meeting of April 11, 1930)? A. No, he did not until after Mr. Jaffe bought and paid back the money that was paid on the royalty (to Mr. Joiner). I was out in East Texas at the time, and when I got back home the assignment was on my desk.
"Q. Was that after the sale by the Okla-Tex Royalty Corporation to the Standard Pipe and Supply Company? A. Yes, sir."
Afterwards, on August 1, 1930, the "Okla-Tex Royalty Corporation acting herein by its Vice-President, M. M. Miller, hereunto duly authorized," duly executed instruments conveying the several mentioned oil royalties to the "Standard Pipe and Supply Company." The sum paid by the Standard Pipe Supply Company for the oil royalty purchased was $1,145, being the exact amount paid C. M. Joiner, trustee, by B. H. Ashby on March 17, 1930. The check was drawn on the Republic National Bank of Dallas for $1,145, payable to the order of Mrs. B. H. Ashby, and she indorsed thereon "Mrs. B. H. Ashby," and the money was paid by the bank on August 2, 1930, to her account. At the same time of the conveyance the following instrument was executed:
"Dallas, Texas, August 1, 1930.
"Received of Standard Pipe and Supply Company, Eleven Hundred and Forty-Five ($1,145.00) Dollars, payment in full for approximately ninety-four (94) full royalty acres in Rusk County, covering approximately eight hundred and ninety-nine (899) acres of land in the vicinity of what is known as C. M. Joiner Bradford No. 1 Well, covered by deeds this day delivered.
"Okla-Tex Royalty Corporation"By M. M. Miller, Secretary."
The evidence of M. M. Miller respecting the sale, briefly stated, was: "I told Mr. Jaffe (Secretary of the Standard Pipe Supply Company) and I told every one that it (the royalties) was Mr. B. H. Ashby's and that I just wanted to get Mr. Ashby's money back; I figured exactly that $1145.00 was the amount that he had in the particular royalties. * * * A check was made out for that amount and it was made to Mrs. Ashby. I had been trying to sell it to get Mr. Ashby out of the hole, and just because he needed the money. I knew at the time that Mrs. Ashby had been appointed guardian for Mr. Ashby. I talked to her about trying to sell the royalty. She was needing money and we recognized that he had spent his bank account. I never took a step but what I consulted Mrs. Ashby about it. When Mr. Jaffe came in and stated that he would purchase (for the Company) these royalties at the price named, r told him I would let him know the next morning. I at once got in touch with Mrs. Ashby and told her I could effect the sale, or had an offer of purchase for the royalties, and get Mr. Ashby's money back out of the royalties. She said she didn't know what to do about it. I told her then to think it over that evening and night. The next morning Mrs. Ashby rung me up. * * * She stated that she didn't know what she ought to do and would just leave it up to my judgment. I told her if she did that I would sell it and make the assignment to the Company."
Mrs. Ashby testified, as far as pertinent to state, that: "I was in the yard with the yardman working when Mr. Miller drove up. He came on in the house and said, I have some papers for you to sign.' He gave me a check. I signed them all at the same time. He said, `Just sign the papers and I will take them back with me.' I signed the papers and the check and Mr. Miller left with both the papers and the check. He deposited the check money into the estate (of which she was guardian). * * * He called me day after day, all summer long, with reference to the sale of this royalty in East Texas. He said he thought I could sell the royalty and the leases I held. I said I didn't want to sell my royalty but I would sell the leases. Every time he told me that I ought to sell the royalty I would tell him I would rather not sell the royalty. He called me up (the day of the sale) and told me that he had a party who wanted to buy both my royalty and the leases. I told him that I would sell the leases but I didn't want to sell my royalty. He said `We have only twenty-four hours to decide about it.' I said, `I can't make up my mind, but I would rather not sell the royalty.' * * * I testified before that I knew the check was for the Rusk County royalty. When Mr. Miller gave me the check that day I didn't think much about it. I was so worried I just signed the check along with the other papers he brought out."
It was proven that the price paid for the royalty was the value thereof at the time of the sale to the Standard Pipe Supply Company. On August 1, 1930, there was no production of oil in Rusk county, and C. M. Joiner had been drilling there for a long time in an effort to find it. Thereafter, though, about October 5 or 6, 1930, the oil well being drilled by C. M. Joiner came in a good producer, and as a consequence leases and royalties in that vicinity immediately advanced in great value. Shortly after the well came in as a producer, the present suit was filed by the appellant.
It was proven that on June 6, 1930, B. H. Ashby was adjudged a person of unsound mind by the probate court of Dallas county, and his wife, the appellant here, was duly appointed the guardian of the person and estate, and that she duly qualified as such. An inventory and appraisement of the estate was duly returned. The royalties in suit were not listed in the inventory of the estate.
Goggans Ritchie, of Dallas, and W. M. Futch, of Henderson, for appellant.
Brachfield Wolfe, of Henderson, W. E. Fitzgerald, of Wichita Falls, and Sullivan Wilson, of Dallas, for appellees.
The pertinent point for review is the ruling complained of in the giving of the peremptory instruction to the jury to return a verdict against the plaintiff. It is believed the giving of the peremptory instruction to the jury is not open to the objection of being erroneous and legally unwarranted under the evidence. The subject-matter before the court was a controversy relating purely to a trust, and the evidence bearing thereon was without conflict in the controlling points of the case. The trial court has made the correct disposition of the case in its several phases as to all the parties.
B. H. Ashby on March 17, 1930, bought from C. M. Joiner, trustee, the several oil royalties in suit as his individual property and for his own benefit, and paid the full purchase price in cash out of his own money. The check given by B. H. Ashby was dated March 17, 1930, and made payable to the order of C. M. Joiner in the sum of $1,145, and drawn on the Mercantile Bank Trust Company in Dallas. Although a memorandum appeared on the margin of the check reading "Royalty to Okla-Tex Royalty Corporation," yet the memorandum was placed there, as is clearly inferable, for the convenience of Mr. Ashby to preserve the information for his benefit. The memorandum has no other effect. While it appeared that B. H. Ashby and M. M. Miller officed together and were each engaged in the same common business of buying oil royalties, still they were "not partners," as M. M. Miller admits, and this particular purchase was for the sole and exclusive property of B. H. Ashby. The conveyances of the oil royalties so purchased were thereafter on March 20, 1930, at the instance of B. H. Ashby made by C. M. Joiner, trustee, in the name of the Okla-Tex Royalty Corporation. B. H. Ashby himself had and directed C. M. Joiner, trustee, to make the conveyances of the oil royalties in the name of the royalty corporation instead of in his own purely as a matter of convenience. As shown by the evidence of M. M. Miller, the conveyances of the oil royalties were directed to be made in the name of the royalty corporation in order "that they might be handled by the Corporation" in the event B. H. Ashby should be taken sick or be incapacitated to attend to business. The evidence conclusively negatives even any reasonable inference that the royalty corporation paid any part of the purchase money or that the money paid by Mr. Ashby was intended as an advancement or loan payable to it in stock. The royalty corporation had no funds and had not issued stock, and had not up to this time obtained any permit to do business in Texas. The royalty corporation was merely in existence as such, and was not at the time undertaking to commence the business for which it was created. It may be regarded, however, as a corporation of sufficient existence to merely hold the legal title of the oil royalties, although not at the time buying the royalties for its own business purposes, for there was proof of corporate meetings and the election of officers. The acceptance of a charter by the corporation arises from merely acting under it. 1 Cook on Corp. (6th Ed.) § 2a, p. 9. M. M. Miller testified, and his evidence is without conflict, that he told Mr. Jaffe and "every one that it (the royalties) was Mr. B. H. Ashby's." There is no pretense in the evidence that either the royalty corporation or M. M. Miller was claiming any interest or right in such oil royalties. In these facts stated the appellant's contention must be sustained that a trust was established to exist in the oil royalties. A trust results, as a matter of pure law, in favor of B. H. Ashby as to the oil royalties, since he supplied the purchase money and intended the purchase for his own benefit and not for the benefit of the royalty corporation. Implied trusts are deducible from the nature of the transaction as matters of intent. 39 Cyc. pp. 25, 26. Whenever the purchase money for an estate in realty is paid by one person and the conveyance is to another, the legal presumption arises of an implied trust, ordinarily termed a resulting trust, in favor of him who pays the purchase money. 3 Pomeroy Eq. Jur. (4th Ed.) § 1, p. 1037; 39 Cyc. pp. 26-27; O'Connor v. Vineyard, 91 Tex. 488, 44 S.W. 485, quoting from Perry on Trusts. The principle on which the rule is based is that the beneficial estate follows the consideration and attaches to the person from whom it comes.
In the view of a trust being established to exist and arising in the conveyances to the royalty corporation on March 20, 1930, Was the sale and conveyance of the oil royalties in August, 1930, by the trustee, the Okla-Tex Royalty Corporation, valid? In August, 1930, the royalty corporation conveyed a portion of the oil royalties to C. M. Joiner, trustee, and the entire remainder to the Standard Pipe Supply Company. The sale and conveyance in both instances was under circumstances showing the existence of good faith and honesty in all matters, and nothing whatsoever adversary in conduct by the trustee or the agent acting for the trustee corporation. There was no production of oil or indications of its find at the time of the sale, and the price obtained for the royalties was the value thereof. It was duly and fully accounted for. The conveyance to C. M. Joiner, trustee, was in the nature of a reconveyance to him to cancel the original conveyance of an excess portion of the royalty. It was intended to restore to C. M. Joiner, trustee, the excess which was never in fact sold to B. H. Ashby and which B. H. Ashby was under obligation to reconvey or have reconveyed to Mr. Joiner. B. H. Ashby, as reflected by the minutes of the royalty corporation, fully recognized the error in quantity conveyed to him and assented to its reconveyance to C. M. Joiner, trustee. The conveyance, though, to Standard Pipe Supply Company, of date August 1, 1930, was that of bargain and sale for the sum of $1,145 paid in cash, being the exact amount paid to C. M. Joiner, trustee, by B. H. Ashby on March 17, 1930. Each of the two conveyances, as made by the trustee, was in the name of the royalty corporation by M. M. Miller, but the authority of the royalty corporation to act through M. M. Miller may be held to have been sufficiently proven. M. M. Miller was the vice president of the corporation and was formally authorized by the board of directors by resolution of record to act generally for the corporation in the execution of documents. The manifest intention of the directors was to confer the authority generally of agents upon M. M. Miller and B. H. Ashby severally, or jointly and severally. And in the special situation proven, the execution of the conveyances by the royalty corporation by M. M. Miller was such execution as will be legally sufficient to conclude the royalty corporation. Neither one of such sales mentioned as made by the royalty corporation may be said to be in anywise contrary to the directions contained in the instrument of trust, for there were no duties imposed nor restrictions or directions whatever in the instrument of trust, which was the conveyances of March 17, 1930.
Ordinarily, in the absence of express authority conferred by the instrument creating the trust, and in the absence of the voluntary consent of the beneficiary, a trustee has no power to sell and convey the corpus of the trust property. Brown v. Harris, 7 Tex. Civ. App. 664, 27 S.W. 45; 39 Cyc. p. 346. But this rule is subject to qualifications, as other and peculiar circumstances may authorize or make necessary. And in this case it is apparent from the testimony that B. H. Ashby intended that these oil royalties should be sold by the royalty corporation. They were placed in the name of the corporation in the sole purpose "that they might be handled by the Corporation"; that is, disposed of by sale when necessary or in the discretion of the corporation in case B. H. Ashby got sick or physically incapacitated. In implied trusts, as here, there is no element of permanency. Thus in the circumstances shown a power of sale of the trust property can and may be implied. Montgomery v. Truehart (Tex.Civ.App.) 146 S.W. 284. Therefore there may not be predicated invalidity of the sale upon the absence of an order of sale or the trustee not first obtaining an order of sale or consent for sale from the probate court of Dallas county. Trust estates may be subject to courts of chancery, but probate courts have no jurisdiction. Dingman v. Beall, 213 Ill. 238, 72 N.E. 729; 39 Cyc. p. 593. The discretionary power of sale resting in the trustee, the authority of the probate court was not in anywise necessary to effectuate the sale by the trustee. If the sale was valid as to the trustee, it must necessarily follow that the sale passed title to the purchaser and he was entitled to a conveyance from the trustee.
There is sufficiency of consent and approval of Mrs. Ashby to the sale and conveyance by the trustee to conclude the beneficiaries. Before the sale Mrs. Ashby was notified of the intention of the trustee to make the sale, and after the sale and conveyance she indorsed the check, and the money was paid to her thereon and was deposited in the estate. Her reception of the proceeds of the sale and her express recognition of the trusteeship of the Okla-Tex Royalty Corporation and its authority to make sale would authorize the conclusive presumption and imputation of assent to, and approval of, the sale and conveyance. One who holds an equitable interest in land, is bound by a sale of such land by the trustee at his request, even though such request be not in writing. Although it be that in the first instance the husband has the exclusive management and control of the community, as this trust estate was shown to be, yet the husband was in this case duly and in all things legally adjudicated insane, and by reason thereof was incapacitated from performing this duty towards the community. Appellant as guardian took over and was then empowered to exercise that right. Article 4164, R.S.; Speer on Marital Rights (3d Ed.) § 80, p. 96. In virtue of that right, and as a necessary incident to such control of the community, she had the legal right to receive the proceeds of sale of the oil royalties and to assent to and approve the sale and conveyance by the trustee. Prior action of the probate court expressly conferring authority upon Mrs. Ashby to give such assent and approval to the sale by the trustee was not essential to infuse vitality into the sale and conveyance by the trustee.
The Judgment is affirmed.