City National Bank v. Hunter

It is testified by the vice-president of the bank that the agent of Hunter, Evans & Co. agreed with the bank that if it would honor O'Neal's checks he would guaranty their payment, and settle O'Neal's accounts at any time by a draft on Hunter, Evans & Co., in case O'Neal was not in Fort Worth to give the draft himself, and that the credit was extended to O'Neal on the strength of said guaranty; that on the day the draft for $9,354.03 was drawn he asked Hunter if it would be paid by Hunter, Evans & Co., and whether or not witness had better take a bill of lading, which would insure the payment of the draft, or hold the cattle, to which Hunter replied that Hunter, Evans & Co. were obliged to pay the draft, and would do it; and that, relying on that statement, witness did not take a bill of landing, but allowed the draft to take its course, and on that day left Fort Worth, and was absent some weeks, and hence was not in Fort Worth when the draft was protested. nor present when the note and bill of sale were executed by O'Neal to the bank. William Hunter, the agent of Hunter, Evans & Co., denied that they bound themselves to pay O'Neal's indebtedness to the bank in any way whatever. Early in the year 1880, one John Dawson proposed to purchase a part of O'Neal's cattle, and drive them to a place outside of Texas, to fill a contract of sale he had made with other parties to deliver cattle at the Ponca agency, in the Indian Territory, by the 20th day of June, 1880, and agreed with O'Neal upon the purchase; but, before this trade could be consummated, it was necessary for Dawson to have the consent of the lienholders, and accordingly he consulted Hunter, Evans & Co. and the officers of the bank, who agreed that the sale might be made.

On the 20th of March, 1880, O'Neal, and his attorney, William Hunter, for Hunter, Evans & Co. and their attorney, the vicepresident of the City National Bank and its attorney, and Dawson, met at Forth Worth, Tex., and three different agreements in writing were executed between the parties. One was between John M. Dawson, Hunter, Evans & Co. and the bank, and recited the existence of indebtedness and liens, and the fact that O'Neal had contracted for the sale of the cattle to Dawson, as shown by a written contract, by the terms of which Dawson was to assume the payment of O'Neal's indebtedness to Hunter, Evans & Co. and the bank, provided sufficient cattle be delivered by O'Neal to Dawson for the purpose; that, in the event that the cattle sold and delivered by O'Neal to Dawson should be insufficient to discharge to amount of the indebtedness in full, then Dawson assumed to pay off and discharge the indebtedness pro rata, to the extent of the cattle received, payment to be made made by Dawson to Hunter, Evans & Co. and the bank by October 1, 1880. The sale was stated to be subject to the liens, and the cattle were to be held in trust for Hunter, Evans & Co. and the bank; that Hunter, Evans & Co. and the bank together should select a to accompany Dawson from Texas to the point where the cattle might be sold, and this man was to have the legal possession of the cattle and receive the proceeds of the sale. If Dawson did not sell the cattle by the 1st of October, 1880, then Hunter, Evans & Co. and the bank might retake the cattle, and dispose of them, and apply the proceeds thereof. Dawson was to have the handling, control, and disposition of the cattle, subject to the provisions of the agreement.

Another of the agreements was between Hunter, Evans & Co., the bank, and O'Neal, whereby Hunter, Evans & Co. and the bank agreed to the sale of the cattle by O'Neal to Dawson, provided O'Neal should, upon the delivery of the cattle to Dawson, surrender to Hunter, Evans & Co. and the bank the proceeds of the sale, consisting of Dawson's paper, together with the contract of sale; and Hunter, Evans & Co. and the bank agreed to receive such paper and contract in discharge of their respective claims upon O'Neal, provided such proceeds equaled the amount of the indebtedness to Hunter, Evans & Co. and the bank; and, if such proceeds should be less than said indebtedness, Hunter, Evans & Co. and the bank agreed to divide the same pro rata. If there should be a deficiency, O'Neal obligated himself to make it good in cash or notes secured to the satisfaction of Hunter, Evans & Co. and the bank, by giving deeds of trust on real and personal property. If there arose a dispute as to the amount O'Neal owed either party, then the amount agreed to be due should be adjusted and discharged, and the amount in dispute should be secured by O'Neal as aforesaid; and, when the dispute should be settled, the amount thereof should be paid from said proceeds of sale or said security furnished by O'Neal. Should there be a deficiency, it was to be 'carried, owned, and held between the said Hunter, Evans & Co. and the said City National Bank according to their respective claims, and the collection arising therefrom to be prorated' between them. If the agreement, 'from any cause whatever, fail to be carried out and consummated, then no statement or recital herein shall be construed to be an abandonment of any right, lien, or security held by any of the parties hereto.' It was further agreed by O'Neal that should there be a deficiency he would secure it in manner aforesaid, and it was to bear interest at the rate of 12 per cent, per annum from date, and to mature on or before the 1st day of January, 1881, the deficiency to be secured at the time said cattle were delivered to Dawson.

The other agreement was between Dawson and O'Neal, reciting that whereas, Hunter, Evans & Co. and the bank had liens on the cattle; and whereas, O'Neal, Hunter, Evans & Co., and the bank had agreed to sell the cattle to Dawson at the prices in said agreement mentioned; and whereas, Hunter, Evans & Co. and the bank had agreed with Dawson upon the time and place of payment for said cattle to the amount of their debt, or so much thereof as said cattle might bring, and also upon the manner and amount of security for said payment by said Dawson: therefore O'Neal, in consideration of the enumerated agreements, 'both of which bear even date herewith, and are made parts hereof,' and the further consideration of the release of said indebtedness to Hunter, Evans & Co. and the bank, agreed 'to gather and deliver to the said John Dawson, at or near Will's Point, in Van Zandt county, my stock of Cattle, consisting of Cows, calves, yearlings, and two, three, and four year olds and upwards, upon which said Hunter, Evans & Co. and said City National Bank have liens, together with such other of my cattle as I may want to put in said sale, and as may be acceptable to said Dawson, at the following prices,'-giving them. Dawson bound himself to pay for the cattle at the rate fixed, 'in such way and such manner as the said Hunter, Evans & Co. and the said City National Bank may require, and payable to them,' as per agreement between Hunter, Evans & Co. and the bank and Dawson. If the cattle should amount to more than the amount of the indebtedness to Hunter, Evans & Co. and the bank, then Dawson for the excess agreed to give O'Neal security, payable not longer than October 1, 1880, with interest at 12 per cent. It was further agreed that the cattle were to be delivered to Dawson on or before May 20, 1880.

The papers having been executed, O'Neal proceeded to gather the cattle for delivery to Dawson, and Dawson prepared to receive them, both incurring considerable expense in so doing; and on the 22d day of May, 1880, the gathering of the cattle was completed near Will's Point, at which place, on that day, Dawson, O'Neal, L. W. Evans, agent of Hunter, Evans & Co., the attorney of that firm, the attorney of the bank, and the attorney of O'Neal, and Gen. Henry E. McCulloch, the agent who had been selected and appointed by the bank and Hunter, Evans & Co. to accompany the drive and receive from Dawson for them the proceeds of the sale of the cattle, assembled. The cattle consisted of 1,741 head, mostly branded O N, and their value at the contract price was $19,033. Hunter, Evans & Co. claimed that O'Neal owed them about $18,000; O'Neal disputed all of said claim except $9,915.74. The debt of the bank on that date was admitted to be $10,339.85. The attorney of Hunter, Evans & Co. wrote a note for Dawson to sign for the purchase money, which he did. It read as follows: '$19,033. WILL's POINT, TEXAS, May 22, 1880. One day after date, for value received, I promise to pay to the order of Hunter, Evans & Co. and the City National Bank of Fort Worth, Texas, at Fort Worth, Texas, the sum of nineteen thousand and thirty-three dollars, with interest at the rate of ten per cent. per annum from date until paid. This note is to be paid according to the terms and stipulations contained in a written contract entered into by and between John Dawson, Hunter, Evans & Co., and the City National Bank of Fort Worth, and dated March 20, 1880. J. M. DAWSON.' The note was handed, by direction of the bank and Hunter, Evans & Co. to Gen. McCulloch. The cattle were delivered to Dawson by O'Neal with the knowledge and consent of Hunter, Evans & Co. and the bank, and were driven by Dawson through Will's Point, to a point three miles west of the town; and on the same day Dawson sold, for cash, cattle to the amount of $3,419, which he paid over to McCulloch, who indorsed upon the note the following: 'Received on the within note three thousand four hundred and nineteen dollars, ($3,419.) May 22, 1880. HENRY E. MCCULLOCH, Agent.'

Upon the basis of the undisputed claims the attorneys of the bank and of Hunter, Evans & Co. figured out the proportions in which the amount of Dawson's note should be distributed, and ascertained that of said note the bank was entitled to receive $9,715.78, and Hunter, Evans & Co. the remainder, $9,317.22; and both of them instructed Gen. McCulloch that of every $1,000 paid in by Dawson he should send Hunter, Evans & Co. $482.52, and the bank $510.48. The $3,419 was then and there divided and paid over to said parties in that proportion, and the bank's attorney indorsed O'Neal's note to the bank with a credit of $9,715.78, as 'assumed by John Dawson,' while a receipt was given to O'Neal by the attorney of Hunter, Evans & Co., 'showing that cattle to the amount of $9,317.50 had been delivered to Dawson.' There was no objection to the delivery of the cattle to Dawson, although before they were delivered there was a wrangle between O'Neal and the agent and the attorney of Hunter, Evans & Co. as to the true amount of the indebtedness of O'Neal to that concern; but, on the contrary, the attorneys of the parties told Dawson that the cattle were his, and he could drive them to market; and it appears to have been understood that he was going to drive them through Northwestern Texas and the Indian Nation to Kansas. Dawson and McCulloch went on with the cattle, getting out of Van Zandt county on the 23d or 24th of May, 1880; and soon after leaving Will's Point Dawson sold another lot of the cattle for something over $2,000, receiving in part payment therefor a draft payable to Hunter, Evans & Co. for $1,842, for which McCulloch entered on Dawson's note the following credit: 'Received on the within note a draft drawn by Frank Houstan for eighteen hundred and forty-two dollars, payable on the 22d day of next month. May 25, 1880. HENRY E. MCCULLOCH, Agent.'

This draft was sent by McCulloch to Hunter, Evans & Co., and at the same time McCulloch drew a draft upon them in favor of the City National Bank for its pro rata part of said payment, $939.88; but when the latter was presented to Hunter, Evans & Co. for their acceptance they declined to accept it, and appropriated the whole of this payment. On the 31st of May, 1880, Hunter, Evans & Co. began suit in the district court of Montague county, Tex., by petition, against O'Neal and Dawson, claiming to have a lien upon the stock of cattle then in the possession of John Dawson in said county of Montague, which lien they charged existed by virtue of a mortgage given them upon said stock of cattle by O'Neal, and sued out a writ of sequestration by virtue of which the sheriff of Montague county took into his possession the property described in the petition and writ, to-wit, 1,478 head of cattle, of the aggregate value of $15,614. The seizure was made on the 2d day of June, and the cattle retaken by Dawson under a replevin or forthcoming bond on the 6th day of June. The bank furnished Dawson the securities on his bond, and when he sold the cattle afterwards he paid the amount of his note and interest into the bank, which has ever since held the same to await the result of this suit. On the 21st day of June, 1880, Hunter, Evans & Co., sued out a supplemental writ of sequestration directed to Van Zandt county, under which about 247 head of cattle were seized, and of these O'Neal replevied a few cows and calves, valued at $110. On the 28th day of December, 1880, the cause was removed into the United States circuit court for the Northern district of Texas, at Dallas. O'Neal appeared first in the state court, and pleaded to the jurisdiction, which plea was pending when the record was filed in the United States court. In 1881 the City National Bank of Fort Worth entered its appearance as a defendant. Both parties then, by leave of court, amended their pleadings. Hunter, Evans & Co. in their amended bill set up their dealings with O'Neal, and the execution of the bill of sale and defeasance, and claimed that O'Neal owed them $18,616.49, February 1, 1880, on which they received during that month from the Texas & Pacific Railroad Company, $625, and on the 22d day of May, 1880, from H. E. McCulloch, $1,668.56; that O'Neal gave a mortgage to the bank subject to their lien, but the bank, in February, 1880, claimed that its lien was superior to that of Hunter, Evans & Co., and threatened to litigate said question; that at that time the O N stock of cattle could not be gathered except at ruinous expense and great trouble, and Hunter, Evans & Co. knew that, pending litigation about them, the cattle while on the range would become worthless by straying off and being stolen and sold by other parties, and to avoid such litigation, expense, and loss of said cattle, Hunter, Evans & Co. entered into two certain agreements, dated March 20, 1880, the two being in fact but one, the substance of which they proceeded to state. Complainants then stated the meeting at Will's Point on May 22d, and said that, without notice to them, O'Neal delivered to Dawson stock of the value of $19,033, of which cattle to the amount of $3,419 were sold, and the proceeds paid to McCulloch, who had been selected by Hunter, Evans & Co. and the bank to accompany the cattle, of which amount complainants received $1,668.38, and the bank the balance; that after the cattle were delivered O'Neal for the first time disputed over $8,700 of his indebtedness to complainants; that O'Neal made to Dawson a bill of sale for said cattle, and Dawson executed his note to complainants and the bank for $19,033, and complainants and the bank gave O'Neal a receipt for said amount; that O'Neal then failed and refused to secure the disputed amount of complainants' claim against him; that 'thereupon the parties to said agreement were remitted to their original rights and liens, and the said agreements thereby became abrogated, and were thereafter of no force or effect;' and that complainants had since 'treated said agreement as abrogated, abandoned, and of no effect.' They charged that O'Neal, Dawson, and the bank confederated to cheat them, and that O'Neal at the time of the agreement in March represented that he owned a large number of cattle included in the bank's lien, but not in complainants', and that if complainants would enter into said agreement said cattle should be embraced therein, and included in the delivery to Dawson; that complainants, relying on the representations which were adopted by the bank, were induced to enter into the agreement with O'Neal, Dawson, and the bank, but the representations were false, and known to be so by the parties; that O'Neal frequently acknowledged that $16,300 of complainants' claim was correct, and promised to meet complainants after said agreements, and fix the amount of the indebtedness, but did not do so, and, after the cattle were delivered to Dawson, then for the first time disputed $8,500 of complainants' claim; that he proposed to pay complainants something over $4,000 in addition to the amount assumed by Dawson, but complainants rejected that proposition; and that complainants tried to obtain arbitration without effect, and O'Neal finally said that he had no property with which to secure his indebtedness to complainants, that his property was mortgaged, etc.; that O'Neal was hopelessly insolvent when he delivered said cattle to Dawson, and after said delivery owned no other cattle except about 300 head of said O N stock, not exceeding the value of $3,000, and included in complainants' bill of sale; that O'Neal's acts and representations, after the delivery to Dawson, were with the view to delay complainants while Dawson hurriedly proceeded to drive the cattle out of Texas with fraudulent purpose; that all the cattle delivered by O'Neal to Dawson belonged to the O N stock, and were included in the complainants' bill of sale, and he did not deliver to Dawson any cattle of the other marks and brands mentioned in the bank's mortgage; that, long after the execution of the bill of sale to complainants, O'Neal, without complainants' knowledge or consent, sold cattle to the amount of $3,000, and converted the amount to his own use; that, on account of the deceit and fraud of O'Neal, Dawson, and the bank, the said agreements of March 20, 1880, are null and void; that Dawson failed to account to McCulloch for $218; that he disposed of part of the stock, and received in exchange about 30 head of yearlings, and was proposing to dispose of them without accounting, when stopped by the levy of the writ of sequestration; and that, after Dawson replevied said cattle, he sold them for $16,500, and now holds that amount. Complainants prayed a decree against O'Neal for the full amount of their debt against him, and for a foreclosure of their lien against O'Neal, Dawson, and the bank; and, if mistaken as to their remedy, they prayed for a decree against Dawson and the bank for the amount of money coming to them from the proceeds of said cattle under and by virtue of said agreements, and for general relief. O'Neal, in addition to his plea to the jurisdiction, answered by a general denial; and, further, that the notes held by complainants were simply executed to secure a margin of credit from complainants, and that complainants' claims were full of incorrect items, which he specified, and which amounted to many thousand dollars.

The bank and Dawson filed joint and several answers, setting up the execution by O'Neal to the bank, on the 10th of December, 1879, of his note for $9,810.11, secured by mortgage on his home stock of cattle, branded H and O N, including horses, mares, and colts; that the bills of sale to Hunter, Evans & Co. and the bank were intended to be mortgages; that Hunter, Evans & Co. knew better than the officers of the bank what O'Neal's financial condition was, and in all their transactions relied on their own knowledge of him and his property; that it was at the special instance and request of complainants that the bank advanced O'Neal the money out of which his indebtedness to it grew, and complainants promised to pay the same; that the bank did intend to institute suit for the purpose of deciding the validity and priority of its own and complainants' liens; that they believe the motives of Hunter, Evans & Co., in entering into said agreements, were the knowledge that they had not in fact a debt against O'Neal of the amount claimed by them, and knew they were primarily liable to the bank for the payment of its debt against O'Neal, and because by entering into said agreements they would escape from responsibility to the bank and from a controversy with the bank as to the validity of their lien, and obtain an equal lien on property they had no lien upon before, and would without surrendering the disputed amount of their debt against O'Neal effect a collection without loss of the uncontested part; that the reservation in said agreement, that if it should fail to be carried out and consummated, then no statement or recital therein should be construed 'to be an abandonment of any right, lien, or security held by any of the parties hereto,' applied only to the consummation of the pending transaction; and that when the sale from O'Neal to Dawson was perfected, by delivery, on the 22d of May, 1880, said agreement took final effect. The circumstances attending the execution of the agreements and the transactions at Will's Point, the execution of Dawson's note, payments made on it, etc., were set out, and defendants said that the objects of the two agreements between O'Neal, the bank, and Hunter, Evans & Co., and Dawson, the bank, and Hunter, Evans & Co., were double,-one was to sell the cattle to Dawson free from every lien before existing against them, but charged with a new lien or trust, to be enforced through the agency of H. E. McCulloch; the other, to obtain a settlement between some, but not all, of said parties, and therefore all of the provisions of one are not provisions of the other agreement; that by the agreement of March 20, 1880, and the purchase of the cattle by Dawson, the original liens of complainants and the bank on the cattle sold Dawson were extinguished, and said new lien substituted therefor; that complainants knew before the delivery of the the cattle to Dawson the exact amount of their debt that was disputed by O'Neal; that Dawson used dispatch in driving the cattle, because, as was known to complainants, he purchased them to fulfill contracts of sale previously made by him, and he commenced with the knowledge and consent of complainants to drive said cattle to their destination out of the state of Texas; that, at the date of the delivery to Dawson, O'Neal owned a large number of cattle, not included in the sale and delivery to Dawson, which he offered to deliver upon the same terms and for the same purpose, if the time required for their being gathered was allowed, but complainants agreed that the cattle then gathered should be delivered; that, at the time of the delivery to Dawson, O'Neal owned of the O N stock on the range in Van Zandt county, besides those delivered to Dawson, as many as 350 head, of the value of $5,250, as complainants well knew, and which were seized a few days afterwards by a writ of sequestration, wrongfully sued out by complainants; that O'Neal was solvent at the time of the sale and delivery to Dawson, and offered to secure Hunter, Evans & Co. by mortgage, which was not executed, because they required a power of sale for cash in 10 days after the amount in dispute had been settled; that O'Neal was always ready to give complainants security, but they refused to take it uncoupled with the authority to foreclose at once; that the cause of the failure of negotiations between complainants and O'Neal was that complainants had conceived the purpose of seizing Dawson's property under such circumstances as they believed would lead to its being surrendered to them by Dawson rather than suffer the damages, delays, and losses which might otherwise ensue; that the officers of the bank and Dawson did nothing at any time with the view to deceive or injure complainants in any way; and if O'Neal had any such purpose he did not communicate it to either of them, but they believed and had every reason to believe that O'Neal was acting with the utmost good faith towards complainants. They denied that the bank or its officers, previous to the date of the agreement, had any knowledge of the number, value, or situation of O'Neal's cattle other than O'Neal's statements to them. They said they never pretended or represented to complainants, or either of them, or any agent of theirs, that said bank, or any of its officers or agents, had any such knowledge, and they denied that they, or either of them, deceived complainants, or either of them, or caused them to be deceived in any respect. They denied all collusion to get possession of the stock of cattle, or to have said agreement executed, before a final settlement between O'Neal and complainants. They denied that Dawson ever disposed of any of the cattle otherwise than he was authorized to do by said agreement, and as the owner thereof, and that they had deceived McCulloch in any respect. They averred that complainants purposely failed to make the bank a party to their suit in Montague county, and brought said suit there in a court which had jurisdiction neither of the property nor of the persons of the defendants. Defendant Dawson charged that complainants, by their wrongful seizure of said cattle by the writ of sequestration, subjected him to great expense, loss, and damage, which he specified, and asked to have allowed by way of reconvention, and that he had been damaged by reason of the malicious suing out of said writ of sequestration in the further sum of $10,000, for which he asked punitive damages.

On the 18th day of May, 1885, the court overruled the defendants' exceptions and O'Neal's plea to the jurisdiction, and entered a decree that Dawson's note be divided between complainants and the bank pro rata, according to their actual demands against John A. O'Neal; that on May 22, 1880, O'Neal was indebted to the complainants in the sum of $18,333.68, and to be bank in the sum of $10,339.85; that complainants were entitled at said date, out of the Dawson note, to the sum of $12,169.64, less the sums received by them from the proceeds of said note, to-wit, the sum of $1,668.69, paid May 26, 1880, and the sum of $1,842, paid June 26, 1880, with interest from May 22, 1880; that Hunter, Evans & Co. recover from Dawson and his sureties the sum of $8,659.15 principal, and $4,329.67 interest, making a total of $12,988.82, with interest from date of decree at the rate of 10 per cent., and costs; that complainants had received the sum of $2,424.56 in the value of cattle sequestered herein and replevied by complainants, of which sum the bank was entitled to $1,311.50; and that the bank recover of complainants said sum, with execution. It further appearing that O'Neal received $110 worth of cattle sequestered on the 20th of July, 1880, it was decreed that complainants recover of Mary O'Neal, administratrix, and the sureties of O'Neal on the replevin bond, $110, with interest at 8 per cent. per annum from July 20th, with execution, the proceeds of said collection to be distributed pro rata between complainants and the bank; that complainants recover of and from the estate of O'Neal, to be or sums received by complainants from the the sum of $4,613.81 and costs, less any sum or sums received by complainats from the execution to be issued against O'Neal's sureties; and that in the mean time the costs of this suit be paid by complainants and the bank pro rata.

A. S. Lathrop, for appellants.

Sawnie Robertson, for appellees.

Mr. Chief Justice FULLER, after stating the facts as above, delivered the opinion of the court.