Taylor v. San Antonio Joint Stock Land Bank

On Motion for Rehearing.

Appellee, the San Antonio Joint Stock Land Bank of San Antonio, complains in its 'motion for a rehearing of our statement to the effect that A. P. Graves was appointed substitute trustee by the executive committee of the bank. This statement was based upon the following testimony given by J. M. Reed, secretary-treasurer of appellee bank, to wit:

“Q. Referring again to the minutes of the Executive Committee, is there anything else contained there with reference to the loan to Mr. and Mrs. Taylor and Mrs. Ridley? A. It shows that A. P. Graves was appointed Substitute Trustee to make the sale.
"Q. On what date was that appointment made? A. November 5, 1932.”

It is true, however, that the record does justify a finding that Wm. B. Lupe, acting as president of appellee bank, made the appointment of A. P. Graves as substitute trustee, and we will accordingly accept appellee’s contention and now discuss the case from the standpoint that the substitute trustee was appointed by Wm. B. Lupe, as the president of the bank.

The deed of trust provides that the holder of the note may, under certain circumstances, appoint a substitute trustee without notice to the mortgagor. The holder in the instant case was the San Antonio Joint Stock Land Bank of San Antonio. The question presented is: “Under this provision in the deed of trust, can the president exercise the discretion of appointing a substitute trustee, or must that discretion be exercised by the board of directors ? ”

The president of a bank or any other corporation has very little power by virtue of his office. Dallas Joint Stock Land Bank of Dallas, Texas v. Colbert (Tex.Civ.App.) 98 S.W.(2d) 239. The board of directors may delegate to' him the exercise of many powers, provided such powers may properly be delegated. It is definitely settled that the power to appoint a substitute trustee must be made by the person or board stated in the deed of trust, and cannot be delegated to any one else. Michael v. Crawford, 108 Tex. 352, 193 S.W. 1070; Holcomb v. Nettletori (Tex.Civ.App.) 35 S.W.(2d) 745; Rhoton v. Texas Land & Mortgage Co. (Tex.Civ.App.) 80 S.W.(2d) 763.

The president or vice president of a.corporation, with few exceptions (which are not involved in this case), exercises only such powers as are delegated to him by the board ■ of directors. By virtue of his office alone he cannot convey the land of the corporation; there must be authority from the board of directors. Corporations have on many occasions escaped liability on this theory. Dallas Joint Stock Land Bank v. Colbert, supra; Logue v. Southern Kansas R. Co., 106 Tex. 445, 167 S.W. 805; Fitzhugh v. Franco-Texas Land Co., 81 Tex. 306, 16 S.W. 1078; Aransas Pass Harbor Co. v. Manning, 94 Tex. 558, 63 S.W. 627; Commercial National Bank of Beeville v. First Nat. Bank of Cuero, 97 Tex. 536, 80 S.W. 601, 104 Am.St.Rep. 879.

It occurs to us that a solution of the question under consideration is readily disposed of by a consideration of how corporations ordinarily act. The board of directors is the official body of the corporation, and when we speak of acts of the corporation we mean acts of the legally constituted board of directors, either done by the board itself, or some person duly authorized to act for it. There is no other alter ego of the corporation except the board of directors, or some officer or agent duly authorized by such board.

We have not been cited to a single aur thority in this or any other jurisdiction where it has been held that the president or vice president of a corporation can, by virtue of his office, appoint a substitute trustee where the deed of trust provides that the corporation itself is authorized to make the appointment. On the other hand, we have been cited to several authorities which we construe as being to the contrary, to wit: Allen v. Alliance Trust Co., Limited, 84 Miss. 319, 36 So. 285; Haggart v. Wilczinski (C.C.A.) 143 F. 22; Williams v. Connor Bros. (Tex.Civ.App.) 83 S.W.(2d) 692; Scottish American Mortgage Company v. Butler, 99 Miss. 56, 54 So. 666, Ann.Cas. 1913C, 1236.

In the very recent decision of the Dallas Joint Stock Land Bank of Dallas, Texas, v. Colbert (Tex.Civ.App.) 98 S.W.(2d) 239, the contention of the land bank was upheld, to the effect that the vice president of the land bank could not, without authority from the board of directors, make a contract with a broker or real estate *875agent to sell certain lands belonging to the bank. If the president or vice president of a land bank does not have the power, by virtue of his office to enter into a listing contract with a real estate agent, how can it be contended that he has the power to appoint a substitute trustee where the deed of trust provides, in effect, .that the appointment must be made by the bank? It is true that the Supreme Court has granted a writ in that cause, but upon the ground that the bank, having knowingly accepted the benefits of the contract, could not avoid liability under the contract. See Texas Syllabi, Jan. 6, 1937, page 3.

We are cited by appellee to the case of Rhoton v. Texas Land & Mortgage Co. (Tex.Civ.App.) 80 S.W.(2d) 763, 769. In that case the deed of trust contained the following provision, to wit: “And should the said A. G. Wood, Trustee, be absent from the State, or fail or refuse, or be disqualified from acting hereunder, the legal holder or holders of said notes, or the General Manager, or Acting General Manager of aforesaid Mortgage Company shall have full power to appoint a substitute, in writing, without notice to us, who shall have the same powers which are hereby delegated to the said A. G. Wood, Trustee, and we do hereby absolutely ratify and confirm any and all acts that the said Trustee, or his successor in this trust, may lawfully do in the premises by virtue hereof.”

It is clear from this provision that the deed of trust authorized the general manager of the corporation to make the appointment of a substitute trustee. James C. Macdonald, general manager of the Texas Land and Mortgage Company, did make the appointment, and thus the provision of the deed of trust was carried into effect, and the person authorized to make the appointment did in fact do so.

This provision in the deed of trust clearly distinguishes that case from the case at bar. No such provision is found in the deed of trust in the Taylor Case.

We wish to further quote from the opinion in the Rhoton Case. The court said: “The trial court found that on March 10, 1932, James C. Macdonald was general manager of the Mortgage Company, and that W. James Mitchell was appointed substitute trustee according to the terms of the deed of trust. A person authorized under a deed of trust to appoint a substitute trustee cannot delegate his power to make such appointment. Michael v. Crawford, 108 Tex. 352, 193 S.W. 1070; Holcomb v. Nettleton (Tex.Civ.App.) 35 S.W.(2d) 745. The reason for .the rule is that the mortgagor has conferred a discretionary power upon a person whom he is willing to trust to execute it, and that, it being a power involving discretion, it cannot be delegated to another, since the one to whom it is delegated might not be. acceptable to the mortgagor.”

We feel that this is a correct statement of the law and entirely upholds our conclusion to the effect that the president of the bank could not appoint a substitute trustee when the deed of trust provided that such substitute was to be appointed by the bank. Of course, the president and secretary could execute the written appointment, if the board of directors had exercised the discretion of choosing and designating who the substitute trustee sho.uld b.e. But an act of the directors performed before the trustee had declined to act, merely giving a list of persons from which a substitute trustee might be selected by the. president or vice president, is not a discharge of the discretionary power placed upon them by the terms of the deed of trust.

We now come to the consideration of whether or not Mrs. Taylor, as ad-ministratrix, can recover the land without tendering the amount due by the terms, of the note secured by the deed of trust. We wish to here acknowledge our mistake in our original opinion wherein we cited Alexander v. Berkman (Tex.Civ.App.) 3 S.W.(2d) 864, as holding that an independent executor was not required to pay claims against the estate in the order prescribed by statute. The decision is to the contrary and does not support our statement.

There are, however, other decisions which do so hold. Ewing v. Schultz (Tex.Civ.App.) 220 S.W. 625; 13 Tex.Jur. 774. Independent of this proposition, we • are of the opinion that we have correctly held that the administratrix did not, and under the law could not, tender the amount due as a prerequisite to her right to recover the land. We also feel that. we were wrong in holding that the bank was in rightful possession of the land. The fore1 closure being void, the bank’s possession was unlawful and not lawful. Fuller v. O’Neil, 69 Tex. 346, 6 S.W. 181, 5 Am.St.Rep. 59. We have further examined all the correspondence between representatives of the bank and James Taylor, and do not *876find anything that would indicate that Taylor agreed for the bank to take possession, but, on the contrary, find that all propositions made by Taylor were not accepted but rejected. The letters from the representatives of the bank make it plain that the bank intended to make no agreements with Taylor, but intended to taka possession of the land by virtue of its substitute trustee’s deed.

We do not conclude, however, that the sale was void in the sense that Mrs. Taylor, as administratrix, can recover the land and deprive the bank of its debt and security. We feel that the correct rule is laid down in Haggart v. Wilczinski, supra, and that equity will require that the ad-ministratrix be permitted to recover the land charged with the full amount of principal and interest provided for in the note and deed of trust.

Accordingly, our judgment heretofore rendered reversing this cause will be set aside, and judgment here rendered that Mrs. Taylor, as administratrix, recover the land herein sued for, subject to a lien to secure the full amount of the obligation expressed in the note and deed of trust, and that this judgment be certified to the probate court of Nueces county for observance, and, should the amounts due be not paid, that the'land be sold by order of the probate court, and in accordance with the laws governing such sale to satisfy the amount due the appellee under the terms of the note herein involved.

Reversed and rendered.

Supplemental Opinion.

Since the rendition of the opinion of this court on January 20, 1937, in this cause, it has come to the attention of the court that the court did not have sufficient, evidence in the record to enable it to determine the exact amount due to the bank upon the notes involved here, in that there is no evidence in the record showing the reasonable rental valúe of the land during the time. it. has been in the possession of the bank,, and it therefore becomes necessary for; this court to. .set aside its judgment rendering this cause,, and the cause will be remanded to‘the district c.qurt, with instructions to hear evidence and determine the reasonable rental value of the land during the time, it has been in possession of the bank, and'deduct this amount from the amount of . principal and interest due ..on' the notes, and add thereto .the amount of all taxes paid out on the land by the bank. The court will then render judgment awarding the land to Mrs. Taylor, as administratrix, charged with an equitable lien for the security of the amount due the bank, as above set forth, after deducting therefrom the reasonable rental value of the land, as above stated, and, in the event the amount due the bank, as thus ascertained by the district court, be not paid by the administratrix, the probate court will be directed to sell the land as provided by law.