Farmers Royalty Holding Co. v. Kulow

MONTEITH, Chief Justice. This action was brought by appellants, Farmers Royalty Holding Company et al., in statutory form of trespass to try title for the recovery from appellees, Charles Kulow et al., of an undivided one-half interest in the mineral estate in two tracts of land in Austin County, Texas, aggregating about 251 acres. By supplemental pleadings appellants alleged that they were entitled to recover the mineral interest claimed by them in said land under the after acquired title rule. Appellees answered by general denials, pleas of not guilty, and other defensive pleas. At the conclusion of the evidence the court discharged the jury and rendered judgment in favor of appellees. Appellants herein are warrantees or subsequent purchasers from appellee Charles Kulow and his deceased wife. The ap-pellees, except Charjes Kulow and the Shell Oil Company, are the heirs of Mrs. Kulow. The Shell Oil Company is the purchaser of an oil lease from the Kulows. The material facts in the case are undisputed. By deed dated June 30, 1915, John Kulow and wife conveyed the land in controversy to Charles Kulow, retaining a vendor’s lien in said deed to secure the payment of a purchase money note for the sum of $3025.50. Thereafter, by separate deeds dated December 12, 1931, Charles Kulow and wife conveyed a % undivided interest in the mineral estate in said land to Farmers Royalty Holding Company and an undivided ⅛ mineral interest therein to G. T. Blankenship. Both of said deeds contained covenants of general warranty. In 1934 Charles Kulow and wife filed suit against Farmers Royalty Holding Company and G. T. Blankenship for the cancellation of said mineral deeds because of alleged fraud. Appellant, Farmers Mutual Royalty Syndicate, intervened in the suit as a subsequent purchaser from Blankenship. This action was removed to the Federal Court and on October 10, 1934, the parties entered into an agreement for a compromise and settlement, and judgment was entered thereon in said suit vesting title to a ¾ undivided interest in the mineral estate in said land in Charles Kulow and wife, and a ¼ undivided interest therein in Farmers Royalty Holding Company and Farmers Mutual Royalty Syndicate. Said judgment provided in part: “* * * ⅛⅛(; the parties by the terms of said settlement have agreed that the title to the ½ minerals in controversy be vested ½ in plaintiffs, ¼ ⅛ Farmers Mutual Royalty Syndicate * * * and ½ in Farmers Royalty Holding Company; thus vesting the entire minerals in and under the 250 acre tract, ¾ thereof in plaintiffs, ⅜ in Farmers Mutual Royalty Syndicate, Inc., and ⅛ in Farmers Royalty Holding Company; that the stock referred to in said petition be cancelled; that the action of plaintiffs and the cross-action of defendants for damages one against the other be dismissed with prejudice * * *. “It is therefore ordered, adjudged, and decreed by the court as follows: (1) That all the minerals in and under the land described in plaintiffs’ bill of complaint be *320 and the same are hereby vested in fee simple, together with all rights pertinent or appendant, and the right of ingress and egress; an undivided 3/4 interest in plaintiffs, Charles Kulow and wife, Antonie Ku-low; an undivided 1/8 of the entire minerals in and under said land in Farmers Mutual Royalty Syndicate, Inc., a corporation; and an undivided 1/8 interest in and to the entire minerals in and under said property in Farmers Royalty Holding Company, a corporation; (2) That the action for damages by plaintiffs against defendants and the cross-action for damages by defendants against plaintiffs both be and the same are hereby dismissed with prejudice. (3) That the stock and certificates thereof issued by Farmers Royalty Holding Company to plaintiffs or either of them be and the same is hereby cancelled. (4) That the costs of this suit be paid equally by the plaintiffs and the defendants.” On December 4, 1936, Herman Buchtien, the owner and holder of the balance due on the said purchase money note for the sum of $3025.50, and the owner of the superior title retained therein, filed suit in the State court against Kulow and wife, Farmers Royalty Holding Company, and Farmers Mutual Royalty Syndicate for foreclosure of his vendor’s lien and to remove cloud cast upon his title by reason of the claims of appellants under their mineral deeds from Kulow and wife. On January 6, 1937, judgment was rendered in favor of Buchtien, awarding a foreclosure of his lien as against all defendants, removing cloud from his title and providing that absolute title vest in the purchaser at foreclosure sale. Buchtien purchased said land at foreclosure sale on April 6, 1937. On April 17, 1937, he conveyed the land in controversy to Kulow for a recited consideration of $2375.00. It is the settled law in this state that “when one conveys land by warranty of title or in such manner as to be es-topped to dispute the title of his grantee, a title subsequently acquired to that land by the grantor will pass eo instante to his war-rantee, binding both the warrantor and his heirs and subsequent purchasers from either.” Caswell v. Llano Oil Co., 120 Tex. 139, 36 S.W.2d 208; Farmers Royalty Holding Co. v. Cherry, Tex.Civ.App., 142 S.W.2d 255, affirmed by Supreme Court, 138 Tex. 576, 160 S.W.2d 908, 910; Baldwin v. Root, 80 Tex. 546, 553, 43 T.J. 249-250, 21 T.J. 23, 12 T.J. 12-57. In the case of Farmers Royalty Holding Co. v. Cherry, supra, the court in its opinion, quoting with approval from Freeman on Judgments, 5th Ed., Vol. 2, Sec. 714, says: “* * * So where a party plaintiff claiming title through his predecessor under a warranty deed, fails because of the invalidity of a deed to his predecessor, the subsequent acquirement of title by the latter inures to the plaintiff’s benefit by virtue of the warranty and may be the basis of a new action by him.” The facts in the instant case are similar in all material respects to those in the cases of Caswell v. Llano Oil Co., and Cherry v. Farmers Royalty Holding Co., supra, with the exception of the fact that, in the instant case, appellants were divested of one-half of their mineral interests in the land in controversy by the agreed judgment in the Federal court prior to their divesture of title under the Buchtien foreclosure suit, while in the cited cases there had been no change in the title of the war-rantees prior to their divesture by foreclosure sale in the Caswell case, and by judgment in trespass to try title in the Cherry case. Under the above facts, the controlling question presented in the appeal is whether, under the doctrine of merger by virtue of the agreed judgment in the Federal court, the rights of appellants as warrantees under the mineral deeds from Charles Kulow and wife were extinguished and appellants were deprived of their rights of recovery of an after acquired title. The nature of the doctrine of merger and its limitations are well stated in Volume 34, Corpus Juris, pages 752-754, as follows: “Sec. 1163 (b). Doctrine of Merger. A claim or demand, being put in suit and passing to final judgment, is merged or swallowed up in the judgment, loses its vitality, and cannot thereafter be used either as a cause of action or as a set-off, unless the statute otherwise provides; and this rule applies to a final decree of a court of equity. Moreover, as a general rule all the peculiar qualities of the claim are merged in the judgment, which then stands on the same footing as all other judgments. And these rules apply to all species of demands, including contracts, bonds, and promissory notes, but not, according to the weight of authority, a judgment on which a new judgment is recovered. *321 “Limitation of Doctrine. The doctrine of merger will not, however, he carried any further than the ends of justice require; the judgment does not annihilate the debt or destroy its character as evidence, nor does it deprive the creditor of his right to resort to a fund held by a trustee, or to avail himself of a lien or security held for the debt; and when the essential rights of the parties are influenced by the original contract, the court will look behind the judgment for the purpose of ascertaining what the original contract was.” In the case of Murphy v. Manning, 134 Mass. 488, it was held that a judgment does not obliterate the essential features of the obligation on which it was rendered. In the case of Gould v. Svendsgaard, 141 Minn. 437, 170 N.W. 595, 596, it was held that “the law of merger does not forbid all inquiry into the nature' of the cause of action. If the prevailing party was entitled to certain privileges, or exemption from certain burdens, under his contract he may be entitled to the same privileges and exemptions under his judgment. Whenever justice requires it, the judgment will generally be construed not as new debt but as an old debt in a new form.” The agreement of compromise and settlement, on which the judgment in the Federal court was based, fixed and established the rights of the parties in the land in controversy. It is silent as to the covenants of warranty contained in said mineral deeds. Its effect was to deny to Ku-low and wife a cancellation of the deeds of a 1/4 undivided interest in said land, and to leave the covenants of warranty of Ku-low and wife, insofar as they applied to the 1/4 interest which was vested in appellants, undisturbed. The decree entered in the Federal court carried out the terms of the compromise agreement. It follows, we think, that the doctrine of merger has nb application in the instant case, since the covenants of warranty, in so far as they applied to the interests retained by appellants, were not in issue in that case — and that under the terms of said judgment the two corporations retained the same character of title to the mineral estate in said land as was vested in them under the mineral deeds from ICulow and wife, in 1931. It follows from the above conclusions that the judgment of the trial court must be reversed and judgment here rendered in favor of appellants. Reversed and rendered.