author: COLLINGS, Justice.

text:
    E. J. McCURDY, Jr., Appellant, v. J. W. KING, Appellee.
    No. 3742.
    Court of Civil Appeals of Texas. Eastland.
    July 13, 1962.
    Rehearing Denied July 27, 1962.
    E. G. Aycock, Ft. Worth, for appellant.
    McMahon, Smart, Sprain, Wilson & Camp, Abilene, for appellee.
   COLLINGS, Justice.

This is a plea of privilege case. J. W. King brought suit for damages against E. J. McCurdy, Jr., for alleged anticipatory breach of a written contract. In an amended petition plaintiff sought judgment for damages in the total amount of $14,000.00, for an additional sum of $4,000.00 as attorney’s fees and “for quieting of his title and the removal of the cloud — thereon by defendant’s actions.” McCurdy filed a plea of privilege to be sued in Tarrant County, the alleged place of his residence. The plea of privilege was overruled and Mc-Curdy has appealed.

Appellee King filed an original and an amended controverting affidavit claiming venue in Haskell County under the provisions of Subdivisions 5 and 14, Article 1995, Vernon’s Ann.Texas Civ.St. The contract in writing relied upon by appellee as the basis of his suit was substantially as follows:

“May 24, 1961
“Mr. E. J. McCurdy, Jr.
“1214-15 First National Bank Building
“Fort Worth, Texas
“Dear Mr. McCurdy:
“This letter is to set out and clarify a verbal deal made between us of this date.
“Subject to the following Conditions I will assign to you or your assigns an undivided three-fourths (¾) Working Interest in the following described acreage.
(Description of two tracts of land of a total acreage of approximately 1219 acres located in Haskell County.)
“I am to drill a well on above acreage to fully test the Palo Pinto Reef (Canyon) but not to exceed a maximum depth of 3500 feet, production at a lesser depth or otherwise, unless mutually agreed to run pipe at a lesser depth.
“Upon completion to total depth in this first test well you are to pay to me the sum of $17,500.00. You are to pay all third party services incurred in the drilling of this well including surveying location, mud, cementer, dirt work, tests, cores, logs, damates, etc., except that I will furnish all the surface casing that is necessary for it.
“If first well is productive of oil or gas we will enter into a mutually satisfactory operating agreement. Each shall be responsible for his pro-rata share of all completion costs, future drilling, completion and operating costs of the development of both leases.
“If this is your understanding of our agreement, please sign below in the space so provided.
“Yours very truly,
“s/J. W. King
“J. W. King
“ACCEPTED & AGREED THIS
“24th DAY OF MAY, 1961
“s/ E. J. McCurdy, Jr.
“E. J. McCurdy, Jr.”

Appellee alleged in his pleadings as plaintiff that subsequent to the execution of the above writing appellant repudiated same, thus making himself guilty of an anticipatory breach of the contract in its entirety; that in entering into the contract the parties contemplated a test well would be drilled on the land described, and if appellant had not breached the contract appellee would have drilled the test well with his own rig and have earned, over and above the expense of drilling, the sum of $9,500.-00, and in addition would have earned as his own property a ¼⅛ working interest in the leases in question. In his first amended original petition appellee prayed judgment against appellant for his damages and “for quieting his title and the removal of the cloud cast thereon” by appellant’s actions.

Appellant presents two points in which it is urged that the court erred in overruling his plea of privilege to be sued in the county of his residence because venue was not, as contended by appellee, fixed in Haskell County under the provisions of Subdivision 5 of the venue statute, and was not fixed in Haskell County by virtue of the provisions of Subdivision 14 of the statute.

Contrary to appellee’s contention, the contract in question does not expressly name any county or definite place therein in which any obligation sued upon is to be performed, and therefore venue does not lie in Haskell County under the provisions of Subdivision 5. Appellee admits that if the only obligation of appellant under the writing was to pay $17,500.00 upon completion of the test well, that venue would not, by reason of that obligation alone, be maintainable in Haskell County, because there was no provision in the contract that the payment should be made in Haskell County. Appellee contends, however, that a reasonable construction of the contract obligates appellant to furnish or bear the expenses of all third party services incurred in drilling the well and to furnish or bear the expenses of surveying location, mud, cementer, dirt work, tests, cores and logs, and damages. Appellee urges that these services could only be furnished in Haskell County where the well was to be drilled and that appellant therefore obligated himself by the contract to do and perform such acts in Haskell County. We cannot agree with this contention. The obligation of appellant under the contract was to pay certain specified expenses and no particular place is named for the performance of such obligation.

Appellee further contends that venue is properly maintainable in Haskell County under the provisions of Subdivision 14. In this connection appellee urges that his pleadings as set out in his first amended original petition alleges a cause of action to quiet appellee’s title to land and that the record shows the land to be located in Haskell County. We cannot agree with this contention. There are two requirements necessary to bring a case within the provisions of Subdivision 14: (1) the nature of the suit must come within the terms of the statute and, (2) the land must be situated in the county in which venue is claimed. The question whether the nature of the suit complies with the statute is determined by the allegations of the plaintiff’s pleadings. A consideration of appel-lee’s pleadings in the instant case shows that the nature of his suit was not one for the recovery of lands, or for damages thereto, or to quiet title thereto. Land is described in the contract which appellee set out as the basis for his alleged cause of action but appellee’s pleadings do not show that he is seeking to recover land or to quiet title to land or to recover for damages to land. Appellee’s prayer does ask “for quieting of his title and removal of the cloud cast thereon by defendant’s actions.” But his pleadings as a whole show that the relief he seeks is damages. The damages he seeks to recover are not damages to land, but are damages alleged to have been sustained by him because of appellant’s alleged breach of an obligation to pay money. Appellee’s pleadings do not indicate that he even owned the land described in the contract sued upon. What appellee alleged was that because of appellant’s breach of the contract he was unable to earn an undivided ½⅛ working interest in the leases on said land and was unable to earn the profit he would have made by the drilling of the test well, “but on the contrary had to obligate himself for the purchase of such interest — The nature of this suit as shown by appellee’s pleadings does not come within the provisions of Subdivision 14.

Appellant’s points are well taken. The judgment of the trial court is reversed and the cause remanded with instructions to sustain appellant’s plea of privilege and to enter an order transferring said cause of the proper court of Tarrant County.


source: Caselaw Access Project

author: GRISSOM, Chief Justice.

license: Public Domain

text:
    HOUSTON NATURAL GAS CORPORATION et al., Appellants, v. Oscar WYATT, Jr., Appellee.
    No. 3714.
    Court of Civil Appeals of Texas. Eastland.
    June 1, 1962.

      Fulbright, Crooker, Freeman, Bates & Jaworski, Houston, Keys, Russell, Keys & Watson, I. M. Singer, City Atty., Corpus Christi, for appellants.
    Lewright, Dyer & Redford, William H. Darden, Corpus Christi, Hofheinz, Sears, James & Burns, Houston, for appellee.
   GRISSOM, Chief Justice.

Oscar Wyatt, Jr., as a taxpayer of the City of Corpus Christi, sued Houston Natural Gas Corporation, the City of Corpus Christi and its officials to restrain them from executing a contract which was alleged to be void because not submitted to competitive bids. The contract provided for gas to be sold to the city by Houston Natural Gas Corporation and to be paid for only out of funds derived from the resale of the gas by the city. The defendants, by pleas in abatement and otherwise, challenged the authority of Wyatt to maintain the suit. The challenges were overruled. Defendants were enjoined and have appealed.

Appellants’ first contention is that Wyatt, as a city taxpayer, did not have authority to maintain the suit. The appellee relies upon Section 2, Article 2368a, Vernon’s Ann.Rev.Civ.St.Texas and Section 18, Article IX, of the city charter of Corpus Christi for authority to maintain the suit as a taxpayer. Article 2368a, Section 2, provides that no city shall enter into such a contract without submitting the proposed contract to competitive bids. The last paragraph provides that any such contract made without competitive bids shall be void and “performance of same and * * * payment of any money thereunder may be enjoined by any * * * taxpaying citizen of such * * * city.” Section 18, Article IX, of the city charter provides that “Any citizen who is a property taxpayer of the City of Corpus Christi may maintain an action * * * to restrain the execution of any illegal * * contract * * Wyatt contends that said statute and charter provision authorize him to sue as a taxpayer, regardless of the fact that the consideration is payable only out of gas revenues. Appellants say that said statute and charter provision do not authorize a taxpayer to bring such a suit unless he has suffered or will suffer some damage peculiar to himself or the consideration for the contract is to be paid from tax funds. Mr. Wyatt contends that when he alleged that he brought the suit as a property taxpayer of the city he brought himself within the provisions of said statute and charter provision and that he was not required to allege or prove that the consideration for the contract was to be paid from tax funds or that he would suffer damage peculiar to himself. He says this conclusion is required by City of Corpus Christi v. Mireur (Writ Ref.), Tex.Civ.App., 214 S.W. 528. The court did say that the award of a depository contract to the lowest bidder was in the face of the rights of the taxpayers of the city, “who are directly interested in receiving the highest rate of interest obtainable for money on deposit by the city”, and that the plaintiff taxpayers had such an interest as could be enforced by them. It further said that “the question upon which the right of the individual taxpayer to sue to prevent the making of an illegal contract would usually turn is whether or not the execution of the contract will financially affect the taxpayer.” Appellee says that neither the decision in the City of Corpus Christi v. Flato, Tex.Civ.App., 83 S.W.2d 433 (Writ Dis.) nor Hayward v. City of Corpus Christi, Tex.Civ.App., 195 S.W.2d 995 (Ref. N.R.E.), militate against his conclusion that said charter provision gave him the right to sue as a taxpayer, despite the fact that the contract is payable only out of utility funds. In the Flato case a property taxpayer of Corpus Christi brought suit for himself, as a taxpayer, and for the city. Much of the decision is relative to a determination that a taxpayer sues for himself, not for the city. In other words, where a taxpayer is authorized to sue he sues to prevent damage to himself and not for the city. Flato, not only sued for the city, he also brought the suit for himself, as a taxpayer, to restrain payment of bonds alleged to be void. The trial court dismissed his case. Harris, both as an individual taxpayer and as relator for the city appealed. The judgment dismissing his case was affirmed by the Coui't of Civil Appeals and the Supreme Court dismissed his application for writ of error. If said charter authorized him to sue as a taxpayer without showing that the contract was payable out of tax funds or that he would suffer damage peculiar to himself, his suit should not have been dismissed.

In City of Goose Creek v. Hunnicutt, 118 Tex. 326, 15 S.W.2d 227, a resident of a city, who had only such interest in the result of an election as was had by all residents and the public at large, sued the mayor and others to contest an election. A statute provided that any resident of the city might contest the validity of such an election. The Commission, in an opinion adopted by the Supreme Court, said that Hunnicutt had no interest distinct from that of the general public in the result of the election; that, regardless of said statutory grant of authority to any residents to bring such a suit, “because of constitutional restrictions, it [could not] have [the] effect to authorize a suit by a private citizen in respect of matters which concern the public exclusively.”

In City of San Antonio v. Stumburg, 70 Tex. 366, 7 S.W. 754, 755, our Supreme Court, in 1888, said:

“We think it a principle established by the overwhelming weight of authority in the courts of all countries subject to the common law that no action lies to restrain an interference with a mere public right, at the suit of an individual who has not suffered or is not threatened with some damage peculiar to himself.”

See also Altgelt v. City of San Antonio, 81 Tex. 436, 17 S.W. 75, 13 L.R.A. 383 and Polly v. Hopkins, 74 Tex. 145, 11 S.W. 1084, 1085.

In West Texas Utilities Co. v. Smith, Tex.Civ.App., 168 S.W.2d 665, (Writ Ref.), it was held that a city taxpayer did not have such an interest in the city’s contraer as would authorize him to maintain a suit to enjoin its execution when the consideration was payable only from utility revenues.

In Estes v. City of Granbury, Tex.Civ.App., 314 S.W.2d 154 (Writ Ref.), it was held that a city taxpayer could not maintain a suit to enjoin issuance of utility bonds by the city without alleging an injury peculiar to himself.

In Hoff v. Westhoff, Tex.Civ.App., 102 S.W.2d 293, the suit was by a voter and taxpayer of a city to contest an election to determine whether the city should issue revenue bonds for an electric system. He alleged the bonds were void for lack of competitive bids. The taxpayer relied upon the provision in Article 2368a that payment of bonds illegally issued might be enjoined by any taxpaying citizen of the city. The court held that a property taxpaying citizen, who showed no damage peculiar to himself, could not maintain such a suit, notwithstanding the fact that said statute purported to give any taxpaying citizen the right to enjoin payment of such bonds. The Supreme Court refused a writ of error.

In Hazelwood v. City of Cooper, Tex.Civ.App., 87 S.W.2d 776 (Writ Ref.), it was held that a statute authorizing a taxpaying citizen to enjoin payment of obligations created by a city in violation of the Bond and Warrant Act referred only to obligations payable from tax funds. See also Fisher v. City of Bartlett, Tex.Civ.App., 76 S.W.2d 535 (Writ Dis.), 88 S.W.2d 1068 (Writ Dis.); Powell v. City of Baird, Tex.Civ.App., 132 S.W.2d 464; Wood v. City of Victoria, 18 Tex.Civ.App. 573, 46 S.W. 284, 287 (Writ Ref.), and Womack v. City of West University Place, Tex.Civ.App., 32 S.W.2d 930.

It is evident that it has been held, in effect, with the approval of our Supreme Court that appellee does not have authority to sue as a taxpayer by virtue of Article 2368a, Section 2. We think the effect of the decision in City of Corpus Christi v. Flato, Tex.Civ.App., 83 S.W.2d 433, is that he was given no right to sue as a taxpayer by the city charter. The same reasoning that compelled an adverse holding as to Article 2368a requires a like decision relative to a grant of authority by said charter provision. We conclude that Wyatt, as a taxpaying citizen of Corpus Christi, cannot maintain this suit to enjoin execution of the contract in question, which is payable only out of gas revenues.

The judgment is reversed and the suit is dismissed.


author: POPE, Justice. MURRAY, Chief Justice POPE, Justice.

text:
    CITY OF WESLACO, Texas, et al., Appellants, v. GENERAL TELEPHONE COMPANY OF THE SOUTHWEST, Appellee.
    No. 13820.
    Court of Civil Appeals of Texas. San Antonio.
    Nov. 29, 1961.
    Rehearing Denied July 5, 1962.

      Holdridge & Preston, San Angelo, Smith, Mcllheran & Jenkines, Weslaco, for appellant.
    Holdridge & Preston, San Angelo, for appellee.
   POPE, Justice.

This is a telephone rate case. The trial court permanently enjoined the City of Weslaco, a home rule city, from enforcing the terms of a rate regulatory ordinance enacted June 21, 1960. The injunction was granted upon General Telephone’s contention that the City had no power to regulate intra-state rates, and the local rates were confiscatory, as that term is used in rate cases. General Telephone Company of the Southwest v. City of Wellington, 156 Tex. 238, 294 S.W.2d 385, 389. We must determine (1) whether General Telephone exhausted its administrative remedy before resorting to the courts, (2) whether a Texas municipality has the power to regulate the rates for intra-state calls which originate among its inhabitants within the City, and (3) whether the depreciation, as an expense item was correctly and consistently computed by the court.

General Telephone exhausted its administrative remedy, and the trial court properly overruled City’s plea to abate the suit. Hearings began in January, I960, and proceeded intermittently on several occasions until June 21, 1960, when the City passed its ordinance fixing both intra-state and local rates. The ordinance was immediately effective. In the course of the hearings, City demanded certain information, particularly with respect to intrastate business. General Telephone steadfastly refused this information on the grounds that the City had no regulatory powers over intra-state rates, and information about long-distance business was irrelevant. Although the City passed the rate regulation ordinance, it undertook to reserve jurisdiction over rate matters for one year and until the requested information was furnished. General Telephone then filed this suit and the trial court correctly overruled City’s plea in abatement. As stated in Glen Oaks Utilities, Inc. v. City of Houston, 161 Tex. 417, 340 S.W.2d 783, 785:

“An administrative body cannot, by reserving for itself the power to change a ruling, deprive the courts of jurisdiction to the detriment of the parties injured by the ruling. Railroad Commission of Texas v. Houston Chamber of Commerce, 124 Tex. 375, 78 S.W.2d 591; Southern Surety Co. v. Hendley [Handley], Tex.Civ.App., 226 S.W. 454.”

City, under existing authorizations, does not have rate regulatory powers over intra-state calls. A delegation of such powers must be expressed by clear language or by clear implication. Railroad Commission of Texas v. Houston Natural Gas Corp., 155 Tex. 502, 289 S.W.2d 559; Texas-Louisiana Power Co. v. City of Farmersville, Com.App., 67 S.W.2d 235, 238; Coleman Gas & Oil Co. v. Santa Anna Gas Co., Com.App., 67 S.W.2d 241, 242; City of Baytown v. General Telephone Company of the Southwest, Tex.Civ.App., 256 S.W.2d 187, 190. Such delegation of powers can not extend beyond the territory of the city or its inhabitants. City of Arlington v. Lillard, 116 Tex. 446, 294 S.W. 829. The legislative delegation of powers with respect to local service is apparent, but it is also apparent that the Legislature has treated local and long-distance service as distinct and different problems.

The power to regulate telephone rates comes from Articles 1119, 1124 and 1175(12), Vernon’s Tex.Civ.Stats. Under those statutes the business of providing local service may be authorized by a franchise previously granted by a municipality. A franchise is a special privilege conferred by the government upon some one, which privilege does not belong to citizens generally. State v. Austin & N. W. R. Co., 94 Tex. 530, 62 S.W. 1050; 86 C.J.S. Telegraph, Telephone, etc. § 12. In some instances, without such a franchise the privilege can not be exercised. West Texas Utilities Co. v. City of Baird, Tex.Civ.App., 286 S.W.2d 185. It is, of course, without dispute that Weslaco has granted a franchise to General Telephone to provide local service to the inhabitants of that City.

Intra-state service, on the other hand, may be furnished without the grant of a franchise. This important distinction between local service and intra-state service is made in Athens Telephone Co. v. City of Athens, Tex.Civ.App., 163 S.W. 371. Accord, Athens Telephone Co. v. City of Athens, Tex.Civ.App., 182 S.W. 42. A city may not interfere with such service and the service may be furnished without a franchise, as a matter of right. In contrast with Articles 1124 and 1175(12), which are the source of municipal power to regulate local service, is Article 1416, which authorizes intra-state service without the grant of a franchise. That statute applies to long-distance telephone companies. San Antonio & A. P. Ry. Co. v. Southwestern Telegraph & Telephone Co., 93 Tex. 313, 55 S.W. 117, 49 A.L.R. 459. Except for such regulations as will avoid inconveniences to a city in the use of its streets, it has been held that “the city had no authority to require the telephone company to accept its ordinances as a condition precedent to entering the city.” City of Brownwood v. Brown Telegraph & Telephone Co., Tex.Civ.App., 152 S.W. 709, 106 Tex. 114, 157 S.W. 1163. The Brownwood case concerned a company that was furnishing intra-state telephone service from Goldthwaite to Temple and desired to erect facilities along the streets and alleys of Brownwood. The Court stated that “the right of the telephone company to pass through the city or town, over and upon its streets, is absolute, and a city has no authority to deny that right.” We regard it settled, therefore, that the powers of cities over local telephone service are different from and broader than their powers over intra-state service. A franchise, though non-exclusive, may be required for local service but not for intra-state service.

We shall now examine in some detail the two articles upon which Weslaco, as a home rule city, relies for its power to regulate intra-state rates. Article 1175 (12) authorizes the City:

“(1) To prohibit the use of any street, alley, highway or grounds of the city by any telegraph, telephone, elec-trie light, street railway, interurban railway, steam railway, gas company, or any other character of public utility without first obtaining the consent of the governing authorities expressed by ordinance and upon paying such compensation as may be prescribed and upon such condition as may be provided by any such ordinance. (2) To determine, fix and regulate the charges, fares or rates of any person, firm or corporation enjoying or that may enjoy the franchise or exercising any other public privilege in said city and to prescribe the kind of service to be furnished by such person, firm or corporation, and the manner in which it shall be rendered, and from time to time alter or change such rules, regulations and compensation; * * *. In order to ascertain all facts necessary for a proper understanding of what is or should be a reasonable rate or regulation, the governing authority shall have full power to inspect the books and compel the attendance of witnesses for such purpose.” (Numerals are added.)

In the first sentence of the quoted statute, there is a requirement that a public utility, before it can use the streets and other grounds of the city, must have municipal consent and must pay for the privilege. This is a lawful requirement for local service, but not for intra-state service. The second sentence specifically states the powers which flow to the city as a result of its grant of a franchise. This statute grants the power over that which is franchised, meaning local service which can be performed only upon the grant of a franchise. The statute says more. It states, not merely that the power to regulate rates applies to franchised corporations, but further limits regulatory powers geographically by adding, “in said city.” See City of Arlington v. Lillard, supra.

The other claimed source of power is Article 1124, which provides:

“(1) Any city having a special charter or a charter adopted or amended under the provisions of chapter 13 of this title, (2) and having authority under its charter to determine, fix and regulate the charges, fares or rates of compensation to be charged by any person, firm or corporation (3) enjoying a franchise in said city, shall in determining, fixing and regulating such charges, fares or rates of compensation, base the same upon the fair value of the property of such person, firm or corporation devoted to furnishing service to such city, or the inhabitants thereof, * * ("Numerals are added.)

City meets the first requirement stated in the statute. When we come to the second, however, we find that the charter grant of power is no broader than these statutes which we are parsing. In fact, its powers are there stated to reach a corporation which exercises any right of franchise of public privilege. Intra-state service is not dependent upon any right of franchise of public privilege. At this point, the City fails under Article 1124. The third requirement "is a statutory statement that rate regulation may be exercised over a corporation enjoying a franchise in said city. Because General Telephone does have a franchise in said City, its rates may be regulated. The franchise, however, is essential to local service, not intra-state service. We conclude that the powers over rate regulation are co-extensive with the powers over local service which the City possessed in granting its franchise. The powers do not include intra-state service. See, General Telephone Co. of the Southwest v. City of Wellington, 156 Tex. 238, 294 S.W.2d 285, 291; Southwestern Bell Telephone Co. v. City of San Antonio, 5 Cir., 75 F.2d 880, 883.

The historical reasons for treating local and intra-state service differently are explained by City of Cherokee v. Northwestern Bell Telephone Co., 199 Iowa 727, 202 N.W. 886. Iowa is the only State, other than Texas, which has established no method for state-wide regulation of telephone rates. There, as in Texas, local service may be dependent upon a franchise while intra-state service is not. We conclude that the City has no regulatory powers over intra-state long-distance telephone service, and the trial court properly enjoined the City from enforcing these portions of the rate regulatory ordinance.

The trial court also enjoined the City’s regulation of local rates, because such rates are confiscatory. We reverse this part of the judgment. To fix the rate of return one must determine (1) the fair value of the plant, (2) the operating revenues, and (3) the operating expenses. The difference between the last two items is the net operating income. Those earnings must produce a fair return of the fair value of the plant. The parties do not dispute the fair value as fixed by the trial court at $675,245.33. The operating revenue from local service during 1959 was $197,-878.90. The operating expense for 1959 was $166,280.00. The dispute between the parties concerns the amount of operating expenses, and that argument essentially narrows down to the annual depreciation item which was fixed at $37,592.67 for 1959, the test year. City urges that the depreciation item is loaded with excess expense, which if correctly computed would show less expense, more income, and a higher rate of return.

Depreciation is an important element which enters into the determination of the fair value for the rate base. It is also important in determining the annual depreciation expense. Depreciation can be determined by several methods. One method may be called the accountant’s method of amortizing costs. By this method there is a systematic distribution of the cost or other basic value of tangible capital assets, less salvage over the estimated useful life of the unit. The original cost of an asset is treated as a prepaid operating expense to be apportioned among the years of its life. Annual depreciation is the portion of the total charged under such system that is allocated to the year. The difference between the cost of an asset and the total of the accumulated depreciation charges made to date against the asset is called the book value or the unamortized cost. These annual depreciation charges may be determined in several methods. One method is the straight-line method. By this method, the annual depreciation is computed by dividing the book cost or other basic value, less salvage, by the estimated useful life, of the item involved.. Accrued accumulation under this system for all previous years was $128,626.08, or 18.02 per cent of the original plant cost. City urged this method in working out the rate base; General Telephone attacked it as unrealistic.

A second method for determining depreciation may be called the appraisal concept of depreciation. This is observed depreciation. Appraisal engineers optically inspect and give their judgment of the present cost for replacement of the plant new. Appraisers also give their judgment of the per cent relation of the existing plant in its present condition to like items reconstructed new. The difference between the percentages thus estimated and one hundred per cent is called depreciation. The mathematics of the depreciation computation may be stated otherwise. The appraisers estimate the present cost of replacing the property new. They also estimate the present fair market value of the existing plant. The difference between the two estimates represents the accrued appraisal depreciation. In this case accrued appraisal depreciation was estimated at $72,915.84, or 9.02 per cent of the plant value reconstructed new. General Telephone urged this method in working out the rate base. City claimed that it was too hypothetical.

No single system may universally be called the only correct one, but whatever system is used, it should be consistently used. If one system which produces a low depreciation is used in determining the rate base; a different system which produces a high depreciation should not be used in determining the annual expense. The rule of consistency is enjoined upon rate makers in Railroad Commission v. Houston Natural Gas Corporation, 155 Tex. 502, 289 S.W .2d 559:

“Where the property rate base is based in part upon an adjusted reproduction cost new, the proper treatment of depreciation is both complex and difficult. In the company’s accounts at bar some depreciation is charged as an annual expense item. We have not examined it in detail and the state has not attacked this so we do not pass upon it. The item of depreciation of a given piece of property appearing in current expenses for rate purposes should be closely correlated with the ‘fair value’ appraisal of the same piece of property from year to year, and the whole should be consistent.”

The Court in Iowa-Illinois Gas and Electric Company v. City of Fort Dodge, 248 Iowa 1201, 85 N.W.2d 28, 47-49, observed this rule of consistency. In that case, there was proof of both an appraisal depreciation and of straight-line depreciation. The Court expressed little confidence in the evidence which proved appraisal depreciation, and therefore used straight-line depreciation. In doing so, however, it consistently used that method both for the rate base and for the annual depreciation expense item. Inconsistent methods for computing depreciation were discovered in Los Angeles Gas & Electric Corporation v. Railroad Commission, D.C., 58 F.2d 256, 261. See also, Denver Union Stock Yard Co. v. United States, D.C., 57 F.2d 735, 745.

The trial court found that the local rates fixed by the City were confiscatory, but it did so by using two inconsistent methods of depreciation. It used the appraisal method for proof of the rate base and the straight-line method for proof of annual expenses. We shall first examine the proof with respect to the rate base. City claimed the benefit of accrued straight-line depreciation of $128,626.08 and asked that it be subtracted from the original plant investment. General Telephone, on the other hand, insisted upon the appraisal method which showed accrued depreciation of only $72,915.84, and asked that it be subtracted from the estimated value of the plant reconstructed new. Thus was drawn the line. The City insisted upon high straight-line depreciation on a low original cost. General Telephone insisted upon a low appraisal depreciation on a high replacement value. The court solved the dispute by fixing the fair value for the rate base at the exact arithmetic mean between the two contentions. To this were added two items which were not disputed, and that brought the rate base to $675,245.-33.

The rate base was reached by consideration of four elements. Those four elements were approved in Railroad Commission v. Houston Natural Gas Corporation, supra, by its statement that the value for plant equipment is “a reasonable balance between the original cost less depreciation and replacement cost new less an adjustment for present age and condition.” The trial court accordingly reached a reasonable balance between (1) original cost (2) less straight-line depreciation, as urged by the City, and (3) appraisal of the reproduction cost new, (4) less appraisal depreciation, as urged by General Telephone. The first two elements produced a low value; the last two produced a high value. By taking all factors into consideration a rate base was produced which is supported by the evidence, is accepted by both parties, is not disputed, and both parties are now anchored to it.

Depreciation, as an annual expense item, was computed by a method which was inconsistent with the method used in arriving at the rate base. The trial court did not take into consideration the depreciation computed by both the appraisal method and the straight-line method. It did not strike a mean between theories which produced low and high depreciation figures. In fact, the trial court had no evidence before it by which it could arrive at depreciation as an annual expense by the same method it used in fixing accrued depreciation for determining the rate base. General Telephone abandoned its ideas of appraisal depreciation when it came to the matter of annual depreciation for the test year, 1959. There is no proof of annual depreciation grounded on that method. Annualized appraisal depreciation requires proof of two appraisals, one at the beginning of the test year and another at the end of the year. General Telephone turned to the method it had previously rejected, and its proof of annual depreciation is by the straight-line method. The result was that it used low appraisal depreciation to keep the rate base high, and the straight-line depreciation to keep its income low.

The depreciation for the 1959 annual expense item is excessive. The figures in this case are instructive. While relying upon appraisal depreciation to prove the rate base, General Telephone proved that accrued depreciation was only 9.02 per cent of the plant reconstructed new. This amounted to $72,915.85. By changing to straight-line depreciation, its proof, accepted by the court, was that for the one year, 1959, the plant depreciated 5.14 per cent of its value reconstructed new. This amounted to $37,-592.67. Comparing the two results, the figures are disproportionate. More than one-half (5.14%) of all accrued depreciation (9.02%) occurred during the one test year. $37,592.67 of the accrued depreciation ($72,915.85) occurred during that year. This is enough to show that if appraisal depreciation had been annualized, it would have shown a smaller depreciation. If, on the other hand, depreciation for fixing the rate base had been by the straight-line method, and the plant value reconstructed new had been depreciated 5.14 per cent per year for several years, there would have been much higher accrued depreciation. Consistency would argue that if General Telephone used appraisal depreciation for computing the fair value it should have used appraisal depreciation to compute annual expense. If, on the other hand, it used a straight-line method to compute expense, it should have used a straight-line method to compute the fair value. Appraisal depreciation was very low. Straight-line depreciation was high. General Telephone has used low appraisal depreciation to keep the rate base high, and the straight-line depreciation .to keep its income low. If a mean between the high and low depreciation methods was used in arriving at the rate base, we see no sound reason that the low element should be dropped and the high element used exclusively in arriving at the annual expense.

The rates which were enjoined provide a return of 4.68 per cent on the fair value. That return, however, is determined by subtracting $37,592.67 as annual depreciation from the total operating revenues. The figure is too high in some unknown amount. We can not know it, for there is no proof of annualized appraisal depreciation, an important element, considered in reaching the rate base and disregarded in computing the expenses. We know that the depreciation as an expense item is excessive, and to the extent that it is excessive, there was more income and a return in excess of 4.68 per cent.

We observe that in computing the straight-line depreciation for the annual expense, General Telephone has depreciated a plant value of $730,997.01. We are unable to determine how this figure was reached. It is not the original investment, depreciated or undepreciated; nor the reproduction cost new, depreciated or undepreciated; nor the mean between the two. In our opinion, General Telephone has failed to discharge its burden to prove by consistent methods that the local rates are confiscatory. The permanent injunction should be dissolved.

That part of the injunction which enjoined enforcement of the intra-state rates is affirmed. That part of the injunction which enjoined the City from enforcing the local rates is reversed and the permanent injunction is dissolved.

MURRAY, Chief Justice

(dissenting in part).

I concur in the opinion of the majority wherein it holds that (1) the Telephone Company exhausted its administrative remedy before resorting to the courts, and (2) the City of Weslaco did not have the power to regulate the rates for intra-state calls which originate among its inhabitants within the City, but I do not concur in the holding of the majority that the depreciation deduction for the year 1959, the test year, was not supported by the evidence, and that the trial court’s error in using this item in determining the net revenue of the Telephone Company requires a reversal of the judgment.

The majority opinion on rehearing holds: “The issue is now narrowed to the determination of the depreciation rate, which in turn will control the amount of the depreciation expense. If the court fixed that rate too high, the expense for 1959 is too high, and the net income for 1959 is correspondingly too low.” The majority decided that the annual depreciation of the plant for the year 1959, in the sum of $37,592.67, was too high, and therefore reversed the judgment and remanded the cause.

The majority find that the value of the local telephone plant in 1959, for rate base purposes, was correctly found to be the sum of $675,245.33; that the operating revenue from local service during 1959 was $197,-878.90, and that the operating expense for 1959 was $166,280.00, with the exception that the depreciation of $37,592.67 was too high, thus causing the net revenue to be too low.

The majority say: “The trial court erred because it fixed the annual depreciation rate by a method which is inconsistent with that used in fixing the rate base and the plant value.” In my opinion, this is no reason for a reversal of the trial court’s judgment. The Telephone Company would have preferred to take the same figure for a rate base value as it took for fixing the depreciation value, but in deference to the rule laid down in Railroad Commission v. Houston Natural Gas Corp., 155 Tex. 502, 289 S.W.2d 559, the Telephone Company reluctantly agreed that the appraised value of the plant in 1959 might be correlated with the original costs, less straight-line depreciation on a 50% basis, thus lowering the rate base value of the plant from $735,033.08 to $675,245.33, which would make their annual percentage of income at a higher rate, so the taking of the rate base value at $675,-245.33, instead of $735,033.08, inured to the benefit of the City.

The evidence shows without dispute that the Telephone Company was entitled to a depreciation in the sum of $37,592.67. This was based upon the testimony of a number of experts whose testimony stands undisputed and, so far as I understand the record, unobjected to. Appellants’ Exhibit No.' 14 demonstrates how this figure was computed, To clarify this matter, I copy Exhibit 14:

It will be seen that various rates of depreciation for various kinds of ■ property were used, one as low as 2%, and one as high as 13.70%. The experts stated that these rates of depreciation were furnished by the Federal Communications Commission and were correct. There was no evidence to the contrary.

The total plant value of $730,997.01, as used in plaintiff’s Exhibit 14, was the average of reproduction cost new before adjustment for present age and condition and gross book cost for all depreciable property accounts. In this connection, neither land nor vehicles and other work equipment are depreciable accounts under the Uniform System of Accounts, as prescribed by Federal Communications. The experts testified that unless the Telephone Company is allowed to recover this value during the useful life of the plant it is not recovering the proper depreciation. This testimony was not disputed. If present values should recede in future years, the City would be • entitled to a new appraisal of the local plant

The majority have cited with approval the case of Iowa-Illinois Gas and Electric Co. v. City of Fort Dodge, 248 Iowa 1201, 85 N.W.2d 28. In that case a temporary injunction bond had been given by the Gas Company and certain refunds were to be made out of this bond. Much of the discussion in the opinion relates to calculating these refunds, a matter not here involved. There is some very interesting language found in that opinion. It is there stated:

“One question, then, is how much weight is to be given to original cost and how much to present-day construction costs, to arrive at a properly-judged figure as to present value. We think that where construction costs have been substantially level for a long period of time, perhaps for a large part of the average life expectancy of a utility property, original cost would merit major consideration. Where fluctuations of price levels are sharp, but seem likely to balance out over a short term, a ‘50-50’ weighting such as that given by the trial court would be completely tenable. However, where construction costs have fallen more or less continuously over a substantial period of time, or have risen more or less continuously over such a period, original cost can be given weight only to the extent that a return to the same level appears reasonably imminent.
“It would appear that the level of construction costs which can be expected to prevail in the foreseeable future would be a floor below which the pricing of the present value of a utility property could not go without entering the area of possible confiscation. In this, as in any other constitutional inquiry, the duty of the trial court is to determine the facts from the material and competent evidence before it, and not on its own impulse. We believe that in its approximate ‘50-50’ fair value determination, unsupported in the record, the trial court was in error.” (Emphasis mine.)

Under the conditions that exist in this country today, there is no one who is so optimistic as to believe that in the foreseeable future construction costs will soon return to levels of 1956. The general belief is that costs are going to climb higher. There is nothing in the record that contradicts this present trend, known to everybody. The trend in the foreseeable future is that prices will go higher and higher.

I am of the opinion that from the undisputed evidence the court properly held that the depreciation item for the year 1959 was $37,592.67.

The rate ordinance adopted in June, 1960, was not retroactive in its effect. It fixed future rates for the Telephone Company and it is shown that under such rates the Company will not be permitted to make a fair return on the fair value of its local plant at Weslaco, and is therefore confiscatory and void. In my opinion, the trial court properly so held. I would affirm the judgment and put it into immediate effect.

My original dissenting opinion handed down on Nov. 29, 1961, is withdrawn and this opinion substituted therefor.

On Motions for Rehearing.

POPE, Justice.

Contrary to what we said in the original opinion, the plant value for depreciation purposes was correctly fixed by the trial court at $730,997.01. The record shows that the plant value was arrived at by computing the average between (1) the reproduction cost new before adjustment for present age and condition as urged by General Telephone, and (2) the gross book cost as urged by the City. Subtracted from each of those items in advance were land and certain equipment, which the parties agree should not be treated as depreciable items. General Telephone is entitled to recover that figure through depreciation, amortized over the life of the plant. Iowa-Illinois Gas & Electric Co. v. City of Fort Dodge, 248 Iowa 1201, 85 N.W.2d 28.

Hence, certain essential facts are settled. 1959 is the fair test year for the determination of net operating revenue and the operating expenses. General Telephone is entitled to a fair return on a rate base of $675,245.33. The plant value upon which General Telephone is entitled to compute its annual depreciation expense is fixed at $730,997.01. The trial court fixed not only the rate base, but also the plant value by giving equal weight to the appraisal methods urged by General Telephone and the non-appraisal methods urged by City. The issue is now narrowed to the determination of the depreciation rate, which in turn will control the amount of the depreciation expense. If the court fixed that rate too high, the expense for 1959 is too high, and the net income for 1959 is correspondingly too low.

The trial court erred because it fixed the annual depreciation rate by a method which is inconsistent with that used in fixing the rate base and the plant value. We do not hold that the straight-line accounting method of depreciation is a wrong method, nor do we hold that the appraisal method is the only right one. Both in proper context are correct methods. The court merged both methods in fixing the rate base and the plant value, and we approve that method. We do not hold that the trial court necessarily had to give equal weight to the methods urged by General Telephone and City. The court, perhaps could, and in a proper case should, give greater weight to the one or the other. In this case, however, we find that the court used both methods to arrive at a fair figure for two of the essential elements in the rate formula, but in fixing the annual depreciation rate it wholly abandoned the appraisal method. The inequity of this method is mentioned in our former opinion, but it can be further illustrated.

Exhibit 4 contains the evidence urged by General Telephone as the appraised value of the plant as of December 31, 1959. It shows the percent condition of the plant as of that date. This information was used by the trial court and is an essential part of the figure reached in both the rate base and the plant value. General Telephone’s proof of the annual depreciation rate is contained in its Exhibit 14. These were the rates used by the trial court. Depreciation was computed, not by giving weight both to appraisal and straight-line methods. Straight-line was used exclusively. This discloses that General Telephone used different methods for depreciating its property in connection with two significant elements in the result. When we place, side by side, the plant’s appraised depreciation, as found in Exhibit 4, and the straight-line depreciation, as found in Exhibit 14, we see the differences in the rates of depreciation produced by the methods. Buildings, under the appraisal method, on December 31, 1959, are ninety-seven per cent as good as new. For all time up to that date, they depreciated only three per cent. By shifting to the straight-line method, however, the buildings depreciate 2.25 per cent every year. Station connections, by appraisal, for all time up to December 31, 1959, depreciated only ten per cent, but by using the straight-line method, they depreciated fourteen per cent during 1959. Under the straight-line method, they depreciated more during 1959 than they had depreciated under the appraisal method for all time in the past. The other items are equally instructive.

The inconsistency is revealed by other proof offered by General Telephone. Its Exhibit 8 shows the appraised value of the plant as of March 31, 1959. This proof shows that the plant was 91.1 per cent as good as new. It had depreciated for all time in the past only 8.9 per cent. General Telephone further proved the appraised value of the plant as of December 31, 1959, nine months later. By that time, the plant had a total accrued depreciation of 9.02 per cent. During the nine-month period in 1959, therefore, the plant had depreciated only .12 per cent, a little more than one-tenth of one per cent. By shifting to the straight-line depreciation method, General Telephone proved that the plant depreciated 5.4 per cent during the twelve months of 1959. This was the figure taken by the trial court.

The court in fixing the annual depreciation wholly excluded any consideration of the method it had significantly considered in reaching the rate base and the plant value. The rate base and plant values were boosted by use of the appraisal method. The depreciation expense was also boosted by wholly excluding the low depreciation evidenced by the appraisal method. The net income for 1959 was correspondingly depressed. General Telephone failed to prove the appraisal depreciation for the twelve-, month period of 1959, and, in our opinion, the use of the appraisal method in two parts of the rate formula and its total exclusion in fixing the annual depreciation rate violated the admonition in Houston Natural Gas -Corporation, supra, that “The item of depreciation of a given piece of property appearing in current expenses for rate purposes should be closely correlated with the ‘fair value’ appraisal of the same piece of property from year to year, and the whole should be consistent.”

General Telephone argues that there was no point which attacks the depreciation rate. Both by point and argument, the matter is raised. Gleason v. Davis, 155 Tex. 467, 289 S.W.2d 228; Fambrough v. Wagley, 140 Tex. 577, 169 S.W.2d 478.

Both motions for rehearing are overruled and costs are taxed equally against the parties.

      . “Section 2: The Oity Commission of the City of Weslaco hereby retains jurisdiction of this rate hearing, until advised by General Telephone Company of the Southwest that the rates so fixed are agreeable to them for a period of one year, and further reserves jurisdiction to require the additional information necessary to make determination of all issues involved and to reduce the above rate schedule, if, after such additional evidence is produced, such reduction is fair alike to the Telephone Company and the subscribers of the Weslaco exchange.”

      . “Article 1416. Corporations created for the purpose of constructing and maintaining magnetic telegraph lines, are authorized to set their poles, piers, abutments, wires and other fixtures along, upon and across any of the public roads, streets and waters of this State, in such manner as not to incommode the public in the use of such roads, streets and waters.”

      . “Said City shall have the power to determine, fix or regulate the charges, fares, and rates of any person, firm or corporation exercising, or that may hereafter exercise any right of franchise of public privilege in said City, and to prescribe the kind of service to he furnished, the equipment to be used, the manner of which service shall be rendered and to change such regulations from time to time; that in order to ascertain all the facts necessary for a proper understanding of what is or should be reasonable rate or regulation, the governing authority shall have full power to inspect the books and other records of such person, firm or corporation and compel the attendance of witnesses for such purpose; * * *."

      . Accounting Method
      Plant Investment Depreciation Reserve Net Value
      Per Co. Books
      $701,690.33 $128,626.08 $573,064.25
      (18.02% depreciation)
      Appraisal Method
      Reproduction Cost New Per Cent Condition
      $807,948.92 90.98 or $72,915.84 $735,033.08
      (9.02% depreciation)
      Mean of the Two Methods $654,047.67
      Working Capital 8,147.57
      Materials and Supplies 13,049.09
      Rate Base $675,245.33

      .
      “Depreciation During The Year — Valuation Basis
      Let R.CN-1 — Cost of replacing plant at beginning of the year.
      KCN-2 = Cost of replacing plant at end of year.
      Yal-1 = Value at beginning of year.
      Val-2 = Value at end of year.
      Dep-1 = Depreciation existing at beginning of year.
      Dep-2 = Depreciation existing at end of year.
      Then (1) RCN-1 - Val-l = Dep-1
      (2) RCN-2 - Val-2 = Dep-2
      (3) Dep-2 - Dep-1 = Depreciation during the year.”
      Depreciation — History and Concepts in the Bell System, page 21 (1957).

      .
      Exhibit 4 Exhibit 14
      Appraisal Method Per cent condition as of Dec. 31, 1959 Straight-line Method for 1959
      Buildings 97% 2.25%
      Central Office Equipment 97 4.00
      Station Apparatus 90 6.00
      Station Connections 90 13.70
      Pole Lines 82 5.00
      Aerial Cable 90 4.00
      Underground Cable 96 3.00
      Aerial Wire 87 5.00
      Underground Conduit 98 2.00

      . City’s Point of Error

      “4. The Trial Court erred in holding that 4.68% return on the Telephone Company’s investment was confiscatory (presuming the Trial Court found ‘expense-loading’ income derived from depreciation collected from Weslaco subscribers, over and above original cost, was not profit).” Argument

      “The controversy is over whether or not the company must count as ‘profit’ the windfall it acquires through ‘expense loading,’ which makes the difference between their admitted 4.68% return, and the 7.-88% return they are making if the windfall from depreciation alone is put back in profit, where the City contends that it belongs. * * »

        “Depreciation and maintenance should he honestly handled: Depreciation allowed as an expense must be correlated and consistent with depreciation deducted from the plants’ ‘fair value,’ else it is unfair to either the utility or subscribers. * ⅜ ⅜
      “If the Telephone Company’s sworn statement that it has collected a depreciation reserve from Weslaco subscribers of $122,819.42 (or 18.4%) as of March 31, 1959, or $128,626.08 (or 18.2%) as of December 31, 1959, is correct, then their statements on Plaintiff’s Exhibit 8, that they have in the same period suffered actual depreciation of only 8.9% as of March 31, 1959, and only 9.02% as of December 31, 1959, is either patently false, or a large percentage of the actual depreciation has been recovered through maintenance. ⅜ * *
      “But let us not ignore the mandate of honesty and fairness implicit in the dicta: ‘and the whole should be consistent.’ Such requirement of ‘consistency’ condemns as dishonest, and unfair, two sehed- - ules such as here involved, one claiming a high rate of depreciation and the other claiming that -the' full depreciation so claimed by the first did not in fact oceur. So if ‘fair value’ is used in determining expense, so must ‘observed depreciation’ be used in determining the extent thereof, and the Plaintiff must not be allowed to collect it again under the guise of ‘maintenance’.”


author: PER CURIAM.

text:
    Ancel M. AUTRY et al., Appellants, v. Anita D. AUTRY, Appellee.
    No. 5462.
    Court of Civil Appeals of Texas. El Paso.
    July 25, 1962.

      Sanders & Stanford, Canton, Wynne & Wynne, Wills Point, for appellants.
    W. Ernest West, Canton, Wilbur J„ Barnes, Rockville, Md., for appellee.
   PER CURIAM.

This is an ancillary application for writ of mandamus brought by relator, Anita D. Autry. Relator is a resident of the State of Maryland and the mother of six children, the issue of her marriage to Ancel M. Autry, from whom she was divorced, a mensa et thoro, in the Circuit Court of Montgomery County, Maryland, on March 2, 1959. Custody of all six of the children was awarded to relator by the Maryland court. However, after the custody proceeding was initiated and jurisdiction of the Maryland court over the children had attached, relator’s former husband, Ancel M. Autry, who was then living in the State of Texas, came to Maryland and surreptitiously obtained possession of the five oldest children of the marriage and fled with them to Texas, leaving the youngest of the six children with relator in Maryland.

In an effort to defeat the jurisdiction of the Maryland court over the five children, said Ancel M. Autry undertook to invoke the jurisdiction of the district court of Van Zandt County, Texas, by attempting to prosecute a second suit for divorce (although he unquestionably knew at such time that relator had already obtained from him a divorce a mensa et thoro by decree of the Maryland court). In such suit, cause No. 10,186 on the docket of the District Court of Van Zandt County, Texas, Autry also petitioned the court for custody of the five children. As a result of the filing of such action, relator was forced to travel from Maryland to Texas to defend against this suit. She filed a plea in abatement, setting up the prior decree of divorce from the Maryland court, and a plea to the jurisdiction based on the contention that the Maryland court had first obtained jurisdiction over the children involved. Relator also filed a cross-action for custody of the five children.

Following a full hearing in which the trial court heard testimony concerning their previous marital difficulties from both An-cel M. Autry and relator herein, Anita D. Autry, as well as testimony bearing on the fitness of the respective parents to have the care and custody of the five minor children here involved, it was the conclusion of the trial court that jurisdiction of all matters involved in the cause then pending had been fixed in the Circuit Court of Montgomery County, Maryland, more than nine months prior to the filing of such cause, and that defendant’s (relator’s) plea in abatement and plea to the jurisdiction were well taken and that both pleas should be sustained, and that the suit of the plaintiff, Ancel M. Autry, should be dismissed. Judgment sustaining the two pleas and dismissing the cause was made and entered by the trial court on February 13, 1960. Plaintiff Autry excepted and gave notice of appeal to the Court of Civil Appeals for the Fifth Supreme Judicial District of Texas, at Dallas, Texas. Thereafter, by order of the Supreme Court of Texas, the case was transferred, for purposes of equalizing the docket, from the Dallas court of civil appeals to the Eighth Court of Civil Appeals at El Paso, Texas. In an opinion by this court, dated September 27, 1961 (Autry v. Autry, 350 S.W.2d 233), we affirmed the judgment of the trial court, and thereafter writ of error in said cause was denied by the Supreme Court of Texas (Cause A-8720) on January 24, 1962.

The proceeding below, in which relator’s pica in abatement and plea to the jurisdiction were sustained and judgment of dismissal entered, was had before the Honorable' A. A. Dawson, the then presiding judge of the District Court of Van Zandt County, Texas. From Judge Dawson’s order of dismissal an appeal was taken.

Before the appeals were concluded, Judge Dawson was forced to retire from the bench by reason of ill-health. He was succeeded by respondent, the Honorable Thomas H. Crofts, who was appointed to fill out the un expired term of Judge Dawson. Judge Crofts qualified, took the oath of office, and assumed the duties of Judge of the 86th Judicial District of Texas on November 1, 1961.

All of the proceedings leading up to the above-mentioned appeal were tried before respondent’s predecessor in office, the Honorable A. A. Dawson. At the time of such trial Judge Dawson not only had in personam jurisdiction over both parents of the children, but the children themselves were residing in Texas and were physically before the court. Prior to the Texas proceeding, the children were residing with their mother (relator) in the State of Maryland, and the jurisdiction of a Maryland court to decide their custody had already been invoked and had attached before their father (Ancel M. Autry) took the children and fled with them to Texas. We believe that under the facts of the case as outlined above, Judge Dawson might have done either of two things: First, since both parents were before the court and the children were residing within the boundaries of the state, he could have taken the position that the welfare of the children was threatened, requiring him to act for the state as an interested party in order to protect and provide for the best interest and welfare of children residing within its boundaries ; or, second, he might (as we believe he actually did do) conclude that neither parent was unfit to have the care and custody of the children and that he should, in such case, act in a disinterested capacity for the sole purpose of determining the personal right of the parents with respect to the children.

It has been held that when both parents are before the court and the child or children are residing within the state, either of the two alternatives is applicable. A court having acquired jurisdiction over the persons of the parents, it may determine their individual rights, or it may, in behalf of the state, in the exercise of its function as parens patriae, act to protect and provide for the best interests of its infant subjects. Such concept of jurisdiction is basic and is recognized in most courts. (See U. of Pa.L.Rev. 712, and 4 A.L.R.2d 15).

At the trial, the evidence reflected that the children were being well cared for. Their immediate welfare was not threatened, and no unusual or emergency situation existed requiring the Texas court to decide the question of proper custody on the merits. Further, the mother of the children (relator) was not shown to be an unfit person, but on the contrary the evidence reflected that she had a strong maternal interest in and for each of her children, and the record contains nothing to indicate that the welfare of the children would have been adversely affected if placed in her custody.

Judge Dawson’s refusal to decide the question of custody and his dismissal of the fathers’ prayer for custody because of the pendency of relator’s action for custody in the Maryland court affirmed, as-between the parties, the right of relator to have the question of proper custody decided on the merits by the Maryland court. To give effect to such decree, only a single ministerial act remained to be performed by the trial court, and that was to grant or remand the children to relator, who was their last lawful custodian, without prejudice to the right of the father of the children, or other claimants, to apply to the Maryland court for change of custody as. the best interests of such children might appear to demand. Due to the fact that an appeal was taken from the trial court’s order of dismissal, Judge Dawson very properly deferred entering a final order remanding the children to relator, or permitting them to be removed from Texas, until the questions raised by the appeal had been decided.

Relator’s application for writ of mandamus is ancillary to the judgment rendered by Judge Dawson and affirmed by this, court. It is now a final judgment. If it affirmed, as between the parties, the right of relator to have the question of proper custody decided by the Maryland court (which we think it did), relator is entitled to the enforcement of that right. If there has been a change of condition since the rendition of such judgment, its enforcement would in no wise deprive the father of the children, or other claimants, of the right to apply to the Maryland court for change of custody. We believe the duty imposed upon this court to enforce such decree is the same as would have been the case had Judge Dawson elected to hear and determine the question of custody on the merits. He clearly had the authority to do so; and, in such case, had the judgment appealed from awarded relator custody of the children (the actual remand of the physical custody of the children being deferred until a determination of the appeal), assuming such judgment was also affirmed, it would remain ineffectual until the trial court had performed the last ministerial act required to give it force and effect, namely, remand of the physical custody of the children to their mother. In either case, the successful party should not be required to re-litigate the matter following the conclusion of an appeal in order to obtain possession of the children. Where the losing parties have remained in possession of the children pending the appeal, as they have in this case, and fail or refuse to surrender possession after the judgment has become final, or where the trial court fails or refuses to perform a ministerial act, mandamus will issue.

As mentioned above, the order appealed from was entered by the trial court on February 13, 1960 and did not become final until almost two years later, when the Supreme Court of Texas, on January 24, 1962, entered its order dismissing petitioner’s (Ancel M. Autry’s) application for writ of error for want of jurisdiction. During such period Judge Dawson resigned from the bench and was succeeded by the Honorable Thomas H. Crofts. Relator contends that she became entitled to possession of her children as soon as all appeals were resolved in her favor, and that it became her right to have and obtain all necessary and proper writs, remedies and procedures in the Texas courts in aid and defense of her right to possession of said children. Relator charges that Judge Crofts has failed and refused, and continues to fail and refuse, to perform his duty and remand said children to the custody of relator, but insists upon holding another custody hearing and trying the entire issue of custody de novo, on the ground that the presence of the minor children gives him jurisdiction to do so, and that he can determine the issues of jurisdiction and custody over and over, as often as the matter is presented to him.

Through no fault of her own relator has now, for a period of more than two years, been denied access to and possession of her children. In passing upon the question of the relator’s right to have the custody of the children determined by the Maryland court, Judge Dawson said:

“Under the record here there is no question but what the Maryland Court got jurisdiction first, and I can’t say to them that ‘You got jurisdiction, and you have disposed of the divorce, but you have not disposed of the custody of the children.’ The custody of the children were part of the jurisdiction that (Maryland) court got * *

He then very promptly sustained both of relator’s pleas, and dismissed the father’s application for custody. In the absence of the appeal that followed, relator would have been entitled to immediate possession of the children, subject to the right of the Maryland court to determine the issue of permanent custody. Relator contends, and respondent (Judge Crofts) admits, in the answer filed herein, that the Maryland court did, on January 4, 1961, award the custody of the children to relator, but respondent asserts that relator thereafter, on January 10, 1961, again invoked the jurisdiction of the Texas court to determine, de novo, the question of custody, by filing an application for writ of habeas corpus to obtain possession of the children by virtue of the Maryland decree.

Admittedly, no formal action was taken on relator’s application for writ of habeas corpus until more than a year later and after the appeals in the former case had been resolved in relator’s favor. Judge Dawson was still judge of the 86th Judicial District when the application for the writ was filed, and according to the sworn pleadings on file herein, Judge Dawson executed (signed) the writ, but held the matter in abeyance pending a determination of the appeals.

Relator’s application for writ of habeas corpus was filed independently of the case then on appeal, and was based on an asserted right to possession of the children by reason of the decree of the Maryland court awarding custody of the children to her. It was docketed as a new case and given a new number upon the docket of the court. Nevertheless, Judge Dawson elected to take no official action on the matter until the appeal in the former case had been decided. Technically, relator or her attorneys may have acted improvidently in filing a second suit before the first was finally determined. We are of the opinion, however, that the disposition of the first rendered moot any question that might be resolved by the second, and that the filing of the second suit conferred upon the district court no greater power or authority than it already possessed to determine the custody of subject children. By the same token, we are of the opinion that the cross-action filed by respondent was not sufficient to confer jurisdiction upon the court to re-litigate the matter then on appeal.

Mere change of circumstances normally incident to the passage of time occasioned, as it has been here, by undue delay not caused by any fault of relator, but due solely to the tedious and sometimes cumbersome processes of our own state justice is not, in our opinion, sufficient change of circumstances to warrant a denial by the trial court of the right of the last lawful custodian to immediate possession of the child or children; nor do we believe such normal change of circumstances as are apt to occur by reason of the adaptation of the child or children to a particular environment, personal attachments, et cetera, would be sufficient to warrant the trial court in ordering a trial de novo on the issue of custody.

At this writing, more than two years have elapsed since Judge Dawson entered his order of February 13, 1960 dismissing the application of the father for custody of the children, thereby declining to take jurisdiction of the custody matter and affirming, not only the right of the Maryland court to determine the question, but also the right of the mother of such children (relator) to have the Maryland court pass upon such question. It is inevitable that some changes must have taken place in the lives of the children during these two long years. They have undoubtedly become accustomed to their present surroundings and environment; no doubt they have made many new friends at play and at school and, in all probability, they are healthy, happy and contented with their present circumstances. By the same token there is no reason to believe the children would now be any less happy, healthy and contented if the situation had been reversed, with the children in the care and custody of their mother for the past two years instead of with their father.

In our original opinion we observed that the controversy presented by this case was all too typical of divorce cases involving the custody of children. Unfortunately, the courts of the several states, including those of Texas, must share part of the blame for a shameful situation, brought about by reason of the adoption of policies and attitudes by courts and judges which do nothing to discourage the unlawful acts of parents, but which, on the contrary, actually tend to foster and encourage violence, kidnaping by parents, or the evasion of the jurisdiction of one court by the physical removal of the child or children to the jurisdiction of a foreign court. Such actions are encouraged so long as a parent has reason to believe that he may fare better in the foreign court. All too often, particularly in child custody cases, policies and attitudes adopted by our courts have resulted in decisions holding, in effect, that the only proper place to rear a child is within the boundaries of the particular state in which that court has jurisdiction. Even though the court finds that there is a prior, valid, subsisting judgment of another state awarding such custody, it may, in such cases, limit its consideration of the merits to conditions which have changed since that foreign judgment was rendered; but again, all too often, courts tend to find “changed conditions” (regardless of how inconsequential they may be) to exist in favor of a local citizen. Such practices result in neither equity nor justice, and not only encourage unlawful acts on the part of parents, but tend to create strife and foster ill-will between courts of different states, and totally ignore principles of comity, which, we believe, have their best application in cases such as this.

Barring exceptional circumstances creating an immediate emergency, we believe it is the duty of a court, on finding a child within its borders who is either domiciled in another state or has been wrongfully removed from such other state to escape jurisdiction in a pending proceeding, not to decide the question of proper custody on the merits, but to immediately grant or remand such child to the last lawful custodian without prejudice to the right of the other claimant or claimants to apply to the foreign court for a change of custody as the best interest of the child might appear to demand.

We denied a prior application for ancillary writ of mandamus filed by relator by reason of technical defects therein, but we still adhere to the basic conclusions asserted therein, and they have been repeated here.

It follows that we are of the opinion that relator’s application for writ of mandamus should be granted. Judge Crofts is bound by the judgment entered by his predecessor in office, and it having become final, there remains but a single ministerial act to be performed, and that is to remand the children involved to the custody of relator. If a duty to perform the ministerial act was imposed upon Judge Dawson by reason of the judgment entered, it was not extinguished by his resignation or retirement from office; and respondent, as his legal successor in office, is also, bound.

Mandamus is granted and respondent,. Judge of the 86th District Court of Texas, is hereby directed to forthwith issue his order remanding the custody of the five children involved herein to relator, and it is so ordered.

No motion for rehearing will be entertained.


author: BARROW, Justice.

text:
    Gary H. REID, Appellant, v. W. B. UHLHORN, d/b/a Uhlhorn Construction Company, et al., Appellees.
    No. 13938.
    Court of Civil Appeals of Texas. San Antonio.
    June 27, 1962.
    Rehearing Denied July 25, 1962.

      Wm. Andress, Jr., Dallas, for appellant.
    Carter, Stiernberg, Skaggs & Koppel, Orrin Johnson, Harlingen, Fansler & Fans-ler, John E. Fitzgibbon, Laredo, for appel-lees.
   BARROW, Justice.

This is a venue case arising from an in-terpleader action filed by appellee Uhlhorn against appellant, Reid, and various other persons and firms. The 49th Judicial District Court of Webb County, Texas, overruled the plea of privilege of Reid and ha duly perfected his appeal.

This controversy arose out of the performance of a public housing contract in the City of Laredo, Webb County, Texas. Uhl-horn was the principal contractor. Reid was the masonry subcontractor, and all other defendants, except the Union National Bank of Laredo, the Harlingen National Bank of Harlingen, and Trinity Universal Insurance Company, had furnished labor or material in performance of the subcontract. In October, 1959, Uhlhorn entered into a contract with the Housing Authority and duly filed a performance and payment bond as required by Article 5160, Vernon’s Tex. Civ.Stats. He then entered into a masonry subcontract with Reid for $175,000.00, and although the subcontract required both a performance and payment bond of Reid, the record reflects that only a performance bond with Trinity Universal Insurance Company as surety was delivered to Uhl-horn.

After a few months Reid was in financial difficulty, and arrangements were made with the Harlingen National Bank for Uhlhorn to deposit money to cover payroll and material checks of Reid as they were presented. This agreement was set forth in a letter of March 25, 1960, from Reid to Uhl-horn, and was accepted by Uhlhorn. It reads as follows:

“With reference to contract which I, the undersigned, have with Uhlhorn Construction Company, being Job known as the Laredo Public Housing Project, I hereby assign, pledge and transfer to the Harlingen National Bank, Harlingen, Texas, all monies now due or to become due under this contract.
“You are hereby authorized and requested to make all checks payable under this contract to the Harlingen National Bank and the Bank is hereby au-: thorized to use these funds to pay any and all notes which they have signed by myself and the balance of the funds are to be deposited to my checking account with said Bank.”

Difficulties arose between Uhlhorn and Reid, and in September, I960; Uhlhorn took over this subcontract and finished it at a cost of approximately $900.00. Upon finishing the work, Uhlhorn had $3,496.74 remaining of the original subcontract of $175,000.00, which sum was interpleaded in this cause. Reid has asserted a claim against Uhlhorn of $18,916.80 for extra work.

In the meantime, ten persons and firms, including five residents of Webb County, made demand upon Uhlhorn for payment of labor and material used in performance of the subcontract. In August, 1960, the Union National Bank of Laredo filed suit against Reid for checks which had not been paid by the Harlingen Bank and served writ of garnishment on Uhlhorn. Default judgment was taken against Reid, but no judgment has been entered against him. The entire project was accepted on October 31, 1960, but the sum of $24,620.88, which is the total of the demands asserted against Reid and Uhlhorn by the ten creditor defendants, has been withheld from Uhlhorn by the Laredo Housing Authority.

On January 24, 1961, Uhlhorn filed the interpleader, to which Reid filed his plea of privilege. Each of the other defendants, except the Harlingen National Bank and Pete Herrera, filed cross-actions against Reid and also asserted claim to the inter-pleaded sum. The plea of privilege was duly controverted, and by agreement of all parties the action on this plea shall control venue on the cross-actions.

Appellant, Reid, concedes that if the bill of interpleader was proper, venue lies in Webb County. He asserts, however, that there was no basis for interpleader and that the Webb County defendants were simple creditors holding open accounts for contract balances against him.

This is based primarily on two propositions : first, that the defendant creditors did not comply with Art. 5160 as amended in 1959 (referred to as the McGregor Act), and, second, the agreement of March 26, 1960, with the Harlingen Bank, was an assignment, and after Uhlhorn’s acceptance, the subsequent suppliers of Reid, who had not complied with the above statute, had no claim to the fund.

It is not necesary to this appeal, and we expressly do not determine that one of the creditor defendants, residing in Webb County, Texas, had fully complied with the McGregor Act. Rule 43, Texas Rules of Civil Procedure, materially broadened the interpleader’s practice of this State as it existed prior to 1941. The stakeholder may initiate an interpleader action joining persons having claims against him when he is or may be exposed to double or multiple liability. Vol. I, McDonald, Tex.Civ.Practice, § 3, 39; Security State Bank of Pharr v. Shanley, Tex.Civ.App., 182 S.W.2d 136, 138.

Uhlhorn’s office manager testified that the creditor defendants had made a demand on Uhlhorn to pay their claims in the sum of $24,620.77. It is seen that they have filed pleadings in this case affirmatively asserting claims against Reid and also against Uhlhorn, and alleging that notices were given as provided by law. In addition, Mr. Fred W. Schillo, general manager of Laredo Brick Company, and Mr. Francisco J. Guerra, secretary-treasurer of Herring Price Lumber Company, each of which corporations is a creditor-defendant and a resident of Webb County, Texas, testified that notices were given to comply with Art. 5160, Vernon’s Tex.Civ.Stats., and 40 U.S.C.A. § 270b. These facts show a bona fide controversy between rival claimants and not a frivolous claim as was asserted in Rio Grande Nat. Life Ins. Co. v. Schmidt, Tex.Civ.App., 292 S.W.2d 864.

Uhlhorn was not required to prove the creditors’ absolute right to the funds or to determine at his own risk whether or not the various creditors had complied with the notice provisions of the McGregor Act. There must exist a reasonable doubt, either of fact or law, as to which conflicting claimants are entitled to receive assignment of the funds. Employers’ Casualty Co. v. Rockwall County, 120 Tex. 441, 35 S.W.2d 690, 38 S.W.2d 1098. The granting of interpleader is addressed to the sound discretion of the trial court. Barnett v. Woodland, Tex.Civ.App., 310 S.W.2d 644. The trial court, after hearing the evidence, found that there was a reasonable doubt of both fact and law as to which of the claimants were entitled to receive the money remaining on hand. The trial court did not abuse his discretion in permitting Uhlhorn to file his interpleader and we overrule Reid’s first point.

We overrule Reid’s second point, that the funds belonged to the Harlingen National Bank under the letter agreement of March 25, 1960. It is significant that the Harlingen Bank has not asserted a claim to any of the money. It is clear from the agreement that the Bank was acting merely as a stakeholder. Central West Texas Coop. Marketing Ass’n v. Banner Dairies, Tex.Civ.App., 252 S.W.2d 483. In this case, as distinguished from Glass v. Carpenter, Tex.Civ.App., 330 S.W.2d 530, obli-gor had a justiciable interest, in that there was reasonable doubt as to the rights of the claimants, and it was necessary for obligor to insure that he would not have to pay said funds twice.

We hold that venue properly lies in Webb County, Texas, under Subd. 4, Art. 1995, Vernon’s Tex.Civ.Stats., and therefore it is unnecessary to discuss the application of the other exceptions asserted by appellees.

The judgment of the trial court is affirmed.