text:
    REPUBLIC NATIONAL BANK OF DALLAS, Appellant, v. Bernard WHITTEN, Trustee, Appellee.
    No. 16358.
    Court of Civil Appeals of Texas. Dallas.
    July 3, 1964.
    Rehearing Denied Sept. 25, 1964.

      Leachman, Gardere, Akin, Porter & De-Hay, Dallas, for appellant.
    Wynne, Jaffe & Tinsley and Carl W. Wilson, Dallas, for appellee.
   DIXON, Chief Justice.

Appellee Bernard Whitten, Trustee in Bankruptcy of TexMex Corporation, hereinafter called TexMex, sued Republic National Bank of Dallas, hereinafter called the Bank, alleging that the Bank had diverted corporate funds of TexMex to its own use prior to the latter’s bankruptcy by requiring TexMex to pay a $65,000 personal note of Robert Yarber, President of TexMex, out of the proceeds of a $257,000 loan made by the Bank to TexMex.

Both appellant and appellee filed motions, for summary judgment. Appellee’s motion was sustained. Judgment was rendered against the Bank for $65,270.83 principal with interest at 6 percent from November 27, 1959.

FACTS

The material facts, as established by affidavits and copies of documents, are undisputed.

TexMex was incorporated February 21, 1955 as a Texas corporation. On or about June 27, 1957 its charter was amended to include the power to accumulate and lend money and to sell and deal in notes and shares of stock.

On July 5, 1957 the stockholders voted to adopt the Texas Business Corporation Act.

On August 25, 1958 the Board of Directors of TexMex passed a resolution under the terms of which a depository account was established with the Bank in the name of TexMex. This resolution, a copy of which was filed with the Bank, included the following provisions:

(1) Withdrawals were authorized in the name of the company by the joint signatures of Yarber and Cozine, officers of the corporation.
(2) Yarber and Cozine were authorized to borrow money from the Bank and give therefor the company’s notes in such amounts for such time and at such interest rates as might be designated in the notes and might pledge for the payment of said notes any of the company’s bills receivable, stocks, bonds, or other property.
(3) The Bank was authorized to honor all withdrawals against the company’s funds although payable to the officer or agent signing or countersigning the same, whether presented for cash or for credit to the personal account of said officer or agent or any other person without the need of any inquiry by the Bank concerning such items or the disposition of the money, items or credit.
(4) The certification to the resolution named the officers of the company and those authorized to sign as Robert A. Yarber, President, Robert M. Cozine, Secretary and Robert M. Cozine, Treas-. urer. The record shows that Cozine later also held the office of Executive Vice-President.

On September 11, 1958 Yarber executed and delivered to the Bank a letter in which he unconditionally guaranteed payment to the Bank of all indebtedness of TexMex present and future.

On October 24, 1958 Yarber was indebted to the Bank upon his personal note in the sum of $75,000. Yarber’s note was secured by 37,500 shares of common stock of Tex-Mex. As additional security TexMex had given the Bank a letter, signed by Yarber as President and Robert M. Cozine as Executive Vice-President, whereby TexMex agreed to purchase the 37,500 shares of stock at a price of $2 per share if called on to do so during the term of the loan. At the time the stock was quoted “over the counter” at a price of $1.50 bid and $1.75 asked.

On November 24, 1959 TexMex owed the Bank $329,187.50; Peoples’ Realty Company, a wholly owned subsidiary of Tex-Mex, owed the Bank $97,500; and Yarber owed a balance of $65,270.83 on his personal note. At various times prior to the last named date officers of TexMex had talked with officials of the Bank with regard to the Bank’s lending an additional sum of $257,-000, which would have made a total indebtedness of TexMex to the Bank of $586,687.-50. The Bank was unwilling to make this additional loan except on certain terms and conditions which will be hereinafter stated.

On November 24, 1959 the Board of Directors of TexMex by resolution authorized the officers of TexMex to execute the corporation’s note for $257,000 and to assign to the Bank as security two second lien notes of $600,000 and $80,000 respectively together with an agreement subordinating other notes held by TexMex to the above two notes.

The Bank refused to make the additional loan of $257,000 unless the balance of approximately $65,000 on Yarber’s note be paid out of the proceeds of the $257,000 additional loan.

On November 27, 1959 the Bank agreed to make and did make the additional loan of $257,000 upon certain terms and conditions, all of which were carried out and completely executed by the Bank, TexMex and Yarber. The transaction was as follows:

(1) The Bank made the additional loan of $257,000 to TexMex, secured as will hereinafter be explained.
(2) TexMex paid the balance of $65,-270.83 due on Yarber’s note. The Bank marked Yarber’s note “Paid” and surrendered the note so marked to TexMex together with the 37,500 shares of Tex-Mex stock securing the note and the letter whereby TexMex had agreed to buy the

stock at $2 per share.

(3) Yarber executed a new note payable to TexMex for the $65,270.83 which TexMex had expended in paying Yarber’s note to the Bank. Yarber also assigned to TexMex the 37,500 shares of stock as security for the new note.
(4) TexMex paid the $97,500 note of Peoples’ Realty Corporation, the wholly owned subsidiary of TexMex.
(5) The $257,000 note of TexMex was secured (a) by assignment to the Bank as a pledge of the $600,000 and $80,000 second lien notes, together with the subordination agreement in regard to said notes, and (b) by assignment to the Bank as a pledge of Yarber’s note for $65,270.83, which was itself secured by Yarber’s 37,500 shares of TexMex stock.
(6) TexMex used $73,800 of the loan money to pay various of its creditors who need not be listed here.
(7) After making the above payments TexMex had left the sum of $21,200 out of the $257,000 loan, which sum remained in its bank account subject to withdrawal by check.

On December 4, 1959 the Board of Directors of TexMex adopted a resolution which provided that all contracts, compensations, acts and proceedings by the officers of the corporation and its executive committee in conducting the business of the corporation be and they were “hereby approved, confirmed and ratified.”

On January 29, 1960 at a meeting of the Board of Directors Yarber as chairman explained to the directors that he had obtained for the corporation a $257,000 loan from the Bank secured by the two second lien notes “but the Bank required the corporation to pick up a $65,000 unpaid personal loan of his which was included as a part of the $257,000 loan to the corporation.” Yarber also told the directors that it was necessary for the corporation to sell the $600,000 note to pay off the $257,000 loan and to meet other obligations of the corporation, but he had been unsuccessful in selling the note.

On June 17, 1960 the Board of Directors of TexMex by resolution directed their attorney to write a letter to the Bank advising that the Board of Directors “did not recognize the $65,000 loan by the Bank to Mr. Yarber as an obligation of the corporation; and that the proper officials of the company would be authorized to negotiate for the renewal of the balance of $167,000 due by the corporation on its portion of the $257,000 note.”

Negotiations were thereafter had with the Bank, but the Bank refused to reduce the TexMex note by $65,000 and to renew and extend the note as so reduced.

On June 22, 1960 upon request of the Bank a letter was written to the payer of the $600,000 second lien note advising him to make his monthly payments of $5,000 direct to the Bank rather than TexMex. Thereafter said payments were made direct to the Bank.

Some time prior to October 7, 1960 the Board of Directors of TexMex passed a resolution to the effect that the sale of the $600,000 second lien note pledged to the Bank was necessary to pay off various obligations owed by TexMex, including the indebtedness to the Bank.

By October 14, 1960 Ervin W. Atkerson had agreed to purchase the $600,000 second lien note for $370,000. At the time there was an unpaid balance of $540,000 on said note.

On October 17, 1960 Ervin W. Atkerson for the sum of $370,000 purchased from the Bank the notes then pledged to the Bank to secure the $257,000 loan to TexMex. Of the $370,000 paid by Atkerson the Bank received $226,655.65. The Bank assigned and delivered to Atkerson (1) two notes of Tex-Mex, one being the note for $257,000, the other a note for $5,999.92 executed March 29, 1960; and (2) the collateral securing the above notes, being (a) the $600,000 second lien note, (b) the Yarber note to Tex-Mex of $65,270.83 and (c) a $40,000 note of Acme Securities Corporation, together with all security which had been pledged with the Bank to secure payment of the last two notes above named.

The assignment from the Bank to Atker-son was made without recourse on the Bank and without any warranty or representations by the Bank as to the validity, genuineness or legality thereof. The indebtedness of TexMex as evidenced by the $257,-000 note was extinguished so far as the Bank was concerned. The agreement entered into between the Bank and TexMex when the loan was made thus became fully executed on both sides.

The balance of $143,344.35 remaining out of the $370,000 purchase price was paid to TexMex by Atkerson. This sum together with $55,298.74 received by TexMex in the sale of other properties was used to pay other creditors of TexMex.

On October 7, 1960 more than 80 percent of the shareholders of TexMex voted the adoption of the following resolution:

“RESOLVED that the sale of the second deed of trust notes originally executed by Airport Holiday Corporation and payable to The Texmex Corporation in the original sum of $600,-000, dated October 1, 1959, on which there is an approximate balance of $540,000, have been sold to E. W. At-kerson for approximately $370,000 cash, and the action of the Board of Directors expressed in its resolution on this subject is in every respect approved, ratified, and confirmed, including the disbursements out of the purchase price as detailed in said Board of Directors resolution.”

The resolution of the Board of Directors referred to in the above shareholders’ resolution contained this provision:

“Therefore, the officers of the corporation are also authorized and directed to pay off and discharge the secured claim asserted by the Republic National Bank in the approximate sum of $254,049.40, plus accrued interest,* * *."

On December 23, 1960 a petition in bankruptcy was filed against TexMex. On March 21, 1961 Hon. Bernard Whitten was appointed Trustee in Bankruptcy.

On July 27, 1962 this action against the Bank was filed by the Trustee.

In an affidavit Robert M. Cozine states that the fact that TexMex had paid from its corporate funds a personal debt of Robert Yarber was not disclosed to the shareholders of TexMex in any information or material sent to them by the corporation; and that fact was not discussed at any shareholders’ meeting. The total number of shareholders or who they were is not shown in the record. However, in his trial brief (made part of the Transcript) appellee concedes that the directors were shareholders. As already stated, the directors knew about the questioned transaction not later than January 29, 1960. Whether they knew of it before that date is not shown by the record.

OPINION

Though appellant Bank and appellee Trustee present only two very general points and counter points on appeal their briefs, pro and con are concerned specifically with five contentions designated by appellant as Arguments. These so-called Arguments are really the points on appeal presented by appellant as grounds for reversal of the trial court’s judgment and rendition by this court of judgment in favor ■of the Bank. These five Arguments are:

Argument (a) The Trustee has no cause of action against the Bank under Article 2.04, Texas Business Corporation Act, V.A.T.S.
Argument (b) TexMex as a matter of law ratified the transaction with the Bank upon which this suit is based.
Argument (c) The Trustee is estopped as a matter of law to recover against the Bank.
Argument (d)' The Trustee may not dis-affirm that part of the agreement with the Bank which he considers onerous to TexMex and affirm and retain the benefits of the beneficial part.
Argument (e) TexMex sustained no damages in the transaction with the Bank.

We agree with appellant’s Argu,ment (a) as above stated. Art. 2.04, subd. A, Texas Business Corporation Act, enacted by the Legislature in 1955, provides: “Lack of capacity of a corporation shall never be made the basis of any claim or defense at law or in equity.”

So far as we know the above statute has never received a judicial interpretation by the courts of our state. However, similar laws in other jurisdictions have been construed in keeping with the Bank’s contention. Stadium Realty Corp. v. Dill, 233 Ind. 378, 119 N.E.2d 893; Strauss v. W. H. Strauss & Co., Inc., 330 Pa. 517, 199 A. 195; Wickstrand v. Nelson, 273 Mich. 393, 263 N.W. 404; Dwelley v. Tom McDonnell, Inc., 334 Mich. 229, 54 N.W.2d 217; California Canning Peach Growers v. Harkey, 11 Cal.2d 188, 78 P.2d 1137. In the Dill case the money lender, Dill, knew that the loan to the corporation was for the personal use of Eberhard, the corporation president. Nevertheless the statute was held to be applicable. In the Strauss case there was no consideration flowing to an insolvent corporation, which signed an accommodation note for J. F. Kaufman, its secretary and treasurer. ' The money loaned went to pay a personal debt owed by Kaufman. Yet the transaction was upheld because of the statute.

Appellee on the other hand argues that Art. 2.04 is merely a limitation on the common law doctrine of ultra vires and was enacted only to protect innocent parties, and may not be invoked by a party who has actual knowledge of the lack of authority or lack of capacity. In support of this view appellee cites Art. 1349, V.A.C.S., Art. 2.02 (6), Texas Business Corporation Act, Comment of Bar Committee relating to Art. 2.04; Commissioners’ Notes to Uniform Business Corporation Act, Sec. 11; and 13 Am.Jur. CORPORATIONS, Sec. 753. These authorities as we view them do not control our decision here.

The Bar Committee’s comment, referred to by appellee, seems to us to refer to Section B of Art. 2.04, not to Section A of the article. The Uniform Business Corporation Act, referred to by appellee, was withdrawn in 1958 by the National Conference of Commissioners on Uniform State Laws. Vol. 1, Mod.Bus.Corp.Act, Ann., Sec. 4.03, page 5. The Texas Act was patterned after the Model Business Corporation Act, Vol. 3A, V.A.C.S., page IX. Neither the Texas Act nor the Model Business Corporation Act limit the defense in question to parties who have no knowledge of the lack of capacity. See also 14 Tex.Jur.2d 495. Under Art. 2.04 of the Texas Business Corporation Act, corporations and their shareholders have protection against ultra vires acts of officers and directors: they may sue the officers and directors to recover assets lost as a result of such activities. Art. 2.41 Texas Business Corporation Act; 40 Tex.L. Rev. 677, 690. In fact Art. 2.41(2) and (4) expressly impose liability on directors who assent to the making of a loan to an officer. Under Articles 1349 and 1351, V.A.C.S. the Attorney General may bring a suit to forfeit the charter of a corporation which violates Article 1349. Art. 4, Sec. 22, Constitution of Texas Vernon’s Ann.St.; Union Men's Fraternal & Ben. Ass’n v. State, Tex.Civ.App., 190 S.W. 242. We think Article 1349 must be interpreted so as not to nullify or conflict with Art. 2.04, subd. A of the Corporation Act, which is a much later enactment. Moreover, Art. 1349, V.A.C.S. must be construed in connection with Art. 1351, V.A.C.S. The latter statute expressly provides that when the assets of a corporation have been used in violation of Art. 1349, V.A.C.S. by any officer or director it shall be considered the act of the corporation unless within one year from the date of the violation it has caused an order to be entered repudiating the wrong and dismissing all persons connected with such violation.

As to the reference in 13 Am.Jur., See. 753, it will be seen from Note No. 7 that the statement therein contained as to actual knowledge is based on the Commissioners’ Notes to the Uniform Business Act, Sec. 11, and 10 Ohio Jur. The Uniform Business Act and the Ohio law have been withdrawn or changed since 1938, when 13 Am.Jur. was published.

Wc sustain appellant’s Argument (a).

We also agree with appellant’s Argument (b) to the effect that TexMex ratified the transaction with the Bank. On December 4, 1959 the corporation’s Board of Directors by resolution “approved, confirmed and ratified” all contracts, compensations, acts and proceedings of its officers. The record does not show that the directors took this action with actual knowledge of the payment of Yarber’s note, nor does it show that the action was taken in actual ignorance of the facts. However, Robert M. Cozine, an officer and director of the corporation, who did not benefit from the payment of Yarber’s note, certainly had knowledge of the facts. It was he who countersigned all of the company’s checks written in connection with the agreement with the Bank, including the payment of Yarber’s personal note. Under the circumstances Cozine’s knowledge will be imputed to the corporation. Goldstein v. Union Nat’l Bank, 109 Tex. 555, 213 S.W. 584; Reed v. Continental State Bank of Beckville, 2 S.W.2d 426 (Tex.Com.App,).

We point out also that the Board of Directors of TexMex took no action to comply with Art. 1351, V.A.C.S. The alleged violation took place November 27, 1959. More than a year transpired from the date of the violation without any action by TexMex through its Board of Directors. Therefore under the terms of Art. 1351, V.A.C.S. the paying of Yarber’s debt to the Bank with corporate funds must be considered the act of the corporation.

However, we need not rest ratification in this case on implied or imputed knowledge of the Board of Directors. It is undisputed that on January 29, 1960 Yarber himself told the Board of Directors that the Bank had “required the corporation to pick up a $65,000 unpaid personal loan of his which was included as part of the $257,000 loan to the corporation.” It is true that the Board then ordered its attorney to write a letter to the Bank repudiating the Yarber payment and seeking to renew the $257,000 note less the $65,000 paid on Yarber’s personal note. But the Bank refused to renew the note on such terms. And the undisputed facts are that after this effort at repudiation the Board of Directors by its conduct and actions acquiesced in the payment of Yarber’s note and recognized the Bank’s claim as an obligation of the corporation.

With actual knowledge of the facts the Board of Directors performed these acts:

(1) On June 22, 1960 by agreement between the Bank and the Board the payer of the $600,000 second lien note was instructed to make his $5,000 monthly payments direct to the Bank for application on the $257,000 note. So far as the record shows the Board, of Directors in making this agreement did not challenge the amount of the Bank’s claim.

(2) Prior to October 7, 1960 the Board passed a resolution to sell the $600,000 second lien note so as to pay off various obligations including the Bank’s claim. This resolution was later approved and ratified by more than 80 percent of the shareholders of TexMex

(3) On October 17,1960 Ervin W. Atker-son purchased the $600,000 second lien note on which there was a balance still' owing of $540,000. He paid the Bank $226,000 which was the balance due on the $257,000 note of TexMex and included the $65,000 Yarber debt. This was done with the knowledge of the Board of Directors of TexMex.

Appellee says that as matter of law the unanimous consent of all the shareholders of a corporation is necessary before a corporation can ratify the payment out of corporate assets of a personal obligation of one of its officers. While some authority may be cited in support of appellee’s contention we believe the great weight of authority is clearly to the contrary.

In the instant case only Yarber of the officers on the Board of Directors had any personal interest or profit in the transaction in question. It is not shown that Cozine, who countersigned the check in payment of Yarber’s debt, or any of the other directors had any personal interest in the payment. Under such circumstances the Board of Directors could ratify the transaction either actively or by acquiescence. Kirby v. Fitzgerald, 126 Tex. 411, 89 S.W.2d 408; Brooks v. Zorn, Tex.Civ.App., 24 S.W.2d 742; Hall v. Crawford & Delphenis Co., Tex.Civ.App., 11 S.W.2d 804; Fort Worth Nat’l Bank v. Harwood, 229 S.W. 487 (Tex.Com.App.). We sustain appellant’s Argument (b).

We also agree with the Bank’s 'Argument (c) that the Trustee is estopped as-a matter of law to recover against the Bank.

Appellee does not plead fraud on the part of the Bank. So far as the record shows the Bank acted in good faith.

TexMex unquestionably received benefits as a result of its agreement. These benefits were (1) payment of the $97,500 note of Peoples’ Realty Corporation, the subsidiary of TexMex; (2) execution by Yarber of a note payable to TexMex secured by Yar-ber’s 37,500 shares of TexMex; (3) discharge of any obligation by TexMex to buy Yarber’s shares at $2 per share upon call by the Bank during the term of Yarber’s note to the Bank; (4) the availability of $73,800 cash for payment, and the payment by TexMex, of said sum to various creditors; and (5) the residue of $21,000 left to the credit of TexMex in its bank account after all the above payments were made.

The Bank in reliance on the agreement increased the loan to TexMex by approximately $97,000 even if the payment of the $97,500 note of Peoples’ Realty Company- and the $65,000 note of Yarber are not included in the calculation.

We believe the Bank’s claim of estoppel is. supported by these authorities: Texas W. Ry. Co. v. Gentry, 69 Tex. 625, 8 S.W. 98 (1888); Bond v. Terrell Cotton & Woolen Mfg. Co., 82 Tex. 309, 18 S.W. 691 (1891); Tenison v. Patton, 95 Tex. 284, 67 S.W. 92 (1902); Kincheloe Irrigation Co. v. Hahn Bros. & Co., 105 Tex. 231, 146 S.W. 1187 (1912); Reed v. Continental State Bank of Beckville, 2 S.W.2d 426 (Tex.Com.App., 1928); Lange Soap Co. v. Ward, 269 S.W. 851 (Tex.Civ.App., San Antonio, 1925), no wr. hist.; Malone v. Republic Nat’l Bank & Trust Co., 70 S.W.2d 809 (Tex.Civ.App., Dallas, 1934), err. dism.; Williford Lumber Co. v. Malakoff Brick Co, 113 S.W.2d 248 (Tex.Civ.App., Dallas, 1938), err. dism.; and see cases cited in 1 Hildebrand, Texas Corporations, pages 350 to 352, inclusive.

In answering the Bank’s Argument (c) appellee relies on Dunagan v. Bushey, 152 Tex. 630, 263 S.W.2d 148 and Farracy v. Security Nat’l Bank, Tex.Civ.App., 4 S.W.2d 331. Neither of these cases seems to us to be in point here. They were both decided prior to the enactment of the Texas Business Corporation Act in 1955. In the Dunagan case the corporation received no benefit. It was the victim of a scheme by its directors and organizers to benefit themselves without complying with Constitutional provisions in regard to securing a charter. No ratification or estoppel was involved or could have been involved. In the Farracy case no benefit came to the corporation. The corporation officers did not execute notes to the corporation after they replaced their personal notes with corporation notes. We sustain appellant’s Argument (c).

We also agree with appellant’s Argument (d). The transaction of November 27, 1959 was a “package” deal. It was the result of a counter offer made by the Bank and accepted by TexMex in its entirety. The entire agreement has already been described in detail in this opinion. The Trustee seeks to repudiate only a portion of the transaction — the payment by Tex-Mex of Yarber’s note. The Trustee proposes to keep all the benefits which came to TexMex in the transaction.

It is to be remembered that this is not an executory contract. It is a contract fully performed and executed on both sides. The Trustee may not disaffirm that part of the agreement which he considers onerous and affirm and retain the benefits of the beneficial part. Menard v. Sydnor, 29 Tex. 257 (1867); Reed v. Continental State Bank of Beckville, 2 S.W.2d 426 (Tex.Com.App., 1928); McCombs v. Abrams, 28 S.W.2d 584 (Tex.Civ.App., Galveston, 1930), affirmed 48 S.W.2d 612 (Tex.Com.App., 1932); Nat’l Aid Life of Oklahoma City, Okla. v. Adams, 157 S.W.2d 957 (Tex.Civ.App., Eastland, 1941), err. ref.; Mazzola v. Lucia, 109 S.W.2d 273 (Tex.Civ.App., Beaumont, 1937) err. ref.; Ogburn-Dalchau Lumber Co. v. Taylor, 59 Tex.Civ.App. 442, 126 S.W 48 (1910), no wr. hist.; Southwestern Cooperage Co. v. Kivlen, 266 S.W. 826 (Tex.Civ.App., Dallas, 1924). We sustain the Bank’s Argument (d).

We shall not pass on the Bank’s Argument (e). Considering the record before us as a whole we are of the opinion that our decision in this case does not depend on the question whether TexMex sustained any damages in its transaction with the Bank. That is not an issue in the application of Art. 2.04, subd. A of the Texas Business Corporation Act, or in the other points urged by the Bank.

Since the material facts are undisputed and since we have sustained the Bank’s Arguments (a), (b), (c) and (d) we have concluded that the judgment of the trial court should be reversed and judgment here rendered that the Trustee take nothing by his suit against the Bank.

It is so ordered.

Reversed and rendered.

ON REHEARING

The statute in the case of Stadium Realty Corp. v. Dill, et al., 233 Ind. 378, 119 N.E.2d 893 is not so similar to our Art. 2.04, subd. A, Texas Corporation Act, as it is similar to our Art. 202A(6), Texas Corporation Act. Nevertheless we think it is appropriate to cite the Dill case in support of our holding in this case for these reasons: (1) the statute in the Dill case prohibited loans by a corporation to any officer or director of the corporation; (2) Dill and partners loaned $60,000 to the corporation; (3) at the time this loan was made Dill knew that the corporation proposed to loan and did loan $50,000 of the money to the corporation’s president; (4) the corporation thereafter contended that the loan by it to its president was ultra vires and therefore void, which prevented Dill and partners from recovering on their loan to the corporation ; (5) the corporation sought to avoid its contract with Dill and partners without making restitution to the partners; (6) Dill’s knowledge that the corporation was going to lend the money to its president did not make the loan by Dill and partners void; and (7) the court held that Dill and partners were entitled to recover on their loan to the corporation.

The Trustee says that we were mistaken when we said in our original opinion that the Board of Directors of TexMex took no action to comply with Art. 1351, V.A.C.S. In support of his contention the Trustee says that the Board did not know until January 29, 1960, when Yarber told them, that part of the loan from the Bank had been used to pay Yarber’s debt to the Bank. The bankruptcy proceeding against TexMex was filed December 23, 1960. Therefore, according to the Trustee, we were in error in saying that more than a year had transpired without any action by TexMex through its Board of Directors in compliance with Art. 1351, V.A.C.S.

We find no evidence in the record to show that all or a majority of the members of the Board had actual knowledge prior to January 29, 1960 of the loan by TexMex to Yarber. However, it is certain that Robert M. Cozine, a disinterested officer and director of TexMex, in his official capacity had knowledge of the facts for more than a year prior to December 23, 1960. We shall not pass on the question whether under the circumstances here present the other directors in the proper discharge of their responsibilities as directors should have known of the loan to Yarber long before Yarber himself told them of it. See 19 C.J.S. Corporations § 762, p. 109.

The statute, Art. 1351, V.A.C.S., places the responsibility on the directors to take the prescribed action within one year from the date of violation, (not the date of actual knowledge) otherwise the act shall be considered that of the corporation. The violation occurred November 27, 1959. The proceeding in bankruptcy was filed December 23, 1960 — well over a year after the violation. No action had been taken during that time to comply with Art. 1351, V.A.C.S.

We do not hold that TexMex lost any of its rights against its officers and directors by its failure to act within a year after the violation. But we do hold that so far as Republic National Bank of Dallas is concerned the act became the act of tire corporation under Art. 1351, V.A.C.S. because of the failure of the Board to act within a year from the date of the violation.

The motion for rehearing is overruled.

Overruled.


source: Caselaw Access Project

author: WILSON, Justice.

license: Public Domain

text:
    PIONEER CASUALTY COMPANY, Appellant, v. Louis M. BLACKWELL et al., Appellees.
    No. 4268.
    Court of Civil Appeals of Texas. Waco.
    Oct. 8, 1964.
    Rehearing Denied Oct. 29, 1964.

      Talbert, Giessel, Cutherell, Barnett & Stone, Don Weitinger, Houston, for appellant.
    Jim Phelps, Houston, for appellees.
   WILSON, Justice.

This is an appeal without a motion for new trial from a judgment in a jury trial. Appellees, having recovered a default judgment in a personal injury action against insured, filed this suit against his automobile liability insurance carrier to recover the amount of the unsatisfied judgment. The insured had mailed the citation in the initial suit to an insurance agency 26 days after it was served, and the agency failed to forward it to appellant’s home office. Appel-lees alleged the agency was authorized by the insurer to receive and forward the citation and petition. The insurance carrier denied the agency’s authority and pleaded breach of a policy requirement that insured should immediately forward to the company every demand, notice or summons received by him.

The court submitted three issues to the jury: (1) whether the insurance agency had “actual authority” to accept the suit papers from insured on behalf of the insurer, (2) whether the agency had “apparent authority” to accept the papers, and (3) whether they were forwarded by insured to the agency “immediately”. The jury answered the first two issues affirmatively, but were unable to agree on the third.

The judgment recites that appellant insurer and appellee-plaintiffs thereupon made motions for instructed verdict, or that the cause be withdrawn from the jury and that judgment be rendered for the respective movants. “The Court stated it was of the opinion that it was going to overrule both motions and grant a new trial. The defendant Pioneer Casualty Company then stated that rather than have to try the case again, it preferred that the court grant the plaintiffs’ motion for judgment or instructed verdict, and give said defendant the opportunity toappeal, since it was of the opinion the cause could be decided on appeal. The court then stated that, instead of following such suggestion on the part of the said defendant, the court would take a partial verdict and then decide if it was possible to render a judgment on the verdict. Plaintiffs agreed to the taking of a partial verdict; however, the defendant Pioneer Casualty Company objected to the taking of a partial verdict.” The court ordered the verdict read in open court, received, accepted and filed, after the jury had been polled. Eight days after the verdict was so accepted and filed, appellant filed a “motion for judgment” that plaintiffs take nothing against it. This motion was overruled, and appellees’ motion for judgment was granted.

Appellant’s nine points each assert the court erred in overruling (a) its motion for instructed verdict, and (b) its motion for judgment non obstante veredicto for specified reasons. The reasons urged are, in essence, that there is no evidence to sustain the two jury findings; that the agency had no authority as a matter of law, and insured breached the contract of insurance as a matter of law, as to forwarding suit papers.

Appellant’s procedural methods have precluded our consideration of most of its contentions. Rule 324, Texas Rules of Civil Procedure, provides that a motion for new trial is a prerequisite to appeal; provided that it is not so essential in order to complain, among others, “of the action of the court in giving a peremptory instruction, or in withdrawing the case from the jury and rendering judgment, or in rendering or refusing to render judgment non obstante veredicto or notwithstanding the finding of the jury on one or more special issues.” It provides that a motion shall not be required in a non jury case.

We have no jurisdiction to consider appellant’s points that the court erred in overruling its motion for instructed verdict. The overruling of this motion (as distinguished from its having been granted) may not be complained of on appeal 'in a jury case, under Rule 324, without an assignment in the prerequisite motion for new trial. Wagner v. Foster, 161 Tex. 333, 341 S.W.2d 887, 892; Dallas Fountain and Fixture Co. v. Hill, Tex.Civ.App., 330 S.W.2d 648, 651, writ ref., n. r. e.; Wagner v. Walenta, Tex.Civ.App., 225 S.W.2d 463; Sterley Common School Dist. etc. v. County Board of School Trustees, etc., Tex.Civ.App., 200 S.W.2d 717, 719, writ dism.; Tuttle v. Bearing Chain & Supply Co., Tex.Civ.App., 272 S.W.2d 745. See McKelvy v. Barber, Tex.Sup., 381 S.W.2d 59, 62.

The court did not “withdraw” this case from the jury as in, e. g., Smock v. Fischel, 146 Tex. 397, 207 S.W.2d 891. The court, instead, received and accepted the verdict. The case did not become a non-jury case. Although the judgment recites numerous findings of fact in addition to those relating to the forwarding of suit papers, the court was not authorized to make findings on controverted issues of fact, Ditto v. Ditto Investment Co., 158 Tex. 104, 309 S.W.2d 219, 220; Fancher v. Cadwell, 159 Tex. 8, 314 S.W.2d 820, 822; See Hooker v. Roberts, Tex.Civ.App., 330 S.W.2d 493. In the state of the record the court was authorized to decide and make a conclusion of law on the third unanswered issue if the evidence was undisputed, or the undisputed evidence determined the question as a matter of law; otherwise, he was authorized only to declare a mistrial. Gulf, Colorado & Santa Fe Ry. Co. v. Deen, 158 Tex. 466, 312 S.W.2d 933, 937. See Appellate Procedure in Texas, Sec. 8.4(1). The court concluded the 26-day delay in forwarding suit papers was not an “unreasonable” delay under the undisputed evidence.

We have no jurisdiction, absent a motion for new trial and an assignment here, to determine that the trial court was unauthorized to decide the third unanswered issue as being a disputed fact issue, and thereupon remand; for no complaint of that action has been preserved for review. Elliff v. Texon Drilling Co., 146 Tex. 575, 210 S.W.2d 558, 4 A.L.R.2d 191; Ramsey v. Dunlop, 146 Tex. 196, 205 S.W.2d 979.

Neither may we consider appellant’s contentions under this record that there is no evidence to support the jury findings, for appellant did not file or present a motion to disregard the jury findings as having no support in the evidence as provided by Rule 301, and there is no motion for new trial. Miller v. Miller, Tex.Civ.App., 274 S.W.2d 762, 764, writ refused; See City of Austin v. Daniels, 160 Tex. 628, 335 S.W.2d 753, 81 A.L.R.2d 1180.

The only points preserved, consequently, are that the court erred in overruling appellant’s motion for judgment non obstante veredicto. Under Rule 301 such a motion encompasses only the ground that “a directed verdict would have been proper.” Houston Fire & Casualty Ins. Co. v. Walker, 152 Tex. 503, 260 S.W.2d 600, 603. We have applied a liberal construction to appellant’s “motion for judgment” to consider it, with some doubt, to be such a motion.

We are unable to conclude that no issue of fact was raised as to whether injured “immediately” forwarded the suit papers to the insurance agency. The policy requirement that the process be “immediately” forwarded means “within a reasonable time under the circumstances, and ordinarily is a question of fact.” Commercial Standard Ins. Co. v. Harper, 129 Tex. 249, 103 S.W.2d 143, 146, 110 A.L.R. 529; General Acc. F. & L. etc. v. Butler’s Ice Cream Factory, Tex.Com.App., 5 S.W.2d 976.

In determining whether an instructed verdict for appellant would have been proper we do not decide whether the evidence raises an issue of fact concerning “actual authority” of the agency to accept and receive the citation. We have con-cluded that the evidence does not resolve the issue of apparent authority as a matter ■of law so as to make an instructed verdict proper under a motion for judgment non •obstante veredicto. Appellant argues that the policy requirement that the insured shall forward any process served on him “to the company” settles the matter.

The existence of apparent authority is based upon estoppel, and one seeking to charge a principal through the apparent authority of an agent “must prove such conduct on the part of the principal as would lead a reasonably prudent person, using diligence and discretion, to suppose that the agent has the authority he purports to exercise.” Chastain v. Cooper & Reed, 152 Tex. 322, 257 S.W.2d 422, 427.

Appellant furnished to McWilliams, doing business as Bankers Insurance Agency, its printed insurance application form on which insured signed his application filled out by McWilliams’ employees and addressed to appellant, at the agency office. Appellant’s corporate name was printed in the largest letters used in the form. It contained a printed blank designated “broker,” in which the name “Bankers Insurance Agency” was typed. Appellant furnished to Bankers Insurance Agency a supply of its printed premium promissory installment note forms, one of which insured signed at the agency office at the instance of Bankers Insurance Agency contemporaneously with the making of the application. The printed payee in the note form was “Pioneer General Agency, Inc.”, appellant’s general agent. The note recited it was payable at the office of the latter agency in San Antonio. Collections on insured’s note were made and the initial premium installment was received by McWilliams’ agency in Houston with appellant’s approval, upon its instructions, and in conformity to its standard practice. Appellant furnished McWil-liams printed “daily” forms, one being used on insured’s application, designated “Agent’s Copy”. Appellant issued the policy applied for on its forms, sending the policy to McWilliams for delivery to insured. The policy was “written by and through Bankers Insurance Agency” in Houston, it was stipulated. The agency retained a portion of the premium as commission, and transmitted the balance to appellant. McWilliams testified it was standard practice to tell insureds, if they had an accident, “come by our office; we will take care of you”, and it “could have been told” insured “if any papers were served on him to bring them by” his office. He testified the present citation was most likely not the only one for appellant ever received in his office.

Insured testified McWilliams gave him a “coupon book to pay my insurance with,” and a receipt for his “down payment” and a subsequent payment. The coupon book was sent to McWilliams by appellant. Insured went to McWilliams’ office to make a report of the accident, signing the “blue form” which was filled out there by Mc-Williams’ staff, and which “they were going to mail to Austin.” Bankers Insurance Agency instructed insured to go to the office of an adjuster who regularly conducted appellant’s investigations where he made oral and written statements. Insured mailed the citation to McWilliams’ office, where it was temporarily misplaced or lost.

Appellant’s vice president testified his company operated on a direct writing basis; that it furnished applications and note forms to McWilliams, who was not authorized to bind a risk, and who forwarded the application to appellant’s subsidiary corporation, Pioneer General Agency; that appellant had never instructed McWilliams not to receive suit papers delivered to him ; that about five percent of all appellant’s citations were sent by insureds to an agent or broker; others were sent directly to the company or to an approved adjuster. Appellant had instructed its adjusters to tell insureds to turn citations over to them. He testified it was not a company policy that citations “all have to be mailed to San Antonio.” “Q. You say you discourage turning these petitions over to the agent who wrote the policy, who took the application, but actually there is nothing wrong with doing that other than just one more step in it. That is the only objection you have to it? A. Yes. That is right.”

Appellant’s adjuster, investigating insured’s accident, testified on direct, “that assignment actually came from Bankers Insurance Agency”, who reported it by telephone.

Appellant points to contrary evidence which would have supported a verdict in its behalf, but we have summarized a part of the facts and circumstances which in our opinion raise an issue of fact as to apparent authority precluding an instructed verdict. Affirmed.


author: McDONALD, Chief Justice.

text:
    The LOCATORS, INC. OF TEXAS, Appellant, v. Verner C. J. PETERSON, individually and d/b/a Medical Center Pharmacy, Appellee.
    No. 4266.
    Court of Civil Appeals of Texas. Waco.
    Oct. 8, 1964.
    Rehearing Denied Oct. 29, 1964.

      Engel & Yelton, Houston, for appellant.
    James P. Markham, Jr., Houston, for ap-pellee.
   McDONALD, Chief Justice.

This is a suit to recover a commission. Plaintiff, Locators, Inc., sued defendants for a $10,000. commission, alleging it was entitled to such sum under an “exclusive authorization,” wherein plaintiff was appointed exclusive agent for the sale of defendant’s business known as Medical Center Pharmacy. Defendant answered, among other things, that plaintiff’s “Exclusive Authorization” did not comply with Art. 3995 (Sec. 4) R.C.S. (Statute of Frauds), nor with Art. 6573a R.C.S. (Texas Real Estate License Act), Vernon’s Ann.Civ.St. art. 6573a.

Trial was to the court without a jury. At the conclusion of plaintiff’s evidence the Trial Court sustained defendants’ motion for judgment, and entered judgment that plaintiff take nothing.

Plaintiff appeals, contending the Trial Court erred in rendering judgment against it for the reason that the “Exclusive Authorization” agreement between the parties was not invalid as a matter of law.

The principal question for determination is whether the “Exclusive Authorization” agreement is invalid as a matter of law under Art. 3995, Sec. 4 (Statute of Frauds) or Art. 6573a (Texas Real Estate License Act) for want of a proper description of the real estate involved. Pertinent portions of the agreement follow:

“Exclusive Authorization to The Locators, Inc. of Texas Houston
“Date Jan. 24, 1962
“You are hereby appointed my Exclusive agent and authorized to negotiate the Sale or Lease of the property described on the reverse side hereof for the price and upon the terms herewith given or otherwise agreed to by me, and for the commission herein agreed upon, which I shall pay you forthwith at your office, if and when you procure a buyer or lessee ready, able, and willing to negotiage for such price and terms. If the property shall be sold by me or leased by some other agent while this contract remains in force, I shall nevertheless pay you the agreed commission whether the buyer or lessee is procured by you, by me, or such other agent.
* * * * * *
Price to be asked by the Locators, Inc. of Texas $125,000.
“The owner, and/or its assigns, agrees to pay the Locators, Inc. of Texas-% commission for SALE or LEASE and 10% for sale of fixtures and/or stock, if any, in accordance with the commission schedule of the Houston Real Estate Board on any SALE or LEASE of said property if SOLD or LEASED to any person, group of persons, company or corporation, contacted by the Locators, Inc. of Texas, during the above specified time, either at the price and terms stated herein, or at any other price and terms accepted by the owner and/or its assigns.
“This contract shall be in full force and effect until February 7, 1962, and thereafter until 15 days’ notice of cancellation sent by Registered Mail shall have been given to you.
“ * * * I shall procure the transfer of my lease if any, for the premises wherein the property is located, and obtain the consent of the lessor to an assignment thereof to the buyer. * * *.
* * ij!
“VERNER C. J. PETERSON
Owner
THE LOCATORS, INC. OF
TEXAS
BY Eli Pickens.”
No property whatsoever was described on the reverse side of the “Exclusive Authorization” instrument. Plaintiff did introduce in evidence an instrument which it asserts became a part of the agreement, and supplies the necessary description. Pertinent portions of such instrument follow:
“MEDICAL CENTER PHARMACY
Operating Expenses
November, 1961 1-1 to 11-30-61
Amount % Amount %
Advertising 69.58 21 1761.97 49
Acct & Legal 400.00 1.20 4400.00 1.22
* * * * Jjí íjí * * * * *
Note: Above statement is prepared without audit for use of the management only.”

The “Exclusive Authorization” involved real estate, and in fact called for a transfer of the lease (which the record reflects had 17 years to run).

It is our view that nowhere in the agreement or in the additional instrument introduced, is a legally sufficient description of the real estate here involved.

Our Supreme Court in Wilson v. Fisher, 144 Tex. 53, 188 S.W.2d 150, in considering the sufficiency of a writing under the Statute of Frauds, says:

“In so far as the description of the property is concerned the writing must furnish within itself, or by reference to some other existing writing, the means or data by which the particular land to be conveyed may be identified with reasonable certainty. * * *
“The certainty of the contract may be aided by parol only with certain limitations. The essential elements may never be supplied by parol. * * * But the parol must not constitute the framework or skeleton of the agreement. * * * ”

Neither the “Exclusive Authorization” nor the other instrument introduced in evidence contains any reference, which would fill the gap of an insufficient description, and cause same to be legally sufficient under the Statute of Frauds.

The want of description is likewise fatal to plaintiff’s case under the Texas Real Estate License Act. See Bachman Center Corp. v. Sale (n. r. e.), Tex.Civ.App., 359 S.W.2d 290.

The judgment of the Trial Court is affirmed.


author: CLAYTON, Justice.

text:
    Alvin R. ADAMS, Appellant, v. FIRST STATE BANK, MONAHANS, Texas, Appellee.
    No. 5672.
    Court of Civil Appeals of Texas. El Paso.
    Sept. 23, 1964.
    Rehearing Denied Oct. 28, 1964.
    Howze & Howze, Monahans, for appellant.
    Tom L. White, Monahans, for appellee.
   CLAYTON, Justice.

This is an appeal from a summary judgment of the District Court of Ward County, Texas in a suit filed by appellee First State Bank, Monahans, Texas, under the Bulk Sales Law against appellant Alvin R. Adams and his father, L. E. Adams, and his father’s wife, Nora F. Adams. Appellee had obtained a judgment against L. E. Adams, the cause of action arising out of promissory notes executed by L. E. Adams to appellee. Appellee here alleged that subsequently L. E. Adams had sold his mercantile business and the stock of merchandise located in and used in connection therewith to his wife and son “with the intent to defraud and avoid his creditors” and in violation of Article 4001, T.R.C.S., the Bulk Sales Law, the wife and son thereby becoming receivers of such stock of merchandise for the benefit of appellee and any other then creditors of L. E. Adams. Appellant Alvin R. Adams, in his First Amended Original Answer, pleaded, among other matters, that appellee had actual notice of such sale and that, by reason of its failure to timely object, it was estopped to invoke the provisions of the Bulk Sales Law or to claim a non-compliance therewith. The trial court granted appellee’s Motion for Summary Judgment, and Alvin R. Adams appeals.

Appellant, in two points, urges error of the trial court in granting appellee’s motion, and rendering summary judgment, as there were substantial and material issues of fact to be resolved in said cause.

In his “Argument and Authorities” the appellant supports with cited cases several general assertions concerning the principles underlying the granting or refusal of a summary judgment, such as:

“If genuine, substantial and material issues of fact exist, Summary Judgment is improper.”
“In passing upon Summary Judgment Motion, Court only determines if genuine issues of fact exist.”
“Summary Judgment should only be rendered in those instances where an instructed verdict would be in order, if facts were the same as urged in Motion for Summary Judgment.”
“A judge may not pass upon credibility or weight of evidence (when considering Motion for Summary Judgment), nor anticipate what the evidence would be on trial.”
“Nor, may the Court substitute his judgment for that of the jury on issues of fact, if such exist.”
“In Summary Judgment proceeding, movant has burden of clearly proving his right to Summary Judgment.”

Without analyzing the cited cases, or expressly holding that the cases cited un-qualifiedly support the principles which are set out and in support of which they are cited, we accept, for present purposes, the verity of the asserted principles. This brings us, then, to an examination of the pleadings and the evidence offered at the hearing on Motion for Summary Judgment, no testimony having been offered at such hearing.

In support of his two Points of Error, appellant, in his brief, enumerates the following alleged material issues of fact as having been raised by the pleadings:

“(a) Whether, by reason of knowledge and acquiescense in the sale and transfer from L. E. ADAMS to APPELLANT, Appellee was estopped to attack the sale, necessarily requiring a finding of fact upon evidence, though same was undisputed by Appellee;”

Presumably, this issue is said to arise because of appellant’s pleading in his First Amended Original Answer that prior to the sale of the business and stock of the mercantile company by L. E. Adams to Alvin R. Adams, the said L. E. Adams had discussed with an officer of appellee bank the former’s attempts to find a buyer for the business, gave a “sale circular” to the officer and on April 28, 1961 wrote the officer a letter, the first paragraph of which letter reads as follows:

“Grandfalls, Texas 4/28/61
“Mr. Willard Pane
Pres. First State Bank,
Monahans, Texas
Dear Sir:
Due to my bad health and advanced age I am disposing of my mercantile business as per my circular which I sent you several days ago. I am selling my remnant of stock to my Son who has been employed by the Kid Lumber Co. of this city.”

The second paragraph of the letter relates to a renewed offer in compromise of the indebtedness under the promissory notes given to appellee by L. E. Adams.

Appellant’s pleadings then recite the following :

“That all of the creditors of L. E. ADAMS and of ADAMS MERCANTILE COMPANY were cognizant of and acquiesced in such sale, including said Plaintiff bank. That by its election to stand idly by until such sale was consummated, and in remaining silent for over a year with reference thereto, allowing Defendants, especially Defendant ALVIN R. ADAMS to move to his great damage by reason of changed position relying on such consent, acquiescence, and agreement of said Plaintiff should not now be heard to complain, or to attack the validity of such sale, and Defendants say that by reason of all of the above and foregoing facts, said Plaintiff in equity is estopped to assert the alleged invalidity thereof, or to attempt to invoke the harsh penal provisions of the Bulk Sales Law as against these Defendants.”

On the subject of “Waiver and Estoppel” under the Bulk Sales Law, 26 Tex.Jur.2d 498, Fraudulent Conveyances, § 203, it is stated:

“Creditors are estopped from attacking the validity of the transaction, when they affirm an original sale made in contravention of the Bulk Sales Law, and appropriate to the payment of their claims the money received by the debtor, and thereafter assert in court that there was no violation of the law and no legal fraud, that the transactions were valid, and that the trustee holds absolute title to the property transferred.”

The above authority, in its annotation on “Waiver, estoppel, acquiescence, or laches of creditors with respect to attack on sale under Bulk Sales Law” cites 15 A.L.R.2d 937. The work cited, at page 943, recites:

“Creditors who consent to, or acquiesce in, a bulk sale are generally held to have waived their rights under the bulk sales act or to be estopped to attack the validity of the sale because of violations of the law.”

In support of this assertion the Texas cases of Warren v. Parlin-Orendorff Implement Co., 207 S.W. 586 (Tex.Civ.App., 1918; ref.), and Midland Shoe Co. v. A. L. & K. Dry Goods Co., 3 S.W.2d 475 (Tex. Civ.App.1927; ref.) are cited. The first case holds, 207 S.W. at page 591:

“ * * * The creditors, by affirming the contract, made it their own, and would be estopped from setting up that it was originally illegal.”

The second cited case is to the same effect, stating 3 S.W.2d at page 477:

“It is admitted that the sale of the merchandise and fixtures by C. W. Cecil & Co. to the Farmers’ Mercantile Company was not made in compliance with the Bulk Sales Law; hence, such sale was void as to all creditors of Cecil & Co., including interveners, and the purchasers of the property became trustee for such creditors; however, after the sale, the participation by interveners in the subsequent sales and transfer of the property estops the in-terveners from asserting that such transactions were invalid, as in violation of the Bulk Sales Law.”

But such is not the situation here. If the letter dated April 28, 1961 from L. E. Adams to the officer of the appellee is here represented to be notice to the latter of an intended sale under Article 4001, T.R.C.S., the so-called Bulk Sales Law, it does not comply with the provisions of the statute. Nor does there appear anywhere else in the record that there was ever, on the part of the appellee, any waiver, estoppel, acquiescence or laches of the appellee with respect to the sale of the mercantile business by L. E. Adams to his son, the appellant, as such terms are employed in the above cited authorities.

In its brief appellee sets forth, with reference to this case, four essential or basic requirements of the Bulk Sales Law, and it is evident that they are applicable and decisive in the.matter before us. They are as follows: .

“1. That he demand and receive of his father, the transferor, a written list of the names of transferor’s creditors, together with their addresses and the amount of the indebtedness due or owing each creditor.
“2. That the list be certified by the transferor under oath to be a full, accurate and complete list of his creditors and his indebtedness.
“3. That Appellant transferee notify personally or by registered mail each of such creditors of the proposed transfer at least ten days before taking possession of or paying for such merchandise and fixtures.
“4. That such notice contain the price, terms and conditions of the proposed transfer.”

As will be noted, these excerpts are statements of law paraphrased by the appellee, but undoubtedly they set forth some of the basic requirements of a sale under the Bulk Sales Law. It will be readily seen, in the matter before us and before the trial court, that the fulfillment of these requirements was a matter of law. No one maintains that they were ever fully met. Nowhere is it shown that the creditors received any notice of the transfer to appellant, or that appellant received a sworn, authenticated list of transferor’s creditors. These matters not having been attended to leaves this case resting squarely on a legal foundation, with no material fact issues to be determined. As seen by the cases cited above, transferee became a trustee for the creditors of transferor. Because of the failure to abide by these provisions of the Bulk Sales Law, the question of whether transferee was a purchaser in good faith or not is immaterial. As a matter of fact, no questions of real importance remain. However, we will discuss the appellant’s other purported issues of fact.

The second issue of fact claimed by appellant to have been raised by the pleadings is:

“(b) Whether Appellee and other creditors were notified in advance of the sale and transfer, as alleged in Plaintiff’s pleadings, and as required by Art. 4001, R.C.S.”

We find nothing in the record to indicate that appellee or other creditors received any character of notice in advance of the challenged sale and transfer, other than the letter of April 28, 1961 which, as we have stated above, does not comply with the requirements of Art. 4001.

The third issue of fact claimed by appellant follows:

“(c) Whether Appellant was purchaser for value in good faith, and in compliance with Law.”

As stated above, we deem the matter of good faith on the part of appellant to be irrelevant. Again referring to 26 Tex. Jur.2d, Fraudulent Conveyances, § 200 at page 496, it is declared that “the fact that the buyer acts in perfect good faith in the transaction is immaterial”. Cornish v. Nance Motor Co., 13 S.W.2d 139 (Tex.Civ.App., 1928; ref.), at page 141 holds:

“The evidence was sufficient to support the finding of the trial court that plaintiffs did not comply with the requirements of the Bulk Sales Law; that, therefore, the sale was void as to creditors of the motor company, and plaintiffs became accountable to them for the assets of the company that came into their hands by reason of such sale, notwithstanding the uncon-troverted proof that plaintiffs acted in perfect good faith in the transaction and relied on assurances given by Nance that there were no outstanding liabilities of the company.”

The phrase in the third asserted fact issue (c), “and in compliance with Law”, as well as the stated fourth issue: “(d) Whether, in the light of pleaded facts, Appellant was, under Law, a receiver for creditors — which question of Law necessarily should have been based upon finding of facts under the evidence” beg the question, since there is nothing in the evidence that shows any attempt to comply with the Bulk Sales Law.

In conclusion, and after careful analysis of the matter before us, we fail to find any "genuine, substantial and material” issue of fact raised in the record, and we are constrained, therefore, to affirm the trial court’s order granting appellee’s motion for summary judgment.

Affirmed.


text:
    Hans KAYEM et ux., Appellants, v. Doyle STUCKEY, Appellee.
    No. 4269.
    Court of Civil Appeals of Texas. Waco.
    Oct. 8, 1964.
    Rehearing Denied Oct. 29, 1964.
    Fulbright, Crooker, Freeman, Bates & Jaworski, Houston, for appellants.
    Abe Dunn, Joseph R. Pulaski, Houston, for appellee.
   McDONALD, Chief Justice.

This case involves the meaning and enforcement of certain restrictions applicable to the Long Meadows residential subdivision in Harris County, Texas. Plaintiffs Kayem instituted this suit against defendant Stuckey (and others) to enjoin the alleged violation of restrictions applicable to the subdivision. Trial was before the Court without a jury, which, after hearing, entered judgment that plaintiffs take nothing and denied their request for injunction.

Plaintiffs appeal, contending that the Trial Court erred in holding the restrictions applicable to the subdivision did not prohibit the construction of more than one residence on each lot in said subdivision.

The applicable restriction is:

“(12) Only one single family residence and its usual accessories shall be constructed or permitted on each site or separate parcel of land hereafter conveyed out of said subdivision.”

The facts in the case are undisputed. The subdivision is platted into lots and such plat filed for record. Plaintiffs own lot 4 in Block 2. Defendants own lots 5, 7 and 8. Defendants built and sold a house on the east portion of lot S and retained ownership of the west portion of lot 5. Defendants built and sold a house on the northeast portion of lot 8 and retained ownership of the balance of lot 8. Defendants have commenced building a house on parts of lots 8 and 7.

SCHEMATIC DIAGRAM

Defendants seek to divide the lots 5, 7 and 8 as platted into 4 lots and build houses on each; or in other words squeeze in an additional building site on the 3 platted lots. Defendants contend that the restrictions as written contemplated that each lot can be divided into smaller sites or parcels with a residence being allowed on each parcel out of such lot; and that no intention is evidenced in the restrictions to restrict one residence to each lot, as shown on the plat.

We disagree with defendants’ contentions. The restrictions recite that the Lacy Meadows addition had been subdivided as shown by the plat; that the addition was to be subjected to uniform building and usage restrictions; and that the restrictions were imposed for the benefit of every purchaser and were imposed upon each site or parcel of land in the subdivision. Paragraph 12 then recites that “only one single family residence shall be constructed or permitted on each site or separate parcel of land hereafter conveyed out of said subdivision.”

Paragraph 16 provides for consolidation of adjoining tracts or fractions thereof into one homesite, but does not in any way allow more than one residence on any one lot. (The balance of the restrictions are inapplicable here.)

We must construe the restrictions in the light of the obvious intent of the plan for development of the subdivision. To us it is clear that only one single residence and its usual accessories would be permitted on each lot of the subdivision as shown by the plat. We think “each site or separate parcel of land” as stated in paragraph 12 of the restrictions, obviously means each lot of the subdivision. The only sites or tracts shown on the plat are the lots of the subdivision. Moreover, the restrictions themselves recite “said restrictions shall be, and are hereby imposed upon each tract or parcel of land in said subdivision.” See: Alexander Schroeder Lbr. Co. v. Corona, (n. r. e.), Tex.Civ.App., 288 S.W.2d 829.

The Trial Court should have rendered judgment enforcing the restrictions. The judgment is accordingly reversed and remanded to the Trial Court with instructions to enter permanent injunction restraining defendants from building the house partially on lot 8 and partially on lot 7.

Reversed and remanded.


author: TIREY, Justice.

text:
    The AETNA CASUALTY AND SURETY COMPANY, Appellant, v. Arthur J. BRYANT, Appellee.
    No. 4261.
    Court of Civil Appeals of Texas. Waco.
    Oct. 8, 1964.
    Rehearing Denied Nov. 5, 1964.
    Fulbright, Crooker, Freeman, Bates & Jaworski, L. S. Carsey, Houston, for appellant.
    Alvis S. Ellisor, Cleveland, Helm, Jones & Pletcher, Houston, for appellee.
   TIREY, Justice.

This suit was brought by Bryant to recover workmen’s compensation benefits and the jury answered all special issues favorable to him and the court’s judgment awarded him a recovery of benefits in a lump sum in keeping with the verdict. Plaintiff went to trial on his original petition. Pertinent to this discussion he alleged that he was working within the scope of his employment for T. E. Mercer Trucking Company and while in the State of Louisiana in the performance of his duties on March 21, 1964, he suffered accidental bodily injuries; that “As a result of the occurrence made the basis of this suit, plaintiff received injuries to his left foot, left ankle and left heel. In this connection it is shown unto the Court and jury that the injuries, and the effects thereof, to his left foot, left ankle and left heel have naturally extended to and affected his left leg and other portions of his body other than his left leg. By reason of his injuries, the left leg is so affected as to substantially and materially impair the use thereof in the practical performance of its functions in the pursuit of a laboring man, so your plaintiff is therefore suffering from total loss of use of his left leg as that term is defined under the Workmen’s Compensation law for the State of Texas. The insurance carrier entered a general denial and specially plead that it had paid plaintiff for thirteen weeks disability and the payments terminated when plaintiff returned to work; that if he had any loss of use of his left leg or left foot, or any loss of earning capacity beyond the period for which defendant paid compensation benefits to him, such loss or use or earning capacity was slight and temporary, and that it has long since ceased. Testimony was tendered that plaintiff was injured on March 21, 1961, in Louisiana while unloading a truck of pipe; that a long joint of pipe fell off the rack and hit the ground and bounced against his left ankle; that no other part of claimant’s body was injured; that plaintiff was taken to a local hospital where he was x-rayed and put in a cast from his ankle to his knee; that thereafter he was brought back to Houston, his home, in a company truck and placed under the care of Dr. Roberson, the company physician. Dr. Roberson saw him on March 27, 1961; that the doctor removed the cast from his ankle on May 8, 1961, and released plaintiff for work on June 19, 1961. Roberson testified to the effect that x-rays made by him showed a minor fracture of the left ankle which did not involve the ankle joint; that the ankle had healed when claimant returned to work on June 19, 1961 with no permanent effects; that on August 14, 1961, the claimant returned to Dr. Roberson complaining of some soreness of the left ankle into the left hip. Thereafter, he returned to Dr. Roberson on September 5th of the same year, still complaining of some soreness in his left hip and Dr. Roberson x-rayed the hip on that date and found no abnormalities in the hip; that he saw plaintiff on five occasions after September 5th, the last being December 11, 1961, when he found claimant to be doing “all right” and dismissed him from his care. Plaintiff testified in part with reference to his injuries:

“q. * * * and them whether or not you were well and your ankle had been cured up when you went back to work for your employers ?
“A. No sir, it was not.
“Q. Was it hurting you?
“A. Yes Sir.
“Q. Was it hurting you much or little?
“A. It would hurt when I’d drive a long ways, my leg hurt and my hip.
“Q. All right, now—
“A. From my ankle to my hip.
******
“Q. Now you said the pain, you say the pain goes from where?,
“A. From here up (indicating).
“Q. Up to your hip?
“A. Yes Sir.
******
“Q. What happens when you work and walk around on it for any length of time there Arthur?
“A. Well it hurts and hurts up to my hip.
******
“Q. This pain that you are telling u's now, this pain in your ankle, you say you have there, goes up your leg to your hip?
“A. That’s right.
"Q. Now is that when you step on something that it goes up your leg?
“A. Well, I will be driving or standing or walking a long time or drive a long time, and it does that.
******
“Q. So it is just a pain that starts in that ankle when you are standing on your ankle?
“A. Yes, sir, that’s right and at night if I work real hard it wakes me up cramping.
******
“Q. All right, what happens to your leg, if anything, when you have worked a full day’s work?
“A. It cramps when I go to bed at night, I get cramps in my leg and hip and I cannot rest.
******
“Q. You may not have understood my; question. The accident happened in March, and you said you went back to work in June, now, please tell us when you first had any of this difficulty with the pain going from your ankle to your hip ?
“A. Well, when I was driving a long ways it — .”

The jury in answer to Issue (1) found that the injuries to appellee’s left ankle had extended to and affected his left hip. Appellant’s first contention is that the jury finding that the injury to appellee’s left ankle extended to and affected his hip is without any support in the evidence, and contends that there is no evidence in the record to support the finding. Its second point is to the effect that the evidence is insufficient to support the answer of the jury to such issue; and the third point is to the effect that such answer is so against the overwhelming weight and preponderance of the evidence as to be manifestly wrong and unjust. It is appellee’s position that the following testimony of claimant supports the jury’s finding to issue (1) :

“Q. Does this pain that you have in there that goes from your ankle to your hip, does that hurt when you try to use that ankle?
"A. When I walk a long time or when I sit driving — and at night I go to bed at night and my leg cramps.
“Q. Does that happen whenever you have used the ankle?
“A. If I use it a right smart in the day, at night it cramps.
“Q. It does not bother you in the daytime though?
“A. It bothers me all the time whén I stand on it a long time.
“Q. Does it happen only when you use your ankle that the pain goes up to your hip?
“A. To my hip, to my knee and my hip.
“Q. Does that happen only when you use your ankle?
“A. If I work hard and all it does that, and I go to bed at night and it wakes me up at night.”

Appellee also relies on the following testimony of Dr. Roberson to sustain the jury’s answer to Issue (1).

“Q. Did you see him again after that?
“A. Yes, Sir, he came back approximately two months later, on August 14, 1961. He came back and complained of some soreness on the left ankle into his left hip, but was working and doing fine when working, and he came back September 5, still complaining of some soreness in his left hip, so I x-rayed his left hip.
“Q. What did the x-ray reveal?
“A. They were normal, they didn’t reveal any abnormalties at all.
“Q. Did you see him again after that?
“A. Yes, sir, he came back about two weeks after that, on September 20, and he was still working then and doing fairly well. He still complained at that time of some soreness and I gave him some medication to help relieve that, and he came back on October 9, and was doing well then, and I saw him again October 30 and dismissed him from any further treatment, and I saw him again December 1, complaining of his left hip pain.
“Mr. Helm: What was that date ?
“A. December 1, complaining of his left hip, and I gave him some medication and tried to relieve that, and I saw him again ten days later, December 11, and at that time he was doing all right, and I dismissed him from any further treatment with instructions that if he had any further difficulty to return, but I haven’t seen him since.
“Q. On December 11, was he having —did he have any complaints that time when you dismissed him —did he have any complaints at that time of any pain in his body?
“A. No, sir, I don’t believe so.
“Q. Was he complaining of any thing that you felt required further treatment ?
“A. No, sir.
“Q. Was he, at that time, in your opinion, healed or not?
“A. Yes, sir, I thought he was.
“Q. Now, do you have an opinion as to whether, when you saw him last on December 11, is this opinion based on reasonable medical certainty, if on December 11, he had any physical disability in his ankle or any other part of his body that was traceable to the injury of March—
“A. It was my opinion, at that time, that he had no permanent disability.
“Q. Did you have an opinion at that time, and do you now, if he was able to do the regular work that he had been doing before?
“A. Yes, sir, he was working at that time, and I thought that he was able to work.
“Q. Have you seen him since ?
“A. No sir.”

With reference to the foregoing testimony appellee says:

“This testimony was analyzed by the jury in light of the testimony given by the appellee that his leg and hip hurt when he drove a long ways; that it hurts up to my hip; that he had not been able to do regular work of long haul driving; that he could not make these long hauls because my leg and ankle hurt; that he is not in good sound physical condition nor getting better and that he has not improved in the last year. The jury viewing the testimony of this man, age 35 at the time of the trial, chose to believe the appel-lee, and discredited the testimony, claimed to be unfavorable, given by the doctor for the insurance company.”

We think it pertinent to point out the following testimony of Dr. Roberson elicited by claimant on cross-examination:

“Q. Now then have you had an opportunity to see this man when he has tried to put in a hard days work, and then see his foot aft-erwards, and his leg?
“A. Yes sir, I saw him several times after he went back to work. In fact he went back to work in June, on June 20th, I believe, and I saw him periodically after that for several months, approximately six months. I saw him then December 11, and he was still working, and I could not find any objective evidence. I havn’t seen him since then though. That was the last time. I could find no evidence that his injury had not healed.
***** *
"Q. And do your records reflect and show on each of these visits that he returned and complained of pain and was complaining of pain up into his left hip and you finally x-rayed his left hip, is that correct ?
"A. I x-raycd his left hip on his second complaint. The first time with complaints of hip pain was August 14, and I examined him and found no physical evidence of any injury to this hip at that time, so he returned on the 5th of September and was still complaining of some hip pain so I x-rayed it and I didn’t find any x-ray evidence of anything in the hip that could be causing his pain.”

Our view of the entire record is that there is no evidence of any limp as a residt of the ankle injury, nor of restricted motion of the ankle, nor of swelling in the ankle or hip, nor of atrophy of the ankle, leg or hip, nor of nerve damage in the ankle, leg or hip, nor of any other medical or physical condition that could account for pain going from the ankle up to the hip or for cramps in the leg and hip. The only evidence in the record of pain extending from the left ankle into the left hip is that of claimant. Testimony was tendered to the effect that claimant had advised with another physician, but he was not called as a witness and no explanation is shown as to why such physician was not called to testify.

In Argonaut Insurance Co. v. Newman, S.Ct., 361 S.W.2d 871, we find this statement:

“When an injury is confined to a specific member, the amount of the recovery is determined by the extent to which the claimant has lost the use of that member. If an injury to a specific member extends to and affects the body in general, the crucial inquiry is whether such extension has caused incapacity. The fact that a specific injury in itself may disable the claimant is immaterial.”

We have carefully read the Statement of Facts to see if there is any evidence of probative force to sustain the jury’s finding to Issue (1), and each of the other findings in the verdict wherein the jury found substantially that the in-| jury to plaintiff’s left ankle had extended to his left hip so that it had resulted in his permanent, total general incapacity, and we have found none. In so doing we have constantly kept in mind that we must consider only the evidence which would sustain the jury’s findings and disregard all other evidence and, at the same time, bear in mind that the burden of proving that the specific injury extended to and affected other portions of the body so as to result in general injury rested upon the claimant. We think he failed to carry this burden.

The factual situation here is ruled by the pronouncements of our Supreme Court in Texas Employers’ Ins. Assn. v. Espinosa, 367 S.W.2d 667, (points 1, 2, 3 and 5) and cases there cited. The Court held:

“ * * * that a specific partial incapacity cannot develop into a general incapacity under Art. 8306, § 10 of Workmen’s Compensation Act, when the disabling incapacity consists of pain and dizziness and results solely from using or attempting to use an eye or other member of the body for which specific compensation is provided by Article 8306, § 12.”

That is the exact situation here. The Court then refers to and quotes from an opinion in Coleman v. Hartford Acc. & Ind. Co., Tex.Civ.App., 297 S.W.2d 236, writ ref. In that case evidence was tendered to the effect:

“ * * * that whenever claimant attempts to work, the use of his injured arm results in pain therein which extends therefrom into his whole body, particularly into the shoulder and upper part of his back and his neck, causing him to be unable to perform the character of labor involved in his employment. It is therefore believed that a proper disposition of the case depends upon the correct answer to the following question:
“Quare: Where a claimant under the Texas Workmen’s Compensation Act sustains an injury to a specific member mentioned in Section 12 of Article 8306, V.A.T.S., and such injury results in a percentage of permanent partial loss of use of such member, may he recover compensation for future general incapacity occasioned as the result of pain incident to any attempted utilization of the member’s remaining use, such pain originating in the injured member and extending to and affecting other portions of his body?
“Answer: No.”

We think the factual situation here is very similar to the factual situation in the Espinosa and Coleman cases, supra, except the injuries here are far less severe. In the case at bar it is appellee’s contention that the injury sustained to his left ankle extended to and affected his hip, and we have previously set out all the testimony which we believe is pertinent to the appel-lee’s contention. We are of the view that appellee failed to carry his burden of proof and show that the specific injury to his left ankle extended to and affected his hip, and that it resulted in general disability or a general injury. See Consolidated Underwriters v. Langley, 141 Tex. 78, 170 S.W.2d 463; Texas Employers’ Insurance Association v. Brownlee, 152 Tex. 247, 256 S.W.2d 76. The same rule was applied in the Espinosa case. It is our view of all the testimony that there is no evidence of probative force which causally links Bryant’s alleged pain from his ankle up to his hip to a source other than the injury to his left ankle and his attempts to use his left ankle in its impaired condition. This view brings claimant’s cause of action within the rule announced in the Espinosa and Coleman cases. Moreover, there is no medical testimony that the injury to his left ankle had affected his left hip. The only medical testimony in the record is that his hip was x-rayed and no objective evidence connecting the pain in the hip with the injury to the left ankle or any other source was found. It is true that appellee complained of pain from the ankle to the hip when he attempted to use the ankle, and this claim was made about five months after the injury to his ankle. We are of the view that the evidence we have quoted on the question of hip pain is not evidence of the extension of the specific injury so as to affect the body generally; that there is no evidence in the record to support the finding of the jury that it did. In the Espinosa case the jury found that an injury to Espinosa’s left eye which required surgery extended to and affected his head and body generally, thereby resulting in incapacity. It is true that Espinosa complained of headaches, pain and dizziness. The operating surgeon found no physical objective evidence connecting the headaches and dizziness with the injury to the left eye or any other source. He did say that possibly some damage to the motor nerves controlling the left eye could cause headaches, but that in order to determine whether or not this was the case it would be necessary to perform an exploratory operation. In the Espinosa case the Court said:

“Specific injuries like all bodily injuries have their painful aftermaths and like undesirable consequences, but mere proof of this is insufficient in law to show an extension of a specific injury.”

It is our view that upon authority of the Espinosa case, that appellant’s point (1) must be sustained. If we are mistaken in the foregoing view, and if there is a scintilla of evidence to support the submission of special issue (1), we are of the further view that the answer of the jury that the injury to appellee’s left ankle extended to and affected his left hip, is so contrary to and against the overwhelming weight of the evidence as to be manifestly wrong and unjust, and the evidence is not sufficient in law to support it. See Liberty Mutual Ins. Co. v. Lee, S.Ct., 381 S.W.2d 172. See also Indemnity Insurance Co. of North America v. Cady, 356 S.W.2d 323, n. w. h. In the Lee case, supra, the claimant sustained an injury to his left knee, and the injury was such that it required an operation and after that his knee and leg swelled up and it would do so after he worked for a few hours and he testified that a small place in his back would hurt; that his condition was such that he could not get any sleep at night. On the verdict of the jury he was awarded 401 weeks’ compensation. It is true that he did not plead that the injuries he sustained extended to and affected other parts of his body, and no issues on this were requested nor submitted. There was medical testimony to the effect that the claimant’s knee condition was permanent, but the evidence was without dispute that he was still working; that the doctor said that he could use the leg, but that the whole leg was involved, but that the claimant was not totally disabled. We think it is significant in that case that the Court made the following statement:

“We find no evidence that would justify the recovery for total, permanent disability and its resulting incapacity.”

It is without dispute that Bryant quit the Mercer Trucking Company because of suspected health problems not related to the ankle injury, and after doing so obtained a job driving a truck for Walter Mischer after he had passed a physical examination. He retained that job until he quit because of weather, and a little later obtained a job at Younger Brothers Trucking Company; after passing an ICC physical and stayed on that job until he quit because the work was slow. He later obtained a job in Odessa with a well servicing outfit and retained it until he obtained a better job with Louie Montgomery Trucking Company, and kept this job until the time of the trial and was still employed with them. Our view of the record is that it shows that Bryant missed no time from work because of injuries after being discharged by the treating physician. He .did not complain of a limp or limited motion in his ankle or any other part of his body. Nor did he have any swelling in his ankle or leg or hip. We find no evidence in the record of any disabling physical condition, except the statement of Bryant that when he worked a full day, using his ankle, he had pain from his ankle to his hip and would have cramps. As we have stated above, it is our view that there is no evidence to sustain the jury’s answer to special issue (1), nor that claimant sustained permanent injuries that resulted in total permanent and general incapacity to him, and if we be mistaken in that view, that under all the evidence submitted, the answer of the jury thereto is against the great weight and preponderance of the evidence, and that this view will require that the cause be reversed and remanded. See King v. King, 150 Tex. 662, 244 S.W.2d 660; 30 T.L.R. 805.

Under this view of the case, the other points pass out of the case, and in view of another trial we pretermit further discussion of them.

Accordingly, the cause is reversed and remanded.


author: LANGDON, Justice.

text:
    Paul V. HULL et al., Appellants, v. Morty L. FREEDMAN et al., Appellees.
    No. 16548.
    Court of Civil Appeals of Texas. Fort Worth.
    Oct. 2, 1964.
    Rehearing Denied Oct. 30, 1964.

      R. Marvin Pierce, Wichita Falls, for appellants.
    Anderson, McDonald & Cherry; Spence, Martin & Richie, and Gene Richie, Wichita Falls, for appellees.
   LANGDON, Justice.

On November 5, 1959, appellees instituted suit to recover excess payments made under an oil and gas lease. The reservation of the overriding royalty interest contained in the lease under which the payments were made provides in part as follows:

“When the oil produced hereunder from the depths below two-thousand (2,000) feet shall amount to an average of thirty (30) barrels or more per well per day, the overriding royalty shall be a net one eighth (Véth) of the total oil so produced under this assignment, same to be free and clear of all operating costs and expenses; and when such production falls below an average of thirty (30) barrels per well per day, the over-riding royalty shall be a net one-sixteenth (Jieth) of the total oil produced under this assignment, free and clear of operatings expenses and costs. * * *

“Nothing herein will be construed to require the assignee to produce the wells into separate tanks for the purpose of determining the overriding royalty, but the average will be arrived at by averaging all producing wells on the daily basis of the number of days they are produced each month.”

The appellees, owners and operators of the lease, alleged that in April of 1951 production dropped below 30 barrels per well per day and have not produced an average of 30 barrels since that time except for three months in 1951. That appellants received and converted to their own use and benefit some 4,697 barrels of oil produced from the lease which at the time of conversion had a reasonable cash market value of $14,091.00. The petition contained a prayer for judgment in the amount of $14,-091.00, for costs and general relief hut contained no reference to interest.

The case was tried to the court without a jury. Judgment was entered against appellants in the sum of $3,423.92, plus $753.26 interest, for a total of $4,177.18, with 6% interest thereon from date of judgment.

The appellants were notified in August or September of 1959 that under the sliding royalty agreement their interest should be reduced from l^th to %6th. This was their first notice. Upon being satisfied that the facts justified the reduction of their interests the appellants promptly agreed to such reductions.

During the trial of the case all monthly payments received by the appellants from April of 1951 through July of 1959, based upon a one-eighth G4th) interest, were stipulated and agreed upon.

The judgment of the court in the sum of $3,423.92 was apparently arrived at by taking one-half (Y) of all money received by the appellants during the four (4) year period next preceding the filing of the suit, and allowing interest thereon at six .per cent for the period of about 4 years from 'the date suit was filed to the date of judgment, October 9, 1963. This would account for the sum of $753.26 in interest.' One-half of the money received during the period would of course represent payment for a one-sixteenth (%eth) royalty interest. There is no dispute that overpayments were made each month during the period of four (4) years prior to the time suit was filed and for each month during the years 1951 through 1959 except for three months during 1951 when production began to decline and in 1959 when appellants agreed to a reduction.

While it is not entirely clear from the record, it appears that the court, in effect, held either that the “conversion” alleged by the appellees or money paid under a mistake of fact constituted a debt evidenced by a contract in writing and that the four (4) year statute (Art. 5527, subd. 1, Vernon’s Ann.Rev.Civ.St. of Texas) rather than the two (2) year statute of limitation (Art. 5526, subd. 4, Vernon’s Ann. Rev.Civ.St. of Texas) was applicable. We are of the opinion the court erred and that its judgment should.be reformed based upon application of the two year statute of limitation. It is well settled that in order for an action to be founded upon a written contract “the written instrument relied upon must itself contain a contract to do the thing for the nonperformance of which the action is brought.” Cowart v. Russell, 135 Tex. 562, 144 S.W.2d 249 (1940); Shaw v. Bush, 61 S.W.2d 526 (Waco Civ.App., 1933, writ ref.). The lease contract in question placed no duty upon the appellants. There was no failure of performance on their part. The contract in question did not more than provide the explanation for the payments to the appellants. The case of Gulf Oil Corporation v. Lone Star Producing Co., 322 F.2d 28 (U.S.Ct. of App., 5th Cir., 1963), cited by appellees, involving a fixed price per barrel for 600 barrels per day, has no application to the facts of this case.

There was no evidence to support the allegations based on conversion. The appellants at no time received any oil and thus could not have been liable for the conversion thereof. Appellants at all times pertinent hereto were entitled to receive payments for oil based on either 14th or íieth. The appellees, owners and operators, were under a duty to ascertain when the sliding royalty slipped from Y&th to Vieth. and to serve notice upon the appellants and the pipeline company to which they delivered the oil. This they failed to do.

“Conversion involves a taking of property without the owner’s consent; hence there can be no conversion where the owner has expressly or impliedly assented to the taking or disposition. To constitute a ‘conversion’ of property, in the sense in which that word is used in law, there must be some repudiation of the owner’s right or an exercise of dominion over the property, wrongfully and in denial of or inconsistent with that right; or, as the rule has been otherwise stated, there must be an illegal assumption of ownership.” 14 Tex. Jur.2d, p. 9, § 3. See also Sunray Enterprises, Inc. v. Rosenaur, 335 S.W.2d 670 (Dallas Civ.App., 1960, ref. n. r. e.).

“Ordinarily, a demand and refusal are required to establish a conversion by a person who acquired possession lawfully and without fault.” 14 Tex.Jur.2d, p. 12, § 4.

“Money may be a subject of conversion if it can be described or identified as a specific chattel; that is, there may be a conversion where there was an obligation to return specific money, but not where an indebtedness may be discharged by the payment of money generally.” 14 Tex.Jur. 2d, p. 17, § 11.

Although we are of the opinion that judgment cannot be sustained upon the basis of conversion we believe under the record as a whole that the appellees were entitled to judgment based upon the theory of money paid under a mistake of fact.

“It is a general rule that money paid under a mistake of fact, that is, an unconscious ignorance or forgetfulness of a fact, may be recovered. This is true where, for example, by reason of such a mistake a debt has been paid twice, or the amount paid was in excess of the amount due. The reason for the rule is that the payee ought not to retain what in conscience does not belong to him as against the person to whom in conscience it does belong.

“The mere fact that the mistake was due to negligence on the part of the person who made the payment will not preclude a recovery. The payor may recover though he had the means of knowing the facts at the time, where he did not have actual knowledge of them, unless the payment was made intentionally and in circumstances showing a determination to pay without choosing to investigate the facts. Negligence in paying does not give the payee the right to retain what was not his due, unless he was misled or prejudiced by the mistake.” 44 Tex.Jur.2d, p. 750, § 77, Mistake of fact.

The two-year statute, prescribing a period of limitation for actions for debt where the indebtedness is not evidenced by a contract in writing, applies in an action for the recovery of money paid under mistake.” 37 Tex.Jur.2d, p. 164, § 49. See also 37 Tex.Jur. p. 144, § 38 and authorities therein cited.

The appellees were not entitled to interest prior to judgment since the amount sued for was not a liquidated, undisputed debt. The sum of money to which ap-pellees were entitled, if any, could not be determined until the trial, where the facts •could be fully developed and the court ascertain therefrom the amount due. This is particularly applicable where there is no prayer for interest and no contract providing therefor.

The appellants’ points of error regarding application of the four-year statute of limitation and the interest allowed by the court are sustained. While we have sustained the contention regarding judgment based upon conversion, we are of the opinion that under the pleadings and the proceedings as a whole that judgment of the trial court could have been and probably was based upon the theory of payment by mistake.

Based upon the authorities cited as applied to the facts of this case, we are of the opinion that the trial court should have entered judgment in the sum of $1,597.68, representing one-half of all payments received by the appellants during the two year period immediately preceding November 5, 1959, the date on which the suit was filed, with interest thereon from October 9, 1963, the date of judgment. We therefore reform the judgment in part as indicated and, as reformed, affirm it.

Judgment reformed and affirmed.


author: SELLERS, Justice.

text:
    Walter S. FIELDS, d/b/a Tex-Mex Drilling Company, Appellant, v. John FORD, Appellee.
    No. 80.
    Court of Civil Appeals of Texas. Tyler.
    Oct. 15, 1964.
    Rehearing Denied Nov. 5, 1964.

      Herbert Boyland, Kenley, Ritter & Boy-land, Longview, for appellant.
    J. O. Bean, Bean, Francis, Ford & Francis, Dallas, Crawford Parker, Jr., Carthage, for appellee.
   SELLERS, Justice.

This is a Plea of Privilege case wherein the Appellee, John Ford, seeks to sustain venue in Panola County under Section 9a, Article 1995, R.C.S., Texas: This section authorizes suits to be maintained in the county where an injury occurred as a result of negligence proximately causing the injury.

The hearing of the Plea of Privilege was before the court without a jury and resulted in a judgment overruling the Plea of Privilege, from which ruling the appellant, Tex-Mex Drilling Company, has duly prosecuted this appeal.

The undisputed facts are that-Tex-Mex Drilling Company, as the name indicates, was,drilling an oil well in Panola County and had reached a certain stage where it was necessary to set casing. To do this work, Tex-Mex Drilling Company employed,Power Tongs, Inc., for whom Appellee, John Ford, worked to install the casing in the hole being drilled by appellant. This put two crews on the job at the same time, one known as the drilling crew and the other as the casing crew. The casing crew came on the j ob about 7:30 in the evening. It was dark but the drilling rig was lit up with electric lights. The drilling rig has what is commonly known as a block and tackle, referred to herein as the traveling block. This block weighs a ton or better. It operates up and down inside the derrick and is used to remove from the well casing or drill stem as needed. This block is operated by a power control located, somewhere on the floor of the drilling rig and the power control is operated exclusively by the foreman in charge of the drilling crew.

There was on the outside of the derrick a ladder that extends up several feet, and then an off-set about a foot, and the ladder continues on up appellant’s derrick for several feet, at least some 30 feet or more. Appellee Ford, in order to install a platform in the derrick which was needed in placing^ the casing in the well, climbed this ladder up to a point of some 20 or 30 feet, from which point he fell and struck his head on an • object below with such force that a brain injury occurred and he has not been able since to remember anything about the accident or to tell how it happened. He so-states while on the witness stand as a witness.

The only other witness to testify on the hearing was Archie Bentley, a member of the casing crew. The effect of his testimony is that he was working on the ground immediately under where the appellee was on the ladder and on the same side of the derrick, that he heard a rattling noise up in the derrick which sounded like steel against steel and he immediately looked up and saw the appellee about 20 or 30 feet in the air completely loose from the ladder, falling in a standing position. His feet and hands were not touching the ladder on the derrick. At the time he looked up the big ton block was swinging away from the side of the derrick where the appellee had gone up the ladder and that he saw the block swing hack against the derrick twice after he looked up, that it struck the derrick some 20 or 30 feet up from the floor of the derrick just about the place where the appellee was when he first saw the appellee falling. He further testified that a man riding the traveling block could not have caused it to swing and hit the derrick.

We are of the opinion that these facts are sufficient to sustain the trial court’s findings of negligence on the part of the foreman of drilling crew in the operation of the power which controls the traveling block, and that such negligence was the proximate cause of appellee’s injury.

The facts of this case are very similar in legal effect to the following cases: Halliburton Company v. Andrews, Tex.Civ.App., 366 S.W.2d 240; Archie Lacy Truck Lines v. Smith, Tex.Civ.App., 350 S.W.2d 216.

The judgment of the trial court is affirmed.