author: MASSEY, Chief Justice.

text:
    H. S. GREEN et al., Appellants, v. A. R. CLARK INVESTMENT COMPANY et al., Appellees.
    No. 16369.
    Court of Civil Appeals of Texas. Fort Worth.
    Dec. 28, 1962.
    Rehearing Denied Jan. 25, 1963.

      Hudson, Keltner, Jordan, Smith & Cunningham, K. K. Smith and Joe Bruce Cunningham, Fort Worth, for H. S. Green, A. B. Canning, William T. Green, Earl M. Moore and E. M. Moore Investment Co.
    Frank E. Crumley and R. E. Rouer, Fort Worth, for A. R. Clark Investment Co. and A. R. Clark and Bille Clark.
    Stone, Parker, Snakard, Friedman =& Brown, and R. F. Snakard, Fort Worth, for appellee H. R. Weissberg Corp.
   MASSEY, Chief Justice.

Matters in the case on appeal are rather involved, with the most important question appearing to be whether or not a constructive trust was properly engrafted on a fund, or what remained thereof, in the hands of the alleged trustee. We have reached the conclusion that the facts and circumstances of the case did not entitle the plaintiffs to such form of a trust, but only to an equitable lien.

Before going into the facts giving rise to the causes of action presented on trial we will state our interpretation of the law in an abstract situation.

Where a Texas corporation is the obligor on an obligation which is not matured, as, for example, upon a promissory note which has not become due or which is not in arrears, and where obligee, or creditor, finds that the corporation has distributed all its assets to one of its stockholders with notice, so that the corporation is insolvent or does not possess assets sufficient to discharge the obligation (to the obligee-creditor) when it shall become due, said obligee may invoke the equity jurisdiction of the district court to have it declared that the stockholder holds the assets distributed to him and still in his possession burdened by an equitable lien. Simkins on Equity, 2nd Ed., p. 350, “Equitable and Contract Liens — Further Illustrations of Equitable Liens”; Panhandle Nat. Bank v. Emery, 1890, 78 Tex. 498, 15 S.W. 23; Restatement of the Law, Restitution, p. 828, et seq., “Following Property”, sec. 203, “Innocent Converter”, and generally see all of Part II under said Restatement on “Constructive Trusts and Analogous Equitable Remedies”.

In such a situation the obligee is not entitled to have such assets seized nor have a constructive trust engrafted thereon for a variety of reasons, the most important being because the time for the performance of the corporation’s obligation has not matured and the obligee would not be entitled to beneficial use of the assets nor to any increase in the hands of the stockholder to whom distributed, particularly when the obligor’s status would be synonymous to that of an innocent converter. See generally 116 A.L.R. p. 270, et seq., Anno. “Jurisdiction of equity to sequester, seize, enjoin transfer of, or otherwise provisionally secure assets for application upon money demand which has not been reduced to judgment”; 13 Am.Jur., p. 818, “Corporations”, see sec. 804, “(Alienation of Property) — Effect of Prejudice to Creditors”; Restatement of the Law, Restitution, p. 828, et seq., “Following Property”, sec. 203, “Innocent Converter”.

We do not perceive there to be any reason, legal or equitable, to qualify the abstract statement in a case where the distribution of the assets of a corporation to its stockholder involved an innocent conversion by the latter, or was one wherein the obligee-creditor either consented to the distribution or contracted that it might be done in advance with actual or implied knowledge that corporate insolvency would result. In particular would this be true where the obligee’s agreement for the distribution made was qualified by a provision that the stockholder should receive the distributed assets “subject to the corporation debts”. Neither would the fact that the obligee might hold security in the form of liens on real or personal property, to secure the performance of the obligation when it matured, qualify the abstract statement. The position of the obligee-creditor would not be as well secured after such distribution as before, and therefore it should not be said that “adequate provision” had been made for the discharge of the corporation’s obligation as applied to that not yet matured, within the meaning of V.A.T.S., Texas Business Corporation Act, Art. 6.11, “Articles of Dissolution.” In this respect see comment of the Bar Committee under the article.

Let us take the stated abstract situation further, and assume that the obligation (as, for example, a promissory note) did become due and was matured. A confessedly owed liquidated claim, or a claim reduced to judgment in favor of the obligee-creditor and against the insolvent corporation, would support a decree engrafting a trust upon the assets received by and remaining in the hands of the stockholder to whom they had been distributed. Assuming a proper showing could be made in a suit for declaratory-judgment brought by an obligee against the stockholder, such' a right might be authorized to be declared even in advance of the time for the obligation to become matured.

Reverting to the abstract situation as stated, and assuming a dispute, it would be the right of the obligee to maintain a suit for declaratory judgment to have it judicially declared whether (in view of the distribution) the corporation remained personally obligated to him, whether the stockholder became personally obligated to him, and whether the stockholder became personally obligated to the corporation. We believe the corporation would remain and continue to be personally liable to the obligee-creditor in the same manner and to the same extent as would have been the case had the corporation been an individual, for in this the corporation had bound itself by contract. The stockholder would be personally liable to the obligee-creditor because he received the corporate assets knowing that to do so would render the corporation insolvent. The stockholder would be personally liable to the corporation for the same reason, it being through the corporation that it would be liable to such creditor.

Upon the maturing of the obligation the stockholder’s personal liability to the ob-ligee-creditor could be reduced to judgment • if and in the event satisfaction of the obligation be not readily discharged by the corporation or someone for it, to the extent of the value of the corporate assets which were distributed to said stockholder, and without regard to whether all or any part of the assets so distributed remained in his hands or had been declared subject to an equitable lien. World Broadcasting System, Inc. v. Bass, 160 Tex. 261, 328 S.W.2d 863. If the stockholder receiving the assets were also a director of the corporation there would be no factual question upon the matter of notice and knowledge of the corporation’s insolvency, and he would be chargeable therewith as a matter of law.

The suit out of which the appeal arose was instituted in the district court of Tar-rant County by plaintiffs H. S. Green, William T. Green, A. B. Canning, and Earl M. Moore, who will be hereinafter termed plaintiffs as a matter of convenience, with occasional reference to one or more of them by name. Additional plaintiffs in the suit, as filed, were E. M. Moore Investment Company (a corporation which had succeeded to most of the rights of co-plaintiff E. M. Moore) and the Florida Management Company, a corporation. Florida Management Company may be disregarded for purposes of the opinion. The rights and interests of E. M. Moore Investment Company, being merely by succession to those of Moore, will be settled by what is hereinafter held as to the rights of plaintiffs when considered collectively. As finally resolved the case became one for construction of contract, for declaratory relief, and for appropriate equitable relief in view of the contractual construction, contractual reformation, and declaratory relief anticipated. There were other phases of the case in which other parties sought relief, as by defendants’ cross-actions against these plaintiffs and against one another. We will describe these matters at later stages of the opinion where such additional phases of the case will be discussed.

By the suit as originally filed primary defendants were P. Frank Lake, Secretary of State for Texas, and the gentlemen who were the then Assistant Secretary and the Chief of the Charter Division, since plaintiffs sought to enjoin the issuance of a certificate of dissolution of a Texas Corporation, and the caption of the case bore the name of Mr. Lake in his official capacity, along with other defendants. By the time the case reached the point of judgment in the trial court the position of these gentlemen as parties became relatively unimportant in that it is only by implication that the Secretary of State is affected by the judgment. Further, by the time the case had been appealed by plaintiffs those defendants of importance were A. R. Clark Investment Company, a corporation) (hereinafter termed Investment Company), A. R. Clark, an individual, and his wife Bille (for convenience hereinafter merely termed Clark although the wife is included), and the H. R. Weissberg Corporation (hereinafter termed as Weissberg or Weissberg Corporation).

We have, therefore, caused the caption and title under which the opinion is to be published to show H. S. Green et al., as appellants and to show A. R. Clark Investment Company et ah, as appellees. Plaintiffs are before us as appellants in respect to the parts of the trial court’s judgment of which they complain, just as Clark Investment Company and Weissberg are' in fact appellants, or cross-appellants, as to the denial of certain relief sought in the trial court and as to relief granted against them. Weissberg Corporation was a defendant as applied to relief against it sought by Clark and in this court it is in the position of an appellant complaining of the amount of attorney’s fees awarded against it and in favor of Clark, while in other respects its position is that of a co-appellee along with the Investment Company and Clark.

For approximately two years prior to March 7, 1961, the Clark Investment Company owned certain real and personal property known as Western Hills Hotel. Investment Company was a corporation whose stock was wholly owned and held by Clark and his wife. We will hereafter speak of the Investment Company ownership as merely that of Clark. Before Investment Company became the owner of the hotel it was owned by plaintiffs and Clark, each holding 20%’ ownership or 20% of all the shares of stock representing ownership. Simply stated, the mechanics by way of which Investment Company became the owner was for each of the plaintiffs, along with Clark, to transfer the 20%' interest of each over to said company. This was accomplished as the result of contracts and for the exchange of consideration reflected therein, material parts of which we will state.

Contractual obligations assumed by Clark and/or Investment Company, incident to the transaction by which Investment Company became the owner of Western Hills Hotel properties and Clark the owner of all the stock in Investment Company, included :

(1) Execution and delivery by Investment Company of promissory notes to each of the four obligee plaintiffs in the principal sum of Two Hundred Seventy-five Thousand Three Hundred Seventy-five Dollars ($275,375.00) a grand total of One Million One Hundred One Thousand Five Hundred Dollars ($1,101,500.00). These notes were to bear interest at the rate of 5.2%' per annum; the interest only to become due and payable during the first five (5) year period; interest, and an amount on the principal balance owing sufficient to amortize the principal amount equal to 1%' per year during the second five (5) year period; interest, and an amount on the principal balance owing sufficient to amortize the principal amount equal to 2%' per year during the second ten (10) year period; with the entire principal balance remaining to become due at the end of the entire twenty (20) year period.

(a) The notes were secured by a second lien on the realty, i. e., the Western Hills Hotel premises, and also by a second lien on the personal property used in the operation of the hotel. The notes referred to the chattel mortgage on said personal property and provided that in the event of default in the payments provided to be made thereon that the holder or holders thereof should have the option of maturing the notes, in which event the indebtedness due thereon and reflected thereby would become immediately due and payable. The chattel mortgage securing the notes provided that the mortgagee(s) might declare all of the indebtedness evidenced thereby immediately due and payable in the event the mortgagor should, without written consent,' sell or surrender the possession of said personal property. The collection of attorney’s fees, if necessary to be incurred in the collection of said indebtedness, was also provided.

(2) That Clark would assign and transfer his personal 20% interest in Western Hills Hotel, Incorporated, to Investment Company (without consideration from Investment Company, but by reason of the acts, agreements and other considerations on the part of the plaintiffs), with the result that all of the properties of the Western Hills Hotel would be owned by Investment Company. The Investment Company would be owned by Clark. Said hotel properties would be burdened with indebtedness to two lending agencies. The first of these was the Prudential Life Insurance Company, said indebtedness being secured by first lien on all the hotel properties. The second of these was, and would be, the plaintiffs individually and collectively on the notes heretofore described, secured by second lien on all the same properties.

(3) That Clark and Investment Company would, so long as any sum of money remained unpaid on the Investment Company notes to plaintiffs, afford said plaintiffs the right of “first refusal” to purchase the whole of the stock of Investment Company or the physical assets of the Western Hills Hotel, should an offer be received therefor from a third party and Clark and Investment Company desire to sell. In other words plaintiffs were granted the right to be informed as to the terms of any offer for the hotel upon which Clark or Investment Company desired to act in disposing of the same either by way of transfer of stock or delivery of the physical property itself, and, if they desired individually or collectively to take such in the place and stead of the third person who had made an offer, such was their right.

(4) Agreement by Investment Company that so long as any sum of money remained unpaid on note or notes given plaintiffs payment of “compensation” to Clark or any other person who might have, directly or indirectly, any interest in the ownership of the hotel facility would be restricted to the grand total amount of Twenty-five Thousand Dollars ($25,000.00) per year, whether by way of dividends, salaries, expenses or otherwise, — except that said amount could be increased to Fifty Thousand Dollars ($50,000.00) if the hotel property was being maintained in a first-class condition, — and provided that reasonable compensation for services rendered pursuant to operating the hotel facility might be otherwise and additionally paid to an individual even though he might have an interest in the ownership of Investment Company or Western Hills Hotel.

(5)That Investment Company would “make no change in its capital structure without the prior written consent of Sellers, provided, however, Company may distribute to Clark all of its assets subject to its debts.”

The contract between plaintiffs and Clark was consummated by the incorporation of Investment Company, its execution and delivery of the notes, liens, mortgages, etc., coupled with the delivery to Investment Company all the stock theretofore owned by plaintiffs and Clark in Western Hills Hotel, Incorporated,, so that Investment Company became the owner of the whole of the hotel properties, said properties comprising the whole of Investment Company’s assets. Clark, of course, was and became the owner of Investment Company through his ownership and possession of its stock.

After Investment Company had owned and operated Western Hills Hotel for approximately two years Clark received an offer to purchase the real and personal physical assets of the hotel. Such offer was made by Weissberg Corporation. In accordance with the obligation incumbent upon Clark and Investment Company the plaintiffs were informed of the terms of Weissberg’s offer, that the sale was desired to be made, and the opportunity afforded plaintiffs and any of them to purchase on the same terms as contemplated to be made by the sale to Weissberg. In writing, plaintiffs certified the fact that they consented to the sale to Weissberg (subject to certain conditions immaterial to our consideration) and that they did not desire to exercise their prior option to purchase.

Sale was consummated to Weissberg. It went into possession of both the real and personal properties which had formerly belonged to Investment Company, being all of the real and personal properties theretofore comprising the whole of the assets of Investment Company. Weissberg did not assume any personal obligation to plaintiffs on the second lien notes given plaintiffs by Investment Company, but its purchase was provided to be “subject to” the mortgages outstanding against both the real and personal property received as part and parcel of the purchase made. In other words, as applied to the interests of the plaintiffs, Weissberg recognized that plaintiffs each held mortgages on the real and personal properties received from Investment Company, secured by mortgage lien second only to that of the insurance company which held the first lien. Circumstances rendered it obvious that Weissberg was obliged to perform in behalf of Clark and/or Investment Company, or assure itself that Clark and/or Investment Company performed all the obligations and duties theretofore assumed by them in their contract with plaintiffs. Any failure therein would expose Weissberg to hazard of plaintiffs’ imposition of rights and penalties therein provided. Most important, of course, would be plaintiffs’ prospective right to accelerate their second lien notes, coupled with right to foreclose their mortgage liens.

What is said in the paragraph preceding is of particular importance in the case. After the consummation of the transaction whereby Investment Company sold and Weissberg purchased, plaintiffs became fearful for the security of their debt. One reason therefor was founded in the realization that the Prudential Life Insurance Company indebtedness, secured by lien first and superior to their own, was for a great deal of money. Realizing this they feared that in the event of any forced sale of the Western Hills Hotel properties it would be possible that the price realized therefrom would be insufficient to discharge all the liability evidenced by their notes after the rights of the prior lienholder were discharged. Furthermore they lacked confidence that Weissberg’s operations of the hotel would match the standard of efficiency maintained during the period it was operated by Investment Company and Clark, and feared that the hotel properties would become depreciated and “run down” so that in the event of a forced sale of the hotel properties at a future time, after values thereof were depreciated, they might receive nothing whatever.

Coupled with these fears was an additional factor of concern to plaintiffs. They learned that Clark had transferred and distributed to himself, as stockholder, all of the Investment Company’s assets, and was preparing to “wind up” the affairs of Investment Company and dissolve the same without planning to apply any part of these assets to the indebtedness evidenced by their notes, or to supply (additional) security for payment when due. Plaintiffs decided to seek a declaration by a court of their rights, and also all relief at law and in equity that might be warranted under the changed and changing circumstances, dating from Investment Company’s sale to Weissberg.

Concerning the action taken by Clark to dissolve Investment Company as a corporation, it is noticed that on April 14, 1961, Investment Company filed in the Office of Secretary of State of Texas, a statement of intention to dissolve as a corporation. On April 25th following, its articles of dissolution were filed. There is no question, and it is a fact, that Investment Company ceased to do business as a corporation.

Investment Company failed to cause the delivery of written notice of intent to dissolve to each known creditor of and claimant against it, nor did it pay, satisfy or discharge all of its liabilities and obligations.

W,e believe that Investment Company’s statement to the Secretary of State, in the articles of dissolution, that “All debts, obligations and liabilities of the corporation have been paid and discharged or adequate provision has been made therefor,” was an incorrect statement in that adequate provision was lacking in behalf of the plaintiffs on their debt to the extent provided by their contract(s) or provided by law in the absence of contract. We believe that “adequate provision” would mean that plaintiffs would be as secure after the dissolution of the corporation as they were immediately prior to the dissolution. It should be remembered that the contract provided that assets of the Investment Company might be distributed to Clark ■“subject to its debts”, which, under applicable rules of law, we hold applied to the •corporation’s assets, whether in the form ■of that property initially contemplated as -of the time. the parties contracted, or as •they might exist should there be a change In form. Clark being both a director and a stockholder of Investment Company, the assets of which were distributed to him, would hold same “subject to its debts”, whether h,e specifically agreed to do so or not, under the circumstances of this case.

In our consideration of the circumstances, by reason of which we reach such conclusion, we will review the financial condition of Investment Company.

With certain liberties taken, for the sake of simplification, and disregarding distribution of corporation assets to dark, Investment Company’s financial status immediately before the distribution may be considered as having these assets: ■

Bonds . 279,399.43
.Notes Receivable:
H. R. Weissberg Corporation . 148,305.54
Accounts Receivable
H. S. Green. 2,400.00
William T. Green- 2,400.00
A. B. Canning. 2,400.00
E. M. Moore. 2,400.00
Total Assets $502,422.49

and having liabilities as follows (here we disregard the debt to Prudential Life Insurance Company, on which Investment Company was personally liable. The debt was secured by a first lien on Western Hills Hotel.):

H. S. Green . $ 275,375.00
William T. Green. 275,375.00
A. B. Canning . 275,375.00
Earl M. Moore (sue- 275,375.00 cessor in interest E. M. Moore Investment Company)
$1,101,500.00

It may readily be observed from the foregoing statement that Investment Company appeared to be insolvent, in the sense that its liabilities were greater than its assets, even before the assets were distributed to Clark. Such a conclusion might be erroneous, however, when note is taken of the fact that the sale had been made to Weiss-berg “subject to” the second lien mortgages to plaintiffs. Solvency of Investment Company would depend upon the value of the security.

It should be remembered that Weissberg owned the hotel and the incident right to remain in possession, undisturbed, so long as those payments falling due under the aforesaid mortgages were promptly paid and other obligations of Clark and Investment Company were satisfied. The obligation to make the payments was on Investment Company as its personal liability, Weissberg not having assumed any personal responsibility.

Should Weissberg become dissatisfied with the hotel it would be at liberty to “walk off” and leave it, refusing to maintain on a current status the mortgage notes on which Investment Company was liable. Of course, should Weissberg do this it would take as its loss the consideration it had paid for the hotel, plus the total amount it paid on the mortgages. (The note to Investment Company, on which it was personally liable, should be added as part of its loss.) Plaintiffs had no personal recourse against Weissberg on their notes.

In the event Investment Company did not rneet subsequent payments provided by the notes, plaintiffs could foreclose on their mortgages and have a sale of the hotel and property made by the sheriff pursuant to court order, with any deficiency in the debt owing them constituting a mere personal indebtedness of Investment Company;— and, if the debt thus owing still remained unsatisfied, furthermore, constituting a personal indebtedness against any and all stockholders of Investment Company to whom any of Investment Company’s assets might have been distributed, to the extent of the value of assets so distributed. If any of said assets, so distributed, could be physically ascertained, they could either be seized and subjected to forced sale, with proceeds applied on the indebtedness still owing, or a trust might be engrafted thereon for the benefit of the creditor.

As hereinabove set out, the statement makes it appear that Investment Company, having ceased to do business, might be factually found to be solvent or insolvent immediately prior to the distribution to Clark. The trial court, as the finder of fact, was entitled to find either way under all the circumstances of the case.

We will state our reasons for the conclusion. The notes payable to plaintiffs were not due and presently payable and the total assets, particularly those constituted by the cash and bonds, were sufficient to enable it to reenter into possession of the hotel should Weissberg abandon it, or to take other action in protection of itself and its creditors or for and in behalf of itself and/or its creditors should Weiss-berg fail to satisfy Investment Company’s personal obligations by making the payments on the mortgage notes as they fell due. Equity would be available for such a purpose if necessity therefor should arise. It was the opinion of the trial court, and is also our own, that Investment Company was and should be treated as solvent until it distributed its assets to Clark so that it became unable to protect itself and its creditors as discussed in this paragraph.

But should Investment Company denude itself of its assets or so much of the assets that it could not protect itself and its creditors in such event, the court, sitting as the chancellor, could treat said corporation as insolvent. It was the opinion of the trial court, and also our own, that it was and should be treated as insolvent when its assets were distributed to Clark. This would be so even though plaintiffs had.contracted and consented in advance that there might be such a distribution.

Our conclusion might have been different had plaintiffs contracted that the distribution of the assets to Clark might be made “free of any claim by plaintiffs thereupon, or by reason thereof” or that plaintiffs’ sole security on their notes would forever be restricted to their second lien mortgages. Such had not been agreed to.

The author, in attempt to insure a correct understanding by all who have recourse to this opinion, here takes occasion to state that what is held is that plaintiffs are entitled to relief by way of an equitable lien completely aside from and unrelated to any provision of the contract of the parties. They would be entitled to the same relief had there been no contract. Furthermore, it is our holding that plaintiffs are neither entitled to a decree of constructive trust nor equitable lien under their contract. Thereunder they are entitled only to the declaratory judgment rendered by the trial court, amended by us only in a very minor respect and concerning restriction on annual amounts which can be taken out of Western Hills Hotel profits. We will qualify this statement by stating that they were also entitled by reason of their contract to the injunctive relief preventing further action toward corporate dissolution, etc. This the trial court did grant by its judgment. Of all this more will be said later.

Before we begin a discussion of the parties’ rights under contract, and in emphasis of our conclusion that in matters most material plaintiffs’ entitlement to relief is other than by reason of any contractual provision, we suggest that note be taken from what we have heretofore discussed that the distribution of the assets to Clark resulted in Investment Company’s total inability to protect itself and plaintiffs in the event Weissberg should decide to “walk off” and leave the hotel. Hence there was a material diminution of their security The most common creditors are the banks of this country. The best security on a loan is the reputation for responsibility of him who pledges his personal obligation to repay the same, not the mortgage lien he might also tender as additional security. It is likewise with a corporate debtor. A corporation, and its directors, might be said to owe the duty to preserve itself and its ability to pay its creditors. Certainly the positive duty is owed creditors to refrain from any destruction of the corporation without their consent, where such would be likely to result in a loss to them, or even to so weaken or alter its capital responsibility or structure as to reduce the likelihood of debt payment.

Since equity would properly treat Investment Company as insolvent (apart from considerations of contract) in view of the distribution of all of its assets to its director and stockholder Clark, with no adequate provision having been made in the protection of plaintiffs, as its creditors (i. e., they were not as well secured after the distribution to Clark as they were before such distribution), plaintiffs are entitled to an equitable lien on the assets remaining in Clark’s hands. In this respect reference is made to the abstract situation set out in an early part of this opinion.

In said part of the opinion it is made clear that Investment Company continued to be personally liable to plaintiffs, and Clark to Investment Company and plaintiffs, upon the obligations of plaintiffs’ notes as same accrued.

By judgment of the trial court a constructive trust was engrafted upon the assets distributed by Investment Company and found, at the time, in the hands of Clark. It is our holding that a constructive trust was improper, but that an equitable lien was proper. Had an equitable lien been impressed upon these same assets, rather than a trust engrafted, the trial court would have been granting relief of the same general character within the greater limitation of that relief which was awarded. Therefore we believe this court should reform the judgment and reduce the relief erroneously granted to that lesser included relief deemed proper in the circumstances. We will, therefore, reform the judgment so as to impress the assets remaining in Clark’s hands with an equitable lien. Plaintiffs did pray for such form of relief.

As has been observed there would have been no question but that engraftment of a constructive trust upon such assets would have been proper were plaintiffs entitled to mature their claim under their notes and rightfully be claiming the right to present payment. Plaintiffs strongly contend for the right to accelerate and mature the indebtedness under the contractual agreement.

We proceed to those rights of the parties determinable in view of the contractual relationships existent between them.

In the trial court’s findings of fact and conclusions of law, it was held that plaintiffs could not mature the notes on any ground sounding in contract. A material contention upon which plaintiffs’ claim was thus predicated lies in provisions ordinarily found in promissory notes and accompanying chattel mortgages. The notes given plaintiffs provided that in the event of the failure of the obligor thereon to perform any of the agreements in the chattel mortgage, the holders of the notes should have the option of maturing the same^ whereupon they should at once become due and payable. The mortgage securing these notes provided that so long as the possession of the mortgaged property, the personal property of the hotel, was permitted to remain with the mortgagor it should not be sold without the written consent of the mortgagee, and that if the mortgagor without the consent of the mortgagee should surrender the possession of any of said property to another or others, or sell any part thereof, the mortgagee, at its option, might declare all of the indebtedness to be immediately due and payable.

The trial court held that plaintiffs having consented in writing that Western Hills Hotel could be sold that there was included therein their consent that the personalty covered by the chattel mortgage be delivered as part and parcel of the sale. This finding and holding on the part of the trial court was within its province as the finder of fact. Plaintiffs’ contest made upon the finding and holding was predicated upon the fact that they did not know of their own rights under the terms of the chattel mortgage and could not have waived the right of requiring a consent in writing to the sale. It appears from the record that the chattel mortgage was prepared by plaintiffs’ own attorney, who necessarily had knowledge of what he had prepared. We believe and hold that the knowledge on the part of plaintiffs’ attorney amounted to knowledge and notice as a matter of law on the part of plaintiffs themselves. Furthermore, at all material times the chattel mortgage was filed of record with the County Clerk of Tarrant County, and plaintiffs were therefore charged with notice of their own rights under the recording statutes. Plaintiffs further contend that the pleadings against them did not raise the affirmative defenses of waiver and estoppel, but we believe that a fair construction of the pleadings refutes their contention in this regard. Plaintiffs, with knowledge of the sale to Weissberg, continued to accept monthly payments made on the notes for over six (6) months prior to complaint in assertion of a right to accelerate the notes.

Plaintiffs found a further contention that they are entitled to mature the notes upon the premise that the distribution of Investment Company’s assets to Clark rendered it insolvent, and that this entitled them to a foreclosure by virtue of the provisions in the Deed of Trust executed to secure the notes, in addition to the mortgage security on the personal property of the hotel. The provision under which the contention is made is to be found in standard forms of deeds of trust generally reading “in case of the insolvency of the undersigned” (him who executes the deed of trust, in this case Investment Company). In the test to be made under the contention advanced, it is to be remembered that by the contract entered into between plaintiffs and Clark (and by construction Investment Company would also be treated as a party to the contract), the plaintiffs had expressly consented to the very distribution of Investment Company’s assets upon which they found their contention of a right to mature the notes. Considering this the trial court concluded that Investment Company was not “insolvent” within the meaning of the parties and as expressed by the provision relating to insolvency in the deed of trust. The finding and conclusion on the part of the trial court was correct and it could not properly be said that plaintiffs are entitled to mature the notes on such contractual ground.

We have heretofore, at an earlier part of this opinion, listed by paragraphs numbered (1) to (5) inclusive contractual obligations which were assumed by Clark and/or Investment Company pursuant to the transaction by which Investment Company became the owner of Western Hills Hotel properties and Clark the owner of all the stock in Investment Company. In the paragraph we numbered (4) is the language limiting and restricting the annual “compensation” which could directly or indirectly be paid to Clark or any other person having an interest in the ownership of the hotel to Twenty-five Thousand Dollars ($25,-000.00), or in any event to Fifty Thousand Dollars ($50,000.00). In the paragraph numbered (5) is the language which provided that Investment Company could make no change in its capital structure without the prior written consent of plaintiffs, "provided, however, Company may distribute to Clark all of its assets subject to its debts.” (Emphasis supplied.) Plaintiffs found a further contention of entitlement to mature the notes upon the premise that one or both said provisions were breached, whereby right to mature the notes became vested.

A case determined since June 14, 1927 (from which date those Courts of Civil Appeals opinions in which petitions for writ of error “refused” outright became as authoritative as opinions of the Supreme Court) was that of Crumley v. Ramsey, 1936 (Tex.Civ.App., Waco), 93 S.W.2d 191, error refused. The court, in passing upon a contention that the terms of a note authorized the acceleration of maturity said: “In the beginning, it should be noted that a contract to thus accelerate the maturity of a debt gives a remedy that is harsh in its nature, and provision therefor, in order to be effective, should be clear and unequivocal ; and, if there is a reasonable doubt as to the meaning of the terms employed, preference should be given to that construction which will avoid the forfeiture and prevent acceleration of the maturity of the debt.”

In the instant situation the trial court applied the principle of law so announced, and concluded that the whole of the agreement between the parties, including that of paragraphs (4) and (5) to which we have referred, disclosed that said agreement did not clearly and unequivocally grant to plaintiffs the right to accelerate the notes, and that there was a reasonable doubt as to> the meaning of the terms employed. The court’s finding and conclusion was that the distribution made by Investment Company to Clark (resulting in the financial condition of Investment Company which was a necessary incident of such distribution) was not the pay of “compensation” inhibited by the parties’ contract. In this we believe, and.it is our holding, the trial court was correct.

Concerning the matter of effecting a change in Investment Company’s capital structure it is to be noted elsewhere in this opinion that such a change was intended by Clark and Investment Company but never consummated. It is true that these parties are contending in this court as in the trial court for right to so change the capital structure and the question of whether they are entitled to do so without prejudice to their rights under the contract with plaintiffs is involved in the declaratory phase of the trial court’s judgment. We have held against the contentions of Investment Company and Clark in this respect, and that the trial court was correct in enjoining further prosecution of action directed toward the accomplishment of any dissolution of Investment Company. Therefore the event in which plaintiffs would found contention that they would have an additional right to mature their notes has never occurred, but was merely formerly in prospect but prevented by their timely action in the trial court. We agree with the trial court that a dissolution of Investment Company would effect a change in its capital structure, inhibited by the contract between the parties.

What we have hereinabove discussed discloses our holdings relating to the more material complaints of plaintiffs because the trial court did not award them additional relief. What we have heretofore discussed also discloses necessary holdings as to most complaints made by Investment Company and Clark. In addition thereto is their complaint of the adjudication that Investment Company was not entitled to dissolve and cease to be a corporation, and of the orders incident thereto mandatorily enjoining and directing Clark and Investment Company to consent to the revocation of all voluntary dissolution proceedings undertaken, to execute and verify a statement of revocation of said proceedings, and to deliver forthwith to the Secretary of State duplicate originals thereof.

The trial court was correct in all these holdings. Its declaration of plaintiffs’ rights were in accordance with the law as applied to facts found upon adequate evidence. As heretofore discussed the steps taken to dissolve Investment Company as a corporation were void and ineffectual in that the statutory procedure for dissolution was not followed. See V.A.T.S., Texas Business Corporation Act, Art. 6.06, “Procedure After Filing of Statement of Intent to Dissolve”, and Art. 6.11, “Articles of Dissolution”. Furthermore the agreement of the parties in the contract, pursuant to which Investment Company delivered its notes to plaintiffs, provided that said corporation should not change its capital structure. A dissolution of a corporation constitutes the most radical change in the capital structure thereof. The action of the trial court was proper.

H. S. Green, one of the plaintiffs, individually and separately, complains because the judgment of the trial court denied him his claimed right, under a separate contract with Investment Company and Clark to have and receive the sum of $100.00 per week after Investment Company’s sale to Weissberg. The trial court, construing the contract, concluded that Green’s right to compensation thereunder ended upon the sale. In this the court did not err.

Pertinent portions of the contract provide: “For a period of ten (10) years, H. S. Green agrees to devote as much as one-half (½) day each week advising and counseling in connection with the operation of the Western Hills Hotel facility. . H. S. Green shall receive a salary of $100.00 per week for these services and the salary shall be paid by A. R. Clark Investment Company so long as it owns the Western Hills Hotel facility, and by A. R. Clark, if he individually becomes the owner of the hotel facility.”

Under competent evidence the trial court, as the finder of fact, concluded that there was no mutual mistake in the wording of the contract, whereby the court might reform the same, and that it was the mutual understanding of the parties that Green’s services thereunder would come to an end in the event the hotel should be sold to any third party prior to the expiration of the prescribed contractual period.

Furthermore, we believe that Green was not in position to maintain suit for the relief claimed, having himself breached the contract. After Weissberg bought the hotel Green neither performed nor tendered any performance under the contract up until the time suit was filed. A party who is himself in default on a contract cannot maintain a .suit for its breach.

The judgment of the trial court awarded the sum of $20,000.00 as attorney’s fees in behalf of Clark and against Weiss-berg. Weissberg contends that the amount was excessive. We do not agree that the amount awarded was excessive and overrule the point in which the contention is presented.

Award of the attorney’s fee was predicated upon contractual provisions incident to the sale of Western Hills Hotel to Weiss-berg. The sale was prescribed as having been made subject to the liability, if any of Investment Company and Clark on the notes held by plaintiffs, and to the liability, if any, to H. S. Green on the employment contract hereinabove discussed. Thereon Weiss-berg agreed to protect and hold harmless Investment Company and Clark from any and all liability in connection with the aforesaid obligations, “including, but not by way of limitation of, all expenses and attorneys’ fees in connection therewith or incident thereto.”

When the suit was filed the plaintiffs made Weissberg a party defendant. Weiss-berg filed pleadings in its own behalf and apparently in derogation of any responsibility to defend plaintiffs’ suit as against Investment Company and Clark. Indeed, Clark was apparently compelled to sue Weissberg for the reasonable value of the services of his attorney on a cross-bill in the same suit. Clark’s pleadings were countered by a general denial on the part of Weiss-berg with no claim of any tender of an attorney’s services, and no admission of any character of obligation owed Clark.

It is true that a substantial part of plaintiffs’ suit against Investment Company and Clark was predicated upon the contention that they were liable because of the insolvency and attempted dissolution of the corporation. Suit in this respect fell without the provisions of Weissberg’s agreement to indemnify Clark. However, plaintiffs sought to impose liability under their theory of the contractual obligations as well. This part of the suit came under the indemnity agreement. In view thereof substantially the same amount of legal services became necessary to be performed, and even if the part which would not have become necessary could be segregated it would not comprise more than 10% or 15% of the total of the services which were .rendered.

Furthermore, we believe the trial court recognized that not all the attorney’s services rendered in behalf of Investment Company and Clark would fall within the indemnity obligation of Weissberg. In the conclusions of law made by the court it is stated: “A. R. Clark is entitled to recover of and from H. R. Weissberg Corporation the sum of $20,000.00 as attorneys’ fees.” The court did not state that the value of the services rendered Clark by his attorneys was said amount. Impliedly the court held that “of the services rendered Clark by his attorneys, such of them as fell within the indemnity provisions of Weissberg’s contract were of the value of $20,000.00.”

We have made a test upon an important group of complaints made by plaintiffs directed toward the trial court’s calculation of the extent of Clark’s personal liability. The court limited such liability, as applied to plaintiff’s notes, for all sums which may become due thereunder to the amount of $327,967.98.

Clark had paid to - the United States Government the sum of $106,000.00 as an • estimated income tax liability, using a part of the assets distributed by Investment Company for the purpose. Had this estimated tax not been so paid the figure stated in the preceding paragraph would amount to $433,967.98 (rather than merely $327,-967.98).

Plaintiffs contend that Clark’s maximum personal liability should have been declared the greater figure, to continue until plaintiffs’ notes have been fully paid, satisfied o.r discharged. In applying tests to be made we believe that we should not lose sight of the fact that plaintiffs necessarily carried the burden of proof of facts upon which the court would rule and conclude as to the relative rights of the parties. When we do so we are of the opinion that there was evidence in the record from Clark which warranted an inference that if Investment Company be not dissolved as a corporation it would have been liable to the United States for a tax which would be equal to or in excess of the $106,000.00 paid and that said sum should not be included in the calculation of Clark’s maximum personal liability to plaintiffs. It is to be remembered that plaintiffs sought to prevent the dissolution of Investment Company, and action of the trial court did effectively prevent the dissolution. Evidence in behalf of plaintiffs did not overcome the inference aforementioned, nor did such proof as we find in the record compel the finding and conclusion for which they contend, which is simply that the aforesaid tax liability was that of Clark, individually, and not of the Investment Company. Their points of error in said respect are overruled.

The trial court denied the claim of Clark for damages under Clark’s contention that he has suffered damages because of the court’s having granted a temporary restraining older and also a temporary injunction pending trial on the merits, all of which inhibited a use of the assets distributed. The only damage alleged is that which arose by reason of the loss of use of the funds distributed by Investment Company to Clark. There was no evidence introduced in proof of any damages sustained. Actually the use by Clark of the funds distributed to him was not prevented, the restraint imposed having enjoined only the Secretary of State and designated officials in his office. Points of error presenting Clark’s complaint are therefore overruled.

The trial court imposed the duty upon Weissberg to limit the total withdrawals by it, “its successors or assigns, directly or indirectly, from the operations of Western Hills Hotel to a grand total of Twenty-Five Thousand Dollars ($25,000.-00) per year; provided, however, if the hotel is being maintained in a first-class condition, the total amount may be increased so that said total amount shall not exceed Fifty Thousand Dollars ($50,000.00) per year; and further provided, however, except for the limitation on payments to be made to H. R. Weissberg Corporation, its successors or assigns, either directly or indirectly, it is understood that reasonable compensation for services rendered may be paid to any individual, even if he may have an interest, either directly or indirectly, in the ownership of Western Hills Hotel.” Of this the plaintiffs complain.

Plaintiffs contention is predicated upon the proposition that the proper construction to be given the obligation of the contracts assumed by Weissberg in connection with its acquisition of the property, coupled with the fact that it has many stockholders, makes it necessary to an award of that complete relief requisite in equity that said stockholders be included as persons restricted from withdrawals along with Weissberg. This contention of plaintiffs is sustained, and our judgment herein will reform that of the trial court so as to include the stockholders of Weissberg.

There are points of error presented by plaintiffs, Investment Company, and Clark which are not covered by our opinion. To do so would unduly lengthen it. We have severally examined points of error so presented and concluded that they should be and are severally overruled.

Accordingly the judgment of the trial court will be reformed and affirmed, with the cause remanded to the trial court in view of the obvious necessity that it perform administrative duties incident to authorizing Clark’s enjoyment, use and transposition of the assets upon which an equitable lien is declared, so long as its character continues that of personal property, or until its form (by exchange) shall wholly merge into a form upon which the equitable lien to which plaintiffs are entitled may become adequately protected under recording statutes.

The judgment is reformed in the following respects :

Paragraph numbered 5, that section of the judgment which purports to impress a constructive trust upon the assets of the A. R. Clark Investment Company distributed to A. R. Clark and Bille Clark is reformed so as to read and provide: “The assets distributed to defendants A. R. Clark and Bille Clark by defendant A. R. Qark Investment Company and remaining after the payment of corporate liabilities heretofore paid, of the value of $327,967.98 at the date of distribution thereof, are chargeable with an equitable lien, as security for the payment of the four notes described in paragraph 1 of the judgment of the trial court, to the extent of the value of such assets at the time of the enforcement of such obligation, and such assets shall be held by A. R. Clark and Bille Clark charged with an equitable lien as security for the present and future owners and holders of said notes until said notes and each of them are fully paid, satisfied or discharged. That said assets in their present form are endowed with the character of a fund on which the recording of a lien would have no value or material effect, by reason of which the trial court will retain jurisdiction for administrative purposes if and in the event judgment in the case becomes final in order that any conversion thereof into property of a different character may take place under authority of an order of the court and with safeguards provided in behalf of the present and future owners and holders of said notes until such time as there has been conversion thereof into property of a character upon which a recorded lien affords as efficient security as that afforded by this order.”

That part of paragraph numbered 12, sub-paragraph (b), the section of the judgment which provides that H. R. Weissberg Corporation and its successors and assigns are bound and obligated with respect to limitation upon total withdrawals from the operations of Western Hills Hotel to a grand total of Twenty-five Thousand Dollars ($25,030.00) per year, etc., is reformed so as to read and provide as follows: “Defendant H. R. Weissberg Corporation and its successors and assigns are bound and obligated, by .reason of the provisions of that certain Loan Agreement dated August 3, 1959, and more fully described in paragraph 6 of this trial court judgment: (b) To limit the total withdrawals by H. R. Weissberg Corporation, its successors or assigns, and any shareholder or shareholders of said corporation, so long as it owns Western Hills Hotel, directly o.r indirectly, from the operations of Western Hills Hotel to a grand total of Twenty-five Thousand Dollars ($25 000.00) per year; provided, however, if the hotel is being maintained in a first-class condition, the total amount may be increased so that said total amount shall not exceed Fifty Thousand Dollars ($50,-00003) per year; and further provided, however, except for the limitation on payments aforesaid, it is understood that reasonable compensation for services rendered may be paid to any individual, even if he may have an interest, either directly or indirectly, in the ownership of Western Hills Hotel.”

In all respects other than those in which judgment is so reformed it is affirmed.

in view of the necessity for administration in carrying judgment into effect upon the finality thereof, the cause is remanded to the trial court for appropriate administrative action.


source: Caselaw Access Project

author: CHAPMAN, Justice.

license: Public Domain

text:
    BAKER & TAYLOR DRILLING CO., Appellant, v. BLANCHARD DRILLING CO. and Pete Thomas, Appellees.
    No. 7192.
    Court of Civil Appeals of Texas. Amarillo.
    Nov. 19, 1962.
    Rehearing Denied Jan. 7, 1963.

      Underwood, Wilson, Sutton, Heare & Berry, Amarillo, for appellant.
    Neill, Blanks, Lewis & Logan, San Angelo, for appellees.
   CHAPMAN, Justice.

This is an exception five venue case. The exception provides:

“If a person has contracted in writing to perform an obligation in a particular county, expressly naming such county, or a definite place therein, by such writing, suit upon or by reason of such obligation may be brought against him, either in such county or where the defendant has his domicile.” Article 1995, Subdivision 5, Vernon’s Ann.Civ.St.

Baker & Taylor Drilling Co., appellant, sued Blanchard Drilling Co. and Pete Thomas in Potter County to recover damages for alleged failure of appellees to make payments to them for materials, services, work, equipment, etc. furnished by appellant pursuant to a written contract between the parties obligating them so to do. The trial court after a hearing on the plea of privilege, duly controverted, transferred the case to appellees’ county of residence, Tom Green County. Appeal is perfected from that judgment.

The written contract provides appellant was to furnish the drilling rig, etc. and appellees were to furnish certain equipment and supplies at their sole cost and expense; provides appellees were to pay appellant $15,000 cash and to assign an undivided interest in the described leases; and provides appellees were to pay appellant for day work time performed in excess of a certain amount. That part of the contract that seems to furnish the basis of the disagreement and interpretation between the parties and which we believe the trial court misinterpreted in changing venue provides: “The cash consideration herein agreed to be paid by Second Party to First Party shall be paid at Amarillo, Potter County, Texas * * Appellant’s petition alleged performance of day work by appellant entitling it to $14,394.53 and that appellees owe it $18,870.59 for supplies and equipment, after allowances for all offsets, credits, and payments made.

To determine under this exception whether venue is properly in Potter County we are not required to find appellant established a prima facie cause of action but only whether it has brought suit upon an obligation appellees have contracted in writing to perform in Potter County. Petroleum Producers Co. v. Steffens et al., 139 Tex. 257, 162 S.W.2d 698 (Com.App. opinion adopted) ; Curlee Clothing Co. v. Wickliffe, 126 Tex. 573, 91 S.W.2d 677; Whitworth v. Mangels of Texas, Inc., Tex. Civ.App., 347 S.W.2d 844 (writ dismissed).

Appellees contend only the $15,000 item provided for in paragraph three of the contract was to be paid in Potter County and therefore any claim for other payments would have to he tried in Tom Green County.

Payment is an affirmative defense to be determined only upon the merits. Southwestern Investment Company v. Allen, 160 Tex. 258, 328 S.W.2d 866. However, even if it should be said that the pleadings of appellant do not include the $15,000 item and it is not a part of the cause of action alleged, we still believe the contract is not subject to that narrow and technical interpretation urged by appellees. In arguing the point appellees contend appellant must rely on the proposition that “cash” was used in the same broad meaning as “money”. We believe a study of the contract shows that “cash” was used in just that sense. The terms “cash” and “money” taken in their usual and accepted sense have the same meaning. People v. Quiel, 68 Cal.App.2d 674, 157 P.2d 446. “Cash” taken in its technical and narrow sense would be minted or current coin, strictly coin or specie. Thompson v. Thompson et al., 149 Tex. 632, 236 S.W.2d 779. Surely appellees would not contend that the term “cash” as used in the contract was intended to mean the $15,000 cash payment was contemplated as cash in the sense of currency, or coin or specie. The very fact that they made the payments they did make by check would indicate a contrary view.

The well was to be drilled in Lipscomb County. The contract provides that appel-lees, in addition to the $15,000 payment, were to make other money payments to appellant, such as the day work time money appellant alleges was due in the amount of $15,394.53 and the payments for certain equipment and supplies. Then, the contract requires that appellees were to furnish certain materials and furnish the right of ingress and egress. The materials were to be used in the well drilling operation in Lipscomb County and obviously were needed in the county of the well location. Therefore, we believe the word “cash” as used in the contract was simply for the purpose of distinguishing the contractural obligations payable in an equivalent of money and those obligations not so performable.

A question very close to ours has been decided by the El Paso Court of Civil 'Appeals. There the contract for the drilling of a well provided the “entire considerations” should be paid the contractor at Fort Stockton whereas our contract provides the “cash considerations” should be paid in the county of suit, Potter County. That contract, so far as we can tell from the opinion, obligated the defendant only to the payment of money, whereas ours required a number of other obligations of defendant that did not include money. That court held venue in the county provided in the contract for payment.

In our case, if the term “cash” is considered in the same broad meaning as “money”, then it seems clear that all payments to which appellant was entitled were to be made in Potter County because the only obligations under the contract for which appellant is suing are obligations which required the payment of money as distinguished from such obligations as those requiring the transfer of interests in the lease, etc. Accordingly, we hold appellant has brought suit upon an obligation appellees have contracted to perform in Potter County; viz. payments of money they obligated themselves for in the services rendered. Venue, therefore, is in Potter County and the judgment is reversed and rendered to conform to this holding.

      . Renaud et al. v. Simmons, 254 S.W.2d 418.


author: WILLIAMS, Justice.

text:
    CITY OF DALLAS et al., Appellants, v. W. T. OVERTON et al., Appellees.
    No. 16177.
    Court of Civil Appeals of Texas. Dallas.
    Dec. 14, 1962.
    Rehearing Denied Jan. 4,1963.
    H. P. Kucera, City Atty., N. Alex Bick-ley and Thomas B. Warren, Asst. City Attys., Dallas, for appellants.
    Jacksonj Walker, Winstead, Cantwell & Miller, D. L. Case, B. L. Woolley, Jr., and Jack Pew, Jr., Dallas, for appellees.
   WILLIAMS, Justice.

Declaratory judgment action by W. T. Overton and Tecon Corporation against City of Dallas and' Norman Register, the Assessor and Collector of Taxes of said City, involving the question of taxable situs of tangible personal property.

The essential stipulated facts, and uncon-tr.overted testimony, may be summarized as follows: W. T. Overton was on and prior to January 1, 1961, and is now, a resident of and has his domicile in the City of Dallas, Texas; that he has a business office in the City of Dallas, where he is engaged in the investment business. On and prior to the critical date of January 1, 1961 Overton was and is the owner of a Cessna Airplane which, when not in use, is located at Addison Airport which is located in the City of Addison, Dallas County, Texas. Such aircraft is used by Overton in his investment business and for pleasure and when not in use it is kept at the Addison Airport, receiving service and maintenance as is provided at such airport. Overton uses the said Addison Airport not only for storing and servicing of his airplane, as is provided at such airport, but also for landing and take off of said plane. Tecon Corporation, a Delaware Corporation, was on and prior to January 1st, 1961 doing business in the State of Texas and having its home office and principal place of business in the City of Dallas, Texas. On and prior to said critical date of January 1st, 1961 Tecon was and is the owner of a Convair Aircraft and a DC-3 Aircraft, both of which are used by the corporation in its business and for pleasure, and when not in use both planes are located and hangared at the Addison Airport, receiving service and maintenance there as well as using the facilities of said airport for landing and take off. The airplanes in question are private crafts; that they are not available for transporting property of others for hire and that they do not fly on a fixed schedule. The airplanes are used for business and pleasure trips by their owners. That Addison Airport is located within the City limits of Addison, and no part thereof is in the corporate limits of the City of Dallas. The City of Addison is a general law city and has the power to tax personal property; that it provides water, street lighting, fire and police protection to the Addison Airport. That Norman Register, in his capacity as Assessor and Collector of Taxes for the City of Dallas, has, on behalf of the City of Dallas, notified Overton and Te-con that their airplanes, hangared at the Addison Airport, are subject to ad valorem taxes by the City of Dallas and has demanded that a payment of such taxes be made. Overton and Tecon have declined to render such airplanes to the City of Dallas for taxation.

At the conclusion of a non-jury trial judgment was rendered in favor of Overton and Tecon Corporation denying the City of Dallas the right to tax the personal property in question.

In extremely able briefs, as well as in helpful oral argument before this Court, the attorneys for both appellants and appel-lees agree that the sole question presented by this appeal from the order of-the-District Court is whether, under the facts presented, the taxable situs of the personal property in question is within the City of Dallas, Texas.

Art. VIII, § 11, Texas Constitution, Vernon’s Ann.St. is the basic law which provides that all property, whether owned by persons or corporations, shall be assessed for taxation, and the taxes paid in the County where situated. Art. 1175, Vernon’s Ann. Civ.St. grants to Home Rule Cities, such as the City of Dallas, the power to levy and collect ad valorem taxes. Section 1181 of the Home Rule Charter of the City of Dallas provides that:

“All property, real, personal or mixed, lying and being within the corporate limits of the City of Dallas on the 1st, day of January, shall be subject to taxation, excepting such property as may be exempt from taxation under the Constitution and the Laws of the State of Texas.” (Emphasis ours.)

Being limited to the authority granted to it by its Charter, the City of Dallas, in order to levy and collect a tax upon appellees’ airplanes, must show that such property has a taxable situs, either actually or constructively, within the limits of the City of Dallas. Great Southern Life Ins. Co. v. City of Austin, 112 Tex. 1, 243 S.W. 778.

Since it is agreed by the parties that ap-pellees’ “airplanes were not and are not physically within the Corporate limits of the City of Dallas” the appellants, in order to prevail, must demonstrate constructive tax situs, or as stated by appellees, an artificial or fictional situs, at the domicile of their owners in the City of Dallas. Appellant contends the “within” provision of its Charter does not necessarily mean a physical location, relying upon the language of the Supreme Court in City of Dallas v. Texas Prudential Ins. Co., 156 Tex. 36, 291 S.W.2d 693 in which it was said:

“ [I]t is our opinion that the language ‘where situated’, as used in the Constitution, does not, by its own force, determine the situs of personal property to be where it is physically located.”

Since there is admittedly no applicable statute controlling this particular situation appellants necessarily rely upon the application of the common law maxim, “mo-bilia sequuntur personam” (movables follow the person) meaning that all movable property was considered to have its tax situs at the domicile of its owner.

The rationale, as well as the history of the ancient common law doctrine “mobilia sequuntur personam” is succinctly stated in 51 Am.Jur. “Taxation” § 451, p. 466 as follows:

“A literal application of the principle of mobilia sequuntur personam to taxation of personal property not only justified a sovereign in taxing the property of his subjects although it was kept outside the territory, but also prohibited him from taxing property of persons who were not his subjects which was kept within his territory; this principle was sufficiently satisfactory in the Middle Ages when the resident of one country rarely kept personal property in another country, and if he traveled, he generally carried his wealth with him, but with changing economic conditions and increasing accumulations of wealth in the various forms of personal property kept by owners at places other than their place of residence or domicil, it became obvious that the principle of mobilia sequuntur person-am could not properly be applied as the ultimate test of situs of tangible personalty for purposes of taxation. That principle is inapplicable where, contrary to the principle it establishes, the property has acquired an actual si-tus in a jurisdiction other than the dom-icil of the owner.”

Cooley “The Law of Taxation” Vol. 2, Fourth Ed., § 440, discusses *he ancient doctrine and its modern exceptions in the following language:

“In relation to situs for purposes of taxation, there is much reference to the legal maxim 'mobilia sequuntur per-sonam' i. e., 'movables follow the person’. That maxim is sometimes loosely expressed in the phrase ‘The situs of personal property is ’ the domicile of the owner.’ However, this maxim is merely a fiction of law. It was ‘intended for convenience, and not to be controlling where justice does not demand it.’ It is not of universal application, does not rest on any constitutional foundation, and gives way before express law. As has been said, ‘the fiction that personal property follows the domicile of its owner’ cannot be allowed to obstruct the truth.’ ‘This rule,’ it has been well said, ‘is subject to so many exceptions and limitations that it is quite as liable to mislead as to furnish a correct guide, when considered alone.’ So far as applied to taxation, it merely means that the situs of personal property for purposes of taxation is the domicile of the owner unless (1) there is a statute to the contrary, or (2) the property is tangible and has acquired an actual si-tus of its own in a state or place other than where the owner is domiciled, or (3), in case of intangible property, it has acquired a business situs in a state other than the one where the owner is domiciled. As thus limited, the maxim applies to taxation of personal property.”

For further background on the history and modern development of common law rule see In re County of Washington v. Estate of Jefferson, 35 Minn. 215, 28 N.W. 256; Union Refrigerator Transit Co. v. Kentucky, 199 U.S. 194, 26 S.Ct. 36, 50 L. Ed. 150, 48 LRA 790; Pullman’s Palace-Car Co. v. Pennsylvania, 141 U.S. 18 and 11 S. Ct. 876, 35 L.Ed. 613.

In the early case of Hardesty Bros. v. Fleming, 57 Tex. 395 (1882) the Supreme Court held that cattle owned by residents of Kansas, but pastured in Hansford County, Texas, were taxable where they had acquired a tax situs in Texas.

The more modern rule, which we think has application in our jurisdiction, is enunciated in 84 C.J.S. Taxation § 115, pp. 224, 225, as follows:

“Although, in determining the situs of tangible personal property, two opposed considerations, that is, place of ownership and place of property location, have been applied and have caused some legal difficulty in the broad application of the principle of mobilia sequuntur personam, the general rule is that movable property which has a value of its own, instead of being merely the evidence or representive of value, and which has a visible and substantial existence, is taxable where it is usually or permanently kept; and, if located in the state or territory, it is taxable there regardless of the residence or domicile of the owner, * * .”

This rule is recognized in Texas. 40 Tex. Jur. “Taxation” § 19, pp. 34 and 35. Dealing specifically with aircraft, the rule is announced in Tex.Jur. Ten Year Supp. Vol. 1, “Aeronautics” § 11, as follows:

“The principles applicable in taxing other types of tangible property are applicable to airplanes and aviation property. The rule that the situs for purposes of taxation of tangible personal property is in the jurisdiction in which the property is physically located, to the exclusion of any other including the state of the owner’s domicile, applies to aircraft.”

In 155 A.L.R. 264, the rule relating to taxation of airplanes is thus stated:

“The situs for purposes of taxation of tangible personal property is, under the present state of the law, in the jurisdiction in which such property is physically located, to the exclusion of any other, including the state of the owner’s domicil. Under this test, apart from the argument that, from the nature of an aeroplane as an instrumentality designed to move about, it cannot be deemed to have any situs of any permanency in any particular jurisdiction, and under the assumption that it: is physically located in a particular jurisdiction, the taxable situs of am aeroplane is in that jurisdiction, and. not at the domicil of its owner.”

Our Texas courts have continually recognized and held that taxable personal property may be taxed in the jurisdiction where it is located, as opposed to the residence of its owner. Clampitt v. Johnson,. 17 Tex.Civ.App. 281, 42 S.W. 866; State: v. Fidelity & Deposit Co. of Maryland, 35 Tex.Civ.App. 214, 80 S.W. 544; Guaranty Life Ins. Co. v. City of Austin, 108 Tex. 209, 190 S.W. 189; City of Galveston v. Haden, Tex.Civ.App., 214 S.W. 766; Great-Southern Life Ins. Co. v. City of Austin,. 112 Tex. 1, 243 S.W. 778.

In the more recent case of State v. Crown Central Petroleum Corp., Tex.Civ.App., 242 S.W.2d 457, writ ref., the question was directly presented as to whether Nueces. County had the right to tax oil which had been produced and stored in Nueces County, but owned by a corporation residing im Plarris County, Texas. Following a comprehensive review of all of the above authorities relating to the ancient doctrine of mobilia sequuntur personam, Chief Justice-Murray of the San Antonio Court of Civih Appeals, speaking for that Court said:

“One exception to the rule that tangible personal property is only taxable in the county of the residence of the owner is, that tangible personal property which by its character and concrete form is capable of having a value and an actual physical situs, may be-taxed in the county where permanently located. State v. Fidelity & Deposit Co. of Maryland, 35 Tex.Civ.App. 214, 80 S.W. 544.”

The court held that the oil by its character and concrete form, is capable of having; •a value and it has always had an actual physical situs of a permanent nature in Nueces County, and therefor taxable there even though its owner resided in another ■county. The Court further stated that the intention of the owner to have the oil loaded in tanks or barges and transferred to Harris County is not sufficient to change 'the actual physical and permanent situs ■of the oil which existed at the time of the .levy of taxes by Nueces County.

We are of the opinion that the above case, which has been approved by Our Supreme Court, announces the correct rule of law applicable to the factual situation here presented. That rule of law is, as announced by Chief Justice Murray, that tangible personal property acquires a tax situs in a jurisdiction apart from its owner if it is kept there with sufficient permanency that it may fairly be regarded as being a part of the general mass of property within the jurisdiction.

The term “permanent” as used in expressions relating to this rule of law is sometimes confusing. The term “permanent” is used in contra distinction of the term “temporary” or “transitory”. The •question of “permanency” is clarified considerably in Cooley, “Law of Taxation” Fourth Ed., § 452, as follows :

“In order to acquire a situs in a state or taxing district so as to be taxable in the state or district regardless of the domicile of the owner and not taxable in another state or district at the domicile of the owner, tangible personal property must be more or less permanently located in the state or district. In other words, the situs of tangible personal property is where it is more or less permanently located rather than where it is in transit or temporarily and for no considerable length of time. * * *
“The governing rule, as usually stated, is that the taxable situs depends on whether the property is 'permanently’ within the state. However, in this connection, the word ‘permanently’ is apt to be misleading unless read in connection with the facts of the particular case. It means a more or less permanent location for the time being.”

See also 110 A.L.R. pp. 707, 717:

“The courts are all agreed that before tangible personal property may be taxed in a state other than its owner’s domicil, it must acquire there a location more or less permanent. It is difficult to define the idea of permanency that this rule connotes. It is clear that ‘permanency,’ as used in this connection, does not convey the idea of the characteristics of the permanency of real estate. It merely involves the concept of being associated with the general mass of property in the state, as contrasted with a transient status— viz., likelihood of being in one state today and in another tomorrow.”

See also such cases as Brock & Co. v. Board of Supervisors of Los Angeles County, 8 Cal.2d 286, 65 P.2d 791; Town of Cady v. Alexander Construction Co., 12 Wis.2d 236, 107 N.W.2d 267 and City Bank Farmers’ Trust Co. v. Schnader, 293 U.S. 112, 55 S.Ct. 29, 79 L.Ed. 228.

Obviously the courts do not construe the term “permanent” to mean absolutely permanent, since movable property is seldom absolutely permanent. The question of whether or not the property in question is “more or less permanent”, as the term is often utilized, depends upon the factual situation in each case as illustrated by that of State v. Crown Central Petroleum Corp., Tex.Civ.App., 242 S.W.2d 457, writ ref., wherein the oil in question was stored in Nueces County awaiting removal to Harris County at some future date, but indefinite time.

In the light of the record made by the stipulations and undisputed testimony as reviewed above, we are of the opinion that appellees’ airplanes are, within the meaning of the term “permanently” kept at Addison Airport with that degree of permanency as to make them taxable at that jurisdiction rather than in the City of Dallas where the owners reside. The planes receive their servicing and maintenance at Addison. They remain available there for their owners’ business trips, and when the trips are completed they are returned to Addison. The planes are not transitory nor temporarily kept at Addison. There is no “transient status” applicable to these airplanes at Addison. They have become a part of the “general mass of property” within the City of Addison. Therefore, as a matter of law, appellees’ planes may be said to be permanently kept at Addison Airport. If the stipulations and testimony raised any issue of fact as to whether the planes were permanently at Addison Airport, the District Court has impliedly found that they are and such finding is supported by the evidence. Renfro Drug Co. v. Lewis, 149 Tex. 507, 235 S.W.2d 609.

Appellants impliedly concede that the common law doctrine of mobilia sequuntur personam has acquired definite exceptions. While they do not seem to question the theory of “permanent location” of tangible personal property, their argument is that “permanency” of location is not the complete test; that tangibles may acquire a tax situs in a jurisdiction apart from their owners only if they have attained a “business situs” at the place where they are located. In advancing this contention, appellants have confused the rule applicable to tangible personal property with the rule applicable to intangible personal property. It is the intangible personal property which may be taxed at its owner’s domicile unless it has acquired a “business situs” elsewhere. On the other hand tangible personal property is said to be taxable where it is permanently kept or where it has acquired a permanent status in the community. This distinction was discussed in State v. Crown Central Petroleum Corp., 242 S.W.2d 457, writ ref.

Even if it may be conceded, arguendo, that appellants’ contention concerning "business situs” is correct, yet we feel that under the undisputed facts in this case that the tangible personal property of ap-pellees had acquired, in some degree, a “business situs” at the Addison Airport in Addison, Texas. It is undisputed that the aircrafts in question, while kept hangared at Addison Airport, are also used frequently by their owners in both business and pleasure trips. Certainly it cannot be said that the aircrafts in question were merely placed in dead storage at the Addison Airport. The airplanes have been used for the purpose for which they were designed, namely, to transport their owners from place to place in both business and pleasure trips. Under these circumstances-it is quite apparent to us that the aircrafts in question have acquired a permanent situs and are certainly used in business by their owners at that situs.

Appellants contend that the judgment of the District Court conflicts with the decisions of Gulf, C. & S. F. Ry. Co. v. City of Dallas, Tex.Com.App., 16 S.W.2d 292; City of Fort Worth v. Southland Greyhound Lines, 123 Tex. 13, 67 S.W.2d 354,, aff. 123 Tex. 13, 67 S.W.2d 354, 361; Chemical Express v. City of Roscoe, Tex.Civ. App., 310 S.W.2d 694, writ ref. A careful examination of these authorities clearly reveal distinguishing features which make them inapplicable to the factual situation before us. In the Southland Greyhound and Chemical Express cases the City was attempting to tax motor vehicles that were only temporarily being kept within its limits. The courts correctly held that such property having failed to acquire “permanent” location apart from its owner, had its tax situs at the owner’s domicile. This is different from the situation here where the airplanes of appellees have definitely acquired a permanency of location. The cases of Gulf, C. & S. F. Ry. Co. v. City of Dallas, 16 S.W.2d 292 related to the situs for taxes of rolling stock of its railroad. This case was controlled by a statute expressly exempting railroad rolling stock from rendition to cities along the railroad’s lines. In our case we are not dealing with a statute.

In such cases as Great Southern Life Ins. Co. v. City of Austin, 112 Tex. 1, 243 S.W. 778; City of Dallas v. Texas Prudential Ins. Co., 156 Tex. 36, 291 S.W.2d 693, the courts were dealing with specific statutes regulating taxation of personal property. Therefore, these cases are in nowise controlling of the factual situation here wherein we are not concerned with a specific statute.

The property in question, having acquired a permanent status for tax purposes at Addison, Texas, rather than in the City of Dallas, Texas, appellants’ points on appeal are without merit and the judgment of the trial court is affirmed.

Affirmed.

BATEMAN, J., not participating on rehearing.


author: CHADICK, Chief Justice.

text:
    TEXACO INC., Appellant, v. Buford JOFFRION, Appellee.
    No. 7446.
    Court of Civil Appeals of Texas. Texarkana.
    Dec. 18,1962.
    Rehearing Denied Jan. 15, 1963.

      William P. Gibson, Wallace G. Malone, Dallas, Long, Strong, Jackson & Strong, Carthage, for appellant.
    Tom Bankhead, T. G. Davis, Carthage, for appellee.
   CHADICK, Chief Justice.

This is an action by a surface lessee against the mineral lessee of an 844.3 acre tract of land, to recover for the diminution in the value of a surface lease caused by the mineral lessee (1) negligently damaging and (2) using more of the surface of the tract than was reasonably necessary in the production of minerals. A jury verdict awarded the surface lessee $3,300.00, and the judgment on the verdict is affirmed.

The appellee, Buford Joffrion, moved to dismiss this appeal because the appellant, Texaco Inc., failed to file its brief within thirty days after April 26, 1962, the date the transcript and statement of facts were filed in this court. Texaco belatedly tendered a brief on June 9, and requested leave to file it June 11, 1962, the sixteenth day following the date the brief should have been filed. At the time of the motion and tender, argument and submission of the appeal had been set for September 18, 1962.

The motion was sworn to and offered the facts contained in this statement to excuse its delay, to-wit:

“Since the date the transcript and statement of facts were filed in this Court this attorney has had the most hectic busy time he has had in his five years with Texaco Inc. The acquisition of the TXL Oil Corporation was just in its concluding stages. This attorney had to attend the taking of depositions in a damage suit filed against Texaco on two different occasions; the depositions were taken by commission and not by agreement.
“This attorney represented Texaco in a Rule 37 hearing for a special permit which was vigorously contested by Humble Oil & Refining Company.
“Another damage suit against Texaco Inc., in the sum of $60,000.00, in which this attorney is handling the defense for Texaco Inc., was set for trial June IS, 1962, at Montague, Texas; however, this attorney has now arranged with plaintiff to have that lawsuit dismissed.
“The other attorney in this attorney’s office, Mr. Wallace G. Malone, although appearing as an attorney of record, has not participated in this lawsuit, did not attend the trial, has not worked on any of the pleadings, and did not assist in the preparation of appellant’s brief. Mr. Malone has been busy in the trial of a lawsuit in Tyler, Texas, in attending in the taking of depositions in Oklahoma City, Oklahoma, and has handled other litigation during this period and is not familiar with this lawsuit.
“As stated before, the past six weeks have been the busiest this attorney has ever been since his employment by Texaco Inc. I have been working nights and yet it was still not possible to get this brief filed within the 30-day period.”

Joffrion does not claim that tardy filing of the brief will do him material injury, but insists the wording of Rules 414 and 415 requires the appeal to be dismissed because Texaco failed to show cause excusing delay. Rule 414 obligates an appellant to file a brief in the Court of Civil Appeals within thirty days after the filing therein of the transcript and statement of facts, but provides that when good cause is shown for so doing, the Court of Civil Appeals may grant either or both parties further time for filing their respective briefs. Rule 415 says:

“When the appellant has failed to file his brief in the time prescribed, the appellate court may dismiss the appeal for want of prosecution, unless good cause is shown for such failure and that appellee has not suffered material injury thereby. The court, may, however, decline to dismiss the appeal, whereupon it shall give such direction to the cause as it may deem proper.”

Examination of the excuse offered by Texaco shows that counsel for the appellant was engaged in the routine work of a busy lawyer during the time attention should have been given this appeal. By choice or neglect counsel favored other matters over preparation and filing of a brief in this case. One of the elements of good cause is the impact of some event beyond the immediate control of the litigant. Mere forgetfulness, neglect, or other pressing work can not excuse compliance with the briefing rules. Good cause for delay is not shown.

The question presented by this situation is whether or not this appeal should be dismissed because Texaco did not timely file its brief, when no material injury has or will be suffered by Joffrion. The force of precedent obliges a negative answer. The source of Rule 415 is Rule 39, “Rules for the Courts of Texas”, promulgated by the Supreme Court of Texas in 1877. Rule 39 was amended, and in substance made applicable to Courts of Civil Appeals by revision in 1892 and again in 1921, evolving finally to its present form, as quoted above. 2 Texas Law Review, p. 30; and “Author’s Comment”, and other data on source under Rule 415, Vernon’s Ann.Tex. Rules. At the turn of the century the Supreme Court decided that the rule as it then existed did not require a dismissal because an appellant, without good cause, failed to timely file a brief if the appellee was not materially injured by a tardy filing. San Antonio & Aransas Pass Ry. Co. v. Holden, 93 Tex. 211, 54 S.W. 751. The Holden interpretation has not been overruled and is still applicable. 2 Tex.Law Rev., p. 53, and 5 Tex.Law Rev., p. 74. Appellee’s motion to dismiss is overruled.

Another question of briefing procedure must be decided. Joffrion objects to consideration of the points of error in Texaco’s brief because the wording of the points bases them squarely upon the trial court’s alleged error in overruling appellant’s motions for instructed verdict. Twenty-one of Texaco’s twenty-two points of error began with this phrase: “The court erred in overruling defendant’s motion for instructed verdict made at the time plaintiff rested and at the close of all the evidence because * * The twenty-second point did not follow this word pattern. In the trial court, when Joffrion completed introduction of testimony and rested, and again at the conclusion of all testimony, Texaco moved for an instructed verdict; both motions were denied. After jury verdict, Texaco moved for judgment non obstante veredicto; this motion was denied, too. Texaco did not file a motion for new trial. In support of his objection Joffrion cites Wagner v. Foster, 161 Tex. 333, 341 S.W.2d 887, where at page 891 it is said: “A point of error cannot be based upon a motion for instructed verdict. To form the basis of a point of error, grounds in a motion for an instructed verdict must be carried forward as assignments of error in a motion for new trial.”

The objections would be satisfied by rewording the points to refer to the motion non obstante veredicto. The liberal rebriefing procedures available to Texaco would permit it to amend its brief. Rules 422, 429, 431 and 437. Delay would be the net result of sustaining Joffrion’s objections. Furthermore, Texaco’s point of error twenty-two is not subject to the objection, and is a reiteration of the errors alleged in the preceding twenty-one points. In addition, no difficulty is encountered in understanding Texaco’s complaint, which is the absence of evidence to support the various adverse findings of fact made by the jury. The objection is overruled.

The jury found that Texaco used more lands in its drilling and producing operations than was reasonably necessary, and that such use was a proximate cause of the diminution in value of Joffrion’s surface leasehold estate. In this connection the jury found the value of Joffrion’s leasehold was reduced by $3,250.00 for the period between January 1, 1960 and the date of suit, and $50.00 for the unexpired remainder of the lease’s twelve year term.

The following summary is the evidence in its most favorable aspect supporting the jury findings. Texaco drilled and operates seventeen wells producing oil from the 844.3 acre tract. Oil and salt water pits were excavated that were not large enough to hold the oil, petroleum substances and salt water run into them in the course of production. The pits overflowed and these substances escaped onto the ground and into the creeks and water supply. Approximately 100,000 feet of pipe'line was laid on the ground, the lines were “scattered”, crossed open fields and hay meadows, and did not follow the roads to the wells or any particular pattern. The fence enclosing the land was cut in six different places, but no gates or cattle guards were installed for approximately fifteen months. Roads to well sites were graded, abandoned, and new roads built in different locations. The entire tract was rendered useless for dairying, pasturing, cultivation of crops and harvesting of hay by Texaco’s use of the surface. The leasehold interest had a value of $5,000.00 per year for dairying purposes.

The essence of Texaco’s complaint is that Joffrion was required, as a prerequisite to recovery, to introduce evidence showing what use of the surface a prudent mineral lessee would make, and how Texaco deviated from it. Specifically, Texaco argues that Joffrion had the burden of showing the custom in the industry in this regard, and Texaco’s violation of the custom. Warren Petroleum Corp. v. Martin, 153 Tex. 465, 271 S.W.2d 410; Wohlford v. American Gas Production Company, 5 Cir., 218 F.2d 213, and Robinson Drilling Co., Inc. v. Moses, Tex.Civ.App., 256 S.W.2d 650 are cited by Texaco to support its contention.

Neither of the cited cases support Texaco’s contention. The Supreme Court in Brown v. Lundell, 162 Tex. 84, 344 S.W.2d 863, states that “ * * * decision in Warren Petroleum Corp. v. Martin was based on two theories, (1) there was no proof of negligence; (2) the lessee was under no duty to exclude the cattle from the vicinity of the well and therefore the lessee owed no duty to the lessor except to refrain from intentional or wanton injury to his livestock. * * * ” In Wohlford v. American Gas Production Company the court declines to discuss the question of reasonable use of the surface, saying, “Despite the claim of trespass, therefore, appellant’s second contention resolves itself into a negligence issue, the same as his third contention which is frankly based on negligence.” Robinson Drilling Co., Inc. v. Moses was decided by sustaining the points of error that plaintiff did not allege or prove that the drilling company was negligent, or that it used more land than was reasonably necessary in drilling two oil wells. The court’s opinion does not summarize the facts proven, if any. No case has been brought to this court’s attention that is precisely in point.

Dean Page Keaton of the School of Law, The University of Texas, and Lee Jones, Jr., of the San Antonio Bar, in 35 T.L.R., at p. 4 recite a typical oil, gas and mineral lease grant, very similar to the grant in this case, and write:

“ * * * While the language is not expressly so restricted, all courts would hold that this provision means that the lessee can do such things only so long as they are reasonably necessary, or, alternatively, that he must exercise his respective rights and privileges with reasonable regard for the rights and privileges of the holder of the serv-ient estate in the leased premises. The question whether or not the use which is being made of the surface is reasonable is one of fact for the jury, just as is the question of negligence. For example, the early leases apparently contained no provision for construction of houses on leased property for use of employees, and the question whether or not such could be done was regarded as one for the jury; and, indeed, in one case, the court in its judgment described the kind of house that could be constructed. Since the typical lease expressly authorizes the construction of a house, it would appear that the construction of a house for employees cannot now be questioned, although the kind and size could be regarded as unnecessary, and therefore an issue for the jury could conceivably be raised as to whether the actual house constructed was the kind and size reasonably required.” (Emphasis added.)

The emphasized language in this quote shows these eminent writers regarded the question of reasonable use of the surface as one of fact, proper for jury determination. They base their conclusion on Holbrook v. Continental Oil Company, 73 Wyo. 321, 278 P.2d 798 (1955); Moore v. Decker, 220 S.W. 773 (Tex.Com.App.1920); Joyner v. R. H. Dearing & Sons, 112 S.W.2d 1109 (Tex.Civ.App.1937), N.W.H. The reasoning underlying the quoted expression and the cases cited leave no room to doubt that an ultimate fact question in this case is whether or not Texaco used more of the surface of the land than was reasonably necessary to effectuate the purpose of its mineral lease.

This last conclusion narrows the next inquiry to the question of burden of proof, that is, was Joffrion required to show by proof of custom, usage, or practice in the industry, what use of the land Texaco, as a prudent operator, could make or should have made, and followed such proof by evidence that Texaco used more of the surface than was shown to be customary in the industry in the operation of its mineral lease. In negligence actions, general custom, usage and practice in an industry is admissible in evidence to aid a jury in determining an issue of negligence. Brown v. Lundell, 162 Tex. 84, 344 S.W.2d 863; Hubb Diggs Co. v. Bell, Tex.Com. App., 1 S.W.2d 575; Comanche Duke Oil Co. v. Texas Pac. Coal & Oil' Co., Tex. Com.App., 298 S.W. 554; Gulf, Colorado and Santa Fe Ry. Co. v. Evansich, 61 Tex. 3. These cases, however, hold that custom is not an absolute test of negligence, for the custom itself may be negligent. By analogy, it seems to follow that a determination that Texaco's operation of its lease did or did not coincide with the custom in the industry is not an element of proof required of the plaintiff. Custom is a fact a jury might weigh in determining a mineral lessee’s reasonably necessary use of the surface estate and nothing more. The industry might customarily use more or less of the surface than is necessary to effectuate rights granted a lessee in a lease.

Inasmuch as Texaco’s argument is that the proof made is deficient mainly because there is no evidence of industry custom, usage and practice to show what or how much use of the surface was necessary in drilling and producing the wells located on the tract, and it appearing that proof of industry practices is not a prerequisite to recovery and that there is evidence supporting the jury verdict that Texaco used more of the surface than was reasonably necessary to the enjoyment of its mineral estate, Texaco’s points of error raising this issue are overruled.

Besides the jury findings already discussed, the jury found as acts of negligence and as proximate causes of the diminution in the value of Joffrion’s leasehold that Texaco failed to bury its pipe line beneath the surface of the ground, and cut and left open the fenced enclosures. Defensively, besides the matters already discussed, Texaco urges that these negligence issues should not have been submitted as the mineral lease predated and was superior to Joffrion’s surface lease and contains provisions that changes in ownership of the fee estate shall not be binding upon the lessee unless furnished with a copy of the instrument accomplishing the transfer. Joffrion for his part makes no claim that a copy of his lease had been furnished to Texaco.

Joffrion’s suit is based in part upon trespass growing out of Texaco’s use of more land than was reasonably necessary to the enjoyment of its mineral leasehold estate, and recovery on this theory is independent of and not founded upon some contractual obligation to pay found in the mineral lease. The intent of the paragraph' referred to in the mineral lease appears to control payments to be made by Texaco and the con-commitant rights of the parties upon the happening of events referred to in the lease. For the same reason, Joffrion’s negligence action for cutting the fence is outside this particular contractual obligation. Discussion of Texaco’s failure to bury its pipe line will be omitted as the judgment may be affirmed upon either the theory of trespass or negligence in cutting the fence.

Texaco’s points of error are overruled, and the judgment of the trial court is affirmed.