author: CLAUDE WILLIAMS, Justice.

text:
    NEW AMSTERDAM CASUALTY CO. et al., Appellants, v. T. J. BETTES et al., Appellees.
    No. 16709.
    Court of Civil Appeals of Texas. Dallas.
    June 3, 1966.
    Rehearing Denied Oct. 28, 1966.

      Brundidge, Fountain, Elliott & Churchill, Lloyd E. Elliott, and J. Willard Gragg, Dallas, for appellants.
    Vinson, Elkins, Weems & Searls, John C. Snodgrass and John B. Holstead, Houston, Dean Carlton, Dallas, for appel-lees.
   CLAUDE WILLIAMS, Justice.

This is an appeal from a judgment for $1,178,770 in favor of T. J. Bettes Company against New Amsterdam Casualty Company. The recovery of T. J. Bettes Company was upon alleged obligation of four bonds executed by L. A. Peterson, Inc., as principal, and New Amsterdam Casualty Company as surety, said bonds being conditional upon the faithful performance by L. A. Peterson, Inc., of contracts for the construction of buildings located in Virginia and New York.

The factual background of the parties and subject matter involved in this litigation is so complex that the record will not yield to a simple statement.

BACKGROUND OF PARTIES

L. A. Peterson, Inc. (hereinafter called Contractor or Peterson, Inc.) is a Texas corporation engaged in the construction business. All of the stock of this corporation was owned by L. A. Peterson with the exception of two shares, one owned by his wife and one by his brother. Its directors were R. C. Peterson, James R. Cash, B. W. Morris, Frank Zitzman and L. A. Peterson.

South Falls Corporation was incorporated under the laws of the State of Texas. James R. Cash, Billy W. Morris and L. A. Peterson each owned one-third of the stock of this corporation. Later, the stock of the company owned by L. A. Peterson was transferred to L. A. Peterson, Inc.

Disco Corporation was a wholly owned subsidiary of South Falls Corporation. Morris, Peterson and Cash were officers and directors of this corporation. Both corporations were engaged in acquiring land and constructing buildings thereon in various parts of the United States. The corporations will be referred to as South Falls and Disco, respectively, and collectively as South Falls-Disco.

Because of the interrelationship between Peterson, Inc. and South Falls-Disco, Peterson, Inc., was the contractor on the majority of the building projects constructed by South Falls-Disco in Iowa, Illinois, Ohio, Texas, Virginia and New York.

T. J. Bettes Company (hereinafter called Bettes) is a Texas corporation engaged in the mortgage banking business, one facet of which is the making of interim construction loans. Bettes was the interim construction lender on the building projects mentioned above in Ohio, Illinois, Iowa, Texas, Virginia and New York. On each of the projects Bettes required that Peterson, Inc. and an approved corporate surety execute dual obligee bonds, being identical with those bonds involved in the present litigation and which will be described in more detail hereinafter.

THE VIRGINIA AND NEW YORK CONSTRUCTION CONTRACTS

Peterson, Inc. engaged to build buildings for Disco in Norfolk, Newport News and Richmond, Virginia and in Plattsburgh, New York. On each of these jobs Bettes required that South Falls-Disco, L. A. Peterson, Inc. and L. A. Peterson, James R. Cash and B. W. Morris, individually, execute a loan agreement which spelled out in detail the conditions under which Bettes’ loan was being made with reference to interim financing of the respective jobs. These loan agreements provided, inter alia, that on each construction project South Falls-Disco should furnish Bettes as security the following instruments: (1) note and deed of trust; (2) collateral assignment of an unconditional contract to purchase the buildings previously executed by A. A. Rosen, a New York investor; and (3) collateral assignment of landlord’s interest under a twenty-year lease previously executed by Maxam’s Inc., a large discount department store chain. Also, Peterson, Inc. was required to furnish the owner, South Falls-Disco, and the lender, Bettes, dual obligee payment and performance bonds executed by an acceptable corporate surety.

On January 19, 1962 Disco, as owner, and L. A. Peterson, Inc., as contractor, executed three standard form agreements for the construction of “Maxam’s Department Stores” in Norfolk, Newport News and Richmond, Virginia for an agreed consideration of $861,802 each. The completion date in each contract was May 26, 1962. In each of the contracts Peterson, Inc. agreed to furnish all of the materials and to perform all of the work shown on the drawings and described in the specifications for each of the respective jobs and to do everything required to be done by the contract. Article 7 of the contract entitled “Guaranty Bonds” provided:

“Contractor shall furnish to owner and to T. J. Bettes Company, as construction loan lender, performance and payment bonds, in which owner and such lender shall be obligees (commonly referred to as dual obligee bonds) as their respective interests may appear. Such bonds shall be executed by a corporate surety satisfactory to both owner and lender. Owner agrees that the interest of the lender in such bonds shall be the amount of construction money which it shall have advanced, together with interest on each such advance from the time of the advance at the rate of 6 per cent per annum, which interest and claim of such lender on each such bond shall be prior and superior to any interest and claim of owner.”

On June 5, 1962 South Falls, as owner, and L. A. Peterson, Inc., as contractor executed a construction contract for the construction of “Forest Hills Outlet Store, Plattsburgh, New York”, such contract having the same general provisions as the Virginia contracts except that the amount was to be $750,000.

Subsequent to the execution of each of the construction contracts Peterson, Inc. as principal and New Amsterdam, as surety, executed two bonds, a payment bond and a performance bond, on each of the four construction projects in question.

THE PERFORMANCE BONDS

The four performance bonds, which are of vital concern in this litigation, were all on standard A. I. A. forms and the one on the Norfolk, Virginia project is illustrative of all:.

“KNOW ALL MEN BY THESE PRESENTS:
That L. A. Peterson, Inc., 7135 Empire Freeway, Dallas, Texas as Principal, hereinafter called Contractor, and NEW AMSTERDAM CASUALTY COMPANY, a corporation organized and existing under the laws of the State of New York, as Surety, hereinafter called Surety, are held and firmly bound unto Disco Corporation, 1066 W. Mockingbird Lane, Dallas, Texas and T. J. Bettes Co., Houston, Texas as Obligee, hereinafter called Owner, in the amount of Eight Hundred and sixty-one thousand, eight hundred two dollars and no/ 100 Dollars ($861,802.00), for the payment whereof Contractor and Surety bind themselves, their heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents.
“WHEREAS, Contractor has by written agreement dated January 19, 1962 entered into a contract with Owner for general construction of Maxam’s Department Store, Norfolk, Virginia in accordance with drawings and specifications prepared by Donald H. Speck, which contract is by reference made a part hereof and is hereinafter referred to as the Contract.
“NOW, THEREFORE, THE CONDITION OF THIS OBLIGATION is such that, if Contractor shall promptly and faithfully perform said Contract, then this obligation shall be null and void; otherwise it shall remain in full force and effect.
“The Surety hereby waives notice of any alteration or extension of time made by the Owner.
“Whenever Contractor shall be, and declared by Owner to be in default under the Contract, the Owner having performed Owner’s obligations thereunder, the Surety may promptly remedy the default, or shall promptly
(1) Complete the Contract in accordance with its terms and conditions, or
(2) Obtain a bid or bids for submission to Owner for completing the Contract in accordance with its terms and conditions, and upon determination by Owner and Surety of the lowest responsible bidder, arrange for a contract between such bidder and Owner and make available as work progresses (even though there should be a default or a succession of defaults under the contract or contracts of completion arranged under this paragraph) sufficient funds to pay the cost of completion less the balance of the contract price; but not exceeding, including other costs and damages for which the Surety may be liable hereunder, the amount set forth in the first paragraph hereof. The term “balance of the contract price,” as used in this paragraph, shall mean the total amount payable by Owner to Contractor under the Contract and any amendments thereto, less the amount properly paid by Owner to Contractor.”

Each bond contained an endorsement which reads as follows:

“The Surety shall not be liable under this bond to the obligees, or either of them unless the said obligees, or either of them, shall make payments to the principal, strictly in accordance with the terms of said contract as to payments and shall perform all the other obligations to be performed under said contract at the time and in the manner therein set forth. This agreement is hereby attached to and becomes a part of the bond.”

The four labor and material payment bonds covering each of the four construction projects contained basically the same information as the four performance bonds.

ALLEGED DEFAULT IN CONTRACTS BY PETERSON, INC.

After the work on the Virginia construction contracts had been carried off almost to completion Peterson, Inc., was called upon to correct the defects and deficiencies claimed by the owners. The requested corrections were not made. Bettes claimed that in order to procure the acceptance of the Virginia buildings by the tenant, it was required to place in escrow the sum of $80,570 for repairs and completion of the buildings. It was claimed that New Amsterdam refused to perform its obligation under the bond.

It was also claimed' that in November 1962 L. A. Peterson, Inc., abandoned the work on the Plattsburgh project at a time when it was only 25 to 30 per cent complete. It was alleged that after such abandonment it was discovered that the value of the work completed was only about $188,000, and that South Falls would be required to expend the further sum of $561,700 to complete the project. It was alleged that New Amsterdam refused to perform its obligation as surety on this breach.

Bettes’ cause of action against New Amsterdam and Peterson, Inc., was to recover not only actual damages which it claimed to have incurred in the completion of the projects but also special damages in the nature of diminution of value of the property caused by delay in completion of the construction contract.

FINDINGS OF FACT AND JUDGMENT ON THE VIRGINIA BONDS

The case was tried to the court without a jury and the trial judge filed Findings of Fact and Conclusions of Law. Among other things the court found that as to the Virginia bonds the principal, Peterson, Inc., and the surety, New Amsterdam, were liable not only for the $80,570 required to complete the construction of the projects but also the sum of $460,000 representing the diminution in value of the buildings and the lender’s security by virtue of the loss of the twenty-year lease and also the loss of the Rosen agreement to purchase the property. In this connection the trial court found that Maxam’s lease and the Rosen contract to purchase were terminable unless the buildings were completed on time; that the Virginia buildings were not completed on time; that liens totaling $557,-235.34 were filed against the Virginia projects; that because of the filing of the liens and the failure of L. A. Peterson, Inc., to complete the construction on time, the time expired on the Maxam’s lease and the Rosen agreement to purchase. The court further found that Bettes, in mitigation of its damages, was compelled to enter into negotiations with Rosen and Maxam’s to salvage what it could from those transactions. The court found that the Maxam’s twenty-year lease was lost, that as a result of the renegotiation of the Rosen contracts to purchase Rosen agreed to purchase the Virginia buildings only upon condition that permanent financing be procured for him, and that the only lease Bettes could procure in place of the Maxam lease was a two-year lease at a reduced rental by another discount chain. The court found that because of the loss of the Max-am lease the Bettes Company’s security was impaired and diminished to the extent of 20 per cent of the value of the property, or $460,000, which the court found was additional damages to be assessed against the principal and surety on the performance bond. The judgment, as relates to the Virginia contracts, was against Peterson, Inc. and New Amsterdam for (a) $80,570, representing actual cost of completion of the construction of the Virginia projects; and (b) $460,000, being the diminution in value of the buildings and the lender’s security by virtue of the loss of the twenty-year lease and the agreement to purchase.

OPINION

VIRGINIA BONDS

As to that portion of the judgment relating to the Virginia projects appellant does not challenge the award of $80,570, representing the cost of completion of the job, but vigorously attacks, by six points of error, that portion of the judgment wherein the amount of $460,000 is awarded for diminution of value of the security of Bettes. Thus we are confronted with the principal issue as to whether the trial court was correct in holding that $460,000 alleged diminution in the lender’s security was a proper measure of damages and recoverable under the Virginia bonds.

Appellee Bettes places great reliance upon that part of the bond which provides that whenever the contractor shall be in default under the contract the surety may do one of two things: (1) complete the contracts in accordance with its terms and conditions, or (2) obtain a bid or bids for submission to owner for completing the contract in accordance with its terms and conditions and arrange for a contract between such bidder and owner and make available as work progresses sufficient funds to pay the cost of completion less the balance of the contract price; but not exceeding, including other costs and damages for which the surety may be liable hereunder, the amount set forth in the first paragraph of the bond. This provision, says Bettes, is broad and comprehensive and contemplates any and all costs and damages less than the amount of the bond principal. It relies upon cases such as Prudence Co., Inc. v. Fidelity & Deposit Co. of Maryland, 2 Cir., 77 F.2d 834, modified and affirmed 297 U.S. 198, 56 S.Ct. 387, 80 L.Ed. 581; Kidd v. McCormick, 83 N.Y. 391; Trainor Co. v. Aetna Casualty & Surety Co,, 290 U.S. 47, 54 S.Ct. 1, 78 L.Ed. 162, 165, and Purdy v. Massey, 306 Pa. 288, 159 A. 545, as holding that special damages in the nature of depreciation in value of property is recoverable against a surety under an undertaking of the character presented by this appeal.

Appellant supports its position that the diminution, if any, of the security held by Bettes is not a proper measure of damages in an action upon a bond of the character here presented, by pointing to the express provisions of the bond itself which, it contends, may not be enlarged upon by implication or otherwise. Appellant further -contends that the cases relied upon by .appellee, while containing some broad and general language, do not, upon close analysis, .actually hold that special damages of the character here claimed are within the contemplation of the law nor the parties as proper damages against a surety on a completion bond.

Having carefully examined this record in the light of the contentions here advanced we agree with appellant that the trial court .applied an erroneous measure of damages ■in allowing the item of $460,000.

We are here dealing with the obligation <of a surety, appellant New Amsterdam, -upon a written bond obligation, the condition of which is specific in its terms:

“NOW, THEREFORE, THE CONDITION OF THIS OBLIGATION is such that, if Contractor shall promptly and faithfully perform said Contract, then this obligation shall be null and void; otherwise it shall remain in full force and effect.”

Thereafter follow the provisions relative to the rights of the surety in the event of default by the' contractor. The bond also contains the endorsement to the effect that the surety shall not be liable to either of the obligees unless all contract obligations are performed by the obligees. The effect of the “dual obligee bonds” is that the owner agrees that the interest of the lender shall be the amount of the construction money which it shall have advanced and that claims of the lender on each bond shall be prior and superior to that of the owner. Thus it is apparent that the liability of the surety under the bond is in no sense increased because Bettes is also an obligee. The interest of Bettes is only by way of priority to any damages for which the surety would be liable if Bettes were not an obligee.

We cannot agree with Bettes that the words “including other costs and damages for which the Surety may be liable hereunder,” which are found in the bond and relating to one of the means by which the surety may take care of the work not performed by the contractor, authorize an enlargement of the surety’s obligation. These words are nothing more than a limitation upon the amount which the surety will have to make available as work progresses in the event of default, and is not a condition upon the surety to pay or become obligated for anything further.

While there are some vague references in appellee’s brief concerning ambiguity we find nothing in the bond which would justify such a contention. The bond is clear and explicit in its terms and provisions and we must construe the same in the light of well established rules announced by the authorities.

The rule that the obligation of a surety must find a basis in the bond itself and cannot be supplied by implication results from the favorable position of a surety under Texas law as stated in 53 Tex.Jur.2d 591, § 26:

“The liability of a surety is strictissimi juris; it cannot be extended by implication, construction, or presumption beyond the terms of his contract nor to persons who are not parties thereto. The surety may stand on the letter of his contract, his obligation does not extend beyond what is agreed to in the bond, and he is not liable for the default of his principal to perform any duty or obligation not fairly within the undertaking.”

The same rule is applicable to both uncompensated sureties and corporate sureties who enter into contracts or suretyship for profit. Hess & Skinner Engineering Co. v. Turney, 110 Tex. 148, 216 S.W. 621, 622.

We find nothing in the bond obligation which would extend the obligation of the surety beyond the general recital that the bond shall be void “if the Contractor shall promptly and faithfully perform said Contract.” Indeed, the limit of liability is specifically set forth by the provisions of the bond that if the contract is declared by the owner to be in default the surety may remedy the default in one of two ways. There is an overall limitation to the penalty of the bond by the provision that the amount to be advanced for completion, plus other costs and damages for which the surety may be liable hereunder, shall not exceed the total amount of the bond.

Ordinarily the normal measure of damages for failure on the part of the surety to comply with the bond provisions is the amount it would cost over and above the contract price to remedy the defects or to complete the structure. Graves v. Allert & Fuess, 104 Tex. 614, 142 S.W. 869, 39 L.R.A.,N.S. 591; American Surety Co. v. Lyons, 44 Tex.Civ.App. 150, 97 S.W. 1080; American Surety Co. v. Gonzales Water Power Co., Tex.Civ.App., 211 S.W. 251 (error refused); Birmingham v. Lindemann, Tex.Civ.App., 236 S.W.2d 843; Annotations, 76 A.L.R.2d 805.

As for the possible recovery by an obligee of special damages over and above the actual cost of completion of the buildings, the general rule is set forth in 103 A.L.R. 1396, 1397, as follows:

“The general rule is now well established that a mortgagee-obligee, having had no satisfaction of his debt, in a situation where the same represents purchase money as well as advances for proposed improvements, who, in order adequately to strengthen his security, has required a surety bond for performance according to agreement of all things relating to such improvements, may recover to the extent to which he has suffered by nonconformity with the agreement, such being considered the difference between the value of the property with the unfinished improvements and the value thereof as it would have been with the improvements completed. The actual cost of completion is consequently and invariably the main guide in determining the chief element of the damage, although it may not always be conclusive.”

In Prudence Co. v. Fidelity & Deposit Co., 297 U.S. 198, 56 S.Ct. 387, 80 L.Ed. 581, the Supreme Court of the United States was dealing with a case in which the lower court had allowed only cost of completion as a measure of damages in a suit against the surety on a completion bond. The Supreme Court held that in such a case the measure of damages was:

1. Cost of doing the unfinished work;
2. Loss resulting from omissions and substitutions; i. e., amount necessary to correct defective work;
3. Damages for delay, which is a reasonable rental value during the period of idleness, or carrying charges “not to exceed the rental value, during the period of idleness.”

This decision, heavily relied upon by appellee, does no more than hold that there may be added to the actual cost of completion something for delay, not exceeding rental value for the period of idleness.

In Trainor Co. v. Aetna Casualty & Surety Co., 290 U.S. 47, 54 S.Ct. 1, 78 L.Ed. 162, a mortgagee of land with buildings and improvements to be erected thereon, in order adequately to secure its debt, took a surety bond guaranteeing faithful performance of the building contract. The Supreme Court, speaking through Mr. Justice Sutherland, in establishing the correct measure of damages, said:

“Petitioner is entitled to be put in as good position in respect of its debt as it would have occupied if the buildings had been completed in accordance with the terms of the undertaking; and this can be done here only by giving it the amount of the difference between the value of the unfinished buildings and their value as it would have been if completed in accordance with the agreement * * * but exceeding neither the amount due on its debt nor the amount of the bond.”

In Kidd v. McCormick, 83 N.Y. 391 the court held that the plaintiff was entitled to “as much as will put him in as good plight as he would have been had the houses been finished”, and that his damages “are the difference in the value of the premises, as they were with the houses unfinished, [on the date of abandonment of the work] from what the value of them would have been, had the houses been finished on that day according to the contract.”

In both Mechanics’ Trust Co. v. Fidelity & Casualty Co., 304 Pa. 526, 156 A. 146 and Purdy v. Massey, 306 Pa. 288, 159 A. 545, the court held that upon a breach of the obligation to complete a building the bond surety would be liable for the cost of completion of construction only.

In this case Bettes contends that it is entitled to the diminution in value of its security by virtue of the failure to complete the construction of the buildings and that the elements which make up such diminution are such as damages predicated upon increased demands made by one under contract to purchase, which in turn resulted in, Bettes agreeing to repurchase a permanent loan, which it had to repurchase because the tenant Maxam’s subsequently became bankrupt. The authorities relied upon by Bettes do not in any manner go as far as to allow such special or consequential damages as here contended by Bettes. We therefore sustain appellant’s first point of error, and hold that the diminution in lander’s security to the extent of $460,000 was not a proper measure of damages and recoverable under the Virginia bonds.

Special or consequential damages are such damages which a party may recover on the breach of a contract which are incidental to and caused by the breach, and may reasonably be supposed to have entered into the contemplation of the parties at the time of the contract. Humble Oil & Refining Co. v. Wood, Tex.Com.App., 292 S.W. 200; Jones v. George, 61 Tex. 345, 355.

The trial court found that New Amsterdam was well aware of the possibility of the loss which might be occasioned by Bettes when it executed the bonds in question and that such loss was within the contemplation of both of the parties. Appellant attacks this finding as being without supporting evidence or contrary to the overwhelming weight and preponderance of the evidence. We have carefully examined the record in this connection and we agree with appellant that it has not been demonstrated by evidence of probative value that New Amsterdam knew, or could have’ reasonably known, of the complicated financial arrangements between Bettes and South Falls-Disco as well as the arrangements concerning the purchase agreement and lease agreement involved in the Virginia projects. In the event there is any evidence the same is wholly insufficient, in our opinion, to justify the trial court’s finding that the consequences of the loss in question were within the contemplation of the parties at the time the bond was executed. Accordingly, we sustain appellant’s points two and three.

From what we have said it is unnecessary for us to pass upon appellant’s points four, five and six.

PLATTSBURGH PROJECT

On the Plattsburgh contract the judgment against appellant was for $638,200, consisting of the following elements:

(a) $119,700 being the amount required to complete the construction of the building;

(b) $346,500 representing the loss of rentals provided for under Maxam’s lease on this building from completion date provided in the contract to the date of the trial; and

(c) $172,000 alleged liens on the property.

Appellant attacks this portion of the judgment in fifteen points of error, briefed under three main topics. By its points seven, eight and nine appellant contends that the trial court erred in holding that the surety was not released by an overpayment to contractor of in excess of $100,000 on the Plattsburgh project; that Bettes should not be allowed to recover on the bond because of the breach of contract by South Falls; and that when the overpayment to contractor is restored to the contract balance no excess of completion costs results and hence the trial court should not have allowed the recovery of $119,700.

The contract for the Plattsburgh project is dated June 5, 1962 and requires completion within 150 days after receipt of approved plans and specifications. The contract price is $750,000 payable 90 per cent on the first day of each month based on the contract prices for labor and material incorporated in the work as estimated by the architect. The record reveals that the contractor proceeded with the work and partially completed the same. As of October 29, 1962 the total amount of work done on the contract was $342,600, which with 10 per cent retainage, made a total of $308,340 paid the contractor for work to that date. However, the record is also undisputed that from time to time L. A. Peterson, Inc. filed “certificates for payment” with South Falls, said certificates being verified by L. A. Peterson. As South Falls received the various “certificates for payment” from L. A. Peterson, Inc., they were forwarded to Bettes Company which advanced the requested money to South Falls based upon such certificates. The record reveals that the contractor did not complete the Plattsburgh project and that after it abandoned all work it was discovered that the sworn “certificates for payment” were false and that certain funds from the project had been diverted by L. A. Peterson to pay bills on other projects. As a result of these false “certificates for payment” contractor had received payments on the Plattsburgh project totaling $308,340, and the actual value of the work completed on such project was only $188,000, representing an overpayment of $120,304. Based upon evidence relating to the amount that Bettes would be required to expend to complete the project in accordance with the original plans and specifications the trial court awarded Bettes $119,700 damages for the excess cost of completion brought about by overpayment as above set forth.

Appellant contends that the admitted breach of the contract by the contractor resulted in a release of the surety from its obligation to South Falls. This for the simple reason that to allow recovery of this amount of admitted overpayment is to permit the owners to recover for their own breach of contract. Aetna Casualty & Surety Co. v. Russell, Tex.Com.App., 24 S.W.2d 385; Old Colony Ins. Co. v. City of Quitman, 163 Tex. 144, 352 S.W.2d 452; and 10 Tex.Jur.2d 87, § 71. Such position of appellant presupposes and assumes knowledge and acquiescence as to South Falls concerning the false “certificates for payment” executed by Peterson to obtain the overpayment. Based upon the evidence presented the trial court impliedly found that the officials of South Falls did not know of the falsity of the certificates. However, we do not deem this fact to be of great importance or of controlling value to the question here presented. The issue here is whether Bettes may recover this item of damages.

There is no evidence in this record that any official of Bettes knew of the falsity of the affidavits made the basis of the overpayment in question. New Amsterdam admits that Bettes advanced the funds on the “certificates for payment” without notice that the certificates were false and that excess payments were being made. However, New Amsterdam takes the position that the rights of Bettes under the Plattsburgh dual obligee bonds must stand or fall with the rights of South Falls, and that if South Falls knew of the falsity of the certificates filed by Peterson, Inc. then Bettes, an innocent party, cannot recover under the bond. We cannot agree with appellant’s contention in this regard. Assuming, arguendo, that South Falls knew of the falsity of the affidavits yet we cannot find any basis for charging Bettes with this knowledge. The position of Bettes as a co-obligee on the bond is defined by the well expressed terms of the bond itself, copied above.

The Commission of Appeals in Williams v. Baldwin, Tex.Com.App., 228 S.W. 554, opinion adopted by the Supreme Court, involved a similar situation. Baldwin, as owner, sued Davis Construction Company and the sureties on its performance bond to recover the cost of completion of a building which was in excess of the contract price. Baldwin also sued materialmen and laborers who were unpaid and had attached liens on his property, and they also sought to recover under the performance bond. The sureties contended that they were discharged on the ground that there had been a violation of the terms of the bond by the principal without their consent. The Commission of Appeals held that as to Baldwin the sureties were discharged but as to the materialmen and laborers, the other obligees under the bond, the sureties were not discharged. The court said :

“The rule is that, where the bond names the materialmen and laborers as obligees and is conditioned for the payment of claims for labor performed and material furnished, the sureties are not discharged from liability to persons furnishing labor and material by reason of the owner having made payments in violation of the bond unless they knew of such violation at the time of furnishing the material and performing the labor.” (Citing authorities.)

We think that Bettes stands in a similar position to the materialmen in the Baldwin case, supra, and its rights should be unaffected by any act or knowledge of South Falls, even assuming such knowledge (and we do not do so).

Appellant’s points seven, eight and nine are overruled.

By its points ten and eleven appellant complains of the portion of the judgment awarding appellee $346,500 representing the loss of rentals on the Plattsburgh building from completion date provided in the construction contract to the date of trial, it being contended that such amount is not a proper measure of damages under the record in this case. We agree with appellant that the trial court’s award in this regard is not supported by the record.

The record is extensive in detailed facts concerning what transpired after the contractor failed to proceed with the completion of the unfinished- building at Platts-burgh. In November 1962 the contractor abandoned the project and the building was far from being completed. The roof was not on nor the flooring in and it was open to the elements. Many negotiations transpired between the parties, including renegotiation of the lease contract with Maxam’s with a rental of $120,000 per year. At the time of the trial the building was not yet completed and no tenant occupied the building. Bettes had no success in securing a tenant for the building and no rentals were paid on the property to the date of trial. The trial court based this item of special damages solely on rental value as disclosed by the lease agreement with Maxam’s.

The evidence reveals that the premises had no rental value and that efforts had been made to lease the premises without success. The trial court’s allowance of $346,500 as rental based on the Maxam lease constituted special damages against the surety. Appellant concedes that the measure of damages in such a case might reasonably include a reasonable rental value of the premises for a reasonable length of time. However, it contends, and we agree, that there was no showing as to what the reasonable rental value of the premises was, nor is there any proof as to the reasonable length of time that it normally would require a reasonably prudent owner to have completed the building and secured a tenant therefor. The original contract required completion in 150 days or five months from the furnishing of plans and specifications. The building was 35 per cent complete when abandoned by Peterson, Inc. in October or November of 1962. With this as a criterion a building 35 per cent complete should reasonably have been completed within 150 days from resumption of construction.

The cases cited in the early part of this opinion dealing with the Virginia projects and having to do with the measure of damages in the event of breach of construction contracts are applicable here. Illustrative is the case of Prudence Co., Inc. v. Fidelity & Deposit Co., 297 U.S. 198, 56 S.Ct. 387, 80 L.Ed. 581, in which the Supreme Court of the United States held that such damages could include a reasonable rental value of the premises during the period of idleness. It is significant to note that the United States Supreme Court in the Prudence case said:

“Another trial will permit the petitioner to show more accurately than it has done upon the record now before us that the building was continuously un-tenantable until the completion of the work and that the time taken for completion did not outrun the bounds of reason.”

It is our opinion that the basis of the court’s award in this connection is not founded upon a reasonable period of time nor a reasonable rental value. Accordingly, we sustain appellant’s points ten and eleven.

In its final group of points, twelve through fifteen inclusive, appellant assails that part of the Plattsburgh judgment awarding the sum of $172,000 representing unpaid bills for laborers and materialmen. Appellant contends that there is no basis for holding that such bills constitute present liens against the Plattsburgh property and that the surety is not liable for such amount without a showing that Bettes had suffered an actual loss in that amount by reason of said claims.

Appellee counters appellant’s contention that it is entitled to the recovery of the $172,000 for the use and benefit of unpaid mechanics and materialmen by virtue of the payment bond executed by appellant which does not require proof of valid liens. We cannot agree with this contention. In his findings of fact the trial court expressly found that the $172,000-item was assessed on the performance bond,, as follows:

“As to the job in Plattsburgh, N. Y.,. Peterson, Inc. and New Amsterdam, as. surety on the peformance bonds of Peterson, Inc. are liable for the following amounts:
“(a) $172,000 for unpaid bills of laborers and materialmen which are at present a lien against the property and a cloud upon the security.”

Thus it is evident that the trial court assessed this element of damages against appellant not on the payment bond, as contended by appellee, but upon the performance bond, and also upon the specific finding that such claims were valid liens against the property. The record does not support the trial court’s findings that such amounts are represented by valid liens against the property in New York.

With reference to outstanding bills for labor and materialmen Peterson testified:

“Q. Well, you recognize that you owe a lot of money by virtue of your operation up there in Plattsburgh, don’t you?
“A. I owe one hundred forty something thousand dollars.
C( * * *
“Q. Who do you owe it to ?
“A. I owe it to various subcontractors.
“Q. Well, if they place liens against South Falls property which has to be taken over by Bettes because they can’t pay it, don’t you think you owe it to South Falls?
“A. I owe the liens, or, rather, L. A. Peterson, Incorporated, does, until such time as it pays them.”

His testimony does not establish valid liens as found by the court nor the amounts found by the court.

In an effort to prove the amount found as well as validity of liens which might constitute a “cloud upon the security” appellee introduced its Exhibit 26 which is a separate volume containing on the index information with respect to the amounts of the various claims, the date of filing, etc., the total of such being $172,441.41. This, together with lien affidavits, constitutes the sole proof of alleged liens on the property.

Such proof is insufficient to establish the liens under Texas law. Art. 5453, Art. 5455, Vernon’s Ann.Civ.St.; 38 Tex. Jur.2d 676; Campbell Bros., Inc v. General Electric Supply Co., Tex.Civ.App., 383 S.W.2d 61, 63.

Since the record does not contain any evidence of the requirements of the New York law to establish valid liens we must assume the laws of that state are the same as those of Texas where this litigation was decided. .

Since there is no evidence of probative force to support the trial court’s findings in regard to valid liens constituting a “cloud upon the security” there is no basis for the judgment based thereon.

Moreover, since it is evident that appellee has not recovered such item of damages based upon a payment bond, as it contends, nor “for the use and benefits” of lienholders, such recovery is not justified absent a showing of injury or loss. There is no evidence that appellee has paid any of the alleged claims outstanding which go to make up the disputed element of damages and therefore there is no basis for such recovery by Bettes. Union Indemnity Co. v. Vetter (5th Cir.) 40 F.2d 606.

Appellant’s points twelve through fifteen are sustained.

JUDGMENT

For the reasons stated the judgment of the trial court is reversed and remanded for a new trial.

Reversed and remanded.

ON MOTIONS FOR REHEARING

The opinion of this court delivered on July 8, 1966 on motions for rehearing is hereby withdrawn and the following substituted therefor.

Appellee Bettes, on rehearing, contends that our judgment should have reformed the trial court’s judgment so as to affirm same in two particulars, namely, the item of $80,570 representing the cost of completion of the Virginia Projects, and the item of $119,700 representing the amount required to complete the construction of the Plattsburgh Project. Appellant New Amsterdam concedes liability for the first item of damages and we have overruled New Amsterdam’s contention with reference to the second item.

In view of the fact that New Amsterdam has admitted liability for the sum of $80,570 on the Virginia Projects we have concluded that Bettes’ point of error in its motion for rehearing relating to this item should be sustained.

As to that part of the trial court’s judgment relating to the Virginia Projects our judgment is, therefore, that the judgment of the trial court insofar as it awards the sum of $80,570 to Bettes is hereby affirmed and that part of the judgment awarding other items of damages is reversed and remanded for a new trial.

As to that part of the trial court’s judgment awarding $119,700 on the Platts-burgh Project in favor of Bettes a different situation is presented. Here New Amsterdam makes no concession but preserves its complaint to our action in affirming this item of damages. The item of $119,700 constitutes one item of an indivisible cause of action for breach on the bond relating to the Plattsburgh Project. Since the item of damages is not severable we include it in that part of the judgment which is reversed and remanded for a new trial. 4 Tex.Jur.2d, § 874, p. 459; Housing Authority of City of Dallas v. Hubbell, Tex.Civ.App., 325 S.W.2d 880; Waples-Platter Co. v. Commercial Standard Ins. Co., 156 Tex. 234, 294 S.W.2d 375; Fisher v. Coastal Transport Co., 149 Tex. 224, 230 S.W.2d 522.

Therefore, as to that portion of the judgment relating to the Plattsburgh Project the same is reversed and remanded for a new trial.

We have carefully considered both appellants’ and appellees’ second motions for rehearing and, with the exception of the modification as above stated, all points of both motions are overruled.

Appellants’ and appellees’ motions for rehearing are overruled and the judgment of the trial court is modified and affirmed in part and reversed and remanded in part.

      . See Southwest Savings Ass’n v. Dunagan, Tex.Civ.App., 392 S.W.2d 761, in which we applied the same rule in construction of guaranty agreements.

      . The case was tried July 19, 1965, which was approximately two years and eight months after contemplated completion date under the contract.


source: Caselaw Access Project

author: BATEMAN, Justice.

license: Public Domain

text:
    Michael P. GRACE, II, et al., Appellants, v. Charles B. ALLEN et al., Appellees.
    No. 16760.
    Court of Civil Appeals of Texas. Dallas.
    July 8, 1966.
    Rehearing Denied Oct. 7, 1966.

      Richard S. Chambers, Dallas, for appellants.
    Edward B. Winn, of Lane, Savage, Counts & Winn, Dallas, for appellees.
   BATEMAN, Justice.

This is a suit to recover the value of accountants’ services performed. The appel-lees, residents of New York, rendered the services in New York to the appellants, who were then residents of New York but who subsequently moved to Dallas, Texas, where they were sued. Appellants pled, inter alia, that appellees were not entitled to recover because their alleged services constituted the unauthorized practice of law. The jury fixed the value of the services at $8,400 and found that appellees were also entitled to a reasonable attorney’s fee in the sum of $4,200. The trial court rendered judgment for appellees for the total of $12,600, and appellants appeal on two points of error.

The first of these is that the court erred in holding as a matter of law that the services rendered by appellees did not constitute the practice of law. Appellants assert that under the circumstances New York law should control in the determination of that question. Appellees contend that their services in question did not constitute the practice of law, even under the New York law, and that in any event such services were within the purview of the federal law and Treasury Department regulations; that although not members of the Bar, they were licensed to practice before the Treasury-Department, that everything they did was pursuant to and in accordance with that license, and that if their services were proscribed under New York law they were fully authorized by the federal law and Treasury regulations and, therefore, lawful. The defense in question was on motion kept from the jury, and the court resolved it in favor of appellees as a matter of law.

There is no substantial dispute as to the facts. Appellees were both licensed public accountants, one of them being certified, and both were admitted to practice before the Treasury Department, although neither of them was a lawyer. Both of them had been employed by the Internal Revenue Service for a number of years before entering private practice. Although the ap-pellees had not prepared the appellants’ income tax returns for the years 1955, 1956, 1957 and 1958, when the Internal Revenue Service assessed additional taxes for those years they were employed to work with appellants’ attorneys in New York City in the preparation and presentation of a protest of such assessment. They did so, and it is these services which appellants say constituted the unauthorized practice of law, pointing out that one of the appellees testified that “complicated issues” were involved, that the protest cited numerous cases as authority for the position they were taking, some of which cases had been discussed with the lawyers but some of which had been found as a result of research by the ap-pellee Brown. Appellees had prepared in their office several Forms 872, “Consent to Extension of the Statute of Limitations,” also memoranda used and presented in various conferences, with representatives of the Internal Revenue Service. Appellees conferred frequently with appellants’ attorneys and kept them advised by telephone and mail as to audits by the Internal Revenue Service and the preparation of the protest. The attorneys participated and cooperated in the preparation of the protest and in conferences with the Internal Revenue Service examining agent and conference coordinator. Appellees also prepared a power of attorney authorizing the attorneys to act for appellees in connection with audits of appellants’ tax returns. Appellants employed appellees to prepare and file their Federal and New York State income tax returns for 1960 and their declarations of estimated income tax (Federal and State) for 1961; also to maintain appellants’ proper books and records therefor.

To support their position that under New York law the work done by appellees constituted unauthorized law practice, appellants rely wholly on the case of In the Matter of New York County Lawyers Association (Bernard Bercu, Respondent), 273 App.Div. 524, 78 N.Y.S.2d 209, 9 A.L.R.2d 787. In that case the Association sought to punish Bercu, an accountant, for contempt and to enjoin him from practicing law. It was shown that Croft Steel Products, Inc. had sought and obtained his advice in connection with its liability for certain New York City taxes and Federal income taxes. Bercu was not the auditor for the company, nor did he prepare its tax returns or do any work of any kind on its books; all he did was render a written opinion on the legal question of tax liability. He admitted that this was not an isolated instance of its kind and that he often gave advice of the same character without examining books or preparing tax returns. The court pointed out that the decision was made difficult because of the overlapping of law and accounting, that an accountant must be familiar to a considerable extent with tax law and must employ his knowledge of the law in his accounting practice, and that a tax lawyer must have an understanding of accounting. The court recognized that an accountant employed to keep a taxpayer’s books or prepare his tax returns would be expected and permitted to answer legal questions arising out of and incidental to the accounting work. The court also recognized that the matter of taxation, “which permeates almost every phase of modern life, is so inextricably interwoven with nearly every branch of law that one could hardly pick any tax problem and say this is a question of pure taxation or pure tax law wholly unconnected with other legal principles, incidents or ramifications.” Recognizing the necessity of drawing a line of demarcation between the work of the tax lawyer and that of the tax accountant, the court said, “ * * * the point at which it must be drawn, at very least, is where the accountant or non-lawyer undertakes to pass upon a legal question apart from the regular pursuit of his calling.” Since Bercu’s advice concerning the law was not incidental to any accounting work done by him for Croft Steel Products, Inc., it was held that he was unlawfully practicing law.

However, in the case at bar it is not shown that appellants consulted appellees or sought or obtained their opinion on any legal subject that was not incidental to their accounting work. Appellees were preparing the appellants’ 1960 income tax returns and were the regular accountants for appellants. They were also doing accounting work in reviewing and classifying the great volume of papers and records of appellants necessary to the preparation of the protest of the tax assessment and to enable them to discuss with the Revenue Agents the asserted tax liability. It is true that in the preparation of the protest appel-lees cited numerous cases in support of their position, but this was necessary and incidental to the preparation and presentation of the protest. Moreover, appellees consulted the appellants’ attorneys concerning these authorities and other aspects of the work being done and kept them informed as the work progressed.

Both parties agree that the Bercu case correctly announces the New York law on the subject. A careful reading of that opinion demonstrates the dissimilarity between it and the case at bar. It is clear from the record before us that the work performed by appellees, which appellants assert constituted the unauthorized practice of law, was only incidental to their accounting work and was therefore permissible and not unlawful under New York law.

Appellees assert, and appellants do not deny, that the work done by appellees was all within the purview of their licenses to practice before the Treasury Department. It was agreed on the trial that the court might take judicial notice of the federal law and Treasury regulations on the subject. One of those regulations, in part, provides :

“Practice before the Internal Revenue Service comprehends all matters connected with presentations to the Internal Revenue Service or any of its officers or employees relating to a client’s rights, privileges, or liabilities under laws or regulations administered by the Internal Revenue Service. Such presentations include the preparation and filing of necessary documents, correspondence with, and communications to the Internal Revenue Service, and the representation of a client at conferences, hearings, and meetings.”

Appellees take the position that if there is a conflict between the state law and the federal law, the former must yield, and that, since the regulations referred to were promulgated under sanction of the federal law, they have the force and effect of law. We agree with appellees. The rights conferred by the admission to practice before the Treasury Department are federal rights which cannot be impinged upon by the states in their praiseworthy efforts to protect their citizens from unskilled and unethical practitioners of the law. Sperry v. State of Florida ex rel. Florida Bar, 373 U.S. 379, 83 S.Ct. 1322, 10 L.Ed.2d 428.

This is not to say that the states have surrendered their right to regulate and control the practice of law within their respective boundaries, as was done in the Bercu case. See also Hexter Title & Abstract Co. v. Grievance Committee, 142 Tex. 506, 179 S.W.2d 946, 157 A.L.R. 268. In fact, one of the Treasury regulations referred to (§ 10.39) contains this proviso: “And provided further: That nothing in the regulations in this part shall be construed as authorizing persons not members of the Bar to practice law.”

See also Free v. Bland, 369 U.S. 663, 82 S. Ct. 1089, 8 L.Ed.2d 180; Hatfried, Inc. v. Commissioner of Internal Revenue, 3 Cir., 162 F.2d 628; Haywood Lumber & Mining Co. v. Commissioner of Internal Revenue, 2 Cir., 178 F.2d 769; Burton Swartz Land Corp. v. Commissioner of Internal Revenue, 5 Cir., 198 F.2d 558. Appellants’ first point is overruled.

This brings us to their second point, which is that the court erred in holding that appellees were entitled to recover attorney’s fees under Vernon’s Ann.Civ.St., Art. 2226. Appellants’ position is that, although Article 2226 authorizes the recovery of a reasonable attorney’s fee in a suit “for personal services rendered,” it is not applicable to a suit for such services rendered in another state which does not provide for the recovery of attorney’s fees, it being pointed out that under New York law it is specifically provided that such fees are not recoverable. However, the Corpus Christi Court of Civil Appeals held directly to the contrary in Nolen v. Rig-Time, Inc., Tex.Civ.App., 392 S.W.2d 754, wr. ref. n. r. e., approving recovery of attorney’s fees in a Texas case to recover for services rendered in Louisiana, and calling attention to the fact that the statute does not provide, expressly or impliedly, that services rendered by a claimant must be contracted for or supplied within the State of Texas, but that, on the contrary, the right is accorded “[a]wy person having a valid claim * * * for personal services rendered, * * (Italics ours.) We agree with that decision and, accordingly, overrule appellants’ second and last point of error.

Finding no error requiring reversal, we affirm the judgment of the trial court.

Affirmed.

       Tax Regulations, § 10.2(b), CCH Standard Federal Tax Reporter, paragraph 60270.


author: NYE, Justice. SHARPE, Justice

text:
    Willett WILSON et al., Appellants, v. CITY OF PORT LAVACA, Texas, Appellee.
    No. 232.
    Court of Civil Appeals of Texas. Corpus Christi.
    Sept. 29, 1966.
    Rehearing Denied Oct. 20, 1966.

      Willett Wilson, Houston, for appellants
    Harry F. Maddin and Kemper Williams Jr., of Cullen, Mallette, Maddin, Edwards & Williams, Victoria, Mike Fricke, Citj Atty., Port Lavaca, for appellee.
   OPINION

NYE, Justice.

Plaintiffs, as taxpayers, brought this action against the City of Port Lavaca tc enjoin the collection of their taxes. The] alleged that the assessments against the! property were discriminatory and illega because large amounts of personal prop erty, principally bank and saving and loai association deposits, were intentionally anc arbitrarily left off the tax rolls and not tax ed. The City of Port Lavaca filed a cros action to enforce the collection of plain tiffs’ delinquent taxes. The case was triei to a jury and in response to issues submit ted, judgment was entered for the City o Port Lavaca on its cross action and plain tiffs’ relief was denied. Taxpayers hav perfected their appeal to this Court.

The most serious error complained o was in the refusal of the trial court to per mit the appellant taxpayers to take the depositions of the officers of three financial institutions. For a proper determination of this appeal it is necessary to review the proceedings that led up to the trial.

The case had been specially set for a jury trial on September 20, 1965. On or about the 1st day of September, 1965, appellants filed a request for a commission to take the oral depositions of certain named officers of the First State Bank & Trust Company of Port Lavaca, the First National Bank of Port Lavaca and the Coastal Bend Savings & Loan Association of Port Lavaca, hereinafter called Institutions. Such request for the commissions included an application to require a subpoena duces tecum to be served on such officers, directing them to produce “all books, ledgers, ledger cards, microfilm, and any other records reflecting the following: (1) Names of depositors in the (named institution) on January 1st of each of the years 1963, 1964 and 1965, inclusive, and (2) Amount of deposit in said bank of each of said depositors on January 1st of each of the years 1963, 1964 and 1965 inclusive.”

On September 8 and 9, the three Institutions filed motions to quash the commissions and subpoenas duces tecum, alleging in substance as grounds for quashing such commissions and subpoenas that: (1) the aforementioned books, records, etc. containing the names of the depositors, and the amounts of their deposits, were confidential and privileged, and may not be disclosed to third parties according to the provisions contained in Article 342-709, Vernon’s Ann.Civ.St. and Article 342-210, V.A. C.S.; (2) the Institutions were not parties to the law suit, nor were they necessary or proper parties; (3) the depositors or owners of deposits were not parties to the law suit nor were they proper or necessary parties; (4) the records of the Institutions did not contain information which was relevant or material to the issues in controversy; (5) the Institutions would be subject to a multiplicity of law suits from depositors should they disclose this information sought by the appellants; (6) the Institutions would be materially prejudiced from the standpoint of their business relations with their depositors if they gave out the information sought by the appellants, and that if they gave out the information it would hurt the individual businesses of the depositors; that such information was confidential and could not be released without the consent of each depositor and/or without making each depositor a party to such action; (7) the gathering of such information would constitute an expense to the Institutions without arranging for payment or remuneration for such expense; and (8) the commissions should be quashed under the provisions of Rule 177a and Rule 186b, Texas Rules of Civil Procedure.

Upon the presentation and consideration of the application to quash the commissions and subpoenas, the court issued a temporary restraining order on September 10, 1965, and set a hearing on September 17, 1965, for the further consideration of the court’s temporary order. On September 17 the court heard the Institutions’ Motion and ordered the various commissions and subpoenas quashed.

Just prior to this hearing, on September 14, 1965, appellants filed an amended petition naming in addition to the City of Port Lavaca, the three Institutions as parties defendants. They alleged in substance that the Institutions have refused to fu-nish the tax assessor and collector of the City of Port Lavaca or these plaintiffs the amounts of taxable deposits for the years 1963 and 1964 and that therefore each Institution has caused and/or will cause these plaintiffs damage in the amount of One Thousand Dollars ($1,000.00) for each of said years.

The City of Port Lavaca filed a motion to sever this new cause of action brought by the plaintiffs against the three named Institutions under Rule 41, T.R.C.P. The City contended in such motion that any possible recovery by the plaintiffs against the three named Institutions would involve a determination of issues separate and distinct from those to be adjudicated in the principal case. At the hearing on the motion to sever, the court advised the plaintiffs that there had not been time for service of citation nor time for the three named defendant Institutions to file an answer, and that the only way that these plaintiffs could proceed to trial against the City of Port Lavaca in their regular order, would be to sever these parties (the Institutions) from the main suit. Although the plaintiffs objected to the severance they did not seek a continuance. The record is clear that they wished to proceed to trial against the City. The court granted the motion to sever the cause of action against the three named Institutions and the plaintiffs announced ready for trial on the severed cause of action against the City of Port Lavaca. Subsequently, the appellants voluntarily dismissed their cause of action against these three named defendant Institutions at their cost. No appeal was perfected from this severed cause of action.

The trial court is vested with broad discretion in acting on motions to sever causes of action. Hamilton v. Hamilton, 154 Tex. 511, 280 S.W.2d 588 (1955). Appellants’ point of error complaining of the trial court’s action in granting the motion to sever is overruled. There is no showing that the trial court abused its discretion in granting this severance. Rule 41, T.R.C.P.; Hayes v. Norman, Tex.Civ.App., 383 S.W.2d 477 (1964) ref. n. r. e.

Appellants’ first point complains of the trial court’s ruling in sustaining the motion to quash the commission to take the deposition of the officers of the various Institutions. Appellee, on the other hand, contends that Article 342-709, exempts the Institutions from disclosing the sought for information and in any event the trial court did not abuse its discretion in quashing the commissions and subpoenas under Rule 177a and Rule 186b, T.R.C.P. Article 342-709 provides in substance that a bank shall not be required to disclose the amount deposited by any depositor to third parties except where the depositor or owner of such deposit is a proper or necessary party to the proceedings or that the bank itself is a proper or necessary party to the suit. The record is clear that the three financial Institutions were neither proper nor necessary parties to this suit as was evident by the severance and the subsequent dismissal of the severed cause of action.

Appellants based their cause for in-junctive relief essentially on two grounds: (1) that the City had improperly assessed their property at a rate higher than its true market value; and (2) that the City had adopted an illegal and arbitrary scheme of taxation whereby certain personal property had been omitted from the tax rolls. The record shows that appellants’ suit was not a direct attack on the scheme of taxation, nor was it a suit to prevent the initiation or operation of an illegal scheme or plan by the taxing agency. No relief was sought by the appellants by mandamus or injunction prior to the time the plan of taxation was put into operation. The taxpayer is entitled to relief where it is shown that there was a deliberate and arbitrary preconceived plan for the omission from the tax rolls of bank deposits. However, this is not the case here. There was no such evidence of a deliberate, arbitrary or systematic scheme on behalf of the City of Port Lavaca to omit bank deposits from the tax rolls. There is in fact testimony in the record showing that an attempt was made to determine all of the taxable property including bank accounts and other personal property by the tax assessor and collector during the years in question.

It is settled law that no attack on valuations fixed by the tax boards will be sustained in absence of proof of fraud, or want of jurisdiction, illegality or the adoption of an arbitrary and fundamentally erroneous plan or scheme on valuation. Even when such official action is attacked it will be presumed that such boards discharged their duty according to law and acted in good faith. State v. Whittenburg, 153 Tex. 205, 265 S.W.2d 569 (1954). The court in Whittenburg held that it is not sufficient to show that certain property was omitted from the tax rolls altogether to be entitled to relief, but such omission must be shown to have been the result of a deliberate and arbitrary plan or scheme to permit certain classes of property to escape their fair share of the tax burden.

It was appellants’ contention that without the evidence from the banks and savings and loan associations as to the amounts that were on deposit, they could not prove the amount of money on deposit in the Institutions so that when this amount was determined and added to the property, real and personal, already on the City’s tax rolls, or taken in consideration in taxing plaintiffs’ property and other property, it would have required the City to use a lower ratio of value or lower rate at which to tax property. Plaintiffs cite Rowland v. City of Tyler, Tex.Com.App., 5 S.W.2d 756, 761, and Ramey v. City of Tyler, Tex.Civ.App., 45 S.W.2d 359, 363. It was plaintiffs’ theory that because the trial court refused the plaintiffs’ request to secure by deposition this purported necessary evidence, they were prevented from proving their defenses to the amount of taxes claimed due by the City. Therefore, they were forced to go to trial on their main case without the necessary evidence.

Once a tax plan is put into effect the litigant may defeat recovery of taxes only to the extent that they are excessive, and he must prove the excessiveness. City of Arlington v. Cannon, 153 Tex. 566, 271 S.W.2d 414 (1954); Jackson v. Maypearl Independent School District, Tex. Civ.App., 392 S.W.2d 892 (1965); Bass v. Aransas County Independent School District, Tex.Civ.App., 389 S.W.2d 165 (1965) ref. n. r. e., and cases cited therein. When the attack is made because the taxing authority has followed an arbitrary plan or scheme, the taxpayer in order to prevail must not only show that the plan was an arbitrary and illegal one, but also that the use of the plan worked to his substantial injury. State v. Whittenburg, supra; City of Orange, Texas v. Levingston Shipbuilding Co., 5 Cir. 1958, 258 F.2d 240; City of Arlington v. Cannon, supra.

Appellants rely primarily upon the Supreme Court case of Whelan v. State, 155 Tex. 14, 282 S.W.2d 378 (1955). This case is entirely distinguishable from the case before us. In Whelan, the writ of error was granted primarily because of the refusal of the trial court to admit into evidence the amount of taxable bank deposits omitted from the tax rolls, where it was undisputed that such omission by the taxing authority was deliberate, arbitrary and systematic.

The law places the most onerous burden upon the taxpayer in cases like this. City of Houston v. McCarthy, Tex.Civ.App., 371 S.W.2d 587 (1963). “The difficulties to be encountered in making the necessary proof as a basis for relief is the penalty the taxpayer must pay for sitting idly by while taxing authorities put into effect a plan of taxation which deliberately permits certain classes of property to escape taxation.” City of Arlington v. Cannon, supra. The plaintiffs offered no testimony concerning the value of any of the properties rendered by them or assessed by the City of Port Lavaca. The appellants have wholly failed to show that any particular tract or property of theirs was assessed at a higher rate than would have been in the event that any omitted taxable property had not been included on the tax rolls. There was no evidence in the record to show that the city’s taxing authorities deliberately or systematically eliminated from the tax rolls bank deposits and savings and loan deposits. On the other hand the record shows that there was an attempt by the tax assessor and collector to determine all taxable property, including bank accounts. During the course of the trial officers from the various institutions were called as witnesses by the appellants. The Institutions did testify as to total deposits for the various years. Yet the appellants presented no testimony of true value of their property or that comparable property was assessed at a lower valuation than theirs, or that had another system of rendering and assessing property been used how much of their taxes would not be owing and should therefore be avoided. City of Houston v. McCarthy, supra.

Even if appellants had been able to pursue their theory by adequate proof of the actual or taxable value of the omitted property, they completely failed to make any attempt to translate this omission into hard dollars out of their pocket. They must go further than proof of the omitted property. They must demonstrate that they have actually sustained damage. To do this, the taxpayer must in turn prove the actual market value of his property as a part of his case. No attempt on the part of the appellants to do this was made. City of Orange, Texas v. Levingston Shipbuilding Co., supra.

We hold that the trial court did not err in refusing to permit the appellants to take the depositions of officers of the various financial institutions or in quashing the subpoenas, under the facts of this case. Article 342-709, V.A.C.S., Rule 177a and 188b, T.R.C.P. The information sought by the appellants could have been obtained from other sources. The officers of the Institutions and the depositors were neither necessary nor proper parties to plaintiffs’ suit. The City of Port Lavaca made out a prima facie case for the delinquent taxes due the City from the appellants for the years 1963 and 1964. The judgment of the trial court so stated and appellants made no attack on this portion of the judgment. The city government does not lose its right to taxes justly owing on the plaintiffs’ property by reason of the failure of its officers either negligently or designedly to assesss other property that is likewise taxable. City of Arlington v. Cannon, supra.

Even if the trial court committed an error of law in excluding the testimony, the trend of the courts is to follow “a policy of refusing to set aside or reverse judgments for errors of law unless in the sound judgment of the court the errors contributed in a substantial way to bring about an unjust result.” See “The Development of the Doctrine of Harmless Error in Texas”, 31 Texas Law Review 1, 17 — 18 (1951). Rule 434, T.R.C.P. Appellants’ point is overruled.

Appellants’ third point complains of the trial court in overruling plaintiffs’ objection to the court’s charge. The objections set forth in appellants’ brief are not the actual objections which appellants made to the court’s charge and are therefore waived. Rule 274, T.R.C.P. However, appellants complain, as we understand their contention, that the court’s instruction was based on Article 342-709, V.A.C.S., and that such article is unconstitutional being in violation of Article VIII, Section 1 of the Vernon’s Ann.St. Constitution of the State of Texas. We do not believe that this article is unconstitutional. It is a reasonable restriction enacted by our Legislature for the protection of our banking institutions and thier depositors from disclosing confidential information to third parties except under reasonable and well-defined circumstances. Appellants’ point is overruled.

Appellants’ fourth point complains of the failure of the trial court to define arbitrary and capricious. This point is without merit inasmuch as the appellants failed to tender a substantially correct definition in accordance with provisions of Rule 279, T.R.C.P. Appellants have waived their complaint and therefore their point is overruled.

Appellants’ fifth point complains that the trial court erred in submitting special issues 1 and 6 over their objections that such issues involve questions of law. This point is presented for the first time on appeal as no objection was made by the appellants to the submission of these issues. No alternate issues were requested or submitted. In fact, the issues were those in which the appellants relied on to establish their case against the City. Therefore, any complaint that these issues involve a determination of questions of law as well as fact would be waived. Rule 274, T.R.C.P.

Appellants’ sixth point complains that the trial court erred in rendering judgment for the defendant City of Port Lavaca based on the findings of the jury’s answers to special issues 1 and 6 because the answers to said issues were against the overwhelming weight and preponderance of the evidence so as to demonstrate they were guided by bias, prejudice and passion. The issues concern whether or not the City failed to assess all the taxable bank and savings and loan association deposits for the years 1963 and 1964. There was evidence that such bank deposits were taxed. Inasmuch as the burden of proof was upon the appellants to prove that taxing authorities had deliberately and systematically excluded bank accounts from taxation and since the appellants failed to establish such evidence, the point of error is without merit. Kelly v. A. & M. Consolidated Independent School District, Tex.Civ.App., 398 S.W.2d 438 (1966), ref. n. r. e.

The appellants complain or improper jury argument wherein they contend that one of appellee’s attorneys stated: ‘‘Mr. Wilson wants the City to violate the law.” The jury argument was not recorded by the court reporter and does not appear in the statement of facts. Appellants’ bystanders bill does not show the circumstances under which this argument was made; it does not show whether or not it was in answer to an invited argument; it does not show that appellants requested the court to instruct the jury to disregard such argument; nor does it show that appellants made a motion for mistrial. The only showing before us is, that the statement was made. Appellants have not demonstrated that this argument caused, or was calculated to cause, the rendition of an improper judgment in this case. Rule 434, T.R.C.P. Therefore, appellants’ seventh point is overruled.

The trial court in its judgment further determined that the appellants had waived their right to contest the validity of the manner and mode of the assessment of ad valorem taxes for the two years by the City of Port Lavaca. Appellants contended throughout the trial that the City had adopted an illegal and arbitrary scheme of taxation which made the assessment of their ad valorem taxes invalid, to their damage. Upon the trial of the case, evidence was developed that the appellants had paid their taxes which were assessed by the City of Port Lavaca upon certain other property belonging to the plaintiffs without objection. This property was assessed by the City at the same rate and under the same scheme for the two years in question. Issues were submitted to the jury, and in response thereto, the jury found that the appellants had in fact paid the taxes assessed by the City of Port Lavaca on taxable property owned by the plaintiffs at the amount assessed by the City for the years in question. All of the evidence adduced upon the trial failed to disclose any excessive valuations by the City on any property. The assessments as to the value of the appellants’ property were not attacked by the appellants in any way. In fact, the evidence showed that some of plaintiffs’ property exceeded the value placed on it by the City. Plaintiffs have waived any right to complain of the valuations placed upon their property by the Board of Equalization of the City of Port Lavaca. The payment of a portion of the taxes due was an admission by the appellants that a proper system of taxation was adopted by the taxing authority. Since the appellants offered no evidence that their property was overevaluated and since the appellants have paid taxes on some of their property, they cannot come into court now and complain of the system as being illegal and arbitrary as to the other tracts of land which were taxed under the same system by the City of Port Lavaca. See Doneghy v. State, Tex.Civ.App., 240 S.W.2d 331 (1951); Bell v. Turkey Independent School District, Tex.Civ.App., 214 S.W.2d 834 (1948), ref. n. r. e.; Republic Insurance Co. v. Highland Park Independent School District, Tex.Civ.App., 123 S.W.2d 784 (1938), err. dism. 133 Tex. 545, 125 S.W.2d 270.

Judgment of the trial court is affirmed.

SHARPE, Justice

(concurring).

I concur in affirmance of the judgment for the reasons stated in this separate opinion.

Appellee has asserted an affirmative cross-point as follows:

“This case should be affirmed because appellants totally and wholly failed to meet the burden of proof placed upon them by law to show either an arbitrary and illegal scheme of taxation or substantial injury.”

In my view, this affirmative cross-point should be expressly sustained.

This case involves a plan of taxation for each of the years 1963 and 1964 which had been put into effect prior to the filing of appellants’ suit to enjoin collection of taxes for such years and for other relief. Appellee correctly argues that in such circumstances the burden was upon appellants to prove not only that the scheme of taxation was fundamentally erroneous but also as a consequence that the taxpayer has suffered substantial injury. See State v. Whittenburg, 153 Tex. 205, 265 S.W.2d 569 (1954); City of Arlington v. Cannon, 153 Tex. 566, 271 S.W.2d 414 (1954); Whelan v. State, 155 Tex. 14, 282 S.W.2d 378 (1955); City of Orange, Tex. v. Levingston Shipbuilding Co., 258 F.2d 240 (5 C. 1958). I agree that the taxpayers here did not sustain their burden of proof on the essential elements of their cause of action. In particular, appellants failed to show that any tract belonging to them was assessed at a higher rate than it would have been in the event that any omitted taxable property had been included on the tax rolls. Appellants therefore failed to show substantial injury or excessiveness. Judgment in favor of appellee upon its cross-action was, therefore, proper and should be affirmed.

It is further my view that although the record reflects certain errors in the course of the proceedings below, they are not shown to be such as were reasonably calculated to cause and probably did cause the rendition of an improper judgment so as to require reversal. Rule 434, T.R.C.P. The errors referred to were in connection with quashing the commissions to orally take three depositions of representatives of banks and a savings and loan association, and in holding that appellants had waived their rights to contest the validity of all taxes because payments were made on some tracts.

The action of the trial court in quashing the subpoenas issued in connection with such depositions may be properly upheld under the provisions of Rule 177a, T.R.C.P., but I am unwilling to hold that the trial court could completely prohibit appellants from taking the oral depositions of said witnesses. I believe that appellants should have been allowed to question the witnesses and if it developed that there was a refusal to answer as to certain matters, the court could have proceeded on proper application, under Rules 215a and 186b, T.R.C.P., to resolve the contested matters and to make such orders for the protection of the parties and the deponents as might be necessary under the conditions shown to exist. Counsel for appellants requested that such procedure be followed but such request was denied. The order of the trial court quashing the commissions to take the oral dep- ■ :‘:ons and the subpoenas was rendered on' September 17, 1965. The case was called for trial on the merits on September 20, 1965, at which time appellants announced ready and proceeded to trial. Appellants called as witnesses the representatives of the banks and savings and loan associations whose records were originally involved in the depositions sought to be taken and-elicited some testimony from them, particularly concerning total deposits, which was admitted into evidence. However, the record does not reflect that any of the said witnesses were served with subpoenas duces tecum to bring their account records with them at the trial on the merits. It thus appears that appellants did not follow through at the trial on the merits with the same requests concerning records as were made in connection with the attempt to take depositions. As a result of this and in the absence of other evidence, the record is silent concerning accounts to the credit of depositors in the three financial institutions involved which would have been subject to taxation by the City of Port Lavaca, and which were in fact not taxed. In my view, the failure., of appellants to attempt ‘ to develop their case more fully at the trial on the merits and the consequent lack of proof, renders harmless the erroneous rulings in connection with the depositions.

I am unwilling to hold that Art. 342-709, V.A.C.S., properly construed, precludes the development of material facts in a judicial proceeding such as this. To hold otherwise, in my view, would be to encounter serious questions as to constitutionality of the statute and deprivation of due process of law under Article 1, Sections 13 and 19 of the Constitution of Texas and the Fourteenth Amendment to the Constitution of the United States of America. The amounts of money on deposit in the three financial institutions were material as to the tax years in question only as of the first day of January, 1963 and 1964. The depositions were sought to be taken and the trial on the merits was held in September, 1965. The trial court has considerable discretion in connection with the taking of depositions relating to the records in question as well as their identification, production and admission into evidence upon the trial of the case, and may properly exercise it in order to protect the deponents and parties and to prevent oppression, harrassment, undue disclosure and expense.

The tremendous burden placed upon a taxpayer in a suit such as this would not be met by simply showing that certain amounts were on deposit in banks or savings and loan associations, but, in addition, the residence of the owner and the consequent situs for taxation must be proved in order to determine whether a particular taxing agency may lawfully assess and collect taxes on the same. City of Orange v. Levingston Shipbuilding Co., supra. Although appellants did not sufficiently develop their case to demonstrate reversible error, I cannot agree that the records of financial institutions such as those involved here would not be subject to judicial disclosure under appropriate safeguards in a proper case.

I am also unwilling to hold that appellants have waived their entire cause of action asserted in this case simply because they paid taxes to the City on a few parcels of real estate owned by them for the tax years in question. They may have justifiably concluded that they could not carry the onerous burden of proof to show substantial injury or excessiveness as to such tracts. Appellants should not be required to incur penalties and interest upon taxes they are willing to pay on some tracts in order to complain concerning other tracts upon which they might be. able to secure relief.

For the reasons stated, I concur in affirming the judgment of the lower court.

      . Emphasis and parenthesis supplied throughout.


author: CHAPMAN, Justice. NORTHCUTT, Justice.

text:
    Norberto CAPETILLO, Appellant, v. The CROSBY COUNTY FUEL ASSOCIATION, Appellee.
    No. 7639.
    Court of Civil Appeals of Texas. Amarillo.
    Oct. 10, 1966.
    Brown, Shuman & Harding, Lubbock, for appellant.
    McWhorter, Cobb, Johnson & Cobb, Crenshaw, Dupree & Milam, Cecil Kuhne and Tom S. Milam, Lubbock, of Counsel, for appellee.
   CHAPMAN, Justice.

Plaintiff, Norberto Capetillo, sued Crosby County Fuel Association for damages to his person resulting from anhydrous ammonia escaping from a pop-off valve on a fertilizer tank which contained liquid fertilizer. The parties will be referred to as in the court below.

The suit was based both upon specific grounds of common law negligence, and upon liability without fault — allegations of breach of implied warranty. The trial court sustained exceptions to plaintiff’s pleadings that asserted a cause of action grounded solely upon implied warranty, such exceptions, in effect, being leveled at the failure of the pleadings upon their face to show contractual relations or privity between plaintiff and defendant. The case was then tried and submitted to the jury upon 38 issues of negligence of defendant and contributory negligence of plaintiff.

The jury found no issues or series of issues of negligence against defendant upon which a verdict and judgment could be based for plaintiff under the negligence theory; absolved plaintiff of any grounds of contributory negligence; found the accident was the result of an unavoidable accident; and answered, “None” to the damage issues.

The appeal is based solely upon alleged error of the court in sustaining special exceptions to plaintiff’s asserted cause which sought to place upon defendant liability under the implied warranty theory. The record is before us upon briefs and the transcript, without a statement of facts.

Plaintiff’s pleadings allege in effect that defendant sold anhydrous ammonia fertilizer to farmers, including plaintiff’s employer, Johnny Nunnley, and as an inducement to attract customers, furnished the tank in question owned by defendant on a bailment basis for the convenience of the farmers in applying the fertilizer to their land; that the pop-off valve was located adjacent to the outlet controls on the tank and anyone using the outlet controls would be in close proximity to the pressure relief valve; that when said valve popped off it allowed ammonia vapor liquid to escape under pressure ; and that it did pop off while plaintiff was using the outlet controls and sprayed ammonia liquid and vapor upon plaintiff to his serious damage.

There were also allegations that the tank was negligently designed in such manner as to creat a hazardous condition in the event the relief valve popped off while one was attempting to remove the contents thereof; that defendant in furnishing the tank for application of the fertilizer impliedly warrantied it was satisfactory for use for the purpose for which it was intended; i. e., storage under pressure of anhydrous ammonia fertilizer and removal of the contents thereof; and that defendant has breached such warranties.

The manufacturer of the tank was not sued, so we have a facet in the strict liability field in which the plaintiff seeks to recover against a “middle man” rather than a manufacturer. We have tried to read all the Texas appellate court opinions from Jacob E. Decker & Sons, Inc. v. Capps, 139 Tex. 609, 164 S.W.2d 828, 142 A.L.R. 1479 (1942) to Cruz v. Ansul Chemical Company, Tex.Civ.App., 399 S.W.2d 944 (1966 N.R.E.), in an effort to determine the trend of the Texas courts concerning the extension of the doctrine announced in Jacob E. Decker & Sons, Inc. v. Capps, supra, as well as many opinions from other jurisdictions.

Regardless of all that has been said by text writers in this state and case law from some other jurisdictions concerning the fall of the citadel of privity and the inevitability of the State of Texas becoming a part of the more “enlightened” jurisdictions capitulating to the attack upon that citadel, the fact still remains that our court of last resort has not disavowed its majority opinion in Bowman Biscuit Co. of Texas v. Hines, 151 Tex. 370, 251 S.W.2d 153. There, Justice Smith spoke for the 5-4 majority in distinguishing in strong language the difference in abandonment of privity between the consumer and manufacturer of food for human consumption (to which he agreed) and that of abandonment of privity between the retailer and wholesaler (the middle man) and the consumer, saying: “The situation of wholesaler-retailer and consumer is properly governed by the rides of negligence law. The retailer owes to the consumer the duty to supply goods packed by reliable manufacturers, and such as are without imperfections that may be discovered by an exercise of care, skill and experience of dealers in such products generally.” (All emphases added).

As a matter of fact: “Strict liability has been repudiated in strong language in Texas” by our Supreme Court, Klostermann v. Houston Geophysical Company, Tex.Civ. App., 315 S.W.2d 664 (writ ref.), except in food cases. In 1958 that court refused a writ outright in Klostermann v. Houston Geophysical Company, supra, wherein the “enlightened” view of strict liability was rejected where suit was filed for damages resulting from seismograph operations.

It is not easy to categorize the area of products liability into which our case must be placed. Certainly it is not in the food area, and those cases are used only for the general principles announced. If it could be said to be in the category of storage and use of explosives, then Texas has abandoned the common law rule of absolute liability-laid down in the old English case of Rylands v. Fletcher, (L.R. 3 H.L. 330) and predicate liability upon negligence, in the absence of controlling statutes or facts so obvious as to constitute a nuisance as a matter of law. Turner v. Big Lake Oil Co., 128 Tex. 155, 96 S.W.2d 221, 224; Klostermann v. Houston Geophysical Co., supra.

Though N.R.E. cases, Brown v. Howard, Tex.Civ.App., 285 S.W.2d 752, and Cruz v. Ansul Chemical Company, supra, give some indication that as late as February 1956 (+he date of the latter announcement) th: Supreme Court of Texas had not capitulated to the liability without fault doctrine outside of food cases. At least it approved the result reached in these last two cited cases.

Appellant relies chiefly upon a case from the federal jurisdiction announced by our Fifth Circuit in 1964 wherein that court in a strong opinion held privity between user and manufacturer or assembler was unnecessary. That court stated the Supreme Court of Texas “ * * * has not committed itself to a position on the necessity for privity as a prerequisite to recovery in non-food cases.”

The function of the federal courts is to attempt to follow and apply the substantive law of the state where the litigation arose, Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and to ascertain from all available data what the state law is. West v. American Teleph. & Teleg. Co., 311 U.S. 223, 237, 61 S.Ct. 179, 85 L.Ed. 139, 144 (1940). In the cited case of Putman v. Erie City Manufacturing Company the Fifth Circuit made an “educated guess” that:

“Today, the Supreme Court of Texas would follow Decker to its logical conclusion and rule that a manufacturer or assembler of a defective product, unreasonably dangerous to the user, is subject to strict liability to the user for an injury caused by the defect, even though the product is not a food for human consumption, there is no proof of negligence, and there is no privity between the user and the manufacturer or assembler.”

Even that statement does not guess the middle-man into liability without proof of privity between him and the user.

We are not unmindful of a new publication of the American Law Institute. The Restatement Of Law, (Second), Torts (1965) includes the following pronouncement:

“ ‘Sec. 402A. Special Liability of Seller of Product for Physical Harm to User or Consumer
“ ‘(1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if
“ ‘(a) the seller is engaged in the business of selling such a product, and
“ ‘(b) it is expected to and does reach the user or consumer without substantial change in condition in which it is sold.
“ ‘(2) The rule stated in Subsection (1) applied although
“ ‘(a) the seller has exercised all possible care in the preparation and sale of his product and
“ ‘(b) the user or consumer has not bought the product from or entered into any contractual relation with the seller.’ ”

It may well be that the Supreme Court of Texas may extend Decker into other areas some day and follow the American Law Institute in a proper case. However, we are obligated to follow the precedent that court has estalished until they change it. In Burrus Feed Mills, Inc. v. Reeder, Tex.Civ.App., 391 S.W.2d 121, we only extended the doctrine to animals that had been applied to humans in Decker for what we considered the very good reasons stated therein. Further, the fact still remains that most of the cases relied upon by plaintiff involve the manufacturer of the product in question — Jacob E. Decker & Sons, Inc. v. Capps, supra, manufacturers of sausage; Putman v. Erie City Manufacturing Company, supra, manufacturer and assembler of a wheelchair.

There is no statement of facts from which we may determine who manufactured the fertilizer tank in question. Plaintiff does not allege defendant was such manufacturer, but alleges it was negligently designed in order to create a hazardous condition in the event the relief valve popped off while anyone was attempting to remove the contents therefrom. Thus, the defendant here sought to be held liable was not the manufacturer of either the tank or its contents and the jury absolved it of using it as a defective vehicle to market its product when it found the fertilizer tank was not defective, not filled beyond its working pressure stamped thereon, and not overfilled to the point of being unsafe.

Since there is no statement of facts, every presumption must be indulged in favor of the trial court’s judgment. Lane v. Fair Stores, 150 Tex. 566, 243 S.W.2d 683; Schweizer v. Adcock, 145 Tex. 64, 194 S.W.2d 549; Commercial Credit Corporation v. Smith, 143 Tex. 612, 187 S.W.2d 363. We could, therefore, not review the evidence to determine if it was sufficient to support the jury findings. Hopkins v. Pence, Tex.Civ.App., 322 S.W.2d 321 (N.W.H.).

Since there must first be proof of a defective product or substance, and injury thereby even on the theory of implied warranty, Jacob E. Decker & Sons, Inc. v. Capps, supra, we believe appellant has failed to show any grounds for reversal under Rule 434, Texas Rules of Civil Procedure, which provides:

“ * * * no judgment shall be reversed on appeal and a new trial ordered in any cause on the ground that the trial court has committed an error of law in the course of the trial, unless the appellate court shall be of the opinion that the error complained of amounted to such a denial of the rights of the appellant as was reasonably calculated to cause and probably did cause the rendition of an improper judgment in the case, * *

The judgment of the trial court is affirmed.

NORTHCUTT, Justice.

I concur in the result reached in the above opinion but I do not understand that the holding in the case of Jacob E. Decker & Sons, Inc. v. Capps, 139 Tex. 609, 164 S.W.2d 828 applies only to food cases. I construe the case to hold it applies to articles that are injurious to human health or life. In considering the rule of implied warranty or liability without fault the court stated: “Liability in such case is not based upon negligence, nor on a breach of the usual implied contractual warranty, but on the broad principle of the public policy to protect human health and life.” As I construe the holding of that case is that the implied warranty, so called, reaching from the manufacturer of articles to the ultimate purchaser for immediate use is in the nature of a representation that the highest degree of care has been exercised and is fit for the use for which it is sold, and if used as directed, it will not harm human health or life. For example, I ani unable to distinguish the difference in effect of human suffering when a person uses an eye-wash solution that caused blindness and from sickness caused by eating improper food.

      . Putman v. Erie City Manufacturing Company, 338 F.2d 911.