author: HALL, O. J.

text:
    PAYNE v. CHANCE.
    (No. 2883.)
    Court of Civil Appeals of Texas. Amarillo.
    Jan. 18, 1928.
    Rehearing Denied March 7, 1928.
    1. Wills <S=>324(2) — Question of testamentary capacity ordinarily is one of fact for jury.
    The question of testamentary capacity or- ' dinarily is one of fact for the jury.
    2. Wills <0=350 — Testator has capacity if he knows nature of transaction in which he is engaged, extent of property, and persons who are objects' of his bounty.
    A testator has the capacity to make a will if he knows the nature of the business or transaction in which he is engaged, the extent of his property, and the persons who are the objects of his bounty.
    3. Wilis <§=»21— Ordinarily, less capacity is required to enable one to make will than to enter into contract or engage in complex business transactions.
    Ordinarily, less capacity is required to enable a testator to make a valid will than for the same person to enter into' a contract or engage 'in intricate and complex business transactions.
    4. Wills <0=321 — Testator’s mental capacity must be determined as of date of will.
    ■ The testator’s mental capacity must be determined as of date of the will.
    5. Wilis <0=3288(1) — Tendency of courts is to uphold wills.
    The tendency of courts is to uphold wills.
    6. Wilis <0=s52(I)— Burden is on proponent to show by positive evidence that testator was possessed of mental capacity sufficient to make valid will at time will was executed.
    The burden is on the proponent of a will to show by positive evidence at the time he seeks to have the will probated that the testator was possessed of mental capacity, at time will was executed, sufficient to make valid will.
    7. Wills <0=352(1) — Proof of habitual intoxication raises no presumption that incapacitating drunkenness existed at time will was executed.
    Proof of habitual intoxication raises no presumption that incapacitating drunkenness existed at the time will was executed.
    8. Wills <0=343, 44 — That testator is addicted to drugs or to drinking cannot, in itself, be held to incapacitate him from making will.
    So long as there has not been a destruction of that mentality which the law requires for the making of a will, it cannot be said that the fact that testator is addicted to the habit of drinking or of using drugs incapacitates him from making a will.
    9. Wilis <03=44 — 'That testator was under influence of liquor when he made will does not invalidate will, unless he had no intelligent comprehension of what he was doing.
    That at the time testator made his will he was under the influence of liquor does not invalidate will, unless testator had no intelligent comprehension of what he was doing.
    10. Evidence <0=3527 — Wills <0=344 — 7Effeet of intoxication on testator’s capacity depends on common observation and facts of particular case and is not question for experts.
    The effect of the intoxication of testator on his capacity at the time of making his will is not a question for experts, but depends on common observation and the facts of the particular --ease.
    11. Wiils <0=>54(3) — In will contest, testimony showing testator’s statements as to persons to whom he would give or devise property held admissible for sole purpose of showing mental capacity, though contradictory of will.
    In will contest, testimony contradicting provisions of 'will, relative to testator's statements before and after execution of will in question, as to who'm he expected to give his property and to whom it had been devised, held admissible only for purpose of showing mental capacity.
    12. Wills @=>55(6) — Evidence held not to support jury’s finding of testator’s lack of mental capacity to make will.
    In will contest' proceedings, evidence held not sufficient to support jury’s finding that testator did not have mental capacity to make will.
    Appeal from District Court, Crosby County ; Homer L. Pharr, Judge.
    Application by J. H. Payne for the probate of the will of Dan Plogan, deceased. From an order of the County Court admitting the will to probate, the contestant, D. W. Chance, appealed to the District Court, which rendered judgment for contestant, and proponent appeals.
    Reversed and remanded.
    Bean & Klett, of Lubbock, for appellant.
    L. A. Wicks, of Ralls, for appellee.
   HALL, O. J.

On September 30, 1922, Dan Hogan executed a will, in which he gave his property, in certain proportions, to the children of L. W. Chance, Miss Bessie Elliott, and an aunt of the testator, Miss Nora Mor. an. Thereafter on November 9,1923, he made another will in which he gave his property to the children of appellant, J. H. Payne, Miss Margaret Elliott, and Miss Nora Moran. Testator died April 20, 1924.

On the 23d of April, 1924, the appellant filed his application to have the last-mentioned will probated. On November 18,1925, the appellee filed an answer contesting the probate of said will on two grounds, namely: (1) Lack of testamentary capacity; and (2) undue influence. On the same day, the county court admitted the will to probate. Erom this order, Chance appealed, to the district court, and on March 14, 1927, the case was tried in that court to a jury.

T.wo issues were submitted to the jury. The first, with the finding, is, in effect, that at the time Dan Hogan signed the last will, dated November 9, 1923, be did not bave testamentary capacity. Tbe second issue, which related to tbe question of undue influence, was not answered. Based upon tbe verdict, tbe court' denied appellant’s prayer for tbe probate of tbe will. Prom a judgment entered in accordance with tbe verdict, this appeal is prosecuted.

Tbe sole issue before us is that of tbe testamentary capacity of Dan Hogan at tbe time be executed tbe last' will. There is no issue of insanity of any character, senility, or undue influence in tbe case. It is insisted by appellant: (1) That there is no evidence to support tbe jury’s finding; (2) that tbe great preponderance and overwhelming weight of tbe evidence is that tbe testator had sufficient mental capacity to make a valid will at tbe time be executed it on November 9, 1923, and that tbe undisputed evidence in behalf of tbe proponent showed that testator was more than 21 years of age, was of sound mind, and executed tbe will with all tbe formalities and solemnities required by law. These contentions require us to review tbe statement of facts and tbe evidence relevant .to tbe issue to be decided. In determining tbe issue presented by this appeal, there are certain fundamental principles of law and procedure which govern in such cases and which may be stated as follows:

Tbe question of testamentary capacity is ordinarily one of fact for the jury. Bienhardt v. Nehring (Tex. Civ. App.) 283 S. W. 347; 1 Alexander on Wills, p. 548, § 403.

It is held that a testator is capacitated if be knows the nature of the business or 'transaction in which be is engaged, tbe extent of bis property, and the persons who are the objects of his bounty. Vance v. Upson, 66 Tex. 476, 1 S. W. 179; In re Bartels’ Estate (Tex. Civ. App.) 164 S. W. 859; Prather v. McClelland, 76 Tex. 574, 13 S. W. 543; Morris v. Morris (Tex. Com. App.) 279 S. W. 806.

Ordinarily less capacity is requisite to enable a testator to make a valid will than for tbe same person to enter into a contract or engage in intricate and complex business matters and transactions. Vance v. Upson, supra; 1 Alexander on Wills, p. 444. Tbe testator’s mental capacity must be determined as of the date of the will. Vance v. Upson, supra; Warren v. Ellis (Tex. Civ. App.) 137 g. W. 1182; 1 Alexander on Wills, p. 435.

While tbe tendency of tbe courts is to uphold wills (1 gchouler on Wills [6th Ed.] § 200), tbe rule in Texas is that tbe burden is on tbe proponent to show by positive evidence, at the time be seeks to bave tbe will probated, that tbe testator was possessed of mental capacity at the time tbe will was executed, sufficient to make a valid will.

Upon tbe issue involved, about 25 witnesses testified pro and con. It was shown that tbe testator was an old bachelor about 55 years of age, a native of Ireland, and bad lived at Balls and in that vicinity for about 20 years. He was a painter by trade, bad been a cowboy in earlier days, and at about tbe time of bis death owned a wagon yard and bad been running a small restaurant. When be first came to Balls, it appears that be was taken into tbe home of L. W. Chance, tbe contestant, where he was treated practically as a member of tbe family. During this period, he executed tbe first will. Later be moved into a small house in bis wagon yard and lived there until bis death. It is conceded that he was an habitual drunkard, and at times would become so intoxicated that he was not mentally or physically able to attend to his business. Tbe contestant insists that at tbe time tbe last will was executed, be was intoxicated and that be bad been so weakened menially by heavy drinking prior to that date that be was not capable of making a valid will.

Proof of habitual intoxication raises no presumption that incapacitating drunkenness existed at tbe time tbe will was executed. 1 gchouler on Wills (6th Ed.) § 214.

As said in 1 Alexander on Wills, § 475:

“A person may drink and yet retain his mental faculties, although some may claim they are blurred fo an extent, yet the use of intoxicants does not necessarily mean a complete loss of understanding. The same may be said regarding drugs, yet without question, a person, through a superabundance of alcoholic drinks or the excessive use of drugs, may become so mentally obscured that he is, for the time being, comparable to a mad man. In such a condition, he cannot make a valid will, for understanding is lacking, but the effects of alcohol and of drugs wear off and although they may leave the user weakened, both in mind and in body, yet so long as there has not been a destruction of that mentality which the law requires for the making of a will, it cannot be said that the fact that the testator is addicted to the habit of drinking or of drugs incapacitates him from making a will, gucli fact alone does not raise a presumption that the necessary intelligence is lacking. The question to be determined is the mental capacity of the testator at the time he makes his will and the fact that he may be then under the influence of liquor does not invalidate his testament unless he had no intelligent comprehension of what he was doing, and the effect of the intoxication on his capacity is not a question for experts but depends upon common observation and the facts of the particular case.”

Upon the issue of Hogan’s mental capacity, as affected by bis habits of intoxication, four witnesses for tbe proponent and one for tbe contestant testified as to such condition on November 9th, when tbe last will was executed. Tbe statement of facts is voluminous, comprising over 100 pages, and we will merely give a summary of such testimony, from tbe various witnesses, bearing upon this issue.

It appears that on the morning of the 9th ■of November, the testator, with Payne, concluded to go to Crosbyton, but they were prevented from leaving Ralls until about noon. About that hour they left Ralls and went to Crosbyton, tbe county seat, 8 or 10 miles distant. Upon arrival at Crosbyton, tbe testator went immediately to tbe office of Mr. Green Harrison, tbe county attorney, wbo bad been his legal adviser for a number of years, and stated that be wanted Harrison to draft bis will. He gave Harrison a statement- of wbat disposition be desired to make of bis property as well as a statement of tbe property, including several town lots in Ralls. Tbe county attorney wrote tbe will and it was attested by tbe County Judge Jake Made, and the sheriff, John D. McDermett. These three witnesses testified that they bad known the testator for a number of years and that at that time be was in his usual frame of mind and was not intoxicated. Tbe fourth witness, Y. R. Plummer, an abstractor, bad an office in the courthouse, and while tbe testator was in the courthouse, be called on Plummer and they bad a settlement of some business transactions. It seems that testator bad been doing some painting for Plummer and Plummer bad been doing the testator’s abstract work, and in a settlement Plummer gave Hogan a check for a balance due the latter. Plummer testified that Hogan handled the transaction in a business-like way, and that be observed nothing out of the ordinary in Hogan’s mental condition. Harrison testified that be thought Hogan’s mind was sound; that be did not smell whisky and did not think Hogan was drunk at the time tbe will was signed. He stated affirmatively that in bis opinion Hogan was sober.

Sheriff McDermett testified that be bad known Hogan for years and years, bis acquaintance beginning in a cow camp when Crosby county was only a cattle ranch. He testified that from tbe conversation be bad with him that be thought Hogan’s mind at the time be executed tbe will was all right.

Judge Made was not so positive in bis testimony because be explained that be merely attested tbe will at Hogan’s request and did not observe him critically. 1-Ie had known Hogan for only two or three years, but he stated that there was nothing about Hogan’s conversation or manner as attracted his attention specially or caused him to think or believe that there was anything out of tbe ordinary or unusual in Hogan’s condition; that bis conduct was as a business man while there.

Plummer stated that his business relations commenced with Hogan in 1917 or 1918; that based on his transactions with Hogan on tbe day tbe will was signed, judging from bis conduct and appearance, physical as 'well as mental, in bis opinion Hogan was sober.

Several witnesses testified that after knowing Hogan intimately for years, in their opinion, when Hogan was sober, be was at himself mentally as much as any other man. Tbe consensus of tbe,opinion of practically all of tbe witnesses for both sides was that be bad good business judgment and clear ideas, especially concerning bis own affairs, when be was not intoxicated.

Several witnesses for tbe contestant admitted that when Hogan was on a spree be would not attempt to transact any business. The effect of their testimony is to show that be realized while be was under tbe influence of liquor that be was incapable of attending to bis business affairs, even in tbe issuing of checks, and would refer parties wbo called' upon him to transact business matters to L. W. Chance.

Plis banker testified that be told him at one time during a protracted spree not to pay any checks of bis which bad not been O. K.’d by L. W. Chance. It would seem that tbe effect of this testimony is to rebut tbe contestant’s position that Hogan would undertake to dictate and execute a will while intoxicated.

Will Ezell is tbe principal witness introduced by contestant to sustain tbe contention that Plogan was intoxicated on tbe day tbe last will was executed. It seems reasonably clear that Ezell was mistaken as to the date. The testimony is uncontradicted that tbe will , was executed early in tbe afternoon of November 9th. According to Ezell’s testimony, in which be details an all-day orgy with Iio-ggn, be says be was drunk with Hogan in Crosbyton on November 9th. He says be met Hogan about 8 o’clock in tbe morning. He did not express an opinion as to Hogan’s mental capacity, but described bis condition as “shaking,” “nerves all torn up,” and in “pretty bad shape.” Ezell admitted that be was a “jake” and “extract” drinker himself; that be bad been drinking “that stuff about as strong as anybody for a number of years”; and that at times be was “almost crazy.” His testimony shows that together with Hogan and a third party by tbe name of Andy Wooten, wbo was not introduced as a witness, they purchased between 10 and 15 bottles of vanilla extract and Jamaica ginger, retired behind a signboard, and drank it, most of which was consumed in tbe forenoon. Tbe reasonable inference from Ezell’s testimony is that this drunken spree was on a date other than November 9th.

Tbe only other witness, whose testimony in behalf of tbe contestant tends even remotely to show Hogan’s condition on tbe day in question, is the witness Williamson, wbo says that be was in tbe transfer business at Ralls and hauled some shoes from tbe depot to Hogan’s place of business either on tbe 8th ’ or 9th of November, 1923, and that Hogan •was drunk tbe day.be hauled tbe shoes. He further says that Hogan was drunk on both days. It is difficult to understand bow Hogan could be drunk in Ralls for two days and during one of sucb days get on a drunk with Ezell in Crosbyton.

One important witness for tbe contestant was Dr. Fullbright, who testified as an expert upon testator’s mental and physical condition; but there is considerable doubt, from his testimony, as to the period when he was Hogan’s medical adviser. It appears, according to his statement, that he visited Hogan while the latter was in jail in Crosbyton charged with drunkenness in March, 1923, and until about a week before testator died in April, 1924. He finally said:

“When he was in jail here, I saw him a few days before he was down here, and I think I saw him a few days professionally afterward.”

The doctor testified that Hogan had Bright’s disease, which had affected his heart and rendered him dropsical, resulting in a swelling of his lower limbs. He gave it as his professional opinion that Bright’s disease would, in certain cases, result in oedema of the brain, but he did not state that Hogan was in such condition. On recross-examination, he said:

“I wo-uld not want to leave the impression with the jury that a man, though crippled and diseased, in the limbs, that his mind is affected to such an extent that he would not know what to do with his property or how he wanted to give it away or how he wanted to dispose of it by will. I would not say a man of old age or a man who drank would not still have enough mind to know to whom he wanted to give his property.”

The testimony of the witnesses not herein specifically mentioned all tend to show that Hogan was a heavy drinker and was frequently intoxicated to such dn extent that he did not attempt to conduct his business affairs, which consisted in part of an army store and a small restaurant and café. It is conceded that when he was not in a drunken condition he was a man of more than ordinary intelligence and above the average in mentality. He read the daily papers and was well informed in public affairs. He was a member of the Knights of Columbus, a Catholic in religious belief, a Republican in principle but voted the Democratic ticket in Texas, and during the struggle between Ireland and England was a strong partisan of his native Isle. He was bitterly opposed to the Ku Klux Klan and freely and intelligently discussed all such issues with his friends. Aside from the opinion of Dr. Fullbright and possibly one or two other witnesses, there is nothing to indicate that his mind had become so enfeebled by his use of intoxicating liquors that he could not efficiently conduct his business affairs when not on one of his sprees, and the testimony, taken as a whole, does not indicate that when ordinarily sober he would be mentally incapacitated to dispose of his property by will.

Considerable testimony was introduced showing that he had stated, both before and after the execution of the last will, to whom he expected to give his property and to whom it had been devised. This, with other testimony of declarations, which, in effect, contradicted the provisions of the will, was admissible only for the purpose of showing his mental capacity and should have been limited by the court to that purpose.

Because we are convinced that the verdict of the jury, as to the testator’s- mental capacity, is contrary to the preponderance of the testimony, the judgment is reversed and the cause is remanded.
      . <0=For other oases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes


source: Caselaw Access Project

author: JONES, C. J.

license: Public Domain

text:
    FARRACY v. SECURITY NAT. BANK OF DALLAS et al.
    (No. 10155.)
    Court of Civil Appeals of Texas. Dallas.
    Feb. 25, 1928.
    Rehearing Denied March 31, 1928.
    1. Banks and banking <§=>112 — Discharge of corp'orate notes substituted for personal notes of officers, at instigation of bank officer, held unlawful “diversion of corporate funds” rendering bank liable (Rev. St. 1925, arts. 1348, 1349).
    Where president of corporation executed corporate notes and substituted them for personal notes of president and another officer held by bank, with knowledge and at instigation of cashier and vice president of bank, held, that use of corporate money to discharge such substituted notes was an unlawful diversion of funds of corporation under Rev. St. 1925, arts. 1348 and 1349, for which bank was equally liable with the president and such officer.
    [Ed. Note. — -For other definitions, see Words and Phrases, First and Second Series, Diversion — Divert.]
    2. Bankruptcy <@=>(51 — 'Trustee held vested with title to all property of estate and powers possessed by bankrupt and also with rights of execution creditor (Bankruptcy Act, §§ 47, 70[a], [e] [II USCA §§ 75, 119 (a), (e)]).
    Under Bankruptcy Act, §§ 47, 70 (a), (e) (11 USCA §§ 75, 110 [a], [e]), a trustee in bankruptcy is not only vested with title to- all property owned by the estate and all powers in reference to such property that bankrupt possessed before bankruptcy, but also with all ■rights of an execution creditor.
    3. Bankruptcy <§=>185 — Trustee can avoid any unlawful transfer that bankrupt or lien creditor could have avoided (Bankruptcy Act §§ 47, 70[a], [e] [II USCA §§ 75, 110(a), (e)]).
    Under Bankruptcy Act, §§ 47, 70 (a), (e) (11 USCA §§ 75,110 [a], [e]), trustee in bankruptcy can avoid any unlawful transfer of property that bankrupt could have avoided at time of adjudication and any such transfer that creditor holding a legal or equitable lien could have avoided, regardless of whether, at time of unlawful transfer, bankrupt was solvent or insolvent.
    4. Bankruptcy 178(1) — Trustee held authorized to recover amounts paid bank on corporate notes of bankrupt corporation unlawfully' substituted .for personal notes of bankrupt’s officers (Bankruptcy Act, §§ 47, 70 [a], [e] [II USCA §§75, 110(a) (e)]).
    Where, at instigation of bank officer, corporate notes were substituted for personal notes of corporate officers and corporate notes discharged and corporation became bankrupt, held, that under Bankruptcy Act, §§ 47,’ 70(a) (e) (11 USCA §§ 75, 110[a], [e]) trustee can recover from bank amount paid in discharge of such notes.
    5. Bankruptcy ®=»I82 — Bank held bona fide holder for value of corporate note not Hable to trustee in bankruptcy of corporation for amount paid in discharge of it (Bankruptcy Act, §70 [e] [II USCA § 110 (e)]).
    Bank taking over assets and assuming liabilities of another bank held a bona fide holder for value of corporate note which had unlawfully been substituted for personal note of corporate officer, and was not liable under Bankruptcy Act, § 70 (e) (11 USCA § 110 [e]) to trustee in bankruptcy of corporation for amount paid in discharge of. such note.
    Appeal from District Court, Dallas County ; Joel R. Bond, Judge.
    Action by Harry D. Farracy, trustee in bankruptcy, against the Security National Bank of Dallas and another. Judgment for defendants, and plaintiff appeals.
    Reversed and rendered in part, and affirmed in part.
    Davis, Synnott & Hatchell, of Dallas, for appellant.
    Touchstone, Wight, Gormley & Price, of Dallas, for appellees.
   JONES, C. J.

Appellant, Harry D. Far-racy, trustee in bankruptcy for the estate of D. H. Lewis Company, bankrupt, has duly appealed from an adverse judgment entered against him in the trial of this suit in the district court of Dallas county and in favor of appellees, the Security National Bank of Dallas and the Southwest National Bank of Dallas. The suit was instituted by appellant, and had for its purpose the recovery from appellees, as a part of said bankrupt estate, the sum of $43,000, alleged assets of said estate in the possession of appellees.

The facts upon which this suit is based are:' The L. H. Lewis Company was incorporated in June, 1919, for the purpose of conducting a wholesale dry goods business in the city of Dallas, with a capital stock of $500,-000, represented by 5,000 shares of stock of the par value of $100 per share. The affidavit attached to the articles of incorporation showed that L. I-I. Lewis had subscribed for 3,000 shares of said stock, and had paid in $150,000 in cash; that J. H. Webb hadi subscribed for 500 shares of said stock and had paid in $25,000; that Cull C. Moorman had subscribed for 1,500 shares of said stock and paid in $75,000, thus showing that all of the capital stock of the corporation had been subscribed by these three incorporators and 50 per cent, paid in. As a matter of fact, however, a number of other parties at the time the organization was perfected held a considerable portion of the capital stock and ■ had paid therefor. .

The organization was perfected during the months of June and July, and as soon as possible thereafter the corporation was op-ined for the transaction of the business authorized under its charter. The first meeting of stockholders was held, a board of nine directors elected; and by-laws adopted. At the first meeting of the board of directors, L. H. Lewis, was elected president, Cull C. Moorman vice president, and J. H. Webb secretary. Under the by-laws, the affairs of the corporation were placed under the management of its board of directors and such officers and agents as the board “may elect or employ.” Among other powers vested by the by-laws in the president was that—

“He shall sign all cheeks, all certificates of stock, conveyances of real estate, and any other instruments in writing requiring a signature, and perform such other duties as may be required of him from time to time by the directors.”

The president was authorized to negotiate at any and all times, and in such manner as he might see fit, for* the necessary -funds for the proper financing of the business of the corporation and empowered “to sign such notes, or instruments in writing as may be necessary from time to time for the securing of such sums of money as the business of L. H. Lewis Company may require.”

Edwin H. Hobby was a vice president and cashier of appellee the Security National Bank, and an initial stockholder in the L. H. Lewis Company. Cull C. Moorman was also a vice president of the Security National Bank.

At the time the Lewis Company opened for business, all of its authorized capital stock had been paid in. It is important to note the circumstances attending the payment to said company of $50,000 for 500 shares of capital stock, issued to Lewis and Webb subsequent to the issuance of the charter, but prior to opening business. These circumstances are: While the Lewis Company was in course of organization, Mr. Lewis, the chief mover in the organization, in an interview with the Security National Bank through its cashier, Edwin H. Hobby, informed the bank that he desired the company to open business with the credit of having all its capital stock fully paid up, but that he also desired, that 500 shares of the capital stock should not bo immediately issued to individuals but carried by the L. H. Lewis Company in tbe nature of treasury stock, so that if it was considered best for the Lewis Company to have desirable parties or future employes to become financially interested in such company, this stock would be available for such purpose. His plan was for the bank to advance to the company $50,000 with this capital stock as collateral, but' for' this to be done in such a way as not to lessen the amount of credit that the company with its capital stock fully paid up would be normally entitled to. The plan to carry the 500 shares as treasury stock was not adopted by the bank, but, in lieu thereof, it was agreed that Lewis would execute to the bank his personal note for $35,000 and Webb his personal note for $15,000, and with the proceeds of his note, Lewis would take up 350 shares of his unpaid stock subscription, and Webb, with the proceeds of his note, would take up 150 shares of his unpaid stock subscription; that these notes would be carried indefinitely, or until the 500 shares were purchased by the desired parties. These notes were executed by the respective parties on the 15th of July, 1919, and the $50,000, as proceeds of such notes, was paid into the treasury of the L. H. Lewis Company, a certificate for 350 shares issued to Lewis, and one for 150 shares issued to Webb, and the said shares of each deposited with the bank as collateral security for their respective loans; Webb later placing as security an additional certificate for 100 shares.

Each note was renewed from time to time as it matured, by the respective makers, by the personal payment by each of the interest due thereon, until May 2d, 1921. Previous to this date Webb had paid $1,000 on the principal of his note. On this date, Hobby, as cashier and representative of the Security National Bank, demanded of Lewis that he, as president of the L. H. Lewis Company, substitute the company’s notes for these individual notes of Lewis and Webb. It was explained by Hobby that he knew the agreement was to carry these notes indefinitely for Lewis and Webb, and that he did not intend to repudiate such agreement, but that the bank examiner was present a-nd that it had become necessary that the indebtedness be carried for a time by the company until the “present flurry” was over. To this proposition, Lewis at first strongly demurred on the • grounds, first, of the agreement, and, second, that he was unable to do so without putting the matter before the directors of the Lewis Company, but, on the insistence of Hobby that the change must be made and that the old manner of carrying this indebtedness would be restored in a short time, Lewis reluctantly consented, and, in lieu of the individual notes representing the $49,000 indebtedness of Lewis and Webb, he executed four notes of the L. H. Lewis Company, aggregating the said sum of $49,000, all of said notes being signed m the usual way the Lewis Company executed such an evidence of indebtedness, viz.: “L. H. Lewis Company by L. H. Lewis, President.” These four notes were executed on May 2,1921, and bore on their face nothing to disclose the fact that they were executed to take up the individual indebtedness of Lewis and Webb. The first of said notes was for the principal sum of $9,000 and matured in 30 days; the second was for the principal sum of $10,000 and matured in 60 days; the third was for the principal sum of $10,000 and matured in 90 days; the fourth was for the principal sum of $20,000, and matured in 90 days. Each of said notes was indorsed by L. H. Lewis, but it appears that all other notes executed to creditors by the Lewis Company likewise bore his indorsement. Except as to the fourth, all of these notes were paid by the L. H. Lewis Company as they respectively matured. The fourth note, for $20,000, has never been paid, but on August 1, 1921, was duly renewed by the L. H. Lewis Company by a note in the same amount payable to the Security National Bank. Some time after this first renewal, and before its maturity, it became the property of appellee the Southwest National Bank, 'and subsequent renewal of said note was had through said bank. There was nothing on the face of this first renewal note for $20,000 to show that it was a renewal of- a note that had theretofore matured. The last renewal of this note matured in January, 1923.

On February 13, 1923, an involuntary petition in bankruptcy was filed in the United States District Court at Dallas against the L. H. Lewis Company. Thereafter a voluntary petition in bankruptcy was filed by the L. H. Lewis Company, and, on or about March 1, 1923, these two causes were consolidated and the L. H. Lewis Company duly adjudged a bankrupt. Subsequently appellant was duly appointed trustee of the bankrupt's estate, immediately qualified as such, and since which time has been acting as such trustee.

On May 2,1921, the date on which the four notes of the L. H. Lewis Company were substituted for the individual notes of Lewis and Webb, the L. H. Lewis Company was solvent, in that its liabilities were less than its assets, but at such time it owed between $700,-00.0 and $800,000, and its credit was somewhat impaired. On such date the American Exchange National Bank of New York was a creditor of L. H. Lewis Company to the amount of $36,239.05, and continued creditor in such amount until the L. H. Lewis Company was adjudged a bankrupt. The said bank’s claim in such amount was duly allowed by the bankrupt court as an unsecured claim. In all, 297 unsecured creditors prepared and filed proofs of claim and had same allowed. The sum total of all these claims amounted to $335,851.84. To these creditors, including the American Exchange National Bank of New York, there has been paid by the trustee a 70 per cent, dividend. It is contemplated that an additional dividend of 5 per cent, will be ordered, but will exhaust the assets now in the hands of the trustee. It appears, therefore, that at the time of ■the trial of this cause each unsecured creditor would sustain a loss of 25 per cent, of his claim, or a total loss would be sustained by all of such creditors of $83,962.96, an amount in excess of the amount here claimed.

The Southwest National Bank was organized on or about July 1, 1921, and on or about July 19, 1921, the Security National Bank of Dallas transferred and assigned to the Southwest National Bank the major portion of its assets, and the Southwest National Bank assumed the liabilities of the Security National Bank, except as to its stockholders. This agreement between appellees was evidenced by a written contract. By this contract, the Security National Bank obligated itself to sell, assign, and deliver any and all of its assets of any kind and description, except its corporate name and charter, to the Southwest National Bank. All notes, bills of exchange, or other evidences of indebtedness owned by the Security National Bank were to be indorsed by its officers duly empowered to do so to the Southwest National Bank.It also obligated itself to execute and deliver all and any deeds necessary to convey title in any real estate it owned, and to transfer and deliver all bank balances due from other banks, by means of drafts or otherwise, to the Southwest National Bank. In consideration thereof, the Southwest National Bank obligated itself to assume all the liabilities of the Security National Bank, except that to its shareholders, and agreed to select from the assets of the Security National Bank a sufficient amount of assets to equal in value the liabilities assumed; and further agreed to set up on its books a credit to the amount of $500,000 to the account of the shareholders of the Security National Bank to be used by them in the purchase of stock in the Southwest National Bank. To reimburse' itself for the credit, the Southwest National Bank was to select assets of the Security National Bank in the value of said sum. It was further agreed that the Southwest National Bank, after it had selected the assets heretofore provided for, was then to select assets to the value of $500,00.0 as additional consideration for the assumption of the liabilities of the Security National Bank and for other services performed and to be performed by the Southwest National Bank. It was provided that the then remaining assets should be delivered to the Liberty Investment Company as agent, or other duly appointed liquidating agent, for the use and benefit of shareholders, -but subject in all things to a preference lien on such remaining assets to R. W. Hig-genbotham.

The transaction of.May 2, 1921, in which the individual notes of Lewis and Webb were taken up by the four notes of the L. H. Lewis Company, was never brought before any meeting of the directors, and nothing occurs in the minutes of directors’ meetings on this subject. When the substitution was had, the notes of Lewis and Webb were delivered to Lewis, duly canceled, and Lewis delivered Webb’s canceled note to him, and both of such notes were destroyed. An entry of bills receivable for the amount of this indebtedness was made in the books of the Lewis Company, and the certificates of. stock of each, that were held as collateral security by the Security National Bank, were delivered to the company and deposited in its vaults. No transfer of such stock to the company was ever entered on the books. No notes to the company for the indebtedness of either Lewis or Webb was ever executed by either of them. A certificate representing 100 shares of the Lewis Company stock, that had been deposited by Webb in excess of the 150 shares, was returned to him. Certificates representing the 350 shares owned by Lewis, and the 150 shares owned by. AVebb, were in the possession of the company at the time of the bankruptcy.

On two occasions subsequent to May 2, 1921, and inferentially before any of the notes executed on such occasion by L. H. Lewis Company had been paid, L. II. Lewis attempted to get Hobby to restore the former státus of this indebtedness, but without avail, although there was at each time a promise to do so. On one of these occasions Lewis was rather insistent, stating in effect that the company had all of its own burdens it could bear.

At the time the 70 per cent, dividend in the bankrupt’s estate was declared, neither appellant, as the trustee in bankruptcy, nor his attorney, knew of the history of the $20,000 note executed by L. H. Lewis Company to the Security National Bank, and did not know of this history nor the source of such note at the time the $14,000 dividend was paid to the Southwest National Bank. There is no evidence that the Southwest National Bank knew the history or source of the $20,000 note at the time it was selected as an asset of the Security National Bank or at the time it received the 'dividend.

Under authority of the bankruptcy court, the appellant filed this suit to recover from appellees the $29,000 paid to the Security National Bank, in liquidation of the three notes above described, on the theory as against the Security National Bank that the execution of the three notes by the L. H. Lewis Company was wholly unauthorized and beyond the power of the president, L. H. Lewis, to execute them, and that the payment of said notes was a wrongful diversion of the money and assets of said company, and that all of such facts were known to Edwin Hobby, the cashier and vice president of said bank. All of the facts are set up in the petition with great particularity, and it was further alleged that such matter constituted a fraud on the L. H. Lewis Company and on its creditors. He seeks to hold the Southwest National Bank on the said claim of $29,000 on the agreement entered into to assume the liabilities of the Security National- Bank. He seeks to recover the $14,000 dividend paid to the Southwest National Bank on virtually the same theory. Appellees raised by defensive pleading all the > questions hereinafter discussed.

The case was tried before the court, and resulted in a judgment in favor of appellees, allowing appellant no recovery. The court filed findings of fact and conclusions of law.

Was the debt contracted on July 15, 1919, with the Security National Bank by L. H. Lewis and by J. H. Webb their individual debt, or was such indebtedness lawfully contracted by said parties for the use and benefit of the L. H. Lewis Company, and therefore its indebtedness? An answer to this-question will be determinative of the right of appellant to recover from such bank the $29,000 paid to it by the L. H. Lewis Company in the summer of 1921. Lewis' plan, in reference to this block of 500 shares of the Capital stock of the Lewis Company, was twofold. He desired, first, to have the money representing the par’ value of this stock in the treasury of his company before it opened for business, so that his company could begin business with its full capital stock of $500,000 paid in; and, second, that the status of this block of stock would be such as that it could be subject to purchase by those whom he deemed desirable to have interested in the business of his company. He desired also to accomplish these two objects in a manner that would give to his company the full credit that would normally result from the fact that the par value of its entire capital stock had been paid in and there were no outstanding obligations. His first suggestion to Hobby was that it be carried as treasury stock and its par value advanced to his company by the Security National Bank on this stock. Manifestly this could not be done, for the reason that, if the money were advanced to his company on this treasury stock, it would be an outstanding obligation of the company for $50,000, and the credit of the company would be necessarily impaired to that extent These 500 shares represented unissued stock that had been subscribed for by Lewis and Webb. If there should be an immediate redemption of their stock subscription by them, then both objects could be achieved, for Lewis and Webb, as officers of the company and its chief promoters, could hold this stock subject to purchase by such desirable persons when they should be induced to become interested in the L. H. Lewis Company. This was the plan suggested hy Hobby and accepted by Lewis. The agreement was made that Lewis execute his note to the bank for $35,000, and Webb execute his note for $15,000, and with the $50,000 thus secured, the 500 shares were issued — 350 to Lewis and 150 to Webb. The stock certificates issued became the personal property of Lewis and Webb, and the indebtedness created became ,their personal indebtedness. The undisputed evidence shows that each recognized this to be the status of such indebtedness, for Lewis and Webb paid the interest accruing on this indebtedness from time to time out of their own funds, and Webb paid $1,000 out of his own funds on the principal of his note. The undisputed evidence shows that when, on the insistence of the Security National Bank, through Hobby, its cashier, this indebtedness was assumed by the L. H. Lewis Company, both Lewis and Hobby recognized that it was the debt of said individuals and not the debt of the Lewis Company, for the assumption of the debt was made on the understanding of both parties that, when the emergency passed away that caused the Security National Bank tp demand such a procedure, the old status of the indebtedness would be restored.

The conclusion being inescapable that the $35,000 note executed by L. H. Lewis to the Security National Bank represented his personal indebtedness, and that the $15,000 note executed by J. H. Webb represented his personal indebtedness, the conclusion is likewise inescapable that, when the Security National Bank, through its vice president and cashier, Edwin Hobby, with full knowledge of all the facts, demanded and secured from L. H. Lewis, president of the L. H. Lewis Company, the liquidation of this personal indebtedness by the execution of the notes of L. H. Lewis Company and their substitution for the notes of Lewis and Webb, the Security National Bank became a responsible partici'pant to the wrong perpetrated on the L. H. Lewis Company, its shareholders and creditors. The use of the money of the Lewis Company to discharge three of the notes given for this illegal purpose was an unlawful diversion of the funds of the L. H. Lewis Company. Articles 1348 and 1349, R. C. S. 1925; Newton v. Houston Hot Well Improvement Co. (Tex. Civ. App.) 211 S. W. 960; McCaleb v. Boerne Electric Power & Mfg. Co. (Tex. Civ. App.) 173 S. W. 1191; North Side Ry. Co. v. Worthington, 88 Tex. 562, 30 S. W. 1055, 53 Am. St. Rep. 778; Taylor Feed & Pen Co. v. Taylor National Bank (Tex. Civ. App.) 177 S. W. 176; Deaton Grocery Co. v. Harvester Co. (Tex. Civ. App.) 105 S. W. 556.

.When there was such unlawful diversion of $29,000 of the money of the L. H. Lewis Company, an action against those participating in such an unlawful act could have been maintained by such company at any time from such diversion up to the date of bankruptcy to recover this amount from either or both of the wrongdoers. There is no element of estoppel under the facts in this case. The Security National Bank, through its said cashier, was the prime mover and- instigator of the wrong perpetrated on the corporation and its shareholders when such bank deliberately chose to require the L. H. Lewis Company,, through the single act of its president, to assume this indebtedness and. deliberately released the real debtors from their obligation. It took this course at its peril and with full knowledge that neither Lewis, as president, nor the board of directors, could so divert corporate funds.

What right has appellant, as trustee in bankruptcy, in the premises? It is provided by section 110 (a), 11 USCA (section 70a of the Bankruptcy Act), that the trustee shall be vested by operation of law with the title of the bankrupt as of the date of the adjudication, except as to exempt property, and that he shall have all powers which the bankrupt might have exercised for his own benefit. In subdivision (e) of said section (11 USCA § 110 [e]) it is provided that—

“The trustee may avoid any transfer by the bankrupt of Ms property which any creditor of such bankrupt might have avoided, and may recover the property so transferred, or its value, from the person to whom it was transferred, unless he was a bona fide holder for value prior to the date of the adjudication. Such property may be recovered or its value collected from whoever may have received it, except a bona fide holder for value.”

By an amendment to the Bankrupt Act, enacted in 1910 and made a part of section 75, 11 USCA (section 47, Bankruptcy Act), it is further provided that—

“As to all property in the custody or coming into the custody of the bankruptcy court,” a trustee in bankruptcy “shall be deemed vested with all the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings thereon; and also, as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the .rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied.”

Under these sections of the Bankrupt Act, it is clear that appellant, as trustee of the banurupt estate, is not only vested with title to all the property owned by the estate, and all the powers in reference to said property that the bankrupt possessed before bankruptcy, but, in addition thereto, is vested with all the rights of an execution creditor. In other words, appellant can avoid any unlawful transfer of property that the bankrupt could have avoided at the time of the adjudication, and any such transfer that a creditor holding a legal or equitable lien could have avoided. This, too, without regard as to' whether at the time the unlawful transfer was made his bankrupt was solvent or insolvent. Baldwin v. Kingston (D. O.) 247 F. 163, and authorities there cited; affirmed by Circuit Court of Appeals, 257 F. 554.

We therefore are of the opinion that the trial court erred in his conclusion of law in reference to appellant’s suit against the Security National Bank for the sum of $29,000, and we are further of the opinion that judgment should here be rendered against said bank for such sum.

We do not believe that, under the .facts of this case, any judgment should be entered' against the Southwest National Bank. It was no party to the wrongful diversion of the $29,000. It is true, under its agreement with the Security National Bank, it took over the assets of such bank and assumed the liabilities. At the time this contract was entered into, there was nothing to put the Southwest National Bank on notice that the note executed by the L. H. Lewis Company to the Security National Bank was other than what it purported to be — evidence of a legal debt owing by the Lewis Company to the Security National Bank, and, therefore, an asset of such bank, and was accepted by the Southwest National Bank as such. In other words, such latter bank was a bona fide holder of this $20,000 note for value. The very section of the Bankrupt Act which gives appellant a cause of action against the Security National Bank decrees that such transfer of property shall not be avoided when it is held by a bona fide holder for value prior to' the date of adjudication. We are therefore of' the opinion that the trial court correctly rendered judgment in favor of the Southwest National Bank, and that this case should be-affirmed as to such appellee.

It therefore follows that this case should be reversed and rendered in favor of appellant for the sum of $29,000 against appellee the Security National Bank, and should be affirmed as to appellee the Southwest National Bank.

Reversed and rendered in part, and affirmed in part.
      @=For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

      <©^>For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes


author: GALLAGHER, C. J.

text:
    THOMAS et al. v. BASDEN & CARRELL et al.
    (No. 636.)
    Court of Civil Appeals of Texas. Waco.
    March 15, 1928.
    I. Set-off and counterclaim <&wkey;28(2) — In suit on note given for garbage cans, garbage contracts, etc., defendant could file cross-action against plaintiff and hotel for failure to deliver garbage cans and for breach of garbage contract; “arose out of and was incident ⅛ and connected with cause of action sued on.” • (Rev. St. 1925, art. 2017).
    In suit on úote given for garbage cans, hogs, garbage contracts, and truck, in which defendant claimed consideration had failed in part, defendant could file cross-action against plaintiff and hotel contracting to furnish garbage, alleging that hotel refused to deliver garbage cans which plaintiff had represented were in service at such hotel, and that hotel had terminated garbage contract -without giving 90 days’ notice, which plaintiff had represented was required under such contract, since cause of action, though unliquidated, arose out of and was incident to and connected with cause of action sued on, within meaning of Rev. St. 1925, art. 2017.
    2. Pleading <&wkey;20 — Alternative pleading is permissible where defendants each claim damages resulted from the other’s default.
    Alternative pleading is permissible when party is doubtful of facts he can establish, and it is necessary for his full protection to plead in double aspect and to join two defendants, one or both of whom are liable to him in whole or in part for his damages, and where each of parties contends that such damages resulted from wrong or default of the other.
    3. Damages <&wkey;120(i) — Measure of damages for breach of contract to furnish garbage was net loss sustained as direct result of breach.
    Where it could reasonably be supposed that loss of profits, if any, resulting from breach of hotel’s contract to furnish garbage, was within contemplation of parties at time garbage contract was made and at time buyer of garbage cans and garbage contracts was accepted as party thereto, measure of damages was net loss sustained by buyer as direct and proximate result of breach of contract.
    4. Evidence <&wkey;>20a(l) — in cross-action for breach of contract to furnish garbage, defendant’s statement in pleading regarding expense of hauling garbage .held not admission against interest.
    In suit on note given for garbage cans, garbage contracts, etc., in which defendant filed eross-actiqn for breach of contract to furnish garbage, defendant’s statement in pleading of amount of expense of hauling garbage and feeding same to his hogs held, not necessarily admission against interest, since if expense exceeded amount stated it was self-serving declaration.
    5. Damages &wkey;>163(4) — To recover for breach of contract, party must furnish testimony from which net amount of loss could be determined with reasonable accuracy.
    To recover for breach of contract to furnish garbage, party was required to not only show that he sustained pecuniary loss or damage by reason of breach, but also to furnish testimony from which net amount of loss could be determined by jury with reasonable accuracy.
    6. Appeal and error <&wkey;1062(1) — Submitting issue of net loss sustained by reason of breach of contract to jury held reversible error under evidence.
    In suit on note given for garbage cans, garbage contracts, and other property, in which defendant filed cross-action against plaintiff and hotel alleging breach by hotel of contract to furnish garbage, submission of issue of net loss, sustained by reason of breach of contract, to jury, held reversible error, in view of evidence.
    7.Appeal and error <&wkey;l 173(1) — Judgment for one joint defendant could not be affirmed, where judgment against the other defendant was reversed and remanded, issues between parties remaining undetermined.
    In suit on note given for garbage cans, garbage contracts, etc., in which defendant filed cross-action against plaintiff and hotel which had contracted to furnish garbage, and alleged that plaintiff had represented that 96 cans were in service at hotel, but hotel claimed they had only 56 cans, and that plaintiff had represented contract required hotel to give 90 days’ notice of intention to terminate, and that hotel had terminated contract without notice, and defendant sought damages for breach of contract and for failure to deliver 40 cans, where judgment was rendered for plaintiff on note and against hotel for value of 40 cans and damages for breach of contract, judgment for plaintiff could not be affirmed where judgment against hotel was reversed for error in - submitting issue on insufficient evidence, since issues between parties remained undetermined.
    Appeal from Dallas County Court at Law; •Payne L. Bush, Judge.
    Action by Basden & Carrell and others against John H. Thomas, in which defendant filed cross-action against plaintiffs and against the Baker Company. Prom the judgment, defendant and the Baker Company appeal.
    Reversed and remanded.
    John H. Thomas, Leachman & Gardere, D. W. Burkhalter, and G. Q. Youngblood, all of Dallas, for appellants.
    J. E. Newberry and Jimmie MacNicoll, both of Dallas, for appellees.
   GALLAGHER, C. J.

Basden & Carrell sued John H. Thomas to recover a balance of $474.96 due on a promissory note executed and delivered to them by him, and to foreclose. a mortgage lien on certain personal property for which said note was given. Thomas answered, and alleged that the consideration for said note had failed in part; that said note was given for one Reo truck, 45 head of hogs, 171 swill or garbage cans and certain garbage contracts held at that time by said firm; that they represented to him that-96 of said cans were in service at the Baker Hotel; that they had a' contract with the Baker Company, a corporation operating said hotel, to receive and remove therefrom free of charge all garbage accumulating from day to day in the operation of said hotel; that under the provisions of said contract said company agreed not to terminate the same without giving 90 days’ notice of such purpose; that he purchased the property for which said note was given relying on such representations; that the said company denied that said contract contained any agreement requiring them before terminating the same to give 90 days’ notice of their purpose to do so; and that after he had performed his duties under the same properly and efficiently for about 2½ months, it had without any notice whatever to him refused to deliver any further garbage; that said company also denied that said firm had in service at said hotel at the time of his purchase 96 garbage cans, as claimed by them, but contended that said firm had at that time in service in said hotel only 56 such cans, and that it refused to deliver the remaining 40 cans to him; that said cans were worth $4 each; that he at that time had about 225 head of hogs and was fattening them on garbage ; that the garbage from said hotel would feed and fatten 100 head of hogs and increase the weight of each hog 100 pounds in 90 days; that said 100 hogs would by reason of such additional weight increase in value in the aggregate $1,077.30; that the expense of hauling said garbage and feeding it to said hogs would amount to $464 during such period, leaving a net profit of $613.30. Thomas pleaded by cross-action the value of said cans and the net damages so claimed against Basden & Carrell and also against the Baker Company, which he made a party to the suit, and sought recovery on said cross-action against both said firm and said company, or either of them, as he might show himself entitled by evidence. The Baker Company denied that any cans owned by Basden & Carrell and so purchased by Thomas were in its possession, and also denied that its contract with said firm required it to give 90 days5 notice of a purpose to terminate the same, and alleged affirmatively that it refused to allow Thomas to continue to remove such garbage because the facilities furnished by him were inadequate and his services in that connection were inefficient and unsatisfactory.

The case was tried before a jury on special issues and findings returned thereon. The substance of said findings may be properly condensed as follows:

(a) That the Baker Company had withheld from Thomas 40 garbage cans of the value of $3 each, which he had purchased from Basden & Carrell.

(b) That said company had agreed 'with Basden & Carrell to give them 90 days’ notice if it "desired to terminate said garbage contract; that said company did accept said Thomas to perform said contract instead of said firm.

(c) That Thomas, in the performance of said contract, furnished adequate facilities for handling such garbage and rendered competent and efficient service.

(d) That Thomas, as the direct result of the failure of the Baker Company to give 90 days’ notice of its purpose to terminate said contract, suffered damage in the sum of $500.

The court rendered judgment on said verdict in favor of the firm of Basden & Carrell against said Thomas in the sum of $560.76,' the full amount remaining unpaid on the note sued on, and foreclosed their mortgage lien on the personal property in part payment for which said note was given. The court rendered a further judgment that Thomas take nothing on his cross-action against Bas-den & Carrell, and that he recover of the Baker Coifipany the sum of $620, the value of said cans, and the amount of damage found in his favpr against said company by the verdict of the jury. Both the Baker Company and John H. Thomas have appealed.

Opinion.

The Baker Company excepted to Thomas’ cross-action on the ground that it appeared therefrom that the suit of Basden & Carrell against him was on a note, the same being a liquidated demand, and that his suit against it was for damages for conversion and breach of contract, and therefore un-liquidated and in no way related to or connected with the cause of action sued on by Basden & Carrell. The court overruled said exception, and such action is presented as ground for reversal. Thomas’ answer and cross-action, while in some respects informal, alleged, in effect, that Basden & Carrell did have in service at said hotel the number of garbage cans sold by them to him, and that their contract with the Baker Company required said company to give 90 days’ notice of a purpose to terminate the same before doing so, and Thomas sought recovery thereon against the Baker Company on said, theory. Said cross-action further alleged, in effect, that if the facts were not as so stated, 'Thomas was entitled to a recovery for the loss of his cans and for his damages as an offset to said note and in reconvention against Basden & Carrell. The Baker Company denied both these assertions and denied liability to Thomas on the ground that such representations and each of them were untrue. It also alleged that Thomas had failed to furnish adequate facilities and to render efficient and satisfactory service in the performance of said contract, and that such failure constituted sufficient cause for the termination of the same. The cause of action so asserted against Basden & Carrell, though un-liquidated, arose out of and was incident to and connected with the cause of action sued on by Basden & Carrell, and was, under the provisions of article 2017 of the Revised Statutes of 1925, properly pleaded as a cross-action against them, notwithstanding their demand was liquidated. They were asserting that they did leave in service in the possession of the Baker Company the number of cans claimed by them to have been so placed, and that said company had agreed to give them 90 days’ notice of a purpose to terminate the contract sold by them to Thomas be-fqre doing so. Both Basden & Carrell and the Baker Company were interested in the determination of these issues. If determined in accordance with the contention of Basden & Carrell they were not liable for the loss of cans or the- damages arising from the alleged breach of said contract claimed to have been suffered by Thomas. If determined according to the contentions of said company, it was not liable to Thomas for any damages sustained by him by reason of any loss of cans or refusal to permit him to longer receive and carry away the garbage from its hotel. All the parties were interested in the determination of the issue bf adequate facilities and the rendering of efficient and satisfactory service by Thomas in the performance of said contract. If this issue was determined in accordance with the contention of •the Baker Company, it was not liable to Thomas for any damages on account of such termination, and Thomas was not entitled to any recovery against Basden & Carrell for such damages, whether they represented that the contract sold to him required the Baker Company to give 90 days’ notice of the purpose to terminate the same or not. The testimony admissible on such issues was necessarily substantially the same, whether introduced in one suit, to which all of them were parties, or in a separate suit by Thomas against said company. Thomas was interested in having all these issues determined in a suit to which both Basden & Carrell and said company were parties, so that both of them would be bound by the findings of the court or jury thereon, whether such findings were in part against one and in part against the other, or whether the same were wholly against one or wholly against the other. He was also interested in having said issues determined in one suit and thereby avoiding the trouble and expense of separate actions and the possibility, since the evidence was conflicting, of an adverse verdict in each of two separate suits, by reason of which he might utterly fail to obtain against either of said parties the relief, if any, to which he might be entitled. Love v. Keowne, 58 Tex. 191, 198.

Such alternative pleading is permissible when a party is doubtful of the facts he can establish, and it is necessary for his full protection to plead in a double aspect, and to join two defendants, one or both of whom are, liable to him in whole or in part for his damages, and where each of said parties is contending that such damages resulted from the wrong or default of the other. Floyd v. Patterson, 72 Tex. 202, 207, 10 S. W. 526, 13 Am. St. Rep. 787; Love v. Keowne, supra, pages 195-199, 200-204; Skipwith v. Hurt, 94 Tex. 322, 329 et seq., 60 S. W. 423; Kunz v. Ragsdale (Tex. Civ. App.) 200 S. W. 269, 270, par. 3; Harris v. Cain, 41 Tex. Civ. App. 139, 91 S. W. 866, 869; Harris v. Warlick (Tex. Civ. App.) 42 S. W. 356, 357; Clay County Land & Cattle Co. v. Skidmore, 26 Tex. Civ. App. 472, 64 S. AV. 815, 816. Said exception was properly overruled.

The Baker Company presents as ground for reversal a proposition complaining of the action of the court in submitting over its objection the issue of damages to Thomas arising from the breach of his contract in the following form; “What is the amount of damage, if any, so suffered?” In response to such issue the jury answered: “500.” The gist of said objection was that there was no legal or competent evidence in the case upon which the jury could find any certain sum as such damage. Tilomas alleged as the measure of his damages the loss of the net profits he would have realized had he been permitted to continue for a period of 90 days to receive such garbage' and feed the same to his hogs. Said allegations have hereinbefore been set out in detail. The testimony disclosed that when the Baker Company refused to longer deliver such garbage to him he sold approximately the number of hogs which he testified he could have fed and fattened thereon. He introduced testimony tending to support his allegation that if he had kept the hogs so sold and had been permitted to feed them on such garbage, they would have increased in weight during said period, and consequently in value at the end thereof, in approximately the sum of $1,000 as alleged by him. He wholly failed to introduce any evidence of the amount of expense which he ■syould have probably or necessarily incurred in handling said garbage and feeding the same to said hogs or otherwise in connection with their keep during that time. We think the loss of profits, if any, resulting from the breach of the company’s contract to furnish such garbage to Thomas, should reasonably be supposed to have been within the contemplation of the parties at the time said contract was made and at the time Thomas was accepted .as a party thereto instead of Basden & Carrell. The measure of his damages was therefore the net loss, if any, sustained by him as the direct and proximate result of the breach of such contract. Jones v. George, 61 Tex. 345, 354, 48 Am. Rep. 280; Travis v. Duffau, 20 Tex. 49, 57; Payne v. Mt. Franklin Fuel & Feed Co. (Tex. Civ. App.) 234 S. W. 595, 598, 599 (writ refused); W. H. Norris Lumber Co. v. Harris (Tex. Civ. App.) 177 S. W. 515, 517, and authorities there cited; Grand Prairie Gravel Co. v. Joe B. Wills Co. (Tex. Civ. App.) 188 S. W. 680, 686-7; Dickinson Creamery Co. v. Lyle (Tex. Civ. App.) 130 S. W. 904, 906; Barstow Irr. Co. v. Cleghon (Tex. Civ. App.) 93 S. W. 1023, 1024.

In all the cases above cited, it appears either expressly or with reasonable certainty that net profits only were held recoverable. Thomas admitted in his pleading that the hauling of such garbage and feeding same to his hogs was attended with material expense. His statement therein of the amount of such expense was not necessarily an admission against interest, as contended by him. If such expense would have exceeded the amount stated in such pleading, the same was a self-serving declaration and not an admission against interest. Thomas, in order to recover, was required to show, not only that he sustained pecuniary loss or damage by reason of the breach of said contract, but to also furnish testimony from which the net amount of such loss could be determined by the jury with reasonable accuracy. I. & G. N. R. Co. v. Simcock, 81 Tex. 503, 504, 17 S. W. 47; Hartford Fire Ins. Co. v. G. H. & S. A. R. Co. (Tex. Com. App.) 239 S. W. 919, 927. Thomas’ failure to furnish such testimony was evidently an oversight. If the court had sustained said objection to the submission of said issue, he would doubtless have asked to be allowed to reopen the case and supply the deficiency. The evidence before the jury was not sufficient to afford a basis for an answer to such issue, and the court erred in submitting the same. Such error requires a reversal.

Basden &. Carrell, appellees herein, ask that their judgment against Thomas be affirmed, regardless of the disposition made of the appeal of the Baker Company from the judgment rendered in his favor against it. We have heretofore held that Thomas was entitled to join both Basden & Carrell and the Baker Company as defendants in his cross-action that he might have the issues involved determined in a suit to which both were parties. Thomas claims iio defense to the note sued on by Basden & Carrell unless it should be determined, as.contended by the Baker Company, that they did not leave in its possession the 40 cans in controversy and that their contract with said company did not require it to give 90 days’ notice of a purpose to terminate the same. Since the judgment in favor of Thomas against the Baker Company is here reversed, such issues remain undetermined. The reasons which justified the original joinder of Basden & Carrell and the Baker Company as defendants in Thomas’ cross-action still continue, and his right to such joinder would be defeated if their judgment against him was affirmed. The manifest justice of the case requires that we treat the judgment appealed from as an entirety and that we reverse and remand the same as to all parties, and it is so ordered. Hamilton & Co. v. Prescott, 73 Tex. 565, 567, 11 S. W. 548.
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author: PIERSON, J.

text:
    CITIZENS’ NAT. BANK OF HILLSBORO v. GRAHAM.
    (No. 4160.)
    Supreme Court of Texas.
    March 28, 1928.
    1. Statutes <§=>-206 — Court must, if possible, give effect to every part of statute to effect purpose of Legislature.
    •It is the duty of the court, if possible, to give effect to every part of a statute so as to effectuate purpose of the Legislature in each material part thereof.
    2. Vendor and purchaser <§=5278 — Suit on vendor’s lien notes held not barred, where last note of series not barred (Rev. St. 1911, art. 5694, as amended by Acts 1913, c. 1-23, § 2).
    Under Rev. St. 1911, art. 5694, as amended by Acts 1913, c. 123, § 2 (prior to revision of 1925), requiring an a'ction on a vendor’s lien note to be brought within four years after maturity, and providing that, “if several obligations are secured by said deed of conveyance, the same may be enforced at any time prior to four years after the note or obligation last maturing has matured and may be enforced as to all notes not then barred by the four years’ statute of limitations,” suit on vendor’s lien notes was not barred by limitation as to notes which had matured more than four years before commencement of the action, which was brought within four years after maturity of last note of same series.
    Error to Court of Civil Appeals of Tenth Supreme Judicial District.
    Suit by the Citizens’ National Bank of Hillsboro against Tom Graham. . Judgment for plaintiff was reformed and affirmed by the Court of Civil Appeals (258 S. W. 1103), and plaintiff brings error.
    Judgment of Court of Civil Appeals reversed and that of the district court affirmed after ease was withdrawn,
    on motion for rehearing, from Commission of Appeáls, whose opinion is reported in 275 S. W. 997.
    Collins, Dupree & Crenshaw, 6f Hillsboro, for plaintiff in error.
    Frazier & Averitte, of Hillsboro, for defendant in error.
   PIERSON, J.

On January 28, 1914, plaintiff in error, Citizens’ National Bank of Hills-boro, conveyed to defendant in error, Tom Graham, a certain tract of land, and a part of the consideration therefor was evidenced by a series of five notes of even date with said conveyance. The first two notes were paid. The last three became due January 1, 1917, January 1, 1918, and January 1, 1919, respectively. On March 17, 1922, plaintiff in error filed this suit to" recover on said three unpaid notes and to foreclose the vendor’s lien retained in the notes and in the conveyance of January 28, 1914. The last of the series at the time suit was filed was less than four years past due, but the other two were more than four years past due. A plea of limitations was interposed to said two notes, and tender was made on the last one. The district court denied the plea, and gave judgment for the full amount of all three notes with foreclosure of the lien. The Court of Civil Appeals held that two of the notes were barred by the statute of limitations of four years, and limited the recovery to the last note. -258 S. W. 1103. The application of plaintiff in error for a writ of error was granted, and the case was transferred to Section A of the Commission of Appeals. The Commission reported an opinion prepared by Judge Harvey, and recommended that the judgment of the Court of Civil Appeals be reversed and that of the district court be affirmed, which recommendation was adopted by the court on October 14, 1925, and is to be found in 275 S. W. 997. On motion for rehearing, however, the case was withdrawn from the Commission, all previous orders were vacated, and the cause was set down for hearing before the Supreme Court.

The important and controlling question to be decided is the proper construction of article 5694 of the Revised Civil Statutes of 1911, as amended by chapter 123, § 2, of the Legislative Acts of 1913. The article reads as follows:

“The right to recover any real estate by virtue of a superior title retained in any deed of. conveyance heretofore or hereafter executed, or in any vendor’s lien note or notes heretofore or hereafter executed, given for the purchase money of such real estate, shall be barred after the expiration of four years from the maturity of such indebtedness, and if suit is not brought for recovery of such real estate, or for the foreclosure of the lien to secure such note or notes within four years from the date of the maturity of such indebtedness, or if suit is not brought within such time for the recovery of the land by the original vendor, or his transferee, or for the foreclosure of the lien giv'en to secure such notes, the purchase money therefor shall be conclusively presumed to have been paid in any suit to recover such land or to enforce a lien thereon, and the lien reserved in any such notes and deeds conveying the land shall cease to exist four years after the note or notes have matured, provided the lien reserved in such note or notes may be extended as provided in section 5695 Of this chapter and provided, if several obligations are secured by said deed of conveyance, the same may be enforced at any time prior to four years after the note or obligation last maturing has matured and may be enforced as to all notes not. then barred by the four years’ statute of limitations.”

It will be observed that the body of the article creates a four years’ statute of limitations, but follows that with a special provision relating to and affecting “several obligations” or series of vendor’s lien notes. Therefore the article may be divided into two parts: (a) The enacting portion; and (b) the proviso. Each has its purpose and must be given effect, if possible. It is the duty of the court, if possible, to give effect to both, parts of said article, so as to effectuate the purpose of the Legislature in each material part of it.

The proviso under consideration contains a compound sentence. But for the limiting effect of the concluding words, the proviso de- ' dared a policy that several of a series of vendor’s lien notes would be protected from the four years’ statute of limitations as long as the last one of the series was not barred. It reads:

“Provided, if several obligations are secured by said deed of conveyance the same may be enforced at any time prior to four years after the note or obligation last maturing has matured.”

If the article had stopped there, it is perfectly clear the Legislature would have declared a policy of' protecting from the four years’ bar all of “several obligations” or notes until four years after the maturity of the last one. The concluding words, “and may be enforced as to all notes not then barred by the four years’ statute of limitations,” are simply a limitation that this immunity shall extend only to such of the notes as are not “barred by the four years’ statute of limitations” at the time mentioned — that is, at the maturity of the last note. This fixes the public policy that such notes are not to be barred if their maturity falls within a period of four years prior to the maturity of the last note of the series. If the word “then” in the last sentence be construed to refer to the time when the suit is filed, and not to the time of 'the maturity of the last note, as was held by the Court of Civil Appeals, then the first sentence, which is the main and controlling part of the proviso, would become wholly meaningless and without effect, and in fact would render the entire proviso without effect or meaning, and would be another way of saying that all vendor’s lien notes should be barred within four years after their maturity. As stated above, it is our duty to give meaning to every material portion of the article. The proviso is intelligible, and according to its words has a definite and clear meaning, and fixes a clear and definite policy of limitation as to this class of obligations. It does establish a different rule of limitation as to this class of obligations, but that does not affect its validity or effectiveness.

Construing the article in both of its parts, and giving effect to the proviso according to the clear meaning of the language used, it seems to us clear that it was intended to fix the date the last note matured as the date from which to calculate the four years’ limitation as applied to “several obligations” secured by reservation of “superior title retained in any deed of conveyance.” The Legislature in its wisdom has seen fit to fix a policy which favors a series of notes, and to give protection to an indulgent creditor and not penalize him for his willingness to await payment on such notes as are not more than four years past due at the maturity of the last note of the series, and as long as the last note is hot four years past due.

The meaning given herein to the proviso being clearly in accord with the words used, the plaintiff in error, Citizens’ National Bank of Hillsboro, had a right to rely upon them, and should not be penalized for its indulgence of defendant in error, as it is not claimed that the notes were in fact paid.

In Revised Statutes of 1925 it appears that the proviso as applied to vendor’s lien or purchase-money notes was omitted, but the similar proviso as applied to “several obligations” secured by mortgage or deed of trust on.land was retained. The cause of action in this ease arose under the statute as it existed prior to the revision of 1925. We are expressing no opinion as to the effect -to be given to the changes made by the codifiers.

We conclude that none of the notes sued on in this case were barred by the statute of • limitations. Therefore the judgment of the Court of Civil Appeals is reversed, and that of the district court is affirmed.
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