author: WALTER, Justice.

text:
    Aramis REKDAHL et al., Appellants, v. Janies M. LONG et al., Appellees.
    No. 4088.
    Court of Civil Appeals of Texas. Eastland.
    Sept. 23, 1966.
    Rehearing Denied Oct. 21, 1966.

      Kelley, Ryan & Merrill, William J. Merrill, Houston, Hall W. Griggs, West Columbia, for appellants.
    Fulbright, Crooker, Freeman, Bates & Jaworski, Chester M. Fulton, Houston, for appellees.
   WALTER, Justice.

This case deals with the construction of Section 26 of Article 1, of the Constitution of the State of Texas, Vernon’s Ann.St., being the rule against perpetuities. The will of Mabel A. Rekdahl was admitted to probate in ancillary probate proceedings in Brazoria County in March, 1954. She left surviving her one child, the plaintiff, Aramis Rekdahl. He and his wife filed suit against the trustee and others and contended that a trust created by his mother’s will was void because it created an interest in real estate which will not vest within the period measured by lives in being at the time of his mother’s death plus twenty-one years, and therefore, contrary to the rule against perpetuities. In a non-jury trial, judgment was rendered holding the trust valid. However, the court ordered the trustee to increase plaintiff’s monthly allowance to not less than $1,000.00 per month. Aramis Rekdahl and wife have appealed from that part of the judgment holding the trust valid. The trustee and other defendants have appealed from that part of the judgment providing for an increase in the monthly allowance.

Aramis Rekdahl is fifty-five years of age, has been married'twice and has a son by his first wife and two daughters by his second wife. The children range in age from 28 to 34 years. The children are alive and each had children living at the time of trial.

The only portion of the will which Ara-mis complains about is Article 111 which is as follows:

“111. TEXAS TRUST: I give, bequeath and devise to my trustee hereinafter named all property whether real or personal or mixed which I die owning or in which I have any interest upon my death, which is located in or having a legal situs in the State of Texas in trust for the benefit of persons and as follows, to-wit:
A. The said trustee shall receive and take charge of all of such property, hold possession thereof, manage, invest and reinvest the same, collect and receive the income therefrom and after payment therefrom of all expenses of the administration of such trust and such other charges as are properly payable therefrom relative to the operation and maintenance thereof, he shall pay the net income therefrom as follows, to-wit:
1. The sum of Two hundred dollars per month to my son Aramis Rekdahl, as long as he is living, provided however, that if such income is at any time inadequate considering other property and income which he might have for the support and maintenance of said Aramis Rekdahl, according to his customary standard of living, and further considering his family obligations, my trustee is authorized to increase such monthly payments, whether from income of from the principal (corpus) of said trust, so that Aramis Rekdahl, shall have sufficient income to live according to such standard.
2. After the foregoing payments have been made such trustee shall pay from the net income the sum of One hundred dollars per month to my said sister, Mildred Manning, for any month where during the preceeding calendar month her income from employment was less than Fifty Dollars. For the purpose hereof any income which she might receive from social security or any old age retirement or pension shall not be deemed income from employment so as to defeat her right to such monthly payments. In event the income herefrom is inadequate to make these payments the obligation to make the same shall accumulate and when there are sufficient funds from income the same shall be paid. Payments under this provision shall continue for the life time of Mildred Manning. I authorize the trustee hereunder to accept her statement sufficient of the facts of her condition, income and employment.
3. After the foregoing have been paid I direct my trustee to pay to my brother in law, Harold Rekdahl, from the income from said trust the sum of Fifty Dollars per month. The obligation herefor shall also accumulate in event through lack of funds there is not sufficient funds to pay the same at any time, the same shall later be paid when income from said trust is available therefor.
4. First Accumulation: I direct my trustee after the foregoing have been paid to accumulate from the income of said trust the sum of Twenty Five thousand dollars and the same when accumulated shall be available for payment of any of the foregoing directions to pay from income. The trustee shall not accumulate income however, at any time after the death of Aramis Rekdahl; provided however, that if Aramis Rekdahl dies before I die then such accumulation shall be made until twenty one years after my death or until the entire trust hereunder terminates whichever is sooner.
5. Second Accumulation: Brothers, Sisters, and Brothers in Law and Sisters in Law: After the foregoing have been paid and the foregoing accumulation has been made I direct my trustee to accumulate the sum of Ten thousand dollars from the income from said trust which Ten thousand dollars shall be held in trust for my brothers and sisters and for the brothers and sisters of my deceased husband, Sverre C. Rekdahl, as long as they are living and the net income therefrom shall be paid to them in equal shares among such of them as are at any time surviving and if at any time any one of them, who because of illness or injury is unable to support himself or herself, or to pay his or her medical expenses and such brother or sister has liabilities exceeding assets, (excluding property exempt from execution in computation) as to them such trustee, from what has become the corpus, of such accumulation may pay to such brothers or sister such sum as in the discretion of the trustee may be necessary to support such brother or sister according to his or her ordinary standard of living, or pay such medical expenses to enable the same. No funds shall be accumulated for this purpose hereunder after the death of Aramis Rekdahl; provided however, that if Ara-mis Rekdahl dies before I die then such accumulation shall be made until twenty one years after my death or until the entire trust hereunder terminates whichever is sooner. When the last of such brothers and sisters have died any balance remaining hereunder shall be transferred by said trustee back into the residue of such basic trust and finally paid out as hereinafter provided.
6. After all of the foregoing have been paid and the foregoing accumulations have been made (or without such accumulation having been made, if for any reason such accumulations have been ruled invalid), then all of such net income which is left shall be paid to Ara-mis Rekdahl for his lifetime.
7. When Aramis Rekdahl dies or upon my death if he has predeceased me I direct that the sum per month which he would have received be paid in equal shares as follows: One fourth thereof to his wife, Violet Rekdahl, and the bal-anee thereof in equal shares to his children who survive him, provided that if any child of Aramis Rekdahl dies leaving-issue then such issue shall take the share which his or her parent would have taken had he or she survived him. If said wife dies the share which she would have received thereunder shall be paid as aforesaid to the said children or issue of Aramis Rekdahl. Such payments shall continue until such child receiving hereunder is thirty five years of age, at which time each of such children successively becoming thirty five years of age, shall cease to receive any money herefrom and the full balance of such payments shall be made to such child or such children of Aramis Rekdahl, who has not or have not attained the age of thirty five years, provided further however, all such payments from income shall cease when the last of such children has become thirty five years of age and for this purpose, issue of any deceased children of Aramis Rek-dahl shall not be considered in determining such time.
8.After the death of Aramis Rekdahl and after his children have successively attained the age of thirty five years or have died so that there is none left to attain the age of thirty five years then all of this trust shall terminate with the exception of the second accumulation above for brothers and sisters and all of the assets whether corpus or income of such trust shall be distributed in equal and undivided shares to the children of Aramis Rekdahl, who survive him, provided however, that if any such children dies leaving issue who survive Aramis Rekdahl, then such issue shall take the share which such parent would otherwise have taken. Upon the termination of the trust referred to above, as the 'second accumulation’ for brothers and sisters, any residue therein shall be distributed in equal and undivided shares to the children of Aramis Rekdahl, who survive Aramis Rekdahl, provided however, that if any such children dies before Aramis Rek-dahl, leaving issue who survive Aramis Rekdahl, then such issue shall take the share which such parent would otherwise have taken if he or she had survived.
9. Neither the assets or such trust nor any part of the trusts referred to above, nor the income therefrom shall vest in any of such beneficiaries, until the termination of said trust nor shall such assets nor the income therefrom be liable for the debts of any one of them nor shall any one of said beneficiaries have any power to sell, assign, transfer, incumber or in any other manner to anticipate or dispose of his or her interest in said trust or the income produced thereby prior to the actual payment to him or her as aforesaid.
10. I hereby appoint James M. Long of Minneapolis, Minnesota, my brother, to be the trustee of said trust and in event he dies before I die, then I appoint Mylla Petterson of Houston, Texas, to be such trustee and in event he also predeceases me then I appoint - of -. In event none of such trustees survive me or in event for any reason they do not qualify and act as such trustee I request that any court of competent jurisdiction appoint any suitable person as such trustee, as I do not intend this trust to fail for want of a trustee. Any successor trustee to the original trustee hereunder shall have all of the powers, whether discretionary or otherwise of such original trustee.”

The appellants’ point that the court erred in holding the trust provisions of the will valid cannot be sustained.

After providing for monthly payments from income to her son, her sister and her brother-in-law, the testatrix, in paragraph seven provided, that upon the death of her son Aramis, that his payments shall be made to his wife and “to his children who survive him.” In paragraph eight, she provides for the termination of the trust and its distribution.

Do the provisions of the trust violate the rule against perpetuities? The purpose of the rule is stated in Kettler v. Atkinson, 383 S.W.2d 557, (1964), (Tex. Supreme Court), as follows:

“The purpose of the rule is to prevent the taking of the subject matter of the perpetuity out of commerce or trade for the prohibited period. As this court said in Singer v. Singer, 150 Tex. 115, 237 S.W.2d 600 (1951): ‘A perpetuity has been defined as a limitation which takes the subject matter of the perpetuity out of commerce for a period of time greater than a life or lives in being, and 21 years thereafter, plus the ordinary period of gestation.’ ”

In Kelly v. Womack, 153 Tex. 371, 268 S.W.2d 903, (1954), the court said:

“The rule, ‘as appears by its statement, relates only to the vesting of estates and interests, and not to their duration or ending.’ And it has no application to present interests, legal or equitable, in realty or personalty, whether or not alienable. 70 C.J.S. Perpetuities § 8, page 584; Singer v. Singer, 150 Tex. 115, 237 S.W.2d 600. * * • * The requirement of the rule in this respect is complied with when a future estate or interest becomes vested in interest regardless of when it becomes vested in possession. Hunt v. Carroll, Tex. Civ. App., 157 S.W.2d 429. Handbook on Law of Future Interest by Lewis M. Simes, 1951, at page 369 has this to say: ‘The word “vest” refers to a vesting in interest and not in possession. It is but an enlargement of the feudal concept of vesting which was applied in determining whether a remainder was vested or contingent for purposes of the destructibility rule.’ Similarly, text writers generally maintain that restraint on alienation has no bearing upon the question of whether or not the title has vested. Griswold, Spendthrift Trusts, 2d Ed. 1947, p. 361; also same text, Sec. 280.1.”

The court also quotes from Rust v. Rust, Tex.Civ.App., 211 S.W.2d 262, affirmed by the Supreme Court, as follows:

“ ‘It is immaterial that full possession and enjoyment of the property is postponed beyond the period of a life or lives in being and 21 years thereafter with the ordinary period of gestation added.’ ”

In Munger v. Munger, (Tex.Civ.App.) 298 S.W. 470, at page 474, (Writ Ref.) the court said:

“The provisions of the will now under consideration are not in our opinion of doubtful meaning, but, if they should be so considered, it would be our plain duty to give to them such interpretation, guided by applicable rules of course, as would uphold, rather than destroy, the trust. Neely v. Brogden (Tex.Com.App.) 239 S.W. 192 (193).”

The general rule is that the ascertainment of the intention of the testatrix is the cardinal rule to be followed in construing a will. Methodist Orphanage of Waco v. Buckner’s Orphans’ Home of Dallas, Tex.Civ.App., 261 S.W. 203, (Writ Ref.); Carr v. Rogers, 383 S.W.2d 383, (Sup.Ct.) 1964.

For reasons of her own which she considered to be for the best interest of her son and grandchildren, Mrs. Rekdahl provided that Aramis should receive only income from the trust. It is equally clear that she intended for the assets of the trust to “be distributed in equal and undivided shares to the children of Aramis Rekdahl, who survive him, provided, however, that if any such children dies leaving issue who survive Aramis Rekdahl, then such issue shall take the share which such parent would otherwise have taken.” Also, in paragraph eight and referring to the residue of the “Second Accumulation”, she provides that it “shall be distributed in equal and undivided shares to the children of Aramis Rekdahl, who survive Aramis Rekdahl.”

The testatrix placed the legal title in a trustee, a beneficial life interest in Aramis, and a vested beneficial remainder in the children. The testatrix clearly identifies the persons or the class of persons who are to take the remainder estate at Aramis’ death. They are Aramis’ children and grandchildren who survive Aramis. It is true there is a possibility of Aramis fathering another child before his death. However, that would not prevent the vesting of the remainder estate in Aramis’ living children upon the testatrix’s death. In Johnston v. Johnston, Tex.Civ.App., 276 S.W. 776, at page 778 (no writ) (1925) the court said:

“At the time the devise in remainder to this said class took effect, there were two members in being, to wit, Mrs. Magee and Mrs. Tyler, and the estate in remainder immediately vested in them as the sole representatives of said class then in being, subject, however, to such estate opening to let in after-born children of this class.”

The eligible members of the class of beneficiaries will be determined at Aramis’ death. Their interest vested well within the period set out in the rule against per-petuities. The condition of the will providing for distribution of the corpus of the trust relates only to the time when the beneficiaries shall be delivered possession and control of his portion of the estate and has no effect on the vesting of the estate.

We find no merit in appellants’ point that the court erred in admitting the testimony of Honorable Walter S. Johnson, a Minnesota attorney, regarding conversations he had with the testatrix. There is nothing in the record to indicate that the court gave any consideration to the alleged inadmissible testimony. In a case tried before the court without a jury, we presume that the court considered only the admissible evidence.

The appellees have appealed from that portion of the judgment increasing the monthly payments.

In the State v. Rubion, 158 Tex. 43, 308 S.W.2d 4, (Sup.Ct.), 1957, the court at page 9 said:

“The discretion with which a trustee of a support trust is clothed in determining how much of the trust property shall be made available for the support of the beneficiary and when it shall be used is not an unbridled discretion. First National Bank of Beaumont v. Howard, 149 Tex. 130, 229 S.W.2d 781, 785; Anderson v. Menefee, Tex.Civ.App., 174 S.W. 904, writ refused; Scott on Trusts, Vol. 2, sec. 187, p. 986. He may not act arbitrarily in the matter, however pure may be his motives. In re Brown’s Appeal, 345 Pa. 373, 29 A.2d 52; Restatement of Trusts, Sec. 187, p. 487 ; 90 C.J.S. Trusts § 261, p. 310. His discretion must be reasonably exercised to accomplish the purposes of the trust according to the settlor's intention and his exercise thereof is subject to judicial review and control.”

We find some evidence of probative force in the record to support the court’s action in ordering the trustee to increase the monthly payments. The trustee’s exercise of discretion, in determining what amount of money would be sufficient to maintain Aramis in his customary standard of living, was subject to judical review. This point is overruled.

The judgment is affirmed.


source: Caselaw Access Project

author: CLAUDE WILLIAMS, Justice.

license: Public Domain

text:
    MANNEY & COMPANY, Appellant, v. TEXAS RESERVE LIFE INSURANCE COMPANY et al., Appellees.
    No. 16732.
    Court of Civil Appeals of Texas. Dallas.
    Oct. 7, 1966.
    Rehearing Denied Oct. 28, 1966.

      William A. McKenzie, Dallas, for appellant.
    Thompson, Coe, Cousins & Irons and R. B. Cousins, Dallas, for appellees.
   CLAUDE WILLIAMS, Justice.

Manney & Company, a Texas corporation, has perfected this appeal from an order of the district court granting a summary judgment and thereby denying to it any recovery in its stockholder’s derivative action against Texas Reserve Life Insurance Company, a Corporation, now known as Great Southwest Life Insurance Company, a Corporation; Great Southwest Life Insurance Company, a Corporation; Big “D” Development Corporation; D. A. Childre and H. Thad Childre.

In its original petition plaintiff alleged that it was a minority stockholder of Texas Reserve Life Insurance Company and that it brought this action for and on behalf of the corporation as well as all other stockholders of Texas Reserve Life Insurance Company similarly situated to recover the sum of $1,000,000 which, it was charged, the defendants, and especially the defendants H. Thad Childre and D. A. Childre, had misappropriated and used for their own benefit to the loss and detriment of the plaintiff and other minority stockholders. It was also asserted that the defendants had manipulated control of the Texas Reserve Life Insurance Company in such a manner as to carry out a scheme through taking advantage of and seizing corporate opportunity to unjustly and wrongfully enrich the defendants through the use of the money borrowed from the Texas Reserve Life Insurance Company, all to the injury and damage of the minority stockholders. It was further contended that defendants had wrongfully caused a merger of Texas Reserve Life Insurance Company with Great Southwest Life Insurance Company. Plaintiff prayed for an accounting, for the recovery of $1,000,000, attorneys’ fees, a cancellation of the merger of the two corporations, exemplary damages, and the establishment of a constructive trust of all sums of money received by defendants from Texas Reserve Life Insurance Company.

Defendants denied any wrongdoing and alleged that the acts complained about were carried out and performed by the proper officials of the corporations in accordance with the laws of the State of Texas.

Defendants filed their motion for summary judgment, supported by affidavits and depositions. Plaintiff responded with controverting affidavit and depositions. The motion for summary judgment was sustained and this appeal follows.

FACTS

Texas Reserve Life Insurance Company was a Texas insurance corporation. It had issued and outstanding 247 shares of preferred stock with a par value of $50 per share and 498,172.2 shares of common stock with a par value of $1.00 per share.

Great Southwest Life Insurance Company was formed on December 20, 1951. D. A. Childre was President and H. Thad Childre was Chairman of the Board.

Big “D” Development Corporation was formed in November 1955 under the laws of the State of 'Texas. D. A. Childre was President and H. Thad Childre was Chairman of the Board. It had 2,676,233 shares of common stock at a par velue of $1.00 each. Shareholders of Big “D” Development Corporation owning approximately 93 per cent of its total outstanding shares entered into a voting trust agreement. H. Thad Childre and D. A. Childre, brothers, owned approximately 64 per cent of the units of the voting trust agreement, thereby having voting control of the corporation.

In the year 1964 there was in existence a voting trust agreement representing approximately 54 per cent of the total outstanding shares of stock of Great Southwest Life Insurance Company. 56 per cent of the voting trust units in that voting trust agreement were owned by Big “D” Development Corporation. In addition, Big “D” Development Corporation owned 56,-133 shares of the common stock of Great Southwest Life Insurance Company. This situation gave Big “D” Development Corporation voting control of Great Southwest Life Insurance Company.

During the spring of 1964, it came to the attention of the management of Big “D” Development Corporation that Lincoln Liberty Life Insurance Company held a promissory note executed by J. S. Shively, then President of Texas Reserve Life Insurance Company, the payment of said note being secured by a pledge of 138,984 shares of common stock in Texas Reserve Life Insurance Company and also by slightly more than 50 per cent of the outstanding shares of Inter-Continental Corporation. InterContinental Corporation owned 113,310 shares of common stock of Texas Reserve Life Insurance Company. The aggregate of such common shares of Texas Reserve Life Insurance Company owned by Shively and Inter-Continental Corporation was 252,-294 out of 498,172 outstanding, or slightly over 50 per cent.

On June 4, 1964 Big “D” Development Corporation, acting through its officers and counsel at foreclosure sale, bought the pledged shares of stock. At that time Big “D” Development Corporation paid to Lincoln Liberty Life Insurance Company the sum of $700,000 in cash and gave a note payable on or before thirty days in the sum of $778,283.44, thereby paying or agreeing to pay the sum of $1,478,283.44 for the stock it purchased. In addition to this it contingently assumed a $250,000 obligation of J. S. Shively to Twin Lakes Corporation.

The $700,000 in cash was obtained by the issuance to Great Southwest Life Insurance Company and the investment by that company in a bond executed by Big “D” Development Corporation, said bond being personally guaranteed by all of the individual directors of Big “D” Development Corporation.

On or about June 8, 1964 the old officers and Board of Directors of Texas Reserve Life Insurance Company resigned and a new set of officers and directors was elected. H. Thad Childre was elected Chairman of the Board and D. A. Childre was elected President. On or about that date, pursuant to a duly authorized resolution of the directors of Big “D” Development Corporation and Texas Reserve Life Insurance Company, Big “D” Development Corporation executed and delivered its bond or debenture in the amount of $1,000,000 and Texas Reserve Life Insurance Company invested in such bond and transferred the sum of $1,000,000 to Big “D” Development Corporation. A portion of the resolution reads:

“Be it resolved that Texas Reserve Life Insurance Company be, and it is hereby authorized to invest One Million Dollars ($1,000,000.00) of its capital, surplus and contingency funds over and above the amount of its policy reserves in a five-year five and one-half per cent (5½%) corporate bond of Big “D” Development Corporation.”

The bond issued by Big “D” Development Corporation was personally endorsed by seventeen directors and two shareholders who were not directors of Big “D” Development Corporation. These shareholders had a combined financial statement of in excess of $8,000,000 in assets. Out of the funds thus realized by Big “D” Development Corporation the $778,283.44 note, mentioned above, was paid. At the time of the investment in the bond of Big “D” Development Corporation it was a corporation more than five years old and had not defaulted in any obligation.

Thereafter, the management of the two life insurance companies proposed a merger whereby Texas Reserve Life Insurance Company would become merged into Great Southwest Life Insurance Company under a plan issued in a proxy statement which was prepared and mailed to stockholders of the corporations on November 30, 1964. This proxy statement was completely detailed and set forth the method by which the merger was to be accomplished and providing for the receipt by stockholders of Texas Reserve Life Insurance Company of certain ratio shares in the new corporation. Following due notice a meeting of the two insurance corporations was held at which more than 80 per cent of the stock in each corporation was voted in favor of the merger. Pursuant to the provisions of the Insurance Code of the State of Texas, the merger was presented in all of its aspects to the Commissioner of Insurance at a public hearing and was by him approved. At that hearing no protest was made by appellant. The order of the Insurance Commissioner provided, inter alia, as follows:

“The Commissioner further finds: (1) that the minimum capital and surplus, as required by law, is the bona fide property of GREAT SOUTHWEST LIFE INSURANCE COMPANY, (2) that the officers, directors and managing executives of GREAT SOUTHWEST LIFE INSURANCE COMPANY have sufficient insurance experience, ability and standing to render success of the company probable; and (3) that GREAT SOUTHWEST LIFE INSURANCE COMPANY is acting in good faith.
“Based upon the evidence and testimony presented at the hearing and the documents filed, it appears to the Commissioner of Insurance that the Plan of Merger does not substantially reduce the security of and service to be rendered the policyholders of the two companies, and that such plan is not contrary to law nor contrary to the best interests of the policyholders affected by the plan. * * ”

OPINION

Since this is an appeal from an order sustaining a motion for summary judgment pursuant to Rule 166-A, Vernon’s Texas Rules of Civil Procedure, the sole question is whether genuine issues of fact are presented by the pleadings, affidavits, depositions and other documents presented to the trial court. In answering this question we must necessarily adhere to and follow the now well established procedure of reviewing all of the record in the light most favorable to the opponents of the motion; disregard the conflicts in the testimony, and indulge, in favor of the opponents of the motion for summary judgment, every intendment reasonably deducible from the evidence. Gulbenkian v. Penn, 151 Tex. 412, 252 S.W.2d 929; Smith et al. v. Bolin, 153 Tex. 486, 271 S.W.2d 93; Little v. Employees Security Life Ins. Co., Tex.Civ.App., 343 S.W.2d 517.

Appellant urges reversal of the trial court’s judgment based upon the following three points of error:

1. “The trial court erred in rendering summary judgment against appellant, genuine issues of material facts having been raised by the pleadings, the affidavits filed in connection with and in opposition to the motion for summary judgment and the depositions and exhibits thereto taken on discovery.”
2. “The trial court erred in rendering summary judgment in favor of appellees, who had the burden of proving that there were no genuine issues of material facts.”
3. “The trial court erred in rendering summary judgment in favor of appellees by resolving all doubts as to the existence of a genuine issue of a material fact in favor of appellees without accepting as true all evidence of appellant and allowing it every reasonable inference.”

These points of error are nothing more than abstract propositions of law and therefore do not comply with the briefing rules. However, in accordance with our policy of liberal construction of the briefing rules and in an effort to ascertain appellant’s real basis of appeal we have carefully reviewed and examined the statements set forth by appellant under the respective points of error. Having done so, we have concluded that appellant’s sole and only assault on the trial court’s judgment is its complaint with reference to the $1,000,000 loan or investment between the two insurance corporations, as above related. Nowhere in appellant’s brief does it contend that issues of fact are raised concerning the merger of the two corporations. In fact, in appellant’s answer to appellees’ motion for summary judgment it is there stated:

“Plaintiff does not contest the merger as it is a foregone conclusion but Plaintiff does, by this action, contest the use of the corporate money for the Defendants’ own purposes.”

Appellant’s sole contention on appeal seems to be contained in this statement in appellant’s brief:

“Basically, Appellant complains that it was a Texas Reserve stockholder that paid its own money for the stock it holds, while Appellees put themselves into office as Directors and officers of Texas Reserve Life Insurance Company and simultaneously therewith used One Million Dollars ($1,000,000.00) of the company’s funds out of its reserves for their own benefit and in furtherance of their scheme of acquisition.”

In its statement under its Point One appellant, after setting forth general propositions of law relating to review of summary judgments, says that “directors and officers are not permitted to appropriate the money or property of the corporation to or for their resulting benefit”, and “Here it cannot and has not been denied that the Appellees Childre used the money of Texas Reserve Life Insurance Company by making a loan for the use and benefit of their wholly controlled alter ego, Big “D” Development Corporation as shown by D. A. Childre’s deposition, Exhibit P(l), p. 9, wherein it is stated: ‘H. Thad Childre and D. A. Childre, brothers of Dallas, Texas, own approximately 64% of the units of the Voting Trust Agreement of the Shareholders of Big “D” Development Corporation, thereby having voting control thereof.’ ”

Appellant’s statement that Big “D” Development Corporation is the alter ego of the Childre brothers finds no support in the record before us. The undisputed testimony reveals that D. A. Childre was president of the company and that as such president and chief executive officer he made the main business decisions, subject to the Board of Directors’ approval. It was further testified that the actions and conduct of Childre were subject to the directors’ approval, at all times, in writing and with their signatures attached. It was testified that all business procedures of the corporation were presented to the board or through the executive committee of the board first, and then at the full board meeting. The copies of the minutes of the Big “D” Development Corporation reveal that the Board of Directors and the executive committee functioned on numerous occasions. To establish the alter ego doctrine it is necessary to show that the stockholders disregarded the entity of the corporation thereby making it a mere conduit for the transaction of their own private business and that the separate individualities of the corporation and its stockholders in fact cease to exist, Sefton v. San Diego Trust & Savings Bank (Calif. Appeals), 106 P.2d 974, 984; Superior Coal Co v. Department of Finance, 377 Ill. 282, 36 N.E.2d 354; Gardner v. Rutherford, 57 Cal.App.2d 874, 136 P.2d 48.

The mere fact that the Childre brothers owned or controlled a majority interest in the corporations involved here does not ceate an issue of fact as to the alter ego theory or allegation.

We find no evidence in the record to support appellant’s allegation that corporate funds were used by D. A. Childre personally to the detriment or loss of any stockholder. The record reveals that the corporation assumed $180,000 of personal debts of D. A. Childre in consideration of his transfer to the corporation of 32,727 shares of the common stock of Great Southwest Life Insurance Company, which was shown to have a value of $5.50 per share. This transaction is reflected by the minutes of the corporation and we find no evidence to indicate a disregard for the corporate existence of Big “D” Development Corporation. We have examined Pages 9-10 of Exhibit P(1), referred to by appellant in its statement under Point One, and find nothing contained therein which would amount to undeniable proof that Childre personally used money of Texas Reserve Life Insurance Company in any illegal fashion. The mere fact that Childre and his brother owned approximately 64 per cent of the units of the voting trust agreement of the shareholders of Big “D” Development Corporation, thereby giving them voting control thereof, is not, in itself, illegal or fraudulent. Manney himself was cross-examined at great length concerning any untrue statement contained in the exhibit referred to but could not state that he knew that any were untrue.

The correct rule of law applicable to the controlling point of this appeal is found in 14 Tex.Jur.2d, § 228, p. 344, as follows:

“A transaction is not necessarily void because made between two corporations having the same directorate, but such a transaction is subject to the scrutiny of the courts in the interests of the shareholders of both corporations, and may be set aside if unfair in any respect, particularly where the personal interests of the directors are enhanced at the expense of the shareholders. But if it should appear, on investigation, that the transaction is fair and that there has been no abuse of the trust relation, the transaction will be permitted to stand.”

The key phrase of this rule is “at the expense of the shareholders” and this phrase or similar ones such as “damage or harm to the shareholders” or “loss to the shareholders” are liberally sprinkled throughout the authorities dealing with this subject. Indeed, the sine qua non of any stockholder’s derivative action is the demonstration by probative evidence that the minority stockholders have suffered loss or damage by virtue of the alleged wrongful or fraudulent act on the part of other stockholders or directors of the corporation. The matter is classically illustrated in one of the cases relied upon by appellant, Milam v. Cooper Co., Inc., Tex.Civ.App., 258 S.W.2d 953, in which Chief Justice McDonald of the Waco Court of Civil Appeals makes an exhaustive review of the applicable authority relating to the relationship of officers and directors of a corporation and their dealings with the stock and other assets of the corporation in such a manner as to enrich themselves to the detriment of other stockholders. In that case there was ample evidence that an officer of the corporation wrongfully diverted funds of the corporation for his own benefit to the detriment of the remaining stockholders.

We see no parallel with that situation in the instant case. The facts presented to the trial court were undisputed. Texas Reserve Life Insurance Company made an investment of its funds in a bond issued by Big “D” Development Corporation, a solvent company, which had not defaulted in the payment of any debt within five years next preceding the investment. Art. 3.39 pt. I, Subdivision C, Texas Insurance Code, V.A.T.S., which governs such companies as Texas Reserve Life Insurance Company, specifically provides for such an investment in that:

“It may invest its capital, surplus and contingency funds over and above the amount of its policy reserves in the following securities:
“1. Capital Stock, Bonds, and other Obligations of Corporations.
“The capital stock, bonds, bills of exchange, or other commercial notes or bills and securities of any solvent corporation which has not defaulted in the payment of any debt within five (5) years next preceding such investment, * *

Upon authority of this statute the Insurance Commissioner of the State of Texas considered the investment a legal one in that he considered same in approving the merger of the two corporations.

The balance sheet of Big “D” Development Corporation, the correctness of which is nowhere placed in dispute, demonstrates such corporation to have a net worth as of June 30, 1964, at the end of the month in which the investment in its bond was made by Texas Reserve Life Insurance Company, of $3,437,452.71. The bond bears interest at the rate of 5½ per cent per annum whereas the record demonstrates that the assets, converted to cash in order to purchase the bond had a composite yield of a lesser amount.

The bond is still a valid and outstanding' obligation and has not been defaulted. In this state of the record appellant has completely failed to demonstrate by the presentation of any evidence of probative value damage to Texas Reserve Life Insurance Company or a profit made by the appellees personally not enjoyed by all of the stockholders of Texas Reserve Life Insurance Company. The loan of money to Big “D” Development Corporation does not constitute a profit to such corporation or any of its shareholders. The money so loaned must be repaid and there is nothing in this record to indicate that the same will not he repaid upon due date. The obligation to repay the money includes interest and therefore it is an expense to Big “D” Development Corporation and a profit to Texas Reserve Life Insurance Company which made the investment. The former stockholders of Texas Reserve Life Insurance Company still hold their interest by virtue of their stock in Great Southwest Life Insurance Company. Whether Big “D” Development Corporation makes a profit out of the purchase of the stock is contingent upon several things. This corporation paid the approximate market price for the stock at the time of the foreclosure at which it purchased the shares of Texas Reserve Life Insurance Company. Its profit or loss will depend upon the effect of the merger of the two corporations and the operations of the companies following such merger. These factors may have an effect upon the market price of the stock. If the stock purchased by Big “D" Development Corporation increases in value as a result of these factors the stock owned by the minority stockholders will increase in value. This demonstrates the fact that no special damage can flow to the minority stockholders of Texas Reserve Life Insurance Company which will be unique to them and no profit can be realized by the majority stockholders which will not also be realized by the minority stockholders.

In this connection we find it quite significant that Mr. Manney, president of appellant corporation, testified concerning the stock he held, as follows:

“Q. And you would be willing to sell your stock for whatever you have got in it, would you?
“A. No, sir.
“Q. You wouldn’t?
“A. No.”

Thus appellant, by its own testimony, has indicated there has been no damage to the shares owned by it.

We have concluded, after careful review of the entire record, that appellant has completely failed to demonstrate by evidence of probath-p force an issue or issues which should have been presented to the jury or a trier of fact concerning the allegations made relating to the investment of the $1,000,000 and which forms the complete basis of this appeal.

Under its second and third points appellant attempts to set forth fifteen alleged issues of fact which should have been submitted by the court to a trier of fact. We have carefully examined each of these alleged issues of fact and find that they are either completely unsupported by competent evidence or they amount to nothing more than issues of law and therefore not properly issues to be submitted to a jury. All of the alleged points go to the question of the validity of the $1,000,000 investment and what we have heretofore said relating to the question is sufficient to dispose of these questions. It is sufficient to say, in summary, that since the investment was authorized by statute, the $1,000,000 became the property of Big “D” Development Corporation. This corporation owns the money and the purposes for which it was used became a matter for determination of the management of the Big “D” Development Corporation. If any of these uses were damaging to the shareholders of Texas Reserve Life Insurance Company then such would be a proper subject for inquiry in this litigation. However, no injury or damage has been shown and until some default in the repayment of the investment has been shown it can hardly be said that there has been damage to appellant.

The careful trial judge who reviewed all of the matters before him in considering the motion for summary judgment correctly arrived at the conclusion that if this case had been submitted to him and to a jury a peremptory instruction would have been proper. Such being true, the motion was properly sustained. Hurley v. Knox, Tex.Civ.App., 244 S.W.2d 557; Fowler v. Texas Employers’ Ins. Ass’n, Tex.Civ.App., 237 S.W.2d 373, wr. ref.

Finding no merit in any of appellant’s points of error the same are overruled and the judgment of the trial court is affirmed.

Affirmed.


author: MASSEY, Chief Justice.

text:
    Calvin W. BUHRMAN, Appellant, v. Edith BUHRMAN et al., Appellees.
    No. 16760.
    Court of Civil Appeals of Texas. Fort Worth.
    Sept. 30, 1966.

      Hill, Paddock & Street, and Clifford F. McMaster, Fort Worth, for appellant.
    Edith Buhrman, pro se.
   OPINION

MASSEY, Chief Justice.

Child custody suit growing- out of a petition for writ of habeas corpus. Calvin Buhrman, father, was awarded permanent custody of his minor daughter pursuant to judgment of an Oklahoma District Court which also granted him a divorce of and from Edith Buhrman, the mother, under date of July 26, 1965. Seeking enforcement thereof said father, on August 2, 1965, filed petition for a writ of habeas corpus in the District Court of Tarrant County, Texas. The matter was transferred to the Domestic Relations Court, No. 1, of Tarrant County.

By pleadings filed in the Texas court the mother sought a decree of custody of her minor child on the ground of a change of condition. Following a trial before the court judgment was entered awarding custody of the child to the Tarrant County Probation Department, with direction that the child reside with her mother under supervision of the Department. The father has appealed. The mother has not appealed.

Observable in the findings of fact and conclusions of law filed by the trial court is that the sole predicate for disturbing the custodial right of the father was the court’s conclusion that there had been a material change in circumstances of the parties, such as to give the court jurisdiction to readjudicate the question of custody. We have carefully examined the full and complete statement of facts brought forward on the appeal. Therein we find that there was no evidence which warranted a finding or conclusion that there had been a change of condition of the parties or in the circumstances of the minor ch'ld. Therefore the trial court should have granted the father’s petition for a writ of habeas corpus and should have compelled delivery of the person of the minor child, Sharon Buhrman, into the custody of her father.

Indeed, all the testimony in the case points up the fact that there has been no change in condition or circumstances. The father’s ability and qualification to be custodian has never undergone any alteration. However, he has not yet been able to enter upon his office as such.

About May 1, 1964 the mother left the family home in Oklahoma, with the minor child, and departed for points in Texas. The father filed a suit for divorce and custody in Washington County, Oklahoma. He obtained an order granting temporary custody of the child to him. Strenuous efforts to locate and secure the person of the child were fruitless. Such was the condition of affairs when trial of the divorce and custody case was begun in Oklahoma on July 16, 1965. The mother was present in court and by cross-action sought a decree which would award custody of the child to her. She had, however, left the child in Texas. The court recessed the trial begun on the 16th, to be resumed on July 26, 1965, with the mother ordered to have the child present in court at such time. She did not appear. The Oklahoma judgment was rendered as of that date. The mother filed a motion for new trial in said cause, and such was pending when the father filed his petition for a writ of habeas corpus in the Tar-rant County Court on August 2, 1965. Under her sworn pleadings filed September 7, 1965 the mother stated that her motion for new trial in the Oklahoma case was scheduled for hearing on September 9, 1965. All reliance upon any absence of finality in the decree of the Oklahoma court was abandoned by December 1, 1965, however, for by her pleadings filed in the Texas court on said date she sought readjudication of her right of custody, under allegations of a change in circumstances and conditions. The Texas trial was conducted on the same date, and judgment followed as of December 31, 1965.

Oklahoma was the domicile of the father and mother when the parties separated. Though the mother left said state, taking the minor child with her, she later submitted to the jurisdiction of the Oklahoma court, where she sought custody under a cross-action. There has been no showing that any difference existed between Oklahoma laws and laws of Texas applicable to the circumstances under consideration. Therefore no reason appears why we should distinguish the Oklahoma judgment from one rendered by a court of competent jurisdiction in Texas. The judgment was properly authenticated, proved, and introduced into evidence. It is entitled to full faith and credit. The Oklahoma trial court had jurisdiction to determine the matter of child custody, since it had jurisdiction of the parties and of the domicile of the father, who was the natural custodian until otherwise decreed by a court of competent jurisdiction. Smith v. Ansley, 257 S.W.2d 156 (Waco Civ.App., 1953, writ ref. n.r.e.), and cases cited.

The court below could do nothing other than to view the case before it as one wherein the father held the legal custodial right, with the mother in position of a stranger who sought to oust him. There was an interval of only seven (7) days between the date of the Oklahoma adjudication upon the issue of custody, and the date the father filed his petition for writ of habeas corpus. Neither within that interval, nor within the interval between the date of the Oklahoma judgment and the date of the trial in Texas had any change occurred. No greater interval of time may be viewed or considered. The facts shown in the record do not make the exceptional case which is prerequisite to an exercise of jurisdiction by the courts of Texas to the extent of a new and independent determination of child custody rights. On near analogous facts such was the holding of the Supreme Court of Texas in Bukovich v. Bukovich, 399 S.W.2d 528, 1966 (Tex. Sup.). The decision in such case controls that before us.

Judgment of the trial court is reversed and judgment is here rendered that custody of Sharon Buhrman be awarded to and vested in Calvin W. Buhrman in accordance with the decree of the District Court in and for Washington County, State of Oklahoma, dated and filed July 26, 1965, in cause No. D-6008, entitled Calvin W. Buhrman v. Edith Buhrman. It is further ordered that the Judge of the Court of Domestic Relations, No. 1, of Tarrant County, Texas, issue a warrant to the Sheriff of Tarrant County, Texas, to take and bring said child, Sharon Buhrman, should she be found within the state, before said Judge to be placed by order in the custody of Calvin W. Buhrman, the petitioner for writ of habeas corpus.


author: DENTON, Chief Justice.

text:
    Aubrey KEELING et al., Appellants, v. Sherill RIGSBY, Appellee.
    No. 7640.
    Court of Civil Appeals of Texas. Amarillo.
    Oct. 10, 1966.

      Paul Spillman, Wellington, for appellants.
    Huff & Bowers, Lubbock, Broadus A. Spivey, Lubbock, of counsel, for appellee.
   DENTON, Chief Justice.

This is a venue case under Sections 9 and 9a, Article 1995, Vernon’s Ann.Civ.St. Sherill Rigsby sued Aubrey Keeling and Julian Keeling, a partnership d/b/a K & K Pole Line Construction Company for personal injuries alleged to have been sustained on May 28, 1963 while an employee of the defendants. Aubrey Keeling filed his plea of privilege and in it alleged under oath “that no partnership exists between the named persons as a partnership”. Rigsby filed a controverting affidavit in answer to this plea of privilege. The plea of privilege, after a hearing, was overruled. Aubrey Keeling gave a notice of appeal, however the appeal was not perfected and the trial court’s order became final. On August 31, 1965, which was subsequent to the trial court’s order overruling Aubrey Keeling’s plea of privilege, plaintiff filed a first amended original petition in which he alleged the named defendant, Julian Keeling, was a misnomer and then named Gaylon Wayne Keeling as the partner with Aubrey Keeling d/b/a K & K Pole Line Construction Company. After service, Gaylon Keeling filed a plea in abatement alleging the two-year statute of limitations, a plea of privilege, and a general denial subject to the foregoing pleas. Neither the answer nor plea of privilege denied the partnership under oath. The plea of privilege of Gaylon Keeling was set for hearing on January 28, 1966. Neither party offered testimony. The trial court held Gaylon Keeling, having been alleged to be a partner in the K & K Pole Line Construction Company, failed to deny the partnership under oath and the prior order overruling the plea of privilege was res judicata. We affirm the order of the trial court.

In the absence of a sworn denial of partnership, a partnership stands admitted as alleged. Howell v. Bowden, 368 S.W.2d 842 (Ref. N.R.E.). Rule 93(f) Texas Rules of Civil Procedure. It follows that in order for the issue of partnership to arise in a venue hearing the defendant must deny partnership under oath in the plea of privilege. Davis v. Hill (Tex.Civ.App.) 371 S.W.2d 917; (Error Dis.). Moore v. James (Tex.Civ.App.) 242 S.W.2d 958. At all times pertinent to this case, Aubrey and Gaylon Keeling were partners, d/b/a K & K Pole Line Construction Company, the true defendants in this suit. The partnership, not being in issue as it was not denied under oath, was established in the pri- or hearing which resulted in the order overruling the plea of privilege of Aubrey Keeling in June, 1965.

The amended pleading filed after the limitation period was only for the purpose of correcting a misnomer and was not the institution of a new suit. It did not change the parties to the suit or allege a new cause of action. The liability of partners is joint and several. Their relationship is not that of principal and surety. Sheffield v. Nobles (Tex.Civ.App.) 378 S.W.2d 391. Lang v. Bass (Tex.Civ.App.) 374 S.W.2d 900. The suit having been timely filed against the partnership and the partners thereof is not barred by the statute of limitations. Under the state of this record, the introduction of evidence on the issues presented by Gaylon Keeling’s plea of privilege became unnecessary.

The judgment of the trial court is af- • firmed.


author: DAVIS, Justice.

text:
    LOUISIANA & ARKANSAS RAILWAY COMPANY, Appellant, v. S. D. CARPENTER et ux., Appellees.
    No. 7748.
    Court of Civil Appeals of Texas. Texarkana.
    June 21, 1966.
    See also Tex.Civ.App., 402 S.W.2d 198.
    James N. Haltom, Wheeler, Watkins, Hubbard & Patton, Texarkana, for appellant.
    Jesse L. Nickerson, Pittsburg, for ap-pellees.
   DAVIS, Justice.

A suit by plaintiffs-appellees against defendants-appellant for damages because a fire burned over most of a 162 acre tract of land situated in Camp County, Texas, alleged to have been caused by the operation of one of appellant’s trains. The jury answered the special issues in favor of appellees. Appellant has perfected its appeal and brings forward one point of error which reads as follows:

“POINT ONE

“The Trial Court erred in denying the Defendant’s Motion for Judgment non obstante veredicto which read, with the exclusion of the Special Issues, as follows: ‘The Defendant requests that the Court grant its Motion for Judgment non obstante veredicto in the above styled cause in as much as a jury’s findings as to the liability was not supported by the evidence as presented in this cause, and for the further reason that it was not supported by the evidence in the cause, and was contrary to a preponderance of the evidence in said cause. The Defendant further requests that the Court grant its Motion non obstante veredicto in the above styled cause in as much as the jury’s findings in the amount of damages was contrary to the evidence as presented in this cause, and for the further reason that it was not supported by the evidence in the cause, and was contrary to a preponderance of the evidence in said cause. WHEREFORE, the Defendant, Louisiana & Arkansas Railway Company prays that Notice of its Motion be given as required by law and •.that on hearing of the same, a judgment non obstante veredicto be entered for ±his Defendant.’ ”

The appellee did not file a brief.

Appellant takes the position in its brief that there is no evidence to support the jury’s finding as to its liability because there is no evidence that the train caused the fire. It takes the further position that the evidence is insufficient to support the jury finding, and that the jury verdict is contrary to the overwhelming weight ■and preponderance of the evidence. These are the only points of error we have to decide. Under these contentions, we had to carefully examine the statement of facts. Kings Estate (1951), 150 Tex. 662, 244 S.W.2d 660, and authorities cited therein. In doing so, we found that appellees owned a 162 acre tract of land of which 78 acres had been set out with pine trees. The railroad ran adjacent to the tract and there was grass and weeds anywhere from knee high to head high immediately joining the railroad that spread onto appellees’ 162 acre farm. On July 26, 1964, about 1:00 o’clock p. m., a train passed the farm. About 1:30 p. m. appellee, S. D. Carpenter, Jr., was notified that there was a fire on his farm. He went to the farm immediately. When he arrived there was an agent of appellant on the tract and another man. The fire marshall was there with one of his helpers. Prior to the time the fire started, a man had gone on the tract of land to fish. He noticed the train passing and in a few moments he saw smoke, made an investigation and discovered the fire going into the pines. There was no other person near the farm at that time. The evidence shows that there is a hill that the train goes up as it passes the farm. The grass was extremely dry at that time. There is evidence that shows that the train could have and did start the fire. The jury found that it did. There is sufficient evidence to support the jury findings. We are bound thereby. Gulf, C. & S. F. Ry. Co. v. Blakeney-Stevens-Jackson Co. (1908) 48 Tex.Civ.App. 443, 106 S.W. 1140, N.W.H.; Gulf, C. & S. F. Ry. Co. v. Meentzen Bros. (1908) 52 Tex.Civ.App. 416, 113 S.W. 1000, N.W.H.; Team v. Texas & Pacific Ry. Co. (1947), Tex.Civ.App., 199 S.W.2d 274, E.R., N.R. E.; Texas & Pacific Ry. Co. v. Brandon (1944), Tex.Civ.App., 183 S.W.2d 212, E.R. The point is overruled.

The judgment of the trial court is affirmed.


text:
    Foy BARRETT, Appellant, v. Jesse C. CURTIS, Appellee.
    No. 16790.
    Court of Civil Appeals of Texas. Dallas.
    Oct. 7, 1966.

      Parkhill, Watson & Grantham, Grand Prairie, for appellant.
    Carter, Gallagher, Jones & Magee, Charles Gallagher and Ben Warder, Jr., Dallas, for appellee.
   CLAUDE WILLIAMS, Justice.

This appeal is from a judgment awarding appellee actual and exemplary damages for breach of a restrictive covenant contained in a written sales contract.

On May IS, 1962 Foy Barrett sold and conveyed his automobile wrecker service business located in Grand Prairie, Texas to Jesse C. Curtis. The contract of sale imposed upon the seller the following restriction :

“That he, the said Foy Barrett, shall not at any time hereafter within a period of 10 years from date of closing of this transaction open or operate, or seek or become employed in any like business, either for himself or as an employee of others within Dallas County, Texas, to that business which is being sold, to-wit: the Wrecker Service Business, and that he shall not participate in any manner whatsoever, in either open direct competition with the said Jesse C. Curtis nor indirectly with him, nor aid and advise any other person, firm or corporation or influence any person whomsoever to so compete, nor furnish aid, assistance nor advice to any such person to so compete.”

Alleging Foy Barrett had violated the above covenant by aiding and abetting his brother, Ike Barrett, to enter into competition with him in a similar business, Jesse C. Curtis brought this action to enjoin the competing business and also to recover damages. A jury trial resulted in a verdict for appellee Curtis for actual damages in the sum of $1,000 and exemplary damages in the sum of $2,500.

Appellant, by his first point of error, makes no complaint concerning that portion of the restrictive covenant dealing with time and geographical area but vigorously assails that part of the covenant which precludes him from aiding and advising any other person to compete with ap-pellee in a similar business. He argues that such restriction is unreasonable, arbitrary, oppressive and against public policy as an unreasonable restraint of trade and therefore illegally incapable of being enforced or made the basis for awarding damages.

Our determination of appellant’s point is governed by well established principles of law. Negative covenants are to be closely scrutinized. A restrictive covenant not to compete must be reasonably necessary, must not be oppressive and must not be broader than the business sold. The covenant, to be enforceable, must not impose a greater restraint than is reasonably necessary to protect the business conveyed. In determining the reasonableness of a restrictive contract provision the courts will ordinarily determine the question as one of law. Weatherford Oil Tool Co. v. Campbell, 161 Tex. 310, 340 S.W.2d 950; Caraway v. Flagg, Tex.Civ.App., 277 S.W.2d 803; Martin v. Hawley, Tex.Civ.App., 50 S.W.2d 1105.

In Caraway v. Flagg, supra, this court considered a restrictive covenant which was attacked on the same grounds as here asserted. In upholding the contract in that case we referred to the Texas rule as stated in 8 Tex.Law Rev. 422-423, as follows:

“ * * * The courts recognize that restriction is a necessary part in the absolute sale of any business, that there is a definite social interest in the freedom of an individual to sell his property ab-lutely, that good will is a definite property having a salable value, and that these considerations outweigh the social interests that individuals should be free to enter whatever business they please. * * * Consequently a promise imposing a restraint in trade or occupation which is reasonable, which is not wider than is necessary for the protection of the cove-nantee in some legitimate interest, which does not impose a harsh burden on the covenantor with no corresponding benefit to the covenantee, where the restrictive promise is ancillary to some permissible transaction, and where the contract is made on a good and adequate consideration, is held valid. * * * Hence covenants in partial restraint of trade are generally upheld as valid when they are agreements by the seller of property not to compete with the buyer, in such a way as to derogate from the value of the property or business sold. Such restrictions must be reasonably necessary, however. * * * Such contract must not be characterized by any oppression. * * * The rule is sometimes stated that the restriction must not be broader than the business sold. * * * In situations such as the instant case where the sale is made to one who was not formerly a competitor, there is no diminution in competition by the covenant. Hence it constitutes but a minor restraint of trade. An express stipulation is included to allow the enforcement of the restraint which may not be created by implication. * * * Yet under the Sherman Act [15 U.S.C.A. §§ 1-7, 15 note] a restrictive covenant accompanying the sale of a business is valid. * * * Such a contract has been held legal in Texas. Gates v. Hooper, 90 Tex. 563, 39 S.W. 1079 (1897). * * *."

Having carefully examined the portion of the contract complained of by appellant-we are unable to agree with him that the same is invalid, as a matter of law. The covenant in question expressly applies only to the wrecker service business sold by appellant to appellee and does not restrict appellant from engaging in any other type of business. It does prohibit appellant from entering into a similar type of business personally and also goes further and prevents him from aiding and abetting others in competition of the business conveyed to ap-pellee. We find nothing unusual or oppressive about such a restriction. Such appears to be reasonably necessary for the protection of appellee in the operation of the wrecker service business that he purchased from appellant. The covenant is not broader nor more comprehensive than the business conveyed. It refers to and is limited specifically to the automobile wrecker business. Since appellee was not a competitor of the appellant prior to the time he purchased the wrecker service business it cannot be said that the covenant complained of diminished the competition as between the parties. We hold as a matter of law that the covenant in question is valid and enforceable. Appellant’s first point is overruled.

Appellant’s second point is multifarious in that it contains two separate complaints, both relating to Special Issue No. 1 as submitted to the jury. Such issue inquired:

“Do you find from a preponderance of the evidence that the Defendant (Barrett) has violated the said agreement of 15 May 62, sued upon in this case and contained in Plaintiff’s Exhibits No. 1 and 2?”

Appellant says that (1) such issue was not an ultimate issue but was a general charge and (2) there is no evidence to support the jury’s affirmative answer thereto.

Appellant’s first objection to the issue may not be considered by us for the simple reason that the same was not properly preserved by an assignment of error in the motion for new trial. Nowhere in appellant’s objection to the court’s charge nor in his motion for new trial is there any complaint that such issue was a submission of a question of law as opposed to one of fact or that the issue was a general charge. It is elementary that in the absence of a proper assignment directing the trial court’s attention to the alleged error we have no right to consider the point on appeal.

As to the second portion of appellant’s point complaining of the absence of testimony to support the jury’s affirmative answer to such issue we have carefully examined the statement of facts and find ample testimony upholding appellee’s contention that appellant violated the agreement.

In considering this “no evidence” point we must disregard all evidence adverse to the finding of the jury and consider only the evidence favorable to such finding, indulging every legitimate conclusion which tends to uphold it. Fisher Construction Co. v. Riggs, 160 Tex. 23, 325 S.W.2d 126.

Without entering into a detailed account of the testimony of both the parties and other witnesses it is sufficient to state that the evidence revealed that Foy Barrett did aid and assist his brother, Ike Barrett, in the operation of a wrecker service business in competition with appellee. Foy Barrett owned and operated the only automobile wrecker service business in Grand Prairie, Texas. He sold and conveyed this business to appellee Curtis, who operated the same for a year. At this time Ike Barrett, brother of Foy Barrett, started the operation of his wrecker service business in the place of business owned by Foy Barrett. Foy leased the back lot, driveway and a back room in his garage to Ike Barrett for $100 a month. Various employees of Foy Barrett drove Ike Barrett’s wreckers and answered the phone for Ike. Foy aided his brother by signing his note at the bank for the purchase of a wrecker and also sold a wrecker to Ike. Ike was engaged in another type of business, operating a drag-line during the day, and one of his employees, Pallet, operated the wrecker business. Pallet was a former employee of Foy Barrett and the evidence revealed that he did mechanical work for Foy at the same place of business where the wrecker business was operated. Witnesses testified that they used the wrecker service from “Foy’s”. Curtis testified that he lost the local Grand Prairie wrecker service because of Foy Barrett, Ike Barrett, and a man by the name of Looney. When the entire testimony is viewed in the light of the rule announced by our Supreme Court we believe that the jury was justified in finding that Foy Barrett aided and abetted his brother Ike Barrett in the operation of the wrecker service in competition with Curtis. Appellant’s second point is therefore overruled.

By his third point appellant complains of the action of the trial court in overruling his motion for instructed verdict made immediately after plaintiff rested and before defendant offered any evidence in that plaintiff had not proved a cause of action and no evidence of damages had been offered. The record reveals that while appellant did submit his motion for instructed verdict at the conclusion of appellee’s testimony he elected to proceed with the introduction of his own testimony after the court had overruled same. Subsequently the motion for instructed verdict was not re-urged or resubmitted. For these reasons appellant has waived his right to complain of the ruling. Where a motion for a directed verdict is denied, the moving party must stand on the ruling or he may not complain of the error. Travelers Ins. Co. v. Arnold, Tex.Civ.App., 378 S.W.2d 78; Robb v. Gilmore, Tex.Civ.App., 302 S.W.2d 739; 41-B Tex.Jur., § 184, p. 213; 56 Tex. Jur.2d, § 205, p. 545.

Even had the point of error been properly presented to us we would have overruled same. This for the simple reason that the testimony introduced by appellee was sufficient to prove some damages sustained by appellee as a result of the breach of the contract by appellant. Appellee testified that his automobile wrecker business decreased by better than fifty per cent after Ike’s Wrecker Service went into business. There was other testimony which would justify the jury in believing that appellee had sustained some actual damages as a result of the competition by Ike Barrett who was aided and abetted by his brother, Foy Barrett, as above related. Appellant’s third point is overruled.

Appellant’s fourth point, again multifarious and not in conformity with briefing rules, complains of Special Issue No. 2 submitted to the jury because (1) said issue amounted to a general charge and not an ultimate issue of fact and (2) there was no evidence to support the jury’s affirmative answer thereto. Special Issue No. 2, as submitted to the jury, was:

“Do you find from a preponderance of the evidence that the Plaintiff (Curtis) has sustained any money damages as the result of said violation, if any, inquired about Special Issue No. 1, if you have found that there was a violation?”

Appellant’s first complaint may not be considered by us for the reason that same was not properly preserved in an appropriate assignment of error contained in his motion for new trial. No objection was made in advance of the submission of said issue to the effect that same constituted a general charge nor was the trial .court’s attention directed to such complaint in the motion for new trial.

Appellant’s second complaint, being a “no evidence” point, must likewise be overruled. As above pointed out appellee testified that following the time appellant’s brother entered a competitive business with him in the City of Grand Prairie, Texas his business decreased approximately fifty per cent. Without detailing the testimony we find sufficient evidence of probative force contained in this record to amply justify the jury answering Special Issue No. 2 in the affirmative. Appellant’s fourth point is overruled.

Appellant’s complaint concerning Special Issue No. 3 as submitted by the trial judge is brought to us in his fifth point of error, multifarious in nature. He says (1) that said issue was erroneously submitted conditionally upon the jury’s answer to Special Issue No. 2 and (2) that there was no evidence to support the jury’s finding to Special Issue No. 3. This issue inquired of the jury as to the amount of actual damages sustained by appellee as a result of the contractual violation inquired about in Special Issue No. 1.

Appellant’s first complaint may not be considered by us for the reason that no objection was made in the trial court concerning conditional submission of the issue. Moreover, no harm could have possibly resulted in such conditional submission. Rule 434, Vernon’s Texas Rules of Civil Procedure.

Appellant’s second complaint concerning this issue is likewise without merit as we find sufficient evidence in this record to justify the jury’s answer of the sum of $1,000 representing actual damages sustained by appellee. For example, appellee testified that after Ike Barrett entered the automobile wrecker service business and started into competition with him that there was a loss of $14,000 income in his business. This loss occurred during the period of one year following the beginning of the competitive business. Appellant’s fifth point is overruled.

By Special Issue No. 4 the trial court inquired of the jury as to the amount of money which would reasonably compensate appellee for exemplary damages. In connection with the issue the court instructed the jury that “exemplary damages, as that term is used herein, is meant the sum awarded as punishment of the defendant for any malice, if any you may believe to exist in this case * * The court also instructed the jury that “ ‘Malice’, in its legal sense, means the intentional doing of an illegal act.”

By his sixth point appellant asserts that the trial court should have set aside and disregarded the jury’s findings to Issue No. 4 because there was no evidence that appellant acted with malice or committed any tort in violating the sales contract which is a prerequisite to an award of exemplary damages. It is appellant’s position that at most this is a case of a simple breach of a contract unaccompanied by tort and therefore exemplary damages are not legally recoverable even though the breach is brought about capriciously and with malice. This is the rule of law announced by our Supreme Court in A. L. Carter Lumber Co. v. Saide, 140 Tex. 523, 168 S.W.2d 629. See also McDonough v. Zamora, Tex.Civ.App., 338 S.W.2d 507; 25 C.J.S.Damages § 120; 17 Tex.Jur.2d, § 185; Kolehouse v. Connecticut Fire Ins. Co., 267 Wis. 120, 65 N.W.2d 28, 46 A.L.R.2d 988. Ap-pellee admits that the general rule in this state is that announced by the Supreme Court but contends that such rule is applicable only for breach of an ordinary commercial contract. He urges that there are two well recognized exceptions to the rule, to-wit, exemplary damages rnay be recovered in. an action for breach of a contract to marry, and contracts of public service companies. Appellee urges us to enlarge these exceptions by including therein an action for breach of a restrictive covenant as in this case. Appellee cites no Texas authority, and we are unable to find any, wherein such damages have been allowed in breach of restrictive covenant cases.

In our determination of appellant’s point we find it unnecessary for us to decide the broad question of whether an action upon a restrictive covenant falls within the exception to the general rule relating to the awarding of exemplary damages. This for the reason that we fail to find evidence of malice on the part of appellant which would justify the jury in penalizing him. The only specific testimony referred to by appellee in support of his contention that there is evidence of malice came from appellee himself, as follows:

“Q. Now, you say you lost it because of Foy Barrett, Ike Barrett and Glen Looney. How can you separate the three as to where the business was lost?
“A. The origination of it because Ike had no money to go in the wrecker business and neither did Glen Looney and they was depending solely on Foy to back them and Foy told Glen he would like to see him get in it and bust me completely out.
“Q. Did you hear that or who told you that?
“A. Glen Looney.”

Looney was called as a witness but was not asked concerning such conversation. Obviously, appellee’s testimony was hearsay and amounted to no evidence at all.

There being no evidence of probative force in this record to support the jury’s answer to Special Issue No. 4, the court should have disregarded the findings as to exemplary damages. Appellant’s sixth point is sustained.

Our disposition of appellant’s sixth point renders it unnecessary that we pass upon his seventh point of error which relates to the matter of submission of the issue on exemplary damages.

That part of the trial court’s judgment awarding the sum of $2,500 exemplary damages against appellant is reversed and here rendered. That part of the judgment awarding appellee the sum of $1,000 actual damages against appellant is affirmed. The cost of this appeal is adjudged equally between appellant and appellee.

Reversed and rendered in part and affirmed in part.


author: WERLEIN, Justice.

text:
    FIRST STATE BANK OF BELLAIRE, Appellant, v. CITIZENS NATIONAL BANK AND TRUST COMPANY, Appellee.
    No. 14860.
    Court of Civil Appeals of Texas. Houston.
    Oct. 6, 1966.

      Fulbright, Crooker, Freeman, Bates & Jaworski, Tom Connally, Houston, for appellant.
    Martin & Knox, Jack R. Martin, Houston, for appellee.
   WERLEIN, Justice.

This is an appeal from a judgment rendered in favor of appellee, Citizens National Bank and Trust Company of Bay-town, Texas, against First State Bank of Bellaire, Texas in the sum of $1911.44. The facts, some of which were stipulated by the parties and others found by the court or testified to, are substantially as follows:

In November, 1961 one A. L. Byrd, who was in Saudi Arabia, had in his checking account in the Baytown bank the amount of $1911.44. On the morning of November 10, 1961 an imposter called at appellant bank ■ in Bellaire and falsely represented that he was A. L. Byrd and that he had a checking account in appellee bank in the amount of about $2,000.00. He wanted to withdraw such amount, close the account, and open a checking account with such money in the Bellaire bank. He then drew a draft on appellee payable to appellant in the sum of $1500.00, forging the name of A. L. Byrd as drawer, but filling in no account number on the draft. Not knowing the exact amount in the account of the real A. L. Byrd in appellee bank, the imposter drew a second draft on such bank payable to appellant, writing in the word, “Balance” Dollars, forging the name of A. L. Byrd as drawer, but filling in no account number on the draft.

When the imposter was in appellant bank, an official of such bank telephoned appellee inquiring whether A. L. Byrd had on deposit in a checking account with appellee the amount of approximately $2,000.00. An official of appellee’s bank replied that he did. Appellant then, without properly identifying the imposter or requiring from him any identification whatever, forthwith opened an account for such imposter in the name of A. L. Byrd, depositing therein the $1500.00 draft as a cash item and accepting for collection said draft drawn for “Balance” of the account of the real A. L. Byrd in appellee bank. Several days later when the drafts reached appellee, it filled in the amount of $411.44, which represented the “Balance.” On the afternoon of the same day, November 10, 1961, that appellant opened up said account for the imposter, he returned to appellant bank and, representing that he needed some money to close the purchase of a house, drew a check in the amount of $1400.00 on the account which appellant had opened up for him that morning in its bank. Appellant cashed such check for the imposter and forger who blithely departed with the money. The forgery was not discovered until some sixty days thereafter since Mr. Byrd was in Saudi Arabia and it took that long for communications to make the round trip there and back. It is not disputed that only $1400.00 is actually involved in this suit since appellant returned to appellee the sum of $511.44 some time subsequent to the discovery of the forgery.

The forged drafts were transmitted by appellant through normal banking channels and were received by appellee two or three days after the imposter opened his account with appellant, and the amount of $1911.44 was paid to appellant. The $1400.-00 was released to the imposter by appellant two or three days before appellee received the forged drafts signed by the imposter. The trial court concluded that appellant was negligent in ascertaining who the imposter was and in allowing the money to be disbursed to the imposter, and hence entered judgment in favor of appellee.

Appellant asserts that the trial court erred in entering judgment for appellee because it paid the forged checks and charged them against its depositor’s account, and also because appellee was negligent in failing to discover that its depositor’s signature was a forgery, and that such negligence was a proximate cause of the loss. It further contends that the court erred because the undisputed evidence shows that appellant was not negligent in failing to require identification from the imposter.

We do not agree with appellant’s contentions. It is our view that the trial court’s conclusion and finding of negligence on the part of appellant is amply supported by the evidence. It is difficult to see how there could have been any other finding. Appellant naively accepted the word of a total stranger who was an imposter and forger, without requiring any identification whatever, and permitted such stranger to mulct from it $1400.00 two or three days before the forged drafts had reached appel-lee. It paid the imposter the $1400.00 before the forged drafts had either been received or paid by appellee and before there was any money in the imposter’s account. The loss occurred when the imposter was given the money by appellant, and it was appellant’s negligence that proximately caused such loss. Also, Mr. Goldston, vice-president of appellant bank, testified that the money was released to the imposter before the money was in the bank and that this was not customary.

Appellant relies upon the case of First National Bank of Wichita Falls v. First National Bank of Borger (1931) Tex.Civ. App., 37 S.W.2d 802, writ ref. That case is distinguishable from the instant case. In that case the drawee bank in Wichita Falls sued the cashing bank of Borger to recover the money paid on a check where the drawer’s signature was a forgery. Although the cashing bank at Borger accepted the check for collection only and informed the drawer that he could not get any money until the check was paid, the check was accidentally forwarded as a cash item. The drawee bank received the check and decided that the forged signature of its depositor was genuine and remitted the money to the cashing bank at Borger.

The check was received by the Borger bank on October 14, 1929. No money was paid out by the Borger bank to the imposter until October 16, when it paid $500.00, and on October 17, when it paid the balance in the sum of $1750.00. The Borger bank had told the imposter that he couldn’t get any money until the check was paid, and there is nothing in the opinion of the court showing that the Borger bank paid out the money before receiving it from the Wichita Falls bank. Of course, if the money was paid out by the Borger bank after receiving it from the drawee bank at Wichita Falls, it is clear that the drawee bank, charged with knowing the signature of its depositor, would have no right to recover, and the court held that it could not recover. In the absence of any statement in the opinion to the contrary, we assume that that is what happened.

We also assume in view of the dates when the payments were made to the imposter, and the statement in appellant’s brief to the effect that the payment on October 17 was made after the Borger bank had received the money, that in any event the forged check had probably been received and accepted by the Wichita Falls bank and the amount thereof charged against the account of its customer, prior to the time any of the money was paid out by the Borger bank. If the Borger bank had notice of such acceptance before paying out the money, the Wichita Falls bank would not be entitled to recover from the Borger bank.

In the present case the Bellaire bank paid the $1400.00 to the imposter two or three days before the Baytown bank ever saw or received the drafts, and there was nothing done by the Baytown bank which in any way caused or contributed to the loss. Of course, the Baytown hank was liable to its depositor since it charged the amount of the forged drafts against his account and was as a matter of law negligent in so doing. But no negligence on the part of the Baytown bank could have possibly caused or contributed to the loss of the $1400.00 paid to the imposter by the Bellaire bank under the facts of this case. Hence the Baytown bank should be permitted to recover the amount paid by mistake to the Bellaire bank even though it was negligent in not discovering the forged signature of its depositor. Had the Bay-town bank made such discovery and refused to pay the money to the Bellaire bank, it is certain that the Bellaire bank would not be entitled to recover against the Baytown bank the amount it paid the imposter. In other words, the Bellaire bank if required to pay back the $1400.00, will be in no worse position than it would have been if the Bay-town bank had refused to pay the forged drafts and not forwarded the money.

In First National Bank v. Farmers’ & Merchants’ State Bank, 146 S.W. 1034, writ dism’d, upon facts somewhat similar to those in the instant case, though less favorable to recovery by the cashing bank than the facts in the present case, Justice Key speaking for the Austin Court of Civil Appeals used the following language which is applicable to the instant case: “ * * * In other words, the draft being a forgery, the defendant could not enforce its payment, and had no right to the money received from the plaintiff thereon, and, if compelled to refund it, will be in no worse condition than it was before it received the plaintiff’s money. Such being the case, it is immaterial that the plaintiff was negligent, because it does not lie in the defendant’s mouth to say to the plaintiff: ‘While I had no right to the money, I have a right to keep it because, if you had exercised proper care and diligence, I would not have obtained it.’ Such doctrine is unsound in law, is contrary to the plain principles of justice, and repugnant to the fundamental rules of equity. * *

Although the case of Fidelity & Deposit Co. of Maryland v. Fort Worth Nat. Bank, Tex.Com.App., 65 S.W.2d 276, involves the payment of money by the collecting bank on a forged indorsement, we are of the opinion that the holding of the court upon the facts in such case, at least by analogy, strongly supports the right of appellee in the instant case to recover. The court said:

“Though there is some authority to the contrary, the great weight is on the side which holds that a collecting bank which accepts a check on another bank on a forged indorsement acquires no title thereto, and holds the proceeds thereof, when collected from the drawee bank, for the rightful owner, who may recover from the collecting bank as for money had and received, even though such bank has fully paid over and accounted for the same to the forger without knowledge or suspicion of the forgery. Michie on Banks and Banking, pp. 522, 523, and 524. * * *.”

See also First State Bank of Wichita Falls v. Oak Cliff Savings & Loan Association, Tex.Sup. 1965, 387 S.W.2d 369; First Nat. Bank v. Wood County, Tex.Civ.App., 294 S.W. 324.

Judgment affirmed.


author: WADDILL, Commissioner.

text:
    LEXINGTON CARTAGE COMPANY, a Corporation, Appellant, v. Charles WILLIAMS and the Workmen’s Compensation Board, Appellees.
    Court of Appeals of Kentucky.
    Oct. 21, 1966.
    C. W. Swinford, Stoll, Keenon & Park, Lexington, for appellant.
    Weldon Shouse, Shouse, Barker & King, Lexington, for appellees.
   WADDILL, Commissioner.

Appellee, Charles Williams, 37 years of age, has had a history of limited mental capacity since birth. In 1962 he received a blow to his head arising out of and in the course of his employment with appellant, Lexington Cartage Company, for whom he had worked five and one-half years. Subsequently the parties agreed to an award under the Workmen’s Compensation Act based on 10% permanent partial disability and this was approved by the Workmen’s Compensation Board.

In 1965 appellee was unable to perform any work and his mental condition had so deteriorated that he was placed in the Eastern State Hospital. A motion to reopen the workmen’s compensation award was filed on his behalf alleging a change of condition in that he had become totally and permanently disabled. KRS 342.125(1).

Medical evidence was introduced on behalf of appellee. No evidence was offered by appellant. The board overruled the motion to reopen and an appeal was taken to the Fayette Circuit Court. The circuit judge rendered an opinion wherein he observed that the board apparently recognized a change of condition but refused to reopen the award because the medical evidence did not positively establish that appellee’s worsened condition was due to his work-connected injury. Relying upon recent opinions of this Court the circuit judge concluded the board erred in requiring unequivocal evidence as to causation and, therefore, its conclusion was not justified by the evidence. The board’s order was set aside and the cause remanded for. the entry of an appropriate award. This appeal ensued.

Under our Workmen’s Compensation Act the board is the sole finder of fact and the circuit judge may not substitute his opinion for that of the board on the weight of the evidence. KRS 342.285(3). However, if the board’s finding is not substantiated by evidence of probative value then its finding and the award based on it must be set aside on appeal and the cause remanded to the board for a proper determination. Sullivan v. Foster & Creighton Co., Ky., 394 S.W.2d 917; Grimes v. Goodlett and Adams, Ky., 345 S.W.2d 47. Consequently, we review the evidence to determine whether the board’s finding against appellee Williams was unreasonable.

Doctor Harvey Chenault, a neurologist, had treated appellee after he received the blow to his head. He testified that in 1963 he had performed a pneumoencephalogram upon appellee which disclosed atrophy of the cortex of the brain and was of the opinion that this was due to a head injury. He testified appellee’s condition had since worsened and that he was now totally disabled as a result of his injury. On cross-examination he acknowledged that appellee has a history of mental limitation and his present condition could have resulted without any injury. Nevertheless, Doctor Chenault opined that, in view of the stability of appellee’s intellectual state over the period he was employed by appellant, his present accelerated rate of deterioration would not have occurred without some unusual cause.

The staff psychiatrist at Eastern State Hospital, Doctor A. L. Robertshaw, testified that appellee had undergone a complete personality change and that it was probable his injury was the basis of it. On cross-examination he stated he could not say the blow to the head was the sole cause of appellee’s present condition.

Doctor John Rompí, a psychiatrist who examined appellee after the award for partial disability, stated that appellee’s present condition of disability was due to a combination of his pre-existing mental condition and his head injury. Doctor Rompf conceded that other factors could also have precipitated appellee’s present condition.

In summary we have three qualified expert witnesses who consider the 1962 injury to appellee to be the probable cause of his present disability but who acknowledge the possibility of other causative factors.

In Grimes v. Goodlett and Adams, Ky., 345 S.W.2d 47, we recognized that expert medical witnesses often find it impossible to state a medical cause of a disability with absolute certainty. We concluded that “ * * * The facts or hypothesis on which the professional witness testifies need not be conclusive. They are sufficient if in his opinion they indicate the cause within reasonable probability.” See also Lewis v. United States Steel Corp., Ky., 398 S.W.2d 490.

In the instant case the medical experts were agreed that the injury to appel-lee’s head probably caused his presently disabled condition. Therefore the mere possibility of other causes does not permit a contrary finding. Ed Hall Drilling Co. v. Profitt, Ky., (Decided October 14, 1966); Terry v. Associated Stone Co., Ky., 334 S.W.2d 926. Hence the board was bound to find that at least a partial causal relationship was established.

The judgment is affirmed.