text:
    ROCK CREEK OIL CORPORATION et al. v. MOORE et al.

    No. 3589.
    Court of Civil Appeals of Texas. Amarillo.
    April 8, 1931.
    Rehearing Denied May 6, 1931.
    Writ of Error Granted July 22, 1931.

      Underwood, Johnson, Dooley & Simpson, of Amarillo, for appellants.
    Dorenfield, Poster & Pullingim, of Amarillo, for appellees.

      Writ o£ error granted.

   JACKSON, J.

This suit was instituted in the district court of Potter county, Tex., by the plaintiffs Lydia B. Moore, S. Hendrie Buffington, E. K. Whitehead, Prank E. Rogers, and William B. Rankin, against the defendants Rock Creek Oil Corporation, a corporation, Ed R. Mayer, its president, and C. G. Mayer, its secretary, to enforce by a mandamus the statutory right of plaintiffs, as stockholders in the Rock Creek Oil Corporation, to inspect the books and records thereof, and to make or cause to be made an audit of such records, books, accounts, receipts, vouchers, bills, etc., and all other documents kept by such corporation evidencing the financial condition thereof.

The plaintiffs alleged that they are stockholders ; that they had made written demand of the defendants to be permitted to examine and have audited the books, records, etc., of the defendant corporation; that the defendants failed to permit the plaintiffs to examine or make an audit as demanded and have attempted to annex such burdensome and unlawful conditions to plaintiffs’ right as to amount lo a refusal thereof.

The conditions imposed by the defendants before they would allow the plaintiffs to examine and audit the books, as requested, are substantially set out in Johnson Ranch Royalty Co. et al. v. Hickey et al., in an opinion by Chief Justice Hall, reported in (Tex. Civ. App.) 31 S.W.(2d) 150, to which reference is here made.

The defendants filed a general demurrer and numerous special exceptions to appellees’ petition. As a justification for refusing the plaintiffs’ demand, the defendants alleged that, since the organization of the defendant corporation in 1020, Ed R. Mayer had- been president thereof, and that until April, 1920, he, C. R. Mayer, M. E. Bates, E. K. Whitehead, and C. A. Leland had constituted the board of directors; that the defendant corporation had a full, correct, and complete audit of its books and business made annually, which truly revealed the financial condition of the company; that such audits were made while M. E. Bates, E. K. Whitehead, and C. A. Leland were each members of the board of directors and made with their knowledge and consent and without objection. That the books and such audits are kept open to the plaintiffs and all other stockholders; that a summary of such annual audit was each year mailed to each stockholder; that duplicate originals of each of such audits were delivered to M. E. Bates and E. K. Whitehead, to which plaintiffs have access; that plaintiffs have knowledge and information of all of such facts and of the financial affairs and conditions of the defendant corporation.

That at a regular stockholders meeting in April, 1929, Ed R. Mayer, G. G. Mayer, Robert Officer, T. E. Durham, and John H. Gilmore were elected directors of such corporation, and M. E. Bates, E. K. Whitehead, and O. A. Leland, although they made an active campaign among the stockholders to bo re-elected to the board of directors, were defeated.

That for months prior to the stockholders’ meeting in April, 1929, M. E. Bates and E. K.* Whitehead were so unfriendly to the president of the corporation that they, in communications sent by them to other stockholders, attacked the character and integrity of the president of the company, and such antagonism and hostility handicapped the business of the defendant corporation. That the efforts of said Bates and Whitehead to be reelected and to retain on the directorate their colleague C. A. Leland were actuated by their desire to have such control of the business of the corporation as to enable them to interfere with the services of Ed It. Mayer, should he be continued as president. That Bates and Whitehead secured the assistance of a small coterie of the stockholders, including the plaintiffs, who are and were partisans of Bates, Whitehead, and Leland, and shared their hostility toward the president of the company. That Bates, Whitehead, and Leland, together with the plaintiff’s, were greatly chagrined and incensed when the said Bates, Whitehead, and Leland were defeated for directors, and in this suit all of said parties are acting in concert and pursuant to a common understanding with the intention of securing a so-called audit with which to serve their purpose of gratifying their enmity against Ed R. Mayer; creating agitation, demoralization, and dissatisfaction among the stockholders and arousing in the minds of the public doubts as to the financial stability of the corporation-; that M. E. Bates has been dealing in the capital stock of the corporation and desires to continue, and, by instigating through plaintiffs a demand for the examination and audit of the books and the institution of tlais suit, intends to demoralize the affairs of the corporation, produce an unsettled market for its capital stock, and thereby facilitate her exploitation of the stockholders fos her own interest, all of which tends to the destruction of such corporation and is against the interest of the stockholders and the value of their stock.

That, while said Bates and Whitehead were on the board of directors, their hostility and antagonism to the president of the corporation became generally known, and such condition resulted unfavorably to the corporation, and when the plaintiffs, acting in concert with Bates and Whitehead to accomplish the end sought by them, began the activities leading up to the institution of this suit, the market value of the stock declined, is now much below its intrinsic value, and such activities have greatly damaged the corporation, and, if plaintiffs are allowed to continue this suit, It will further affect injuriously the pecuniary credit of the corporation and damage the stockholders thereof.

That, while plaintiffs’ demand as alleged purports to seek an examination of the fiscal records of the defendant corporation, they do not desire impartial information and are not acting in good faith, but are prompted by ulterior motives as herein alleged.

Defendants alleged in the alternative that, at the time the demand of plaintiffs was received, defendants were certain that plaintiffs were actuated by ulterior motives, but, not wishing to prejudge the matter, the defendants, for the best interest of all concerned, notified the plaintiffs that an examination and audit of the records of the corporation might be made upon certain reasonable conditions designed to protect the corporation, with which conditions plaintiffs refused to comply.

In a supplemental petition in reply to defendants’ answer, the plaintiffs demurred generally and excepted . to the allegations in paragraph 3 relative to the activities of M. E. Bates and E. K. Whitehead concerning the election of directors at the stockholders’ meeting in April, 1929, and to the allegations relative to the annual audits made by the corporation and to the allegations to the effect that plaintiffs in their demand are prompted by ulterior motives and acting in concert with Bates and Whitehead for the purpose of injuring and damaging the defendant corporation and to the allegations relative to the reasonableness of the conditions imposed by the defendants upon the plaintiffs prior to the examination and auditing of the books; because such allegations, taken separately or together, are insufficient to constitute any defense to plaintiffs’ demand to be allowed to examine and audit the books of the defendant corporation.

These demurrers and exceptions were sustained by the court, the defendants declined to amend, the case was heard, and judgment entered to the effect that the defendant corporation should not be put to any expense or unnecessary interference with the conduct of its business; that no valuable papers should be removed; that a bond in the sum of $10,-000, to be approved by the court, should be executed payable to the corporation, conditioned for the redelivery of all papers, documents, or property of every kind in the hands of plaintiffs; that the accountant selected should be a certified public accountant in the state of his residence, and the examination and auditing, when' commenced, should continue and be conducted diligently until completed; and that a writ of mandamus issue directing the defendants to give the plaintiffs immediate access to the records, books, etc.

The defendants reserved their exception to the action of the court in sustaining the demurrers and exceptions to their answer, excepted to the judgment of the court, and prosecute an appeal from said judgments to this court.

The appellants present as error the action of the court in sustaining the demurrers and exceptions urged by appellees to the sufficiency of, the allegations in the answer of appellants to defeat appellees’ right- to examine and audit or have audited the books, etc., of the corporation.

The appellees’ contention in reply to appellants’ assignment is that, inasmuch as they are stockholders of the defendant corporation, their right to examine the books and record's and have' an audit thereof made is statutory, and none of the conditions imposed by appellants and none of the defenses alleged by them are sufficient to defeat their statutory right.

“Mandamus is not a writ of right. It issues to remedy a wrong, not to promote one, and will not be granted in aid of those who do not come into court with clean hands.” U. S. ex rel. Turner v. Fisher, 222 U. S. 204, 32 S. Ct. 37, 56 L. Ed. 165.

Article 1328, R. O. S., provides that: “They [the directors of a corporation] shall cause a record to be kept of all stock subscribed and transferred, and of all business transactions. Their books and records shall at all reasonable times be open to the inspection of any stockholder.”

The courts are not in entire harmony relative to the nature of the right of a stockholder to inspect the books of a corporation when the right is conferred by statute. The Texas courts have apparently adopted the view that: “The statute is construed to be for the benefit of the corporation and the stockholder, to be exercised by the stockholder as such; and where the purpose is injurious to the corporation or to stockholders generally, or where petitioner’s interest is not germane to his relation as stockholder, the right will be denied.” Perris on Extraordinary Regal Remedies, page 339.

In Roberts et al. v. Munroe (Tex. Civ. App.) 193 S. W. 734, 736, Eli W. Gaffney, a stockholder, sought a writ of mandamus to compel the Amicable Life Insurance Company and its officers to permit him to inspect the books and records of such life insurance company. The life insurance company refused and defended on the allegations that Gaffney was not a stockholder, that he and those acting with him had entered into a conspiracy for the purpose of destroying and wrecking the business of the corporation, and, in order to accomplish that result, Gaff-ney desired to inspect the corporation’s books and records to obtain a list of stockholders for the purpose of communicating with such stockholders and making false and untrue charges against the corporation and its officers in the management of the business. The court, in passing upon the statutory right of Gaffney to inspect the books, holds that the life insurance company “had filed an answer, alleging facts which, if true, should have defeated Mr. Gaffney’s right to examine the books of the corporation. In other words, we hold that if Mr. Gaffney was not a stockholder, or if he sought to examine the books of the corporation, not for the purpose of protecting his own rights as a stockholder, but for the purpose of obtaining information to be used by him in furtherance of a scheme to defraud stockholders and wreck the corporation, then and in that event he was not entitled to the aid of a court of equity to enable him to accomplish that result, although it is provided by statute that a stockholder shall -have the right to examine the books of the corporation.”

In Dreyfuss & Son v. Benson (Tex. Civ. App.) 239 S. W. 347, 349, 350, writ refused, the court says: “However, we do not hold that appellee’s counter contention is correct to the extent that it declares article 1160 [now 1328] of the Revised Civil Statutes gives appellee, by virtue of his being a stockholder, the absblute right to inspect the books and records at reasonable hours regardless of his motives. To hold this would mean that a court should compel a corporation under this law to open its books and records to a stockholder regardless of whether he is prompted by motives wholly evil and corrupt to seek the information they might reveal. Following a decision which seems to have soundly construed this statute brings us into conflict with appellee’s sweeping declaration of its force. Roberts v. Munroe (Tex. Civ. App.) 193 S. W. 734. On the other hand, we do not think that the common-law rule requiring a stockholder of a corporation who seeks access to its records to prove good faith prevails against the provisions of this statute. The effect of the statute, at least, is to put upon a corporation, when it resists such right of inspection by a stockholder, the requirement to plead and prove corrupt motives actuating the stockholder. This is the greatest extent of laxity in this respect whch, in our opinion, should be indulged in construing this statute, the terms of which strongly indicate that it was intended altogether to remove the common-law rule that an examination can be compelled only where the stockholder asks for it in good faith and for reasons connected with his rights as a stockholder.”

The general and so-called special exceptions sustained by the court were, in effect, but general demurrers, Lee v. First National Bank (Tex. Civ. App.) 254 S. W. 394; P. & S. F. Ry. Co. v. Shell et al. (Tex. Civ. App.) 265 S. W. 758; Shaller v. Allen (Tex. Civ. App.) 278 S. W. 873; and all reasonable intendments will be indulged in favor of the pleading, Stone et al. v. Day, 69 Tex. 13, 5 S. W. 642, 5 Am. St. Rep. 17; Cochran et al. v. People’s National Bank (Tex. Civ. App.) 271 S. W. 433.

The appellants, in their pleading, did not use the terms “fraud” or “conspiracy,” but did allege sufficient facts, in our opinion, to raise such issues. Hickernell et al. v. Gregory et ux. (Tex. Civ. App.) 224 S. W. 691; McKay et al. v. Matthews et al. (Tex. Civ. App.) 285 S. W. 335.

The appellants alleged that the plaintiffs were acting in concert with M. E. Bates and with a common purpose, actuated by ulterior motives, and concerted action is: “Action that has been planned, arranged, adjusted, agreed upon and settled between parties acting together in pursuance of some design or in accordance with some scheme.” 12 C. J. 385.

The appellants set out in sufficient detail alleged facts which would authorize the admission of testimony to show that plaintiffs were not acting in good faith, seeking impartial information as to the financial condition of the corporation, but were acting in concert with M. E. Bates, who instigated their demand to be permitted to examine and audit the books and their institution of this mandamus proceeding, whose purpose was to obtain a so-called audit with which she expected to create agitation, demoralization, and dissatisfaction among the stockholders, and depress the market value of the stock so that she, by continuing to deal therein, would profit by exploiting the other stockholders.

The other assignments urged by appellants are settled against them in Johnson Ranch Royalty Co. v. Hickey et al. supra.

The judgment is reversed, and the cause remanded.


source: Caselaw Access Project

author: PER CURIAM.

license: Public Domain

text:
    YOUNG v. CHILTON.
    Motion No. 139.
    Court of Civil Appeals of Texas. Eastland.
    April 3, 1931.
    Rehearing Denied May 15, 1931.
    H. R. Bondies, of Sweetwater, for relator.
    Jas. H. Beall, Jr., of Sweetwater, for respondent.
   PER CURIAM.

This is an original application for a mandamus to compel the respondent, who is the official court reporter for the Thirty-Second Judicial District, to prepare a narrative transcript of the evidence in duplicate which was introduced upon the trial of cause No. 2561 in the district court of Nolan county, styled Roy Young v. Kansas City Mexico & Orient Railway Company.

The record discloses that proper proof of relator’s inability to pay or secure the costs of appeal has been made, and that this court has jurisdiction of the appeal. The only defense interposed by respondent which we find it necessary to mention is that the Act of the Forty-First Legislature, at its Fourth Called Session, being chapter 50, p. 91, of the General Laws of Texas, 1930, Fourth and Fifth Called Sessions (Vernon’s Ann. Civ. St. art. 2278a), is unconstitutional, in that the caption of the act is deceptive and insufficient to give proper notice of the subjects of legislation embodied in the act. The act, together with its caption, is as follows:

“An Act providing for the obtaining of a statement of facts on appeal by a pauper and providing the compensation of the court reporter and providing an emergency.
“Be it enacted by the Legislature of the State of Texas:
“Section 1. In any civil case where the appellant or plaintiff in error has made the proof required to appeal his case without bond, such party shall make affidavit to such fact, and upon the making and filing of such affidavit the court shall order the official reporter to make a transcript in narrative form in duplicate, and to deliver the same to said party, but such court reporter shall receive no pay for same.'
“Sec. 2. The fact that there is now no law providing a way by which a pauper may obtain a statement of facts in order to take an appeal creates an imperative public necessity, demanding that the Constitutional rule requiring bills to be read in each House on three several days be suspended, and the same is hereby suspended, and this Act shall take effect and be in force from and after its passage, and it is so enacted.”

. The specific contention made is that the caption of the act gave notice that the compensation of the court reporter was provided therein, whereas the body of the act provides that “such court reporter shall receive no pay for same.” It is. claimed that section 35, art. 3, of the Constitution is violated in this particular.

We are inclined to the opinion that the legislation is not subject to the objection urged, since the caption gives notice that the subject of compensation is dealt with in the act, but do not find it necessary to pass upon that question for the reason that, should the specific provision that the reporter should receive no pay be stricken from the act, we should still have a valid special statute directing him to make a transcript in narrative form in duplicate, and to deliver the same to relator. By the express provision of the section and article of the Constitution above referred to, if any subject shall be embraced in any act which shall not be expressed in the title, such act shall be void only as to so much thereof as shall not be so expressed. The striking from the act of the particular provision complained of would leave a valid statute, and, same being special in its. nature, would control over the general statute regarding the compensation of court reporters. In other words, if the provision in question be stricken from the act, same would be construed to require the reporter to prepare the transcript of the evidence without compensation.

It is therefore our order that the writ of mandamus issue as prayed for, and that the costs of this proceeding be taxed against respondent.

On Rehearing.

In his motion for rehearing respondent requests that we directly pass upon the question of the constitutionality .of the legislation. In deference to this request we here hold that the legislation is not subject to the objection made thereto as to its constitutionality. The general subject of the act was the provision of the method of appeal by a pauper. Its. purpose was not to provide the compensation for court reporters, but to provide effective means of appeal by one unable to pay costs or give security therefor. The. caption furnished sufficient notice to the legislators that the subject of compensation was covered in the body of the act. That is all that is required.

If respondent’s contention is correct, then the whole law creating the office of court reporter and providing for all of his compensation is likewise unconstitutional. The caption to chapter 119, Acts of the 32nd Legislature, 1911, is subject to the same vice as that urged here. In the case of Rice v. Roberts (Tex. Civ. App.) 177 S. W. 149, the constitutionality of that act, in so far as same required the court reporter to furnish a transcript of the testimony to a pauper without compensaron, was questioned. The opinion of Chief Justice Key in that case might, with slight modifications, be applied to the contention here presented.

The motion will be overruled.


author: JACKSON, J.

text:
    SAYERS v. NAVILLUS OIL CO et al.
    No. 3602.
    Court of Civil Appeals of Texas. Amarillo.
    April 29, 1931.
    Rehearing Denied June 17, 1931.
    Works & Bassett, of Amarillo, for appellant.
    Birge & Nelson, of Amarillo, for appellees.
   JACKSON, J.

This suit was instituted in the district court of Potter county, Tex., by Dollie Sayers, for herself and as next friend of Phyllis Ann Sayers, as plaintiff, against the defendants Navillus Oil Company and John B. Sullivan, to recover damages for the death of Joe Sayers, who was the husband of Dollie Sayers and the father of Phyllis Ann Sayers, alleged to have been caused by the negligence of the defendant Navillus Oil Company.

On the findings of the jury the court entered judgment against the Navillus Oil Company in behalf of Dollie Sayers for the sum of $6,000, and in favor of Phyllis Ann Sayers, the minor, for the sum of $12,000. Of this judgment no complaint is made.

The court denied the plaintiffs a recovery against the defendant John B. Sullivan and decreed that he go hence without day with his costs, from whicji judgment of the court this appeal is prosecuted.

The appellant challenges as error the action of the court in refusing her and the minor child a judgment against the defendant John L. Sullivan, because it is asserted under the pleadings, the evidence, and the findings of the jury, they were entitled to recover against the defendant John B. Sullivan.

The appellant alleged that the appellee John L. Sullivan is personally liable for the damages sustained because the Navillus Oil Company was frauduently incorporated to carry on the individual business of and protect the personal interest'of the appellee John L. Sullivan, and especially in an attempt to avoid personal liability for the development of the-mineral interests on the land on which a well was located. That the Navillus Oil Company was incorporated with a capital stock of $40,000, divided into 40,000 shares of no par value, and the only assets of the corporation-was a lease of SO acres of land on which the-well was located.

The appellee John L. Sullivan answered by general demurrer, special exceptions, genera! denial, adopted the answer, in so far as not in> conflict with his personal answer, of the Na-villus Oil Company, and specially denied that he ever owned all the stock of the corporation,, that he is indebted to the corporation, or that the corporation was organized solely for the-purposes of promoting his interest. That at the time of the accident he was absent from the state of Texas.

The jury found that the Navillus Oil Com- ' pany was fraudulently incorporated to carry on the individual business of John B. Sullivan in an attempt on his part to avoid personal liability for the development of the-mineral rights in which he was interested.

The record discloses that the original petition was filed on April 3, 1929, against the-Navillus Oil Company, a corporation. That on June 22, 1927, the state of Texas issued a charter, in proper form, constituting the Na-villus Oil Company a corporation with authority to establish and maintain an oil business, contract for the lease and purchase of the right to prospect for, develop, and use coal, minerals, petroleum, and gas, together with the right to erect, build, and own all oil tanks, cars, and pipes necessary for the operation of its business. That the capital stock of the Navillus Oil Company was paid for in services and property — an oil lease on 80 acres of land. That a well was drilled thereon, completed about November 1, 1927, and that the well flowed naturally for a while and was later put on the pump. That in an effort to clean the well out, the tools were lost therein and Joe Sayers was employed by John L. Sullivan, as president and general manager of the corporation, to work for the corporation at the well. That while so employed, an explosion occurred, resulting in the death of Joe Sayers and the destruction of the well. That the corporation was a going concern and transacting business in its name. That before the explosion and fire which resulted in the death of Joe Sayers and the destruction of the well, the corporation was not insolvent.

A charter having been issued by the state of Texas to the Navillus Oil Company, a corporation was created — whether de jure or de facto is immaterial. “After the State has certified the charter and so recognized the legal existence of the corporation, it would be contrary to public policy * * * to allow a private individual to initiate an inquiry into the validity of an act of the State in a proceeding to which the State is not a party. The element of good faith is frequently mentioned in the case, — that is to say good faith in assuming to act as a corporation is regarded as essential to recognition by the courts of its de facto existence. This appears to mean that the corporate existence may not be used as a cloak for transactions which are either fraudulent in themselves or a fraud upon the law; at least it does not mean that the courts will look beyond the certificate of the charter and undertake an inquiry into the question of whether or not acts of bad faith tainted the proceedings and attended the steps preliminary to the creation of the corporation.” 10 Tex. Jur. § 40, and authorities cited.

In support of the law as announced in Texas Jurisprudence, supra, see American Salt Co. v. Heidenheimer et ah, 80 Tex. 344, 15 S. W. 1038, 26 Am. St. Rep. 743; Scharbauer et al. v. Lampasas County (Tex. Com. App.) 235 S. W. 533; Home Inv. Co. et al. v. Fidelity Petroleum Co. (Tex. Civ. App.) 249 S. W. 1109; Cochran et al. v. Hill et al. (Tex. Civ. App.) 255 S. W. 768; St. Regis Candies, Inc., et al. v. Hovas et al., 117 Tex. 313, 3 S.W.(2d) 429; Berwald et al. v. Hamilton-Brown Shoe Co. (Tex. Civ. App.) 22 S.W.(2d) 760; Curry et al. v. Port Lavaca Channel & Dock Co. (Tex. Civ. App.) 25 S.W.(2d) 987.

The Navillus Oil Company, having been granted a charter and incorporated by the state of Texas for a legal purpose, having begun and continued to transact business in the name of the corporation for a period of more than a year, and being a going concern at the time of the explosion on June 27, 1928, and the deceased being in the employ of the corporation at the time of his death, in our opinion the appellant could not attack the validity of the corporation and, under the record in this case and the findings of the jury, was not entitled to a judgment against the appellee John L. Sullivan.

The judgment is affirmed.


text:
    PARKS v. JENKINS et al.
    No. 3478.
    Court of Civil Appeals of Texas. Amarillo.
    Nov. 5, 1930.
    Rehearing Denied Dec. 3, 1930.
    Writ of Error Granted Jan. 1, 1931.
    Glover Engledow, of Clairemont, and Perry T. Brown, of Friona, for appellant.
    W. D. Wilson, of Spur, for appellees.
   JACKSON, J.

J. A. Parks, the appellant, filed this suit in the county court of Kent county, Tex., against the appellees G. C. Jenkins and the First National Bank of Jayton, Tex., to recover a balance of $407.50, with 10 per cent, interest and attorney fees thereon, evidenced by a note executed by G. C. Jenkins and payable to J. A. Parks. The appellant also sought to foreclose a chattel mortgage on personal property fully described in Ms petition, the value of which he alleged to be $400.

The appellees each filed a plea attacking the jurisdiction of the court because appellant’s allegation that the property on which he sought to foreclose a mortgage was of the value of $400, was false and untrue, not made in good faith, but was falsely made for the fraudulent purpose of attempting to confer jurisdiction on the county court. 1 That in truth and in fact the personal property upon which a foreclosure was sought was of the value of $1,500.

The issue presented on the question of jurisdiction was tried to the court without the intervention of a jury, and after hearing the testimony, the court found, in substance, that the aggregate value of the property upon which appellant sought to foreclose his lien was the sum of $1,750. That neither the plaintiff nor his attorney made proper inquiry to determine the value of the property before the filing of the suit. That an investigation would have disclosed the value of the property to be greatly in excess of $1,000. That the appellant’s attorney, in alleging the property was of the aggregate value of $400, did not intend any fraud upon the jurisdiction of the court, but made such allegation in good faith and without any intention to place the jurisdiction of the case where it did not rightfully belong, and that in the opinion of said attorney the value of the property was the sum of $400. That in fact the value of said property was inaccurately alleged, the effect of which allegation was to confer jurisdiction where it did not rightfully belong. Upon these findings the court concluded as a matter of law that he was without jurisdiction and dismissed the case, from which order and judgment the appellant prosecutes this appeal.

The appellant challenges as error the action of the trial court in sustaining the pleas to his jurisdiction and dismissing the case after having found that the allegation in appellant’s petition stating the value of the property mortgaged was made in good faith, believing it to be true, and without any intention to perpetrate a fraud upon the jurisdiction of the court or place the jurisdiction of the case where it did not rightfully belong.

In Hoffman v. Cleburne Bldg. & Loan Association, 85 Tex. 409, 22 S. W. 154, 155, the Supreme Court says: “In such cases the jurisdiction exists if it appears from the allegations of the petition. The jurisdiction of the court cannot be defeated when the case stated in the petition is within its jurisdiction, unless it is made to appear that the allegations upon which the jurisdiction depends were fraudulently inserted in the petition for the purpose of conferring the jurisdiction. Such fraud exists when the jurisdictional averments are not only untrue, but are made by the pleader for the purpose of deceiving, and without being believed to be true.”

In Hunter v. Marlin National Bank (Tex. Civ. App.) 195 S. W. 882, 883, it is said: “It has been settled by repeated decisions of our Supreme Court that, in a suit for debt and to foreclose a chattel mortgage, the value of the property mortgaged is determinative of the jurisdiction of the court. It is well settled that the question of jurisdiction will be determined by the allegations in plaintiff’s petition, unless the same are fraudulently made for the purpose of maintaining or defeating jurisdiction of the court in which the suit is filed.” Citing numerous authorities.

See, also, Davis et al. v. T. & P. Ry. Co., 12 Tex. Civ. App. 427, 34 S. W. 144, and authorities cited; J. F. Turner & Bro. v. Gable (Tex. Civ. App.) 195 S. W. 348, and authorities cited.

As we understand these authorities, they are decisive in favor of appellant’s contention.

The great discrepancy in the value of the property as alleged and as disclosed by the testimony, the want of investigation to determine the value of the property when it could readily have been ascertained, with numerous other facts and circumstances in the case, would have supported a finding by the court that the allegations as to value were not made in good faith, but were made for the purpose of conferring jurisdiction where it did not belong; but there is evidence, sustaining the finding of the court to the contrary, and his finding is not challenged.

The judgment is reversed, and the cause remanded.


author: McCLENDON, C. J.

text:
    SCRUGGS et al. v. CROCKETT AUTOMOBILE CO.
    No. 7574.
    Court of Civil Appeals of Texas. Austin.
    April 29, 1931.
    Rehearing Denied July 22, 1931.
    Leachman, Gardere & Bailey, of Dallas, and Woodward, Hart, Gay & Hart, of Austin, for appellants.
    Hart & Patterson, of Austin, for appellee.
   McCLENDON, C. J.

Appellee (a private corporation) instituted this proceeding under title 125, R. S. 1925 (articles 7402-7425), against appellants (copart-ners doing business under the name of Packard Scruggs Company), to try the title to. a Packard automobile. Trial to the court without a jury resulted in a judgment awarding the automobile to appellee. The appeal is from this judgment.

Appellee purchased the car on- March 3, 1930, from Rascoe, who had purchased it on October 7, 1929, from C. E. Motor Company (dealer at Coleman), had had it registered in his name, and had operated it ever since that date. Appellants asserted ownership and that the sale by C. E. Motor Company to Rascoe was unauthorized, since the former held the car under a bailment contract 'between it and appellants. Appellee’s title is predicated upon a sale by appellants to C. E. Motor Company, and the claim that appellee and Rascoe were -bona fide purchasers. The questions in the appeal involve the legal effect of delivery of possession by appellants to C. E. Motor Company, and the bona fides of Rascoe and/or appellee. The evidence and unassailed findings of the trial court will support the following:

Appellants were dealers in Packard cars at Dallas, and C. E. Motor Company (a copart-nership) was a dealer at Coleman, in new and secondhand automobiles, having a show room at Coleman for the purpose of exhibiting new automobiles for sale. On September 3, 1929, C. E. Motor Company applied to appellants for the agency for Packard cars at Coleman. The application was upon the regular form of appellants, and provided generally for the consignment by appellants to C. E. Motor Company of motor vehicles for sale upon commission. The proceeds of sales were to be the property of appellants and to be held in trust for them. On September 12, 1929, C. E. Motor Company executed an instrument designated a consignment agreement, acknowledging receipt of the automobile, and having the following pertinent provisions: Authority to sell for cash only, and to hold the proceeds in trust for appellants; specific denial of right to lend, rent, mortgage, pledge, or incumber, “or, except in cases of -bona fide prospective sales, shall not operate, use or demonstrate said motor vehicle, but may immediately drive it direct to the undersigned’s place of storage, and there hold same expressly subject to the terms thereof”; also “the undersigned agrees to sell the above described motor vehicle within --- days from the date hereof, and in ease of failure or neglect to do so, to settle -for the same in the following manner, to-wit: at the option of Packard Scruggs Company to pay Packard Scruggs Company therefor the sum of-Dollars in cash, or to return the same to Packard Scruggs Company, free of charge, at its office in Dallas, Texas, and receive from Packard Scruggs Company any advancement made thereon by the undersigned.” The court found that the automobile was delivered on September 12, 1929, under this agreement. Mow-dy, an employee of appellants, testified that this receipt was merely signed temporarily, pending receiving from the printer forms of bailment contract, and that later on the same day a bailment contract was substituted for the consignment contract. The court’s finding in this regard was that after delivery of the car under the consignment receipt and on the same day, appellants obtained the bailment contract from the C. E1. Motor Company who made a $500 deposit thereon. This bailment contract was for a period of 90 days, and provided that the automobile was delivered to bailee for the purpose of display only. The bailee acknowledged that there was pasted upon the windshield, in full view, the following: “This automobile is the property of the Packard Scruggs Company, Dallas, Texas.” And the bailee agreed not to remove or deface this notice and to replace it should it be removed or defaced; and further “that he will not directly or indirectly by word or conduct ■represent that said automobile is owned by him, or that his possession of said automobile is otherwise than upon the terms and conditions thereof.” Appellee was given the right to display the automobile “at his place of business as an example of the current model of the Packard automobile for a period of 90 days, or until (prior to the expiration of 90 days) demand is made therefor.” The bailee also agreed to pay for the privilege .of displaying the automobile at the .rafe of $-- per calendar month. This blank was filled by the oral evidence of Mowdy as being 10 per cent, of the cost of the car, which was to. be deducted from the deposit; the amount of which was left blank in the contract, but was supplied by Mowdy’s testimony at $500, acknowledged by the contract to have been deposited with the bailor. The automobile was driven by a representative of C. E. Motor Company from Dallas to Coleman, on September 12, 1929, and placed on exhibit in its show rooms for sale to all prospective purchasers from said date until October 7, 1929, when it was purchased by Rascoe. The court found (and the finding is unassailed) that appellants “knew that said car was exhibited for sale from said time, September 12, 1929, to October 7, 1929, as ordinary merchqndise or automobile”; and that it knew of the sale to Rascoe on or immediately subsequent to October 7, 1929. Rascoe testified that he had previously purchased a Packard from C. E. Motor Company, for which he had given his •notes; that he purchased the ear in suit on October 7, 1929, the consideration - being in part services which he had theretofore rendered to C. B. Motor Company, and the balance in services thereafter rendered. The evidence is sufficient to support the finding that he had no knowledge or notice of the terms under which the car was held by the O. E. Motor Company. Rascoe had the car registered in his own name, drove it to áan Antonio, where he presented it to his then wife, and he drove the car on the streets of San. Antonio and elsewhere from that time until March 3, 1930, when he traded it to ap-pellee, under the circumstances iater detailed. Just what efforts appellants made to locate Rascoe and recover the ear are not detailed, but both Mowdy and Rascoe testified to two long-distance telephone conversations between them some time after Rascoe’s purchase. In '•one of these conversations Rascoe was at San Antonio, and in the other at Temple. Mowdy testified that Rascoe agreed to bring the cai-to Dallas and surrender it. Rascoe denied this, testifying that he told Mowdy that if they got the car they would have to get it by legal process. On February 14, 1930, appellants sued Rascoe for the car in San Antonio, but Rascoe was not served with process until after the sale to appellee, when sequestration was issued and the car taken thereunder from appellee’s possession. This proceeding was then instituted in Travis county by appellee and the car replevied 'by it. The ’evidence will support the following findings regarding the circumstances under which appellee acquired the car from Rascoe:

Appellee was an automobile dealer at Austin. Rascoe had been known to its officers and employees for some time. He was prominently known generally as a member of the State Ranger force, and favorably known to appellee. He had had the car in question at appellee’s place of business for the purpose of light repairs or refueling and lubrication one or more times prior to March 3, 1930. On that daté negotiations were begun and concluded whereby he exchanged the car for a new Packard owned by appellee, the latter at the sale price of $4,400, the car in question being appraised and accepted in the trade at $2,400. Rascoe gave his notes for the difference, secured by chattel mortgage on the new car, which mortgage was filed for record in Travis county. Rascoe exhibited his license receipt, showing that the car was registered in his name, and represented to ap-pellee that he was the owner of the car, and that there were no liens or charges against it. The trade was consummated on the afternoon of March 3, 1930, and the new car was delivered to Rascoe and the car in question to appellee and placed in its sales room. The following morning a party, who was a neighbor of Rascoe’s . then wife (he having since October 7th been' divorced and married the second time), and who was' at appellee’s establishment upon other business, and learned incidentally of the trade, intimated to one of appellee’s employees that it might be well to ascertain Rascoe’s title to the exchanged car; whereupon said employee telephoned the county clerk at Coleman, and learned that no mortgage or other lien had been registered against the car. Further telephone conversations traced prior ownership of the car to appellants, and in a telephone conversation between representatives of appellants and ap-pellee, appellants! claim to the car was asserted, and appellee was requested to hold Ras-coe, which it declined to do. The following day there was a conference between Rascoe, a representative of appellee, and appellee’s attorney, in which Rascoe asserted his ownership of the exchanged car, and declined to rescind the sale or to deliver back to appellee the car he had purchased.

Later appellee brought suit to foreclose its chattel mortgage on the new ear, and thereafter took a bill of sale thereto from Rascoe in consideration of the cancellation of the purchase money notes. It later traded the new car to a third party. There was no further communication between appellants and appel-lee until after this last trade was made, when negotiations were had, the effect of which was that appellee offered to turn over to appellants both the ears it had received in trade, provided appellants would make it whole in the transaction, including appellee’s attorney’s fees and expenses. This appellants declined.

While the findings of the trial court are not as definite as they might be upon the subject, it seems reasonably clear that it was the intention to find that the car was delivered to and held by the O. E. Motor Company under the consignment and not under the bailment contract. All of the testimony with reference to the delivery of the car to C. E. Motor Company, outside of the written instruments themselves, was by Mowdy, an interested witness, and we are inclined to the view that taking all of the circumstances into consideration, a finding that'the bailment contract was not effective would be warranted. Appellants contend, however, that the finding of the trial court that appellants obtained the bailment contract after the consignment contract, and received thereunder the $500 deposit, was tantamount to a finding that the bailment contract superseded the consignment contract, under the doctrine that where a subsequent' written contract is executed which is inconsistent in its terms with the former, it takes the place of the former and merges all of the provisions thereof in the subsequent. We will consider the case from both view points. .

None of the blanks in either the consignment or the bailment contract were filled in. As stated, those in the bailment contract were supplied by the oral testimony of Mowdy, and it would have been equally competent to have filled the blanks in the consignment contract by oral testimony. Assuming these blanks to have been filled, the question then arises as to the proper construction of the consignment contract; that is, whether it was in fact a consignment contract or a conditional sale. If the latter, it was subject to R. S. art. 5439, and since it was not registered, creditors and bona fide purchasers would be protected.

There has been a vast amount of legal literature regarding the characteristics distinguishing a consignment from a conditional sale. As in many other phases of the law, there is quite a diversity of view among the authorities in construing the several varieties of provisions which from time to time have been employed in this character of instruments. It would not be profitable to enter into an extended review of the authorities, or to point out wherein difference of view and conflict of decision have arisen. We have reached the conclusion that the proper test for determining whether an instrument is a conditional sale or a consignment is that laid down in McKenzie v. Grocery Co., 9 Ga. App. 185, 70 S. E. 981, 982, where it is said: “If the person to whom the possession of the property is delivered gets it by virtue of a contract of purchase (i. e., gets it under such circumstances that the person parting with the possession can sue for the purchase price, irrespective of whether the person to whom the possession is delivered has sold or otherwise disposed of the goods), the contract is one of conditional sale, notwithstanding it may impose limitations upon the purchaser’s right to. dispose of the property and may require a definite plan of accounting.”

Applying this test and filling the blanks in-thé above quotation from the consignment contract, we think the court correctly construed that instrument as a sale. What the parties may have labeled the instrument is. immaterial; its true classification is to be determined by its provisions. Under the quoted provision, the C. E. Motor Company bound itself absolutely to sell the ear, and upon failure or neglect to do so, appellants had the option of either demanding the price or the return of the car. The C. E. Motor Company could not at any time after execution and delivery of the contract have returned the car to appellants and been relieved of the obligation to pay for it, without the consent of appellants.

Accepting, however, appellants’ view that under the court’s finding the bailment contract superseded the assignment contract, we have reached the conclusion that under the trial court’s findings title nevertheless passed to Rascoe and appellee as bona fide purchasers. We base’ this holding upon the general doctrine of estoppel.

The general principle here involved was announced in the leading English case of Pickering v. Busk, 15 East, 38, in which Lord Ellen-borough wrote: “If the principal sends his commodity to a place where it is the ordinary business of the person to whom it is confided to sell, it must be intended that the commodity was sent thither for the purpose of sale. If the owner of a horse send it to a repository of sale, can it be implied that he sent it thither for any other purpose than that of sale? Or if one send goods to an auction 'room, can it be supposed that he sent them thither merely for safe custody? Where the commodity is sent in such a way and to such-a place as to exhibit an apparent purpose of sale, the principal will be bound, and the-purchaser safe.”

This general principle is recognized in this state. Morris v. Sellers, 46 Tex. 391; Posey v. Adam Schaaf Co. (Tex. Civ. App.) 189 S. W. 977. In the former Chief Justice Roberts wrote: “The possession of cotton by a cotton factor, who is a factor only, not engaged in buying and selling on his own account, would not raise the presumption of ownership, so as to authorize others, who knew him to be only a factor, to deal with him in all respects as the owner. (Story on Agency, sec. 113.) The presumption would rather be, in such case, that he was in possession of it, on commission, for some other owner. It is well settled, however, that such presumption may be rebutted, by the real owner permitting his ownership to be concealed, and the property to be so acquired, managed, and possessed as to indicate to third persons that the factor is the ostensible and real owner of the property ; and such ostensible owner, so held out as the real owner, may sell the property, in discharge of his previous debt, to one who, has no notice, actual or constructive, of the defect of his title to it, and the sale will be held valid.”

Prof. Williston (Sales [2d Ed.] vol. 1, p. 720), commenting on Lord Ellenborough’s above quotation, says: “Doubtless in the case here supposed the owner’s action in sending his goods to a sales room is some evidence of authority to make a sale, but Lord Ellenbor-ough seems to have supposed that a sale by the person intrusted would transfer a title to a purchaser even though the original owner intrusted the goods to the possessor for some purpose other than sale, which clearly appeared from the evidence. So far as Lord Ellenborough’s remarks contain this implication, they go beyond the law both before and since the decision of the case in which the remarks were made.”

The mere intrusting of possession to one engaged in the business of selling the particular article is quite generally held not to es-top the true owner from claiming his property from one who has purchased in good faith from such party in possession. Just what additional acts or circumstances are essential to clothe the party in possession with indicia of ownership is a subject upon which there is much diversity of view in the adjudicated cases. We deem a discussion of the authorities upon this subject unnecessary here. Our holding is based upon the particular facts of toi.l.iires 01 wfi'icb are: Tnat appellants were dealers in Packard cars aEcTwere interested in putting them on the market; that the motor company was a dealer in new and old cars; that the car in question was delivered by the former to the latter for the purpose of display only, with no right of sale; that appellants knew that this stipulation was violated, and that the car was being offered for sale generally in the sales room of the" motor company; and that in the due course of business under such sale the purchaser would have the ear registered in his own name as owner.

These facts we think sufficient to warrant a finding that appellants clothed the motor company with the indicia of ownership, and a sale by the latter to a bona fide purchaser passed the title to the car.

We think the evidence sufficient to uphold the finding of bona fide purchaser in Rascoe to the extent of his subsequently rendered services, and of appellee in toto.

The case as made by the pleadings only involved title to the car delivered to the motor company; and for that reason we preter-mit any discussion of other issues raised in the brief and argument.

The trial court’s judgment is affirmed.

Affirmed.

On Motion for Rehearing.

Appellants contend that the trial court’s finding that appellants “knew that said ear was exhibited for sale from said time, September 12, 1929, to October 7, 1929, as ordinary' merchandise or automobile,” is ambiguous as to the time of appellants’ knowledge ; that the uncontradicted evidence shows that such knowledge was not acquired until the ear was sold; and that this ambiguity should be resolved in accordance with such evidence. The evidence leaves a great deal to inference and is almost exclusively from interested witnesses. While it is true that the finding is not expressly that appellants knew that the car was being offered for sale while it was being so offered, we think that is the natural import of the language used and is the only reasonable interpretation to be given to the finding. There 'would be no relevancy in a finding that appellants acquired such knowledge at some indefinite time after the sale of the car. Such finding could have no material bearing upon any issue in the case. Furthermore, it is a cardinal rule applied to findings of trial courts that they should be so construed as to support the trial court’s judgment. Elder, Dempster & Co. v. Weld-Neville Cotton Co. (Tex. Com. App.) 231 S. W. 102.

It is further contended that our holding that the consignment contract was in effect a conditional sale is in conflict with that in Milburn Mfg. Co. v. Peak, 89 Tex. 209, 34 S. W. 102.

We find it unnecessary to consider the question or to pass upon the proper, construction of the consignment contract. It was not our intention to rest our decision upon that issue. We sustain appellants’ contention that the trial court’s finding that appellants obtained the bailment contract after the consignment contract, and received thereunder the $500 deposit, was inconsistent with the further legal existence of the consignment contract, and was therefore tantamount to a finding that the bailment contract superseded tlie consignment contract under the doctrine stated in our original opinion. This holding renders a construction of the bailment contract unimportant, and that portion of our original opinion may be disregarded.

Other points raised in the motion have been fully covered in our original opinion.

The motion is overruled.

Overruled.


author: CONNER, C. J.

text:
    COWAN et al. v. CLAY COUNTY BOARD OF EDUCATION et al.
    No. 12530.
    Court of Civil Appeals of Texas. Fort Worth.
    Feb. 14, 1931.
    Rehearing Denied April 25, 1931.
    Taylor-Muse & Taylor, of Wichita Falls, for appellants.
    W. J. Glasgow, of Henrietta, for appellees.
   CONNER, C. J.

This suit was instituted September 9, 1930, by R. T. Gowan, R. S. Gowan, L. B. Hapgood, F. D. McNeill, Ebb Sweazea, and Mrs. E. H. Carter, all residents of Clay county, and K. N. Hapgood, a resident of Dallas county, against the Clay county board of trustees, alleged to be a body politic with authority to sue and be sued to set aside certain orders of said county board, purporting to abolish the Gowan common school district No. 17 of Clay county and distribute its territory among adjoining school districts. It was alleged that:

“On the second day of March, 1929, at a meeting of the Clay County School Board, an order was passed abolishing Gowan District No. 17, thereafter at a meeting on April 6, 1929, said School Board transferred and annexed the territory of Gowan School District No. 17 to the following adjoining district, to wit:
“New London Common School District, No. 25,1770 acres, Secret Springs Common School District No. 20, 3079 acres, Friendship Common School District, No. 14,1679 acres, Belle-vue Independent School District 3984 acres.”

The orders of the county board referred to appear in the agreed statement of facts without objection as to form, but it was alleged that such action was taken without petition or election therefor on the part of the qualified taxpaying voters of any of the districts concerned, and without the consent or order of the Gowan common school district.

The case was tried upon the agreed statement of facts by the court without a jury and resulted in a judgment which denies the plaintiffs all relief, and the case is now before us for review.

There are no findings of fact and conclusions of law in the familiar form, but the judgment recites that:

“The court finds that the County Board of Trustees did not pursue the course provided by Statutes then in effect in abolishing said Gowan School District and transferring said territory to said other school districts.
“But the court finds further that the said action of the County Board of Trustees of Clay County, Texas, has been in all things ratified and validated by a general act of the Legislature of the State of Texas, and that the said Bellevue Independent School District, the New London Common School District No. 25, the said Secret Springs Common School District No. 20, and the said Friendship Common School District No. 14, as changed created and affected by the said action of the said County Board of Trustees of Clay County, ■ Texas, and as described in said orders of said Clay County Board of Trustees are each legal, valid and subsisting school districts under the laws of the State of Texals.” .

It is admitted in behalf of the appellee school board that the several orders and proceedings made and had by it were at the time wholly without authority. It hence is unnecessary to examine or discuss the legislative provisions necessary to the validity of the action taken by the board. The only question presented for our determination by the briefs of counsel is whether the trial court was correct in holding that the unauthorized acts of the county board of trustees was validated by a subsequent act of the Legislature.

The act relied upon is to be found on pages 117 and 118 of the pamphlet laws of the 41st Legislature at the 4th and 5th Called Sessions (chapter 5 of 5th Called Sess. [see Vernon’s Ann. Civ. St. art. 2742j]). The act became effective 90 days after the Legislature adjourned, which was on March 20, 1930. In the first section of the act, provision is made for the formation of a common school district into an independent school district. Sections 2 and 3 of the act (the portion of the act here relied upon) read as follows:

“All school districts, including common school districts, ⅜ * ⅜ consolidated independent school districts, county line school districts, consolidated county line school districts, and rural high school districts, whether created by general or special law in this State, heretofore laid out and established or attempted to be established by the proper officers of any county, or by the Legislature of the State of Texas, including such districts as have been created under the provisions of Section 5, Chapter 84, of the Acts of the First Called Session of the 40th Legislature of the State of Texas, 1927, created or attempted to be created by any county board of trustees as therein provided, are hereby in all respects validated as though they, had been duly and legally established in the first instance. All acts of the Board or Boards of Trustees in such districts ordering elections, declaring the result of such elections, and levying the tax therefor, and all bonds issued and now outstanding, .are hereby ifi all things validated. The fact that by inadvertence or .oversight any act of the officers of any county in the creation of any district was omitted shall in no wise invalidate such district, and the fact that by inadvertence or oversight any act was omitted by any Board of Trustees of a county in creating such district, or in any Board of Trustees of such District in ordering an election or elections, or in declaring the result thereof, or in levying the taxes for such district, or in the issuance of the bonds of any such district was omitted shall in no wise invalidate such proceedings or the bonds so issued by any such district.
“Sec. 3. The fact that there is at present no method provided for the incorporation of independent school districts in a territory having a population of less than seven hundred (700) inhabitants, and there exists an urgent need for more effective control for the development and control of public free schools and the creation of independent school districts in territory having less than seven hundred (700) inhabitants; and the fact that the legal existence of various school districts may be questioned, create an emergency and an imperative public necessity that the Constitutional Rule requiring bills to be read on three several days in each House be suspended, and that this Act take effect and be in force from and after its passage, and said rule is hereby suspended, and it is so enacted.”

The terms of section 2 are very broad, including as they do all classes of our school districts, and certainly manifest the purpose of the Legislature to cure all organization in-firmatives of school districts theretofore established. The purpose to so do' is further shown by section 3, the emergency clause, as well as by the caption of the act, which we think unnecessary to quote. If, therefore, the validating act is sustainable as a lawful exercise of the legislative power and effective as against the proceedings questioned, it must follow that all conditions, omissions, irregularities, and unauthorized acts or proceedings on the part of the county board of trustees, of which complaint is now made, furnish no judicial cause of complaint.

Appellants, under appropriate assignments and propositions of error, insist that the judgment of the trial court in upholding the action of the board is erroneous for the reason that the acts of the board are void and that “no such act or ratification or validation was in existence” at the time. The contention being that the Legislature was without power to validate an antecedent void act and further for the reason that the acts of the board amounted in law to actual fraud, which was beyond the powers of the Legislature to cure.

In answer to the contention last made, we think it must be said that the evidence wholly fails to show any such fraud, actual or constructive, on the part of the county board of trustees. We apprehend that no definition of fraud can be given that will fit all cases. Webster defines “fraud” as: “Quality of being deceitful; deception deliberately practiced with a view to gaining an unlawful or unfair advantage; deceitfulness; trickery.” And in Crosby v. Wells, 73 N. J. Law, 570, 67 A. 295, 302, it is said that: “Fraud is complex, involving a mental state, as well as an open act. The mental state, in turn, has, usually at least, three elements: Knowledge, intent, and design.” Numerous other definitions are given in 2 Words and Phrases, Second Series, 638, under the title of “Fraud.”

As shown by the statement of facts, the county board of trustees was composed of A. C. Campbell, chairman, Lee Bryan, J. M. Anderson, J. W. Dixon, and T. J. Owens. The statement further indicates that the action was taken in response to a petition addressed to the county superintendent and county board of education, dated March, 1923, and signed by the president and secretary of the board of trustees of Bellevue independent school district. In this petition it is recited that:

“This district (the Bellevue Independent School District) has for a number of years been schooling the children from district No. 17 at a loss in that the average cost per scholastic in the Bellevue District is $50.00 per year while transfers from No. 17 only bring in from $18.00 to $27.00 a year per scholastic (the grade determines the tuition rate). The local taxpayers are continually complaining to this board about the above mentioned condition.

“Make your actions effective immediately and notify this board of your actions, and oblige.”

The record further discloses that the appellants in this case first appealed to the state superintendent of public instruction, and from him to the state board of education, both authorities denying appellants the relief later sought in the district court, which rendered the judgment from which this • appeal has been prosecuted.

In the case of Tom Green County v. Moody, Atty. Gen., 116 Tex. 299, 289 S. W. 381, 385, our Supreme Court had occasion to consider the effect of a legislative act validating the proceedings which terminated in the issuance of certain of Tom Green county’s road bonds. We quote the following from the opinion which was written by Mr. Justice Greenwood:

“The Governor, on October 14, 1926, approved a law, which became effective on that date, whereby the election at which the bonds here involved were voted, the notice of the election, all orders of the commissioners’ court, the taxes levied to pay the bonds, and all other proceedings pertaining to the bonds were each and all expressly ratified and validated.
“We have already shown that under principles repeatedly declared by the Supreme Court of the United States the Legislature of Texas might in the first instance have made any reasonable selection of the property to be taxed for the improvement of the public roads in Tom Green county, and could have levied ad valorem taxes on such property to pay the cost of such improvement. There being no constitutional provision to the contrary, whatever the Legislature might originally have lawfully authorized in respect to these matters it could subsequently confirm. The rule is thus tersely put, by Mr. Justice Gaines in Nolan County v. State, 83 Tex. 182, 17 S. W. 823, viz.:
“ Where a contract which a municipal corporation has attempted to create is invalid merely for want of legislative authority to create it, it can be made valid by a subsequent law.’
“The United States Supreme Court, through Mr. Justice McKenna, in Charlotte Harbor & N. R. Co. v. Welles, 260 U. S. 11, 43 S. Ct. 3, 4, 67 L. Ed. 102, says:
“ ‘The general and established proposition is that what the Legislature could have authorized it can ratify, if it can authorize at the time of ratification’ — citing numerous cases.
“To the same effect is Kansas City Southern Ry. Co. v. Road District, 266 U. S. 379, 45 S. Ct. 136, 69 L. Ed. 335.”

In the later case of Anderson County Road District No. 8 v. Pollard, 116 Tex. 547, 296 S. W. 1062, 1065, the Supreme Court, in an opinion written by Chief Justice Cureton, said: “The general and established rule is, what the Legislature could have authorized in the first'instance it can ratify, if at the time of ratification it has the initial authority to authorize. Charlotte Harbor & Northern Ry. Co. v. Welles, 260 U. S. 8, 43 S. Ct. 3, 67 L. Ed. 100; Tom Green County v. Moody [116 Tex. 299], 289 S. W. 3S1; Nolan County v. State, 83 Tex. 182, 17 S. W. 823; and other authorities supra.”

In Ogburn Orchard Co. v. Bozeman, 194 S. W. 1155, the Texarkana Court of Civil Appeals held that a validating act of the Legislature in 1913 had the effect of legalizing a void order of the commissioners’ court in transferring 1,000 acres of land from one school district to another. See also U. S. v. Heinszen, 206 U. S. 387, 27 S. Ct. 742, 51 L. Ed. 1098, 11 Ann. Cas. 688.

We find no want of power in the Legislature to enact the curative legislation under consideration in this case.

In the ease of County Board of School Trustees of Young Co. v. Bullock Common School District No. 12, 37 S.W.(2d) 829, this court had occasion to consider the constitutionality of House Bill No. 25, chapter 47, and a validating act of House Bill No. 220, chapter 109, of the Eirst Called Session of the 41st Legislature (see Vernon’s Ann. Civ. St. arts. 2742e, 2742f); both acts being kindred to the one now under consideration. We held that the legislation was valid as against the constitutional objections urged thereto. In the present case no constitutional objection is urged. Section 1 of article 7 of our Constitution, provides that: Public Schools to be Established.—“A general diffusion of knowledge, being essential to the preservation of .the liberties and rights of the people, it shall be the duty of the legislature of the state to establish and make suitable provision for the support and maintenance of an efficient system of public free schools.”

Section 3 of the same article provides, in part, as follows: “And the legislature may also, provide for the formation of school districts by general or special law without the local notice required in other cases of special legislation.”

It is to be noted that these sections of the Constitution do not prescribe the procedure to be observed by the Legislature in establishing the system of our public free schools, nor do the sections contain any limitation of the legislative power as to time or circumstance when the power is to be exercised. Nor do we find in any other part of our Constitution any clause that infringes upon or limits the wide powers given by the sections quoted. It must therefore be held, we think, tha!t the Legislature, at the time of the enactment of the validating act under consideration, had full power to make changes in districts or to constitute them in the manner and form attempted by the county board of school trustees of Clay county. This being true, as we think, under the authorities 'above cited, the trial court committed no error in the rendition of the judgment un<jer consideration.

Appellants make a further contention that the validating act should not be held to operate for the reason that it became effective after the beginning of this suit and during its pendency, but inasmuch as the act contains no reservation exempting pending actions from its operation, we think this contention must be overruled without extended discussion.

There is another view of the case, not presented by the assignments of error, which leads to a denial of a right of recovery on the part of appellants. In 35 Cyc. p. 833, it is said: “The power to organize, establish, or lay off new school districts, or to divide, change the boundaries, or otherwise alter existing districts is vested primarily in the legislature, which may act without the assent of the inhabitants of the affected territory,” citing, to support the proposition stated in the text, Attorney Gen. v. Lowrey, 131 Mich. 639, 92 N. W. 289; School Dist. No. 17 of Garfield County v. Zediker, 4 Okl. 599, 47 P. 482; Kuhn v. Wellsburg Board of Education, 4 W. Va. 499, to which may be added State v. Norwood, by the Galveston Court of Civil Appeals, 24 Tex. Civ. App. 24, 57 S. W. 875.

In chapter 12, title 49, Rev. Civ. Statutes (article 2584 et seq.), the county board of education is given the general management and control of public schools in their county, and the article in the title confers power to divide and subdivide districts, etc., but in article 2711 of chapter 12 it is said: “Said board shall consolidate schools, wherever in its judgment, it is practicable, and arrange if possible, for the transportation of pupils to and from such consolidated schools. Before consolidating two or more separate schools located in separate school districts said board shall call a meeting of the board of trustees of such school districts to meet with the county board for the purpose of giving such boards of local trustees an opportunity of being heard as to the advisability of making such consolidations.”

It is thus’ seen that the trustees of the school district to be affected by the consolidation are entitled to have notice and be given an opportunity to be heard as to the advisability of making the proposed consolidations. In the case of Henderson v. Miller, 286 S. W. 501, this court held that such trustees were charged in a general way with the management of the affairs of the districts and the protection of their just interests, and article 2683 of the Statutes provides: “The county school trustees of each county shall constitute a body corporate, by the name of the county school trustees of-County, State of Texas, and in that name may acquire and hold real and personal property, sue and be sued,” etc.

In the case now before the court, the trustees of the Gowan common school district are not complaining and have not been made parties, and the appellants in their petition only allege, in substance, that they are taxpayers and residents of the Gowan common' school district. It is nowhere alleged that they have children and are patrons of the school in that district, nor is it alleged that the district has a bonded indebtedness that will be affected or that by the consolidation of the district with other districts their taxes will be increased. So that, as it seems to us, they wholly fail to show any legal cause of complaint.

However, regardless of the suggestion last made, we conclude that for the reasons heretofore stated, the judgment of the trial court must be affirmed.