author: FUNDERBURK, Justice.

text:
    C. I. T. CORPORATION v. HAYNIE.
    No. 1945.
    Court of Civil Appeals of Texas. Eastland.
    Nov. 10, 1939.
    Rehearing Denied Jan. 12, 1940.

      Smith & Eplen, of Abilene, for appellant.
    Hudson Smart, of Abilene, for appellee.
   FUNDERBURK, Justice.

As incident to a suit by C. I. T. Corporation against Wm. A. Turnidge, seeking judgment for debt and possession of particular merchandise, the State District Court, through a receiver, took possession of such property, on April 18, 1938. Subsequently on the same day, Wm. A. Turn-idge, under the trade name of “Army Store” and/or “Turnidge Appliance Store,” filed a petition in voluntary bankruptcy. R. W. Haynie, the trustee in bankruptcy, on June 4, 1938, filed a petition of intervention in said State Court claiming said property as assets of the bankrupt’s estate and seeking recovery of the possession thereof. C. I. T. Corporation, in the attitude of a defendant as to the intervener, in addition to defensive pleadings, asserted a cross-action against the intervener claim-' ing ownership of the property, and in the alternative a lien thereon. By agreement the property was sold and the proceeds, in the sum of $1,600, is held in lieu of the property.

In a non jury trial judgment was rendered for said intervener and against C. I. T. Corporation, reciting, in part, that it was the '“opinion of the court that this court has no Jurisdiction over the property involved and that the proceeds of the same should be delivered to the said trustee in bankruptcy,” It was, “therefore, ordered, adjudged and decreed that the district clerk deliver to R. W. Haynie, Trustee in Bankruptcy, the proceeds of the sale of said chattels, being the ■sum of $1600, and it is further ordered, adjudged and decreed that this action be and is hereby dismissed” etc. The plaintiff C. I. T. Corporation has appealed.

There was no question involved regarding the trial court’s jurisdiction. The judgment disposed of the controversy on its merits, and we shall treat the purported dismissal of the action as surplusage, or at any rate as not affecting the real nature of the action and judgment as stated.

We regard the pleadings as presenting no issue relating to the custody of the property in controversy at the particular time of filing the petition in bankruptcy. The receiver of the State Court had taken possession of the property from Turnidge and the fact is of no importance, we think, that all of the property may not have been removed from the premises before the petition in bankruptcy was filed. The appearance of appellee in the State Court as an intervener in the light of the allegations of his petition, was conclusive, we think, that the recovery of possession sought by him related to property of which he had not acquired the custody for the bankruptcy court.

Two questions are presented for decision. The first is whether or not a “reservation of the title to or property in chattels [effective by means of trust receipts, executed in compliance with previous contract], as security for the purchase money thereof” which R.S.1925, Art. 5489, declares “shall be held to be chattel mortgages”, are such mortgages or liens as R.S.1925, Art. 4000, Vernon’s Ann.Civ.St. art. 4000, under the circumstances therein stated, declares to be “fraudulent and void”. The other is whether or not in Texas the “rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied” which sec. 47, sub. a, of the Bankruptcy Law, 11 U.S.C.A. § 75, sub. a, confers upon a trustee in bankruptcy, include the right, remedy or power of such trustee to recover the possession of chattels from a mortgagee or lienee in holding possession under a valid but unregistered mortgage or lien.

The first question was answered by the Supreme Court in Bowen v. Lansing Wagon Works, 91 Tex. 385, 43 S.W. 872, 874. According to that decision, although a “reservation-of the title to, or property in chattels as security for the purchase money thereof” be held to be a chattel mortgage and subject to all the provisions of R.S. 1925, Arts. 5489 and 5490, it is not subject to the provisions of R.S.1925, Art. 4000. That is to say, such a mortgage or lien, even though thereafter the chattels constitute a “stock of goods, wares or merchandise daily exposed to sale, in parcels, in the regular course of business” etc., is not by said Art. 4000 declared to be fraudulent or void. In .terms of the reasons supporting it, the proposition may be otherwise stated thus: A lien consisting of a bona fide “reservation of the title to or property in chattels, ■as security for the purchase money thereof” which Art. 5489 declares to be a chattel mortgage, is not a chattel mortgage given by .an “owner of any stock of goods, wares or. merchandise daily exposed to sale” etc. within the meaning of said Art. 4000.

The decision in Bowen v. Lansing Wagon Works, supra, so far as we have found, "has never been overruled or modified by any subsequent decision of the Supreme Court. The holding upon the point stated has been followed in a number of decisions of the Courts of Civil Appeals, at least one ■decision by the Commission of Appeals and one or more decisions of Federal courts. Commercial Credit Co. v. Schlegel-Storseth Motor Co., Tex.Com.App., 23 S.W.2d 702; Universal Credit Co. v. Vance, Tex.Civ.App., 117 S.W.2d 508, 511; International Harvester Co. v. Smith, Tex.Civ.App., 91 S.W.2d 827, 830; Grimes v. Huntsville State Bank, Tex.Civ.App., 12 S.W.2d 1087; Park v. South Bend, etc., Co., Tex.Civ. App., 199 S.W. 843, 844; Mayfield Co. v. Harlan & Harlan, Tex.Civ.App., 184 S.W. 313; Hall v. Keating Implement, etc., Co., 33 Tex.Civ.App. 526, 77 S.W. 1054, 1056; B. F. Avery & Sons v. Waples, 19 Tex.Civ.App. 672, 49 S.W. 151; In re Varner, D. C., 297 F. 337.

The pleadings presented no issue that the purported reservation of title in C. I. T. Corporation as security for the purchase price of the radios and other merchandise involved was merely simulated, or only col-orable. ■ The action brought by appellee challenged the validity of the reservation of title and the taking possession of the property by appellant under the terms of its contract with Turnidge, solely on the ground that such reservation and act of taking possession were void.

Upon the authorities above cited, it is our conclusion that the reservation of title was not void but valid, unless appel-lee showed that he occupied the position of a (lien) creditor, a bona fide purchaser, •or the right to recover possession by virtue of authority conferred under the provisions of 11 U.S.C.A. § 75, sub. a, hereafter to be noticed.

Upon the second question, it may be well to consider, preliminarily, the applicable provisions oí law as existing prior to the amendment of June 25, 1910 of section 47 of the United States bankruptcy statutes, 11'U.S.C.A. § 75, sub. a, in order to determine the change, if any, and the nature thereof effected by said amendment.

In this State, chattel mortgages though unregistered, were valid as between the parties thereto and all others, except “subsequent purchasers and mortgagees or other lien holders in good faith.” Article 5490. The law in that respect has not been changed. The;proposition is still sound that one who has not acquired a lien by process of law on chattels, claimed (by another) under a prior, unrecorded, mortgage is not a creditor within the meaning of the statute regarding chattel mortgages, and is not entitled to protection as such. Overstreet v. Manning, 67 Tex. 657, 4 S.W. 248; Grace v. Wade & Mains, 45 Tex. 522, 527; Biccochi v. Casey-Swasey Co., 91 Tex. 259, 270, 42 S.W. 963, 66 Am.St.Rep. 875; Bowen v. Lansing Wagon Works, supra; Commercial Credit Co. v. Schlegel-Storseth Motor Co., Tex.Com.App., 23 S.W.2d 702. Before said amendment of 1910, presently to be noticed, it was settled that an adjudication in bankruptcy (operative as of the time of filing the petition in bankruptcy) would not have the effect to give a trustee in bankruptcy the status of a lien creditor as to valid, although unregistered, mortgages or other liens. York Mfg. Co. v. Cassell, 201 U.S. 344, 26 S.Ct. 481, 50 L.Ed. 782.

Said amendment provides that “trustees, as to all property in custody or' coming into the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings thereon; and also as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a judgment creditor holding' an execution duly returned unsatisfied.” The first part of the provision conferring upon the trustee the “rights, remedies; and powers of a creditor holding a lien” etc. is by its own terms applicable only in cases wherein the property is in the custody, or comes into the custody, of the bankruptcy court. In such case the rights, remedies and powers accrue as of .the time of filing the petition in bankruptcy. Bailey v. Baker Ice Machine Co., 239 U.S. 268, 36 S.Ct. 50, 60 L.Ed. 275; Carey v. Donohue, 240 U. S. 430, 36 S.Ct 386, 60 L.Ed. 726, L.R.A. 1917A, 295; Martin v. Commercial Nat. Bank, 245 U.S. 513, 38 S.Ct. 176, 62 L. Ed. 44L

However, the property involved in the instant suit as already indicated has never been in the custody of the bankruptcy court. The purpose of appellee’s intervention was to. acquire for the bankruptcy court the custody of said property. The petition of intervention alleges that the' possession was taken by the receiver at the instance of appellant, not from the custody or possession of the bankruptcy court, b.ut from Turnidge. If, therefore, the trustee has qny rights, remedies or powers beyond such as a creditor without lien would have, it. must be solely because of the part of the hereinabove quoted provision reading thus: “and also, as to all property not in the custody of the bankruptcy court, [the trustee] shall be deemed vested .with all the rights, remedies and powers of a judgment creditor holding an execution duly.. returned unsatisfied.” The acquisition of the rights, remedies and powers thus conferred, like those above named, accrue, we think, as of the time of the filing of the petition in bankruptcy.

What are the rights, remedies, and powers of a “judgment creditor holding ah execution duly returned unsatisfied?” Certainly under the laws of this State, not the samé as a lien creditor. Generally, a judgment, with execution duly returned unsatisfied, does not alone, and in no case, perhaps, unless so provided, by some statute, create a lien. Southern Dairies v. Banks, 4 Cir., 92 F.2d 282, and .áuthorities stated.

In this State, even as to real property judgments are hot liens except upon due recording of abstracts of .judgment as.provided in R.S.1925, Arts. 5447, 5448 and 5449, Vernon’s Ann. Civ. St. arts. 5447-5449. We think no authority can be found to support a proposition to the effect that a judgment with execution issued thereon but not levied upon any property and not otherwise satisfied and no abstracts of which have been filed for record as by statute provided, constitutes a lien upon any property, whether real or personal.

We, therefore, conclude that it was established by the undisputed evidence applicable to the issues as defined by the pleadings, that the reservation ’ of title to the property by appellant followed by the possession of the property taken by the receiver of the ■ trial court at the instance of appellees, and inuring to its benefit, and as authorized by the terms of the contract, was valid as against appellee.

Had the Shield Company, Inc., the wholesaler, reserved the title to, or property in, the merchandise (chattels) as security for the purchase price thereof and C.I.T. Corporation had had no connection with the transaction; then we think such reservation of title, or property, would have been just as certainly valid as Bowen v. Lansing Wagon Works, supra, is authoritative as an interpretation of the law. If the wholesaler could sell subject to a valid reservation then undoubtedly it could convey its reserved title to another for a valuable consideration, such as the payment to it of the unpaid price of the property would be. We see no reason why it could not sell and make the same reservation directly in favor of the third persón in consideration of the latter paying to it the amount of the purchase price in cash. A good analogy is to be found in the not uncommon transaction wherein a vendor of land willing to sell only for cash, and •a vendee unable to pay cash may yet effect a deal by providing that purchase money notes be executed payable to a third party who in consideration therefor pays the purchase price in cash to the vendor. By agreement the parties may substitute the third party to all the rights in the way of security that - the’ vendor could retain directly.

The Shield Company, Inc., from .previous dealing, if in no other way, knew that Turnidge had secured from C.I.T. Corporation the advantages of the latter’s floor plan accommodations. This is conclusively shown by the act of submitting to him for execution trust receipts in favor of C.I.T. Corporation.. The shipment of merchandise direct to Turnidge and the mailing of invoices to him, otherwise and alone sufficient, perhaps, prima facie, to show a completed sale and transfer of title . were prevented from having such effect by the notation “C.I.T. Floor Plan” on the invoice and the request for Turnidge to execute the trust receipts, and to accept the draft drawn upon him by the wholesaler payable’ to C.I.T. Corporation, or order.

The transaction clearly, we think, negatived any intention to vest in Turnidge either title to or ownership in the merchandise except as burdened with a reservation of the title as security for the purchase price. There was affirmatively evidenced the intention of all parties to reserve the title to or property in the merchandise in C.I.T. Corporation by way of substituting the latter for the wholesaler, in consideration of payment to the wholesaler of the purchase price of the goods.

Appellee, calling attention to the fact, as shown by some of the evidence, that C.I.T. Corporation could for nearly two weeks, or more, after shipment of the property to Turnidge, have declined to “purchase the draft” and accept the trust receipts and bill of sale (all tendered together), very pertinently inquires: Who would have title to the property during such time, and particularly who would have title after such time in case C.I.T. Corporation refused to purchase the draft? To speak of the action of C.I.T. Corporation as purchasing the draft, or refusing to purchase it, was obviously inaccurate. Why should the original payee in a draft purchase it? The real nature of the option which, according to some of the evidence, C.I.T. Corporation had, was to pay the amount of the draft in cash to the Shield Company as a condition upon which the draft, with the trust receipts and bill of sale, was to be delivered or bfecome effective.

Under the circumstances, had C. I. T. Corporation refused to accept delivery of said papers, would that show conclusively that title to the property was in Turnidge? We think not. On the contrary, under such circumstances the Shield Company, Inc., could have established ownership of the merchandise as against Turnidge. The situation would have been similar to a transaction wherein, in contemplation of a conveyance of land, the grantee by permission should take possession before the execution of the deed and thereafter something transpires to render the execution of the deed impossible. Neither the ownership of, nor title to, the land would be in the grantee but would remain in the grantor and in a proper action could be so declared by judgment. By delivering possession of the goods to Turnidge the Shield Company no doubt took some risk but under this record it is our conclusion that no absolute title passed and the reservation of title in the way attempted was just as effective as if it had been made directly by the wholesaler to itself.

It is not our view that the possession of the property taken by appellant for Turnidge was in virtue of absolute ownership of the property. The reservation of title was as security for the purchase price of the property. That necessarily implies a sale. The effect» of the reservation was, as plainly declared by the statute (R.S. 1925, Art. 5489), the retention of a lien upon same as security for the purchase price. The act of appellant in taking possession of the property was in virtue of a contract right, as a means of enforcing the lien.

Had there been an equity in the property, such equity would have constituted an asset of Turnidge’s bankrupt estate. Had appellee recognized appellant’s lien and the validity of appellant’s possession as a means of enforcing such lien, and have shown an equity in the property, then no doubt upon condition of satisfying appellant’s lien, ap-pellee would have been entitled to possession of the property. Such was not the nature of the action. It is plainly evident there was no equity in the property and there was no claim that there was any. Hence, we conclude that the possession of the property by appellant was rightful as against the claims of appellee.

It being our opinion that the judgment of the court below should be reversed and judgment be rendered for appellant to the effect that appellee take nothing, it is accordingly so ordered.

On Rehearing.

In our original opinion is this statement: “We regard the pleadings as presenting no issue relating to the custody of the property in controversy at the particular time of filing the petition in bankruptcy.” That was inaccurate. The thought intended to be expressed was that the pleadings presented no issue of jurisdiction as independent of and distinct from the issues involving the rights of the parties in and title to the property. The intervener trustee alleged that plaintiff “has no vajid claim or right to the possession and ownership of the said property” etc. (Italics ours.) “That the title and possession of said property has been and was at all times in the said Wm. A. Turnidge up until the filing of his petition in bankruptcy at 5 o’clock on April 18, A. D. 1938.” (Italics ours.) Then followed allegations .evidencing the contention that C. I. T. Corporation had no right or title to the property. The facts to show the asserted invalidity of C. I. T.’s title to the-property were averred evidently for ho other purpose than to set forth the basis upon which intervener', having invoked the jurisdiction of the court to determine the rightfulness of title and possession,’ prayed that “said Frank Massey, State Receiver, be directed to deliver to R. W. Haynie; your intervener, all property now in his possession which was taken by him from the store and possession of Wm. A. Turnidge” etc. In the pleadings there is absent any suggestion to the effect that even though C. I. T. Corporation may subsequently be adjudged in the proper court to have the better right or title to the property, only the Federal Court has jurisdiction to make such adjudication and that in the meantime the receiver is entitled to the possession regardless of the true ownership or rights in the property.

In our original consideration of the case we failed to understand the recitations of the judgment relative to jurisdiction and the provision for the dismissal of the case. In the light of appellee’s motion for rehearing they become understandable, with the .result that we are readily convinced we were in error in saying that since there was no question involved regarding the trial court’s jurisdiction we should “treat the purported dismissal of the action as surplusage, or at any rate as not affecting the real nature of the action and judgment.”

The trial court had jurisdiction even if, disregarding any question of pleading, the jurisdiction was dependent upon the question of who had possession of the property af the time the petition in bankruptcy was filed. Under the uncontrovert-ed evidence the Receiver of the state court took possession of the property about 4 o’clock, in the afternoon. He started immediately to take the merchandise out of the store and finished about 6:30 or 7:00 o’clock. The petition in bankruptcy was filed about 5 :30 p. m. The possession was not forcefully or fraudulently taken but Turnidge yielded his possession to the Receiver upon the advice of the attorney preparing. the petition in bankruptcy. The reason, however, of yielding possession is here unimportant. The fact that possession was yielded by Turnidge and taken by the Receiver before the petition in bankruptcy was filed is important and we think conclusive.

We are confronted with the question of whether it becomes our duty to remand the case for retrial even though it appears that the case has already been fully tried, and if aside from the jurisdictional question our opinion be correct, which it appears the motion for rehearing does not seriously challenge, there exists-no doubt as to the judgment which the court should have rendered. It appears to-us that all essential issues were conclusively established and if we are correct in our views of the law the court below, instead of the judgment of dismissal, should have rendered judgment in favor of C. I. T. Corporation. We, therefore, conclude it is our duty to reverse the judgment of dismissal, and render judgment that the intervener take nothing by his plea of intervention, that the plaintiff C. I. T. Corporation upon its cross-action have and recover the $1,600-deposited in the registry of the court, that otherwise the motion for rehearing be overruled, all of which is accordingly so ordered.


source: Caselaw Access Project

license: Public Domain

text:
    BOWDEN v. JONES et al.
    No. 1954.
    Court of Civil Appeals of Texas. Eastland.
    Dec. 8, 1939.
    Rehearing Denied Jan. 12, 1940.

      Webster Atwell, of Dallas, and Scarborough & Ely, of Abilene, for appellant.
    Wagstaff, Harwell, Douthit & Alvis, of Abilene, Coombes & Andrews, of Stamford, and George Connor, of Fort Worth, for appellee.
   FUNDERBURK, Justice.

Mrs. Nina Woodall Bowden (joined by her husband, A. F. Bowden, since deceased) by deed dated March 1, 1937, executed in performance of a sales contract of date February 19, 1937, conveyed to Robert L. Atchison, for a cash consideration of $2,500, a quarter section of land (actually 166.89 acres), situated near Avoca in Jones County, Texas, except a one half mineral royalty interest and “the sole and exclusive right and authority [of the grantor] to prospect for, produce and market oil, gas and other minerals on, in, under and from the west ½” of the tract “which said undivided one half royalty interest in the entire tract and the exclusive right to develop as to the west one half of said tract of land, with the right of ingress and egress for such purposes, are hereby reserved to the grantor Nina Woodall Bowden” etc. The $2,500 consideration was paid by A. V. Jones and H. R. Stasney, geologists, the title being vested in said Atchison as trustee for them, a fact, however, at the time unknown to the grantors. On March 10, 1937, Atchi-son conveyed the land, subject Jo the exceptions stated, to Jones & Stasney, who, of date March 24, 1937, executed an oil and gas lease upon the east one half of the quarter section (83.5 acres) to Iron Mountain Oil Company. By instrument of the same date, March 24, 1937, Nina Wood-all Bowden (joined by her husband) leased the west ½ of the quarter section to Iron Mountain Oil Company (the same lessee) for a consideration (in addition to royalty) of $417.50 cash, and the obligation of said lessee “to pay lessor a further bonus in a sum equal to $30 per acre payable out of ¼ of %ths of the first production of oil or gas obtained under this lease from the above described 83.45 acres of land if, as and when produced.” Each of said leases as to the specific East ⅜ and West ½, respectively, of the quarter section, also included “all of the land and interests in the land owned by lessor adjoining the above described land and therewith forming a single tract, whether owned or claimed by inheritance, deed, gift, limitation or otherwise.” By separate assignments dated June 30, 1937, Iron Mountain Oil Company conveyed an undivided one half interest in both said leases to Humble Oil & Refining Company.

After the filing of this suit (on February 9, 1938) A. F. Bowden died. According to plaintiff’s first amended original petition, parties to the suit ’were Nina Woodall Bowden (a feme sole), .plaintiff, and “A. V. Jones and H. R. Stasney, individually, doing business as a partnership under the firm name of Jones & Stas-ney; W. G. Webb and W. Graham Webb, Jr., individually, doing business as a partnership under the firm name of Webb & Webb; Robert L. Atchison; and Iron Mountain Oil Company”, defendants. The nature of the suit is an action to cancel, because of alleged fraudulent representations: (1) The deed from plaintiff to Robert L. Atchison, (2) the deed from the latter to Jones & Stasney, and (3) the oil and gas lease from the latter to Iron Mountain Oil Company. (As to the latter, no fraudulent representations were charged but cancellation sought upon aver-ments that said company took with notice.)

As an offer to do equity, plaintiff alleged that she “tenders to the defendants any and all sums due them to the extent of the money advanced for the purchase of said property. In this connection, plaintiff asks for a full and complete accounting and asks that the defendants Jones & Stasney be required to account to this plaintiff for the lease money and royalty payments which have heretofore been made to the defendants Jones and Stas-ney and to account for whatever sums may be due. This plaintiff offers to do equity and agrees to reimburse Jones and Stas-ney for the $2,500 paid out by them, less such sums, if any, as they may have collected upon lease sale and royalty payments. This plaintiff here now tenders the same and agrees to fully repay defendants Jones & Stasney the total amount of $2,500 which they have paid for the property and which this plaintiff conveyed to their dummy, [R. L. Atchison].”

Upon sustaining a general demurrer of Webb & Webb and refusal of plaintiff to amend, the court dismissed the case as to said defendants. In response to a motion praying such action, the court instructed a verdict for Iron Mountain Oil Company. Robert L. Atchison was eliminated from the suit by dismissal at the request of plaintiff.

As between plaintiff and defendants Jones & Stasney the trial was by jury. By special verdict the jury found (1) that Jones and Stasney directed Robert L. At-chison to act as their agent for the purchase of the land; (2) that Jones and Stasney wrote the letter of February 10, 1937 to James-Blair Baker, Jr., with the intention that the contents should reach the plaintiff. (3) That the statement in the letter that “there is not sufficient control in the area to definitely work surface or subsurface geology” was not false. (4) That Jones and Stasney made the statement inquired about in special issue No. 3, to induce the plaintiff to enter into a contract to convey her property to Robert L. Atchison. (5) That plaintiff relied upon the statement of Jones and Stasney inquired about in special issue No. 3 in entering into the contract to convey her property to Robert L. Atchison. (6) That plaintiff would not have contracted to convey her property to Robert L. Atchison if the statement of Jones and Stasney inquired about in special issue No. 3 had not been made. (7) That at the time plaintiff entered into the contract to convey her property to Robert L. Atchison, said property was worth more than she received for it.

From the judgment for defendants, Jones & Stasney, plaintiff has appealed.

As an answer to all of appellant’s propositions, appellees urge a counter proposition by which they endeavor to show that the court should have instructed a verdict for them. The theory thus advanced is, of course, that had the court done so, then the matters complained of by appellant would have been rendered harmless or immaterial.' The counter proposition must be overruled, because not presenting a question of fundamental error, it lacks the support of a necessary assignment of error (cross assignment of error). The counter proposition is grounded upon the view that the failure of the court to instruct a verdict for appellees was erroneous. If appellees by any proper proceeding invoked a ruling of the court upon the question of their right to an instructed verdict, the ruling of the court, whatever it was, is not made the ground of error in any cross assignment of error. “If”, as this court has had occasion to conclude, “it becomes necessary for an appel-lee or a defendant in error to invoke the authority of the appellate court to determine the existence of error, not fundamental, in any ruling, action or other part of the proceedings of the trial court whether to obtain further relief in a judgment awarding partial relief, or to sustain the judgment in his favor upon some other basis, or for some other reason than that upon which it was predicated by the trial court, then it is necessary to present such matters by cross-assignments of error.” Miller v. Fenner, Beane & Ungerleider, Tex.Civ.App., 89 S.W.2d 506, 509, and authorities cited. See, also, Texas Co. v. Graham, Tex.Civ.App., 107 S.W.2d 403; A. H. Belo Corp. v. Blanton, Tex.Civ.App., 126 S.W.2d 1015.

If it be granted that the court should have instructed a verdict for ap-pellees, we are not informed by the counter proposition nor by any cross assignment of error (there being no cross assignments of error) whether the failure to do so was the result of some duly invoked ruling or of mere inaction. We think if ap-pellees failed to procure a ruling upon an asserted right for an instructed verdict and failed to assign error upon a wrong ruling, if any, and without objection permitted issues to be submitted to the jury, they thereby waived any error in such proceeding. In effect, they thereby consented that the judgment to be rendered should be based upon the verdict, subject, of course, to the right to procure a review of fundamental errors and other assigned errors. A good analogy, it would seem, is to be found in the erroneous admission of evidence. To authorize the appellate court to review such action, the complaining party must, by timely objection, have procured a ruling upon the admissibility of the evidence.

Recognizing that some courts have held that a proposition, not purporting to be an assignment of error, may, if it contains the essentials of an assignment of error, be treated as such, we find upon examination that the cross assignment of error in question not only fails to specify the ground (rulings or actions) on which appellant relies, but does not direct “the attention of the Court to the error [alleged wrong ruling or action of the court] complained of” as required by R.S. 1925, Art. 1844, Vernon’s Ann.Civ.St. art. 1844. True, .the counter proposition does, perhaps, imply the action (more accurately perhaps, inaction) of the court as to instructing a verdict for appellees, but so far as the language of the counter proposition discloses such implied action may have been entirely proper in view of some other undisclosed ruling or action, the error wherein, if any, has been waived by failure to make it the ground of any assignment of error. For example, let us suppose that ap-pellees duly presented a motion to the court to instruct a verdict for them and that the court overruled same, thereby determining against appellees the very question of their right to such instructed verdict. Can it be doubted that the error, if any, in such ruling would be waived by the failure of the injured party to present it for review by an assignment of error? If not, then the mere failure of the court to instruct a verdict would in itself be no error at all. The mere omission of the court to instruct a verdict may result from the action of the court in overruling a motion for an instructed verdict, a demurrer to the evidence, or at least the denial of a request for an instructed verdict, and whether erroneous or proper, would depend entirely upon whether the preceding action or ruling was erroneous or proper.

Proceeding now to a consideration of the appellant’s eight propositions, urged as grounds for reversal of the judgment, we find that the first seven of said propositions relate to the refusal of the court to submit requested special issues. The other relates to the action of the court in overruling objections to the special issues which were submitted. From this statement it would appear, not unnaturally, that the questions for decision are not difficult. They have, however, been found to be unusually difficult, due mainly, if not altogether, to the nature of plaintiff’s pleadings. In such pleadings no distinction seems to have been recognized as between conclusions of fact which constitute issues and facts which are but evidence of such issues or mere elements of issues and/or arguments supporting issues. In view of this condition we think we may best express our. views, upon most of the propositions urged by considering the evidence in the. light of particular allegations in the pleadings, rather than by taking up the several propositions separately.

Appellant alleged: “* * * that said defendants Jones & Stasney had worked out a structure in Jones County, Texas which, among other lands, included the land of the plaintiff herein; that said defendants * * * had discovered said structure and knew that it was there * * * That after said structure had been worked out and was well known to the defendants * * * they sought to assemble the acreage * * * Jones & Stasney wanted the .property because it was situated on an oil structure * * * plaintiff * * * did not know that it was situated on an oil structure * * * defendants had worked the geology upon the land in question and had determined that there was a structural condition favorable for the production of oil upon which the plaintiff’s land was situated. * * * Defendants well knew that a structure did exist * * * and were at that time assembling and seeking to assemble sufficient acreage in the neighborhood of the plaintiff’s land for the purpose of exploration of oil and gas * * * Defendants had done considerable geological work upon said land and in the immediate vicinity and had determined that a structure did exist there and were in the process of assembling sufficient acreage at that time for exploration of oil and gas upon such property. * * * the fact that said land was located on an oil and gas structure was to this plaintiff unknown but was well knozvn to Jones & Stasney when they employed Webb & Webb to try to buy it for them. * * * They had worked out the geology on said area and had discovered that a structure zoos situated in the vicinity of plaintiff’s property. * * * was in truth and in fact a part of said structure * * * knew plaintiff’s land was located on a structure * * (Italics ours)

On February 9, 1937, James Blair Baker, Jr., wrote to Jones and Stasney a letter as follows:

“A good friend of mine owns the Northwest quarter of Section 196, BBB&C Co. Survey Jones County, Texas, about two miles northeast of Leuders. It is in the name of Nina Woodall. Will you please tell me immediately how this looks structurally and tell me what you would do with the property if it were yours. I have no interest in it other than it is owned by a good friend, so any information you can give me will be appreciated.
“I would also like to know if you have heard from Roeser & Pendleton and, if so, what are their plans concerning the well by the Newell lease.
“And to you Mr. Jones, where is my $27.00?
“Best regards to you both.
“Sincerely yours,
“James Blair Baker, Jr."

In reply to said letter, Jones & Stasney, by H. R. Stasney, replied on February 10, 1937, as follows:

“In regard to the northwest quarter of Section 196, BBB&C Co. Survey Jones County, Texas. The Marland Oil Company drilled a dry hole to 2500 feet one and a half miles north and did not have any shows of oil or gas.
“There is not sufficient control in the area to definitely work surface or subsurface geology. There is no production near the tract but several other dry holes as you will notice on the Jones County map.
“If this property was ours (not being farmers) we would probably sell it and retain a little of the royalty.
“Dave Dean was in here the other day and they will drill the well on their tract giving us a direct west offset. They have no doubt moved in by this time. The Elevation of their location is 1718.0. Roeser and Pendleton have agreed to help them.
“Brother Jones is enclosing his check for the sum of twenty-seven dollars. He said do not spend it for whiskey better donate it to the Salvation Army.
“Come see us Baker.
“With best wishes, we are
“Yours truly,
“Jones & Stasney
“By H. R. Stasney.”

It is clearly to be seen that if the allegation so] many times repeated as shown by the foregoing quotation from plaintiff’s petition, was true, to the effect that at the very time Jones & Stasney wrote said letter they had worked out the geology and knew of the existence of a structure, then their statement that “there is not sufficient control in the area to definitely work surface or subsurface geology” was a false statement of a matter of fact. Such falsity was alleged as also perhaps all other elements essential to show a cause of action for cancellation because of fraud, including as two essential elements thereof the fact that such statement was made and the fact of its falsity. There being no issue of fact as to the making of the statement, and, therefore, no necessity, or even propriety, of submitting it to the jury, the issue of its falsity was submitted and found that the statement was not false. A careful reading of all the evidence convinces us that no other conclusion was warranted. The fact, if not conclusively established by the evidence, was supported by the overwhelming weight and preponderance of the evidence, that Jones & Stasney did not know of the existence of a structure. The evidence showed conclusively, we think, that Jones and Stasney had no knowledge of any facts supporting a definite opinion or theory of the existence of a structure in the vicinity of the land in question not known to Baker, the addressee of the letter, and not known by the writers to have been known by Baker. The truth of the statement made in response to the inquiry as to how the land looked structurally was abundantly proved, and hence its falsity, to say the least, was not proved. It results, as to any cause of action alleged, of which the knowledge of Jones & Stasney of the existence of a structure was a material fact, no right of recovery by appellant was shown and the judgment was proper.

It is doubtful, we think, whether any ground of recovery was alleged existing independently of the fact that Jones and Stasney knew of the existence of a structure favorable for the accumulation of oil or gas. As to the correspondence already noted between James Blair Baker, Jr., and Jones & Stasney, plaintiff further alleged that Baker by his letter “made inquiry as to what the prospects were and in reply to that letter Jones & Stasney represented to him * * * that they knew of no oil development in that territory * * Jones & Stasney were then and there planning and conceiving and promoting the acquisition of the acreage covering the structure in question * * * were at the time assembling and seeking to assemble sufficient acreage in the neighborhood of the plaintiff’s land for the purpose of exploration of oil and gas * * * that the representations made to Blair Baker, Jr. by Jones & Stasney that there was no development nor expected development in said area for oil and gas purposes was false” etc. (Italics ours) The representation thus alleged is quite obviously a different representation from the one that “There is not sufficient control in the area to definitely work surface or subsurface geology.” However, it is reasonably clear from the pleadings that the alleged representation to the effect that there was no development, nor expected development, was claimed to have been made in the letter itself. As a matter of law, in our opinion, the letter of Jones & Stasney to Baker did not contain a representation to the effect that there was no development nor expected development. Aside from the letter there was no other evidence of any such representation. No issue relating to such a representation was submitted to or found by the jury, and, of course, very properly so.

Appellant further alleged “* * * that the representations contained in the letter of the defendants * * * to James Blair Baker, Jr. hereinbefore set out are ambiguous and misleading and were made designedly, deceptive and misleading and created upon the plaintiff an impression that her land was not situated upon any structure from which there was a possibility of production of oil and gas. That the defendants knew and intended to create such false impression upon the plaintiff * * * that regardless of the literal truth of the statement in the letter of Jones & Stasney to the effect that there was no definite control the expression was used with the intention of causing the plaintiff to believe that so far as the defendants Jones & Stasney knew there was no possibility so far as they knew for the development of oil and gas, whereas in truth and in fact the words ‘definite control’ were used with the express purpose and intention of misleading and deceiving the plaintiff and causing her to believe that the effect of this statement meant that the property had no indications that it would produce oil or gas. This innuendo was misleading and false as shown by the fact that Jones & Stasney were themselves the prospective purchasers of the land in question and their conduct was inconsistent with the entire tenor of said lease.” (Italics ours)

The part of appellant’s pleadings just quoted was the basis of the special issues requested and refused. It is our conclusion that the “representations contained in the letter” in question were not “ambiguous” or “misleading.” There was no evidence to support a finding to the effect that they “were made, designedly, deceptive and misleading.” While appellant did testify to the effect that three paragraphs of the letter which she saw “created upon the plaintiff” as alleged “an impression that her land was not situated upon any structure from which there was a possibility of production of oil and gas” there was no evidence of any facts to justify such impression, to say nothing of evidence of design on the part of appellees to produce that impression. The only reasonable inference from all the evidence is that Baker knew and Jones & Stasney knew that he knew every geological fact known to them to support a theory of the probable existence of a structure in the area, except, perhaps, some of those truly stated in the letter. The letter supplied to Baker up-to-date information as to the fact evidences of the existence of a structure. The undisputed evidence shows that Baker received no false impression from the letter. Baker’s letter did not, we think, call for expression of any opinion. Knowing that Jones & Stasney knew what Baker knew a year or so before regarding evidences of a structure, Baker, on February 9, 1937, by the letter, merely asked them to “please tell me immediately how this looks structurally.” Baker testified to the effect that he was merely asking them to bring him up-to-date. In addition, instead of asking their opinion as geologists, he requested them to “tell me what you would do with the property if it were yours.” There was no evidence that any of the information given in compliance with the request was not true. There was an abundance of evidence tending to show that it was true. Furthermore, there was no evidence that at the time the letter was written Jones & Stasney were assembling or blocking acreage for a test or that they contemplated doing so.

A reading of all the evidence leads inevitably to the conclusion that but for the letter of Jones & Stasney to Baker this controversy would never have arisen. It was entirely legitimate for appellees to purchase the land through a trustee. The purchasers were under no duty to disclose to the seller any information they may have had affecting the value of the land. Had appellees delayed answer to the Baker letter until after the purchase of the land, there would have existed not a single fact, to say nothing of all the fact elements of a cause of action, upon which to predicate the claim involved in this suit. That much may perhaps be conceded. Having previously begun negotiations for the purchase of the land and in order to acquire it at a price unaffected by a speculative theory of theirs regarding the possible existence of a structure in the vicinity and having determined to acquire the land in the name of another in order to accomplish that result, were appellees upon receipt of Baker’s letter confronted with two absolute alternatives (1) not to answer the letter, or (2) to disclose their highly speculative theory based upon facts known to Baker as well as themselves? This is the real question in the case. If they answered the letter their duty was (1) to answer truly, and (2) answering truly, to do so in such way as to imply no-material false representation. Appellees answered Baker’s letter truly. No material fact known to them was withheld. The facts as they were truly stated implied no-false representation of any other fact. Had appellees as geologists been requested to give an opinion, although they would have been under no duty to do so, yet if they did so, would have had the duty to-give a true or real opinion. A purported opinion contrary to their real opinion may have constituted a false representation, the same as a false representation of a fact. Having truly answered the matters of fact inquired about, were appellees under the duty to volunteer the statement of a mere theory or guess, which, as honorable men, they were unwilling and never did put forth as a definite professional opinion? We do not think so. It seems to us that only upon the untenable theory that before purchasing the land appellees were under the duty to disclose their theory to the seller, could it be said that the failure to-state it in the letter created a false implication, whether of fact or opinion.

Let us suppose that appellees had given Baker the benefit of their theory just as. the undisputed evidence shows they did afterwards give it to Neely when they made the contract with Iron Mountain Oil' Company to drill a well upon a block of leases to be furnished by them at an agreed price. And further suppose that because thereof an otherwise advantageous sale of the land had been declined. Then suppose the mere guess involved in the theory had proved to be wrong. Would appellant have had a cause of action against appel-lees for damages based upon such theory of a false representation resulting in a loss of the advantages of the sale? Clearly, we think, appellant would have had no right to rely upon the statement of such a theory as being a material representation and the basis of fraud. Yet, but for the failure to disclose such a theory it is quite evident this suit would not have been brought. The only reasonable inference from the evidence is that Neely, for his company, the Iron Mountain Oil Company, took a gamble that a particular one of three to six different interpretations of well known geological data was correct. Had he merely performed his original contract obligations no oil or gas would have been discovered and the mineral value of the lands would have remained merely.nominal or speculative to the extent of other lands in Jones County not known to be situated upon structures favorable for the accumulation of oil or gas. About 300 feet above the “Saddle Creek lime” was found a marker inconclusively indicating a “high.” The Saddle Creek formation when reached was found to be high. Then for the first time was the mineral value of the 1 and in suit and lands in the same vicinity affected by real factual evidence of favorable geological structure. Such evidence was not conclusive but sufficient to enable Iron Mountain Oil Company to sell to the Humble Oil & Refining Company a one half interest in the block of leases, Iron Mountain Oil Company agreeing to drill the test well to a greater depth than the original contract provided. Finally the difference between the success that resulted and the failure that might have resulted was the narrow margin represented by lowering the drilling tools into the well for just once more before abandonment. The production was obtained from a horizon which had never been known to produce in Jones County and was generally believed to be unproductive. Appellant reserved a ' one half mineral royalty (not less than l/16th of the total production) in the whole quarter section of land and all the minerals except a one half royalty interest in one half thereof. She leased her land for a substantial cash bonus in addition to $30 per acre to be paid out of 1/4 of 7/8ths of oil if, as and when produced. In order to comply with their obligation to Iron Mountain Oil Company to furnish the contemplated leases necessary for making a test, ap-pellees were required to assume payment of the contingent $30 per acre payment. Presumably without appellees incurring such obligation no test of the area would have been made and no real mineral value of the land would have been discovered. Appellant’s offer to do equity in its last analysis is not to return the $2,500 paid by appellees for the land, saying nothing of the taxes assumed and presumably paid for the year 1937, but to take full advantage of the exploratory operations and the values resulting from the efforts of appelleés at no little cost and expense, by charging them with the consideration received for the lease and the royalty received thereunder and crediting same against said $2,500. It seems to us it would be inequitable under the circumstances of this case to decree a cancellation, even if there were no other obstacles to such action.

Our conclusions as above expressed, we think, dispose of all appellant’s propositions based upon the contention that the court erred in refusing to submit requested special issues. Requested special issue No. 2, had it been given, would -have inquired of the jury whether by a preponderance of the evidence they found that the representations of the defendants contained in the letter in question “were true or false.” It would have been error to submit the question as an issue because there was no issue as to whether the representations, if any, were true. The issue was, Were they false? Under the proposed submission had the jury been unable to say from a preponderance of the evidence that they were true, would necessarily have had to answer that they were false, thus improperly placing the burden of proof.

Proposition No. 8 reads as follows: “The trial court erred in submitting special issues 3, 4, 5, and 6 to the jury and in not sustaining the plaintiff’s objections and exceptions thereto for the reason that said special issues limited the contents of the letter of February 10, 1937 to the single sentence set out in the court’s charge, whereas the misrepresentation is covered by the letter as a whole and the jury should have been instructed to take the letter as a whole to determine the truth or falsity thereof.” There was no limitation of the letter as evidence. According to the pleadings the letter contained more than one representation alleged to be false. Each alleged representation constituted an element in a separate ground of recovery. The burden was upon appellant if the court omitted to submit proper issues to request their submission upon penalty of a waiver of error in the failure to do so. The fault could not be reached by objection to the issues that were given. Harris v. Thornton’s Dept. Store, Tex.Civ.App., 94 S.W.2d 849.

Upon the whole it is our conclusion that the judgment of the trial court should be affirmed and it is accordingly so ordered.


author: LOONEY, Justice. BOND, Chief Justice

text:
    LINCOLN et ux. v. BENNETT.
    No. 12810.
    Court of Civil Appeals of Texas. Dallas.
    Nov. 25, 1939.
    Rehearing Denied Jan. 6, 1940.

      Goggans & Ritchie, John B. Stigall, Jr., and Nathaniel Jacks, all of Dallas, for appellants.
    Lively, Dougherty &: Alexander, of Dallas, for appellee.
   LOONEY, Justice.

James A. Lincoln and wife, Blanche Horne Lincoln (appellants), filed this suit against Dale E. Bennett (appellee) and Hiram F. Lively, seeking the cancellation of three certain deeds of trust, in which Bennett was beneficiary, and for an injunction to prevent Lively, trustee in each of the deeds of trust, from selling lands conveyed as security for certain notes ; two of the deeds of trust conveyed the identical property situated on San Jacin-to Street in the City of Dallas, to secure two notes, one dated July 5, 1926, for $8,-000, and the other dated March 22, 1928, for $2,000. The other deed of trust conveyed a lot on Harwood Street in the City of Dallas, to secure a note for $7,000, dated May 31, 1927.

Lively filed a disclaimer showing that he had no interest in the litigation, other than as trustee in the deeds of trust. Appellee Bennett answered and, in a cross action, sought judgment for the amount due upon the three notes and for foreclosure upon the lands conveyed in trust to secure same.

(Lively was discharged on his disclaimer, and judgment was rendered in favor of appellee on his cross action for the amount due on the $8,000 and $2,000 notes, with foreclosure on the San Jacin-to Street property. The correctness of the judgment in the respects just mentioned is not challenged, hence no further notice will be given these phases of the case.)

The other deed of trust, conveying the lot on Harwood Street, as before stated, was to secure the payment of a note for $7,000, and the only question presented on this appeal is, as to appellee’s right to foreclose the lien of the trust deed on said property, as against appellants’ homestead claim. Both in his answer to appellants’ suit and in his cross action against them, seeking judgment for debt and foreclosure, appellee Bennett alleged that, the note for $7,000 and the deed of trust given upon the Harwood Street property to secure same, were executed for the purpose of renewing and extending a note dated May 25, 1922, in the principal sum of $7,000, payable on May 25, 1927, to G. H. Schoellkopf, which was taken up, renewed and extended by appellee at the special instance and request of appellants, and was duly transferred to appellee by the trustees of the Schoellkopf estate (the payee having died), in consideration of the payment of the $7,000 note held by the estate against appellants. Appellee further alleged that, at the time of the Schoellkopf transaction, and as a part thereof, appellants, on May 22, 1922, duly executed and' acknowledged a homestead designation, designating as their homestead certain other property then owned by them, located on Lindsley Avenue in the City of Dallas, declaring that, the designated property was then held, used and occupied by them as their homestead, and that their homestead claim did not embrace any other lands; that the designation was duly recorded in the deed records of Dallas County, which, together with an abstract of title showing the record of the trust deed, were furnished by appellants to Lively, who, in all the transactions here involved, acted for and on behalf of Bennett, were examined and considered by him before accepting the transfer of the Schoellkopf note and consummating the transaction; that at the time, and as an inducement, James A. Lincoln represented to Lively that the Schoellkopf note was secured by a valid subsisting first 'lien on the Harwood Street property; that same was not appellants’ homestead and was not used and occupied by them as such on May 25, 1922, when the Schoell-kopf note and deed of trust were executed by appellants; that, at the timé of the purchase and extension of the Schoell-kopf note, neither Bennett nor Lively knew or had any notice that, on May 25, 1922, appellants were claiming, using or occupying the Harwood Street property as their homestead, nor of the falsity of the statements made by Lincoln, nor of the falsity of the statements contained in the designation; but, believing and relying upon the truth of said statements by Lincoln, and upon the truth of the facts revealed by the record, that is, the trust deed and the statements recited in the homestead designation, Lively (acting for ap-pellee) was induced to purchase the Schoellkopf note, to renew and extend same, and accept the Harwood Street property as security for the note given in lieu of the Schoellkopf note; also alleged that, appellants fraudulently concealed from Lively, and failed to disclose the true facts respecting the homestead status in May, 1922, of the Harwood Street property, with the intention of inducing him to purchase the Schoellkopf note and trust deed securing same, and to renew and extend the indebtedness, but . for such fraudulent concealment, Lively (acting for appellee Bennett) would not have purchased the Schoellkopf note and accepted from appellants the renewal .note and deed of trust on the Harwood Street property; that Hiram F. Lively (acting for and on behalf of appellee), relying upon and believing the statements of James A. Lincoln, and relying upon and believing the facts revealed by the record and the statements contained in the homestead designation, and because of appellants’ concealment and failure to disclose the material facts, that is, that said property was their homestead and was used and occupied by them as such at the time of the inception of the Schoellkopf loan, was persuaded and induced to purchase said original note and to pay $7,000 therefor, and accept appellants’ note and deed of trust in renewal and extension of the Schoellkopf indebtedness, therefore, appellants are es- ’ topped to assert the invalidity of the original lien.

The cause was submitted to a jury on •special issues. It is not disputed that, at the time the Schoellkopf loan was consummated in May, 1922, the Harwood Street property was the homestead of appellants, and that, the statements contained in their homestead designation to the contrary were untrue, and that all other statements or implications contradictory of the idea of its being their homestead at the time were untrue.

Bearing upon the issue of estoppel, the jury made the following findings: That, at the instance of James A. Lincoln, Judge Lively, acting for and on behalf of Mr. Bennett, purchased the Schoellkopf note, paying therefor $7,000 in cash, and at that time, did not know that, in May, 1922, when the Schoellkopf loan was consummated, the Harwood Street property was being used and occupied by appellants as their homestead; that Mr. Lincoln represented to Lively that the Harwood Street property was not appellants’ homestead at that time, and, furthermore, that the Schoellkopf note was secured by a valid lien on said property. The jury also found that, such representation was believed by Lively, but that it was not relied upon by him.

In view of the undisputed evidence, •we are of opinion that, what the jury meant to say — and that their answer should be so construed — was that, Judge Lively did not rely exclusively upon the statement of Lincoln that the Schoellkopf note was secured by a valid lien on the Harwood Street property. The testimony of Judge Lively, undisputed, is that Lincoln told him the Harwood Street property was not appellants’ homestead in May, 1922, when the Schoellkopf loan was made, represented that the Schoellkopf note was a valid lien upon the property, furthermore, that appellants. had designated the Lindsley Avenue property as their homestead, which, on investigation, Lively found to be true; that these facts, together with the abstract furnished by Lincoln exhibiting a good and valid lien on the Har-wood Street property, securing the Schoell-kopf note, altogether were relied upon, and induced him to take up and extend the note. So,.in view of this undisputed testimony, we think the jury intended to say that, in consummating the loan, Judge Lively did not rely exclusively upon Lincoln’s representation that, the Schoellkopf note was secured by a valid lien upon the Har-wood Street property. No other reasonable interpretation can be given the answer, in view of the undisputed evidence •and the other findings.

However that may be, the jury also found that Judge Lively believed and relied upon the facts stated by appellants in their homestead designation (executed as a part of the Schoellkopf transaction), to the effect that, on May 22, 1922, the Lindsley Avenue property was then occupied, held and used by them as their homestead and that their homestead claim did not embrace any other lands, and further found that appellants failed to inform Lively, at or before he purchased and paid for the Schoellkopf note, that the Har-wood Street property was used and occupied by them as their homestead when the Schoellkopf loan was made.

The parties, respectively, filed motions for judgment on the verdict and, in the alternative, for judgment non obstante veredicto. Appellants’ motion was overruled and that of appellee being sustained, judgment was rendered that, appellants take nothing by their suit, that they were estopped to assert the invalidity of the lien on the Harwood Street property as against appellee, that the injunction theretofore granted be dissolved, that appellee recover on his cross action against appellants, the amount, principal, interest and attorneys’ fees, due and owing on the. note, for foreclosure of the lien on the Harwood Street property, but that the amount for which foreclosure was ordered did not include the attorneys’ fees. From this judgment, appellants appealed. Appellants assert that estoppel, as an answer to a claim of homestead, can be urged only in three instances, that is: (1) Where the use and occupancy of the premises are of such 'nature as to render doubtful its homestead status; (2) where the homestead claimant, in a simulated sale, creates apparently valid vendor’s lien notes, and (3) where the claimant induces a lender to extend or renew an apparently valid mechanic’s lien obligation, by misrepresenting its validity; contending that, as the transaction here involved does not belong to either of these categories, the plea of estoppel cannot prevail as against appellants’ claim of homestead.

We cannot accept appellants’ theory. We do not think that, estoppel as an answer to a claim of homestead is limited and circumscribed, as contended by appellants, but that the fraud, misrepresentation or deceit, underlying and forming the basis of a plea of estoppel — Proteus-like— may assume any form or shape that the ingenuity of those practicing deceit or perpetrating fraud may devise.

There is nothing in the Constitution or Statutes of the State that prevented appellants from creating a perfectly valid lien on land not occupied, used, or claimed by them as a homestead, and that is precisely ■ the nature of the transaction that was simulated in the instant case, and we think the record evidenced a perfectly valid lien. It was so represented to Judge Lively by Mr. Lincoln. The record disclosed the homestead designation, also the trust deed given by appellants to secure the Schoellkopf note; all this, absent any knowledge or notice to the contrary, reinforced by appellants’ silence (when, in good conscience, they should have disclosed to Lively the truth in regard to the homestead status of the property at the time the Schoellkopf loan was negotiated), deceived Lively and induced him to purchase the note from the Schoell-kopf estate, and to renew and extend same under the belief that he was acquiring a perfectly valid lien.

In Garrett v. Katz, Tex.Civ.App., 23 S.W.2d 436, 438, writ refused, we had occasion to review the authorities on the subject of estoppel, and, among other things, said that: “The doctrine is also well settled that, where a void lien emerges from an illegal transaction, such as the one involved in this controversy, the maker will be estopped to set up its invalidity where he has induced a stranger to become its purchaser on representations that asserted its validity. See Buchanan v. Burnett, 102 Tex. 492, 119 S.W. 1141, 132 Am.St.Rep. 900; Cain v. Bonner (Tex.Civ.App.) 149 S.W. 702; Melcher v. Higbee (Tex.Civ.App.) 165 S.W. 478, 481; Moore v. Beakley-(Tex.Com.App.) 215 S.W. 957; Baxter v. Baxter (Tex.Civ.App.) 225 S. W. 204; Farmers’ State Bank v. Welch (Tex.Civ.App.) 279 S.W. 481; Bernstein v. Hibbs (Tex.Civ.App.) 284 S.W. 234; Barron v. Theophilakos (Tex.Civ.App.) 13 S.W. (2d) 739.”

In the instant case, the facts and findings of the jury show that, appellants were silent at a time when they should have disclosed to Judge Lively the homestead status of the Harwood Street property at the time the Schoellkopf loan was consummated, as the validity of the lien securing the note appellants were seeking to have appellee take up and extend, depended upon that fact. Silence giving rise to an estoppel, was also discussed in Garrett v. Katz, supra; quoting from an authority, we said: “ ‘Estoppel by silence arises where a person, who by force of circumstances is under a duty to another to speak, refrains from doing so and thereby leads the other to believe in the existence of a state of facts in reliance upon which he acts to his prejudice.’ 16 Cyc. 680, footnote 10. The doctrine laid down in the foregoing authorities is undoubtedly-approved by our own court. Love v. Barber, 17 Tex. [312], 318; Ragsdale v. Gohlke, 36 Tex. 287; Bynum v. Preston, 69 Tex. [287], 288, 6 S.W. 428, 5 Am.St. Rep. 49; Waggoner v. Dodson, 96 Tex. [415], 423, 73 S.W. 517.”

The facts involved in First Texas Joint Stock Land Bank v. Chapman, Tex.Civ.App., 48 S.W.2d 651, 655, appeal dismissed, were very similar to those involved here. As in the instant case, estoppel was pleaded in answer to a claim of homestead. Disposing of that phase of the case, the court said: “Notwithstanding this emphatic language of the Constitution, it seems now to be the settled law of this state that the homestead of a family may be lost, not on the ground that a conveyance, mortgage, or lien covering the same is valid, but on the ground that the homesteader may estop himself or herself from claiming the benefits of the constitutional provisions.” In other cases presenting the question, the holdings were to the same effect. See Judge v. Shaboub, Tex.Civ.App., 57 S.W.2d 613; McMullan v. San Antonio, etc., Bank, Tex.Civ.App., 78 S. W.2d 669, writ refused.

Appellants also contend that, because they were in possession of the Harwood Street property in 1922 (and at all times since), actually using same as their homestead at the time the Schoellkopf loan was consummated (and since), appellee was visited with constructive notice of the homestead status of the property as it existed at that time.

In Texas Land & Loan Co. v. Blalock, 76 Tex. 85, 13 S.W. 12, 13, the Supreme Court announced a doctrine, now well settled in this state, that: “Every person dealing with land must take notice of an actual, open, and exclusive possession; and when this, concurring with interest in the possessor, makes it homestead, the lender stands charged with notice of that fact, it matters not what declarations to the contrary the borrower may make.”

Under this doctrine, we think that unquestionably, Mr. Schoellkopf was charged with notice of the homestead status of the property at the time his loan was closed, but do not think it follows that Judge Lively (acting for appellee), five years later, was retroactively visited with such constructive notice. The cases in point are against appellants’ contention. The question arose in First Texas Joint Stock Land Bank v. Chapman, supra, and the question of -estoppel involved was disposed of in the following language: “The case before us we think distinguishable from that line of cases which hold that the actual possession of the homesteader will, as notice of his rights, control mere representations in a trust deed or other conveyance in writing, declaring the land occupied free of the homestead right. The trust deed executed in favor of appellant bank recited that the land described was Chapman’s homestead, and the facts show that he was at that time in actual possession. But a good-faith advancement of money with which to discharge the note and trust deed of October, 1918, conferred upon the Houston bank the right by subro-gation to enforce that right, in the absence of notice that the lands involved was occupied as a homestead upon the date of the execution of the 1918 note and deed of trust. * * * So that it was not material to the Houston bank that Chapman and wife were occupying the land in question in July, 1922, the material question being, in order to acquire a valid right by subrogation: Was the land involved the homestead of Chapman and wife in 1918?” While in the discussion the court seemingly mentions the doctrines of subrogation and estoppel as interchangeable, yet it is obvious that, the doctrine of estoppel ruled the decision; the court concluded by saying: “Without further discussion, we conclude that the undisputed evidence shows that the appellees, Chapman and wife, are estopped from claiming the land in controversy was their homestead in October 1918, and the judgment below to this extent will accordingly be reversed and here rendered in favor of appellant, in harmony with such conclusion.”

Similarly, in Judge v. Shaboub, supra [57 S.W.2d 615], the court said: “We overrule the assignments, complaining of the foreclosure of the deed of trust lien. While appellants were occupying the garage and filling station on the 27th day of September, 1929, the date appellee inspected the property and purchased this lien from Voorhies, yet they gave no notice to appellee that they were occupying this lot as their residence or business homestead on the 12th day of January, 1928, the date of the execution of the deed of trust lien. As against the representations in the deed of trust and the statement by appellants that the lien was valid, no presumption arose from the homestead occupancy on the 27th day of September, 1929, that it was so occupied on January 12, 1928.” And, to the same effect, see McMullan v. San Antonio, etc., Bank, supra, where the court used the following language [78 S.W.2d 671]: “In the second place, defendant in error was not charged with knowledge of the actual status of the property at a time several years prior to its transaction with plaintiffs in error. In their application to it for a loan to take up the F. B. Collins Investment Company loan made several years prior thereto, the plaintiffs in error stated that this property had never been their homestead. Various and sundry recorded designations covering a period of years verified this statement. That was a declaration that this property was not their homestead at the time the lien was created in favor of F. B. Collins Investment Company. Defendant in error had a right to rely upon this statement of a fact as to a condition existing prior to that time, and plaintiffs in error could not be heard to say that the statement made by them as to this prior existing fact was false. This question is fully discussed and the authorities analyzed in First Texas Joint Stock Land Bank v. Chapman (Tex. Civ.App.) 48 S.W. (2d) 651. No further citation of authorities seems necessary.” Appellants also contend that Mrs. Lincoln was not estopped by the acts and representations of her husband. We do not deem it necessary to decide the point, because, in our opinion, Mrs. Lincoln’s participation in the proceedings that resulted in the execution of the renewal note and trust deed securing same was sufficient to estop her. However, we know of no reason why Mr. Lincoln, as manager of the community estate, acting alone, could not have estopped his wife by his acts and representations, in obtaining the desired renewal and extension of the Schoellkopf note, based upon the record made by both of them five years before, that is, their homestead designation and trust deed, properly executed, acknowledged and recorded, that together exhibited to Judge Lively a perfectly valid lien upon the Har-wood Street lot. Everything Lincoln is alleged to have represented to Judge Lively was in accord with this five-year-old record, and nothing contradicting it was alleged to have been represented by Lincoln, as an inducement to secure the renewal. However, as just stated, we are of opinion that, Mrs. Lincoln’s participation in the renewal proceedings was sufficient to estop her, independently of any statement by her husband.

The record fails to disclose that Lively or appellee knew or was visited with constructive notice that, at the time the Schoellkopf loan was consummated, five years before, the Harwood Street property was being occupied and used by appellants as a homestead. However, appellants knew that fact, but each remained silent when, we think, good faith and fair dealing required them to disclose to Lively the truth. Instead, they permitted him to rely upon the record, that is, the sham homestead designation, falsely stating that their homestead was on lot 10, block 20, East-side (the Lindsley Avenue property), and that “We do hereby declare that the said land is now occupied, held and used by us as our homestead, and that our homestead claim does not embrace other lands”. Also, in the deed of trust executed to secure appellee in the payment of the renewal note, referring to the record of the original Schoellkopf deed of trust, appellants agreed that the lien created thereby should remain in full force and effect as security for the renewal note. In effect, we think appellants reaffirmed the integrity and good faith of all that had preceded, same being consistent with the idea that the original deed of trust was a valid, subsisting lien upon the Harwood Street property, and inconsistent with any other theory.

Absent knowledge or notice, we do not think Judge Lively was derelict or guilty of negligence, under the circumstances, in failing to inquire beyond the five-year-old record made by appellants, that is, the homestead designation and trust deed that, together, showed conclusively that, the Schoellkopf note was secured by a valid lien on the Harwood Street property. In Guaranty Bond State Bank v. Kelley, 13 S.W.2d 69, 71, (by the Commission), it was contended, as in the instant case, that the wife was not es-topped by the conduct of her husband. Disposing of the contention that the wife was not estopped, the court used language that we think is pertinent here; it said: “It was suggested in the arguments that Mrs. Kelley could not be estopped by anything short of an actual fraud affirmatively committed by her, and it is argued that the fraud of the husband, who consummated the deal- with the bank, could not be imputed to her. The principles thus contended for are sound; but that fraud which will estop a married woman is not necessarily intentional fraud, but rather any intentional affirmative act of hers which operates as a legal fraud, whether so intended or not, will estop her. Here Mrs. Kelley contributed in an active, affirmative way, to the perpetration of a legal fraud. Her intentions may have been, and no doubt were, perfectly harmless and with no actual purpose to wrong 'any one. But in law her conduct amounted to an affirmative representation that she and her husband had, in good faith, conveyed the homestead and reserved the lien thus assigned to the bank. To permit her now to plead the invalidity of the transaction would be to permit a legal fraud.”

Neither do we think Judge Lively was required to investigate as to the truth or falsity of appellants’ statements contained in the homestead designation, executed five years before, but that he could rely upon the records showing homestead designation and trust deed, both presented as inducements to secure the loan to take up and extend the Schoellkopf note. In Eylar v. Eylar, 60 Tex., 315, the Supreme Court, in an opinion by Judge Stay-ton, held that: “A purchaser from a vendee whose vendor remains in possession is not bound to inquire further as to the title, when he finds on record in the county a deed from such vendor conveying title, properly proved up and registered. To hold otherwise would be to strike at the very foundation of the policy on which registration laws rest. When' inquiry as to title is prosecuted to the highest source which affords evidence of the right, there is no obligation to explore inferior and less reliable channels of information. Mullin’s Guardian v. Wimberly, 50 Tex. 457, discussed and distinguished. Van Keuren v. Central R. Co. [38 N.J.L. 165] 9 Vroom [165], 167; Groton Savings Bank v. Batty, 30 N.J.Eq. [126], 133; New York Life Ins. Co. v. Cutler, 3 Sandf.Ch. [N.Y., 176] 179;. Cook v. Travis, 20 N.Y. 400; Bloomer v. Henderson, 8 Mich. 395 [77 Am.Dec. 453]; Scott v. Gallagher, 14 Serg. & R. [Pa.], 333 [16 Am.Dec. 508], cited and approved.” To the same effect, see Buchanan v. Burnett, 102 Tex. 492, 119 S.W. 1141, 132 Am.St.Rep. 900; Moore v. Beakley, 215 S.W. 957, by the Commission; approved by Supreme Court.

Appellants also contend that, since appellee purchased the Schoellkopf note after its maturity, he held the lien subject to all defenses that could have been urged by appellants against Schoellkopf. We do not think so. Although the lien may have been invalid in the hands of Schoellkopf, we think it was enforceable when taken over by appellee, because, not acquired in the usual and ordinary course of business,' but as the result of solicitation by Lincoln, and under circumstances that estop appellants to urge, as against appellee, the defense that properly could have been urged against Schoellkopf. The following decisions, we think, sustain the correctness of this proposition: See Farmers’ State Bank v. Welch, Tex.Civ.App., 279 S.W. 481; Garrett v. Katz, Tex.Civ.App., 23 S.W.2d 436; Little v. Shields, Tex.Com.App., 63 S.W.2d 363.

We have duly considered all assignments, and failing to find reversible error, the judgment of the trial court is affirmed.

Affirmed.

BOND, Chief Justice

(dissenting on rehearing) .

The trend of appellate courts of our state, as well as those of other jurisdictions, to abrogate constitutional provisions to meet exigencies by strained construction and by frivolous, technical, and speculative circumvention, has grown to such an alarming extent that it should be checked. The Constitution means today the same as it did when adopted by the people in conventions, or amended by suffrage. ■ ■

The homestead provisions of our Constitution, Vernon’s Ann. St., were adopted to insure a home for a family — wife and children — safe from debts and speculative loans. If property be homestead in fact and law, the Constitution, in effect, says, without equivocation, that lenders must understand that liens cannot be advanced upon it, and that declarations of the husband and wife to the contrary, however made, must not be relied upon. Article 16, Section SO, provides: “The homestead of a family shall be, and is hereby protected from forced sale, for the payment of all debts except for the purchase money thereof, or a part of such purchase money, the taxes due thereon, or for work and material used in constructing improvements thereon, and in this last case only when the work and material are contracted for in writing, with the consent of the wife given in the same manner as is required in making a sale and conveyance of the homestead; nor shall the owner, if a married man, sell the homestead without the consent of the wife, given in such manner as may be prescribed by law. No mortgage, trust deed, or other lien on the homestead shall ever be valid, except for the purchase money therefor, or improvements made thereon, as hereinbefore provided, whether such mortgage, or trust deed, or other lien, shall have been created by the husband alone, or together with his wife; and all pretended sales of the homestead involving any condition of defeasance shall be void” (Italicized for emphasis.)

It is not contended here that the debt and deed of trust sought to be enforced against appellants’ homestead were creatures of any provision of the Constitution. They were not for purchase money, or any part thereof; they were not for taxes due thereon, or for work and material used in constructing improvements thereon. It is, in effect, conceded, so held by the majority opinion, that the debt and lien sought to be enforced herein were given in renewal and extension of a void lien. Notwithstanding the emphatic language of the Constitution that such lien is void and not susceptible to foreclosure on the homestead, it seems, from the majority opinion, that the homestead of appellants may be lost; not on the ground that the conveyance, mortgage, or lien covering the same is valid, but on the ground that the husband misrepresented the facts; and the wife, in the presence of and under the dominion of the husband, silently stood by and failed to speak when it was her duty to have spoken; thereby the homesteaders are estopped to claim the benefits of the constitutional provision.

It is settled in this state by many decisions, that mere record representations contained in an instrument filed by a wife and her husband, designating certain property as a homestead, without more ado, would not estop the wife and' her husband from asserting homestead rights in other property which had, in fact, been used and acquired as a homestead when the instrument was filed; nor, indeed, is the wife, by her silence, mum in the presence of her husband, estopped to claim her constitutional rights, to avoid the loss of her home through foreclosure of a void deed of trust.

The only ground presented in this appeal for the enforcement of appellee’s deed of trust is one not found in the Constitution or the statute, but in decisions of courts of equity- — denominated “estoppel”. An examination of all such decisions discloses that enforcement by estoppel of a lien against a homestead, not coming within the purview of the constitutional exemptions, is in cases which may be grouped into three general classes (First Texas Joint Stock Land Bank v. Chapman, Tex.Civ.App., 48 S.W.2d 651, 655): “(1) When the owners, not actually occupying the property, or so using it that its status is dubious at the time the mortgage is executed, represent that it is not their homestead; (2) when the owners create a lien by entering into a simulated transaction which has all the outward appearance of a valid, unconditional sale, but which is in fact a mortgage; (3) when the owners represent that existing notes are valid mechanic’s lien notes for improvements, secured by a mechanic’s lien contract properly executed.” The reasoning of the courts is founded on facts showing: either a simulated transaction with all the outward appearance of a valid, unconditional sale, but which is in fact a mortgage; or, out of which simulated purchase money (vendor’s lien) notes result; or simulated mechanic’s lien notes, secured by a mechanic’s lien contract, properly executed; or, a set of facts representing two places, where the homestead character may well be attached to either, according as husband and wife intend. In the latter case, however, the two places are so occupied as to render either capable oí being the homestead, and the actual homestead can only be determined by the expressed intention' of the parties; and, in the other cases of simulated transactions, the result is to create an exemption allowed by the Constitution. It may well be advanced that, unless the facts- show either: (1) That two places are being so used or occupied as a homestead that it is ambiguous as to which one constitutes the true homestead; or (2) a simulated transaction which has all the outward appearances of a valid, unconditional sale, resulting in a purported purchase money note; or (3) simulated mechanic’s lien notes, secured by mechanic’s lien contract properly executed, that any other form of deed of trust, mortgage, or other lien on the homestead is invalid and incapable of enforcement, being inhibited by the Constitution, whether created by es-toppel or otherwise.

In the instant case, the facts do not give rise to an apparent lien consistent with the form o'f those classes of liens which, by the exceptions in the Constitutional provision,' are. valid against the homestead. Appellee extended the loan solely on the representations of the; husband, that the lien in favor of Schoell-kopf ’(appellee’s assignor) was valid and the record representations contained in a filed instrument of homestead designation at another place, contrary to the true facts.

The uncontradicted evidence shows that appellants, together with their daughter, moved into the Harwood Street property (the property in suit) in 1907, used and occupied the same as their homestead continuously, unambiguously and uninterruptedly from that date down to the date of trial. The jury also found that the Har-wood Street property had been, since said date, the uninterrupted homestead of appellants. In 1922, appellants applied to Mr. Schoellkopf for a loan of $7,000, expressed a desire to secure the loan by an unsecured personal note, which was refused ; and, subsequently devised a scheme, suggested by the lender, to give a deed of trust on their homestead as security for the loan and designate, by written instrument, the property on Lindsley Avenue as their homestead, contrary to the facts. In 1926, Mr. Lincoln secured another loan from appellee Bennett in the sum of $8,-000, evidenced by note and deed of trust on property at San Jacinto-Hawkins Streets, in the City of Dallas. The note and deed of trust were prepared by Judge Lively, the trustee named in the deed. íhat deed of trust, among other provisions usual in such instruments, recites: “Said property is not the homestead of the grantor herein, but our homestead is located at Dallas, Texas, on South Harwood Street and this representation is made as a part of the consideration for the loan herein secured.” Thereafter, when the $7,000 Schoellkopf loan became due, Mr. Lincoln approached Judge Lively and requested the loan involved in this controversy, for the sole purpose of taking up the Schoellkopf loan, and, to that end, represented to the Judge that the loan was secured by a valid lien on the property; indeed, a layman’s conclusion of law, which, by all rules of reason, the Judge, an able and. experienced lawyer, was not justified in accepting as true, especially in the face of the above declaration to the contrary in the $8,000 transaction, of which he and appellee were fully cognizant. It is not disclosed that Judge Lively made any inquiry whatsoever as to the basis for the conclusion that the lien was valid, and none was given. The jury found that Lincoln did not represent to Lively that the South Harwood Street property was not his homestead. In the face of all this, the loan involved in this suit was eventually consummated, appellee paid the money to Schoellkopf for his note and deed of trust, which were duly transferred; and, in turn, the note and deed of trust involved here were executed and delivered in lieu of and in renewal and extension of the original Schoellkopf loan. Thus it will be seen that appellee acquired by the transaction, no better security than his predecessor had.

It is settled law that persons dealing with land must take notice of an actual, open, and exclusive possession concurrent with interest in the possessor, which makes the land a homestead; a lender loaning money to persons in possession stands charged with notice of the homestead rights, irrespective of declarations to the contrary made by persons in possession. Nixon et al. v. Hirschi, Tex.Com.App., 132 S.W.2d 89.

In the case of Texas Land & Loan Company v. Jas. A. Blalock et al., 76 Tex. 85, 13 S.W. 12, 13, Chief Justice Stayton, after observing that the declaration in an application for the loan recited that the property was not the homestead of the applicant, said: “ * * * Here nothing was hidden. Possession was open, certain, and in character in no respect ambiguous. It was such as gave homestead right, and the lender cannot be heard to say that it did not know it. The constitution forbidding the fixing on the homestead of liens other than such as are thereby expressly permitted, no estoppel can arise in favor of a lender, who has attempted to secure a lien on homestead in actual use and possession of the family, based on declarations of the husband and wife, made orally or in writing, contrary to the fact. To hold otherwise would practically abrogate the constitution.”

It will serve no useful purpose to cite numerous authorities condemning loans of this nature. Indeed, the pronouncement of Judge Stayton in the above case has become a rule of property in this state. In the very recent case of the Commission of Appeals’ opinion, written by Judge Taylor, approved by the Supreme Court, Nixon et al. v. Hirschi, 132 S.W.2d 89, 92, the contention of appellee is put to rest. The disposition of this appeal may well stand on the reasoning and conclusions stated in that opinion. After quoting from many decisions on cognate questions, the Commission of Appeals, in that case, said: “The fact that the holding of this. Court reflected in the above excerpt from the Blalock case has for many years been a rule of property in this State, is sufficient reason for declining to overrule it. Furthermore the Court shares the view expressed by Chief Justice Stayton that holding otherwise would abrogate that provision of the Constitution, Vernon’s Ann.St.Const. art. 16, § SO, declaring that no mortgage, trust-deed, or other lien on the homestead shall ever be valid except for the purposes therein stated, by ultimately rendering such provision ineffective.”

To hold, as in the majority opinion, that today a lien on a homestead is void and unenforceable, but may become valid and enforceable tomorrow, is a dangerous precedent, leaving wide open the door to abrogate the Constitution. Analysis of the holding shows that a lender may knowingly loan money on a homestead inhibited by the Constitution, hold its enforcement for a term, then assign the void and unenforceable lien to another, and, on representations of the homesteaders in the first instance that the lien is valid, such representations give to the subsequent assignee an enforceable contract, on the theory of equitable estoppel. In other words, equity breathes life into a transaction which otherwise lacks vitality — void under the law. It is a rule well recognized in this state that, the principles of equity will not invade any constitutional guaranty, or abrogate, or modify any positive law. It is elementary and fundamental that no equitable relief may be granted, where a legal or statutory right is positively declared. As in the Blalock case, supra, expressly approved in Nixon v. Hirschi, supra, * * * nothing was hidden. Possession was open, certain, and in character in no respect ambiguous. It was such as gave homestead right, and the lender cannot be heard to say that it did' not know it”. No estoppel arises in favor of the lender under the facts of this case. While reluctant to differ with my associates, yet sincerity dominates my action. ‘The judgment of the court below should he reversed and rendered, granting the injunction.

Dissent.


author: GRISSOM, Justice.

text:
    TWIN CITY FIRE INS. CO. v. TURNBOW.
    No. 1962.
    Court of Civil Appeals of Texas. Eastland.
    Dec. 15, 1939.
    Rehearing Denied Jan. 12, 1940.

      Stinson, Hair, Brooks & Duke, of Abilene, for appellant.
    Scarborough & Ely, of Abilene, for ap-pellee.
   GRISSOM, Justice.

L. F. Turnbow instituted this suit in a justice court of Taylor County against Twin City Fire Insurance Company. The insurance company, after pleading defensively, filed a cross-action against Turn-bow on a note for $14.70, given for the premium on the hail insurance policy upon which plaintiff bases his suit. The case was appealed to the county court of Taylor County. Judgment was there rendered for Turnbow against the insurance company for the sum of $80, and for the insurance company against Turnbow for the sum of $14.70, “each to be offset against the other.” Said judgment further recites: “It is therefore the ruling of this court that the plaintiff * * * do have and recover of and from the defendant * * * the sum of $65.30 * * *.”

The insurance company has appealed.

The plaintiff (appellee) challenges the jurisdiction of this court. Article 1819, R. S. 1925, (as amended by Acts 1929, 41st Leg., p. 68, ch. 33, § 1) Vernon’s Ann.Civ.St. art. 1819, provides: “The appellate jurisdiction of the Courts of Civil Appeals shall extend to all civil cases within the limits of their respective districts of which 'the District Courts and County Courts have or assume jurisdiction when the amount in controversy or the judgment rendered shall exceed One Hundred Dollars exclusive of interest and costs.”

In connection with said contention .plaintiff states that under said rule, even though the amount sued for does not exceed $100, exclusive of interest and costs, if the value of the security on which foreclosure is sought exceeds the sum of $100 this court has jurisdiction. We agree with plaintiff’s statement of the rule, but we are of the opinion that the allegations of defendant’s cross-action bring it within said rule. Plaintiff’s suit' in the county court was for $80 damages, alleged to have been caused by hail. Defendant’s cross-action was based on the note and mortgage; defendant sought foreclosure of its mortgage lien on plaintiff’s oat crop, and that relief. was improperly denied. The value of the mortgaged property was alleged in defendant’s cross-action as follows: “Defendant here alleges that the reasonable value of said oat crop is the sum of $150 and that the said defendant here prays the court for foreclosure of its mortgage lien * * (Italics ours.)

The question of jurisdiction is to be determined “by the averm'ents in the petition in so far as they state facts in relation to the thing in controversy; and this is true, regardless of the truth of the allegations, unless it is made to appear by pleading and proof that the allegations as to jurisdiction were fraudulently made.” Booth v. Texas Employers’ Ins. Ass’n, 132 Tex. 237, 123 S.W.2d 322, 327. Since the amount in controversy is to be determined by the pleadings, and defendant in its cross-action alleged the value of the mortgaged property at the time of the institution of the suit was $150, we think this court has jurisdiction of the appeal. Plaintiff’s (appellee’s) cross-assignment is therefore overruled.

The insurance policy in question was in the sum of $200. Paragraph 22 of the policy provides, in substance, that in the event the insured crop is damaged by hail the amount payable under the policy shall in no event exceed the actual loss or damage sustained by hail. Paragraph 5 provides: “If this policy covers grain crops other than corn, no liability attaches until at least 75 per cent of the plants have jointed.” There was no proof that at the time plaintiff’s oat crop was damaged by hail that 75 per cent of the plants had jointed. Defendant contends that in the absence of proof of such fact, under said contract provision, liability of the insurance company is not shown. We know of no rule of law that prevents the making of such a contract with liability of the defendant, in any event, contingent upon the injured plant being in a certain state of growth or development at the time of the injury or damage. The parties have so agreed in this instance. Potomac Ins. Co. v. Easley, Tex.Com.App., 1 S.W.2d 263; Federal Surety Co. v. Smith, Tex.Com.App., 41 S.W.2d 210, 213; John Christensen & Co. v. McNeil, Tex.Civ.App., 251 S. W. 351; Superior Lloyds of America v. Boesch Loan Co., Tex.Civ.App., 130 S.W. 2d 1036; 24 Tex.Jur. 1061. The policy here sued on does not contain an agreement fixing the value of the crop per acre and providing for payment for loss and damage on the basis of such value as the policy did which was considered in St. Paul Fire & Marine Ins. Co. v. Pipkin, Tex.Civ.App., 207 S.W. 360, 361.

There was evidence that the plaintiff’s oat crop was damaged by hail to the extent of 40 per cent or more. There was no other proof of the amount of damages suffered by the plaintiff. The petition alleges the hail insurance policy insured plaintiff “against loss by hail to ten acres of oats in the total amount of $200 * * *It alleged that the oat crop had been damaged in the amount of 40 per cent of said total amount. Appellant’s second assignment of error is to the effect that, there being a total absence of evidence showing the difference between the value of the oat crop before and after the hail, proof, under such a policy, merely that the crop had been damaged 40 per cent was insufficient to authorize a recovery of damages. The contention is sustained. In 13 Tex.Jur. p. 44, 45, the applicable rule is stated as follows:

“In case of partial injury to a crop, the measure of damages is the difference between the value of the property immediately before and immediately after the injury * * *
“In arriving at the value of a growing crop which has been injured or destroyed, it is proper to consider evidence showing the probable yield, under proper cultivation, the value of such yield when matured and ready for sale, and also the expense of cultivation, gathering, .preparation and transportation to market.”

Also, see International & G. N. Ry. Co. v. Pape, 73 Tex. 501, 11 S.W. 526; City of Amarillo v. Ware, 120 Tex. 456, 40 S.W.2d 57, 62; Shell Pipe Line Corp. v. Harris, Tex.Civ.App., 68 S.W.2d 236, 237; Galveston, H. & S. A. Ry. Co. v. Borsky, 2 Tex.Civ.App. 545, 21 S.W. 1011, 1012; Abilene & S. Ry. Co. v. Herman, Tex.Civ.App., 47 S.W.2d 915, 919.

Defendant’s said assignments of error are sustained. There are no other errors assigned which need arise upon another trial and, since the judgment must for the reasons stated be reversed, they will not be discussed. The judgment is reversed, and the cause remanded.