author: WALTHALL, Justice.

text:
    TARVER et al. v. BRACKEN et al.
    No. 3872.
    Court of Civil Appeals of Texas. El Paso.
    Nov. 24, 1939.
    Rehearing Denied Dec. 21, 1939.

      W. H. Jack, Jr., R. L. Dillard, Jr., and Saner, Saner & Jack, all of Dallas, for appellants.
    Henry H. Harbour and Wynne & Wyn-ne, all of Longview, for appellees.
   WALTHALL, Justice.

This appeal is prosecuted from a directed verdict for the defendants in the trial court (appellees here) against the plaintiffs (appellants here), and upon which directed verdict judgment was rendered.

This suit was brought on March 28, 1937 in the 71st District Court of Gregg County by A. H. Tarver and others, as plaintiffs, owners of a certain 28 acre oil and gas lease' in Upshur and Gregg Counties, against J. A. Bracken and others, as defendants, who own an overriding royalty interest in the same lease as that of plaintiffs. The suit by plaintiffs is to recover of defendants the amount or value of the oil run from oil wells, which defendants collected and retained prior to the time of the filing of the suit, and to remove as a cloud on the title to plaintiffs’ leasehold estate the defendants’ claim to a one-eighth overriding royalty interest.

The respective claims of both plaintiffs and defendants depend upon the meaning and legal effect of an assignment of said oil and gas lease, of date May 25, 1931-, from J. A. Bracken et al. to W. S. Randall et al., under whom the plaintiffs claim; and particularly whether, under such assignment, defendants are entitled to receive one-fourth or one-eighth of the leasehold oil produced, where actual production has been reduced, not by any hindering or preventing cause for which plaintiffs are responsible, but solely as the result of the operation of the conservation and proration statutes of the State of Texas and orders of the Railroad Commission in the enforcement thereof.

The case was tried before a jury, and at the conclusion of plaintiffs’ case, upon a motion by defendants, the trial court directed a verdict for defendants and against plaintiffs and upon such directed verdict the court rendered judgment, from which this appeal is prosecuted.

Plaintiffs having alleged that their right to recovery depended upon the assignment of the oil and gas lease above referred to, the pertinent portion of the assignment is here stated: For the same consideration stated and received, and. “other valuable consideration herein reserved unto the assignors,” the assignors bargain, sell, grant, transfer, assign and convey all rights, title, and interest in and to the lease and all rights thereunder insofar as it covers the lands described, together with the personal property used or obtained in connection therewith, to Bracken et al., “except,” and the part of the assignment we copy is the part following the exception. The contract embracing the exception reads:

“The assignors retain and reserve unto themselves as an overriding royalty, the equal one-fourth part of the lessee’s proportionate part of the oil and/or gas produced, saved and marketed from the leased premises, or the market value thereof at the option of the assignee, until the full open' production of the well or wells to be drilled thereon shall decline to two hundred fifty barrels per day each, when and at which time, the overriding royalty therein reserved unto assignors shall decline to one-eighth of the lessee’s proportionate part of the oil and/or gas produced, saved and marketed from any such well or wells, or the market value thereof at the option of the assignees and the other one-eighth thereof hereinabove reserved shall itnme-diately and without the necessity of any further conveyance, pass to and vest in the assignees, their successors and assigns, as fully and to the same extent as if the same had been originally conveyed herein and no reservation thereof made.' It is the intent of this instrument that the assignors shall receive a royalty of one-fourth of the lessee’s proportionate part of the oil and/or gas produced, saved and marketed from each and every well upon the premises producing more than two hundred fifty barrels of oil per day, and a royalty of one-eighth of the lessee’s proportionate part of the oil and/or gas produced, saved and marketed from each and every well upon the premises producing less than two hundred fifty barrels of oil per day. The term ‘day,’ as used herein is a day of twenty-four hours and in arriving at whether or not any well upon the premises has declined to less than two hundred fifty barrels per day, the same shall be continuously pumped or otherwise produced for three full days and the average production thus obtained shall be considered the correct daily production from said well. Such test to be made in the presence of a representative of both parties hereto if they so desire. * * *
“The assignee shall at all times have the right to market any and all oil and/or gas produced upon the premises, payment of assignor’s proportionate part -of the proceeds thereof to be made directly to assignors upon division order, by the pipe line company or other purchasing agency running and purchasing the oil and/or gas produced, saved and marketed thereon, free, clear and discharged of all cost or expense to the assignors; it being further understood that no liability shall 'ever attach to the assignees, their heirs, successors or assigns by reason ■ of their failure to produce from the premises any given quantity of oil and/or gas, or to continue the production thereof for the benefit of the assignors.”

It seems to be undisputed and admitted facts that plaintiffs drilled five wells on the lease and property and fully equipped them to produce to full capacity, but under regulations of the Railroad Commission of Texas, production from the wells was limited to the number of barrels per day as specified and set forth in the exhibit, and conforming to the rules for production as permitted none of the wells have in fact produced as much as two hundred fifty barrels per day from September 5, 1931 to the trial. It is not questioned that plaintiffs have acted diligently and efficiently in seeking to produce the allowed maximum of oil from the wells. It is admitted that defendants received the proceeds of one-fourth of the leasehold production from September 5, 1931 to March 31, 1937. Since the last stated date the pipe line company purchasing the production has withheld the one-eighth interest in dispute.

Plaintiffs plead all.the above facts, and in addition pleaded: (1) that the contract (the assignment above quoted) is plain and unambiguous and the intention of the parties, as shown by the contract, is that the amount of the overriding royalty is to be determined by the actual production of oil from said wells, in the absence of any negligence or hindering and preventing cause on the part of plaintiffs; and that because of proration, the actual production since September 1, 1931, has been less than two hundred fifty barrels per day; (2) that the contract was entered into in contemplation of the right of the State in the exercise of its governmental powers and in the conservation of the natural resources to control the production of oil; consequently, ‘ the legal effect of the contract is that the amount of the overriding royalty was and is to be determined by the actual production of oil from said lease by the plaintiffs in the orderly operation of the wells, the plaintiffs acting diligently and efficiently.

It is plaintiffs’ contention, as expressed in the above statement in their pleading as to the legal effect of the contract and as contended in their propositions, that plaintiffs’ overriding royalty reserved unto themselves was to be determined .by the actual production of' oil from the wells in the absence of any hindering cause for which plaintiffs are responsible and not solely by the wells’ potential capacity for production; that where the assignment contract provides that it is the intention of the instrument that the overriding royalty shall be one-fourth • of the oil produced, saved and marketed until the production declines to two hundred fifty barrels per day, at which time the royalty shall decline to one-eighth of such production, the contract, by reason of such provision, does not provide that the royalty interest can only be reduced by a failure in natural producing capacity, but stipulates for a reduction where there is a decrease in actual production, whether through natural failure or other causes for which the operators are not responsible, and appellants suggest that such would be particularly so where the contract further expressly states the intention of the parties that the royalty shall be based on the amount of oil actually produced.

Appellants reason from the above statements that where the actual production has been reduced by proration orders, the trial court erred in refusing to enforce the contract provision for reduction of the royalty, and on the contrary instructing a verdict based on the assumption that the royalty is only determined by capacity for production regardless of proration restriction. Appellants further submit that where the contract expresses the intention that the royalty reserved shall be based on the actual production, a further provision in the contract that where the production shall decline to two hundred fifty barrels per day, the royalty shall decline to a lesser fraction, does not manifest the intention that the royalty is reduced solely by decrease in natural capacity for production, but indicates the intention that the maximum amount of actual production shall not be reduced by any cause for which the operators are responsible.

While plaintiffs have other propositions stating their contentions, they seem to us only to amplify what is stated above.

Controverting the above, appellees submit that a contract or assignment, as here, unambiguous in its terms, is to be construed according to the intent and meaning of the parties as expressed in the language of the entire instrument; that the court cannot ascribe a different meaning to words, phrases or sentences contained in such contract than the parties themselves have indicated or defined; that the meaning of a word or phrase used in a contract when the meaning is stipulated as to its meaning such must prevail even over the usual or ordinary meaning; that the contract provides that the overriding royalty shall be one-fourth part of the oil produced, saved and marketed from the leased premises, “until the full, open production of the well or wells to be drilled thereon shall decline to two hundred fifty barrels per day,” and providing that a day is twenty-four hours, and that in arriving at whether or not any well upon the premises has declined to less than two hundred fifty barrels per day, the wells shall be continuously pumped or otherwise produced for three full days, and the average production thus obtained shall be considered the correct daily production from the wells. Ap-pellees submit that such provision in the contract manifestly intended that such provision should be considered the only test as to production.

Appellants do not contend the pumping test when applied would not determine the correct daily production, but submit, as stated, such pumping test was not the only one provided in the contract.

There is no allegation in plaintiffs’ pleading, nor have we found in evidence any proof, of any natural decline in production or any test made of a decline in production by pumping as specifically provided in the contract. Actual production has decreased below two hundred fifty barrels of oil per day because of proration, but not otherwise, so far as the petition alleges or the evidence shows. '

We think the difference in the verbiage of the contract here and the verbiage of the contract in Butler v. Jenkins Oil Corporation et al., Tex.Civ.App., 68 S.W.2d 248, 249, and reviewed by the Commission of Appeals in 128 Tex. 356, 97 S.W.2d 466, distinguishes this case from that. The Butler case is more nearly in point than any case we have found, and we refer to it more at length than we otherwise would. In the Butler case the contract provides: “The undersigned Roy Jenkins, the present owner of said lease and all rights thereunder incident thereto, does hereby bargain, sell, transfer, assign and convey all rights, titles and interest of the original lessee and present owner in and to said lease and rights thereunder, insofar as it covers a one-sixteenth overriding royalty out of the leaseholder’s seven-eighths, said one-sixteenth overriding royalty to cover the oil, gas and other minerals in and under .all of the above described thirty acre tract of land, more or less, to be paid on such basis as long as each well upon said lease produces one hundred ninety barrels, or more per day, to be based upon an average of fifteen days. In the event said well or wells produce less than one hundred ninety barrels per day each to be based upon an average of fifteen days then said overriding royalty shall be one thirty-second interest, the above royalty interest to he computed on each well separately.”

■ After the contract, the producing wells in the Butler case, by reason of the pro-ration, were not permitted to produce as much as one hundred ninety barrels per day. The question in the Butler case was whether Butler, in view of the fact that the wells were not permitted, by reason of the proration,, to produce one hundred ninety barrels per day, was limited to only a one thirty-second royalty, or whether the contract contemplated that one-sixteenth royalty should be paid on actual production, or capacity for production, as if no proration or other orders limiting production were made. The trial court held that the contract was not ambiguous, and excluded parol proof to vary its terms, and the Court of Civil Appeals upheld that ruling and further held that the construction of the contract was to the effect that the royalty was to be paid on the basis of actual production rather than possible production.

The Commission of Appeals said that while that court was not required to pass on the construction of the contract, the court stated as its opinion that the contract was entered into in contemplation of pro-ration in the interest of conservation, and that the amount of royalty was to be determined by actual production and not on the basis of capacity for production, and affirmed the case.

In the Butler case the payments under the contract for oil from the well were to be made on “production” merely; while in the present case the assignors in the contract “reserve unto themselves as an overriding royalty (and not conveyed) the •equal one-fourth part of the lessee’s proportionate part of the oil * * * produced, saved and marketed * * * until the full open production of the well or wells to be' drilled thereon shall decline to two hundred fifty barrels per day each, when and at which time the overriding royalty therein reserved unto the assignors shall decline to one-eighth of the lessee’s proportionate part of the oil and/or gas produced, saved and marketed,” and that the other one-eighth reserved immediately passes to and vests in the assignees. Without quoting the contract further, it restates in part what the assignor shall receive. The contract then provides the method for determining “whether or not any well upon the premises has declined to less than two hundred fifty barrels per day.” It will be noted in the Butler case that the question there was that the amount to be paid for the interest conveyed was based on and payments continued as long as the wells produced a stated amount, while in the present case the contract reserves title to the interest conveyed until there is a decline in production, which decline in production was to be determined by a specific test, that is, in one contract payments ceased on production, in the other title ceased on decline in production evidenced by test applied. In neither case is proration specifically referred to in the contract.

Appellants in argument refer to that part of the contract beginning with the words: “It is the intent of this instrument,” and continuing through that sentence, and say, “this provision of the assignment is independent of and in addition to the rest of the contract, and full effect should be given to the language used.” Appellants point out that in that sentence no reference is made to a “decline” or to “full and open production” or to “capacity to produce.”

We do not think the sentence is independent of, or in addition to, the rest of the contract, but it is, as it seems to us, a reference to the early part of the exception and reservation and makes only a briefer statement of the intent of the parties, but we are of the opinion that it does not state a contract different or one in conflict with the other parts. The previous part of the contract and the sentence stating the intent of the instrument each refers to the production per day. The contract then states the meaning of the term “day,” as used in the contract and provides the manner of determining whether any well has declined to less than two hundred fifty barrels per day. The contract states what the parties meant by daily production and how it is determined.

The contract in the present case, as we view it, is materially different from the contract in the Butler case, in that, in the Butler case the parties contracted •only with reference to actual production ■of oil to which proration specifically applied with the view to limit production and thereby prevent waste. Here, as in the Butler case, the production of oil in the wells is controlled by the Railroad Commission, but, as we construe the entire •contract, appellants’ royalty interest reserved is not determined by the actual production limited by proration, but such right of recovery is conditioned and determined upon the well or wells failing by natural decline in production to produce an average of two hundred fifty barrels of oil per day, such capacity of production to be ascertained as provided in the contract.

Appellants do not deny that such is a plain and express provision of the contract but allege that it is also the intent of the instrument that the amount of the royalty reserved and not assigned is the actual production determined in the orderly operation of the wells. We do not concur in .appellants’ interpretation of the contract. Manton v. City of San Antonio, Tex.Civ.App., 207 S.W. 951; Midas Oil Co. v. Whitaker et al, Tex.Civ.App., 123 S.W.2d 495; Spinks v. First Christian Church of Vera, Tex.Com.App., 273 S.W. 815; McGavock v. Virginia-Carolina Chemical Co., 114 Tenn. 317, 86 S.W. 380, 381.

The case is affirmed.

On Motion for Rehearing.

Appellants have filed a very forceful motion for a rehearing and in the motion ■say this court, in determining the legal effect of the contract, wholly failed to give any consideration to the situation of the parties and the obvious nature and object •of their agreement, and failed to give any ■consideration to appellants’ contention that the contract then under consideration was entered into in contemplation of the right •of the Railroad Commission to control the production of the oil wells referred to in the contract.

We think the opinion itself, though imperfect in many respects, negatives the above statements.

At the time the assignment was entered into, May 25, 1931, authorized production of oil in the East Texas Oil Fields was limited to production of seven hundred fifty barrels per well per day. The parties entered into the contract with full .knowledge and in view of and in contemplation of any action the Railroad Commission had then made or would thereafter make in the production of oil in the wells. Whether the past action of the Railroad Commission or a possible future action influenced the parties in entering into the terms of the contract would be wholly speculative, the contract making no reference to the Railroad Commission, its action, or any possible action, in limiting oil production.

Plaintiff pleaded, and we think correctly, that the contract was not ambiguous, which statement in the pleading and our construction of the contract itself led us to the conclusion that the contract was without a doubtful or equivocal meaning, uninfluenced by any action taken or to be taken by the Railroad Commission or any other body.

The contract being unambiguous, it could have but one meaning, and that meaning expressed in the contract itself.

The appellees in making sale of their overriding royalty interest in the lease retained and reserved to themselves the interest described until the full, open production of the well or wells to be drilled should decline to amount stated, when and at which time, evidently at such time when the open flow of oil in the well or wells should decline to the amount stated and agreed upon, the interest retained and reserved should pass to and vest in the assignees.

We cannot escape the conviction that the parties had in mind the capacity of the well or wells to produce oil to the extent of two hundred fifty barrels per day, and did not have in mind and contract with reference to any action the Railroad Commission might fix or limit in production. No test would be necessary to determine the production of oil limited and fixed by the Railroad Commission. We must consider the whole contract and not a part of it only.

To determine the time when and the circumstances under which the royalty interest should pass to the grantees the parties in the assignment agreed to ascertain the extent of the decline in the possible oil production of the well or wells by continuously pumping for three full days, and the average production thus obtained should be considered the correct daily production in determining the decline in oil production.

We have concluded that the proper result was reached in the opinion, and that the motion should be overruled, and it is so ordered. '


source: Caselaw Access Project

author: WILLIAMS, Justice.

license: Public Domain

text:
    GEYER et al. v. ORTIZ OIL CO.
    No. 5473.
    Court of Civil Appeals of Texas. Texarkana.
    Nov. 21, 1939.
    Rehearing Denied Dec. 7, 1939.
    Storey, Sanders, Sherill & Armstrong, of Dallas, for appellants.
    J. E. Hall, John Davenport, and Arthur Tipps, all of Wichita Falls, and McDavid & McDavid, of Henderson, for appellee.
   WILLIAMS, Justice.

Adolph A. Geyer, Will Thompson, Mrs. J. A. Ferguson, Augusta Nichols, and R. G. Storey, the owners of %o, ⅜, ⅜, ⅛, and 9¾040, respectively, of the oil and gas royalty interest under a leasehold estate called the Tolliver lease in the Juan Zimines Survey in Rusk County, sued the Ortiz Oil Company, the owner and operator of the % leasehold estate, fortheir proportional part of the market value of 303,899 barrels of crude oil which they allege the defendant produced, sold and converted to its own use from the lease (during December 1933 through 1934, and in April 1935) in excess of the amount allowed by the rules and regulations of the Railroad Commission of Texas. n

In addition to a general demurrer and general denial, defendant pleaded and urged as a defense that the excess oil was not as marketable as the allowable oil but was sold for the highest market price obtainable, and checks at numerous times were issued by the Ocean Oil Company and the Louisiana Brokerage Company to plaintiffs for their pro rata part of the excess oil which plaintiffs accepted and cashed. That during this same period plaintiffs received regularly checks from a pipe line company for their pro rata part of the allowable oil. That plaintiffs knew, or could have known by the use of reasonable diligence, that they were being paid for excess oil by-the checks issued by the Ocean Oil Company and the Louisiana Brokerage Company. That they should now be estopped from recovering any additional amount for above reason, and for the reason that they agreed to, acquiesced to, and participated in the production of excess oil, and since the same was produced in violation of the Railroad Commission’s orders, plaintiffs cannot recover .any sum other than that already paid.

Plaintiffs replied with general demurrer, ■special exceptions, general denial, and further answered that these were, fictitious concerns dominated and controlled by defendant for the purpose of running excess •oil, of which plaintiffs had no knowledge, and the checks by them did not disclose what amount, price, or kind of oil same covered.

In response to special issues the jury found: (1) That the Ocean Oil Company and the Louisiana Brokerage Company were fictitious purchasers and defendant used such names in disposing of excess oil from the lease; (2) that each plaintiff knew, or could have known by the exercise of reasonable diligence, that the checks received and cashed by him or her represented excess or illegal oil; (3) that each of the plaintiffs accepted the checks tendered in full satisfaction of his or her portion of the excess run from the lease; but (4) that at the time the plaintiffs cashed said checks from Ocean Oil Company and Louisiana Brokerage Company they were not advised of, or by the exercise of reasonable diligence could not have ascertained the amount of excess oil run or the price being paid therefor.

The verified reports made by defendant to the State Comptroller discloses the amount of allowable oil produced during the period and sold to Century Refining Company which remitted by check monthly for the allowable at the posted price of $1 per barrel. ’ Recovery for any allowable oil is not involved in this suit. The reports reveal and defendant admits it had produced in the same months 297,899 barrels of oil in excess of the amount allowed by the rules .■and regulations of the Railroad Commission of Texas, such excess being colloquially known as “hot oil.”

It is to be observed from pleadings herein detailed that defendant urged an accord and satisfaction. The court entered judgment in favor of defendant grounded upon this theory of defense. Plaintiffs by proper objections, exceptions and assignments assert that the court erred in not sustaining plaintiffs’ motion for instructed verdict at the close of the evidence, and in refusing their motion for judgment non obstante veredicto; and in the alternative, urges a conflict in the jury findings.

May 2, 1934, defendant filed its first production reports. This covered the previous months of December, January, February, and March, and showed 82,352 barrels of hot oil produced, of which 13,849 barrels were sold to Ocean Oil Company and the remainder to Century Refining Company, Golden Oil Company, and Tyler Pipe Line Company. The first remittance any plaintiff received other than the checks from the Century Refining Company for the allowable oil was in the form of a cashier’s check which was mailed from Shreveport on or about March 24, 1934. No data accompanied this remittance to reveal what it was in payment for or from whom it came. Defendant claims such cashier’s checks were remittances of the Ocean Oil Company.

Defendant produced from the lease in July, August, and September, 1934, and reported sold to Century Refining Company 36,777 barrels; Ocean Oil Company 37,-767 barrels; and Louisiana Brokerage Company 46,326 barrels of excess oil for $41,207.64. Reports covering these months were filed in September, October, and November. On or about October 27, 1934, plaintiffs received their first checks from Louisiana Brokerage Company. Checks of this date, which aggregated $1,154.19, do not cover plaintiffs’ pro rata part, even at the price defendant reported same sold for. Production of 70,998 barrels in October, and 3,471 barrels in December was reported in January, 1935. Onava Oil Company received the December oil. The amount of 20,208 barrels produced in April was reported in June 1935. Each plaintiff received his second check from Louisiana Brokerage Company on November 20, 1937, and continued to receive small remittances from the same source through January, May, June, August and September, 1935. No report filed by defendant shows any production from the lease for the last mentioned months. No showing is made that the Onava, Golden, or Century Companies ever remitted to plaintiffs for any of the excess oil so reported sold to them. Plaintiffs were never furnished any memorandum or statement which revealed anything about the amount of oil involved, when produced, how produced, or price for which it was sold. The checks issued by Louisiana Brokerage Company did contain a clause reading: “This check is in full settlement of account as shown hereon. Acceptance by endorsement constitutes receipt in full.” There was no “account as shown hereon.” Also Louisiana Brokerage Company did enclose a memorandum which read: “The enclosed check is in payment of your net royalty interest for oil purchased from the Tolliver lease for the month of October 1934”; others of similar reading were issued for September and December 1935.

Some of the plaintiffs went to Shreveport to ascertain from the Ocean and Louisiana Brokerage Company what these early remittances covered. Neither concern could be located. Subsequently a lawyer out of Tyler, to whom they were directed, promised to send plaintiffs 'statements for such oil sold, showing the price and amounts and whether or not the remittances were for allowable oil, but this was not done. Plaintiffs later cashed and retained these remittances. Judgment in favor of the State of Texas against defendant for penalties for producing excess oil was entered in October or November of 1936. After some correspondence and demand for an accounting plaintiffs filed suit in June 1937.

Admitting that plaintiffs knew, or could have known by the exercise of reasonable diligence, that the checks received represented excess or illegal oil, as found by the jury, plaintiffs were never informed for what amount of oil or the price the remittances purported to cover. Correctly did the jury find that at the time plaintiffs cashed said remittances they were not advised of, or by the exercise of reasonable diligence, could not have ascertained the amount of excess oil run or the price being paid therefor. And from a study of this record it cannot now be determined what particular oil the respective remittances covered. If defendant remitted a part of the amount due through the agencies of the Ocean and Louisiana Brokerage Company, •which the jury found were fictitious concerns, it performed only in part its legal obligation. Under the lease defendant was obligated to pay plaintiff for the oil produce ed. There was no bona fide dispute between these parties. Plaintiffs were kept in the dark as to what extent the remittances covered. This suit is based upon a liquidated demand, that is, a recovery of plaintiffs’ pro rata part of the oil produced at the market value of $1 per barrel. Under this record the defense of accord and satisfaction is not tenable. The acceptance of the checks will be considered only as a part payment for the oil. “An accord and satisfaction * * * requires the meeting of the minds of the parties and knowledge by both of the relevant facts, in order to render the same valid and effectual.” Chicago Fraternal Life Ins. Ass’n v. Herring, Tex.Civ.App., 104 S.W.2d 901, 903. See also Bergman Produce Co. v. Brown, Tex.Civ.App., 156 S.W. 1102; Simms Oil Co. v. American Refining Co., Tex.Com.App., 288 S.W. 163; United States v. Skinner & Eddy Corp., D.C., 28 F.2d 373; Silvers Box Corp. v. Boynton Lumber Co., Tex.Civ.App, 297 S.W. 1059; 1 C.J. p. 476, Sec. 6; Chester v. American Law Book Co., Tex.Civ.App., 102 S.W.2d 501.

Defendant went upon and operated this leasehold under a contract wherein it contracted to deliver to the owners of the royalty, free of cost, in the pipe line, the equal ⅜ part of all oil produced and saved from the premises. And it may be added that under this contract the parties intended for the laws to be observed and obeyed. Plaintiffs’ right of recovery is based upon a legal contract as evidenced by the terms of this lease. Their right of recovery requires no aid from illegal conduct of defendant in producing and running excess oil. Sharp v. Beacon Oil & Refining Co, Tex.Civ.App, 108 S.W.2d 870; Turnbow v. Lamb, 5 Cir., 95 F.2d 29.

Counsel agreed that in the event there should be a recovery for plaintiffs for any sum, such judgment should bear credits “for the total amounts paid to the respective plaintiffs by the Ocean Oil Company and/or Louisiana Brokerage Company as evidenced by checks in evidence and any cashier’s checks that may be hereafter produced that were endorsed by any of the plaintiffs herein.” The checks introduced together with admission of receipt of certain cashier’s checks show total received by Geyer of $636.39; Thompson $1,175.71; Ferguson $949.09; Nichols $949.09; and Storey $670.48. These credits so determined and the respective royalty interests, the amount of excess oil produced and its posted or market price of $1 being without controversy, the cause is reversed and judgment is here rendered that of and from th» defendant, Ortiz Oil Company, a corporation, plaintiff Adolph A. Geyer recover the balance due in the sum of $3,552.81; likewise Will Thompson the sum of $5,030.51; August Nichols the sum of $3,705.57; Mrs. J. A. Ferguson the sum of $3,705.57; and R. G. Storey the sum of $2,659.40.

The judgment is reversed and rendered.

On Motion for Rehearing.

Defendant contends that in no event are plaintiffs entitled to recover at a higher rate than 50‡ per barrel for the illegal oil so produced, because the jury found the average reasonable cash market value of illegally produced or “hot” oil to be 50‡ per barrel. We do not sustain this contention. Sharp et al. v. Beacon Oil & Refining Co. et al., Tex.Civ.App., 108 S.W.2d 870. In our original opinion we concluded that the market value of .this illegally produced oil was $1 per barrel. The oil was produced from the same wells and at the same time. Defendant sold all the legally produced oil at $1 per barrel. The posted price of all legally produced oil was $1, and there is no evidence of any other price prevailing in the district during this period of time involved.

However, the oil produced was chargeable with a production and pipe-line tax of 2¾6⅜ per barrel which was not deducted in our former computation. To this extent the former judgment is modified so as to read that of and from the defendant Ortiz Oil Company, a corporation, plaintiff Adolph A. Geyer recover the balance due in the sum of $3,461.17; likewise Will Thompson the sum of $4,894.74; Augusta Nichols the sum of $3,603.75; Mrs. J. A. Ferguson the sum of $3,603.75; and R. G. Storey the sum of $2,586.59.

With this modification, the motion for rehearing is respectfully overruled.


text:
    COMMERCIAL CREDIT CO., Inc., v. ROGERS.
    No. 5480.
    Court of Civil Appeals of Texas. Texarkana.
    Dec. 7, 1939.
    Dorbandt & Dorbandt, of Tyler, for appellant.
    B. T. Fitzhugh, of Tyler, for appellee.
   WILLIAMS, Justice.

In this suit by Commercial Credit Company, Inc., against Yandell Rogers to recover upon a promissory note and foreclose mortgage lien on an automobile, plaintiff was denied recovery, and defendant on his cross action for alleged wrongful issuance and levy of sequestration on the automobile was awarded $150 damages. The judgment is grounded upon the court’s findings that defendant had paid the note prior to filing of the suit.

The disposition of this appeal depends solely upon the question if and when a check dated September 22, 1937, given after maturity of the note, by defendant to plaintiff, drawn on the Tyler State Bank & Trust Company in the amount of the balance due on the note, was paid to plaintiff’s alleged agent.

Defendant not having funds on deposit, the drawee bank twice refused payment. Then plaintiff deposited the check with the bank for collection. The check was still with the bank on November 2nd when defendant delivered to J. D.' Stringer, its president, a note in the approximate sum of $3,000, with instructions for the bank to attach same to a draft and forward to a Houston bank for collection. Also defendant instructed Stringer to .pay certain checks, including above one, out of the proceeds if and when collected. Stringer attached the $3,000 note to a draft for transmission, and at the same time made out a deposit slip for the amount in favor of “J. D. Stringer, Special.” Stringer personally looked after all defendant’s business with the bank. The employees had orders not to honor any check or draft of defendant until instructed to do so by Stringer. The Tyler bank was advised by wire at 3:05 p. m., November 3rd, that the draft had been paid. Plaintiff was not advised of and had no knowledge of these transactions or' of any instructions given by defendant to Stringer when this suit was filed on November 3, 1937, between 2 and 4:20 p. m. Remittances between the two banks were usually made by balancing of the respective accounts. Following this custom, the Tyler bank received a “credit advice” on November Sth, and on the same date charged the account of the Houston bank with the amount of the draft.

Before closing hours on November 4th Stringer instructed the exchange teller to issue a cashier’s check payable to plaintiff. The cashier’s check is still in possession of the bank. The check executed by defendant was signed “Yandell Rogers.” Stringer testified that he wrote “J. D. Stringer. Spec.” over that signature on the check for the purpose of charging the check to the deposit of “J. D. Stringer, Spec.” It was charged to the latter' account on November 6, 1937. Plaintiff was not a customer of drawee bank. The bank had theretofore issued cashier’s checks to plaintiff upon the collection of checks executed by others and left with it for collection.

We need not determine if receipt of the telegraphic advice at 3:05 p. m. on November 3rd of the draft having been paid to the Houston bank was the equivalent in law to a deposit of funds.at that time in drawee bank to the credit of Yandell Rogers. If it be considered that Yandell Rogers then had funds on deposit in drawee bank in the name of “J. D. Stringer, Spec.”, the drawee bank had done nothing prior to November 4th, the day after suit was filed, in accepting or paying the check. On this latter date the cashier’s check was issued payable to plaintiff. Until the cashier’s check was issued or drawee bank had otherwise accepted or certified the check, it did not become liable to plaintiff as debtor. Kilgore National Bank v. Moore Bros. Lumber Co., 129 Tex. 92, 102 S.W.2d 200; State of Texas v. Rambert National Bank, Tex.Civ.App., 118 S.W.2d 400. Until such was done, defendant could have stopped payment. Defendant had appointed J. D. Stringer under the special arrangement to make a certain collection and pay this check. This agent of his did not pay or authorize its payment until after suit was filed. Plaintiff had not constituted Stringer its agent to collect the check. It is therefore concluded that the check had not been paid prior to filing of this suit. Articles 5947, Sec. 185; 5940, Sec. 127; 5941, Sec. 132; and 5947, Sec. 189, of R.C.S. of 1925; 9 C.J.S. Banks & Banking, page 692, § 344, page 501, § 245.

The judgment of the trial court is reversed, and, pursuant to agreement of litigants upon such event, judgment is here rendered that plaintiff recover of and from defendant the sum of $179.98 with 10% interest per annum from January 25, 1938, and for foreclosure of its mortgage lien on the Dodge automobile therein described.


author: SLATTON, Justice.

text:
    CITY OF SAN ANTONIO v. HUMMEL.
    No. 10421.
    Court of Civil Appeals of Texas. San Antonio.
    June 28, 1939.
    Rehearing Denied Dec. 30, 1939.

      T. D. Cobbs, Gus C. Garcia, and Victor Keller, all of San Antonio, for appellant.
    Marcus W. Davis and Hill & Uhl, all of San Antonio, for appellee.
   SLATTON, Justice.

This is an appeal from a judgment rendered in favor of Charles E. Hummel against the City of San Antonio, in the 45th Judicial District Court of Bexar County, for the sum of $1,200.

The theory of recovery was damages to property claimed in virtue of changes made by the City of San Antonio in the street and sidewalk upon which Hummel’s property abutted. The trial was to the court without a jury. The trial court filed findings of fact and conclusions of law.

The City attacks the findings of the trial court as being without support in the evidence. It urges the proposition that the City, being limited by the provisions of its Charter, acts of its officers or agents must be in accordance with such provisions in order to bind the City on said acts or the consequences resulting therefrom.

Hummel contends by his second proposition that the evidence showing that after the widening of the paved portion of the street, it was necessary to lower the sidewalk in controversy, that the City’s engineer and street superintendent were on the ground, and the sidewalk being in fact lowered, the trial court was justified in concluding that it was lowered by authority of the City, it being a matter exclusively within its jurisdiction.

A determination of the question thus presented settles this appeal.

We have carefully considered the evidence pointed out in the briefs of the parties and have concluded that the same does not support the findings of the-trial court and the judgment rendered thereon. We quote from appellee’s brief the evidence upon which he relies:

“W. W. Toxey, Assistant City Engineer, testified upon direct examination to the following :
“Q. Mr. Toxey, what if anything, was done or stated by you in regard to the approval or disapproval of the plans for lowering of that sidewalk from its proper level to the one now existing? A. Well, the best was, I believe, that I could state that would be, I believe when we widened the street it was a direct raise because the street was—
“The Court: A little bit louder; when you what?
“The Witness: When we widened the street.
“The Court: Widened it? A. Yes, sir, widened, the curb out, and when this was done it was a direct rise from the sidewalk to the curb, it was impossible, you couldn’t go up there, you may say, so then Mr. Collins who was superintendent of the paving for the City, as best I remember, he took this matter up with Mr. Steffler to see if something couldn’t be done because the proportions were in bad shape.
“Q. Mr. Toxey, I will ask you whether or not, before it was lowered, you were apprized of what was proposed to be done with reference to the lowering, knew it was going to be lowered or there was a discussion with reference to the lowering, you knew that? A. Yes, sir.
“Witness Toxey further testified upon cross examination by appellant as follows:
“Q. About when was it you went out there with reference to the progress of the undertaking there ? A. I believe the sidewalk was built and the curb was in construction. I cannot remember for sure about that, the curb was in construction, we had arranged that, and the curb was too abrupt to the sidewalk, it was an abrupt offset.
“Q. Now, you mentioned before that caused an offset there; is that correct?
A. Yes, sir.
“Q. About what offset did it leave there when the street widening was completed?
A. About twenty-four to twenty-seven inches.
“Q. From twenty-four to twenty-seven inches? A. Yes, .sir.
“Q. Then it was when the other work was done, is that correct? A. Yes, sir.
“The witness Toxey further testified upon cross examination propounded by the appellant as follows:
“Q. Now, referring back to this exhibit 1, ánd keeping in mind your statements that there was an offset there originally when the work on the street was completed, just show the court what you mean by that offset and where it existed. Just show the court. A. If you don’t mind, I can draw this better.
“Mr. Nass: All right.
“The Court: Mr. Sheriff, just clear that board, please, and give him a piece of paper.
“The Witness: May I talk as I draw?
“The Court: Yes, sir.
“The Witness: I would like to represent it as I go along. We will say here is the street, as it existed (illustrating), and on the side of the street there was a curb. Now that distance, from curb to curb, that distance is twenty-seven feet (illustrating).
“The Court: Speak out pretty loudly, Mr. Toxey.
“Mr. Nass: Yes, sir, and speak out so the stenographer can hear.
“The Court: You will have to speak louder, Mr. Witness, so the counsel can hear, the stenographer, and so I can hear.
“The Witness: The distance from the face of the curb, to the face of the curb here (indicating) was twenty-seven feet, then we widened that street to thirty-seven feet, no thirty-nine feet, which is twelve feet, a twelve foot widening, being six feet on each side. Leveling this curb back, carrying the same grade, establishing another curb here (indicating) and on the other side, the distance from there to there (indicating) would be six feet, Now,—
“Q. Draw it on the other side too, please, Mr. Toxey so as to give the Court the entire background. A. That will make a total from the face of the curb to the face of the curb thirty-nine feet, now then, — I am not certain, Judge, whether-there were three steps or two steps. This is the best I can remember. I would like to write on here this is the section opposite the store building (illustrating).
“Q. Now, is that the Hummel store building? A. Yes, sir.
“Q. All right. A. Then, there was a rise here — may I refer to that picture? '
“Q. Sure, this one? (Passing picture to witness) A. Yes, that would be the front of the store, — of the store room. Then on the other was a platform or vestibule that went in here to the store room (indicating). There was a main floor of the store. Now, Judge, when we took this back through here (indicating), cut out of the curb, we had to have some cut out for the curb because of the building and then there was a job, which was something like that (indicating) up to this wall. That was some twenty-four inches, as I remember. Now, under those conditions, if an automobile drove up to there they could not get into the store, they couldn’t get on the sidewalk. Well, that is the condition of the store that existed at the time. Now, there was a rise, a certain, amount, say a quarter of an inch to a foot on a slant here (indicating). You see, this is a fifty-six foot street, and a thirty-nine foot roadway would give you eight feet three from there to the property line (indicating), a quarter of an inch to a foot. However, I think the wall was put out back of the property line, the back of the wall. The City usually does not put anything out on the street. In other words, this fifty-five, six on the street was in the clear. This wall was still on a quarter of an inch to the foot, it would slant (illustrating) to the store. That is usually our rules and regulations.
“Q. According to the sidewalk ordinances? A. Yes, sir, we are supposed to do that.
“Q. All right. A. Then, this wall, if I remember, was put on right there (illustrating). Here is another thing I would like to bring in here, eight foot three, parking and sidewalk ordinances, shows the sidewalk shall be four feet and one foot for the property, that would make it five feet from the property line out to the line there (indicating). When that condition existed it was a case then of getting up to the level of the floor. We did that by going into the vestibule. That is all.
“The witness further testified upon cross-examination, by appellant as follows:
“Q. Why was that sidewalk condition changed out there, Mr. Toxey? A. I know it was changed for this reason, you couldn’t get from the curb, twenty-four inches is a pretty long step, and the only why you could get from the step to the sidewalk, you would have to take the step. It is a pretty dangerous condition to let the sidewalk stay up there that way; that is my way of looking at it.”

It does not appear in the record before us that the acts related by the assistant city engineer were authorized by the City of San Antonio. Neither does it appear that the acts related by the assistant city engineer were performed by agents of the City within the course of their employment. For aught that appears in this record the acts related by the engineer may have been performed by the parties for their own benefit or for others, other than the City of San Antonio.

Upon the following authorities we hold that Hummel failed in his proof: Denison & P. S. Ry. Co. v. James, 20 Tex.Civ.App. 358, 49 S.W. 660; City of Dallas v. Beeman, 12 Tex.Civ.App. 344, 34 S.W. 340; City of Galveston v. Brown, 28 Tex.Civ.App. 274, 67 S.W. 156.

It follows that the trial court erred in his findings and in rendering judgment against the City. On account of such errors the judgment will be reversed and the cause remanded for another trial.


author: SMITH, Chief Justice.

text:
    OLIVARES v. SAN ANTONIO PUBLIC SERVICE CO.
    No. 10632.
    Court of Civil Appeals of Texas. San Antonio.
    Nov. 29, 1939.
    Rehearing Denied Dec. 30, 1939.
    Marcos Zertuche and J. R. Cade, both of San Antonio, for appellant.
    Brooks, Napier, Brown & Matthews and Harper MacFarlane, all of San Antonio, for appellee.
   SMITH, Chief Justice.

Francisca Olivares sued the San Antonio Public Service Company for damages for personal injuries. Upon a jury verdict judgment was rendered denying her any recovery, and she has appealed. The parties will be referred to herein as plaintiff and defendant, respectively, as in the trial court.

Plaintiff alleged that while walking along a public street in the outskirts of the City of San Antonio, during or shortly following an unprecedented rain and electric storm, threé overhead electric light wires, belonging to defendant and as a result of defendant’s negligence, fell to the ground near her, resulting in a severe shock and serious bodily injuries to her. As stated in her brief “Plaintiff alleged several acts <?f negligence, some of which were the insulation of the wires that fell were faulty, wires were too loosely strung, defendant failed to make an inspection of wires within reasonable time, wires were strung too low overhead, defendant failed to bury the wires.”

Those acts were submitted in the form of special issues to the jury, who found against plaintiff as to each of them. The jury further found that the wires fell to the ground solely as a result of lightning, that plaintiff suffered no physical shock to her body on account of the falling wires, and, in effect, that she sustained no damages. Plaintiff concedes, by not assigning error thereon, that every jury finding was supported by sufficient testimony.

The trial judge submitted to the jury the issue of whether defendant was negligent in not having previously buried the three wires underground, and while discussing that particular issue one of defendant’s counsel stated to the jury that “it would cost a great deal to put the wires underground, and that would cause the defendant to charge a higher rate.” Plaintiff objected to the argument on the ground that it was “highly prejudicial and inflammatory to the rights of Plaintiff, that some of the members of the Jury were consumers of electricity furnished by defendant and paid therefor.” Regardless of the question of propriety of the argument, which we do not decide in view of the state of the record, it cannot be seriously contended that it probably influenced the jury in their specific findings that plaintiff received no shock, and sustained no damage, as a result of the wires falling, and that lightning was the sole cause of that event. No matter what findings the jury could have made on the issues of defendant’s alleged negligence, plaintiff could not have recovered in the face of 'the finding that the wires were grounded solely by lightning and that plaintiff received no shock and sustained no damage as a result of the incident. If the argument was improper, its effect, if any, was certainly harmless. For that reason, if no other, we overrule plaintiff’s first assignment of error, in which this question is raised. For the same reason we overrule plaintiff’s related third assignment of error.

Another of defendant’s counsel, by way of philosophizing, argued to the jury that it is more difficult to procure witnesses to testify against, rather than for, litigants. Plaintiff complains of this argument in her second assignment of error. It is not conceivable that the expression of this theory could operate more against one litigant than another, or that it was of such an inflammatory and prejudicial nature and effect as to require a new trial below or reversal here, particularly in the face of the findings that plaintiff was not injured or damaged, and that the accident was due solely to lightning. Plaintiff's second assignment of error will therefore be overruled.

Plaintiff sought to require the trial judge to apply the doctrine of res ipso loqui-tur to defendant in this case, which the trial judge refused to do. In her fourth assignment of error plaintiff complains of that ruling. _ We overrule the assignment of error. In the first place, the doctrine invoked does not apply in this case for the reason that the jury found that the falling of the wires was caused solely by lightning, which we judicially know was not under the control of the defendant. Moreover, the ruling complained of, even if technically erroneous, was rendered immaterial in view of the unquestioned jury findings that plaintiff was not injured by the falling of the wires, and sustained no damages as a result thereof.

The judgment is affirmed.


author: STOKES, Justice.

text:
    CULLUM et al. v. COMMERCIAL CREDIT CO.
    No. 5062.
    Court of Civil Appeals of Texas. Amarillo.
    Oct. 9, 1939.

      Sturgeon & Sturgeon, of Pampa, for appellants.
    Clayton & Bralley, of Amarillo, for ap-pellee.
   STOKES, Justice.

On the 19th of February, 1938, George W. Taylor, a resident of Gray County, purchased an automobile from appellants, Fred Cul-lum and Frank Henry Cullum, who also were residents of Gray County and engaged in business at Pampa as a co-partnership under the trade name of Cullum & Son. As part of the consideration Taylor executed a note in the sum of $1259.96, payable in six monthly installments, the first five installments being in the sum of $60 each, and the sixth in the sum of $959.96. The note was payable to Cullum & Son at the office of the .appellee, Commercial Credit Company, at Amarillo, which is in Potter County, and provided for interest after maturity at the rate of ten percent per annum. Contemporaneously with the execution of the note Taylor executed a chattel mortgage of the automobile and the note and chattel mortgage were assigned to appellee by Cullum & Son without recourse. On the 24th of February, 1938, five days after the execution of the note and chattel mortgage, appellants, Cullum- & Son, executed and delivered to appellee an instrument designated “Dealer Guaranty of Purchaser Account” in which the following clause appears:

“You require Undersigned’s unconditional guaranty that the purchaser shall pay his obligations under said .security instrument and/or note, otherwise you will refuse to purchase the same, or if purchased will redraw upon Undersigned for the amount thereof, as agreed. Undersigned requests you to purchase or continue to hold such security instrument and/or promissory note, and in consideration thereof Undersigned hereby guarantees the prompt payment of the same and each and every instalment thereof as the same shall become due and payable. Undersigned will immediately upon demand pay any amounts due, for the payment of which the purchaser is in default, under said security instrument and/or promissory note, without requiring any proceedings to be taken by you as against the purchaser. The liability of Undersigned hereunder shall not be modified in any manner whatsoever by any extension that may be granted to purchaser by any court in any proceeding under the Bankruptcy Act or any Amendment thereof and Undersigned expressly waives the benefit of any such extension. If purchaser shall at any time be in default in payment of three (3) instalments of said note Undersigned will thereupon forthwith pay the entire unpaid balance owing on said note.”

Taylor, the maker of the note, defaulted in three installments and appellee, on July 13, 1938, filed this suit in the district court of Potter County against George W. Taylor and appellants, Fred Cullum and Frank Henry Cullum, seeking a joint and several judgment and foreclosure of the chattel mortgage lien.

Appellants, Cullum and son, filed pleas of privilege in due form and prayed that the cause of action be transferred to Gray County where all of the defendants resided. Controverting affidavits were filed in response to -the pleas and upon a hearing of the issues made thereon the trial court overruled the pleas of privilege to which-appellants duly excepted, gave notice of appeal, and have brought the case before this court for review.

The principal contention made by appellants is that, inasmuch as the contract of guaranty executed by them does not expressly name Potter County as the place of performance and, it being undisputed that appellants reside in Gray County, the district court of Potter County could not maintain venue of the case in the face of proper pleas of privilege. Error is assigned, therefore, to the action of the court in overruling appellants’ pleas of privilege.

In support of their contention appellants assert that under the provisions of Sub. 5 of Art. 1995, R.C.S.1925, as amended by the Acts of the 44th Legislature, p. 503, ch. 213, § 1, Acts of 1935, Vernon’s Ann.Civ.St.Art. 1995 subd. 5, venue of the case cannot be maintained in Potter County in disregard of the pleas of privilege because the contract of guaranty which they signed does not, by its own terms, expressly name Potter County or a definite place therein where they agfeed to perform the obligations created by the contract of guaranty. The amendment referred to provides that if a person has contracted in writing to perform an obligation in a particular county, expressly naming such county or a definite place therein by such writing, suit upon such obligation may be brought against him either in such county or where he has his domicile. A reference to the contract of guaranty will reveal the absence of any stipulation or agreement within its own terms whereby appellants specifically agreed to perform the guaranty obligation in Potter County or expressly named that county or a definite place therein where it should be performed. The contract, however, is one of guaranty and as a general rule the liability created by it is measured by that of the principal. It has long been so held in this as well as other jurisdictions unless a more limited or more extensive liability is specified by the guarantor. McCauley v. Cross et al., Tex.Civ.App., 111 S.W. 790; Looney v. Le Geirse & Co., 2 Willson Civ.Cas.Ct.App. § 531, page 477; Bagley v. Cohen, 121 Cal. 604, 53 P. 1117; Groendyke v. Musgrave, 123 Iowa 535, 99 N.W. 144; Franklin v. The Duncan, 133 Tenn. 472, 182 S.W. 230, Ann.Cas.1917C, 1080.

The contract of guaranty entered into by appellants in this case was an absolute and unconditional one. It provided that appellants would guarantee the prompt payment of the note and each and every installment thereof as the same shall become due and payable. The note, according to its specific terms, was payable at the city of Amarillo, which is located in Potter County, The contract of guaranty did not create an obligation of the guarantors to pay a sum of money specified therein as would a, promissory note, but bound them, upon default of the maker, to pay the sum of money specified in another instrument, viz., the promissory note which had theretofore been executed by George W. Taylor. It was essentially a contract of guaranty and was unconditional. Its effect was to bind appellants to pay the note of Taylor upon the sole contingency of Taylor’s default. Being a general and unconditional guaranty its effect was to bind appellants upon the note according to all of its terms. In addition to the legal obligation created by such contract, the guaranty contract itself provides that in consideration of appellee’s purchase of the note appellants guarantee the prompt payment of same and each and every installment thereof “as the same shall become due and payable.” The note became due and payable at Amarillo in Potter County and we think the conclusion is inescapable that appellants are, by the law and also by the specific terms of the contract itself, bound by the venue provision of the note in the same manner as they are bound by its other provisions.

In the case of Looney v. Le Geirse & Co., supra, R. H. Looney wrote a letter to the appellees in which he said: “I will be responsible for the amount bought by my brother John Looney.”

Appellees resided in Galveston County and the Looneys were residents of Mitchell County. The suit was filed in Galveston County where the obligation was payable and, in discussing the ruling of the court upon a plea of privilege of R. H. Looney the Court of Appeals said: “If then, the guaranty of R. H. Looney is a part of the contract of John Looney, it is evident that, its legal effect is to render R. H. Looney responsible for the amount of John Looney’s, indebtedness, according to the terms and. conditions of the contract of purchase. Such is the plain import of the guaranty. It is an obligation to make good the contract of John Looney in all particulars and to the-full extent thereof. It covers the interest stipulated to be paid, and it undertakes that the contract shall be performed in Galveston county.”

The case of McCauley v. Cross, supra, was a suit upon a note in the sum of $3000; executed by G. W. Cross and one Adams, payable to the appellant, McCauley, six months after date, at Fort Worth, in Tarrant County. After the note had been executed W. B. Cross, who was the father of G. W. Cross, delivered to McCauley an instrument in writing as follows [111 S.W. .791]: “I have sworn off going on notes, but want to help my son, and, if he should not pay the $3,000 note, I will see that it is fixed and told the banker that I would.”

The defendants resided in Brown County and McCauley brought suit upon the note in Tarrant County making W. B. Cross a party defendant. The latter filed a plea of privilege which was sustained by the trial court. In discussing the question here involved, Chief Justice Willson, speaking for the Court of Civil Appeals, said: “His [W. B. Cross’] undertaking was a general one to pay the note. The note was a contract to1 pay so much money at a designated time and at a designated place. The stipulation which bound the makers to pay at Ft. Worth was as truly a part of their contract as was the stipulation as to the amount to be paid. Having guaranteed the payment of the note, we think it necessarily follows that he guaranteed to pay it, not according to some of its stipulations, but according to all of them; for less than all of them did not constitute the note. The rule has been stated to be that the liability of a guarantor ‘is in general measured by that of the principal and will be so construed unless a less or greater liability is expressly assumed by the guarantor.’ ”

In Citizens’ State Bank of Alice v. Commonwealth Bank & Trust Co., Tex.Civ.App., 268 S.W. 1008, 1009, the contract of guaranty consisted of a letter written by the president of the Citizens State Bank of Alice to the Commonwealth Bank & Trust Company of San Antonio in which the following paragraph occurs: “I know that we are going to take care of the paper that you have there, as I told you when I talked to you some few days ago about it.” The letter was signed by the president of the bank of Alice. The Commonwealth Bank & Trust Company filed suit upon the ■note in Bexar County where it was payable, making the Citizens State Bank of Alice, in Jim Wells County, a party defendant. The latter bank filed a plea of privilege and in discussing the question of extent of the liability assumed by it under the guaranty contract and specifically the quoted paragraph of the letter, Justice Cobbs, speaking for the San Antonio Court of Civil Appeals, said: “What did he mean by the use of the words, ‘take care of the paper you have there,’ unless it was a promise to pay it, or to guarantee its payment when it matured. How else could he take care of it there? We can give no other meaning to the use of the words than that it was a written promise to pay in Bexar county, according to the tenor and terms of the note itself.”

From these quotations it will be seen that our courts have consistently held that a guarantor under a contract of guaranty such as the one involved here becomes obligated to pay the note or indebtedness guaranteed by him. The effect of his contract of guaranty is to make him liable upon the instrument guaranteed by him unless, by his contract, he limits his liability and makes it less than that which is implied by the 'instrument or obligation which constitutes the subject of his guaranty. Such being the case the provisions of sub. S of Art. 1995 as amended are not violated by holding the guarantors liable in a situation such as that which is presented here because the import of the language used by them in their contract of guaranty was to name the particular county in which they contracted in writing to. perform the obligation. By such contract appellants undertook the burden of discharging the note according to its terms and the note itself provided for payment at Amarillo which is in Potter County. Their obligation to pay the note in that county was not by implication but by express terms of the contract.

From what we have said it is evident that we are not in accord with appellants’ contention in their first assignment of error and it must, therefore, be overruled.

Under other assignments appellants contend that inasmuch as they were not necessary parties to the suit, their pleas of privilege should have been sustained under the provisions of sub. 29a of Art. 1995, R.C.S., Vernon’s Ann.Civ.St. art. 1995, subd. 29a. In view of our holding upon the first assignment of error we do not deem it necessary to pass upon the remaining questions raised by the briefs. Obviously, if appellants are bound under the provisions of the note, including its provision as to the county in which it is payable, the question of whether they were necessary parties or merely proper parties to the suit becomes immaterial.

In our opinion no error is shown in the rulings of the court below upon the controlling question which we have discussed, and its judgment will, therefore, he affirmed.


text:
    CULLUM et al. v. COMMERCIAL CREDIT CO., Inc.
    No. 5070.
    Court of Civil Appeals of Texas. Amarillo.
    Oct. 23, 1939.
    Rehearing Denied Nov. 13, 1939.
    Sturgeon & Sturgeon, of Pampa, for appellants.
    Clayton & Bralley, of Amarillo, for ap-pellee.
   STOKES, Justice.

This suit was instituted by appellee against appellants upon two promissory notes and to foreclose chattel mortgage liens given to secure them. The trial court found the amount due on the notes to aggregate $877, together with interest and attorney’s fees, for all of which judgment was rendered, and the chattel mortgage liens were foreclosed.

Appellants did not contest the execution of the notes nor the right of appellee to recover thereon, but they alleged substantially that they were engaged as partners in the sale of automobiles at retail and that appellee was engaged in the business of purchasing and handling for automobile dealers generally what is known as automobile paper, that is, notes, mortgages, trust receipts and other similar obligations executed by dealers and purchasers of automobiles. They alleged that they had sold to appellee from time to time certain notes, mortgages and other such paper as appel-lee was accustomed to purchase, secured by chattel mortgage and other liens upon automobiles, and that on April 27, 1937, in order to effect a definite understanding as to their liability to appellee on such notes and mortgages, they entered into what is commonly referred to as a reserve agreement. This reserve agreement was in writing and was introduced in evidence. It contained the provision that appellee would set up and credit appellants with certain reserves consisting of 1½% on the first $500 and ½% of all amounts in excess of $500 on paper secured by liens on new automobiles where the paper was payable in twelve months or less and 2% on the first $500 and 1% on the excess on obligations running more than twelve months. Other percentages were provided as to notes, secured by mortgages on automobiles and vehicles that had been used. Under this reserve agreement, on July 31, 1938, there had accumulated as a reserve fund in the hands of appellee to the credit of appellants the sum of $1996.06. Appellants pleaded this reserve fund as an offset to the notes sued on by appellee and, to the action of the trial court in refusing to allow the same and in granting judgment in favor of appellee for the balance due on the notes sued on, appellants reserved appropriate exceptions and from the judgment entered in favor of appellee, they gave notice of appeal which they have perfected and now present the case in this court upon the same contentions represented by appropriate assignments of error.

The case was tried before the court with.out the intervention of a jury. In the findings of fact filed by the trial judge the reserve agreement is copied in full and it contains the following provision: “As of January 31st, July 31st, and October 31st, you (appellee) will pay to us (appellants) the amounts by which reserves set up under this and any other agreements, heretofore executed by us, exceed 3% of the total balances outstanding on all notes purchased from us, provided that no payments need be made by you so long as any indebtedness we may owe to you at the time of settlement above stated is unpaid, but such reserves may be held and applied by you against such indebtedness.”

The court found that on July 31; 1938, the last settlement day prior to the trial under the terms of the reserve agreement, appellants were indebted to the appellee in the total sum of $2880, exclusive of interest and attorney’s fees. He concluded as a matter of law, therefore, that appellants were not entitled to be paid the reserves before or at the time of the trial because of the stipulation in the reserve agreement to the effect that no payments were due as long as appellants were indebted to ap-pellee. The reserve account amounted to $1996.06 and appellants were indebted to appellee at the time of the trial in the total sum of $2880. The court, therefore, rendered judgment against appellants and denied them the offset for which they contended.

Under the provisions of Articles 2015, 2016 and 2017, R.C.S:1925, and a long line of decisions of our courts, a defendant is permitted to offset certain claims against a demand of the plaintiff, but the rule is well established that unmatured obligations of the plaintiff in favor of the defendant cannot be set-off as a* defense to a claim of the plaintiff in the absence of a showing of insolvency. Stockyards National Bank v. Presnall, 109 Tex. 32, 194 S.W. 384; Wilkens & Lange v. Christian, Tex.Civ.App., 223 S.W. 253.

In Stockyards National Bank v. Presnall, supra, Chief Justice Phillips, speaking for the Supreme Court, said [109 Tex. 32, 194 S.W. 385] : “It is a primary rule that a debt must have matured to be available as a set-off.”

Appellants admit the rule of law to be such as we have announced but they contend that the debt due them under the reserve agreement matured July 31, 1938. We cannot agree with them in this contention. They were indebted to appellee in the total sum of $2880. Of that amount the sum of $877, exclusive of interest and attorney’s fees, was due upon the notes sued on in this case. In addition, the findings of the trial court show that appellants were indebted to appellee upon a note executed by one George W. Taylor in the sum of $1116, exclusive of interest and attorney’s fees, and that they were indebted to appellee upon another note executed by them in the sum of $800. It is shown they were indebted to appellee upon still another note executed by one Paul Nichols in the sum of $87. These items, together with the notes sued ,on, make up the total sum of $2880 which was owing to appellee by appellants on the 31st of July, 1938. The reserve account to which they were entitled as a credit upon the books of appellee amounted to $1996.-06. Under the reserve agreement, if appellants had not been indebted to appellee they would have been entitled to be paid all of this sum except 3% of the total balance on outstanding notes purchased by appellee from them, the exact amount to which they would have been entitled on July 31, 1938, being $1012.83. The provisions of the reserve agreement, however, to the effect that no payments need be made by appellee so long as any indebtedness may be owing to it by appellants at the time settlements otherwise would be due, but that such reserves may be held and applied against such indebtedness, precluded appellants’ right to demand payment of the excess reserve or utilizing it .as a set-off against the portion of the total indebtedness upon which the suit was filed. After deducting the amount due upon the notes herein sued upon, they still were indebted to appellee upon the other obligations in the sum of approximately $1800 and, under the reserve agreement, appellee was entitled to hold the excess reserve as security for that indebtedness. The excess reserve was, therefore, as found by the trial court, not due at the time the suit was tried and was not available to appellants as an offset.

The trial court concluded as a matter of law that, since appellants were indebted to appellee on July 31, 1938, none of the reserves were due or payable to them and, appellee not being shown to be insolvent, appellants could not off-set their contingent unmatured claim to the reserve fund as against appellee’s matured demand. This conclusion is in accord with the law as announced in the cases above cited and many others. The trial court’s action in rendering judgment against appellants was not subject to the criticism made by them and we find no error revealed by the record. Appellants’ assignments of error are, there- ■ fore, overruled and the judgment of the court below will be affirmed.