author: TIREY, Justice.

text:
    HOME BEN. ASS’N v. GAYLE.
    No. 2242.
    Court of Civil Appeals of Texas. Waco.
    Jan. 23, 1941.

      John F. Sheehy, of Waco, and Cecil R. Glass, of Marlin, for appellant.
    Conway & Scharff, of Waco, for appel-lee.
   TIREY, Justice.

This suit was brought by Mrs. Elsie Gayle against Home Benefit Association (a local mutual aid association) for the collection of a balance of $3,300, due on three policies of insurance upon the life of her husband. The case was tried before the court without a jury and she recovered judgment for the sum of $3,267, with six per cent interest thereon from September 3, 1935, the date of the death of her husband. The association has appealed. The parties will be designated- as in the trial court.

In view of the questions involved, it will be necessary to make a comprehensive statement. The policies in question totalled $5,000, and, after the death of insured, the defendant admitted liability thereon and made partial payments at various times, and up to the 25th day of November, 1936, had paid $1,610 thereon. On that day plaintiff and defendant entered into the following written agreement:

“That, Whereas, the Home Benefit Association of Falls, McLennan and adjoining counties, is indebted to me, the undersigned, in an amount not to exceed the sum of $3300.00, to be paid to me out of the Mortuary fund of said Association; and
“Whereas, there are numerous other claims unpaid and outstanding against said Mortuary fund, and said Association is unable to pay current claims in full until all prior claims are paid; and
“Whereas, it would be to the mutual ad- ' vantage of the undersigned and the Home Benefit Association for said Association to pay its current claims promptly in order to maintain its membership;
“Therefore, for and in consideration of the premises, it is agreed by and between said Association and the undersigned, that said Association shall have the right to first pay the claims maturing against the Mortuary fund from and after the 1st day of January, 1937, and that the claims maturing and unpaid before said date shall be paid on a pro rata basis out of the surplus of said fund and that said proration shall be made quarterly or oftener. It is further agreed, however, that out of the surplus in said fund after the payment of current claims, said Association may compromise a'nd settle for less than full value, claims outstanding against the same with claimants desiring to do so.”

Defendant sought to avoid liability on the unpaid balance of the policies on the ground that they were superseded by the terms of the above contract and that it had complied with said contract and that same had not been repudiated nor rescinded by it and that it was in full force and effect. Defendant further pleaded the two-year statute of limitation as a defense and further that plaintiff’s suit was barred by virtue of the provisions of the policies and the Constitution and by-laws of said Association, “which provide that no cause of action based upon said certificate of membership shall be brought more than two years and one day after the accrual of said cause of action.” The plaintiff, in supplemental petition, admitted the execution of the agreement in question but pleaded that it was not a bar to her recovery upon the policies for three reasons: (1) that it was a composition agreement and that the defendant had breached such agreement by paying its policy holders whose claims matured before January 1, 1937, indiscriminately a sum in excess of $24,000, and claimed that some of the policies were paid in full, and that some were paid in excess of 50% of the amount of the debt; (2) that it was secured through fraud; and (3) that said agreement was without consideration.

At the request of the defendant, the court filed findings of fact and conclusions of law. The court, in his findings of fact, found on each material allegation of fact supporting plaintiff’s theory of the case and concluded as a matter of law substantially (1) that said contract was an execu-tory composition agreement and that it was breached by the defendant, and that said breach revived the original claim of the plaintiff upon the policies in suit; (2) that plaintiff was induced by fraud of the defendant to sign the same, and that such fraud avoided the agreement and revived her claim on the policies and that such fraud was not discovered by the plaintiff until after December 25, 1938, a short time before suit was filed; (3) that said agreement was without any consideration and was void; (4) that the plaintiff’s claim was not barred by the statute of limitation and that defendant had waived and is estopped to plead the statute of limitation.

Error is assigned substantially on three grounds: (1) that the court erred in finding that the contract of November 25th was not based upon a sufficient consideration; (2) that the evidence is wholly insufficient to sustain the finding that plaintiff was induced to sign the contract by fraudulent statements of defendant; (3) that the evidence is wholly insufficient to show a breach of the contract of November 25th, because the evidence shows that all of the payments made in January and February of 1937 were made before said contract became effective.

Each of the foregoing assignments is overruled. The facts are not in dispute. The association (in November 1936) represented to Mrs. Gayle prior to and at the time she executed the contract of November 25th that it owed claims of about $200,-■000, and that said indebtedness was distributed among approximately 200 policy creditors, and that it was bankrupt; that it would be impossible for it to continue its business unless the policy creditors would make an agreement with defendant, whereby it could pay first its claims maturing after January 1, 1937, and that all claimants whose claims matured prior to January 1, 1937, would subordinate their claims so that they could be paid on a pro rata basis out of the surplus of the mortuary fund accumulated and remaining after the claims maturing after January 1, 1937, had been paid; that it would be necessary for such an agreement to be signed by all of the policy creditors in order that the association would be able to go out and get new business, and unless it was done the association would fail; that she would be paid her pro rata part on the foregoing basis in the event she signed the agreement; that “they had met with no opposition, that it had been very agreeable with the old policyholders ;” that they were making progress and believed they would get all the policy creditors to sign up and that if they did not sign up, her contract would not be valid. Mrs. Gayle received a check in partial payment for the sum of $90, dated November 16, 1936, which she cashed on November 30, 1936. During the months of January and February, 1937, the association paid (indiscriminately and not on a pro rata basis) on claims that matured pri- or to January 1, 1937, the sum of $24,969.-50. This sum exceeded the mortuary receipts of said months to the amount of $8,629.71. (Mrs. Gayle received no payment during this period.) It was agreed that at the time the foregoing payments were made “the defendant executed with the beneficiary a deferred payment agreement, whereby it agreed to pay the balances on the said policies under terms similar to the ones which they made with Mrs. Gayle, except that where * * * payments made the policyholders at various times during January and February of 1937, this agreement does not apply.” For example, one claim matured on July 22, 1936 in the amount of $2,125. Partial payments were made thereon as follows: February 3, 1937, $125; February 20, 1937, $375; February 23, 1937, $350. Three small claims were paid in full and some of the other payments were in excess of 25% of the claim. The association paid such amounts on each respective claim as was sufficient to obtain the claimant’s signature to said agreements. Some agreements were obtained by the payment of very small amounts and in others the entire claim was subordinated without any cash payment. The work of signing up the policy creditors was completed about March 1; 1937. The association paid its first dividend on a pro rata basis (on claims maturing prior to January 1, 1937) on March 31, 1938, and another on July 30, 1938. Mrs. Gayle received and accepted $16.50 on each payment.

In view of the foregoing record, was the association legally bound to Mrs. Gayle to pay first its claims maturing after January 1, 1937, and permit its mortuary fund to accumulate and withhold and forego payments after January 1, 1937, on all claims that matured prior to that date, until it could be determined whether or not said contract could be consummated? We think good faith so required. Willis v. City National Bank, Tex.Civ.App., 280 S.W. 270, point p. 274; Lockney Farmers’ Coop. Ass’n v. Egan, Tex.Civ.App., 275 S.W. 732; Gustafson v. American Land Co., Tex.Civ.App., 234 S.W. 244. The contract of November 25th was an executory composition agreement. Block & Co. v. Largent, Tex.Civ.App., 135 S.W. 1078; 12 C.J. 251; 15 C.J.S., Compositions With Creditors, § 1. Composition agreements must be strictly construed. 15 C.J.S., Compositions With Creditors, § 9, p. 679. It has long been the rule in Texas that those who enter into composition agreements shall exercise the utmost good faith towards each other, and, in the absence of an express stipulation to the contrary, there is an implied agreement that the creditors who enter into it shall share alike, and that no one shall receive more than the others without the assent of the others. A preference cannot be given “without the knowledge or consent of the other creditors, and when that exists, whatever may be its form, it renders the agreement for preference illegal and void.” Oklahoma Tool & Supply Co. v. Daniels, Tex.Civ.App., 296 S.W. 631, 635; 12 C.J. 287; 15 C.J.S., Compositions With Creditors, § 14, p 691; Willis & Bros. v. Morris, 63 Tex. 458, 51 Am. Rep. 655. The contract of November 25th gave the association the right “to first pay the claims maturing against the mortuary fund from and after the 1st day of January, 1937.” It further provided “that the claims maturing and unpaid before said date shall be paid on a pro rata basis out of the surplus of said fund and that said proration shall be made quarterly or oftener.” The association was bound to the exercise of good faith in preserving the equality of the payments pro rata on those claims which matured prior to January 1, 1937, by the express terms of the agreement, and the association could not pay indiscriminately nor in full those claims maturing prior to January 1, 1937, because those who were so paid secured a greater advantage than their associates obtained under the composition agreement. See Willis & Bros. v. Morris, supra; 9 Tex.Jur. 322. Our courts have uniformly held that “an undertaking between a debtor and one of. his creditors, in effecting a composition of his debts, by which he agrees to a secret preference of such creditor, renders the whole composition invalid * * See Gourley v. Tyler, 4 Willson Civ.Cas.Ct.App. § 215, 15 S.W. 731, point page 733. It appears from the record that the association made the payments in January and February of 1937 under the belief that it had the legal right so to do, but we think that such payments made indiscriminately by the association on claims that matured prior to January 1, 1937, without the knowledge and consent of Mrs. Gayle, constituted a preference and were fraudulent in law. Abernathy Rigby Co. v. McDougle, Cameron & Webster Co., Tex.Civ.App., 187 S.W. 503, point page 504; Batchelder & Lincoln Co. v. Whitmore, 1 Cir., 122 F. 355, 361. Surely the foregoing payments placed the association in such position that it could not keep and perform the agreement of November 25th with plaintiff. Did not this change in position operate as a fraud against plaintiff? See Texarkana Nat’l. Bank v. Hubbard, Tex.Civ.App., 114 S.W.2d 389. Moreover, the association, having failed to comply with the terms of the agreement of November 25th, could not set up the agreement as a defense. In re Nachman Co., 2 Cir., 6 F.2d 427, point page 430. The association having breached the contract of November 25th, such breach revived the original claim of Mrs. Gayle upon the policies, and she had the right to sue for the whole of the original debt, less the amount previously paid to her. In re Nachman Co., 2 Cir., 6 F.2d 427; 15 C.J.S., Compositions With Creditors § 13, p. 690; Ashbrook v. Neal, Tex.Civ.App., 103 S.W.2d 1101; Hudspeth v. Hilburn, Tex.Civ.App., 283 S.W. 314; Ferguson-McKinney Dry Goods Co. v. Garrett, Tex.Com.App., 252 S.W. 738; 12 C.J. 270, § 40, p. 285, § 79, 15 C.J.S., Compositions With Creditors, §§ 10, 13.

The appellant contends that the plaintiff’s cause of action under her policies is, barred by the statute of limitation. We overrule this contention. In fraud actions “the rule is that limitation begins to run from the time of the discovery of the fraud, or from the time it might have been discovered by the use of reasonable diligence.” Glenn v. Steele, Tex.Sup., 61 S.W.2d 810; American Indemnity Co. v. Ernst & Ernst, Tex.Civ.App., 106 S.W.2d 763. We think the evidence is ample to sustain the finding of the trial court that fraud was not discovered by the plaintiff until after December 25, 1938, and a short time before the institution of this suit.

The association having breached its contract of November 25th, such breach revived the plaintiff’s claim on her policies, and she was entitled to recover legal interest on the unpaid balance of her claim from the date the same matured. Hudspeth v. Hilburn, Tex.Civ.App., 283 S.W. 314; Ferguson-McKinney Dry Goods Company v. Garrett, Tex.Com.App., 252 S.W. 738; Kirby v. American State Bank, Tex.Com.App., 18 S.W.2d 599, 63 A.L.R. 1528.

We have considered all other assignments and they are overruled.

The judgment of the trial court is affirmed.


source: Caselaw Access Project

author: JACKSON, Chief Justice.

license: Public Domain

text:
    HOBBS v. DOWNING et a
    No. 5248.
    Court of Civil Appeals of Texas. Amarillo.
    Jan. 20, 1941.
    R. L. Graves, of Brownfield, for appellant.
    L. C. Heath, of Brownfield, for appellees.
   JACKSON, Chief Justice.

The record shows that W. B. Downing and H. H. Longbrake as partners owned and operated the partnership business of the Brownfield Hardware Company in Brownfield, Texas. They were plaintiffs in Cause No. 720 in Justice Court, Precinct No. 1, in Terry County, Texas, and as such on May 28, 1937, obtained a joint and several judgment in said court against S. E. Maroney and J. C. Tyson for the sum of $180, together with all costs.

' No appeal was prosecuted from this judgment; it became final but was never paid and on December 13, 1939, plaintiffs made application for, and had issued on said judgment, a writ of garnishment which was served against Clarence Hobbs requiring that he answer what if any effects he had in his possession belonging to the defendant S. E. Maroney. He answered that he had nothing in his possession belonging to S. E. Maroney and did not owe him any money.

The plaintiffs in garnishment replied alleging that they believed and had good reason' to believe that the garnishee did at the time the writ was served on him have property in his possession belonging to S. E. Maroney. On December 23, 1939, the case was tried in the Justice Court of Precinct No. 1, in Terry County, and judgment rendered that plaintiff take nothing by his suit against Clarence Hobbs who was adjudged to go hence with his costs.

The plaintiff prosecuted an appeal to the county court and in due time the case was tried without the intervention of a jury and the court found in his judgment that in the year 1935 S. E. Maroney owned two cows and made a contract with Clarence Hobbs whereby he was to take the cows, attend to, and care for them for the milk and one-half of the increase; that about the 1st day of January, 1937, S. E. Maroney delivered to Hobbs three more cows on a similar agreement but advised him then that he had given the cows and his part of the increase to his daughter, Vivian Maroney; that as a result of these agreements the garnishee had in his possession belonging to S. E. Maroney eight head of cows and two two-year old heifers each of which is worth the reasonable cash market value of $25, or a total of $250; that S. E. Maroney voluntarily gave the above-described cattle to his daughter, Vivian, on the 14th day of October, 1936, and said gift or conveyance was not for a consideration deemed valuable in law and was made subsequent to the time of the accrual of plaintiffs' debt, which was the basis of the judgment obtained in Cause No. 720.

The court concluded as a matter of law that the voluntary gift or conveyance orally made by S. E. Maroney to his daughter, Vivian, was void since he had no other property at the time subject to execution out of which plaintiffs could make their debt that existed previous to the gift or conveyance, which made plaintiffs prior creditors under the statute. On these findings the court rendered judgment against the garnishee to the effect that the ten head of cattle in his possession were the property of S. E. Maroney and subject to the payment of the judgment of plaintiffs and the- garnishee should deliver them to the officer into whose hands an order of sale was placed. He also directed the clerk to issue an order of sale commanding the sheriff or any constable to take possession of the cattle, sell them as under execution and make due return to the court of his action therein us provided by law, from which judgment this appeal is prosecuted.

The appellant challenges the jurisdiction of the county court to render judgment against him because the plaintiffs in their appeal from the judgment in garnishment against them in justice court failed to file bond to perfect their appeal of the case to the county court.

The record shows that no appeal bond was filed in the justice court and if the filing of such bond is a prerequisite to the jurisdiction of the county court the appellant’s contention is correct.

In Leathers v. Leon County, Tex.Civ.App., 228 S.W. 658, 659, the court says: “It is well settled in this state that where no affirmative recovery is had against a plaintiff in a suit brought by him in a justice’s court no appeal bond is necessary to entitle him to an appeal to the county court; (Edwards v. Morton, 92 Tex. 152, 46 S.W. 792; [Houston & T. C.] Ry. Co. v. Red Cross Farm, 91 Tex. 628, 45 S.W. 375) and as this appeal is governed by the same rule, it was not necessary for the purpose of conferring jurisdiction on the county court that an appeal bond should have been given by appellant to remove her suit from the commissioners’ court to the county court.”

In Houston & T. C. R. Co. v. Red Cross Stock Farm, 91 Tex. 628, 45 S.W. 375, the syllabus summarizes the holding of the court in this language: “In an action before a justice, it was adjudged that the plaintiff recover nothing by his suit; and judgment was rendered against him for costs, but no other judgment was entered against him. Held, that he was entitled to an appeal without filing an appeal bond,, under Rev. St. 1895, art. 1670, providing for a bond in ‘double the amount of the judgment’ ”.

To the same effect is the holding in Zwernemann v. Loving, Tex.Civ.App., 120 S.W.2d 140.

Under the findings of the court these decisions, in our opinion, settle adversely to appellant his contention.

The appellant also says in a proposition that if he be correct in his first assignment the court erred in rendering judgment against him for any property because there was no property or effects in the hands of the garnishee belonging to S. E. Maroney at the time of the service of the writ. Article 3997, Vernon’s Annotated Texas Civil Statutes, so far as applicable to this appeal, is as follows: “Every gift,, conveyance, assignment, transfer or charge made by a debtor, which is not upon consideration deemed valuable in law, shall be void as to prior creditors, unless it appears that such debtor was then possessed of property within this State subject to execution sufficient to pay his existing debts.”'

Under the court’s finding, which is amply supported by the testimony, no> consideration deemed valuable in law was paid to S. E. Maroney by his daughter for the cattle and the gift or conveyance was made subsequent to the time the debt of plaintiffs which was later reduced to judgment, was created.

In Rector et al. v. Continental Bank & Trust Co., 180 S.W. 309, 311, this court,, speaking through Chief Justice Huff, said: “If it should be shown by the evidence that the father was at the date of the gift,, or either of them, indebted and was not possessed of property sufficient to pay his existing debts, the gift then so made as to such existing creditor would be void. Art. 3967, R.C.S.; Maddox v. Summerlin, 92 Tex. [483], 486, 49 S.W. 1033, 50 S.W. 567.”

This contention is overruled.

The appellant also contends that in no event could the appellees obtain a valid judgment since this was a proceeding in garnishment under which the relief granted could not be adjudged.

In Willis et al. v. Yates, 12 S.W. 232, 233, the Supreme Court holds that: “The use of a writ of garnishment for reaching assets fraudulently conveyed by a debtor is unusual; but, while it is ordinarily true that a plaintiff in garnishment does not acquire any right against the garnishee other than the defendant debtor might have enforced, such procedure is recognized to be proper when the garnishee has received property from the debtor under a conveyance fraudulent as to creditors. This is upon the theory that such conveyances are inoperative as to creditors.”

See, also, 20 Tex.Jur. 729, para. 27.

Finding no error presented in the record, the judgment is affirmed.


author: SMITH, Chief Justice.

text:
    UNITED STATES v. BRANSON, Banking Com'r, et al.
    No. 10859.
    Court of Civil Appeals of Texas. San Antonio.
    Jan. 8, 1941.
    Rehearing Denied Feb. 5, 1941.
    Douglas W. McGregor and Brian S. Odem, both of Houston, and James L. Abney, of Brownsville, for appellant.
    Gerald C. Mann, Geo. W. Barcus, Wm. J. Fanning, Lloyd Armstrong, Ocie Speer, and Joe Goodwin, all of Austin, J. C. Hall, of Edinburg, Stewart, Burgess & Morris, of Houston, Kemp, Lewright, Dyer, Wilson & Sorrell, of Corpus Christi, Malone, Lipscomb, White & Seay, of Dallas, Strickland, Ewers & Wilkins and R. D. Cox, all of Mission, Kelley & Looney and Preston Shirley, all of Edinburg, and Henry D. Lauderdale, of Mercedes, for appellees.
   SMITH, Chief Justice.

The United States of America brought this action in the nature of a bill of review-in a district court of Hidalgo County to collect the sum of $34,349.53, plus interest, which had been assessed against the American State Bank & Trust Company, in. liquidation, as a deficiency in 1934 income and excess profits taxes. A judgment was rendered against the United States, which gave proper notice of appeal. No appeal bond appears in the record, but the transcript was timely filed in this court. Ap-pellee F. C. Branson, in his capacity as State Banking Commissioner, has presented a motion to dismiss this appeal on the ground that the United States, sole complainant of the judgment, has failed to file an appeal bond as required by statute.

Art. 2253, R.C.S.1925 provides that “an appeal may * • * * be taken * * * by the appellant giving notice of appeal * * * and by his filing with the clerk an appeal bond, where bond is required by law * * Art. 2265 prescribes the form and sufficiency of the bond. The legislature has seen fit to exempt certain persons and entities from the requirement of filing an appeal bond. Arts. 2254, 2072a, 2276, 279a, 1174 and 7057c sec. 13, Vernon’s Ann.Civ.Stats. Among these are the State of Texas, the heads of State departments and certain specified agencies of the federal government, Art. 279a, but no Texas statute, either expressly or by implication, exempts the United States from giving the bond required by Art. 2253. Neither is it Exempted by any act of Congress. It is true that the, provisions of 28 U.S.C.A. § 870, as amended June 19, 1934, chap. 653, sec. 7, 48 Stat. 1109, specifically exempt the United States from giving a bond or security for costs in an appeal to the Supreme Court or any district court, but this statute applies only to appeals taken in federal courts and does not include state courts within its scope. United States v. Kinney, D.C., 264 F. 542, writ of error dismissed 254 U.S. 663, 41 S.Ct. 64, 65 L.Ed. 464. Appellant does not contend otherwise.

Appellant contends that it is not liable for costs in this case, and therefore it is unnecessary for it to file a bond. Without deciding its liability for costs, we hold that in the absence of a statutory exemption, an appeal to this court can not be perfected without filing an appeal bond or affidavit in lieu thereof. Stinnet v. Dudley, Tex.Civ.App., 277 S.W. 801. Appellant did conform to that part of Art. 2253 which provides for the giving of notice of appeal, but it failed to perfect its appeal by filing a cost bond within the time prescribed by statute.

There appears, in the record an unsigned statement of the trial judge (which was not entered in the minutes of his court), that the appellant may appeal without giving bond. Such procedure, however, is not contemplated by the statutes of this State, and we do not consider that this statement in any way complies with the provisions of Article 2256. It is, therefore, without any force or effect in this appeal.

Appellant claims that the only purpose of an appeal bond is to secure the opposite party in his costs. This is not correct. Under our system of practice an appeal bond is,a jurisdictional prerequisite to an appeal to this Court, and it may not be dispensed with in the absence of specific statutory authority. It is as necessary as the giving of notice of appeal, or any other jurisdictional step in our procedure.

Previous to the Act of February 5, 1858 (requiring the filing of bond), a writ of error could be perfected in this State without bond. Turner v. Hamilton, 6 Tex. 250. Under federal statutes, the giving of security for costs does not appear to be essential to perfect an appeal (Stewart v. Masterson, 124 U.S. 493, 8 S.Ct. 561, 31 L.Ed. 507; Mayer v. Hickey, 5 Cir., 67 F.2d 489), but in Texas procedure, an appeal bond is necessary and absolutely essential to the perfection of an appeal. 3 Tex.Jur. sec. 609, p. 870; Callihan v. Montrief, Tex.Civ.App., 71 S.W.2d 564, error refused; City of Beaumont v. Stephenson, Tex.Civ.App., 107 S.W.2d 915. Under these decisions the United States has not perfected its appeal in this case, whether it is liable for the costs or not.

Lastly, appellant contends that it is not subject to the provisions of Arts. 2253 and 2265 because they “transgress the limits of state power * * * because the United States, relying on its sovereign prerogatives and attributes, that costs could not be awarded against it,.did not execute the cost bond provided by Art. 2265.” We overrule this contention. If there be one power left to the State of Texas in this new era of broadened federal authority, it is the sovereign one to set up and require adherence to her own system of practice in state courts. The Legislature of Texas, alone, has authority to prescribe how an appeal can be taken to this Court, and when the United States, having selected the forum by instituting suit in a Texas court, attempts to appeal, it must abide by and conform to the provisions of the Texas statutes, the same as any other litigant. Since the giving of a bond is a prerequisite to an appeal, the United States must give that bond. 3 Tex.Jur. p. 329, sec. 225; 4 C.J.S., Appeal and Error, p. 979, § 517; Bryson v. Payne, Tex.Civ.App., 232 S.W. 362; In re Elkin’s Estate, 36 Ariz. 334, 285 P. 281; United States v. Choctaw, O. & G. R. Co., 3 Okl. 404, 41 P. 729; State v. United States, 8 Blackf., Ind. 252.

There is no question of waiver or limitations involved here, and the United States is bound to observe the statutes of Texas in appealing this case.

The attempted appeal is dismissed. No statutory provision provides that the United States must pay the costs of this proceeding and mandate will issue without payment of costs.

Appellees’ motion to dismiss the appeal is granted.

NORVELL, J., disqualified and not sitting.


author: MONTEITH, Chief Justice.

text:
    MUNICIPAL LIFE INS. CO. et al. v. UNITED FIDELITY LIFE INS. CO.
    No. 11107.
    Court of Civil Appeals of Texas. Galveston.
    Jan. 9, 1941.
    Rehearing Denied Feb. 6, 1941.
    A. D. Dyess, of Houston, for appellants.
    Storey, Sanders, Sherrill & Armstrong, of Dallas, for appellee.
   MONTEITH, Chief Justice.

This is an appeal from an order sustaining a plea of privilege, in an action brought in the district court of Harris County by appellants, Municipal Life Insurance Company et al., against appellee, United Fidelity Life Insurance Company.

Appellee filed its plea of privilege to have said suit tried in Dallas County, the county of its residence.

In due time appellants filed their controverting affidavit,' in which they embodied their original petition, and claimed venue in Harris County under Subdivision No. 23 of Art. 1995, Revised Statutes of 1925.

On a hearing in the district court of Harris County an order was entered sustaining appellee’s plea of privilege and directing the transfer of the cause to Dallas County. Appellants appeal from this order.

The suit was instituted by the Municipal Life Insurance Company, who has its domicile in Harris County, Texas, and by H. A. Birkelbach and R. B. Kirkpatrick, both of Harris County, Texas, against United Fidelity Life Insurance Company, a Texas corporation with its principal office in Dallas County, Texas, for the alleged breach of a contract of re-insurance, a portion óf which was alleged to have been performed by appellee in Harris County. Appellants alleged that defendant was a corporation and has an office in Harris County.

Appellee filed a. plea of privilege to be sued in Dallas County, which was duly controverted by appellants.

At the request of appellants, the trial court filed its findings of fact and conclusions of law, the material part of which reads: “I find that defendant, United Fidelity Life Insurance Company, is a corporation duly incorporated under the laws of the State of Texas, with its domicile and principal office in Dallas, Dallas County, Texas, and that such defendant has a representative in Harris County, Texas.”

The primary issue made by the pleadings in this action is whether venue was properly laid in the district court of Harris County, Texas. The controlling question to be determined in this appeal is whether a defendant corporation, under the venue statutes of this state, can be sued in any county in which it has an agent or representative.

The material part of Article 1995, Revised Statutes of 1925, reads: “23. Cotr porations and associations. — Suits against a private corporation, association or joint stock company may be brought in any county in which the cause of action, or a part thereof, arose, or in which such corporation, association or company has an agency or representative, or in which its principal office is situated. * * * ”

While there is much confusion among our Courts of Civil Appeals as to the facts necessary to be proven to establish venue, we think that the rule is now well, settled that there are certain exceptions under subdivisions of Article 1995, Vernon’s Ann. Civ.St. art. 1995, which in their very nature require proof of plaintiff’s entire cause of action, if relied upon for venue, and that there are certain other subdivisions of such statute, which are of equal dignity, including said Subdivision No. 23 of said statute, in which the venue facts are whether or not defendant was a corporation and had an agent or representative in the county where the suit was instituted, and whether or not the cause of action arose in said county.

Said exception No. 23 contains three distinct conditions under which a corporation may be sued out of the county of its domicile. It may be sued in any county (a) in which the cause of action, or a part thereof, arose; (b) in any county in which it has an agent or representative, or in which its principal office is situated; and (c) if the corporation be a railroad it may be sued in, any county through which it extends or operates. Further it is not necessary that each and all of the contingencies and subdivisions contained in Exception No. 23 be shown in order to establish venue. De Shong Motor Freight Lines, Inc., v. North Texas Coach Co., Tex.Civ.App., 108 S.W.2d 766; Eppenauer v. Shrup, Tex.Civ.App., 121 S.W.2d 473; Central Motor Co. v. Roberson, Tex.Civ.App., 139 S.W.2d 287; American Seed Co. v. Wilson, Tex.Civ.App., 140 S.W.2d 269.

It is held by the Commission of Appeals in the case of Lakeside Irrigation Co. v. Markham Irrigation Co., 116 Tex. 65, 285 S.W. 593, that the proof of either of said exceptions is sufficient to establish venue.

The part of Subdivision No. 23 relied upon by appellants to confer venue in Harris County, omitting those parts which have no application here, reads: “Suits against a private corporation * * * may be brought in any county in which * * * such corporation * * has an agency or representative.”

Thus venue facts depend only upon an issue of fact whether or not the defendant is a corporation and has an agent or representative in the county where the suit is brought.

The identical question before us was decided by the Commission of Appeals, with the approval of the Supreme Court of Texas, in Texas-Louisiana Power Co. v. Wells, 121 Tex. 397, 48 S.W.2d 978, 980. This case was filed in Montague County, Texas, against Texas-Louisiana Power Company and another. Plaintiff alleged that the named defendant was a corporation and that it maintained an agency and representative in Montague County. Plaintiff sought damages for the death of his son. A plea of privilege and controverting affidavit were filed. The plea of privilege contained an admission that defendant was a corporation. Upon a hearing, the plaintiff offered only testimony in support of his controverting plea to the effect that the defendant kept and' maintained an agency and representative in Montague County at the time plaintiff’s cause of action accrued-. This proof was not controverted and the trial court overruled the plea of privilege.. The judgment entered recited: “There exists in law exceptions to exclusive venue in the county of one’s residence, in that it appeared that the defendant, Texas-Louisiana Power Company, is a corporation and maintains an agent and representative in the County of Montague and does business in the County of Montague upon whom service of citation was obtained in said county and the court is of the opinion that it has jurisdiction of the parties.”

The case was appealed and the following question was certified to the Supreme Court for answer: “Did the trial court err in overruling the defendant’s plea of privilege, either for the reasons given by the trial court or for any other reasons?”

In answering the question the Supreme Court said: “Suits against a private corporation, association or joint stock company may be brought in any county * * in which such corporation, association or company has an agency or representative. * * * Tlle faC(- that said company is a corporation is expressly admitted in said supporting affidavit; consequently there was no need for the plaintiffs to introduce testimony to prove this admitted fact. In the plaintiffs’ controverting affidavit, it is alleged that said corporation has an agency and representative in Montague county; and the statement of facts, which accompanies the above certificate, shows that its allegation is sustained by testimony introduced at the hearing of the plea of privilege. The judgment overruling the plea of privilege- is therefore justified by both pleading and proof.”

The question was answered in the negative.

In the instant case, the appellee in its plea of privilege and its affidavit thereto admitted that it was a corporation. Appellants in their controverting affidavit, duly verified, - alleged that appellee was a corporation, and the court in its findings of fact and conclusions of law found that ap-pellee was a corporation. Appellants in their original petition alleged that the defendant corporation had an agency and representative in Harris County, Texas, naming such representative, and the trial court in his findings of fact found that appel-lee was a corporation with its domicile and its principal office in Dallas County and that it had a representative in Harris County, Texas.

The above allegations and findings of the court establish conclusively that at the time of the matters complained of and the institution of this suit, appellee was a corporation, and that it had a representative in Harris County.

For the reasons stated, the judgment of the trial court sustaining said plea of privilege is reversed and the cause remanded, with the instruction that the trial court retain venue of the cause in Harris County.

Reversed and remanded with instructions.


author: O’QUINN, Justice.

text:
    MARYLAND CASUALTY CO. v. LANDRY.
    No. 3758.
    Court of Civil Appeals of Texas. Beaumont.
    Jan. 23, 1941.
    Rehearing Denied Feb. 5, 1941.

      Smith, Smith & Boyd, of Beaumont, for appellant.
    Xavier Christ, of Port Arthur, and B. C. Johnson, of Houston, for appellee.
   O’QUINN, Justice.

This is a compensation insurance case. Wilson. Landry was the employee, the Texas Can Company of Port Arthur, Texas, the employer, and Maryland Casualty Company the compensation insurance carrier. This is the second appeal in this case. See 129 S.W.2d 755. Wilson Lan-. dry while in the course of his employment, on October 13, 1936, received an injury for which he claimed compensation. The Industrial Accident Board awarded him compensation. From that award appellant appealed and filed this suit to set said award aside. On the first trial judgment was for appellee. On appeal that judgment was reversed. On the second trial (the instant hearing) judgment was again for appellee for total and permanent incapacity for 401 weeks at $15 per week, less partial payments of $8.40 per week for 9 weeks and 5 days made on the first 10 weeks, the compensation to be paid in a lump sum less legal discount, together with six per cent interest on all matured weekly payments to’ the date of judgment. Mo-’ tion for a new .trial was overruled, and this appeal followed.

There are 150 assignments of error urged by appellant. We shall discuss only those believed to' be necessary to a disposition of the appeal.

The first proposition urges that the court erred in refusing to give its requested special issue No. 11, which reads: “Do you find from a preponderance of the evidence that any disability sustained by the cross-plaintiff, Wilson Landry, is temporary? Answer Yes or No.”

In answer to the third special issue, the jury found that appellee suffered total disability as a result of his injuries, and in answer to the fifth special issue that the total disability was permanent. The sixth special issue inquired: “How long, if for any length of time, do you find from a preponderance of the evidence such total disability, if any you have found, to exist? Answer by stating the length of time, if any.” The jury answered “permanent.”

The evidence raised the issue as to whether the total incapacity suffered by appellee from his injury was permanently total, or was temporary total disability. We think the requested charge covering this feature was appropriate, but we also think that the sixth special issue, set out supra, given to the jury covered the inquiry. The 3rd special issue inquired whether the disability was total, and the 5th whether such total disability was permanent. These were answered “Yes.” The 6th inquired for how long, if for any length of time, the total disability would exist, to which the jury answered “permanent.” In Traders & General Insurance Co. v. Herndon, Tex.Civ.App., 95 S.W.2d 540, this identical manner of inquiry as to temporary incapacity was held sufficient as against the court’s refusal to submit a requested special issue similar to that here requested. In the cited case the court held the matter under inquiry was sufficiently covered by the court’s charge in substance the same as here given. Petition for writ of error was dismissed in the Herndon case. The issue inquired for how long, if for any length of time, the total disability existed. The jury, if the facts warranted so doing, could have answered any length of time. They answered “permanent,” that is that the total disability would not end — in other words, was not temporary. While the issue could have been differently framed, and so better understood, yet the answers of the jury were consistent and did not reflect any confusion or misunderstanding of the questions. The assignment is overruled.

What we have said disposes of assignment two.

The court submitted special issue No. 10, which reads:

“Do you find from a preponderance of the evidence that Wilson Landry’s disability, if any, is not limited to his right hand ?
“In the event your answer is in the affirmative, the form of your answer should be ‘disability not limited to right hand’; otherwise the form of your answer shall be ‘No.’
“In answering the above special issue you are instructed that all injuries below the elbow are construed to be injuries to the hand; if any injury below the elbow results in pain and suffering permanently rendering one disqualified to perform the usual tasks of a workman so as to obtain and retain employment, then the disability resulting from such injury is not limited to the hand.”

To this issue, and particularly the explanations following it, appellant objected on the grounds: (a) that when considered in connection with the explanation following same, it was a general charge; (b) that the explanation was not a definition of any legal term contained in the issue; and (c) that the explanation was not necessary to enable the jury to properly pass upon and render a verdict on said issue as authorized by Article 2189, Vernon’s Ann.Civ.St. This article provides: “In submitting special issues the court shall submit such explanations and definitions of legal terms as shall be necessary to enable the jury to properly pass upon and render a verdict on such issues.” Clearly the instruction or charge following the issue was not a definition of any word or term contained in the issue. The first part of the instruction, to wit: “In answering the above special issue you are instructed that all injuries below the elbow are construed to be injuries to the hand,” is correct. Article 8306, Section 12, providing compensation for specific injuries, provides that “For the loss of a hand, sixty per cent of the average weekly wage during one hundred and fifty weeks.” This is followed by the provision for the loss of an arm, towit: “For the loss of an arm at or above the elbow, sixty per cent, of the average weekly wage during two hundred weeks.” These two provisions, in determining whether the loss was one of the hand or arm, should be construed together, and since the loss, if above the elbow, is that of an arm, then necessarily the loss, if below the elbow would be the loss of a hand. But the remaining portion of the instruction, to wit: “If any injury below the elbow results in pain and suffering permanently rendering one disqualified to perform the usual tasks of a workman so as to obtain and retain employment, then the disability resulting from such injury is not limited to the hand,” is neither a definition nor an explanation of any legal or technical term in the issue, necessary to enable the jury to properly understand and pass upon and render a proper verdict on the issue, Humble Oil & Refining Co. v. McLean, Tex.Com.App., 280 S.W. 557.

As propositions 5 to 15, inclusive, involve questions similar to the above, they need not arise on another trial, and so will not be discussed.

We overrule the 16th, 17th, 18th, 19th, 20th, 21st, 22nd, 23rd, 24th, 25th, and 26th propositions complaining in various ways that the submission of special issue No. 3, inquiring whether the incapacity of appellee, if any, was total, was error. The issue was proper, being raised both by the pleading and the evidence. It was not subject to the objections levelled against it.

Proposition 27 is too general— objects to the court’s charge as a whole; 28 insists that where the only theory on which claimant could recover compensation for a general injury, the injury having been to the right wrist, was to show that the injury to the wrist had affected other portions of his body to such extent that he became entitled to a recovery greater than for a specific injury and consequent disability, and appellee not having requested- the submission of any issue as to whether the injury had extended to or involved other portions of his body, he had waived such ground of recovery, and so a judgment for total permanent incapacity, as for a general injury, as a matter of law, could not stand. This contention is without merit. Proposition 29 is overruled. It was proper for the court, in his charge to define “total disability.” Propositions 30, 31, 32, 33, 34, 35, 36, 37, 38, and 39, complaining that the answers of the jury to the several issues pointed out are without sufficient support in the evidence, are overruled. They are amply supported by the record.

Proposition 40 is that the court erred in refusing its special requested issue, reading: “Do you find from a preponderance of the evidence that all disability, if any, sustained by Wilson Landry results solely from the impaired use, if any, of his right hand?”

The refusal of the issue was not error. It was substantially and sufficiently covered by special issue 10 given by the court which read: “Do you find from a preponderance of the evidence that Wilson Landry’s disability, if any, is not limited to his right hand?”

The word “not” in the issue was so placed because of an objection to the issue by appellant. The jury answered “Disability not limited to right hand.” This was a sufficient submission of appellant’s requested issue.

Proposition 40-B complains that the court erred in refusing appellant’s special requested issue, reading: “Do you find from a preponderance of the evidence that ■all incapacity, if any, of Wilson Landry results from an injury, if any, confined to his right arm?”

The refusal was not error. The matter was substantially and sufficiently covered by special issue II given by the court which read: “Do you find from a preponderance ■of the evidence that Wilson Landry’s disability, if any, is not limited to his right arm ?”

The jury answered: “Disability not limited to right arm.” This was a sufficient submission of appellant’s requested issue.

The 48th proposition complains that the court erred in refusing to permit appellant to introduce excerpts from the record of testimoñy of appellee given on a former trial of his case relating to the manner of his receiving the injury for which he claims compensation, for the purpose of impeaching appellee’s testimony given by him as to how he received his injury in- the instant trial. We gather from the instant record that the testimony in main for both parties had been finished and that appellee was placed on the stand for the purpose of rebutting evidence given by witnesses who had testified for appellant, not involving the matters here sought to be heard, and on cross-examination by counsel for appellant it was sought to lay a predicate for his impeachment by offering portions of his testimony given on the first trial relating to the manner of receiving his injury, and upon objection by counsel for appellee that the testimony then sought to be introduced was not in rebuttal to any thing testified to by appel-lee, the impeaching evidence was refused.

The proposition is without force. The control and direction of the trial of the case as regards the order of proof rests within the discretion of the trial judge, and refusing to permit counsel for appellant to offer evidence for impeaching purposes after appellant had offered its evidence in main, particularly where the proffered evidence was not in rebuttal of any thing to which appellee had testified when testifying in rebuttal, was not an abuse of his discretion, and so not error. Moreover, it appears that while appellee was testifying in his own behalf in the main case he was repeatedly asked on cross-examination by appellant if his testimony in the instant trial was not different from his testimony in the former trial as to his movements just prior to the time of receiving his injury, to which questions ap-pellee replied that he did not remember the questions and answers on the former trial, but that he was here trying to answer the questions as he remembered the facts — but that the injury happened so quickly that he could not say exactly how it happened. It appears that appellant, in the main examination of appellee, had full opportunity to examine and cross-examine appellee but did not offer to go into the matter as now sought. No injury is perceived to have been received by appellant,'.and no abuse of discretion on the part of the trial judge is shown.

We overrule propositions 49 to .63, inclusive, variously complaining that special issue 8 submitting “good cause” to the jury was insufficient and erroneous. We denied this contention on the same facts on former appeal. 129 S.W.2d 755.

Proposition 72 complains of alleged improper argument by counsel for appellee in his opening argument to the jury. The argument was: “Gentlemen, that boy got an injury out there. He didn’t have an injury before, and I don’t hesitate to say that he has suffered a total disability.”

No objection was made to the argument at the time it was made. This is shown by the judge’s qualification to the bill. It is to be observed that the argument was not inflammatory, and was but the conclusion of coimsel drawn from the evidence. Judge Sharp, speaking for the Supreme Court, in Ramirez v. Acker, 134 Tex. 647, 651, 138 S.W.2d 1054, 1056, said: “The second rule is: If the argument is of such a nature or is made under such circumstances that if objection is made at the time, so that counsel can offer an explanation or make such corrections as will make such argument proper or harmless, or if the argument is of such a nature that its' withdrawal by counsel or instruction by the court to the jury to disregard same will cure the error and render the effect of the argument harmless, the complaining party must object to such argument and request the court to instruct the jury not to consider same; and failure so to do waives the error.”

The proposition is overruled.

What we have said disposes of proposition 73.

Proposition 74 complains that the answer of the jury to special issue 7 as to the wage rate of appellee was without support in the evidence. We think the finding has ample support. The proposition is overruled.

We have considered all the propositions presented, and those not discussed are without merit, and are overruled.

For the error discussed, the judgment is reversed and the cause remanded for another trial.

Reversed and remanded.

COMBS, J., dissents.


author: McDONALD, Chief Justice.

text:
    WICHITA NAT. BANK v. UNITED STATES FIDELITY & GUARANTY CO.
    No. 14161.
    Court of Civil Appeals of Texas. Fort Worth.
    Jan. 10, 1941.
    Rehearing Denied Feb. 7, 1941.

      Edgar M. Mann, of Wichita Falls, for plaintiff in error.
    Malone, Lipscomb, White & Seay and Eric Eades, Jr., all of Dallas, for defendant in error.
   McDONALD, Chief Justice.

W. W. McReynolds, under appointment by the County Court of Wichita County, served as guardian of three minors, Dora Dean, Nellie Frank and James Carver, from June 29, 1932, until he was removed on May 29, 1939. Appellee, United States Fidelity & Guaranty Company, was surety on his guardian’s bond. On August 8, 1932, the guardian deposited $1,000, belonging to the minors’ estate, in the Wichita State Bank & Trust Company, which bank was succeeded by the appellant, Wichita National Bank of Wichita Falls, which took over the assets and assumed the liabilities of the first-named institution. Under date of September 6, 1932, the Wichita State Bank & Trust Company entered into a written agreement with the guardian and the appellee, providing that all guardianship funds were to be deposited in such bank, and that all checks drawn by the guardian should, before being honored by the bank, be countersigned by the appellee bonding company. At the time this countersignature agreement was made, the amount on deposit was $640.80, all of which was checked out by June 27, 1934. On May 3, 1935, the guardian made a deposit of $303.51, which was checked out by March 7, 1936.

Between May 6, 1935, and February 29, 1936, the guardian drew the twenty-eight checks involved in this suit, aggregating $295.68, none of which was countersigned by appellee, and all of which were paid out of the May 3, 1935, deposit of $303.51. The guardian’s final account was contested, and all of the checks just mentioned, as well as other items of the final account, totalling altogether $765.95, were disallowed by the County Court. Two of the minors, having attained their majority, settled their respective claims against the surety for $180 eafch, before the County Court had passed on the final account and the contest of it The guardian and his surety were ordered to pay over $255.31 to the newly appointed guardian of the remaining minor. The surety, the appel-lee, paid over this $255.31, plus the amount of $360 paid in settlement to the two minors who had attained their majority, making a total .of $615.31. These claims were paid by appellee in July of 1939, and on August 1, 1939, appellee filed this suit against the appellant, to recover $295.68, the amount of the checks which were not countersigned and which were disallowed in the hearing on the final account.

The appellant presented pleas under the two and four year statutes of limitations, and a plea of want of consideration.

Trial before the court, without a jury, resulted in a judgment in favor of the surety against the bank, for $229.44, the trial court having reduced the recovery in the proportion of the saving effected by the surety in making the compromise settlements of the claims of the two minors who had become of age.

The appeal is upon an agreed statement of facts, from which it appears that $120.35 of the checks were cashed more than four years before the suit was filed.

Appellant assigns as error the overruling of his pleas of limitation and want of consideration.

By cross-assignments of error the ap-pellee complains of the action of the trial court in reducing the amount of the recovery from $295.68 to $229.44.

The appellant bank contends that limitation began to run with the cashing of each check which was not countersigned. The appellee surety company contends that limitation did not begin to run until it had paid the money to the minors.

The only wrong charged against the bank in the plaintiff’s petition was the breach of the countersignature agreement, to-wit, cashing the checks which were not countersigned.

It was then that the breach of the contract occurred.

“A cause of action arising out of contractual relations between the parties accrues as soon as the contract or agreement is breached.” 1 Corpus Juris Secundum, Actions, p. 1387, § 124, subd. b.

The fact that the surety might not have known, at'the time, about the checks being cashed, would not prevent the running of the statute. Houston Water Works v. Kennedy, 70 Tex. 233, 8 S.W. 36. Nor would the fact that the surety might not then be able to determine the amount of damages it might eventually suffer. Quinn v. Press, Tex.Sup., 140 S.W.2d 438, 128 A.L.R. 757; Smith v. Fairbanks, Morse & Company, 101 Tex. 24, 102 S.W. 908.

The order of the County Court disallowing the items in the guardian’s final account was only a determination of liability whichr had existed since the cashing of the checks, and the date of it is not controlling on the question of limitations. Kauffman v. Wolf, 77 Tex. 250, 13 S.W. 987; American Indemnity Co. v. Ernst & Ernst, Tex.Civ.App., 106 S.W.2d 763.

The surety was not without remedy to protect itself when the wrongful payment of the checks began, even though it had not yet actually paid out any money. It could have resorted to injunction or other appropriate remedy to prevent the misapplication of the guardianship funds, and could have compelled restoration of any already paid out. City of Bonham v. Taylor, 81 Tex. 59, 16 S.W. 555.

In American Indemnity Co. v. Ernst & Ernst, 106 S.W.2d 763, 765, by the Waco Court of Civil Appeals, writ of error refused by the Supreme Court, the appellant, surety on the bond of a tax collector, brought suit against the auditing firm of Ernst & Ernst. It alleged that it executed the collector’s bond in reliance upon the report of the auditing firm that the collector’s books for the prior year were in order, and that later it had to pay off a judgment covering money embezzled by the tax collector. The question was whether limitation began to run at the time the auditing firm furnished the false report to the surety company, or when the surety company paid off the judgment covering the shortage. The Court of Civil Appeals, speaking through Justice Alexander, held that limitation began to run when the fraud was perpetrated, or at least when it was discovered. The opinion is, in part, as follows: “In this connection, the plaintiff contends that the full amount of its damages could not be ascertained, and in fact it was not damaged at all, until the claim of the school district had been reduced to final judgment and the judgment paid by the bonding company, and since this occurred less than two years prior to the filing of this suit, the cause of action was not barred by limitation. We cannot sustain this view. The defendant’s conduct, if any, in falsely inducing plaintiff to renew Arrington’s bond constituted a violation of the plaintiff’s rights and its cause of action therefore arose immediately or upon discovery of the fraud, even though the full amount of damages that would result therefrom could not then be ascertained, and even though the plaintiff was not required to pay the claim of the school district for the liability thus assumed under the bond until a later date.”

On appeal the appellant appears to have abandoned its plea under the two year statute, the suit being based upon breach of a written contract.

We therefore conclude that $120.35 of appellee’s claim is barred by the four year statute of limitation. Vernon’s Ann.Civ.St. art. 5527.

Appellant also pleads want of consideration, seemingly upon the theory that the guardian had already deposited the guardianship funds when the countersignature agreement was made. But the checks involved in this suit were all cashed out of a deposit made after the countersignature agreement was made. In a case similar to the case on appeal, it was held by the Eastland Court of Civil Appeals that the keeping of the funds by the bank and the use thereof constituted a sufficient consideration for such a countersignature agreement. Abilene State Bank v. United States Fidelity & Guaranty Co., Tex.Civ.App., 37 S.W.2d 815. In its brief, appellant attempts to distinguish the case just mentioned from that on appeal by contending that the money was deposited in the bank in the Abilene State Bank case after the countersignature was made, and in the case on appeal before the countersignature agreement was made. While we believe that the rule would be the same in both cases, we point out that in the case on appeal the checks involved in this suit were all paid out of a deposit made after the execution of the countersignature agreement.

We are not able to find any legal basis to support the action of the trial court in reducing the amount of the recovery because the surety made a compromise settlement with two of the minors 'for less than the amount later found to be due them. No claim foe such a reduction is presented in the defendant’s pleadings, nor is any authority for it cited in its brief.

We are of opinion that the plea of limitation under the four year statute should have been sustained, as to $120.35 of the amount sued for; that the plea of want of consideration was properly overruled; that the trial court erred in deducting from the amount of the judgment the sum of $66.24, the proportionate part of the saving effected by the compromise settlements; and that therefore the judgment of the trial court should be reformed so as to allow judgment in favor of appel-lee for $175.33, being the amount sued for less the $120.35 barred by the four year statute of limitations.

Each of the parties having obtained some relief in this court, it is ordered that the costs of this appeal be taxed equally against the parties.

Reformed, and as reformed, affirmed.


author: WALKER, Chief Justice.

text:
    LEWIS v. INDEPENDENT SCHOOL DIST. OF CITY OF AUSTIN et al.
    No. 3769.
    Court of Civil Appeals of Texas. Beaumont.
    Jan. 23, 1941.
    Rehearing Denied Feb. 5, 1941.

      Hardy Hollers, of Austin, for appellant.
    J. M. Patterson, Black, Graves & Stay-ton, and J. Harris Gardner, all of Austin, and Brown, Carlson, Kiefer & Kunke, of Chicago, Ill., for appellees.
   WALKER, Chief Justice.

The simple question presented by this appeal is whether appellee, the Independent School District of the City of Austin, incorporated under the laws of this state as an independent school district, with the statutory board of trustees and other officers, can legally purchase and hold the policy of fire insurance issued to it by the Millers Mutual Fire Insurance Company, legally incorporated under the laws of Texas. The action is by appellant, C. H. Lewis, in his capacity of a tax paying.citizen, a resident of the School District, to enjoin appellee from consummating the purchase of the insurance policy. The amount of the policy premium was $264; the insurance policy had been issued and delivered to the school district, but the premium had not been paid. On trial to the court without a jury, on an agreed statement of facts, judgment was rendered denying appellant’s prayer, from which he prosecuted his appeal to the Austin Court of Civil Appeals. The case is on our docket by order of transfer by the Supreme Court.

Appellee, the School District, contracted for this policy of insurance under the provisions of article 4860a — 8, Vernon’s Ann. Civ.St.: “Any public or private corporation, board or association in this State or elsewhere may make application, enter into agreements for and hold policies in any such mutual insurance company. Any officer, stockholder, trustee, or legal representative of any such corporation, board, association or estate may be recognized as acting for or on its behalf for the purpose of such membership, but shall not be personally liable upon such contract of insurance by reason of acting in such representative capacity. The right of any corporation organized under the laws of this State to participate as a member of any such mutual insurance company is hereby declared to be incidental to the purpose for which such corporation is organized and as much granted as the rights and powers expressly conferred.” Clearly, under the provisions of this statute the School District had the right to contract with the Millers Mutual Fire Insurance Company for the policy in issue. Appellant recognizes this as a proper construction of article 4860a — 8, but it is his contention that this article of the statute contravenes the following provisions of our State Constitution: Vernon’s Ann.St. Sec. 3 of Art. 11: “No county, city, or other municipal corporation shall hereafter become a subscriber to the capital of any private corporation or association, or make any appropriation or donation to the same, or in anywise loan its credit; but this shall not be construed to in any way affect any obligation heretofore undertaken pursuant to law.” Section 52 of Art. 3: “The Legislature shall have no power to authorize any county, city, town or other political corporation or subdivision of the State to lend its credit or to grant public money or thing of value in aid of, or to any individual, association or corporation whatsoever, or to become a stockholder in such corporation, association or company.”

The courts will not strike down as unconstitutional an act of the Legislature unless the Constitution, considered in the light of the facts of the case at bar, clearly forbids what the Legislature had done. Texas National Guard Armory Board v. McCraw, Attorney General, 132 Tex. 613, 126 S.W.2d 627.

We take the following summary of the controlling facts from appellees’ brief:

“The management of the public free schools of the City of Austin is by law placed in its board of trustees, consisting of seven members, and under the provisions of Article 2827, R.S.1925 [Vernon’s Ann. Civ.St. Art. 2827], such board is expressly authorized to pay insurance premiums out of local school funds from district taxes, tuition fees of pupils and other local sources, and it had, at the time the insurance policy here involved was written and delivered to it, ample funds from such sources to pay the premium of $264.00, which is the standard premium determined by rates fixed by the Board of Insurance Commissioners for a similar policy of fire insurance, whether issued by a mutual company or a stock company. This policy of insurance is nonassessable. No further payment can be exacted.
“The Millers Mutual Fire Insurance Company of Texas is a mutual fire insurance corporation, originally chartered as such by the State of Texas on February 28, 1898. Its charter provides that the corporation is organized for the purpose of The insuring of the property of its members in this State and in any other State or States of the United States of America, against loss by fire/ and that the corporation ‘shall have no capital stock.’
“Its by-laws provide that all policies shall be issued on, the participating, plan; that each person, firm or corporation having a policy in the company ‘shall be a member thereof during the life of his policy, and no longer,’ and shall be entitled to one vote regardless of the amount of insurance or the number of policies held by him; that the management of the company shall be in charge of a Board of Directors to be elected annually by a majority vote of the members present or represented by proxy; that the liability of each policyholder is limited to and determined to be the amount of deposit premium fixed and specified in his policy; that the deposit premium shall be paid by the policyholder upon the issuance of the policy, and will be returned to the policyholder, upon termination of the policy, after deducting therefrom the amount due or accrued from such policyholder, and that all policies issued should be subject to the conditions of such by-laws.
“The by-laws also provide for the creation of a permanent guaranty fund of $200,000.00 over and above all legal reserves and other liabilities, ‘for the greater protection of this company’s policyholders,’ and the directors may also create and maintain against the contingency of excessive loss in any year such surplus as they may deem expedient; but ‘no member, while this company continues to transact business, shall ever be entitled to receive any portion of such funds except in payment of losses.’
“The appellee mutual insurance company lias a deposit of securities with the State Treasurer of Texas in the amount of $200,-■000.00; it is licensed by the Texas Insurance Department as a mutual fire insurance company, and under the law of this State such companies when they have .a surplus in excess of $100,000.00 can issue a nonassessable policy. As of December 31, 1939, this company owned assets of $2,153,053.04 and had a net surplus, over and above all legal reserves and other liabilities, of $1,140,066.93, and since its surplus is far in excess of $100,000.00 it is legally authorized to issue nonassessable policies.
“The policy involved in this case is non-assessable and contains excerpts from the by-laws evidencing such limit of liability. It was issued for the stipulated premium of $264.00, which is the amount of premium determined by the premium rates fixed and promulgated by the Board of Insurance Commissioners, and is exactly equivalent to the premium that would be exacted and paid on the same policy if issued by a stock fire insurance company.
“The Millers Mutual Fire Insurance Company of Texas has been issuing fire insurance policies to public corporations (counties, cities, towns, independent and common school districts) for more than 20 years. At all times during such time the company has had outstanding fire insurance policies held by such corporations. It now has such policies held by more than 50 of such public corporations, and writes about 50% of all mutual fire insurance held by such Texas counties, cities, towns and schools.
“The participating plan upon which the policies of the company are issued enables its policyholders to receive insurance protection at a saving over the standard rate. The unused portion of the deposit premiums of policyholders is returned to them pro rata on the termination of their policies. The company was organized in 1898 and up to January 1, 1940, it had collected a total of $21,252,975 in deposit premiums and had returned to its policyholders $6,-282,432 in unused premiums. The substantial savings in the cost of insurance carried in The Millers Mutual Fire Insurance Company is evident. The anticipation of a very probable saving in insurance costs for the school districts was one of the reasons why the school board elected to insure in the mutual company.”

On the following propositions, pertinent to the facts of this case, Article 4860a — 8 is not unconstitutional:

(1) By purchasing the policy of fire insurance and by contracting to pay the premium in the amount of $264, the School District did not make a loan of its credit to the Millers Mutual Fire Insurance Company. Unless prohibited by statute, mutual insurance companies may issue policies of fire insurance for a cash premium only, without contingent liability attaching to the policyholder. Union Ins. Co. v. Hoge, 1858, 21 How. 35, 62 U.S. 35, 16 L.Ed 61; McMahon v. Cooney, 1933, 95 Mont. 138, 25 P.2d 131; Spruance v. Farmers’ & Merchants’ Ins. Co., 1886, 9 Colo. 73, 10 P. 285; Patrons’ Mut. F. Ins. Co. v. Brinker, 1926, 236 Mich. 367, 210 N.W. 329; State v. Manufacturers’ Mut. Fire Ins. Co., 1887, 91 Mo. 311, 3 S.W. 383.

On the conditions of the policy and of the by-laws of the Millers Mutual Fire Insurance Company, in the event of the insolvency' of the insurance company, no assessment could be made against the School District on this policy. It is elementary that a receiver for an insolvent company can not enforce any contract beyond its terms; the policy in issue denied any and all assessment liability against the School District.

“The receiver has no greater right to impose assessments than that possessed by officers of the company on the date the custodian took possession.” Central Mutual Auto Ins. Co. v. Gauss, 1940, 292 Mich. 309, 290 N.W. 808, 811.

The School District did not make a loan of its credit to the Millers Mutual Fire Insurance Company on the theory of a partnership among the policyholders in the company. A mutual insurance corporation is not a partnership; the policyholders are neither partners of each other nor of the company.

“But whatever analogies there may be between mutual companies and ordinary partnerships, and the relation of the members of the two organizations, an incorporated company, although organized upon the mutual principle, is in no proper or legal sense a partnership.” Cohen v. New York Mutual Life Ins. Co., 1872, 50 N.Y. 610, 624, 10 Am.Rep. 522.

“ * * * so a policy holder is not a partner of the company.” Joyce on Insurance, 2d Ed., Section 319; Brown v. Stoerkel, 1889, 74 Mich. 269, 41 N.W. 921, 3 L.R.A. 530.

(2) The School District did not become a stockholder in the Millers Mutual Fire Insurance Company or a subscriber to its capital stock by its purchase of the insurance policy in issue.

In its brief appellee has reveiwed the authorities from many states, and on these authorities the following proposition is announced : “It has never been authoritatively held by any court that'a policy holder in a mutual insurance company is a stockholder in the company. Although courts have occasionally illustrated the rights and liabilities of policyholders in such mutual companies by comparison with the rights of stockholders in other types of corporations, it has always been clear in all these cases that the courts were merely drawing an-analogy to cover only the immediate point being illustrated. The cases passing directly on this question have universally held that a policyholder in a mutual insurance company is not a stockholder.”

Section 52 of Article 3 of our State Constitution has its counterpart in the constitutions of many of the states. The constitutions of thirty-five states, including Texas, definitely prohibit the lending of its money or its credit by a municipality or other public subdivision to a private corporation; the constitutions of these states also prohibit municipalities and other political subdivisions from becoming stockholders in private corporations. Twenty-nine of these states have enacted statutes similar to Article 4860a — 8, expressly authorizing the insuring of public property in mutual insurance companies. In no case has any court held its statute on this issue unconstitutional. These statements are made on authority of appellees’ brief.

In French v. Mayor of Millville, 66 N.J.L. 392, 49 A. 465, 466, affirmed 67 N.J.L. 349, 51 A. 1109, the right of a city to insure in a mutual company was affirmed. The court said meeting many of appellant’s points of argument: “By giving its premium notes, the city did not loan its credit to the company. Its promises were made for a consideration of value beneficial to itself, and, like other assets of the company, they were purchased, not borrowed; nor did the so-called ‘membership’ of the insured render the city in any sense the owner of the stock or bonds which belonged to the company, or a holder of stock in the company, within the fair import of the constitutional prohibition. The right, beyond mere insurance, which insured parties acquired by virtue of their membership in this company, is declared by section 11 of the charter to be a right to a ‘proportion of the profits, if any, of each year’s business, in proportion to the amount of premium paid.’ This right to share in a limited part of the profits of business is essentially different from corporate stock, which represents a proportionate part of all the property of the corporation. The difference is similar to that which exists between the interest of the members of a co-partnership and that of its. employés, whose compensation is measured by its profits.”

Downing v. Erie School District, 297 Pa. 474, 147 A. 239, 241, involved constitutional provisions of the State of Pennsylvania, similar to the constitutional provisions of our constitution invoked by appellant, and a statutory enactment, 53 P.S.Pa. § 1761, authorizing insurance policies on public school buildings to be taken out “with any mutual fire insurance company duly authorized by law to transact business in the Commonwealth of Pennsylvania.” The court said: “Our constitutional provision was designed to prevent municipal corporations from joining as stockholders in hazardous business ventures, loaning its credit for such purposes, or granting gratuities to persons or associations where not in pursuit of some governmental purpose. Taking of insurance in a mutual company with limited liability is not within the inhibition, for the district does not become strictly a stockholder, 'nor is it loaning its credit.”

In Fuller v. Lockhart, 209 N.C. 61, 182 S.E. 733, 737, sustaining the right of the County Board of Education to purchase a policy of insurance in a mutual company, the court said: “Under the purchase of the insurance the board in no way became a stockholder or partner, nor did it incur any liability for debts. It is a mutual company without stock or stockholders. Its policyholders are its only members. A stockholder is the owner or holder of shares in a- corporation having a capital stock represented by shares. The policyholders can in no way become liable for the debts of the corporation. For the insurance purchased, it paid $12.35, and its contingent liability is limited to the maximum of the cash payment, in the present case to $12.35. The county board of education had full power and authority to make the contract and it was in its sound discretion. * * * ”

We make the following quotations from the leading textbookb discussing this proposition :

(a)“By becoming a member of a mutual insurance company a municipality does not become the owner of any stock or bonds of the company in violation of a constitutional provision prohibiting any municipality from owning any stock or bonds of any association or corporation; and by giving premium notes for the payment of assessments to meet losses incurred'by such an insurance company, the municipality does not loan its credit to the company in violation- of a constitutional prohibition against doing so.” 1 Cooley’s Constitutional Limitations, vol. 1, 8th Ed., p. 469, note.
(b) “As an incident to the power to erect and maintain a city hall, school houses, and other public buildings, the municipality has the right to contract for indemnity against loss by fire by insuring these buildings; and, having the power to insure, it may insure them in a corporation organized on the mutual plan under the laws of the state in which the city is located. Giving premium notes for losses incurred by such company on other insurance is neither a loan of the credit of the city, nor the owning of stock or bonds of the company in violation of constitutional prohibitions.” 3 Dillon on Municipal Corporations, 5th Ed., p. 1558.
(c) “The fact that a'municipality takes out insurance on its property by becoming a member of a mutual insurance company does not make it the owner of stock in a private company so as to violate the constitutional prohibition; and giving premium notes- for payment of assessments to meet losses incurred by a mutual insurance company of which the municipality is a member does not constitute a loaning of credit to the company.” 5 McQuillin on Municipal Corporations, 2d Ed., p. 959.
(d) “As a municipal corporation is empowered to erect and maintain such public buildings, it also has the power, incidental thereto, to contract for indemnity against loss by the burning of such building. This right may be exercised by insuring of such building. This right may be exercised by insuring in a mutual, as well as in a stock company.” 1 Cooley Briefs on Insurance, 2d Ed., 104.
(e) “If the charter of a city empowers it to exact (erect) and maintain certain public buildings, the city acquires as incidental to the power thus granted the right to contract for indemnity against loss of such buildings by fire and such right can be exercised by insuring on the mutual plan. * * *” 1 Joyce on Insurance, 2d Ed., p. 708.

The following additional authorities sus^ tain our proposition that the School District did not become a stockholder in Millers Mutual Fire Insurance Company or a subscriber to its capital stock by purchasing the insurance policy in issue. Clifton v. School Dist. No. 14, 1936, 192 Ark. 140, 90 S.W.2d 508, 509; Miller v. Johnson et al., 1935, 4 Cal.2d 265, 48 P.2d 956; Burton v. School District No. 19, 1934, 47 Wyo. 462, 38 P.2d 610; Johnson v. School District No. 1, 128 Or. 9, 270 P. 764, rehearing denied, 1929, 128 Or. 18, 273 P. 386; McMahon v. Cooney, 1933, 95 Mont. 138, 25 P.2d 131; Dalzell v. Bourbon County Board of Education, 1921, 193 Ky. 171, 235 S.W. 360; City of Macon v. Benson, 1932, 175 Ga. 502, 166 S.E. 26.

Appellant prefaces his' argument with the following statement: “The principle of law involved in this case has not been ultimately decided by our Appellate Courts.” However, appellant contends strenuously that the following authorities by our Texas courts rule the constitutional questions presented by this appeal: City of Tyler v. Texas Employers’ Ins. Ass’n, Tex.Com.App., 288 S.W. 409; Southern Cas. Co. v. Morgan, Tex.Com.App., 12 S.W.2d 200; Great American Indemnity Co. v. Blakey, Tex.Civ.App., 107 S.W.2d 1002. As recognized by appellant, these cases are not exactly on all fours with the case .at bar. As we understand these- cases, the holdings invoked by appellant arc obiter and do not control the judgments; the courts were discussing policies where the policyholders, under the by-laws of the companies and the terms of the policies, were subject to assessment. In the policy at issue before us, both on the law and on the facts, the School District could never have been called on for any additional payment.

The point presented by this appeal is of the greatest importance to the municipalities of this state. Article 4860a — 8 is remedial in its nature, and on the statement we have taken from appellees’ brief it appears that the municipalities - insuring with the Millers Mutual Fire Insurance Comr pany make great savings on their insurance premiums. Since the very constitutional points presented by this appeal have been ruled against appellant in every state where they have been raised, we do not feel authorized, on the authorities cited by appellant, to hold that Article 4860a — 8 is unconstitutional.

It follows that the judgment of the lower court should be affirmed, and it is accordingly so ordered.

Affirmed.