author: RICE, J.

text:
    RICH et al. v. PARK.
    (No. 5315.)

    (Court of Civil Appeals of Texas. Austin.
    Feb. 17, 1915.
    On Motion for Rehearing, May 26, 1915.)
    1. Corporations <&wkey;269 — Liability of Stockholders — Calls.
    Proof of a subscription and a valid call upon stockholders makes out a prima facie case, in an action to recover on stock subscriptions.
    [Ed. Note. — Eor other cases, see Corporations, Cent. Dig. §§ SS7, 888, 980, 1149-1159, 2277; Dec. Dig. <&wkey;>269.]
    2. Trial <&wkey;143 — Province of Jury.
    Where the evidence on an issue is conflicting, it should be submitted to the jury.
    [Ed. Note. — For other cases, see Trial, Cent. Dig. §§ 342, 343; Dec. Dig. &wkey;143.]
    3. Corporations <&wkey;244 — Stockholders — Liability — Transfer.
    Where corporate stock is transferred before the whole of the subscription price has been paid, and the transfer is duly recorded, the transferror is usually discharged from further liability upon the subscription.
    [Ed. Note. — Eor other cases, see Corporations, Cent. Dig. §§ 960-977; Dec. Dig. <&wkey;>244.]
    4. Appeal and Error <&wkey;1064 — Review — Harmless Error.
    In an action for amounts uncalled on contracts for subscriptions to corporate stock, the giving of a special charge, which was in conflict with the general charge and informed the jury that a bona fide transfer of the stock would not defeat the action, cannot be held harmless; the charges being contradictory, so that it could not be determined which the jury followed.
    [Ed. Note. — For other cases, see Appeal and Error,’ Cent. Dig. §§ 4219, 4221-4224; Dec. Dig. <&wkey;>1064.]
    5. Corporations <&wkey;269 — Stockholders — Liability — Burden of Proof.
    A creditor seeking to recover amounts due on a subscription contract to corporate stock has the burden of proof.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. §§ 887, 888, 980, 1149-1159, 2277; Dec. Dig. <&wkey;>269.]
    6. Trial <&wkey;252 — Instructions.
    In an action for amounts claimed to be due on contracts for subscriptions to corporate stock, a charge that, unless the jury found by a preponderance of the evidence that defendants paid for the stock, the verdict should be for plaintiff for the amount claimed, is erroneous as allowing a verdict for plaintiff without regard to the evidence.
    [Ed. Note. — For other cases, see Trial, Cent. Dig. §§ 505, 596-612; Dec. Dig. &wkey;252.]
    7. Corporations <&wkey;269 — Stockholders — Action on Subscriptions — Evidence.
    In an action against subscribers to corporate stock to recover amounts uncalled for, it is improper to exclude evidence of any of the property delivered by the subscribers to the corporation.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. §§ 887, 888, 980, 1149-1159, 2277; Dec. Dig. &wkey;>269.]

      8. Gorpobations <&wkey;269 — Stockholders — Action on Subscriptions — Evidence.
    In an action against the original subscribers .to corporate stock to recover on their contracts, evidence that their transferee sold the corporate business for more than he paid is material on the question of the value of a stock of goods transferred by the subscribers in payment of their subscriptions.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. §§ 887, SSS, 980, 1149-1159, 2277; Dec. Dig. <S&wkey;269.]
    9. Witnesses &wkey;331% — Impeachment — Evidence.
    Where a purchaser of the property of a corporation testified as to the value of a stock of goods transferred by original subscribers in payment of their subscriptions to the stock, evidence that he received more than he paid for it is admissible to impeach his credibility.
    [Ed. Note — For other cases, see Witnesses, Dec. Dig. ©¿r^Sl^.]
    10. Witnesses <&wkey;266 — Cross-Examination —Right.
    The right of cross-examination is a valuable one, and its denial upon a material matter is reversible error.
    [Ed. Note. — For other cases, see Witnesses, Cent. Dig. §§ 907-912, 914r-920, 922; Dec. Dig. <®=266.]
    11. Venue <&wkey;22 — Privilege—Residence.
    One of several subscribers, sued for sums due on corporate stock, is not entitled to assert his privilege to be sued in the county of his residence, where the venue was located in a county where other subscribers resided.
    [Ed. Note. — For other cases, see Venue, Cent. Dig. §§ 35-37; Dec. Dig. &wkey;22J
    12. Judgment &wkey;>641 — Construction.
    An order of a referee in bankruptcy, declaring that the original subscribers to stock of a corporation were liable for sums unpaid, and that the trustee might maintain suit therefor, is a mere administrative order for the purpose of authorizing the trustee to file suit.
    [Ed. Note — For other cases, see Judgment, Cent. Dig. § 1155; Dec. Dig. &wkey;>641.]
    13. Judgment &wkey;>731 — Conclusiveness — Matters Concluded.
    Where an order of the referee in bankruptcy finding that the original subscribers to corporate stock were liable for amounts unpaid did not dispose of defenses raised, the order does not, in a subsequent suit by the trustee, conclude the subscribers as to those defenses.
    [Ed. Note. — For other cases, see Judgment, Cent. Dig. §§ 1259, 1261; Dec. Dig. <&wkey;781.]
    14. Judgment &wkey;>729 — Construction—Conclusiveness.
    Where an order of a referee in bankruptcy, finding original subscribers to the stock of an insolvent corporation liable on their contracts, provided for suit by the trustee, and declared that in such suit the subscribers might urge any defenses they desired, the order is not a conclusive adjudication as to their liability.
    [Ed. Note. — For other eases, see Judgment, Cent. Dig. § 1262; .Dec. Dig. ©»729.]
    On Motion for Rehearing.
    15. Corporations <&wkey;244 — Stockholders’ Liability.
    A purchaser of corporate stock, who buys with knowledge that the stock has not been fully paid in, is liable for the balance, notwithstanding representations that it was paid for, but if he buys without such knowledge he is not liable; the purchaser not usually being chargeable with notice that amounts are due on stock which he.in good faith purchases in the open market.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. §§ 960-977; Dec. Dig. &wkey;>244.]
    16. Corporations <&wkey;244 — Subscribers—Liability.
    Under Const, art. 12, § 6, declaring that no corporation shall issue stock except for money paid, labor done, or property actually received, subscribers to the stock of a corporation who had not fully paid for stock received are guarantors of the balance due regardless of transfer.
    [Ed. Note. — For other eases, see Corporations, Cent. Dig. §§ 960-977; Dec. Dig. &wkey;244.]
    Appeal from District Court, McLennan County; Tom L. McCullough, Judge.
    Action by M. C. H. Park, as trustee, against B. T. Rich and others. From a judgment for plaintiff, defendants appeal.
    Reversed and remanded.
    Spann & Spann, of Temple, and Sleeper, Boynton & Kendall, of Waco, for appellants. J. D. Williamson, of Waco, for appellee.

       writ of error pending in Supreme Court.

   Statement of the Case.

RICE, J.

The Rich Dry Goods Company was duly incorporated October 21, 1909, with B. T. Rich, S. D. Stitt, Frank Leahy, and J. S. Thompson as original stockholders therein, Rich for 50 shares at $100 per share, Stitt for 64 shares at $100 per share, and Leahy and Thompson jointly for 36 shares at $100 per share — amounting in the aggregate to $15,000. They constituted the board of directors of said corporation, and claimed to have transferred to said corporation, in full payment for such shares a stock of goods, wares, and merchandise, mercantile notes and accounts, furniture and fixtures, valued at $15,000; whereupon said corporation issued said shares of stock to them, showing on their face to be fully paid and nonassessa-ble. A dry goods business was thereafter conducted by said corporation until about the 31st day of January, 1910, when appellants sold all of their shares of stock therein to one Hallenbeck, who paid them full value therefor, and Hallenbeck & Sons, as stockholders in said corporation, continued to operate said business for about a month thereafter, when they sold their entire interest therein to one Cordell, who operated the same until the 17th of February, 1911, at which time said corporation was adjudged a bankrupt by the United States District Court at Waco, and appellee M. O. H. Park was on the 20th of March, 1911, duly- elected trustee of said bankrupt estate, who, after having qualified as such, took possession of the effects of said concern and reduced all of its assets to cash, reporting to the referee in bankruptcy that they were not sufficient to discharge the debts of said estate, and made an application to said referee, stating said facts, and further stating that although stock in said corporation had been issued to said Rich, Stitt, Leahy, and Thompson in the amounts above named as fully paid and nonassessable, they had not in fact paid said amounts therefor, but Stitt had only paid $1,220.66, Rich had only paid $983.33, and that Leahy and Thompson had only paid $708, leaving said stockholders still indebted to said corporation in the following amounts, Stitt for $5,179.34, Rich for $4,016.67, and Leahy and Thompson jointly in the sum of $2,892; and prayed that a call be made upon said stockholders requiring them to pay the balance due on said stock. Whereupon, said referee, after a hearing, entered an order finding the amounts due to be as stated by the trustee, and granting said application and directing said parties to pay within three days said balances so found to be due on their stock; and, in the event of failure so to do, the trustee was directed to bring suit against each of them for the respective amounts due by them. But it was further recited therein that said order should not be construed to prevent the trustee or any of the parties sued by him pursuant to the provisions thereof, from showing payment for said stock, nor from asserting or from offering evidence to establish, or from proving, if the facts so justified, any cause of action or defense such trustee or other party may have to assert or make in such suit or suits, action or actions. Said parties having failed to pay said amounts as directed, the trustee brought this action on the 12th day of March, 1913, to enforce payment thereof, alleging the foregoing facts.

After a plea of privilege by Stitt to be sued in Bell, the county of his residence, all of the parties answered by general denial and two special defenses, to wit: First, admitting that they were original subscribers for the capital stock of said bankrupt corporation, but alleging, however, that they had fully paid therefor by delivering to said corporation goods, wares, and merchandise, fixtures, and mercantile notes and accounts of the value equal to the par value of said capital stock. Second, that, irrespective of whether said stock was fully paid or not, each of them had, in good faith, while said corporation was solvent and a going concern, transferred all of their stock in said corporation to Hallenbeek, by reason of which they were absolved from further liability thereon to said corporation or to said trustee for any unpaid portion of their subscription to said capital stock.

Appellee interposed a general denial of all of the allegations in appellants’ special answers, and specially denied that said stock of goods, wares, and merchandise, etc., alleged to have been transferred by appellants to said corporation in payment for said capital stock was of the value stated by appellants, but that said property so transferred by appellants to said corporation in payment for their said stock was only sufficient to pay the sum of $2,860.10 thereon, leaving the balance, of said capital stock unpaid. And further answering, alleged that appellants had not transferred their stock in said corporation in good faith, but that the transferee thereof had notice that the same was unpaid, and had not assumed appellants’ obligations on said unpaid stock. And further pleaded res adjudicata, in that all matters pleaded in defense by appellants had been adjudicated by the referee in bankruptcy in making a call for said unpaid stock.

A jury trial resulted in a verdict and judgment against each of the appellants for the following amounts, to wit: B. T. Rich, $1,-640; S. D. Stitt, $2,160; and Frank Leahy and Joe S. Thompson jointly in the sum of $1,200 — from which this appeal is prosecuted.

Opinion.

Appellants assign as error for review: First.' The refusal of the trial court to peremptorily charge a verdict in their favor (a) at the close of plaintiff’s testimony, (b) at the close of the case before charging and submitting the issues to the jury, which points are presented under the first and second assignments of error. Second. Incorrect, contradictory, and misleading charges of the court; the specific errors complained of being presented by the third, fourth, fifth, sixth, seventh, and eighth assignments of error. Third. The unwarranted abridgment by the trial court of their right of proper cross-examination, presented under the ninth assignment. Fourth. The denial of appellant Stitt’s plea of privilege to be sued in the county of his residence, presented by the tenth assignment. All of which we will consider seriatum.

With reference to the first, it may be stated that the plaintiff introduced the following evidence and rested: First, the order of the bankruptcy court adjudicating the Rich Dry Goods Company a bankrupt; second, order approving the bond of Park, as trustee of said bankrupt estate; third, the application of the trustee for an order of the referee to make a call for unpaid stock subscriptions alleged to be due said bankrupt corporation; fourth, the order of the referee making said call; fifth, a certified copy of the charter of said Rich Dry Goods Company, by the introduction of which evidence we think appellee at least made out a prima facie case, making it incumbent upon appellants to introduce evidence in rebuttal.

Thompson on Corporations, § 3802, is authority for the proposition that proof of a subscription and of a valid call makes a pri-ma facie case for the recovery of the amount embraced in the call; for which reason we think the court did not err in refusing said peremptory charge. Nor did the court err, we think, in likewise refusing, after the close of the evidence, a peremptory instruction in behalf of appellants, on the theory that the evidence showed that the appellants in good faith had transferred to Hallenbeek the stock owned by them in said corporation at such time and under such circumstances as to relieve them from all liability on their subscriptions therefor. It will be recalled that the appellants had urged two defenses; the first that they had paid full value for said stock by transferring to said corporation a stock of merchandise, and outstanding notes, accounts, fixtures, and furniture of the face value of said stock; and, second, that they had transferred their respective shares of stock to Hallenbeck in good faith while said corporation was solvent and a going concern. And, while they have introduced evidence in support of each of these contentions, still ap-pellee offered evidence in rebuttal thereof, thereby raising an issue of fact as to each of said pleas that ought, in our judgment, to have been submitted to the jury, and upon which the jury might or might not have found that said stock was in fact paid for in full, and might or might not have found that the same was transferred to Hallenbeck in good faith while said corporation was solvent and a going concern; and, when such is the case, it is always the duty of the court to submit the issues so raised for the consideration of the jury. Said assignments are therefore overruled.

The third assignment insists that the court erred in giving appellee’s special charge No. 5, which was to the effect that if the jury found from the evidence that appellants had subscribed for the respective shares shown by the testimony, and that the same were not fully paid for by them and each of them, and they should further find that appellants caused the books of said corporation to show that such capital stock was fully-paid, and represented to Hallenbeck that it was fully paid, then to return a verdict in favor of the appellee against each of them for the amounts unpaid on their subscriptions to said capital stock, except as to defendants Leahy and Thompson, and as to them they should find against them jointly for the amount unpaid on their subscription, because: (a) The same did not state a correct principle of law applicable to the facts; (b) said charge is upon the weight of evidence; (c) because the facts stated therein, if found to exist, are not sufficient in themselves to authorize appellee’s recovery; (d) because said charge instructed the jury to find for appellee in the event they should find said stock not fully paid up and appellants caused the books of said corporation to show that said capital stock was fully paid up and represented to Hallenbeck that it was fully paid up, thereby disregarding the issue of good faith on the part of appellants in making the transfer to Hallenbeck, and because said representations, if any, made by appellants to Hallenbeck or the entries upon the books, if any, were not conclusive evidence as to appellants’ good faith in making said transfer, but were only circumstances which the jury were authorized to consider in passing upon the issue of appellants’ good faith in making said transfer of their stock in said corporation to Hallenbeck; and (e) because said charge is confusing and is well calculated to mislead the jury.

The charge complained of should not have been given. It fails to submit the question of the bona fides of appellants in the transfer to Hallenbeck while the corporation was solvent and a going concern, and withdrew this issue from the jury, and was equivalent to a peremptory instruction to find against appellants if they 'should find any part of their stock subscription unpaid, and was therefore directly contrary, as we understand it, to the law upon this subject. In 1 Cook on Corporations (6th Ed.) § 255, it is said:

“Transfers of shares may be made at any time after the contract of subscription is made and before any part or after a part or the whole of the subscription price has been paid. The well-established and general rule of law is that where a stockholder makes an absolute transfer of his stock in good faith, and the transfer is duly recorded on the corporate books, the transferror is thereby wholly discharged from all further liability upon the uncalled subscription price of the stock” — citing many authorities in support of the text.

Machen, in his Modem Law of Contracts (volume 1, §§ 763, 764), treating this subject states that the owner of the shares at the time the call is made is liable for its payment, and that the criterion for determining such ownership is the company’s share register or stock book and further says (section 765):

“It follows that a transfer of shares completed by a proper entry in the company’s books releases the transfers of all liability for subsequent calls. This is true although the trans-ferror was the original allottee, his case not being assimilated to that of an original lessee of land whose liability persists in spite of an assignment of the term. Probably, a transfer would release the original allottee from future liability, even though he might have expressly promised at the time of subscribing to the shares to pay their par value. A transfer works a complete novation, so that the transferee may be sued in assumpsit for any calls made after the transfer, although he may have made no express promise to pay the same; and a declaration or complaint charging the defendant as subscriber to shares has been held to be sustained by proof that the defendant acquired shares by transfer.”

In England, where the transfer is absolute, the transferror retaining no interest in the shares, he is relieved entirely from future liability by reason of such transfer. The American law, on the other hand, refuses to relieve the transferror from liability where the assignment was made with the knowledge of the company’s failing condition and for the purpose of escaping liability and where the transferee is insolvent. See section 765, Id.; also, Webster v. Upton, 91 U. S. 65, 23 L. Ed. 387, which quotes with approval from Angelí & A. on Corporations, § 534, wherein it is said:

“When an original subscriber to the stock of an incorporated company, who is so bound to pay the installments on his subscription from time to time as they are called in by the company, transfers his stock to another person, such other person is substituted not only to the rights, but to the obligations, of the original subscriber, and he is bound to pay up the installments called for after the transfer to Mm. The liability to pay the installment is shifted from the out-going to the in-coming shareholder. A privity is created between the two by the assignment of the one and the acceptance of the other, and also between them and the corporation; for it would be absurd to say, upon general reasoning, that, if the original subscribers have the power of assigning their shares, they should, after disposing of them, be liable to the burdens which are thrown upon the owners of the stock.” (

Continuing, the opinion says:

“So in Redfield on Railways, 53, it is said the cases agree that, whenever the name of the vendee of shares is transferred to the register of shareholders, the vendor is exonerated, and the vendee becomes liable for calls. We think therefore the transferee of stock in an incorporated company is liable for calls made after he has been accepted by the company as a stockholder and his name has been registered on the stock books as a corporator; and, being thus liable, there is an implied promise that he will pay calls made while he continues the owner.”

See, also, note 4, page 257, to the case of Kettle Palls Land Co. v. Raymond, 47 L. R. A. See, also, note C on transfer of shares to the case of Gettysburg Bank v. Brown, 93 Am. St. Rep. 359, in which it is said:

“Where a subscriber to the capital stock of a corporation transfers his stock to a third person, and has such transfer entered upon the books of the corporation, he ceases, according to the weight of authority, to be liable for future calls. The consent of the corporation to the transfer is, in effect, a novation, a release of the transferror, and an acceptance of the transferee as liable for future calls. Accordingly, for calls made subsequent to the time the transfer became effective on the books of the corporation, the assignor is not, in the absence of statute, responsible; but such calls are collectible from his assignee, who, by his receipt of the stock, and consent to become a stockholder on the corporation books, assumes the liability” — citing many cases in support of the doctrine, among them Cole v. Adams, 19 Tex. Civ. App. 507, 49 S. W. 1052.

The same note, section 2, says that:

“In order that the transaction may operate to release the transferror and substitute in his stead the transferee, it must be bona fide, and not a fraud on the corporation” — citing cases.

In discussing this subject, in Cole v. Adams, supra, Mr. Justice Pleasants said, among other things:

“Amid the conflict of opinion on the subject, we conclude the correct rule to be that a stockholder who transfers his stock in good faith, and with no intention to defraud, while the corporation is solvent, and has the transfer entered upon the books of the corporation, is not liable either to the corporation, or to its creditors, for unpaid subscriptions to the stock. This rule has its exceptions, but we do not understand from the evidence that this case falls under any of the exceptions” — citing authorities.

It is true that the court gave a special charge at the instance of appellants, charging the law in their behalf, as announced in Oole v. Adams, supra, and the other authorities quoted from; but it cannot be held that this error was rendered harmless by reason thereof, because the two charges were conflicting and diametrically opposed to each other, and left the jury without any rule to follow. See Baker v. Ashe, 80 Tex. 361, 16 S. W. 36; Reed v. W. U. Tel. Co., 31 Tex. Civ. App. 116, 71 S. W. 389; T. & P. Ry. Co. v. Browder, 144 S. W. 1043; Railway Co. v. Bailey, 136 S. W. 822; Muldoon v. Bray Land Co., 147 S. W. 701; Ash v. A. B. Frank Co., 142 S. W. 42; Royle Min. Co. v. Fidelity & Casualty Co., 161 Mo. App. 185, 142 S. W. 438; 38 Cyc. p. 1632, and cases cited in note 10.

In the- case of Baker v. Ashe, supra, Mr. Justice Gaines, speaking for the court, said:

“A charge which instructs the jury to find for plaintiff in the event they find certain facts proved by the evidence, and omits one of the facts essential to a recovery, is erroneous, and is not cured by a contradictory instruction given at the request of the other party which makes no direct reference to the erroneous charge. The erroneous charge ought to be withdrawn altogether or corrected by, a qualification referring directly to it.”

And in the case of Reed v. W. U. Tel. Co. supra, Mr. Justice Key, speaking for this court, after citing the case of Baker v. Ashe, and approving the rule therein stated, said:

“But as it (the charge), was framed there was at least apparent inconsistency in the two paragraphs submitting the two issues to the jury, and the jury may have been misled and confused thereby. When a positive error has crept into one paragraph of the court’s charge, it is not corrected by another paragraph which states the law correctly, when the latter does not expressly refer to and modify the former.”

We therefore sustain said assignment.

At the instance of appellee, the court charged the jury that the burden of proof is on the defendants to show payment for stock subscribed by them in the Rich Dry Goods Company, and, unless the jury found by a preponderance of the evidence that they paid for the stock issued to them, a verdict should be returned for the jdaintiff against each of the defendants for the amount each is sued for by the plaintiff, unless the jury should find for the defendants on some other portion of the court’s charge, or the special charges given. This is assigned as error on the ground, among other' things, that it places upon defendants a burden of proof not imposed upon them by law; and, further, that it is a charge upon the weight of evidence, in that it authorized the jury to find for the plaintiff for the amount sued for, withoirt regard to the evidence. We think the charge with reference to the burden of proof under the state of the pleadings is subject to the criticism urged against it. See Kelley v. Fletcher et al., 94 Tenn. 1, 23 S. W. 1099; Shields v. Clifton-Hill Lumber Co., 94 Tenn. 123, 28 S. W. 668, 26 L. R. A. 509, 45 Am. St. Rep. 700; Thompson on Corp. (2d Ed.) vol. 4, § 5149, note 79. Mr. Thompson in the second edition of his work on Corporations (volume 4, §' 5149), says that the general rule as to the burden of proof applies to a creditor who seeks to enforce the debts due from a corporation against the stockholder. So, in such an action to enforce the statutory liability of the stockholder on the ground that his subscription has not been paid, the burden of proof is on the creditor to show the fact of nonpayment.

Certainly, in no event can it be said that the court could properly tell the jury to find for the plaintiff in the amount sued for, irrespective of what the evidence may have been in regard thereto, as seems to have been done by this charge. Said assignment is therefore sustained.

We sustain the fifth assignment, complaining of paragraph 2 of the main charge of the court, for the reasons set forth in our discussion of the third assignment; and, further, because there was lack of evidence going to show the insolvency of said dry goods company at the time of the transfer of said stock by appellants to Hallenbeek.

We overrule the sixth assignment of error, but sustain the seventh, which complains of special charge No. 3 given at the instance of' appellee, because thereunder the jury were limited to a consideration of the valuation of the property turned over by appellants to the Rich Dry Goods Company in payment for stock issued by it to them alone to the property of the Shotwell Dry Goods Company; whereas, in truth and in fact the evidence shows that other property besides that of the Shotwell Dry Goods Company was turned over to said corporation by appellants in payment for their capital stock, thereby depriving them of the benefits of the value of such other property.

M. L. Hallenbeek, a witness for plaintiff, while on the stand on direct examination having testified that he sold the stock of merchandise which he had bought from the Rich Dry Goods Company to B. A. Cordell within about a month thereafter, and that a short while prior to such sale he had taken an inventory of such stock and the same amounted to $6,500, was asked on cross-examination what he sold same for. Whereupon counsel for appellee objected on the ground that such testimony was immaterial. This witness would have testified, if permitted, that he received more for said stock than he had given for it. We think this testimony was admissible: Hirst, as having a tendency to show the value of said merchandise at the time testified to by the witness in his examination in chief; and was likewise competent for the purpose of contradicting said witness and of discrediting his testimony, and therefore it was error to exclude it. G., C. & S. F. Ry. Co. v. Jackson & Edwards, 99 Tex. 343, 89 S. W. 968; M., K. & T. Ry. Co. v. Rich, 112 S. W. 114; Railway Co. v. Scurlock, 97 Tex. 305, 78 S. W. 491; Curren v. Ampersee, 96 Mich. 553, 56 N. W. 87; Buist v. Guice, 105 Ala. 518, 16 South. 915; Seattle & M. R. Co. v. Roeder, 30 Wash. 244, 70 Pac. 498, 94 Am. St. Rep. 864; Lentz v. Carnegie, 145 Pa. 612, 23 Atl. 219, 27 Am. St. Rep. 717; Wells v. Kelsey, 37 N. Y. 143; Jones on Evid. (2d Ed.) 826; Ency. of Evid. vol. 3, p. 863.

The right of cross-examination is a valuable right to the litigant, and a denial or abridgment thereof upon a material matter is reversible error. We therefore sustain the ninth assignment.

We overrule the tenth assignment, complaining of the action of the court in not sustaining appellant Stitt’s plea of personal privilege to be sued in Bell, the county of his residence, because it appears that Thompson, one of his codefendants, who was likewise a stockholder in said company, lived in Mc-Lennan county, where the suit was brought. In such case it seems to be the policy of the law to join all the stockholders in one suit, thus preventing a multiplicity of suits, and thereby permitting the issues between all the parties to be disposed of in a single action. See Cook on Stocks and Stockholders (6th Ed.) § 222; Natl. Bank v. Texas Invest. Co., 74 Tex. 433, 12 S. W. 101; Mathonican v. Scott, 87 Tex. 396, 28 S. W. 1063; Clegg v. Varnell, 18 Tex. 294; Wyman v. Bowman, 127 Fed. 257, 62 C. C. A. 189; Brown v. Allebach (C. C.) 156 Fed. 697; Carnahan v. Campbell, 158 Ind. 226, 63 N. E. 384; Mathis v. Pridham, 1 Tex. Civ. App. 58, 20 S. W. 1021; Cook v. Carpenter, 212 Pa. 165, 61 Atl. 799, 1 L. R. A. (N. S.) 900, 108 Am. St. Rep. 854, 4 Ann. Cas. 723. In the case of Natl. Bank v. Texas Investment Co., supra, Mr. Justice Gaines, quoting with approval from Clegg v. Varnell, says:

“From an early day our courts have encouraged the bringing of all parties interested in the subject-matter of a litigation before the court, and determining their rights in one action.”

By his cross-assignments appellee urges that the court erred in failing to sustain his plea of res adjudicata and in refusing to direct a verdict thereon in his favor, as requested by him, for the amounts found to be due by the referee from appellants upon their unpaid stock, insisting that said order of the referee was conclusive as to the amounts found to be due by appellants, and that hence the court erred in permitting them to introduce testimony going to show the contrary. It will be remembered that the referee in bankruptcy, in making said call, found Rich to be due $4,016.67 upon his stock; that Stitt was due the sum of $5,179.-34 upon his stock, and Frank Leahy and Joe S. Thompson jointly were due the sum of $2,892 on their stock. The decree, however, expressly provided that it should not be construed to prevent the trustee, or any party who might be sued by him pursuant to its provisions, from showing payment for such stock, nor from asserting nor from offering evidence to establish any cause of action or defense such trustee or other party may have to assert or make in such suit or suits, action or actions brought by said trustee. This feature of the decree was doubtless made in response to the prayer of appellants therefor.

We think there are three separate and distinct reasons why the action of the court in ■overruling said plea of res ad judicata should be sustained: First, because the order of the referee itself, without reference to said proviso, is not conclusive of the amounts due upon said stock, not being a judgment, but only an administrative order made for the purpose of authorizing the trustee to file a plenary suit to enforce said call. Second, because there were two separate defenses urged by appellants; and, while the facts upon which the first was based were passed on by the court, still said order is wholly silent as to the defense urged in the second, viz., a bona fide transfer of their stock to Hallenbeck. Ttyird, if for no other reason, because the order itself specially granted to appellants the right to make any defense to said plenary suit, when the same might be brought, that was justified by the facts. If appellee’s contentions were correct in this respect, there would have been no necessity for such plenary suit.

We agree with appellants’ contention set forth in their supplemental brief that the granting of such an order by the referee in bankruptcy is not a judgment, but is purely a summary order, administrative in its character, and a necessary predicate for the institution of a plenary suit to recover in a court of competent jurisdiction. See Scovill v. Thayer, 105 U. S. 143, 26 L Ed. 968. The court had the right to order the call, and might adopt its own methods in making same. See 10 Cyc. 656, III, where it is said:

“Where an assignment has been made for the benefit of creditors by an insolvent corporation, it is competent for the superintending court to make an order requiring the payment of unpaid subscriptions.”

Such assessment, however, by the court does not determine the liability of any particular shareholder, but merely had the effect of making due and payable whatever he may be liable for under the call, so that suit may be brought therefor by the assignee. In re Driving Park Association, 53 Minn. 423, 55 N. W. 598; In re Newfoundland Syndicate (D. C.) 196 Fed. 443, where it is held, as shown by the syllabus, that a proceeding by1 the trustee of a bankrupt corporation to have an assessment ordered on unpaid stock is not a suit within the meaning of the bankruptcy act, but is an administrative proceeding within the jurisdiction of the court of bankruptcy, since it does not require notice to nor the presence of the stockholders whose personal rights are not involved, but remain to be determined in subsequent suits to collect the assessments, if made. See, also, Great Western Tel. Co. v. Purdy, 162 U. S. 329, 16 Sup. Ct. 810, 40 D. Ed. 986; Auld v. Smith, 23 Kan. 65, wherein it is held that only final judgment affords a basis for the plea of res adjudicata, holding that the reports of referees, etc., are not such.

In Re Minnehaha Driving Park Ass’n, supra, it is said:

“When a court has charge, through its receiver or assignee, of collecting and converting the assets of a corporation, and applying the proceeds to the satisfaction of its debts, the court’s call for the unpaid subscriptions to stock stands precisely as does a call made by the directors of an operating corporation. Such a call does not determine absolutely the liability of the stockholders; it has not the effect of a judgment. Its effect is to make whatever the stockholders are liable for, within the call, become due and payable, so that suit may be brought to enforce such liability.”

See, also, the following cases: Rood v. Whorton (C. C.) 67 Fed. 434; Id., 74 Fed. 118, 20 C. C. A. 332; In re Yorkville Coal Co., 211 Fed. 619, 128 C. C. A. 570. The Supreme Court of the United States, in the case of Great Western Tel. Co. v. Purdy, supra, said:

“The order of that court was in effect, as it was in terms, simply a ‘calí or assessment’ upon all stockholders who had not paid for their shares in full. It was such as the directors might have made before the appointment of a receiver; and in making it the court, having by that appointment assumed charge of the assets and affairs of the corporation, took the place and exercised the office of the directors. Scovil v. Thayer, 105 U. S, 143-155 [26 L. Ed. 968]; Hawkins v. Glenn, 131 U. S. 319-329 [9 Sup. Ct. 739], 33 L. Ed. 185-191; Lamb v. Lamb, 6 Biss. 420, 424 [Fed. Cas. No. 8,018]; Glenn v. Saxton, 68 Cal. 353 [9 Pac. 420]; Great Western Tel. Co. v. Gray, 122 Ill. 630-636 [14 N. E. 214]; Great Western Tel. Co. v. Lowenthal, 154 Ill. 261 [40 N. E. 318].”
“The order of assessment,” the court continues, “whether made by the directors, as provided in the contract of subscription, or by the court as the successor in this respect of the directors, was doubtless, unless directly attacked and set aside by appropriate judicial proceedings, conclusive evidence of the necessity for making such an assessment, and to that extent bound every stockholder without personal notice to him. Hawkins v. Glenn, 131 U. S. 319, 9 Sup. Ct. 739, 33 L. Ed. 185; Glenn v. Liggett, 135 U. S. 533, 10 Sup. Ct. 867, 34 L. Ed. 264; Glenn v. Marbury, 145 U. S. 499, 12 Sup. Ct. 914, 36 L. Ed. 790. But the order was not and did not purport to be a judgment against any one. It did not undertake to determine the question whether any particular stockholder was or was not liable in any amount. It did not merge the cause of action of the company against any stockholder on his contract of subscription, nor deprive him of the right, when sued for an assessment, to rely on any defense which he might have to an action upon that contract. In this action, therefore, brought by the receiver in the name of the company, as authorized by the order of assessment, to recover the sum supposed to be due from the defendant, he had the right to plead a release or payment, or statute of limitations, or any other defense going to show that he was not liable upon his contract of subscription.”

The following language is used by Mr. Justice Rellstab in Re Newfoundland Syndicate, supra:

“To ascertain whether there are insufficient corporate assets, and whether capital stock has been issued at less than par value, are administrative matters, not involving any personal judgment affecting such stockholders in their individual capacity. Their personal presence is therefore not necessary when such ascertainment and assessment is made; nor are they entitled to any other notice than the constructive one had by operation of law by the institution of such bankruptcy proceedings. The enforcement of said assessment against the stockholders alleged to be liable thereto, however, is plenary in its nature, and, except with their consent, cannot be made in the bankruptcy court. Section 23b, Bankruptcy Act. In the suit to collect such assessment, the defendant is entitled to make all defenses that relate to him in his individual as distinguished from his corporate capacity, such as that he is not a stockholder, or that he has fully paid for the stock taken.” Great Western Tel. Co. v. Purdy, supra; Converse v. Hamilton, 224 U. S. 243, 32 Sup. Ct. 415, 56 L. Ed. 749, Ann. Cas. 1913D, 1292; Gorse v. Carter, 156 Fed. 752, 84 C. C. A. 402.

If, however, we are mistaken in the view above expressed, we think there can he no question but that the plea of res adjudicata should not have been sustained, if for no other reason than that it was not conclusive of the second defense pleaded by appellants which was not referred to and embraced in said order of the referee. The decree having expressly left open to appellants the right to assert any defense against such plenary suit as they might have, such right was expressly reserved thereby, and appellants could not be deprived thereof. Therefore the plea was rightfully overruled and the charge properly refused. The rule seems to be that where the pleadings and evidence raise an issue between the parties, and the judgment or decree has expressly left said issue open, then it.is not res adjudicata of such question involved therein. See Moore v. Woodson, 53 Tex. Civ. App. 588, 116 S. W. 608; Groesbeck et al. v. Crow, 91 Tex. 74, 40 S. W. 1028; Converse v. Davis, 90 Tex. 462, 39 S. W. 277; Williams v. Wiley, 96 Tex. 148, 71 S. W. 12; Parrish v. Mills, 102 S. W. 186.

For the reasons stated, the judgment of the court below is reversed, and the cause remanded.

Reversed and remanded.

On Motion for Rehearing.

Special charge No. 5, given at the instance of appellee, in effect told the jury that if they should find from the evidence that appellants subscribed for certain respective shares of the capital stock of the Rich Dry Goods Company, and that such capital stock was not fully paid for by them, and they should further find that appellants caused the books of said company to show that such capital stock was fully paid, and represented to Hallenbeck that it was fully paid, then they were charged that they should find a verdict in favor of appellee against appellants for the amount unpaid on their subscription to said capital stock. Appellants assailed this charge, and we sustained the assignment, holding that the giving of this charge was error. An elaborate motion for rehearing has been filed by appellee complaining of our holding in this respect; but, after a careful consideration of same, we are still of the opinion (though for a different reason than that assigned in the original opinion) that said charge was error, and should not have been given. Supplementing what was said in our original opinion, we wish to add that this charge did not negative the idea that Hallenbeck, notwithstanding such representations, may have known that said stock was not paid up. If he knew that it was not fully paid up, then the general rule of law is that he became liable for such unpaid balance, and this fact would ordinarily relieve the appellants from liability thereon. The general doctrine stated in our original opinion, and sustained by many of the cases, to the effect that a bona fide sale of stock to another will relieve the transfer-ror, is based on the assumption that the transferee knew at the time of the purchase that the stock was not fully paid for, and therefore is presumed to have assumed the payment of such unpaid balance, and is based on the idea of novation; but no reference, however, was made to this phase of the case in our original opinion. There can be no novation in the absence of such knowledge and assent thereto. See Am. & E. Ency. Law (2d Ed.) vol. 21, p. 666. But where the purchaser has no knowledge that the stock is unpaid, and buys upon the belief that the stock is fully paid up, he cannot be held for the unpaid balance thereon. In discussing this question, the court, in the case of Eastern Nat. Bank v. American Brick & Tile Co., 69 N. J. Eq. at page 334, 60 Atl. 57, says:

“The liability of transferees for assessments on account of unpaid stock has been the subject of much consideration by the courts of this country, resulting in radical differences of opinion ; but in my judgment the weight of authority and sound reason support the view that a bona fide transferee of stock, the certificate for which recites that it is fully paid, is not liable to make good the contract of the original subscriber if the transferee has no knowledge that the subscriber has not paid in full, nor notice of any fact from which knowledge may be inferred, or which requires him to inquire as to the truth of such statement. The right to hold a stockholder for an unpaid subscription, in the interest of creditors, rests upon the doctrine that the capital stock is a trust fund for the payment of the obligations of the company, and that the subscription creates a debt due to the corporation upon which a creditor may rely and which the company cannot remit to his injury. The contract between the corporation and the subscriber is.that for the stock issued he will make full payment, and any attempt to avoid this, by waiver or other device, will, not excuse the subscriber to the injury of the creditor, but there is no equitable reason why the creditor should be allowed to shift the right' he holds against the contractor to a bona fide transferee without knowledge of the infirmity, and to imply that he has assumed a contract of which he has no knowledge and which he would not have made had he been informed regarding it”

See, also, French v. Harding, 235 Pa. 79, 83 Atl. 586, Ann. Cas. 1914B, 744, where it is held, as shown by the syllabus, that a bona fide purchaser for value and without notice of the stock issued by a corporation as paid up cannot be held liable on such stock in any way, either to the corporation, corporate creditors, or any other person, even though the stock was not actually paid up as represented.

In Cook on Corporations, yol. 1, § 257, it is said:

“The question whether the purchaser of stock is bound to take notice that the stock he purchases is not fully paid for is a serious and complicated one. The better opinion, and the one most in accord with the usages and demands of trade, is that, where one buys stock in open market in good faith and without notice that the subscription price thereof has not been paid up, such a purchaser cannot be held liable to pay the unpaid balance of subscription.”

See, also, Davies v. Ball, 64 Wash. 292, 116 Pac. 833, and note to that case on page 754 of Ann. Cas. 1914B, where the same doctrine is announced. See, also, West Nashville Planing Mill Co. v. Nat. Savings Bank, 86 Tenn. 252, 6 S. W. 340, 6 Am. St. Rep. 835.

In addition to his other contentions, •counsel for appellee insists that this court erred in not holding that the original stockholders were liable on the ground that they had the stock issued as fully paid up when it was not in fact so paid, basing this insistence upon article 12, § 6, of our state Constitution, which provides that no corporation shall issue stock or bonds except for money paid, labor done, or property actually received, and all fictitious increase of stock or indebtedness shall be void. We have reached the conclusion that this contention on the part of appellee is well taken. This provision of the Constitution puts the original stockholders in the attitude of guarantors, making them responsible to creditors for the unpaid balance due thereon; and this is true, we think, regardless of whether or not they may have transferred said stock to another who had notice that the same was not fully paid up; and, in view of another trial, we think the jury should be so charged. In this connection, see Harris’ Const, art. 12, § 6, and authorities there cited; Van Cleve v. Berkey, 143 Mo. 109, 44 S. W. 743, 42 L. R. A. 593; Camden v. Stuart, 144 U. S. 105, 12 Sup. Ct. 585, 36 L. Ed. 363; O’Bear, Nestor Glass Co. v. Anti-Explo Co., 101 Tex. 431, 108 S. W. 967, 109 S. W. 931, 16 L. R. A. (N. S.) 520, 130 Am. St. Rep. 865.

After fully considering same, our opinion is that the motion for rehearing should be overruled, and it is accordingly so ordered.

Motion overruled.
      ®=^Ror other oases see same topic and KEY-NUMBER in all Key-Numbered. Digests and Indexes

      &wkey;oEor other oases see same topic and KEY-NUMBER in all Key-Numhered Digests and Indexes


source: Caselaw Access Project

author: TALBOT, J.

license: Public Domain

text:
    ORIENT INS. CO. OF HARTFORD, CONN., et al. v. HARMON et al.
    (No. 7266.)

    (Court of Civil Appeals of Texas. Dallas.
    May 8, 1915.
    On Motion for Rehearing and Additional Bindings of Facts, June 5, 1915.)
    1.Trial @=169 — Directed Verdict.
    A complaint which alleged that defendant insured plaintiff’s house, that the house was totally destroyed by fire, and that plaintiff had complied with all the requirements of the policy as to proof of loss, but that nevertheless defendant refused to pay the loss, and to avoid the expense of litigation, plaintiff agreed to submit the amount of the loss to appraisers, as provided in the policy, that the appraisers awarded a certain amount to plaintiff, but that defendant had not paid that amount, wherefore plaintiff prayed that he recover the amount of the award, which was less than the face of the policies, states a cause of action on the policies, as well as one on the award, and defendant is not entitled to a directed verdict under Acts 33d Leg. c. 127, § 3 (Vernon’s Sayles’ Ann. Civ. St. 1914, art. 1829), providing that any facts specially pleaded by the defense that are not denied by the plaintiff shall be taken as confessed, because of plaintiff’s failure to deny the new matter alleged in the answer to avoid the award.
    [Ed. Note. — For other cases, see Trial, Cent. Dig. §§ 341, 381-387, 389; Dec. Dig. @=169.]
    2. Insurance @=574 — Award op Appraisers — Action—Pleading.
    In an action on an award by appraisers appointed under a fire insurance policy, proof that the award was excessive because certain items were included therein twice is not sufficient to annul the award, where there was no pleading raising that issue.
    [Ed. Note. — For other cases, see Insurance, Cent. Dig. §§ 1430-1432, 1434; Dec. Dig. @= 574.]
    3. Insurance @=572 — Award op Appraisers —Procedure—Notice and Evidence.
    Where neither the provisions of a fire insurance policy for the appointment of appraisers to determine the loss, nor the agreement appointing them, prescribed the procedure before them, such procedure is left to their discretion, and their failure to give the insurer notice of the hearings, and an opportunity to introduce evidence, does not render the award void.
    [Ed. Note. — For other cases, see Insurance, Cent. Dig. §§ 1422, 1423, 1427, 1429; Dec. Dig. @=572.]
    4. Insurance @=572 — Award op Appraisers —Procedure—Notice and Evidence.
    If such appraisers were subject to the common-law rules of arbitration, their failure to give such notice and hear such' evidence does not render the award void, where there was no showing that the insurer, although its agent knew that the appraisers were engaged in their work, made any request for permission to submit evidence.
    [Ed. Note. — For other cases, see Insurance, Cent. Dig. §§ 1422, 1423, 1427, 1429; Dec. Dig. @=572.]
    5. Insurance @=572 — Award by Appraisers —Umpire—Duties.
    Where a fire insurance policy provided for an appraisement by appraisers appointed by each party, the two appraisers to appoint an umpire to whom they should submit their differences on failing to agree, and the agreement appointing the appraisers made no provision as to the umpire, the latter was not limited to determining the differences between the other appraisers, but could fix an amount independently thereof, and exceeding the amount fixed by either appraiser, where thereafter both appraisers agreed to such amount and signed the award.
    [Ed. Note. — For other cases, see Insurance, Cent. Dig. §§ 1422, 1423, 1427, 1429; Dec. Dig. <&=572.]
    6. Insurance @=574r — Award by Appraisers —Pres umptions — V alidity.
    Where the award of fire insurance appraisers does not show that they allowed anything for depreciation of the property, but does not conclusively show that they failed to make such allowance, the award will be sustained, since it is supported by every presumption in its favor not contradicted by the proof.
    [Ed. Note. — For other cases, see Insurance, Cent. Dig. §§ 1430-1432, 1434; Dec. Dig. @= 574.]

      7. Insurance <®=>57íL-Award by Appraisers —Beview by Courts.
    An award by appraisers appointed under tlie provisions of a fire insurance policy to determine the loss will not be disturbed for every error of law or fact, but only where fraud, partiality, misconduct, or gross mistake is shown.
    [Ed. Note. — For other cases, see Insurance, Cent. Dig. §§ 1480-1432, 1434; Dec. Dig. <§= 574.]
    Appeal from District Court, Dallas County; E. B. Muse, Judge.
    Separate actions by George A. Harmon and another against the Orient Insurance Company of Hartford, Conn., and the Palatine Insurance Company, Ltd., of London, England, were consolidated for trial. Judgment for the plaintiffs, and defendants appeal.
    Affirmed, and motion for rehearing and for additional findings of fact overruled.
    Crane & Crane, of Dallas, for appellants. W. H. Clark and Harmon & Harmon, all of Dallas, for appellees.

       Writ of error pending in Supreme Court.

   TALBOT, J.

The appellees, George A. Harmon and G. 1-1. Schoellkopf, instituted two separate suits against the appellants, Orient Insurance Company of Hartford, Conn., and Palatine Insurance Company, Ltd., of London, England, the former having been filed in the district court for the Forty-Fourth judicial district of Texas, and the latter in the district court for the Fourteenth judicial district. The suit against the Palatine Insurance Company of London, England, by consent, was transferred to the district court for the Forty-Fourth judicial district, and by agreement was consolidated for the purpose of trial with the suit against the Orient Insurance Company. There is no difference in the allegations of the two petitions filed in said suits. In each it is alleged, in substance, that the defendant therein named was engaged in the fire insurance business in the city of Dallas, Dallas county, Tex.; that on the 17th day of April, 1912, the plaintiff George A. Harmon owned in fee simple a certain dwelling house situated in the city of Dallas, and known as No. 2918 Greenwood Street; that on said date each of the defendants issued and delivered its policy of insurance to the said George A. Harmon, whereby, in consideration of the payment of the premiums charged, the defendant insured said Harmon — ■

“against loss or damage by fire to the amount of $3,000 upon his said dwelling, for the period of five years; that thereafter on the 12th day of April, 1913, said dwelling house was practically totally destroyed by fire; that said house was of the value of $10,000; that plaintiff Harmon gave to the defendant due and proper written notice and proofs of the fire and loss in accordance with the terms and condition of the policy; that defendant, though often requested, had failed' and refused to pay the loss to plaintiff’s damage in the sum of $3,000.”

The petition in each case further alleged that the policy therein sued on contained what is known as a “mortgage clause” in favor of the plaintiff G. H. Schoellkopf, stipulating and agreeing that said loss or damage, under and by virtue of said policies, shall be payable to said G. H. Schoellkopf, as his interest may appear, and that his interest in said insurance amounted to $5,-160, the unpaid purchase money due him upon the premises insured; that after the defendant was given notice and proofs, of the fire and damage sustained by plaintiffs in said sum of $3,000, the defendant, on, to wit, the 30th day of June, 1913, pretended to believe that it was not liable to plaintiffs, or either of them, in the sum of $3,000, and insisted that the same was an excessive claim, and demanded, under and by virtue of one of the many terms and conditions of its policy, that the amount of its liability on its said policy should be determined by an appraisement as provided for in their said policy; that plaintiffs consented to said demand in order to save the loss incident to the delay and expenses incident to the cost of litigation, and the agreement for submission of plaintiffs’ claim to appraisers was duly drawn on one of the defendant’s forms, and executed on June 30, 1913, by the plaintiff Harmon and the defendant, as provided for by said policy, and H. P. Self and J. Dawson Matthews, both of Dallas, Tex., were named and appointed appraisers to appraise the “sound value” and the loss and damage sustained by plaintiffs, and to return an award accordingly; that as provided for in said policy, said two appraisers agreed upon selected and appointed an umpire, S. P. Brickey, to submit to him their differences, if any; that said skillful, honest, and competent appraisers proceeded to perform, and did perform, their duties aforesaid, and on August 15, 1913, without dissent, said two appraisers and umpire finished their said appraisement and rendered and each signed their award as follows, to wit: Finding that the “sound value” of plaintiff Harmon’s said dwelling house, when burned, was $10,000, and that plaintiffs’ loss or damage by said fire to said dwelling house was $5,341.85; and thereupon the plaintiffs demanded of the defendant the payment of the sum of $2,670.90, the defendant being liable to the plaintiffs for one-half of the total loss, according to the terms and provisions of said policy, whereby the defendant became liable and justly indebted to the plaintiffs upon said award, and in the alternative for the actual value of the loss by fire, in the said sum of $2,670.90, with interest thereon from August 15, 1913, until paid, at the legal rate of 6 per cent, per annum, yet, though often demanded, defendant has refused, and still does refuse, to pay the same, or any part thereof, to plaintiffs’ actual damage $2,-900. The prayer of each petition is that the plaintiffs therein—

“recover judgment for, himself and for the use and benefit of the plaintiff G. H. Schoellkopf, for the sum of $2,670.90, with legal rate of 6 per cent, interest per annum thereon from August 15, 1913, until paid, and for costs of suit, and for such other and further relief, general and special, legal and equitable, as to the court may seem just and proper.”

The defendant in each suit, by answer filed therein, admitted that it issued the policy described in the plaintiffs’ petition; that on the 12th day of April, 1913, the property insured was damaged by fire, but denied that it was practically totally destroyed by fire. On the contrary, each averred that the building insured was not destroyed, but that it was damaged to about the extent of 32,500. Each further admitted that the extent of plaintiffs’ loss could not be agreed upon, and that plaintiffs and defendant entered into the agreement to appraise the loss as alleged by plaintiffs; that thereafter the appraisers and umpire rendered an award signed by all of them, wherein they found that the sound value of the property insured was $10,000, and the amount of loss and damage thereto by fire was 35,341.85. Defendants, however, each alleged that the award was not binding upon them, for reasons which will be sufficiently indicated for the purposes of this opinion in the discussion of the questions arising on the appeal.

Defendants further averred that at the date the policy in suit was issued, and at the time of the fire, the property was occupied and used as k rooming house; that had it known that the property was used as a rooming house, this defendant would not have issued the policy sued on, because it avers that from its experience in the underwriting business such class of risks was an undesirable one, and the same was on its prohibited list. In addition to this defendant avers that the rate upon rooming houses was something over twice as great as that of a private dwelling. Wherefore it says that said policy was null and void, both as to plaintiff George A. Harmon and plaintiff G. H. Sehoellkopf.

There was a cross-action also filed by each of the defendants; but, as we view the case, the matters therein alleged need not be stated. After the jury had been selected and the pleadings had been read defendants presented a motion, asking the court to peremptorily instruct the jury to find for the defendants, because under section 3, c. 127, Acts 33d Leg. (Vernon’s Say les’ Ann. Civ. St. 1914, art. 1829), plaintiffs not having denied the allegations contained in defendants’ answers as to the matters pleaded as to the award not being binding, and there being no averment in any pleading of the plaintiffs that they did not have information sufficient to form a belief, the matters alleged in defendants’ answers should be taken as confessed, and, the suit being upon an alleged award, there was nothing to submit to the jury. The court overruled the motion, to which each of the defendants excepted. The case was submitted to the jury upon a general charge, and the jury found a verdict in favor of plaintiff George A. Harmon for the sum of 35,-341.85, with 6 per cent, interest thereon from August 15, 1913, one-half of which sum was adjudged against each of the defendants, and that plaintiff George A. Harmon recover of this sum 35,000 for the use and benefit of plaintiff G. H. Sehoellkopf, and judgment was entered accordingly. Defendants’ motion for a new trial having been overruled, they appealed.

It is first assigned that the court erred in overruling the defendants’ motion for an instructed verdict in their favor. The contention is that the plaintiffs based their suits upon the award alleged by them, and the defendants having pleaded in their answer facts which, as a matter of law, showed that said award was not binding upon them, and the plaintiffs having failed to deny the allegations of defendants’ answer, and having failed to allege that they did not have information sufficient.to form a belief in regard thereto, as required by section 3, c. 127, Acts 33d Leg., such alleged facts were confessed, and the court should have peremptorily instructed the jury to find for the defendants. Manifestly this contention is predicated upon the assumption that the plaintiffs based their suit, and sought to recover, solely upon the alleged award. This we believe is an erroneous assumption. The fair construction of plaintiffs’ petition, if it does not so clearly appear from its language, is that it alleges two separate and distinct causes of action in the alternative; one upon the award of the appraisers, and the other upon the insurance policy issued to the plaintiff Harmon for the amount of the damages alleged to have been sustained by reason of the fire that injured his building. Under our system of pleading such course was open to him, and it is a common practice for the plaintiff, in stating his case, when he deems it necessary, “to frame his petition with a double aspect,” in order to place himself in a position to obtain alternative relief. Such evidently was the purpose of the pleader in drafting plaintiffs’ petition in this case, and we think the allegations in the petition, if true, authorized a recovery upon either the award of the appraisers and umpire, or upon the policies. If this view of the petition is correct, then for that reason, if no other, there was no error in overruling defendants’ motion requesting the court to instruct a verdict in their favor.

The assignments of error from the third to the ninth, inclusive, complain of the court’s refusal to give defendants’ special charge No. 1, which directed the jury to return a verdict for the defendants. It is urged that this was error for the reason that the award was not binding upon the defendants, because: (1) The "undisputed evidence showed that said award was uncertain in that the amounts agreed upon by the two arbitrators in several particulars, particularly in the items, of flooring and roofing, were likewise included in tile amount found by tbe umpire, and that tbe total found by tbe umpire and tbe total found by tbe two appraisers were added together, wbicb constituted tbe award, and that said award was therefore excessive in that tbe amount of damages upon the itéms aforesaid was included twice in tbe award;” (2) because, “under tbe terms of tbe agreement to arbitrate, it was tbe umpire’s duty to settle tbe differences between tbe two appraisers; that upon tbe items that tbe two appraisers could not agree as to tbe amount of damage tbe umpire did not determine tbe difference between tbe two appraisers, but disregarded their findings as to tbe amount of the loss and damage, and did not consider them at all, but made up an independent valuation of bis own wbicb, in tbe items of floors, mantel, upstairs, roof, dining room chimney, plumbing, furnace, foundation, and painting exterior, was several hundred dollars in excess of the amount of damage found and estimated by tbe highest estimate made by either of tbe appraisers;” (3) because “tbe undisputed evidence shows that the arbitrators did not notify these defendants, or either of them, when they would meet to appraise tbe loss, although in law these defendants were entitled to reasonable notice of tbe time and place of tbe meetings of tbe arbitrators;” (4) because “the undisputed evidence shows that these defendants, or either of them, were not given an opportunity to appear before tbe arbitrators and present evidence as to tbe amount of tbe loss and damage to tbe property, although in law they were entitled to appear before said arbitrators and to offer evidence thereon;” (5) because, “tbe undisputed evidence shows that these defendants were not advised that tbe appraisers bad failed to agree, nor were these defendants notified of tbe time and place when tbe umpire would take up and determine tbe question of tbe differences between the two appraisers;” (6) because, “tbe undisputed evidence shows that these defendants were not given an opportunity to appear before tbe umpire and appraisers and offer evidence as to tbe extent of tbe loss and damage, although tbe defendants had expert witnesses who were ready and willing to testify concerning these matters;” and (7) because “under tbe terms of tbe appraisal agreement and conditions of the policies sued on, it was tbe duty of the appraisers and umpire, in estimating tbe damage to the property insured, to take from tbe actual case value of said property tbe amount of tbe depreciation; that the undisputed evidence showed that said property had greatly depreciated in value, but that in estimating the 'damage to the property, tbe appraisers and umpire made no allowance therefor.” Neither of tbe reasons here assigned would have justified tbe court in giving tbe peremptory instruction requested.

It was alleged as a ground for annulling the award that it was uncertain, in that the amounts agreed upon by the two arbitrators in estimating tbe damage to tbe floors and roof of plaintiffs’ building, or to any other item, were included in tbe amount found by the umpire, and that therefore tbe award was excessive. There was testimony given by J. Dawson Matthews, one of tbe appraisers, to the effect that be and tbe other appraiser, H. P. Self, estimated tbe damage to tbe upstairs floors of tbe building at $87.60, and it also appears that tbe umpire Briekby estimated tbe damage to tbe floors of both tbe upper and lower stories of tbe building at $210, and that tbe two amounts were included in tbe award, but in tbe absence of pleadings raising such an issue, tbe facts in relation thereto, though proven, could not be considered as a ground for declaring tbe award invalid. To be available any matter of defense must be alleged, as well as proved.

Tbe other grounds upon wbicb appellants base their asserted right to tbe peremptory instruction in question are equally unavailing, but for other and different reasons. Tbe agreement to arbitrate their differences by tbe appellants and appellees was not entered into under the provisions of our statute. It was made in conformity to provisions of the policies sued on, and does not require tbe appraisers to notify tbe appellants “when they would meet to appraise tbe loss” in question, or to advise them of their failure to agree, in tbe event of such failure, and of the time and place when tbe umpire would take up tbe question of differences between tbe appraisers, and to thereby afford them an opportunity to appear and present evidence as to tbe amount of tbe loss and damage to plaintiffs’ property. Tbe provision of tfie contract relating to tbe matter is as follows:

“In tbe event of disagreement as to the amount of loss the same shall, as above provided, be ascertained by two competent and disinterested appraisers, the insured and this company each selecting one, and the two so chosen shall first select a competent and disinterested umpire, the appraisers together shall then estimate and appraise the loss, stating separately the sound value and damage, and, failing to agree, shall submit their differences to the umpire; and the award in writing of any two shall determine the amount of such loss.”

And the agreement for arbitration entered into under this provision, after stating tbe substance of said provision and that a disagreement had arisen between tbe parties as to the amount of the loss to tbe plaintiffs’ property by reason of tbe fire wbicb occurred April 12, 1913, and that tbe insurance company bad demanded an appraisement under the terms of tbe policy, contains the following stipulation:

“It is hereby agreed by and between said insurance company and said assured under the said demand that H. P. Self of Dallas, Texas, and J. Dawson Matthews of Dallas, Texas, are hereby appointed as appraisers to appraise the sound value and the loss and damage and return an award in accordance with the terms and conditions of said policy.”

Prom a glance at the provision of the policy and. the stipulation in the agreement quoted, it will be seen that in neither is the method or procedure to be pursued by the appraisers in arriving at the extent of the damage to plaintiffs’ property and the amount of his loss, or by the umpire in the event he was called upon to act, prescribed. So that, looking alone to the provisions of the policy and of the agreement to arbitrate, we find that the manner and means of ascertaining the extent of such damage and loss by the appraisers, and of determining the extent of the damage and loss to those items of property about which the appraisers disagreed by the umpire, is left entirely to their candid judgment, and if such provisions control, the duty did not devolve upon the appraisers and the umpire to give to the appellants the notice and opportunity to be heard which appellants .claim should have been given them, and the failure to give such notice and opportunity furnishes no legal' ground for setting aside the award.

But if the appraisers and umpire, notwithstanding the silence of the agreement to arbitrate with respect to the method and procedure to be pursued in arriving at the loss and damage to plaintiffs’ property, were subject to the principles governing common-law arbitration, still under the pleadings and evidence in the case the award should not be declared void. There is neither allegation nor proof that appellants asked and were denied permission by the arbitrators to be heard by witnesses or otherwise, nor is there any evidence that would justify the conclusion that the appraisers or the umpire acted secretly in any respect in the discharge of their duties to the detriment of appellants, or that either of them was otherwise than fair and impartial in rendering the award made by them. No undue haste in arriving at the conclusion reached by them, or disposition on their part to deny a full and fair hearing of any testimony appellants may have desired to offer, is shown. Indeed it is fairly deducible, if not obvious, from the agreement to arbitrate and the action of all the parties at interest, that it was not contemplated that the appraisers would conduct a trial and notify the parties of the time and place thereof, to the end that they might have an oral examination of witnesses touching the matters in controversy, or that, if ever contemplated, the failure of the appraisers to so conduct their investigation was acquiesced in and approved. That appellants knew that the arbitrators were inquiring into the loss and damage to plaintiffs’ property, and failed to request a hearing and examination of the witnesses, cannot be questioned. In one place in his testimony, the appraiser, Matthews, says, without contradiction, that he notified Mr. Bucklew, who was the adjuster and representative of the appellants, when the appraisers would meet, and that he discussed the plaintiffs’ claim; that he (Bucklew) appeared before them in his (Matthews’) office and discussed the matter with them fully. So it occurs to us that if appellants have suffered from a failure to get the testimony of certain witnesses before the appraisers, it is not attributable to any act or omission on the part of the appraisers, but to their own want of attention in not notifying the appraisers of the existence of such testimony and a desire to have it placed before them. Rector v. Blunter, 15 Tex. 380. It is an undisputed fact that, although the appraisers, to the knowledge of appellants, were engaged several weeks in investigating the damage and loss to plaintiffs’ property and in reaching a conclusion as -to the amount thereof, appellants did not, at any time, offer to bring before them a single witness, or suggest the name of one whose testimony might be obtained. If, under the circumstances, the mere failure of arbitrators, selected and authorized to act as were the arbitrators in this case, to notify the complaining party when they would meet to appraise the: loss would constitute a valid ground to vacate and set aside their award, the facts and circumstances shown by the record before us presents, in our opinion, no such case. The law favors arbitrations, and every reasonable intendment will be indulged in support of them. The eases cited by appellants were decided upon facts materially different from the facts in the instant case, and therefore do not control its decision.

Concerning the proposition that the award is not binding upon appellants because the “umpire did not determine the differences between the two appraisers, but disregarded their findings as to the amount of the loss and damage and made up an independent valuation of his own” which, in certain items, was largely in excess of the amount of damage found by the highest estimate made by either of the appraisers, we think it may safely be said that in so acting the umpire did not exceed the authority conferred upon him. Neither the agreement to arbitrate nor the law made it his duty to adopt the findings of one. or the other of the appraisers as to the amount of the loss and damage to items of property about which they differed, or to assess the amount thereof at some sum not to exceed the highest estimate placed upon any particular item by either, as seems to be the contention of appellants. On the contrary, we think the duty of the umpire under the terms of the arbitration agreement, or as imposed upon him by law, was to ascertain and determine, in the exercise of his own best judgment, the actual amount of the loss and damage to any item of property about which the appraisers had disagreed, independent of the findings of the appraisers, or either of them. This is what the umpire did, according to the record before us, and both of the appraisers agreed to his findings and signed the award, which included them.

Resfiecting the contention that the undisputed evidence showed that the property covered by the policies, and particularly several of the items thereof, had depreciated greatly in value, but that the appraisers and umpire, in estimating the loss and damage to the property, made no allowance for depreciation, we deem it sufficient to say that if the evidence is insufficient to show that the appraisers and umpire did in fact allow for depreciation in the value of the property in estimating the damage and loss thereto, it does not affirmatively show the contrary, and as the court must support the award “by every presumption in its favor not contradicted by the proof,” appellants are in no position to insist that the award is not binding upon them because appellees’ property had depreciated in value and no allowance was made therefor in determining the amount of their loss.

Now, to the foregoing remarks, and as applicable to all of appellants’ propositions here under discussion, it may be added, as was well said in Payne v. Metz, 14 Tex. 56, that:

“The court should interpose in this class of cases with great caution, and never, except in a case of urgent necessity, to prevent the consummation of a fraud, or some great and manifest wrong and injustice. It is not every error or mistake of law or fact which will warrant the setting aside of an award. If it were, there would be but few awards made which would stand the test of judicial investigation; for they are most frequently made by men not learned in the law, nor skilled in judicial proceedings. * * * The law therefore requires that, to authorize the interference of a court of equity in the ease of awards, there must appear to have been fraud or partiality, misconduct or gross mistake, committed on the part of the arbitrators, to the manifest injury of the party complaining.”

No such fraud, partiality, misconduct, or gross mistake as was here contemplated by the Supreme Court characterized the action of the appraisers in this case, and their award is final and conclusive as to all matters embraced therein.

But aside from all of the above considerations, we think the special charge for a directed verdict was properly refused because it ignored that branch of the plaintiffs’ case founded on the contracts of insurance without reference to the award. The allegations of the petition and the evidence adduced in support thereof were sufficient to authorize and support a recovery either on the award or policies of insurance, and it would have been positive error to have given the peremptory charge in question upon the theory that plaintiffs’ suit was based solely upon the award, and not binding upon defendants for the reasons urged by them. The verdict of the jury was a general one, and, so far as the record shows, may have been based upon plaintiffs’ alleged cause of action on the insurance contracts and the evidence adduced in support thereof.

The other assignments of error have been disposed of adversely to the appellants’ contention by what we have already said, and need not be further noticed.

The judgment of the court below is affirmed.

On Motions for Rehearing and Additional Bindings of Fact.

The appellants’ motion for a rehearing has failed to convince us that we erred in the conclusions heretofore reached and set forth in our original opinion, and will therefore he overruled. Appellants’ motion for additional findings of fact will also be overruled, but a statement made by the witness Matthews, which does not appear in our original opinion, will be given. In our original opinion it is said:

“In one place in Ms testimony the appraiser, Matthews, says, without contradiction, that he notified Mr. Bucklew, who was the adjuster and representative of the appellants, when the appraisers would meet, and that he discussed the plaintiffs’ claim; that he (Bucklew) appeared before them in his (Matthews’) office and discussed the matter with them fully.”

This statement was made by the witness, as said in one place in his testimony, but in another place in his testimony he said:

“We did not notify Mr. Harmon or Mr. Buck-lew, or any representative of the insurance company, as to when we were going to meet and try to appraise the list.”

This additional statement of the witness, it occurs to us, should have been quoted in our original opinion; and, as it was omitted, we now give it for what it is worth. It does not, however, in our opinion, materially affect the questions involved.
      @=»Eor other oases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

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text:
    CARTWRIGHT v. WARREN.
    (No. 7462.)
    (Court of Civil Appeals of Texas. Dallas.
    May 22, 1915.)
    1. Injunction <®=1 — “Mandatoey Injunction’ ’ — “Preventive Injunction. ”
    Injunctions are “mandatory” or “preventive” according as they command defendant to do or to refrain from doing a particular thing.
    [Ed. Note. — For other cases, see Injunction, Cent. Dig. § 1; Dec. Dig. <§==>1.
    For other definitions, see Words and Phrases, Second Series, Preventive Injunction; also First and Second Series, Mandatory Injunction.]
    2. Injunction <&=133 — Mandatoey Injunction — .Interlocutory Application.
    A court of equity, though reluctant to grant a mandatory injunction on an interlocutory application and before final hearing, may do so in extreme cases where the right is clearly established and the invasion of the right results in serious injury.
    [Ed. Note. — For other cases, see Injunction Cent. Dig. § 302; Dec. Dig. <§=>133.]
    3. Injunction <@=>143 — Mandatoey Injunction — Inteblocutoey Application — Petition.
    Where the petition in an action to restrain defendant from further interfering with a channel, and to require him to remove an obstruction from the channel, and permit water to pass as before the placing of the obstruction, did not clearly charge defendant with anything more than obstructing and preventing the flow of .'surface water, it appearing that the word “channel” was used as synonymous with “clráw,” and left it in doubt whether defendant had obstructed a natural water course or stream with defined banks, it was error to grant a mandatory injunction giving the full relief sought, without notice to defendant and opportunity to be heard.
    [Ed. Note. — Eor other cases, see Injunction, Cent. Dig. § 315; Dec. Dig. <§=143.]
    4. Waters and Water Courses <§=38 — “Draw.”
    The word “draw,” as commonly understood, does not mean a stream of running water with well-defined banks, as distinguished from the flow of surface water.
    [Ed. Note. — Eor other eases, see Waters and Water Courses, Cent. Dig. § 30; Dec. Dig. <§= 38.
    Eor other definitions, see Words and Phrases, Eirst and Second Series, Draw.]
    5. Injunction <§=137 — Preliminary Injunction-Right to Grant — Balance oe Convenience and Hardship.
    In a doubtful case, where the granting of a preliminary injunction will, if defendant ultimately prevail, cause greater detriment to him than will, if plaintiff prevail, be suffered by him through its refusal, the injunction should ordinarily be denied.
    [Ed. Note. — Eor other cases, see Injunction, Cent. Dig. §§ 307-300; Dec. Dig. <®=137.]
    6. Injunction <§=143 — Prohibitory Injunction — Right to Issue — Petition.
    While, under the express provisions of Rev. St. 1895, art. 2994, the issuance of an injunction without notice is within the discretion of the trial judge, such injunction should not be granted unless the petition clearly shows a right thereto and necessity therefor, and that a temporary restraining order until the hearing on tlie application for a temporary injunction, will not amply protect plaintiff.
    [Ed. Note. — Eor other cases, see Injunction, Cent. Dig. § 315; Dec. Dig. <§=143.]
    Appeal from District Court, Henderson County; John S. Prince, Judge.
    Action by B. F. Warren against O. T. Cartwright. From judgment for plaintiff, defendant appeals.
    Reversed and remanded.
    J. J. Faulk and W. R. Bishop, both of Athens, for appellant. E. P. Miller, of Athens, for appellee.
   TALBOT, J.

This is an appeal from an order of the district judge of the Third judicial district, made in chambers, granting to the appellee a prohibitory and mandatory injunction against the appellant. The injunction prayed for was granted and caused to be issued without notice to appellant, or an opportunity given him to be heard, and the question for our decision is whether or not the allegations of the petition show such facts as entitled appellee to the summary relief granted. The petition alleges, so far as is necessary to state, that the plaintiff and defendant own adjoining tracts of land of about 40 acres each; that the defeudant’s land lies east of the plaintiff’s land, and the division line is about 550 yards long. The fifth paragraph of the petition is as follows:

“That about midway on said division line the water divides, and the water north of this division line runs north, and the water south thereof runs south. The petition further alleges that there is a wire fence separating the plaintiff’s land from the defendant’s land, which is practically on the dividing line; that there is a natural channel or water course, adjoining and on the east side of the said division fence, which begins immediately south of the division line set out and described in paragraph No. 5 of this petition, and said channel extends south and on the east side of said division fence a distance of about 250 yards, to where said channel intersects or comes in contact with another draw or natural channel which runs or courses practically east and west, and in this last-named channel the water runs east, or really it runs southeast; that there is a natural draw or channel coming from the northeast through a portion of the defendant’s land, which carries considerable water, and the same intersects and empties its water into the said channel on the east side of the said fence, at a point about 100 yards south of the beginning of the said channel on the division line described in paragraph 5 of this petition; that a great deal of water accumulates and empties into the said channel coming' from the defendant’s land, and this in turn empties into the channel on the east side of the said fence, and in addition to this a great deal of surface water from the defendant’s land accumulates and empties into the channel on the east side of the said fence; that at a point about 150 yards from the beginning point of the said channel, located on the east side of the said fence, and running south with said fence, the defendant has recently filled up a dam and obstruction in said last-named channel, and has opened up a passway for the water under the said division fence, and that the water in the future coming down said channel at said last-named point will be diverted by said obstruction, and will pass under said division fence, and the water will spread out over plaintiff’s land and crop, and that it will destroy the plaintiff’s crop and injure his land; that he expects to plant said land, and cultivate the same in potatoes within the next few days; that the defendant has completely stopped up the said channel on the east side of the said fence at a point about 150 yards from its beginning, as aforesaid, and the water cannot longer pass through and down the natural channel south of the said point, but is and will be diverted and caused to pass under said division fence to the west and on to the plaintiff’s land and crop, as aforesaid; that, in truth and in fact, the defendant has opened up a way for the said water to pass under the said division fence and on to the plaintiff’s land; that on the east side of the said division fence and at a point where the natural channel runs practically east and west, under and near said division fence, the defendant has built up a dump or dam, and has blockaded said channel, which will cause the. water to back west and spread over the plaintiff’s land and crops, and will thereby damage the plaintiff. Plaintiff further charges that the defendant is threatening and is in the act of opening up a water way, on the east side of said division fence, and by the side of the said division fence, and south of the said channel running practically east and west; that on account of the lay of the ground it is impossible for the water to be carried away; that the opening up of this channel will cause the water to spread over the plaintiff’s land on the west, and injure the same, together with, his crop; that the defendant has created a tank of water in the northwest corner of his said 40 acres of land; that said tank has considerable water in it, and has had for quite a while; that the defendant has so constructed said tank that he has caused said -water to spread ont and ba^k up over plaintiff’s land, and to injure the plaintiff’s said land, as well as*said division fence; that by reason of all of which the plaintiff is prevented from using a portion of his said land. Plaintiff further show's to the court that by reason of all of the wrongs herein charged this plaintiff will be greatly damaged; that, if the defendant is permitted to continue said wrong, as he has already done and threatens to do, plaintiff will be greatly damaged: that said injuries are irreparable, and cannot be compensated in damages; that the plaintiff’s farm or the east portion of it will be practically ruined and destroyed if the defendant is permitted to continue his wrongdoing and his said obstructions are not removed, and that his crops will be destroyed; that the defendant is not now', and would not be, in the opinion of the plaintiff, at the termination of this suit, the owner of property, real or personal, that is subject, to execution, sufficient to satisfy this plaintiff for the damages he would ultimately sustain from the diversion of the said water from its natural channel as aforesaid and the flooding of his lands and crops, as the defendant is now doing and is about to do.”

The prayer is for a writ of injunction “restraining the defendant from further interfering with said channel, and that the defendant be required, under the order of the court, to remove said obstruction in said channel, and that the water be permitted to pass as it did before the defendant interferred with the same,” etc. By the judge’s fiat indorsed on the petition the injunction as prayed for was granted, and the clerk of the court directed to issue the same upon plaintiff, giving bond in the sum of $300. The bond was given and the writ of injunction issued as directed, and the defendant appealed.

As is well understood, injunctions are mandatory or preventive according as they command defendant to do or to refrain from doing a particular thing. And, while a court of equity is always reluctant to grant a mandatory injunction upon an interlocutory application and before final hearing, it may yet do so in an extreme case when the right is clearly established and the invasion of the right results in serious injury. High on Inj. (4th Ed.) § 2. Mr Joyce, in his excellent work on Injunctions (section 97a), states the rule substantially as follows: An applicant for a preliminary mandatory injunction is required to show a clear right and a case of necessity or extreme hardship, and the court will seldom grant a mandatory injunction pendente lite unless the plaintiff’s right is so clear that the denial of the right must be either captious or unconscionable. In other authorities it is held that, to justify a court of equity to issue a mandatory injunction before hearing and without notice, the complainant must show “a strong and mischievous case of pressing necessity.” In the case of Railway Co. v. Anderson County, 150 S. W. 240, Chief Justice Pleasants, in delivering the opinion of the court, correctly said:

“The power of a court of equity to grant a preliminary injunction without notice to the defendant should never be exercised unless there is pressing necessity for such action, and, as a general rule, a mandatory injunction should not be ordered before a final hearing of the case and for the purpose of executing the judgment of the court. The usual purpose of a preliminary injunction is to maintain the status quo of the subject-matter of the suit, or to prevent impending injury, and when the issuance of such injunction would have the effect of granting all the relief that could be obtained by a final decree, it should not be granted, except in cases of extreme hardship. The instinct of justice which forbids that one should be condemned without a hearing permeates our whole system of jurisprudence, and, while cases may and do occur in which the danger of irreparable injury is so great and so pressing_ that the restraining hand of equity should be immediately interposed to prevent such injury, the present case cannot be placed in that category.”

And so we think it may be said in the case before us that, if the allegations of the plaintiff’s petition show definitely any cause of action at all, they fail to show any such emergency or pressing necessity as justified the issuance of the mandatory injunction herein granted, without notice to the defendant and an opportunity to be heard. Indeed, as said in Holbein v. De La Garza, 126 S. W. 42:

“It is rarely, under our equiiy procedure in regard to the issuance of injunctions, that it becomes necessary to issue a temporary writ of injunction, even a merely prohibitory writ, without a hearing. If it appears necessary from the allegations of the petition that a defendant be stopped at once and without the delay necessary to give notice and an opportunity to be heard, a temporary restraining order may in all cases be issued compelling immediate cessation of the threatened injury until such time as may reasonably be required to allow the defendant to present his side of the case, which may change the whole aspect of the controversy. If it be said, in answer, that a defendant may obviate this difficulty by a motion to dissolve, wherein he may fully present his objections to the issuance of the writ, the reply is apt and conclusive that, under the peculiar rale adopted by the Legislature allowing appeals from an order granting a temporary injunction, but not to an order refusing to vacate on motion to dissolve, a defendant would ordinarily lose, by lapse of time, his right to appeal from the order granting an injunction if he delayed until his motion to dissolve could be heard.”

The plaintiff, by his petition in the ease at bar, as will bo observed, sought and obtained a prohibitory writ of injunction restraining the defendant from “opening up a water way on the east side of the division fence” between Ms la,nd and thd defendant’s, and south of the channel alleged to run practically east and west, which he says defendant was threatening- to open up, and which he says, if done, would cause the water to spread over his land on the west and injure the same and his crops, and also a mandatory writ commanding defendant to remove thp obstruction which had already been placed in the channel on the east side of the division fence at a point 150 yards from its beginning, and north of the place where he was threatening to open up a water way. This mandatory writ was absolute, and its effect was to require the defendant to at once remove the obstructions placed by him in the channel referred to. It granted to the plaintiff all the relief he could obtain on a final hearing upon proof of every material allegation in his petition. The petition discloses no sufficient reason for granting such relief without notice to defendant and an opportunity given him to be heard. Indeed, it may be seriously doubted from the language of the petition that defendant is charged with anything more than obstructing and preventing the flow of surface water upon his land.

The word “channel” seems to be used in the petition by the pleader as synonymous with the' word “draw,” and the word “draw,” as commonly understood and in the sense here used, does not mean a stream of running water with defined banks, as contradistinguished from the flow of surface water. If the fair construction of the petition is that it charges the defendant with obstructing and impounding surface water upon the plaintiff’s land, then no cause of action whatever is shown. Barnett v. Matagorda R. & I. Co., 98 Tex. 355, 83 S. W. 801, 107 Am. St. Rep. 636. And, if the language of the petition does not make it clear that the defendant has obstructed a natural water course or stream with defined banks, but leaves the same in doubt, then neither the prohibitory nor mandatory injunction should have been granted, without notice to the defendant, or, if the allegations of the petition fail to show a clear right and case of necessity or extreme hardship, the action of the court in granting the mandatory injunction was unwarranted, and should be set aside.

It may also be stated in this connection that the balance of convenience or hardship ordinarily is a factor of controlling importance in cases of substantial doubt existing at the time of the granting or refusing the preliminary injunction. Such a doubt may relate either to the facts or to the law of the case, or to both, and it is a well-recognized rule that:

“In a doubtful case, where the granting of the injunction would, on the assumption that the defendant ultimately will prevail, cause greater detriment to him than would, on the contrary assumption, be suffered by the complainant through its refusal, the injunction usually should be denied.” Joyce on Inj. vol. 1, § 25.

It is unquestionably true that, “as to the issuance of the prohibitory injunction without notice, much must be left to the sound discretion of the judge” (Rev. Stat. 1895, art. 2994; Holbein v. De La Garza, 126 S. W. 42), but it occurs to us that the petition does not charge with sufficient definiteness and certainty that the flow of water which the defendant, according to the allegations of the petition, was threatening to divert and cause to be impounded upon plaintiff’s land, was that of a running stream with well-defined banks, as distinguished from surface water, to justify even the issuance of the prohibitory injunction, granted in this case, without notice. A temporary restraining order, until a hearing upon the application for a temporary injunction, would have amply protected the plaintiff. An injunction is a harsh remedy, and should not be granted in the first instance, except upon a pretty clear prima facie case and upon positive aver-ments of the equities on which the application for the relief is based. 1 High on Inj. (4th Ed.) § 34. Our conclusion is that the injunction in this case was, for the reasons indicated, improperly granted.

It is therefore ordered that the judgment below be reversed, and that the writ of injunction as to both its prohibitory and mandatory features be set aside and vacated, and the cause remanded for proceedings in accordance with this opinion.
      <S=>For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

      dt=For other oases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes