text:
    CROW et al. v. CATTLEMEN’S TRUST CO.
    (No. 8680.)
    (Court of Civil Appeals of Texas. Ft. Worth.
    June 23, 1917.
    On Motion for Rehearing, Nov. 17, 1917.)
    1. Corporations <©=3614(4) — Dissolution — - Grounds — Pleading—Sufficiency.
    A complaint alleging that the corporation assumed to be acting under a charter which was an amendment of the charter of a defunct corporation, and that the corporation in fact, acting without authority and doing acts for which it could not be incorporated under the present law's, states a good cause of action for dissolution of the corporation.
    2. Joint-Stock Companies <©=>23 — Right to Sue and Be'Sued — Parties.
    Where plaintiffs holding stock purporting to be corporation stock charged that the corporation had in fact no legal existence and was assuming to do acts which it could not be authorized to do under the present laws, and sought dissolution of the company, the relief prayed could not be granted w<here only three stockholders were served and the officers were not served as provided for by Vernon’s Sayles’ Ann. Civ. St. 1914, arts. 6149-6151, providing for suits against and service upon joint-stock companies.
    3. Dismissal and Nonsuit <©=>57 — Defective Service — Right to Amend.
    In action against alleged joint-stock company when plea in abatement for lack of service on the officers was sustained in the absence of showing that plaintiffs declined to make further efforts to procure service, it was error to dismiss the cause.
    4. Corporations <©=>29(2) — Prohibited Corporation-Collateral Attack.
    If a company, which assumed to be a corporation by amendment of the charter of an old and defunct corporation, exei-cising powers prohibited by the law after its beginning business, was neither a de jure or de facto corporation, persons purchasing stock could attack its existence collaterally.
    On Motion for Rehearing.
    5. Appeal and Error <©=>188 — Preservation of Exceptions — Time to Complete Service.
    Where the court on a plea in abatement dismissed the petition on the ground that the corporation sought to be dissolved was at least a de facto corporation, the fact that plaintiffs, who had failed to serve the officers of the company, failed to ask for time in which to complete service did not bar them from asking on appeal that the case be reversed for failure to allow such time.
    Appeal from District Court, Tarrant County; Ben M. Terrell, Judge.
    Suit by W. E. Crow and others against the Cattlemen’s Trust Company. Judgment of dismissal, and plaintiffs appeal.
    Reversed and remanded, and motion for rehearing overruled.
    McLean, Scott & McLean and B. K. Goree, all of Et. Worth, for appellants. Bryan, Stone & Wade and A. H. Kirby, all of Ft. Worth, for appellee.
   DUNKLIN, J.

W. E. Crow and 13 other holders of capital stock in the Cattlemen’s Trust Company instituted this suit against that company and all other stockholders therein to wind up the business of the company, and for a distribution of its assets among the shareholders. Later plaintiff Crow took a nonsuit, and by order of court he was made a party defendant; the suit being prosecuted thereafter by the other plaintiffs. The following facts were alleged in plaintiffs’ petition:

The defendant company is doing business under and by virtue of a charter originally granted by a special act of the Legislature to the Star State Sayings Association, which was approved in March, 1871. The company so chartered was duly organized, and thereafter acquired real and personal property; but in April, 1873, at a meeting of its shareholders, duly appointed, it was decided to dissolve' the corporation and surrender the charter. To accomplish that end it was further resolved at the same meeting that, áll the assets of the company should be transferred by its officers to trustee elected at the same time, who were authorized and directed to sell the same and distribute the proceeds ratably among the shareholders; all of which, was dime, and as a result of those proceedings the corporation then and there became defunct and its charter null and void. About 40 years after such dissolution and cessation of business, 4 shares of stock were purchased from the surviving wife of a former stockholder, and with those shares as a basis the purchasers filed with the secretary of state what purported to be an amendment of the original charter, changing the name of the original corporation to the Continental Trust Company Of Waco. Later, and in about the year 1912, another amendment of the charter was filed changing the name of the corporation to the Cattlemen’s Trust Company named as one of the defendants in this suit. By both of said amendments the capital stock of the original corporation was increased. The capital stock of the original corporation was 72 shares, of the par value of $500 each, and the capital stock already issued by the defendant ' association and now outstanding is of an aggregate par value of $500,000, upon which there has been paid in about $370,-000. The present assets of the defendant company consist of real estate, stocks in other corporations doing business in this and other states, bonds, cash, notes for money loaned, and every variety and description of personal and real property of the aggregate value of $700,000, less an approximate indebtedness of about $200,000. Plaintiffs are the holders of capital stock in the defendant company in the aggregate amount of 1,400 shares, for which they have paid divers sums .in cash aggregating several thousand dollars, and some of them still owe additional sums for their respective shares.

It was alleged, in effect, that under its charter the original corporation was vested with the following powers:

“To sue and be sued, plead and be impleaded, contract and be contracted with; buy, hold, sell and convey real personal and mixed property; to rent and lease, execute deeds, mortgages and deeds of trust; to loan, borrow, discount or take on deposit money, exchange, bullion, bank notes, government securities or stocks, and other valuables in accordance with bank usages, make divisions of property, declare dividends, and to do and perform all such acts, including the making and enforcing- of by-laws, rules and regulations for their government, as may be necessary and consistent with law and the Constitution.”

The defendant Cattlemen’s Trust Company, in order to induce plaintiffs to subscribe for their stock, represented, in effect, that said company had succeeded to the charter rights of said original corporation, and was vested with all the authority granted by said original charter, and by reason thereof was authorized to transact any business which could have been transacted by said original company. Plaintiffs believed said representations and were induced thereby to purchase said stock, and paid the consideration charged therefor, and did not, until shortly before the institution of the suit, discover that said representations so made were in fact untrue.

Plaintiffs further alleged in their petition that as the original charter became defunct, the attempted amendments thereto were of no force or effect, and that the defendant Cattlemen’s Trust Company is operating as such a corporation without any lawful authority so to do, and that by reason of those facts all of the shareholders therein were in fact partners and would be liable as such to any creditor of said company. According to further allegations in the petition, at the time of such attempted amendments of the charter, there was no statutory authority for the creation of a corporation with such powers as were conferred by the charter granted to the Star State Savings Association, and the Cattlemen’s Trust Company is transacting business under and by virtue of said charter for the doing of which no new legal charter could be procured. There was a prayer for the appointment of a receiver to take charge of the assets, wind up all the business of the company, and after liquidating its liabilities, disburse the proceeds remaining among the ■ shareholders, according to their respective interests. The petition also contained a prayer for a personal judgment against the company and the other stockholders for the amount of money which plaintiffs had paid for their stock. Presumably, this was in the nature of an alternative plea, although the petition does not specifically so state.

There were more than 200 shareholders-named as defendants in the suit, many of whom resided in divers counties in the state, some in New Mexico, others in California,. Massachusetts, New York, etc. The defendants A. H. Kirby, Geo. C. Clarke, and J. W. Milner, included among the stockholders named as defendants, for themselves alone filed a plea in abatement. They asked that the suit be abated on, substantially, four grounds: (1) That the defendant the Cattlemen’s Trust Company was a de jure corporation incorporated under the laws of the state of Texas, as shown by a copy of the charter attached to the plea; (2) that if not a de jure corporation, it was, at least, a de facto corporation, in that a charter had been granted to it by the proper officers of the state under a valid and existing law authorizing the granting of the same, which charter was applied for in a bona fide attempt to organize a corporation under said law, and the company has in good faith exercised the corporate powers purported to be shown by said charter, and has been recognized by the state as such corporation; (3) that no such partnership existed between plaintiffs and the individual defendants as is alleged in plaintiffs’ petition; and (4) that the three defendants filing said plea were the only defendants who had been served with citation. Evidence was heard upon all the issues so tendered by said plea, and all of the allegations made in said plea were sustained by the trial judge, and the case was dismissed. It thus appears, as alleged, that only three of the stockholders were served with citation. Although the names and residences of the officers of the Cattlemen’s Trust Company were alleged in plaintiffs’ petition, no service was had upon them so as to get jurisdiction of the company.

By chapter 2, title 102, 4 Vernon’s Sayles’ Texas Civil Statutes, provision is made for suing unincorporated joint-stock companies or associations. By article 6149 of that chapter, it is provided that such a company may be sued, and that it shall not be necessary to make the individual stockholders or members thereof parties to the suit. By article 6150 it is further provided that in such a suit service of citation may be had upon the president, secretary, treasurer, or general agent of the company, and by article 6151 that a judgment against the company shall be as conclusive on the individual stockholders and members thereof as if they were individual parties to the suit. By other articles of the same chapter it is provided, in effect, that in suits against such a company service may be had upon the stockholders also, and that when they are'so served their individual property may be levied on and sold to satisfy any judgment for money" rendered against the company. As shown by article 6154," that chapter of the statutes is expressly made cumulative of other remedies existing at the time of its enactment.

It thus appears that service updn the company would have given the court jurisdiction to deeree'a winding up of the business of the company and a distribution of its assets, or in the alternative, to render a money judgment against the company 'for the amount which plaintiffs had paid for their stock, for the payment of which recourse could be had .'against any property owned by the company. And service upon the stockholder defendants would not be necessary except for the purpose of subjecting their individual property to the payment of any money judgment which plaintiffs might recover. Allegations to the effect that the association was legally a partnership would have been material in a suit by an ordinary creditor to collect a debt contracted by the company. Such allegations were perhaps material ,to plaintiffs’ suit in that they were urged to show a probable danger of loss to the plaintiffs by reason of demands from future creditors, and thereby to add an additional reason why the business of the company should be wound up and settled, but such allegations did not determine the nature .of the suit. Aside from .that purpose, we are of the opinion that the petition stated a good cause of action for the winding up of the affairs of the company, and, in the event of such a dissolution, the interest of the stockholders in the proceeds would be the same, whether or not it could be said that such shareholders would be liable -as partners to creditors.

But with only three of the stockholders served with citation, the relief prayed for by the plaintiffs could not have been granted.

.As stated already, when the plea in abatement was sustained the cause was dismissed, and it does not appear that plaintiffs declined to make further efforts to procure the service of citation upon other defendants. In the absence of such a showing, we think there was error in the order dismissing the cause, for which the same must be reversed and the cause remanded. Evidence at great length was introduced to sustain the allegations in plaintiffs’ petition that the Star State Savings Association was dissolved and its charter defunct some 39 years prior to the purported amendments of the charter, and the questions whether or not by the filing of such amendments and the proceedings thereunder the Cattlemen’s Trust Company became a de jure or, at all events, a de facto corporation, and whether or not, in any event, plaintiffs can question the validity of such amendments to the charter, have been argued- at great length in the briefs filed in this court.

Although the issue last stated was not presented by the plea in abatement, we deem it proper to discuss it. At the time the purported amendments to the original charter were filed, there was no statutory authority in this state for the creation of a private corporation with such powers as were vested in the Star State Savings Association by its special charter; and if, as alleged in plaintiffs’ petition, that company had been lawfully dissolved and. its charter had become defunct, prior to said purported amendments of the charter, then the Cattlemen’s Trust Company did not become either a de jure or a de facto corporation. In that event plaintiffs had the right to challenge the validity of said charter, especially if they were induced to purchase the stock by misrepresentations as to the validity of the charter under which defendant company was operating, as further alleged. Davis v. Allison, 189 S. W. 968, and authorities there cited; Clark v. Am. Co., 165 Ind. 213, 73 N. E. 1083, 112 Am. St. Rep. 217; Huber v. Martin, 127 Wis. 412, 105 N. W. 1031, 1135, 3 L. R. A. (N. S.) 653, 115 Am. St. Rep. 1023, 7 Ann. Cas. 400; W. U. Telegraph Co. v. M. A. L. Co., 31 Okl. 528, 122 Pac. 505, Ann. Cas. 1914C, 1244. The other issues go to the merits of plaintiffs’ case, and any determination thereof could not 'be binding upon the Cattlemen’s Trust Company, or any of the other defendants who have not been served with citation, and who have not had their day in court.

For the reasons indicated, the judgment is reversed, and the cause remanded.

On Motion for Rehearing.

Appellees invoke the familiar rule announced in numerous authorities that all presumptions consistent with the record will be indulged to sustain the judgment of the trial court, and that in order to- secure a reversal the burden is upon the complainant to show some error in the judgment. Some of the authorities cited are Lindly v. Lindly, 102 Tex. 135, 113 S. W. 750; Ferguson v. Cochran, 45 S. W. 30; 4 C. J. 731. They insist that, under that rule and in view of our ruling upon original hearing, that the relief prayed for by plaintiffs could not have been granted for lack of proper service of citation, the judgment of the trial court dismissing the cause should have been affirmed rather than reversed, since it does not appear that plaintiffs moved for further time within which to serve defendants.

The record fails to show that at the time said judgment was rendered, plaintiffs applied to the court for a postponement of the case in order that they might' procure further service of process against the defendants, and in the absence of such showing the question is presented whether or not they are in position to ask that the judgment be reversed, and the cause remanded for another trial.

The judgment of the court from which the appeal was prosecuted specifically recites that the court having heard the plea in abatement, together with the evidence adduced thereon, concluded that the plea should be “in all things sustained.” It further- appears that the dismissal of the suit was predicated upon that conclusion. As noted in the original opinion, one of the grounds urged by appellees in abatement of the suit was that the Cattlemen’s Trust Company was a de jure corporation duly incorporated under the laws of the state of Texas. Another ground was that if it was not a de jure corporation, it was, at least, a de facto corporation. If either of those propositions was true, it would not only abate plaintiffs’ cause of action, but it would be a complete bar to any relief prayed for in plaintiffs’ petition; and such being the court’s ruling, it would have been entirely useless for plaintiffs to have asked for a postponement of the trial in order to allow them to get additional service of process, for it is altogether unreasonable to suppose that the court would have postponed the case in order to get additional service of process on a petition upon which, in the court’s opinion, no recovery could be had of any character. In Bigham Bros. v. Port Arthur Channel & Dock Co., 100 Tex. 192, 97 S. W. 686, 13 L. R. A. (N. S.) 656, the judgment of the trial court was reversed and the cause remanded because the general demurrer to plaintiff’s petition was improperly sustained. The trial court had also sustained special exceptions to the plaintiff’s petition, and plaintiff had not asked leave to amend to meet those exceptions. In disposing of tire case, our Supreme Court used the following language:

“Counsel for defendant in error insists that, although the court may have erred in sustaining the general demurrer, yet th.e judgment should not be reversed for that reason because some of the special exceptions were properly sustained and the plaintiffs did not amend their petition. The correct rule of practice is thus stated by Chief Justice Willie in the ease of Everett v. Henry, 67 Tex. 405 [3 S. W. 567]: ‘We think the petition showed a good cause of action against Henry, and that his general demurrer should not have been sustained. This renders it unimportant whether the special exceptions of the same defendant should have been sustained or overruled. If they were well taken, it would not have served any good purpose to amend the petition to meet the objections raised; for the court, having held the petition bad on general demurrer, would necessarily have dismissed it, though every special demurrer had been met and its force destroyed by. a proper amendment.’ That learned Chief Justice stated the same proposition even more tersely and forcibly in these words in Porter v. Burkett, 65 Tex. 383: ‘What does it avail a plaintiff to fortify his petition against a special exception, when the court, in effect, holds that if he does so it is still bad on general demurrer? There can be no use in amending a petition in one particular, when, after amendment, it shows upon its face no cause of action.’ ” ,

See, also, Brown v. Davis, 178 S. W. 842, which is to the same effect.

In other words, the rule announced in those decisions was that if it reasonably appears that, even though the petition had been amended to meet valid special exceptions addressed thereto and sustained by the court, nevertheless the court would have dismissed plaintiff’s suit because of the further ruling that the" general demurrer to the petition should be sustained, then in order to secure a reversal of the judgment and a remand of the cause for a new trial, it was not necessary for plaintiff to show that but for such ruling on the general demurrer, he would have amended the petition to cure the defects pointed out by such special exceptions.

While those decisions related to special exceptions, we can perceive no reason why that fact would preclude the application of the principle there announced to the present suit, with the same force and effect.

Appellees’ motion for rehearing is overruled.

CONNER, O. J., not sitting, serving on writ of error committee at Austin.
      <g=>For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes


source: Caselaw Access Project

author: HUFF, C. J.

license: Public Domain

text:
    NATIONAL UNION FIRE INS. CO. v. PATRICK.
    (No. 1251.)
    (Court of Civil Appeals of Texas. Amarillo.
    Nov. 21, 1917.)
    1. Appeal and Ebror <g=>719(8) — Assignments op Error — Fundamental Error.
    In an action on a policy insuring against damage to a cotton crop by hail, the error in rendering judgment for plaintiff, unsupported by the evidence, in that it was .uncontroverted that the policy was not issued or effective until' after the loss and had not been reformed, was fundamental, so that objections to the assignments of error were immaterial.

      2. Evidence <§=441(13) — Parol Evidence to Vary Writing — Insurance Policy.
    Where plaintiff applied for hail insurance, the application stating that the insurance was to be effective from the day the application was accepted and approved at the insurer’s state agency, and the written policy stating that it was effective from noon of the day of its date, June 27th, the policy was conclusive evidence of the contract, unless impeached by fraud or mistake, though the state agent could have accepted the application when wired into his office, and though the insurance was applied for with the understanding that it was to be effective 24 hours after the application should be wired to the agency. ⅝
    3. Insurance «§=>130(2) — Application—Necessity of Acceptance — “Contract of Insurance.”
    A mere application for insurance is not a •contract of insurance, but when made out and forwarded to the insurer is only a proposition ■on the part of the applicant which must be accepted by the proposed insurer before it can become a contract of insurance.
    [Ed. Note. — For other definitions, see Words and Phrases, First and Second Series, Contract ■of Insurance.]
    4. Insurance <§=>92 — Authority of Agents —Evidence.
    In an action on a policy insuring against damage from hail, evidence held sufficient to authorize a finding that the insurer’s soliciting agent had authority to contract with the applicant that the insurance should be effective 24 hours after being wired to the insurer’s state •agency.
    5. Insurance <§=>130(1) — Application—Partial Acceptance.
    Where an application for insurance stating that it was to be effective from the day the application was accepted and approved by the insurer’s state agency was accepted by the insurer’s soliciting agent under the agreement or understanding that the insurance should be effective 24 hours after the application was wired to the state agency, the insurer could not accept the application and reject this condition, but if it did not wish to accept the application on such condition because of the threatening weather, should have rejected the entire application.
    6. Evidence <§=>441(13) — Parol Evidence to Yary Writing — Contracts of Insurance.
    Where an insurer’s state agency had expressly authorized soliciting agents to wire in applications, liability to begin 24 hours thereafter, •evidence that an application was accepted by the soliciting agent under the agreement or understanding that it would be effective 24 hours after being so wired did not contradict the application asking for insurance from the day the application was accepted and approved at the state office.
    7. Insurance <§=>665(2) — Commencement of Risk — Evidence.
    In an action on an insurance policy, evidence held to warrant a finding that the insurance was solicited and obtained on the authority given the soliciting agent by the insurer’s •state agent to wire in applications, liability to commence • 24 hours thereafter, and that there was an agreement to this effect based on such authority.
    '8. Insurance <§=>143(6) — Reformation of Policy — Grounds—Fraud or Mutual Mistake.
    Though, where an insurance application was accepted by a soliciting agent with the understanding that it would be wired to the insurer’s •state agency, and that the insurance should be effective 24 hours later, the state agent could ■not accept the application and postdate the contract, but if unwilling to accept it was bound to reject it in toto, the policy as issued , commencing the insurance more than 24 hours after the application was wired in could not be corrected except for fraud or mutual mistake, since as issued it evidenced that the proposition made was not assented to, and that no agreement was ever reached.
    9. Reformation of Instruments <§=.30 — Form of Remedy — Necessity of Independent Suit.
    It was not necessary to bring an independent suit to reform the contract, but if properly alleged and proved, recovery could be had on the contract as it should have been.
    Appeal from Motley County. Court; A. B. Crane, Judge.
    Action by J. K. Patrick against the National Union Fire Insurance Company. From a judgment for plaintiff, defendant appeals.
    Reversed and remanded.
    Dedmon, Potter & Pinney and H. A. Turner, all of Ft. Worth, for appellant. Bouldin & Surles, of Matador, for appellee.
   HUFF, C. J.

J. K. Patrick, appellee, instituted suit against appellant insurance company, and by his first amended original petition alleges substantially that on June 24, 1916, appellant insurance company entered into a contract with appellee to insure, and did insure, 25 acres of cotton against damage by hail; that on the above date the insurance company presented an instrument termed by the company an application for insurance, which was executed by the parties, wherein the company agreed to issue a policy of insurance on the cotton; that at the time the contract was entered into ap-pellee, through its agent, agreed to wire the application in to the office at Ft. Worth on that day, and that the insurance should go into effect immediately after it was wired into the office at Ft. Worth, and that the insurance would be. in full force and effect on the cotton for $500 from the 24th day of June, 1916, until the 1st day of October, 1916; that he verily believes that the agent did wire the application into appellant’s office at Ft. Worth, as he agreed to do, and he alleges that a policy was issued for the full amount of $500, and delivered to him, “a copy of which is attached to plaintiff’s original petition filed herein and marked Exhibit A, to which reference is here especially made for the contents of said policy and its agreements and covenants therein set out; that the defendant, instead of dating said policy on the 24th day of June, 1916, as it agreed to do, dated said policy on the 27th day of June, 1916”; that the application was in the possession of the company, and for that reason its contents could not be given; The company was notified to produce it in court at the trial, or secondary evidence would be offered. It was further alleged that the cotton was destroyed by hail June 26, 1916, asking for the face of the policy and interest. We will not set out the other pleadings In this casé, as they will not in any way affect the ■ conclusion we have reached.

The case was tried before the trial court without a jury. The facts may be stated generally that appellant had a general agency at Ft. Worth, Tex., K. T. Martin & Co., whose authority yvas to accept or reject applications for insurance and to issue policies therefor. Martin testified he received the application June 27, 1916, and that it was on that day that he issued it and mailed the same to the appellee. The ¡policy, as testified to by the parties and as pleaded by all of them, shows that it was issued on the 27th of June; and that it was effective from 12 o’clock noon of that day. The appellee, or the appellant, did not offer the policy in evidence, but without objection all the witnesses treat it as of that date, and being effective as insurance from that time; and both parties in effect pleaded such was the effect of the policy. We shall therefore consider the policy on that issue as properly before the court; The cotton insured was destroyed June 26, 1916, in the afternoon about 4 o’clock, the day before the policy was issued or dated. On the 24th day of June, 1916, Oscar Vinson took Patrick’s application for the insurance, and he testified:

“I remember taking the application of the plaintiff, J. K. Patrick, on the 24th day of June, 1916, at Flomot, in Motley county. He was living on the E. A. Preston farm. The amount of insurance was $500, and the policy was taken to cover at the rate of $20 per acre. I took Mr. Patrick’s application up to Lockney to be wired in that night, and I told Mr. Patrick that I would wire it in myself, and as I 'understood it it would take effect 24 hours after being wired into the office at Ft. Worth. I got this understanding from Meriwether Bros., and from a letter shown me by them. The letter you show me is' the letter written Meriwether Bros., which I read: ‘National Fire Insurance Co. of Pittsburg, Pa. K. T. Martin & Co., State Agents, Hail Department. Ft. Worth, Texas, June 17, 1917 [1916?]. Messrs. Meriwether Brothers, Lockney, Texas — Gentlemen: I have had instructions from the company not to bind any more application by wire immediately upon receipt of the wire, however, I will put the application into effect in 24 hours‘after I receive a wire, if that will be any advantage to you. In most of the territory the agent can mail an application in the evening, and it reaches our office the next morning, at which time the insurance goes into effect, but of course you are out on a branch road and it takes the mail longer to get from Lockney to Ft. Worth than it would ordinarily any place else. Thanking you very much for the business that you have given us, I beg to remain, Yours very truly, [Signed] K. T. Martin, State Agts.’ ”

Vinson wrote hail insurance for appellant company, and testified he had authority only from Meriwether Bros., of Lockney, Tex., who are local agents at that place, for appellant. Robt.. L. Forrest, an adjuster for appellant, during the year 1916 was in Meri-wether Bros.’ office at Lockney June 24, 1916. In his testimony he states that Meri-wether Bros, made report of the applications received that day,, among which was appel-lee’s application. This report was made by letter of that date. Their office was in Lock-ney, Floyd county. This witness further testified:

That he phoned in to Martin & Co. at Ft. Worth the application of Patrick and one Cain, from Plainview, on the 24th day of June, 1916, after he reached that place from Lockney. That he was in, the office of Meriwether Bros., and in discussing other matters with them made mention that he was going to communicate with the Ft. AVorth office by phone, when they informed him they had some applications which they were preparing to wire in, and asked if he would not save them the'expense, “and when I phoned Mr. Martin to also phone the letter Which they had then prepared, showing the name and amount in each policy, number of acres covered, and where located. This I agreed to do, but stated at the time to Geo. T. Meriwether, of the firm of Meriwether Bros., that on account of weather conditions which then existed I would recommend to the office that no policies be issued until the application reached the office, because it then looked like it might hail at any minute. On reaching Plainview that night, I communicated with Mr. Martin over telephone -concerning the various items of business, and did read to him the message given to me by Geo. T. Meriwether, of Meriwether Bros., and also told him the clouds were hanging low, and it looked as if it might hail any minute, and that I thought it -would be very improper to bind any policy until such time as the applications could reach the office and be approved in the usual manner. Mr. Martin stated to me that he would not bind any application until they were received at the office in Ft. Worth in the usual way.’’

F. T. Day, of Waseca, Minn., testified that his business was writing hail insurance, managing agents, writing insurance, and general manager of the hail department if appellant during the year 1916. He was permitted to testify, without objection:

“The date of the policy issued to the plaintiff in this case is June 27, A. D. 1916, and under its terms became effective at 12 o’clock noon on that date. The language of the application inquired about in this interrogatory is as follows: T, J. K. Patrick, of Flomot, O. O., R. F. 'D. -, county of Motley, state of Texas, hereby make application for insurance upon growing cotton against damage by hail, only, for the season of 1916, to the amount of $500.00, from the day this application is accepted and approved at the state office of the hail department of the 'National Union Fire Insurance Company, at Ft. Worth, Texas, at 12 o’clock noon, standard time until October 1, 1916, standard time, where property is located, and in no event shall the company be liable after the insured’s cotton is picked on the following described property.’ Then follows a description of, the property and other provisions in reference to the insurance, not material here.”

The appellee testified:

_ “At the time I gave Mr. Vinson the application he told me he would have it wired in, and as he understood it it would take effect 24 hours after being wired into the office at Ft. Worth.”

Assignments 1, 2, and S all assail the judgment of the court because the evidence does not support it. (1) That it appears from the pleadings that the policy to be valid must first be countersigned by the agent of the company at Ft. Worth, Tex., and that it was not signed until Juné 27, 1916. (2) The evidence is uncontroverted that ■ there was no contract of insurance prior to the loss. (3) That the application was made June 24th, crop destroyed June 26th, and the policy issued June 27th, effective from that date until October 1, 1916. (4) And there was no

effort to reform the policy, and the suit was filed as upon the written policy, and the judgment should therefore have been rendered for appellant.

The appellee makes' certain objections to the assignments, which, if they are good, would not affect the disposition of this appeal for the reason that if the errors complained of should be sustained they are fundamental. The general proposition may be true, as stated by appellee, that an oral contract of insurance will bind the insurer, but appellee did not declare on an oral contract of insurance. He shows that he made an application for insurance, which the soliciting agent took, and which was forwarded to the company’s general agent at Ft. Worth, who was authorized to issue the policy, and who did issue it as of date June 27, 1916. This policy, according to all the evidence, was effective from 12 o’clock noon of that date. This was in, writing, and it is conclusive evidence of the contract, unless impeached by fraud or mistake. The cotton insured was destroyed about 4 o’clock on tho afternoon of June 26th, a day before the insurance vwas effective. Hence, under the policy, no liability was shown. The mere application for insurance is not a contract of insurance. When the application is made out and, forwarded it has only attained to the dignity of a proposition on the part of the applicant, which must be accepted by the proposed insurer before it can become a contract of insurance. Merchants’ & Bankers’ etc., v. Parker, 190 S. W. 525, and authorities therein cited; Insurance Co. v. Rudolph, 45 Tex. 457; German Insurance Co. v. Daniels, 33 S. W. 549; Coker v. Atlas, etc., 31 S. W. 703; Insurance Co. v. Young, 23 Wall. 85, 23 L. Ed. 152; Dorman v. Insurance Co., 41 Okl. 509, 139 Pac. 262, 51 L. R. A. (N. S.) 873. There is no evidence that the insurance applied for should be effective from the date of the application. It is uncontradicted that the insurance was only effective from the day of acceptance by the Martin Company at Ft. Worth. All that may be said is that the general agent could have accepted when the application should be wired in, and that upon such agreement the appellee applied for the insurance, effective 24 hours after the application should be wired to the agency. The contract alleged and proven, and as executed, does not show it was so accepted, but on the contrary shows it was consummated on the 27th of June, and effective from 12 o’clock noon of that day.

However, the facts in this case under proper pleadings might have authorized the finding that the soliciting agent had authority to contract with the applicant that the insurance should be effective 24 hours after having been wired to the agent at Ft. Worth, and if the application was accepted under such agreement or understanding the company might be estopped from denying such a contract. Amarillo National Life Ins. Co. v. Brown, 166 S. W. 658. If when the application was phoned to the agent he then accepted the application he probably did so with the understanding that it was effective 24 hours thereafter. He could not make a contract of insurance by accepting part of the proposition and rejecting a part, but he should have rejected it as a whole, if he did not agree to the proposition. He could not for his company accept that which was beneficial to it and reject that which he considered an extra burden, but he must abide by the entire contract completed upon acceptance. If he did not wish to accept the application as made, with storm clouds hanging low, threatening hail, he should have rejected the entire ap-1 plication. The company ought not be permitted to retain the premium which was paid for a period of time for which it was applied without also being liable for the loss occurring during that time. Taber v. Eyler, 162 S. W. 490.

It should be noted that this evidence would not contradict the application to the effect that the policy is effective from the day the application is accepted by the agency at Ft. Worth. The agency at Ft. Worth, according to their letter, had expressly authorized the soliciting agents to wire in applications because of their situation as to mail facilities, and that liability should begin 24 hours thereafter. The evidence might warrant the finding that this insurance was solicited and obtained on such authority and an agreement based thereon. If it was part of the contract, and so accepted, it should be enforced. The time was fixed for the commencement of liability, and the agent could not, after so accepting, postdate the contract; but, if he was unwilling to accept the contract, he should have rejected it in toto. What is here said is subject to the fundamental rule that there must be a mutual assent in order to make a contract of insurance. Hence, as the pleadings now stand, even if the soliciting agent procured the application upon the authority and agreement testified to the policy as issued evidences that the proposition as made was not assented to. In order to impeach a contract in writing or supply an omission or correct a recital to make it speak the agreement of the parties it is necessary to allege either fraud or mutual mistake in executing the contract. In this case it is simply alleged that it was the understanding when appellee made the application that the policy when issued should be effective from the date of the application. The evidence offered on this point is that it ■should be effective 24 hours after the application should be wired to the agency. In other words, there is no allegation of facts constituting either mutual mistake or fraud in making the contract, or in issuing the policy, and such fact should be affirmatively so alleged in order to introduce all the agreement or to import into the contract the omitted provisions therefrom. Parker v. Allen, 33 Tex. Civ. App. 206, 76 S. W. 74; Dalton v. Dalton, 143 S. W. 241. As alleged, in effect it is asserted no agreement was ever reached. In order to set up the contract as made, that is, to protect the property from 24 hours after the application should be wired to the agency, it was necessary to allege and prove the policy omitted that term, and that it was fraudulently so omitted or fraudulently postdated, or that the same was done by the mutual mistake of the parties. But it was not necessary to bring an independent suit to reform the contract, but if properly alleged and proven in this case recovery could be had on the contract as it should have been. Insurance Co. v. Brannon, 99 Tex. 391, 89 S. W. 1057, 2 L. R. A. (N. S.) 548, 13 Ann. Cas. 1020; Alfalfa Lumber Co. v. Mudgett et al., No. 1243, this day handed down, 199 S. W. 387.

Eor the reasons above given, the judgment of the lower court is- reversed, and the cause remauded.
      <fcs>For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

       <SS=>For other eases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes


author: CONNER, C. J.

text:
    MERRIAM & MILLARD CO. v. COLE.
    (No. 8713.)
    (Court of Civil Appeals of Texas. Ft. Worth.
    Oct. 13, 1917.
    Rehearing Denied Nov. 17, 1917.)
    1. Gamins <®=»12 — Contract for Future Delivery — Intent—-Validity.
    A contract for the sale of goods to be delivered at a future date is valid, even though the seller has not the goods nor any other means of getting them than to go into the market and buy them, provided the parties really intend and agree that the goods are to be delivered by the seller and the price is to be paid by the buyer; though if the real intent is to speculate and the goods are not to be delivered, but the parties are to settle according to the difference between the contract price and the market price at the •date fixed for executing the contract, the contract is invalid.
    2. Gamins <©=>'50(1) — .Sale for Future Delivery-Action eor Price — Evidence—Directed Verdict.
    In a suit to recover a balance due under a written contract for the purchase of oats, providing for the deposit of a margin, and for an option to declare the contract at an end, where it appeared that the seller had the oats in an elevator, and that the parties contemplated a delivery, and not a settlement based upon the ■difference between the contract price and the market price at the time fixed for delivery or a gambling contract or a dealing in futures, the plaintiff was entitled to a verdict.
    3. Commerce @=>40(1) — “Interstate Commerce” — Dealing in Futures — State Statute.
    A written contract for the purchase of grain by defendant, a resident of Texas, from a company doing business in Nebraska, contemplating the interstate transportation and delivery of the grain, was within the rules applicable to interstate commerce; so that Pen. Code 1911, art. 539, inhibiting dealings in futures without a bona fide intent of the parties to deliver the goods, did not apply.
    [Ed. Note. — For other definitions, see Words and Phrases, First and Second Series, Interstate Commerce.]
    4. Commerce <©=>80 — Foreign Corporations —Interstate Commerce.
    The laws of the state of Texas authorizing a foreign corporation to transact business or to maintain a suit therein by obtaining a permit to do so have no application to cases where the corporation’s business constitutes interstate commerce.
    Appeal from District Court, Denton County ; C. F. Spencer, Judge.
    Suit by the Merriam & Millard Company against T. A. Cole. Judgment for defendant, and plaintiff appeals.
    Reversed, and judgment rendered for plaintiff.
    Geo. M. Plopkins, of Denton, for appellant. Sullivan & Hill and Luther Hoffman, all of Denton, for appellee.
   CONNER, C. J.

The appellant company instituted this suit against appellee to recover a balance of $828.54 alleged to be due under a written contract dated on the 4th day of September, 1913. By the terms of the contract, which will be later set out, appellee purchased from the appellant 15,000 bushels of No. 3 white oats at the contract price of 55½ cents per bushel for December shipment, basis Texas group 1, with the option of carrying after December 31, 1913, at a quarter of a cent per bushel for each 10 days, until May 1, 1914. Appellant alleged that it was a corporation duly incorporated under the laws of the state of Nebraska, with office and place of business in the city of Omaha, Neb., engaged in interstate commerce and carrying on such interstate commerce in the state of Texas and other states, buying and selling grain from its office in Omaha, Neb., to parties residing in other states of the Union, including the state of Texas, making contracts for the sale of corn, wheat, oats, and other grain, and delivering such grain under such contracts into the state of Texas and other states from its elevators at Omaha, Neb., as interstate commerce. The appellee answered by general denial and a special answer, alleging that the appellant was a' foreign corporation not authorized to transact business or maintain suit in the state of Texas, in that it had not secured a permit under our laws to do so, and further that the contract of sale sued upon was a gambling contract and did not constitute interstate commerce. The case was tried before a jury upon special issues, which were so answered as to sustain the special defenses urged by appellee, whereupon the court entered judgment in appellee’s favor, from which judgment this appeal has been prosecuted.

A number of questions are presented which, in view of the conclusion reached by us, need not he noticed. The controlling question, as we view the case, is presented by appellant’s fourth assignment urging error to the action of the court in refusing to give a peremptory instruction to find for the plaintiff in the suit, as was duly requested in writing. We are of opinion that this assignment must he sustained.

The contract upon which appellant based its suit is as follows:

“Omaha Grain Exchange Official Contract.
“Merriam & Millard Company,
Grain Merchants. •
“No. -. Omaha, Sept. 4th, 1913.
“T. A. Cole, Frisco, Texas:
“We herewith confirm sale to you: Quantity -cars ■ — -- 15,000 bushels. Grade, No. 3 white oats. Price, 55½⅜ per bushel of 32 pounds. Basis, Texas group 1. Time of shipment: December shipment, buyer’s option. Routing: -. Remarks: Privilege of carrying after December 31st at a quarter of a cent for each ten days to May 1st.
“Omaha Grain Exchange weights and grades to govern.
“Payment by demand draft with documents attached.
“It shall be the duty of the buyer to furnish shipping directions immediately or upon request of the seller, and if the buyer fails to furnish directions, in accordance with this agreement, the seller reserves the right, without further notice to' the buyer, to cancel the contract, charging loss, if any, to the buyer, or to sell same for the buyer’s account.
“This transaction is made under the rules, regulations and customs of the Omaha Grain Exchange of the City of Omaha. Any claims or differences to be settled under rules and regulations of the Omaha Grain Exchange of the City of Omaha in Omaha.-
“Shipping terms are defined by the Omaha Grain Exchange as follows:
“Three days shipment shall mean within three calendar days at place of shipment.
“Five days shipment shall mean within five calendar days at place of shipment.
“Ten days shipment shall mean within ten calendar days at place of shipment.
“Excluding the date of sale, time of shipment shall be figured from date full shipping directions are received at Omaha.
“Sale or purchase of grain for which shipment or delivery may extend beyond ten (10) days from date of contract, to be subject to the ‘Rules Governing Gash Margin Calls’ as printed on back hereof.
“Manifest errors excepted.
“Merriam & Millard Co., Per -.
“Rules Governing Cash Margin Calls.
“Regulation 16. On purchase or sale of grain, feeds, or seeds, for which shipment or delivery extends beyond ten (10) days from date of contract, said contract shall state that either buyer or seller may call for margins to the market, and release such margins to the market until final adjustment has been made; and all such contracts shall contain the following:
“First. It is agreed that either party to this contract may call for a marginal deposit to the market, same to be released when market justifies. In cases wherein more than one contract has been made, deposit call arid subsequent calls for the releasing of same shall not exceed the net aggregate difference owing by one party to the other on all contracts open and amenable to this rule.
“Second. Said margin when called by a resident member of the Omaha Grain Exchange shall be deposited with the secretary of the Omaha Grain Exchange and shall be subject to the rules of the Omaha Grain Exchange governing the depositing and releasing of margins. Nonresidents may deposit with the secretary of the Omaha Grain Exchange or in any banking institution properly designated as a depository for margins. Margins must be deposited within' twenty-four (24) hours as herein provided; legal holidays in either buyer’s or seller’s place of business shall not be counted. Nonresidents of Omaha, Neb., may remit by telegraphic transfer or by mail remittance if preceded by telegraphic notification from (his or their) local bank that such remittance has been made.
“Third. Party making marginal deposit must advise the secretary of the Omaha Grain Exchange immediately, giving name of party for whose protection the deposit is made.
“Fourth. In case marginal deposit call to the market is not deposited and official notice of same is not received within twenty-four (24) hours, as hereinbefore provided, the party thus calling shall have the privilege to cancel all contracts covered by such margin call at the general market value, or to resell or rebuy at his or their option, under prompt telegraphic advice, charging difference or loss to the defaulting party, said amount to be due and payable at once.
“Fifth. All margins shall be immediately released upon faithful performance of the contract.
“Sixth. Where contracts for future delivery of grain include a carrying charge, such carrying charge must be paid and collected at the expiration of each thirty day period.
“Seventh. A committee of three shall be appointed by the president, to whom all disputes as to a proper marginal price, or any other feature connected with cash margins, shall be referred.
“Omaha banking institutions authorized by the board of directors as depositories for. margins: Omaha National Bank. United States National Bank. First. National Bank. City National Bank. Merchants’ National Bank. Corn Exchange National Bank. Nebraska National Bank.”

The contract was indorsed on its face, “Accepted,” and signed by the appellee, T. A. Cole.

Appellee, among other things, testified:

“How I happened to enter into this contract, 1 never gave it a thought and didn’t know anything about it. * * * I Was working over at Frisco in a house that I owned, and about 2 o’clock, on the 1st of September, Mr. Shrader came in where I was at work, and he said, ‘Cole,, don’t you want to make some money?’ and I said, ‘Certainly, I would like to make some money.’ and he said, T can put you onto something where we can make some money.’ He told me he had an oat deal, and I told him that I didn’t know anything about it, and I said: T will just trust it to you ; you have been handling grain here.’ And he said: ‘Now, Cole, I will handle this deal for you, and you will never have to touch an oat; you will just be buying it like you were buying spot cotton, but you will never have to touch an oat.’ He told me that I would have to put up $300 on 15,000 bushels, and he said, u will phone it in to Galbraith,’ and' as I started home that evening I gave him a. cheek for $300, and in a day or two these papers came back, and they were signed up, and I never even read the contract, because I was looking to Shrader to handle that for me. I never paid any attention to the matter, so I got a letter then from Merriam & Millard, stating that they wanted a margin, and X went and called Fount up then, and I said: ‘Fount, this here thing looks rocky to me. I don’t know anything about it, and it looks rocky to me.’ And he said: T would have nerve, Oole; I would stay with it.’ I said, ‘I went into it on your statement, and if you think there is a chance for me not to lose out, I will just take your advice,’ and I put up $400 or $450 more and it rocked along. Now, I had bought a lot of cotton from my renters, and it laid out in the rain, and I was in hard shape, and I went to Fount and said, ‘Fount, I want you to get me out of this, I want to get out of it,’ and he said, ‘I will do all I can for you,’ and I went down to see Mr. Galbraith and told him that X- wanted to get out of it, and he said, ‘I will take the matter up, but I haven’t got a thing in the world to do with it,’ and then I just set down and wrote those fellows that I had 'turned this matter over to Sullivan & Hill. * * *
“If Shrader hadn’t told me that I wouldn’t have to handle an oat, I wouldn’t have made the deal. I went into this deal because Shrader came to me, and I thought he was a friend of mine and it was going to make me some money and that I need not to be bothered with it. It wasn’t my intention to have one actual oat shipped to me, because I didn’t have any place for oats. I wasn’t in the grain business or milling business. I am a farmer by occupation; am a farmer now, and was then. * * *
“Mr. Shrader and I didn’t buy the oats together ; Shrader didn’t have anything to do with the oáts. I didn’t buy any oats with Shrader; I think Mr. Shrader bought some oats before— when he came in he said, ‘I will put you onto a deal where you can make some money,’ and he told me that he had bought some of them, and I said, ‘If you think I can make some money, I will take some.’ I don’t know whether or not it looked like at that time oats were going up; I wasn’t posted on the market, but Shrader said he thought they were going up. As to whether _ it didn’t look like the cotton market was going up, too, at that time, will say I don’t remember about the cotton, whether it looked like it was going up or not. It is true I was buying some cotton that year and was holding it. It is true I bought some oats, too; the only oats I bought, however, was on this deal here, the oats I bought from Merriam & Millard Company.
“As to whether it is not a fact that if the price of oats had gone up I would have expected those people to deliver the oats to me, will say I didn’t want the oats; I was dealing for the profit in the oats; I didn’t want any oats, because I had no place for that many' oats. Fount Shrader told me that I wouldn’t have to handle tho oats; he said, ‘I will handle the deal for you.’ As to whether it is not a fact that I expected to make a profit, will say that is why I went into it; he- said I could make some money. I didn’t want the oats. It is true that Merriam & Millard Company didn’t mention anything about not delivering the oats in the contract. * * ⅜ ”

Beside several letters which passed between the parties, all of the other testimony was by deposition on the part of witnesses who testified in behalf of appellants. Various officers and employSs of the appellant company testified by deposition, as stated, to the effect that the appellant company was engaged in the business of buying and selling grain for cash at Omaha, Neb., and had been so engaged since the organization of the company in 1910 or 1911; that the company operated a large terminal elevator at Omaha, buying, storing, and selling grain; that the contract hereinbefore set out had been mailed direct to T. A. Cole at Frisco, and was by him executed and returned to the company by mail; that T. A. Cole at no time furnished shipping instructions or accepted the oats under the contract prior to December 31, 1913; that the oats were held in storage for the account of Cole after December 31, 1913, until March 16, 1914, upon which date the Merriam & Millard Company received notice that T. A. Cole refused to have anything further to do with Ms contract; that the oats were thereupon sold by the Merriam & Millard Company for the account of T. A. Cole at the average price of 38 cents per bushel at Omaha; that the proceeds of the sale plus the margins placed by T. A. Cole with the secretary of the Omaha Grain Exchange, $750, plus $1,350 in adjustment of freight, was credited to the account of Cole, leaving a balance due from Cole to the appellant company under the terms of the contract in the amount for which the suit had been instituted.

The depositions were to the further effect that all of the appellant company’s business was transacted from its office in Omaha, Neb., that being the only office maintained by the company; that the company did not transact and does not transact business in the state of Texas, all transactions with Texas firms being conducted from the Omaha office; that the company does not deal in futures nor are its contracts gotten up for the purpose of concealing the real intent of the parties; that from September 4, 1913, to December 31,1913, they actually had on hand in their elevator at Omaha from 265,700 bushels to 313,000 bushels of No. 3 white oats; that on December 31, 1913, the company had in said elevator 245,000 bushels, and at all times later could, and would, have filled appellee’s contract and shipped him the number of bushels of oats as therein called for had appellee given them shipping orders that would have ' enabled them to so deliver; that such was the intention of the company and the only reason no such delivery was made was that the company never received instructions from Cole as to when or where he wished the oats shipped, as provided in the written contract, and. that the time had not expired on hisi contract when he notified the company that he would not fulfill his part of it and accept the oats at the contract price; that under the rules of the Omaha Grain Exchange each party to the contract under consideration was required to and did deposit with the secretary of the Omaha Grain Exchange $750, which covered the deposit to be made under the contract up until the time Cole repudiated it. The depositions further disclosed that, in addition to the contract with appellee, the appellant company was also under contract for the delivery of No. 3 white oats to at number oí oilier Texas persons and firms in Houston, Ft. Worth, El Paso, Frisco, Sherman, Dallas, Marshall, Greenville, Corsicana, and San Antonio, aggregating 303,750 bushels, at which time the company had on hand in its elevator at Omaha approximately 375,000 bushels of No. 3 white oats.

It was further shown by the depositions that the appellant company daily sent quotations of prices on grain by telegraph to various parties at different places in Texas; that these persons repeated the quotations to such other persons as might desire to purchase grain, and, if such persons indicated a desire to purchase grain at prices quoted, the company was notified by telegraph to that effect; the’company thereupon sent by mail to each of such proposed purchasers duplicate copies of a contract, stating the terms of sale, with instructions to sign one of said copies and return to the company at its office in Omaha, Neb.; that it had no representative in Texas with any other or further power than to give such quotations. Neither “Fount Shrader” nor “Galbraith” mentioned in appellee’s testimony was called to testify.

We find nothing on the face of the contract itself nor in the evidence which authorizes the conclusion that the transaction under consideration was a gambling transaction.

“The generally accepted doctrine in this country is, as stated by Mr. Benjamin, that a contract for the sale of goods to be delivered at a future day is valid, even though the seller has not the goods, nor any other means of getting them than to go into the market and buy them; but such a contract is only valid when the parties really intend and agree that the goods are to be delivered by the seller and the price to be paid by the buyer; and if, under guise of such a contract, the real intent be merely to speculate, in the rise or fall of prices, and the goods are not to be delivered, but one party is to pay the' other the difference between the contract price and the market price of the goods at the date fixed for executing the contract, then the whole transaction constitutes nothing more than a wager and is null and void.” Irwin v. Williar, 110 U. S. 499, 4 Sup. Ct. 160, 28 L. Ed. 225.,

S%e, also, Clews v. Jamieson, 182 U. S. 461, 21 Sup. Ct. 845, 45 L. Ed. 1196. In the case last cited and on the same page of the law edition referred to, it was further said:

“As a sale for future delivery is not on its face void, but is a perfectly legal and valid contract, it must be shown by him who attacks it that it was not intended to deliver the article sold, and that nothing but the difference between the contract and the market price was to be paid by the parties to the contract. And the fact that at the time of making a contract for future delivery the party binding himself to sell has not the goods in his possession and has no means of obtaining them for delivery, otherwise than by purchasing them after the contract is made, does not invalidate the- contract.”

It was there also said:

“In order to invalidate a contract as a wagering one, both parties must intend that instead of the delivery of the article there shall be a mere payment of the difference between the contract and the market price.”

The law as stated in the quotations made seems abundantly supported by other authorities. See 2 Elliott on Contracts, § 995; 6 B. C. L. § 188; Burr v. Davis, 27 S. W. 589.

The contract declared upon, as it seems to us, is easily distinguishable from that class of contracts commonly understood as gambling contracts in futures. It is undisputed that the appellant company was actually engaged in the sale and delivery of actual grain at the time owned and held by them in their own elevators; that they sold such grain to numerous persons not only in Texas, but in other states. It is scarcely to be doubted that, had the fluctuations of the market been in favor of the appellee, he could have legally demanded and enforced delivery of the 15,000 bushels of oats for which he contracted; or, in case of a refusal to deliver, had the remedies provided for him in the contract, including a right of action for damages. The fact that the contract provided for the deposit of “margins” does not invalidate it. See 2 Elliott on Contracts, §§ 1002, 1003, and eases cited in the notes. See, also, 6 B. C. L. § 189. Nor can it make any difference, as we think, that under the terms of the contract under certain circumstances the parties had the option to declare the contract at an end. The deposits of margins as shown by the testimony was with the secretary of the Omaha Grain Exchange, and so provided for the mutual protection of the parties to the contract against fluctuations in the market; and the fact that the plaintiff company under the rules, of the Grain Exchange and by the terms of the contract had the right, upon appellee’s refusal to increase his margin, or to pay storage fees, to declare the contract at an end and to sell the grain for the account of the appellee, does not establish the invalidity of the contract. Such provisions on their face seem in no way inconsistent with fair dealing, but, on the contrary, are entirely consistent with business prudence and legal procedure. The options given to declare the contract at an end were reciprocal ; that is, either party thereto' was given the right to so declare upon default of the opposite party.' Neither party was given the absolute right of cancellation at will, nor could either party force an exercise of the opposite party’s option. In other words, as before stated, on its face the contract seems valid, and nothing appears therefrom indicating a want of intention to actually deliver the grain contracted for at the time and under the circumstances specified in the contract. It is true, as appellee sought to do, it was competent to show by proof that neither. party contemplated an actual delivery of the grain, and appellee’s testimony was to the effect that he had no purpose of receiving the grain; but, as we have seen from tfte authorities cited, his intention and purpose alone are insufficient to invalidate the contract. It was essential that he should have established an intent on the part of the appellant company not to deliver the grain as it had contracted to do. Indeed, it is not very clear that appellee, himself, had an unlawful' intent. His testimony is susceptible of the construction that he merely trusted his friend, Fount Shrader, to “handle” the deal for him, which Fount Shrader could have satisfactorily done had prices advanced by an actual receipt and disposition of the grain at Frisco without any actual delivery to appellee. ■ At all events, there is nothing in the testimony that indicates that the appellant company, through its managing officers, or otherwise, had any notice of appel-lee’s expressed intent, even though such intent was in contravention of the public policy against gambling transactions. Appellee nowhere testifies that he notified Galbraith, or any other representative of the appellant company, of his expressed purpose, or that Fount Shrader gave any such notice.

Appellee insists, however, that- the transaction under consideration comes within the purview of article 539 of our Penal Code, inhibiting dealings in futures. That article ■forbids a sale or purchase of any cotton, grain, meat, lard, or stocks or bonds of any corporation, to be delivered in the future, •when it was not the bona fide intention of -the party being prosecuted at the time that such sale, contract, purchase, or offer to sell or purchase, was made, that the thing mentioned in such transaction should be delivered and iraid for as specified in the transaction, and further declares that:

' ■ “Any such sale, purchase, offer or contract, Where it was the intention of the party being prosecuted hereunder at the time of making such contract or offer, that the same should, or, at the option of either party, might be settled by paying or receiving a margin or profit on such contract.”

: It may be well doubted, at least, whether the transaction under consideration falls within the meaning of the article of the Penal Code invoked, for, assuming that the appellant company is the party prosecuted, there is nothing in the evidence, as we have already seen, indicating that it was not appellant’s bona fide intention to deliver the grain as it had contracted to do. Nor is there anything on the face of the contract or in the evidence, as we construe it, establishing the proposition that either appellant company or appellee had the option of settling the transaction by merely paying or receiving a margin or profit on such contract. True, margins were provided for in sums as stated, but nothing in the contract, or in the evidence, indicates that had there been some sudden and great fluctuation in the market price, either one way or the other, not sufficiently covered by the margins actually deposited, that the losing party would be relieved of. all liability by a mere surrender of the margin that had been deposited by him.

But whatever merit there may be in this view, we think the article of the Code quoted cannot be made to apply here for the reason that the transaction falls within the rules applicable to interstate commerce. If it does, it will not be contended that our local statute is operative, for in such cases- it is otherwise well settled in the authorities. But it is insisted in behalf of appellee that a distinction is to be made between the contract we have under consideration and interstate commerce. It is insisted that the oontrhct itself does not constitute interstate commerce. Viewed alone and disassociated from other circumstances in the case, the distinction is apparent and might be properly indulged. As we have observed before, however,, the contract under consideration contemplated the actual transportation and delivery of the subject-matter of the contract from the state of Nebraska to the state of Texas, and in this respect differs from that class of contracts for the purchase and sale of futures that may be settled by mere adjustment of margins.

In the case of Sioux Remedy Co. v. Cope, 235 U. S. 197, 35 Sup. Ct. 57, 59 L. Ed. 193, it was, among other things, said:

“The right [of a foreign corporation] to demand and enforce payment for goods sold in interstate commerce, if not a part of such commerce, is so directly connected with it and is so essential to its existence and continuance that the imposition of unreasonable conditions upon this, right must necessarily operate as a restraint or burden on interstate commerce.”

As it seems to us the principle embodied in the quotation has application here. It is true no grain under the terms of the contract was actually transported, hut the contract was a lawful one and very intimately connected with the subject of the interstate commerce contemplated and contracted for. Indeed, the contract is the very foundation of the appellant’s right of recovery in this case. Without contracts and guaranties between parties to such transactions, it would seem difficult and wholly impracticable to engage in interstate commerce at all. It is matter of common knowledge that a great volume of our interstate commerce is dependent upon the guaranties afforded by contracts for the sale and delivery of the merchandise transported. Had the grain specified in the contract under consideration been actually shipped and delivered at Frisco, as provided in the contract, it could hardly be contended, we think, that the transaction did not fall within the rules applicable to interstate commerce, and we do not think that appellee by a default on his part can constitute the transaction differently.

What we have said in disposing of ap-pellee’s contention that the transaction under consideration falls within the meaning of article 539 of the Penal Code sufficiently disposes of appellee’s further defense that the appellant company could not lawfully maintain this suit because of its failure, which was shown by the proof, to take out a permit to do business in this state, as provided by our laws relating to foreign corporations. These laws, as has been so frequently decided as not to require the citation of authorities, can have no application in cases of interstate commerce. Moreover, it may well be doubted whether the evidence is susceptible of the construction that the appellant company was doing business within this state within the meaning of the laws referred to.

On the whole, we conclude that the court should, under the undisputed evidence, have peremptorily instructed the jury to render a verdict for the appellant company, and, it being our duty to here render such judgment as the lower court should have rendered, it is ordered that the judgment below be reversed, and judgment here rendered for appellant as prayed for; there being no dispute in the evidence as to the amounts claimed.

Reversed and rendered.
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