author: REESE, J.

text:
    FIRST NAT. BANK OF SHREVEPORT v. CITY NAT. BANK.
    (No. 5600.)
    (Court of Civil Appeals of Texas. Galveston.
    March 8, 1911.
    Rehearing Denied June 11, 1914.)
    Appeal and Error (§ 877) — Persons Entitled to Allege Error.
    In an action against a bank for negligence in making a deposit, where the plaintiff did not set up any claim against a second bank impleaded by the defendant, plaintiff, who was defeated below, cannot complain that the court also found in favor of the impleaded bank.
    [Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. §§ 3560-3572; Dec. Dig. § 877.] •
    Appeal from Galveston County Court; Geo. E. Mann, Judge.
    Action by the First National Bank of Shreveport against the City National Bank of Galveston, which impleaded the Stockyards National Bank of Ft. Worth. From a judgment in justice court for plaintiff and for defendant over against the impleaded defendant, defendant appealed to the county court, and from a judgment there for defendant, plaintiff appeals.
    Affirmed.
    Questions determinative of the case were certified to the Supreme Court, which answered them in favor of the affirmance.
    See 166 S. W. 689.
    P. A. Drouilhet, of Galveston, for appellant. Stewarts, of Galveston, Geo. T. Burgess, of Dallas, and J. E. Quaid, of Galveston, for appellee City Nat. Bank. Wm. J. Berne, of Ft. Worth, for appellee Stockyards Nat. Bank.

      For other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key-No. Series & Rep’r Indexes

   REESE, J.

In this case the First National Bank of Shreveport (which will be hereinafter designated as the “Shreveport bank”) sued the City National Bank located at Galveston (which will be designated as the “Galveston bank”) to recover the amount of three several drafts, aggregating $326.32, less a credit of $135.52,' on the Edgewood National Bank, which were sent by the Shreveport bank to the Galveston bank for collection. The suit was instituted in the justice court. The Galveston bank brought in the Stockyards National Bank of Ft. Worth (hereinafter designated the “Ft. Worth bank”), to which it had sent the drafts for collection, and by which they had been sent to the Edgewood bank, and prayed for judgment over and against said bank in ease of a recovery against it. A trial in the justice court resulted in a judgment against the Galveston bank in favor of plaintiff, and in favor of the Galveston bank against the Ft. Worth bank. An appeal to the county court resulted in a judgment in favor of the Galveston bank and the Et. Worth bank, upon a peremptory instruction to the jury. The Pt. Worth bank filed its plea of privilege to be sued in Tarrant county, which was taken under advisement by the county court but was not ruled upon; the court rendering judgment in favor of the bank as to the demand of the Galveston bank against it, upon the rendition of the judgment in favor of the Galveston bank as against the claim of the Shreveport bank. Prom the judgment the Shreveport bank prosecutes this appeal.

Appellant having made no claim against the Pt. Worth bank, and consequently not being entitled to any relief against. it, on its pleadings, cannot complain of the judgment in favor of that bank against the claim of the Galveston bank. The case as presented is limited to the judgment in favor of the Galveston bank as to the claim of the Shreveport bank against it.

It is stated in appellant’s brief, and the evidence shows such to be- the fact, that the only disputed facts are as to the sending .and receipt of two. certain letters, one on .January 20 or 21, 1909, and the other on October 30, 1908, both of which, it is claimed by appellee, were written and sent by it to the Shreveport bank on the dates named, but which appellant claims never to have received, and evidence in support of such contentions was introduced by the parties respectively. Omitting the facts with regard to the sending and receipt of these two letters, which we do not deem material, the undisputed evidence discloses the following facts:

About May 27, 1908, the Shreveport bank entered into an agreement with the Galveston bank by the terms of which the former was to keep with the latter, on deposit, not less than $50,000 upon which the latter bank was to pay 2 per cent, interest. The Galveston bank was to collect all of the Texas business of the Shreveport bank at par, by which we understand, without expense to the Shreveport bank. In pursuance of this arrangement, appellant sent to appellee daily its Texas collections, aggregating several thousand dollars in amount, and many different items each day. Each day the receipt of these items was acknowledged by appel-lee on postal cards, using a printed form containing the following statement:

“Due diligence will be observed in the selection of banks or agents for the collection of all papers out of the city, but this bank will not be responsible for the failure or negligence of such bank or agents.”

'There is no question that this statement was observed by appellant. About the same time a similar arrangement was entered into between appellee and the Pt. Worth bank under which appellee was to keep a certain amount on deposit with the Pt. Worth bank, which was to pay interest on the same, and in consideration thereof to do a similar collecting business for appellee, as to a part of its business in certain territory, free of charge. Under this arrangement it was customary, which custom was general and well understood among bankers, including appellant, to enter a credit of items received from the sending bank, with the understanding that such credits should be canceled if the item was not paid.

On December 2d and 3d, appellant sent to appellee for collection the three small drafts referred to, drawn on the Edgewood National Bank, located at the town of Edgewood in Van Zandt county, Tex. These items were received by appellee and at once entered to the credit of appellant and promptly transmitted by appellee to its correspondent, the Pt. Worth bank. Appellee was instructed to protest these drafts if not paid, and these instructions it transmitted to its correspondent, the Pt. Worth bank. Under the arrangement between these banks referred to, it was not expected by appellant that the cash should be remitted to it, when collected, nor by appellee that such should be done by its correspondent at Pt. Worth. These drafts reached the Pt. Worth bank on the 5th of December, and were by it at once transmitted to the Edgewood National Bank, the drawee, for collection and returns, with instructions to protest if not paid, and reached the Edgewood bank on December 7th, when they were marked, “Paid”; but no returns were made to the Ft. Worth bank, nor, so far as we can find from the evidence, was there any inquiry made by the Pt. Worth bank of the Edgewood bank prior to its failure. In addition to the particular instructions with regard to these drafts, the Edgewood bank had been previously instructed by the Pt. Worth bank to collect and remit promptly all money collected for it. The Edgewood bank failed and closed its doors on January 13, 1909. Its business was wound up by receivers, and a dividend of $135.52 was sent to the Pt. Worth bank, which was transmitted to appellee and by appellee to appellant.

Up to the day of its failure, the Edgewood bank was in good credit and standing and was regarded by banks and bankers and business men generally as a solvent and reliable bank. It was thie only bank in the town of Edgewood. There were several reliable banks in towns nearer Edgewood than Pt. Worth, one within seven miles, and others at various distances. Edgewood is nearer Shreveport than Galveston, and there is direct communication between the towns by railroad.

.Immediately upon receiving notice of the failure of the Edgewood bank, the Pt. Worth bank, on the 18th or 19th of January, notified appellee. Appellee claims to have at once, on the 19th or 20th of January,- written and mailed a letter, to appellant notifying it of the failure, and introduced evidence of this fact; but appellant denied that it bad received this letter and supported the denial by testimony. It is, however, undisputed that on February 27th appellant received such notice from ap-pellee. It is stated in appellant’s brief that:

“In view of the admitted fact that the Bank of Edgewood failed January 13th, this difference is not material.”

On receipt of the drafts by the Ft. Worth bank, it entered the amounts to the credit of the Galveston bank, which credit was canceled upon the failure of the Edgewood bank. The credit to appellant by appellee was carried on its books until some time in March, 1909; but in the letter of February 27th ap-pellee stated that, the drafts not having been paid, the credits would be canceled. In this letter of February 27th appellee called attention to a letter of' January written by it to appellant notifying the latter of the nonpayment, but in the reply of appellant to this letter it stated that its records did not show this letter of January.

The undisputed evidence, coming from various bank officials, including the cashier of appellant, shows that at and prior to the transactions in controversy, there was a general custom among bankers in Texas, and elsewhere, that, when one bank sent to another bank items to be collected out of the town or city of the receiving bank, such bank was not expected to collect such item itself, but through other agencies to be selected by it, and that it should not be held responsible for the default or negligence of such agents, but was only required to exercise due care and diligence in such selection, and only responsible to the sending bank for such damages as resulted from its failure in this regard. The bank so selected should be considered the agent of the initial bank and not of the bank from which it received the collection. It was further shown to be the general and recognized custom, when the bank upon which such collections were drawn was the only bank in the town, and was in good credit and standing, to send the collections direct to such drawee bank. This was the custom, notwithstanding the drafts or checks were to be protested upon nonpayment, and in such case it was customary for the drawee bank to protest, if not paid, and this was generally done. The Edgewood bank was the only bank in the town. Express companies would not take collections subject to protest, and it was the general custom for banks and bankers to collect only through other banks. It was also the general custom for banks upon receipt of checks or drafts which, under this general custom, were to be forwarded for collection through other banks, to credit the same to the sender upon receipt, subject to final payment.

The business between appellant and appel-lee was 'handled in this way, and appellant’s cashier testified to these various customs as general, and as controlling the business of banks with each other, and that in sending the drafts in question it expected that appel-lee would handle this business in the usual and customary way, and not otherwise.

The trial court charged the jury as follows:

“The undisputed evidence is that the Edge-wood National Bank paid the checks to itself as a collecting bank, but never remitted the proceeds to the Stockyards National Bank, the sender, and you will return a verdict for defendant.”

Without 'pausing to criticise the form of the charge, it will be treated simply as a peremptory instruction to return a verdict for the Galveston bank, and, if the evidence presents any issue of fact as to the liability of appellee, the judgment would have to be reversed. For this reason we have set out so fully the result of the undisputed evidence. The only two facts about which there was any controversy are, we think, immaterial. Whether appellee first notified appellant on the 20th of January or the 27th of February of the nonpayment of the drafts, is immaterial, as the Edgewood bank failed on the 13th of January, and it is not shown that any damage resulted to appellant that could have been averted if it had received this notice on the 20th of January instead of the 27th of February.

The assignments of error, which will not be discussed in detail, present several questions of great importance, and upon which we find great conflict of the authorities, relieved, however, to some extent, in so far as this case is concerned, 'we think, by the facts established by the undisputed evidence.

Was appellee liable for the default or negligence, if any, of the Ft. Worth bank? The courts of the different states of the United States have divided upon this question; some following what is 'known as the New York rule, and others the Massachusetts rule, the former holding that, when a claim is sent to a bank for collection which requires the intervention of other agencies for such collection, such agencies selected by the receiving bank become its agents, for whose default or negligence it is' responsible to the sender. The other rule is to the contrary; that in such case the bank to which the collection is sent is impliedly authorized to select other agents, who thereby become the agents of the sender or depositor; and that the bank with whom the draft, check, or other paper is deposited for collection is required only to exercise due care and diligence in the selection of such agents, and only liable for the consequences of a failure to do so. A clear statement of the two rules of decision with the authorities supporting each is found in Exchange National Bank v. Third National Bank, 112 U. S. 276, 5 Sup. Ct. 141, 28 L. Ed. 722, in which the New York rule is followed. It is, however, - stated in the opinion that even in tlie cases from New York the general liability of banks might be varied and limited by express agreement of the parties or by implication arising from general usage. It is very clear from the opinion that the general rule followed would not apply when either by express contract or by general usage and custom a different rule of liability was to govern in’the transaction of the business.

In support of its contention that the Et. Worth bank was the agent of appellee, for whose default it was liable, appellant cites the Texas cases of Schumacher v. Trent, from this court, 18 Tex. Civ. App. 17, 44 S. W. 460, and State National Bank of Ft. Worth v. Thomas Mfg. Co., from the Court of Civil Appeals of the Second District, 17 Tex. Civ. App. 214, 42 S. W. 1016. In the first case cited, it was held by this court that:

“When a note is deposited with a bank to be collected at a distant point, where it has no agent or regular correspondent, and it transmits the same to another bank at such point, for collection and return of the proceeds, in the absence of any special agreement between the parties, or custom or usage of bankers having the force and effect of law, which fixes upon the bank with which the deposit is made another measure of liability, such bank, by implication of law, becomes, the agent of the depositor for the collection of the paper, and the bank to which the note is transmitted becomes the agent, not of the depositor, but of the bank with which he made the deposit, and such bank is responsible to the depositor for the' default of the collecting bank.”

It is further said that:

“A custom to acquire the force of law, and thus modify the general law of agency, must be general as to a particular trade or business, and so well established that any one dealing in that trade is presumed to know it.”

It may be doubted as to whether the court was justified in the statement as to the weight of authority being in favor of the rule stated. See statement of both rules and authorities in support of each, X Morse on Banking, § 272 et seq.- But however that may be, the exception in case of contract or general custom, establishing a different measure of liability, is recognized by the opinion in that case and in every case we have found, where there was evidence of such contract or custom. The opinion in the second of the two cases cited supports the contention of appellant, but in that ease there was nothing shown in the way of general custom or -contract to warrant the application of a different measure of liability, and it is clearly intimated in the opinion that such general custom, as affording the basis of an implied understanding or agreement, would abrogate, the general rule. The case seems to have been ruled upon Bank v. Bank, 112 U. S., supra, which clearly recognizes this principle. 1 Morse on Banks, § 270.

Where nothing is shown hut the fact that the paper to be collected must be sent for that purpose to a bank at some other point than the place of payment, whether the law will imply authority to the receiving bank to appoint an agent to collect who shall be the. agent of the sending bank, imposing upon the receiving bank no liability for the default of such agent, we need not decide in this ease. The weight of authority seems to us to favor what is denominated the Massa-chussets rule, but the increasing growth of general custom in accordance with this rule probably renders the difference between the tyyo of little practical importance.

Application of these principles to the undisputed evidence in the present case compels the conclusion that the Et. Worth bank was the agent of appellant, and that appellee is not liable for the negligence, if any, of that bank. The custom referred to was general, and was well known to appellant, and, in addition to such general custom, the notice contained in the several acknowledgments of receipts of items of collection by appellee from appellant, including the drafts in question, accepted by appellant without objection, amounted to a contract on its part that-the collections should be made in this way and an acceptance of appellee’s conditions that it would only hold itself liable for the exercise of due diligence in the selection of the collecting agent.

Upon this point the witness Bayersdorffer, active vice president and former cashier of appellant, testified:

“Plaintiff first began sending items for collection to defendant on May 27, 1908, and ceased March 19, 1909. Items sent for collection would average 10 to 20 items or more daily. Said defendant acknowledged receipt of said items. The first acknowledgment was on or about May 29, 1908. Said defendant daily acknowledged receipt of practically all items received by it between the 29th of May, 1908, to the middle of March, 1909. There was on said acknowledgments no itemized statement except the receipt of the items, 'they were by postal cards. All postal cards received” during that period were similar to those attached to depositions. All contained these words: ‘Due diligence will be observed in the selection of banks or agents for the collection of all paper out of the city, but this bank will not be responsible for the failure or negligence of such banks or agents.’ No objection was made to the wording of these postal cards. * * * The defendant did not notify us that -they would not personally attend to the collection of said checks; such notice was not necessary, as plaintiff knew that defendant could not collect the items personally from the Bank of Edgewood as that bank was not located in the City of Galveston. All that plaintiff required of said defendant was that it handle the items in the usual and regular course of business. * * * The plaintiff did not expect defendant to handle said items in any other than in the regular course of business.” 5 Oyc. 504, and cases cited: Bank & Trust Co. v. Newland, 97 Ky. 464. 31 S. W. 38; Kershaw v. Ladd, 34 Or. 375, 56 Pac. 402, 44 L. R. A. 236.

According to the general custom and the express contract of the parties, appellee was not responsible for the default of the EL Worth bank.

Did appellee exercise due care in selecting the Et. Worth bank as the agent to collect the drafts? No question is made of the solvency and entire reliability of this bank, but it is contended that it was not a suitable agent for the collection, because appellee knew that it would transmit the drafts to the Edgewood bank, the drawee, and that this was an act of legal negligence which could not be sanctioned by custom no matter how general. The general principle seems to be established by the weight of authority that it is negligence in a bank with whom paper is deposited for collection to send such paper to the person or bank on which it is drawn. 1 Morse on Banks, § 236; First National Bank v. City National Bank, 12 Tex. Civ. App. 318, 34 S. W. 459; Bank of Rocky Mount v. Floyd, 142 N. C. 187, 56 S. E. 95; German National Bank v. Burns, 12 Colo. 539, 21 Pac. 714, 13 Am. St. Rep. 247; Carson, Pirie, Scott & Co. v. Fincher, 129 Mich. 687, 89 N. W. 570, 95 Am. St. Rep. 449; Minneapolis Sash & Door Co. v. Bank, 76 Minn. 136, 78 N. W. 980, 44 L. R. A. 504, 77 Am. St. Rep. 609; Anderson v. Rogers, 53 Kan. 542, 36 Pac. 1067, 27 L. R. A. 248, Givan v. Bank (Tenn. Ch.) 52 S. W. 923, 47 L. R. A. 272.

The testimony, however, shows that the Edgewood bank was the only bank in the town, that appellant knew this fact, that in such cases there was a general custom known to and acted upon by appellant, that the drafts in question would be sent, either by appellee or its correspondent, to that bank direct for collection, that it was the general custom, and, as stated by the witness Bay-ersdorfEer, “the general pratice,” for banks to have protested checks drawn on themselves when sent direct to them for collection. In fact, it- is shown that appellant understood and expected that these drafts would be sent to the Edgewood bank for collection. How can it then be said that appellee was negligent when it transacted the business in the manner appellant expected and understood it should be done? It was shown that appellant in its own business did the same thing. The precise question was decided by the Supreme Court of Illinois in Wilson v. Carlinville National Bank, 187 Ill. 222, 58 N. E. 250, 52 L. R. A. 632 in which it was held:

“One who deposits for collection a check on a distant bank with knowledge that it is the' only bank in the place and that the check will be collected without expense to him through other banks in accordance with banking usages, is estopped from charging the bank in which he deposited it with negligence in sending it to a correspondent who forwards it to the drawee for collection in accordance with the custom in such cases.”

In the case of Bank of Corsicana v. Bank of Dallas, 12 Tex. Civ. App. 318, 34 S. W. 458, it is expressly stated that it did not appear that there was any custom or usage which authorized the sending the check to the drawee bank. In fact, the only case we have found stating the broad rule that it is negligence in such eases to send a check or draft for collection direct to the drawee bank, even though there be no other bank m that locality and though it is customary to do so, is the case of American Exchange Bank v. Metropolitan Bank, 71 Mo. App. 451, cited by appellant, and none of the cases cited present the features of this case in respect to the custom, the knowledge thereof by appellant, and the expectation and understanding that the drafts would be sent to the Edgewood bank for collection. We therefore hold that, in the circumstances of this ease, appellee was not guilty of negligence in sending the drafts to the Ft. Worth Bank.

It follows that if there was negligence on the part of the Ft. Worth bank, in failing to keep closer track of the draft, and in failing for so long a time to make any inquiry as to why the amount was not remitted, as directed, appellee was not liable therefor. The evidence tended to show that the Ft. Worth bank was negligent in this regard, as it appears that the Edgewood bank was open for business until January 13th, and would have paid these drafts, or remitted the proceeds, if such had been demanded, up to the 13th of January. Having received the drafts for collection on December 7th preceding, it is reasonably clear 'that proper diligence on the part of the Ft. Worth bank would have resulted in the actual collection of the money. But, as we have said, appellee was not responsible for this default, and, as appellant sought no relief against the Ft. Worth bank, it is remediless in this case.

It seems to be conclusively shown by the testimony that the loss to appellant was not proximately caused by the sending of the drafts to the drawee bank for collection, but by the failure to look more closely after the collection by the Ft. Worth bank. The drafts were received by the Ft. Worth bank on the 5th of December, and by the Edge-wood bank on the 7th, two days thereafter. They were marked paid by that bank, and thére the matter rested until the 13th of January thereafter, when the Edgewood bank failed. This bank up to the day of failure was regularly engaged in the discharge of its usual functions as a National Bank, and it is entirely clear that, if proper demand had been made by the Ft. Worth bank for the return of this money for these small drafts, the money would have been forthcoming. A week would have been a reasonable time to wait for the return of the money before making further demand, in view of the specific instructions given to the Edgewood bank by the Ft. Worth bank to remit promptly, and. can it be doubted, from the testimony, that if this demand had been made and insisted on at the end of a week, which would still have been a month before the bank closed its doors, the money would have been remitted and the loss avoided? We think this is clear, and that therefore the loss may be directly attributed to the failure of the Ft. Worth bank to look more closely after the collection, a result for which appellee is not liable.

It is immaterial that appellee did not sooner inform appellant that the credits would he canceled, on account of the failure to collect. Appellee had no notice of the nonpayment until after the failure of the Edge-wood bank, and it is not shown that appellant suffered any damage by the delay in canceling the credits. It is clear that this credit was entered subject to be canceled upon failure to collect the drafts. This was in accordance with the course of dealings between the parties.

Counsel for both parties have shown, in the preparation of the briefs and in the citation of authorities, very great industry and close investigation, and we take occasion to acknowledge the very great assistance furnished to the court in the determination of the troublesome questions presented.

We have carefully examined the several assignments of error and propositions thereunder, and have reached the conclusion that none of them presents grounds for reversal. Under the undisputed evidence, no other judgment could have been properly rendered, and the judgment is therefore affirmed.

Affirmed.


source: Caselaw Access Project

author: DUNKLIN, J.

license: Public Domain

text:
    FIRST NAT. BANK OF RISING STAR v. TEXAS MOLINE PLOW CO. et al.
    (No. 7962.)
    (Court of Civil Appeals of Texas. Ft. Worth.
    May 9, 1914.
    Rehearing Denied June 13, 1914.)
    1. Assignments (§ 49) — Deposits—Checks.
    The mere giving of a check on a bank, even for a valuable consideration, does not, prior to acceptance by the bank, operate as an assignment pro tanto of the amount standing to the credit of the drawer, though the circumstances may be such as to amount to an assignment pro tanto before acceptance of the check.
    [Ed. Note. — For other cases, see Assignments, Cent. Dig. §§ 85-98; Dec. Dig. § 49.]
    2. Assignments (§ 49) — Deposits—Checks.
    To constitute the giving of a check on a bank by a depositor thereof an assignment pro tanto of the deposit, the parties must have intended that the check should so operate.
    [Ed. Note. — For other cases, see Assignments, Cent. Dig. §§ 85-98; Dec. Dig. § 49.]
    3. Assignments (§ 49) — Deposits—Checks.
    Where the court found that a deposit was subject to the payment of checks generally, and was not a special deposit, but did not find that it was understood that the giving of a check should operate as an assignment pro tanto, the findings warranted the legal conclusion that the check was not an assignment of any part of the deposit.
    [Ed. Note. — For other cases, see Assignments, Cent. Dig. §§ 85-98; Dec. Dig. § 49.]
    . Appeal from District Court, Eastland County; Thos. L. Blanton, Judge.
    Action in garnishment by the Texas Mo-line Plow Company and others, as plaintiffs, against the City National Bank of Eastland, as garnishee, to subject a deposit in favor of T. B. Roberds to the payment of a judgment held by plaintiffs, in which the First National Bank of Rising Star intervened. From a judgment for plaintiffs, the intervener appeals.
    Affirmed.
    Scott & Brelsford, of Eastland, for appellant. D. M. Oldham, Jr., of Abilene, and Earl Conner, of Eastland, for appellees.

      For other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key-No. Series & Rep'r Indexes

   DUNKLIN, J.

This is a suit in garnishment instituted by the Texas Moline Plow Company, Mayhew & Co., and the Merchants’ & Farmers’ National Bank of Cisco, as plaintiffs, against the City National Bank of East-land, as garnishee, to subject a deposit in that bank in favor of T. B. Roberds to the payment of a judgment held by the plaintiffs against Roberds. The First National Bank of Rising Star intervened in the suit, claiming the deposit by reason of a check given by Roberds in favor of the intervener for the deposit before the service of the writ of garnishment. From a judgment in favor of the plaintiffs subjecting the deposit to their claim the intervener has appealed.

The trial was by the court without the aid of a jury, and the following are the findings of fact and conclusions of law filed by the trial judge:

“Findings of Fact.
“I find that on February 28, 1913, the defendant T. B. Roberds made a general deposit of $1,000 in the City National Bank of Eastland, Tex., and that prior to that time he had made various general deposits therein, and had from time to time drew checks thereon until on March 24, 1913, the same was reduced to the sum of $751.45; that on March 25, 1913, the said balance was reduced by the payment of checks to $748.45, and all times such deposit was subject to the payment of checks generally, and was not a special deposit, at any time.
“(2) I find that on the morning of March 29, 1913, the said the City National Bank credited the sum of $518.34 of the balance of such deposit in liquidation of a past-due indebtedness of the said T. B. Roberds, to said bank, leaving a balance to the credit of T. B. Roberds in said bank on the morning of March 29, 1913, of the sum of $230.11, and that all parties agreed in open court that said bank had the right to apply said $518.34 to its debt.
“(3) I find that all parties to this cause agreed in open court that the only issue in this case was as to the amount of said $230.11, and as .to the rights of the several parties with respect .thereto.
“(4) I find that on March 24, 1913, and prior thereto the defendant T. B. Roberds was indebted to the First National Bank of Rising Star in an amount in excess of $751.45, and that on that date he drew a check on the City National Bank of Eastland, Tex., for that amount, to wit, $751.45, in favor of the First National Bank of Rising Star, and placed the same with, said bank which gave him, the said T. B. Rob-erds, credit for that amount, and that said check was in due course of time forwarded through the correspondent bank of the Rising Star Bank, at Waco, Tex., for collection, ano that said check for $751.45 was received through the mails at Eastland, Tex., by the City Na tional Bank between 3 o’clock and 4 o’clock p. m. March 29, 1913, and that the City National Bank refused payment of said check, noting on the back of the same that payment was refused because it had been garnished.
“(5) I find that the City National Bank of Eastland had been garnished with writ of garnishment served on it about noon on March 29, 1913, issued out of cause No. 6, styled ‘Texas Moline Plow Co. y. T. B. Roberds et al.’ pending in the district court of Eastland_ county, Tex., and wherein there was a valid judgment against the said T. B. Roberds and others, in favor of the Texas Moline Plow Co. for an amount greatly in excess of the amount of the $751.45 check.
“(6) I find that at no time did the City National Bank of Eastland have any notice of any kind that said $751.45 check had been drawn, or of its existence until it received the same on the evening of March 29, 1913, and after it had canceled a past-due indebtedness due it by T. B. Roberds, and after it had been garnished.
“(7) I find' that all parties hereto agreed in open court that,a fee of $25 for the City National Bank for answering this writ of garnishment was a reasonable fee for such service.
“Conclusions of Law.
“1. I conclude that the City National Bank of Eastland is entitled to a fee of $25 for answering in this cause.
“2. 1 further conclude that the giving of said check for $751.45 was not, under the facts in this case, an assignment of that amount, or any other amount of the general deposit of the said T. B. Roberds with the City National Bank of Eastland, at the time of the giving of such check, or at any other time, and that therefore the sum of $230.11 on deposit with the City National Bank at the time of the service of the writ of garnishment on it in this cause was subject to such garnishment and to the payment, pro tanto, of the judgment of the Texas Moline Plow Co. against said T. B. Rob-erds.”

But one assignment of error is presented, which reads:

“The court erred in its conclusion of law No. 2, in which he found as matter of law that the giving of the check in controversy by Roberds to the First National Bank of Rising Star was not an assignment of the funds of said Roberds on deposit with the City National Bank of Eastland at the time of the execution and delivery of the check to said First National Bank of Rising Star, or at any other time, and therefore that the deposit of said Roberds with the Eastland National Bank was subject to garnishment at any time prior to the receipt of the check and acceptance and payment of same by the bank on which it was drawn.”

It is well settled in this state that the mere giving of a cheek upon a bank even for valuable consideration does not, prior to its acceptance by the bank, operate as an assignment pro tanto of the amount standing to the credit of the drawer of the cheek. House v. Kountze, 17 Tex. Civ. App. 402, 43 S. W. 561; McBride v. American Railway & Lighting Co., 127 S. W. 229. It is equally as well settled that the facts and circumstances in conjunction with the giving of a check may be such as to constitute an assignment pro tanto of the deposit in bank even before the check is accepted by the drawee bank. N. Y. Life Ins. Co. v. Patterson & Wallace, 35 Tex. Civ. App. 447, 80 S. W. 1058; Burns & Bell v. Lowe, 161 S. W. 942.

One of the essentials necessary to constitute such an assignment is the intention of the parties that the check shall have that effect. The absence of such intention is noted in House v. Kountze, supra, and the necessity for the same in order to constitute an assignment is recognized in McBride v. American Ry. & Lighting Co., supra, and the decisions therein cited, and also in Peters v. Hardin & Co., 168 S. W. 1035 (No. 7487 by this court, and not yet officially published).

It will be observed that the assignment is to the conclusion of law by the trial court from the facts found by him that the giving of the cheek did not amount to an assignment of the credit in favor of Roberds in the garnishee bank. It will be noted, further, that there is an absence of any finding of fact by the trial judge that it was intended and understood between Roberds and the intervener bank at the time the check was given that the same should operate as an assignment pro tanto of the amount on deposit to his credit in the garnishee bank. It will be noted, further, that the court has expressly found that the deposit in favor of Roberds was subject to the payment of cheeks generally, and was not a special deposit. The facts so found constitute the sole basis of the judgment, and we think warrant the conclusion reached that the check did not constitute an assignment of any part of the deposit to the credit of T. B. Roberds. Accordingly the assignment of error is overruled, and the judgment is affirmed.

Affirmed.


author: CONNER, C. J.

text:
    CHASTAIN et al. v. HOSKINS et al.
    (No. 7947.)
    (Court of Civil Appeals of Texas. Ft. Worth.
    April 18, 1914.
    Rehearing Denied May 23, 1914.)
    1. Appeal and Error (§ 742) — Assignment op Errors — Statement Accompanying As-sigment.
    An assignment complaining of the action of the trial court in sustaining a special exception was disregarded because the accompanying statement did not show any order of the court sustaining the exception.
    [Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. § 3000; Dec. Dig. § 742.]
    2. Schools and School Distbicts (§ 37)— Alteration op Distbicts — Powers op County Commissioners.
    The power conferred on the commissioners’ court under Rev. St. 1911, art. 2815, authorizing .the county commissioners to reduce the area of any common school district and to create such additional districts as may be necessary, etc., and article 2816, requiring them when necessary to redistrict the county and to consolidate or subdivide districts, etc., is very general, and a petition signed by citizens is not necessary to an exercise of the power; the only limitation being that no district shall be reduced to contain less than nine square miles.
    [Ed. Note. — For other cases, see Schools and School Districts, Cent. Dig. §§ 60-65, 67; Dee. Dig. § 37.]
    3. Schools and School Districts (§ 39)— Alteration op Districts — Powers .op . County Commissioners.
    An exercise of power by county commissioners under Rev. St. 1911, art. 2815, authorizing them to reduce, redistrict, consolidate, and subdivide school districts when to the best interest of the school children, etc., is not reviewable except where there is an abuse of discretion.
    [Ed. Note. — For other cases, see Schools and School Districts, Cent. Dig. §§ 68, 69; Dec. Dig. § 39.]
    4. Schools and School Districts (§ 32)— ' Alteration oe Districts — Powers oe County Commissioners.
    Under Rev. St. 1911, art. 2816, authorizing the county commissioners to reduce, redistrict, consolidate, and subdivide school districts when necessary, etc., the commissioners did not abuse their discretion in transferring 2,500 acres of land from one school district to another, as they acted upon a petition of citizens interested, after a hearing of the people from both districts.
    [Ed. Note. — For other cases, see Schools and School Districts, Cent. Dig. §§> 52-54; Dec. Dig. § 32.]
    5. Schools and School Distbiots (§ 32)— Alteration oe Districts — “Bonded Indebtedness.”
    Vouchers issued by the trustees of a school district for the erection of a schoolhouse was not “bonded indebtedness” within Rev. St. 1911, art. 2815, inhibiting a reduction of the area of a school district where a bonded indebtedness exists.
    [Ed. Note. — For other cases, see Schools and School Districts, Cent. Dig. §§ 52-54; Dec. Dig. § 32.

    For other definitions, see Words and Phrases, voi. 1, pp. 834, 835.]
    Appeal from District Court, Denton County; C. F. Spencer, Judge.
    Action by R. H. Chastain and others against S. H. Hoskins and. others. Judgment for defendants, and plaintiffs appeal.
    Affirmed.
    Zumwalt & Key, of Denton, for appellants. Sullivan & Hill, of Denton, for appellees.

      For other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key-No. Series & Rep’r Indexes

      For other oases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key-No. Series & Rep’r Indexes

   CONNER, C. J.

At a time named in appellants’ petition, the commissioners’ court of Denton county transferred about 2,500 acres of land from the Hackberry common school district to the Little Elm common school district of Denton county, and this suit was instituted by R. H. Chastain, the owner of some of the land so transferred, and.E. W. Stone and others, trustees of the Hackberry common school district, against S. H. Hoskins, the county judge of Denton county, and the several commissioners who, together with the county judge, constitute the commissioners’ court of that county. It was alleged that the land so transferred was among the most valuable of the Hackberry district; that in making the change the boundary line had been brought within three-fourths of a mile of the Hackberry schoolhouse, and that unless the order of transfer was repealed or qualified it would become necessary to purchase another site and move the schoolhouse thereon; that said trustees of the Hackberry district had erected the house and executed vouchers for the cost duly approved by the county superintendent of Denton county, and that there yet remained outstanding the sum of $479; that in order to pay said vouchers a special school tax of 15 cents on the $100 valuation of taxable property of the district had been voted; that it was questionable whether the citizens of the district would authorize a further assessment, and that hence the signers might, and would, become legally bound for their payment; that the transfer would have the effect of shortening the length of the school term in the district and cause a loss of pupils. It was further alleged that the commissioners’ court, in acting upon the petition therefor, did not assign any reason why the transfer should be made; that the petition had not been signed by a majority of the voters residing in either district or in the territory transferred; that the court had transferred more territory than had been asked for in the petition; that the territory was not needed by the Little Elm district, but was necessary for the Hackberry district; that the plaintiffs appeared before and requested the commissioners’ court to go upon the ground and inspect the same, and see for themselves the condition existing, but that the court refused such request. It was further alleged that the Little Elm school district had a special school tax of 50 cents on the $100 valuation, and that if the transfer) was permitted to stand the plaintiff Chastain would be assessed with said special tax upon his land that was transferred to the Little Elm district, and that said tax would be collected, or attempt be made to collect, and that it would be illegal to collect, or attempt to collect, such tax. The prayer was for an injunction restraining the defendants from levying, assessing; and collecting taxes in the transferred' territory as • a part of the Little Elm district, and that said territory, or at least “300 or 400 acres nearest the Hackberry schoolhouse, be decreed a part of the Hackberry school district, and for general and special relief.” The defendants answered generally to plaintiffs’ petition, and specially excepted to that part thereof alleging the contract for the erection of the schoolhouse in the Hackberry district, and the plaintiffs’ alleged liability thereon. The case was tried by the court without a jury, and judgment was rendered denying the relief asked by the plaintiffs, and they have appealed.

Appellants’ first assignment of error is to the action of the court, as they allege, in sustaining the special exception above referred to; but the assignment must be disregarded for the reasons that, in 'the statement following it, it is not shown that there was any order of the court sustaining the exception, nor do we find any such order in the court’s judgment. Moreover, an examination of the statement of facts discloses that the evidence on the subject was received without objection appearing in the record.

Other assignments question the power of the commissioners’ court to make the transfer of territory as alleged, and yet others insist that, if the power existed, there was an abuse of discretion. These assignments make it necessary that we review some of the articles of the statute relating to the subject. Article 2815 of chapter 15, tit. 48, Revised Statutes 1911, after imposing the duty of dividing and subdividing the respective counties into convenient school districts, further provides that:

“The county commissioners’ court may reduce the área of any common school district and create such additional districts as may be necessary for the best interests of the school children ; provided, that no school district shall be reduced to contain less than nine square miles of territory; * * * and provided, further, that the area of a school district having an outstanding bonded indebtedness shall never be reduced until after such bonded indebtedness shall have been fully discharged.”

The next article (2816) declares that:

“It shall be the duty of the commissioners’ court, at any time they deem necessary, to redistrict a part or all of said county; and they may at any time consolidate two or more adjacent school districts, or may subdivide any school district or districts.”

It is thus seen that the power of the commissioners’ court over the subject is very general. We know of no law, and none has been cited, which makes it necessary in order to an exercise of the power of the commissioners’ court in forming common school districts or in reducing the area, or in subdividing the same, that it shall be done upon the petition of any given number of the citizens, or that an opportunity for a hearing shall be extended whenever in the judgment of that court such action may be deemed necessary for the best interest of the school children. They are given the power and are charged with the responsibility; the only limitation is that no district shall be reduced to contain less than nine square miles of territory or changed during the existence of a bonded indebtedness. It seems clear that an exercise of the power can only be reviewed where it is shown that there has been an abuse of discretion, and we fail to find any such abuse here. There is evidence to the effect that in subdividing the district the court acted upon a petition of citizens interested, after affording a hearing of the people from both districts, and that after such hearing and after deliberation the commissioners’ court made the change complained of, believing that it would be for the best interest of the school children concerned. Moreover, it appears that after the transfer Little Elm district had but 10 square miles of territory; Robertson district, the only other one affected not heretofore named, 11 square miles; and the Hackberry district, 12 square miles. The mere fact that later, upon the'complaint of the trustees complaining in this suit, the commissioners’ court declined to reopen the matter, cannot affect the legality of the original action.

While it may be true, as urged by the appellant Chastain, that his property cannot be lawfully subjected to the levy of 50 cents upon the $100 valuation made in the Little Elm district (see Crabb v. Celeste Ind. Sch. Dist., 105 Tex. 195, 146 S. W. 528, 39 L. R. A. [N. S.] 601, the question is not involved in the present suit. No evidence is referred to which shows that there has been, or will be, an effort of the authorities of the Little Elm district, to subject the property of the appellant Chastain to the 50-cent tax voted in that district. Nor can it be said that the “vouchers” which it is alleged the trustees of the Hackberry district issued for the erection of the échoolhouse constitute “bonded indebtedness” within the meaning of the statute inhibiting a reduction of the area of a school district in, cases where a bonded indebtedness exists.

We conclude that there is no error in the judgment of the court below, and it is in all things affirmed.


author: PLEASANTS, C. J.

text:
    TOOLE v. FIRST NAT. BANK OF HEMPHILL et al.
    (No. 6563.)
    (Court of Civil Appeals of Texas. Galveston.
    May 21, 1914.
    Rehearing Denied June 25, 1914.)
    1. Counties (§ 170) — Warrants—Indorsers —Liability.
    A petition in an action on a county warrant brought against the county and indors-ers, which shows that the suit was not brought at the first term of the court after the maturity of the warrant, but which alleges the invalidity of the warrant as against the county because issued under an illegal contract, states a cause of action against the indorsers, who are liable as original obligors, and not within the protection of Rev. St. 1911, arts. 579, 583, 584, requiring an action at the first term of the court after the accrual of a cause of action to fix the liability of an indorser.
    [Ed. Note. — For other cases, see Counties, Cent. Dig. §§ 256-259; Dec. Dig. § 170.]
    2. Bills and Notes (§ 299) — Indorsers— Actions — Time to Sue — Statutory Provisions.
    Rev. St. 1911, arts. 579, 583, 584, requiring the bringing of a suit at the next term of court after the accrual of the right of action to fix the liability of an indorser, is a substitute for protest under the law merchant, and does not apply in a case in which protest is not required, and, where a maker is insolvent or a nonresident, protest and notice or suit at the first term of the court are not necessary to hold an indorser.
    [Ed. Note. — For other cases, see Bills and Notes, Cent. Dig. §§ 680-705; Dec. Dig. § 299.]
    3. Counties (§ 167) — 'Warrants—Collection.
    Where a bank contracting with a county as depository of the county funds to keep all county warrants at par purchased, to comply with its contract, all county warrants offered to it, and, when a particular warrant was presented by an individual, an officer of the bank requested the individual to indorse it, and on his doing so the amount thereof was paid to him, and the warrant was carried by the bank as an asset, and where the warrant was void, he must refund the money to the bank and cannot escape liability on the theory of a sale to the bank.
    [Ed. Note. — For other eases, see Counties, Cent. Dig. § 249; Dec. Dig. § 167.]
    4. Counties (§ 150) — Contracts—Validity —“Debt.”
    A contract for the drilling for a county of an artesian well in the courthouse square, executed at a time when there was not sufficient revenue on hand or to be collected for the year with which to pay the price, creates a debt within Const, art. 11, §§ 5, 7, and, when no provision is made for the payment of the debt, the contract is void.
    [Ed. Note. — For other eases, see Counties, Cent. Dig. §§ 165, 166, 215-217; Dec. Dig. § 150.

    For other definitions, see Words and Phrases, vol. 2, pp. 1864-1886; vol. 8, p. 7628.]
    Appeal from District Court, Sabine County; A. E. Davis, Judge.
    Action by the First National Bank of Hemphill against J. O. Toole and others. From a judgment for plaintiff against defendants Toole and another, and in favor of codefendant Sabine County, defendant Toole appeals.
    Affirmed.
    Davis & Ramsey, of San Augustine, and D. M. Short & Sons, of Center, for appellant. Foster & Davis, of San Augustine, for ap-pellees.

      For other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key-No. Series & Rep’r Indexes

      For other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key-No. Series & Rep’r Indexes

   PLEASANTS, C. J.

This is a suit by ap-pellee First National Bank of Hemphill to recover upon a warrant for $2,000 issued by Sabine county in favor of D. A. Smith and transferred and indorsed by said Smith to appellant, Toole, and indorsed by said Toole and sold by him to appellee bank. The amended petition upon which the case was tried alleges the issuance and delivery of the warrant by Sabine county to Smith in payment of an indebtedness due him by the county, the registration of the warrant by the county treasurer, the transfer and in-dorsement by Smith to appellant, Toole, and the indorsement and sale of said warrant by Tpole to appellee bank, and prays for judgment against the county, as maker, and against Smith and Toole as indorsers, for the amount of said warrant, and interest thereon.

In the alternative plaintiff pleaded in substance:

“That the warrant for $2,000 was issued by the county of Sabine under a contract made by the commissioners’ court of said county with defendant Smith on October 31, 1910, by the terms of which Smith agreed to drill an arte-sian well on the public square, upon which is situated the courthouse of said county, and guaranteed an artesian flow of water, and agreed, to bear all the expense of drilling the well, and to furnish the machinery necessary to drill the well, and to proceed to drill the well at once until a good flow of artesian water was developed, and to furnish a gate valve to be attached to casing, and when the conditions should be complied with, and the well accepted by said county, said court was to pay said Smith for said services the sum of $7,500, as follows: When the derrick and machinery shall be put on the ground, $2,000; when the well shall be drilled at a depth of 500 feet, $1,000; when the well shall be drilled 1,000 feet, $2,000; and the balance to be paid when the well shall have been completed. That this contract created a debt within the meaning of the Constitution of the state, and no provision was made by the county, at the time of its creation, to pay the sum, and it was not contemplated that the contract price should be paid from the current revenues of the county, which were inadequate to pay the contract price as it matured, and the condition of the revenues either was known to the commissioners’ court, or, by the exercise of reasonable diligence, could have been known, when the contract was made, and that the said Smith did not believe, or have reasonable grounds to believe, that the current revenues were sufficient to pay the sums of money called for in said contract, and that neither of the parties could have had any reasonable expectation that the contract price could have been discharged out of any current revenues then on hand, or that would come in, and that the drilling of the well, as contemplated by the contract, did not constitute an ordinary current expense of the county. That said warrant, though regular on its face, and issued by apparent authority, was void, because the contract under which it was issued created a debt, and, no provision being made for its payment, said contract was void. That plaintiff purchased' said warrant in good faith without any notice of any irregularity in its issuance, and paid therefor the sum of $2,-000, and that defendants Smith and Toole, by the indorsement of said warrant, became liable and bound to pay to plaintiff the said sum of $2,000, with interest thereon, for which amount plaintiff prays judgment against said defendants.”

The answer of defendants Smith and Toole contained the following special exceptions to plaintiff’s petition:

“First. That the petition alleged the date of their indorsement to be on the 17th day of November, 1910, and the suit was not filed on said indorsements at the first term of the court after the maturity of said warrant, nor was there any suit filed at the second term thereafter, nor any reason given why suit was not filed at the first term.
“Second. This being a suit on a county warrant, payable on demand, after being duly registered, it being alleged that the warrant was registered on the same day it was issued, whereby its status as a county demand against public funds was definitely established, and this suit not having been filed until the 8th day of September, 1911, the warrant could have been paid on the 17th day of November, 1910, or some good reason’alleged why it was not paid, and two terms of court having passed before this suit was filed, and no reason is alleged why suit was not sooner filed, by reason of which the petition is defective, in failing to allege the facts constituting diligence, or excusing the reasonable diligence required by the plaintiff to establish any liability caused thereof by either of these defendants.”

They further answered by general denial, and by special plea adopt that' portion of plaintiff’s petition whicñ alleges facts showing that the contract between the county and Smith was valid, and that the warrant was legally and regularly issued, and was a valid and binding obligation of the county. They further specially pleaded as follows:

“And for further special answer come these defendants and say that this suit was not filed against them until the 8th of September, 1911, and that two terms of the court elapsed after the pretended cause of' action set up against them had matured before this suit was instituted, and it appears that plaintiff’s claim is founded upon a pretended assignment or in-dorsement of a certain obligation, in writing, the legal effect of which, under the plaintiff’s contention, even passed out of existence after the second term of the court had passed at which the suit could have been brought, and these defendants now plead these facts in bar of the plaintiff’s right to hold them, or either of them, liable as indorsers or assignors of said writings; all of which they propose to verify.
“And for further special answer to plaintiff’s demand as to them, they come and say that said warrant has been paid in so far as they are concerned, and has ceased to be the evidence of any demand against Sabine county, because they say when it was issued and delivered to the defendant D. A. Smith, as alleged, it was then duly registered and for a valuable consideration delivered to the defendant J. O. Toole by the defendant D. A. Smith on the same day it was issued and registered; and thereafter, on the same day, the defendant J. O. Toole presented it for payment to A. M. Jones, the duly acting deputy treasurer of Sabine county, who paid the same by delivering to the said defendant the amount of money called for in said warrant; and, as evidence of the receipt of said money, the defendant J. O. Toole wrote his name on the back of said warrant, not with any intention of guaranteeing any one against loss, nor with any intention of conveying title except by receipting for the money demanded, but merely following a custom of the treasurer of Sabine county, used by him in identifying pieces of paper, upon the authority of which he had paid out money belonging to the county to individuals, and with the view of determining the individual to whom the money' had been paid and the amount of it, and being, in effect, a receipt. So these defendants say that the above is their connection with the piece of paper, and their only connection with it, and that they made no contract with any one to guarantee the payment of said piece of paper; nor was it intended by them, or either of them, to make themselves liable for any amount of money by virtue of any act done by them with reference to said piece of paper, except in the manner above stated; all of which they stand ready to verify.
“And for further special answer to said petition, if they are mistaken in their contention of release of liability by the failure to bring suit against them, or in their contention of the payment of the warrant as set forth in this special answer herein, then the defendants come and say that plaintiff paid said warrant through its cashier, A. M. Jones, upon presentation of said warrant 'for payment to the plaintiff by the defendant J. O, Toole, as here-inbefore stated, in compliance with and obedience to the terms of its certain valid and subsisting contract theretofore made with the duly authorized agent of the defendant county to pay all of latter’s warrants in full upon presentation by the legal holder thereof, among which class was the warrant described in plaintiff’s petition; and that plaintiff, in accepting said warrant thus presented for said purpose, was merely carrying out its said contract with the county by paying over the said amount in said warrant mentioned to the legal holder thereof in compliance with its said obligation assumed in said contract with the county, and was not making, and did not make, any contract whatever with the defendant J. O. Toole, nor did the defendant J. O. Toole make' any contract with the plaintiff, nor was he asked to make any contract with the plaintiff, either expressed or implied, with • reference to said piece of paper, nor did either party intend to make any contract with each other when said warrant was presented and paid, or when said warrant was presented by the defendant J. O. Toole and accepted by the-plaintiff, nor when the defendant Toole accepted the money mentioned in said warrant; but, on the contrary, the transaction occurred and-was understood by the parties to mean that which is hereinbefore alleged; all of which these defendants stand ready to verify.”

The defendant county filed its answer, including a general demurrer, the plea of non est factum, a general denial, and specially that the contract was void because the commissioners’ court created a debt against the-county without providing for its payment.

The trial in the court below without a jury resulted in a judgment in favor of the-defendant county that plaintiff take nothing against it, and in favor of plaintiff against the defendants Smith and Toole for the amount of said warrant, with interest.

The following conclusions of fact filed by the trial judge are supported by the evidence, and we adopt them as our fact conclusions :

“(1) I find that the warrant of Sabine county for $2,000, dated November 17, 1910, which was introduced in evidence, and upon which plaintiff sues, was issued by L. E. King, the county clerk of said county, acting by and' through his duly appointed and qualified deputy, W. R. Hyden, under the seal of the commissioners’ court of said county, to the defendant D. A. Smith, or bearer; that the said warrant was issued by the said Hyden, deputy clerk, upon the written order of J. H. McGown, county judge of said county, directing the issuance of samé; that the said warrant was in all respects regular upon its face, and imported-a valid obligation of the said county.
“(2) I find that after the issuance of th( aforesaid warrant the same was, for a valuable consideration, indorsed, transferred, and assigned by the said D. A. Smith to the said J, O. Toole, and that thereafter the said Toole sold and delivered the said warrant to the-plaintiff First National Bank of Hemphill, Tex., the plaintiff paying him therefor the sum oi $2,000 in cash, and that the defendant Toole was' required and did indorse by writing his name upon the back thereof of said warrant to the plaintiff before the said $2,000 was paid-to him by the plaintiff, and that the plaintiff would not have purchased the said warrant without the indorsement of the said Toole. That the warrant was presented at the teller’s window of plaintiff’s banking house by the said Toole, and purchased as aforesaid by one G. L. Davidson, the assistant cashier of the. bank, who was acting for and on behalf of plaintiff.
“(3) That at the time the said Davidson, as assistant cashier of plaintiff, received the said’ warrant from the said Toole, with the said Toole’s indorsement or assignment on the back thereof, paying therefor the sum of $2,000, as aforesaid, the said Davidson had no notice that the same was based and issued upon an illegal contract, as I shall find subsequently, and had no notice that there was any vice or irregularity whatever connected with the said-warrant.
“(4) I find that on the same day on which the plaintiff purchased from Toole the said warrant the plaintiff caused the same to be registered in the office of the treasurer of Sabine county as provided by law, and caused the fact of such registration to be noted upon the warrant by the treasurer, which was done on the 17th day' of November, 1910, being the day the-warrant was purchased from the said Toole.
“(5) I find that the plaintiff is the legal owner and holder of the aforesaid warrant, and has-been such owner ever since the 17th day of November, 1910; that prior to instituting this suit the plaintiff demanded payment of the warrant of the said Toole and of the treasurer of Sabine county, which was by them refused; that the commissioners’ court of said county, by an order duly passed on December 6, 1910, canceled, rejected, and repudiated the contract upon which the warrant was issued, and plaintiff has been compelled to bring this suit to enforce collection thereof.
“(6) I find that the aforesaid warrant was issued to D. A. Smith in the attempted payment of the first installment due the said Smith by Sabine county under a certain contract entered into between the county and Smith during the month of October, 1910, to wit, October 31, 1910, by the terms of which the said Smith agreed to drill an artesian well in the town of Hemphill, Tex., on the public square owned by the county, guaranteeing an artesian flow of water, and agreeing to furnish all of the machinery, pipe, wood, and derrick, and to defray any other expense in drilling the well; that the county, acting by its commissioners’ court, agreed on its part to pay for said completed well the sum of $7,500, to be paid as follows: When the machinery, pipe, and derrick should be placed on the ground, $2,000; when the well should reach a depth of 500 feet, $1,000; when the well should reach a depth of 1,000 feet, $2,006; and the balance when the well should be completed.
“(7) I find that at the time the contract, as mentioned in the paragraph next above, was entered into between D. A. Smith and Sabine county, acting through its commissioners’ court duly assembled and constituted, there was not sufficient revenue on hand, or to be collected from all sources, available for the year 1910 with which to pay. the contract price for said well; that on October 31, 1910, when the said contract was entered into, the treasurer’s books showed a cash balance on hand to the credit of the general county fund of $3,808, but there were outstanding, unregistered warrants of the county aggregating $4,000 or $5,000 against said fund; that the current expenditures covered by warrants outstanding on October 31, 1910, plus the contract price for the well, $7,-5Ó0, would exceed by about $5,000 or more the current revenue to the credit of the general county fund from all sources for the year 1910; that the commissioners’ court, when said contract was entered into, did not have reasonable ground to believe that the contract price should be discharged out of the current revenue for the year 1910, and that they and the said Smith could not have reasonably contemplated its payment out of such current revenue; that the contract price could not have been paid except by appropriating a large part of the general county fund that accrued for 1911, by the regular ad valorem tax for the year 1911, and not otherwise; that when said contract was made no provision was made for levying a tax to pay the contract price.
“(8) I find that D. A. Smith substantially complied with the conditions of the contract required to be performed before he could be paid $2,006; that is to say, he had, before receiving the -said warrant, placed the machinery, pipe and derrick on the ground in substantial compliance with the contract.
“(9) I find that after the county repudiated the contract on December 6, 1910, there was a regular term of the district court held in Sabine county, beginning in March, 1911, and I further find that plaintiff did not file suit upon the said warrant until September 7, 1911, which suit was brought in time for the September term, 1911, of said court.”

By his first and second assignment's of error appellant assails the judgment overruling his exceptions to the petition on the ground that, it appearing from the face of the petition that plaintiff’s suit was not filed at the first term of the court after the warrant became due, and no cause being shown for not instituting the suit before the first term of the court after plaintiff’s right of action accrued, appellant cannot be held liable as an indorser of said warrant

The petition shows that the suit was not brought at the first term of the court after the warrant became due and plaintiff’s cause of action thereon accrued, and no reason is shown by the petition for not bringing the suit to the 'first term of the court, and, if the warrant was a valid, binding obligation of Sabine county the failure of the bank to bring the suit at the next term of the court after the cause of action accrued would release appellant from liability as indorser of the warrant. Articles 579, 583, and 584, Revised Statutes 1911. But the petition, as we have before shown, alleges in the alternative that the warrant, though regular on its face, was invalid, and not a binding obligation of the county, because it was issued under a contract which the county was not authorized to make, and which was illegal and void. Under these allegations the indorser of the warrant is liable as an original obligor, and the rule of diligence which requires that, in order to fix the liability of an indorser, suit against the maker or original obligor must be brought at the first term of the court after the cause of action accrues has no application. If a suit against the maker of a negotiable or nonnegotiable instrument could accomplish nothing, the indorser of said instrument could lose nothing by the failure of the holder to sue the maker, and in such case the reasons of the rule which requires the holder to protest the instrument for nonpayment or to bring suit thereon at the next term of court after the cause of action accrues does not exist, and the enforcement of the rule would require the doing of a vain and useless thing, and give no protection or benefit to the indorser. When the reason for a rule ceases the rule ceases to be applicable. In volume 4, Am. & Eng. Ency. Law, p. 447, it is stated:

“If a bill or note is void, e. g., as for forgery, usury, or want of proper stamp, an indorser thereof may be held liable without proof of demand or notice.”

A similar doctrine is stated in Daniel on Negotiable Instruments, § 669a, and Parsons on Bills and Notes, 560. It seems to us that the soundness of this rule is obvious.

Our statute which requires suit to be brought at the next term of the court after the right of action accrues is a substitute for protest under the law merchant, and does not apply in a case in which protest would not be required. Durrum v. Hendrick, 4 Tex. 499; Wood v. McMeans, 23 Tex. 484; Wells Fargo v. Simpson, 19 Tex. Civ. App. 636, 47 S. W. 1024; Bank v. De Morse (Civ. App.) 26 S. W. 417.

It is well settled by the decisions of the Supreme Court of this state that, when the maker of a note is insolvent or a nonresident, protest and notice or suit at the first term of the court are not necessary in order to hold the indorser, but in such case the in-dorser may be treated as an original obligor. The ground upon which protest or suit is held unnecessary in all of the above-cited cases is that no injury could have resulted to the indorser by the failure of the holder of the obligation to protest it for nonpayment or to 'sue the maker at the next term of the court.

We think it clear that this principle is applicable to this case, and, the warrant issued by the county being void, the appellee bank was not required to comply with the rule of diligence prescribed by the statute in order to hold appellant liable for the amount paid him by the bank for said warrant.

The third assignment of error complains of the finding of the trial judge that appellant, Toole, sold the warrant to appellee bank. The contention under this assignment is that appellant cannot be held as a seller and indorser of the warrant because the bank was the depository of the funds of the county, and appellant, Toole, testified, in substance, that in presenting the warrant at the bank, and indorsing his name thereon, and receiving the $2,000 therefor, he thought he was collecting the warrant from the county, and that he did not sell the warrant to the bank, and indorsed it only for the purpose of showing that he had received the money called for by said warrant.

The evidence shows that the bank, under its contract with the county as depository df the county funds, had obligated itself to keep all county warrants at par, and, in order to comply with this contract, it purchased at par all county warrants offered to it. When the warrant in question was presented to the assistant cashier of the bank, he requested the appellant to indorse it, and, upon appellant’s compliance with the request, paid him $2,000 therefor. This was the bank’s money, and the warrant was carried by the bank as an asset, and was used as collateral for borrowing money from one of the bank’s correspondents. At the time the bank took the warrant and paid appellant therefor the county did not have sufficient funds to pay said warrant, and before payment was demanded by the bank the county had repudiated the contract under which the warrant was issued. We think the evidence fully sustains the finding of the trial judge that the bank purchased the warrant. Appellant may have thought, when he indorsed and presented the warrant to the bank and received $2,000 therefor, that he was collecting the money from the county, but the undisputed evidence shows that the bank paid its own money for the warrant, and appellant, having indorsed a void warrant and received the bank’s money therefor, snould not be permitted to' retain the money on the ground that when he receiVed it he supposed it was paid him by the county. The assignment is overruled.

Under appropriate assignments of error appellant further assails the judgment, on the ground that the evidence does not sustain the finding of the trial judge that at the time the contract under which the warrant in question was issued was executed—

“there was not sufficient revenue on hand or to be collected from all sources available for the year 1910, with which to pay the contract price for said well; that on October 31, 1910, when the said contract was entered into, the treasurer’s books showed a cash balance on hand to the credit of the county fund of $3,808, but there was outstanding in registered warrants of the county aggregating $4,000 or $5,000 against said fund; that the current expendi-' tures covered by warrants outstanding on October 31, 1910, plus the contract price for the well, $7,500, would exceed by $5,000 or more the current revenue to the credit of the general county fund from all sources for the year 1910; that the commissioners’ court, when said contract was entered into, did not have reasonable ground to believe that the contract price could be discharged out of the current revenue for the year 1910, and that they and the said Smith could not nave reasonably contemplated its payment out of such current revenue; that the contract price could not have been paid except by appropriating a large part of the general county fund to accrue for 1911, and otherwise; that when said contract was made no provision was made for levying a tax to pay the contract price.”

The Undisputed evidence shows that no provision was made by the county at the time the contract was executed for the payment of the debt created thereby. The evidence further shows that the assessed value of all taxable property in Sabine county for the year 1910 was $4,807,206, and for 1911 $4,895,221. A tax of 20 cents on the $100 was levied for 1910, and 25 cents for 1911. The bookkeeper for the county treasurer testified that from November 8, 1909, to November 14,1910, receipts from all sources amounted to $9,328.-59, and disbursements for said period were $14,196.95, and from November 14, 1910, to November 13, 1911, receipts were $10,393.31, and disbursements $11,471.64. He further testified the average yearly receipts for 1909, 1910, and 1911 were $8,483, and the average ordinary expenses of the county for those years were $8,993.

On November 14, 1910, the balance in the general county fund was $1,226.36, and there were outstanding warrants which had been issued against this fund of from $6,000 to $7,000. We fail to find in the record any evidence from which it can be concluded that there was any fund on hand at the time the contract was made, or that the current revenues for the year 1910 would produce a fund available for that purpose out of which the debt created by the contract could be paid. This being so, neither the commissioners nor Smith had reasonable grounds to believe, or could have reasonably contemplated, that the contract price of the well could be paid out of the current revenues of the county. A contract for permanent improvements, of the character provided for in this contract, executed when there are no existing or prospective funds derived from the general current revenues of the county available to meet the obligation imposed on the county by such contract is the creation of a debt within the meaning of the Constitution, and, when no provision is made for the payment of the debt, the contract is void. Constitution of Texas, §§ 5 and 7, art. 11; McNeal v. Waco,. 89 Tex. 83, 33 S. W. 322; Terrell v. Dessaint, 71 Tex. 771, 9 S. W. 593; Pendleton v. Ferguson, 99 Tex. 296, 89 S. W. 758; Howard v. Smith, 91 Tex. 15, 38 S. W. 15; Tyler v. Jester, 97 Tex. 344, 78 S. W. 1058; Biddle v. City of Terrell, 82 Tex. 336, 18 S. W. 691; Edwards County v. Jennings, 89 Tex. 619, 35 S. W. 1053; Ault v. Hill County, 102 Tex. 336, 116 S. W. 359; City of Tyler v. Building & Loan Co. (Civ. App.) 82 S. W. 1066; Peck-Smead Co. v. City of Sherman, 26 Tex. Civ. App. 210, 63 S. W. 340; Mineralized Rubber Co. v. City of Cleburne, 22 Tex. Civ. App. 621, 56 S. W. 220; Corpus Chrisü v. Woessner, 58 Tex. 462.

It would serve no useful purpose to discuss the remaining assignments of error presented in appellant’s briéf. What we have said disposes of the material questions raised by the record. Each of appellant’s assignments have been duly considered, and none of them should, in our opinion be sustained. It follows that the judgment of the court should be affirmed, and it has been so ordered.

Affirmed.