author: - CONNER, C. J.

text:
    FT. WORTH & D. C. RY. CO. v. FT. WORTH HORSE & MULE CO.
    (No. 8269.)
    (Court of Civil Appeals of Texas. Ft. Worth.
    Nov. 13, 1915.
    Rehearing Denied Dec. 18, 1915.)
    1. Carriers <&wkey;230 — Carriage oe Live Stock — Injury — Contributory Negligence-Declaration as Matter oe Law.
    In an action for injury to a shipment of live stock, the court can declare that the evidence establishes contributory negligence on the part of the shipper or his agents as a matter of law only where there has been a violation of some statute or where the evidence is without material conflict and admits of no other reasonable conclusion.
    [Ed. Note. — For other cases, see Carriers, Cent. Dig. §§ 961, 962; Dec. Dig. <©=>230.]
    2. Carriers <&wkey;230 — Carriage oe Live Stock — Injury — Contributory Negligence-Question for Jury.
    In an action for injury to a mare in1 transit, whether the plaintiff’s own agent had been guilty of contributory negligence in continuing shipment of the mare after she was kicked in the shipping pens, held for the jury under the evidence.
    [Ed. Note. — For other cases, see Carriers, Cent. Dig. §§ 961, 962; Dec. Dig. &wkey;>230.]
    3. Carriers &wkey;>216 — Carriage oe Live Stock —Liability for Injuries — Character of Animals.
    Where the proximate cause of the death of a mare in transit was a kick from another horse while in the shipping pens, not brought about by any negligence of .the railroad’s servants, and not followed by any negligence of the road in the further transportation of the mare, proximately contributing to her death, the road was not liable therefor, since in shipments of live stock the carrier is not liable for - injury arising only from the inherent nature or vicious disposition of the animal.
    [Ed. Note. — For other cases, see Carriers, Cent.- Dig. § 929; Dec. Dig. <©=>216.] •

      4. CARRIERS <&wkey;217 — Carriage of Live Stock — Injury to Mare — Liability.
    Where a mare was seriously injured either in the oars or by being kicked by another mare in the shipping pens, and the shipper’s agent had knowledge of the fact, and knew, or might have known by the exercise of due care, the danger of further transporting such mare, and declined to unload her and to take such reasonable precautions as might have resulted in her recovery, taking a chance on it, and the further transportation, unaccompanied by any negligence on the part of the railroad’s servants, resulted in the mare’s death, the road was not liable.
    [Ed. Note. — For other cases, see Carriers, Cent. Dig. § 9S1; Dec. Dig. &wkey;2i7.]
    5. Carriers &wkey;>217 — Carriage oe Live Stock — Injury to Mare — Contributory Negligence.
    Where 'the agent of the shipper of a mare, after discovering the animal’s injured condition in the ears, directed that she be shipped on through and not removed from the train, which was negligence on his part proximately contributing to such mare’s death, the shipper could not recover therefor from the railroad, although its servants were also negligent in the further transportation, since after the discovery of an injury, even if wrongfully occasioned, the duty rests upon the owner of the injured property to exercise reasonable care to save it or lessen the injury.
    [Ed. Note. — For other cases, see Carriers, Cent. Dig. § 931; Dec. Dig. &wkey;217.]
    Appeal from Tarrant County Court; Charles T. Prewitt, Judge.
    Action by the Ft. Worth Horse & Mule Company against the Ft. Worth & Denver City Railway Company. Judgment for plaintiff for $125, and defendant appeals.
    Reversed, and cause remanded.
    Thompson & Barwise and George Thompson, Jr., all of Ft. Worth, for appellant. M. B. Harris, of Ft. Worth, for appellee.
   - CONNER, C. J.

The Ft. Worth Horse & Mule Company instituted this suit against the Ft. Worth & Denver City Railway Company to recover the value of one mare worth, as alleged, $150, and which it was alleged had been killed as a result of negligence on the part of the railway company while being transported from Pueblo, Colo., to Ft. Worth, Tex. On a trial in a justice court appellee recovered a judgment for the sum of $125, and later on appeal to the county court in a de novo trial the plaintiff recovered a like judgment, from which the railway company has prosecuted this appeal.

H. J. Gray, who accompanied the shipment in question and who acted as appellee’^ agent in handling the shipment, among other things, testified to the effect that the mare in question, which was one of a carload being transported, had been injured by the jamming of the cars together while switching at Amarillo, whereby the animal had been thrown to the floor of the car and injured by other horses falling over and against her, etc. The testimony offered in behalf of appellant, however, tended to show that the mare had been kicked and seriously injured by one of the other horses while in the shipping pens at Amarillo, of which the said Gray had been informed and thereupon advised to take the mare out of the shipment and leave her at Amarillo. It is urged under the first assignment that the evidence establishes contributory negligence on the part of appellee’s said agent or representative as a matter of law. This can be declared only where there has been a violation of some statutory enactment, or where the evidence is without material conflict and admits of no other reasonable conclusion. Adams v. Railway Co., 164 S. W. 853. As stated, there was evidence, and much evidence, to the effect that the mare had been kicked and seriously injured by another animal in the pens, and that the appellee’s caretaker had been informed of that fact and afforded an opportunity to unload the animal in question with a view of her ultimate recovery. But the agent denied that the animal had been kicked, and some of his testimony is susceptible of the construction that he did not apprehend the extent of the mare’s injury, so that we have not felt prepared to sustain appellant’s first assignment of error.

We do think, however, that the defensive issues should have been submitted to the jury, and error has been assigned to the court’s refusal to do so, and these assignments we think must be sustained. Among other things, after having testified that the cars were jammed as a result of which the mare was thrown against the end of the car and thus injured, H. J. Gray testified that she, the mare—

“appeared to be hurt. She was hurt across the loins and across the back. She would try to get up, and she could not get up in her hind parts; she would get up with her front feet, and could not get up with her hind parts; she was hurt in the back. She was broke down in the back; that is where I pronounced her hurt. The trainmen and I got her up again', and put a 2x6 between her and the others, and left her standing up in the end of the car. The train stopped there quite awhile, and they thought I had better unload her, and the train was waiting there awhile, and she seemed to be strengthening up, and I thought maybe she would ride; the train was just about ready to pull out, so I took a chance on her riding, and after they started up she went back down, and never did get up any more. * * * There was no way of telling how badly she was hurt; you could not tell just exactly; you had to guess at it; just took a chance on it, and that was all. * * * These men asked me hadn’t I better unload this animal, but she was up on her feet, and I says, ‘Maybe she will go through and make the trip all right, and I will let her go;’ we never took her out of the car. They told me she had been kicked, and I told them she had not been kicked.”

W. T. Graham testified, among other things:

“I remember this shipment because the man in charge of the stock at first decided to unload these animals at the pens on account of this mare being injured; after we put them in the train he decided to unload them, and we took the ear out of the train on the main line, and he stopped us and said the injured animal might just as well die in the ear as in the pen, if she was going to die, and for us to put the car back and let them go on. This circumstance caused me to remember this) particular shipment. * * * The animal that was injured in the pens got down after she got in the car, and then got up, and trembled and sunk down again. We got the injured animal up after she was loaded into the car and had gotten down, but that was about all it could do, on account of the injury it had received from being kicked by another mare while in the pens, and it was not due to any jamming of the car; the animal was in bad shape, and was not able to stay up, on account of the injury it had received in the pens.”

R. E. E. Smith testified, among other things that:

“When the man1 in charge of the stock came from the restaurant where he had been eating, I explained the case. He walked up and says, 'What is the matter?’ A crowd was standing around there, and I explained the case to him; also I made the suggestion that he take the stock and unload it, and get a veterinary to take charge of the animal, and he finally decided to do it, and he says, ‘Well, I believe I will do that;’ so we set the car for the main line and put the caboose back on the train and it stayed there probably several minutes—10 or 12 minutes— and he says, ‘If you boys will be good enough to put the stock back on the train, I will take her on.’ He made the statement to us and we went and cut the caboose off and put the car of stock on the train, and he says, T hate to lose the market in Ft. Worth.’ He says, T would rather lose the animal than lose the market at Ft. Worth.’ ”

There was other testimony of like tendency, hut enough has been quoted to illustrate the conclusions we have reached. We think it must now be settled that in shipments of live stock the carrier is not liable for injuries arising alone from the inherent nature, disposition, or vice of the animals. Railway v. Berry, 170 S. W. 125. So that, if the proximate cause of the death of the animal under consideration was a kick or kicks by other animals while in the pens at Amarillo, not brought about or induced by any negligence on the part of appellant’s servants, and not followed by any negligence of appellant in the further transportation proximately contributing to the final result, then appellant was entitled to a verdict in its favor, and the jury should have been so instructed.

Or in whatever way the injury may have been brought about, if the mare was seriously injured at Amarillo, either in the pens or in the cars, and knowledge of this fact was brought home to appellee’s caretaker, or agent, and he either knew, or might have known by the exercise of due care, the danger of further transportation, and with such knowledge declined to unload her and to take such reasonable care and precaution as might have resulted in the mare’s recovery, and, as he expresses it, “took a chance on it,” and the further transportation, unaccompanied by any negligence on the part of appellant’s servants, resulted in the death of the mare, then also would appellant have been entitled to a verdict. In such a state of the evidence, should the jury so find, ap-pellee’s servant must be held to have deliberately assumed the risk of the mare’s death.

Or, if after a discovery of the mare’s injured condition at Amarillo, the direction of appellee’s agent to continue her shipment constituted under all of the circumstances, such a want of ordinary care as would amount to negligence on his part, and if such negligence proximately contributed to the final result, then it would be the duty of the jury to find for appellant, notwithstanding there may also have been negligence on the part of appellant’s servants in the further transportation, as well as in bringing about the injury. For the law is that, after the discovery of an injury, even wrongfully occasioned, the duty rests upon the owner of the property injured to exercise reasonable care to save it or to lessen the injury, if it can be done. K. C., M. & O. Ry. Co. v. McCunningham, 149 S. W. 420.

We concluded that appellant was entitled to have the several theories we have suggested arising from the evidence presented in appropriate instructions to the jury. This was not done, although appellant properly excepted to the court’s charge and requested several special instructions which at least suggested such defenses. See Olds Motor Co. v. Churchill, 175 S. W. 785.

It is ordered that the judgment be reversed, and the cause remanded for a new trial.

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

      ©=jFor other oases see same topio and KEY-NUMBER tn all Key-Numbered Digests and Indexes


source: Caselaw Access Project

author: HALL, J.

license: Public Domain

text:
    DEXTER v. FIRST GUARANTY STATE BANK et al.
    (No. 871.)
    (Court of Civil Appeals of Texas. Amarillo.
    Dec. 11, 1915.)
    1. Banks and Banking <&wkey;96—Ultea Yibes CONTRACTS—SEPARABLE CONTEACTS.
    Where certain banks and an individual associated themselves to trade in cotton, and insured cotton in which they were to deal against certain perils, agreeing to pay premiums on the 15th day of each month for the preceding month, which agreement was reduced to writing and signed by “West & Co., Assured,” the name under which the hanks and their partner did business, they were liable on such agreement, since the contract for insurance was separate and apart from the partnership agreement, and was not in itself ultra vires.
    [Ed. Note.—For other cases, see Banks and Banking, Cent. Dig. § 230; Dec. Dig. i&wkey;>96.]
    2. Banks and Banking <&wkey;96—Implied Con-teaot.
    Such banks were liable, apart from the question of ultra vires, upon quasi contract for premiums due under the policies.
    [Ed. Note.—For other cases, see Banks and Banking, Cent. Dig. § 230; Dec. Dig. &wkey;?96.]
    3. Banks and Banking <&wkey;>101 — Ultea Vires Contract — Formation of Firm — Recovery of Profits by Partner.
    Where banks made an ultra vires association with a natural person to deal in cotton, such natural person could recover from them his -share of any profits made by the firm, or, if the relation of principal and agent existed between the banks and himself, any compensation clue him, since corporations must perform the obligations imposed upon them by their ultra vires contracts fully executed by the other contracting party.
    [Ed. Note. — For other cases, see Banks and Banking, Cent. Dig. §§ 237, 238; Dec. Dig. <§=» 101.)
    Error from District Court, Hardeman County; J. A. Nabors, Judge.
    Action by George J. Dexter against the First Guaranty State Bank and another. To review a judgment of dismissal, plaintiff brings error.
    Reversed, and cause remanded.
    Locke & Locke, of Dallas, for plaintiff in error. M. M. Hankins, of Quanah (Jno. W. Yeale, of Amarillo, of counsel), for defendants in error.
   HALL, J.

Plaintiff in error, as the as-signee of the causes of action, instituted this suit to recover from the First Guaranty State Bank and the Citizens’ National Bank of Quanah premiums alleged to have been due the Home Insurance Company and Royal Insurance Company, Limited, of Liverpool, on certain policies issued by such companies, respectively, in favor of West & Co., of Quanah, Tex., covering certain bales of cotton. The defendants filed general and special exceptions, all of which were sustained by the court. The plaintiff declining to .amend, the suit was dismissed. '

We adopt from appellant’s brief the following as the substance of the material allegations of the petition:

“(1) The Home Insurance Company issued its policy No. 305, whereby, in consideration of a premium hereinafter to be specified, it insured ‘West & Co., of Quanah, Tex., * * * on cotton in bales,’ etc.
“(2) Premium was agreed upon, and policies specified ‘that the assured should pay such agreed premium * * * on the 15th day of each month for the preceding month.’ Premium agreement reduced to writing and attached to policy and is copied in petition. It is signed by ‘West & Co., Assured,’ and promises payment of premiums as stated.
“(3) After issuance of policy, and as required therein, West & Co. furnished daily reports of •cotton handled, and, in accordance with the same, premiums became due of certain amounts, detailed statements of which are attached to the petition.
“(4) Though the premiums shown thereby to be due for certain months were duly paid, the premiums shown thereby to be due for the months of December, 1912, and January and February, 1913, amounting to $377.32, are unpaid.
“ (5) The plaintiff has reason to believe' that reports furnished by West & Co. of cotton handled are incorrect, and has been informed by West & Co. that on February 1, 1913, they had on hand 1,721 hales, instead of 751, as reported, and on account of this difference alone the premium for the month of February, 1913, alone, would he increased by more than $125. The policy provides that the company shall be permitted to examine the hooks of the assured and its correspondents for the purpose of verifying the accuracy of the reports, and company ■demanded in February, 1914, permission to ■examine hooks of West & Co., and also defendant hanks, and such requests were refused. .Plaintiff alleges on information and belief that there-was due to the insurance company, at the time of the termination of the policy in February, 1913, and yet remains unpaid, the sum of $1,000 for premiums, in addition to the sum of $377.33 above mentioned.
“(6) Royal Insurance Company, Limited, issued its policy No. M — 107883, ‘whereby it insured West & Co., of Quanah, Tex., against certain adventures and perils on cotton in bales,’ etc.
“(7) The policy was issued in consideration of premiums at agreed rates to be paid to the company on demand on account of all shipments made thereunder.
“(8) West & Co. made various shipments of cotton coming within the terms of the policy and sent memoranda thereof to the company, as required by the policy, and according to such memoranda premiums of certain amounts became due for such shipments, detailed statements of which are attached to the petition.
“(9) Premiums for shipments during certain months were paid to the company, but premiums for shipments during the months of December, 1912, and January, 1913, and for errors in premiums on shipments in previous months, amounting to $1,233.43 in all, remain unpaid, though demand for the payment thereof has often been made.
“(10) West & Co., named as assured in said policies, consisted of one T.. J. West, of Quanah, Tex., and the defendant banks. West & Co. was a trade-name used by them in buying, selling and shipping cotton under the arrangement hereinafter set out. T. J. West was the active manager of said business, but the defendants were the owners (each, in entirety, of a portion) of all the cotton bought, sold, or shipped in the course thereof, and the said West, in dealing with reference to such cotton, was acting as their agent; that is to say as the' agent of whichever of them owned such cotton.
“(11) In the summer or early fall of 1912, prior to the purchase of any cotton under which premiums became due to said insurance company under said policies, the said T. J. West entered into an agreement separately with each of the defendant banks in substance wholly or partly as follows: The said T. J. West, who was regarded by each of said banks as an intelligent, experienced, well-informed, and competent cotton man, as well as a man of integrity, would conduct a cotton business in the name of West & Go.; the said West under said name would negotiate the purchase of cotton and the sale of the same; the bank would supply all the money necessary for the purchase of such bales of cotton as the said West might call upon it for; it would take the title to the cotton in itself at the time of furnishing or paying for the purchase of the same, and would retain such title and all the symbols and evidence of the ownership and possession of said cotton, until a sale satisfactory to itself was negotiated by the said West, when it would transfer the title and surrender the symbols and evidence of ownership and possession in exchange. for the proceeds of such sale; and that a certain method would be pursued in the conduct of the business as is set out at length in the petition.
“(12) Such arrangement was followed, ‘and all the bales of cotton on which any premiums became due to said insurance companies under said policies were entirely paid for by one or the other of said banks, and the property therein passed to the hank which paid for the same, and remained in such bank, unless sold to the other bank, ffuring all of the time when the same was subject to any risk covered by either of said policies. All of the premiums due under said policies were owed on account of cotton purchased by one or the other of said banks as aforesaid, and were earned during the time when such cotton remained the property of one or the other of said banks.’
“(13) Before said banks, or either of them, would provide any money for the purchase of any cotton under the arrangement aforesaid, said banks, and each of them, insisted that insurance on said cotton should be obtained against the peril of fire, so that they would be protected from any loss which might occur while they were the owners of said cotton, and also that insurance should be obtained against all perils on cotton, the sale of which was negotiated by the said West, during the time that the same' was in course of shipment to the p'ur-chasex-, so that they would be protected in the credit which they extended upon the receipt and acceptance of a draft drawn on such purchas-1 er for the amount of the purchase price. Accordingly, at the special instance and request and by the direction of each of said banks, and for the use and benefit of each, as to all cotton or drafts purchased by it as aforesaid, the said West, in the name of said West & Co., applied for and obtained from said company said policies of insurance. Said policies were delivered immediately upon their writing to the custody and possession of the defendant the Eirst Guaranty State Bank, and have ever since so remained, except that the policy of said the Home Insurance Company was delivered up to said company and canceled on Febraary 14, 1913, and that said Royal Insurance Company, Limited, policy was delivered up and canceled in June, 1913. In procuring said policies from said companies the said West was acting as the agent and representative of each of said banks. Said banks were at all times the owners of the cotton at risk under said policies, or of the drafts to which certificates of insurance were attached, and the benefits of said policies accrued directly and immediately to them. They knew that said policies had been obtained, they knew the- terms thereof, and knew that premiums were daily accruing to said companies thereunder, and that said companies were expecting payment for the same. They knew, also, that they were substantially the sole beneficiaries of said insurance, and that the premiums thereon would be paid only out of funds supplied by them or derived out of said cotton. With such knowledge they accepted the benefit of such insurance, and became bound to pay for the same, and they expected and intended to pay for the same. All the premiums aforesaid that were paid to either of said companies as afoi'e-said were paid, or the moneys were supplied for such purpose, by one or the other of said defendant banks. * * *
“(18) By reason of the premises aforesaid, each of said defendant banks became liable and pi’omised to pay to each of said companies the premiums accruing to such company under its said policy on account of all bales of cotton for which it supplied the purchase price and took the title as aforesaid, and on account of all shipments of cotton in connection with which drafts drawn in the name of said West & Co. on the purchaser thereof were purchased and owned by such banks, etc.
“(19) Neither the plaintiff, however, nor either of said insurance companies, has any knowledge as to number or value of the bales of cotton owned during said months by either of said banks, or what portions of such premiums are' due and payable by either.
“(20) After said premiums matured and remained unpaid, demand was made by said insurance company upon each of said banks for the payment thereof; but they wholly failed and refused to pay the same, ancLthe same remain wholly unpaid.” ”

The following are the special exceptions which were sustained:

“(a) Said petition fails to show any mutuality between the plaintiff and these defendants:
“(b) Said petition fails to show that these defendants had knowledge of the fact of the nonpayment of the premiums contracted to be paid by West & Co.
“(c) The same fails to show any agreement upon the part of these defendants to pay the premiums due and owing by West & Co.
“(d) The same fails to show that these defendants knew or were chargeable with the knowledge of the nonpayment of said premiums.
“(e) The facts pleaded by plaintiff, seeking to show a partnership, are insufficient to establish a partnership.
“(f) 1. The facts stated, if they did show a partnership, would be such a partnership as would be void in law on account of the incapacity of a state bank or a national bank to enter into a partnership. 2. Such partnership as alleged would be against public policy and void.
“(g) Because under the law of the- state of Texas a state bank cannot enter into a partnership such as is attempted to be set up in plaintiff’s petition.
“(h) That this court has no jurisdiction of this suit, for the reason that the amount sued for is less than $500, while it is stated in subdivision 5 of plaintiff’s petition that they have an idea that West & Co. owe them $1,000 in addition to $377.33, yet there ai-e no facts alleged as against these defendants which could be a basis for any charge, and especially any charge over and above $377.33, and these defendants now here say that this court is without jurisdiction to hear and determine this cause.
“(i) That the exhibits attached to said petition show by their terms that West & Co., even. were they parties to this suit, were not insured and they could not recover on any claim for loss; neither could any other party recover anything on said policies. By reason of the stipulations contained in the policies they were exempt from liability of any third party, and if West & Co. were parties to this suit they could successfully plead failure of consideration herein, which is now here pleaded so far as the same may affect these defendants.”

In addition to the statement hereinbefore made, as to the substance of the petition, the plaintiff alleged in paragraph 14 that on 'February 3, 1914, West & Go. drew a check on the defendant the First Guaranty State Bank in favor of one S. J. Matthew, the agent of the Royal Insurance Company, Limited, in the sum of $538.46, that being the amount due on premiums for the month of December, 1912; that Matthew presented the check to the drawee bank; that the same was marked “Paid,” and a deposit slip for the amount thereof was delivered to the said'Matthew; that thereafter, on the same or the next day, the bank struck the credit from its books and erased the paid stamp on the check, returning the same to Matthew, and obtained from Matthew, without the knowledge or consent of the insurance company, said deposit slip. In paragraph 16 of the petition it is alleged in substance that on February 4, 1913, after the recall of the deposit slip, Matthew, acting in behalf of the insurance company, informed said banks that the companies would immediately request the cancellation of their policies, upon learning of such circumstance, and inquired whether the banks desired such policies terminated; that the banks protested against the cancellation of the policies, and promised, each with respect to the cotton belonging to it, and covered by said policies,, that it would pay all premiums thereafter ae-cruing; that said company, in reliance upon such promises, permitted said policies to continue in force. It is further alleged in paragraph 17, in substance, that since said last-named date there became due to the Home Insurance Company $70.97, as premiums under its said policy. These paragraphs allege an express contract, and there seems to be no contention upon the part of appellees with reference thereto.

The first counter proposition urged by ap-pellees is that:

“Recovery founded upon an ultra vires contract void in law cannot be had directly or indirectly; where in order to maintain such recovery it is necessary to look to or to have recourse to such contract, nor can the parties to it by subsequent acts, or the courts, infuse life into it.”

This is the principal question raised upon this appeal. In support of the proposition, we are cited by appellees to decisions rendered by the Supreme Court of the United States and the decisions of state courts other than our own.

That the allegations in the petition are a sufficient declaration upon an express written contract must be admitted, and but for the issue of ultra vires their sufficiency as against a general demurrer could not be questioned. This is also true of that portion of the petition which declares upon a quasi contract. It may be conceded that the defendant banks were not authorized by their charters to enter into a partnership or any other business arrangement with West under the terms of which they could become the owners of cotton purchased upon the open market, to be thereafter sold, either for their joint or several account. Such an agreement on the part of the corporations is manifestly ultra vires. The plaintiff’s allegations, however, do not show that the insurance companies were parties in any sense to that agreement. Under the allegations, as we understand them, the insurance companies were not concerned in either the success or failure of the business venture. They were entitled to their premiums, whether the cotton transactions resulted in profits or losses. Their undertaking was collateral to the purpose and intention manifested by the contract to buy cotton. In the very nature of things, they would not be entitled to premiums, nor could they become liable for losses, until cotton had been acquired by West & Co. Their connection with the ultra vires transactions and operations described in the petition was purely a contingent one. Granting the invalidity of the contract, or business arrangement between West and the defendant banks, because it was ultra vires, it in no degree taints the separate contract alleged to have befen made between the banks and insurance companies.

It cannot be successfully asserted that the act of a corporation in insuring its property, .or property in which it has an interest, is ultra vires. The right to insure the building and fixtures owned and used by it in pursuing its legitimate business is an incidental power, and need not be set out in its charter; nor do we think the law condemns a contract of insurance entered into for the protection of its property, even though it be acquired through an ultra vires act. The property itself is not on this account absolute contraband. This suit is not based on the contract to buy cotton, but on the one to pay premiums due upon policies covering cotton alleged to be owned by defendants. Even though the cotton was obtained by the exercise of an authority not granted them by law, it is nevertheless the absolute property of the banks, and any contract which they may see fit to make with reference to its insurance, storage, or sale, if otherwise legal, would not be invalidated because they acquired it by exceeding their corporate powers. It is uniformly held in numerous Texas cases that corporations must perform the obligations imposed upon them by their ultra vires contracts when the same have been fully executed by the other contracting party. North Side Ry. Co. v. Worthington, 27 S. W. 746; Steger v. Davis, 8 Tex. Civ. App. 23, 27 S. W. 1068; Edwards County v. Jennings, 33 S. W. 585; Galveston & W. Ry. Co. v. City of Galveston, 37 S. W. 27; First National Bank of Greenville v. Greenville Oil & Cotton Co., 24 Tex. Civ. App. 645, 60 S. W. 828; Continental Fire Ass’n v. Masonic Temple Co., 26 Tex. Civ. App. 139, 62 S. W. 930; Kincheloe Irrigation Co. v. Hahn Bros. & Co., 105 Tex. 231, 146 S. W. 1187; San Antonio Hardware Co. v. Sanger, 151 S. W. 1104; Phoenix Land Co. v. Exall, 159 S. W. 474.

Under this rule, even West could recover from the banks his share of any profits, if a partnership existed, or his compensation, if the relation of principal and agent existed, which might be shown to be due him. For a stronger reason, the defendant banks should not be permitted to take the protection afforded them by the policies of insurance, and avoid a just indebtedness growing out of it, by setting up an illegal contract between themselves and West; and because plaintiff’s petition may disclose the existence of such a contract does not render it subject to demurrer. The Texas courts have never given ear to such defense. In Wallerstein v. Ervin, 112 Fed. 124, 50 C. C. A. 129, decided by the Circuit Court of Appeals for the Eastern District of Pennsylvania, where a corporation had entered into a similar arrangement as is disclosed by the record in the instant case, and sought to avoid the effect of the relation by alleging that it acted ultra vires in advancing the money to Ervin & Fagin in the prosecution of the firm’s business, it is held that the corporation was not entitled to file its claim in the bankruptcy proceedings of the firm, and have the same allowed, using this language:

“These transactions were, at the time of the adjudication of bankruptcy, fully executed, and the appellant could not avoid the legal consequences of what it had already completely done by showing that in so doing it had overstepped the bounds of its lawful authority. The trustee in bankruptcy did not seek to enforce an ultra vires contract, nor to compel a performance of any of its provisions. He simply insisted that a status which had been created by what had actually occurred should not, at the instance of a party to its creation, and to the prejudice of innocent third parties, be utterly ignored, and we think that in sustaining this insistence the court below was clearly right.”

See, also, 4 R. C. L. §§ 581, 678, 680, 681.

It is our opinion that the court erred in sustaining the general and special demurrer, and dismissing the case.

The' judgment is reversed, and the cause remanded.
      &wkey;sFor other cases see same topic and KEY-NUMBEB in all Key-Numbered Digests and Indexes


author: DUNKLIN, J.

text:
    CLEBURNE ST. RY. CO. v. BARBER.
    (No. 7894.)
    (Court of Civil Appeals of Texas. Ft. Worth.
    June 27, 1914.
    Rehearing Denied Nov. 7, 1914.
    Writ of Error Denied by Supreme Court Nov. 3, 1915.)
    1. Estoppel <§=115 — Pleading and Issues.
    In a suit against a street railway company for material furnished to its lessee and alleged agent and used in the improvement of the company’s park property, the submission of whether the company had ever previously given its president and general manager power to purchase material to improve the park property and to give a lien thereon was erroneous, where the issue was not pleaded by plaintiff, and was one of estoppel only.
    [Ed. Note. — For other cases, see Estoppel, Cent. Dig. § 305; Dec. Dig. <@=115.]
    2. Corporations <§=432 — Authority of Officers — Evidence.
    In such suit, where the authority of the defendant company’s president and general manager to purchase material for the improvement of its park property was in issue, the refusal to permit the company to prove by its president that he had never made an important contract without consulting with and obtaining the consent of the company’s board of directors, upon plaintiff’s objection that the minutes of the board were the best evidence was erroneous, in view of the president’s previous testimony as to important transactions for the company negotiated by him with the consent of its board, and which had not been entered in the minutes, and that the board had not authorized him to agree to a lien on the property, and the want of proof of any by-law authorizing him to contract for such improvement.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. §§ 1717, 1718,1724, 1726-1735, 1737, 1743, 1762; Dee. Dig. <§=432.]
    3. Corporations <§=432 — Authority op Officers — Evidence—By-Laws.
    In such suit the exclusion of the company’s by-laws specifying the duties and powers of its president was erroneous, since they were material on the issue of his power to bind the company by the contract'asserted by plaintiff.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. §§ 1717, 1718, 1724, 1726-1735, 1737, 1743, 1762; Dec. Dig. <§=432.]
    4. Principal and Agent <§=148 — Authority of Agent — Notice. •
    Persons dealing with known agent are chargeable with notice of the powers of such agent.
    [Ed. Note. — For other cases, see Principal and Agent, Cent. Dig. §§ 534-552; Dec. Dig. <§= 148.]
    5. Corporations <§=432 — Powers of Agent —Evidence.
    In a suit against a corporation to recover for material furnished to its lessee or agent in the improvement of its park property and to foreclose a lien, testimony of the lessee as to his conversation with defendant’s president in which the president authorized the giving of a lien for the materials was inadmissible, without a proper predicate showing prima facie that the president had authority from defendant to authorize the lessee to place a lien on the property, or that defendant was estopped to deny such fact.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. §§ 1717, 1718, 1724, 1726-1735, 1737, 1743, 1762; Dec. Dig. <§=432J
    6. Mechanics’ Liens <§=304 — Authority of Owner — Material—Personal Judgment.
    In such suit, where it appeared that any authority of the lessee to place liens was limited to a lien on the material necessary for a certain improvement, a personal judgment against the company for any sum was not authorized, nor was such judgment authorized by the note sued on, which, neither in the body thereof nor in the signature thereto, purported to be the obligations of the company.
    [Ed. Note. — For other cases, see Mechanics’ Liens, Cent. Dig. §§ 632-635; Dec. Dig. <§= 304.] .
    7. Mechanics’ Liens <§=277 — Action to Enforce — Issues.
    In such suit whether the company had been in possession of the park property in the improvement of which the material was used since a certain date was immaterial.
    [Ed. Note. — For other cases, see Mechanics’ Uisns, Cent. Dig. §§ 546 — 554; Dec. Dig. <§=
    8. Mechanics’ Liens <§=280 — Action to Enforce — Evidence.
    In such suit a supplemental contract between the company’s lessee or agent and the company changing some of the terms of the original lease, and evidence that the defendant’s president had expressed his pleasure with the improvement were inadmissible.
    [Ed. Note. — For other cases, see Mechanics’ Liens, Cent. Dig. §§ 557-563; Dec. Dig. <§= 280.]
    9. Appeal and Error <§=1067 — Harmless Error — Instructions—Issues.
    In a suit to enforce a claim for materials against defendant railway company, alleged to have been contracted for by its lessee or agent, where it did not appear that plaintiff was allowed a recovery upon the ground of a partnership between the company and such agent, the refusal to instruct that there was no issue of partnership was not prejudicial.
    [Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. § 4229; Dec. Dig. <§=1067; Trial, Cent. Dig. § 475.]
    10. Mechanics’ Liens <§=277 — Action to Enforce — Issues—Suretyship.
    In a suit against an individual, his surety, and a street railroad company for the value of materials furnished to the individual, as the company’s lessee or agent, and used by him in improving the company’s property, an answer alleging that such alleged lessee was not the company’s agent in purchasing the material or in executing the notes and liens to secure it, that the property had been leased to such lessee, who had bound himself to make the improvements which on expiration of the lease were to become the property of the company, did not raise the issue of suretyship between the company and its lessee.
    [Ed. Note. — For other cases, see Mechanics’ Liens, Cent. Dig. §§ 546-554; Dec. Dig. <§£=> 277.]
    11. Tbial <S=>240 — Argumentative Instructions.
    Argumentative instructions are properly refused.
    [Ed. Note. — For other cases, see Trial, Cent. Dig. § 561; Dee. Dig. <S=»240.]
    12. Mechanics’ Liens <@=>58- — Authority oe Owner — Lessee.
    The fact that a lessee was required to put certain improvements on the property which, on expiration of the lease, were to become the property of the lessor, would not authorize the fixing of a mechanic’s lien upon the property under a contract with the lessees, independent of the question whether the company’s general manager consented that the lessee might give the lien.
    [Ed. Note. — For other cases, see Mechanics’ Liens, Cent. Dig. §§ 72, 73; Dec. Dig. <@=>58. ]
    Appeal from District Court, Johnson County; O. L. Lockett, Judge.
    Suit by A. C. Barber against the Cleburne Street Railway Company and others. Judgment for plaintiff against the other defendants, and against the Railway Company, with foreclosure of lien, and the Company appeals.
    Reversed and remanded for another trial, leaving the personal judgments against the other defendants undisturbed.
    J. M. Moore and Walker & Baker, all of Cleburne, for appellant. S. C. Padelford and H. P. Brown, both of Cleburne, for appellee.
   DUNKLIN, J.

A. C. Barber instituted this suit against A. J. Habermacher, Lee Yater, and the Cleburne Street Railway Company to recover the value of certain building material furnished by plaintiff to Habermacher and used by him in the construction of certain improvements upon a park owned by the street railway company known as “Lovelady Park,” situated in the suburbs of the city of Cleburne, and for foreclosure of a mechanic’s lien on the park and improvements, the land upon which the park is situated being about 20 acres. A judgment was rendered in favor of the plaintiff against Habermacher for $1,-873.39, against Lee Yater as guarantor for $600 of said sum, and against the street railway company for $850 of said sum, and with a decree of foreclosure of the mechanic’s lien claimed on the entire park for said sum of $850. From that judgment, the street railway company has appealed.

It was alleged in plaintiff’s petition that the building material was furnished to the street railway company and Plabermaeher, and was used in improving and making additions to a certain skating rink, which had theretofore been constructed upon the park. An itemized account of the material so furnished was attached to the petition as a part thereof. It was further alleged that Haber-macher executed a written mechanic’s lien contract, together with notes for the value of the material so furnished; that the mechanic’s lien contract was in the form of a deed of trust, with power of sale upon the land and improvements. The claim of lien upon the property was predicated upon two grounds: First, that the material was purchased both by Habermacher and by the street railway company; second, upon the allegation that Habermacher executed the lien contract and notes for the purchase price of the material both for himself and the street railway company, and that he was duly authorized by the company as its agent to execute the same, the notes specifically giving a mechanic’s and materialman’s lien on the premises for such material.

In addition to a general denial, the street railway company, among other special defenses, pleaded that Habermacher was not its agent in purchasing the material, or in the execution of the notes and liens to secure the same, and, if Habermacher ever attempted to create a lien upon the property his act in so doing was wholly without authority from the company, or any one authorized to act for it. Defendant further alleged that prior to the date of the contract upon which plaintiff’s suit is predicated, the park was leased to Habermacher by the street railway company for a period of five years, with the right to renew the same for a period of another five years upon certain conditions; that as a part of the consideration for the lease Habermacher bound himself to place and lay upon the floor of the skating rink a floor of maple wood and to make other improvements in the park, which said improvements were at the expiration of the lease to become the property of the company, all of which was known to the plaintiff at the time of his transaction with Habermacher.

By a supplemental petition plaintiff denied the allegations of the special answer, and specially denied that he had any notice of the lease contract pleaded by the defendant at the time he contracted with Habermacher to furnish the materials. In this pleading plaintiff further claimed a lien by reason of the facts alleged in the defendant’s answer, namely, that the material was purchased and used by Habermacher for. the construction of improvements upon the park during the existence of his lease and as one of the considerations for the lease and in compliance with the terms of the lease contract that the improvements, when so constructed, should become the property of the Railway Company.

The case was tried before a jury, who, in obedience to instructions from the court, returned findings upon special issues.

The lease from the street railway company to Habermacher was introduced in evidence. It was dated July 13, 1911. It was a lease of the park for the period of five years from the date of the instrument, with the right to Habermacher to operate the skating rink, dancihg pavilion, eating stands, and cold drink stands and other amusements, with the privilege of renewing the lease for an additional period of five years. The consideration for the lease, as shown in the instrument, in part, was Habermaeher’s contract to pay to the railway company $1,600 per annum for each year, payable in installments of $200 at the beginning of each year and $50 on the second Monday in each month thereafter until the full sum of $1,600 shall be paid. Paragraph 5 of the lease reads as follows :

“As a further consideration for the use of the privileges of said park, the party of the second part [the lessee] agrees and obligates himself to at once lay and place upon the existing floor of the skating rink in said park a floor of maple wood, and to securely nail such floor to the existing floor and to leave the surface of such maple floor perfectly smooth, and to build in said skating rink a suitable cloakroom.”

Paragraphs 11 and 12 of the lease read as follows:

“(11) The party of the second part agrees to take out insurance on the pavilion in such park in the name of the party of the first part in the sum of $1,000, for the use and benefit of the party of the first part, which insurance is to be kept alive and in force during the life of this lease, and, in case said pavilion is destroyed by fire or water during this lease, then the party of the first part agrees to immediately restore such pavilion or other improvements that may be destroyed.
“(12) It is agreed that all improvements made in such park in the nature of fixtures by the party of the second part during the life of this lease shall become the property of the party of the first part at the expiration of this lease.”

Other terms of the lease are not deemed to be material to the controversy, and therefore are not referred to. It does not appear that the lease was ever filed for record in the county clerk’s office. The skating rink, as originally constructed, was finished about the 1st of July, 1911, and was opened to the public on July 4th.' It was then in charge and control of Habermacher, who was operating and managing it under a contract with the railway company, the receipts from such operation being divided equally between the parties to the contract; the street railway company furnishing the park, rink, and car service, and Habermacher furnishing the skates. The operation of the ring continued under this contract until the execution of the lien contract referred to above.

Plaintiff introduced in evidence a deed of trust executed by Habermacher in favor of plaintiff, Barber. The property described in the deed of trust and upon which the purported lien was given was as follows:

“All of the improvements on a tract of land known as Lovalady Park and leased to and used as a park by A. J. Habermacher; also a skating rink, drink stand, etc., and more especially a certain itemized bill of material sold to the said A. J. Habermacher; also an itemized bill of labor in constructing the improvements, together with all and singular the rights, members, hereditaments, and appurtenances to the same in any manner belonging or appertaining.”

The instrument contains the further stipulation:

“This conveyance, however, is intended as a trust for the better securing of A. C. Barber of the county of Johnson and state aforesaid, in the payment of 4 certain promissory notes of which the following is a substantial copy: One note for $700, due on or before 120 days; one note for $200, due on or before 120 days; one note for $600, due on or before September 1, 1912; one note for $837.29, due on or before September 1, 1912 — bearing interest at the rate of 10 per cent, per annum from date.”

The instrument was dated: July 15, 1911, acknowledged before a notary public October 21, 1911, and filed for record in the county clerk’s office in Johnson county on November 9, 1911. Plaintiff also introduced in evidence two promissory notes dated July 15, 1911, both payable to plaintiff and sign.ed by Habermacher, one for the sum of $600, and the other for $837.29, both due and payable September 1, 1912, stipulating for interest at the rate of 10 per cent, per annum, and stipulating further that they are secured by “mechanic’s, materialman’s, laborer’s, and contractor’s lien” on improvements theretofore and thereafter placed on the land by Habermacher, and both containing the usual stipulations for attorney’s fees of 10 per cent, in case they should be placed in ■ the hands of an attorney for collection. The evidence further showed that defendant Lee Xater guaranteed to plaintiff the payment of $600 of the indebtedness so contracted by Habermacher.

Habermacher testified that before he began operating the rink under the first contract; and before he had purchased the skates with which to do so, he insisted to Daniel Hewitt, the president and general manager of the street railway company, that the pine floor in the rink as constructed was not suitable, as it was too soft and would soon cut out, and that the same should be replaced with maple flooring, which was a hard wood; that Hewitt told him then that the company had spent its last dollar and could not make such change, but requested Habermacher to purchase the material for the maple floor and reimburse himself therefor out of the company’s half of the earnings from the operation of the rink under the original contract. He testified, further, that that conversation occurred just prior to July 3d; that on the latter date he applied to plaintiff, Barber, who was engaged in the lumber business, to purchase from him the maple flooring to be used in the lease, telling Barber at the same time that Hewitt had told Habermacher that the company had spent all its money and could not purchase the lumber, but had authorized Habermacher to purchase it and reimburse himself out of the company’s share of the earnings. According to his testimony, plaintiff, in reply to that statement, said that he would be willing to sell him the flooring provided the street railway company would give its authority to Habermacher to place a lien on the material before it was sent out to the grounds; that thereupon he called Mr. Hewitt over the phone and had the following conversation with him:

“I says: ‘Mr. Hewitt, Mr. Barber has found the hard wood floor in XPt. Worth, and says he can let us have it the way you said to get it, provided you will consent that the company wrill give authority to place a lien on. any material that goes out there; be can’t send it out there without you say so.’ He says: ‘Tell him to get it and rush it through.’ ”

He further testified that Barber was present at the time he so telephoned to Mr. Hewitt, and that he repeated to Barber what Hewitt said in that conversation. Haber-macher testified that this conversation was prior to the beginning of any negotiations which resulted in the written lease of the park above set out.

The plaintiff testified that at the time of the execution of the notes and deed of trust by Habermacher to him he knew that Habermacher had leased the park, but did not know the terms of the lease. The testimony shows that one load of the lumber furnished by plaintiff to Habermacher was delivered on July 14, 1911, one day prior to the date of the execution of the deed of trust by Habermacher referred to already, and the remainder of the material furnished Habermacher was furnished after the execution of that instrument: According to other testimony offered by plaintiff, the wagon load of lumber sent out on July 14th was sent out by mistake, as it was not intended that any of the lumber should go out until after the deed of trust had been executed.

The evidence further shows without controversy that the lease to Habermacher was terminated and possession of the park resumed by the street railway company about one year after the date of the lease. The lease being thus terminated, Habermacher owned no interest in the improvements of the park at the time of the institution of this suit; for, even if the company wrongfully ousted him from the premises, as contended in plaintiff’s pleadings, but denied by the defendant both by pleading and evidence, the only claim he could have had against the company would have been for damages for such breach of the contract, or for reinstatement of his possession, and it does not appear that either of those claims was asserted by him by any suit.

Hewitt was the president and general manager of the street railway company, conducting practically all of its business, and there was no showing on the minutes of the corporation that the board of directors had expressly empowered him to bind the company in other important transactions in the name of and for the benefit of the company which were never repudiated by it. Those facts constituted practically the only evidence relied on by plaintiff to prove the authority of Hewitt to bind defendant by the contracts alleged in the petition or that the company held him out to the public as vested with such authority.

The fifth special issue submitted by the court to the jury reads as follows:

“Fifth. You are instructed that under the undisputed evidence in this case it is not shown, that the board of directors of the Gleburne Street Railway Company, by resolution, authorized Daniel Hewitt to act for the company in buying lumber and material and creating a lien in favor of Barber on said park, but you will find whether or not the said street railway company held the said Hewitt out to the public as tBe president and general manager, having the apparent authority to purchase material for the improvement of said park, and to determine that question you will answer the following question: Had the Cleburne Street Railway Company on or prior to the third day of July, 1911, given Hewitt the power, as president and general manager, to purchase material to improve said park and to give a lien thereon?”

To that issue the jury answered: “Yes.” That finding was one of the material findings upon which the judgment was based. Error has been assigned to the submission of that issue because it was one of estoppel only, and was not pleaded by plaintiff. We are of the opinion that this assignment is sound, for the reason stated, and it is accordingly sustained. Y. M. C. A. v. Schow, 161 S. W. 931; Swayne v. Insurance Co., 49 S. W. 518; Wolf v. Galbraith, 39 Tex. Civ. App. 351, 87 S. W. 390; Tex. Pro. Co. v. Turner, 27 S. W. 583; Mutual B. L. I. Co. v. Collin County Nat. Bank, 17 Tex. Civ. App. 477, 43 S. W. 831; Casey Swasey Co. v. Treadwell, 32 Tex. Civ. App. 480, 74 S. W. 791; Tres. Palacios Rice & Irri. Co. v. Eidman, 41 Tex. Civ. App. 542, 93 S. W. 698.

We are of the opinion that there was further error in the court’s refusal to permit the defendant street railway company to prove by Daniel Hewitt, its president and general manager, that he had never made an important contract, such as the one sued on by the plaintiff in this case, without consulting with and getting the consent of the board of directors of the company to make the same, over the objection of plaintiff that the minutes of the board of directors were the best evidence of such facts. Hewitt had already denied the conversation over the telephone to which Habermacher testified, and had also testified that several important transactions, in behalf of the street railway company negotiated by him had been with the knowledgé and consent of the board of directors, but that such action of the board of directors had not been entered upon the minutes. He further testified that the board of directors never authorized him to agree that Habermacher might fix a lien upon the property for the material necessary to put in the hard wood floor in the skating rink. There was no proof of any by-laws or resolution of the hoard of directors spread upon the minutes giving to Hewitt authority to make the alleged contract upon which plaintiff’s suit is predicated, and it is a familiar rule that persons dealing with a known agent are chargeable with notice of the powers of the agent. Green v. Hugo, 81 Tex. 452, 17 S. W. 79, 26 Am. St. Rep. 824. Plaintiff sought to hold the company liable upon the theory that it authorized Hewitt to make such contracts, or else held him out as having such authority. In the absence of any by-law, the only method by which Hewitt could have been so authorized or held out in such a manner as to legally bind the company would be by some action or acquiescence of the board of directors. Plaintiff’s objection to the evidence now under discussion, which substantially embraced the proposition that no action of the board of directors could be proven except such as appeared on the minutes, is inconsistent with his further contention that it could be proven by circumstances aside from the by-laws and resolutions spread upon the minutes that the company held out Hewitt as vested with the authority to make the contract alleged by plaintiff, or else expressly authorized him so to do, and thereby bound itself. If, as insisted by plaintiff, appellant could be so bound by proof of that character, then clearly the evidence now under discussion was admissible to rebut the same, independent of whether or not such evidence was admissible upon some other theory. For the same reasons, we are of the opinion that there was error in excluding from the evidence the company’s by-laws over plaintiff’s objection thereto that the same could not bind nor affect the rights of the' plaintiff. The by-laws so offered specified the duties and powers of Daniel Hewitt, its general manager and president, and we think were material upon the issue of his power to bind the company by statements which Habermaeher testified Hewitt made to him over the telephone, and which are set out above.

In view of the foregoing conclusions, we deem it unnecessary to discuss several assignments of error presented in appellant’s brief, but, in view of another trial, we deem it proper to submit some suggestions upon questions raised by other assignments.

The testimony ‘of I-Iabermacher to the conversation with Daniel Hewitt over the telephone, of course, would be inadmissible, unless the proper predicate therefor is first laid by showing, prima facie at least, that Hewitt had authority from the company to authorize I-Iabermacher to place a lien upon the property to secure the purchase price of the material purchased from the plaintiff, or else that the company is estopped from denying such fact.

It appears, further, that even according to that testimony of Habermaeher, his authority to place the lien was limited to a lien upon the material necessary for the maple flooring and for the purchase price thereof 'only, including, of course, material necessary for additional support of the flooring. Furthermore, giving that testimony its widest scope, it did not authorize a personal judgment against the street railway company for any sum, and the same can be said of the notes sued on, since neither in the body thereof nor in the signature thereto do they purport to be obligations of the street railway company. 1 Daniel, Negotiable Instruments, § 80S.

The issue submitted in the third paragraph of the charge, the same being a peremptory instruction to find that the street railway company has been in possession of Lovelady Park and the privileges and skating rink since August 12th, we think was irrelevant, immaterial to the rights of any of the parties to the case, and should be omitted upon another trial, as the same might possibly tend to prejudice the rights of the street railway company.

We fail to see the relevancy of the supplemental contract between Habermaeher and the street railway company of date May 9, 1912, nullifying some of the terms of the 'original lease upon the exclusion of which appellant’s eighteenth assignment of error is predicated. We are of the opinion, further, that the testimony of I-Iabermacher sot out under appellant’s nineteenth assignment of error, in effect, that Daniel Hewitt expressed himself as well pleased with the improvements after they had been finished, should not have been admitted.

We fail to see how appellant was prejudiced by the court’s refusal to submit special instruction No. 2 requested by appellant and set out under the- twenty-second assignment; to the effect that there was no issue or question of partnership between the railway company and Habermaeher, as it does not appear that plaintiff was allowed a recovery upon that issue.

The requésted instructions set out in the twenty-third assignment were properly refused because they were argumentative in form. We are of the 'opinion that the facts set out in the defendants’ answer do not raise the issue of suretyship between Habermaeher and the Cleburne Street Railway Company under the lease contract. The fact that I-Iabermacher was under contract with the railway company to construct the improvements at his own expense in consideration for the lease of the park might be the proper basis for a judgment in favor of the railway company over against Haber-macher in event the railway company should be held liable to the plaintiff, but that would be by virtue of the contract alone, and not by virtue of any relation of principal and surety, as contended by appellant in several assignments of error.

Appellee insists that, as I-Iabermacher was required by the lease contract to place the impr'ovements on the property in consideration for the lease, and that as those improvements, when so placed, were, by the terms of the lease itself, to become the property of the railway company, those facts would of themselves authorize the fixing of a mechanic’s lien upon the property, independent of the further question whether or not Daniel Hewitt, as the president and general manager of the company, gave his consent to Habermaeher to fix such lien. This contention is overruled upon the authority of Faber v. Muir, 27 Tex. Civ. App. 27, 64 S. W. 940, in which a writ of error was denied as shown in 65 S. W. xvi.

For the reasons noted, the personal judgment against appellant, and also the judgment of foreclosure of the lien against the park and improvements thereon, are reversed, and the cause is remanded for ariother trial upon those issues, but the personal judgment in favor of the plaintiff against the other two defendants is undisturbed.

SPEER, J., not sitting.
      <@=For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

       other eases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes


author: BUCK, J.

text:
    PIERCE FORDYCE OIL ASS’N v. WOODS et al.
    (No. 8263.)
    (Court of Civil Appeals of Texas. Ft. Worth.
    Oct. 16, 1915.
    Rehearing Denied Dec. 4, 1915.)
    1. Appeal and Error &wkey;>272, 501 — Exception — Necessity—Showing in Recohd.
    The overruling of exceptions is not subject to review unless it is excepted to at the proper time, and where the transcript fails to disclose any order overruling such exceptions the appellate court will only consider the question of fundamental error.
    [Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. §§ 1611-1619, 2300-2305; Dec. Dig. &wkey;272, 501.]
    2. Appeal and Error <&wkey;193 — Objections— Sufficiency op Pleading.
    An objection that plaintiffs’ petition does not state facts sufficient to constitute a cause of action may be urged for the first time on appeal.
    [Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. §§ 1226-1238, 1240; Dec. Dig. <&wkey;193J
    3. Novation &wkey;>l — What Constitutes.
    ■‘Novation” is the substitution by mutual agreement of one debtor or one creditor for another, whereby the old debt is extinguished, or the substitution of a new debt or obSgation for an. existing one, which is thereby extinguished; it is the extinguishment of one obligation by another, the substitution of a new obligation in lieu of that old obligation, the effect of which is to pay or otherwise discharge it.
    [Ed. Note. — For other cases, see Novation, Cent. Dig. § 1; Dee. Dig. <&wkey;>l.
    For other definitions, see Words and Phrases, First and Second Series, Novation.]
    4. Novation &wkey;>7 — Requisites — Assent op Pasties.
    To constitute a novation by the substitution of a new obligation between the same parties there must be the consent of both parties, and the obligor’s intention that the existing debt shall be discharged by his new obligation does not suffice; and to constitute a novation by substitution of creditors or debtors there must be a mutual agreement among three or more parties whereby a debtor, in consideration of being discharged of liability to his original creditor, contracts a new obligation in favor of a new creditor.
    [Ed. Note. — For other cases, see Novation, Cent. Dig. § 7; Dec. Dig. <&wkey;>7.]
    5. Novation &wkey;>3 — Requisites—Release op Existing Obligation.
    If an agreement does not and is not intended to operate as a release of an original debt, it is not a novation.
    [Ed. Note. — For other cases, see Novation, Cent. Dig. § 3; Dec. Dig. &wkey;>3.]
    6. Novation t&wkey;ll — Substitution op Con-te act — Presumption .
    A petition in an action to recover on oil-drilling contracts, averring that after entering into an oral contract with defendant plaintiff entered into a written contract with others, induced by the representations of defendants that such written contract would not alter or destroy an obligation entered into by the defendants in the verbal contract, and that the plaintiff entered into and executed the written contract with the express understanding with defendants that such action would not affect defendant’s liability, excluded the presumption of no-vation and any intention of the parties that the written contract should be a substitution for the verbal contract. •
    [Ed. Note. — For other cases, see Novation, Cent. Dig. § 11; Dec. Dig. &wkey;>ll.]
    7. Oonteacts <&wkey;245 — Oral Oontbacts — Merger in Written Contract.
    In a suit to recover on two oil-drilling contracts, one verbal and the other written, embodying the same terms, but different parties, a petition pleading an agreement on the part of defendant that the written contract was to be taken only as further security for the defendants, and not as superseding the verbal contract did not show the intention of the original parties to the verbal contract that it be merged into the written contract.
    [Ed. Note. — For other cases, see Contracts, Cent. Dig. §§ 1129, 1130; Dec. Dig. &wkey;245.]
    8. Contracts &wkey;»245 — Oral Contract — Effect of Additional Written Contract.
    One having a verbal contract should not be penalized by being deprived of his original security by the acceptance of additional contract in writing to secure it containing the obligation of other parties, especially where such security is accepted at the instance and for the protection of the original obligors.
    [Ed. Note. — For other cases, see Contracts, Cent. Dig. §§ 1129, 1130; Dec. Dig. <@^»245.]
    9. Appeal and Error <^=31050 — Harmless Error — Admission of Evidence.
    In an action to recover on two oil-drilling contracts, error, if any, in the admission of a conclusion of a witness was harmless, where the witness in other parts of his deposition testified without objection to facts sustaining the conclusion.
    [Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. §§ 1068, 1069, 4153-4157, 4166; Dec. Dig. <&wkey;1050.]
    Appeal from District Court, Wise County; Edgar Scurry, Judge.

      Suit by G. 0. Woods and another against the Pierce Fordyee Oil Association and others. Judgment for plaintiffs, and defendant Pierce Fordyee Oil Association appeals.
    Affirmed.
    Huff, Martin & Bullington, of Wichita Falls, for axjpellant. Fitzgerald' & Cox, of Wichita Falls, for appellees.
   BUCK, J.

This suit was filed by appellees, G. O. Woods and Bert Brodie, doing a drilling business in the name of the Bert Brodie Drilling Company, to recover on two contracts, one a verbal contract and the other a written contract embodying the same terms, subject-matter, and conditions, except that the first, the verbal contract, was alleged to have been made by and between appellees of the first part and appellant and one J. E. Head of the second part, while the written contract was alleged to have been made by and between appellees of the first part and the Dundee Dome Oil Company of the second part, which latter obligation was guaranteed by J. B. Plarris and J. G. Tiller. The verbal contract was entered into on the-day of March, 1914, and by the terms thereof, the plaintiffs covenanted and agreed to drill an oil well on the J. E. Head lease out of the Alexander-Al'bright farm in Archer county, Tex., to a depth of 2,500 feet. The defendants were to furnish a complete standard rig, all casing, fuel, water, and tank to contain the same, at the well, and plaintiffs were to furnish a boiler, engine, belts, drilling tools, water pipes, and connections, etc., including labor, at their own expense. Plaintiffs were to receive for the drilling of said well $3.50 per each foot drilled to a depth of 2,100 feet, and $5 per foot for each foot drilled thereafter up to 2,500 feet. They were to receive 60 per cent, of the price due when a depth of 1,200 feet was reached, and 60 per cent, when a depth of 2,100 feet was reached. Plaintiffs alleged that, pursuant to the terms of said contract, they began operations and spent large sums of money for labor and material, and made all necessary preparations for carrying out the terms of said contract, and began actual drilling of said well and continued the same until they had reached a depth of some 500 to 700 feet; that at this stage of the work the defendants J. E. Head and the Pierce Fordyee Oil Association requested them to sign a written contract, which written contract was alleged to have been attached to the petition and made a part thereof. It does not appear to have 'been so attached, and no evidence as to its contents was introduced in evidence, except as will be hereinafter stated. Plaintiffs alleged' that the defendants aforesaid requested plaintiffs to sign the written contract with plaintiffs as parties of the first part and the Dundee Dome Oil Company, J. B. Harris, and J. G. Tiller as parties of the second part; defendants stating to plaintiffs at the time that the company aforesaid and said Harris and Tiller were interested in the development of said oil lease, in the drilling of said well, and that the purpose of having plaintiffs enter into this written contract was to make said company and parties mentioned jointly liable with the other defendants for the drilling of said well, and plaintiffs were assured by the said defendants Head and Pierce Fordyee Oil Association that the signing of said written contract by the plaintiff was not intended to and did not in any way affect the liability of said Head and Pierce Fordyee Oil Association, nor in any way supersede or set aside the oral contract theretofore made, and that with such understanding plaintiffs signed and executed said written contract. Plaintiffs further alleged that the defendants had breached their verbal and written contracts, and had failed to furnish fuel and water and tanks, etc., necessary to the further prosecution of said work, and, upon plaintiffs having reached a depth of 1,200 feet, failed and refused to pay plaintiffs the 60 per cent, of the price for said work so agreed upon, and that they (the plaintiffs) were willing, anxious, able, and ready to continue the drilling of said well until completed, as they had agreed to do both in the verbal contract with the two defendants above mentioned and the written contract with the other defendants mentioned, but they had been prevented by the failure and refusal of the defendants to comply with their said contracts. They alleged that they would have made a profit of $3,000 on the 1,300 feet that they were prevented from drilling by defendant’s breach; that they were entitled' to the sum of $5,250 for the 1,200 feet drilled, for which they prayed judgment.

Defendant Pierce Fordyee Oil Association, which alone appeals, after general and special demurrers, pleaded a merger of the verbal contract into the written contract alleged, and that it was fully released and the plaintiffs relinquished any claim on it by the execution of the written contract. It denied that it had ever requested plaintiffs to sign the written contract, or had given any assurances to them that the signing of said contract was not intended to affect said defendant’s liability, and denied any liability at all for any alleged breach, or for the default or miscarriage of other contracting parties. It further pleaded that subsequent to the filing of the original petition in this suit an original writ of attachment had been issued at the instance of plaintiff against the property of the Dundee Dome Oil Company; that the same had been sold by the sheriff of Archer county for the sum of $3,000 and. purchased by plaintiffs at said sale; and that said sum was amply sufficient to satisfy all losses to which plaintiffs had been subjected by reason of said alleged breach.

In a supplemental petition plaintiffs admitted tlie sale of the property of the Dundee Dome Oil Company under a writ of attachment, and admitted that they had received about the sum of $2,200 therefrom after the costs had been paid. They further alleged that J. E. Head and one L. S. Kemphner, who are alleged to have entered into the original contract with plaintiffs, did not disclose their agency, nor their principal, the Pierce Eordyce Oil Association, but that in fact they were the agents of said Pierce Eor-dyce Oil Association, and that all their rights, contracts, and agreements relative to said leases, and the development of the same, in their contract for the drilling of the well mentioned, was done for and on behalf of the said Pierce Eordyce Oil Association, and as the agents of said association, and the said contract was in truth and in fact the contract and agreement of said Pierce Eordyce Oil Association, and it became bound to plaintiffs thereunder. In the alternative, they alleged a partnership existing between said Head and Kemphner and the Pierce Eordyce Oil Association with reference to said leases, and the development thereof, and the drilling of said well, and that thereby said association became bound as a partner.

In their first supplemental answer defendant association denied the allegations contained in plaintiffs’ first supplemental petition, wherein they charged the agency of said Kemphner and said Head and the partnership existing between said two named partners' and the appellant.

In its first assignment appellant urges error in the overruling of its general exception, and in its second assignment to the overruling of a special exception. The transcript fails to disclose any order of the court overruling said exceptions. Therefore we will only consider the question of whether or not fundamental error is shown, for the action of the trial court in overruling exceptions is not subject to revision, unless such action was excepted to at the proper time. But an objection that plaintiffs’ petition does not state facts sufficient to constitute a cause of action may be urged for the first time on appeal. W. U. Tel. Co. v. Hidalgo, 99 S. W. 426, affirmed in 102 Tex. 596, no opinion. Such error is fundamental. Black v. Calloway, 30 Tex. 232 ; Stanbury v. Nichols, 30 Tex. 145.

The question, then, presented to us in the consideration of these two assignments, is: Does the petition show a cause of action against this appellant? Or, in other words, can plaintiffs recover upon an alleged verbal contract between them and appellant, when the petition discloses that subsequently plaintiffs entered into a written contract touching the same subject-matter and containing the same terms as to payment, etc., but to which other named defendants were made parties? Was the verbal contract merged into the written one as a matter of law; or, otherwise stated, was there a novation as to parties to be charged by reason of this written contract?

“Novation is the substitution by mutual agreement of one debtor or one creditor for another, whereby the old debt is extinguished, or the substitution of a new debt or obligation for an existing one, which is thereby extinguished. It is the mode of extinguishing one obligation by another — the substitution, not of a new paper or note, but of a new obligation in lieu of an old one — the effect of which is to pay, dissolve, or otherwise discharge it.” 29 Cyc. 1130, and authorities there cited. To constitute a novation by a substitution of a new obligation between the same parties, there must be the consent of both contracting parties. The intention of the obligor that the existing debt should be discharged by the new obligation he enters into does not suffice. The creditor must concur in this. To constitute a novation by substitution of creditors or debtors, there must be a mutual agreement among three or more parties, whereby a debtor, in consideration of being discharged from his liability to his original creditor contracts a new obligation in favor of a new creditor. Scott v. Atchison, 38 Tex. 385; Gimbell v. King, 43 Tex. Civ. App. 188, 95 S. W. 7. There can be no novation to which the original debtor does not assent, and to which he is not a party. Dean v. Ellis, 108 Mich. 240, 65 N. W. 971. If the agreement does not, or was not intended to, operate as a release of the original debt, it is not a novation. 29 Cyc. 1134.

In plaintiffs’ petition they specifically averred that they entered into the written contract, and were induced to do so upon the representations of defendants J. E. Head and the appellant that such written contract would in no wise alter, destroy, or decrease the obligation alleged to have been entered into by the two last-named parties in the verbal contract, and that plaintiffs entered into and executed the written contract with the express understanding between them and the defendants Head and appellant that such action would in no wise affect the liability of said Head and appellant. Therefore we are of the opinion that the petition on its face sufficiently alleged facts which would exclude the presumption of novation, and exclude the presumption that it was the intention of the plaintiffs and the other parties to the original verbal contract that the written contract should be a substitution for the verbal one.

It will be noted that the only evidence in the statement of facts as to what the written contract contained is as follows:

“The defendant introduced the following documentary evidence: * * * (6) A contract between the Dundee Dome Oil Company and the Bert Brodie Drilling Company, by G. O. Woods, for the drilling of a well on the Alex. Albright farm in Archer county, said well to be 2,500 feet deep, if oil or gas in paying quantities is not found at less depth, and the consideration to be paid is $3.50 per foot down to 2,100 feet and $5 per foot from 2,100 to 2,500 feet, and other stipulations as pleaded l)y plaintiffs in their pleadings.” (Italics ours.)

Plaintiffs pleaded tlie agreement on tlie part of Head and appellant that said written obligation was to be taken and understood only as further security for the benefit of the two above-named defendants, and not as in any way superseding the verbal contract. Perhaps, under this state of the record, we would be justified in concluding that the written contract contained such stipulations. But in reaching our conclusion we are not dependent on this strict, though perhaps warranted, construction of this admission by appellant contained in the statement of facts above mentioned.

We do not think the petition on its face shows the intention by the original parties to the verbal contract that such verbal contract should be merged into the written contract, nor do we think that such result follows as a matter of law. While it is true, as has been clearly stated by Mr. Greenleaf (volume 1, p. 275):

“Where the parties have deliberately put their engagements into writing in such terms as import a legal obligation, without any uncertainty as to the objection or extent of such engagement, it is conclusively presumed that the whole engagement of the parties and the extent and manner of their undertaking was reduced to writing, and all oral testimony of a previous colloquium between the parties, or of conversations or declarations at the time when it yras completed, or afterwards, is rejected, as it would tend, in many instances, to constitute a new and different contract for the one which was really agreed upon, to the prejudice, possibly, of one of the parties ”

—yet we do not think, to sustain plaintiffs’ cause of action as pleaded, it would be necessary to violate the well-established rule of evidence enumerated above; for, in the first place, the parties obligor are not the same in the verbal contract and in the written contract, and, except as to the count wherein plaintiffs seek to hold appellant liable as a partner, there is no allegation of appellant’s liability except as to the verbal contract.

We see no reason why one having a verbal contract with one or more parties should be penalized, by being deprived of his original securitj’-, for the acceptance of additional security in writing, and with other parties obligor, especially when such security was accepted at the instance and for the protection of the original parties obligor. We believe plaintiffs’ petition in effect pleads a cause of action against the appellant and J. E. Head on the verbal contract and against the other defendants on the written contract accepted as additional security to the plaintiffs, and also as security on behalf of the original obligors, and as such we believe the petition is good as against the exceptions urged.

In other assignments error is urged to the •action of the court in admitting over objection testimony of one of the plaintiffs as to verbal conversations, contracts, and agreements between said plaintiff and J. E. Head and L. S. Kemphner, with reference to the drilling of the well; same being objected to on the ground that it was an effort on the part of the plaintiff to prove by oral testimony a contract different in its terms from the written contract declared upon in this case. But for the reason heretofore given we do not find any error in the action of the court, and the assignments are overruled.

In the fifth assignment error is urged to the admission of interrogatory No. 30, propounded to J. E.. Head, and the answer thereto; the objection being that the same involved a conclusion and opinion of tlie witness and invaded the province of the jury and was hearsay. The interrogatory was as follows:

“Please state whether or not the Pierce For-dyce Oil Association, at the time you entered into a contract herein for the drilling of a well in Archer county, was interested in said lease upon which said well was to be drilled. If you state that it was interested, then state fully and completely and in detail just how it was interested and whereby it became interested.”

To which the witness answered:

“I know that the Pierce Fordyce Oil Association was interested. I know from the statements of Kemphner and statements of Oahoon, and because of the facts hereinbefore stated, and because of the payment by the Pierce For-dyce Oil Association of drafts drawn for their portion of the expense of acquiring the property, and because of the various facts herein before stated.”

While it is true that a witness may not be permitted to testify as to his conclusion or opinion as to the probative effect of facts, but rather should be limited in his testimony to the facts upon which he bases such opinion, and leave it, to the jury to draw conclusions therefrom, yet any error in the court’s ruling in this instance is rendered harmless by the fact that in other portions of his deposition the witness Head testified, and without objection, to facts and circumstances which, if true, showed conclusively that the Pierce Fordyce Oil Association was interested in the leases covering the land upon which the well in question was drilled. Pie testified that E. S. Kemphner held the assignments of leases for the Pierce Fordyce Oil Association; that Mr. Oahoon, the vice president and general manager of said association, and admitted by appellant so to be, with full authority to bind the corporation, told him (Head) that Mr. Kemphner was at Wichita Falls, Tex., and was their representative, but that for business reasons it was desirable that Mr. Kemphner’s connection with the Pierce For-dyce Oil Association be not revealed; that the Pierce Fordyce Oil Association was dependent bn a contract for its oil for its refinery, and at the time of this conversation the Pierce Fordyce Oil Association had no visible supply of crude oil in sight, independent of the source from which they were then getting it, and if they became aggressive as producers it might in some manner prejudice tlieir acquiring oil, and for that reason they were desirous of not being identified with Kemphner’s transactions for the time being; that Mr. Oahoon discussed with him the Dundee Dome Oil Company’s deal, and was present in Tulsa, Okl., when he and Mr. Kemphner and Head agreed on terms which led to the organization of the Dundee Dome Oil Company, which terms were subsequently reduced to written form in the Pierce For-dyce Oil Association’s office at Tulsa, Okl.; that C. W. Cahoon, Kemphner, himself, and George Walker, the Pierce Fordyce Oil Association’s stenographer, were present on the night of February 23, 1914, when the agreement was entered into whereby the said Head and the Pierce Fordyce Oil Association became jointly interested in said leases and the development of the Dundee Dome oil field. He further testified that Oahoon sent him to Kemphner as their agent and representative in said oil field, and further that the written contract entered into at Tulsa, Okl., on the 23d of February, 1914, embodied all the terms and conditions, except that it was carried in the name of L. S. Kemphner, instead of the Pierce Fordyce Oil Association, and that the Pierce Fordyce Oil Association was the principal in the transaction, instead of Kemphner. Other testimony, even by Mr. Cahoon, appellant’s vice president, conclusively showed that appellant was interested in this lease at the time mentioned. Hence we believe that the error, if any, was harmless.

Believing that no prejudicial error has been shown, it is the judgment and order of this court that the judgment of the trial court be in all things affirmed.
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