text:
    CLARK & BOICE LUMBER CO. v. COMMERCIAL NAT. BANK OF JEFFERSON.
    (No. 1842.)
    (Court of Civil Appeals of Texas. Texarkana.
    Nov. 23, 1917.
    Rehearing Denied Dec. 6, 1917.)
    1. Chattel Mortgages <&wkey;47 — Description of Property—Sufficiency.
    Where the scrivener who prepared a chattel mortgage failed to insert the description of the property at the place where it would logically be found, but there was a reference in another part of the mortgage which stated with reasonable certainty Avhat property the parties intended to incumber, the mortgage being valid between the parties, may, in view of the fact that a mortgage of chattels to be valid between the parties need not be in writing, be supplemented by parol evidence as to the property incumbered and despite any possible insufficiency in the description is, as to one who purchased property knowing that it was incumbered, sufficient.
    2. Appeal and Error <§=907(3) — Review-Presumptions.
    In the absence of a statement of fact it will be assumed that the trial court had before it evidence sustaining its determination.
    3. Chattel Mortgages <§=189 — Validity— Statute.
    Rev. St. art. 3970, declares void every mortgage or deed of trust attempted to be given by the owner of any stock of goods, wares, or merchandise, daily exposed for sale in parcels in the regular course of business and contemplating a continuance of the possession of the goods and control of the business by the owner. Plaintiff loaned a cotton oil company funds to purchase seed for its mills, and the cotton oil company executed a chattel mortgage on the seed and the products manufactured therefrom, including oil, meal, and hulls. The chattel mortgage further recited that the oil company should at the end of each week make a written report to plaintiff showing the amount of seed on hand, and the amount of manufactured product, and that plaintiff should retain the seed tickets showing the amount paid, until the seed should he manufactured, the products disposed of and the money received thereby applied to plaintiff’s debt. Held, that such mortgage, despite occasional retail sales by the oil company, did not, though the oil company was made plaintiff’s agent for the sale of the manufactured products, etc., violate the statute, for such statute should be given a strict construction, and does not apply unless all the element sspecified exist.
    4. Chattel Mortgages <&wkey;225(l) — Conversion — What Constitutes.
    In such case, a purchaser familiar with the stipulations of tlio mortgage who, over the objection of the cotton oil company, retained the purchase price, or by agreement with the company diverted the purchase price of manufactured products to a purpose contrary to that expressed in the mortgage, becomes a wrongdoer, and holds the property subject to rights of mortgagee, and is liable for misapplication of a trust fund.
    Appeal from District Court, Marion County; J. A. Ward, Judge.
    Action by the Commercial National Bank of Jefferson against the Clark & Boice Lumber Company. From a judgment for plaintiff, defendant appeals.
    Affirmed.
    Glass, Estes, King & Burford, of Texar-kana, for appellant. Schulter & Singleton, of Jefferson, for appellee.
   HODGES, J.

This is a suit commenced by the appellee against the appellant in the court below for conversion of a quantity of cotton seed meal on which the appellee claimed to have a mortgage. The case was tried, before the court without a jury, upon substantially the following facts: The Jefferson Cotton Oil & Fertilizer Company, a private corporation, was in September, 1913, engaged in the business of buying cotton seed and manufacturing same into oil, meal, and hulls. Desiring to purchase cotton seed for that purpose, it borrowed the sum of $4,000 from the Commercial National Bank of Jefferson, the appellee in this appeal, for which sum it executed a note. On the 6th of September, 1913, contemporaneously with the execution of the note and to secure its payment, the oil mill company executed a chattel mortgage, of which the following is in part a copy:

“That we, the Jefferson Cotton Oil & Fertilizer Company, of the county of Marion and state of Texas, to secure my indebtedness to the Commercial National Bank of Jefferson, Texas, for the sum of forty-one hundred three and ten/100 dollars, as evidenced by . certain promissory note, bearing date the 6th day of September, 1913, payable to the order of the Commercial National Bank of Jefferson, at its office in Jefferson, Texas, on the.. signed by ourselves, and also such other sums of money which we may be owing to the Commercial National Bank of Jefferson during the year 1913 and 1914, having bargained, sold and conveyed and by these presents do bargain, sell, release and convey to the Commercial National Bank of Jefferson, of the county of Marion and state of Texas, all that certain . in Marion county, Texas. Also the following described personal property, to wit:. This money is furnished to the said Jefferson Cotton Oil & Fertilizer Company of Jefferson, Texas, to purchase seed for said mill, and this instrument is intended as a mortgage on said seed and all the by-products manufactured therefrom, including ail oil, meal and hulls, and any other that may be manufactured by said mill. It is hereby understood and agreed that said mill shall, at the end of each week, make a written report to the Commercial National Bank showing the amount of said seed on hand in the house and elsewhere, and the amount of products of each kind on hand figured at the market price of said products and the amount paid for seed. The said Commercial National to retain the seed tickets showing amount paid until the seed have been manufactured and the products disposed of and the money received thereby applied to any indebtedness it may then owe to the said Commercial National Bank of Jefferson, Texas.”

Other advances of money were from time to time made to the oil mill company, for the purpose of enabling it to buy seed to be used in the manufacture of its products. During the course of the construction of the oil mill it became indebted to the appellant, Clark & Boice Lumber Company, for lumber and material furnished in the erection of the necessary buildings; and at the time this litigation originated it was indebted to the Clark & Boice Lumber Company in the sum of $4,918, evidenced by a note, and in the further sum of $555 on an open account. This indebtedness appears to have been secure by a mortgage upon some other property, not involved in this contest. During a period extending from February 4, 1914, to May 19th following, the oil mill company sold to the appellant cotton seed meal to the amount of $1,478. Instead of paying cash for the meal purchased, the Clark & Boice Lumber Company gave the oil mill company credit for that sum on its indebtedness. The court found as a fact that the meal sold and delivered to the Clark & Boice Lumber Company was that upon which the appellee had a mortgage, and that this sale and the refusal to pay the purchase price of the same constituted a conversion; and judgment was accordingly rendered in favor of the appel-lee.

Among other conclusions of law filed by the court, he holds that the mortgage before referred to was valid, and was not within the terms of the statute making that class of mortgages fraudulent and void; but further concludes that und^r the terms of the mortgage executed by the oil mill company it became the agent of the mortgagee for the purpose of selling the mortgaged products of the mill, and to pay over the proceeds in accordance with the terms of the instrument. He also concludes that the mortgage was intended to cover all the cotton seed purchased with the money furnished by the plaintiff, and all of the hy-products of the cotton seed manufactured therefrom, and any other hy-products that might he manufactured by the mill.

At the request of the appellant the court made additional findings, some of which we regard as immaterial in considering the issues here presented. As to the manner in which the oil mill company disposed of its product the court found:

“That it [the oil mill company] manufactured all of the cotton seed purchased by it with the money obtained from the sources above mentioned into cotton seed oil, cotton seed meal, cotton seed hulls and delinting cotton; that the manufactured products were stored in tanks, rooms and sheds forming' a part of the plant of said company at Jefferson, and sold therefrom, most of same being delivered on cars and sold in carload lots upon contracts, but the retail trade at Jefferson and in that vicinity was also supplied with cotton seed meal and cotton seed hulls when the parties came to the plant to make purchases; that cotton seed meal was put in sacks of 100 pounds each, and kept in a room or warehouse used exclusively for cotton seed meal in its plant at Jefferson, Texas, and loaded therefrom on cars upon orders or contracts and delivered therefrom to such retail trade as the company had at Jefferson and in that vicinity. And I further find that a number of persons at Jefferson and farmers in the vicinity of Jefferson purchased at said plant from said oil company such quantities of cotton seed meal as they desired, the same being delivered by said company to them from said warehouse and sold to them at retail prices.”

There are two principal grounds upon which the appellant rests its defense in this case: One is that the description of the mortgaged property in the instrument relied upon is insufficient. The second is that the mortgage is an effort to incumber goods, wares, and merchandise remaining in the hands of the mortgagor and daily exposed for sale, and for that reason is prohibited by article 3970 of the Revised Civil Statutes.

It is apparent from an inspection of the mortgage itself that the writer who prepared it failed to insert the description of the property at the place where it would logically be found. There is, however, in another part of the mortgage, a reference which states with reasonable certainty what property the parties intended to incumber. Where the record alone is relied upon to give notice to third parties dealing with mortgaged property, the law is more exacting in its requirements as to the sufficiency of the description than in cases where they have actual notice of the identity of the property covered. It has been held that a mortgage of chattels need not be in writing. Edwards v. Mayes, 136 S. W. 510; Gardner v. Planters’ National Bank, 54 Tex. Civ. App. 572, 118 S. W. 1147; Crews v. Harland, 99 Tex. 93, 87 S. W. 656, 13 Ann. Cas. 863. If an entire chattel mortgage, good as between the parties and those having actual notice, may be established by parol, there would seem to be no good reason why an inadvertent omission from a written instrument could not be supplied by oral testimony if this should become necessary, and does not contradict the writing itself. In this instance the court finds as a fact that the property sold and delivered to the appellant was that covered by the mortgage, and there is no contention that this finding is not supported by.tEe evidence; in fact, there is no statement of facts in the record. Neither is there any contention that the appellant had no notice that the property purchased by it was incumbered with a mortgage. We must therefore assume that the trial judge had before him satisfactory legal evidence that the property was mortgaged, and that the appellant knew that it was so incumbered at the time purchase was made.

The second objection urged, that the mortgage was void because in violation of the terms of the statute, presents a more difficult question. The only basis for the contention that the property mortgaged was “a stock of goods, wares, and merchandise daily exposed for sale” is to be found in the findings of the court heretofore set out. The court concluded from the terms of the mortgage that the mortgagor retained possession and disposed of the mortgaged property as the agent of the mortgagee. The correctness of that conclusion is assailed by the appellant. In Grow v. Red River County Bank, 52 Tex. 362, our Supreme Court had under consideration a question very similar to that here involved. Justice Bonner, who rendered the opinion of the court, said:

“In the case of Peiser v. Petticolas, 50 Tex. 638 [32 Am. Rep. 621], this court decided that a mortgage upon a stock of goods, wiien the mortgagor retains possession and, with the knowledge and consent of the mortgagee, sells them in the usual course of trade and applies the proceeds to replenish the stock, and not to the payment of the debt, was void as being against public policy and inconsistent with the true purposes of a mortgage; that" if the intent and purpose of the parties to make such a mortgage are manifest from the terms of the instrument itself, it should be declared void by the court; that if not thus shown, then it is1 a question of fact for the jury, who should find against the validity of the mortgage, if this intent and purpose are shown by uncontradicted testimony. The mortgage in this case is in the usual form, and does not contain any stipulation that the mortgagors should remain in possession of the goods and sell them in the usual course of trade, and apply the proceeds to their own benefit or to the purchase of other goods. The testimony tended to prove that though the mortgagors remained in possession and sold the goods, they did so as agents of the mortgagees. If a mortgage be given on a stock of goods to secure a bona fide debt, the fact that the mortgagors remained in possession and sold the same as agents of the mortgagees, and applied the proceeds to the payment of the debt would not, of itself, render the mortgage void.”

The same rule is announced by the Supreme Court of Montana in Noyes v. Ross, 23 Mont. 425, 59 Pac. 367, 47 L. R. A. 400, 75 Am. St. Rep. 543, where the question is discussed at some length. It is true that the Texas case referred to arose before the enactment of the statute now appearing as article 3970, which declares void every mortgage or deed of trust attempted to be given by tbe owner of any stock of goods, wares, or merchandise daily exposed for sale in parcels in the regular course of business and contemplating a continuance of the possession of the goods and control of the business by the owner. In the case of Bettes v. Weir Plow Co., 84 Tex. 543, 19 S. W. 705, which arose after the enactment of our statute, Justice Gaines refers to that statute as being merely declaratory of the common-law rule. Evidently the act was not an effort to arbitrarily narrow the right of contract and deprive parties of the power to create bona fide liens to secure just obligations. It may properly be regarded as an effort to protect creditors and purchasers from fraudulent or fictitious incumbrances. Where the, mortgage contemplates that the mortgagor is to remain in control of the mortgaged property as the owner, with authority to dispose of it in any manner he sees proper and with the option to retain the proceeds of the sales made or apply them to the satisfaction of the mortgage debt, such a lien would be more of a fiction than a reality and could serve no purpose further than to shield the property of the debtor from the demands of other creditors.

In the case of Bowen et al. v. Lansing Wagon Works, 91 Tex. 385, 43 S. W. 872, the Supreme Court had under consideration a case apparently within the meaning of article 3970. The facts showed that Bowen was a dealer in wagons, buggies, and other similar vehicles, with his place of business in the city of Waco, Tex. I-Ie had entered into a written contract with the Lansing Wagon Works for the purchase of a number of vehicles to be disposed of by him in the regular course of business. The contract stipulated, however, for a reservation of the title in the Lansing Wagon Works. It was contemplated that the property should be sold in the regular course of business and paid for in cash or in the notes of the purchasers. Those notes were to be forwarded to the Lansing Wagon Works as taken. While still having some of the Lansing vehicles on hand, Bowen executed a deed of trust in favor of certain named creditors on his entire stock. In a contest between the Lansing Wagon Works and the creditors of Bowen claiming under that deed of trust the validity of the lien asserted by the Lansing Wagon Works was assailed. In answering certified questions the Supreme Court held that the lien claimed by the Lansing Wagon Works resulting from a reservation of the title at the time of sale did not come within the meaning of the act of 1879, now article 3970. The question, however, was discussed very briefly. Justice Denman, who rendered the opinion, merely stated that this law should not be intended so as to include that transaction, a reservation of title by the vendor; that such was not '“any form of lien attempted to be given by the owner.” This appears to be an exceedingly strict construction of article 3970, and evinced an indisposition on the part of the court to extend its provisions beyond what is clearly within the terms of the statute. For the practical consequences to third parties dealing with mortgaged property is the same, whether the adverse lien results from the title being reserved by the vendor or from the giving of a chattel mortgage by the vendee. In view of this ruling we do not feel warranted in extending the scope of that statute beyond the evils it was intended to suppress.

In order that a transaction may fall within its inhibition all of the conditions there enumerated should exist. It does not denounce as unlawful a mortgage merely because it. stipulates that the mortgagor shall retain possession of the property and sell it, nor does it apply to all classes of property. The property must not be a “stock of goods, wares, or merchandise,” but'must be “daily exposed for sale” by the mortgagor “in parcels in the regular course of his business.” Manifestly this description was intended to include tradesmen engaged in mercantile enterprises, as a business, and that class of property which is usually and customarily designated as a “stock of goods, wares, or merchandise.” Whether or not the property mortgaged belongs to that class is usually a question of fact to be settled by the evidence. In this instance there is nothing in the facts found by the court which necessitates the conclusion that the cotton seed meal sold to the appellant constituted a stock of merchandise, or that it was to be “daily exposed for sale in the regular course of business.” The court may have concluded that the property was only the product of a factory, and that tne mortgage provided that it should be sold under conditions not amounting to a daily exposure for that purpose in the regular course of the business. Unless the mortgage itself or the accompanying evidence discloses a purpose on the part of both parties that the property shall be disposed of in the manner designated in the statute, it is not unlawful. The mortgagor cannot alone adopt that method and thus annul his own obligation.

In the case before us the mortgage stipulates, not how the lien may be forclosed in case of default in the payment of the debt, but that the property shall be sold and the proceeds paid over and applied in satisfaction of the debt. The mortgagor is given no option in the matter; it is made his duty when the goods are sold to thus apply the proceeds. This was in itself a method of foreclosure— not an exclusive one, it is true, but one which is not per se unlawful. The fact that the mortgagor was selected to make the sales of the property and report the proceeds is not alone sufficient to bring the transaction within the terms of the statute. Whether or not it was designed to operate as a hindrance to the enforcement of their rights by other creditors and serve only a fraudulent purpose was a question of fact upon "which the court had a right to pass, and his conclusion upon that issue is not assailed.

But it may be said that if the,mortgagor was authorized to sell the property it had the pcwer to pass a good title to the purchasers ; that the mortgagee by permitting a sale waived its lien. That would be true as to parties who purchased in compliance with the terms of the mortgage; hut when the purchaser, familiar with the stipulations of the mortgage over the objection of the mortgagor retains the purchase price, or when by an agreement with the mortgagor he diverts the purchase price to a purpose contrary to that, expressed in the mortgage, he becomes a wrongdoer, and a party to a misapplication of a trust fund. He holds the property subject to the rights of the mortgagee. Wethered v. Boon, 17 Tex. 143; Kennedy v. Baker, 59 Tex. 154; Perry on Trusts, §§ 217, 225; Black v. Caviness, 2 Tex. Civ. App. 118, 21 S. W. 635.

We regard it as unnecessary to discuss the remaining assignments of error, and the judgment of the trial court is affirmed.
      other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

      (g^For oilier cases see same tonic and KEY-NUMBER in all Key-Numbered Digests and Indexes


source: Caselaw Access Project

author: HIGHTOWER, Jr., C. J.

license: Public Domain

text:
    COMMONWEALTH TRUST CO. et al. v. HARDEE.
    (No. 177.)
    (Court of Civil Appeals of Texas. Beaumont.
    Dec. 31, 1917.
    Rehearing Denied Jan. 23, 1918.)
    1. Bills and Notes @=»106 — Illegal Consideration-Issuing Stock for Note — Sufficiency of Evidence.
    In suit by maker to cancel note and trust deed securing same on ground that, as note was given in part for stock of defendant trust company doing a banking business, it was void, evidence lielO, sufficient to support jury findings that the shares of stock belonged to the company, were issued by it out of its capital stock, and that the note was made payable to it.
    2. Bills and Notes <&wkey;520 — Bona Fide Purchaser — Estoppel—Evidence.
    In suit by maker against original payee and indorsee to cancel a note, evidei ce held insufficient to show that maker requested indorsee to purchase note or promised or led him to believe that she would pay the same, so that she was estopped to deny liability as to him-.
    3. Bills and Notes <&wkey;351 — Purchaser After Maturity — Rights.
    The purchaser of a note from the payee long after maturity, took it subject to all defenses that the maker had against the payee.
    4. Bills and Notes <&wkey;106 — Note Given for Corporate Stock — Validity.
    Where a trust company gave shares of its stock as part consideration for a note, the note was void and unenforceable in view of Const, art. 12, § 6, providing that no corporation shall issue stock except for money paid or property actually received, and that. all fictitious increase of stock or indebtedness shall be void.
    Appeal from District Court, Hardin County; J. Llewellyn, Judge.
    ■Suit by Mrs. V. D. Hardee against the Commonwealth Trust Company and others. Judgment for plaintiff, and' defendants appeal.
    Modified and affirmed.
    Stevens & Stevens, of Houston, for appellants. E. B. Pickett, of Liberty, and F. J. Winter, of Houston, for appellee.
   HIGHTOWER, Jr., C. J.

This suit was filed by the appellee, Mrs. V. D. Hardee, in the district court of Liberty county on the 31st day of July, 1915, against the Commonwealth Trust Company, a private corporation, Charles R. Brice and F. J. Winter, as defendants.

Plaintiff, for cause of action, alleged substantially the following: That about the 1st day of November, 1912, she applied to defendant Commonwealth Trust Company, which at that time was doing business as a banking and trust company, and lending money upon security, for a loan of $1,165.86; that plaintiff needed said sum of money for the purpose of paying off and discharging a lien on a certain tract of land owned by her and situate in Liberty county, Tex., and being a portion of the Reason Green league of land in said county, and which tract was alleged to contain 363 acres of land; that plaintiff was advised by one W. E. Richards, who at that time was president of the Commonwealth Trust Company, that the loan desired by her would probably be extended; that thereafter, on November 30, 1912, plaintiff again called upon said W. E, Richards, as president of the Commonwealth Trust Company, for said sum of money, and that thereupon she was advised by the said W. E. Richards, as president of said Commonwealth Trust Company, that said company could only make the loan to her upon condition that she purchase from said Commonwealth Trust Company ten shares of its capital stock, at the price of $105 per share; that the said W. E. Richards represented to plaintiff that said stock at the time was worth $105 per share, and had been paying and was at that time paying 10 per cent, dividends, and would pay larger dividends in the future; that plaintiff, being compelled to raise the sum of $1,165.86 with which to pay off the lien on her land, agreed with the said W. E. Richards, as president of the Commonwealth Trust Company, to purchase said ten shares of stock at the price of $105 per share, aggregating $1,050; that thereupon she executed to the Commonwealth Trust Company two notes, one for the sum of $2,-310, and the other for the sum of $183, both bearing interest at the rate of 10 per cent, per annum from their date until paid, and both being payable to the Commonwealth Trust Company 90 days thereafter; that said stock of the Commonwealth Trust Company so purchased by her was not worth $105 per share, as represented by the said W. E. Richards, and that, in fact, such stock was not worth at that time in excess of 10 cents per share; that such representations by the said Richards, as president of said trust company, as to the value of said stock, were wrongfully, falsely, and fraudulently made for the purpose of inducing plaintiff to purchase said stock; and that she would not have done so but for such false and fraudulent representation on the part of said Richards, and by which she was deceived. Plaintiff further alleged that the only money actually received by her at the time of the execution of said notes was the sum of $1,-165.86, and that the $183 note was for the purpose, as she understood, of paying the attorneys’ fees, examination of abstract, etc., in connection with the loan to her of said money, and further that the note for $2,310 was void, for the reason that the same was executed by her in payment for said ten shares of stock of the Commonwealth Trust Company, as well as evidencing the fact of her indebtedness to said company for the loan of said sum of $1,165.86; that said transaction was wholly between plaintiff and the Commonwealth Trust Company, and that, while the negotiations leading up to arid the consummation of said transaction were had between plaintiff and the said W. E. Richards, the said Richards was acting for and on behalf of the Commonwealth Trust Company, as its president; that the defendant Brice was claiming to be the legal owner of the $2,310 note executed by her to the Commonwealth Trust Company, and was claiming the right to collect from plaintiff the unpaid balance due on said note, but that, as a matter of fact, such claim on the part of the defendant Brice was only simulated, and that in truth and in fact said note was still owned by the Commonwealth Trust Company, but that, if it be true that defendant Brice had acquired said note, he did so long after its maturity, and took the same subject to all defenses that plaintiff had against said note; that, in order to secure the payment of said notes executed by plaintiff, she at the same time executed and delivered to one Fleming, as trustee, a deed of trust on the tract of land owned by her in Liberty county, and hereinbefore mentioned; that the defendant E. J. Winter had been made substitute trustee in said deed of trust for the purpose of executing the same in behalf of the Commonwealth Trust Company, and that at the instance of defendant Brice the said Winter, as trustee, had advertised said tract of land for sale, under the authority given by said deed of trust; that the said Winter would proceed to sell said tract of land, as trustee, under the authority conferred by said deed of trust, in payment of the balance claimed by defendant Brice to be due on said note for $2,310; and that, unless restrained and enjoined, said Winter would sell said land under said deed of trust, as he had advertised and was threatening to 4o. A temporary injunction was prayed for, restraining the said Winter as trustee from selling said tract of land under said deed of trust, and it was prayed that upon final hearing said note claimed by defendant Brice be canceled, and also that said deed of trust be canceled and held for naught, as constituting a cloud upon plaintiffs title to the land covered thereby. It was further alleged by plaintiff that she had paid back to the Commonwealth Trust Company all money that she had received' from said company at the time said notes and deed of trust were executed.

The defendants Commonwealth Trust Company and O. R. Brice filed separate answers, the answer of. the defendant Brice, on which he went to trial, being his second amended original answer, and the answer of the Commonwealth Trust Company being its first amended original answer.

The answer of the Commonwealth Trust Company consisted of general demurrer and general denial, and further said company specially alleged that it had no transaction whatsoever with the plaintiff, Mrs. V. D. Hardee, as claimed by her; that the ten shares of stock of said company that were issued to her belonged, at the time of her purchase of same, to the said W. E. Richards individually, and-were issued out of stock owned by the said Richards individually, and that the loan of money made to the plaintiff at the time of such transaction was made by the said W. E. Richards personally and, individually, out of his own personal means and funds, and that in doing so the said Richards acted for himself individually, and not for the Commonwealth Trust Company, and that the notes executed at the time by the plaintiff were not executed in favor of or made payable to the Commonwealth Trust Company, but that .they were executed by plaintiff and made payable to the order of herself, and were indorsed by her; that shortly after said transaction was consummated between plaintiff and said W. E. Richards, and before maturity of said notes, the said $2,310 note was transferred and sold by the said W. E. Richards to the Commonwealth Trust Company; and that said company paid to the said Richards full value thereof, without any notice of any fact or circumstance that would vitiate said note. And, in substance, it was alleged that the Commonwealth Trust Company was the owner and holder of said note by purchase from said Richards for value, in due course of trade, and without notice of any defects or facts that would vitiate said note in its hands.

Defendant Brice answered by general demurrer and general denial, and pleaded specially that the transaction in connection with which plaintiff executed the note here sought to be canceled was wholly between the plaintiff and said W. E. Richards personally, and that the note sought to be canceled was executed by the plaintiff and made payable to the order of herself, and not to the Commonwealth Trust Company, and that, if there were any facts in connection with the transaction that would vitiate said note in the hands of said Richards, nevertheless, the Commonwealth Trust Company, for a valuable consideration, purchased said note from said W. E. Richards, without any notice of any such facts, and paid full value therefor, in due course of trade, and was therefore a purchaser of said note in good faith, and that thereafter defendant Brice purchased said note from the Commonwealth Trust Company, and paid full value therefor, and was the legal and equitable owner of the same, as well as the lien constituted by said deed of trust to secure the payment of said note, and that defendant was entitled to collect said note, or the balance due thereon, together with a foreclosure of said deed of trust to secure the same. This defendant further alleged that before he purchased said note from the Commonwealth Trust Company he tools the precaution to call upon plaintiff for the purpose of ascertaining whether there was any reason why he may not safely purchase the same, and that, in substance, he was informed by plaintiff that she owed said note, and that plaintiff in fact requested this defendant to purchase said note, and that, relying upon such statements and request of plaintiff, this defendant purchased said note from the Commonwealth Trust Company, and_ paid full value therefor, and would not have done so but for such representations and statements on the part of plaintiff, and that therefore plaintiff was estopped to now question the validity of said note or deed of trust securing the same, or this defendant’s right in any manner to collect said note and foreclose said deed of trust to secure the same, and also, by a cross-action in proper form, defendant Brice prayed for recovery against plaintiff for the balance due on said $2,310 note, together with interest and attorney’s fees, and for foreclosure of said deed of trust given to secure the same.

On June 6, 1916, the case was tried with a jury, and was submitted to the jury upon 13 special issues, all of which were answered by the jury, and upon such verdict the court rendered judgment in favor of appel-lee, canceling said $2,310 note, and also canceling said deed of trust, as constituting a cloud upon plaintiff’s title to the land covered thereby.

Defendant Brice in due time filed his motion for a new trial, which was overruled by the trial court, and the action of the trial court in that regard was duly excepted' to, and the judgment has been brought here by appeal for review.

The first issue submitted to the jury by the trial court was as follows:

“Question No. 1. Who was the real owner of the ten shares of stock of the Commonwealth Trust Company immediately prior to the time same was transferred to Mrs. V. D. Hardee, the said W. E. Richards, or the Commonwealth Trust Company?”

To this question the jury answered: “The Commonwealth Trust Company.”

Issue- No. 5 submitted to the jury was as follows:

“Question No. 5. Was the note in question payable to the Commonwealth Trust Company?”

To this question the jury answered: “Yes.”

The sixth issue submitted to the jury was as follows:

“Question No. 6. Was the note in question payable to ‘myself’ and by Mrs. Hardee indorsed ?”

To this question the jury answered: “No.”

The eighth issue submitted to the jury was as follows:

“Question No. 8. Did Mrs. Y. D. Hardee tell the defendant C. R. Brice at or prior to the time he purchased said note that if he bought the same that she would pay the same?”

To this question the jury answered: “No.”

We deem it unnecessary to set out further questions propounded by the court to the jury, or the .answers of the jury in response to further questions, for the reason that, if the findings of the jury to questions Nos. 1, 5, 6, and 8, as above shown, are based upon sufficient evidence to support them, then the judgment of the trial court must be affirmed.

It is strenuously insisted by counsel for appellant Brice that the answer of the jury to question No. 1, to the effect that the ten shares of stock issued to appellee belonged to the Commonwealth Trust Company, was wholly without support in the evidence, or, if not, that the evidence so preponderated against such finding as to suggest prejudice or bias or some other improper motive prompting the jury to so find, and that this court should so hold. Upon this point, the material testimony, as we conceive it to be, was substantially as follows:

Appellee testified that she went to W. E. Richards, as president of the Commonwealth Trust Company, for the purpose of securing a loan of $1,105.86 from the Commonwealth Trust Company, knowing that said company was engaged in the business of banking and lending money upon proper security; that this was about the 1st of November, 1912, and that she went through the usual procedure of furnishing an abstract of title to the tract of land in Liberty county covered by the deed of trust in question, and, in fact, made known to Richards, as president of said company, just what she wanted and the necessity for getting the money as soon as she could; that she went back about the 30th of November, 1912, and she was then informed by Mr. Richards that the company would make her the loan desired, provided she would purchase ten shares of the company’s stock; that it was represented to her by Richards that the stock of the Commonwealth Trust Company had a value at that time of $105 per share, and that, being compelled to raise money with which to pay oft and discharge a lien then existing upon the tract of land covered by the deed of trust, she agreed with Richards, as president of the company, and acting for the company, to purchase ten shares of the stock of the Commonwealth Trust Company, and that thereupon she executed two notes, one for $2,310, and the other for $183, both payable to the Commonwealth Trust Company, and both being due 90 days thereafter, and bearing interest at the rate of 10 per cent, per an-num until paid; that the ten shares of stock were issued to her, and that she attached the same to the $2,310 note as additional security for its payment; that it was not stated to her by the said Richards that he was making the loan to her out of his individual means, or that'in making such loan he was acting for himself individually, nor did the said Richards state to her that the stock purchased by her was his individual stock, but, on the contrary, it was expressly stated that the stock was being issued by the Commonwealth Trust Company, and the money was being loaned by such company; that she received in actual cash at the time of such transaction $1,221, and said stock certificate for ten shares; that she did not pay anything for said stock when it was issued, other than said note, nor did she perform any labor of any kind for such stock; that the $183 note was fully paid off and discharged; and that appellee had also paid to the Commonwealth Trust Company the full amount of money that she received at the time of the execution of said notes and deed of trust.

There was also introduced in evidence .in this connection the following letters from W. E. Richards, president of the Commonwealth Trust Company, to Mrs. V. D. Hardee:

“Houston, Texas, Nov. 30, 1912.
“Mrs. Y. D. Hardee, Houston, Texas — Dear Madam: This is to advise that we are to make payment of the taxes on your lands in Liberty county for the years 1911 and 1912, the taxes for 1911 supposed to be $14.18 and for 1912.
“There is also a charge of $5.00 for bringing down the supplemental abstract, which is to be paid by us, as well as recording fees for deed, deed of trust, and releases, etc. It is our understanding that all of these charges are to be taken care of by us.
“Yours truly,
“W. E. Richards, President.”
“Houston, Texas, Nov. 30, 1912.
“Mrs. V. D. Hardee, Houston, Texas — Dear Madam: This is to confirm the agreement had with you to the effect that you have the right to cut' the timber on the 313-acre tract of land in Liberty county, same tract against which wg hold security; the understanding being that all of the proceeds coming to you are to be deposited with us for the payment of your obligation to us. I believe that you expect to get a net price of $3.00 per thousand for the pine and so much for the cord wood and hardwood as.you can get.
’’ '“Yours truly,
“W. E. Richards, President.”1

On the other hand, it was positively testified by W. E. Richards that the ten shares of stock which were issued to appellee at the time of the execution of the notes and deed of trust in question was his own individual property, and that he informed appellee at the time of the transaction in question that he, individually, was making the loan to her, and that the stock which she was purchasing was his individual stock, and that the transaction was between him individually and appellee, and that the Commonwealth Trust Company had nothing to do with same; that the notes which were executed by ap-pellee were not made payable to the Commonwealth Trust Company, but were made payable to the order of appellee, and were indorsed by appellee; that he (Richards) caused said notes to be made so payable, so that he might be able to transfer them without indorsement by himself, and that he did, within a few days after the transaction was consummated, transfer and sell said notes to the Commonwealth Trust Company, but that he could not remember just what was paid him by the Commonwealth Trust Company for said notes, but that approximately the face value thereof was paid to him; that he made no false representations to appellee as to the value of said stock, but that he considered said stock worth $105 at the time of its purchase by appellee; that he was the owner at the time of this transaction of approximately $60,000 worth of the Commonwealth Trust Company’s stock; and that the ten shares issued to appellee came out of the shares of stock owned by him in said Commonwealth Trust Company, as shown by the stock ledger of the Commonwealth Trust Company. A page from the stock ledger of the Commonwealth Trust Company (it being a loose-leaf ledger) was introduced in evidence, from which it appears that the 10 shares of stock issued to appellee were out of stock certificate No. 171 for 601 shares of the Commonwealth Trust Company’s stock standing in the name of W. E. Richards. The note itself, which was executed by ap-pellee at the time of the transaction in question, was not produced on the trial, but it was claimed by the Commonwealth Trust Company and the defendant Brice that the note had been lost, and that the same could not be found, after diligent search, and therefore the note itself could not be produced for the purpose of showing to whom it was made payable, but it was recited in the deed of trust given to secure the same that the note executed by appellee at the time of the transaction was made payable to the order of appellee, and this recitation in the deed of trust was introduced in evidence on that point. There was also introduced in evidence on the trial what purported to be a copy of said $2,310 note, which the defendant Brice claimed he made before the note was lost, and this copy showed that said note was made payable to the order of ap-pellee. as claimed by both defendants in 'this suit. The defendant Brice, however, was not able to explain just why he made this copy of the note, nor could he or the Commonwealth Trust Company explain how the note itself got lost. While the witness Richards was on the stand, he was asked by counsel for appellee if the Commonwealth Trust Company’s records would disclose how this transaction with appellee was carried on its books as between W. E. Richards and the company itself, and to this question Richards replied that he supposed the records of the trust company would show how this transaction was carried as between the company and himself, but that he had not the records with him showing such fact, and that he had made no search for any such record, and, in substance, that appellee might make the search if she desired to do so.

Portions of the original answer, which was filed by the Commonwealth Trust Company as a predicate for a motion to dissolve the temporary injunction in this case granted in vacation, were introduced in evidence on this point, from which it appears that in such original answer it was admitted that the certificates of stock purchased by appellee were purchased from the Commonwealth Trust Company. The effect of this admission was sought to be nullified and explained •away by the defendant Brice while a witness on the stand, and also by the witness W. E. Richards.' Nevertheless this admission as to the ownership of the stock at the time of this transaction was legitimate and proper evidence before the jury, and was entitled to consideration and such weight as the jury thought proper to give it, in connection with the other facts and circumstances on this point.

It is also undisputed that the money advanced to appellee at the time the note in question was executed, and which, together with the ten shares of stock issued to her, constituted the consideration for the note in question, was in the form of a check drawn by the cashier of the Commonwealth Trust Company on that company, and there was nothing in connection with this check to indicate that any part of such money represented thereby belonged to or was furnished by said W. E. Richards individually, but Richards testified that he caused this to be done merely as a convenience, and that he was charged by the Commonwealth Trust Company with the money thus advanced to appellee, and this is the record that counsel for appellee was inquiring about when the said Richards stated that he had not looked for such record, and that he presumed the same was open to inspection by counsel for appellee if they desired to see the same.- -

We believe that the foregoing states, substantially, most of the material testimony introduced on the trial below relative to .the issué of the ownership of the ten shares of stock in question, at the time the .same was issued to appellee, but there are other circumstances shown by-the record which, in our judgment, tend to corroborate and sustain the contention of appellee that said stock was sold to her by the Commonwealth Trust Company itself, acting through its president, W. E. Richards, and not by W. E. Richards individually, and we are of opinion that the evidence on this point was sufficient to warrant the jury in so finding, in response to that issue submitted by the court.

Now, the next point to be determined is whether the finding of the jury in response to issue No. 5, to the effect that the note in question was made payable to the Commonwealth Trust Company, has sufficient support in the evidence, or is so wholly without support in the evidence as to authorize this court to set aside and ignore that finding.

As stated above, the note itself was not produced on the trial, it being claimed by the Commonwealth Trust Company and appellant Brice that the note had been lost, but neither of them could say who was responsible for the loss of the note, or how the same was lost. Appellants, however, strenuously argue that, because it was recited in the deed of trust that such note was made payable to the order of appellee, this recitation itself ought to be conclusive on the point, but that, if not, still this recitation, corroborated as it was by the positive testimony of W. E. Richards and appellant Brice, shows beyond reasonable controversy that such note was not made payable to the Commonwealth Trust Company, but was made payáble to the order of appellee. The testimony- of ap-pellee on this point was positive, to the effect that this note was made payable to' thé Commonwealth Trust Company, and the jury evidently gave full credence to appellee’s testimony on this point; and in view of the fact that the note itself was not produced, and taking into consideration the relation sustained by W. E. Richards and the appellant Brice to the Commonwealth Trust Company at the time of the transaction in question, we do not feel authorized to say that the jury’s finding on this point is so wholly without support in the evidence as to warrant this court in setting such finding aside and substituting its own in that connection.

At the. time of this transaction W. E. Richards was president of the Commonwealth Trust Company, which concern was in the business of lending money upon security, and for that reason, as stated by appellee, she applied to the Commonwealth Trust Company for the loan she desired, and it would be but natural tq presume that the president of the company acted for the company in extending this loan, and that he did not extend the same personally or individually, and thereby become a competitor of his company in the business of lending money. We say this would be a natural presumption in the usual and ordinary course of business.

Appellant Brice was at the time attorney for the Commonwealth Trust Company, under regular monthly salary, his business being, among other things, to examine abstracts of title to property offered as security to the company for loans, and in his capacity as attorney he examined the abstract to ap-pellee’s land here in question, but he could not say on the witness stand whether in examining this abstract he was acting for the Commonwealth Trust Company or for W. E. Richards individually, and there is nothing in the record to indicate that he received for his services in this connection any compensation other than the salary paid him monthly by the Commonwealth Trust Company.

Taking, therefore, the positive testimony of appellee, to the effect that this note was made payable to the .Commonwealth Trust Company, in connection with the fact that the note was not produced on the trial, and the other circumstances just mentioned by us, we cannot say that the finding of the jury on this point is without sufficient support in the evidence to warrant this court in upholding the same, but, on the contrary, it is our opinion that the evidence on this point, taken as a whole, was such that the jury was warranted and authorized to find that said note was made payable to the Commonwealth Trust Company.

What we have said in connection with the fifth finding of fact by the jury necessarily disposes of their finding on the sixth issue, which finding was that said note was not made payable to the order of appellee.

As hereinbefore stated, appellant Brice, among other things, alleged, substantially, that before he purchased the note in question from the Commonwealth Trust Company, he made inquiry of appellee as to whether she recognized the note as an obligation against her, etc., and that, in fact, appellee requested him to purchase the note, and stated to him that she would pay the same if he did so, and that, acting and relying upon her statements and promise in that connection, he did purchase the note, and that therefore ap-pellee was, in effect, estopped to deny the validity of the note in his hands. On the trial below appellant Brice swore substantially to these allegations contained in his answer, but appellee testified just to the contrary, and further stated that she did not even know that appellant Brice was contemplating purchasing the note, but that he did, in fact, make some inquiry of her regarding the security furnished by the land covered by the deed of trust. W. E7. Richards also testified on this point, in substance, that before appellant Brice agreed to purchase the note from the Commonwealth Trust Company, he (Brice) stated to Richards that he desired to confer with appellee about the matter, for the reason that she was a woman, and that he did not care to purchase the note until assuring himself that no question would be raised by her as to the validity of the note, in the event he should purchase the same, and that appellant Brice, upon making such statement, left the office of Richards, with the statement that he was going then to see appellee about the matter, and that shortly thereafter Brice returned and stated to Richards that he was satisfied, and would purchase and did purchase the note from the Commonwealth Trust Company.

This is practically all the material testimony on this point, and from this it is contended that the jury was compelled to find that appellee stated to Brice, before he purchased the note from the Commonwealth Trust Company, that she intended to pay and would pay the same to him. We cannot agree with this contention on the part of appellant, and hold that the testimony in favor of ap-pellee on this issue, if given credence by the jury, was sufficient to authorize their finding on this point, and overrule appellants’ contention in this connection.

It follows from what we have said that the evidence was sufficient to warrant the jury in finding: (1) That the shares of stock purchased by appellee at the time of the transaction in question were owned and issued by the Commonwealth Trust Company, out of its capital stock; (2) that the note in question was made payable to the' Commonwealth Trust Company; (3) that appellee did not request appellant Brice to purchase said note from the Commonwealth Trust Company, and did not promise or lead him to believe that she would pay the same to him, in the event he should do so.

The record is undisputed to the effect that appellant Brice did not purchase the note in question from the Commonwealth Trust Company until long after its maturity, and for that reason he took the same subject to all defenses that appellee had against the Commonwealth Trust Company, had said company sought to collect the same while in its hands.

If the Commonwealth Trust Company sold the ten shares of stock in question to appellee, taking as part consideration therefor said note,. such transaction was unauthorized, and was prohibited by article 12, § 6, of the Constitution of this state, which provides that;

“No corporation shall issue stock or bonds except for money paid, labor done, or property actually received, and all fictitious increase of stock or indebtedness shall be void.”

And since the jury in this case has found that the shares of stock in question were issued by the Commonwealth Trust Company, a corporation, to- appellee, and since the undisputed proof shows that the note executed by appellee in payment therefor constituted a material and substantial part of the consideration for such stock, and since it is undisputed that appellant Brice is not in the attitude of an innocent purchaser of said note, the same is void and unenforceable in his hands, and the trial court was not in error in so decreeing. Irrigation Co. v. Deutschmann, 102 Tex. 207, 105 S. W. 486, 114 S. W. 1174; Republic Trust Co. v. Taylor, 184 S. W. 772; McCarty v. Loan Co., 142 S. W. 96; Mason v. Bank, 156 S. W. 366; Lockney State Bank v. Martin, 191 S. W. 796. See also Reed v. Brewer, 91 Tex. 144, 37 S. W. 418; Edwards County v. Jennings, 89 Tex. 618, 35 S. W. 1053.

While we have not discussed numerically the assignments of error found in appellants’ brief, yet we have considered them all, and what we have said above has the effect to dispose of them all adversely to appellants’ contention, and it follows that the judgment of the trial court canceling and holding for naught the note and deed of trust in question should, to that extent, be in all things affirmed, and it is so ordered; and, it appearing to this court that upon the verdict of the jury the trial court was authorized and should have entered judgment to the effect that appellant Brice take nothing by his cross-action against appellee, this court here now enters such judgment as the trial court should have entered in that connection, and it is ordered that appellant Brice take nothing upon said cross-action as against appellee, and the judgment of the trial court is modified and affirmed accordingly.
      &wkey;oFor otter cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes


author: RASBURY, J.

text:
    LINDSLEY et al. v. DALLAS CONSOL. ST. RY. CO. et al.
    (No. 7956.)
    (Court of Civil Appeals of Texas. Dallas.
    Dec. 15, 1917.
    Rehearing Denied Jan. 12, 1918.)
    1. Injunction <&wkey;65 — Right to Remedy — Interest in Subject-Matter.
    Street railway having valid franchise to use city streets has such an interest in the use of the city streets that it may sue to restrain the use thereof by jitneys licensed under alleged invalid ordinance.
    2. Injunction <&wkey;65 — Jitneys — Illegal Operation.
    Street railway having valid franchise to use city streets may by injunction proceed. against city for purpose of declaring invalid legislative grant of power to license jitneys, in order to avoid ruinous multiplicity of suits, since otherwise it must resort to individual suit against each licensee.
    3. Injunction &wkey;>65 — Right to Writ — Threatened Injury.
    Where city passed ordinance for licensing jitneys which street railway alleged was invalid, it could sue to enjoin threatened enforcement of the ordinance directly against the city.
    4. Municipal Corporations <&wkey;57 — Powers.
    Municipalities or other legislative instru-mentalities may exercise only such legislative powers as are expressly or by implication delegated to them by the Legislature.
    5. Municipal Corporations <&wkey;108 — Jitneys — Ordinances—Validity.
    Dallas City charter, art. 3, subd. 1, requires all powers conferred on city to be exercised by mayor and board of commissioners, unless otherwise directed. Article 2, § 8, subd. 7, empowers the city, through the board of commissioners, to regulate charges of franchise holders and to prescribe the service upon fair hearing. Article
    2, § 8, subd. 27, authorizes regulation of charges of carriers. Article 8, § 1, provides for the initiative and referendum of ordinances. Held, that as regulation of carriers must be by the board of commissioners an ordinance regulating jitneys and authorizing them to be licensed, passed under the initiative and referendum clauses, is invalid.
    Appeal from District Court, Dallas County; Kenneth Poree, Judge.
    Injunction by the Dallas Consolidated Street Railway Company and others against Henry D. Lindsley and others, as Mayor and Board of Commissioners of the City of Dallas. From order of temporary restraint, the defendants appeal.
    Affirmed.
    L. R. Callaway, Lee Richardson, and Roy-all R. Watkins, all of Dallas (Dwight L. Lew-elling and George Clifton Edwards, both of Dallas, of counsel), for appellants. Thompson, Knight, Baker & Harris, of Dallas, for appellees.
   RASBURY, J.

This is an appeal from an order of the trial court temporarily restraining appellants, the mayor and board of commissioners of the city of Dallas, from observing or acting under the provisions of an ordinance granting and regulating the use of the city’s streets by motor busses, commonly known as jitneys. The following general statement of facts disclosed by the record is necessary. Other specific facts will be noted when necessary in discussing the issues presented. Under the authority conferred by the Legislature, the city first undertook to regulate the jitney traffic by ordinance of July 31, 1915. Further regulation was had by ordinance of April 19, 1916. On January 5, 1917, another regulatory ordinance was passed and all former ordinances repealed. On February 5, 1917, the last ordinance was declared void by the judge .of the Forty-Fourth district court and the city restrained from enforcing or observing it. On April 3, 1917, the electorate of the city, under the initiative and referendum provisions of the charter, by decisive majority adopted an ordinance regulating jitneys. On June 19,1917, the judge of the Fourteenth district court in the instant case declared that ordinance void, and restrained the city and its officers from enforcing or observing it. As indicated, it is from the action in the present case that this appeal is taken. The salient provisions of the initiative ordinance necessary to be stated are these: A motor bus is defined to be any automobile,. automobile truck, or trackless motor vehicle engaged in the business of carrying passengers for hire over designated streets and routes within the city of Dallas. License for such vehicles to engage in such business is authorized upon payment of a license fee of $25 for each car so engaged, and a fee of $10 for each operator, and provides for the employment of an automobile inspector who is required to inspect and certify the car to be safe before license may issue. Licenses may not issue to an applicant until he has contributed $50 to, a fund intended to indemnify persons negligently injured by such busses while operated by licensees, and until said fund reaches $5,000. Busses may, in a limited way, detour from fixed routes of service for the convenience of passengers. Licensees are compelled to operate over their designated routes only for a period of 8 hours in 24, though they may voluntarily operate continuously. They are not required to operate on Sundays. Licensees are subjected to examinations concerning their physical fitness. Licenses may be transferred. Speed and number of passengers are regulated, and provision is made for remodeling cars in order to increase the seating capacity. Passengers may occupy rear doors when safe fastenings are provided. They may not occupy running boards. Pare shall be 5 cents between termini. Violation of the provisions of the ordinance is declared a misdemeanor punishable by fine of not less than $1, nor more than $50. The indemnity fund is created by requiring each licensee to contribute thereto $50 before his license is issued. The fund is required never to be less than $5,000. It is not required to be more. If it reaches the sum of $25,000 it shall never be less, but if it exceeds the latter sum the surplus may be returned to those entitled to it under the act. Any person injured while upon a licensed jitney operated by a licensee while upon his designated route, may, when his claim is established in a court of competent jui-isdiction, recover as much as $2,-500 from said fund, if it cannot be made from the defendant, upon motion thereafter to be filed in court. If the indemnity provision shall be declared invalid, other provisions of the ordinance are nevertheless to be in force, and licenses shall issue upon compliance therewith. Any other facts necessary to be stated will be referred to in our discussion of the issues presented in the brief. Nor will we discuss seriatim the points presented by counsel, but, in lieu, discuss as such the issues raised.

Accordingly, the first issue tó be considered is that which challenges appellees’ right to maintain the suit on the ground that appel-lees have no interest in the subject-matter thereof. Appellees’ reply to the contention is that a corporation lawfully authorized by a municipality to use its streets as a common carrier of passengers has such an interest therein as enables it to complain of competitors illegally using same. In connection with the contentions noted, it is shown by the record that appellees are private corporations authorized to and which are operating street railways upon the streets of Dallas under authority of valid franchise grants from the city of Dallas, and by which they are required to pay the cost of paving between their rails and two feet on the outside thereof, as well as the cost of maintaining and repairing same. Each company is a large taxpayer. The motor bus referred to in the ordinances has reference, as we have said, to the jitney, which is also a common carrier of passengers in competition with appellee in, the city of Dallas. The city enrolled the ordinance after its adoption by the people, and was proceeding or threatening to proceed to observe and enforce its provisions, when the suit was filed. Appellants, under the first issue, discuss, in substance, two points: (1) Appellees’ want of such interest in the subject-matter as would authorize them to sue at allj and (2) conceding the interest, their right to challenge the validity of the ordinance in a suit against the city.

As to the first point “subject-matter,” as-applied to legal proceedings, is defined to be the “cause; the object; the thing in dispute.” Bouvier. Those elements in this suit are the right of those complying with the provisions of the ordinance to engage in the jitney traffic upon the city’s streets and the right of the city to enforce and observe such provisions. Have appellees any interest in that right? While the public interest, as argued by counsel, is ordinarily greatest, it is equally true that the holder of a valid franchise authorizing the use of the public streets has also an important interest therein; undoubtedly such an interest as entitles him to defend any invasion of his layvful franchise rights by the city or another. Such is obviously true of any franchise or privilege granted lawful^. Franchises, whether corporate entities or public grants, are property. Their invasion is an invasion of property rights. As a consequence, if the acts here complained of in law constitute an invasion of appellees’ franchise, an interest in the subject-matter is shown, in that connection it is claimed by appellees that the ordinance is void, which brings us to the question whether it is an invasion of a valid franchise for the municipality, to permit others to engage in a similar competing business under void authority. It has been decided by our Supreme Court that the owner of an unlicensed ferry, where licenses are required by law, may be restrained by his competitor, who is licensed, from engaging in the business on the ground that the licensed ferryman is entitled to protection against unlawful competition. Tugwell v. Eagle Pass Ferry Co., 74 Tex. 492, 9 S. W. 120, 13 S. W. 654. It was said in that ease to be immaterial that license could issue to the unlicensed ferry, legalizing the competition, but that “it was sufficient that no such second license has in fact been issued.” The most careful analysis of the holding in- that case develops no more nor less than that one lawfully conducting a ferry may enjoin a competitor from unlawfully engaging in the same business, and the fact that the state could authorize competition is immaterial in the absence of such authorization. But appellants argue, in effect, that there is a difference between one pursuing a business without any authority and one pursuing the same business under that which purports to be but is not authority. Counsel have not cited, nor have we been able to find, any case from our own courts adjudicating the precise question, that is, holding that while one lawfully upon the streets of a city may challenge the right of a competitor without any authority whatever, he may not challenge such right when the competitor is acting under color of authority. The point, however, has been decided by other courts and discussed by eminent text-writers. The cases are in conflict, while the text-writers are in agreement. Some of the cases hold, in substance, that one public utility may not challenge the authority of a rival to engage in a similar business on the ground that questions relating to the regularity of charters and the validity of franchises are to be challenged alone by constituted public authority. The leading case announcing such rule is Baxter Teleph. Co. v. Cherokee Co. Mut. Teleph. Ass’n, 94 Kan. 159, 146 Pac. 324, L. R. A. 1916B, 1083. The precise holding in that ease is that while the laws of Kansas require the Cherokee County Mutual Telephone Association to secure a license from the state Public Utilities Commission, which it had failed to do, yet its rival, Baxter Telephone Company, could not on that ground challenge its right to engage in a competing business. It will be observed that such holding is in direct conflict with Tugwell’s Case, supra. The court in the Kansas case argues as reason for its holding that the Public Utilities Commission might, in the exercise of its discretion, grant the permit, and if it did it would affect appellant in precisely the same manner that it would without such permit, that is to say, competition would be just as sharp under license. The court also bottoms its holding on the broader ground that the occupancy or usurpation of public streets is a public matter for the protection of which the state or its agencies only are entitled to act. In Coffeyville Min. & Gas Co. v. Citizens’ Nat. Gas & Min. Co., 55 Kan. 173, 40 Pac. 326, the same court declared that one public service corporation authorized to use the streets and public grounds of a municipality was without standing in court to test the right of a rival concern to use the streets for similar purpose, or the validity of the ordinances under which the rival was acting. The court based its holding on the ground that the use of the city streets was a public question, and that the validity of grants thereon was a matter for the attention of the proper public officers. Market Street Ry. Co. v. Central R. Co., 51 Cal. 583, holds, without discussion, that a street railway company licensed to occupy a street may not challepge the right of another unlicensed street railway company to similarly occupy the street. This, case, it will be observed, is also in conflict with the Tugwell Case. In the case of Memphis St. Ry. Co. v. Rapid Transit Co., 133 Tenn. 99, 179 S. W. 635, L. R. A. 1916B, 1143, Ann. Cas. 1917C, 1045, the Kansas cases were cited and adopted without discussion, other than the statement that questions concerning the regularity of charters and the validity of franchises are to be determined at the suit of public officials and not of a competing corporation. Other cases in analysis hold that the-right to use public streets depends upon legislative grant, and that the use thereof by public utilities without authority is a public nuisance, generally to be challenged by state or other public authority, but that an abutter, when he sustains special and peculiar damage, and the grantee of a valid but not exclusive franchise, may in equity challenge and ultimately restrain such use. Bartlesville Elec. Light & Power Co. v. Bartlesville Interurban Ry. Co., 26 Okl. 453, 109 Pac. 228, 29 L. R. A. (N. S.) 77, is a well-considered case supporting the rule stated. In that case the appellant sought to restrain appellee, who was without any authority, from using the city streets in competition with appellant. Injunction was denied and appeal taken. On appeal it was not claimed that any injury to or interference with appellant’s plant or property would result from appel-lee’s use of the streets. The sole complaint was that the use of the streets without authority from the city would be an encroachment upon appellant’s lawful right to use the streets as evidenced by its franchise. The Kansas cases were reviewed and declared to be supported by neither the better reason nor the weight of authority. It was said to be the general rule that relief in such cases does not depend upon the right to exclusively occupy the streets in the sense that others may not be permitted to do so, but upon a lawful grant to enter thereon, and that' as a result one who is lawfully upon the streets possesses against one without like authority and exclusive franchise. The court in that case asserts that while the appellant had no exclusive franchise- from the city to occupy its streets, and while the city had the right to grant similar franchises to others, yet the right of such others to use its struts was dependent upon the consent of the city, and when appellee entered upon the streets of the city without such consent it was not only guilty of maintaining a public nuisance, but inflicted upon appellant a special injury which could be restrained. The foregoing case, it will be observed, is one where there was an absence of any authority, as in the Tugwell Case, in fact that case is cited in support of the holding. Later, the case of Tulsa St. Raii-way Co. v. Oklahoma Union Traction Co., 27 Okl. 339, 113 Pac. 180, involving the precise Question involved in' the instant case, reached the Oklahoma Supreme Court. In that case the traction company was the holder of a franchise lawfully granted, permitting it to use the streets of Tulsa. It sued the street railway company to restrain it from building a parallel and competing line of railway on the ground that the street railway company was without franchise or other legal authority to do so. The street railway company answered that it did possess a franchise authorizing its proposed action. The traction company replied that if the street railway company did possess such franchise it was void, because the city was without authority to grant it, to which the latter answered that in such proceeding the validity of its franchise could not be questioned, since such issue could only be raised by the governing authority. In passing on the case the court notes that a similar question was decided in Bartlesville Elec. Light & Power Co. v. Bartlesville Interurban Ry. Co., but says that it is claimed the case is not ruled thereby, because of a difference in facts requiring the application of a different rule, and states the difference in the facts to be that in the first case an entire absence of authority to use the streets was admitted, leaving no issue of fact or law to be determined in order to ascertain if the company was a trespasser upon the streets. The court, however, declares nevertheless that whether one is a trespasser upon public streets may be either an issue of fact or of law, both of which may be determined in a proceeding in equity. The court then refers to and approves the former holding that one with a lawful franchise has the exclusive right to exercise privileges granted thereby as against one who has not a similar lawful franchise, and adds that such privilege is private property, which may be protected against public nuisances, and that the court may investigate' the facts and determine whether the defendant company has a franchise, and, if it has a pretended franchise, may determine whether such franchise is invalid because granted without authority of law.

Allen v. Clausen, 114 Wis. 244, 90 N. W. 181, was a suit in which Allen, who owned property abutting upon a public street in Kenosha, among other matters, sought to enjoin Clausen from building a street railway on such street on the ground that the grant of the right by the city was without authority. Any inquiry into the validity of the franchise was objected to on the ground that a court of equity could not make such inquiry at the suit of a private individual, but only in a proceeding in the nature of quo warranto by the state. The court holds that “where one attempts to justify acts by a pretended license or franchise which the grantor had no power whatever to confer, a court, whether of law or equity,” can discover that fact and deny the claim of justification, and it is immaterial whether the lack of power lies in the state or its agencies. Many cases are cited in support of the rule announced.

In Millville Gaslight Co. v. Vineland Light & Power Co., 72 N. J. Eq. 305, 65 Atl. 504, it was said, in substance, that legislative franchises, however granted, are necessarily exclusive against all persons upon whom similar rights have not been conferred, since the exercise of such rights, without authority, is both usurpation of power and an invasion of the private rights of those upon whom franchises have been conferred. For the protection of such rights, so inadequate is the law, equity will extend its protective writ, even though it bring into question the validity of the franchise grants. In support of the rule other equity cases are cited.

In the case of Atlanta Ry. & Power Co. v. Atlanta Rapid Transit Co., 113 Ga. 481, 39 S. E. 12, it was held that the validity of a city ordinance in a contest between rival companies could be challenged and its enforcement restrained, if granted without authority. In State ex rel. Morgan’s Louisiana & Texas R. & S. Co. v. Judge of Division A, Civil District Court, 52 La. Ann. 1065, 27 South. 580, it was held that a similar proceeding could be maintained by any taxpaying citizen.

It is said that:

“The grantee of a valid franchise, according to what seems to be the better rule, may enjoin interference with its property rights by a competitor which has not obtained a valid grant of the right to use the streets.” McQuillin, Mun. Corp. vol. 4, § 1771.

A similar declaration is found in Dillon, Mun. Corp. (5th Ed.) § 1771, with a broader discussion of the fundamentals of the rule.

We have not reviewed every case which by analogy or otherwise supports the right to contest in a proceeding in equity the validity of legislative grants under facts similar to those disclosed in the instant case, but those we have discussed very clearly disclose that they are based on principles of equity, that is to say, upon principles of fairness, justness, and right dealing, as that rule is understood, and since our inquiry is more precisely the right to maintain the suit, rather than a discussion of why it may or may not be maintained, any lengthy discussion of the reasons for the rule is unnecessary, if the right exists. One of the cases cited, however, declares that unlawful competition is denied because it would be to permit one to unlawfully take from another a portion of the latter’s business without any corresponding obligation to the city whose streets are being used. Our own Supreme Court says in the Tugwell Case that it is so because lawful business is entitled to protection against unlawful competition, which it occurs to us is a sufficient answer alone. While, as we have just said, the cases reviewed sustain the right to maintain such suits on equitable principles, the contrary holdings not only do not deny the right on equitable grounds, or on the ground that unlawful business may not be prevented, but on the ground in the last analysis that the right to proceed is in public officers, and whether they do proceed is with them to some extent at least a matter of discretion, even though such failure might injure another in his private property rights, which is but to say that all relief would be denied, since those charged with the performance of public duties are not expected to protect private interests.

It is thus obvious that not only the current of authority, but the better reason as well, supports the right to challenge such grants as we have been discussing in the manner done in this suit, in fact we are unable-to escape the fact that the Tugwell Case is controlling. We accordingly hold that there was no error in the action of the district judge in holding that appellees were entitled to maintain this suit on the ground that they were interested in the subject-matter.

As relates to the other point, that is, the right to proceed against the city for the purpose of declaring invalid a legislative grant, we conclude that right manifestly exists in equity, and rests, as said by another, “on the firm and satisfactory ground of its necessity to avoid a ruinous multiplicity of suits, and to give adequate protection to plaintiff’s property in its franchise.” Pom-eroy’s Eq. Juris, vol. 6, §§ 583, 584. While most of the reported cases are suits between individuals or corporations, municipalities are none the less subject to the rule, since they may sue and be sued in the same man-, ner that individuals or private corporations may sue and be sued, and whether, in equitable proceedings like the instant one, .they are necessary or proper parties, and may be sued in order to avoid a multiplicity of suits, depends upon the exigencies disclosed by the facts. To maintain an effective suit against the jitneys authorized to operate under the ordinance in suit would truly require a ruinous multiplicity of suits. Under the ordinance any .number of licensees who cared to do so could engage in the business. Licenses can be issued at any time and as often as those desiring them comply with the terms of the ordinance. Licensees may also sell and transfer their licenses And re-enter the business intermittently. Obviously, it might take a great number of suits to proceed directly against the licensees. After suit is' brought others could enter the business, which would require suits against them. Those actually sued could sell or transfer their license, rendering any judgment against-them ineffective. Even after decree there would be nothing to prevent the city from issuing licenses to others not parties thereto. Even if it be assumed that the city would suspend enforcement of the ordinance after restraint of those licensed thereunder, such fact would not afford ground for denying ap-pellees the relief sought, as will appear from the case cited next below.

Further, no jitney had been licensed to operate under the ordinance attacked, and it was to enjoin its threatened enforcement that this suit was commenced. That this may be done in a suit directly against the municipality is, we believe, established in City of Austin v. Austin City Cemetery Ass’n, 87 Tex. 330, 28 S. W. 528, 47 Am. St. Rep. 114. The precise holding in that case was that one whose business was injuriously threatened by city ordinance could in a direct proceeding against the city test the validity and enjoin the enforcement thereof, even though the city was not attempting to enforce same, and even though the effort of such relief was to enjoin criminal prosecutions, which usually may or should be prevented by resort to habeas corpus. There, the act consisted in unlawfully interfering with plaintiff’s business. Here, the act complained of is the granting to another of colorable authority to do the same thing. It occurs to us that either act inevitably imports the same thing. As a consequence, we conclude the authority cited is also authority for maintaining the suit, aside from the -equity rule as announced by Mr. Pomeroy.

The next issue to be considered is that which challenges the holding of the trial court that the Legislature has not conferred upon the electorate for their determination under the initiative and referendum provisions of the charter, the matters comprehended by the ordinance under discussion, but that such authority is reserved to the mayor and board of commissioners. It is hardly necessary for us to repeat here, in reference to this oft-recurring question, the statement iterated and reiterated in all judicial decisions that except in the particulars wherein it is restrained by the federal Constitution the Legislature may exercise all legislative power not forbidden, expressly or by implication, by the state Constitution. A corollary of such rule necessarily is that municipalities or other legislative instrumen-talities or agencies may exercise only such legislative powers as are in turn, expressly or by implication, delegated to them by the Legislature. The inquiry then is, Did the Legislature by the charter granted to the city of Dallas authorize the voters to enact the ordinance complained of, or did it authorize the board of commissioners to do so? As indicated, it may be exercised only by the agency chosen. The determination of that issue does not involve the construction of complicated legal questions, but solely the ordinary signification to be attached to the language used in the charter. In determining that question, however, we expressly pretermit any discussion of whether the Legislature could or could not delegate such power to the electorate, but confine ourselves to a discussion of where the power in the charter lies as between the electorate and the board of commissioners of the city and nothing more.

The charter grant to the city has many provisions, but we shall attempt to recite only the substance of those material to the issue stated. By article 3, sub. 1, it is declared that all powers conferred on the city shall be exercised by a mayor and board of four commissioners, unless otherwise directed. By article 2, § 8, sub. 7, the city has the right, acting through its board of commissioners, to determine, fix, and regulate the charges, fares, or rates of franchise holders or those exercising any other public privilege, and to prescribe the service to be rendered and alter and change same, and in connection with which the board is required to make rules for a fair hearing to those to be affected, and no change shall be made until after notice and fair hearing. By article 2, § 8, sub. 27, the city has the power by ordinance to fix and regulate, among other things, the fares, tolls, and charges of public carriers and hacks, whether transporting passengers, freight, or baggage, and generally to fix and regulate the rates, tolls, or charges ánd the kind of service of public utilities of every kind. By article 8, § 1, any proposed ordinance may be submitted to the board of commissioners by registered electors of the city under certain regulations, and if found to be in compliance with the initiative provisions of the charter shall be by the board referred without alteration to the electorate, and if adopted by a majority of the voters shall become a valid and binding ordinance of the city and may not be amended or repealed save by a vote of the people. The ordinance here involved, the salient points of which we have detailed, we assume, for the immediate discussion, to have been adopted in conformity with all provisions of the charter, which we have not stated because immaterial in view of the conclusion we have reached. In Southwestern Tel. & Tel. Co. v. City of Dallas, 104 Tex. 114, 134 S. W. 321, it was held under the provisions which -we have enumerated, now in the city charter without change, that the tolls to be charged by the telephone company and the maturity and manner of their collection could not be regulated under the initiative and referendum provisions contained in the charter, for the reason that the right to regulate such matters was by the charter reposed in the board of commissioners, who were required to give notice and fair hearing to those to be affected, and because such fair hearing obviously could not be had “in a campaign before the electorate of the city.” Appellants’ contention in the instant case, as disclosed by supplemental briefs, is, in substance, that the right of the board of commissioners to fix the rates and regulate the service to be given by public utilities extends only to such concerns as operate under franchises as defined in the city charter, and that hence the case cited is without application. It is true that that portion of the charter which expressly reserves to the commission the right to determine, fix, and regulate charges .of public utilities, and prescribe the kind and manner of service to be rendered, is found in that portion referring to, defining, and regulating franchise grants by the city, and while it is true that we conclude, for reasons stated in City of Dallas v. Gill et al., 199 S. W. 1144, this day determined, that the ordinance in this proceeding is not a franchise as defined in the charter, we nevertheless conclude that the power to enact the ordinance was alone in the board of commissioners. The subdivision which is controlling being subdivision 7, of section 8, article 2, confers upon the hoard not only authority to determine, fix, and regulate the charges and the service to be rendered by those that do or may enjoy a franchise, but to similarly determine, fix,' and regulate the charges and the service to be rendered by any person, firm, or corporation who does or may exercise any other public privilege in said city. It is manifest that it was the intention of the Degislature and that the language used does distinguish between a franchise and a public privilege. The books make a distinction.

“In American law a franchise is defined as a special privilege conferred by the government on individuals and corporations, and which does not belong to the citizens of a country generally by common right. * * * The term franchise includes the term privileges, but a privilege is not necessarily a franchise.” McQuillin, Mun. Corp. vol. 4, § 1614, p. 3360.

As said at another' point, a franchise is property, or, as said by the writer just quoted, “an incorporeal hereditament.” The right to use the streets under the ordinance in question is at most, we believe, a permissive privilege. Certainly, it is not as is a franchise a vested property right. As a consequence, the section not only reserves to the commissioners the right to pass all regulatory ordinances affecting franchise holders, but to pass all such ordinances affecting those exercising any other public privilege. To hold less would be to construe as meaningless the term “public privilege.”

Further, it is declared in the telephone case, supra, that the authority conferred by subdivisions 7 and 27 of section 8 of article 2, of the charter, is to be exercised only by the board of commissioners. The language used is that:

“There can be no doubt that the authority to so regulate the business named in said sections may be exercised by the board of commissioners.”

Thus to the board of commissioners it appears is reserved all the power conferred by said sections. That power as contained in section 7 is, in substance, to pass all ordinances fixing and regulating the charges, Caves, or rates of those enjoying a franchise or other public privilege. Such power as contained in section 27 is, in substance, to pass all ordinances fixing and regulating the price of water, gas, and electric lights, and the fares, tolls, and charges of local telephones, of public carriers and hacks, whether transporting passengers, freight, or baggage, and generally to fix and regulate the rates, tolls, charges, and service “of all public utilities of every kind.” It would seem idle to argue that the vehicles described in the ordinance under discussion are not included in the sweeping provisions of the two sections. The licensees in using them upon the public streets as carriers of passengers are certainly exercising that character of public privilege referred to in subdivision 7. They are certainly public utilities and public carriers as described in section 27.

For obvious reasons we have refrained from any discussion of the policy of granting or denying to the electorate the powers claimed in this proceeding. That is a political question for determination by the Legislature. We have confined ourselves solely to a construction of the grant, and conclude from the language used and the construction placed thereon by the Supreme Court that the powers attempted to be exercised by the voters were reserved by the Legislature to the board of commissioners, and that as a consequence the ordinance is void.

The judgment is affirmed.
      jS&wkey;For other eases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes