author: RAINEY, C. J.

text:
    TEXAS FIDELITY & BONDING CO. v. GENERAL BONDING & CASUALTY INS. CO. et al.
    (No. 7456.)

    (Court of Civil Appeals of Texas. Dallas.
    Feb. 5, 1916.
    Rehearing Denied March 11, 1916.)
    1. Corporations <®=3484(2) — Powers or Corporation— ‘Indemnity. ’ ’
    A corporation organized under Rev. St. 1911, art. 492S, empowering such corporations to guarantee contracts between individuals, corporations, as well as the state and municipal corporations or counties, has no authority to make a contract of indemnity which is an engagement to make good and save another from loss upon some obligation which he has incurred or is about to incur to a third person, and is an independent agreement instead of collateral to some principal undertaking as is a contract of guaranty or suretyship.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. § 1815; Dec. Dig. ®^484(2).
    For other definitions, see Words and Phrases, First and Second Series, Indemnity.]
    2. Corporations <§=»484(2) — Powers of Corporations — Ultra Vires.
    A cfirporation authorized by law to enter into contracts of guaranty cannot justify the making of indemnity contracts on the theory that they fall within its implied powers, and such a contract is ultra vires.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. § 1815; Dec. Dig. <@^4S4(2).]
    3. Corporations <©=»38S(2) — Ultra Vires Act — Estoppel.
    Defendant, a Texas corporation, authorized only to do a guai’anty business, entered into an indemnity contract with plaintiff, another Texas corporation authorized to do a similar business. Sold, that, notwithstanding defendant received compensation under such contract, it was not es-topped to urge the ultra vires character of the contract, for plaintiff must have had knowledge of the limitations of defendant’s powers.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. § 1557; Dec. Dig. <®=s>388(2).]
    Appeal from District Court, Dallas County ;' Kenneth Feree, Judge.
    Action by the Texas Fidelity & Bonding Company against the General Bonding & Casualty Insurance Company and others.
    From a judgment in favor of the corporate defendant but against the individual defendants, plaintiff appeals.
    Affirmed.
    Etheridge, McCormick & Bromberg, of Dallas, for appellant. W. D. Cardwell, T. L. Camp, and W. J. J. Smith, all of Dallas, for appellees.

      Application lor writ oí error pending in Supreme Court.

   RAINEY, C. J.

This was an action on

three indemnity bonds, executed for value to insure appellant against the consequences of its becoming surety on three criminal bail bonds required by a court in Louisiana, to recover the losses sustained by appellant as such surety. The case was tried before the court without a jury, and resulted in a judgment in favor of the plaintiff against the individual appellees, but in favor of the corporate appellee.

Appellant pleaded, in substance: That on and prior to May 7, 1913, A. C. Karslake was in jail in the parish of Morehouse, state of Louisiana, where he was being held under three informations charging him in one with the crime of burglary and in two with the offense of grand larceny, and that his bail had been fixed in the burglary case at $3,-000, and in the grand larceny cases at $1,-000 each. That the appellant, at the instance of the appellees, and induced so to do by the execution and delivery to it by appellees of three instruments of indemnity by which the appellees agreed to hold appellant harmless against the consequences of the execution of said bonds as to all demands, liabilities, expenses, and attorney’s fees that it might suffer thereby, executed the bail bonds as surety for Karslake. That Karslake who was released by reason of the bonds on which appellant became surety, afterwards defaulted, and that the bonds were forfeited, and judgment rendered against appellant on said bonds, which judgment had been paid off by the appellant in the sum of $5,046.52, and that it had been required to pay attorney’s fees, in Louisiana of $50, and for bringing this suit of $750. The appellees filed their original answer, consisting of a general demurrer, a general denial, and W. W. Nelms, appellee, filed no other pleadings. On October 22, 1914, the corporate appellee filed an amended answer, on which the ease was tried, consisting of a general demurrer and general denial; certain specific denials and denials of information; and a plea that the contracts sued on were void for want of corporate power to execute them;’ and a plea that said defendant was a corporation organized under the laws of Texas for the purpose of doing a surety, casualty, and liability insurance business, and none other, and was at the time of the execution of said alleged contract engaged in the business of a surety company, and that it was not authorized or empowered to do business in the state of Louisiana at the time of the execution and delivery of tlie alleged contracts, which fact was well known to tlie plaintiff, and that the contracts were void in law as between the parties thereto, for the want of authority and corporate power on the part of the corporation defendant to make and enter into the alleged contracts which were, and each of them was, in excess of and in violation of the charter conferring corporate powers on s.aid appellee and of the purposes of its incorporation ; that these facts were known to the appellant at the time of the execution of the alleged contracts.

The foregoing statement of the pleading is taken from appellant’s brief, which the appellees adopt, as well as the conclusions of fact of the trial court, which conclusions are as follows:

“I. I find that on the 7th day of May, 1913, A. G. Karslake was in custody of the sheriff of the parish of Morehouse, state of Louisiana, at Monroe, Da., under warrants issuing on in-formations in three cases charging him in two of the eases with grand larceny and in the other with burglary, and that bail had been fixed in the sum of $3,000 in the burglary case, and in the sum of $1,000 for each of the grand larceny cases, copies of which said bail bonds are hereto annexed and made a part hereof, and marked ‘Exhibits A,’ ‘B,’ and ‘C.’
“II. I find that on the 15th day of May, 1913, the defendants W. W. Nelms and A. U. Puckett executed the instruments on which they are sued herein, and that on the 7th day of May, 1913, the defendant General Bonding & Casualty Insurance Company executed the instruments on which it is sued herein, all of which instruments are of identical verbiage, except the signature and date, one being signed by both W. W. Nelms and A. IT. Puckett in each of the three cases, and one being signed by General Bonding & Casualty Insurance Company in each of the three cases. The instruments, omitting dates and signatures, are as follows: “ ‘This agreement witnesseth: That whereas, we, the undersigned, have requested the Texas Fidelity & Bonding Company, a corporation, under the laws of the state of Texas (hereinafter called the company) to sign and execute a certain bond or undertaking on behalf of A. C. Karslake, reference to which is hereby made for the purpose of certainty, and a copy of which instrument is or may be hereto attached; and whereas, the company has signed and executed, or is about to sign and execute the said instrument upon condition of the security and indemnity hereby and herein provided:

“ ‘Texas Fidelity & Bonding Company.

“ ‘Now, therefore, in consideration of the premises and of the sum of one dollar in hand paid to us by the company, the receipt whereof is hereby acknowledged, we the undersigned, hereby covenant and agree with the company, its successors and assigns, in manner following:
“ ‘First. That we will pay in cash to the company at its principal office in the city of Waco, Texas, for the execution of the said instrument, the annual premium or charge of one hundred and no-100 dollars, to be paid annually in advance on the - day of - in each and
every year during the time the company shall be and continue liable upon the said instrument, and all matters arising therefrom and until there shall have been furnished to the company, at its principal office in the city of Waco, Texas, due and satisfactory proof, by evidence legally competent, of such discharge and release.
“ ‘Second. That we will at all times indemnify and keep indemnified the company and hold and save it harmless from and against any and all demands, liabilities and expenses of whatsoever kind or nature, including counsel and attorney’s fees, which it shall at any time sustain or incur by reason or in consequence of having executed the said instrument; and that we will pay over, reimburse and make good to the company, its successors and assigns, all sums and amounts of money which the company or its representatives shall pay or cause to be paid or become liable to pay, under its obligation upon said instrument, or as charges and expenses of whatsoever kind or nature, including counsel and attorney’s fees by reason of the execution thereof, or in connection with any litigation, investigation or other matters connected therewith, such payment to be made to the company as soon as it shall have become liable therefor, whether it shall have paid out said sum or any part thereof, or not. That in any settlement between us and the company the vouchers or other proper evidence showing payment by the company of any such loss, damage or expense, shall be prima facie evidence against us of the fact and amount of our liability to the company, provided that such payment shall have been made by the company in good faith believing that it was liable therefor.
“ ‘Third. That in case any action at law, suit in equity or other proceeding be commenced or notice of such action, suit or proceeding be served upon the undersigned affecting the liability of the company upon said instrument, or growing out of any matter connected therewith, or on account of which the said instrument was given, we will immediately so notify the company at its principal offices in the city of Waco, Texas.
“ ‘Fourth. The company may at any time hereafter take such steps as it may deem necessary or proper to obtain its release from any and all liability under the said instrument, or under any other instrument within the meaning of section fifth hereof, and to secure and further indemnify itself against loss and all damages and expense which the company may sustain or incur or be put to in obtaining such release, or in further securing itself against loss shall be borne and paid .by us.
“ ‘Fifth. That no act or omission of the company in modifying, amending or extending the instrument so executed by the company shall in any way affect our liability hereunder, nor shall we or any of us be released from this obligation by reason thereof, and we agree that the Company may alter, change or modify, amend, limit or extend said instrument and may execute renewal thereof, or other and new obligations in its place or in lieu thereof, and without notice to us, notice being expressly waived, and in any such case we and each of us shall be liable to the company as fully and to the same extent on account of any such altered, changed, modified, amended, limited or extended instrument, or such renewals thereof, or other new obligations in its place or in lieu thereof, whenever and as often as made, as fully as if such instrument were described at length herein.
“ ‘Sixth. That it shall not be necessary for the company to give us, or either of us, notice of any act, fact or information coming to the notice or knowledge of the company concerning or affecting its rights or liability under any such instruments by it so executed, or our rights or liabilities hereunder, notice of all such being hereby expressly waived.
“ ‘Seventh. That this agreement shall bind not only the undersigned jointly and severally, but also our respective heirs, executors, administrators, successors and assigns (as the case may be), until the company shall have executed ,a release under its corporate seal, attested by the signature of its officers proper for the purpose.
“ ‘Eighth. That these covenants, as also all collateral securities or indemnity, if any, at any time deposited with or available to the company concerning any bond or undertaking' executed for or at the instance of us, or any of us, shall, at the option of the company, be available in its behalf and for its benefit and relief as well concerning any or all former or subsequent bonds or undertakings executed for us, or at the instance of us, or any of us, as concerning the bond, or undertaking such covenants, collateral securities or indemnity shall have been made, deposited or given.
“ ‘In testimony whereof we have hereunto set our hands and affixed our seal this-day of -, 19-.
“ ‘Signed, sealed and delivered in the presence of’
“III. I find that during the month of May, 1913, the plaintiff had so complied with the laws of Louisiana that it was accepted as surety on bonds in the courts of Louisiana, and that the defendant General Bonding & Casualty Insurance Company had not so complied with the laws of Louisiana and was not acceptable as surety on bail bonds in the courts of that state.
“IV. I find that the contracts sued on were delivered to the plaintiff, and that after such delivery and the payment to the plaintiff of $100 by Karslake the plaintiff became surety on the bail bonds of Karslake in the three cases in which bail had been fixed as aforesaid, and in the amounts of the bail so fixed, and that Kars-lake was enlarged upon the giving of said bail bonds.
‘‘V. I further find that the said Karslake failed to appear in either case as required by his bond, and that the bonds were forfeited and judgment final rendered against the plaintiff in each of the cases, which judgments aggregated the sum of $5,000; that interest ran on them at the rate of 5 per cent, per annum from January 6, 1914, to March 13, 1914, which interest amounted to $46.52 and that on March l3,
1914, the plaintiff duly paid off and discharged said judgments by paying thereon the sum of $5,046.52; copies of said judgment respectively upon said respective bail bonds, together with all notices issued thereon, are hereto attached, and marked ‘Exhibits D,’ ‘E,’ ‘F,’ ‘G,’ ‘H,’ T,’ and ‘J.’
“VI. I further find that, when plaintiff was advised that the judgments had been rendered against it the plaintiff employed an attorney named J. Zack Spearing, of New Orleans, La., to investigate the validity of said judgments and advise it as to its liability thereon, and that the plaintiff paid the said J. Zack Spearing on the 20-th of March, 1914, the sum of $50 as compensation for his services rendered in that matter, which is a reasonable charge for said services.
“VII. I further find that, before the institution of this suit, the plaintiff employed the law firm of Etheridge, McCormick & Bromberg to institute and prosecute this suit to final determination, for which services the plaintiff agreed to pay said attorneys the sum of $750, which is a reasonable charge for said services.
“VIII. I find that General Bonding & Casualty Insurance Company was duly incorporated under the laws of the state of Texas on the 30th day of November, 1910, ‘for the purpose of transacting (1) all kinds of surety business, and (21 all kinds of casualty insurance business, and (3) all kinds of liability insurance business.’
“IX. I find that A. O. Karslake paid the defendant General Bonding & Casualty Insurance Company the sum of $100 for the execution and delivery to the plaintiff of the contracts sued on, which sum the defendant General Bonding & Casualty Insurance Company still retains; and I find that this payment was made under substantially the following circumstances and conditions: The said A. C. Karslake had been arrested and imprisoned under warrants issuing in the three cases mentioned in plaintiff’s petition, and hereinbefore mentioned, and had employed the defendants Nelms and Puckett to represent him as attorneys at law in defense of the charge against him, and to procure him bail bonds for his enlargement until the trial. That the said Nelms and Puckett applied to the agents of the plaintiff at Dallas to become surety on said bail bonds. That the plaintiff agreed to do so upon being indemnified for so doing by the said defendants Nelms and Puckett and the defendant General Bonding & Casualty Insurance Company, and not otherwise; and then the said defendants Nelms and Puckett, or one of them acting for the said A. C. Karslake, procured the defendant General Bonding & Casualty Insurance Company the sum of $100 for so doing, and that said General Bonding & Casualty Insurance Company then delivered the contracts signed by it, herein sued on, to the plaintiff, whereupon tire plaintiff executed the bail bonds mentioned in the plaintiff’s petition, and thereby procured the enlargement of the said A. C. Karslake; and that because the plaintiff had, and the defendant General Bonding & Casualty Insurance Company had not, complied with the laws of Louisiana, the contracts of said General Bonding & Casualty Insurance Company to the plaintiff were executed and delivered to induce the plaintiff to execute as surety said bail bonds.
“X. At the time of the execution of the indemnity contract executed by the General Bonding & Casualty Insurance Company, E. B. Wortman was vice president and treasurer and also underwriting manager of the Texas Fidelity & Bonding Company, plaintiff in this cause, and it was his duty to supervise and pass on bonds that were executed by plaintiff, including bail bonds, and he did pass upon and approve the bail bonds given for Karslake. I find that the plaintiff, through its said vice president and treasurer and supervisor of bonds, F. B. Wort-man, was acquainted with the General Bonding & Casualty Insurance Company, one of the defendants, at that time. Both plaintiff and defendant bonding companies were organized under the laws of the state of Texas, and, at the time that the plaintiff accepted said indemnity contracts from the defendant bonding company, the plaintiff’s home office was at Waco, Texas, and plaintiff and defendant bonding companies were competitors in business, and plaintiff, through said Wortman, knew that defendant bonding company was a Texas corporation organized under the laws of Texas and know that the defendant company was a bonding company, and that it acted as a surety company, and understood that it was organized under the laws of Texas.”

There being no controversy as to what the facts are the controversy arises upon what are the legal conclusions to be drawn from the facts adduced.

Practically but two points are raised, and they are: (1) Was the contract entered into by appellee ultra vires? (2) If so, was appellee estopped by reason of having accepted a valuable consideration therefor? Appellee was incorporated under the laws of Texas, R. S. art. 4928, and was empowered to “guarantee any contract or undertaking between individuals, or between private corporations, or between individuals or private corporations and the state and municipal corporations or counties, or between private corporations and individuals”; but no authority is granted it by law to make contracts of “indemnity.” Contracts of indemnity are different from those of guaranty and suretyship, and are distinguishable, “in that in ordinary contracts the-engagement is to make good and save another from loss upon some obligation which he has incurred or is about to incur to a third person, and is not, as in guaranty and sure-tyship, a promise to one to whom another is answerable.” 22 Cyc. 80.

Again, it is said in 20 Cyc. p. 1402:

“There are important differences between a contract of guaranty and one of indemnity. The former being a collateral undertaking presupposes some contract or transaction as principal thereto; while a contract of indemnity is original and independent, to which there is no collateral contract and with respect to which there is no remedy against the third party. As contracts of indemnity are not required by the statute of fraud to be in writing, while contracts of guaranty must be evidenced by a sufficient writing in order to be enforceable, the courts have been frequently called upon to determine whether parol contracts belong to the one class or to the other.”

Th.ere being a difference between the two contracts, and appellee’s charter not authorizing the making of indemnity contracts, it follows that said contracts are ultra vires.

But appellant contends that:

“As appellee was chartered for the purpose of transacting all kinds of surety Business, and all kinds of liability insurance business, it had full power, when compensated therefor, to execute and bind itself by the contract sued on, and to enter into any obligation or contract essential to the transaction of its authorized business.”

It is true that it has been held that corporations have “implied power to do whatever is necessary or reasonably appropriate to the exercise of the authority expressly conferred.” It is hard sometimes to determine whether or not the act done by the corporation falls within its implied powers, and it is not easy to lay down a rule to govern in every case; but we think the remarks of Hr. Ghief Justice Gaines in Railway Go. v. Worthington, 88 Tex. 562, 30 S. W. 1055, 53 Am. St. Rep. 778, are applicable here, as follows:

“But the following, as announced by a well-known text-writer, commends itself not only as being reasonable in itself, but also as being in accord with the great weight of authority: ‘Whatever be a company’s legitimate business, the company may foster it by all the usual means; but it may not go beyond this. It may not, under the pretext of fostering, entangle itself in proceedings with which it has no legitimate concern. In the next place, the courts have however, determined that such means shall be direct, not indirect; i. e., that a company shall not enter into engagements, as the rendering of assistance to other undertakings from which it anticipates a benefit to itself, not immediately, but immediately by reaction, as it were, from the success of the operations thus encouraged — all such proceedings inevitably tending to breaches of duty on part of the directors, to abandonment of its peculiar objects on part of the corporation.’ Green’s Brices’ Ultra Vires, 88. In short, if the means be such as are usually resorted to and a direct method of accomplishing the purpose of the incorporation, they are within its powers. If they be unusual, and tend in an indirect manner only to promote its interests, they are held to be ultra vires.”

The charter of appellee did. not grant it power to enter into an “indemnity” contract as was here entered into, but was an indirect method of enlarging its business and unauthorized.

It is also contended by appellant that as appellee entered into the indemnity contract, and though ultra vires, it is estopped from setting up its want of power by reason of having received benefit thereof.

Appellant and appellee were chartered under the laws of Texas, granting them power to transact the same kind of business, and each knew, or ought to have known, the authority of the other to enter into such contracts ; therefore we think no such equities exist as to invoke the doctrine of estoppel. The contract was clearly outside the charter powers and was void. The principle governing this case is in accord with that announced in Fidelity & Deposit Co. v. Bank, 48 Tex. Oiv. App. 301, 106 S. W. 782, in which this court adopted the following from Transportation Co. v. Pullman Co., 139 U. S. 59, 11 Sup. Ct. 488, 35 L. Ed. 55, to wit:

“ ‘A contract of a corporation, which is ultra vires in the proper sense, that is to say, outside the object of its creation as defined in the law of its organization, and therefore beyond the powers conferred upon it by the Legislature, is not voidable only, but wholly void, and of no legal effect. The objection to the contract is, not merely that the corporation ought not to have made it, but that it could not make it. The contract cannot be ratified by either party, because it could not have been authorized by either. No performance on either side can give the unlawful contract any validity, or be the foundation of any right of action upon it.’ It must be borne in mind that we are speaking of acts that are ultra vires absolute — that is, such as are ‘beyond the powers of the bank for any purpose and under all circumstances — and not acts that are ultra vires by circumstances, or such as are beyond its authority for some purposes or under some circumstances, but are within its power under other circumstances or for other purposes.’ We regard the acts involved in this controversy to be of the character first named.”

The courts do not look with favor upon the plea of ultra vires, but, when invoked in a proper case, it must be considered and the principle applied as in other cases, as said in McCormick v. Bank, 165 U. S. 538, 17 Sup. Ct. 433, 41 L. Ed. 817:

“The doctrine of ultra vires, by which a contract made by a corporation beyond the scope of its corporate powers is unlawful and void, and will not support an action, rests, as this court has often recognized and affirmed, upon three distinct grounds: (1) The obligation of any one contracting with a corporation, to take notice of the legal limits of its powers; (2) the interest of the stockholders, not to be subject to risks which they have never undertaken; (3) and, above all, the interest of the public, that the corporation shall not transcend the powers conferred upon it by law.”

The appellant cites many cases where the defense of estoppel has been invoked, but we think in those cases the facts were different from those in this case, and the equities therein were so strong as not to be disregarded; while in this case the two corporations having similar charters under the laws of Texas they should have known, if they did not, that the powers granted to them by their charters and their contracts were not within the scope of their authority and void, hence the plea of estoppel cannot prevail in order to enforce said contract and give appellant relief.

The judgment is affirmed.
      ©¿jE'or other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes


source: Caselaw Access Project

author: FLY, C. J.

license: Public Domain

text:
    INDIANA CO-OP. CANAL CO. et al. v. GRAY.
    (No. 5602.)
    (Court of Civil Appeals of Texas. San Antonio.
    Feb. 2, 1916.
    On Motion for Rehearing, March 15, 1916.)
    1. Trial <@=>357 — Verdict — Special Findings — Responsiveness to Issues.
    In an action for injuries to land by water seeping, through an embankment of defendants on plaintiff’s land, where the court submitted the issue what was the reasonable value of plaintiff’s land immediately after the act complained of, the answer, “No immediate market value for agricultural purxioses,” was not responsive, and was insufficient to sustain judgment on the theory that the value of the land was entirely destroyed.
    [Ed. Note. — For other cases, see Trial, Ctent. Dig. § 855; Dee. Dig. <@=>357.]
    2. Waters and Water) Courses <@=>178(2)--Injuries to Land — Damages.
    The measure of damages for injuries to land by seepage through an embankment of defendants on plaintiff’s land is the difference in the market value of the land immediately before and immediately after the injury, but in arriving at the market value the permanency or temporary nature of the damage should be considered.
    [Ed. Note. — For_ other cases, see Waters and Water Courses, Cent. Dig. § 255; Dec. Dig. <@=>178(2); Damages, Cent. Dig. § 270%.]
    3. Waters and Water Courses <^=178(1)— Injuries to Land — Actions—Evidence.
    In an action for injuries to land by seepage of water through defendants’ embankment, the defendant, in order to show the market value of the land after the water had soaked into it, should be allowed to prove that it had regained its normal state.
    [Ed. Note. — For other cases, see Waters and Water Courses, Cent. Dig. §§ 251-254; Dec. Dig. <@=>178(1) 5 Damages, Cent. Dig. § 276%.]
    4. Waters and Water Courses <@=>178(1)— Injuries to Land — Damages — “Permanency. ”
    .In determining damages to plaintiff’s land from water seeping through defendants’ embankment, an injury that lasts for a time only, even though it be several years, cannot be deemed permanent, since “permanency” carries with it the idea of something durable, lasting, that never changes.
    _[Ed. Note. — For other cases, see Waters and
    Water Courses, Cent. Dig. §§ 251-254; Dec. Dig. <@=>178(1); Damages, Cent. Dig. § 276%.
    For other definitions, see Words and Phrases, First and Second Series, Permanency.]
    5. Waters and Water Courses <@=>179(6)— Damage from Seepage — Verdict—Special Issues — Questions to be Submitted.
    In an action for injuries to land by water seeping- through defendants’ embankment, the jury should, in order to arrive at the permanency of the injuries, have been required to answer as to the condition of the land at the time of the trial or before that time.
    [Ed. Note. — For other cases, see Water’s and Water Courses, Cent. Dig. <]§ 256, 258, 259, 264; Dec. Dig. <@=>179(6); Trial, Cent. Dig. § 858.]
    On Motion for Rehearing.
    6. Judgment <@=>256(2) — Verdict — Special Issues — Responsiveness op Answers.
    It is fundamental error for a judgment to be rendered on an answer of a jury which is not responsive to the issue without which there is no basis for the judgment.
    [Ed. Note. — For other cases, see Judgment, Cent. Dig. § 447; Deo. Dig. <@=>256(2).]
    7. Appeal and Error <@=>934(2) — Review — Scope and Extent.
    In an action for injuries to land by water seeping from defendants’ embankment, while the statement of facts might be consulted to sustain the judgment if an issue had not been submitted to the jury whether the value of the land was totally destroyed, this cannot be done where the issue was submitted.
    [Ed. Note — For other cases, see Appeal and Error, Dee. Dig. <@=>934(2).]
    Appeal from District Court, Cameron County; W. B. Hopkins, Judge.
    Action by Asher W. Gray against the Indiana Co-operative Canal Company and others. From a judgment for plaintiff, certain defendants appeal.
    Reversed and remanded.
    R. B. Creager, Amos Rich, and H. W. Williams, all of Brownsville, for appellants. J. C. George, Ira Webster, and Canales & Dancy, all of Brownsville, for appellee.
   FLY, C. J.

Appellee sued the Indiana Cooperative Canal Company, E. F. Rowson, E. C. Shireman, and A. C. Swanson for damages in the sum of $4,000, alleged to have arisen hy -virtue of appellants and A. C. Swanson, who is not a party to this appeal, having negligently constructed this canal so that water escaped through the embankment into and upon the land of appellee and rendered it worthless. The cause was submitted on special issues, and upon the answers thereto, given by the jury, judgment was rendered in favor of appellee against appellants for $2,516.68, and in favor of A. C. Swanson as against appel-lee.

The evidence indicates that water seeped through appellants’ embankment on the land of appellee, and either by some mineral in the water, or the solution and development of mineral contained in the land, the vegetation on the land was destroyed, and it was rendered unfit for immediate agricultural purposes.

In this case appellee recovered the full value of the land on the proposition that the value was totally destroyed. The court submitted the following issue:

“What was the reasonable market value of plaintiff’s land immediately after the accomplishment of the act complained of in plaintiff’s petition, namely, seeping of plaintiff’s land as therein alleged?”

The answer of the jury was not responsive to the question; for, instead of stating that the land had no market value, the evasive answer was given:

“No immediate market value for agricultural purposes.”

The land had never been used for agricultural purposes, but was uncultivated land covered with grass, cactus, and mesquite trees. The question was broad enough to cov* er the market value for all purposes, as it should have done, but the jury did not answer it, and the answer was not full enough to form the basis for a judgment. The answer did not meet the issue, and it can be clearly inferred from it that the jury believed that the land did have a market value for purposes other than that of agricultural, and even in a short while value for that purpose. There should be a definite, clear answer to such an issue before appellee can be permitted to recover the full value of the land and have the land also. It may be, as said in Railway v. Wallace, 74 Tex. 581, 12 S. W. 227, that the owner of land has the right to have his damages measured by the extent of the injury to the land used for any lawful purpose. to which he might desire to appropriate it; still, when the jury was asked to find the market value after the injury was inflicted, the answer should not have fixed the market value by the use that could have been made' of the land, but should have found whether the land had any market value, regardless of the purpose to which it might be appropriated. There was evidence to the effect that the land had resumed its pristine vigor, and, if that be true, it would not be a just measure of damages to give appellee the full value of the land. A proper measure of damages should be, and is, one which gives compensation, and it should not be made the means of speculation. It cannot be contended with any degree of propriety that temporary destruction of the fertility of the land should entitle ap-pellee to a recovery for the full value of the land, and in inquiring into the damages weight should be given to facts which tend to show a renewal of the fertility of the land and a return to its normal state. The land might have been rendered for a while utterly unproductive, and have no market value for a time for agricultural purposes, but have a market value for purposes of speculation or other purposes.

It is true, as stated by appellee, that the measure of damages in cases of this character is the difference in the markpt value of the land immediately before and immediately after the injury, but in arriving at that market value the permanency or temporary nature of the damage should be considered. Suppose for instance land is flooded, but in a few weeks the water disappears, leaving the land as good as it was before the flood; if the fact of the abatement of the water is not considered, but the damage measured by the market value of the land as soon as flooded, a person might be made to pay the full value of the land, and the owner in a few weeks have his land in fine condition. In order to arrive at the market value of the land after the water had soaked into it appellant should have been allowed to prove that the land has regained its normal i state. That proof might throw some light | | | on the market value at the time of the injury.

The court recognized the fact that the jury should take into consideration the renewal of the fertility of the land in arriving at the permanency of the damages, for he so instructed them, but, when some of the proof was offered of the fact of the land regaining its fertility, it was excluded by the court. Under the facts proven, the court should not have rendered judgment for the full value of the land.

Undoubtedly it was a serious injury to impair the usefulness of the land for any length of time, but an injury that lasts for a time only, even though it be several years,, cannot be deemed permanent, and the court erred in so instructing the jury. Permanency carries with it the idea of something that is durable, lasting, that never changes. An. injury to land may be in its nature permanent as distinguished from the injury to the crops on it, but it might as well be said that eternity is a greater lapse of time as to say that a thing is permanent that is cured in a few years.

The fourth and fifth assignments of error-are overruled, and the sixth assignment is too general to be considered.

We sustain the seventh and eighth assignments of error for reasons hereinabove given. The jury should, in order to arrive at the permanency of the injuries, have been required to answer as to the condition of the land at the time of the trial, or before that time. The verdict should have been reached by taking into consideration the time for which the injury lasted.

We have considered all errors that are likely to be committed on another trial, and,, for the reasons given, the judgment is reversed, and the cause remanded.

On Motion for Rehearing.

i | This court has not held, as so emphatically asserted by appellee, that he cannot recover every dollar of damages inflicted upon him by the negligence of appellant, but this court did hold, and reiterates, that he cannot recover for total destruction of the value of his land under a finding that it was only temporarily rendered unfit for agricultural purposes. The answer of the jury was not responsive to the question propounded to-them by the court, and no measure of damages can be applied to their answers. If the land had a value for any purpose immediately after the damages were inflicted, that value should be kept in. view in arriving at the amount of compensation to be awarded the injured party. This is nothing but common sense and justice. No man should be allowed to recover for the full value of his land, and yet retain the land, which, as in this case, had some value. As is usual in overzealous motions for rehearing, it is as- | serted that this court has overruled numbers. | of decisions of other courts, and totally disregarded the former decisions of this court. There is no conflict between the decision of this court and that of any other court in this, or any other state. The evidence tended strongly to show that the value of the land was not totally destroyed, and the jury failed and refused to so find.

It is contended that this court has violated the rules in considering the assignments of appellant, but there is no merit in the contention. It is fundamental error for a judgment to be rendered on the answer of a jury which is not responsive to an issue without which there is no basis for the judgment. The jury evaded an answer to the issue as to what was the value of the land immediately after the alleged injury was inflicted, and there was absolutely no basis upon which to found a judgment for appellee. It is all very well to theorize about the land value being totally destroyed, but the fa'ct remains that the jury failed and refused to so find. The judgment must stand upon the findings of the jury, and not upon theories and hypotheses (however ingeniously and plausibly advanced. If any hardship comes to appellee through the application of the rule that in every case in which damages are sought, compensation, and compensation alone, for injuries can be recovered, it is the rule to which appellee, as others have •done before him, must submit. This court is not responsible for the rule, nor is it the author of it, but in justice and good conscience it will enforce it. The rule of compensation is the rule of justice in every damage suit, and all rules must bend to the demands of that rule. Whenever any arbitrary rule stands in the way of the enforcement of the rule of compensation, it must and will be set aside, without fear and without favor.

If the question of whether the value of the land was totally destroyed or not had not been submitted to the jury, the statement of facts might be consulted to sustain the judgment, but it cannot be done in this case, where the issue was submitted. Terrell v. Proctor, 172 S. W. 996.

The motion for rehearing is overruled.
      <g^>For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes


author: RASBURX, J.

text:
    CARTER v. SMITH et al.
    (No. 7354.)

    (Court of Civil Appeals of Texas. Dallas.
    Jan. 22, 1916.
    Rehearing Denied March 11, 1916.)
    1. Specific Performance &wkey;>58 — Contract fob Sale of Land.
    Where a contract for the sale of land provided in its concluding clause that if the purchaser failed or refused to perform by the payment of the purchase money as provided, without default of the vendor, then the purchaser should “as a full penalty and liquidated damages for his breach of this contract forfeit to [the vendor] the first payment of $500 this day made upon the land herein contracted for,” such contract was alternative, and gave the purchaser the choice of paying for the land or of failing or refusing to do so and forfeiting the first payment, in view of the declaration that the penalty should be in payment of liquidated damages in case of breach, so that specific performance of the contract at the purchaser’s suit could not be decreed after default in the payment of the balance of the price.
    [Ed. Note. — For other cases, see Specific Performance, Cent. Dig. §§ 179, 180; Dec. Dig. &wkey;?58.]
    2. Specific Peefobmance <&wkey;126(2) — Alteb-NATIVE CONTRACT TO SELL LAND.
    A decree for specific performance of a contract to sell land must follow the substantial, if not the precise, terms of the contract, so that it cannot be entered where the contract is alternative in favor of the purchaser, permitting him to perform or to forfeit a payment for breach.
    [Ed. Note. — For other cases, see Specific Performance, Dec. Dig. <§=»126(2).]
    3. Specific Peefobmance <&wkey;121(10) — Abandonment of Contract — Sufficiency of Evidence.
    In the purchaser’s suit for specific performance of a contract to convey land, evidence held sufficient to sustain the finding that the purchaser abandoned the contract.
    [Ed. Note. — For other cases, see Specific Performance, Dee. Dig. <&wkey;>121(10).]
    4. Appeal and Eeeob &wkey;1010(l) — Review-Finding.
    The fact that the evidence will sustain a finding contrary to that of the trial court affords the appellate court no sufficient reason for interfering with the finding below, provided the evidence was also sufficient to sustain it.
    [Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. §§ 3979-3981; Dec. Dig. <&wkey; 1010(1).]
    5. Specific Peefobmance <&wkey;121(10) — Abandonment of Contract — Intent.
    In the purchaser’s suit for specific performance of a contract to sell land, the fact that the vendors’ title was not good was not conclusive on the point whether the purchaser abandoned the contract by declining to proceed further with the trade.
    [Ed. Note. — For other cases, see Specific Performance, Dec. Dig. <&wkey;121(10).]
    Appeal from District Court, Dallas County; Kenneth Foree, Judge.
    Suit by R. O. Carter against James A. Smith and others. From a judgment for defendants, plaintiff appeals.
    Aflirmed.
    Morrow & Morrow, of Hillsboro, and C. M. Smithdeal, of Dallas, for appellant. Barry Miller, Meador, Davis, Johnson & Golden, and Smith, Robertson & Robertson, all of Dallas, for appellees.

      Applies tion for writ of error pending in Supreme Court.

   RASBURX, J.

R. O. Carter, appellant, sued James A. Smith and his wife, M. M. Smith, Mollie D. Ivirby, personally and as executrix of the will of her husband, M. W. Kirby, deceased, Union Terminal Company and D. E. Johnson to enforce specific performance of a written contract to convey lands. A jury was waived and the cause submitted to Hon. Kenneth Foree, Judge, resulting in judgment against appellant, from which this appeal is prosecuted.

The pleading in the court below supports the issues presented in the briefs of both parties, and for that reason it is unnecessary to recite same.

Upon request of appellant the trial judge prepared and filed conclusions of fact. Many of the findings are challenged on the ground that they are without support in the evidence. For that reason we do not attempt to state such findings. Nor will we prepare conclusions of fact upon the whole case, since we do not regard it necessary to do so in order to dispose of the case. We will, however, upon the issues we do discuss, state our conclusions of fact as deduced from the evidence bearing upon such issues.

The contract, which is the basis of the suit, omitting formalities and the acknowledgment of the parties, is as follows:

“This agreement this day entered into by and between Jas. A. Smith and his wife, M. M. Smith, party of the first part, and R. O. Carter, party of the second part, all of Dallas county, state of Texas, witnesseth:
“First. For and in consideration of the sum of five hundred dollars ($500.00), to us in hand paid the receipt of which is hereby acknowledged, and the further sum of thirty-five hundred dollars ($3,500.00) to be paid in cash at the date of the execution of the conveyances hereinafter called for, and the further consideration of eight thousand dollars ($8,000.00) to be paid, to be evidenced by three notes payable to the order of the said James A. Smith, each in the sum of two thousand six hundred and sixty-six dollars and sixty-six and two-thirds cents ($2,666.66%) payable one, two and three years after date, secured by vendor’s lien, interest 7 per cent., payable semiannually, party of the first part does hereby covenant, contract and obligate itself to convey to said R. O. Carter, party of the second part, by regular deed of conveyance, with the usual warranties the following described property, situated in the city and county of Dallas, state of Texas, the same being all of block 340, according to Murphy & Bolanz official map of the city of Dallas, the same fronting 100 feet on the S. side of Young street and 100 feet on the N. side of Columbia street and 200 feet on the E. side of Broadway street, and being a tract of land 100 by 200 feet.
“Second. The party of the first part agrees to furnish the party of the second part an abstract of title to said land showing good and merchantable title in the first parties, and after delivery of same to second party he shall have reasonable time within which to have said title passed upon by his attorney, and it is hereby agreed and said second party has sixty days from date within which lie can pass upon said title and accept the same, and the said second party shall have the full term of sixty days from date within which to accept the title under the terms of this agreement without forfeiture upon the obligation of the parties of the first part to convey title to him as herein provided.
“Third. If, however, said first parties cannot show good and merchantable title in themselves to said land, they shall bave reasonable time after the knowledge of such fact within which to make their title merchantable, and if their said title cannot be made merchantable within said reasonable time, the parties of the first part shall refund to said second party the $500 paid them under the terms of this contract, and this obligation shall become null and void.
“Fourth. If said first parties are able to show good and merchantable title, as aforesaid, in them to the lands herein described, the said second party agrees to pay the said first party upon the execution and delivery of the said deed to him, as aforesaid, the further sum of $3,500 cash, and to execute his notes for the balance of the purchase money as above provided; and in the event said second party fails or refuses to perform the terms of this contract by the payment of the purchase money, as above provided for, in money and notes, without default of the party of the first part, as above defined, then said second party shall as a full penalty and liquidated damages for his breach of this contract forfeit to first party the first payment of $500, this day made upon the land herein contracted for.”

The construction placed upon the contract by respective counsel, aside from all other issues in reference thereto depending upon facts aliunde the contract, differs widely. The position of counsel for appellant is that the essential thing intended by the parties was the conveyance of the land, and that the agreement to forfeit the $500 was intended as a means of coercing performance rather than a satisfaction of the contract, if appellant failed or refused in that respect. The position of counsel for appellee is that the contract is alternative and gave appellant the election of performing the contract or of refusing to do so. Thus a construction of the intention of the parties, gathered from the contract, is obviously of prime and initial importance; and such intention on the issue so raised is to be gathered wholly from the concluding clause thereof, since the remaining provisions of the contract refer wholly to other matters.

In reference to such contracts the Supreme Court of this state say:

“Much has been well said in the opinions of this court * * * affirming the right to specific performance of contracts for the conveyance of land which contain stipulations for the payment of sums of money, called penalties, or liquidated damages, inserted to secure the performance of the act agreed to be performed. A different class of contract is that where one of the parties is given the election to do something else in lieu of conveying the land.” Red-wine v. Hudman, 104 Tex. 21, 133 S. W. 428.

In the case cited the court adopts as a correct rule for determining the class to which a given contract belongs the following:

“The question always is, what is the contract? Is it that one certain act shall be done, with a sum annexed, whether by way of penalty or damages, to secure tbe' performance of this very act? Or is it that one of two things shall be done at the election of the party who has to perform the contract, namely, the performance of the act or the payment of the sum of money? If the former, the fact of the penal or other like sum being annexed will not prevent the court enforcing the performance of the very act, and thus carrying into execution the intention of the parties. If the latter, the contract is satisfied by the payment of a sum of money, and there is no ground for proceeding against the party having the'election, to compel the performance of the other alternative.” Fry, Spec. Per. § 115.

We conclude, in the light of the rule stated, the contract was alternative, and gave appellant the choice of two courses, a comifiiance with either of which would relieve him of all liability. Giving to the language of the contract its ordinary meaning, appellant’s obligation was, if appellees’ title was good, to accept the land upon the agreed terms. Or he could, title being good and appellees without default, breach or fail, or refuse to perform the contract. The contract expressly provides that if appellant fails or refuses to perform, he shall forfeit to appellees th^ $500 deposited by him. For what purpose? The contract itself furnishes the answer when it declares it shall be the agreed or liquidated damages for the breach of the contract. In short, its breach is permitted by forfeiting the $500. The contract provides as much. This conclusion is sustained by the further provision that the $500 shall, if forfeited, be “full penalty and liquidated damages” for such “breach” thereof. While the word penalty is descriptive merely of the sum agreed upon, the term “liquidated damages” means, in connection with penalty, that said sum was ascertained and fixed as fair compensation for appellees in the event appellant elected or chose to breach or recede from the contract The foregoing conclusions are fairly deducible from the language of the contract. A contrary conclusion can find little, if any, support in the language of the contract. No expression is found in the contract indicating that the penalty was intended as a means of coercing performance. The amount of the penalty in its relation to the sum agreed to be'paid for the land is insignificant and more nearly represents perhaps the loss which would befall appellees, than a sum which would induce appellant to perform the contract, rather than submit to the forfeit. However, if there was nothing at all in the contract indicating the intention of the parties, we would be inclined to hold that the penalty was inserted to coerce performance. But when, as here, the parties declare the penalty is to be in payment of the agreed or liquidated damages in ease of breach, we are constrained to conclude that such was the intention. A contract quite similar in its provisions with the one under discussion was construed in Moss v. Wren, 102 Tex. 567, 113 S. W. 739,120 S. W. S47. The only material difference in the contracts is that by the one in the case cited the seller agreed to “accept” the penalty in satisfaction of the breach of the contract. It is true that the Supreme Court, in receding from its original conclusion that the sum was inserted as a means of coercing performance, said, “If nothing had been said as to the acceptance of the $1,000 by the seller, our original opinion would have been correct,” seemingly making the case turn upon the agreement by the seller to accept the sum. We think the Supreme Court did mean to say that the contract must bind the seller to accept the agreed sum, but did not mean that he could only be held to be bound when the precise word “accept” was used for that purpose. It occurs to us that when appellees assented to the provision in the contract that appellant could breach the contract by forfeiting the $500, they were as much bound to accept same as they would have been had they agreed in express words to do so, and that the Supreme Court meant no more than that. It was precisely so ruled in the case of Simpson v. Eardley, 137 S. W. 378, and wherein the Supreme Court denied the writ of error. There is no provision in the contract in the instant case that appellant should accept deed from appellees or that appellees should accept the balance of the cash and deferred note payments, but it will not be contended that each was any the less bound to do so had there been no failure of title or breach of contract.

It being clear, then, that appellant had the election of two courses to pursue, the remedy of the parties was not mutual, and specific performance should not have been decreed. This is true for the reason that a decree of specific performance must follow the substantial, if not the precise, terms of the contract Such a decree in this case would be one that would permit appellant, even thereafter, to perform the contract or forfeit his $500; in short, a decree requiring appellees to perform specifically but allowing appellant the choice of performing or forfeiting the agreed penalty. In such cases it has been repeatedly held the parties must resort to their remedy at law.

The court below found as a fact that appellant declined to proceed under the contract within the time provided and abandoned same. While we think all other issues immaterial in view of our construction of the contract, we nevertheless further conclude that the evidence does sustain the finding of the court that appellant both declined to perform the contract and abandoned it. It is held that one may “except in the case of a perfect legal title to a corporeal hereditament,” abandon “every right or interest in, title to, or ownership of property.” 1 C. J. 9. Or, stated otherwise, “there is nothing in principle, to prevent the owner from abandoning his right of property in land, provided the intention to do so be evidenced by an act or deed legally sufficient to operate a divestiture of his title.” Dikes v. Miller, 24 Tex. 417.

The testimony, which tended to show the refusal to proceed under the contract and an abandonment, is as follows: Appellant is the son of J. Mercer Carter, who was the agent of appellant prior and subsequent to the execution of the contract in all matters pertaining to the land in controversy in this suit. W. G. Currie, real estate broker, commenced with the elder Carter the negotiations which resulted in the execution of the contract. After the contract was executed, Smith, one of the appellees, in compliance with the contract, delivered an abstract of title to the land to an abstractor with instructions to supplement it so as to show the condition of the title to date, and deliver same to J. Mercer Carter when he called for it, but not to attach his certificate until he called for it.

The purpose of holding the certificate open was that Carter when he did call for it might have a certificate covering all matters up to the very time he received same and to avoid furnishing another supplement. Carter was advised by Smith as many as three times that the abstract was at the abstractor’s office for him whenever he called for same. Carter did call at the office of the abstractor several times with different people and was told that whenever he was ready for it the certificate would be attached and the abstract delivered. He declined to take it, explaining to the ab-stractor that when he was ready he would advise him. Carter never did call for the abstract; nor did appellees actually deliver the same to him; nor did It. O. Carter ever call at the abstractor’s office; nor was he advised that the abstract was ready for him. Having heard nothing from Carter on May SO, 1907, and construing the contract as having expired on that date, Smith, one of the appellees, secured his abstract from the ab-stractor and declared the $500 forfeited to him by Carter and appropriated same. Subsequent to the forfeiture and after the expiration of the time fixed by the contract Carter in casual conversation with Currie inquired whether Currie had received his commission for negotiating the sale for appellees. On being informed that he had not, Carter said he ought to have it. Currie repeated to appellees his conversation with Carter, whereupon appellees directed him to secure a written order or release of the money, and they would pay Currie his commission. Returning to Carter he secured the following:

“Mr. W. G. Currie, Dallas, Texas — Dear Sir; I am not inclined to abandon my belief that I am entitled to a return of the $500.00 I paid through you to Messrs. Kirby & Smith, as earnest money on the Berger lot No. 340, but I will concede you the right and privilege to get any adjustment for your commission for making the sale, and if one is made satisfactory to you to-day I will withdraw any and all claims on account of the $500 that I may have and end the matter.
“[Signed] J. Mercer Carter.”

Upon receipt of the letter appellees paid Currie one half of the $500, retaining the other half under their agreement with Currie that the commission should be divided in case Currie secured a purchaser. Subsequent to the foregoing and in October, 1907, J. Mercer Carter balled upon appellees and sought another option upon the land or the privilege of selling it. Upon being informed that the land was not for sale Carter requested an opportunity of selling it whenever it was placed on the market, assigning as a reason the fact that he had lost his former deposit which he would like to make back. The contract to convey was executed March 30, 1907. The facts just detailed transpired before the expiration of the year 1907. The instant suit was filed April 2, 1914.

Under the foregoing we feel constrained to hold that the evidence was sufficient to sustain the conclusion of the trial judge that the contract was abandoned, and when there is such evidence we may not disturb the finding. While the evidence may have also sustained a contrary finding, that fact affords no sufficient reason for interference on our part. And in connection with our conclusion it may be admitted, as contended by appellant, that there was evidence adduced by appellants tending to show that appellees’ title was not good, and that that was the reason that appellant declined to proceed further with the trade, and yet this court would be bound thereby, since it would not follow as a certainty that it was not the intention of appellant to abandon the contract.

There are a number of other propositions and counter propositions urged by both sides, but we do not consider them, nor deduce the facts in reference thereto because of the conclusions reached on the two issues we have discussed.

The judgment is affirmed.
      &wkey;3For other oases see same topic ana KEY-NUMBER, in all Key-Numberea Digests ana Indexes


author: HUFF, C. J.

text:
    COMMONWEALTH BONDING & CASUALTY INS. CO. v. HILL et al.
    (No. 882.)
    (Court of Civil Appeals of Texas. Amarillo.
    Dec. 18, 1915.
    On Motion for Rehearing, Feb. 16, 1916.)
    1. CORPORATIONS &wkey;>89(2) — SUBSCRIPTION TO Stock — Call.
    A call for a subscription to stock in a corporation is not necessary when the contract of subscription contains the promise to pay the amount subscribed at a specified date, as the obligation matures at such time.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. §§ 375, 376; Dec. Dig. &wkey;89(2).]
    2. Corporations <&wkey;78 — Issue op Stock — Payment ojt Subscription.
    A corporation is not bound under a subscription to its stock to issue a certificate of stock until the subscription is fully paid.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. §§ 219-231, 420-424, 429-434; Dec. Dig. <&wkey;78.j
    3. Corporations &wkey;>78 — Subscription to Sto ck — Liability .
    On the corporation’s acceptance of a subscription to its stock with the indorsement of secured notes to it the subscriber became liable thereon.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. §§ 219-231, 420-424, 429-434; Dec. Dig. &wkey;?78.]
    4. Corporations <&wkey;99(l) — Subscription to Sto ck — V alidit y— Coíí stitutional Provisions — “Issue.”
    Under Const, art. 12, § 6, declaring that stocks and bonds issued without money paid therefor shall be void, and in view of Rev. St. 1911, art. 1170, providing for the forfeiture of stock on nonpayment of the subscription notes, a subscription contract with the promoter of a bonding and casualty insurance company upon which the subscriber executed his notes payable to the promoter and to secure which he executed a deed of trust on certain land, which stock was not delivered to the subscriber, but held as additional security for the payment of the notes, was not void or illegal, as the stock subscribed for did not represent any outstanding liability for stock or any representation to the public that the corporation had in its hands actual cash- as represented by fully paid up certificates, and as there was no “issue” of such stock; the term “issue,” as a noun, meaning the act of sending or causing to go forth, the act of passing out, and, as a verb, meaning to send out officially, to send or put forth, to put in circulation, to emit.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. § 444; Dec. Dig. <&wkey;99(l).
    For other definitions, see Words and Phrases, First and Second Series, Issue.]
    5. Evidence <&wkey;83(l) — Presumption — PERFORMANCE OE OFFICIAL DUTY.
    The presumption is that the officer charged with the issue of a permit to a foreign corporation on its filing of an affidavit showing that it had on deposit with the state treasurer $100,000 did his duty.
    [Ed. Note. — For other cases, see Evidence, Cent. Dig. § 105; Dec. Dig. <&wkey;83(l).]
    6. Corporations <&wkey;92 — Subscription to Stock — N otes — 'Validity.
    Notes given as part of the subscription to stock of a corporation are not void, and may be enforced and collected as valid obligations.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. § 366; Dec. Dig. <&wkey;>92.]
    On Motion for Rehearing.
    7. Evidence <&wkey;15S(26) — Best and Secondary Evidence — Issue oe Corporate Stock.
    The issuance of the stock of the corporation to its subscriber should be established by the stock itself, which should be produced as the best evidence of its issuance and acceptance; and parol evidence as to the issuance of such stock is inadmissible.
    [Ed. Note. — For other cases, see Evidence, Cent. Dig. §§ 507-513; Dec. Dig. &wkey;158(26); Corporations, Cent. Dig. § 1736.]
    Appeal from District Court, Swisher County; R. C. Joiner, Judge.
    Action by W. F. Hill and others against the Commonwealth Bonding & Casualty Insurance Company, with plea of intervention by C. C. Cantrell, and cross-action by the defendant company. Judgment for plaintiffs and the intervener denying the defendant’s cross-action, and defendant appeals.
    Reversed and remanded.
    Speer & Brown, of Ft. Worth, and Martin, Kinder, Russell & Zimmermann, of Plain-view, for appellant. Alexander, Baldwin & Ridgway, of Ft. Worth, and Moss & Leak, of Memphis, for appellees.
   HUFF, C. J.

We adopt the statement made by appellant, which is as follows:

“On October 30, 1914, appellee W. F. Hill (plaintiff below) filed this suit in the district court of Swisher county, Tex., against appellant, Commonwealth Bonding & Casualty Insurance Comp.any (defendant below), to cancel three promissory notes for $500 each, and one for $250, payable to Commonwealth Organization Company, and executed by one C. C. Cantrell (intervener and plaintiff below) on December 1, 1910, nearly four years beforS suit filed, and seeking to cancel deed of trust given at the same time by said C. C. Cantrell to John Schar-bauer, trustee for Commonwealth Organization Company, on N. E. of survey No. 130, block M10, Swisher county, Tex., plaintiff alleging that after the giving of said notes and deed of trust by Cantrell, he, the said Cantrell, sold said land to one <3. W. Harp, who in turn sold to appellee Hill, and Hill sold one-half interest therein to appellee Dora Davis April 20, 1914, or about six months prior to suit. Trustee Scharbauer, the Commonwealth Organization Company, and 6. W. Harp were not parties to the suit, and C. C. Cantrell and Dora Davis and husband, M. L. Davis, were not original parties to suit, but on trial of cause appellee Hill’s attorneys joined the names of Dora Davis and M. L.'Davis as plaintiffs with Hill in an amended petition, and filed a plea of intervention for C. C. Cantrell seeking for Cantrell the same relief sought for the plaintiffs. Appellees sought a cancellation of said notes and deed of trust upon the bare technical legal allegations that said notes were given in payment for stock in a corporation issued to intervener, Cantrell, and were therefore void, making no allegations that same were fraudulently obtained or that said stock was not in a going concern and worth par value.

Appellant, the Commonwealth Bonding & Casualty Insurance Company, answered, denying that said notes were given in payment for such stock, but claiming that same were executed to secure a subscription contract for stock, and were held as collateral security to said subscription contract, and, further, that it is a corporation incorporated under the laws of Arizona, and under the laws of that territory said notes were valid and not prohibited even though given for stock direct. Appellant also by way of cross-action sought judgment on said notes and foreclosure of deed of trust.

“Upon trial before the court without a jury judgment was entered on April 29, 1915, in favor of plaintiffs Hill, Dora Davis, and husband, M. L. Davis, and intervener Cantrell, canceling said notes and deed of trust lien, denying defendant the relief sought in-its cross-action, and decreeing that title and possession of the certificates of stock should be divested out of inter-vener and vested in defendant.”

C. C. Cantrell entered into the following subscription contract with the Commonwealth Organization Company:

“Commonwealth Bonding & Accident Insurance Company.
“Capital $10.00. Surplus $30.00.
“No. 1124. Subscription to Capital Stock.
“Whereas, Commonwealth Organization Company, of Ft. Wtorth, Texas, are promoting the organization of a Casualty Bonding & Accident Insurance Company, to be incorporated in pursuance of the laws of the State of Texas, under the name of Commonwealth Bonding & Accident Insurance Company, or such other name as may be selected, with an authorized capital stock of three hundred thousand dollars, and a paid-up capital of at least two hundred thousand dollars, paid up and free from organization expenses, all in accordance with a printed prospectus issued by them and delivered to me;
“And whereas, by their acceptance of this subscription, said Commonwealth Organization Company agree to endeavor with all reasonable diligence to accomplish on or before December 31, 1910, the organization of said corporation, with capital stock fully paid as aforesaid, they to defray all expenses of the organization and incorporation:
“Now, therefore, I do hereby subscribe for 50 one-tenth shares, of the par value of ten dollars each, of the capital stock of said Commonwealth Bonding & Accident Insurance Company, and agree with said company and the said Commonwealth Organization Company, to pay therefor the sum of $2,000.00 dollars, as follows: The sum of $1,750.00 dollars I agree to pay in money or securities satisfactory to the insurance department, with six per cent, interest, to said Commonwealth Bonding & Accident Insurance Company or its trustees at Ft. Worth, Texas (which goes to capital and surplus), at any time after November 1, 1910, immediately upon receipt of notes from said Commonwealth Organization Company that its capital stock has been subscribed in good faith in amounts and at rates netting the. company at least two hundred thousand dollars of capital in the aggregate when paid. The remaining sum of ¥250.00 dollars I agree to pay and do pay concurrently with this subscription to the said Commonwealth Organization Company, in consideration of their agreement hereinbefore recited, and in lieu of any further or other contribution to expenses of organization and incorporating said company.
“No conditions, representations, or agreements other than those printed herein shall be binding on Commonwealth Organization Company or the Commonwealth Bonding & Accident Insurance Company.
“Witness my hand this the 29th day of September, 1910. C. C. Cantrell [Name of Subscriber], Memphis, Texas. Occupation: Farmer. Witness: B. E. Bristol.”

On December 1, 1910, Cantrell executed Ms four notes, three for $500 each, due in 12, 24, and 30 months after date respectively, and one note for $250, due 48 months after date, payable to the order of Commonwealth Organization Company, and to secure which he executed a deed of trust upon the land described in the petition to John Scharbauer, trustee. The deed of trust was filed for record January 20,1911. Thereafter, on the 31st day of May, 1911, Cantrell conveyed the land to G. W. Harp by a quitclaim deed for a recited consideration of $4,800, as paid, and the assumption by Harp assuming the obligation of the original purchaser of the land to the state of Texas. This deed recites that a vendor’s lien is retained to secure the note. Harp by school land deed conveyed the N. E. Vi of the section to W. F. Hill, which was filed for record October 27, 1911. W. H. Hill conveyed to Dora Davis an undivided half interest to the land in question, dated April 20, 1914, and recorded November 3, 1914. The four notes were introduced in evidence, which showed to bear interest at the rate of 6 per cent, per annum until maturity, and thereafter until paid at the rate of 10 per cent, per annum, payable annually, and providing for the usual 10 per cent, attorney’s fees, and said notes being secured by $2,000 stock in the Commonwealth Bonding & Casualty Insurance Company, and by deed of trust given to John Scharbauer, trustee. The notes were signed by Cantrell and indorsed to appellants by the Commonwealth Organization Oompany.

The charter for the Commonwealth Bonding & Casualty Insurance Company was obtained under the laws of Arizona on the 23d day of March, A. D., 1911. The purposes for which said corporation was organized were to act as surety, guarantor of the fidelity of employes, trustees, executors, administrators, guardians, and to act as administrator, etc. That the authorized capital stock was to be $300,000, divided into 30,000 shares of the par value of $10 each.

The deed of trust was made to Scharbauer, as trustee, to secure the Commonwealth Organization Company in the payment of the notes above specified, and was dated December 1, 1910. Cantrell by his testimony showed that the certificate of stock was issued, and that it was left in the hands of B. J. Thorne, an attorney, who was then representing the Commonwealth Bonding & Casualty Insurance Company. He states that the note and deed of trust were executed in consideration for wMch he was to receive a certificate of shares of stock in the appellant company. There was no stock certificate offered or produced at the trial and Cantrell’s testimony as to the stock is all the testimony that there is in the record as to the issuance of the stock, and this testimony was admitted over the objection of appellant.

It is a generally recognized rule that a call for subscription to stock in a corporation is not necessary when the contract of subscription contains the promise to pay the amount subscribed at a certain specified date or dates; the obligation matures at the time agreed upon.

A corporation is not bound under the subscription to issue a certificate of stock until the subscription is fully paid. California Hotel Co. v. Callender, 94 Cal. 120, 29 Pac. 859, 28 Am. St. Bep. 99. When the appellant accepted Cantrell’s subscription contract with the indorsement of the secured notes to it, he became liable thereon. Panhandle Packing Company v. Bivins, 140 .S. W. 523.

The appellee Cantrell has not paid his subscription contract for stock, and for that reason appellees assert his contract is void, and that the note and deed of trust given to secure Ms subscription are void. Const, art. 12, § 6, does not declare that a subscription contract with a note secured for subscription is void; but it is the stock and bonds issued without money paid therefor, which are declared to be fictitious stock or indebtedness, that are void. If the notes were given for a lawful purpose, we do not think they should be declared void. The fact that the contract was to pay for stock in the corporation does not render it illegal. To construe the Constitution to have the effect that such contract was illegal would render it impracticable to form a corporation. The Constitution prohibits “the issue” of stock by a corporation unless the money is paid. In San Antonio, etc., v. Deutschmann, 102 .Tex. 207, 105 S. W. 486, 114 S. W. 1174, our Supreme Court said stock “can be paid for in installments.” If it can be so paid for, then a contract of subscription with secured notes to be paid in installments would not be an illegal contract. The subscription and the notes given as part thereof are not for an illegal issue of stock. The purpose of the Constitution and laws was doubtless to prevent the issuance of watered stock. If a corporation has not issued such stoek, there is no representation to the public that it has in its hands actual cash as represented by fully paid up certificates. If it does not execute such certificate or deliver the same, there is no obligation on the corporate body for such stock. The stock subscribed for does not represent an outstanding liability for stock. If the contention of the appellees shall prevail, the very object of the law would be thwarted. A corporation could not force collection of stock subscriptions because certain subscribers will not pay and cannot be made to pay. Innocent third parties would be made to suffer and an injustice worked against other subscribers who in good faith have complied with their contract. “Issue,” in its ordinary sense, is thus defined in 23 Oye. 358a:

“As a noun: The act of sending or causing to go forth; a moving out of an inclosed place; egress; the act of passing out; exit; egress or passage out; the ultimate result or end. As a verb: To send out; to send out officially; to send forth; to put forth; to deliver for use or authoritatively; to put in circulation; to emit; to go out; to go forth, as authoritative or binding ; to proceed or arise from; to proceed as from a source.”

Cantrell says the stock was issued to him for these notes, but it is to be noted that the stock was never delivered to him. He says he saw it in the possession of Robt. J. Thorne, an attorney for appellant company. Moss also testified he saw the stock in the hands of Thorne. It should also be noted that the notes in question were executed to the Organization Company, and before the appellant was incorporated. The evidence is also to the effect that the stock was not delivered to Cantrell, but held as additional security for the payment of the notes. This stock was not therefore sent out or put forth and delivered to Cantrell. It was never in circulation or binding upon the corporation, or by its authority emitted as an obligation binding upon the corporation. The framers of the Constitution evidently used the word “issue” in its ordinary sense. If so, there was never an issue of this stock, and no illegal act with reference thereto. Hidalgo County Drainage Dist. v. Davidson, 102 Tex. 539, 120 S. W. 849. The conclusion of Cantrell that the stock was issued to him for the notes is contrary to the facts upon which he bases that conclusion. He had executed his notes before any stock could possibly be issued to him. He had agreed with the Organization Company that he would give his notes and secure the same as part of his subscription, or that he would pay the money. He elected to give the notes with security. The Organization Company transferred the contract and the notes to appellant This transaction should not be denounced as illegal. 1-Ie made the contract for the purpose of bringing into existence the corporation, and employed the Organization Company as his agent to perform that labor, and, when this was done, he agreed to pay his subscription contract. The law did not require before incorporating that the stock should be fully paid before incorporation (article 1121, subd. 37, and articles 1129, 1130, 4928, R. O. S.), such as is required in life insurance companies (article 4725e). The law only required $100,000 to be paid in by domestic corporations upon obtaining charters issued prior to the act of the Legislature of 1913' (page 123, § 1).

This company was organized and permitted to do business in this state in 1911. Article 4928 was amended in 1913 by adding thereto that all foreign corporations should file an affidavit showing that such corporations had on deposit with the state treasurer $100,000; but, should the law, as now amended, apply to foreign corporations as it did to domestic corporations at the time the permit was granted by this state to appellant, the charter shows that there was a $300,000 capital stock authorized, and therefore all the capital stock had not been paid when the charter was granted or the permit issued, and no presumption that the capital stock, including Cantrell’s, was fully paid and issued, or so represented to have been. The presumption is that the officer whose duty it was to issue the permit did his duty. The mere fact that the notes were secured by the stock of Cantrell in the corporation does not evidence an issue of stock or make an illegal contract. This agreement, if such it was, is no more than the law fixed on such stock without such an agreement. Article 1170, R. C. S. It has been held by the Courts of Civil Appeals that notes given as part of the subscription to stock are not void, and that they may be enforced and collected as valid obligations. Cope v. Pitzer, 166 S. W. 447; Bank v. Falvey, 175 S. W. 833; Horn Bros. v. Baker, 173 S. W. 470; Davis v. Burns, 173 S. W. 476-480. This court has hitherto held in two cases not reported that a subscription contract upon which appellant corporation was organized was valid.

Our attention has been called to the case by the Court of Civil Appeals of the Second District, not yet published, a copy of which has been furnished us. Cattlemen’s Trust Company v. Turner, 182 S. W. 438. This ease goes into a thorough discussion of the question here involved, and we are persuaded that the conclusion there reached is a correct one, and -we are in accord with the views there expressed, and believe that case to be decisive of the question here at issue. We think the cases cited by appellees are distinguishable from this, in most of which stock was issued for notes which it appears the court held violated the provisions of the Constitution referred to. But where, as in this case, the note is a part of the subscription, and the stock was not issued or delivered to the subscriber for the notes, but held to secure the payment of the subscription and notes, we think the various courts, so far as has been called to our attention, hold that the notes will be valid and collectible.

We believe the trial court was in error in canceling the four notes and the deed of trust on the land; that he should have rendered judgment upon appellant’s cross-petition on the notes for the amount sued for, together with the interest and attorney’s fees stipulated for in the notes, together with the foreclosure of the lien prayed for on the land.

The judgment of the trial court will he reversed, and judgment here rendered for appellant, in accordance with its prayer.

Reversed and rendered.

On Motion for Rehearing.

We believe the fourth assignment by the appellant should be sustained, and that the court was in error in admitting, over the objection of the appellant, parol testimony as to the issues of a certificate of stock to Cantrell. The issuance of the stock to him should be established by the stock itself, and we think that it should be produced as the best evidences of its issuance and existence. This is the fact upon which appellee’s right of recovery, in a measure, depended, and parol evidence ought not be permitted to establish such fact, in the absence of the proper predicate for its nonproduetion. Harvey v. Cummings, 68 Tex. 599, 5 S. W. 513. A delivery of the certificate, of course, could be shown by parol. The testimony of Cantrell that he left the certificate in the hands of the attorney for the company does not necessarily prove that it was ever delivered to him by the company. It is just as consistent that he saw it there first and left it as that it was delivered to him, and that he took it to the attorney and left it with him. The facts show in this case, according to our view, that it was under the control of the company, and that it was retained to secure the payment of the note. The issuance and existence of the certificate was capable of better proof than by parol. The delivery to Cantrell we do not think sufficiently proven, and on that ground we reversed and rendered this case. Perhaps, under the rule, we should have reversed and remanded, as our conclusion of the facts must necessarily be contrary to the findings of tlie trial court.

The judgment, therefore, reversing and rendering, will be set aside, and the case reversed and remanded, and to that extent the motion for rehearing will be granted.
      <g=»Eor other eases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

      (&wkey;>Por other cases see same topic and KEY-NUMBER. in all Key-Numbered Digests and Indexes