author: TALBOT, J.

text:
    ADAMS v. SAN ANTONIO LIFE INS. CO.

    (No. 7459.)
    (Court of Civil Appeals of Texas. Dallas.
    March 18, 1916.
    Rehearing Denied April 29, 1916.)
    1. Judgment <&wkey;585(3) — Res Judicata — Identity oe Causes.
    Judgment in action on note by assignee against the maker, who gave it for an insurance premium, to which purpose it was never applied, having been converted by the insurance agent, held not a bar to an action by the maker’s as-signee against the insurer to recover the amount of such note; the causes not being identical.
    |Ed. Note. — -For other cases, see Judgment, Cent. Dig. §§ 1062-1064, 1067, 1073, 1094; Dec. Dig. <&wkey;585(3).]
    2. Appeal and Eoreoe <&wkey;743(l) — Scope oe Review — Record—Inaocubacies.
    That an assignment of error erroneously refers to the bills of exception by incorrect numbers does not preclude consideration of it, where the court’s action fully appears of record, so that no bill of exceptions was necessary; the error.being clerical only.
    [Ed. Note. — For other cases, see Appeal and: Error, Cent. Dig. § 2999; Dec. Dig. &wkey;743(l).]
    3. Troves and Conversion &wkey;>28 — Limitations.
    An action for the recovery of money paid by plaintiff’s assignor to the transferee of a note given by the assignor to defendant and wrongfully appropriated by him, is for detention and conversion of personalty and barred in two years under Vernon’s Sayles’ Ann. Civ. St. 1914, art. 5687.
    [Ed. Note. — For other cases, see Trover and Conversion, Cent. Dig. §§ 18(1-188; Dec. Dig. <®=x>28.]

      4. Limitation of Actions <&wkey;43 — Computation op Time.
    As a general rule, the statute of limitations begins to run from the time the right of action accrues.
    [Ed. Note. — For other cases, see Limitation of Actions, Cent. Dig. §§ 217-219; Dec. Dig. &wkey;> 43.]
    5. Trover and Conversion <&wkey;10 — Conversion op Note.
    Where an insurance agent took the applicant’s note for a premium, and, when the insurer declined the risk, refused to return the note, and negotiated it, his acts were a. conversion, giving the applicant a right of action.
    [Ed. Note. — For other cases, see Trover and Conversion, Cent. Dig. §§ 84-94; Dec. Dig. <&wkey;> 10.]
    6. Limitation op Actions <&wkey;55(5) — Computation op Time — Accrual op Cause.
    When a life insurance agent, on refusal of the insurer to accept a risk, refused to return the applicant’s premium note, and negotiated it, the right of action arose, and the statute of limitations began to run, barring action for the conversion after two years.
    [Ed. Note. — For other cases, see Limitation of Actions, Cent. Dig. § 303; Dec. Dig. &wkey;j55(5).]
    7. Limitation op Actions &wkey;>100(l) — Conversion-Computation op Time.
    The statute of limitations governing actions of conversion begins to run from the time when the owner of the property has notice or by reasonable diligence would know of the conversion.
    [Ed. Note. — -For other cases, see Limitation of Actions, Cent. Dig. §§ 480, 493; Dec. Dig. &wkey;> 100(1).]
    8. Limitation op Actions &wkey;3l00(13) — Computation op Time — Notice op Right op Action — Evidence.
    Where an insurance agent, when the company declined the risk, refused to return the applicant’s note, but negotiated it and appropriated the money, the refusal of the agent to return the note after notice to the applicant that his application was declined was sufficient notice of the conversion as to start the running of the statute of limitations.
    [Ed. Note. — For other cases, see Limitation of Actions, Cent. Dig. § 492; Dec. Dig. t&wkey;> 100(13).]
    9. Limitation op Actions <&wkey;174(l) — Rights op Parties — Assignee.
    The assignee of one holding a right of action for conversion occupies no better position than the assignor, and is subject to the same rule as to limitation of his action.
    [Ed. Note. — For other cases, see Limitation of Actions, Cent. Dig. §§ 659, 661; Dec. Dig. <&wkey;> 174(1).]
    10. Limitation op Actions <&wkey;197(2) — Conversion — Notice op Right op Action — Diligence — Evidence.
    Evidence held to show that the holder of a right of action for conversion exercised no diligence in the premises, so that his action was barred within the statutory period from the time of the conversion.
    [Ed. Note. — For other eases, see Limitation of Actions, Cent. Dig. § 724; Dec. Dig. &wkey;> 197(2).]
    Appeal from District Court, Dallas County; Kenneth Foree, Judge.
    Action by the San Antonio Life Insurance Company against L. T. Adams and another. Judgment against defendant Adams and for defendant Southland Life Insurance Company and order overruling motion for new trial,. and Adams appeals.
    Reversed, and judgment rendered for defendant.
    Fitzgerald & Cox, of Wichita Falls, and M. M. Plowman, of Dallas, for appellant. John F. Onion, of Dallas, for appellee.

       Application for writ of error pending in Supreme Court.

   TALBOT, J.

The Southland Life Insurance Company was a corporation organized under the laws of the state of Texas, doing a life insurance business in said state, with its principal office in the city of Dallas, Dallas county, Tex. The appellee, San Antonio Life Insurance Company, was a corporation doing a life insurance business in said state, with its principal office in the city of San Antonio, Bexar county, Tex., and the appellant, L. T. Adams, was a resident citizen of Jacksboro, Jack county, Tex. In October, 1910, L. T. Adams was the agent of the San Antonio Life Insurance Company, and during that month Roland J. Johnson of Young county, Tex., made application to said Adams for a life insurance policy on his life to be issued by that company. Later the policy thus applied for was issued and delivered to the said Johnson by the San Antonio Life Insurance Company by and through its said agent, L. T. Adams. Adams took Johnson’s note in the sum of $1,160.20, evidencing the amount of the first premium agreed to be paid by Johnson for the insurance. This note is dated November 23, 1910, and is made payable to the order of the said L. T. Adams on or before the 15th day of January, 1911. On the 19th day of January, 1911, L. T. Adams, having ceased to be the agent of the San Antonio Life Insurance Company, represented to Roland J. Johnson that he was then agent for the Southland Life Insurance Company and desired to change the said Johnson’s policy for one in the Southland Life Insurance Company. Adams said:

“I will take up the San Antonio policy and send it in for cancellation and get you [Johnson] one in the Southland.”

Johnson then gave Adams the insurance policy which had been issued to him by the San Antonio Life Insurance Company, and also at the instance of Adams gave him an application for a similar policy to be issued by the Southland Life Insurance Company. For the policy to be issued by the Southland Life Insurance Company on the application just mentioned Johnson executed and delivered to the said Adams at the date of said application his promissory note in the sum of $1,160.20, and Adams returned to Johnson the note which Johnson had given for the policy issued by the San Antonio Life Insurance Company. The note given by Johnson to Adams for the policy to be issued to him by the Southland Life Insurance Company was dated January 19, 1911, and payable to the order of the said Adams on or before the 1st day of October, 1911. When Johnson I delivered to L. T. Adams the policy issued to him by the San Antonio Life Insurance Company Adams sent it to that company for cancellation, but cancellation was refused and the policy returned to Johnson about the 23d day of January, 1911. The South-land Life Insurance Company denied Johnson’s application given to Adams for a policy of insurance in that company and refused to issue to him such a policy. When the Southland Life Insurance Company refused to issue Johnson the policy applied for in that company, it wrote him a letter to that effect, and advised him that if he had paid the agent anything to recall it at once. Johnson mailed this letter to Adams and requested him to return the note given for the policy of insurance which he expected would be issued to him by the Southland Life Insurance Company. Johnson says the exact date when this letter was received by him and forwarded to Adams he does not remember. Adams says he received the letter of Johnson demanding a return of the note about March 15, 1911. Adams did not return the note to Johnson, and did not reply in any manner to the demand for its return. He had, prior to such demand, and about 30 days after receiving the note from Johnson, sold and transferred the note to the Eirst National Bank of Jacksboro, Jack county, Tex. Some time during the latter part of September, or about the 1st of October, 1911, Johnson received notice from the First National Bank of Jacksboro that it held the note; that it would be due on the first day of October, 1911, and must be paid. This was the first actual notice Johnson had received that Adams had sold and assigned the note. He testified that from the 19th day of January, 1911, until about the 1st day of October, 1911, he did not know where the note he had given for the policy to be issued by the Southland Life Insurance Company was. Except the demand made upon Adams in March, 1911, to return him the note, Johnson made no effort, so far as the record discloses, to find out where the, note was or to obtain its possession. About December 19, 1911, Johnson, upon demand of the First National Bank of Jacksboro, paid to that bank the note of $1,160.20 given by him to Adams for the policy which Adams promised and agreed should be issued by the Southland Life Insurance Company, and neither Adams nor the Southland Life Insurance Company has ever repaid Johnson or the appellee herein the amount of said note. After the San Antonio Life Insurance Company refused to cancel the .policy delivered by it to Roland J. Johnson and returned said policy to the said Johnson, he (Johnson) retained the same, and thereafter, on June 21, 1913, acknowledged that he owed to that company, as the first annual premium for the policy so returned, the sum of $1,160.20, and in consideration of $10 paid and the further consideration of a receipt for the amount of said first annual premium, sold and transferred, by an instrument in writing, to the San Antonio Life Insurance Company, all his right, title, and interest in and to the said sum of $1,160.20 paid by Johnson on the note given by him to Adams for the insurance policy which Adams agreed the Southland Life Insurance Company would issue and the claim he had against Adams by reason of Adams’ sale and conversion of said note, and expressly conferred upon said San Antonio Life Insurance Company the right to collect said claim or to sue upon it. Johnson testified that, when Adams made the statement to him that he (Adams) would have the policy in the San Antonio Life Insurance Company canceled, he believed him, that said statement induced him to change the policy, and that he would not have given Adams a new note if he had not made that statement. Having thus acquired the said claim of Roland J. Johnson against the appellant, Adams, the San Antonio Life Insurance Company instituted this suit upon it and made the Southland Life Insurance Company a party to the suit.

The Southland Life Insurance Company answered by a general demurrer, a general denial, and by special answer alleged that, if there was any liability on its part, it was secondary only, that the appellant, L. T. Adams, was solely liable, and prayed that, if any judgment should be rendered against it, it have judgment for a like amount over and against the said L. T. Adams, and for such other relief as it was entitled to. Appellant, Adams, answered by demurrers, pleas of res adjudicata and of limitation of two years, and by a special answer denying the allegations of appellee’s petition. The plea of res adjudicata is, in substance, that at the March term of the district court in and for Jack county, Tex., A. D. 1913, in a certain suit therein pending, numbered on the docket of said court 1742, wherein the San Antonio Life Insurance Company was plaintiff, and this appellant, L. T. Adams, was defendant, the same cause of action was pleaded in that suit, and set out in plaintiff’s petition in this suit, together with other transactions therein sued on, as is fully shown by plaintiff’s original petition filed therein, a certified copy of which is thereto attached and marked “Exhibit A,” and made a part thereof. The plea of limitation is as follows:

“Defendant, further answering herein, shows to the court that said cause of action,' as set out in plaintiff’s amended original petition, is barred by the statute of limitation of two years, for the reason that said plaintiff alleges and it is so shown that prior to the alleged transfer and assignment of said claim by said Roland J. Johnson to the said San Antonio Life Insurance Company the said Roland J. Johnson made and demanded a return to him of the note given by the said Roland J. Johnson in payment of the premium for a policy to be issued by the South-land Life Insurance Company; that said demand was made at said time, and limitation against the alleged claim of the said Roland J. Johnson began to run from said time; that suit thereon on said claim was not brought by said Roland J. Johnson or this plaintiff until the 14th day of August, A. D. 1913. And in the alternative said L. T. Adams further pleads that, if said cause of action did not accrue and limitations did not begin to run at date of demand, said limitations against said claim began to run from the date of the transfer of said note by said L. T. Adams to the First National Bank of Jacksboro, Tex. Wherefore defendant L. T. Adams prays that said claim be declared barred by the statute of limitations of two years, because more than two years have elapsed since plaintiff’s cause of action accrued and the filing of this suit, and that he be dismissed with his cost, and such other and further relief both general and special.”

Other portions of the answer need not be stated. By supplemental petition the San Antonio Life Insurance Company demurred to that portion of the appellant’s answer pleading res adjudicata in bar of its action upon the ground, in substance, that said plea showed upon its face that the suit in the district court of Jack county, Tex., in 1913 did not include the cause of action sued on in this suit, and this demurrer was by the court sustained. The court, after hearing the evidence of appellant and appellee, a jury being waived, rendered judgment in favor of appellee, the San Antonio Life Insurance Company, against appellant, L. T. Adams, in the sum of $1,160.20, with interest from December 1, 1914, at the rate of 6 per cent, per annum, together with costs, and further adjudged that the San Antonio Ufe Insurance Company take nothing by its suit against defendant the Southland Life Insurance Company. Motion for new trial by Adams being overruled, he appeals.

The first assignment of error is that:

“The court erred in sustaining the exceptions of the plaintiff, San Antonio Life Insurance Company, to the defendants’ plea of res adjudi-cata, and in holding that said plea shows upon its face that the suit at Jacksboro, Tex., therein pleaded was an entirely different transaction from the one set up in case at bar, as shown in defendant Adams’ motion for new trial, paragraph 1, and bill of exception No. 1.”

We conclude there was no error in this ruling of the court. The petition filed in the suit brought in Jack county, was, as is alleged in appellant’s plea of res adjudicata, made a part of said plea, and shows, we think, as held by the trial court, that the cause of action declared on in that suit was entirely different from the one heroin sued on.

The controlling question is presented by appellant’s fifth assignment of error. This assignment is to the effect that the court erred in overruling the appellee’s motion filed in the district court for judgment in his favor, for the reason that appellant’s cause of action was barred by the statute of limitation of two years prior to the institution of this suit. Appellee objects to a consideration of this assignment on the ground that it refers to bill of exception No. 3 in support thereof; whereas bill of exception No. 4 contained in the record was the bill reserved to the court’s action here complained of, and bill of exception No. 3 relates to an entirely different ruling. The objection is not well taken. The action of the court complained of appears otherwise of record, and no bill of exceptions was necessary to reserve an exception thereto and have the ruling reviewed by this court. But we think it would be highly technical to refuse to consider the assignment of error for the reason urged, even if it was necessary, in order to have the court’s ruling revised and corrected, that it be presented by a proper bill of exceptions. The record and appellant’s brief show that such a bill was reserved in this instance, and we think it manifest that the reference to it in the assignment as No. 3 instead of No. 4 is a mere clerical error, which should not deprive appellant of a consideration of his assignment.

The question then is: Should the trial court have sustained appellant’s motion for judgment in his favor on the ground that it appeared from the evidence that appel-lee’s cause of action was barred by the statute of limitation? We think the question should receive an affirmative answer. The case was tried on an amended petition filed December 1, 1911, and this petition does not show when the original petition was filed, nor does the date of its filing appear from any evidence adduced on the trial, but appellant in the seventh paragraph of his amended answer filed herein on December 1, 1914, wherein he pleads the statute of limitation in bar of a recovery, refers to the suit as having been brought August 14, 1913, and through his counsel states in his brief that the original petition was filed on that date. We shall therefore regard the suit as having been instituted on the 14th day of August, 1913. The suit is one for the detention and conversion of personal property, and the period of limitation in such a case, as fixed by our statute, is two years. Vernon’s Sayles’ Texas Statutes, art. 6687; Mutual Life Insurance Co. v. Garland, 23 Tex. Civ. App. 380, 56 S. W. 651. The general rule is that the statute of limitation begins to run from the time the right of action accrues.

Under the facts of this case Roland J. Johnson was entitled to a return of the note in question upon the refusal of the Southland Life Insurance Company to issue to him the insurance policy which Adams had agreed that company would execute and deliver to him, and the refusal of Adams to return the note upon the demand of Johnson constituted such a detention and conversion of the same as gave Johnson a right of action against him for such conversion. This is especially true, since there was, so far as the record discloses, no concealment of the sale and conversion of the note by Adams, and the same had been actually sold and converted by him at the time of the demand, and refusal of its return to Johnson and Johnson’s liability for its payment to the bant fixed. So instantly upon the refusal of Adams to return the note when demand was made therefor Johnson’s right of action for its detention and conversion accrued. The demand of Johnson and refusal of Adams to return the note occurred not later than the 15th day of March, 1911, and, more than two years having elapsed from the date of such refusal and the institution of this suit, and appellee occupying the same position that Johnson would have occupied with respect to appellant’s plea of limitation were he suing, the cause of action declared on was barred by the statute of limitation, and the trial court should have so held.

If, however, limitation did not begin to run from the time Adams refused to return the note to Johnson, then, as appellant, Adams, had wrongfully sold and converted said note some time in February, 1911, limitation began to run when Johnson had notice of, or by the use of reasonable diligence would have known of, such conversion. Underwood v. Coolgrove, 59 Tex. 164; Mutual Life Ins. Oo. v. Garland, supra. According to the testimony of Johnson, he had no actual notice or knowledge of the sale and conversion of the note in question by Adams until about the 1st of October, 1911, but it is manifest that both he and Adams, in the transaction resulting in its execution and delivery, contemplated and understood that, if the policy of insurance was not issued by the Southland Life Insurance Company upon the application made therefor by the said Johnson, said note was to be of no effect and returned, and, under the rule announced above, the duty rested upon Johnson to exercise reasonable diligence upon the receipt of notice that said insurance company had declined to issue the policy to discover the conversion of the note by- Adams. Such notice must have been received by him not later than the 15th day of March, 1911, and probably sooner. I-Ie testified:

“I sent the letter declining the application to Mr. Adams. I don’t remember the date, but it must have been two or three months after I got the letter from the Southland Life Insurance Company stating that I was rejected, and if I had paid the agent anything to recall it at once.”

In another place in his testimony he said:

“I don’t remember the exact date that the Southland Life Insurance Company wrote me a Jotter notifying me that I had been rejected, but when I got the letter I sent it on to Mr. Adams. It was some little time after the 19th day of January, 1911, but I don’t know for sure just when it was.”

On cross-examination he said:

“I don’t remember just when it was that Dr. Turner was there. I didn’t keep any date of it. It must have been something like a month after I received my -application back from the South-land Life. ⅜ ⅞ * It was after Dr. Turner’s visit that I received the letter from the South-land Life Insurance Company. It gave no reason for turning me down; just said: ‘You are hereby notified that you have been rejected, and if you have paid the agent anything to recall it at once.’ ”

Tire appellant, L. T. Adams, testified in this connection that he received the letter from Mr. Johnson demanding a return of his note about the 15th of March, 1911. The evidence is undisputed that Adams made no reply to Johnson’s demand for the return of the note and failed or refused to return it, and there is absolutely no evidence that he made any further demand for a return of the note, or exercised any diligence whatever to ascertain whether it was still held by Adams or had been sold and transferred to some third party. In other words, the record is bafren of any evidence showing or tending t'o show that Johnson used any diligence whatever to discover the conversion of the note by Adams. In this state of the evidence the plea of limitation interposed by the appellant should have prevailed.

The appellee, to whom Johnson’s claim was transferred, occupies no better position with respect to that plea than Johnson would were he suing, and the fact that suit was brought before two years had expired after Johnson actually discovered the conversion of the note will not suffice t'o defeat the bar of limitation. There is no evidence that Adams concealed the sale of the note to the bank, or that the exercise of reasonable diligence on the part of Johnson would hot have led to a discovery of such sale and the conversion of the note by reason thereof.

Certainly the undisputed facts that the appellee, San Antonio Life Insurance Company, refused to cancel the policy issued to Johnson by that company, of which Johnson had notice about the 23d day of January, 1911, the rejection of his application by the Southland Life Insurance Company, of which he was informed not later than March 15, 1911, and the failure of appellant Adams to return the note upon Johnson’s demand' or to in any manner reply to such demand, were sufficient to put Johnson upon inquiry and call for the use of reasonable diligence on his part to ascertain whether Adams was then the holder of the note or had by sale or otherwise converted it to his own use. Johnson not only failed to use such diligence to discover the conversion, but failed to use any whatever. He and Adams resided in adjoining counties, and the domicile of the bank to which Adams sold the note was in the County of Adams’ residence. Johnson knew where Adams resided and the location 'of said bank, and from all the facts and circumstances in the case it clearly appears that, had Johnson exercised the diligence required of him by law, he would" have discovered the conversion of the note in question by Adams within a reasonable time, and more than two years before the institution of this suit. Adams says he would not have refused to inform Johnson of his disposition of the note had he demanded to know 'of its disposition, and so it is evident that by simply asking Adams, who was within easy reach, about the matter, he would have ascertained that the note had been sold before its maturity and thereby converted by Adams. Johnson failed to make any such inquiry or to otherwise learn what had been done with the note. The rule being, as we have hereinbefore stated in effect, that limitation began to run when Roland J. Johnson had notice of or might by the use of reasonable diligence have discovered the conversion of the note by Adams, and two years having elapsed between the date when such conversion might have been so discovered and the filing of this suit, appellant’s cause of action was barred by the statute of limitation, and the trial court should have so held and entered judgment in favor of appellant.

The other assignments need not be considered. What we have said effectually disposes of the case. The case seems to have been fully developed, and we shall render in this court such judgment as we think should have been rendered in the court below. It is therefore ordered that the judgment of the district court be reversed, and that judgment be here rendered for appellant.

Reversed and rendered.
      <§=n>For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

      <&=}For otter cases see same tapio and KEY-NUMBER in all Key-Numbered Digests and Indexes


source: Caselaw Access Project

license: Public Domain

text:
    WESTERN INDEMNITY CO. et al. v. MacKECHNIE.
    (No. 7423.)
    (Court of Civil Appeals of Texas. Dallas.
    April 1, 1916.
    Rehearing Denied April 29, 1916.)
    1. Appeal and Eeror <§=o760(l) — Assignments OP ERROR — BRIEFS— SUFFICIENCY.
    Assignments of error urged on appeal identical with the grounds assigned in the motion for a new trial, where the bills of exception relied on though not copied in the brief, were referred to and the pages of the transcript where they may be found were given, were sufficiently supported by a reference to the record.
    [Ed. Note. — For other cases, see Appeal and Error, Cent. Dig'. § 3095; Dec. Dig. <&wkey;760(l).]
    2. Insurance <&wkey;623(4-) — Action on Policy-Denial oe Liability — Time to Sue.
    Where an insurer absolutely denied its liability on an accident policy, the beginning of on action without regard to the provisions of the policy relating to the time in which suit might be brought thereon was authorized.
    [Ed. Note. — For other cases, see Insurance, Cent. Dig. § 1551; Dee. Dig. i&wkey;>623(4).]
    3. Insurance <&wkey;146(3) — Construction of Contracts.
    A contract of insurance should be construed most favorably to the insured, and where its language is fairly susceptible of any construction making the insurer responsible for the loss or injury, it is the duty of the court to so construe it, though the court cannot undertake to make a new contract in disregard of the plain and unambiguous language used by the parties.
    [Ed. Note. — For other cases, see Insurance, Cent. Dig. § 295; Dec. Dig. <S&wkey;146(3).]
    4. Insurance <&wkey;466 — Accident Insurance —Construction .
    Under an accident policy stipulating that for total disability the insurer would make certain weekly payments, and that if during, the period of such disability and within 90 days from the accident the injury should directly, independently, and exclusively of all other causes result in permanent paralysis, the insurer would pay the principal sum, where insured, when injured by a fall, was suffering from a disease contributing to his paralysis, such paralysis was not the direct, independent, and exclusive result of the fall, though it hastened the paralysis, so as to entitle the insured to a recovery.
    [Ed. Note. — For other cases, see Insurance, Cent. Dig. §§ 1178, 1186; Dec. Dig. &wkey;466.J
    5. Appeal and Ereor <&wkey;882(12) — Party Entitled to Allege Error — Invited Ereor.
    Defendant, in an action on an accident policy, was not deprived of the right to complain of error in a charge substantially the same as a charge requested by and- given for it after its correct charge had been refused.
    [Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. § 3692; Dec. Dig. <&wkey;> 882(12).]
    6. Insurance &wkey;>668(ll) — Accident Insurance-Issue.
    In an action on a policy of accident insurance to recover for paralysis alleged to have resulted from an accident or fall, where the evidence tended to show that other diseases caused the paralysis, defendant was entitled to have the issue as to whether such diseases caused the paralysis submitted to the jury.
    [Ed. Note. — For other cases, see Insurance, Cent. Dig. §§ 1745, 1763, 1764; Dec. Dig. <&wkey;> 668(11).]
    7. Insurance i&wkey;466 — Accident Insurance —Liability.
    Where arterio sclerosis and Bright’s disease, with which insured was suffering, caused a stroke of paralysis consequent upon his falling, or where the injury received by him in his fall and such diseases concurred in causing the paralysis, the insurer was not liable, but if the injury alone caused the paralysis within 90 days, from the accident “directly, independently, and exclusively of all other causes,” as provided by the policy, the insurer was liable.
    [Ed. Note — For other cases, see Insurance, Cent. Dig. §§ 1178, 1186; Dec. Dig. t&wkey;466.]
    Appeal from District Court, Dallas County; B. B. Muse, Judge.
    Suit by Ellen MacKechnie, guardian of Edward MacKechnie, against the Western Indemnity Company and others. Judgment for plaintiff, and defendants appeal.'
    Reversed and remanded.
    Love & Taylor and Carden, Starling, Car-den, I-Iemphill & Wallace, all of Dallas, for appellants. Henry P. Edwards and Cockrell, Gray & McBride, all of Dallas, and R. R. Hazlewood, of Amarillo, for appellee.
   TALBOT, J.

The appellee, as guardian of Edward MacKechnie, instituted this suit against the appellants Western Indemnity Company, a corporation organized under the laws of the state of Texas, and Western Casualty & Guaranty Insurance Company, a corporation created under the laws of the state of Oklahoma, on an accident insurance policy. It is alleged, in substance, that the appellant Western Casualty & Guaranty Insurance Company executed and delivered to Edward MacKechnie, February 20, 1911, its written policy of insurance, whereby it insured the said .Edward MacKechnie for the term of 12 months from the date of said policy against bodily injuries effected directly and independently of all other causes through accidental means. That said policy stipulated that if the said Edward MacKechnie should sustain bodily injuries which should immediately, continuously, and wholly disable and prevent him from performing any and every kind of duty pertaining to his occupation, the insurance company would pay him for the period of such total disability a weekly indemnity of $25 per week to an amount not exceeding the sum of $5,000, plus any accumulations which might have accrued under said policy at the time such injuries were sustained. It is further alleged that said policy of insurance also stipulated that if such injuries to the said Edward MacKechnie immediately, continuously, and wholly disabled and prevented him from performing any and every kind of duty pertaining to his occupation, and during the period of such disability and within 90 days from the date of the accident should directly, independently, and exclusively of all other causes result in permanent paralysis, the appellant Western Casualty & Guaranty Company would pay him the principal sum of $5,000 of said policy, and in addition thereto the weekly indemnity stipulated to be paid, for one year from the date of such paralysis. That on the 25th day of September, 1913, the said Edward MaeKech-nie, while attempting to board the ear of a street railway company in the city of Dallas, Dallas county, Tex., did suffer a fall to the ground or against said ear, and did thereby sustain bodily injuries, which were effected directly and independently of all other causes through accidental means; that said injuries immediately, continuously, and wholly disabled and prevented the said Edward Mac-Kechnie from performing every kind of duty pertaining to his occupation and has continued so to do since the date of said accident. That said injuries not only wholly prevented the said Edward MacKechnie from performing any and every kind of duty pertaining to his occupation, but during the period of such disability and on the 25th day of October, 1913, and within 90 days from the date of said accident, resulted directly, independently, atad exclusively of all other causes, in permanent paralysis, and that within 30 days after the expiration of one year from said date of October 25, 1913, the said Edward MacKechnie was declared by competent and duly constituted medical authority to be permanently paralyzed and permanently insane; that -appellee, Ellen Mac-Kechnie, is the duly appointed, qualified, and acting guardian of the said Edward Mac-Kechnie, and that the appellant Western Indemnity Company has taken over all the business, properties, affairs, and policies of the appellant Western Casualty & Guaranty Insurance Company, and assumed all its liabilities, including the terms and obligations of the contract herein sued on.

The defenses were: First, that the suit was was prematurely brought, for that by the terms of the policy suit could not be instituted until 3 months from the date of filing proofs of the alleged paralysis, and such proofs had never been filed; second, that for a valuable consideration the assured had settled with appellants and released them from all liability; third, that the assured’s paralysis did not result directly, independently, and exclusively of all other causes from the accident in question, but was caused alone by then existing bodily diseases known as ar-terio sclerosis or Bright’s disease, or by the concurrence and co-operation of said diseases with said accident. The appellee, by supplemental petition, averred that appellants claimed that on October 15, 1913, they effected a settlement with Edward MacKechnie for all liability present and future upon the insurance policy sued on, and, at all times since that date, have asserted and maintained that they were no longer liable upon said policy, hence appellee was relieved and absolved from the necessity of making proof to appellants of the accident and its resultant injuries to Edward MacKechnie, and could bring suit instantly upon such denial of liability. Appellee further averred that the assured, Edward MacKechnie, was mentally incapacitated to execute the release asserted by appellants at the time it was executed and not bound thereby.

The case was submitted to a jury upon special issues, and upon their findings judgment was rendered in favor of the appellee for the sum of $6,345.25, and motion for a new trial being overruled, the appellants appealed.

Appellee objects to a consideration of the appellants’ assignments of error. The principal objections urged are, that, the assignments are not supported in the brief by any statement or reference to the record showing that the points urged were embraced in a motion for a new trial, nor by any sufficient statement showing that the action complained of was taken by the court below and exceptions duly taken and reserved by bills of exception. The rules relating to the matters of practice referred to have at least been substantially complied with, and a refusal to consider the assignments of error would not be justified. There was a motion for a new trial filed in the court below, and grounds assigned in the motion constitute the assignments of error urged in this court. It thus appears that the points urged in this court were embraced in a motion for a new trial in the court below. And where the bills of exception relied on here are not copied in the brief, they are referred to, and the page of the transcript where they may be found is given. The objections are overruled.

The record discloses that the appellants issued to Edward MacKechnie an accident insurance policy, such as is alleged in appellee’s petition, and that said policy was in force on the 25th day of September, 1913; that on that day the said Edward MacKechnie, while attempting to catch a moving street car, with the view of boarding it, fell and accidentally broke one of his arms and bruised his forehead ; that on the 15th day of October, 1913, 20 days from the date of the accident, the said MacKechnie, in consideration of the sum of $142.15, paid to him by appellants, released them, in writing, from all claims under the policy issued to him, “on account of and in full compromise settlement for injuries accidentally sustained on or about September 25, 1913,” and appellants’ first contention is that the trial court erred in refusing to charge the jury as follows:

“You are instructed that the burden of proof is upon the plaintiff to establish by a preponderance of the evidence that Edward MacKech-nie was mentally incapacitated at the very time he executed the release in evidence to know that he had done so, and the plaintiff having wholly failed to offer any testimony whatever tending to establish this fact, it therefore follows as a matter of law that said release cannot be set aside and you are instructed to return a verdict for the defendants as follows: ‘We, the jury, find for the defendants.’ ”

The testimony bearing upon the issue is very fully set out in appellants’ brief, but it'is too voluminous to be stated or quoted in this opinion. We have carefully read and considered all of it, and as the case, in our opinion, must be reversed and cause remanded for a new trial for reasons hereinafter stated, we shall overrule the assignment of error presenting the question raised without further comment than to say that the evidence was sufficient to require the submission of the question to the jury for their determination. This disposes also of appellants’ second assignment of error.

The next contention is that thé court erred in not sustaining appellants’ plea in abatement charging that the cause of action declared on by appellee had not, under the terms of the policy,’ arisen at the time of the filing of the suit, for that it was brought prior to the lapse of the time stipulated in the policy. This contention is not sustained. The evidence was sufficient to show such an absolute denial of liability on the part of appellants as authorized the institution and maintenance of the suit without regard to the provisions of the policy relating to the time within which suit might be brought for the enforcement of rights claimed under it.

A vital 'issue submitted to the jury was whether the injuries the assured Mac-Kechnie received by the fall he suffered in attempting to catch the street car, directly, independently, and exclusively of all other causes, resulted in permanent paralysis, and as a rule of law to guide and govern them in the solution of the question the jury was instructed thus:

“By cause of paralysis as referred to in the policy is meant the proximate or predominate cause. If you believe from the evidence that Mr. MacKechnie at the time of the accident was suffering with arterio sclerosis or Blight’s disease, or other disease which contributed to the paralysis and which might or probably would later have resulted in his becoming paralyzed, yet if you believe from the evidence that the fall hastened the paralysis and caused it to result sooner than it would have resulted had the fall not have happened, then you must find that the accident was the direct, independent, and exclusive cause of the paralysis.”

Appellants challenge the correctness of this charge, and assert that it abrogates the plain and unambiguous terms of the policy sued on, and instructs the jury that if they believe from the evidence that the said MacKechnie was suffering from either arterio sclerosis, Bright’s disease, or any other disease which contributed to his paralysis, they must find that such paralysis was the direct, independent, and exclusive result of the fall, if said fall hastened the paralysis; whereas, if such arterio sclerosis, Bright’s disease, or any other disease either caused or contributed to cause the paralysis, such paralysis did not result from the fall directly, independently, and exclusively of all other causes. The ap-pellee contends that the charge is a correct one, or if not appellants are in no position to complain of it because at their request the court gave a charge substantially to the same effect.

There is substantial evidence tending to show that before and at the time the assured' suffered the fall and received the injuries which appellee claims caused him to be stricken with apoplexy and permanent paralysis of the body, he was afflicted with diseases known as arterio sclerosis and Bright’s disease, and that such diseases are often productive of such results; that while the assured was not a drunkard, he was accustomed to drinking intoxicating liquors, and that such indulgences had a tendency to aggravate the diseases mentioned; that on the day of the accident which resulted in the injuries complained of, and a short time before the accident occurred, he took two or three drinks of intoxicating liquor, and soon thereafter, although not intoxicated, fell to the sidewalk while walking along the street, and was picked up by friends in a “dazed” condition ; that he apparently recovered from this condition in a few minutes, and a little later attempted to catch a moving street car, with a view of boarding it as a passenger, and before reaching the car fell in the street and was injured substantially as alleged by appel-lee. There is other testimony relating to the nature and effect of the assured’s injuries, but it is not essential to a proper discussion of the question under consideration to state it. It may be, however, that there is nothing in it which indicates that the disease or diseases which the assured was afflicted with resulted from the injuries received by him in the accident in question, and no such issue of law as such evidence would raise, if present, is in the case. There seems to be some diversity of judicial opinion upon the question involved in the challenge of the correctness of the charge complained of and it is not without difficulty, hut looking to our own decision we think it must be held to be erroneous and prejudicial to appellants. It is well established that a contract of insurance “should be construed in that manner which is most favorable to the assured, and that if its language is fairly susceptible of any construction that would make the insurer responsible for the loss (or injury sustained), it would be the duty of the court to place such construction upon it; but the courts cannot undertake to make a new contract in disregard of the plain and unambiguous language used by the parties.” Maryland Casualty Co. v. Hudgins, 97 Tex. 124, 76 S. W. 745, 64 L. R. A. 349, 104 Am. St. Rep. 857, 1 Ann. Cas. 252. In Continental Casualty Co. v. Annie Wade et al., 101 Tex. 102, 105 S. W. 35, the Supreme Court had under consideration an insurance contract obligating the company to pay the beneficiaries named therein in'-the event the insured Green received an accidental injury, and such injury was “solely and independently of all other causes” the result of the accident, and after stating the rule substantially as announced above, said:

“But there is no ambiguity or uncertainty in the language; there is nothing in it which indicates that Mrs. Wade was to be compensated for the loss of life of her son, Bishop Green, except upon the terms and conditions specified in the contract. If harsh, they are just what Green agreed to when he made the contract, and it is not within the province of the court to interfere or relieve one of a hard bargain which he deliberately and willingly entered into.”

It is equally clear, we think, that the terms of the policy involved in the case at bar is free from ambiguity and uncertainty, and the words used to set forth and express the contract of the parties must be given their usual and ordinary meaning. While it is true that such policies “are to be construed liberally, and ambiguous provisions, or those capable of two constructions, should be construed favorably to the insured, and most strongly against the insurer, plain, explicit language cannot be disregarded, nor an interpretation given the policy at variance with the clearly disclosed intent of the parties.” If the words of that provision of the policy sued on which obligates the appellants to pay Edward MacKecfinie the sum of $5,000 in the event he received accidental injuries which “should directly, independently, and exclusively of all other causes” result in permanent paralysis, be given their usual interpretation, the charge under discussion does not embody a correct proposition of law applicable to the facts. Giving the words of the contract, “independently and exclusively,” their ordinary ¿leaning, appellee was not entitled to recover, unless the paralysis with which Edward Mac-Kechnie was suffering was caused solely by the injuries received by him; that is, apart from or without regard to any disease with which he was afflicted at the time of the accident resulting in such injuries. The charge complained of instructed the jury that if they believed Mr. MacICechnie was suffering from either arterio sclerosis, Bright’s disease, or any other disease which contributed to his paralysis, without regard to whether such disease contributed proximately or remotely to the paralysis, they must find that such paralysis was the direct, independent, and exclusive result of the fall causing his injuries, if such fall hastened the paralysis. Such view of the law, as applicable to this case, seems to be supported by the opinion of the Supreme Court of Arkansas rendered by a divided court, in the case- of Fidelity & Casualty Co. v. Meyer, 106 Ark. 91, 152 S. W. 995, 44 L. R. A. (N. S.) 493, and perhaps others, but we think the decision in the case named and those in line with it are contrary to the decision of the Court of Civil Appeals for the Fourth District of this state in the case of Maryland Casualty Co. v. Glass, 29 Tex. Civ. App. 159, 67 S. W. 1062, the cases there cited, and the general trend of the decisions of- our Supreme Court. The cases,ref erred to are also opposed to the decision rendered in Penn v. Standard L. & A. Ins. Co., 158 N. C. 29, 73 S. E. 99, 42 L. R. A. (N. S.) 593. In Maryland Casualty Co. v. Glass, supra, the insured died while undergoing a surgical operation under the influence of chloroform regularly administered — a risk covered by the policy — and it was held that if the death of the insured was caused by the anesthetic alone, the insurer was liable; but if he was afflicted with disease which caused or directly contributed to his death, there could be no recovery, though the anesthetic might have been a cause concurring with his affliction in producing death. The insured was undergoing an operation for appendicitis, and the court said:

“If he was suffering from appendicitis, as is shown by the undisputable' evidence, and if the anesthetic would not have caused his death had it not been for such affliction, but he died because the chloroform aggravated the effects of the disease, or appendicitis aggravated the effect of the drug, the company would not be liable under its contract. For in either event appendicitis and chloroform would be concurring and inseparable agents proximately contributing to his death, and it could not have been the result of an injury from the anesthetic, independent of all other causes.”

In Penn v. Standard Dife & Accident Ins. Co., supra, it is field (quoting from tfie syllabus) that:

“Merely hastening through an accidental fall the destruction of sight, which was inevitable, through cataract, is not where both causes contribute to the result, within the operation of .a policy insuring against bodily injuries effected directly and independently of all other causes through external, violent, and accidental means.”

In discussing tfiat case the court said that the question of proximate and immediate cause is not raised under the conditions of a policy which in terms excludes disease or bodily infirmity, and which could have n'o more force than the general provision, “independent of all other causes”; that if the jury had found that the injury was caused by the sum of two causes—that is, that the accident and the pre-existing cataract and diseased, condition of the eye were together responsible for the subsequent blindness— the plaintiff c'ould not have recovered, as the injury must have resulted from the accident “independent 'of all other causes.” White v. Standard Life & Accident Ins. Co., 95 Minn. 77, 103 N. W. 735, 884, 5 Ann. Cas. 83; Ward v. Ætna Life Ins. Co., 85 Neb. 471, 123 N. W. 456.

The contention, that if the charge was not a correct one appellants are in no position to complain of it, because the court gave a charge substantially to the same effect at their request, cann'ot be sustained. If the charges are not essentially different, the one given at the request of the appellants was not asked until after the court had" refused the following special charge requested by appellants: ■

“You are instructed that, by the term ‘directly, independently, and exclusively of all other causes,’ is meant that the stroke of apoplexy and resulting paralysis, if any, must have occurred or been caused directly and proximately from the fall of Mr. MacKechnie in the street, and that no other efficient cause, such as disease, must have directly and proximately contributed thereto. If you do not believe from the preponderance of the testimony that the fall of Mr. MacKechnie in the street on the occasion in question resulted directly, independently, and exclusively of all other causes, in the stroke of apoplexy on said October 25th, then it will be your duty to answer special issue No. 2 ‘No.’ ”

This refused special charge fairly reflects the theory maintained by the appellants and the view of the law therein expressed, as applicable to the facts, not being concurred in by the trial court, but the view adopted as is expressed in the charge complained of, appellants will not be deprived of the right to attack on appeal the correctness of the court’s charge because they may have requested a charge prepared by themselves embodying substantially the same principle of law as that enunciated in the court’s charge. It cannot be successfully contended, in such ease, that the error of the court was invited.

The refusal of the foregoing special charge is complained of and made the basis of appellants’ sixth assignment of error, and for the reasons indicated in our discussion of the fifth assignment we think it, or some charge equivalent thereto, should have been given.

The court refused to submit the issue as to whether the arterio sclerosis and Bright’s disease with which the assured Mac-Kechnie was afflicted caused him to be stricken with apoplexy on the 25th day of October, 1913, and the refusal is assigned as error. We think the assignment should be sustained. There was evidence tending to show that the diseases mentioned caused the stroke of apoplexy suffered by the assured and the resultant paralysis, and appellants were entitled to have that specific issue submitted to the.jury for their determination.

If the diseases referred to caused the stroke of apoplexy, or if the injury received by the assured in the fall and said diseases concurred and co-operated in causing the apoplexy and paralysis, no liability existed. But if the injuries alone caused the apoplexy and paralysis the appellants are liable.

Other assignments need not be discussed. What we have said disposes, practically, of all the material questions raised. For the reasons indicated the judgment is reversed, and the cause remanded.

Reversed and remanded.
      other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes


author: RASBURY, J.

text:
    KANAMAN v. GAHAGAN.
    (No. 7452.)

    (Court of Civil Appeals of Texas. Dallas.
    Feb. 5, 1916.
    Rehearing Denied April 22, 1916.)
    1. Bills and Notes <@=>188‘ — Manee as Payee—Indorsement in Blank—Effect.
    A note payable to maker’s order, when indorsed in blank, becomes, in legal effect, a note payable to bearer.
    [Ed. Note.—For other eases, see Bills and Notes, Cent. Dig. §§ 447-452; Dec. Dig. 188.]
    2. Bills and Notes <®=210—Note Payable to Bearer—Possession.
    When a note is payable to bearer, possession passes property and is sufficient authority for maintaining suit.
    [Ed. Note.—For other cases, see Bills and Notes, Cent. Dig. §§ 424, 425, 499; Dec. Dig. <®=210.]
    3. Bills and Notes <S=>489(2) — Action — Pleading—E viden ce.
    In suit on a note payable to the maker’s order and indorsed in blank, the allegations that defendant executed the instrument and put it into circulation,' and that, in time, plaintiff became its owner, were sufficient to admit the note in evidence on the issue of ownership.
    [Ed. Note.—For other cases, see Bills and Notes, .Cent. Dig. §§ 1588, 1589; Dec. Dig. <3= 489(2); Pleading, Cent. Dig. § 1325.]
    4. Bills and Notes <3=462(1)—Pleading— Sufficiency.
    In such suit, where the petition did not aver .to whom the defendant delivered or agreed to deliver the stock attached to the note as security, but did allege that the stock was owned and held by plaintiff, who produced it on trial, the petition was sufficient.
    [Ed. Note.—For other cases, see Bills and Notes, Cent. Dig. § 1444; Dec. Dig. <3=462(1).]
    5. Bills and Notes <3=^508—Bearer—Paper —Admissibility.
    Such note was admissible in evidence, though the evidence failed to show to whom it was to have been delivered or to whom it was to have been payable.
    [Ed. Note.—For other cases, see Bills and Notes, Cent. Dig. §§ 1728-1732; Dec. Dig. <§= 508.]

      6. Bills and Notes @=>509 — Action—Evidence.
    Evidence of defendant that he never intended to put such note into circulation at all was admissible against plaintiff, who took the note after maturity.
    [Ed. Note. — For other cases, see Bills and Notes, Cent. Dig. §§ 1740-1745; Dec. Dig. @=> 609.]
    7. Bills and Notes @=>537(2) — Intention oe Makee — Question oe Fact.
    Whether defendant ever intended to put the instrument into circulation at all was an issue of fact for the trial court.
    [Ed. Note. — For other cases, Notes, Cent. Dig. §§ 1863-1S65; 537(2).] see Bills and Dec. Dig. @=>
    8. Appeal and Ebbob @=>1010(1) — Review-Finding oe Teial Oouet.
    The Court of Civil Appeals cannot disturb a finding of the trial court as to an issue of fact supported by sufficient evidence.
    [Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. §§ 3979-3981; Dec. Dig. @=> 1010(1).]
    9. COEPOEATIONS @=>99(1) — SALE OE STOCK ON Ceedit — Statute.
    Under Const, art. 12, § 6, providing that no corporation shall issue stock or bonds, except for money paid, labor done, or property actually received, where, after defendant subscribed for stock in a traction company, .which was not to be issued until payment, he .was induced by the agent of the promoters to execute a note for the price, to which the stock issued in defendant’s name was attached as collateral security, the parties agreeing that defendant had deposited and pledged his stock as security for the price he had agreed to pay for it, providing a method by which title could be divested out of him in case he defaulted by foreclosure of lien and sale of the stock, also providing that, in the event the stock sold for more than the debt, the surplus should be paid defendant, the transaction was a prohibited sale of corporate stock on credit.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. § 444; Dec. Dig. @=>99(1).]
    Appeal from District Court, Dallas County; Jas. P. Haven, Judge.
    Suit by H. I. Gahagan against W. I. Kana-man. From a judgment for plaintiff, defendant appeals.
    Judgment reversed, and rendered for defendant.
    Adams & Stennis, of Dallas, for appellant. John W. Pope and M. L. Morris, both of Dallas, for appellee.

       Application for writ of error pending in Supreme Court.

   RASBURY, J.

The appellee sued appellant upon his promissory note and collateral agrees ment dated August 30, 1913, by the combined provisions of which appellant agreed to pay to himself, 90 days after date, $850, together with 8 per cent, per annum interest from date until paid, and as security for which promise he pledged ten shares of the capital stock of the Southern Traction Company of Dallas, Tex. By his answer the appellant under oath denied the execution and delivery of the note and agreement, and affirmatively averred that he was induced to sign and deliver possession of same by the fraud and deceit of ap-pellee. At trial jury was waived and the whole case submitted to Hon. James P. Haven, who exchanged districts with Hon. E. B. Muse, by direction of proper authority. Judgment was for appellee for the principal of the note, interest, attorney’s fee and for foreclosure of lien upon the corporate stock pledged as security for the debt. From the judgment so rendered, this appeal is prosecuted.

The essential facts deducible from the testimony are free from material conflict, and are substantially as follows; Prior to November 20, 1911, certain gentlemen were associated together under the name of the Southern Traction Company in an effort to construct a system of interurban railroads in a southerly direction from Dallas; the ultimate purpose being to incorporate. These promoters for such purpose solicited subscriptions from the public, selecting as their fiscal agent to whom subscriptions should be payable one John Auchincloss. On November 20, 1911, appellant subscribed in writing to ten shares of the capital stock of the proposed corporation, for which he agreed to pay $85 per share at periods agreed upon, but not necessary to enumerate. By the agreement no stock was to be issued to appellant until he had paid Ms subscription in full. Subsequent to the execution of the subscription contract just detailed, and on May 11, 1912, the Southern Traction Company, which had in the meantime incorporated, issued to Auch-incloss, fiscal agent, certificate of stock for the ten shares subscribed by appellant, to be delivered by him to appellant when he had complied with his contract. Appellant failed to make any of the payments provided for in his contract. The matter so standing, ap-pellee, acting for the promoters, or those who had succeeded them in the collection and adjustment of such subscriptions, and who are denominated by the witnesses as syndicate managers, underwriters, and reunderwriters, and whose functions, it seems, were to guarantee the payment of all subscriptions, reached the conclusion that the matter would be in better shape if he could secure appellant’s note in lieu of his subscription contract. Ap-pellee called upon appellant for that purpose. Appellant agreed to the proposed arrangement; whereupon the note and agreement sued upon were prepared by appellee and signed by appellant. It is as follows:

“Dallas, Texas, Aug. 30, 1913.
“90 days after date, without grace, I promise to pay myself eight hundred and fifty dollars for value received, negotiable and payable without defalcatioñ or discount at the office of the Guaranty State Bank & Trust Co., Dallas, Texas, with interest at the rate of 8 per cent, per annum from date until paid.
“W. I. Kanaman.”
“I (we) have deposited -or pledged with the holder of this note as collateral security for payment of this note shares C/S (preferred) Southern Traction Co. of Dallas, Texas.
“Now, in the event of nonpayment of this note at maturity, the holders hereof are hereby invested with full authority to use, transfer, hy> pothecate, sell or convey the said property or any part thereof, or to cause the same to he done at public or private sale, with or without notice or demand of any soi-t, at such place and on such terms as the said holders hereof may deem best, and the holders of this note are authorized to purchase said collaterals when sold for their own protection, and the proceeds of such sale, transfer, or hypothecation shall be applied to the payment of this note, together with all protests, damages, interests, costs, and charges due upon the note or incurred by reason of its nonpayment when due, or in the execution of this power, also a commission of 2½ per cent, on the gross amount of collateral sold. Surplus if any, after payment of this note, together with all charges above stated, shall be paid to the drawer of this note, or, at the election of the holder hereof, be paid on any other obligation of the drawer hereof, whether as principal, debtor, or otherwise held by the holders hereof; and, if the proceeds of the above sale shall not be sufficient to pay this note, the drawer hereof agrees to make good on demand any deficit, and it is \mderstood and agreed, should there be any depreciation in the value of said security prior to the maturity of this note, such an amount of additional security shall be furnished as will be satisfactory to said holder of this note, and, should such additional security not be furnished within twenty-four hours after demand so to do, then in that event said holder of this note may proceed at once to sell, as above specified, the security herein named. In the event default is made in the payment of this note at maturity, and it is placed in the hands of an attorney for collection, or suit is brought on the same, then an additional amount of 10 per cent, on the principal and interest of this note shall be added to same as collection fees.
“W. I. Kanaman.”

The note and agreement were executed in appellant’s office under the direction of ap-pellee, who had with him at the time the certificate of stock issued to Auchineloss, which he attached to appellant’s note under the terms of the collateral agreement; Auchineloss having in the meantime transferred the certificate in blank. Appellee then, as he had advised appellant he intended to do, pledged with a bank appellant’s note and stock with other securities, in effecting a loan. Shortly before the note matured the promoters, or those representing them, transferred appellant’s note, among others, to appellee. Appellee was in the employ of the promoters, and the purpose and Consideration of the transfer was that appel-lee might, in his name, for them, handle such notes as his judgment dictated. When the note matured, appellant failed to pay same. Suit was commenced with the result stated.

The first and second assignments raise an issue as to the sufficiency of the pleading. There is no allegation in the petition that the note sued upon was delivered to any one after its execution; merely the allegation that it was “delivered.” Appellant urged a general demurrer to the sufficiency 'of the pleading and a special exception pointing out such insufficiency, both of which were overruled by the court, and it is the action of the court in the respect stated which is challenged. We conclude there was no error in the action of the court. As appears from an examination of the note, it is payable to “myself’ or the payee. In Johnson v. Mitchell, 50 Tex. 212, 32 Am. Rep. 602, our Supreme Court quotes approvingly the rule that “a note payable to the maker’s order becomes, in legal effect, when indorsed in blank, a note payable to bearer.” When so payable, possession passes property and is sufficient authority for maintaining suit. See, also, Grant v. Ennis, 6 Tex. Civ. App. 44, 23 S. W. 998; Garrett v. Findlater, 21 Tex. Civ. App. 637, 53 S. W. 840. The note being in legal effect payable to bearer, the allegation that appellant executed it and put it in circulation and that in time appel-lee became the owner of same was sufficient to admit the same in evidence on the issue of ownership.

The third assignment complains of the action 'of the court in overruling appellant’s special exception, which' pointed out that the petition was insufficient because it did not aver to whom appellant delivered or agreed to deliver the certificate of stock attached to said note as security therefor. The security was a part of an incident to the note and appellee’s right to a foreclosure and sale thereof was dependent upon ownership and possession. He did allege that the stock was owned and held by him and produced it upon trial, which was sufficient under the authorities cited.

The fourth- assignment of error complains of the admission of the note in evidence on the ground, in effect, that the evidence failed to show t'o whom the note was to be delivered or to whom it was to be payable. As shown by the cases cited, it was not necessary to allege or prove delivery of such a note nor to whom payment was intended. The law supplies both under the rule that possession is delivery and that by the execution of such a note it is “intended” to be, and is, payable to bearer or the one in possession. We do not, of course, intend to say that such rule excludes any other defense t'o the note. It was proper for appellant to testify as he did that he never intended to put it into circulation at all, and such evidence was admissible against appel-lee, since he acquired it after maturity, but such issue was one of fact to be determined by the court, which he did in favor of the appellee, and since, in our opinion, the evidence is sufficient to support the finding, we are without authority t'o disturb such finding under well-settled rules in that respect.

The fifth assignment asserts that the evidence was insufficient to support the judgment on the ground that it shows that the note sued on was given in payment of stock in a corporation sold, issued, and delivered on a credit, and hence issued in violation of article 12, § 6, of the Constitution, which declares that “no corporation shall issue stock or bonds except for money paid, labor done, 'or property actually received.”

It has been decided a number of times that a sale of the stock of a corporation on a credit is not a sale in consideration of money paid, labor done, or property actually received, and is hence illegal and void, because prohibited by the Constitution. Stated in another way, a contract which is in contravention of the Constitution cannot form the basis for any character of relief in the courts of the state. San Antonio Irrigation Co. v. Deutschmann, 102 Tex. 201, 105 S. W. 486, 114 S. W. 1174; McCarthy v. Tex. Loan & Guaranty Co., 142 S. W. 96; Farmers’ & Merchants’ State Bank v. Falvey, 175 S. W. 833. The inquiry then is: Did the several transactions detailed result in the issue of stock of a corporation in violation of the constitutional inhibition cited? Under the undisputed facts it can be said that the transactions resulted in nothing else. It is true that the original subscription contract was a lawful one and could have been enforced, for the very good reason that by that contract it was never contemplated that the stock in Southern Traction Company should be issued until the agreed price was paid. It expressly so provides. Nor did the delivery to Auchincloss, fiscal agent, by the traction company, after it was incorporated, of the amount of stock to which appellant subscribed, constitute a violation of the constitutional provision, since his possession of the stock was the possession of the company, and since it was held by him under the terms of appellant’s subscription Contract and to be delivered in accordance therewith. By the subsequent transaction, however, the relations of the parties underwent a radical, though simple, change, by which they merged the original subscription contract into a completed sale of the stock of the traction company on a credit. By the provisions "of the note and agreement executed in lieu of the subscription contract the parties treat the transaction from no standpoint other than that of one conferring ownership of the stock upon appellant. They agree thereby that appellant has deposited and pledged his stock as security for the price he has agreed to pay for it. They provide a method by which title may be divested out of appellant in case default is made in the payment of the note by foreclosure of lien and sale thereof. They provide that in the event the stock sells for more than the amount of the debt that the surplus shall be paid to appellant or applied to any other debt appellant may be due the owner of the note. Such provisions are wholly inconsistent with any theory other than that the title and possession of the stock passed to appellant. Appellee proceeded in the court below on the theory of ownership, and the court found as matter of fact by his judgment that appellant was the owner of the stock, and foreclosed appellee’s lien thereon, and ordered same sold in compliance with the agreement of the parties in ' that respect. Further, the record of the testimony contains repeated assertions by ap-pellee, who is also treasurer of the Southern Traction Company, that it was a sale, of which tlie following is typical:

“The certificate of stock attached represents the stock purchased by Mr. Kanaman. * * * The seal of the corporation is on the stock. The stock is duly issued. * * * ”

It may be that the parties never contemplated such a result from their acts, but on that we may not speculate, since it is our sole function to declare the result of the adduced facts. It is, however, argued by counsel for appellee that the transaction in the instant case is not controlled by the cases cited, for the reason tha't the sale to appellant was not by the corporation, but by Auch-incloss, a third party. The evidence, we conclude, will not support the claim. It is not contended that Auchincloss paid the Southern Traction Company for the stock or that it was ever intended he should. On the contrary, it shows beyond reasonable dispute that he was acting in respect to the stock for the contemplated corporation. By the subscription contract appellant agreed to subscribe to ten shares of the stock of the proposed corporation, Southern Traction Company, and to pay the agreed amount to Auch-incloss, fiscal agent. “Fiscal agent,” in the sense used in the subscription contract, could clearly mean nothing more than the financial agent of the promoters of the corporation, whose duty it was to collect and receive the money paid on subscriptions. This conclusion is fortified by the further fact that after the Southern Traction Company was, in fact, chartered it issued and delivered the stock intended for appellant to Auchincloss, who retained the certificate in his possession until the note sued on was executed, when he indorsed it and delivered same to appellee, who in turn attached same to appellant’s note in the maimer we have detailed. It is true that it may be inferred from certain general statements of appellee and the witness Painter that a group of gentlemen known as the syndicate managers and as the underwriters of the subscriptions were in control of the subscription of appellant. This we also believe to be immaterial. If they were underwriters, it would mean no more than that they guaranteed to some one, presumably those who intended in the main to finance the road, that all subscriptions would be paid. It would not alter the main fact that the last transaction culminated in the issuance, delivery, and sale of stock upon credit. The method or agencies used to accomplish such result are immaterial if that is the result.

Entertaining the views we do with reference to the issuance of stock to appellee, and it appearing that the facts surrounding the final transaction have been fully developed, we feel constrained, under the authorities cited, to reverse the judgment of the court below and render judgment for appellant, which is hereby decreed.

Reversed and rendered.
      ^mFor other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

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


author: WALTHALL, J.

text:
    WOODS et al. v. MOORE.
    (No. 555.)

    (Court of Civil Appeals of Texas. El Paso.
    April 13, 1916.
    Rehearing Denied. May 4, 1916.)
    1. Taxation @=>789(1) — Tax Sales — Evidence of Title.
    In trespass to try title by a purchaser from one buying at a tax sale, the judgment, order of sale, and the sheriff’s deed in the tax suit, which was against unknown owners, were admissible in evidence against defendants, not parties to the tax suit, as muniments of title to establish the fact that the grantee had acquired the title of the unknown owner.
    [Ed. Note. — For other cases, see Taxation, Cent. Dig. § 1566; Dee. Dig. @=>789(1).]
    2. Evidence @=>340(3) — Codies of Records— Statute.
    Under Rev. St. 1911, art. 3694, making certified copies of the records of all public officers and courts of the state admissible as evidence where the records themselves would be admissible, in trespass to try title by one claiming under a purchaser at a tax sale, certified copies of orders of the probate court in the administration of a decedent’s estate were admissible in evidence in rebuttal of defendants’ claim of title under power -of attorney of persons claiming to be decedent’s heirs.
    [Ed. Note. — For other eases, see Evidence, Cent. Dig. § 1297; Dee. Dig. @=>340(3).]
    3. Judgment @>=712 — Taxation @=>641 — Tax Suit — Judgment — Binding Force — Adverse Possessor.
    Unless a party’s title by limitation to land has been fully perfected before bringing of a tax suit against unknown owners, he is not a necessary party to the suit, under his claim of title by limitation, and judgment in the suit binds him as well as all other persons, though he is not served with notice.
    [Ed. Note. — For other cases, see Judgment, Cent. Dig. § 1233; Dec. Dig. @=>712; Taxation, Cent. Dig. § 1304; Dec. Dig. @=>641.]
    4. Estoppel @=>71 — Tax Titles — Estoppel of Occupant — Disclaimer.
    Where the occupant of lands delinquent for taxes went to the county attorney and told him that, if he would not make him a party to the tax suit, as he owned no interest thez-ein, but would sue simply unknown owners, he, the occupant, would buy in the land at the sale under the judgment, which the attorney did, such occupant was estopped from asserting any title by limitation in himself against one claiming under the purchaser at the tax sale.
    [Ed. Note. — For other cases, see Estoppel, Cent. Dig. §§ 173-182; Dec. Dig. @=>71.]
    Appeal from District Court, Haskell County; Jno. B. Thomas, Judge.
    Suit by Mrs. M. M. Moore against W. M. Woods and another. From a judgment for plaintiff, defendants' appeal.
    Affirmed.
    A. H. Kirby, of Abilene, Scott W. Key, of Haskell, and R. M. Reed, of El Paso, for appellants. W. H. Murchison, H. G. McConnell, Bruce W. Bryant, and H. R. Jones, all of I-Iaskell, for appellee.

       Application for writ of error pending in Supreme Court.

   WALTHALL, J.

Appellee, Mrs. M. M. Moore, brought this suit in trespass to try title, against appellants, W. M. Woods and A. O. Foster, to recover a tract of land in Haskell county, containing 177 acres, originally granted to Wm. Strode. Appellants answered by pleas of general denial, hot guilty, and limitations of 5 and 10 years. Appellee, by supplemental petition, alleged, in substance, that on the 20th day of April, 1911, the land in controversy was delinquent for taxes, interest, penalties, and costs due for some 20 previous years, and that on said date the state instituted its suit to recover therefor and to foreclose its lien, and thereafter recovered a judgment against unknown owners for the amounts due, and foreclosing the lien for taxes due the state and county of Haskell upon the land in controversy; that under said decree an order of sale was issued, a public sale of the said land was had, and the sheriff executed a deed to the purchaser under said sale. Appellee claimed title from the purchaser at said sale; denied the facts alleged by appellants under which they claimed title by limitation; alleged that appellant Foster is estopped from asserting title under his plea of limitation, for the reason that prior to the filing of the tax suit, and while the county attorney had before him the data showing the delinquency of said lands for taxes, interest, penalties, and costs, and had in preparation the pleadings for said tax suit, and had contemplated including appellant Foster in said suit as one of the defendants, that Foster went to the said county attorney’s office, and, when notified by the said county attorney that he was preparing to file said tax suit and of his intention to include him as a party defendant therein, said Foster stated to said county attorney that he (Foster) did not claim or own any interest in said land, and requested said county attorney not to include him as a defendant in said suit, but would buy said land in at the foreclosure sale if the suit were against the unknown owners; that said county attorney accepted said statement as sufficient reason for not including said Foster as a defendant in said tax suit, but did prosecute said suit against said unknown owners to a final judgment and sale, as alleged. Appellants, by supplemental answer, denied the facts alleged in the supplemental petition, and alleged that they were in actual possession of the land at the time of filing of the tax suit and at the time of the judgment in said tax suit and sale thereunder, that at the time the proceedings in the tax suit were had appellant Foster’s title was of record in Haskell county, and that neither of appellants was made parties defendant in the suit or any of the proceedings therein, and for that reason they claim the judgment and sale thereunder were void as to them, and they denied the "facts and the sufficiency of them in appellee’s plea of estoppel. The case was tried without a jury, and judgment was rendered for appellee on th'e facts found by the court.

The facts found by the court are substantially as follows: That on the 20th day of April, 1911, the taxes on the property in question had not been paid for the years stated in the petition; that the state, through the county attorney of Haskell county, filed suit in the district court of Haskell county for the taxes due, and for the penalties and costs, and the costs of suit, against the unknown owners, perfected service of citation by publication, and on the 2d day of December, 1911, obtained judgment against the unknown owners of the property for the amounts due for taxes, penalties, and costs a foreclosure of state’s lien against the land; that on the 19th day of January, 1912, an order of sale under said judgment was duly issued and a sale regularly and duly made of said land to Bruce W. Bryant for and in consideration of his bid, and a deed made to him by the sheriff of that county, on the payment of his bid, being the amount of said taxes, interest, penalties, and all costs then due; that by proper deed, Bruce W. Bryant conveyed the property in controversy to appellee; that the land in controversy was patented on the 15th day of December, 1858, to Wm. Strode, his heirs and assigns; that neither of the appellants in this suit was ever cited or named as defendants in the tax suit; that when the county attorney of Haskell county was preparing to institute the tax suit and was preparing his petition and exhibits to be filed in that suit he had then named appellant Foster as one of the defendants therein, and so wrote his name on an exhibit then in preparation, and intended to file his suit as then prepared, and that while the suit was in that state of preparation, and a short time before the suit was filed, appellant Foster called at the office of the said county attorney, and on being informed by the said county attorney of his intent and purpose in filing said suit as then prepared and to include him (Foster) as one of the defendants in said suit, said Foster then said to the said county attorney that he (Foster) did not have any interest in the said lands, and requested th'e county attorney not to include him as a defendant in the suit, but to sue simply the unknown owners, and that he (Foster) would buy in the land at the sale under the judgment to be obtained in said suit; that the county attorney relied upon the statements of appellant Foster so made, abandoned his purpose of including Foster as a defendant, and sued only the unknown owners as defendants; that both appellants knew of said suit and said judgment before said property was sold at the tax sale; that neither of the appellants at any time have occupied or had possession themselves or by tenant of the land or any part of it, claiming for themselves or either of them, and that neither they nor either of them, for himself or themselves, paid any taxes upon said lands except for the year 1914; that certain parties claiming to be the heirs of Hiram Riggs, deceased, did execute and deliver to appellant Foster and Delmas Givens a power of attorney in which they were named as attorneys in fact for said parties representing themselves to be the heirs of Hiram Riggs, deceased, and in which power of attorney said parties authorized said Foster and Givens to sue for and reduce to possession certain lands, including the land in controversy, and in said power of attorney conveying to them in consideration of their said services one-half of said tract of land, three-fourths of one-half to Foster, and one-fourth of one-half to Givens, which instrument was duly acknowledged and recorded in Haskell county in 1888; that appellant Woods is a tenant in possession of said land for the heirs of Hiram Riggs, deceased; that the evidence is insufficient to show the time when the heirs of Hiram Riggs went into possession of said land, and is insufficient to show ten years’ possession prior to the filing of the tax suit; that the possession of said land consisted of its being inclosed in a pasture with 5,136 acres; that its inclosure with said other lands in a pasture is the only character of possession had or claimed by the heirs of Hiram Riggs or their tenants prior to the filing of the tax suit, except for about one or two years that the taxes on said land were paid by the heirs of Hiram Riggs for the years 1906, 1907, 1908, and 1909; that the heirs of Hiram Riggs never had at any time any deed to the property recorded in Haskell county; and that the heirs of Hiram Riggs and appellant Woods are mere trespassers on said land.

The first three assignments of error complain of the admission in evidence of the judgment, order of sale and the sheriff’s deed in the tax suit, and in their proposition assert that a judgment rendered against an unknown owner in a tax suit foreclosing the lien for taxes is not binding on persons not parties to said suit, and as to such persons is hearsay.

Appellants refer us to Scales v. Wren, 103 Tex. 304, 127 S. W. 164, as sustaining their proposition. We do not so understand that, case. The question in that case was not the admissibility of the judgment as evidence in the ease, but its legal effect as concluding Wren’s title. The Supreme Court in that case simply held that, where Wren held a deed by regular chain of title from the state, his title deeds being duly recorded in the county where the land is situated, stating his residence, the 'records would have given the county attorney the information that the owner of the land was not unknown; that without making inquiry from the sources of information provided by the law the county attorney made his affidavit that the owner was unknown, and the judgment against the unknown owner would not conclude Wren’s title under such circumstances where he was not a party to the suit. The conclusive effect of the judgment was the point decided under the facts of that case, and not its admissibility as evidence. The judgment, order of sale, and sheriff’s deed were not hearsay. The judgment, order of sale, and sheriff’s deed in trespass to try title were admissible in evidence against appellants, though n'ot parties thereto, as muniments of title to establish the fact that the grantee had acquired the title of the unknown owner. Ellis et al. v. Re Bow et al., 96 Tex. 532, 74 S. W. 528. It seems to us that the effect of the judgment, order of sale, and sheriff’s deed in the tax suit, as concluding the appellant’s title, would depend upon the question presented in the Scales v. Wren Case: Did the court have the pr'oper parties? The question is presented and determined under other assignments. The assignments are overruled. Appellee offered in evidence the certified copies of the application for administration on the estate of Hiram Riggs, and other proceedings in the administration of the estate, including the order of the probate court directing the sale of the land certificate, by virtue of which the land in controversy was sold on a credit of 12 months’ time to P. N. Luckett, and the sale approved by the court, to all of which appellants objected on the ground of immateriality, irrelevancy, no evidence that any conveyance was ever made in pursuance of the order of sale, or that the purchaser ever complied with his bid. The overruling of the objection is made the basis ’of the fourth assignment.

On the trial the appellants introduced in evidence the power of attorney referred to in the finding of facts filed by the court. In rebuttal, and as a circumstance to show that the heirs of Hiram Riggs never had any interest in the land certificate and never owned the same, the certified copies of the orders and proceedings 'of the probate court were offered. The certificate itself reads as follows:

“No. 337. This is to certify that Hiram Riggs, attorney for Wm. Strode, has appeared before ¡ us, the board of land commissioners for the county of Brazoria, and proved according to law that said Strode arrived in the county previous to 2d day of May, 1845, and that he is a married man and entitled to an augmentation of one labor of land upon condition,” etc.

The date of the certificate is 15th day of February, 1838, the order of the court confirming the sale of the land certificate to Luckett was in January, 1857, and the patent to the land located on the augmentation certificate was issued to Wm. Strode, his heirs or assigns, in December, 1858. There is no transfer in the record from Strode or his heirs to Hiram Riggs or his heirs.

The assignment raises the question of the admissibility as evidence of the certified copies of probate proceedings. Article 3694, R. S. 1911, makes the certified copies of the records of all public officers and courts of this state admissible as evidence in all cases where the records themselves would be admissible. The certificate being personal property, it seems to us that no formal transfer of the certificate would be necessary other than its delivery to the purchaser. We think the admissibility of the certified copies of the orders of the probate court in the matters of the administration of the estate of Hiram Riggs is not error, and especially would this be true, as the copies of the proceedings of the probate court were offered in rebuttal of appellant’s claim of title under the power of attorney from persons claiming to be heirs of Hiram Riggs. Appellee was not by the probate proceedings seeking to show ownership in herself under the Hiram Riggs’ claim of title.

Assignments fifth, sixth, seventh, eighth, and ninth complain of the findings of the trial court on the possession of the land by appellant as not sustaining their pleas of limitation and as being mere trespassers on the land. These assignments cannot be sustained. The proof is quite clear that neither of the appellants was in possession of the land in controversy, claiming it for themselves, but whatever possession they had of the land in controversy was for the heirs of Hiram Riggs. But suppose that it could be said that their possession of the land was-complete before the institution • of this suit, and that by their possession for the prescribed period -they, for the heirs of Hiram Riggs or for themselves, had acquired the title as against the unknown owner; the proposition would then be the same as stated and held by the Court of Civil Appeals in Patten v. Minor, 117 S. W. 920, based on the case of Jordan v. Higgins, 63 Tex. 150, that because the unknown owner could not have recovered against them because of their possession, the purchaser of the property at a tax sale made by the state for taxes cannot recover of them, But. the Supreme Court in Patton v. Minor, 103 Tex. 176, 125 S. W. 6, reversed the Court of Civil Appeals, and distinguished the Jordan v. Higgins Case. Unless their title by limitation had become fully perfected before the bringing of the tax suit, they were not necessary parties to the tax suit, under their claim of title by limitation, and the judgment in the tax suit would bind them as well as all other persons, although not served with notice. But appellants claim title in themselves by reason of their possession. They do not claim title in the heirs of Hiram Riggs by reason of their possession for the heirs of Hiram Riggs. Appellant Woods testified that he went into possession and held under appellant Foster; that Foster told him that he was acting for the heirs of Hiram Riggs; that he had the use of the land for the payment of the taxes, and that he paid the taxes for the time he was in possession for and in the name of the heirs of Hiram Riggs; that he paid the taxes on the rendition made by Poster as agent for the heirs of Hiram Riggs. Certainly there was nothing in the possession of the land by appellants for the heirs of Hiram Riggs, nor in the oihces of the assessor or collector of taxes, that would notify the county attorney of ownership of the land in appellants. The only intimation of ownership of any interest in appellants in the land found in the records in the county clerk’s office is in the record of the power of attorney from the heirs of Iiiram Riggs to Poster and Givens. If it could be said that this record is sufficient to notify the county attorney of ownership of any interest in Poster, we think the evidence and the finding of the facts by the trial court sufficient to estop-Poster from now asserting such ownership under appellee’s plea of estop-pel. Hove v. Barber, 17 Tex. 312; Williams v. Chandler, 25 Tex. 4; Scoby v. Sweatt, 28 Tex. 713; Page v. Arnim, 29 Tex. 54. Appellant Woods certainly had no title, and his possession was as tenant under Poster as agent for the heirs of Hiram Riggs.

We are of the opinion that the trial court was not in error in his conclusions of law under the facts found, and the judgment entered was the only judgment that could properly have been rendered.

The case is affirmed.
      <grs>For other cases see same topic and KEY- NUMBER in all Key-Numbered Digests and Indexes