author: MeMEANS, J.

text:
    COHEN et al. v. CITY OF HOUSTON et al.
    (No. 6934.)
    (Court of Civil Appeals of Texas. Galveston.
    April 3, 1915.
    Rehearing Denied April 29, 1915.)
    1. Municipal Coepoeations <&wkey;29 — Annexation op Territory— Charter PROVISIONS— Validity.
    Acts 33d Leg. c. 147 (Vernon’s Say les’ Ann. Civ. St. 1914, arts. 1096a-1096i), adopted to put into effect the amendment to Const, art. 11, § 5, which authorized cities to adopt or amend their charters, but provided that no such charter should contain any provision inconsistent with the constitution of the state, or the general laws, which act gave to a city adopting its own charter under that amendment power to fix boundary limits, provide for the extension of boundary limits, and the annexation of additional territory, superseded in so far as such cities were concerned, Rev. St. 1911, art. 781, which requires a vote of the inhabitants of outlying territory before it can be annexed to a city, so that a provision of a city charter authorizing it to extend its boundaries so as to include adjacent territory without vote of the inhabitants of such territory, does not conflict with a general law.
    [Ed. Note. — Por other cases, see Municipal Corporations, Cent. Dig. §§ 66-75; Dee. Dig. <&wkey;>29.]
    2. Municipal Coepoeations <&wkey;-29 — Annexation op Teeeitoby — Submission to Vote —Necessity.
    The Legislature can authorize a city to annex additional territory without the consent and even against the remonstrance of the residents of such territory.
    [Ed. Note. — Por other cases, see Municipal Corporations, Cent. Dig. §§ 66-75; Dec. Dig. <&wkey;29.]
    3. Municipal Coepoeations <&wkey;29 — Annexation op Terbitoey — Objections—Indebtedness op City.
    It is no constitutional objection to the annexation of territory to a city, without the consent of the residents of such territory, that the territory is thereby subjected to taxation to discharge a pre-existing debt of the city.
    [Ed. Note. — Por - other cases, see Municipal Corporations, Cent. Dig. §§ 66-75; Dec. Dig. <&wkey;>29.]
    4. Municipal Coepoeations ®=^33 — De Pac-to Corporation — Attack.
    Where a city had extended its boundaries under its charter so as to include new territory, and had exercised governmental control over the new territory, it was a de facto municipal corporation throughout the entire territory, and the legality of the charter provisions for annexation cannot be attacked in a suit by residents in the annexed territory to restrain the city from issuing bonds.
    [Ed. Note. — Por other eases, see Municipal Corporations, Cent. Dig. §§ 81-97; Dec. Dig. <&wkey;>33.]
    5. Injunction <&wkey;24 —Bonds —Injunction Against Issuance — “Balance op Convenience.”
    Where the right of complainants to enjoin the issuance of city bonds, because the territory in which their property was located was illegally annexed to the city, is doubtful, the injunction will be denied on the doctrine of “balance of convenience,” which is the rule that where in a doubtful case, the granting of an injunction would cause greater harm to the defendant if he should prevail than its refusal would cause to the complainant if he should prevail, the injunction will be denied, and where in such doubtful case the refusal of an injunction will cause greater damage to the complainant if he were ultimately successful than the injunction would to the defendant if he should thereafter succeed, it will be granted, since in such case the complainants, if their property is not subject to taxation to pay the bonds, can resist the collection of the taxes therefor, while to grant the injunction would interfere with the construction of public improvements for the city.
    [Ed Note. — Por other cases, see Injunction, Gent. Dig. § 23; Dec. Dig. t&wkey;24.]
    6. Municipal Coepoeations <&wkey;993 — Bonds — Injunction Against Issuance — Misappropriation op Funds.
    The fact that a city had misappropriated money in the sinking fund created to pay previous bond issues, does not authorize an injunction against a subsequent bond issue until that money has been restored; especially where the complainants are not holders of the other bonds, since the principle of equity that a defaulting trustee can be restrained from further exercising the trust until he has made the default good, does not apply to municipal corporations exercising sovereign powers-, and that right can be enforced against a trustee only by the beneficiaries of the trust.
    [Ed. Note. — Por other cases, see Municipal Corporations, Cent. Dig. §§ 2158-2161; Dec. Dig. <&wkey;993.j
    7. Municipal Coepoeations <&wkey;929 — Bonds —Submission to Voters — Installments.
    A city can issue, in installments as they are needed for the work, bonds, though the question submitted to the voters was the issue of the total amount, where the intention to issue in installments was stated by the city officials in a public newspaper of wide circulation.
    LEd. Note. — Por other cases, see Municipal Corporations, Cent. Dig. § 1942; Dec. Dig. &wkey;>
    8. Municipal Coepoeations <&wkey;915 — Bonds —Amount—Limit op Taxing Power — Issuance in Installments.
    Such bonds are not invalidated because the total amount authorized was such that the city could not levy a tax sufficient to pay the interest thereon, and provide the required sinking-fund, if each installment thereof was not to be issued until the taxable valuations had increased sufficiently so that the interest and sinking fund could be provided for.
    [Ed. Note. — Por other cases, see Municipal Corporations, Cent. Dig. §§ 1906, 1909-1912; Dec. Dig. <@¿^915.]
    Appeal from District Court, Harris County ; John A. Read, Judge.
    Action by H. P. Cohen and others against the City of Houston and others. Prom an order of the district court refusing to grant a temporary injunction, plaintiffs appeal.
    Affirmed.
    Wilson, Dabney & King, of Houston, for appellants. J. C. Hutcheson, Jr., and Winston McMahon, both of Houston, for appel-lees.
   MeMEANS, J.

This is an appeal from an order of the district court of Harris county refusing to grant a temporary injunction upon the application of the plaintiffs, who are appellants here.

Plaintiffs sought a temporary injunction to restrain the city of Houston from holding an election to determine whether several issues of bonds aggregating in amount $5,-450,000 should be issued and from doing any other acts toward the issuance or sale of such bonds, or the collection of taxes on account of same, upon the following grounds:

(a) That the city of Houston did not have available taxable values in sufficient amount out of which it could make provision at the time of issuing of said bonds to levy a tax sufficient to pay the interest thereon, and to create a sinking fund of at least 2 per cent, per annum as required by law to redeem the same at maturity.

(b) That the city of Houston had outstanding bonds in the aggregate sum of $9,-855,000, and that at the time of issuing same provision had been lawfully made for a levy of a tax sufficient to pay the interest on said bonds each year, and to create a sinking fund of at least 2 per cent., as provided by law, for each year throughout the period of same; that of .the amount collected on account of the sinking fund of said outstanding bonds, only a minor portion thereof had been preserved, but that the larger portion of the amount collected as such sinking fund, to wit, $1,500,000, had been misapplied by the city of Houston to other purposes; that the city of Houston acted in the assessment, collection, and preservation of said sinking fund as a trustee, and in the execution of its trust it had no right to issue the $5,450,000 of new bonds unless and until the city had first replaced in the sinking fund the amount which it had misapplied.

(e) That it was not contemplated or intended by the city of Houston to make immediate public improvements of the magnitude as submitted to the people in said bond election, but it was the intention and purpose of the city and its officers to issue said bonds in installments through a period of five years, according as the said improvements might, in the opinion of the city officials, be needed, and the increased available taxable values in the city should warrant.

(d) That the present officials of the city of Houston had removed $200,000 in cash from the sinking fund and used same in the building of public improvements, and had placed in the sinking fund in lieu thereof the bonds of the city in the sum of $200,000, issued for public improvements, and which had never been sold in the market of the city of Houston, and which bonds mature at a date later than the bonds secured by the sinking fund which were removed; and that the city should be enjoined from the issuance of the new bonds until this $200,000 had been replaced in the sinking fund in money.

(e) That on the 15th day of October, 1913, the city of Houston • had undertaken to amend its charter, and to thereby extend its limits more than a mile in several directions, and including a resident population of some 5,000 people, without giving the persons in the territory thus made a part of the city by amendment a right to vote thereon; that the inclusion of said territory into the city was illegal and void, and there was no authority in the city to hold the election in said territory for the purpose of authorizing the issuance of bonds,' and that the city should be enjoined from issuing said bonds against said territory, or from collecting any city taxes off of property in said territory, or exercising any other right of government therein.

When the petition for injunction was presented to the court, the court indorsed thereon an order for notice to he issued to defendants to appear at the time and place stated in the order, to show cause why the injunction should not be granted as .prayed. The defendants on the date set for the hearing filed its answer, presenting its defenses, first presenting a demurrer to so much of the petition as sought to enjoin the holding of the election, which was sustained. After-wards, and before the hearing was had on the merits, the election was held and the proposition to issue the bonds was carried.

On November 2, 1914, a hearing on the merits was had upon the petition and answer, and affidavits and copies of documents, and thereafter the court entered judgment sustaining all of defendants’ contentions as to the right to issue the bonds, and denying plaintiffs any of the relief prayed, except that the defendants were commanded and enjoined:

“(1) That they do not hereafter invest the sinking fund of any bond issue of the city of Houston, in bonds maturing later than the bonds secured by such sinking fund.
“(2) That they proceed at once to prepare and keep proper books with separate and distinct accounts thereon, showing at all times the condition of the sinking fund of each specific bond issue, and showing all amounts paid out of the sinking fund of each specific bond issue, and all amounts added thereto from time to time.
“(3) That defendants and each of them be commanded and enjoined that hereafter the levy of the sinking fund taxes made in the annual levy of each year shall be made in such manner as to show specifically the portion 'or amount of the levy that is made for each outstanding bond issue for the city of Houston.”

Erom the judgment of the court refusing to enjoin the issuance of the bonds, the plaintiffs have appealed.

On the trial the following facts were established by the evidence and admission of the parties:

(a) The city of Houston is incorporated under and by virtue of a special act of the Legislature of Texas adopted in 1905. The boundaries of the city, as established by the act, are described as “four miles square, to be run with the cardinal points of the compass, of which the center of the courthouse square of Harris county, in the city of Houston shall be" the center,” except where such boundaries would conflict with the boundaries of the incorporated town of Houston Heights. The city, within the boundaries thus established, contains a population of near 100,000 persons and taxable values of $103,000,000.

On October 15, 1913, at an election beld among tbe qualified voters resident witbin tbe boundaries of tbe city, as established by tbe special act, tbe proposition was adopted to extend tbe boundaries of tbe city so as to include additional territory, having a population of some 5,000 persons and taxable values of about $6,000,000. At this election tbe qualified voters residing witbin the additional territory did not vote. Thereafter tbe city, seeking to avail itself of what is popularly known as tbe “Home Rule Amendment” to tbe Constitution of Texas, adopted November 6, 1912, and of tbe enabling act adopted by tbe Legislature, approved April 7, 1913, amended its charter, and by this amendment tbe boundaries of the city were so defined as to include said additional territory, and tbe city since has exercised tbe functions of government over the territory described in its charter as amended. At tbe time of tbe adoption of this amendment tbe city bad a bonded indebtedness of $9,855,000.

Tbe plaintiffs are 16 in number. Some of them reside and own taxable property in tbe added territory, others live witbin tbe original boundaries of the city, and own property situated in tbe added territory subject to taxation, and still others are nonresidents of Harris county, but own property in tbe added territory subject to taxation. None of them was shown to be an owner or bolder of any of tbe bonds of tbe city.

(b) Tbe city of Houston by ordinances duly passed on September 21, 1914, called an election to be beld on October 28, 1914, at which none but qualified voters and taxpayers residing within tbe boundaries of tbe city, as extended, should be allowed to vote, to pass upon tbe question of whether or not tbe city should be authorized to issue bonds for five separate purposes, viz.: (1) in tbe sum of $3,000,000, to be paid serially in one to forty years after issuance, tbe proceeds of said bonds, when sold, to be used for tbe purpose “of making permanent city improvements, to wit, wharves, docks, and slips, and other appliances and structures for facilitating or accommodating commerce or navigation on Buffalo Bayou Ship Channel”; (2) in tbe sum of $1,000,000, etc., tbe proceeds of same, when sold to be used for tbe purpose of making permanent city improvements, viz., drainage and sewerage in tbe city; (3) in tbe sum of $1,000,000, etc., tbe proceeds of same, when sold, to be used in making permanent city improvements, to wit, sanitary sewerage, disposal plants, with tbe necessary sanitary sewers and connections, and all other structures and appliances incident to a complete sanitary sewerage system in tbe city; (4) in tbe sum of $250,000, etc., tbe proceeds of same, when sold, to be used for tbe purpose of making permanent city improvements, viz., tbe perfecting of tbe public park system of tbe city, by providing tbe necessary enlargements and additions thereto, together with all public driveways, walks and other structures and appliances necessary to tbe public use and enjoyment thereof; and (5) in tbe sum of $200,000, etc., tbe proceeds of same, when sold, to be used for tbe purpose of making permanent city improvements, to wit, to build permanent public school buildings in said city. No question is made as to tbe regularity of the form of tbe ordinances calling the election, and there is therefore no necessity for copying them here. Tbe election was beld on tbe date for which it was called, and resulted in a large majority of tbe qualified voters who participated therein voting in favor of granting to tbe city tbe authority to issue tbe bonds in tbe several amounts, and to be used for tbe various purposes specified.

(c) The taxing power of tbe city of Houston is limited by its charter to a tax of $2 upon each $100 valuation of taxable property witbin its limits. At tbe time of the bolding of tbe election above mentioned it bad levied a tax of $1.15 on tbe $100 valuation for general purposes, and 70 cents on tbe $100 valuation for tbe purpose of paying tbe interest upon its outstanding bonded debt, amounting, as before stated, to $9,855,000, and for tbe purpose of accumulating a sinking fund to discharge such debt at maturity; and it is admitted that this tax of 70 cents on each $100 valuation of such property is sufficient for that purpose. This, then, left only a margin of 15 cents on each $100 valuation available to pay tbe interest upon, and to create a sinking fund for tbe redemption of, tbe proposed issues of bonds, at their maturity, which is admittedly not sufficient for that purpose. It is charged by tbe plaintiffs and admitted by tbe defendants that it iái not tbe purpose of tbe city to issue the entire bond issue of $5,450,000 at one time, but to issue tbe same in annual installments throughout a period of five years to follow, and to negotiate tbe same as the legislative discretion of tbe city council and tbe necessities of tbe city shall demand. Prior to tbe election above mentioned tbe mayor of Houston and tbe harbor board of said city, published in tbe Houston Post, a paper of wide circulation in said city, a statement with reference to tbe proposed bond issues, from which it appeared that it was the intention and purpose of tbe city to issue each of said sets of bonds in five annual installments, throughout tbe five years to follow, it being assumed that there would be a steady increase in property values sufficient to provide for tbe issuance of each of said installments, inasmuch as there bad been a similar increase in value in tbe five preceding years; and it was stated in said published statement that “we promise that tbe bonds will only be sold and tbe funds expended from year to year as further permanent municipal harbor improvements are made necessary by the business developed.” It is evident that the city intended to issue the bonds in installments as 'money should be needed to prosecute the work contemplated, and as the available taxable values would warrant, and that the purpose of the city was to not issue any installment of any set of the proposed! bonds unless at the time of issuance the available taxable values and the margin of taxing power were sufficient, as the basis of the levy of a tax sufficient to pay the interest on the bonds and create a lawful sinking fund for their redemption at maturity. Por the first annual installment the city proposed and intended to issue bonds, for the various purposes for which they were voted, in the total amount of $1,950,000, divided as follows: Wharf, etc., $500,000, drainage, etc., $500,000, sanitary sewers, etc., $500,000, school buildings, etc., $200,000, park improvements, etc., $250,000. A tax of 15 cents on each $100 valuation on the taxable property within the city, the total of which is $109,-000,000 (or of $103,000,000, if the property values in the added territory be excluded) would produce a sum more than sufficient to pay the interest upon this installment, and accumulate a sinking fund sufficient to redeem the bonds at maturity.

(d) At the time of the election to determine whether the city should be authorized to issue the bonds in question the city, as before stated, had a bonded indebtedness of $9,855,000, none of which has matured. There had been collected by taxation and passed into the sinking fund to redeem these bonds approximately the sum of $1,928,608.-33. Of this sum there had been diverted and applied to other uses by the city administration prior to that of Ben Campbell’s, the present administration, approximately the sum of $1,209,927.16, so that instead of there being on hand the full sum collected on account of the sinking fund, there remains in said fund in money and 'securities approximately only the sum of $628,681.17. During the present administration and subsequently to the amendment by the city of its charter, whereby the boundaries of the city were extended, the city of Houston, acting under its charter which authorized it to issue bonds in sums not exceeding $100,000 for any one purpose, without being authorized to do so by a vote of the property taxpayers of the city, issued bonds in the sum of $100,000 for the purpose of constructing an annex to the City Hall, and $100,000 for the construction of sewer extensions, and further acting under its charter, which authorized it to invest the sinking fund in the purchase of its bonds, provided that such bonds do not mature at a date later than the maturing of the bonds whose sinking fund was thus used, purchased both bond issues for the use and benefit of the sinking fund, paying in cash therefor, out of the moneys in this fund, the par value of said bonds and accrued interest, and with the money thus obtained constructed the City Hall annex and sewer extension. These bonds matured at a date later than the bonds, to pay which the sinking fund had been and is being collected, mature.

The city owns several hundred thousand dollars of free assets, which can be converted into cash and with which the depleted surplus fund can be in part restored.

(e) Prior to June 30, 1911, the cash and securities in the sinking fund were held in lump, and there had not been a separate levy and collection of the sinking fund for each respective issue of bonds, but since said date a separate levy and collection for each issue has been made, and a separate account kept.

The pleadings of the parties are quite voluminous, and for that reason we have not undertaken to set them out in this opinion, but we think it is sufficient to say that the facts adduced were properly admitted under the issues raised by them.

We shall first consider the contention of appellants to the effect that the extension of the city limits so as to include a larger area of outlying territory was illegal and void.

As has been hereinbefore shown, the special act of 1907, granting a charter to the city of Houston, defined the boundaries thereof as four miles square, of which the center of the courthouse square in Harris county, in the city of Houston, should be the center. At the time of the passage of the Special Act no power was lodged in any incorporated city in this state by general law by which it could, in any manner, extend its boundaries, except in the maimer prescribed by article 574 of chapter 10, title IS, Revised Statutes 1895 (article 781, Revised Statutes 1911) which, in part, reads as follows:

‘Whenever a majority of the inhabitants qualified to vote for members of the state Legislature of any territory adjoining the limits of any city, incorporated under or accepting- the provisions of this title, to the extent of one-half mile in width, shall vote in favor of becoming a part of said city, any three of them may make affidavit to the fact, to be filed before the mayor, who shall certify the same to the city council of said city. The said city council may by ordinance receive them as part of said city; from henceforth the territory so received shall be a part of said city.”

In 1912 an amendment of section 5, article 11, of the Constitution of Texas, commonly known as the “Home Rule Amendment,” was adopted, which reads as follows:

“Cities having more than 5,000 inhabitants may, by a majority vote of the qualified voters of said city, at an election held for that purpose, adopt or amend their charters, subject to such limitations as may be prescribed by the Legislature, and providing that no charter or any ordinance passed under’ said charter shall contain any provision inconsistent with the Constitution of the state, or of the general laws enacted by the Legislature of this state.”

Appellants contend that this provision of the Constitution, expressly prohibiting the insertion in a city charter of any provision inconsistent with the general laws, was a direct prohibition against the city of Houston to provide in its charter, by amendment, for the extension of its boundaries in any manner or over a greater area than as provided by general law; and that as the manner of the extension of boundaries and the area over which such boundaries might be so extended were prescribed by general law, viz., article 781, Revised Statutes of 1911, the attempted extension by the city in any other manner than that prescribed in said article, was illegal and void.

We shall not pause to determine whether the article quoted applies to the manner of extending the boundaries of cities incorporated by special act of the Legislature. It will be noted that title 18, Revised Statutes of 1895, relating to cities and towns, provides the method by which they may be incorporated, and prescribes their powers and the duties of its officers. It will be observed that the article quoted provides the method by which territory adjoining the limits of a city “incorporated under or accepting the provisions of this title,” may become a' part of such city. It may be that a city incorporated by a special act and not under the general laws, which should, by an amendment to its charter, enlarge its boundaries, should not be controlled by the provisions of article 574, which prescribes the manner in which a city incorporated under the provisions of title 18 may acquire additional territory, and that such an amendment would not be inconsistent with any general law of the state that is applicable to such a city. But this is a question that is not necessary for us to now decide. But if we should assume that article 574 was the only general law which prescribed the method by which a city of either class might extend its boundaries, then we think that any city, whether incorporated by special charter or under the general law, would be bound thereby, and that any provision of a city charter or of an ordinance which undertook to provide a different means of extending the city limits than that therein provided, would be inconsistent therewith, illegal and void. But is the article in question the only general law upon the subject? In 1913, before the adoption by the city of Houston of the amendment to its charter whereby its boundaries were extended, the Legislature adopted an enabling act to put into effect the above-quoted amendment to the Constitution (Acts 1913, p. 307), wherein it is provided:

“That by the provisions of this act it is contemplated to bestow upon any city adopting the charter or amendment thereunder, the full power of local self-government, and among the other powers that may be exercised by any such city the following are enumerated for greater certainty; * * * the power to fix boundary limits of said city, to provide for the extension of said boundary limits and the annexation of additional territory lying adjacent to said city, according to such rules as may be provided by said charter.”

This act was in full force at the time the city of Houston adopted the amendment to its charter extending its boundary limits and annexing the additional territory. Being a general law it superseded article 574 (article 781, R. S. 1911) as applied to cities which, under the home rule amendment, had adopted or amended its own charters, and the amendment to the charter by which the city limits were extended was not only not inconsistent “with the Constitution of the state or of the general laws enacted by the Legislature,” but in harmony with the general law above referred to as the “Enabling Act.”

Appellants contend that the adoption by the city of the amendment to its charter, whereby a large section of the adjoining territory was annexed, is, in its essence, the adoption of a charter and the erection of a new city, which consisted of Houston as formerly bounded and the new limits, and they contend, in this connection, that the charter could not be adopted under the terms of the Constitution, unless an election were held within the limits of the whole city, both the old limits and the new; and that the home rule enabling act of the Legislature made no provision for holding such an election. They argue, in this connection, that to erect and create a territory into a municipal corporation, without taking an election of the inhabitants of such territory to determine their consent, is an act which can be done only by the Legislature by virtue of its sovereign legislative authority, and that such authority cannot be delegated by the Legislature to third persons. 'We think it is sufficient to say, in answering this contention, that the Legislature not only may originally fix the limits of the corporation, but it may, in the absence of any constitutional restriction, authorize the annexation of additional territory, and this without the consent, and even against the remonstrance, of the majority of the persons residing in the corporation or in the annexed territory. 1 Dill. Mun. Corp. (5th Ed.) pp. 615, 617; Graham v. City of Greenville, 67 Tex. 62, 2 S. W. 742. In the case cited it is said that the power of the Legislature to extend the limits of a city so as to include adjoining territory is not restrained by the Constitution. It follows that as the Legislature can delegate its power to extend the corporate limits so as to annex additional territory without the consent, and even over the remonstrance, of a majority of persons living therein, and that as the Legislature has so delegated its power to the city of Houston, as we have heretofore endeavored to show, its act in so annexing the new territory is valid, whether it be regarded as extending the corporate boundaries only, or the erection or creation of a new city.

And it is no constitutional objection to the exercise of this power of compulsory annexation that the property thus brought within the corporate limits will be subject to taxation to discharge a pre-existing municipal indebtedness, since this is a matter which, in the absence of special constitutional restrictions, belongs to the Legislature to determine. 1 Dill. Mun. Corp. p. 617.

If we are wrong in all the conclusions heretofore stated, we think that the injunction was properly refused on another ground. It is shown by the testimony that after the amendment of the charter of the city of Houston, extending the boundaries, the city, acting as a city within its new boundaries, assumed and exercised governmental control over both the old and the new territory, performing its duties toward all the inhabitants thereof, and exacting of all the people therein that need of duty owing by a people to the local government; and if the limits were unlawfully extended and the added territory unlawfully annexed, nevertheless the corporation, extending throughout the entire territory, was a de facto municipal corporation, and being such was not subject to the attack made against it by private citizens, the plaintiffs in this case; for this can only be done by quo warranto in behalf of the state. In Graham v. Greenville, 67 Tex. 69, 2 S. W. 742, the Supreme Court expressly declared that whether the boundaries of a city had been extended improperly or not, the question could not be raised in a collateral proceeding, but could only be taken advantage of by the state in a direct proceeding. In City of El Paso v. Ruckman, 92 Tex. 89, 46 S. W. 25, our Supreme Court said:

“The rule is well established that when the creation of a public corporation, municipal, or quasi municipal, is authorized by statute and a corporation has been organized under the color of such authority, its corporate existence cannot be inquired into by the courts in a collateral proceeding. The validity of the incorporation can only be determined in a suit brought for that purpose in the name of the state or by some individual under authority of the state, who has a special interest which is affected by the existence of the corporation.”

In Parker v. Harris County Drainage District, 148 S. W. 351, in which the legality of the incorporation of a drainage district was attacked by individuals, 'this court, speaking through Associate Justicé Reese, said:

“It is a firmly established doctrine that when the law provides for the creation of such districts by the action of any public body, as the commissioners’ court in the present drainage law, the validity of such action in the creation and organization of such districts cannot be questioned except by a direct proceeding in quo warranto, at the suit of the state, for mere irregularities in, or failure to comply with, the prescribed procedure.” .

In Carthage v. Burton, 51 Tex. Civ. App. 195, 111 S. W. 440, this court gave the following as the correct rule:

“•Even if a municipality has been illegally constituted, the state alone can take advantage of the fact in a * * * proceeding instituted for the purpose of testing the validity of- its charter. When the question arises collaterally the courts will not, permit- its corporate character to be questioned, if it appear to be acting under color of law and recognized by the state as such.”

See, also, Gibbons v. Ross, 167 S. W. 21.

It seems clear to us that if the extension of the boundaries of the city of Houston, in the manner and under the authority shown, has not resulted in creating a de jure corporation coextensive with the boundaries defined in the amended charter, it has certainly created a de facto one, which is exercising all the functions of city government throughout such limits, with the consent and acquiescence of the state, and under its authority, and the question being political'and not one of property, a court of equity will not interfere at the instance of a citizen; for the matter is one to be determined, if at all, by the state in a suit of quo warranto and not otherwise.

And we think the action of. the court in refusing to grant the injunction prayed should be sustained upon a further ground, viz., upon the doctrine of “balance of convenience.” The doctrine is thus stated in 1 Joyce on Injunction, § 25:

“Where the rights of the parties are doubtful, the court applied to for an injunction should look at the balance of convenience, and act upon the consideration of the comparative inconvenience which may arise from granting or withholding the injunction. In this connection,” says the author, “it is said in a recent case: ‘In a doubtful case where the granting the injunction would, on the assumption that the defendant ultimately will prevail, cause greater detriment to him than would, on the contrary assumption, be suffered by the complainant, through its refusal, the injunction should usually be denied. But where, in a doubtful ease, the denial of the injunction would, on the assumption that the complainant will prevail, result in greater detriment to him than would, on the contrary assumption, be sustained by the defendant through its allowance, the injunction usually should be granted. The balance of convenience or hardship ordinarily is a factor of controlling importance in cases of substantial doubt existing at the time of granting or refusing a preliminary injunction.”

This rule is quoted with approval by this court in Jeff Chaison Townsite Co. v. McFaddin, Wiess & Kyle, 56 Tex. Civ. App. 611, 121 S. W. 720, and applied in Matagorda Canal Co. v. Markham Irr. Co., 154 S. W. 1176, and Houston Electric Co. v. Glen Park Co., 155 S. W. 965. Of course this rule should not be applied where the right to in-junctive relief is clear and the complainant has no adequate remedy except by restraining the act .complained of. It seems to us that the rule applies in full force under the facts of this case, for if it be a fact that the amendment to the charter extending the boundaries of.the city so.as to include complainants’ property and subject the same to the payment of city taxes, is unconstitutional and void as claimed by plaintiffs, or that such property is not for any reason subject to city taxation, the plaintiffs may successfully resist the payment thereof when payment is sought to be enforced (Parks v. West, 102 Tex. 11, 111 S. W. 726); whereas, to grant the injunction, at this time, a great city would be throttled in its activities and denied the right to make great public improvements, determined by the city and by a majority of its property taxpaying citizens to be necessary.

We may add that the question of taking property without due process of law is not legitimately involved in any of the questions presented upon this appeal.

We shall not prolong this opinion by an extended discussion of the other points presented by appellants, but shall state our conclusions as briefly as we may.

We think it clear that the appellants were not entitled to the injunction prayed to compel the city to restore to the sinking fund of its prior bond issue the amount that had been wrongfully applied to other uses, and to restrain the city from issuing the new bonds until said sum had been restored. The misapplication of money collected for a specific purpose to other uses was wrongful, and the misapplication of iti must be condemned. But the right of a city to issue bonds when authority to do so is conferred by the qualified voters, is a right given by law, and when the city, in the exercise of its discretion, has determined that the issuance of bonds is necessary, and when the voters have given permission for their issuance, the right and power is not destroyed by reason of some unauthorized act 'by the city in the matter of misapplying funds theretofore collected to redeem a prior issue of bonds. When these bonds mature the holders of them have the undoubted right, in a proper way, to compel the city to pay them, but the appellants are not suing as, nor are they shown to be, holders of said bonds, nor have any of said bonds matured. The principle of equity that would restrain a .defaulting trustee from the further discharge of his trust until he made his default good, or that would require his removal altogether, has no application to a municipal corporation exercising sovereign powers delegated to it by the Legislature, nor can it be invoked by others than the beneficiaries of the trust.

But the appellants contend that the court erred in not enjoinng the proposed issues of bonds because the questions submitted to the people in thq bond election were for the issue of the whole of each issue of bonds as units, either now or in the immediate future, no one issue of bonds being given precedence over another, and because, further, that such bonds cannot be lawfully issued for the reasons: (1) That the city has .not taxable values to authorize their issuance in accordance with the Constitution, and (2) that the city cannot issue a less amount of any particular class of bonds than that submitted to the people in the election, as no such improvement was submitted to the people and authorized 'by them.

The issues submitted to the-people in the election were of five different sets of bonds, aggregating $5,450,000 in amount. There was nothing in the questions submitted to the voters to indicate that the bonds would be issued in annual installments running for a period of five years; but such was the intention of the city authorities, and this intention was expressed by the publication thereof in a newspaper of wide circulation in the city of Houston, and must have been known to the people who, and at the time they, participated in the election; There is no question that the margin of taxing power of 15 cents of each $100 of taxable property in the city available to the city after making provision for the payment of the interest upon, and the creation of a sinking fund sufficient to redeem the existing bonds at maturity, is not sufficient as a 'basis for the issuance of the entire issue of the proposed bonds, and therefore under article 11, section 5 of the Constitution the full amount of the proposed bonds could not lawfully issue at one timé. But it is not questioned that there is a sufficient margin of taxable values and taxing power, as a basis for the issuance of the first installment of the bonds that the city proposed to issue. The question presented by this state of fact, then, is whether the city can lawfully issue the bonds in annual installments, running for a period of five years? We think the answer should be in the affirmative, provided that at the time of issuing each installment the city has available a margin of taxing power and property values sufficient to raise, by taxation, the sum of money necessary to pay the interest upon and to create a sinking fund of at least 2 per cent, for the redemption of such installment at maturity. In City of Austin v. Valle, 71 S. W. 414, the Austin Court of Civil Appeals, in an opinion written by Associate Justice Streetman, passed directly upon this question, and a writ of error was denied by the Supreme Court. We quote:

“We do not hold that the voters of a city could give their consent to the issue of an unlimited amount of bonds, and' that the council might at any time thereafter act on such consent and issue bonds up to the limit of the taxable values of the city. But we believe that when a large public enterprise is contemplated, which will require several years for its.completion, the people, by an election, may authorize their council to issue bonds for the purpose, and that the bonds need not be issued at one time, but as the demands of the work may require; and if the taxable values increase, so that the indebtedness actually outstanding against the city at no time exceeds the limit prescribed by law, that the bonds will be valid, although the bonds would have been excessive if all of them had been issued at the time the election was held. We-cannot see that such a course violates any provision of the Constitution or the charter. The consent of the voters has been obtained, it has been acted upon within a reasonable time, and, when the debt was created, the provision for its payment could be made, * * * as required-by the Constitution.” ■ -

The court, after holding that neither the holding of the election, nor the passing of the ordinance* providing ijor the. issuance of bonds, nor the preparation, signing and sealing of the bonds created any obligation or debt within the meaning of the Constitution, and that the debt was not in fact created until the bonds had been sold and delivered to the purchaser, further says:

“It is earnestly insisted that because, at the time the election was held, the city could not lawfully have issued the full amount of the bonds voted on, for this reason it was impossible for the voters to give their consent to the issue of the bonds. If it was not lawful for them to give their consent, it was because of the prohibition in the Constitution; but, as we have seen, this prohibition relates only to the time when the debt is created, and this is not done until the bonds are delivered as obligations against the city. We are of the opinion that, although the taxable values may not be sufficient at the time the election, is held, yet if, at the time the bonds actually become debts against the city, the taxable values are sufficient to pay the interest and provide the sinking fund, the bonds will be valid.”

In Wells v. City of Sioux Falls, 16 S. D. 547, 94 N. W. 425, the Supreme Court of South Dakota says:

“The contention that the defendants are without power to issue these bonds to the amount of $50,000, because the proposition submitted to the voters provided for ‘issuing bonds to the extent of $210,000,’ is untenable, especially as it appears that they intended to issue the remaining portion as they may be required by the contemplated municipal improvement. The mere statement of the contention is sufficient to show its fallacy. It would be contrary to the dictates of reason to hold that the city authorities are bound to sell more bonds than are needed for the intended purpose, or that they are required to dispose of all of them at one and the same time.”

We have carefully read the lengthy and interesting brief of the able counsel for appellants, but we cannot agree to any of their contentions to the extent of holding that the injunction prayed was improperly denied. We have concluded that the judgment refusing to grant the injunction should be affirmed, and it has been so ordered.

Affirmed.

PHEASANTS, C. J., not sitting.
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source: Caselaw Access Project

author: FLY, C. J.

license: Public Domain

text:
    MOORE et al. v. DECKER.
    (No. 5464.)
    (Court of Civil Appeals of Texas. San Antonio.
    April 21, 1915.
    Rehearing Denied May 26, 1915.)
    1. Appeal and Error <&wkey;544 — Questions Presented eor Review — Bill oe Exceptions — Necessity.
    In the absence of bills of exceptions, assignments complaining of errors in the charge, which did not state what the charge was, must be overruled.
    [Ed. Note. — Eor other cases, see Appeal and Error, Cent. Dig. §§ 2412-2415, 2417-2420, 2422-2426, 2428, 2478, 2479; Dec. Dig. &wkey; 544.]
    2. Mines and Minerals <&wkey;78 — Oil Leases— Judgment.
    Where defendant disclaimed any intention of interfering with plaintiffs’ rights in wells opened, and plaintiffs made no effort to have the jury determine how much land was necessary for their operation, they cannot complain of a judgment which'merely awarded so much land as was necessary.
    [Ed. Note. — For other cases, see Mines and Minerals, Cent. Dig. §§ 205-207; Dec. Dig. &wkey;78.]
    3. Evidence &wkey;>461 — Parol Evidence — Written Instruments.
    Where an oil lease merely gave plaintiffs such land as was necessary to operate wells, they cannot show a parol agreement that for each well opened they should be entitled to an acre of land.
    [Ed. Note. — For other cases, see Evidence, Cent. Dig. §§ 2129-2133; Dec. Dig. &wkey;461.]
    4. Mines and Minerals <&wkey;77 — Oil Leases —Defenses.
    Where plaintiffs sued to prevent defendant from interfering with their possession of oil land, they are not entitled to show that defendant, who had a lease from the owner, had forfeited his rights; that being a matter concerning the owner alone.
    [Ed. Note. — For other cases, see Mines and Minerals, Cent. Dig. § 204; Dec. Dig. &wkey;77.]
    Appeal from District Court, Harris County; Chas. E. Ashe, Judge.
    Action by J. B. Moore and others against I-I. R. Decker. From a judgment for defendant, plaintiffs appeal.
    Affirmed.
    R. W. Franklin and Jno. T. Garrison, both of Houston, for appellants. PI. F. Ring and Carothers & Brown, all of Houston, for ap-pellee.
   FLY, C. J.

Appellants, J. B. Moore, W. P. Melnnemey, Ed. Spaulding, A. Stelzig, and James Antil, sued appellee, H. R. Decker, for the possession of a certain lot, No. 13 or 14, alleged to have been leased by them for obtaining oil, and for an injunction to restrain appellee from going upon said land and boring wells, or in any wise interfering with plaintiffs in the operation of their wells upon said property. Fifty pages of the transcript are devoted to pleadings, about 14 typewritten pages being consumed by the third amended petition in setting up the cause, although it seems to be a simple suit to maintain possession and use of a parcel of land, which appellants claim under a lease from R. W. Franklin, who was the receiver appointed in a certain suit between the owners and one Herman, to W. J. Ker-win and W. P. Mclnncrney, said lease including lots 13, 14, 15, and 16 in the Dunman-Conway disputed strip in the John Strange survey in Harris county, lying south of Jordan’s gully. Appellee answered, setting up the terms of the receiver’s lease and claiming a forfeiture by appellants of the lease, except as to two wells known as the “Queen Bee Wells,” by a failure to operate the wells on the land as they bound themselves to do in the lease contract, and alleging that ap-pellee was entitled to tine possession of the land by virtue of a lease of the same executed to him by the owners of the land on May 15, 1909. Appellee also filed a cross-action against the Texas Company, but, as it was dismissed from the suit, further mention of the cross-action is unnecessary. The jury, under instructions of the court, returned a verdict for appellee, and on that verdict judgment was rendered that appellants take nothing, and that appellee’s title to all the land described in the lease be recognized, except the two wells known as the “Queen Bee Wells,” and that all clouds on the title by reason of the claims of appellants be removed. The judgment further recites:

“The defendant, H. R. Decker, having admitted by his pleadings that under the terms of the Kerwin-Mclnnerney lease the lessees therein and their assigns are entitled to the use of such space as is necessary to operate the two wells known as the ‘Queen Bee Wells,’ and having disclaimed any intention to interfere with said lessees or their assigns in the use of such space as is necessary to operate said two Queen Bee wells, it is now considered, adjudged, and ordered by the court that the right of the said Kerwin and Mclnnerney and their assigns to the use of such space as is necessary to operate said two Queen Bee wells be, and the same is hereby, recognized.”

Appellants admitted that they had forfeited the lease contract, except as to the lot on which they had the two Queen Bee wells, and only claimed those wells and the ground about them necessary for their proper operation. The court gave them all they claimed, as clearly appears from the excerpt from the judgment hereinbefore copied. Appellants claimed that one acre was required to properly operate the two wells, and the court did not peremptorily instruct the jury, as stated by appellants, that they “were not entitled to one acre of land for the successful operation of the wells bored upon said acre.” Appellants were decreed all the space necessary to operate the wells, whether the same be more or less than an acre. The judgment followed the terms of the lease, and gave appellants all they had any right to. No objection was urged to the charge at the time it was given, nor a bill of exceptions to the same reserved. Vernon-Sayles Stats, art. 1971.

There was no evidence that the receiver had agreed to permit an acre to be held for the operation of any well or wells that might be secured on the acre, and the evidence was not sufficient to show that an acre would be required, and there was no issue to go to the jury on that matter. The lease contract does not make any such allowance or concession. It merely gave the “necessary space to operate them.” The judgment protected that right.

Whatever appellee may have done pri- or to the trial to prevent appellants from operating the wells, he disclaimed any intention to further interfere, and judgment was rendered protecting appellants in the use of the wells. The appellants made no-effort to have the jury state how much land was necessary for the proper operation of the wells, and made no objections whatever to the instructions of the court, until a motion for new trial was filed. The first, second, third, fourth, and fifth assignments of error are overruled.

The court very properly refused testimony as to what the understanding was between the receiver and appellants as to each well on an acre holding the whole acre. It was a plain attempt to vary the terms of a written contract which was plain in its terms. Through their sixth assignment of error appellants claim that they sought to prove by Moore that at the time of, and sub-, sequent to, the execution of the lease it was agreed and understood that the boring of a well upon an acre would hold it. A reference to the bill of exceptions does not sustain the assignment of error, for the qualification by the judge shows that evidence of an agreement with the receiver was not sought, but merely “what understanding was placed upon that by the landowners or by the receiver.”

The seventh assignment is overruled. The testimony of Kirlicks would have varied the terms of the written contract, and was properly rejected by the court. The contract provided for land necessary for the operation of a well, the oral testimony sought to show that the receiver had agreed that a whole acre would be set apart to each well. There was no allegation that a whole acre was necessary to the operation of one or two wells.

The question of appellee’s forfeiture of his lease was not an issue in the case, and it was a matter that concerned the owners alone. It was a matter that the court properly refused to permit to be injected into the ease by appellants. Had the evidence been admitted it would not, under the terms of appellee’s lease, have shown a forfeiture on his part.

The contract of lease in this case was plain and unambiguous in its terms, and did not require the test of the understanding of the parties to it to make it clear. If it had been desired to recite that one well would hold the acre of land about it, it could have been easily inserted in the contract. That was not desired, however, for the contract provided that when a forfeiture was taken it should be “as to all lands embraced in this lease not taken up by producing wells and the necessary space to operate same.”

The judgment is affirmed.

On Motion for Rehearing.

Appellants assert that this court erred in overruling the first, second, third, fourth, and fifth assignments of error on the ground that appellants did not make objections or take bills of exception to the charge of the court. This court made no such ruling, but merely stated that no objection was urged to the charge at the time it was given, nor a bill of exceptions reserved. This court has not made itself a party to the conflict among several of the Courts of Civil Appeals on the practice that should prevail as to taking bills of exception when a review is sought of the action of the trial court in giving peremptory instructions. What the charge of the court was, however, does not appear in any statement under either of the first three assignments of error, and this court could only ascertain what was in the charge by searching the record. This duty is not imposed on a court. Whatever the charge may have been, no objection was made to it, and no charges were asked by appellants. No objection to the charge was made until an amended motion for new trial was filed two weeks after the charge was given.

The fourth assignment of error complains of recitals in the judgment, but fails in the statement to show what the recitals were in the judgment. However, it may be said that appellee did disclaim any intention of interfering with appellants in the use of such space as is necessary to operate his wells, and there could be no harm in reciting that disclaimer in the judgment and basing a judgment for appellants thereon. If appellee did not make the disclaimer, he, and not appellants, has cause to complain.

The fifth assignment of error complains that the judgment is improper in that it does not adjudicate as to how much was necessary for the proper operation of the wells. It was not alleged in the petition that an acre of land was necessary for the operation of the wells, but merely that appellee had agreed that an acre was necessary. There was no evidence of an agreement, as before stated, that an acre of land should go with the wells. The evidence did not show that an acre was necessary.

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


author: HALL, J.

text:
    WELLS FARGO & CO.’S EXPRESS v. MITCHELL.
    (No. 615.)

    (Court of Civil Appeals of Texas. Amarillo.
    June 6, 1914.)
    Courts <@==65 — Teems of Court — County Court.
    Under an order of the commissioners’ court authorized by Const, art. 5, § 29, stating when the terms of the county court for civil and probate business shall begin, and providing that they may continue till the succeeding term begins, and stating when' its terms for criminal business shall begin, and providing that they may continue till the succeeding term, a term for civil and probate business ends, as regards time for filing bond on appeal from a judgment rendered at such term, when the next term for criminal business begins.
    [Ed. Note. — For other cases, see Courts, Cent. Dig. §§ 230-246; Dec. Dig. <S=65.]
    Huff, C. J., dissenting.
    Appeal from Cooke County Court; R. V. Bell, Judge.
    On rehearing.
    Reversed, and appeal dismissed.
    For former opinion, see 165 S. W. 139.
    Stuart, Bell & Moore, of Gainesville (H. L. Stuart, of Oklahoma City, Okl., of counsel), for appellant. Robt. E. Cofer, of Austin, for appellee.

       Writ of error dismissed.

   HALL, J.

At a former day of this term we overruled the appellee’s motion to dismiss this appeal, and the case was considered upon its merits. On motion for rehearing ap-pellee has called to our attention several authorities not presented in his original motion, and, after carefully reviewing them, together with the record, we have concluded that we were in error in overruling the motion to dismiss, and we therefore grant the rehearing, withdraw our opinion upon the merits, and dismiss the appeal.

The order passed by the commissioners’ court of Cooke county on February 20, 1913, and set out in the opinion of this court in 165 S. W. 139, is substantially a reproduction of the order of the commissioners’ court which was considered and held to be valid in Mo. Pac. Ry. Co. v. Graves, 2 Willson, Civ. Cas. Ct. App. § 676, and the Graves Case is approved by the Supreme Court in Hughes v. Doyle, 91 Tex. 421, 44 S. W. 65. In the last-named case Wilson v. State, 15 Tex. App. 150, is cited with approval, in which it is held that article 5, § 29, of the state Constitution authorizes the commissioners’ court to provide for special terms of the county court for the transaction of criminal business alone. Under these authorities the term for criminal business in Cooke county began, according to the order of the commissioners’ court, on May 5, 1913, and the April term for civil and probate business must be held to have been ended on that date, instead of on May 10th, as shown by the record. It follows, therefore, that the appeal bond filed on May 30th was too late, and confers no jurisdiction upon this court.

Our opinion reversing the judgment and remanding the cause for a new trial is therefore withdrawn and set aside, and the appeal is dismissed.

HUFF, C. J., dissents.
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author: HUFF, C. J.

text:
    LE MASTER v. HAILEY et al.
    (No. 765.)
    (Court of Civil Appeals of Texas. Amarillo.
    April 10, 1915.
    Rehearing Denied May 8, 1915.)
    1. Corporations <@=^121 — Sale op Stock — False Representations — Sufficiency of Evidence.
    In an action to cancel a contract for the purchase of corporate stock and a note given for the price, evidence held sufficient to show that defendant, in procuring the note and contract, made false representations as to the amount of the corporation’s capital stock and his right to sell it.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. §§ 504, 505; Dec. Dig. <&=>121.]
    2. Corporations ¡@=>121 — Sale op Stock — Consideration — Sufficiency of Evidence.
    In an action to cancel a contract for the purchase of stock, and a note given for the price, evidence held sufficient to show that such note and contract were unsupported by consideration.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. §§ 504, .505; Dec. Dig. ¡§=121.]
    3. Evidence ¡@=3434 — Parol Evidence Affecting Writings — Misrepresentations.
    In an action to cancel a contract for the purchase of stock and a note given for the price, the fact that the contract recited that defendant was selling stock in a life insurance company, which was a $1,000,000 corporation, did not render inadmissible, as varying the writing, parol evidence that such was not the case.
    [Ed. Note. — For other cases, see Evidence, Cent. Dig. §§ 2005-2020; Dec. Dig. ¡@=>434.]
    4. Appeal and Error ¡@=879 — Review.
    Where a party defendant assigned no error and appealed neither against plaintiff, who secured judgment, nor its codefendant, the appellate court could not review the j'udgment against it.
    [Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. §§ 3581-35S3; Dec. Dig. <§= 879.]
    Error from District Court, Cottle County; Jo. A. P. Dickson, Judge.
    Action by J. R. Hailey against Mike C. Le Master and others. Judgment for plaintiff, and the named defendant brings error.
    Affirmed.
    Cooper & Merrill, of Houston, and Lump-kin & Harrington, of Amarillo, for plaintiif in error. J. M. Hawkins and J. M. Whatley, both of Paducah, G. E. Hamilton, of Matador, and M. M. Hankins, of Quanah (John W. Yeale, of .Amarillo, of counsel), for defendants in error.
   HUFF, C. J.

This action was brought by defendant in error J. R. Hailey against the plaintiff in error, Mike C. Le Master, the Quanah National Bank, Citizens’ National Bank, Lone Star Life Insurance Company, and the First State Bank of Cottle County. This action was originally instituted by the defendant in error Hailey against the various parties to cancel a note and a certain contract to buy stock in the Lone Star Life Insurance Company, alleging a failure of consideration for the note and in the contract and fraudulent representations in obtaining the same.

The various parties answered, and, upon trial before the court without a jury, a judgment was rendered in favor of Hailey, canceling the note and the contract to purchase stock in the insurance company, and that the Citizens’ National Bank take nothing on its cross-petition over against Hailey, but rendered judgment in favor of the Citizens’ National Bank against Mike C. Le Master. for the amount of the note, with interest and attorneys’ fees.

The-State National Bank at Paducah was dismissed by Hailey, and judgment was also rendered against the Lone Star Insurance Company in favor of Hailey to cancel the note and contract above mentioned. Mike C. Le Master alone sued out a writ to this court, making Hailey, the Citizens’ National Bank of Quanah, and the Lone Star Insurance Company, and the First State Bank of Cottle County defendants. Le Master alone assigns error in this court.

The facts will sufficiently present the issues without a further statement of the pleadings. The court was authorized to find that Mike C. Le Master on the 25th day of March, 1910, approached Hailey to sell him stoek in the Lone Star Life Insurance Company; that he represented himself to be the agent of said company and authorized to sell such stock. He represented that he was selling stock in a corporation of $1,000,000 capital stock, and did not tell him at that time that the capital stock had been reduced to $100,000. The plaintiff Hailey also testified:

“I am the plaintiff in this case. I know the defendant Mike C. Le Master. I met Mr. Le Master in Paducah. Le Master represented to me that he was agent for the Lone Star Life Insurance Company, and that said company was being organized as a $1,000,000 corporation, and that all the stock had been sold, except a small amount he had. I relied on the statement of Mr. Le Master, in subscribing to the stock. I was to receive the stock from the company. Mr. Le Master told me the stock would be delivered about the 1st of October. I have never received the stock. I gave my note for $l-,000, and signed a subscription note for $1,500. I have never offered to pay the remaining $1,500, and the stock has never been transferred to me. There was no consideration for the $1,000 note I signed. At the time suit was filed, I knew I could not get the stock. Mr. Hawkins has a letter from the company, stating that Le Master was not the agent. I was ready at any time the stock was tendered. I am now ready to pay the $1,500 and take the stock, if I could get it according to contract. The Lone Star Life Insurance Company nor any one else ever notified me that all the capital stock was paid and my stock was ready. The Lone Star Life Insurance Company, Mike C. Le Master, L. H. Morgan & Co., or the First State Bank never tendered me any original stock in the $1,000,000 corporation, and no one ever tendered me any kind of stock until after the suit was brought. I never received any notice that the capital stock of the Lone Star Insurance Company would be reduced from $1,-000,000 to $100,000. The first knowledge I ever had that the company did not recognize Le Master as their agent was from Mr. Spradley. The first written knowledge was a letter to ■Whatley & Hawkins. The letter stated that my subscription was rejected.”

At that time, from the representation so made to Hailey by Le Master and his associate, he executed a note, made .payable to himself or order, and indorsed this note to Le Master, and also entered into a written contract wherein it is recited that L. H. Morgan & Co., of Dallas, Tex, are promoting the organization of a life insurance company, which has been chartered under the laws of the state of Texas, under the name of the Lone Star Life Insurance Company, with an authorized capital stock of $1,000,-000, and a paid-up capital of at least $100,-000, and a net surplus of $50,000 paid up and free from promoting and organization expenses. He subscribed for 100 one-tenth shares, of a par value of $10 each, of the capital stock of said insurance company, reciting that he agreed with the company and with L. H. Morgan to pay the sum of $2,500 as follows: The sum of $1,500 to be paid in money or in securities, satisfactory to the insurance department of Texas, to said Lone Star Life Insurance Company, at any time after October 1, 1914, reciting that he would pay immediately upon notice from Morgan & Co. that the stock had been subscribed in good faith to amounts and rates netting the company at least $100,000 and at least $50,-000 of surplus, in the aggregate when paid. The remaining $1,000 he agreed to pay and does pay concurrently with this subscription to the said L. H. Morgan & Co. in consideration that their agreement theretofore recited and in lieu of any other further contribution to the expense of promoting and incorporating said company.

Le Master, the evidence shows, was acting for Morgan & Co. in; the sale of the stock. The facts show that in the early part of 1909 Morgan & Co. purported to be representing and had their contract with certain Dallas parties who were to organize and incorporate under the name specified. The facts from the officers of that company establish that Morgan & Co. proceeded to represent or to sell stock in the proposed organization company, and that the officers having learned through outside sources that they were charging an unreasonable sum for promotion, and having failed also to get the man whom they had selected as president to take the position, they decided to abandon the matter; and the evidence is sufficient to show that all the contracts so taken were destroyed, and the checks that had been paid were returned to the parties giving them, by the proposed incorporators of the insurance company, and also turned back the charter or organization up to that time to Morgan & Co. It further appears that after this Morgan & Co., during the year 1909, by, as the witnesses say. some bogus proceedings, secured the issuance of a charter for $1,000,000 by issuing stock to certain directors, and that this organization was illegal and invalid, but that Morgan & Co., still pretending to represent the insurance company, proceeded to sell its stock in the corporation, using the name of the present holders of the corporation stock and officers thereof. Again hearing of this fact, they called in Morgan & Co. before them on the 5th day of March, 1910, and directed them to sell no more stock, and objected to their name being used as it had been, destroying various contracts of subscription, and returning the checks of parties who had subscribed, and decided that at that meeting they would organize a corporation with $100,000 capital stock, with $50,000 surplus, and so notified Morgan & Co., and'that there was that amount already subscribed, and there was no more stock to sell. Le Master was at this meeting, and, while he states that he did not hear all that was said, the officers of the company state they think he was present and heard the declaration. After this the insurance company was in fact organized and a charter issued for $100,-000 in October, 1910; but after March 5, 1910, and on the 25th day of March, as above stated, Le Master purported to sell this stock to Hailey. The officers of the insurance company disclaim any responsibility for his act, and declare that he or Morgan had no authority to sell the stock, and they were so instructed not to sell on the 5th of March, as the stock had then all been subscribed and there was none to sell. It appears that, when knowledge was brought to the insurance company of the transaction, they disclaimed any interest in the contract and notified Hailey, together with others, who had been induced to subscribe for stock under the same direction, that there was no stock to issue; that it had all previous thereto been subscribed. There is some testimony in this case that after the suit was filed, the bank holding the note and the contract had stock which had been issued to Hailey which it was instructed to deliver upon payment of the notes and contract. The stock itself, as we understand, is not in evidence, and we do not know just when it was issued, but the fact's warrant the inference that it was issued before the company was reorganized for $100,000. Hailey relied,- upon the representations made by Le Master and upon representations by Ledbetter in his letter. He was willing to purchase the stock if the corporation had been in a situation to issue it, and would have done so and was ready and willing to do so; that he was induced to give the note and execute the contract upon the representations above set out. Hailey instituted this suit against the several parties on the 3d day of December, 1910, and citation was served on them.

J. E. Ledbetter was president of the Quanah National Bank and wrote a letter to whom it may concern, recommending Le Master and his associate, and recommending the Lone Star Insurance Company as being a safe and sound investment. After receiving this letter and showing it to Hailey, together with his representations, he induced Hailey to sign the note and execute the contract above mentioned. After Le Master procured the $1,000 .note, which represented the promotion charges mentioned in the contract, he returned from Paducah to Quanah and negotiated with J. E. Ledbetter, the president of the Quanah National Bank on March 30, 1910, the sale of this note, and who gave him therefor two deposit slips, for $500 each, representing the amount of the note, which deposit slips were made payable ta the order of himself, with the agreement, however, that the money so deposited should not be paid until after the note executed by Hailey became due, Le Blaster statingi to Ledbetter that he had been to Paducah selling insurance, and Ledbetter substantially admits that, while he did not actually know that the note had been given for stock to Le Blaster, he thought it had been so obtained. After the institution of this suit by Hailey against the Quanah National Bank, the Quanah National Bank went into liquidation, and the Citizens’ National Bank came into possession of the note with other assets; and, after that bank came into possession of the assets, they paid off the deposit slips above mentioned. These certificates were paid November 29, 1910, and January 17, 1911. Further than above recited, there is no evidence that we find in the record showing that the Citizens’ National Bank paid value for the note. The certificates of deposit on their face do not purport to represent payment for the note. The evidence does not show, as we understand it, that the Citizens’ National Bank had actual knowledge of the pendency of the suit at the time they purchased the assets of the bank, or had actual knowledge of Hailey’s contention that a fraud had been perpetrated on him in procuring the note.

Le Blaster testifies also that he had an arrangement with Biorgan & Co., and was so instructed by Morgan & Co., that they would not take the notes of parties contracting to purchase stock in the insurance company, but that he must either send the cash, which represented the amount paid for promotion of the company, or send a deposit slip, and he states that he, in accordance with instructions, sent these deposit slips to Morgan & Co. There is no evidence in the record, that we find, that Morgan & Co. actually collected the money on these slips, or that the Citizens’ National Bank actually paid it to Morgan. The indorsements on the deposit slips show that one of them was paid through clearing house to Farmers’ State Bank of Quanah and the other paid the Farmers’ & Merchants’ National Bank of Ft. Worth. The note executed by Hailey is dated March 25, 1910, payable to himself or order, and indorsed by him to Bíike C. Le Master, who indorsed it to the Quanah National Bank, due December 1, 1910, bearing interest at the rate of 6 per cent, from date. We think the evidence in this case is amply sufficient to show that Le Master, in procuring the note and the contract, falsely represented the corporation that he was then seeking to organize, as to the amount of its capital stock, and also his right to sell the stock therein. It clearly appears from the evidence, with substantially but little contradiction, if any, that Le Master knew that he was not authorized to sell the stock in the corporation which was agreed to be organized on Blarch 5, 1910; in fact, he had been instructed that all the stock in the proposed corporation was subscribed, and that he had nothing to sell. The evidence is not only sufficient to show he made misrepresentations, but he procured the note and the contract without any consideration therefor, and for that reason the facts, we think, are amply sufficient to sustain the judgment in so far as Le Master is concerned, and the assignments of plaintiff in error, to the effect that defendant in error cannot dispute the recitations in the written contract, are not well taken. The representations made in order to induce another to enter into a contract are admissible to show that a fraud was practiced upon the maker of the contract in order to induce him to sign the same. The mere fact that the contract recited that he was selling stock in the Lone Star Life Insurance Company did not make that fact true; and the fact that the company was a $1,000,000 corporation instead of $100,000 corporation did not make that fact true. It was in its nature a misrepresentation of the fact. Le Blaster had no right to sell the stock, but was expressly forbidden to do so, and we think the fraud is clearly shown in inducing defendant in error to enter into the contract. The authorities and the principle upon which this holding is made will be found in U. S. Gypsum Co. v. Shields, 106 S. W. 724, and 101 Tex. 473, 108 S. W. 1165. This court, in Commonwealth, etc., v. Cator, 175 S. W. 1074, and other authorities which it is not thought necessary to cite, follow the above cases.

The judgment, we think, should be affirmed, canceling the note and contract as to the insurance company and the bank.

The Citizens’ National Bank of Quanah is not here by assignment of error or by appeal, and has not filed assignments or appeal against its codefendant, as required by the rules and authorities. Such being its condition, we are not authorized to consider the question as to whether or not the court was in error in rendering judgment against it canceling the note and contract. Gillespie v. Crawford, 42 S. W. 625; Hunter v. Herndon, 12 Tex. Civ. App. 637, 35 S. W. 80. There are several interesting and delicate questions presented by the record with reference to its right to recover on its cross-action against Hailey; but, as the record now stands, we do not feel authorized in disturbing the judgment of the court below as to the bank.

It is assigned by Le Blaster also that the bank was not entitled to a judgment over against him on his indorsement. This assignment is overruled. We think the au-tib.oriti.es amply sustain the action of tlie court in giving judgment in favor of the hank over against Le Master.

Having found the facts as above, and the record in the condition in which it is, we believe the case should be affirmed; and it is accordingly so ordered.
      ©=For other oases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes


author: CONNER, C. J.

text:
    CISCO OIL MILL v. SHEPHERD.
    (No. 8170.)
    (Court of Civil Appeals of Texas. Ft. Worth.
    April 24, 1915.)
    A-ppm at. and Error &wkey;>494i — Record—Rendition of Final Judgment.
    Under Rev. St. 1911, art. 2078, authorizing appeals from final judgments of the county court, the transcript on appeal from the county court must show rendition of final judgment, or the appeal must be dismissed.
    [Ifld. Note. — Eor other cases, see Appeal and Error, Cent. Dig. §§ 2285, 2280; Dec. Dig. <S&wkey; 494.]
    Appeal from Callahan County Court; L. L. Blackburn, Special Judge.
    Action by the Cisco Oil Mill against M. A. Shepherd. From a judgment granting insufficient relief, plaintiff appeals.
    Dismissed.
    F. S. Bell, of Baird, for appellant. Dallas Scarborough, of Abilene, for appellee.
   CONNER, C. J.

The record in this ease shows that on the 10th day of February, 1912, the Cisco Oil Mill recovered a judgment against M. A. Shepherd for the sum of $107.70, besides costs of suit, from which the said Shepherd duly appealed to the county court of Callahan county by giving a bond, with J. N. Shepherd and W. O. Lasley thereon as sureties, as required by statute in such cases, and conditioned “that the appellant shall prosecute an appeal to effect and shall pay off and satisfy the judgment which may be rendered against him on such appeal.” See Revised Statutes 1911, art. 2393. Before the trial in the county court, however, to wit, on the 7th day of July, 1913, M. A. Shepherd took the benefit of the bankrupt act, and pleaded that he was duly discharged, as required by law, by the United States District Court having jurisdiction thereof; the debt in controversy having been duly scheduled as among the liabilities of the bankrupt. The record further shows conclusions of fact on the part of the county court, an order overruling a motion for new trial by appellant, and the prosecution of an appeal to this court, and it is here insisted that the county court erred in failing to render a judgment against the sureties on the appeal bond given in the justice court, for the reason that section 16 of the bankrupt act provides that;

“The liability of a person who is a codebtor with, or guarantor or in any manner a surety for, a bankrupt shall not be altered by the discharge of such bankrupt.” Act July 1, 1898, c. 541, 30 Stat. 550, 1 Fed. Stat. Ann. p. 578 (U. S. Comp. St. 1913, § 9600).

The record, however, fails to disclose any judgment by the county court either for or against said sureties, or otherwise disposing of the issues on their merits. It is from final judgments alone of the county court, with exceptions not necessary to here notice, to which our appellate jurisdiction extends. See Revised Statutes 1911, art. 2078. It is to be inferred, doubtless, that a final judgment was, in fact, rendered, but inferences are not to' be indulged.' The transcript should contain the evidence required by law; otherwise the appeal must be dismissed. See H. & T. C. Ry. Co. v. Parker, 126 S. W. 942; Id., 104 Tex. 162, 135 S. W. 369.

It is accordingly ordered that the appeal in this case be ■ dismissed.