author: SHARP, J. CUBETON, C. J.

text:
    LENNOX et al. v. TEXAS COTTON CO-OP. ASS’N.
    No. 1605—5997.
    Commission of Appeals of Texas, Section A.
    Dec. 22, 1932.
    Lennox & Lennox, of Clarksville, and Wm. Hodges and King, Mahaffey, Wheeler & Bry-son, all of Texarkana, for plaintiffs in error.
    C. K. Bullard, of Dallas, Robbins & Bailey, of Clarksville, and Long & Wortham, of Paris, for defendant in error.
   SHARP, J.

This cause has been pending in the courts many years and prior to this appeal has been before the appellate courts many times. Texas Farm Bureau Cotton Ass’n v. Lennox (Tex. Civ. App.) 257 S. W. 935; Id. (Civ. App.) 283 S. W. 619; Id. (Civ. App.) 296 S. W. 328; Id. (Civ. App.) 16 S.W.(2d) 413. For convenience, except as may be stated in this opinion, we will refer to Lennox & Lennox as plaintiffs and the Texas Cotton Co-Operative Association as defendant, as they were designated in the trial court. The judgment from which the instant appeal was prosecuted was based on the plaintiffs’ second amended original petition filed May 22, 1930, the defendant’s fifth amended original answer and cross-bill filed on May 22, 1930, plaintiffs’ second amended supplemental petition filed on May 23, 1930, and the defendant’s first amended third supplemental answer filed on May 23, 1930.

The trial court instructed the jury to re-' turn a verdict in defendant’s favor on its cross-action for $37,783.17 as liquidated damages it was entitled to recover by virtue of a written marketing contract, for $782.99 as expenses it had incurred and for $7,500 as attorney’s fees; the court further instructed the jury to find against the defendant as to its cross-action for a specific performance of the contract; and then submitted to thet jury special issues in response to which they made certain findings described in the opinion of the Court of Civil Appeals from which we quote as follows (37 S.W.(2d) 331, 335):

“(1) That the oral contract was niade as alleged by appellees. (2) That appellant violated the provisions of said contract when it sold the 1,095 bales of cotton as it did. (3) That the $101,107.54 for which appellant claimed it sold the 1,095 bales was a less sum than it would have received therefor if it had exercised proper care and complied with the termsl of the contract in selling the cdt-ton. (4) That, by exercising such care, appellant could have sold the cotton for $21,-960.90 more than the $101,107.54 it reported it sold same for. (5) That, in accounting to appellees, appellant was entitled to deduct $9,407.05 from the amount the cotton sold for. (6) That appellees were restrained from selling 877,032 pounds of cotton from August 31, 1925, when the writ of injunction was issued out of the district court, to March 2S, 1929, when said writ was dissolved. (7) That appellees were' restrained from selling 818,-863 pounds of cotton from September 18, 1929, when the writ of injunction was issued out of the Supreme Court, to October 23, 1929, when said writ was dissolved. (8) That the price of cotton was lower March 2S, 1929, than it was August 31, 1925. (9) The cotton appellees were restrained from selling had declined 7½ cents a pound March 28, 1929, from the highest price obtainable after the writ of injunction was issued August‘31,1925. (10) The market price of cotton declined 2 cents per pound from September 19, 1929, to October 23, 1929. (11) Appellees were damaged in the sum of $82,154.60 by reason of the decline in the market price of cotton August 31, 1925, and the market price thereof October 23, 1929. (12) Appellees exercised proper care in the preservation of the cotton they were restrained from selling. (13) In exercising such care appellees expended $11,-823.65 for storage of the cotton. (14) Such expenditure was reasonable in amount. (15) Appellees exercised due care in having the cotton insured. (16) They expended $23,961.-10 for such insurance. (17) And the amount so expended was reasonable. (18) But for the injunction appellees could have sold the cotton they were enjoined from selling on the market at Clarksville during the gathering season of 1925-26 for $219,258. (19) While stored in the warehouse at Clarksville, the cotton lost 5 pounds per bale. (20) The average price per pound of cotton appellees were enjoined from selling on the Clarks-ville market March 28, 1929, was 17.5 cents. (21) Appellees were damaged by being deprived of the use of the cotton by the issuance of the writs of injunction. (22) Such damage amounted to $43,S51.60. (23) There was a decline in the price of the cotton appel-lees were enjoined by the Supreme Court from selling between September 18, 1929, and October 23, 1929. (24) The 1,095 bales of the 1919, 1920, and 1921 crops were sold by appellant on actual samples taken from the bales. (25) The 1,095 bales when sold by appellant did not bring their reasonable cash market value. (26) The 1,095 bales were stored, segregated, classed and graded separate and apart from all other cotton of the defendant association. (27) And same was sold in pools separate and apart to themselves. (28) The contract between appellant and appellees required the former to consult the latter and obtain their consent before selling the 1,095 bales of cotton. (29) The freight per bale on the 1,095 bales from Clarksville to Houston in 1922 was $3.89. (30) The reasonable and customary insurance charge at Houston ‘per $60.00 valuation on such cotton (the 1,095 bales) was 18 cents.’ (31) The ‘reasonable and customary storage charge, per bale, on such cotton during the year 1922! was ‘25½ per month.’ (32) The First National Bank of Clarksville ‘had a verbal mortgage or verbal lien’ on appellees’ ‘cotton of the 1925 year crop before the issuance of the injunction herein on August 31, 1925.’ (33) Warehouse receipts against ap-pellees’ ‘cotton of the 1925 year crop were in the hands of the First National Bank and being held by it as security for the indebtedness of the plaintiffs (appellees) at the time of the issuance of the writ of injunction herein on August 31, 1925.’ (34) Of the cotton held under warehouse receipts 35,000 pounds had been sold. (35) The amount appellant sold the 1,095 bales for, less the freight, insurance, storage, and interest on money it had advanced to appellees, was paid to them by appellant.
“On said findings of the jury and findings made by the court himself ‘on undisputed facts,’ he said, the court rendered judgment in appellees’ favor for $160,845.11, the differ-'enee, the court determined, between the amounts found in their favor and the amounts found in appellant’s favor.”

The defendant appealed to the ■ Court of Civil Appeals at Texarkana and by a divided court it was held that the trial court was correct in instructing the jury to return a verdict in favor of the defendant for the; sums of $37,783.15, $7,500, and $782.99, a total of $46,066.14. As to the other items, the Court of Civil Appeals reversed and rendered judgment in favor of the defendant for $13,-442.94, the difference between $32,623.20, the amount awarded plaintiffs on account of the breach of the contract by defendant, and $46,066.14, the amount awarded defendant as liquidated damages, etc. That part of the judgment denying specific performance of the contract in favor of the defendant was not disturbed and final judgment rendered in favor of the defendant against plaintiffs for the sum of $13,442.94. 37 S.W.(2d) 331. We refer to the various opinions rendered on former appeals for a more detailed statement of the case. Plaintiffs, Lennox & Len-nox, bring the cause to the Supreme Court by writ of error.

This suit involves the construction of chapter 8, title 93, articles 5737 to 5764, enacted in 1921, and commonly known as the Co-operative Marketing Act (R. C. S. 1925) under which the Texas Earm Bureau Cotton Association was created, and the general marketing contract executed. In 1930 it changed its name to the Texas Co-Operative Marketing Association in which name it now appears in this suit. In article 5737 the policy of the law is stated that “in order to promote, foster and encourage the intelligent and orderly marketing of agricultural products through co-operation and to eliminate speculation and waste; and to make the distribution of agricultural products as direct as can be efficiently done between producer and bonsumer; and to stabilize the marketing problems of agricultural products, this law is passed.” In article 5740 the purposes for which the act was enacted are declared and it provides that “an association may be organized to engage in any activity in connection with the marketing or selling of the agricultural products of its members. * * * ” In article 5742 the powers of the association are set forth, among other things, as follows: “(a) To engage in any activity in connection with the marketing, selling, * * * storing, handling or utilization of any agricultural products produced or delivered to it by its members. * * No association, however, shall handle the agricultural products of any non-member. * * * (c) To act as the agent or representative of any member or members in any of the above mentioned activities. * * *' (g) To do each and every thing necessary, suitable or proper' for the accomplishment of any one of the purposes or the attainment of any one or more of the objects herein enumerated ; or ’conducive to or expedient for the interest or benefit of the association; and to contract accordingly; and in addition to exercise and possess all powers, rights and privileges necessary or incidental to the purposes for which the association is organized or to the activities in which it is engaged; and in addition, any other rights, powers and privileges granted by the laws of this State to ordinary corporations, except such as oare inconsistent with the express provisions of this Act; and to do any such thing anywhere.” The act further provides who may become members of the association (article 5743); how the association may .incorporate (article 5744); for the adoption of by-laws (article 5746); the election of directors (article 5748), and other steps necessary to govern and control the association in its operations.

In article 5753 it is provided that “the association and its members may make and execute marketing contracts, requiring the members, to sell, for a period of time, not over ten years, all or any specified part of their agricultural products or specified commodities exclusively to or through the association or any facilities to be created by the association. The contract may provide that the association may sell or resell the products of its members, with or without taking title thereto; and pay over to its members the resale price, after deducting all necessary selling, overhead and other costs and expenses, including interest on preferred stock, not exceeding eight per cent per an-num, and reserves for retiring the stock, if any, and other proper reserves. * * * The by-laws and the marketing contract may fix, as liquidating damages, specific sums to be paid by the member or stockholder to the association upon the breach by him of any provisions of the marketing contract regarding the sale or delivery or withholding of products; and may further provide that the member will pay all costs, premiums for bonds, expenses and fees in case ahy action is- brought upon the contract by the association ; and any such provisions shall be valid and enforceable in the courts of’ this State. In the event of any breach or threatened breach of such marketing contract by a member, the association shall be entitled to an injunction to prevent the further breach of the contract and to a decree of specific performance thereof. Pending the adjudication of such an action and upon filing a verified complaint showing the breach or threatened breach, and upon filing a sufficient bond, the association shall be entitled to a temporary restraining order and preliminary injunction against the member.”

On or about June 30, 1921, Lennox & Len-nox, who were partners in the practice of law and jointly interested in the growing of cotton through- tenants on land which they jointly owned, signed a written agreement for the purpose of forming a marketing association under the provisions of the foregoing act. The pertinent parts of that agreement are as follows:

“The undersigned propose to organize a non-profit association, without capital stock, under the laws of the State of Texas for the purpose of promoting, fostering and encouraging the business of producing and marketing cotton co-operatively; for reducing speculation; for stabilizing the cotton markets; for co-operatively and collectively handling the problems of cotton growers; and for other pertinent purposes.
“We, the undersigned, in consideration of the premises and of our mutual undertakings and of the agreement of each and every other party hereto, do hereby agree as follows, each for himself and collectively for the express benefit of and as the Association to be organized:
“1. We will become members of the Texas Earm Bureau Cotton Growers’ Co-Operative Marketing Association, a non-profit association, without capital stock, to be organized under the laws of the State of Texas.
“2. The Association may include in its membership any cotton grower in Texas, or the landlord or tenant or lessor or lessee of land in Texas on which cotton is grown, provided the landlord or lessor receives all or part of the rental in cotton.”

The agreement further* reads: “Growers Lennox & Lennox as Joint tenants, Postoffice Address Clarksville, Texas.”

The testimony further shows that, after the execution of the contract or agreement, Lennox & Lennox conducted their principal farming operations upon land which they owned jointly and operated in the same manner as they did before the signing of the agreement. The cotton which they failed to deliver to the association, and which the trial court held should have been delivered, was grown upon the lands owned jointly by thorn and under the same joint arrangements between themselves which existed during the year 1920 and for many years prior thereto.

Plaintiffs contend that, by reason of signing of the contract by them as joint tenants, they did not become members of the association and were not bound by the terms of the contract as partners.

The almost unanimous demand for the enactment of co-operative marketing association laws and the current events with respect to the urge for the passage of legislation to promote prosperity in agricultural pursuits is well known to the courts. Nearly every state in the Union enacted co-operative marketing statutes substantially like the one under review. To the same purpose Congress enacted the Clayton Act, October 15,1914, chap. 323, 38 Stat. at L. 730; the Capper-Yolstead Act, February 18, 1922, chap. 57, 42 Stat. at L. 388, U. S. C., title 7, §§ 291, 292 (7 USCA §§ 291, 292); and the Co-operative Marketing Act of July 2, 1926, chap. 725, 44 Stat. at L. 802, U. S. C., title 7, § 414—1 et seq. (Mason’s), 7 USOA §§ 451-457. These marketing acts have been given a liberal construction by the courts in order to accomplish the purposes for which they were enacted. See Liberty Warehouse Co. v. Burley T. G. Co-Op. Ass’n, 276 U. S. 71, 48 S. Ct. 291, 72 L. Ed. 473, and the cases cited and referred to in the footnotes.

We have carefully read the statute involved here in the light of the history of this legislation and the construction given statutes similar in principle by both federal and state courts and we find nothing in the act to prohibit the association from contracting with its members, as was done here, and Len-nox & Lennox by reason of their acts became members of the association and are bound by the terms of their agreement. This precise form of agreement and contract and the foregoing act was upheld by our Supreme Court in the case of Texas Farm Bureau Cotton Association v. Stovall, 113 Tex. 273, 253 S. W. 1101. In that opinion the contract is more fully set out and we refer to same.

It is also contended by Lennox & Len-nox that the act in question violates our anti-trust laws. Article 5762 explicitly provides: “No association organized hereunder shall be deemed to be a combination in restraint of trade or an illegal monopoly; or an attempt to lessen competition or fix prices arbitrarily; nor shall the marketing contracts or agreements between the association and its members nor any agreements authorized in this chapter, be considered illegal or in restraint of trade.”

The Congress of the United States passed similar acts with like purposes. See the Cap-per-Volstead Act, supra; Co-operative Marketing Act, etc., supra. Thus it will be seen that the Legislature and Congress have definitely declared it to be the public policy that associations organized under the Co-operative Marketing Acts do not contravene the anti-trust laws. Those acts have been construed by the various courts and it is held that they do not violate the anti-trust laws. Hollingsworth v. Texas Hay Association (Tex. Civ. App.) 246 S. W. 1068, writ denied; Liberty Warehouse Co. v. Burley Tobacco Growers’ Co-Operative Association, supra. In the Stovall Case, supra, the point was raised that the act and contract violated the anti-trust laws, and, while the Supreme Court did not discuss this precise question in its opinion, the question was passed upon and by inference overruled. These statutes rest upon the broad ground that the Legislature and Congress approved the plan for protecting producers, stabilizing prices for their products, eliminating waste, and advancing the public interest.

To carry out the purposes for which the association was organized, a contract was entered into by and between the association and its members. It was to be a mutual obligation. The members obligated themselves to do certain things and the association likewise obligated itself to perform certain services. In order to make more efficient its services to its members, the law provided that no association shall handle the agricultural products of any nonmember. The marketing agreement referred to, and which was embraced in the agreement signed by the members, among other things, contains the following:

“2. The Association agrees to buy and the Grower agrees to sell and deliver to the Association all of the cotton produced or acquired by or for him in Texas during the years 1921,1922,1923,1924 and 1925. * * *
“17. If the Grower has on hand, on July 1, 1921, any cotton of the 1920 or previous crops, free of liens and capable of delivery, he shall deliver such cotton to the Association as it may direct, to he graded by the Association and marketed by it in pools wholly separate from all other deliveries here made, but generally in the manner here-inabove set forth.
“18. (a) Inasmuch as the remedy at law would be inadequáte; and inasmuch as it is now and ever will be impracticable and extremely difficult to determine the actual damage resulting to the Association, should the Grower fail so to sell and deliver all of his cotton, the Grower hereby agrees to pay to the Association for all cotton delivered, sold, consigned, withheld or marketed by or for him, other than in accordance with the terms hereof, the. sum of five cents per pound, middling basis, as liquidated damages for the breach of this contract; all parties agreeing that this contract is one of a series dependent for its true value upon the adherence of each and all the growers to each and all of the said contracts.
.“(b) The Grower agrees that in the event of a breach or threatened breach by him of any provision regarding delivery of cotton, the Association shall be entitled to an injunction to prevent breach or further breach hereof and to a decree for specific performance hereof, and the parties agree that this is a contract for the purchase and sale of personal property under special circumstances and conditions and that the buyer cannot go to the open markets and buy cotton to replace any which the Grower may fail to deliver.
“(e) If the Association brings any action whatsoever, by reason of a breach or threatened breach hereof, the Grower agrees to pay to the Association all costs of court, costs for bonds and otherwise, expenses of travel and all expenses arising out of or caused by the litigation and any reasonable attorney’s fees expended or incurred by it in such proceedings; and all such costs and expenses shall be included in the judgment and shall be entitled to the benefits of any lien securing any payment thereunder.”

In view of the very nature of the business undertaken by the association and its members, it was necessary that some binding contract or agreement be entered into defining their respective obligations. The question for decision here is: Are the provisions of the contract binding upon the association and the members? We think they have a reasonable relation to a proper purpose as contemplated by the act and the contract executed by the parties, and the provisions thereof are binding. Texas Farm Bureau Cotton Ass’n v. Stovall, supra; Hollingsworth v. Texas Hay Ass’n, supra; Liberty Warehouse Co. v. Burley Tobacco Growers’ Co-operative Ass’n, supra.

By the terms of the contract, the association agreed to buy and the growers agreed to sell and deliver to the association all the cotton produced or acquired by or for them in Texas during the years 1921, 1922, 1923, 1924, and 1925. The contract further provides that the growers expressly warrant that they have not heretofore contracted to sell, market, or deliver any of said cotton to any person, firm, or corporation, except as noted at the end of the agreement (see section 3 of the contract). No exception was noted by Lennox; & Lennox at the end- of the contract.

Nor can the act and contract be condemned because it is provided that the association, in the event of any breach or threatened breach of such marketing contract by a member of the association, shall be entitled to an injunction to prevent further breach of the contract and to a decree of specific performance. Both the act and contract definitely provide for such remedy and these provisions of the act and agreement have been repeatedly upheld. Texas Farm Bureau Cotton Ass’n v. Stovall, supra; Hollingsworth v. Texas Hay Ass’n, supra; Liberty Warehouse Co. v. Burley Tobacco Growers’ Co-Operative Ass’n, supra.

By force of the act and contract, the association, if the grower fails to sell and deliver all of his cotton as he agreed to do, or in the event of any breach on threatened breach of such marketing contract by a mem-' ber, shall be entitled to an injunction to prevent the breach of the contract and to a' decree of a specific performance, and, in addition thereto, the association is entitled to recover from the grower the sum of 5 cents per pound, middling basis, as liquidated damages for the breach of his contract for all cotton delivered, sold, consigned, withheld, or marketed by or for him other than in the terms stated in the contract. The dealings Lennox & Lennox had with the association were as members and not as outsiders. Whatever contract they had with the association in respect of the 1,095 bales of cotton will be considered in that light. If the association was negligent in handling the 1,095 bales of cotton intrusted to its hands, then it would be responsible therefor. The trial court allowed them the sum of $32,623.20 for such negligence. Under the terms of the contract, the association was entitled to 5 cents per pound, middling basis, as liquidated damages on all cotton not delivered to it by the growers produced and acquired by them during the years 1921, 1922, 1923, 1924, and 1925. The trial court entered judgment for this item in favor of the association, excluding the cotton produced or acquired by Lennox & Lennox during the year 1925 sub* jeet to the terms of the contract, in the sum of $37,783.18, together with the expenses incurred and attorney’s fees, a total of $46,-066.14. We have already stated the other amounts awarded Lennox & Lennox in the judgment and same will not be repeated here.

But the growers contend that, by reason of the injunction issued on August 21, 1925, which prevented them from selling 1,664 bales of cotton of the 1925 crop, they are entitled to damages therefor. That injunction restrained the growers “from selling, delivering, consigning or otherwise disposing of all or any part of the cotton produced or acquired by it for them and each of them during the year 1925, to any person or persons other than defendants herein.” If the growers-were not complying with their contract or threatened to breach its provisions,, the association was entitled to the injunction above stated. The growers certainly could not claim damages for cotton held by them not described in the writ of injunction. The. order - embraced the -language of the contract signed by Lennox & Lennox.

On September 18, 1929, the Supreme Court, on application of the association, granted a writ of injunction restraining the growers “from selling, consigning, marketing or otherwise disposing” of 1,664 bales of cotton then “in storage in a warehouse in Clarksville, Red River County, Texas.” This writ was dissolved by the Supreme Court on October 23, 1929. On the trial it appeared that there-were 1,559 bales of cotton instead of 1,664 bales in the warehouse. It is contended that between September 18, 1929, when the writ was granted, and October 23, 1929, when the writ was dissolved, the price of cotton fluctuated 2 cents per pound, and that the growers are entitled to damages for that amount.

' As grounds for this claim, the growers contend that they were indebted to a bank for a large sum of money which was secured by a verbal lien and by warehouse receipts or certificates issued on the cotton and delivered to the bank, and for that reason the cotton produced or acquired by them during the year 1925 was not subject to the terms of the contract. The Honorable Court of Civil Appeals in rendering its opinion in this cause, reported in 16 S.W.(2d) 413, 422 (writ denied) held in effect: (a) That by reason of the agreement or contract Lennox & Lennox became members of the cotton association. (b) It was conceded that Lennox & Lennox failed to ship their cotton in accordance with the terms of the marketing contract and were liable, for the damages awarded in the trial below if that contract was binding on them. (c) Although members of the association by mortgaging rent cotton to a bank for borrowed money and thus placing it beyond their control, might render a suit for specific performance by association under the contract an inappropriate remedy, it would be no defense to action for damages for breach of the contract, (d) The bank, furnishing money used by the landlord in making advances and in purchasing cotton from their tenants and holding negotiable warehouse receipts issued as the cotton was purchased and stored, occupied the status of a mortgagee in possession. (e) Where members of the cotton association borrowed money from -a bank for use in making ádvances and in purchasing cotton from their tenants, and transferred to the bank negotiable warehouse receipts issued as cotton was purchased and stored, the cotton so purchased and held was not within the marketing contract, so as to authorize suit for a specific performance by the association. (f) That the remedy of specific performance is never applicable where there is no obligation to perform, (g) That part of the judgment which awarded damages against Lennox & Lennox for the failure to deliver cotton grown and acquired by them during the years 1922, 1923, and 1924 will not be disturbed; but the order directing Lennox & Lennox to specifically perform by delivery of the 1,664 bales of cotton in the warehouse and perpetuating the injunction will be set aside and the injunction dissolved. We quote from the opinion of the Court of Civil Appeals giving the reasons for denying a specific performance of a contract and dissolving the injunction as follows:

“According to,the testimony of the appellants, they borrowed the money for which the entire 1,664 bales of cotton were mortgaged because they did not have sufficient funds to make the advances to their tenants and to purchase their tenants’ interest in the cotton in the fall of the year. There is nothing in the record to indicate that appellants are now financially able to pay that debt and redeem the cotton without a sale of the mortgaged cotton. They are therefore in a position where they cannot comply with the order of the court requiring an immediate and unconditional delivery of all the cotton in the warehouse to the association. ‘Since a court of equity will not do a useless thing or make a nugatory decree, specific performance will not, as a rule, be decreed against a vendor who is unable for want of title to comply with his contract; -and this is true, although the want of title is caused by the defendant’s own act, as by his conveyance to a bona fide purchaser.’ 25 R. G. L. p. 245, and eases referred to. The principle there announced would justify the court in refusing to direct the specific performance of any of the cotton incumbered with a mortgage and in possession of the mortgagee. The practical inability of the appellants to obey such an order would warrant a refusal to make the order. However, that situation would not exempt the appellants from liability for damages in failing to deliver cotton which was subject to the terms of their contract.”

The contract also contains the following provisions:

“(e) If the Grower places a crop mortgage upon any of his crops during the term hereof, the Association shall have the right to take delivery of his cotton and to pay off all or part of the crop mortgage for the account of the Grower and to charge the same against him individually. The Grower further agrees that if the mortgagee desires, he will execute in favor of the creditor an assignment of his interest in the cotton which he has sold, or will sell, to the Association for the protection of the creditor to the extent of the creditor’s just claim, and the Association in turn agrees, upon notice of such assignment, to respect the same and to pay to the creditor to the extent of his just claim the proceeds otherwise due the Grower.
“The Grower shall notify the Association prior to making any crop mortgage; and the Association will advise the Grower in any such transactions.”

It is conceded that whatever mortgage the hank had on the 1,559 bales of cotton was oral and that the association had no notice of any such mortgage until after the issuance of its injunction in 1925. It is undisputed that C. D. Lennox was president and H. H. Lennox vice president of the bank claiming the verbal mortgage against the cotton in controversy, that the bank was never and is not now a party to the suit or to any of the injunctive proceedings, and it has never asserted in this cause any rights claimed by virtue of being the mortgagee of this cotton. The contract expressly provides that the growers must notify and advise with the association before entering into any such transaction, and, if after such conference a mortgage should be executed, then the association should have certain rights as to its payment. This clause of the contract has been sustained. Texas Hay Ass’n v. Angleton State Bank (Tex. Com. App.) 291 S. W. 846; see, also, Long v. Texas Farm Bureau Cotton Ass’n (Tex. Civ. App.) 270 S. W. 561, at page 563; Dark Tobacco Growers’ Co-op. Ass’n v. Dunn, 150 Tenn. 614, 266 S. W. 308; Feagain v. Dark Tobacco Growers’ Co-Op. Ass’n, 202 Ky. 801, 261 S. W. 607; Kansas Wheat Growers’ Ass’n v. Floyd, 116 Kan. 522, 227 P. 336; Kansas Wheat Growers’ Ass’n v. Leslie, 126 Kan. 694, 271 P. 284; Kansas Wheat Growers’ Ass’n v. Ast, 118 Kan. 247, 234 P. 963; Kansas Wheat Growers’ Ass’n v. Loehr, 118 Kan. 248, 234 P. 962; Redford & Garrison v. Burley Tobacco Growers’ Ass’n, 205 Ky. 515, 266 S. W. 24. The very purposes for which the association was created may not be thwarte'd by the members thereof evading the vital provisions of the marketing contract in such a way as would render the contract unenforceable and a nullity.

If the 1,559 bales was cotton produced or acquired by Lennox & Lennox jointly, it was cotton they were obligated by their contract to deliver to the association and they were not entitled to recover damages because of the injunction issued restraining them from disposing of the cotton. If all or any part of the 1,559 bales was cotton not produced or .acquired, by Lennox & Lennox by virtue of their contract with the association, then on account of the language used in the injunction issued by the Supreme Court they will be entitled under proper pleadings to recover the damages sustained by them for restraining that part of the cotton not embraced within their contract.

We therefore recommend that both the judgments of the Court of Civil Appeals and of the district court be reversed and this cause remanded to the district court for trial in accordance with the following instructions: If the pleadings and proof should show that all or any part of the 1,559 bales of cotton was produced or acquired by Len-nox & Lennox during the year 1925 as would bring it under the terms of the contract made by them with the cotton association, then the association would be entitled to recover 5 cents per pound, middling basis, as liquidated damages for failure to deliver -such cotton to the association. On the contrary, if it should be shown that all or any part of the 1,559 bales of cotton was not produced or acquired by Lennox & Lennox as would bring it under the terms of the contract and that they were damaged by reason of the writ of injunction issued by the Supreme Court upon application of the cotton association on September 18, 1929, and dissolved on October 23, 1929, then they would be entitled to the amount of damages sustained for "that reason. In other words, the trial court should determine only the two issues above stated. Whatever amount of damages, if any, that the association is entitled to recover for failure to deliver to it by Lennox & Lennox any cotton produced or acquired by them during the year 1925,' should be added to the sum of $46,066.14; and whatever amount of damages, if any, should be recovered by Lennox & Lennox against the association by reason of the issuance of the writ of injunction by the Supreme Court in respect of the 1,559 bales of cotton on September 18, 1929, should be added tol the sum of $32,623.20 adjudged by the trial court in favor of Lennox & Lennox and the two amounts balanced and judgment be entered accordingly in favor of the party entitled to the difference.

CUBETON, C. J.

Judgments of the district court and Court of Civil Appeals both reversed, and the cause remanded with instructions, as recommended by the Commission of Appeals.

We approve the holdings of the Commission of Appeals on the questions discussed in its opinion.


source: Caselaw Access Project

author: CRITZ, J. CURETON, C. J.

license: Public Domain

text:
    STUDDERT v. GUARDIAN TRUST CO.
    No. 1600—5986.
    Commission of Appeals of Texas, Section A.
    Dec. 22, 1932.
    Andrews, Streetman, Rogue & Mobley, J. D. Lockett, Robert H. Kelley, and Sam Street-man, all of Houston,, for plaintiff in error.
    Baker, Botts, Andrews & Wharton, Palmer Hutcheson, and S. H. German, all of Houston, for defendant in error.
   CRITZ, J.

This suit was filed in the district court of Harris county, Tex., by James H. Studdert against Guardian Trust Company, independent executor and trustee under the will of H. Hamilton, deceased, to recover a sum of money alleged to have been received and held in trust for Studdert ;by the deceased. The trust company denied the trust, and claimed the benefit of the four-year statute of limitation. The case was tried before a jury, and resulted in a judgment for Studdert. On appeal by the trust company, the Court -of Civil Appeals.at Beaumont reversed the judgment of the district court, and rendered judgment for the trust company. 36 S.W.(2d) 578. Studdert brings error.

On August 17, 1907, Studdert executed and delivered to Hamilton a promissory note for the principal sum of $26,250, due five years after date, and bearing 6 per cent, interest. This note recited that it was given in payment of 150 shares of stock of Houston lee & Brewing Company, bought by Studdert from Hamilton on such date. The note also recited that the stock was attached to secure its payment, and that the dividends earned by such stock should be payable to Hamilton and credited on the note.

On the same date the note was executed, and as a part of the same transaction and contract, Hamilton executed and delivered to Studdert an instrument in writing which, in substance, recited that Plamilton had sold Studdert, his faithful employee and true friend, 150 shares of stock in the above company, at $175 per share, $26,250, as evidenced by the above note. This instrument then contained the following stipulation:

“I hand this to Mr. Studdert to witness my acknowledgment that I hold his note; and my agreement that I require that all dividends that may be paid upon the said 150 shares of stock shall be paid to me for the full five years unless the dividends should sooner liquidate the amount of his note; and to further witness my agreement that I look to the dividends upon the stock to pay out the note and if the same is not paid by the dividends within 5 years then in that event Mr. Studdert may pay me the balance that may remain due at the end of the 5 years, or maturity of the note, in cash or Mr. Studdert may surrender the stock to me and I will accept the same in full payment of the note and surrender the said note to Mr. Studdert cancelled and receipted in full, just as Mr. Studdert may elect.
“I further acknowledge that to the note of Mr. Studdert herein mentioned there is attached certificates of the stock of the Houston Ice & Brewing Company for one hundred and fifty shares.”

After the completion of the above transactions, and up to August 20, 1914, Hamilton collected all the dividends on the above stock. Also during the time between the execution of the contract and the 19th day of October, 1914, the stock in question was delivered to Studdert in several installments.

On or about August 20,1914, Hamilton surrendered the above note to Studdert with the statement on the back thereof showing that the dividends collected and retained by Hamilton had paid the note in full, and left a balance due by Hamilton to Studdert of $11,582.-91. This statement, after setting out the various items of charges and credits, contains these words: “Balance due Studdert, $11,582.-91.”

Also the jury found that during the above period Hamilton paid Studdert in cash in addition to the sums applied to the payment of the principal and interest of such note the sum of $9,150. t

The jury further found on probative evidence that Studdert accepted the figures indorsed on the back of the note as a true and correct statement of the amount he claimed to be due him by Hamilton.

For further statement of this case, we refer to and adopt the one contained in the opinion of the Court of Civil Appeals which is reported at 36 S.W.(2d) 518.

The trust company contends that, since the contract between Hamilton and Studdert, which consists of the note and agreement above mentioned, is utterly unilateral, in that Studdert is not hound in any manner, and is still executory as to any balance due Stud-dert, it is void and unenforceable. We do not decide this question, as we sustain the trust company’s plea of limitation, as will later appear.

Studdert contends that the original contract between him and Hamilton created a trust wherein Hamilton was constituted trustee to collect the dividends on the stock in question and apply same on his note, and that such trust did not terminate as to any balance remaining until demand was made therefor. On the other hand, the trust company contends that, when Hamilton tendered to Studdert the settlement of 1914 canceling the note and surrendering the stock under the facts and circumstances above shown, any trust relation theretofore existing between Hamilton and Studdert terminated, and the relation of debtor and creditor began. The trust company then contends that any claim Studdert had against Hamilton was barred by the four-year statute of limitation at the time of Hamilton’s death about eight years later. The Court of Civil Appeals sustained these contentions of the trust company.

We have read and carefully considered the holding of the' Court of Civil Appeals touching this matter, and, in our opinion, such holding is correct. We therefore approve that part of the opinion of the Court of Civil Appeals. No good purpose can be served by further discussion by us.

We recommend that the judgment of the Court of Civil Appeals be affirmed.

CURETON, C. J.

The judgment of the Court of Civil Appeals affirmed, as recommended by the Commission of Appeals.


author: RYAN, J. CURETON, C. J.

text:
    PLATTE v. SECURITIES INV. CO.
    No. 1351—5906.
    Commission of Appeals of Texas, Section B.
    Dec. 22, 1932.
    Neblett & Norman and W. P. Neblett, all of Houston, for plaintiff in error.
    Hill & Harvey, Kenneth Krahl and Lewis Wood, all of Houston, for defendant in error.
   RYAN, J.

By deed dated May 4, 1918, J. F. Griffin acquired title to lots 11, 12, 13, and 14 in block 3 of Lizzieton Terrace addition to tlie city of Houston; by deed of trust dated May 4, 1920, Griffin conveyed said property to W. X. Forest, trustee, as security for an indebtedness evidenced by promissory note payable six months after date with 10 per cent, annual interest thereon, after maturity, to the First National Bank of Jacksonville", Tex., in the sum of $105; afterwards, by deed of trust dated August 7, 1923, Griffin conveyed the same property to J. M. Hawkins, trustee, as security for an indebtedness to Oskar Laebo, in the sum of $200, evidenced by promissory note payable one year after date with 8 per cent, annual interest.

The Securities Investment Company filed suit in the county court of Harris county against J. F. Griffin for the recovery in debt of the sum of $775 and caused writ of attachment to issue on September 26, 1925, which was on the same day levied by the sheriff of Harris county, on said property, and a copy of the writ and return filed with, and recorded by, the county clerk of said county.

On December 22,1925, judgment by default was rendered against Griffin by the county court in favor of the Securities Investment Company, for the sum of $775, and legal interest from the date of judgment; this judgment foreclosed said attachment lien as it existed on September 26, 1925. Execution issued thereunder and at sheriff’s sale on the -first Tuesday in April, 1926, said property was struck off to the Securities Investment Company for the sum of $100 and sheriff’s deed accordingly executed to it:

As disclosed by the records, the title thus acquired by the Securities Investment Company was of whatever interest Griffin owned as of the levy of the attachment, subject to the outstanding liens evidenced as above stated by the deeds of trust securing the First National Bank of Jacksonville and Oskar LaebQ.

Miss Anna M. Platte’s claim is based upon a loan of $550 payable two years after date, with 10 per cent, annual interest, payable semiannually, made by her to Griffin and secured by deed of trust to W. P. Neblett, trustee, bearing date September 18, 1925, but not filed for record until October 14,1925.

Griffin failed to pay a semiannual interest, installment due on said note, whereupon the property was sold at trustee’s sale on June 1, 1926, to Miss Anna M. Platte for the sum of $625 as the highest and best bid therefor. Said trustee’s deed was filed for record on June 8, 1926.

In this condition of the title, the Securities Investment Company on August 8, 1928, filed suit in trespass to try title to said property against Anna M. Platte and Harriett M. Nias and Percy C. Nias to whom Miss Platte had contracted to sell same, but they having disclaimed, the controversy as tried was between ■the investment company as plaintiff and Miss Platte as defendant.

Miss Platte answered by general demurrer, general denial, plea of not guilty, and by cross-action sought recovery of the property; she further averred her loan to Griffin, the deed of trust lien securing same, the application of the proceeds of such loan to the payment of the two other indebtednesses and deed of trust liens then against the property, by reason of which she became subrogated thereto. In reply to such claim of subrogation, the investment company pleaded the statute of limitation of four years (Rev. St. 1925, article 5520) in bar of the indebtedness due by Griffin to the First National Bank of Jacksonville and the lien securing the same and prayed, if the court should decide that Miss Platte is entitled to be subrogated to the liens of the original lienholders, and only in that event, that the amount of money which Miss Platte is entitled to, be'determined and after so determined, that plaintiff, investment company, be allowed to pay her such sum of money and have the property decreed to it.

It was proven by the testimony of Mr. W. P. Neblett, representing Miss Platte when she made the loan to Griffin, that on October 14, 1925, he paid, for her, the note due the First National Bank of Jacksonville and the note due Oskar Laebo, by his check in the sum of $510.75 payable to the order of South Texas Commercial National Bank. When he gave said check, the bank turned over to him two releases, one from the First National Bank of Jacksonville and the other from Oskar Lae-bo, both direct to J. F. Griffin. These releases and the trust deed from Griffin to Miss Platte were simultaneously filed for record with the county clerk of Harris county on October 14, 1925.

The trial court (a jury having been waived) rendered judgment for the plaintiff, investment company, for the title and possession of the property involved, and for Miss Platte in so far as her plea of subrogation is concerned as to all lien debts on said property not barred by the statute of limitations at the time of the payment thereof by her.

It will be noted that the claim of the First National Bank of Jacksonville appears to have been barred by the statute of limitation of four years when Miss Platte’s representative paid it at the South Texas Commercial National Bank, and the trial court fixed the amount to which she was subrogated, at the sum of $250, and rendered judgment for her in that sum, with 8 per cent, per annum interest thereon from date of judgment, and foreclosed lien therefor, if not paid within ninety days thereafter.

Said judgment was affirmed on appeal by •the honorable Court of Civil Appeals. 34 S.W.(2d) 295.

Opinion.

We think it clear that the superior title to the property is in the investment company ; its attachment created a lien from the date of its levy. Art. 300, Rev. Stat. 1925; Paris Grocer Co. v. Burks, 101 Tex. 106, 105 S. W. 174; Thomson v. Shackelford, 6 Tex. Civ. App. 121, 24 S. W. 980; Brooks v. Chatham, 57 Tex. 31; Walton v. Cope, 3 Tex. Civ. App. 499, 22 S. W. 765.

Miss Platte acquired no rights uijder her deed of trust until afterwards, when she consummated the loan to Griffin; this occurred, not at the date of her trust deed, hut when it was delivered to her on October 14, 1925. She paid no money until then — at this time the attachment lien of the investment company had been fixed and her transaction was necessarily subject thereto. Until then, Griffin owned the property unencumbered by any claim on her part. It was this title of Griffin which was covered by the attachment. Traders’ Nat. Bank v. Price (Tex. Com. App.) 228 S. W. 160; Diltz v. Dodson (Tex. Civ. App.) 207 S. W. 356.

The deed of trust securing her lien, subsequently delivered, must yield to the priority of the attachment lien and any sale made by virtue of such deed of trust must necessarily yield to a salé made under foreclosure of the attachment lien.

This brings us to the question, whether Miss Platte is entitled to subrogation to the liens existing on the property when the attachment was levied, and if so, to what extent.

The Court of Civil Appeals found that, while the evidence does not show any agreement or understanding that Miss Platte was to be subrogated to'the rights of the lien-holders at the time the debts were paid by her, the facts and circumstances in evidence are sufficient to show that such was the intention and she would not have advanced the money to pay said debts but for her right to be so subrogated.

Subrogation may arise from the agreement of the parties or by implication in equity to prevent fraud or injustice [Cason v. Connor, 83 Tex. 26, 18 S. W. 668]; it is a doctrine of equity [Tarver v. Bank, 7 Tex. Civ. App. 425, 27 S. W. 40], a substitution of another person in the place of the creditor so that the person in whose favor it is applied succeeds to the rights of the creditor in relation to the debt [Sanger Bros. v. Ely & Walker Dry Goods Co. (Tex. Civ. App.) 207 S. W. 348].

As said by Judge Brown, in Paires v. Cockerell, 88 Tex. 428, 31 S. W. 190, 194, 639, 28 L. R. A. 528: “Perhaps the courts of no state have gone further in applying the doctrine of subrogation than has the court of this state.”

In Hicks v. Morris, 57 Tex. 658, Morris owed a debt for the purchase money of land and a lien was retained to secure its payment. He applied to Hicks for a loan of money to pay the debt. Hicks lent the money and took a note and mortgage on the land. Subsequently, a new note was given for the amount of this note and interest, which expressed upon its face that it was executed for the purchase money of the land, and the previous note and mortgage were marked canceled and delivered to Morris. When Morris executed the first note to Hicks, there was no express agreement that he should be subrogated to the rights of the holder of the note which the borrower intended to pay. In a suit brought by Hicks upon the second note, it was held that Hicks was substituted to the rights of the original vendor, and that holding was expressly approved in Pridgen v. Warn, 79 Tex. 588, 15 S. W. 559.

Where one pays the debt of another as a result of an agreement, express or implied, that the prior lien be kept alive for his benefit, equity will substitute the person so paying to the place of the original creditor to enable him to enforce the lien for his reimbursement. First State Bank v. Farmers’ Nat’l Bank (Tex. Civ. App.) 262 S. W. 225; Dixon v. Investment Co. (Tex. Civ. App.) 40 S. W. 541; Pioneer Savings & Loan Co. v. Paschall, 12 Tex. Civ. App. 613, 34 S. W. 1001; Texas Land & Loan Co. v. Blalock, 76 Tex. 85, 13 S. W. 12; Mergele v. Felix, 45 Tex. Civ. App. 55, 99 S. W. 709.

We therefore conclude that Miss Platte was subrogated to the enforceable liens of the pri- or creditors.

As shown above, the claim of the First National Bank of Jacksonville was barred by the statute of limitations, at the time Miss Platte’s claim accrued. Chapter 123, Gen. Laws (33rd Leg.) 1913; chapter 27,1st Called Session (33rd Leg.) 1913; Frank v. Bank (Tex. Com. App.) 263 S. W. 255; Farmers’ Life Ins. Co. v. Wolters (Tex. Com. App.) 263 S. W. 259. No renewal thereof was shown; the investment company, therefore, as correctly held by the Court of Civil Appeals, had the right to interpose the defense of limitation as to that claim, in protection of its rights under its attachment lien.

Being subrogated to the claim of Oskar Laebo, Miss Platte became entitled to only the rights, securities, and remedies which he had. As said in 25 R. C. L. p. 1377: “It follows from the very principles of the doctrine of subrogation that one can not thereby succeed to or acquire any claim or right which the person for whom he is substituted did not have, the extent of his remedies and the measure of his rights being controlled by those possessed by the creditor, and those rights, claims and securities to which he succeeds are taken subject to the limitations, burdens and disqualifications incident to them in the. hands of his predecessor. Beyond this he has no valid claim for protection.” In James v. Jacques, 26 Tex. 320, 82 Am. Dec. 613, the court held that James, by virtue of his purchase at the sheriff’s sale under foreclosure of an attachment lien, became the owner of an equity of redemption and possessed the same rights that the makers of a previously executed trust deed (whose interests were attached) retained at the time of its execution, and, while the creditor could enforce the lien upon the encumbered property, this must not be done in such manner as to affect James’ equity of redemption. So here, the investment company by its acquisition of the property at attachment foreclosure sale became the owner of the property, subject to the prior trust deed lien of Oskar Laebo, and equity of redemption thereunder; by paying such lien it could have extinguished all claims thereunder, but this was the lien held by Lae-bo and not one subsequently created for a different amount, under a different deed of trust and to another and different trustee.

The maker of a trust deed containing power of sale may impose on its exercise any limitations he desires and they must be strictly followed and the power admits of no substitution and of no equivalent. Michael v. Orawford, 108 Tex. 352, 193 S. W. 1070.

If a sale had been made under the original trust deed, the purchaser would have taken the mortgagor’s title divested of all interests and incumbrances afterwards made. Hampshire v. Greeves, 104 Tex. 620, 143 S. W. 147. The sale here was not made under that trust deed but under the later one to W. P. Neblett, trustee, for another and different debt,, the lien of which was subordinate to the attachment lien. She made no effort to foreclose her subrogated lien.

The trial court and Oourt of Civil Appeals correctly disposed of this ease and we recommend that their judgments be affirmed.

CURETON, C. J.

Judgments of the district court and Court of Civil Appeals are both affirmed, as recommended by the Commission of Appeals.


author: HARVEY, P. J. CURETON, C. J.

text:
    METROPOLITAN CASUALTY INS. CO. v. CHEANEY et al.
    No. 1594—5970.
    Commission of Appeals of Texas, Section A.
    Dec. 22, 1932.
    . Terrell, Davis, McMillan & Hall, of San Antonio, and J. A. .Thomas, Louis D. Gayer, and Lloyd Kerr, all of San Angelo, for plaintiff in error.
    Upton & Upton, J. F. Sutton, S. C- Autry, J. W. Stovall, Anderson & ■ Jones, Smift^ & Neill, and Harris 0. Williams, all of San Angelo, and George C. Purl, G. Drummond Hunt, and Rice & Hyman, all of Dallas, for defendants in error.
    Smith. & Neill, of San Angelo, for San. Angelo Board of Education.
   HARVEY, P. J.

This controversy involves the rights of various claimants of funds retained in the hands of the San Angelo board of'education, hereinafter designated as the school board; said funds constituting a part of the contract price which the school board agreed to pay for the construction of certain public improvements. The facts are substantially as follows: On April 11, 1928, the school board and Thomas-Sable Construction Company, hereinafter called the construction company, entered into five contracts in writing, whereby the latter became bound to construct certain improvements on five public school buildings in San Angelo. Each of said contracts involved a different school building, and was distinct from the other four. In connection with each of said building contracts, the construction company, as principal, and the Metropolitan Casualty Insurance Company, hereinafter called the insurance company, as surety, executed a bond in conformity to the provisions of article 5160 of the Revised Statutes, as amended by Acts 1927, 1st Called Sess., c. 39. With reference to each building contract and bond, the construction company executed to the insurance company an assignment reading as follows: “That in further consideration of the execution o-f said bond, the undersigned hereby assigns, transfers and conveys to the Company all deferred payments and retained percentages, and any and all moneys and properties that may be due and payable to the undersigned on account of said contract, or on account of extra work or materials supplied in connection therewith, hereby agreeing that such money, and the proceeds of such payments and properties shall be the sole property of the company and to be by it credited upon any loss, cost, damage, charge and expense sustained or incurred by it under said bond.”

On September 10, 1928, the construction company completed the construction work in accordance with the respective building contracts, and the work was accepted by the school board. At that time the school board held and still holds in retainage, from the contract price of the construction work on the various school buildings involved^ the following sums: Junior high school, $11,353.31; John H. Reagan school, $4,123.87; Santa Rita school, $3,381.85; San Jacinto school, $4,-050.87; Ft. Ooncho school, $2,470.65 — aggregating the sum of $25,380.55. When all the construction work was completed, the construction company owed claims aggregating $2S,589.43, for labor and material that went into the various buildings. The furnishers of such labor and material included the defendants in error herein, to wit, the plaintiff A. T. Cheaney and the various interveners herein, and also included Wm. Cameron & Co., whose claim amounted to $13,063.40, and the Lydick Roofing Company whose claim amounted to $1,020.15. The two last named companies secured liens on the bonds of the construction company by complying with the provisions of R. S. art. 5160, as amended in the year 1927; and, in April, 1929, the insurance c'ompany, as surety on said bonds, paid the claims of said two companies. None of the defendants in error secured liens on any of said bonds by complying with the last-mentioned statute. They did, however, give notice of their claims to the school board, as provided by section 1 of the Act of 1925, c. 17, p. 44, Laws passed by 39th Legislature, Regular Session (article 5472a, Vernon’s Ann. Civ. St.). The Lydick Roofing Company also gave notice of its claim in accordance with the provisions of the last-named statute. All the notices just mentioned were given prior to January 1, 1929. Wm. Cameron & Co. did not comply with the last-mentioned statute. The present sfiit was commenced in March, 1929, by the defendant in error A. T. Cheaney against the construction company, the insurance company, and the school board, in which he sought to recover of the construction company the amount due on his claim for labor and material furnished, and to require the school board to pay same from said funds retained by the board. The various other defendants in error intervened in the suit and sought similar relief in respect of their respective claims for labor and material furnished. The insurance company in its answer set up a cross-action in which it asserted (i) a prior claim to all said funds by virtue of the several assignments executed by the construction company, which became effective long before any of the defendants in error gave notice of their respective claims to the school board; and, in the alternative (2) a right to share in the distribution of said funds, as the successor in right, by sub-rogation, to Wm. Cameron & Co. and the Lydick Roofing Company, whose claims the insurance company has paid as surety of the construction company. These rights asserted by the insurance company furnish the main grounds of controversy in the case. The trial court gave judgment for all the defendants in error for the relief sought by them, and established liens in their favor on the funds in retainage, as a whole, and directed the payment of the claims of the defendants in error from said funds, as a whole, without regard to which of the several building contracts the various claims for labor and material pertained. The trial court denied the relief sought by the insurance company in its cross-action. The latter company appealed, and the Court of Civil Appeals reversed the judgment of the trial court and remanded the cause [32 S.W.(2d) 691], and in so doing con-eluded, in effect (1) that, as regards each separate retainage fund in question, the claim of the insurance company, as assignee of the construction company, is inferior to such of the claims for labor or material as are chargeable against that particular fund; (2) that, since the Eydicls Roofing Company complied with the provisions of the act of 1925 (Vernon’s Ann. Civ. St. art. 5472a) and thus procured a lien on retained funds in the hands of the school board, the insurance company, in paying the Eydick Company’s claim, became subrogated to the lien which the latter company had fixed; (3) that, with respect to the claim of Wm. Cameron & Co., the insurance company was not entitled to a lien on any of said funds; (4) that the trial court erred in directing payment of claims for labor and material from said retained funds, without regard to the particular building contract in respect of which the labor or material was furnished.

Excepting the third conclusion, which relates to the claim of Wm. Cameron & Co., it is our opinion, for reasons to be stated, that the several conclusions of the Court of Civil Appeals, as indicated above, are correct. Sections 1 and 2 of said act of 1925 (appearing in Vernon’s Statutes as articles 5472a and 5472b) read as follows:

“Art. 5472a. That any persons firm or corporation, or trust .estate, furnishing any material, apparatus, fixtures, machinery or labor to any contractor for any public improvements in this State, shall have a lien on the moneys, or bonds, or warrants, due or to become due to such contractors for such improvements ; provided, such person, firm, corporation, or stock association, shall, before any payment is made to such contractor, notify in writing the officials of the State, county, town or municipality whose duty it is to pay such contractor of his claim.
“Art. 5472b. That no public official, when so notified in writing, shall pay all of said moneys, bonds or warrants, due said contractor, but shall retain enough of said moneys, bonds or warrants to pay said claim, in case it is established by judgment in a court of proper jurisdiction.’’

These statutes were in force when the respective building contraéis between the school board and the construction company were made, and are yet in force. The provisions of said statutes entered into and became part of each building contract the same “as if they were expressly referred to, or incorporated in its terms.” Winder Bros. v. Sterling, 118 Tex. 268, 12 S.W.(2d) 127, 128, 14 S.W.(2d) 802 and authorities there cited. With reference to the moneys, etc., due or to become due the construction company under each building contract, the company impliedly consented to the terms of the statutes, as constituting terms of the building contract, and thereby agreed, in effect, to subordinate the company’s claim to the claims of those furnishing labor or material in furtherance of the work called for in said contract, and who complied with the terms of the statute first quoted above. Winder v. Sterling supra. Consequently the claims which subsequently came into being, for labor and material furnished in furtherance of the work under the particular contract, and which were fixed, in accordance with the statute, as “liens” on funds arising from said contract, became, by virtue of the terms of the contract, superior to the claim of the construction company. The construction company could not, by assigning to another its claim to said funds, discharge the claim of the restrictions provided in the contract from which the claim arose. In the hands of the assignee, the assigned claim, remained subject to the terms of the contract which gave laborers and materialmen a potential right to appropriate to the payment of their claims the retained funds which pertain to the particular building contract in furtherance of which the labor or material was furnished.

Before leaving this subject, it may be well to notice the case of Harris County v. Campbell, 68 Tex. 22, 8 S. W. 243, 2 Am. St. Rep. 467, followed in Clark v. Gillespie, 70 Tex. 513, 8 S. W. 121, and upon which the insurance company so confidently relies. In those cases article 3176 of the Revised Statutes of 1879, was in material respects of the same import as the statute under consideration here, except that the former statute was not limited in application, by its terms, to contracts for public improvements. In the cases cited, it was held, in effect, that an assignment by the original contractor, of his claim to retained funds which arose from the contract for the construction of public improvements for a county, of which assignment the county had notice prior to receiving notice of the materialman’s claim, had effect to give the assignee a prior right to the ássigned funds, as against the materialman. We are not sure that such holding is reconcilable with the well-established principle upon which the ruling in Winder v. Sterling is based, and which controls our decision in the present case.

With reference to the Cameron & Co. claim, the insurance company, in paying that claim was but discharging its liability as surety for its payment. The insurance company therefore acquired, by subrogation, the same right to fix a lien on funds in the hands of the school board as Cameron & Co. possessed. The fact that no notice of the claim was given to the school board before this suit was commenced is not an important consideration. As regards retained funds in the hands of a municipality, the statute (article 5472a) prescribes no limitation as to the time of giving notice of a claim to the municipality. The statute does provide, .however, that such notice shall be “in writing.” There is no reason in the present case to justify a conclusion that notice to the school board of the claim of the insurance company, as successor in right to Cameron & Co., should not be- as effectual, if given in the written pleadings of the insurance company in the case, as if similar notice had been given by Cameron & Co. to the school board, by a written document, immediately after the construction work under the building contracts was completed. likewise the pleadings of any other lien claimant may, upon another trial, be taken into consideration in determining the sufficiency of notice to the school board of a given claim, regardless of whether the school board was sufficiently notified of such claim prior to this suit or not. The several liens for labor and material, including those of the insurance company respecting the Cameron & Co. and Lydick Company claims, which have already attached, or which may before another trial become properly attached, to a particular fund involved herein, are and will be on an equal footing and occupy a common status. There is nothing in the statute to indicate a distinction in rank between liens which attach to the same fund. Moreover, it appears that no equitable ground for such distinction exists in this case.' All funds retained by the school board remain intact just as they existed before the required notice was given to the board by any of the claimants. There is therefore no question involved respecting priority, as between the several lienholders, on account of diligence in the matter of fixing any of the liens on the retained funds.

We recommend that the judgment of the Court of Civil Appeals, reversing the judgment of the trial court and remanding the cause, be affirmed.

CURETON, C. J.

The judgment of the Court of Civil Appeals, reversing that of the district court, is affirmed, as recommended by the Commission of Appeals.

We approve the holdings of the Commission of Appeals on the questions discussed in its opinion.


author: HARYEY, P. J. CURETON, C. J.

text:
    STOKES v. SNYDER.
    No. 1588—5960.
    Commission of Appeals of Texas, Section A.
    Dec. 22, 1932.
    W. B. Moss, of Sinton, and J. D. Todd and J. D. Todd, Jr., both of Corpus Christi, for plaintiff in error. '
    Jas. G. Cook, of Sinton, for defendant in error.
   HARYEY, P. J.

This is a suit brought by the plaintiff in error, L. S. Stokes, against the defendant in error, William Snyder, to recover damages, both actual and exemplary, on account of the seizure and-detention, under a writ of attachment, of certain property belonging to Stokes. The trial court overruled a general exception which Snyder urged to the plaintiff’s petition. The ease was tried to a jury on special issues resulting in, a judgment in favor of Stokes for the several amounts of damages found by the jury, in answer to the several special issues hereinafter set out. Snyder appealed, and presented a number of assignments of error, the Court of Civil Appeals sustained the assignment of error relating to the action of the trial court in overruling the general exception to the plaintiff’s petition, and reversed the judgment of the trial court, without discussing any of the other assignments of error presented by Snyder. 34 S.W.(2d) 918. The application of Stokes for the writ of error has been granted by the Supreme Court.

We are inclined to believe that the trial court properly overruled the general exception to the petition of Stokes; but since other assignments of error duly presented and urged in the Court of Civil Appeals, by Snyder, show reversible error, the judgment of the last-named court reversing and remanding the cause should be affirmed.

The facts of the case so far as need be stated here are substantially as follows: Snyder sued Stokes for an alleged debt. The for*mer procured a writ of attachment to be issued, and caused same to be levied on the tools and other equipment which were used by Stokes in his business of conducting a garage for the repair of automobiles, including equipment for a filling station which Stokes conducted, as a business, in connection with his garage business. The building in which said filling station business and garage business were conducted by Stokes was in the possession of Stokes under a lease for a term which had not expired. ' The writ of attachment in question was, at .the instance of Snyder, levied upon all the above-mentioned property of Stokes. The officer, upon levying the writ, took possession of all said property, closed the place of business of Stokes, and excluded the latter .therefrom for a period of about thirty-six hours. At the end of such period, Stokes duly replevied all said property and thereby regained possession of same, and resumed his business. The writ of attachment, under which said property was .taken, is admittedly unlawful, for the reason that the affidavit which Snyder made, and which forms the basis of such writ, is legally insufficient to authorize the writ. Nobody disputed this. The testimony also raised a fact issue as to whether or not Stokes owed Snyder the indebtedness, or any part thereof, alleged in the affidavit for attachment. This fact issue was resolved by the jury in favor of Stokes, in answer to a special issue on the subject, which was submitted to them on the trial of this case. The present suit, as has been already indicated, was brought by Stokes against Snyder for the recovery of damages, both actual and exemplary, on account of the seizure and detention of his said property. At the trial of the case, the trial court submitted charges and special issues to the jury which, together with the respective answers given by the jury, are as follows:

“This case is submitted to you upon special issues, in the form of certain questions for the jury to answer, and thereupon to cause the same to be signed by your foreman where indicated; and in connection herewith the Court charges the jury upon the law applicable to this case, and you will be guided in arriving at your answers to the questions alone by the facts submitted to you under the ruling of the court and the law as herein given you.
“You are charged and instructed by the court that the attachment proceedings sued out and levied herein by the defendant is void, and is thereby wrongful, and you must therefore find actual damages in some amount in favor of the plaintiff and against the defendant.
“You are further charged and instructed by the court that the suing out and causing to be levied a writ of attachment is a harsh and severe remedy, and should not be exercised except upon lawful grounds, and upon probable cause, and without malice, or evil motive or intent. •
“You are further charged that the Constitution and laws of this State exempt from seizure or forced sale, and from attachment, all tools in any trade, and you are charged that if such personal property if used by one engaged in the’business or trade of automobile mechanic, is exempt from attachment. You are further charged that there is also exempt to every family one carriage or buggy, and that an automobile is such. You are further instructed that the homestead of a family is exempt, and that a leasehold for one year may be such homestead.
“Now bearing in mind the foregoing charges upon the law and any subsequent charge's in connection with your answers or otherwise, submitted by the Court, you will answer the following special issues submitted in the form of questions:
“Special Issue Number One. What sum of money do you find the plaintiff sustained as actual damages by reason of the closing of his place of business and loss of'business during the time the same was closed?
“Answer in dollars and cents. $22.75
“In connection with the foregoing special issue Number one you are instructed that you may consider loss sustained by the plaintiff in his business during the time it was actually closed under the writ of attachment, and the said property and place of business was detained from him by reason thereof.
“You are further charged that the defendant is responsible for the acts of the officer in closing said place and detaining said property under the writ of attachment, and that he is responsible for the acts of his agents, servants and attorneys in the way and manner in which such attachment proceedings were sued out and levied.
“Special Issue Number Two. What sum of money, if any, do you find the plaintiff sustained as actual damages, if any, in the loss of business by reason of the issuance and levy of the writ of attachment, and as the reasonable and natural result of such seizure and levy?
“Answer in dollars and cents. $1059.52.
“In connection with the foregoing special issue Number Two you are instructed that you may take into consideration the amount or volume of plaintiff’s business for a reasonable time before his business was closed under said writ, and the same after he recovered his property and place of business. By the term ‘reasonable and natural result,’ is meant such as might have been reasonably and naturally expected or contemplated to occur directly and proximately from the issuance and levy of the attachment in the way and manner as it was done.
“Special Issue Number Three. Was the writ of attachment sued out and caused to be levied maliciously; that is, without probable cause and with intent to injure the plaintiff in his business or business reputation?
“Answer yes or no. Yes — yes No. — .
“In connection with the foregoing special issue Number three, you are instructed that malice may be inferred from wrongful and unlawful acts, it may be proved by direct evidence or by circumstances.
“Special Issue Number Four. If you have answered the foregoing special issue number three in the affirmative, then you will answer this last Special Issue Number Four, in the following question:
“What sum of money do you assess against the defendant as exemplary damages?
“Answer in dollars and cents. $3125.00.
“In connection with the foregoing special issue Number four, you are charged that in arriving at the amount of exemplary damages, you may take into consideration loss of credit, or damage to his credit, if any, to plaintiff, in his business, damage to his property and business, if any, injury to his feelings, shame or humiliation, if any, as the direct and proximate result of the wilful and malicious issuance and levy of the void writ.”

There were some other special issues submitted, but, so far as they bear on the questions to be discussed, that bearing is materially the same as that of the special issues set out above. The nature of some of the errors of which the defendant in error, Snyder, complains, will appear from our disbussion of the case.

Where a case is tried on special issues, the trial court is not permitted to give the jury any charge, except “such explanations and definitions of legal terms as shall be necessary to enable the jury to properly pass upon and render a verdict on such issues.” R. S. art. 2189. It has been repeatedly held that the giving of a general charge, except as authorized by the above statute, is not permitted, and will require a reversal of the case, when the point is properly preserved and presented to the appellate court, unless it clearly appears that no injury resulted to the complaining party, on account of such general charge. Humble Oil Oo. v. McLean (Tex. Com. App.) 280 S. W. 557; Texas & P. Ry. Co. v. Perkins (Tex. Com. App.) 48 S.W.(2d) 249, and authorities there cited.

It is plain that a'number of the charges or instructions given to the jury in the present case are essentially of the same character which were held to be general charges in the cases to which we have referred, and which were there held to be of an injurious nature. Particularly is this true with regard to that paragraph of the preliminary instructions which relates to the harshness and severity of the remedy of attachment, etc., as well as the paragraph which relates to the exempt character of property of the classes there designated. Regardless, therefore, of grounds of complaint urged by Snyder in other respects, the giving of the last-mentioned instructions to the jury was erroneous; and same affords justification for the action of the Court of Civil Appeals in reversing the case, even though that court assigned a wrong reason therefor.

In view of another trial, however, we deem it proper to point out the different aspects of the law relative to loss of business as a ground of recovery of actual damages in attachment cases. The broad rule has been laid down in this state that, in such a case, the loss of business is not an element of actual damage. Kirbs v. Provine, 78 Tex. 353, 14 S. W. 849; Kaufman v. Armstrong, 74 Tex. 65, 11 S. W. 1648; Miller v. Jannett, 63 Tex. 82. But that rule has reference to a case where the value of the property taken furnishes the measure of damage. It does not apply, as thus broadly laid down, to a case of this sort, where the property taken is detained for a period of time, and such detention necessarily has effect to interrupt the business of the defendant in attachment. In such a case, the thing lost to the latter is the value of the use, for the time being, of the property which is detained from him, and for which loss the law allows compensation by way of compensa--tory or actual damages. Such profits as would have been earned by Stokes in his business, but which were lost to him as the proximate result of the wrongful detention of his property, measures the value of the lost use of his property. Hamlett v. Coates (Tex. Civ. App.) 182 S. W. 1144 (writ refused); Halcomb v. Stubblefield, 76 Tex. 310, 13 S. W. 231; Wilson v. Manning (Tex. Civ. App.) 35 S. W. 1079. In no event, however, can the loss of any profits, which is not directly referable to, or proximately caused by, the wrongful detention of the use of the property from the defendant in attachment, constitute a legal basis for the recovery of actual damages.

We recommend that the judgment of the Court of Civil Appeals, reversing the judgment of the trial court and remanding the cause, be affirmed.

CURETON, C. J.

The judgment of the Court of Civil Appeals, reversing that of the district court, is affirmed, as recommended by the Commission of Appeals.


author: CALHOUN, J.

text:
    JONES v. STATE.
    No. 15316.
    Court of Criminal Appeals of Texas.
    Dec. 21, 1932.
    Clifford' L. Stone and John O. Gray, both of Henderson, for appellant.
    Lloyd W. Davidson, State’s Atty., of Austin, for the State.
   CALHOUN, J.

Conviction is for possessing intoxicating liquor for the purpose of sale; punishment assessed at two years in the penitentiary.

Peace officers searched the automobile of appellant and found therein four one-half gallons of whisky. The appellant did not testify nor offer any testimony in his behalf. No search warrant had been issued authorizing the search of appellant’s car. Objection was made to the testimony of the officers touching the result of the search on the ground that the search was made without a search warrant and without probable cause. The qualification to the bill of exception presenting this objection shows that, when the objection was made by appellant to the testimony, the jury was retired, and it is shown by the bill of exception that, before the evidence was admitted, R. W. Watson, one of the searching officers, testified that he had information that the appellant was handling whisky and had been watching him for a week or two; that on the day of the search he first saw the appellant’s automobile on the square just a little before sundown; that it was a two-door Chevrolet, and he had seen the appellant riding in that automobile before; that he noticed the appellant driving the car and had seen him get out and look around, and several times when he got out of the car he would look on the back seat, and it looked to the officer like appellant was trying to hide something, and he saw him place an overcoat on something on the back seat; that a number of times before he noticed him talking to some bootleggers who were pinting whisky; that on the evening in question he saw him talking to a negro porter in the Randolph Hotel and another boy over by the oil exchange; that his actions were peculiar, and he noticed him talking to a fellow on the corner and pointing back east; that he then saw the appellant talking to the negro and pointing back east; that, after he saw him talking to these parties and pointing east, he saw appellant walk across to his automobile, and he noticed him looking back a time or two; appellant then drove off in the automobile and drove east, and one Hallmark, another deputy sheriff, and he, then followed appellant in an automobile; that the appellant drove across the bridge at the lake on the new Pine Hill road and drove his car up to above a filling station and pulled in against the bank and cut his lights out; as the officers drove up beside appellant’s automobile, the appellant opened the door, and they could see the bulk of something in the back seat of the a]®ellant’s car, and he (the witness) then asked appellant what he had in his ear, and appellant made no reply; that there was an overcoat lying lengthwise on the back seat of appellant’s car, and he could tell that there was something underneath the overcoat, and, upon raising the overcoat, he found four half-gallon jars of whisky, each in a paper sack.

The qualification to the bill of exception was to the effect that, after hearing said testimony, the court determined that the officers, from the facts, had probable cause to search defendant’s automobile, and the facts of the search were admissible in evidence.

We think the testimony which has been quoted was sufficient to warrant the officers in searching the appellant’s automobile, and it warranted the court in receiving the testimony relating to the result of the search, and that such facts would be sufficient to constitute probable cause as the term is defined in our decisions. In Landa v. Obert, 45 Tex. 539, the Supreme Court of this state defined “probable cause” as follows: “A reasonable ground of suspicion, supported by circumstances sufficiently strong in themselves to warrant a cautious man in the belief that the person accused is guilty of the offense with which he is charged.” Where, in advance of the search of an automobile, there is evidence of facts showing probable cause, a search without a warrant is justified. See Rochelle v. State, 107 Tex. Cr. R. 79, 294 S. W. 860; Battle v. State, 105 Tex. Cr. R. 568, 290 S. W. 762, 764; Odenthal v. State, 106 Tex. Cr. R. 1, 290 S. W. 743. As said in Battle v. State, supra, “Whether ‘probable cause’ existed to authorize the search is largely a question of fact.” We would not feel warranted in holding, as a matter of law, that “probable cause” was not shown to have existed in the present instance.

By bill of exception No. 3, complaint is made of the action of the trial court in permitting the introduction of one of the officers’ testimony that, when the appellant stepped out of his car at the time of the search that the officer asked him what he had under the coat on the back seat of his car and the appellant did not say anything. Appellant objected to said testimony for the (reason that appellant was under arrest pri- or to the time of the search being made and he had been detained by. two deputies, who testified that they were officers, and further because they had no search warrant,- nor does the testimony given by them constitute probable cause whereby the same witnesses were justified in searching said car.

There is nothing in this bill showing that the appellant was under arrest at the time the question was asked. There is nothing in the bill to verify the truth of the objections that he was under arrest, and a mere statement of a ground of objection in a bill of exception is not a certificate of the judge that the facts which formed the basis of the objection are true. The bill merely shows that such an objection was made, and the appellant did not incorporate a sufficient amount of the evidence in the bill as would verify the truth of his objection. Therefore the bill is not subject to consideration under the authorities. See Coleman v. State, 110 Tex. Cr. R. 409, 10 S.W.(2d) 559; Arnold v. State, 74 Tex. Cr. R. 269, 168 S. W. 122; Fisher v. State, 107 Tex. Cr. R. 383, 296 S. W. 545; Stanford v. State, 103 Tex. Cr. R. 182, 280 S. W. 798.

Other bills of exception in the record relate to the officers giving in evidence the acts and conduct of the appellant just prior to the discovery of the whisky; that is, with reference to his talking to a negro porter and other parties. The officer did not attempt to give any evidence on this matter further than to detail the acts and conduct of the appellant prior to the discovery of the whisky in his possession. As these bills are presented, no error is shown.

We note that the verdict of the jury finding the appellant guilty assessed his punishment at two years in the penitentiary and the sentence fixed his punishment at confinement in the penitentiary for not less than two nor more than two years. The sentence will therefore be reformed so as to assess appellant’s punishment at confinement in the penitentiary' for an indeterminate period of not less than one year nor more than two years, and, as so reformed, no reversible error appearing, the judgment is affirmed.

Reformed and affirmed.

PER CURIAM.

The foregoing opinion of the Commission of Appeals has been examined by the judges of the Court of Criminal Appeals and approved by the court.