author: CADENA, Justice.

text:
    SOUTHWESTERN BELL TELEPHONE CO., Appellant, v. Oleta GRAVITT, Appellee.
    No. 15513.
    Court of Civil Appeals of Texas, San Antonio.
    Nov. 10, 1976.
    Rehearing Denied June 1, 1977.

      Foster, Lewis, Langley, Gardner & Ba-nack, James E. Barden, San Antonio, for appellant.
    Pat Maloney, San Antonio, for appellee.
   CADENA, Justice.

Defendant, Southwestern Bell Telephone Company, appeals from a summary judgment awarding plaintiff, Oleta Gravitt, $80,000.00 in death benefits and a monthly pension in the sum of $586.84 on account of the death of her husband, T. O. Gravitt, who, at the time of his death, was defendant’s employee. Plaintiff’s claim is based on the provisions of defendant’s “Plan for Employees’ Pensions, Disability Benefits and Death Benefits” (referred to in this opinion as “the Plan”).

The Plan provides for the payment of death benefits and pensions to surviving spouses of defendant’s employees. It is administered, in accordance with written regulations, by an Employees’ Benefit Committee (referred to in this opinion as “the Committee”), consisting of five persons who are appointed by, and serve during the pleasure of defendant’s Board of Directors. The Plan is non-contributory in the sense that the employees make no contributions to the fund out of which the payments called for by the Plan are made. However, today it is settled that the lack of employee monetary contributions does not convert the payments called for by retirement and pension plans into mere gratuities bestowed by a generous employer. Such plans create contractual rights and obligations, and are regarded as a mode of employee compensation. Lee v. Lee, 112 Tex. 392, 247 S.W. 828 (1923); Mora v. Mora, 429 S.W .2d 660 (Tex.Civ.App. — San Antonio 1968, writ dism’d).

Shortly after the death of plaintiff’s husband, the Committee approved payment to plaintiff of $80,000.00 in death benefits, as well as a pension in the amount of $586.84 per month. On November 15, 1974, after the Committee’s decision but before any payments were made to her in accordance with the Committee’s decision, plaintiff, joined by two surviving children of the decedent, filed suit against defendant seeking recovery under our wrongful death statute (Art. 4671, Tex.Rev.Civ.Stat.Ann.), of damages for the death of T. O. Gravitt, alleging that defendant wrongfully caused his death.

Following the filing of the wrongful death action, the Committee rescinded its prior action and, by letter, informed plaintiff that, because of the wrongful death action filed against defendant, “it will not be possible to pay the one-year Death Benefit at this time.” This action by the Committee was based on the provisions of Paragraphs 25 and 26 of Section 8 of the regulations governing the administration of the Plan. These paragraphs read as follows:

25. Should claim other than under these Regulations be presented or suit brought against the Company . . . , for damages on account of injury or death of an employee, nothing shall be payable under these Regulations on account of such injury or death except as provided in Paragraph 26 of this Section; provided, however, that the Committee may, in its discretion and upon such terms as it may prescribe, waive this provision if such claims be withdrawn or if such suits be discontinued.
26. In case any judgment is recovered against the Company or any settlement is made of any claim or suit on account of the injury or death of an employee, and the amount which would otherwise have been payable under these Regulations is greater than the amount paid on account of such judgment or settlement, the difference between the two amounts may, in the discretion of the Committee, be distributed to the beneficiaries who would have received benefits under these Regulations, except that no party to any such suit against the Company shall be entitled to any portion thereof.

Plaintiff filed the present suit on January 20, 1975. Her first amended original petition alleged four separately numbered causes of action. The first cause of action, captioned “Suit for Vested, Monthly Pension Benefits and Vested Death Benefits,” alleges the death of plaintiff’s husband, the approval of the payments of death benefits, and a monthly pension to plaintiff by the Committee, and the subsequent rescission of such approval. This count includes the assertion that Paragraphs 25 and 26, which formed the basis for the Committee’s decision to withhold payment, constitute forfeiture provisions which are contrary to public policy.

The second cause of action is for declaratory judgment seeking, essentially, a declaration that Paragraphs 25 and 26 are unenforceable forfeiture provisions.

The third and fourth causes of action are not relevant to this appeal.

In addition to a general denial, defendant’s answer, by way of a plea in abatement and allegations in the nature of an affirmative defense, contends that until plaintiff’s wrongful death action is discontinued or disposed of by judgment or settlement “the Committee . . . cannot make a deter-

mination of the amount ... of such death and pension benefits due Plaintiff” because, under the provisions of Paragraphs 25 and 26, “any benefit paid” under the Plan “shall be only the excess over any judgment or settlement of” the wrongful death suit.

The order granting plaintiff’s motion for summary judgment declares that Paragraphs 25 and 26 “are void and unenforceable as against public policy insofar as they permit the withholding of benefits which a beneficiary of a deceased employee is entitled to receive . . . The order provides that plaintiff recover from defendant $80,000.00 as death benefits and orders defendant to pay to plaintiff a pension in the sum of $586.84 per month, effective August 1, 1978. Finally, the order effects a severance of that portion of plaintiff’s cause of action “which is encompassed by this Summary Judgment” from the remainder of the cause of action set forth in plaintiff’s petition.

The clear import of the language found in the paragraphs in question precludes the conclusion, for which defendant contends, that such paragraphs merely permit defendant to “offset,” against the benefits otherwise payable under the Plan, whatever amount plaintiff may realize as a result of prosecuting her suit to judgment or effecting a settlement of her statutory claim for wrongful death.

Paragraph 25 clearly provides that, except as set out in Paragraph 26, no payment whatever may be made to plaintiff under the Plan unless her wrongful death action is “discontinued,” in which event the Committee may, in its discretion, waive the bar to payment resulting from the filing of the suit. There is no language in this paragraph which can possibly be interpreted as providing that, as claimed by defendant, “any benefits paid [under the Plan] shall be only the excess over any judgment or settlement” of the suit.

Nor, unless we ignore the language used, it is possible to interpret Paragraph 26 as providing for an offset as far as plaintiff is concerned. Under that paragraph, if, as a result of a judgment rendered in, or settlement of, the suit, defendant is obligated to pay an amount less than the amount otherwise payable under the Plan, the Committee may elect to pay the difference to beneficiaries who are not parties to the suit. Since plaintiff is a party to the wrongful death action, she is not entitled to receive any payments whatever under the provisions of Paragraph 26.

Stated bluntly, Paragraphs 25 and 26 permit no payments under the Plan to plaintiff unless she completely relinquishes her right to recover for the wrongful death of her husband. If she prosecutes her suit to judgment, she receives nothing, even if the judgment denies her recovery. If she settles her claim, she receives nothing, irrespective of the amount paid to her by defendant under the terms of the settlement.

If the intention was simply to permit the Committee to pay the difference between the amount payable under the Plan and a lesser amount paid by defendant to plaintiff as a result of the rendition of a judgment in, or settlement of, the wrongful death suit, it would be extremely difficult to choose language more inappropriate for the purpose of giving expression to such intention. Instead of saying, “if, because of your suit, you receive, by way of judgment or settlement, an amount less than that to which you would be entitled under the Plan, the. Committee may elect to pay you the difference,” Paragraphs 25 and 26 simply declare, “If you press your claim to judgment or settlement you will receive none of the benefits provided for by the Plan.”

It cannot be concluded that the language used in the paragraphs in question is merely the result of inept draftsmanship. Where the intention was to provide simply for set-off, the draftsman had no difficulty in choosing appropriate language. Paragraph 27 of the rules and regulations provides:

In case any benefit or pension, which the Committee shall determine to be of the same general character as a payment provided by the Plan, shall be payable under any law now in force or hereafter enacted to any employee of the Company, to his beneficiaries or to his annuitant under such law, the excess only, if any, of the amount prescribed in the Plan above the amount of such payment prescribed by law shall be payable under the plan;

There is a marked difference between this language, which unmistakably provides for offset, and the language found in Paragraphs 25 and 26.

It is not unusual to find in the rules and regulations governing the administration of pension plans language providing for a forfeiture, suspension, or other limitation of the rights or benefits accruing under such plans if the beneficiary engages in certain types of conduct. Our immediate concern is with the enforceability of such forfeiture provisions where their practical effect is to impose on employees, or on their beneficiaries under such plans, restraints which would be impossible to enforce if the restraint were embodied in a covenant by the employee to refrain from engaging in the described conduct.

It appears to be well settled that an employer cannot include in a contract of employment a provision relieving him of liability for his wrongful conduct which results in the death of his employee. 6A Corbin, Contracts § 1472, p. 592 (1961); 2 Restatement, Contracts § 573(l)(a) (1932). This rule has been followed in Texas. Galveston, H. & S. A. Ry. Co. v. Pigott, 54 Tex.Civ.App. 367, 116 S.W. 841 (San Antonio 1909, writ ref’d). Because of this judicial hostility to “no suit” covenants, express covenants by an employee purporting to waive his right to recover for future tor-tious conduct of his employer have been replaced by forfeiture provisions annexed to pension plans which, at the very least, have the effect of forcing the beneficiary to elect between accepting benefits under the plan or seeking judicial redress for the employer’s tortious conduct.

The cases involving the validity of such provisions are relatively few, and most, if not all, of the decisions considering the problem were handed down prior to 1930. There can be no doubt that a clear majority of the courts which have considered the problem have held such forfeiture provisions valid. Annot. 12 A.L.R. 477 (1921).

Provisions of this type have taken several forms. Perhaps the most common form is a provision to the effect that acceptance of benefits under the plan shall operate as a discharge of the employer from liability for wrongful conduct resulting in injury to, or death of, the employee. Such a provision is generally upheld because, analytically, it is the acceptance of benefits under the plan which results in the discharge of an existing right, as opposed to an agreement exempting the employer from liability for future wrongdoing. Eckman v. Chicago, B. & Q. R. Co., 169 Ill. 312, 48 N.E. 496 (1897); 15 Williston, Contracts § 1751A, pp. 161-62 (3d ed., Jaeger, 1972).

Most of the courts which have faced the problem have also upheld a clause providing that any suit seeking recovery of damages for injury to, or death of, an employee will bar recovery of benefits otherwise payable under the plan unless the suit is discontinued. Koeller v. Chicago, B. & Q. R. Co., 88 Neb. 712, 130 N.W. 420 (1911).

Where the beneficiary files suit without having accepted benefits under the plan previously, it cannot, of course, be argued that there has, in effect, been a compromise of an existing cause of action by accepting benefits under the plan. Where prosecution of the suit is held to bar recovery of benefits under the plan, it has been said that the provision in question does not deprive the beneficiary of the right to sue for wrongful injury or death but merely “requires him to make his election either to take the benefits provided by [the plan], or prosecute an action to recover all of the damages which are the result of his injury.” Koeller, supra, 130 N.W. at 422.

A somewhat analogous problem is presented where the forfeiture results from the fact that the employee, after terminating his employment, engages in competition with his former employer. It is well settled that a covenant, ancillary to a contract of employment, which embodies an agreement by an employee to refrain from competing with his employer upon termination of the employment will not be enforced if it unreasonably restricts the freedom of the employee, although in many jurisdictions, including Texas, the fact that the restraint is unreasonable does not result in the denial of all relief to the employer. As pointed out in Weatherford Oil Tool Co. v. Campbell, 161 Tex. 310, 340 S.W.2d 950, 952 (1960), the cases “hold that although the territory or period stipulated by the parties may be unreasonable, a court of equity will nevertheless enforce the contract by granting an injunction restraining the [employee] from competing for a time and within an area that are reasonable under the circumstances.”

Nevertheless, a majority of the courts will enforce a clause in a pension plan which declares that an employee participating in the plan will forfeit his pension rights if, following the termination of his employment, he engages in competition with his former employer. This is true even if the restraint, as written, is unrestricted as to time and area. Dollgener v. Robertson Fleet Services, Inc., 527 S.W.2d 277 (Tex.Civ.App. — Waco 1975, writ ref’d, n. r. e.). In enforcing the forfeiture provision, the Texas court relied heavily on the following language from Rochester Corp. v. Rochester, 450 F.2d 118, 122-23 (4th Cir. 1971):

The authorities, though, generally draw a clear and obvious distinction between restraints on competitive employment in employment contracts and in pension plans. The strong weight of authority holds that forfeitures for engaging in subsequent competitive employment, included in pension retirement plans, are valid, even though unrestricted in time or geography. The reasoning behind this conclusion is that the forfeiture, unlike the restraint included in the employment contract, is not a prohibition on the employee’s engaging in competitive work but is merely a denial of the right to participate in the retirement plan if he does so engage.

The “clear and obvious distinction between restraints on competitive employment in employment contracts and in pension plans” is, in reality, not clear, not obvious, and more importantly, not releyant. Given the present judicial attitude toward pension plans and the nature of the rights and obligations created by such plans, it cannot be argued that such plans are not a part of the contract of employment. As far as a restraint on competition is concerned, the fact is that a restriction on an employee’s freedom to engage in competition with his employer following termination of the employment is more likely to be enforced when the restraint is incorporated in the contract of employment, and less likely to be enforced if it is not included in such contract. 2 Restatement, Contracts §§ 515(e), 516(f). The courts considering the validity of provisions for forfeiture of pension rights brought about by a suit by the beneficiary against the employer apparently have not considered as controlling the fact that the forfeiture provision is contained in the pension plan rather than in the contract of employment. The distinction drawn in the cases involving forfeiture because of the competitive activities of the employee is clearly unsound insofar as it is based on whether the restraint is found in a “contract of employment” or in a pension plan.

The argument that a forfeiture provision is not a prohibition against the employee’s engaging in the conduct which results in the forfeiture is unacceptable. It is based on the theory that the result of the forfeiture provision is merely to force the employee to elect between participation in the pension plan and engaging in the forfeiture-producing conduct. This conclusion is based on the universally accepted view that a promise creates an obligation to act in a certain manner, while a condition imposes no obligation but merely declares the result of such action on the rights of the actor. But this distinction is irrelevant where the problem involves a determination of whether or not the forfeiture provision is contrary to public policy rather than a determination of whether or not the actor has breached a contractual duty.

Bluntly stated, the “election” argument refuses to recognize the fact that, in law, there are such things as invalid and unenforceable conditions, as well as invalid and unenforceable promises. The invalidity, on public policy grounds, of a restriction or restraint depends on the nature of such restriction or restraint, and not on whether it is expressed in the form of a promise or in the form of a condition which results in a divestiture of rights. 2 Restatement, Contracts § 512, comment d.

For example, a general restraint on marriage is unenforceable whether the restraint results from a promise not to marry or from enforcement of a condition providing for forfeiture of rights in case of marriage. 17 C.J.S. Contracts § 233a. Another example is to be found in the application of the rule that a general restraint on the power of the owner of a vested fee simple estate to alienate his interest will not be enforced because it is contrary to public policy. The restraint upon alienation may take one of three forms. It may be embodied in a covenant by the holder of the fee simple not to convey. It may také the form of an express prohibition against alienation. Finally, the restraint may take the form of a provision for forfeiture should the owner attempt to transfer his interest. Whether the restraint is of the disabling type (a promise to transfer or an express prohibition of transfer) or of the forfeiture type is irrelevant. The restraint will not be enforced. 4 American Law of Property §§ 26.9-26.11, pp. 420, 421-24 (1952).

The “election” rationale leads to results which are not only absurd but socially undesirable. According to this theory, if A promises to pay B $10,000.00 annually in return for B’s promise to take care of A during A’s lifetime and to kill at least one governmental official annually, the agreement to murder would be held unenforceable as contrary to public policy. But if A promises to pay B $10,000.00 annually in return for B’s promise to take care of A during A’s lifetime, and adds a stipulation or “condition” to the effect that A will be under no obligation to pay unless B murders at least one governmental official annually, the election theory would compel the conclusion that since B is under no duty to murder the effect of the condition is merely to put him to an election whether to murder or forego payment. No clever euphemism can disguise the hard, ugly fact that the creation of the “election” has as its purpose forcing B to commit murder annually in order to collect the money. Whatever the linguistic legerdemain employed, the result in either Case is, to put it bluntly, “no murder, no money.” The effect of the forfeiture provision involved in this case can also be simply stated: “No abandonment of your right to hold the employer liable for the death of your husband, no pension.”

Some courts, admittedly a minority, have refused to make the distinction between a promise and a condition in determining whether the restraint violates public policy. With respect to forfeitures resulting from the fact that the employee has engaged in competition with his employer, it has been said, “it is substance, not form, that controls,” and that such clauses reflect that the primary purpose of the forfeiture clause is to prohibit postemployment competition by the employee. Holsen v. Marshall & Ilsley Bank, 52 Wis.2d 281, 190 N.W.2d 189, 191 (1971). Under the minority view, for the purpose of determining whether there is a violation of public policy, the forfeiture clause is viewed as being no different from a covenant by which the employee agrees not to become employed by a rival company and to pay a penalty for doing so. Food Fair Stores, Inc. v. Greeley, 264 Md. 105, 285 A.2d 632, 638 (1972); cf. Carson v. Sun Life Assurance Co. of Canada, 56 Ga.App. 164, 192 S.E. 241, 242 (1937).

The same reasoning has been resorted to in order to invalidate provisions seeking to produce a forfeiture of rights for seeking recovery for personal injury resulting from the employer’s negligence. In Cameron, Joyce & Co. v. State Highway Commission, 350 Mo. 389, 166 S.W.2d 458, 461 (1942), a provision imposing a penalty on the exercise of the right to seek redress for tortious personal injury was regarded, for the purpose of determining the public policy question, as a contract for immunity from the legal consequences of future torts.

The distinction between a promise or covenant on the one hand and a forfeiture provision on the other forms no acceptable basis for resolution of the public policy question. The majority view, which enforces forfeiture clauses similar to the one before us, is based on faulty reasoning resulting from an undue judicial enchantment with form and completely ignores the fact that, whatever the form of expression, the result is “no murder, no money.” If a promise to murder is unenforceable, a contractual provision which penalizes a refusal to murder should be equally unenforceable, since, whatever the form used, the result is encouragement of murder.

It must be concluded that enforcement of the forfeiture provision in this case would be contrary to public policy.

Defendant insists that even if the forfeiture provision is unenforceable, the presence of material issues of fact compels the reversal of the order granting summary judgment in favor of plaintiff in this case.

The first asserted issue of fact concerns the amount of benefits payable under the Plan. Part of the argument urged in support of the contention that the amount payable to plaintiff is not conclusively established rests on the assumption that Paragraphs 25 and 26 create “express offset” provisions which make it impossible to determine the amount due plaintiff while the wrongful death action is pending. Since we have concluded that Paragraphs 25 and 26 constitute unenforceable provisions for forfeiture, rather than valid “offset” provisions, this argument is unpersuasive.

Defendant next calls our attention to Paragraph 27 of the rules and regulations in support of its contention that there exists an issue of material fact concerning the amount due plaintiff under the Plan. Defendant correctly points out that Paragraph 27, which has been set out above, permits the Committee to offset any recovery by plaintiff under the Workmen’s Compensation Act. The contention is that, because of Paragraph 27, the amount due plaintiff under the Plan cannot be determined until the amount recovered by her under the Workmen’s Compensation Act is definitely known.

The right of offset is an affirmative defense. The burden of pleading such defense and of proving the facts necessary to support it are on the person asserting it. American National Ins. Co. v. Fox, 184 S.W.2d 937 (Tex.Civ.App. — Fort Worth 1944, writ ref’d, w. o. m.). It was, therefore, incumbent on defendant to come forward with summary judgment “evidence” which at least raise an issue of fact concerning the existence of the essential elements of the defense. There is nothing in the record before us which even suggests that defendant is covered by workmen’s compensation insurance. There is nothing to indicate that plaintiff has made a claim for compensation or that, given the lapse of time, there is any possibility that she can make a claim. The burden was not on plaintiff “to negative” the defense plea. “Moore” Burger, Inc. v. Phillips Petroleum Co., 492 S.W.2d 934 (Tex.1972); Torres v. Western Casualty and Surety Co., 457 S.W.2d 50, 53 (Tex.1970).

The deposition of the Chairman of the Committee, in the form of answers to written interrogatories, has attached to it as an exhibit the minutes of the meeting of the Committee at which it was decided to withhold payment of benefits to plaintiff. The minutes reflect that the Committee decided to withhold payment of death benefits in the amount of $80,000.00 and a pension in the sum of $586.84 per month. At the hearing on the motion for summary judgment, the trial court, referring to these minutes, inquired of counsel for defendant whether the Committee had not determined that plaintiff was entitled to receive payments in the amounts stated in the minutes, but that payment was being withheld “solely” because of the provisions of Paragraphs 25 and 26. Counsel for defendant answered the question in the affirmative. The amounts payable to plaintiff were conclusively established. Once it has been determined that the “sole” reason for withholding payment to plaintiff is invalid, we clearly have final action by the Committee that plaintiff is entitled to the amounts specified in the judgment.

The judgment of the trial court is affirmed.

KLINGEMAN, J., did not participate in the consideration or disposition of this case.

      . Plaintiff has received $160,000.00 under a such payment is not in issue here. group life insurance policy. Her right to receive


source: Caselaw Access Project

license: Public Domain

text:
    UNITED STATES FIRE INSURANCE COMPANY et al., Appellants, v. C. H. MOSELEY, Receiver of American Grain and Cattle, Inc., Appellee.
    No. 15531.
    Court of Civil Appeals of Texas, San Antonio.
    Nov. 17, 1976.
    Rehearing Denied June 1, 1977.

      Larry L. Gollaher, Thompson, Coe, Cousins & Irons, Dallas, for appellants.
    Pat Maloney, San Antonio, for appellee.
   CADENA, Justice.

This is a plea of privilege case. Defendants, United States Fire Insurance Company, General Adjustment Bureau, Inc., and Highlands Insurance Company, appeal from an order of a district court of Bexar County overruling their pleas of privilege. The suit was filed by plaintiff, H. C. Moseley, in his capacity as operating receiver, appointed by a United States District Court in arrangement proceedings under Chapter XI of the Federal Bankruptcy Act (11 U.S.C. §§ 701-708), of American Grain and Cattle, Inc., an agricultural cooperative organized under the laws of the State of Texas.

In this opinion the following designations will be used: United States Fire Insurance Company will be identified as “U. S. Fire”; General Adjustment Bureau will be identified as “General”; Highlands Insurance Company will be identified as “Highlands”; H. C. Moseley will be identified as “Receiver”; and American Grain and Cattle, Inc. will be identified as “Debtor.” Defendants, U. S. Fire, General, and Highlands will sometimes be referred to collectively as “appellants.”

The Receiver was appointed on January 30, 1975. On February 5, 1975, Debtor, without joining Receiver and without seeking approval of the court in which the arrangement proceedings were pending, filed suit against appellants and two other defendants in a district court of Bexar County. The purpose of this suit was to recover actual and exemplary damages because of the refusal of appellants, in pursuance of what Debtor described as a conspiracy between appellants and the other two defendants, to pay to Debtor moneys allegedly due Debtor following the destruction by fire and explosion of buildings and their contents, owned by Debtor and insured against such loss.

Each appellant timely filed its plea of privilege on March 3, 1975. Debtor failed to file controverting affidavits in response to these pleas.

On March 4, 1975, Great American Life Insurance Company, one of the other defendants named in Debtor’s suit, filed its motion to dismiss the suit, alleging that Debtor lacked capacity to prosecute such suit in its own name because, prior to the institution of such suit, H. C. Moseley had been appointed operating Receiver for Debtor in the Chapter XI arrangement proceedings. Apparently, the trial court has never ruled on this motion.

On March 21, 1975, the United States District Court, in which the Chapter XI proceedings are pending, entered an order on application of Debtor and Receiver. This order (1) authorized, nunc pro tunc, the retention of counsel for the purpose of instituting the proceedings described in the application of Debtor and Receiver, that is, the suit which had been previously filed by Debtor in Bexar County; (2) authorized, nunc pro tunc, the institution of such proceedings; and (3) authorized Debtor and Receiver to join as parties plaintiff in such Bexar County proceedings.

On March 24,1975, appellants filed in the pending Bexar County litigation motions to transfer the case to Dallas County, where U. S. Fire and General maintain their principal offices, or to Harris County, the location of the principal office of Highlands. Appellants alleged they were entitled to such transfer because of Debtor’s failure to controvert their pleas of privilege within the time prescribed by law.

On March 25, 1975, Debtor dismissed its suit against appellants. At the time of such dismissal, the trial court had taken no action on appellants’ pleas of privilege nor on their motions to transfer the case. At the time the voluntary nonsuit was taken, Receiver had not been made a party to the proceedings, nor had he intervened or sought to intervene in such suit.

There can be no doubt that the venue issue must be considered to have been conclusively adjudicated adversely to Debt- or as a result of his voluntary dismissal of his suit while the plea of privilege was pending. Tempelmeyer v. Blackburn, 141 Tex. 600, 175 S.W.2d 222 (1943); Heifer v. Texas Employers’ Insurance Association, 467 S.W.2d 687 (Tex.Civ.App. — San Antonio 1971, no writ); 1 MacDonald, Texas Civil Practice §§ 4.48, 4.62, pp. 592, 628 (1965 rev.). As between appellants and Debtor, then, the venue issue is deemed to have been conclusively decided in favor of appellants as a result of the prior proceedings. This rule has been described in terms of an application of the doctrine of res judicata.

The first question to be determined is whether appellants may, in this action, assert as against Receiver, the prior proceedings as conclusively determinative of the venue issue.

The parties agree that a question of law or issue of fact which has once been litigated and adjudicated in a court of competent jurisdiction cannot be relitigated in a subsequent suit between the same parties or those in privity with them. Swilley v. McCain, 374 S.W.2d 871, 874 (Tex.1964). However, there is disagreement as to whether the required identity of parties is present in this case in order to preclude the relitigation of the venue issue in this case by Receiver.

Receiver is a successor of the Debtor for many purposes. With certain exceptions not believed relevant here, clauses 5 and 6 of § 70 of the Federal Bankruptcy Act (11 U.S.C. § 110(a)(5, 6)) vest the Receiver with title to (1) contract actions to which the Debtor had title on the date the bankruptcy proceedings were filed and (2) all rights of action to which the bankrupt had title on the date the bankruptcy petition was filed and which the bankrupt could have transferred or creditors could have seized prior to such filing. These clauses undoubtedly gave Receiver title to Debtor’s claims against the insurers for the amounts the insurers contracted to pay as indemnity. The clauses also vest in Receiver title to actions for those consequential damages that Debtor would have suffered if the insurers’ failure to pay had not forced him into insolvency. But it appears that Receiver did not succeed to the Debtor’s cause of action for damages resulting from the fact that Debtor was forced into bankruptcy. Although such damages may have stemmed from a wrong perpetrated before bankruptcy, such damages are not suffered until the bankruptcy petition is filed. Reichert v. General Insurance Company of America, 59 Cal.Rptr. 724, 428 P.2d 860, 867-68 (Cal.1967).

The petition in the suit filed by Debtor seeks to recover damages, allegedly flowing from the insurers’ refusal to pay indemnity for lost profits, loss of members, loss of ability to buy grain, loss of ability to repair Debtor’s property in time for the grain season, and losses resulting from the fact that Debtor was unable to handle its grain automatically and being forced to handle the grain manually. No mention is made of the fact of Debtor’s bankruptcy, nor is it alleged that the bankruptcy itself had resulted in damage to Debtor.

Receiver’s petition in this case seeks recovery for the same items of damage enumerated in Debtor’s prior suit, with no mention being made of damages flowing from the fact that Debtor became bankrupt.

Title to the cause of action asserted in Debtor’s original suit and in the subsequent suit by Receiver had vested in Debtor prior to the initiation of the Chapter XI proceedings. Therefore, title to that claim became vested in Receiver under § 70 prior to the time that Debtor filed his original suit on the claim which Receiver now seeks to enforce.

Receiver must be considered as the transferee of the particular chose in action by operation of law or judicial process. If Debtor had commenced his original suit pri- or to the time that title to the cause of action became vested in Receiver, the ordinary rules governing the application of the doctrine of res judicata would support the conclusion that Receiver, who succeeded to Debtor’s interest after institution of the suit, would be bound by the result of Debt- or’s suit. Restatement, Judgments § 89 (1942). But here Debtor’s interest in the cause of action had been transferred to Receiver prior to the time that Debtor instituted his suit. The situation is analogous to those eases where an assignor seeks to assert a right which he has previously assigned. The rule in such a situation is that the assignee, who acquired the assignor’s interest prior to commencement of the assignor’s suit, to which the assignee is not a party, is not bound by the judgment rendered against his assignor. Wood v. Spears, 62 S.W.2d 550 (Tex.Civ.App.—Galveston 1933, writ dism’d); 50 C.J.S. Judgments § 789, pp. 327-28.

We conclude that Receiver is not bound by the prior adjudication, in Debtor’s suit, of the venue question.

We must, therefore, consider whether Receiver’s suit is maintainable in Bexar County against the nonresident appellants.

Insofar as U. S. Fire and General are concerned, Receiver seeks to maintain venue in Bexar County under Tex.Rev.Civ. Stat.Ann., art. 1995, Subdivision 27 (1964) of the venue statute, which provides that a foreign corporation doing business in Texas is suable in any county where such corporation has an agency or representative. The only point concerning the applicability of Subdivision 27, which appellants present in their brief, is to the effect that the trial court erred in retaining venue in Bexar County because Receiver “failed to establish that” U. S. Fire and General are foreign corporations.

In his controverting affidavit, Receiver alleged that both U. S. Fire and General were foreign corporations. Since this allegation was not denied under oath, it is deemed admitted. Insurance Go. of No. Am. v. Fire Insurance Exch., 508 S.W.2d 703 (Tex.Civ.App.—Waco 1974, no writ); Rules 52 and 93(g), Tex.R.Civ.P. Appellants raise no question concerning the existence of the other venue facts which must be established to make Subdivision 27 applicable. The trial court, therefore, correctly overruled the pleas of privilege filed by U. S. Fire and General.

As to Highlands, a Texas corporation, the trial court held that venue was maintainable in Bexar County under Subdivisions 23 and 29a.

Subdivision 23, insofar as here relevant, provides that a suit against a private corporation may be brought in the county in which its principal office is situated; or in the county in which the cause of action or part thereof arose; or in the county in which plaintiff resided at the time the cause of action or part thereof arose, provided such corporation has an agency or representative in such county.

In its plea of privilege, Highlands asserts that it has its principal office in Harris County. There is nothing to indicate that Highlands has its principal office in Bexar County and, therefore, venue cannot be maintained in Bexar County on the theory that Highlands has its principal office there. Greer v. Newton, 245 S.W.2d 299 (Tex.Civ.App.—Eastland 1951, no writ). Since there is no contention that Receiver was a resident of Bexar County at the time that the cause of action arose, venue can be maintained in Bexar County only if the cause of action against Highlands, or a part thereof, arose in that County.

Under these circumstances, in order to maintain venue in Bexar County against Highlands, Receiver had the burden of establishing, by a preponderance of the evidence, all elements of a cause of action against Highlands. 1 MacDonald, Texas Civil Practice § 4.30.2 (1965 rev.). Receiver introduced no evidence tending to show the existence of such cause of action and, therefore, he cannot rely on Subdivision 23.

Subdivision 29a provides that when there are two or more defendants in a suit, and the suit is lawfully maintainable in the county where it is filed under the provisions of the statute as to any of such defendants, such suit may be maintained in such county against any and all necessary parties. No extended discussion of this provision is required. It is sufficient to note that a plaintiff who relies on Subdivision 29a to maintain venue in the county of suit against a nonresident defendant must not only allege the facts which make such defendant a necessary party to the suit, “but must also prove by independent evidence all of such facts” except those which are deemed as admitted by the pleadings or which are established as a matter of law by the pleadings. Ladner v. Reliance Corp., 156 Tex. 158, 293 S.W.2d 758, 763-64 (1956). There is in the record no independent evidence tending to establish existence of facts which make Highlands a necessary party to the suit against U. S. Fire and General.

The trial court erred in overruling the plea of privilege filed by Highlands.

The next question to be determined concerns the order to be entered by this Court. There is no question that that portion of the trial court’s order overruling the pleas of privilege filed by U. S. Fire and General must be affirmed, while that portion of the order retaining venue in Bexar County as to Highlands must be reversed. The sole question is as to whether judgment should here be rendered sustaining the plea of privilege filed by Highlands.

It is apparent from the record in this case that the question concerning the applicability of Subdivisions 23 and 29a was not fully explored. No evidence was introduced other than copies of the pleadings filed in the prior action and the orders of the United States District Court in the Chapter XI proceedings. As far as this evidence is concerned, appellants assumed the burden of going forward with the evidence. Clearly, the attention of all parties was focused on the question of res judicata.

It is well settled that where a case has not been fully developed, the judgment of the appellate court should be one of remand rather than rendition. This rule is applicable to orders sustaining or overruling pleas of privilege.

■ It is the general rule in civil cases that, when the Court of Civil Appeals reverses the judgments [sic] of the trial court for lack of evidence in support thereof, it will not render judgment unless it appears that the case in that respect has been fully developed. . . . It is now also the settled law of this state that appeals regarding interlocutory orders sustaining or overruling pleas of privilege are governed by the same rules that govern appeals in civil cases generally. If the Court of Civil Appeals determines that the judgment of the trial court is unsupported by the evidence, or that the evidence in support thereof is insufficient, its judgment should be one of remand and not one of rendition, unless it appears that the facts were fully developed at the trial appealed from.

Lanford v. Smith, 128 Tex. 373, 99 S.W.2d 593, 594 (1936).

That portion of the judgment of the trial court overruling the pleas of privilege filed by appellants, United States Fire Insurance Company and General Adjustment Bureau, is affirmed. The portion of the trial court’s judgment overruling the plea of privilege of appellant, Highlands Insurance Company, is reversed and the cause is remanded to the trial court for determination of the venue question as to Highlands Insurance Company only.

Two-thirds of the cost of this appeal are taxed against United States Fire Insurance Company and General Adjustment Bureau, Inc. The remaining one-third of such costs shall be paid by appellee, H. C. Moseley, Receiver of American Grain and Cattle, Inc.


author: BARROW, Chief Justice.

text:
    The STATE of Texas, Appellant, v. Harold S. NELSON, Appellee.
    No. 15747.
    Court of Civil Appeals of Texas, San Antonio.
    March 16, 1977.
    Rehearing Denied April 27, 1977.

      Davis Grant, Stephen D. Peterson, Wayne H. Paris, Gary McNeil, Austin, for appellant.
    Fred Clark, New Braunfels, for appellee.
   BARROW, Chief Justice.

Appellant, Grievance Committee for State Bar District 10, has perfected its appeal from a judgment rendered on July 16, 1976, after a non-jury trial which suspended appellee from the practice of law for the duration of his probation resulting from a conviction for violating Title 18, United States Code § 371, in the United States District Court of the District of Columbia.

The Grievance Committee urges that the attorney should be disbarred under the mandatory provisions of Art. 320a-l, § 6, Tex.Rev.Civ.Stat.Ann. (1973), following proof of final conviction of a felony involving moral turpitude. § 6 of the State Bar Act was amended in 1969 to include the following:

Provided, however, upon proof of conviction of an attorney in any trial court of any felony involving moral turpitude or of any misdemeanor involving theft, embezzlement, or fraudulent appropriation of money or other property, the district court of the county of the residence of the convicted attorney shall enter an order suspending said attorney from the practice of law during the pendency of any appeal from said conviction. An attorney who has been given probation after such conviction shall be suspended from the practice of law for the period of his probation. Upon proof of final conviction of any felony involving moral turpitude or of any misdemeanor involving theft, embezzlement, or fraudulent appropriation of money or other property, where probation has not been given or has been revoked, the district court of the county of the residence of the convicted attorney shall enter a judgment disbarring him.

On November 1, 1974, appellee was adjudged guilty as charged and given a “split sentence”; that is, he was ordered to serve the first four months of a three-year sentence at the Federal Prison Camp, Montgomery, Alabama, the remainder of his sentence being suspended, and he was placed on probation for a period of two years. He was also ordered to pay a fine of $10,000.00. This conviction is now final.

Two questions are presented by this appeal: 1. Was appellee convicted of a felony involving moral turpitude; and 2. What is the effect of a “split sentence” under § 6 of the State Bar Act?

Appellee pleaded guilty “as charged in an Information of the offense(s) of Conspiracy in violation of 18 U.S.C. 371.” The information alleged that appellee, in concert with others, made several illegal campaign contributions in violation of 18 U.S.C. § 610. Also, appellee was charged with conspiring to give a thing of value to a public official for and because of his performance of an official act in violation of 18 U.S.C. § 201(f). Appellee urges that § 371 is a general conspiracy statute involving any offense against the United States, and since it is not possible to determine from the judgment of conviction the nature of the offense for which appellee was convicted, it is just as likely that he was found guilty of making illegal political campaign contributions as he was of bribery of a public official. He asserts that the offense of making illegal political campaign contributions should not be considered as a felony involving moral turpitude within the meaning of Art. 320a — 1, § 6.

This contention is without merit irrespective of whether we consider that the offense of making illegal campaign contributions is a felony involving moral turpitude. The maximum punishment for a violation involving illegal campaign contributions is a $10,000.00 fine or imprisonment of not more than two years or both. Here the sentence imposed was for imprisonment for three years. It is therefore obvious that the trial judge considered the offense more serious than that of making illegal campaign contributions. Furthermore, by pleading guilty to the Criminal Information, appellee admitted all the facts contained therein. McCarthy v. United States, 394 U.S. 459, 89 S.Ct. 1166, 22 L.Ed.2d 418 (1969); Littlejohn v. Hiatt, 197 F.2d 334 (5th Cir. 1952). Louisiana State Bar Ass’n v. Hennigan, 340 So.2d 264 (La.1976). Included in the information was the count for conspiracy to bribe a public official. This offense is a felony involving moral turpitude. In re Barron, 155 W.Va. 98,181 S.E.2d 273 (1971); In re Anderson, 195 N.W.2d 345 (N.D.1972).

A more difficult question is raised by the “split sentence” wherein part of the sentence was probated and part was executed. We have not found a case in this or any other jurisdiction which construes the effect of a “split sentence” on a provision similar to § 6 of the State Bar Act.

The most logical construction of the provision would be to hold that a sentence is either probated or it is not probated. The Legislature has provided that where an attorney is convicted of a felony involving moral turpitude, the attorney should be disbarred unless the sentence is probated. It seems reasonable that the Legislature intended that an attorney should be disbarred where he is convicted of a felony involving moral turpitude unless the entire sentence is probated. Otherwise you could have a situation of an attorney being merely suspended although he was serving a term in prison. Here the entire sentence was not probated in that appellee was required to serve four months in the Federal Prison Camp and to pay a fine of $10,000.00. It is true that the remaining portion of his sentence was probated, but only after he had served the four months in prison and paid the fine.

We conclude that the trial court erroneously considered appellee's final conviction of a felony involving moral turpitude as having been probated, and therefore, erroneously entered a judgment of suspension for the period of his probation. The proper judgment was one of disbarment in accordance with the mandatory provisions of the last sentence of § 6.

The judgment of the trial court is reversed and the cause is remanded for entry of a judgment of disbarment.


author: NYE, Chief Justice.

text:
    C. L. KING and Monarch Real Estate Corporation, Appellants, v. Charles W. TUBB and Don Middlebrook, Appellees.
    No. 1117.
    Court of Civil Appeals of Texas, Corpus Christi.
    March 31, 1977.

      Lynn N. Hughes, Howard & Hughes, Roy L. Wardell, Howard & Hughes, W. James Kronzer, Kronzer, Abraham & Watkins, Houston, for appellants.
    Larry E. Wadler, Wadler & Webb, William A. Cline, Jr., Cline & Cline, Wharton, for appellees.
   OPINION

NYE, Chief Justice.

This is a real estate fraud case. Suit was brought by Charles W. Tubb and Don Mid-dlebrook against C. L. King and Monarch Real Estate Corporation to recover moneys advanced to King and Monarch for the purchase of a 646.74 acre tract of land in Wharton County. Trial was to the court. From a judgment awarding Tubb and Mid-dlebrook $188,226.72, appeal has been perfected to this Court.

Don Middlebrook, a licensed real estate broker, approached Harold Seller about the sale of some 2,741 acres owned by Seller in Wharton County. Middlebrook obtained a listing to sell this land. Middlebrook then approached C. L. King, a Houston real estate businessman and president (and 100% stockholder) in Monarch Real Estate Corporation, about the possible sale and development of this land. It was decided that 647 acres of the land could be used to develop an industrial park. King and Middlebrook then began to solicit investors in the project. They set up the Wharton Industrial Trust with Middlebrook as the trustee. The purpose of the Trust, in addition to raising the money to purchase and develop the land, was two-fold. The first purpose was to prevent any direct connection between the purchasers of the property and Don Middlebrook. The second purpose was evidently to clarify the proportion each investor would receive upon resale of the developed property. Regardless of the purpose, investors did put their funds into the Trust. One of the first potential investors approached was Charles Tubb, who not only invested $30,000.00 in the Trust, but also offered to solicit additional investors. King, Middlebrook and Tubb then entered into an agreement whereby they might purchase the property themselves. Several investors were acquired and approximately $70,000.00 was raised to purchase the property.

Sometime thereafter, the plan to acquire the land was devised. It was proposed that the Trust would put up the down payment on the land which would be taken in King’s name. This amounted to a payment of $2,000.00 per acre of which $128,726.72 was paid in cash and the remainder $1,285,340.00 was to be paid on a note executed to the original landowner, Seller. The plan was then to simultaneously transfer the property to the Trust at a down payment of some $220,000.00 greater than the initial down payment plus assumption of the note held by the original landowner. Before this deal was consummated, King and Middlebrook obtained a “Back-up contract” from Carl Almquist whereby Almquist would buy the land at a profit to the Trust if the development of the land proved unsuccessful. On December 13, 1974, the first half of the transaction was closed. Prior to the closing, it was discovered that the Trust was short some $50,000.00 on the initial down payment. At that juncture, King came up with $10,500.00, Tubb came up with $15,-000.00 and Middlebrook $11,046.61 to consummate the deal. In addition, Middle-brook credited $32,180.00 of his commission on the sale to the down payment raising the total down payment to $128,726.72.

It was at this point that the transaction encountered difficulty. The second sale, from King to the Trust, was not consummated because the Trust did not have sufficient funds. At this point, King was the record owner of the property but was faced with making payment on the note and did not have any funds from which to make the payments. Shortly thereafter, the present litigation now before this Court was commenced.

Initially, Tubb brought suit against King and Middlebrook to recover his $45,000.00 invested in the project. In connection with this suit, a lis pendens was filed against the property. Middlebrook filed an answer to Tubb’s claims and brought a cross claim against King and Monarch to recover $188,-180.11 in actual damages plus $376,360.22 in exemplary damages. Middlebrook’s actual damages consisted of $96,546.61 of trust funds, less the $10,500.00 put up by King, used for the down payment plus his $32,-133.60 in commissions plus the $20,000.00 earnest money on the second contract for the sale of the land plus $50,000.00 earnest money on a contract wherein he and King and Paul Hughes were attempting to purchase 2,375.08 acres of land in Matagorda County. King filed an answer to both of these sets of claims and then filed a counterclaim and cross claim against Middle-brook, Tubb, Raymond L. Torp, Mary Mid-dlebrook, Martha Middlebrook, Mike Allison and Joe Allison. King’s cross claim against Middlebrook was for failure to execute the second contract. King’s claim against all the parties was that they had conspired to tie up his land with their lawsuits and sought $376,789.50 damages and $50,000.00 exemplary damages. Monarch denied all claims against it. All of the parties denied King’s claims.

At the conclusion of testimony, the trial judge entered judgment in the amount of $188,226.72 for Middlebrook and Tubb. Middlebrook’s recovery was for $70,000.00 in earnest money plus $73,226.72 in funds used by King for the down payment on the land (total: $143,226.72). Tubb recovered $45,000.00 for funds used by King to purchase the property. All of King’s counterclaims were denied as were the remaining claims of Middlebrook and Tubb.

The first ground of recovery by Middle-brook and Tubb against King and Monarch found by the trial court was for fraud. Specifically, the trial court concluded that the facts established that King had violated § 27.01 of the Business and Commerce Code (1968). Section 27.01(a) states:

“(a) Fraud in a transaction involving real estate or stock in a corporation or joint stock company consists of a
(1) false representation of a past or existing material fact, when the false representation is
(A) made to a person for the purpose of inducing that person to enter into a contract; and
(B) relied on by that person in entering into that contract; or
(2) false promise to do an act, when the false promise is
(A) material;
(B) made with the intention of not fulfilling it;
(C) made to a person for the purpose of inducing that person to enter into a contract; and
(D) relied on by that person in entering that contract.”

In support of this conclusion, the trial court made the following findings of fact: King represented to Middlebrook and Tubb that he was experienced in developing industrial parks and would assist King and Tubb in purchasing and developing the subject land; that Middlebrook relied on representations of King as to development and raising of funds; that King represented to Tubb, Torp and H. F. Means that he would help develop the land and in reliance on these representations, Tubb invested $45,000.00, Torp invested $20,000.00, Allison invested $30,-000.00 and Middlebrook invested $11,046.61; that King repudiated these representations to Middlebrook and Tubb to develop and stated his only intention was to make a $226,000.00 profit; that his prior representations were made to induce Middlebrook, Tubb and Torp to invest in the property; that the representations of King were material factors inducing Middlebrook and Tubb to enter into the various agreements and contracts involved; and that King benefited from his false statements by purchasing the land.

The elements of actionable fraud under § 27.01 are a false statement made by the party charged; reliance on the statement by the parties claiming fraud; action in reliance on the statement and damages resulting from such fraud. Susanoil, Inc. v. Continental Oil Company, 519 S.W.2d 230 (Tex.Civ.App — San Antonio 1975, writ ref’d n. r. e.); Morgan v. Box, 449 S.W.2d 499 (Tex.Civ.App. — Dallas 1969, no writ). See Kain v. Neuhaus, 515 S.W.2d 45 (Tex.Civ.App. — Corpus Christi 1974, no writ); Brady v. Johnson, 512 S.W.2d 359 (Tex.Civ.App. — Austin 1974, no writ); Brooks v. Parr, 507 S.W.2d 818 (Tex.Civ.App. — Amarillo 1974, no writ); Long v. Smith, 466 S.W.2d 32 (Tex.Civ.App. — Corpus Christi 1971, writ ref’d n. r. e.).

We agree that the trial court’s findings of fact are supported by sufficient evidence and such findings are sufficient to support the trial court’s conclusion that § 27.01 was violated by King. Because of appellant’s numerous points of error challenging the legal and factual sufficiency of the evidence, we will follow the familiar rules of law which govern the disposition of such points as found in In re King’s Estate, 150 Tex. 662, 244 S.W.2d 660 (1951) and Calvert, “No Evidence and Insufficient Evidence Points of Error”. 38 Tex.L.Rev. 359 (1960). We will take up each element of fraud and the evidence we find that supports such elements. The first element found by the trial court was that King made a false statement to Middlebrook and Tubb. The false statement made by King was that he would assist Middlebrook and Tubb in developing the land. As a general rule for a statement to be fraudulent, it must be a statement as to a present existing fact. However, as here, where the representation is a promise to do an act in the future and there exists at the time of the representation an intention not to perform, such representation implies an existing fact. It is in effect the present intention of the speaker not to perform in the future that makes the representation a present false statement. The failure of the speaker to perform the promise does not, in and of itself, prove the existence of an intention not to perform the promise at the time the promise was made. If, however, the party making the promise denies making such promise, that alone is sufficient evidence to support a finding of lack of intent to perform at the time the statement was made. Stanfield v. O’Boyle, 462 S.W.2d 270 (Tex.Sup.1971); Bond v. Duren, 520 S.W.2d 460 (Tex.Civ.App. — Waco 1975, writ ref’d n. r. e.); Markman v. Gaitz, 499 S.W.2d 692 (Tex.Civ.App. — Houston [1st Dist.] 1973, writ ref’d n. r. e.); Stone v. Williams, 358 S.W.2d 151 (Tex.Civ.App. — Houston 1962, writ ref’d n. r. e.); and see Mangum Road Center v. DiSclafani, 450 S.W.2d 130 (Tex.Civ.App. — Houston [14th Dist.] 1969, writ ref’d n. r. e.).

Middlebrook’s testimony demonstrates that King represented to him that he would assist him in developing the land as does the testimony of Raymond Torp, Paula Torp, and Harold Seller. Tubb and Middlebrook testified that soon after the first sale was closed, King told them he was not going to assist them in developing the property. Even the testimony of King himself was contradictory. In his deposition, King stated he was buying the land for himself. Later when reminded of these statements, he remembered making the statements and then said he never actually intended to purchase the land for himself. In addition, he testified his only position in the deal was to act as a go between for the purchase of the land and resale to the Trust. He stated that for this service, he was to receive $220,000.00. He admitted he allowed Middlebrook to represent to others that he had expertise in developing industrial tracts. Later, he stated that he never told anyone he was going to develop an industrial park.

From this testimony, it is apparent to us that there was sufficient evidence that King promised to assist in the development of the land and that he then later denied ever making such a representation. These statements by King were material representations and amounted to more than statements of opinion or expectation. Therefore, the trial court was correct in finding that King made a false representation.

In reference to the second element of proof under § 27.01 that there was reliance on the false statement by the party charging fraud, we find ample evidence in the record. Middlebrook testified that he relied on King's representations and the trial court so found. Although the trial court made no specific finding of reliance by Tubb, there is sufficient evidence in the record to support such a finding. Since all the remaining elements of fraud were found by the trial court as to Tubb’s cause of action, we presume and so hold that the trial court impliedly found Tubb relied on King’s statements. See Rule 299, T.R.C.P.; Red Arrow Freight Lines, Inc. v. Howe, 480 S.W.2d 281 (Tex.Civ.App. — Corpus Christi 1972, writ ref’d n. r. e.) and authorities cited therein. The appellant does not attack any of the findings of the trial court on the remaining elements of fraud under § 27.01. Suffice it to say, we hold there was sufficient evidence to support the trial court’s judgment that King defrauded Middlebrook and Tubb.

Not only did the trial court find that King had defrauded Middlebrook and Tubb, which by itself constituted sufficient grounds for recovery, the court also found, as a separate ground of recovery, that King and Tubb were entitled to recover the funds advanced under “Assumpsit”. A cause of action for assumpsit arises when money is paid for the use and benefit of another if made at the beneficiaries’ request or if the beneficiary adopted or took advantage of the money. 6 Tex.Jur.2d Assumpsit § 6 (1959). This form of recovery amounts to a quasi-contractual obligation to repay funds advanced. for another’s benefit. See Fun Time Centers, Inc. v. Continental National Bank of Fort Worth, 517 S.W.2d 877 (Tex.Civ.App — Tyler 1974, writ ref’d n. r. e.).

The evidence is undisputed that King received record title to the land upon payment of the $128,680.00 down payment. The record is equally undisputed that of this $128,680.11 down payment, only $10,-500.00 was King’s personal funds, the remainder of the money came from the appel-lees. King himself admitted that these moneys should be repaid. Therefore, all the necessary elements of assumpsit were present. Money was given to King which he used to his benefit and which he acknowledged he owed a duty to repay. Since all of the elements are supported by the evidence, the trial court was correct in rendering judgment against King for the amounts advanced to him by Tubb and Mid-dlebrook.

Appellant’s argument against the trial court’s assumpsit judgment is that there was no evidence or insufficient evidence of any express or implied promise by King to repay the money given him by Tubb and Middlebrook and, therefore, there was no loan upon which the appellees were entitled to recover. In a suit to recover money received by another, the complaining party must only show that the defendant holds money which in equity and good conscience belongs to the plaintiff. See Staats v. Miller, 150 Tex. 581, 243 S.W.2d 686 (1951). Where one seeks a recovery in as-sumpsit, he must only show the pertinent facts involved and the court will grant the proper relief. Orgain v. Butler, 478 S.W.2d 610 (Tex.Civ.App — Austin 1972, no writ). Assumpsit is a recovery for the unjust retention of a benefit to the loss of another, or the retention of money of another against the fundamental principals of justice and equity. Fun Time Centers, Inc. v. Continental National Bank of Fort Worth, supra. As the record clearly demonstrates and as King’s testimony readily admits, King received the record title to the land primarily on money advanced by others at an actual expenditure to himself of only a relatively small amount. It was stated in Jones v. Hydro Corporation, 420 S.W.2d 210 (Tex.Civ.App. — Amarillo 1967, no writ), where a benefit is received and accepted, the promise to pay for such benefit will be implied in law. See Resendiz v. Resendiz, 367 S.W.2d 220 (Tex.Civ.App. — San Antonio 1963, no writ). The case of Acoustical Screens In Color, Inc. v. T. C. Lordon Company, Inc., 524 S.W.2d 346 (Tex.Civ.App.— Dallas 1975, writ ref’d n. r. e.) is analogous to the case before us. In the above case, the appellee had advanced $25,170.00 to the appellant for the purpose of promoting appellant company. In consideration for these advances, appellee was to receive stock in appellant company. The stock was never issued to appellees and they sought to recover their advance. The court held that since the funds were not a gift but were based on a future agreement which failed to materialize, equity required the return of appellees’ funds.

In addition to the trial court’s separate holdings of recovery under fraud and assumpsit, Tubb and Middlebrook are also entitled to a recovery under a combination of both theories. In Wichita County v. Tittle, 27 S.W.2d 649 (Tex.Civ.App. — Amarillo 1930), aff’d 41 S.W.2d 11 (Tex.Comm’n App.1931), it was held that where funds are obtained by fraud, the law will imply a promise from the recipient of the money to return it to the lawful owner.

The appellant’s other argument concerning the assumpsit recovery is that King, Middlebrook and Tubb were partners or joint venturers in the purchase. It is King’s contention that such a relationship precludes an assumpsit recovery. Tubb did testify that his understanding of the deal was for King, Middlebrook and himself to acquire the property as partners or in some joint relationship. Tubb and Middlebrook testified, however, that King later renounced any such relationship and claimed the property for himself. King never specifically stated what the relationship was between himself, Middlebrook and Tubb. Based on these facts, it is apparent to us that equity dictates that King should return the funds to those who advanced the same to him. Even if some joint relationship existed at the outset between King and the other litigants, that relationship was renounced by King himself after he had used funds that were not his own to acquire the land. As in the Acoustical Screens case, (supra), where the agreement or relationship fails to materialize, equity dictates that the funds that were advanced should be returned.

Next, we consider the propriety of the trial court’s action in awarding as part of the total judgment $20,000.00 advanced by Middlebrook on a second contract for the sale of the land. It is the appellant’s contention that the trial court erred in holding that Middlebrook was unable to perform the contract because the title was unmer-chantable because of the filing of the notice of lis pendens by Tubb and Allison after the original pleadings in this suit were filed.

On January 28, 1975, Tubb and Allison filed suit against King seeking to impose upon the land in question a constructive trust in the amount of $75,000.00. In addition to filing suit, Tubb and Allison filed a notice of lis pendens against the property on January 30, 1975. On June 6, 1975, Middlebrook filed his original counterclaim against King and Monarch to recover, among other things, the $20,000.00 earnest money put up by the Trust to purchase the land from King. It was Middlebrook’s contention that the contract could not be consummated because of the lis pendens notice which rendered the title unmerchantable thereby entitling him to the return of the earnest money. The contract in question provided that King would sell to the Trust the 647 acres of land at $2,500.00 per acre. The contract required $20,000.00 in earnest money. The sale was to be closed no more than 60 days after the buyer received the commitment of title insurance. Mrs. Georgia Willis testified that the title report was sent to Middlebrook on December 2, 1974. She also testified that on January 29, 1975, she received notice of the lis pendens against the property which was one day prior to the last day for closing the sale. The record conclusively establishes that during the closing period, the lis pendens was filed thereby preventing the closing of the sale. The notice of lis pendens was in full compliance with Tex.Rev.Civ.Stat.Ann. (1964), art. 6640.

The earnest money contract specifies in paragraph 7 that if the seller is unable to fulfill his obligations under the contract by reason of defect in title, the buyer may terminate the agreement and have his earnest money returned.

The ultimate effect of lis pen-dens is to prevent either party to certain litigation from alienating the property that is in dispute. Black v. Burd, 255 S.W.2d 553 (Tex.Civ.App. — Fort Worth, 1958, writ ref'd n. r. e.). It is a well settled rule of law in this State that a purchaser of land pendente lite stands in no better attitude than his vendor. Rio Bravo Oil Co. v. Hebert, 130 Tex. 1, 106 S.W.2d 242 (1937); Randall v. Snyder, 64 Tex. 350 (1885); Willis v. Ferguson, 59 Tex. 172 (1883) and cases cited therein. The very purpose of the statutory lis pendens notice is to put those interested in the land on inquiry as to the status of the land. Kropp v. Prather, 526 S.W.2d 283 (Tex.Civ.App. — Tyler 1975, writ ref’d n. ,r. e.). Therefore, it is apparent that the filing of the lis pendens notice by Tubb and Allison rendered King’s title to the land defective and justified Middlebrook’s failure to consummate the sale, resulting in his claim for the return of his $20,000.00 earnest money. Regardless of the fact that Tubb and Allison later released the lis pendens against the land at the time the contract was to be closed, King no longer had a title to the land clear of defects. The trial court was correct in granting judgment against King and Monarch for the $20,000.00 in earnest money. Since the trial court was correct in holding that the lis pendens rendered the contract unperformable, it is unnecessary for us to consider the propriety of the trial court’s findings that the property description in the contract was too vague and indefinite and was incapable of being located on the ground.

The next question presented by this appeal is whether or not Middlebrook is entitled to recover $50,000.00 in his individual capacity as a part of the total judgment rendered in his favor, when such money came into his hands originally as trustee of the Wharton Industries Trust. As we have heretofore stated Joe Allison and Dr. Raymond Torp invested $30,000.00 and $20,-000.00, respectively, with Middlebrook as trustee of the subject Trust. This money was part of the money that was turned over to King. After Tubb filed suit against King and others, Middlebrook voluntarily repaid Allison and Torp the amount of moneys they had invested with him. It is the appellant’s contention that $50,000.00 of the total judgment constitutes the $30,000.00 invested by Joe Allison and $20,000.00 invested by Dr. Raymond Torp. The record shows that although Middlebrook repaid each of these parties out of his own pocket, he failed to receive any assignment of their claim or chose in action against King. Mid-dlebrook did not plead any such assigned claims, nor did he offer any evidence of these assignments. Allison and Torp testified that the money invested was returned by Middlebrook to them.

Regardless of whether or not Mid-dlebrook was assigned whatever causes of action Allison and Torp may have had against King, Middlebrook was still entitled to recover these funds from King in his capacity as trustee of the Wharton Industries Trust. Middlebrook brought a cross-action, both individually and as trustee, against King and Monarch for the amounts awarded him in the judgment. It is undisputed that Allison invested $30,000.00 in the Trust and Torp invested $20,000.00. It is equally undisputed that Middlebrook was trustee of the Trust. Article 7425b-25(E), Tex.Rev.Civ.Stat.Ann. (1960) provides that a trustee of an express trust is authorized to contest any and all claims of the trust estate. Therefore, regardless of whether or not Torp and Allison individually had a claim against King and had assigned that claim to Middlebrook, he was entitled to bring suit in the name of the Trust and recover for the Trust in his capacity as trustee.

Appellant argues in his reply brief that a certain paragraph of the Trust prohibits such action by Middlebrook by providing that any assignment of a beneficial interest in the Trust be transferred only by an assignment in writing. This particular provision has no relationship to the action brought by Middlebrook. The beneficial interest referred to in the subject paragraph of the Trust instrument is the percentage of interest in the Trust owned by each investor as illustrated by a certain schedule “A” which is attached to the Trust instrument. This paragraph does not require the trustee to obtain a written assignment of interest from each investor before bringing suit on behalf of the Trust.

The only problem created by our holding is that the trial court’s judgment awards Middlebrook a total judgment of $143,226.72, individually. The judgment does not award $50,000.00 of the total amount to Middlebrook in the capacity as trustee. However, under Rule 434, T.R.C.P. (Supp.1976), this Court may and should render the judgment which it deems should have been rendered by the trial court where it appears from the face of the record that modification is necessary. Carter v. Barclay, 476 S.W.2d 909 (Tex.Civ.App.—Amarillo 1972, no writ); Wofford v. Miller, 381 S.W.2d 640 (Tex.Civ.App.—Corpus Christi 1964, writ ref’d n. r. e.); Craft v. Hahn, 246 S.W.2d 897 (Tex.Civ.App.—Eastland 1952, writ ref’d n. r. e.). It is clear from the record in this case that everyone who advanced funds to King for the purchase of this property is entitled to the return of these funds. To hold that Middlebrook could not recover the $30,000.00 invested by Allison and the $20,000.00 invested by Torp would require him to bring this same suit on the same grounds simply to recover a judgment specifically in his capacity as trustee of the Trust against King. The better reasoned procedure which we adopt would be for this Court to modify the judgment to state that Middlebrook recover $50,000.00 of the total judgment as Trustee of the Wharton Industrial Trust.

Appellant next complains of the trial court’s findings that the Monarch corporate entity was never differentiated from the individual entity of King and that the corporate entity of Monarch was disregarded by King and was really only a depository for earnest money collected by King. Based on these findings, the trial court rendered judgment against King and Monarch for a portion of the total judgment representing the earnest money put up with King and Monarch by Middlebrook, individually and as trustee for the Wharton Industrial Trust.

As a general rule, the corporate entity will not be disregarded unless there are compelling reasons to disregard. Drye v. Eagle Rock Ranch, Inc., 364 S.W.2d 196 (Tex.Sup.1962); Pace Corporation v. Jackson, 155 Tex. 179, 284 S.W.2d 340 (1955); First Nat. Bank in Canyon v. Gamble, 134 Tex. 112,132 S.W.2d 100 (Tex.Comm’n App. —1939, opinion adopted); Minchen v. Van Trease, 425 S.W.2d 435 (Tex.Civ.App.— Houston [14th Dist.] 1968, writ ref’d n. r. e.). The most recent statement by the Supreme Court of the test for disregarding the corporate entity is found in Bell Oil & Gas Company v. Allied Chemical Corporation, 431 S.W.2d 336 (Tex.Sup.1968). In that case, the court held:

“. . . that the corporate arrangement must be one which is likely to be employed in achieving an inequitable result by bringing into operation a basically unfair device which in all probability will result in prejudice to those dealing with one or more of the units making up the corporate arrangement, or one which has actually resulted in the complaining party's having been placed in a position of disadvantage by the exercise of inequitable means, of which the corporate arrangement is a part.”

The entire record indicates that King and Monarch were one entity. King seemed to switch positions at will, sometimes acting in his individual capacity, sometimes acting through Monarch. As an example, the record indicates that the $10,-500.00 he put up for the original down payment was Monarch’s funds, yet he took title to the land individually. He transferred earnest money back and forth stating that he held the money and then explaining that it was held in the Monarch Trust account. It appears from the entire record that King used Monarch to achieve inequitable results by using the corporation as an unfair device to prevent Middlebrook from obtaining the return of his earnest money.

The next question presented by appellant involves the trial court’s action in awarding Middlebrook the refund of his $50,000.00 earnest money on the “Matagorda contract”. The Matagorda contract itself was not introduced into evidence. From the record the transaction may be reconstructed as follows: King, Middlebrook and a Paul Hughes entered into an earnest money contract with Thomas Garrett to purchase 2,375.08 acres of land in Matagorda County. King and Middlebrook put up $100,000.00, ($50,000.00) as earnest money on the contract. This money was deposited by Mid-dlebrook and King with King’s corporation, Monarch. The deal fell through due to a defect in title. King was refunded his $50,-000.00 earnest money by Monarch. However, Monarch and/or King refused to refund Middlebrook his $50,000.00. King stated that he had transferred the money from the first escrow account held by Monarch to another escrow account for the Almquist’s “back-up contract” account, that Monarch was holding. This action was taken by King after he had refunded to Alm-quist the $50,000.00 Almquist had deposited with King on the original option contract. King admitted he had transferred these funds without Middlebrook’s permission and his only reason for the transfer was that he thought Almquist had a claim against Mid-dlebrook for these funds. Almquist stated that he had no claim against either Middle-brook or King. The trial court was correct in awarding judgment to Middlebrook against King and Monarch.

Appellant complains, however, that the trial court abused its discretion in not granting his motion for dismissal or separate trial of Middlebrook’s cross action on this Matagorda contract. The basis for appellant’s motion was that the action was a separate and distinct transaction from the main suit filed by Tubb. The trial court took appellant’s motion under consideration and chose to rule after all of the evidence was presented.

Rule 97(e), T.R.C.P. (Supp.1976) states that a pleading may state as a cross action any claim by one party against a coparty arising out of the transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein. The Texas Courts have been notably liberal, in furtherance of their policy of avoiding multiplicity of suits, in the construction applied to cross-claims, in order to hold that they are sufficiently connected with the subject matter in controversy to be proper. See 52 Tex.Jur.2d, Setoff, Counterclaim, and Cross Actions § 48 (1964). McDonald Texas Civil Practice § 7.56 (1970) and cases cited therein. Rule 97(e) was adopted unchanged from Federal Rule 13(g). The test used by the Federal Courts is the logical relationship test, and that is, whether the cross-claim involved has many of the same factual and legal issues presented in the main action. Lasa Per L’Industria Del Marmo Societa Per Azioni of Lasa, Italy v. Alexander, 414 F.2d 143 (6th Cir. 1969). We find that the present cross action meets this test.

Tubb’s original causes of action against King and Middlebrook were: against Middlebrook for breach of the Trust agreement; against King and Middlebrook for fraud; and against King for unjust enrichment concerning the Wharton County land. As was stated earlier Middlebrook cross-claimed against King and Monarch for his $50,000.00 earnest money on the Mata-gorda deal. King’s testimony showed that the $50,000.00 Middlebrook put up on the Matagorda land was transferred by King to the escrow account on the Almquist’s backup contract which was on the original Wharton County land. Therefore, the evidence demonstrates that Middlebrook’s $50,000.00 was a part of the Wharton County transaction upon which Tubb brought suit against King and Middlebrook. There was an identity of factual issues present between Tubb’s claims and the cross-claim of Middlebrook. Although the identity of the two causes of action is not readily apparent from the pleadings, the trial court wisely heard the evidence which ultimately revealed the identity of all of the issues. We hold that the trial court did not abuse its discretion by failing to order separate trials under Rule 174(b), T.R.C.P. (Supp. 1976).

Appellant’s next complaint is that the trial court erred as a matter of law in awarding Middlebrook the $50,000.00 earnest money on the Matagorda contract because the necessary parties were not before the court. This point of error is in reference to the fact that Paul Hughes, a co-purchaser of the property with King and Mid-dlebrook, and a Thomas Garrett, the seller, were not made parties to the action. Without getting into an unnecessary discussion of Rule 39, T.R.C.P. and the distinction between proper, necessary and indispensable parties, the record clearly reflects that the trial court’s judgment was not dependent on the presence of either of the absent parties to the Matagorda contract. The record clearly shows that Hughes had nothing invested in the contract and that Garrett evidently agreed to the refund of the earnest money due to some defect in his title to the land. Since it is apparent that Middlebrook’s cross-claim for the return of his $50,000.00 was against King and Monarch alone, the other two parties’ absence does not effect the trial court’s judgment.

Appellee Charles Tubb has presented one cross-point of error for this Court’s consideration. Appellee Middlebrook, in response to Tubb’s cross-point, has filed a motion to dismiss the cross-point due to the alleged failure of Tubb to properly perfect his cross-appeal.

It is an old court made rule of law in this State that unless the entire judgment is brought forward on appeal, an ap-pellee must apprise the trial court of his dissatisfaction with the judgment before his cross-points of error may be considered. West Texas Utilities Company v. Irvin, 161 Tex. 5, 336 S.W.2d 609 (1960); Dietz v. Dietz, 540 S.W.2d 418 (Tex.Civ.App. — El Paso 1976, no writ); Upjohn Company v. Petro Chemicals Suppliers, Inc., 537 S.W.2d 337 (Tex.Civ.App. — Beaumont 1976, writ ref’d n. r. e.); National Farmers Organization v. Smith, 526 S.W.2d 759 (Tex.Civ.App. —Corpus Christi 1975, no writ); Portwood v. Buckalew, 521 S.W.2d 904 (Tex.Civ.App. —Tyler 1975, writ ref’d n. r. e.); Payne v. Lucas, 517 S.W.2d 602 (Tex.Civ.App.— Houston [1st Dist.] 1974, writ ref’d n. r. e.); White Stores, Inc. v. Crain, 515 S.W.2d 677 (Tex.Civ.App. — Austin 1974, no writ); Flagg Realtors, Inc. v. Harvel, 509 S.W.2d 885 (Tex.Civ.App. — Amarillo 1974, writ ref’d n. r. e.); Maloney v. Strain, 410 S.W.2d 650 (Tex.Civ.App. — Eastland 1966, no writ).

This is not to say that an appellee must perfect a separate appeal in order to present cross-points on appeal in every situation. Travelers Indemnity Company v. Pollard Friendly Ford Company, 512 S.W.2d 375 (Tex.Civ.App. — Amarillo 1974, no writ).

Recent changes in the rules of civil procedure make it increasingly difficult for an appellee to perfect his cross-points following the above quoted rule. As of January 1, 1976, notice of appeal is no longer necessary. See amended Rule 353, T.R.C.P. and Rule 363. Where the trial was to the court, no motion for new trial is required to bring forward points of error. Rule 324, T.R.C.P. It is equally well recognized that an appellee need not file a cost bond to present cross-points of error. Dietz v. Dietz, supra. The question now is: how in a practical manner would an appellee, in such cases, apprise the trial court of his dissatisfaction? We find the answer most difficult. In some cases, an appellee may raise his cross-point for the first time in his original brief. Therefore, where, as in the case at bar, an appellee really has no mandatory steps he must take to perfect his cross-point; yet, the prevailing view of the law in this State is that he must take some steps (whatever they may be) to apprise the trial court of his dissatisfaction with the judgment. We think that in a judge tried case, it would be best to consider such cross-points when raised for the first time in appellee’s brief. Rule 420, T.R.C.P. The appellant would answer such points in a reply brief as usual.

In the case at bar, the judgment was severable and that portion of the judgment complained of by Tubb was not brought forward by King. Tubb’s cross-point of error is that the trial court should have entered judgment for him against Middlebrook because Middlebrook misused the trust funds as trustee. Having reviewed the record on this question, however, regardless of whether or not appel-lee’s cross-point is properly before this Court, we hold that it is without merit. The record shows that Tubb was fully aware of Middlebrook’s use of the Trust funds and in fact openly encouraged the course of action pursued by Middlebrook. Appellee’s cross point is overruled.

The judgment of the trial court is, therefore, modified in the following respects:

(a-1) against C. L. King and Monarch Real Estate Corporation in favor of Don Middlebrook: $ 50,000.00

(a-2) against C. L. King and Monarch Real Estate Corporation in favor of Don Middlebrook, Trustee: 20,000.00

(b-1) against C. L. King in favor of Don Middlebrook: 43,226.72

(b — 2) against C. L. King in favor of Don Middlebrook, Trustee: 30,000.00

(c) against C. L. King" in favor of Charles W. Tubb: 45.000.00

Total amount of judgment: 188,226.72

The judgment of the trial court as modified is AFFIRMED.