text:
    ASSOCIATES CAPITAL CORPORATION (H. Marshall Judd, Intervenor), Plaintiff-Appellant, v. COOKEVILLE PRODUCTION CREDIT ASSOCIATION, Defendant-Appellee.
    Court of Appeals of Tennessee, Middle Section.
    May 5, 1978.
    Certiorari Denied by Supreme Court Aug. 8, 1978.

      Neal & Ledbetter, H. Marshall Judd, Cookeville, for plaintiff-appellant.
    Donald G. Dickerson, Cookeville, for defendant-appellee.
   OPINION

DROWOTA, Judge.

The issue in this case is whether a 12' X 65' “mobile home” that has had its wheels removed and has been affixed to realty is subject to the certificate of title provisions for motor vehicles under chapters 1 and 3 of Title 59 of Tennessee Code Annotated. If so, the security interest of plaintiff Associates Capital, which was noted on a certificate of title to the home, was perfected in accordance with those provisions and takes priority over defendant Cookeville Production Credit’s real estate mortgage, which was not noted on the certificate. If Title 59 is not applicable, on the other hand, priority must be given to defendant’s realty mortgage, which was created by a deed of trust properly recorded in accordance with state mortgage law and with the U.C.C. provisions on fixtures.

In October of 1973, Carlos Gaw and De-Wayne Adams bought a tract of land consisting of about 60 acres in Jackson County. On the property was located, in addition to a house, a 1971 Capella mobile home. This home, which had been placed on the property by the previous owner in 1971, was 65 feet long and 12 feet wide. Its condition and connection to the realty on which it was located are described in more detail below.

To secure a purchase-money loan of $51,-286.00 on the property, Gaw and Adams executed a deed of trust to L. H. Williams, secretary-treasurer of defendant Cookeville Production Credit Association. The deed, executed on October 19, 1973, conveys the realty “together with all buildings and improvements thereon or hereafter erected thereon and all rights and appurtenances thereto belonging . . . .” The deed of trust was recorded in the Jackson County Register’s Office on October 23, 1973.

Subsequently, Gaw borrowed $5,256.00 from plaintiff Associates Capital Corporation. This debt is evidenced by a note dated April 12, 1974, and signed by Gaw and his wife. In a security, agreement of the same date, the Gaws granted associates Capital a security interest in the 1971 Capella home to secure payment of the note. The security agreement contains the Gaws’ warranty that the collateral is free of “all security interests, liens and encumbrances,” and does not mention any interest of Adams in the property. Associates Capital entered its name as “1st lienholder” on a motor vehicle certificate of title that was certified by the Commissioner of the Department of Revenue on May 31,1974. The certificate describes the Capella home and lists Carlos Gaw as the owner. Plaintiff Associates retained the certificate, and no other liens have been noted on it.

The instant suit was brought in Jackson County Chancery Court by plaintiff Associates on December 18, 1975. Plaintiff alleged that defendant had taken unlawful possession of the Capella home, and asked the court to decree its entitlement to possession and a reasonable rent for the period during which defendant had maintained possession. In its answer, filed March 26, 1976, defendant admitted that it had taken possession of the home on November 26, 1975, but asserted that this had been lawfully done pursuant to the deed of trust. Defendant also asserted that the property subject to the deed of trust, which included the Capella home as a fixture to the realty, had been deeded to it by the trustee after a foreclosure sale, and that defendant was the owner of the home. Defendant contended that its lien and ownership were superior to plaintiff’s claim against the home.

At the brief trial, an employee of plaintiff Associates testified that there was a balance of $1,168.00 due on its note, on which the Gaws defaulted in December of 1975. He stated that prior to default, plaintiff had no indication either of defendant’s claim against the Capella home or that DeWayne Adams had any interest in the property.

Testimony was also given by Jim Jackson, the man who had sold the property to Gaw and Adams. He said that he had put the 65’ by 12’ Capella home on the property in 1971. He had attached metal “underpinning,” which runs from the bottom of the home to the ground and is designed both to improve the appearance of the home and to keep the weather from the pipes and other attachments underneath it. He had also built concrete steps up to the front door of the home. The steps were placed on a concrete slab or apron in front of the home. Jackson had connected the home to electricity, and had erected next to it a small “block building” for the well and pump and for storage. He had also connected the home to a water supply and to a septic tank, which he had had installed to dispose of sewage. Jackson had also equipped the home with a central air conditioning system, connected to a small “pump house” outside. Numerous slides were introduced to document the appearance of the home and its attachments as Jackson described them. Finally, Jackson explained that the home had had wheels and axles when it was brought to the property and installed, but that he had removed these after installation and had given them to the workmen who connected the septic tank. Jackson testified that, when he bought and installed the Capella home, it was his intention to live in it as a home. He also stated that he thought he had given Gaw a certificate of title to the home when he sold the property to him.

Gaw himself testified briefly about the loan transactions. He said that he had considered the Capella home, which was resting on blocks with the underpinning around it when he bought the property, as part of the collateral conveyed by the deed of trust at the time of the deed’s execution. Two employees of defendant, one of whom examined the property three months after execution of the trust deed while the other saw it at the time of the foreclosure sale, testified that the home was attached and that it was considered part of the realty.

The Chancellor, after hearing the evidence and allowing the parties to file briefs, rendered his decree on June 9, 1977. He found that the Capella mobile home had been a fixture to the realty when the deed of trust was executed. He also found that the home was subject to the deed of trust. Considering that defendant’s lien on the home was superior to plaintiff’s, he concluded that defendant owned the home through its purchase at the foreclosure sale and dismissed the case.

Plaintiff Associates appealed. On June 30, 1977, pursuant to a motion, the trial court entered an order allowing H. Marshall Judd, trustee in bankruptcy for the Gaws, to intervene as a party plaintiff. Apparently the debt to Associates had been satisfied in the bankruptcy proceeding, and the trustee is now asserting the rights of Associates under the security interest in the Capella home. The trustee is the only party plaintiff who has filed a brief and prosecuted its appeal in this Court.

The trustee’s position on appeal is that the Capella home was subject to the certificate of title provisions of chapters 1 and 3 of Title 59 of the Code when the deed of trust to defendant was executed. Thus, the argument proceeds, T.C.A. § 59-327 provides that notation on the certificate of title is the only way to perfect a lien on the home, and the U.C.C. expressly defers to Title 59 in this regard in § 47-9-302(3)(b) & (4). Since defendant recorded its deed of trust in the proper place for recording liens against realty but did not note its interest on the certificate of title, the trustee argues that defendant did not properly perfect its lien against the home. He also argues that, since Associates did note its lien on the home’s certificate of title in accordance with Title 59, its lien on the home was properly perfected and takes priority over defendant’s.

Defendant, of course, argues that the home is not subject to the certificate of title law. Defendant contends that its lien against the home, a fixture, was perfected under § 47-9-401(l)(b) by filing the deed of trust in the proper place for filing a mortgage on the realty, the Jackson County Register’s Office. Under defendant’s theory, defendant’s lien on the home would have priority over Associates’ both as a prior interest in the realty under § 47-9-313(3) and because Associates never perfected its interest by filing in the proper place for filing a realty mortgage.

It is obvious from even a cursory examination of these two lines of argument that one issue is central to this case: Was the Capella mobile home subject to the certificate of title provisions of chapters 1 and 3 of Title 59 of the Code? We conclude that it was not, and affirm the Chancellor’s dismissal of the case.

T.C.A. § 59-103(b) includes in its definition of a “motor vehicle” the term “mobile home or house trailer,” as that term1 is defined in § 59-105(d):

(d) The words “mobile home or house trailer” mean any vehicle or conveyance, not self propelled, designed for travel upon the public highways, and designed for use as a residence, office, apartment, storehouse, warehouse, or any other similar purpose.

These definitions apply to chapters 1-6 of Title 59. Section 59-301 subjects motor vehicles “driven or moved upon a highway, and every mobile home or house trailer when occupied” to the registration and certificate of title provisions of chapters 1-6. Sections 59-324 and 59-325 provide for liens on vehicles subject to chapters 1-6 to be noted on the certificate of title, while § 59-327(a) makes such notation constructive notice of all liens, except those dependent on possession, to creditors and subsequent purchasers and encumbrancers. Section 59-326 provides that no lien or encumbrance on a registered vehicle, other than one dependent upon possession,

shall be valid against the creditors of an owner or subsequent purchasers or en-cumbrancers until the requirements of this section and § 59-327 have been complied with, unless such creditor, purchaser, or encumbrancer has actual notice of the prior lien.

In § 59-327(b), the method of certifying by noting on the certificate of title a lien on a “motor vehicle, mobile home, house trailer or other mobile structure, whether or not taxed as real property,” subject to chapters 1-6 of Title 59 is made “exclusive except as to liens depending upon possession.”

We conclude that the above described provisions of Title 59 did not apply to the Capella home at the time the deed of trust to defendant was executed and recorded, because the home did not qualify at that time as a “mobile home” under the definition given in § 59-105(d). In October of 1973, the home in the instant case was not “designed for travel upon the public highways,” nor was it so designed when Gaw and Associates executed their security agreement on April 12, 1974. The quoted phrase necessarily implies that a “mobile home” under the statute is either one that is in a condition to act as a conveyance over the public highways or one that may, with a relatively reasonable amount of effort, be reconverted into such a condition. The Capella home in the instant case does not meet that description.

Our decision that the Capella home was not “designed for travel upon the public highways” in October of 1973 and April of 1974 is the product of several factors, no one of which is conclusive in and of itself. First, the Chancellor found that the home was legally a fixture to the realty, a finding .supported by the evidence and by the authority defining fixtures in Tennessee. See Dudzick v. Lewis, 175 Tenn. 246, 133 S.W.2d 496 (1939); Fuson v. Whitaker, 28 Tenn.App, 338, 190 S.W.2d 305 (1945). In addition, all of the evidence on the nature and extent of the home’s affixation to the realty, summarized above, is a factor supporting the conclusion that the home was not “designed for travel upon the public highways.” Another very important factor is the size of the home, sixty-five feet long by twelve feet wide. Also, although there were once wheels on the home, these were removed and disposed of by the owner subsequent to installation. The only reason for ever having wheels on the home at all was so that it could be transported to its place of affixation. These are the primary elements that lead us to conclude that the home was not “designed for travel upon the public highways” under § 59-105(d) during October of 1973 or April of 1974.

The trustee places great weight on the 1971 amendment to T.C.A. § 59-105(d). This amendment deleted the following words, which had previously been the concluding phrase of the subsection: “except when such vehicle or conveyance has become a fixture attached to the owner’s land.” The trustee argues that this evidences a legislative intent to include within the provisions of Title 59 any mobile home, whether or not it is a fixture. We need not comment on the validity or invalidity of this argument, for our decision is not contrary to such a legislative intent, if such an intent exists. We have held that the Capella home in the instant case was not a “mobile home” under § 59-105(d) because it was not “designed for travel upon the public highways.” That the home in question was legally a fixture is only one factor, albeit an important one, in our decision. Among the other factors we have considered, as we explained above, are the size of the home, the nature and extent of its affixation, and the absence of wheels and axles not only from the home itself but from the owner’s possession, all of which indicate that the home was a building and a permanent residence rather than a vehicle “designed for travel upon the public highways” during the period in question. The absence of an express statutory exemption from the definition of “mobile home” for a vehicle that has merely “become a fixture attached to the owner’s land” does not conflict with the rationale or result of our decision.

Since the Capella home in the instant case was not a “mobile home” under § 59-105(d) and so not subject to Title 59 in October of 1973 and April of 1974, perfection of a lien on the home was not controlled by Title 59. The home was a fixture, and liens on it could be perfected by filing “in the office where a mortgage on the real estate concerned would be filed or recorded” under § 47-9-401(l)(b). Defendant complied with this provision on October 23, 1973, when it recorded its deed of trust conveying the realty and its improvements, of which the home was one. Defendant’s claim to the home has priority over that of Associates and of the trustee under § 47-9-313(3) because defendant held an interest in the realty when the security interest of Associates attached. Defendant also has priority because Associates’ interest was never perfected by filing in accordance with § 47-9 — 401(l)(b).

The trustee also raises § 59-331, which requires anyone who “scraps, dismantles, or destroys a vehicle” to turn in its certificate of title within 72 hours. He argues that, if the Capella home did cease to be a “mobile home” subject to Title 59 at some time after its installation, § 59-331 would apply to require the certificate of title to be turned in. The trustee asserts that this was never done. We need not, however, decide whether § 59-331 applies in this case. While there is force in the trustee’s argument that that section must be applied to prevent a certificate of title to something that is no longer a vehicle from being used to defraud creditors, any fraud in the instant case would be between the owner of the home and Associates, which took a security interest in it on the assumption that it was a vehicle subject to Title' 59. Any such fraud could not affect the priority of the lien of defendant, a good faith encum-brancer that took its lien before Associates took its security interest.

We recognize that the concept of a “mobile home” is broad and variable. It is capable of embracing everything from the small, car-drawn trailer to today’s large prefabricated or modular house. It can encompass anything that can be fairly included in that range of items that partake of some of the attributes of both a vehicle and a building. The definition of a “mobile home” for legal purposes will vary according to the circumstances, that is, not only according to the nature and surroundings of the vehicle or building itself but also according to the purpose and context of the legal definition. For example, since real estate tax law and zoning law have different purposes and rationales behind them, the group of items included as “mobile homes” under the definition of one might differ from those included under the other.

We wish it to be clear that, in the instant case, we have simply held on the facts before us that a particular home was not “designed for travel upon the public highways” under T.C.A. § 59-105(d) and consequently not subject to the certificate of title provisions of chapters 1 and 3 of Title 59, which deals with the certification and registration of motor vehicles.

The Chancellor’s decision is affirmed.

SHRIVER, P. J., and TODD, J., concurs.


source: Caselaw Access Project

author: DANIEL, Justice. POPE, Justice,

license: Public Domain

text:
    PHILLIPS PETROLEUM COMPANY, Petitioner, v. STAHL PETROLEUM COMPANY, Respondent.
    No. B-6813.
    Supreme Court of Texas.
    June 21, 1978.
    Rehearing Denied July 26, 1978.

      McGinnis, Lochridge & Kilgore, Lloyd Lo-chridge, Austin, Kenneth Heady and C. J. Roberts, Bartlesville, Okl., Jack Ritchie, T. L. Cubbage, II, and David B. McCall, Amarillo, for petitioner.
    Stone, Stone & Chambers, John C. Chambers, Amarillo, for respondent.
   DANIEL, Justice.

The question on this appeal is whether Phillips Petroleum Company, a purchaser of casinghead gas from Stahl Petroleum Company, owed interest on Stahl’s portion of the increased prices which Phillips had collected from its interstate purchasers pending final approval of its rate increases by the Federal Power Commission. The trial court, without aid of a jury, rendered judgment that Phillips owed no interest on the delayed payments. The Court of Civil Appeals reversed and rendered judgment for Stahl for $14,094.12 interest on the delayed payments as of December 7, 1972, and for interest on that sum from December 7,1972 to the date of judgment. Tex.Civ.App., 550 S.W.2d 360. We affirm the judgment of the Court of Civil Appeals.

Stahl is a leasehold owner and producer of natural and casinghead gas in the Panhandle Field of Texas. Phillips is engaged in the production, purchase, transportation and sale of gas in both intrastate and interstate commerce. Under the terms of Stahl’s contract with Phillips dated December 5, 1957, it was agreed that Phillips would purchase casinghead gas owned or purchased by Stahl from certain wells located in Gray County. The purchase price to be paid by Phillips for the gas delivered to it by Stahl was based on a percentage of the “weighted average price received” by Phillips from sales of gas from the Panhandle Field to third parties. Exact terms of the relevant portions of the contract and details concerning the proceedings below are set forth in the opinion of the Court of Civil Appeals. We shall repeat only so much thereof as is necessary for determination of this appeal.

The payment provision of the contract required that payment for all gas delivered each month be made not later than the last day of the succeeding month. There was no provision for Phillips to withhold any portion of the monthly payments attributable to Phillips’ receipts from price increases which had not been approved by the Federal Power Commission (FPC); nor was there any provision that such receipts should be excluded from the “weighted average price received” by Phillips pending FPC approval. Neither was there any provision for payment of interest on delayed payments.

The contract was made subject to all valid statutes and rules and regulations of any duly constituted federal or state regulatory body having jurisdiction. However, Phillips concedes that there was no statute or rule preventing it from making payments to its royalty owners and suppliers based upon the increased prices received by Phillips pending FPC approval or disapproval. Such payments would, of course, be subject to proportionate reimbursement on any refunds which Phillips was obligated to make in ease of subsequent FPC disapproval. The parties further agree that the terms of the contract relating to price and payment are not ambiguous, and that the question before us should be decided as a matter of law. Myers v. Gulf Coast Minerals Management Corporation, 361 S.W.2d 193 (Tex.1962); Tower Contracting Company v. Flores, 157 Tex. 297, 302 S.W.2d 396 (1957).

Prior to the execution of the Stahl contract, the Supreme Court of the United States had held in Phillips Petroleum Company v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035 (1954), that the Federal Power Commission has jurisdiction under the Natural Gas Act, 15 U.S.C. § 717 et seq., to regulate well-head prices of natural gas sold in interstate commerce, and that Phillips’ gas sales in interstate commerce were subject to such jurisdiction and regulation. Also, prior to the Stahl contract, Phillips had filed numerous applications with the FPC for blanket price increases on interstate sales of gas transported to its customers from the Panhandle Field. Rather than waiting for approval by the FPC of proposed price increases, the Natural Gas Act allows a pipeline company to begin collecting from its purchasers the proposed increased prices after thirty days’ notice, 15 U.S.C. § 717c(d), unless the FPC suspends the operation for not longer than five months. 15 U.S.C. § 717c(e); 18 C.F.R. § 154.102. The FPC suspended a total of thirty-one proposed price increases relating to Phillips’ interstate gas sales from the Panhandle Field. Thereafter, Phillips was permitted to sell such gas at its filed rate increases upon posting a corporate obligation guaranteeing to refund with interest all or any part of such increases ultimately disapproved by the FPC as being unfair and unreasonable.

Over 18 years expired before the FPC approved in part and disapproved in part the price increases in FPC Opinion 586, which became final on October 30, 1972. During that time Phillips had over 900 lease and purchase contracts in which the monthly price agreed to be paid to its royalty owners and suppliers was based in part on a percentage of the prices received from its interstate sales. In some instances Phillips included these increased price receipts in calculating and making payments under similar contracts. However, as to Stahl and many other suppliers, according to the numerous reported cases, Phillips remitted only on the basis of prices previously approved by the FPC. These were referred to as “firm” prices. They represented no portion of the increased prices which Phillips had been receiving from its interstate sales. The so-called “suspense funds” withheld by the company were placed in the general funds of the company and used during the 18-year period for general corporate purposes.

When the rate order became final on October 30, 1972, Phillips returned to its customers the disapproved (“refundable”) portion of its receipts from the price increases. It then recalculated the payments due Stahl by including the approved (“sustainable”) portion of such increased price receipts in its weighted average of all receipts. The difference between the amount already paid and the amount due upon this recalculation was $24,258.81. This sum was paid by Phillips to Stahl on December 7, 1972.

Almost three years thereafter, on September 11, 1975, Phillips filed this declaratory judgment action against Stahl. It sought a declaration that it was not liable for the sum paid to Stahl on December 7, 1972, and in the alternative that it was not liable for interest thereon, and, in no event, for interest prior to October 30, 1972, the date when approval of the sustainable portion of the price increases became final. The record does not show that Stahl had asserted any claim to interest prior to the time Phillips filed this suit. However, Stahl promptly joined issue with a counterclaim against Phillips for interest on the sum paid from the respective dates on which Phillips received the funds.

The trial court held that Phillips was obligated to pay Stahl the $24,258.81 as the principal sum due under the contract, but it held that Phillips was not liable for any payment of interest thereon. Only Stahl appealed, arguing that it was entitled to $14,084.12 interest, figured at six percent per annum on the sum of $24,258.81 to December 7, 1972. Stahl also sought prejudgment interest on the $14,084.12 from December 7, 1972, to the date of the judgment.

Interest Under the Contractual Obligation

The general rule in Texas, originating in the common law, has long been stated that prejudgment interest cannot be allowed eo nominee (under that name) unless provided for by contract or statute. Watkins v. Junker, 90 Tex. 584, 40 S.W. 11 (1897); Heidenheimer v. Ellis, 67 Tex. 426, 3 S.W. 666 (1887). As shall be demonstrated later, in neither of these cases, nor in numerous other Texas cases, have the courts been consistent or rigid in applying the rule in a manner that would deny a party legal compensation for the use or detention of his money. See Phillips Petroleum Company v. Adams, 513 F.2d 355 (5th Cir. 1975), and Texas cases therein and hereinafter cited. Phillips attacked the Circuit Court’s opinion as being contrary to Texas law, contending that absent a specific contractual or statutory provision, no interest was due. The Court of Civil Appeals agreed that Stahl’s right to interest depended upon the authority of an enabling Texas statute, and it proceeded to render an interest judgment for Stahl based upon the following statutes:

“Article 5069-1.01. Definitions
“(a) ‘Interest’ is the compensation allowed by law for the use or forbearance or detention of money; . . ..”
“Art. 5069-1.03. Legal rate applicable
“When no specified rate of interest is agreed upon by the parties, interest at the rate of six percent per annum shall be allowed on all written contracts ascertaining the sum payable, from and after the time when the sum is due and payable; and on all open accounts, from the first day of January after the same are made.” [Effective Oct. 1, 1967, but identical with its predecessor, Article 5070.]

Phillips contends that the statute does not apply because the sum payable under its contract was neither ascertainable nor due and payable until the finality of the FPC’s order on October 30, 1972. We disagree. The unambiguous terms of its contract provided the means for ascertaining the sums due and payable to Stahl each month. These payments for gas delivered by Stahl each month (to be made not later than the last day of the succeeding month) were to be based in part on “the weighted average price received” by Phillips from all of its sales of Panhandle Field gas to third parties during the preceding month. This weighted average price received by Phillips was based upon both intrastate and interstate sales, and there was no qualification or exception excluding any interstate price receipts which might be refundable if not approved by the FPC. It is not denied that these monthly sums were ascertainable on this basis and that they were actually ascertained and paid on such basis to other suppliers. See note 2, supra. The Court of Civil Appeals correctly concluded:

“At the time the contract was executed, Phillips, as permitted during the pendency of its applications for increases in the interstate commerce rates for its gas sales, was receiving from its purchasers and accepting as payment for its gas an amount of money in excess of the then established rates. Albeit the excess was subject to possible refund, none of the excess was contractually excluded from the ‘price received’ by Phillips and on which payment to Stahl was contractually based. Phillips candidly concedes that neither statutory or decisional law nor the rules and regulations of the Federal Power Commission prohibit Phillips from including the excess in the amount on which calculation of payment to Stahl was made. It naturally follows that the portion of the prices exceeding the then approved interstate commerce rate received by Phillips from its gas sales in the Panhandle Field was, under the plain meaning of the language of the contract, a part of the ‘price received’ on which the month-by-month payments to Stahl were to be based. Hence, within the meaning of the statute, the written contract is one ascertaining the sum payable, and interest is allowable on each unpaid sum which was due and payable monthly under the contract. And there is nothing in the contract to alter this legal consequence even though it later developed that Phillips was required to refund to its purchasers a portion of the purchase prices it has received.” 550 S.W.2d at 366-67.

Phillips contends that this holding is subject to an interpretation that Stahl was entitled to receive and retain monthly payments based in part on price increases which were subject to disapproval by the FPC, without any obligation to make a proportionate refund to Phillips. We do not so construe the opinion, and we disavow any such interpretation. On the contrary, the Court recognized that the contract was subject to valid federal laws and regulations. Since any portion of the increased prices received by Phillips was subject to refund, with interest, to its purchasers if finally disapproved by the FPC, it follows as a matter of law that any portion of the “refundable money” which had been paid to Stahl under its contract was likewise subject to reimbursement with interest to Phillips. Thus, if Phillips had made its monthly payments to Stahl based on its percentage of the weighted average “price received” by Phillips during all of the years pending FPC action, the only amount necessary to be ascertained as between Stahl and Phillips after the FPC opinion became final on October 30, 1972, would have been the portion of Stahl’s payments which were refundable, with interest, to Phillips. Only the “sustainable” remainder would have been re-tainable by Stahl, and having been paid when due, there would have been no issue concerning interest.

Phillips’ concern over this literal interpretation of the unambiguous terms of the contract is understandable, but Phillips prepared the contract. It knew that its receipts from interstate sales were subject to regulation by the FPC. It would have been a simple matter for the contract to have provided that increased prices from interstate sales would not be figured in the “weighted average price received” until after approval by the FPC, if that had been the intention of the parties. Or, it could have been provided that the percentage of monthly payments based on unapproved interstate price increases would be withheld unless Stahl indemnified Phillips by a surety bond or other guarantee that Stahl would refund to Phillips, with interest, any portion of its payments attributable to price increases which were subsequently disapproved by a valid order of the FPC. See Fuller v. Phillips Petroleum Company, 408 F.Supp. 643 (N.D.Tex.1976), a case in which Phillips made full payments under such an indemnity agreement, with such payments being ascertained each month on precisely the same basis as contended for by Stahl under its contract. The Court of Civil Appeals correctly interpreted and applied the terms of the contract. It properly allowed interest on the delayed payments which Phillips had withheld until December 7, 1972.

Interest Under the Equitable Doctrine For Use or Detention of Money

Although the Court of Civil Appeals reached a correct result, we do not agree with its holding .that Stahl’s only right to recover interest was dependent upon an enabling statute. As heretofore indicated in note 3, supra, the U.S. Court of Appeals, 5th Circuit, applying what it understood to be Texas law, held under similar facts that Phillips is liable for interest on the delayed payments on an “elemental equitable principle” that “Phillips ought not to be able to use someone else’s money as it pleases for ten years, thereby enjoying a very considerable benefit, and then pay nothing for the use of the money.” Phillips Petroleum Company v. Adams, 513 F.2d at 368. As to Texas Law, the Court said:

“A reading of all the relevant Texas cases convinces us that interest is awarded or refused in that jurisdiction only after a careful consideration of all the circumstances in the particular case, and that the Texas interest statute is sufficiently flexible to permit the courts to do equity. . . . ” Id. at 366.

The Circuit Court concluded as follows:

“ . . . Texas courts do not insist on statutory rigidity in the allowance of interest, for they realize that the right to interest is a marketplace concept and that the use of money is a mercantile privilege which should not go uncompensated, absent countervailing considerations. To exonerate Phillips from its interest obligation here would be to give the pipeline company an extracontractual lagniappe, for it is incontrovertible that Phillips has derived a very considerable benefit from the unrestricted use of the Adams family’s money. Phillips may say that its possession and utilization of funds to which it had no pretense of claim was reasonable, or even that its actions were necessary, but Phillips cannot be heard to say that it is fair and equitable that it should enjoy such a financial advantage for so long, and pay not a cent for it.” (Emphasis added.) Id. at 370.

We agree, both as to Texas law and the equity of compensating Stahl for Phillips’ use of money which it held and used. As to the funds attributable to payment for Stahl’s gas, Phillips had no possible right or title. It was in the position of a stakeholder who used royalty monies which were held in suspense, Kishi v. Humble Oil and Refining Company, 10 F.2d 356 (5th Cir. 1925), without any permissive agreement such as was contained in Gulf Pipe Line Co. v. Nearen, 135 Tex. 50, 138 S.W.2d 1065 (1940). In Kishi, the court properly awarded interest on suspense funds, while in Nearen, an opposite result, based on provisions of the division order contract, was proper. In the present case Phillips knew that funds attributable to payment for Stahl’s gas either would be paid to Stahl or refunded to its customers with interest. It made a conscious choice, without any permission or consent of Stahl, to comingle these so-called suspense funds with its general operating funds. Therefore, it should pay for the use of the sustainable portion of this money.

It is possible that the Court of Civil Appeals would have mentioned this additional equitable grounds of recovery had it not believed that this was foreclosed by the common law rule stated in Watkins v. Junker, 90 Tex. 584, 40 S.W. 11 (1897), and Heidenheimer v. Ellis, 67 Tex. 426, 3 S.W. 666 (1887), that interest cannot be allowed under that name unless provided for by statute. That common law rule is slightly less ancient than its predecessor, which held that all interest was unlawful and uncol-lectable. In 1545, the allowance of interest was first sanctioned by statute in England, but there were rigid limitations to the statutory exceptions for subsequent centuries. 47 C.J.S. Interest § 2, p. 12. The common law became effective by statute in the Republic of Texas on March 16, 1840, and on the same date a statute became effective providing for interest in a manner quite similar to Article 5069-1.03, supra. Since then, as stated by the Circuit Court in Adams, supra, the Texas courts have not insisted on statutory rigidity in the allowance of interest when necessary to permit compensation for the use or detention of one’s money. Nonstatutory interest has been allowed most often under the name of “damages,” measured by the legal rate of interest, while at other times it has been allowed in the name of “interest” itself.

For instance, in 1855, the Court held in Close v. Fields, 13 Tex. 623, that a defendant collecting money as the agent of the plaintiff was liable in damages for its detention, and that “the legal rate of interest is the safest criterion or standard of damages” in such cases. The Court continued: “The fact of the jury, in the verdict, calling it interest when it was damages, is no ground for reversal.” To the same effect, see Anderson v. Duffield, 8 Tex. 237 (1852); Commercial and Agricultural Bank v. Jones, 18 Tex. 811 (1857); and Murchison v. Payne, 37 Tex. 305 (1872).

As heretofore indicated, Watkins and Heidenheimer, the two leading cases of this Court cited for the rule that prejudgment interest cannot be allowed under that name unless provided for by contract or statute, merely acknowledged the rule as a preliminary to approval of exceptions based upon equitable principles. In Watkins, the Court said:

“It is objected in this case that interest is a creature of the statute, and cannot be allowed upon unliquidated damages. It is true that interest, strictly speaking, exists only by statutory law, but it is likewise true that courts have recognized the fact that compensation for detention of that which is due on account of injury inflicted is an element of damages necessary to the complete indemnity of the injured party; and the courts have, by analogy, adopted the legal rate of interest fixed by statute as the standard by which to be governed in assessing damages for the detention of money. . . . ” (At page 11, emphasis supplied.)

In Heidenheimer, the Court said, “It is frequently said in the decisions of the courts that interest is a creation of the statute. In a certain sense this is true; but as applied to one class of cases, the phrase is misleading.” The Court listed various instances of money used by the debtor or holder in which indemnification was justified, and the Court said:

“Now, let it be conceded that the claim sued upon in this case is not a ‘written contract ascertaining the sum payable,’ provided for in article 2976 of the Revised Statutes, nor yet an open account, such as is mentioned in article 2977. It is a stated account to be paid in cash upon delivery of goods, the sale of which constituted its consideration, and which had been delivered when the accounting was had. Here is a manifest delinquency on part of the debtors, working a gross injustice to the creditors, and resulting in a wrong which cannot be compensated by any sum less than the principal and the interest on the debt from the time at which it ought to have been paid. ...” (At page 667.)

Our holding that Stahl is entitled to legal interest on that portion of his money which was held in suspense and used by Phillips is a mere extension of the equitable principles announced in Watkins and Heidenheimer. The only difference is that we treat interest for the use of money under these circumstances as an equitable exception to the “interest eo nomine ” rule. In such cases, it is permissible but no longer necessary to continue the round-about method of allowing indemnity under the name of damages measured by the legal rate of interest. Without being as explicit, more recent cases have charted the way with equitable exceptions of this nature. In Donaldson v. Meyer, 261 S.W. 369 (Tex.Comm’n App.1924, judgmt. adopted), the Court allowed recovery for the use of money without statutory authority and without a valid contract, saying:

“ . . . The right of Donaldson to recover the $3,000 used by Meyer and wife as necessaries is not based on the contract that Meyer entered into, it having been ascertained that he was incapable of entering into a binding contract, but the relief given Donaldson is on the equitable ground that he is entitled to recover the money he had paid to Meyer, and which had been used by Meyer and his wife for necessaries, and, the right to recover not being based upon any contract of Meyer, then Donaldson could not recover the rate of interest mentioned in the contract, but could recover only the legal rate of 6 per cent.” (At page 371, emphasis supplied.)

In City of El Paso v. Nicholson, 361 S.W.2d 415 (Tex.Civ.App.1962, writ ref. n. r. e.), again without enabling statute or contract, it was held that Plaintiff was entitled to collect interest for the use of his money by the City. The Court said:

“Up until the money was taken from the police, it was a police action and it had not been determined in any way that the money had illegally been taken; but on January 16, the City of El Paso received this money and put it to use, apparently, as it was put into the General Fund. We think interest, therefore, is proper and allowable, not as a punitive measure, but merely because the City had the use of this sum of money by virtue of the action of the alderman

(At page 418, emphasis supplied.)

Stahl cites language in Cox v. Davison, 397 S.W.2d 200 (Tex.1965), as inferring that an equitable claim to interest may be proper under certain circumstances, although it was not allowed in that case. On the other hand, it has been suggested that Cox may preclude an award of interest in the instant case. The cases are distinguishable. In Cox, the contesting parties were cotenants in mineral producing properties. The non-consenting cotenants, who refused to join in a drilling program, sued the producing co-tenants for an accounting on their proportionate part of the production. The producing cotenants sought credit for six percent interest on the nonconsenters’ proportionate share of the costs advanced for the drilling program. This Court held that no interest was due because of the peculiar legal relationship of the parties. Since the noncon-senting cotenants had not agreed to the expenditures, the Court held that no debt existed upon which the producing cotenants could recover a personal judgment for reimbursement; their reimbursement being limited to recoupment from the nonconsenters’ share of the production. The Court said “interest is an incident of debt and is not payable in the absence of an obligation binding one person to pay money to another. . . The obligation may be expressly set forth in a contract or it may be implied by law.” It held that neither circumstance existed in Cox v. Davison.

In the instant case there is an obligation binding Phillips to pay money to Stahl for its gas; a debt upon which Stahl was entitled to a personal judgment. Therefore the conditions laid down in Cox v. Davison for the recovery of interest are present here. Our decision in this case applies only to facts under which the obligor was holding and using money of the obligee without its consent. As heretofore indicated, we agree that the Circuit Court correctly applied Texas law in the Adams case by awarding interest upon equitable grounds, thus preventing undue enrichment of Phillips because of its unauthorized use of an obligee’s money while ostensibly holding it in “suspense.”

Interest Upon Interest

The sum paid by Phillips to Stahl on December 7, 1972, was $24,258.81. It was conceded that interest at six percent per annum on such amount totaled $14,094.12 as of December 7, 1972. The Court of Civil Appeals allocated the $24,258.81 payment first to past due interest ($14,094.12), leaving $10,164.69 to apply on the principal debt. This allocation reduced the principal to $14,094.12, upon which the Court adjudged interest at the statutory rate of six percent per annum. Phillips complains of this allocation. In the absence of an agreement to the contrary, this type of allocation is usually proper. Community Savings and Loan Association v. Fisher, 409 S.W.2d 546, 550 (Tex.1966).

In the present case, however, we agree with Phillips that the allocation was error. It was not in sought in Stahl’s pleadings, and at trial both parties treated the $24,-258.81 as payment of the principal sum of the delayed payments. It was upon “rollback” audits of that sum that interest at six percent per annum was shown to total $14,-094.12 as of December 7, 1972. This amount of interest, plus $2.3168 per day from December 7,1972, to the date of judgment is what Stahl sought in the lower courts.

The error in allocation was harmless, because it did not change the amount of additional interest which Stahl was entitled to recover under its pleadings and proof. Whether the $14,094.12 was the remaining principal or the accrued interest due as of December 7, 1972, interest thereon at six percent per annum amounted to $3,011.84 on the date of judgment. That is the precise sum which the Court of Civil Appeals included in its total judgment of $17,105.96.

Implicit in Phillips’ point of error relating to allocation is the argument that Stahl is not entitled to prejudgment interest on the sum of interest which had accrued as of December 7, 1972. There is no clear consensus in the Texas cases which have considered this question. The conflict and the apparent majority view was fully discussed in a decision awarding interest on interest under the same circumstances in the case of Fuller v. Phillips Petroleum Company, 408 F.Supp. 643 (N.D.Tex.1976).

Some of the confusion originated with the holding in McDaniel v. Miller, 317 S.W.2d 546, 549 (Tex.Civ.App.1958, no writ), that allowance of interest on interest was fundamental error. No authority was cited for the holding, but the case was cited and followed in at least two cases before it was rejected in subsequent decisions. See Lanpar Co. v. Stanfield, 451 S.W.2d 254, 257 (Tex.Civ.App.1970, no writ), and Ligón v. E. F. Hutton & Co., 428 S.W.2d 434, 440 (Tex.Civ.App.1968, writ ref’d n. r. e.).

We disapprove the above mentioned holding in McDaniel v. Miller, supra. When a definite sum of money is determined to have been due and payable at a date certain prior to judgment, the legal rate of interest has been allowed thereon from such date to the date of judgment. Davidson v. Clearman, 391 S.W.2d 48 (Tex.1965); Ft. Worth & D. C. Ry. Co. v. Greathouse, 82 Tex. 104, 17 S.W. 834 (1891); Heidenheimer v. Johnston, 76 Tex. 200, 13 S.W. 46 (1890); Houston & T. C. R’y Co. v. M. L. Jackson, 62 Tex. 209 (1884); New York Underwriters Insurance Company v. Coffman, 540 S.W.2d 445, 458 (Tex.Civ.App.1976, no writ); International & G. N. R. Co. v. Dimmitt County Pasture Co., 5 Tex.Civ.App. 186, 23 S.W. 754, 756 (1893, no writ). We believe this to be the more reasonable rule for fully compensating one whose money has been detained by another. There is no good reason for an exception if the payment is due for accrued interest rather than for principal or damages. Thus, we hold that prejudgment interest was properly allowed on the $14,-094.12 sum due Stahl from its accrual date on December 7, 1972, to the date of judgment. No question has been raised about the Court having allowed post judgment interest on the entire judgment in accordance with Article 5069-1.05.

Accordingly, the judgment of the Court of Civil Appeals is affirmed.

Concurring opinion by POPE, J., in which BARROW and CHADICK, JJ., join.

POPE, Justice,

concurring.

The court of civil appeals, whose judgment we affirm, holds that the contract between the parties constituted a basis for legal interest. This court also makes that reason the basis for its holding. Since the court reaches that conclusion, with which I agree, its dictum about equitable interest is unnecessary.

BARROW and CHADICK, JJ., join in this concurring opinion.

      . The original contract was with Stahl’s predecessor, Panhandle Gas Compression Company. Since Stahl has succeeded to all rights of Panhandle and was treated as the party at interest for all purposes, the agreement will be referred to herein as the Stahl contract.

      . Such payments were conditioned on indemnity agreements assuring Phillips of the suppliers’ agreements to reimburse Phillips with interest, for any portion thereof which the FPC might require Phillips to refund to its customers. See Phillips Petroleum Company v. Adams, 513 F.2d 355, note 10 at page 362 (5th Cir. 1975), and Fuller v. Phillips Petroleum Company, 408 F.Supp. 643 (N.D.Tex.1976). Whether Stahl could have compelled Phillips to remit such payments under their contract without receiving an indemnity agreement from Stahl is not before us. Cf. Ashland Oil & Refining Co. v. Statts, Inc., 271 F.Supp. 571 (D.Kan.1967).

      . In the meantime Phillips had lost three similar cases on the interest issue in the United States Court of Appeals for the Fifth Circuit on May 22, 1975, rehearing denied on June 18, 1975. Phillips Petroleum Company v. Adams, 513 F.2d 355 (1975); First National Bank of Borger v. Phillips Petroleum Company, 513 F.2d 371 (1975); and Phillips Petroleum Company v. Riverview Gas Compression Co., 513 F.2d 374 (1975). Writs of Certiorari were denied by the Supreme Court in all three of these cases on November 3, 1975. 423 U.S. 930, 96 S.Ct. 281, 46 L.Ed.2d 259. As to interest, the factual circumstances giving rise to those cases are identical in all material respects to the facts in the present case, but Phillips contended throughout that they were decided on an incorrect interpretation of Texas law.

      . A slightly different wording of the definition existed at the time the Stahl contract was executed, which read “interest is the compensation allowed by law or fixed by the parties to a contract for the use or forbearance or detention of money.” V.A.T.C.S., Article 5069, which was replaced on October 1, 1967, by the enactment quoted above. All statutory references are to Vernon’s Annotated Texas Civil Statutes.

      . For writ history and similar holdings in two other cases decided on the same date, see Note 3, supra. Accord: Phillips Petroleum Company v. Grady Hazlewood, 534 F.2d 61 (5th Cir. 1976); Fuller v. Phillips Petroleum Company, 408 F.Supp. 643 (N.D.Tex.1976); Shutts v. Phillips Petroleum Company, 222 Kan. 527, 567 P.2d 1292 (1977); Gray v. Amoco Production Co., 1 Kan.App.2d 338, 564 P.2d 579 (1977); Lightcap v. Mobil Oil Corp., 221 Kan. 488, 562 P.2d 1 (1977).

      . Early English common law held all contracts for interest to be void. 45 Am.Jur.2d, Interest and Usury § 3; 47 C.J.S. Interest § 2. Blackstone wrote that “the Canon law has proscribed the taking of any, the least, increase for the loan of money as a mortal sin.” Ill Blackstone’s Commentaries, 453-454 (Tucker Edition, 1803). Hill v. George, 5 Tex. 87, 91 (1849).

      . An Act to Adopt the Common Law of England, approved January 20, 1840, II Gammel Laws of Texas, 177; An Act to Regulate Interest, approved January 18, 1840, id. p. 182.

      . The sum of $2.3168 per day was shown to be the correct calculation of daily interest on the $14,094.12 at the rate of six percent per annum. It is undisputed that this daily interest from December 7, 1972 to the date of the judgment on June 28, 1976, amounted to $3,011.84.

      . See Brooklyn Union Gas Co. v. Transcontinental Gas Pipe Line Corp., 201 F.Supp. 679, 683 (D.C.Tex.), affirmed in Socony Mobil Oil Co. v. Brooklyn Union Gas Co., 299 F.2d 692, 696 (5th Cir. 1962), cert. den. 371 U.S. 887, 83 S.Ct. 183, 9 L.Ed.2d 121 (1962); E. G. Gasperson v. The Madill National Bank, 455 S.W.2d 381 (Tex.Civ.App. 1970, writ ref’d n. r. e.).


author: McGEE, Justice.

text:
    TOWN NORTH NATIONAL BANK, Petitioner, v. Larry BROADDUS et al., Respondents.
    No. B-7319.
    Supreme Court of Texas.
    July 26, 1978.

      Wynne & Jaffe, Hubert A. Crouch, III, Dallas, for petitioner.
    Parnass & Fowler, Walter W. Leonard, Irving, for respondents.
   McGEE, Justice.

Town North National Bank, hereinafter referred to as the Bank, brought suit against Larry Broaddus, Terrell C. Taylor, and Charles W. Curtis, seeking to recover on a promissory note. Curtis was subsequently dismissed without prejudice because he was a defendant in bankruptcy proceedings. The trial court thereafter granted the Bank a summary judgment against Broaddus and Taylor. The court of civil appeals reversed and remanded. 558 S.W.2d 909. We reverse the judgment of the court of civil appeals and affirm that of the trial court.

Broaddus and Taylor were co-makers, along with Curtis, on a promissory note to the Bank in the principal amount of $8,900. The note was executed on January 10,1975, and became due on July 9,1975. It provided for interest at the rate of 10 percent per annum. In September, 1975, a partial payment of $1,900 was made to the Bank which reduced the principal balance to $7,000. At that time, the due date on the note was extended to October 9,1975. On November 25, 1975, the Bank demanded payment in full. Except for a subsequent partial payment of interest, the makers made no further payments, thereby leaving a balance of $7,231.02.

The Bank brought suit upon the note and moved for a summary judgment. In conjunction therewith, one of the Bank’s officers, William Hudson, filed an affidavit in which he stated that he was competent to testify to every statement made therein and that the facts stated in the affidavit were within his personal knowledge and were true and correct. Attached to the affidavit was a copy of the note. Hudson stated in the affidavit that a true and correct copy of the note was attached and incorporated for all purposes. In this connection, we recently held that when a photographic copy of a promissory note is attached to an affidavit in which the affiant swears that the attached note is a true and correct copy of the original note, then the note is a sworn copy within the meaning of Rule 166-A(e) of the Texas Rules of Civil Procedure and is proper summary judgment evidence. Life Insurance Go. of Virginia v. Gar-Dal, Inc., 570 S.W.2d 378 (Tex.1978).

Broaddus and Taylor responded to the Bank’s motion for summary judgment with an answer and affidavits which they contended, in conjunction with other instruments on file, raised genuine, material fact questions and issues with respect to their liability to the Bank. Each of them executed an affidavit which stated that Hudson, as agent for the Bank, explained to them that Curtis would have sole responsibility for payment of the note, the proceeds of which were to be used to purchase two cows, and that the Bank would not look to either of them for repayment. After reviewing the affidavits of all the parties, the trial court determined that there was an absence of a genuine issue of any material fact and rendered summary judgment on the Bank’s behalf.

The court of civil appeals reversed and remanded on the ground that the affidavits of Broaddus and Taylor raised a fact question as to fraud in the inducement of the promissory note. Referring to Dallas Farm Machinery Co. v. Reaves, 158 Tex. 1, 307 S.W.2d 233 (1957), the court noted that there is an exception to the parol evidence rule which permits extrinsic evidence to show fraud in the inducement of a written sales contract. Section 3.306(2) of the Tex. Bus. & Comm.Code Ann. (1968) makes this rule applicable to actions on promissory notes, where, as we have here, the holder of the note is not a holder in due course. The court of civil appeals then cited as determinative of this case the decisions of Berry v. Abilene Savings Association, 513 S.W.2d 872 (Tex.Civ.App.-Eastland 1974, writ ref’d n. r. e.) and Viracola v. Dallas International Bank, 508 S.W.2d 472 (Tex.Civ.App.—Waco 1974, writ ref’d n. r. e.). Under the facts of those cases, it was held that the application of section 3.306(2) was proper and parol evidence was admissible to show that the maker of a note was induced by the false and fraudulent representations of the payee to sign the promissory note. While we recognize the validity of the rule announced in those decisions, we do not believe that Berry and Viracola are controlling under the facts of this case.

The question thus presented is whether, in a suit by one not a holder in due course against the maker of a promissory note, the parol evidence rule prohibits the admission of extrinsic evidence showing that the maker was induced to sign the note by the payee’s representations that the maker would not incur liability on the note. We hold that the allegations of fact in the instant case, even if true, do not constitute fraud in the inducement so as to support an exception to the parol evidence rule.

In reaching this result, we have examined many Texas decisions concerning fraud in the inducement of promissory notes. From a study of these decisions, it appears that one rule prevails when there is only a representation to a maker, or surety, by the payee that he will not be liable; on the other hand, a different rule prevails in the instance where something more than just that representation is involved.

We begin our discussion of the issue presented with an examination of the authorities we consider to be controlling in this case. In these decisions there was, in essence, only a representation by the payee to a maker or surety that he would not be liable on the note. See Lanius v. Shuler, 77 Tex. 24, 13 S.W. 614 (1890); Mitcham v. London, 110 S.W.2d 140 (Tex.Civ.App.—Austin 1937, no writ); Dean v. Allied Oil Co., 261 S.W.2d 900 (Tex.Civ.App.—Waco 1953, writ dism’d); Jones v. Hubbard, 302 S.W.2d 493 (Tex.Civ.App.—Waco 1957, writ ref’d n. r. e.); Howeth v. Davenport, 311 S.W.2d 480 (Tex.Civ.App.—San Antonio 1958, writ ref’d n. r. e.); Fisher v. Howard, 389 S.W.2d 482 (Tex.Civ.App.—Dallas 1965, no writ); McPherson v. Johnson, 436 S.W.2d 930 (Tex.Civ.App.—Amarillo 1968, writ ref’d n. r. e.); Texas Export Development Corp. v. Schleder, 519 S.W.2d 134 (Tex.Civ.App.—Dallas 1974, no writ). The rule from these cases is, quite clearly, that a negotiable instrument which is clear and express in its terms cannot be varied by parol agreements or representations of a payee that a maker or surety will not be liable thereon. As was stated by the court in Dean v. Allied Oil Co., supra, at 902:

“But even had defendants offered proof under proper pleadings that plaintiff had induced defendants to sign the note by a false representation — that he would not be personally liable thereon— or made an agreement or had an understanding to that effect, and had the jury so found, it still would avail defendants nothing. An unconditional written instrument cannot be varied or contradicted by parol agreements or by representations of the payee that the maker would not be held liable according to the tenor of the instrument.”

The decisions of Mitcham v. London, supra, and Howeth v. Davenport, supra, offer further insight into the question before us. In Mitcham, the court stated:

“As we understand appellee’s contention upon this issue, it is that the fraud consisted in making the agreement not to hold the note as a personal obligation against him with the then present intention not to perform that agreement. . . . The promise here complained of as being intended not to be performed was a collateral one in parol at variance with the written contract entered into, and one proof of which the law does not admit. If fraud could be predicated upon such promise and intention, then any collateral parol agreement might be asserted to contradict, vary, or even abrogate any written contract, under the guise of a fraudulent intent not to perform such collateral parol agreement. The practical effect would be to destroy the parol evidence rule altogether.” Mitcham v. London, 110 S.W.2d at 142.

Or, in the words of another court, a promissory note would be reduced to a “meaningless scrap of paper.” Howeth v. Davenport, 311 S.W.2d 480, 482 (Tex.Civ.App.—San Antonio 1958, writ ref’d n. r. e.).

The reasoning behind these cases was recently expressed in an opinion by the Dallas Court of Civil Appeals where it was noted that “[a] party to a written agreement [promissory note] is charged as a matter of law with knowledge of its provisions and as a matter of law cannot claim fraud when he is bound to the provisions unless he can demonstrate that he was tricked into its execution.” Texas Export Development Corp. v. Schleder, 519 S.W.2d 134, 139 (Tex.Civ.App.-Dallas 1974, no writ). The obligation of a maker who signs an instrument is clearly set out by the Uniform Commercial Code. See Tex.Bus. & Comm.Code Ann. § 3.413 (1968). Were we to deviate from the holdings of Schleder and cases similar to it by permitting extrinsic evidence of the type sought to be shown in this instance, the result would be uncertainty and confusion in the law of promissory notes. Therefore, under the facts of this case, we hold that the mere representation by a payee to the maker that the maker will not be liable on the note does not constitute fraud in the inducement so as to be an exception to the parol evidence rule.

In reaching its decision that parol evidence was admissible in this case, the court of civil appeals placed primary reliance on Berry v. Abilene Savings Association, 513 S.W.2d 872 (Tex.Civ.App.—Eastland 1974, writ ref’d n. r. e.) and Viracola v. Dallas International Bank, 508 S.W.2d 472 (Tex.Civ.App.—Waco 1974, writ ref’d n. r. e.). It is true that the rule to be taken from those two decisions is that when there has been a representation by the payee to the maker of a note that the maker will not be liable thereon, extrinsic evidence of fraud in the inducement is to be permitted. A careful reading of Berry and Viracola, however, reveals that some sort of trick, artifice, or device was employed by the payee in addition to his representation to the maker that he would not be liable. In our research, this element of trickery or deception was found to be common to the other Texas decisions involving promissory notes in which fraud in the inducement was recognized as an exception to the parol evidence rule. See generally Farnsworth v. Dolch, 488 S.W.2d 531 (Tex.Civ.App.—Waco 1972, writ ref’d n. r. e.); Costello v. Sample, 470 S.W.2d 446 (Tex.Civ.App.—Waco 1971, writ ref’d n. r. e.); Lee v. First Nat’l Bank, 254 S.W. 394 (Tex.Civ.App.—Beaumont 1923, no writ).

For example, Berry v. Abilene Savings Association, supra, involved the situation of a college student who signed a $5,000 note made payable to the Western Commercial Savings & Loan Association. Abilene Savings Association subsequently acquired the note after it was mature and sought to collect on the note by way of suit. Abilene Savings Association moved for and was granted a summary judgment. In opposition to the motion for summary judgment, Berry filed an affidavit to support his allegations that he was induced to sign the note by false and fraudulent representations made to him by one Claude McAden, president of Western Commercial Savings & Loan Association, and one Fred Newman, Berry’s employer.

The detailed affidavit filed by Berry revealed that McAden and Newman were neighbors; that Newman needed the $5,000 loan, but due to certain restrictions and technicalities, Western Commercial Savings & Loan could not loan the money directly to Newman; that a scheme was devised whereby Berry would take out the loan and turn over the proceeds to Newman; that McAden told Berry several times that he would not be liable on the note and only Newman would be looked to for payment on the note; that McAden told Berry that he knew that he was a college student, had neither money nor property and, under normal circumstances, would have never made such a loan to him; that Berry was under a great deal of pressure from McAden and his employer, Newman, to sign the note; and that he signed the note, received the money, and then turned the proceeds over to Newman. Based on the affidavit, the court of civil appeals reversed and remanded the trial court’s judgment because it held that there was a genuine material issue of fact concerning fraud in the inducement.

The Viracola v. Dallas International Bank, supra, decision is equally as illustrative. Viracola was president of the American Panel Corporation. At that time the company was involved in negotiations for its sale to a buyer in Alabama. In order to support the company’s operations during the negotiations, the company borrowed $9,000 from the Bank and made a note to it for that amount. The Bank eventually sued to collect on the note. The trial court granted a summary judgment on behalf of the Bank.

In opposition to the Bank’s motion, Vira-cola filed an affidavit which essentially set out the above facts and then went on to state that Viracola signed the note on behalf of the corporation in his capacity as president; that soon thereafter, the Bank requested Viracola to co-sign the note individually and to pledge his American Panel stock with the Bank “only to assure the Bank that the note would be paid in full first from the proceeds of the sale before any distribution of funds was made to other creditors and stockholders”; that Viracola was assured by the Bank that “if the sale was not finalized” the stock would be returned to him and his individual liability on the note would end; that on this basis he pledged the stock and co-signed the note; that the sale ultimately fell through and the Bank returned the stock to him; that at a later date the Bank pursued an action on the note against Viracola despite the agreement. As in Berry, the court of civil appeals reversed and remanded holding that a genuine material issue of fact existed with reference to the fraudulent inducement of the note.

Therefore, from our review of Berry and Viracola, we believe that implicit within their holdings that extrinsic evidence is permissible to show fraud in the inducement of a note is the requirement there be a showing of some type of trickery, artifice, or device employed by the payee in addition to the showing that the payee represented to the maker he would not be liable on such note. Applying that standard to the facts before us, we find no such showing by the respondents. The affidavits offered by Broaddus and Taylor in opposition to the Bank’s motion for summary judgment indicate only that the Bank made representations to .Broaddus and Taylor that they would not be liable on the note, which, even if correct, would be insufficient under our discussion. Consequently, we do not consider the Berry v. Abilene Savings Association, supra, and Viracola v. Dallas International Bank, supra, decisions as being dis-positive of this case.

To be entitled to a summary judgment, the movant has the burden of establishing that there exists no material fact issue and that he is entitled to judgment as a matter of law. Mitchell v. Baker Hotel, 528 S.W.2d 577 (Tex.1975); Gibbs v. General Motors Corp., 450 S.W.2d 827 (Tex.1970); Swilley v. Hughes, 488 S.W.2d 64 (Tex.1972). By way of pleadings and proper summary judgment proof, Town North National Bank demonstrated as a matter of law that it was entitled to summary judgment. In opposition to this, Broaddus and Taylor asserted the affirmative defense of fraud in the inducement. In order to avoid a summary judgment in favor of the plaintiff-Bank, it was their burden as defendants to show the existence of an issue of fact with respect to their affirmative defense. See Life Insurance Co. of Virginia v. Gar-Dal, Inc., 570 S.W.2d 378 (Tex.1978); Hudnall v. Tyler Bank & Trust Co., 458 S.W.2d 183 (Tex.1970); Kuper v. Schmidt, 161 Tex. 189, 338 S.W.2d 948 (1960); Gulf Colorado & Santa Fe Ry. v. McBride, 159 Tex. 442, 322 S.W.2d 492 (1958). To meet this requirement, Broaddus and Taylor offered an affidavit in which it was averred that an officer of the Bank represented to them that they would not be held liable on the note, that only Curtis would be looked to for payment of the note. Rule 166-A(e) of the Texas Rules of Civil Procedure (Supp. 1978) requires that supporting and opposing affidavits, among other things, “shall set forth such facts as would be admissible in evidence.” This rule has been interpreted to mean that the affidavits must set forth such facts as would be admissible in evidence at a trial. See Phagan v. State, 510 S.W.2d 655 (Tex.Civ.App.—Forth Worth 1974, writ ref’d n. r. e.); Mason v. Mid-Continent Supply Co., 374 S.W.2d 922 (Tex.Civ.App.—Fort Worth 1964, writ ref’d n. r. e.); Dickey v. Bird, 366 S.W.2d 859 (Tex.Civ.App.—Amarillo 1963, writ ref’d n. r. e.). Because of our previous holding that the facts in their affidavit upon which they rely to establish fraud in the inducement are barred by the parol evidence rule, Broaddus and Taylor are, in effect, in the position of having offered no summary judgment proof to meet the burden imposed upon them to show the existence of a genuine issue as to a material fact. Consequently, the trial court properly granted summary judgment in favor of Town North National Bank.

Accordingly, the judgment of the court of civil appeals is reversed and that of the trial court is affirmed.

GREENHILL, C. J., notes his dissent.

      . Section 3.306 provides:
      “Unless he has the rights of a holder in due course any person takes the instrument subject to
      (1) . . .
      (2) all defenses of any party which would be available in an action on a simple contract;

        . The tendency of the courts of this state to adhere to such a strict approach is further illustrated by the following decisions: see Kuper v. Schmidt, 161 Tex. 189, 338 S.W.2d 948 (1960); Lassiter v. Boxwell Brothers, Inc., 362 S.W.2d 884 (Tex.Civ.App.—Amarillo 1962, no writ); Dewey v. C. I. T. Corp., 374 S.W.2d 298 (Tex.Civ.App.—Amarillo 1963, writ ref’d n. r. e.); Johnson v. Packaging Corp. of America, 375 S.W.2d 780 (Tex.Civ.App.—Forth Worth 1964, no writ); Roseborough v. Phillips, 389 S.W.2d 593 (Tex.Civ.App.—Dallas 1965, no writ). See generally Martin v. Coastal States Gas Producing Co., 417 S.W.2d 91 (Tex.Civ. App.—Eastland 1967, no writ). Although no allegations of fraud are involved in them, the cases are nevertheless persuasive to the extent that they demonstrate the'unwillingness of the courts to release a maker from liability on a note solely on a representation to him by a payee that he will not be looked to for payment.


author: PER CURIAM.

text:
    CITY OF CORPUS CHRISTI et al., Petitioners, v. PUBLIC UTILITY COMMISSION et al., Respondents.
    No. B-7136.
    Supreme Court of Texas.
    July 26, 1978.

      McGinnis, Lochridge & Kilgore, B. D. St. Clair, Austin, for petitioners.
    Dyer, Redford, Burnett, Wray & Wool-sey, W. N. Woolsey, Corpus Christi, John L. Hill, Atty. Gen., Joe N. Pratt, Asst. Atty. Gen., Austin, for respondents.
   PER CURIAM.

The Application for Writ of Error is refused, no reversible error.

This is an appeal from a temporary injunction issued by the trial court enjoining enforcement of an interim rate order promulgated by the Public Utilities Commission. The Court of Civil Appeals dissolved the injunction and dismissed the cause for want of jurisdiction. In so doing, the Court held that the Public Utilities Commission has the implied power to make interim orders; that an interim order need not be supported by a finding that it is required because of an “imminent peril to the public health, safety, or welfare;” that appeal will lie from final orders only. 555 S.W.2d 509. These holdings are in accord with our decision in the direct appeal of the final order in this same rate matter. City of Corpus Christi, et al. v. Public Utility Commission, et al., 21 Tex.Sup.Ct.J. 376 (May 20, 1978) on rehearing, 21 Tex.Sup.Ct.J. 463 (July 8, 1978).

The Petitioner Cities in this Application seek to have the injunction against the interim order reinstated. Even if we were to agree with the contentions of the Cities it would be impossible to grant the relief sought because the interim order expired when the final order was issued. The cause is, therefore, moot. Poole v. Giles, 151 Tex. 224, 248 S.W.2d 464 (1952). Normally, upon a finding of mootness our practice is to dismiss the entire cause. Texas Foundries, Inc. v. International Moulders & Foundry Workers’ Union, 151 Tex. 239, 248 S.W.2d 460 (1952). See also, Rule 483, Texas Rules of Civil Procedure. When, however, dismissing the appeal or application, or refusing the application, would accomplish the same result, we have occasionally done so. Boatright v. City of Mineral Wells, 415 S.W.2d 901 (Tex.1967). Here, the judgment of the Court of Civil Appeals dismisses the cause and we will therefore refuse this Application with the notation “no reversible error.”

GREENHILL, C. J., not sitting.


text:
    L. L. S., Petitioner, v. STATE of Texas, Respondent.
    No. B-7601.
    Supreme Court of Texas.
    July 26, 1978.

      David T. Lancaster and Steven P. Amis, Dallas, for petitioner.
    Henry Wade, Dist. Atty., Maridell Tem-pleton, Asst. Dist. Atty., Dallas, for respondent.
   PER CURIAM.

The Application for Writ of Error is refused, “No Reversible Error.” Rule 483, Texas Rules of Civil Procedure.

We note the further writing of the Court of Civil Appeals questioning its jurisdiction and directing that future appeals shall be governed by Rule 385. 565 S.W.2d 252. We disagree. As to this, we hold that the thirty-day period for the filing of the notice of appeal “as in civil cases generally,” see Section 56.01(d) of the Family Code, is applicable to appeals from an order of the trial court waiving its exclusive jurisdiction and transferring the juvenile to a criminal district court for prosecution as an adult.


author: BISSETT, Justice.

text:
    James R. BRYCE, Appellant, v. CORPUS CHRISTI AREA CONVENTION AND TOURIST BUREAU, Texas nonprofit Corporation, and Bob Conwell, Appellees.
    No. 1322.
    Court of Civil Appeals of Texas, Corpus Christi.
    May 24, 1978.
    Rehearing Denied June 26, 1978.
    Second Rehearing Denied Aug. 29, 1978.

      Michael W. Williams, Corpus Christi, for appellant.
    William R. Anderson, Jr., Sorrell, Anderson & Sorrell, Anthony Pletcher, Maddin, White & Brin, Inc., Corpus Christi, for ap-pellees.
   OPINION

BISSETT, Justice.

This is an appeal from an order which dismissed plaintiff’s cause of action. James R. Bryce, a resident taxpayer of the City of Corpus Christi, Texas, sued Corpus Christi Area Convention and Tourist Bureau, hereinafter called the “Tourist Bureau”, and Bob Conwell, its executive vice president, to recover money on behalf of the City of Corpus Christi, which the City donated to the Tourist Bureau pursuant to “a contract or contracts between the City and the Tourist Bureau”. Both defendants filed general denials, and the Tourist Bureau filed a motion styled “MOTION TO QUASH PLAINTIFF’S CAUSE OF ACTION IN ITS ENTIRETY”. The trial court granted the motion and dismissed the suit. James R. Bryce, plaintiff, has appealed.

In summary, plaintiff alleged: 1) he is a property taxpayer of the City of Corpus Christi pursuant to “Article IX, Section 18, of the City Charter of Corpus Christi, Texas”; 2) tax monies were furnished to the Tourist Bureau by the City of Corpus Christi; 3) some of the monies so furnished were used by the Tourist Bureau for the publication and distribution of two magazines, “The Sparkler” and “The Texas Tropical Coast”; 4) “the ownership of the magazines aforesaid is represented by the defendants to be privately in the defendant Bob Conwell”; 5) Conwell was allowed by the Tourist Bureau to retain for himself all of the profits resulting from the sale of the magazines; and 6) the monies paid by the Tourist Bureau to Conwell constituted a dividend “in direct contravention of Article 1396-2.24, V.A.T.S.”. In addition to general relief, plaintiff prayed for: 1) an accounting for all services and income paid from tax monies of the City used by the Tourist Bureau and Conwell for the publication of the magazines; 2) an accounting of all profits generated by advertising in the magazines; and 3) a return of all tax monies to the general fund of the City of all profits derived from the publication and distribution of the magazines.

The Tourist Bureau, in the aforesaid motion, alleged: 1) Article IX, Section 18, of the City Charter does not authorize a suit to be brought by a private citizen “against a contractor with the City of Corpus Christi whereby the only claim by such plaintiff is that such contracting party has made an illegal distribution”; and 2) Bryce “is not such a party who may bring as a private citizen an action against this Defendant under Article 1396-2.24”. For those reasons, and those alone, the Tourist Bureau prayed that:

“[PJlaintiff’s Original Petition in its entirety be quashed for reason that same is brought by a party who has not the capacity or the authority to institute such suit . . and that on hearing that Plaintiff’s petition be abated in its entirety;”

The motion, which was sworn to and duly verified, was set down for hearing. Evidence was introduced at the hearing. Bryce, who was called as a witness by the Tourist Bureau, testified that he lived in Corpus Christi, owned property situated within the City, and paid taxes to the City. He also stated that he was not a member of the Tourist Bureau. He further testified that he did not have any complaint about the contracts which existed between the City and the Tourist Bureau, and that he filed this suit to recover money which was illegally spent by the Bureau.

Article IX, Section 18, of the City Charter was not introduced in evidence at the hearing. No evidence was offered at the hearing relating to whether the monies sued for were or were not dividends which were distributed to the members, directors or officers of the Tourist Bureau in contravention of Article 1396-2.24.

The aforesaid hearing was held on September 13, 1977. The trial judge granted the motion and dismissed the suit per written order, which was signed on October 13, 1977. The order of dismissal is couched in general terms, without indicating the basis for the ruling.

The City of Corpus Christi is not a party to this suit. There is no showing that the City authorized Bryce to file this suit. The allegation “James Bryce brings this action as a property taxpayer” of the City of Corpus Christi, and the allegation that Bryce sues to recover tax monies of the City illegally spent for the general fund of the City do not make the City a party to the action brought by Bryce. This suit is a controversy solely between Bryce, the Tourist Bureau and Conwell.

We know of no rule which permits the dismissal of a lawsuit in its entirety in response to a motion “to quash plaintiff’s cause of action”. However, the name by which a motion is designated does not determine its character, and we attach no controlling effect to the styling of the Tourist Bureau’s motion in this case. We look to the substance of the motion.

The Tourist Bureau, during oral argument, argued that the motion, in effect, is a plea in abatement and that the trial court properly sustained the plea and dismissed the suit. Whether the motion is, in essence, a plea in abatement is determined by the substance of the motion, and the effect which will be accomplished if it is granted. Smith v. City of Dallas, 404 S.W.2d 839 (Tex.Civ.App.—Dallas 1966, no writ); Armstrong v. Snapp, 186 S.W.2d 380 (Tex.Civ.App.—Fort Worth 1945, no writ).

Generally speaking, the sustaining of a plea in abatement defeats the pending action but does not bar a revival of the action or a future action on the same cause. So, matters which merely postpone the enforcement of a right alleged in the petition are necessarily in abatement. The matter is decided, not by the form in which it is raised, but by its substance. 1 Am.Jur.2d, Abatement, Survival and Revival, § 2; 1 Tex.Jur.2d, Abatement and Revival, § 4.

A plea in abatement should not only show the grounds upon which the suit is improperly brought, but should also show how it should have been brought, and should always state facts, not conclusions of law. State v. Goodnight, 70 Tex. 682, 11 S.W. 119 (1888). When such a plea is sustained, the suit should not be dismissed until the plaintiff has been given a reasonable opportunity to amend, if it is possible to do so, and thereby remove the obstacle which defeated the suit initially filed. Even if the case-is dismissed, it is revived upon the removal of such obstacle which prevented its further prosecution in the first instance. Life Ass’n of America v. Goode, 71 Tex. 90, 8 S.W. 639 (1888); Humphrey v. National Fire Ins. Co., 231 S.W. 750 (Tex.Com.App.1921, opinion adopted). The sufficiency of the plea must be tested by its own allegations, and cannot be assisted by allegations in any other plea. Breen v. Texas and Pacific Railway Company, 44 Tex. 302 (1875); 1 Tex.Jur.2d, Abatement and Revival, § 71.

The result of sustaining a plea in abatement was pointed out in Texas Highway Department v. Jarrell, 418 S.W.2d 486, 488 (Tex.Sup.1967), by Chief Justice Calvert, who, speaking for the Court, said:

“. . . [a] plea in abatement, if sustained, would require an abatement of the claim or cause of action until some obstacle to its further prosecution was removed . . . ”

It was observed by Justice Garwood in Kelly v. Bluff Creek Oil Company, 158 Tex. 180, 309 S.W.2d 208, 214-215 (1958):

“. . . [T]he practice of misnaming a plea in bar in order to procure a preliminary trial as if the plea were one in abatement is confusing and not to be encouraged.”

In the case at bar, the motion cannot be considered as a plea in abatement because the action has been improperly brought in some respect that does not go to the merits of the cause of action. There are no allegations of fact set out therein. The assertions that Article IX, Section 18, of the City Charter does not authorize the bringing of the suit by Bryce, and that he is not authorized to bring such a suit under the referenced statute are conclusions, not allegations of fact. The further assertion that the petition should be “quashed” because Bryce did not have the “capacity” or “authority” to institute the suit is also a conclusion. The motion, when tested solely by the allegations contained therein, is insufficient as a plea in abatement.

The motion cannot be treated as a motion for summary judgment, nor can it be considered as a plea in bar. In either of those instances, the only judgment which could be rendered in the event the motion or plea was sustained would be a take nothing judgment. Here, the judgment was of dismissal.

Under the circumstances, for the reasons stated and under the foregoing authorities, it was reversible error to render a judgment of dismissal with respect to the suit filed by Bryce against the two defendants, the Tourist Bureau and Conwell. Moreover, a reversal of the judgment insofar as it dismissed the suit against the Tourist Bureau would also require a reversal of the judgment insofar as it dismissed the suit against Conwell. Bryce has alleged that the City’s tax monies were donated by the City to the Tourist Bureau, who illegally paid such monies to Conwell; that the latter illegally received them; and that the two illegally spent the same. In that state of the pleadings, the action asserted is so interrelated and interwoven with respect to the acts of the Tourist Bureau and Conwell that it is impossible to sever the action and proceed independently as to each, so that all issues should be resolved in one suit against both defendants. We believe that the judgment as to its entirety should be reversed and the cause as to both defendants be remanded in the interest of justice. Rule 434, T.R.C.P.

Since the judgment of the trial court will be reversed and the cause remanded, we observe that the law is well settled that a taxpayer of a city does not have standing to bring suit to recover public funds of the city already illegally expended by the city. Scott v. Graham, 156 Tex. 97, 292 S.W.2d 324 (1956); Hoffman v. Davis, 128 Tex. 503, 100 S.W.2d 94 (Tex.Comm’n App.1937, opinion adopted); First National Bank of Bellaire v. Prudential Insurance Co. of America, 551 S.W.2d 112 (Tex.Civ.App.—Houston [14th Dist.] 1977, writ ref’d, n.r.e.); Glass v. City of Austin, 533 S.W.2d 411 (Tex.Civ.App.—Austin 1976, no writ). The right to institute such suit belongs exclusively to the municipality. Scott v. Graham, supra; Glass v. City of Austin, supra. We further observe that it has been held proper to grant a motion for summary judgment in favor of the defendants where a taxpayer of a city files suit to recover public monies allegedly illegally spent solely on the ground that the plaintiff did not have standing to sue. See First National Bank of Bellaire v. Prudential Insurance Co. of America, supra.

The judgment of the trial court is REVERSED and the cause is REMANDED.

OPINION ON MOTION FOR REHEARING

The Corpus Christi Area Convention and Tourist Bureau (Tourist Bureau) has filed a vigorous motion for rehearing in this case. The main thrust of the motion is that its “MOTION TO QUASH PLAINTIFF’S CAUSE OF ACTION IN ITS ENTIRETY”, since no exceptions were levelled at the conclusions alleged therein, was sufficient to serve as a plea in abatement; and, further, the evidence presented was sufficient to sustain the plea.

Plaintiff Bryce alleged in his original petition:

“James R. Bryce brings this action as a property taxpayer pursuant to Article IX, Section 18, of the City Charter of Corpus Christi, Texas, to recover all monies illegally and without authorization paid by the defendant Corpus Christi Area Convention and Tourist Bureau to its officer, defendant Bob Conwell, from tax monies furnished to said Corpus Christi Area Convention and Tourist Bureau by the City of Corpus Christi pursuant to a contract or contracts between the City and the said Tourist Bureau • . . ”

The Tourist Bureau, in its said motion, alleged:

“Article 9, Section 18 does not authorize a suit to be brought by a private citizen against a contractor whereby the only claim by such Plaintiff is that such contracting party has made an illegal distribution . . . ”

Despite the Tourist Bureau’s contentions that no special exceptions were filed with respect to its motion, Bryce did challenge all allegations therein in a pleading denominated “PLAINTIFF’S RESPONSE TO DEFENDANT’S MOTION TO QUASH ACTION IN ITS ENTIRETY”, wherein the asserted provision of Article IX, Section 18 of the Corpus Christi City Charter is quoted, as follows:

“[I]n case any . . . illegal, unauthorized or fraudulent bills, claims or demand, or any such salary or compensation shall have been paid (a) citizen may maintain an action in the name of said city against the officer making such payment and the party receiving the same, or either, or both, to recover the amount so paid . . . ”

The allegations contained in the motion and in the response thereto do not constitute evidence. They do, however, put the authority of Bryce to bring the suit under the authority of the Charter in issue.

The City of Corpus Christi is not a party to the suit, and Bryce is not attempting to recover money that was illegally expended by the City itself. He brings the action in behalf of the City to recover monies which he alleges were illegally expended by the Tourist Bureau. Our observations in the original opinion apply solely to cases where the City itself has illegally expended public funds. Here, a recovery is sought, not against the City, but against the Tourist Bureau and Con well on two grounds: 1) an alleged violation by the defendant Tourist Bureau of Tex.Rev.Civ.Stat.Ann. art. 1396-2.24; and 2) pursuant to the provisions of Article IX, Section 18, of City of Corpus Christi Charter. Assuming, arguendo, that Bryce is not such a party who may bring this suit under the aforesaid statute, the burden was on the Tourist Bureau, in order to sustain its motion, to prove that the suit brought by Bryce was not authorized by Article IX, Section 18 of the Charter. This, it did not do. As noted in the original opinion, the relevant portion of the Charter was not introduced in evidence at the hearing on the motion. The record does not show that the Charter of the City of Corpus Christi, including Article IX, Section 18 thereof, has been recorded or certified in the manner required by Tex.Rev.Civ.Stat. Ann. arts. 1165 and 1174, respectively. Consequently, neither the trial court (nor this Court) could take judicial notice of Article IX, Section 18 of the Charter. See Kirkman v. City of Amarillo, 508 S.W.2d 933 (Tex.Civ.App.—Amarillo 1974, writ ref’d n.r.e.); Hayden v. City of Houston, 305 S.W.2d 798 (Tex.Civ.App.—Fort Worth 1957, writ ref’d n.r.e.). Under the record here presented, since the relevant provision of the Charter was not introduced in evidence and as the trial court was not authorized to take judicial notice of Article IX, Section 18 of the Charter, no basis existed for an abatement of the action.

The motion for rehearing is OVERRULED.


author: DUNAGAN, Chief Justice.

text:
    Hannah T. LOVEJOY, Appellant, v. Freddrick LILLIE et al., Appellees.
    No. 1127.
    Court of Civil Appeals of Texas, Tyler.
    June 8, 1978.
    Rehearing Denied July 13, 1978.

      Monroe K. Walter, Bellaire, for appellant. J. Richard Hall, Houston, for appellees.
   DUNAGAN, Chief Justice.

This is a case to determine the heirship of the estate of Freddy Cooper Lovejoy, deceased. The decedent, Freddy Cooper Lo-vejoy, died on or about December 15, 1971, in Houston, Texas, intestate. On or about' August 1, 1973, temporary administration was taken out on his estate by Hannah Thompson Lovejoy, the last woman to whom he was ceremonially married prior to his death. On February 27, 1974, the ad-ministratrix filed her application for determination of heirship and an attorney ad litem was appointed to represent the unknown heirs therein. Contestants appeared as follows:

1. Ruth Roberts Bellare, claiming to be the common-law wife of Freddy Cooper Lovejoy;
2. Elroy Lovejoy, claiming to be a surviving son;
3. Mrs. Philonis Lillie, claiming to be the common-law wife of the decedent;
4. Freddrick Lillie, son of Philonis Lillie and the decedent, claiming to be a surviving son; and
5. Mary Elizabeth Lillie, daughter of Philonis Lillie and the decedent, claiming to be his surviving daughter.

The probate court sitting without a jury entered judgment that the appellant was the surviving spouse and the three adult offspring of the two purported common-law wives were entitled to inherit from the decedent according to the laws of descent and distribution of the State of Texas.

The appellant brings forward three points of error asserting that these three adults, found to be the children of Freddy Cooper Lovejoy, are not entitled to inherit one-half of decedent’s estate. The appellant’s first point of error merely contends that the three adult children named here are not entitled to inherit from the decedent’s estate. No reason for such contention is given. The appellant’s second and third points of error involve the theory of adoption by estoppel or equitable adoption, the appellant merely asserting that there is insufficient evidence or no evidence to support a recovery based on this theory.

The appellee asserts that there are three theories upon which the judgment of the trial court may be affirmed. The first involves a recent decision by the Supreme Court of the United States entitled Trimble v. Gordon, 430 U.S. 762, 97 S.Ct. 1459, 52 L.Ed.2d 31, 1977, holding that an illegitimate child must be treated equally to a legitimate child when determining the method of descent and distribution of intestate property. Section 42 of the Texas Probate Code treats an illegitimate child the same as if it were the legitimate child of his mother but does not treat an illegitimate child as if he were the legitimate child of his father. The trial court in its conclusions of law held that Section 42 of the Texas Probate Code was unconstitutional to the extent that the section violated the decision in Trimble v. Gordon, supra. The appellant asserts that Trimble v. Gordon, supra, was a case decided after the application for probate which is the subject of this suit and, therefore, should not be applied in this case. The Trimble ease was decided after the application for probate was filed, but it was decided prior to the time the judgment was rendered and signed. However, it is immaterial, in our opinion, as to what stage of the proceedings of the instant case the decision in the Trimble case was delivered.

In Trimble v. Gordon, the U.S. Supreme Court, basing its opinion on the equal protection clause of the 14th Amendment to the United States Constitution, struck down a provision of the Illinois Probate Act under which illegitimates were permitted to inherit by intestate succession from their mothers only, whereas legitimates could inherit from both their fathers and their mothers. The rationale of the decision is that such discrimination does not bear a reasonable relation to the legitimate legislative aims. The Court rejected the argument that difficulties of proving paternity in some situations justified the discriminatory provisions of the Act.

The Trimble case is indistinguishable from the present attack on section 42 of the Texas Probate Code. No difficulty in establishing paternity exists here since the court below has found that the children involved were the biological children of the decedent. We are of the opinion that Trim-ble, being the supreme law of the land, is not only applicable but is controlling the case at bar.

Appellant argues that the constitutional issue was waived by appellees in the trial court because they failed to plead the same and, therefore, such issue is not subject to review by this court. We disagree.

It is the well established law in this state that the court will always adjudicate whether a statute is constitutional when its unconstitutionality is obvious and apparent, regardless of when or how the question is raised. Smith v. Decker, 158 Tex. 416, 312 S.W.2d 632, 636 (1958); Gann v. Keith, 151 Tex. 626, 253 S.W.2d 413, 417 (1952); Gohlman, Lester & Co. v. Whittle, 114 Tex. 548, 273 S.W. 808, 812 (1925). This rule applies even though the alleged unconstitutionality of a statute is not pled. Houston Chronicle Publishing Company v. City of Houston, 531 S.W.2d 177 (Tex.Civ.App.—Houston [14th Dist.] 1975) writ ref’d n. r. e. 536 S.W.2d 559 (Tex.). Also appellate courts may consider fundamental errors though they are not assigned. McCauley v. Consolidated Underwriters, 157 Tex. 475, 304 S.W.2d 265 (1957); Ramsey v. Dunlop, 146 Tex. 196, 205 S.W.2d 979, 982-83 (1947). Ordinarily fundamental errors are those errors which directly or adversely affects the interest of the public generally or errors in assuming jurisdiction where none exists. City of Baytown v. Townsend, 548 S.W.2d 935, 941 (Tex.Civ.App.—Houston [14th Dist.] 1977, writ ref’d n. r. e.); Magic Chef, Inc. v. Sibley, 546 S.W.2d 851, 858-59 (Tex.Civ.App.—San Antonio 1977, writ ref’d n. r. e.); Douthit v. McLeroy, 539 S.W.2d 351 (Tex.1976); McCauley v. Consolidated Underwriters, supra; Ramsey v. Dunlop, supra. The section of the Texas Probate Code here under attack on constitutional grounds does affect the interest of the'public generally.

Since section 42 of the Texas Probate Code treats an illegitimate child the same as if it were the legitimate child of his or her mother but does not treat such child as if he or she were the legitimate child of his or her father, it violates the equal protection clause of the 14th Amendment of the United States Constitution by invidiously discriminating against illegitimate children. Trimble v. Gordon, supra. This statutory discrimination as contained in section 42 of the Texas Probate Code against illegitimate children is unconstitutional to the extent that it conflicts with the Trimble v. Gordon decision.

Upon request, the court filed findings of fact and conclusions of law wherein the court found that Freddy Cooper Love-joy was the biological father of the three children named herein, which finding the appellant did not challenge. As a result, appellants are bound by those findings of fact. Texas State Board of Pharmacy v. Gibson’s Discount Center, Inc., 541 S.W.2d 884, 886 (Tex.Civ.App.—Austin 1976, writ ref’d n. r. e.); Rule 296, Tex.R.Civ.P.

In view of the disposition we have made of this appeal, it renders unnecessary a discussion of appellant’s other points presented concerning adoption by estoppel.

The judgment of the trial court is affirmed.

ON MOTION FOR REHEARING

Appellant in her motion for rehearing asserts that we were in error in holding that she did not challenge the finding of the trial court to the' effect that the decedent was the biological father of Freddy Cooper Lovejoy, Freddrick Lillie and Mary Elizabeth Lillie. To support this contention appellant relies upon the third paragraph of her requested conclusions of law contained in her request for additional findings of fact and conclusions of law.

Appellant has mistaken such holding to refer to a challenge in the trial court. To clarify the holding we now specifically state that such holding was in reference to no challenge of such finding of fact on appeal.

The finding of fact, here in controversy, made by the trial court was not challenged by appellant in her brief on appeal. The question was not preserved. Therefore, the assignment of error has been abandoned and cannot be considered by this court, where, as here, no fundamental error appears. It is necessary that material findings of fact be challenged by appropriate points in appellant’s brief or else the appellant is bound by the findings of fact. Since this finding of fact has not been challenged by any point of error, it stands as the proven facts in this case. Accordingly, this court has no jurisdiction to go behind these findings and must accept them as supported by the evidence. McBurnett v. Gordon, 534 S.W.2d 370 (Tex.Civ.App.—Beaumont 1976, writ ref’d n. r. e.); Slayton v. White, 487 S.W.2d 204 (Tex.Civ.App.—Tyler 1972, writ ref’d n. r. e.); State Farm Mutual Automobile Insurance Company v. Cowley, 468 S.W.2d 353 (Tex.1971); Cortez v. Cortez, 457 S.W.2d 131, 133 (Tex.Civ.App.—San Antonio 1970, n. w. h.); Bickler v. Bickler, 403 S.W.2d 354, 361 (Tex.1966); Waters v. King, 353 S.W.2d 326, 328 (Tex.Civ.App.—Dallas 1961, n. w. h.); Colorado River Western Ry. v. Texas & New Orleans Railroad Co., 283 S.W.2d 768, 771 (Tex.Civ.App.—Austin 1955, writ ref’d n. r. e.); Thompson v. Larry Lightner, Inc., 230 S.W.2d 831 (Tex.Civ.App.—San Antonio 1950, writ ref’d n. r. e.).

Appellant’s motion and amended motion for rehearing are respectfully overruled.