author: McDONALD, Chief Justice.

text:
    Ralph Lamar WILKINSON, II, Appellant, v. Pauline Waterman CLARK, as Independent Executrix of the Estate of Dan H. Clark, M. D., Deceased, Appellee.
    No. 5783.
    Court of Civil Appeals of Texas, Waco.
    Oct. 13, 1977.
    Rehearing Denied Dec. 8, 1977.

      Fred E. Davis, Davis & Davis, Austin, for appellant.
    Terry 0. Tottenham, Fulbright & Jawor-ski, Houston, Bill M. Payne, Lawrence, Thornton, Payne & Watson, Bryan, for ap-pellee.
   OPINION

McDONALD, Chief Justice.

This is an appeal by Plaintiff Wilkinson from a take-nothing judgment in a medical malpractice suit, and involves the application of the “Dead Man’s Statute” (Article 3716 VATS).

Plaintiff sued Dr. Dan H. Clark on July 8, 1974 alleging plaintiff (an A & M student) went to Dr. Clark (the Student Health Center Doctor) with an eye injury on March 26, 1973; and again later; that he thereafter consulted Dr. Brenner a specialist in Ophthalmology, and it was determined plaintiff had a detached retina which was surgically repaired by Dr. Brenner on May 20, 1973. Plaintiff alleged Dr. Clark negligent on two separate occasions 1) in failing to properly diagnose and treat him; and 2) in failing to immediately refer him to a specialist in Ophthalmology for corrective surgery. Plaintiff further alleged Dr. Clark’s negligence was a proximate cause of deterioration of his eye which made surgical repair less effective, to his damage.

On September 24,1974 plaintiff amended substituting Pauline W. Clark Independent Executrix of the Estate of Dr. Clark, as defendant, (Dr. Clark having died).

In January 1975 defendant propounded written interrogatories to plaintiff; and in May 1975 took the oral deposition of plaintiff.

Prior to trial defendant filed Motion In Limine for instruction to plaintiff not to testify as to any conversation “plaintiff had with Dr. Clark or as to any tests performed by Dr. Clark during the care and treatment provided on March 26 and April 20, 1973, because such conversations and test results are clearly transactions with the deceased as defined by the Texas Dead Man’s Statute (Article 3716) and, therefore are inadmissible into evidence”.

The trial court sustained such Motion In Limine, and plaintiff perfected his bill of exception to such action.

The cause was thereafter tried to the court without a jury, which rendered judgment plaintiff take nothing.

Plaintiff appeals on 2 points contending:

1) The trial court erred in holding on the basis of the Dead Man’s Statute (Article 3716) that plaintiff could not testify regarding medical treatment provided by Dr. Clark.
2) The trial court erred in holding that defendant had not waived the protection of the Dead Man’s Statute (Article 3716) by the interrogatories propounded to plaintiff, and the taking of plaintiff’s oral deposition.

Contention 1 asserts the trial court erred in holding plaintiff could not testify regarding medical treatment provided by Dr. Clark on the basis of the Dead Man’s Statute; that the Dead Man’s Statute is simply inapplicable to this case.

Plaintiff testified on Bill of Exceptions that he sustained an injury to his left eye on March 17, 1973, that he went to the Medical Center and consulted with Dr. Clark on March 26,1973; that he explained to Dr. Clark how the injury occurred and the symptoms which followed; that Dr. Clark instructed plaintiff to place a piece of paper over his right eye while Dr. Clark moved a finger in front of his left eye; that Dr. Clark performed no other tests; that Dr. Clark prescribed “Visine” and told plaintiff to come back if he did not get better; that he used the eye drops as instructed, did not improve, but worsened; that he returned to Dr. Clark on April 20, 1973; that a urinalysis and a blood sugar test were performed with results of “normal”; that Dr. Clark on determining plaintiff would be returning to his home in Houston in three weeks at the end of the semester suggested he see an ophthalmologist when he arrived in Houston, but did not indicate to him that the delay might worsen his condition; that he returned to Houston, went to see an eye specialist on May 16, 1973 who diagnosed a detached retina and performed corrective surgery on May 20, 1973; that altho the eye was corrected as best possible, he had suffered irreversible damage due to the delay in proper treatment.

Article 3716 prohibits parties testifying to transactions with, or statements by, a deceased person in actions by or against executors, administrators, heirs, guardians and legal representatives, in which action judgment may be rendered for or against them as such, unless called to testify by the opposite party.

Plaintiff is a party; Dr. Clark is deceased; the cause is an action against the executrix of deceased, and judgment may be rendered against her as such.

The words “transaction with” includes “Every method by which one person can derive impressions or information from the conduct, condition, or language of another”. Holland v. Nimitz, Com.App., adopted 111 Tex. 419, 232 S.W. 298, 299; Hart v. Rogers, Tex.Civ.App., NRE, 527 S.W.2d 230; Insurance Company of America v. Royer, Tex. Civ.App., NRE, 547 S.W.2d 350.

“Transaction with” includes medical services rendered by a physician. Garwood v. Schlichenmaier, Er.Ref., 25 Tex.Civ.App. 176, 60 S.W. 573; Anderson v. Caulk, Tex. Civ.App., 5 S.W.2d 816, Aff’d. 120 Tex. 253, 37 S.W.2d 1008.

And in Texas the Dead Man’s Statute is applicable to negligence cases involving personal injuries to a plaintiff. Andreades v. McMillan, Tex.Civ.App., Er.Dism’d, 256 S.W.2d 477; Grant v. Griffin, Tex., 390 S.W.2d 746.

The trial court properly excluded testimony of plaintiff’s medical treatment provided him by Dr. Clark.

In his brief plaintiff asserts the A & M University medical records which were admitted on the bill of exceptions should be admissible on the trial of the case. We agree. Poehnert v. Coryell, Tex.Civ.App., NWH, 317 S.W.2d 84; Chajkowski v. Clements, Tex.Civ.App., Er.Dism’d, 229 S.W.2d 633; 2 McCormick Sec. 1262; Loper v. Andrews, Tex., 404 S.W.2d 300.

But such cannot serve to reverse this case because: 1) Plaintiff has no point in his brief complaining of any refusal of the trial court to admit such records on the trial of the case; 2) plaintiff did not tender such records into evidence on the trial of the case; 3) plaintiff’s Motion In Limine did not request the court to exclude such records. It only moved the trial court to instruct “plaintiff not to testify regarding any conversation that plaintiff had with Dr. Clark or as to any tests performed by Dr. Clark during the care and treatment provided on March 26 and April 20, 1973 * * * 4) the trial court sustained plaintiff’s Motion In Limine, but did not instruct plaintiff not to offer the A & M records; it only instructed plaintiff not to testify.

Point 1 is overruled.

Contention 2 asserts the trial court erred in holding that defendant had not waived the Dead Man’s Statute by propounding interrogatories to plaintiff and taking plaintiff’s deposition.

Plaintiff asserts specifically that Interrogatories 27 and 30 and the questions below on the deposition inquire of a transaction with the deceased.

Interrogatory 27 propounded by defendant to plaintiff reads: “Immediately or soon after the injury what effect on the vision had occurred? Thereafter, until the time that you first sought medical attention, describe the changes or effects on your vision up to and including the time that you first sought medical attention”. Interrogatory 30 reads: “On the first or second visit mentioned above, did you have occasion to mention to the Doctor or be treated for any other condition other than your left eye?”

And in the deposition of plaintiff defendant inquired: “Does the Student Center have an ophthalmologist on its staff? Do you know? [A. “I don’t know”] “So you certainly never checked to find out, I assume.” [A. “That’s true”].

When testimony of a witness, who would otherwise be incompetent to testify regarding matters covered by the Dead Man’s Statute is taken by deposition or interrogatories, and the opposite party initiates an inquiry relative to a transaction with the decedent, the statute is waived and the witness may testify fully regarding such transaction. Chandler v. Welborn, 156 Tex. 312, 294 S.W.2d 801.

The questions asked on both the interrogatories and the deposition in no way covered the transactions between Dr. Clark and plaintiff concerning Dr. Clark’s diagnosis and treatment of plaintiff’s left eye.

Defendant did not waive the Statute by interrogatories 27 and 30, or by the inquiry above in the plaintiff’s deposition.

Contention 2 is overruled.

AFFIRMED.


source: Caselaw Access Project

author: WARD, Justice.

license: Public Domain

text:
    FORD MOTOR CREDIT COMPANY, Appellant, v. John M. BLOCKER et ux., Appellees.
    No. 6629.
    Court of Civil Appeals of Texas, El Paso.
    Oct. 26, 1977.
    Rehearing Denied Nov. 23, 1977.

      Sawtelle, Goode, Davidson & Troilo, Terry Topham, San Antonio, for appellant.
    Law Office of Pat Maloney, Inc., J. Pat Maloney, Bayne, Snell & Krause, Barry Snell, San Antonio, for appellees.
   OPINION

WARD, Justice.

The Plaintiffs, John M. Blocker and Rosemary Blocker, purchased a mobile home at the sales lot of Mobile America Sales Corporation and assumed the payments that were then owing to Ford Motor Credit Company on an outstanding retail installment contract. The Plaintiffs subsequently sued Ford Motor Credit Company and Mobile America Sales Corporation for penalties arising out of alleged violations of the Texas Consumer Credit Code, Tex.Rev.Civ.Stat. Ann. art. 5069-7.01, et seq., and of the Federal Truth-in-Lending Act, 15 U.S.C.A. Sec. 1631, and Federal Reserve Regulation Z, 12 C.F.R. Sec. 226.1, et seq. As a result of Plaintiffs’ motion for partial summary judgment, they recovered judgment against Ford Motor Credit Company for $1,000.00 for violation of the federal law, and as a result of the trial of the balance of the case before a jury they have recovered additional judgment against Ford Motor Credit Company for $22,071.40 for violations of the Texas Consumer Credit Code together with attorney’s fees. During the trial, the Plaintiffs settled their problems with Mobile America Sales Corporation and Ford Motor Credit Company is the only Appellant. We affirm.

Mobile America Sales Corporation is in the business of selling mobile homes to the pubic. The mobile home in question was originally sold by Mobile America under a retail installment contract dated December 26, 1973, to Kenneth Ray Miller and his wife. That contract and the security interest created therein were transferred and assigned by Mobile America to Ford Motor Credit Company. Under an agreement between the retailer and Ford Credit, when a buyer defaulted on any installment contract, Ford Credit could either demand that the retailer repurchase the contract and all interest that Ford Credit had in the security, or the retailer could continue to make the monthly payments due on the contract and hold the contract open for transfer on an assumption basis. In the latter event, the mobile home would be placed upon Mobile America’s lot for resale to a new buyer who would assume the remaining payments on the existing contract at the same interest rate, provided that both Mobile America and Ford Credit approved the transfer. The original buyers, Miller and his wife, defaulted and voluntarily surrendered the mobile home and the trailer was returned to the Mobile America sales lot and placed on the market for a sale on the assumption basis under the second option referred to above. On June 11, 1974, the mobile home was sold to Clifford L. Flock and wife under a Transfer of Equity Agreement of that date whereby the Flocks assumed the unpaid balance under the original contract and agreed to pay the remaining installments. This Transfer of Equity Agreement was signed by the Millers as transferors and the Flocks as transferees and consented to by Mobile America and Ford Credit. The Flocks in turn subsequently defaulted, at which time the mobile home was returned to the Mobile America sales lot and the contract held open for transfer on an assumption basis.

The Plaintiffs saw the mobile home on the sales lot of Mobile America and agreed to buy it by paying $751.00 in cash for the sales tax, license and title transfer, and by assuming the balance of the payments which were then due Ford Credit. They first had to sign a credit application form. Later, on December 18, 1974, after being informed that their credit was acceptable, they executed a Transfer of Equity Agreement, a consent and waiver form reciting where the home would be placed and that it would remain personal property, and a mobile home addendum to retail installment contract which identified certain personal property in the home as being a part of the retail installment contract and not subject to becoming a part of any real property. All of the above forms were supplied by Ford Credit for the use by Mobile America and, with the exception of the Transfer of Equity Agreement, were all filled in by Mobile America employees. The Transfer of Equity Agreement was filled in by Ford Credit and was then sent to Mobile America for execution by the Plaintiffs. In addition to the above instruments, there was the usual title application and the tax affidavit forms supplied by the State and filled out by Mobile America. The title work connected with the Blocker transfer was handled by Mobile America, and this included a repossession affidavit which was executed by Ford Credit at the request of Mobile America and which was used to complete the title transfer. The affidavit states that Ford Credit had repossessed the mobile home in question under the terms of its chattel mortgage.

One of the instruments used by Mobile America to secure the transfer of title to the Plaintiffs was a power of attorney executed by the Flocks in June, 1974, whereby Mobile America was empowered to apply for a certificate of title or to transfer title or equity to the mobile home in question. It is this instrument which Ford Credit claims made the transaction a sale between private individuals since Mobile America entered the picture only as an agent or attorney in fact for the previous owners, the Flocks.

However, additional facts are present that bear on this relation between Mobile America and the Plaintiffs. While Mobile America made no visible profit from the sale to the Plaintiffs, it was interested in disposing of the mobile home for the obvious reason that it passed on its own contractual obligation to Ford Credit to the new purchaser. Also, the mobile home was in an unsatisfactory condition as it had been stripped of many items of furniture and fixtures. In effecting the sale to the Plaintiffs, Mobile America agreed to and did furnish at its own expense two new air conditioners, a washer, a dryer, a refrigerator, a broiler pan for the stove, and new draperies. Because the Plaintiffs had their own furniture, Mobile America also installed a new freezer as a replacement for the missing furniture. It was these items that were listed on the mobile home addendum to retail installment contract previously referred to above, and this contract was executed by Mobile America as seller and by the Plaintiffs as buyers. Further, at the time of the sale, various repairs were agreed to be made by Mobile America and at that time Mobile America agreed to furnish to the Plaintiffs a “one-year warranty” on the home effective from the date that the home was installed in place. About ten days after the papers were signed, Mobile America delivered the mobile home. Sometime subsequent to the sale, the Blockers received their copy of the certificate of title to the mobile home showing them as owners and Mobile America as the previous owner with Ford Credit as lienholder. Thereafter, numerous problems developed with the mobile home and the Blockers complained to Mobile America. Mobile America sent representatives in an attempt to make the repairs but the repairs were unsatisfactory. Finally, on advice of counsel, the Blockers stopped making their payments, vacated the home, and the present suit was instituted in December, 1975.

The Transfer of Equity Agreement, the form filled in and provided by Ford Credit, is to the effect that the transferors sell and convey all of their interest in the property to the transferees who assume and agree to pay all of the transferors’ obligations to Ford Credit under the described contract. The original retail installment contract dated December 26, 1973, is described; the original time balance of $26,614.08 is set forth; the unpaid balance of the obligation assumed is set forth as being $24,580.43; the annual percentage rate on the obligation assumed is stated to 11.41%; and the transferees agree to pay the amount financed in 133 monthly installments of $184.82 each. The Blockers as transferees executed the instrument in two separate places, but the instrument is not executed by the transferors. Mobile America Sales Corporation, as the original seller, executed a consent to the transfer on the form and in turn the consent of Ford Motor Credit Company is also reflected on the contract.

It was stipulated by the parties at the trial that this Transfer of Equity Agreement did not comply in at least one respect with the disclosure requirements of the Texas Consumer Credit Code applicable to retail installment transactions. Ford Credit’s position is that the Blockers purchased the mobile home under the existing retail installment contract initially executed by and between Mobile America and the. Millers, and assumed the outstanding balance and remaining payments at the same annual percentage rate; that Mobile America had no title or interest in the mobile home to convey to the Blockers and was acting only as agent for and on behalf of the previous owners, the Flocks, in handling the transfer to the Blockers; and that Chapter 7 of the Texas Consumer Credit Code is not applicable to an assumption purchase but only to a retail purchase from a retail seller.

Other than issues on attorney’s fees, the case was submitted on one question inquiring of the jury if they found that Mobile America Sales Corporation, in handling the sale of the mobile home to John and Rosemary Blocker, acted as seller in its own behalf. To the question the jury answered “It did.” Thus, it appears that the case was tried on the premise that it was necessary for the Blockers to prove a retail sale from Mobile America to the Blockers in order for the transaction to qualify as a retail installment transaction subject to the requirements and prohibitions of Chapter 7 with the consequent penalties afforded by Chapter 8.

Ford Credit, by a series of points, asserts that as a matter of law the transaction was not a sale or a retail installment transaction as defined by Chapter 7 but was an assumption; that there was no evidence supporting the finding of the jury; and finally, that the finding was contrary to the great weight and preponderance of the evidence. To resolve these points, we must first examine the Statutes. Retail sales of various motor vehicles, including mobile homes, are governed by the Statute where there is a “retail seller” and a “retail buyer” as those terms are therein defined. On the other hand, the Statute is inapplicable to private transactions between individuals neither of whom is a “retail seller.” A “retail buyer” is defined as meaning “a person who agrees to buy or buys a motor vehicle other than principally for the purpose of resale, from a retail seller in a retail installment transaction.” Tex.Rev.Civ.Stat.Ann. art. 5069-7.-01(b). A “retail seller” is defined as “a person engaged in the business of selling motor vehicles to retail buyers in retail installment transactions.” Tex.Rev.Civ. Stat.Ann. art. 5069-7.01(c). A “retail installment transaction” is defined in Sec. 7.01(d) as follows:

“ ‘Retail Installment Transaction’ or ‘Transaction’ means any transaction as a result of which a retail buyer acquires a motor vehicle from a retail seller under a retail installment contract for a sum consisting of the cash sale price and other charges as limited by this Chapter and agrees with a retail seller to pay part or all of such sum in one or more deferred installments. * * * ”

That Section goes on to say that a retail installment “shall include every transaction wherein the promise or agreement to pay the deferred balance of such sum is made by the retail buyer to the retail seller * *.”

“ ‘Retail Installment Contract’ or ‘Contract’ means a contract entered into in this State evidencing a retail installment transaction. * * * ” Sec. 7.01(e).

In many ways the statutory coverage is not spelled out. That is true of the fact situation before us. However, Chapters 7 and 8 of the Texas Consumer Code were designed to protect buyers by preventing abusive and deceptive trade practices by both sellers and creditors of personal property and motor vehicles in ordinary credit transactions. To effect that purpose, the rule of strict construction applicable in the past to punitive statutes has been subordinated to the cardinal rule of construction that the statutes are to be liberally construed to effect the intention of the Legislature. To achieve that result, a strict duty to see that contracts comply with the statutory requirements and prohibitions has now been imposed on both the seller and the creditor in the ordinary credit transaction. Thus, the duty was imposed on the seller in O. R. Mitchell Motors, Inc. v. Bell, 528 S.W.2d 856 (Tex.Civ.App. — San Antonio 1974, writ ref’d n. r. e.), and on the creditor in Southwestern Investment Company v. Mannix, Tex., 557 S.W.2d 755 (1977).

Here, these Plaintiffs who meet the definition of “retail buyers” deal with Mobile America which meets the definition of a “retail seller” and acquire a motor vehicle from that retail seller by assuming the balance of an outstanding retail installment contract by executing a Transfer of Equity Agreement filled in and prepared by the creditor whereby those buyers agree to pay an interest charge in excess of ten percent. Those buyers qualify for the protection afforded by Chapter 7 and this transaction is within the definition of a “retail installment transaction.” The fact that the buyer acquires a motor vehicle from a retail seller by promising to pay a sum consisting of a cash price plus finance charges in deferred installments brings the transaction under the Code.

The fact that the deferred installment equals the outstanding balance under some previous contract in no way exempts the transaction, neither does the fact that Mobile America was acting as agent or attorney in fact in conveying the interest'of the Flocks to the Plaintiffs avoid the Chapter. Mobile America was also acting for itself as a retail seller and in the transaction was engaged in the business of selling motor vehicles to retail buyers in retail installment transactions. In reviewing the legal sufficiency points, we have considered only the evidence and inferences arising therefrom which support the jury’s finding. In reviewing the contention that the finding was contrary to the great weight and preponderance of the evidence, we have considered all of the evidence and points 1 through 9 inclusive are overruled.

Ford Credit requested a special issue inquiring from a preponderance of the evidence if the transaction by which the Plaintiffs acquired the mobile home was an assumption or a retail installment transaction. The request was refused and error is assigned. As indicated, the facts were not disputed. Ford Credit on the last occasion had repossessed the trailer but had never foreclosed its security interest, and after the transaction was completed, the Plaintiffs had merely assumed the outstanding balance. As we have discussed, there was both a sale of th& trailer and an assumption of the obligation; yet it was clearly a retail installment transaction within the definition where the creditor had the duty of complying with the requirements of Chapter 7. For breach of that duty, it became liable under the terms of Chapter 8. The issue was unnecessary and points 10 through 12 inclusive are overruled.

The next point is directed toward an alleged ambiguity in the jury’s answer to Special Issue No. 1 which inquired if Mobile America, in handling the sale of the mobile home, acted as a seller in its own behalf. Here the jury answered “It did” and that answer is unequivocal. If there was any ambiguity, it would have to be found in the form in which the issue was submitted and not in the jury’s answer. Ford Credit did not object to the form of the issue at trial and therefore has waived any possible objection. Tex.R.Civ.P. 279. As previously pointed out, the case was tried on the premise that it was necessary for the Plaintiffs to prove a retail sale from Mobile America in order for the transaction to qualify as a retail installment transaction. That theory was submitted by the issue and there was no objection from either side. The point is overruled.

By its next three points, Ford Credit maintains trial Court error in granting the partial summary judgment because the Transfer of Equity Agreement violated the Federal Truth-in-Lending Act and Federal Reserve Regulation Z. Ford Credit asserts that as a matter of law the Transfer of Equity Agreement complied with the Act and the Regulation, or that at least a genuine issue of material fact was presented by the pleadings and summary judgment evidence.

Both parties agree that the transaction is a consumer credit transaction subject to the provisions of the Federal Truth-in-Lending Act and Federal Reserve Regulation Z, and that Regulation Z requires that certain disclosures be made on assumptions such as presented here.

In its order granting the partial summary judgment, the trial Court found that the Plaintiffs were entitled to a judgment as a matter of law for the Defendant’s failure to disclose the “total of payments” as required by Federal Reserve Regulation Z. 12 C.F.R. 226.1, et seq. The disclosures that are required to be made are set forth in Section 226.807(b)(1) of the Regulation which provides as follows:

“(1) If the finance charge originally imposed on the existing evidence of debt was an add-on or discount type finance charge, the creditor need only disclose:
“(i) The unpaid balance of the obligation assumed;
“(ii) The total amount of the charges imposed by the creditor, individually itemized, in connection with the assumption;
“(iii) The number, amount, and due dates of remaining payments to be made after assumption, the total of such payments, and any other applicable information required under Sec. 226.8(b)(3) *

Section 226.8(b)(3) is to the following effect:

“The number, amount, and due dates or periods of payments scheduled to repay the indebtedness and * * * the sum of such payments using the term, ‘total of payments.’ * * * ”

The part of the Transfer of Equity Agreement under consideration is as follows:

“DETAILS OF TRANSACTION
“1. Unpaid Balance of obligation assumed — AMOUNT FINANCED .... ¡S24.580.43
“2. Transfer Fee (Paid in Cash Herewith) . ⅜ 25.00
“3. ANNUAL PERCENTAGE RATE in obligation assumed 11.41%
Transferee agrees to pay the Amount Financed, (a) in 133 monthly instal-ments of $184.82 each * * * all payable the like date of each successive month commencing Jan. 9. 1975

From an examination of the disclosures made, it appears that there was a failure to use the term “total of payments,” in a violation of the Federal Truth-in-Lending Act and Federal Reserve Regulation Z has been shown. While the above involves considerable nitpicking, that has been mandated as the order of the day. Pennino v. Morris Kirschman and Company, 526 F.2d 367 at 370 (5th Cir. 1976). Points of Error Nos. 14, 15 and 16 are overruled.

Ford Credit’s last two points complain of the trial Court’s action in declining to grant Ford Credit a judgment on its counterclaim. Ford Credit filed a cross-action against the Plaintiffs under the terms of the retail installment contract of December, 1973, which had been assigned to it at that time by Mobile America. The terms of the retail installment contract had been assumed by the Plaintiffs according to the terms of the Transfer of Equity Agreement. Ford Credit alleged that it was accelerating the maturity of the contract because of the default in the payments by the Plaintiffs. However, according to the stipulation of the parties made at the trial, all payments due under the contract had been made by Mobile America and had been received and accepted by Ford Credit up until the time of trial. No basis existed by which Ford Credit could accelerate the maturity of the contract because of the failure of payments. The action of the trial Court in refusing to accelerate the contract and in refusing to enter judgment on the cross-action was correct. Cook v. Service Finance Corporation, 143 Tex. 211, 183 S.W.2d 436 (1944).

We have considered all of the Appellant’s points and they are overruled. The judgment of the trial Court is affirmed.


author: MOORE, Justice.

text:
    Herbert CROOK, Receiver, et al., Appellants, v. WILLIAMS DRUG CO., INC., et al., Appellees.
    No. 970.
    Court of Civil Appeals of Texas, Tyler.
    Oct. 27, 1977.
    Rehearing Denied Dec. 1, 1977.

      George W. Bramblett, Jr., Haynes & Boone, Dallas, Warren W. Shipman, III, McGown, Godfrey, Decker, McMackin, Ship-man & McClane, Fort Worth, for appellants.
    Winifred Hooper, Jr., Hooper, Kerry, Chappell & Broils, Forth Worth, Frank Cicero, Jr., Kirkland & Ellis, Chicago, Ill., for appellees.
   MOORE, Justice.

This is a suit by Herbert Crook, the statutory Receiver for two domestic insurance companies, Dealers National Insurance Company (Dealers) and Liberty Universal Insurance Company (Liberty), seeking damages or, in the alternative, cancellation of certain transactions allegedly having caused the two insurance companies to become insolvent and thus to be placed in receivership. Named as a defendant was Harold Simmons, individually, and as trustee of a family trust which controlled a conglomerate empire of drug and finance companies, including defendants Contran Corporation, Madigan Corporation and Williams Drug Company, which latter two corporations in turn owned respective controlling interests in Dealers and Liberty. Also named as a defendant was Glenn Simmons, the brother of Harold Simmons.

The Receiver alleged that in November 1969 Harold Simmons and the other defendants instigated a corporate reorganization of Dealers and Liberty consisting of a series of financial transactions herein referred to as the “November Transactions,” in which Dealers and Liberty were caused to exchange a vast amount of stocks and other assets with the corporate defendants. Receiver alleged that these transactions proximately led to Dealers’ and Liberty’s insolvency. As grounds for a cause of action based on breach of fiduciary duty, Receiver alleged that the November Transactions were unfair to both Dealers and Liberty because the stocks and other assets received by them in the course of the transactions were worthless, and as such amounted to a fraud upon their respective creditors and policyholders. Receiver prayed for damages in excess of $10,000,000.00, together with exemplary damages, and in the alternative for a rescission of the November Transactions.

In response to Special Issues Nos. 1 and 2, the jury found that the November Transactions were fair to Dealers and Liberty in every respect. Based on these findings, as well as numerous other findings, the trial court entered a take-nothing judgment against the Receiver from which he perfected this appeal.

We affirm.

ANSWER: They were.”

The record is voluminous, consisting of over 7,500 pages of testimony and over a thousand exhibits. A detailed statement of all the facts would neither be possible nor appropriate. Prior to discussing the various points of error brought by the Receiver, we will undertake to outline the posture of the defendants and the two insurance companies as they existed before the November Transactions, and then set forth the evidence showing how and why the November Transactions were consummated.

The record reveals that defendant, Harold Simmons, commenced in business in 1961 after purchasing a drug store in Dallas, Texas. In 1966 he purchased the Williams Drug Company in Waco, Texas, which owned seven drug stores. In 1967 he acquired the Mading, Dugan and Simpson drug store chains. In 1969 Simmons’ Mad-ing-Dugan Company (later changed to Ma-digan) acquired the Ward drug store chain, consisting of thirty-six stores. As a result of the acquisitions, Mr. Simmons’ drug business rapidly grew from a family drug store to a chain of ninety-five stores. A controlling interest in each of the corporate entities was owned by the Harold Simmons Family Trust with Harold Simmons as trustee.

In the fall of 1967 Dealers National Insurance was a small fire and casualty company situated in Dallas, Texas. At the suggestion of Harry P. Stuth, a Dallas insurance man, and his associate Charles Caldwell, Mr. Simmons became interested in purchasing Dealers. Shortly thereafter the management of the Mading-Dugan drug chain acquired 83 percent of Dealers for $465,000.00. Mr. Stuth became president and chief operating officer and Harold Simmons, his brother Glenn Simmons, Stuth and Caldwell were made directors. In the year following the acquisition, Stuth gave the directors glowing reports on the progress of the company which led them to follow his recommendation to purchase another insurance company, Liberty Universal, in Forth Worth, Texas.

In the spring of 1968, Mr. Stuth began negotiating with Liberty’s president, Hunter McLean, who was a former commissioner of the Texas State Board of Insurance and a majority stockholder of Liberty Universal. Thereafter, in June 1968, upon Stuth’s recommendation, Dealers acquired 95 percent of the stock of Liberty for $1,138,000.00. Despite what its previous owner and the company books and records might have disclosed to Mr. Stuth, the evidence shows that shortly after the purchase the State Insurance Board made an examination of the company’s financial condition and found that at the time it was acquired it should have been put in liquidation. Thereafter the new management injected new capital into the company which saved it from insolvency.

Soon after Dealers and Liberty had been acquired by the Simmons interest, their respective boards of directors sold most of the securities held in their securities portfolio and reinvested the proceeds in the stocks and securities of other corporations controlled by Simmons. As a result, the vast majority of the assets of the two insurance companies consisted of stocks and securities of the Simmons companies.

In the latter part of 1968, Mr. Simmons and the management of Mading-Dugan became interested in acquiring an interest in Texas Consumer Finance Corporation (TCFC), a multi-state consumer loan business with assets of $40,000,000.00 and lines of credit with major banks throughout the country. In late 1968 Dealers and Liberty, subsidiaries of Mading-Dugan, acquired thirty-five percent of the stock of TCFC.

In December 1968, the management of Mading-Dugan and the management of TCFC cooperated in forming a holding company, called Contran Corporation, to acquire the full ownership of TCFC, and ultimately the entire Mading-Dugan drug store chain. In early 1969 a share for share tender offer was made by Contran with the shareholders of TCFC. Consequently, Dealers and Liberty, which owned 35 percent of TCFC stock, acquired shares in Contran.

On November 23,1969, shortly before the November Transactions which form the basis of the present suit, the corporate structure of the Simmons family trust and its ownership of the other corporations are depicted by the following chart:

Harold Simmons served as president and director of Williams, Madigan and Contran, and his brother Glenn served as director of each of the corporations and vice-president of Madigan and Contran. Glenn Simmons served as president and director of both Dealers and Liberty, while Harold Simmons served as board chairman and director until he resigned shortly before the November Transactions. TCFC’s Board of Directors consisted of Harold Simmons, Glenn Simmons and a Wallace Jay, President.

In May 1969 Glenn Simmons became concerned that Stuth’s personal expenses at Dealers were excessive. Accordingly, an outside auditing firm was called in to conduct a special investigation of Stuth’s expenses. The investigation not only disclosed unauthorized cash advances from Dealers to Stuth, but also revealed that, rather than operating at a profit as reported by Stuth, Dealers had incurred a substantial net loss for the year ending April 30, 1969. Because Mading-Dugan (Madi-gan) was a publicly-owned company subject to regulations by the Securities and Exchange Commission, the company was required to and did issue a press release disclosing the loss sustained by its subsidiary, Dealers. The press release resulted in adverse consequences for both Dealers and Liberty. The market price of the stock of Mading-Dugan and its affiliate, Contran Corporation, suffered a severe decline in value. Because Dealers owned securities of both Mading-Dugan and Contran, the market value of its assets declined severely and as a result its surplus was adversely affected.

The impact of the declining market value of the stocks on the surplus of Dealers concerned the State Board of Insurance. As a result of an examination of both Dealers and Liberty, the State Insurance Board examiner urged management to dispose of the Mading-Dugan and Contran securities to prevent further decline of surplus. The examiner’s suggestion was supported by the State Insurance Commissioner who insisted and demanded of Harold Simmons that the Dealers and Liberty insurance operations be separated from the retail drug operations of Mading-Dugan and Contran. In response to such suggestions and demands, Simmons and the management of the defendant companies devised a plan whereby the drug chain securities would be completely eliminated from the securities portfolio of the insurance companies. The plan resulted in a series of eight separate exchanges of securities between the insurance companies and the drug companies. The exchange of the securities having been consummated in the latter part of November 1969, it became known as the “November Transactions.”

After these transactions were consummated, Dealers, Liberty and TCFC commenced operating under a separate corporate umbrella known as Liberty Financial Corporation, a holding company organized by the management of the three companies.

During 1970 the nation’s economy suffered a recession, bringing about a credit crunch and a period of tight money. As a result, banks and other lending institutions throughout the country began retracting lines of credit. On June 23, 1970, Fort Worth National Bank, TCFC’s principal lender, cancelled TCFC’s $2,000,000.00 line of credit and notified TCFC’s other lenders of its action. This triggered a chain reaction in which other banks cancelled TCFC’s lines of credit. Although TCFC had consumer loan accounts receivable in excess of its bank loans, its customers’ repayment schedule would not accrue fast enough to allow TCFC to retire the short term loans due the banks, and it was therefore required to seek protection under Chapter 11 of the Federal Bankruptcy Act. At this time, one of Dealers’ banks that held Dealers’ TCFC stock as collateral for a loan threatened to foreclose because the TCFC stock became practically worthless. This, in turn, dramatically affected the market value of Dealers’ stock held by Liberty. When it became apparent that TCFC would take bankruptcy, Dealers and Liberty immediately notified the State Board of Insurance and consented to immediate receivership in order to prevent foreclosure by Dealers’ lenders.

In December 1970 TCFC was sold out of bankruptcy to Colonial Commercial Corporation for $18,000,000 cash and notes for all the stock of TCFC. Under the arrangement Dealers received certain assets and the forgiveness of certain debts in exchange for the TCFC stock owned by Dealers.

The cause was submitted to the jury by 24 special issues. In response to the following numbered special issues, the jury found: (1) that the November Transactions were fair to Dealers in every respect; (2) that the November Transactions were fair to Liberty in every respect; (3) that the fair market value of the stocks, bonds and other assets given up by Dealers in the November Transactions was “$3,122,181 + stocks”; (4) that the fair market value of the stocks and other assets received by Dealers in the November Transactions was “$1,988,468 + stocks”; (4A) that the fair market value of the benefit received by Dealers in the November Transactions due to the cancellation of its $7,750,000 surplus debenture payable to Madigan was $7,750,000; (5) that the fair market value of the land and the stocks given up by Liberty in the November Transactions was $400,000 + stocks”; (6) that the fair market value of the 483,539 shares of Dealers stock received by Liberty in the November Transactions was $2,509,-567; (6A) that the fair market value of the benefit received by Liberty in the November Transactions due to the cancellation of its $3,585,000 surplus debentures payable to Williams was $3,585,000; (7) that Contran and Dealers were mistaken as to the extent of the delinquency of the TCFC loans at the time Contran exchanged TCFC shares for Contran stock held by Dealers; (8) that the mistake was not material; (9) that the Receiver failed to establish that any of the defendants exerted undue influence over Liberty in causing it to enter into the November Transactions; (10) that the Receiver failed to establish that any of the defendants exerted undue influence over Dealers in causing it to enter into the November Transactions; (11) that the Receiver failed to establish exemplary damages in favor of Dealers; (12) that the Receiver failed to establish exemplary damages in favor of Liberty; (13) that the Receiver did not establish that defendants failed to investigate adequately the financial affairs of TCFC in connection with the November Transactions; (16) that in carrying out the November Transactions each of the defendants reasonably exercised his best business judgment; (17) that in carrying out the November Transactions each of the named defendants exercised Ordinary care and in good faith relied and acted upon audited financial statements of TCFC prepared by the accounting firm of Price, Waterhouse; (18) that the exchange between Contran and Dealers in which Dealers received 3,322,123 shares of TCFC stock from Con-tran in return for 3,022,000 shares of Con-tran stock was fair to Dealers in every respect; (19) that the fair market value of those items received by Dealers from the sale of the assets and stock of TCFC to Colonial Commercial Corporation through the Bankruptcy Court at the time of sale was “18 million” dollars; (20) that the Receiver failed to establish that when Dealers acquired the TCFC stock on November 28, 1969, TCFC had liabilities which exceeded its assets; (21) that the Receiver failed to establish that Dealers did not have surplus immediately before payment of the $7,750,-000 surplus debenture held by Madigan; (22) that Dealers had a surplus of “$7,750,-000 + ” at such time; (23) that the Receiver failed to establish Liberty did not have surplus immediately before the payment of its $3,585,000 surplus debentures held by Williams; and (24) that Liberty had a surplus of $3,585,000 at such time.

Based on the foregoing findings, the trial court entered a take-nothing judgment against the Receiver on October 23, 1975. Two days before the entry of judgment, the Receiver filed a lengthy motion for judgment notwithstanding the verdict, but the record fails to show that the motion was ever presented to or acted on by the trial court.

The record, however, reveals that the Receiver filed a motion for new trial. In his motion for new trial the Receiver had numerous assignments asserting that the trial court erred in overruling his motion for judgment n. o. v. These assignments were brought forward in the brief by points of error Nos. 1, 3, 5, 7,11, 13,16, 20, 21, 23, 26, 29, 32, 34, 36, 38,41,44, 49, 50, 51 and 52. Before discussing the case on its merits we are confronted with the problem of whether these points were properly preserved for appellate review. As stated, the record shows that the motion n. o. v., although filed, was never presented to or acted on by the trial judge. It therefore must be regarded as a nullity. Consequently, the Receiver’s complaint in his motion for new trial asserting that the court erred in overruling his motion for judgment n. o. v. is without foundation. In this state of the record, nothing is preserved for appellate review. Commercial Standard Ins. Co. v. Southern Farm Bureau Casualty Ins. Co., 509 S.W.2d 387 (Tex.Civ.App.—Corpus Christi 1974, writ ref’d n. r. e.); Ladd v. Knowles, 505 S.W.2d 662 (Tex.Civ.App.— Amarillo 1974, writ ref’d n. r. e.); Murphy v. Maroney, 456 S.W.2d 787 (Tex.Civ.App.—Waco 1970, writ ref’d n. r. e.). The aforementioned points of error are accordingly overruled.

By the second and fourth points of error the Receiver contends that the trial court erred in rendering judgment for defendants because there was “insufficient” evidence to support the jury’s findings on Special Issues Nos. 1 and 2 that the November Transactions were fair to Dealers and Liberty in every respect.

In considering a point of error asserting the evidence is “insufficient,” we of course must consider and weigh all the evidence in the case, both that in favor of the verdict and that contrary thereto, and arrive at a conclusion as to whether the evidence is factually insufficient to support the verdict or whether the verdict is so against the great weight and preponderance of the evidence as to be manifestly unjust. In re King’s Estate, 150 Tex. 662, 244 S.W.2d 660 (1951).

Before passing on the question of whether the evidence was factually insufficient to support the jury’s findings of “fairness”, we think it would be appropriate to set forth the trial court’s instructions relating to the duty owed by defendants to Dealers and Liberty and the concept of “fairness” as defined by the court. In this connection the court instructed the jury as follows:

“Corporate officers and directors and other persons who by virtue of their controlling interest or influence in such corporations are fiduciaries and their authority and powers are vested in them in trust for the benefit of the corporations, their shareholders and in case of an insurance company, its policy holders.
“In their transactions or dealings with other corporations, which they also represent or influence, such persons, corporations or legal entities must exercise a high degree of good faith and dedicate their uncorrupted business judgment for the benefit of all of such corporations.
“The concept of ‘fairness’ has no exact special legal definition, but rather should be understood in the ordinary meaning of the word as used in everyday life. You, the jury, should apply your own good common sense and consider all of the relevant evidence admitted before you in determining whether any particular transaction or series of transactions, was ‘fair’. Among the factors which you may consider in making such a determination is [sic] whether Dealers and Liberty received value in these transactions substantially equivalent to what they gave up; whether the transactions were at fair market value or constituted a better bargain than Dealers and Liberty could otherwise have obtained in dealings with others at arms length; whether there was a detriment to Dealers and Liberty as a result of these transactions; whether defendants siphoned off a gain belonging to Dealers and Liberty directly or through corporations they controlled and whether full disclosure of all material facts was made.
“In this case, as a matter of law, you are instructed that Harold Simmons, Glenn Simmons, Williams, Contran, Madi-gan and Simmons Trust were fiduciaries of Dealers and Liberty and that the burden of proving the fairness of the November Transactions to Dealers and Liberty rests upon such defendants.”

It is a well-recognized principle of law that in transactions between boards of directors of corporations having common members, as here, such transactions will be guarded as jealously by the law as are personal dealings between a director and his corporation, and where the fairness of such transactions is challenged, the burden is upon those who would maintain them to show their entire fairness and, where a sale is involved, the full adequacy of the consideration. Geddes v. Anaconda Copper Mining Co., 254 U.S. 590, 41 S.Ct. 209, 65 L.Ed. 425 (1919); Felty v. National Oil Co. of Texas, 155 S.W.2d 656 (Tex.Civ.App.—San Antonio 1941, no writ).

In an effort to discharge their burden of proving that the November Transactions were fair in every respect, defendants called eight witnesses.

Dale Wood, Contran’s financial vice-president, testified that shortly after the Texas Insurance Commission suggested that Dealers and Liberty be divested of their stocks and securities in the drug chains, he, together with Harold Simmons and other officers of the insurance companies and the drug chains, concluded that it would be to the advantage of the insurance companies for them to trade their drug chain securities for stock and securities of TCFC. He explained that they concluded that this exchange would be advantageous because TCFC had an audited book value of $12,-000,000, its stock was the only asset available that would fit the requirements of the Texas Insurance Commission and it was thought that as a result of the exchange TCFC would be in a position to loan money to both Dealers and Liberty. He further testified that he was familiar with each of the eight transactions comprising the November Transactions and that in his opinion each transaction was fair to Dealers and Liberty because both companies received quid pro quo in each of the exchanges. Defendants Harold Simmons and Glenn Simmons likewise testified that they were familiar with all eight of the transactions and believed each transaction was fair. Robert Wall, who became a member of the Board of Directors of both Dealers and Liberty immediately following the November Transactions, testified he worked with the comptroller of the two insurance companies in an effort to insure the fairness, legality and adequacies of the November Transactions, and stated he “knew the transactions were fair.” Keith Kelly, attorney for Dealers and Liberty, testified the transactions were legal and of substantial benefit to the insurance companies. Guy Ewing, a director of Dealers, testified he had no reason to question the fairness of the November Transactions. Will Davis, an attorney specializing in insurance law who was employed by the defendants to assist in the November Transactions, testified that Dealers and Liberty were better off after the November Transactions than before.

Clyde Buck, an investment banker with Rotan Mosle, Inc., who was employed by the Receiver to determine the value of TCFC’s and Dealers’ stock, was one of Receiver’s key witnesses. He testified that the total dollar value of the assets given up by Dealers in the November Transactions amounted to approximately $7,000,000, whereas the total dollar value of the assets received by Dealers in return was of no value. He further testified that the total dollar value of the assets given up by Liberty was approximately $1,000,000, whereas the total dollar value of the assets received by Liberty in the November Transactions was of no value. He therefore concluded that all eight of the November Transactions were unfair to Dealers and Liberty.

Although the Receiver challenged the fairness of each of the eight November Transactions, he states in his brief that the crux of this entire controversy resolves itself into a question of whether the final transaction in which Dealers traded 3,020,-000 shares of Contran stock for 3,322,123 shares of TCFC stock was unfair. He argues that this particular transaction was unfair because the evidence conclusively shows that the value of the Contran shares given up by Dealers had a market value of $6,902,565, while the TCFC stock received by Dealers in exchange was worthless since TCFC was actually insolvent at the time of the transaction. He takes the position that this particular transaction, standing alone, makes the November Transactions as a whole unfair to Dealers and argues that, based on this transaction, Dealers should be awarded damages in the amount of at least $6,902,565. Defendants agree that this particular transaction is the most crucial of the eight.

In an effort to prove that TCFC was insolvent and its stock worthless, the Receiver called numerous witnesses who testified that, based on their investigations, TCFC was insolvent because of major delinquencies in its loan portfolio. According to their testimony, many of TCFC’s branch managers had engaged in deceptive loan practices in order to make it appear that the delinquencies in their branch office were minimal when in fact a large percentage of the loans was uncollectible. They estimated that approximately one-half of TCFC’s loan portfolio was delinquent and uncollectible. Clyde Buck testified that this particular transaction was unfair to Dealers because he determined that TCFC was insolvent and that, therefore, the stock received by Dealers was worthless. He testified he reached this conclusion based on his estimation that the installment loans held by TCFC were worth only $20,000,000 as opposed to a book value of $37,000,000, and that as a consequence TCFC’s total assets amounted to only $34,000,000, an amount substantially less than the company’s senior liabilities of $41,000,000.

In rebuttal, defendants offered the annual audit reports prepared by Price Water-house & Co., a large accounting firm employed by TCFC as its outside auditor from 1966 through 1969, showing that TCFC had operated at a profit during each of those years. The 1968 audit report showed that TCFC had a loan portfolio for that year of approximately $43,000,000 and loan losses of approximately $1,600,000, which loan loss figure had been practically the same in prior years. The audit reports also showed that the same amount of reserves for bad loans had been established in each of such prior years and that the reserves were adequate to take care of the losses. There was nothing in the audit reports suggesting that the employees of TCFC had engaged in any significant amount of deceptive loan practices covering up loan delinquencies, nor did the reports indicate that the loan delinquencies were considered to be excessive. Defendants offered testimony showing that they relied on these reports, especially the 1968 report, in determining the fairness of this transaction.

Allen B. Coleman, Dean of the Southern Methodist University School of Business Administration and formerly professor at Harvard and Stanford Universities, was employed by the defendants to evaluate the fairness of this particular exchange. He testified that, after relying on the Price Waterhouse reports and the financial records of TCFC and Contran, he applied the capitalized earning method of appraising the value of both companies and concluded that at the time of the November Transactions the TCFC stock had a value of $2.35 per share and the Contran stock a value of $2.21 per share. Based on these findings, he testified that the Contran stock given up by Dealers had a total value of $6,678,620 and the TCFC stock received by Dealers in exchange a value of $7,806,989. He therefore concluded that, as Dealers received TCFC stock having a greater value than the Contran stock which it gave up, the transaction was fair to Dealers.

Arthur Styles, Vice-President of the investment banking firm of Kidder Peabody & Co., testified that he had been employed by the defendants to evaluate the Contran and TCFC stock at the time of the transaction in question. He testified that upon applying the book equity per share formula, as well as the earnings per share formula, it was his conclusion that the exchange by Dealers of its Contran stock for the TCFC stock was fair.

The comparative value of the securities exchanged in each of the eight November Transactions is the subject of much conflicting testimony. After a review of the record as a whole, we have concluded that the evidence is not factually insufficient to support the jury’s verdict in response to Special Issues Nos. 1 and 2, finding that the November Transactions were fair to Dealers and Liberty in every respect, nor are such findings against the overwhelming weight and preponderance of the evidence. Receiver’s second and fourth points are accordingly overruled.

By the twenty-second point the Receiver seeks a reversal on the ground that the jury’s finding on Special Issue No. 8 is against the overwhelming weight and preponderance of the evidence. This issue was conditionally submitted under Special Issue No. 7. In response to Special Issue No. 7 the jury found that the parties were mistaken as to the extent of the delinquencies of TCFC’s outstanding loans at the time Dealers traded 3,020,000 shares of Contran stock for 3,322,123 shares of TCFC stock. In Special Issue No. 8, the jury was requested to find whether the mistake constituted a material mistake. The jury answered in the negative.

After weighing and balancing all of the evidence adduced in this regard, both that in favor of the finding as well as that contrary thereto, we find that we cannot-agree with the contention that the finding is contrary to the overwhelming weight and preponderance of the evidence. The point is overruled.

In the forty-seventh point, the Receiver complains of the action of the trial court in refusing to submit his specially requested instruction reading as follows:

“Plaintiffs would request the court additionally to instruct the jury that in considering whether or not the defendants reasonably exercised their best business judgment in consummating the November Transactions, that the jury be instructed that this consideration has absolutely no bearing whatsoever on the findings of fairness in this case.”

In view of the broad definition of fairness and the sound instructions as to fiduciaries’ standard of care given in the charge, we do not believe that the error, if any, in refusing the specially requested instruction amounted to such a denial of the rights of the plaintiff as was reasonably calculated to cause and probably did cause the rendition of an improper judgment. Rule 434, T.R. C.P. The point is overruled.

Under the fifty-third point the Receiver contends that the trial court erred in admitting the testimony of Dr. Coleman, defendant’s expert witness, because he refused to consider certain evidence as true in responding to several hypothetical questions propounded by the Receiver’s counsel, thereby rendering his opinion incomplete and misleading. We find nothing in the record showing that any objection or complaint was made at the time Dr. Coleman gave his testimony in this regard. No complaint having been made in the trial court, no predicate for appellate review exists. T. & L. Lease Service, Inc. v. Biddle, 500 S.W.2d 186 (Tex.Civ.App.Houston [14th Dist.] 1973, no writ); Royal v. Cameron, 382 S.W.2d 335 (Tex.Civ.App.—Tyler 1964, writ ref’d n. r. e.). The point is overruled.

The Receiver further complains of the jury’s findings to Special Issues Nos. 3 through 4-A, 5 through 6-A, 16, 18, 19, 20, 21, 22, 23 and 24, on the ground that the evidence is factually insufficient to support such findings. Under the view we take of the record, each of these findings was rendered irrelevant and immaterial by virtue of the jury’s findings on Special Issues Nos. 1 and 2 that the November Transactions were fair to Dealers and Liberty in every respect. We deem Special Issues Nos. 1 and 2 to be the controlling issues in the case. The jury’s findings on the other issues complained of were merely findings on the fairness of some particular facet of the November Transactions or on some particular aspect of the concept of fairness. They therefore constituted nothing more than frag-mentations of the broad issue of whether the November Transactions were fair in every respect. The issues in question were designed primarily for the purpose of determining whether Dealers and Liberty received quid pro quo in the exchange of securities in certain specified fragments of the November Transactions. While the jury’s findings to Issues 3, 4, and 5 were incomplete and therefore meaningless, all the other issues complained of were answered in a manner consistent with the jury’s findings in response to Special Issues Nos. 1 and 2.

While Issues Nos. 1 and 2 are broad and embrace the question of fairness of all eight of the November Transactions collectively, the Receiver registered no objection to the submission of the issues in this form. The record shows that the cause was tried and submitted upon the theory that Special Issues Nos. 1 and 2 were the controlling issues. In view of the jury’s findings that the November Transactions were fair to Dealers and Liberty in every respect, all such other issues complained of are immaterial to the controlling issues in the case. Buck v. Reed, 370 S.W.2d 867 (Tex.1963); Goeke v. Baumgart, 92 S.W.2d 1047 (Tex. Civ.App.—Beaumont 1936, no writ); McElwrath v. City of McGregor, 58 S.W.2d 851 (Tex.Civ.App.—Waco 1933, writ dism’d). These issues, which were unconditionally submitted, would become material had the jury returned a verdict favorable to the Receiver finding that the November Transactions were not fair to Dealers and Liberty. They would in that event disclose in which respects the transactions were unfair and thereby determine the rights of the parties. Since the jury found that the November Transactions were fair in every respect, the Receiver is in no position to contend that Special Issues Nos. 1 and 2 are not the controlling issues and that he is therefore entitled to a reversal on the ground that the evidence was factually insufficient to support the findings to the issues in question. Continental Casualty Co. v. Street, 379 S.W.2d 648 (Tex.1964). For the reasons stated points 6, 8, 9,12, 14, 17, 24, 27, 30, 33, 35, 37, 39, 40, 42, 43, 45 and 46 are overruled.

All points which have not been discussed have been considered and found to be without merit and are accordingly overruled.

The judgment is affirmed.

      . “SPECIAL ISSUE NO. 1:
      Do you find from a preponderance of the evidence that the November Transactions were fair to Dealers in every respect?
      ANSWER: They were.
      “SPECIAL ISSUE NO. 2:
      Do you find from a preponderance of the evidence that the November Transactions were fair to Liberty in every respect?


author: McCLOUD, Chief Justice.

text:
    AMOCO PRODUCTION COMPANY et al., Appellants, v. L. T. UNDERWOOD et al., Appellees.
    No. 5082.
    Court of Civil Appeals of Texas, Eastland.
    Oct. 27, 1977.
    Rehearing Denied Nov. 17, 1977.

      Charles F. Potter, Potter, Guinn, Minton & Dickerson, Tyler, S. Tom Morris, Gibson, Ochsner, Adkins, Harlan & Hankins, Amarillo, for appellants.
    Edward L. Atkinson, Lemon, Close, Atkinson & Shearer, Perryton, James R. Harris, Harris, Cook, Browning & Barber, Corpus Christi, for appellees.
   McCLOUD, Chief Justice.

This case involves the cancellation by lessors of a “gas unit” designated by lessee under the pooling provisions of eight oil, gas and mineral leases. The jury found that the designation of the gas unit by the lessee was not made in “good faith”.

Victory Petroleum Corporation entered into a “Farmout Contract” with Amoco Production Company whereby Victory agreed to drill a test well on Section 3, BS&F Survey, Wheeler County, Texas, and Amoco agreed to assign to Victory certain leases covering land located near Section 3. Amoco reserved an overriding royalty interest in the leases assigned. After the test well was completed as a gas well, Victory filed a gas unit declaration forming a 688.02 acre gas operating production unit designated as the Victory Petroleum Company et al, Circle Dot Ranch Gas Unit No. 1. As designated, the unit perpetuated beyond the primary term eight different oil, gas and mineral leases containing 2,252.03 acres of land. The unit affected the eight leases as follows:

Lessor Land Covered Total Acres in Lease Acres Included in Unit Acres Excluded From Unit

Walser (Circle Dot) See. 3 643.23 553.02 90.21

Walser (Circle Dot) Sec. 81 647.90 45.00 602.90

Underwood NW/4 & SE/4 of Sec. 2 320.90 10.00 310.90

Underwood N/2 of Sec. 1 320.00 20.00 300.00

Wright American United SE/4 of Sec. 1 160.00 10.00 150.00

Hefley SW/4 SW/4 of Sec. 4 40.00 40.00 0

Johnson N/2 SW/4 SE/4 SW/4 of Sec. 4 120.00 10.00 110.00

TOTALS 2,252.03 688.02 1,564.01

Circle Dot Ranch, Inc., acquired the Walser interest in Sections 3 and 81 after the execution of the leases in question.

Plaintiffs, L. T. Underwood and wife, Ora Lee Underwood, and Circle Dot Ranch, Inc., sued defendants, Amoco Production Company, Victory Petroleum Company, Westland Oil Development Corporation, L. C. Kung, Natural Gas Pipeline Company of America, American United Life Insurance Company, Sam J. Wright and wife, Gertrude Wright, Jack Hefley and wife, Bernice Hefley, Eula E. Johnson, individually and as Independent Executrix of the Estate of Jack I. Johnson, Deceased, Kenneth P. Clepper and wife, Peggy Sue Clepper, Euline S. Walser, a feme sole, and Leon L. Hoyt, Jr. and Hughes Seewald, Independent Executors of the Estate of Donald D. Harrington, Deceased, seeking, among other relief, cancellation of the Circle Dot Ranch Gas Unit No. 1. Defendants, Kenneth P. Clepper and wife, Peggy Sue Clepper, and Euline S. Walser, nonparticipating royalty owners, filed answers admitting all allegations contained in plaintiffs’ original petition and requested that they be realigned as plaintiffs. Defendants, American United Life Insurance Company, Sam J. Wright and wife, Gertrude Wright, Jack Hefley and wife, Bernice Hefley, Eula E. Johnson, individually and as Independent Executrix of the Estate of Jack I. Johnson, Deceased, and Leon L. Hoyt, Jr. and Hughes Seewald, Independent Executors of the Estate of Donald D. Harrington, Deceased, were served citations but failed to answer. The other defendants filed answers and participated in the trial.

The jury answered two issues. In special issue 1, the jury found “it was the judgment of Victory Petroleum Company, West-land Oil Development Corporation, Amoco Production Company, and L. C. Rung that it was necessary or advisable to designate the gas unit in the manner set out and described in the Unit Declaration dated May 20, 1975 in order to properly develop and operate the eight (8) oil, gas and mineral leases in question.” In special issue 2, the jury found that the designation of the Circle Dot Ranch Gas Unit by Victory Petroleum Company, Westland Oil Development Corporation, L. C. Rung and Amoco Production Company “was not made in good faith”.

Judgment was entered that the Unit Designation of the Victory Petroleum Company et al, Circle Dot Ranch Gas Unit No. 1 be canceled and held for naught; that the cloud upon plaintiffs’ title to the oil, gas and other minerals in and under the N/2 of Sec. 1, BS&F Survey, the SE/4 and NW/4 of Sec. 2, BS&F Survey, and Sec. 81, Block M — 1, H&GN RR Co. Survey, all in Wheeler County, Texas, by reason of the execution and recordation of the gas unit, be in all things removed; that the gas purchase contract by and between Victory Petroleum Company and Natural Gas Pipeline Company of America be canceled and held for naught insofar and only insofar as the contract covers the property described above; that the oil, gas and mineral leases dated May 29, 1970, executed by the Underwoods and Walsers as lessors, covering the above described property have terminated for failure of production; and, that Circle Dot Ranch, Inc., Euline S. Walser and the Estate of Donald D. Harrington, Deceased, are entitled to all royalties payable on gas and condensate heretofore or hereafter produced and sold from the existing well situated on Section 3, BS&F Survey, Wheeler County, Texas.

Amoco Production Company, Victory Petroleum Company, Westland Oil Development Corporation, L. C. Rung and Natural Gas Pipeline Company of America have appealed. We affirm.

Appellants contend the court erred in overruling their motion for instructed verdict and motion to disregard the jury’s answer to special issue 2 because there is no evidence that appellants were not acting in good faith in designating the Circle Dot Ranch Gas Unit. Appellees argue the appellants “gerrymandered” the eight leases as set out iii the unit designation to advance their own pecuniary interest without regard to the rights of appellees and the other mineral owners in and under the affected lands.

Appellees or their predecessors in title executed four oil, gas and mineral leases in favor of Amoco, dated May 29, 1970, with each containing a five-year primary term. The leases were assigned to Victory and each contained a pooling clause which, in part, provides as follows:

“Lessee, at its option, is hereby given the right and power to pool or combine the land covered by this lease, or any portion thereof, as to oil and gas, or either of them, with any other land, lease or leases when in Lessee’s judgment it is necessary or advisable to do so in order to properly develop and operate said premises, such pooling to be into a well unit or units not exceeding forty (40) acres, plus an acreage tolerance of ten percent (10%) of forty (40) acres, for oil, and not exceeding six hundred and forty (640) acres, plus an acreage tolerance of ten percent (10%) of six hundred and forty (640) acres, for gas, except that larger units may be created to conform to any spacing or well unit pattern that may be prescribed by governmental authorities

The court in Elliott v. Davis, 553 S.W.2d 223 (Tex.Civ.App.—Amarillo 1977, writ filed) recently stated that the lessee must exercise “good faith” toward the lessor and royalty owners in making a pooling designation. See also Pritchett v. Forest Oil Corporation, 535 S.W.2d 708 (Tex.Civ.App.—El Paso 1976, writ ref. n. r. e.); Texaco, Inc. v. Lettermann, 343 S.W.2d 726 (Tex. Civ.App.—Amarillo 1961, writ ref. n. r. e.); Banks v. Mecom, 410 S.W.2d 300 (Tex.Civ. App.—Eastland 1966, writ ref. n. r. e.); Tiller v. Fields, 301 S.W.2d 185 (Tex.Civ. App.—Texarkana 1957, no writ); Expando Production Company v. Marshall, 407 S.W.2d 254 (Tex.Civ.App.—Fort Worth 1966, writ ref. n. r. e.); Imes v. Globe Oil & Refining Co., 184 Okl. 79, 84 P.2d 1106 (1938). As a general rule, the question of good faith is a fact question to be determined by the fact finder. Kiser v. Lemco Industries, Inc., 536 S.W.2d 585 (Tex.Civ. App.—Amarillo 1976, no writ).

In considering appellants’ no evidence points, we must consider only the evidence and inferences tending to support the jury’s finding and disregard all evidence and inferences to the contrary. Garza v. Alviar, 395 S.W.2d 821 (Tex.1965).

Westland Oil Development Corporation and Victory Petroleum Company are “associated companies” occupying joint offices. On May 20,1975, A. B. Rothwell, Vice-President of Westland Oil Development Corporation and Victory Petroleum Company sent the following letter to Amoco:

“We are still conducting completion operations on the Circle Dot Ranch No. 1 well in Wheeler County, Texas, although we have no doubt that we will be successful in making a Morrow Sand gas completion.
As you are aware, the majority of your leases included under your Farmout Contract (EA 56,278) will expire at the end of their primary term on May 29,1975. It is imperative that we file a Gas Unit Declaration of record prior to this date.
We are forwarding herewith three (3) copies of Victory Petroleum Company et al’s Circle Dot Ranch Gas Unit No. 1 Unit Declaration. This unit has been designed to hold the majority of your leases which will expire on May 29, 1975, and also takes into consideration our recent review of your seismic records.” (Emphasis added)

The Victory Petroleum Circle Dot well was commenced on Section 3 in December 1974. It was completed in the Upper Morrow Formation on or about May 16, 1975, and the official potential test was conducted on May 21, 1975. The gas unit designation was signed on May 20, 1975, and filed on May 27, 1975, only two days before May 29, 1975, the termination date of the primary term of appellees’ oil, gas and mineral leases.

At the time of trial, appellants had no plans to drill an additional well on any part of the 2,252 acres affected by their gas unit. Appellants excluded from the unit 90.21 acres in Section 3 where the well was located even though their records indicated the excluded acreage was probably productive, and included 45 acres in Section 81, which perpetuated beyond the primary term 602.-90 acres, even though Section 81 was “lower structurally”. One of appellants’ witnesses testified that with the information at hand when the unit was designated, it would be “extremely stupid” to drill in Section 81, where the “seismic and subsurface” data indicated it was “lower”. Their plan would be to move to a higher structural position. The Circle Dot well was drilled on a lease containing 643.23 acres. It was not necessary to bring in additional acreage in order to have a full spacing unit and receive full allowable under the Texas Railroad Commission’s “spacing rules”.

After May 29, 1975, the termination date of the primary term of the leases .in question, appellees could have leased their land, other than Section 3 where the well was located, to other persons for a cash bonus of $75 per acre if it had not been “tied up” by the gas unit. Riney and Laxson, employees of Westland and Victory, attempted to justify the boundaries of the unit, however, the jury could have concluded from their testimony that they were not familiar with the Upper Morrow Formation and not qualified to evaluate the facts from a geological or engineering standpoint.

The jury could have properly concluded from the evidence and inferences listed above that the configuration of the unit was not established in good faith, but designated as stated in Rothwell’s letter to Amoco, “to hold the majority of the leases” which would otherwise expire on May 29, 1975.

We have considered all of appellants’ points of error and they are overruled. Judgment of the trial court is affirmed.