text:
    Ramon PALACIOS, Appellant, v. The STATE of Texas, Appellee.
    No. 55256.
    Court of Criminal Appeals of Texas.
    Oct. 5, 1977.

      S. Cliff Preslar, El Paso, on appeal only, for appellant.
    Steve W. Simmons, Dist. Atty. and Thomas C. Roepke, Asst. Dist. Atty., El Paso, Jim D. Vollers, State’s Atty., Austin, for the State.
   OPINION

ONION, Presiding Judge.

This is an appeal from a conviction for burglary of a habitation following appellant’s guilty plea, wherein the jury assessed punishment at ten (10) years.

All three grounds of error relate to the court’s admonishment. All three grounds contend the trial court erred in accepting appellant’s plea of guilty without first (1) admonishing him as required by Article 26.-13(a), Vernon’s Ann.C.C.P.; (2) making a determination if the plea was free and voluntary as required by Article 26.13(b), Vernon’s Ann.C.C.P.; (3) informing him that any recommendation of the prosecuting attorney is not binding on the court. See Article 26.13(a)(2), Vernon’s Ann.C.C.P.

Appellant’s first two contentions are really directed as to when the admonishment was given rather than to the sufficiency of the admonishment. It appears that on August 30,1977 the appellant entered a plea of guilty before a jury to the charge of burglary of a habitation. After the indictment was read to the jury and the appellant had entered his guilty plea, the court inquired of appellant’s counsel if the appellant had been fully advised of his rights when his plea is not guilty, if he understood the consequences of entering a guilty plea, and what rights he loses by entry of a guilty plea. The court received affirmative answers to each question from counsel. The trial then proceeded. After both parties rested and closed, the court recessed for the day.

The next morning, prior to the charge being read to the jury, the court admonished the appellant as to his guilty plea in the absence of the jury. The court explained his rights to appellant, determined that he had not been threatened or promised anything to plead guilty, inquired into the question of mental competency, and informed the appellant of the range of punishment. The appellant stated he still wished to plead guilty because he was guilty. The charge was then read to the jury and jury arguments followed.

There were no objections made to the court’s belated admonishment. No motion for new trial was filed.

Article 26.13, Vernon’s Ann.C.C.P., as amended (Acts 1977, 65th Leg., p. 748, ch. 280, effective Aug. 29, 1977), provides:

“(a) Prior to accepting a plea of guilty or a plea of nolo contendere, the court shall admonish the defendant of:
“(1) the range of punishment attached to the offense; and
“(2) the fact that the recommendation of the prosecuting attorney as to punishment is not binding on the court. Provided that the court shall inquire as to the existence of any plea bargaining agreements between the state and the defendant and, in the event that such an agreement exists, the court shall inform the defendant whether it will follow or reject such agreement in open court and before any finding on the plea. Should the court reject any such agreement, the defendant shall be permitted to withdraw his plea of guilty or nolo contendere, and no statement or other evidence received during such hearing on the defendant’s plea of guilty or nolo contendere may be admitted against the defendant on the issue of guilt or punishment in any subsequent criminal proceeding.
“(b) No plea of guilty or plea of nolo contendere shall be accepted by the court unless it appears that the defendant is mentally competent and the plea is free and voluntary.
“(c) In admonishing the defendant as herein provided, substantial compliance by the court is sufficient, unless the defendant affirmatively shows that he was not aware of the consequences of his plea and that he was misled or harmed by the admonishment of the court.”

Said statute is found in Chapter 26 of the Code of Criminal Procedure relating to arraignment where the plea is guilty or nolo contendere. Article 27.13, Vernon’s Ann.C. C.P., found in Chapter 27 of said Code relating to pleading provides:

“A plea of ‘guilty’ or a plea of ‘nolo contendere’ in a felony case must be made in open court by the defendant in person; and the proceedings shall be as provided in Articles 26.13, 26.14 and 27.02. If the plea is before the judge alone, same may be made in the same manner as is provided for by Articles 1.13 and 1.15.”

In Wilson v. State, 436 S.W.2d 542 (Tex.Cr.App.1968), this court wrote:

“We agree with appellant’s contention that the proper time for a defendant to be admonished of the consequences of his plea of guilty is upon arraignment and before the jury is empaneled. .
“It does not follow that a conviction on a plea of guilty before a jury will be set aside where the record reflects that the defendant was admonished — as required by Art. 26.14 (sic) — after the jury was empaneled, and persisted in entering such plea.”

In Wilson the defendant pled “not guilty” at arraignment. After a jury was empaneled, he was again arraigned in the jury’s absence and entered a plea of guilty. He was not then admonished. After the indictment was read to the jury, the defendant was then admonished. The delayed admonishment came before any evidence was heard.

In Vasquez v. State, 477 S.W.2d 629 (Tex.Cr.App.1972), the court in admonishing the defendant before accepting his plea of guilty erroneously informed him of the range of punishment. The parties then began to orally stipulate the evidence, but the court interrupted the reading of such stipulations and corrected the range of punishment. The defendant agreed that his answers would be the same to all the questions previously asked. The court failed to perceive any harm in the trial court’s correction of its error at the earlier admonishment.

In King v. State, 501 S.W.2d 893 (Tex.Cr.App.1973), it was held that although the governing statute contemplates that admonitions are to follow a plea of guilty, a defendant who was properly admonished at the time of the plea was not prejudiced by the variance in timing.

We adhere to what we said in Wilson that the proper time for admonishment is at arraignment prior to the time the jury is empaneled. If the jury has been empaneled, then the admonishment should be done in the absence of the jury and prior to trial and prior to the acceptance of the court of the guilty plea or plea of nolo contendere. See Article 26.13, supra.

In the instant case there was no admonishment as required by Article 26.13, supra, prior to trial or prior to the acceptance of the guilty plea. The admonishment came after both sides rested but before the case was submitted to the jury. While the admonishment was belated, the appellant insisted he was still pleading guilty as he was guilty and made no objection to the lateness of the admonishment. He makes no claim now that he was not aware of the consequences of his plea, that he was misled or harmed, or prejudiced by lateness of the admonishment. While the admonishment should have been made prior to accepting the plea, we cannot conclude that reversible error is reflected.

Appellant’s next contention is that the court did not admonish him that any recommendation of the prosecuting attorney as to punishment is not binding upon the court as required by Article 26.13, supra. It is true that such is a requirement of the statute and that the court failed to make such admonishment. However, it should be remembered that the plea of guilty was before the jury, not the court, and that it was within the authority of the jury to assess the punishment. See Article 26.14, supra. Such admonishment is therefore irrelevant in a jury case. There was no evidence of any plea bargain, and the prosecutor made no recommendation to the jury as to punishment. We fail to perceive how appellant was harmed.

The judgment is affirmed.

      . Obviously the opinion intended to refer to Article 26.13, Vernon’s Ann.C.C.P. Article 26.-14, supra, deals with trial before a jury on a guilty or nolo contendere plea and not admonishment.

      . See Wood v. State, 515 S.W.2d 300 (Tex.Cr.App.1974); Minafee v. State, 482 S.W.2d 273 (Tex.Cr.App.1972), and cases there cited.

      . The court in the instant case did not formally announce it was accepting the guilty plea, but permitted the trial to proceed before the jury upon appellant’s announced plea of guilty.

      . A careful trial judge might want to admonish a defendant that no recommendation of punishment is binding on a jury where a jury is to be empaneled upon a guilty or nolo contendere plea but one is not required by statute.


source: Caselaw Access Project

author: ODOM, Judge. ONION, Presiding Judge,

license: Public Domain

text:
    Ex parte Willie Festus HOGAN.
    No. 54307.
    Court of Criminal Appeals of Texas.
    Oct. 12, 1977.
    Carol S. Vance, Dist. Atty., and Clyde DeWitt, III, Asst. Dist. Atty., Houston, Jim D. Vollers, State’s Atty., Austin, for the State.
   OPINION

ODOM, Judge.

This cause was ordered filed and set for submission as a post-conviction habeas corpus application under Article 11.07, V.A.C.C.P.

The convicting court entered an order reciting in part:

“The Petitioner was convicted in this court in Cause No. 238020, hereafter styled the primary case. After sentencing he was addressed by the court and waived orally and in writing his right of appeal. His attorney approved that action.
“The Petitioner now has filed what purports to be a notice of appeal in the primary case. Good cause for filing the notice of appeal is not shown. Permission to withdraw the waiver of appeal is denied. The notice of appeal is ineffective to initiate the appellate process in the primary case.
“Construing the notice of appeal as a post-conviction application for writ of ha-beas corpus in which the Petitioner asserts that his waiver of appeal was not voluntarily entered, the court finds that the Petitioner’s waiver of right to appeal and of ten days in which to give notice of appeal were knowingly, intelligently and voluntarily entered and good cause for filing an out of time appeal has not been shown.”

Although the district court construed the notice of appeal as an assertion that the waiver of appeal was not voluntary, the notice of appeal does not allege facts that, if proven, would show the waiver was coerced or involuntary. Furthermore, there is nothing in the record suggesting involuntariness that would support sua sponte consideration of the issue. For want of an allegation of facts that, if true, would entitle petitioner to relief, the cause is dismissed. To the extent that Ex parte Dickey, Tex.Cr.App., 543 S.W.2d 99, is in conflict with this opinion, it is overruled, and hereafter no attack on a waiver of the right to appeal will be entertained in the absence of factual allegations supporting such a claim.

It is so ordered.

ONION, Presiding Judge,

concurring in part and dissenting in part.

I concur in the result reached, but I dissent to the overruling of Ex parte Dickey, 543 S.W.2d 99 (Tex.Cr.App.1976), to the extent of any conflict. There is no need for this overruling as this case and Dickey are not in conflict.

In the instant case the petitioner filed a written notice of appeal within ten days after sentence had been pronounced although there had been an earlier waiver of appeal after sentence. The handwritten instrument merely gave notice of appeal and made no other request. The trial court denied permission to withdraw the waiver and then construed the notice of appeal as a post-conviction application for writ of habe-as corpus as asserting his waiver of appeal was not voluntarily entered. This was a gratuitous construction for there was no assertion that petitioner was denied his right of appeal or that his waiver of appeal was not voluntarily entered. The court then forwarded certain selected portions of the record, including the oral and written waivers of appeal made after sentence.

In Ex parte Dickey, supra, the defendant also filed a written notice of appeal within ten days after sentence. The trial court denied such notice of appeal, finding Dickey had earlier made a knowing and intelligent waiver of appeal. The trial court took no further action in connection therewith. Subsequently, Dickey, unlike the instant case, filed a pro se post-conviction application for writ of habeas corpus seeking to appeal his burglary conviction. The court did not conduct an evidentiary hearing, but made findings of facts and conclusions of law and denied relief.

The record which reached this court in Dickey showed Dickey had waived his right of appeal prior to trial and during trial confirmed the waiver he made in writing. A supplemental record was later filed showing Dickey had answered “Yes Sir” to the court’s inquiry after sentence if he wanted to waive his right of appeal. This court held that the waiver prior to trial or the confirmation of such waiver during trial was premature and not binding on Dickey, and that evidence of waiver after sentence was meager and, without more, made it difficult to determine if the waiver after sentence was knowingly and intelligently made for Dickey may well have thought he had no choice in the matter in light of the earlier invalid waivers. The cause was remanded for an evidentiary hearing to determine if the waiver of appeal made after sentence was knowingly and intelligently made. Following remand it was determined that the waiver after sentence was knowingly and intelligently made.

Thus, Dickey and the instant case are clearly distinguishable and are not in conflict. Dickey, which has been frequently cited by this court, need not be overruled even if the overruling is limited to the extent of any conflict which is not explained. What holding of Dickey in the majority opinion is to be overruled? If it be something attributed to the majority opinion by the opinion concurring in part and dissenting in part, then this should be made plain for the bench and bar. It may be that the overruling is directed to the conclusion in the opinion concurring in part and dissenting in part that the allegations in Dickey’s habeas corpus petition were insufficient. If this be so, then it should be remembered that while Dickey’s pro se habe-as corpus petition may not have been drawn with lawyer-like precision or form book accuracy, when its allegations were considered in light of the record of invalid premature waivers of appeal, etc., the question of whether the waiver after sentence was voluntary, knowingly and intelligently made was clearly raised.

For the reasons stated, I concur in the result reached, but I would not overrule Dickey.

      . Note Article 44.02, V.A.C.C.P., as amended, Acts 1977, 65th Leg., ch. 351, p. 940, effective August 29, 1977, which now provides:
      “Art. 44.02. Defendant may appeal
      “A defendant in any criminal action has the right of appeal under the rules hereinafter prescribed, provided, however, before the defendant who has been convicted upon either his plea of guilty or plea of nolo con-tendere before the court and the court, upon the election of the defendant, assesses punishment and the punishment does not exceed the punishment recommended by the prosecutor and agreed to by the defendant and his attorney may prosecute his appeal, he must have permission of the trial court, except on those matters which have been raised by written motion filed prior to trial. This article in no way affects appeals pursuant to Article 44.17 of this chapter.”

      . This holding in Dickey has been consistently followed. See Ex parte Thomas, 545 S.W.2d 469 (Tex.Cr.App.1977); Bailey v. State, 543 S.W.2d 653 (Tex.Cr.App.1976); Ex parte Townsend, 538 S.W.2d 419 (Tex.Cr.App.1976).


author: DALLY, Commissioner.

text:
    James GILL, Appellant, v. The STATE of Texas, Appellee.
    No. 55580.
    Court of Criminal Appeals of Texas.
    Oct. 12, 1977.

      James T. Flynt, Mineóla, James Douglas Pickett, Winnsboro, for appellant.
    Jim D. Vollers, State’s Atty., Austin, for the State.
   OPINION

DALLY, Commissioner.

This is an appeal from an order revoking probation.

The appellant entered a plea of guilty before the court and was convicted of the offense of selling marihuana; punishment of imprisonment for 7 years was assessed, but the imposition of sentence was suspended, and the appellant was placed on probation on June 8, 1973.

After hearing the State’s motion to revoke probation, the court entered the order appealed from on January 13, 1977. The court found that as alleged the appellant had violated the condition of probation that he avoid persons of disreputable or harmful character, by associating, on November 12, 1976, with Danny Ray Osbourn, who the appellant knew was a disreputable person and an escaped felon. This was the sole ground for revocation.

The appellant asserts that the trial court abused its discretion in revoking probation, because the evidence does not support the allegation of the motion to revoke and the court’s finding that the appellant knew Danny Ray Osbourn was an escaped felon and a disreputable person. The appellant’s contention is correct. If the appellant knew that Danny Ray Osbourn was an escaped felon and of disreputable character, the record fails to show that he knew it.

The appellant was arrested in Smith County while in an automobile with James Smith and Danny Ray Osbourn on November 12,1976. The arresting officer testified that all three of the men were charged with “public intoxication” and placed in jail. The evidence that the State says proves appellant knew Danny Ray Osbourn was an escaped felon and of disreputable character is the testimony of the sheriff of Wood County. The sheriff testified that on November 11, 1976, he discussed with the appellant the escape of Danny Ray Osbourn. The sheriff testified:

“I advised James [appellant] at that time that Danny Ray had escaped and that he couldn’t stand to be caught with him, that he was on probation and to leave him alone if he seen him.”

There is no evidence that the appellant had ever associated with Danny Ray Osb-ourn other than when he was arrested in the car with Osbourn and Smith by the Smith County deputy sheriff. Although the sheriff of Wood County testified in a conclusory manner that he had discussed Osbourn’s escape with the appellant, there is no testimony to show that Osbourn was a felon or from what or where he had escaped. More importantly, there is no evidence that the appellant knew that Osbourn had escaped from a penal institution or that Osbourn was of disreputable character. Although inferences may be drawn from the sheriff’s meager testimony, these inferences are not evidence and they will not support the allegations of the motion to revoke or the findings of the trial court. The prosecutor failed to prove what he said he would prove in his unsworn opening statement; if he had done so, the evidence would have been sufficient. Since the evidence in the record does not support the allegations of the motion to revoke or the court’s finding, there was an abuse of discretion in revoking probation and we have no alternative but to reverse the judgment. See Jackson v. State, 464 S.W.2d 153 (Tex.Cr.App.1971); Steed v. State, 467 S.W.2d 460 (Tex.Cr.App.1971); Shortnacy v. State, 474 S.W.2d 713 (Tex.Cr.App.1972); cf. Mendietta v. State, 476 S.W.2d 682 (Tex.Cr.App.1972).

The judgment is reversed and the cause remanded.

Opinion approved by the Court.


author: KEITH, Justice. DIES, Chief Justice,

text:
    RYAN MORTGAGE INVESTORS et al., Appellants, v. BERTON LAND DEVELOPMENT CORPORATION et al., Appellees.
    No. 7962.
    Court of Civil Appeals of Texas, Beaumont.
    Aug. 1, 1977.
    Rehearing Denied Aug. 29, 1977.

      Stanford Harrell, Fort Worth, for appellants.
    Benton Musslewhite, Houston, for appel-lees.
   KEITH, Justice.

We are called upon again to review two interlocutory orders which (a) overruled defendants’ plea of privilege and (b) granted a temporary injunction restraining defendants from foreclosing a deed of trust covering certain lands in Montgomery County. We faced similar appeals involving the same note and lien in Ryan Mortgage Investors v. Lehmann, 544 S.W.2d 456 (Tex.Civ.App.—Beaumont 1976, writ dism’d), to which we refer. After consideration of the record in Lehmann, we dissolved the temporary injunction, vacated the order overruling defendant’s plea of privilege, and ordered the case transferred to Tarrant County-

We will enter the same order in this appeal for the reasons now to be stated.

Defendants filed their plea of privilege to be sued in Tarrant County and answered subject thereto. Plaintiffs filed their controverting affidavit invoking subdivisions 14, 7, 5, 23, 27, 29a, 9, and 9a, art. 1995 (1964). Subject to their plea of privilege, defendants answered by special exceptions, pleas of res judicata, and other pleas in bar. At the conclusion of the hearing, the trial court overruled the plea of privilege and entered a temporary injunction restraining defendants from foreclosing their lien upon the land. Defendants have perfected their appeal from the two orders, and we will dispose of both interlocutory appeals in this single opinion.

The trial court filed extensive findings of fact and conclusions of law which plaintiffs insist are controlling on this appeal. We disagree. We have a complete statement of facts buttressed by a plethora of written exhibits offered by the parties. As we said in Stephenson v. Perlitz, 537 S.W.2d 287, 289 (Tex.Civ.App.—Beaumont 1976, writ ref’d n. r. e.):

“Findings of fact are not conclusive on appeal when, as in this case, a statement of facts appears in the record. Swanson v. Swanson, 148 Tex. 600, 228 S.W.2d 156, 158 (1950); Rosetta v. Rosetta, 525 S.W.2d 255, 260 (Tex.Civ.App.—Tyler 1975, no writ).”

Defendants argue under their first point of error that the trial court erred in granting the temporary injunction restraining the foreclosure of the deed of trust lien because their plea of res judicata conclusively established a defense to plaintiffs’ contentions.

Defendants proved upon the trial of this cause that on October 9, 1974, the District Court of Montgomery County, in Cause No. 26,630, entered its final judgment granting the defendant and cross-plaintiff therein [Ryan Mortgage] a permanent injunction reading in part as follows:

“IT IS HEREBY ORDERED, ADJUDGED AND DECREED that Berton Land Development Corporation, its officers, directors, agents, servants and shareholders, be, and they hereby are, perpetually enjoined and restrained from interfering with the quiet and peaceful ownership of PMN, Inc., to the property herein involved, . . . and Berton Land Development Corporation, its officers, directors, agents, servants and shareholders are further perpetually enjoined and restrained from interfering, enjoining, or in any manner disturbing the exercise by Ryan Mortgage Investors of its rights to post notices of trustee’s sale or foreclose its deed of trust lien on such property.”

This was an agreed order approved by counsel for Berton as well as Benton Musslewhite who signed it “Individually and as Officer and Shareholder of BERTON LAND DEVELOPMENT CORPORATION.” It is conceded that the earlier suit involved the same note, lien, and land involved in this suit. The earlier suit [26,630] was verified by the affidavit of Benton Musslewhite, “an officer of Plaintiff corporations” and Newton B. Schwartz was counsel for the plaintiffs. Berton, Schwartz, and Musslewhite are parties to the present suit. Musslewhite was lead counsel and witness in the hearings below, and Schwartz identified himself as a stockholder as well as a former officer and director of Berton.

It is obvious from even a casual review of the pleadings in the two cases that the concurrence of the four conditions necessary for the invocation of the doctrine of res judicata as set out in Philipowski v. Spencer, 63 Tex. 604, 607 (1885), were shown.

The attorneys participating in the earlier litigation were bound by the terms of the injunction. Ex parte Browne, 543 S.W.2d 82, 85 (Tex.1976). The stockholders were likewise bound by the earlier judgment. Western Inn Corporation v. Heyl, 452 S.W.2d 752, 760 (Tex.Civ.App.—Fort Worth 1970, writ ref’d n. r. e.).

This final judgment by a court of competent jurisdiction upon a matter within its jurisdiction is conclusive of the rights of the parties in all other actions on the points at issue and adjudicated in the first suit. The rule of res judicata bars future litigation of all issues connected with the cause of action or defense. Abbott Laboratories v. Garvis, 470 S.W.2d 639, 642 (Tex.1971). See also, Steakley & Howell, “Ruminations on Res Judicata”, 28 Sw.L.J. 355 (1974), and authorities therein cited.

Plaintiffs have attacked this judgment upon several grounds, one of which is that it was a consent judgment — one entered into by agreement of the parties. There is no merit to the contention. There are many decisions which support the rule announced in Pollard v. Steffens, 161 Tex. 594, 343 S.W.2d 234, 239 (1961), where the Court said: “[A] consent judgment has the same degree of finality and binding force as does one rendered by the court at the conclusion of an adversary proceeding.” The Court, in Wagner v. Warnasch, 156 Tex. 334, 295 S.W.2d 890, 893 (1956), held that such a consent judgment has neither less nor greater force or effect than one rendered after protracted litigation, “ ‘except to the extent that the consent excuses error and operates to end all controversy between the parties.’ ”

A final judgment — by consent or after a lengthy contest — is intended to be the end of controversy and trial, and not the starting point for new litigation for the purpose of reexamining the questions theretofore decided. Harrison v. Manvel Oil Co., 142 Tex. 669, 180 S.W.2d 909, 914 (1944). See also, Schwartz v. Jefferson, 520 S.W.2d 881, 887 (Tex.1975); Peddicord v. Peddicord, 522 S.W.2d 266, 268 (Tex.Civ.App.—Beaumont 1975, writ ref’d n. r. e., concurring opinion); Annotation, 2 A.L.R.2d 514, “Consent Judgment as Res Judicata” (1948).

Upon the final day of the hearing on the interlocutory matters, plaintiffs, for the first time, replied to the defendants’ pleas of res judicata. This was done in the form of a trial amendment which was long and verbose. The essence of the pleading, however, tendered the issue of fraud by acts or statements which prevented a real litigation or a fair hearing on the claims of the plaintiffs. See Crouch v. McGaw, 134 Tex. 633, 138 S.W.2d 94 (1940); Alexander v. Hagedorn, 148 Tex. 565, 266 S.W.2d 996 (1950); Bankston v. Bankston, 251 S.W.2d 768, 772 (Tex.Civ.App.—Dallas 1952, no writ); Bell v. Bell, 434 S.W.2d 699, 701 (Tex.Civ.App.—Beaumont 1968, writ ref’d n. r. e.).

Such an attack constitutes an impermissible collateral attack upon a final judgment. See authorities discussed in the concurring opinion in Peddicord v. Peddicord, supra.

At the time of the filing of such trial amendment, defendants had a plea of privilege pending which had not been ruled upon. When the plaintiffs filed such trial amendment, belatedly setting up some type of defense to the plea of res judicata, their controverting plea of privilege was already on file and made no mention, of course, of the matters alleged in the trial amendment. Until set aside by a court of competent jurisdiction, defendants’ plea of res judicata conclusively established the non-existence of a cause of action by plaintiffs against defendants.

Thus, plaintiffs failed to plead in their controverting plea the facts which would have sustained venue in the county of suit. Thus, the matter was not properly before the trial court and cannot be used to sustain the order overruling the plea of privilege. See the many authorities discussed in Leonard v. Maxwell, 365 S.W.2d 340 (Tex.1963). See also, Wilson’s Pharmacy, Inc. v. Behrens Drug Company, 494 S.W.2d 161 (Tex.1973); Madeley v. Oualline, 449 S.W.2d 352 (Tex.Civ.App.—Beaumont 1969, no writ).

Even though the trial amendment was on file, the court was not permitted to consider it upon the venue hearing, but was confined to the facts stated in the controverting plea, either directly or by incorporation. Buchanan v. Jean, 141 Tex. 401, 172 S.W.2d 688, 689 (1943); Madeley v. Oualline, supra (449 S.W.2d at 354).

It was error, consequently, for the trial court to overrule the plea of privilege filed by Ryan Mortgage. Defendants’ second point of error is sustained.

The existence of the final judgment also mandates the reversal of the judgment granting the temporary injunction. Chief Justice Calvert stated the rule applicable in Sun Oil Company v. Whitaker, 424 S.W.2d 216, 219 (Tex.1968):

“The basic issue to be tried [on the hearing of an application for a temporary injunction] is the probable right of the applicant to a permanent injunction when all defenses made by the pleadings are considered.” (emphasis in original)

With the doctrine of res judicata standing as a complete bar to further prosecution of their case, the plaintiffs have not shown any probable right to a permanent injunction; indeed, the contrary has been shown beyond question. Moreover, as noted in Great American Mortgage Investors v. Republic of Texas Savings Ass'n, 538 S.W.2d 146, 148 (Tex.Civ.App.—Houston [14th Dist.] 1976, no writ), we find nothing in this record which indicates that Berton’s legal remedy will not adequately compensate it if Ryan conducts the same fraudulently or unreasonably. Berton will still have its opportunity to establish upon the trial its alleged cause of action. Since there was no showing of the absence of a clear, full and adequate relief at law, the temporary injunction was erroneously granted and is now dissolved.

REVERSED and RENDERED; the temporary injunction is dissolved, and the cause is transferred to a district court in Tarrant County.

DIES, Chief Justice,

dissenting.

With respect, I dissent. The trial court had before him probative evidence that Berton entered into the deed of trust with Ryan only on the assurance by Ryan that it would and could finance the development of the some 1500 acres on Lake Conroe; that at that time it knew it could not and would not carry this out; to Berton’s damage. The representation was made in Montgomery County. Under these circumstances venue was properly laid in Montgomery County under Tex.Rev.Civ.Stat. art. 1995 § 7 (1964). See “Survey of Texas Law for the Year 1948”, 3 Sw.L.J. 386 (1949); McDonald v. Peebles, 267 S.W.2d 476 (Tex.Civ.App.—Austin 1954, no writ); Tex. Employers Ins. Ass’n v. Kelly, 261 S.W.2d 480 (Tex.Civ.App.—Galveston 1953, no writ); Neon Signs & Service v. Hill, 251 S.W.2d 570 (Tex.Civ.App.—Galveston 1952, no writ). See also Custom Leasing Inc. v. Texas Bank & T. Co. of Dallas, 516 S.W.2d 138, 143-144 (Tex.1974).

With respect to the judgment of October 9,1974 (discussed and quoted in the majority opinion) the court had evidence before him from which he could infer that Berton and Ryan agreed to this for the purpose of finding a new investor for the development plan. The trial court also heard evidence from which he could infer that not only did Ryan fail to cooperate in this task but probably prevented it. Under these circumstances, the court was authorized to grant relief under the bill of review. See 34 Tex.Jur.2d, Judgments, § 188 et seq. at 19 (1962), and authorities cited. Such authority rests largely in the discretion of the trial court and is not disturbed in the absence of abuse. See 34 Tex.Jur.2d, Judgments, § 193 at 28 (1962), and authorities cited.

At any rate, if this dissent be incorrect as to the venue question, I see no reason to dissolve the temporary injunction, and much reason not to. The record reflects Berton has unsecured creditors. It also shows the land in question is far greater in value than Berton’s debt. Therefore, if Ryan prevails in a trial on the merits, preventing foreclosure until the outcome on the merits can do Ryan no harm. On the other hand, continuing in force the temporary injunction will protect the unsecured creditors until the case is concluded on its merits. See Great Am. Mtg. Inv. v. Republic of Texas Sav. Ass’n, 538 S.W.2d 146, 148 (Tex.Civ.App.—Houston [14th Dist.] 1976, no writ) (on Motion for Rehearing).

      . The Lehmann Case, which will be so referred to hereinafter, bore the trial court number 27,-947 while the trial court number of this cause was 27,947-A, and plaintiffs’ trial court pleadings in this case adopted the Lehmann pleading even to the extent of attaching a copy thereof.

      . Musslewhite was the leading lawyer for plaintiffs and was likewise the leading witness upon the hearing below. Our record discloses beyond peradventure of a doubt that he has been involved in the litigation for years. See in this connection State Bar Disciplinary Rules DR 5-101, 102 [Vol. 1A, Tex. Rev.Civ.Stats., Title 14 App., Art. 12, § 8 (1973)].


author: ELLIS, Chief Justice.

text:
    Earl T. SMITH and Earl T. Smith & Associates, Inc., Appellants, v. SABINE ROYALTY CORPORATION, Appellee.
    No. 8773.
    Court of Civil Appeals of Texas, Amarillo.
    Aug. 15, 1977.

      Culton, Morgan, Britain & White (Maston C. Courtney), Amarillo, for appellants.
    Gibson, Ochsner, Adkins, Harlan & Han-kins (S. Tom Morris), Amarillo, for appellee.
   ELLIS, Chief Justice.

Sabine Royalty Corporation brought suit against multiple defendants to establish and quiet title to an undivided ⅛ mineral interest in certain land and to obtain an accounting as to damages for conversion of ⅛ of the oil and gas produced from the land. Earl T. Smith and Earl T. Smith & Associates, Inc., two of the named defendants, hereinafter referred to as “Smith,” counterclaimed for specific performance of an alleged farmout agreement or contract covering Sabine’s ⅛ interest. The jury’s verdict was favorable to the defendants, but the trial court granted Sabine’s motion for judgment notwithstanding the verdict and rendered judgment favorable to Sabine. The basic question in Smith’s appeal is whether Sabine contracted to farmout its working interest in the minerals to Smith. We have concluded that under the facts and circumstances of this case, the parties did not enter into an enforceable contract and thus the trial court’s judgment notwithstanding the verdict is affirmed.

The facts giving rise to this controversy had their inception in September, 1974. At that time, El Paso Natural Gas Company owned an oil and gas lease covering of the minerals in Section 9, Block M-2, H & GN Ry. Co. Survey, Roberts County, Texas. On September 17,1974, El Paso executed a Farmout Agreement with W. P. Buckthal and James B. Franklin. Under this agreement, Buckthal and Franklin undertook a firm obligation to begin drilling a well on Section 9 on or before December 1, 1974. Buckthal and Franklin, in turn, assigned these farmout rights to Smith. As a result of this transaction, by early October, 1974, Smith had acquired ownership of the working interest in ⅝ of the minerals in Section 9, subject to the obligation to commence drilling by December 1. Sabine Royalty Corporation owned fee simple title to the remaining ¾⅜ of the minerals. Thus, Sabine and Smith had become tenants in common in the mineral estate. Simpson-Fell Oil Co. v. Stanolind Oil and Gas Co., 136 Tex. 158, 125 S.W.2d 263, 267 (1939), reversed on other grounds, 136 Tex. 158, 146 S.W.2d 723 (1935); Willson v. Superior Oil Co., 274 S.W.2d 947, 950 (Tex.Civ.App.—Texarkana 1954, writ ref’d n. r. e.).

As a co-tenant with Sabine, Smith had a legal right to proceed to drill and produce oil and gas from the land without Sabine’s consent or joinder. Burnham v. Hardy Oil Co., 147 S.W. 330, 334 (Tex.Civ.App.—San Antonio 1912), affirmed on other grounds, 108 Tex. 555, 195 S.W. 1139 (1917). In the event, however, of such drilling and production, there would be an obligation for Smith to account to Sabine for Sabine’s proportionate (Ve) part of the value of the oil and gas produced, less Sabine’s proportionate (⅛) part of the drilling and operating expenses. Cox v. Davison, 397 S.W.2d 200 (Tex.1965).

Smith set out to acquire the rights to Sabine’s ¾% interest. During October, 1974, Smith contacted Sabine’s representatives and requested that Sabine join him in his drilling venture or lease or farmout its interest to him. Sabine was initially non-responsive, but Smith’s insistence eventually resulted in the following letter, dated November 7, 1974, from Sabine to Smith:

“In confirmation of our recent telephone discussion and with particular reference to your letter dated October 28, 1974, as I informed you the management of this Company does not consider the drilling of your proposed test in the captioned section to be in the best interests of Sabine at this time. We strongly prefer that Section 10 be developed before drilling Section 9.
“If you elect to proceed with the drilling of the Morror test in Section 9, we would be willing to grant an oil and gas lease to our subsidiary, Dalco Oil Company, with the lease to provide for ¼ royalty. Dalco would farmout this leased interest to you subject to the drilling of the proposed test with the understanding that production would be required to earn the interest and Dalco would retain a 50% backin option at payout of the well. By the drilling of your initial test and completing a producer, you would be entitled to 100% of this lease insofar as it covers the acreage allocation to the well, or pro-ration unit and you would further be granted a 50% interest in the lease on any acreage outside the initial proration unit. Assuming you complete a gas well and the usual 640 acres plus 10% tolerance is established as field rules in this area you would, in that case, earn all of this leasehold interest in this section through payout. The farmout would be further limited to rights 100' below total depth drilled.
“If you wish to pursue this arrangement, please let us know and the appropriate instruments will be forwarded for your approval.”

After this letter was sent, the parties did not communicate again until January 9, 1975.

Smith, however, drilled a producing oil and gas well. On January 9, 1975, after he knew the well was a producer, Smith telephoned Sabine’s representative and indicated he wished to “reconfirm” the deal proposed in the November 7 letter. Sabine’s representative responded that management had considered the matter terminated. On the same day (January 9) Smith sent Sabine a letter acknowledging the telephone conversation and indicating that he wished to “accept the proposal” outlined in the November 7 letter. Sabine replied by letter indicating that management had already considered negotiations on the matter terminated.

On these facts, Sabine has argued that it, as fee simple owner of the ⅛ of the minerals in Section 9, was entitled to receive ⅛ of the oil and gas produced, subject to its payment of of Smith’s drilling and other costs of production. It was uncontroverted that Sabine held fee simple title to ⅛ of the minerals as of September, 1974. Accordingly, Sabine would be entitled to the relief for which it prayed unless Smith prevails in its contention concerning an enforceable farmout agreement. Cox v. Davison, supra.

Specifically, Smith has contended that Sabine is not entitled to relief because it had farmed out its Vfe interest to Smith. According to Smith, Sabine’s letter of November 7 and Smith’s January 9 letter, when read together, constitute a binding farmout agreement contract which Smith is entitled to have specifically performed. The jury findings were favorable to Smith, but the trial court set aside the findings and granted Sabine’s motion for judgment notwithstanding the verdict. Smith has appealed on 7 points of error contending that the evidence supported the jury’s findings on each of the three issues submitted and that the November 7 letter was specific enough to satisfy the statute of frauds and to be enforceable as a contract. Sabine has presented three cross-points questioning the factual sufficiency of the evidence for the jury’s finding on each of the three special issues.

In the first point of error, Smith has argued that the trial court erred in concluding that there was no evidential support for the jury’s answer to special issue No. 1. In answering that issue, the jury found that Smith accepted the offer of a farmout Sabine proposed in its November 7,1974 letter (above quoted) by commencing the well in reliance on the offer.

In our opinion, however, the November 7 letter was not an offer which could have been accepted by Smith’s commencement of drilling. The terms of the letter indicated what Sabine and Dalco (Sabine’s wholly owned subsidiary) would be willing to do if Smith elected to drill the well. The language used did not indicate that any offer was being extended at that time. Quite significantly, the terms of the letter invited a response from Smith if he wished to pursue the arrangement. In turn, Sabine would forward the appropriate instruments for Smith’s approval. Nothing in the letter indicated any intent to extend an offer which could be accepted by drilling a well. It is our opinion that the letter was only an invitation to further negotiations. It did not contemplate acceptance by performance. The language used by the parties should be accorded its plain meaning in order to arrive at their intention when the instrument was drafted. Fox v. Thoreson, 398 S.W.2d 88 (Tex.1966). Plainly, the language used in Sabine’s November 7 letter did not contemplate acceptance by drilling. Furthermore, as previously discussed, the November 7 letter clearly indicated that formal instruments would be required before the contract would be complete. The letter expressly made Smith’s pursuing the proposal contingent upon his approval of the formal instruments forwarded to him. Where written instruments are contemplated on essential portions of an agreement, the parties are not bound until the instruments are executed. Edmunds v. Houston Lighting & Power Company, 472 S.W.2d 797 (Tex.Civ.App.—Houston [14th Dist.] 1971, writ ref’d n. r. e.). Also see Elkhorn-Hazard Coal Co. v. Kentucky River Coal Corporation, 20 F.2d 67 (6th Cir. 1927).

In the instant case, Sabine’s November 7 letter stated only what Sabine “would be willing” to do if Smith elected to proceed with drilling. This language is indicative of negotiation — not a firm offer. Furthermore, the letter expressly called for execution of formal documents. The letter contained only a few of the terms a farmout agreement or lease would contain and, as hereinafter shown, essential terms of such an agreement were not included. Lastly, the letter called for Smith to communicate with Sabine so that the transaction could become finalized. In our opinion, the November 7 letter was not an offer which could have been accepted by Smith’s commencement of drilling.

Smith, however, testified that he relied on the November 7 letter when he commenced drilling. According to Smith, drilling on the strength of such letters was customary in the business. It is recognized that this testimony by Smith constituted some evidence of reliance, but no evidence of acceptance by drilling. The letter called upon Smith to respond to the proposal outlined; it did not authorize acceptance by performance. The letter, in our opinion, contemplated the making of bilateral contract which would involve the preparation and approval of formal contract documents. Point 1 is overruled.

In the second point, Smith has contended that the trial court erred in concluding that there was no evidence supporting the jury’s response to special issue 3. The jury found that the January 9, 1975 letter by Smith constituted an acceptance within a reasonable time from November 7, 1974. Sabine’s letter of that date specified no period of time within which the proposal must be accepted. Both parties have recognized the rule implying a reasonable time for acceptance where none is specified. See, e. g., Texas Pipeline Co. v. Miller, 84 S.W.2d 550 (Tex.Civ.App.—Eastland 1935, no writ). The question of what period of time between offer and acceptance is reasonable is a question of law where the facts of a case are not in dispute. Hatt v. Walker, 33 S.W.2d 489 (Tex.Civ.App.—Dallas 1930, writ dism’d); McGary v. Campbell, 245 S.W. 106 (Tex.Civ.App.—Beaumont 1922, writ dism’d).

In the case before us, 63 days passed between the November 7 proposal and the January 9 reply. The critical facts here are not disputed and we hold that this delay was unreasonable as a matter of law. Under these circumstances, it is clear that the November 7 proposal was not intended to allow Smith to drill the well, determine that it would be a good producer and then accept the farmout agreement. On the contrary, all indications pointed to the fact that both parties considered the situation as a matter for prompt decision. In Smith’s preliminary letters to Sabine, he repeatedly stressed the importance of a prompt reply within 1-5 days.

Smith, however, has contended that he was justified in waiting until he knew the well would be a producer because, under the terms outlined in the November 7 letter, he would not earn an assignment of the lease until production. However, acceptance within a reasonable time was necessary to acquire even the farmout rights from Sabine through Dalco, its subsidiary. Absent such an acceptance, Smith could not have acquired rights under the letter. As above detailed, we do not believe the November 7 letter was an offer to contract. There is no dispute shown by the record concerning the time element, and it is our opinion that a delay in acceptance from November 7, 1974 to January 9, 1975, after the well was drilled and known to be a producer, would not be a reasonable time, as a matter of law. See Hatt v. Walker, supra; McGary v. Campbell, supra; Lewis v. Clark, 149 S.W.2d 244, 247 (Tex.Civ.App.—San Antonio 1941, writ dism’d, judgment correct); 1 Corbin on Contracts (1963) § 36, at 147-148. Point 2 is overruled.

In the third point, Smith has argued that the trial court erred in concluding that no evidence supported the jury’s finding on issue 3. There, the jury found that Sabine did not intend for formal documents to be prepared and approved before any contract with Smith would become effective. In support of his point, Smith has directed our attention to the rule requiring enforcement of a contract actually made which contemplated preservation of the agreement in a formal document even though the formal documents were never executed. See e. g., Vick v. McPherson, 360 S.W.2d 866 (Tex.Civ.App.—Amarillo 1962, writ ref’d n. r. e.). Pierce Oil Corporation v. Gilmer Oil Co., 230 S.W. 1116 (Tex.Civ.App.—Amarillo 1921, writ dism’d).

In the cases applying the foregoing rule, however, the parties to the contract had expressly agreed upon all material terms of the contract and the contract was enforced on the strength of this agreement. The formal documents were intended only to be a convenient written record of their agreement. In the case before us, the parties never agreed on any of the terms necessary to their contract. The November 7 letter does not reflect that any agreement had been reached between the parties. Instead, it was merely a proposal of what Sabine “would be willing” to do. In our opinion, the rule urged by Smith is inapplicable here because the parties had never reached any agreement on the contract terms. The November 7 letter, according to its plain terms, indicated that Sabine intended that formal documents be prepared and executed before the contract would become effective.

Smith, however, has directed our attention to the deposition testimony of Harold Carter, a Sabine vice-president. Carter testified that it was the normal practice of Sabine’s Operating Committee not to record a farmout arrangement in its formal minutes until it was accepted. Smith has pointed out that the committee’s formal minutes reflect a discussion about Smith and Section 9.

It is noted that the minutes to which Smith has referred were dated November 1, 1974, six days before the critical November 7 letter was written. Furthermore, the minutes themselves refute any argument that the committee considered the deal consummated on November 1. The minutes indicate that the committee discussed the risks involved and approved “offering Mr. Smith a 50-50 farmout on a lease with a ¼ royalty to Sabine.” (Emphasis added). In view of this language indicating the committee approved only an offer to Smith, we consider inclusion of a discussion concerning Smith and Section 9 in the minutes to constitute no evidence of probative force to establish that Sabine considered the contract as having been made. Point 3 is overruled.

In the fourth and fifth points of error, Smith has urged that the trial court erred in concluding that the November 7 letter was lacking in essential terms and therefore unenforceable as a contract and in violation of the statute of frauds. Smith’s position is that all essential terms of the contract were supplied in the November 7 letter. According to Smith, the contract terms were certain enough to enable the court to determine what the contract is and to require performance. Johnson v. Snell, 504 S.W.2d 397 (Tex.1973); Langley v. Norris, 141 Tex. 405, 173 S.W.2d 454 (1943).

The letter, however, set down only general guidelines, lacking in specificity in essential respects, as to what the agreement between Smith and Sabine actually might be. To require specific performance, there must be a “clear, definite and precise understanding of all the terms [of the contract].” Bryant v. Clark, 163 Tex. 596, 358 S.W.2d 614, 616 (1962). The letter merely outlined a proposal under which Sabine would grant a lease to Dalco at some time and Dalco would, in turn, farm out its interest to Smith. Sabine would retain a Vi royalty and Dalco would retain a 50% backin option. Regarding the lease from Sabine to Dalco, there is no mention of the effective date of the lease, nor the duration of the primary term. Nothing was said about consideration or how the ¼ royalty would be paid. Furthermore, such common terms as pooling arrangements, offset well obligations, warranties, etc., were not mentioned. Regarding the proposed farmout agreement between Dalco and Smith, nothing is mentioned about any terms other than Smith’s drilling obligation, his right to an eventual assignment from Dalco and Dalco’s option for a 50% backin interest after payout. No other details of the arrangement are mentioned. It is noted that the letter specified no terms with respect to the eventual assignment from Dalco to Smith.

We are unauthorized to supply the terms of the parties’ contract. Bryant v. Walker, supra. In our opinion, the terms of the agreement alleged were not sufficiently definite to be specifically enforced. Furthermore, even if the agreement were definite enough to be considered a contract, it would be unenforceable under the statute of frauds. Tex.Bus. & Comm.Code Ann. § 26.01. That statute provides that a contract for the sale of mineral interests is unenforceable if not in writing and signed by the person to be charged with the agreement.

Decisions rendered under the statute of frauds have held that the written agreement of the parties must contain the essential terms of the contract and that these must be “expressed with such certainty and clarity that it may be understood without recourse to parol evidence to show the intention of the parties.” Wilson v. Fisher, 144 Tex. 53, 188 S.W.2d 150, 152 (1945); Boddy v. Gray, 497 S.W.2d 600 (Tex.Civ.App.—Amarillo 1973, writ ref’d). In the case before us, the proposed oil and gas lease from Sabine to Dalco was identified only as “an oil and gas lease” in the November 7 letter. Similar references have been held insufficient to satisfy the statute of frauds. Fagg v. Texas Co., 57 S.W.2d 87 (Tex.Com.App.1933, jdgmt. adopted).

Smith, however, has argued that the statute of frauds is no bar because the November 7 letter settled all the material terms of the contract and the “details” were to be fixed only by Sabine. The cases upon which Smith relies support, in general, the proposition that “the statute of frauds is met where the contract . . . gives either party the unqualified right or power to make a selection or determination of the details without the necessity of further agreement or approval of the other party.” See Tiller v. Fields, 301 S.W.2d 185 (Tex.Civ.App.—Texarkana 1957, no writ), citing Stekoll Petroleum Co. v. Hamilton, 152 Tex. 182, 255 S.W.2d 187 (1953). Also see Skeeters v. Granger, 314 S.W.2d 364 (Tex.Civ.App.—Texarkana 1958, writ ref’d n. r. e.). Smith contends that the November 7 letter grants this power to Sabine.

The November 7 letter, however, does not expressly give Sabine the right to furnish the details of the transaction. In fact, the letter above quoted stated unequivocally that “appropriate instruments” would be forwarded for Smith’s approval, if he desired to pursue the “arrangement.” Thus, we cannot agree with Smith’s contention that the November 7 letter fixed all the contract terms because Sabine was granted the power to fill in the details of the agreement.

Smith also has relied upon the decisions in Wilson v. Wagner, 211 S.W.2d 241 (Tex.Civ.App.—San Antonio 1948, writ ref’d n. r. e.), and Johnson v. Snell, 504 S.W.2d 397 (Tex.1973), in support of its contentions. In Wilson v. Wagner, the court held that a written agreement which was complete as to its essential terms did not violate the statute of frauds simply because there were other provisions which could have been included in the contract. There, however, the lease defined the consideration, term, rental payments, and other detailed items necessary to the formation of the lease. In this case, none of these essential terms are set out, and it is our opinion that the proposal was not complete as to its essential terms.

In Johnson v. Snell, supra, the court held that failure to include the terms of a deed of trust alluded to in the contract did not render the contract unenforceable. We agree with the principles relied upon in that case, but find them inapplicable here. In that case, the contract’s meaning was perfectly clear without the terms of the deed of trust. In this case, essential terms of the contract are lacking, and it is apparent that such terms are concerned with matters which vary from contract to contract in the oil and gas exploration business. Points 4 and 5 are overruled.

In the sixth and seventh points, Smith has argued that the court erred in concluding that Sabine’s ⅛ mineral interest was not held subject to Smith’s leasehold interest and in granting to Sabine judgment notwithstanding the verdict. It has been clearly established that the well could be legally drilled and produced by Smith without the joinder of the other mineral owner, but that action would not subject Sabine to the lease in the absence of an enforceable agreement to that effect.

For the reasons previously set out, it is our opinion that Sabine’s letter of November 7 was only an invitation to negotiate a contract, and that it definitely anticipated and required the submission and acceptance of formal documents to effectuate a contract. Further, the letter was so lacking in essential terms that a simple acceptance could not make it an enforceable contract. Even if the letter should be regarded as an offer, it was not established that it was accepted by Smith’s commencement of the well in reliance on such purported offer and was not accepted within a reasonable time by the letter of January 9, which was after the completion of the drilling and knowledge that such drilling had resulted in production. Additionally, for the reasons previously stated, it is our opinion that this transaction did not satisfy the requirements of the statute of frauds. Thus, we hold that Sabine’s interest is not subject to a leasehold interest and we find no error in the court’s granting of judgment notwithstanding the verdict. Points 6 and 7 are overruled.

Pursuant to Tex.R.Civ.P. 324, Sabine has presented three cross-points in which it asserts that the evidence is factually insufficient to support the jury’s findings on each issue and that its answers to such issues are against the great weight and preponderance of the evidence.

For the reasons stated in connection with our disposition of points 1-7, it is our opinion that the trial court’s action in disregarding the answers of the jury to the issues submitted and in granting judgment in favor of Sabine notwithstanding the verdict was proper. We therefore affirm the judgment rendered. Thus, it is not necessary that we discuss the cross points in further detail. However, in the event that it should be determined that the rendition of judgment notwithstanding the verdict was not proper, we would hold that the evidence is factually insufficient to support the jury’s findings and that such findings are against the great weight and preponderance of the evidence, in such event, and only in such event, the judgment would be reversed and the cause remanded.

For the reasons above stated, the judgment of the trial court is affirmed.


author: RAY, Justice.

text:
    LONE STAR GAS COMPANY, Appellant, v. The HOWARD CORPORATION, Appellee.
    No. 8418.
    Court of Civil Appeals of Texas, Texarkana.
    Aug. 30, 1977.
    Rehearing Denied Sept. 27, 1977.

      Joe N. McClendon, Jack Pew, Jr., Jackson, Walker, Winstead, Cantwell & Miller, Dallas, for appellant.
    Roach & Robertson, Dallas, for appellee.
   RAY, Justice.

This is a suit by the seller of gas, The Howard Corporation, appellee (plaintiff), against the buyer, Lone Star Gas Company, appellant (defendant), to recover the difference between the price actually paid by Lone Star to Howard for gas sold by Howard to Lone Star in Scurry County from January 1, 1973, through June 30, 1975, in intrastate commerce and the price Howard contends Lone Star was required to pay under the “favored nations” provisions of the contract. The quantum of gas actually sold and delivered and the price actually paid by Lone Star to Howard were stipulated. After a trial before the court, judgment was rendered in favor of Howard against Lone Star for increases in price under the favored nations clause, amounting, after a remittitur, to $46,121.32 plus interest and attorney’s fees. Findings of fact and conclusions of law were made and filed. Appellant, Lone Star Gas Company, has perfected its appeal and submits thirteen points of error for our consideration.

The dispute in this case is over the existence and sufficiency of facts necessary to trigger the favored nations clause in the intrastate gas purchase contract between the parties.

A favored nations clause is a vendor protection clause. It enables the vendor to receive the benefit of increases in the market price of his product over the term of a long range contract with a purchaser. A three-party favored nations clause enables a vendor to receive the benefit of a higher than contract price paid by any purchaser. A two-party favored nations clause restricts the vendor to the benefit of higher than contract price paid by his contract purchaser. The instant case is concerned with a two-party favored nations clause. The contract provides the following:

“COMPARATIVE PRICE ADJUSTMENTS: If, at any time or times, subsequent to the date of the execution of this agreement and so long as gas is delivered hereunder, there shall be in effect any agreement between Buyer and any other producer or producers of gas providing for the purchase of gas produced in District 8 of the Railroad Commission of Texas, as presently constituted, at a price per one thousand (1,000) cubic feet higher than the price per one thousand (1,000) cubic feet, payable at the same time hereunder and for gas of a like character taken under substantially similar provisions relating to delivery, pressures, quantity, compression requirements, and primary term of contract, then Buyer will thereupon increase the price thereafter payable hereunder so that it will equal the price payable at the same time under such other agreement, and such higher price hereunder shall continue in effect during the remainder of the primary term of this contract so long as any such higher price is paid for gas by Buyer under any such other agreement.” (Emphasis added.)

It was stipulated that the “comparative price adjustments” clause was part of the contract between the parties. The parties further stipulated the amount of gas sold and the price paid under the contract, as well as the existence of eight separate contracts entered into by the appellant for the purchase of gas from other parties. There is no dispute over the price payable under these contracts. Dispute arose from the appellee’s contention that the subsequent contracts of the appellant were sufficiently similar to trigger the favored nations clause and implement a higher price to be paid by Lone Star, the purchaser, to Howard, the seller.

Appellant-purchaser paid to subsequent sellers higher prices for gas than was contracted for with the appellee. The appellant has focused its appeal on the adequacy of the subsequent contracts to meet all provisions of the favored nations clause and implement the higher price in the Howard contract. The appellant’s first twelve points of error are essentially “no evidence”, “insufficient evidence”, and “against the great weight of the evidence” attacks upon the findings of the trial court that the gas purchased in the subsequent contracts was of like character and taken under substantially similar conditions to that of the Howard contract.

The appellant has also complained on appeal of the award of attorney’s fees against it.

The gas sales contracts of a natural gas company dealing in interstate commerce of gas for resale are controlled by the federal Natural Gas Act, 15 U.S.C.A., Sec. 717, et seq., and are subject to the jurisdiction of and regulation of the Federal Power Commission. Superior Oil Company v. El Paso Natural Gas Company, 377 S.W.2d 691 (Tex.Civ.App. El Paso 1964, no writ); Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035 (1954). When favored nations clause cases have found their way into the federal courts, the courts have shown great deference for the Federal Power Commission’s finding of relative similarity when based upon specialized knowledge gained from experience in regulation or trade practice, and have limited their participation to application of rules of ordinary contract construction. Texas Gas Trans. Corp. v. Shell Oil Co., 363 U.S. 263, 80 S.Ct. 1122, 4 L.Ed.2d 1208 (1960). The Texas Gas Transmission case presents an example of the U. S. Supreme Court applying contract law in review of a FPC order. The court affirmed the conclusion of the FPC that the favored nations clause being reviewed by the court had not been triggered by redetermination of price under a contract which had antedated the favored nations clause. The clause called for an agreement by the purchaser to buy from another source at a higher price. A price adjustment of a preexisting contract was held not to be such an agreement as would trigger the favored nations clause.

In an appeal not dealing with questions of law, the FPC appears to have much discretion. A case in which the FPC declined to implement a favored nations clause on a finding of substantial dissimilarity to the alleged triggering contract is Pure Oil Company v. Federal Power Commission, 299 F.2d 370 (7th Cir. 1962). The FPC found that the high pressure and great quantity of gas purchased in the subsequent contract were distinguishing features. The Court of Appeals upheld the right of the FPC in weighing comparability to consider all factors the FPC considered relevant in arriving at the value of gas, whether specifically authorized by contract or not.

When the FPC has not contributed its technical expertise, the trial court must weigh similarities as best it can. In Louisiana-Nevada Transit Co. v. Woods, 393 F.Supp. 177 (W.D.Ark.1975), a court in such a position construed broadly the requirement of the favored nations clause that any triggering contract be “comparable”. The critical inquiry was held to be one of price, not condition. The appellee in the instant case persuasively points out the similarity of the Louisiana-Nevada Transit case to the case at bar.

A case in superficial conflict is Chemplex Company v. Tauber Oil Company, 309 F.Supp. 904 (S.D.Iowa 1970). Respective conditions were held to more rigorous analysis, and found not to be comparable. As pointed out by the Louisiana-Nevada Transit case, supra, the particular favored nations provision in Chemplex would impose on the parties all of the same conditions of the triggering contract, thus warranting the scrutiny of these different conditions. The Louisiana-Nevada favored nations clause, as the clause before the court in the instant case, would impose only the higher price of the triggering contract on the parties.

The appellant has attempted to distinguish the Louisiana-Nevada Transit case on the basis of the plain language of the favored nations clause. It is urged that the favored nations clause in the instant case is not activated by a showing that the triggering contract contains a higher price, without a further showing that a list of conditions precedent have been satisfied. The essence of the appellant’s position is contained in its statement that “in order to maintain an action under such clause Howard was required to prove (1) that the contract relied upon contained an agreement for the purchase of the gas at a price per MCF, and (2) that such price was payable for gas taken, and (3) that such price was payable for gas of like character to that being purchased from Howard, and (4) that the gas was taken under substantially similar conditions as to all of the following: delivery, pressures, quantity, compression requirements and primary term of contract.”

The appellant’s first three assertions appear to be in error. The favored nations clause does not require that a subsequent triggering contract express its price in terms of thousands of cubic feet of gas (MCF), but rather that such price be greater than the existing contract price when expressed in MCF. Similarly the clause does not require that subsequent contracts of purchase and sale be for gas of like character, but rather that the gas be of like character when its price per MCF is calculated for purposes of comparison. Neither does the clause require that the gas actually be taken by the purchaser, but rather that there be an agreement for the purchase of gas taken under substantially similar provisions.

The appellant’s fourth assertion that the gas must be taken under substantially similar conditions is supported by the language of the' contract. The trial court found, however, that this requirement had been satisfied. Such a finding is subject to the same force and dignity as a jury verdict upon special issues, and when supported by competent evidence will not be disturbed on appeal unless so against the overwhelming weight of the evidence as to clearly and manifestly be wrong. 4 McDonald’s, Texas Civil Practice, Sec. 16.05; Paul v. Johnson, 314 S.W.2d 338 (Tex.Civ.App. Houston 1958, writ dism’d).

The appellant is able to submit discrepancies between Howard and subsequent contracts in several respects, including quantity, quality and point of delivery of the gas. These discrepancies need not, and perhaps cannot, be construed as insignificant by any measure. They did not, however, preclude the trial court’s finding of substantial similarity between the contract and conditions under which the gas was taken.

“Substantial” is a relative term susceptible to different meanings according to the circumstances of its use; it must be examined in relation to its context and its meaning gauged by circumstances surrounding the matter in reference. 40 Words and Phrases, Substantial, p. 762, Supp. p. 89; Smith v. City of Fort Dodge, Iowa, 160 N.W.2d 492, 497 (Iowa 1968); Atchison, Topeka & Santa Fe Railway Co. v. Kings County Water District, 47 Cal.2d 140, 302 P.2d 1, 3 (Cal.1956). It is an elementary principle of contract law that in construing terms of a contract the finder of fact must endeavor to give effect to the intentions of the parties. Simmons and Simmons Construction Co. v. Rea, 155 Tex. 353, 286 S.W.2d 415 (1956); Marcus v. Armer, 117 Tex. 368, 5 S.W.2d 960 (1928). The trial court cannot be said to have acted without sufficient evidence in construing the conditions under which gas was taken under the Howard and subsequent contracts to be sufficiently similar to trigger the favored nations clause. Under the subsequent contracts a higher price was paid for gas which was ultimately pooled with the Howard contract gas in a common transmission system. The purpose of the favored nations clause was to equalize the prices paid for gas in such situations. The trial court adopted a contractual construction which effectuated this purpose.

The appellant contends that the trial court erred in making an award of $5,000.00 for attorney’s fees. By agreement, the attorney’s fees issue was submitted for determination by the trial court. The appellant argues that any such determination in this case is violative of Tex.Rev.Civ.Stat.Ann. art. 2226 (Supp.1976-1977).

Article 2226, supra, is the statutory provision for attorney’s fees in Texas. It has been interpreted by the courts many times. The law is settled that an award of attorney’s fees, not anticipated by contract, cannot stand unless authorized by the statute. Turner v. Turner, 385 S.W.2d 230 (Tex.1965); Wm. Cameron & Co. v. American Surety Co. of New York, 55 S.W.2d 1032 (Tex.Com.App.1932, opinion adopted). Since the statute is penal in character, it is to be strictly construed. Van Zandt v. Fort Worth Press, 359 S.W.2d 893 (Tex.1962); Perry v. Leuttich, 132 Tex. 159, 121 S.W.2d 332 (1938).

Article 2226 allows a claimant to recover attorney’s fees in seven specific situations. Included among these is the claim for materials furnished. The appellee argues, and the appellant does not deny, that gas is “material furnished” within the meaning of the statutory provisions. Texas Gas Corporation v. Hankamer, 326 S.W.2d 944 (Tex.Civ.App. Houston 1959, writ ref’d n.r.e.) is in accord.

The appellant affirmatively defends, however, by contending that the gas in the instant case was the subject of a special contract. It has been judicially determined that Article 2226 has no application to a suit based on a “special contract” between the parties. Meaders v. Biskamp, 159 Tex. 79, 316 S.W.2d 75, 78 (1958); Eisenbeck v. Buttgen, 450 S.W.2d 696 (Tex.Civ.App. Dallas 1970, no writ).

The courts have found a special contract easier to recognize than to define. The definition most often cited is found in 17 C.J.S. Contracts § 10, p. 584, in which it is stated:

“Special contract is one with peculiar provisions or stipulations not found in the ordinary contract relating to the same subject matter. These provisions are such as, if omitted from the ordinary contract, the law will never supply.”

See Ennis Business Forms, Inc. v. Todd, 523 S.W.2d 83, 88 (Tex.Civ.App. Waco 1975, no writ); Pines California, Inc. v. Miller, 446 S.W.2d 91, 95 (Tex.Civ.App. Eastland 1969, no writ); Eisenbeck v. Buttgen, supra.

There has been considerable doubt about the scope of the special contract doctrine which, as defined, appears to preclude recovery on any express contract. Clark Advertising Agency, Inc. v. Tice, 490 F.2d 834, 838 (5th Cir. 1974).

The courts, however, have often allowed recovery of attorney’s fees in contract actions. Pacific Coast Engineering Co. v. Trinity Const. Co., 481 S.W.2d 406 (Tex.1972); Page v. Superior Stone Products, Inc., 412 S.W.2d 660 (Tex.Civ.App. Austin 1967, writ ref’d n.r.e.); Zorola v. Bishop & Son, 401 S.W.2d 713 (Tex.Civ.App. San Antonio 1966, writ ref’d n.r.e.).

The Texas Supreme Court squarely acknowledge the possibility of recovery of attorney’s fees in an action founded on an express contract in Tenneco Oil Company v. Padre Drilling Company, 453 S.W.2d 814 (Tex.1970). The court there dealt with a contract to drill a test oil and gas well. The “materials furnished” provisions of Article 2226, supra, were not, however, of direct concern because all materials allegedly furnished were actually used by the plaintiff in performance of the contract. In disallowing an award of attorney’s fees, the court noted that the statute as it then existed (prior to the 1971 amendment) did not anticipate that corporations could have a claim for “personal services rendered” or for “labor done.” Pains were taken, however, to point-out the narrow basis of the decision and to preclude its construction as disallowing attorney’s fees in all actions based in contract and the court stated the following:

“We are not to be understood as holding that claims for personal services rendered and labor done cannot be founded upon contract. A contract for purely personal services or for labor only will support an award for attorney’s fee.”

The court then went on to indicate that the enumerated claims permitted under Article 2226 must be the essence of any action in which attorney’s fees could be recovered, and the court stated:

“On the other hand, a suit based primarily upon a contract for a product or a general service will not authorize an award of attorney’s fee merely because performance of the contract may require employment of others to render personal services or to perform labor.”

The court had earlier affirmed a decision of a court of civil appeals which applied substantially similar reasoning in upholding an award of attorney’s fees in an action in contract for materials furnished. Ferrous Products Co. v. Gulf States Trading Co., 323 S.W.2d 292 (Tex.Civ.App. Houston 1959), affirmed, 160 Tex. 399, 332 S.W.2d 310 (1960). The intermediate court had found attorney’s fees recoverable in any valid claim for materials furnished without limitations because of the manner in which the claim arose. 323 S.W.2d 292, 297. The language of the Supreme Court in affirming was less expansive, but uncontradictory. The finding of a valid claim for materials furnished under a quasi or implied in law contract was affirmed.

We feel compelled to follow the example of the Texas Supreme Court in Tenneco and the Houston Court of Civil Appeals in Ferrous Products in looking to the essence of the claim sued upon rather than looking to the contract to ascertain whether it is or is not “special.” See Blackmon & Associates, Inc. v. Cooper, 445 S.W.2d 577, 581 (Tex.Civ.App. Eastland 1969, writ ref’d n.r.e.).

The cases which have disallowed attorney’s fees on a finding of special contract have emphasized elements of the contract providing as consideration for tendered personal services, labors or material, that which could not have been foreseen prospectively as of necessarily equivalent value. Attorney’s fees have been disallowed, for example, in actions on employment contracts deemed special by virtue of their provisions for commissions or percentage of profit. G & W Marine, Inc. v. Morris, 471 S.W.2d 644 (Tex.Civ.App. Beaumont 1971, no writ); Pines California, Inc. v. Miller, supra; Eisenbeck v. Buttgen, supra. Similarly, attorney’s fees have been disallowed in actions for materials furnished founded in contracts which set prices without any reasonable connection to value. Roby Industries, Inc. v. Maxwell Electronics Corp., 409 S.W.2d 559 (Tex.Civ.App. Dallas 1966, writ ref’d n.r.e.); Burney v. Ibarra, 415 S.W.2d 517 (Tex.Civ.App. San Antonio 1967, writ ref’d n.r.e.). These provisions transformed the claim from one for services rendered, or labor performed, under Article 2226, to one for simple breach of contract.

The appellant urges that the favored nations clause in the instant case has the effect of making the contract sued upon “special” so as to preclude the possibility of an award of attorney’s fees. The contract sued upon may be unusual but it is not special. The favored nations clause has the effect of raising the contract price with the market value of the gas. The claim of the appellee is essentially one for the value of the materials furnished. The disputed clause is one which the law would, in essential effect, imply. Allowance of attorney’s fees in this case is consistent with a strict interpretation of Article 2226.

The judgment of the trial court is affirmed.


author: KLINGEMAN, Justice.

text:
    MOBILE AMERICA SALES CORPORATION and Ford Motor Credit Company, Appellant, v. Hazel N. RIVERS, Appellee.
    No. 15797.
    Court of Civil Appeals of Texas, San Antonio.
    Sept. 14, 1977.
    Rehearing Denied Oct. 12, 1977.

      Terry Topham, Sawtelle, Goode, Davidson & Troilo, James L. Bran ton, Hardberger, Branton & Herrera, Inc., San Antonio, for appellant.
    Barry Snell, Bayne, Snell & Krause, San Antonio, for appellee.
   KLINGEMAN, Justice.

This is a suit for damages and statutory penalties under the Texas Deceptive Trade Practice Act and the Texas Consumer Credit Code. The parties subsequently compromised and settled the deceptive trade practice cause of action and also a cross action by Mobile America Sales Corporation against the manufacturer, Craftmade Homes. The appeal before us involves only the alleged violations of the Texas Consumer Credit Code. Appellee, Hazel N. Rivers, filed a motion for partial summary judgment pertaining to violations of the Texas Consumer Credit Code against appellants, Mobile America Sales Corporation, and Ford Motor Credit Company. This motion was granted by the trial court, the trial court finding, as a matter of law, the following specific violations of Chapter VII of the Texas Consumer Credit Code, Tex.Rev.Civ.Stat.Ann. arts. 5069-7.01 [et seq.] (1971):

1. The selling or procuring of property insurance at a premium or rate of charge not fixed or approved by the State Board of Insurance, without disclosing such fact to appellee, as required by art. 5069-7.06(3).

2. Requiring property insurance in connection with the transaction, without furnishing appellee a statement which clearly and conspicuously states such insurance is required, as required by art. 5069-7.06(3).

3. Failing to make an accurate disclosure of the kind, coverage, term and amount of premium for the property insurance required in connection with the transaction, as required by 5069-7.06(5).

4. Including within the retail installment contract a provision whereby the buyer agrees not to assert against the seller or holder any claim or defense arising out of the sale, in violation of art. 5069-7.07.

Final judgment was entered in favor of appellee against appellants, jointly and severally, in the sum of $27,218.52, interest, and stipulated attorney’s fees.

Appellee will be sometimes hereinafter referred to as Rivers; appellant, Mobile America Sales Corporation, as Mobile America; and appellant, Ford Motor Credit Company, as Ford Credit.

This suit arose from a credit purchase of a 1974 Craftmade Mobile Home by Rivers from Mobile America, evidenced by certain instruments, including a Customer Order Form dated June 1,1974, and a Texas Automobile Retail Installment Contract dated June 28, 1974. The installment contract was transferred and assigned by Mobile America to Ford Credit. Rivers alleged in her petition that the Code provides for penalties in an amount twice the time price differential and default and deferment charges; that the time price differential was $12,889.26; the default charges were $5.00 per installment for 144 installments, or $720.00; that appellee is entitled to twice such sums, or $27,218.52, plus reasonable attorney’s fees; and that Mobile America and Ford Credit are jointly and severally liable for such amounts.

The trial court found appellants guilty of four different violations of the Consumer Credit Code. Multiple penalties, that is, a separate penalty for each violation, were not requested or awarded. It was not necessary for appellee to secure favorable findings on all of the various alleged violations, and the finding of the court of one specific violation, if correct, is a sufficient basis for the recoveries herein allowed.

We will first consider appellants’ points of error which pertain to the court’s finding that appellants had violated the Texas Consumer Credit Code by selling or procuring property insurance at a premium or rate of charge not fixed or approved by the State Board of Insurance, without disclosing such fact to appellee, as required by the Code. By such points of error, appellants assert that the trial court erred in finding, as a matter of law, that (1) appellant sold or procured property insurance at rates not fixed or approved by the State Board of Insurance, without disclosing such fact to appellee; (2) the term “fixed or approved” is of uncertain meaning, ambiguous, and therefore unenforceable; (3) the complained of findings are based upon an affidavit which is a conclusion of law and therefore insufficient to support the judgment; and (4) there were no pleadings to support such finding, appellee’s second supplemental petition having the effect of an amended petition which negated all prior pleadings.

The pertinent provisions of the Texas Motor Vehicle Installment Sales Act, art. 5069, may be summarized as follows:

1. Art. 7.01. “Motor Vehicle” means . motor home.
2. Art. 7.02(1). Each retail installment contract shall be in writing, dated, signed by both the buyer and seller, and completed as to all essential provisions before it is signed by the buyer. .
3. Art. 7.06(3). When insurance is required in connection with such a contract or agreement made under this Chapter, the seller or holder shall furnish the borrower a statement which shall clearly and conspicuously state that insurance is requested or required in connection with the contract. ... In addition when any requested or required insurance is sold or procured by the seller or holder at a premium or rate of charge not fixed or approved by the State Board of Insurance, the seller or holder shall include such fact in the foregoing statement. Such statement or statements may be made in conjunction with or as a part of the retail installment contract required by Article 7.02. (Emphasis added).
4. Art. 8.01. Any person who violates this Subtitle by contracting for, charging or receiving interest, time price differential or other charges which are greater than the amount authorized by this Subtitle, or by failing to perform any duty specifically imposed on him by any provision of this Subtitle, shall forfeit to the obligor twice the amount of interest or time price differential and default and deferment charges contracted for, charged or received, and reasonable attorney’s fees fixed by the court, provided there shall be no penalty for a violation which results from a bona-fide error. (Emphasis added).

It is undisputed that insurance was required in the ease before us. Appellee asserts that the summary judgment evidence establishes, as a matter of law, that the insurance was sold at rates not fixed or approved by the State Board of Insurance, and such evidence also establishes, as a matter of law, that appellants did not make the disclosure required by the code in this regard.

The retail installment contract here involved specifically states that physical damage insurance is required by this contract. The insurance portion of such contract contains this provision:

Q If checked, the premium for such insurance included herein is at a rate of charge not fixed or approved by the State Board of Insurance of Texas.
D Such box was not checked.

The physical damage insurance in this case was written by Mobile County Mutual Insurance Company. Art. 17.22 of the Texas Insurance Code reads as follows:

County mutual insurance companies shall be exempt from the operation of all insurance laws of this State, except as in this Chapter specifically provided.

The article then goes on to list specific exceptions to this rule, but none of such exceptions authorizes the State Board to fix or set rates.

Appellee, in support of her motion for partial summary judgment, filed an affidavit made by Joseph D. Hawkins, the Commissioner of Insurance of Texas. In such affidavit, Commissioner Hawkins states:

I certify and attest that the mobile home insurance rates of MOBILE COUNTY MUTUAL INSURANCE COMPANY are not fixed or approved by the State Board of Insurance.

The basic thrust of appellants’ first three points of error may be summarized as follows:

1. Assuming, for purposes of argument, that the premiums for the required physical damage insurance written by Mobile County Mutual Insurance Company in this transaction were not fixed or approved by the Board, the Consumer Credit Code only requires the facts to be disclosed to the buyer; the statute does not provide that such declaration be contained in the retail installment contract; that such disclosure can be made by other means; and that appellee did not prove that appellants failed to perform any duty specifically imposed on them.

2. The term “fixed or approved” is of uncertain meaning, ambiguous, and therefore unenforceable.

3. The finding of the trial court was based on the affidavit of Hawkins, which . affidavit is a conclusion of law and is not sufficient to support the summary judgment.

We find no merit in these points of error.

With regard to appellants’ contention that the disclosure need not be made in the retail installment contract, a careful reading of art. 7.06(3) shows an intent that it be in the document forming the credit transaction, which in this case was the retail installment contract. It is noteworthy that the contract here involved specifically contains a box which was to be checked if the premiums were at a rate or charge not fixed or approved by the State Board of Insurance, and that this box was not checked. The buyer could logically assume that since such box was not checked, the rates were fixed or approved. Although appellants talk about separate disclosures of such information, there is nothing in the summary judgment evidence to indicate that any separate disclosure was in fact made.

Appellants also argue that: (1) county mutual insurance companies must fix and determine their rates or charges in their by-laws, and that such by-laws must be filed with the State Board of Insurance before a county mutual insurance company can receive charter; (2) that all amendments to the by-laws must also be approved; (3) that this is tantamount to the Insurance Board fixing or approving the rates of county mutual insurance companies. We disagree.

We find nothing ambiguous or uncertain about the term “fixed or approved” as used in the statute.

Appellants also contend that the trial court’s finding that they sold or procured property insurance at rates or charges not fixed or approved by the State Board of Insurance, without disclosing such facts to appellee, is without support in the pleadings. Such contention is based upon appellants’ assertion that the only pleadings to support such finding are found in appellee’s first supplemental petition and appellee’s second supplemental petition; that such pleadings were in fact amended pleadings, which supplanted the instruments to which they amended; and that the amended pleadings must stand alone unaided by the previous pleading; and as such, were insufficient to support the court’s findings.

It is to be noted that appellants did not object or except to either pleadings and no complaint was made to any of such petitions until after judgment was rendered. It appears obvious from the reading of the petitions involved that they were intended as additions to, rather than replacement of, prior pleadings. They were so treated by all the parties.

In 2 R. McDonald, Texas Civil Practice § 8.01.4 (1970), it is said:

Though a supplemental or an amended pleading should be so endorsed, a misnomer normally is not important. A pleading which in fact is a supplemental pleading may inadvertently be denominated an amended pleading, and vice versa. In the absence of a special exception directly challenging the misnomer, the pleading will be construed according to its contents rather than its endorsement. So, absent such an exception, a pleading endorsed as a supplemental pleading may be treated as an amendment to the claim or defense alleged in the original pleading and may be allowed to aid it, the two being considered together, to determine whether the plaintiff has sufficiently alleged his claim, or the defendant his defense. This rule has been applied to sustain a plaintiff’s recovering upon an alternative theory alleged only in his ‘supplemental’ petition. * * * But absent a special exception pointing out the misnomer, a liberal construction is preferable, and no objection is made in the trial court to the erroneous endorsement, it is futile to reverse a judgment, otherwise correct upon the merits, to compel a correction of formal paper work.

Appellants also urge that the trial court erred in entering judgment awarding appellee statutory penalties prescribed by Chapter VIII of the Texas Consumer Credit Code, in that the imposition of the statutory penalties amounts to an excessive fine which is prohibited by the Constitution of the State of Texas, Art. I, § 13, and Amendment VIII of the Constitution of the United States of America. Appellants did not plead unconstitutionality in the court below. Unconstitutionality of a statute is an affirmative defense which must be plead. State v. Scott, 460 S.W.2d 103, 107 (Tex.1970), cert. denied, 402 U.S. 1012, 91 S.Ct. 2188, 29 L.Ed.2d 435 (1971); Houston Chronicle Publishing Co. v. City of Houston, 531 S.W.2d 177 (Tex.Civ.App.—Houston [14th Dist.] 1975, writ ref’d n. r. e.); City of South Houston v. Sears, 488 S.W.2d 169 (Tex.Civ.App.—Houston [14th Dist.] 1972, no writ).

In City of Houston v. Sears, supra, the court said:

It is true that Rule 94, Tex.R.Civ.P., does not specifically mention ‘unconstitutionality’ as an affirmative defense, but it is also true that the list of affirmative defenses is not limited to those expressly enumerated therein. It also includes ‘. . . any other matter constituting an avoidance or affirmative defense.’ As with illegality, there is no indication on the face of plaintiff’s petition of any unconstitutionality. Unconstitutionality, as here argued, is asserted to avoid liability and as a defense to the contract. Though not expressly elaborating on this point the opinion of the Texas Supreme Court in State v. Scott, 460 S.W.2d 103, 107 (Tex.Sup.1970), cert. denied, 402 U.S. 1012, 91 S.Ct. 2188, 29 L.Ed.2d 435 (1971), gives support to the conclusion that unconstitutionality is an affirmative defense within the meaning of the rule. 488 S.W.2d at 173-74.
sfc ⅜ ⅜ ⅜ Sfc ifc
The last two challenges, illegality and unconstitutionality, we hold under the instant circumstances to be affirmative defenses which, not having been plead by the City as required by Rule 94, Tex.R.Civ.P., were also waived. 488 S.W.2d at 173.

Appellants’ points of error pertaining to the unconstitutionality of the statute are overruled.

In view of our holding herein, we do not deem it necessary to pass on or discuss appellants’ points of error which pertain to other alleged violations. The trial court’s finding as to one violation, if correct, is sufficient under the Motor Vehicle Installment Sales Act to hold appellants liable for the statutory penalties here awarded.

The judgment is affirmed.

      . All references herein are to Tex.Rev.Civ.Stat. Ann.

      . See Tex.Atty.Gen.Op. No. WW-401 (1958).