author: MATHERNE, Judge.

text:
    Virginia L. COOK as next friend and guardian of her minor son James Perry Cook, Appellee, v. Gayle Franklin COOK, Appellant.
    Court of Appeals of Tennessee, Western Section.
    June 6, 1977.
    Certiorari Denied by Supreme Court Dec. 5, 1977.

      James F. Schaeffer, Memphis, for appellant.
    Ashley, Ashley & Lawson, Dyersburg, for appellee.
   MATHERNE, Judge.

In this lawsuit the nature and extent of an oral trust is to be declared. The trust is then to be impressed upon the proceeds of a life insurance policy on the life of the deceased settlor, to be administered by a trustee approved by the court.

I.

On a prior appeal this Court found that the proceeds of the insurance policy was impressed with an oral trust and remanded for a determination of the terms of the trust. On petition for certiorari the Supreme Court, in Cook v. Cook (Tenn.1975) 521 S.W.2d 808, generally agreed v/ith the conclusions reached by this Court and made the following statement on how the lawsuit would be handled on remand:

We remand this case to the Chancery Court in Union City, for further hearing under the following guidelines:
a. The entire record in this cause will be deemed and treated as a part of the record on remand, without the necessity for recalling any witness, rereading any deposition, or re-introducing any document.
b. Plaintiff will have the right to recall any witness for further examination.
c. Defendant will have the right to recall any witness for further cross-examination.
d. Either party will have the right to call any additional witness.
The Chancellor shall insure a full investigation into this controversy to the end that the precise nature and extent of the trust be developed and declared.
It being evident that there is hostility between Gayle Franklin Cook, the appointed (but not qualified) guardian, and Virginia L. Cook, mother and natural guardian, and it being further evident that there is a possibility of a conflict of interest on the part of Gayle Franklin Cook, this Court directs that the Court appoint a disinterested person to serve as guardian pendente lite or may cause the insurance proceeds to be paid into the Registry of the Court, to be managed and invested, pendente lite, under the direction and supervision of the Court. Upon the determination of the precise terms of the trust, the Court will appoint a permanent guardian, not handicapped by any conflict, hostility or incompatibility-
As modified and amplified, the judgment of the Court of Appeals is affirmed.

Upon remand the chancellor ordered the defendant, Gayle Franklin Cook, the party to whom the proceeds of the life insurance policy had been paid, to pay the funds in to the clerk and master. The defendant did on July 23, 1975 pay in to the clerk and master the sum of $64,357.22 as the balance of the funds remaining in his hands.

After the hearing, the chancellor in his final decree appointed the clerk and master special guardian of the minor, James Perry Cook. The chancellor did not find and declare the precise nature and extent of the oral trust as ordered by the Supreme Court. Instead, the chancellor set up a trust, as follows:

The Court further found said Special Guardian shall take possession of, hold and administer said trust fund, under the terms as set forth as follows and shall invest and reinvest the same for the benefit of said minor in such manner as authorized and approved for the investment of fiduciary funds by appropriate statute, and shall pay the net income, after deducting any expense and guardian’s fees allowed by the Court, to or for the benefit of said minor for his support, maintenance, welfare and education until such time as said minor ward shall attain the age of majority, at which time said guardianship shall terminate and the balance of said trust fund and all accumulated and unexpended revenues therefrom shall be paid over to said James Perry Cook pursuant to and in accordance with the proper orders of this Court made and entered at such time.
Upon proper application of the Guardian or other proper person charged with the care, custody and control of said minor during the continuation of said guardianship, encroachments upon the corpus of said trust funds may be allowed by proper orders of this Court for the support, maintenance, welfare and education of such minor, and provided further, that upon any such application for encroachment being made, the Court, in its sound discretion, may require notice of such application be given to defendant, Gayle Franklin Cook, in order to allow him to be heard on the issue of the advisability of allowing an encroachment upon the trust fund corpus.

The chancellor further found that the defendant as trustee had wrongfully spent $17,011.97 in payment of a debt of the settlor; he had failed to pay in to the clerk and master $433.75 of the trust funds; he had failed to properly invest trust funds with a resulting loss of $1,500.00 interest, all of which sums he ordered the defendant to pay to the clerk and master. The chancellor did allow the defendant trustee credit for a total of $3,251.33 paid out by the trustee.

The defendant trustee appeals.

II.

The plaintiff filed a motion to strike the bill of exceptions because it was not filed in accordance with T.C.A. §§ 27-110 and 27-111.

The bill of exceptions bore the certificate of the court reporter. It was not approved by the filing party, defendant. The bill of exceptions was left with the clerk and master within the time allowed for filing. The filing party left with the clerk and master a proposed order for the chancellor to sign showing that the bill of exceptions had been tendered and was approved by the chancellor. On the second page of the order was a certificate that the filing party had mailed a copy of the order to the opposing party. The chancellor, after the expiration of ten days, signed the order approving the bill of exceptions.

The plaintiffs argue that the copy of the proposed order for the chancellor to sign did not constitute notice, and the certificate did not meet the statutory requirement that the filing party certify that notice of filing had been given the opposing party. We do not agree with the plaintiff. The order, copy of which was received by the plaintiff, showed that the bill of exceptions had been tendered. This was notice to the plaintiff and she had ten days within which to object to any portion of the bill of exceptions. This form of notice is not a good one and should not be followed. The statute, however, does not prescribe the form of the notice nor of the certification of notice. We hold that the bill of exceptions was properly filed and the motion to strike the bill of exceptions is overruled.

III.

On August 19, 1975, a hearing was had before the chancellor on the nature and extent of the oral trust. Proof was taken over a period of two days.

The defendant Gayle Franklin Cook testified that his brother, the settlor, stated to him that he was changing the beneficiary on his life insurance policy from his wife, Virginia Cook, to Gayle Franklin Cook. The defendant stated that his brother said that he did not want his wife to have any of the money from the insurance policy. He stated that the settlor told him to use the money to pay the settlor’s debts, to set the settlor’s step-son, William Baker, up in a farming operation, and to use the rest for the benefit of the settlor’s son, James Perry Cook. The settlor further stated that if anything happened to Gayle Franklin Cook then the money was to be handled the same way by the settlor’s other brother, John Cook.

John Cook testified to the same terms of the trust. He stated that he agreed to handle the money as requested by the set-tlor in the event of death or inability on the part of Gayle Franklin Cook. John Cook further testified that the settlor told him that should the minor beneficiary die before the trust terminated, the balance was not to go to the heirs of the minor, but would go to the heirs of the settlor. He stated that the settlor made this condition because he did not want his wife, the mother of the minor beneficiary, to have any of the money under any condition.

Carloss Johns, a farm implement dealer and second cousin of the settlor, testified that the settlor told him that he had named Gayle Franklin Cook as the beneficiary under the life insurance policy. He stated that the settlor told him that he had instructed Gayle Franklin Cook to pay the settlor’s debts first, to set William Baker up in a farming operation and to spend the rest on the settlor’s minor son as it should be spent.

Virginia Cook, the divorced wife of the settlor and the mother of the minor beneficiary, testified that she knew the beneficiary of the life insurance policy had been changed from her to Gayle Franklin Cook. She stated that the settlor told her he did that to prevent her from getting any of the money. She said the settlor told her that the entire amount of the policy proceeds were to be used by Gayle Franklin Cook for the benefit of the minor, James Perry Cook.

William Baker, the twenty-three year old step-son of the settlor, testified that the settlor told him that he did not want Virginia Cook to have any of the money from the insurance policy. He testified that the settlor told him that Gayle Franklin Cook was the beneficiary and he would first pay all debts owing by the settlor, set William Baker up in a farming operation, and the rest would go to the minor son of the set-tlor.

IV.

When testing an oral trust it is important to take note of the relationship between the parties and to thereby weigh the reasonableness of the terms of the trust as orally related. The record establishes beyond a reasonable doubt that the settlor and his brothers Gayle Franklin Cook and John Cook enjoyed a close, confidential, and concerned feeling, each for the welfare of the other. The only testimony to the contrary is that of Virginia Cook, who testified to the effect that the settlor and Gayle Franklin Cook could not talk together without becoming upset with one another to the point of being antagonistic toward each other. Had her view of that relationship been correct, it appears that she could have produced some independent evidence of the fact. The record establishes that the settlor and his former wife, Virginia Cook, had a rather strained marriage that ended in divorce with considerable post decree litigation. The relationship between those parties was not good. The record establishes that the relationship between Gayle Franklin Cook and John Cook with the minor beneficiary are good. If some one was to be named as the party to spend funds for the benefit of the minor, there is no showing in the record but that Gayle Franklin Cook and John Cook would be that party; according to the proof, the settlor’s selection was reasonable. The step-son William Baker was very close to his step-father, the settlor. The step-son is almost totally estranged from his mother, Virginia Cook. William Baker, after finishing high school, worked for and with the settlor in a farming operation. On the year of the settlor’s death, 1972, the two of them farmed about 1100 acres of land. There was no formal or informal partnership agreement between them. It was a" father and son operation, with each apparently happy and pleased with the performance of the other. Considering the work and performance of William Baker, it was a very natural thing for the settlor, who apparently had not been able to pay William much, to be concerned for William’s welfare and to include him as a party to benefit from the proceeds of the insurance policy.

We conclude that the relationship of the parties would dictate that it was reasonable for the settlor to place the funds in the hands of his brother Gayle Franklin Cook with instructions that the money be used to pay the settlor’s debts, set William Baker up in a farming operation, and use the remainder for the benefit of the settlor’s only son. There is not one thing that is strained or unreasonable about the naming of Gayle Franklin Cook nor of the instructions given to him.

We hold that the object of the trust is that the proceeds of the insurance policy be used for the three purposes above stated. The chancellor erred in holding that the entire proceeds would be used for the benefit of James Perry Cook. We further hold that the duty of carrying out the terms of the trust was placed on Gayle Franklin Cook. We further hold that the trust thus imposed upon Gayle Franklin Cook was a personal trust growing out of the confidence and trust the settlor had in the named trustee. The proven terms of the trust render it personal, in that it was left to the discretion of the trustee to decide in what manner and to what extent the set-tlor’s step-son, William Baker, was to be set up in a farming operation. The terms of the trust also left it to the discretion of the named trustee as to how the remaining funds would be used for the benefit of the settlor’s minor son.

We further hold that the trust will terminate upon James Perry Cook reaching the age of 18 years. At that time the entire corpus will be paid over to him.

It is obvious from the record that the settlor did not want his former wife, Virginia Cook, to share in any of the proceeds from the insurance policy. One witness, John Cook, testified that the settlor told him that if the beneficiary James Perry Cook died before the trust terminated, he wanted the corpus to go to his, the settlor’s, heirs. Gayle Franklin Cook stated that he did not know what the settlor wanted done in that event. The attorney for Gayle Franklin Cook asked the chancellor for permission to let Gayle Franklin Cook explain that answer, but the chancellor refused. If Gayle Franklin Cook had testified as did John Cook, we would not, under the entire record, uphold that portion of the oral trust, because the proof would not be sufficient to allow these two brothers who were named as trustee and successor trustee to place themselves in the position of contingent beneficiaries of the trust estate. We therefore hold that the suggested disposition of the corpus should James Perry Cook die before the trust terminates is not established by the record.

V.

On November 7, 1972, the trustee received a check for the proceeds of the life insurance policy in the amount of $76,-111.25. The trustee purchased a $20,000 certificate of deposit at the Bank of Troy and placed the balance of $56,111.25 on checking account with that bank. The certificate of deposit was made payable to Gayle F. Cook or John W. Cook, or the survivor; and the checking account was in the name of both. The trustee proceeded to harvest and sell the 1972 crops of the set-tlor. He qualified as executor of his brothers estate in the probate court of Dyer County. It was the opinion of the trustee that he could settle all debts, carry out the terms of the trust and not have to touch the $20,000 certificate of deposit. The trustee filed annual income tax returns with the federal government which reflect that he treated the funds as trust funds. There is no proof that the trustee has himself used any of the trust funds, nor has he used any amount thereof other than as authorized by the terms of the trust.

The plaintiff, Virginia Cook, complains because the trustee paid from trust funds a debt of $17,011.97 owing by the decedent to the Bank of Trimble. She also complains that the trustee-executor gave to her son, William Baker, used farm machinery and equipment of a value of between $15,000 to $20,000 out of the estate of the decedent. The chancellor did not pass upon the disposition made of the farm machinery, but ordered the trustee to refund to the trust account the $17,011.97, plus interest.

The will of the settlor left his entire estate to his minor son, James Perry Cook. The trustee explained that in carrying out the trust provision that he set William Baker up in a farming operation, he deemed it economically prudent to set him up in farming with machinery owned by the decedent and to pay off the debt on the machinery with trust funds. This reasoning is not challenged by proof to the contrary. Where a trustee has honestly and prudently carried out his duties under the trust, he cannot properly be surcharged for expenditures of trust funds. Compare Dietz v. Mitchell (1874) 59 Tenn. 676; Gibson County v. Fourth and First National Bank, 20 Tenn.App. 168, 96 S.W.2d 184. William Baker testified that he was satisfied with what he received under the terms of the trust. That phase of the trust has been executed and is terminated.

There is no showing in this record upon which to base a charge against the executor-trustee that he bled the estate for the benefit of the trust. The chancellor erred in ordering the trustee to refund the $17,-011.97, plus interest, into the trust fund. We do not here prejudge the probate court of Dyer County in its administration of the estate of the settlor. If that estate proves to be insolvent, or, if for any other reason that court deems it necessary to surcharge the trustee-executor for the value of the machinery given to William Baker, allowing credit for estate debts paid out of the trust, those issues are for determination by that court.

VI.

The chancellor ordered the defendant trustee to pay $1,500 into the trust fund as interest which should have been earned on trust funds during a period of about five or six months. It is true that where a trust fund cannot be applied either immediately or within a short time to the purposes of the trust, it is the duty of the trustee to invest the fund in a proper interest bearing account. Linder v. Officer (1940) 175 Tenn. 402, 135 S.W.2d 445.

As heretofore noted the defendant invested $20,000 of the trust fund in a certificate of deposit. The balance of about $56,000 of the insurance money was placed on checking account and remained there until the defendant was sued in this lawsuit. Upon being sued and enjoined from spending the money, the defendant deposited the $56,000 in a savings account on February 9, 1973. The $56,000 did not draw interest for that period of three months. The defendant explained that he was gathering the crops of the settlor, marshaling assets of the estate and determining how much the estate was indebted. He did not know how much of the trust fund would be needed for the payment of the debts of the decedent. The first and foremost duty placed on the defendant under the trust was to pay the debts of the settlor. We hold that the defendant is not, under the circumstances, liable for interest during that three month period.

The other period complained of is a period from May 15, 1975, until the funds were paid in to court on July 23, 1975, or two months and eight days. The amount of trust funds not drawing interest during that period was $64,357. Interest at 5% would amount to $268.15 per month, or $8.93 per day. We do not understand from the record why the money was removed from an interest bearing account during this period of time. We therefore agree with the chancellor that the trustee is chargeable with interest at 5% per annum on $64,357.00 for two months and eight days, or a total of $607.74.

We agree with the chancellor that the defendant is to pay into the trust fund the sum of $433.75 which he failed to pay in to court. The record reveals this was an oversight on the part of the defendant and we do not charge him with interest on that amount.

The defendant testified that all known debts of the settlor have been paid except a $300.00 attorney fee owing by the estate. It appears that the first purpose of the trust has been met. This can not be definitely stated to be the case, however, until the estate is fully administered in the Probate Court of Dyer County.

We should here note that the first decree of the chancellor, later appealed to this Court and the Supreme Court, dissolved the injunction restraining the defendant from expending any of the trust funds. The defendant testified that he was advised by the lawyer then representing him that he could proceed with the expenditures of trust funds, which he did.

The trustee submitted the following accounting of trust funds:

RECEIPTS AND DISBURSEMENTS
August 19, 1975
Reoftints
11-11-72 Insurance Proceeds $76,111.25
1973 Interest Income — All Sources 3,707.20
1974 Interest Income — All Sources 4,350.33
1975 Interest Income — Estimated 457.49
TOTAL RECEIPTS $84,626.27
Disbursements
12-12-72 Abernathy’s Motor Cycle Sales 231.00
4-13-74 Internal Revenue Service 1973 Taxes 255.00
4-13-74 Internal Revenue Service Estimated 1974 Taxes 255.00
11-19-74 Farmer’s Bank of Trimble Indebtedness Payoff 17,011.97
12-20-74 Trade-in Difference — Second Motorcycle 229.83
1975 Internal Revenue Service— Additional 1974 Income Tax $ 117.00
4-14-75 Internal Revenue Service— Estimate of 1975 Income Tax 372.00
5-14-75 Elam, Glasgow, Tanner and Aeree Attorney’s Fees 1,357.00
5-15-75 Gayle F. Cook — Reimbursements for Copies 6.50
5-15-75 Gayle F. Cook 433.75
7-23-75 Clerk and Master— Chancery Court 64,357.22
TOTAL DISBURSEMENTS $84,626.27

We approve that accounting and all disbursements shown, with the exception of “estimated” interest income for 1975, and on the further condition that the trustee pay in to the trust fund the $433.75 and the $607.74 heretofore found as owing by him.

VII.

We must now determine if the chancellor erred in removing the trustee. We note that life insurance may be made payable to a trustee to be named as beneficiary in the policy and the proceeds of such insurance shall be paid to such trustee and shall be held and disposed of by the trustee as provided in a trust agreement made by the insured during his lifetime. T.C.A. § 35-620; see also T.C.A. § 35-602.

A trustee may be removed by motion, T.C.A. § 35-108; by the petition of a beneficiary for grounds stated by statute, T.C.A. § 35-109; and by the court’s own motion for any ground stated in T.C.A. § 35-109, Bailey v. Rice (1903) 1 Tenn.Chanc.App. 645; or a court of chancery may remove a trustee for any good cause shown, Maydwell v. Maydwell (1916) 135 Tenn. 1, 185 S.W. 712. A court may, instead of removing the trustee, require of him a bond as will effectually protect the interests of the parties. T.C.A. § 35-113, Faust v. Levy (1880) 72 Tenn. 320.

As heretofore shown the trustee before the court is not guilty of fraud as charged in the complaint; he is not guilty of refusing to carry out the term of the trust as charged; he is not guilty of misappropriating trust funds as charged; and he is not guilty of failure to account, except for the item of $433.75, which is an admitted error and the item of $607.74 interest.

The settlor placed a high duty of personal responsibility on the named trustee. It is obvious that the settlor did not want the clerk and master to take care of the needs of his minor son, nor to set William Baker up in a farming operation. Those duties were placed in an individual in whom the settlor had every confidence, and in the event of that person’s death or inability another individual was named. The trust imposed requires a personal relationship between the two named individual beneficiaries and the trustee so that the intent of the settlor could be accomplished. The record, reveals a good personal relationship between the trustee and both individual beneficiaries; there is no hostility upon which to base the removal of the trustee.

There is hostility on the part of the plaintiff, Virginia Cook, the mother of the beneficiary James Perry Cook. This hostility has been made evident by the actions, attitude and accusations of Virginia Cook, rather than by the trustee. Virginia Cook filed this lawsuit within a few weeks of the date the trustee received the money from the insurance company, wherein she makes grave and serious charges which she failed to prove. She also immediately sued the defendant as executor of the estate of the decedent claiming a year’s support for the minor son of the parties. It was the trustee’s duty to defend these lawsuits. We see no reason for an honest and responsible trustee to be hounded out of his position of performing a trust personal to him and the beneficiary because of the incessant advancement of unfounded claims and charges by some third party, even though that third party be the mother of the minor beneficiary. The plaintiff has tried for five-years to place some blame on this trustee; she has totally failed.

We hold the chancellor erred in removing the trustee and in naming the clerk and master as special guardian.

The parties have argued before this court whether or not the prior opinion of the Supreme Court ordered the chancellor to appoint a guardian other than the mother or the defendant trustee. As we read that opinion we do not find an intent to so direct the chancellor on the naming of the permanent trustee or guardian. That court did direct the chancellor to have the funds paid in to court pending the hearing and decision of the lawsuit. But we can not read into that opinion an order by that Court to eliminate the defendant as trustee. The defendant had not at that time testified. We hold that the Supreme Court did not intend to eliminate the defendant from serving as trustee without first hearing from that defendant who stood ready and able to explain not only the terms and extent of the trust but also to account for his every act in the face of multiple lawsuits. We hold that Gayle Franklin Cook is not handicapped by any conflict, hostility or incompatibility which would hinder or prevent his carrying out the terms of the trust.

VIII.

The nature and extent of the trust is as follows:

The settlor, James Milton Cook, made his brother, Gayle Franklin Cook, the beneficiary of a policy of life insurance on the settlor’s life, the proceeds from the policy were to be held in trust for the following purposes: (1) pay all debts of the settlor; (2) put the settlor’s step-son, William Baker, in a farming operation; (3) the remainder of the funds to be used for the benefit of the settlor’s only son, James Perry Cook. The trustee was to exercise his judgment and his discretion in carrying out the terms of the trust. The trustee can use income and corpus for the purposes stated. The trust will terminate upon James Perry Cook reaching the age of 18 years, at which time the entire corpus will be paid to him. Should Gayle Franklin Cook die or become unable to administer the trust, the settlor’s brother, John Cook will act as trustee under the same terms and conditions.

IX.

Considering the history of this trust, the continuous litigation, the obvious distrust exhibited by the mother of the minor beneficiary, we feel that Gayle Franklin Cook should make a $50,000.00 bond as trustee. We do not require this bond in lieu of removing him as trustee. We hope that the requirement of bond will tend to end arguments and litigation at the expense of the trust. The bond is to be approved by the chancellor.

Upon satisfactory bond being made, the chancellor will enter an order in this cause directing the clerk and master to surrender to Gayle Franklin Cook all funds the clerk and master holds as special guardian of James Perry Cook. This cause will remain on the docket of the Chancery Court at Union City, Tennessee, and Gayle Franklin Cook will annually file in that court an accounting of his management of this trust.

The decree of the chancellor is reversed. A decree will be entered in this court setting out the nature and extent of this trust as stated in Section VIII of this opinion; ordering Gayle Franklin Cook to pay into the trust $433.75 and $607.74; approving the accounting filed by Gayle Franklin Cook as stated in this opinion; ordering bond as required in this opinion; adjudging all costs in the trial court and in this court since the order of remand one-half against the trust fund and one-half against the plaintiff Virginia Cook; and remanding this cause to the Chancery Court sitting at Union City, Tennessee for such further proceedings as may be necessary.

NEARN, J., and QUICK, Special Judge, concur.


source: Caselaw Access Project

author: TODD, Judge.

license: Public Domain

text:
    CHEROKEE INSURANCE COMPANY, Plaintiff-Appellant, v. UNITED STATES FIRE INSURANCE COMPANY et al., Defendants-Appellees.
    Court of Appeals of Tennessee, Middle Section.
    July 1, 1977.
    Certiorari Denied by Supreme Court Dec. 5, 1977.

      Levine & Rosenblum, Stewart, Estes & Donnell, Nashville, for plaintiff-appellant.
    Douglas M. Fisher, of Howell & Fisher, Vaden Lackey, Jr., of Denney, Lackey & Chernau, Nashville, Earl Thompson, Nashville, for defendants-appellees.
   TODD, Judge.

ABRIDGED OPINION

This is a declaratory judgment suit to determine insurance liability for destruction of a building by fire. From an unsatisfactory result before the Chancellor, the plaintiff, Cherokee Insurance Company, has appealed.

Plaintiff assumed liability upon a policy of builder’s risk insurance issued by another insurer to defendant, Randall Phillips Builders, Inc., covering an extensive complex of condominium apartment buildings. There was no fixed inception or termination date of insurance under the policy, for it encompassed many buildings or units which were added to the policy when construction was begun and removed from the policy when construction was completed and title transferred to the permanent owners.

Insurance protection for the permanent owners was provided by a policy issued by defendant, United States Fire Insurance Company to Hickory Valley Condominium Phase II, which was the owner’s association which managed the section of the complex known as Phase II on behalf of the condominium owners in that phase of the complex. The inception date of insurance under this policy was not fixed because buildings or sections of the complex were added to the policy as finished and title conveyed to purchasers who were members of the insured association.

On October 12,1974, fire destroyed Building 13 of the complex. It is conceded that plaintiff is fully liable to the owner-insured for the loss unless plaintiff’s policy had terminated by its terms or the liability should be shared with United States Fire Insurance Company.

Plaintiff’s suit, filed against Randall Phillips Builders, Inc., United States Fire Insurance Company and other parties not material to this appeal, asked for a declaration that plaintiff be exonerated of liability because its coverage of the building had terminated by the completion of the building prior to its destruction or that United States Fire Insurance Company be required to bear a proportionate share of the loss.

Randall Phillips filed an answer and counterclaim seeking judgment against plaintiff and U. S. Fire for the loss.

U. S. Fire filed an answer and motion for judgment on the pleadings, which motion was sustained. U. S. Fire was dismissed and took no further part in the proceedings until this appeal in which U. S. Fire was named as appellee in the appeal bond and filed a responsive brief.

Randall Phillips filed a motion for judgment on the pleadings, which motion was overruled and the cause was heard upon its merits resulting in judgment in favor of Randall Phillips and against plaintiff, cross-defendant, from which judgment plaintiff-cross defendant has appealed.

Appellant does not assign as error the dismissal of U. S. Fire Insurance Company.

The first assignment is based upon the provisions of both policies excluding coverage in event of “other insurance,” resulting in mutually repugnant exclusions and shared liability. State Farm Mutual Insurance Company v. Taylor, Tenn.1974, 511 S.W.2d 464; United Services Automobile Association v. Hartford Accident and Indemnity Co., 220 Tenn. 120, 414 S.W.2d 836 (1967).

The Cherokee policy was issued to Randall Phillips, the owner of the building at the time of its destruction. That the building was duly added to the policy and proper premium therefor paid by Randall Phillips is not controverted.

The U. S. Fire policy was issued to Hickory Valley Condominium Phase II, the association of owners of condominium apartments. Neither the association nor any of its members is shown to have owned any interest in the building in question, and there is no evidence that said building had been added to the U. S. Fire policy or premium paid therefor at the time of the destruction by fire. Thus, there is no evidence of dual coverage.

Even if dual coverage should exist (which is not shown by the evidence) proration is not ordinarily allowed where the policies are issued to different insureds to cover differing interests. Atlantic Ins. Co. v. Massey, 381 F.2d 520 (1957); MFA Ins. Co. v. Gulf Ins. Co., Mo.1969, 445 S.W.2d 829.

The other contention of Cherokee is that it is not liable because, as to the destroyed building, the Cherokee policy had terminated by its own terms.

The terms of the Cherokee policy on this subject are as follows:

“Coverage shall cease when the interest of the assured ceases or when the property has been accepted by the owner, when the property has been occupied, or when this policy has expired or been cancelled, whichever shall first occur.”

There is no evidence that the interest of the assured had ceased, or that the property had been accepted by the owner (the constructor and owner were one and the same) or that the property had been occupied or. that the policy had expired or had been cancelled. There is, therefore, no basis for excusing Cherokee from liability because of termination of coverage under the terms of the policy.

Cherokee contends that the building had been substantially completed and that this fact (if true) in some manner served to terminate the builder’s risk coverage which was issued for protection during the period of construction.

At the time of the fire, all details of the building had been completed which were scheduled for completion before sale of the various condominium apartments therein. The installation of carpet, wallpaper and other decorative items was delayed so that the purchaser might make selection of same. None of the carpet or wallpaper had been installed in the subject building because no part of the building had been sold.

One of the employees of Randall Phillips testified that he considered the building “completed.” However, this meant “completed” for the purpose of offering for sale and not “completed” in the sense that no more work was to be done on the building by Randall Phillips.

The issue of completion or substantial completion is immaterial under the terms of the contract as previously quoted. Even if material, the issue was decided by the Chancellor adversely to appellant and the evidence does not preponderate otherwise. T.C.A. § 27-303.

Appellant complains of the Chancellor’s view that the insurance coverage by Cherokee upon the subject building did not terminate until the completion of all buildings covered by the policy. Even if said view should be incorrect, the result of the present appeal would not be affected; for the decision of this Court is based upon the grounds stated herein and not upon any theory requiring extension of insurance on all buildings in the complex until the last of the buildings should be complete.

Where a correct result is reached by the Trial Judge, his judgment may not be reversed simply because it may have been predicated upon an erroneous reason. Delforge v. McMurtry, Tenn.App.1972, 481 S.W.2d 396 and authorities cited therein.

Cherokee insists that the period of coverage of builder’s risk insurance is determined by the purpose for which such insurance is generally obtained, that is, to protect the constructor during the period of construction. Absent any uncertainty or ambiguity in the policy, its terms determine the rights of the parties, generally industry practices in the trade or industry notwithstanding.

The decree of the Chancellor is affirmed. Costs of this appeal are taxed against appellant.

Affirmed.

SHRIVER, P. J., and DROWOTA, J., concur.


author: O’BRIEN, Judge.

text:
    STATE of Tennessee ex rel. Johnny HEMBY, Petitioner, v. Joe B. O’STEEN, Sheriff of Lauderdale County, Respondent.
    Court of Criminal Appeals of Tennessee.
    Oct. 28, 1977.

      Robert C. Wilder, Ripley, for appellant.
    Brooks McLemore, Jr., Atty. Gen., Robert A. Grunow, Asst. Atty. Gen., Nashville, for appellee.
   OPINION

O’BRIEN, Judge.

This matter is before us on application for certiorari and supersedeas granted by a judge of this Court and set for hearing before a full panel.

On July 17th, 1977, defendant was arrested in Lauderdale County on a warrant charging him with assault with intent to commit first degree murder. He was bound over in a preliminary hearing before the General Sessions Judge with bond fixed at twenty-five thousand dollars ($25,000.00). On August 12th, 1977, a hearing was had on a second warrant charging him with second degree murder. The General Sessions Judge bound him over to the Grand Jury on that charge and left the bond set at a total of twenty-five thousand dollars ($25,000.00) on both charges. On August 19th, 1977, a petition for Writ of Habeas Corpus was filed in the Circuit Court of Lauderdale County alleging that petitioner was illegally restrained of his liberty by the sheriff of that county by reason of excessive bond pending action of the Grand Jury. On August 22nd, 1977, a hearing was held. The trial judge found that the motion for reduction of bond was not well taken because the defendant was a threat to his family, and to society, particularly while under the influence of alcohol. The bond in the amount of twenty-five thousand dollars ($25,000.00) was retained in force and the sheriff directed to make arrangements to have the petitioner observed and treated for possible alcoholism at a local mental health center. On September 30th, 1977, the petition for writ of certiorari and supersedeas was filed in this court and granted with a temporary bond fixed at fifteen thousand dollars ($15,000.00) subject to further orders of the court. It appears that while the matter was pending in this court the Grand Jury of Lauderdale County returned indictments charging the petitioner with involuntary manslaughter and aggravated assault. The record seems to show that the charges against defendant grew out of assault and battery upon his wife and the unexplained death of his five-week-old son. At the bond reduction hearing in the trial court the Sheriff of Lauderdale County testified that an oral autopsy report indicated the child died of lack of oxygen which could have resulted from intentional obstruction of the child’s breathing or from a cause unrelated to any external force. It was his opinion, from his personal knowledge, that the petitioner was extremely fond of the child. He also expressed the view that petitioner had experienced a drinking problem which caused a personality change but, at the time of the hearing he had managed to bring this under control. The wife of petitioner testified that she was not afraid of petitioner and had no fear for the safety of two other minor children if he were released. That she needed him at home and had no desire to prosecute him. His employer testified that he would put him back to work as quickly as possible if he were released. A sister, who is a police officer in the city of Memphis, testified she and her husband would assume the responsibility to assure that petitioner would pursue any course of alcoholic rehabilitation treatment he embarked upon if he were released.

The first assignment charges error to the trial judge in dismissing the Writ of Habeas Corpus because the amount of bail was excessive under the provisions of the Eighth Amendment of the United States Constitution and Article 1, Section 16 of the Tennessee Constitution.

There is no doubt that the right to bail is mandatory in all except capital cases. Constitution of Tennessee, Article 1, Sec. 15. Wallace v. State, 193 Tenn. 182, 245 S.W.2d 192. The mandate against excessive bail is equally decisive under the provisions of Article 1, Section 16 of the Constitution. The United States Supreme Court, through Mr. Justice Douglas in Bandy v. United States, 364 U.S. 477, 81 S.Ct. 197, 5 L.Ed.2d 218, citing from Stack v. Boyle, 342 U.S. 1, 72 S.Ct. 1,96 L.Ed. 3, has said that it would be unconstitutional to fix excessive bail to assure that a defendant will not gain his freedom.

There is some authority on the State level to the effect that the right of a convicted felon to bail is subordinate to the public peace and well-being of society, see Goins v. State, 192 Tenn. 32, p. 10, 237 S.W.2d 8, and on the Federal level that bail should not be granted where the offense of which the defendant has been convicted is an atrocious one and there is danger that if he is given his freedom he will commit another of like character, Carbo v. United States, 82 S.Ct. 662, 7 L.Ed.2d 769. However, these cases seem to be limited to denial of bail after conviction.

Confining our ruling to the facts shown in the record, particularly the indictments returned by the Grand Jury charging the petitioner with a considerably lesser degree of offenses than those contained in the original warrants, we conclude that the bail set in this case violates the express provisions of Article 1, Section 16 of the Tennessee Constitution. The petitioner has now been confined nearly three months due to his inability to secure bail set by the General Sessions Judge. This is tantamount to a denial of bail. The exigencies of the situation demand that we reduce the bond rather than remand the cause to the trial court for a further hearing. The bail in this case is reduced to the sum of two thousand dollars ($2,000.00) on the involuntary manslaughter charge, and the sum of one thousand dollars ($1,000.00) on the charge of aggravated assault. The trial judge may impose any reasonable and proper conditions he deems necessary on defendant’s release. The case is remanded to the trial court for further proceedings in accordance with this opinion.

WALKER and DUNCAN, JJ., concur.

      . The American Bar Association Standards relating to Pre-trial Release, Part V, Sec. 5.5, provides some excellent guidelines for situations of this nature.


author: PER CURIAM.

text:
    Zearl T. YOUNG et al., Petitioners, v. C. D. HICKS, Jr., Respondent.
    No. B-6654.
    Supreme Court of Texas.
    June 22, 1977.
    Brooks, Gordon & Long, Abilene, for petitioners.
    Bradbury & Tippen, Abilene, for respondent.
   PER CURIAM.

This suit was brought by petitioners, Zearl T. Young and H. E. Field, for damages and for an injunction requiring C. D. Hicks, Jr. to remove two gates and two fences that interfered with petitioners’ use of a road. The trial court granted the injunction, but the court of civil appeals reported at 553 S.W.2d 1 (Tex.Civ.App.1977) reversed and ordered a trial of all issues.

Testimony at trial indicated that the general public had been using the unpaved road for at least sixty years and that the county periodically had maintained the road. Hicks’s land lay on the east side of the road and Young’s on the west. Prior to the time Hicks built the fences in question the only fence on his side of the road was set back from the road. Hicks testified at trial that he had had his land surveyed and that this survey showed that the property line between his land and Young’s ran down the center of the road. On the basis of this survey Hicks erected an electrified fence on the property line as well as on the west side of the road, thereby leaving about eight to ten feet of clearance for vehicles using the road. Testimony indicated that these fences made passage of larger pieces of farm equipment or county maintenance equipment impossible. Hicks stated that the two fences provided a route by which he could drive his cattle to his back pasture. The fence on the west side of the road was necessary to keep the cattle out of Young’s grain.

In response to special issues the jury found that the road had become public, that Hicks had built the fences to harass petitioners, and that the road was half on Hicks’s land and half on Young’s. The trial court then issued an injunction requiring Hicks to move the fences and not rebuild them except on the fence line in existence when Hicks purchased the property. The court of civil appeals reversed and remanded because the injunction failed “to establish with specificity either the location or the width of the road in question, or the location of the line of the old fence in existence when C. D. Hicks, Jr. purchased the land.”

While we agree with the court of civil appeals that the injunction failed to meet the specificity requirements of Rule 683, the general remand by the court of civil appeals was contrary to Rule 434, which provides:

[I]f it appear to the court that the error affects a part only of the matter in controversy and that such part is clearly separable without unfairness to the parties, the judgment shall only be reversed and a new trial ordered as to that part affected by such error. .

Neither of the parties complained of the jury findings that the road was public and that Hicks erected the fence for harassment purposes. The only points of error before the court of civil appeals dealt with the lack of evidence of the location of the road and the fences. The location issue is separable from the other issues in the case and the parties will not be harmed by limiting the trial on remand to this issue. There is no reason to require the parties to retry the other issues in the case that have been correctly litigated submitted, and determined. Therefore, pursuant to Rule 503, we limit the remand to the issue of the location of the road and fences. We order the opinion of the court of civil appeals published.

Under Rule 483, after granting the application for writ of error and without hearing oral argument, the judgment of the court of civil appeals is affirmed in part and reversed in part, and the cause is remanded to the district court in accordance with this opinion.

      . All references to rules are to the Texas Rules of Civil Procedure.


text:
    Archer PARR et al., Petitioners, v. Bonnie M. WHITE, Administratrix, Respondent.
    No. B-6462.
    Supreme Court of Texas.
    June 22, 1977.
    Spitz & Grossman, Oscar Spitz, Wood, Boykin & Wolter, Marshall Boykin, III, Corpus Christi, for petitioners.
    Branscomb & Miller, V. Camp Cuthrell, III and G. Ray Miller, Jr., Corpus Christi, for respondent.
   PER CURIAM.

The application for writ of error is refused, no reversible error. The opinion of the court of civil appeals contains a statement that may mislead litigants in the future, however. The court of civil appeals stated that an appeal from the probate court to the district court by writ of certiorari is still available. 543 S.W.2d 440, 443. Although we concluded in Cluck v. Hester, 521 S.W.2d 845 (Tex.1975), that writ of certiorari review was available, the holding in that case was bottomed on the failure of the legislature to repeal section 30 of the Probate Code, which authorized such review. After Cluck v. Hester the legislature repealed section 30, thereby making writ of certiorari review by the district court no longer available in probate matters. See Tex. Probate Code Ann. § 5(e) (Supp. 1976).

POPE, J., not sitting.


author: CHADICK, Justice. McGEE, Justice,

text:
    Burtis R. HAMMONDS et ux., d/b/a the Garden Center and Flower Shop, Petitioners, v. Ed HOLMES et al., Respondents.
    No. B-6468.
    Supreme Court of Texas.
    Nov. 9, 1977.

      Lockman & Line, David K. Line, Dallas, for petitioners.
    Larry R. Wright, Corsicana, Strasburger, Price, Kelton, Martin & Unis, R. Chris Harvey and W. Ed Walts, II, Dallas, for respondents.
   CHADICK, Justice.

The question here is the preclusive effect of a prior judgment. In the prior suit Burtis Hammonds and his wife, Norma, sued Corsicana National Bank for wrongful foreclosure of a deed of trust on their business property. That suit was resolved by a judgment of dismissal with prejudice, granted on motion of the plaintiffs Ham-monds. Four months later the present suit was filed by Mr. and Mrs. Hammonds “individually and d/b/a The Garden Center and Flower Shop” against Corsicana Bank, Ed Holmes, and Zane Stites for wrongful foreclosure of the same deed of trust on the same property.

On the ground of res adjudicata the trial court granted a summary judgment for all defendants. The Court of Civil Appeals affirmed. 543 S.W.2d 20. We affirm as to the Bank and Stites but reverse- and remand as to Holmes.

A statement of the traditional general principle of res adjudicata is as follows:

[A] question of fact or of law, distinctly put in issue and directly determined by a court of competent jurisdiction as a ground of recovery or defense in a suit or action between parties sui juris, is conclusively settled by the final judgment or decree therein, so that it cannot be further litigated in a subsequent suit between the same parties or their privies, whether the second suit be for the same or a different cause of action. State of Oklahoma v. State of Texas, 256 U.S. 70, 86, 41 S.Ct. 420, 422, 65 L.Ed. 831 (1920).

Without finality of judgments, litigants might face harassment by contentious adversaries and courts might generate inconsistent dispositions of the same dispute, causing confusion and wasting judicial time. Steakley and Howell, Ruminations on Res Judicata, 28 Sw.L.J. 355 (1974).

Hammonds argues that the second suit is brought in a different capacity by virtue of the claim of the partnership. The petition alleges that The Garden Center and Flower Shop is “a partnership comprised of and owned by Burtis R. Hammonds and Norma Hammonds” and “an assumed name through which Burtis R. Hammonds and Norma Hammonds transact business.” There is no diversity in identity or interest of the party plaintiffs in the two suits. If the partnership is to be viewed as a separate entity, the individual partners sued as its representatives in the former suit. It is said that the “[i]dentity of parties is not a mere matter of form, but of substance.” Chicago, R. I. & P. R. Co. v. Schendel, 270 U.S. 611, 620, 46 S.Ct. 420, 424, 70 L.Ed. 757 (1926); National Bondholders Corp. v. Seaboard Citizens National Bank, 110 F.2d 138, 145 (4th Cir. 1940); Restatement (Second) of Judgments § 85 (Tent.Draft No. 2, 1975).

Hammonds then argues that the former judgment is no bar to the suit against Zane Stites and Ed Holmes, who were not parties in the first suit. Zane Stites is President of Corsicana National Bank, and Ed Holmes is a Vice-President. A final judgment for or against an employer may or may not bar a second suit against an employee. See Marange v. Marshall, 402 S.W.2d 236 (Tex.Civ.App.1966, writ ref d n. r. e.); Restatement (Second) of Judgments § 99 (Tent.Draft No. 3, 1976); Annot., 23 A.L.R.2d 710 (1952). It is frequently said in cases where there is a diversity of parties that the former judgment bars a second suit against all who were in “privity” with the party in the first suit. Benson v. Wanda Petroleum Co., 468 S.W.2d 361 (Tex.1971). It is important to look to the claim that was litigated in the first suit as well as the relationship of the new defendant to the former one. If a plaintiff suffers a take nothing judgment or dismissal with prejudice in a suit against an employer only because the harm was due to a deed of an employee done outside the scope of his employment, the judgment should not bar suit against the employee. If the first suit was against an employee, a second suit may be brought against the employer if the cause of action sets forth liability not entirely derivative of the liability pursued against the employee in the first suit. Maxey v. Citizens National Bank of Lubbock, 507 S.W.2d 722 (Tex.1974).

Plaintiffs’ pleadings in these two suits differ with respect to Stites only in that he is named as a formal party in the present suit. As President of the Bank he was the actor for the Bank. He is here alleged to have ousted plaintiffs from their property “in concert” with the Bank. There is no allegation that Stites acted in any respect except as President of the Bank; we construe the petition to say that he acted only as President of the Bank. There are therefore no issues as to Stites’ liability which plaintiffs have not previously litigated.

The situation is different as to Holmes. He was trustee in the deed of trust, and plaintiffs allege that he foreclosed without cause to do so and that he acted maliciously. It cannot be said as a matter of law that he acted in the foreclosure in the capacity of bank employee. The trustee has a separate capacity and is imposed with a particular legal responsibility. He must act with absolute impartiality and fairness to the grantor in performing the powers vested in him by the deed of trust. First Federal Savings & Loan Assoc. v. Sharp, 359 S.W.2d 902 (Tex.1962); Fuller v. O’Neal, 69 Tex. 349, 6 S.W. 181 (1887). The summary judgment was not justified on the strength of the former judgment and the allegations of these pleadings alone.

Plaintiffs’ cause of action against Ed Holmes is severed from the cause of action against Zane Stites and Corsicana National Bank. The judgments of the courts below are affirmed as to the latter cause. In the cause of action against Ed Holmes, the judgments below are reversed and the cause is remanded to the trial court.

Dissenting opinion by McGEE, J.

McGEE, Justice,

dissenting.

I respectfully dissent. Under the circumstances of this particular case, I must disagree with the majority holding that Holmes may not avail himself of the doctrine of res judicata in order to preclude this action against him. I would hold that Holmes was in privity with The Corsicana National Bank.

There is no generally prevailing definition of privity; one who is in privity must be determined from the circumstances of each case. Benson v. Wanda Petroleum Co., 468 S.W.2d 361, 363 (Tex.1971); 46 Am.Jur.2d Judgments § 532 (1969). In his book concerning res judicata, Professor Vestal states that:

[T]he term ‘privity’ in itself does not state a reason for either including or excluding a person from the binding effect of a prior judgment, but rather it represents a legal conclusion that the relationship between the one who is a party on the record and the nonparty is sufficiently close to afford application of the principle of preclusion.

A. Vestal, Res Judicata/Preclusion V-302 (1969).

While agreeing that Holmes could have an independent legal capacity other than as an employee, the circumstances of this case dictate that the doctrine of res judicata be applied to bar this action against Holmes as well. There may be a technical distinction between Holmes’ position as an employee of the Bank and his position as trustee, but the cause of action and the relief sought are the same. As stated in Benson v. Wanda Petroleum, supra at 363, “privity connotes those who are in law so connected with a party to the judgment as to have an identity of interest that the party to the judgment represented the same legal right.” See also Hixon v. Kansas City, 361 Mo. 1211, 239 S.W.2d 341 (1951); 46 Am.Jur.2d Judgments § 532 (1969). Further, privity does not always depend upon whether the parties constitute independent legal entities. Cf. Lerner v. Los Angeles Board of Education, 59 Cal.2d 382, 29 Cal.Rptr. 657, 380 P.2d 97 (Cal.1963); Zaragosa v. Craven, 33 Cal.2d 315, 202 P.2d 73 (Cal.1949).

The deed of trust in this case was such that Holmes foreclosed upon the instructions of the secured party who was also his employer, The Corsicana National Bank. I do not feel that Holmes’ position as an employee under these circumstances is, as asserted by Hammonds, inconsequential in law to his trustee’s position and responsibilities. In the prior action, it was determined as against the Bank that there was no wrongful foreclosure. Holmes was not named as a party in that action. He was, however, quite clearly designated in the petition as an agent, servant, and employee of the Bank in furtherance of the Bank’s interest. Although Holmes was a trustee in a deed of trust, I feel that Holmes and The Corsicana National Bank were so closely connected in interest as employer-employee in the foreclosure action that the judgment for the Bank must also act in favor of Holmes. Therefore, I would hold that Holmes was in privity with his employer, The Corsicana National Bank, and a final judgment in favor of the Bank in the first action for wrongful foreclosure precludes a second suit against him based on the same cause of action. See Marange v. Marshall, 402 S.W.2d 236 (Tex.Civ.App.—Corpus Christi 1966, writ ref’d n. r. e.); Restatement (Second) of Judgments § 99 (Tent. Draft No. 3, 1976).

For the reasons stated above, I would affirm the judgments of the courts below.


author: GREENHILL, Chief Justice.

text:
    L. H. LACY COMPANY, Petitioner, v. The CITY OF LUBBOCK, Texas, Respondent.
    No. B-6615.
    Supreme Court of Texas.
    Nov. 23, 1977.

      Bailey, Williams, Westfall, Lee & Fowler, James A. Williams, Dallas, for petitioner.
    Fred 0. Senter, Jr., City Atty., James P. Brewster, Asst. City Atty., Lubbock, for respondent.
   GREENHILL, Chief Justice.

This case involves the validity of an arbitration award. We hold that when, as here, both parties participated in the arbitration proceedings, when neither party unequivocally withdrew its consent to arbitrate, and when the arbitration proceedings resulted in an award, the award is valid and enforceable under Texas common law.

The arbitration agreement in question here was contained in a construction contract. Because the Texas General Arbitration Act exempts construction contracts from its coverage, the Act is not applicable here. However, historically, awards not enforceable under arbitration statutes have been upheld as valid common law awards, and we therefore examine the validity of the present award under the common law.

The trial court, on the basis of stipulations between the parties, enforced the arbitration award and rendered judgment in favor of Lacy and against the City on all claims except certain interest awards. These awards of interest in favor of Lacy were eliminated from the arbitration award in the trial court’s judgment.

Each of the parties appealed from that portion of the judgment which was adverse to it. The City’s first contention, that the award was invalid under the statutes and at common law, was sustained by the Court of Civil Appeals; and that court reversed and rendered judgment vacating the arbiters’ award. 546 S.W.2d 373. We reverse the judgment of the Court of Civil Appeals and affirm the judgment of the trial court.

The parties, Lacy and the City, entered into a written contract for the construction of runway and taxiway improvements to the Lubbock Regional Airport. The contract was drawn by the attorneys for the City and contained the following arbitration agreement:

GC — 54 ARBITRATION
All questions of dispute under this Agreement shall be submitted to arbitration at the request of either party to the dispute. The parties may agree upon one arbiter, otherwise, there shall be three, one named in writing by each party, and the third chosen by the two' arbiters so selected; or if the arbiters fail to select a third within (10) days, he shall be chosen by a District Judge serving the County in which the major portion of the project is located, unless otherwise specified. Should the party demanding the arbitration fail to name an arbiter within the ten (10) days of the demand, his right to arbitrate shall lapse, and the decision of the Engineer shall be final and binding on him. .
The arbiters shall act with promptness. The decision of any two shall be binding on both parties to the contract, unless either or both parties shall appeal within ten (10) days from the date of the award by the arbiters, and it is hereby agreed that each party shall have the right of appeal and all proceedings shall be according to and governed by arbitration statutes of Texas. The decision of the arbiters upon any question submitted to arbitration under this contract shall be a condition precedent to any right of legal action. The decision of the arbiter or arbiters may be filed in court to carry it into effect.
The arbiters, if they deem the case demands it, are authorized to award the party whose contention is sustained, such sums as they deem proper for the time, expense and trouble incident to the Appeal, and if the Appeal was taken without reasonable cause, they may award damages for any delay occasioned thereby. The arbiters shall fix their own compensation, unless otherwise provided by agreement, and shall assess the cost and charges of the arbitration upon either or both parties.

During the construction of the airport improvements, disputes arose in connection with the contract; and upon completion of the project, Lacy demanded arbitration pursuant to the above contract. Lacy, by letter, designated an arbiter. The City of Lubbock replied, and it also designated an arbiter. The City’s letter also stated that its action was expressly “. . . without waiver of: (1) further consideration of the applicability of this particular dispute . to the arbitration process set forth in the contract documents or at law; (2) its right to raise the question whether the arbitration clause in the contract document is subject to or qualified for arbitration within the terms of the Texas General Arbitration Act.”

The arbiters selected a third arbiter for the panel in accordance with the arbitration agreement. Each party then submitted requested documents, a summary of contentions and positions as to the issues, and finally, a reply to the contentions of the other party. When the arbitration proceedings commenced, on October 28,1974, in the Lubbock City Hall, the City presented a “Plea to the Jurisdiction” and various objections which were overruled by the arbiters. In its “Plea to the Jurisdiction,” the City contended that since the provisions of the General Arbitration Act were not applicable to arbitration under this construction contract, that, under the terms of the arbitration agreement, there was no other authority for these arbitration proceedings. The City did not contend that there was no jurisdiction for common law arbitration proceedings, and the City at no time refused to participate in the proceedings.

After the arbiters overruled the Plea and objections, the City participated fully in the proceedings through the final award, but it maintained at all times that such participation was “subject to the jurisdictional pleas and objections.” The arbiters recited this fact in their final award, which was favorable to Lacy. Each party paid one half of all expenses of the arbitration proceedings. The City then refused to honor the award, and Lacy has sued to enforce it.

Historically, the settlement of disputes by arbitration has been favored in Texas law. Early cases recognized arbitration as an approved and effective mode of trial, and statutes have provided for arbitration since 1846. Thus, a dual system of arbitration has existed in Texas, and the statutory method has been viewed as cumulative of the common law.

A well-reasoned analysis of the historical co-existence of statutory and common law arbitrations was made in Carpenter v. North River Insurance Co., 436 S.W.2d 549 (Tex.Civ.App.—Houston [14th Dist.] 1969, writ ref’d n. r. e.), and the court correctly concluded that common law arbitration continues to be a viable alternative to the statutory method. The Carpenter case, like this one, involved an arbitration agreement outside the scope of the Texas General Arbitration Act. While the exclusions under that Act have been the subject of a good deal of criticism, extension of statutory arbitration is the role of the Legislature. In contracts not governed by the Act, this court’s function is to judge the validity of arbitration agreements under such common law rules as may be relevant.

Under the traditional common law, courts have refused specific enforcement to agreements to arbitrate future disputes. Either party to an executory agreement providing for arbitration of future disputes has been allowed to revoke the agreement at any time before the arbitration proceeding resulted in an award. The only penalty for such revocation consisted of damages, if any, for breach of contract. Deep South Oil Co. v. Texas Gas Corp., 328 S.W.2d 897 (Tex.Civ.App.—Beaumont 1959, writ ref’d n. r. e.), Dougherty & Graf, Should Texas Revise Its Arbitration Statutes ?, 41 T.L.R. 229 (1962). The rationale behind these rules rested on a “public policy” argument against allowing private persons to oust the courts of their jurisdiction to determine the rights and liabilities of parties to a contract. This notion was a result of early English precedent which was transferred to the United States and to Texas through our adoption of the common law. The doctrine has long since been abandoned in England by case law and by statute, and an increasing number of American jurisdictions have rejected the rationale by adopting modern and comprehensive arbitration statutes. Coulson, Texas Arbitration—Modern Machinery Standing Idle, 25 Sw.L.J. 290, 291 (1971). The doctrine was evolved in an era when court congestion was not a major problem as it is today, and in modern times a policy encouraging agreements to arbitrate is preferable. In addition to alleviating some measure of the burden on the courts, arbitration in a commercial context is a valuable tool which provides business people, and all citizens, with greater flexibility, efficiency, and privacy. Coulson, supra. While it is unnecessary in this case to alter common law arbitration rules, the policy of refusing specific enforcement to ex-ecutory arbitration agreements is not justifiable when the case fits within the common mold.

The arbitration award in the present case is valid and enforceable under the common law as heretofore expressed by Texas courts. Under even the earliest Texas cases, once the parties to a contract had submitted their disputes to arbitration and an award had been made, the parties were bound by the award if no fraud, mistake, or misconduct was involved. Forshey v. Railroad Co., 16 Tex. 516 (1856), Bell v. Campbell, 143 S.W. 953 (Tex.Civ.App.—Amarillo 1912, writ ref’d.); Florida Athletic Club v. Hope Lumber Co., 18 Tex.Civ.App. 161, 44 S.W. 10 (1898, not writ hist.). This rule has been applied to uphold executory agreements to arbitrate future disputes as well as agreements entered into after a dispute arose. Brazoria County v. Knutson, 142 Tex. 172, 176 S.W.2d 740 (1943). The Court of Civil Appeals therefore erroneously concluded that the arbitration agreement in the present contract was void.

Furthermore, while contracting parties have been allowed to withdraw from executory arbitration agreements, such withdrawal must be unequivocal and must take place prior to the rendition of an award. In Tejas Development Co. v. McGough Brothers, 165 F.2d 276 (5th Cir. 1947), an attempt to withdraw after the arbiter had made a preliminary award was viewed as ineffective under the Texas common law. Similarly, in Carpenter v. North River Insurance Co., 436 S.W.2d 549 (Tex.Civ.App.—Houston [14th Dist.] 1969 writ ref’d n. r. e.), the court rejected a contention that an effective withdrawal from arbitration had been made. In that case, the attorney for the insurance company objected to the substitution of an arbiter and, at the date set for the hearing, appeared only in order to file a motion for continuance. The motion was denied and the hearing proceeded to an award. The Court of Civil Appeals upheld the award, reasoning that the motion for continuance was not an unequivocal indication of an intent to revoke the arbitration agreement. In so holding, the Court stated the rule that “. the award is presumed to have been made pursuant to an existing agreement until the complaining party sustains the burden of proving that it had withdrawn its agreement to arbitrate.” 436 S.W.2d at 551.

The City here, as indicated by the trial court judgment, did not meet this burden of proof. By participating fully in the arbitration proceedings, the City failed to make the unequivocal withdrawal required to revoke the arbitration agreement. The City contends that it participated subject to “jurisdictional pleas and exceptions,” but, as noted above, these pleas were not made with reference to common law arbitration. The fact that the City raised jurisdictional questions from the outset of these proceedings indicates its awareness that the statute was inapplicable and that common law arbitration was involved. Under established common law rules, the City could have revoked the arbitration agreement by simply refusing to participate in the proceedings. Tejas Development Company v. McGough Brothers, 165 F.2d 276 (5th Cir. 1947); Murray v. United States Fidelity & Guarantee Co., 460 S.W.2d 212 (Tex.Civ.App.—Dallas 1970, writ ref’d n. r. e.). Instead, the City chose to pursue arbitration, and in doing so the City did not exercise its opportunity to make a common law revocation.

The City further contends that the arbitration agreement indicated consent to arbitrate only under the Texas Arbitration Act. We do not agree. Furthermore, whether the parties had in view a statutory or a common law arbitration has been held immaterial if the proceedings could be upheld under either system. Forshey v. Railroad Co., 16 Tex. 516, 538 (1856); Bell v. Campbell, 143 S.W.2d 953, 955 (Tex.Civ.App.—Amarillo 1912, writ ref’d.).

As required, we have considered all other points contained in the City’s brief in the Court of Civil Appeals but not reached by that court. We find no points which would require that the judgment of the Court of Civil Appeals be affirmed. King v. Skelly, 452 S.W.2d 691, 694 (Tex.1970), Moulton v. Alamo Ambulance Service, Inc., 414 S.W.2d 444, 449 (Tex.1967).

The trial court declared invalid that part of the arbitration award which awarded Lacy damages in the nature of interest for delayed payment and that part giving Lacy interest on the amounts awarded on certain claims. The Court of Civil Appeals specifically overruled Lacy’s appeal from this portion of the trial court judgment, and Lacy did not complain of this action in its motion for rehearing, or in its points of error before this court. We therefore lack jurisdiction to determine whether the trial court and the Court of Civil Appeals erred in this holding that part of the award is invalid. The remaining parts of the award are severable and distinct from the part held invalid. Gulf Oil Corporation v. Guidry, 160 Tex. 139, 327 S.W.2d 406, 408 (1959); 5 Am.Jur.2d 619, Arbitration and Award § 137.

The judgment of the Court of Civil Appeals is reversed, and the judgment of the trial court is affirmed.

      . Article 224 et seq. All statutory references are to Vernon’s Texas Civil Statutes Annotated.

      . Rector v. Hunter, 15 Tex. 380 (1855); Myers v. Easterwood, 60 Tex. 107 (1883); Carpenter v. North River Insurance Company, 436 S.W.2d 549, 552 (Tex.Civ.App.—Houston [14th Dist.] 1969, writ ref’d n. r. e.).

      . Forshey v. Railroad Co., 16 Tex. 516, 539 (1856).

      . Acts 1846, p. 127, G.L. vol. 2, p. 1433. Until 1969, the Texas Constitution, Article 16, § 13, expressly directed the Legislature to enact such laws as may be necessary for arbitration. This section, along with a number of others, was repealed in an effort to delete obsolete and unnecessary provisions from the Constitution, and the legislative history indicates that one reason for repeal of this section was the fact that permissive arbitration has long been recognized at common law without the necessity of a constitutional provision authorizing arbitration statutes. Report of the Texas Legislative Council on Constitutional Revision. December 1960, Report 56-10, vol. 1, p. 122.

      . See, for example, Ferguson v. Ferguson, 93 S.W.2d 513 (Tex.Civ.App.—Eastland 1936, writ dism’d), Bell v. Campbell, 143 S.W. 953 (Tex.Civ.App.—Amarillo 1912, writ ref’d); Carrington, The 1965 General Arbitration Statute of Texas, 20 Sw.L.J. 21 (1966).

      . Carrington, The 1965 General Arbitration Statute of Texas, 20 Sw.L.J. 21 (1966); Coulson, Texas Arbitration—Modern Machinery Standing Idle, 25 Sw.L.J. 290 (1971).

      . Art. 1, Vernon’s Annotated Texas Statutes.

      . Dougherty & Graf, Should Texas Revise Its Arbitration Statutes? 41 T.L.R. 229, 230 (1962), citing Scott v. Avery, 5 H.S. 811, 10 Eng.Rep. 1122 (1856); New Arbitration Act, 1950, 14 Geo. 6, ch. 27, which superceded the Arbitration Act, 1889, 52 & 53 Vict. ch. 49.