author: SELLERS, Justice.

text:
    HUMBLE OIL & REFINING CO. v. ROBERTSON.
    No. 4397.
    Court of Civil Appeals of Texas. Texarkana.
    Feb. 13, 1934.
    Rehearing Denied Feb. 22, 1934.
    Davidson, Blalock & Blalock, of Marshall, and R. E. Seagler and K. W. Gilmore, tooth of Houston, for appellant.
    Jones & Jones, of Marshall, Ben A. Harper, of Tyler, and W. B. Handley, of Dallas, for appellee.
   SELLERS, Justice.

L. B. Robertson ¡brought this suit in the district court of Harrison county against Humble Oil & Refining Company to recover damages in the sum of $30,000 for personal injuries received to himself. For cause of action plaintiff alleged, in substance, that on or about April 7, 1981, defendant was engaged in the business of producing and refining oil in Gregg county, Tex., and particularly near Kilgore, Tex., and at a point about four miles southwest of Kilgore in said county. That at such place defendant had located its said tank or tanks being used as depositories for various oils taken from wells of defendant or others in the oil field, near Kilgore. That the plaintiff was an employee of the J.- W. Olvey Drilling Company and required to watch a certain water pump of his employer near the tanks of defendant and at a low place where water was being pumped to the well operated by the J. W. Olvey Drilling Company. That on or about said date defendant negligently permitted to escape from said tank inflammable gas, although well knowing that said gas would toe calculated to collect in pockets in low places such as where plaintiff was working; and that said gas exploded and/or ignited in a low place where plaintiff was working, causing him in an effort to escape from the ensuing fire to severely fall upon and strike his left leg in such manner as to inflict an injury. That he was terrorized and frightened to such extent that he made a sudden dash or movement to gain safety, and in fleeing from said exploded and burning gas he fell upon his leg in such manner as to break, fracture, and tear loose the bones of his foot and particularly the Ibones in and near the ankle joint. Plaintiff pleaded a number of particular acts of negligence on the part of defendant ■which the disposition of this appeal makes unnecessary to set out.

The defendant’s answer contained a general demurrer, a general denial, and specially alleged contributory negligence on the part of plaintiff. At the close of the evidence offered by the plaintiff, both plaintiff and defendant closed their case, and the court submitted certain, special issues to the jury which were answered by the jury in favor "of plaintiff, and in accordance with the jury’s verdict the court entered judgment for plaintiff in the sum of $5,000. From this judgment the defendant has duly prosecuted this appeal.

' By appropriate assignments of error the appellant complains of the sufficiency of the evidence to sustain the jury’s verdict and the judgment of the court based thereon. The court submitted to the jury issue No. 1, which, together with the jury’s answer, is as follows: “Do you find from a preponderance of the evidence that any of the gas which burned at the place where the plaintiff was working at the time of his injury came from rhe tanks of the defendant, Humble Oil & Refining Company?” Answer: “Tes.”

We have concluded that the great preponderance of the evidence on this issue is contrary to the jury’s finding. The substance of the evidence on this issue is to the effect that appellee at the time of his injury on April 7, 1931, was working for the j. W. 01-vey Drilling Company and was required to watch a certain water pump. This pump was located in a comparatively new oil field which was at the time of appellee’s injury about one and one-half miles wide and about two miles long. The water pump was located in what may be termed a “hollow” near where two creeks ran together. On this date about midnight gas which had settled around the place where the water pump was located became ignited, either from a fire which appel-lee had kindled, or from the exhaust of the engine, or from a cigarette which appellee was smoking. The fire was first noticed by appellee close to his feet. He became frightened and while running away from the fire injured his foot, for which injury he here seeks to recover. About 309 or 400 yards from the pump were located four tanks belonging to appellant, from which appellee claims the gas escaped which exploded and caused the fire. These tanks were constructed only a few days before appellee received his injury. No witnesses testified that these tanks were being used by appellant for the storage of oil or that gas was escaping therefrom before - appellee received his injury. There is evidence that the next day after the injury gas was seen to escape from the tanks in large quantities. There were brush piles between the place where appel-lee was working and the tanks belonging to appellant. Appellee’s description of the fire is that it followed these brush piles, and that an explosion sounding somewhat like the report of a gun would happen as the fire would reach each of the brush piles, and the- blaze would extend 10 or 15 feet into the air. This fire' continued in the direction of appellant’s tanks up to a point about 30 or 40 feet from them, stopping when it reached the cleared place where the tanks were located. The evidence further shows that within one-half or three-quarters of a mile from the pump where appellee was working there was ⅛ cated at least three or four oil wells not the property of appellant, from which-there was being produced at this time several thousand barrels of oil a day each. That a great deal of gas was being given off from these wells and turned loose in the air. That in the opinion of the witness this gas would be carried by the wind some distance and that portion of the gas which was not dissipated or rendered harmless by the air would settle in low places. That gas had been seen in great quantities in low places in this field. That it later became necessary to burn the escaping gas from the wells and tanks in this field, but as far as the evidence shows, none was being burned at the time of appellee’s injury.

From the entire record, the substance of the material portion of which is above set out, we have concluded, as above stated, that the overwhelming- preponderance of the evidence was’ contrary to the jury’s finding that gas which caused the fire complained of came from the tanks of appellant. In view of the undisputed evidence to the effect that there were several sources from which the gas that caused the fire could have come, we think it at least incumbent upon appellee to show that the appellant was using his tanks as a storage for oil or that gas was escaping therefrom immediately before the fire before a jury would be authorized to answer the issue submitted in the affirmative.

Appellánt insists that we should reverse and render this judgment. With this view we are not in accord. By expx-ess provision of statute, it is made the duty of the Court of Civil Appeals to decide and make 'conclusions upon both issues “of law” and “of fact.” Article 1876 (Vernon’s Ann. Oiv. St.). Tinder this authority such appellate courts can, and in the proper case shall, reverse and remand the cause where the verdict is •contrary either to the weight of the evidence ■or against the preponderance of the evidence. Wininger v. Ry. Co., 105 Tex. 56, 143 S. W. 1150; Manning v. Ry., 107 Tex. 546, 181 S. W. 687; Davidson v. Ryle, 103 Tex. 209, 124 S.W. 616, 125 S. W. 881; and other cases. As stated in the case of Wininger, supra, as well as in others: “The Honorable Court of Civil Appeals had authority to reverse the judgment of the triál court on the preponderance of - the evidence; tout it could not render the judgment, if, discarding all adverse evidence, and giving credit to all evidence favorable to the plaintiff, and indulging every legitimate conclusion favorable to the plaintiff which might, have been drawn from the facts proved, a jury might have found in favor of the plaintiff.” It is only where the Court of Civil Appeals undertakes to “render the judgment” in dealing with the facts of the case that they exceed their authority, in case there is some evidence tending to support the verdict of the jury. Vann v. Ins. Co. (Tex. Com. App.) 24 S.W.(2d) 347; Pounds v. Minter (Tex. Com. App.) 13 S.W.(2d) 351; Eastham v. Hunter, 98 Tex. 560, SO S. W. 323, 324; Underwood v. Jones, 95 Tex. 121, 65 S. W. 480; Stevens v. Masterson, 90 Tex. 425, 39 S. W. 292, 921; and other cases. As stated in the Hunter Case: “Upon reversing the judgment of the trial court, the Court of Civil Appeals could render judgment only in ease the evidence is so conclusive that there was no issue as to notice which should have been submitted to a jury — -that is, if the trial court should have instructed a verdict, then the Court of Civil Appeals correctly rendered judgment; otherwise it had no authority to do so.” That was the same ruling made in the cases of Vann and Pounds, supra. Those cases undertook “to render judgment,” and not “to remand the case.” The difference in the authority of the court is that of “rendering,” as a pure matter of law, a judgment, and “remanding” a cause in matters concerning the weight and preponderance of the evidence.

The disposition made of this appeal renders discussion of other assignments of appellant and cross-assignments of the appellee unnecessary.

The judgment of the trial court will be reversed, and the cause remanded.


source: Caselaw Access Project

author: GRAVES, Justice.

license: Public Domain

text:
    MASTERSON v. ALLEN et al.
    No. 9899.
    Court of Civil Appeals of Texas. Galveston.
    Jan. 25, 1934.
    Rehearing Denied Feb. 15, 1934.

      Elliott Cage and Walter E. Brown, both of Houston, for plaintiff in error.
    Eulbright, Crooker & Freeman, of Houston (John H. Crooker, Jno. H. Freeman,- and Chas. A. Leddy, all of Houston, of counsel), for defendants in error.
   GRAVES, Justice.

The parties will be designated appellant and appellees rather than by the longer appellations appearing in the record.

This briefly stated but merely general statement of the outstanding features appertaining to the nature and result of the suit is taken, in substance, from the appellant’s brief, since it is thought to correctly reflect the proceedings in so far as it goes:

“N. T. Masterson brought this suit in the district court of Harris County to recover from S. M. Allen an amount alleged to be due on k partnership accounting and settlement, including (1) one-half of four demand-notes aggregating $368,455.15 executed on August 20th of 1924 in Masterson’s favor by Allen individually and by the cattle-firm the two composed, and (2) a balance of $11,873.07 on subsequently-incurred open accounts of the firm, which Masterson claimed to have paid.

“A. T. Eddingston intervened, claiming a garnishment-lien on whatever Allen was found to owe Masterson.
“Allen denied that he was indebted to Masterson and invoked the statute of limitation as a defense. He also filed a cross-action against Masterson, alleging that — on the dissolution of the partnership — the assets had been turned over to Masterson for liqui-daban of the partnership affairs, and Master-son had negligently handled these assets, causing a loss for which he was responsible to Allen. Damages of $150,000.00 with six per cent interest from January 1, 1923, were sought by Allen oh his cross-action.
“The cause was submitted to a jury on special issues. The jury’s verdict was returned on November 27, 1931, and the defendant filed a motion for judgment in his favor on this verdict. Plaintiff moved for judgment non' obstante veredicto, and requested the court to disregard certain findings of the jury because they had no support in the evidence. Plaintiff’s motion was heard and overruled by the court, to which ' plaintiff excepted, and defendant’s motion was granted, the court rendering judgment on December 7, 1931, that Masterson take nothing against Allen; that -Eddingston take nothing by his intervention, and that Allen take nothing on his cross-action.”

The record is voluminous well-nigh to the nth degree, containing, among other features, contributing to that resulting condition, 109 assignments of error; but, although this court has painstakingly examined the whole, it is its conclusion that the appeal is properly reducible to, and determinable upon, the few high points that will be herein discussed and disposed of.

The litigants had long before the transactions here involved been engaged as partners in the cattle business under the firm name of Allen & Masterson, Allen being the practical stockman in that occupation, Mas-.terson not being such, but being a resident, of the city of Houston and having considerable personal resources, together with valuable financial connections; these partnership relations became the subject-matter of a written contract between them of February 28, 1916, of which the provisions deemed most pertinent here were these:

“That all money heretofore borrowed or to be borrowed is to be paid with interest first, and second, all expenses are to be paid before either partner is to receive any profits arising from the sale of cattle or leasing land, etc. * * *
“Neither party is to receive any salary or compensation for his or their work until after the debts and expenses are paid, and if at that time there are any profits, that same shall be divided equally, share and share alike.”

Pursuant to this agreement, the large business developed continued up to June 30 th of 1922, when, at appellant’s instance, this written contract of dissolution was entered into:

“First: Whereas, heretofore the above parties have been partners in the buying, selling and raising of cattle and they have mutually agreed that said partnership shall cease and become effective on July 1, 1922.
“Second: Said S. M. Allen and Neill T. Masterson having had a partnership prior to 1916 and at that time entered into a written contract and in said written contract under paragraph Three, it is provided that if there is any gain or loss that each of the above named partners are to share the gain or profits in equal proportions share and share alike; and;
“Whereas, at the present time said firm of Allen and Masterson owe approximately Five Hundred Thousand Dollars ($500,000.-00), and as far as partnership heretofore existing is concerned, after the indebtedness of Allen &, Masterson has been paid, then and in that event if there are any profits arising whatsoever, or loss, they are to be divided as originally contemplated, share and share alike.
“Now, therefore, for and in consideration of the sum of One Dollar ($1.00) cash in hand paid, I, S. M. Allen, do hereby transfer, set over, sell and assign to Neill T. Masterson all of my interests, rights, and equities, being my undivided one-half interest in all of the leases and live stock, and everything that is set out in that certain mortgage executed to the Finance Cattle Loan Corporation. Also to cattle that have been bought since then, that are now mortgaged to the First National Bank, Houston, Texas.
“There is to be-an accounting of all cattle sold, to the said S. M. Allen, at the time that they are sold; there are to be books kept to show how the accounts of Allen & Masterson stand, including their indebtedness and expenses in the handling of these cattle, and said books are to be accessible to the said S. M. Allen at any time that he may desire to see them.
“That S. M. Allen relinquishes any rights-whatsoever, or claims in the management of the said ranches or the properties thereon, and it is the intention of this instrument to transfer any and all improvements heretofore made by the said Allen and Master-son.
“Witness our hands this the 30th day of June, 1922.
“[Signed] S. M. Allen
“[Signed] Neill T. Masterson.”

The capital contributions of each partner to the firm business as further reflected by the first quoted from contract, which, along with that just copied in full, was made a part of the appellant’s trial petition, were in essence that Allen, on the one side, would put in his work and experience — including his entire time in handling the cattle — together with certain hoi-ses and equipment he owned and the use for pasturage purposes of his one-half of. the 11,000-aere San Bernard ranch, while Masterson, on the other, was to procure or furnish the necessary money for the conduct of the joint enterprise, inclusive of that to be used in buying the cattle, paying for other grazing lands leased, incidental expenses, et cetera. Among the provisions of the instrument tending toward the portent given, other than the two above quoted, are these:

“1. That Whereas, heretofore, the above parties have bought cattle and have executed their notes for the payment of the cattle, and contemplate buying cattle in large numbers in the future, Sam M. Allen having the necessary equipment and horses to work the cattle, and Neill T. Masterson agreeing to procure and furnish all the money needed in the business for the purpose of buying cattle, leasing lands for grazing purposes, and for oil purposes in connection with the oil land of Bernard Ranch, and the expenses incident thereto. ⅜ ⅜ *
'“2. That while it is understood that Sam M. Allen is to take care of the cattle and Neill T. Masterson is to procure the money, however, if for any reason it is found impossible for said Neill T. Masterson to raise such amounts of money, he is not to forfeit any part or interest in the profits or losses that may arise.
“That it shall be the duty of Sam M. Allen to help the said Neill T. Masterson in any way that it is possible to procure any and all money that may be necessary in the conduct of their business, and in the event that Sam M. Allen is sick or disabled, it shall be the duty of said Neill T. Masterson to help in every way possible that is known to him, to work and take care of said cattle. * ⅜ *
“3. Sam M. Allen agrees that the firm of Allen & Masterson shall have the use of his undivided one-half interest in the Bernard Ranch during the life of the lease this day entered into by and between Mrs. S. E. Allen, Sam M. Allen and N. T. Masterson, composing the firm of Allen & Masterson, and
“4. That whereas, should Sam M. Allen die during this partnership, then Neill T. Bfas-terson shall have one year’s time within which to sell off the cattle, pay the debts and divide the profits, if any, with his heirs and assigns, and the said Neill T. Masterson is to-have the use of the horses and necessary equipment for working and taking care of said cattle free of any cost or charge, and,
“5. Whereas, should Neill T. Masterson die during the life of this partnership, then Sam M. Allen shall have one year’s time wiChin which to sell the cattle, pay such debts as may exist, and divide the profits, if any, with his heirs or assigns.”

Just as these contractual provisions — both of original engagement and subsequent dissolution-determined at all times the reaches of their relations toward each other with respect to the firm’s business, so now they likewise lie at the base of this dispute over the final settlement of its affairs; in short, they plainly disclose: (1) That the partnership property was exclusively made up of the use alone of moneys -borrowed for or personally advanced to the fina by appellant on the one side (he always retaining the property thereof in himself), and of equipment, experience, pasturage, and services furnished by the appellee upon the other; (2) that appellant, 'by express stipulation, was to -be reimbursed for all money or capital borrowed for or advanced to the partnership by him before any profits could be declared; (3) that neither partner was to share in the capital losses, if any, of the other — that is, by clear implication from what was thus written between them, Masterson alone was to be out his money, while in like manner Allen was to lose his labor and equipment; (4) the dissolution agreement, whereby appellant was to take over the entire partnership assets under specific stipulation that he would liquidate them and apply the proceeds toward settlement of the firm’s indebtedness, together with an accounting therefor to the appellee, created a trusteeship with defined duties in the latter’s favor, which, if violated, gave him a fight of redress as for conversion.

These legal consequences from the way they thus bound themselves are, since the writings were -both made parts thereof, all apparent from the face of the appellant’s pleadings, the last one only so in potentiality, however, depending on whether the trust was in fact shown from evidence to have been breached; when the statement of facts and the jury’s findings are looked to, not only is the necessary proof on that one found to- have been properly presented, but the existence of the others is thereby fully confirmed also.

It follows, therefore, irrespective of the multiplicity of considerations interposed against it, that the learned trial court’s judgment was the only one that could properly have been entered in the circumstances. Since the notes sued upon allegedly grew out of the partnership transactions, as to which no accounting between its members had been had when they were executed, no recovery upon them as such was permissible. Hardee v. Adams Oil Ass’n (Tex. Civ. App.) 254 S. W. 602; Lockhart v. Lytle, 47 Tex. 452; Merriwether v. Hardeman, 51 Tex. 436; Worley v. Smith, 26 Tex. Civ. App. 270, 63 S. W. 903; Danforth, Roos & Eppstein v. Levin (Tex. Civ. App.) 156 S. W. 569 ; Snyder v. Slaughter (Tex. Civ. App.) 208 S. W. 974; Parsons on Partnership, 286; Collier on Partnership, § 284; First Story’s Eq. § 664.

Neither could any contribution to the debts the notes were claimed to evidence be required of the appellee under any other form, because, as presaged supra, they were all (if in fact any by the partnership) indisputably, if not undisputedly, shown from both the pleadings and the proof to have been losses only of the moneys as capital that were wholly — under the specific conditions already shown — furnished by the appellant alone, wherefore his sole partner, having never owned any individual interest therein, could not 'be held for the replacement thereof, he only, -by well-settled authority, having to bear the total loss. The recognized rule on this subject is thus stated in Rutherford’s “Institutes of Natural Law” (2 Am. Ed.) p. 140: “In partnership, where work is contributed on one side and money on the other, the partner from whom the money comes may contribute only the use of the money or the property of it. If he contributes the use of it, and still keeps his property in the principal, so that the joint stock is to be considered as made up of the labor of one partner and the use of the other’s money, it is plain that, supposing the principal to be safe, it belongs to him, and that, supposing it to be lost, he alone bears the loss. The other partner who contributes work, since as the case is put, he had no claim to the principal money or any part of it, cannot be obliged to make good any part of the lo-ss, or to bear any share of it, but if he contributes the property of his money, so that the joint stock upon which each of them has a common claim, is made up of his principal money and of the other’s labor, then the partner who labors has a claim upon the principal money itself; and consequently, whenever the partnership is dissolved, if the principal or any part of it is safe, he ought to share in it; and, if the principal is lost, he is a sufferer hy losing such share.”

To the same effect are Ruling Case Law, vol. 20, p. 930 ; Meadows v. Mocquot, 110 Ky. 220, 61 S. W. 28; Heran v. Hall, 1 B. Mon. (Ky.) 159, 35 Am. Dec. 178; Baker v. Safe Deposit & Trust Co., 90 Md. 744, 45 A. 1028, 78 Am. St. Rep. 463; Manley v. Taylor, 50 N. Y. Super. Ct. 26; Hasbrouck v. Childs, 16 N. Y. Super. Ct. 105; In re Liquidation of Mitchell-Borne Const. Co., 145 La. 379, 82 So. 377; Cameron v. Watson, 10 Rich. Eq. (31 S. C. Eq.) 64; Notes L. R. A. 1917E, 879 ; Ann. Cas. 1916D, 825; Johnston v. Steele, 48 Tex. Civ. App. 335, 107 S. W. 631; Bivins v. Proctor & Goodman (Tex. Civ. App.) 49 S.W.(2d) 824; Simpson v. Fulcher (Tex. Civ. App.) 45 S.W.(2d) 1012.

The evidence discloses that the contracts were prepared hy appellant; hence they must he construed most strongly against him. Texas Jurisprudence, vol. 10, § 162; Demilley v. Texas & N. O. Ry. Co., 91 Tex. 215, 42 S. W. 540; Faulk v. Dashiell, 62 Tex. 642, 50 Am. Rep. 542; Powers v. Sunylan Co. (Tex. Com. App.) 25 S.W.(2d) 808.

When the second of these was executed on June 30, 1922, by its express terms appellant accepted a position of a trustee, whose rights and obligations were not only limited thereto (Diversified Fruit Farms v. Johnson (Tex. Com. App.) 58 S.W.(2d) 73, 76), hut whose duty to promptly dispose of the partnership assets and apply them to the payment of its existing debts was expressly and clearly defined; the proof conclusively shows, consisting in considerable measure of his own testimony, that, instead of so doing, he continued thereafter to buy, sell, feed, and care for cattle over a period of several years, without • keeping any separate accounts on these transactions, thereby so mingling the new business he did with the old that had been conducted for the partnership that it had become impossible for any ascertainment to he made of what losses or gains should he charged to the former partnership and what to the new deal.

It is true that, as the sole authorization of this procedure, he set up in his pleadings that, subsequent to the delivery of the dissolution contract, he and the appellee orally agreed to the effect that their partnership would be continued during the liquidation of its old assets whereby additional cattle would be bought and sold, with the profit resulting therefrom to be equally divided be'tween the parties according to the terms of their original articles of copartnership; but this issue of fact as to whether such oral agreement was so made was submitted to the jury and on sufficient evidence answered in the negative, which relegated matters back to where they formerly stood.

Being thus without right to continue the partnership business at all after agreeing in the manner shown to dissolve and liquidate it — in return for a conveyance to himself for that purpose of his partner’s entire interest— and having so breached the obligations to the latter he thereby assumed, especially in finally exhausting and appropriating to his own use the firm’s total assets intrusted to him, as well as in rendering impracticable any balancing of its accounts in liquidation as between them, he not only failed herein to show himself entitled to recover anything from the appellee, but laid himself liable as for wrongful appropriation of the latter’s property; ordinarily, it is time, one partner cannot sue the other for conversion of the firm property where there has been no settlement of its af-fsiirs, since each is deemed entitled to the possession of the whole, 21 A. L. R. page 121, and notes; but the rule is otherwise in instances like this, where a contract of liquidation has been entered into, being thus stated in the same volume in the notes on page 123: “One partner, after dissolution and settlement of the partnership affairs by an agreement wherein the defendant contracted to collect the assets of the firm and apply them to the outstanding debts, could maintain an action for the conversion by the latter of the moneys collected by him.” Snyder v. Baber, 74 Ind. 47; Bartley v. Williams, 66 Pa. 329; Edelin v. Hagan’s Administrator (Ky.) 7 S. W. 251; Rathwell v. Rathwell, 26 U. C. Q. B. 179.

On this feature of the cause the jury found, on evidence this court cannot say was insufficient, that not only were the assets thus taken over by appellant under the liquidation contract at that time sufficient to pay all then existing partnership obligations — inclusive of all capital advances made by him — .but that this same condition still existed as late as December 13th of 1922, together with the added finding that the agreed upon liquidation of the firm’s affairs could have been effected within that intervening time by the exercise of reasonable diligence upon his part.

When trust property becomes so mixed with that belonging to the trustee individually that it is impossible to trace or identify it as entering into any other specific property, the trust disappears and is supplanted by a conversion. Gault v. Hospital for Consumptives of Maryland, 121 Md. 591, 89 A. 105; Phillips v. Overfield, 100 Mo. 466, 13 S. W. 705; In re Steinway’s Estate, 37 Misc. 704, 76 N. Y. S. 452. In such an instance the-cestui que trust may recover the property, or its equivalent, Hanover Nat. Bank v. Thomas, 217 Ala. 494, 117 So. 42; not only so, but the burden of distinguishing trust funds when the trustee has mingled them with his own is upon the trustee, Baker v. Bankers Mortgage Co., 15 Del. Ch. 209, 135 A. 486; Atkins v. Atkins, 279 Mass. 1, 180 N. E. 613; Gibson Company v. Elze, 88 Colo. 181, 293 P. 958.

Obviously, if these conclusions be sound, as they are thought to be, it would be a work of supererogation to go into the many other presentments made — -whether of limitation, sufficiency of evidence to sustain certain findings of the jury, procedure upon the motion for new trial, or what not; that will therefore not be done.

Having found no reversible error, an af-firmance has been entered.

Affirmed.


author: LESLIE, Justice.

text:
    JEWELL et al. v. SAL-O-DENT LABORATORIES, Inc., et al.
    No. 1233.
    Court of Civil Appeals of Texas. Eastland.
    March 2, 1934.
    Rehearing Denied March 23, 1934.
    M. A. Childers, o-f San Antonio, for appellants.
   LESLIE, Justice.

The plaintiffs, R. C. Jewell and W. R. Kaye, brought this suit for the appointment of a receiver for the Sal-O-Dent Laboratories, Inc., making R. J. Blake, the president of the corporation, a party defendant. Several stockholders intervened, adopting the allegations of the plaintiffs’ petition and praying for the same relief. The matter came on for hearing at a regular term of the district court, and a general demurrer was sustained to the petition. Upon failure to amend, the petition was dismissed, and, from that order, this appeal is prosecuted.

The petition covers several pages, and it will not be set out. Its substance only will be referred to. The receivership was sought under articles 2293 and 2318, R. S. 1925, and especially under subdivisions 3 and 4 of the first article. It is there provided that a receiver may be appointed:

“3. In cases where a corporation is insolvent or in imminent danger of insolvency * * *” and
“4. In all other cases where receivers have heretofore been appointed by the usages of the court of equity.”

The receivership is, in fact, sought on the ground of “imminent danger of insolvency” of the corporation, but the plaintiffs’ right thereto will also be considered under the general rules of equity.

This court has made a careful examination of the allegations of the petition to determine whether or not the plaintiffs bring themselves within the terms of this statute, or within the general rules of equity, entitling them to the relief prayed for. In brief, the Sal-O-Dent Laboratories, Inc., was chartered for the purpose of manufacturing and selling a tooth paste. Common and preferred stocks were issued in the outset and distributed to the stockholders. Some of this was done after certain charter amendments were obtained. The complaining parties hold either common or preferred stock, or both. On February 1, 1932, eight directors of the corporation were elected; among these were Dr. R. 0. Jewell and W. R. Kaye, plaintiffs herein, and W. H. Cowden, an intervener seeking the same relief.

The board of directors organized and elected R. J. Blake president; said W. R. Kaye, vice president; and Leo II. Baxter, secretary-treasurer. The above matters having been set out, it is then alleged that, immediately upon the election of these officers, said Blake and Baxter took “absolute control” of the corporation “without regard to the wishes of the board of directors * * * and in violation of the charter provisions of the corporation.” Said Baxter and Blake are further charged in general terms with removing the general office and management of the corporation from Texas to Missouri, with giving unreliable information to the stockholders concerning the corporation’s business affairs, and with attempting to mislead “this honorable court” in a hearing theretofore had on October 21, 1933 (2), on a motion to vacate a receivership previously granted for Sal-O-Dent Laboratories, Inc. This latter phase of the case is set forth in the plaintiffs’ petition in paragraphs (a) to (f), inclusive, and it is therein alleged that, in various and divers ways, said Blake gave alleged false and misleading testimony and statements on the hearing of said motion to vacate the receivership.

It does not clearly appear from the petition what were the results of the hearing on the motion to vacate the receivership, but the implication necessarily arises from the pleadings that that receivership was thenva-vated and dissolved. For aught this record shows, there may now be pending an appeal from such judgment. Equally possible, the matters therein complained of may long since have become res adjudicata by virtue of a judgment there entered and which may have become final. The petition before us does not have the characteristics of a bill of review attacking the validity of some previous judgment, but it is an independent suit for a receivership. In later allegations the admission is made that the office and headquarters of the corporation have been reestablished in the city of San Antonio.

After careful examination of the allegations contained in said paragraphs (a) to (f), this court has reached the conclusion that nothing is set forth therein that would warrant a re-examination of the matters therein presented and evidently gone into and adjudicated on the previous hearing to vacate that receivership.

The plaintiffs’ petition, beginning with paragraph X, makes additional charges against the defendant Blake and secretary, Baxter, and undertakes to set out further and additional reasons why the receivership should have been granted. It is alleged in this paragraph (x) “that the wishes and desires of said board of directors, particularly in recent months since they have awakened to the real condition of said corporation, have been totally disregarded by said officers in the management of said corporation.” In this connection it is alleged that the present management of the corporation has been such as to impair the value of its stock, and that, unless the assets of the corporation are taken under judicial custody and administered for the protection and custody of the stockholders and creditors, the assets of said corporation will soon be exhausted or so frozen as to paralyze the operation of said corporation and impair its credit and standing and render it unable to meet its past-due obligations, and obligations that will soon mature. It is also disclosed that the two plaintiffs, and the intervener Cowden, have been directors of this corporation during the time of the alleged mismanagement chiefly complained of, and there are no allegations in any way disclosing how, when, or where the directors lost control of the same. On the other hand, according to the plaintiffs’ allegations, the directors “in recent months * * *. have awakened to the real condition of said corporation.” In one or two instances and in an effort to obtain an amended charter, the admission is made by the plaintiff R. 0. Jewell that he made an affidavit and certain statements concerning assets of the corporation that were wholly unwarranted by the facts, but he explains that he made the same upon the representations of the defendant Blake. Such matters will not be further examined here, as the negligence and carelessness of this particular plaintiff may not be material to the questions presented for consideration.

The allegations of the petition seem to exonerate the directors, as such, from any wrongdoing. No attack is made upon them. They are not charged with usurpation, fraud, or gross negligence, and, as stated in 14a 0. J., p. 84, § 1843, the rule is that, in the absence of usurpation, fraud, or gross negligence on the part of the directors, a court of equity will not interfere at the suit of a minority of stockholders, merely to overrule and control the discretion of the directors on questions of corporate management, policy, or business. The receivership was not warranted on the ground of mismanagement as alleged. There is nothing in the acts charged indicating reckless mismanagement, or that the acts were not done, or authorized, in an honest exercise of the judgment of the board of directors, and in the interest of the corporation.

If the appellants rely upon fraud as a ground for a receiver, their petition is insufficient, in that it does not allege the specific conditions and facts warranting the same. It is not sufficient to charge fraud as a general assertion or as mere conclusions. 14a O. J., p. 967, § 3191.

Further, the ground of “imminent danger of insolvency” was not established as a basis for the relief. The specific facts entitling these plaintiffs to such relief under those conditions are not alleged, and the petitioners themselves frankly admit that the corporation was not insolvent at the time they sought this relief.

Article 1327, R. S. 1925, provides that “the directors (of the corporation) shall have the general management of the affairs of the corporation * * * in such manner as the by-laws may prescribe,” and there is nothing in this petition challenging the right of the directors of this corporation to exercise such control, nor is it shown they have in any way abandoned their functions.

The principles upon which a court of equity acts on application for receivership of a corporation have been stated thus: “The power to appoint a receiver, especially of a corporation, will not be exercised, except upon a very grave necessity, and upon a clear showing that the applicant’s rights imperatively demand the appointment, and that without it he has no adequate remedy, and is in danger of suffering irreparable loss.” 11 Tex. Jur. p. 97, § 430.

Based upon the foregoing considerations, and foi- the reasons above expressed, we are of tbe opinion that the plaintiff’s petition was subject to a general demurrer, and that the allegations of the same do not show the petitioners entitled to the appointment of a receiver of the corporation, either upon statutory grounds, or under the general rules of equity.

The judgment of the trial court is affirmed.


author: HIGGINS, Justice.

text:
    AMERICAN SODA FOUNTAIN CO. v. HAIRSTON et al.
    No. 2931.
    Court of Civil Appeals of Texas. El Paso.
    Feb. 8, 1934.
    Rehearing Granted March 8, 1934.
    Rehearing Denied March 22, 1934.

      See, also, 52 S.W.(2d) 764.
    . Peyton A. Ellison and Hoyt A. Armstrong, both of Dallas, for appellant.
    N. C. Walker, of San Saba, for appellees.
   HIGGINS, Justice.

On March 14, 1930, the American Soda Fountain Company, a corporation, incorporated under the laws of Delaware, filed this suit in One Hundred First district court of Dallas county, against R. A. Hairston and A. D. Nelson, copartners under the firm name of Hairston Drug Company. The suit was to recover upon notes given by defendants in payment for a soda fountain and its equipment and to foreclose a mortgage upon the property sold.

On April 12, 1930, defendants, in due order of pleading, filed plea in abatement and answer to the merits. In the plea they set up that the notes sued upon were given in part payment for the property 'described in the mortgage and purchased by defendants from the American Soda Fountain Company, a corporation, incorporated under the laws, of Maine; that such corporation was transacting and soliciting business in Texas and had failed to file a certified copy of its articles of incorporation with the secretary of state, and had failed to secure a permit to do business in this state wherefore neither said corporation nor its pretended assignee,-the plaintiff, could maintain the suit.

On June 4,. 1930, an amended petition was filed whereby the American Soda Fountain Company, a corporation, incorporated under the laws of Maine, was substituted as the plaintiff in the case.

December 22,1932, the case was transferred to the One Hundred Sixteenth district court, the terms of which begin on the first Monday in January, April, July, and October and continue until the Sunday immediately preceding the date set for the beginning of -the next term. Acts 41st Legislature, 5th C. S. c. 71, p. 228 (Vernon’s Ann. Civ. St. art. 199, subd. 116).

On the date of the transfer judgment was rendered by the One Hundred Sixteenth district court in favor of the American Soda Fountain Company for the amount of the notes and the mortgage foreclosed. This judgment was rendered in the absence of defendants and their attorney, all of whom were nonresidents of Dallas county.

January 12, 1933, defendants filed motion for new trial setting up a good defense and excusing their failure to bfe present when the case was called for trial. The motion was sustained and on January 27, 1933, defendants filed their first amended plea in abatement and first amended answer and cross-action for damages.

Eater the • case was transferred to the Fourteenth district court of Dallas county where on March 14, 1933, a hearing was had and in response to a peremptory charge a verdict was returned finding that plaintiff, at the time of transactions in question, was a foreign corporation, and in carrying on said transactions was doing business in Texas without having first obtained a permit from the state so to do. Whereupon the plea in abatement was sustained and the suit dismissed.

Opinion.

The October term, 1932, of the One Hundred Sixteenth district court continued in session until Sunday, January 1, 1933. The motion for new trial and to set aside the judgment rendered December 22, 1932, was filed January 12, 1933.

Appellant presents the point that since the motion for new trial was filed at the succeeding term, the judgment could not be set aside in the absence of written agreement of the parties; that when a motion for new trial was not filed during the term at which the judgment was rendered, such judgment can be vacated only on a bill of review and the motion in this was insufficient as such a bill. Smith v. Ferrell (Tex. Com. App.) 44 S.W.(2d) 962, from Harris county, is cited as decisive in favor of the position stated. That case has no present application for the reason that the petition for review in that case was filed at a subsequent term and about five months after the rendition of the judgment sought to be vacated. It was simply held that the proceeding must be considered as a bill of review because filed after the judgment had become final by operation of law under the provisions of article 2092, R. S., as amended by Acts 1929, c. 222, § 1 and Acts 1930 (5th Called Sess.) c. 70, § 1 (Vernon’s Ann. Civ. St. art. 2092).

The practice in such matters in the civil district courts of Dallas and Harris counties is governed by the article mentioned.

Subdivision 29 thereof provides that motions for new trials shall be filed within 10 days after the judgment is rendered, but this time limitation is regarded as directofy. Automobile, etc., v. Radford (Tex. Civ. App.) 293 S. W. 869; Id. (Tex. Com. App.) 299 S. W. 852.

It rests within the sound discretion of the court whether a motion for new trial not filed within the ten-day period will be considered. Southern S. S. Co. v. Edwards (Tex. Civ. App.) 291 S. W. 335. Subdivision 30, of said article, provides: “Judgments of such civil district courts shall become as final after the expiration of 30 days after the date of judgment or after a motion for a new trial is over-ruled as if the term of court had expired. After the expiration of thirty days from the date the judgment is rendered or motion for new trial is over-ruled, the judgment cannot be set aside except by bill of review for sufficient cause, filed within the time allowed by law for the filing of bills of review in other district courts.”

The motion for new trial in this case was filed in less than thirty days after the rendition of the judgment. The judgment there-' fore had not become final.

Not having become final, the court had jurisdiction to entertain the motion. Nevitt v. Wilson, 116 Tex. 29, 285 S. W. 1079, 48 A. L. R. 355.

And in Wear v. McCallum, 119 Tex. 473, 33 S.W.(2d) 723, 724, Justice Pierson said: “That a trial court has control over his judgments until they become final judgments by operation of law, either by the termination of the term of court at which they are entered or by other statutory provision, may be admitted. The district courts of Dallas county, however, as well as those of certain other counties in Texas, as to when judgments entered by them shall become final are controlled by article 2092, subd. 30, R. S. 1925.”

In Pierce v. Watkins, 114 Tex. 153, 263 S. W. 905, 907, it was said: “The judgment does not become final until after the expiration of thirty days from the date of the judgment, or after a motion for new trial was overruled, at which time the term of court is at an end as far as the immediate case is concerned.”

See, also, Townes v. Dattimore, 114 Tex. 511, 272 S. W. 435, and Nevitt v. Wilson, supra.

Under the authorities cited it is quite clear the court had jurisdiction to entertain the motion for new trial and power to grant same.

Another proposition is to the effect that the original plea in abatement was overruled by operation of law upon expiration of the term at which it was filed. This is without merit. Failure to invoke timely ruling of the court upon a plea in abatement (see article 2013, R. S. and District Court rule 24) may operate as a waiver of such plea and require that it be overruled when it is acted upon (Texas Packing Co. v. Railway Co. (Tex. Com. App.) 227 S. W. 1095). But the plea until acted upon remains undisposed of regardless of the termination of the term at which it was filed.

Furthermore the original plea in this case was directed against the suit of the American Soda Fountain Company of Delaware. That company passed out of the case hy the amended petition which substituted the Maine corporation as the plaintiff in the case.

This brings us to a consideration of the plea upon its merits. There are two corporations bearing the name of American Soda Fountain Company, one incorporated under the laws of Maine; the other, incorporated under the laws of Delaware. These corporations will'be respectively referred to as the Maine company and the Delaware company. The first-named company is without a permit to transact business in this state. The other company has been transacting business in the state for many years and has a permit so to do. It has a place pf business in Dallas. C. F. Rouse is a representative of the Delaware company. Upon the solicitation of Rouse the defendants gave a written order for the property sold which reads:

“American Soda Fountain Company (Maine Corporation) Watertown, Mass.; Please ship the following described
“Special innovation soda water apparatus as follows: on or aboiit Rush, or as soon thereafter as possible to Hairston Drug Store, Richland Springs, Tex.
“(Give name and address where apparatus is to be installed) Description 1 — 12 ft Arctic, 10 pumps, 3 fruits, 3 draft arms, (xxxx) 1 sink, 1 spoon Yat, 1 — No. 602 dipper well 1 — Auto tumbler washer
“Counter — Breche Pav. die, Verde top, verde frieze & verde base Fob factory. (1-Leader Carb. 110 Volts a. c. 60 cy. (used car-bonatar in Dallas stock in A1 condition fob Dallas.)
“For which we agree to pay ($1452.50 Fourteen Fifty Two and 50/100) f. o. b. Water-town, and to deliver to you properly packed, the following described apparatus 1'6 ft. Liquid which we warrant to be free from all liens, and we further agree to the following:—
“Terms: — $72.60 paid with this order, $145.-25 to be paid on tender of bill of lading, and balance $145.25 May 1st and 30 monthly payments beginning June 1st, 1929.
“Ship via-to your order. Send bills of lading to-Bank, to be surrendered on payment of draft and signing of notes in your usual form ta’ evidence above deferred payments with interest at 6 percent from date of shipment. We agree at such time or at any later time to execute and deliver to you or your authorized representative mortgage or such other paper, acknowledgments or affidavits which you may request. We will pay all freight and transportation charges and we assume all risk of loss and damage after shipment has been made. We will pay all taxes. You will insure the apparatus -for the account of our respective interest in your Blanket Policy against damage during transit and loss by fire from the time it leaves your factory until fully paid for, and for such insurance we agree to pay you one and one-half per cent (11/2 per cent) of purchase price, which shall be added to the 1st, 13th and 25th notes. You are not responsible for any delays caused by strikers, accidents, or other causes beyond your control. We will attend to all plumbing and electrical work. If we default you may repossess and pursue any other remedy which law or equity may permit. You are to retain title of above property until purchase price, or any notes, or renewals thereof, or judgment for same Shall 'have been paid in full.
. “It is agreed that upon the failure or refusal of the undersigned purchaser to accept said goods when tendered, or to pay the freight and transportation charges on said goods, or to make the settlement or any payment provided for, the full purchase price of said goods, less any actual cash payments thereon, and all unpaid payments $hall at once become due and payable at Dallas, Dallas County, Texas; whereupon American Soda Fountain Company, or any person by its order, may take possession of and remove said goods with or without legal process and proceed at once to sell the same at either private or public sale, after posting notices in three public places within the county for ten days prior to such public sale and apply the proceeds of such sale to the principal, interest and attorney’s fees due upon the indebtedness resulting from this contract and the expense of said sale, and the remainder, if any, shall be paid over to the purchaser. It is agreed further that should the purchaser fail or refuse to complete this contract, the American Soda Fountain Company may elect either to declare the entire debt herein contracted, due and payable, or retain as liquidated damages for such breach, the advance payment made by the purchaser at the timfe of the execution of this order. It is further agreed that should any portion of the indebtedness hereby incurred by the purchaser, be placed in the hands of an attorney for collection after its maturity, the purchaser agrees to pay fifteen (15%) per cent thereon additional for attorney’s fees. It is further agreed by the purchaser that in whatever manner said property shall become attached to real estate, it shall be and remain personal property and shall not become a fixture or any part of the real estate.
“There are no other conditions or agree1-ments except those herein stated. This order cannot be countermanded. It is solicited by ■an employee of the American Soda Fountain ■Company (Delaware Corporation), and is taken subject to acceptance in writing of an officer of your Company.
“Witnesses:
“Hairston Drug Company
By R. A. Hairston
Signature of purchasers.”

This order was accepted by the Maine com-, pany at its place of business in Watertown, Mass., where both companies have oflices. The Maine company manufactures and sells soda fountains and accessories. The Delaware company is engaged solely in the sale of soda fountains and accessories on a commission basis. The fountain and other articles sold, except the Leader carbonator, were shipped from Watertown, Mass. They were installed at Richland Springs, Tex., by the Delaware company through its representative Rouse, at the expense of the Delaware company. Subsequent to the' installation of the fountain, repairs thereon were made by the Delaware company in an effort to correct defective original installation. The Leader car-bonator referred to in the order had been previously sold by the Maine company, repossessed by it, and stored in the warehouse of the Delaware company at Dallas. It was sold to ■avoid shipping back to Watertown. It was sold to defendants for $118.75. New types of the carbonator sold for $285. It was also shown that in part payment for the property •sold an old fountain owned by defendants was traded in. The old fountain became the property of the Behrens Drug Company of Waco, Tex., which company represented the Delaware company 'in the Richland Springs trade territory and was entitled to a part of the commission earned upon the sale. A part •of the old fountain was sold to a party in Richland Springs.

, The foregoing statement sufficiently reflects the material facts shown in support of the plea in abatement.

It is well settled that the statutes of this state (articles 1529 and 1536, R. S.), requiring- foreign corporations transacting business in Texas to comply with certain conditions and obtain a permit as a condition precedent to the right to sue in the local courts, have no application to suits based upon sales made in interstate commerce.

It is also settled that the interstate character of a sale is not affected by the fact that the seller, as an incidental part of the contract of sale, agrees to assemble and install in this state as a complete unit the property sold and does so install it. York Mfg. Co. v. Colley, 247 U. S. 21, 38 S. Ot. 430, 62 L. Ed. 963, 11 A. L. R. 611; Southern Discount Co. v. Rose (Tex. Com. App.) 296 S. W. 482, 483; J. B. Colt Co. v. McBurnett (Tex. Civ. App.) 1 S.W.(2d) 385.

But these rules, in our opinion, have no present application because of the fact that a part of the property sold was a Leader car-bonator previously repossessed and owned by appellant situate in this state. The sale of this article was purely a local transaction and a part of the articles sold and to be assembled and installed in this state.

This presents a case where a sale of articles in interstate commerce was by the seller joined with a local sale, wherefore, in our opinion, the transaction lost its purely interstate character. This conclusion, however, is not free from doubt as to its correctness in view of the i-uling in Southern Discount Company v. Rose, supra.

In that case a foreign corporation sold, in interstate commerce, and installed in this state an acetelyne gas plant.

The facts were thus stated by Justice Smith of the Court of Civil Appeals, 290 S. W. 861, 863:

“The facts in this case, with reference to the transaction as being interstate or intrastate, must be analyzed. The subject of the sale in controversy was an acetelyne gas plant for use in cooking and lighting in appellee’s home. The complete plant comprises, primarily, a generator, a water heater and tank, and heating and lighting fixtures and appliances. All these items were shipped from the gas company’s domicile in the state of Indiana direct to appellee in the state of Texas. The shipment was made f. o. b. the car in Indiana, the shipping charges being paid by ■appellee, who paid the purchase price of the plant by executing the note herein sued upon. It seems to be true, as a matter of law and of. fact, that these facts, if standing alone, would constitute the transaction as one of purely interstate commerce.
“But the transaction was not completed by the fácts just stated. Tbe articles shipped from Indiana did not comprise all those that were put into the completed plant, for, in addition to the articles enumerated, the obligation and undertaking of the seller required it to supply between 150 and 175 feet of three-fourths inch and three-eighths inch piping for distributing the gas, when' generated, to various parts of appellee’s premises, as well as the. various elbows, joints, unions, and like materials necessary in connecting the pipe into lines and with the various heating and lighting drops and stations on the premises. And, in addition to this equipment, the seller supplied 100 pounds of carbide with which to set the plant in operation and test its power, capacity, and sufficiency under the seller’s warranty. All these materials and supplies were obtained by the sgller, not by shipment without the state, but from points within the state; they were obtained, not out of interstate commerce, but from intrastate commerce. Just what proportion the value of these articles obtained locally bore to the value of those sold in interstate commerce does not appear, but, while it is apparent that that proportion was relatively small, it cannot be said to be negligible; on the other hand, it is necessarily substantial.”

In the course of the opinion it was said:

“Of course, the mere sale and shipment of an article of commerce into this state from another constitutes interstate commerce, even though the sale is effectuated through soliciting agents operating in this state for the nonresident dealer, and the delivery is made by the latter at the destination. ⅜ ⅝ *
“But the courts draw a distinction between that simple transaction wholly in interstate commerce and a transaction which embraces not only the shipment of articles from another state, but includes other acts done and other articles obtained in this state, which are joined by the seller to the interstate article, and both erected into one whole plant or machine or other object, in which case- the transaction loses its interstate character and assumes that of a local nature.’ To state it differently, if the complete product of the transaction is made up of different units or parts, some of which are shipped into the state from without and others are obtained from local sources, and both are. united by the seller into the finished product in order to complete the sale, then the transaction, as á whole, is without the protection of interstate commerce and becomes a subject of regulation by the state. The protection of interstate commerce is extended to those transactions only which consist of acts concerning interstate commerce goods, ‘dissociated from any attempt to connect them with or make them a part in the state of property which had not and could not have been the subject of interstate commerce.’ Browning v. City of Waycross [233 U. S. 16, 34 S. Ct. 578, 58 L. Ed. 828], supra.”

In disposing of the case upon writ of error the Commission of Appeals, through Justice Bishop, said:

“In installing the plant the gas company was under obligation to supply, and did supply, from points within this state, between 150 and 175 feet of three-fourths inch and three-eighths inch piping, together with elbows, joints, and unions for distributing the gas when generated to various parts of the premises, and also 106 pounds of carbide with which to set the plant in operation and test its efficiency. * * *

‘‘Our federal Constitution confers upon Congress the exclusive power to regulate interstate commerce, and the state is without authority to enact a law which would interfere with this'power. The purchase of the gas plant to be transported from Indiana to this state was an interstate transaction, and one which the state by statutory enactment had no power to regulate or control by requiring a permit or denying the seller the right to institute suit in the courts of this state to enforce payment of the purchase price. ‘The right to make an interstate commerce contract,’ such as the one here involved, ‘includes in its very terms the right to incorporate into such contract .provisions which are relevant and appropriate to the contract made.’ The agreement, to supply materials and labor, whether from points within or without this state, for the purpose of installing the plant and thereby performing the obligation imposed under the terms of the contract, was relevant and appropriate to a transaction inherently interstate in. character. The materials and labor supplied were essentially connected with the subject-matter of the sale. This ease, in its facts, px-esents the question of law decided by the United States Supreme Court in the case of York Mfg. Co. v. Colley, 247 U. S. 21, 38 S. Ct. 430, 62 L. Ed. 963, 11 A. L. R. 611. See, also, McCaskey Register Co. v. Mann (Tex. Civ. App.) 273 S. W. 1113.”

The effect of the ruling of the Commission of Appeals was that the agreement to supply material and labor within this state simply for the purpose of installing the plant did not alter the interstate character of the transaction.

But in the present case the contract called for the sale of a cai’bonator owned by appellant and situate in this st-ate. Such sale was a local transaction and not a meré incident of the sale of the other articles and their installation.

In our opinion, by the joining of this local transaction with the interstate sale of the other articles, the transaction as a whole lost its purely interstate character and renders applicable the views and ruling of the Court of Civil Appeals in the Southern Discount Company Cáse.

We, therefore, sustain the action of the trial court in giving the peremptory instruction. ■

Affirmed.

On Motion for Rehearing.

In its motion for rehearing appellant calls attention to the recent case of Phelps v. Jesse French, etc. (Tex. Civ. App.) 65 S.W.(2d) 374.

In the case mentioned Justice Looney, speaking for the Dalias Court of Civil Appeals, sustained a recovery by a foreign corporation of the purchase price of four pianos, owned by such corporation, stored in Texas upon repossession, and later sold to Phelps. There is no material difference between the facts in that case and the one at bar. As was stated in our original opinion, our conclusion sustaining the judgment of the lower court was reached with doubt as to its correctness.

Upon consideration of the motion for rehearing, the conclusion is reached that the ruling in the case cited is correct and that we erred in affirming the judgment sustaining the plea in abatement.

See, also, Miller v. Goodman, 91 Tex. 41, 40 S. W. 718; Shaw Piano Co. v. Ford (Tex. Civ. App.) 41 S. W. 198; Smith v. Mergenthaler Linotype Co. (Ark.) 58 S.W.(2d) 686; Vulcan, etc., v. Flanders (D. C.) 205 F. 102.

Accordingly the motion for rehearing is granted, the judgment is reversed, and the case remanded for trial upon its merits.


author: MARTIN, Justice.

text:
    COLEMAN et al. v. MOORE.
    No. 4182.
    Court of Civil Appeals of Texas. Amarillo.
    March 12, 1934.
    M. M. Coleman and Clyde F. Elkins, both of Lubbock, for appellanis.
    • Lockhart & Brown, of Lubbock, for appel-lee.
   MARTIN, Justice.

Estell Moore is a negress in the town of Lubbock. In February, 1931, she purchased a house from W. R. Graves and executed a trust deed on a lot in the town of Lubbock to which said house was removed, to secure the payment of a note to Graves in the sum of $198.50, payable in monthly installments of $10 each. Payments were made on this note until about September, 1932. About December, 1931, this note was sold by Graves to appellant M. M. Coleman. Payments made by appellee on this note had been credited on the back thereof and the transfer of this note with the lien from Graves to Goleman recited:

“That all payments, offsets and credits to which said note is entitled do appear on the back of said note.”
Coleman claiming that appellee was in default in her payments, sold this property under his trust deed and his coappellant, Clyde F. Elkins, moved the house situated thereon away from said lot and appropriated it to his own use. It was claimed that this was in payment of his attorneys’ fees due by Coleman. Thereafter appellee, claiming that she had fully paid the said note of $198.50 prior to said sale, instituted suit for this property, asked for judgment against both appellants for the value of the house, and asked for exemplary damages, alleging, in.part, that appellants had wrongfully and willfully converted said property to their own use and benefit and alleged specifically:
“Plaintiff says that the conversion of said property and specially said dwelling house was wrongfully, unlawfully, wilfully and maliciously — and was done for the purpose of injuring and defrauding this plaintiff of tlie value of her property; and by reason thereof, the plaintiff is entitled to recover from defendants the further sum of $1,000.00 as exemplary damages.”

The answer of appellants was a general demurrer and general denial and a special pleading setting out her indebtedness on said last-mentioned note at and prior to the time of the sale of the property by the trustee.

In answer to special issues the jury found that appellee had paid all money due on the note of $198.50 to W. It. Graves and M. M. Coleman; that the reasonable market, value of the house alleged to have been converted was $125;. and that defendants acted wrongfully, unlawfully, willfully, and maliciously in moving said house from said lot and found as exemplary damages against the appellants the sum of $200.

Of the alleged errors committed by the trial court and discussed in appellants’ brief, none were properly raised and preserved, unless it he those having to do with the issue of exemplary damages. These pass out of the ease by the disposition we feel compelled to make of the judgment awarding the said sum- of $200 against defendants as punitive damages. We agree with appellants’ contention raised in their motion for new trial that the finding of the jury on this issue is without evidence to support it. If we correctly understand this record, the note in question bore certain in-dorsements of payment at the time of its purchase by appellant Coleman. These were called to appellee’s attention about that time and their correctness apparently agreed to by her. She continued without objection to make payments on said note to Coleman until about the following September, when for the first time she raised the question that Coleman’s predecessor in title had not properly credited her with a small payment, amounting to less than or about $10. A sharp dispute arose between them and appellee deposited in a hank the sum of $5.30 to Coleman’s credit, which it was claimed by her constituted the balance owing him on the note. If this deposit was ever called to Coleman’s attention until after the sale of appellee’s property, we fail to find it in this record. Appellee had certain receipts and deposit slips claimed to show payment of the note in question and which we think sufficiently supported the jury’s finding as to payment above mentioned, but there could not be implied from this that. Coleman thought or knew he had been paid prior to the sale in question, so as to support an action for exemplary damages. This because there was ample ground for an honést difference of opinion between appellants and appellee, prior to the sale as to whether appellee had actually paid the note in full. All the circumstances tend to support Coleman’s view, and he is completely corroborated by the evidence of Graves, his predecessor in title. All the controversy was over an alleged payment to Graves prior to the acquisition of the note by Coleman. Graves testified that the note correctly showed all credits, and explained the difference between the amount shown by the receipts held by appellee and such credits, by testimony showing that part of the receipts were duplicates. Coleman depended upon the correctness of the credits made by Graves and in relying upon these and Graves’ statements, as we think is clearly 'inferable from the record, he could not be said to have acted will-fully and maliciously. He himself knew nothing personally about the transaction, and we think the conclusion is not justified that his claimed acceptance of Graves’ credits and version was wholly without any reasonable basis. We quote here from the authorities on this subject;

“ ‘These damages are allowable only where there is misconduct and malice, or what is equivalent to it. A tort committed by mistake, in the assertion of a supposed right, or without any such recklessness or negligence as evinces malice or conscious disregard of the rights of others, will not warrant the giving of any damages for punishment, where the doctrine of such damages prevails.’ 1 Sutherland on Dam., 724. ‘Th'at which is done contrary to one’s conviction of duty, or with a wilful disregard of the rights of others, whether it be to compass some unlawful end, or some lawful end by unlawful means, or to do a wrong and unlawful act, knowing it to be such, constitutes legal malice.’ Drake on Attach., | 733.
“These elements for the maintenance of -an action for exemplary damage clearly constitute the belief and intentions of the wrongdoer a controlling ingredient; therefore, although there may not exist good cause for suing out an attachment, yet, if the evidence concerning all the circumstances attending it are consistent with and show that it was sued out under an honest belief of the truth of the grounds relied on, based on reasonable grounds, the inference of malice, which would otherwise arise, is repelled, and no recovery for exemplary damages could be had.” Jacobs, Bernheim & Go. v. Crum, 62 Tex. 415.

See, also, Rankin v. Bell, 85 Tex. 28, 19 S. W. 874, 876, and 13 Tex. Jur., pp. 243 and 244.

“A power such as may be exercised by juries in awarding exemplary damages is liable to great abuse, — may often lead to great oppression; and there is no class of cases in which the conservatism of the judge should more frequently find field for action. In cases based on facts which merit condemnation, or even punishment, though not by law constituting crime, juries, under commendable impulses, but with judgment warped by passion, no doubt often render excessive verdicts; and, if it be conceded that such verdicts are to stand because the matter was within the discretion of the jury, then we have an absolutism — a despotism — nowhere else found in our form of government. The matter is in the discretion of the jury in the first instance, but it is the duty of the judge to see that this discretion is not abused.” Tynberg v. Cohen, 76 Tex. 409, 13 S. W. 315, 317.

It is our duty as we see it to require a re-mittitur of the entire amount recovered in this case as exemplary damages within fifteen days from this date as a condition of affirmance, otherwise this cause will be reversed and remanded for a new trial, and it is accordingly so ordered.


text:
    CAMPBELL et al. v. LAND.
    No. 4177.
    Court of Civil Appeals of Texas. Amarillo.
    March 12, 1934.
    Seay, Malone & Lipscomb, of Dallas, M. F. Billingsley, of Munday, and C. C. Broughton, of Childress, for appellants.
    Williams & Bell, of Childress, for appellee.
   MARTIN, Justice.

The present controversy arose out of the following facts: Russell T. Land died January 15, 1930, leaving a will in which he appointed his wife, Mary Gladys Land, independent executrix. The probate of this will was contested by J. J. Land, father of deceased, and pending such contest F. O. Campbell, one of the appellants herein, was appointed temporary administrator of the estate of Russell T. Land, deceased, on February 17, 1930, and thereafter executed a bond in the sum of $20,000 with his coappellant herein, United States Fidelity & Guaranty Company, as his surety. On July 3, 1930, by a judgment of the district court of Knox county, Mary Gladys Land was finally appointed independent executrix and thereafter qualified as such. On July 7, 1930, F. O. Campbell filed his final report as temporary administrator and asked for his# discharge. Such report came on to be heárd before the county court of Knox county, and on August 18, 1930, an order was entered in part as follows:

“It is therefore considered, ordered and decreed by the Court that the said report of the said P. O. Campbell, temporary administrator of said estate, be and the same is in all things and respects approved and the sum of $900.00 is hereby allowed the said F. 0. Campbell for services as such temporary administrator, which the Court finds to be a reasonable compensation.
“It further appealing to the Court that Mrs. Gladys Land has heretofore qualified as executrix of the last will and testament of Bussell T. Land, deceased, and the said Temporary Administrator is hereby ordered and directed to pay and deliver to her all money and property belonging to said estate, and when so paid he shall stand discharged as such temporary administrator.”

J. J. Land filed a contest on this report, seeking to prevent the payment of the money then on hand and held by the temporary administrator and the discharge of said temporary administrator. His contest was denied and he appealed to the district court of Knox county. Again losing, he appealed to the Court of Civil Appeals of the Eleventh Supreme Judicial District, where he was again denied any relief. This case is reported in Land v. Land, 40 S.W.(2d) 207, where the facts pertaining to same are fully stated. A writ of error being refused by the Supreme Court, the district court judgment was finally certified for observance to the county court of Knox county on June 16, 1932.

While temporary administrator, there had come into his hands $10,000, collected from a life insurance policy, which was deposited ■in the First State Bank of Munday by such administrator. This bank closed its doors on October 22, 1931, while the J. J. Land appeal was pending. There was also deposited a sum of money with the First National Bank of Munday which limited withdrawals, but, as this sum was subsequently paid, no further reference will be made to it. The $10,000 deposited in the First State Bank of Munday was never paid, and its nonpayment furnishes the background for the major legal issue involved on this appeal.

Subsequent to July, 1930, and while the J. J. Land appeal was pending, the appellee, Mary Gladys Land, demanded payment of F. O. Campbell, which was refused. Thereupon she instituted suit in the district court of Childress county against F. O. Campbell, temporary administrator, and his surety, United States Fidelity & Guaranty Company, for the payment of the said $10,000 and for a penalty of 5 per cent, per month under article 3543, B. S. 1925. She also joined J. J. Land and his sureties and asked for judgment in the alternative against them by reason of an appeal bond executed and which appeal bond, yás as follows:

“Estate of B. T. Land Deceased,
“In the County Court Knox County, Texas. “Whereas in the above entitled and numbered cause pending in the County Court of Knox County, Texas, and on the 18th day of August, 1930, an order and judgment was made and entered by said Court approving the final report of F. O. Campbell as temporary administrator and directing said temporary 'administrator to turn over and deliver to Mary Gladys Land all of the property and funds of said estate in his hands as is more fully manifest by said order and judgment or record in the minutes or said County Court. From which order and judgment J. J. Land one of the creditors of said estate desires to appeal to the District Court, of Knox County, Texas.
“Now, therefore, we, J. J. Land’ as principal and the other subscribers hereto as sureties acknowledge ourselves bound to pay to Oliver W. Lee, county judge of Knox County, Texas, and his successors in office in the sum of Twenty Thousand Dollars conditioned that the said J. J. Land appellant shall prosecute his said appeal to effect and perform the decision, order, decree or judgment which the District Court shall make thereon in case the cause shall be decided against him the said J. J. Land:
“Witness our hands this 19th day of August, 1930.
“J. J. Land',
“Fred N. Warren,
“J. W. Byan.
“Approved this 26th day of August, 1930.
“Thomas F. Glover,
“Clerk County Court, Knox County, Texas.”

To this suit appellants answered'by various special exceptions and pleas, many of which are not necessary to mention. They plead: in substance and effect the facts hereinbefore set out. They specially pleaded that there had never been a final order of the probate court authorizing and empowering the temporary administrator to deliver the money sued for, this by reason of the appeal of J. J. Land already adverted to. They further pleaded in substance and effect that, when the money in the hands of the administrator was deposited in the hanks already mentioned, each and both were solvent and had the general reputation of being solvent and that the administrator used reasonable care in the selection of a depository. They each further, by way of cross-action against J. J. Land and his sureties, alleged that, at the time the probate court of Knox county approved the final report of such administrator and ordered the payment of all funds on hand to the appellee, the Eirst State Bank of Munday was solvent and payment could then have been made, and that the appeal of J. J. Land prevented said payment, by reason of which said money in said bank was finally lost, and asked that the said Land and his sureties be made parties to the suit and that they have judgment over against them for the amount of any judgment that might be rendered for appellee against them upon the administrator’s bond.

Land and his sureties answered and upon exception were dismissed from the suit. The nature of their pleadings will more fully appear hereinafter. Upon final hearing the court entered judgment against Campbell and his surety, appellants herein, for the sum of $20,000. Approximately $10,000 of this shows to have been the amount on deposit in the Eirst. State Bank of Munday, and the remainder of such judgment was penalty and interest.

Error is properly assigned to the action of the trial court in dismissing J. J. Land and his sureties from this suit. We sustain this assignment. They became bound by the stipulations of their bond to perform the order and judgment of the district court of Knox county. This decree was in substance and effect for the payment of the funds in the hands of the temporary administrator to appellee, Mary Gladys Land. The bond of J. J. Land is set out above. Appellee could sue upon said bond or upon that of Campbell, or both. She did, in fact, sue upon both; her prayer for judgment against Land and his sureties being in the alternative. On the other hand, Campbell and his surety upon proof of the issue tendered in their respective pleadings and payment of the amount due under said bond was subrogated to any and all rights the executrix, Mary. Gladys Land, ■ever had or held in the aforesaid Land appeal bond, and were therefore entitled to judgment over against Land and his sureties for any amount they -or either were compelled to pay. This is, we think, clearly settled. We quote: ■

' “The guarantor had the right to pay the amount of*the judgment recovered against his principal, and thus put an end to this liability at once. By the voluntary intervention of the appellant in becoming surety on the appeal bond, all further proceedings on the judgment which the landlord was awarded the right of immediate possession were stayed, and the hands of the guarantor were effectually tied until the appeal was 'disposed of. * * ⅜ Having intervened as a volunteer, and by his interposition stayed proceedings on the judgment for possession to the prejudice of the guarantor, whose liability had become fixed and at an end so far as respects future rents, it must be considered in equity that he did so upon the condition that he would take the place of the guarantor from that time forward.” 60 C. J. 768, note (a).

“As between successive sets of sureties on different bonds given in judicial proceedings, those last in time are primarily liable, and those first -in time become supplemental sureties for them. The sureties among themselves are liable in the inverse order of their undertakings, and accordingly the sureties on prior bonds may seek reimbursement from those on later bonds when compelled to pay the indebtedness. * * * ” 50 C. J. 315.

“Where the interposition of the second surety is the means of involving the first in the liability which he was ultimately compelled to pay, the equity of the first is complete, and he is entitled, on the principles of subrogation, to stand as though the creditor had assigned the bond to him. So where a second bond operated to stay an execution levied against real estate, this is detrimental to the first surety, and therefore entitled him to subrogation upon the payment of the judgment to the rights of the creditor in the stay bond. But for the interposition of the second surety the judgment might have been enforced against the real estate.” 25 R. O. L. 1331, § 14.
“In regard to this question of superiority of equities, which is liable to arise in the case of prior and subsequent bonds, executed by different sureties, for distinct purposes, and both constituting securities in the hands of the creditor for the same debt, it is well settled thát, if the interposition of the second surety is for the benefit of the principal alone, without the sanction or assent of the first surety, who may be prejudiced thereby, as when the effect of the second bond is to prevent the enforcement of present payments from the principal, and thus to prolong the responsibility of the first surety, in such a ease the equity of the first surety is superior, and he is entitled to be subrogated to the rights of the creditor as against the second.” 77 A. L. R. 459; Hartwell v. Smith, 15 Ohio St. 200.

Judge Wheeler, for the Supreme Court in the case of Mitchell v. De Witt, 25 Tex. Supp. 180, 185, 78 Am. Dec. 561, uses the following language: “Where, however, such means consist of the responsibility of an individual becoming a later surety or guaranty for the same debt of the principal, there arises a conflict of equities, which may give rise to new questions as to the priority between the former and latter surety; such latter surety stipulating, at the instance of the principal, to pay the debt, suiters no absolute injustice in being obliged to do so, since he is compelled to perform no more than he undertook, and has no right to complain that he is not allowed to use, as a payment by himself, the money which proceeds from another person, whom his principal was previously bound to save harmless. How the equity would be in a naked ease of this kind, I give no opinion; it is sufficient that it is settled, that if the interposition of the second surety may have been the means of involving the first in the ultimate liability to pay, the equity of the first surety decidedly preponderates.”

See, also, Brandenburg v. Flynn’s Adm'r, 12 B. Mon. (Ky.) 397; Hinckley v. Kreitz, 58 N. Y. 583; Hawkins v. Western Nat. Bank of Hereford (Tex. Civ. App.) 145 S. W. 722,

The reason given in the pleading filed by J. J. Land and his sureties for their dismissal was that the cause of action against Campbell and his surety was ex contractu, while that alleged against themselves was ex de-licto. This is a mistaken view. Both arose out of a contract relating to precisely the same debt. The evidence is essentially the same in both cases. But one debt is involved, and all equities between the parties can be adjusted in one suit, and we are of the opinion that the trial court erroneously declined to assume jurisdiction over the cause of action alleged by both the executrix and appellants against Land and his sureties. This conclusion is supported by many authorities. The case of Skipwith v. Hurt, 94 Tex. 322, 60 S. W. 423, by our Supreme Court, in its facts and reasoning, is, we think, in point. Other authorities are Love v. Keowne, 58 Tex. 191; 1 Tex. Jur. pp. 639, 640, 641, and 654; Barton v. Farmers’ State Bank (Tex. Com. App.) 276 S. W. 177, 180, 181, and numerous authorities there correlated; National Surety Co. v. Atascosa Ice, Water & Light Co. (Tex. Com. App.) 273 S.W. 821; Harless v. Haile (Tex. Civ. App.) 174 S. W. 1020; Cobb v. Barber, 92 Tex. 309, 47 S. W. 963; Notes to case of Ader v. Blau, 41 A. L. R. p. 1231.

There is one peculiar phase of this case that makes the joinder of Land and his sureties particularly necessary in order for complete redress to be given the executrix without a multiplicity of suits. As we shall presently attempt to show, the executrix could not recover interest from the appellants during the time payment to her was held up by Land’s appeal. Being deprived of the use of her money, she ought to recover interest. We see no reason to doubt that she might, therefore, recover judgment against appellants for the principal and against Land and his sureties for her interest, and in this same judgment appellants might secure protection for themselves on any sums paid out and which loss to them was occasioned by the said appeal of Land.

We are further of the opinion that neither interest nor penalties are recoverable against appellants during the pendency of the Land appeal. -The right to the.recovery of a penalty, if any exists, is based upon article 3543, reading as follows: “Where an order is made by the county judge, for an executor or administrator to pay over money to any person other than the State. Treasurer, and such executor or administrator shall neglect to make such payment when it is demanded by the person entitled thereto, his agent or attorney, such executor or. administrator shall be liable on his official bond to the person in whose favor such order of payment was made, for damages upon the amount he shall so neglect to pay, at the rate of five ber cent per month for each month he shall so neglect to make such payment after the same was so demanded, such damages to be recovered by suit against such executor or ach ministrator and the sureties upon his bom} before any .court having jurisdiction of the amount claimed, exclusive of interest and such damages.”

By the terms of this statute, an administrator is liable only and if he neglects to pay upon demand to the party entitled thereto. The executrix here was not entitled to money in the hands of the temporary administrator until a final judgment was rendered ordering him to pay same over, and such administrator did not neglect to pay when the court’s order to pay had' been suspended by Land’s appeal. How could he neglect to perform a duty whose performance had, in effect, been suspended? He would have no protection in such case if he made a mistake, and we think common prudence demanded the very action he took in this case pending Land’s appeal from the final decree which ordered him to pay. This decree was suspended pending Land’s appeal from it. Wiren v. Nesbitt, 85 Tex. 286, 20 S. W. 128; Cavanaugh v. Cavanaugh (Tex. Civ. App.) 249 S. W. 264; Earl v. Mundy (Tex. Civ. App.) 227 S. W. 716. The trial court erred in awarding any recovery against appellants for penalty and interest during the pendency of said appeal of J. J. Land; it appearing that Land’s action was in no wise controllable by appellants.

There are some other questions raised which we think either pass out of the ease in view of the above or will likely not again occur. We decline to discuss the sufficiency of the evidence in view of another trial.

The judgment is reversed, and cause remanded.