In the recent case of Hugh v. Hugh, 221 S. W. 970, in a decision by Section A of the Commission of Appeals, opinion approved by the Supreme Court, it is expressly held that one seeking a disaffirmation of a deed of contract on the ground of minority must restore the consideration if still within his possession or in his control.

thority we conclude that the court was in, disaffirming the contract; or if not to preerror in rendering judgment in the plain- clude him absolutely, to, at least, require him tiff's favor upon the notes declared upon. to pay its equivalent without inquiry as to the purposes to which he has devoted it." The contract evidenced by those notes was voidable, and appellant had the right upon attaining his majority to disaffirm it, provided, however, before being permitted to do so, he should not only offer, but should be required to restore the premises secured by him under the terms of the contract, and to also account for the reasonable value of its use and occupancy during the time he actually occupied it and during the time he rented it and used the rents for the purchase, as he testified, for necessaries for his family. Appellant testified that he moved into the premises in controversy together with his wife, and called it his home, and occupied it and used it as his home

In the case of Bullock v. Sprowls, 93 Tex. 188, 54 S. W. 661, 47 L. R. A. 326, 77 Am. St. Rep. 849, it was held that a minor plaintiff, seeking to disaffirm a sale of land made by him during nonage, was not required to tender back the consideration received by him and spent for other than necessaries during his minority as a condition to his right to disaffirm. In that case, however, it did not appear, as here, that the minor was able to do so, or that he had appropriated the proceeds received by him in the transaction there under consideration to supply himself or his family with necessaries, and the court in the course of its opinion had this further to say:

We conclude, therefore, as before indicated, that under the facts as presented in the record before us appellant is entitled to disaffirm the contract evidenced by his notes upon restoration of the premises in controversy to the plaintiff, and to recover the $2,500 in cash paid by him, less the reasonable value of the use and occupancy of the premises in controversy to the date when he tendered plaintiff possession and warranty deed from himself and wife. It would be manifestly unjust and inequitable, we think, to permit the defendant to recover from the plaintiff the full $2,500 in cash and at the same time relieve him from accounting for the reasonable value of the use and occupancy of the premises as indicated. He does not deny that the premises, while occupied by himself and wife, were reasonably necessary as a home, and he admits that thereafter until about the date of the trial he rented the premises and used the rents in purchases necessary for himself and family. It is clearly within his power and control to permit an abatement to such extent from the sum he seeks to recover of the plaintiff, and this he should be required to do, regardless of any purpose or necessity that may have induced his purchase.

Before concluding this opinion, we should perhaps add that we have not considered what effect, if any, should be given to the fact that appellant, as he testified, collected and used the rent off the premises after he attained his majority, for the reason that the issue of ratification is not presented in the present record, either in the pleadings, the court's charge, or the briefs of the parties, and we do not wish to be understood by what we may have said in disposing of this case as having determined the issue of ratification, should it be presented on another trial.

"That one disaffirming his deed on the ground that it was executed when he was a minor must restore the consideration, if it is still in his possession or within his control, is a proposition about which there can be doubt. It may also be true that if he has used it during minority for purposes for which the law would permit him to charge his estate, as for obtaining necessaries, he must restore or account for its equivalent. Searcy v. Hunter, 81 Tex. 646; Womack v. Womack, 8 Tex. supra. It is ordered that the judgment be revers. If he has retained it until he reached full age and then appropriated it, this may be a suffi-ed, and the cause remanded for a new trial cient reason, ordinarily, to preclude him from not inconsistent with this opinion.

1. Corporations 262(2)-Fraud in procur: Ing stock subscription not available against creditors of insolvent corporation.

Fraud in procuring a stock subscription contract, which would be a good defense against the corporation as to liability on the contract or a note given thereunder for stock, is not available where the corporation has become insolvent and suit thereon is for the benefit of creditors whose rights accrued after organization of the corporation.

fendant receiver appeals. Reversed and remanded.

Marvin H. Brown, of Fort Worth, for appellant.

W. F. Schenck, of Graham, and Bean & Klett, of Lubbock, for appellee.

BOYCE, J. This case comes back to us, after a sojourn of nearly six years in the Supreme Court, for reconsideration on assignments not disposed of in our original judgment. See 192 S. W. 611, and 245 S. W. 74.

The suit was brought by J. C. Bowles, as plaintiff, against the Commonwealth Bonding & Casualty Insurance Company, and J. 2. Corporations 262 (2)-Organization under W. Mitchell, receiver, to cancel his note and laws of another state than agreed not avail- deed of trust securing it, given in payment of able against creditors after insolvency, where his subscription for certain shares of stock in note was given under subscription contract. the Commonwealth Bonding & Casualty InWhere subscription contract was to take stock in a Texas corporation, the defense of the surance Company, and to recover a certain organization of the corporation under the laws amount of money paid on said subscription. of another state, available, in the absence of The defendant Mitchell answered and by anything more, both against the corporation and cross-action sought judgment on the note and its creditors after its insolvency, is not avail- foreclosure of lien and in the alternative on able against such creditors, where the sub-plaintiff's subscription contract. The plainscriber settled the contract by making a cash tiff, in answer to this cross-action, set up the payment and giving note for balance, and received stock. same matters pleaded to sustain his action for cancellation of such contracts. This appeal is from a judgment in plaintiff's favor, canceling the note and deed of trust and

3. Corporations 253-Insolvency and necessity of amounts due for stock established by judgment in receivership case.

Judgment in receivership case against a corporation adjudging it insolvent and directing the receiver to collect unpaid subscriptions, with a recital that the company's liabilities exceeded the assets, is sufficient, in an action by the receiver on a note for balance of stock subscriptions, to establish the insolvency and the necessity of collection of all amounts due for stock.

4. Corporations 265 (4) Receiver cannot have judgment on stock subscription note in possession of persons outside court's jurisdiction and not parties to suit.

Receiver of an insolvent corporation cannot have judgment on a stock subscription note, it

appearing that it is in the possession of per

sons outside the court's jurisdiction, not parties to the suit and evidently holding it under some claim of right thereto.

5. Cancellation of instruments

35(3)—Hold

ers of subscription note necessary parties to suit by maker to cancel it.

against the receiver, on his cross-action.

The facts alleged and sustained by proof are as follows: Plaintiff, on September, 30, 1910, executed a contract, whereby he subscribed for 621⁄2 shares of the capital stock of a corporation to be "incorporated in pursuance to the laws of the state of Texas, under the name of the Commonwealth Bonding & Accident Insurance Company," agreeing to pay therefor $2,500, $312.50 in cash to StuartHarkrider & Co. as organization expenses, and the remaining $2,187.50 to be paid to the company or its trustees, in money or securities satisfactory to the insurance department on notice from Stuart-Harkrider & Co. that

the capital stock of the corporation had been subscribed so as to perfect the organization. This subscription contract was secured by false representations as to material matters, which it is not necessary to here detail. On January 31, 1911, Bowles, on representation There is a want of necessary parties to a that the corporation was ready to organize, suit against a corporation and its receiver by executed and delivered to one of its organa subscriber for stock to cancel his subscrip-izers his note, payable to the corporation, dattion note, it appearing that the note is in the possession of persons outside the court's jurisdiction, not parties to the suit and evidently holding it under some claim of right thereto.

ed December 1, 1910, payable December 1, 1915, for the $2,187.50, securing its payment by deed of trust on land in Lubbock county. The Commonwealth Bonding & Casualty Insurance Company was thereafter incorporatAppeal from District Court, Lubbock Coun- ed under the laws of the state of Arizona, by ty; W. R. Spencer, Judge.

Suit by J. C. Bowles against J. W. Mitchell, receiver, and another, with cross-action by the receiver. Judgment for plaintiff, and de

a charter filed on March 23, 1911, and some time thereafter secured a permit to do business in Texas. Certificates of stock were issued and delivered to plaintiff in June, 1911.

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

By the terms of the subscription contract the plaintiff contracted to take stock in a Texas corporation, and, if he had done nothing more than this, it seems to us that there would be no basis for assertion of liability to pay for stock in an Arizona corporation. See authorities above. But the matter proceeded further than this: The subscription contract was settled by making a cash payment and execution of the note as therein provided. This note was used in the organization of the company as a part of its capital stock and shares of stock issued and delivered to plaintiff who thereafter acted as a stockholder for a number of years. These facts, we think, bring him within the effect of the decisions last above cited.

These did not disclose that the corporation, of such contract by the execution of the note. was an Arizona corporation, and plaintiff did not discover such fact and the falsity of the representations made to him until a short while before the institution of this suit, on October 15, 1915. Plaintiff paid interest as it accrued on his notes and was represented by proxy in at least one stockholders' meeting of the corporation. On September 18, 1915, the district court of Tarrant county appointed appellant Mitchell and J. W. Hill receivers of all the property of the defendant corporation, and J. W. Mitchell was thereafter made sole receiver. A judgment was entered in the receivership case, adjudicating that the corporation was insolvent and directing the receivers to collect all unpaid subscriptions to the capital stock, reciting that the liabilities of the company would, in all reasonable probability, far exceed its assets. The receiver pleaded that he did not have possession of the plaintiff's note and deed of trust; that these were in possession of a receiver for the corporation, appointed by the courts of Arizona. Plaintiff, on the trial, offered testimony of the former secretary of the company, who remained in the service of the receiver as an employee, as follows:

[3] But it is urged by appellee that before plaintiff can be cut off from urging a defense which would be good against the corporation, the receiver must show that the debts were created after plaintiff became an ostensible shareholder, the amount thereof, and such other facts as may be necessary to determine the extent of plaintiff's liability to the creditors, and in this connection it is contended that the receiver did not allege or prove such necessary facts. It is true that there are no specific allegations or proof of the facts as to the creation of indebtedness and the amount thereof, etc., except as these facts are to be inferred from allegations and

"The records of the company indicate that plaintiff's notes, for which plaintiff sues, for a cancellation thereof, are on deposit with the treasurer of the state of Arizona. I do not know the exact date, but they have been so deposited since I have been secretary and treasurer, which is since March, 1913. The collat-proof of the fact that the district court of erals and securities, if any there are accompanying said notes, are at this time attached to the notes and are in the same custody as stated above, to wit, with the treasurer of the state of Arizona."

Tarrant county on September 18, 1915, adjudged that the corporation was insolvent and that its liabilities exceeded its assets. The judgment of the district court in the receivership case is, in our opinion, sufficient [1, 2] If it were not for the fact of the in- to establish the insolvency of the corporation tervening insolvency of the defendant com- and the necessity of collecting all amounts pany, the plaintiff made a good defense to due for capital stock. Cole v. Adams, 19 Tex. liability on the subscription contract or the Civ. App. 507, 49 S. W. 1052; Rich v. Parks note on at least two grounds-fraud in secur- (Tex. Civ. App.) 177 S. W. 184; Mathis v. ing the subscription contract and the organi- Pridham, 1 Tex. Civ. App. 58, 20 S. W. 1022 zation of the corporation under the laws of (4); Bartow v. Nix, 15 Wash, 563, 46 Pac. Arizona. Medlin v. Commonwealth Bonding 1033; Lehman v. Glenn, 87 Ala. 618, 6 South. & Casualty Co. (Tex. Civ. App.) 180 S. W. 44; Great Western Telephone Co. v. Gray, 122 899; Wrather v. Parks (Tex. Civ. App.) 227 Ill. 630, 14 N. E. 214; Fletcher's Cyc. Corp. § S. W. 518 (3); Commonwealth, etc., Co. v. 4120. See, also, McWhirter v. First State Meeks (Tex. Civ. App.) 187 S. W. 684. But it Bank (Tex. Civ. App.) 182 S. W. 682. It would is now well settled that fraud in procuring be obviously impossible, until toward the close the subscription contract is not a good de- of the receivership proceedings, to estimate fense where the suit is for the benefit of cred- with any exactness the amount that would be itors whose rights accrued after the organiza- finally realized on the assets of the defunct tion of the corporation, based on such sub-corporation and the amount of its liabilities, scription contract. Thompson v. First State and it would be impracticable to require such Bank, 109 Tex. 419, 211 S. W. 977; Id. (Tex. an accounting in suits brought by the receivCiv. App.) 189 S. W. 116; Davis v. Burns er, in an effort to realize on the assets. We (Tex. Civ. App.) 173 S. W. 476 (writ of error have no doubt that in the receivership case denied); McWhorter v. First State Bank proper the plaintiff might before final settle(Tex. Civ. App.) 182 S. W. 684. The fact of ment have an adjudication of any equities the organization under the laws of Arizona and refund of any money paid by him if it might in any event be a good defense to a would be made to appear that the collection suit brought by the receiver on the subscrip- from him was unnecessary to pay the claims tion contract if there had been no settlement of creditors. Debts could not have been cre

(248 S.W.)

cate.

3. Insurance 770-New certificate naming member's estate as beneficiary held ineffective even if it revoked certificate naming his wife as beneficiary.

ated by the corporation prior to its organiza-doned or failed or neglected to minister to him, tion. So we think that the facts stated, con- as required by the by-laws of the society, was sidered in connection with the judgment in ineffectual and did not cancel the first certifithe receivership case above referred to, necessarily show that this action is taken for the benefit of creditors, whose claims originated after plaintiff became ostensibly a shareholder in the corporation and liable for the payment of his note given as part of its capital [4, 5] But the receiver was not entitled to judgment for the reason that the note was in the possession of persons outside the jurisdiction of the court not parties to the suit and who evidently held possession under some claim of right thereto. Dillard v. McAdams (Tex. Civ. App.) 141 S. W. 1023; 8 C. J. 821, note 85. For the same reason there is a want of necessary parties to the proceeding to cancel the note and deed of trust. Jones v. Abernathy (Tex. Civ. App.) 174 S. W. 682; Jones v. Nix (Tex. Civ. App.) 174 S. W. 685; Crawford v. Aultman, 139 Mo. 262, 40 S. W. 952; Chandler v. Ward, 188 Ill. 322, 58 N. E. 919; Black on Rescission & Cancellation, § 661.

Neither party is entitled to judgment under the facts presented by the record, and the judgment will be reversed, and the cause remanded.

KLETT, J., not sitting.

In view of Vernon's Sayles' Ann. Civ. St. 1914, art. 4832, prescribing who may be beneficiaries under fraternal benefit certificates and authorizing changes in beneficiaries, within such restrictions, in accordance with the laws, rules, and regulations of the society, a new certificate naming the member's estate, in place of his wife, as beneficiary contrary to such statute and the by-laws of the society, is ineffective to make the estate the beneficiary even if it completely revoked the first certificate.

4. Insurance 793-Residuary legatee under benefit society member's will held not entitled to benefits; "person."

Under by-laws of a fraternal benefit society requiring payment of benefits to the beneficiary named in the deceased member's certificate, to "persons" designated beneficiaries, in the order named, in the by-laws, or to the "person' designated by the member in his will, if a legal beneficiary, and designated in the order provided in the by-laws, one of several to whom a deceased member devised the balance of his estate after collection of all debts due him, including insurance, by his executors, and payment of debts, funeral expenses, and special bequests, was not entitled to the benefit fund; the estate, not a "person" belonging to the class designated in the by-laws, being the beneficiary named in the will.

ANDERSON et al. v. GRAND LODGE, UNIT-[Ed. Note.-For other definitions, see Words ED BROTHERS OF FRIENDSHIP OF

TEXAS. (No. 805.)

(Court of Civil Appeals of Texas. Beaumont. Feb. 6, 1923.)

1. Insurance 784(1)-Change of beneficiary must comply with constitution and by-laws of benefit society.

In view of Vernon's Sayles' Ann. Civ. St. 1914, art. 4832, authorizing members of fraternal benefit societies to change the beneficiaries named in their certificates "in accordance with the laws, rules or regulations of the society," a change in beneficiary must be made in the manner prescribed by the constitution and by-laws, which, being binding on the member, are part of the contract between him and the society.

and Phrases, First and Second Series, Person.] 5. Insurance 775-Intention to designate beneficiary by will must be clearly expressed.

While a member of a fraternal benefit sowhere the constitution and by-laws prescribe ciety may designate a beneficiary in his last will, no different method, such intention must be clearly expressed.

6. Insurance 784 (5)-Member of fraternal benefit society held not entitled under by-laws to revoke certificate and name new beneficiary in will.

Under fraternal benefit society by-laws providing that the fund shall be paid "to such person as may be designated by a member in his or her last will," a member cannot revoke his certificate and name a new beneficiary in his will, such provision being applicable only where a legal beneficiary appointed as required by the by-laws in the first instance has predeceased the member and the latter makes no new designation by procuring the issuance of a new certificate.

2. Insurance 784(4)-Attempted change of beneficiary by issuance of new certificate on affidavit as to loss of original held ineffectual. In view of Vernon's Sayles' Ann. Civ. St. 1914, art. 4832, authorizing change of beneficiaries by members of fraternal benefit societies "in accordance with the laws, rules or reg-7. Insurance 782-Wife, as first beneficiary ulations of the society," an attempted change; of beneficiary by issuance of a new certificate, naming the member's estate instead of his wife as beneficiary, on affidavit that the original certificate was lost, without affidavits of the mem- Under fraternal benefit society by-laws prober and two witnesses that his wife had aban-viding for payment of deceased member's in

named in by-laws, takes benefit fund, where certificate issued after cancellation of certificate naming her as beneficiary names no legal beneficiary.

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

surance money to the beneficiary named in his [ of said certificate as a residuary portion of certificate or to persons designated beneficiaries the estate. The defendant in error declined in the constitution and by-laws in the order to pay the money to either claimant, but aftnamed, the wife, as the first beneficiary therein er consulting with the attorney for claimant, named, takes, though the member's certificate v. N. A. Bell, and attorney for the executors naming her as beneficiary is legally cancelled, where a new certificate names no legal beneficiary.

of the will, and the attorney for the claimant, Cora Anderson and other residuary legatees in the will, who all agreed that the estate

Appeal from Harris County Court; John of Bell could not take the fund, the executors W. Lewis, Judge.

Action by Cora Anderson and husband against Grand Lodge, United Brothers of Friendship of Texas. Judgment for defendant, and plaintiffs appeal. Affirmed. See, also, 223 S. W. 237.

surrendered the certificate to defendant in error, and defendant in error then paid the benefit fund to V. N. A. Bell, the beneficiary in the first certificate, who receipted and surrendered same to defendant in error on October 31, 1918.

On April 1, 1919, this suit was filed by M. H. Broyles, of Los Angeles, Cal., for ap- plaintiff in error Cora Anderson, joined by pellants.

Meek & Kahn, of Houston, for appellee.

her husband, as the only claiming residuary legatee under the will of Bell, against defendant in error, to collect the sum of $500 claimed to be due them by virtue of said second certificate.

Defendant in error answered by general demurrer, and special demurrer to the effect that the petition alleged that the policy upon which plaintiffs in error sought to recover was payable to the estate of J. B. Bell, and that

by-laws of defendant in error, the estate of Bell could not be made the beneficiary. It also answered by general denial and special plea, as follows:

O'QUINN, J. In 1913, J. B. Bell procured a benefit certificate for the sum of $500 in the United Brothers of Friendship of Texas, a fraternal beneficiary corporation, incorporated under and by virtue of the laws of the state of Texas, in which V. N. A. Bell, his wife, was named as beneficiary. About August 1, 1917, Bell applied for a new certifi-under the laws of the state of Texas, and the cate, making oath that his former certificate was lost, and requested that in the new certificate his estate be named as his beneficiary. A new certificate was issued, in which his estate was named as beneficiary. Bell died November 4, 1917. At the time of his death, fendant shows that heretofore, long prior to "Further specially answering herein, this dehe was a member in good standing in said the time mentioned in plaintiffs' petition, that fraternal benefit society. He left a will in the said J. B. Bell, as a matter of fact, was a which he directed that his executors should member of one of its local lodges, and as such collect all debts owing to him, including his member designated and had issued a certifilife insurance, and that after paying all his cate, regular in form, wherein he designated debts, funeral expenses, and certain bequests, and named therein his wife, V. Nora A. Bell, as the remainder of his estate should be paid to his beneficiary; that said policy was issued to the plaintiff in error Cora Anderson, and said member, J. B. Bell, on the 7th day of June, 1913, and accepted by him, and retained others in equal shares. When Bell obtained and kept in his possession; that thereafter, so the first certificate, in which his wife was defendant is informed, some time during the named as beneficiary, he carried it home and year 1917, as alleged by plaintiff, the said J. B. locked it up with other papers in an iron Bell, in some way, caused a policy or certificate safe, and it remained there until his death; to be delivered to him by this defendant order but in obtaining his second certificate he payable to his estate; that as a matter of law, made affidavit that it was lost. At the time as provided in the constitution and by-laws of the defendant order of which the said J. B. Bell of his death he and his wife were living towas a member, such a certificate could not be gether, and there is nothing in the record to issued, as well as under the laws of the state disclose that any discord had ever occurred of Texas such a certificate could not be issued; between them during the 17 years they thus that thereafter, after the death of said J. B. lived. Plaintiff in error Cora Anderson was Bell, his wife, V. Nora A. Bell, sent to this a sister of Bell. Bell's wife knew nothing of defendant, with proper proof of death, the certhe second certificate until after the death of tificate it had issued to the said J. B. Bell in his her husband. Plaintiff in error Cora Ander-lifetime, and on the date above written, and demanded payment thereof; that this defendant son, to whom the other residuary legatees in association took the matter up with the indethe will, his sisters, and nieces, had relin-pendent executor of the estate of said J. B. Bell, quished their claim, claimed the fund named mentioned by the plaintiff; that this defendant in the second certificate on the ground that after all special bequests, debts, and expenses of the estate were paid, there remained con siderable property, and as she and her said sisters and nieces were the residuary legatees in the will, they were entitled to the proceeds

and said executor took advice from lawyers in the city of Houston, said executor consulting with Judge A. R. Hamblen and Judge Streetman, so it is informed, and after said consultation and advice it has been advised that under the laws of the order, and under the laws of the state of Texas, that said certificate issued to