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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 The contract evidenced by those notes was purposes to which he has devoted it.” voidable, and appellant had the right upon In the recent case of Hugh v. Hugh, 221 attaining his majority to disaffirm it, provid- s. W. 970, in a decision by Section A of the ed, however, before being permitted to do Commission of Appeals, opinion approved by so, he should not only offer, but should be the Supreme Court, it is expressly held that required to restore the premises secured by one seeking a disaffirmation of a deed of him under the terms of the contract, and to contract on the ground of minority must realso account for the reasonable value of its store the consideration if still within his posuse and occupancy during the time he actu- session or in his control. ally occupied it and during the time he rent- We conclude, therefore, as before indied it and used the rents for the purchase, cated, that under the facts as presented in as he testified, for necessaries for his fam- the record before us appellant is entitled to ily. Appellant testified that he moved into disaffirm the contract evidenced by his notes the premises in controversy together with upon restoration of the premises in conhis wife, and called it his home, and occu- troversy to the plaintiff, and to recover the pied it and used it as his home
$2,500 in cash paid by him, less the reasonable “about 7 or 8 months"; that “during the past value of the use and occupancy of the prem12 months I have used what rent I have col- ises in controversy to the date when he tenlected off this house, together with my other dered plaintiff possession and warranty deed income, for the purpose of living expenses of from himself and wife. It would be mani. myself and wife. * On September 20, festly unjust and inequitable, we think, to 1921, I collected the last $50; that was just a permit the defendant to recover from the few days ago.
That is since I became 21 years of age.
plaintiff the full $2,500 in cash and at the I have not ever returned any of that money to Mr. Johnson. I have not the same time relieve him from accounting for money."
the reasonable value of the use and occupan
cy of the premises as indicated. He does not In the case of Bullock v. Sprowls, 93 Tex. deny that the premises, while occupied by 188, 54 S. W. 661, 47 L. R. A. 326, 77 Am. himself and wife, were reasonably necessary St. Rep. 849, it was held that a minor plain as a home, and he admits that thereafter tiff, seeking to disaffirm a sale of land made until about the date of the trial he rented by him during nonage, was not required to the premises and used the rents in purchastender back the consideration received by es necessary for himself and family. It is him and spent for other than necessaries clearly within his power and control to perduring his minority as a condition to his mit an abatement to such extent from the right to disaffirm. In that case, however, sum he seeks to recover of the plaintif, and it did not appear, as here, that the minor was this he should be required to do, regardless able to do so, or that he had appropriated the of any purpose or necessity that may have proceeds received by him in the transaction induced his purchase. there under consideration to supply himself Before concluding this opinion, we should or his family with necessaries, and the court perhaps add that we have not considered in the course of its opinion had this further what effect, if any, should be given to the to say:
fact that appellant, as he testified, collect
ed and used the rent off the premises after "That one disaffirming his deed on the ground he attained his majority, for the reason that that it was executed when he was a minor the issue of ratification is not presented in must restore the consideration, if it is still in his possession or within his control, is a
the present record, either in the pleadings, proposition about which there can be doubt. the court's charge, or the briefs of the parIt may also be true that if he has used it dur-ties, and we do not wish to be understood by ing minority for purposes for which the law what we may have said in disposing of this would permit him to charge his estate, as for case as having determined the issue of ratifiobtaining necessaries, he must restore or ac- cation, should it be presented on another count for its equivalent. Searcy v. Hunter, 81
trial. Tex. 616; Womack v. Womack, 8 Tex. supra. If he has retained it until he reached full age
It is ordered that the judgment be reversand 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.
fendant receiver appeals. Reversed and reMITCHELL v. BOWLES. (No. 1097.) manded. (Court of Civil Appeals of Texas. Amarillo.
Marvin H. Brown, of Fort Worth, for apFeb. 14, 1923.)
W. F. Schenck, of Graham, and Bean & 1. Corporations w262(2)-Fraud in procur. Klett, of Lubbock, for appellee. ing stock subscription not available against creditors of insolvent corporation. Fraud in procuring a stock subscription
BOYCE, J. This case comes back to us, contract, which would be a good defense against after a sojourn of nearly six years in the Suthe corporation as to liability on the contract preme Court, for reconsideration on assignor a note given thereunder for stock, is not ments not disposed of in our original judgavailable where the corporation has become in- ment. See 192 S. W. 611, and 245 S. W. 74. solvent and suit thereon is for the benefit of
The suit was brought by J. C. Bowles, as creditors whose rights accrued after organization of the corporation.
plaintiff, against the Commonwealth Bond
ing & Casualty Insurance Company, and J. 2. Corporations en 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. Where subscription contract was to take
the Commonwealth Bonding & Casualty Instock 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 ap3. Corporations em 253-Insolvency and neces. peal is from a judgment in plaintiff's favor,
sity of amounts due for stock established by canceling the note and deed of trust and judgment in receivership case. Judgment in receivership case against a cor
against the receiver, on his cross-action. poration adjudging it insolvent and directing the
The facts alleged and sustained by proof receiver to collect unpaid subscriptions, with are as follows: Plaintiff, on September, 30, a recital that the company's liabilities exceeded 1910, executed a contract, whereby he subthe assets, is sufficient, in an action by the scribed for 6242 shares of the capital stock receiver on a note for balance of stock sub- of a corporation to be “incorporated in pursuscriptions, to establish the insolvency and the ance to the laws of the state of Texas, under necessity of collection of all amounts due for the name of the Commonwealth Bonding & stock.
Accident Insurance Company," agreeing to 4. Corporations 265(4) - Receiver cannot pay therefor $2,500, $312.50 in cash to Stuarthave judgment on stock subscription note in Harkrider & Co. as organization expenses, possession of persons outside court's juris- and the remaining $2,187.50 to be paid to the diction and not parties to suit. Receiver of an insolvent corporation cannot ties satisfactory to the insurance department
company or its trustees, in money or securihave judgment on a stock subscription note, it appearing that it is in the possession of per
on notice from Stuart-Harkrider & Co. that sons outside the court's jurisdiction, not par- the capital stock of the corporation had been ties to the suit and evidently holding it under subscribed so as to perfect the organization, some claim of right thereto.
This subscription contract was secured by
false representations as to material matters, 5. Cancellation of instruments 35(3)-Hold
ers of subscription note necessary parties to which it is not necessary to here detail. On suit by maker to cancel it.
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 ed December 1, 1910, payable December 1, possession of persons outside the court's juris- 1915, for the $2,187.50, securing its payment diction, not parties to the suit and evidently by deed of trust on land in Lubbock county. holding it under some claim of right thereto.
The Commonwealth Bonding & Casualty In
surance Company was thereafter incorporatAppeal from District Court, Lubbock Coun.
ed under the laws of the state of Arizona, by ty; W. R. Spencer, Judge.
a charter filed on March 23, 1911, and some Suit by J. C. Bowles against J. W. Mitchell, time thereafter secured a permit to do busireceiver, and another, with cross-action by ness in Texas. Certificates of stock were isthe receiver. Judgment for plaintiff, and de- sued and delivered to plaintiff in June, 1911.
For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes
These did not disclose that the corporation, of such contract by the execution of the note. was an Arizona corporation, and plaintiff did By the terms of the subscription contract the not discover such fact and the falsity of the plaintiff contracted to take stock in a Texas representations made to him until a short corporation, and, if he had done nothing more while before the institution of this suit, on than this, it seems to us that there would be October 15, 1915. Plaintiff paid interest as it no basis for assertion of liability to pay for accrued on his notes and was represented by stock in an Arizona corporation. See authorproxy in at least one stockholders' meeting ities above. But the matter proceeded furof the corporation. On September 18, 1915, | ther than this: The subscription contract the district court of Tarrant county appoint- was settled by making a cash payment and ed appellant Mitchell and J. W. Hill receivers execution of the note as therein provided. of all the property of the defendant corpora- This note was used in the organization of the tion, and J. W. Mitchell was thereafter made company as a part of its capital stock and sole receiver. A judgment was entered in the shares of stock issued and delivered to plainreceivership case, adjudicating that the cor- tiff who thereafter acted as a stockholder for a poration was insolvent and directing the re- number of years. These facts, we think, ceivers to collect all unpaid subscriptions to bring him within the effect of the decisions the capital stock, reciting that the liabilities last above cited. of the company would, in all reasonable prob-  But it is urged by appellee that before ability, far exceed its assets. The receiver plaintiff can be cut off from urging a de pleaded that he did not have possession of fense which would be good against the corthe plaintiff's note and deed of trust; that poration, the receiver must show that the these were in possession of a receiver for the debts were created after plaintiff became an corporation, appointed by the courts of Ari- ostensible shareholder, the amount thereof, zona. Plaintiff, on the trial, offered testimony and such other facts as may be necessary to of the former secretary of the company, who determine the extent of plaintiff's liability remained in the service of the receiver as an to the creditors, and in this connection it is employee, as follows:
contended that the receiver did not allege or "The records of the company indicate that prove such necessary facts. It is true that plaintiff's notes, for which plaintiff sues, for a there are no specific allegations or proof of cancellation thereof, are on deposit with the the facts as to the creation of indebtedness treasurer of the state of Arizona. I do not and the amount thereof, etc., except as these know the exact date, but they have been so facts are to be inferred from allegations and 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 accom- Tarrant county on September 18, 1915, adpanying said notes, are at this time attached to judged that the corporation was insolvent the notes and are in the same custody as stated and that its liabilities exceeded its assets. above, to wit, with the treasurer of the state The judgment of the district court in the reof Arizona."
ceivership 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 III. 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 receiv. Civ. 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
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. MeAdams (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.
3. Insurance 770-New certificate naming member's estate as beneficiary held ineffective even if it revoked certificate naming his wife as beneficiary.
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.
[Ed. Note.-For other definitions, see Words 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
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 bene-certificate. ficiaries 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 member 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.
Under fraternal benefit society by-laws pro
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 bene- of the will, and the attorney for the claimficiary.
ant, Cora Anderson and other residuary lega
tees 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.
surrendered the certificate to defendant in Action by Cora Anderson and husband error, and defendant in error then paid the against Grand Lodge, United Brothers of benefit fund to V. N. A. Bell, the beneficiary Friendship of Texas. Judgment for defend- in the first certificate, who receipted and surant, and plaintiffs appeal. Affirmed. rendered same to defendant in error on OctoSee, also, 223 S. W. 237.
ber 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.
her husband, as the only claiming residuary Meek & Kahn, of Houston, for appellee.
legatee under the will of Bell, against de
fendant in error, to collect the sum of $500 O'QUINN, J. In 1913, J. B. Bell procured claimed to be due them by virtue of said a benefit certificate for the sum of $500 in
second certificate. the United Brothers of Friendship of Texas,
Defendant in error answered by general a fraternal beneficiary corporation, incorpo- demurrer, and special demurrer to the effect rated under and by virtue of the laws of the that the petition alleged that the policy upon state of Texas, in which V. N. A. Bell, his which plaintiffs in error sought to recover was wife, was named as beneficiary. About Au-payable to the estate of J. B. Bell, and that gust 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 by-laws of defendant in error, the estate of was lost, and requested that in the new cer- Bell could not be made the beneficiary. It tificate his estate be named as his beneficiary. also answered by general denial and special A new certificate was issued, in which his
plea, as follows: estate was named as beneficiary. Bell died November 4, 1917. At the time of his death,
"Further specially answering herein, this dehe was a member in good standing in said the time mentioned in plaintiffs' petition, that
fendant shows that heretofore, long prior to 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 certifi. life 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, ma le 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 to
was 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 bis 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 inde. the 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 and said executor took advice from lawyers after all special bequests, debts, and expenses in the city of Houston, said executor consulting of the estate were paid, there remained con
with Judge A. R. Hamblen and Judge Street. siderable property, and as she and her said tion and advice it bas been advised that under
man, so it is informed, and after said consultasisters and nieces were the residuary legatees the laws of the order, and under the laws of the in the will, they were entitled to the proceeds state of Texas, that said certificate issued to