208 S.W. 372 | Tex. App. | 1918
Lead Opinion
The appellant filed its suit in the county court of Potter county, Tex., to recover on a promissory note, executed by the appellee and payable to the Amarillo National Life Insurance Company. The appellant alleged that it was a corporation, incorporated under the laws of the state of California, with a *373 permit to do business in Texas, and that the Amarillo National Life Insurance Company is a corporation, incorporated under the laws of the state of Texas. On the 19th day of October, 1913, the appellee executed his promissory note, payable to the Amarillo National Life Insurance Company, for the amount of the premium due on the policy issued by the Amarillo National Life Insurance Company. The appellant alleges that —
After the execution of the note sued on, "the California Life Insurance Company took over all of the assets and liabilities of said the Amarillo National Life Insurance Company, and became the legal owner and holder of the note above described, having assumed the obligations imposed by all policies of insurance issued by said the Amarillo National Life Insurance Company, including the defendant's policy, and having purchased and become the legal owner and holder of all premium notes due on such policy, and having the right by reason of such purchase to collect premiums due on such policies of insurance, including the defendant's policy of insurance and the premium thereon due as here sued for, plaintiff becoming the owner of said note above set forth by reason of said purchase on or about the 18th day of March, A.D. 1916."
The appellant, by supplemental petition, alleged that —
"About the 18th day of March, A.D. 1916, the plaintiff, by purchase, took over the Amarillo National Life Insurance Company's life insurance business with all its assets and liabilities pertaining to such insurance business, assuming liability on its existing policies of insurance and having transferred to it all notes and choses in action of said Texas corporation pertaining to said insurance business, among which was the note of the defendant herein sued upon. That such contract of sale of said Amarillo National Life Insurance Company to the California State Life Insurance Company was in all things according to law and such contract was approved by the department of insurance and banking of the state of Texas."
The trial court sustained a general demurrer, and, the appellant refusing to amend, the cause was dismissed, from which Judgment the appellant has appealed to this court.
Article 7797, Rev.St. 1911, provides as follows:
"A monopoly is a combination or consolidation of two or more corporations when effected in either of the following methods: (1) * * * (2) Where any corporation acquires the shares or certificates of stock or bonds, franchise or other rights, or the physical properties, or any part thereof, of any other corporation or corporations, for the purpose of preventing or lessening, or where the effect of such acquisition tends to affect or lessen competition, whether such acquisition; is accomplished directly or through the instrumentality of trustees, or otherwise."
Article 7807, Rev.St. 911, provides as follows:
"Any contract or agreement in violation of the provision of this chapter shall be absolutely void and not enforceable either in law or equity."
Article 4737, Rev.St. 1911, provides as follows:
"Any life insurance company, organized under the laws of this state, may reinsure in any insurance company authorized to transact business in this state, any risk or part of a risk which it may assume; provided, that no such company shall have the power to so reinsure its entire outstanding business until the contract therefor shall be submitted to the commissioner of insurance and banking, and be by him approved, as protecting fully the interest of all the policy holders."
The allegation that the appellant "took over all the assets and liabilities of the Amarillo National Life Insurance Company" does not necessarily mean that the transaction was not authorized by the provisions of article 4737 of the Revised Statutes. All of the assets and liabilities of the Amarillo National Life Insurance Company may have been represented by the outstanding policies of insurance and the premium notes unpaid. If this was true, the transaction was not repugnant to the provisions of the anti-trust statutes above quoted.
The allegations of the appellant are susceptible of the construction that the transaction pleaded had been fully executed by the voluntary act of the parties. If the transaction was an executed one, the authorities seem to hold the title to the note in question passed to the appellant. The rule is stated in 13 C.J. p. 511, § 467:
"That property has been acquired in violation of some law does not rob it of its character as property nor prevent it from becoming the subject of legitimate contract which may be enforced in courts of law."
In the case of Wegner v. Biering,
"When the contract has been executed without the aid of courts by the voluntary acts of the parties, the profit or estate realized is not contaminated."
We are of the opinion that the pleadings of the appellant are not subject to general demurrer, and therefore reverse and remand the cause that the matters in controversy may be tried out.
HUFF, C.J., disqualified.
Concurrence Opinion
The statute under consideration makes illegal the purchase of the property of one corporation by another only when the acquisition is "for the purpose of preventing or lessening or where the effect of such acquisition tends to affect or lessen competition." The first question, then *374
is whether the allegations of plaintiff's petition show that such was the purpose or effect of the transaction set out therein. The presumption of innocence would apply, and, unless the facts stated clearly show that the transaction was unlawful, it will be presumed that the contract did not violate the law. Williams v. Talbot,
But I am of the opinion that the demurrer was improperly sustained, even if the allegations of the petition had brought the contract of sale within the terms of Rev.St. art. 7797. Of course, under such circumstances, if the suit were brought to enforce the contract of sale, its invalidity would be a sufficient defense; but the contract itself has been consummated and furnishes only the basis of plaintiff's title to the note. Let us first consider this phase of the question, independent of any effect that the provision of the statute, which makes contracts in violation of the act "absolutely void and not enforceable," might have on it. The authorities, I think, amply sustain the proposition that where a contract, in violation of law or against public policy, has been fully executed, the courts will recognize and protect the rights and titles resulting from the execution of the contract. As between the parties themselves, when an illegal contract has been executed in whole or in part, the maxim, "Exturpi causa non oritur actio, in parl delicto melior est conditio possidentis" (Pomeroy, Equity Jurisprudence [2d Ed.] § 939), applies. The condition of the possessor referred to in the maxim "is clearly the condition of the parties with respect to their property rights created by or resulting from the contract. If the contract is still executory, the promisor is left undisturbed in possession of the money or other property which he agreed to pay or transfer. If the contract has been executed, the promisee is left undisturbed in the possession of the money or other property which has been conveyed to him." Pomeroy, § 939. If in such executed contracts the other party to the unlawful contract cannot question the title to property conveyed in execution thereof, why should some third person who has no title to the property himself, and whose only interest in the matter is in the question of title, be permitted to do so? The following Texas authorities support the proposition first above announced:
In Wegner v. Biering,
"When the contract has been executed without the aid of the courts by the voluntary acts of the parties, the profit of estate realized is not contaminated."
See, also, quotations to same effect from the Planters' Bank Case (16 Wall. 483,
In Patty-Joiner Co. v. City Bank,
"The distinction between enforcing illegal contracts or contracts void as against public policy, and asserting title to property or money which has arisen from them, is clearly and distinctly drawn."
In the Northern Securities Cases (Harriman v. Northern Securities Co.)
"In fine, the title to these stocks having intentionally been passed, the former owners or part of them cannot reclaim the specific shares and must be content with their ratable proportion of the corporate assets."
The cause of action in this case is on the note, which has no connection with the illegal contract. The title to this note is either in the Amarillo Company or the California Company. If, as between these two, it is in the California Company, the defendant cannot question such result unless this conclusion is affected by the terms of the statute which expressly make such contracts "absolutely void and not enforceable."
I do not deny that in one sense, and perhaps in the strictest and most accurate conception thereof, the word "void" involves the idea of utter ineffectiveness in all situations and for all purposes, leaving the effect of the void transaction the same as if it had not taken place. Nor that the use of the word "absolutely" in connection does not lend strength to the contention that it was in this sense that the word was used in this statute. But the word "void" is very frequently used in legal phraseology to describe the effect of a stated set of circumstances in a sense that does not comprehend this utter nullity. In fact, the authorities assert that it is "seldom, unless in a very clear case, to be regarded as implying a complete nullity; but it is, in a legal sense, subject to large qualifications, in view of all the circumstances calling for its application and the rights and interests to be affected in a given case." Wiener v. Zweib,
While the suit here is by one of the parties to the alleged illegal contract, the suit is not to enforce that, contract; it has been executed by the parties themselves. The title to the note alone is involved, and that has been by the acts of the parties vested in the California Company. *376
Dissenting Opinion
I regret my inability to agree with the majority in the disposition made of this appeal. The primary question presented is whether or not the court erred in sustaining the general demurrer to the plaintiff's cause of action, as set out in its original and first supplemental petitions. Appellant, plaintiff in the court below, instituted a suit to recover of appellee upon a note for $485.90, executed to the Amarillo National Life Insurance Company. The note is as follows:
"485.90. Sandia, Tex., October 19, 1913.
"On or before the 19th day of July, 1914, without grace, I promise to pay to the order of the Amarillo National Life Insurance Company, at its office in Amarillo, Texas, the sum of four hundred eighty-five and 90/100 dollars, with interest thereon from date until paid. at the rate of five per centum per annum. This note is given on account of the premium due October 19, 1913, on said company's policy No. 3368, insuring my life and if it shall not be paid in full at its maturity all insurance under said policy shall cease and determine ipso facto and immediately, save as therein otherwise provided. In such event this note shall cease to be binding except for the amount of the premium unpaid and unearned at the date of default, together with interest thereon; but for that amount and interest it shall remain a valid obligation. [Signed] J. D. Kring."
Plaintiff's original petition alleges:
That it is a corporation, having its principal office and place of business in Sacramento, Cal., but has a permit to do business in this state and is lawfully doing business in Texas, maintaining an office and place of business in Amarillo, Potter county, Tex. "That heretofore, to wit, on or about the 19th day of October, 1912, the Amarillo National Life Insurance Company, a corporation, having its principal office and place of business at Amarillo, Potter county, Tex., duly organized and chartered and doing business under the laws of the state of Texas, was in the business of insuring the lives of individuals in said state, receiving premiums therefor on the policies of insurance so issued by it."
The pleading then sets out the issuance of a policy to appellee, giving the amount, and alleges the execution of a premium note, in the sum of $485.90; that on the 19th day of October, 1913, the second annual premium being due, the note above set out was executed and delivered to the Amarillo National Life insurance Company, and continues as follows:
"That thereafter the plaintiff herein, the California State Life Insurance Company, took over the assets and liabilities of the said the Amarillo National Life Insurance Company, and became the legal owner and holder of the note above described, having assumed the obligations imposed by all policies of insurance issued by the Amarillo National Life Insurance Company," etc.
The petition further alleges that plaintiff is the owner of the note sued on by reason of the fact that it purchased the same from the Amarillo National Life Insurance Company. By appropriate allegations it is shown that $364.42 of said note, with interest thereon, from October 19, 1913, was earned premium at the time of the filing of the suit; that said amount is long since past due, and defendant, though often requested, has wholly failed to pay the same. By supplemental petition appellant alleges, in part, as follows:
"For special answer, if required, to the allegations in said first amended original answer, plaintiff admits that the Amarillo National Life Insurance Company was a corporation, duly organized and existing by virtue of the laws of the state of Texas, wih its principal office and place of business in Potter county, Tex., and that at the times complained of had full charter powers of conducting the business of a life insurance company, in soliciting insurance on the lives of individuals, and of collecting premiums on such of its policies as were issued; that the California State Life Insurance Company is a foreign corporation, organized and existing under and by virtue of the laws of the state of California, with a permit to do business in Texas, and that it had such permit to do business in Texas prior to the sale of the Amarillo National Life Insurance Company to it, but plaintiff alleges that, at the time of such purchase of said Amarillo National Life Insurance Company by it, it had few, if any, policies of insurance in force in the state of Texas, having only one agent in the state, and that such policies as had been issued by it and as were in force and effect had virtually all expired at the time of the purchase of said Texas corporation; that about the 18th day of March, A.D. 1916, the plaintiff, by purchase, took over the Amarillo National Life Insurance Company's life insurance business, with all its assets and liabilities pertaining to such insurance business, assuming liability on its existing policies of insurance and having transferred to it all notes and choses in action of said Texas corporation pertaining to said insurance business, among which was the note of the defendant herein sued upon; that such contract of sale of the said the Amarillo National Life Insurance Company was in all things according to law, and such contract was approved by the department of insurance and banking of the state of Texas; and plaintiff alleges the fact to be that the policy of insurance as issued to defendant was in all things according to the charter rights and powers of said the Amarillo National Life Insurance Company, in accordance with its life insurance business," etc.
The note above set out was payable to the order of the Amarillo National Life Insurance Company, and bore no indorsements whatever.
Article 7797, Vernon's Sayles' Civil Statutes, defining a "monopoly," is:
"A monopoly is a combination or consolidation of two or more corporations when effected in either of the following methods: (1) * * * (2) Where any corporation acquires the shares or Certificates of stock or bonds, franchise or other rights, or the physical properties, or any part thereof, of any other corporation or *377 corporations, for the purpose of preventing or lessening, or where the effect of such acquisition tends to affect or lessen competition, whether such acquisition is accomplished directly or through the instrumentality of trustees or otherwise."
Article 7807, Id., provides:
"Any contract or agreement in violation of the provisions of this chapter shall be absolutely void and not enforceable either in law or equity."
The allegations in appellant's pleadings, as I understand them, leave no room for doubt as to the nature of the transaction through which appellant acquired the note. I am unable to find the faintest hint that it was a reinsurance undertaking. The allegations are:
"That thereafter the plaintiff herein, the California State Life Insurance Company, took over all the assets and liabilities of the said the Amarillo National Life Insurance Company; * * * that plaintiff is the owner of the note sued on by reason of the fact that it purchased the same from the Amarillo National Life Insurance Company; * * * that it had such permit to do business in Texas prior to the sale of the Amarillo National Life Insurance Company to it, but plaintiff alleges that at the time of such purchases of said Amarillo National Life Insurance Company by it," etc.
There is this further specific allegation:
"That about the 18th day of March, A.D. 1916, plaintiff, by purchase, took over the Amarillo National Life Insurance Company's life insurance business, with all its assets and liabilities pertaining to such insurance business," etc.
These statements, in my opinion, show simply a sale upon the one part and a purchase upon the other, and I am unable to find the word reinsurance or any synonym of it anywhere in the pleading. If I am correct in this construction, then article 7797, supra, has been violated, and it requires no argument to show that the effect of such a sale tends to affect competition. The unavoidable conclusion is that, when the Amarillo National Life Insurance Company sold all of its life insurance business, it, by virtue of that fact, was at an end. Appellant having acquired the note in virtue of a contract clearly within and inhibited by the statute, it is, in the language of the statute, "absolutely void and not enforceable, either in law or equity." Article 7807, supra; Langford et al. v. Powell et al.,
"The defense of illegality, although open to the parties and those claiming under them, cannot as a rule be invoked by third persons. This rule is, of course, subject to an exception, where it is attempted to assert rights based on a contract where the illegality of the contract appears from the plaintiff's own showing or where the interests of the person asserting the invalidity are affected." 13 C.J. 508, § 458.
Since the statute expressly declares contracts of the character shown in the plaintiff's pleadings to be absolutely void, and since in order to recover as the assignee of the note appellant must assert ownership under the contract, the writer thinks the case comes within that class which may be attacked by third parties. Cumberland Tel. Tel. Co. v. City of Evansville (C. C.) 127 F. 196. The absolute ownership of the note being still in the Amarillo National Life Insurance Company, appellee could insist that no one but the owner be permitted to collect it from him. Until appellant shows its legal right to recover by its pleading, a general demurrer should be sustained. 8 C.J. 885, § 1157; Colbertson v. Beeson,
Special Chief Justice ROLLINS quotes from 13 C.J. 511, § 467, as follows:
"That property has been acquired in violation of some law does not rob it of its character as such, nor prevent its becoming the subject of legitimate contracts which may be enforced in courts of law."
The language quoted is a part of the syllabus of Wayman Investment Co. v. Wessinger Wagner,
"Although there may be some illegal features indirectly connected with a transaction involved in a suit, yet the plaintiff may recover if his cause of action is otherwise legitimate, and he can make out his case without calling to his aid the illegal agreement. The test of whether the demand can be enforced at law is whether the plaintiff requires the aid of the illegal contract to establish his case."
That case is authority in this only in the announcement of the above rule. Since it is not necessary for the lessor, in order to recover the rent, to prove any fact or circumstance with regard to the erection of his building, as a whole the case has no application here. The writer has no quarrel with the rule of law quoted by Special Chief Justice ROLLINS. Although the lessor in that case had, in violation of the fire ordinance, erected a wooden or prohibited building on his lot, it was nevertheless his property as against the world, and there was no statute declaring, as in the instant case, that the contract was "absolutely void and not enforceable, either in law or equity." Nor is the rule quoted from the case of Wegner Bros. v. Biering,
"Where a statute expressly declares that certain kinds of contracts shall be void, there is then no doubt of the legislative intention and an agreement of the kind voided by statute is unlawful. The same is true where the contract is in violation of a statute, although not therein expressly declared to be void. It is immaterial whether the thing forbidden is malum in se or merely malum prohibitum." 13 C.J. 420, § 351.
The presumption of innocence, which Associate Justice BOYCE thinks should apply, in my opinion does not obtain here, and the holdings to that effect in the cases cited by him were under altogether different circumstances. In my opinion the presumption of innocence should not obtain when the accused has confessed his crime in writing; nor should the courts, in the face of such confession, endeavor to draw from it inferences of fact tending to show a possibility of innocence as against an unequivocal confession, setting up the details of his offense, such as we find in the appellant's pleadings. A culprit should not be permitted to urge a general plea of not guilty and call upon the courts to imagine the existence of facts not set out in his statement and contrary thereto which, if true, would possibly acquit him; nor should he be permitted to retain and enjoy the fruits of his contract illegally obtained, simply because he was not caught in the act and was not challenged until he had the goods safely in hand and was in a position where he could claim that the contract was an executed one. This would be placing a premium on alertness and agility in lawbreaking.
As between the two insurance companies, the contract may in one sense be considered as executed, but judicial aid should not be extended either party in the enforcement of any alleged rights acquired under it, especially when the plaintiff must depend upon the illegal contract as one necessary ground of recovery. Both the statute and consideration of public policy demand this of the courts. McMullen v. Hoffman,
Entertaining the views above expressed, I respectfully dissent from the majority holding and insist that the judgment should be affirmed.
Addendum
"I am unable to find the word reinsurance, or any synonym of it, in the pleading." The common acceptation of the term "reinsurance" is to assume the obligation imposed by a policy of insurance. The pleader alleged that the California Company assumed the obligation imposed by all policies of insurance issued by the Amarillo Company. This court has held that the presumption of legality must be indulged. Jackson v. Greenville Compress Co.,
Counsel for appellee contend that it was the duty of the appellant to plead any special circumstances which relieved the transaction of illegality, and that it is not proper for the court to conjecture that such circumstances exist. The court does not undertake such task. Appellee urged a general demurrer. The transaction must be presumed-legal unless the contrary conclusively appears. Every reasonable intendment in favor of the sufficiency of the petition must be indulged. A reinsurance contract would have been legal. It does not conclusively appear that the transaction alleged was not a reinsurance contract. It necessarily follows that this court should indulge the presumption of the legality of the transaction and the sufficiency of the pleading, rather than to conjecture that the "appellant had made the best statement of its cause of action that it could make, and that there were no special circumstances which it could truthfully plead that would relieve the transaction and contract between appellant and the Amarillo National Life Insurance Company of its apparent illegality."
The Supreme Court of this state has held that a county commissioner's court and, a broker contracting with it are presumed to know the law and intended to obey it. Foard County v. Sandifer,
In the opinion of the writer the motion is without merit and is in all things overruled.
Addendum
The motion is in all things overruled.
