T. V. Board v. Texas & Pacific R. W. Co. , 46 Tex. 316 ( 1876 )

Moore, Associate Justice.

This suit was brought by appellants, citizens of Harrison county, to annul certain proceedings had in the County Court of said county, ordering that bonds of said Harrison county for $300,000 should' be issued and delivered to appellee, the Texas and Pacific Railway Company, as a donation by said county, to aid in the construction of its railway, and to enjoin the clerk of the County Court from attesting said bonds, the chief justice of said county from issuing, and said railway company from demanding and receiving them.

On an application to Hon. M. D. Ector, judge of the sixth judicial .district, in which said county of Harrison is situated, before the filing of the petition, an order was made by said judge in chambers, that an interlocutory injunction, as asked for, should he issued on the petition being filed, and bond for the sum of $100,000 being given by plaintiffs. The plaintiffs, however, failed to give bond as required, and consequently the injunction prayed for was not issued. But the petition having been filed, on the 6th of June, 1874, citations were issued which, on the 8th of said month, were regularly served upon the defendants, who in due time entered their appearance and answered the petition. And at the January Term, 1876, of the District Court for Harrison county, the case came on to be heard on a demurrer of the defendants to the petition; and the court holding the demurrer well taken, the plaintiffs amended their petition, and, among other things, alleged that said Texas and Pacific Bailway Company had fraudulently procured all of said bonds, referred to in the original petition, to be signed by the chief justice of said County Court, and to be countersigned by said clerk and attested with his official seal; and that said chief justice had delivered them to the comptroller of the State, by whom, after they were registered and indorsed, they had, on or about the 10th of May, 1874, been- delivered to said railway company ; and that said company having, by illegal means and devices, obtained possession of said bonds, with the fraudulent intent and purpose of preventing the legaliiy of the proceeding whereby they were procured to be issued from being inquired into, had, on to wit, about the 30th day of May, 1874, transferred and assigned all of them to some person or persons to plaintiffs unknown, for the full face value thereof; but that said persons to whom said bonds had been so transferred by said company and the then holders of them, took them with full notice of the fraudulent practices and devices, by means of which said bonds were caused to be issued, and by which their delivery to said company by the comptroller was procured.

The relief prayed for by the plaintiffs in their amended petition is, in substance, that all the orders and proceedings of the County'Court in the premises be held void and of no effect; that all of said bonds be adjudged and declared null and void, and the special tax levied by said County Court for their payment be revoked and repealed; or if it should be found that said bonds had gone into the hands of innocent parties, without notice of said frauds, whereby they were procured, and that in law and equity they should be paid to the parties holding them, they pray, in that event, that said Texas and Pacific Kailway Company " be adjudged and held to provide for the payment of the same,” &c., and that the order of the County Court levying a special tax for this purpose be annulled.

To the petition as amended, the defendants again excepted, and then* exceptions were sustained; and plaintiffs declining to further amend, final judgment was given by the court against them on the exceptions.

It is altogether unnecessary, in the attitude in which they are presented in this record, for us to consider or undertake to determine the several questions mainly discussed by appellants’ counsel, touching the validity of the bonds, to enjoin the issuing of which the suit was first brought. Whatever conclusion we might be inclined to form as to them, we think it manifestly appears from the petition and amended petition that the parties interested in the subject-matter of the suit are not before the court. If it is conceded that the judgments or orders of the County Court, brought in question by appellants, can be reviewed, and if found to be erroneous or unauthorized, revoked and annulled by an original suit, brought for this purpose in the District Court by an inconsiderable fraction of the citizens and tax-payers of the county, evidently the holders and owners of the bonds are immediately and directly interested in the suit, and should be made parties to it.

Appellants’ counsel do not deny or attempt to controvert this well-established elementary principle. They maintain, however, that it is inapplicable in this case, because, as they say, appellees, the defendants in the court below, were the only parties having or claiming any interest in upholding or maintaining the validity of the judgments, orders, and proceedings of the County Court which they desire to review, or who claimed any right to or interest in the bonds which appellants Avere seeking to have canceled and annulled Avheu the suit was instituted; and although they allege in their amended petition that the bonds had been transferred by appellees to the then holders of them, for their full face value, yet, as it appears they must have been so transferred after the filing of their original petition, the holders acquired whatever interest they have to them pendente lite, and are not therefore, as they maintain, entitled to be made parties to the suit, but must abide its result against those from whom they purchased.

If the rule of lis pendens is applicable to the persons to whom appellants allege, in their amended petition, these bonds were transferred by the. Texas and Pacific Bailway Company, unquestionably the objection that these parties have not been brought before the court is untenable. It may, however, be well questioned whether there was a lis pendens, such as operated as constructive notice to the purchasers at the time these bonds were transferred. The determination of this point depends upon whether Us pendens begins from the filing of the petition or the service of the citation. This question, as far as.we are aware, has not attracted the attention of this court; but elsewhere it seems to be generally held to commence, unless it is otherwise pro- , vided by statute, from the service of the subpoena and the filing of the bill.

Says Chancellor Kent, who, by his decision in the case of Murray v. Ballou, 1 Johns. Ch., 566, seems to have first grafted this doctrine into American jurisprudence: “ The lis pendens begins from the service of the subpoena after the bill is filed.” And says Mr. Commissioner Earl, in the case of Leitch v. Wells, 48 N. Y., 585: “Itherefore hold that there, is no lis pendens, so as to give constructive notice to strangers, until a summons has been served, and a complaint, distinctly stating the subject of the litigation and specifying the claim made, has been filed in the proper clerk’s office.” “The rule,” he adds, “ as thus stated, is sufficiently hard and unreasonable.” And says Mr. Freeman, in his valuable work on Judgments: “While Us pendens can in no case commence at common law until process is issued and served, a constructive service produces the same effect as a personal service. Whenever the service may be made by publication, the lis pendens is complete upon the actual publication of the notice for defendant to appear; but it seems there is no Us pendens until the order for publication is fully executed. The acceptance of service, as of a prior date, in pursuance of a previous agreement, will not bind any lands conveyed prior to the time when the acceptance of service was in fact made. Where a defective subpoena was served, and afterwards the service was set aside and the subpoena amended so as to bear date the day the service was set aside, it was held that Us pendens did not begin until service of the amended subpoena.” (Freem. on Judg., sec. 195, and. cases cited.)

It should be observed, however, that in some of the courts, where it is held that constructive notice of Us pendens dates from the service of the subpoena and filing of the bill, the suit or action is begun by issuing the subpoena, or other process, and not as with us, by the filing of the petition or bill setting forth the cause of action. Hence, a stranger to the action- would have an opportunity of informing himself of the existence and nature of the suit here by the filing of the bill, which would not be afforded merely by service of a subpoena. And it may be that public policy, from which this rule springs, should give it effect with us from the fifing of the suit, if due and reasonable diligence in procuring service and prosecuting the suit is shown.

But, as there is another answer to appellants’ position, that the parties to whom these bonds were transferred pending the suit are subject to the rule of lis pendens, which is conclusive, we need not at present make an authoritive decision as to the time at which, with us, it begins.

Whatever difference of opinion there may have been in the professional mind in regard to secmities of the character of these bonds, it must be conceded that it is now too well settled, by the overwhelming weight of judicial decision, for those entertaining a different opinion, to maintain that they should not be treated as commercial paper, or that the holders of them are not entitled to the privileges and immunities attaching to negotiable instruments. (Dillon Muncip. Corp., sec. 405; note Daniel on Bego. Inst., sec. 1500, and cases cited.) In the courts of Pennsylvania alone, it is believed the contrary doctrine is still maintained. The Supreme Court of that State, while denying that such bonds are negotiable instruments, says: “We have said on several former occasions, that we will not treat bonds like these as negotiable secmities. On this point we stand alone. All the courts, American and English, are against us.” (Diamond v Lawrence County, 37 Penn. St., 353.)

And there is not even one solitary exception to the universally recognized rule that negotiable instruments are not within the rule of Us pendens. “ There is no case,” says Mr. Powell, in Ms work on mortgages, (2 vol., 618,) “in which equity has determined the property in goods to be effected by reason of a Us pendens, where possession is the principal evidence of ownersMp, as of personal chattels.” And Mr. Freeman, while he insists that it must be conceded that at tMs day lis pendens applies with equal force to controversies in regard to personal property, as in real actions, and that commercial paper not past due is the only exception to the universal application of the rule, says: “ The necessity of preserving the negotiable character of negotiable paper not due, so as to require no inquiry beyond inspection of the paper itself, in relation to its ownership, has frequently been considered paramount to the necessity of avoiding transfers pendente lite, and that class of paper is the only property not liable to the doctrine of lis pendens.” (Freeman on Judgments, sec. 194; Kriffer v. Ehler, 13 Penn. St., 388; Diamond v. Lawrence County, 37 Penn. St., 353; Day v. Zimmerman, 68 Penn. St., 72; Murray v. Lylburn, 2 Johns. Ch., 441; Winston v. Westfeldt, 22 Ala., 760.)

It is also insisted by appellants, as it is alleged in the petition, that the holders took the bonds with full knowledge of the frauds through which they were procured; and as they hold them by no better title than did the Texas and Pacific' Railway Company before they transferred them, they are open to the same defenses in their hands as in the company’s, and therefore the holders need not be made parties. But this is no answer to the objection that the holders of the bonds should be parties to the suit; for if they have no better title to them than said company, they are nevertheless entitled to be heard before a decree is made in any way affecting their rights.

And even though the parties to whom the bonds were transferred had notice of the fraud by which they were procured, if they were in fact procured by fraud, how can the court know that they will not pass into the hands of innocent parties before the case is tried, and that its judgment will be either inoperative and useless, or injuriously affect the rights of parties who have had no notice of the suit, and no opportunity of being heard in vindication of their rights. “When such paper is the subject of the suit, the court ought to require it to be brought into court, or so placed that the defendant cannot commit a fraud upon the law by making the judgment unavailable.” (Freeman on Judg., sec. 194.) And it would seem, unless the plaintiff will take the necessary steps to have this done, he would have no right to ask the court to render an unavailable judgment. Courts do not sit to determine abstract principles, but to decide practical issues, and settle controversies in which the litigants have a substantial or immediate interest.

It remains to inquire, as it is held that the court did not err in holding that plaintiffs’ petition was insufficient to warrant a judgment annulling the bonds, should it have given the alternative judgment prayed for by the defendants, viz, that the Texas and Pacific Bailway Company he compelled to pay the principal and interest of said bonds, and that the tax assessed for this purpose he repealed ?

That a judgment of this kind is not authorized by anything in the petition, is, we think, too obvious for discussion. To repeal the tax for the payment of the principal and interest of the bonds, would impair the rights of the bondholders, is beyond question. The plaintiffs have no right to ask'the court to require them to accept a different security for the payment of the bonds to that given by law. The judgment asked is of an extraordinary character. It could probably be only made effective through a mandatory injunction, by which the company, under penalty of attachment, would be required to pay to the collector of taxes the amount annually assessed -for the payment of the bonds. The plaintiffs have no interest in this matter beyond the amount of their own assessment. They do not allege how much this is, or that payment of it has been demanded of them; or, if they should be wrongfully compelled to pay said tax, that there is reason to fear that they will thereby suffer irreparable injury. Bor do they show any reason whatever for the interposition of a court of equity, and the granting of the extraordinary and unusual relief asked for.

The judgment is affirmed.

Aeeirmed.