Court Opinion

ID: 9662328
Source: CourtListenerOpinion
Date Created: 2023-08-23 23:05:57.346885+00
Date Added: 2024-06-11T18:14:38.632089
License: Public Domain

*791On Motion for Rehearing.
Appellants have filed an extensive and able motion for rehearing in this case and have most forcefully challenged our opinion in several respects, one challenge being to our statement that the patent had not been returned to appellee. It is true that the original letters patent were shown to have been in possession of appellee at the time of the trial, but the right to their use was still in appellants and will so remain until such time as they are recon-veyed, forfeited or cancelled by judicial decree. The physical possession of the letters patent does not carry with them the right to their use in the face of the license agreement in the record.
Appellants also challenge most forcefully our disposition of their Point 9 which is set out in the foregoing opinion. They contend that the alleged illegality of the contract is fundamental error and may be considered by this court or by the Supreme Court without the matter having been pleaded or the point having been raised, and rely strongly upon the cases of Texas & Pacific Coal Co. v. Lawson, 89 Tex. 394, 32 S.W. 871, 34 S.W. 919, and Ramsey v. Dunlop, 146 Tex. 196, 205 S.W.2d 979, in an opinion dated November 12, 1947, subsequent to the passage of Rule 94.
In the Lawson case the question that the contract violated the anti-trust statutes and was therefore void was not raised by either of the parties in the trial court and was not assigned as error on appeal. The Supreme Court in holding that the contract created a trust within the meaning of the statute and was void and that no action or counterclaim could be founded thereon, regardless of pleading, said [89 Tex. 394, 34 S.W. 920]:
“Counsel for Lawson, in an able argument, contends that this court has no jurisdiction to consider the illegality of the contract, since that question, as indicated in our former opinion, was not raised in the court below, and not assigned as error here. * * * the various claims and counterclaims of the plaintiff and defendant as set up in the pleadings are based upon the supposed rights of the parties growing out of and dependent upon the validity of the contract * * * referred to, and the one preceding it, which was tainted with the same vice. * * * Parties litigant cannot, by express waiver, induce a court to pass over the illegality of g contract, and administer their supposed rights thereunder, based upon the assumption of its legality; and certainly a mere omission to notice such vice or bring it to the attention of the court cannot have that effect.” (Emphasis ours.)
In Ramsey v. Dunlop, supra, 1947, the Supreme Court, citing the Lawson case said [146 Tex. 196, 205 S.W.2d 983]:
“We shall not undertake to give, an all-inclusive definition of fundamental error; but, to the purpose of this case, we do hold that an error which directly and adversely affects the interest of the public generally, as that interest is declared in the statutes or Constitution of this state, is a fundamental error. Our meaning finds illustration in the case of Texas & Pacific Coal Co. v. Lawson, 89 Tex. 394, 400, 32 S.W. 871, 34 S.W. 919. In that case the plaintiff sued for rents alleged to be due under a written lease; the defense was that á correct statement of accounts would show that Lawson owed no rents but was due lárge sums by plaintiff. Although it was apparent from the petition that the contract violated the anti-trust statutes, that question was nowhere raised by either of the parties. But, after the submission of the case, this court itself raised the question, set aside the submission and referred ‘the cause back for oral and written arguments, or either, as counsel may desire.’ 89 Tex. 397, 32 S.W. 872. Certain of the assigned errors related to the pleading and proof of efforts on the part of the plaintiff’s officers to destroy Lawson’s business. Noting the insistence by Lawson’s counsel that the parties had nowhere questioned the legality of the contract, this court said in reference to these assigned errors, 89 Tex. 394, 34 S.W. 921: ‘If the foundation of the action fails, all pleadings and evidence tending to support the verdict are thereby necessarily shown to have been improperly sustained and admitted, and it *792would be folly for a court to thereafter undertake to determine, as we are now asked to do, whether such pleading and evidence were properly sustained and admitted upon the assumption of the legality of the cause of action. Parties litigant cannot, by express waiver, induce a court to pass over the illegality of a contract, and administer their supposed rights thereunder, based upon the assumption of its legality; and certainly a mere omission to notice such vice or bring it to the attention of the court cannot have that effect.’ * * *
“If our courts, in whom is imposed the judicial power of this state, cannot act of their own motion in such a situation, only because litigants whose personal interests are adverse to that public policy have waived the error, then the government of this state is indeed impotent. * * *
“Therefore, we hold that it is both the province and the duty of the court of civil appeals to consider the error.” (Emphasis ours.)
There is a definite conflict between the holding of the Supreme Court in the Lawson and the Ramsey v. Dunlop cases, and the holdings of the courts of civil appeals in the following cases: Benefit Ass’n of Ry. Employees v. O’Gorman, Tex.Civ.App., 1946, 195 S.W.2d 215, wr. ref., nre; Continental Fire & Casualty Ins. Corp. v. American Mfg. Co. of Texas, Tex.Civ.App., 1948, 206 S.W.2d 669, no writ history; Wilde v. Liedtke, Tex.Civ.App., 1950, 231 S.W.2d 1009, no writ history; Dimmitt v. Dimmitt, Tex.Civ.App., 1954, 263 S.W.2d 648.
We think it advisable to point out these conflicts in view of our statement in the foregoing opinion to the effect that the failure to plead the illegality of the contract waived the defense of such illegality.
In the case of Benefit Ass’n of Ry. Employees v. O’Gorman, supra, the court said [195 S.W.2d 218]:
“We do not see fit, however, to dispose of the limitation question on the ground of invalidity of the policy provision, because of the state of the pleadings. Appellant pleaded the contract provision in defense of the suit. Appellee did not by replication question the legality of the provision, and therefore, by reason of Rule 94, we doubt if the legality of the provision in question is before us on this appeal. Rule 94 provides in part:
“ ‘In pleading to a preceding pleading, a party shall set forth affirmatively * * * illegality * * * and any other matter constituting an avoidance or affirmative defense * * *.’
“Before the adoption of the present rules of procedure the illegality might have been noticed at any time, either by the trial court or by the appellate court, but we doubt if we can now do so under the state of the record before us. Reid v. Associated Employers Lloyds, Tex.Civ.App., 164 S.W.2d 584, writ refused; Federal Underwriters Exchange v. Craighead, Tex.Civ.App., 168 S.W.2d 699. We have referred to the possible invalidity of the policy provision lest we might be thought to have construed it as valid.”
A conflict between Rule 94 and the Lawson and Ramsey v. Dunlop cases can readily be noted from the quoted part of the opinions and the above-quoted part of the rule.
In the case of Continental Fire & Casualty Ins. Corp. v. American Mfg. Co. of Texas, supra, the court said [206 S.W.2d 672]:
“The point of error relied upon by defendant poses the issue of the illegality of the obligation sued on. Rule 94, Texas Rules of Civil Procedure, requires the defendant to specially plead the illegality of the contract before he can avail himself of that defense. Of course in this venue case defendant has not been called upon to plead the merits of the case. It may also be observed that if plaintiff’s petition affirmatively and conclusively shows upon its face the illegality of the transaction upon which suit is based, it becomes a judicial admission and defendant can rely upon it.”
In Wilde v. Liedtke, supra, the court said [231 S.W.2d 1010]:
*793“As we view appellee’s pleadings, the evidence and the trial court’s judgment, the case it bottomed upon rescission of a contract for failure to comply with warranties which appellant made to appellee at the time of sale. The testimony is sufficient to support the trial court’s judgment and the only question before us is as to whether appellant’s theory is correct, that is, was the transaction between him and appellee void under Section S3 of the Certificate of Title Act, Vernon’s Penal Code, Article 1436-1, which reads as follows: ‘All sales made in violation of this Act shall be void and no title shall pass until the provisions of this Act have been complied with.’
“Under Rule 94, Texas Rules of Civil Procedure, the burden was on appellant to not only plead but also prove illegality of the contract. See Reid v. Associated Employers Lloyds, Tex.Civ.App., 164 S.W.2d 584, writ refused; Federal Underwriters Exchange v. Craighead, Tex.Civ.App., 168 S.W.2d 699, writ refused, w. m.”
In Dimmitt v. Dimmitt, supra, the court said [263 S.W.2d 660]:
“Since this fraudulent scheme was not pleaded and no issue thereon was submitted to the jury and none requested and since it is not contended that such fraudulent purpose is established by the undisputed evidence it is our opinion that the question presented by appellee is not before us. Rules 94 and 279, T.R.C.P.”
Fraud, not illegality, is involved in the Dimmitt case. If the rule requires fraud to be pleaded, then it requires that illegality be pleaded. If the rule means what it says, and must be liberally construed, we can see no escape from pleading any illegality as a defense to any lawsuit, even though the illegality is apparent in the record. Our Rule 94 is Federal Rules Civ.Proc. Rule 8(c), 28 U.S.C.A., except for the second sentence which was added by amendment of March 31, 1941.
There are very few cases cited by the Federal courts on the question here, but the cases cited definitely hold that illegality must be pleaded, as required by Federal Rule 8(c). American Casualty Co. of Reading, Pa. v. Morris, D.C., 51 F.Supp. 889, 896, affirmed, Simon v. American Cas. Co. of Reading, Pa., 4 Cir., 146 F.2d 208. “The defense of illegality must be affirmatively pleaded. Rule 8(c), Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c.”
In the case of Charm Tred Mills, Inc., v. Erie P. Halliburton, Inc., 7 Cir., 202 F.2d 294, 297, no writ history, the court in speaking of the requirements of pleading illegality under Federal Rule 8(c) said:
“This illustrates the danger of attempting to try out issues for which there is no basis in the pleadings. Plaintiff points out that a jobber could change its form of organization without losing its mark-up privileges, citing 2 Pike & Fischer O.P.A. Price Service, Consumers Goods Desk Book, p. 11,187. Plaintiff claims that had it been advised of defendant’s contention by pleading or otherwise, it could have proved that a partnership with the same name and with the same interests had been a well-known jobbing firm in Chicago since 1934. We hold that defendant, neither having raised this defense in the pleadings nor until after the plaintiff had finished its proof, cannot now assert a violation of that section of the regulation to prevent a recovery upon the contract.”
The conflict poses a problem for the Supreme Court and we will not try to reconcile same.
The motion for rehearing is overruled.