Appeal from District Court, Hunt County; Wm. Pierson, Judge.
Action by F. N. Hopkins against Walter Connally & Co. and others. From the judgment, Walter Connally & Co. appeals. Reversed and remanded, with instructions.
The suit was commenced by appellee Hopkins against appellees Wilson and the Fire Association of Philadelphia and appellant Walter Connally & Co. by a petition filed December 23, 1915. Its principal purpose was to subject to the payment of indebtedness of Wilson to Hopkins a sum due by the insurance company on a policy of fire insurance issued by it on a gin plant, consisting, among other things, of machinery sold on credit by Hopkins to Wilson and one Patten and of other machinery sold on credit by Connally & Co. to said Wilson and Patten. The trial was to the court with a jury. It appears from his findings that the facts were as follows: August 9, 1913, Hopkins, by a warranty deed, conveyed certain land in Wood county and a gin plant situated thereon to J. F. Wilson and W. H. Patten, receiving as part payment therefor Wilson and Patten's six notes, five for $1,500 each, and one for $2,000, secured by a vendor's lien expressly retained in both the deed and notes. August 13, 1913, Wilson and Patten, to further secure the notes, conveyed the property to D. S. Armstrong as trustee. In the instrument evidencing this conveyance Wilson and Patten agreed to—
"keep the buildings and improvements on the above-described premises insured against loss by fire in some solvent insurance company or companies to the extent insurance can be obtained thereon, and will transfer the insurance or an amount thereof equal to the amount due on said notes and deliver the policies to said D. S. Armstrong, trustee, with loss, if any, payable to said trustee as his interests may appear."
January 2, 1914, Wilson and Patten entered into a contract with Walter Connally & Co. by the terms of which they agreed to purchase certain gin machinery of said Connally & Co., and in accordance with which they paid to Connally & Co. $1,000 in cash, delivered to Connally & Co. old machinery of a similar kind which had formed a part of the gin plant conveyed to them by Hopkins at a valuation of $1,100, and made and delivered to Connally & Co. their four promissory notes, two for $598 each, payable November 1, 1914 and 1915, respectively, and two for $600 each, payable December 1, 1914, and December 1, 1915, respectively. In the instrument evidencing the contract of sale Wilson and Patten agreed to keep the property they purchased of Connally & Co. fully insured against fire until the notes they were to execute were paid, the loss, if any, to be payable to Connally & Co. as their interest appeared, and further agreed to deliver the policy evidencing such insurance to Connally & Co. at Tyler. In the contract was a stipulation that a failure or refusal to insure the property should operate to authorize Connally & Co. to declare due and payable at Tyler the part of the purchase price of the machinery evidenced by the notes to be executed by Wilson and Patten, and a stipulation that the machinery "should not become realty or a fixture to realty, but should remain personal, and the title to the same should remain in Walter Connally & Co. until paid for." At the time Wilson and Patten entered into the contract with Connally & Co., and before the machinery sold to the former was delivered to them, an agent of the latter in Tyler telephoned Hopkins in Alba, and advised him (Hopkins) that Connally & Co. were contracting with Wilson and Patten to sell them the machinery, and to accept as part payment by Wilson and Patten therefor machinery at a valuation of $1,100 then in the plant Hopkins had sold them. Hopkins, in the conversation over the telephone, consented to the arrangement, and agreed that the old machinery in the plant he had sold to Wilson and Patten "might be removed and taken for such purpose." Connally at that time "knew of Hopkins' deed of trust and vendor's lien notes," but the evidence failed to show that Hopkins knew anything about the terms of the contract between Wilson and Patten and Connally & Co. for the sale of the machinery; and he did not know of the provision in that contract—
"in reference to keeping said property insured for the benefit of Walter Connally & Co., nor of the provision making the property so sold by Walter Connally & Co. personal property, nor of the fact that Walter Connally & Co. were retaining a mortgage lien thereon or title thereto until paid for."
Connally & Co. knew at the time they contracted to sell the machinery to Wilson and Patten that it was "to be placed in the gin
plant" they purchased of Hopkins "to replace the old machinery they were to receive in part payment"; and they also knew—
"that it was necessary to have the machinery so placed in order to make it a complete plant to enable the owners thereof to operate the same, and the said new machinery was to be connected with said gin plant and connected with the soil in such ways as to injure the real estate if the same should be removed, and I find," the court added, "that said machinery was so connected with the plant and with said real estate."
January 27, 1914, Patten sold and conveyed his interest in the property he and Wilson had purchased of Hopkins and in the machinery they had purchased of Connally & Co. to Wilson, who assumed the payment of the indebtedness against same. March 13, 1914, to secure the notes executed by him and Patten, Wilson made and delivered to Connally & Co. a "chattel mortgage covering the property" Connally & Co. had sold to him and Patten. This mortgage was filed for registration in Wood county on March 24, 1914. Among other things, it contained recitals and stipulations as follows:
"Said machinery is located and to be located at Alba, in Wood county, Texas, and to remain personalty however and wheresoever located; and it is expressly agreed and understood that future purchases by me of machinery, extras, fittings, attachments and goods from Walter Connally & Co. are hypothecated and mortgaged to said Walter Connally & Co. for the purchase money thereof and for this debt. And it is further expressly agreed and understood that the above-described machinery is hereby hypothecated and mortgaged to said Walter Connally & Co. to secure such other sums of money as I, or we, may now be due and owing, or that may hereafter become due to said Walter Connally & Co. by the purchase of machinery, supplies or otherwise. I also agree immediately upon the request of Walter Connally & Co. to insure the machinery above described for an amount equal to the indebtedness due to Walter Connally & Co., the loss, if any, payable to said Walter Connally & Co. as their interest may appear; and in case of fire all other insurance carried by me against said property is hereby assigned, set over and transferred to Walter Connally & Co. until they are paid in full."
Except so far as they might be charged therewith by reason of its registration, neither Hopkins nor the insurance company had any notice of the making of the mortgage or its contents. Both the contract between Wilson and Patten and Connally & Co. and the mortgage from Wilson to Connally & Co. were on printed forms used by said company. "Wilson, while charged in law with the contents of said instruments," the court said,
"never in fact read the same, and never had any actual notice of the fact that either of them contained the provisions aforesaid (referring to the provisions in said instruments specified and set out in the foregoing statement), until after the fire in question occurred; that there was no agreement between defendant Walter Connally & Co. and defendant Wilson by which said property was to be insured for the benefit of said company, except in so far as same may exist on account of said provisions; that the matter was never discussed or agreed upon, and that said company never requested Wilson to have said property insured for their benefit, although they did inquire of him on one occasion whether or not he had the property insured and were informed that it was insured."
June 2, 1915, the Fire Association of Philadelphia, by its agent said D. S. Armstrong, at the instance of Wilson, issued its policy insuring the gin plant against fire until June 2, 1916, in the sum of $4,000. By the terms of the policy $1,000 of the amount thereof covered the gin building and boiler rooms. $2,000 "fixed and movable machinery of all kinds," and $1,000 the engine and boilers, including "foundation and settings, smokestack, heater and pumps." From the time they purchased the property of Hopkins, Wilson and Patten kept it insured. The policy above referred to as having been issued June 2, 1915, was—
"in the same language, and contained the same description of the property, that had been used and contained in the several policies previously issued on said property. The amount of insurance was the same in each policy."
When Armstrong, as agent of the insurance company mentioned, issued the policy, he retained the possession thereof in his capacity as trustee in the deed from Wilson and Patten, hereinbefore referred to. It was in his possession as such trustee November 10, 1915, when the engine and boilers and their foundations and settings were damaged and the other property covered by the policy was destroyed by fire, November 12, 1915. Connally & Co. requested Wilson to transfer his claim under the policy issued June 2, 1915, to them. He refused to do so. On the same day, to wit, said November 12, 1915, Connally & Co. commenced a suit against Wilson and Patten in the district court of Smith county on the notes they had given for part of the purchase price of the machinery Connally & Co. sold to them, and on that...
