Frank J. Abel, Individually and D/B/A Dal-Air and Frank J. Abel Trust v. Brayton Flying Service, Inc.

RIVES, Circuit Judge.

This appeal is from a judgment for the appellee, plaintiff ■ below, Brayton Flying Service, Inc., against the appellants for the sum of $25,000.00 plus 6% interest from November 19, 1956, the date of trial, together with costs. The judgment also directed the foreclosure of a chattel mortgage securing the indebtedness. For reversal of the judgment, appellants rely upon only one claimed error thus stated in their brief:

“The Court erred in not allowing offsets in the amount of $5,097.50 usurious interest included in the $25,000.00 judgment and $6,702.30 usurious interest previously paid Appellee by Appellant Abel, *

While the appellants have thus not specified as error the overruling by the district court of their motion to dismiss, our brother, Judge CAMERON, who originally undertook the writing of the court’s opinion upon this appeal, has reached the firm conclusion that the district court lacked jurisdiction because of the absence of an indispensable party plaintiff, namely Clyde E. Brayton as an individual, whose presence would have destroyed the requisite diversity of citizenship. With that conclusion, the majority does not agree.

Upon that threshold question of jurisdiction, as well as upon the merits, it is necessary to consider the entire written contract upon which the action was based. Because of its length, that contract dated April 19, 1955 is attached as an appendix to this opinion. The indebtedness was secured by a chattel mortgage dated April 28, 1955, naming as mortgagee the corporation, Brayton Flying Service, Inc., and covering:

“all furniture, fixtures, tools, equipment and personal property of whatsoever nature, located in or at or used in connection with the place of business at 3211 Love Field Drive in the City of Dallas, Dallas County, Texas.”

The plaintiff rested after introducing the written contract and the chattel mortgage. The defendants called as their witness Clyde E. Brayton himself, who testified that he owned a majority interest in the stock of the plaintiff corporation.¹ In the course of Mr. Brayton’s testimony, the defendants introduced in evidence the written memorials of the series of transactions recited in the “whereas” paragraphs of the contract sued on, and dated respectively, September 10, October 14 and November 17, 1954, and January 17 and April 13, 1955. On their face those transactions appeared to be as recited in the contract sued on. Defendants claimed, however, that several of them were mere subterfuges to overcome the Texas usury laws.²

Brayton admitted that he had paid Abel only $13,000.00 for the purchase of the B-25 aircraft on September 10, 1954, and that upon its sale on January 17, 1955 he received $19,727.50. If interest, the $6,727.50 profit was more than the ten per cent permitted by the Texas statutes. (Footnote 2, supra). The answer is, however, that there was no evidence going to show that the earliest contract between Abel and Brayton, dated September 10, 1954, was anything different from what it appeared to be, namely a sale by Abel to Brayton of a “B-25” aircraft with an option to Abel, but no obligation upon him, to repurchase. That form of contract could very well be used as a cloak to conceal usury, but there should be some evidence to that effect.³

Further, the contract sued on stated in writing over the signature of both Abel and Brayton that a bona fide dispute existed and an accord and satisfaction had been reached.⁴ In the absence of any countervailing evidence, we cannot say that it would be clearly erroneous to hold such a written statement sufficient to meet the burden resting upon a party asserting an accord and satisfaction to prove that a bona fide dispute existed.⁵ Indeed, the Texas law seems to be that “A party to a written settlement may not contend that there was no dispute to compromise, when the instrument clearly recites the grounds for the settlement, and he deliberately signed and acknowledged it.” 1 Texas Jurisprudence, Accord and Satisfaction, § 32, p. 274, citing Ferguson v. Ragland, Tex. Civ.App,, 243 S.W. 721, see page 723.

Appellants urge also that there was no consideration for the alleged accord and satisfaction. Brayton had advanced to Abel $1,800.00 on April 13, 1955. On April 19th, Brayton advanced to Brayton Flying Service, Inc. an additional $18,-102.50, which in turn gave its check for that amount to Abel and the Director of Internal Revenue at Dallas. In addition, the contract of April 19th provided that in lieu of fifty per cent of the net profit from the sale of the Stearman aircraft and the 83 T-6’s Brayton Flying Service, Inc. would receive $2,000.00 per aircraft plus thirty per cent of the gross sales price of those aircraft to which were added 19 other T-6’s owned by Abel and certain T-6 fuselages, wings, engine mounts and parts. Actually that exchange proved advantageous to Brayton Flying Service, Inc., but there was no showing that it could not have been advantageous to Abel if the market for such things had gone differently before they were sold. In addition, Brayton Flying Service, Inc. obtained security on the 19 other T-6’s and on all furniture, fixtures, tools, equipment, and personal property used in connection with appellants’ business. Brayton Flying Service, Inc. further agreed that in lieu of the $125,000.00 to be paid from the proceeds of sales of aircraft and parts, it would accept the sum of $50,000.00 as full payment before November 1, 1955 or the sum of $100,000.00 before the end of the calendar year of 1955. There was no evidence to show that such agreements were actually of no value. We think that there was ample consideration for the accord and satisfaction.

That is true also as to the other promises on Abel’s part contained in the contract of April 19, 1955, including the promise to pay the $25,000.00 which formed the basis for the judgment from which this appeal is prosecuted. That $25,000.00 exceeded the $19,902.50 paid to Abel by $5,097.50, which, if interest, was more than the permissible ten per cent (footnote 2, supra). Again, however, there is no sufficient evidence to re-. quire a finding that such profit was interest or that the contract of April 19, 1955 did not speak the truth or was in any way a subterfuge. If Abel really thought so, he completely failed to explain his failure to take the stand and so testify.

Several of the issues which have been discussed involved Brayton as an individual. We shall hereafter point out that Brayton could have been made a cross defendant without depriving the district court of jurisdiction. While that was not done, the issues treated were argued, and apparently tried, by the implied consent of the parties and.those issues should therefore be treated as if raised by the pleadings. Rule 15(b), Federal Rules of Civil Procedure, 28 U.S.C.A.

For a clearer understanding of the dealings between the parties, we have thought it more convenient to reverse the logical order and to discuss the merits before expressing the views of the majority on the point raised by Judge Cameron that the district court lacked jurisdiction because the individual Clyde E. Brayton was an indispensable party plaintiff.⁶ As we view the case, he was not even a proper party plaintiff. The promise to pay the $25,000.00 upon which the judgment was based ran to the corporation alone, Brayton Flying Service, Inc. As between Brayton Flying Service, Inc. and Clyde E. Brayton the contract attached as an appendix was clearly several rather than joint.⁷ The promises to pay upon which this action is based were contained in paragraph numbered III of the contract (see appendix) and ran solely to Brayton Flying Service, Inc. Similarly, the chattel mortgage securing the payment of the $25,000.00 named as the sole mortgagee, Brayton Flying Service, Inc.

The rule has been long settled that “When a contract has been made with several persons under which a separate duty arises to each, in contemplation of law it is the same as if a separate and distinct contract had been entered into with each separately, and they must sue separately.” 39 Am.Jur., Parties, § 31, pp. 894, 895.⁸

Further, no injustice was worked on Abel by the omission of Brayton as a party plaintiff. Any relief to which Abel might have been entitled against Brayton arose out of the transactions which formed the subject matter of the suit. A counterclaim for such relief would have been auxiliary to the action of which the district court already had jurisdiction and needed no independent jurisdictional ground to support it.⁹ Abel did not avail himself of the right to file such a counterclaim and cannot now complain. Especially is that true, since, as we have seen, the really pertinent issues between Abel and Brayton were tried by implied consent and have been considered pursuant to Rule 15(b), Federal Rules of Civil Procedure.

Finally, under a so-called “cross-assignment of error” the appellee urges

“ * * * that the portion of the judgment allowing interest on $19,-902.50 of the $25,000.00 judgment at the rate of 6% from the date of the judgment be reformed and ren- ' dered for 10% interest on said $19,-902.50 out of the $25,000.00 from April 19, 1955 until paid * *

Judge Sibley called attention years ago that the Texas rule permitting an appellee to cross-assign errors without himself appealing has no application in the federal courts.¹⁰ It has been repeatedly held that, in the absence of a cross-appeal, appellee may not attempt either to enlarge his rights under the judgment appealed from or to lessen the rights of appellants.¹¹

It results that the judgment appealed from should be and the same hereby is

Affirmed.

1 . There was no proof that Brayton was the sole owner or alter ego of the corporation.

2 . “Article 5069. * * * Definitions

“ ‘Interest’ is the compensation allowed by law or fixed by the parties to a contract for the use or forbearance or detention of money: ‘legal interest’ is that interest which is allowed by law when the parties to a contract have not agreed upon any particular rate of interest; and ‘conventional interest’ is that interest which is agreed upon and fixed by the parties to a written contract, not to exceed ten per cent per annum. ‘Usury’ Is interest in excess of the amount allowed by law; all contracts for usury are conti-ary to public policy and shall be void.”

“Art. 5071. * * * Limit on rate

“The parties to any written contract may agree to and stipulate for any rate of interest not exceeding ten per cent per annum on the amount of the contract; and all written contracts whatsoever, which may in any way, directly or indirectly, provide for a greater rate of interest shall be void and of no effect for the amount or value of the interest only; but the principal sum of money or value of the contract may be received and recovered.”

Bevised Civil Statutes of Texas, Title 79.

3 . Mays v. Pierce, 154 Tex. 489, 281 S.W.2d 79, 81, 82; Gholson v. Peeks, Tex. Civ.App., 224 S.W.2d 778, 779.

4 . See the last “whereas” paragraph in the contract attached as an appendix.

5 . Stewart v. Friona State Bank, Tex.Civ.App., 278 S.W.2d 425, 433; 1 Texas Jurisprudence, Accord and Satisfaction, § 31, p. 274.

6 . We may assume that we should consider the alleged lack of an indispensable party though not urged on appeal. The party was not added and actual diversity persisted. It may be therefore, that the point could be waived. See Mastercrafters Clock & Radio Co. v. Vacheron & Constantine — Le Coultre Watches, Inc., 2 Cir., 1955, 221 F.2d 464, 467. In any event, however, we have the option to and will notice the denial of the motion to dismiss as a plain error though not specified, if in fact an error was committed which resulted in an erroneous assumption of jurisdiction. See Rule 24, subd. 2(b) of the Court of Appeals for the Fifth Circuit, 28 U.S.C.A.

7 . See 10 Texas Jurisprudence, Contracts, §§ 192, 277; 12 Am.Jur., Contracts, § 269; 17 C.J.S. Contracts §§ 352(b), 355 (b).

8 . See also Hall v. Leigh, 8 Cranch 50, 12 U.S. 50, 3 L.Ed. 484; Shipman v. Straitsville Cent. Mining Co., 158 U.S. 356, 300, 15 S.Ct. 886, 39 L.Ed. 1015; 37 Tex.Jur., Parties, §§ 22, 24; 67 C.J.S. Parties § 24; 47 C.J. p. 61; Annotation 9 L.R.A. 704; Rule 19, Federal Rules of Civil Procedure.

9 . Moore v. New York Cotton Exchange, 270 U.S. 593, 609, 46 S.Ct. 367, 70 L.Ed. 750; United Artists Corporation v. Masterpiece Productions, 2 Cir., 1955, 221 F.2d 213, 217; Lenz v. Wagner, 5 Cir.. 1957, 240 F.2d 666, 669; Rule 13 (a), Federal Rules of Civil Procedure.

10 . Bryant v. Massachusetts Bonding & Ins. Co., 5 Cir., 1946, 158 F.2d 967, 969.

11 . The William Bagaley, 1866, 5 Wall. 377, 72 U.S. 377, 18 L.Ed. 583; Helvering v. Pfeiffer, 1937, 302 U.S. 247, 58 S.Ct. 159, 82 L.Ed. 231; Kingory v. United States, C.C.La.1891, 44 F. 669; Calder v. Henderson, 5 Cir., 1893, 54 F. 802; Orient Petroleum Co. v. Wichita State Bank & Trust Co., 5 Cir., 1927, 17 F.2d 263, denying rehearing 5 Cir., 16 F.2d 417; Likins v. Jefferson Standard Life Insurance Co., 5 Cir., 1934, 69 F. 2d 98; Arkansas Fuel & Oil Co. v. Leisk, 5 Cir., 1943, 133 F.2d 79, 81; Browne v. Makin, 5 Cir., 1949, 177 F.2d 753, 756; United States v. Serinopskie, 5 Cir., 1950, 179 F.2d 959; Hall v. Keller, 5 Cir., 1950, 180 F.2d 753; see Tuschman v. Pennsylvania Railroad Co., 3 Cir., 1956, 230 F.2d 787; 28 U.S.C.A. § 1291, Note 19.