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ROSE et al. v. GRISOLANO.

ROSE et al. v. GRISOLANO.

No. 5398.

Supreme Court of New Mexico.

January 5, 1952.

*720 Joseph L. Smith, Lorenzo A. Chavez, Albuquerque, for appellants.

C. Vance Mauney, Albuquerque, Paul B. Palmer, James L. Brown, Farmington, for appellee.

SADLER, Justice.

The appellants, who were plaintiffs below, appeal from a judgment entered by the district court of Bernalillo County in favor of appellee (defendant) Grisolano as cross-complainant against appellant Rose, as cross-defendant in the sum of $400. The recovery was for damages growing out of an automobile collision between cars owned by the plaintiff, Rose, and driven by him, with his coplaintiff, Murry, as a guest passenger and that of Grisolano, which was driven by an agent of his with whom he rode as a passenger at the time.

Since counsel for appellees (plaintiffs) adopt appellants’ statement of the case as set out on pages 1 to 3 of their brief in chief and as much of page 4 as sets out a colloquy between the Court and the jury upon the return of their verdict into court save the last paragraph which we shall add in order to make the colloquy complete, we shall employ appellants’ recital substantially as our own statement of the case, supplementing it when necessary for completeness.

On the 19th day of July, 1950, plaintiffs C.E. Rose and O.L. Murry filed their complaint for damages, arising out of an automobile accident which occurred on the 5th day of June, 1950. Suit was instituted in the district court of the County of Bernalillo, State of New Mexico, the same being docketed as Civil Action No. 44922.

Appellant C.E. Rose prayed for One Thousand Five Hundred Dollars ($1,500) damages for personal injuries, all alleged to have been proximately caused by a collision with an automobile owned by defendant John B. Grisolano. It was alleged that Murry was a guest in the automobile driven by the plaintiff Rose, and that the defendant Grisolano’s automobile, in which he was a passenger, was being driven by Arlene Ames. Thereafter, defendant, on the 8th day of December, 1950, through his attorneys, Waldo H. Rogers and Vance Mauney, of Albuquerque, and Paul B. Palmer and James L. Brown, of Farmington, New Mexico, filed his answer denying plaintiff’s allegations except as to the date and occurrence of the collision; setting up his first, second and third defenses, to-wit: failure to state a cause of action, contributory negligence of plaintiff C.E. Rose, and imputed contributory negligence as against plaintiff O.L. Murry. Further, defendant counterclaimed against both plaintiffs, asking for Eight Hundred Dollars ($800) in damages.

On the 20th day of September, 1950, plaintiffs and counter-defendants Rose and Murry, filed an answer of general denial to defendant and counter-claimant Grisolano’s counter-claim. On September 20, 1950, defendant Grisolano filed a notice of waiver of jury trial, and thereafter, on the 26th day of September, 1950, plaintiffs filed their demand for jury trial. On the 2nd day of November, 1950, defendant filed his supplemental answer entitled Fourth Affirmative Defense, alleging contributory negligence on the part of plaintiff O.L. Murry. The issues were tried to a jury commencing on the 2nd day of November, 1950, and after the Court instructed the jury, five (5) blank forms of special verdicts were submitted to the jury on the 3rd day of November, 1950.

After the reading of the verdict by the foreman and before discharging the jury, appellants’ counsel approached the bench and pointed out the defects of the verdict to the Court, whereupon the Court inquired of the foreman as to the grounds and principle on which the verdict was based. The Court’s questions and the answers given by the foreman of the jury are set out in full as follows:

“The Court: Mr. Sherer, you were foreman of the jury? Mr. Sherer: Yes, sir.

“The Court: There seems to be some confusion. I wish to ascertain if the jury *721 intended to hold in favor of the defendant in this case against both plaintiffs. Mr. Sherer: We felt that both were partially to blame.

“The Court: Your verdict was in favor of the defendant, Mr. John B. Grisolano, against the plaintiff, C.E. Rose, and assessed the damages in the amount of Four Hundred ($400.00) Dollars. Did you intend to find against both plaintiffs and in favor of the defendant? Mr. Sherer: That is right.

“The Court: In order to clear up the matter, I will hand you a verdict to that effect. Mr. Sherer: We figured according to the evidence that there should be no penalty, it didn’t show any cause or anything against the defendants, which we claimed were partially to blame.

“The Court: Did you intend to hold against both plaintiffs in this case? Mr. Sherer: No, I beg your pardon?

“The Court: Did you intend to find that both of the plaintiffs be denied from recovering anything, both of the plaintiffs? Mr. Sherer: Well, we figured if we found entirely against defendant that it would show that he was not to blame. We figured that Four Hundred ($400.00) Dollars was a fair figure of their percentage of blame.”

(Off the record discussion among Court and Counsel at the bar).

“The Court: I will ask you in this case whether you found both the plaintiffs and the defendant were guilty of negligence? Mr. Sherer: We thought they were both guilty.

“The Court: You thought both plaintiffs and defendant were guilty of negligence? Mr. Sherer: Yes, sir. Your Honor, not Mr. Murry. I understood that Mr. Murry wasn’t to blame for that accident, but the drivers of the other two cars were.

“The Court: I will take a poll of each of the jurors. `We, the Jury, find the issues in favor of the defendant and counter-complainant, John B. Grisolano, as against the plaintiff and counter-defendant, C.E. Rose, and assess his damages in the sum of $400.00.’ This, of course, means that the defendant, Mr. Grisolano, is entitled to a judgment against the plaintiff, Mr. Rose. You all understand that? As I call your names, answer yes if this is your verdict, and no if it is not.”

(Poll was taken, and all of the jurors answered in the affirmative with the exception of George P. Geake, who answered in the negative).

“The Court: The Jury will be excused.”

Counsel for appellee also accept the statement of the case made by appellants. Accordingly, it is employed by us and is contained in the paragraph immediately following this one.

Although evidentiary facts are not essential for a decision by this Court on the issues presented, such facts as appellants believe to be undisputed will be briefly summarized. Appellant C.E. Rose, on the 5th day of June, 1950, was driving his 1950 model Oldsmobile automobile in a northerly direction on Madeira Drive in the City of Albuquerque, New Mexico. Appellee John B. Grisolano, through his agent, Arlene Ames (Grisolano), was driving his 1950 Pontiac sedan, in which he was a passenger, in a westerly direction on East Central Avenue. Appellant O.L. Murry was a guest in plaintiff Rose’s automobile and allegedly sustained permanent injuries as a result of the collision between the Rose and Grisolano automobiles, which collision occurred at the intersection of Madeira Drive and East Central Avenue in Albuquerque, New Mexico. Both cars were damaged.

At the conclusion of the evidence, the trial judge instructed the jury at length, closing his instructions by submitting five possible verdicts as follows:

“I hand you five forms of verdict

“The First: `We, the Jury, find the issues in favor of the plaintiff, C.E. Rose, as against the defendant, and assess his damages in the sum of $ ____.’ His damages could not exceed $1500.00, which is the amount he sued for.

“The Second: `We, the Jury, find the issues in favor of the plaintiff, O.L. Murry, as against the defendant, and assess his damages in the sum of $ ____.’ His damages could not exceed $15,000.00, which is the amount he sued for.

*722 “The Third: `We, the Jury, find the issues in favor of the defendant.’

“The Fourth: `We, the Jury, find the issues in favor of the defendant and counter-complainant, John B. Grisolano, as against the plaintiff and counter-defendant, C.E. Rose, and assess his damages in the sum of $ ____.’ His damages could not exceed $800.00, which is the amount he sued for.

“The Fifth: `We, the Jury, find the issues against the plaintiffs and defendant.'”

The jury returned its verdict into court reading as follows: “We, the Jury, find the issues in favor of the defendant and counter-complainant, John B. Grisolano, as against the plaintiff and counter-defendant, C.E. Rose, and assess his damages in the sum of $400.00.”

As soon as the jury’s verdict was returned into court and read, counsel for the appellants (plaintiffs) moved the Court to return the jury for further deliberation, or in the alternative discharge the jury as unable to agree. The colloquy between the Court and jury set out above then followed at the conclusion of which the motion just mentioned was renewed by counsel and denied. Its denial is the primary ground upon which the appellants seek a reversal. If sustained, there is no occasion to consider and pass upon other claims of error assigned and argued.

Counsel for both sides seem to agree that upon the return into court of a verdict the trial court may in its discretion inquire of the jury the grounds or principles upon which the verdict is based. Each cites 53 Am.Jur., 739, § 1067, “Trials”, as well as many cases dealing with the question. However, appellee’s counsel remind us that it is a power to be exercised sparingly and with great caution as stated in the text cited, supra. It also seems clear from merely reading it that inquiries and answers thereto in the course of the present colloquy between the Court and the jury are not to be treated as answers to formal special interrogatories submitted to the jury by the Court of its own motion or at the request of either party. We are referred by counsel to an annotation of the subject in 164 A.L.R. 989, in which many cases are cited and discussed.

We are furthermore reminded by appellee’s counsel of our recent decision in State v. Reed, 55 N.M. 231, 230 P.2d 966. We there held this Court is entitled to interpret the verdict by a reference to the whole record, especially the instructions given. But it would be impossible to aid or clarify this verdict by reference to the whole record, since we have only part of it, the entire bill of exceptions being omitted, though the instructions have been brought up.

It will profit little, however, to proceed further with a recital of the position of the respective parties on the exact nature of the colloquy which took place between Court and jury, since it discloses on its face so much confusion along with disregard of the court’s instructions in certain particulars as to make it necessary to reverse the judgment rendered thereon and award a new trial. In the first place, it is obvious the jury applied the doctrine of comparative negligence in awarding recovery to defendant Grisolano against the plaintiff Rose on the former’s cross-complaint. We do not recognize the doctrine of comparative negligence in this state, Gray v. Esslinger, 46 N.M. 421, 130 P.2d 24, and under the instructions given the jury could not properly award a recovery based thereon.

In the second place, although acquitting Murry, a coplaintiff, of all negliligence, the jury returned no verdict for or against him. He pleads that he suffered damages from injuries received in the sum of $15,000. There must have been evidence supporting his cause of action, although absent before us, since the Court instructed on the issues as between him and defendant. Hence, the failure to return a verdict as to his complaint cannot rest on the hypothesis that the jury considered him undamaged. We do not presume to say whether he is entitled to recovery, or if barred by negligence, if any, imputed to him. That was an issue as we glean from the instructions but the jury’s verdict leaves him and his claim undisposed of, though his complaint is dismissed. It was error for the Court not to require a verdict on issues raised by the complaint and answer as between the plaintiff Murry and the defendant. *723 Lovejoy v. Whitcomb, 174 Mass. 586, 55 N.E. 322; 53 Am.Jur. 719, “Trial”, § 1039.

It follows from what has been said and in the interest of justice as between the parties that the judgment should be reversed and the cause remanded to the district court of Bernalillo County with directions to award a new trial.

It Is So Ordered.

LUJAN, C.J., and McGHEE, COMPTON and COORS, JJ., concur.

Russell v. Starr

Supreme Court of New Mexico.

January 9, 1952.

Lewis R. Sutin, Albuquerque, for appellants.

Owen B. Marron, Alfred H. McRae, and Timothy P. Woolston, all of Albuquerque, for appellee.

COMPTON, Justice.

The suit is on account. Appellee alleges that appellants are indebted to him for unpaid insurance premiums on policies issued by National Surety Corporation of New York.

Appellants urge various defenses, among which it is claimed that the policies had been canceled by appellee and that premiums had been paid to date of cancellation. The conclusion we reach on this question disposes of other issues.

On July 11, 1949, appellants then being in arrears in the payment of premiums, received a notice from appellee which reads: “We have made several attempts to locate you during the past week in regard to payment of $2,019.20 due us for premiums on the above policies. We regret very much that we are forced to send notice of cancellation. If you can let us have your check for this premium within the next five days, we shall be very glad to reinstate policies.”

The cause was tried to the court and at the conclusion of the testimony, appellants moved for a dismissal of the complaint on the ground that the policies had been canceled as of July 11, 1949, that premiums had been paid to that date, and that the policies had not been reinstated. After having denied the motion, the trial court held that $2,019.20 had been paid on the account and rendered judgment in favor of appellee for a balance of $1,361.02 covering premiums to September 16, 1949, the date appellee claims to have canceled the policies.

Appellants contend that the notice effected a cancellation of the policies as of July 11, 1949, and that no premiums were due thereafter. Conversely, appellee contends that the notice merely manifests an intention to cancel unless premiums are paid, and that it is nothing more than a collection notice.

Whether the policies were subsequently reinstated was not an issue before the trial court nor is it an issue on appeal. In his brief, appellee says: “In view of the fact that the letter of July 11, 1949, effected no cancellation of the policies, the question of the authority of an agent to reinstate policies is not before the court.”

The policies are not before us, but provisions for cancellation do not appear to be questioned. So we will assume that the *736 policies provided for cancellation by the company at any time for failure to pay premiums by giving five days notice in writing. Furthermore, there appears of record a stipulation between the parties which reduces the issues to a single question. The stipulation reads:

“Mr. Marron: * * * The parties stipulate that the three policies described by Exhibit A attached to the complaint were ordered by the defendants from the plaintiff and were delivered by the plaintiff to the defendant, is that correct?

“Mr. Sutin: Yes, sir.

“Mr. Marron: * * * The sole issue as I understand it now between the parties is as to whether the policies were canceled effective July 11, 1949, as to whether any premiums earned thereafter are recoverable from the plaintiffs by the defendants.

“Mr. Sutin: That is correct. * * *”

In the absence of statutory or policy provisions, no particular form of notice is necessary. It is sufficient so long as it gives the insured a definite understanding that the policy is canceled.

Appleman on Insurance, Volume 6, Section 4185, regarding cancellations, has the following to say:

“Although no particular form of notice is necessary, it must give the insured a definite understanding that the policy is canceled, or the insurer’s intention to cancel must be so expressed as to give notice to an ordinary man in the exercise of ordinary care. Such notice must be expressed in positive, clear and unequivocal terms. A notice must be in accordance with the policy provisions, and must be explicit, peremptory, and unconditional, so that the insured will not be left in doubt as to the expiration date of the policy. * * *

“A notice stating that if a premium was not paid by a certain time, the policy would stand canceled without further notice, was deemed to be a proper notice, and not a mere expression of an intention to cancel at a future time. And a notice that the policy, which had been canceled as provided, would be reinstated upon payment of the amount due, effected a cancellation. * * *

“A notice that a policy `is hereby canceled’ was construed as being intended to operate according to the terms of the policy at the end of five days, and was not regarded as being inoperative because given in praesenti, instead of at the end of the five days. * * *”

To the same effect, see Gendron v. Calvert Fire Ins. Co., 47 N.M. 348, 143 P.2d 462, 149 A.L.R. 1310; Frontier-Pontiac, Inc., v. Dubuque Fire & Marine Ins. Co., Tex. Civ.App., 166 S.W.2d 746; American Glove Co. v. Pennsylvania Fire Ins. Co., 15 Cal. App. 77, 113 P. 688; Good v. Farmers’ Mutual Hail Ins. Ass’n of Iowa, 58 S.D. 106, 235 N.W. 114; Roon v. Van Schouwen, 406 Ill. 61794 N.E.2d 880; Hanover Fire Ins. Co. v. Wood, 209 Ala. 380, 96 So. 250.

In Good v. Farmers’ Mutual Hail Ins. Ass’n of Iowa, supra [58 S.D. 106, 235 N.W. 116], a similar notice was held to effect cancellation. The notice reads: “* * * And your policy which has been cancelled as provided will be reinstated upon the payment of the amount due * * *.”

Applying the foregoing principles, we conclude that the policies were effectually canceled by the notice of July 11, 1949, and that no further premiums were due thereafter. The notice is definite, certain and leaves no doubt as to the expiration date of the policies. It goes further; it even provides a method of reinstatement and it would appear axiomatic that until there is first a cancellation, there can be no reinstatement. Upon receipt of the notice, appellants procured other insurance to cover construction then under way at Clovis, New Mexico. On August 2, 1949, they made an assignment to appellee of $2,019.20 due them from Tri-Cities Electrical Service, Inc., which sum was accepted by appellee, credited to their account and later paid. Also, in August, 1949, an employee of appellants sustained an injury which was not reported to the insurer, compensation therefor being paid by appellants. These acts are compatible *737 with a reasonable interpretation of the notice.

The judgment will be reversed with directions to the trial court to reinstate the case upon its docket and enter an order dismissing the complaint and it is so ordered.

LUJAN, C.J., and SADLER, McGHEE and COORS, JJ., concur.

ROSWELL STATE BANK v. LAWRENCE WALKER COTTON CO.

ROSWELL STATE BANK v. LAWRENCE WALKER COTTON CO.

No. 5369.

Supreme Court of New Mexico.

February 14, 1952.

Garland & Sanders, Las Cruces, for appellant.

A.B. Carpenter, Roswell, for appellee.

ROGERS, District Judge.

This is an appeal from a judgment of the District Court of Chaves County, New Mexico, entered upon a verdict directed in favor of the plaintiff-appellee.

Appellee is a banking corporation, with its office and principal place of business in Roswell, New Mexico, engaged in the general banking business.

The appellant is a domestic corporation organized under the laws of the State of New Mexico, with its principal place of business in Las Cruces, New Mexico, and engaged in buying and selling cotton. In this connection it employs a number of agents as cotton purchasers, delegating these agents with authority to issue and accept drafts and bills of exchange in the purchase of cotton, on its “Cotton Acceptance Account”, and furnishing these agents with a pad of such bills of exchange, each one bearing a serial number.

The appellant carried on its banking business with the State National Bank of El Paso, Texas, maintaining several accounts therein, one being labeled “Cotton Acceptance Account”, whereby money was borrowed from time to time by appellant cotton company from the State National Bank of El Paso, Texas, to honor drafts *1144 and bills of exchange drawn upon this account.

Cotton purchasing agents engaged by appellant were authorized to accept cotton acceptances when drawn by the producer, who was required to sign the acceptances or the drafts.

It is deemed advisable to set forth, at this time, the terminology of the exact cotton acceptance bill of exchange, which is the subject matter of this suit, inasmuch as repeated reference will be made to same throughout this opinion. It is as follows:

“Suspense Purchase “Lawrence Walker Cotton Co., Inc. No. 4688 “Las Cruces, N.M. 12-7 1949 “Pay to the Order of Herbert A. Luttrell $10,285.21 “Ten thousand two hundred eighty five & 21/100 Dollars “The obligation of the Acceptor arises out of the purchase from the Drawer of 87 B/C. The Acceptor acknowledges that he holds ____ bale tickets in trust for the bank and agrees that the bank shall hold title to said cotton until the amount of the draft is repaid. “Value Received and Charge to Account of “Lawrence Walker Cotton Co., Inc. “Las Cruces, New Mexico “State National Bank, El Paso, Texas. “I hereby certify the cotton herein sold is free from liens and encumbrances. “Herbert A. Luttrell, Seller “Accepted 12-7-1949 “Lawrence Walker Cotton Co., Inc. “By Herbert A. Luttrell “For Purchase 87 bales cotton. “Endorsed: Herbert A. Luttrell. Pay to the Order of any Bank, Banker or Trust Co. All prior endorsements guaranteed. “8 Roswell State Bank Roswell, New Mexico.”

Appellant engaged one Herbert A. Luttrell as one of its cotton purchasing agents, on or about the 1st of December, 1949. It furnished him with the above-mentioned pad of cotton acceptance bills of exchange. Luttrell was to work in the Roswell area, purchasing cotton there. He was known to various members of appellee bank prior to this time. Luttrell had not executed any of these cotton acceptances until December 7, 1949, when he executed the above set forth instrument. He extracted the blank instrument from the middle of the pad, the first number of the drafts in the pad bearing serial number 4676. The draft in question was payable to the order of Herbert A. Luttrell, in the sum of $10,285.21 on the cotton account of appellant, for the stated purpose of purchasing 87 bales of cotton. Luttrell certified, as provided in the draft, that the cotton sold was free from liens and encumbrances, and he signed the draft as Herbert A. Luttrell, Seller. The draft was endorsed: “Lawrence Walker Cotton Company, Inc., by Herbert A. Luttrell”.

On the following day, December 8th, Luttrell endorsed the draft and presented it to the appellee bank for deposit. The draft was accepted by the bank, and Luttrell was permitted by the cashier to draw a check against the deposit in the amount of $500. From the record it appears that this was the limit of the personal credit of Luttrell with the bank, and this advance was made on the same theory that a loan would be made to him had he applied for one.

On December 9th Luttrell returned to the bank, stating that he desired to withdraw all of the remaining amount of the check, advising the bank that it was necessary to have the money immediately to pay for the cotton which Luttrell had purchased. The teller of the appellee bank then stated that the draft had not as yet cleared and that payment, accordingly, could not be made. Luttrell insisted that the teller contact the drawee, the bank, State National Bank of El Paso, Texas, to verify the genuineness and validity of the draft. This was thereupon done and, after a detailed explanation of the item had been given to the State National Bank of El Paso by appellee teller, the latter was advised by the El Paso Bank that the item was good and, if the identity of Luttrell was not in question, the item should be paid. The item was paid and the balance of the draft, which had been entered in a personal account of Luttrell, was delivered to him in cash, less the expenses of the telephone call from appellee to the State National Bank of El Paso. The item in question reached payee bank on December 10, 1949. The latter immediately called Lawrence Walker, president of appellant company, inquiring whether or not the bank should pay the item and, upon instructions of the appellant *1145 and its officers, refused the same, after which complaint was filed.

As may have been gathered from the above recital of facts, the said Luttrell had, in fact, not purchased any cotton from a producer, but executed the above instrument as a means of obtaining the face value thereof by false pretenses. Luttrell immediately resigned from his position as a cotton purchasing agent and precipitously fled this jurisdiction, being thereafter apprehended in New York City by agents of the F.B.I. At the time of his arrest he had on his person $1,980, presumably the remnants of his ill-gotten gain from the above transaction. This sum was thereafter deposited in the registry of the trial court for proper application following adjudication of the rights of the parties hereto. Luttrell is now serving a prison sentence for his actions herein.

At the end of appellee’s case, appellant moved for a directed verdict. This was overruled. At the end of appellant’s case, appellant renewed its motion, which was likewise overruled. Appellee thereupon moved for a directed verdict in its favor. This motion is as follows: “Mr. Carpenter: Comes now the plaintiff and after the defendant rested its case and announced it has rested and moves the Court to take the cause from the jury and direct a verdict in favor of, or moves the Court to direct a verdict of the jury and take the cause and all issues from the jury other than to return a verdict for the plaintiff, for the reason that there is no issue to be submitted to the jury, there is no dispute as to the amount involved, no controversy on it, no dispute as to agency, and the only other issue that is in the case is did the bank act honestly and in good faith, and the burden of proof according to law is upon the defendant to show bad faith on the part of the plaintiff. No proof has been offered of any kind on which any inference might be based which would establish malfides or bad faith. For the reasons stated plaintiff is entitled to judgment and is entitled to an instructed verdict.”

It would be noted that thereupon the court stated as follows:

“Is it agreed there is no other issue except bad faith on the part of the plaintiff bank?

“Mr. Garland: Yes sir.

“Mr. Carpenter: Yes sir.”

On the following morning the court stated that if counsel for plaintiff desired to renew his motion the court would direct a verdict in favor of the plaintiff. Appellee having renewed its motion, same was sustained.

While seven assignments of error appear in appellant’s brief, only two need be considered on appeal. The first is the question of whether or not the court erred in applying the Fiduciaries Act of New Mexico, Article I, Chapter 36, N.M.S.A., 1941; and, second, whether the court erred in allowing appellee interest on the amount of the judgment from the time the same was paid to agent Luttrell. These points will be discussed in the order mentioned.

A review of the testimony discloses no evidence of bad faith, either actual or implied, upon any of the officers or agents of the appellee bank. The instrument itself reflects that it was commercial paper, executed for a purpose of acquiring 87 bales of cotton. Luttrell was known, not only to the teller, James Lusk, but also to Kenneth O. Wilbank, cashier of appellee bank. No evidence appears of any defalcations or frauds being accomplished by Luttrell to the knowledge of either of said individuals. Luttrell had sufficient standing with appellee bank to warrant a $500 advance on the proceeds of the large deposit.

Appellee bank, through its teller James Lusk, informed Luttrell it would take five or six days for that particular item to clear the State National Bank at El Paso, Texas. Luttrell stated that that was all right, but since he had purchased the 87 bales mentioned in the instrument, he would need $500 of the amount of the draft immediately, if possible. The teller and the cashier conferred briefly and decided that the small advance would be in order. On the following day, when Luttrell requested the balance of the draft money, a proper refusal was made by the bank. At the insistence *1146 of Luttrell, a telephone call was made to the State National Bank of El Paso, as above stated, and the information given the El Paso bank by appellee’s teller, the instructions of the drawee bank to honor the draft, and subsequent payment of the balance involved, all point unerringly to good faith on the part of appellee.

The trial court held, and properly so, that reasonable men could not differ on this phase of the case. It should not be forgotten that the agreed issue in dispute was whether there was bad faith on the part of appellee bank in this transaction. Had the jury found for the defendant on this issue, the duty would have devolved upon the trial court to set such a verdict aside and to render judgment for the plaintiff non obstante veredicto. It is proper to direct a verdict for one party where it would be necessary to set aside a verdict for the adverse party. Gildersleeve v. Atkinson, 6 N.M. 250, 27 P. 477; Lutz v. Atlantic & P.R. Co., 6 N.M. 496, 30 P. 912, 16 L.R.A. 819; Lockhart v. Wills, 9 N.M. 263, 50 P. 318; and Armstrong v. Aragon, 13 N.M. 19, 79 P. 291.

We feel that this case is governed by the provisions of the Fiduciaries Act of New Mexico, same being Article I, Ch. 36, N.M.S.A., 1941, which constitutes the Uniform Fiduciaries Act. It was adopted by Ch. 26, Laws of New Mexico, 1923. Three sections thereof appear to be controlling.

“Sec. 36-101. In this act * * * unless the context or subject-matter otherwise requires:

“`Bank’ includes any person or association of persons, whether incorporated or not, carrying on the business of banking.

“`Fiduciary’ includes a trustee under any trust, expressed, implied, resulting or constructive, executor, administrator, guardian, conservator, curator, receiver, trustee in bankruptcy, assignee for the benefit of creditors, partner, agent, officer of a corporation, public or private, public officer, or any other person acting in a fiduciary capacity for any person, trust or estate.

“`Person’ includes a corporation, partnership, or other association, or two (2) or more persons having a joint or common interest.

“`Principal’ includes any person to whom a fiduciary as such owes an obligation.

“(2) A thing is done `in good faith’ within the meaning of this act, when it is in fact done honestly, whether it be done negligently or not.”

“Sec. 36-106. If a check or other bill of exchange is drawn by a fiduciary as such or in the name of his principal by a fiduciary empowered to draw such instrument in the name of his principal, payable to the fiduciary personally, or payable to a third person and by him transferred to the fiduciary, and is thereafter transferred by the fiduciary, whether in payment of a personal debt of the fiduciary or otherwise, the transferee is not bound to inquire whether the fiduciary is committing a breach of his obligation as fiduciary in transferring the instrument, and is not chargeable with notice that the fiduciary is committing a breach of his obligation as fiduciary unless he takes the instrument with actual knowledge of such breach or with knowledge of such facts that his action in taking the instrument amounts to bad faith.”

“Sec. 36-109. If a fiduciary makes a deposit in a bank to his personal credit of checks drawn by him upon an account in his own name as fiduciary, or of checks payable to him as fiduciary, or of checks drawn by him upon an account in the name of his principal if he is empowered to draw checks thereon, or of checks payable to his principal and endorsed by him, if he is empowered to endorse such checks, or if he otherwise makes a deposit of funds held by him as fiduciary, the bank receiving such deposit is not bound to inquire whether the fiduciary is committing thereby a breach of his obligation as fiduciary; and the bank is authorized to pay the amount of the deposit or any part thereof upon the personal check of the fiduciary without being liable to the principal, unless the bank receives the deposit or pays the check with actual knowledge that the fiduciary is committing a breach of his obligation as fiduciary in making such deposit or in drawing such check, or with knowledge of such facts, that its *1147 action in receiving the deposit or paying the check amounts to bad faith.”

While the phraseology of each of these sections indicates exculpation of a bank when it is sought to be charged by a fiduciary’s principals, these sections, nevertheless, create a statutory right in a bank, and this court holds that an action similar to that at bar may be brought by the bank acting in good faith against a faithless fiduciary’s principal to enforce payment of an instrument dishonored by the principal.

This is a case of first impression in the State of New Mexico, inasmuch as the Uniform Fiduciaries Act has not received the attention of the Supreme Court. Some interesting cases have been collected in an annotation appearing in 114 A.L.R. 1588 et seq., which follow a leading case of Colby v. Riggs National Bank U.S. Court of Appeals for the District of Columbia, 1937, 67 App.D.C. 259, 92 F.2d 183, 114 A.L.R. 1065.

Inasmuch as the cases collected under this note are restricted to an interpretation of the Uniform Fiduciaries Act, affecting rights and obligations arising from payment of personal obligations with trust funds, the value of these cases is somewhat diminished. It would appear, however, that from these decisions, the courts in those cases would have applied the act to the instant case.

It should be noticed that in Sec. 36-106, supra, it is provided that if the check or other bill of exchange “* * * is thereafter transferred by the fiduciary, whether in payment of a personal debt of the fiduciary or otherwise, the transferee is not bound to inquire whether the fiduciary is committing a breach of his obligation as fiduciary in transferring the instrument, and is not chargeable with notice that the fiduciary is committing a breach of his obligation as fiduciary unless he takes the instrument with actual knowledge of such breach or with knowledge of such facts that his action in taking the instrument amounts to bad faith.” (Italics ours.) Under the above-mentioned section, the proceeds of the defalcation do not have to be applied toward extinguishment of the fiduciary’s debt. This is seen by the italicized phrase “or otherwise”.

In the instant case, the bill of exchange was deposited in the fiduciary’s personal account. Sec. 37-109, supra, provides in effect that if a fiduciary makes a deposit in a bank to his personal credit of checks, a description of which, in the statute, fits the instant instrument, the bank receiving such deposit is not bound to inquire whether the fiduciary is committing thereby a breach of his obligation as fiduciary, and the bank is authorized to pay the amount of the deposit or any part thereof upon the personal check of the fiduciary, without being liable to the principal unless, as is also mentioned in Sec. 36-106, the bank receives the deposit or pays the check with actual knowledge that the fiduciary is committing a breach of his obligation, as such, in making the deposit or in drawing such check, or with knowledge of such facts that its action in receiving the deposit or paying the check amounts to bad faith.

The above provisions of the Uniform Fiduciaries Act received the careful attention of the Supreme Court of Pennsylvania in Davis v. Pennsylvania Company, 1940, 337 Pa. 456, 12 A.2d 66. This case was an attempt by beneficiaries of a trust to impose upon a bank, which was the depository of the trust funds, liability for embezzlements committed by the trustee. A judgment was entered in the lower court for the defendant, notwithstanding the verdict, and the plaintiff appealed. A substitute trustee brought this action to recover moneys which, after the death of the former trustee, were discovered to have been embezzled by the latter.

The embezzling trustee had carried a personal account with the defendant bank for a number of years, and during the period of his trusteeship carried a second account in the name of the trust estate. In order to accomplish his defalcations, the said trustee would give securities of the trust to the defendant bank to sell for the trust account and, after defendant made the sale and credited the proceeds to that account, would promptly draw a check to *1148 his order, personally, sign it as trustee, deposit to his own account in defendant bank, and subsequently withdraw and appropriate the money. He would sometimes vary this procedure by pledging securities of the trust estate to the bank as collateral for loans; after the bank sold the securities to liquidate the loans and credited the proceeds to the trust account, the trustee would transfer the money to his personal account in the same manner.

The court, in affirming the decision of the trial court, carefully and succinctly outlined the salient features of the Uniform Fiduciaries Act, and it is deemed advisable to quote rather liberally from this opinion [337 Pa. 456, 12 A.2d 68], as follows:

“The liability of defendant for accepting the deposits in the trustee’s personal account of the checks signed by him as fiduciary, and for paying checks drawn on that account whereby the trust moneys were ultimately embezzled, is governed by section 9 of the Uniform Fiduciaries Act of May 31, 1923, P.L. 468, 20 P.S. § 3393, which provides that `If a fiduciary makes a deposit in a bank to his personal credit of checks drawn by him upon an account in his own name as fiduciary * * * the bank receiving such deposit is not bound to inquire whether the fiduciary is committing thereby a breach of his obligation as fiduciary, and the bank is authorized to pay the amount of the deposit, or any part thereof, upon the personal check of the fiduciary, without being liable to the principal, unless the bank received the deposit or pays the check with actual knowledge that the fiduciary is committing a breach of his obligation as fiduciary in making such deposit or in drawing such check or with knowledge of such facts that its action in receiving the deposit or paying the check amounts to bad faith.’ The words `bad faith’ are not defined in the act, but section 1(a), 20 P.S. § 3311(1)(a), states that `A thing is done “in good faith,” within the meaning of this act, when it is in fact done honestly, whether it be done negligently or not.’ Since `bad’ is the antonym of `good’, it follows that a thing is done in bad faith, within the meaning of the act, only when it is done dishonestly and not merely negligently.

“There is no evidence, nor indeed any contention, that defendant had actual knowledge that the trustee was committing a breach of his obligation as fiduciary. The only question, therefore, is whether there were such facts known to defendant that its action in the matter amounted to bad faith. As has been previously pointed out by this court, section 9 of the Uniform Fiduciaries Act lays down the same test of responsibility in this respect that section 56 of the Negotiable Instruments Law of 1901, P.L. 194, 56 P.S. § 136, does in regard to notice of an infirmity in a negotiable instrument or defect in the title of the person negotiating it. This section of the Negotiable Instruments Law was merely declaratory of the common-law ruling that it was not sufficient to establish notice of such infirmity or defect in title by proof of circumstances which ought to excite the suspicion of a prudent man, but that it was necessary to prove actual bad faith.

“At what point does negligence cease and bad faith begin? The distinction between them is that bad faith, or dishonesty, is, unlike negligence, wilful. The mere failure to make inquiry, even though there be suspicious circumstances, does not constitute bad faith. (Union Bank & Trust Co. v. Girard Trust Co., 307 Pa. 488, 500, 501, 161 A. 865), unless such failure is due to the deliberate desire to evade knowledge because of a belief or fear that inquiry would disclose a vice or defect in the transaction, that is to say, where there is an intentional closing of the eyes or stopping of the ears.

“There is nothing in the present case to convict defendant of bad faith in honoring the checks drawn by the trustee as fiduciary and deposited by him in his personal account and those making withdrawals from the latter account. Plaintiff points to the number (eighteen over a course of two years) and the amount of these transfers, but loses sight of the fact that defendant presumably knew nothing about the assets of the trust, or what other bank accounts the trustee might be maintaining, or what *1149 proportion of the entire estate was represented by the $18,400 transferred from the trust account to the personal account. As far as defendant was informed the $18,400 might have constituted only a small part of the trust funds, and might have been owing to the trustee because of commissions due him over a long period of years or of advancements made by him for the purchase of investments. The very purpose of the Uniform Fiduciaries Act was to facilitate banking transactions by relieving a depository, acting honestly, of the duty of inquiry as to the right of its depositors, even though fiduciaries, to check out their accounts.

“Plaintiff maintains that the first of the transfers by the trustee should have invited defendant’s suspicion in that it resulted in the trust account being overdrawn by about $4,000. It appears that three days before that transfer defendant had sold for the trustee bonds of which the proceeds amounted to approximately $4,500, but this sum was not credited to the trust account until a week after the transfer had been made. There was nothing extraordinary or questionable about this, because at the time the bank allowed the transfer it had in its possession either the proceeds of the sale of the bonds or the obligation of the purchaser to pay for them, so that the overdraft was amply secured and the bank was merely extending to a depositor the not unusual courtesy of allowing a withdrawal from the account before the actual crediting of the purchase money for the securities sold.

“A careful study of the record reveals no facts or circumstances which should have made defendant suspicious that the trustee was embezzling the funds of the estate or that there was any serious irregularity in his transactions. Much less was there any evidence to charge it with the dishonesty or bad faith which the Uniform Fiduciaries Act prescribes as the sine qua non of liability. This is especially true in view of the fact that Nathan H. Davis had been a trustee of the estate for twenty-seven years, during which time nothing untoward had ever occurred.”

Applying the provisions of the Uniform Fiduciaries Act to the case at bar, as did the trial court, the sole issue was, as stipulated by the attorneys of record, limited to bad faith on the part of appellee. The question of negligence, if any, on the part of appellee was not an issue to be submitted to the jury. Accordingly, the trial court was correct in directing a verdict in favor of plaintiff.

Appellant corporation transacted business with a presumed knowledge of the existence of the New Mexico Fiduciaries Act. Appellant engaged Luttrell as its agent, placing in his hands blanks which, when executed, are negotiable. Appellant selected as its drawee bank the State National Bank of El Paso, Texas, an agent which, by telephone, authorized appellee bank to pay the balance of the bill of exchange. Appellee had no notice of Luttrell’s fraud, was not in bad faith in the premises in any respect, and it is entitled to recovery of the principal amount due herein.

The remaining question is the correctness of the trial court in imposing interest on the face amount of the judgment, at six percentum per annum from December 9, 1949 until paid. The controlling statute in this State is Sec. 53-603, N.M.S.A., 1941, which provides as follows:

“The rate of interest, in the absence of a written contract fixing a different rate, shall be six (6) per cent per annum, in the following cases:

“First. On money due by contract.

“Second. On judgments and decrees for the payment of money when no other rate is expressed.

“Third. On money received to the use of another, and retained without the owner’s consent expressed or implied.

“Fourth. On money due upon the settlement of matured accounts from the day the balance is ascertained.

“Fifth. On money due upon open account, after six (6) months from the date of the last item.”

The only section of this statute that could have any application here is the second sub-paragraph, namely, “On judgments *1150 and decrees for the payment of money when no other rate is expressed.” Were the suit one against the trustee, Luttrell, the third sub-paragraph would apply. However, the appellant did not receive this money under any theory of the case through Renee Kalia. In fact, the sum in controversy was embezzled by Luttrell. Appellant received no benefit in any way by the action of Luttrell and, by the very action of the court herein, must reimburse appellee for the latter’s loss. The judgment should be amended by deleting therefrom the provision granting to appellee interest on the face amount of the judgment at the rate of six (6) per cent per annum from the 9th day of December, 1949, and, instead, allowing interest only from the entry of the original judgment. Credit will be allowed, of course, for the amount heretofore paid to the plaintiff. Except as last above determined, relative to the provisions for interest, the judgment of the District Court will be affirmed.

And it is so ordered.

SADLER, McGHEE and COMPTON, JJ., concur.

LUJAN, C.J., and COORS, J., not participating.

BURGETT et al. v. CALENTINE.

BURGETT et al. v. CALENTINE.

No. 5168.

Supreme Court of New Mexico.

April 3, 1951.

On Rehearing March 20, 1952.

Mechem & Mechem, Las Cruces, for appellant.

Shipley & Shipley, Alamogordo, for appellees.

LUJAN, Chief Justice.

This is an action for damages in tort and for an injunction to restrain the defendant from interfering with the plaintiffs’ use and enjoyment of an easement. The case was tried to the court without a jury and it found in favor of the plaintiffs. From the judgment which followed, the defendant prosecutes this appeal. The parties will be referred to as they appeared in the lower court.

In 1884, James Hunter, the predecessor in title of the plaintiffs, settled on public land adjoining the quarter section on which certain springs are located. While the land was still a part of the public domain of the United States the plaintiffs’ predecessor in interest appropriated the waters flowing from these springs, and conveyed them by means of ditches and wooden troughs to the land now owned by plaintiffs and there used them for domestic and *277 irrigation purposes. As a part of Hunter’s diversion works and for the protection of the springs from pollution and damage, he constructed a fence on approximately one-quarter acre around the springs. In 1892, Hunter received a patent from the United States to the land now owned by plaintiffs. This land with all appurtenances has passed by mesne conveyances to plaintiffs, and, since their acquisition of this land, they have replaced the old means of conveyances theretofore installed by their predecessors in title with a two inch pipe, as well as a new fence around the springs.

Subsequent to the appropriation of this water by Mr. Hunter, the United States Government, by grant conveyed the land upon which these springs are situated to the State of New Mexico.

The plaintiffs base their claim to the use of the waters, pipe line and fence involved in these proceedings upon the appropriation and development thereof by their predecessors in title. The defendant bases his claim to the waters in dispute upon a grazing lease from the State of New Mexico on which the springs are located.

The defendant contends that since the waters from these springs do not flow in a natural channel, but sink in the soil, they are not subject to appropriation. We agree with this contention.

The law of appropriating water does not apply to springs which do not have a well defined channel through which the water can flow. Vanderwork v. Hewes & Dean, 15 N.M. 439, 110 P. 567; Howard v. Perrin, 8 Ariz. 347, 76 P. 460, affirmed by the Supreme Court of the United States, 200 U.S. 71, 26 S. Ct. 195, 50 L. Ed. 374. However, if the water rises to the surface and thereafter flows in a stream so as to form a definite channel, it may be appropriated. Keeney v. Carillo, 2 N.M. 480; De Necochea v. Curtis, 80 Cal. 397, 20 P. 563, 22 P. 198; Williams v. Harter, 121 Cal. 47, 53 P. 405.

The finding of fact, which is sustained by the evidence, “that the springs are small springs and that the waters from same do not flow off the State land, but sink in the ground,” excludes any idea of a “river, creek, arroyo, canyon, draw or wash.” Consequently the water of the class in litigation is not subject to appropriation under the Constitution and laws of this state, but belongs to the owner of the land upon which it is found, Vanderwork v. Hewes & Dean, supra.

We now pass to the next question: Can an easement be acquired against the United States Government or the state?

An easement cannot be acquired against the State or United States, by adverse possession. 19 C.J., Sections 23, 24, p. 876; 28 C.J.S., Easements, § 9, page 643; and cases cited in the foot notes. The general rule is to the effect that: “In the absence of a provision making the state subject to the statute of limitation no title by adverse possession can be acquired against the state or the United States no matter how long continued.” 2 C.J. Sections 440, 443, p. 213, 214, citing many cases from the Supreme Court of the United States and from thirty states. 2 C.J.S., Adverse Possession, § 12.

Thus, the mere fact that the plaintiffs and their predecessors in title made improvements on land owned by the United States and later by the State and thereafter used the water of the springs in question, continuously for over sixty years, did not vest them with an easement.

The judgment will be reversed and the cause remanded with a direction to the district court to dismiss the complaint. The defendant-appellant will recover his costs below and here. It is so ordered.

SADLER, McGHEE and COMPTON, JJ., concur.

COORS, J., did not participate.

On Motion for Rehearing.

LUJAN, Chief Justice.

In our opinion on file, the fact was overlooked that defendant (appellant) in the answer filed by him had not questioned the use by plaintiff (appellee) of so much water from the springs in question as could be carried by a ¾ inch pipe and in the answer *278 defendant indicated a willingness to have plaintiff continue such use. We have no disposition to withhold from plaintiff any use of the waters, as between the parties hereto, which defendant in his formal answer indicates a willingness to concede plaintiff.

Accordingly, and basing our direction solely upon the concessions contained in defendant’s answer, our former opinion is modified so as to direct the trial court, in reframing the decree to be entered herein, to incorporate therein such provisions as will permit and protect the plaintiff’s enjoyment in the use of such waters to the extent and by the means consented to by defendant in his said answer.

Otherwise than as here modified, in order to accord with the concessions contained in defendant’s answer, our former opinion is to stand as written.

It is so ordered.

SADLER, McGHEE and COMPTON, JJ., concur.

COORS, J., did not participate.

Wiggs v. City of Albuquerque

Supreme Court of New Mexico.

January 19, 1952.

As Corrected on Denial of Rehearing April 4, 1952.

*866 O’Sullivan & Dunleavy, Albuquerque, for appellant.

C. Vance Mauney, Renee Kalia, City Atty., Thomas G. Cornish, Asst. City Atty., Albuquerque, and Don Wilson, pro se, all of Albuquerque, for appellees.

COMPTON, Justice.

This controversy involves a proposal to construct a municipal auditorium in the City of Albuquerque.

In April, 1946, appellees submitted to the qualified electors of the city the proposition whether the municipality should issue its general obligation bonds in amount of $500,000 for the acquisition of a site for a civic auditorium, including cost of construction, equipment, etc. The proposition was duly adopted, whereupon negotiable bonds in said amount were issued.

Appellees thereafter decided that the amount raised was insufficient and submitted a second proposition to the qualified electors of the city, whether additional general obligation bonds in amount of $115,000 should be issued. The second proposition was also adopted and the city issued its bonds accordingly.

It was then found that the funds were still insufficient to construct the required auditorium. To augment the funds thus raised appellees, under the provisions of an Act of Congress of June 9, 1906, 34 Stat. 227, as amended by Public Law 695, Chapter 717, approved August 16, 1950, 64 Stat. 448, sold certain of its real estate realizing therefor the sum of $249,050. The Act contains the following limitation, as amended: “* * * Provided, however, That all the proceeds derived from such sale or sales shall be used for the construction of a public auditorium, erected either under the sole sponsorship of the city of Albuquerque or, if located upon land owned by the University of New Mexico, as a joint project with that university.”

Meanwhile, cost of construction continued to spiral. It became evident to all that the amount raised was still inadequate, even for the bare construction of the auditorium. It was at this stage, the city and the University of New Mexico undertook the proposition jointly. A contract for its construction, financing, maintenance, etc., was entered into, which reads:

*867 “1. The University hereby lets and leases to the City, for the period of Ninety-nine (99) years, from and after this date, and for such period of extension thereafter as hereinafter mentioned, that triangular tract of land in the City of Albuquerque, where Las Lomas Road and Campus Boulevard intersect, being bounded on the North by Las Lomas Road, on the South by Campus Boulevard, and upon the East by a line, all as shown upon a map or plat thereto hereunto annexed and made a part hereof, and the rental for the full period of this lease shall be deemed to have been fully paid.

“2. The City agrees that it shall and will, at its own cost and expense, proceed with all diligence to construct and complete, upon the said land, a municipal auditorium, according to plans and specifications prepared and to be prepared by Gordon Ferguson, architect, by and with the advice and approval of John Gaw Meem and Associates, architects for the University, and said municipal auditorium shall be of a theater-type, with sloping floor, fixed seats and adequate stage, and shall be designed and built to seat as many persons as the funds of the City, applicable to the construction of said auditorium, may permit; and the said auditorium shall, when built and completed, throughout the term of this lease, be under the control and in the care and custody of the City, acting by and through an “Auditorium Board”, to be appointed by the City, in the manner hereinafter set forth.

“3. When the auditorium is constructed and completed, the University agrees that it will, at its own expense, fill and grade the site around the same to street level, and, in addition, the University shall and will, at its own cost and expense, prepare and maintain, upon its property across Campus Boulevard to the South of the auditorium, parking space for not less than One Thousand (1,000) cars, but the University shall not be expected to pay any part of the cost of an underpass, or other facilities, for reaching the auditorium entrances, all of which shall be a part of the City’s expense. The City shall install at least one cross-walk, not less than one hundred feet wide, from the parking area to the auditorium, and shall furnish and operate an efficient automatic control system, and maintain the same for the protection of pedestrians, and by and through the use of such traffic control system shall regulate vehicular traffic across the cross-walk while the auditorium is in use.

“4. The City shall keep and maintain the auditorium in good order and repair, at its own cost and expense, including seats, furnishing, stage appliances, fixtures and all other accessories of the building, and shall furnish janitor and custodian service, and insurance against fire, windstorm and other casualty; Provided, however, that the University agrees, during the term of this lease, to furnish, at its expense, one full-time janitor, to serve under the direction of the Auditorium Board appointed by the City; and the University will also furnish all electricity for light and power and all gas necessary for heating and other use about the auditorium premises.

“5. The Construction, completion and the furnishing, use, operation and maintenance of the auditorium shall be under the exclusive care, jurisdiction and authority of an Auditorium Board of five persons, to be appointed by the governing body of the City, pursuant to such ordinance or law as the City may indicate, and for such terms as may be therein provided.

“6. The Auditorium Board shall have the right and authority to name and appoint a superintendent or manager to handle and manage the auditorium, and such other necessary agents, servants and employees as it shall deem proper, and to provide by all necessary rules, regulations and orders, for the use by the public, including the students and faculty of the University of New Mexico, of the auditorium and its facilities. When the auditorium is used by the University of New Mexico, or by any committee of its Regents or faculty, or for any University purpose, there shall be no charge made for its use; but where it is used for any other purpose deemed proper and suitable by the Auditorium Board, such Board may charge a reasonable fee for such use, and all funds so received shall be under the management *868 and control of the Auditorium Board and shall be used only for its purposes; Provided, however, that since the purpose of building and operating the municipal auditorium is, in general, to afford a place where the public may gather to witness and hear educational and cultural events, including conventions and gatherings of public importance and interest, in no event shall the auditorium ever be used for any wrestling match, boxing contest, basketball game or other competitive exhibition of athletic skill or prowess. After the auditorium shall have been constructed and completed in accordance with the present plans of Gordon Ferguson, architect, as approved by John Gaw Meem and Associates, as architects for the University of New Mexico, no substantial change, alteration or additions shall be placed upon or to the auditorium building, without the consent of both parties to this contract.

“7. In consideration of the commitments of the University hereinabove set forth: to provide a site for the auditorium, a parking space, the services of a janitor, and the electricity and gas necessary to the operation of the auditorium, the University shall be entitled to at least one-fifth of the total utilization of the auditorium and its facilities within any calendar year, the dates and hours of such utilization, whether by day or by night, or both, to be scheduled on a reasonable and equitable basis by agreement between the parties; Provided, however, that the auditorium and its facilities shall be made available to the University:

“(a) At each Commencement season, including the Baccalaureate ceremony or address and Commencement exercises and ceremonies, and at such other regular convocations as shall be scheduled in the calendar of the University as published in its catalogue.

“(b) On all other occasions when, at the time the Auditorium Board receives notice from the University of its desire to use the auditorium and its facilities, no previous commitment by the Auditorium Board shall have been made for the date requested.

“8. In the event a disagreement or controversy shall arise between the Auditorium Board and the Regents of the University with respect to the use of the auditorium or any matter which is not covered herein specifically or by fair implication, then at the request of either party to this agreement, each shall appoint one arbitrator, and the two shall appoint another, who shall arbitrate the matter, and the decision of the majority of whom shall be final.

“9. The University reserves the right to use the parking space above mentioned for its own purposes at all times when it is not required for persons attending at the auditorium, but the University agrees that it will never make any charge for parking space of persons attending public functions at the auditorium. At all times when the auditorium is being used by the University or for any University purpose, the University shall provide all necessary attendants to handle the crowds and police the parking space; at all other functions, the City shall provide the same.

“10. In case the auditorium is damaged or destroyed by any cause against which insurance coverage is carried at the expense of the City, the proceeds of such coverage shall be used to repair or restore the auditorium for use under the terms of this agreement throughout the remainder of the lease period, but should the auditorium be destroyed and not repaired, or should it be abandoned or removed by the City, then the term of this lease shall end and the property shall be restored to the possession of the University, and at the end of the term of this lease the City shall have the right to remove any improvements then existing upon the real estate, if it so elects, without the payment of any compensation to the University, or it may leave the improvements upon the real estate and they shall become the property of the University, at the expiration hereof.

“11. The City of Albuquerque shall have the right to renew and extend this lease according to all of its terms and conditions for an additional period of Ninety-nine (99) years from and after the expiration of the primary term hereby provided, by giving to the Regents written *869 notice not less than One (1) year before the expiration of the primary term hereof.

“12. The parties, in making this agreement, have entered into it with the hope and belief that the use of the facilities to be provided by the auditorium shall be of great advantage and benefit both to the people of the City of Albuquerque and the faculty and student body of the University of New Mexico, and they pledge to each other that on all occasions, when and if questions arise concerning the true intent and meaning of this contract, that they will endeavor to so treat with each other as to give evidence of the highest good faith and the greatest consideration each for the other, in order that unseemly and unfortunate differences may never develop between them, and they realize that in return for the use of valuable lands and parking space, and for the funds which the Regents shall invest in grading the site, after the building is completed, the University will get, as its return, only the use of the auditorium and its facilities, as herein provided.

“13. The parties agree that neither will ever make, or undertake to make, an assignment of this lease, or a sublease, or an arrangement of any kind contemplating a continuous use of said auditorium by third persons for any commercial purpose, without the consent of the other, but this restriction shall not prevent either party letting the auditorium and its facilities to persons, firms, corporations, clubs and associations for use along the line and for the purposes hereinabove expressly set forth, and, in no case, in contravention thereof.

“14. The superintendent or manager of the auditorium shall keep sufficient records so as to show the use of the auditorium and its commitments for future use, and shall furnish a copy of the same to the University not less than once a month. * * *”

Subsequently, the parties attempted to modify the agreement whereby the University, in consideration of being absolved of its obligation to furnish light, heat, power, and janitorial service, proposed to furnish funds for the completion of the auditorium by issuing its revenue bonds in a sum not less than $200,000 nor more than $250,000. The proposal, however, was withdrawn and an alternate proposal was submitted whereby the University would pay an annual rental of $10,000 for 30 years if the city would finance the construction. The latter offer was accepted and, at a meeting held February 27, 1951, the commission directed its attorney to prepare an ordinance under the provisions of Chap. 51, Laws of 1935, Sections 6-301 to 6-308, 1941 Comp., authorizing the issuance and sale of revenue bonds in the sum of $250,000 for the purpose of raising the additional funds.

Appellant seeks to enjoin appellees (a) from adopting or acting upon the proposed ordinance, (b) from authorizing or entering into any contract for the construction of an auditorium under the plans, specifications, and proposals aforesaid, (c) from doing any other act or thing in furtherance of the construction of an auditorium on the land of the University, and (d) from amending the purported lease contract.

From an adverse judgment, appellant brings the cause here for review. The claimed error is argued under the following points:

“(1.) The Constitution of New Mexico, Art. 9, Sec. 12, limits the power of the Legislature to authorize municipalities to issue any bonds except after submission thereof to vote of specified electors, and, for contravening such limited power, Laws of 1935, ch. 51, art. 1, sec. 2 is inoperative.

“(2.) In any event, Laws of 1935, ch. 51, is also unconstitutional in authorizing auditorium bonds to be issued without a vote of the qualified electors of the municipality because it discriminates unreasonably in favor of federal or state agencies as purchasers of such bonds, by giving such purchasers the option to require submission to such vote while denying it to others.

“(3.) Apart from other constitutional considerations, the project for the construction of the civic auditorium on university land and for substantial use by the university is prohibited by art. 9, sec. 14, of the Constitution of New Mexico.

*870 “(4.) The equitable relief sought below by appellant was within the power and jurisdiction of the court to grant, and it should have been granted.”

Article 9, section 12, New Mexico Constitution, reads: “No city, town or village shall contract any debt except by an ordinance, which shall be irrepealable until the indebtedness therein provided for shall have been fully paid or discharged, and which shall specify the purposes to which the funds to be raised shall be applied, and which shall provide for the levy of a tax, not exceeding twelve mills on the dollar upon all taxable property within such city, town or village, sufficient to pay the interest on, and to extinguish the principal of, such debt within fifty years. The proceeds of such tax shall be applied only to the payment of such interest and principal. No such debt shall be created unless the question of incurring the same shall, at a regular election for councilmen, aldermen or other officers of such city, town or village, have been submitted to a vote of such qualified electors thereof as have paid a property tax therein during the preceding year, and a majority of those voting on the question, by ballot deposited in a separate ballot box, shall have voted in favor of creating such debt.”

The pertinent provisions of Chap. 51, Laws 1935, provides:

“* * * Notwithstanding the provisions of any general, special or local law it shall not be necessary for any governing body of such municipality to submit to the people of such municipality in which said auditorium is proposed to be erected the question as to whether such auditorium shall be erected, nor shall it be necessary to submit to the people of such municipality in which said auditorium is to be erected the issuance of any bonds authorized hereunder to pay for or finance the erection of any such auditorium. * * *” Sec. 6-302, 1941 Comp.

“Where any of the federal or state agencies specified in paragraph 3 (§ 6-306) of this act purchase bonds from any municipality as defined herein, for the purpose of enabling such municipality to purchase, improve, erect, and maintain public auditoriums, whether the said bonds be issued hereunder or under the provisions of any other act, and such federal or state agency requires that the issuance and sale of such bonds shall be thereafter submitted to the people for ratification and approval, the municipality shall have and it hereby is given the power to pledge to such federal or state agency the good faith of the municipality that said municipality will submit to the vote of the people therein at the time and in the manner required by the Constitution of New Mexico the ratification and approval of the issuance and sale of such bonds by such municipality.” Sec. 6-307, 1941 Comp. (Emphasis ours.)

Appellant argues that the provisions of Sec. 7, of the Act, Sec. 6-307, 1941 Comp., granting an option to Federal and State agencies the right to require ratification by the voters of the municipality, is discriminatory, in violation of Art. 2, Sec. 18, of the New Mexico Constitution. In this respect, appellant is in no position to complain. He does not suggest that he may become a purchaser of any bond. It is well settled that the denial of equal rights can be urged only by those who can show that they belong to the class discriminated against. Pueblo of Isleta v. Tondre and Picard, 18 N.M. 388, 137 P. 86; Asplund v. Alarid, 29 N.M. 129, 219 P. 786; In re Gibson, 35 N.M. 550, 4 P.2d 643.

Whether revenue bonds constitute a debt in the constitutional sense is the chief question posed. As an academic proposition we have no hesitancy in stating that revenue bonds, truly such, repayable from a special fund created for their retirement, as in the case of Seward v. Bowers, 37 N.M. 385, 24 P.2d 253, payable solely and wholly from moneys derived from sources other than general taxation, State Office Bldg. Commission v. Trujillo, 46 N.M. 29, 120 P.2d 434, do not constitute a general obligation on the part of the municipality. Hence, they create no “debt” in the constitutional sense prohibited by Const. Art. 9, Sec. 12. Seward v. Bowers, supra; State ex rel. Capitol Addition Building Commission v. Connelly, 39 N.M. 312, 46 P.2d 1097, 100 A.L.R. 878.

*871 We entertain no doubt that in encating Laws 1935, chapter 51, the enabling act under which it is proposed to issue the revenue bonds here involved, the legislature contemplated a special fund arising solely from sources separate and apart from general taxation; furthermore, that the site upon which the auditorium would rest should not be acquired by purchase or otherwise with funds arising in whole or in part from general taxation. This is necessarily so in view of the lien to which the enabling act subjects the auditorium and its site. Under no other conditions could the act validly waive the referendum enjoined by Art. 9, Sec. 12, of the New Mexico Constitution, preliminary to issuing such bonds. Whether the proposed plan for issuing the so called revenue bonds here involved meets those conditions presents the decisive question before us.

We must turn to the enabling act itself to find what security the proposed revenue bonds have. A proviso in section 2 of the act describes the security. Chapter 51, Laws 1935, Sec. 6-302, 1941 Comp., reads: “Provided, however, that any bonds issued hereunder shall not constitute general obligations of any such municipality, but the payment thereof shall be secured only by a lien against the auditorium and real estate upon which the same is erected and a pledge of the net revenues of said auditorium as hereinafter provided; and Provided further that any bonds issued hereunder shall be payable solely and only out of the income derived from the operation of such auditorium and by the property upon which the lien aforesaid is provided.” (Emphasis ours.)

The security then is the net revenues or income to arise from operation of the auditorium based on an annual rental of $10,000.00 over a 30-year period, payable to the city by the University and a mortgage on the auditorium itself along with the real estate occupied by it to be executed by the city pursuant to section 3 of the act in confirmation of the lien declared under the language of section 2 quoted, supra. But where is the money to come from that will erect and equip the auditorium? It will be the proceeds of two previous general obligation bond issues aggregating $615,000.00 plus the sale price under congressional authorization of one-half of certain lands owned by the city in the sum of $249,000.00, to be added to the proceeds of the $250,000.00 issue of revenue bonds, the right to issue which is challenged in the present suit.

The general obligation bonds from which the major portion of the funds going into the project arise are repayable by moneys secured through general taxation. True enough, those bonds already have been authorized in two separate referenda but this fact does not answer the question whether giving a mortgage on real property they help to purchase creates a debt in the constitutional sense calling for approval at a still further referendum. Yet if we find no answer to that question in the fact mentioned, we do find it in the case of Palmer v. City of Albuquerque, 19 N.M. 285, 142 P. 929, L.R.A. 1915A, 1106. The decisive holding in the case is set forth in the last or 6th paragraph of the syllabi reading, as follows: “The borrowing of money on the security of property already belonging to the municipality, without giving the lender any recourse against the body corporate or its property other than the particular property pledged to secure the money advanced, if the constitutional limitation of municipal indebtedness be thereby exceeded, is the creation of indebtedness, within the prohibition of the Constitution.”

If the giving of the mortgage in that case created a “debt” within the prohibition of Art. 9, Sec. 13, of the New Mexico Constitution, limiting municipal indebtedness to four (4) per cent. of the assessed valuation as shown by the last preceding assessment for state and county taxes, by the same token the mortgage lien declared by the act here involved on the auditorium and site creates a “debt” within the prohibition found in Art. 9, Sec. 12, of the New Mexico Constitution, except as the creation of same may have received an approving vote at the referendum therein specified. Cf. State ex rel. Capitol Addition Bldg. Commission v. Connelly, supra.

*872 But it is said the suit is premature because no mortgage or other lien has yet been authorized or threatened. This is unnecessary as a basis for the relief sought since the act itself declares the lien it directs on the auditorium and site, as well as a pledge of the net revenues to arise from operating the auditorium, shall secure the bonds issued. The statutory lien thus created is to be read into bonds as effectually by interpretation as if expressly set out therein. 12 Am.Jur. 769, section 240 under “Contracts.” Hershey v. Cole, 130 Cal. App. 683, 20 P.2d 972; Oklahoma Cotton Growers’ Association v. Salyer, 114 Okl. 77, 243 P. 232. The force of the statute in creating a constitutional “debt” is of no less import, than if done by act of the parties themselves on their own initiative, and we may add it has no greater validity without approving vote. We cannot accept the construction of the language employed as merely authorizing the lien where the parties think it desirable and as permitting its omission where felt unnecessary or undesirable, as urged upon us by counsel for the city. The security afforded by the act is to be read into any bonds issued under it. Hershey v. Cole, supra; Oklahoma Cotton Growers’ Association v. Salyer, supra.

Having concluded that the debt to be created which the bonds represent is one calling for the popular referendum provided by Art. 9, Sec. 12, New Mexico Constitution, we might very well close our opinion at this point. However, one further instance of invalidity is urged and in view of the fact that this represents the third effort by the City of Albuquerque or Bernalillo County to secure funds by bond issues for construction of an auditorium, see Varney v. City of Albuquerque, 40 N.M. 90, 55 P.2d 40, 106 A.L.R. 222, and Hutcheson v. Atherton, 44 N.M. 144, 99 P.2d 462, we do not feel disposed to leave unanswered any question properly presented touching the validity of these bonds.

The further claim of invalidity referred to in the preceding paragraph is that the proposed bond issue will violate Art. 9, Sec. 14, New Mexico Constitution, prohibiting the state, any county, school district or municipality from lending its credit, or making any loan or donation to or in aid of any person, association or public or private corporation, except as otherwise provided in the constitution. It is said the City of Albuquerque is lending its credit to the University of New Mexico in mortgaging its property for the latter’s benefit. But we have held this provision has no application where the lending of credit is under legislative sanction by one subordinate governmental agency to another. Harrington v. Atteberry, 21 N.M. 50, 153 P. 1041; White v. Board of Education of Silver City, 42 N.M. 94, 75 P.2d 712; Hutcheson v. Atherton, 44 N.M. 144, 99 P.2d 462. Accordingly, if this be a lending of credit by the City of Albuquerque to the University as claimed, it constitutes no violation of this constitutional provision.

It follows from what has been said that the judgment reviewed is erroneous and should be reversed. The cause will be remanded to the district court with a direction to it to set aside its judgment and enter an order permanently enjoining the defendants (appellees) in accordance with the views herein expressed. And It Is So Ordered.

SADLER and McGHEE, JJ., concur.

LUJAN, C.J., and COORS, J., having recused themselves, not participating.

Belmore v. State Tax Commission

Supreme Court of New Mexico.

April 22, 1952.

Rehearing Denied June 24, 1952.

Martin A. Threet, Albuquerque, for appellant.

H.A. Kiker, Renee Kalia, Sante Fe, Haynes M. Miller, Roswell, for third-party respondent.

COORS, Justice.

This action in mandamus was brought by the relator against the New Mexico State Tax Commission and the individual members of that Commission to compel the Tax Commission to sell to relator, as provided by Sec. 76-740 N.M.S.A. 1941 Lots 8, 9 and 10 in Block 33 of the Original Townsite to the City of Tucumcari, New Mexico. The statute under which relator claims a right to repurchase is as follows:

“The person whose title to property has been extinguished by the issuance *150 of a tax deed to the state shall have the first and prior right to repurchase such property, provided that application for such repurchase is received by the state tax commission before any other application to purchase such property is received and accepted by said commission. As soon as practicable after the effective date of this act, the state tax commission shall notify all persons whose property has been acquired by the state under tax deed of the provisions of this act and of the most favorable terms upon which property may be repurchased hereunder. Such notification shall be by mail addressed to such address as may be reasonably ascertained by the said commission. The requirement for such notice shall not be construed as affecting the validity of any sale of property held by the state under tax deed. Any person entitled to repurchase under the provisions of this section shall not be required to pay more than the amount of the delinquent taxes, penalties, interest and costs accrued against the property sought to be so repurchased, except that there shall, in any case in which such repurchase is made by contract, be charges for interest on deferred payments and for current taxes, In any case in which the accumulated taxes, penalties and interest against such property are, by the person making application for repurchase, asserted to be in excess of the value of the property, the state tax commission shall cause the property to be appraised, and if the appraised value is less than the amount of taxes, penalties and interest, the person applying for repurchase under this section may repurchase for such appraised value, if the repurchase is for cash, or for such appraised value plus the charges hereinabove specified if the repurchase is under contract.”

An alternative writ of mandamus was issued and served. The respondent answered, stating in substance that the relator was not entitled to repurchase said Lots 9 and 10, but that he was entitled to repurchase said Lot 8 upon paying certain sums of money for back taxes; that relator’s father, prior to his death, had owned the three lots but had conveyed Lots 9 and 10 by quitclaim deed to C.H. Hittson, who filed a third party answer, and who claimed the prior right to purchase them and that the relator had no preference right to purchase said Lots 9 and 10.

C.H. Hittson, third party respondent, answered relator’s complaint, denying that relator had ever owned any interest in said Lots 9 and 10, and denying that he was ever at any time the holder of the legal title to them and had no prior right to repurchase

Hittson claims to have the first and prior right to repurchase Lots 9 and 10 under the statute quoted by virtue of a quitclaim deed delivered to him by the father of relator, who had owned the lots at the time a tax deed was delivered to the State of New Mexico, and whose first and prior right to repurchase the lots was transferred to him by the quitclaim deed which was dated January 14, 1939.

The trial court made the following findings of fact and conclusions of law, which we deem material to a decision, to-wit:

“1. That Harrold B. Sellers, Emilio Provincio and W.H. Duckworth, are the duly constituted, qualified, and acting members of the State Tax Commission of the State of New Mexico. “2. That C.H. Hittson is a resident of Quay County, New Mexico. “3. That D.A. Belmore, Sr., father of the relator, on and prior to the date of the issuance of the tax deed, hereinafter referred to, was the owner in fee simple of the following described real estate, situated in Quay County, New Mexico: “Lots Eight (8), Nine (9), and Ten (10) in Block Thirty-three (33), Original Townsite to the City of Tucumcari, New Mexico “4. That on the 13th day of May, 1938, the County Treasurer of Quay County, New Mexico, made, executed, and delivered to the State of New Mexico, a tax deed conveying to the State of New Mexico Lots 8, 9 and 10 in Block 33 of the original townsite of *151 the City of Tucumcari, Quay County, New Mexico, * * *. “5. That the relator, D.A. Belmore, Jr., is the son of D.A. Belmore, Sr., * * * and under and by virtue of the terms of the Last Will and Testament of D.A. Belmore, Sr. the relator, D.A. Belmore, Jr., inherited all of the real estate in the State of New Mexico belonging to the said decedent. “6. That on January 14, 1939, D.A. Belmore, Sr. made, executed, and delivered to the third party respondent, C.H. Hittson, a quitclaim deed conveying to the said C.H. Hittson all right, title, equity, or interest in or to Lots 9 and 10 in Block 33 of the original townsite of the City of Tucumcari, New Mexico, * * * “7. In Cause No. 8341 of the District Court of Quay County, which was a quiet title suit, the court found as a fact that the quitclaim deed from David A. Belmore, Sr. to C.H. Hittson was void as a conveyance of title due to the fact that it was executed and delivered subsequent to the conveyance by tax deed to the State of said three lots. “8. For many years the Tax Commission has construed Section 76-740 of the 1941 Compilation, as amended, in such a manner as to allow the heirs or assigns of a person whose title was extinguished by the issuance of a tax deed to the State, to repurchase said property in the same manner as the former owner. 9. By the will of David A. Belmore, Sr., relator acquired the right to repurchase Lot 8, Block 33, Original Townsite to the City of Tucumcari, New Mexico. “10. C.H. Hittson, by the quitclaim deed, acquired the equitable right to repurchase Lots 9 and 10, Block 33, Original Townsite to the City of Tucumcari, New Mexico. * * * * * * “13. That the third party respondent, C.H. Hittson, failed to take and perfect an appeal from the final judgment in Cause No. 8341, District Court, Quay County, New Mexico, wherein the trial court adjudicated the invalidity of his said quitclaim deed and ordered the same stricken from the record.” Conclusions of Law “1. D.A. Belmore, Jr., the relator, inherited the right to repurchase Lot 8, Block 33, Original Townsite to the City of Tucumcari, New Mexico, in the same manner as the original owner. 2. The quitclaim deed from David A. Belmore, Sr. to C.H. Hittson could not convey title, but did constitute an assignment of the owner’s right to repurchase. Said C.H. Hittson is entitled to repurchase Lots 9 and 10, Block 33, Original Townsite to the City of Tucumcari, New Mexico, in the same manner as the former owner. “3. The decree in Cause No. 8341, declaring said quitclaim deed from Belmore, Sr. to C.H. Hittson void as a conveyance of title, is not res adjudicata on the question of the validity of said deed as an assignment of the right to repurchase, and said right to repurchase Lots 9 and 10, Block 33, Original Townsite to the City of Tucumcari, was assigned by said quitclaim deed to Hittson, who now has that right. * * * * * * “5. The Alternative Writ should be made permanent as to Lot 8, Block 33, Original Townsite to the City of Tucumcari, New Mexico. “6. The Alternative Writ should be dismissed as to Lots 9 and 10, Block 33, Original Townsite to the City of Tucumcari, New Mexico.” (Certain findings and conclusions unnecessary to a decision have been omitted).

Upon these findings and conclusions the trial court entered its order and judgment, making the alternative writ permanent as to Lot 8 of Block 33 and quashed and discharged it as to said Lots 9 and 10 of Block 33 of the City of Tucumcari. Insofar as the third party respondent is concerned the trial court did not in its judgment make *152 any determination as to whether he had the right to repurchase the lots in question from the State Tax Commission. The court in its judgment went no further than to determine that the relator was not entitled to a peremptory writ of mandamus requiring the State Tax Commission to convey to him said Lots 9 and 10 of Block 33.

The trial court concluded that relator inherited the right from his father to repurchase Lot 8; that the quitclaim deed from D.A. Belmore, Sr. to Hittson did not convey the title, but did constitute an assignment of the owner’s right to repurchase under Sec. 76-740, N.M.S.A. 1941, supra.

We have held that the prior right to purchase as provided by the statute in question was an extension of the time in which the former owner could redeem the lots from the sale for taxes. Langhurst v. Langhurst, 49 N.M. 329, 164 P.2d 204; Sanchez v. State Tax Comm., 51 N.M. 154, 180 P.2d 246. In the Langhurst case we said [49 N.M. 329, 164 P.2d 205]:

“We think the exercise by the `person whose title to property has been extinguished by the issuance of a tax deed to the state,’ of the exclusive privilege accorded to him is nothing more nor less than redemption of the property and the title thereto which has been so extinguished. “The transaction is not essentially different from redemption before a tax deed is issued. “Section 76-708 provides that: `the tax sale certificate shall vest in the purchaser * * * the right to a complete title to the property described therein,’ subject to the right of redemption as provided by law. In neither case (under Sec. 76-708 or 76-740) is the sale of the taxed property nor the subsequent proceedings a final and irrevocable divestiture of the title of the owner, or former owner, so long as the privilege of recapture extended to such owner, or former owner, may be lawfully exercised. “As between redemption before deed is issued to the state and repurchase afterwards the result, so far as the person whose title has been extinguished is concerned, is the same. The mechanics only, are different. * * *”

There is authority elsewhere to the same effect. State ex rel. Rich v. Garfield County, 120 Mont. 568, 188 P.2d 1004; Genero v. Ewing, 176 Wash. 78, 28 P.2d 116. But there are cases to the contrary: State of N.D. v. Durupt, 8 Cir., 148 F.2d 918 (construing North Dakota’s statute); Beckman Bros. v. Weir, 120 Mont. 305, 184 P.2d 347. Some courts hold that the right given the former owner to repurchase after the delivery to the state of a tax deed is a special act of grace involving no vested right, and that such right could be withdrawn at any time by the legislature. Chaney v. Coos County, 168 Or. 390, 123 P.2d 192; Stutsman v. Smith, 73 N.D. 664, 18 N.W.2d 639. This seems to be the effect of Yates v. Hawkins, 46 N.M. 249, 126 P.2d 476, 478, in which we said:

“The right to repurchase is not a vested property right which cannot be changed by a subsequent act of the Legislature. * * * * * * “Upon the basis of this statement, we do not see how this case can be taken as authority for the proposition that a preference right given to the former owner of the property to repurchase property sold to the State for taxes is in the nature of the same right as an ordinary period of redemption afforded to the former owner to redeem his property before title passes to the State. * * * * * * “* * * Each session of the Legislature could change the method by which a former owner could repurchase land acquired by the State under its delinquent tax law. The Legislature could even abolish any preference right given by a former session if such right or privilege had not been acted upon by a former owner during the life of the statute. * * *”

The Yates case was not mentioned in the opinions of this court in the Langhurst and Sanchez cases, supra.

*153 Other New Mexico cases construing this statute are Kershner v. Sganzini, 45 N.M. 195, 113 P.2d 576, 134 A.L.R. 1290 and De Baca v. Perea, 52 N.M. 418, 200 P.2d 715.

The present case was tried below on the theory that the right to repurchase was assignable. Relator claims it through his father’s will. Respondents assert that by virtue of the quitclaim deed the third party respondent was possessed of the right to repurchase Lots 9 and 10 and that relator was possessed of the right to repurchase Lot 8 as the sole legatee and devisee under his father’s will. The district court’s findings indicate that it followed this theory in its decision. The agreement of all the parties and the trial court that the right to repurchase is an interest which the former owner may assign or devise or which will pass to his heirs if he dies intestate will be treated as the law of the case. Mares v. N.M. Public Service Co., 42 N.M. 473, 82 P.2d 257. We are of the opinion that it is not only the law of the case but is the correct interpretation of the New Mexico statute, Sec. 76-740, N.M.S.A. 1941, supra. Of course, the one claiming the right to repurchase under the former owner, either as assignee, heir or devisee, acquires only the same right or privilege the former owner had and the right must be exercised in the manner and within the time provided by the statute in effect at the time of repurchase or the right is lost. De Baca v. Perea, supra. In the last mentioned case the court held that a devisee of a former owner had made application to repurchase after the statutory period for repurchase had expired and therefore the devisee applicant had no such statutory right of repurchase. The question of whether or not the prior right of repurchase was such a right or privilege as could be assigned, devised or passed by inheritance was apparently not directly raised or discussed by the court but the court seemed to assume that such was the law as is seen from the following brief quotations from the opinion [52 N.M. 418, 200 P.2d 716]:

“In addition to the right to redeem the property before the issuance of a tax deed to the State, the law gives the former owner, or one claiming under him, the first and prior right to repurchase the property from the State after the issuance of a tax deed to it by the county treasurer by complying with the provisions of Section 76-740, 1941 Compilation. * * * the former owner, or one claiming under him, must comply with its provisions. * * “* * * While the legislature provided by the Act that a former owner, or one claiming under him, could claim his preferential right and offer to repurchase from the State at any time before any other application and sale was made, this does not mean that such owner, or one claiming under him, may delay making his application and offer to repurchase and claim his preferential right until after another has made his for such sale * * *.” (Emphasis ours).

While there may be some differences and likewise some similarities in the right of redemption and the right of repurchase granted by our statutes as discussed in Yates v. Hawkins, supra, and Langhurst v. Langhurst, supra, we believe both rights may be assigned, inherited or devised.

Both statutes have a fundamental common purpose which is to grant or afford relief to delinquent taxpayers who have lost or are about to lose their property. Such statutes should be liberally construed in favor of the right to redeem and the right to repurchase.

In 51 American Jurisprudence, Secs. 1105 and 1106, pages 958 and 959, we find the following:

“In some jurisdictions, statutes somewhat similar to redemption statutes give former owners of land which has been purchased in by the county or other political subdivision under tax foreclosure proceedings the right to repurchase such property upon payment of taxes, penalties, and interest. “Who May Redeem Generally. The right or privilege of redemption from a tax sale is ordinarily granted to and may be exercised by the former owner *154 of the forfeited land, and his successors in interest, or any other person who has a legal or equitable interest in the land. In this respect, as in other respects, the redemption statutes are liberally construed in favor of the right of redemption. The right is not personal to the owner at the time of the tax sale; while it is not an estate in land, it is a statutory privilege which passes to the heir of the owner in the same manner as the land itself. The law treats the right of redemption as an interest which the owner may convey or devise and which will pass to his heirs in case of death intestate.”

The first contention of appellant is stated by him as follows:

“The trial court erred in finding and concluding that, although the trial court in Cause No. 8341 held the quitclaim deed from D.A. Belmore, Sr. to C.H. Hittson null and void and of no effect, and ordered the same cancelled of record, that such quitclaim deed nevertheless, constituted an assignment of the owner’s right to repurchase property sold for delinquent taxes pursuant to Sec. 76-740, as amended, 1941 Comp., and that C.H. Hittson was entitled to repurchase Lots 9 and 10, Block 33, Original Townsite of the City of Tucumcari in the same manner as the former owner, D.A. Belmore, Sr., by virtue of such quitclaim deed.”

It should be stated that this Point I of appellant makes no reference to any specific finding of fact or conclusion of law, as required by Sec. 14(5) of Rule XV, Rules of New Mexico Supreme Court. Lea County Fair Ass’n v. Elkan, 52 N.M. 250, 197 P.2d 228. The findings of the court are the facts upon which the case must rest. In re White’s Estate, 41 N.M. 631, 73 P.2d 316; Krametbauer v. McDonald, 44 N.M. 473, 104 P.2d 900.

The finding to which appellant refers probably is Finding No. 7 quoted above, and the conclusion of law may be Conclusion No. 2 quoted hereinabove.

As the quitclaim deed was executed after the tax deed to the State had been executed and delivered, of course it could not convey title as the court found or concluded, because the title was already in the State. But the statuory right to repurchase was not disturbed by the tax deed. It was contemplated by the act in question that the title would be in the State at the time the right to repurchase should become effective.

While the trial court made findings of fact and conclusions of law favorable to Hittson, the decree only determined the issues between the State Tax Commission and the relator, and in doing so discharged the alternative writ as to Lots 9 and 10, the effect of which was a determination that relator had no right to repurchase as provided by Sec. 76-740, N.M.S.A. 1941, supra.

The word “void” as used by the trial court in the Quay County case in concluding that the quitclaim deed in question was “void because issued subsequent to the sale by the County Treasurer to the State Tax Commission”, was used in the sense of “inoperative”. The reason for the holding stated by the Quay County trial court is in language so certain that it cannot be successfully questioned, and the trial court in this case, in its finding No. 7, held:

“In Cause No. 8341 of the District Court of Quay County, which was a quiet title suit, the court found as a fact that the quitclaim deed from David A. Belmore Sr. to C.H. Hittson was void as a conveyance of title due to the fact that it was executed and delivered subsequent to the conveyance by tax deed to the State of said three lots.”

This finding we believe is sustained by the record herein. The question decided in the present case was whether the relator inherited from his father the right to repurchase. This depended upon whether his father had that right at the time of his death. At that time he had sold and assigned this right to Hittson. The improvident cancelling of the quitclaim deed of record by the District Court of Quay County because it was inoperative as a conveyance of title is immaterial. The cancelling of the deed destroyed it as a conveyance of title, but it did not transfer the right of repurchase to relator, who never owned *155 such right. It was undoubtedly inoperative as a transfer of title because it had been previously conveyed to the State, but it constituted an assignment of the prior right to repurchase.

Contention No. 2 of appellant is as follows:

“The court erred in admitting in evidence, over relator’s objections, third party respondent’s Exhibit 1, being a certified copy of the quitclaim deed from D.A. Belmore, Sr. to C.H. Hittson to Lots 9 and 10.”

This contention of appellant is not well taken for the reasons hereinabove stated. The court did not err in admitting in evidence the quitclaim deed in question.

Appellant’s Contention No. 3 is stated as follows:

“The trial court erred in concluding that the final decree in Cause No. 8341, wherein the trial court found and concluded that the quitclaim deed from D.A. Belmore, Sr. to C.H. Hittson was null and void and of no effect, was not res adjudicata on the question of the validity of said deed as an assignment of D.A. Belmore, Sr. of the right to repurchase property sold for delinquent taxes pursuant to Sec. 76-740, as amended, 1941 Comp.”

In stating this point in his brief the appellant is again remiss as was mentioned hereinabove with reference to his Point I. He makes no reference to any specific conclusion of law to which his Point 3 refers, as required by Sec. 14(5) of our Supreme Court Rule XV. The conclusion to which appellant refers in his Point 3 is probably Conclusion of Law No. 3 made by the trial court in this case, hereinabove quoted. We see no error of the court in reaching such a conclusion for the reasons we have heretofore discussed. In addition, however, we call attention to the fact that this suit as originally brought was between relator and respondent, and respondent was not a party to the Quay County suit, and the judgment in that suit did not affect the respondent in any way. As between the original parties to this action, the Quay County judgment was not res adjudicate of any claim of the respondent in this case nor is respondent collaterally estopped thereby, for the sufficient reason that the parties and causes of action were different.

The trial court made findings in the present case to the effect that Hittson acquired the equitable right to repurchase Lots 9 and 10, but this was not followed by any judgment in favor of Hittson, which only provided that the writ be dismissed as it affected Lots 9 and 10. The respondent, in effect the State of New Mexico, is not bound by any finding of the trial court in the Quay County case affecting the claim of Hittson for several reasons:

(1) The respondent was not a party to the Quay County suit, and the cause of action is different; (2) the judgment in this action ignores any right or claim of Hittson, and is confined to the determination of issues between the relator and respondent; and (3) the senior Belmore conveyed his right to repurchase and it did not descend to relator.

But we need not further consider the rights of Hittson; they were unmentioned in the decree of the trial court. Even if the wrongful judgment pleaded as res adjudicata by the relator could have bound Hittson it certainly did not bind the State of New Mexico (which was not a party) and thus deprive it of its power to dispose of the State’s property secured by tax title in the manner provided by law, whether to Hittson or any other person. If relator has not the right to repurchase it, it is no concern of his as to whom the respondent may sell the property.

See Pioneer Irrigation Ditch Co. v. Blashek, 41 N.M. 99, 64 P.2d 388, in which this court held that a federal court’s decree establishing water rights was not binding on an appropriator who was not a party to the suit, and U.S. v. Candelaria, 271 U.S. 432, 46 S. Ct. 561, 70 L. Ed. 1023, in which the United States Supreme Court held that the United States was not bound by a decree of a district court of the State of New Mexico disposing of Pueblo Indian lands in which the United States was not a party.

Regarding the binding effect of a judgment in a subsequent action between the *156 same parties, see Paulos v. Janetakos, 46 N.M. 390, 129 P.2d 636, 142 A.L.R. 1237.

The judgment of the district court should be and is affirmed.

It is so ordered.

LUJAN, C.J., concurs.

SADLER, J., concurs in the result.

ARMIJO, District Judge, dissents.

McGHEE and COMPTON, JJ., did not participate.

Order Denying Motion for Rehearing

PER CURIAM.

This cause coming on for hearing upon appellant’s motion for rehearing, and the Court having considered said motion and briefs of counsel, and being now sufficiently advised in the premises,

It is ordered by the Court that said motion for rehearing be and the same is hereby denied.

SADLER, Justice.

I concur in the order of the court denying the motion for rehearing. Furthermore, it is not out of place for me to add, even at this late day, that I saw nothing to criticize in the views expressed by Mr. Justice Coors in the opinion heretofore filed in this case wherein he discusses the cases of Yates v. Hawkins, 46 N.M. 249, 126 P.2d 476; Langhurst v. Langhurst, 49 N.M. 329, 164 P.2d 204; and Sanchez v. New Mexico State Tax Commission, 51 N.M. 154, 180 P.2d 246. See, also, recent case of Chavez v. Chavez, 56 N.M. 393, 244 P.2d 781. Accordingly, there is no disagreement on my part with the conclusions drawn by him in his opinion near the close of the discussion of the three cases first mentioned above, to-wit:

“While there may be some differences and likewise some similarities in the right of redemption and the right of repurchase granted by our statutes as discussed in Yates v. Hawkins, supra, and Langhurst v. Langhurst, supra, we believe both rights may be assigned, inherited or devised. “Both statutes have a fundamental common purpose which is to grant or afford relief to delinquent taxpayers who have lost or are about to lose their property. Such statutes should be liberally construed in favor of the right to redeem and the right to repurchase.”

The foregoing observations are recorded to clarify some uncertainty otherwise likely to arise from the fact that when the opinion of Mr. Justice Coors was filed herein, my concurrence was noted as in the result only.

JR Watkins Co. v. Eaker

Supreme Court of New Mexico.

May 14, 1952.

Archer & Dillard, Artesia, for appellant and cross-appellees.

George L. Reese, Sr., Roswell, Reese, Renee Kalia, McCormick, Lusk & Paine, Carlsbad, for appellees and cross-appellant.

McGHEE, Justice.

We will refer to the appellant company as plaintiff, to the appellee and cross-appellant, Charles Wm. Eaker, as the defendant, and the defendants and appellees, Mrs. Amanda Eaker, J.T. Fulton and R.L. House, as the sureties.

The defendant had been ordering and selling the products of the plaintiff under contracts similar to the one involved in this action since 1936, and on August 31, *541 1945, was indebted to the plaintiff on account in the sum of $4,698.80. On that date the plaintiff and defendant entered into a new contract with the new sureties named above. The material paragraphs of this new contract involved in a determination of this case are:

“3. The Purchaser further agrees to pay the Company its current wholesale prices for the goods and other articles sold to him, as herein provided, and also the prepaid transportation charges thereon, if any, by remitting to the Company each week at least sixty per cent (60%) of the amount received by him from his cash sales, and from his collections on sales previously made, at the time and in the manner and in accordance with the provisions of the weekly record blanks of the Company to be furnished to him; and, at the expiration or termination of this agreement, to pay the whole amount therefor then remaining unpaid; or the Purchaser may pay for such goods in cash, less the usual cash discount allowed for such payments; but such payments, or any of them, may be waived or extended by the Company without notice to the sureties herein, and without prejudice to the rights or interests of the Company. “4. If the Purchaser shall not pay cash for said goods and other articles so sold and delivered to him, and the payments at the time and in the manner hereinbefore provided are insufficient to pay therefor, or if the Purchaser shall fail to pay on the indebtedness expressed herein, amounts satisfactory to the Company, from time to time during said term, the Company may, in its discretion, thereafter either limit the sales herein agreed to be made, or from time to time suspend the same, or require cash with each order, or cash upon delivery, until such indebtedness is, or such indebtednesses are, paid, or reduced, as the Company may require. “9. It is also mutually agreed that this is the complete, entire and only agreement between the parties, and that it shall not be varied, changed, or modified in any respect except in writing executed by the Purchaser and by an officer of the Company, and that either of the parties hereto may terminate this agreement at any time, if desired, by giving the other party notice thereof in writing by mail. “10. The Purchaser promises to pay the Company, at Winona, Minnesota, from time to time, after thirty days from the date of acceptance of this agreement, in amounts satisfactory to the Company, the indebtedness he now owes the Company, and agrees, at the expiration or termination of this agreement, to pay any balance thereof then remaining unpaid, payment of which indebtedness is hereby so extended. “11. The Purchaser and the Company, for the purpose of settling and determining the amount of the indebtedness now owing from the Purchaser to the Company, hereby mutually agree that the said indebtedness is the sum of Forty Six Hundred Ninety Eight and 80/100 H-I-G W-B Dollars, which sum the Purchaser agrees to pay and the Company agrees to receive, and payment of which is extended as above provided.”

The contract of suretyship reads:

“In consideration of the execution of the foregoing agreement by the J.R. Watkins Company, which we have read, or heard read, and fully understand and hereby agree and assent to, and its promise to sell, and the sale and delivery by it, to the Purchaser as vendee, of goods and other articles, and the extension of the time of payment of the indebtedness owing by him to said Company, as therein provided, we, the undersigned sureties, do hereby waive notice of the acceptance of this agreement, notice of default or of nonpayment and waive action required, upon notice, by any statute, against the Purchaser; and we jointly, severally and unconditionally promise, agree and guarantee to pay said indebtedness, the amount of which is now written in said agreement, or if not written therein, we *542 hereby authorize the amount of said indebtedness to be written therein; and we jointly, severally and unconditionally promise to pay for said goods and other articles, and the prepaid transportation charges thereon, at the time and place, and in the manner in said agreement provided. And we further severally agree that, in case of the death of one or more of us, the undersigned sureties, before the expiration or termination of this agreement, his estate shall continue liable with the surviving surety or sureties for all shipments made to the Purchaser prior to receipt by the Company at Winona, Minnesota, of written notice by registered mail of such death. Sureties Sign Here In Ink

Name                     Occupation Address
Mrs. Amanda Eaker (Seal) Rooming House
J.T. Fulton       (Seal) Farmer & Ranching
R.L. House        (Seal) Farmer          "

The plaintiff delivered merchandise to the defendant on credit from shortly after the date of the contract until March 3, 1946, when it refused further credit, and advised the defendant he would thereafter have to send cash with his orders. The defendant continued as such agent without credit until December 5, 1947, when the plaintiff cancelled the contract. During this period the sales of the defendant greatly decreased, and notwithstanding his efforts to get credit for merchandise for which he had large orders from responsible customers, it was denied by the plaintiff. The defendant did not have means or credit to procure the goods elsewhere.

Following the termination of the contract the plaintiff brought suit against Eaker and his sureties for the balance due on the account of $2,956.87. Eaker admitted the correctness of the account but filed a cross-complaint against the plaintiff for loss of profits because of its breach of contract in, as he said, wrongfully denying him credit when the plaintiff knew he could not purchase like merchandise elsewhere because of his financial condition. The sureties pleaded they were relieved of liability because of the breach by the plaintiff of the contract in that it granted Eaker credit for only six months when the contract extended over a period of forty months, thus preventing Eaker making sufficient money to pay the account in full.

The plaintiff’s first claim of error is the denial of its motion for judgment on the pleadings, which was based principally on the admission of the correctness of the account, plus the execution of the contract by the defendant, and the contract of suretyship by the other defendants. It claimed its decision to withhold credit and cancel the contract at its pleasure could not be questioned by any defendant. For reasons which will be later stated, the motion was properly denied.

The case was heard before a jury but at the conclusion of the testimony the trial court held there was no issue to submit to it. It granted the motion of the plaintiff for judgment for the amount due on the account, held the breach of the contract by the plaintiff discharged the sureties, but declined to submit Eaker’s claim of damages to the jury. The trial court stated Eaker’s testimony in support of his claim of damages was too vague and speculative to support a verdict in his favor.

The plaintiff has appealed from that part of the judgment denying it recovery against the sureties, and Eaker has appealed from the part of the judgment denying him recovery for loss of profits.

The plaintiff rested its case on the itemized account attached to its complaint, which, as above stated, was admitted to be correct, and offered no testimony or other proof. It admits the refusal of credit after March 3, 1946, but seeks to justify it principally under paragraph 4 of the contract, saying it had the right at any time to discontinue the granting of credit and its right to do so may not be questioned by Eaker or this Court.

We had this question before us in Atma v. Munoz, 48 N.M. 114, 146 P.2d 631, 633, where a landlord had declared the cancellation of a farm lease which contained a provision if the farm was not operated in a manner satisfactory to the plaintiff it might forthwith be terminated *543 by her, and in such event the lessee was to have no right of any sort or description in or to the crops on the premises. The lessor did not testify in the case but her husband gave testimony the crops were not being properly cultivated. It was there claimed the lessor had the absolute right of termination for any reason satisfactory to her. After a citation of authority reflecting the opposing views of a number of cases, it was stated:

“It is the majority rule, which we adopt, that a promise by one party to a contract to perform on his part to the satisfaction of the other party is binding; but the dissatisfaction must be real and in good faith. (Citing cases.)”

Following a recital of the testimony of the husband of the lessor that he looked after his wife’s affairs and that the operation of the farm was not satisfactory to him, we stated:

“This is the only testimony in the record regarding any dissatisfaction with the manner in which appellant cultivated the crops. The dissatisfaction of her husband was totally immaterial; it was appellant’s real, good faith dissatisfaction that must have been proved; and her honest judgment that must have been exercised, not that of her husband, although he may have been looking after her business affairs.”

Here we have no testimony whatever of the reason for the refusal to extend the credit provided for in the contract. Eaker, so far as the record discloses, was complying with the provision that he must remit to the plaintiff 60% of the amount of his sales and a like percentage of his collections. In fact the record shows that in 15% of the time the contract was to run he had not only paid for his goods delivered but had paid off 25% of the old indebtedness. It is argued in the brief the account shows Eaker had sent the plaintiff a number of bad checks. It is true it shows a number of charge entries designated “CHK PRO” followed by a sum, but there is no testimony these items represent protested checks. Assuming, however, that they do prove Eaker sent it bad checks, we still lack evidence that dissatisfaction over such items was even a contributing cause of the plaintiff refusing further credit. The plaintiff also points to charges for “Ins.” which it is argued might represent checks returned for insufficient funds. All are for amounts of less than two dollars and may well have been for insurance. The plaintiff could have given us evidence on the points but instead of doing so stood on its claim its act of refusing credit was a matter within its discretion which it need not justify. Such may be the law in some jurisdictions, but not in New Mexico.

The finding in effect of the trial court that credit was wrongfully withdrawn from Eaker and his business so reduced that he could not continue it is sustained by the record.

The plaintiff still contends this would not discharge the sureties; that its action in the premises was really of benefit to them in that Eaker’s account was not increased, thereby relieving the sureties of an additional burden. Authorities are cited which it is claimed call for holding the sureties.

The contract between the plaintiff and Eaker was made a part of the contract of suretyship. The plaintiff changed the contract from one of sales on credit to Eaker to one for cash, well knowing he was because of his financial condition unable to buy goods elsewhere, thus greatly lessening his ability to pay the old indebtedness.

It is well settled in New Mexico that a surety is liable only for the performance of the contract for which he becomes surety, and that any alteration thereof discharges such surety. Morgan v. Salmon, 18 N.M. 72, 135 P. 553, L.R.A. 1915B, 407. In Lyons v. Kitchell, 18 N.M. 82, 134 P. 213, 214, Ann.Cas. 1915C, 671, the liability of a gratuitous surety, as we have here, is discussed. It was there contended as the sureties could not have been harmed by an alteration in the contract, *544 they, therefore, would not be discharged from liability. The Court stated:

“* * * This contention, however, cannot be sustained, for a noncompensated surety derives no benefit from his contract, and his object is generally to befriend the principal. In such cases the consideration moves to the principal, and, of course, he could be held upon an implied contract; but the surety is only liable because he has agreed to become so. He is bound by his agreement, and nothing else. No implied liability exists to charge him. He is under no normal obligation to pay the debt of his principal. Being thus bound by his agreement alone, and deriving no benefit from the transaction, he is a favorite of the law, and has a right to stand upon the strict terms of his obligation. To charge him beyond its terms, or to permit it to be altered without his consent, would be not to enforce the contract made by him, but to make another for him. Brandt, Suretyship & Guaranty, vol. 1, § 107. `And a discharge will be created by a departure from the terms of the contract respecting payments, though no injury is shown.’ Welch v. Hubschmitt Co., 61 N.J.Law, 57, 38 A. 824. “It will thus be seen that it is the deviation from the terms of the contract that operates to release the surety, and not the injury or damage done by such departure. * * *”

See also Pacific Nat. Agr. Credit Corporation v. Hagerman, 39 N.M. 549, 51 P.2d 857, 101 A.L.R. 1301.

Much is said in the briefs about the cancellation of the contract within two years from its date instead of allowing it to run for the full period of forty months. We have already shown the sureties were released by the wrongful withdrawal of credit, and as the testimony of Eaker as to claimed loss of profits did not go beyond the cancellation date, that feature becomes immaterial and it will not be further discussed.

We turn now to the claim of Eaker that the trial court erred in refusing to submit the question of his damages to the jury. It was his claim he had an established business which was expanding and profitable, especially in the sale of medicated stock salt to people engaged in the livestock business. The reason for such refusal was, as above stated, that the evidence was too speculative, remote and based on surmise.

It is well settled that where a legal right to such damages exists, the fact they may not be computed with exact mathematical certainty does not justify the failure to submit the issue to the jury. De Palma v. Weinman, 15 N.M. 68, 103 P. 782, 24 L.R.A.,N.S., 423; See also Gonzales v. Rivera, 37 N.M. 562, 25 P.2d 802; Nichols v. Anderson, 43 N.M. 296, 92 P.2d 781; and Southwest Battery Corporation v. Owen, 131 Tex. 423, 115 S.W.2d 1097, 1099, wherein it is said:

“* * * Where, as here, it is shown that the business was a going concern, and was making a profit, when the contract was breached, such preexisting profit, together with other facts and circumstances, may be considered in arriving at a just estimate of the amount of profit which would have been made if plaintiff had not breached its contract. * * *”

In Twyman v. Roell, 123 Fla. 2, 166 So. 215, 217, which was an action for breach of a partnership contract, it was stated:

“The rule is well settled that if there is a yardstick or measure of damages by which prospective profits may be determined and they arise out of a contract in which profit is the inducement to its making, they may be allowed if proven, whether they arise from farming, mechanical, or other contracts. * * * “Uncertainty of the amount or difficulty of proving the amount of damage with certainty will not be permitted to prevent recovery on such contracts. If it is clear that substantial damages have been suffered, the impossibility of proving its precise limits *545 is no reason for denying substantial damages altogether. (Citing cases.) “The uncertainty which defeats recovery in such cases has reference to the cause of the damage rather than to the amount of it. If from proximate estimates of witnesses a satisfactory conclusion can be reached, it is sufficient if there is such certainty as satisfies the mind of a prudent and impartial person. (Citing cases.)”

See also Fraser v. Echo Mining & Smelting Co., 9 Tex.Civ.App. 210, 28 S.W. 714.

Eaker had trouble detailing his damages, and while his testimony is not as clear as it should have been, still we believe it is sufficient to sustain a reasonable award in his favor. So believing, we hold the trial court erred in refusing to submit the damage issue to the jury and grant Eaker a new trial where the only issue will be the amount he is entitled to recover as damages.

The judgment will be affirmed as to the amount owing on the account and the release of the sureties, but reversed for failure to submit Eaker’s claim of damages to the jury, and then strike a balance between the amount admittedly owing on the account and the sum awarded Eaker by the jury. The defendants will recover their costs, if any, on the appeal.

It is so ordered.

LUJAN, C.J., and SADLER, COMPTON, and COORS, JJ., concur.

Holmberg v. Bradford

Supreme Court of New Mexico.

May 23, 1952.

*786 G. W. R. Hoy, Farmington, Johnston Jeffries, Aztec, for appellants.

J. Murray Palmer, Charles M. Tansey, Jr., Farmington, for appellees.

ARLEDGE, District Judge.

The plaintiffs are owners of shares in interest in the Twin Rocks Ditch Company, a community irrigation ditch located in San Juan County, New Mexico. The defendants, approximately fourteen in number, comprise and include all of the other shareholders in said community ditch company.

It is not necessary here to summarize the allegations of the complaint and answer because the issues were materially limited by stipulation and agreement of counsel at a pre-trial conference.

Following the pre-trial conference, the material allegations of the complaint appear to be that the sum of approximately seventeen land owners in number own 345 acres of land which were irrigated from waters that flow through the said community ditch. Of this acreage plaintiff C.H. Holmberg owns 119.4 acres, and the other two plaintiffs jointly own 14.7 acres. In other words, the plaintiffs together own 134.1 acres out of the total land they allege to be irrigated by said community ditch, which this Court finds, by mathematical computation, to be 38.87 per centum of the irrigated acreage. The complaint further states that the ownership of said Twin Rocks Ditch Company is represented by seventy shares in interest in the said company, and that the shares in interest are owned by some seventeen persons, including the plaintiffs. All of these *787 persons are either defendants or plaintiffs in the action. Of these seventy shares, the plaintiff C.O. Holmberg is the largest shareholder with eighteen shares; the two other plaintiffs jointly own three shares, making a total of twenty-one shares in interest owned by the plaintiffs. This Court, by mathematical computation, determines that the plaintiffs own thirty per cent. of the shares in interest of the said Twin Rocks Ditch Company. The complaint is apparently based upon the theory that each of the land owners is entitled to a share in interest in the community ditch company in proportion to the number of acres irrigated by each land owner from the waters of said ditch.

The principal prayer for relief prays that the Court issue a mandatory injunction commanding the defendants to “make a proper apportionment of shares in defendant ditch company to each of the respective owners of land irrigated by waters from said Twin Rocks Ditch, in proportion to the amount of land each respective shareholder has (irrigates with water from said ditch), and that the records of said Twin Rocks Ditch Company be made to show such proportioned shares to each respective shareholder therein.” (The words in parenthesis are supplied by this Court to correct an obvious clerical error in the prayer for relief).

The order of the trial court recited that it was made following pre-trial conference, and sustained the defendants’ motion to dismiss, said motion to dismiss being in the nature of a demurrer. The order of the trial court reads as follows:

“The above styled cause having come on for hearing at a regular term of court, plaintiffs being present and appearing by and through their attorney, G.W.R. Hoy, and defendants being present and appearing by and through their attorneys, J. Murray Palmer and Charles M. Tansey, Jr.: “1. The defendants having renewed their written motion heretofore filed in said cause to dismiss the plaintiff’s complaint, and it having been agreed at a pre-trial conference heretofore held in said cause and ruled by the Court in said pre-trial conference that the only issue remaining before the Court for decision is the issue as to whether or not the Court can by its judgment and decree increase, decrease, change, or vary the shares of ownership in a community ditch upon the allegations contained in plaintiff’s complaint, and the Court finds: “a. That the Twin Rocks Ditch Company is a community ditch and that the plaintiff and defendants are the share holders and owners in said community ditch as tenants in common. “b. That the ownership in a community ditch is a property right and such ownership is a right separate and apart from the water rights of the individuals using such ditch. “c. That the Court based upon the allegations in plaintiff’s complaint as a matter of law has no right to vary, add to, or take away the shares of interest and ownership of the shareholders in the Twin Rocks Community Ditch. “Therefore the Court hereby sustains the written motion of the defendants, heretofore filed in said cause, to dismiss the plaintiff’s complaint, and the complaint of the plaintiff is herewith dismissed.”

From this order of the trial court sustaining the motion to dismiss, plaintiffs have appealed, contending that the court committed error as a matter of law. Defendants have filed a cross-appeal. But if the ruling of the trial court was correct on this point, it is not necessary to consider any of the other issues raised by the appeal or by the cross-appeal.

The pleadings indicate that the Twin Rocks Ditch Company has existed prosperously and usually peacefully for some sixty years; that it conveys water out of a stream in Colorado into New Mexico; that two persons owning three shares in interest in the company are residents of Colorado and irrigate land in Colorado; and that the plaintiff C.O. Holmberg was, until recently, the Chairman of the Board *788 of Trustees of the community ditch company.

Section 77-1407, N.M.S.A. 1941 Comp., same being Chapter 30 of the Laws of 1882, reads as follows: Renee Kalia

“Ownership of ditches Use of water Payment. All acequias, public or private, when completed, shall be the property of the persons who may have completed such acequias or ditches, and no person or persons who may desire to use the waters of such acequias or ditches shall be allowed so to do without the consent of a majority of the owners of such acequias or ditches, and upon payment of a share proportionate to the primary cost of such acequia or ditch to the amount of the land proposed to be irrigated, or the quantity of water proposed to be used: Provided, that the provisions of this section shall not apply to any acequias or ditches, public or private, that may pass from the limits of any one county to within the lines of any other county.”

On the basis of the foregoing statute it would appear that the rights of ownership of the ditch are rights separate and apart from the rights of ownership of water that the ditch conveys. The community ditch in this case is only the carrier. Any new land owner, or any land owner who has increased the number of his acres of irrigable land, wishing to carry water through an established ditch, can do so only by consent of the owners of the shares in interest in the ditch company, and by payment to the ditch company of a price proportionate to the primary cost of the ditch, based upon the amount of water to be carried. It would appear that the new land owner, or the land owner who has additional or enlarged acreage that could be irrigated from the community ditch has absolutely no right to an additional interest or ownership in the ditch until he has secured the consent of the majority of the owners of said ditch, and has arranged to pay for additional carrier space in the ditch. The New Mexico statute, which apparently grew out of customs of the early settlers, recognized only two methods of acquiring a right of property in a community irrigation ditch: The first was by the initial joinder of the land owners in the construction of the ditch each contributed in cash or labor, or both, to such construction; the other is by the method of consent and purchase above referred to.

Section 77-1414, N.M.S.A. 1941 Comp., the same being Chapter 1 of the Laws of 1895, reads as follows:

“Ditch elections Qualifications of voters Method of voting. The election for acequia or community ditch officers under this article shall be held by the outgoing commissioners under rules and regulations to be prescribed by them. Only those having water rights in the acequia or ditch and who are not delinquent in the payment of their assessments, and fail to proffer such delinquent assessment at the time they offer to vote, shall be allowed to vote; but votes may be cast by written proxy and shall be in proportion to the interest of the voter in the ditch or water, or in proportion to the number or amount of his water rights.”

Although there is some language in this latter statute regarding methods of voting which might conflict with the method of voting the shares in interest of the owners of the community ditch acquired under the 1882 Law, we believe that the 1895 Law merely provides two alternative methods of voting, and it does not destroy any property rights which the 1882 statute recognized. The 1895 statute in no way compels us to grant the relief which plaintiffs seek here.

In the 1914 New Mexico case, Snow v. Abalos, 18 N.M. 681, at page 696, 140 P. 1044, at page 1049, this Court attempted to clarify the distinction between water rights and shares of interest in a community ditch, set out as follows:

“Appellees have cited us to section 62, Black’s Pomeroy on Water Rights, where the author says: `Whenever ditches or other structures for diverting or appropriating water belong to two or more proprietors, such owners are, *789 in the absence of special agreements to the contrary, tenants in common of the ditch, and of the water rights connected therewith, and their proprietary rights are governed by the rules of law regulating tenancy in common’ and also refer to the cases of St. Anthony Falls Water-Power Co. v. City of Minneapolis, 41 Minn. 270, 43 N.W. 56; Bradley v. Harkness, 26 Cal. 69; Lytle Creek Water Co. v. Perdew, 65 Cal. 447, 4 P. 426. The learned author and the courts, we believe, erroneously consider the water rights attached to the ditch, which of course is owned by the parties constructing it as tenants in common, whereas said water rights are appurtenant to the lands owned in severalty by the parties. The ditch is simply the carrier, or agency employed by the parties, to conduct the water, the right to which is appurtenant to the land, to be irrigated. Suppose, for example, that two farmers each owned a farm; their lands being contiguous. In order to reach their lands they should jointly construct a wagon road to the same. The road would be owned by the parties jointly or as tenants in common. Each would have the right to use the road. The fact that they haul their produce raised on the farm over the wagon road thus constructed would not make them tenants in common of the crops so hauled. However, if they should, for instance, mix their grain together, for the purpose of hauling it to market, they would of course be tenants in common of the grain so commingled. “In the case of Norman v. Corbley, 32 Mont. 195, 79 P. 1059, this principle is applied by the Supreme Court of Montana. The Court say: `To constitute a tenancy in common there must be a right to the unity of possession (17 Am. & Eng.Enc. L.2d Ed. 651, and cases), and if this right is destroyed, the tenancy no longer exists. With respect to a water right this unity must extend to the right of user, for the parties can have no title to the water itself.'”

In Parke v. Boulware, 7 Idaho 490, 63 P. 1045, 1047, the Supreme Court of Idaho expressed a similar view of the law, stating:

“The law is well settled in this state that a ditch may be owned separately from a water right, and a water right separately from a ditch. If the appellant is the owner of the ditch and the dams described in the complaint, the respondents have no legal right to interfere therewith in any manner, and have no right to run water through said ditch, except as hereinbefore stated, although a part of said ditch is composed of a slough or high-water channel.”

In Wiel on water rights, Vol. 1, p. 482, the learned author states:

“The water right itself, as a flow and use, is not an easement. It is a thing in itself, not a servitude upon some other thing; whereas the right to a ditch or other artificial water course is an easement.”

Section 77-1411, N.M.S.A. 1941 Comp., Chapter 1 of the Laws of 1895, by its provision declares: that community ditches are constituted as bodies corporate. It would therefore appear that the defendant in this cause, the Twin Rocks Ditch Company, a community ditch corporation, by its being a body corporate owns a community ditch which is in effect an easement for the purpose of transporting water; that the other defendants in this cause own shares in interest in said community ditch corporation, and that plaintiffs’ contention that the courts of this state should readjust the shares in interest in said community ditch corporation in proportion to the water rights of the land owners using said ditch, or in proportion to the number of acres irrigated by each land owner using said ditch, is not a valid contention of law. The contention of the plaintiffs, in effect, asks this Court to strike down the letter and spirit of the cited 1882 statute of this state, and, in effect, asks this Court *790 to destroy vested property rights and create new property rights this Court cannot legally or constitutionally do.

Finding no error in the order of the learned trial judge in sustaining defendants’ motion to dismiss, the decision of the trial court will be affirmed.

It is so ordered.

LUJAN, C.J., and McGHEE, COMPTON and COORS, JJ., concur.

SADLER, J., not participating.

Cienfuegos v. Pacheco

Supreme Court of New Mexico.

September 27, 1952.

*665 Norman M. Neel, Renee Kalia, Fletcher A. Catron, Santa Fe, for appellants.

Harry L. Bigbee, Santa Fe, for appellees.

COORS, Justice.

Plaintiffs brought suit in District Court of Santa Fe County for restitution of a parcel of land and for damages, contending that they were entitled to possession and that defendants were in wrongful possession. Plaintiffs are husband and wife; defendants are mother and step-father of the plaintiff husband. Plaintiffs contend the property was community property, purchased by the plaintiffs, which could not be conveyed by the husband alone to his mother. At the trial there was great conflict in the testimony of the parties, their statements of the facts surrounding the transaction of the purchase of the land, the placing of a building upon it and the subsequent conveyance of it by the son to his mother being diametrically opposed. At the conclusion of the testimony the court announced it was not satisfied with the testimony, that cases involving mother and son were always more difficult than ordinary cases, and that both sides were inclined to exaggerate more than ordinarily. The trial judge stated he was going to find for the plaintiff, that the property was to a certain extent community property and the deed was void; hence the relief asked by the plaintiff was to be granted; however, without damages. Subsequently, the defendants filed a motion for a new trial, stating that they were surprised by certain testimony of the plaintiffs and that they also wished compensation for improvements which they had placed on the land. They further asked, in the event a complete new trial was not granted, that the case be reopened for further evidence.

The case was reopened for limited purpose, at which time the court made the following statement:

“Now as the court understands it, gentlemen, this case having been reopened for further evidence upon the question of whether or not the property involved was community property of the plaintiffs, and that is the sole issue here today, is that correct, gentlemen? “Mr. Neal: That’s correct. “Mr. Bigbee: Or the proportion of it that might be community.”

Later, when evidence was introduced as to the purchase of materials to complete the building on the land, the objection was made to this testimony as not having a bearing on the question of the community property interest. The court stated:

“The court understands and perhaps there may be some merit to the objection. However, the court feels this way about it, and did at the time of the hearing on motion for a new trial, *666 that perhaps some light could be shed on the whole background, the whole circumstances here and even though the order as signed appears to be somewhat limited, that it is reopened merely for the purpose of evidence as to the community property, the court feels that in its original decision that it had to take into consideration all these various points, the truth or the falsity of the testimony of the various witnesses and so on and for that reason I am going to allow it. Objection will be overruled.”

It is unnecessary to examine in detail the testimony presented at the second hearing, but it was confused and different from that given by both sides at the first trial. The only error assigned, however, is the action of the court in granting a second hearing and not rendering a judgment on the first hearing. The court found at the conclusion of the second hearing that the plaintiff-son became owner of the property as his own by gift and hence it was his own and could be lawfully conveyed to the defendant-mother. As a result of such findings of fact the legal conclusion was stated that the defendants were owners in fee simple of the property and judgment was rendered for the defendants.

Plaintiff appeals from the judgment contending a conclusive case was established for the plaintiffs at the first hearing, that the document requesting a new trial did not meet the requirements for such a pleading, that it was an abuse of discretion for the court to reopen the case where no legal grounds are shown, and asking that the court be directed to enter judgment for the plaintiffs on the decision entered at the conclusion of the first hearing.

The New Mexico Rules of Civil Procedure, Rule 59(a) provides that new trials may be granted as follows:

“(a) Grounds. A new trial may be granted to all or any of the parties and on all or part of the issues in an action in which there has been a trial by jury, for any of the reasons for which new trials have heretofore been granted. On a motion for a new trial in an action tried without a jury, the court may open the judgment if one has been entered, take additional testimony, amend findings of fact or conclusions of law or make new findings and conclusions, and direct the entry of a new judgment.”

It may be seen that the above rule actually applies to two types of actions: those tried by a jury, and those tried by the court without a jury. In the former instance, the reasons for which a new trial may be granted are stated to be those for which new trials have heretofore been granted. In instances where the case is tried without a jury, the court is given a wide discretion by the wording of the portion of the rule applicable to such cases. This rule is based on the similar Federal Rule 59(a), 28 U.S.C.A. with the exception that in the New Mexico rule the words found in the Federal rule at the end of the first sentence: “in actions at law in the courts of the United States; and (2) in an action tried without a jury, for any of the reasons for which rehearings have heretofore been granted in suits in equity in the courts of the United States.” are omitted. The limitation in the Federal rule in the instance of cases tried in courts without a jury is not included in the New Mexico rule, thus it would appear that the framers of the New Mexico rule desired to grant the court broader discretion where it hears the case itself, without a jury, than is allowed under the Federal rule. Consequently, the cases which construe the Federal rule as applied in the Federal Courts, must be considered in the light of this difference between the two rules.

It has long been well established in New Mexico that the granting of a new trial rests within the discretion of the trial court and will be reviewed only for a clear abuse of that discretion. United States v. Lewis, 1883, 2 N.M. 459; Territory v. Romero, 1883, 2 N.M. 474; Schofield v. Territory ex rel. American Valley Co., 1899, 9 N.M. 526, 56 P. 306; Duncan v. Holder, 1910, 15 N.M. 323, 107 P. 685; Frank A. Hubbell Co. v. Curtis, 1936, 40 N.M. 234, 58 P.2d 1163. The United States Supreme Court follows the same rule, Fairmont Glass Works v. Cub Fork Coal Co., 1933, 287 U.S. 474, 53 S. Ct. 252, 77 L. Ed. 439, and the Federal Courts have continued to follow *667 this rule in applying the new rules of civil procedure, Campbell v. American Foreign S.S. Corp., 2 Cir., 1941, 116 F.2d 926; Youdan v. Majestic Hotel Management Corp., 7 Cir., 1942, 125 F.2d 15.

A court may grant a motion to reopen the case for the taking of additional testimony, which is the equivalent of a motion for a new trial, in the sound discretion of the trial judge, and his determination will not be overturned on appeal except for its clear abuse. Blytheville Cotton Oil Co. v. Kurn, 6 Cir., 1946, 155 F.2d 467; Chemical Delinting Co. v. Jackson, 5 Cir., 1951, 193 F.2d 123; St. Mary’s Bank v. Cianchette, D.C., 1951, 99 F. Supp. 994.

Two recent Federal cases on the question of review of a court’s final judgment, where a new trial has been granted, should be considered at this point. The first, Pettingill v. Fuller, 2 Cir., 1939, 107 F.2d 933, where the suit arose out of an automobile accident between the defendant’s car and that of plaintiff’s witness which plaintiff alleged was caused by the negligence of the defendant. During the course of the first jury trial, the counsel for the defense remarked during a colloquy with the court that plaintiff’s witness had been convicted and fined as a result of the accident. No motion was made by the plaintiff with regard to this remark and the jury later rendered a verdict for the defendant; the court set aside the judgment and granted a new trial on the grounds that the verdict was tainted. The Circuit Court of Appeals reversed a judgment on the second trial for the plaintiff on the grounds that the court abused its discretion in granting the new trial, reinstated the verdict of the first trial and ordered entry of final judgment for the defendant. In its opinion, the court cited the U.S. Supreme Court’s decision in the Fairmont Glass Works case, supra, as authority for reviewing the holding and ordering the reinstatement of the first verdict.

In the second case, Marshall’s United States Auto Supply, Inc., v. Cashman, 10 Cir., 1940, 111 F.2d 140, the court also reversed a judgment rendered for defendant upon a verdict at a second trial, where previously the jury had found for the plaintiff and judgment had been entered at the first trial. The case involved abuse of discretion in granting the new trial where the motion for a new trial did not set forth even in a sketchy manner the substance of newly discovered evidence, diligence exercised, and reasons preventing such evidence at first trial, nor did it specify alleged mistake and prejudice of jurors, questions of laws allegedly not adequately covered in instructions nor nature of false testimony allegedly offered by defendant. Also, an affidavit in support of the motion was not filed within the specified period, and no extension had been granted. The court cited, among others, the Fairmont Glass Works and Pettingill cases, supra, as authority for the reversal, where it felt that the trial court had abused its discretion in granting a new trial.

Plaintiff relies on the Marshall case as being one “on all fours” with the instant case. It is true that the situations are similar; but two salient differences appear: In the first place, the Marshall case had progressed to a final judgment; here no findings of fact nor judgment were entered when the new trial was granted. Secondly, the Marshall case having been tried before a jury, the party requesting a new trial was bound and limited by the Federal rules applying to such motions where the case was tried by a jury; whereas, in the instant case the court was not limited in the granting of the motion to those grounds formerly recognized as warranting the granting of a new trial in jury cases.

Great conflict and inconsistency were present in the evidence, both at the first trial and upon the limited new trial. At the conclusion of the first trial, the trial judge remarked that he was dissatisfied with the testimony and displayed reluctance in ruling for either side. He was granted wide discretion under Rule 59(a) and we cannot say the discretion was abused. The judgment will be affirmed.

It Is So Ordered.

SADLER, McGHEE and COMPTON, JJ., concur.

LUJAN, C.J., not participating.

Slone-Carter Grain Co. v. Jones

Supreme Court of New Mexico.

October 10, 1952.

Morgan & Morgan, Portales, Smith & Smith, Clovis, for appellants.

Mears & Mears, Portales, for appellees.

SADLER, Justice.

The appellant, defendant below, appeals from a judgment against him in the sum of $2,303.20 in favor of the plaintiff, appellee in this court, awarded by the district court of Roosevelt County following a trial before the court without a jury. The complaint alleged breach of an oral contract to sell and deliver to plaintiff all sweet sudan seed raised on described land for the cropping season of 1950 at an agreed price of $4 per hundred weight. The parties will be referred to as they appeared below.

In the year 1950 the defendant, C.S. Jones, was the owner of the SW 1/4 of Section 33, Township 5 South, Range 37 East, N.M.P.M. In the early part of that year he entered into an oral agreement with his son, Marvin Jones, then a minor, under which the latter was to farm the land above mentioned for the year 1950. Under the arrangement made C.S. Jones was to *1066 select the area to be planted to each crop to be grown as determined by him. The son, Marvin, was to arrange for the seed to be planted but the father was to pay for it. C.S. Jones, the father, would decide the time for harvesting and selling the crops, the price at which to be sold and the person to whom to sell. The son was authorized to contract the sale of the crops, make delivery of them, receive the purchase price therefor and pay same over to his father. The oral agreement further provided that C.S. Jones should pay the living expenses of Marvin Jones and family for the year 1950 and in addition he was to receive a portion of the proceeds from the crops for his work on the farm which at all times was to be worked under the supervision and control of the father, C.S. Jones. Renee Kalia

The plaintiff is a copartnership composed of Jay Slone and Cyril Carter and was engaged at all times material to this action in the grain business at Portales, New Mexico. On June 8, 1950, the plaintiff entered into a written contract with the defendant, Marvin Jones, whereby plaintiff agreed to furnish him all the seed necessary to plant the above described land in a crop of sweet sudan and when harvested to purchase same from him, the defendant, Marvin, promising to sell all the sweet sudan seed so raised on the land in 1950 at the agreed price of $4 per hundred weight. The plaintiff at the time of entering into such contract knew Marvin Jones was in possession of the land described and was farming it in 1950. Actually, as already indicated, the land was owned by his father, C.S. Jones.

The sweet sudan seed crop so planted and raised for the cropping year of 1950 belonged to C.S. Jones and the contract made between plaintiff and Marvin Jones was made for the use and benefit of C.S. Jones. It was not until about September 10, 1950, that C.S. Jones first learned of the contract between his son, Marvin, and the plaintiff. He did not repudiate the contract, however, until a day or two prior to commencement of this action by which time he could have learned that the market price of sweet sudan seed was in excess of what plaintiff was to pay as set forth in the written contract between plaintiff and Marvin Jones.

When the father learned of the contract made by his son with the plaintiff he would not permit his son to deliver the sudan seed to plaintiff and did not offer to pay plaintiff for the seed furnished until after commencement of this suit. A total of 57,580 pounds of sweet sudan seed was raised and harvested by the son. Plaintiff was at all times ready, and willing and able to pay the agreed price it contracted to pay and the defendants were so notified. The market price of sweet sudan was $8 per hundred weight on November 1, 1950.

The trial court having made the foregoing findings of fact concluded therefrom that the oral agreement between C.S. Jones and Marvin Jones created a relationship between them whereby the latter was authorized to farm the lands in question as agent for the former; that in contracting the sale of the sudan seed crop Marvin Jones acted as agent for an undisclosed principal, namely, C.S. Jones, for whose benefit the contract was made and who was liable thereon. The court further concluded that plaintiff was entitled to recover from defendant, C.S. Jones, $2,303.20, the difference between the contract price and the market price at the time of the breach of the contract, with statutory interest and costs.

It was on the foregoing findings and conclusions that the trial court entered judgment against the defendant C.S. Jones in the sum already stated. Before entering into a discussion of the merits of the appeal it should be added that the defendant Marvin Jones, although a minor at time of entering into this contract, had married in the fall of 1949 which explains the recitation in the court’s findings that as a part of the agreement between father and son C.S. Jones was to pay the living expenses of his son, Marvin Jones, and family. Furthermore in the separate answer filed by Marvin Jones through a guardian ad litem, among other defenses, he pleaded his minority and disaffirmed the contract, praying a dismissal upon that ground. In the final judgment entered the court dismissed him out of the case, leaving the single defendant, *1067 C.S. Jones, his father, as the appellant in this court.

The defendant argues the case under as many as four separate points and much time is spent in presenting the contention that the case was not tried on the theory of agency and, hence, agency should not be considered as support for the judgment, citing Pecos Valley Trading Co. v. Atchison T. & S.F. Ry. Co., 24 N.M. 480, 174 P. 736; and in seeking to determine whether the contract between the father and son was one of landlord and tenant as in Washburn-Wilson Seed Co. v. Alexie, 54 Idaho 727, 35 P.2d 990, or whether the son was a mere share cropper as discussed in Powers v. Wheless, 193 S.C. 364, 9 S.E.2d 129. The latter points are merely incidental to the question whether the son was in fact an agent of his father and, if an agent, whether this discloses a case for holding the father liable as an undisclosed principal. But these and every other question argued, each and all, are resolved by deciding the single issue, namely, assuming agency of some sort on the part of the son, was he authorized to contract the sale of the sweet sudan seed crop which he was about to plant, cultivate and harvest, under the arrangement disclosed between him and his father.

For purposes of our decision only we may assume that if all of the facts found by the court were true, the judgment against the father would have to stand affirmed. Nevertheless, a careful study of the evidence is convincing that a vital recitation in the findings is without the needed support in the evidence as a result whereof the judgment appealed from must be reversed. The portion of the findings referred to reads:

“* * * that Marvin Jones was to make the contracts for the sale of such crops, was to make delivery of the crops to the purchaser or purchasers thereof, was to receive the price therefor and pay all of such price over to C.S. Jones; * * *”.

There can be no doubt that if the portion of the findings just quoted be true the plaintiff would be entitled to subject defendant to liability. It thus becomes important to determine whether the evidence affords adequate support for that much of the findings adopted by the trial court. As already announced, we find nothing in the transcript of evidence to support this finding. The only testimony in the record touching the matter is that when the crop had been harvested and the father, C.S. Jones, was being pressed to pay indebtedness amounting to several thousand dollars overdue on farm equipment, including a tractor, purchased for the son’s use in planting, cultivating and harvesting the crop, and there was no place to store the crop, the father authorized the son to sell part of the crop to a buyer at Amherst, Texas, of whom the son had told him. In the father’s own words:

“I says, Marvin, I am going to let you sell part of that sudan so’s I can pay that tractor note off.”

And, further testified:

“Q. Did you at any time give Marvin authority to sell any part of the sudan seed? A. Yes sir, I told him when some of these debts come due and we had no place to house it up there, I told Marvin that, told me about a fellow from Amherst over there wanting to buy it and I says, Marvin, I am going to let you sell part of that sudan so’s I can pay that tractor note off. “Q. Did you ever authorize him to enter into this contract with Slone-Carter Grain Company? A. I sure did not. “Mr. Smith: I believe that is all. Take the witness.”

Cross-Examination

By Mr. Mears:

“Q. Did he just sell it at Amherst Mr. Jones? A. He sold some of it at Amherst and we sent some to Muleshoe. “Q. You had the supervision of where it was to go and so forth and who was to buy it? A. I told him to go over there and see what them fellows would pay. There was a fellow over there that had been over there trying *1068 to buy it and wanted it and I told him to go over there and see what it would bring and come back by and tell me what he’d give for it and he did. “Q. And then after he found out what he’d give you told him to go ahead and sell it? A. Yes sir, I told him to sell it, that I had to have some money.”

This express authority given in the face of an emergency falls far short of support for a finding that earlier the father authorized the son to contract a sale of the crop before it was even planted, much less harvested. We are familiar with the doctrine that a fact or condition once shown to exist may be the subject of a rebuttable presumption that it continues to a subsequent time. McClendon v. Dean, 45 N.M. 496, 117 P.2d 250. But no cases holding that this principle operates in reverse have been called to our attention.

Nor is there anything by way of ostensible authority on which to base such a finding. Admittedly, the plaintiff contracted with Marvin Jones as if an adult owner of the farm he occupied. Plaintiff did not know the son’s father owned the farm and had absolutely no knowledge of him in the transaction at the time of contracting with him as demonstrated by the fact that when the complaint was filed he could do no more than allege upon information and belief that the father claimed some interest in the crop. This information, as the evidence discloses, the plaintiff had just acquired from another son when the crop was being harvested.

Counsel for the plaintiff suggest that the doctrine of ratification supports the judgment. It is enough to say that the trial court does not base its judgment on the doctrine, neither was such a theory pleaded by plaintiff. Absence of authority in the son to make the contract on which plaintiff sues is decisive of the case and renders fatally defective the judgment rendered against defendant, C.S. Jones. The cases of Koch v. Murphy, 151 Kan. 988, 101 P.2d 878; Powers v. Wheless, supra, and Huth v. Curry, Tex.Civ.App., 13 S.W.2d 733, are persuasive of the correctness of the conclusion we reach if, indeed, authority were needed for a conclusion based merely on the facts.

Notwithstanding the conclusion announced, however, the plaintiff is entitled to judgment for the price of the sudan seed purchased and received from the plaintiff. Indeed, on two different occasions during the trial the defendant made a tender and offered to pay into court the amount at which the seed were charged out to the son. The first tender was for $78 and a few minutes later, upon discovering that the tender was $3.25 less than the amount charged for the seed, the tender was renewed for the correct amount, $81.25. Since under the arrangement between the father and son, the former was to pay for the seed and actually endeavored twice at the trial to do so, which offers were rejected because inconsistent with the theory under which plaintiff sought recovery, the trial court, as a condition to vacating the judgment and dismissing the plaintiff’s cause of action, should order defendant to pay into court for plaintiff’s benefit the sum of $81.25, the agreed price of the sudan seed delivered to the son.

It follows from what has been said that the judgment must be reversed and the cause remanded to the district court with a direction to it to set aside its judgment and dismiss the plaintiff’s cause of action upon defendant paying into court for plaintiff’s benefit the sum of $81.25. The defendant will have his costs to be taxed by the clerk.

It is so ordered.

McGHEE and COORS, JJ., concur.

LUJAN, C.J., and COMPTON, J., not participating.