
    GENERAL BONDING & CASUALTY INS. CO. et al. v. MOSELEY et al.
    (No. 2834.)
    (Supreme Court of Texas.
    May 5, 1920.)
    1. Corporations <§=>99(2) — Contract right transferred in payment for stock is “property actually received.”
    Contract rights transferred to a corporation in payment for stock to the extent of their value are .“property actually received” by the corporation within Const, art. 12, § 6.
    [Ed. Note. — For other definitions, see Words and Phrases, First and Second Series, Actually Receive.]
    2. Corporations <8=399(2) — Insurance <§=>33— Stock subscriber’s note secured by first mortgage is “property actually received.”
    Note of a subscriber to corporate stock in an insurance company, secured by valid first mortgage on real estate to which the subscriber has title, accepted by the corporation in payment for the stock, is “property actually received,” within the meaning of Const, art. 12, § 6, so that Acts 1909, c. 108, authorizing the incorporation of insurance companies whose capital consists of first mortgages on unincum-bered realty in Texas, is valid.
    Error to Court of Civil Appeals of Seventh Supreme Judicial District.
    Action by A. Moseley and another against the General Bonding & Casualty Insurance Company and others. To review the judgment for plaintiffs, defendants brought error in the Court of Civil Appeals, which affirmed (174 S. W. 1031), and defendants bring error. Judgment of the district court and Court of Civil Appeals reversed, and cause remanded to the district court.
    Locke & Locke, of Dallas, for plaintiffs in error.
    M. M. Harkins, of Quanah (Jno. W. Veale, of Amarillo, of counsel), for defendants in error.
   PHILLIPS, C. J.

The suit was one for the cancellation of a note and deed of trust upon land to secure its payment, given by the plaintiffs for shares of stock in the defendant corporation, upon the ground of fraud in the procurement of the plaintiffs’ subscription agreement, and because, as is claimed, the note and mortgage were not “property” within the meaning of Section 6 of Article 12 of the Constitution, and hence could not be accepted in payment for the stock.

It is undisputed that the mortgage was a first mortgage upon the land; that the title of the plaintiffs to the land was valid; and that the value of the land was double the amount of the note, a policy of fire insurance for $3,000.00 covering the buildings on the property having been delivered to the corporation with loss payable to it.

The corporation was organized under Section 62 of the Act of 1909. By the provisions of that act its capital could consist of first mortgages upon unincumbered real estate in this state, the title to which was valid and whose market value was double the amount loaned thereon exclusive of buildings, unless the buildings were insured in some responsible company and the policy or policies were transferred to the corporation. Article 4711, Revised Statutes.

The question in the case is whether the subscribers’ note and first mortgage upon the land constituted “property actually received” by the corporation, within the meaning of Section 6 of Article 12 of the Constitution.

We held in Washer v. Smyer, 109 Tex. -, 211 S. W. 985, 4 A. L. R. 1320, that the naked note of a subscriber to the capital stock of a corporation given in payment of his subscription was not property within the intendment of the Constitution, since it was simply his promise to pay the amount of his subscription in another form. But under the established rule of decision in this court, that ccontract rights transferred to a corporation in payment for stock are, to the extent of their value, “property actually received” by the corporation, (Cole v. Adams, 92 Tex. 171, 46 S. W. 790) — a decision whose soundness cannot be controverted — a subscriber’s note secured by a valid first mortgage upon real estate, accepted by the corporation in payment for stock, cannot be held as other than property in the full sense of the Constitution. The corporation thereby obtaiils something more than the mere promise of the subscriber to pay. It obtains the right to have the land appropriated to the payment of the note. This is a valuable right, a property right, as fully so as any contract right, and, in general, as valuable as any such right. The corporation receives it and owns it. It constitutes a distinct asset in its hands; recognized, generally, as one of the most stable, desirable and easily convertible forms of property, as instanced by the Legislature’s Act authorizing the capital of such corporations as this one to consist of such mortgages.

The right acquired under such mortgages is clearly property, and the law was therefore one within the power of the Legislature to enact.

The judgments of the. District Court and Court of Civil Appeals are reversed and the cause remanded to the District Court for trial upon the issues of fraud.

HAWKINS, J. In this case I will file later, a statement of my views. 
      <§=3For other eases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes
     