WILSON v. SPENCER, 261 F. 357

FOSTER, District Judge. Tn this case the material facts are these: Appellee purchased $10,000 worth of the stock of the Aniero Valley Land Company, a corporation to be organized under the laws of Colorado, and gave his note for $5,000 in connection with the purchase. The note passed through several hands, and came into possession of appellant, who claims to be a holder in good faith, before maturity, for value, without notice. The note was made and delivered in Texas.

The Constitution of Texas contains the following provision: “No corporation shall issue stock or bonds except for money paid, labor done or property actually received, and all fictitious increase of stock or indebtedness shall be void.”

Article 12, § 5. The Constitution of Colorado has a similar provision.

Article 15, § 9. Appellee set up fraudulent representations in the sale of the stock to him, and also that the note was void under the above provision of the Constitution of Texas. The question presented is one of general commercial law, in deciding which the federal courts are not bound to follow the decisions of the highest state courts. Watson v. Tarpley, 18 How. 517, 15 L. Ed. 509; Murray v. Lardner, 2 Wall, 110, 17 L. Ed. 857. But a discussion of that feature is unnecessary, as will presently be seen.

At the time the case was tried in the District Court there were various conflicting decisions of the Courts of Civil Appeal of Texas on the question. In deciding the case the District Court held the note to be void under the law of Texas, resting its decision on the case of Republic Trust Company v. Taylor (Tex. Civ. App.) 184 S. W. 773. Shortly before the decree was entered, the Supreme Court of Texas had decided to the contrary in the case of Washer v. Smyer, 211 S. W. 987; but the case was not then reported, was not known to counsel, and was not brought to the court’s attention.

As this decision conforms to the federal jurisprudence (see Watson v. Tarpley and Murray v. Lardner, supra), and would be controlling in the view of the case taken by the District Court, it is clear the decree appealed from must be reversed. As the District Court did not consider or decide the question of the bona fides of appellant’s possession of the note, the case will be remanded for further proceedings. Reversed and remanded.