Cavaness v. General Corp.

• Decision Date: 05 October 1955
• Docket Number: No. 4992,4992
• Parties: J. D. CAVANESS, Petitioner, v. GENERAL CORPORATION et al., Respondents.
• Court: Texas Supreme Court

Page 33

283 S.W.2d 33

155 Tex. 69

J. D. CAVANESS, Petitioner, v. GENERAL CORPORATION et al., Respondents.

No. 4992.

Supreme Court of Texas.

Oct. 5, 1955.

Rehearing Denied Nov. 9, 1955.

Wm. Andress, Jr., Dallas, for petitioner.

Carrington, Gowan, Johnson, Walker & Bromberg, Wiley Johnson and John L. Hauer, Dallas, for respondents.

GARWOOD, Justice.

The single issue at the present stage of this litigation concerns the right of our petitioner, J. D. Cavaness, to maintain individually an action upon a written agreement made by him in the name of, and as purported president of, a purported corporation, called D-A-M Company, which has actually never existed either de jure or de facto.

The agreement, dated July 17, 1946, was a license of patent rights actually then and still owned by the petitioner-plaintiff, Cavaness, but recited to belong to the purported corporation, which was also the named payee of the stipulated minimum royalties, which the petitioner-plaintiff seeks to recover. The other signatory to the agreement, or licensee therein, was General Corporation, the principal defendant below and respondent here, the additional respondents-defendant being sued as guarantors of the stipulated obligations of General Corporation.

While the agreement was elaborate in terms and couched in clear and correct legal language as a purely corporate affair, the only place in it where the petitioner-plaintiff himself appears in any manner, direct or indirect, is the purported corporate signature, which was in the usual form for such a purpose and included the signed name of the petitioner-plaintiff as 'President', the acknowledgment being in the usual corporate form to correspond with the signature. There was also a final provision that 'This contract covers all the agreement between the parties hereto and no oral representations will be recognized.'

Contemporaneously with the license agreement there was executed and evidently attached to the latter by the individual respondent-defendant, J. W. Greenwood, an agreement on behalf of a partnership, called Southwest Company, guaranteeing performance of 'the above and foregoing contract by and between the D-A-M Company and the General Corporation, as if the Southwest Company had executed said contract as Licensee.' Greenwood, who also signed the license agreement for General Corporation as its president, is sued along with the other individual respondents-defendant as partners, or former partners, of the guarantor partnership.

The pleadings of the petitioner-plaintiff stated that his individual ownership of the patent rights in question was at all times well known to the respondents-defendant; that well prior to both the license agreement and the actual incorporation of the licensee, General Corporation, negotiations looking to an exploitation of the invention by interests affiliated with the respondent-defendant, Greenwood, had been conducted individually between the latter and the petitioner, it being mutually understood that, merely for convenience, the interests of the petitioner as patent owner-licensor would later be lodged in a corporation, of which the petitioner would own substantially all of the stock, and that the interests of the licensee would also be vested in a corporation; that at the time the agreements were signed, while the respondent General Corporation had in fact been organized for the Greenwood interests, and an application for a charter of the purported licensor D-A-M Company had been prepared, Greenwood and his associates well knew that the latter had not been filed; that by reason of these facts and the fact that the licensor corporation was never organized 'plaintiff, as the promoter and representative thereof thereby became personally obligated under the aforesaid contract and was in truth and in fact the principal therein as was well known to the defendants.'

While, as hereinafter discussed, the petitioner also bases his individual right of action upon alleged part performance by the respondents, his pleadings include no allegations in this behalf.

The defenses of the respondents included sworn pleas questioning the petitioner's individual right of action. These pleas were taken along by the court with the case on the merits.

At an early stage of the trial, the petitioner sought to introduce the license agreement in evidence, and the manifold objections thereto of the respondents were then sustained. Both at this time and previously, the petitioner also sought to introduce proof in support of his above-mentioned pleadings as to the negotiation and signature of the agreements and also evidence to the effect that, after they were signed, the respondents had partly performed them by making certain investigations about available materials with a view to operating under them. During the course of the petitioner's efforts to introduce this evidence after the ruling on the agreement, counsel for the respondents stated that the proffered proof and any more that might be forthcoming would be immaterial in the light of the ruling and urged the court to discharge the jury and forthwith render judgment in their favor. This the court did, at the same time assuring protesting counsel for the petitioner (as did also counsel for the respondents) that he would be allowed 'a full bill' of exception concerning the evidence.

This judgment was affirmed by the Court of Civil Appeals. 272 S.W.2d 595. The original opinion, by one of the Associate Justices, reasoned that the petitioner was barred by his own breach of the agreement in failing to cause the licensor corporation to be organized and also was estopped from suing individually and thus denying the recited existence of the corporation. On rehearing, the Chief Justice took the position that, particularly in the light of the stipulation against parol representations, the petitioner was foreclosed from his personal action by the Parol Evidence Rule. The third Justice simply voiced concurrence in the result.

The evidence for the purpose of the above-mentioned bills of exception was never properly developed and the trial court by qualification declined to treat it as if it had been. However, the proceedings in connection with the rendition of judgment were of such summary character, and the statements of the court and respondents' counsel so broad as to what the petitioner might have in the way of bills, that we feel justified in assuming that the petitioner would have supported his allegations as to the knowledge of the respondents and other circumstances attending signature of the agreements, as well as what the statement of facts indicates he intended to prove concerning partial performance on the part of the respondents. Notwithstanding these assumptions, we have concluded on oral argument and further study of the briefs, that the writ was improvidently granted, and that the judgments below against the petitioner should be affirmed.

But for the effect, if any, of the petitioner's proffered proof dehors the written agreement, he obviously could no more maintain this action than could X recover royalties from Y by merely proving a contract of Y to pay royalties to Z and Y's failure to perform. Without the writing there is no obligation of anybody to pay royalties to anybody. With the writing alone, there is a purported obligation of General Corporation to pay, but to pay only an existing corporation called D-A-M Company, of which one Cavaness happened to be the president with no personal interest in the matter. With the writing and the proffered proof together the intended effect is necessarily to utilize the written agreement in so far as it establishes the obligation of the licensee to pay but, at the same time, to vary it by substituting for the payee-licensor corporation its purported president, making the latter individually the principal in the arrangement in which the writing shows him to be merely an officer-agent of the principal.

Unless the corresponding part of the writing be disregarded in favor of the proffered parol testimony, the position of the petitioner is not that of a disclosed principal nor undisclosed principal nor the promoter of a corporation to be formed, but more nearly that of a disclosed agent seeking to show that his written 'disclosure' is false and that he is in fact the principal. We think the Chief Justice below was right in the view that the petitioner's position conflicts with the Parol Evidence Rule, and this even without invoking the 'no oral representations' clause.

While that Rule is probably more often applied in the area of what is to be done or not done under the corresponding writing, it may also be applied in the area of who is to be bound or not bound. It is no less reasonable or more legalistic to forbid a party to a writing to prove that he was not to be considered merely the agent the writing agreed that he was than...