Commonwealth Bonding & Casualty Ins. Co. v. Barrington

• Decision Date: 07 February 1914
• Docket Number: (No. 546.)
• Citation: 180 S.W. 936
• Parties: COMMONWEALTH BONDING & CASUALTY INS. CO. v. BARRINGTON.
• Court: Texas Court of Appeals

Page 936

180 S.W. 936

COMMONWEALTH BONDING & CASUALTY INS. CO. v. BARRINGTON.

(No. 546.)

Court of Civil Appeals of Texas. Amarillo.

February 7, 1914.

On Motion for Rehearing, April 4, 1914.

Appeal from Hale County Court; W. B. Lewis, Judge.

Suit by M. H. Barrington against the Commonwealth Bonding & Casualty Insurance Company. Judgment for plaintiff, and defendant appeals. Reversed and remanded.

Stephens & Miller, of Ft. Worth, and Cooper, Merrill & Lumpkin, of Houston, for appellant. Austin C. Hatchell, of Plainview, for appellee.

HUFF, C. J.

The appellee, Barrington, brought this suit in the county court of Hale county, against appellant, the Commonwealth Bonding & Casualty Insurance Company, to recover the sum of $50 paid, with interest thereon, and to cancel a note for the sum of $350, dated December 1, 1910. It is alleged by the appellee that in August, 1910, and prior thereto, R. T. Stuart applied to appellee and sought to have him subscribe for stock in appellant's company and for the purpose of inducing appellee to purchase said stock, represented in effect that as soon as organized the company would begin making loans to its stockholders; that arrangements had already been made by appellant whereby the said company would be in a position to make a loan to the appellee as soon as the charter could be secured. Upon the faith of such representations appellee entered into a written contract to subscribe for said stock, and that the representations were false and fraudulent and made for the purpose of inducing appellee to enter into said contract; that they were material and relied upon by the appellee, and he thereby induced to enter into said contract and to subscribe for stock in appellant company; that later, on the 1st day of December, 1910, Ben F. Allen approached the appellee and made substantially the same representations as did Stuart, and on that day appellee executed the note in question, together with the deed of trust, on certain real estate; that all the representations so made were false and fraudulent and made for the purpose of deceiving the appellee; that in truth and in fact the corporation was not organized under the laws of the state of Texas, and had no authority to make loans and had no arrangements by which money could be secured to loan appellee. It is charged that Stuart and Allen were the agents of the appellant and if they were not their acts and representations were thereafter ratified by appellant. The appellant, by answer, denied the allegations of appellee and denied that Stuart and Allen were its agents or that it ever ratified their acts or representations; that they had no knowledge of any fraudulent representations, etc. The appellee introduced in evidence the following instrument:

Commonwealth Bonding & Accident Insurance Co.

                Capital, $10,000.        Surplus, $30,000
                

Subscription to Capital Stock.

No. 162. Whereas, Stuart, Harkrider & Co., of Ft. Worth, Texas, are promoting the organization of a casualty, bonding and accident insurance company, to be incorporated in pursuance of the laws of the state of Texas under the name of Commonwealth Bonding & Accident Insurance Company, with an authorized capital stock of $300,000 paid up, and free from organization expenses, all in accordance with a printed prospectus, issued by them and delivered to me: and whereas, by their acceptance of this subscription, said Stuart, Harkrider & Co. agree to endeavor with all reasonable diligence to accomplish on or before December 31, 1910, the organization of said company, with capital stock fully paid as aforesaid, them to defray all expenses of organization and incorporation: Now therefore, I do hereby subscribe for ten one-tenth shares of the par value of $10 each of the capital stock of said Commonwealth Bonding & Accident Insurance Company, and agree with the said company and the said Stuart, Harkrider & Co. to pay therefor the sum of $400, as follows: The sum of $350 I agree to pay in money or securities satisfactory to the Insurance Department with 6 per cent. interest, to said Commonwealth Bonding & Accident Insurance Company, or its trustees (which goes to capital and surplus) at any time after September 1, 1910, immediately upon the receipt of notice from said Stuart, Harkrider & Co. that the capital stock has been subscribed in good faith in amount and at rates netting the company at least $200,000 of capital in the aggregate when paid. The remaining sum of $50 I agree to pay and do pay concurrently with this subscription to said Stuart, Harkrider & Co. in consideration of their agreement heretofore recited and in lieu of any further or other contribution to expenses of organization and incorporating said company. No conditions, representations or agreements other than those printed herein shall be binding on Stuart, Harkrider & Co., or the Commonwealth Bonding and Accident Insurance Company.

Witness my hand this the 9th day of August,

                1910.                   M. H. Barrington
                                        [Name of Subscriber.]
                

On the 1st day of December, 1910, appellee executed his note for the sum of $350, payable to the order of the Commonwealth Bonding & Casualty Insurance Company payable at its office in the city of Ft. Worth, Tex., as set out in its pleadings. The appellee also introduced copy of resolutions of August 27, 1912, which purport to have been passed by a meeting of the executive committee of the Commonwealth Bonding & Casualty Insurance Company, held at Ft. Worth, reciting in effect that there was dissatisfaction among the stockholders of the company who have been disappointed in not being able to get loans which they expected to secure, by reason of the fact that funds have not been available with which to meet the loan requirements of stockholders. In order to obtain the cordial support of the stockholders the committee is convinced that a large number of the stockholders favor a policy which will enable the company to meet the loan requirements of its stockholders, and the charter now meets the legal requirements for a general trust and money loaning business. It was therefore resolved to have its business in different lines in which it had been engaged theretofore underwritten upon the best terms obtainable, in such manner that the company's guaranty funds could be taken down and made available as a loan fund, and thus discontinued the general casualty insurance and surety features theretofore engaged in, and adopting instead trust company features, as authorized by its present charter, which also includes the business of borrowing and loaning money. This resolution was sent by mail to the stockholders and one to the appellee, accompanied by a letter making statement similar to that included in the above resolution. On March 20, 1911, at what is designated a special stockholders' meeting of the Commonwealth Bonding & Casualty Company, held in the Flat Iron Building, in Ft. Worth, Tex., and which appears to have been held under the following call:

"The Commonwealth Bonding & Casualty Insurance Company is now ready to file its charter and enter the field for business and to facilitate the execution of bonds in the transacting of a bonding business, as well as to cover some other features of a general casualty business, it is necessary to have a by-law passed, authorizing the president or active vice president to appoint from time to time, as the business of the company may demand, resident vice president, resident assistant secretaries, an attorney in fact, to represent and to act for and on behalf of the company. For this purpose and for the further purpose of deciding under what state laws this company shall incorporate a meeting of the stockholders is called by the president and executive committee, to be held in the home office of the company in the Flat Iron building, in Ft. Worth, Tex., at 10 o'clock a. m., the 20th day of March, 1911. All the stockholders are requested to be represented either in person or by proxy. Should it not be possible for you to be present, kindly sign one of the two forms of proxies which are inclosed herewith. One authorizes the names selected by the executive committee to act, and the other is in blank and can be filled in as you may select."

At this meeting, it appears that a majority of the stockholders were present or represented by proxies, and by a unanimous vote of the stockholders a by-law was added to the effect that the president or vice president may from time to time appoint a resident vice president, assistant secretary and attorney in fact, to represent and to act on behalf of the company, giving the attorney in fact power to execute bond, recognizance, and contracts of indemnity, etc. At that meeting they also passed the following resolution:

"That the executive committee of the board of directors of the Commonwealth Bonding & Casualty Insurance Company be and they are hereby authorized and instructed to incorporate said company under the laws of whatsoever state or territory that they may deem best for the interest of the company."

It further appears from the record that on the same day the executive committee reported back that they had decided it to be for the best interest for the stockholders to incorporate under the laws of the territory of Arizona. On March...