Commonwealth Bonding & Casualty Ins. Co. v. Bomar

• Decision Date: 30 May 1914
• Docket Number: (No. 627.)
• Parties: COMMONWEALTH BONDING & CASUALTY INS. CO. et al. v. BOMAR.
• Court: Texas Court of Appeals

Page 1060

169 S.W. 1060

COMMONWEALTH BONDING & CASUALTY INS. CO. et al. v. BOMAR.

(No. 627.)

Court of Civil Appeals of Texas. Amarillo.

May 30, 1914.

Rehearing Denied October 10, 1914.

Appeal from District Court, Baylor County; Jo. A. P. Dickson, Judge.

Suit by E. P. Bomar against the Commonwealth Bonding & Casualty Insurance Company and others. Judgment for complainant, and defendants appeal. Reversed and rendered in part, and affirmed in part.

F. H. Haddix, of Ft. Worth, for appellant Commonwealth Bonding & Casualty Ins. Co. McLean, Scott, McLean & Bradley, of Ft. Worth, for appellant Stuart. C. D. Russell, of Plainview, J. A. Stephens, of Benjamin, and Carrigan, Montgomery & Britain, of Wichita Falls, for appellee.

HENDRICKS, J.

This suit was instituted by the appellee, Bomar, to recover $1,500, paid upon a subscription contract of $4,000, to $1,000 of the capital stock of the Commonwealth Bonding & Casualty Insurance Company (designated herein as the Bonding Company), and for the cancellation of five notes of $500 each, executed as a partial consideration for said stock. The appellee alleged that certain agents, who were officers of said corporation, in soliciting the subscription to said stock, falsely represented to him that the corporation, at that time, had received the sum of $200,000 in cash, in payment of stock, and also alleged that said corporation had made arrangements to obtain all the money it wanted at 5 per cent., and would lend to him (appellee) as much as he might desire, provided he furnished good security therefor; appellee making other allegations of fraud inappropriate, we think, to this discussion, further presenting, however, that said representations induced him to subscribe to the stock, and that but for such representations he would not have entered into the contract. Upon trial before the court, judgment was rendered against the bonding company for the $1,500 paid upon the stock and for the cancellation of the notes and the subscription contract.

Appellant bonding company pleaded the written subscription contract, and especially the following clause, contained in the same, as a bar to the alleged fraud:

"No conditions, representations or agreements other than those printed herein, shall be binding on the Commonwealth Organization Company or the Commonwealth Bonding & Casualty Insurance Company."

The bonding company assigns fundamental error that the judgment of the trial court was erroneous in granting the relief to the appellee "on the petition which sought recovery * * * that the subscription contract was obtained through fraudulent representations and agreements not intended to be performed, but which failed to show that the petitioner had sustained any pecuniary or actionable injury. * * *"

In addition to the allegation that the officers of said corporation, as agents, falsely represented that $200,000 of said capital stock had been paid in cash for the sale of said stock, appellee further alleged that "in fact not more than $20,000 had been received in cash by said corporation for said stock," which allegation would have been, as against a general demurrer, and in this instance, without the presentation of any demurrer, sufficient to show damage or injury, conceding that some damage or injury is necessary to be shown, in accordance with the rule enunciated in Bremond v. McLean, 45 Tex. 17, and in the main, as to the principle, followed by the Supreme Court in the case of Moore v. Cross, 87 Tex. 558, 29 S. W. 1051. In the Bremond-McLean Case. Justice Moore said:

"It does not appear from the petition that plaintiff suffered any injury from the alleged false and fraudulent representations as to the character of the note transferred to him, or that the note would or could possibly have been of any greater value to him than it was if appellant's representations respecting it had been true."

However, it is reasonably deducible in this cause that stock, if $200,000 in cash had been paid to and had become the assets of a corporation, would have been more valuable than the same stock in the same corporation, where not more than $20,000 in cash had been paid to said corporation upon subscription contracts for the purchase of said stock, and that any business man would so regard it. Necessarily the assets of a corporation, consisting of paid subscriptions to its capital stock, and without which it is unable to transact its business, lends substance to the corporation, and would likewise affect the marketability of the stock in proportion to the amount of such assets. This contract of subscription as pleaded (and as shown by the testimony) is partially executory, was repudiated by the subscriber, and the record is without any estoppel brought forward in the brief, or exhibited by the evidence.

In reading numerous authorities, affirmative and negative, in favor of and against the proposition that damage or injury must be shown in matters of false representation as an inducement to the contract, where an executory contract is attempted to be rescinded, we do not find any cause deciding the question, or which refers to any case which does decide, that a difference in value of the thing contracted for, and that represented, must be shown in accordance with the dollar mark; that is, that a measure of such damage or injury is required as a prerequisite to such right of rescission. The case of Moore v. Cross, supra, invoked by appellant, was decided by the Supreme Court squarely upon the evidence, and was one involving an executed contract, and was a cause, in reality, primarily sounding in damages for a difference in value, though rescission was also prayed for, and granted by the trial court and Court of Civil Appeals. The evidence showed in that cause that Cross received in estimated value what he traded for, and parted with, in estimated value, the property he conveyed, and without any claim that the property received was less than such estimated value, and that the property conveyed in exchange was any greater than such value — Cross did not agree to pay more than the property he received was worth, nor did he part with his property for less than it was worth. In regard to the representation in that cause by Moore that certain railway shops and depot yards would be constructed contiguous to the property he traded to Cross, it was not shown that the latter would derive any pecuniary benefit from their construction, and while Justice Brown does not so remark, it was not a legitimate inference, from the evidence in that cause, that the value of the property would have been increased by the construction of such improvements. In this case it is a legitimate inference that the stock contracted for by appellee would have been more valuable if the assets of the corporation, as alleged, would have been as represented.

On this question we adopt the following portion only of the opinion of Circuit Judge Wallace, in the cause of Stern v. Kirby Lumber Co. (C. C.) 134 Fed. 510, appropriate to the status here:

"Doubtless a court of equity would not grant relief in a case of purely inconsequential fraud, but the present bill does not present such a case. The reasonable deduction from the allegations of the bill is that the plaintiff's stock would have been of greater intrinsic value if the assets of the corporation had been such as they were represented to be."

The amount of capital stock paid in is quite indefinite from the testimony, though the president and treasurer of the bonding company and the officers of an organization corporation, promoting said bonding company, testified in the cause; however, the maximum amount deduced from the record is so subordinate in comparison with the amount represented to have been paid in as to sustain, in the main, appellee's contention upon this point; the assets really consisted of some secured and unsecured subscriptions to the capital stock which were never "whipped" into...