Edmonds v. White

• Decision Date: 15 December 1922
• Docket Number: (No. 2626.)
• Parties: EDMONDS et al. v. WHITE.
• Court: Texas Court of Appeals

247 S.W. 585

EDMONDS et al. v. WHITE.

(No. 2626.)

Court of Civil Appeals of Texas. Texarkana.

December 15, 1922.

Rehearing Denied January 25, 1923.

Appeal from District Court, Bowie County; Hugh Carney, Judge.

Action by Joe White against T. A. Edmonds and others. From a judgment for plaintiff, defendants appeal. Reversed and rendered as to defendant W. G. McIntyre, and as to other defendants affirmed.

See, also, 226 S. W. 819.

Preston B. Cox, of Wichita Falls, and Keeney & Dalby, of Texarkana, for appellants.

Elmer L. Lincoln, of Texarkana, for appellee.

WILLSON, C. J.

Appellee was the plaintiff in the court below. His suit against appellants, T. A. Edmonds, T. G. Williams, A. R. Bleakley, F. L. Shackelford, and W. G. McIntyre, was to rescind certain contracts covering a purchase by him and purchases by a number of other persons of shares of stock in the Southland Oil Company, a jointstock association existing by virtue of a trust agreement, by the terms of which appellants (except McIntyre) as trustees held the property of the association and transacted the business thereof, and to recover back sums aggregating $10,450 alleged to have been paid by him and said other persons for the stock.

Appellee's claim of a right to the relief he sought was predicated on allegations in his petition showing that appellants had practiced fraud on him and said other persons, in that appellants had induced him and them to subscribe and pay for the stock by falsely representing to him and them that the 14 acres of land in Wichita county on which the oil company owned an oil and gas lease was situated within 1,700 or 1,800 feet of the "initial Fowler well," which was an oil-producing well in the Burkburnett oil field.

The judgment was based on findings of a jury (warranted by the testimony, we think): (1) That appellants or their selling agents made the representation as claimed by appellee; (2) that the representation was a material one and induced appellee and said other persons to buy the stock; and (3) that the representation was false. On those findings and others made by the trial court judgment was rendered in appellee's favor for $6,350.

By a special exception appellants questioned the sufficiency of the petition, so far as it was predicated on a right in appellee to the relief he sought as assignee of said other persons. The ground of the exception was that the right to such relief "was not (quoting) a proper subject of assignment, but such assignment is void." And, on the same ground, appellants requested the trial court to instruct the jury to find in their favor as to the recovery sought by appellee as such assignee. The assignments attacking as erroneous the action of the trial court in overruling the exception and in refusing the instruction present the question about which we have had most doubt in determining the disposition to be made of the appeal.

It appears from the record that only $500 of the amount awarded appellee by the judgment was on account of money paid by him for shares of the stock. The remainder of the amount was the aggregate of sums paid for such stock by the other persons referred to, about 60 in number. It further appears that each of said other persons by an instrument in writing assigned all his "right, title, and interest in and to the Southland Oil Company" to appellee, together with "all causes of action or defense, in law or equity," the assignor had against said oil company and the trustees named above, "by reason of fraud, misrepresentation, breach of contract, or otherwise, arising out of any relation whatsoever" between the assignor and the oil company and said trustees. It further appears that it was understood between appellee and each of said other persons that the amount of any recovery by appellee as assignee, less the expense of recovering same, was to be prorated and paid over to the assignors.

Appellants insist that the facts stated showed that the only right acquired by appellee as assignee of the other persons "was to bare right to file a bill in equity to set aside" the contracts made by said persons with appellants, and they further insist that if it should be held that the assignments operated to pass any other right to appellee they necessarily also operated as an affirmance of the contracts by the assignors, and that appellee's suit for a rescission of the contracts therefore was not maintainable.

There is no doubt the rule at common law, enforced in many jurisdictions outside this state, is, as stated in 5 C. J. 892, that—

"The assignment of a mere right to file a bill in equity for fraud committed on the assignor is void as being against public policy and savoring of maintenance."

The doubt we have entertained is as to whether this state, in adopting the common law (article 5492, Vernon's Statutes), adopted the rule. We have not been referred to and have not found a case decided by a court in this state in which the question had been directly presented. But, looking to the basis for the rule, we think it has been in effect determined that it was never adopted in this state. The rule had its origin in the common-law doctrine of champerty and maintenance (Breeden v. Insurance Co., 220 Mo. 327, 119 S. W. 576), which, and the reasons for it, are stated at length in 11 C. J. 231 et seq., and 5 R. C. L. 268 et seq. It has been held that the reasons for that doctrine have never existed in this state and that it has never been the law here. Bentinck v. Franklin, 38 Tex. 458; Stewart v. Railway Co., 62 Tex. 246; Perry v. Smith (Tex. Com. App.) 231 S. W. 340. If that is true, then a basis for the rule never existed in conditions here, and it would be illogical to hold that it is a part of the law of this state. We conclude, therefore, that the contention, so far as it is that appellee was not entitled to maintain the suit because of the rule referred to, should be overruled.

That leaves for determination the part of the contention based on the view that the legal effect of the assignments to appellee was to affirm the validity of the contract by which the assignors purchased the stock. Of course, if that is true, appellee could not maintain a suit for the rescission of the contracts, for they were voidable only, and the assignors electing to treat them as valid would be binding on them and on appellee as well. 2 Black on Rescission and Cancellation, § 610 et seq. But the question as to whether the assignors ratified the contracts or not was one of fact, and the determination thereof depended on whether they intended by the assignments to ratify them or not. Id. § 611. Looking to the face of the instruments, it appears that they purported to transfer the stock issued to the assignors and also "all causes of action, in law or in equity," the assignors had "by reason of fraud, misrepresentation," or otherwise, arising out of their purchase of the stock, and looking to the testimony it appears that the purpose and intent of the parties to the instruments was to pass to appellee the right the assignors had to sue for a rescission of the contracts covering the purchases...