Ford v. Sutherland Springs Land & Town Co.

• Court: Texas Court of Appeals
• Writing for the Court: Taliaferro
• Citation: Ford v. Sutherland Springs Land & Town Co., 159 S.W. 876 (Tex. App. 1913)
• Decision Date: 18 June 1913
• Parties: FORD et al. v. SUTHERLAND SPRINGS LAND & TOWN CO. et al.

159 S.W. 876

FORD et al. v. SUTHERLAND SPRINGS LAND & TOWN CO. et al.

Court of Civil Appeals of Texas. San Antonio.

June 18, 1913.

Rehearing Denied October 15, 1913.

Appeal from District Court, Wilson County; F. G. Chambliss, Judge.

Suit by Charles E. Ford and others against the Sutherland Springs Land & Town Company and others. From a judgment of dismissal, plaintiffs appeal. Affirmed in part, and reversed in part.

Fiset & McClendon, of Austin, for appellants. T. F. Mangum, of San Antonio, O. A. McCracken, of Floresville, and Semp Russ, of San Antonio, for appellees.

TALIAFERRO, J.

This suit was filed by Chas. E. Ford and wife and Chas. Morris and wife against the Sutherland Springs Land & Town Company, a corporation, and J. L. Kerr, I. T. Pryor, M. H. Townsend, Semp Russ, A. D. Powers, A. L. Matlock, J. H. Burton, W. E. Nelson, J. C. Nelson, H. P. Nelson, and H. A. Speer. It was alleged that the Sutherland Springs Development Company, a corporation not a party to this suit, had acquired a large tract of land in Wilson county, which it had divided into blocks and lots, streets and alleys, for a town site, and called it New Sutherland Springs. The tract of land was sufficiently described, and it was alleged that 150 acres thereof was designated and set apart as a public park, and the said corporation entered upon the enterprise of exploiting the new town of Sutherland Springs and selling the lots, placing agents in the field for that purpose and issuing and circulating attractive literature publishing the beauty of the said town and the value of the property offered by it for sale. That, for the fraudulent purpose of avoiding the dangers of loss and financial difficulties, said corporation on February 18, 1910, for a fictitious consideration, conveyed all the land, which had not been already sold, to W. E. and H. P. Nelson, reciting a fictitious cash payment and taking their notes for $132,500, which notes, it was alleged, were in fact the entire consideration. That this conveyance was in pursuance of a "plan, scheme, and conspiracy entered into between said corporation and its directors and the said Nelsons to exploit the town site and for the purpose of preventing the said corporation and its stockholders from sustaining any loss by reason of the exploiting of said town site and to enable said corporation to take back, free from any claims of said Nelsons, so much of said town site as said Nelsons might dispose of, in case the said venture should prove unprofitable."

It was further alleged that, after promoting the said town site scheme for a period without success, the Nelsons, conspiring with the officers, directors, and stockholders of the said Sutherland Springs Development Company, conceived the scheme of again transferring the said property in furtherance of their fraudulent plans. Whereupon they formed a corporation known as the Sutherland Springs Land & Town Company, with a capital stock of $100,000 fully paid up and nonassessable, the officers and directors of which corporation were the same as those of the Sutherland Springs Development Company. That the capital stock was claimed to have been paid up in cash or valuable property, but that such claims were false and fraudulent in that no value whatever was paid for said stock, but that, on the contrary, it was held by the stockholders and directors of the Sutherland Springs Development Company without any valuable consideration whatever, and that all of the holders of said stock were justly indebted to the corporation for the stock held by them. The names of such stockholders were given with the amount of stock held by each.

It was asserted that the said Land & Town Company was insolvent from the date of its organization, and that it had its birth in the fraud and conspiracy of the defendants to exploit the town site of New Sutherland Springs without loss or risk to said defendants and to give color of stability to their financial organization in its effort to sell the lots to the public.

It is alleged the scheme was again advertised, this time by the Land & Town Company, and alluring literature was issued; promises and representations were made as to improvements and betterments to be made upon said property, among which was a promise or guaranty, on the part of said Land & Town Company, to the purchaser of lots in said town site, that it would in good faith expend $50,000 cash in the improvement of the streets and alleys in said town site and upon the aforesaid park, and that by reason of such promises and guaranties many persons had bought lots in said town site, and that among such purchasers were the plaintiffs. The numbers and descriptions of the lots bought by plaintiffs were set out.

But it is alleged that the said Land & Town Company never carried out its said obligations and never was able to carry them out and wholly failed to perform its contract in any part with reference to such improvements, and that in a further effort to defraud plaintiffs and other purchasers of lots, and in furtherance of its fraudulent conspiracy with the other defendants, the said Land & Town Company in July, 1912, conveyed all the said property, including the park, except such lots as had previously been sold by it, to the Sutherland Springs Development Company in consideration of the cancellation of the $132,000 notes of the Nelsons, payment of which had been assumed by said Land & Town Company, and that the said development company, in pursuance and furtherance of said conspiracy, at once conveyed the said property to H. A. Speer, who paid no cash in the transaction but executed his notes in a large sum as consideration. To secure the payment of these notes to T. F. Mangum, to whom the notes seem to have been made or assigned, Speer executed his deed of trust with H. M. Hart as trustee.

Thereupon it is alleged that Speer, in the manner and for the purposes as before alleged, and in furtherance of the original fraud and conspiracy, began to advertise and exploit the town site and to sell lots, and that he continued to do so, and that he repudiates any and all obligations of the Land & Town Company or any other of said defendants.

It is further alleged that plaintiff Chas. E. Ford is also the owner of 10 shares of the stock of said Sutherland Springs Land & Town Company, purchased in good faith and for a valuable consideration from W. E. Nelson on December 19, 1910. That at that time he believed said corporation was solvent, and that the entire capital stock had in good faith been paid in, and that the representations of said company were true. As such stockholder, and to protect his rights as such, he prays that a receiver be appointed to take charge of the property of the Sutherland Springs Land & Town Company and to sue for such assets as it had fraudulently transferred and to sue for the unpaid balances due upon the stock held in said corporation by the various stockholders thereof.

Plaintiffs also allege that they have been damaged by reason of the fraudulent misrepresentations and conspiracy of said defendants in that each lot held by them would be worth $1,000 more than it is now worth if the defendant Land & Town Company had complied with its agreement with reference to making the improvements upon the streets, alleys, and parks, and they pray that their claims in the sums of $1,000 upon each lot be established as valid claims against said corporation and join in the prayer to have a receiver appointed, whose duty it shall be, among other things, to pay their claims aforesaid.

To plaintiffs' petition the defendants presented the general demurrer and 36 special exceptions which assail every allegation of appellees' petition. The court overruled the general demurrer but sustained all the special...