Houston & T. C. R. R. Co. v. Shirley

• Decision Date: 17 December 1880
• Docket Number: Case No. 4088.
• Citation: 54 Tex. 125
• Parties: THE HOUSTON & T. C. R. R. CO. v. THOMAS M. SHIRLEY.
• Court: Texas Supreme Court

54 Tex. 125

THE HOUSTON & T. C. R. R. CO.

v.THOMAS M. SHIRLEY.

Case No. 4088.

Supreme Court of Texas.

Jan. 16, 1880.

Dec. 17, 1880.

APPEAL from McLellan. Tried below before the Hon. C. C. Alexander.

On the 19th day of July, A. D. 1869, the Waco Tap Railroad Company, afterwards called the Waco & Northwestern Railroad Company, entered into a written contract with the appellee, Thomas M. Shirley, whereby Shirley undertook to construct the railway for the company from Bremond to Waco. It was to be completed in two years. About April 1, 1870, the railroad company notified Shirley that he would no longer be recognized as contractor on the road.

On the 16th day of July, A. D. 1870, Shirley filed his suit against the Waco Tap Railroad Company for damages occasioned by a breach of the contract, which he alleges was made by the railroad company.

At the fall term, A. D. 1878, of the district court of McLennan county, a trial was had, which resulted in the jury returning this verdict: “We, the jury, find for the plaintiff in the sum of eight thousand five hundred and nine dollars and forty-one cents, being principal and interest on reserved per cent. and work actually done, and for actual damages in the sum of fifty-four thousand and one dollars and nine cents; also, for exemplary damages in the sum of thirty-seven thousand and five hundred dollars; and further, find that the mortgage be foreclosed against the Waco & Northwestern Railroad Company and the Houston & Texas Central Railroad Company.”

Judgment was rendered in accordance with the verdict foreclosing the mortgage on the railroad extending from Bremond to Waco, road-bed, right of way, superstructure, rights and properties and franchises thereof, for the payment of the sum of $8,509.41; and for the other amounts found by the jury, a general judgment was entered against the Houston & Texas Central Railway Company, to be enforced by execution in usual form.

After the termination of Shirley's connection with the Waco Tap Railroad Company as contractor, on the 10th day of June, 1871, the Houston & Central Railway Company entered into a contract with the Waco Tap Railroad Company, then known as the Waco & Northwestern Railroad Company, whereby, for the considerations expressed in the contract, the Houston & Texas Central Railway Company undertook to build and construct, and did build, construct and complete the railroad from Bremond to Waco for the Waco & Northwestern Railroad Company.

An inducement moving the Houston & Texas Central Railway Company to undertake the building of the railroad seems to have been the execution and delivery to it of a bond, payable January 1, 1873, for the sum of $600,000, in gold, made by the Waco & Northwestern Railroad Company. The payment of this bond was secured by a deed in trust, whereby the Waco & Northwestern Railroad Company conveyed to Peter W. Gray and Benj. A. Botts “all and singular the several tracts and parcels of land which now are, or may hereafter be, or constitute the site of the railway, turn-outs, side-tracks, depot grounds and appurtenances, and all lands which now are or may hereafter constitute and be a part of the road, and the rights of way thereof from the town of Bremond, where it connects with the road of the Houston & Texas Central Railway Company, to the depot grounds in the city of Waco, on the east side of the Brazos river, and thence as authorized by the charter of the party of the first part (the Waco & Northwestern Railroad Company), and also the cross ties and other superstructure work which has been or may hereafter be placed and built on the line of road aforesaid; and also all and singular the chartered rights, privileges and franchises of every kind granted to the party of the first part (the Waco & Northwestern Railroad Company) by acts of the legislature of the state of Texas, which now are possessed by the party of the first part, or to which they may hereafter become entitled under said acts and the laws of Texas relating to railroads.”

The Houston & Texas Central Railway Company completed the construction of the line of railroad from Bremond to Waco during the year 1872.

The bond for $600,000 in gold matured January 1, 1873, and the Waco & Northwestern Railroad Company made default in its payment.

A sale under the deed in trust was made by Gray and Botts, trustees.

It was admitted in the record, “that all said documents, to wit: said contract, supplemental contract, bond and deed in trust, were duly and legally executed, and that the sale under the deed in trust, made by Gray and Botts, was regular and in conformity with the said deed in trust. That said sale was made by the said trustees, Gray and Botts, on the 4th day of February, A. D. 1873, and that at said sale the Houston & Texas Central Railway Company became the purchaser of the property in said deed in trust mentioned, for the sum of four hundred thousand dollars, and the trustees thereupon executed a deed conveying all and singular the trust property to the Houston & Texas Central Railway Company.

On the 24th day of May, 1873, the Houston & Texas Central Railway Company procured the passage of an act of the legislature of the state of Texas, by which, so far as the legislature could lawfully effect it, the said W. & N. R. Co. was merged into the said H. & T. C. R. Co., and thereafter constituted a part of the same, there being no provision made in said act of merger for the debts of the said W. & N. R. Co.

On the 22d day of April, A. D. 1876, the Houston & Texas Central Railway Company was made a party to this suit, by an amended petition filed on that day, wherein the plaintiff Shirley averred that all said acts and doings in and about said contracts, sale and purchase between said W. & N. R. Co. and said H. & T. C. R. Co. being illegal and fraudulent and ultra vires, therefore no title or right to the property of said W. & N. R. Co. passed to said H. & T. C. R. Co. thereby, and that said H. &. T. C. R. Co. acquires its rights to hold and enjoy the rights and benefits of the property and franchise of said W. & N. R. Co. through said act of merger as aforesaid only, and by no other right or authority. And by virtue of said act of merger and consolidation of said W. & N. R. Co. into said H. & T. C. R. Co., the latter is bound to pay your petitioner all his claims, demands and damages, with interest thereon, and his proper costs in this behalf expended as hereinbefore set up, the same as said W. & N. R. Co. was bound and liable before said merger.”

The Houston & Texas Central R'y Co. pleaded--

1. A general demurrer.

2. The general denial.

3. The statute of limitations.

4. The manner by which it acquired the property of the Waco & Northwestern Railroad Company.

5. That the Houston & Texas Central Railway Company was a bona fide purchaser of all the property for value paid without notice, etc.

6. Several matters of estoppel on the part of plaintiff.

7. And adopted the allegations contained in the answer of its co-defendant, the Waco & Northwestern Railroad Company.

A motion for a new trial overruled, and defendant gave notice of appeal. This appeal was prosecuted by the Houston & Texas Central Railway Company.

The charge of the court on the subject of exemplary damages was as follows:

“16. A private corporation is, like an individual, punishable by exemplary damages for wrongful acts done in a fraudulent, malicious or oppressive manner; but in order that it be held responsible, it must be shown that it authorized the act done, sanctioned it in the manner required for the performance of official acts afterward, with a knowledge of the facts, or that it was done by an authorized agent in the performance of an act authorized by the corporation.

17. Malicious, fraudulent or oppressive acts done by an agent of a corporation, done after the breach of a contract by the corporation, and not in pursuance of its instructions, cannot be considered as a basis for exemplary damages against a corporation from the manner of breaking a contract.”

The acts complained of, from which it was claimed that a right to exemplary damages resulted, consisted of what it was claimed was an “intentional gross breach of a contract.”

Exhaustive and able arguments for rehearing were filed by counsel for appellee, devoted chiefly to a discussion of the evidence. Their length precludes insertion.

Geo. Goldthwaite, for appellant.

R. R. Reeves, for appellee.

I. If the deed from Gray and Botts to the Houston & Texas Central Railway Company vested the title in said company to the property therein conveyed, the land grant from the state to the Waco Tap R. R. Co., and its existence as a corporation, and its corporate powers and franchises, did not pass to the Houston & Texas Central Railway Company by said deed, but were derived from the act of merger; and when the Houston & Texas Central Railway Company accepted the merger without providing for the liabilities of the W. & N. W. R. R. Co., it became liable thereby to the plaintiff for the damages claimed in his suit. Act of merger, May 24, 1873, Special Laws, p. 581; Atkinson v. The Marietta & Cinn. R. R. Company, 15 Ohio St., 21-35;Chicago R. R. Co. v. Moffitt, 75 Ill., 528;Thompson v. Abbott, etc., 61 Mo., 176;Eldridge v. Smith, 34 Vt., 490, and other cases referred to under first assignment.

II. By accepting the acts of merger and its benefits, without providing for the payment of the liabilities of the Waco Tap & Northwestern Railroad Company, the Houston & Texas Central Railway Company, as its successor and representative, became bound for all said liabilities in the same way that the Waco & Northwestern Railway Company was bound before the merger. Waco Tap R. R. Co. v. Shirley, 45 Tex., 325; Gordon v. Jones, 27 Tex., 620;Hays v. The H. & G. N. R. R. Co., 46 Tex., 280;Graham v. Roder, 5 Tex., 149; The H. & G. N. R. R. Co. v. Randall, Supt. Ct. Texas, Law Journal, November 22, 1878, No. 18, p. 278; ...