Laid Rite, Inc. v. Texas Industries, Inc.

• Decision Date: 28 June 1974
• Docket Number: No. 17523,17523
• Citation: 512 S.W.2d 384
• Parties: LAID RITE, INC., et al., Appellants, v. TEXAS INDUSTRIES, INC., Appellee.
• Court: Texas Court of Appeals

Page 384

512 S.W.2d 384

LAID RITE, INC., et al., Appellants, v. TEXAS INDUSTRIES, INC., Appellee.

No. 17523.

Court of Civil Appeals of Texas Fort Worth.

June 28, 1974.

Oscar H. Mauzy, Dallas, Street, Swift & Brockermeyer, Fort Worth, and Dean Carlton, Dallas, for appellants.

DeVore, Bagby, McGahey & Ross, and Philip C. McGahey and Stewart W . DeVore, Arlington, for appellee.

OPINION

BREWSTER, Justice.

This suit was filed by the plaintiff, Texas Industries, Inc., against the defendants, Laid Rite, Inc., and Tom Russell, Jr., an individual, seeking to recover from defendants the principal, interest and attorneys' fees provided for in a promissory note that defendants had executed on April 30, 1968, payable to plaintiff on or before April 30, 1969. The note was for the principal sum of $47,658.02, and it provided for payment of interest at six percent.

Defenses to the note alleged in defendants' answer were: (1) the execution of the note was induced by false promises of plaintiff's agents, to the effect that Laid Rite would be given $2.00 rebate on each cubic yard of concrete it purchased from plaintiff and that defendants would not be charged any interest on the debt involved; (2) that the note has been paid in full if defendant is given credit for the rebates he was promised and if the interest charged by plaintiff is deducted as the parties agreed; (3) the execution of the note was induced by fraud and duress; and (4) that the interest charged defendants on the note sued on was usurious.

Certain names will be often referred to in this opinion. For the sake of brevity we will refer herein to Texas Industries, Inc. as TXI; to Southwestern Financial Corporation as SFC; to Laid Rite, Inc ., as Laid Rite; and to Kiest Forest Development Corporation as Kiest Co.

The defendant, Tom Russell, Jr., filed a cross-action and counterclaim against TXI and SFC, which latter corporation was a wholly owned subsidiary of TXI.

In Russell's counterclaim he alleged in substance that at all times involved SFC was a wholly owned subsidiary of TXI and that each acted as the alter ego of the other and that, in the alternative, they conspired with and aided each other and each received the benefits of the wrongful acts involved. Russell further alleged that on April 19, 1966, he personally was indebted to SFC for over $200,000.00; that on that date Laid Rite owed on open account $49,872.84 to TXI; that on that date Kiest Co. owed TXI on open account $18,565.77; that Russell had no personal liability on these two corporate debts and that these two corporations, SFC and TXI, conspired to force Russell to execute notes personally for these two debts that Laid Rite and Kiest Co. owed on open account to TXI by threatening to call all of Russell's personal obligations owed to SFC immediately due if Russell did not personally sign the note sued on, which he had not personally owed, and if he did not also personally sign a note to TXI on the Kiest Co . obligation.

Russell further alleged that TXI and SFC also told him that the debts he personally owed to SFC would not be renewed unless he did personally sign such notes covering the debts that Laid Rite and Kiest Co. owed to TXI; that when SFC required Russell to obligate himself personally on the notes of Kiest Co. and Laid Rite as a consideration for the continued use of monies that Russell already personally owed to SFC, its effect was to charge him an unlawful rate of interest for the use of such money. He alleged that since the interest thus charged was in excess of double the amount of interest that could be legally charged, he was entitled to recover from cross-defendant the penalties provided by statute for charging usurious interest.

At the conclusion of the evidence offered during a jury trial, the trial court instructed a verdict for TXI and against the defendants, Russell and Laid Rite, on all parts of the case except the issue of the amount of plaintiff's attorneys' fees. Judgment was then rendered that TXI recover from Russell and Laid Rite $75,540.56 as principal, interest and attorneys' fees on the note sued on and that Russell and Laid Rite take nothing on their cross-action and counterclaim. This is an appeal by Russell and Laid Rite from that decree.

The judgment awarding the plaintiff, TXI, a recovery on the note against the defendant, Laid Rite, is affirmed. The judgment in so far as it awards plaintiff a recovery on the note it sued on as against Russell, personally, and in so far as it decreed that Russell take nothing on his counterclaim and cross-action against the two cross-defendants, TXI and SFC, is reversed and remanded to the trial court for a new trial.

In his 6th point of error Russell contends that the court erred in refusing to admit evidence that he was forced by duress and threats to execute the note in question. His 7th point of error is that the court erred in instructing a verdict against him because there was evidence that raised his defense that he was caused to execute the note by duress. His point of error No. 8 is that the court erred in refusing to admit evidence tending to prove that he was induced to execute the note by false promise of rebate.

We overrule appellants' points Nos. 6, 7 and 8.

The undisputed evidence shows that prior to April 19, 1966, the debt that is now evidenced by the note sued on was owed by Laid Rite to TXI and that such debt was then in the form of an open account.

On April 19, 1966, a note was drawn, payable to TXI, for the amount of the balance owed on that open account and the defendants, Russell and Laid Rite, executed the note as makers.

That original note was payable in installments with the final installment of principal being due on or before March 19, 1967. The parties renewed that note on April 10, 1967, with the renewal note providing that the final payment thereon was to be due April 10, 1968. On April 30, 1968, the parties again renewed the obligation when Russell and Laid Rite executed the note sued upon for $47,658.02.

The record shows without dispute that the statements that Russell claims to have been made to him that constituted duress and fraud in the inducement causing him to sign the note personally were made to him in April, 1966, and that he thereafter executed two renewals of the note, including the one being sued on here.

It is thus undisputed that Russell had full knowledge of all the facts which he now alleges constitute fraud in the inducement and duress at the time he executed the two renewals of the note.

We hold that when Russell executed the renewal note sued on with full knowledge of all the facts that he now alleges to constitute duress and fraud in the inducement he waived such defenses. Maddox v. Oldham Little Church Foundation, 411 S.W.2d 375 (Tyler Civ.App., 1967, ref., n.r.e.); Knox v. First National Bank of Mesquite, 422 S.W.2d 832 (Waco Civ.App., 1967, no writ hist.); Vick v. Downing, 120 S.W.2d 279 (Eastland Civ.App., 1938, no writ hist.); and Braxton v. Haney, 82 S.W.2d 984 (Waco Civ.App., 1935, writ ref.).

Defendants' point of error No. 9 is that the court erred in excluding testimony of the governmental investigation and indictment relating to price fixing after plaintiff's officer had testified that no investigation existed.

We overrule this 9th point of error.

Russell had testified during the trial that plaintiff had promised to give him a rebate of $2.00 per cubic yard on all concrete purchased chased and had also promised not to let any interest accrue on the account. Defendants had pleaded that these promises were false and fraudulent promises and that defendants were induced by them to sign the note in question. They contended that this evidence was therefore admissible during the trial, even though it was in variance with and contradicted the terms of the note sued on. Defendants contended that the plaintiff's agent told them the reason the rebate was not given was because plaintiff was under investigation for price fixing. Evidence to that effect was excluded and that ruling is the basis for this 9th point of error.

It is apparent that the only issue in the case that this excluded evidence would relate to is the question of whether or not the two allegedly false promises referred to relating to the rebate and waiver of interest were in fact made and constituted a defense of fraud in the inducement of defendants to execute the notes.

We have held above that as a matter of law this claimed defense of fraud in the inducement was waived by defendants, even if it had in fact once existed, by their admitted action in later executing the renewal notes with full knowledge of all the facts.

Since the excluded testimony only related to that issue of fraud in the inducement, which went out of the case, the trial court did not commit a prejudicial error by excluding it.

In Russell's 2nd and 5th points of error he contends that the trial court erred in directing a verdict because his cross-action based on usury was established in his favor as a matter of law and because the evidence in the case proved prima facie a cause of action for usury against plaintiff on which he was entitled to have a trial by jury.

We overrule the 2nd point of error and sustain the 5th point holding that Russell did prove prima facie a cause of action for usury on which he was entitled to have the jury pass.

The problems here involved are complicated.

The substance of the allegations in Russell's cross-action wherein he seeks to recover from TXI and SFC for usury is the following: that prior to April 19, 1966, Russell was personally indebted to SFC for a balance of over $240,000.00 on four separate loans; that at this same time Laid Rite owed TXI $49,872.84 on open account and Kiest Co. owed TXI on open account $18,565.77 that SFC at all times in question was the wholly owned subsidiary of TXI and each acted in this transaction as the alter ego of the other; that TXI and...