Lone Star Salt Co. v. Texas Short Line Ry. Co.

• Decision Date: 11 March 1905
• Citation: 86 S.W. 355
• Parties: LONE STAR SALT CO. v. TEXAS SHORT LINE RY. CO.<SMALL><SUP>*</SUP></SMALL>
• Court: Texas Court of Appeals

86 S.W. 355

LONE STAR SALT CO. v. TEXAS SHORT LINE RY. CO.^*

Court of Civil Appeals of Texas.

March 11, 1905.

Appeal from District Court, Dallas County; Richard Morgan, Judge.

Action by the Texas Short Line Railway Company against the Lone Star Salt Company. From a judgment for plaintiff, defendant appeals. Affirmed.

Coke & Coke, for appellant. J. M. McCormick, for appellee.

BOOKHOUT, J.

The appellee instituted this suit December 11, 1902, for the purpose of compelling specific performance of a contract alleged to exist between it and appellant, in words and figures as follows:

"Whereas, on January 18th, 1901, the Board of Directors of this Company adopted a resolution authorizing the President and Secretary to enter into a contract with Henry M. Strong, of Battle Creek, Michigan, in form and substance as set forth in said resolution, which appears in full in the minutes of the said meeting of January 18th, 1904, and

"Whereas, the sum of four thousand dollars ($4,000.00) provided as liquidated damages for breach of said contract by this Company is not satisfactory to the said proposed contract unless the liquidated damages for breach thereof be fixed at the sum of $6,000.00,

"Therefore, resolved, That the said President and Secretary be authorized to execute a contract with the said Henry M. Strong, in terms identical with the contract heretofore authorized as aforesaid, except that the liquidated damages be changed from four thousand dollars ($4,000.00) to six thousand dollars ($6,000.00), the contract hereby authorized being in words and figures as follows:

"The indenture made and entered into by and between the Lone Star Salt Company, a corporation under the laws of Texas, of the first part, and Henry M. Strong, of Battle Creek, Michigan, of the second part, on this the 15th day of February, 1901, witnesseth:

"That, whereas, the first party has built and now in operation a plant of works of a permanent character for the manufacture of salt of great value, located at the town of Grand Saline, in Van Zandt County, Texas; which produces annually a large quantity of salt, which has to be moved to market by rail, and is in direct competition with other salt produced at works enjoying the benefit of several railways at point of origin, and

"Whereas, there now exists only one line of railway at Grand Saline, which is detrimental to the interest of the said first party, and embarrasses it in its competition aforesaid in many ways, and

"Whereas, said second party for himself and associates, and the corporation to be by them formed, contemplates building another line of railway into Grand Saline, which will afford to the first party an additional outlet by rail for its product, provided said second party can be assured for a definite time of sufficient revenue to warrant the construction of said contemplated line.

"Therefore, the said first party hereby agrees with the said second party, and hereby covenants and [binds] itself, to furnish to said second party or its assigns, for transportation, for the full term of twenty years, sixty-six per cent. of all the tonnage moved by rail incident to the operation of its said works at Grand Saline, together with any renewals or extensions thereof, said term to begin to run from the date when the line of railway of said second party or his assigns shall be open for traffic to a point of intersection with some line of existing railway other than the Texas & Pacific Railway.

"In consideration whereof said second party hereby agrees with said first party, and hereby covenants and binds himself and his assigns, to construct a line of railway into said town of Grand Saline, which shall extend thence to a point of intersection with some line of railway now existing, other than the Texas & Pacific Railway, which line so to be constructed shall be open for traffic to such point of intersection within twenty-four months from date hereof, which limitation of time is hereby declared to be of the essence of this contract.

"And to receive promptly and promptly forward all freight tendered to it by said first party, and in respect to said freight to fully discharge all of its duties as a common carrier of freight, and to make to said first party on freight, or any part thereof, the lowest rate made, quoted or given by any common carrier or common carriers between the same points, on such freight, so that said Lone Star Salt Company, first party, shall never be compelled to pay more freight to the second party or his assigns for any service, than it would have to pay for the same service to any other carrier or carriers.

"It is further agreed between the parties hereto that inasmuch as the damages for a breach of this contract by the first party would be impossible of satisfactory estimation under the rules of law, the same are hereby liquidated at the sum of six thousand dollars ($6,000) per annum, and the said first party hereby agrees to pay to the second party or his assigns the sum of six thousand dollars ($6,000.00) liquidated damages, for each year during said contract period in which said first party shall fail to tender to second party or his assigns for transportation sixty-six per cent. of its tonnage into and out of Grand Saline, which damages shall be payable annually as they accrue.

"It is further mutually agreed that this contract shall terminate without notice whenever the Texas & Pacific Railway and the proposed railroad shall cease to compete for business.

"In witness whereof the parties hereto have signed these presents in duplicate on the day first written and the first party has attached hereto its corporate seal.

                  "[Seal.]        F. R. Blount, President
                                 "D. C. Earnest, Secretary
                                 "Henry M. Strong, Party
                                        of Second Part."
                

A trial on January 28, 1904, resulted in a judgment "that the said contract be specifically enforced against the defendant, and the defendant, its agents, officers, and employés, are hereby enjoined and required, so long as the Texas & Pacific Railway Company and the plaintiff shall compete for business, but not after the 8th day of September, A. D. 1921, to furnish to the plaintiff for transportation, as it accrues, sixty-six per cent. of all outgoing tonnage moved by rail, incident to the operation of defendant's works at Grand Saline, Texas, together with any renewals or extensions thereof, and also to furnish to the plaintiff for transportation, as it accrues, in addition to said sixty-six per cent., such amount of outgoing tonnage moved by rail, incident to the operation of defendant's works at Grand Saline, Texas, together with any renewals or extensions thereof, as will equal sixty-six per cent. of all the incoming tonnage moved by rail, incident to the operation of defendant's works at Grand Saline, Texas, together with any renewals or extensions thereof; provided, such additional outgoing tonnage, when added to the incoming tonnage incident to the operation of defendant's works at Grand Saline, Texas, together with any renewals or extensions which defendant may furnish to plaintiff for transportation, if any, shall not exceed sixty-six per cent. of the incoming tonnage aforesaid." Defendant duly perfected an appeal.

The defendant pleaded fraud in the execution of the contract, specifically alleging facts which it was claimed constituted fraud. The contract is dated February 15, 1901, and is copied in the above statement. At the time of the making of the contract, F. R. Blount was president of the Lone Star Salt Company, and D. C. Earnest was its secretary and general manager. F. R. Blount resided in the state of New York at the time, and was the owner of 6 shares of stock in the Lone Star Salt Company. D. C. Earnest resided at Grand Saline, Tex., and was the owner of 6 or 7 shares. William T. Hunter owned 1,200 or 1,300 shares, and resided in New York. J. M. McCormick owned 1 share, and F. D. Matthews owned about 20 shares, and the last two resided in Dallas, Tex. C. E. Scovell was also a stockholder, but neither the number of shares owned by him, nor his residence, is shown. There were other small stockholders, whose names are not given. The whole number of shares of stock of the Lone Star Salt Company was 1,950. Its main plant was located at Grand Saline, in Van Zandt county, on the line of the Texas & Pacific Railway. This was at that time the only railroad entering said town. The salt company was anxious to have another railroad constructed to Grand Saline, so as to have competition, and not be dependent on one line. In January, 1901, H. M. Strong, who resided at Battle Creek, in the state of Michigan, came to Texas, and went over the territory extending from Alba, a small town of about 150 inhabitants, located in Wood county, on the Missouri, Kansas & Texas Railroad, to Grand Saline, and thence to Corsicana. He knew the people of Grand Saline were desirous of having another railroad built to that town. He approached the Lone Star Salt Company with reference to building a railroad from Alba to Grand Saline. He had previously called on the merchants of the place to ascertain what bonus they would give to have the road constructed. He represented to the salt company that he could not build the road to Grand Saline unless he could get for a term of years a large proportion of the tonnage of the salt company. Thereafter he made a written proposition to the salt company, which was submitted to its board of directors. The matter was discussed at the directors' meeting, and had been discussed by letters between F. R. Blount and D. C. Earnest. William T. Hunter also had notice of the proposition, and discussed the matter with F. R. Blount. The draft of contract as submitted was subsequently changed, placing the liquidated damages at $6,000, in lieu of $4,000, as contained in the original draft. As changed, the proposition was approved and adopted at a...