Shirley v. Waco Tap R. Co.

• Decision Date: 22 January 1889
• Citation: 10 S.W. 543
• Parties: SHIRLEY <I>v.</I> WACO TAP R. CO. <I>et al.</I>
• Court: Texas Supreme Court

10 S.W. 543

SHIRLEYv.

WACO TAP R. CO. et al.

Supreme Court of Texas.

January 22, 1889.

Commissioners' decision. Appeal from district court, McLennan county.

HOBBY, J.

This litigation, now for the third time upon appeal, had its origin in a suit brought by the plaintiff, T. M. Shirley, in July, 1870, against the Waco Tap Railroad Company, to recover damages for the breach of a written contract by that company, which the parties had entered into, for the construction of said company's road from Bremond to Waco, Tex. A trial, in February, 1875, resulted in a judgment in favor of Shirley for the sum of $167,682.95; which, upon appeal by the Waco Tap Railroad Company, was reversed upon questions not recurring in nor connected with this appeal. It was then decided that Shirley had "an equitable mortgage on the road for the amount found to be due him for money advanced under the terms of the contract." 45 Tex. 376. Pleadings subsequently filed by the parties alleged other facts, and presented questions necessary to be noticed, so that the issues involved in this appeal, and their connection with those heretofore determined, may be understood.

It is disclosed by the record in this case that within a few weeks after the institution of this suit in July, 1870, among other changes made in the charter of the Waco Tap Railroad Company, its name was changed to that of the Waco & Northwestern Railroad Company. In 1871 the Waco & Northwestern Railroad Company entered into a written contract with the Houston & Texas Central Railway Company, in which, for the consideration of $600,000, to be secured by deed of trust, and other considerations, the Houston & Texas Central was to complete and furnish the Waco & Northwestern Railroad by October 1, 1872. A supplemental contract was entered into between these companies, changing the original in some of its provisions; among others, relieving the Waco & Northwestern Railroad Company of its obligation to grade and furnish cross-ties; the consideration to the Houston & Texas Central being that the Waco & Northwestern Railroad Company should issue to the former company 2,000 shares of its capital stock, and deliver $100,000 in bonds of the city of Waco, and assign absolutely to the Central all notes, accounts, tax-lists, and demands whatever, owned by the Waco & Northwestern Railroad Company.

In February, 1873, under the terms of the deed of trust executed to secure the payment of the $600,000 above mentioned, the Waco & Northwestern Railroad Company was sold, and the Central became the purchaser, and a conveyance was executed by the trustees to all of the property of the Waco & Northwestern Railway Company. By an act of the legislature of May, 1873, the Waco & Northwestern Railroad Company was merged in the Houston & Texas Central Railway Company; no provision being made for the creditors of the former road by this act of merger. After the happening of the foregoing events appellant filed an amendment, in April, 1876, making the Houston & Texas Central Railway Company a party defendant, and alleged a fraudulent combination entered into between the two companies for the purpose of absorbing all of the property of the Waco & Northwestern Railroad Company, and illegally transferring it to the Houston & Texas Central Railway Company, with the intention of placing said property and assets beyond the reach of appellant, who was a creditor of the former company. The acquisition of the Waco & Northwestern Railroad Company by the Houston & Texas Central Railway Company, in February, 1873, was charged to have been fraudulent and ultra vires. It was also claimed by appellant that the latter company, by its acceptance of the act of merger of May, 1873, consolidating the Waco & Northwestern Railroad Company with the Houston & Texas Central Railway Company, became liable to the creditors of the former road. In June 1878, appellant further amended his pleadings, and charged that after the act of merger the directory of the late Waco & Northwestern Railroad Company, on the 24th of June, 1874, in fraud of his rights as a creditor of said company, transferred, by resolution and deed of conveyance, to the Houston & Texas Central Railway Company the land certificates representing the land donation to which the Waco & Northwestern Railroad Company was entitled from the state, aggregating about 500,000 acres of land.

An important feature in its effect upon the rights of appellant is developed at this juncture. The plea of appellant just mentioned, filed June 7, 1878, and alleging the fraudulent assignment of the land donation to the Central on the 24th of June, 1874, was withdrawn by him on the 15th of November, 1878; the record disclosing the fact that it was expressly averred by appellant that he no further relied upon the plea attacking said transfer of the land donation to the Houston & Texas Central Railway Company, but caused his abandonment of the same to be entered of record upon the minutes of the court. The cause thus standing, a trial was had at the November term, 1878, upon appellant's allegations of a fraudulent acquisition by the Houston & Texas Central Railway Company of the Waco & Northwestern Railroad Company, and the liability of the former to him, as a creditor of the latter company, by reason of the act of merger of May, 1873, accepted by the Houston & Texas Central Railway Company, together with appellant's claim for exemplary damages upon the ground of a fraudulent breach of the contract by the Waco & Northwestern Railroad Company with the malicious intent to oppress. A judgment was again rendered in favor of appellant for actual and exemplary damages, aggregating about $100,010.50, against the Houston & Texas Central Railway Company. From this judgment the Houston & Texas Central Railway Company appealed, and it was reversed upon the grounds that the acceptance of the conditions of the act of merger of May, 1873, by the Central, did not subject that company to liability for the debts of the Waco & Northwestern Railroad Company. The act of merger, it was said, in substance, did not affect the rights of creditors of the last-mentioned road, and did not place beyond their reach any of its assets. The claim for exemplary damages, it was also held, could not be sustained, under the averments of the petition that the "breach of the contract had been committed fraudulently and with a malicious intent to oppress." As actual damages had been recovered for the breach of the contract, to allow a recovery of exemplary damages under these averments would amount to a "double recovery for the same wrong." The rule was, however, recognized, of "the right to sue in" one action for a breach of contract and for damages for a tort, where both claims grow out of the same transaction, and are so connected that they may conveniently and appropriately be litigated together. Railway Co. v. Shirley, 54 Tex. 133.

After the disposition made of the second appeal in the manner last mentioned, the plaintiff, Shirley, on the 10th November, 1881, by amendment, made the directory of the late Waco & Northwestern Railroad Company last elected by its stockholders previous to the sale in February, 1873, parties defendant, under the statute constituting such directory trustees of the creditors of the sold-out road. Pasch. Dig. art. 4916. The allegations filed, as before stated, by him, on June 7, 1878, charging the fraudulent transfer of the land donation, and which were withdrawn and abandoned on November 15, 1878, were revived by appellant on November, 1881, to which the statute of limitation was promptly interposed by the Houston & Texas Central Railway Company. Again, in October, 1885, elaborate amendments were filed by appellant, consolidating his pleadings, upon which this trial was had, setting forth the contract for the construction of the Waco & Northwestern Railroad from Bremond to Waco; compliance with its stipulations by plaintiff until its breach by said company, in April, 1869, as he had previously alleged in his original petition; claiming actual damages in the sum of $150,000. Appellant's pleadings were, as they had been originally, replete with charges of a fraudulent combination between the two companies, entered into for the purpose of defrauding him, and to hinder and delay him, as a creditor of the Waco & Northwestern Railroad Company, in the collection of his claim, and "to consolidate, illegally absorb, appropriate, and fraudulently convert and merge, to the use and benefit of the Houston & Texas Central Railway Company, all of the property, rights, franchises, assets, and the entire corpus and existence, of the Waco & Northwestern Railroad Company, regardless of law and equity," etc., and that, in pursuance of that purpose, said companies entered into the contract of June, 1871, by the terms of which the Houston & Texas Central Railway Company was to construct and equip the road of the Waco & Northwestern Railroad Company to Waco by October 1, 1872, in consideration of $600,000, and other considerations, to be secured by deed of trust to be executed by the Waco & Northwestern Railroad Company. That in October, 1871, these two companies entered into a supplemental contract, changing some of the provisions of the original, among other things relieving the Waco & Northwestern Railroad Company of its obligation to grade and furnish cross-ties for said road; the consideration to the Houston & Texas Central Railway Company being that the Waco & Northwestern Railroad Company should issue to the Houston & Texas Central Railway Company 2,000 shares of its capital stock, — the original contract having provided that the Waco & Northwestern Railroad Company should issue no more shares of its capital stock without the permission of the Houston & Texas Central Railway Company, — and deliver to the Houston & Texas Central Railway Company the bonds of the city of Waco to the amount of $100,000, and...