Texas Consol. C. & M. Ass'n v. Dublin C. & M. Co.

• Decision Date: 11 November 1896
• Citation: 38 S.W. 404
• Parties: TEXAS CONSOLIDATED COMPRESS & MANUF'G ASS'N v. DUBLIN COMPRESS & MANUF'G CO.<SMALL><SUP>1</SUP></SMALL>
• Court: Texas Court of Appeals

38 S.W. 404

TEXAS CONSOLIDATED COMPRESS & MANUF'G ASS'N v. DUBLIN COMPRESS & MANUF'G CO.¹

Court of Civil Appeals of Texas.

November 11, 1896.

Appeal from district court, Erath county; J. S. Straughan, Judge.

Action by the Dublin Compress & Manufacturing Company against the Texas Consolidated Compress & Manufacturing Association and others. Reversed.

Ben B. Cain, L. N. Frank, and Duncan & Jones, for appellant. Lindsey & Goodson, for appellee.

NEILL, J.

This suit was brought by the appellee, a private corporation, against the appellant, also a corporation, and J. H. Brown & Co., a firm composed of J. H. and J. A. Brown, to recover certain lots, and a cotton compress and appurtenances thereon situated, and to cancel a certain deed thereto on the ground that it had been procured through fraud. Certain parties mentioned in appellee's petition were alleged to be its directors, who asked, in the event it should be held that the corporation was dissolved under the facts which appear in our conclusions, that they be allowed, as trustees, to prosecute the suit for the benefit of the stockholders and creditors of the appellee. The petition asks for a cancellation of the deed, judgment for the property, damages, etc. The appellant corporation filed a plea in abatement, in which it averred under oath that the suit had been instituted, without authority, in the name of the Dublin Compress & Manufacturing Company. It also filed a motion in which it asked the court to require the plaintiff to show by what authority the suit was filed and sought to be prosecuted in appellee's name. Its answer contained also a general demurrer; special exceptions to plaintiff's right to sue in the name of the Dublin Compress & Manufacturing Company; that it appeared, from the petition, that there was a nonjoinder of parties, and a misjoinder of parties and of actions; a general denial; pleas of not guilty, and purchase in good faith; special denial of any acts of fraud on its part or under its authority; and an estoppel. The pleas in abatement and general and special exceptions to plaintiff's petition being overruled, the cause was tried before a jury, and a verdict returned in favor of the plaintiff, upon which the judgment appealed from was entered.

The first, second, and fourth assignments of error are to the effect that the petition shows on its face that the suit is sought to be maintained by individuals, in the name of the Dublin Compress & Manufacturing Company, who have held no stock in the concern since July, 1891, and who, if they have any cause of action at all, are seeking to recover on their several separate causes of action without joining John D. Fredd, the party who perpetrated the fraud upon them, if any fraud was in fact perpetrated, and that Fredd, pretending to act as agent of defendant, and various other individuals and plaintiff, derived property which has not and cannot be restored and the parties placed in statu quo in this proceeding. Under these assignments the appellant makes the following propositions: "(1) The individuals who formerly held stock in the Dublin Company, having transferred their stock, ceased to have any voice in the management of the company and had no right to use its name. Their remedy was to sue either to recover their stock or for damages. So long as their stock was held by others, a recovery in the name of the company would not inure to their benefit. (2) The defendant corporation cannot be held for the deceit and fraudulent representations alleged, because it appears that the same, if perpetrated at all, were not the acts of the corporation, but the ultra vires acts of officers and directors, for which the company is in no way liable. There was no reasonable presumption of authority, and no actual authority. (3) The contract transferring the property in question could not be rescinded, because all parties interested were not before the court, and it was therefore impossible to restore them to their original status." The petition shows upon its face that it was not a suit by individuals, but was brought by the Dublin Compress & Manufacturing Company to recover its own property. It is true that appellee's officers were joined in the petition, and asked to be allowed to conduct the suit as trustees for appellee's stockholders and creditors, in the event the court should hold that the corporation had been dissolved, and on that account had no capacity to sue. In order that what we may say on these and some other of the assignments of error may not be misunderstood, we will state some of the facts which were pleaded and established by undisputed and uncontroverted testimony. They are as follows:

On and prior to June 30, 1891, the Dublin Compress & Manufacturing Company owned lots Nos. 1, 2, and 3, in block 11, and lots 1, 2, 3, and 4, in block 16, in Keith's addition to the town of Dublin, upon which were situated buildings, machinery, and other appurtenances constituting a cotton compress, which, with the lots, constituted practically all the property of the corporation. At a called meeting of the stockholders of the association, at which only 16 members were present, there then being 33 persons holding stock in the corporation, held on the day above mentioned, the object of the call being stated to be "to get an expression of the stockholders as to whether or not the company [appellee] wants to sell its plant to the Texas Consolidated Compress & Manufacturing Association with headquarters at Tyler," the following proceedings were had, viz.: "Motion by A. A. Chapman, and seconded by C. W. Travis, that this company sell and transfer to the Texas Consolidated Compress & Manufacturing Association all the stock of this company, together with new stock issued to cover all present outstanding liabilities, for their paid-up nonassessable stock at par. Motion carried unanimously. A. A. Chapman explained to the members present that this plant now owes about $13,000, with no funds on hand. Motion that when J. H. Brown & Co., of Tyler, remit to the First National Bank of Dublin a sufficient amount of stock to cancel the stock of the Dublin Compress & Manufacturing Company, the president and secretary be authorized to make deed to Texas Consolidated Compress & Manufacturing Association. Motion carried. Motion that this company be dissolved when the transfer to Texas Consolidated Compress & Manufacturing Association be completed. Motion carried. Upon motion, meeting adjourned." On the 6th day of July, 1891, the following instrument was executed: "State of Texas, County of Erath. Know all men by these presents, that the Dublin Compress & Manufacturing Co., of the county of Erath and state of Texas, in consideration of the sum of thirty-seven thousand ($37,000) dollars to us in hand paid by J. H. Brown & Co., of Tyler, Texas, as follows: Thirty-two thousand ($32,000) dollars cash in hand paid, the receipt whereof is hereby acknowledged, and the assumption of the full payment of a five thousand dollar note due by said Dublin Compress & Manufacturing Co. to the Campbell Cotton Compress Co., of Cincinnati, Ohio,— have granted, sold, and conveyed, and by these presents do grant, sell, and convey, unto the said J. H. Brown & Co., of the county of Smith and state of Texas, all that certain tract or parcel of land, and all the improvements thereon, consisting of compress building and machinery, said land being known as lots Nos. 1, 2, and 3, in block 11, and lots Nos. 1, 2, 3, and 4, in block 16, in Keith's addition to the town of Dublin, Erath county, Texas, which addition is duly recorded in volume G, in the probate minutes of Erath county, Texas, on pages 85 and 86, and for further description reference is made to said map. The grantor herein is a private corporation, and duly and legally incorporated under and by virtue of the laws of the state of Texas, with its principal office in the city of Dublin, Erath county, Texas. To have and to hold the above described premises, together with all and singular the rights and appurtenances thereto in any wise belonging, unto the said J. H. Brown & Co., and their heirs and assigns, forever. And we do hereby bind ourselves, our heirs, executors, and administrators, to warrant and forever defend all and singular the said premises unto the said J. H. Brown & Co., and their heirs and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof. Witness our hands at Dublin, Texas, on this 6th day of July, 1891. R. H. McCain, Pres't. B. M. Utterback, Sec'y." This instrument was acknowledged by R. H. McCain, as president, and B. M. Utterback, as secretary, on the day of its execution, and was filed for record and recorded on the 3d day of August, 1891, in the county clerk's office of Erath county. The by-laws of appellee provide that "it shall be the duty of the treasurer to keep the seal of the company, and not to use or place the imprint of same on any contract, note, or other obligation, * * * unless the same has been signed by the president and secretary, or the vice president, when the president cannot, or is otherwise incapacitated from acting." About the time the instrument bears date all the stockholders transferred their shares of stock in the corporation, leaving a blank space in the transfer for the insertion of the name of the transferee, which certificates, with the instrument above set forth, were placed in the Dublin bank, to be delivered upon the issuance to the stockholders of stock in lieu thereof of the Texas Consolidated Compress & Manufacturing Association, in accordance with the understanding of the stockholders of the Dublin concern at the time they resolved to sell its property. However, when they transferred their stock as above stated, they did not know that the deed to the property had been made to J. H. Brown & Co. The transfer of stock was made in order that it might be canceled upon the receipt of...