Donoho v. Carwile
Donoho v. Carwile
Opinion of the Court
The plaintiffs in error, C. D. Donoho, P. K. Thompson, A. S. Laird, and E. G. Senter, filed this suit in the court below against the defendants in error, W. L. Carwile, S. J. McFarland, Edwin Hobby, and the Interurban Land & Development Company, a private corporation. For the sake of brevity, they will be hereinafter alluded to, respectively, as plaintiffs and defendants; that being their positions in the trial court.
The suit was grounded upon eight promissory notes executed by the defendant Interurban Land & Development Company, dated June 13, 1913, each for the principal sum of $1,562.50, bearing 8 per cent, per annum interest, payable semiannually, providing fox-10 per cent, attorney’s fees in case of default in payment of interest or principal, and secured by a secondary vendor’s lien .upon 200 acres of land in Dallas county, conveyed by plaintiffs to the Interurban Land & Development Company, in part payment of which the notes were executed. Liability against defendants, other than the Interurban Land & Development Company, which was alleged to be insolvent, was based on the allegation that they had subscribed to stock in the corporation which they had not paid, and as a consequence were responsible to plaintiffs as creditors of the corporation *555 to the extent of such subscriptions, which in the case of defendant Carwile was $8,000, of defendant Hobby $4,000, and of defendant McFarland $2,500. Liability for the further sum of $1,866 was alleged on the ground that when defendant Interurban Land & Development Company purchased plaintiffs’ land, acting by said Carwile, it withheld from the cash consideration said amount, which represented interest about to mature on the first lien notes and for which plaintiffs were responsible, and which amount it is alleged Carwile, with the assistance of Hobby and McFarland, appropriated to his personal use. Further liability was charged against Carwile personally on the ground that he had converted $3,000 of the funds of the defendant Interurban Land & Development Company to his personal use. On the ground stated, prayer was that defendants be compelled to contribute to the payment of plaintiffs’ debt to the extent in whidh their liability was shown. The foregoing are the general grounds upon which liability for the debt was sought to be charged against defendants. -The facts and circumstances which brought about the alleged liability are particularized in the pleading. They are not stated here, for the reason that they will be included in our statement of the facts. • Defendants generally and specially denied the allegations of plaintiffs’ petition, and further specially averred a compromise and settlement of all differences between the parties.
Trial was by jury to whom special issues of fact were submitted by the court at the request of both parties. Upon the answers of tbe jury thereto, judgment was for the defendants, from which this appeal is prosecuted.
The salient and controlling facts, all conflicts being resolved in support of the verdict of the jury, stated in our language are, in substance, briefly these: W. N. May-field of Dallas conceived the organization of a corporation for the purpose of acquiring two adjoining tracts of land in Dallas county, which he believed could be subdivided and sold in small tracts at a profit. One of the tracts, consisting of 200 acres, was owned in common by the plaintiff who understood Mayfield’s plan. The other tract contained 110 acres and was owned by Ed S. Lauderdale. In time Mayfield commenced negotiations with plaintiff Laird, who, in conjunction with plaintiff Senter, represented the other owners of the 200-acre tract. About the same time Mayfield sought the assistance of the defendant Carwile, advising him of his plan and that he believed plaintiffs’ tract could be bought for $200 per acre, an advance of $10 per acre over what they paid for it, and that the Lauderdale tract could be bought for approximately $9,000 and the two tracts, sold to the proposed corporation for $200 per acre. To induce Car-wile to interest himself in the plan, May-field offered him one-half of whatever profit was realized in the purchase of the Lauder-dale tract and its sale to the corporation, if Carwile would advance the cash payments necessary tp acquire same. Mayfield finally purchased the Lauderdale land for $7,500, taking deed in his name; Carwile, 'however, advancing the cash payment of $1,500. May-field also had -a tentative agreement with plaintiffs to purchase their tract at $200 per acre. At this point Mayfield set about securing subscriptions to the capital stock of the proposed corporation, by securing sub seriptions in the usual way. All money so collected was deposited with Edwin Hobby as trustee. The subscription -lists recited, in substance, that it was the purpose of those signing to organize a corporation capitalized at $27,500 to purchase a tract of 310 acres of land at Fowler station on the Dallas-Fort Worth Interurban Railway, nine miles west of Dallas, the price of the land to be $200 per acre, or a total of $62,000 for the 310 acres; the capital stock of the company to represent the first cash payment thereon.
Ultimately, as a step towards the culmination of the plan, Mayfield, and plaintiffs, conveyed the respective tracts of land to Edwin Hobby;- the deeds reciting that the land was to be held by Hobby in trust pending incorporation of the Interurban Land & Development Company and to be conveyed to that concern upon the consideration recited therein upon proof of its incorporation. Subsequently, those interested conferred for the purpose of preparing and executing articles of incorporation, at which time it developed that sufficient cash subscriptions had not been obtained to authorize incorporation. To overcome the difficulty, all present agreed that Carwile should deliver to Hobby, the trustee, his check for $14,000 in Order that Hobby as trustee could make affidavit that there was deposited with him a sum in excess or amounting to 50 per cent, of the authorized capital stock of the proposed corporation, with the understanding that when the corporation was enfranchised it should repay Carwile the money so paid and assume the Lauderdale mortgage on the tract sold to Mayfield and issue stock for the balance of the purchase price. After the understanding just related, articles of incorporation were prepared under professional direction of plaintiff Senter. Those named as directors were W. L. Carwile, W. N. May-field, E. G-. Senter, Cecil T. Casey, J. C. Everett, J. V. Dupies, and Edwin I-Iobby. Attached to the articles was a list containing the names of the subscribers and the amounts of their respective subscriptions, aggregating $30,000, together with the affidavit of W. N. Mayfield, W. L. Carwile, and *556 E. G. Senter, reciting, in substance, that of the $30,000 of subscriptions $28,000 had been paid, and that the directors named therein all resided in Dallas county, Tex.; also, the affidavit of Edwin Hobby, reciting that there was deposited with Mm as trustee for the proposed corporation in excess of $15,000. On the list of those having subscribed and paid for stock was Edwin Hobby $4,000, S. J. McFarland $3,000, E. G. Senter $1,000, W. D. Carwile $8,000, paid $7,000, W. N. Mayfield $2,000, paid $1,000.. Hobby and Me-Earlandt subscribed at the solicitation of Carwile to stock on condition that Carwile would relieve them from liability at their option.
Before the corporation was enfranchised, they declined to take the stock, and Carwile agreed to take what they had subscribed to. The articles, with the proof recited attached, were forwarded by plaintiff Senter to the Secretary of State, who approved the articles and filed them in his office. The directors named in the charter met subsequently, those present being Carwile, May-field, S'enter, and Casey, and elected Carwile president, Casey secretary, appointed Senter, Mayfield, and Hobby to prepare and submit by-laws, and authorized the purchase of the plaintiffs’ 200-acre tract, on the terms specified in the deed to Hobby, as well as the purchase of the Lauderdale tract on the terms specified in the deed from Mayfield to Hobby; the president being in that respect authorized to execute all notes, instruments, etc., necessary in his judgment to complete such transactions. Thereafter, Edwin Hobby, trustee, in compliance with the terms of the conveyance to him by plaintiffs Laird, Donoho, Senter, and Thompson, conveyed plaintiffs’ 200-acre tract to the Interurban Land & Development Company, in consideration of $40,000, of which $10,000 was paid in cash, $17,000 by assuming two notes, one for $2,500-due October 16, 1913, and one for $15,000 due October 16, 1916, then existing against the land in favor of the National Benevolent Association, and secured by the vendor’s lien, and $12,500 evidenced by the corporation’s eight promissory notes, each for $1,562.50, two payable to Laird, two to Donoho, two to Senter, and two to Thompson, four of said notes maturing October 1, 1914, and four October 1, 1915, all secured in payment by lien on the land secondary to that securing the debt of the National Benevolent Association. From the cash payment to plaintiffs, among other items, was deducted by the corporation $1,886. This sum represented earned interest on the $17,-500 debt which the corporation assumed. The cash paid plaintiffs by Hobby was from cash subscriptions to stock in the corporation. Hobby as trustee also conveyed to the Interurban Land & Development Company the 110 acres known as the Lauderdale tract. Only a general statement that this deed was introduced appears in the record. There is, however, in the record oral testimony establishing that the consideration was $22,-000, which was paid by the corporation’s assuming $6,000 of purchase-money notes due from Mayfield to Lauderdale, paying the $1,500 advanced by Mayfield and Carwile, which was also paid from the cash subscription to stock and issuing its stock for $14,500.
When the corporation acquired the land, it was for the purpose of dividing it into small tracts for suburban homes. In order to make sales possible, it was necessary to have the tracts as sold released from both the first and second liens. At all events, plaintiffs informed those acting for the corpora: tion that they had such an arrangement with the holder of the first lien and would insert a similar agreement in the deed to the corporation as between the corporation and themselves. The agreement was omitted from the deed. Deed of correction, including the provision, was promised, but never' executed. As a consequence, it was impossible to effect what defendants term a “selling campaign,” for the reason that prospective purchasers would demand some arrangement of the first and second lien notes before purchasing. The corporation’s plan was to subdivide the land and sell same at once in order to provide funds with which to meet its indebtedness. In the meantime, the $2,500 first lien note and interest, as well as the interest on the $15,000 first lien note, which the corporation assumed, matured, and default was made in its payment for the reason that the corporation had no funds. The first lien holder thereupon declared the entire debt due as it had the right to do and advertised the property for sale for the first Tuesday in February, 1914. Meanwhile, the semiannual interest on plaintiffs’ second lien notes matured and was not paid, which fact matured the second lien notes at the option of plaintiffs. On promise to pay $500 to the owners, plaintiffs secured a 60-day extension of the first lien debt, which deferred the sale thereunder, and at once advertised the land for sale under their second lien for the first Tuesday in March, 1914. Plaintiffs failed, however, to pay the. $500 promised the first lien holder. Thereupon Carwile purchased from the holder the first lien debt and advertised the land for sale thereunder, simultaneously in time with the sale under the second lien.
Much is developed in the evidence by both parties concerning the motives of each in advertising the land for sale under the respective liens and what preceded such action; but, inasmuch as the net result was the advertisements, a statement of such evidence will be of no consequence, and for that reason is omitted. Matters so standing, Carwile and Laird and Senter tentatively reached *557 an. agreement, by which both debts were to be extended for such time as would enable the corporation to sell some of its land and ease its financial stress, but which Carwile declined to execute. About this time certain subscribers to the stock of the corporation learned for the first time that the Lauder-dale tract had been conveyed to the corporation at an advance of $14,500 above what had been paid for it, and for which corporate stock had been issued to Carwile. The disclosure evoked considerable discussion among those not previously aware of the fact. As a result, Carwile called a stockholders’ meeting, the upshot of which was the appointment of a committee from the stockholders who conferred with Carwile and plaintiffs and an oral agreement reached for adjustment of all matters. The agreement was detailed to the attorneys for the corporation, who reduced same to writing. The agreement was signed by Carwile individually and by Hugh E. Prather, claiming to represent all the stockholders in the Interurban Land & Development Company, other than those owning the $14,500 which represented the profit on the Lauderdale tract. The agreement, after reciting that .the parties desired to compromise differences which had arisen concerning the management of the corporation, provided, so far as is necessary to state, in substance, that Carwile would secure $14,500 of the stock of the Interurban Land & Development Company and deliver same canceled to Prather and associates, pay them $1,875 cash, which sum represented the cash payment on the Lauderdale tract, advanced to Carwile, and $375 collected by him as rentals for the lands of the corporation, and resign from the presidency of the corporation. Prather and associates agreed to procure the conveyance of the Lauderdale tract of land to Carwile, who was to assume the incumbrance thereon; pay the first lien notes against the Fowler tract of land held by Carwile, on condition that Carwile would transfer the lien as directed. Carwile and plaintiffs agreed to withdraw their respective notices of sale and abandon same. The agreement was to be consummated in 30 days, and, when consummated, should acquit all of any liability to the other.
Simultaneously with the execution of the foregoing agreement, another was executed between Prather, representing all the stockholders (other than those owning the stock agreed to be secured and delivered by Car-wile), and Laird, Senter, Donoho, and Thompson, the plaintiffs herein and owners of the second lien notes against the Fowler tract, aggregating $12,500, by which they ratified and confirmed the contract between Prather and Carwile and agreed to cancel their second lien notes and deliver same to Prather in consideration of the delivery to them by Prather of $13,000 of the capital stock of the Interurban Land & Development Company on condition that when the contract between Prather and Carwile was consummated the Interurban Land & Development Company was the owner of the Fowler 200-acre tract, subject only to the first lien notes held by Carwile, and that there should be outstanding of the capital stock of the Interurban Land & Development Company only $10,000 plus the $13,000 of stock to be delivered to them. After execution and delivery of the foregoing contracts, both Carwile and plaintiffs withdrew notices of their respective sales and abandoned same. Carwile secured and delivered to Prather the $14-,500 of stock, paid the $1,875 cash, and resigned as president of the Interurban Land & Development Company. Prather was elected president of the corporation to succeed Carwile, and at a special meeting of the directors, those present being Prather, Laird, Senter, Dupies, and Hardy, the president and secretary were authorized to procure a loan of $18,500 from G. W. Owens with which to take over and renew and extend the first lien notes then held by Carwile. Owens did, at request of Senter and Laird, take over the notes and lien held by Carwile. The Interurban Land & Development Company by appropriate action authorized its officers to execute deed to the Lauderdale tract to Carwile, which they did; Carwile assuming the incumbrance thereon. The several things done by the parties under their respective contracts, just recited, were not accomplished within the 30 days specified in the contract between Prather and associates and Carwile; but the evidence will warrant the conclusion both of mutual extension and subsequent ratification and acquiescence in what was actually done. Subsequent to the foregoing, the owners of the second lien notes against the Fowler tract of 200 acres, Laird, Senter, Donoho, and Thompson advertised and sold same for an inconsequential sum, which was credited upon the notes, Laird being the purchaser at the sale, conveying subsequently a fourth interest therein to his coplaintiffs. Thereafter, the Fowler Land Company, a private corporation, was organized and enfranchised; the original directors being Hugh E. Prather, H. D. Lindsley, and A. S. Laird. After its organization, the title to the Fowler 200 acres acquired at the sale under the second lien notes was conveyed to the Fowler Land Company. The Interurban Land & Development Company, by its proper officers and under authority of appropriate resolution, conveyed by quitclaim deed whatever interest it had in said 200-acre tract to the Fowler Land Company in consideration of the assumption by the vendee of the first lien thereon. The 200 acres of land are all the assets of the corporation. The authorized capital stock of the Fowler Land Company was $25,000. Originally certificates of stock for $3,500 were issued to Laird, Senter, Donoho, and Thompson each, arid one for $10,000 to them *558 collectively. Subsequently, the certificate for $10,000 was surrendered and $8,500 thereof I issued to Prather, Lindsley, Dupies, Nicholson, Hardy, Irish, Tenison and Flippen former subscribers in the Interurban Land & Development Company, in the amount to which they had formerly subscribed to the stock of the last-named corporation; the balapce of the stock remaining subject to the action of the new corporation.
The first assignment presents the contention that the court erred in refusing to peremptorily direct verdict for plaintiffs for the reason that 'the evidence disclosed without controversy that the Interurban Land & Development Company was insolvent, was indebted to plaintiffs in the amount sued for, and that the defendants had subscribed to it£ capital stock in the amounts alleged for which they had not paid. Ordinarily, under the facts recited, subscribers to the capital stock of a corporation would be liable to creditors in the manner claimed. The jury found, however, in response to various issues of fact submitted to them, that any liability of defendants as subscribers to the stock of the Interurban Land & Development Company had been compromised by the agreements referred to in this opinion with the consent, acquiescence, and authority of plaintiffs, the Interurban Land l& Development Company, its officers, directors, and stockholders, and that thereafter all matters therein agreed to be performed were consummated. Such compromise agreements plaintiffs in final analysis assert did not include or contemplate any adjustment of defendants’ liability as subscribers to the stock of the corporation, In short, that they were separate transactions, the stock of $14,500 being in payment of the profit made on the Lauderdale tract of land, while the subscriptions were merely agreements to purchase that much additional stock. Concerning these subscriptions, it is not in dispute that each of the defendants subscribed for the amount claimed. Hobby and McFarland subscribed at the solicitation of Carwile with the understanding that they might recede from their obligation before organization. This they did. Carwile assumed their obligation. Carwile testified that his subscription to the capital stock of the corporation, as well as the Hobby and McFarland subscriptions which he assumed, were paid for with the .stock issued for the profit made out of the Lauderdale tract, and that it was at all times the understanding that it should be paid in that manner.
“Voluntary settlements are so favored that if a doubt or'dispute exists between the parties with respect to their rights, and all have the same knowledge or means of obtaining knowledge concerning the circumstances involving those rights, and there is no fraud, misrepresentation, concealment, or other misleading incident, a compromise into which they have voluntarily entered must stand and be enforced, although the final issue may be different from that which was anticipated, and although the disposition made by the parties in their agreement may not be that which the court would have decreed had the controversy been brought before it for decision.”
Whatever may have been the knowledge of the plaintiffs and the bona fide subscribers to the stock at the inception of the matter *559 concerning tlie profit Carwile souglit to make npon tire Lauderdale land and the issuance of the “watered” stock in that connection, that matter was surely bared at the several meetings and discussions prior to the time the agreements were signed and delivered. The one subject of discussion was that fact, and the one purpose of the meeting to require Carwile to surrender the stock, repay the Interurban Land & Development Company the cash advanced on the Lauderdale land, receive it back and assume the payment of the mortgage thereon, and retire from fur-' ther connection with the corporation. Such was the prime object of the agreements between the several contracting parties. All interested, including plaintiffs, possessed full knowledge of the facts, concerning whi,ch no fraud, misrepresentation, or concealment was practiced. It may be that Carwile, all other issues aside, would have been liable on his subscription, or, as some authority indicates, upon the watered stock for plaintiffs’ debt but for the compromise; hut, as the court say in the case cited, “if a doubt or dispute exists between the parties with respect to their rights,” the compromise will be enforced whatever might have been the result in a proceeding in court.
On the issue of compromise, plaintiffs also assert that the finding of the jury that the matters required to be performed by the compromise agreements were in fact consummated is without support in the evidence. We have examined the evidence on the matter pointed out by plaintiffs, and we are not prepared to say that the finding is without such support. We could in deference to counsel quote the evidence, but it would serve no useful purpose to do so. Upon us is the duty and responsibility in such case, and we apprehend it is sufficient to state our conclusions, since they may be reviewed.
The third assignment complains of the action of the court in permitting counsel for defendants to elicit from the witness Laird the statement that plaintiffs had owned the Fowler tract for two years when it was sold tb the Interurban Land & Development Company at a profit of $10,000. The .bill preserving the *560 objection discloses that the witness at other times during the trial testified to substantially the same facts without objection, and it so appears from the record. While the testimony might be justified on other grounds, it has been repeatedly ruled that the fact that the same testimony was admitted without objection affords sufficient reason for holding that it does not, even if erroneous, constitute reversible error.
,[6-8] The fourth assignment of error complains of the admission in testimony of the contract between Carwile and Prather and associates, while the fifth assignment complains of the admission in testimony of the contract between Prather and associates and plaintiffs, both of which we have substantially recited in our statement of the case. Numerous objections to the admission of the agreements are raised by plaintiffs. Defendants urge that the action of the court should not be reviewed for the reason that the bills of exception taken at the time merely disclose, that the plaintiffs merely objected to the admission of the contracts without specifying the ground of the objection. While the reason urged by defendants for refusing to review the action of the court is undeniably sufficient, we are also of opinion that the contracts in the light of the pleading were both relevant and pertinent. •
Error is also assigned on the action of the trial judge in further eliciting, over plaintiffs’ objection, from the witness Lindsley the statement that the Fowler Land Company represented the original arrangement, with Carwile’s interest out, and the further fact, which the court declared he desired for public information, that the Fowler Land Company had entered into a contract to sell the Fowler tract to the Industrial College for Colored Youth of Texas for $45,000.
There are 22 assignments of error calling into review the correctness of as many issues of fact submitted to the jury and under which there is submitted a total of 98 propositions *561 for separate consideration. To consider the points seriatim would extend this opinion beyond the point of toleration, which is our excuse for reciting the fact. Notwithstanding the assignments are, in our opinion, multifarious under the rules prescribed by the Supreme Court, we have examined the issues so submitted and the points urged thereunder and reached the' conclusion that there is nothing shown which would authorize a reversal of the case. The interrogatories do not, in our opinion, present the issues as clearly as might easily have been done, and yet each does embrace issues of fact material to the determination, of the case and which the parties had a right to submit. In some instances the interrogatories embrace more than one disputed issue, but the answer to the interrogatory, as well as the answers of the jury to all the interrogatories, consisting of 2S by plaintiffs and 22 by defendants, a total of 50 special issues of fact, indicate that the error, if any, was harmless, and did not ampunt to such a denial of plaintiffs’ rights as was reasonably calculated to or did cause the rendition of an improper verdict.
“The general rule is that the burden of proof ‘remains on a party offering a fact in support of his case, and does not change in any aspect of the cause; though the weight of evidence may shift from side to side, according to the nature and strength of the proof offered in support or denial of the main fact to be established.’ ⅜ * ⅜ *The same rule holds in reference to defendants, when they set up an independent fact by way of confession and avoidance. Thus they admit the plaintiffs’ case, and as to such case assume. the onus proban di. As in an action of debt,.when the defendant pleads payment, accord and satisfaction, a discharge in bankruptcy,” etc. Clark v. Hills, 67 Tex. 141, 2 S. W. 356.
It would have been appropriate and correct for the court to have further instructed the jury that the burden was upon tho defendants to prove that they had adjusted and compromised their liability upon the stock subscriptions, for obviously the burden in that respect was upon them. The court failing to do so, it was the duty of plaintiffs to either object to the main charge on the ground that it did not instruct that the burden was upon defendants on the facts affirmed by them, or to tender a special charge in that respect. They observed neither rule. As a consequence the matter cannot be reviewed.
There are some assignments of error which we have not discussed for the reason that to do so would extend the opinion beyond the proprieties, but which are overruled for the reason that they do not, in our opinion, present reversible error.
Finding no reversible error in the record, the judgment is affirmed.
Affirmed-
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Reference
- Full Case Name
- DONOHO Et Al. v. CARWILE Et Al.
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- 12 cases
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- Published