Guardian Development Co. v. Jones

BOND, Justice. The appellant, Guardian Development Company, a corporation, instituted this suit against the appellees, T. R. Jones, Hill Top Stables, Inc., T. R. Jones, Inc., and Bird-Haven Farms, Inc., to cancel a deed, executed on October 14, 1932, by R. E. Burt, president, under a proper resolution of the board of directors and stockholders of the corporation, to T. R. Jones, conveying 210 acres of land located in Dallas county, Tex., and, in the alternative, for damages. The ground urged in pleadings and evidence for the cancellation of the deed was a fraudulent concealment, by appellee Jones, of a material fact, which induced the appellant to execute the deed; and, as we view this appeal, the primary contention centers, assuming, as found by the jury, that appellee Jones was guilty of fraud, on whether appellant suffered damages by virtue of such fraudulent act. The record reveals that the appellant, Guardian Development Company, is a corporation, with R. E. Burt as its president, having a capital stock of $100,000, divided into 1,000 shares, and owned by the Burt family; R. E. Burt owned 360 shares, Mrs. R. E. Burt owned 640 shares, and Mrs. Joe Burt, daughter-in-law of R. E. Burt and wife, owned 90 shares. The 10 remaining shares is held by S. Reid, merely to qualify him to act as secretary. Wood R. Alexander, who participated in the actions hereinafter mentioned, is a son-in-law of Mr. and Mrs. R. E. Burt, having married their only daughter. *467 In-1930, the appellant agreed with Alexander that he could place improvements on the 210 acres involved in this suit, and use it in operating a riding stable. Between the years 1930 and 1932, Alexander erected stables, a barn, a residence, and other improvements upon the premises, which cost him about $25,000; purchased between 30 and 40 horses, riding equipment, such as saddles, blankets, et caetera, which cost him between $12,000, and $15,000, and obtained a charter for a corporation, named “Bird-Haven Farms, Inc.,” into which he transferred, as its only assets, the horses and riding equipment. The business of the Bird-Haven Farms, Inc. (capital stock of which was owned by Mr. and Mrs. Alexander), was the renting of its horses, also training and boarding horses owned by others. In operating the business, Alexander acquired additional acreage, purchasing an adjoining 151 acres for the sum of $16,000 —$12,000 in cash and $4,000 in notes. The legal title to this additional acreage was placed in S. Reid, Reid signing the notes, with the understanding that Alexander was to pay them. The 210 acres and the 151 acres were used as one contiguous tract, through which many bridle paths extended, and on which the Bird-Haven Farms, Inc., conducted its business. On August 29, 1932, Alexander, being in need of money, debts of the Bird-Haven Farms, Inc., being pressed for payment, a $2,800 note secured by a mortgage on the horses, and the $4,000 notes, secured by vendor’s lien on the 151 acres and necessary improvements on the bridle paths, approached Jones for a loan of $7,500. Jones advanced the money, taking Alexander’s note therefor, due on May 1, 1933, and, as security therefor, took a transfer of the stock of the Bird-Haven Farms, Inc., with all its rights and interest in the 210 acres, the 151 acres and the horses; exacted of Alexander his resignation as president and manager of the corporation, and secured a transfer of the vendor’s lien on the 151 acres. At the same time and as a part of the transaction, Jones and Alexander entered into a written optional contract, which, so far as is here material, provides: (a) That the 151 acres, the 210 acres, and the Bird-Haven Farms, Inc., properties be considered as one unit; (b) that Jones and Alexander have a reciprocal option, to be exercised within two years, to acquire an undivided 50 per cent, interest in all of the properties; (c) that the one exercising the option would be required to equalize the other’s investment, i. e., would have to pay what was needed to make the amount paid by each, equal; and (d) that, if and when Alexander, should exercise the option, he would be given a $25,000 credit towards the purchase of the 50 per cent, interest for the investments. he had made in the properties. The contract evidenced an intention- on the part of Jones to make improvements on the property, purchase machinery and equipment, and to acquire title to the 210 acres from the Guardian Development Company, and to the 151 acres from Reid. Alexander informed R. E. Burt, president of the Guardian Development Company, of the terms of the agreement and a proposal to> purchase the 210 acres for $50,000. On September 26, 1932, Jones, having declined to exercise the option to purchase the 210 acres from the appellant for $50,-000, presented to Burt, through R: W. Peat-ross, a real estate agent, a written contract to purchase the land at $43,000, which Burt declined to extend, until importuned to do so by Alexander, representing to him that the reduction from the original proposal would inure to his benefit, by virtue of the existing option between Alexander and Jones. On this assurance, Burt executed the agreement and caused the directors of the corporation to pass a resolution, authorizing him, as president of the corporation, to execute a deed to Jones for the recited consideration of $43,000 — $10,000 in cash, $25,000 in Dallas stadium bonds, and the assumption by Jones of an outstanding $8,000- note on the 210 acres of land due the Union Central Life Insurance Company; and, on October 14, 1932, Burt, in accordance with the agreement and resolution of the corporation, executed the deed. On October 4, 1932, Alexander and Jones, without imparting knowledge to Burt, agreed to cancel their optional contract, destroyed the written memorandum thereof, and agreed that if Jones exercised the option to purchase the 210 acres from the Guardian Development Company, Alexander would' claim no interest therein, atid that the conveyance would be free of all obligations under the optional agreement of August 29, 1932. Neither the resolution nor the deed conveying title to the land from the corporation to Jones mentions the contract of Jones and Alexander as a consideration for its execution. The testimony is undisputed *468 that the resolution, authorizing the execution of the deed, for the recited consideration of $43,000, was as intended by the directors of the corporation; that appellant received all and expected no other than the'recited consideration, and, so far as the corporation and its stockholders were concerned, the sale, under the terms of the deed, was a final and complete transaction. Mr. Burt testified that tire only interest to himi and the corporation was to “see that that option was carried out between Jones and Alexander.” The testimony further reveals, and found by tlie jury to be* true, that, at the time Jones and Alexander entered into the optional agreement, they each intended to carry out its terms, and the subsequent abrogation was mutual between the contracting parties. There is no question raised, if, in fact, it could be done, that Jones practiced any deception on Alexander for the surrender of his rights under the contract. We believe that the law, in this regard, is correctly stated in the case of Wells v. Burroughs, 65 S.W.(2d) 396, 397, wherein the Texarkana Court of Civil Appeals, in a suit to1 cancel a deed to land for fraudulent promises to erect a gin on the land, and subsequent failure to perform, disposes of the question, as follows: “If the promise and representation to erect a gin on the land was, as seemingly appears, truly made in good faith at the time of the contract of purchase and sale in May, 1928, and the defendant, subsequently, as conclusively appears, changed his mind and failed or refused to perform the promises before the execution and delivery of the deed, then such conduct would not constitute fraud in legal acceptation such as would justify the cancellation of the deed. Selari v. Selari (Tex. Civ. App.) 124 S. W. 997.” Furthermore, the rule of law in this state is settled, we think, that, in 'order for fraudulent representations to be actionable, they must have resulted in some pecuniary damage to- the party acting thereunder. A fraud which causes no injury is not legally cognizable, and courts of law or courts of equity will not exercise their power for ¿he purpose of enforcing moral obligations or correcting unconscientious acts which do not result in some damage, loss, detriment, or injury to the complaining party. In the case of Russell v. Industrial Transportation Co., 113 Tex. 441, 251 S. W. 1034, 1037, 258 S. W. 462, 51 A. L. R. 1, by the Supreme Court, followed and cited with approval in the case of Blankenship v. Lusk (Tex. Civ. App.) 77 S.W. (2d) 341, Judge Randolph, speaking for the court, said: “It is elementary that where a false representation is charged to have misled a party into signing a contract, he must not only show the falsity of the representations, that he was misled by such and induced to sign the contract thereby, but he must also show that he has been damaged and the extent of his damages.” Also see 20 Texas Jurisprudence, par. 39, p. 68; Bryant et al. v. Vaughn (Tex. Sup.) 33 S.W. (2d) 729; Lay v. Midland Farms Co. et al. (Tex. Civ. App.) 8 S.W. (2d) 230; Fortune v. Midland Farms Co. (Tex. Civ. App.) 8 S.W. (2d) 236; Abernathy et al. v. Brashear (Tex. Civ. App.) 48 S.W.(2d) 393; Bauder v. Johnson (Tex. Civ. App.) 36 S.W. (2d) 1112; Johnson v. Magnolia Petroleum Co. (Tex. Civ. App.) 75 S.W. (2d) 283; Blankenship et al. v. Stricklin et ux. (Tex. Civ. App.) 77 S.W. (2d) 339. Such being the case, the optional contract, allowing Alexander to repurchase into the enterprise upon the happening of a given contingency, i. e., Jones exercising the option to purchase the 210 acres from the appellant and 151 acres from S. Reid, was not for the benefit of the appellant or the stockholders of the corporation, but for the benefit of Alexander, and neither the optional contract between the corporation and Jones, nor the deed from the corporation to Jones, was so framed as to deprive Alexander of the power to enter into a subsequent contract abrogating his rights under his agreement. The deed sought to be rescinded having been delivered to the grantee, and accepted by him as performance of the contract for the sale and purchase of the land, must, in law, be regarded as the final obligation of the agreement of the parties, and the sole repository of the terms on which they agree. 14 Texas Jurisprudence, 875. It was the duty of appellant, acting through its president, who was a man of large business affairs, once may- or of the city of Dallas, and a managing officer of- large financial enterprises, to have the option agreement, or reference thereto, incorporated in the deed, and the failure to so incorporate the option agreement in the deed, under the circumstances, is sufficient, we think, to prevent the appellant from now saying that the prior nego- *469 Rations were not merged in the deed itself. Alexander was the only person interested in the performance of his contract, and could have maintained an action in his own name, which, in fact, he has done for its enforcement. However much Mr. Burt and other members of the Burt family, owning the stock of the appellant corporation, may have been interested in the welfare of Alexander, personally, or because he had married Burt’s daughter, they or the corporation had no legal interest in Alexander’s contract and could suffer no injury for its abrogation; therefore, cannot- be heard to complain because Alexander, saw fit to cancel the contract in which he alone was legally interested in its enforcement. As we view the record, it does not raise any issue of actionable fraud, of which appellant could legally complain. The cause of action, if any, accrued to Alexander, and was not such, if there had been any damage, that could he maintained by appellant. True' enough, while Burt considered the value of the land at $100,000 to $125,000 and the jury valued it at $76,500, yet, the corporation parted with all of its right, title, and interest therein, reserving nothing unto itself, thus losing nothing, and expecting nothing other than the recited consideration in the deed. The stockholders, the Burt family, suffered the disappointment of an anticipated benefit accruing to the son-in-law, Alexander, which they surrendered, and for which the corporation had no redress for its loss. The trial court should have sustained appellees’ motion for an instructed verdict. The view we have taken of this appeal, as expressed above, makes a discussion of appellant’s further assignments, based on trial errors, unnecessary; they are overruled, and the judgment of the lower court is affirmed. Affirmed.