Lakeland Properties, Inc. v. Mangum

DIES, Chief Justice. In June, 1972, James L. Dannheim, Der-rill G. Whitten, and Lakeland Properties, Inc., as plaintiffs, filed suit against Ruth Vivian Mangum, as defendant for “actionable fraud." They alleged that during the months of May and June, 1969, Dannheim, Whitten, and another, had discussions with Mangum concerning a land venture near Lake Livingston. The defendant Mangum [915] represented she knew of an 80 acre tract which could be bought for $50,000 and she would contribute merchantable timber worth $18,000 as her share of the venture. In August, 1969, the parties formed a corporation in which 36% of the stock (360,000 shares) was owned by Mangum, and substantial dividends were paid the shareholders through May, 1971. On May 27, 1971, Lakeland Properties, Inc., agreed to purchase the Mangum stock, paying some cash and giving her a note for $54,000. Plaintiffs alleged that this note was given in reliance that Mangum had deeded the timber to the owners of the 80 acre tract, which was false and fraudulent. In addition to monetary damages, plaintiffs prayed for an injunction to prevent Man-gum from negotiating the note, and in their prayers asked for the $54,000 due on the note. By a first supplemental petition, plaintiffs alleged that Mangum falsely represented the cost of the 80 acre tract as being $50,000, whereas in truth and in fact it was $32,000. Trial was to a jury which found among other things that defendant Mangum represented to her partners that the true cost of the 80 acres was $50,000; that this was false and known by her to be false; relied on by Dannheim and Whitten; but that they possessed knowledge prior to December 31, 1969, as would incite an inquiry in the mind of an ordinarily prudent person to ascertain the true purchase price of the 80 acres; that defendant Mangum’s misrepresentations could have been discovered by them by the exercise of reasonable diligence; and they failed to find she represented she was contributing $18,000 merchantable timber for her interest. The jury further found that she represented to Lakeland Properties, Inc., that the purchase price of the 80 acres was $50,000, but they failed to find this was false. A take nothing judgment was rendered by the court on October 27, 1972. The judgment recited: “The court finds that the jury verdict is to the effect that the plaintiffs were precluded from any recovery because the time for this cause of action had run under the Statute of Limitations. . that the Plaintiffs possessed such knowledge prior to December 31, 1969 as would have incited inquiry on the part of the Plaintiffs to determine the actual purchase price of the subject land and that the Plaintiffs did not exercise reasonable diligence to determine the true purchase price of the subject land.” This case was appealed, and we affirmed. Dannheim v. Mangum, 498 S.W.2d 224 (Tex.Civ.App., Beaumont, 1973, no writ). The case we now review was filed November 3, 1972, in the same District Court that rendered the above-referred to judgment by Ruth Vivian Mangum, plaintiff, against Lakeland Properties, Inc., defendant, on the $54,000 note previously given by Lakeland in partial payment of the Mangum stock. Trial was again to a jury which found that Ruth V. Mangum was issued 360,000 shares of stock in Lakeland on March 12, 1970, in exchange for the $54,000 note dated June 25, 1971, that the stock was “something of value”; they failed to find Ruth Mangum obtained this note by representing to Lakeland that she had given something of value for her stock. Judgment for Ruth Mangum on the note plus interest, plus attorneys’ fees followed on August 9, 1973, from which Lakeland perfects this appeal. After the selection of the jury, but before any evidence was adduced, plaintiff Mangum filed a motion to sever asking “that the pleadings set out in the Defendants Answer having to do with tort in the nature of fraud be severed as a separate [916] suit,” giving as her reason that this issue had been litigated in the previous lawsuit. This motion was sustained by the court, stating as follows: “The case at bar, however, we have a different slant on it, in that the case, 8067, was filed raising the question of fraud, tort action, everything else, and it was tried extensively on that question. At that time it was submitted to a jury, and the jury answered certain issues, the case was carried to the Court of Civil Appeals in Beaumont, they affirmed it, there isn’t a final judgment on it, but in the light of the record at this time I think the Court, the Trial Court, must look to that holding thus far. The jury finding in response to Special Issues in that case conclusively and affirmatively found there was no fraud on the part of the conveyance, on the part of Mrs. Mangum to the corporation, which is the defendants in this cause of action in Cause No. 8110. The jury’s finding in that cause of action, where the question of fraud was raised and an issue submitted, found there was no cause of action on the element of fraud, therefore, I feel that it would be inadvisable for this Court now to go back into or permit going back into those questions or those elements of fraud, No. 1. A corporation issued capital stock for land, the capital stock was issued, a certain percentage, for a certain percentage of the capital stock. Later on, I take the position that there’s ratification on the part of the corporation, in that the stock and land that was conveyed and the values of stock issued, the ratification of it, to permit now the defensive questions of going into all the elements of fraud that were raised in the original case, Cause No. 8067, would be a violation of the rules to the point that it would be an endless matter because every time a case came up, once it had been adjudicated, the same element of fraud could be raised. I think the element of fraud was thoroughly, completely, and extensively weighed and tried in Cause No. 8067 in which the jury found there was no fraud. “The Court is sustaining this motion up to the point that you will not be privileged to go back into any question of fraud that was covered by the original cause of action, 8067, which was submitted to the jury in that cause of action. I think you have a different question here, I think you have a question of contract; that if there had been no question of fraud raised in the prior pleadings, the prior case, and untried, then I think you would be correct in your position, that you would have a defensive issue on fraud to raise in that point. In response to Special Issues that were raised in Cause No. 8067, after the corporation, the issue of fraud was submitted to the jury as to Derrill G. Whitten and James L. Dannheim, Special Issue 11, as to one of the defensive issues that you have raised here: ‘Do you find from a preponderance that Ruth Vivian Mangum represented to James L. Dannheim and Darrell G. Whitten that she was contributing $18,000 worth of merchantable timber for her thirty-six per cent interest in the partnership for the purchase of eighty acres of land?’, the jury fouild she did not. I might call attention that this case on appeal, there was no question raised on some of those issues. The only three points raised was no evidence rule. “The next issue that I think the Court would have to look to as to making a determination on this, Special Issue No. 20.: ‘Do you find from a preponderance of the evidence that Ruth Vivian Man-gum represented to Lakeland Properties, Incorporated, the true purchase price of eighty acres of land was $50,000 at the time that Lakeland Properties, Incorporated, issued thirty-six per cent of its stock?’, and they said: ‘We do.’ “The following issue: ‘Do you find from a preponderance of the evidence [917] that such representation of Ruth Vivian Mangum was false?’, and: ‘We do not.’ “Special Issue No. 28: ‘Do you find from a preponderance of the evidence that Ruth Vivian Mangum represented to Lakeland Properties, Incorporated, that she had contributed $18,000 worth of merchantable timber for her thirty-six per cent interest in the partnership for the purchase of eighty acres of land at the time that Lakeland Properties, Incorporated issued thirty-six per cent of its stock to her?’ The answer by the jury: ‘We do not.’ “Further on that same point, Special Issue No. 37: ‘Do you find from a preponderance that after June the 10th, 1969, Ruth Vivian Mangum made additional representations to James L. Dann-heim and Derrill G. Whitten that the true purchase price of the land, of the said eighty acres of land, was $50,000?’ We do not.’ “Special Issue No. 43: ‘Do you find from a preponderance of the evidence,’ predicated on 20, ‘that after June the 10th, ’69, Ruth Vivian Mangum made additional representations to Lakeland Properties, Incorporated, that the true purchase price of the said eighty acres of land was $50,000?’, and it says: We do not.’ “Now, gentlemen, that was questions, a question of fraud, which they went into extensively in the original trial in which there was a finding that there was no question of fraud. In the case that went up to the Court of Civil Appeals, —Give me that opinion. “MR. McCLENDON: Your Honor, would you like to use this copy ? “THE COURT: Is that a copy of the original opinion from the Court of Civil Appeals? Well, he’ll be here with the original in a moment. He’ll be here in a moment. “(Reading aloud from the opinion re-ferres [sic] to.) “Now, the case has been affirmed and the opinion delivered on July 19th of 1973. Gentlemen, to permit a defensive issue that has already been tried and passed on by a jury as to the element of fraud prior to the issuance of this stock, it seems to me would be an endless and prohibitive permission on the part of the Court to rehash after one jury has already passed on the very same issues that could be raised at this time. Therefore, I am sustaining the motion and limiting the defensive issues on fraud to and including the date of the issuance of the stock, I mean the capital stock, or limiting it to anything that might have been done as a corporation, as an element of fraud to the corporation. “I find some cases holding that where ratification has been made, that it’s conclusive. I further take the position that the ratification of 1971 on the issue of, upon the purchase of the stock, outstanding stock, of Vivian Mangum and Burchfield, almost is a complete ratification of their act of 1969 at the date of the issuance of the stock. The presumption would be that the corporation gave full value and that they received full value for the issuance of their corporate stock. Sustained up to that point. “Counsel for the defendant, you may have a bill for all of the rulings of the Court.” Appellant’s first seven points attack the trial court’s action in granting the motion for severance. It says that Rule 41 of Texas Rules of Civil Procedure is intended to correct a mis-joinder or non-joinder; that the court erred in basing its order on res judicata or ratification which was not affirmatively plead; appellee had no pleadings to limit the defense of fraud to occurrences after March 12, 1970; that this was an arbitrary date; and resulted in preventing Lakeland from proving Mangum was not a holder in due course of the note. The date of March 12, 1970, was the date [918] the stock of Lakeland Properties, Inc., was issued. As previously noted in this opinion, the same trial judge granted the “motion to sever” as had tried the previous case. He certainly could take judicial notice of this previous case without formal pleadings, since it involved the same subject matter and some of the identical parties. Gardner v. Martin, 162 Tex. 156, 345 S.W.2d 274, 276 (1961) : “It is well recognized that a trial court may take judicial notice of its own records in a cause involving the same subject matter between the same, or practically the same, parties.” (Citing authorities) (See authorities cited in 23 Tex.Jur.2d, Evidence, §§ 26, 47.) The mistaken designation of Appel-lee’s motion as “a motion to sever” is not fatal under our practice. Rule 71 of T.R. C.P. See Texas Highway Department v. Jarrell, 418 S.W.2d 486 (Tex.1967). As previously noted, in the first lawsuit Lakeland sought judgment for $54,000 due on the note, alleging the same “fraudulent” representations which it now seeks to relit-igate in this controversy. In the case of Dannheim and Whitten, while the jury supported their contentions, it found they were barred by limitations. In the case of our appellant here, Lakeland, while the jury found that Mangum represented the true purchase price of the 80 acres as being $50,000, they failed to find (S.I. 21) that this was false. And they further failed to find (S.I. 28) that she had represented to Lakeland that she had contributed $18,000 worth of merchantable timber for her interest in the 80 acres of land. Thus, we conclude that the contention of fraud by Lakeland has already been ■ litigated, and the court was correct in restricting any such proof to a point in time after the stock was issued (March 12, 1970). Appellant’s other points of error only present various shades of this same contention. All points of error are overruled and the judgment of the trial court is affirmed.