Case Name: CHAPMAN, Commissioner of Insurance and Banking, et al. v. GUARANTY STATE BANK OF CLEBURNE et al.
Court: Texas Court of Civil Appeals
Jurisdiction: Texas
Decision Date: 1927-04-30
Citations: 297 S.W. 545
Docket Number: No. 11769
Parties: CHAPMAN, Commissioner of Insurance and Banking, et al. v. GUARANTY STATE BANK OF CLEBURNE et al.
Judges: BUCK, J., not sitting.
Reporter: South Western Reporter
Volume: 297
Pages: 545–554

Head Matter:
CHAPMAN, Commissioner of Insurance and Banking, et al. v. GUARANTY STATE BANK OF CLEBURNE et al.
(No. 11769.)
Court of Civil Appeals of Texas. Fort Worth.
April 30; 1927.
Rehearing Denied July 16, 1927.
Chas. Li. Black and Jno. W. Goodwin, both of Austin, and Heber Henry,' of Cleburne, for appellants.
Keith & Prestridge, of Cleburne, and Bailey & Bailey, and R. L. Stennis, all of Dallas, for appellees.

Opinion:
DUNKLIN, J.
This is the second appeal in the above-entitled cause; the final disposition of the first appeal appéaring in the opinion of the Commission of Appeals and reported in 267 S. W. 690. The history of the transaction in which the controversy originated is recited, in that opinion, and therefore a repetition of all the details will not be necessary in this opinion.
As shown in that opinion, this suit was instituted by the Guaranty State Bank of Cleburne and its directors against J. D. Chapman, commissioner of insurance and banking of the state, and members of the state banking board, to obtain a rescission and cancellation of a contract in writing executed by Ed. Hall, the former commissioner of insurance and banking and predecessor of J. L. Chapman, and the Guaranty State Bank of Cleburne, dated April 15, 1922, and to recover of defendants the sum of $125,000 paid into the Guaranty State Bank by the stockholders of that bank.
The contract referred to above recites that the Traders' State Bank of Cleburne had become insolvent and the commissioner had taken over its assets and had added thereto the sum of $200,000 out of the state depositors' guaranty fund; .that, in addition to the sum so added, the assets of the Traders' State Bank included bills receivable equal to the capital, surplus, and undivided profits of that bank, amounting to $328,160.12, from which was deducted the sum of $15,000, leaving a total balance of $313,160.12, all of which together with an assessment that had been levied by the commissioner against the stockholders of the Traders' State Bank on their-capital stock and another item of $15,000 was reserved by the commissioner from the assets of the Traders' State Bank, and the $200,000 was turned over to the Guaranty State Bank in trust to be applied to the satisfaction of the unsecured, noninterest-bearing claims of the depositors of the Traders' State Bank. The balance of the assets of the Traders' State Bank, not so reserved by the commissioner, less notes aggregating $313,000 which were eliminated because they were worthless, were transferred and assigned by the commissioner to the Guaranty State- Bank, who, in consideration therefor, contracted and agreed to apply the $200,000 so furnished by the commissioner out of the depositors' guaranty fund to the satisfaction of the claims of the depositors of the Traders' State Bank, whose accounts were unsecured and bore no interest, and bound itself "absolutely and at all events to assume, pay off, liquidate, discharge, and satisfy all lawful debts, lawful liabilities, and lawful claims, known and unknown, of all creditors of the Traders' State Bank of Cleburne, Tex., excepting, however, any liability of said Traders' State Bank to its stockholders."
The contract contained these further stipulations:
"And, in case any litigation shall arise against the commissioner on account of this contract, the bank agrees, as its own proper cost of any and every nature whatsoever, including attorneys' fees, to defend the same and to pay any judgment that may be rendered against the commissioner in any such litigation.
"And the said bank specially guarantees unto the commissioner that it will properly and faithfully apply the sum of $200,000 unto the payment and satisfaction of the depositors of the Traders' State Bank whose accounts are unsecured and bear no interest, and that said sum of $200,000 so advanced by him from the depositors' guaranty fund shall be sufficient therefor and that no further advances of such nature shall be required to protect such liability of the Traders' State Bank."
The contract further recites that the Guaranty State Bank had been organized with a paid-up capital stock of $100,000, and that it was then in a position to administer the assets and liabilities of the Traders' State Bank, under the terms of said transfer, safely to all creditors, and with far less loss and impairment of the assets than would be occasioned under the enforced continued liquidation thereof by the commissioner.
The record shows that the Guaranty State Bank was chartered on April 13, 1922, for the purpose of taking over the assets of the Traders' State Bank and pursuing a banking business in the town of Oleburne. The following is a list of the subscribers to the charter, the amount of capital stock subscribed by each, and the place of residence of each, all of whom were by the charter made directors of the Guaranty State Bank for the first year of its existence:
At the first meeting of the board of directors Gus Ayres tendered bis resignation and was succeeded by R. B. Caldwell, who was elected president.
The proof further showed that, after the eontrac.t of purchase and sale between Ed Hall, commissioner, and the representatives of the Guaranty State Bank had been reduced to writing and agreed on tentatively by the parties, subject to the approval of the judge of the district court of Johnson county, Ed Hall filed with said judge his petition for authority to enter into said contract. The petition -was signed by W. A. Keeling, Attorney General, and Eugene A. Wilson, Assistant Attorney General, as attorneys for the commissioner, and the petition was duly verified by the commissioner. Attached to the petition was a copy of the contract already tentatively agreed upon by the parties. On the same day of its filing, the judge indorsed his fiat thereon, setting the hearing thereof and directing notice .be given to- the Traders' State Bank, in the absence of a waiver of such notice by that bank. On the same day the Traders' State Bank, through its president, filed its waiver of service of such notice and entered its appearance for said hearing. On the same day the said district judge heard and granted the petition. The order of the judge made upon such hearing contained these recitals:
"The said petition was considered by the judge of the court; and having beard the evidence and being fully advised as to the facts, the judge is of the opinion that the petition should be in all things granted; and that the sale and transfer of the assets contemplated, and set forth therein, should be consummated.
"It is therefore considered by the judge, and so ordered, that the said Ed Hall, as commissioner of insurance and banking of the state of Texas, be and he is directed to conclude the contract described in said petition with the Guaranty State Bank and to sell to said Guaranty State Bank of Oleburne all of the assets of the Traders' State Bank, in said petition described, and that all of the terms of the said contract, as alleged, be carried out in all respects; the said Guaranty State Bank assuming the liabilities and obligations in said contract specified.
"It is further ordered that upon the report of the final conclusion of such sale by said Hall unto the said Guaranty State Bank and upon the approval of the judge of this court of such conclusion of such contract, the same shall become effective."
The contract was executed in obedience to the authority and direction so given by the district judg'e, and the transfers so authorized were duly made by the commissioner, subject to confirmation by the court. By another order the judge approved and confirmed the sale upon a report thereof duly filed.
The Guaranty State Bank then took charge of the assets and began the transaction of a banking business in'the town of Cleburne.
The Traders' State Bank became insolvent, and its doors were closed by action of its board of directors on April 15, 1922. At that time, and for more than one year prior thereto, the following persons constituted its board of directors: S. P. Ramsey, O. L. Bishop. F. H. Barlow, J. G. Dunlap, and H; L. Wallace.
During the month of September, 1921, and thereafter, the defendant J. D. Chapman, commissioner of insurance and banking, who had succeeded Ed Hall, after an investigation of the affairs of the Guaranty State Bank, demanded of its officers that its stockholders put into the bank the sum of $25,000 to replace bills receivable found to be worthless, which, according to allegations and testimony of plaintiffs, formerly belonged to the Traders' State Bank; and that demand was complied with over protest by the officers of the bank. The Guaranty State Bank then continued to do business until April 4, 1923, when the commissioner of insurance and banking, over the protest of the officers of the bank, took charge of its business on grounds of its insolvency. Neither then nor at any time prior thereto did the officers of the Guaranty State Bank complain that they had been defrauded by Ed Hall, nor did they then offer to rescind the transaction with Ed Hall, nor had they at any time prior thereto offered such rescission.
This suit was based upon allegations to the effect that S. W. Sibley, Reece S. Allen, J. G. Dunlap, H. D. Wallace, and other incor-porators of the Guaranty State Bank had been induced to enter into the contract of purchase and sale by the fraudulent misrepresentations of Ed Hall, commissioner, and W. A. Sandlin, his assistant, acting under his direction, to the effect that—
"By taking from the assets of said Traders' State Bank the amount of undesirable notes which the said Ed Hall, commissioner, was proposing to take therefrom, the remaining notes held by said Traders' State Bank would be good and solvent notes, and the removal of such amount of undesirable notes would clean said Traders' State Bank, and the transfer to the proposed new bank of the remainder of the assets of said Traders' State Bank, including all.of its notes not removed by said Ed Hall, commissioner, would give to the proposed new bank clean assets and make it one of the cleanest banks in Texas, and that the removal of such amount of undesirable notes from said Traders' State Bank would take from the assets of said Traders' State Bank all worthless and doubtful paper."
As shown in the opinion disposing of the former appeal, the relief prayed for in the suit as originally instituted was for a rescission of the contract referred to above, with restoration to the commissioner of all the remaining assets • on hand of the Traders' State Bank and for the recovery of $125,000 paid in to the Guaranty State Bank by its stockholders.
As disclosed in that opinion, it was held .that the sale to the Guaranty State Bank by the commissioner was a judicial sale, which could not in any event be rescinded in the absence of direct proceedings to -vacate the orders of the court under and by virtue of which the sale was made, and that, since plaintiffs had not in their pleadings made a direct attack upon those orders, they were in no position to recover for that reason alone, independently of any other.
After a remand of the cause, plaintiffs filed amended pleadings in which Chas. O. Austin, as successor to the former commissioner J. L. Chapman, and the members then composing the state banking board of Texas, were all made defendants. In their pleadings, plaintiffs made substantially the same allegations with respect to the alleged fraud on the part of Ed Hall in inducing the execution of the contract between him and the Guaranty State Bank, in connection with further allegations to the effect that the or ders of the district judge, approving the contract in question, authorizing the commissioner to execute it and to make the necessary transfers in consummation thereof and later confirming the same, were all procured by fraud practiced upon the judge by the commissioner Ed Hall for the purpose of perpetrating a fraud upon the Guaranty State Bank and its organizers and incorporators, in that the applications made to said judge and the orders made by the judge thereon were all prepared by Commissioner Hall or by his attorney; that said orders were signed by the judge without reading them, upon the request of the commissioner, and upon his statement that the major portion of the assets of the Traders' State Bank had been sold to the Guaranty State Bank and upon his request for the approval of the sale; that the recitals in said orders, to the effect that the court considered the report and made inquiry into the facts and was of the opinion that the report should be in all things approved, were in fact untrue. It was further alleged, in effect, that the officers of the Guaranty State Bank were not present at those hearings, took no part in those proceedings, was not a party thereto, and knew nothing of the alleged fraud so practiced by the commissioner upon the court. There were further allegations to the effect that plaintiffs did not discover the falsity of the representations made by the commissioner which induced plaintiffs to enter into the contract in question until after the commissioner had declared the Guaranty State Bank insolvent' and had taken over its assets, which action on the part of the commissioner plaintiffs alleged was wrongful and without just cause.
There were further allegations by plaintiffs to the effect that the business of the Guaranty State Bank was conducted by its officers honestly, faithfully, and carefully, without loss and at a profit, that the closing of the doors of the bank' by the commissioner was due to no fault or failure on the part of the officers of the bank, and that but for the worthless notes and paper transferred to it by the commissioner the Guaranty State Bank was solvent at the time its doors were closed. • Apparently this allegation was made for the purpose of meeting the objection that plaintiffs did not return, or offer to return, and manifestly was unable to return, to the commissioner all the assets of the Traders' State Bank which the commissioner had turned over to the Guaranty State Bank.
The case was tried before a jury, and the special issues, with the findings thereon by the jury, are as follows:
"(1) In his effort to sell or reorganize the Traders' State Bank, did Ed Hall, commissioner of insurance and banking, in words or in substance, propose to sell to S. W. Sibley a clean bank? Ans. Yes.
"(2) If you have answered 'Yes' to special issue No. 1, then did S. W. Sibley and his associates accept the proposition of Ed Hall, if any, referred to in special issue No. 1? Ans. Yes.
"(3) Did Ed Hall, commissioner of insurance and banking, represent to Reece S. Allen. .1. G. Dunlap, S. W. Sibley or H: L. Wallace as a fact that he would sell them or any of them and their associates a clean bank or that in selling the Traders' State Bank or its assets he would clean said bank or its assets or take from said bank whatever paper it was necessary to take in order to clean said bank or its assets? Ans. Yes.
"(41 Was it the understanding and intention of Ed Hall, commissioner of insurance and banking, and those to whom he sold the greater part of the assets of the Traders' State Bank, that said Ed Hall would reserve and take from such assets all worthless notes? Ans. Yes.
"(5) Was a large amount of the notes sold by said Ed Hall to said Guaranty State Bank worthless on April 15, 1922? Ans. Yes. .
"(6) Did Ed Hall, commissioner of insurance and banking, on or prior to April 15, 1922, at or prior to the execution of the written memorandum of agreement of that date, represent, in words or substance, to S. W. Sibley or Reece S. Allen, as a fact and as an inducement to either of them to organize a new bank at Cle-burne and purchase part of the assets of the said Traders' State Bank of Cleburne, that taking from the assets of the said Traders' State Bank the amount of notes and other assets reserved by the commissioner in said written memorandum of agreement and depositing in said bank $200,000 from the guaranty fund, would clean said Traders' State Bank? Ans. Yes.
"(7) If in answer to any of the foregoing issues or questions you have found that Ed Hall, commissioner of insurance and banking,- did make any of the representations therein mentioned, did the Guaranty State Bank and its organizers believe and rely upon such representations, if any, in agreeing to purchase said assets and in closing their deal with said Ed Hall, commissioner, on April 15, 1922? Ans. Yes.
"(8) If in answer to any of the foregoing issues or questions you have found that Ed Hall, commissioner of insurance and banking, did make any of the representations therein mentioned, then were such representations untrue? Ans. Yes.
"(9) Did the losses, then known or unknown, of the Guaranty State Bank, by reason of worthless no tes. sold by Ed Hall'to said Guaranty State Bank when- it was organized on April 15, 1922, then exceed the sum of $100,000? Ans. Yes.
"(10) After aequix-ing full knowledge of the material facts involved in the transaction whereby Ed Hall, commissioner of insurance and banking, had sold and transferred to the Guaranty State Bank on April 15, 1922, certain notes and assets of the Traders' State Bank, did the Guaranty State Bank, through its officers and representatives, ratify the contract under which said Ed Hall, commissioner, sold and transferred said notes and assets to said Guaranty State Bank? Ans. No."
Upon that verdict the court rendered a judgment in favor of the plaintiffs, setting aside the orders of the court theretofore made, referred to above, authorizing the commissioner to execute to the plaintiffs the contract of sale and approving the same and directing the execution of the conveyance of the assets in accordance with the terms of the contract; also rescinding and canceling the contract between the parties; also awarding to the plaintiff's a recovery against the defendants in their respective official capacities for the sum of $125,000, with interest thereon at the rate of 6 per cent, per annum from April 21, 1923, with an order to the defendants to satisfy said judgment out of the depositors' guaranty fund; also establishing said judgment as a valid claim against the depositors' guaranty fund and the liquidating funds of the Traders' State Bank and the Guaranty State Bank now held by the commissioner, subject only to the claims for any valid, unpaid, unsecured, and noninter-est-bearing depositors. The relief so granted was prayed for in the amended petition upon which plaintiffs went to trial.
At the outset it will be noted that there was no finding by the jury upon the issues tendered by the plaintiffs that Ed Hall, or any one else representing him, made any misrepresentations of fact to the district judge, which induced the granting of the orders authorizing and directing the commissioner to sell the assets of the Traders' State Bank to the Guaranty State Bank in accordance with the terms of the contract and thereafter approving and confirming the sale so made; nor was there any evidence to sustain plaintiffs' allegations of such facts. Fur- ' thermore, there was neither allegation nor proof that the directors of the Guaranty State Bank who negotiated the trade with the commissioner Hall were prevented from appearing in court when the orders were made and there controverting the showing made by the commissioner as the basis for the granting of the orders.
Plaintiffs having failed to sustain their allegations of fraud practiced upon the district judge, which induced him to make the orders referred to above, it- follows that the fraud alleged by them, practiced by Ed Hall, the commissioner, and. found by the jury, which induced them to enter into the contract of purchase and sale, was the sole basis for the relief granted by the trial court in the judgment from which this appeal was prosecuted.
In 2 Black on Rescission and Cancellation, § 443,'the following is said:
"The transfer of property by means of judicial sale constitutes a contract, the court which orders the sale being the vendor and contracting party on the one side and the purchaser at the sale the other, while the officer who conducts the sale is the agent or representative of the court."
To the same effect, see 16 Ruling Case Law, § 2, p. 6, and section 54, p. 75; also 35 Corpus Juris, § 2, p. 8.
The following is quoted from 2 Black on Rescission and Cancellation, § 594:
"If a person, after acquiring knowledge of circumstances which would justify him in rescinding a contract to which he is a party, makes any declaration or does any act which distinctly recognizes the contract as still subsisting and as binding upon him, he will be held to have waived his right to rescind."
Also the following from section 596, by the same author:
"One who receives property under a contract, and discovers that he has been defrauded, should thereafter treat the property as a reasonably prudent and careful man is bound to treat the property of another found in his possession, but not as his own property. And if, instead of taking this course, he asserts ownership of the property, treats it as his own, and exercises acts of ownership over it, he will be held to have waived his right to rescind on account of the fraud."
To the same effect are sections 590, 595, 597, 598, and 599; also Minter v. Hawkins, 54 Tex. Civ. App. 228, 117 S. W. 172; Ellis v. Ellis, 5 Tex. Civ. App. 46, 23 S. W. 996.
It is also a familiar general rule of equity that, as a condition for the exercise of the right of rescission by the purchaser of a contract of sale, induced by the fraud of the vendor, it is incumbent upon him to restore to his vendor the property purchased; otherwise he is relegated to his action for damages for the fraud practiced.
As noted above, the sale by Ed Hall to the Guaranty State Bank of the assets of the Traders' State Bank was consummated on April 15, 1922, and during the fall of that year J. L. Chapman, commissioner of insurance and banking, who had succeeded Ed Hall, after an investigation of the affairs of the Guaranty State Bank, called the attention of its officers to the fact that many of the bills receivable held by the bank, which had formerly belonged' to the Traders' State Bank and which had been purchased by the Guaranty State Bank, were worthless, and demanded that the stockholders of the Guaranty State Bank pay into its capital the sum of $25,000 in order to replace such worthless notes, which demand was complied with.
Indeed, those facts were specifically pleaded by the plaintiffs in their amended petition, upon which the last trial was had, save and except that transaction was alleged to have taken place "on or about the-day of December, 1922." While it was further alleged and plaintiffs introduced testimony tending to prove that such addition of $25,000 to the assets of the bank by the stockholders was made "upon the personal assurance of J. L. Chapman, commissioner, that there was no other bad paper in said assets, and that there would be no further payment demanded from said stockholders to take the place of any of said paper that might be found to be worthless, and in order to have no friction with J. L. Chapman, commissioner, and to avoid any possible complications that might result from refusing," yet such representations by Chapman were made long after the sale had been consummated, and the same were not alleged by plaintiffs as a basis of their asserted right of rescission for the alleged fraud of Ed Hall in the first instance, which induced them to purchase the assets of the Traders' State Bank. Hence plaintiffs' right of rescission could not in any event have been based upon those representations and promises by Chapman, which were never brought to the attention of the court in making the same and in no manner induced it. It is to be noted further that, after plaintiffs, during the fall of 1922, discovered that E'd Hall had defrauded them in the sale made in April of that year, they failed then to make any complaint of any such fraud, and also failed to demand a rescission either of the commissioner or of the court who ordered the sale. To the contrary, they elected to retain the worthless notes of the Traders' State Bank as assets of the Guaranty State Bank; and neither in their, pleadings nor in the evidence introduced upon the trial was there any showing as to what portions of the assets of the Traders' State Bank had been collected1 by the plaintiffs and what portions remained on hand at the time the doors of the Guaranty State Bank were closed by the commissioner on April 4, 1923.
Under the facts recited above and the authorities noted, we conclude that the defendants' plea of waiver and estoppel of the alleged fraud of Ed Hall, which induced plaintiffs to enter into the contract in controversy, was conclusively established, and that defense was of itself a complete bar to a recovery. .
In the final disposition of the former appeal, the following was said: Some of these questions raise in our mind a very serious doubt of the right of defendants in error to recover at all in the light of the record as it now stands. This is particularly true, in view of the evidence that the organizers of the Guaranty State Bank were in equally as good position as the commissioner, if not better, -to know and to leax-n the true value of the notes and paper assigned to them, and there is no sufficient allegation of fact as to why the purchasers had a right to rely upon the commissioner, or were fraudulently induced to forbear making examination and inquiry for themselves."
"Having reached the conclusion that this action was not properly brought, it is not necessary to discuss certain questions, which would be pertinent if the suit had been brought in the nature of a direct proceeding to set aside and vacate the action of the district judge.
In adopting the opinion of the Commission of Appeals, the Supreme Court said:
"We approve the holding of the Commission of Appeals on the questions discussed in its opinion."
The language quoted, to the effect that the organizers of the Guaranty State Bank were in equally as good position as the commissioner, if not better, to know and to learn the true value of the notes and paper assigned to them, we construe as a conclusion of law, and the same conclusion is warranted under the evidence introduced upon the last trial.
In appellees' brief it is stated that the proof made at the last trial was substantially the same as that made at the first trial, from which the former appeal was prosecuted, except that the examiners' report and the testimony of the witness Gus Ayres, introduced on the first trial, was not introduced on the last trial, and at the last trial was introduced the following evidence not introduced on the first trial, to wit: The memorandum of agreement between Ed Hall and the directors of the Guaranty State Bank, set out above; the petition made by the commissioner to the district judge for authority to sell the assets of the Traders' State Bank to the Guaranty State Bank; the testimony of witnesses Thomas Johnson, Ed Taylor, Lynn P. Talley; the agreement between the parties as to the administration of the assets between the Traders' State Bank and the Guaranty State Bank that no receiver or liquidating agent had ever been appointed; proof that said banking commissioner had been called upon to prosecute this suit, as suggested, in the opinion of the Commission of Appeals and certain minutes and letters. The testimony of the four witnesses just named was introduced by the defendants and tended to refute, rather than sustain, the allegation in plaintiffs' petition that they were induced to purchase the assets of the Traders' State Bank by fraudulent misrepresentations on' the part of commissioner Ed Hall and his assistant Sandlin.
The other additional evidence referred to had no particular bearing upon that issue as a separate and distinct issue of fact. We shall not undertake to set out all the testimony supporting the' conclusion of the Commission of Appeals noted, for to so do would unduly lengthen this opinion. But we will refer to some of its salient features. Ed Hall,the commissiouer, was a resident of Austin, and the evidence does not show that he was personally acquainted with the makers of the bills receivable in favor of the Traders' State Bank at the time the sale was made, although it does show that he had previously investigated the condition of the Traders' State Bank and had closed its doors on account of its insolvency. But there is no showing of the sources of his information with respect to the financial responsibilities of the persons who were then indebted to the Traders' State Bank. The testimony further shows that S. W. Sibley, one of the plaintiffs who lived in Dallas, was an experienced banker and had been connected with several banks as an officer or director. Plaintiffs J. G. Dunlap and H. L. Wallace, two of the incorporators of the Guaranty State Bank, had theretofore been directors of the Traders' State Bank'for more than a year. P. H. Barlow, who was an incorpo-rator and became cashier of the Guaranty State Bank, and O. L. Bishop, its vice president, had likewise been officers and directors of the Traders' State Bank during the same length of time. And, in accordance with our interpretation of the conclusion noted in the opinion of the Commission of Appeals, it would follow from the facts recited, aside from other evidence, that plaintiffs failed to show any right of recovery.
The statements which the jury found were made by Ed Hall to induce, and which did induce, plaintiffs to enter into the contract of purchase, as alleged by them, were, in legal effect, warranties, which the commissioner had no authority to make, under the orders of the district judge; and plaintiffs were chargeable with notice of such lack of authority, since their purchase was under and by virtue of those orders, and there was no showing of excuse for their alleged lack of knowledge of the orders prior to the final consummation of the sale. Under such circumstances, we are inclined to the belief that the rule of caveat emptor is applicable, and that it would preclude a recovery by plaintiffs in any event, although we do not definitely so hold, in view of our foregoing conclusions, which render a decision of that question unnecessary to support our disposition of this appeal. 2 Willis-ton on Contracts, § 643, 970, 971; Id. vol. 3, § 1504, 1505, 1508 ; 2 Black on Rescission and Cancellation, § 445. The right of rescission for such misrepresentations is an alternative to the right, if any, to recover damages, 3 Williston on Contracts, § 1454 and 1455.
Independently of the foregoing c'onclusions, we are of the opinion further that the court erred at all events in not submitting to the jury the defendants' requested issues as to whether or not the statements made by Ed Hall to the directors and incorporators of the Guaranty State Bant, with respect to the solvency of the makers of the notes held by the Traders' State Bank and transferred by the commissioner to the Guaranty State Bank, were expressions of opinions rather than representations of fact, and so understood by the parties. Those facts and the testimony of the witnesses introduced by the defendants, as well as the testimony introduced by plaintiffs themselves, strongly tended to support that defense. The defendants therefore had the right to an affirmative presentation to the jury of the facts so pleaded. Railway Co. v. McGlamory, 89 Tex. 639, 35 S. W. 1058; Fox v. Dallas Hotel Co., 111 Tex. 461, 240 S. W. 517; Id. (Tex. Civ. App.) 196 S. W. 648; Gammage v. Gamer Co. (Tex. Com. App.) 213 S. W. 930; Campbell v. Johnson (Tex. Com. App.) 290 S. W. 526; and -many other authorities that might be cited. In 27 Corpus Juris, p. 74, the following is said:
"When the form of a statement, and the subject-matter or the- circumstances under which it was made are such that it cannot fairly be construed as anything but an expression of opinion or belief, it is proper for the court so to hold, and to refuse to submit the question to the jury. But if, as is often the case, a statement is of such a nature that it may be interpreted either as a mere expression of opinion, or as a statement of facts, and there is any question as to how it was intended and understood, whether it amounts to fraud or not is a question of fact, and is for the jury. So ordinarily it is for the jury to say whether representations as to value, solvency, or a third person's financial ability are statements of fact or of opinion. The court may decide as a matter of law whether statements are of fact or of opinion, where they are in writing and in language, the meaning of which cannot be misunderstood. The question of whether defendant intended to be understood as expressing an opinion or as stating an existing fact is for the jury upon conflicting evidence as to the exact language used. Whether the parties are so situated that the representation of one as to his opinion may form one of the necessary elements of fraud or deceit is a question for the jury to determine."
In Benton v. Kuykendall (Tex. Civ. App.) 160 S. W. 438, cited by appellees in support of their contention that there was no error in the refusal of the requested instruction noted above, it is held that the trial court did not err in refusing a similar instruction with respect to alleged fraudulent misrepresentations as to the value of the property sold. But in that case the court, in discussing the requested charge, said:
"These charges were not, in our opinion, called for by the evidence, and would have been misleading if given. The evidence was wholly insufficient to warrant a finding that the representations made by appellant were the mere expressions of hfe opinion."
That case therefore is clearly distinguishable from the present suit.
We sustain the further assignment of error to the action of the court in refusing appellants' requested instruction as to what would constitute a ratification of the contract of sale by the officers and representatives of the Guaranty State Bank after they had acquired full knowledge of the facts involved in the transaction, within the meaning of issue No. 10 that was submitted to the jury. The question of ratification was a mixed question of law and fact, and the jury should not have been left to determine that issue without some instruction from the court as to what acts would constitute a valid and binding ratification.
There are other assignments in the record which we deem unnecessary to determine, and therefore they will not be discussed.
Upon the conclusion we have reached that plaintiffs failed to sustain their allegations that the judicial orders were procured by fraud practiced upon the judge, and that the evidence conclusively shows that plaintiffs waived their right to complain of the fraud found by the jury, upon which they relied for the relief prayed for, and thereby ratified the contract of sale as made; and the further conclusion that the evidence shows without controversy that prior to and at the time of the consummation of the sale plaintiffs were in as good position, if not better, as was Ed Hall, the commissioner, to know the value of the assets of the Traders' State Bank taken over by the Guaranty State Bank, as held by the Commission of Appeals with the approval of the Supreme Court, the judgment of the trial court is reversed, and judgment is here rendered in favor of appellants, independently of the merits of the two assignments last discussed and sustained, and either of which would, at all events, require a reversal of the judgment and a remand of the cause.
BUCK, J., not sitting.