Court Opinion

ID: 9672720
Source: CourtListenerOpinion
Date Created: 2023-08-24 03:59:16.896714+00
Date Added: 2024-06-11T18:16:17.977799
License: Public Domain

CARVER, Justice,
Dissenting.
I adhere to the original unanimous panel opinion holding that, since all the asserted rights of the parties grew out of their common scheme to use Price’s inside information as county commissioner regarding the location of a new highway to speculate in lands lying under, or adjacent to, the new highway before the owners, or the public, learned the same information known to Price, the parties’ scheme was contrary to public policy and that this court should not adjudicate, but should dismiss, a dispute between the schemers.
Since my brethren, on motion for rehearing, have determined to adjudicate the schemers’ dispute, as well as keep silent in their new opinion as to the violation of public policy shouted from this record, I adopt our original opinion, in its entirety but with minor grammatical changes, as my dissent.
B.J. Kirby, Robert E. Hogan, Taylor B. Almon, Charles R. Hoover, Phil Clemente, and Ben Sierad appeal: (1) a judgment, notwithstanding the verdict of the jury, in favor of B.W. Cruce, Jr., David C. Cole, and Mesquite Investment Corporation; and (2) a judgment on the verdict in favor of Hexter-Fair Title Company. Since the rights, if any, of the appealing parties necessarily rest upon their speculation in property on the basis of information obtained from a public servant (accessible to him only because of his office but not accessible to the public), contrary to the public policy of our state, neither the trial court, nor this court, may properly lend itself to the realization of any such claimed right, but should leave such parties in whatever position they have placed themselves. Consequently, I would hold that the trial court erred by adjudicating the suit rather than dismissing it. I would reverse the judgment of the trial court and render a judgment of dismissal.
The record reflects that Dallas County District 2 Commissioner Mel Price initiated a scheme to profit personally from his official knowledge (knowledge not yet known to the public) of the location of a new loop highway through eastern Dallas County by acquiring land both on and adjacent to the right-of-way at a price not yet affected by knowledge of the loop in the owners of the property or knowledge of the loop by competing purchasers.
*170Price recruited the present appealing parties to share in this scheme, which is evidenced by two exhibits placed in the record by them. The first exhibit was a handwritten letter of Mel Price dated June 21, 1972, which we reproduce as Appendix 1. The second exhibit was an “Agreement to Participate in the Hickox-Castle Property Joint Venture” proposed by “B.W. Cruce Jr., Trustee, for Mel Price” and “approved and agreed to” by individual signatures for a stated percentage by each of the appealing parties, which we reproduce as Appendix 2. The appealing parties also introduced testimony describing a meeting of Price, his trustee Cruce, and all the recruited members of the scheme as follows:
Q All right, did Mr. Price participate in that meeting?
A Mr. Cruce conducted the meeting.
Q Okay, did Mr. Price have anything to say during that meeting that you recall?
A Yes, sir.
Q Could you tell us what that was?
A It was primarily that the land was — the proposed Loop 9 was going to go through the middle of it; even if the alternate route was picked by the highway department it would still be very close to this property which would enhance it whether it went through the property or not, but it was primarily a discussion of the potential of the property and how good it was, and we were going to sell this thing at a profit. It was a get-together meeting more than anything.
It is our duty to determine whether the agreement of the parties to initiate and carry out their scheme was in violation of public policy despite the absence of a pleading in the trial court by any party raising the issue. In After Hours, Inc. v. Sher-rard, 456 S.W.2d 227, 228 (Tex.Civ.App.— Austin 1970), rev’d on other grounds, 464 S.W.2d 87 (Tex.1971), it was held that the illegality of the parties’ agreement (tested by its object) may be raised at any stage of the proceedings, or may be raised by the appellate court sua sponte. Pleading of
illegality is not required, and the parties may not waive the issue, because the issue is not for their benefit but for the public good. Westwood v. Continental Can Co., 80 F.2d 494 (5th Cir.1935). The actual existence of, or degree of, injury to the public is not material; whether the tendency of the agreement is injurious to the public good is the main question. Hazelwood v. Mandrell Industries Co., 596 S.W.2d 204, 206 (Tex.Civ.App. — Houston [1st Dist.] 1980, writ ref’d n.r.e.). An agreement whose tendency, or object, is to produce a breach of duty of one who stands in a fiduciary relationship is illegal, void, and against public policy because it is the policy of the law to secure fidelity of those holding positions of trust and confidence; or, stated another way, agreements tending to cause unfaithful conduct by fiduciaries are illegal because they are, in effect, agreements to wrong or defraud the persons whose interests the fiduciaries have in charge. Dial v. Martin, 37 S.W.2d 166, 188 (Tex.Civ.App. — Amarillo 1931), rev’d on other grounds, 57 S.W.2d 75 (Tex. Comm.App.1933, judgmt adopted).
There can be no dispute that public officers, including a county commissioner, are fiduciaries to the public whose interest they have in charge. It cannot be said that a commissioner, Mel Price, served the public in using information coming to him by virtue of his office, to speculate in land under, or adjacent to, the new loop highway, especially when some of that same “public” would be selling the land with an inferior bargaining position; or when other members of that same “public” would be uninformed competitors; or when other members of that same “public” could, subsequently, only buy the land from a speculator who acquired it on “insider” information. Our Legislature codified (from prior court decisions) this type of breach of a public servant’s fiduciary duty to the public by condemning it as a crime in the passage of TEX.PENAL CODE ANN. § 39.03 (Vernon 1974), which provided:
(a) A public servant commits an offense if, in reliance on information to *171which he has access in his official capacity and which has not been made public, he:
(1) acquires or aids another to acquire a pecuniary interest in any property, transaction, or enterprise that may be affected by the information; or
(2) speculates or aids another to speculate on the basis of the information.
(b) An offense under this section is a Class A misdemeanor.
The Practice Commentary accompanying this section provides, in part, that:
This offense is new to Texas law, but it is analogous to several statutes in the prior law forbidding disclosure of certain insider information, Penal Code arts. 144, 145, 426, and prohibiting a state official from buying claims against the state, art. 868.
The fiscal integrity of the state may be undermined if public servants are permitted to profit from confidential information acquired by virtue of their position. Enrichment of insiders will also disadvantage citizens who deal with the insiders in ignorance, and the temptation to profiteer may motivate public servants to delay, slant, or even falsify information concerning governmental transactions.
However, the Legislature was not the first to recognize, or to condemn, a public servant’s similar breach of duty because Penal Code § 39.03 merely codified existing public policy and added the criminal penalty. In DeLeon v. White, 9 Tex. 598 (1853), Justice Lipscomb held a land title in a minor, granted by a commissioner who was the minor’s father, was void as obtained in violation of public policy. DeLeon held that the vice lay in attempting, faithfully, to serve two masters simultaneously. De-Leon stated that it relied upon “Mr. Justice Storey” quoting: “It may be correctly said with reference to Christian morality that no man can serve two masters whose interests are in conflict’ (emphasis added) (citing “Storey on Agency Sec. 210”). While it was in the public’s interest (as the master of Mel Price) to have Price locate the new loop highway to best serve the public and to acquire for the public a right-of-way therefor at the most reasonable price, it was the desire for personal gain (as a different master of Mel Price) that led to Price’s scheme, for himself and others, to locate the new loop, and to acquire property through which it passed, for private profit. I would find that the public service due from Mel Price was incompatible with his private profit scheme and that such scheme was violative of public policy so as to deny access to the courts to resolve disputes between the schemers.
Similarly in Flanikin v. Fokes, 15 Tex. 180 (1855), Steel was a land commissioner and contracted with Fokes to clear title to her headright certificate for a one-half interest. Flanikin, as assignee of Steel, filed suit to enforce the agreement. The court, relying specifically upon the principles discussed in DeLeon, supra, held that the commissioner’s private interest so displaced the public’s interest as to make invalid and unenforceable the agreement as a matter of public policy. Likewise, I would hold that, as evidenced by the testimony quoted and the documents attached as appendices 1 and 2, the private interest of Mel Price, and the appealing parties he recruited to his scheme, so displaced the public’s interest with which Price was charged to further, that their scheme violated public policy.
The most obvious parallel in its facts and its holding is found in Wills v. Abbey, 27 Tex. 202 (1863), wherein a deputy surveyor located a certificate for a league and labor of land and sought to enforce an agreement for ½ thereof for his efforts. Justice Bell, for the court, held that:
Public policy required that the officers chosen to locate and survey the public lands should not be permitted to speculate in them, or to acquire interests in them, which would present to such officers the temptation to take advantage of the information which their official positions enabled them to acquire, to the detriment of the holders of certifi*172cates generally (Flanikan v. Fokes, 15 Tex. 180; DeLeon v. White, 9 Tex. 598). (emphasis added).
27 Tex. at 204. Likewise, I would hold that public policy requires that county commissioner Mel Price, being chosen to locate a new loop highway, should not be permitted to speculate in thq lands lying under or adjacent thereto because he would be, and was, tempted (along with those he recruited to share in the temptation) to take advantage of information which Price’s official position enabled him (and them) to acquire, to the detriment of the public.
I would reverse the judgment of the trial court only because it denied relief to the appealing parties rather than dismissing their suit as one upon which the court could not act. Anaya v. Jacaman, 505 S.W.2d 952 (Tex.Civ.App. — San Antonio 1974, no writ). I would dismiss the claims of the appealing parties, but the officers of the court whose costs are unsatisfied should be awarded such unpaid costs from the appealing parties and their surety.

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*174

*175APPENDIX II
EXHIBIT H-l
AGREEMENT TO PARTICIPATE IN THE HICKOX-CASTLE PROPERTY/JOINT VENTURE
B.W. CRUCE, JR., as Trustee is forming a joint venture to acquire approximately 253.-762 acres of land in the Castle, Hickox, Rowlett and Merritt Roads area in Dallas County, Texas, within the municipal boun-dries of Rowlett, Texas. This property is presently owned by six different owners.
B.W. CRUCE, JR., Trustee, for MEL PRICE, has negotiated a contract for the purchase of the venture property. The total purchase price would be approximately One Million Eight Thousand Seven Hundred Two Dollars and thirty-six/100 ($1,008,702.36) payable as follows. $241,-000.00 in cash at the time of closing and notes for $771,108.26. All interest is at 7V2 %. Down payment of approximately $241,-000.00 leaves $3,405.90 remaining to be used to pay attorney’s fees, closing costs, survey costs, title company expenses and to establish a bank account, to be held in trust by the Trustee, to be used as an operating bank account to pay any expenses as they occur, such as engineering fees, taxes, etc. Proper pre-payment privileges and release clauses will be obtained in final contract. Note schedule attached.
The purchase contract generally conforms to standard title company contracts of sale. The Seller is required to furnish an Owner’s Title Policy of Insurance and title would be placed in B.W. CRUCE, JR., Trustee.
Your ownership would be an interest of 25 percent (referred to as “your pro-rata share”) in the joint venture upon it’s formation, in consideration of the following: (1) a cash contribution by you to the joint venture in an amount equal to your pro rata share of the cash required in closing of the purchase of the venture property, shall be paid to B.W. CRUCE, JR., Trustee, as escrow agent, upon execution of this instrument by you, receipt of which is hereby acknowledged, for $1,000.00, the balance of which will be due on five (5) day notice by B.W. CRUCE, JR., on the date of closing, B.W. CRUCE, JR., will transfer all funds deposited with him as escrow agent under the terms of this instrument, to the account of the joint venture or shall expend the same on behalf of the joint venture pursuant to written instructions from the joint venture to do so: (2) on or before closing, you would be required to sign notes in the total amount of approximately $771,108.26 made payable to the various owners of the 6 tracts involved. (3) B.W. CRUCE, JR., shall be the Trustee for the joint venture and shall be responsible for the management of the property.
Any expense incurred by B.W. CRUCE, JR., Trustee on behalf of this joint venture, such as legal fees, accounting fees or engineering fees, shall be charged to the joint venture: (4) cash required for closing will be $241,000.00 of which your pro-rata share shall be $_
Some of this property is presently zoned residential but it is anticipated that better zoning can be obtained if and when it is applied for. All properties are near anticipated route of Loop 9.* Utilities serve (or are financed to serve) these properties.
If, within a reasonable length of time, B.W. CRUCE, JR., Trustee, is unable to obtain commitments for participation in the joint venture on the basis set forth in this instrument for one hundred (100) percent interest in the joint venture, or if he is unable to complete the valid contract, then he will notify you in writing of this, returning with the notice, the amount of your earnest money deposited and neither party shall have any further obligation or liability hereunder. In the event you should default in the performance of any obligation to be performed by you hereunder, B.W. CRUCE, JR., Trustee for other parties in the joint venture, may, at their option, retain the earnest money deposited by you and terminate your right to participate in *176the joint venture or pursue any other legal remedies, either at law or in equity, which they may have by reason of your default.
If the foregoing represents your understanding of our agreement, please so indicate by signing the copy of the instrument and returning same together with your check payable to B.W. CRUCE, JR., Trustee in the amount of $1,000.00
Yours Very Truly,
/s/ B.W. Cruce, Jr.
B.W. Cruce, Jr., Trustee
Attorney for Mel Price
APPROVED AND AGREED TO:
This 27 day of June, 1972.
By: B.J. Kirby