Court Opinion

ID: 3963719
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:23:40.627639+00
Date Added: 2024-06-11T07:43:48.806106
License: Public Domain

Under my view of the law, hereinafter stated, appellant was not entitled to recover in any event; but if in this I am mistaken, I agree that the case was properly reversed and remanded, because the evidence shows a much larger sum of money was due appellant than the jury found in his favor. However, I cannot agree that the case should have been reversed on either of the other two grounds mentioned by the majority, and, while not essential to the disposition of the case, I deem it not out of place to briefly express my views on these grounds.
The majority, for reasons stated, held that the trial court committed reversible error in admitting, over appellant's objection, a pencil note written by H. M. Rogers, one of the plaintiffs, to Mr. Miller, manager of the Miller Company. The main fact under inquiry, to which this pencil note was considered pertinent, was whether Textile Finance Company, the partnership composed of Coleman and Rogers, made a verbal contract with Miller Company to sell a large number of its shares of the second increase of its stock; this fact was affirmed by Coleman but denied by Miller. Coleman contended that certain language contained in advertisements, approved by Mr. Miller before publication, *Page 840 
corroborated his contention; Miller, on the other hand, contended that the advertisements approved by him were changed, and that he had not authorized the objectionable matter that appeared therein. This controversy arose during the progress of the business between the Finance Company and Miller Company, before Rogers and Coleman dissolved partnership, several months before this suit was filed, and it was with reference to this controversy that Rogers wrote Miller the note in question, as follows:
"Mr. Miller: Jones (auditor for Miller Company) says you are sore at both of us (meaning Coleman and himself) about the addition to the ad. I don't want you to be sore at me for you know Coleman handled and wrote the ads and if a change was made I didn't know it.
"[Signed] H. M. Rogers."
Appellant's objection was that the note was written without his knowledge, that he had no opportunity to cross-examine Rogers in regard to the matter; in other words, the objection, in effect, was that the note was hearsay.
The note written by Rogers, a member of the firm, in regard to a live business controversy with Miller Company, was clearly a matter within the field of immediate inquiry, and was, in my opinion, admissible under the res gestae rule. 22 C.J. 443, § 535; Smith v. Farmers' State Bank (Tex.Civ.App.) 262 S.W. 835-837; Sherrod v. City National Bank (Tex.Civ.App.) 294 S.W. 295-297; Farmers Mill, etc., Co. v. Hodges (Tex.Com.App.) 260 S.W. 166; Haskell v. Merrill (Tex.Civ.App.)242 S.W. 331-335.
But even if the court erred in admitting the note, no harm to appellant resulted, for nothing was admitted or affirmed by Rogers, except to say that, if advertisements were changed, it was done without his knowledge. The probative value of the evidence was, in my opinion, negligible and of no materiality.
The majority also found reversible error in the refusal of the court to grant a new trial on the argument of counsel for appellee. The language objected to is fully set out in the majority opinion, with reference to which the majority say that there is nothing in the record to warrant or justify the strictures against Coleman.
District court rule No. 39 provides that: "* * * Counsel shall be required to confine the argument strictly to the evidence and to the arguments of opposing counsel. * * *"
From this it seems that, so long as counsel confines his argument to the evidence, the rule will not be infringed. Where inflammatory language was used, based entirely on foreign matter, the Supreme Court, in Willis v. McNeill, 57 Tex. 465-476, said: "The argument of counsel, complained of in the present case, did not legitimately belong to any proper issue in the case; was not based upon any evidence adduced, or which could have been properly adduced on the trial, and was calculated to inflame the passions and excite the prejudices of the jury."
To the same effect, see Prather v. McClelland (Tex.Civ.App.) 26 S.W. 657. But where the argument objected to was based on evidence, the Supreme Court, in Mayer v. Duke, 72 Tex. 445-454, 10 S.W. 565, 570, used this language: "The offensive words related to no facts outside of the record. They were merely epithets applied to the principal defendants, and, though highly improper, being, like all other epithets, weak as arguments, are not to be presumed to have influenced the minds of the jury."
From these expressions, it is clear that the rule of court, with reference to argument of counsel, is not violated so long as it is confined to evidence.
I do not agree that there is nothing in the record that justified the remarks of counsel; on the contrary, I think they were justified both by evidence and the circumstances in which they were made.
As to the facts, counsel, in the argument referring to the suggestion that Coleman was a stock salesman, ridiculed the idea, stating that he did not sell any stock, but sat in a swivel chair, while other men sold stock, from which he reaped a profit of $54,000; that he was not a stock salesman, but a "kidgloved, patent-leather, spat-wearing parasite." The evidence was to the effect that stock sold by Textile Finance Company, from which Coleman derived a profit of $54,000, was through stock salesmen; that throughout the progress of the stock-selling business, Coleman was employed in the office of his firm in the city of Dallas. The only remark that can be considered denunciatory was in calling him a parasite, but in the connection used the epithet implied nothing immoral or dishonorable, and meant nothing more than that Coleman depended upon and reaped a profit from labors of other men. Counsel also said that the money made by Coleman was gathered from taxpayers of Texas, and that he took the money to Hollywood, Cal. The facts are, before the Textile Finance Company put on the sale of stock, as a preparatory measure for the campaign, they procured lists of taxpayers from different tax assessors, and that after the campaign was over, Coleman did go to his home in California. The statement that Coleman was a professional litigant, and preferred to extort money by lawsuits rather than by earning an honest living, finds some basis in appellant's prosecution of the present suit, and the one brought by him against Roy Johnson, one of his stock salesmen, after his return to California. The statement that Coleman expected a jury to put his hand in the pocket of Miller Company and take out a large sum *Page 841 
of money, etc., is purely figurative, and just another way of saying that he expected the jury to give him a large verdict. While some of the remarks of counsel are rather caustic, it cannot be correctly said that they were not based upon a substratum of evidence, and in my opinion the remarks were fairly inferable from the facts and circumstances, and within the meaning and spirit of the rule. Argument is the professional weapon of the lawyer, when freely and intelligently used, hidden and obscured things are exposed to the light of reason, and so long as confined to evidence, the advocate should be accorded latitude of expression and given free reign to employ his imagination and genius for advocacy. I am not in favor of any rule that, in effect, puts the lawyer in a strait-jacket while arguing the facts of his case, or that would curtail the freedom of discussion, for fear some appellate court may say thus far and no further you should have gone in your comments on the evidence. It is only when the lawyer wanders entirely out of the record, that the rule is violated, but when fairly based on evidence, it can never be correctly said, legally speaking, that the argument is prejudicial. This doctrine is enunciated in 2 R.C.L. 427, § 26, as follows: "Hence it is the rule that what is proven by direct testimony or is fairly inferable from facts and circumstances proved, and which has a bearing upon the issues, may be fair subject for comment by counsel, and if such deductions or inferences tend to fix upon a defendant the wickedness or the crime charged against him, it is within the scope of proper and fair argument to denounce him accordingly."
But even if it be true that the language used by counsel was inflammatory, and not justified by the evidence, it was, in my opinion, a justifiable retaliation for repeated denunciatory allegations in the pleadings of appellant, with reference to Mr. Miller. Miller, as head of the Miller Company, with whom Coleman and Rogers had all of their dealings, bore the full brunt of all charges of fraud and wrongdoing brought by plaintiffs against defendants. Referring to a contract Miller Company had with a Mr. Silvers for the sale of its stock, alleged to have been violated by the company, plaintiff charged that: "Silvers complained to the said C. R. Miller of his ruthless disregard of the right of the said Silvers, who refused to acquiesce in the highhanded and arbitrary action of said Miller." Again, after alleging that plaintiff had sold, under their contract, a large amount of stock, had paid Miller Company a large sum of money, that Miller, "without cause or justification * * * arbitrarily, dishonestly and corruptly, seeking to prevent these plaintiffs from further performing same," sought to abrogate the contract; and, further, that "said C. R. Miller has withheld and is now withholding and seeking through fabrication, fraud, falsehood, and misrepresentations to appropriate to himself, and the use and benefit of the said C. R. Miller Manufacturing Company, $41,375 fund which he has in his hand, belonging to these plaintiffs, and as to which there exists no lawful or honest claim on his behalf"; that plaintiffs had at all times been willing and ready to perform the contract, and "but for the high-handed and arbitrary violation thereof by the said C. R. Miller, acting individually and as president, etc., they would have performed the contract to a finality * * * that had the said C. R. Miller Manufacturing Company continued to comply with the terms thereof instead of violating said contract and undertaking through fabrication, fraud and chicanery to deprive these plaintiffs of the benefit of the work they had perfected through their advertising, organization, etc.," they would have completed the contract and reaped a profit on an average of $12.50 per share.
Defendants leveled special exceptions at this denunciatory language, but were overruled by the court, and, of course, the pleadings containing the allegations were read to the jury.
The language used by counsel in regard to Coleman is much milder than the charges against Miller of ruthless, high-handed methods, of dishonesty, fabrication, falsehood, misrepresentation, and chicanery. Appellees, in the only proper way, by special exceptions, sought to have the denunciatory allegations eliminated and expunged from the record, but were overruled; the allegations therefore reached the jury, resulting in such prejudice to defendants as might reasonably be expected to flow from such strong language. In this situation, I think retaliation was justifiable.
It is generally held that improper argument is not ground for reversal where the language used is provoked by remarks of counsel for the adverse party. Where inflammatory language in a pleading gets to the ears of the jury, it is certainly as detrimental and prejudicial as if spoken by counsel in argument; therefore, if in one instance retaliation in kind is condoned, there exists no good reason why condemnation in the other instance should be visited. This proposition is well sustained by the following authorities: San Antonio, etc., Co. v. Barnett,12 Tex. Civ. App. 321, 34 S.W. 139; St. Louis, etc., Co. v. Daughtery (Tex.Civ.App.) 31 S.W. 705; Willis v. McNatt, 75 Tex. 69, 12 S.W. 478-482; Belknap v. Groover (Tex.Civ.App.) 56 S.W. 249-252; I.  G. N. Ry. Co. v. Goswick (Tex.Civ.App.) 83 S.W. 423-425; St. Louis, etc., Co. v. Granger (Tex.Civ.App.) 100 S.W. 987-989; Paschal v. Owen, 77 Tex. 583-587,14 S.W. 203.
The material points involved in my dissent, however, are these: I am of opinion that the contract of September 19, 1924, under which the parties operated, was utterly void, because entered into in violation of the Blue *Page 842 
Sky Law of this state, and also in utter disregard of the terms, conditions, and stipulations under which Miller Company was authorized to sell its stock, as shown by the permit or authority issued by the secretary of state. But even if the contract was valid and not subject to these objections, appellant did not show himself entitled to recover, because the jury found that plaintiffs were themselves at fault in violating the contract without valid excuse.
These propositions will be discussed in the order named; but, before entering upon the discussion, I will notice a finding of fact stated in the majority opinion, which I respectfully submit is not supported by the record. This finding is to the effect that Miller Company was chartered in 1919 and had been a solvent going concern during all of this time. If this finding is intended as a substitute for, or in lieu of, the finding the statute requires the secretary of state to make and enter of record, as a basis for the exemption of the concern from the general requirements of the Blue Sky Law, then I insist that it cannot be so considered.
Article 588, Rev.St. 1925, provides that: "Any concern which has been a solvent going concern for a period of two years next preceding the date of any application named in this article, may submit to the Secretary of State satisfactory evidence of such fact and of its present sound solvent condition; whereupon the Secretary of State shall consider the same and shall require such further evidence, and may make such independent investigation as he may deem proper, concerning such matter. If upon full consideration thereof he shall conclude that such concern has been a solvent going concern for a period of two years and is at present solvent, he shall enter such finding upon his record, whereupon the proposed issue and sale of such stock, debentures or other securities, as defined in this title, of such concern, shall be exempt from the general requirements of this title."
No issue was made by the pleadings as to the solvency of Miller Company at the time the application was made to the secretary of state for authority to sell its stock, nor as to its solvency during the two preceding years, no such issue was submitted to the jury, and the record, in my opinion, will be searched in vain for any direct evidence on the question. That the company had been for more than two years, and was at the time the application was made, a going concern, is beyond dispute, but that it had been for two years and was then solvent can only be arrived at by conjecture; therefore, as the record fails to disclose any finding or record by the secretary of state as to its solvency, it could not be and was not exempt from the general requirements of the Blue Sky Law. But even if the finding by the majority, as to the solvency of Miller Company, was justified by evidence, such finding cannot substitute for the finding the law requires shall be made by the secretary of state, and in this way validate contracts and acts entered into and accomplished in flagrant violation of law.
The Blue Sky Law, articles 579 to 600, inclusive, Rev.St. 1925, requires all concerns desiring to sell capital stock, either of original or subsequent issue, to file in the office of the secretary of state an application for a permit to do so, accompanied, among other things, by a copy of its articles of association, copies of stock certificates, statement as to the amount of its capital stock, its par value, the price at which it is to be sold, the amount of commissions to be paid agents for sales, and a detailed statement showing assets and liabilities, with a profit and loss statement. But such concern, on proper showing to and a finding by the secretary of state, entered of record, to the effect that it is then and has been a solvent going concern for a period of two years next preceding the application, shall be exempt from the general provisions of the law. It is obvious, however, that an application to the secretary of state for authority to sell stock, on conditions named in the law, is one thing, whilst an application under article 588, setting up facts Justifying an exemption, is another and an entirely different thing. The majority hold that the authority issued by the secretary of state to Miller Company, to sell stock on terms and conditions named, exempted the company from the general requirements of the law, and on this theory sustained the validity of the contract. From this view I dissent; the contents of the document issued by the secretary of state, and not the style or name written upon it, will determine what it is and its legal effect. The secretary of state made no finding or record whatever to the effect that Miller Company was, at the time the application was made and had been for the two prior years, a solvent going concern, as the law requires shall be done as the basis for exemption, but, on the contrary, the document issued by the secretary of state, styled exemption, specifically required Miller Company to sell stock at its par value of $100 per share, to pay no agent's commissions for sales, stipulating that all expenses incident to sales should not exceed 5 per cent of the sale price, and provided that the business should be conducted in all things in accordance with the Constitution and laws of the state, and the "Blue Sky Law thereof."
It seems rather incongruous to say that Miller Company, in selling stock, was exempt from the observance of the general requirements of the Blue Sky Law, under a document issued by the secretary of state that required the company, in all things, to observe the provisions of the law. This cannot be, for it cannot be both exempt from the provisions of the law, and at the same time required to observe its provisions. The document is just what its contents proclaim it to *Page 843 
be; that is, a permit to sell stock, on terms and conditions, not exempt from, but in accordance with, the provisions of the law.
Furthermore, the document cannot be given the legal effect of an exemption, for the simple reason that the secretary of state is not authorized by law to grant exemptions. The statute is specific, his only duty is to hear the application and proof, and if, after full consideration, he finds that the concern is at the time solvent and has been for the period of two years next preceding, he shall enter such finding on his record, whereupon the law, not the secretary of state, speaks and declares that the proposed issue and sale of such stock, debentures, or other securities shall be exempt from the general requirements of the law.
It may be contended, however, that, because the secretary of state styled the document issued by him an exemption from the general requirements of the Blue Sky Law, the presumption will be indulged that he performed his legal duty, and found and entered of record the necessary facts justifying an exemption in favor of the company.
The general rule is that a presumption will always be indulged to the effect that official acts or duties have been properly performed and, in general, that everything done by an official, in connection with the performance of an official act in the line of duty, was legally done; but this presumption relates only to official acts done in the routine of official business, and will not be indulged when the acts of the official are outside the duties of his office. Speaking to this point, in Jones v. Muisbach, 26 Tex. 235, 237, Judge Moore, for our Supreme Court, said: "But this presumption can never be invoked to sustain the acts of an officer outside of, or contrary to the usual and well recognized functions and duties of his office. To do so would be to withdraw the acts of such officers entirely from legal scrutiny, and constitute their own sense of duty as the sole criterion of their powers; and would, in all probability, sanction every usurpation of which such an officer might have been guilty. In fact, the more gross the usurpation, the more difficult would it be for those who should deny the validity of the act to show that he had been forbidden to perform it by superior authority. The correct rule, as recognized by this and every other court, unquestionably is, that where an officer of well known, defined and limited powers, performs an act at variance with or beyond the scope of his usual authority, the burden of proving its validity rests upon the party seeking to sustain it. Otherwise, the party seeking to overthrow such a presumption would be forced to prove a negative."
Also see Houston v. Perry, 3 Tex. 390-395; Ford v. Dilley, 174 Iowa 243,156 N.W. 513527; Fouke v. Jackson County, 84 Iowa 616, 51 N.W. 71-73. For these reasons, I am of opinion that the Miller Company was not exempt from the general requirements of the Blue Sky Law, but was required to comply in all things with its provisions. One of its provisions (article 583) is that: "* * * Commissions for the sale of stock and other securities, promotion, and all other incidental expenses shall not, in the aggregate, exceed twenty per cent. of the price at which the stock or other securities are to be sold, as shown by the application or amended application." It is perfectly obvious that this provision of the statute was violated, as well as the express stipulations and conditions of the permit issued by the secretary of state, to the effect that the stock should be sold at its par value, of $100 per share; that no commissions should be paid for the sale thereof; and that all expenses should not exceed 5 per cent. of the sales price.
Under the sales contract the parties (plaintiffs and defendant) made, plaintiffs undertook to sell, and did sell to the public, the common stock of Miller Company at $130 per share, $30 in excess of its par value and $30 in excess of the price at which the company was authorized by the secretary of state to sell; that the company agreed to allow and did allow plaintiffs, as sales agents, $30 commissions (or profit, it is immaterial which) for each share of stock sold — all this in plain violation of both the civil and criminal statutes of the state, and in utter disregard of the terms stipulated and conditions of the permit issued by the secretary of state.
The very thing the Blue Sky Law was designed to prevent, that is, imposition on the unwary public in the sale of stocks, was accomplished in this case. It is a matter of common knowledge that citizens of this state, chiefly those of moderate means, had been shamefully imposed upon by unscrupulous promoters in the sale of stocks, as devoid of real value as the blue sky above. The average small investor knows little, if anything, in regard to commercial ratings, and in the nature of the case cannot afford the expense of an audit before investing, hence is unable to deal at arm's length with skilled stock salesmen.
It is also quite apparent that those promoting the increase of the capital stock of Miller Company secured the secretary of state's approval of the charter amendment, authorizing the increase of capital, also the issuance by said official of the permit or authority for marketing same, by false representations and deceit; and that the parties to this suit entered into an arrangement for the sale of the stock in violation of law, and in utter disregard of the restrictions and conditions of the permit.
These conclusions are based on the following undisputed facts: The original contract between the parties, of date September 19, 1924, was in form a subscription or purchase *Page 844 
contract by Rogers and Coleman for 14,250 shares of the capital stock of Miller Company, at $100 per share, payable $75,000 cash, the balance on or before July 1, 1925; but this form was in fact a cover for an illegal arrangement entered into by the parties for the sale of stock on a commission basis. The real agreement, that is, the sales agreement, was not disclosed in the writings, but rested in parol, until after the parties successfully passed the secretary of state, and thereupon Miller wrote plaintiffs the letter of October 2, 1924, in which he expressed the pith of the understanding under which the parties acted, as follows: "You are to sell your stock in said company at $130.00 per share, paying C. R. Miller Manufacturing Company for it $100.00 per share, which gives you a profit on the transaction of $30.00 per share."
On September 22, 1924, there was filed in the office of the secretary of state the pro posed amendment to the charter of Miller Company, increasing its capital stock from $1,750,000 to $3,250,000, divided into 32,500 shares of the par value of $100 each; the proposal was supported by the affidavit of proponents, to the effect that 50 per cent. of the amount of the increased capital stock had been in good faith subscribed, and $150,000 paid in cash; that H. M. Rogers and F. W. Coleman of Dallas, doing business as copartners under the firm name of Textile Finance Company, had subscribed for 6,750 shares of the stock and had paid in $75,000 in cash; and that C. R. Miller had subscribed for 750 shares of the stock and had paid in $75,000 in cash. As a matter of fact, Rogers and Miller had not subscribed for a single share of the stock, but had with the company an undisclosed agreement for the sale of stock on a commission basis; they had not paid a single dollar in cash, and have never paid a penny of the $75,000, alleged to have been paid in cash. On the same day, September 22, 1924, Miller Company made application to the secretary of state, and was granted authority (permit or exemption, the name is immaterial) by said official, to issue and sell 15,000 shares of its authorized increase at the par value of $100 per share; no commissions were to be paid for the sales, and all other expenses should not exceed 5 per cent upon the sales price, and sales were to be conducted in all things in accordance with the laws of the state. In violation of the law, and in utter disregard of restrictions of the permit, the parties carried out an arrangement under which stock was sold to the public at $130 per share, on a commission of $30 for each share sold.
In view of these undisputed facts, the parties, in my opinion, are in part delicto, and neither should be aided by a court to enforce, or to reap the profits of, such an Illegal arrangement, but should be left where they are found. See 13 C.J. 493, § 440; Beer v. Landman,88 Tex. 450 -453, 31 S.W. 805; Seeligson v. Lewis, 65 Tex. 215, 57 Am.Rep. 593; Reed v. Brewer, 90 Tex. 144, 37 S.W. 418; Dallas Brewery v. Holmes Bros., 51 Tex. Civ. App. 514, 112 S.W. 122.
In Beer v. Landman, supra, the doctrine here invoked was announced by our Supreme Court in the following language: "Where two persons guilty of participation in an unlawful transaction are in pari delicto, as in this case, neither a court of law nor a court of equity will aid either to recover or reinvest himself with any title or interest which he, in consideration of such unlawful contract, has vested in the other, but will leave them in the same condition as to vested interests as they, by their own acts, have placed themselves."
On the assumption, however, that the contract sued upon was and is in all respects legal and valid, still I am of opinion that plaintiffs were not entitled to recover, and that the request of appellees for an instructed verdict should have been given, for this reason, it affirmatively appears that plaintiffs failed without a valid excuse, to perform the contract sued upon.
This suit was based on the idea that, without fault on their part, plaintiffs were prevented, by the wrongful conduct of defendants, from completing certain contracts for the sale of stock and from earning profits incident thereto; also, that defendants were wrongfully withholding certain profits already earned by plaintiffs on consummated sales of stock.
The jury found against plaintiffs on all material issues, that is, that defendants were not at fault and did not prevent plaintiffs from completing the contract; that plaintiffs without excuse, abandoned the contract and left it unfinished.
In the contract sued upon, plaintiffs agreed to pay defendant, on or before July 1, 1925, $1,425,000, being $100 per share for the stock plaintiffs had either subscribed for or contracted to sell (it being immaterial which, considered in this connection), and defendant was given the right under the contract to hold all money and notes turned over by plaintiffs, for the faithful performance of the contract, until the full sum of $1,425,000 was paid.
The general rule of law, applicable here, was tersely stated by the court in Davis v. Yates, 1 White  W. Civ.Cas.Ct.App. § 265, to the effect that one who refuses or fails to perform the conditions imposed on him by the terms of the contract, and shows no excuse for such refusal or failure, cannot recover. This doctrine precisely states the predicament of plaintiffs according to the findings of the jury. I am of opinion, therefore, that plaintiffs were not entitled to recover, because the contract sued upon was void, but, if valid, plaintiffs were not entitled to recover, because, without excuse, they failed to perform but abandoned same. *Page 845