Court Opinion

ID: 6882865
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:20:12.690525+00
Date Added: 2024-06-11T16:05:37.987231
License: Public Domain

HUTCHESON, Circuit Judge
(dissenting).
While I share the opinion of the majority, that what McAllister gave for the stock was not “reasonably worth at least the sum at which it was taken by the company”,1 that in short, the stock issued to McAllister was quite disproportionate to any value received from him for it, I cannot agree that the shares were void in his hands as a fictitious increase of stock under Article 12, Section 6, Texas Constitution. Texas authorities are quite plain that the two provisions of the constitution, (1) that no corporation shall issue stock or bonds except for money paid, labor done or property actually received, and (2) all fictitious increase of stock shall be void, are quite separate and distinct and that it is only when there is a “fictitious increase” that the shares are void. Smith v. Ideal Laundry Company, Tex.Civ.App., 286 S.W. 285; approved in McAlister v. Eclipse Oil Co., 128 Tex. 449, 98 S.W.2d 171. Neither can I agree with the apparent though not clearly disclosed view of the majority that the transaction was affected with fraud and concealment, and neither limitations nor laches is a defense to the suit. Improvident as the valuation placed on McAllister’s contract was, resting so largely as it did, on faith in the future, the substance of things hoped for, the evidence of things unseen, there was neither fraud nor concealment about it.2
Everything was done in the open, the whole matter was disclosed and was open and available to the state authorities, including the Secretary of State, McAlister v. Eclipse Oil Co., supra, and to all of those to whom stock was sold.
While therefore, because of the great disproportion between the value placed on McAllister’s surrendered right to continue to take the profits under his contract with the Building and Loan Association, and the amount of stock issued to him, relief from the excessive overvaluation could and should have been granted, if the suit had been timely brought, at the instance of persons who could show their non-assent to the transaction, Cf. Smith v. Ideal Laundry Company, McAlister v. Eclipse Oil Co., supra; Park v. Compton, 5 Cir., 55 F.2d 80, long acquiescence and the statute of limitations have barred the action.
It is settled in Texas that a suit of this kind must be brought within four years after the cause of action has accrued. Brought by one stockholder, none of the others joining in the suit, after an acquiescence of nine years, all of the others continuing to acquiesce therein, the long delay and acquiescence and the statute of four years limitations have long since barred the action and the judgment should be affirmed. Pruitt v. Westbrook, Tex.Civ.App., 11 S.W.2d 562; Pacific American Gasoline Company v. Miller, Tex.Civ.App., 76 S.W.2d 833; 27 Tex.Jur. page 24; Southwestern Portland Cement Company v. Latta & Happer, Tex.Civ.App., 193 S.W. 1115; Smith v. Ideal Laundry Co., supra; McCord v. Nabours, 101 Tex. 494, 109 S.W. 913, 111 S.W. 144.
I respectfully dissent from the reversal

 Vernon’s Texas Civil Statute, Art. 1353 — Watering stock — “No corporation shall issue any stock whatever, except for money paid, labor done which is reasonably worth at least the sum at which it was taken by the corporation, or property actually received reasonably worth at least the sum at which it was taken by the company.”

 But if there was, the authorities cited in the majority opinion establish that in Texas, fraud prevents the running of a statute of limitations only until discovered or until by reasonable diligence the fraud might have been discovered, “knowledge of facts that would cause a reasonably prudent person to make inquiry which would lead to discovery of the fraud is in law a knowledge of the fraud. Tex.Jur. vol. 20, p. 112, § 75, and authorities there cited.” Glenn v. Steele, Tex.Sup., 61 S.W.2d 810; 27 Tex.Jur. page 30.