Court Opinion

ID: 9667747
Source: CourtListenerOpinion
Date Created: 2023-08-24 01:54:06.494773+00
Date Added: 2024-06-11T18:15:40.428385
License: Public Domain

DIXON, Chief Justice
(dissenting - in part).
I agree to the affirmance of- the trial-court’s judgment, but not for -thé reasons given in bur original opinion;
This is a suit instituted by appellant as plaintiff on a written contract.; It is not a suit to cancel the contract for- fraud, accident, or mistake. It is not a suit to reform the contract. Tt is hot a- suit for consequential damages for breach of the-contract. As acknowledged by appellant, it is a suit on the ■contract. ..
In his second amended petition appellant alleged that on January 16, 1946 he individually was the owner of an,invention covering a power mower. He further pled: “On July 17, 1946 the plaintiff in the name of said proposed corporation-, entered into a written contract * * The D-A-M Company, the party actually named in the contract, was then nonexistent. It was only a proposed corporation which appellant intended to organize later. (In fact it never was organized.) Appellant alleged all these facts were well known to appellees.
Early in the trial of the case appellant offered the written contract in evidence. Appellees objected- on the grounds that (1) there was nothing in the contract to indi*601cate that it had been entered into by appellant Cavaness individually in behalf of a proposed nonexistent corporation, the only named party on the one side being the D-A-M Company; and (2) any attempt of appellant Cavaness by parol testimony to vary the contractual capacity in which the parties executed the instrument would violate the parol evidence rule, since the contract is unambiguous, and also contains a “merger clause.”
The court sustained appellees’ objection and appellant was not allowed to introduce the written contract. I think the objection was good. And the proper rejection of the contract was of course fatal to appellant’s recovery of judgment.
The contract itself is not ambiguous in its description of the contracting parties. On its face it clearly, expressly, and un-qualifiedly names only the D-A-M Company on the one hand and appellee General Corporation on the other hand. Appellant Cavaness is not named as a party. Execution of the instrument was acknowledged before a notary public. Appellant acknowledged that he appeared and was known to be the president of the D-A-M Company, and that his name was signed and the contract executed as the act of the ' corporation. There is nothing in the writing to suggest that appellant was only acting as agent or promoter of a nonexistent proposed corporation. His allegation to that effect would have to be established if at all by parol testimony.
And such parol testimony would have to be introduced in the face of a paragraph in the contract commonly known as a “merger clause.” Here it is: “This contract covers all the agreement between the parties hereto and no oral representations will be recognized.”
The contract expressly refers to the D-A-M Company as Licensor; and it recites that Licensor is owner of the invention in--question. By its terms Licensor sells, assigns, and conveys to appellees a license to manufacture, sell, and distribute mowing machines. A royalty of $2 per machine for each of the first 20,000 machines and of $1 for each machine thereafter manufactured, sold, or distributed is to be paid to Licensor, the money to be deposited quarterly in the Republic National Bank at Dallas in the name of Licensor. Licensor agrees to defend infringement suits and to ho,Id appellees harmless from any damages by reason of said suits.
The contract further provides that even if appellees fail to manufacture, sell or distribute any machines in the years 1947 and 1948 they shall pay Licensor royalties for a minimum of 10,000 machines for each of said years — a total of $40,000. Appellees have never manufactured, sold, or distributed any machine but this paragraph in the contract is looked to by appellant to . support his suit for $40,000.
In the absence of a proper legal explanation there was a fatal variance between appellant’s pleading and his evidence. Appellant contends that he pled a proper legal explanation when he alleged that appellees knew that the corporation was nonexistent, that appellant was acting as promoter of a proposed corporation to which he intended to assign his rights as licensor, and that he, appellant, was really the principal party in interest. Further he contends he had a right to prove such allegations by parol testimony. I find myself unable to agree with appellant.
The very purpose in reducing contracts to writing is to avoid misunderstanding, to refresh recollection, and to make certain what was agreed to and who agreed to it. If parties take the precaution to write down the terms of their agreement and to acknowledge it before a notary public, as a general rule they ought not to be .permitted to negative their writing by later saying that notwithstanding their written agreement they verbally agreed otherwise. What then would be the use of going to the trouble of preparing a written contract? I think the parol evidence rule is all the more applicable when, as in this case, the written contract contains a “merger clause” expressly declaring that the writing “covers all the agreement * * * and no oral *602representations will be recognized.” (Emphasis supplied.) See Heffron v. Pollard, 73 Tex. 96, 11 S.W. 165; Waggoner v. Magnolia Petroleum Co., Tex.Civ.App., 252 S.W. 865; Super-Cold Southwest Co. v. Elkins, 140 Tex. 48, 166 S.W.2d 97; Browning-Ferris Machinery Co. v. Thomson, Tex.Civ.App., 58 S.W.2d 183; Otis Elevator Co. v. Berry, 28 Cal.App.2d 430, 82 P.2d 704.
In my opinion the law covering the circumstances presented on this appeal is 'stated in Restatement of the Law of Agency, Section 326, Comment b: “* * * if it appears unambiguously in an integrated contract that the agent is not a party, parol evidence is not admissible to show the contrary intent, and * * * this is so although the effect of the evidence is to show that the purported principal is nonexistent. * * *” (Emphasis supplied.)
The case of Weeks v. San Angelo National Bank, Tex.Civ.App., 65 S.W.2d 348 (writ ref.), cited by appellant, does not seem to me to support appellant’s contention. A promissory note was signed “Weeks Drug Store No. 4, by Jno. A. Weeks.” Such signature was plainly ambiguous. On its face it did not indicate whether “Weeks Drug Store No. 4” was a corporation, a partnership, an association, or simply a trade name used by Jno. A. Weeks individually. The parol testimony did not contradict or vary from the terms of the written instrument. It merely explained which of several possible meanings was intended by the written words. Furthermore, there was no merger clause involved in the Weeks case.
Appellant cites a number of cases in which promoters who executed contracts in the name of nonexistent corporations have been held liable as defendants. The inference is that if a promoter incurs liability because of his executing such a contract, the rule must be that he has ághts under the contract which he is entitled to assert as plaintiff. However, in many cases the inference is not correct.
It is generally held that such a promoter is liable as a defendant, not on the contract, but for breach of warranty, or deceit in connection with his execution of the contract in the name of a nonexistent corporation. In Weeks v. San Angelo National Bank, Tex.Civ.App., 65 S.W.2d 348, at page 349 (writ ref.), already mentioned as a case cited by appellant, it is said, “It is generally held that the promoter is personally liable if the corporation is not thereafter created, upon the theory of implied warranty that it will be brought into existence.” See also Weiss v. Baum, 218 App.Div. 83, 217 N.Y.S. 820; arid Farmers’ Co-Op. Trust Co. v. Floyd, 47 Ohio St. 525, 26 N.E. 110, 12 L.R.A. 346. For cases holding that one assuming 'without authority to act as agent for a purported principal may be sued for breach of warranty, or deceit, but not on the contract, see Heffron v. Pollard, 73 Tex. 96,11 S.W. 165 ; and First State Bank of Roby v. Hilbun, Tex.Civ.App., 61 S.W.2d 521. In the last named case, 61 S.W.2d at pages 521 and 522, Chief Justice I-Iickman, then on.the East-land Court of Civil Appeals, said: “A suit to enforce such liability should not be brought upon the contract itself, but should be for breach of warranty or deceit. Plaintiff’s suit was based upon the contract itself, which did not purport to be the contract of the defendant, and clearly it was not entitled to a judgment thereon.” In such cases, though a promoter might be liable for breach of warranty or deceit, it would certainly not follow that he had rights on the contract which he was entitled to assert as plaintiff.
Furthermore, it has been held that a promoter who contracts in the name of a nonexistent, proposed corporation is not liable at all when the other contracting party had knowledge, as appellant says appellees had here, that the purported principal was a nonexistent, proposed corporation. 126 A.L.R. 118, and cases there cited.
Appellant’s strongest Texas case seems to be Ennis Cotton-Oil Co. v. Burks, 39 S.W. 966 (no writ history). The facts were that one John Guitar represented *603himself as agent for a corporation which did not exist hut which was later organized, and which then adopted the contract made by Guitar. Guitar was held liable for $41.04, the amount of the indebtedness incurred prior to the adoption of the contract by the corporation. The opinion declares that a person who contracts as agent, without authority, or without a principal, is held to be a principal himself with all the rights and liabilities of a principal.
But I do not believe that the Ennis Cotton-Oil case should control our decision here for several reasons. For one thing, the given facts are different. For another thing, some material facts are not given at all. For example, the opinion does not disclose (1) whether the contract was in writing, (2) whether it contained a “merger clause,” (3) whether it showed on its face that the corporation was only a nonexistent, proposed corporation, (4) whether the language of the contract was ambiguous, or (5) whether the other contracting party knew there was no such corporation in existence.
Appellant also cites Abbott v. Hapgood, 150 Mass. 248, 22 N.E. 907, 5 L.R.A. 586. But the cited case does not discuss application of the parol evidence rule, nor, so far as I can tell, did the contract contain a “merger clause.” Furthermore, it allowed only consequential damages resulting from reliance on the contract, not damages measured by the contract’s provisions.
In his third point on appeal appellant takes the position that appellees cannot first complain of the nonexistence of the corporation after operating under the contract for one year. I do not think appellant may properly rely on such grounds on this appeal. In the first place he did not plead that appellees operated under the contract for one year, or any other length of time. In the second place I seriously doubt that there is any evidence, or any proposed evidence in the bills of exception to support such allegation if it had been pled. On the contrary the evidence and the proposed evidence tend to establish that appellees actually did nothing by way of performance of the contract because they were unable to buy motors at a suitably low price. Appellant’s first four points were properly overruled.
Appellant in his last four points complains of events which occurred subsequent to the rejection in evidence of the contract in question. While appellant as plaintiff was still trying to present testimony, appellees interposed a demurrer to the evidence. Appellant informed the court that his witnesses were ready to testify and also explained to the court what the purpose and the substantial content of their testimony would be. Nevertheless the court announced that he would sustain the demurrer to the evidence and render judgment for appellees. The jury was thereupon discharged and the trial came to an abrupt end. The court then said to- appellant’s counsel: “You can have your full bill, Mr. 'Andress, as to any matters you desire to include in it." (Emphasis supplied.)
Thereafter appellant prepared and submitted bills of exception showing the parol testimony he would have offered if his witnesses had been permitted to testify. The trial court at first refused to approve and sign the bills, but later signed them, though he qualified them by saying the matters and things set out in the bills had not been presented before him, so he did not certify that the witnesses would have testified as stated in the bills. Appellant did not except to these qualifications.
Appellees admit that it was error for the court to sustain their demurrer to the evidence, but say that under the circumstances it was harmless error. As to the bills of exception, appellees say that in view of appellant’s failure to except to the court’s qualifications, the bills are not properly before this Court for consideration.
I think appellant’s bills of exception are properly before us for consideration. Since appellant did not except to the court’s qualifications of the bills, we must accept the qualifications as true. 3-A *604Tex.Jur. 70S. But even so, the qualifications do not under the circumstances here presented destroy the validity of the hills.
One way to make out bills of exception when testimony has been excluded is to let the witnesses testify in the presence of the court out of the hearing of the jury. The purpose is to apprise the court what the witnesses, if permitted, would testify, so that the court may weigh the testimony’s admissibility, materiality and purpose and may understand the scope and effect of his ruling. However, that is not the only way the purpose may be served, and it is not the only proper way that bills of exception may be made out. When the court is informed by counsel what the substance of the testimony will be, what its purpose is, how it bears on the issues in the case, and it is evident from the remarks of the attorneys and the court and other attendant circumstances that the court, under the view it takes of the issues involved, would not admit the testimony anyway, it is permissible to complete the bill without having the witnesses on the stand before the judge to make out the bills. Gray v. Mills, Tex.Civ.App., 206 S.W.2d 278, affirmed 147 Tex. 33, 210 S.W.2d 985; 31 Texas Law Review 128, at pp. 129 and 130 (McCormick).
As I view the circumstances in this case, it was not necessary for appellant to present the witnesses in court to give their testimony in order to make out his bills of exception. It follows that though the court’s qualification is true, appellant’s bills are properly part of the record before us, and appellant’s last four points are entitled to be considered on their merits.
However, I think appellant’s last four points must be overruled. In my opinion our action in overruling appellant’s first four points is decisive of this appeal, regardless of any action we might take on his last four points. The latter points under the circumstances become immaterial and whatever errors the court may have committed, as contended in said points, must be regarded as harmless. The testimony which appellant proposed to introduce could not have furnished a basis for judgment in his favor. The judgment as I see it was correct and ought not to be reversed because of the procedural error. 3-B Tex.Jur. 285.
I do not believe the trial court’s judgment should be affirmed on the grounds of estoppel, as stated in the majority opinion. In the first place, estoppel would have been available as a defense to appellees only if it had been pled and evidence offered to support it. Neither at the trial nor on this appeal, by pleading or by evidence, have appellees grounded their defense on estoppel. In my opinion, there is no basis in the record for a conclusion that appellees should prevail .-on that .theory. ... ■ ■' .i
I concur in overruling appellant’s motion for rehearing. .
YOUNG, Justice..
I am in accord with the conclusion of my associates that appellees’ , judgment herein should be affirmed.