Court Opinion

ID: 9831481
Source: CourtListenerOpinion
Date Created: 2023-09-01 21:08:09.09941+00
Date Added: 2024-06-11T07:43:35.263358
License: Public Domain

On Motion -for Rehearing.
The impertinent motion for rehearing filed in this case will be discussed, not because of ,its merit, for it has none, but because it contains many assertions which are unjust, untrue, and dehors the record. Batson-Milholme Co. v. Faulk, 109 Tex. 480, 211 S. W. 972; Walls v. Cruse (Tex. Civ. App.) 217 S. W. 240; Millers’ Indemnity Underwriters v. Lane (Tex. Civ. App.) 241 S. W. 1086; Kansas City M. & O. Ry. Co. v. Whittington & Sweeney (Tex. Civ. App.) 153 S. W. 689.
It is first insisted that the court erred in holding that the Hereford Sanitarium, as a joint-stock association, is a necessary party to the suit and is not before the court, and in reversing the judgment after having correctly held that the Hereford Sanitarium was, in legal effect, a partnership and the members thereof were liable as partners. It is clear from the record that the defendant in error’s counsel have' pleaded, tried, and briefed this case while laboring under the mistaken impression that if the Hereford Sanitarium should prove to be a joint-stock association instead of a “nontrading part•nership,” that the defendants, as stockholders, would not be liable as partners, when the statute cited, the original opinion, and every case referred to says that they would be so held. The original petition charges that the property was conveyed “to the defendants by, through, and in the name of the Hereford Sanitarium, and for their benefit as a firm and partnership doing business and operating said sanitarium under the firm name and style of the Hereford Sanitarium. * * * That the defendants designated the said Hereford Sanitarium as a joint-stock association, and issued what they designated a's certificates of stock to each of said defendants. * * * But plaintiff specially shows that each and all of said defendants were, in truth and in fact, partners, and that their association, organization, purchase, control, authority, management of the business, and partnership under the designation of the Hereford Sanitarium was, in reality, as a firm and partnership, rendering each and all of said defendants liable to plaintiff on, said notes, although the same were- signed only by said Ashbrook, as trustee for the said Hereford Sanitarium, being designated in said deed as beneficiary and as grantee in said deed, and that said conveyance was made for the use and benefit of said sanitarium.”
It is further alleged that certificates of stock representing one share of the capital stock of the said Hereford Sanitarium as 'a joint-stock association was issued to Carl, the defendant in error, and in this connection he alleges that being under the necessity of bringing suit to foreclose the lien, he gave written notice of his withdrawal from the enterprise and of his purpose to have the partnership dissolved in so far as affected his interest. He alleges that certain personal property, consisting of furniture in the house which was sold to the sanitarium, had been sold to Deaf Smith county, and that he seeks to have the proceeds thereof applied to the discharge and payment of his notes. Notwithstanding repeated denials of the existence of the association as a joint-stock association, they set out in their supplemental petition the terms of the agreement and subscription contract, and alleged that a number of the subscribers held a meeting on March 7, 1921, for the purpose of organizing the association by the election of a board of directors for the purpose of organizing a joint-stock company; that a president and board of directors for the association were elected at said meeting; that a committee was appointed to prepare a set of by-laws and report their action to an adjourned meeting on March 21st; that the committee on by-laws reported on March 21st, and that the by-laws were then adopted as the rules under which the Hereford Sanitarium should be conducted; that thereafter, in pursuance of the by-laws,- officers were elected, -the capital stock was divided into 100' shares' of the par value of $100 each, and that plaintiff accepted and paid for one of these shares; that 62 other shares were issued to each o'f the stockholders which are made defendants to this suit; that thereafter, on the 2d day of April, .the deed was made to Ashbrook, as trustee for the use and benefit of the Hereford Sanitarium, and that the notes sued on were issued by Ashbrook, as trustee, in part payment for the house and furniture upon which a lien is sought to be foreclosed by this suit.
Oarl was examined at great length by his attorney in an effort to show that no joint-stock association had been formed, notwithstanding the foregoing allegations in his pleadings.
The statutes of Texas make no express provisions with reference to the formation of a joint-stock company. The common-law rule is:
“If associates hold a meeting, agree on the name of the association, adopt articles of as*294sociation or a constitution and by-laws, appoint officers, and conduct business for a considerable length of time as an association, the organization of the company is sufficient.” S3 O. J. 881.
During the introduction of the evidence, counsel endeavored to show that the association had been dissolved, evidently proceeding upon the theory that Oarl’s attempt to withdraw his membership would dissolve it under the principle of delectus persons©. This, of course, would not dissolve the association, and its dissolution could not be shown except by mutual consent of all the members and the appointment of trustees to wind up its affairs. 33 C. J. 882. Tlie plaintiff-not only pleaded, but proved, the organization and existence of a joint-stock association which, so far as the record shows, was still functioning at the time of the trial.
In the motion it is asserted that—
“The liability of the plaintiffs in error on the obligations sued on herein being shown to be joint and several and as partners, and all the members of the said Hereford Sanitarium, including those designated as officers, dix-ectors, and trustees, being parties hereto, and having answered, this court erred in holding that said Hereford Sanitarium, as a supposed joint-stock association, as such association, was a necessary party not sufficiently before the court, etc.”
 A full and sufficient answer to the statement that “the obligations sued on have been-shown to be joint and several” is that it is incorrect both in fact- and in law. The fact is, as alleged by Carl, that the notes sued on are signed, “Hereford Sanitarium, by D. E. Ashbrook, Trustee,” and no other defendant ever signed them or either of them. The law is that the defendants who did not sign them cannot be properly sued on them, even though they were made partially for their benefit; because no one is chargeable on a note unless his name appears as a party to it in some relation. Unless they actually signed it, they are not necessary parties to the suit, either under the common law or the Texas statutes. Adams v. First National Bank of Waco (Tex. Civ. App.) 178 S. W. 993; Moore v. Belt (Tex. Civ. App.) 208 S. W. 225; R. S. 1925, art. 6133. The liability of the stockholders, if any, is not on the notes, but is incidental, and arises from the fact that they are stockholders in the association and liable as partners, and the original opinion so holds; but this is foreign to the question of whether the joint-stock association, as a legal entity, is a necessary party to this suit. R. S. 1925, art. 2029, is as follows:
“Against Corporations and Joint-Btoch Associations. — In suits against any incorporated company or joint-stock association, the citation may be served on the president, secretary or treasurer of such company or association, or upon the local agent of such company or association in the county , where suit is brought, or by leaving a copy of the same at the principal office of the company during office hours. If neither the president, secretary or treasurer reside in the county, * * * then the citation may be served upon any agent representing such company or association in the state.”
The intention of the Legislature clearly expressed by this article is to give a joint-stock association, when a defendant in an action, the same legal status and entity for the purpose of being made a party to the suit, as the law recognizes if a corporation was being sued. It is true that we have found no case in Texas or in any other jurisdiction under such a statute which so holds, for the obvious reason that all lawyers who have heretofore sued joint-stock associations have made the association, as such, a party defendant.
R. S. 1925, art. 6134, adds emphasis to the former statute by saying:
“In suits against such companies' or associations, service of citation may b,e had on the president, secretary, treasurer or general agent of s-uch unincorporated companies.”
This provision also clearly implies that the association as an entity shall be made a party.
Article 6135 is:
“In suits by or against such unincorporated eoippanies, whatever judgment shall be rendered , shall be as conclusive on the individual stockholders and members thereof as if they were individually parties to such suits.”
And article 6136 provides that where the suit is brought against the company, and only the president, secretary, treasurer, or general agent is served with process, a judgment against the association shall be -binding on the joint property of all the stockholders or members thereof, and further expressly provides that it “may be enforced by execution against, the joint property; but such judgment shall not be binding on the individual .property of the stockholders or members, nor authorize execution against it.”
Article 6137 conclusively sustains our holding to the effect that the association, as an entity, is a necessary party to this suit. It provides:
“In a suit against such company or association, in addition to service on the president, secretary, treasurer or general agent of such companies or associations, service of citation may also be had on any and all of the-stockholders or members of such companies or associations; and, in the event judgment shall be against such unincorporated company or association, it shall be equally binding upon the individual property of the stockholders or members so served, and executions may issue against the property of the individual stockholders or members-, as well as against the joint property; .but executions shall not issue against the individual property of the stockholders or members until execution against the *295joint property has been returned without satisfaction.”
The last clause of this article is conclusive of the question under consideration. The statute clearly contemplates that the property of the association shall he exhausted before the plaintiff in judgment will be allowed to proceed against the property of the stockholders, and the Supreme Court has expressly so held in construing this statute, since the original opinion was handed down. Howe et al. v. Keystone Pipe & Supply Co., Ltd., 278 S. W. 177. How could execution issue against the Hereford Sanitarium and its property unless it had been made a party to the suit? If Carl should issue an execution upon the judgment in its present form, an injunction to restrain the sheriff from executing the writ could be successfully maintained. The association’s property could not be sold because it was not a party defendant to the suit. The individual property of the stockholders could not be sold because the statute expressly prohibits such a proceeding until execution against the joint property had been returned without -satisfaction. These articles of the statute, together with the authorities cited in the original opinion, clearly show that the Hereford Sanitarium is a legal entity for the purpose of suing and being sued, and not “a mystical bugaboo.” Moreover, the Hereford Sanitarium, as beneficiary of the trust, and so designated in the deed, is a necessary party defendant, and is so held by the authorities cited in the original opinion, and we have found nothing, and counsel for movant has cited no authority, to the contrary. This court has not “hunted for an error, upon which it could predicate a reversal of the judgment.” The failure to make a necessary party defendant is a flagrant error glaringly apparent upon the face of the record, and is so fundamental that appellate courts are required to take notice of it.
It is asserted in the motion that the “minutes of the first or organizing meeting of March 7, 1921, said nothing about this concern being a joint-stock association. The first time that joint-stock association gets into the record is by these so-called certificates dated October 31,1921.” It is true that the words “joint-stock association” were not used at the first meeting, but plaintiff’s evidence showed that a joint-stock association, and nothing else, resulted from that meeting. It is ordinarily not necessary to write the words, “this is a horse,” under a perfect picture of that animal. With a subscription contract, a set of by-laws, the election of officers, the issuance of stock in ptirsuance of the' by-laws, subsequent meetings of the directors and members, functioning as a joint-stock association, what else is necessary'to show it character? The motion says:
“As we understand the opinion of this- court, defendant in error is compelled to allege what he knows to be untrue as- to the Hereford Sanitarium being a joint-stock association in order to make it a party as such association. * * * And it is beyond our thinking that we should be required to allege the existence of something that does not exist in order to make this supposed nonexisting being a party, thereby weakening our position before the court and jury that the concern is a partnership before we can have any relief in the courts of this country.”
This court is not responsible for the limited extent of the “thinking” of the plaintiff’s counsel, but we are responsible to the extent that a valid judgment shall be entered in this case. It is our duty to see that all necessary parties to a suit are before the court, before a judgment is rendered which affects the property rights of a necessary party defendant who has not been given an opportunity to be heard. It is further our duty to protect, not only the interests of the stockholders who, under the statute, should not be made liable until the joint property of the association has been exhausted ; but we also feel that the interest of the unfortunate client whose lawyer filed this suit and this motion demands that this judgment should be reversed in order that he may have an opportunity of collecting his money out of the joint property, which is shown to be the house and lot -and the furniture and other personal property, consisting of hospital equipment, and that it may be first sold/ for that purpose. Isolated sentences from the opinions rendered by present and former members of this court are quoted in support of the proposition that this court is “willing to play tweedledee and tweedledum, and disregard every x-eason and full consideration in determining when the court has sufficient parties before it.”
There is not a syllable in either of the cases quoted from, when read with its context, which is inconsistent with the holding that the joint-stock association is a necessary party to this suit. That question was not considered in either of the cases quoted from, because it was not presented, and we will be considerate enough to say that the unjust charge made in the motion is attributable alone to the inability of the attorney, who filed the motion, to “think beyond” the propositions he has urged.
For the reasons here stated, and based upon the authorities and principles announced in the original opinion, the motion is overruled.