Court Opinion

ID: 5042803
Source: CourtListenerOpinion
Date Created: 2021-10-01 06:51:57.015915+00
Date Added: 2024-06-11T14:07:38.544978
License: Public Domain

I respectfully dissent. The majority, entranced by the trial court's colloquy with counsel while passing upon plaintiff's `motion to sever', has completely overlooked the controlling effect of Rule 97(a): This suit was a compulsory counterclaim in the first proceeding. In order to demonstrate such fact, it is necessary that I add to the already lengthy statement.
Lakeland Properties, Inc., was a party plaintiff in the original suit, having sought damages from Mrs. Mangum for fraud in the inducement of the execution and delivery of the promissory note now involved in this cause. It failed to carry its burden of persuasion and did not obtain favorable answers from the jury to the issues on fraud and the judgment went against it upon that trial. Although it duly appealed from the judgment, it assigned no points of error and the judgment was affirmed. Dannheim v. Mangum, 498 S.W.2d 224 (Tex.Civ.App., Beaumont, 1973, no writ).
Mrs. Mangum did not file a cross-action upon the note in the original suit despite the requirement of Rule 97(a), even though the note had been in default for several months before the suit went to trial. Instead, a week after the order overruling Lakeland's motion for new trial in the first suit, she instituted this suit to recover on the note. Lakeland answered the present suit with a verified pleading setting up the prior litigation and contending that the present suit on the note should have been asserted as a compulsory counterclaim under Rule 97(a), and alleged the concurring elements necessary for making the counterclaim compulsory. See: 2 McDonald, Texas Civil Practice (1970 Rev.Vol.) § 7.49, p. 283. Alternatively, Lakeland pleaded the former litigation was res judicata of the present suit.1 *Page 920 
No formal order was entered disposing of the plea of compulsory counterclaim, but our statement of facts reveals that the plea was presented, argued, overruled, and an exception duly noted. This was sufficient to preserve the question for review. See and compare Marek v. Baylor County,430 S.W.2d 220, 222 (Tex.Civ.App., Eastland, 1968, error ref. n.r.e.); Webb v. Mitchell, 371 S.W.2d 754, 761 (Tex.Civ.App., Houston, 1963, no writ).
Unfortunately, Lakeland does not present a direct challenge to this ruling by any of its points of error. Generally, it is mandatory that an appellant comply substantially with the briefing rules in order to gain appellate review. Cf. Wagner v. Foster, 161 Tex. 333, 341 S.W.2d 887 (1960); Leal v. Aluminum Company of America, 443 S.W.2d 942, 945 — 946 (Tex.Civ.App., Corpus Christi, 1969, no writ).
Indeed, in State Farm Mutual Automobile Ins. Co. v. Cowley,468 S.W.2d 353, 354 (Tex. 1971), the Court held that the failure to present a point of error complaining of the trial court's action precludes appellate review, unless the error is fundamental. Whether Rule 97(a) is applicable to a particular case would not ordinarily be considered to be fundamental error. Cf. McCauley v. Consolidated Underwriters, 157 Tex. 475,304 S.W.2d 265 (1957).
But this general rule is of doubtful validity when Rule 97(a) is involved. Griffin v. Holiday Inns of America, 496 S.W.2d 535
(Tex. 1973).2 The time and place for Mrs. Mangum to have sought recovery upon the promissory note was in the original litigation. If we can reach the matter, a rendition of the judgment is required.
I also disagree with the majority's conclusion stated in the last paragraph that `Appellants' other points of error only present various shades of this same contention.' The third and fourth points of error, so summarily rejected, are entitled to consideration under the liberalized rules enunciated in Fambrough v. Wagley, 140 Tex. 577, 169 S.W.2d 478, 482 (1943): `(T)he Court will pass on both the sufficiency and the merits of the `point' in the light of the statement and argument thereunder.' So tested, I am of the opinion that we are authorized to consider such points notwithstanding each refers to the error of the court in sustaining the `motion to sever.' The presentation under these points is much broader than the opening phrases therein.
Points three and four go to the heart of plaintiff's case in her suit upon the promissory note. On May 27, 1971, plaintiff was the owner and holder of 36 percent of the outstanding stock of defendant corporation and was a member and chairman of the Board of Directors. On that date she entered into a contract with Dannheim and Whitten, both directors and president and secretary, respectively, on behalf of the corporation, whereby the corporation agreed to redeem her stock. Pursuant to this agreement, she received $36,000 in cash from the corporation and it executed and delivered its promissory note to her in the principal sum of $54,000, payable on June 25, 1972, bearing interest from date until paid at the rate of 8 percent.
As indicated earlier, the corporation pleaded fraud not only in the original issuance of the stock, but in the contract to repurchase or redeem. It also pleaded a complete lack of consideration supporting the note. Testimony tending to support each of these defenses was tendered by the defendant and excluded by the trial court because of its earlier action upon the `motion to sever.' Such testimony is now in *Page 921 
our record in the form of bills of exception.3
Furthermore, the trial court's action in exculding the evidence was based, in part at least, upon the concept that the corporation had ratified the entire transaction whereby Mrs. Mangum had secured her original interest in the land which was eventually transmuted into the stock and finally into the note now in suit. Plaintiff had not pleaded ratification and this theory of the case was injected into the trial by the court.
In Zorn v. Brooks, 125 Tex. 614, 83 S.W.2d 949, 951 (1935), the Court reviewed the authorities in detail and came to this conclusion:
 "The authorities generally are in complete accord in declaring that a contract between a corporation and one or all of its officers and directors is not void per se, but that it may be avoided for unfairness or fraud. . . . This is the settled rule in Texas." (citations omitted)
A contract which is merely viodable, may be ratified and the right to annul may be lost. Missouri Pac. Ry. Co. v. Brazil,72 Tex. 233, 10 S.W. 403, 406 (1888); Gaston v. Copeland, 335 S.W.2d 406, 409 (Tex.Civ.App., Amarillo, 1960, error ref. n.r.e.).
Thus, the contractual agreement between Mrs. Mangum and Lakeland, whereby the corporation was to redeem her shares through the payment of money and the issuance of the note, was — at best — a voidable transaction at the option of the corporation. In order to prevail in her suit upon the contract, which includes the note in issue, it was Mrs. Mangum's burden, as expressed in Tenison v. Patton, 95 Tex. 284,67 S.W. 92, 95 (1902), to make `a full disclosure of all facts known to him about the subject, takes no advantage of his position, deals honestly and openly, and concludes a contract fair and beneficial to the company.'
The latest expression of our Supreme Court on the subject is that of Justice Steakley in Popperman v. Rest Haven Cemetery, Inc., 162 Tex. 255, 345 S.W.2d 715, 717 (1961), from which this quotation is taken:
 "Closely related to the foregoing principles is the well-established rule that transactions between an officer or director and the corporation are subject to strict scrutiny; it was stated in Zorn v. Brooks, supra, `that a contract between a corporation and one or all of its officers and directors is not void Per se, but that it may be avoided for unfairness or fraud.' (125 Tex. 614, 83 S.W.2d 951) Previously, this court in Tenison v. Patton, supra (95 Tex. 284, 67 S.W. 92), discussed at some length the problem of contracts between officers and directors and the corporation itself, and recognized that such contracts are binding Where the contracting director establishes the fairness of the transaction to the corporation. See also Texas Auto Co. v. Arbetter, Tex.Civ.App., 1 S.W.2d 334, er. *Page 922
 dism.; and Felty v. National Oil Company of Texas, Tex.Civ.App., 155 S.W.2d 656." (emphasis supplied)
This holding was reinforced by the Court when it said: `We hold that the burden of establishing the fairness of the transaction to the corporation is upon petitioner' — Mrs. Mangum in our case. The reason for the rule, as stated in Paddock v. Siemoneit, 147 Tex. 571, 218 S.W.2d 428, 431 (1949), is that corporate directors occupy the position of a fiduciary toward the corporation.
In the case which we now review, Mrs. Mangum neither pleaded nor proved that the transaction was fair and just to the corporation, nor did she make a full disclosure of all the facts known to her about the subject, as required in Tenison, supra. Yet, the majority permits her to recover on the note.
Mrs. Mangum, relying upon the court-conceived theory of ratification, was successful in excluding evidence tendered by the defendant corporation which would have raised the issue of unfairness. Her belated reliance upon the theory of ratification likewise falls under the same theory and line of authorities. `Ratification is generally a matter of intent, with knowledge of the voidable nature of a prior act, to adopt such act as binding.' Williams v. Hooks, 333 S.W.2d 184, 189 (Tex.Civ.App., Beaumont, 1960, no writ).
Just as Mrs. Mangum labored under the burden of proving fairness (under Popperman, supra), she had the burden of showing ratification was done with full knowledge of all of the pertinent facts. Leonard v. Hare, 161 Tex. 28, 336 S.W.2d 619, 621 (1960). She did not discharge either burden by pleading or by proof.
Considering the record as a whole, including the unsatisfactory condition of the pleadings and the proof on the critical issue of fairness and ratification, it is apparent that the case has not been fully developed in accordance with the applicable rules controlling this type of suit in the posture in which it was presented to the trial court. I would sustain points three and four; and, in the interest of justice, reverse the judgment below and remand the cause for further proceedings in accordance with the applicable procedural and substantive rules governing this cause, only some of which have been discussed herein.
1 Our judgment on the first appeal was not final at the time of the filing of the plea of res judicata and did not become final until several days after the completion of the trial of the second suit. See 34 Tex.Jur.2d, Judgments, § 472, pp. 521, 522 (1962), and Annotation, 9 A.L.R.2d 984, 994 (1950), for a discussion of the Texas cases on the subject.
2 The dissent of Justice Johnson in Griffin, supra, indicates that the controlling effect of Rule 97(a) was raised by the Supreme Court sua sponte. (496 S.W.2d at 539)
3 It appears from our record that the trial court treated the `motion to sever' as a motion in limine designed to suppress evidence heard upon the former trial upon issues therein determined by the jury.
The action of a trial court in ruling upon a motion in limine is necessarily preliminary in nature and does not, in and of itself, reflect error. This is true whether the action is in granting the motion or in overruling it. In order for the trial court's action to be tested upon appeal, it must be shown that evidence which was tendered was introduced or excluded (as the case may be) over an appropriate objection timely interposed. The action of the court in so admitting or excluding the evidence will then be considered by the appellate court under the usual rules governing the admission or exclusion of evidence. If the action of the trial court is held to be error, the court will then determine whether such error amounted to reversible error. See generally: Bridges v. City of Richardson, 163 Tex. 292, 354 S.W.2d 366 (1962); Hartford Accident and Indemnity Co. v. McCardell, 369 S.W.2d 331, 335 (Tex. 1963); State v. Cave, 430 S.W.2d 692, 694 (Tex.Civ.App., Austin, 1968, no writ); State v. Lock, 468 S.W.2d 560, 565 (Tex.Civ.App., 1971, Beaumont, error ref. n.r.e.).