A. Leschen & Sons Rope Co. v. Moser

159 S.W. 1018, 1913 Tex. App. LEXIS 205

• Court: Court of Appeals of Texas
• Decided: June 28, 1913
• Status: Published

Opinions

ND, J. (after stating the facts as above).

By the first assignment of error appellant complains because a verdict was instructed for all defendants except Moser. It is contended that the issue whether the Del Carmen Mining Company assumed the indebtedness sued upon by appellant should have been submitted to the jury. All purchases from appellant were made by Moser individually, and it is clear that Moser bound himself to complete the tramway and turn it over to the company; all expense to be borne by him. To secure his compliance with such agreement, the stockholders purchasing from him entered into an agreement with him by which $80,000 paid for stock should constitute a trust fund. This fund proving inadequate, the stockholders loaned the company $65,000, and $50,000 of this sum was used to pay Moser's debts. Still debts remained unpaid, and the stockholders who had made a long struggle to save the mining properties from forfeiture to the Mexican Ore Purchasing Company found it impossible or inadvisable to raise further funds. It appears the directors of the company as such undertook to dispose of the trust fund of $80,000 which was created, not by agreement between the corporation and Moser, but by agreement between certain stockholders and Moser. However, it is clear, that whether such directors acted for the company or for the stockholders only who were interested in the fund, it was contemplated and always stipulated that Moser was to deliver the tramway to the company completed, and no dealings were had by the corporation or individual stockholders with appellant company, nor was Moser the agent of the stockholders or of the corporation in his dealings with appellant. In fact he bought the tramway before the Del Carmen Mining Company was incorporated. The $65,000 fund was borrowed by the corporation from its stockholders and a lien to secure it was given upon the properties, including the tramway. This fund could be disposed of by the directors as such. After securing this fund, they authorized the manager to pay off such claims as the company owed and such as were necessary to be paid to successfully conduct the business of the company. Some discretion was evidently vested in the manager in the matter of determining what claims were necessary to be paid off to successfully conduct the business of the company. He concluded that the debt due appellants by Moser was such a debt because he wrote appellants promising to take care of such account as soon as an examination of the books could be had. His explanation indicates that, had there been sufficient funds on hand out of the $50,000, he would have paid the account, but finding the fund exhausted, and having no other funds, the account was not paid. We think, viewing the testimony as a whole, the issue whether the company assumed the indebtedness should have been submitted to the jury. We therefore sustain the first assignment.

The second assignment complains of the refusal of the court to instruct the jury that plaintiff was authorized to sue in Texas on its claim. As the court instructed a verdict against Moser, it necessarily held that plaintiff could maintain its suit, because if it could not sue in the state court, instead of instructing a verdict upon the merits against Moser and for the other defendants, the court would have dismissed the case. Smythe Co. v. Ft. Worth Glass Sand Co., 142 S.W. 1157. The action of the court in holding that the suit could be maintained in the state court was correct. All the material for the tramway was sold f. o. b. cars at St. Louis. The contract provided for payment in installments, two of which were payable before the completion of the cable and the last 14 days after it should be in operation and not later than June 1, 1908. Appellants did not undertake the installation of the tramway but merely agreed to furnish a competent man, if desired, who would superintend its installation and for whose services Moser was to pay at a certain price. No obligation rested upon Moser to accept or retain the services of this man, but it appears that he did accept such services and even delegated to him the power to hire and discharge those who erected the tramway for Moser and who were paid by Moser for their work. The contract did not provide for the sale and delivery of a tramway after its completion, nor did it call for the sale of a tramway delivered with an agreement to install the same, but it was merely proposed to furnish a competent superintendent in order to facilitate the erection of the machinery by Moser and make proper adjustment thereof. We do not think this incidental agreement can be given the effect of making the transaction one not involving interstate commerce. To so hold would mean that a corporation in another state would have to forego sales in such state of machinery to be erected in this state, if the purchaser refused to buy, unless the corporation furnished a capable man to supervise the erection and adjustment of the machinery, or else it would have to secure a permit to do business in this state. We hold that appellants are entitled to maintain their suit. Flint Walling Mfg. Co. v. McDonald, 21 S.D. 526,114 N.W. 684, 14 L.R.A. (N.S.) 674, 130 Am.St.Rep. 735; Milan Mill Co. v. Garten, 93 Tenn. 590, 27 S.W. 971, 26 L.R.A. 135; Smythe Co. v. Ft. Worth Glass Sand Co., 142 S.W. 1160.

By the third assignment complaint is made because the court refused to give a special charge reading as follows: "Foreign corporations are prohibited by law from transacting business in Texas without first filing with the state department a certified copy of their articles of incorporation and obtaining from the Secretary of State a permit so to do; and, where a foreign corporation does business in Texas without obtaining such permit, the stockholders therein are liable as partners, jointly and severally, for all debts and liabilities incurred by such association. If you believe from the evidence, therefore, that the materials, supplies, and labor furnished by plaintiff to the defendant Carlos Moser were in fact furnished for the benefit of the Del Carmen Mining Company and appropriated to the use of said company, you are instructed to return a verdict for plaintiff against said Del Carmen Mining Company and against the defendants Thomas B. Palfrey, Carlos Moser, F. J. Rheiner, W. D. Kincaid, and Ike T. Pryor, jointly and severally, for the sum of $9,296.84, with interest thereon from March 11, 1910."

In support of its contention that, if the Del Carmen Mining Company assumed the payment of the debt, the stockholders are liable as partners for such debt, appellants rely upon the case of Empire Mills Co. v. Alton Gro. Co., 15 S.W. 505, 12 L.R.A. 366, in which the stockholders of a corporation were held liable as partners. In that case much importance was given to the fact that the Legislature had repealed a statute permitting incorporation for mercantile purposes, thereby indicating a policy not to permit the transaction of that character of business by corporations. The corporation was created under the laws of Iowa for the sole purpose of doing business in Texas, and it was not even legally organized. This case is different in several material respects. The Del Carmen Mining Company was chartered in Arizona for the purpose of carrying on business in any part of the world, and its charter permitted offices and places of business to be kept at Boquillas, Mexico, and San Antonio, Tex., at which meetings of stockholders might be had and business transacted. The charter was very broad, but one of its purposes, in fact the principal one, was to carry on a very extensive mining business. Incorporation for that purpose is permitted by our statute, and a permit to engage in such business in Texas could have been obtained. However, the mines it intended to operate were situated in Mexico, and it did not intend to engage in mining in Texas but to transport ore from Mexico into Texas by means of an aërial tramway and then by wagons and trucks to the railroad. In view of the extent and nature of the business to be transacted and of the further fact that a large part thereof was to be transacted in Mexico, we do not think the taking out of the charter in Arizona by citizens of this state was a fraud upon the rights of this state. Nor is there any evidence that the charter was obtained by any fraud upon the state of Arizona or that it was not a legally organized corporation under the laws of that state. Appellant's claim does not arise by reason of the sale or transportation of ore but merely because of an alleged assumption of the payment of a debt due for material for the tramway, which debt resulted from certain interstate commerce. This debt could be assumed without taking out a permit to do business in Texas, and we do not think that, because the corporation may have engaged in other transactions for which it should have procured a permit or have maintained an office in Texas without obtaining a permit, we are justified in holding its stockholders liable as partners for the debt assumed. If the stockholders of a corporation, which could legally do business in Texas under a permit, are to be punished for not obtaining a permit by being held to be partners, such punishment should be limited to liabilities arising from transactions for which the permit is required and not extended to liabilities not arising by reason of the conduct of a business prohibited from being transacted without a permit.

In discussing the right of a nonresident corporation to sue in Texas, our Supreme Court, in Security Co. v. Nat. Bk., 93 Tex. 580, 57 S.W. 23, said: "The business was done in another state. When, however, the obligation had matured, the plaintiff in error brought suit and obtained a judgment upon it in this state. In the adjustment of its demand, it then entered into a negotiation which resulted in the extension of the debt and the execution of the new security out of which the present controversy arose. The purpose of the statute was probably twofold: One to protect the people of the state from irresponsible foreign corporations by affording the means by which they could readily ascertain such information in reference to them as is ordinarily afforded by their charters; the other to place them upon the same footing as like domestic corporations by requiring them to pay a like fee for a permit to do business as is required of a domestic company for filing its charter. See Rev. Stats. art. 2439. It is to be presumed, therefore, that the business had in view, in making the requirement, was the ordinary business of the company — the business it was organized to pursue and which its charter empowered it to pursue. Had it been intended to prohibit a foreign corporation from collecting, extending, adjusting, or bringing suit for a debt contracted elsewhere, it would have been easy to have made that intention plain. If it was the purpose of article 745 to deny the corporation the comity which is usually extended throughout the states of the Union of bringing suits in the courts of this state, article 746 was wholly unnecessary. On the other hand, that article shows that such was not the purpose. It in effect merely denies the right of a foreign corporation to bring suit upon any cause of action arising after it had done business in the state without a permit, thus showing that it was regarded that bringing a suit in court was not doing business within the purview of article 745. If bringing suit to collect a debt be not doing business within the meaning of the provision in question, how can the adjustment of a debt be such business?" From this quotation it will be seen that foreign corporations may adjust debts due them although such adjustment take place in Texas. Therefore in this case, if the Del Carmen Mining Company made a contract in Texas to assume the payment of a debt due the Leschen Sons Rope Company legally enforceable against the makers thereof in the courts of Texas, such contract of assumption can be sued upon in the courts of Texas by the Leschen Sons Rope Company. This comity is extended to such nonresident plaintiff, and we see no reason for not extending the same comity to the foreign defendant corporation by recognizing its corporate existence as to transactions which do not involve the carrying on of the ordinary business of the corporation in competition with domestic corporations. We conclude that the stockholders of the Del Carmen Mining Company cannot be held liable as partners for plaintiff's debt, should it be found that said mining company assumed the payment of the same.

We are of the opinion that the tramway, in so far as it existed within the state of Texas, constituted an improvement within the meaning of article 5621, Revised Statutes 1911, and a lien could be fixed thereon under the provisions of our statutes with reference to liens of mechanics, contractors, builders, and materialmen.

Appellant was an original contractor within the meaning of article 5622 and therefore had four months after its debt accrued within which to fix its lien. Baxter Lumber Co. v. Nickells, 24 Tex. Civ. App. 519,60 S.W. 451; Matthews v. Association, 83 Tex. 604, 19 S.W. 150. The debt for material furnished accrues at the date of the last delivery of material for the improvement erected or constructed when there is no agreement fixing the time of its accrual. In this case the date was December 1, 1909, and the sworn account was not filed within four months thereafter but was filed within four months from the date of the last charge made for services of a tramway superintendent, which services were rendered under, and payable by the terms of, the written contract filed June 8,1910. This contract was filed within four months of the accrual of the last item for services and expenses; but, as the date when said items were payable was fixed by contract, each of them would stand alone, and the lien would only exist upon those accruing within four months of the fixing of the lien by filing the contract. There is no authority given to fix a lien by sworn account for an indebtedness existing by virtue of a written contract, as such contract itself must be filed in such a case in order to fix a lien. We conclude that under the contract a lien was fixed for the items for services and expenses of the tramway superintendent which accrued within four months of filing the contract, and that no lien for the material furnished was fixed within four months after the debt for same accrued, and therefore none exists for any material furnished. The statute extends the time when indebtedness for material furnished shall accrue so as to fix it at the time when the last material is delivered but does not provide that the furnishing of labor thereafter shall further extend the time of accrual of indebtedness for material furnished.

No lien exists upon the defendant Kincaid's land, because neither Moser nor the Del Carmen Mining Company had at the time of the accrual of items for services and expenses, for which a lien exists, any interest in the land belonging to Kincaid which could be subjected to a lien.

The judgment is reversed in so far as it provides that appellant take nothing against Claud J. Carter, receiver of the Del Carmen Mining Company, a corporation, and also for the purpose of trying the issue of appellant's lien upon the tramway in accordance with the views herein stated, and the judgment establishing the lien of R. E. Brooks, trustee, as a superior lien to that of appellant upon said tramway is also reversed, and as to said parties and said issues this case is remanded for a new trial, but as to all other parties and all other issues the same is affirmed.

Affirmed in part, reversed and remanded in part.

On Motion for Rehearing. Appellants ask us to make some corrections in and additions to our statement of the pleadings of the parties and findings of fact. Some of the errors have been corrected in the original opinion; others will be corrected here.

In addition to alleging that the Del Carmen Mining Company failed to secure a permit to do business in Texas, it was also alleged that said corporation was organized by citizens of Texas for the purpose of doing business in Texas and conducted its business wholly in Texas; the acts relied upon as constituting the doing of business in Texas being set out in detail. It was also alleged that Kincaid knew, when purchasing the land, that the tramway had been placed thereon at great expense and was unpaid for, and that plaintiff was claiming and entitled to a lien thereon. It was further alleged that Kincaid was a stockholder in said mining company at the time he bought the land; that the land was of little or no value except by reason of the location of the tramway thereon; that he paid a small sum for the land, knowing the tramway was thereon; and that he was estopped to deny the right of plaintiff to enforce its lien upon the tramway or for said tramway to exist upon said land.

Appellant earnestly contends that the material sued for in this case was furnished under the written contract entered into between Moser and appellant and, admitting that the entire sum contracted to be paid under the original contract for material has been paid, contends that the material furnished upon orders thereafter made and specified in the sworn account was all furnished under the original contract. This contention is based upon the testimony of H. J. Leschen to the effect that no new contract was entered into between the A. Leschen Sons Rope Company and Moser; that the original contract was not annulled, but the same stood as modified. The original contract was complete in itself and does not call for delivery of any further material than is therein described. In fact, the contract provides that "there are no contracts or agreements not specifically specified" in the same. The transactions involving the purchase of other material are distinct and separate and constitute no part of the original contract. This is recognized by appellant by his filing a sworn account for such items and not relying upon his filing of the contract. Leschen testified the prices in the invoices for material furnished additional to that called for in the contract were charged as in "open accounts." In several places he speaks of the material as additional to that called for in the contract, and he testified the prices charged in the invoices constitute the fair market value of the items of material. It is clear that the material for which a lien is sought to be fixed was sold on open account; and, in deciding whether a lien has been fixed, we must apply the law applicable to sworn itemized accounts and not that relating to contracts in writing. The salary to be paid Graham was provided for in the original contract, and therefore, in determining whether a lien exists for same, we are governed by the law applicable to such contracts. As the salary was made payable at the end of each week according to the terms of the contract itself, each of said items stands alone so far as fixing the lien is concerned, and the lien exists only for those items which became due within four months of the filing of the contract. It follows that the provision of the contract calling for payment of one-third within 14 days after tramway is in operation applies only to the material mentioned in the contract, all of which is paid for, and therefore such provision may be entirely discarded in passing upon the issue of the extent to which a lien may be asserted upon the tramway. We see no reason to change our views in regard to the matter complained of in the first specification of error.

Appellant contends that there is testimony from which a jury could find that Kincaid knew the tramway was on the land purchased by him at the time of his purchase and knew it was unpaid for, or, if not, that he had notice of such facts as would put him upon inquiry thereof when he purchased the lands. This contention is sustained by us, but in our opinion it has absolutely no bearing upon the question whether appellant can assert a lien against Kincaid's land. Neither Moser nor the Del Carmen Mining Company had any interest in the land which could be subjected to a lien, and there was no contract or transaction between appellant and Max B. Ernst which would entitle appellant to fix a lien on the land. Therefore Kincaid was at liberty to buy the same from Ernst's administrator without danger of having a lien fixed for transactions taking place between appellant and Moser or appellant and the company. There is absolutely no evidence that Kincaid bought the land for the company.

We are of the opinion that the jury could find from the evidence that the Del Carmen Mining Company was transacting business in Texas in so far as it sold ore for delivery in Texas, also that it kept an office in Texas within the meaning of article 1314 of the Revised Statutes of 1911, and, as testified by Brooks, that it never intended to take out a permit to do business in Texas, and still we believe its stockholders cannot be held liable as partners. Appellant contends for the enforcement of article 1318 (Revised Statutes of 1911) as it is written and undertakes to show that we have ignored or overridden said article. The article reads as follows: "No such corporation can maintain any suit or action, either legal or equitable, in any of the courts of this state upon any demand, whether arising out of contract or tort, unless at the time such contract was made, or tort committed, the corporation had filed its articles of incorporation under the provisions of this chapter in the office of the Secretary of State, for the purpose of procuring its permit." According to the plain reading of said article and the construction placed thereon by our courts, the same merely denies the right of a foreign corporation to bring suit upon any cause of action arising from contract or tort, if such contract was made or tort committed prior to the filing of the articles of incorporation for the purpose of procuring a permit. Security Co. v. Nat. Bank. 93 Tex. 580,57 S.W. 22; Bank v. Holland, 103 Tex. 269, 126 S, W, 564; Smythe Co. v. Glass Sand Co., 142 S.W. 1162. In the last two cases it is held that our statutes do not make contracts void because made by a foreign corporation without a permit, and in the first cited case the court says that it was not intended by article 745 (Statutes of 1895, now article 1314) to deny foreign corporations the comity usually extended throughout the states of the Union of bringing suits in the courts of this state, because, if such was the intention, article 746 (Statutes of 1895, now article 1318) was wholly unnecessary. It follows from the holdings in said cases that our laws do not go to the extent of refusing to recognize the existence of foreign corporations but prescribe only one penalty for doing business without taking steps to secure a permit, and that is they cannot bring a suit in our courts. If the Legislature had desired to do so, it could easily have added the penalty that the stockholders of foreign corporations would be liable as partners on all demands arising from business done in this state without a permit, but it did not see proper to do so. We have no authority to go further than the penalty prescribed.

Appellant requests that we find that Thos. B. Palfrey, Ike T. Pryor, W. D. Kincaid, F. J. Rheiner, Carlos Moser, and R. E. Brooks were stockholders in the Del Carmen Mining Company since prior to June 1, 1909. We find mention in the minutes prior to June 1, 1909, of the following persons: Carlos Moser, F. J. Rheiner, R. E. Brooks, and Thos. B. Palfrey. W. D. Kincaid's and Ike T. Pryor's names appear for the first time in the minutes of January 28, 1910. We find no evidence that Kincaid and Pryor were stockholders prior to June 1, 1909. This finding is made in deference to appellant's request; the same being immaterial if we are correct in holding that the stockholders cannot be held liable as partners.

The motion for rehearing is overruled.