Cavaness v. General Corporation

272 S.W.2d 595, 1954 Tex. App. LEXIS 2194

• Court: Court of Appeals of Texas
• Decided: July 16, 1954
• Docket: 14786
• Status: Published

Opinions

CRAMER', Justice.

Appellant Cavaness filed this action in district court against appellees General Corporation, a,Texas corporation, and the partners (nine) in the Southwest Company, a co-partnership, based, upon, a contract, the first four paragraphs of which are as follows :

“This agreement, made and entered into by and between The D-A-M Company, a Texas corporation, domiciled in Dallas, Dallas County, Texas, hereinafter referred to as licensor, and the General Corporation, a Texas corporation, domiciled in Dallas, Dallas County, Texas, hereinafter referred to as licensee: Witnesseth :■

“Whereas, the said licensor, the D-A-M Company, is the owner of a certain invention covering a power driven mower, ‘for which is filed application for letters of patent of the United States, under serial number 619460, filed, on the 1st day of October, A.D. 1945, which application is now pending in the Patent Office of the United States Government and it is desirous of licensing the same upon the following terms and conditions throughout the entire world; and,

“Whereas, the said licensee is desirous of acquiring exclusive license to manufacture, sell and distribute said power driven mower under the said application and under any patent or patents which may hereafter be granted thereon, throughout the entire world, Now, Therefore:

“For and in consideration of the sum of one ($1.00) dollar paid by each party hereto to the other, in hand paid and acknowledged by the licensors and licensee, the parties to this agreement do hereby agree as follows:”

It was then provided that the licensor conveys the “full and exclusive license to manufacture and .sell and distribute, and to license others for said purposes or otherwise as licensee may desire, to dispose of said power driven mower together with any improvements thereon, before and after said license may issue to the licensee, of any patent or patents issued thereon, throughout the entire world. No machine, however, shall be manufactured in any foreign country under this contract.” The contract provided for a royalty ($1 per machine) to be paid to licensor at stated times; and for a' minimum-number of machines, 10,000 per year during the years 1947 and 1948; also provided that all improvements, changes, modifications or alterations in design in construction in the mower by licensee or its employees shall become the property of licensor; provided for the keeping of adequate records, etc.',’numerous general-provisions, and also provided for a cancellation under certain circumstances, with a merger clause as follows: “This contract •covers all the agreement between the parties hereto and no oral representations will be recognized.” The contract was signed July 17, 1946 by the parties as follows:

The contract was acknowledged as follows :

“State of Texas, County of Dallas: Before me, the undersigned authority, on this day personally appeared J. D. Cavaness, President of The D-A-M Company, a corporation known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that the same was the act of the said The D-A.-M Company, a corporation, and that he executed the same as the act of such corporation for the purposes and consideration therein expressed and in the capacity therein stated. Given under my hand and seal of office, this the 17th day of July A.D, ,1946. Marguerite High, Notary Public, in and for Dallas County, Texas.

“State of Texas, County of Dallas: Before me, the undersigned authority, on this day personally appeared J. W. Greenwood, President of the G.eneral Corporation, a corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that the same was the act of the said the General Corporation, a corporation, and that he executed the same as the act of such corporation for the purposes and consideration therein expressed, and in the capacity therein stated. Given under my hand and’ seal of office this the 22nd day of July A.D. 1946. Marguerite High, Notary Public, in and for Dallas County, Texas.”

It appears from the statement of facts that after two witnesses, to wit, appellant Cavaness and appellee J. W. Greenwood, Sr., had testified and the application for patent on the power driven mower, the contract sued on, and the patent No. 2471367 issued to Cavaness had been introduced, the court, before the parties rested, withdrew the case from the jury and rendered judgment that appellant take nothing by his suit. From that judgment appellant has duly perfected this appeal and here briefs eight points of error.

Points 1 to 4 inclusive are in substance: (1) Cavaness as the organizer of a proposed corporation is personally bound by a contract made in its behalf; (2) this action can be brought by Cavaness as the true party in interest; (3) appellees as parties to a contract made with a nonexistent proposed corporation, with full knowledge that Cavaness who signed the contract and was the sole owner of the lawn mower, the patent, application, etc., “cannot first complain of such nonexistence upon their breach of the contract after operating under it for a year”; and (4) the nonexistence of a proposed corporation which is a party to a contract is no defense by the other party who had full knowledge of the facts at the time the contract was executed.

These points are collectively answered by appellees with two counter-points in substance: (1) It appearing from the written contract that Cavaness signed only as agent of the D-A-M Company, parol evidence was not admissible to show Cavaness intended it to be his pfersonal contract, no fraud, mistake or other grounds for reformation being alleged; especially in view of the merger clause in the contract. (*2) Had the situation been reversed, appellees could not have sued Cavaness personally on the contract because he was not a party to it, but could only have sued for a breach of his implied warranty that the D-A-M Company either existed or would be brought into existence; and in this case could not have sued Cavaness on any theory since the contract was in the name of and solely on the credit of the D-A-M Company.

From the above record it appears without dispute that Cavaness as a promoter of a corporation to be known as the D-A-M Company entered into an agreement solely as agent (President) of such proposed corporation, the D-A-M Corporation, with a then existing corporation (General Corporation) wherein the D-A-M Company as a corporation agreed as owner to license the General Corporation to manufacture a patented article under a patent owned by D-A-M Company, a corporation, if and when such patent should be issued.

Cavaness breached this contract to organize the proposed D-A-M Company as a corporation and now seeks to recover damages due under the licensing contract between General Corporation and the D-A-M Company in his own individual capacity for his own individual benefit.

The only question raised by the points is whether or not under such facts Cavaness can personally in his own name and for his sole individual benefit maintain this suit and recover, if he establishes the facts pled, the minimum royalty provided for in the contract.. It is settled law in Texas that: “A promoter, though he purport to act on behalf of the projected corporation, and not for himself, cannot be treated as agent, because the nominal principal is not then in existence; and hence, where there is nothing more than a contract by a promoter, in which he undertakes to bind the future corporation, it is generally conceded that it cannot be enforced. Kelner v. Baxter, L.R. 2 C.P. 174; Melhado v. Railway Co., L.R. 9 C.P. 503. The promoters themselves are liable upon the contract, unless the person with whom they engage agrees to look to some other fund for payment. * * *” Weatherford, M. W. & N. W. Ry. Co. v. Granger, 86 Tex. 350, 24 S.W. 795, 796, opinion by Justice Gaines. Applying the reasoning there to the matter here, the contract here up until the corporation is organized cannot be enforced, and after, organized, against the corporation only if the corporation, after it comes into existence, properly ratifies and/or otherwise adopts its benefits. Here it is claimed by appellant that although he breached his contract to organize the D-A-M Company as a corporation, he nevertheless can take advantage of the later refusal of the General Corporation to deal with him individually and he personally can carry out the terms of the contract, and that the provisions of the contract do not bar such a construction as is placed upon it by him.

Under the record, however, we cannot agree with appellant. In our opinion he cannot now claim the benefit of the contract personally since he, Cavaness, by signing the contract as President of the D-A-M Company, a corporation,- is estopped and barred from denying the existence of the •corporation. The rule is correctly stated in 13 Am.Jur. 209, Corporations, sec. 65, as follows:

“In order for one to be estopped to deny the corporate existence of an organization, he must have .contracted or dealt with it as .a corporation. Such recognition is generally held to be shown by the use of a name usually importing a corporation, that is, naming an ideality, but disclosing that of no individual.”

The note on Texas authorities, under the above is as follows-: "In Texas the rule seems to be that the mere designation in a contract of a body by a name appropriate to a corporation does not imply a corporation without some statement in the contract that the body so described is a corporation, within the rule that one contracting with a body described by a corporate name is es-topped to deny its corporate existence. Holloway v. Memphis, E. P. & P. R. Co., 23 Tex. 465, 76 Am.Dec. 68; Empire Mills v. Alston Grocery Co., 4 Willson, Civ.Cas. Ct.App. §§ 221, 346, 15 S.W. 505, 12 L.R.A. 366. Annotation: 5 A.L.R. 1584.”

We therefore hold that appellant cannot recover in this proceeding for the reason (1) that he breached the contract first by failing to secure the legal organization of the D-A-M Company as a Texas corporation; and (2) independently of such breach he, Cavaness, is estopped from personally denying in this suit the existence of the D-A-M Company as a legal corporation and from bringing this suit personally in his own name and for his own individual benefit.

Points 1 to 4 inclusive are overruled.

Points 5 to 8 inclusive are in substance: (5) Appellees demur to the evidence, waive all objections to the admissibility of appellant’s testimony; and (6) admit as true such evidence and all inferences favorable to appellant which may reasonably be drawn therefrom; (7) since ^appellees’ demurrer to the evidence should not have been offered or sustained prior to appellant’s closing his direct evidence, it was necessary for appellees to agree to the allowance of a full bill of exceptions setting forth all the testimony and all the testimony he expected .to produce; (8) appel-lees’ said demurrer and the entry of judgment thereon waived all of appellees’ defenses and authorized the court to enter judgment upon, the record thereby authorizing this Court to enter- judgment upon all evidence which would have been offered by the plaintiff- below. These points are countered by two points in substance: (1) That the judgment as rendered and entered was a general judgment that Cavaness take nothing for the reason that it appeared to the court-that he had-no cause of action on the contract in question and the court was precluded from rendering and entering the judgment which he did; and (2) even if the judgment as entered had been one sustaining the demurrer to the evidence in-, stead of the general judgment entered we could not now treat the demurrer as having been -made to a record which did not exist at the time the demurrer would have been made had the written contract been in evidence instead of having been rejected and had the various so-called bills of exception, containing matters not even pleaded, been presented in the form of sworn - testimony instead of in the unsworn and unsigned condition they now appear before this Court.

The record shows the court stated to the jury that he sustained a demurrer to the evidence and they should return to the central jury room and be discharged. The judgment entered recited that “Plaintiff commenced the introduction of his testimony and other evidence; and during the afternoon of July 28, 1953, the plaintiff offered in evidence the contract upon which his suit is based; and the court having examined the said contract and plaintiff’s pleadings, and plaintiff’s counsel having stated in open court that his only cause of action herein was based upon said written contract, and it appearing to the court therefrom'that plaintiff has no cause of action upon which he can recover of defendants herein and that while the plaintiff was offering evidence and before he had rested the cause should be withdrawn from the jury and judgment entered for the defendants” ; and directed that appellant take nothing against appellees.

The basis of these points is contained in four bills of exception. Each of such bills of exception, after reciting certain facts necessary to the bill, is as follows: “The foregoing bill of exception No. 1 having been reduced to writing by the attorney for said plaintiff and having been presented to the undersigned judge who tried said cause for allowance and signature within 50 days from entry of judgment and within the time required by law, and having been submitted to adverse counsel, and having been by me found to be correct, is hereby allowed, approved, and ordered filed by the Qerk of this Court as a part of the record in such cause this the 14th day of October, 1953 with the following qualifications”; to which the court before he signed such bill presented by appellant added the following notation: “The testimony set out in the foregoing bill of exception was not presented before me, and I do not certify that the witness would testify as stated therein.”

Under such a record we cannot consider the evidence as quoted in the bills ’'and not contained in the statement of facts since such evidence is not properly before us as part of the bill or the statement of facts. The court’s qualification not excepted to by- appellant must be taken as correct. 3A Tex.Jur. 704, Appeal and Error, sec. 547.

Without a record of the tendered evidence properly before us under the certificate of the trial judge as having been offered by the witnesses in the presence of the judge as a part of their bill, we cannot consider it. Points 5 to 8 must be overruled.

Finding no reversible error in the.record, the trial court’s judgment is .

Affirmed.