Stuart v. Mitchell , 241 S.W. 713 ( 1922 )

According to the trial court's conclusion of law the judgment in favor of the receiver was allowed upon the ground only of estoppel. The legal effect attaching to the facts according to the court's conclusion was:

"That the defendant, R. T. Stuart, is estopped at this time from denying the validity of his said two notes sued upon herein."

This is the real and pertinent question in the case. If the appellant is precluded by the doctrine of estoppel from asserting, as a remedy, that the notes sued on are without legal consideration and cannot be enforced by suit thereon, then the other assignments of error as they are herein presented have no application, and could not have been prejudicial. The appellant pleaded failure of consideration, and in reply thereto the receiver, in the supplemental petition, charges the elements of an equitable estoppel. Under the facts, as found by the trial court, is there an equitable estoppel which ought to preclude the appellant from asserting that the notes in controversy are without consideration and are not enforceable as lacking one of the essential elements of a valid contract? The court finds as a fact that the appellant, both as a director and as an officer, participated in the business and transactions of the corporation. Further:

"That the principal sums of the two notes sued upon herein represent the unpaid balance of capital stock for which he [defendant] subscribed; that the defendant R. T. Stuart executed and delivered to the said company his two promissory notes payable to it, being the same notes that are sued on herein by the receiver, and that such notes, by and with the consent of the defendant, R. T. Stuart, were placed among the assets of said Commonwealth Bonding Casualty Insurance Company, and were held out to the world and to the stockholders and creditors of said insurance company as valid and subsisting obligations."

It does not affirmatively appear from the court's findings that stock certificates had been issued and delivered to appellant himself. He testified that the stock certificates had not in fact been delivered to him. These facts, as above stated, are not challenged by appellant. It is believed that, in the evidence, the trial court's conclusion is correct. Even though it be correct that the notes given in payment for the stock are not of legal force as between the appellant and the company, it does not legally follow that the notes given for the stock are utterly void and not enforceable under special circumstances. Washer v. Smyer,109 Tex. 398, 211 S.W. 985, 4 A.L.R. 1320. The special circumstances here are that the appellant expressly consented to have, and knew, the two notes "were placed among the assets" of the company, and that they "were held out to the world and to the stockholders and creditors of said insurance company as valid and subsisting obligations." The creditors dealing with the company could rely upon such notes, "placed," as they were, "among the assets," as being just and legally payable obligations; they could assume that the notes were such as the company were authorized to take and hold within the scope of its authorized business. Consequently all the elements of an estoppel in pais are present when it affirmatively appears, as here, that appellant had knowledge of the facts, as well as the intention and admission, which would make the two notes in equity assets of the company so as to allow creditors to subject same to the payment of their debts. In these facts the want of a consideration could not, because of estoppel, be alleged and asserted as a defense. Thompson v. First State Bank, 109 Tex. 419,211 S.W. 977; Davis v. Mitchell (Tex. Civ. App.) 225 S.W. 1117.

The judgment is affirmed.