Goodwin v. Abilene State Bank , 294 S.W. 883 ( 1927 )

Believing that a reversal of this case violates fundamental principles, both of procedure and substantive law, I am compelled to enter my dissent. The suit was by the Abilene State Bank on a note executed by appellant to it. Appellant answered that the note was a renewal of another note executed by him, and that the execution of the original note was procured by the fraud of the "plaintiff bank." The substance of the allegations charging fraud have been set out in the majority opinion. Nowhere in the answer was there any suggestion that there was any connection between the plaintiff bank and any other bank in respect to either the original or renewal note. But in each instance in which the names of those connected with the transaction are stated, it is distinctly alleged that the transactions were had between the appellant and the Abilene State Bank or its agents. It appears to be conceded that the answer alleged fraud on the part of the Abilene State Bank only. The evidence shows conclusively that the transactions complained of in appellant's answer were had with the Guaranty State Bank. The substance of the testimony relating to any supposed connection between the Guaranty State Bank and the Abilene State Bank is stated in the majority opinion. The evidence further shows that the indebtedness of Matthews in the approximate sum of $6,000, which was charged against the account of Cozart and Matthews, was not due the Abilene State Bank as alleged, and that the Abilene State Bank did not charge said indebtedness against the proceeds of the note executed by appellant, and that the Abilene State Bank nor any of its agents had anything to do with the transactions of which appellant complains, unless the evidence is sufficient to show that the Abilene State Bank is the same institution as the Guaranty State Bank, but operating under another name, and as to that matter more will be said later.

The burden was upon appellant to prove the fraud alleged and that it was perpetrated on him by the Abilene State Bank. It is elementary that the burden of proof is always on a party asserting a matter; on the plaintiff as to his cause of action, and on the defendant as to his matters of defense. It is fundamental that in all legal proceedings the allegata and probata must correspond, and this rule is as applicable to the answer of the defendant as it is to the petition of the plaintiff. Bank of Garvin v. Freeman, 107 Tex. 523, 181 S.W. 187.

These rules are not denied in the majority opinion, but are thought to have been complied with on two grounds. First, because it is concluded that the evidence is sufficient to raise the issue as to the liability of the Abilene State Bank for the liabilities of the Guaranty State Bank. While not disposed to concede this contention, I do not believe that, if conceded, it would destroy the effect of the variance between the allegations and the proof. It is more a question of identity. The reports are replete with cases where a fatal variance was found between the pleadings and the proof, even though the proof showed liability on the part of the party sought to be charged. The holding of the majority that there is no variance is distinctly predicated upon the fact that the facts introduced do not necessarily establish separate identity. This, in and of itself, in my judgment, is fatal to the proof, so far as the appellant's claim is concerned, that the proof corresponds to the allegations. As stated, the burden of proof was upon the appellant to prove that the fraud was perpetrated upon him by the Abilene State Bank, and this he could not do by offering testimony which did not disprove the fact asserted. He could not, by failure of proof, raise an issue where the burden to prove such issue was plainly upon him. A few recent decisions thought to sustain the views suggested will be referred to. New Amsterdam Casualty Co. v. Harrington (Tex.Com.App.) 290 S.W. 726. Numerous other authorities supporting this rule are available. Western Union Telegraph Co. v. Smith, 88 Tex. 9, 28 S.W. 931, 30 S.W. 549; Maddox v. Summerlin, 92 Tex. 483, 49 S.W. 1033, 50 S.W. 567; Lewis v. Hatton,86 Tex. 533, 26 S.W. 50; Bates v. Dipple (Tex.Civ.App.) 242 S.W. 541; Schulz v. Annick (Tex.Civ.App.) 29 S.W. 916.

In this case, all the light that appellant saw fit to give to the trial court and the jury on his allegations that fraud had been perpetrated on him by the Abilene State Bank, was proof that the note in question was a renewal of the note executed by him to the Guaranty State Bank of Abilene, and that later on the Abilene State Bank took over the assets of the Guaranty State Bank, and that the Abilene State Bank had the same officers as the Guaranty State Bank but different stockholders. This is not sufficient, in my judgment, to show that the Guaranty State Bank and the Abilene State Bank were the same legal entity. Proof that two corporations have each the same stockholders and the same officers and the same directors does not prove that they are the same legal entity. Corsicana Transit Co. v. Walton (Tex.Civ.App.) 189 S.W. 307. In the above case, the decision of the Court of Civil Appeals was affirmed and the opinion adopted by the Supreme Court under the style of Walton v. Corsicana Transit Co., 222 S.W. 979.

In the New Amsterdam v. Harrington Case, supra, it was clearly held that an allegation that Gragg was the employer of the defendant was not sustained by proof of his employment by a copartnership of which Gragg was a member, although Gragg, as well as the copartnership, would be liable at common law for any injury caused by their negligence and sustained by Harrington in the course of his employment.

The majority opinion seems to proceed upon the idea that, because from the evidence separate identity is not conclusively established, or because the evidence did not exclude the idea that there had been a consolidation of the two existing corporations, the allegation that the fraud had been perpetrated by the plaintiff bank was sufficient to make an issue to go to the jury. If I have not misconstrued the theory upon which the holding is predicated, it amounts to saying that, although the evidence does not show that there is a coincidence of identity between the Abilene State Bank and the Guaranty State Bank, and although this is a case where the burden is on the appellant to show that there was a coincidence of identity, such failure to prove what is alleged is sufficient to take the matter to the jury. This is curious law to me, and amounts in my mind to an assumption that the Guaranty State Bank and the Abilene State Bank were, in fact, but one and the same corporation, operating at different times under different names. It is not enough, in my judgment, for a party to make out a case to merely raise a surmise or conjecture that the facts may be as alleged by him, but he must prove that such a state of facts does not exist, or offer testimony from which such conclusion may, as a matter of fact, be drawn. Joske v. Irvine,91 Tex. 574, 44 S.W. 1059.

Brought to its last analysis, the holding appears to be that, where it is shown that one corporation takes over the assets of another corporation, and thereafter employs the same officers, there is a presumption that there has been a consolidation or amalgamation of the two.

Resort has also been made in the majority opinion to the rule that variance, to be fatal, must be material and such as is calculated to mislead or surprise the adverse party. Reference is made to a number of cases applying this rule, but they are cases where the precise transaction relied on was pleaded, but a mistake had been made as to the names or dates. In most instances the names were "idem sonans," and the conclusion seems to have been reached by the majority that this rule requires a showing of actual surprise. I do not believe that its application can be invoked in this case. If the rule was as applied in this case, the decision in New Amsterdam Casualty Co., supra, should not have been made, nor would the Supreme Court have held as it did in the case of Western Union Telegraph Co. v. Smith, cited in the case last above referred to. In neither case was the element of surprise presented, and particularly was it absent in the New Amsterdam Casualty Co. Case. Obviously, where a party pleads one transaction and proves another, the rule can have no application, for such a situation presents but the fundamental question that a party cannot recover upon a cause of action nor assert a defense which is not pleaded.

The last proposition which is seemed to be relied on is statements from Poole quoted in the majority opinion. These certainly cannot be held to refer to the Abilene State Bank.

The writer presents another reason why he thinks appellant is precluded from a recovery in this case, and this comes under the rule that the maker of a note procured by a fraud by a renewal of it, waives all defenses of which he had knowledge at the time of the execution of the renewal or which he could have discovered by the exercise of ordinary diligence. If he is in possession of the facts which put him upon inquiry, it then becomes his duty to make such inquiry before executing the renewal, and, if he fails to do so, he is as much bound as if he had knowledge thereof. 3 R.C.L., titles "Bills and Notes," § 321; Padgett v. Lewis, 54 Fla. 177, 45 So. 29; Twichell v. Klinke (Tex.Civ.App.)272 S.W. 283; Roess Lumber Co. v. State Exchange Bank, 68 Fla. 324,67 So. 188, L.R.A. 1918E, p. 297, Ann.Cas. 1916B, 327.

It appears from the undisputed evidence in this case that appellant renewed the note in controversy seven times after it was acquired by the Abilene State Bank. These renewals covered a period of practically two years. On May 2, 1922, appellant executed a guaranty to induce the plaintiff bank to extend to appellant's said son-in-law, Cozart, $4,000, and in said guaranty represented that the $7,000 note which was then held by the appellee was a valid obligation. It further appears that appellant and his son-in-law were on good terms during the whole time of this transaction, and lived in the same city where the transactions occurred. If a case was ever presented where the undisputed facts showed a duty to inquire, it seems that this is one.

I am not unmindful of the rule that, where there is an issue of fact, regardless of how weak the evidence may be in probative force, the question is one for a jury. Appellant's claim of fraud rests solely upon his contention that he borrowed this money for the purpose of furnishing new capital for the enterprise. His attention was called pertinently and directly on the part of the bank to this matter by demands for renewals of this paper and with knowledge that nothing had been paid at any time upon the principal. At the time of the last renewal, he executed the guaranty referred to. I cannot conceive how a jury could find, or their findings could be sustained by the evidence, that a person of ordinary prudence would not have made some inquiry of Cozart or the bank as to the condition of the affairs of the firm of Cozart and Matthews or as to what had become of the $7,000 which appellant claims he borrowed for capital for the firm.

There is not, to my mind, a question of presumption. The appellant was on the stand, and testified that he had no knowledge of the application of the bank of the money to Matthews' debts, or of the existence of the indebtedness of Matthews to the bank, but he was silent as to whether he made an inquiry. If he had inquired, he would have performed his duty, and could have relied upon the information which he received, but, having made no inquiry, the law puts him upon notice of all the facts which the inquiry would have disclosed. The presumption, in my judgment, has been placed the other way around. In order to absolve him from the consequence of his failure, it seems necessary to presume that he did inquire.

Other matters might be discussed, but the above are sufficient to illustrate my view as to why the judgment of the trial court should be affirmed.