Geo. W. Armstrong & Co. v. Waggoman , 1922 Tex. App. LEXIS 724 ( 1922 )

As we think it appeared as a matter of law, in any view taken of the testimony, that appellee Waggoman's cause of action was barred by the two-year statute of limitations long before he commenced his suit, it will not be necessary, in disposing of the appeal, to consider other questions presented by the assignments.

The contention of said appellee to the contrary of the conclusion reached by us is on the theory, it seems, that his case in its facts was within the rule applicable to express trusts, according to which the statute does not begin to run in favor of the trustee until he repudiates the trust and the beneficiary has notice thereof. As we understand the facts established by the testimony they do not make that kind of a case. Instead they show it to be the ordinary one arising from the breach of a contract involving no element of trust different from that involved in most, if not all, contracts.

What appellant agreed to do, if anything, was to issue a stock certificate for $1,250 to appellee when he and the other indorsers on the Godair note paid the balance due on it, and after issuing the certificate to hold it for him. It did not issue the certificate to appellee, but issued it to other parties, and so breached its contract. A cause of action at once arose in said appellee's favor. The only pretense of a reason appearing in the testimony why the statute of limitations did not then begin to run against said appellee was such as was predicable on confidence he had in the mill company. It has never been held, we think, that mere confidence reposed by one party to a contract in performance by the other party of his obligation under it had the effect to toll the statute in favor of the party reposing the confidence.

If it appeared that the mill company agreed to sell said appellee an interest it had not already disposed of in its property and business, it might be plausibly contended that he became the owner of such interest July 16, 1910, when he paid the $1,250 on the note, without respect to the fact that a certificate evidencing the interest was never issued to him; that the mill company and appellant thereafter held the interest in trust for him; and therefore that the principle invoked applied to the case. And it might with as good, or better, reason be contended it applied, if it appeared that the mill company issued the stock certificate to him as agreed upon, and after issuing it breached an undertaking on its part to hold same for him until he called for it.

But, as we have seen, the mill company and appellant never became a trustee in either of the ways suggested. The most favorable view to appellee which can be taken of the testimony is that the mill company through its officers and agents practiced a fraud on him when they induced him to make the payment on the note by promising to issue the stock certificate to him and then to hold it until he called for it. In that view of the testimony it is doubtless true that the statute would not begin to run against said appellee until he discovered the fraud, or in the exercise of reasonable diligence would have discovered it.

That he did not exercise any diligence whatever during more than six years which intervened between the time (July 16, 1910) he had a right to demand the issuance and delivery of the certificate and the time (the latter part of 1916 or early part of 1917) when he learned same had not been issued to him we think conclusively appeared. For during all that time, as the owner of other stock in the mill company, he had a right to inspect the records of that company, which showed that a stock certificate had never been issued to him, and that on October 28, 1910, the company issued to other persons all the stock it could lawfully issue. No reason why he did not inspect said records nor make any inquiry whatever during that time to ascertain if the stock certificate had been issued to him as agreed upon appears in the testimony, except that referable to confidence he had in the company's having performed its undertaking under the contract and to the fact that stock in the mill company was then of little value. Boren v. Boren, 38 Tex. Civ. App. 139,85 S.W. 48; Cleveland v. Carr (Tex.Civ.App.) 40 S.W. 406; Prosser v. Bank (Tex.Civ.App.) 134 S.W. 781; Wood v. Carpenter, 101 U.S. 135,25 L. Ed. 807.

In the case first cited it appeared that the plaintiff was induced by his older brother, who at the death of their father had taken the control and management of the family affairs, and in whom the plaintiff had implicit confidence, to convey land he owned as devisee under his father's will, but did not know he owned, to his brother, by fraudulent representations of the latter that plaintiff did not own an interest in the land, but that it was necessary for him to execute the deed to satisfy a loan company from whom the older brother wished to procure a loan to buy a home for their mother. In sustaining the contention of the defendant that the plaintiff's cause of action was barred by the statute of limitations, the court said, with reference to the plaintiff's claim that he was ignorant of the fact that the land was devised to him in his father's will:

"This will was probated and became a public record, easily accessible to appellant [plaintiff] and open to his examination. It disclosed his right to the property in controversy, revealed the falsity of appellee's alleged statements, and exposed the fraud complained of. From the date of the probate of this will, appellant had ample means of detecting the fraud alleged to have been perpetrated upon him, and by the exercise of reasonable diligence he would have seasonably discovered the truth and his right to the property claimed in this suit. Having had the means of discovery in his power, and having failed to make use of them, he cannot, after so long a time, avail himself of the fraud charged to avoid the bar of the statute."

We do not think any of the cases cited by appellee support his contention that the statute did not begin to run against him until he discovered that appellant had not issued the stock certificate to him. In Neyland v. Bendy, 69 Tex. 711, 7 S.W. 497, it appeared that Bendy had conveyed land to Neyland by a deed absolute on its face, but in fact in trust to pay certain indebtedness, and upon an express agreement that when the indebtedness was paid Neyland would reconvey the land to him. It was held that limitation would not run in Neyland's favor until he repudiated the trust thus created and Bendy had notice of such repudiation. A like ruling was made in McCarthy v. Woods (Tex.Civ.App.)87 S.W. 405, on the theory that the defendant had agreed to hold the land for the plaintiff. In McBride v. Briggs (Tex.Civ.App.) 199 S.W. 341, it appeared that McBride and Briggs jointly purchased and paid for the land; the title thereto being taken in McBride's name alone. The trust thus created was never repudiated, and the court held it must have been to Briggs' knowledge before limitation would begin to run. Brothertom v. Weathersby, 73 Tex. 471, 11 S.W. 505, and Trust Co. v. Harbaugh (Tex.Civ.App.) 205 S.W. 496, were like the McBride-Briggs Case. The ruling in Ash v. Frank (Tex.Civ.App.) 142 S.W. 42, was on the theory that the defendant had misappropriated proceeds of certain insurance policies the plaintiff had turned over to it for collection. The court held that limitation does not begin to run against a principal in favor of an agent, when the latter has misappropriated funds of the former, until the misappropriation is discovered by the principal, or by the use of reasonable diligence would have been discovered by him. In White v. Leavitt, 20 Tex. 703, it appeared that the plaintiff had consigned certain goods to the defendant for sale. The suit was to recover the value of the goods. With reference to the statute of limitations which the defendant set up as a bar to the recovery sought, the court said:

"The proof shows that the goods were held and disposed of by White Co. in trust for Leavitt, and there being no evidence that the trust was ever repudiated, the statute of limitations did not run upon the cause of action."

In Cole v. Noble, 63 Tex. 432, it appeared that C. W. Noble turned over to his brother S. F. Noble for collection certain notes he owned, which were secured by the vendor's lien on land he had sold. S. F. Noble surrendered the notes to the maker and took a reconveyance of the land, but in his own name instead of the name of his brother. The suit was by C. W. Noble against the widow of S. F. Noble. It did not appear that S. F. Noble intended when he took the title in his own name to defraud his brother, and he never repudiated the trust created by his act, nor did his widow repudiate it until a short time before the suit was commenced. The court held that limitation did not commence to run before such repudiation by the widow. In Cobb v. Bank, 91 Tex. 226, 42 S.W. 770, it appeared that Cobb, in consideration of service he rendered the bank as an attorney in procuring a judgment in its name and which it had a right to collect and discharge, became the owner of a part of the judgment before it was rendered. The bank collected the judgment, but failed either to account to Cobb for his part of it or to notify him of the fact that it had collected it. The court held that Cobb had a right to rely on the good faith of the bank, that it practiced fraud on him when it acted as it did, and that limitation did not begin to run in its favor until he "was apprised that the judgment had been discharged." In McCarthy v. Woods (Tex.Civ.App.) 87 S.W. 105, the court held that the statute had not run in the defendant's favor on the theory that he had agreed to hold the land in question for the plaintiff, who owned it, to protect him against a claim that might be asserted against it by one Decker. The court, concluding that the defendant by such agreement became a trustee, held that limitation did not begin to run in his favor until he repudiated the trust.

We think the judgment should have been in favor of appellant. Therefore it will be reversed, and judgment will be rendered here that appellee take nothing by his suit against appellant.