San Antonio Irrigation Co. v. Deutschmann

Selig Deutschmann brought this suit against R.H. Russell, J.A. Simmons, and the San Antonio Irrigation Company, to recover for the appropriation and conversion of his interest in a certain franchise granted by the city of San Antonio, which he claimed to be one-third. He recovered a judgment against the Irrigation Company for the value of his interest in the franchise, which judgment was by the Court of Civil Appeals affirmed in so far as it gave a judgment against the Irrigation Company, but reversed in so far as it gave a lien upon the company's property for the payment of the judgment.

The facts as found by the Court of Civil Appeals are that Russell and Simmons and defendant in error entered into a contract to acquire from the city of San Antonio a franchise for the disposition of the sewerage of the city, and that for his labor, assistance, and legal services in the enterprise, defendant in error was to have one-third interest in the franchise when acquired. The franchise was procured and defendant in error's interest attached. But having failed to procure the money to operate the proposed plant in exercise of the franchise, it was agreed between the promoters that they would organize a corporation to which the franchise should be transferred and that they would procure money for the prosecution of the business by the sale of stock in the corporation. The capital stock of the corporation was to be $25,000. There was $5,000 of stock agreed to be set apart to the promoters as a bonus, but as this was never done it is fact of no importance in the case. The defendant in error agreed to take one-fourth of the stock. He claimed that he was to have time to pay for it, which was denied on the other side, but the Court of Civil Appeals resolved the conflict in his favor. The franchise was granted to "Russell Simmons and their associates" and was transferred by Russell Simmons to the corporation. But it seems that before this was done Russell Simmons went to defendant in error and demanded that he should subscribe for the stock he was to take and should pay fifty percent thereof on the next day. The defendant in error, claiming that he had the right under their agreement to take the stock on a credit and to pay for it in future, declined to accede to their request and the negotiations were broken off. The Court of Civil Appeals held, it would seem upon sufficient evidence, that the purpose of Russell Simmons was to force him out of the corporation by demanding terms with which they knew he was unable to comply.

Now it is contended on behalf of plaintiff in error, that, the franchise having been granted to Russell Simmons "and their associates," they held the legal title and had the power to convey it. Defendant in error seems not to dispute the proposition, but claims that the Irrigation Company had notice of defendant in error's rights, and therefore took the property subject to them. There is some authority which seems to support the proposition. (Ennis v. Brown, 36 N.Y. Supp., 737.) It occurs to us that an affirmance of the proposition is necessary to a support of the judgment in this case; for, if Russell Simmons were without power to convey defendant in error's interest, his title was left unimpaired by the conveyance; and we are unable to see how it can be claimed that it has been converted in such a way as to entitle defendant in error to recover its value. He would be left with title as a tenant in common to a one-third interest in the franchise with the rights incident to that relation.

But conceding that the legal title to his interest passed by Russell Simmons' conveyance, and that he may elect to treat it as the extinguishment of his right and the conversion of his interest, the question is, has he been injured by such action? When the parties found that they would be unable with the means at hand to comply with the conditions of the concessions by the city and formed a corporation with the understanding that the franchise should be conveyed to it, and the charter of the corporation was procured and the franchise transferred in accordance with the agreement, what right had any one to complain?

It is clear to us that the wrong which has been inflicted upon the defendant in error was in his being deprived of his right to take stock in the corporation with the privilege of paying for it in a reasonable time.

There being no conversion of his interest in the franchise by the Irrigation Company the judgment can not stand.

We think the Court of Civil Appeals was correct in holding that the Carter mortgage contained no power of sale and deem it unnecessary to add to their remarks on that subject.

For the error in rendering judgment against the Irrigation Company for the conversion of the franchise, the judgment is reversed and the cause remanded.

Opinion filed November 27, 1907.

ON REHEARING.