in question by its terms does not apply as against a claim adverse to or inconsistent | NUECES VALLEY IRR. CO. v. DAVIS et al. with that evidenced under the instrument, (Court of Civil Appeals of Texas. which has been asserted during the first 10 years that the instrument has been upon record. The court finds that this instrument 1. APPEAL AND ERROR (§ 1008*)-SCOPE OF

Where certain conveyances of a corporation's property were unauthorized, but the purchasers paid the value of the land and there was no positive fraud, the corporation as a condition precedent to the cancellation of the conveyances would be required to refund the purchase price so paid, but without interest; the purchasers having had possession in the

ances by reason of the fact that the stock of | Davis for the sum of $500, alleged to be due the corporation changed hands, and the purchas- the company by reason of his purchasing in ers bought with knowledge of the illegal trans- the name of his wife while president of the actions of the prior board of directors. [Ed. Note.-For other cases, see Corporations, corporation 20 shares of the company's capiCent. Dig. § 1413; Dec. Dig. § 316.*] tal stock at $25 per share, when its par, as 8. CORPORATIONS (§ 316*)-SALE TO DIRECTORS well as market value, was $50 per share. -VACATION-LIEN FOR PRICE. The defendants answered by certain pleas in abatement, by general and special exceptions (none of which was called to the attention of the trial court), by pleas of not guilty and general denial, and specially the matters set out in our conclusions of fact as a ratification of the acts of the company's board of directors and its president, the alleged invalidity of which is the basis of this suit, which acts are also set up as estopping plaintiff from maintaining this action. The case was tried without a jury, and the trial resulted in a judgment against the plaintiff as to the land and cancellation of the deed, and in favor of defendants as to everything else involved. From this judgment the plaintiff alone has appealed.

meantime.

[Ed. Note. For other cases, see Corporations, Dec. Dig. 316.*]

On Rehearing.

9. EQUITY (§ 66*)-PLEADING.

A party suing in equity is not required to plead the equities of his adversary; it being only where such equities are so blended with his own case as to be inseparable from a fair statement thereof that he is required to offer to do his adversary equity before he recovers.

[Ed. Note.-For other cases, see Equity, Cent. Dig. 88 188-190; Dec. Dig. § 66.*] 10. APPEAL AND ERROR (§ 1178*) — REVIEW LIMITATION BY SCOPE OF RECORD-REVERSAL-DISPOSITION OF CAUSE.

Where, in a suit to set aside certain illegal conveyances of a corporation's property, the purchasers did not plead the placing of improvements on the property in excess of the purchase price, and ask that the cost be refunded in case the conveyances were set aside and no issue was made thereon at the trial, the Court of Appeals on reversing a judgment for defendants and directing a cancellation of the deeds would not remand the cause for a determination of such question on the affidavit of appellees' counsel that since defendants had bought the premises they had placed improvements thereon aggregating $5,000.

[Ed. Note. For other cases, see Appeal and Error, Dec. Dig. § 1178.*]

Appeal from District Court, Bexar County; Arthur W. Seeligson, Judge.

The facts found by the trial judge are:

(1) That on March 15, 1904, at a regular meeting of the corporation at which were present Dr. W. H. Davis, F. Vandervoort, J. A. Daugherty, and J. S. Taylor, the company passed the following resolution: "That the president of the Nueces Valley Irrigation Co. is hereby authorized to sell to the members of this company, land or lands now owned by this company, either to pay debts owing to such members, or for cash at such price as may be agreed upon and to sell with the land perpetual water rights for irrigation purposes. The president is further authorized to borrow money on the property of the company to the amount of five thou

sand dollars ($5,000.00) and to give a mortgage on the property of the company." No money was borrowed by the president for the purpose mentioned in the resolution. (2) That on July 4, 1904, the corporation, through its board of directors, Wm. Hope Davis, F. Vandervoort, J. A. Daugherty, and J. S. Taylor, at a regular meeting of the corporation, authorized its president to negotiate a loan for the company for the sum of C. C. Clamp $5,000 for the completion of work under

Action by the Nueces Valley Irrigation Company against William H. Davis and others. Judgment for defendants, and plaintiff appeals. Affirmed in part and reversed and rendered in part. Motion for rehearing

overruled.

A. C. Bullitt, for appellant. and S. S. Searcy, for appellees.

progress, and such new work as clearing land, making laterals, fencing, grubbing, and other work determined on from time to time as the superintendent and engineer might deem necessary; that at the time said directors owned practically all the stock of plaintiff corporation; that the president failed to negotiate a loan for the purpose of paying its indebtedness, and for making the improvements for which the company was indebted.

NEILL, J. Appellant, a private corporation, brought this suit on June 7, 1907, against appellees, William H. Davis, Alletta B. Davis, his wife, and Ida F. Brooks, to cancel a deed made by appellant through its president, William H. Davis, on June 4, 1904, to his wife, Alletta B. Davis, and Ida F. Brooks, conveying them 200 acres of land situated in the county of Dimmitt, and state of Texas, the property of appellant corporation, upon the ground that the conveyance is void because executed by Davis without authority of the irrigation company. In the same action the company sued William H.

(3) That on July 11, 1904, the stockholders of the corporation elected the following directors: Dr. Wm. Hope Davis, Mrs. J. S. Taylor, J. S. Taylor, Mrs. Alletta B. Davis, and Ida F. Brooks, there being 620 shares of

capital stock of the corporation represented, | pany, which contract provided that Bullitt the entire issuance of which did not exceed & Bullitt, attorneys for Dunlap and asso700 shares at $50 per share, aggregating ciates, should investigate the title to the $35,000. land, condition of the company and its stock

(4) That on June 14, 1904, the president, During the investigation Dunlap and his asWm. Hope Davis, acting under the author-sociates had all the records of the corporaity conferred upon him by the board of direc- tion, together with all title papers and stock tors, conveyed 78% acres of the company's book, and were fully advised of the condiland to Adams, Kirkpatrick & Nicholson for tions herein before enumerated; and therethe sum of $- per acre, to Ida F. Brooks after, on September 3, 1904, they purchased 100 acres at $5 per acre, to Alletta B. Davis all the stock owned by Davis and wife and 100 acres at $5 per acre, and to Mrs. J. S. Ida F. Brooks of the company, and from Taylor 152 acres at $5 per acre; that all that date to the present they owned all the the land so conveyed was similar in quality stock of the corporation, save that owned and value except the land conveyed to by the Taylors, who are still members of the Adams, Kirkpatrick & Nicholson, which was corporation owning the shares heretofore better and worth more than the other land; noted. that the consideration received from the sales was paid to the company and expended in paying its debts and improving its property; that the corporation made a deed to Mrs. Davis and Ida F. Brooks for the 200 acres conveyed to them which was filed in the deed records of Nueces county on July 18, 1904, and duly recorded; that Alletta B. Davis was the wife of Wm. Hope Davis when she bought the land; and that the respective purchasers took possession of the respective lands conveyed to them, and have used, occupied, and improved the same ever since.

(5) On July 11, 1904, at a regular meeting of the board of directors, the following resolution was unanimously adopted: "It is hereby ordered that the sale of 78% acres of land sold by Dr. Davis to J. E. Adams, Kirkpatrick, and Nicholson, 100 acres sold to Ida F. Brooks, 100 acres sold to Alletta B. Davis, and 1504 acres sold to Mrs. J. S. Taylor, be and is hereby approved." On that date W. P. Dunlap, W. W. Cunningham, Wm. M. Carroll, and Henry D. Keith were not members of the corporation.

(6) On June 30, 1904, there was issued to Mrs. Alletta B. Davis 50 shares of the capital stock of the corporation at $25 per share, | which sale was made by virtue of a resolution of the board of directors authorizing the president of the company to sell said stock. This resolution was not entered upon the minutes, but the stock book shows the issuance of the stock and the ledger account shows its issuance at the reduced rate of $25 per share, the par value being $50 per share; that the money derived from the sale was used by the company in paying its indebtedness and for improvements; that on said date the company owed approximately $3,000, and there was allowed Wm. Hope Davis $242.26 out of the company's funds by an order of the board of directors for expenses and outlays incurred by him in its business. (7) On July 23, 1904, Wm. Hope Davis. Alletta B. Davis, and Ida F. Brooks entered into a written contract with said Dunlap and his associates for the sale by Davis and his associates to Dunlap and his associates

(8) On July 10, 1905, the new directors of the corporation, who were said Dunlap and his associates, by resolution approved and ratified all the acts of the old board and the company except the sale of the land to Mrs. Davis; the resolution being silent as to the purchase of the land by her.

(9) The land purchased by Mrs. Taylor was shown by the testimony of her husband J. S. Taylor, to be of similar value to that purchased by Miss Brooks; that in the sale of the land the parties acted in good faith and paid the fair market value therefor. No question was raised by the company as against the sale to Adams, Kirkpatrick & Nicholson or to Mrs. Taylor; that the company received the cash consideration for the various tracts of land sold, as well as for the stock, hereinbefore enumerated, and the money was used in payment of debts and for improvements.

(10) Prior to September 3, 1904, the date when Dunlap and associates became the owners of all the capital stock except that owned by the Taylors, the acts and things done and performed by said corporation, was, with the unanimous consent of the directors and stockholders mentioned, and at the time the various acts and things, hereinbefore mentioned, were done, Dunlap and his associates had no interest in the corporation, either as stockholders or as directors.

Upon these findings of fact, the trial court concluded as a matter of law that the plaintiff is not entitled to recover upon any issue of the case claimed by it and alleged in its petition against defendants. No exception was taken to these findings of fact, nor to evidence upon which they were found, nor was the trial court requested by either party to make any additional findings. Therefore they will be taken as true, and the naked question of law considered, whether they support the judgment rendered on them. This depends upon whether the resolution of the board of directors under which the sales of the property was made was void, and, if it was, whether the sales were afterwards ratified by the stockholders.

It was held by the Supreme Court in San

fer upon Davis, the president of the concern, the power to sell its land to themselves, who, acting under the guise of the resolution, did sell to two of the directors who passed the resolution and to himself, or, what is the same thing, to his wife. And, when they had bought the property, they, still acting as a board of directors (for themselves), approved the sales. In other words, having bought the property under a void resolution, they approve their own purchase by a resolution which is likewise void. It cannot be successfully contended that this resolution of approval was by the stockholders; for the board of directors was not composed of all the stockholders when either of the resolutions was passed. Therefore any stockholder who was not present, and never assented to or ratified the unauthorized acts of the board of directors and president of the corporation, had the right to require the corporation to institute suit to cancel the unauthorized deed, or, upon the failure of the company to sue, to bring the action himself.

26 S. W. 1040, that a director is without au- | the corporation, when there was not a quothority to act as such in a matter in which rum of the board of its directors. Thus acthis interest is adverse to the corporation, cit-ing, they undertook by the resolution to coning 1 Mora. on Corp. § 517, 518. In that case two of the four directors constituted the quorum when a resolution was passed by which a contract between the corporation and certain parties, of whom two were directors, was made, and, when another resolution was passed affecting the contract, one of the board of directors interested in the contract sat as president at the meeting of the board of directors with only two other members of it present. The court upon the principle stated held the resolutions void. The decision cited rests upon the principle that the directors of a corporation occupy a fiduciary relation towards the corporation, and cannot, either directly or indirectly, in their dealings on behalf of the corporation, acquire any benefit or advantage not also enjoyed by the other stockholders. And for this reason it is generally held that if the directors or other officers of a corporation represent it in making or authorizing a contract or other transaction in which they are personally interested adversely to the corporation, and their consent is necessary to bind the corporation, the transaction is voidable at the option of the corporation and without proof of fraud. 3 Clark & Marsh. Cor. §§ 757, 758, 759. It seems, however, that these principles are not in this state carried to their logical result; for here a corporation cannot, at its mere option, without inquiring into its fairness, avoid a contract made with one of its directors. The

Upon the same principle we do not think that the resolution of July 10, 1905, passed by the new board of directors, approving and ratifying the acts of the old board of directors (called in the trial court's conclusions "the old company"), precluded the corporation from maintaining this suit; it not appearing that the members of the new board were all the stockholders of the company, for it was essential to a ratification of such acts that it should be made by all the stockholders.

Nor, as to the cancellation of the deed, can we perceive from the facts found anything to estop the company from maintaining this action against Miss Brooks, Davis, and wife A corporation is an entity

for that purpose.

right of directors to make fair contracts with the corporation is upheld in the case of Tenison v. Patton, 95 Tex. 294, 67 S. W. 92. But in the same case it is said: "It is doubtless right to allow a beneficiary the option of avoiding a trade affecting his interests which has been effected by a trustee representing separate and distinct from its board of diboth parties to it, for the reason that the trus-rectors, whose personnel may change and tee ought not to be allowed to act for and be different at different times; but this does bind two parties having conflicting interests. not affect the identity or life of the corporaIt may be perfectly just to apply this prin- tion. The spirit of its existence is its charciple to transactions in negotiating which a ter, and there can be no dissolution of a body director or directors of a corporation were corporate until it loses its life, which is its personally interested, and at the same time charter. The Nueces Valley Irrigation Comrepresented the corporation, either alone or pany, after Dunlap and his associates became conjointly with co-directors; and this is prob- the majority stockholders and members of its ably the true spirit of the rule as it has been board of directors, remained the same entity enforced in most of the cases." See, also, that it was before. Whatever unlawful or Parks v. Worthington (Tex.) 109 S. W. 909; unauthorized disposition was made of its Greathouse v. Martin (Tex. Civ. App.) 91 S. property through the board of its directors W. 385; Id., 100 Tex. 99, 94 S. W. 322; Na- and officers when Dr. Davis was president bours v. McCord, 100 Tex. 456, 100 S. W. could be righted by suit brought by the corporation under the direction of the board of directors afterwards elected to set aside such wrongful or unauthorized act, and to recover its property from those who claimed it through means thereof, if such acts had not before been ratified by all the company's stockholders. Nor can we perceive any reason why the purchase by Dunlap and his as

1152.

In the case at bar the purchasers of the land did not, as did the director in Tenison v. Patton, divest themselves of their representative character in the transactions under consideration and deal with the corporation through others competent to represent it; but they retained and acted in their representa

Affirmed in part and reversed and render-pected to reverse the judgment based upon ed in part.