*1 relief, granting may the court
require protect parties who bond relief”). by the
will be affected Alterna-
tively, a proper order determina-
tion of be that the the direct would
Relator, acting those concert with
it, stock, are prohibited selling also
because, just we be as would unable to any Respon-
reverse sale made
dents, powerless equally we would be Relator, particular-
reverse sales of the stock, it
ly treasury as to be appears stock,
newly issued the Relator is
attempting to sell.
HEALTH DISCOVERY
CORPORATION,
Appellant, WILLIAMS, Shirley Williams,
Bill G. Walker, Jerry
W. Steven W. Peter Shrimp Corpo
mann and Automated
ration, Appellees.
No. 10-04-00126-CV. Texas, Appeals
Waco.
Aug. *2 GRAY,
Before Chief Justice Justice VANCE, and Justice REYNA. OPINION VANCE, BILL Justice.
This is an accelerated appeal from an temporary injunction. order Tex. Civ. PRAC. & Rem.Code Ann. 51.014(a)(4) (Vernon § Supp.2004). Be- cause we find that the trial court abused in failing injunc- its discretion to issue an tion to preserve quo the status pending a issues, trial of the we reverse the order and remand the cause with instructions to injunction. temporary issue a (HDC) Discovery Health Corporation Williams, sued Walker, Jerry Petermann, W. Steven W. and Shrimp Corporation Automated to cancel shares of HDC had been issued to its officers and directors. The trial court issued a restraining order hearing but after a a temporary denied brought HDC this original an proceeding, which we heard oral argument injunction and issued an to protect jurisdiction our preserve subject appeal. matter of the See In re Discovery Corp., Health 148 S.W.3d 10-04-00125-CV, No. 2004 WL at *2 (Tex.App.-Waco July Schmidt, Lauralyn Chrisley, C. Thomas 2004, orig. proceeding). Tittlebaum, Hoffer, Marc M. Schmidt & In HDC had four officers and di- L.L.P., Houston, Fontaine, Stephen R. rectors: Bill G. Robert S. Bras- Fontaine, P.C., Waco, Stephen R. for ap- IV, Petermann, Jerry well W. and W. Ste- pellant. ven Walker. These officers and directors McNamara, LaNelle LaNelle registration McNa- filed a statement with the Se- mara, P.C., L. Moody, Steven Steven L. curities and Exchange Commission to is- P.C., Clark, Clark, Moody, Dick Clark & sue million one to themselves: Howell, L.L.P., Waco, Mills, 350,000 Williams, 300,000 Braswell, Richard G. to to Mills, 200,000 Petermann, 150,000 Law Office Richard G. Duncan- to ville, for appellees. W. Walker.1 The shares were issued in Octo- filing multiplied 1. The shares were also the of 7 for 1 SEC must be 7. split, stock so that the numbers recited in the management the Cause Action After ber and before company changed suit shares, respect HDC With filed, agreed to the cancellation Braswell are void2 the transactions be pled temporary in- of his Before the shares. comply not with the cause the directors did *3 junction hearing, Petermann settled with 2.35-l(A) of the requirements of article his shares. has HDC and returned HDC (the Act). Act Corporation Texas Business appeal, saying this dismissed Walker (Ver Ann. art. 2.35-1 Tex. Bus. CoRP. Act him. that it its differences with has settled 2003). evidence non There is substantial Thus, review of denial HDC now seeks the comply to with that the directors failed injunction to of its as the re- temporary an ways that interested any of the three maining defendants. through validly director can obtain that involved here. a transaction such as STANDARD OF REVIEW Thus, produced and pled Id. HDC has the The issue before trial court of action. support evidence to a cause See injunction hearing in a is temporary (“needs Oil, only 424 at 218 to Sun S.W.2d may preserve whether the applicant the action”). a cause plead of quo litigation’s status the matter of pending applicant trial on the merits. The Right Sought the Probable to Relief plead must three prove and elements (1) injunction: a temporary obtain a cause undisputed that The evidence is the (2) defendant; of action the a against prob by approved transaction was not disinter (3) sought; able to the relief and a by good-faith, ested or a affirma directors imminent, irreparable injury probable, and tive vote of the shareholders. Tex. Bus. in the interim. Butnaru Ford Motor (2). 2.35-l(A)(l), Act Ann. art. The CoRP. Co., (Tex.2002). 198, 84 204 The S.W.3d that of the directors on the evidence a vote applicant required is not establish that place took issuance of shares never is the prevail upon it will a final trial. at 211 Id. if Even we as almost uncontroverted.3 Whitaker, (citing Oil Co. v. 424 Sun occurred, is, that such a vote that sume (Tex.1968)). Our S.W.2d 218 review authorization, ratification approval, or strictly the is limited to whether trial court the directors or share the disinterested in clearly granting its discretion abused holders, proving the of the fairness burden id. See on the interested of the transaction rests at may judg not substitute our We H directors. Landon v. S & Market See simply ment for that of the trial court (Tex. Inc., 673 Group, ing 82 S.W.3d because have decided we would otherwise. pet.); no see also Tex App.-Eastland Moore, 595
as Bank & Trust Co. v. S.W.2d OUR REVIEW (Tex.1980) (a profiting fiducia 508-09 showing the ry of the has the fairness We will review each three ele- burden transactions). testimony at the if the of the The ments to determine trial court hearing conflicted— temporary injunction temporary injunction a should have issued it was a testified fair in this Williams Walker instance. required. It is vote the directors is appeal, 2. On HDC concedes that the transac- formal may tions be voidable. a undisputed are no minutes of there approved meeting at the directors which points 3. HDC to Dowdle v. Texas Am. Oil question. transactions in Corp., (Tex.Civ.App.-El 647 Paso 503 S.W.2d writ), proposition no for the 170
transaction,
Braswell, Petermann,
question
ber
shares in
should it be
two independent investors in
company
damages
awarded
in lieu of a cancellation
testified that
it was not.
Furthermore,
Because HDC of the shares.6
points
HDC
does- not bear the
disproving
burden of
to the fact that the
voting rights
relative
fairness, it
probable
has shown a
right to
all shareholders will be affected absent a
the relief it seeks: cancellation of the
cancellation of
in question.7
the shares
Oil,
shares.4
Thus,
See Sun
at
S.W.2d
HDC has shown that
injury
(“show probable
right on final trial
allowing
to the
questioned
shares to be sold
seeks”).
relief he
litigation
while the
is
is irrepara-
Oil,
ble. See Sun
that the Williamses had sold and were We find that the trial court abused attempting to sell at its very the time in denying discretion request of HDC’s for a hearing. the Bill Williams testified that temporary injunction. City See some of the Waco v. April5 shares had been sold in of Marstaller, (Tex. May S.W.2d 723-24 2004 and that it was his intention writ). Civ.App.-Waco Thus, no to “sell we keep some of the shares and some and, reverse the order Thus, because of of the the na shares.” HDC showed a presented ture of the facts tempo at the probable and injury. imminent Is it irrep rary injunction hearing, direct arable? the probable HDC has shown a court, trial upon filing the of a bond in to cancel subject shares that the were the of $25,000, amount of issue following the the tem filing, subject SEC which are to differ porary injunction preserve ent the restrictions than status other shares that quo until a in judgment the trial court have case by ie., been issued company, the becomes final: shares that originally by were held HDC’s parent corporation Williams, but were the Williams, a stock parent’s dividend to the sharehold Shrimp and Automated Corporation, addition, ers on May 2001. In servants, the agents, their employees, affili- registration ates, statement any control, states there person entity they or or public little no for any market the person acting in concert with shares, stock,” and, “penny described as a hereby them are commanded to desist although the evidence that a shows market and refrain selling or otherwise exists, currently HDC has no assurance transferring disposing any or share of that it will repurchase be able to num- stock of Health Discovery Corporation argue 4. The defendants that HDC testimony hearing lacks stand- 6. Bill Williams's at the ing to maintain this cause of action and that ability pay casts substantial doubt about his preempts federal law state law in this in- judgment damages. for reject We stance. both contentions. 7. There are 260 shareholders of HDC other Although 5. Williams testified it was a "mis- than the four who received the shares in communication,” some shares were sold question. split, aAs result of the 7 for 1 stock temporary restraining while order was in 18,000,000 By hearing, effect. they time of the there were more than had shares out- 2,000,000 shares, approximately sold standing trading when started on November equivalent they of all the shares owned before those, 2001. Of the four officers and question plus approximate- the transaction in 7,000,000. directors had issued themselves 700,000 2,450,000 (350,000 ly 7) of the times received in this transaction. judgment until the in Cause No.2004-
1188-3, HOUSTON, in Appellant, the 74th District CITY OF County, Texas, Court of McLennan be- final; comes and Bill G. Shir-
ley K. Shrimp BOYLE, Appellee. and Automated A.P. Gerald servants, Corporation, agents, their em- 01-03-00016-CV, Nos. 01-03-00759-CV. affiliates, ployees, any person entity or control, they any person acting in Texas, Appeals Court of hereby concert with them are further (1st Dist.). Houston deposit commanded to registry into the July of the 74th District Court of McLennan Texas, County, all shares of Health Dis-
covery Corporation now owned or held them, them, any whether as name,”
share certificates or a “street
such shares to be held in the registry of until judgment in Cause
No.2004-1188-3, the 74th
District County, Court of McLennan
Texas, becomes final and then
further order of the Court.
Costs of this against are assessed K
Automated Shrimp Corporation.
Chief Justice dissenting. GRAY GRAY, Justice,
TOM Chief dissenting.
This is a case in which the simply
disagrees court, with the trial so it substi- judgment
tutes its for that of the trial
court. The Court has confused the burden proof at a trial on the merits and the
burden proof prove entitlement to a
temporary injunction. Because the evi-
dence of whether there was a vote on
whether to issue the stock disputed, the evidence of the fairness
and/or
transaction disputed, was also I cannot
hold the trial court abused its discretion We do time, resources,
not have duty,
or the to micromanage the trial court
process. I would not in this instance.
I respectfully dissent.