*1 246 hands, principal ($2,500), position- reduction of clean the valid with are in no incep- delinquent
the same at remained to ask relief the courts. A defense rendering equitable tion of estoppel raised, proceeding's; foreclosure thus applicable affirmatively pled. an- principal, 94, the settled first Rule T.R.C.P. Watson, Hemphill 60 nounced v. However, grounds on as- above first Tucker, v. followed in Texas Co. signed, cross-appellees’ rehear- motion for Tex.Civ.App., ref.) (Writ 129 762 S.W.2d sustained, affirm- must be our order of “that after a has been sale real estate pf aside, instead, ance set made, trust, under the terms of a deed of the trial court be here ren- reversed and late thereby paid, too debt except original appellants; dered for aside attempt to thereafter sale to' set the Madisons are withdrawal entitled to obligation for vice or frailties in the deposit $6,792.16),, (actually of their court sale security which the given, was to re- District Clerk is ordered satisfy. especially true This is them, taking receipt turn to due therefor.. where, case, as in part of the debt the security for which un- given was was Reversed rendered. questionably valid, portion even if another consisted of void A usurious interest. provisions trust,
sale under the of a deed conditions, such
under is not void.” See
also Volunteer Co. Sum- State Life Ins.
ner, Tex.Civ.App., 74 319. unnec Above conclusions would render MORRISON, Appellant, R. E. essary any points discussion of to 9 as 1 presented by cross-appellees; but relative HOTEL, ANTHONY SAN ANTO- The ST. briefly: the following thereto be stated NIO, Texas, al., Appellees et (1) It still our Nelms was view that No. 13017. chargeable with Title Com notice of the pany manner concerning transactions of Civil of Texas. $2,500 which his check disbursed. was San Antonio. According to Layton, Mr. its books 12, Sept. the entire deal “charged T. B. Madi son” disbursements checks as Rehearing Denied Nov. Mortgage $42; policy premium follows: fee; County escrow Clerk $5 $3.25
cording fee; attorney’s and transfer fee
$5; $500; to Collector of Internal Revenue
Merchants State Bank Tal $531.33; O. J. $225.76; ley $200; City Tax Collector Madison, totaling B. three
Thos. items A trial court finding that Nelms
$987.66. lender, purchaser not the but a faith, good note in
original would be to realities”;
"ignore was observed in Schlein, D.C.Mun.App., A.2d
Elliott 104 So, under almost identical facts.
also, Sotscheck, in Schanz v. 86 Misc. 145, Id., App.Div. 202, N.Y.S. (2) point cross-appellees
N.Y.S. Madisons, coming
assert into
Davis, Clemens, Knight Weiss, & Ernest Clemens, George Spencer, W. H. San An- tonio, appellant. for Johnson, Dodson, Duke, Wright Carl Davis, Antonio, San Branch & P. H. Antonio, Jr., appellees. Swearingen, POPE, Justice. Morrison, E. a former
R.
stockholder in
Hotel,
appealed
has
dismissing his
an order
The St.
directors,
and the Pan
Company,
American Hotel
which owned the
of The
Anthony.
plea
The trial court sustained a
ju-
of res
special exception
dicata
which stated
plaintiff
failed
had
to assert a cause
of action. Morrison sued
a contract
to recover divi
which he claims a
was carried forward and was
he
He
sued
dends.
written into the charter of The
individually
by reason of
St. Anthony
claims he
suffered
Hotel. The stock certificates
*3
practices and a
mismanagement
carried
agreement by
forward the
part
printing
breach
trust on
of the
on
of
the
their face:
stockholder,
in de
resulted
which conduct
“
**
* and the directors of the
By
stock values.
pressing his dividends and
required
shall be
to declare
of
issues
former trial and
the
pay
year
each
stockholders,
to the
ownership
stock
the stock
and the value of
as
provided,
herein
all net earnings of
litigation was
decided. That
former
the
year,
for said
com-
issues,
court
those severed
the
mencing
year
with the
ending January
American,
Mor
Pan
than
held that
rather
31, 1950, within a reasonable time after
rison,
question. Morris
the stock in
owned
the close
year
of each fiscal
after the
Hotel,
Anthony
Tex.Civ.App.,
son v. St.
accounts and financial conditions of
issues were com
558. Those
the company have
been audited
present
pletely
issues now
severed from the
Certified
Accountants,
Public
and the
ed.
shall first consider the court’s hold
We
profits
net
year
for the
have been de-
presented are
the issues here
ing that
* *
termined
adjudicata. We
plea of res
barred
Morrison,
whether
no
then consider
shall
agreement
The 1948 settlement
further
stock,
of the
longer
owner
denied
provided
American,
that Pan
the dominant
agreement
under his
stockholder,
for dividends
a suit
would have a continuing option
defendants, and whether
he
purchase
minority
Upon
stock.
damages
action for
for misman
denied an
option,
exercise
of
value would be de-
agement. The
is reversed
auditor,
company
termined
who was
the cause
remanded.
designated as
sole
arbiter. He would
compute
money
of
equal
sum
to three
Morrison and Pan American were
In 1948
times the average net annual earnings of
suit,
they
engaged
another
settled
Anthony Hotel,
The
taxes,
St.
before
dur-
agreement.
by executing a written
The
years
the three
preceding
next
the ex-
much
nature
that settlement and
of
of
ercise
option.
phase
of the
This
of the
present
are
history
stated in de-
agreement
was also reflected in the
Hotel,
Anthony
tail in Morrison v.
su-
Anthony
charter of The St.
Plotel and on
since,
pra.
In
at all times
Pan
the face of the stock certificates.
physical
owner of all the
was the
American
Anthony
By
Plotel.
1952, Pan American
properties
op-
exercised its
settlement
Mor-
buy minority
of the
terms
stock
up-
tion
and called
separate corpora-
others formed a
rison and
on the auditor to determine the value of the
stock,
contemplated by
as The St.
known
as
tion
settlement
Texas,
purpose
operat-
Antonio,
agreement,
the charter and stock certifi-
fifty-
Pan American owned
hotel.
ing the
cates. Morrison then filed suit. He
corpora-
ownership
of the stock in the new
percent
despite
claimed
two
others
Morrison and
owned the
of the
exercise
and also
tion
claimed that
Pan American made a new lease
he was entitled to the
earnings
net
balance.
in the
properties to the new operating
the hotel
form of undeclared
dividends in The St.
By
Anthony up
company.
settlement
option.
exercise of
terms
minority
the owners
agreement,
He also claimed
for mismanage-
in The St.
Hotel were
by majority
to re-
stock
ment
stockholder to its own
all the net
profit,
depression
ceive
malicious
by it of
$130,000.
corporation up to
new
his
and stock values. To Morri-
sev-
sue before
suit,
motion to
us.”
order
filed a
of the trial court
defendants
son’s
ownership
Ap-
could
and the
issue
er,
stock
Court of Civil
so
peals
granted
The trial
tried.
saved the
separately
dividend and dam-
ownership of
age
issue of
issues for a later
motion.
trial.
severed,
completely
We,
therefore,
Morrison,
have
owner
was declared
American
ownership
trial
phase
suit,
of this
Hotel, su-
v. St.
stock.
endeavoring to raise issues which would
rely
trial
pra. Defendants
show he had not received dividends in line
judicata of
issues.
res
settlement,
with the 1948
the charter and his
*4
certificates;
stock
and also trying to show
its
ownership
and
the stock
The
of
agreement
that his
was so violated that he
only issues
and
controlling
were the
value
was damaged by the mismanagement of the
ac
in
severed
the former
before the
majority stockholder. Each time Morrison
order of severance decreed
The
tion.
litigate
tried to
these
he
matters
was told
Anthony
“for
The St.
Hotel
motion of
the
that the narrow issue
ownership
of stock
ex-
ownership
separate trial of
of
the
said
cluded
consideration of
collateral
those
B stock in the St.
shares of Class
issues. Morrison is now
this Court
before
* *
*
that said
granted, and
issues and is
those
faced with
de-
the
separately
shall be
before
issue
determined
they
already
fense
decided
*
issues in
cause
the trial of other
If
rights
former suit.
Morrison
no
it
has
already
day
has
in
not because he
had his
re-
decreed “that
further
order
The
Appeals
court. The Austin
of
Court
Civil
production
for
plaintiff (Morrison)
quest of
expressly stated its
refusal
consider
to
The St.
reports
the defendant
of
of audit
presented,
they were
issues here
because
hereby
be,
the same is
Anthony Hotel
and
severed
of
single
collateral to the
and
issue
postponed until after
abeyance and
in
held
ownership.
of
issue of owner-
determination
said
in
B stock
ship
said 1200 shares of Class
of
ownership was an issue between
Stock
The
of
Hotel.”
The St.
They were
Pan American.
and
Morrison
recognized
the Court of Civil
parties
severed
but
to the
singleness
and said: “The
of
issue
Therefore,
not.
the former
relating
severed
issues
to
trial court
appellees’
appeal
judicata
res
and the
is not
ownership of the stock
other issues
from
plea
have been overruled.
should
only
stock owner-
tried
and
in the case
Appeals,
exception
of Civil
ship
Court
an
to
issues.”
The trial court sustained
order, refused to
the severance
claimed cause of action
div-
of
Morrison’s
because
any
apart
special exception
issues
from
damages. The
give consideration
idends and
ownership
objections
sufficiency
re-
issue.
It
to the
suggests
stock
several
upon
question
divi-
pass
of
Docs
a stockholder have
pleadings.
fused
of
prior
dends,
question
“The
of dividends
to the time
saying:
dividends
any rights to
separate
Does
in the court below
?
a stockholder have
they
was severed
declared
are
complain there
appellant did not
incident to the stock after the
any rights
trial
complain
buy
here that such sever-
his stock?
not
and does
exercise
stockholder, independent
prejudicial
and such
was erroneous
former
ance
Does a
corporation’s rights
before
no
to redress
question
damage,
us and we make
individually
have an action
speculation concerning
Speaking
it.”
ma-
issues,
Ap-
for breach of its
other
of Civil
trust to-
stockholder
jority
minority
“All
stockholder for
peals
of the matters mentioned
misman-
stated:
ward the
points
by appellant
the malicious refusal
agement
under
to de-
these
[Morrison]
ownership
suppress
are
collateral
issue
values?
clare
questions
question,
is-
answer to the first two
ultimate
or-
apart
minority
are ex-
but there
stockholders
dinarily
negative
objectives
intended
1948 settlement
ceptions
passing
rule.
interpreted
shall
in Morrison
exception, we
and as
validity
special
Anthony Hotel, supra.
the facts
pleadings
consider
as true
Anthony Hotel,
disclosed in Morrison v. St.
Generally,
supra.
not the
which must
stockholders
a for
litigation arose out
This
corporate
wrongs
dress
which weaken
val
settle
agreement.
mer settlement
case,
proper
But in
where a ma
ues.
minority
the other
gave
ment
jority stockholder has
its discretion
abused
things
two
maliciously suppressed
pay
and has
—all
$130,000, and
company up
operating
dividends,
may
ment
assert
a stockholder
Ameri
of stock until
ownership
cause
action for
option.
basis of
can
On
exercised
compel the declaration
dividends. Pat
contem
contract,
parties
did
Nicholas,
ton
plate
option would
exercise of the
that the
848; Warburton v.
Phil
Wanamaker
John
*5
earnings.
rights to net
wipe Morrison’s
adelphia,
5,
506;
out
Lydia
329 Pa.
196 A.
E.
was embodied in
agreement
Gove,
Pinkham Medicine Co.
303 Mass.
on their
they clearly stated
1,
482,
certificates
490;
20 N.E.2d
Crocker v. Waltham
required
directors “shall be
Co.,
397,
face that
230,
Watch
315
53 N.E.2d
Mass.
* * *
year
all
pay each
234;
declare and
to
New England Trust Co. v. Penobscot
In
corporation.”
Mor
earnings
Co.,
286,
net
Fibre
Chemical
142 Me.
50 A.2d
Hotel, Tex.Civ.App.,
188;
Q.
O’Neall,
rison v. St.
W.
O’Neall Co. v.
108
556,
568,
565,
held
116,
Ind.App.
274 S.W.2d
656;
25 N.E.2d
Burk v. Otta
parties
this
objective of the
to
Co.,
6,
wa Gas & Electric
Kan.
123
87
P.
from a
857;
determined
must be
Mills,
Patterson
Hosiery
transaction
v. Durham
documents,
including
806,
of all
214
consideration
N.C.
251 sacrifice, pre- rights ercised it at their retire stock sell (cid:127)surrender the Cyclopedia, price ferred stock at its contract 13 Fletcher is actionable.” permitted. Texas Prior exercise of (Perm. Ed.), Corporations § option, general exception to the interest induced (cid:127)recognizes v. minority to stock. Massachusetts its common surrender rule. Commonwealth 222; 216, 398, Dividends been Davis, on common stock had not 140 Lasky Cor profits, declared to cover there Paramount-Famous the full Stinnett 145, $48,064.68 Tex.Com.App., being a balance of after declar- poration, 37 Ariz. also, per 74 Spalding, a four After Funk v. cent dividend. 150. See surrendered, General the common 219, thus P.2d Sutter 246 525, 170 company profits, Corporation, 28 Cal.2d Petroleum tremendous which, 211; Peter v. 898, 901, together A.L.R. with balance 167 the credit P.2d Cir., F. Union, stated, $360,000. Though Newspaper above exceeded Western plaintiff had common surrendered its 2d preferred stock and lost its stock on the Mayflower Hotel Stockholders option, exercise the stockholders Mayflower Hotel Committee v. Protective still had against a cause of action F.2d U.S.App.D.C. Corp., majority stockholders. The case holds against brought parted yet one who has his stock officers, Noyes Inter- management recover dividends which were undeclared Relations, (1909), Ed. corporate 2d § major- when surrendered in a suit corpora duty concerning quoted ity who breached their trust *6 case, this tions, Pan American in such as wrongfully inducing part stockholders to subsidiary controlling stock in a own which Fischer, their In shares. Hotchkiss of trust duty Their is one corporation. 136 Kan. 16 P.2d a former stock- into force come strong presumptions similarly holder was protected. pays itself management which the against In Zahn Corporation, v. Transamerica to refuses management fees and enormous D.C., F.Supp. 243, facts similar to the Noyes quoted: is pay dividends. plaintiff, instant case are stated. of majority of a “When upon by the exercise option of the an another, corporation by is owned one majority, surrendered twenty all but shares to acquires thereby the which his of stock in Axton-Fisher re- Co. and management, the control- its control agreed redemption price. ceived the He assumes a relation corporation ling later sued the Corporation, Transamerica minority stockholders the towards trust which owned controlling stock in Ax- controlled, corporation Co., ton-Fisher for inducing Axton-Fisher manage its obligation to under option exercise its to in a such manner as the stock- the benefit of all affairs to defeat the stockholder’s rights to share aggran- not for its own holders liquidation in a and merger which was applica- merely an This is dizement. contemplated. Court, then The District that, while a principle tion above, held, in cited as did the stockholders majority in case, trial court that the corporation’s busi- control legally valid, redeem was and when”'it was duty assume the correlative ness, they rights stock, exercised incident to the faith, manipulate and cannot good destroyed plaintiff were and the thereafter in their own interest business such rights. had no The District dis- Court minority stockholders.” injury suit. missed the Macgill, 135 Md. On Macgill v. Third Circuit Court of controlling ex- held plaintiff, asserted A. against cause a of action they, when by agreement, against stockholder which the inter acted should have charged been Pan Ameri- minority. can; ests of the In well-considered a that at one earnings time when opinion, corpora held that one $131,000, amounted to the board declared tion, which controlled another $50,000, dividends of conditioned directors, through occupied approval, Morrison’s written failing which case, minority. they relation toward the In that told they him would declare majority, $40,000 conformity in strict pleaded dividends. He further that pertinent powers granted statute and the paid $95,863 American itself out corporate charter, operating exercised cash for a debt which was not power price. call its stock at a stated due December, until alleged 1979. He stockholder, Nevertheless, dominant defendants maliciously mismanaged power exercise of that could not breach for the wrongful purpose of its trust profit expense at reducing minority’s earnings minority. plaintiff suppress asserted their dividends. He action, a double as a other allegations. one stockholder the other as a who had non-stockholder already surrendered his stock. Morrison asserted cause of action plaintiff held that had a cause The St. Hotel and Pan despite his of action as an individual Company, American Hotel both under the former surrender of stock. Becartse contract which the minority would Axton-Fisher named directors of receive all net of The St. Transamerica, purpose and acted for Hotel and on the theory breach of trust Transamerica, principal, their true profiting for damages. however, The recovery, of action. plaintiff cause asserted a a single recovery for an action “Liability from the dereliction which flows asserted on two A single theories. imposed upon Transamerica must [Pan covery for loss of earnings alleged. allegations which under American] Morrison asserts that the same breaches of *7 complaint, constituted the board of depressed trust which Anthony Axton Fisher [St. Hotel] sulted in his receiving a less sum for his controlled it.” Transamerica Zahn v. stock. Our understanding of the former 36, 495, Corp., F.2d A.L.R. 162 172 46, appeal severed is that ownership the same view. support cases 508. Other stock and stock values were there deter Cir., Union, Newspaper 5 Peter Western Appeals mined. Civil cor 867, 872; Kungs Soderstrom F.2d 200 judgment rected the trial court’s to include 1008; Cir., Co., F.2d 7 189 Baking holm additional due sums Morrison —not Cir., Co., 125 F. 7 Inland Steel Lebold v. only. but for stock values As the Cir., Miller, 2 F.2d 369; 37 Eden v. 2d stated, Court of Civil Cir., 522; McMullen, 6 F. 8; 79 Ritchie v. by values were determinable a named 219, Ariz. 246 P.2d Spalding, 74 Funk v. auditor, by agreement whose decision Werner, App.Div. 184; 239 Hammer final, parties City deemed citing 172; 38, Magen Von Au v. 265 N.Y.S. McKenzie of San Antonio v. 629, Construction
heimer, App.Div. 110 N.Y.S. 126 Co., 1114; 136 N.E. N.Y. 89 196 affirmed Moroney, Tex.Com.App., 286 Moroney v. net earnings, Dividends unlike the S.W. values, were matter of not determi- Anthony’s by a named arbiter. pleaded that The St. nable Morrison as- charged against The of directors cer- an action board serted controlled and directors’ fees and Pan American Hotel Company Hotel salaries tain
253
upheld up
net earn-
the Austin Court can
of dividends
the matter
theory
complete
on a
that there was a
sev
ings.
erance of the cause of
as
who
action
cause
reversed and
legal
owners of the
B stock.
Class
remanded.
Smith, Tex.Civ.App.,
Richards v.
239 S.W.
724;
Works,
2d
Biggins v.
Iron
Oltmer
(dis-
MURRAY,
W.
Chief
O.
Justice
Cir.,
214;
Steamship
154 F.2d
Zarati
Co. v.
senting) .
Cir.,
Bridge Corp.,
Park
POPE, Justice. rehearing is over- for Appellees’ motion Apolonio SANTOS, Transfer Santos d/b/a Company, al., Appellees. et is devoted Most of motion ruled. Civil Austin Court argument No. 13034. matter already passed on Appeals has Court Civil of Texas. Morrison. owing to that were of dividends con- Antonio. expressly states The Austin Court question of “The : trary [274 567] Oct. below was severed Rehearing Denied Nov. appellant did separate trial and complain here complain there and does not or erroneous severance was such not before question and such
prejudicial concerning speculation we make no us and
it.” Austin Court urge also that
Appellees his divi- already Morrison awarded
has by requiring the additur
dends Again, the Austin Court $20,952.62. option “the states, sum was added to as the value appellant’s stock”
price of computing the in items omitted was concerned The Court
stock value. option, stock val- exercise of the required tender ownership. The
ues and price deficiency only. value concerned of stock dividends. concern
It did (1) things, to two entitled value of (2) stock and on his option. exercise of upon the power parties, the By agreement stock was vested value
compute the prescribed formula auditor.
in an average earn- multiply the him to
required pass- The Austin three.
ings course, value, looked to dividends *9 fixing stock values. formula
under the payment has ordered But no Austin such. values com- his stock
awarded Morrison’s formula. the dividend
puted on entirely distinct is an appellees confuse with stock
matter
values.