Opinion ID: 396895
Heading Depth: 1
Heading Rank: 3

Heading: Shareholder standing.

Text: 17 The Oppenheims' third major quarrel with the proceeding below concerns the absence of a jury instruction stating that only a shareholder may complain of the removal of a corporate officer. The district court below refused such an instruction and instead informed the jury of the Moreaus' claim of breach of fiduciary duty: 18 Under this legal theory the Moreaus claim that the Oppenheims breached their fiduciary duties to them by the holding of a shareholders' and a directors' meeting of the corporation in October of 1979 and removing the Moreaus as directors and officers. 19 A fiduciary relation applies to any person who occupies a position of confidence toward another. It is a relationship involving trust and confidence. A fiduciary relationship exists where special confidence is placed in another who in equity and good conscience is bound to act in good faith and with due regard to the interest of the one reposing the confidence. 20 You will find for the Moreaus on their claim for breach of fiduciary relationship if you find that they have proved by a preponderance of the evidence that a fiduciary relation existed between the Moreaus and the Oppenheims and that the Oppenheims failed to act in good faith with due regard to the Moreaus' interest. You will find for the Oppenheims on this claim if you find that the Moreaus have failed to prove by a preponderance of the evidence that a fiduciary relationship existed or if you find that the Oppenheims have proved by a preponderance of the evidence that they have acted in good faith and with due regard to the Moreaus' interest. 21 The Moreaus admit that they did not contribute any funds to the corporation and were therefore not entitled to any stock. They counter, however, by citing Thompson v. First State Bank of Amarillo, 109 Tex. 419, 211 S.W. 977 (1919), and article 12, section 6 of the Texas Constitution, 10 codified in article 2.16 of the Texas Business Corporation Act, 11 arguing that stock issued to appellants (the Oppenheims) and voted by them was for an insufficient consideration and for which full and lawful payment was not made .... (A)s such, any exercise of the rights which normally accompany stock ownership is void. 22 We do not need to resolve the question of whether the Alduro-Raynes stock issuance was in fact void. On our review of the record, there was ample reason for the trial judge to conclude that an instruction on shareholders' standing was not applicable to the Moreaus' claim and would only confuse the jury. In this case there was evidence that the Moreaus, French citizens who purportedly spoke little or no English, trusted the Oppenheims to explain the transaction and the American law on which the joint venture would be based. The trial court correctly viewed the dubious corporate legality of Alduro-Raynes as irrelevant. The real issues for the jury to determine were whether a fiduciary relationship existed between the parties and whether the duty to inform the Moreaus concerning the directors' meeting and to act according to their fiduciary obligations was breached by the Oppenheims. The shareholder status of the Oppenheims vis-a-vis the Moreaus is insignificant if, in achieving that status, the Oppenheims breached a fiduciary relationship. 23 Thompson v. First State Bank of Amarillo, supra, is instructive. In that case the Texas Supreme Court found that a subscriber to bank stock who gave only a promissory note for issuance of corporate stock was estopped from asserting the invalidity of the issuance in a creditor's suit to enforce the note. In this case, the Oppenheims' purported breach of their fiduciary relationship-including their issuance of shares without consideration and subsequent ouster of the Moreaus as corporate officers without notice-prevented the Moreaus from achieving shareholder status. The district court was correct to direct the jury to the question of the existence of the fiduciary duty. If the Oppenheims breached their duty, they are estopped from claiming a defense based on that breach. If the Moreaus cannot claim shareholder status, the Oppenheims, who never fulfilled their part of the agreement as to contributive share either, can hardly claim this status. It is a well-established rule of equity that one who by his conduct has induced another to act in a particular manner should not be permitted to adopt an inconsistent position and thereby cause loss or injury to the other. 24