Court Opinion

ID: 9681426
Source: CourtListenerOpinion
Date Created: 2023-08-24 07:50:04.901189+00
Date Added: 2024-06-11T18:17:33.916345
License: Public Domain

On Motions for Rehearing
Appellee has filed a second motion for rehearing in which he strongly re-urges his contention that appellants have waived their objection to the failure of the trial court to appoint an appraiser by proceeding to trial without first presenting to the trial court a plea in abatement.
A proceeding for valuation of shares is purely a creature of statute. A stockholder did not have a cause of action at common law to require the corporation to purchase his shares merely because he objected to the action of the majority in selling all of the assets of the corporation. The Business Corporation Act created the right and prescribed the procedure to be followed by the dissenting stockholder. The Act does not authorize the shareholder *273to bring suit for the value of his shares. It authorizes him to “file a petition in any court of competent jurisdiction in the county in which the principal office of the corporation is located, asking for a finding and determination of the fair value of such shares by an appraiser to be appointed by the court.” Art. 5.12, subd. B, Texas Business Corporation Act. Section D of the Act provides for the appraiser to file his report with the clerk of the court and that “ * * * Such report shall be subject to exceptions to be heard before the court both upon the law and the facts. The court shall by its judgment determine the fair value of the shares * * Until the appraiser’s report and the exceptions thereto, if any, are filed, there is nothing before the court except the petition for determination of the fair value of the shares by an appraiser. There are no pleadings in support of which evidence might be introduced and issues drawn. The only judgment authorized by the Act is one based on such portions of the appraiser’s report to which no exceptions are filed and the court’s determination of such issues as are raised by exceptions to the report. We are impelled to the conclusion that the appointment of the appraiser and the filing of his report is jurisdictional for the reason that the question of valuation cannot be brought before the court for determination in any manner except as prescribed by the Texas Business Corporation Act. The pleadings authorized by this Act cannot be made to conform to the requirements of Rules 22, 45, 47, 83 and 85, Texas Rules of Civil Procedure, setting forth requirements for initiating and defending civil suits.
Appellee sought relief in alternative counts. He failed to show himself entitled to valuation of his shares by the court. He did plead a cause of action based on fraudulent conspiracy and secured jury findings supporting it. We are of the opinion that he is not entitled to damages for fraudulent conspiracy and also valuation of his shares under the Texas Business Corporation Act. Since judgment cannot be rendered on the count for valuation, judgment has been rendered on the count for fraudulent conspiracy. One element of such damage would be the reduction in value of his shares by reason of the sale made the basis of the suit. Since the jury was authorized to consider all proper elements of damage by the court’s charge, we must presume that they did so in making their answer to special issue No. 14. If we should reverse this cause for the purpose of permitting further proceedings in valuation, we would be authorizing appel-lee a double recovery. If we give no effect to the jury answers to the issues on actionable conspiracy, we would be permitting appellee a new trial of a cause of action where there was no error other than in rendering judgment on the verdict of the jury, an error which we are authorized to correct, and now have corrected.
Appellee’s motion for rehearing is denied.
Appellants have also filed a motion for rehearing in which they contend that as a matter of law there was no actionable conspiracy. They contend that “ * * * there was not the slightest dispute about the occurrence of the controlling factual transactions; the question was purely and simply a legal one, — were the acts of appellants lawful?” In our former opinion we answered this question in the negative, however, it is possible that our opinion could be misinterpreted. As we stated in our original opinion, appellee charged appellants with fraud in that they conspired together to acquire the assets of “Old Companies” for themselves at less than their fair market value, thereby injuring appellee. We hold that the sale of all of the assets of “Old Companies” to “New Companies” at a price far less than fair market value, as found by the jury, was fraudulent. The answers of the jury establish that the sale of the assets of “Old Companies” by the directors was a sale to themselves. Popperman v. Rest Haven Cemetery, Inc., Tex., 345 S.W.2d 715, and *274the authorities cited therein, demonstrate that the contract of a corporation with a director may be avoided for fraud or unfairness. The sale of corporate property at a price much less than its fair value by the directors and officers of a corporation to a corporation owned by them, incorporated for the purpose of purchasing such assets and conducting the identical business previously conducted by the selling corporation, is a species of fraud. Such a sale would not be permitted over the objection of a nonparticipating stockholder if less than “substantially all” of the assets were sold in such a transaction and such stockholder would not be forced into the position of a dissenting stockholder under the terms of the Business Corporation Act. The provisions of that Act authorizing the sale of all or substantially all of the assets of a corporation over the protests of minority stockholders does not authorize the directors of a corporation to sell to themselves. If the assets of “Old Companies” had been sold to another corporation in an arm’s length transaction, appellee’s objection could not have prevented the sale, nor would such a transaction have afforded the basis for a suit for damages. We recognize that the courts of New York in Beloff v. Consolidated Edison Co., 300 N.Y. 11, 87 N.E.2d 561, Ct.App.N.Y.1949, and Blumenthal v. Roosevelt Hotel, 202 Misc. 988, 115 N.Y.S.2d 52 and possibly, California, Beechwood Securities Corp. v. Associated Oil Co., 104 F.2d 537, 9th Cir. 1939, have held that there is no constitutional right to continue as stockholder or to follow .n investment into a consolidated corporation. However, we do not think that such decisions, in view of the policy of this State with reference to transactions with a corporation by its officers and directors, require us to hold that the Texas Business Corporation Act authorizes unfair or fraudulent transactions between a corporation and its officers and directors or require a minority stockholder complaining of such transactions to seek valuation as his sole remedy.
Appellants also contend in their motion for rehearing, for the first time, -that the answer of the jury to the damage issue is supported by no evidence. There was in evidence the amount realized from the sale by the corporation and a great deal of evidence concerning the properties owned by the corporation and their values as well as the earnings of both “Old Companies” and “New Companies.” While the evidence is too voluminous to quote, we have carefully considered the record and find that the answer made by the jury properly is supported by. competent evidence.
Appellants’ motion for rehearing is denied.
In answer to appellee’s request, additional findings and statements of evidence are made as follows:
I. Appellee questions the correctness of the statement found in our opinion that Special Issue No. 41 was not intended as a damage issue or appropriate as such. He further states that it was his contention, recognized by all parties, including the trial judge, that said issue was an inquiry as to the “fair value of appellee’s stock interest * * * We agree with this contention, but do not agree that this issue, designed to secure a finding as to fair value, is a damage issue appropriate to a cause of action for actionable conspiracy. However, we do consider that the answer of the jury properly could be considered as establishing that the sale was made for an inadequate consideration and should be considered, in connection with the other issues submitted, in determining whether or not judgment should have been rendered on the cause of action for actionable conspiracy. Since we are in agreement with appellee that the issue was a fair value issue, we do not consider it necessary to elaborate further in response to Request No. 1.
II. It is the opinion of the Court that appellee submitted the case to the jury on *275alternative counts, (1) actionable conspiracy, and (2) statutory valuation under the Texas Business Corporation Act. In this Court appellee has spent considerable time arguing that he is entitled to judgment on a cause of action for conversion of his stock interest.
III. Interest on the sum of $151,-529.27 was allowed from the date of formal dissolution of the corporation for the reason that after the corporation was dissolved appellee was entitled to his share of the assets on demand. Prior to dissolution of the corporation the proceeds from the sale of the assets were the property of the corporations. It appears in the record that the funds were tendered to appellee only on conditions which became improper on dissolution. Conditions might properly be attached to a tender made at a time when there was no obligation to pay.