Court Opinion

ID: 3909187
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:38:11.467246+00
Date Added: 2024-06-11T14:16:00.556598
License: Public Domain

On Motion for Rehearing.
A voluminous motion for rehearing has been filed by appellees in this cause, which has been duly considered. In that motion the following is said:
"The most vital error, as appellees understand this record, is in the conclusion reached by this honorable court that appellees failed to sustain their allegations that the judicial orders were procured by fraud practiced upon the judge, which induced him to make the orders pertaining to the sale of the property in controversy, and that it necessarily follows that the fraud alleged by appellees, as practiced by the banking commissioner upon them and found by the jury as having induced them to purchase the property, was the sole basis of the relief granted by the trial court, and was insufficient to support the judgment of rescission of said sale and the setting aside of said orders." *Page 553 
In the motion it is insisted that the following facts, which it is claimed the evidence established, were sufficient to show that the orders of the court, under which the sale of the assets of the Traders' State Bank to the appellees was consummated, were procured by fraud practiced upon the court by Ed Hall, the banking commissioner, to wit:
(1) That the court did not set down the petition for hearing as recited in the first order.
(2) That the court did not hear evidence and was not advised as to the facts as recited in the second order.
(3) That the recitals in the report of sale made to the court by the commissioner, to the effect that he had concluded with the Guaranty State Bank of Cleburne the contract of sale, in pursuance of the court's order, and that the commissioner believed that the sale was fair and just, were all untrue.
(4) That the recital in the third order of the court, approving and confirming the sale, to the effect that the court had considered the report and made inquiry into the facts and had examined the statement of the assets and liabilities of the bank and was of the opinion that the report of sale should be in all things approved, was also untrue.
(5) That in making the third order of court the district judge relied solely upon the statements of Ed Hall and his attorney, without any hearing, inquiry, or investigation into the facts, and that the third order of court, signed by the district judge, was prepared by Ed Hall or his attorney at Austin, and that the petition, report of sale, and the three orders were prepared and used by Ed Hall for the purpose of perpetrating a fraud upon the Guaranty State Bank, its organizers and incorporators, and thereby a fraud was perpetrated upon the judge.
The record shows that the contract of sale was agreed on before the petition was presented to the judge by Ed Hall and his attorney, for authority to consummate it, and that a copy of the contract was attached to the petition. The effect of the orders of court were simply to grant such authority and to confirm the sale after a report of it was made. No proof was offered to show that Ed Hall practiced any deception on the court or introduced any false testimony in order to procure the orders. The effect of the contention of appellees is simply this, that the court in making the orders merely approved and confirmed the contract that had already been agreed upon by the parties, without hearing any further evidence as to whether or not the sale should be made. We fail to perceive how it can be said that, by reason of that fact alone, a fraud was practiced upon the court in procuring said orders, even though it be further said that in consummating the sale in obedience to the orders the commissioner misrepresented the value of the assets and thereby induced the appellees to purchase them.
It is further insisted that there is no evidence to support the findings by this court upon original hearing, to the effect that during the fall of the year 1922, J. L. Chapman, commissioner of insurance and banking, who had succeeded Ed Hall, after an investigation of the Guaranty State Bank, called attention of its officers to the fact that many of the bills receivable held by the bank, which had formerly belonged to the Traders' State Bank and which had been purchased by the Guaranty State Bank, were worthless, and demanded that the stockholders of the Guaranty State Bank pay into its capital the sum of $25,000 in order to replace such worthless notes; and that, after appellees had, during the fall of 1922, discovered that the banking commissioner had defrauded them in the sale in April of the same year, they elected to retain the worthless notes of the Traders' State Bank theretofore purchased from Ed Hall, banking commissioner. The contract of purchase and sale of the assets of the Traders' State Bank by the Guaranty State Bank was dated April 15, 1922, as recited in our original opinion. Paragraph 7 of appellees' petition, upon which the last trial of the case was had, contains the following allegations:
"Plaintiffs say that a few months after the organization of said Guaranty State Bank, and after the transfer by defendants to said Guaranty State Bank of the assets of the old Traders' State Bank, J. L. Chapman, the commissioner of insurance and banking, for himself and the other defendants, on or about the _____ day of December, 1922, represented to said Guaranty State Bank that further investigation by him or his assistants had disclosed the worthless condition of part of the paper which had been transferred by defendants to said Guaranty State Bank as aforesaid, although such worthlessness was at all times known to defendants, or should have been known to them, and said J. L. Chapman, commissioner, for himself and the other defendants, insisted that the stockholders of said Guaranty State Bank put into said bank the further sum of $25,000 in cash to take the place of said worthless paper, and said Guaranty State Bank and its stockholders protested against putting into said bank any sum of money to take the place of any worthless paper which had been transferred to said bank of defendants, insisting at the time that the state banking board should take care of any of said paper that might be found to be worthless, and, after some negotiations with said J. L. Chapman, commissioner, and upon the personal assurance of said J. L. Chapman, commissioner, that there was no other bad paper in said assets, and that there would be no further payment demanded from said stockholders to take the place of any of said paper that might be found to be worthless, and in order to have no friction with said J. L. Chapman, commissioner, and to avoid any possible complications that might result from refusing said stockholders did deposit in said bank the *Page 554 
further sum of $25,000 in cash, and said bank continued to operate until thereafter closed as aforesaid."
In addition to those allegations, appellees further alleged that, after the organization of the Guaranty State Bank, no bad loans were made, and all of the paper taken by them was worth 100 cents on the dollar. The statement in our original opinion, to the effect that those allegations were evidently made for the purpose of meeting any possible objection that plaintiffs did not return, or offer to return, to the commissioner the assets of the Traders' State Bank, is hereby withdrawn, since appellees say in their motion that such was not the purpose of those allegations.
In addition to those allegations in the pleadings, the record shows that Mr. Sibley, one of the organizers of the Guaranty State Bank, on August 5, 1922, wrote a letter to the president of the bank, stating that the bank was then in a critical condition, and requested the president to tell Bishop and Barlow, who were formerly officers of the Traders' State Bank and then officers of the Guaranty State Bank, that "we cannot make any more loans, and that they have got to assist us in collecting some of the loans they have made," with the further statement that the writer was willing to keep Bishop and Barlow in the new bank, "provided they assist us in cleaning up the mess which they have gotten us into." Practically all the appellees testified that all the loans made by the Guaranty State Bank were worth 100 cents on the dollar.
On September 30, 1922, Mr. Chapman, banking commissioner, wrote a letter to the board of directors of the Guaranty State Bank, stating that he had received a report of a recent examination of the bank, and it was "necessary that a majority of the board come to his office to discuss means to place the bank in a more acceptable condition." On October 5, 1922, Mr. Chapman wrote the board another letter, stating that the bank had "unquestionably a serious amount of losses, hazardous, and doubtful loans." And in the same letter the commissioner informed the board of his intention to levy a stockholders' assessment of 100 per cent. and require them to remove a like amount of paper from the assets of the bank, with the statement that the bank examiners had classified more than that amount as hazardous and doubtful loans. Other letters of like tenor from the commissioner to the board, of date prior to December 14, 1922, were also introduced. On October 3, 1922, Sibley wrote to Chapman that his letter to the board of directors, of date September 30th, was a shock to him, because, when he agreed to buy $50.000 stock in the Guaranty State Bank, he and Hall, the former commissioner, had a "man to man" agreement that the Guaranty State Bank "should have ample time to work out any objectionable assets that the new institution might have." On December 14, 1922, Chapman addressed another letter to the board of directors, referring to an agreement that he had made with them by the terms of which they were immediately to remove $25,000 of notes classified as losses, and another $25,000 by February 10th, and that the balance of the $38,000, which the banking examiner had classified as losses, was also to be eliminated by cash payment or by acceptable guaranty. That letter also contained the following:
"It is further agreed on my part that after the removal of the $50,000 of paper as above set out and the placing of the remaining $38,000 in satisfactory condition, that, so long as the bank's affairs are being given close and constructive attention, this department would not be inclined to further severely criticise or demand the removal of any additional paper that was taken over from the defunct Traders' State Bank until after one year from this date."
In the same letter the commissioner stated that he was inclosing a list of notes which had been classified by the banking examiners as doubtful, aggregating more than $100,000. The letter further called attention to the custom of the banking department to demand the strengthening of doubtful paper, and added:
"This requirement is waived in your favor upon conditions enumerated in the foregoing paragraphs, for the reason that the Guaranty State Bank inherited the major part of this doubtful paper by taking over the accepted assets at par of the Traders' State Bank."
While we believe that the testimony supports the findings of this court, to the effect that the appellees discovered the worthless character, or at least a large part, of the notes of the Traders' State Bank during the fall of 1922: yet, if mistaken in that, we believe there can be no doubt that such discovery was made about the middle ofDecember, 1922, and that such difference of time of discovery would not be material.
Many other criticisms of the findings of this court as shown in the original opinion are made in the motion for rehearing as being unsupported by any evidence. In order to fully answer all of those criticisms, we would be required to set out so much of the statement of facts as we feel would unduly lengthen this opinion. However, we have, after carefully considering all of those criticisms in connection with a further examination of the record, reached the conclusion that they are without merit.
The motion for rehearing is overruled. *Page 555