Court Opinion

ID: 9648709
Source: CourtListenerOpinion
Date Created: 2023-08-23 14:33:11.04307+00
Date Added: 2024-06-11T18:12:04.790176
License: Public Domain

SMITH, Justice
(dissenting).
I respectfully dissent. When the facts are taken into consideration, we find that this court should be concerned primarily *585with whether or not there is any evidence to support International’s theory that Holloway, Beasley and Walden are jointly and severally liable to International for profits allegedly realized by the three as the result of a conspiracy entered into by the three to defraud the Company by the sale of their personally held shares of International, “no par stock” in competition with sales of International’s “new issue” of no par stock of the same class. This court has before it a “no evidence” question. The Court has reviewed the transactions involved and has concluded that it cannot be said as a matter of law that Holloway, Beasley and Walden acted independently of each other and that there was no concert of action “in their systematic activities” in the transactions. Whereas, I submit that there is not a scintilla of evidence in this record that the three acted in concert in these transactions which include the sale of their personally owned stock, or that the three entered into a conspiracy as alleged by International.

Sale of Personal Stock

Holloway and Beasley acted in concert, but the two at all times acted independently of Walden. However, International does not claim that Holloway and Beasley entered into a conspiracy. The Court has held that the Walden letter was erroneously admitted into evidence. This eliminates the chief evidence claimed by International to show a conspiracy as between the three. However, the Court gives International another chance to prove a conspiracy by remanding the case for a new trial. How does it accomplish a remand? The Court adopts the ingenious method of holding in favor of Holloway and Beasley on their alternative point that the trial court erroneously submitted the issue of time of discovery (limitations) by the Directors that the three had disposed of their personal stock in competition with the sale of Company stock. It is my view that this question should never be reached. If there was no conspiracy, then International’s lawsuit against Holloway and Beasley is without foundation and must fall.
Directing my dissent at this point specifically to the question of conspiracy as to the stock sales, I find there is no direct evidence of a conspiracy or of concerted action. The jury found that Walden, Holloway and Beasley entered into a combination (International calls it a “preconceived plan”) by their concerted action to dispose of their personal stock in competition with the sale by International of its new stock during the period from April 1, 1955, to September 6, 1955. During this period of time Holloway sold about 5,575 shares of personal stock at a net profit of approximately $23,704.00 and that Beasley sold about 5,480 shares at a net profit of some $24,025.00. The trial court and the Court of Civil Appeals have held Beasley and Holloway liable for an additional sum of $121,355.50 of profits realized by Walden. Now, if all of the stock was sold through the “concerted action” of the three defendants, they would surely be jointly and severally liable to International as joint tort-feasors, provided, of course, the sales of their personal stock gave International a cause of action. Apparently, International realizes that the three did not act in concert; and, therefore, has conceived the idea of a conspiracy or a “preconceived plan” in order to hold Beasley and Holloway jointly and severally liable for the actions of the defaulter, Walden. The Court says that inferences of concerted action may be drawn from joint participation in the four transactions and from enjoyment of the fruits of the transactions.
Beasley and Holloway cannot be held liable for damages that the jury awarded as the result of Walden’s sales of stock or as to Walden’s transactions. Walden acted alone in the matter of sale of his personal stock. There is no evidence of any agreement on the part of all with respect to their sale of personal stock or any of the so-called transactions. It is true there was an agreement between the three and one Lyle to participate in a 10,000 share pool to be used to obtain good directors for International. I can hardly believe that this *586can be said to be a part of the alleged conspiracy or concerted action to sell personally owned stock in competition with International. The undisputed facts not only will not support an inference that the three acted in concert, but such facts show that Holloway and Beasley, on the one hand, and Walden, on the other hand, proceeded entirely independently in selling personal stock.
It is impossible to analyze all of the testimony in this voluminous record, but illustrative of my position, I will discuss some of the facts which support my view that there is no evidence in this record showing' a conspiracy between Beasley, Holloway and Walden relative to any of these stock transactions. When it is once admitted that the Walden letter is not admissible, then, the following argument of Beasley and Holloway is perfectly sound and unanswerable:
“Together Holloway and Beasley sold about 11,055 shares of personal stock to September 6, 1955, for a total profit of about $47,720.00, or approximately $4.31 per share. During the same period Walden sold about 18,751 shares, more than Holloway and Beasley together, at a net profit of about $6.47 per share. If these sales resulted from any agreement, combination or concerted action, Holloway and Beasley were imbeciles because Walden not only sold many more shares than they but his per share profit was in excess of $2.00 more than that realized by Holloway and Beasley.
“Moreover, the fact that Walden was proceeding independently of Holloway and Beasley and vice versa is proved by Walden’s trade of 5,500 shares, plus a house, for a valuable lake residence. Quite obviously this was a trade that presented itself to Walden that he, proceeding independently, took advantage of. It was not a trade made in pursuance of any agreement, combination or concerted action as between Holloway and Beasley, on the one hand, and Walden, on the other hand.
“Equally enlightening is the action of Walden and of Holloway and Beasley in purchasing shares that they thereafter sold. Walden bought shares from Sivula for $2.00 per share and sold them for an average profit of about $5.00 per share. Holloway and Beasley bought shares from General Gates and sold them for an average profit of less than thirteen cents per share. These transactions simply cannot be explained upon the hypothesis of any agreement, combination or concerted action involving all defendants.
“The methods whereby the shares were sold reflect no relationship whatsoever between the sales of Holloway and Beasley, on the one hand, and the sales of Walden, on the other. Holloway and Beasley sold a large block of their stock to Werner under a written agreement. Walden was not a party to that transaction; made no sales to Werner; and sold only a very few shares through him.
“Plaintiff may argue that the sale to jWerner by Holloway and Beasley was a simulated sale; that they were really selling shares through and not to Wer-ner. This is of no significance here because irrespective of how the transaction be characterized, it is plain from the difference in roles played by Wer-ner with respect to Holloway’s and Beasley’s shares and with respect to Walden’s sales that there was no agreement, combination or concerted action as between Holloway and Beasley, on the one hand, and Walden, on the other hand.
“Walden sold many of his shares through Colbert. Holloway and Beasley had no dealings whatsoever with Colbert. Many of the shares originally owned by Holloway and Beasley were sold through LaBay. Walden had nothing to do with LaBay. Walden sold many of his shares directly to Golden Spread (General Clark being a *587friend of his) and paid no commission thereon. Holloway and Beasley sold much less stock on which they paid no commission and sold it to different people, except for the sale to Clyde Weed, hereinafter discussed.
“Aside from the 10,000 share pool, the only possible instance of any concerted action by Walden, on the one hand, and Holloway and Beasley, on the other hand, was with respect to the sale to Clyde Weed. As heretofore shown, pp. 71-2, this transaction was handled in its entirety by Weed, who persuaded Holloway and Beasley to supply 500 shares each at $5.00 per share and who persuaded Walden to supply 300 shares at $5.00 per share.
“Walden sold some of his personal stock at $12.50 per share. Holloway and Beasley did not sell any of their personal stock at such a price.
“Walden testified that at the time it was made he had no knowledge of the sale by Holloway and Beasley of 5,000 shares each to Werner; and that even after he learned about the sale he had no idea how many shares of their personal stock were being sold by Holloway and Beasley.
“Walden stated that while he informed Beasley of his, Walden’s, sales through Colbert, Beasley probably had no idea of how many shares Walden was selling through Colbert; and that Holloway didn’t know of Walden’s personal sales.
“Holloway testified positively that he didn’t know about Colbert’s sales of Walden’s personal stock and didn’t know that Walden had.traded his personal stock for a residence on the lake until after he, Holloway, returned from Europe on October 4, 1955. Holloway also stated that prior to the time he began to sell his personal stock he had no knowledge that Walden was going to sell personal stock.
“It is likewise undisputed that Colbert had no contacts whatsoever with Holloway and Beasley except for brief contacts with Beasley while Colbert was a sub-agent for Werner, selling, new issue stock for plaintiff. Moreover, LaBay, who was purchasing stock from Holloway and Beasley and who was selling stock ultimately supplied by them, had no contacts whatsoever with W alden. '!
“The long and the short of the matT ter is that, with the possible exception' of the 10,000 share pool, the record contains no evidence whatsoever that Walden, on the one hand, and Holloway and Beasley, on the other hand, were acting pursuant to any agreement or had formed any combination or were taking concerted action in the sale of their personal stock. The most that can be said insofar as plaintiff’s case is concerned is that Holloway and Beasley sold their stock as they had opportunities to do so, at a price they were willing to take, and that Walden disposed of his stock when he had opportunities to do so, at a price he considered satisfactory.”
There is another specific example of “no evidence” of conspiracy between the three. The record reflects without dispute that Holloway was in Europe and knew nothing of the transaction whereby Walden traded 5,500 shares of his personal stock and a home for Cloer’s lake residence. There is no evidence of an agreement, 'express or implied, between Holloway and Walden concerning this Walden 5,500-share transaction. Holloway did not know of the transaction until long after the fact. The record also reflects the same state oi facts as to a $5,000.00 advance to a man by the name of Werner as it does with respect to Walden’s 5,500-share trade.
This case has been fully developed. Every conceivable separate act on the part of Beasley,' Holloway and Walden has been explored. Yet none of those acts show a *588conspiracy absent the letter. This Court through the majority opinion is holding that the letter was not admissible as against Beasley and Holloway. I cannot imagine any additional facts that could be introduced upon another trial that would change the situation.
The Court of Civil Appeals makes a factual statement to the effect that Beasley, Holloway and Walden remained in complete control of the Company. The majority here seems to give some importance to the question of continued control and apparently is of the belief that maintaining control of the Company is some evidence bearing on the question of whether the three entered into a conspiracy to sell their personal stock. Control of the Company has nothing to do with the conspiracy. The three could have had control of the Company, yet proceeded separately in the sale of their personal stock or they could have proceeded pursuant to an agreement. My examination of this record,leads me to conclude that Beasley and Holloway proceeded in the sale of their stock pursuant to an agreement, and that Walden proceeded independently. Assuming that inferences can be drawn that a conspiracy exists, the record contains no evidence whatsoever of a profit realized by Walden through the exchange of 5,500 shares of his personal stock, together with a home, for a lake residence. Evidence was introduced about the exchange, but such evidence falls far short of the required proof as to the consideration Walden received for his 5,500 shares. The “valuation established” in a trade is no evidence of market value whatsoever. The record is silent as to the market value of the Walden home and the market value of the lake residence. This being true, what Walden received for his 5,500 shares of stock is not capable of ascertainment. Under no circumstances, in my opinion, can the “Dear Don” letter on a re-trial be brought “within the conditions of the rule permitting evidence of the declarations of a co-conspirator requiring a showing of connection with the conspiracy forming the basis of recovery.” This rule announced by the Court in this cause cannot be applied in this case as the record now stands. It is unreasonable to believe that any evidence on a new trial can change the situation. This for the simple reason that the Walden letter to Hauer was written by Walden long before any association between the three, long prior to the alleged formation of a conspiracy, and concerned a matter entirely foreign to the business of International.
There are many other instances pointed out by Beasley and Holloway which reflect error in the trial court and unless this court performs its duty, the same errors will likely occur upon a new trial. For example, Beasley and Holloway, in their pleadings, admitted all their stock sales and incorporated in their pleadings an accurate tabulation of their sales to the brokers and the brokers’ sales to the ultimate purchasers. In spite of this, the trial court erroneously permitted detailed testimony of purchasers in regard to representations allegedly made to them by brokers, etc. This testimony came almost immediately after the Walden letter was admitted. The tabulated sales were taken from International’s books and records. These tabulations reflected the date of sale, the number of shares sold, the purchaser, the profit realized upon the sale, and all other relevant matters. Apparently, the first error of the trial court was the admission into evidence of the letter. Although there was no evidence of authorization of the representations made by the brokers, such representations were admitted, no doubt, on the theory that such representations were in harmony with the spirit of the letter and tended to prove the ultimate fact of conspiracy.

Plea of Limitations

This Court has held against International on the ground that the defensive limitation issue submitted • to the jury was too restrictive, in that the issue told the jury that discovery by the so-called disinterested directors must be discovered in a Directors’ meeting or an Executive Committee meet*589ing. The Court goes on to hold that “[i]t follows that the correctness of the limitations issue as submitted is to be measured by notice, or not, of the personal/ stock sales and not of the alleged conspiracy.” My difference with the Court on this question is that the Court has misinterpreted this record in holding that it presented a fact question as to whether the disinterested officers and directors of International had knowledge of facts sufficient to require them to exercise diligence by using the means available for discovering the personal stock sales activities of Beasley, Holloway and Walden. There is no evidence of a conspiracy, and the record shows as a matter of law that the disinterested directors had actual knowledge of the Beasley and Holloway sales of personal stock more than two years before this suit was filed. Not only did International’s stock ledger and other records that were readily available to all its officers and directors plainly reflect each and every sale by Beasley and Holloway of personal stock, there is no evidence that either defendant,- or anyone else, through any representation or other action, induced the officers and directors of International not to look at the records. These officers and directors were charged with knowledge of facts plainly reflected by the records of the corporation, unless through some misrepresentation or otherwise, by the one sought to be charged, such officers and directors have been influenced not to consult the records. See: 1 Merrill on Notice, Sec. 409, p. 353; Curtis, Receiver v. Connly, 257 U.S. 260, 42 S.Ct. 100, 66 L.Ed. 222; Calhoun v. The Maccabees, Tex.Com.App., 241 S.W. 101. As said in Merrill, supra:
“One should know what are contained in his own books and records, even though he does not keep them himself. He knows that they exist and should inquire how they affect his interests. This principle has been applied to charge a partner with knowing what appears on the books of his firm; a mutual benefit insurance society with knowledge of its own records; and a corporation with matters entered on its books” (Emphasis added)
Further, there is no evidence which could possibly present a fact question as to the adversity of interest of Audine Jones. Therefore, notice to Audine Jones was notice to the Corporation as a matter of law of the personal stock sales of Beasley, Holloway, and the sales made by Walden independently of Beasley and Holloway. The fact that Audine Jones began her services with International as a typist and stenographer does not mean that the evidence fails to show that she was an officer of the Corporation at all times pertinent to the sales of stock by the several defendants. The record shows that Miss Jones was secretary in charge of International’s stock ledger and was charged with the duty of issuing and reissuing certificates reflecting the ownership of International’s capital stock. The trial court attempted to eliminate Miss Jones from the notice picture by inserting in his judgment a supplemental finding that she was “adversely interested” to International. Apparently the trial court based this unwarranted supplemental finding on the fact that in July, 1955, she sold her 200 shares of stock. Miss Jones had actual notice of each and every sale made by each of the defendants and from time to time she, as secretary of International in charge of its stock ledger, effected the personal sales of stock made by Holloway, Beasley and Walden. For example, in April, 1955, long before the date of sale of her personal stock, Miss Jones had received, as secretary of International, a letter from Holloway informing her of his and Beasley’s sale of 10,000 shares of personal stock to the Mr. Werner hereinabove mentioned. In fact, there is no evidence that Miss Jones, an officer of International and the very person designated by the Corporation to receive notice about the transfer of shares, performed any act indicating any complicity by her in the transaction complained of, nor is there any evidence of participation on her part in any conspiracy. *590Neither is there any evidence of collusion with or domination of her by Beasley, Holloway and Walden or either of them. The record contains no dereliction whatsoever on her part. Nor is there any finding by the jury to such effect. It is clear, therefore, that notice to Miss Jones was notice to International. See: 3 Merrill on Notice, Sec. 1220, pp. 150-5; Goldstein v. Union National Bank, 109 Tex. 555, 213 S.W. 584 (1919); Graham Bros. Co. v. Galloway Woman’s College, 190 Ark. 692, 81 S.W.2d 837 (1935); Rock Springs National Bank v. Luman, 6 Wyo. 123, 42 P. 874. The so-called disinterested or innocent directors cannot assume lightly the responsibility that goes with the privilege of being a director. They should not be permitted to recover from Beasley and Holloway when they either had full knowledge of every stock transaction or where the books reflecting such transactions were there for them to examine and read.
The knowledge acquired by Miss Jones was acquired in the scope of her duties as secretary or agent of International. I contend that notice to Miss Jones was notice to International. The Court below seems to go off on the theory that unless the employee is an officer who participates in the formulation of company policy, knowledge of the employee cannot be imputed to the Corporation. In fact, the Court of Civil Appeals has stated, in effect, that notice to “a mere stenographer whose duties never equaled those of the usual corporate executive officer occupying the position of secretary,” was not notice to International because the scope of her authority was so limited as to preclude imputing her knowledge to International. See: 3 Merrill on Notice, Sec. 1229, pp. 171-4; American Surety Company v. Fenner, 133 Tex. 37, 125 S.W.2d 258. That International should not be able to escape the consequences of its agent’s (Miss Jones’) knowledge is made clear by the logic of Merrill’s, supra:
“The principal who employs several agents, particularly if he parcels out various functions among them, creates knotty problems for the law of notice. Proper solution is all the more important since so much of our economic life is in the hands of corporations and other large business organizations.
“We may start with the relatively simple propositions that it is the duty of a principal to get to his agent the information necessary to prevent the latter from acting in the scope of his employment to the injury of the interest of others, and, similarly, that it is the duty of an agent employed in a matter to get significant information which he possesses to the principal, or to other agents so employed. Hence it follows that it is not at all necessary that all the members of a committee or all the officers or agents intrusted by a principal with authority to represent him in a certain matter should be shown to have knowledge in order to charge the principal with notice. Information to one such representative is sufficient. The notice is not defeated by the fact that one agent, uiho should have reported but did not, has the significant knowledge, while the agent who acts does so in blissful ignorance. Of course this principle is particularly apt in respect to corporations, which otherwise would have an opportunity to escape the consequences of their agent’s knowledge; but it applies as well to the natural person who acts through several representatives.”
So far as Thomas L. White is concerned, there is not a scintilla of evidence in the record reflecting upon White’s integrity, unless it can be said that being a brother-in-law of Walden automatically rendered him adversely interested to International. White was a director and vice president of International, and as a matter of law, notice to him of the fact that Walden had sold shares of his personal stock was notice to International. White was a director and vice president from March 9, 1954, to July 11, 1955. He received knowledge of such sales in the early summer of 1955, or at *591least prior to July 11, 1955. The sales involved were made between the months of April and September, 1955. There is not one word in this record that White acted in collusion with Walden, Beasley or Holloway, or was adversely interested to International by reason of the sale of personal stock or for any other reason.
NO EVIDENCE THAT THE STOCK SALES BY BEASLEY ET AL. DEPRIVED INTERNATIONAL OF ANY CORPORATE OPPORTUNITIES
The burden was upon International to plead, prove and obtain findings that sales by the three of their personally held shares of stock deprived International of the opportunity to sell its new issue stock. Since the evidence shows that the sales of shares by the three deprived International of no “corporate opportunity” the jury’s findings that the sales made by Beasley, Holloway and Walden were made in competition with the sale of company stock are not supported by evidence of probative force. International, in its early briefs in this court and by the insertion of the words “in competition with” in special issue no. 113, apparently realized that the named defendants could be held liable only in those instances in which International could have made the sale if given the opportunity to do so.
My only purpose in referring to the theory of recovery for deprivation of “corporate opportunities” is that in the event the Court maintains its present expressed purpose to remand this phase of the cause to the trial court for a new trial, the issues should not be tried upon inapplicable theories, but upon the only theory so far as stock sales are concerned. Assuming that International has a cause of action, then the trial court should be told that the present defendants, petitioners here, may not be held liable by reason of their sales of shares unless such sales deprived International of the opportunity to sell its shares. See: Guth v. Loft, Inc., 23 Del.Ch. 255, 5 A.2d 503.
International cannot get away from its anchorage to the principle that the sale of personally owned shares must be shown to have been made in competition with the sale of company stock. Obviously, the trial court on the trial level adopted the theory advanced by International in submitting the issues to the jury. There can be no doubt but that the phrase “in competition with” was placed in special issue 113 in keeping with the realization by the trial court that Beasley et al. could be held liable to International for profits realized through the sales of their personal stock only in those instances where International could have made the sale if given the opportunity to do so. Unless an issue submitting this theory in proper form is given, and unless there is evidence of probative force supporting an affirmative finding, International cannot recover.
The issue is not whether a specific sale by Beasley et al. was in competition with International’s sales of its new issue stock, but the ultimate issue is whether International could have made the sale had Beasley et al. not competed. This leads me to say that, in addition to there being no evidence that International could have made the sales, the trial court improperly submitted the issue to the jury. A finding that a sale by a defendant was “in competition with” International’s sales of its new issue shares is not a finding that International could have made the sale if given the opportunity to do so. In other words, it would not be a finding that International was deprived of any “corporate opportunity.” The present record demonstrates that International cannot recover upon the theory it advanced; it cannot recover upon a jury verdict that each of some 200 or more specific sales of personally held shares was “in competition with” International’s sales of its new issue stock. Should the case be remanded for trial, it is my judgment that International has fully developed its case and can do no better in a second trial. *592Therefore, the judgment allowing International the sum of $169,084.50 against Holloway and Beasley, as profits from the sale of the personal stock owned separately by Holloway, Beasley and Walden should be reversed and rendered for Holloway and Beasley.

The Jennings Property Transaction

The Court has affirmed the judgment of the Court of Civil Appeals which allowed International a recovery of profits realized by Holloway and Beasley in the sale of the Jennings property. I have no particular quarrel with the Court’s holding that this is a severable issue, but I vigorously disagree with its holding that the issue as to the Jennings property was fairly tried in the trial court, and that “justice is done” by the affirmance of this severable issue.
The first 52 issues contained in the court’s charge pertained to the Jennings property. Inquiry was made as to the three collectively, then the jury was told that if it answered issues no. 1 and 18 “No,” and only in that event, it should answer issue no. 32. Then followed a series of issues as to each defendant, individually. None of these issues were answered, because the jury had answered issue no. 1, “Yes,” and had not answered issue no. 18, because the court had instructed the jury not to answer said issue only in the event it had answered issue no. 1, “No.”
Issue No. 1 reads as follows:
“Do you find from * * * the evidence that prior to or at the time of the execution of the original purchase contract dated January 30, 1954, the Defendants, Sterling C. Holloway, James W. Walden and D. D. Beasley, entered into a combination by their concerted action to realize a profit to themselves on the purchase by International Bankers of the Jennings tract?”
The jury answered, “Yes.”
In answer to issue no. 2, the jury found that the three realized a profit. And in answer to issue no. 3, the profit so realized was found by the jury to be $15,000.00.
The jury also found that the three acted with malice and awarded exemplary damages in the sum of $30,000.00. The court defined malice, used in the charge, as meaning ill will, bad or evil motive, or such gross indifference to the rights of others as will amount to a willful or wanton act. The court instructed the jury that the award of exemplary damages is intended as a warning or an example to prevent the person or persons who committed the wrongful act and others from the commission of like offenses and wrongs. My purpose in discussing this feature of the case before presenting the reasons as to why issue no. 1 and its companion issues should never have been submitted is to refute the idea that Holloway and Beasley received a fair trial and were not injured by the introduction of the “Dear Don” letter. It is beyond the realm of reason, in view of the introduction of the letter without instructions limiting its effect, to conclude that because there is nothing said therein with reference to the Jennings property, that its harm and prejudice went only to the personal stock sales and the promotional aspects underlying the sales.
How can this court say that the introduction of the letter was harmless so far as the Jennings property is concerned when no distinction was drawn in the trial court? The jury heard the court’s definition of malice and the reasons for the granting of exemplary damages. The jury heard the argument of counsel for International. Under our rules, it is encumbent upon a plaintiff’s attorney to discuss the evidence which he thinks supports an “affirmative answer to each issue upon which he relies. In our case, the attorney naturally bore down on the “Dear Don” letter as part of the evidence going to support a “Yes” answer to issue no. 1 relative to the Jennings property. I contend that the judgment of the courts below should be reversed and rendered. However, if the Court maintains its position that the cause should be remand*593ed as to the stock sales and that on a retrial such letter could possibly be admissible on that issue, then the Court should remand the entire case and direct the trial court to enter an order severing the two causes. No judgment should he rendered against Holloway and Beasley as to the Jennings property in the face of the letter being in evidence.
Reverting now to the reasons for reversing and rendering judgment for- Holloway and Beasley as to the Jennings property:
There is no evidence to support the jury’s finding “that prior to or at the time of the execution of the original purchase contract dated January 30, 1954” for the Jennings tract, Holloway, Beasley and Walden entered into a combination by their concerted action to realize a profit to themselves on the purchase of said tract by International.
Holloway and Beasley objected to the submission of issue no. 1 on the grounds of no evidence. They also moved for instructed verdict on said ground among others. Holloway and Beasley objected to issue no. 1 further on the ground that there was no pleading on the part of International to support the submission of such issue; that the issue assumes that the Fort Worth Corporation’s corporate entity was to be disregarded; that such issue presupposes that the transaction inquired about was unlawful ; that no harm or damage was shown, but to the contrary the evidence was to the effect that International received value commensurate with the purchase price paid by it for such property; that all transactions were a part of the records of International at the time of the transaction, in so far as the purchase price of the property was concerned, and also the deed records showed the consideration paid by the Fort Worth Corporation for such property, and the records of International from the date of the Jennings property purchase showed that it paid $15,000.00 more for such property than was paid for such property by the Fort Worth Corporation. As to this last objection, there is no question but that International’s claim for damages as to the Jennings transaction was barred by the Statute of Limitations as a matter of law.
The record also shows, as claimed by Holloway and Beasley, that no harm or injury resulted to International. Holloway and Beasley offered to rescind and International refused. Therefore, there was no basis for a cause of action for damages as to the Jennings property aside from all of these objections. I respectfully call attention to one other objection to the charge. It reads as follows:
“These defendants further object and except to Special Issue No. 1, for the reason that the evidence is without dispute that the initial contract and initial sale was to the Fort Worth Corporation, a corporate entity, and while plaintiff has plead that the Fort Worth Corporation was merely a tool or vehicle for the handling of such transaction, the burden of proof is on plaintiff to prove such allegation, and the burden does not shift to the defendants with respect to the transaction until such time as plaintiff has proved a fictional character of the Fort Worth Corporation. The evidence is all one way to the effect that the sale was made to the Fort Worth Corporation and in turn there was a sale from the Fort Worth Corporation to the plaintiff.”
These questions are presented to this court by points 17, 18, and 19 in the Holloway and Beasley application for writ of error. I stress objection no. 7 because it strikes at the heart of this Jennings transaction in the event it is held that there is evidence to support the finding of the jury in answer to issue no. 1, and further in the event the Court holds that International’s cause of action as to the Jennings propertjr is not barred by the Statute of Limitations of Texas.
I submit that International cannot reach Holloway and Beasley in its suit for damages as to the Jennings transaction until and unless it discharges its burden of proving that the Fort Worth Corporation was *594a sham or merely the alter ego of Holloway and Beasley. This proof is completely absent from this record. The Fort Worth Corporation was organized and operated as an investment corporation. It operated as a corporation in buying and selling the stock of Continental Life Insurance Company, in negotiating for the purchase of real estate and in actually purchasing the Jennings tract, and in holding stock of corporations engaged in the business of acquiring real estate. Fort Worth Corporation had a perfect right and was clothed with the power to enter into the agreement with J. L. Walden.
It is well settled that the corporate entity may be disregarded only when the evidence will support a finding that it is merely the alter ego of its stockholders. Ballastine: Corporations, revised ed., Sec. 122, pp. 292-3; 1 Hildebrand, Texas Corporations, Sec. 30, p. 153; Tinnin v. Wilkerson, Tex.Com. App., 58 S.W.2d 69; Moroney v. Moroney, Tex.Com.App., 286 S.W. 167; Nichols & Co. v. Secretary of Agriculture, (C.C.A. 1), 131 F.2d 651, 136 F.2d 503; John L. Denning & Co. v. Commissioner of Internal Revenue (C.A. 10), 180 F.2d 288; McComb v. Aibel, (D.C.E.D.N.Y.), 100 F.Supp. 752.
The mere fact that the owners of stock in a corporation or their nominees ultimately receive the profits made by the corporation is immaterial. Such is only an incident of their ownership of the stock in the corporation.
I respectfully submit that judgment should be rendered for Holloway and Beasley on the Jennings prong of this case. For a case illustrative of the difference between a case in which a parcel of property is purchased by officers and directors with the then intention of selling it to their corporation for a profit and a case in which the idea of selling the property to the corporation is reached after its purchase, I cite that of New York Trust Company v. American Realty Company, 244 N.Y. 209, 155 N.E. 102. The present case was submitted according to the holding in this New York case, but there simply is no evidence to support the finding in answer to such issue. When the Court appreciates the form of Issue no. 1, and realizes that Walden was not a stockholder in the Fort Worth Corporation, and further realizes that the record contains no evidence that “prior to or at the time of” the execution of the purchase contract Walden had any knowledge of the purchase, and when the Court fully realizes that the record contains no evidence that prior to or at the time of the execution of the contract, Holloway and Beasley had any idea of selling the Jennings property to plaintiff at a profit, the only alternative is to render judgment in favor of Holloway and Beasley.
I do not reach the question of exemplary damages.
GREENHILL and HAMILTON, JJ., join in this opinion.