Court Opinion

ID: 6897912
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:51:49.233172+00
Date Added: 2024-06-11T16:06:04.010004
License: Public Domain

On Rehearing.
HUXMAN, Circuit Judge.
This case involved the sole question whether the second amended complaint stated a cause of action entitling plaintiffs to go to trial. The trial court was of the opinion that it was devoid of primary allegations of fact necessary to state a cause of action, and accordingly entered judgment dismissing the action. On appeal to this court we affirmed. See Gulf Coast Western Oil Company, Inc., v. Trapp, decided August 21, 1947. We granted appellant’s petition for rehearing, limiting it, however, to a reconsideration of the allegations in subparagraphs 12 to 19, inclusive, of paragraph II of the second amended complaint. Having given further consideration'to these portions of the complaint, we have reached the conclusion that we erred in concluding that they failed to state" a cause of action.
We now think that we construed the allegations of these subparagraphs too narrowly. We also feel that we gave too much weight to the fact that all of these transactions were carried on by the preorganization committee and occurred prior to the organization of the corporation, and to the fact that Trapp was not a member of this committee. The preorganization committee represented the corporation to be formed. All the funds collected by it and which came into its hands were trust funds to be accounted for to the corporation when it was formed. The fact that when the corporation was formed, the properties which the committee had purchased for it were transferred to the corporation and accepted by it, did not absolve the committee from liability for other funds, if any, which it misappropriated unbe*351known to the corporation. So also, the fact that Trapp was not a member of the preorganization committee and had nothing to do with the collection of these funds, would not absolve him of liability, if, in fact, some of these properties purchased with such funds were placed in his name without the payment by him of full consideration therefor. Our former opinion recognizes this, when we said, “Of course, if, as a matter of fact, he received money or property belonging to the corporation for which he had not accounted, a trust relationship would arise by operation of law and he would be required to account therefor * * *”.
In our original opinion, we set out the allegations of subparagraph 12 as being representative of the allegations of all of these paragraphs. Upon a further consideration of the allegations of these subparagraphs, we are of the view that they do state primary facts sufficiently definite to enable the defendant to adequately prepare his defense thereto. Thus, subparagraph 12 alleges, “That on August 21, 1931, G. T. Blankenship and M. E. Trapp purchased a one-sixteenth (1/16) of one-eighth (1/8) royalty interest under ninety-five and five tenths (95.5) acres in the G. F. Penn Survey, Gregg County, Texas, known as the Tom Bell Tract, the legal description of which is set forth in Exhibit No. 8, Paragraph A, hereto attached and made a part hereof. The property was purchased from L. W. Stiron and E. J. Koenig. On September 21, 1931, G. T. Blankenship and M. E. Trapp deeded a one-thirty-second (1/32) of one-eighth (1/8) royalty interest to Farmers Mutual and retained for themselves a one-thirty-second (1/32) of one-eighth (1/8) royalty interest or one-half (1/2) of the amount purchased. That the consideration for the full interest purchased was taken by G. T. Blankenship and M. E. Trapp from funds of the Farmers Mutual and that the said G. T. Blankenship and M. E. Trapp have not accounted to the petitioner for the remaining one-half (1/2) interest of the properties purchased or the proceeds thereof.”
There is no uncertainty or ambiguity in these allegations. They set out the primary fundamental facts, which, if true, would require the defendant to account. They furnish all necessary information enabling Trapp to refute them if they are untrue, and prepare his defense thereto. As already pointed out, the fact that the transactions were consummated prior to the existence of the corporation, if, in fact, the property was purchased with trust funds belonging to the corporation, would not deny the right to an accounting. Likewise, the fact that Trapp was not a member of the preorganization committee or had no part in the purchase of the property would not absolve him from liability if such property was placed in his name. In such event, he would be charged as trustee by operation of law.
A motion to dismiss for failure to state a cause of action admits all facts well pleaded and is to be construed most favorably to plaintiff. Porter v. Karavas, 10 Cir., 157 F.2d 984. We are of the opinion that when so considered, subparagraphs 12 to 19, inclusive, of paragraph II of the econd amended complaint state a cause of action, and that we erred in reaching a contrary conclusion. As to the remaining paragraph of the amended complaint, no petition for rehearing was granted, and a majority of the court adheres to what we said in our original opinion. The judgment heretofore entered by us is accordingly withdrawn, and the following judgment is entered: The judgment of the trial court dismissing the action set out in subparagraphs 12 to 19, inclusive, of paragraph II of the second amended complaint, is reversed, and as to such part of the complaint, the cause is remanded with directions to reinstate the same and proceed in accordance with the views herein expressed. In all other respects, the judgment of the trial court is affirmed. .