Caldwell v. Kingsbery, 11735

• Decision Date: 18 February 1970
• Docket Number: No. 11735,11735
• Citation: 451 S.W.2d 247
• Parties: Earl L. CALDWELL, Jr., Appellant, v. E. G. KINGSBERY et al., Appellees.
• Court: Texas Court of Appeals

Page 247

451 S.W.2d 247

Earl L. CALDWELL, Jr., Appellant, v. E. G. KINGSBERY et al., Appellees.

No. 11735.

Court of Civil Appeals of Texas,

Austin.

Feb. 18, 1970.

Rehearing Denied March 11, 1970.

Carr, Osorio, Palmer, Dickson, Long & Coleman, William Dickson, Austin, for appellant.

David L. Tisinger, Austin, for appellees.

PHILLIPS, Chief Justice.

The appellees, E. G. Kingsbery, Glenn M. Tooke, Jr. and T & K Corporation, brought suit in the court below, as a stockholders' bill for the benefit of the appellee, C.T.K. Corporation, which is alleged to have been in jeopardy by reason of the misconduct of the appellant, Earl L. Caldwell, Jr. The appellees sought a temporary restraining order, temporary injunction, and a permanent injunction, damages and declaratory judgment against the appellant, Earl L. Caldwell, Jr., a director, president and general manager of the C.T.K. Corporation.

The appellees claim that the appellant Caldwell has been ousted as president, general manger and as a director, by majority vote at a special stockholders' and directors' meeting held a few days prior to the filing of their petition on August 8, 1969; such ouster and removal was alleged to have been in good faith because of the manifested inability of the appellant Caldwell to properly perform his corporate duties; that the appellant Caldwell:

'refuses to recognize his removal, and avows that he will continue in office and in charge of the Company; contrary to express order of the Board of Directors he continues to write checks, and has diverted by unauthorized and prohibited check writings $9,500.00 from the Company Bank Account * * * and has misapplied such sums beyond the reach of the Company officers and beyond the reach of the Company.'

The appellees further alleged in their petition that:

'unless restrained and enjoined, defendant will before notice can be issued and hearing had cause immediate and irreparable injury, loss and damage to Plaintiffs by continuing to write checks and use Company money for other than corporate purposes, and continuing to hold himself out as Company President and General Manager, and continuing to hold the Company books, journals, checkbooks, deposit slips, and financial records in his custody to the exclusion of Plaintiffs;'

The appellees further alleged that they have no adequate remedy at law and that they have already been damaged in untold amounts and that in view of appellant Caldwell's persistence in claiming his offices in the company in spite of his removal, the court should enter judgment declaring him removed and enjoining him from claiming any office.

The court issued a temporary restraining order without notice and subsequently entered a temporary injunction, after a hearing, prohibiting appellant from managing the affairs of the Corporation.

The appellant Caldwell filed a Petition as cross-plaintiff in behalf of himself and the C.T.K. Corporation. He also asked for a temporary injunction to preserve the status quo. The court denied this relief.

The temporary injunction restrained appellant from writing any C.T .K. Corporation checks and from using any money obtained from the Company except as salary, from acting as an officer of the corporation, and from refusing to give appellees access to the company books and records. The court further directed that another director's and stockholder's meeting should be held on September 2, 1969. Appellant's request for an injunction and for a receivership were denied. Consequently, appellant perfected his appeal to this Court.

We affirm the judgment of the trial court.

We will consider appellant's first six points of error together. They are the error of the court in enjoining appellant from functioning as president, director and general manager of the C.T.K. Corporation because the injunction determines the rights of the appellant without a proper trial on the merits, because the injunction is based on mere surmise, destroyed the status quo, grants appellees all relief for which they prayed and was in conflict with Texas statutory law and the bylaws of C.T.K. Corporation.

We overrule these points.

The C.T.K. Corporation was formed to operate a Mexican restaurant business. Appellant was procured by Tooke and Kingsbery on a trial basis to manage the restaurant when a building they had under construction was completed. Pending construction of the building he was authorized to tend to routine matters.

When the corporation was formed, appellant was appointed president and the bylaws gave him authority of general supervision over the corporation's affairs. However, the corporation's business was carried on very informally, and at least two directors consulted sually as to any matter of importance. The bylaws also provided that an officer could be removed at any time by a two-thirds vote of the Board of Directors.

Three of the appellees, Kingsbery, Tooke and T & K Corporation, own two-thirds of the stock of C.T.K. Corporation. Kingsbery and Tooke each own fifty percent of the stock in T & K Corporation, except that a Mrs. Laura Bomar (not a party) owns 100 shares out of ten thousand, or one per cent of the stock of T & K. Mrs. Bomar has, from the beginning, left the management of T & K entirely up to Mr. Kingsbery. Therefore, for all practical purposes, Mr. Kingsbery and Mr. Tooke control T & K Corporation, and thus control two-thirds of the stock of C.T.K. Corporation.

T & K Corporation was formed in 1964. Its has been very successful in the Mexican restaurant business, and has no other business.

In 1968 Kingsbery and Tooke considered opening another Mexican restaurant, and sought to find a manager on a trial basis. Tooke had known appellant Caldwell in past years and thought he might teach Caldwell the Mexican restaurant business. Kingsbery and Tooke discussed this proposition with Caldwell and the three agreed that a new corporation would be formed and Caldwell on a trial basis would be trained to manage it. C.T.K. Corporation was thus formed for the purpose of implementing the proposal, and Caldwell, Kingsbery and Tooke were to each have one-third of the stock, except that most of Kingsbery and Tooke's stock was placed in the name of T & K Corporation. The stock issue was 5000 shares to Caldwell, 9800 shares to T & K Corporation, 100 shares to Kingsbery, and 100 shares to Tooke. Caldwell was appointed President, Kingsbery Vice President, and Tooke was appointed Secretary-Treasurer.

Land was purchased, building plans developed, City rezoning arranged, financing on an interim basis at the Capital National Bank was procured with Kingsbery's guaranty, and the building started. In the meantime, Tooke started trying to teach Caldwell the Mexican restaurant business. In a short time Tooke learned that Caldwell was not qualified to learn such business, and could not get along with Mexican people. Tooke testified that getting along with Mexican people was one of the main secrets to success.

Caldwell had been in the Navy twenty years, with practically no business experience. For a short time before coming with Kingsbery and Tooke he had been a claims adjuster.

Appellees contend that Caldwell showed very poor business judgment . He did not know he was supposed to hold out social security and withholding taxes; he put the company automobile in his own name because he did not think that the company could get insurance. He did not keep up with what was in the company bank account, and he did not keep up with the money that the company owed the bank. He refused to show the books to the other officers at times, stating that he would have to consult counsel. He was inefficient.

That with arbitrary conduct, Caldwell made unreasonable demands on workmen at the construction job, constantly took their pictures for reasons peculiar to...