Connally v. Continental-Southland Savings & Loan Ass'n

• Decision Date: 21 November 1931
• Docket Number: No. 11167.,11167.
• Citation: 54 S.W.2d 244
• Parties: CONNALLY et al. v. CONTINENTAL-SOUTHLAND SAVINGS & LOAN ASS'N.
• Court: Texas Court of Appeals

Page 244

54 S.W.2d 244

CONNALLY et al. v. CONTINENTAL-SOUTHLAND SAVINGS & LOAN ASS'N.

No. 11167.

Court of Civil Appeals of Texas. Dallas.

November 21, 1931.

Rehearing Denied November 12, 1932.

Appeal from District Court, Dallas County; W. M. Taylor, Judge.

Suit by Mrs. May Connally against the Continental-Southland Savings & Loan Association, wherein certain others intervened. Judgment of dismissal, and plaintiff and interveners appeal.

Reversed and remanded. Certified questions answered, 51 S.W.(2d) 293.

Renfro, Ledbetter & McCombs, Louis J. Hexter, Wm. Andress, Jr., W. Gregory Hatcher, and Goggans & Ritchie, all of Dallas, for appellants.

Geo. T. Burgess, of Dallas, and Maco Stewart, of Galveston, for appellee.

JONES, C. J.

Mrs. May Connally, one of the appellants, filed, a suit in a district court of Dallas county against Continental-Southland Savings & Loan Association, appellee, to recover the sum of $5,100, alleged to be due her by virtue of the fact that she owned class C shares in appellee association, of the par value in said amount, and that when she subscribed for the shares she paid in cash to appellee the par value of the stock. A number of others, who are appellants, intervened in the suit, also seeking a recovery of the value of matured shares, which they severally owned in the appellee association. A temporary writ of injunction was sought by each appellant to restrain an alleged illegal transfer of the assets of appellee, until its obligation to each had been paid. The trial court sustained a general demurrer to the pleading of each appellant, and a judgment of dismissal was entered in the cause. An appeal has been duly prosecuted to this court for review of the judgment. The following is a sufficient statement of the case:

A general demurrer having been sustained, this court must treat as established facts on this appeal all of the facts alleged in the pleadings of appellants. The petition of the plaintiff and each plea of intervention are substantially the same in respect to the allegations on which is rested the cause of action.

Appellee was incorporated as Continental Savings & Building Association, and about January 30, 1929, the assets of the Southland Building & Loan Association, were purchased by appellee and all of the liabilities of the selling corporation were assumed by the purchasing corporation. When this purchase was made, the name was changed to Continental-Southland Savings & Loan Association.

As the fact appears from the pleadings that the present stockholders in the appellee association, who had subscribed for stock in the selling association, have all of the rights that accrued to them under the selling association, the case will be discussed as though appellee was the original association. It is shown that appellee is a solvent and active building and loan association, chartered under the building and loan laws of this state, with idle money in its treasury in a sum of more than twice the amount alleged to be due all of the appellants. Each appellant has given the notice legally required to make the sum sought to be recovered due and payable. Each appellant claims that he has priority over every other like claim due to investment stockholders. In other words, the petition of plaintiff and each plea of intervention contain all of the necessary allegations to entitle each party to priority in payment from the idle fund of a solvent and active building and loan association.

The allegations in plaintiff's petition and in each intervener's plea show that Maco Stewart has made a proposition to purchase all of the assets of appellee association and to assume its obligations to the stockholders on terms stated in the written proposal, accepted by appellee's administration officers and submitted to the stockholders for their acquiescence. The proposal is as follows:

"A Proposal from Maco Stewart to Shareholders of the Continental-Southland Savings and Loan Ass'n, Dallas, Texas, September 12th, A. D., 1931.

"When substantially all of your shareholders whose stock is pledged to secure real estate loans and two-thirds in number and amount of your other shareholders, sign and return duplicate of this letter authorizing liquidation of the Continental Southland Savings and Loan Association (and such liquidation approved by the Banking Commissioner as required by law) and the sale to me of all assets for $4,231,195.13, I will purchase all stock in Continental Southland Savings & Loan Association on the following terms:

"The auditors, Hutchinson, Smith, Prince and Harris, have divided your assets into two classes, A and B (as per their enclosed statement) placing into Class A your properly secured and current real estate loans plus sufficient amount of lawful stock loans and note of liquidating company to bring the total assets to $5,090,243.91 (being 75% of total outstanding stock other than permanent stock and stock pledged to secure real estate loans), and placing into class B your remaining assets subject to your liabilities. The note of the liquidating corporation to be payable on or before five years and bearing interest at the rate of six per cent. (6%) payable monthly with right to pay thereon at any time any sum desired and same to be secured by lien on all assets of liquidating corporation.

"I will pay for the assets in Class A, stock in Guaranty Building & Loan Co., amounting to $5,090,243.91 to be evidenced by Certificates (in form printed on back hereof) and same to be exchanged and distributed ratably to your shareholders (other than permanent shares and shares pledged on real estate loans) in proportion to their credits shown on the books of the Continental Southland Savings and Loan Association.

"I will pay for the remaining assets in Class B, stock in the Mortgage Liquidating Corporation to be formed by me and operated solely for the purpose of liquidating your Class B assets, subject to your liabilities. The stock in such liquidating corporation will be nonpar stock in usual form. There shall be seven directors of whom four shall be named by Continental-Southland's present directors and three by Stewart and any action by Board to receive two-thirds vote of Board.

"The foregoing assures your shareholders receiving the full benefit of all assets of the Continental Southland Savings and Loan Association.

"On the basis of your Class A assets being fixed as above stated each Continental Southland shareholder (other than permanent shareholders and shareholders whose shares are pledged to secure real estate loans) will receive stock in Guaranty Building & Loan Co. to the extent of seventy-five per cent. of the amount now credited on the books to his stock, and for the remainder will receive his pro-rata of stock in the liquidating corporation. As an illustration—One who has credit on the Continental Southland books of say $1,000.00 will receive 7½ shares of stock in Guaranty Building & Loan Co., of the face and par value of $750.00 and will also receive 250 shares in the Liquidating Corporation, all of which will be preferred over the shares to be issued as Common stock to your permanent shareholders.

"The certificate in stock of Guaranty Building & Loan Co. provides for dividends quarterly and expressly restricts filing of application for withdrawal to one-fifth of the amount per year.

"The assets of the Liquidating Corporation will consist principally of real estate and delinquent notes and be liquidated in an orderly manner and as fast as can be done without sacrifice. Guaranty Building & Loan Co. will furnish, without charge, all clerical services in the home office necessary in such liquidation, and no charge will be made for my services to the Liquidating Corporation.

"When the proposed plan meets the required approval, each shareholder in Continental-Southland will be promptly notified to send in stock to the First National Bank of Dallas, which will act as transfer agent for the stock.

"The assets so transferred to me will be simultaneously by me transferred, the Class A assets to the Guaranty Building & Loan Co. and the Class B assets to the Liquidating Corporation.

"Each borrower will receive credit on his loan for the amount paid in as stock dues and dividends as credited to his account by the books of the Association and such borrower shall execute extension note payable to Stewart or assigns for the balance as shown by such books at the same rate of interest provided in note now held by the association and principal and interest re-payable in installments of not less than $12.50 per month per thousand.

"Time is of the essence of the contract and the required approval must be had by October 18, 1931, and the deal will then be promptly closed.

                      "Respectfully
                                           "Maco Stewart."
                

Appellants allege that the approval of the required two-thirds majority of the investment stockholders will be given, that the proposal of Stewart will thereby be accepted upon its terms, and that all of the assets of appellee will thus pass into the possession and apparent ownership of Stewart, and that they will thus be deprived of a vested right to have immediate payment of the full withdrawal value of their shares. They further alleged, in effect, that the proposal of Stewart is illegal, in that the proceedings to be had under the terms of the proposal, to effect the dissolution and liquidation of appellee, are neither that of voluntary liquidation, as provided for in our building and loan law, nor that of a consolidation with another like association, nor a transfer of appellee's "engagements, funds and property" to another association. Appellant's allegations in respect to the solvency of appellee, the fact that it is an active building and loan association, and that the proceedings attempted to be carried out under the proposal of Stewart, are illegal, are very full and complete, but it is not deemed necessary to state the...