Dunagan v. Bushey

• Decision Date: 23 April 1953
• Docket Number: No. 12477,12477
• Citation: 257 S.W.2d 822
• Parties: DUNAGAN v. BUSHEY et al.
• Court: Texas Court of Appeals

Page 822

257 S.W.2d 822

DUNAGAN v. BUSHEY et al.

No. 12477.

Court of Civil Appeals of Texas, Galveston.

April 23, 1953.

Merrill & Scott and Sam R. Merrill, of Houston, for appellant.

Boyles & Billingsley and M. U. S. Kjorlaug, Houston, for appellee First Nat. Bank in Houston.

George W. Eddy, Houston, for appellees C. W. Bushey, J. B. White and Harry L. Hill.

MONTEITH, Chief Justice.

This action was brought by appellant Everett Dunagan for himself and on behalf of the stockholders and creditors of Tem-Trol, Incorporated, a Texas corporation, in which he was a stockholder, seeking recovery from C. W. Bushey, J. B. White, and Harry L. Hill, who were engaged in promoting and incorporating Tem-Trol, Incorporated, and the First National Bank in Houston of the sum of $18,025. He alleged that he had purchased from appellees White and Bushey stock of Tem-Trol, Incorporated, of par value of $5,000, which had been subscribed by them and paid for with checks totaling that amount, which were subsequently used for the benefit of the corporation; that the application for said charter showed an authorized capital stock of $35,000 of which $18,000 was stated to have been paid in cash.

Appellant alleged that Tem-Trol, Inc., was chartered in April, 1948, and that appellees C. W. Bushey, J. B. White and Harry L. Hill were named as its first board of directors, and that he was approached by appellee White, relative to buying stock in the proposed corporation. The record reflects that prior to March 30, 1948, appellees Bushey and White had negotiated a loan from the First National Bank in Houston in the sum of $18,000, to be deposited to the credit of the corporation and to be used as the necessary cash payment for securing such charter; that appellee bank issued a duplicate deposit slip in that amount for use in securing such amount. Appellant alleged that appellee bank had knowledge of such plan or was in possession of sufficient facts to put it on inquiry with reference thereto; that appellees Bushey and White later withdrew $18,025 from the corporate funds by check payable to themselves and used the same to pay their note to appellee bank. He alleged that appellee bank had knowledge of such fraudulent plan and that appellee bank had knowledge of the unlawful plan to withdraw such funds that left the corporation without sufficient funds to enable the corporation to proceed with the business for which it was incorporated.

At the conclusion of the trial before a jury, the trial court withdrew the case from the jury and the trial court rendered judgment that appellant take nothing by his suit.

The record shows that appellant was present and interposed no objection or protest at the stockholders meeting of April 26, 1948, when he was advised of the loan from the bank; and at which meeting the action of the stockholders meeting of April 8, 1948, adopting a resolution which designated the First National Bank in houston as the depository for Tem-Trol, Inc., and which authorized withdrawals by checks signed by C. W. Bushey and J. B. White, was ratified.

It is undisputed that appellant was approached by appellee White relative to buying stock in the proposed corporation, that he was informed of the nature of the business the proposed corporation would engage in.

On July 21, 1950, a judgment was rendered by one of the district courts of Travis County, dissolving the corporation for its failure to pay the franchise tax due the State.

Appellant relies on 15 points of assigned error, in which he contends that since the evidence shows that the individual appellees caused the check of the corporation for $18,025, to be drawn in favor of the appellees White and Bushey, the corporation did not receive full and adequate consideration, that such conduct was in violation of their trust as such incorporators and directors, and that such check was invalid; and appellant contends that since appellee First National Bank in Houston accepted the check of the corporation payable to appellees White and Bushey for $18,025, in payment of their note, appellee bank became liable to the corporation for that amount regardless of whether or not the bank or its representatives actually knew, or had notice, of the fact that such check was wrongfully issued. He contends that the bank, having loaned the sum of $18,000 to appellees, and having issued its duplicate deposit slip for that amount to be used in securing the corporate charter and then used the money thus received to pay appellees' note to the bank, that the bank remained liable to the corporation for its funds so withdrawn, and that the individual appellees and the appellee bank were jointly and severally liable to the corporation for the sum of $18,025, and that the trial court erred in overruling the alternate motion of appellant for an instructed verdict. Appellant contends that the court erred in failing to submit to the jury as a controverted fact issue the question of whether the officers and representatives of appellee bank knew or should have known at the time it issued its duplicate certificate of deposit for $18,000 of the purpose of the individual appellees to sell to the corporation, when organized, properties of questionable value for the amount of their note to the bank and then use that money to pay said note.

In the case of Waco Drug Co. v. Hensley, Tex.Com.App., 34 S.W.2d 832, in which allegations of fraud, misrepresentation, concealment or conspiracy were charged, the court set out the rule laid down by the Supreme Court in the case of Joske v. Irvine, 91 Tex. 574, 44 S.W. 1059, that it was the duty of the court to instruct a verdict if its probative force was so weak that it only raised a mere surmise or suspicion of the existence of the fact sought to be established and that such testimony in legal contemplation fell short of being any evidence, and that it is the duty of the court to determine whether the testimony has more than that degree of probative force.

The rule announced in the case of Joske v. Irvine, supra, has been followed in the cases of Texas Loan Agency v. Fleming, 92 Tex. 458, 49 S.W. 1039, 44 L.R.A. 279; Nordyke v. Wright, Tex.Civ.App. 11 S.W.2d 385; Wills v. Central Ice & Cold Storage Co., 39 Tex.Civ.App., 483, 88 S.W. 265; Harpold v. Moss, Tex.Civ.App., 106 S.W. 1131; Missouri, K. & T. R. Co. v. Williams, Tex.Civ.App., 117 S.W. 1043; Dayton Lumber Co. v. Stockdale, 54 Tex.Civ.App. 611, 118 S.W. 805; Advance-Rumely Thresher Co. v. Moss, Tex.Civ.App., 213 S.W. 690; Kirby Lumber Co. v. Boyett, Tex.Civ.App., 221 S.W. 669; M. H. Thomas & Co. v. Hawthorne, Tex.Civ.App., 245 S.W. 966; Houston v. Holmes, Tex.Civ.App., 262 S.W. 849; Blackwell v. Ship Channel, etc., Tex.Civ.App., 264 S.W. 223.

It is, we think, the settled law in this State that a bank is charged with liability for misappropriation of its depositor's funds only when it has actual knowledge of the misappropriation and acts in bad faith.

In this case there is no evidence in the record that the appellee bank acted in bad faith or that it possessed actual knowledge of any misconduct or intended misconduct on the part of appellees, C. W. Bushey, J. B. White and Harry L. Hill.

In connection with appellant's charge of fraud on the part of appellees, there is no evidence that the appellee bank committed an unlawful act and by its act effected an unlawful purpose.

The ledger sheet of this account in the bank shows...