Furr v. Hall

• Decision Date: 30 June 1977
• Docket Number: No. 8747,8747
• Citation: 553 S.W.2d 666
• Parties: Roy K. FURR and Don G. Furr, Executors, Appellants, v. Shelley Furr HALL, Appellee.
• Court: Texas Court of Appeals

Page 666

553 S.W.2d 666

Roy K. FURR and Don G. Furr, Executors, Appellants, v. Shelley Furr HALL, Appellee.

No. 8747.

Court of Civil Appeals of Texas, Amarillo.

June 30, 1977.

Rehearing Denied July 25, 1977.

Crenshaw, Dupree & Milam, James H. Milam and Cecil C. Kuhne, Jr., Lubbock, for appellants.

Nelson, McCleskey, Harriger & Brazill, Lubbock, McGinnis, Lochridge & Kilgore, Morgan Hunter, Austin, for appellee.

REYNOLDS, Justice.

Resolving the ultimate issues, the trial court correctly determined that two of the three executors' proposed redemption of the estate's shares of stock by corporations which the two executors successfully controlled and managed as directors and stockholders, as well as officers in two of the corporations, would violate V.T.C.A., Probate Code § 352 (1956), and would be enjoined. Affirmed.

Roy Furr died 13 June 1975, survived by his wife and their three children. His will, with an attached codicil, named his children, Roy K. Furr, Don G. Furr and Shelley Furr Hall, who are devisees under the will and the beneficiaries of a trust established by the codicil, independent executors of his estate in the event his wife, Lela Rosellen Furr, should die, resign or be unable to act as executrix. When Mrs. Furr declined to qualify as the executrix, Roy K. Furr, Don G. Furr and Shelley Furr Hall, referred to for simplicity as Roy, Don and Shelley, respectively, duly qualified as joint independent executors and executrix of their father's estate.

At Roy Furr's death, the community estate had assets of approximately $7,000,000, the community debts were approaching $5,000,000, and sufficient cash was not available to satisfy the debts. Among the assets of Roy Furr's estate were shares of stock of Furr's, Inc., Furr's Realty Company, Furr's Cafeterias, Inc., and Farm Pac Kitchens, Inc. Two of the corporations, Furr's, Inc., and Farm Pac Kitchens, Inc., were beneficiaries of insurance policies on the life of the decedent approximating $3,400,000.

After several meetings, executors Roy who is president and chief executive officer of Furr's, Inc., and Furr's Realty Company, as well as a director of and a stockholder in all of the named corporations and Don who is chairman of the board and chief executive officer of Furr's Cafeterias, Inc., as well as a director of and a shareholder in all of the named corporations proposed to receive the life insurance proceeds in redemption of certain shares of the Furr corporations' stock from the estate to generate enough cash to pay the estate's debts. Without the presence or participation of Roy and Don, the board of directors of Furr's, Inc., and Furr's Cafeterias, Inc., voted to redeem shares of their stock from the estate at a price the court found to be the fair market value to the estate. (Prior to trial, Furr's Realty Company and Farm Pac Kitchens, Inc., merged, and Furr's Realty Company became the surviving corporation.)

Thereupon, Shelley, in her capacity as a devisee, brought this action, alleging that, because of Roy's and Don's individual ownership of capital stock in and fiduciary relationships to the purchasing corporations, the proposed redemption would constitute a sale by independent executors to themselves prohibited by V.T.C.A., Probate Code § 352 (1956). She sought a declaratory judgment to that effect and a perpetual injunction preventing Roy and Don, in their capacities as independent executors, from selling the shares of stock to the corporations.

After a hearing without the intervention of a jury, the trial court rendered a declaratory judgment decreeing that the proposed sales, if consummated, would violate V.T.C.A., Probate Code § 352, which, in part, reads:

The personal representative of an estate shall not become the purchaser, directly or indirectly, of any property of the estate sold by him, or by any co-representative if one be acting.

Finding that Shelley had no adequate remedy at law, the court perpetually enjoined Roy and Don, as independent executors of the estate of Roy Furr, from

. . . selling or transferring to Furr's, Inc., Furr's Realty Company and/or Furr's Cafeterias, Inc., any of the property belonging to the Estate of Roy Furr, Deceased, so long as they are an officer, director or stockholders of such corporation that is purchasing such property or redeeming such stock unless Plaintiff (Shelley) consents in writing to such sale or redemption by Furr's, Inc. Furr's Realty Company and/or Furr's Cafeterias, Inc. of the property or capital stock or such corporation belonging to the Estate of Roy Furr, Deceased.

Executors Roy and Don have appealed, presenting twenty-seven points of error. In the first two of these, they urge that the court erroneously enjoined the proposed sale because (1) Roy and Don do not own, either individually or jointly, a controlling interest in any of the purchasing corporations, and (2) neither Roy nor Don participated in the purchasing corporations' decisions to redeem the stock.

The prohibition stated in V.T.C.A., Probate Code § 352 is the statutory expression of the general rule that an executor or administrator may not purchase at his own sale property in the decedent's estate, 31 Am.Jur.2d, Executors and Administrators, § 383, which appertains in the United States and in the British Empire. 21 Am.Jur., Executors and Administrators, § 622. The statute implicitly recognizes that an independent executor, occupying the position of fiduciary in relation to the estate, must be possessed of an independent and impartial judgment as to the advisability of selling assets of the estate and, if it be advisable, in determining the price at which to sell. It seeks to avoid the possibility of fraud and the temptation of self-interest. See 105 A.L.R. 450 and authorities therein cited. The same rationale was expressed by the Supreme Court in Southern Trust & Mortgage Co. v. Daniel, 143 Tex. 321, 184 S.W.2d 465, 466-67 (1944), in disapproving a trustee's public sale of land described in the deed of trust to a corporation of which he was an officer, director and stockholder, by this language:

It cannot be said that the trustee might not have sought and obtained a much higher bid from the corporation itself had he not been one of its officials. As an officer of the corporation the temptation to make an advantageous purchase of the property would be as great as, if not greater than, it would were he purchasing from himself individually.

. . . The opportunity for conflict between interest and duty is the vicious ingredient. The presence of the opportunity in this case is too unmistakable and certain to overlook.

. . . (W)hat we decline to approve is a practice which affords an opportunity for and creates a temptation to disloyalty. Were that practice given the approval of this court, then instances of disloyalty could rise under circumstances in which it would be impossible to make proof thereof. That consideration affords sufficient grounds for condemning the practice altogether.

The statutory prohibition against self-dealing announced by § 352 of the Probate Code is clear and unambiguous and does not provide for any exception of its terms. 7-Up Bottling Company of Austin, Inc. v. Capital National Bank in Austin, 505 S.W.2d 624, 627 (Tex.Civ.App. Austin 1974, writ ref'd n.r.e.). In 7-Up, the individual who was coindependent executor with a bank and who also was an officer, director and stockholder of a corporation which exercised its option to buy the decedent's stock in the corporation was said by the court to be purchasing, directly or indirectly, property of the estate sold by him. The dual relationship, irrespective of the equities pleaded and raised, fell within the prohibition of V.T.C.A., Probate Code § 352.

Similarly, the provisions of the statute prohibiting the guardian from purchasing his ward's property are mandatory and admit of no exceptions whatever. Wall v. Wall, 172 S.W.2d 181, 185 (Tex.Civ.App. Amarillo 1943, writ ref'd w.o.m.). By extension of that statute, the next friend cannot purchase a minor's property in a court ordered sale. Mitchell v. Thompson, 292 S.W. 862, 863 (Tex.Comm'n App.1927, holding approved).

Beyond that, the trial court found that Roy and Don successfully control and manage the corporations and would control the corporations redeeming the shares of stock. By their fourteenth point of error executors Roy and Don attack these factual findings as immaterial and irrelevant, not supported by the evidence, and against the great weight and preponderance of the evidence. However, other than a statement that Roy and Don are minority stockholders, there is no record referenced statement of the facts directed to the point or a discussion of the facts and authorities relied upon as required by Rule 418(c), Texas Rules of Civil Procedure, to maintain the point. In the Matter of D______R______D______, 537 S.W.2d 133, 134 (Tex.Civ.App. Amarillo 1976, no writ). Where, as here, Rule 418(c), T.R.C.P., is not complied with, this court has no duty to independently search the 1,020 pages of the statement of facts to ascertain if the point of error has merit. Saldana v. Garcia,155 Tex. 242, 285 S.W.2d 197, 200-01 (1955). We do state, however, that from our review of this record, including sixty-six exhibits in addition to the 1,020 page statement of facts, in connection with the appeal, we cannot say, with due regard for the trial court's prerogative in assessing the evidence, that these findings are so against the great weight and preponderance as to be manifestly wrong and unjust.

Given these principles and these findings of fact, the trial court correctly determined that under the circumstances where the executors' proposed sales of the estate's shares of stock, in the form of stock redemption, to corporations which the executors control and manage in their capacities as officers, directors and stockholders are sales prohibited by V.T.C.A., Probate Code § 352, regardless...