Green v. Bennett

• Decision Date: 07 April 1908
• Citation: 110 S.W. 108
• Parties: GREEN et al. v. BENNETT et al.<SMALL><SUP>*</SUP></SMALL>
• Court: Texas Court of Appeals

110 S.W. 108

GREEN et al. v. BENNETT et al.^*

Court of Civil Appeals of Texas.

April 7, 1908.

Rehearing Denied April 23, 1908.

Appeal from District Court, De Witt County; James C. Wilson, Judge.

Action by William Green and another against John M. Bennett and others. From a judgment of dismissal on sustaining a demurrer to the petition, plaintiffs appeal. Affirmed.

Wallace & Wimberly and Denman, Franklin & McGown, for appellants. Prive & Green, Davidson & Bailey, Lackey & Lewright and Proctors, Vandenberge & Crain, for appellees.

REESE, J.

This is a suit by William Green and Phillip Welhausen, stockholders in the First National Bank of Yoakum, against J. M. Bennett, Sr., E. B. Carruth, W. T. Brian, B. P. Stephenson, M. V. Arnold, J. M. Green, D. T. Price, the First National Bank of Yoakum, and the Yoakum National Bank of Yoakum, complaining of the action of the individual defendants in placing the First National Bank of Yoakum in voluntary liquidation, and disposing of its assets to the Yoakum National Bank of Yoakum, to the injury of plaintiffs as stockholders in the first-named bank. The court sustained a general demurrer, and certain special demurrers, which, in fact, were in the nature of general demurrers to the petition, and, plaintiffs declining to amend, the cause was dismissed, from which judgment plaintiffs appeal.

The petition is quite lengthy. The following statement, taken from appellants' brief, and admitted by appellees to be accurate, presents, with but slight abbreviation, its essential averments: "The First National Bank of Yoakum is referred to as the `First National' and the Yoakum National Bank of Yoakum as the `Yoakum National.' The First National was incorporated in 1890 with an authorized capital stock of $50,000, divided into 500 shares of $100 each, and ever since the date of its incorporation up to the times thereinafter averred in the petition has been engaged in the banking business in the city of Yoakum. Appellants on or about the 15th day of July, 1899, purchased and became the owners jointly of 55 shares of the capital stock of the First National, and are still the owners and holders of such stock. On or about the 8th day of January, 1907, appellees, other than the First National and the Yoakum National, were elected directors of the First National, and have since continued and still are directors of said First National. On or about the 8th day of January, 1907, appellee Bennett was elected president of the First National, appellee Green, vice president, appellee Carruth, cashier, and appellee Brian, assistant cashier of said bank, and since said time have continued to hold their said offices and still hold same. The First National has continuously been in business from the date of its incorporation and, during said time, built up a valuable and paying business, acquiring large assets, numerous customers, and large deposits from numerous and divers depositors, and, from time to time, out of its earnings, after paying dividends to its stockholders, set aside sundry and divers moneys as surplus, which surplus, on the 10th day of April, 1907, amounted, in the aggregate, to some $65,000, and at said date said bank likewise had a large amount of undivided profits, and was a perfectly solvent banking concern, with assets largely in excess of its liabilities, which solvent condition continued up to the present time. By reason of its large business and large surplus and undivided profits the book value of the stock of the bank continuously increased, and on said 10th day of April was and still is $275 per share, or some such large sum; and the market value of the stock had otherwise continuously increased until, on said date, it amounted to the sum of $400, per share, or some such large sum.

"On the 10th day of April, 1907, the charter of the First National had not expired, but had the further term of about two years to run, and under the provisions of the laws of the United States the charter could have been renewed, and the corporate life of the bank extended for many years, and by reason of the value of the business controlled by said bank, its large assets, surplus fund, and undivided profits it was to the interest of the stockholders that it should be kept as a going concern during the life of its present charter, and that its corporate life should be extended upon the expiration of said charter for as long a term as permitted by the laws of the United States. On said date and thence hitherto there was no good cause or reason why the affairs of the bank should be liquidated, the bank closed, and its property and effects sold out or consolidated with any other bank, or that it should be reorganized in any way whatsoever; but, on the contrary, either a liquidation of said bank, or the selling out of same, or the consolidation with another bank, or its reorganization, was not only unnecessary, but distinctly injurious to the bank and to each and all the stockholders, for, in truth and in fact, its business had so grown and prospered that it was earning and paying, in dividends to its stockholders, about 15 per cent. on the par of its stock, after annually adding out of its earnings large amounts to its surplus fund. Notwithstanding the prosperous condition of the bank, and that no necessity whatever existed for its liquidation, the appellees, directors, on or about the 1st day of February, 1907, being desirous of acquiring all of the stock for themselves and their immediate friends, and appellants and other minority stockholders being unwilling to dispose of their stock to said directors, they wrongfully and illegally conspired, combined, and confederated together to force a liquidation of the bank, and to dispose of its assets to another banking corporation, to be organized by said directors, or to consolidate said bank with the new corporation to be so formed, and to exclude appellants and other minority stockholders of said First National from any participation in the new corporation, and from the holding of any stock therein, and thus to destroy the value of appellants' stock and that of the other minority stockholders, and to pay to such stockholders only such amount on their stock as might be realized from the liquidation of the bank, and to absolutely control the liquidation and fix the prices at which the assets of the bank should be sold, and thus to convert appellants and said other minority stockholders from stockholders in a going and paying concern into simple creditors in liquidation, and to exclude appellants and said minority stockholders from any further participation in the profits that would be realized, either by the continuance of said bank as a going concern, or by its consolidation with such new corporation so to be formed; and said directors further wrongfully and illegally combined and confederated with each other to convey or cause to be conveyed to such new bank, so to be organized, controlled, and managed by themselves, all of the property, assets, business, deposits, and good will of said bank, at a price to be fixed by themselves, so as to enable themselves as stockholders, directors, and officers of said bank to reap large profits from the transaction, and to exclude appellants from any participation therein. That in furtherance of said wrongful conspiracy and combination said directors, on the 10th day of April, 1907, held a directors' meeting at the office of the bank, of which meeting neither appellants nor the minority stockholders were given any notice, and proceeded to adopt and did adopt the following resolution: `Resolved, That a meeting of the shareholders of this bank be, and is hereby called to meet at the office of the bank at 4 o'clock p. m. May 18, 1907, for the purpose of voting upon the question of placing this bank in voluntary liquidation in accordance with provisions of section 5220, United States Revised Statutes (U. S. Comp. St. 1901, p. 3503), and the cashier is directed to mail a notice of said meeting to each shareholder.' In accordance with said resolution, and in furtherance of said combination and conspiracy, the said Carruth, cashier of said First National, did mail a notice of said stockholders' meeting, together with a copy of the foregoing resolution, to appellants and the various stockholders of the said bank.

"The said resolution was passed, and said meeting called, not for the purpose of liquidating the bank in the interest of all its stockholders, nor because any necessity for liquidation existed, but solely for the purpose of carrying out said wrongful and illegal conspiracy and combination, so entered into by said directors and to wrongfully and illegally acquire all of the assets, good will, surplus, undivided profits and deposits in said bank, including its assets, its banking house, and place of business owned by it in the city of Yoakum, and to exclude appellants from any further interest in the bank and in all of its assets, except such interest as the said named directors might allot to them on their stock in said bank in liquidation, and thus destroy their stock as stock, and convert it into mere claim in liquidation for whatever amount said named directors might determine that appellants were entitled to on said stock upon the liquidation of the bank. At said time, said named directors owned over a two-thirds majority of the stock of the bank, and were in absolute control of said bank. In pursuance of said illegal and wrongful conspiracy, before the passage of said resolution, the said directors had determined to incorporate another bank in said city of Yoakum, to be called the Yoakum National Bank of Yoakum, to subscribe for and take at least two-thirds of the capital stock of the new bank, to elect themselves directors of the new bank, and to elect officers of said First National Bank as officers of the new bank, viz., Bennett, president, Green, vice president, Carruth, cashier, and Brian,...