Holland v. Brown, 2441.

• Court: Texas Court of Appeals
• Writing for the Court: Walker
• Citation: Holland v. Brown, 66 S.W.2d 1095 (Tex. App. 1933)
• Decision Date: 11 November 1933
• Docket Number: No. 2441.,2441.
• Parties: HOLLAND et al. v. BROWN.

Page 1095

66 S.W.2d 1095

HOLLAND et al. v. BROWN.

No. 2441.

Court of Civil Appeals of Texas. Beaumont.

November 11, 1933.

Rehearings Denied January 3, 1934.

Appeal from District Court, Jefferson County; Geo. C. O'Brien, Judge.

Suit by H. Lutcher Brown against George E. Holland and others, in which defendants brought a cross-action. Judgment for plaintiff, and defendants appeal.

Affirmed in part, and reversed and rendered in part.

E. L. Reid, of Orange, and Chas. T. Butler, of Beaumont, for appellants.

W. D. Gordon and L. J. Benckenstein, all of Beaumont, for appellee.

WALKER, Chief Justice.

This case was filed in the district court of Jefferson county on the 19th day of November, 1931, by H. Lutcher Brown, appellee, against appellants, George E. Holland, Edgar A. Holland, son of George E. Holland, and his wife, Novalene B. Holland, and their two minor children, Edwina Holland and George E. Holland, Jr. During the pendency of the case in the lower court, American National Bank of Beaumont, having been duly appointed guardian of the two minors, answered in their behalf, as one of the defendants. The judgment of the lower court was against all the defendants, and all of them have joined in the prosecution of the appeal to this court.

The nature and result of the case as tried in the lower court may be stated as follows: Appellant Judge George E. Holland, for twenty-five years before the filing of this suit, had been the confidential attorney of appellee and his father before him, and since his father's death, of his mother and his brother, E. W. Brown, Jr., who owned property worth many millions of dollars. On the 12th day of April, 1929, appellant Judge George E. Holland owned 1,000 shares of the common stock and 1,000 shares of the preferred stock, of the par value of $100 each, of the Brown Paper Mill Company, a Louisiana corporation with its principal office in the city of Monroe, La.; on that date Judge Holland's daughter-in-law, Mrs. Novalene B. Holland, and her two minor children, as named above, each owned 25 shares of the common stock and 25 shares of the preferred stock of the Brown Paper Mill Company. On that date Judge Holland, Joe Miller, and appellee H. L. Brown, and his mother, Carrie L. Brown, and his brother, E. W. Brown, Jr., held and owned together as a syndicate $400,000 worth of the preferred stock of the Brown Paper Mill Company, paid for by them by money borrowed from New Orleans and Houston banks, for which they gave their joint notes. Of this syndicate obligation it was agreed by the parties thereto that Judge Holland owed $75,000, as representing the stock owned by him in the company, and $2,875 for his daughter-in-law and the same sum for each of his grandchildren, making his total syndicate obligation $83,625. Judge Holland's interest in this syndicate stock was duly issued, and on the date it was issued, it was indorsed by him in blank and delivered to Mr. Sells, one of the stockholders in the company, who held it until appellee called for it under the terms of his option contract, copied below. For three or four weeks prior to the date above mentioned, Judge Holland had been negotiating with appellee for the purpose of selling him all his stock and the stock owned by his daughter-in-law and two grandchildren in the Brown Paper Mill Company. On the day mentioned, these parties entered into the following written contract for the conditional sale and purchase of Judge Holland's stock:

"State of Texas, County of Jefferson

"This option, contract and agreement, entered into this day between George E. Holland, of Jefferson County, and H. L. Brown, of Harris County, witnesseth:

"George E. Holland is the present owner and holder of one thousand (1000) shares of the Cumulative Preferred Stock of the Brown Paper Mill Company of Monroe, Louisiana, at present evidenced by interim certificate No. 18, dated February 5, 1927, issued to him by said Company; and is also the owner of One Thousand (1000) shares of the capital stock in said Brown Paper Mill Company evidenced by ten (10) certificates of One Hundred (100) shares each, issued to him and held by the said Holland under date February 2, 1924, each of which said shares, both common and preferred, are of the par value of One Hundred ($100.00) Dollars each, making the total amount of the stock, common and preferred, Two Hundred Thousand ($200,000.00) Dollars.

"The said Brown desires, and the said Holland hereby gives to him the right upon the consideration and terms hereinafter recited to purchase said stock at any time within five (5) years from the date hereof for the total sum and price of Five Hundred Thirty-eight Thousand ($538,000.00) Dollars.

"As a consideration for this option the said Brown agrees and obligates himself hereby to pay to the said Holland the sum of Thirty-two Thousand Two Hundred Eighty ($32,280.00) Dollars each year pending this option, which shall be paid semiannually on the 1st. day of June and the 1st. day of December, payable at Orange, Texas, and which shall be payment of the interest on the notes. (G. E. H.)

"The said Brown shall have the right upon sixty (60) days notice before that time given, on any payment date to pay for and take such stock, or any part thereof, paying the agreed price therefor, to wit: The Preferred at par and the common stock at 4.38, that is Four Dollars and Thirty-eight Cents ($4.38), for each One ($1.00) Dollar par value thereof.

At the expiration of the five (5) year period should the said Brown elect not to take said stock, or any part thereof, he shall have the right to cancel this agreement, but if he should elect to take said stock he shall pay therefor the price herein agreed upon and fixed. All Dividends on stock during life of this agreement to be paid to said Brown and stock may be re-issued to him. (G. E. H.)

"As a part hereof, and evidencing the obligation, the said Brown has this day made, executed and delivered to the said Holland his promissory note (not negotiable) in said sum of Five Hundred Thirty-eight Thousand ($538,000.00) Dollars payable on demand and bearing six per cent (6%) per annum interest from its date.

"Witness our hands in duplicate original this the 12th. of April, A. D. 1929.

                "[Signed] Geo. E. Holland
                                "[Signed] H. L. Brown
                "Witness
                  "Emily W. Brown
                  "Joe Miller."
                

At the time Judge Holland and appellee agreed upon the terms of the foregoing option contract, they also contracted, as between themselves, for the purchase by appellee of the stock of Mrs. Novalene Holland and her two minor children, and of Judge Holland's interest in the $400,000 syndicate preferred stock and the assumption of his syndicate obligations. These additional conditions of the contract between Judge. Holland and appellee were not written into the option contract as copied above, but rested in parol and were to the following effect, as testified to by appellee upon the trial of this case; this testimony also reflects appellee's understanding of the legal effect of the written option contract, copied above:

"Q. I want you now to tell this court in a straightforward manner just how this transaction came up and what was said to you by Mr. Holland and what you said to Mr. Holland, up to the time that your signature was attached to this option. A. Why, I can't remember verbatim everything that was said. There were some things were said and I can tell the meat of the thing, just as it was.

"Well, my brother, Edgar, told me that Mr. Holland had offered his stock to him, and, as I remember it, he said it was $6.00 for one, or six for one, and so when I came over on the way home—that was in Orange—on my way home to Houston, I stopped at Hotel Beaumont (Beaumont, Texas) and called Mr. Holland up and asked him to come down to the hotel and have lunch with me. And Mr. Holland did come down there. And I told him that Edgar had told me that he had offered his stock to him, and that I might be able to take an option on his stock, but the price he had asked Edgar for the stock was entirely too high; that there would have to be a lower value set on the stock. And so we talked quite a lot about the stock then, as best I remember it, we adjourned and went into the lobby of the Hotel Beaumont—by the way Joe Miller was with me at the time—and we went out in the lobby, as I remember it. We were in the dining room first. We went out into the lobby and we sat there just about in front of the elevators, and we talked a long time about it. Joe Miller was traveling around first one place and the other. Mr. Holland had very high ideas about the stock. Joe every now and then would come in and say something about the stock being worth this enormous figure.

"Q. How do you know he had high ideas about it? A. Well, because, I was going to say, he talked about it being worth ten times the earning value and that sort of things. I mean, ten times the earnings, and even more than that; compared it with stocks on the stock exchange in that way, drawing that comparison, and therefore the stock should be worth a great deal of money. And of course, that didn't mean anything at all to me. And so, after talking for quite a while, pro and con, on the thing, why, Mr. Holland agreed that $5.00 would be a fair value to place on the stock in this option. And he then asked me about the children's stock. And I told him, of course, I meant the children's stock would also have—that that would also be part of it; that I wanted to take it all in this option. And he objected to that; said that he didn't see any reason for the children giving an option on their stock. And finally I said, `Well, all right, I'll just take their stock outright; I'll buy their stock.' And then he asked about this syndicate note, and I agreed, for a consideration, part of the consideration of the option, that if he would let me have the option on his stock, that I would excuse him; in other words, I...