International Bankers Life Ins. Co. v. Holloway

• Court: Texas Supreme Court
• Writing for the Court: STEAKLEY; SMITH
• Citation: International Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567 (Tex. 1963)
• Decision Date: 24 April 1963
• Docket Number: No. A-8917,A-8917
• Parties: INTERNATIONAL BANKERS LIFE INSURANCE COMPANY, Petitioner, v. Sterling C. HOLLOWAY and D. D. Beasley, Respondents.

Page 567

368 S.W.2d 567

INTERNATIONAL BANKERS LIFE INSURANCE COMPANY, Petitioner, v. Sterling C. HOLLOWAY and D. D. Beasley, Respondents.

No. A-8917.

Supreme Court of Texas.

April 24, 1963.

Rehearing Denied June 26, 1963.

H. Joe Loe, McGown, Godfrey, Logan & Decker, John W. McMackin, John B. McClane, Winfred Hooper, Jr., and Warren W. Shipman, III, with above firm, Fort Worth, for petitioner.

Cantey, Hanger, Johnson, Scarborough & Gooch, Sloan B. Blair, with above firm, Fort Worth, R. R. Holloway, Brownwood, Black & Stayton, Austin, for respondents.

STEAKLEY, Justice.

International Bankers Life Insurance Company, an insurance corporation, plaintiff below and so referred to in this opinion, brought suit against Sterling C. Holloway, D. D. Beasley and J. W. Walden, defendants below and so referred to. Plaintiff's suit charged defendants with conspiracy, breach of fiduciary duties as officers and directors of plaintiff, mismanagement and misappropriation of corporate funds belonging to plaintiff, and the usurpation and appropriation of corporate opportunities.

The trial court entered judgment for plaintiff, based on jury findings, in the sum of $228,979.70, and, additionally, in the sum of $339,714.24 as exemplary damages.

The defendants Holloway and Beasley appealed. The Court of Civil Appeals affirmed the judgment for plaintiff to the extent of the recovery in the sum of $193,904.70 and reversed and rendered the judgment as to exemplary damages. Tex.Civ.App., 354 S.W.2d 198.

The phases of the case before us for decision were submitted to the jury by means of special issues segregated as to the following transactions: a personal profit of $15,000.00 realized by defendants on the purchase by plaintiff of a tract of land identified as the Jennings property; the receipt by defendants of commissions in the sum of $9,260.58 on the sales to the public of a $20.00 stock issue of plaintiff and a conversion item relating thereto of $559.62; and profits in the sum of $169,084.50 realized by defendants from the sale of their personal stock in competition with the sale of plaintiff's stock during the period of April 1, 1955, to September 6, 1955.

The basic issues found by the jury favorably to plaintiff regarding each of the foregoing transactions (other than the item of $559.62 for conversion) were phrased in terms of the defendants' having 'entered into a combination by their concerted action,' respectively, 'to realize a profit to themselves' (Jennings property), 'to receive commissions personally on the sale of the $20.00 stock issue of International Bankers,' and 'to dispose of their personal stock in competition with the company stock during the period from April 1, 1955, to September 6, 1955.' Similar special issues were conditionally submitted, and were not answered, with respect to a combination of any two of the defendants; and, finally, with respect to the acts of the defendants individually.

Also, as to each transaction, issues were submitted inquiring whether defendants acted with malice entitling plaintiff to exemplary damages; each of these issues was answered favorably to plaintiff and exemplary damages were found by the jury as to each transaction.

The judgment entered by the trial court was joint and several against the three defendants.

The points of error of defendants regarding the property, commissions and conversion transactions are, in essence that there is no evidence of a conspiracy or that defendants entered into a combination or engaged in concerted action; and that the trial court erred in the form in which their pleas of limitation were submitted to the jury.

Defendants asserted the same points of error with respect to the personal stock sales transaction and, in addition, that they may not be held liable by reason of the sales of their personal stock during the time of the public offering of plaintiff's stock unless such personal sales deprived plaintiff of the opportunity to sell its shares. In this latter respect defendants say that there must be findings that plaintiff could or would have sold its new issue stock to purchasers of the stock of the defendants had defendants not sold their personal stock to such purchasers; that there is no evidence to support such findings; that defendants had the legal right to sell their personal shares while plaintiff was selling its new issue stock; that the profits realized by defendants on the sales of their personal stock are not a proper measure of plaintiff's recovery; and that there is no evidence that the defendants realized the profits found by the jury.

Also, regarding their pleas of limitations, defendants urge additionally as to the personal stock sales transaction that plaintiff's cause of action is barred by limitation for the reasons that certain officers and directors of plaintiff, including certain disinterested directors, had actual knowledge of such sales more than two years before suit was filed, which knowledge is chargeable to plaintiff; that the books and records of plaintiff reflected such sales more than two years before suit was filed which was notice to plaintiff; and that, in any event, there is a question of fact regarding notice to plaintiff, and whether the agents of plaintiff exercised diligence in discovering the alleged fraud of the defendants.

The defendants present no point of error attacking the form of the liability issues underlying the recovery of the plaintiff corporation for the profits realized by the defendants in the Jennings property transaction and in the commissions transactions. The defendants do attack the special issue submissions underlying plaintiff's recovery for the profits realized by defendants from the sale of their personal stock in competition with the sale of plaintiff's stock.

Plaintiff's application for writ of error was granted on points of error complaining of the judgment of the Court of Civil Appeals reversing the judgment of the trial court awarding exemplary damages.

The following re sume of the facts will serve as the basis for the decisional sections of our opinion in which we hold there was no error in the judgments below awarding plaintiff a recovery of the profits realized by the defendants in the sale to plaintiff of the Jennings property and for the commissions, including the related conversion items, received by defendants on the sale of the $20.00 stock issue of plaintiff; in which we hold there was error in the judgment of the Court of Civil Appeals reversing and rendering the recoveries for exemplary damages; and in which we hold there was error in the judgments below in favor of plaintiff for the profits realized by defendants from the sale of their personal stock in competition with the sale of plaintiff's stock.

We also hold that the issues involved in the separate claims and transactions are severable within the contemplation of Rule 503, Texas Rules of Civil Procedure, and accordingly sever into one cause the claims of the plaintiff corporation based on the Jennings property, the commissions and conversion transactions, and into another cause the claim of the plaintiff corporation based on the personal stock sales of the defendants in competition with the corporation. This is in keeping with the disposition of a similar problem in Slay v. Burnett Trust, 143 Tex. 621, 187 S.W.2d 377, 398. Plaintiff's suit involved one controversy between the parties but asserted separate claims against the defendants growing out of separate transactions. Each of the claims was based on a severable part of the controversy and a judgment on one would not be res judicata of the other. The situation is one where justice is done by the affirmance of the judgment as to severable issues fairly tried since they are sufficiently independent of the issues improperly tried so as not to prejudice the rights of either party.

HISTORY OF PLAINTIFF'S OFFICERS AND DIRECTORS; AND ITS STOCK INCREASES

Plaintiff was incorporated on November 25, 1952. From then until March 9, 1954, defendants were its principal officers and directors. Walden of the defendants was an officer during 1954; he was president and treasurer with Thomas L. White, his brother-in-law, as vice president, and Audine Jones as secretary. The board of directors was increased to six during the year, three of whom were the defendants, and in August of the year a seventh director was elected. At the annual stockholders meeting on March 9, 1954, defendants owned 55.7 per cent of the stock represented at the meeting, but by means of proxies their control was 81 per cent.

During 1955 (between April 1 and September 6 of which year defendants sold their personal stock) Walden was the only defendant who was an officer of the corporation; he was elected president on March 8, 1955, and resigned on April 12, on which date he was elected executive vice president. George V. Brooks succeeded Walden as president and apparently served until December 21 of the year at which time William J. Shirley was employed by the executive committee as president. The vice presidents were Thomas L. White and Edgar H. Keltner, Jr. The secretary was Audine Jones, with Walden apparently serving as treasurer until December 21 when he was succeeded in this position by William J. Shirley. Audine Jones served as assistant treasurer from June 6, 1955, until January, 1956.

The three defendants served on the board of directors during the year 1955, and the defendant Beasley was chairman of the board until October 6, when he was succeeded by O. C. Armstrong. The board was increased to twenty members during the year. A two-man executive committee of the board of directors was authorized on March 8, 1955, with Walden and Armstrong as its members; this was increased during the year to four members, and later to eight members, with Beasley as chairman and Walden as a member. At the March 8, 1955, annual stockholders meeting, the defendants owned 43.5 per cent...