Matthaei v. Clark

• Decision Date: 19 November 1919
• Docket Number: (No. 3034.)
• Parties: MATTHAEI et al. v. CLARK, District Judge, et al.
• Court: Texas Supreme Court

Page 856

216 S.W. 856

MATTHAEI et al. v. CLARK, District Judge, et al.

(No. 3034.)

Supreme Court of Texas.

November 19, 1919.

Action for writs of mandamus by W. A. Matthaei and others against Erwin J. Clark, District Judge, and others. Writs refused.

E. G. Senter, of Dallas, for plaintiffs.

B. F. Looney, Atty. Gen., C. M. Cureton, Asst. Atty. Gen., for Austin.

H. M. Richey, W. E. Spell, and O. L. Stribling, all of Waco, Tom Henderson, of Cameron, and Denman, Franklin & McGown, of San Antonio, for defendants.

HAWKINS, J.

This is an original action in this court for writs of mandamus to the judge of a district court and the commissioner of insurance and banking, respectively, whereby nine relators, as stockholders of Texas Fidelity & Bonding Company, a domestic corporation, seek to have this court control official actions of said officers in relation to certain litigation and certain legal and business affairs of said corporation, as hereinafter more specifically indicated. Especially do relators pray that the district judge be required to vacate and set aside, and that the commissioner be required to ignore and disregard, a certain judgment of the district court, from which no appeal was prosecuted.

Relators' petition to this court covers about 300 typewritten pages, and the "brief" thereof, covering some 19 additional pages, sets out eleven propositions of law. However, a comparatively short statement will indicate, sufficiently, the grounds upon which relators seek said extraordinary writs.

The following statement is based upon uncontroverted allegations of said petition:

On November 29, 1915, in district court of McLennan county, Seventy-Fourth judicial district, the Attorney General filed a suit, No. 877, in the name of the state of Texas, against said corporation, and therein, later, by amended petition, sought forfeiture of its charter and appointment of a receiver, praying alternatively for an injunction restraining said corporation from transacting business without first reducing the number of its directors to the minimum prescribed by law, and from exercising certain enumerated powers, and from performing acts of certain specified kinds, etc. Answers in the name and behalf of the defendant corporation were filed, the original answer being filed at the instance of Gaffney, and his associates, all being stockholders, an amended original answer being filed at the instance of the corporation's president, McCullough.

On November 30, 1915, Harvey and five other stockholders filed, in the same district court, a suit, No. 883, against said corporation and Gaffney and 10 other stockholders, for an injunction, and for appointment of a receiver, etc. In that second suit the defendants filed an answer, and later the bonding company filed a motion to consolidate that suit with said suit No. 877 by the state, upon the grounds "that the parties are largely the same, that the relief sought by the two plaintiffs is largely the same, and that the evidence will be the same."

Said motion was not granted; but what, if any, technical disposition of that second suit, No. 883, has been made, has not been shown here.

Subsequently, on January 19, 1915, there was made and signed by attorneys, as for the parties to said suit by the state, No. 877, and presented to said district court therein, a written agreement for judgment in that cause, and thereupon that court rendered judgment in that cause, accordingly, setting out said agreement, in full, in said judgment. Said written agreement recited pendency of said two suits, giving the number of each and the names of the parties, plaintiffs and defendants, and that—

"All the parties to said suits are anxious to adjust the difficulties in the defendant's affairs and save its effects and assets for its creditors and stockholders from further litigation, loss, and expense."

Said agreement was signed in behalf of the state by the Attorney General and one of his assistants, and was signed by three firms of attorneys, and one other attorney individually, as "attorneys for defendant corporation and its majority and minority directors and stockholders thereof." Among those who so signed said agreement were the attorneys who signed the original petition of plaintiffs in said second suit, No. 883, and also the attorneys who signed the answer of the defendants in that second suit, and also the attorney who signed said motion to consolidate, and also the attorney who signed the answer of the defendant corporation in the state's suit, and also the attorney who signed the amended answer of that defendant in that cause, No. 877.

Said agreement covers eight typewritten pages and includes stipulations numbered from 1 to 15, inclusive. It provides, among other things, for forfeiture of said charter, the corporate existence to be continued three years after such forfeiture; that all assets of the corporation be placed in the hands of two liquidating trustees, with extensive stated powers, one, Gaffney, being selected by majority directors, the other, Bebout, being selected by the minority directors, their compensation being fixed, each to give bond in a stated amount at cost of the corporation, the bonds to be filed with the commissioner of insurance and banking; that all salaries and all other expenses of administration be paid out of funds of the corporation upon its voucher checks signed by said trustees jointly; that said trustees prepare a full inventory and statement of all property and business affairs of the corporation, which shall be published, copies of which shall be filed in court and with the Attorney General and with said commissioner, one copy to be sent to each stockholder, and that said trustees shall make, quarterly, to the stockholders, a full report, which shall take substantially the same course; that succession of trustees, and deposit of corporate funds, and distribution of corporate assets, shall be as therein specifically stipulated; that said trustees shall act jointly, only, and that in event of disagreement they shall refer the matter to the First Assistant Attorney General, whose decision upon the point shall be final; that the district court shall retain jurisdiction of the suit, for such further orders as may be necessary to carry out and effectuate the purpose and intention of the agreement; and that "all court costs in this litigation and in both suits" hereinabove mentioned, and certain expenses of the Attorney General in the premises, shall be paid by said corporation. Said agreement further provided for payment, by said trustees, out of funds of the corporation, of fees as follows: To each of three designated firms of attorneys whose names are signed to said agreement, "for legal services rendered on behalf of said corporation and stockholders thereof in connection with the suits in this agreement hereinabove referred to," $1,250, and to Gaffney, for all services and expense rendered and incurred by him for said corporation to that date, $250, "it being agreed by the said parties after consultation with their respective clients that said fees and amounts are proper and reasonable, and as between them agreed upon."

Said judgment declares that said agreement, therein embodied, is "in all things, approved, and the parties are directed to carry out and effectuate the same," and expressly decrees that said charter be and thereby is forfeited, but that the existence of said corporation be extended three years from that date to permit settlement of its affairs; that all other relief sought by the state be denied; that all property and assets of the company be delivered at once to two therein designated liquidating trustees selected by the directors and named in said agreement and that they proceed to carry into effect the purposes of said agreement for judgment; that said corporation, its officers, agents, directors, and employés, be enjoined from interfering with the management and control of said trustees in the premises; and that costs be taxed as therein directed; and that the trial court retain jurisdiction of the subject-matter of that litigation, and full control of said decree, in order to effectuate its purpose.

Thereafter possession of all assets and control of all business affairs of said corporation were taken over, accordingly, by said trustees.

In November, 1916, 18 individuals, alleging that they were the only remaining qualified directors of said bonding company, filed in said suit by the state a petition for such amendment of said former judgment in that cause as should constitute Gaffney sole trustee thereunder, and increase his bond to $50,000; an averment being that petitioners and the state had agreed thereon. Four individuals, as minority directors when said judgment was rendered, answered, submitting the matter to the court, alleging that they had ceased to be stockholders, tendering their resignations, and praying for an order of discharge from future duty and liability. Another individual, asserting that he still was a stockholder and director, also answered submitting the matter to the court. Bebout, one of said liquidating trustees, answered, submitting the matter to the judgment of the court, praying that, in the event said original decree be so amended as to constitute Gaffney sole trustee, the court enter an order discharging him (Bebout), and releasing him and his sureties from future liability on his bond.

On December 4, 1916, the district court entered an order amending said original decree, and appointing Gaffney sole liquidating trustee, fixing his bond at $50,000, relieving Bebout, as joint trustee, upon the filing and approval of such bond, directing him then to turn over to Gaffney as sole trustee, and continuing, in full force and effect, otherwise, all provisions of said original decree and making them applicable to said sole trustee.

Relators charge, here, that the last preceding report of Gaffney,...