McFarling v. Lapham

• Decision Date: 14 December 1972
• Docket Number: No. 7412,7412
• Citation: 489 S.W.2d 435
• Parties: Tom I. McFARLING, Receiver, et al., Appellants, v. John LAPHAM et al., Appellees.
• Court: Texas Court of Appeals

Page 435

489 S.W.2d 435

Tom I. McFARLING, Receiver, et al., Appellants, v. John LAPHAM et al., Appellees.

No. 7412.

Court of Civil Appeals of Texas Beaumont.

Dec. 14, 1972.

Rehearing Denied Jan. 11, 1973.

House, Mercer, House & Brock, San Antonio, A. M. LeCroix, Austin, Wyckoff, Eikenburg, Russell & Dunn, Houston, for appellants.

Clemens, Weiss, Spencer & Welmaker, Groce, Locke & Hebdon, Lang, Cross, Ladon, Boldrick & Green, Kampmann, Church & Burns, Oliver & Oliver, San Antonio, for appellees.

KEITH, Justice.

Plaintiff below appeals from a summary judgment entered in favor of numerous defendants. Because of the involved nature of the plaintiff's claim and the several defenses urged by the different defendants, an extensive statement of the case is required.

Appellant is the court appointed receiver of Mercury Life & Health Company (hereinafter 'Mercury'), United Security Assurance Company (hereinafter 'United'), and Reserve Investment Credit Corporation (hereinafter 'Rico'). He sought to recover more than $290,000, plus interest and exemplary damages from several defendants who are grouped in our opening discussion. Basically, plaintiff alleged that throuch the acts and omissions which he charged against the several defendants in his pleadings, Mercury and United had been looted of their liquid assets and forced into receivership. Plaintiff sought recovery of funds of the insurance companies alleged to have been appropriated to the use and benefit of certain of the defendants through the aid and assistance of other defendants.

1. Background

It appears to be undisputed in the record that for several years before May 1, 1968, Mercury and United were engaged in conducting the insurance business in Texas, each being a mutual assessment company organized under Chapters 13 and 14 of the Insurance Code, V.A.T.S. Before his death in 1967, both companies were under the actual control of Leonard Hyatt. ¹ This control was exercised through Rico which had a management contract with each company. Rico had outstanding 100 shares of stock, 40 of which were held by Hyatt personally, 15 by each of Hyatt's two daughters and a graddaughter, while the other 15 shares were held by John Peace, Hyatt's attorney. Upon Hyatt's death, his son-in-law, John Lapham, qualified as independent executor and trustee of Hyatt's estate. Lapham then assumed the management of the two companies through Rico.

According to plaintiff's pleadings, each of the insurance companies was solvent and in good standing at all times prior to May 2, 1968. Defendants made no effort to disprove this allegation which was supported by the receiver's affidavit in opposition of the motions for summary judgment.

On May 2, 1968, all of the shares of stock in Rico were sold to the defendant Cartsonas in the series of maneuvers to be set out later, the control of the two insurance companies transferred to Cartsonas, and their liquid assets were effectively dissipated soon thereafter.

2. The Events of May 2, 1968

We recount, in severely truncated form, some of the salient events which occurred on the significant date when Cartsonas acquired control of Rico and, through it, of Mercury and United.

Shortly before the critical date, an agreement had been reached between Lapham, representing the owners of the stock in Rico, and Cartsonas, whereby all of the stock in Rico would be sold to Cartsonas for $210,000 in cash. It was agreed in the written contract that all the various officers and directors of the three corporations would resign to be succeeded by nominees of Cartsonas. At that time, the two insurance companies had on deposit in Brooks Field National Bank ² more than $275,000 in cash and had certain bearer bonds in a safe deposit vault, such being a part of the mortuary fund of the companies.

On the morning of May 2, Cartsonas talked with defendant Walters, an officer of Frost National Bank, concerning the transfer of funds of the several companies to the First National Bank of Alvin. He was advised that before Frost could transfer the funds it must first have 'good' money at its disposal. It appears that what Walters meant was unrestricted funds to the credit of Frost in the Federal Reserve Bank in San Antonio. Walters had a telephone conversation with defendant Gillen, an officer of the Alvin Bank, concerning the transfer of certain other funds from the Alvin Bank to Frost Bank.

Next, Lapham, Cartsonas, one of Cartsonas' associates (the defendant Bush), and an employee of the three involved companies appeared at the Brooks Bank. There, an officer of Brooks Bank accepted new signature cards upon the accounts of Mercury and United authorizing Cartsonas to sign checks upon the accounts of the two companies. Bush, thereupon, issued two ochecks, one for $195,000 upon Mercury's account in Brooks Bank and another for $80,000 drawn upon United's account in that bank. Each check was made payable to the drawing company and was endorsed restrictively for deposit to the account of such company in the Frost Bank.

Neither check ever left the bank; instead, Vice President McCaskill of Brooks Bank debited each check against the account of the respective drawer companies. He then transferred $275,000 to the Frost Bank, not directly, but indirectly. He caused National Bank of Commerce of San Antonio to transfer $275,000 of Brooks Bank's funds to Frost Bank through the branch bank of the Federal Reserve System in San Antonio. The deposit to Frost Bank was unrestricted, a fact that Walters at Frost soon learned.

Walters at Frost then telephoned Gillen at the Alvin Bank, advising that Frost Bank had $275,000 on deposit to the credit of the two insurance companies. Thereupon, Gillen at the Alvin Bank instructed the First City National Bank in Houston to transfer $210,000 to the credit of Frost Bank through the Federal Reserve Bank in San Antonio. ³ This was done, apparently almost instantly, and at that time Frost Bank had in its effective possession $485,000 in 'good money'.

Walters, acting for Frost Bank, then disbursed $210,000 to the stockholders of Rico by issuing its checks to the several individuals. It then sent $275,000 to the Alvin Bank to the credit of the two insurance companies, sending the funds through the First City National Bank in Houston. Thus, in something approximating one hour, Frost came into possession of $485,000 and disbursed the entire sum.

Apparently by the time the $275,000 reached Houston, the Federal Reserve System had closed for the day. Nevertheless, notwithstanding the fact that Alvin Bank did not receive this credit to the two insurance companies until the next day, it reimbursed itself for $210,000 from the insurance companies' funds. Later, an additional $40,000 of the same funds was credited upon Cartsonas' indebtedness to the Alvin Bank.

3. Pleadings of the Parties

Plaintiff named as defendants, in addition to Cartsonas and Bush (neither of whom were served, deposed, answered, or appeared), the following: (a) Brooks Bank and its officer McCaskill; (b) Frost Bank and its officer Walters; (c) Alvin Bank and its officer Gillen; (d) Lapham and the other stockholders in Rico.

Broad allegations of conspiracy negligence, breach of fiduciary duties, unjust enrichment, etc., were alleged against the several defendants. None of the defendants challenged the pleadings by special exceptions and the trial pleading of the plaintiff takes up more than sixty pages in our transcript in addition to exhibits attached thereto.

Defendants answered generally, denied the agency of one Langham, Lapham's attorney who prepared the contract between Cartsonas and Rico, and the several banks sought indemnity or contribution against all other defendants.

4. The Summary Judgment

Extensive depositions were taken (and sent up in original form for our consideration) of the leading participants in the transaction.

Each of the appellees filed a motion for summary judgment supported by affidavit and incorporating the depositions on file. Plaintiff filed his affidavit in opposition to the motions for summary judgment, basing his 'facts' upon his interpretation of the contents of the depositions of the several defendants.

The trial court sustained the defendants' motions as to the plaintiff's cause of action against each of the moving defendants and entered a take nothing judgment as to them. Later, an order of severance was granted as to the remaining causes of action asserted by the plaintiff. The receiver has appealed. Alvin Bank, although it did not file a motion for summary judgment, also filed an appeal bond and aligns itself with plaintiff, at least insofar as a reversal of the summary judgment is concerned. No disposition was made in the summary judgment, or in the order of severance, of the several third party actions for indemnity and contribution.

Incredibly, plaintiff assails the judgment with forty-nine points of error. Alvin Bank, accepting the teachings of Malooly Brothers, Inc. v. Napier, 461 S.W.2d 119, 121 (Tex.1970), comes forward with the single point suggested by Justice McGee.

5. The Alvin Bank Appeal

Upon the day of submission of this cause, and immediately before oral argument, the several appellees filed for the first time their motions to dismiss the appeal of the Alvin Bank. We carried the motions with the case and permitted Alvin Bank to participate in the oral argument, it having otherwise complied with the briefing rules. From our earlier statement of the case, it is clear that Alvin Bank is not an aggrieved party to the judgment entered in the court below. It had not sought a summary judgment nor did the judgment which was entered fix liability upon it nor deny to it any affirmative relief which it sought. Insofar as it had pleaded causes of action for indemnity or contribution, such remained viable issues in the severed cause.

It is fundamental that one may not complain of errors in a judgment which do not affect him...