Moody v. Haas

• Decision Date: 04 April 1973
• Docket Number: Nos. 710,723,s. 710
• Citation: 59 A.L.R.3d 1109,493 S.W.2d 555
• Parties: Robert Lee MOODY et al., Appellants, v. Paul R. HAAS et al., Appellees. Paul R. HAAS et al., Appellants, v. Shearn MOODY, Jr., et al., Appellees. (14th Dist.)
• Court: Texas Court of Appeals

Page 555

493 S.W.2d 555

59 A.L.R.3d 1109

Robert Lee MOODY et al., Appellants, v. Paul R. HAAS et al., Appellees.

Paul R. HAAS et al., Appellants, v. Shearn MOODY, Jr., et al., Appellees.

Nos. 710, 723.

Court of Civil Appeals of Texas Houston (14th Dist.).

April 4, 1973.

Rehearing Denied April 25, 1973.

John M. O'Quinn, W. James Kronzer, Kronzer, Abraham & Watkins, Richard B. Miller, John L. Hopwood, II, Baker & Botts, Houston, Robert W. Alexander, V. W. McLeod, McLeod, Alexander, Powel & Apffel, Galveston, for Moody and others.

Richard P. Keeton, Travis C. Broesche, Vinson, Elkins, Searls, Connally & Smith, Houston, Charles G. Dibrell, Jr., G. William Rider, Dibrell, Dibrell, Greer & Brown, Galveston, John L. Hill, Atty. Gen., Larry F. York, First Asst. Atty. Gen., Robert B. Davis, Robert L. Lemens, Austin, for Haas and others.

TUNKS, Chief Justice.

In 1942 W. L. Moody, Jr. and his wife, Libby Shearn Moody, executed an instrument by which was established The Moody Foundation . The Moody Foundation as so established exists in perpetuity as a charitable trust for the furtherance of 'religious, charitable, scientific and educational uses' within the State of Texas. The trust instrument provides for its administration by three trustees. The three original trustees named in the instrument were W. L. Moody, Jr. (himself), Mrs. Mary Moody Northen, a daughter of the settlors, and Mr. A. A. Horne, a business associate of Mr. Moody.

It is apparent that the settlors established the Foundation as an entity to which they might leave by will the bulk of their estates. Mrs. Libby Shearn Moody died in 1943. Her will created a testamentary trust to which she left a substantial part of her estate. Under the terms of that trust the income from the property so bequeathed shall go to Mrs. Northen, and to Robert L. Moody and Shearn Moody, Jr., two grandsons, so long as they live. The remainder, after their death, is to go to the Foundation. The Moody National Bank is the trustee named in Mrs. Moody's will. The principal asset in Mrs. Moody's estate was approximately one-third of the outstanding shares of stock in American National Life Insurance Company.

Mr. W. L. Moody, Jr. died in 1954. By his will he left the bulk of his estate to The Moody Foundation. The principal asset of his estate, too, was an approximate one-third of the shares in American National. His estate also included a controlling interest in the Moody National Bank. Other assets included hotels, mineral interests, interests in several ranches and various securities. At the time of the trial the assets of The Moody Foundation were estimated to have a value of about $130,000,000.

After the death of W. L. Moody, Jr. his estate was in litigation for some time so that its assets were not available to the Foundation for the making of grants. After that litigation ended and the assets became so available the Foundation began making large grants in the accomplishment of its purpose. At the time of the trial those grants amounted to about $6,000,000 a year.

Mr. A. A. Horne, one of the original trustees, resigned in 1953. The trust instrument provided that vacancies on the board of trustees should be filled by appointment by a majority of the remaining trustees. Acting pursuant to that agreement W. L. Moody, Jr. and Mary Moody Northen appointed Louis Dibrell to fill the vacancy created by Mr. Horne's resignation.

When W. L. Moody, Jr. died in 1954 Mr. Dibrell and Mrs. Northen, instead of merely filling the vacancy thereby created, voted to appoint three additional trustees. Those so named were Shearn Moody, Jr., W. L. Moody, IV and A. J. Newman. Thus the board was increased to five trustees instead of three as provided in the trust instrument.

In 1954 Louis Dibrell resigned and no new trustee was appointed. In 1955 A. J. Newman resigned. Thereupon Robert L. Moody was appointed.

The board thus constituted four members in 1957 when there came up for consideration the appointment of Dan Moody, a former governor of Texas, as trustee. The four members divided two to two on the issue . That stalemate brought about the intervention of the Texas Attorney General into the affairs of the Foundation. The Attorney General filed suit asking that the court render judgment by which the board of trustees of The Moody Foundation be increased to nine members. After negotiations relating to that suit and other pending litigation it was agreed by the interested parties that the board should consist of seven members. Also by agreement J. Sayles Leach, S. Marcus Greer and J. M. Lykes, Jr. were appointed as trustees in 1959. The Attorney General's suit was thereupon dismissed. In 1965 Mr. Leach died and in 1966 Paul Haas was appointed to the board. There has been no change in the membership of the board since that time.

In October, 1970 the members of the board received notice that a meeting was to be held at which consideration would be given to a proposal that the membership of the board again be increased.

Thereupon Shearn Moody, Jr. filed the suit which led to these appeals. In that suit he asked that the proposal to increase the number of trustees be enjoined. He also challenged the validity of prior increases and trustee appointments. He named as defendants the other six individuals claiming to be trustees of The Moody Foundation and the Attorney General of the State of Texas.

The Attorney General was made a party defendant pursuant to the provisions of Vernon's Tex.Rev.Civ.Stat.Ann. art. 4412a (1966). He filed a cross-action contending that if the court found the board's own action in increasing its number above three to be invalid, then the court should itself order an increase and should appoint trustees to the new positions on the board so created. He requested that in the public interest the number of trustees be increased to nine. He also asked that all action taken by the board during the time that it acted through more than three members be validated.

Messrs. Haas, Greer, Lykes and W. L. Moody, IV adopted the position taken by the Attorney General including a proposal that, if the board membership be increased by the court, they be reappointed as trustees.

Paul Haas also contended that, regardless of the holding of the court as to the validity of the board's action in increasing its size, he was, nevertheless, validly appointed.

Robert L. Moody took a position consistent with that taken by the plaintiff, Shearn Moody, Jr. Robert L. Moody also contended that his appointment to the board was valid despite the fact that the board could not increase its number above three. Both Shearn and Robert L . Moody have taken the position that, if the court was to order an increase in the size of the board, then those now validly members should make the appointments filling the newly created positions.

The other named defendant, Mrs. Mary Moody Northen, took no position in her pleadings except to deny any personal liability. At one point during the trial her attorney stated that it was her request that the size of the board not be increased or, at any rate, not beyond five members.

The case was tried without a jury. There were seven separate hearings held in the trial court at which a record was made of the proceedings. The statement of facts shows that the first of those hearings began on November 11, 1970. The last began on March 7, 1972. By this procedure separate issues in the controversy were tried separately. From time to time during the proceeding the trial judge announced his holding upon a particular issue that had been so tried. Those various holdings were ultimately incorporated into one final judgment.

The trial court's judgment may be summarized as follows:

1. All actions taken by the board at a time when there purported to be more than three members are validated insofar as their validity may be questioned because of the fact that more than three purported members participated.

2. The board, itself, did not have the power or authority to increase its membership to more than three members.

3. The court did have the power and authority to increase the membership of the board and by the rendition of judgment it was so increased to seven members.

4. The court, and not the valid members of the existing board, had the power and authority to appoint the persons to fill the memberships created by that portion of the judgment that increased the size of the board. The court will make those appointments after the judgment becomes final and non-appealable.

5. Mrs. Northen and Robert L. Moody validly hold membership on the board by virtue of appointment in accordance with the provisions of the trust instrument.

6. Mrs. Northen and Robert L. Moody, as remaining valid members of the three member board created by the trust instrument, have the power and authority to fill vacancies that occur by virtue of the deaths of resignations of the original three members or their successors. That is to say, under the court's holding Mrs. Northen and Robert L. Moody would appoint one member to the board.

7. Neither Paul Haas, S. Marcus Greer, J. M. Lykes, W. L. Moody, IV nor Shearn Moody, Jr. is a valid member of the board.

Pursuant to agreement of all parties the membership of the board as it existed at the beginning of this suit has continued to act and will so continue until the final disposition of this case.

Shearn Moody, Jr. and Robert L. Moody have appealed from the trial court's judgment. By such appeal they attack those holdings listed as numbers 3 and 4 above. Their basic position is that the court had no power and authority to increase the size of the board from three to seven members. Alternatively, they contend that if the board's size is to be increased then the existing validly appointed members, and not the court, should make the appointments filling the vacancies created by such increase. The appeal raising those questions will be referred to herein as the ...