St. Regis Candies v. Hovas

• Decision Date: 08 June 1928
• Docket Number: (No. 9055.)<SMALL><SUP>*</SUP></SMALL&gt
• Citation: 8 S.W.2d 574
• Parties: ST. REGIS CANDIES, Inc., et al. v. HOVAS et al.
• Court: Texas Court of Appeals

8 S.W.2d 574

ST. REGIS CANDIES, Inc., et al. v. HOVAS et al.

(No. 9055.)^*

Court of Civil Appeals of Texas. Galveston.

June 8, 1928.

Rehearing Denied July 12, 1928.

Appeal from District Court, Harris County; Chas. E. Ashe, Judge.

Action by the St. Regis Candies, Inc., and another against S. N. Hovas and others. From a judgment for defendants, plaintiffs appeal. Reversed and remanded, with instructions.

For answers to certified questions, see 3 S.W.(2d) 429.

Baker, Botts, Parker & Garwood, H. M. Garwood, Jas. L. Shepherd, Jr., S. H. German, Boyles, Brown & Scott, Edward S. Boyles, P. N. Fahey, and J. T. Scott, Jr., all of Houston, for appellants.

Allen Hannay and Fulbright, Crooker & Freeman, all of Houston, for appellees.

LANE, J.

On and prior to the month of January, 1926, Paul Xanthull was the sole owner of a prosperous business which he had successfully conducted for a considerable time in the city of Houston. There had been some negotiations looking to admitting R. P. Donigan and John G. Manison to a part ownership of this business, and later these negotiations contemplated admitting also P. H. Donigan and S. N. Hovas. Pursuant to these negotiations, on January 11, 1926, Paul Xanthull, S. N. Hovas, R. P. Donigan, P. H. Donigan, and John G. Manison associated themselves together for the purpose of forming a corporation under the laws of Texas, executed the application therefor, and filed the same in the office of the secretary of state, thus bringing into being the corporation known as St. Regis Candies, Inc. This charter is in the ordinary form of charters for private corporations in this state, except two paragraphs thereof, which are as follows:

"6. The amount of capital stock is one hundred twenty-five thousand dollars ($125,000.00), divided into twelve hundred and fifty (1,250) shares of one hundred dollars ($100) each, all of which capital stock has been subscribed, and one hundred twenty-one thousand dollars ($121,000.00) paid in, as per affidavit attached hereto.

"7. The capital stock of this corporation shall be divided into two classes, one thousand (1,000) shares thereof being known as class A stock, and two hundred fifty (250) shares thereof being known as class B stock. The class B stock shall be distinguished from class A stock, in that it shall have no voting privileges or power, shall have no right to participate proportionately in future increases of capital stock of this corporation, and shall be subject to such conditions, restrictions and limitations as may be imposed by the by-laws of this corporation. In other instances class B stock shall have full rights, privileges, and power with class A stock."

Of the class A stock, Xanthull subscribed and paid for 51 per cent., S. N. Hovas for 22 per cent., R. P. Donigan for 15 per cent., P. H. Donigan for 5 per cent., and John G. Manison for 7 per cent. And the class B stock was subscribed for as follows: By Xanthull, 40 shares; S. N. Hovas, 100 shares; R. P. Donigan, 50 shares; P. H. Donigan, 40 shares; and by John G. Manison, 20 shares. All of such class B shares were fully paid for except the 40 shares subscribed for by Xanthull.

On January 14, 1926, the first meeting of stockholders of said corporation was held at the office of the company in the city of Houston. All stockholders, with the exception of P. H. Donigan, were present. At that meeting, the charter of the corporation was read and approved, and a copy of same attached to the minutes of the meeting. At said meeting, by-laws of the corporation were unanimously adopted by all the stockholders present. Later P. H. Donigan approved and ratified the minutes of said meeting. The provisions of the by-laws thus adopted which are pertinent here are as follows:

"Article II.—Capital Stock.

"Section 1. The amount of the capital stock shall be $125,000.00, which shall be divided into one thousand (1,000) shares of class A stock, and two hundred and fifty (250) shares of class B stock, each of the par value of $100.00.

"Section 2. Class B stock shall be distinguished from class A stock in that it shall have no voting privileges or power, shall have no rights to participate proportionately in future increases of the capital stock of this corporation, and shall be subject to such conditions, restrictions, and limitations as may be imposed by these by-laws. In all other instances class B stock shall have full rights, privileges, and power with class A stock.

"Article III.—Stockholders' Meeting.

"Section 1. An annual meeting of the stockholders shall be held at 8 p. m. on the third Wednesday in January of each year, at the principal office of the corporation, or such other place as may be designated in the notice. Provided, however, that whenever such a day shall fall upon a legal holiday the meeting shall be held on the next succeeding business day. At such meeting the class A stockholders shall elect directors to serve until their successors shall be elected and qualified.

"Section 2. A special meeting of the class A stockholders to be held at such place as may be designated in the notice, may be called at any time by the president, and in his absence by either of the vice presidents. It shall be the duty of the president or the vice president to call such a meeting whenever so requested by stockholders holding 50 per cent. or more of the class A capital stock."

"Section 5. Every stockholder shall have the right to vote in person or by proxy for the number of shares of class A stock held by him, for as many persons as there are directors to be elected. No cumulative voting for directors shall be permitted. Any director may be removed at any time with or without cause or notice, by the vote of the majority in interest of class A stock.

"Section 6. At every meeting each stockholder shall be entitled to cast one vote for each share of class A stock held in his name, which vote may be cast by him either in person or by proxy. All proxies shall be in writing, and shall be filed with the secretary and by him entered of record in the minutes of the meeting.

"Section 7. Each stockholder holding in his name one or more shares of class B stock shall be entitled to participate in all regular and special meetings of the stockholders, but shall not be entitled to vote thereat for directors or upon any question coming before the meeting.

"Section 8. A quorum for the transaction of business at any such meeting shall consist of a number of members representing a majority of the shares of Class A stock issued and outstanding; but the stockholders present at any meeting, though less than a quorum, may adjourn the meeting for a future date."

"Article XV.—Directors.

"Section 1. The business and property of the corporation shall be managed by a board of 3 to 5 directors, who shall be elected by the stockholders holding class A stock. This number shall be determined from time to time by the said class A stockholders. Each director shall be a class A stockholder, and shall receive such compensation for his services as a director, as may be fixed by the class A stockholders. A transfer by a director of all of his class A stock in the corporation shall operate as a resignation of his office.

"Section 2. Directors shall be elected for a period of one year, or until such time as their successors may be elected and qualified, subject to section 5, article III, hereof."

"Article VII.—Amendments.

"Section 1. Amendments to these by-laws may be made by a vote of the class A stock issued and outstanding at any annual stockholders' meeting, or at any special stockholders' meeting, when the proposed amendment has been set out in the notice of such meeting."

"Article V.—Officers."

"Section 2. The president shall preside at all directors' and stockholders' meetings, shall have general supervision over the affairs of the corporation and over the other officers, shall be ex officio member of all committees, shall employ and discharge all clerks, employees, and agents of the corporation, shall sign all stock certificates and written contracts of the corporation, and countersign all checks, and shall perform all such other duties as are incident to his office. In case of the absence or disability of the president, his duties shall be performed by the vice president in their order."

At such meeting all five stockholders were elected directors, while Xanthull was elected president and authorized to manage the affairs and business of the corporation. Under the agreements of the parties, certificates of stock were issued to and accepted by the several subscribing stockholders in accordance with the classification provided for in the charter and by-laws.

Under the agreements of the parties, Xanthull took charge of the business, managed and controlled its affairs, and under such management the business of the corporation was extended and proved profitable. Such management and control continued undisturbed until the 12th day of January, 1927. On the date last mentioned, Hovas, Manison, and the two Donigans, purporting to act as members of the board of directors and as a majority of the stockholders, assumed the authority to call, and they did call and give notice of, a special meeting of the directors to convene at the law office of Fulbright, Crooker & Freeman, in the city of Houston, at 7:30 p. m., January 13, 1927, the designated purpose of which was stated as follows:

"For the purpose of altering, changing, and amending the by-laws of St. Regis Candies, Inc., to wit: From article 1, section 1, to article VII, section 1, both inclusive, and to revoke the authority of the president, if any he has, to manage the affairs of the corporation during the interim between the meeting of the board of directors, and for the amendment of the charter of the corporation so as to eliminate the class B stock and make all of the stock in the corporation have the same rights, powers, and preferences, and for the transaction of...