Texon Oil & Land Co. v. Hanszen

• Decision Date: 24 February 1927
• Docket Number: (No. 1953.)
• Citation: 292 S.W. 563
• Parties: TEXON OIL & LAND CO. OF DELAWARE v. HANSZEN et al.
• Court: Texas Court of Appeals

292 S.W. 563

TEXON OIL & LAND CO. OF DELAWARE v. HANSZEN et al.

(No. 1953.)

Court of Civil Appeals of Texas. El Paso.

February 24, 1927.

Rehearing Denied March 17, 1927.

Appeal from District Court, El Paso County; P. R. Price, Judge.

Action by H. C. Hanszen and another against the Texon Oil & Land Company of Delaware and others. From an adverse judgment making an allowance for attorneys' fees, named defendant appeals. Affirmed.

Goggin, Hunter & Brown, Kemp & Nagle and Nealon, Hudspeth & McGill, all of El Paso (C. R. Wharton and Baker, Botts, Parker & Garwood, all of Houston, of counsel), for appellant.

R. L. Batts, of Austin, and Turney, Burges, Culwell, Holliday & Pollard, of El Paso, for appellees.

HIGGINS, J.

This is an appeal from a judgment for $175,000 against the appellant, Texon Oil & Land Company, a Delaware corporation, hereinafter called the Texon Company, in favor of Judge R. L. Batts, of the law firm of Batts & Brooks, and Hon. William H. Burges, of the law firm of Turney, Burges, Culwell, Holliday & Pollard, as attorneys' fees for legal services rendered in the above-entitled cause.

The suit was filed in the district court of El Paso county, May 4, 1925, by H. C. Hanszen and J. P. Scranton, minority stockholders of the Texon Company, against said company and certain individual defendants, who were majority stockholders of the company; three of them being directors and officers thereof.

A stockholders' meeting of the company had been called for May 5, 1925, at El Paso, Tex. The plaintiffs sought to have canceled as fraudulent and void 1,400,000 shares of stock in the Texon Company issued to the defendant Cromwell, and for mandatory injunction compelling defendants to permit plaintiffs and all other stockholders to have access to and examine the company's books and records, and for a temporary injunction restraining defendants from holding said meeting until such examination could be made and the court determine whether the parties holding said 1,400,000 shares of stock were entitled to hold and vote same.

On May 4, 1925, Hon. P. R. Price, judge of the Forty-First district court of El Paso county, made an order restraining the holding of the meeting except to adjourn from day to day, and to show cause on May 6th why the plaintiff should not be permitted to examine the books and records as prayed for.

The defendant company answered by plea to the jurisdiction, and, joined by the other defendants, pleaded in abatement of the action to cancel the Cromwell stock a former suit pending in the United States District Court for Delaware by William A. Schenck, and also answered to the merits.

Additional pleadings were filed, and on May 13, 1925, the court entered a restraining order, and appointed an auditor to audit the books and records of the Texon Company and its subsidiary corporations. This order is rather lengthy. Upon its face it does not disclose it was by consent, but from the record as a whole it appears to have been of that nature, having been made after a hearing beginning on May 6th.

On October 16, 1925, Judge Batts, as attorney for the plaintiffs, and Hon. Nathan I. Sachs, as attorney for defendants, entered into a written agreement to settle the litigation. This agreement is lengthy. It need not be stated in full. Suffice it to say that in September, 1925, a consent decree had been entered in the Schenck suit in Delaware.

The first paragraph of the agreement between Messrs. Batts and Sachs provided that the decree entered in the Schenck suit should be confirmed by judgment in the present action. The fourth paragraph of the agreement reads:

"The expenses of the Texon stockholders' protective committee shall be paid by the Texon Oil & Land Company, which defendant corporation shall also pay the attorney's fees of Batts & Brooks, Esqs., W. H. Burges, Esq., the amount of which fees shall be agreed upon between R. L. Batts, Esq., and C. R. Wharton, Esq., and, if not agreed upon shall be fixed by the presiding judge in the within entitled action."

On November 12, 1925, the plaintiffs filed an amended petition, suing in their own behalf as stockholders of the Texon Company, and in behalf of other stockholders who might join in the action and share the expense thereof. It was alleged that Hanszen was a member of the stockholders' protective committee, naming the other members of the committee, among them being Holland S. Reavis and Daniel J. McAuliffe. This petition named as additional defendants various individuals and four subsidiary corporations of the Texon Company, one of which is the Texon Oil & Land Company of Texas, a Texas corporation. The scope of the litigation and the relief sought was greatly enlarged by the amendment. Judgment was thereupon rendered in accordance with the agreement between Messrs. Batts and Sachs.

The parties having failed to agree upon the amount of attorneys' fees, the matter was submitted to Judge Price, who, having heard evidence upon the issue, fixed the fee at $175,000, and rendered judgment therefor against the Texon Company. Upon the hearing a great deal of evidence was adduced, mostly oral. The statement of facts upon such hearing covers more than 400 pages.

Upon request of appellant, the trial court filed findings and conclusions.

It is necessary to outline briefly the salient facts disclosed by this voluminous record. The evidence must be viewed in its most favorable aspect supporting the trial court's findings and judgment.

Judge Batts was originally employed about October or November, 1924, by Mr. Holland S. Reavis, of New York, who represented himself and some friends in Pittsburgh and New York, all of whom had bought stock in the Texon Company. These parties had become suspicious of the officers of the company, who had declined to furnish information to which they insisted they were entitled as stockholders. Besides such declination, other matters had served to arouse their suspicion. Reavis came to Austin, and consulted with Judge Batts, laying before him such information as he had, the matters which had aroused suspicion, and the information which had been denied them. Judge Batts accepted employment, and, after much investigation, filed a suit in the United States District Court at San Angelo, Tex., in the name of Daniel J. McAuliffe. The petition in that case is not in the record, and the exact nature of the relief sought is not shown, but it appears from the record as a whole, and is so stated in appellant's brief, the primary purpose of the McAuliffe suit was to obtain a revelation of the facts concerning the property and status of the Texon Company. This was the first suit filed in the litigation. It was never tried, and later dismissed. After the filing of the McAuliffe suit, Judge Batts had a number of conferences with Hon. C. R. Wharton representing the defendants who sought dismissal of the suit. For his services in that suit Mr. Reavis and associates agreed to pay Judge Batts 6,000 shares of Texon Company stock. The negotiations between Messrs. Batts and Wharton relative to dismissal of the McAuliffe suit extended over a considerable period of time without result.

In the meantime notice was given of the stockholders' meeting to be held at El Paso, Tex., on May 5, 1925, whereupon the present suit was brought. Mr. Burges then became associated with Judge Batts in the litigation.

About April, 1925, the stockholders' protective association was formed. It was composed of two groups; one of which was composed of Pettigrew and Meyer of New York, and their associates. The other group was composed of Reavis and his associates.

Prior to the formation of the protective committee, Hon. Arnold L. Davis of New York City and Hon. Warwick M. Downing of Denver, Colo., were counsel for Pettigrew and Meyer and his associates. Mr. Davis was first retained by Pettigrew and Meyer on December 30, 1924. Mr. Downing was employed by the same parties in January, 1925.

On April 27, 1925, a suit in equity was filed in the United States District Court of Delaware by Wm. A. Schenck, against the Texon Company, its subsidiary corporations, and various individuals, some of whom were stockholders, officers, and directors of the Texon Company. Messrs. Davis and Downing were counsel for the plaintiff in that suit. The McAuliffe suit had been previously brought.

Shortly before the filing of the Schenck suit Mr. Downing conferred with Judge Batts in Austin. At that time Judge Batts gave Mr. Downing the facts which his investigation had disclosed. Mr. Downing left New York for El Paso on April 30, 1925, to attend the proposed stockholders' meeting as the attorney and representative of Schenck, Pettigrew, and Meyer. Arriving in El Paso on May 3d he went into consultation with Messrs. Batts and Burges, and Reavis, Hanszen, McAuliffe, and Skelly, of the stockholders' committee. He remained in El Paso until May 9th, in consultation and co-operation with the parties mentioned, but not actively participating in the litigation which had begun on May 4th, and which was then on trial before Judge Price.

On May 9th he left for Wilmington, Del. He arrived at Wilmington on May 12th. He and Mr. Davis on May 13th presented to Judge Morris an amended bill in the Schenck suit. On the same day Judge Morris entered ex parte an order enjoining the holding of the stockholders' meeting in El Paso, and appointed a temporary receiver to take charge of and impound the Cromwell stock. According to the testimony of Mr. Downing, the action thus taken was with the knowledge and approval of Messrs. Batts and Burges. But, according to the testimony of Batts and Burges, the understanding with Downing when the latter left El Paso for Wilmington was that no action was to be taken in Delaware unless the hearing then in progress in El Paso resulted unfavorably, in which event Mr. Downing was to be wired to invoke the aid of the Delaware court, and that Downing violated this...