Valley Intern. Properties, Inc. v. Los Campeones, Inc.

• Decision Date: 15 June 1978
• Docket Number: No. 1300,1300
• Citation: 568 S.W.2d 680
• Parties: VALLEY INTERNATIONAL PROPERTIES, INC., Appellant, v. LOS CAMPEONES, INC., Appellee.
• Court: Texas Court of Appeals

Page 680

568 S.W.2d 680

VALLEY INTERNATIONAL PROPERTIES, INC., Appellant, v. LOS CAMPEONES, INC., Appellee.

No. 1300.

Court of Civil Appeals of Texas, Corpus Christi.

June 15, 1978.

Rehearing Denied June 26, 1978.

Joel W. Ellis, Carter & Ellis, Harlingen, Rhett G. Campbell, Houston, for appellant.

Joel W. Cook, Schlanger, Cook, Cohn & Mills, Richard L. Fuqua, Haines, Cowgill, Andell & Fuqua, Houston, for appellee.

OPINION

YOUNG, Justice.

Los Campeones, Inc. filed a petition on July 25, 1977, in the district court of Cameron County seeking relief under Tex.Bus.Corp.Act Ann. art. 2.24 B (Supp.1978) which provides for a court of competent jurisdiction to summarily compel an annual shareholders' meeting upon application of any shareholder where no annual meeting has been held within the prior thirteen months. Valley International Properties, Inc., was named in the petition as defendant. Los Campeones is the majority shareholder of V.I.P.

On that same day (July 25) the trial court granted an ex parte order ordering, among other things, the requested shareholders' meeting to be held on September 2. Then, on August 11 V.I.P. filed its answer which sought a hearing to set aside the July 25th order. The trial court set and conducted a hearing without a jury and thereafter, on September 7, rendered judgment, among other things, upholding its prior order and resetting the shareholders' meeting for September 26. V.I.P. appeals from the September 26th order.

Appellant brings forward four points of error. In those points appellant contends: 1) that the trial court was without jurisdiction of this matter because V.I.P. was engaged in a Chapter XI, 11 U.S.C.A. § 701 et seq. (1970), Bankruptcy Proceeding at the time Los Campeones filed suit; 2) that Los Campeones could not compel a meeting because it was not a shareholder of record, because Los Campeones had a defective title to its V.I.P. shares in that it received its stock in a sale which violated the 1933 Securities Act, 15 U.S.C.A. §§ 77a et seq. (1971), because Brownsville Savings & Loan Association, the prior owner of the V.I.P. shares now held by Los Campeones, breached an agreement with V.I.P., and because Brownsville defrauded V.I.P. in certain loan agreements. V.I.P. also contends (3 and 4) that the trial court erred in excluding and admitting certain evidence.

Los Campeones asserts by cross-point and by motions to dismiss the appeal that this court has no jurisdiction of an appeal from a Tex.Bus.Corp.Act Ann. art. 2.24 B (Supp.1978) proceeding. We overrule all of the contentions of the parties and affirm the judgment of the trial court.

The background of this case involves an embittered struggle between the management and stockholders of V.I.P. to gain managerial control. V.I.P. is a corporation owning various country club and golf course facilities in Cameron County, Texas. In order to finance the purchase and construction of its facilities and property, V.I.P. borrowed substantial amounts from Brownsville Savings at some time prior to 1973. Subsequently, on September 24, 1973, Brownsville Savings in conjunction with Mutual Savings Association of Fort Worth and Abilene Savings Association issued a 3.9 million dollar permanent loan commitment to V.I.P. provided it performed certain conditions. The commitment was to be funded September 24, 1976. In December of 1974 V.I.P. shareholders pledged a majority of V.I.P.'s outstanding shares to Brownsville Savings in order to secure the previously mentioned loans.

Sometime in early 1976, it became apparent to V.I.P. and Brownsville Savings that V.I.P. would be unable to pay off its debts as they became due. As a result, the loans were renegotiated and extended. As a further means of insuring the continuing viability of V.I.P., Bill Bass, president of V.I.P., began organizing a limited partnership, Los Conquistadores, which would be used to inject 1.6 million dollars of additionally needed capital into the V.I.P. operations. By June of 1976, Los Conquistadores allegedly had raised $800,000 and still needed to raise an additional $800,000. Bass then purportedly presented the limited partnership idea to Brownsville Savings' president, Thomas Pope, and other officers at a meeting on June 25, 1976. During this meeting, the Brownsville officers stated that they wanted no part of the limited partnership but that they would consider other alternatives for helping Bass inject additional capital into the V.I.P. operations. These alternatives were presented to Brownsville Savings in a written memorandum on June 28, 1976. On July 1, 1976, Pope, on behalf of Brownsville Savings, responded to the memo by agreeing to release the V.I.P. stock in its possession in return for Bass' agreeing to assign a $98,661.00 promissory note to Brownsville Savings. V.I.P. contends Brownsville Savings knew in July that without payment of the 3.9 million dollar commitment due on September 24, 1976, the limited partnership would be unable to secure the additional $800,000 required and thus would fail. But Robert Knowles an officer of Brownsville Savings in 1976, and later president, denied these allegations.

On September 24, 1976, Brownsville Savings refused to fund the 3.9 million dollar commitment because of the failure of V.I.P. to meet certain conditions in the loan commitment; i. e., failure to have the property free of liens and failure to issue a plat as required. The principals of Los Conquistadores then refused to further fund the $800,000, and Bass was unable to secure the $98,661.00 promissory note which he was going to assign to Brownsville Savings in order to secure a release of the pledged V.I.P. stock.

In November of 1976, Bass informed Brownsville Savings that he could not make his payments on the prior debt, whereupon Brownsville Savings accelerated maturities of its outstanding loans to V.I.P. In addition, on November 9, 1976, Brownsville Savings formed Los Campeones, Inc., appellee herein, for the purpose of taking over operations of V.I.P. Pat Stanford was hired as agent for Brownsville Savings to operate Los Campeones and the V.I.P. operations it was assuming. Los Campeones operated the golf course and country club facilities during parts of November and December of 1976.

On December 7, 1976, V.I.P. filed for Chapter XI Bankruptcy. The Federal Bankruptcy Judge then appointed a receiver for V.I.P. In March of 1977, V.I.P.'s unsecured creditors voted on and approved the arrangement plan submitted by V.I.P., and on May 10, 1977, the Bankruptcy Judge entered an order confirming the plan. Subsequently, on May 18, 1977, the Bankruptcy Judge entered an order allowing Brownsville Savings to foreclose on the V.I.P.'s shares in its possession. On June 6, 1977, Pat Stanford's employment with Brownsville Savings terminated. On June 7, 1977, Stanford, representing Los Campeones, purchased all of the V.I.P. shares possessed by Brownsville Savings at a public foreclosure sale.

All of which brings us to a consideration of the merits of this appeal. No findings of fact and conclusions of law were filed nor were any requested. Appellant has brought forward a statement of facts and therefore we must presume that the trial judge found every fact necessary to sustain the judgment, provided such facts are raised by the pleadings and are supported by the evidence. Bishop v. Bishop, 359 S.W.2d 869 (Tex.Sup.1962); Texas Construction Associates, Inc. v. Balli, 558 S.W.2d 513 (Tex.Civ.App. Corpus Christi 1977, no writ).

Appellant's first point of error asserts that the district court lacked subject matter jurisdiction to enter an order compelling an annual shareholders' meeting under Tex.Bus.Corp.Act Ann. art. 2.24 B (Supp.1978) in that the article is unconstitutional as applied to appellant because the Federal Bankruptcy Court had exclusive and paramount jurisdiction over the appellant's cooperative affairs and because Rule 11-44 (U.S.C.A. Bankruptcy Rules, 1975, pamphlet edition) stayed state court proceedings against appellant.

An overview of the jurisdictional provisions of Chapter XI is set forth in In re Breinig, 40 F.Supp. 29 (E.D.Penn.1941). Generally speaking under Chapter XI, the Bankruptcy Court has exclusive jurisdiction of the debtor and his property, wherever located. Chapter X of the Bankruptcy Act, 11 U.S.C.A. § 511 (1970) contains substantially the same provision. In re Bettinger Corporation, 197 F.Supp. 273 (D.Mass.1961). The Bankruptcy Court does not have jurisdiction, though, over all suits brought against the Chapter XI debtor. 8 Collier on Bankruptcy P 3.01(2) (14th ed. 1974), Evarts v. Eloy Gin Corp., 204 F.2d 712, 716 (9th Cir. 1953), cert. denied, 346 U.S. 876, 74 S.Ct. 129, 98 L.Ed. 384 (1953), See In re Prudence Bonds Corporation, 75 F.2d 262 (2nd Cir. 1935).

Much of the precedent which we find relevant to the scope of the Bankruptcy Court's jurisdiction over suits to compel shareholder meetings is found not only in cases dealing with the jurisdiction of Chapter XI proceedings but also in Chapter X, 11 U.S.C.A. §§ 501 et seq. (1970), reorganization cases. Chapter X and Chapter XI represent the two corporate rehabilitation provisions of the Bankruptcy Act. Securities and Exchange Commission v. American Trailer Rentals Co., 379 U.S. 594, 85 S.Ct. 513, 13 L.Ed.2d 510 (1965); In re Texas Consumer Finance Corp., 480 F.2d 1261 (5th Cir. 1973). A more detailed explanation of the background and interrelationship of Chapters X and XI can be found in American Trailer, supra, and Texas Consumer Finance, supra.

In that regard, a Chapter X reorganization provides for extensive jurisdictional and judicial control over the proceedings and administration of a corporation, while a Chapter XI arrangement is intended to provide a quick efficient method of implementing a composition among the debtor's general creditors with minimal court involvement. American Trailer, supra, T-Anchor Corp. v. Travarillo Associates, 529 S.W.2d 622...