Witt v. Nelson

• Decision Date: 26 May 1914
• Docket Number: (No. 5378.)<SMALL><SUP>†</SUP></SMALL&gt
• Citation: 169 S.W. 381
• Parties: WITT v. NELSON et al.
• Court: Texas Court of Appeals

169 S.W. 381

WITT v. NELSON et al.

(No. 5378.)^†

Court of Civil Appeals of Texas. Austin.

May 26, 1914.

Additional Findings of Facts, July 1, 1914.

Appeal from District Court, McLennan County; Tom L. McCullough, Judge.

Action by Edgar E. Witt, trustee, against E. Nelson and another. From a judgment for defendants, plaintiff appeals. Affirmed.

Davis & Cocke, of Waco, for appellant. Sleeper, Boynton & Kendall and Gallagher & Stratton, all of Waco, for appellees.

Findings of Fact.

JENKINS, J.

(1) In 1902 and prior thereto, T. H. Kessler & Co., a copartnership composed of T. H. Kessler, ____ Troutschold, A. J. Droke, and R. G. Ard, owned and operated a planing mill.

(2) It was agreed by the members of the firm and Oscar Myre, an employé of the firm, that they would incorporate, and that Myre would buy Troutschold's interest.

(3) On August 25, 1902, a charter was obtained in the name of T. H. Kessler & Co., with an authorized capital of $30,000.

(4) On September 2, 1902, a proposition was submitted to the directors of the corporation by T. H. Kessler for the partnership, to sell to the corporation all of the property of the firm for $15,000, which proposition was accepted by the corporation.

(5) On September 2, 1902, the partnership T. H. Kessler & Co. conveyed to the corporation T. H. Kessler & Co. all of its assets for the recited consideration of $30,000.

(6) On the same day the corporation issued to the members of the firm of T. H. Kessler & Co., including Myre, who agreed to take Troutschold's interest, 150 shares of stock of the par value of $100 each in proportion to their interest in said firm, as follows: T. H. Kessler, 51 shares; Oscar Myre, 48 shares; A. J. Droke, 36 shares; R. G. Ard, 15 shares.

(7) After issuing the 150 shares, as above stated, there remained unissued 150 shares of the par value of $100 each.

(8) On October 9, 1902, by order of the directors, 40 shares of the capital stock were sold to J. M. Nelson for $2,000, and a certificate for that number of shares was issued to him.

(9) T. H. Kessler remained a director of the corporation until January, 1903, at which time he died, and his wife, Mrs. T. H. Kessler, became the owner of his shares and was elected a director.

(10) On January 26, 1903, a resolution was entered upon the minutes allowing Mrs. Kessler to draw $10 per week to be charged to her account, and, when net earnings had been declared, her part of same to be credited on her account, and, if her account was then found to be overdrawn, she to pay the balance or same to be charged against her stock at her option.

(11) On October 5, 1905, a motion was passed to sell A. L. Elliott $5,000 of "treasury stock" at 75 cents on the dollar per share. Mrs. L. E. Elliott, wife of A. L. Elliott, paid for $2,000 of this stock at 75 cents on the dollar. A. L. Elliott gave his note for 30 shares, with his stock as collateral. He paid interest on his note to July 21, 1908, but none of the principal. On July 21, 1908, by order of the directors, Elliott returned the 30 shares of stock, and his note was surrendered to him.

(12) On July 16, 1906, the certificate for 40 shares issued to J. M. Nelson was by him transferred on the back thereof to E. Nelson, and the same was delivered to E. Nelson.

(13) On May 29, 1907, Mrs. Kessler was indebted to the corporation in the sum of $3,164.73, which, by order of the directors, she was permitted to and did pay by surrendering her certificate for the 51 shares issued to T. H. Kessler, and receiving a certificate for 19 shares.

(14) On May 29, 1907, by order of the board, $5,000 of stock was sold to J. S. Harrington at 75 cents on the dollar.

(15) On May 29, 1907, it was ordered by the directors that $1,000 of stock be sold to E. Nelson at 75 cents on the dollar, but this stock was never issued.

(16) On May 29, 1907, E. Nelson was elected a member of the board of directors, vice J. M. Nelson, who had sold his 40 shares of stock to E. Nelson.

(17) On May 29, 1907, two additional shares were sold to Oscar Myre, at 75 cents on the dollar.

(18) Prior to March 24, 1908, A. J. Droke had died, and his widow had become the owner of his stock. On that date, Mrs. Droke having become indebted to the corporation in the sum of $500, and Mrs. Kessler having become indebted to the corporation in the further sum of $900, by order of the directors they paid these debts by Mrs. Droke's surrendering the certificate for 36 shares issued to A. J. Droke, and a new certificate for 31 shares was issued to her, and by Mrs. Kessler's surrendering her certificate for 19 shares, and a new certificate for ten shares was issued to her.

(19) On July 21, 1908, the corporation, through its board of directors, sold to J. S. Harrison, E. Nelson, and J. L. Enright each $1,000 of stock at 75 cents on the dollar.

(20) The minutes of the corporation show that at a meeting held June 3, 1911, there were present, representing stock in said corporation, as follows: Oscar Myre, 50 shares; E. Nelson, 50 shares; Mrs. A. L. Elliott, 20 shares; R. G. Ard, 15 shares; Mrs. Droke, 21 shares; and J. S. Harrison, 80 shares — total 236 shares. Mrs. Droke's shares had been further reduced from 31 to 21 shares by her surrendering 10 shares in payment of a debt she owed to the corporation. At this meeting the ten shares owned by Mrs. Kessler were surrendered and canceled in payment of a debt for $1,000, due by her to the corporation.

(21) On January 10, 1911, J. L. Enright sold his certificate for 10 shares to J. S. Harrison.

(22) July 9, 1911, J. S. Harrison, for the consideration of $5,000, sold to E. Nelson his certificate for 50 shares of stock, dated May 29, 1907; his certificate for 10 shares of stock dated July 22, 1908, purchased by him from J. L. Enright, and 10 additional shares.

(23) At each of the times of the respective sales of stock of the corporation, after the issuance of the first 150 shares of stock to the members of the firm of T. H. Kessler & Co., the corporation was a going concern and was perhaps solvent; but it needed money to operate its business and to pay debts incurred in such operation, and was unable to continue its business without such money, and had no means of obtaining such money, except by the sale of its stock, or by mortgaging its property. Each of said sales was made for the full market price of such stock, and for the highest price that could be obtained for such stock, and no stock was at any time sold in excess of the then needs of the corporation to enable it to carry on its business. Each of said sales was beneficial to the corporation, its stockholders, and to its then creditors. All of the money obtained from such sales was used in the prosecution of the business of the corporation, and for no other purpose, and none of the money realized from such sales of stock was used for additional investments by the corporation.

(24) None of the certificates purchased by E. Nelson were ever transferred to him on the books of the corporation by surrendering the said certificates and obtaining new certificates in lieu thereof, but the said purchases were known to the corporation, and he was elected a member of its board of directors, and on June 19, 1911, he was elected president and general manager of the corporation, and continued as such until the corporation went into bankruptcy October 15, 1912.

(25) The salary of E. Nelson, as president and general manager of the corporation, was never fixed by the board of directors, but he caused to be credited to himself, on the books of the corporation, for such services, the sum of $200 per month from July 1, 1911, to June 1, 1912, and from June 1, 1912, to October 15, 1912, the sum of $150 per month, aggregating for such salary $2,875, and his services were reasonably worth that amount. He received during said time in cash and merchandise, and caused to be charged against himself on the books, $2,972.88. He was not otherwise paid anything for such services.

(26) From and after the 1st day of January, 1912, said corporation was heavily involved, and its creditors were insistent and pressing, and there was constant demand for money for the purpose of liquidating indebtedness, and for the purpose of paying for material ordered by said company for the purpose of carrying on its work, which said material was required to be paid for in cash, and for the purpose of paying the laborers for carrying on the work of said corporation, which was required to be paid for in cash weekly, and the corporation, from time to time, being without sufficient money to meet said obligations, the said E. Nelson voluntarily paid into and for said corporation for said purposes the sum of $3,857.49 in cash.

(27) Said payments made by said E. Nelson in said sum as aforesaid, into and for said corporation, were made by him without any contract for the repayment of the same, and were made by him on his own responsibility and in recognition of the needs of said corporation, and at the time of the payment of the same and all the same, except the sum of $252.92 paid the Owens Lumber Company on the 15th day of October, 1912, said corporation was a going concern, actively engaged in operation and the carrying out of the purposes for which it was chartered and organized, and said Nelson at the time believed the same to be solvent, and made said payments and advancements to said corporation in good faith, believing that the same would enable said corporation to tide over temporary embarrassments, and continue indefinitely a solvent and going concern.

(28) That said sum of $252.92 paid to said Owens Lumber Company on said 15th of October, 1912, was made by him because he had long prior thereto personally obligated himself to pay the same, or to see the same paid, and at the time he so obligated himself he did so in good faith, believing said corporation was solvent.

(29) On or about the 17th day of October, 1912, the corporation of T. H....