Smith v. Smith

213 S.W. 273, 1919 Tex. App. LEXIS 807
CourtCourt of Appeals of Texas
DecidedMay 7, 1919
DocketNo. 6043.
StatusPublished
Cited by9 cases

This text of 213 S.W. 273 (Smith v. Smith) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Smith v. Smith, 213 S.W. 273, 1919 Tex. App. LEXIS 807 (Tex. Ct. App. 1919).

Opinion

BRADY, J.

This suit was filed by appel-lees, who were stockholders in the City Electric Company, which had been dissolved. They owned about 51 per cent, of the stock in the corporation. It was alleged in the petition that before the dissolution,- and about the 1st day of January, 1914, it was decided at a ■ stockholders’ meeting to sell all of the property of the corporation, and at such meeting one Malcolm Graham was authorized and appointed agent to find a purchaser and that Nelson K. Smith, a stockholder, suggested to the stockholders, and later to Malcolm Graham, that he would try to dispose of the property to the Texas Power & Light Company, and thereafter reported that he had done so, and that the-latter company had refused to purchase; that Nelson K. Smith conceived a scheme to defraud the stockholders of the City Electric Company, and conceived the idea of having an option taken on the property for $40,000 by one E. L. Hardin, who did not intend to become a purchaser, and that N. K. Smith would sell the property for a price in excess of $40,000, an<^ appropriate to his own use the excess; that on March 2, 1914, N. K. Smith caused a stockholders’ meeting to be held, and represented that the Texas Power & Light Company was not and would not become a purchaser, and that he believed he could find a purchaser in E. L. Hardin, and by such representations procured the passage of a resolution authorizing the board of directors to give an option to Hardin and to execute a deed upon the confirmation of the sale; that at the directors’ meeting, N. K. Smith, being a director, upon his motion an option was given to Hardin at the price of $40,000 for a period of 70 days; that N. IC. Smith, being one of the stockholders, thereafter' contracted with the Texas Power & Light Company to sell the property for $60,000 and consummated the sale through a deed to Hardin from the corporation, and through Hardin to Texas Pow,er & Light Company; that these transactions were for the .purpose of defrauding the other stockholders; that before the Texas Power & Light Company accepted the deed, and before it had paid the consideration, W. W. Thornton, president of said City Electric Company, discovered the duplicity of N. IC. Smith, and entered into a conspiracy with him and Hardin to defraud the stockholders out of the property; that the Texas Power & Light Company required a stockholders’ ratification agreement, and that Thornton and N.. K. Smith, through fraud, obtained such agreement, especially through the representations that Hardin had exercised his option, and had contracted to sell to the Power & Light Company; that the property was sold for $60,000, but that the corporation only received $35,000, the excess having been appropriated by N. IC Smith, Thornton, and Hardin to their own use and benefit.

The defendants' answered by general and special exceptions, general denial, and special answer. The substance of the special answer was that during the negotiations, and after their conclusion, the facts were presented to the stockholders in the ratification agreement submitted to and signed by them, and that they thereby ratified the conveyance and were estopped to claim fraud.

The case was submitted to the jury upon special issues,' and judgment was entered by the court, upon the findings of the jury, in favor of plaintiffs, from which judgment this appeal was taken by N. K. Smith and Thornton.

Bindings of Fact.

The special issues submitted to the jury and their answers were as follows:

“First question: Was the defendant N. K. Smith selected by the directors or stockholders of the City Electric Company at a meeting held between the dates of October 1 and 5, 1913, as one of the parties to find a purchaser for the properties of said company? Ans. Yes.
“Second question: Was the deed conveying the properties of the City Electric Company to Hardin executed through and on account of the misrepresentations or deceit of the defendant N. K. Smith? Ans. Yes.
“Third question: (a) Did the defendant Thornton receive any part of the excess between the amount received by the corporation for the sale of its properties and that paid for said properties by the Texas Power & Light Company? Ans. No.”

At the request of the plaintiffs, the following special issues were submitted:

“Plaintiffs’ special issue No. 2: Did Nelson IC Smith .after October 5, 1913, act or assume to act for the benefit of the said City Electric Company of Belton in the sale of its properties? Answer ‘Yes’ or ‘No.’ Ans. Yes.
“Plaintiffs’ special issue No. 3: Were the stockholders of the City Electric Company advised that Nelson K. Smith was acting for the benefit'of said corporation in the sale of its properties after October 5, 1913? Answer ‘Yes’ or ‘No.’ Ans. Yes.”
“Plaintiffs’ special issue No. 5: Did Nelson IC Smith, at the time it was represented that E. L. Hardin oesired to obtain an option on the properties of the City Electric Company, intend to deceive or misrepresent to the other stockholders that the said option was for the benefit of Nelson K. Smith? Answer ‘Yes’ or ‘No.’ Ans. Yes.
“Plaintiffs’ special issue No. 6: Did Nelson IC Smith falsely represent to the stockholders of the corporation on March 2, 1914, that E. L. Hardin for his (Hardin’s) own use was taking an option on its properties? Answer ‘Yes’ or ‘No.’ Ans. Yes.”
*275 “Plaintiffs’ special issue No. 10: Hid Nelson K. Smith and W. W. Thornton cause to he represented to the stockholders on or about May 1, 1914, in Belton, Texas, that Hardin had exercised his right under his option to buy the properties of the Oity Electric Company, and had sold such properties to the Texas Power & Light Company, and that he (Hardin) was getting the difference between the option price and the sale price of said properties. Answer ‘Yes’ or ‘No.’ Ans. Yes.”
“Plaintiffs’ special issue No. 12: Did the stockholders at the time they signed the confirmation of the sale of the properties to the Texas Power & Light Company believe that E. L. Hardin was getting the difference between the option price and the sale price of these properties? Answer ‘Yes’i or ‘No.’ Ans. Yes.”

At the request of defendants the following special charge was given as modified by the trial judge, defendants excepting to the modifications:

“Gentlemen of the Jury: You are instructed that in considering your answer to special issue No. 1 submitted to you by the court and the answer thereto that the fact that the defendant N. K. Smith owned a large number of shares in said corporation in no wise creates him an agent for said corporation, nor .does he by virtue alone of being a shareholder occupy any relation of trust toward the same or toward the other shareholders of said corporation. An agency cannot be implied from the fact that he is a large shareholder in the said corporation. The defendants request this charge No. 5.”

There is support in the evidence for each of these findings, and they are adopted by this court as conclusions of fact, together with these additional facts, which were proven by the practically undisputed evidence:

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Burleson v. Earnest
153 S.W.2d 869 (Court of Appeals of Texas, 1941)
Southwestern Inv. Co. v. Green
19 S.W.2d 102 (Court of Appeals of Texas, 1929)
City of Sherman v. Williams
296 S.W. 663 (Court of Appeals of Texas, 1927)
Hertzel v. Weber
1926 OK 318 (Supreme Court of Oklahoma, 1926)
Carver v. Moore
275 S.W. 90 (Court of Appeals of Texas, 1925)
El Jardin Immigration Co. v. Karlan
245 S.W. 1043 (Court of Appeals of Texas, 1922)
Interstate Casualty Co. of Birmingham v. Hogan
232 S.W. 354 (Court of Appeals of Texas, 1921)
Baker v. Streater
221 S.W. 1039 (Court of Appeals of Texas, 1920)

Cite This Page — Counsel Stack

Bluebook (online)
213 S.W. 273, 1919 Tex. App. LEXIS 807, Counsel Stack Legal Research, https://law.counselstack.com/opinion/smith-v-smith-texapp-1919.