On Motion for Rehearing. I respectfully dissent from the views of the majority as disclosed in the opinion by Mr. BOND, Chief Justice, delivered on June 25, 1948, believing that the judgment below should have been affirmed, and will state my views as briefly as consistent with a proper understanding of the case. The question presented is one of law arising on undisputed facts which may be gleaned from the opinion of the Chief Justice, but in order to have the facts immediately before us during this discussion they will be restated.
Nardis Sportswear, Inc., the appellant, was a Texas corporation chartered for the purpose of transacting the manufacturing business of making ladies' skirts, robes, and sportswear, and to purchase and sell goods, wares, and merchandise used for such business. The corporation leased from Mr. John J. Simmons, appellee, the real estate involved, as a place to conduct its business, agreeing to pay a monthly rental of $625 for five years, beginning July 1, 1943, and ending June 30, 1948. Appellant was also given an option to purchase the real estate outright for a cash consideration of $75,000. This option could have been exercised at any time during the life of the lease contract. The corporation was dissolved on April 30, 1945, on the consent in writing of all its stockholders, as authorized by 3 Vernon's Ann.Civ.St. subdv. 4 of Art. 1387; and its President, Bernard L. Gold, its Treasurer, Irving Gold, and its Secretary, *Page 871 Viola Ray, officers and stockholders, became trustees of the creditors and stockholders of the corporation and were given by law power to settle the affairs, collect outstanding debts, and divide money and other property among stockholders after paying the debts of the corporation and reasonable expenses of the administration, as provided in 3 Vernon's Ann.Civ.St. Art. 1388. For the limited purpose of enabling the trustees to settle up the affairs of the corporation, its existence was continued for three years after the dissolution, as provided in 3 Vernon's Ann.Civ.St. Art. 1389.
Prior to its dissolution the corporation had not exercised the option to purchase the real property. However, on December 17, 1945, the trustees sought to exercise the option, and, to that end, Bernard L. Gold, President, in the name of the corporation, so advised Mr. Simmons by letter. Without reciting immaterial matters that supervened after the attempted exercise of the option, suffice it to say the offer to purchase, or the exercise of the option, was rejected by Mr. Simmons and this suit was instituted in the name of the corporation by the trustees for specific performance of the alleged contract. The case was tried to a jury and at conclusion of the evidence each party moved for an instructed verdict. The motion of plaintiff was denied and that of defendant sustained, and on the directed verdict in favor of the defendant, the court rendered judgment in his favor, that the plaintiffs take nothing, etc., from which this appeal was prosecuted.
The only question that I care to discuss, in my opinion the pivotal question on which the decision of this case turns, is: Were these trustees, acting in the name of and for the dissolved corporation, authorized, in the proper settlement and administration of its affairs, to exercise the option to purchase the real estate involved? Or to compel specific performance of the executory contract?
There are several valid reasons, in my opinion, why these questions should be answered in the negative. The powers left to a corporation after dissolution, and the scope of the authority of the trustees in winding up its affairs, were well stated by Judge Brewster in McBride v. Clayton, 140 Tex. 71, 166 S.W.2d 125, 128, as follows; he said: "Although the statutes give McBride, Inc., a continued existence for as long as three years after the surrender of its charter, it clearly could not be so continued to purchase and sell goods, wares and merchandise and to transact a general retail mercantile business. Its charter ceased on December 15, 1937, to have any force as such, and McBride, Inc., could derive no power from it, could not engage in retail merchandising under it. Whatever powers remained came by virtue of the statute and only for the specific and limited purposes named therein. Its qualified existence was in the nature of an administration of its estate, with all its corporate rights fixed and determined as of the date of its dissolution. Crease v. Babcock, 23 Pick., Mass., 334, 34 Am.Dec. 61. It was continued only to collect what was due it, to pay what it owed and to distribute what was left of its assets to those entitled to them. Jaffee v. Commissioner of Internal Revenue, 2 Cir., 45 F.2d 679; 13 Am.Jur., sec. 1366, p. 1206; 19 C.J.S., Corporations, § 1743(4), at page 1509. In other words, the powers of its officers had become restricted to those of liquidating agents. 11 Tex.Jur., sec. 470, p. 136." Opinion adopted by the Supreme Court.
The power of these trustees is clearly defined in 3 Vernon's Art. 1388, and does not include the power to purchase real estate. After stating that the trustees "shall be trustees of the creditors and stockholders of such corporation, with power to settle the affairs, collect the outstanding debts, and divide the moneys and other property among the stockholders after paying the debts due and owing by such corporation at the time of its dissolution, as far as such money and property will enable them after paying all just and reasonable expenses," the article concludes as follows: "and for this purpose they may in the name of such corporation, sell, convey and transfer all real and personal property belonging to such company, collect all debts, compromise controversies, maintain or defend judicial proceedings, and exercise full power and *Page 872 authority of said company over such assets and property." Thus I think the conclusion inescapable that the dissolved corporation was wholly without power to purchase real estate, or anything else, as it was out of business, and its trustees were not authorized in the winding-up procedure to exercise powers greater than those remaining with the dissolved corporation.
I call attention to 3 Vernon's, Art. 1359, which absolutely prohibits a corporation from purchasing any land "unless the lands so purchased are necessary to enable such corporation to do business in this State, or except where such land is purchased in due course of business to secure the payment of debt." As heretofore stated, the corporation had not exercised the option to purchase the real estate prior to the dissolution; therefore the option remained inchoate, and it was several months after the dissolution that trustees in the name of the corporation sought to exercise the option.
The agreement of Mr. Simmons, called an option, was simply an offer to sell, which, prior to the dissolution, had not been accepted; hence no contract of sale ever came into existence. The limited purposes for which a corporation is authorized to purchase real estate, as stated in the statute quoted above, are: (1) To enable a corporation to do business in this State; or (2) except where such land is purchased in due course of business to secure the payment of debt. It is quite obvious, I think, that the proposed purchase of this land was for neither of such purposes, in that, at the time the trustees attempted to exercise the option, the corporation was dissolved; it was out of business; had no business to conduct, and was incapable of conducting a business; and the attempted purchase was not to secure the payment of a debt; quite to the contrary, the consideration was to be $75,000 in cash taken from the assets of the dissolved corporation.
However, it seems to be seriously contended by appellant that the proposed purchase was authorized, in that same was in due and proper course of administration and settlement of the affairs of the dissolved corporation. In the first place, I think it appears indisputably from the admissions of appellant that the proposed purchase of the real estate was not for administrative purposes, but a real estate speculation, pure and simple. The purpose of the purchase, as alleged by appellant, was "that in the exercise of their (trustees) right to purchase under said option agreement, they (trustees) considered it was to the best interest of the stockholders and creditors of said company to exercise said option to purchase (the) property outright for the purpose of resale or other disposition thereof rather than to continue to pay the rents thereon up to the termination of the lease." (P. 5, Tr.) And this contention seems to have met with approval by the majority, for there is found in the opinion on file, first paragraph, page 8 [213 S.W.2d 868], where, speaking of the authority of the trustees, the majority opinion states: "they may, in the interest of the corporation or its stockholders, purchase the leased property under an option contained in the lease and then, for such purposes, dispose of the property in any way they see fit."
I cannot subscribe to the correctness of this theory; but, even if it be conceded that the proposed purchase was in due course of administration for winding up the affairs of the corporation, paying its debts, and distributing its remaining assets to its shareholders, still I am of the opinion that such a purchase would have been wholly unauthorized. The decision of the Circuit Court of Appeals in Jackson v. Western Union Telegraph Co., 5 cir., 269 F. 598, 600, was to that effect. In that case the court was construing the identical statutes involved in this case and, among other things, said: "The agreement was an executory one of a private corporation to purchase lands not necessary to enable it to do business in Texas, and it was not one for the purchase of land in due course of business, to secure the payment of debt. It was one to do a thing prohibited by the above set out statute law. The stated exceptions to the explicit prohibition do not include a purchase of land by a corporation for the purpose of winding up its affairs, paying debts, and distributing its assets among its shareholders. * * * The contract was not merely *Page 873 ultra vires in the proper sense; that is to say, outside the object of the corporation's creation as defined in the law of its organization, but was explicity prohibited by statute. Such a contract is not voidable only, but is wholly void, and of no legal effect." (Citing numerous authorities.)
For the reasons stated, I am not in accord with the decision of the majority. I think it was erroneous, that the motion of appellee for rehearing should be sustained, the former decision of this court set aside, and the judgment of the court below in all respects affirmed.