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Kruse v. Henderson Texas Bancshares, Inc.

Court of Appeals of Texas, Twelfth District, Tyler

August 30, 2019

WILLIAM R. KRUSE AND DEBORAH KRUSE, APPELLANTS
v.
HENDERSON TEXAS BANCSHARES, INC., APPELLEE

          Appeal from the 4th District Court of Rusk County, Texas (Tr.Ct.No. 2016-139)

          Panel consisted of Worthen, C.J., Hoyle, J., and Neeley, J.

          OPINION

          Brian Hoyle Justice.

         William R. Kruse and Deborah Kruse appeal from an adverse judgment in their suit to determine the value of their dissenters' shares of stock in Prosper Bancshares, Inc., which merged with Henderson Texas Bancshares, Inc. In their sole issue, Appellants contend the trial court abused its discretion when it denied their motion for a jury trial. We affirm.

         Background

         Appellants, owners of a minority share of common stock of Prosper Bancshares, Inc., were notified by that entity that it intended to merge into Henderson Texas Bancshares, Inc., and it proposed to pay minority shareholders $0.80 per share. Appellants voted against the merger, exercised their right of dissent, and demanded payment of $1.82 per share. The parties were unable to agree on the fair value of the stock. Appellants filed suit pursuant to Chapter 10 of the Texas Business Organizations Code. Citing Section 10.354(a)(2), they sought "the fair value of their ownership shares through an appraisal." Additionally, they sought "a finding and determination of the fair value of their ownership interests" pursuant to Sections 10.361 and 10.362. They included a jury demand requesting a trial by jury of all matters of fact. Appellants prayed that the trial court appoint an appraiser to determine the fair value of the shares and order Henderson Texas Bancshares, Inc. to pay them the fair value of the shares.

         The court determined that Appellants perfected their rights to dissent and are entitled to receive payment for the fair value of their ownership interests in Prosper Bancshares, Inc. With the agreement of the parties, the trial court appointed Donald Erickson to serve as appraiser and determine the fair value of Appellants' ownership interests in the stock. Erickson determined that the fair value of the stock was $0.96 per share. Appellants filed extensive objections to Erickson's report. Erickson filed an amended report in which he again determined that the fair value of the stock was $0.96 per share. Appellants filed objections to the amended report.

         Appellants filed a motion for jury trial arguing they have a constitutional right to have their case heard by a jury. The trial court denied this motion, heard testimony, and rendered judgment that the fair value of Appellants' shares in Prosper Bancshares, Inc. is $0.96 per share, ordering that Appellants recover $108, 494.56. This appeal followed.

         Motion for Jury Trial

         In their sole issue, Appellants contend the trial court abused its discretion by denying their request for a jury to find the fair value of their ownership interest in Prosper Bancshares, Inc. They argue that their right to a jury trial is supported by Article V, Section 10 of the Texas Constitution and Article I, Section 15 of the Texas Constitution. They also assert that the existence of fact questions prevents the district court from appraising their ownership interests as a matter of law, and the trial court's error is harmful.

         Standard of Review

         We review the trial court's denial of a request for a jury trial for an abuse of discretion. Mercedes-Benz Credit Corp. v. Rhyne, 925 S.W.2d 664, 666 (Tex. 1996). We consider the entire record and determine whether the trial court's decision is arbitrary, unreasonable, and without reference to guiding principles. Id. Applicable Law

         An owner of an ownership interest in a domestic entity subject to dissenters' rights pursuant to Chapter 10 of the Texas Business Organizations Code is entitled to dissent from a plan of merger, and, subject to compliance with the procedures set forth in the statute, obtain the fair value of that ownership interest through an appraisal. Tex. Bus. Org. Code Ann. § 10.354(a) (West Supp. 2018). The statute specifies the procedures the owner must comply with in order to perfect his right of dissent and appraisal. Id. § 10.356 (West Supp. 2018). The owner must demand in writing that the responsible organization pay the fair value of the owner's ownership interests and state the owner's estimate of the fair value of the ownership interests. Id. § 10.356(b)(3). The organization may either agree to that amount or provide to the owner an estimate of the fair value of the ownership interests. Id. § 10.358 (West 2012).

         If a dissenting owner and responsible organization cannot agree on the fair value of the owner's ownership interests, either party may file a petition with the court in the appropriate jurisdiction requesting a finding and determination of the fair value. Id. § 10.361(a) (West 2012). The court shall determine which owners have perfected their rights and become entitled to receive payment for the fair value of their ownership interests and appoint an appraiser to determine the fair value of those ownership interests. Id. ยง 10.361(e). ...


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