## Facts

- Richard A. Farnsworth was a minority shareholder in several related corporations.
- Controlling shareholders approved a sale of substantially all corporate assets and transferred the business to newly formed corporations.
- Farnsworth alleged the transaction was a scheme to deprive him of the value of his shares and to exclude him from participating in the new enterprise.
- The sale was approved under a statute permitting such a transaction upon the vote of four-fifths of the outstanding shares; Farnsworth dissented.
- Farnsworth sought (1) statutory payment of the fair value of his shares as a dissenting shareholder and (2) tort damages for fraud/conspiracy.
- A jury found (1) $54,000 in damages on the fraud/conspiracy theory and (2) fair value of Farnsworth’s shares of $312,000.
- The trial court entered judgment only for $312,000 (fair value) and refused to award the additional $54,000.
- The intermediate appellate court ruled the trial court lacked power to determine fair value without a court-appointed appraiser and awarded Farnsworth $54,000 plus a lower company-set valuation amount; all parties sought further review.

## Issues

1. Whether a court may determine the fair value of a dissenting shareholder’s stock under the Texas Business Corporation Act without first appointing an appraiser under the statute.
2. Whether a dissenting shareholder may recover tort “special damages” for fraud/conspiracy in addition to the statutory fair-value remedy on the pleadings and proof presented.

## Decision

- The Supreme Court of Texas reversed the court of civil appeals and affirmed the trial court’s judgment.
- The trial court had authority to determine fair value without appointing an appraiser; the appraisal-appointment step was procedural and could be waived.
- Farnsworth was not entitled to recover the jury’s $54,000 fraud/conspiracy award because special damages were not sufficiently pleaded or proved.
- Farnsworth’s recovery was limited to the jury-determined fair value of $312,000.

## Legal Principles

- Statutory dissenters’ rights provisions creating an appraisal remedy do not make court appointment of an appraiser a jurisdictional prerequisite; it functions as a fact-finding aid and may be waived.
- A party’s failure to timely insist on statutory appraisal procedures (e.g., by an abatement-type objection) can waive reliance on those procedures.
- A dissenting shareholder may seek damages beyond statutory fair value only in appropriate cases, but any claim for additional injury must satisfy ordinary rules of pleading and proof.
- Majority-approved asset sales and reorganization can be lawful when carried out in compliance with the corporate statute and when dissenters receive fair value for their shares.

## Conclusion

The court held that the statutory appraisal mechanism allowed the trial court to adjudicate fair value without appointing an appraiser when that procedure was not timely invoked, and it limited the dissenting shareholder’s recovery to fair value because additional fraud-based damages were unsupported by adequate pleading and proof.


Farnsworth v. Massey, 365 S.W.2d 1 (Tex. 1963)