Opinion issued October = 11,=20 2007
For=20 The
GEORGE =
THOMAS COX,=20
Appellant SOUTHERN =
GARRETT,=20
L.L.C., SOUTHERN CHEMICAL CORP., EXCELERATE TRADING, L.L.C., ROGER =
MOYERS,=20
STEPHEN KORKMAS, WILDEBRAND H. SPIN, FRED WOOD, JAN T. SPIN, AND =
ABC=20
CHEMICAL CORP., Appellees
On =
Appeal from the=20
280th District Court Harris =
County,=20
Texas Trial =
Court Cause=20
No. 2004-17850
O P I N =
I O=20
N Appellant, George Thomas Cox, =
appeals a=20
take-nothing final judgment that the trial court granted in favor =
of=20
appellees, Southern Garrett, L.L.C., Southern Chemical Corp., =
Excelerate=20
Trading, L.L.C., Roger Moyers, Stephen Korkmas, Wildebrand H. =
Spin, Fred=20
Wood, Jan T. Spin, and ABC Chemical Corp. In three issues on =
appeal, Cox=20
argues that the trial court erred by (1) refusing to enforce =
Southern=20
Garrett's membership regulations; (2) granting directed verdict on =
Cox's=20
claim for breach of fiduciary duty; and (3) granting directed =
verdict on=20
Cox's claim for piercing the corporate veil of Excelerate and ABC=20
Chemical. We affirm.
This dispute turns on the =
construction of=20
an agreement regarding termination of membership in a limited =
liability=20
company. In 2002, Roger Moyers and Mark Brueggeman approached Cox =
about=20
purchasing a methanol distribution business from Lyondell. At the =
time,=20
Cox was the president of Garrett Oil. Moyers, Brueggeman, and Cox=20
eventually formed Garrett Petrochemicals Southern Chemical is one of the =
largest=20
importers of chemicals in North America. Vey Spin serves as =
President of=20
Southern Chemical, and Vey's son, Jan Spin, serves as a director. =
Cox had=20
discussions with Southern Chemical that led to the formation of =
Southern=20
Garrett, a limited liability company, around October 2002. =
Southern=20
Garrett was owned equally by Moyers, Brueggeman, Cox, and Southern =
Chemical, each owning a 25% interest. The purpose of Southern =
Garrett was=20
to acquire Lyondell's methanol distribution business and to =
diversify into=20
other markets. Although Southern Garrett had =
some rough=20
times due to fluctuations in the methanol market, the company =
experienced=20
success. However, Cox and Vey Spin had differences of opinion that =
culminated in an August 19, 2003 meeting in which the members =
discussed=20
purchasing Cox's 25% interest in Southern Garrett. The evidence =
conflicted=20
as to the terms of Cox's withdrawal from Southern Garrett. Cox =
believed=20
that he had agreed to a buyout in the amount of $550,000 in the =
August 19=20
meeting, and he drafted a letter to Southern Garrett accepting the =
alleged=20
offer. The other members of Southern Garrett, however, believed =
the buyout=20
price for Cox's 25% interest was an amount to be determined once =
they had=20
evaluated the financials of the company. On August 25, 2003, Southern =
Garrett sent=20
a letter proposing a buyout figure of $500,000 based on profits =
after=20
certain deductions for bonuses for non-partner employees. The =
letter=20
stated, "Your signed acceptance of the aforementioned items =
constitutes=20
the full agreement that your ownership and consequently any rights =
to=20
past, present, and future profits in [Southern Garrett] will be=20
relinquished in full as of August 31, 2003." Cox refused to sign =
the=20
letter. However, on September 29, 2003, Southern Garrett delivered =
a=20
second letter to Cox, offering to buy him out effective August 31, =
2003=20
for $506,208.91, along with a check in that amount. The letter =
contained a=20
release of liability, which Cox did not sign. The memo line of the =
check=20
read "G. Thomas Cox Buyout of Southern Garrett, L.L.C." Cox cashed =
the=20
check on September 30, 2003. On April 6, 2004, Cox sued the =
defendants=20
after receiving a letter from Southern Garrett's accountants that =
said=20
2004 would be Cox's last year as a member. In his sixth amended =
petition,=20
Cox alleged breach of fiduciary duty, breach of contract, =
conspiracy,=20
common law fraud by non-disclosure, piercing the corporate veil, =
and=20
conversion, and he sued for an accounting. The defendants denied =
the=20
allegations, asserted affirmative defenses, and filed a =
counterclaim. After the close of Cox's case =
in chief,=20
the defendants moved for directed verdict on a variety of Cox's =
claims.=20
The trial court ruled as a matter of law that Cox had withdrawn =
from=20
membership in Southern Garrett, and it granted a directed verdict =
on all=20
of Cox's claims except the claim that Cox and Southern Garrett had =
entered=20
into an agreement whereby Southern Garrett would purchase Cox's =
25%=20
interest for $550,000. After it granted the directed verdicts, the =
trial=20
court made it clear to the parties that the court considered the =
case to=20
be "a breach of contract case of plaintiff against Southern =
Garrett for=20
the sum of $44,000 something" and that the only issue left to try =
was=20
whether Cox and Southern Garrett had an agreement for Southern =
Garrett to=20
pay Cox $550,000 for Cox's 25% interest. The question whether =
there was=20
such an agreement was submitted to a jury, which answered the =
question in=20
the negative.
Standard of=20
Review A trial court may direct a =
verdict either=20
when a plaintiff fails to present evidence raising a fact issue =
essential=20
to its right of recovery or when the evidence conclusively proves =
a fact=20
that establishes the movant's right to judgment as a matter of =
law.=20
Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc., =
29 S.W.3d=20
74, 77 (Tex. 2000); Cortez v. HCCI-San Antonio, Inc., 131 =
S.W.3d=20
113, 120 (Tex. App.--San Antonio 2004), aff'd, 159 S.W.3d =
87=20
(Tex. 2005). In reviewing the granting of a directed verdict, we =
follow=20
the standard of review for assessing the legal sufficiency of the=20
evidence. S.V. v. R.V., 933 S.W.2d 1, 8 (Tex. 1996); =
see=20
generally City of Keller v. Wilson, 168 S.W.3d 802 (Tex. =
2005). In=20
reviewing the trial court's granting of an instructed verdict, the =
evidence must be considered in the light most favorable to the =
party=20
against whom the verdict is instructed. Texas Employers Ins. =
Ass'n v.=20
Page, 553 S.W.2d 98, 102 (Tex. 1977). We must determine if =
there is=20
any conflicting evidence of probative value that raises a material =
fact=20
issue. White v. Southwestern Bell Tel. Co., 651 S.W.2d =
260, 262=20
(Tex. 1983). If there is any such evidence on any theory of =
recovery, a=20
determination of that issue is for the jury. Szczepanik v. =
First S.=20
Trust Co., 883 S.W.2d 648, 649 (Tex. 1994). We can consider =
any=20
reason why the directed verdict should have been granted, even if =
not=20
stated in the party's motion. Gonzales v. Willis, 995 =
S.W.2d 729,=20
740 (Tex. App.--San Antonio 1999, no pet.). Membership=20
Regulations In his first issue, Cox argues =
that the=20
"trial court erred when it refused to enforce Southern Garrett's=20
Membership Regulations--the sole agreement among Southern =
Garrett's=20
members--regarding the disposition and acquisition of membership=20
interests." He contends that the trial =
court erred by=20
not enforcing this paragraph of the Membership Regulations because =
Moyers=20
admitted at trial that he did not comply with paragraph 4.2 with =
respect=20
to the disposition of Cox's interest. In effect, Cox argues that =
the=20
evidence showed that the defendants breached a contract, namely =
the=20
Membership Regulations. Cox further argues that a disposition of =
his 25%=20
interest could not "become effective until [paragraph] 4.2 of the=20
Regulations had been satisfied." Thus "any 'attempted disposition' =
of=20
Cox's 25% interest was 'void' under Paragraph 4.2," and "[i]f the=20
disposition of Cox's 25% interest in Southern Garrett was 'void,' =
then, in=20
accordance with the Regulations, ownership of Cox's original 25% =
of=20
Southern Garrett still resides in Cox." (Emphasis added.) =
Cox=20
argues that, because he is still a member in Southern Garrett, the =
"Regulations entitle Cox to receive membership distributions." =
The defendants argue that =
paragraph 4.2=20
does not apply to Cox's withdrawal because it was meant to apply =
only to=20
the disposition from a member to an outside party of Southern =
Garrett,=20
i.e., a non-member. Because Cox, a member of Southern Garrett =
during the=20
August 19, 2003 meeting, was attempting to sell his interest back =
to=20
Southern Garrett, the operative section is paragraph 4.5 of the =
Membership=20
Regulations, entitled "Distribution to Withdrawing Members." =
Because the trial court granted =
a=20
directed verdict on Cox's allegations that Southern Garrett's =
Membership=20
Regulations had been breached and held that Cox had withdrawn from =
the=20
company, despite Cox's contentions that he did not withdraw, we =
address=20
Cox's arguments that as a matter of law "an agreement for Cox to =
sell his=20
25% interest . . . could [not] have become effective until =
[paragraph] 4.2=20
of the Regulations had been satisfied" and that "any 'attempted=20
disposition' of Cox's 25% interest was 'void' under Paragraph =
4.2."=20
In construing a contract, our =
primary=20
concern is to ascertain and give effect to the intentions of the =
parties=20
as expressed in the contract. Kelley-Coppedge, Inc. v. =
Highlands Ins.=20
Co., 980 S.W.2d 462, 464 (Tex. 1998). To ascertain the =
parties' true=20
intentions, we examine the entire agreement in an effort to =
harmonize and=20
give effect to all of its provisions so that none will be rendered =
meaningless. MCI Telecomms. Corp. v. Tex. Utils. Elec. =
Co., 995=20
S.W.2d 647, 652 (Tex. 1999). Whether a contract is ambiguous is a =
question=20
of law for the court. Heritage Res., Inc. v. NationsBank, =
939=20
S.W.2d 118, 121 (Tex. 1996). A contract is ambiguous when its =
meaning is=20
uncertain and doubtful or when it is susceptible to more than one=20
reasonable interpretation. Id. However, when a written =
contract=20
is worded so that it can be given a certain or definite legal =
meaning or=20
interpretation, it is unambiguous and the court construes it as a =
matter=20
of law. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d =
154, 157=20
(Tex. 2003). The elements of a valid =
contract are (1)=20
an offer, (2) an acceptance, (3) a meeting of the minds, (4) each =
party's=20
consent to the terms, and, in the case of a written contract, (5)=20
execution and delivery of the contract with the intent that it be =
mutual=20
and binding. Prime Prods., Inc. v. S.S.I. Plastics, Inc., =
97=20
S.W.3d 631, 636 (Tex. App.--Houston [1st Dist.] 2002, pet. =
denied);=20
Copeland v. Alsobrook, 3 S.W.3d 598, 604 (Tex. App.--San =
Antonio=20
1999, pet. denied). The determination of a meeting of the minds, =
and thus=20
offer and acceptance, is based on the objective standard of what =
the=20
parties said and did, and not on their subjective state of mind.=20
Copeland, 3 S.W.3d at 604. Paragraph =
4.2 Cox argues that paragraph 4.2 =
of the=20
Membership Regulations, entitled "Restrictions on the Disposition =
of a=20
Membership Interest," governs the disposition of membership =
interests,=20
including the sale of his interest in Southern Garrett to the =
other=20
members. Cox contends that paragraph 4.2 of the Membership =
Regulations=20
governs the disposition of his membership interest in Southern =
Garrett and=20
that the defendants failed to comply with paragraph 4.2, so that =
his=20
withdrawal from the company was void. Paragraph 4.2 =
provides: 4.2 Restrictions on =
the=20
Disposition of a Membership Interest (a) The Manager must receive, =
on behalf=20
of the Company, a document (i) executed by both the Member =
effecting the=20
Disposition (or, if applicable, the Member's legal representative) =
and the=20
Person to whom the membership Interest, or part thereof, is to be=20
disposed; (ii) including the notice address of any Person to be =
admitted=20
and such Person's agreement to be bound by the Articles and these=20
Regulations; and (iii) setting forth the new Sharing Ratios (after =
the=20
proposed Disposition) of the Member effecting the Disposition and =
the=20
Person to whom the Membership Interest or part thereof is to be =
Disposed.=20
In the definitions' section of =
the=20
regulations, the term "Person" is defined as the "meaning given =
that term=20
in article 1.02(A)(4) of the Act." The current version of the =
Limited=20
Liability Act defines "Person" as: an individual, corporation, =
business=20
trust, estate, trust, custodian, trustee, executor, administrator, =
nominee, partnership, registered limited liability partnership, =
limited=20
partnership, association, limited liability company, government,=20
governmental subdivision, governmental agency, governmental=20
instrumentality, and any other legal or commercial entity, in its =
own or=20
representative capacity. Any of the foregoing entities may be =
formed under=20
the laws of this state or any other jurisdiction. Tex. Rev. Civ. Stat. Ann. art. =
1528n =A7=20
1.02(A)(4) (Vernon Supp. 2006). The term "Person" does not include =
the=20
term "Member" as used in paragraph 4.2. The regulations define=20
Although Cox complains that the =
manager=20
did not receive the documents called for in paragraph 4.2(a), a =
plain=20
reading of Article 4 demonstrates that paragraph 4.2 applies to =
the=20
disposition of Membership Interests to Persons who are not =
Members. The=20
purpose of paragraph 4.2 is to provide rules for the disposition =
of a=20
Member's interest to a non-member, i.e., a person who has not been =
admitted to the limited liability company. Various sub-sections =
within=20
paragraph 4.2 use the phrase "Person to be admitted" which =
supports our=20
interpretation that "Person" in paragraph 4.2 refers only to =
non-members=20
of the company. We hold, therefore, as a matter of law, that =
paragraph 4.2=20
would apply only if Cox were selling his interest to an outside =
party who=20
was not at that time a member of Southern Garrett. Thus, to the =
extent=20
that Cox asked the trial court to enforce section 4.2 of the =
Membership=20
Regulations, the trial court properly refused to do so because =
paragraph=20
4.2 is not applicable to the facts of this case. Paragraph =
4.5 The defendants contend that =
paragraph 4.5=20
of the Membership Regulations govern the terms of a Member's =
withdrawal=20
from the company and that the company complied with section 4.5 =
upon Cox's=20
withdrawal. Paragraph 4.5 provides: 4.5 Distribution to =
Withdrawing Members (a) The "fair value of the =
Membership=20
Interest shall be determined as of the first day of the month =
following=20
the date of the occurrence giving rise to the Member's withdrawal=20
("Determination Date"). (b) Within 180 days from the=20
Determination Date, the Company and the withdrawing Member (or his =
legal=20
representative, if applicable) shall attempt to agree upon the =
fair value=20
of the Member's Membership Interest. Here, the evidence showed that =
on August=20
19, 2003, after the Members' meeting, Cox gave a letter to =
Southern=20
Garrett accepting Southern Garrett's alleged offer to buy his 25%=20
ownership interest in Southern Garrett for $550,000. Cox wanted =
this deal,=20
notwithstanding the regulations, because he wanted to receive his =
buyout=20
sooner rather than later. The evidence also showed that Southern =
Garrett=20
sent a letter to Cox on August 25, 2003, offering a buyout of =
Cox's 25%=20
ownership interest for $500,000, to be effective August 31, 2003.=20
The=20
letter states that "it is important that the partnership has a =
complete=20
and thorough understanding of the conditions, procedures, and =
conclusions=20
by which your [25%] ownership, hereinafter referred to as =
ownership, in=20
[Southern Garrett] will be handled upon your exit from the=20
company." (Emphasis added.) Cox=20
did not sign this letter. Southern Garrett sent a second =
letter on=20
September 24, 2003 that included a new buyout figure of =
$506,208.91, but=20
retained the August 31, 2003 buyout date. Both the August 25 and =
September=20
24 letters stated that the purchase price of Cox's 25% ownership =
interest=20
would be calculated based on the retained earnings of Southern =
Garrett as=20
of August 31, 2003, i.e., on the last day of the month in which =
Cox's=20
withdrawal occurred. Enclosed within the envelope of the September =
24,=20
2003 letter was a check for $506,208.91. This offer substantially =
complied=20
with paragraph 4.5 of the Membership Regulations. Cox deposited =
the=20
$506,208.91 check into his account, indicating his acceptance of =
the=20
figure. We hold that the language of =
the=20
September 24, 2003 letter was sufficient to constitute an offer =
for Cox's=20
Membership Interest in Southern Garrett and that Cox's act of =
depositing=20
the check was an acceptance of the offer. The relevant language of =
the=20
September 24 letter that included the check Cox deposited=20
reads: Your signed acceptance of the=20
aforementioned items constitutes the full agreement that your =
ownership=20
and consequently any rights to past, present, and future profits =
in SG=20
will be relinquished in full as of August 31, 2003. Furthermore, =
you waive=20
any future rights or claims to ownership, compensation, contracts, =
properties, representation, or any business activities directly or =
indirectly pertaining to the management and operation of Southern =
Garrett,=20
LLC. As a result, G Thomas Cox will be released from any and all =
current=20
and future liabilities related to the operation of Southern =
Garrett, LLC.=20
Although Cox did not sign the =
September=20
24 letter, by signing and depositing the check for $506,208.91 Cox =
accepted the buyout of his ownership interest in Southern Garrett =
and=20
completed his effective withdrawal from the company effective =
August 31,=20
2003. We overrule Cox's first =
issue. Breach of Fiduciary =
Duty In his second issue, Cox argues =
that the=20
"trial court erred when it granted directed verdict against Cox on =
his=20
claim for breach of fiduciary duty." Cox argues that three sets of =
circumstances support a finding of a fiduciary relationship, at =
least=20
among Moyers, Southern Chemical, and Brueggeman, the co-owners of =
the=20
closely-held corporation Southern Garrett, which repurchased Cox's =
25%=20
Membership Interests. First, Cox argues that a fiduciary =
relationship may=20
be created through the repurchase of a shareholder's stock in a =
closely=20
held corporation. Second, he argues that a fiduciary relationship =
may be=20
created in a closely held corporation in which the shareholders =
operate=20
more as partners than in strict compliance with corporate form. =
Third, he=20
contends that when a fiduciary profits or benefits in any way from =
a=20
transaction with a beneficiary of the fiduciary relationship, a=20
presumption of unfairness arises that shifts both the burden of =
producing=20
evidence and the burden of persuasion to the fiduciary to show =
that the=20
transaction was fair and equitable to the beneficiary. In his sixth amended petition, =
Cox=20
alleged that defendants breached their fiduciary duties to him by =
"their=20
various defalcations, self-dealing, dishonesty, void transfers of=20
ownership in Southern Garrett, and failure and refusal to disclose =
facts=20
and account to Cox for profits." He also asked the trial court to =
"enforce=20
the Regulations by setting aside the void and fraudulent transfers =
of=20
ownership interests in Southern Garrett to Excelerate and Korkmas =
and to=20
impose a constructive trust on the assets thereof for the benefit =
of Cox."=20
On appeal, Cox contends that defendants breached their fiduciary =
duty to=20
him by failing to "show that the transaction in which they sought =
to=20
acquire Cox's 25% interest in Southern Garrett was fair and =
equitable to=20
Cox." As we held with respect to =
Cox's first=20
issue, section 4.2 of the Membership Regulations does not apply =
and Cox=20
withdrew from Southern Garrett effective August 31, 2003. Because =
Cox's=20
breach of fiduciary duty claim in regard to voiding his 25% =
Membership=20
Interest depended on his section 4.2 argument, his claim fails as =
a matter=20
of law. Cox's breach of fiduciary duty claim in regard to the =
fraudulent=20
transfers of ownership to Excelerate and Korkmas likewise fails =
because=20
both of those transactions occurred after Cox had withdrawn from =
Southern=20
Garrett. Because Cox was no longer a Member after that date, =
Southern=20
Garrett owed him none of the duties owed members after that date.=20
Accordingly, we conclude that the trial court properly granted =
directed=20
verdict because the evidence conclusively proves Southern =
Garrett's right=20
to judgment as a matter of law. We overrule Cox's second=20
issue. Piercing the =
Corporate=20
Veil In his third issue, Cox argues =
that the=20
"trial court erred when it granted directed verdict against Cox on =
his=20
claim for piercing the corporate veils of Excelerate and ABC =
Chemical."=20
The various doctrines for =
piercing the=20
corporate veil are not substantive causes of action. See =
Mapco, Inc.=20
v. Carter, 817 S.W.2d 686, 688 (Tex. 1991). Rather, they are =
a means=20
of imposing on an individual a corporation's liability for an =
underlying=20
cause of action. See Farr v. Sun World Sav. Ass'n, 810 =
S.W.2d=20
294, 297 (Tex. App.--El Paso 1991, no writ) (citing Gulf =
Reduction=20
Corp. v. Boyles Galvanizing & Plating Co., 456 S.W.2d =
476, 480=20
(Tex. Civ. App.--Fort Worth 1970, no writ)). "Without an =
underlying cause=20
of action creating corporate liability, evidence of an abuse of =
the=20
corporate form is immaterial." See Specialty Retailers, Inc. =
v.=20
Fuqua, 29 S.W.3d 140, 147 (Tex. App.--Houston [14th Dist.] =
2000, pet.=20
denied). Because we have already =
concluded that=20
Cox effectively withdrew from the company no later than August 31, =
2003=20
and that any causes of action in regard to piercing the corporate =
veil=20
happened after this date, we likewise conclude that the trial =
court=20
properly granted directed verdict on Cox's piercing the corporate =
veil=20
theories. We overrule Cox's third issue =
on=20
appeal.
We affirm the judgment of the =
trial=20
court. Evelyn V. Keyes Justice Panel consists of Justices =
Nuchia, Keyes,=20
and Higley.=20
Garrett=20
Petrochemicals is a subsidiary of Garrett Oil.=20
2. Lyondell and Garrett Petrochemicals =
signed an=20
agreement on November 1, 2002.=20
3. The trial court granted judgment in favor =
of Cox on=20
the defendants' counterclaim. The defendants do not challenge this =
ruling=20
on appeal.=20
4. Question 1 asked the jury, "Did Tommy Cox =
and=20
Southern Garrett, L.L.C., agree that Southern Garrett, L.L.C., =
would=20
purchase Tommy Cox's 25% share in Southern Garrett for $550,000?"=20