Atomic Fuel Extraction Corp. v. Slick's Estate

• Decision Date: 30 December 1964
• Docket Number: No. 14282,14282
• Citation: 386 S.W.2d 180
• Parties: ATOMIC FUEL EXTRACTION CORPORATION, Appellant, v. ESTATE of Tom SLICK et al., Appellees. . San Antonio
• Court: Texas Court of Appeals

Page 180

386 S.W.2d 180

ATOMIC FUEL EXTRACTION CORPORATION, Appellant, v. ESTATE of Tom SLICK et al., Appellees.

No. 14282.

Court of Civil Appeals of Texas.

San Antonio.

Dec. 30, 1964.

Rehearing Denied Jan. 27, 1965.

Sears & Burns, Houston, W.R. Smith, San Antonio, Haskell, Helmick, Carpenter & Evans, John H. Tippit, Denver, Colo., for appellant.

Carl Wright Johnson, Nat L. Hardy, San Antonio, Holland & Hart, Denver, Colo., Stahl & Sohn, Cox, Smith & Smith, San Antonio, for appellees.

POPE, Justice.

Plaintiff, Atomic Fuel Extraction Corporation, sued Transworld Resources Corporation, Nuclear Resources, Inc., and Tom Slick, who died after suit was filed. The parties will be called Atomic, Transworld, Nuclear, and Slick, respectively. Atomic during 1957 owned a milling contract issued by the Atomic Energy Commission, which would terminate if $2,000,000 was not made available to assure construction of the mill. Atomic charges that the three defendants agreed to furnish the funds but failed to do so. It asserted damages of more than four million dollars under four alternative causes of action: breach of contract, breach of an agent's fiduciary duty, fraud, and tortious interference with a contract. After a lengthy trial, the court granted all defendants' motions for instructed verdict.

Atomic had contracts with both Transworld and Nuclear but it seeks to reach Slick by invoking the doctrine that those corporate entities should be disregarded. In order, we shall discuss our conclusions that Atomic raised fact issues which prevented an instructed verdict for either Transworld or Nuclear, but that Atomic only proved nominal damages against them; that Atomic failed to prove grounds to disregard the corporate entities with whom it chose to contract, and that the instructed verdict for Slick was proper since Atomic's actions, save the one on contract, are barred by the two-year statute of limitations.

We shall discuss the contractual origin of this controversy. Atomic, during 1956, obtained a contract from the Atomic Energy Commission which entitled it to construct a uranium mill in Colorado. The contract would terminate unless Atomic began the mill construction by June 1, 1957. Atomic was able to get an extension of time, but the extension provided for an automatic termination on October 1, 1957, in these words: " * * * unless by said date the Contractor (Atomic) has in its possession and available for the performance of this contract Two Million Dollars ($2,000,000) in cash in excess of its current liabilities, and the Commission has by the same date received clear and convincing written proof thereof, which proof shall be in the form of a contractual agreement between Atomic Fuel Extraction Corporation and the party or parties providing such money."

John Black, an officer and the moving force in Atomic, in July of 1957, wrote Slick Oil Company in San Antonio in an effort to interest that firm in Atomic's uranium venture and to obtain the necessary finances for the mill. This letter resulted in a conference in Denver on July 16, between Black and other officers of Atomic and James V. McGoodwin and others from San Antonio. This conference led to the execution of what is called a letter of agreement dated July 18, 1957. This document is not the basis of the action on contract, but it led up to the actual contracts, called the August 13 letter agreement and the August 16 merger agreement. On August 13, 1957, Transworld submitted a letter agreement to Atomic. It was signed by McGoodwin for Transworld, and was signed and accepted by all of the directors for Atomic. Since this is one of the two documents upon which Atomic grounds its contract action, we shall set forth its relevant portions:

"Informal discussions with the Atomic Energy Commission indicate that performance of the management contract, as discussed in the letter of Agreement, will not satisfy the Atomic Energy Commission requirements under your contract with that agency for a mill operation. Furthermore, the ore supply for the proposed mill is not certain due to the questionable validity of your contract with Beaver Mesa Company concerning certain uranium lode mining claims.

"Notwithstanding these difficulties, Transworld is willing to undertake the construction and operation of a uranium mill under your contract with the Atomic Energy Commission on the following terms and conditions:

1. Atomic Fuel either will be merged into a corporation designated by Transworld or will transfer all of its assets and liabilities to the designated corporation, the alternative to be at the option of Transworld. In either event the consideration will be delivery of at least 25% of the then issued and outstanding stock of the designated corporation to the stockholders of Atomic Fuel or to it, depending on the alternative followed.

2. (Omitted.)

3. Transworld is satisfied that Atomic Fuel has a good possessory title to its mining claims, a list of which will be supplied to Holland & Hart, attorneys, by August 23, 1957, with the exception of the Echo-Hatch group as to which there is a dispute regarding ownership.

4. The liabilities and debts of Atomic Fuel do not exceed $300,000.00, based upon a thorough audit of the books of Atomic Fuel by Peat, Marwick, Mitchell & Co.

5. Transworld is able to obtain an ore supply of a quantity and quality sufficient to meet the production commitments to the Atomic Energy Commission in the mill contract referred to above.

6. The ore supply is amenable to processing by the method contemplated by Transworld.

7. (Omitted.)

8. The officers and directors of Atomic Fuel cooperate fully with Transworld and the designated corporation to secure the approval of the stockholders of Atomic Fuel for all necessary corporate action.

9. All of the foregoing matters, with the exception of 2(d), must be accomplished not later than September 20, 1957."

Investigations disclosed that the AEC would not approve a mere assignment of Atomic's milling contract to another firm. The AEC required a merger. Because Transworld owned mineral interests other than uranium and related ores, and it was intended to keep the Atomic venture separate, it was determined that a new corporation would be formed which would merge with Atomic. On August 16 Nuclear Resources was incorporated in Colorado, and on that date Nuclear and Atomic executed the merger agreement. It detailed the method of the merger and imposed a condition precedent upon Atomic in these words: "subject to the conditions hereinafter contained, the merger provided for herein will become effective as of the close of business on September 20, 1957." Nuclear would be the surviving corporation, would exchange its stock for Atomic's in the proportion provided would become vested with Atomic's assets, and charged with its debts. Article VII of the merger agreement stated, among other things, that the merger "shall be effective only if the following conditions are met:

"(2) Nuclear is satisfied that the conditions stated in a certain Letter of Intent dated August 13, 1957, from Transworld Resources Corporation to Atomic have been met.

"(3) * * * Despite approval of the merger by the stockholders, the merger may, by action of the Board of Directors of Nuclear, be abandoned at any time prior to the actual filing of this agreement with the Secretary of State of Colorado, and any decision so to abandon the merger shall rest solely in the discretion of the said Board of Directors."

The next day, August 17, Atomic's Board of Directors ratified both the August 13 letter agreement and the August 16 merger agreement. On August 21, Atomic and Transworld agreed to some changes in the August 13 letter agreement. The changes substituted Nuclear for Transworld, extended the dead-line for compliance with the conditions precedent, from September 20 to September 25, and added this paragraph:

"9. The plan under which Nuclear acquires the assets and liabilities of Atomic Fuel shall be mutually satisfactory to legal counsel for this corporation (Atomic), Nuclear and Transworld and further that said plan can be legally and effectively carried out within the time permitted by the Atomic Energy Commission and the provisions of Contract No. AT(05-1)-698."

On September 25, 1957, the stockholders of Atomic met and approved the merger with Nuclear. The next day this telegram was sent to the AEC:

"Transworld Resources, Inc. hereby commits Two Million Five Hundred Thousand Dollars for the construction of the Bedrock, Colorado mill subject only and solely to the completion of the ore purchase negotiations now in progress to fulfill the AEC contracts for said mill and the conditions relating to the extension of that contract AT(05-1) 698. Copy to J.V. McGoodwin.

Tom Slick, Chairman of the Board Transworld Resources, Inc."

The AEC did not regard this as a compliance with its requirement that $2,000,000 in cash must be furnished. On September 30, the day before the terminal date of the AEC milling contract, Slick, McGoodwin and others met with representatives of the AEC in Washington and were told that the only way Atomic's AEC contract could be preserved was "to come up with two million dollars in cash in excess of current liabilities like the contract called for." Slick was trying to get an extension of time to October 30. On October 1, this telegram was sent by C.V. Wood, President of Transworld Resources, Inc., to J.V. McGoodwin, President, Nuclear Resources, Inc.:

"Pursuant to action of the Board of Directors of this company taken in response to a proposal from you, we hereby commit to you two and one half million dollars to comply with the provisions of the financial requirement of the modification to contract AT-05-1968. You are hereby authorized to expend such fund in accordance with said contract as now or hereafter modified by the Atomic Energy Commission and whether the mill shall be built at Bedrock, Colorado or elsewhere but...