Caso-Bercht v. Striker Industries

• Decision Date: 13 May 2004
• Docket Number: No. 13-00-650-CV.,13-00-650-CV.
• Citation: 147 S.W.3d 460
• Parties: Jorge CASO-BERCHT, et al., Appellants, v. STRIKER INDUSTRIES, et al., Appellees.
• Court: Texas Court of Appeals

147 S.W.3d 460

Jorge CASO-BERCHT, et al., Appellants, v. STRIKER INDUSTRIES, et al., Appellees.

No. 13-00-650-CV.

Court of Appeals of Texas, Corpus Christi-Edinburg.

May 13, 2004.

Rehearing Overruled November 10, 2004.

Jim L. Flegle, Alan S. Loewinsohn, Loewinsohn & Flegle, Dallas, for appellants.

B.J. Walter Jr., Boris A. Hidalgo, Jon L. Tankersley, Thompson, Knight, Brown, Parker & Leahy, L.L.P., Christopher Paul Hanslik, Ware, Snow, Fogel & Jackson, Carey Scott Davis, Martyn B. Hill, Pagel, Davis & Hill P.C., Houston, for appellees.

Before Justices HINOJOSA, CASTILLO and AMIDEI.¹

OPINION

Opinion by Justice MAURICE AMIDEI(Assigned).

Jorge Caso-Bercht, Don Alfredo Chedraui, Luis Prado Gomez, Purplow Corporation II A.V.V., Carlos Vizcaino Gutierrez, Alejandro Marti, Ignacio Gonzalez Noble, Alberto Barroso Rivera, Ignacio Perez-Salazar, and Jorge Quinzanos Suarez, appellants, appeal from a judgment granting summary judgment motions alleging appellants did not have standing and capacity, and ordering that appellants take nothing by their suit against appellees Striker Industries, Inc., West Oxford Industries, Inc., STDF Corporation, David Collins, Catherine Collins, InterAmerican Securities, Inc., Public Securities, Inc., and William Ross.

Appellants allege they are the owners of investment accounts that were under the discretionary control of appellees, subject to appellants' specific instructions to invest in diversified, quality, low-risk investments. However, contrary to appellants' instructions, appellees used appellants' accounts to purchase worthless securities and notes issued by certain of the corporate appellants, which resulted in the loss of millions of dollars to the appellants.

Four of appellants' claims relate to federal and state securities laws. The remaining thirteen claims relate to a concerted and deliberate course of conduct by all appellees involving fraud, misrepresentation, breach of fiduciary duties, tortious interference with contractual relationships, conspiracy, and conversion. The grounds of appellees' motions for summary judgment are that appellants lack standing and capacity because appellants held the stock in question under "street names" and pseudonyms and were not owners as required by the securities statutes. The trial court's judgment sustained appellees' objections to appellants' summary judgment evidence, granted appellees' motions for summary judgment, and ordered that appellants take nothing by way of this lawsuit against appellees. We reverse and remand.

Standard of Review

The appropriate standard to be followed when reviewing a traditional summary judgment is well established. Schultz v. Rural/Metro Corp., 956 S.W.2d 757, 759 (Tex.App.-Houston [14th Dist.] 1997, no writ). The movant has the burden to show that there exist no genuine issues of material fact and that it is entitled to judgment as a matter of law. Id. A defendant moving for summary judgment on an affirmative defense must expressly present and conclusively prove all essential elements of that defense as a matter of law; there can be no genuine issues of material fact. Id. Every reasonable inference must be indulged in favor of the nonmovants and any doubts resolved in their favor. Martin v. Tex. Woman's Hosp., Inc., 930 S.W.2d 717, 720 (Tex.App.-Houston [1st Dist.]1996, no writ).

In considering a no-evidence motion for summary judgment under rule 166a(i), a summary judgment is improper if the nonmovant brings forth "more than a scintilla of evidence." TEX.R. CIV. P. 166a(i); Macias v. Fiesta Mart, Inc., 988 S.W.2d 316, 317 (Tex.App.-Houston [1st Dist.]1999, no writ). A nonmovant produces more than a scintilla of evidence when the evidence "rises to a level that would enable reasonable and fair minded people to differ in their conclusions." Merrell Dow Pharm., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997).

A no-evidence summary judgment is only proper after an "adequate time for discovery." TEX.R. CIV. P. 166a(i).

Issues Presented

Appellants' first issue asserts that the trial court erred in granting defendants' rule 166a(c) motions for summary judgment. See TEX.R. CIV. P. 166a(c).

The grounds of appellees' motions for summary judgment are that appellants lack standing or capacity to maintain their action because appellees' records do not reflect: (1) that appellants purchased a security from Striker, West Oxford or STDF; or (2) any accounts at InterAmerican or Public in appellants' names.

Appellants argue that the appellees' supporting affidavits of David Collins and William Ross are substantially defective because they state that company records indicate no purchases by appellants, but none of the records referred to were attached to the affidavit. Noriega v. Mireles, 925 S.W.2d 261, 265 (Tex.App.-Corpus Christi 1996, writ denied) (if there is a dispute regarding what is contained in the records, the failure to attach a copy of the records to the affidavit is a substantive defect in summary judgment proof which can be raised for the first time on appeal). Both affidavits state that if any of the appellants had purchased a security from Striker, West Oxford or STDF, their company records would indicate their purchase, but such records would not list the purchases appellants made in a "street name" or under a "pseudonym" in order to protect their privacy.

Appellants claim to be beneficial owners of securities that were bought in "street names" and placed in the custody of the depository firm, The Depository Trust Company (DTC), which registers the securities on CEDE lists.² Stock purchased in a street name by a brokerage firm is owned by the customer or client of the brokerage firm. Weiss v. Dempsey-Tegeler & Co., 443 S.W.2d 934, 935 (Tex. Civ.App.-Amarillo 1969, writ ref'd n.r.e.). Appellees knew, or should have known, that in general, a corporation's shareholder records will not reflect the names or addresses of the beneficial owners but will instead list the names of nominees used by depository firms, and if there were any doubt that appellants purchased stock in Striker, West Oxford, or STDF, a list of beneficial owners could have been obtained with the appellants listed as beneficial owners. Luxottica Group S.p.A. v. United States Shoe Corp., 919 F.Supp. 1091, 1092 (S.D.Ohio 1995) (under SEC regulations, brokers and other record-holders of stock in street name must compile a list of non-objecting beneficial owners ("NOBO") at a corporation's request within five business days). Appellants established that more than 6 million shares of Striker stock were listed on the Striker stock ledger under the caption "CEDE & Co.," and that stock was purchased in corporate names designated by appellants, and those names appear on the Striker Securityholder List. As holders of stock in "street names," appellants are the actual purchasers of the stock and known as the beneficial owners. In re Penn Cent. Sec. Litig., 560 F.2d 1138, 1140 (3rd Cir.1977) (cites final report of the SEC of the practice of recording the ownership of securities in the records of the issuer in other than the name of the beneficial owner of such securities pursuant to section 12(m) of the Securities Exchange Act of 1934). Appellants Caso-Bercht and Marti requested all of the securities held in their accounts be held in street names, and that their names not be released to the corporate issuers. Since the Collins and Ross affidavits do not mention the CEDE list, or that the appellants may own stock purchased in a "street name" or corporate name, the conclusions that appellants did not purchase securities from Striker, West Oxford, or STDF, are inconclusive, misleading and disputed. Appellees cite no authority that holds that appellants have no standing because they purchased stock in "street names." We hold that the Collins and Ross affidavits are substantively defective because the records they referred to were not attached. Id.; see Noriega, 925 S.W.2d at 265.

Even if the Collins and Ross affidavits were not substantively defective: (1) they do not controvert appellants' evidence that they held the securities in accounts in names other than their own for security reasons and to protect their privacy; (2) two of the appellants, Caso-Bercht and Marti, owned their accounts at the outset and their standing and capacity was not contested; and (3) each of the other appellants' affidavits proved assignment and assumption agreements for the accounts held in corporate names, or powers of attorney for the accounts opened under pseudonyms, which is evidence of beneficial ownership and capacity or legal authority to act. These appellants' affidavits stated that each plaintiff is, "the only person with authority to assert and defend any legal claims arising from the purchase, transfer, sale or possession of these securities held in the Accounts." Appellees' objection that appellants cannot testify they owned or are the beneficial owners of securities and notes was erroneously sustained by the trial court. Glasscock v. Frost Nat'l Bank, 928 S.W.2d 599, 600 (Tex.App.-San Antonio 1996, writ denied); First Gibraltar Bank, FSB v. Farley, 895 S.W.2d 425, 428 (Tex.App.-San Antonio 1995, writ denied). We set aside the trial court's order sustaining such objection. The Collins and Ross affidavits do not controvert appellants' statements as to the assignments and ownership of the securities.

To establish the elements of the test for determining standing and capacity, appellees cite Nootsie, Ltd. v. Williamson County Appraisal Dist., 925 S.W.2d 659, 661(Tex.1996), but actually it supports appellant's standing and capacity by its holding, as follows: "A plaintiff has standing when it is personally aggrieved, regardless of whether it is acting with legal authority; and a party has capacity when it has the legal authority to act, regardless of whether it has a justifiable interest in the controversy." Id. at 660-61.

Nootsie upheld the standing...