Delp v. Douglas

• Citation: 948 S.W.2d 483
• Decision Date: 19 June 1997
• Docket Number: No. 2-96-159-CV,2-96-159-CV
• Parties: Gertrude DELP and Billy R. Delp, Appellants, v. Benjamin A. DOUGLAS; and Douglas, Kressler & Wuester, P.C., Appellees.
• Court: Court of Appeals of Texas

Page 483

948 S.W.2d 483

Gertrude DELP and Billy R. Delp, Appellants, v. Benjamin A. DOUGLAS; and Douglas, Kressler & Wuester, P.C. Appellees.

No. 2-96-159-CV.

Court of Appeals of Texas Fort Worth.

June 19, 1997.

Rehearing Overruled Aug. 7, 1997.

Gary F. DeShazo, Jon M. Smith, Jerome J. Schiefelbein, Gary F. DeShazo and Associates, Austin, for Appellants.

Charles T. Frazier, Jr., Dwayne J. Hermes, Gregory J. Lensing, Dallas, for Appellees.

Before LIVINGSTON, DAUPHINOT and RICHARDS, JJ.

OPINION

RICHARDS, Justice.

This is an appeal from a dismissal of one plaintiff's claim and a directed verdict against the other plaintiff's claim in a legal malpractice case. We withdraw our prior opinion and judgment of April 24, 1997 and substitute the following in its place.

Appellees Benjamin Douglas and Douglas, Kressler and Wuester, P.C. (DKW), ¹ represented appellants Billy and Gertrude Delp in a legal dispute with their business partner. Billy and Gertrude subsequently sued DKW for legal malpractice arising out of the representation in the business dispute. After filing the lawsuit, Billy filed for personal bankruptcy in federal court. Gertrude was not a party to Billy's bankruptcy. Philip R. Treacy & Associates (Treacy) bought Billy's claim in a trustee's sale. Although Billy objected, the trial court subsequently granted Treacy's motion to dismiss Billy's claim. Gertrude's claim proceeded to trial. But, after Gertrude rested her case, the trial court granted DKW's motion for directed verdict.

Billy and Gertrude argue that the trial court erred in dismissing Billy's claim and granting a directed verdict against Gertrude. Because we hold that Treacy did not have standing to dismiss Billy's claim, we will reverse as to him. Because we hold that the trial court erred in granting DKW's motion for directed verdict in some respects, but did not err in others, we reverse in part and affirm in part as to her.

BACKGROUND

Because of the complicated nature of this lawsuit, we will review the facts in some detail. In 1956 or 1957, Billy and Gertrude formed the Nu-Way Oil Company with their partner John Harvison and his wife. The focus of Nu-Way Oil was to develop and operate self-service gas stations and convenience stores. As their business grew, Billy, Gertrude, and Harvison expanded their operation to include several other companies. First, they bought Economy Oil Company (Economy). Then, they formed Nu-Way Distributing, which trucked fuel to their convenience stores. They also formed Dynamic Industries Corporation (Dynamic) to develop new self-service stations in Mississippi. Eventually, they formed Nu-Way Energy and Nu-Way Exploration, which were involved in oil and gas exploration. Finally in the mid-1980s, they formed Nu-Way, Inc., which held the stock of Nu-Way Oil, Economy, Nu-Way Distributing, Dynamic, Nu-Way Energy, and Nu-Way Exploration.

Billy, Gertrude, and Harvison served as directors for all of the companies. Gertrude also served as secretary and treasurer. Billy and Gertrude asserted that Gertrude exercised her independent judgment in casting her director votes. Moreover, Billy stated that he never had authority to make decisions on Gertrude's behalf in important business matters.

In 1987, Harvison proposed that the companies go public. Initially, Gertrude adamantly opposed taking the companies public. Gertrude expressed her opposition to the move to Billy and to their son, who worked for the company. Eventually, Gertrude changed her mind and voted in favor of going public. The decision to go public required a unanimous vote. Therefore, the companies would not have been able to go public if Gertrude had not voted in favor of the move.

To go public, Billy, Gertrude, and Harvison first formed FFP Partners, L.P. (FFP Partners). Nu-Way Oil, Economy, Nu-Way Distributing, Dynamic, Nu-Way Energy, and Nu-Way Exploration contributed their assets to FFP Partners. In return, each of those businesses became Class B limited partners in FFP Partners. FFP Operating Partners, L.P. (FFP Operating) was a subsidiary of FFP Partners. FFP Operating managed FFP Partners. FFP Management Company, Inc. (FFP Management), was formed and became a general partner of both FFP Operating and FFP Partners. Billy was the chief executive officer of FFP Management. Billy, Harvison, and six others were the directors of FFP Management. Gertrude was not a director or officer of FFP Management.

Billy stated that as soon as the companies went public, Harvison began trying to buy business entities outside the core business activity of the companies. Billy was concerned that the new ventures would cause the partnership not to meet the expansion commitments made to investors during the initial public offering.

Billy eventually met with DKW attorneys Randy Kressler and appellee Benjamin Douglas to discuss whether he and Gertrude could take any legal action to stop Harvison from taking the partnership in risky new directions. DKW had represented Billy and Gertrude in several matters over the years. Kressler and Douglas advised Billy that, based on their review of the minutes, records, and bylaws of the company, Billy and Gertrude were legally entitled to modify the board because Nu- Way and Economy, companies that they controlled, owned fifty percent of the voting rights of FFP Management. Billy testified that DKW did not advise him or Gertrude of the possible ramifications of taking the proposed action or of any possible response from Harvison.

After considering the attorneys' advice, Billy authorized Douglas to send a notice to FFP Management shareholders of a special shareholders' meeting to be held in April 1989. Billy wanted to make the board smaller and more independent of Harvison's influence. But, Billy still wanted both Harvison and himself to serve on the board.

Harvison reacted to the notice of the special shareholders' meeting by calling for a separate shareholders' meeting. At this meeting, the directors of FFP Management terminated Billy as chief executive officer. Harvison was removed as an officer at subsequent meetings of Nu-Way and Economy. In addition, Billy was given authority to vote all of Nu-Way's and Economy's stock in FFP Management. This gave Billy the power to control the outcome of FFP Management stockholder meetings.

Harvison responded by filing suit on behalf of himself, various members of his family, and various companies he controlled against Billy and Gertrude. Harvison's suit accused Billy and Gertrude of attempting to improperly obtain control of FFP, altering the minutes of Economy to add Gertrude as a director, breaching their fiduciary duties, and acting in bad faith. DKW represented Billy and Gertrude in Harvison's suit.

There was a temporary injunction hearing in which Gertrude was the primary witness. On the second day of the temporary injunction hearing, the two sides began settlement negotiations. Eventually, they reached an agreement in principle. Essentially, they agreed that Billy and Gertrude would receive physical store locations in exchange for giving up ownership and control of FFP companies and the other companies. The agreement was drafted by Harvison's lawyers as a compromise settlement agreement (CSA).

The CSA did not specify which physical store locations Billy and Gertrude would receive in exchange for their ownership and control of the companies. Instead, the CSA specified that the parties would "act with reasonable dispatch, in good faith, and in the most efficient manner reasonably possible" to divide the property. The CSA also required Gertrude to immediately resign her director positions in Economy and Nu-Way. This effectively deadlocked those companies because the only remaining directors were Harvison and Billy. The CSA also prevented any of the parties from suing each other for one year.

Billy and Gertrude met with Douglas for between thirty minutes and an hour. During this meeting, they reviewed the CSA and Douglas answered some of Billy and Gertrude's questions. After Douglas advised Billy and Gertrude to sign the CSA, they did so. Billy read the CSA before signing it and understood it "pretty good." Moreover, Billy testified that he voluntarily and willingly executed the CSA. Billy also said that although she was "reluctant," Gertrude voluntarily signed the CSA.

Shortly after the CSA was signed, Nu-Way experienced financial difficulty. Nu-Way had borrowed money from Sunbelt Savings (Sunbelt). Billy and Harvison had each personally guaranteed the debt. Because Nu-Way could not collect five million dollars owed to it by Harvison, his family, and his various businesses, as well as two million owed by Billy, Nu-Way could not keep up its payments to Sunbelt. Sunbelt eventually sued Nu-Way, Harvison, and Billy for payment of the loan. Sunbelt settled all of their claims against Harvison and his companies separately and then proceeded against Nu-Way and Billy. Sunbelt obtained a $1.2 million dollar judgment against Nu-Way and Billy individually. Because the board was deadlocked under the CSA, Billy was unable to force Nu-Way to liquidate its assets to pay the judgment. In his settlement with Sunbelt, Harvison bought its $1.2 million dollar judgment against Billy for $150,000. Harvison subsequently assigned that judgment to 7 HBF, a company owned by his children. Despite Billy's attempts to stop foreclosure, 7 HBF foreclosed on the debt secured by Nu-Way assets. In this manner Billy and Gertrude lost all of the assets they held through Nu-Way to Harvison and his children, who paid $150,000 for them.

As a result of the Sunbelt debt foreclosure and not being able to sell any assets because of the deadlock on the boards of the various companies, Billy filed for chapter 11 bankruptcy in November 1991. If Billy had not lost his assets through Nu-Way, he would not have had to file for bankruptcy. Documents from the United States Bankruptcy Court indicate that the debtor...