Dodson v. Kung

Decision Date07 August 1986
Docket NumberNo. B14-85-640-CV,B14-85-640-CV
Citation717 S.W.2d 385
PartiesJames M. DODSON, III, Appellant, v. L.C. KUNG, Westland Oil Development Corporation and Ranger Building Corporation, Appellees. (14th Dist.)
CourtTexas Court of Appeals

Newton B. Schwartz, Barry S. Berger, Houston, for appellant.

William Pannill, Anita J. Newland, Joe H. Reynolds, Rory C. Flynn, Fitzhugh H. Pannill, Jr., Houston, for appellees.

Before PAUL PRESSLER, SEARS and CANNON, JJ.

OPINION

PAUL PRESSLER, Justice.

A summary judgment was granted against Appellant, a former employee of Appellee Ranger Building Corporation. Appellant contended that he was induced to leave his business in Dallas for employment as president of a new construction company in reliance on oral promises made by Appellee Kung, president and owner of Westland Oil Development Corporation. After working for the company for two and one-half years, Appellant resigned, claiming the alleged promises were not fulfilled. He sued, alleging, among other theories, common law and statutory fraud, breach of contract and breach of fiduciary duty. We affirm.

Appellant met Kung in 1961 while Appellant was a skeet boy at Lakeside Country Club. The two developed a relationship described as both father/son and mentor/protege. Kung advised Dodson, and on at least two occasions turned down requests by Dodson for financial help. After graduation from college Dodson entered a partnership with his father to build miniwarehouses. He later moved to Dallas and formed a company which installed tennis courts.

According to Dodson, the background was as follows:

In 1980 he called to express sympathy to Kung about his impending divorce, and the two men resumed their friendship. He and Kung, at the latter's instigation, had twenty or twenty-five conversations about his going to work for Kung. Over Thanksgiving 1980, while at Kung's Louisiana hunting lodge, Kung offered to associate with Dodson in the formation of a new construction company, make Dodson president with a large salary and give him ten percent of the stock. He also promised to buy the stock upon demand for not less than $100,000 if Dodson stayed with the company for at least one year after its stock was issued. Dodson asked Kung to put the agreement in writing, but he refused. Dodson never related this agreement to any other Ranger board member. Ranger was incorporated on December 15, 1980. Dodson began as president in January 1981. In February 1981 Westland became the majority stockholder. In November 1982 Westland loaned Ranger $1,000,000, secured by preferred stock, to enable Ranger to obtain a performance bond. Dodson became increasingly dissatisfied with certain changes and resigned on July 12, 1983, complaining of a "police-like atmosphere." When his brother (as his proxy) demanded payment for the Ranger shares, he demanded payment of the directors and not of Kung. He was told that the company was insolvent and the shares worthless.

According to Kung, the background was as follows:

After the resumption of his friendship with Dodson, Westland entered into a written contract with Dodson's Dallas company to clear the site for Westland's new office buildings in Montgomery County. Dodson then came to him and asked to be the contractor for the buildings, and, although he had misgivings about Dodson's inexperience, he hired him because he was a friend and in some financial distress. He denies any oral agreement concerning the stock. Shortly after Ranger's incorporation, Westland and three individuals, including Dodson but not Kung, bought shares in the company and became the board of directors. Twenty-one months later, Dodson voted with the other directors to borrow $1,000,000 from Westland to qualify for performance bonding, and to issue preferred stock as security. By mid-1983, Ranger had bid on ten outside jobs but had been awarded no contracts other than those from Westland. Kung became dissatisfied with the quality of construction on those projects and told Dodson not to bid on any more jobs until he completed those he had. On July 12, 1983, Dodson submitted his resignation and took with him Ranger's files and records. Subsequently, the directors declared Ranger insolvent, and it has never re-paid Westland's loan.

Dodson raises eight points of error. In his third and fourth points of error, Dodson alleges that genuine issues of material fact exist concerning the oral contract to redeem his Ranger stock if he remained with the company for at least one year from the date the stock was issued. Dodson admits that ordinarily such an agreement would be unenforceable under both Tex.Bus. & Com.Code Ann. §§ 26.01(b)(6) and 8.319 (Vernon Supp.1986). Section 26.01 of the Statute of Frauds requires that an agreement which is not to be performed within one year from the date of its making be put in writing and signed. Section 8.319 sets forth a similar requirement for a contract for the sale of securities. Dodson does not dispute that the alleged agreement was made during Thanksgiving of 1980; that shares of stock were issued on February 4, 1981; and that he had to work at least until February 5, 1982, before he could demand that Kung redeem the stock. Appellant argues, however, that Appellees are estopped from relying on these statutes because of a fiduciary relationship between Dodson and Kung.

This argument is based upon the premise that equity may enforce an otherwise unenforceable oral agreement when nonenforcement of the agreement would itself amount to a fraud. Hooks v. Bridgewater, 111 Tex. 122, 128, 229 S.W. 1114, 1116 (1921). "This is the basis, and the only basis, for the jurisdiction which courts of equity have assumed in their creation of exceptions to the statute." Id. One of the exceptions so created is when the existence of a fiduciary relationship between the parties is involved. The Court of Appeals in Locke v. Thigpen, 353 S.W.2d 249, 255 (Tex.Civ.App.--Houston 1961), rev'd on other grounds, 363 S.W.2d 247 (Tex.1962) recognized a confidential relationship as a matter of law in certain recognized fiduciary relations such as attorney and client, trustee and cestui que trust or husband and wife. In addition, such a relationship may exist as a matter of fact when one person has placed a special confidence in another to cause the parties not to deal with each other on equal terms, either because of the dominance of one or the weakness dependence or justifiable trust of the other. Id.

Dodson argues that in Texas the question of whether a confidential or fiduciary relationship existed is ordinarily one of fact for a jury. This is frequently true. In Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex.1962), the Supreme Court determined that there was not such evidence of justifiable trust and confidence as to create a fiduciary relationship. Chief Justice Calvert in his dissent held that there was a controverted fact issue but also stated:

As in most fields of the law, we will have cases in which we can say that the evidence establishes conclusively that there was or was not a confidential relationship, but there will be others in which the evidence will leave the ultimate inference to be drawn in that grey zone in which the trier of facts has always functioned in our system of jurisprudence. Our difficulties begin, of course, when we are called upon to determine whether the evidence in a particular case creates a grey zone.

Id. at 254.

Here the trial court held that there were no genuine issues of material fact for the jury on the fiduciary relationship claim. The relationship at issue was one of business and friendship. While a relationship of trust and confidence may arise informally from a purely personal association, Thigpen v. Locke, 363 S.W.2d at 253, or a business association not otherwise considered a fiduciary relationship as a matter of law, MacDonald v. Follett, 142 Tex. 616, 180 S.W.2d 334, 337 (1...

To continue reading

Request your trial
35 cases
  • Kiefer v. Continental Airlines, Inc., 01-91-01286-CV
    • United States
    • Court of Appeals of Texas
    • August 11, 1994
    ...theories pleaded. Havens v. Tomball Community Hosp., 793 S.W.2d 690, 691 (Tex.App.--Houston [1st Dist.] 1990, writ denied); Dodson v. Kung, 717 S.W.2d 385, 390 (Tex.App.--Houston [14th Dist.] 1986, no writ). Once the defendant produces sufficient evidence to establish the right to a summary......
  • Swanson v. Schlumberger Technology Corp.
    • United States
    • Court of Appeals of Texas
    • November 30, 1994
    ...because of the dominance of one or the weakness, dependence, or justifiable trust of the other. Dodson v. Kung, 717 S.W.2d 385 (Tex.App.-Houston [14th Dist.] 1986, writ ref'd n.r.e.). John Swanson testified that he trusted and relied upon Sedco and later on Schlumberger and that he was comp......
  • Paine v. Sealy
    • United States
    • Court of Appeals of Texas
    • November 20, 1997
    ...establish Paine's alter ego status and subject him to individual liability. See id.; see also Dodson v. Kung, 717 S.W.2d 385, 390 (Tex.App.--Houston [14th Dist.] 1986, writ ref'd n.r.e.) (summary judgment in favor of corporation precluded mutual liability suit against shareholders alleged t......
  • Sneed v. Webre
    • United States
    • Supreme Court of Texas
    • May 29, 2015
    ...requirement would have been futile. See Wingate v. Hajdik, 795 S.W.2d 717, 718–20 (Tex.1990) ; Dodson v. Kung, 717 S.W.2d 385, 390 (Tex.App.–Houston [14th Dist.] 1986, writ ref'd n.r.e.) ; Zauber, 591 S.W.2d at 938 (“If the pleadings do not include specific facts and particularized reasons ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT