Gibney v. Culver, No. 13-06-112-CV (Tex. App. 4/10/2008)
| Decision Date | 10 April 2008 |
| Docket Number | No. 13-06-112-CV.,13-06-112-CV. |
| Parties | MICHAEL GIBNEY, INDIVIDUALLY AND ON BEHALF OF MICRO BLEND, INC., Appellants, v. ROY CULVER, JR., CULVER INTERESTS, AND ANA-TECH, INC., Appellees. |
| Court | Texas Court of Appeals |
On Appeal from the 36th District Court of San Patricio County, Texas.
Before Chief Justice VALDEZ and Justices RODRIGUEZ and GARZA.
This is a two-part suit in which appellant, Michael Gibney, individually and on behalf of Micro-Blend, Inc. ("Gibney"), brought (1) a shareholder derivative suit for fraud and breach of fiduciary duty against appellees, Roy Culver, Jr., Micro-Blend, Inc., Culver Interests, and Ana-Tech, Inc and (2) an individualized claim for shareholder oppression against Roy himself. Gibney secured a judgment of $250,000 from the trial court, for shareholder oppression, against Roy, but the trial court, through a directed verdict, dismissed Gibney's derivative claims. By four issues, Gibney contends that (1) the trial court erred in concluding that his derivative claims against Culver Interests were barred by the applicable statute of limitations, (2) the trial court erred in concluding that his derivative claims against Ana-Tech, Inc. were barred by the applicable statute of limitations,1 (3) the trial court's directed verdict on his derivative claims was premature and improper in that it was not supported by the evidence in the record, and (4) the trial court erred in failing to award prejudgment interest to Gibney. By three issues, taken out of order, on cross-appeal, Roy asserts that (1) the evidence in the record is factually insufficient to support the jury's findings of excessive compensation, (2) no "shareholder oppression" occurred as a matter of law, and (3) the trial court's judgment awarding individual damages to Gibney was erroneous as a matter of law. We affirm in part and reverse and render in part.
Micro-Blend, Inc. ("Micro-Blend") is a close corporation originally formed in 1989.2 Micro-Blend manufactured patented blending systems for soft drinks. The idea for Micro-Blend originated with Gibney and was financed by Roy. There were originally four shareholders of Micro-Blend at its inception—Roy, his brother Doug Culver, Gibney, and Michael Lucas—and later grew to a maximum of thirty-four shareholders.
Micro-Blend's corporate governance structure provided for a five-person board of directors (the "Board") to be elected at their annual shareholders' meetings. Roy served on the Board from the formation of Micro-Blend in 1989 until 1991. Doug served on the Board from 1989 until 1993. Roy, however, served as the chief executive officer of Micro-Blend since its inception. Gibney, the third largest shareholder in Micro-Blend, was a member of the Board from 1989 until 1994.3 Gibney asserts that he resigned from the Board with the title of Vice-President of Micro-Blend.4
In 1991 and 1992, Micro-Blend's systems were assembled on "skids" in Ingleside, Texas, which were then delivered to the customer and installed, rather than assembled on site at the customer's plant. Micro-Blend began contracting with Kemp Industries to build the systems on skids.5 However, Kemp Industries had problems with quality-control and timeliness, so an alternate plan was needed.
At a meeting on August 29, 1994, the Board passed Gibney's motion to have Roy actively pursue other companies to manufacture the skids. At a Board meeting on January 13, 1995, the Board authorized a contract with Culver Interests to manufacture the skids.6 Culver Interests continued to manufacture the systems until Culver Interests Number 3 dissolved in 1997.7 At that time, Culver Interests gave its assets—the equipment and materials used in the production of the skids—to Micro-Blend and Micro-Blend commenced production of the skids on its own.8
Ana-Tech, Inc. ("Ana-Tech") was formed by Roy in the 1980s to supply trained technicians skilled in calibrating and repairing gauges and metering devices for refineries and chemical plants on a temporary basis. Roy and Doug each owned 50% of the stock of Ana-Tech even though Roy ran the company himself. Valero Refinery, Dupont, Oxy, and CPPC were among Ana-Tech's past customers. Essentially, Ana-Tech was an "instrumentation labor pool contractor." In addition, Ana-Tech provided workers compensation insurance on its employees, including the technicians it supplied to customers and its clerical and administrative staff.
From the inception of Micro-Blend, Ana-Tech supplied all employees to the company. In fact, Roy contends that "Gibney himself was paid by Ana-Tech in 1990 for work performed for Micro-Blend . . . ." Ana-Tech continued to supply the labor force for Micro-Blend's operations until 2001. At this time, Micro-Blend's Board decided to pay its own employees rather than transact through Ana-Tech. Gibney contends that "Ana-Tech, Inc., was supposed to be doing Micro-Blend Inc. [sic] payroll, however, the secretary of Micro-Blend Inc., Terri Doyel[,] did all the so called payroll services" and that "[a]ppellee-Culver [Roy] took $4.93 million dollars from Micro-Blend, Inc. through Ana-Tech, Inc. under the disguise that it was providing payroll services." Conversely, Roy argued that the principal reason that Micro-Blend used Ana-Tech to provide its labor force was "Ana-Tech's favorable workers' compensation experience rating." Roy further argues that Ana-Tech's handling of Micro-Blend's labor force saved Micro-Blend $28,000 a year in workers' compensation insurance premiums.9
Gibney filed his shareholder derivative and shareholder oppression actions against Roy, Culver Interests, and Micro-Blend on November 27, 2000. Gibney joined Ana-Tech on April 15, 2003.10 The case was first tried to verdict in 2004, with the jury concluding that Gibney and the other minority shareholders were entitled to $12,000,000 in actual and exemplary damages and $4,000,000 in attorney's fees. However, in response to appellees' motion to disregard the jury's findings and for a judgment non obstante verdicto, the trial judge ordered a new trial on June 16, 2004.11
The case was re-tried to a jury on the causes of action contained in Gibney's seventh amended petition, which was filed on June 23, 2005.12 On July 6, 2005, appellees filed their third amended answer and asserted a counterclaim against Gibney, claiming Gibney's derivative claims "were not preceded by reasonable inquiry, were and are groundless and brought in bad faith; or groundless and brought for the purpose of harassment; or groundless and interposed for an improper purpose" to cause unnecessary delay or needless increase in the cost of litigation. In this filing, appellees also asserted a myriad of affirmative defenses, including a statute of limitations defense.
After Gibney rested his case-in-chief, the trial judge granted appellees' motion for a partial directed verdict on Gibney's fraud claims contained in paragraph thirteen of his seventh amended petition on statute of limitations grounds.13 Once appellees rested their case-in-chief, the trial judge directed a verdict on Gibney's remaining shareholder derivative claims, stating that Gibney had not produced any evidence as to damages. The case went to the jury based solely on Gibney's shareholder oppression cause of action. The trial court submitted five questions to the jury regarding Gibney's shareholder oppression cause of action. Those questions, and the jury's answers thereto, were as follows:
Do you find from a preponderance of the evidence that Roy Culver, Jr., since November 27, 1998, maliciously or wrongfully refused to allow Michael Gibney to examine the books and records of Micro-Blend, Inc.?
Do you find from a preponderance of the evidence that Roy Culver, Jr., since November 27, 1998, maliciously or wrongfully used his position as the Chief Executive Officer of Micro-Blend, Inc., to award excessive salaries and compensation to himself to the detriment of Michael Gibney?
Do you find from a preponderance of the evidence that Roy Culver, Jr., since November 27, 1998, maliciously or wrongfully used his position as the Chief Executive Officer of Micro-Blend, Inc., to award excessive salaries and compensation to members of his family to the detriment of Michael Gibney?
Do you find from a preponderance of the evidence that Roy Culver, Jr., used his position as the Chief Executive Officer of Micro-Blend, Inc., to maliciously or wrongfully direct the withholding of payment of dividends from Micro-Blend, Inc., to Michael Gibney in 1998, 1999, and 2000?
If you have answered any one of the preceding questions "YES," answer the next question. If you have answered each of the preceding questions "NO," do not answer the next question.
What is the value of Michael Gibney's shares in Micro-Blend, Inc.?
Answer in dollars and cents, if any.
As evidenced above, the jury returned a verdict that was partially favorable to Gibney. On August 4, 2005, Roy filed a motion to set aside the jury's findings to the second and third questions contained in the jury charge. Furthermore, on August 29, 2005, Roy, Ana-Tech, and Culver Interests filed a motion for judgment with the trial court asserting that Gibney was entitled to a take nothing judgment as a matter of law on all of his claims. On December 9, 2005, the trial court denied Roy's motion to set aside the jury's findings.
In its judgment signed on February 2, 2006, the trial court held that the jury's findings constituted a finding that Roy...
To continue reading
Request your trial