GNG Gas Systems, Inc. v. Dean
| Decision Date | 04 April 1996 |
| Docket Number | No. 07-95-0273-CV,07-95-0273-CV |
| Citation | 921 S.W.2d 421 |
| Parties | 30 UCC Rep.Serv.2d 1190 GNG GAS SYSTEMS, INC. and E.F. Gouge, Appellants, v. Harry DEAN, O.J. King and Northstar Gas Co., Inc., Appellees. |
| Court | Texas Court of Appeals |
Wauson & Associates, P.C., John Wesley Wauson and Allen D. Russell, Houston, for appellant.
David F. Beale, Houston, for appellee.
Before REYNOLDS, C.J., and DODSON and BOYD, JJ.
GNG Gas Systems, Inc. and E.F. Gouge contend with seven points of error that the take-nothing summary judgment rendered in their contract action against Harry Dean, O.J. King, and Northstar Gas Co., Inc., was rendered in error, or that questions of fact exist to vitiate it. Agreeing, we will reverse and remand.
The recorded evidence reveals that in 1986, Gouge was one of the initial directors and shareholders for Natural Gas Gathering Company of Texas, Inc. (NGGC), and held the positions of vice-president, secretary and treasurer. In 1988, Gouge became chief executive officer of the corporation, and Dean and King were employed as part of the team responsible for operations at NGGC.
Principal assets of NGGC included two operating agreements between the corporation and certain entities known as the Graham entities, 1 covering operations of the Mesa Pipeline System of Utah and the Plains Gathering System in Garza County, Texas (collectively, the Graham contracts). The Graham contracts were negotiated by Gouge on behalf of NGGC, Dean was placed in charge of the Mesa Pipeline System project, and King was in charge of the operation in the field.
Unknown to the other officers and directors, Gouge and a principal with the Graham entities, Kenneth M. McKinny, 2 agreed that the contracts with NGGC would be temporary agreements limited to only a few months, and that Gouge would then resign from NGGC, form his own company, and McKinny would give the Graham contracts to Gouge's new company.
In January of 1990, Gouge resigned from NGGC and formed GNG Gas Systems. To avert attention from Gouge's abrupt departure and the coincidental loss of the Graham contracts, Gouge, Dean, King, and McKinny devised a plan whereby Dean and King would also resign from NGGC, form their own corporation, which they named Northstar Gas Company, Inc., McKinny would negotiate the Graham contracts with them, and the two new companies would share the profits equally. In late January of 1990, Dean resigned, and in February of 1990, King resigned, and the four men implemented their plan by, according to Gouge, an unwritten agreement.
Upon discovery of the loss of the Mesa Pipeline agreement to the new companies headed by its three former employees, NGGC sued Mesa Pipeline Company, the Graham entities, GNG, Gouge, Dean, King and Northstar in Harris County, where at least part of the cause of action accrued and most of the defendants lived or had principal offices. 3 During discovery in the suit, Gouge gave a deposition wherein he admitted that he realized he was wrong in using his influence to usurp business opportunities from NGGC, but felt that NGGC "would certainly do it to me," and added that, Further, in connection with a settlement agreement, Gouge provided an affidavit, the pertinent portions of which read:
In late 1989, I met with an employee of Graham in New Orleans, Louisiana. As a result of that meeting, it was agreed that I would not sign the permanent operating agreement for the Mesa Pipeline system on behalf of NGGC and that I would get the contract after I left NGGC. At this point, our plan was tentative because it was subject to review and approval by Graham upper management.
* * *
McKenny became our regular contact with regard to implementation of a plan to have either me or an entity to be created, with the advice and consent of Graham receive and hold assets of NGGC and, if possible, certain key employees of NGGC.
* * *
[T]hese plans had been approved by senior Graham management and ... were to be kept secret.
Late in 1989, I met Harry Dean and O.J. King at the LaQuinta Hotel on Beltway 8 and I-45 in Houston. This meeting occurred during the business day and started about 3:30 p.m. We were all still employees of NGGC at this time. By this time Henry (sic) Dean and O.J. King were active participants in the plan by Graham and me to take for ourselves the Mesa pipeline deal. In our meeting, we discussed a number of options for implementation of my plan with Graham and ultimately decided that we would form two new corporations. Harry Dean and O.J. King would run an operating company to be formed in the near future and I would run a marketing company. No corporate names were selected at this time. It was agreed at the LaQuinta meeting that I would own one-third of the operating company to be run by Harry Dean and O.J. King. In turn, Harry Dean and O.J. King together would own one-third of the marketing company and I would own the balance. We agreed to joint venture all deals with 50/50 splits of all revenues depending upon who generated the business. We specifically agreed not to put any of this in writing for fear that it would be discovered or be used as evidence against us in a subsequent suit by NGGC or its owners if we were found out.
* * *
[S]hortly after the LaQuinta meeting, Ken McKenny confirmed to us that the Mesa contract would be transferred to the corporation(s) to be formed by us as outlined above.
I told Harry Dean and O.J. King that I would pick the time to resign from NGGC. It was important that our plans be formulated and implementation thereof begun before I gave NGGC notice of my intent to leave the company. I continued to stay with the company for a while but resigned before having to buy anymore (sic) gas.
* * *
Harry Dean and O.J. King formed Northstar. The Mesa Pipeline was bid and thereafter awarded jointly to Northstar/GNG. However, Graham's legal staff decided that the contract should be in the name of Northstar only because Graham thought there would be problems if the company was, on the surface, associated with me because of my high position with NGGC. That is, Graham wanted to keep my true role a secret from NGGC and others.
* * *
The Plains operating contract was conceived at NGGC but awarded to Northstar. This was part of our collaboration with Graham and was pre-arranged.
* * *
Ultimately because Harry Dean and O.J. King controlled the Mesa and Midplains (sic) contracts and were able to starve me out since they controlled all money and because of threats of lawsuits made to Graham by NGGC, they have taken the business opportunities of NGGC for themselves and excluded me. Because Harry Dean and O.J. King did not honor their commitment with me and were in a position to influence Graham, I was eventually excluded in the Graham business activities.
I recognize that what I did was wrong since I was still a director of NGGC when I, Harry Dean, Graham and the others were involved [in] the plan to take assets and business opportunities from NGGC. I believe also that I have been wronged by Harry Dean, O.J. King, and Northstar Gas Co.
In connection with settlement negotiations and as a result of this affidavit, GNG was non-suited with prejudice from the Harris County suit and, later, NGGC dismissed Gouge with prejudice in exchange for a percentage of his recovery against Northstar, Dean and King. 4
Premising their action upon the wrong done by Northstar, Dean and King in taking the Graham contracts solely for themselves, GNG and Gouge brought the action underlying this appeal in Garza County, the county of residence of one defendant and the location of at least part of the cause of action, on March 8, 1993. By their live trial pleadings, they alleged breach of contract, fraud, conversion, duress, conspiracy and unjust enrichment.
Answering, Northstar, Dean and King specially excepted to Gouge and GNG's pleadings, generally denied the allegations made against them, and counterclaimed. Northstar, Dean and King alleged that the contract described by Gouge and GNG in their pleadings did not exist; but, if it was found to exist, they sought by the counterclaim a declaratory judgment that the contract was rescinded or abandoned, or was too vague and indefinite to be enforceable, and that there was a failure of consideration. Further, they alleged that they did not steal any contracts from NGGC, nor did they tortiously interfere with NGGC's contracts, and if Gouge did so, he did so without their knowledge, and they counterclaimed for indemnity. Finally, Northstar, Dean and King asserted that if Gouge's affidavit were true, the alleged contract was illegal and unenforceable as a matter of law.
Northstar, Dean and King moved for summary judgment upon the grounds that (1) the contract, assuming its existence, was illegal and, thus, could not be enforced; (2) Gouge was judicially estopped from denying the illegality of the contract; (3 & 4) the statute of frauds and the vagueness of the contract precluded its enforceability; and (5) the statute of limitations barred the suit. The motion was supported by excerpts from the Harris County suit and Dean's affidavit.
GNG and Gouge responded to the motion for summary judgment, and furnished Gouge's affidavit, which stated, in part:
2. Beginning in early 1990 Harry Dean, O.J. King and myself discussed plans to operate and market gas from the Mesa Pipeline System in Utah and the Plains plant and gathering system in Garza County, Texas. We had all had prior experience with these systems while employees of NGGC.
3. I was aware that NGGC would be unable to renew its contracts for the Mesa Pipeline System and the Plains plant and gathering system in Garza County, Texas. In fact, I was advised that the...
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