Houston Oil Field Material Company v. Stuard

Decision Date11 February 1969
Docket NumberNo. 25960.,25960.
Citation406 F.2d 1052
PartiesHOUSTON OIL FIELD MATERIAL COMPANY, Inc. (now by Amendment of Charter: International Systems & Controls Corporation, Inc.), Appellant, v. R. M. STUARD, Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Roland D. Marble, Jackson, Miss., Roger A. Langenheim, Kansas City, Mo., for appellant.

M. B. Montgomery, Jackson, Miss., Tullius Brady, Brookhaven, Miss., for appellee.

Before WISDOM, THORNBERRY and GOLDBERG, Circuit Judges.

THORNBERRY, Circuit Judge:

The Houston Oil Field Material Company (Homco) appeals from a judgment on a $28,000 jury verdict in favor of R. M. Stuard, who served as manager of the company's office in Brookhaven, Mississippi from 1952 until September 1, 1966. On May 13, 1963, appellant gave Stuard a stock option to purchase 1,000 shares of Homco stock at $6 per share, two conditions being that appellee could not exercise his option for at least a year and could not exercise it unless he remained in the company's employ. He attempted to exercise the option in August, 1964 and again in August, 1966, but at both times Homco refused to issue him the stock on the ground that he ceased being a Homco employee after May 1, 1964. This was the date on which Homco leased certain properties, including its assets in Brookhaven, to the firm of Black, Sivalls & Bryson (B, S & B). At the conclusion of the ensuing trial, the jury found that Stuard was still a Homco employee when he attempted to exercise the option and awarded him $28,000, the stipulated value of 1,000 shares of Homco stock an August 9, 1966 less the $6,000 purchase price.

The issue presented on appeal is whether the district court correctly charged the jury. The disputed charge stated in effect that if the jury believed that the lease arrangement between Homco and B, S & B was for the purpose of convenience and policy in carrying on Homco's business and that Stuard's job remained the same as before and there was no understanding between him and the company that his duties or compensation under his original contract of employment would be affected, then the jury should find that he was still a Homco employee when he attempted to exercise the stock option. This charge reflected recognition on the part of the trial judge that there was evidence to support the conclusion that Homco was the alter ego of B, S & B, that the lease arrangement had no substantive effect on the business carried on in Brookhaven, and that the arrangement was not intended to have and did not have any effect on Stuard's employment. At the time of the lease, Homco owned ninety-seven per cent of B, S & B's outstanding common stock and shortly thereafter it acquired the remaining three per cent. B, S & B directors are elected by Homco directors. After the date of the lease, the office building in Brookhaven continued to carry the Homco name and the telephone listing continued under the Homco name. On the day the lease was executed, Stuard received a telegram from Homco saying that Homco and B, S & B had consolidated operations but that "all Homco personnel will remain in their positions, and employee benefits including hospitalization, insurance and profit sharing will continue unchanged."

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