In re Webber

• Decision Date: 11 September 2006
• Docket Number: Bankruptcy No. 06-30434.,Adversary No. 06-03158.
• Citation: 350 B.R. 344
• Parties: In re Tony L. WEBBER, Debtor. Loan Griggs, Plaintiff, v. Tony L. Webber, Defendant.
• Court: U.S. Bankruptcy Court — Southern District of Texas

350 B.R. 344

In re Tony L. WEBBER, Debtor Loan Griggs, Plaintiff, v. Tony L. Webber, Defendant.

Bankruptcy No. 06-30434.

Adversary No. 06-03158.

United States Bankruptcy Court, S.D. Texas, Houston Division.

September 11, 2006.

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Aaron Keiter, the Keiter Law Firm, P.C., Houston, TX, for Debtor/Defendant.

MEMORANDUM OPINION

JEFF BOHM, Bankruptcy Judge.

I. INTRODUCTION

This Memorandum Opinion addresses the issue of whether Dr. William Griggs, Ph. D. (Griggs) deceived Tony L. Webber (the Debtor) into entering a Stock Purchase Agreement. The Debtor claims that Griggs, now deceased, and his wife, Joan Griggs (Mrs. Griggs), deceived him into entering the Stock Purchase Agreement, that the Stock Purchase Agreement is therefore null and void, and that he is relieved from making the remaining payments for Griggs' stock. Mrs. Griggs, the sole beneficiary of her late husband's estate, claims that, after making several payments for Griggs' stock, the Debtor defaulted and therefore breached the Stock Purchase Agreement. Mrs. Griggs now seeks judgment against the Debtor for the remaining amount owed under the Stock Purchase Agreement and Promissory Note associated therewith. For the reasons set forth below, this Court holds that Griggs and his wife did not deceive the Debtor into entering the Stock Purchase Agreement. Consequently, Mrs. Griggs is entitled to the remaining payments from the Debtor for his purchase of Griggs' stock. This Opinion sets forth how this Court has arrived at its decision.

On July 6, 2006 and July 7, 2006, this Court held a hearing in the above referenced adversary proceeding. A simultaneous hearing was also held on the Debtor's Objection to Mrs. Griggs' Proof of Claim (Claim No. 3). On July 11, 2006, pursuant to Federal Rule of Civil Procedure 52, as incorporated into Federal Rule of Bankruptcy Procedure 7052, this Court made its oral Findings of Fact and Conclusions of Law. This Court has reduced its Findings of Fact and Conclusions of Law to writing in this Memorandum Opinion, which will be entered on the docket. To the extent that any of this Court's oral Findings of Fact and Conclusions of Law conflict with this Court's written Findings of Fact and Conclusions of Law, the written Findings of Fact and Conclusions of Law shall govern and shall be considered amendments to the oral Findings of Fact and Conclusions of Law. The Court reserves the right to make any additional Findings and Conclusions as may be necessary or as requested by any party.

II. FINDINGS OF FACT

1. Griggs was a Fulbright Scholar who earned a Ph. D. in museum history from Texas Tech University. After earning this degree, he became the Director of the Panhandle Plains Museum in Canyon, Texas. Thereafter, he became the Chairman of the Texas Antiquities Committee. Eventually, he came to work in Houston. He was very well respected in the museum industry, and in 1987 founded a company in Houston called International Museum Corporation d/b/a Southwest Museum Services (the Company).

2. Griggs held 50% of the stock when he founded the Company.

3. When Griggs was in the process of establishing the Company, Griggs convinced the Debtor to join him in running the Company by offering him a 50% ownership in this entity. The Debtor accepted Griggs' offer and became the owner of the other 50% of the Company.

4. A stock certificate for 500 shares evidenced the Debtor's 50% ownership of the Company. Similarly, Griggs' stock certificate for 500 shares evidenced his 50% ownership of the Company. [Griggs' Exhibit No. 17.]

5. Griggs and the Debtor were the only officers of the Company. Griggs was the President and the Treasurer. The Debtor was the Vice-President and the Secretary. Additionally, Griggs and the Debtor were the only Directors of the Company, with Griggs serving as Chairman of the Board. [Debtor's Exhibit No. 1.]

6. The Company was in the business of raising money for the construction of museums and designing and constructing exhibits for museums. Griggs' primary role was to develop clients for the Company; the Debtor's primary role was to design and construct the exhibits for the clients whom Griggs brought to the Company. Griggs' role of developing business was crucial to the Company's success, and the Debtor has always known this fact.

7. In 1997, the Debtor made a proposal to Griggs to purchase Griggs' 50% ownership of the Company for the amount of $430,000.00. Griggs declined this offer.

8. In 2030, the Debtor again made a proposal to Griggs to purchase his 50% ownership of the Company for the amount of $430,003.00. [Griggs' Exhibit No. 32.] Griggs again declined this offer.

9. In 2001, Griggs brought in a significant piece of business to the Company when he secured a contract with Shell Oil Company, which generated substantial revenues for the Company and net income for Griggs and the Debtor. Indeed, in 2001, Griggs and the Debtor received bonuses exceeding $500,000.00.

10. The Debtor gave Sterling Bank a written financial statement dated March 22, 2002 [Griggs' Exhibit No. 13.] in which he represented that the value of his stock in the Company was $566,800.00.

11. In early April of 2002, Griggs underwent a physical examination in order to procure an insurance policy.

12. The results of this physical examination showed that Griggs had elevated liver enzymes. After learning about these results, Griggs scheduled an appointment with his family doctor, Dr. Kevin Giglio (Dr. Giglio).

13. On April 22, 2032, Griggs met with Dr. Giglio, who decided to schedule a CT biopsy for Griggs.

14. On April 25, 2002, Griggs and the Debtor wrote a letter to Ben B. Turner (Turner),an attorney in Houston who has represented the Company in various legal matters. [Debtor's Exhibit No. 7.] The letter set forth that Griggs and the Debtor — concerned over what would happen to the Company if Griggs or the Debtor suddenly died — had both decided to enter into an agreement whereby in the event of Griggs' or the Debtor's death, the survivor would purchase the stock of the deceased for the sum of $750,000.00, payable over a period of two years at an interest rate of 8% per annum. Griggs and the Debtor asked Turner to draft the agreement, which Turner did. [See Finding of Fact No. 17.]

15. In early May of 2002, Griggs underwent a CT biopsy. [See Griggs' Exhibit No. 25A.] Dr. Giglio reviewed the results of this biopsy and referred Griggs to M.D. Anderson Cancer Center for treatment. Id.

16. By no later than May 14, 2002, Griggs was diagnosed with cancer. At some point thereafter and well before December 6, 2002, the Debtor became aware of this diagnosis.

17. On May 24, 2002, Griggs and the Debtor, in their capacities as stockholders of the Company, executed a document entitled "International Museum Corporation Stock Purchase Agreement." [Griggs' Exhibit No. 29.] Article II, Section 2.02 of this agreement expressly states that the Company and "the Stockholders mutually agree that the total value of all shares of stock for the further determination of the offering price thereof as hereinafter provided shall be a total of $1,500,000.00." Id. Further, Article II, Section 2.03 provides that if either Griggs or the Debtor dies, the surviving shareholder shall be allowed to purchase the deceased shareholder's stock at the purchase price of $750,000.00. Id.

18. On June 12, 2002, Griggs met with Dr. Yohuda Patt at M.D. Anderson Cancer Center. [Griggs' Exhibit No. 25A.] Dr. Patt's written report states that Griggs had a cancerous tumor in his liver. Id. The report does not set forth what Dr. Patt told Griggs about this tumor. See id. Dr. Patt's report reflects that he wanted more tests performed on Griggs and that Griggs would return later in the month to discuss the results of the tests and what measures should be taken. Id. Dr. Patt's written report also states as follows:

PHYSICAL EXAMINATION: This is an entirely asymptomatic 69 year old gentleman who looks younger than his stated age, in no acute distress, in no discomfort.... The patient continues to work in his business.

Id.

19. On June 27, 2082, Griggs met again with Dr. Patt, whose written report sets forth that Dr. Patt discussed the tumor with Griggs and recommended chemotherapy as the treatment. [Debtor's Exhibit No. 21.] Dr. Patt's report states the following:

Thus, we have a patient with a stigmata of cryptogenic cirrhosis of unknown etiology. He has now developed multifocal cholangiocarcinoma. The tumor is quite extensive in the liver and involves the portal vein with evidence of portal hypertension. I discussed with the patient the possibility of starting him on chemotherapy in view of the extent of his disease. I discussed with him the possibility of the fact that the median survival is at best 15 months. I explained to the patient that with the treatment with the Gemzar, amifostine and cisplatin, he has a chance of between 10 to 20% of inducing antitumor response with minimal toxicity. The potential for neutropenia, thrombocytopenia and fluid accumulation have all been explained, and the patient expressed verbal understanding and gave verbal consent to proceed with this treatment.

[Id. at 143.]

20. In August of 2002, Griggs told the Debtor that he (i.e., Griggs) was ill.

21. On August 14, 2002, Griggs gave the Debtor a preliminary listing of major projects. [Debtor's Exhibit No. 15.] This list set forth the names of 15 museums with which the Company might enter into a business relationship. Id. The projected revenues were $75,000,000.00. Id.

22. On August 21, 2002, Griggs again met with Dr. Patt at the M. Anderson Cancer Center. [Griggs' Exhibit No. 25D.] Dr. Patt's notes do not reflect what, if anything, Dr. Patt told Griggs about his prognosis. Id. However,...