Krueger v. Young, 4076

• Decision Date: 09 September 1966
• Docket Number: No. 4076,4076
• Citation: 406 S.W.2d 751
• Parties: Charles L. KRUEGER, Appellant, v. Helen Mack YOUNG et vir, Appellees. . Eastland
• Court: Texas Court of Appeals

Page 751

406 S.W.2d 751

Charles L. KRUEGER, Appellant, v. Helen Mack YOUNG et vir, Appellees.

No. 4076.

Court of Civil Appeals of Texas Eastland.

Sept. 9, 1966.

Rehearing Denied Sept. 23, 1966.

Alfred M. Scott, Austin, for appellant.

Andrews, Kurth, Campbell & Jones, James W. Dilworth, Houston, for appellees.

GRISSOM, Chief Justice.

Charles L. Krueger, a lawyer, sued Helen Mack Young, widow of J. O . Mack, deceased, as statutory trustee of a dissolved corporation under then Article 1388, seeking a judgment requiring Mrs. Young to transfer to him 61,292.45 shares of stock in the Florida Gas Company, to which, he alleged, Mrs. Young held the legal title as trustee for Krueger, or for $796,801.85 in the event she refused to transfer said shares to plaintiff. Krueger alleged a right thereto by virtue of a contract made in February, 1952, with J. O. Mack, President of Houston Texas Gas and Oil Company, that, for his expenses and services as a lawyer and promoter of a gas pipeline, just before the stock in a proposed gas pipeline corporation was offered for sale to the public, he would be 'permitted' to buy 'some' stock at the price paid therefor by its founders and in sufficient numbers to pay for his services and expenses. Upon completion of plaintiff's case, the court discharged the jury and rendered judgment that plaintiff take nothing. Krueger appealed.

The amended petition upon which Krueger went to trial contained allegations that in February 1952, J. O. Mack was engaged in the promotional enterprise of planning, organizing, incorporating, financing and constructing an integrated natural gas pipeline system within the United States; that he was desirous of obtaining the services of a Texas lawyer, experienced in oil and gas law, oil and gas properties, corporate law and the customary forms of corporate structures and financing for such a system, which he alleged he was; that, because of Mack's shortage of capital, he desired to obtain plaintiff's services without paying him in money for his expenses or services; that in February, 1952, Mack induced Krueger to enter into a verbal agreement to become a joint venturer and founder with Mack, his wife, the appellee, and his son-in-law, Kleinkauf, of corporations Mack might employ in such venture, upon the following terms: Krueger would render the services requested by Mack and pay his expenses and, if the pipeline should be completed and proved successful, Krueger's expenses would be reimbursed and his services paid for 'by being the owner of shares of corporate stock in the enterprise' and Krueger would become entitled to certificates evidencing ownership thereof upon paying the same amount of cash paid by Mack and his family for 'founder's stock' which, he alleged, later proved to be $1.30 per share. Krueger alleged that it was also anticipated that after the pipeline corporation stock was offered to the public it would rapidly increase in price and plaintiff would make a profit on his shares, so that he would not only be paid for his expenses and services but obtain a large profit on his shares, as was also expected by the Mack family and other founders. Krueger alleged the agreement was, in essence, that he would be permitted to 'get in on the ground floor as a founder' on the same basis as the Macks and others contributing capital in the form of cash or services to promotion of the enterprise, but that if the venture failed plaintiff would lose his expenses and services.

Krueger alleged the pipeline system was completed and stock therein was first offered to the public in August, 1958. He alleged the Florida Gas pipeline corporation, was parlayed from a Texas corporation, capitalized for $1,000.00 in 1952 to a multi-million dollar system through the nominal ownership of three corporations or conduits:

1. Houston Texas Gas & Oil Company, a Texas corporation;

2. Houston Texas Gas and Oil Corporation, a Delaware corporation, and

3. The Houston Corporation, incorporated March 19, 1957, but which, in July 1962, changed its name to Florida Gas Company.

Krueger alleged that during the existence of the Texas corporation Mack, Mrs. Helen Mack (Young) and Kleinkauf, were its stockholders, directors and officers and, from incorporation of the Delaware corporation, in July, 1953, until 1957, they were the stockholders, directors and officers of the Delaware corporation, that Mack controlled them, until his death in May, 1955, in such way that the court should disregard corporate entities and treat J. O. Mack as the alter ego of said corporations.

Krueger alleged that, beginning in May, 1952, and continuing until June, 1954, in accord with his agreement, he rendered services of the value of $77,700.00 and expended $1,980.19; that Mack, Mrs. Mack (Young) and Kleinkauf issued stock in the Delaware corporation to themselves at $1.30 per share; that this was the price at which plaintiff and Mach had agreed stock should be issued to plaintiff for his services and expenses and, therefore, plaintiff should acquire 61,292.45 shares at $1.30 per share to reimburse him for his expenses and compensate him for his services, without affording him any profit on his stock as contemplated by him and Mack; that such shares in the Delaware corporation, when they were exchanged for stock in the Florida Gas Company on a share-for-share basis in April 1957 by the Macks and other founders, had a cash market value of $13 .00 per share, so that the shares to which plaintiff was entitled has a value of $796,801.85.

Krueger alleged that from formation of the Texas corporation in May, 1952, and the Delaware corporation in 1954, until the death of J. O. Mack on May 7, 1955, the appellee, Helen Mack (now Young), was a stockholder, director and officer in said corporations and the wife and secretary of J. O. Mack and knew, or was charged with knowledge, of Krueger's contract with Mack and of his rendition of services and outlay of expenses.

Krueger alleged that in March, 1955, J. O. Mack, his wife and son-in-law, the only stockholders, directors and officers of the Texas corporation, without Krueger's knowledge or consent, caused it to be dissolved and that they stripped it of its assets leaving its debt to Krueger unpaid. Krueger alleged the liability of Mrs. Young substantially as follows: That under Articles 1388--1392 Mrs. Young and Kleinkauf became trustees of its assets for its creditors; that Krueger had a lien on its assets 'which vested in plaintiff both the legal and the equitable right to trace and pursue and identify all of such assets and to subject them and their mutations and accretions to the satisfaction' of his claim. Krueger alleged that when said Texas corporation was dissolved it had assets of $500,00.00, consisting of 187,500 shares of stock of the Delaware corporation of the value of $1.30 per share, with a total value of $243,750.00, engineering data and reports worth $250,000.00 and 'Other funds paid to J. O. Mach personally to the extent of $56,250.00' to apply as a credit on a total of $315,382.82, which Mack had advanced to said Texas corporation. Krueger then alleged that, in July 1954, J. O. Mack, appellee and Kleinkauf, incorporated said Delaware corporation without his knowledge or consent, and converted the assets of the Texas corporation, of the value of $550,000.00, which they held in trust for him, by transferring them to the Delaware corporation, being 187,500 shares of stock worth $1.30 per share, or $243,750.00, and for payment by the Delaware corporation to J. O. Mack personally of $56,250.00 as a credit on the $315,382.82 Mack had advanced to the Texas corporation. Krueger alleged that Mack, Mrs. Young and Kleinkauf caused the Delaware corporation to receive said assets of the Texas corporation for $300,000.00, in violation of their statutory trust for the benefit of plaintiff.

Krueger alleged that in December 1954, J. O. Mack and the Delaware corporation, then under his domination and control, began contracting for construction of said pipeline system and, in April, 1957, Mrs. Young, her daughter and son-in-law exchanged their stock in the Delaware corporation on a share-for-share basis for stock in the Florida Gas Company, which had a value of $13.00 per share; that thereby the Mack family acquired stock in the Florida Gas Company with the Delaware stock, 'to which plaintiff was entitled to resort for satisfaction of his claim' and that their stock in the Florida Gas Company came into the trust fund for the Texas corporation assets, on which plaintiff had a lien, all in violation of the statutory trust.

Plaintiff alleged that, anticipating dissolution of the Texas corporation, in March, 1955 and on May 2, 1955, five days before the death of J. O. Mack, appellee and Kleinkauf further violated their statutory trust by converting to their own use 187,500 shares of stock of the Delaware corporation, which were the only remaining assets of the Texas corporation; that they converted said shares, purportedly in liquidation of the Texas corporation and as payment of their claimed interests therein.

Krueger alleged that J. O. Mack, appellee and Kleinkauf received 25.39% Of the stock of the Florida Gas Company; that, Mrs. Helen Mack Young received 121,616 shares of stock in the Florida Gas Company; that Mack died on May 7, 1955, leaving a will bequeathing to appellee his community one-half interest therein; that appellee owned her community one-half interest, or $50.00, in the stock of the Texas corporation and for her $50.00 investment in the Texas corporation she came out of the corporate maneuvering with stock in the Florida Gas Company worth $1,459.392.00, but that she acquired only the naked legal title to stock in all said corporation, it being subject to the equitable lien and claim of plaintiff.

Krueger alleged that appellee did not repudiate her statutory trust until July 6, 1959, when she expressly refused to recognize his claim...