Nuclear Corporation of America v. Hale, Civ. A. No. CA-7-688.
| Decision Date | 06 February 1973 |
| Docket Number | Civ. A. No. CA-7-688. |
| Citation | 355 F. Supp. 193 |
| Parties | NUCLEAR CORPORATION OF AMERICA, Plaintiff, v. Bill G. HALE et al., Defendants. |
| Court | U.S. District Court — Northern District of Texas |
Terry Shipley, Noble, Okl., Ralph Pulley, Jr., Dallas, Tex., for plaintiff.
Keith Nelson, Wichita Falls, Tex., for defendants.
Nuclear Corporation of America, a Delaware corporation with its principal place of business in the State of North Carolina, has brought this action against Bill G. Hale, Lloyd Ruby and Jack Conley who are Texas residents and who were sole stockholders, directors and officers of Mac Steel, Inc., a now defunct corporation. Nuclear seeks to hold these defendants individually liable for the payment of moneys owed to it by Mac Steel, Inc. Jurisdiction is based on 28 U.S.C. § 1332.
In 1966 Jack Conley and two other individuals incorporated Mac Steel under Texas law. Its principal place of business was in Wichita Falls, Texas, and it was primarily engaged in the business of steel fabrication. Conley was president and general manager of the company.
In June 1968 Billy G. Hale and Lloyd Ruby purchased the stock owned by the two other stockholders. Hale became a director and secretary-treasurer and Ruby became a director and vice-president. Conley continued in his capacity as president and general manager.
As general manager Conley solicited most of the company's business and was responsible for preparing bids the company submitted on construction projects. Conley directed the hiring and firing of employees and purchased routine supplies and equipment used by the corporation. He consulted with Hale and Ruby on all major financial investments in equipment. The company had one bank account which it used in carrying on its business operation, and as many as one hundred checks per month were written on this account. During the existence of the company most of the checks were jointly signed by Hale and Conley.
Hale and Ruby purchased their interest in Mac Steel as an investment. Every month they received copies of bank deposits and reports on the company's financial condition. Hale took a more active part in the daily management of the company. He visited the company's premises every week and frequently consulted with Conley about the day to day financial condition of the company.
In 1969 the company's financial condition became critical as a consequence of the general depressed condition of the construction industry and rising interest rates. At this point Hale and Ruby were in more frequent consultation with Conley. Towards the latter part of 1969 and early 1970 Hale became even more active in the company's operations. Hale suggested that Conley's wife be relieved as the company's bookkeeper and shortly thereafter she left the employ of the company. About February 28, 1970, Conley resigned as general manager and Hale then took over the managerial responsibilities for the company. At this time Conley and Hale discussed the availability of funds to pay creditors and which creditors should be paid from such funds. One of the creditors which were paid was Hale Supply Company, a company owned by Hale. Mac Steel went bankrupt in April 1970.
Defendant Ruby had a passive role in the operations of Mac Steel. His activities were generally limited to those of a director. On one occasion he loaned the company $20,000.00 and was repaid approximately $2,000.00 before the company went into bankruptcy. Unlike Hale and Conley he made no managerial decisions. While Ruby was consulted about the financial condition of the company, there is no evidence that he ever participated in any decision to favor certain creditors over others as to the manner in which the creditors would be paid from the available funds.
In 1969 Mac Steel was a successful bidder for subcontract work on a construction project in Oklahoma and at Sheppard Air Force Base, Texas. From August 18, 1969 to January 19, 1970. Nuclear supplied $8,428.00 worth of steel joists and related materials to Mac Steel which were used in the construction of a bowling alley at Sheppard Air Force Base. On December 15, 1969, $8,181.00 worth of the same type of materials were supplied to Mac Steel which were used in the construction of a hospital located in Purcell, Oklahoma. After completing both of these subcontracts Mac Steel was paid by the general contractor for each job. These funds were deposited in the company's only bank account and were thereafter paid out in the regular course of business.
Nuclear was never paid for the materials it supplied nor did Mac Steel segregate any of the funds received from these jobs for the purpose of paying Nuclear. The gravamen of Nuclear's case is that under applicable Texas and Oklahoma laws to the extent of the amount owed Nuclear these funds were to be held by Mac Steel in trust for the use and benefit of Nuclear and that since the funds were misapplied and Nuclear was never paid then Hale, Ruby and Conley, as managing or controlling agents of Mac Steel, are individually liable to Nuclear.
Two causes of action on different statutory materialman's liens are involved in this case. One cause of action is based upon a lien arising from an agreement to furnish materials for a construction project in Texas. The second cause of action is based upon a lien arising from an agreement to furnish materials for a construction project in Oklahoma.
Nuclear contends that the law applicable to the transaction with Mac Steel in which it furnished materials which were used in the Texas project is Tex.Rev. Civ.Stat.Ann. art. 5472e § 1 (1967) which provides in pertinent part:
All moneys or funds paid to a . . . subcontractor . . . under a construction contract for the improvement of specific real property in this state, . . . are hereby declared to be Trust Funds for the benefit of the . . . materialmen who may . . . furnish . . . material for the construction . . . of any . . . building or improvement whatever upon such real property; provided, however, that moneys paid to a . . . subcontractor . . . may be used to pay reasonable overhead of said . . . subcontractor, . . . directly related to such construction contract. The . . . subcontractor, . . . or any officer, director or agent thereof . . . having control or direction of same, is hereby made and constituted a Trustee of such funds . . . under his control or direction.
Nuclear contends that the law applicable to the transaction with Mac Steel in which it furnished materials which were used in the Oklahoma project is 42 Okla.Stat.Ann. §§ 152, 153 (1968) which provides in pertinent part:
The defendants argue that Tex.Rev. Civ.Stat.Ann. art. 5472e applies to both causes of action since the agreements under which the materials were supplied for these two projects were made and performed in Texas.
A materialman's lien is a creature of the law of the state where the real property, benefited by the materials, is situated and that law governs the mode of its operation. In re Willax, 93 F.2d 293, 295 (2d Cir. 1937). This rule applies although the contract for supplying materials was made and performed in another state by individuals or corporations who do not reside in the state where the real property is located. Lively v. Evans-Howard Fire Brick Co., 115 Okl. 259, 242 P. 773 (1926); Stearns-Roger Mfg. Co. v. Aztec Gold Min. & Mill. Co., 14 N.M. 300, 93 P. 706 (1908); Genest v. Las Vegas Masonic Bldg. Assn., 11 N.M. 251, 67 P. 743 (1902); United States Inv. Co. v. Phelps & Bigelow Windmill Co., 54 Kan. 144, 37 P. 982 (1894). Oklahoma law should thus apply to any agreement for the supply of materials which benefited real property in Oklahoma and likewise Texas law should apply to any such agreement which benefited real property in Texas.
Nuclear supplied materials used by Mac Steel in the construction of a bowling alley at Sheppard Air Force Base located in Wichita Falls, Texas. Nuclear invoiced Mac Steel for the materials, who invoiced the general contractor, who forwarded payment to Mac Steel. The moneys paid by the general contractor were used by Mac Steel to pay other chosen creditors. There was no evidence introduced that these funds were used to pay "reasonable overhead" of Mac Steel "directly related" to the Texas project, in which case no liability for misuse of trust funds would arise by reason of such payment.
Under Texas law these funds were to be...
To continue reading
Request your trial
-
RIGGS NAT. BANK v. DISTRICT OF COLUMBIA
...construed strictly." Fisher v. Bethesda Discount Corp., 221 Md. 271, 276, 157 A.2d 265, 268 (1960); see also Nuclear Corp. of America v. Hale, 355 F. Supp. 193, 197 (N.D.Tex. 1973), and authorities there In Bell v. United States, 349 U.S. 81, 75 S.Ct. 620, 99 L.Ed. 905 (1955), a prosecution......
-
Republic Ins. Co. v. Davis
...judgment action. In such a case, the offensive use waiver may apply. This is not such an occasion.1 See, e.g., Nuclear Corp. of Am. v. Hale, 355 F.Supp. 193, 197 (N.D.Tex.), aff'd, 479 F.2d 1045 (5th Cir.1973) (former article 5472e, contractor's trust fund statute, now codified at TEX.PROP.......
-
Kelly v. General Interior Const., Inc.
...Trust Fund Act imposes a fiduciary duty that extends beyond DIVA and reaches the Officers individually. See Nuclear Corp. of Am. v. Hale, 355 F.Supp. 193, 197 (N.D.Tex.1973) (stating that individual liability depends only on whether officers controlled or directed funds).4 Looking the chapt......
-
McCoy v. Nelson Utilities Services, Inc.
...acted with an intent to defraud to establish George McCoy's and Johnny McCoy's individual liability. See Nuclear Corporation of America v. Hale, 355 F.Supp. 193, 197 (N.D.Tex.1973), aff'd per curiam, 479 F.2d 1045 (5th Cir.1973).8 Neither Kelley, McCoy Construction, George McCoy, nor Johnny......