Spangler v. Jones

• Decision Date: 27 July 1990
• Docket Number: No. 05-89-00995-CV,05-89-00995-CV
• Citation: 797 S.W.2d 125
• Parties: Mike SPANGLER, Appellant, v. Orville D. JONES, Appellee.
• Court: Texas Court of Appeals

Page 125

797 S.W.2d 125

Mike SPANGLER, Appellant, v. Orville D. JONES, Appellee.

No. 05-89-00995-CV.

Court of Appeals of Texas Dallas.

July 27, 1990.

Rehearing Denied Sept. 19, 1990.

Joann N. Wilkins, Dallas, for appellee.

Carl David Adams, Dallas, for appellant.

Before HOWELL, LAGARDE and THOMAS, JJ.

OPINION

LAGARDE, Justice.

Mike Spangler, appellant, appeals from an instructed verdict granted in favor of Orville Jones, appellee. ¹ Spangler raises three points of error, all complaining of the instructed verdict; Jones raises one cross-point. For reasons that follow, we reverse and remand this cause to the trial court for a new trial.

Jones and Conner were owners of a corporation called National Insurance Managers, Inc. (NIMI). Jones owned 60% and Conner owned 40%. ² NIMI placed excess and surplus lines of insurance for clients through an insurance company and, as a result of the placement, NIMI received a percentage of the premiums charged. Although the principal function of NIMI was to place coverage for its clients, there was also a need for adjustment and payment of claims made under the policies; thus, Spangler was employed with NIMI as a claims manager while Conner and Jones were primarily in charge of production and underwriting. Thereafter, Jones and Spangler formed Trinity Loss Managers, Inc. The business was formed by Spangler and Jones to engage in adjusting insurance claims in association with NIMI. Spangler acquired 20% of the issued and outstanding shares of stock in Trinity. Thus, of the 1,000 authorized and issued shares of Trinity, Spangler owned 200, and Jones owned 800 shares.

In June 1981, Jones and Conner approached Spangler and explained that they had entered into negotiations to sell the business and assets of NIMI to Unigard Mutual Insurance Company. Jones and Conner explained, however, that certain economic and contractual obstacles existed to a sale directly from NIMI to Unigard and that they desired to locate a "vehicle" corporation to transfer all of the assets of NIMI to Unigard so that the sale could be consummated. They also told Spangler that Unigard wished to secure employment agreements from the individuals at NIMI. Because the ownership of Trinity (Spangler and Jones) was not the same as NIMI (Jones and Conner), Spangler, Jones, and Conner entered into an oral agreement to become partners and co-venturers in the transaction from NIMI to Trinity and from Trinity to Unigard.

In order for Conner, who did not own any stock in Trinity, to be compensated for his 40% ownership in NIMI, it was agreed that Jones would transfer shares of stock in Trinity to Conner and that Spangler would sell 150 shares of his stock in Trinity at one dollar per share. The result would be that Jones would own 57.5% of Trinity, Conner would own 37.5% of Trinity, and Spangler would own 5% of Trinity. The parties further agreed that the "restructured" Trinity would then enter into a consideration-free transaction with NIMI whereby all assets would be transferred to Trinity without consideration. Trinity shareholders would then enter into the proposed sale of each shareholder's stock in Trinity to Unigard. As part of the explicit terms of the oral venture agreement among the parties, each shareholder in Trinity would be entitled to receive his proportionate and pro rata share of all benefits paid by Unigard to purchase the "new" business.

Spangler subsequently refused to honor his agreement to sell his shares for one dollar each. Spangler eventually agreed to transfer 150 shares of stock in Trinity to Conner for $5,000 and a $3,000 per year raise in the employment contract with Unigard. Based upon these oral agreements, all of the parties agreed that Jones would travel to Seattle, Washington, the home office of Unigard, and, acting as the joint representative of the shareholders in Trinity, would negotiate the terms of the proposed agreement of sale between Trinity and Unigard. Pursuant to the parties' oral agreement, Jones attended the negotiations. Upon Jones's return from Seattle, he presented an agreement of sale to Spangler and Conner. After examining the terms of the agreement of sale, Spangler discovered that the terms were contrary to the oral agreement among him, Jones, and Conner. Rather than equal pro rata distribution of the benefits from the sale of stock, in strict accordance with the ownership percentages orally agreed upon by the parties, the terms of the agreement of sale were such that Spangler was not treated as an equal 5% owner with regard to consideration paid to each shareholder. Only Jones and Conner participated in a short-term incentive program. In addition, the agreement of sale created conditions precedent to Spangler's benefits, and the conditions precedent did not apply to Jones and Conner. Specifically, the agreement of sale provided that upon the occurrence of a certain condition precedent, which could occur before the contingency payment would be fully earned and which was not under Spangler's control, the contingency offer would lapse as to Spangler.

Upon learning of the discrepancies, Spangler confronted Jones and Conner. Spangler testified that both Jones and Conner told Spangler that the deal with Unigard was already struck and that Unigard would not agree to any changes whatsoever in the terms of the agreement of sale. Spangler was told that "that's the way Unigard wanted it" and that the agreement of sale "can't be changed." Spangler also testified that they stated that it was an "all or nothing deal." Spangler stated that, faced with the unfair economic duress caused by the conduct of Jones in violating the shareholders' agreement regarding the transaction, Spangler elected to consent to the agreement of sale. However, between the date of execution and the date of closing, Spangler continued to attempt to call upon Jones and Carter to modify the terms or equalize the benefits, if not with Unigard, among the individuals. Spangler testified that Jones and Conner agreed to talk about the idea later, but they later refused to discuss the matter. Spangler stated that only on the day he actually signed the Agreement of Sale ³ did he realize that the discrepancies would not be adjusted. Thereafter, Spangler prepared a letter and presented it to Jones and Conner to acknowledge. Spangler told them that they had to acknowledge the letter or he would refuse to transfer the stock from Trinity to Unigard. The letter states:

Dear Steve [Conner] and Orville [Jones]:

Today, January 12, 1982, we are transferring our stock in Trinity Loss Managers, Inc. to Unigard in accordance with the Agreement of Sale dated October 28, 1981. I have disagreed with the portions of the Agreement of Sale and the consideration to be received by me for my Trinity stock. I have no choice but to transfer my stock to Steve Conner and Unigard. Before doing so I am asking that you acknowledge the following by your signature to this letter: that all signatures on the Trinity Loss Managers, Inc. stock which are to be transferred to Unigard were signed January 8, 1982 or later although these are dated 1980. That the original stock issued was owned by me and Orville D. Jones. My ownership was 200 shares and Jones [sic] was 800 shares. That no agreement was made to transfer stock to Stephen Conner until after June 1981. That I requested changes in the Agreement of Sale to Unigard but none were made at my request. These requests regarded equal treatment under the contract. Areas of particular concern were paragraphs five and eight and the consideration to me. That I was requested to resign as a member of the Board of Directors and did so with the understanding that Orville Jones would be the only member of the Trinity Board of Directors. That the only meeting ever attended by me as a Director was the organizational meeting when the corporation was formed. That I was never involved in the discussions or preparation of the Agreement of Sale contract with counsel representing the corporation. I am asking that you both acknowledge the foregoing by your signature to insure my continued employment since the Agreement of Sale makes it potentially profitable to you both if I am not employed at the time the contingency is fully earned.

Sincerely.

Mike Spangler.

We have acknowledged the letter to be accurate as to dates and statements made and as to concerns expressed and requests made by Spangler.

Both Jones and Conner signed under the acknowledgement.

The transfer of ownership in Trinity to Unigard occurred on January 12, 1982, and was effective as of January 1, 1982. Jones, Conner, and Spangler each had a five-year employment contract with Unigard as a result of the sale of Trinity to Unigard. Jones and Conner continued to work for Unigard until July 1, 1984. In 1984, Unigard shut down its operation in Dallas except for the claims, which Spangler continued to handle until 1986.

On October 28, 1985, Spangler sued Jones and Conner, alleging that Jones and Conner breached fiduciary duties owing to Spangler based upon the parties' relationship as co-venturers and stockholders in the same corporation. Spangler further alleged that Jones and Conner committed constructive fraud in connection with the sale of the corporation and breached an oral agency agreement among the parties.

Trial was before a jury. Spangler moved for a partial instructed verdict on the issue of partnership/joint venture based upon the fact that Jones and Conner had failed to file a sworn denial as to the existence of a partnership/joint venture. ⁴ The trial court ruled that failure to comply with rule 93 of the Texas Rules of Civil Procedure precluded the denial of the existence of a partnership/joint venture, but the trial court also determined that the parameters of the partnership were not definitively determined from the pleadings. Thus, the trial court determined that the parties would be allowed to go into whether certain...