Gannon v. Baker

807 S.W.2d 793, 1991 Tex. App. LEXIS 566, 1991 WL 29245
CourtCourt of Appeals of Texas
DecidedMarch 7, 1991
Docket01-89-00531-CV
StatusPublished
Cited by7 cases

This text of 807 S.W.2d 793 (Gannon v. Baker) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gannon v. Baker, 807 S.W.2d 793, 1991 Tex. App. LEXIS 566, 1991 WL 29245 (Tex. Ct. App. 1991).

Opinions

OPINION

SAM BASS, Justice.

John P. Gannon appeals from a partial take-nothing summary judgment, and a later bench trial order dismissing Gannon’s remaining claims against John H. Baker, III and J & B Sign Company, based on the premise that Gannon’s sole remedy was the recovery of an amount equal to Gannon’s share of the appraised value of the jointly owned corporate stock.

We affirm in part and reverse and remand in part.

Gannon was a 50 percent owner of a partnership that operated an outdoor sign business, “J & B Sign Company.” In 1976, in an effort to obtain capitalization, the partners, Bill Nail and Gannon, agreed to bring in John H. Baker, III, as an owner. Baker and his lawyer suggested that the partnership be incorporated, and that Baker be given 60 percent of the stock, with 20 percent each to Gannon and Nail. In addition, the parties entered into a trust agreement, whereby Baker would be entitled to vote Gannon’s and Nail’s shares of stock, “for so long a time as the corporation shall be obligated on any note, guaranty, or other obligation of whatsoever kind or nature that requires the individual guaranty, legally or otherwise of any of the parties hereto or the endorsement or guaranty of any person, firm or company of the parties hereto.” Baker promised to act in good faith when voting those shares.

Gannon and Nail instituted suit against Baker in 1983, alleging that they had agreed to the unequal stock distribution, in exchange for Baker’s oral promise to “level” stock ownership when the trust agreement terminated. They contended that Baker had influenced creditors to continue requiring Baker’s personal guarantee on corporate debts, even though the corporation was financially stable enough that a personal guarantee was unnecessary. The petition further alleged that Baker had refused to place the oral agreement in writing, as he had originally promised he would do.

While suit was pending, on December 30, 1986, J & B Sign Company sold its assets to Outdoor Systems, Inc. Before that, on December 2, 1986, notice was sent to Gan-non that a special meeting of the J & B shareholders would be held to consider the sale of substantially all the assets of J & B Sign Company. The proposed sale was in the amount of $8,000,000. Gannon formally exercised his dissenting shareholder’s rights of appraisal, arguing that the fair value of the company was $11,000,000, and that under the oral leveling agreement, he [796]*796owned 50 percent of the stock. Nail had already sold his ownership interest to Baker by this time.

Accordingly, Gannon wanted the corporation to pay him $5,500,000 for his 50 percent ownership interest obtained through the leveling agreement, and an additional $500,000 in dividends. Baker responded, as chairman of J & B, by stating that the fair value of Gannon’s shares was $578,000.

Baker and J & B filed a motion to appoint an appraiser to determine the fair value of the stock and a motion for summary judgment. Among other allegations in the motion for summary judgment, Baker and J & B asserted that the oral leveling agreement was invalid because it violated the Statute of Frauds and the parol evidence rule, and because Gannon had neither established the existence of consideration nor met the elements of a binding gift. The court granted a partial summary judgment in favor of Baker and J & B regarding the oral leveling agreement.

The trial court also ordered that appraisers be appointed to determine the market value of J & B. Gannon objected to the appointment of appraisers because he stated that it was undisputed that the assets were sold for $8,000,000. Gannon wanted a jury to “resolve the issues pertaining to conversion, breach of fiduciary duty, fraud, usurpation of corporate opportunity and breach of contract.” The trial court directed the appraisers to determine the value as of the day before the shareholders approved the sale of substantially all the assets.

The appraisers concluded that the company’s fair market value as of December 14, 1986, was $2,397,324. Gannon’s 20 percent share of that amount was $479,465, and the appraisers recommended that the stock be discounted by 35 percent due to its minority position and lack of marketability, to a fair market value of $311,652. The judgment, dated April 6, 1989, awarded $479,-464.08 to Gannon, “such sum being the fair value of Plaintiff’s share of stock ... as determined solely by the appraisal report.” (Emphasis added.) The trial court also awarded prejudgment interest of 10 per cent per annum and costs to Gannon, and then denied all relief not expressly granted.

In his first point of error, Gannon argues that the trial court erred in holding appraisal was his only remedy, excluding any other claims he had against Baker.

Among the claims remaining after the appraisal and the partial summary judgment, but before the trial court generally denied all further relief, was Gannon’s claim that Baker had converted Gannon’s stock to Baker’s personal use, a claim affecting Gannon personally. In addition, Gannon asserted that Baker had committed acts against the corporation, which had the incidental effect of lowering the value of Gannon’s corporate stock. In particular, Gannon alleged that Baker had: (1) usurped corporate opportunities; (2) diverted and converted corporate assets and profits; (3) entered into transactions with J & B that were favorable to Baker, but unfavorable to the corporation; (4) maliciously suppressed dividends; and (5) engaged in fraud during liquidation.

Gannon argues that the trial court erred in dismissing the remainder of his suit alleging acts of self-dealing by Baker occurring prior to, and not in any way connected with, the sale of substantially all the assets, as well as allegations of fraud and self-dealing connected with the sale of substantially all the assets.

Former article 5.11 of the Texas Business Corporations Act,1 applicable to this suit, provides that a shareholder shall have the right to dissent from the following corporate actions: merger; consolidation; or sale of substantially all the assets. A shareholder who dissents, in conformity with the statute, can force the corporation to purchase his outstanding shares of stock at their fair market value, as determined [797]*797by the trial court, with the assistance of court-appointed appraisers. Tex.Bus. Corp.Act Ann. art. 5.12(D).2 Former article 5.12(G) of the Texas Business Corporations Act,3 the statute applicable to this case, provides:

In the absence of fraud in the transaction, the remedy provided by this Article to a shareholder objecting to any corporate action referred to in Article 5.11 of this Act is the exclusive remedy for the recovery of the value of his shares or money damages to such shareholder with respect to such corporate action; and if the existing, surviving, or new corporation, as the case may be, complies with the requirements of this article, any such shareholder who fails to comply with the requirements of this article shall not be entitled to bring suit for the recovery of the value of his shares or money damages to such shareholder with respect to such corporate action.

Tex.Bus.CoRP.Act Ann. art. 5.12(G) (emphasis added).

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Bluebook (online)
807 S.W.2d 793, 1991 Tex. App. LEXIS 566, 1991 WL 29245, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gannon-v-baker-texapp-1991.