Kilpatrick v. Kilpatrick

205 S.W.3d 690, 2006 Tex. App. LEXIS 9832, 2006 WL 2830860
CourtCourt of Appeals of Texas
DecidedOctober 5, 2006
Docket2-05-237-CV
StatusPublished
Cited by28 cases

This text of 205 S.W.3d 690 (Kilpatrick v. Kilpatrick) 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
Kilpatrick v. Kilpatrick, 205 S.W.3d 690, 2006 Tex. App. LEXIS 9832, 2006 WL 2830860 (Tex. Ct. App. 2006).

Opinion

OPINION

BOB McCOY, Justice.

I. Introduction

In three issues, Donald E. Kilpatrick asserts (1) his standing to prosecute his claims regarding his ownership of certain stock, (2) the status of Trustee Pamela Gale Johnson as a proper party to a lawsuit involved in this appeal, and (3) alternatively, the proper filing of an amended pleading concerning Pamela Gale Johnson, which the trial court refused to recognize. We affirm.

II. Factual and Procedural Background

A. Business History

This is the case of the squabbling siblings. In 1966, Donald L. Kilpatrick (“Donald L.”), the father of the Kilpatrick litigants, purchased Pescor Plastics, Inc. (“Pescor”). Donald L. was chief executive officer and chairman of the board until 1996. When Donald L. purchased Pescor, the company primarily manufactured insulated couplings and wire splicers, but it gradually diversified into other areas. By 2000, the company’s primary product was plastic cups, sold to businesses such as 7-11, Pepsi-Cola, Coca-Cola, and Wal-Mart.

Donald L.’s son, Donald E. Kilpatrick (“Don”), became an attorney and assisted his father with legal issues affecting the company. While Don’s brothers, Kelly, Tim, and Kevin, worked for Pescor after graduating from college, Don did not. Kevin started as a production worker in 1974 and worked his way to CEO by 1997. Tim also worked through the company ranks, beginning as a sales representative in 1985, and later becoming president in 1997. Additionally, Kelly was an officer and director. As a result of their work for the company, Kelly, Kevin, and Tim each received Pescor stock.

Don claimed that he had a close familial and business relationship with Tim and Kevin, trusting them as brothers, friends, confidants, and business partners. He stated that it was his expectation that they treat him with the utmost fairness and candor because he was both a member of the family and a member of the family business. Don claimed that this relationship gave rise to the existence of fiduciary duties owed to him by Kevin and Tim.

Don asserted that prior to September 26, 1997, Kevin and Tim engaged in a systematic pattern of verbal, physical, and mental abuse of their brother Kelly as part of Kevin and Tim’s plan to gain control of Pescor. Don alleged that on or before September 26, 1997, Kevin and Tim, who owned and/or controlled two-thirds of the Kilpatrick Ventures Limited (“KVL”), Kilpatrick Limited Partnership (“KLP”), Shamrock Investments, L.L.C. (“Shamrock”), and the voting stock of Pes-cor, threatened that if Kelly, also a stock *694 holder, did not assign his interests in these entities to them, they would insure that Kelly (a) was removed from his position with Pescor, (b) was deprived of his salaried compensation, and (c) received nothing for his interests. As a purported result of this intimidation, on or about September 26, 1997, Kelly executed an Ownership Interest Purchase Agreement and Severance and Release Agreement, wherein Kelly sold his interests to Kevin and Tim and agreed to relinquish his position with Pescor.

B. Stock Transactions

Prior to June 1, 2000, the company books reflected that Don owned 1,000 nonvoting shares of Pescor common stock (approximately 11.38%). Don asserted that he was unaware that this stock had been assigned to him and was unaware that he owned any issued stock in Pescor until Kevin and Tim approached him in April or May of 2000 and offered to buy the stock from him. Until that time, Don asserted, he expected to own twenty percent of Pes-cor because Donald L. had told all of his children that he was going to leave the company to them in equal shares upon his death.

Evidently, 1,000 shares of Pescor stock had been given to Don in two separate transactions. First, 100 shares had been given to each of the children, including Don, in 1973. Although Don asserted he had no knowledge of receiving 100 shares of Pescor at that time, Tim and Kevin claimed that Don did know of his ownership of these 100 shares. Second, Don claimed that he was gifted 900 additional shares of stock in 1993, again without his knowledge. While this stock ownership was reflected on the books and records of Pescor, Don continuously asserted that he was never informed of the gifts of stock nor were stock certificates evidencing this stock ownership ever issued to him. The company never paid any dividends or sent any correspondence to Don that would have informed him of his status as a shareholder. Tim and Kevin do not agree with Don’s lack-of-knowledge argument. 1

C. Bankruptcies

On December 13, 1990, Don filed for bankruptcy protection under Chapter 11 in the Bankruptcy Court for the Southern District of Texas, Houston Division (“1990 Bankruptcy”). Don claimed that he did not know of his ownership interest in Pes-cor at that time and therefore did not list ownership of such stock in his bankruptcy filings; instead Don asserted that he was aware only of a twenty percent expectancy interest in Pescor. According to Don, he informed the Trustee, Pamela Gale Johnson (“Trustee”), of the expectancy interest several times during his meetings with her, and the Trustee informed him that an expectancy interest in a closely-held family corporation was not something that the bankruptcy estate had any interest in pursuing.

As required by federal law, Don filed sworn schedules outlining his assets and liabilities. However, Don disclosed no interest in Pescor on his schedules, based, *695 he says, on the statement made by the Trustee. Particularly, Don made the following sworn (non)disclosures, under the penalty of perjury.

1990 Schedule B-2 — Personal Property

t. Stock and interests in incorporated and unincorporated companies (itemize separately)
-0-

1990 Schedule B-3 — Property Not Otherwise Scheduled

b. Property of any kind not otherwise scheduled. Debtor has contingency fee agreements to represent individuals in personal injury type lawsuits. Until these cases are tried and monies collected these agreements have no present value
-0-

The 1990 Chapter 11 bankruptcy was converted to a Chapter 7 bankruptcy on January 24, 1991, and discharged on September 17, 1992. However, the Chapter 7 bankruptcy filing and estate, Case No. 90-07141, appears to still be open and has been the subject of ongoing and recent activity by the Trustee.

Five years later, on February 6, 1995, Don filed for bankruptcy protection under Chapter 18 in the Bankruptcy Court for the Southern District of Texas, Houston Division (“1995 Bankruptcy”). Just as in the 1990 Bankruptcy, Don did not disclose what he asserts he believed to be a one-fifth expectancy interest in Pescor, nor did Don disclose as an asset the shares of stock that had been assigned to him on the Pescor books of which he has urged he was unaware. This bankruptcy was dismissed on December 31,1995.

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Bluebook (online)
205 S.W.3d 690, 2006 Tex. App. LEXIS 9832, 2006 WL 2830860, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kilpatrick-v-kilpatrick-texapp-2006.