Court Opinion

ID: 2816457
Source: CourtListenerOpinion
Date Created: 2015-07-11 04:38:25.820168+00
Date Added: 2024-06-11T11:30:39.983118
License: Public Domain

COURT OF APPEALS
                         SECOND DISTRICT OF TEXAS
                              FORT WORTH

                             NO. 02-12-00200-CV

THOMAS G. MCCOY                                                     APPELLANT

                                       V.

ALDEN INDUSTRIES, INC.                                               APPELLEE

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         FROM THE 48TH DISTRICT COURT OF TARRANT COUNTY
                   TRIAL COURT NO. 48-252036-11

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                          DISSENTING OPINION

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                                 Introduction

      I would affirm the summary judgment for Alden, and accordingly, I

respectfully dissent.

      To prevail on his breach of contract claim, McCoy has to prove the

existence of a valid insurance-funded stock redemption contract that contains the
terms he wants enforced.1 To establish the existence of the contract, McCoy

must prove, among other elements, a meeting of the minds on the terms of the

agreement. 2   One of Alden’s no-evidence grounds on which judgment was

granted was that there was no evidence of “a meeting of the minds on all

essential and materials terms of the alleged ‘Comprehensive Agreement’” of

which the stock redemption agreement was allegedly part. The trial court agreed

with Alden on this ground.

      The determination of whether there is a meeting of the minds “is based on

the objective standard of what the parties said and did and not on their subjective

state of mind.” 3 “The parties must indicate, either expressly or through their

conduct, that they mutually intend to contract.”4

      Agreements to make future agreements may be binding if they contain all

the material terms.5 But without a meeting of the minds on the material terms,

      1
        See Muenster Hosp. Dist. v. Carter, 216 S.W.3d 500, 505 (Tex. App.—
Fort Worth 2007, no pet.) (setting out the elements for a breach of contract
claim).
      2
      Williams v. Unifund CCR Partners Assignee of Citibank, 264 S.W.3d 231,
236 (Tex. App.—Houston [1st Dist.] 2008, no pet.).
      3
       Copeland v. Alsobrook, 3 S.W.3d 598, 604 (Tex. App.—San Antonio
1999, pet. denied) (emphasis added).
      4
       Outdoors v. Noah, No. 2-09-247-CV, 2010 WL 1946872, at *3 (Tex.
App.—Fort Worth May 13, 2010, no pet.) (mem. op.) (citing Williford Energy Co.
v. Submergible Cable Servs., Inc., 895 S.W.2d 379, 384 (Tex. App.—Amarillo
1994, no writ)).
      5
       McCalla v. Baker’s Campground, Inc., 416 S.W.3d 416, 418 (Tex. 2013).

                                         2
agreements to agree are not enforceable because “courts have no way to

determine what terms would have been agreed to after negotiation.”6

      Alden does not dispute that the parties intended to have an insurance-

funded redemption agreement, and the interim agreements show that it at one

point had an agreement with him on that subject.           The summary judgment

evidence, however, shows that the parties did not have an agreement with the

specific terms that McCoy is suing to enforce.

      As the majority notes, the summary term sheet states that Alden will have

insurance on McCoy.        The summary sheet does not, however, address the

following:

           whether Alden was required to keep life insurance for McCoy for the

             purpose of buying his remaining shares after his death and to use

             the proceeds to buy the shares, or whether the stock redemption

             agreement was for Alden’s benefit and only gave it an option to buy

             the shares;

           what the term “family interest” includes;

           what Alden’s rights were after McCoy’s death to buy any shares he

             had transferred to a non-family-interest third party;

           if McCoy transferred shares to a family interest during his life,

             whether Alden would be required to purchase those transferred

      6
       Id.

                                          3
            shares after McCoy’s death or would have only an option to buy

            them (such as the right of first refusal in the redemption agreement

            Alden already had with Adams);

          whether any third parties to whom McCoy transferred shares would

            have an obligation to sell the shares to Alden at McCoy’s death;

          if McCoy transferred some shares to a nonfamily interest third party,

            whether Alden had to pay McCoy’s estate $30 million for the shares

            McCoy still held at his death, no matter how few shares that may be;

            or

          whether $30 million was the value that the parties agreed the shares

            were expected to be worth at McCoy’s death, an amount demanded

            by McCoy that was unrelated to the price of the shares, or an

            amount selected by Alden in excess of the price of the shares and

            thus an amount that could be decreased at Alden’s discretion.

      McCoy argues that the summary sheet does not leave terms open

because if he were to transfer some of his stock to non-family third parties,

restrictions in the corporate governance agreement executed as part of the June

2008 stock sale would be triggered, and Alden could prevent transfers of

McCoy’s stock to any non-family transferees.     But the corporate governance

agreement does not help him because that document gives Alden a right of first

refusal but does not prevent McCoy from transferring his stock to a third party

who is not a family member. The corporate governance agreement does not
                                       4
give Alden the right to buy back after McCoy’s death any shares transferred to a

non-family third party.

      Alden asserted in the trial court that the summary sheet does not address

how much it would have to pay for the shares still held by McCoy at his death if

he transferred some shares to a third party.       McCoy argues that “either the

transfers are subject to the right to repurchase . . . or the transfers result in a

proportionate reduction in the purchase price to redeem McCoy’s stock upon his

death.” He rejects Alden’s argument that if he transfers shares to a non-family

third party, it might be required to pay his estate the full $30 million for whatever

stock he still holds at his death, arguing that “a reviewing court would be required

to reject the absurd and unreasonable interpretation of the agreement articulated

by Alden.”

      McCoy’s arguments, however, illustrate Alden’s assertion in its summary

judgment motion—McCoy has to rely on a reviewing court to decide what would

be the obligations and rights of Alden upon his death with respect to the

redemption of his remaining shares because the summary sheet leaves open for

disagreement what the parties intended and assumes that the parties do not

know from the summary sheet what their respective obligations and rights are.

This is in contrast to the redemption agreement that Adams signed in 1998,

which set out a specific price per share that Alden would pay for Adams’s shares

after his death.

                                         5
      The summary sheet is some evidence of what is undisputed by the

parties—that the parties discussed an agreement about Alden’s purchase of

McCoy’s remaining shares, that the parties agreed that such a purchase should

be funded by an insurance policy on McCoy’s life, and that the parties discussed

this plan in connection with the negotiation of the 2008 loan agreement. It is also

evidence that the parties, at that point in time, agreed that the policy amount

should be $30 million. But it is not evidence that the parties had agreed to the

specific terms of the contract that McCoy now seeks to enforce.7

      McCoy further contends that the agreement of the parties is accurately

memorialized in the 2008 fourth draft redemption agreement that McCrury

circulated to McCoy, Adams (who was not yet a director at that time), and board

member Youts (but not to other directors), and which McCoy (but not Alden)

signed. McCrury stated in his email sending the document that if the recipients

did not have any comments or questions, “the drafts” would be “circulate[d] for

signature.” This email does not, however, say whose signatures were needed

and does not indicate whether the board had approved, discussed, or even been

fully informed of the draft’s terms. McCrury’s email indicates, though, that the

document was a reflection of what McCrury understood the parties to the email

had agreed on as of the time of the email.

      7
       See Copeland, 3 S.W.3d at 604 (applying an objective standard in
determining whether the parties had a meeting of the minds).

                                        6
      This draft redemption agreement states that upon the death of McCoy,

Alden “shall be obligated” to buy equity interests held by McCoy or his wife for

the purchase price of $30 million. That language, in isolation from the rest of the

document, supports McCoy’s position. And the agreement further states that it is

“the intent of Alden” to fund the purchase with life insurance on McCoy.

      In the next paragraph, however, the agreement states that “[i]n the event

[that] this Agreement is not funded with insurance on the life of [McCoy]” or that

any insurance cannot be collected, “then the obligations of Alden to purchase all

of [McCoy’s] Equity Interests, including any Equity Interests held in the name of

the spouse of [McCoy], shall be waived, notwithstanding any other provision of

this Agreement to the contrary.” Nothing in the agreement’s language requires

Alden to buy life insurance on McCoy to fund the agreement, or, if it acquired

such insurance, to keep it for the rest of McCoy’s life. Accordingly, contrary to

McCoy’s claim of what the parties had agreed to, this agreement does not

evidence an agreement by the parties that Alden would be required to either buy

or keep insurance on McCoy’s life.

      Further, McCoy argues that Alden was obligated under the agreement to

redeem shares held by his family trust after his death, but, like the summary

sheet, the draft redemption does not say that. McCoy is authorized under the

terms of this draft agreement to transfer some of his stock to his trust provided

that the trust agrees to abide by the terms of the agreement, and he did in fact

make a transfer to the trust.     The draft redemption agreement also states,

                                        7
however, that Alden’s written approval was required before McCoy could assign

his rights or interest under the agreement. And it only specified an obligation by

Alden to buy stock held in the name of McCoy or his wife. Given that McCoy

does not point out any evidence that Alden agreed in writing to the assignment of

any part of McCoy’s interest or rights in the agreement (other than the interim

agreements executed after the transfers, which he argues are unenforceable),

the draft redemption agreement does not indicate that, under this agreement, the

trust could compel Alden to purchase the shares that McCoy had transferred to

the trust.

       McCoy argues that by reading this draft together with the summary sheet,

Alden had agreed to buy back shares transferred to the trust. There are two

holes in this argument.    First, the summary sheet does not specify whether

“family interest” means McCoy’s shares held in his wife’s name or whether it also

includes any shares transferred to a family trust (and the summary sheet

indicates that Alden would be able to buy the shares but does not spell out any

obligation for it to do so). Second, McCoy asserts that the 2008 draft redemption

agreement is an accurate, enforceable reflection of the parties’ agreement, and

that document (1) states that it supersedes any prior agreement or understanding

on the subject and (2) does not require Alden to buy back shares transferred to a

trust unless Alden agreed in writing to the transfer of shares to the trust. The

draft redemption agreement does not raise a fact issue about a meeting of the

                                        8
minds on the terms that McCoy is trying to enforce in this suit, which are not

reflected in that document.8

      McCoy further argues that the agreement is not indefinite as to duration,

and the majority agrees with him. McCoy also argues that the agreement is not

indefinite as to costs because one of the loan agreements funding the 2008 stock

sale transaction “placed conditions on the ability to pay for and use insurance to

fund a redemption of McCoy’s remaining shares, including a cap on the amount

of money Alden could be forced to pay each year for the insurance policies.”

However, McCoy’s breach of contract claim is premised on the argument that

Alden was required to acquire and keep a $30 million insurance policy and to use

the payout from the policy to buy back his shares. Thus, regardless of any caps

on insurance premiums provided by the loan agreement, McCoy wants Alden to

maintain a $30 million policy, he contends that its failure to do so is a breach of

their agreement, and he asked the trial court to compel Alden to maintain such a

policy. He cannot have it both ways.

      In summary, the language of the draft agreement, which McCoy argued

was a memorialization of the parties’ agreement, does not suggest that it was

part of any comprehensive agreement. It does not obligate Alden to buy or keep

insurance on McCoy’s life to fund a stock repurchase after his death, whatever

the parties may have discussed at some earlier point of negotiations. It does not

      8
       See id.

                                        9
give McCoy’s family trust the right to compel Alden to purchase the shares

transferred to it by McCoy without Alden’s prior written consent. Thus, even if we

were to hold that this draft agreement contains all the essential terms for an

enforceable stock redemption agreement, it does not contain or raise a fact issue

about the terms that McCoy seeks to enforce. Accordingly, I would hold that

McCoy’s evidence does not show a meeting of the minds and therefore does not

raise a fact question about the existence of a valid contract. Because McCoy

failed to raise a fact issue on whether the parties had a valid contract that

included the terms he sues on, I would hold that the trial court was correct to

grant no-evidence summary judgment on this part of McCoy’s suit and overrule

this part of McCoy’s first issue.

         I would further hold that McCoy failed to raise a fact issue about whether

Alden is estopped from denying McCoy the long-term insurance-funded

redemption agreement. His argument is that Alden cannot retain benefits from

the 2008 stock-loan transaction and also be allowed to “back out on material

terms of the agreement that were promised to McCoy to get him to agree to the

deal.”

         McCoy does not specify in his brief what kind of estoppel he is asserting,

but his argument and the cases he cites relate to quasi-estoppel.         Because

quasi-estoppel is an affirmative defense, in order to defeat Alden’s right to

summary judgment, McCoy had to come forward with evidence sufficient to raise

                                         10
a fact issue on each element of the defense.9 McCoy failed, however, to produce

evidence raising a fact issue about whether Alden struck a bargain with McCoy,

and then, after McCoy performed his side of the bargain, tried to avoid

performing its obligations under the deal by claiming there was no bargain.

      McCoy directs us to certain occurrences and argues that these events

indicate that Alden received benefits from the comprehensive agreement that it

claims does not exist. The events he relies on, however, were all called for or

resulted from the implementation of the 2008 stock-loan transaction—Alden’s

redemption of a portion of his shares, Adams’s assuming the role of CEO,

Alden’s shareholders approving a voting trust under which Adams gained control

of voting rights of the majority of Alden’s shares, and McCoy’s selling of his

shares to Alden rather than to outside third parties.

      This is evidence of performance of the 2008 stock-loan transaction.

Nothing about these events indicates that the transaction was only the first part

of a bigger agreement that Alden failed to perform. McCoy does not dispute that

he has kept his seat as director as called for under the agreements implementing

the 2008 stock-loan transaction or that Alden has performed its obligations as set

out in the loan agreements, the 2008 stock redemption, or any of the written

agreements accompanying that transaction.

      9
       See Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984).

                                         11
      I would further hold that the trial court was correct in granting summary

judgment on McCoy’s director compensation claim.         Alden sought summary

judgment on the ground that there was no meeting of the minds on the material

terms of a compensation agreement under which McCoy would be paid $250,000

a year for as long as he served as a director. It argued that Alden’s bylaws

required its board of directors or executive committee to approve compensation

for officers, which includes the board chairman; that McCoy admitted that the

board did not approve the compensation he seeks to enforce on appeal; and that

Alden did not communicate any such agreement to McCoy.

      Alden’s summary judgment evidence included a copy of the bylaws, which

provide that the chairman of the board is an officer of the company. The section

of the bylaws addressing salaries of officers states that “[t]he salaries of all

officers shall be fixed by the board of directors or the Executive Committee.”

[Emphasis added.] Thus, under Alden’s bylaws, the board of directors had to

determine McCoy’s compensation for his service as chairman of Alden’s board of

directors. McCoy and Adams did not have authority to set his compensation at

$250,000 a year for the duration of his service as chairman.

      Excerpts of Youts’s and MacKenzie’s depositions, attached by McCoy to

his summary judgment response, indicate that Youts, a board member, had

discussed McCoy’s compensation with MacKenzie before June 2008, which was

before MacKenzie joined the board. McCoy also cites to evidence that Adams

signed the payroll change notice at a time when Adams was not a member of the

                                       12
board. None of McCoy’s evidence addresses, much less raises a fact issue,

about whether the board approved the compensation as required by Alden’s

bylaws. None of his evidence shows a discussion of his compensation at a

board meeting, a vote by the board, or some other action by the board fixing his

compensation at that level.    If Alden has an executive committee for setting

compensation, McCoy has not pointed out evidence of who the members of that

committee were or that the committee executed a compensation agreement with

him or fixed his compensation at that level.

      McCoy argues that a paragraph in the loan agreement funding the 2008

stock sale prevents amendment of agreements with directors without written

consent.   Even assuming that the relevant paragraph of the loan agreement

applies to an agreement about McCoy’s director compensation, however, it does

not apply here. There is no evidence that Alden amended an agreement to pay

him $250,000 for the duration of his serving as director because there is no

evidence he had any such board-approved agreement with Alden to amend.

Accordingly, I would hold that the trial court correctly granted summary judgment

for Alden on McCoy’s director compensation claim.

      Because I would hold that McCoy did not produce evidence to raise a fact

issue about whether he and Alden had a meeting of the minds on a stock

redemption agreement on the terms he seeks to enforce or about whether Alden

had agreed to the director compensation package he sues for, I would affirm the

                                        13
trial court’s summary judgment. Because the majority does not, I respectfully

dissent.

                                               /s/ Lee Ann Dauphinot
                                               LEE ANN DAUPHINOT
                                               JUSTICE

DELIVERED: July 9, 2015

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