Thomas G. McCoy v. Alden Industries, Inc. ( 2015 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-12-00200-CV
THOMAS G. MCCOY APPELLANT
V.
ALDEN INDUSTRIES, INC. APPELLEE
----------
FROM THE 48TH DISTRICT COURT OF TARRANT COUNTY
TRIAL COURT NO. 48-252036-11
----------
DISSENTING OPINION
----------
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
14