Don Corley, Jr. v. Gaylan Hendricks and Dan Hendricks ( 2017 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-16-00293-CV
DON CORLEY, JR. APPELLANT
V.
GAYLAN HENDRICKS AND DAN APPELLEES
HENDRICKS
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FROM THE 141ST DISTRICT COURT OF TARRANT COUNTY
TRIAL COURT NO. 141-286695-16
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MEMORANDUM OPINION1
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Appellant Don Corley Jr.2 appeals from the trial court’s granting of a no-
evidence motion for summary judgment in favor of Appellees Dan Hendricks and
1
See Tex. R. App. P. 47.4.
2
On December 5, 2016, counsel for Corley filed in this court a notice of
Corley’s death. Counsel stated their intention to continue the appeal under
Texas Rule of Appellate Procedure 7.1.
Gaylan Hendricks on his cause of action for theft under the Texas Theft Liability
Act (the TTLA). He argues in one issue that the trial court erred by granting no-
evidence summary judgment for the Hendrickses, denying his motion for
reconsideration, and awarding attorney’s fees to the Hendrickses under the
TTLA. Because we hold that the trial court erred by granting summary judgment
and abused its discretion by denying the motion for reconsideration, we reverse
and remand.
I. Background
Corley and Dan began operating an insurance brokerage company called
Senior Security Benefits, Inc. (SSBI) in 2003.3 They later gave shares to Dan’s
wife Gaylan, splitting SSBI’s ownership among the three. For several years, they
ran the business together as directors and officers.
In 2014, Gaylan, acting as SSBI’s CEO, informed Corley that SSBI was
terminating his employment and that he would no longer receive the profit
distributions from SSBI. The Hendrickses also removed Corley as an officer and
director of SSBI and denied him access to SSBI’s books and records.
Corley then filed this lawsuit against the Hendrickses. By amended
petition, he asserted claims for breach of fiduciary duty, theft under the TTLA,
fraud, and civil conspiracy, as well as a shareholder’s derivative action under
3
In his petition, Corley alleged that SSBI was founded in 2000 but did not
begin operating until 2003.
2
Texas Business Organizations Code section 21.563. Tex. Bus. Orgs. Code Ann.
§ 21.563 (West 2012).
During the course of the lawsuit, Corley hired an expert to conduct a
forensic audit of SSBI’s Quicken accounting records, which Gaylan initially
refused to provide to Corley, producing them only after the intervention of
Corley’s attorney. The expert discovered that Gaylan had moved $2.4 million
from SSBI’s retained earnings account to Gaylan’s personal account. The entry
was made on February 12, 2014 but backdated to appear on SSBI’s books on
December 24, 2013, which was before Corley’s termination.
The expert also discovered that on the same day as the $2.4 million
transfer, other entries were made in the records that recharacterized commission
distributions made to Gaylan from sales of insurance products to an SSBI
customer, Countrywide Healthcare Solutions, Inc. (Countrywide), as repayments
on a personal loan from Gaylan to SSBI. The sales to Countrywide had been
made by SSBI employees, the commissions were paid to SSBI, and no
documentation showed an agreement that Gaylan would receive the
commissions individually for such sales. The Hendrickses, however, contended
that the $2.4 million was Gaylan’s property because it arose from a separate
arrangement she had made with Countrywide.
In pretrial discovery, Corley also learned the Hendrickses had used
corporate funds to pay for family vacations. He further discovered that Gaylan
had appropriated commissions under a “letter of understanding” with another
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SSBI customer, Central United Life Insurance Company (CUL). Gaylan, as a
representative of SSBI, signed an agreement with CUL under which SSBI would
earn commissions on sales by SSBI staff on CUL insurance products plus a two
percent override on “all new premium[s] written on CUL’s Affordable Choice
insurance product.” Gaylan had the override commissions paid under that
agreement deposited into her personal bank account, having given CUL a direct
deposit form for that account to use to deposit the commissions.
The Hendrickses filed a motion for no-evidence summary judgment on
Corley’s theft claim under the TTLA, asserting that there was no evidence that
they acted without the consent of SSBI regarding the Countrywide and CUL
transactions or the use of SSBI funds to pay for family vacations. They argued
that because Gaylan and Dan were officers and directors of SSBI at the time of
Gaylan’s actions, her actions had the effective consent of SSBI. In his summary
judgment response, Corley attached:
 His own affidavit, in which he stated that he was a member of
SSBI’s board at the time of the complained-of transactions and that
he had no knowledge of the transactions;
 The letter of understanding between SSBI and CUL stating the
commissions SSBI would receive;
 The direct deposit form Gaylan used to have the CUL
commissions paid into her account; and
 A copy of the audit trail from Corley’s forensic accountant
showing Gaylan’s movement of earnings from the Countrywide
commissions into her personal account.
4
After holding a hearing on the motion, the trial court granted summary
judgment for the Hendrickses on Corley’s theft claim. The court subsequently
signed an order granting attorney’s fees and costs to the Hendrickses under the
TTLA and incorporating its prior order granting summary judgment. Corley filed a
motion for reconsideration, which the court denied. The trial court severed the
theft claim, making its order granting summary judgment and attorney’s fees a
final judgment. Corley appeals from that judgment.
II. Analysis
In Corley’s sole issue, he asks whether the trial court erred by granting
summary judgment on his theft claim under the TTLA, denying his motion to
reconsider, and awarding the Hendrickses attorney’s fees and costs under the
TTLA. The disposition of his issue turns on whether the Hendrickses could
consent to the self-dealing transactions that form the basis of Corley’s theft claim.
A. Standard of Review
When reviewing a no-evidence summary judgment, we examine the entire
record in the light most favorable to the nonmovant, indulging every reasonable
inference and resolving any doubts against the motion. Sudan v. Sudan,
199 S.W.3d 291, 292 (Tex. 2006). We review a no-evidence summary judgment
for evidence that would enable reasonable and fair-minded jurors to differ in their
conclusions. Hamilton v. Wilson, 249 S.W.3d 425, 426 (Tex. 2008) (citing City of
Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005)). We credit evidence
favorable to the nonmovant if reasonable jurors could, and we disregard
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evidence contrary to the nonmovant unless reasonable jurors could not. Timpte
Indus., Inc. v. Gish, 286 S.W.3d 306, 310 (Tex. 2009) (quoting Mack Trucks, Inc.
v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006)). If the nonmovant brings forward
more than a scintilla of probative evidence that raises a genuine issue of material
fact, then a no-evidence summary judgment is not proper. Smith v. O’Donnell,
288 S.W.3d 417, 424 (Tex. 2009); King Ranch, Inc. v. Chapman, 118 S.W.3d
742, 751 (Tex. 2003), cert. denied, 541 U.S. 1030 (2004).
“After a court grants a summary judgment motion, the court generally has
no obligation to consider further motions on the issues adjudicated by the
summary judgment.” Macy v. Waste Mgmt., Inc., 294 S.W.3d 638, 651 (Tex.
App.—Houston [1st Dist.] 2009, pet. denied) (citation and quotation marks
omitted). “The standard of review for a motion to reconsider a prior summary
judgment is whether the trial court abused its discretion.” Id. “A trial court has no
‘discretion’ in determining what the law is.” Walker v. Packer, 827 S.W.2d 833,
840 (Tex. 1992).
B. Theft Claims Under the TTLA
A person who commits theft under the TTLA is liable for damages resulting
from the theft. Tex. Civ. Prac. & Rem. Code Ann. § 134.003 (West 2011). The
definition of “theft” under the TTLA includes the appropriation of property, without
the owner’s effective consent, with intent to deprive the owner of property. Tex.
Civ. Prac. & Rem. Code Ann. § 134.002 (West Supp. 2016); Tex. Penal Code
Ann. § 31.03(a), (b) (West Supp. 2016). “Effective consent” includes consent by
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a person legally authorized to act for the owner. Tex. Penal Code Ann.
§ 31.01(3) (West Supp. 2016).
C. The Hendrickses Could Not Consent to Theft from SSBI
The sole summary judgment ground raised by the Hendrickses in their no-
evidence motion was that Corley had no evidence that their appropriation of
SSBI funds was without SSBI’s effective consent. They maintained that it was
undisputed that as controlling directors and shareholders, they were legally
authorized to act for SSBI and to consent to the complained-of transactions, and
Corley had no evidence that SSBI had not consented to the transactions through
the Hendrickses.
As Corley argued in the trial court and on appeal, the Hendrickses were
not legally authorized to consent to their own theft. Interested directors and
shareholders cannot give effective consent to breaching their fiduciary duty to the
company by stealing from the company at the expense of other directors and
shareholders. See Tex. Bus. Orgs. Code Ann. § 21.418(b) (West 2012) (setting
out the circumstances under which a corporation may approve of an otherwise
valid transaction in which a director of the corporation is interested); cf. In re
Mandel, 578 Fed. Appx. 376, 384 (5th Cir. 2014) (not designated for publication)
(holding that a director and shareholder of a company could not give effective
consent to steal the company’s trade secrets); In re Sherali, 490 B.R. 104,
120 (Bankr. N.D. Tex. 2013) (finding that sole officer, director, and shareholder
7
committed theft under the TTLA when he appropriated net cash sales belonging
to the corporation).
In Corley’s affidavit attached to his summary judgment response, he stated
that he did not know and was not told about the transactions in which the
Hendrickses allegedly stole funds from SSBI.4 Corley could not consent to
transactions he knew nothing about. Corley thus presented the trial court with
more than a scintilla of summary judgment evidence that he—the only
disinterested director and shareholder—had not consented to the transactions.
See Tex. Bus. Orgs. Code Ann. § 21.418(b)(1) (providing that a transaction
involving an interested director is valid if the material facts as to the director’s
interest in the transaction are disclosed and the transaction is approved by the
majority of disinterested directors or by a good faith vote by the shareholders).
The Hendrickses’ only summary judgment ground relied on their ability to
consent to the transactions, which, as a matter of law, they could not do.
Because the Hendrickses could not consent to their own theft, and because
Corley produced evidence that he did not consent to the transactions, Corley
produced evidence raising a fact issue about whether SSBI had consented to the
transactions. See Tex. R. Civ. P. 166a(i).
4
Corley further averred that the thefts caused a loss to SSBI of more than
$2 million of its retained earnings. See Tex. Bus. Orgs. Code Ann.
§ 21.418(b)(2) (providing that a transaction involving an interested director is
valid if it is fair to the corporation at the time the transaction is approved by the
directors or shareholders).
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Further, in Corley’s motion for reconsideration, he directed the trial court to
section 21.418(b) of the Texas Business Organizations Code that provides the
circumstances under which transactions involving interested directors of a
corporation may be approved and are valid, and he argued that a fiduciary, such
as Gaylan, engaging in self-dealing is acting in an unauthorized capacity.
Because the Hendrickses could not give “effective consent” to the alleged theft
for purposes of the TTLA claim, and because the only evidence before the trial
court regarding consent by a disinterested director and shareholder was that no
such consent was given, the trial court abused its discretion in denying Corley’s
motion for reconsideration. See Walker, 827 S.W.2d at 840.
Because we have held that the trial court’s summary judgment cannot be
sustained, the award of attorney’s fees to the Hendrickses under the TTLA must
also be reversed. We sustain Corley’s sole issue.
III. Conclusion
Having sustained Corley’s sole issue on appeal, we reverse the trial court’s
summary judgment and remand this case to the trial court for further
proceedings.
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/s/ Mark T. Pittman
MARK T. PITTMAN
JUSTICE
PANEL: LIVINGSTON, C.J.; WALKER and PITTMAN, JJ.
DELIVERED: April 27, 2017
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