Robert Westerburg, Administrator of the Estate of R.D. West A/K/A Randy Dixon Westerburg v. Western Royalty Corporation

ACCEPTED
07-15-00082-CV
SEVENTH COURT OF APPEALS
AMARILLO, TEXAS
6/4/2015 4:40:36 PM
Vivian Long, Clerk
CAUSE NO. 07-15-00082-CV
IN THE
COURT OF APPEALS
FOR THE SEVENTH DISTRICT OF TEXAS
AMARILLO, TEXAS
Appealed from the 99th District Court
Lubbock County, Texas
ROBERT WESTERBURG, ADMINISTRATOR OF THE ESTATE OF
R.D. WEST a/k/a RANDY DIXON WESTERBURG,
Appellants/Cross-Appellee,
vs.
WESTERN ROYALTY CORP.,
Appellee/Cross-Appellant.
CROSS-APPELLEE’S BRIEF
Steven Thornton
State Bar No. 00789678
WESTERBURG & THORNTON, P.C.
6060 N. Central Expressway, Suite 690
Dallas, Texas 75206
Phone No.: 214.528.6040
Facsimile: 214.528.6170
steve@mwtlaw.com
ATTORNEY FOR APPELLANT
ROBERT WESTERBURG
CROSS-APPELLEE REQUESTS ORAL ARGUMENT
1
TABLE OF CONTENTS
TABLE OF CONTENTS …………..……………………………...……….…… 2
TABLE OF AUTHORITIES ………….……………………………...………… 3
SUMMARY OF CASE ………………………………………………………… 4
REQUEST FOR ORAL ARGUMENT ………………………………………… 5
STATEMENT OF FACTS ……………………………………………………... 6
SUMMARY OF THE ARGUMENT ..………………………………………..... 10
ARGUMENT AND AUTHORITIES …………...…………………..…………. 11
I. Standard of Review …………………………………………..………… 11
II. Judge Sowder Properly Ordered Western Royalty to Produce Records …. 12
A. Texas Law Regarding Corporate Records …………...……………. 12
B. Judge Sowder Properly Granted Westerburg Access to Western
Royalty’s Books and Records ……………………………………… 13
C. Western Royalty’s Point of Error is Meritless ………........................ 14
C.1. Western Royalty Failed to Properly Preserve Error Regarding
the California Probate Court and Prevented Westerburg from
Completing his Reporting Requirement …….………….....… 15
C.2. Judge Sowder’s Order Limited to Documents that Satisfy
Westerburg’s Proper Purpose ……………………………….. 16
C.3. Western Royalty Incorrectly Represents the Effect of
IRS Ruling …………………………………………………… 18
CONCLUSION and PRAYER …………………………………………..……… 20
CERTIFICATE OF SERVICE ………………………….…………………….… 21
CERTIFICATE OF COMPLIANCE ……………………………………..……. 22
CROSS-APPELLEE’S APPENDIX ………………….…………………….….. 23
2
TABLE OF AUTHORITIES
Case Law
Baker's Campground, Inc. v. McCalla, 2012 Tex. App. LEXIS 6173
(Tex. App. – Waco 2012, no pet.) ……………………………………………… 11
City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 678
(Tex. 1979) ………………………………………………………………………. 12
Creditwatch, Inc. v. Jackson, 157 S.W.3d 814, 816 (Tex. 2005) ……………….. 11
Other Authorities
California Probate Code § 8800 …………………………………………. 6, 14, 23
California Probate Code § 8804 ……………………………….………… 6, 14, 23
California Probate Code § 8850 …………………………………………. 6, 14, 23
Tex. Bus. Orgs. Code § 21.218 …………..…. 4, 6, 7, 10, 11, 12, 13, 14, 19, 20, 23
Tex. Bus. Orgs. Code § 21.222 ……………………………………………. 4, 7, 23
Tex. R. Civ. P. 166a ……………………………………………………………… 12
3
SUMMARY OF THE CASE
In 2013, Robert Westerburg’s brother, R.D. West, died in California. A
portion of the Estate of R.D. West included 350 shares of Western Royalty
Corporation (hereinafter “Western Royalty”). Once appointed as administrator of
R.D. West’s estate and acting solely in that capacity, Robert Westerburg
(hereinafter “Westerburg”) sought to examine the books and records of Western
Royalty in order to ascertain a valuation of the stock owned by the Estate and to
allow Westerburg to complete an inventory requirement set by the probate court
and California probate law.
Pursuant to the Texas Business Organizations Code, Westerburg made a
request to Western Royalty for access to the books and records of the company.
Western Royalty refused. Westerburg filed suit against Western Royalty seeking
access to the books and records of the company and recovery of his attorney’s fees,
costs and expenses pursuant to sections 21.218 and 21.222 of the Texas Business
Organizations Code.
After engaging in some limited discovery, the parties filed competing
traditional motions for summary judgment. Judge Sowder considered both
motions and ultimately granted Westerburg’s request and ordered Western Royalty
to make available to Westerburg a defined set of books and records for
examination and photocopying. Judge Sowder refused to award Westerburg any
attorney’s fees in this matter but did award him court costs and expenses.
4
REQUEST FOR ORAL ARGUMENT
Westerburg requests oral argument in this cause as he believes it would be
helpful to the Court in evaluating these issues. Westerburg believes that given the
nature of the claims he is making and the defenses set forth by Western Royalty,
the Court may have questions for the parties that will be useful in reaching a
decision.
5
STATEMENT OF FACTS
Mr. R.D. West died on August 22, 2013 in California. At the time of his
death, R. D. West was a record holder of 350 shares of Western Royalty. A
California Probate Court appointed Robert Westerburg to administer the Estate of
R.D. West, deceased. Clerk’s Record, Vol. 1 – 95. Westerburg, by and through
R.D. West’s ownership and being a holder of shares of Western Royalty, qualified
to examine the corporate records of Western Royalty pursuant to Texas Business
Organizations Code § 21.218. Clerk’s Record, Vol. 1 – 97.
On February 19, 2014, Westerburg delivered to Western Royalty a written
demand for examination of sixteen specific categories of books and records.
Clerk’s Record, Vol. 1 – 96. Westerburg’s purpose in seeking the examination of
these documents is to determine the fair market value of the Estate’s interest in
Western Royalty for the purpose of preparing the required Inventory and
Appraisement for filing in the pending probate case in the Superior Court of
California, San Diego, California. Clerk’s Record, Vol. 1 – 97. Pursuant to the
California Probate Code, Westerburg must file with the California Probate Court
Clerk an inventory of the property to be administered in the Decedent’s estate
together with an appraisal. California Probate Code §§ 8800(a), 8804, and
8850(a); Clerk’s Record, Vol. 1 – 95, 101-103.
As Western Royalty is not a publically traded company and as Western
Royalty does not produce and distribute any information (other than a small
6
dividend to shareholders and a 1099 federal income tax reporting form) to its
shareholders from which such a calculation can be made, Westerburg has no other
means available to him which would provide the information necessary to comply
with the California Probate Code. Clerk’s Record, Vol. 1 – 97. The only purpose
for which Westerburg sought this information is to meet his obligations under the
California Probate Code. Clerk’s Record, Vol. 1 – 97.
Western Royalty refused Westerburg’s request. Clerk’s Record, Vol. 1 – 97.
As such, Westerburg brought suit against Western Royalty seeking the right to access
and examine the requested books and records of Western Royalty and to recover his
costs and expenses, including attorney’s fees, pursuant to sections 21.218 and 21.222
of the Texas Business Organizations Code. Clerk’s Record, Vol. 1 – 97. Western
Royalty objected to both of these claims.
During the proceedings, Judge Sowder ordered Western Royalty to produce to
Westerburg: 1) financial documents detailing the book value of the stock; 2) any
financial statements from the last four years; 3) profit or loss statements from the
last four years; 4) loan applications made by Western Royalty from the last four
years; 5) federal and state tax returns submitted by Western Royalty from the last
four years; 6) all existing oil and gas leases and corresponding division orders and
royalty payments for the last four years; 7) a sworn statement from Tom
Whiteside, President of Western Royalty, that the company has no good will or
intangible value; and, 8) any details of any stock sold, including purchase price and
7
amount of stock, that has occurred in the last seven years. Clerk’s Record, Vol. 1 –
75.
In response to the Court’s order, Western Royalty produced no financial
documentation detailing the book value of the corporation’s stock. Western
Royalty did produce 105 pages of documents. Those documents consisted of 2010
- 2013 tax returns, 3 leases and a sworn statement that the company has no good
will or intangible value. Clerk’s Record, Vol. 1 – 107-220. Western Royalty
answered that it had no financial documents detailing the book value of the stock,
no financial statements from the last four years and no profit or loss statements
from the last four years. Clerk’s Record, Vol. 1 – 107-220. Based on this
production, Westerburg was unable to determine the share value for Western
Royalty and, consequently, was unable to fulfill his reporting obligation to the
California Probate Court.
Following this order and limited production of documents, the parties filed
competing motions for summary judgment. In his motion, Westerburg detailed the
problems with Western Royalty’s prior record production and the need for
additional documents to satisfy his purpose of determining the value of the Estate’s
shares in Western Royalty.
After considering the motions and evidence adduced by both parties, Judge
Sowder granted Westerburg’s request and ordered Western Royalty to produce
documents in eight defined categories. Judge Sowder also awarded Westerburg court
8
costs and expenses. But, Judge Sowder denied Westerburg’s request for recovery of
his attorney’s fees. Clerk’s Record, Vol. 1 – 256-259.
9
SUMMARY OF THE ARGUMENT
Westerburg contends that Judge Sowder properly granted his Motion for
Summary Judgment and ordered Western Royalty to produce a specific category of
books and records for examination pursuant to Section 21.218 of the Texas
Business Organizations Code. Western Royalty’s production following Judge
Sowder’s first order was insufficient to allow Westerburg to determine the value of
the shares of Western Royalty. Given the evidence produced to the trial court by
the parties, this Court should affirm Judge Sowder’s ruling ordering Western
Royalty to produce a specific category of books and records for Westerburg’s
examination.
10
ARGUMENTS AND AUTHORITIES
Western Royalty contends in this appeal that Judge Sowder improperly
ordered Western Royalty to produce specific categories of books and records for
Westerburg’s examination. Western Royalty relies on an IRS regulation and a prior
order from Judge Sowder in its argument that it fulfilled its obligations under section
21.218 of the Texas Business Organizations Code, thus leaving Westerburg without a
proper purpose for requesting additional information. But, the material that Western
Royalty produced was insufficient to meet Westerburg’s needs for ascertaining a
value for the shares of Western Royalty. Further, Western Royalty only produced a
fraction of the material that the IRS regulation and Judge Sowder’s original order
required. Finally, even if this Court determines that Western Royalty’s original
production was sufficient to meet Westerburg’s needs, Western Royalty still violated
section 21.218 of the Texas Business Organizations Code by refusing Westerburg’s
original, pre-litigation request for access to the documents and forcing Westerburg to
file the lawsuit.
I. Standard of Review
Texas appellate courts review the grant of a traditional motion for summary
judgment de novo. Creditwatch, Inc. v. Jackson, 157 S.W.3d 814, 816 (Tex. 2005);
Baker's Campground, Inc. v. McCalla, 2012 Tex. App. LEXIS 6173 (Tex. App. –
Waco 2012, no pet.). In a traditional summary judgment proceeding, the issue is
whether the movant met its burden for summary judgment by establishing that no
11
genuine issue of material fact exists entitling the movant to judgment as a matter of
law. Tex. R. Civ. P. 166a(c); City of Houston v. Clear Creek Basin Authority, 589
S.W.2d 671, 678 (Tex. 1979).
II. Judge Sowder Properly Ordered Western Royalty to Produce Records
In both his prior ruling and in his ruling on the competing motions for
summary judgment, Judge Sowder held that, pursuant to section 21.218 of the Texas
Business Organizations Code, Westerburg is entitled to examine the books and
records of Western Royalty and has a proper purpose for doing so. The central issue
for Western Royalty’s appeal is that Western Royalty contends that it has already
produced sufficient documentation to allow Westerburg to determine the share value
for the company. Westerburg contended, and Judge Sowder ruled, that Western
Royalty had not met its obligations under section 21.218 of the Texas Business
Organizations Code.
A. Texas Law Regarding Corporate Records
The Texas Business Organizations Code provides that a holder of shares of a
corporation for at least six months is entitled, upon written demand stating a proper
purpose, to examine and copy the corporation’s relevant books, records of account,
minutes and share transfer records. Tex. Bus. Orgs. Code § 21.218(b). More
broadly, the Texas Business Organizations Code empowers a court, upon proof of
a proper purpose, to compel a corporation to produce such records for examination
12
by the holder regardless of the period during which the holder was a record holder.
Tex. Bus. Orgs. Code § 21.218(c).
B. Judge Sowder Properly Granted Westerburg Access to Western
Royalty’s Books and Records
In this case, Westerburg demonstrated to Judge Sowder that he met all of the
requirements of section 21.218 entitling him to examine the books and records of
Western Royalty. First, Westerburg adduced evidence that his brother, Mr. R. D.
West, was a record holder of 350 shares of Western Royalty for over 20 years.
Clerk’s Record, Vol. 1 – 95. Mr. West died on August 22, 2013. Clerk’s Record,
Vol. 1 – 95. Westerburg then described for Judge Sowder how the Superior Court
of California, County of San Diego, appointed Westerburg to administer the Estate
of R.D. West, deceased. Clerk’s Record, Vol. 1 – 95. Second, Westerburg
delivered to the Western Royalty a written demand for examination of sixteen
specific categories of books and records on or about February 19, 2014. Clerk’s
Record, Vol. 1 – 96-97. In that demand, Westerburg detailed his need for the
examination. Clerk’s Record, Vol. 1 – 96-97. Western Royalty refused to comply
with that request. Clerk’s Record, Vol. 1 – 97. Western Royalty did not contest any
of these facts in the summary judgment proceedings.
The only other issue was whether Westerburg had a proper purpose in
requesting the examination of books and records. California probate law requires
an administrator to file with the California Probate Court Clerk an inventory of the
13
property to be administered in a Decedent’s estate together with an appraisal. Cal.
Prob. Code §§ 8800(a), 8804, and 8850(a); Clerk’s Record, Vol. 1 – 95, 101-103.
In order to satisfy this obligation, Westerburg needed to determine the fair market
value of the Estate of R.D. West’s interest in Western Royalty. Western Royalty is
not a publically traded company nor does it produce and distribute any information
to its shareholders from which a determination of the fair market value of the stock
can be made. Clerk’s Record, Vol. 1 – 97. As such, Judge Sowder determined that,
as a matter of law, this need for information constitutes a proper purpose under
section 21.218 of the Texas Business Organizations Code. With those facts
established, Judge Sowder granted Westerburg’s request and ordered Western
Royalty to make available for examination and copying several specific categories
of documents. Clerk’s Record, Vol. 1 – 256-259.
C. Western Royalty’s Point of Error is Meritless
Western Royalty makes three arguments that no proper purpose exists
regarding Westerburg’s request for access to Western Royalty’s books and records.
First, Western Royalty alleges that Westerburg did not request a finding from the
California Probate Court as to the value of the Western Royalty shares. Second,
Western Royalty argues that four of Westerburg’s requests are not made in good
faith to determine the value of the shares or for a proper purpose. Third, Western
Royalty contends the only acceptable order would be to follow an Internal
Revenue Service ruling regarding valuation of shares. All of these arguments are
14
without merit and were properly rejected by Judge Sowder.
C.1. Western Royalty Failed to Properly Preserve Error
Regarding the California Probate Court and Prevented
Westerburg from Completing his Reporting Requirement
Western Royalty argues that Westerburg’s alleged failure to request the
California Probate Court to determine the value of the shares somehow impugns
Westerburg’s proper purpose in this matter. Assuming that Western Royalty
intended to cite Appendix L instead of Appendix K on this issue (Appendix K is the
Final Summary Judgment), Western Royalty is citing to a document that it neither
attached to its Motion for Summary Judgment nor provided to the trial court.
Further, this document is not authenticated and contains multiple evidentiary failings
including hearsay. As Western Royalty did not include this document at the trial
court level and deprived Westerburg of an opportunity to refute it, Western Royalty
has failed to properly preserve any error regarding Appendix L and Westerburg’s
alleged actions before the California Probate Court.
But, even if this Court allowed Western Royalty to proceed with this argument
using this document, this argument is ineffective to refute Westerburg’s proper
purpose. As set forth in Westerburg’s affidavit, Western Royalty’s conduct has
stymied Westerburg’s ability to meet his reporting requirements under the California
Probate Code. Clerk’s Record, Vol. 1 – 95-100. Westerburg specifically described
why he cannot meet that obligation with Western Royalty’s current disclosures and
what additional evidence he will need to do so. Clerk’s Record, Vol. 1 – 98-100.
15
Further, Westerburg’s affidavit states that he will complete his reporting requirement
once he has sufficient information. Clerk’s Record, Vol. 1 – 97. Essentially, the
document that Western Royalty improperly cites to this Court is preliminary and will
be amended once this Court affirms the Trial Court’s ruling and Western Royalty
makes available the required documents.
C.2. Judge Sowder’s Order Limited to Documents that Satisfy
Westerburg’s Proper Purpose
Western Royalty’s second argument claims that four of the document
categories ordered by Judge Sowder do not meet Westerburg’s “Proper Purpose” of
determining share value. These categories include the identities of shareholders,
bank statements and cancelled checks for a 5 year period and cash flow reports and
other documents reflecting monies received and expenditures made for the same five
year period. Western Royalty simply asserts that these requests were not made in
good faith to determine the value of the shares. Western Royalty offers no analysis
or precedential authority to substantiate its criticism of Judge Sowder’s order.
Western Royalty just says it.
In fact, there is a very good reason that Judge Sowder included those four
categories in the eight total categories of documents set forth in the Final Summary
Judgment. Initially, Judge Sowder’s ordered Western Royalty to make available for
inspection seven specific categories of documents and provide a sworn statement that
Western Royalty had no good will or intangible value. Clerk’s Record, Vol. 1 – 75.
16
Western Royalty responded by producing four years of tax returns, three leases and
a sworn statement that the company has no good will or intangible value. Western
Royalty affirmatively stated that it had no financial documents detailing the book
value of the stock, no financial statements from the last four years and no profit or
loss statements from the last four years.1 Clerk’s Record, Vol. 1 – 107-220.
This document production did not approach the level necessary to allow
Westerburg to determine the share value for Western Royalty. Specifically,
Westerburg was unable to determine the book value of the stock as he did not
know the total number of shares issued and outstanding and the cash or cash
equivalent of each and every asset of Western Royalty, including, but not limited
to, the value of mineral interests owned by Western Royalty. Clerk’s Record, Vol.
1 – 98-100. Other information that would bear on this issue would be the dates,
prices and numbers of shares and parties to prior transfers of any shares. Clerk’s
Record, Vol. 1 – 98-100.
Given that it would be impossible for Western Royalty to manage the
company without such financial documentation, Westerburg pointed out that
documents such as a stock registry, profit and loss statements, balance sheets or
any other basic accounting information are critical to determining what the values
1 In an email to the Trial Court dated June 25, 2014, Mr. Tom Whiteside, President and
attorney for Western Royalty, stated that the company had three Certificates of Deposit with a
total value of approximately $103,000. Clerk’s Record, Vol. 1 – 221-222.Western Royalty did
not produce a balance sheet evidencing $103,000 cash or an equivalent asset (such as a
Certificate of Deposit) nor is there a document reflecting any expenditure of the $103,000.
17
of the Estate’s shares in Western Royalty are. Clerk’s Record, Vol. 1 – 97-100.
Even if Western Royalty had given all of its financial information sufficient to
determine the value of the business (which it did not), Westerburg still cannot
evaluate the per share value without knowing how many shares are issued and
outstanding. Clerk’s Record, Vol. 1 – 97-100. Since the Estate only owned 350
shares, the per-share value is the critical issue for California Probate Court – not
the total value for Western Royalty.
Consequently, Westerburg filed his motion for summary judgment and
asked the trial court to expand the original order. After reviewing the affidavit of
Robert Westerburg and the previous documents that Western Royalty produced,
Judge Sowder ordered Western Royalty to produce eight specific categories of
documents.
C.3. Western Royalty Incorrectly Represents the Effect of
IRS Ruling
Western Royalty’s last argument against Judge Sowder’s Final Summary
Judgment is that an IRS ruling determines how shares of a closely-held corporation
are valued and that Western Royalty has complied with this ruling. Western
Royalty has overstated both the language in and the effect of this ruling. The
ruling includes the caveat that “The following factors, although not inclusive are
fundamental and require careful analysis in each case:”. (Cross-Appellant Brief,
Appendix G, emphasis added). By that very language, the IRS acknowledged that
18
the listed factors are not an exhaustive list of the issues which may be considered.
Further, no language exists in this Ruling which reads that it is binding or pre-
emptive on any court in any jurisdiction. While the IRS may consider it their own
policy, Western Royalty failed to show how expanding beyond the categories set
under this ruling constitutes any breach of law or a reversible error.
Moreover, even if this Court were to hold that this ruling was conclusive and
pre-empted any Texas law or judicial determinations, Western Royalty failed to
comply with the requirements of the ruling. As set forth in C.3., Western
Royalty’s production was wholly insufficient to meet Westerburg’s proper
purpose, the requirements of the IRS ruling or Judge Sowder’s first order. 2
Western Royalty is asking this Court to reverse Judge Sowder and hold that since
Western Royalty says it does not have the kind of documents that IRS ruling
identified, Western Royalty is absolved from its obligations under 21.218 of the
Texas Business Organizations Code. Given Western Royalty’s conduct, Judge
Sowder had no other option but to grant Westerburg’s Motion for Summary
Judgment and to order Western Royalty to produce additional documents to satisfy
Westerburg’s proper purpose.
2 Western Royalty wrote that the trial court accepted the IRS ruling as “a good, common
sense approach to use”. (Cross Appellant’s Brief, p. 15). That language appears nowhere in the
trial court’s prior order and Western Royalty failed to cite where and when that statement was
allegedly made.
19
CONCLUSION and PRAYER
Westerburg contends that Judge Sowder correctly granted his motion for
summary judgment in that Westerburg is entitled to review Western Royalty’s
books and records pursuant to section 21.218 of the Texas Business Organizations
Code. Westerburg put on evidence of each element of his claim to access to
Western Royalty’s books and records as set forth in that section. Judge Sowder
held that there were no genuine issues of material fact regarding those elements
and rendered a summary judgment in favor of Westerburg granting him access to
eight specific categories of documents. Western Royalty contends that it has
produced sufficient documents to satisfy Westerburg’s purpose. Based on the
uncontroverted evidence before the trial court, Judge Sowder determined as a
matter of law that Western Royalty had failed to produce the documents necessary
for Westerburg to meet his obligation to the California Probate Court. Nothing in
Western Royalty’s brief points to any contradiction in the evidence before Judge
Sowder. As such, Judge Sowder properly granted Westerburg’s Motion for
Summary Judgment.
For the reasons stated herein, Westerburg prays that this Court affirm the
portion of Judge Sowder’s ruling in the Final Summary Judgment in which he
ordered Western Royalty to produce corporate books and records in eight specific
categories. Given the evidence adduced at the summary judgment proceeding,
Westerburg further prays that this Court render a judgment in favor of Westerburg
20
for his total attorney’s fees through this appeal. Finally, Westerburg also prays for
all other relief, in law and equity, to which he may be justly entitled.
Respectfully submitted,
WESTERBURG & THORNTON, P.C.
6060 N. Central Expressway, Suite 690
Dallas, Texas 75206
Phone No.: 214.528.6040
Facsimile: 214.528.6170
steve@mwtlaw.com
By: ______________________________
Steven Thornton
State Bar No. 00789678
ATTORNEY FOR PLAINTIFF
CERTIFICATE OF SERVICE
I certify that a true copy of the above was served on each attorney of record or
party in accordance with the Texas Rules of Civil Procedure and the Texas Rules of
Appellate Procedure on this 4th day of June, 2015.
Steven Thornton
21
CERTIFICATE OF COMPLIANCE
Pursuant to Texas Rule of Appellate Procedure 9.4(i)(3), I hereby certify
that this brief contains 3,456 words (excluding the caption, identity of parties,
table of contents, table of authorities, statement of case, statement of issues
presented, statement of jurisdiction, signature, proof of service, certification,
and certificate of compliance). This is a computer-generated document created
in Microsoft Word, using 14-point typeface for all text, except for footnotes
which are in 12-point typeface. In making this certificate of compliance, I am
relying on the word count provided by the software used to prepare the
document.
Steven Thornton
22
CROSS- APPELLEE’S APPENDIX
List of Documents
Final Summary Judgment A
California Probate Code § 8800 B
California Probate Code § 8804 C
California Probate Code § 8850 D
Tex. Bus. Orgs. Code § 21.218 E
Tex. Bus. Orgs. Code § 21.222 F
23
12.W2014 11:15:00 ""'--8Uclr
APPENDIX A i"IIMt"CIII*
TB
NO. 2014-510,562
ROBERT WESTERBURG, § IN THE DISTRICT COURT
ADMINISTRATOR OF THE ESTATE OF §
R.D. WEST a/k/a RANDY DIXON §
WESTERBURG §
§ 991H JUDICIAL DISTRICT
\r.S, §
§
WESTERN ROYALTY CORP. § LUBBOCK COUNTY, TEXAS
Flnallymmarv Judgmpnt
On December 8 2014, the Court considered the following motions by
submission made In the above..ntltled and numbenld cause:
a. P/Bintifrs Motion for Summary Judgment; and,
b. Defendant Western Royalty ColponJtton's Motion for SumtmJI)'
Judgment
Altar consldellng the motions, pleadings, evidence and the appropriate legal authority,
In part
this Court Is d the opinion that Plaintiff's motion should be GRANTED and that
in part
Defendanfs motion should be DENIED.
IT IS, THERFORE, ORDERED, ADJUDGED AND DECREED that Plaintiff Robert
Weetelburg, Administrator of the Estate of R.D. West a/kla Randy Dbcon Weeterburg's
Motion for Summmy Judgment Is GRANTED~" pert
IT IS FURTHER ORDERED that Dafendant Westem Royalty Corporation's
·n part
Motion for Summ&Jy Judgment is DENIED~
IT IS FURTHER ORDERED that the Defendant Weetem Royalty CorporatiOn
shall produce to Plaintiff Robert Westerburg, Administrator of the Estate of R.D. West
8/kJa Randy Dixon Weatetburg the follOWing documents:
256
1. The records containing the names and addresses of all past and current
shareholders of the corporation and the number and class or series of shares
issued by the corporation held by each of them.
2. The records containing the names and last known mailing addresses of
shareholders entitled to vote at any shareholders meeting.
3. The bank statements and cancelled checks for the period January 1, 2009, to
the present.
4. The cash flow report(s) and/or check register and/or check stubs reflecting
the monies received and the expenditures made for the period January 1,
2009, to the present.
5. The documents describing the mineral interest and/or legal description of
each mineral interest presently owned by Western Royalty Corp.
6. The deeds evidencing Western Royalty Corp.'s ownership of mineral or
royalty interests.
7. The documents evidencing ownership, leasehold, or royalty interest in real or
personal property owned by Western Royalty Corp.
8. The Division Orders reflecting mineral interests owned by Western Royalty
Corp.
IT IS FURTHER ORDERED that Defendant Western Royalty Corporation shall
copy and email the above-described documents to Plaintitrs counsel, Steven Thornton.
Defendant Western Royalty Corporation shall Bates-label the above-described
documents and shall identify which documents are responsive to which categories set
forth in this Order. Plaintiff shall reimburse Defendant for the reasonable costs of
photocopying the above-described documents.
IT IS FURTHER ORDERED that Defendant Western Royalty Corporation shall
produce the above-described documents listed in this Order to Plaintitrs counsel,
Steven Thornton, on or before _D_e_ce_m_b_e_r_1_8_th_ _ _ _ _ _ , 2014 at 5:00p.m.
Final Summary Judgment Page2
257
IT IS FURTHER ORDERED that Plaintiff have and recover from Defendant
$0.00
Western Royalty Corporation the sum of $13,487.50 as reasonable and necessary
attorney's fees incurred in this cause.
IT IS FURTHER ORDERED that Plaintiff have and recover from Defendant
Western Royalty Corporation the sum of $588.09 for costs incurred in this cause.
·-~URTHER ORDERED that Plaintiff have and recover from t
Western Royalty Corporation ve Thousand Dollars ($5,000.00) as
c
IT IS FURTHER ORDERED that the costs of court are taxed against the
Defendant Western Royalty Corporation for which let execution issue if the same are
not timely paid.
IT IS FURTHER ORDERED that this judgment carries post-judgment interest at the
rate of 5.00% per annum from the date of this judgment until paid, together with all costs of
court in this behalf expended.
All writs and processes for the enforcement and collection of this judgment or the
costs of court may issue as necessary.
All relief requested in this case and not expressly granted herein is denied. This
judgment, disposing of all the parties in the lawsuit and all of the issues, is final and
appealable.
Final Summary Judgment Page3
258
December 8, 2014
SIGNED on-----------"
w£&``&~' -
JUDGE PRESIDING
259
.. APPENDIX B
Page 1
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Deering's California Codes Annotated
Copyright BUSINESS ORGANIZATIONS CODE > TITLE 2. CORPORATIONS >
CHAPTER 21. FOR-PROFIT CORPORATIONS > SUBCHAPTER E. SHAREHOLDER RIGHTS AND
RESTRICTIONS
§ 21.218. Examination of Records
(a) In this section, a holder of a beneficial interest in a voting trust entered into under Section 6.251 is a holder of the
shares represented by the beneficial interest.
(b) Subject to the governing documents and on written demand stating a proper purpose, a holder of shares of a
corporation for at least six months immediately preceding the holder’s demand, or a holder of at least five percent
of all of the outstanding shares of a corporation, is entitled to examine and copy, at a reasonable time, the
corporation’s relevant books, records of account, minutes, and share transfer records. The examination may be
conducted in person or through an agent, accountant, or attorney.
(c) This section does not impair the power of a court, on the presentation of proof of proper purpose by a beneficial
or record holder of shares, to compel the production for examination by the holder of the books and records of
accounts, minutes, and share transfer records of a corporation, regardless of the period during which the holder was
a beneficial holder or record holder and regardless of the number of shares held by the person.
History
Enacted by Acts 2003, 78th Leg., ch. 182 (H.B. 1156), § 1, effective January 1, 2006.
Annotations
Notes
Revisor’s Notes. --
No substantive change is intended.
Case Notes
Business & Corporate Law: Corporations: Governing Documents & Procedures: Records & Inspection Rights: General
Overview
Business & Corporate Law: Corporations: Governing Documents & Procedures: Records & Inspection Rights: Inspection
Rights: Remedies
Business & Corporate Law: Corporations: Governing Documents & Procedures: Records & Inspection Rights: Inspection
Rights: Shareholders
LexisNexis (R) Notes
Business & Corporate Law: Corporations: Governing Documents & Procedures: Records & Inspection Rights:
General Overview
1. Divorced wife, who had beneficial ownership of 10 percent of corporate stock standing on corporate records in the name
of her former husband or a trustee, was entitled to examine the corporate books. Texas Infra-Red Radiant Co. v. Erwin, 397
S.W.2d 491, 1965 Tex. App. LEXIS 2378 (Tex. Civ. App. Eastland 1965).
Steve Thornton
Page 2 of 2
Tex. Business Organizations Code § 21.218
Business & Corporate Law: Corporations: Governing Documents & Procedures: Records & Inspection Rights:
Inspection Rights: Remedies
2. Attorney’s fees should not have been awarded to a minority shareholder because the evidence did not show that
corporate books and records had been withheld in violation of former Tex. Bus. Corp. Act Ann. art. 2.44(C) (recodified at
Tex. Bus. Orgs. Code Ann. § 21.218(b)). The company was entitled to impose reasonable restrictions for the protection and
integrity of its books and records when it required that certain items be copied on its premises. Ritchie v. Rupe, 339 S.W.3d
275, 2011 Tex. App. LEXIS 2217 (Tex. App. Dallas 2011).
Business & Corporate Law: Corporations: Governing Documents & Procedures: Records & Inspection Rights:
Inspection Rights: Shareholders
3. Attorney’s fees should not have been awarded to a minority shareholder because the evidence did not show that
corporate books and records had been withheld in violation of former Tex. Bus. Corp. Act Ann. art. 2.44(C) (recodified at
Tex. Bus. Orgs. Code Ann. § 21.218(b)). The company was entitled to impose reasonable restrictions for the protection and
integrity of its books and records when it required that certain items be copied on its premises. Ritchie v. Rupe, 339 S.W.3d
275, 2011 Tex. App. LEXIS 2217 (Tex. App. Dallas 2011).
LexisNexis ® Texas Annotated Statutes
Copyright © 2015 by Matthew Bender & Company, Inc. a member of the LexisNexis Group All rights reserved.
Steve Thornton
APPENDIX F
Tex. Business Organizations Code § 21.222
This document is current through the 2013 3rd Called Session
Texas Statutes and Codes > BUSINESS ORGANIZATIONS CODE > TITLE 2. CORPORATIONS >
CHAPTER 21. FOR-PROFIT CORPORATIONS > SUBCHAPTER E. SHAREHOLDER RIGHTS AND
RESTRICTIONS
§ 21.222. Penalty for Refusal to Permit Examination of Certain Records
(a) A corporation that refuses to allow a person to examine and make copies of account records, minutes, and share
transfer records under Section 21.218 is liable to the shareholder for any cost or expense, including attorney’s fees,
incurred in enforcing the shareholder’s rights under Section 21.218. The liability imposed on a corporation under
this subsection is in addition to any other damages or remedy afforded to the shareholder by law.
(b) It is a defense to an action brought under this section that the person suing:
(1) has, within the two years preceding the date the action is brought, sold or offered for sale a list of shareholders
or of holders of voting trust certificates for shares of the corporation or any other corporation;
(2) has aided or abetted a person in procuring a list of shareholders or of holders of voting trust certificates for
the purpose described by Subdivision (1);
(3) has improperly used information obtained through a prior examination of the books and account records,
minutes, or share transfer records of the corporation or any other corporation; or
(4) was not acting in good faith or for a proper purpose in making the person’s request for examination.
History
Enacted by Acts 2003, 78th Leg., ch. 182 (H.B. 1156), § 1, effective January 1, 2006; am. Acts 2011, 82nd Leg., ch.
139 (S.B. 748), § 25, effective September 1, 2011.
Annotations
Notes
Revisor’s Notes. --
No substantive change is intended.
2011 amendment,
deleted ″in consideration″ after ″certificates″ in (b)(1).
Case Notes
Business & Corporate Law: Corporations: Shareholders: Actions Against Corporations: General Overview
Civil Procedure: Remedies: Writs: General Overview
LexisNexis (R) Notes
Business & Corporate Law: Corporations: Shareholders: Actions Against Corporations: General Overview
1. Shareholder that brought suit against a corporation seeking permission to examine the books and records of the
corporation was entitled to attorney fees because the shareholder was the ″shareholder of record″ even though the shares
were in the name of another pledgee to secure payment of corporate debt. Ft. Worth KJIM, Inc. v. Walke, 604 S.W.2d 362,
Steve Thornton
APPENDIX F Page 2 of 2
Tex. Business Organizations Code § 21.222
1980 Tex. App. LEXIS 3757 (Tex. Civ. App. Fort Worth 1980).
Civil Procedure: Remedies: Writs: General Overview
2. Where the relators, a company, and certain of its officers, brought a mandamus proceeding before the court to have the
trial court expunge from the record an order for discovery, the court held that the trial court, in granting certain
stockholders’ motion for discovery, had deprived relators of a jury trial on the issue of proper purpose because the
stockholders would have received through the order allowing discovery all of the relief sought in the main suit, and thus
relators were entitled to a writ of mandamus ordering the trial court to expunge its order for discovery. Uvalde Rock Asphalt
Co. v. Loughridge, 425 S.W.2d 818, 1968 Tex. LEXIS 314, 11 Tex. Sup. Ct. J. 268 (Tex. 1968).
LexisNexis ® Texas Annotated Statutes
Copyright © 2015 by Matthew Bender & Company, Inc. a member of the LexisNexis Group All rights reserved.
Steve Thornton