William H. Scurlock v. John M. Hubbard

ACCEPTED
06-15-00014-CV
SIXTH COURT OF APPEALS
TEXARKANA, TEXAS
3/19/2015 4:52:34 PM
DEBBIE AUTREY
CLERK

CAUSE NO. 06-15-00014-CV
__________________________________________________________________
FILED IN
6th COURT OF APPEALS
IN THE COURT OF APPEALS TEXARKANA, TEXAS
FOR THE SIXTH DISTRICT OF TEXAS, TEXARKANA DIVISION
3/20/2015 8:21:00 AM
__________________________________________________________________
DEBBIE AUTREY
Clerk

WILLIAM H. SCURLOCK §
§
v. §
§
JOHN M. HUBBARD §
__________________________________________________________________

APPELLANT’S BRIEF
__________________________________________________________________

ON APPEAL FROM THE 102nd JUDICIAL DISTRICT COURT
CAUSE NO. 14C1653-102
__________________________________________________________________

Cory J. Floyd
Texas Bar No. 24049365

Cammy R. Kennedy
Texas Bar No. 24079245

NORTON & WOOD, L.L.P.
315 Main Street
Texarkana, Texas 75501
Phone: (903) 823-1321
FAX: (903) 823-1325

ATTORNEYS FOR APPELLANT,
WILLIAM H. SCURLOCK

ORAL ARGUMENT REQUESTED
 IDENTITY OF PARTIES AND COUNSEL

Appellant
William H. Scurlock

Appellant’s Appellate Counsel & Trial Counsel
Cory J. Floyd
Cammy R. Kennedy
NORTON & WOOD, L.L.P.
315 Main Street
Texarkana, Texas 75501
Phone: (903) 823-1321
FAX: (903) 823-1325
Email: cory@nortonandwood.com
Email: cammy@nortonandwood.com

Appellee
John M. Hubbard

Appellee’s Appellate Counsel &Trial Counsel
Brent M. Langdon
Kyle B. Davis
Langdon & Davis
625 Sam Houston Drive, Suite A
New Boston, Texas 75570
Phone: (903) 628-5571
Fax: (903) 628-5868
Email: blangdon@ldatty.com
Email: kdavis@ldatty.com

Trial Court Judge
Judge Bobby Lockhart
102nd Judicial District Court
Bi-State Justice Building
100 N State Line, Box 10
Texarkana, Texas 75501
Phone: (903) 798-3527
Fax: (903) 798-3301

i

 TABLE OF CONTENTS

Identity of Parties and Counsel .................................................................. i

Table of Contents ................................................................................... ii-iii

Index of Authorities ..............................................................................iv-vii

Statement of the Case ............................................................................. 1-2

Issues Presented ......................................................................................... 3

ISSUE ONE: Should the receivership be vacated when the
Plaintiff failed to meet his burden and establish a
showing of entitlement to the appointment of a
receiver to rehabilitate Pecan Point Brewing Co.
as required by Texas Business Organizations
Code §11.404?......................................................... 3

ISSUE TWO: Should the receivership and injunction be vacated
when the trial court did not condition either on
appropriate bonds or the receiver’s qualification,
as required by Texas law? ..................................... 3

ISSUE THREE: Should the temporary injunction be vacated when
Plaintiff failed to meet his burden and establish a
showing of entitlement to such extraordinary
relief? ...................................................................... 3

Statement of Facts................................................................................... 4-6

Summary of the Argument ..................................................................... 7-9

Argument ............................................................................................. 10-55

Standard of Review .................................................................... 10-11

ii

 ISSUE ONE: The receivership should be vacated when the
Plaintiff failed to meet his burden and establish a
showing of entitlement to the appointment of a
receiver to rehabilitate Pecan Point Brewing Co.
as required by Texas Business Organizations
Code §11.404. .................................................. 12-34

ISSUE TWO: The receivership and injunction should be
vacated when the trial court did not condition
either on appropriate bonds or the receiver’s
qualification, as required by Texas law ......... 34-41

ISSUE THREE: The temporary injunction should be vacated
when Plaintiff failed to meet his burden and
establish a showing of entitlement to such
extraordinary relief ........................................ 41-54

Prayer ................................................................................................... 54-55

Certificate of Compliance ......................................................................... 56

Certificate of Service ................................................................................ 56

Appendix

Trial court’s judgment dated February 3, 2015
Clerk’s Record, page 67-73....................................................Tab 1

Selected Texas Rules and Statutes
Tex. Bus. Orgs. Code Ann. §§11.404, 21.218, 21.719, 21.761;
Tex. Civ. Prac. & Rem. Code Ann. §§64.022, 64.023;
Tex. R. Civ. P. 680, 684, 695a ................................................Tab 2

Company Agreement for Pecan Point Brewing Company
Reporter’s Record, Volume IV, Plaintiff’s Exhibit C............Tab 3

December 2, 2014 Written Consent of the Shareholders
Reporter’s Record, Volume IV, Defendant’s Exhibit 4 .........Tab 4

iii

 INDEX OF AUTHORITIES

RULES

Tex. R. Civ. P. 680 .................................................................................... 41

Tex. R. Civ. P. 684 .............................................................................. 35, 40

Tex. R. Civ. P. 695a ........................................................................ 8, 35, 37

STATUTES

Tex. Civ. Prac. & Rem. Code Ann. §64.022 (Vernon 1985) ................. 8, 39

Tex. Civ. Prac. & Rem. Code Ann. §64.023 (Vernon 1985) ........... 8, 35, 38

Tex. Bus. Orgs. Code Ann. §11.404(a)(1)(A-E) (Vernon 2011) ........... 7, 13

Tex. Bus. Orgs. Code Ann. §11.404(a)(1)(B) (Vernon 2011) ......... 8, 14, 16

Tex. Bus. Orgs. Code Ann. §11.404(a)(1)(C) (Vernon 2011) ............... 8, 14

Tex. Bus. Orgs. Code Ann. §11.404(b)(3) (Vernon 2011) ........................ 31

Tex. Bus. Orgs. Code Ann. §21.218 (Vernon 2006) ................................. 50

Tex. Bus. Orgs. Code Ann. §21.719 (Vernon 2006) ................................. 30

Tex. Bus. Orgs. Code Ann. §21.761 (Vernon 2006) ................................. 14

CASES

Am. Employers' Ins. Co. v. Johnson, 47 S.W.2d 463 (Tex.Civ.App.
—San Antonio 1932), writ dismissed w.o.j. (July 6, 1932) ........... 39

Argo Data Res. Corp. v. Shagrithaya, 380 S.W.3d 249 (Tex. App.Dallas
2012, pet. denied) .......................................................... 11, 24, 25, 49

iv

Ballenger v. Ballenger, 694 S.W.2d 72 (Tex. App.—
Corpus Christi 1985, no writ) ......................................................... 41

Benefield v. State, 266 S.W.3d 25 (Tex. App.—Houston
[1st Dist.] 2008, no pet.) ............................................... 10, 16, 31, 33

BJVSD Bird Family P'ship, L.P. v. Star Elec., L.L.C., 413 S.W.3d
780 (Tex. App.—Houston [1st Dist.] 2013, no pet.) ....................... 33

Bocquet v. Herring, 972 S.W.2d 19 (Tex. 1998) ....................................... 10

Bryant v. Lake Highlands Dev. Co. of Texas, Inc., 618 S.W.2d 921
(Tex. Civ. App.—Fort Worth 1981, no writ) ................................... 40

Camp Mystic, Inc. v. Eastland, 399 S.W.3d 266
(Tex. App.—San Antonio 2012, no pet.) ......................................... 16

Citizens' Guar. State Bank of Hutchins v. Nat'l Sur. Co.,
258 S.W. 468 (Tex. Comm'n App. 1924) ......................................... 38

Clarendon Nat. Ins. Co. v. Thompson, 199 S.W.3d 482
(Tex. App. Houston [1st Dist.] 2006, no pet.) ................................. 42

Covington Knox, Inc. v. State, 577 S.W.2d 323 (Tex.Civ.App.
Houston [14th Dist.] 1979, no pet.) ................................................ 10

Elliott v. Weatherman, 396 S.W.3d 224 (Tex. App.—
Austin 2013, no pet.) ................................................................. 10, 32

Fortenberry v. Cavanaugh, 03-04-00816-CV, 2005 WL 1412103
(Tex. App.—Austin June 16, 2005, no pet.)
(not designated for publication) ................................................ 15, 32

Gibney v. Culver, 13-06-112-CV, 2008 WL 1822767 (Tex. App.
—Corpus Christi Apr. 24, 2008, pet. denied)
(not designated for publication) ...................................................... 25

v

Greater Fort Worth v. Mims, 574 S.W.2d 870 (Tex. Civ. App.
—Fort Worth 1978), dismissed (May 2, 1979) ............................... 32

Hughes v. Marshall Nat. Bank, 538 S.W.2d 820 (Tex. Civ. App.—
Tyler 1976), writ dismissed w.o.j. (Dec. 1, 1976) ........................... 16

Humble Exploration Co., Inc. v. Fairway Land Co., 641 S.W.2d 934
(Tex. App.—Dallas 1982), writ refused NRE (Apr. 27, 1983). ....... 12

Int'l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567
(Tex. 1963) ....................................................................................... 48

Kerr v. Texas Dept. of Pub.Safety, 973 S.W.2d 732 (Tex. App.—
Texarkana 1998, no pet.) ................................................................ 11

Lifeguard Benefit Services, Inc. v. Direct Med. Network Solutions, Inc.,
308 S.W.3d 102 (Tex. App.—Fort Worth 2010, no pet.) ................ 52

Lloyd v. Thorp, 42 S.W.2d 263 (Tex. Civ. App.—Dallas 1931, no
writ) .................................................................................................. 38

Marketshare Telecom, L.L.C. v. Ericsson, Inc., 198 S.W.3d 908
(Tex. App.—Dallas 2006, no pet.) ................................................... 42

Nationwide Life Ins. Co. v. Nations, 654 S.W.2d 860 (Tex. App.—
Houston [14th Dist.] 1983, no writ) ................................................ 40

New Amsterdam Cas. Co. v. W. D. Felder & Co., 214 F.2d 825
(5th Cir. 1954).................................................................................. 38

Patton v. Nicholas, 154 Tex. 385, 279 S.W.2d 848 (1955) ...................... 33

Pegasus Energy Group, Inc. v. Cheyenne Petroleum Co., 3 S.W.3d 112
(Tex. App.—Corpus Christi 1999, pet. denied) .............................. 11

Pray-Chamberlain Producers v. Barnhill, 46 S.W.2d 462 (Tex. Civ.
App.—San Antonio 1932, no writ) .................................................. 15

vi

Remote Control Hobbies, L.L.C. v. Airborne Freight Corp.,
14-12-01088-CV, 2014 WL 1267073 (Tex. App.—Houston [14th
Dist.] Mar. 27, 2014, no pet.) .......................................................... 33

Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014), reh'g denied
(Oct. 24, 2014) .................................................... 11, 15, 23, 25, 33, 48

Rowe v. Rowe, 887 S.W.2d 191 (Tex. App.—Fort Worth 1994),
writ denied (Oct. 5, 1995) ................................................................ 31

Rubin v. Gilmore, 561 S.W.2d 231 (Tex. Civ. App.
—Houston [1st Dist.] 1977, no writ) ............................................... 11

Synergy Ctr., Ltd. v. Lone Star Franchising, Inc., 63 S.W.3d 561
(Tex. App.—Austin 2001, no pet.) ................................................... 42

Transp. Co. of Texas v. Robertson Transports, Inc.,
261 S.W.2d 549 (Tex. 1953)......................................................... 9, 52

Tel. Equip. Network, Inc. v. TA/Westchase Place, Ltd., 80 S.W.3d 601
(Tex. App.—Houston [1st Dist.] 2002, no pet.) .............................. 16

Walling v. Metcalfe, 863 S.W.2d 56 (Tex. 1993) ................................ 43, 52

Williams v. Williams, 60 Tex. Civ. App. 179, 125 S.W. 937 (1910), writ
dismissed ........................................................................................... 7

vii

 STATEMENT OF THE CASE

On December 23, 2014, Plaintiff John M. Hubbard, in his

individual capacity and claiming status as “representative of Hubbard

& Scurlock, LLC and Pecan Point Brewing Company” filed his

Plaintiff’s Original Petition, Request for Declaratory Relief, and

Application for Injunction. [CR 4-53]. In the lawsuit he asserted causes

of action against Defendant William H. Scurlock for declaratory

judgment, breach of fiduciary duty, breach of contract, demand for

books and records, and brought applications for a temporary restraining

order, a temporary injunction, and for the appointment of a receiver

under Texas Business Organizations Code §11.404. [Id. at 8-13].

Defendant William H. Scurlock answered on January 20, 2015,

generally denying all claims, asserting affirmative defenses, and

bringing counterclaims for conversion, trade-secret misappropriation,

and breach of fiduciary duty. [CR 54-59]. Defendant sought a

temporary injunction by separate pleading filed on January 21, 2015.

[CR 60-65].

Plaintiff’s applications for a temporary injunction and the

appointment of a receiver, as well as Defendant’s application for a

1

temporary injunction, were heard by the trial court on January 26,

2015. [RR 2:1-225]. After receiving evidence on January 26, 2015, the

Court instructed counsel to return to court on January 30, 2015. [RR

2:218-219]. The trial court heard additional argument, but received no

evidence on January 30, 2015. [RR 3:1-85]. Thereafter, on February 3,

2015, the trial court entered its Order for Issuance of Temporary

Injunction and Appointment of Receiver. [CR 67-73]. It is from this

Order that appeal is taken. [CR 80-81].

2

 ISSUES PRESENTED FOR REVIEW

ISSUE ONE: Should the receivership be vacated when the

Plaintiff failed to meet his burden and establish a showing of

entitlement to the appointment of a receiver to rehabilitate Pecan Point

Brewing Co. as required by Texas Business Organizations Code

§11.404?

ISSUE TWO: Should the receivership and injunction be vacated

when the trial court did not condition either on appropriate bonds or the

receiver’s qualification, as required by Texas law?

ISSUE THREE: Should the temporary injunction be vacated

when Plaintiff failed to meet his burden and establish a showing of

entitlement to such extraordinary relief?

3

 STATEMENT OF FACTS

Defendant Bill Scurlock (hereinafter referred to as "Scurlock") is

the majority shareholder of Pecan Point Brewing Co., a Texas

corporation (hereinafter referred to “Pecan Point”). [RR 2:172]. Pecan

Point has six shareholders, one of whom is Plaintiff John Hubbard

(hereinafter referred to as "Hubbard"). [RR 2:77]. Scurlock and

Hubbard were both directors of Pecan Point until Hubbard’s removal on

December 2, 2014. [RR 4:Ex. D, G].

Scurlock and Hubbard are each one-half owners of Hubbard &

Scurlock, LLC, a Texas limited liability company (hereinafter referred

to as "H&S"). [RR 4:Ex. A].

Pecan Point owns and operates a brewery and restaurant in

downtown Texarkana, Texas. [RR 2:14; 2:118]. The brewery and

restaurant occupy a building owned by H&S. Id.

Scurlock and Hubbard contributed efforts and financial

resources to Pecan Point and H&S for the purposes of remodeling the

building and to establish the brewery and restaurant. [RR

2:23]. Scurlock contributed approximately $250,000 and Hubbard

contributed approximately $20,000. [RR 2:177].

4

 On December 2, 2014, Scurlock and other shareholders, by

written consent signed by a majority of the shareholders, removed

Hubbard as a director of Pecan Point and authorized Scurlock to

terminate Hubbard’s employment. [RR 4:Ex. G]. Hubbard has no

employment contract. [RR 2:77: 21-23]. Hubbard was terminated for

reasons including deficiencies in his work performance. [RR 2:122;

2:182-3]. Scurlock's counsel forwarded a copy of the resolution to

Hubbard’s counsel, notifying Hubbard of his removal and termination.

[RR 4:Ex. G].

There exists a controversy regarding Hubbard’s right to enforce

portions of the H&S Company Agreement. [CR 4-59]. Hubbard asserts

that actions of Scurlock entitle him to enforce the Company Agreement

and purchase Scurlock’s one-half interest of H&S. [CR 4-14]. Scurlock

denies this assertion. [CR 54-59].

Hubbard’s claims regarding Scurlock and Pecan Point arise

from his removal as director and subsequent termination of his

employment. [CR 6-13]. Hubbard’s claims regarding Scurlock and

H&S arise from the controversy over the H&S Company Agreement.

[CR 5-13].

5

 The trial court appointed Randy Moore to act as receiver, CEO

and CFO of Pecan Point Brewery and entered an injunction against

Scurlock on February 3, 2015. [CR 67-73].

6

 SUMMARY OF THE ARGUMENT

Since as early as 1910, Texas courts have called receiverships the

most harsh and drastic of all remedies—an absolute last resort—

available only when all other relief is inadequate. Williams v. Williams,

125 S.W. 937, 941 (1910, writ dismissed). Forty-one days after filing

suit, prior to consideration of any lesser remedy, the trial court ordered

a comprehensive receivership over Pecan Point governing every aspect

of the business. [CR 67-73].

At the hearing over Hubbard’s Applications for Injunction and for

Appointment of Receiver, Hubbard sought two avenues for

rehabilitative receivership. [CR 12-13].1 Hubbard failed to

demonstrate evidence of the following mandatory elements required by

sections 11.404 of the Texas Business and Organizations Code:

 All lesser legal and equitable relief was considered and

determined inadequate;

 There exists a deadlock in management;

 The deadlock creates a risk of irreparable injury; and

1Section 11.404 of the Texas Business and Organizations Code has five possible
grounds for appointment of a receiver, but Hubbard only pleaded two. TEX. BUS.
ORGS. CODE ANN. §11.404 (Vernon 2011); [CR 12-13].

7

  There was oppressive behavior by one or more of the

shareholders.

Tex. Bus. Orgs. Code Ann. §§11.404(a)(1)(B-C), 11.404(b)(3) (Vernon

2011).

Even if some proof showed that this harsh and last-resort remedy

was appropriate, the receivership over Pecan Point must be vacated

because the trial court instituted the receivership at a date certain,

without requiring Hubbard to post requisite bonds under Rule 695a of

the Texas Rules of Civil Procedure or Texas Civil Practice and

Remedies Code section 64.023 prior to the receivership taking effect.

Furthermore, the receiver was not required to properly qualify. Tex. R.

Civ. P. 695a; Tex. Civ. Prac. & Rem. Code Ann. §§64.023, 64.022

(Vernon 1985).

The trial court also granted a comprehensive temporary injunction

prohibiting Scurlock from operating Pecan Point. An injunction is

improper unless the plaintiff shows, and the court finds: (1) the plaintiff

will more than likely suffer irreparable injury if the injunction is not

granted; (2) the injunction will preserve the status quo; and (3) the

plaintiff has shown that he will likely succeed on the merits. Transp.

8

Co. of Texas v. Robertson Transports, Inc., 261 S.W.2d 549, 552 (Tex.

1953).

The record cannot and does not support the enormously high

burden of proof required for a receivership, and Hubbard failed to prove

any of the elements required for a temporary injunction. As such, the

trial court erred.

9

 ARGUMENT

I. STANDARD OF REVIEW

A. Receivership

The appellate court reviews an order appointing a receiver for

abuse of discretion. Benefield v. State, 266 S.W.3d 25, 31 (Tex. App.—

Houston [1st Dist.] 2008, no pet.).

“It is an abuse of discretion for a trial court to rule arbitrarily,

unreasonably, or without regard to guiding legal principles, or to rule

without supporting evidence.” Bocquet v. Herring, 972 S.W.2d 19, 21

(Tex. 1998). The review focuses on whether the pleadings and evidence

are sufficient to justify a receivership. See Covington Knox, Inc. v.

State, 577 S.W.2d 323, 325 (Tex.Civ.App.—Houston [14th Dist.] 1979,

no pet.); Benefield, 266 S.W.3d at 31. The burden of proof to show the

existence of circumstances justifying the appointment of a receiver rests

on the party seeking the appointment. Benefield, 266 S.W.3d at 32;

Elliott v. Weatherman, 396 S.W.3d 224, 230 (Tex. App.—Austin 2013, no

pet.).

10

 B. Shareholder Oppression

The burden of proof to prove shareholder oppression is higher

than that required for the other elements of a receivership.

Shareholder oppression is a question of law for the court. Ritchie v.

Rupe, 443 S.W.3d 856, 866 (Tex. 2014), reh'g denied (Oct. 24, 2014).

The Appellate Court reviews questions of law de novo and is not

obligated to give deference to the trial court's legal conclusions. Kerr v.

Texas Dept. of Pub. Safety, 973 S.W.2d 732, 734 (Tex. App.—Texarkana

1998, no pet.). As the arbiter of the law the court of appeals evaluates

those conclusions independently. Pegasus Energy Group, Inc. v.

Cheyenne Petroleum Co., 3 S.W.3d 112, 121 (Tex. App.—Corpus Christi

1999, pet. denied); Argo Data Res. Corp. v. Shagrithaya, 380 S.W.3d

249, 264 (Tex. App.—Dallas 2012, pet. denied).

C. Temporary Injunction

The appellate court reviews an order granting a temporary

injunction for abuse of discretion. Rubin v. Gilmore, 561 S.W.2d 231,

234 (Tex. Civ. App.—Houston [1st Dist.] 1977, no writ).

11

II. ISSUE ONE

The receivership should be vacated when the Plaintiff failed to

meet his burden and establish a showing of entitlement to the

appointment of a receiver to rehabilitate Pecan Point Brewing Co. as

required by Texas Business Organizations Code §11.404.

By written Order dated February 3, 2015, the trial court

appointed receiver Randy Moore “to act as the CEO and the CFO of

Pecan Point.” [RR 3:36]. As this discussion will show, the appointment

of Mr. Moore as receiver was an abuse of discretion because it was made

contrary to guiding rules or principles and lacked any supporting

evidence.

A. Hubbard Offered No Evidence of Any of the

Requirements for the Appointment of a Receiver.

Due to the severe nature of a receivership, Texas courts have

required that a receivership order “must be supported by evidence of

each element and conditions” set forth in the receivership statute. See

Humble Exploration Co., Inc. v. Fairway Land Co., 641 S.W.2d 934, 938

(Tex. App.—Dallas 1982), writ ref'd nre (Apr. 27, 1983). Section 11.404

12

of the Texas Business Organizations Code states that a court may

appoint a receiver for a company’s property and business if:

 the entity is insolvent or in imminent danger of insolvency;

 the governing persons of the entity are deadlocked in the

management of the entity's affairs, the owners or members

of the entity are unable to break the deadlock, and

irreparable injury to the entity is being suffered or is

threatened because of the deadlock;

 the actions of the governing persons of the entity are illegal,

oppressive, or fraudulent;

 the property of the entity is being misapplied or wasted; or

 with respect to a for-profit corporation, the shareholders of

the entity are deadlocked in voting power and have failed,

for a period of at least two years, to elect successors to the

governing persons of the entity whose terms have expired or

would have expired on the election and qualification of their

successors.

Tex. Bus. Orgs. Code Ann. § 11.404(a)(1)(A-E) (Vernon 2011).

13

 Hubbard pleaded two grounds for receivership: (1)the governing

persons are irreparably deadlocked and irreparable injury is threatened

by the deadlock, (Tex. Bus. Org. Code Ann. §11.404(a)(1)(B) (Vernon

2011)), and (2) the actions of Appellant, Scurlock, were oppressive. Tex.

Bus. Org. Code Ann. §11.404(a)(1)(C) (Vernon 2011). Viewing the

record in its entirety, this Court will find no evidence to support any of

the requirements in section11.404(a)(1)(B) or (C), much less all of them.

1. No Deadlock Exists at Pecan Point.

A deadlock exists when “the persons empowered to manage the

business and affairs…are so divided with respect to the management of

the business and affairs…that the required vote or consent to take

action…cannot be obtained.” Tex. Bus. Orgs. Code Ann. §21.761

(Vernon 2006).

A majority of Pecan Point shareholders voted by written

resolution on December 2, 2014, to remove Hubbard as director and to

vest authority over employment decisions in Scurlock. [D. Ex. 4]2.

There is no evidence, whatsoever, that the persons empowered to

2Citations to Reporter's Record, volume IV, which contains the exhibits admitted as
evidence, are in the following format: "'Party' Exhibit __" (e.g., D. Ex. 4 refers to
Reporter's Record, volume IV, Defendant's exhibit 4.).

14

manage Pecan Point’s business and affairs were so divided that the

required vote or consent to take action was unobtainable either before

or at the time of the hearing.

Quite the contrary, the shareholders did take action to manage

the business affairs of Pecan Point by written consent sixty-four days

before the receivership was ordered. [D.Ex. 4]. The claim of deadlock

arises simply from the fact that a decision was made concerning

Hubbard’s employment which Hubbard found disagreeable. One

minority shareholder’s mere disagreement with the majority is not a

deadlock. See Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014), reh'g denied

(Oct. 24, 2014); see also Fortenberry v. Cavanaugh, 03-04-00816-CV,

2005 WL 1412103, at *1 (Tex. App.—Austin June 16, 2005, no pet.)(not

designated for publication).3

Irreparable Injury

Texas courts have held that no person's property should be seized

and placed in the hands of another without a clear showing of imminent

irreparable injury. Pray-Chamberlain Producers v. Barnhill, 46 S.W.2d

3There was evidence and argument regarding the existence/non-existence of a
deadlock at H&S, a distinct and separate entity, but no receivership was ordered
over H&S. [RR 3:1-85].

15

462, 462 (Tex. Civ. App.—San Antonio 1932, no writ). Furthermore,

section 11.404(a)(1)(B) of the Texas Business Organizations Code

requires that any alleged deadlock within a company result in actual or

threatened irreparable injury to the entity, not a shareholder. Tex. Bus.

Org. Code Ann. §11.404(a)(1)(B) (Vernon 2006).

Texas case law is clear concerning what does and does not

constitute irreparable injury. To show irreparable injury, the movant

must present evidence that money damages cannot adequately protect

the interest. Benefield, 266 S.W.3d at 32. Additionally, the movant

must present evidence that damages cannot be measured by any certain

pecuniary standard. Tel. Equip. Network, Inc. v. TA/Westchase Place,

Ltd., 80 S.W.3d 601, 610 (Tex. App.—Houston [1st Dist.] 2002, no pet.).

Evidence that irreplaceables such as important records will be lost,

removed, or materially injured may constitute irreparable injury.

Hughes v. Marshall Nat. Bank, 538 S.W.2d 820, 824 (Tex. Civ. App.—

Tyler 1976), writ dismissed w.o.j. (Dec. 1, 1976). Fear or apprehension

of the possibility of injury is not sufficient. Camp Mystic, Inc. v.

Eastland, 399 S.W.3d 266, 276 (Tex. App.—San Antonio 2012, no pet.).

16

 Hubbard did not testify that money damages could not protect

Pecan Point or that damages to Pecan Point could not be measured. In

fact, Hubbard testified that he had no knowledge of Pecan Point’s

finances, whatsoever.

Q: Do you have knowledge of what the

financial condition is of this business?

A: No, sir, I do not. [RR 2:60].

The record is likewise empty of evidence that anything

irreplaceable was at risk. In fact, the only individual removing items

from the business was Mr. Hubbard. Mr. Hubbard was holding in his

personal possession, to the detriment of Pecan Point, certain grains and

hops which belonged to Pecan Point. [RR 2:79].

Hubbard did testify that he had fear or apprehension regarding

Pecan Point’s ability to produce quality beer, without his services:

Q: Are you concerned with the quality [of the

beer] remaining the same?

A: Yes, sir. I’m highly concerned. If a beer

was made in a style that Mr. Scurlock had with – well,

not that you can even buy kits for this size, but if it

17

 was done, the beer is much simpler and basic. [RR

2:59].

He further testified that he was concerned that the brewery would

run out of locally produced beer:

Q: All right. Your concern is they’re going to

run out of beer?

A: I’m concerned that they’re going to run out

of house-made beer, yes. [RR 2:58].

However, Hubbard testified that he had no knowledge regarding

the quantity of the beer on hand:

Q: Well, is it an emergency? This is an emergency

hearing for emergency relief. You’re asking that Bill

[Scurlock] be taken out of the salaried position, and you be

placed into a salaried position. Is that an emergent matter?

A: Yes.

Q: Okay. Why?

A: Because the basis of Pecan Point is making beer,

and I do not believe since I’ve left anyone has made beer.

Q: But you haven’t asked, have you?

18

 A: No, sir. [RR 2:101].

It is noteworthy that Jason Williams, the manager of Pecan Point,

with whom Mr. Hubbard has no significant complaint, testified that

Pecan Point’s beer inventory was adequate for operations. [RR 2:119].

Mr. Williams also testified that the very reason beer was temporarily

not brewed at Pecan Point, was due to Mr. Hubbard’s poor equipment

design. [RR 2:61]; [RR 2:98-99].

Q: The question was asked of you why not

brew any beer since November, or have you brewed any

beer since Mr. Hubbard left. Why? Why not?

A: Because in order to brew those beers, we’ve

had to make modifications to the equipment that Mr.

Hubbard had fabricated so that we could clean and

sterilize our equipment properly to even be able to

brew beer.

Q: Can you explain?

A: All the tanks, cook tanks, you know, mash

tun, and all the fermenting tanks need to be able to be

opened to be cleaned. Through Mr. Hubbard’s

19

 specifications, they were built as they were, without

the ability to be cleaned properly. Now we have had to

send the tanks off to get them re-fabricated with

manways so that they can actually be inside the keg

and cleaned it out. Per our consultant who came in

and told us, she goes, you’re going to have to be able to

get into these fermenting tanks. So we made measures

to do that so that we can continue brewing.

Q: Are you ready to brew beer now?

A: As soon as we get those tanks back. [RR

2:138].

Mr. Williams testified that Mr. Hubbard’s apprehension was

unfounded and that the business was better off without Mr. Hubbard as

an employee. [RR 2:123-124].

Q: Do you believe that the businesses are

thriving under current management?

A: Yes sir.

20

 Q: Do you believe that returning Mr. Hubbard

to the workplace would increase profitability or

improve the business in any way?

A: No, sir.

Q: Okay. So if you stayed in your place as

managing the business, Mr. Hubbard stayed in his

place of brewing the beer, if he’s not running the

business, you are, and we had some third-party that

was taking in the money and paying out the bills that

you said we need to pay these bills, would that work?

A: And the facet [sic] that Mr. Hubbard is here

is only to brew beer, not to –

Q: Yes, sir.

A: -- do anything, supervision or anything?

Q: Yes, sir.

A: I don’t believe it would work. I don’t believe

he has capability to do that, to produce the good quality

product.

21

 Q: Okay. Hang on just a second. If Mr.

Hubbard was ordered by this Court that he couldn’t do

anything other than brew beer and that you continued

to run the business and that there was one other

person out there, that that person took in the money

and paid out the bills, that’s not going to work?

A: I don’t think it would be successful, no, sir.

There cannot be irreparable injury arising from a deadlock if there

is no deadlock. However, even if a deadlock is assumed in this case,

there was still no showing of irreparable injury to Pecan Point.

Additionally, there was no showing of monetary damages, incalculable

damages, or damages for which money could not adequately protect.

The only evidence presented was speculation and apprehension.

Hubbard testified that he was apprehensive about finances, but he had

no factual knowledge of the finances. Hubbard testified he was

apprehensive about the quality and quantity of beer brewed at Pecan

Point, but he presented no evidence to support such apprehension.

Furthermore, the uncontroverted testimony of Mr. Williams shows that

22

any shortcoming in beer quality, or delay in beer production, was the

creation of Mr. Hubbard’s own shortcomings.

Because the majority of Pecan Point shareholders were actively

managing the company as evidenced by a written resolution drafted as

late as December 2, 2014, and Hubbard failed to present evidence of

irreparable injury, the receivership was granted in error.

2. Plaintiff Failed to Prove Oppression

The Texas Supreme Court, in Richie v. Rupe, narrowly defined

shareholder oppression in the context of conduct governed by section

11.404 of the Texas Business Organizations Code.

Oppression occurs when a corporation’s directors or managers

abuse authority, while intending to harm a shareholder’s interests, and

acting inconsistently with the honest exercise of business judgment,

thereby creating a serious risk of harm to the corporation. Rupe, 443

S.W.3d at 871.

In Rupe, the Texas Supreme Court described oppression as more

than a visible departure from the standards of fair dealing; more than a

violation of fair play, holding that oppression cannot be supported on a

23

finding that actions defeated a shareholder’s reasonable expectations

alone. Id. at 870-871.

The trial court found “the actions of the governing person,

Scurlock as the majority shareholder, is oppressive.” [CR 70]. The

record of Scurlock's actions, with regards to Pecan Point, stems mainly

from exercise of the vote of shares to terminate Hubbard. This decision

is consistent with sound business judgment and does not constitute

oppression as discussed herein below.

Hubbard Had No Right to Employment.

The shareholders’ action to terminate Hubbard is not oppressive

because Texas law does not recognize a minority shareholder's right to

continued employment without an employment contract. Shagrithaya,

380 S.W.3d at 266. Absent an employment contract, a shareholder's

expectation of continued employment cannot be considered objectively

reasonable. Id.

Hubbard testified that he had no employment contract. [RR 2:77].

No Evidence of Disparate Dividends or Compensation was Presented.

If a minority shareholder can show that another shareholder

employed by the company is compensated so far in excess of what is

24

reasonable for his position and level of responsibility that such

compensation is, in actuality, a de facto dividend in which the minority

shareholder does not share, such an act may support a finding of

minority shareholder oppression. Gibney v. Culver, 13-06-112-CV, 2008

WL 1822767, *16 (Tex. App.—Corpus Christi Apr. 24, 2008, pet.

denied)(not designated for publication); Shagrithaya, 380 S.W.3d at

268.

Since the opening of Pecan Point, no dividends have been paid,

and no evidence was presented of excess compensation; therefore, there

was no evidence of a de facto dividend.

The Honest Exercise of Business Judgment Does Not Constitute

Oppression

The voting of shares, consistent with honest business judgment,

for the benefit of the corporation, does not constitute oppression. Rupe,

443 S.W.3d at 870. Actions are not oppressive simply because they

defeat a shareholder’s expectations. Id.

There is no evidence in the record to suggest the Shareholder's

decision to terminate Hubbard was not consistent with the exercise of

25

"honest business judgment." On the contrary, there exists evidence in

support of Scurlock’s decision to terminate Hubbard.

Notably, Hubbard was not a good brew-master or employee.

Jason Williams testified:

Q: Do you know why Mr. Hubbard’s

employment was terminated?

A: Yes, sir.

Q: Please describe that for the Court.

A: Mr. Hubbard’s actions as a director caused

employee morale to be low by his constant micro-

managing and his inexperienced decisions that he

made for the business and mostly because of his lack of

organization, cleaning abilities and records for his brew

master, for being the brew -master.

Q: In your experience, was he a particularly

good brew-master for this organization?

A: No, sir.

Q: Did he keep the equipment clean?

A: No, sir.

26

 Q: Have you spent time cleaning up unclean

equipment that he left?

A: Yes, sir.

Q: Has any of the beer he produced or

participated in the production of been wasted or

spoiled?

A: Yes, sir.

Q: Can you describe that, just for the Judge?

A: We’ve lost some kegs here and there, and

then we lost production of about close to 40, 50 percent

of one of our brews, just not very organized in cleaning

and getting the product out there. So we lost quite a

bit due to the non-filtering system that was put into

place. So we lost a lot of each keg at a high amount of

loss. [RR 2:122]

Hubbard was a poor record-keeper:

Q: Did he keep good records?

A: No records that I’m aware of.

27

 Q: Did he provide you with the records that

you requested from him?

A: No, sir. [RR 2:122-123].

Furthermore, Scurlock testified Hubbard was a poor employee:

Q: What are some of the specific things he did

that resulted in his termination?

A: Well, his responsibility, duties were as brew

master, and neither – one of the problems that

management, from the general manager to the

accountant, to me, had was that John was not sharing

the information on brewing with anyone else. Now, it

was not simply about wanting a recipe to reproduce the

beer, although you could make an argument he was

working for hire for Pecan Point. He was receiving a

paycheck from Pecan Point. In my experience, that

means the work he did at Pecan Point belonged Pecan

Point. Yet, he would not share that information, and it

wasn’t just that we wanted to have the recipes to

recreate beer. I mean, that’s part of it when you’re

28

 looking at consistency down the road, but we could not

even get the cost of the beer because we didn’t have –

all we had was a big lump of ingredients but no

breakdown on what was used for each beer, and every

beer is different. Each recipe is different. But when

you don’t have recipes, you can’t allocate costs in the

cost of the product that we made.

Q: Is that information important in

determining what you’re going to brew next and what

you’re going to sell next?

A: Well, it’s important in knowing how much

money you’re making, what price to put on the beer to

start with, and then you want to, of course, you know,

plan ahead on what you’re going to do. [RR 2:182-183].

Because Hubbard was not performing his duties, was not a good

brew-master, and was a poor record keeper, the shareholders were

perfectly within their rights to terminate his employment.

29

Failure to Consult With Hubbard Is Not Oppression.

Shareholder Agreements are valid and enforceable in Texas. Tex.

Bus. Orgs. Code Ann. § 21.719 (Vernon 2006).

Hubbard testified that he was not consulted regarding business

decisions at Pecan Point. [RR 2:65].

Pecan Point had a Company Agreement. [P. Ex. C]. Pecan Point’s

Company Agreement states:

“The business and affairs of the corporation shall be managed by

the Board of Directors who may exercise all such powers of the

corporation and do all such lawful acts and things as are not by

statute or by the Certificate of Formation or by these Bylaws

directed or required to be exercised or done by the shareholders.”

Id.

Pecan Point’s Company Agreement provides for removal of a

director by written consent. See generally, id. Hubbard was removed

by written consent signed by a majority of the shareholders. [P. Ex. G].

Because Hubbard was removed as a director, his right to

participate in business decisions ended. Even assuming he had a right

to be consulted, no evidence was presented that such lack of

30

consultation “created a serious risk of harm,” as required by the test for

oppression.

Hubbard’s testimony about Scurlock's actions is not evidence of

oppression. There was no testimony evidencing an abuse of authority by

the managers or directors of Pecan Point. The Company Agreement,

signed by Hubbard, reserved business decisions to Pecan Point’s

directors. Hubbard was removed as a director, for good cause, by a

majority of the shareholders. Furthermore, Hubbard made no showing

that failure to consult with him created a serious risk of harm. [RR

2:65].

B. Lesser Remedies Not Attempted.

Section 11.404(b)(3) of the Texas Business Organizations Code

conditions the appointment of a receiver on the determination that all

other available legal and equitable remedies are inadequate. Tex. Bus.

Orgs. Code Ann. §11.404(b)(3) (Vernon 2011) (emphasis added);

Benefield, 266 S.W.3d at 31, See Rowe v. Rowe, 887 S.W.2d 191, 200

(Tex. App.—Fort Worth 1994), writ denied (Oct. 5, 1995) (observing that

statute permitting appointment of receiver over corporation authorizes

appointment only if party seeking relief convinces trial court that all

31

other legal and equitable remedies are inadequate). There was no

consideration of alternate remedies before a receiver was appointed in

this case, and therefore no evidence exists in the record to support this

determination.4

Even after failed remedies, such as an unsuccessful mediation,

more is required prior to the appointment of a receiver. Cavanaugh,

2005 WL at *3 .

Texas cases give us examples of lesser remedies which should

precede consideration of a receivership as follows:

 A limited receiver was appointed to conduct director’s meetings

to ensure bylaw compliance. Greater Fort Worth v. Mims, 574

S.W.2d 870, 871 (Tex. Civ. App.—Fort Worth 1978), dismissed

(May 2, 1979).

 The trial court should have considered an injunction restricting

the withdrawal of funds from bank accounts, prior to

appointing a receiver. Weatherman, 396 S.W.3d at 230.

4The Court recited that “other available legal and equitable remedies are
inadequate.” [RR 2:215]. However, the court does not elaborate, and the record is
bereft of any evidence supporting such finding.

32

  The trial court should have ordered a reasonable dividend and

enjoined the parties from future misdeeds. Patton v. Nicholas,

154 Tex. 385, 399, 279 S.W.2d 848, 858 (1955).

 Appointing a fiscal agent to report periodically to the court.

Rupe, 443 S.W.3d at 898.

 Enjoining oppressive conduct such as excessive salaries or

bonuses to individuals. Id.

 Awarding of money damages for oppressive conduct. Benefield,

266 S.W.3d at 32.

 The Court’s inherent power to hold a party in Contempt.

Remote Control Hobbies, L.L.C. v. Airborne Freight Corp., 14-

12-01088-CV, 2014 WL 1267073, at *4 (Tex. App.—Houston

[14th Dist.] Mar. 27, 2014, no pet.); BJVSD Bird Family P'ship,

L.P. v. Star Elec., L.L.C., 413 S.W.3d 780, 782 (Tex. App.—

Houston [1st Dist.] 2013, no pet.)

When considering whether the trial court adequately considered

lesser remedies, it is remarkable that the Court granted a

comprehensive receivership, beyond what even Hubbard requested.

Hubbard testified:

33

 Q: Mr. Hubbard, the limited purpose of your

request for a receivership is only for that person to

control the books and records until such time as we can

get to court for this Court to decide upon the ultimate

issue of the cause of action relating to declaratory

judgment or breach of contract; is that correct?

A: That is correct, sir. [RR 2:107].

Absent Hubbard presenting any evidence that a lesser legal or

equitable remedy would be inadequate, the court ruled arbitrarily,

unreasonably, or without regard to guiding legal principles, or ruled

without supporting evidence. To do so constitutes reversible error.

III. ISSUE TWO

The receivership should be vacated when the trial court did not

condition the receiver’s authority on the posting of appropriate bonds as

required by Texas Rule of Civil Procedure §695a, Texas Civil Practice &

Remedies Code §64.023 or a receiver’s oath as required by Texas Civil

Practice and Remedies Code §64.022.

34

 A. Bonds Required

There are two bonds which are the prerequisites to the

appointment of a receiver.

First, the applicant must post a bond (hereinafter referred to as

“Applicant’s Bond”) payable to the defendant in the amount fixed by the

court, “conditioned for the payment of all damages and costs in such

suit, in case it should be decided that such receiver was wrongfully

appointed to take charge of such property.” Tex. R. Civ. P. 695a. The

amount of any such bond must be fixed at a sum sufficient to cover all

probable damages and costs.” Id.

Second, the receiver must post a bond (hereinafter referred to as

“Receiver’s Bond”) approved by the appointing court, in an amount fixed

by the court and conditioned on the faithful discharge of his duties as

receiver. Tex. Civ. Prac. & Rem. Code Ann. §64.023 (Vernon 1985).

Because the court ordered a temporary injunction in the order

appointed a receiver, a third bond (hereinafter referred to as “Injunction

Bond” is required under Texas Rule of Civil Procedure 684. Tex. R. Civ.

P. 684.

The trial court ordered three bonds as follows:

35

 (1) “Receiver’s bond is set at $10,000 which amount is

sufficient to cover all probable damages and costs

should it be decided that receiver was wrongfully

appointed to take charge.” [RR 3:53-57].

(2) “Hubbard shall post a corporate bond in his individual

capacity in the amount of $100,000 which will fully

protect Defendant’s rights during the pendency of this

action.” [RR 3:53].

(3) “Hubbard shall post a corporate bond in his capacity as

a shareholder in Pecan Point Brewing Company in the

amount of $50,000 which will fully protect Defendant’s

rights during the pendency of this action.” [RR 3:63].

The trial court then ordered “Before the issuance of the injunction

(emphasis added), Plaintiffs must post bond as ordered payable to

Defendants, conditioned and approved as required by law.” [CR 73].

The receiver commenced his administration on February 3, 2015,

in accordance with the order, with the receiver’s bond, and no others, in

effect. [CR 67-73]. Hubbard has been unable to secure the two bonds

36

required, and has since filed a Motion To Amend Order Setting Bond on

February 20, 2015. [CR 76-79].

1. The Receivership Was Not Conditioned on the

Posting of the Applicant’s Bond.

Texas Rule of Civil Procedure 695(a) governs rehabilitative

receiverships and requires “No receiver shall be appointed with

authority to take charge of property until the party applying therefor

has filed with the clerk of the court a good and sufficient bond.” Tex. R.

Civ. P. 695a.

The trial court's order dated February 3, 2015, ordered Scurlock to

"turn over management of Pecan Point Brewing Company to the

Receiver as of February 3, 2015 at 3:00 p.m." [CR 69]. This is error

because, instead of conditioning this expedition into receivership on the

posting of the Applicant’s bond, the receivership was set to take effect at

a certain time and place, specifically, February 3, 2015, at 3:00 p.m.,

regardless of whether any of the required bonds were in place.

Furthermore, it is not clear from the trial court’s order whether

one of the three bonds ordered constitutes an Applicant’s Bond.

Regardless, it is clear the trial court abused its discretion because it

37

established the receivership at a time certain, without regard to the

existence of the Applicant’s Bond, in direct contravention of Texas Rule

of Civil Procedure 695a. This constitutes reversible error.

2. The Receiver’s Bond Isn’t Conditioned on the

Faithful Discharge of his Duties.

Before a receiver assumes his duties, he must execute a good and

sufficient bond that is (1) approved by the appointing court; (2) in an

amount fixed by the court; and (3) conditioned on faithful discharge of

his duties as receiver in the named action and obedience to the orders of

the court. Tex. Civ. Prac. & Rem. Code Ann. §64.023 (Vernon 1985).

Bonds of this nature are generally described as fidelity bonds. Lloyd v.

Thorp, 42 S.W.2d 263, 264 (Tex. Civ. App.—Dallas 1931, no writ).

Fidelity bonds provide protection against loss attributable to acts

of the individual including larceny, malfeasance, fraud or dishonesty.

Citizens' Guar. State Bank of Hutchins v. Nat'l Sur. Co., 258 S.W. 468,

470 (Tex. Comm'n App. 1924); New Amsterdam Cas. Co. v. W. D. Felder

& Co., 214 F.2d 825, 827 (5th Cir. 1954). Recovery is conditioned on

direct proof, by a preponderance of the evidence, of the individual’s bad

38

act. Am. Employers' Ins. Co. v. Johnson, 47 S.W.2d 463, 465 (Tex. Civ.

App.—San Antonio 1932), writ dismissed w.o.j. (July 6, 1932).

Here, the trial court only required the receiver to post bond

protecting against “probable damages and costs should it be decided

that receiver was wrongfully appointed to take charge.” [RR 3:53]. This

leaves Scurlock, the other Shareholders, and Pecan Point exposed to the

obvious hazard of receiver malfeasance. Although the receiver’s bond

does provide assurances against wrongful receivership, no requirement

for a fidelity bond was placed on the receiver, directly flouting Texas

Civil Practice and Remedies Code section 64.023 and constituting error.

B. Oath Required

Before a person assumes the duties of a receiver, he must be

sworn to perform the duties faithfully. Tex. Civ. Prac. & Rem. Code

Ann. §64.022 (Vernon 1985).

The order does not require the receiver to take an oath, or qualify

in any substitute or alternative fashion, constituting error.

Even if the receivership in this case was proper, an assertion

which is not conceded and vehemently contested by Appellant, the

bonds required by the trial court were improper, the receivership was

39

allowed to proceed without the appropriate bonds in place, and the

receiver was not required to qualify properly, including the taking of an

oath. Therefore the receivership should be vacated.

C. Injunction Bond

Texas Rule of Civil Procedure 684 requires that before the

issuance of a temporary injunction the applicant for the injunction must

execute and file with the clerk a bond to the adverse party, with two or

more good and sufficient sureties, to be approved by the clerk, in a sum

fixed by the court. Tex. R. Civ. P. 684. The Temporary Injunction bond

is required in order to protect the party against whom the injunction is

ordered from whatever damages may result from the time of the

issuance of the writ until the injunction is dissolved. Bryant v. Lake

Highlands Dev. Co. of Texas, Inc., 618 S.W.2d 921, 923 (Tex. Civ. App.—

Fort Worth 1981, no writ).

Failure of an applicant to file the required bond, ordered as a

condition precedent to the issuance of a temporary injunction, renders

the temporary injunction void ab initio. Nationwide Life Ins. Co. v.

Nations, 654 S.W.2d 860 (Tex. App.—Houston [14th Dist.] 1983, no

writ).

40

 In this case, the trial court required that “Before the issuance of

the injunction (emphasis added), Plaintiffs must post bond as ordered

payable to Defendants, conditioned and approved as required by law.”

[CR 73]. However, because Hubbard was unable to qualify for any of

the bonds issued, the temporary injunction must fail.

IV. ISSUE THREE

The temporary injunction should be vacated because Plaintiff

failed to meet his burden and establish a showing of entitlement to such

extraordinary relief.

Rule 680, et. seq. of the Texas Rules of Civil Procedure govern

when a temporary injunction is appropriate. Tex. R. Civ. P. 680. Texas

courts have held that a temporary injunction will not, or should not, be

granted unless the applicant has shown that irreparable injury will

result if such relief is not given and that the applicant has not adequate

remedy at law for the damages which may result. Ballenger v.

Ballenger, 694 S.W.2d 72, 75 (Tex. App.—Corpus Christi 1985, no writ).

In addition to failing to post the required bond for the temporary

injunction as discussed above, Hubbard failed to establish any of the

required qualifications; therefore, the temporary injunction must fail.

41

 A. Hubbard Showed No Probability of Injury.

Probable injury, which includes imminent harm, irreparable

injury, and the lack of an adequate legal remedy, is shown when there

is:

 a demonstration of harm;

 for which there can be no real legal measure of damages; or

 none that can be determined with a sufficient degree of

certainty, i.e., a noncompensable injury. Synergy Ctr., Ltd. v.

Lone Star Franchising, Inc., 63 S.W.3d 561, 567 (Tex. App.—

Austin 2001, no pet.).

Probable injury includes the consideration of whether there is no

adequate remedy at law for damages. Clarendon Nat. Ins. Co. v.

Thompson, 199 S.W.3d 482, 494 (Tex. App.—Houston [1st Dist.] 2006,

no pet.).

Evidence of fear, apprehension, and/or possibilities are not

sufficient to establish any injury, let alone irreparable injury.

Marketshare Telecom, L.L.C. v. Ericsson, Inc., 198 S.W.3d 908, 925-6

(Tex. App.—Dallas 2006, no pet.). Damages are usually an adequate

remedy at law, and the requirement of demonstrating an interim injury

42

is not to be taken lightly. Walling v. Metcalfe, 863 S.W.2d 56, 57-8 (Tex.

1993).

A review of the record reflects a lack of evidence proving probable

injury to Pecan Point should a temporary injunction be denied.

Hubbard put on evidence regarding his concern that beer was not being

brewed, but as stated earlier, he was uncertain as to whether such fears

were founded. As such, Hubbard's concern falls short of the standard

required to establish an injury, much less irreparable injury.

B. Hubbard Failed to Show a Demonstration of

Irreparable Harm and Lack of Adequate Legal Remedy

Available.

Mr. Hubbard was asked about what goal the injunction would

accomplish:

Q: Mr. Hubbard, you are requesting the Court

enter an injunction ordering that you be allowed to

return to work at the brewery, appoint a receiver, all

that stuff you just went through with your lawyer.

What I’m trying to figure out is what exactly would

43

 that accomplish? What would that accomplish in the

next, say, six months?

A: Well, I believe it would address my biggest

concern, that Pecan Point is not producing the beer

that its name says it is.

Q: What else? What else would a receivership

accomplish?

A: The receivership part?

Q: Sure.

A: Right now the books are being done by -- it

would tell me the truth of what’s happening in the

building -- in the business, I’m sorry.

Q: What else?

A: I believe it would lead to further -- it would

lead towards success of the business in the long-term.

Q: Anything else?

A: No, sir.

Q: You’ve told me that establishing a

receivership would be proper because the company is

44

 not producing the beer it says it is. Is that a fair

summation?

A: Yes.

Q: And that it would let you know the truth

about the financial condition of the business. Is that a

fair summation?

A: Yes.

Q: And that it would help the success of the

business; is that correct?

A: Yes.

Q: Anything else?

A: No, sir.

Q: Let’s talk about the injunction, the other

temporary relief you mentioned. What would that

accomplish?

A: I’m sorry, which other temporary relief, sir?

Q: Well, you went through about 12 things

when you were testifying. You testified to them.

45

 Which of those would be fixed? What would be

accomplished by this temporary injunction?

A: Mr. Scurlock and I clearly cannot work

together any more. We reached an impasse. Until

something is settled, there has to be, there must be an

outside presence to run the business, to keep -- to

overcome that impasse.

Q: Why do you say that? On what do you rely

for that opinion?

A: That my business partner, my ex-business

partner and I cannot work together any more. We

reached an impasse.

Q: And he should not be entitled to run the

business?

A: Correct.

Q: And you should be entitled to work at the

business?

A: Correct.

46

 Q: Okay. Anything else that the temporary

injunction or the receivership would accomplish?

A: No, sir.

Grouped, these goals fall into two categories: (1) Hubbard and

Scurlock do not agree on management of Pecan Point; and (2) Pecan

Point is not producing the beer Mr. Hubbard wants to produce, which,

in his opinion, would lead to success. There was no evidence that

disagreement at Pecan Point or differences of opinion concerning the

beer strategy were causing economic or other loss. The testimony was

“concern,” not damage, or speculation about future success, not harm.

[RR2:58]; [RR 2:74]. Notably absent was evidence of harm for which

there is no real legal measure of damages, or a non-compensable injury.

Accordingly, the court abused its discretion and the temporary

injunction must be vacated.

C. Plaintiff Failed to Plead and Prove a Probable

Right of Recovery.

In Hubbard’s Original Petition, Request for Declaratory Relief and

Application for Injunction, Hubbard pleaded the following: (1) Scurlock

breached his fiduciary duty to Pecan Point and Hubbard; (2) Scurlock

47

breached Hubbard's employment contract with Pecan Point; and

Hubbard made a demand for the books and records of Pecan Point.

1. No Breach of Fiduciary Duty was Proven

To prevail in a claim for breach of fiduciary duty, against

Scurlock, on behalf of Pecan Point, Hubbard had to prove that there

was a breach, of a duty, and such breach caused Pecan Point damages.

Corporate Officers owe a duty to the corporation they serve. Int'l

Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 576 (Tex. 1963).

Corporate officers do not owe a fiduciary duty to individual

shareholders, absent a contract or other special relationship. Rupe, 443

S.W.3d 856 at 875-6. In Rupe, the Texas Supreme Court confirmed that

directors owe a fiduciary duty to the corporation but explicitly stated

“we cannot adopt a common-law rule that requires directors to act in

the best interests of each individual shareholder at the expense of the

corporation. Id. at 888.

Implicit in Mr. Hubbard’s testimony was the theory that Mr.

Scurlock owed a duty to Pecan Point to not terminate Mr. Hubbard,

because he was good at brewing beer, and such talent would lead to

future success. However, upon close inspection, there is no evidence in

48

the record that Scurlock owed a duty to Pecan Point, to not terminate

Hubbard. There is no evidence that Hubbard was good at brewing beer.

Actually, the evidence showed the opposite. [RR 2:122-123, 182-183].

There was evidence that Pecan Point was better off without

Hubbard. In fact Jason Williams, the manager of Pecan Point,

testified:

Q: All that testimony, you’re not telling the Judge to

do that. You’re not telling him to appoint a receiver and let

John come be the brewer, are you?

A: No, sir.

Q: You think the current way is a better way, don’t

you?

A: Yes, sir. [RR 2:135-136].

Absent evidence of breach of a duty to Pecan Point, or damages

arising from such breach, there is no probable right of recovery and the

court erred in granting the injunction.

2. Hubbard Had No Employment Contract.

As stated above, Texas law does not recognize a minority

shareholder's right to continued employment without an employment

49

contract. Shagrithaya, 380 S.W.3d at 266.

In his petition, Hubbard claimed he had an employment contract

with Pecan Point, but in court, under oath, he testified to the contrary –

that he had no employment contract. [RR 2:77]. Absent an employment

contract, there can be no breach of such contract. Absent a breach of

such contract (a non-existent contract in this case), Hubbard cannot

prove a probable right of recovery. Absent evidence of a breach or

damages, the court erred in granting the injunction.

3. Hubbard’s Record Inspection Claim is Unripe

Until a Request is Denied.

A shareholder is entitled to examine the books and records of the

corporation. Tex. Bus. Orgs. Code Ann. §21.218 (Vernon 2006); See [CR

116] (Paragraph 8.03 of the Company Agreement requiring an annual

statement). Such right is exercised by written demand stating a proper

purpose. Tex. Bus. Orgs. Code Ann. §21.218 (Vernon 2006).

There is no evidence that a written demand, stating a proper

purpose was presented. There was the testimony of Hubbard that he

was denied the records. [RR 2:60]. However, Hubbard also testified

that he received, the very day of the injunction hearing, financial

50

records from the inception of Pecan Point through November 30, 2014.

[RR 2:60]. Pecan Point’s accountant testified that the financial records

were finalized approximately forty-five (45) days after the end of the

month. [RR 2:156].

Accordingly, at the hearing on January 26, 2015, fifty-seven days

after the end of November, and twenty-six days after the end of

December and the end of 2014, the November financial records were the

most current records available. There was no testimony that forty-five

days was an unreasonable amount of time, that such delay was contrary

to Texas Business Organizations Code section 21.218, or that such

delay was malicious.

Absent evidence of a written request, stating a proper purpose,

Hubbard was not denied his right to inspection. Because of evidence

that the most current financial records available were provided, the

court ruled arbitrarily, unreasonably, or without regard to guiding legal

principles, or without supporting evidence. Simply put, Hubbard’s

claim for records is either moot, or unripe.

51

 Absent evidence of a denial of such right, Hubbard cannot prove a

probable right to recovery, and the court erred in granting the

injunction.

D. The Relief Granted Does Not Preserve the Status Quo.

Trial courts may grant interlocutory injunctive relief only for the

purpose of preserving the status quo pending final trial on the merits.

Metcalfe, 863 S.W.2d at 58; Robertson Transports, Inc., 152 Tex. at 558.

Status quo is defined by the Texas Supreme Court as “the last,

actual, peaceable, non-contested status that preceded the pending

controversy.” Id.

“If an act of one party alters the relationship between that party

and another, and the latter contests the action, the status quo cannot be

the relationship as it exists after the action.” Lifeguard Benefit

Services, Inc. v. Direct Med. Network Solutions, Inc., 308 S.W.3d 102,

114 (Tex. App.—Fort Worth 2010, no pet.).

Considering the case at hand, the last, actual, peaceable, non-

contested status that preceded the pending controversy for Pecan Point,

was the time prior to Mr. Hubbard’s removal as director, and

subsequent termination -- approximately December 1, 2014. [RR 2:40].

52

 At that time, the following status existed:

 Scurlock was able to enter Pecan Point at will;

 Scurlock was able to control Pecan Point bank accounts;

 Scurlock was able to possess books and records of Pecan

Point;

 Scurlock was able to act as manager and agent for Pecan

Point; and

 Scurlock was able to represent to third parties that he had

authority to act on behalf of Pecan Point. [D. Ex. 4].

Hubbard had similar authority on or about December 1, 2014.

It is clear from the pleadings and evidence that this temporary

injunction was not sought to be status quo preserving but instead was

intended to be malicious or punitive. This is evidenced by Hubbard’s

testimony that he wanted an injunction to grant him control, restoring

his employment and terminating Scurlock. [RR 2:62].

The trial court, instead of returning to the peaceable, non-

contested status, created an entirely new framework for both parties,

contrary to the last status and Texas law. This try at a remedy

53

constitutes an abuse of discretion because it does not preserve the

status quo.

PRAYER

Thirty-four days after suit was filed, and six days after Scurlock

answered the suit, the trial court held an evidentiary hearing

considering an application for a rehabilitative receivership. Without

evidence, and prior to any attempt to exhaust lesser remedies, the trial

court imposed a comprehensive receivership over Pecan Point Brewing

Co. (“Pecan Point”) ordering the receiver “to act as the CEO and the

CFO of Pecan Point.” [RR 3:36].

The trial court failed to require the proper bonds for the

receivership or injunction. Rather than condition the receivership's

start upon the posting of the proper bonds, the trial court improperly

ordered the receivership to take effect at a certain time. Furthermore,

the court did not require the receiver to properly qualify.

Additionally, the trial court granted the injunction despite

Hubbard's failure to meet his burden and establish a showing of

entitlement to such extraordinary relief.

54

 WHEREFORE, PREMISES CONSIDERED, Appellant asks this

Court to vacate the trial court's Order for Issuance of Temporary

Injunction and Appointment of Receiver, reverse the trial court's

judgment, render judgment denying the application for receivership and

the application for injunction, and award to Appellant, William

Scurlock, all costs incurred with the filing of this appeal.

Respectfully submitted:

/s/ Cory J. Floyd
Cory J. Floyd
Texas Bar No. 24072348

Cammy R. Kennedy
Texas Bar No. 24079245

NORTON & WOOD, L.L.P.
315 Main Street
Texarkana, Texas 75501
Phone: (903) 823-1321
FAX: (903) 823-1325
Email: cory@nortonandwood.com 
          Email: cammy@nortonandwood.com

ATTORNEYS FOR APPELLANT,
WILLIAM H. SCURLOCK

55

 CERTIFICATE OF COMPLIANCE

I hereby certify that, pursuant to Rule 9 of the Texas Rules of
Appellate Procedure, Appellant’s Brief contains 8, 214 words, exclusive
of the caption, identity of parties and counsel, statement regarding oral
argument, table of contents, index of authorities, statement of the case,
statement of issues presented, statement of jurisdiction, statement of
procedural history, signature, proof of service, certification, certificate of
compliance, and appendix.

/s/ Cory J. Floyd
Cory J. Floyd

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on March 19, 2015, a true and correct

copy of the Appellant’s Brief was forwarded to the counsel below:

Brent M. Langdon
Kyle B. Davis
Langdon & Davis
625 Sam Houston Drive, Suite A
New Boston, Texas 75570
Phone: (903) 628-5571
Fax: (903) 628-5868
Email: blangdon@ldatty.com
Email: kdavis@ldatty.com

/s/ Cory J. Floyd
Cory J. Floyd

56

 CAUSE NO. 06-15-00014-CV

WILLIAM H. SCURLOCK,

Appellant,

V.

JOHN M. HUBBARD

Appellee

__________________________________________________________________

APPELLANT’S APPENDIX
__________________________________________________________________

LIST OF DOCUMENTS

1. Trial court’s judgment dated February 3, 2015
Clerk’s Record, page 67-73....................................................Tab 1

2. Selected Texas Rules and Statutes
Tex. Bus. Orgs. Code Ann. §§11.404, 21.218, 21.719, 21.761;
Tex. Civ. Prac. & Rem. Code Ann. §§64.022, 64.023;
Tex. R. Civ. P. 680, 684, 695a ................................................Tab 2

3. Company Agreement for Pecan Point Brewing Company
Reporter’s Record, Volume IV, Plaintiff’s Exhibit C............Tab 3

4. December 2, 2014 Written Consent of the Shareholders
Reporter’s Record, Volume IV, Defendant’s Exhibit 4 .........Tab 4

TABl
Filed 2/3/2015 3:06:35 PM
Billy Fox
District Clerk
Bowie County, Texas
Kelley White, Deputy
 3. The Defendant filed an application for temporary injunction against Plaintiff~

John M. Hubbard ("Hubbard").

4. Defendant has demonstrated probable and imminent harm or loss to Defendant to

an extent that unless certain grains and hops used in the preparation of beer are not returned

immediately Defendant will suffer irreparable injury for which there is no other legal remedy nor

adequate measure of damages by any certain pecuniary standard.

5. Hubbard and Scurlock have reached an impasse to the extent that if the Court

does not intervene it will cause irreparable harm to Plaintiffs. Additionally, Scurlock terminated

Hubbard's employment with Pecan Point Brewing Company and prohibited Hubbard from

entering the business at any time thereby prohibiting Hubbard's ability to brew beer which is

unique to Pecan Point Brewing Company and would be irreparable for the continued operation of

Pecan Point Brewing Company. That Scurlock and his wife did not provide financial

information regarding Pecan Point Brewing Company to Hubbard until the day of the hearing on

January 26, 2015 of the November 2014 financials, and then at the time of the hearing on

January 30, 2015 of the December financials. That Hubbard and other shareholders are entitled

to disbursements from Pecan Point Brewing Company.

6. The Court finds Plaintiffs have demonstrated a probable and imminent harm or

loss to Plaintiffs to an extent that unless this restraint as outlined below is not ordered

immediately Plaintiffs will suffer irreparable injury for which there is neither other legal remedy

nor adequate measure of damages by any certain pecuniary standard.

7. Therefore, by this order, the Court ORDERS the following:

a. The grains and hops in possession of Hubbard shall be returned to Pecan Point

Brewing Company by Hubbard by 5:00 p.m. on February 9, 2015, and Hubbard is

2
 specifically not restrained from Pecan Point Brewing Company from returning the

grains and hops as ordered.

b. Scurlock and his wife are temporarily restrained from entering Pecan Point

Brewing Company effective February 2, 2015 at 3:00 p.m. or until further order

of the Court or at the request of the Receiver.

c. Scurlock and his wife are temporarily restrained, unless requested by the

Receiver, from:

1. controlling, in any manner, any bank accounts associated with Pecan Point

Brewing Company;

II. possessing, holding, maintaining any books, records or documents 6f

Pecan Point Brewing Company; and

111. hindering, preventing or frustrating the business or financial operation of

Pecan Point Brewing Company.

d. Scurlock is temporarily restrained from acting as a manager or agent for Pecan

Point Brewing Company.

e. Scurlock is temporarily restrained from representing to any third party that he has

the authority to act on behalf of Pecan Point Brewing Company unless requested

by the Receiver.

f. Scurlock is ordered to turn over management of Pecan Point Brewing Company to

the Receiver as of February 3, 2015 at 3:00 p.m.

g. That all financial records of Pecan Point Brewing Company are to be turned over

to the Receiver upon the Receivers request either verbally or upon written request.

3
 8. The Court finds there is evidence to support the appointment of a receiver because

the governing persons of Pecan Point Brewing Company are deadlocked in the management of

Pecan Point Brewing Company's affairs, they are unable to break the deadlock, and irreparable

injury to Pecan Point Brewing Company is threatened because of the deadlock, and the actions of

the governing person, Scurlock as the majority shareholder, is oppressive. The appointment of a

receiver is necessary to conserve Pecan Point Brewing Company's property and business and to

avoid damage to interested parties, such as the other shareholders who have invested in Pecan

Point Brewing Company; that all other requirements of the law are complied with; and that other

available legal and equitable remedies are inadequate. That without a receiver, the success,

momentum, and good will that Pecan Point Brewing Company has acquired will devalue the

interests of Pecan Point Brewing Company's shareholders.

9. Therefore, by this order, the Court ORDERS the appointment of Randy Moore as

the receiver and authorizes the Receiver as follows:

a. To act and conduct the business affairs of Pecan Point Brewing Company in a

profitable manner respective to the interests of all shareholders;

b. To act as the sole manager of Pecan Point Brewing Company in all business,

employment and financial affairs;

c. To act as the accountant/bookkeeper of Pecan Point Brewing Company including:

i. authority to the Receiver and the Receiver alone to sign checks or other

financial instruments associated with the business affairs of Pecan Point

Brewing Company;

4
 ii. to keep in the Receiver's control or possession the books, records or documents

of Pecan Point Brewing Company, including payroll disbursements, making

deposits or monies received, and payment to any creditors; and

iii.to in effect act as CEO and CFO for Pecan Point Brewing Company.

d. To act in a manner consistent with sound business practices in the obtaining or

terminating any employees with exceptions of the General Manager, Jason

Williams, Chef, Justin Turner, and Rebecca Williams who can only be

terminated with approval of the Court.

e. To act consistent with shareholders decision to restrict Hubbard from coming

onto the property of Pecan Point Brewing Company and should Hubbard come

onto the property of Pecan Point Brewing Company without the specific

instruction of the Receiver or as otherwise permitted by the Court that Hubbard

will be subject to charges for criminal trespass, (class B).

f. The Receiver shall have the authority to invite Scurlock or Hubbard to Pecan

Point Brewing Company for any reason the Receiver feels is consistent with

conducting the business affairs of Pecan Point Brewing Company. If the

Receiver elects to invite either Scurlock or Hubbard onto the property of Pecan

Point Brewing Company their presence shall not violate the Court's restraining

orders.

g. The Court retains the authority to amend any duties of the Receiver as may be

determined necessary to conduct the business affairs.

5
 h. Receiver's bond is set at $10,000.00 which amount is sufficient to cover all

probable damages and costs should it be decided that Receiver was wrongfully

appointed to take charge.

1. Receiver shall obtain the bond and submit the cost of the bond to the Court for

review and determination of the responsible party.

j. Receiver shall submit all fees and expenses incurred to the Court for review

and determination of the responsible party.

10. Plaintiffs have exercised due diligence in prosecuting the underlying claim in this

cause.

11. Plaintiffs' injury will outweigh any injury to Defendant that may occur on

issuance of this injunction and appointment of receiver.

12. The injunction and appointment of receiver will not disserve the shareholders

interest.

13. Defendants' intended conduct as described above will change the status quo,

which should be maintained in the shareholder's interest.

14. Hubbard shall post a corporate bond in his individual capacity in the amount of

$100,000 which will fully protect Defendant's rights during the pend ency of this action.

15. Hubbard's shall post a corporate bond in his capacity as a shareholder in Pecan

Point Brewing Company in the amount of $50,000 which will fully protect Defendant's rights

during the pendency of this action.

It is therefore ORDERED that a temporary injunction issue, operative until judgment is

entered in this cause as set forth herein.

6
 Pursuant to Rule 692 of the Tex. Rules Civ. Proc., disobedience of this injunction may be

punished by the Court by contempt.

Before the issuance of the injunction, Plaintiffs must post bond as ordered payable to

Defendants, conditioned and approved as required by law.

Pursuant to Texas Business Organizations Code section 11.404, the Court ORDERS the

appointment of Randy Moore to serve as Receiver as set forth herein.

The Court, upon agreement of the parties, ORDERS the parties to mediation on or before

March 31, 2015 before James B. Cranford, Jr.

This Court sets the case for a trail on the merits for September 21, 2015.

at /t:/JJ ~ .M.

APPROVED AS TO FORM:

~2
~ Marshall C. Wood
Attorney for Plaintiffs Attorney for Defendant

7
TAB2
§ 11.404. Appointment of Receiver to Rehabilitate Domestic Entity, TX BUS ORG § 11.404

Vernon's Texas Statutes and Codes Annotated
Business Organizations Code (Refs & Annos)
Title 1. General Provisions (Refs & Annos)
Chapter 11. Winding up and Termination of Domestic Entity
Subchapter I. Receivership

V.T.C.A., Business Organizations Code § 11.404

§ 11.404. Appointment of Receiver to Rehabilitate Domestic Entity

Effective: September 1, 2011
Currentness

(a) Subject to Subsection (b), a court that has jurisdiction over the property and business of a domestic entity under Section
11.402(b) may appoint a receiver for the entity's property and business if:

(1) in an action by an owner or member of the domestic entity, it is established that:

(A) the entity is insolvent or in imminent danger of insolvency;

(B) the governing persons of the entity are deadlocked in the management of the entity's affairs, the owners or members
of the entity are unable to break the deadlock, and irreparable injury to the entity is being suffered or is threatened because
of the deadlock;

(C) the actions of the governing persons of the entity are illegal, oppressive, or fraudulent;

(D) the property of the entity is being misapplied or wasted; or

(E) with respect to a for-profit corporation, the shareholders of the entity are deadlocked in voting power and have failed,
for a period of at least two years, to elect successors to the governing persons of the entity whose terms have expired or
would have expired on the election and qualification of their successors;

(2) in an action by a creditor of the domestic entity, it is established that:

(A) the entity is insolvent, the claim of the creditor has been reduced to judgment, and an execution on the judgment was
returned unsatisfied; or

(B) the entity is insolvent and has admitted in writing that the claim of the creditor is due and owing; or

(3) in an action other than an action described by Subdivision (1) or (2), courts of equity have traditionally appointed a
receiver.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
§ 11.404. Appointment of Receiver to Rehabilitate Domestic Entity, TX BUS ORG § 11.404

(b) A court may appoint a receiver under Subsection (a) only if:

(1) circumstances exist that are considered by the court to necessitate the appointment of a receiver to conserve the property
and business of the domestic entity and avoid damage to interested parties;

(2) all other requirements of law are complied with; and

(3) the court determines that all other available legal and equitable remedies, including the appointment of a receiver for
specific property of the domestic entity under Section 11.402(a), are inadequate.

(c) If the condition necessitating the appointment of a receiver under this section is remedied, the receivership shall be terminated
immediately, the management of the domestic entity shall be restored to its managerial officials, and the receiver shall redeliver
to the domestic entity all of its property remaining in receivership.

Credits
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. Amended by Acts 2011, 82nd Leg., ch. 139 (S.B. 748), § 20, eff. Sept.
1, 2011.

Notes of Decisions (14)

V. T. C. A., Business Organizations Code § 11.404, TX BUS ORG § 11.404
Current through the end of the 2013 Third Called Session of the 83rd Legislature

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2
§ 21.218. Examination of Records, TX BUS ORG § 21.218

Vernon's Texas Statutes and Codes Annotated
Business Organizations Code (Refs & Annos)
Title 2. Corporations (Refs & Annos)
Chapter 21. For-Profit Corporations (Refs & Annos)
Subchapter E. Shareholder Rights and Restrictions

V.T.C.A., Business Organizations Code § 21.218

§ 21.218. Examination of Records

Effective: January 1, 2006
Currentness

(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.

Credits
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.

V. T. C. A., Business Organizations Code § 21.218, TX BUS ORG § 21.218
Current through the end of the 2013 Third Called Session of the 83rd Legislature

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
§ 21.719. Validity and Enforceability of Shareholders' Agreement, TX BUS ORG § 21.719

Vernon's Texas Statutes and Codes Annotated
Business Organizations Code (Refs & Annos)
Title 2. Corporations (Refs & Annos)
Chapter 21. For-Profit Corporations (Refs & Annos)
Subchapter O. Close Corporation

V.T.C.A., Business Organizations Code § 21.719

§ 21.719. Validity and Enforceability of Shareholders' Agreement

Effective: January 1, 2006
Currentness

(a) A shareholders' agreement executed in accordance with Section 21.715 is valid and enforceable notwithstanding:

(1) the elimination of a board of directors;

(2) any restriction imposed on the discretion or powers of the board of directors or other person empowered to manage the
close corporation; and

(3) that the effect of the shareholders' agreement is to treat the business and affairs of the close corporation as if the close
corporation were a partnership or in a manner that would otherwise be appropriate only among partners.

(b) A close corporation, a shareholder of the close corporation, or a party to a shareholders' agreement may initiate a proceeding
to enforce the shareholders' agreement in accordance with Section 21.756.

Credits
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.

V. T. C. A., Business Organizations Code § 21.719, TX BUS ORG § 21.719
Current through the end of the 2013 Third Called Session of the 83rd Legislature

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
§ 21.761. Appointment of Custodian, TX BUS ORG § 21.761

Vernon's Texas Statutes and Codes Annotated
Business Organizations Code (Refs & Annos)
Title 2. Corporations (Refs & Annos)
Chapter 21. For-Profit Corporations (Refs & Annos)
Subchapter P. Judicial Proceedings Relating to Close Corporation

V.T.C.A., Business Organizations Code § 21.761

§ 21.761. Appointment of Custodian

Effective: January 1, 2006
Currentness

(a) In a judicial proceeding under this section, a court shall appoint a custodian for a close corporation on presentation of proof
that:

(1) at a meeting held for the election of directors, the shareholders are so divided that the shareholders have failed to elect
successors to directors whose terms have expired or would have expired on qualification of a successor;

(2) the business of the close corporation is suffering or is threatened with irreparable injury because the directors, or the
shareholders or the persons empowered to manage the business and affairs of the close corporation under a shareholders'
agreement, are so divided with respect to the management of the business and affairs of the close corporation that the required
vote or consent to take action on behalf of the close corporation cannot be obtained and a remedy with respect to the deadlock
in a close corporation provision has failed; or

(3) the plaintiff or intervenor has the right to wind up and terminate the close corporation under a shareholders' agreement
as provided by Section 21.714.

(b) To be eligible to serve as a custodian, a person must comply with all the qualifications required to serve as a receiver under
Section 11.406.

Credits
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.

V. T. C. A., Business Organizations Code § 21.761, TX BUS ORG § 21.761
Current through the end of the 2013 Third Called Session of the 83rd Legislature

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
§ 64.022. Oath, TX CIV PRAC & REM § 64.022

Vernon's Texas Statutes and Codes Annotated
Civil Practice and Remedies Code (Refs & Annos)
Title 3. Extraordinary Remedies
Chapter 64. Receivership
Subchapter B. Qualifications, Oath, and Bond

V.T.C.A., Civil Practice & Remedies Code § 64.022

§ 64.022. Oath

Currentness

Before a person assumes the duties of a receiver, he must be sworn to perform the duties faithfully.

Credits
Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985.

Notes of Decisions (2)

V. T. C. A., Civil Practice & Remedies Code § 64.022, TX CIV PRAC & REM § 64.022
Current through the end of the 2013 Third Called Session of the 83rd Legislature

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
§ 64.023. Bond, TX CIV PRAC & REM § 64.023

Vernon's Texas Statutes and Codes Annotated
Civil Practice and Remedies Code (Refs & Annos)
Title 3. Extraordinary Remedies
Chapter 64. Receivership
Subchapter B. Qualifications, Oath, and Bond

V.T.C.A., Civil Practice & Remedies Code § 64.023

§ 64.023. Bond

Currentness

Before a person assumes the duties of a receiver, he must execute a good and sufficient bond that is:

(1) approved by the appointing court;

(2) in an amount fixed by the court; and

(3) conditioned on faithful discharge of his duties as receiver in the named action and obedience to the orders of the court.

Credits
Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985.

Notes of Decisions (18)

V. T. C. A., Civil Practice & Remedies Code § 64.023, TX CIV PRAC & REM § 64.023
Current through the end of the 2013 Third Called Session of the 83rd Legislature

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
Rule 680. Temporary Restraining Order, TX R RCP Rule 680

Vernon's Texas Rules Annotated
Texas Rules of Civil Procedure
Part VI. Rules Relating to Ancillary Proceedings
Section 5. Injunctions

TX Rules of Civil Procedure, Rule 680

Rule 680. Temporary Restraining Order

Currentness

No temporary restraining order shall be granted without notice to the adverse party unless it clearly appears from specific
facts shown by affidavit or by the verified complaint that immediate and irreparable injury, loss, or damage will result to the
applicant before notice can be served and a hearing had thereon. Every temporary restraining order granted without notice
shall be endorsed with the date and hour of issuance; shall be filed forthwith in the clerk's office and entered of record; shall
define the injury and state why it is irreparable and why the order was granted without notice; and shall expire by its terms
within such time after signing, not to exceed fourteen days, as the court fixes, unless within the time so fixed the order, for
good cause shown, is extended for a like period or unless the party against whom the order is directed consents that it may
be extended for a longer period. The reasons for the extension shall be entered of record. No more than one extension may
be granted unless subsequent extensions are unopposed. In case a temporary restraining order is granted without notice, the
application for a temporary injunction shall be set down for hearing at the earliest possible date and takes precedence of all
matters except older matters of the same character; and when the application comes on for hearing the party who obtained the
temporary restraining order shall proceed with the application for a temporary injunction and, if he does not do so, the court
shall dissolve the temporary restraining order. On two days' notice to the party who obtained the temporary restraining order
without notice or on such shorter notice to that party as the court may prescribe, the adverse party may appear and move its
dissolution or modification and in that event the court shall proceed to hear and determine such motion as expeditiously as
the ends of justice require.

Every restraining order shall include an order setting a certain date for hearing on the temporary or permanent injunction sought.

Credits
Dec. 5, 1983, eff. April 1, 1984. Amended by order of July 15, 1987, eff. Jan. 1, 1988.

Editors' Notes

COMMENT--1988

This amendment extends the length of the initial temporary restraining order from 10 days to 14 days.

Notes of Decisions (165)

Vernon's Ann. Texas Rules Civ. Proc., Rule 680, TX R RCP Rule 680
Current with amendments received through August 15, 2014

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
Rule 684. Applicant's Bond, TX R RCP Rule 684

Vernon's Texas Rules Annotated
Texas Rules of Civil Procedure
Part VI. Rules Relating to Ancillary Proceedings
Section 5. Injunctions

TX Rules of Civil Procedure, Rule 684

Rule 684. Applicant's Bond

Currentness

In the order granting any temporary restraining order or temporary injunction, the court shall fix the amount of security to
be given by the applicant. Before the issuance of the temporary restraining order or temporary injunction the applicant shall
execute and file with the clerk a bond to the adverse party, with two or more good and sufficient sureties, to be approved by the
clerk, in the sum fixed by the judge, conditioned that the applicant will abide the decision which may be made in the cause, and
that he will pay all sums of money and costs that may be adjudged against him if the restraining order or temporary injunction
shall be dissolved in whole or in part.

Where the temporary restraining order or temporary injunction is against the State, a municipality, a State agency, or a
subdivision of the State in its governmental capacity, and is such that the State, municipality, State agency, or subdivision of
the State in its governmental capacity, has no pecuniary interest in the suit and no monetary damages can be shown, the bond
shall be allowed in the sum fixed by the judge, and the liability of the applicant shall be for its face amount if the restraining
order or temporary injunction shall be dissolved in whole or in part. The discretion of the trial court in fixing the amount of
the bond shall be subject to review. Provided that under equitable circumstances and for good cause shown by affidavit or
otherwise the court rendering judgment on the bond may allow recovery for less than its full face amount, the action of the
court to be subject to review.

Credits
June 16, 1943, eff. Dec. 31, 1943. Amended by orders of Oct. 12, 1949, eff. March 1, 1950; June 10, 1980, eff. Jan. 1, 1981.

Notes of Decisions (130)

Vernon's Ann. Texas Rules Civ. Proc., Rule 684, TX R RCP Rule 684
Current with amendments received through August 15, 2014

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
Rule 695a. Bond, and Bond in Divorce Case, TX R RCP Rule 695a

Vernon's Texas Rules Annotated
Texas Rules of Civil Procedure
Part VI. Rules Relating to Ancillary Proceedings
Section 7. Receivers

TX Rules of Civil Procedure, Rule 695a

Rule 695a. Bond, and Bond in Divorce Case

Currentness

No receiver shall be appointed with authority to take charge of property until the party applying therefor has filed with the clerk
of the court a good and sufficient bond, to be approved by such clerk, payable to the defendant in the amount fixed by the court,
conditioned for the payment of all damages and cost in such suit, in case it should be decided that such receiver was wrongfully
appointed to take charge of such property. The amount of such bond shall be fixed at a sum sufficient to cover all such probable
damages and costs. In a divorce case the court or judge, as a matter of discretion, may dispense with the necessity of a bond.

Credits
June 16, 1943, eff. Dec. 31, 1943.

Notes of Decisions (33)

Vernon's Ann. Texas Rules Civ. Proc., Rule 695a, TX R RCP Rule 695a
Current with amendments received through August 15, 2014

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
TAB3
 COMP ANY AGR:)i:Jtl\1ENT
(DY J.AWSJ !!

> " ' • "
' . ,,_, '- ..,,- ,,.
~- -,
.... ,,,..,,,,.,.,. J
PECAN POlN'l'B.:aEWlNG CO.
A TEXAS 1''0R·PROFITCO~tPORA1'10N

DEFlNITlQNS
The following terms shall have !he following nWanings when used in this Company Agreement:

"Com1nu1y Ag1·eeme11t" and "Ilylaws" each mean this Company Agreement, as
.originally execured and as amended from dnie to time.

I ''Cor1101•11tiori" and "Co1npany" shall each 111ean Pecan Point Brewing Co., a Texas for·
profit Corporation. ·

I "CerHficMe of FotmaJion" shaJJ mean the Certificate of Formation .of the Cotporat1on
filed fo the office of the Texas Secretary ()f State on January I, 2014, as the same may be
amended from time to ti111e.

I "Entity" means any association, corpot·ation, general partnershifi, limited partnership,
limited !Jabllity partnership, limited liability company, joint stock association, joint
I venture, firm, nust, business trust, cooperative, and foreign associatioirs of like stn1cture.

"Person" includes an individual, partnership, limited partnership, limited liability
partnership, l.imited liability conipany, foreign limited liability company, trust, estate,
corporation, custodian, trustee, exec\ltor, admiiiistrator, nominee or entity in a
representative capacity.

"Shat'eholders" means any person holding tltle to any shares of the Co1•poration which
have been duly authorized and validly issued, and properly trnnsfe1Ted on the hooks of
the Corporation in accordance with the te1'ms hereof, The initial Shareholde1;1 of the
Corporation are listed on .Exhibit "A", attached hereto and incorporated herein for a.II
pt1rposes.

''Code" shall mean the 'texas Busine{ls Organimtions Code, as the same shall be
m11ended from time to tl111e.

''JR.S Code" shall mean the Internal Revenue Code of 1986 of the United States of
Arnetioa, 26 U.S.C. 101, et seq., as the same shall be amended from time to time,

EXHIBIT

I 0
~
if
,
l
I
II "Priuclpnl Office" means the ofllce of, the Registered Agent .as .shown in the Cenific:ate

I of Formation, or the other adckess as may be est11bl!Shed pursuant io these Regulations.

Il AR'T'!CLE l
I OFFICES
Il Section.1.01. Registered Office.and Agent
!
I'
q
The registered office of the oot·porntiot~ shall b.e at the Principal Office. The name of the
registered agent at such address is the individual or entity named in the Ce11ificate of Formation,
l but may be changed by ac1ton of the Board of Directors at any t.ime.
~
I~
Secrion 1.02. Other Offices
~
~ Th~
corporation may also have offices at such other places both within and without the
!l State of Texas as the Board of Directo1·s may from time to time determine or the bttsiness of the
corporation mayrequire.
J
!
ARTICLE fl
''
SHAREHOLDERS

Section 2.01. Place of Meetings

All meetings of the shareholders for the eleotlon of directors shall be held at the Principal
Office of the Corporation. Meetings of shareholders for any other purpose may be heltl at such
time aJ1d place, within or without the State of Texas, as shal I be stated in the notice of the
meeting or in a duly exec'uted waiver of notice the1·eof.

Secli.on 2.02. Antnlal Meeting

An annual nieeting of the sbare!folders, shall be held on the first Tuesday of January of
each year. lf such day is a legal holiday, then the meeting 111ay be held on the next secular day
i following. At such meeting, the shareholders shall elect directors and transact such other
business as may properly be brought b~fore the meeting.

Ii Section 2.03, Voting List

At least ten days before each meeth1g of shareholder·s, a complete list of the shareholders
I
I entitled to vote at said meeting, arranged in alphabetical order, with the residence of each and the
' number of voting shares held by each, shall be prepared by the officer or agent having ~harge of
i the stock transfe1· books, Su.ch list, fDr a period of ten days prior to such meeting, shall be subject
II
to lntpebtion by any shareholder at any time during usual business hours. Such iis! shall be
'
l
Cmnpnoy _Agrce.-ncnt ot' Jlcc1ln 1>oi111 llren;lug Co.
P-ng~ i
J
l'
J
produced and kept open at the time and place of the rneeting during the whol.e time thereof, and
1 shall be subject to the inspection of any shareholdecr w~o may be present.
''
!
I Sec.tio11 2.04. Special Meetiligs

l Special meetings of the shareholders, for any purpose or purposes, unless oth.erwise.
prescribed by stat\lte or \)y the CettiD()ate offi'IJOl'ation, with postage thereon pre,paid.

Section 2.06. Quorum

The holders of the majority of the shares issued and outstanding and entitled to vote
thereat, pres.ent in person or repl'esented by proxy, shall be l'equisite and shall constitute a
quorum at all meetings of the shoreholders for the transaction of business except as otherwise
ptovtded by statllte, by the CertTffcatc of Formation or by these Bylaws. If, however, such
quorum shall not he presel)t or represented at any meeting of the shareholders, the shal'eholders
entitled. to vote thereat, present ih person or represented by proxy, shall have power to ants located thereon by the corpo1·ation. ·

Section 2.08. Method of Voting
!
Except as hereinafter provided, evet·y stockholder of record .of the corporation shall he.
en lit led 11.t eMh meeting of stockholders to one vote for each share of stock standing in his name
oli the hooks of the corporation.
I!
t
'Ii
Section 2.09. Representation hy Proxy i
I
At any meeting of the stockholders, any stockholder may be represented and vote by a
prOX)' or proxies appoinwl by an inst1'ull'ient lo writing st1bsoribed by such shareho.lder or by his l
!
duly anthol'ized attorney-in-fact and bearing a date not more than eleven (11) months p!'lot' to l
s.uch meeting, l1nless such iQstrunwnt provides for a longer period. Each proxy shall be
revo.cable untcs.s expressly provided thetein to .be iitevoeable, and in no event shall it remain
irrevocable for a period of more than ele.ven (11) months. Each proxy shall be filed with the
Secretary of the corporation prior to or at the time of the meeting.

Section 2.l 0. Record Date; Closing Transfer .Books

The .Board of Directors may designate in advance a record date fo.r the purpose of
determining shareholders enti.tlcd to notice of or to vote at a meeting of shai·eholders, such record
da.tc lo be not less than ten (10) not more than fifty (50) days prior to such meeting; 01· the Board
of Directors may close the stock transfer books for such purpose for a period of not less than ten
(I 0) nor more than fifty (5.0) d(li111 Urcwiug Co.
Pngc ti
 ARTICLE lll

DIRECTORS

Section 3.01.. Management

The business a11d affairs of the corporation shall be managed by the Board of Diroctorn
who may exercise all such powers of the corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Formation or by these Bylaws directed or required to be
exercised or done by the .shareholders.

Section 3.02, Number; QualificatLon; Election; Term

The Board of Directors shall consist of two directors, each of whom shall be a
shareholder. The directors shall be elected at the arn.mal meeting of the shareholders, excer>t as
hereinafter provided, and each director elected shall hold office until his successor shall be
elected and Shall qualify.

Secti.on 3.03. Change in Number

The number of directors may be increased or decreased from time to time by arnend1.nent
to these Bylaws but no decrease shall have the effect of shortening tire term of any incumbent
director. Any directorship to be filled by reason of an ·increase in the number of directors shall
be filled by election or at an annual meeting or at a special meeting of shareholders calle(I for
that purpose. An amendment to this Company Agreement changing the munber of directors
shall require the unanimous consent of all of the shareholders.

Section 3.04. Removal

Any director may be removed for cause at any special meeting of shareholde!'s, by the
affirmative vote of a majority of the number of shares of the shareholders present in person or by
proxy at such meeting and entitled lo vote for the election of such director if notice of intention
to act up.oi1 such matter shall be given in the notice calling such meeting.

Section 3.05. Vacancies

Any vacancy oocurl'ing in tlte Board of Directors (by death, resignation, removal or
otherwise) may be filled by an affirmative vote of a majority of the remainiilg di1'ectors though
less than a quornm of the Board of Directo1·s. A director elected to fill a vacancy shall be.elected
for the unexpired term of his predecessor in office.

Section 3.06. Election of Directors

Directors shall be elected by a plurality vote of the shareholders in accordance with
Section 2.08 of these Bylaws.

Cot11pn.11y ~\g1·ccu1cnl or Pccn11 Polol 1Jrcwi11g Co.
rl_\gc 5
 '
.,,.'

. - -- -- - - --- - - - -· - ;,
· The @der$lgned, sharehdlders of Pemm ,P'olnt Bitw)l)g CQ, (the ''Corpot!\!161111), hi l\ooord1111ce
'

with S.~otlon 6,202 oNbe Texas Business Org1111fa~ti!)ns Cot'\e, Md the di>mpM)' Agreement of
· the Corporation, lw«iby!ld!!pt the full!!wlntrwrltten\>.Qrts~nt;
WH'EREAS,. tfu! p.et$llila afgrtlng thls ¢0itsQnt CQmitltt1te ~t.leMt the minhiiutn number of \'.l:\fes
.neQllssaty to .adqptthll folloWll)g tesolutJonsplild .

· WHEREAS, the \lnqel'Slgned deslre t<> tlike atlvaniage of the Co1J1pany Agteenielltexeouteil l.'>n
Jl.llliiitey 13; 2014 lllld th~ pwvl~o11s of' flie Texas Business OrganlzatlM$ Code, !llld ·\\l'i®Ute a
: · WtfUel). oonsl)llt .ht.lie11of fQ!'mllllY Mldlll~.<.a·······ap.•~.ftl).m~l!tl.ilg of·lh.e s~eholders an\l. llgt~ tltat
," .,,. the adoption of;the fol!owl11g>resolution$ $hall be Y@lld .a114 have the same fo~ Md ~ffeot. all .
. .~ tlrol.lgh s1.1oh r~solutions hl!d be iutd te!ll\lnate
. . . p.l<>ym.en~., Q.f!Ul··.·.Yem.p.J. .!>y. e.e. o. . fthe.Cra.Jio11. w..ilh.·o.ut regll!'arts1 ~u of
which shall he considered originals and that mis Wdtt.ell .con$¢Ul1111cludl11g multlple co11nt~~.
be tiled with the. minutes ofthe prooeedlngs !lf t~e $bar¢lt0ldei's ofthe Corporation.
D~\lei•J,, :2Ql4.

I k~ a:.~k-!)

7l~~·~
·~·.L&/AL

Written Consent~ Shareholders
Peclll\ Polnt Br11wing, Co.
Pilge2 of2