IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 11, 2009
No. 08-50413 Charles R. Fulbruge III
Clerk
ARTHUR W TIFFORD, PA
Plaintiff - Appellant
v.
TANDEM ENERGY CORPORATION, a Colorado corporation; TANDEM
ENERGY HOLDINGS INC, a Nevada corporation; TODD M YOCHAM; TIM
G CULP; JACK CHAMBERS; MICHAEL CUNNINGHAM
Defendants - Appellees
Appeal from the United States District Court
for the Western District of Texas
Before JOLLY, DAVIS, and DeMOSS, Circuit Judges.
DeMOSS, Circuit Judge:
This case concerns whether Tandem Energy Corporation (“Tandem
Colorado”), Tandem Energy Holdings, Inc. (“Tandem Nevada”), Todd Yocham,
Tim Culp, Jack Chambers, and Michael Cunningham (collectively “Defendants”)
can be held liable for conversion and civil conspiracy. We find genuine issues of
fact regarding whether Plaintiff Arthur W. Tifford, PA (“Tifford”), a Florida
corporation, owns a valid interest in Tandem Nevada, and whether Defendants’
actions unreasonably deprived Tifford of that interest. We therefore reverse the
district court’s grant of summary judgment and remand for further proceedings.
No. 08-50413
I.
This dispute centers on a stock certificate in Tifford’s possession. The
certificate, number TE 1069 (“Certificate 1069”), represents 2.7 million Tandem
Nevada shares. Defendants believe Certificate 1069 is invalid, and have refused
Tifford’s demand to be listed as a record owner on Tandem Nevada’s books.
Tifford says genuine issues of fact exist regarding the certificate’s validity, and
whether Tandem’s refusal to transfer record ownership constitutes conversion.
The conflict arises from a corporate deal gone wrong. In 2005, the owners
of Tandem Colorado agreed to sell the company. The buyers hired Ron Williams
to make a deal happen. Williams hired Aritex Consultants (“Aritex”), which was
owned and operated by Lyle Mortensen. Williams and Mortensen were to
execute a “reverse merger,” in which a publicly held shell company acquires the
stock of a private company in exchange for the public company’s stock. The plan
was this: Tandem Texas, a private company, was to purchase Tandem Colorado
and other assets. The yet-to-be-acquired shell company, Tandem Nevada, was
then to purchase Tandem Texas. There was apparently no written agreement
concerning the duties and compensation of Williams, Mortensen, or Aritex.
Mortensen purchased a public shell company, renamed it Tandem Nevada, and
named himself president, secretary, and sole director. In that capacity, he issued
20 million shares to himself in March 2005, to allow him to complete the
formalities necessary to the deal. What happened next is disputed.
Tifford acknowledges that the deal did not go according to plan, but notes
that a reverse merger took place. After the merger, Mortensen re-issued just
over 20 million shares of Tandem Nevada. Of those, just over 17 million went to
the sellers of Tandem Colorado and new investors. Three million shares went to
Aritex, Mortensen’s company, as compensation for expenses and services.
Mortensen resigned from the positions he held in Tandem Nevada, appointing
in his place certain of the Defendants. His shares were later reissued, including
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No. 08-50413
into a block of 2.7 million shares represented by Certificate 1069. All stock
issuances and transfers were done by Manhattan Transfer Registrar Company
(“Manhattan Transfer”), Tandem Nevada’s transfer agent.1
Defendants paint a different picture. They agree that Aritex was supposed
to receive 3 million shares of Tandem Nevada for shepherding the reverse
merger to a close. However, Defendants say that Williams, who is a “securities
fraud felon and disbarred attorney,” sold $8-9 million of the shares issued by
Mortensen in a “pump and dump” scheme, with Mortensen’s knowledge or
complicity. Defendants also aver that Mortensen did not have the power to issue
stock in Tandem Nevada in March 2005 because he was not actually a director
of the company. Moreover, Williams’s and Mortensen’s acts allegedly caused the
original buyers to back out of the deal. After Williams and Mortensen moved on,
Defendants restructured the deal. They capitalized Tandem Nevada directly
with the assets of Tandem Colorado, some other assets, and borrowed funds. In
sum, the originally contemplated reverse merger failed, but Defendants salvaged
a deal by converting Tandem Colorado into publicly held Tandem Nevada.
Defendants state that “[o]n August 25, 2005, the new Tandem Board of
Directors, by unanimous resolution, and pursuant to N EV. R EV. S TAT. § 78.211
cancelled the 20 million stock shares, including [Certificate 1069], based on an
investigation and certified opinion of counsel concluding the shares were issued
without consideration and were, therefore, invalid.” Most of the cancelled shares
were then reissued; only the shares issued to Aritex were not. In a letter dated
August 26, 2005, Tandem directed Manhattan Transfer to “not make any
transfers of cancelled shares and notify us immediately if any attempt or request
is made to transfer any of the cancelled shares.” Defendants say that they
notified Mortensen of the cancellation in a certified letter dated September 7,
1
Tifford named Manhattan Transfer as a defendant in the complaint. The district court
dismissed Manhattan Transfer for failure to prosecute. Tifford does not appeal this dismissal.
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No. 08-50413
2005. Defendants submitted the letter as summary judgment evidence, but did
not produce a certified mail receipt. Mortensen said in an affidavit that he does
not recall receiving notice of the cancellation.
In April 2006, Mortensen signed a Stock Power on behalf of Aritex which
purports to transfer the shares represented by Certificate 1069 to Tifford. In an
affidavit, Arthur Tifford, the owner of the eponymous corporate plaintiff, states
that the transfer was in partial satisfaction of a judgment entered for Tifford’s
client, Universal Express, Inc., in a Florida state-court lawsuit. Tifford now
claims a partial interest in the shares by virtue of a contingency-fee agreement
with Universal Express. Additionally, Tifford alleges he had no knowledge of
Tandem Nevada’s efforts to cancel the shares. In May 2006, Tifford’s agent, T.D.
Ameritrade, made a demand on Manhattan Transfer to have Certificate 1069
reissued in its name. Manhattan Transfer refused due to the August 26, 2005
stop order. On May 17, 2006, Tifford sent a letter to Tandem Nevada’s attorneys
demanding that the shares be reissued. Tandem Nevada refused.
On June 14, 2006, Tandem Nevada sued Aritex, Arthur Tifford and his
corporation, Williams, Mortensen, and Manhattan Transfer in Nevada state
court. Tandem Nevada sought a declaration that Certificate 1069 was invalid.
All defendants but Manhattan Transfer were dismissed for lack of personal
jurisdiction. On May 15, 2007, the court found that the dismissed defendants
were not indispensable parties, and granted summary judgment in favor of
Tandem Nevada. The court held that the shares issued by Mortensen, including
Certificate 1069, were invalid and void. The court ordered Manhattan Transfer
to void and refuse to transfer Certificate 1069 if such were presented to it. A
separate lawsuit involving Aritex and concerning the validity of the stock is
currently proceeding in a Texas state court.
Tifford filed this suit on June 12, 2007. Tifford sought a declaration of its
rights in Tandem Nevada and damages in excess of $12 million for conversion
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No. 08-50413
and civil conspiracy. Initially, Defendants moved to have the claim dismissed for
failure to state a claim. Upon considering evidence outside of the pleadings, the
district court construed Defendants’ motion as one for summary judgment.
However, Defendants have not filed answers to Tifford’s complaint. In a written
order, the court stated that the parties agreed that the conversion took place on
August 25, 2005, and Tifford did not own Certificate 1069 at that time. Thus,
Defendants did not deprive Tifford of a property interest, and summary
judgment was proper. In the alternative, the court held that the Nevada
judgment invalidating Certificate 1069 was an in rem judgment, and thus bound
Tifford. As Tifford could not demonstrate an unlawful act, the court granted
summary judgment in favor of Defendants on Tifford’s civil conspiracy claim as
well. Final judgment was entered and Tifford appealed. We have jurisdiction
pursuant to 28 U.S.C. § 1291.
II.
We review a grant of summary judgment de novo. Delta & Pine Land Co.
v. Nationwide Agribus. Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008). “The
judgment sought should be rendered if the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no genuine
issue as to any material fact and that the movant is entitled to judgment as a
matter of law.” F ED. R. C IV. P. 56(c). “We may affirm a summary judgment on
any ground supported by the record, even if it is different from that relied on by
the district court.” Holtzclaw v. DSC Commc’ns Corp., 255 F.3d 254, 258 (5th
Cir. 2001).
A.
“The unauthorized and wrongful assumption and exercise of dominion and
control over the personal property of another, to the exclusion of or inconsistent
with the owner’s rights, is in law a conversion.” Waisath v. Lack’s Stores, Inc.,
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No. 08-50413
474 S.W.2d 444, 447 (Tex. 1971).2 “[I]t is not necessary that there be a manual
taking of the property in question.” Id. However, the defendant’s actions must
impair the plaintiff’s ownership interest. See Prewitt v. Branham, 643 S.W.2d
122, 123 (Tex. 1982). The plaintiff must prove that: (1) he legally possessed the
property or was entitled to it; (2) the defendant wrongfully exercised dominion
and control over the property, excluding the plaintiff; (3) the plaintiff demanded
the property’s return; and (4) the defendant refused. See Small v. Small, 216
S.W.3d 872, 877 (Tex. App.—Beaumont 2007, pet. denied).
In Texas, a shareholder may sue a corporation for conversion of shares. See
Rio Grande Cattle Co. v. Burns, Walker & Co., 17 S.W. 1043, 1046 (Tex. 1891).
The first element, whether the plaintiff owns or has a right to the stock, is
determined under the law of the state of incorporation. See B & H Warehouse,
Inc. v. Atlas Van Lines, Inc., 490 F.2d 818, 821 (5th Cir. 1974); T EX. B US. &
C OMM. C ODE A NN. § 8.110(a)(1) (providing that the law of the issuer’s jurisdiction
governs the validity of a security). The second element requires a corporate act
that destroys or impairs the stock’s value, such as “unreasonable refusal to
transfer stock ownership. . . .” See Rodriguez v. Ortegon, 616 S.W.2d 946, 949
(Tex. App.—Corpus Christi 1981, no writ). Similarly, imposing unreasonable
restraints on a stock’s marketability can be conversion. See Sandor Petrol. Corp.
v. Williams, 321 S.W.2d 614, 619 (Tex. Civ. App.—Eastland 1959, writ ref’d
n.r.e.). The third and fourth elements, demand for return by plaintiff and refusal
by defendant, may be excused if it was apparent that the defendant would not
reverse its conduct. See id.; see also Prudential Petrol. Corp. v. Rauscher, Pierce
& Co., 281 S.W.2d 457, 460 (Tex. Civ. App.—Dallas 1955, writ ref’d n.r.e.).
2
The parties have briefed Texas’s law of conversion. Under the Erie rule, we must
apply the substantive law of the forum state—including choice of law rules, which may dictate
applying another state’s laws. See Denman v. Snapper Div., 131 F.3d 546, 548 (5th Cir. 1998).
However, by failing to brief any other state’s law, the parties have forfeited any choice of law
argument. See Kucel v. Walter E. Heller & Co., 813 F.2d 67, 74 (5th Cir. 1987).
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No. 08-50413
Tifford has shown genuine issues of fact for the elements of the conversion
claim. We therefore reverse the district court’s entry of summary judgment.
1.
Tifford has shown a genuine issue under Nevada law, which incorporates
Article 8 of the Uniform Commercial Code (“UCC”), whether it has a valid
interest in the shares. Tifford presented evidence that it obtained Certificate
1069 for value and without notice of its cancellation. See N EV. R EV. S TAT. §
104.8202(2)(a) (“A security . . . is valid in the hands of a purchaser for value and
without notice of the particular defect unless the defect involves a violation of a
constitutional provision.”); § 104.1201(cc) (“‘Purchase’ means taking by sale,
lease, discount, negotiation . . . or any other voluntary transaction creating an
interest in property.”). Tifford thus purports to be a “protected purchaser”
entitled to have the transfer of shares registered on Tandem Nevada’s books. See
N EV. R EV. S TAT. § 104.8401. Arthur Tifford states in his affidavit that Certificate
1069 was acquired as a partial satisfaction of a judgment against Williams, and
without knowledge that the shares were invalid. Defendants insist that Tifford
has not given consideration for the stock because the settlement was conditional
and was never recorded. Defendants also assert that Tifford had constructive
notice of the worthlessness of the shares—in essence, given Williams’s
reputation, Tifford should have smelled a rat. The relevant Nevada statutes
nowhere preclude one who acquires stock in conditional settlement of a
judgment from being a “purchaser for value” or a “protected purchaser.”
Moreover, the questions of notice as well as adequacy and finality of
consideration strike us as factual matters pertinent to “purchaser for value” or
“protected purchaser” status which cannot be decided at this stage. See, e.g.,
Demoulas v. Demoulas, 703 N.E.2d 1149, 1164, 1170-71 (Mass. 1998) (treating
“purchaser for value” status under UCC Article 8 as issue of fact).
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No. 08-50413
Defendants note that “a purchaser of a certificated . . . security acquires
all rights in the security that the transferor had or had power to transfer.” N EV.
R EV. S TAT. § 104.8302(1). Because Certificate 1069 was cancelled in 2005, goes
the argument, Tifford received a worthless piece of paper. There are several
problems with this argument. First, Mortensen has sworn that he does not recall
receiving notice of the cancellation. Defendants have not produced a certified
mail receipt showing otherwise. Whether Mortensen is telling the truth is a
disputed issue of material fact. Second, even if Mortensen knew of the August
2005 resolution, we are not convinced that, as a matter of law, the board’s
resolution cancelled the shares. As a treatise explains, “[i]f share certificates are
issued illegally, or by an officer fraudulently or without authority, and the
circumstances are such that they are either void or voidable, the corporation
may cancel them, or they may be cancelled by a court of equity in a suit brought
for that purpose by the corporation . . . .” W ILLIAM M EADE F LETCHER,
C YCLOPEDIA OF THE L AW OF C ORPORATIONS § 5166 (West 2008). Whether
Mortensen issued the shares “illegally,” “fraudulently,” or “without authority”
is an open question. In the present circumstances, we cannot determine as a
matter of law that the shares were void or voidable. Third, conversion is a tort
concerning property rights. As such, a conversion claim is assignable. See
generally PPG Indus., Inc. v. JMB/Houston Ctrs. Partners LP, 146 S.W.3d 79,
87 (Tex. 2004); State Farm Fire & Cas. Co. v. Gandy, 925 S.W.2d 696, 706-07
(Tex. 1996). In acquiring Certificate 1069, Tifford in essence bought the present
cause of action. Cf. Gresham v. Island City Sav. Bank, 21 S.W. 556, 558 (Tex.
Civ. App.—Galveston 1893, no writ). Finally, for reasons we explain in detail
below, we are not convinced that the Nevada state court judgment binds Tifford.
Defendants next posit that Tifford lacks standing because it is not the real
party in interest under F ED. R. C IV. P. 17 and has a 40% interest in the shares,
not an undivided interest. Mortensen transferred Certificate 1069 to Tifford, not
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No. 08-50413
Universal Express (the judgment creditor), because Tifford had a contractual
interest in the Florida litigation. This contractual interest gave Tifford a stake
in the shares, endowing it with the status of a “real and substantial party to the
controversy,” as opposed a mere agent or interested bystander. See Corfield v.
Dallas Glen Hills LP, 355 F.3d 853, 863 (5th Cir. 2003); see also Ensley v. Cody
Res., Inc., 171 F.3d 315, 319-21 (5th Cir. 1999) (distinguishing between
jurisdictional Article III standing and prudential “real party in interest”
requirement). Moreover, forty percent of the damages sought, over $12 million,
is still a “concrete and particularized” injury. See Massachusetts v. E.P.A., 549
U.S. 497, 517 (2007); cf. id. at 522 (reasoning that even when an injury is
“widely shared” a litigant’s individual interest is not diminished for standing
purposes). The absence of other potential litigants, even a real party in interest,
can be excused or cured. See F ED. R. C IV. P. 17(a)(3). Additionally, if an
indispensable party cannot be joined (because there is no personal jurisdiction
or because joinder would destroy diversity of citizenship), dismissal may be
appropriate. See F ED. R. C IV. P. 19(b). As Defendants have yet to file answers in
this case, such matters are better left to the discretion of the district court upon
remand. Lastly, Defendants assert that, in transferring Certificate 1069 to
Tifford, Universal Express violated an injunction issued by the United States
District Court for the Southern District of New York. If such is the case, the
proper remedy is a contempt proceeding in that court, not dismissal of this case.
Tifford has raised a genuine issue of fact regarding an ownership interest in
Certificate 1069.
2.
Turning to the second element of conversion, we think that there is a
genuine question whether Defendants’ refusal to transfer record ownership of
the stock impaired Tifford’s rights. The district court stated: “It is undisputed by
the parties that the alleged conversion took place when Tandem Nevada’s Board
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No. 08-50413
of Directors cancelled the certificate on August 25, 2005.” Because Tifford
received Certificate 1069 in April 2006, the court held that Tifford could not
prove a right to the shares at the time of the conversion. However, Tifford has
consistently argued that Defendants’ refusal to transfer ownership of the stock
from Aritex to Tifford was conversion. This occurred in May 2006, after Tifford
obtained the shares, when Manhattan Transfer refused to reissue Certificate
1069 pursuant to the August 26, 2005 stop order. It is well-established that an
unreasonable refusal to acknowledge a lawful transfer of corporate stock is
conversion. See Burns, 17 S.W. at 1046. In Burns, the Supreme Court of Texas
sustained a judgment of conversion in favor of a transferee of a one-quarter
interest in the defendant corporation where the defendant refused to recognize
the transferee’s interest. Id. Despite the fact that the corporations records and
stock book were destroyed in a fire, the transferee had obtained “at least the
equitable title to the stock or interest” transferred to him. Id. at 1045. In
addition, as noted above, a cause of action for conversion inheres in a plaintiff’s
entitlement to the property. Even if the conversion occurred in August 2005,
whatever cause once belonged to Aritex now belongs to Tifford.
Defendants next say that Tandem Nevada did not have to transfer record
ownership because Tifford has not complied with 17 C.F.R. § 230.144. This rule
limits the public sale of unregistered stock unless the stock is first registered
with the SEC. See, e.g., McDonald v. C.I.R., 764 F.2d 322, 323 n.3 (5th Cir.
1985). The district court did not have an opportunity address whether the rule
applies. We note initially that the transfer to Tifford was not a public sale, and
thus likely falls outside the purview of the rule. Moreover, even if the rule does
apply, a restriction on subsequent public sales may diminish the fair market
value of shares, but such a restriction does not render shares worthless. See id.
at 323. Thus, for summary judgment purposes, Tifford’s alleged non-compliance
with § 230.144 does not undermine its conversion claim.
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No. 08-50413
Defendants suggest that their refusal to transfer ownership was excused
because it was unclear whether Tifford had a legitimate right to the stock. A
good-faith refusal to return property in order to resolve a doubtful matter may
or may not excuse conversion. Compare Whitaker v. Bank of El Paso, 850 S.W.2d
757, 760 (Tex. App.—El Paso 1993, no writ) (“A refusal to deliver property on
request may be justified in order to investigate the rights of the parties, and no
conversion results if such refusal is made in good faith to resolve a doubtful
matter.”), with Rodriguez, 616 S.W.2d at 949 (“The defense of good faith is not
available to a party to excuse his actions in a conversion suit.”). In any case, the
reason “must be distinctly stated to the party demanding possession, however,
or the right to withhold the property is lost. Any reasons for refusing to turn over
the property which are not mentioned at the time of the refusal are lost and may
not be raised later.” Whitaker, 850 S.W.2d at 760. Defendants raise this defense
in their appellate brief, but it is unclear whether they “distinctly stated” the
basis for refusal in response to Tifford’s demands to transfer the stock. Thus, the
defense may have been forfeited. Even if Defendants have preserved this
argument, it was never addressed by the district court. Finally, whether Tandem
Nevada’s refusal to transfer the shares was done in good faith is inherently a
fact question which we may not address at this time.
3.
Tifford also satisfies its burden at the summary judgment stage with
regard to the third and fourth elements of conversion. Tifford made a request via
its agent, T.D. Ameritrade, to have Certificate 1069 reissued in Tifford’s name.
Tandem Nevada’s agent, Manhattan Transfer, refused. Certificate 1069 was
apparently never physically delivered to Manhattan Transfer, but we do not find
this problematic. In light of Tandem Nevada’s unequivocal refusal to transfer
record ownership, delivery of the certificate would have been an empty formality.
Texas law does not require such an act. See Prudential Petrol., 281 S.W.2d at
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No. 08-50413
460; see also Williams, 321 S.W.2d at 619 (excusing failure to demand transfer,
as “[t]o have done so would have been a useless thing since the corporation had
already advised Williams and prospective purchasers of his stock that such a
transfer would not be recognized”).
Tifford has shown a genuine issue of fact as to each element of conversion.
Given the questions of fact which abound in this case, we must reverse the
district court’s judgment unless there is another ground supported by the record.
See Holtzclaw, 255 F.3d at 258. With that in mind, we turn to the district court’s
alternate holding.
B.
In an alternate holding, the district court concluded that the Nevada state
court judgment was in rem, and thus binds litigant and stranger alike.
Specifically, the district court noted that: (1) Tifford was not an indispensable
party, and (2) the “proceeding was in rem pursuant to N EV. R EV. S TAT. §
104.811(1)(a).” We disagree.
We must give the judgment of the Nevada court the same effect it would
have in subsequent litigation in Nevada. See 28 U.S.C. § 1738; Matsushita Elec.
Indus. Co. v. Epstein, 516 U.S. 367, 373 (1996). The Nevada judgment does not
purport to be in rem. Moreover, the statute the court likely meant to cite, N EV.
R EV. S TAT. § 104.8110(1)(a)—as there is no § 104.811(1)(a)—is the choice-of-law
provision of UCC Article 8. The Section says nothing about whether a judgment
regarding the validity of a security is in personam or in rem. In the absence of
legal authority or a clear indication from the judgment itself, we cannot hold
that the Nevada court’s judgment was in rem. Cf. R ESTATEMENT (S ECOND) OF
J UDGMENTS § 30 (“A valid final judgment in an action based only on jurisdiction
to determine interests in a thing: (1) Is conclusive as to those interests with
regard to all persons, if the judgment purports to have that effect (traditionally
described as ‘in rem’) . . . .”).
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No. 08-50413
Defendants also argue that the Nevada judgment should bind Tifford
under the doctrines of res judicata and collateral estoppel. For these doctrines
to apply in Nevada, “the party against whom the judgment is asserted must have
been a party or in privity with a party to the prior litigation.” Univ. of Nev. v.
Tarkanian, 879 P.2d 1180, 1191 (Nev. 1994). At the time of judgment, Tifford
had been dismissed for lack of personal jurisdiction, and thus was not a “party.”
Cf. R ESTATEMENT (S ECOND) OF J UDGMENTS § 34(1) (“A person who is named as
a party to an action and subjected to the jurisdiction of the court is a party to the
action.”). The judgment itself focuses on whether Manhattan Transfer must
comply with or disregard requests to transfer certificates issued by Mortensen.
We see no reason to conclude (nor have Defendants submitted a rationale) that
Tandem Nevada and Manhattan Transfer had adverse interests, that the
validity of the shares was actually litigated, that Manhattan Transfer was in
privity with Tifford, or that Manhattan Transfer adequately represented
Tifford’s rights. See Tarkanian, 879 P.2d at 1191-92; see also Meza v. Gen.
Battery Corp., 908 F.2d 1262, 1265-66 (5th Cir. 1990). We therefore hold that the
Nevada judgment does not bind Tifford under the doctrines of res judicata or
collateral estoppel.
In sum, we feel compelled to reverse the district court’s entry of summary
judgment in favor of Defendants on Tifford’s conversion claim.
C.
We also reverse the grant of summary judgment on Tifford’s civil
conspiracy claim. In Texas, a civil conspiracy is a combination “to accomplish an
unlawful purpose or to accomplish a lawful purpose by unlawful means.” Lane
v. Halliburton, 529 F.3d 548, 564 (5th Cir. 2008) (citation omitted). The elements
are: “(1) two or more persons; (2) an end to be accomplished; (3) meeting of the
minds on the end or course of action; (4) one or more overt, unlawful acts; and
(5) proximately resulting in injury.” Id. A defendant’s liability is derivative of an
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No. 08-50413
underlying tort; without independent tortious conduct, there is no actionable
civil conspiracy claim. Miller v. Raytheon Aircraft Co., 229 S.W.3d 358, 381 (Tex.
App.—Houston [1st Dist.] 2007, no pet.).
Tifford’s civil conspiracy claim lives or dies with its conversion claim. The
district court correctly noted that without a predicate unlawful act, there is no
cause of action for civil conspiracy. See id. However, if there is an issue of fact
on conversion, and Tifford shows evidence of an agreement by Defendants to
commit the acts comprising conversion, then there is an issue of fact on
conspiracy. See Watts v. Miles, 597 S.W.2d 386, 388 (Tex. Civ. App.—San
Antonio 1980, no writ). Here, it is undisputed Defendants agreed by corporate
resolution to cancel Certificate 1069 and the 2.7 million shares it represents.
This allegedly destroyed the value of the shares. Because there is a genuine
issue on conversion and the lawfulness of Defendants’ actions, summary
judgment is inappropriate on Tifford’s conspiracy claim.
III.
We hold that there are genuine issues of fact on claims by Arthur W.
Tifford, P.A. for conversion and civil conspiracy. We also hold that Tifford is not
bound by the Nevada state court judgment cancelling Certificate 1069. We
therefore reverse the district court’s judgment and remand for further
proceedings. We express no opinion as to the ultimate merit of Tifford’s claims.
REVERSED and REMANDED
14