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L.D. Brinkman Investment Corp. v. Brinkman

Court of Appeals of Texas, Fourth District, San Antonio

April 26, 2017

L.D. BRINKMAN INVESTMENT CORPORATION, L.D. Brinkman Jr., Pamela Brinkman Stone and Charles Thomas, Appellants
v.
Kathleen Sparrow BRINKMAN, Individually and as Executor of the Estate of Lloyd D. Brinkman, Deceased, Appellee

         From the 198th Judicial District Court, Kerr County, Texas Trial Court No. 16331B Honorable Rex Emerson, Judge Presiding

          Sitting: Sandee Bryan Marion, Chief Justice Rebeca C. Martinez, Justice Patricia O. Alvarez, Justice

          MEMORANDUM OPINION

          Rebeca C. Martinez, Justice

         This is an accelerated appeal of an order granting a temporary injunction. L.D. Brinkman Investment Corporation ("LDBIC"), [1] L.D. Brinkman, Jr. ("Don"), Pamela Brinkman Stone ("Pam"), and Charles Thomas assert Kathleen Sparrow Brinkman, individually and as executor of the Estate of Lloyd D. Brinkman, deceased, lacked standing to pursue her claims; therefore, the trial court lacked jurisdiction to grant the temporary injunction. The appellants alternatively contend the trial court erred in granting the temporary injunction because: (1) the trial court misapplied the law in concluding Kathleen is the sole director and officer of LDBIC and its subsidiaries; (2) no evidence was presented to establish a probable right to relief on Kathleen's pleaded claims; (3) no evidence was presented to establish an irreparable injury; (4) the temporary injunction failed to preserve the status quo; and (5) the trial court misapplied the law in denying appellants' request for a jury trial on the disputed facts at issue at the temporary injunction hearing. We hold Kathleen has standing to pursue her claims and affirm the trial court's order.

         Background

         Lloyd D. Brinkman ("Brink") formed LDBIC in 1977. When Brink died on July 4, 2015, he owned 1, 000 shares of LDBIC's Series A Preferred Stock, which were devised to his wife Kathleen in his will. Pam and Don each own 5, 000 shares of LDBIC's common stock.[2] The holder of each share of Series A Preferred Stock is entitled to eleven votes per share, while the holder of each share of common stock is entitled to one vote per share.

         At the time of his death, Brink was the sole director of LDBIC and its chairman of the board, chief executive officer, president, and treasurer. Thomas began working with Brink in 1983, and was the only other elected officer of LDBIC when Brink died, serving as its executive vice-president, secretary, and assistant treasurer. At that time, LDBIC was a holding company owning approximately $80 million in non-revenue producing assets, including an art collection worth approximately $40 million, a mansion in Kerrville, Texas that housed the art collection, a house in Cabo San Lucas, Mexico, 200 acres of undeveloped land in Kerrville, and an airplane. Because the assets were non-revenue producing, LDBIC was not profitable. For three to four years before Brink's death, Brink, Pam, Don, and Thomas were working on a concept for a new pizza restaurant tailored on LDBIC's past success as the owner of a successful pizza franchise which LDBIC sold in 2004.

         LDBIC had the right to redeem the Series A Preferred Stock for $1, 000 upon reasonable notice. It was generally understood that the Series A Preferred Stock would be redeemed upon Brink's death. After Brink's death, Kathleen began negotiating with Pam, Don, and Thomas regarding the terms pursuant to which she would consent to the redemption.

         On February 3, 2016, Thomas sent Kathleen's attorney a notice signed in his capacity as an officer of LDBIC, stating LDBIC had redeemed the Series A Preferred Stock. That same day, Pam and Don elected themselves as LDBIC's directors and, as directors, elected Pam as president, Don as treasurer, and Thomas as executive vice-president, secretary, and assistant treasurer. Upon receiving notice of the redemption, Kathleen filed a lawsuit in Dallas County. After LDBIC, Pam, Don, and Thomas filed the underlying lawsuit in Kerr County, Kathleen nonsuited the lawsuit in Dallas County and filed a counterclaim in the underlying lawsuit seeking declaratory relief, including a declaration that the redemption of the Series A Preferred Stock was void.

         Kathleen noticed a special shareholders' meeting for February 22, 2016, at which she elected herself as the sole director of LDBIC, and, as director, she also elected herself as LDBIC's sole officer. Neither Pam nor Don attended the shareholders' meeting.

         On July 28, 2016, the trial court signed an order granting a partial summary judgment in favor of Kathleen, declaring the redemption void and declaring Kathleen's status and rights as the owner and holder of the Series A Preferred Stock remained as those status and rights existed immediately prior to the invalid redemption. Kathleen noticed another special shareholders' meeting for August 12, 2016, at which she again elected herself as the sole director of LDBIC and, as director, elected herself as LDBIC's sole officer. Neither Pam nor Don attended the shareholders' meeting.

         On September 22, 2016, the trial court held a hearing on Kathleen's application for a temporary injunction and subsequently signed an order granting the temporary injunction. On October 4, 2016, the trial court signed an amended order granting the temporary injunction, and this appeal ensued.

         Standing

         For the first time in their reply brief, the appellants assert Kathleen lacks standing to pursue the "two claims upon which the trial court's temporary injunction order was based: corporate waste and Appellants' refusal to recognize Appellee's invalid elections of herself as LDBIC's sole officer and director." The appellants contend Kathleen lacks standing as a shareholder to assert the claim for corporate waste because that claim belongs to the corporation. Although appellants acknowledge Kathleen also asserted a claim based on the appellants' refusal to recognize her as LDBIC's sole officer and director, they contend the only damage attributable to that claim is "the alleged corporate waste [that] wouldn't have happened had she been in control of LDBIC."

         "[S]tanding is a component of subject matter jurisdiction and absent jurisdiction, a court cannot address the merits of a case." RSL Funding, LLC v. Pippins, 499 S.W.3d 423, 429 (Tex. 2016). Standing may be challenged for the first time on appeal. Id.

         "'In Texas, the standing doctrine requires a concrete injury to the plaintiff and a real controversy between the parties that will be resolved by the court.'" Linegar v. DLA Piper LLP (US), 495 S.W.3d 276, 279 (Tex. 2016) (quoting Heckman v. Williamson Cty., 369 S.W.3d 137, 154-55 (Tex. 2012)). "'The plaintiff must be personally injured-he must plead facts demonstrating that he, himself (rather than a third party or the public at large) suffered the injury.'" Id. In addition, "'the plaintiff's alleged injury [must] be likely to be redressed by the requested relief.'" Id.

         In support of their argument, the appellants rely on Wingate v. Hajdik, 795 S.W.2d 717 (Tex. 1990). In Linegar, the Texas Supreme Court explained its holding in Wingate as it related to stockholder standing, describing the general rule as follows:

In Wingate, we stated the general rule that "[a] corporate stockholder cannot recover damages personally for a wrong done solely to the corporation, even though he may be injured by that wrong." We clarified that the general rule does not preclude a stockholder from recovering damages for wrongs done to the stockholder individually, provided the wrongdoer violated a duty "'owing directly by [the wrongdoer] to the stockholder.'" "However, to recover ...

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