Court of Appeals of Texas, Thirteenth District, Corpus Christi-Edinburg
DENNIS W. BERRY; MARVIN G. BERRY; BAY, INC.; BERRY GP, INC., D/B/A BERRY CONTRACTING; AND BERRY CONTRACTING, D/B/A BAY LTD., Appellants,
KENNETH L. BERRY, INDIVIDUALLY; AND KENNETH L. BERRY, IN A DERIVATIVE CAPACITY FOR SKYEAGLE, INC., Appellees.
appeal from the County Court at Law No. 3 of Nueces County,
Justices Benavides, Hinojosa, and Perkes
GREGORY T. PERKES, JUSTICE
interlocutory appeal concerns the trial court's temporary
injunction order in favor of appellees, Kenneth L. Berry
(Kenneth), individually and in a derivative capacity for
Skyeagle, Inc. (Skyeagle), enjoining appellants, Dennis W.
Berry (Dennis); Marvin G. Berry (Marty); Bay, Inc. (Bay);
Berry GP, Inc., d/b/a Berry Contracting; and Berry
Contracting, d/b/a Bay Ltd. from dissolving Skyeagle,
obligating Skyeagle to pay debts of or transfer funds to any
Defendant-owned entities, and indemnifying Skyeagle in an
unrelated suit out of the 214th District Court. By two
issues, appellants contend that the trial court abused its
discretion by granting the temporary injunction because
appellees failed to establish a right of relief under Texas
Civil Practice and Remedies Code § 65.011 and
alternatively, under Texas Business Organizations Code §
2.104. Tex. Civ. Prac. & Rem. Code § 65.011; Tex.
Bus. Orgs. Code § 2.104. We reverse.
1979, Kenneth and his brothers, Dennis and Marty (Defendant
Directors), formed Skyeagle. The three brothers are the sole
shareholders, each owning one-third of the company's
shares. Kenneth previously held the position as
Skyeagle's president, while Dennis and Marty served as
vice-president and secretary, respectively. Defendant
Directors also own controlling interests in other companies,
including Berry Contracting and Bay; although Kenneth never
owned any interest in either company, Kenneth was the former
vice-president for Bay.
March 1994, Skyeagle purchased a railway easement (the
Easement) in Nueces County, Texas from the United States for
$175, 000. This Easement is Skyeagle's sole asset. In May
1995, Bay and the Texas Mexican Railway Company (TM) entered
into a transportation contract in which TM agreed to
transport aggregate products for Bay. Three months later, Bay
and TM entered into an extension of the transportation
contract, during which Bay agreed to a "transfer or
conveyance of the [Easement]" to TM, upon the
satisfaction of certain conditions laid out in the contract.
The contract was signed by Kenneth in his capacity as
Bay's vice-president. Skyeagle was not a party to the
contract. Kenneth's relationship with Defendant Directors
deteriorated over time, and in October 2015, TM filed suit in
the 214th District Court against Bay and Skyeagle, alleging
breach of contract.
February 12, 2018, Kenneth received a "Notice of Special
Meeting of the Shareholders of Skyeagle, Inc."
(Shareholder's notice). The Shareholder's notice
included items that "shall be discussed" by the
shareholders and upon which "the shareholders of the
Company may vote." These items consisted of:
1. The existence and repayment of indebtedness owed by
[Skyeagle] to Berry Contracting, Inc., [Bay], Lone Star
Equipment, Inc., Basic Equipment Company, and/or any related
or affiliated company.
2. Payment of interest on any of the debts determined under 1
above to exist.
3. The existence and substance of existing litigation
involving [TM, Bay, and Skyeagle].
4. The possibility of resolution of the litigation referenced
in 3 above and the granting of authority to accomplish same.
5. The source of funds for the company to pay attorney's
fees or to repay Bay, Inc. or related entities for the
payment of attorney's fees on behalf of [Skyeagle] with
regards to the litigation.
6. Confirmation of the existence and terms of defense and
indemnity obligations of [Skyeagle] towards its directors and
7. The appointment of officers.
8. The possibility of dissolution of [Skyeagle].
claims that he first learned of the TM lawsuit against Bay
and Skyeagle upon receiving the Shareholder's notice. On
February 20, the day the shareholder meeting was scheduled to
take place, Kenneth filed an application for a temporary
restraining order (TRO) and temporary injunction against the
Defendant Directors, alleging that the Defendant
Directors breached their fiduciary duty to Skyeagle and to
Kenneth as a shareholder. On February 22, the TRO was
Temporary Injunction Hearing
March 5, the morning of the temporary injunction hearing,
Defendant Directors filed a "Plea in Abatement and
Objection to the Court's Jurisdiction." In part,
Defendant Directors argued that the 214th District Court
retains "dominant jurisdiction over the easement issue
and the transferring thereof;" therefore, Kenneth is
barred from any attempt at enjoining Defendant Directors from
the use of the Easement and any mandated enjoinment must not
include the Easement.
trial court thereafter held a joint hearing on the temporary
injunction and plea in abatement. The hearing was recessed,
and the court resumed on April 3. At the start of the April
3rd hearing, the court orally granted Defendant
Director's plea in abatement before accepting
additional testimony regarding the temporary injunction.
maintained that the Shareholder's Notice was evidence
that Defendant Directors intended to (1) dissolve Skyeagle
and (2) make Skyeagle liable as a guarantor of the debts and
obligations of Bay and Berry Contracting. See Tex.
Bus. Orgs. Code Ann. § 2.104(b)(2) (providing that a
domestic entity may make a guaranty of the indebtedness of
another if the guaranty may reasonably be expected to benefit
the entity); id. § 2.104(c)(2) (providing that
a shareholder may request to enjoin a proposed guaranty on
the ground that the guaranty cannot reasonably be expected to
benefit the entity).
to Kenneth, Skyeagle purchased an easement directly linked to
what is now the Kansas City Southern Railroad, and Bay should
"have to come to Skyeagle and make a deal for that
asset" if Defendant Directors wished to use
Skyeagle's Easement to fulfill its obligation to TM.
Kenneth argued Defendant Directors "want to give
Skyeagle's assets to [TM]" for the sole benefit of
Bay, a company Kenneth has no ownership in, and to the
detriment of Skyeagle, which would lose its only asset.
also took issue with Skyeagle potentially paying Bay's
attorney's fees in its suit against TM because both
companies are represented by the same firm although their
interests are averse. Kenneth argues, in relevant part:
[Bay] is a party to a contract with [TM] that Skyeagle is
not. Skyeagle got sued because of a contract that it's
not a party to. Therefore, they're adverse. The contract
between [Bay] and [TM] allegedly talks about assets that are
owned by Skyeagle, and Skyeagle should have it's [sic]
own separate independent lawyer to defend its position
against allegation[s] from either [Bay] or [TM] in this case.
complained that losing the Easement or dissolving the company
would result in "worthless" shares and "no
company to conduct business." Kenneth conceded that
although Skyeagle is not bonded and lacks a prime contract,
Skyeagle could become insured for business: "[Skyeagle]
has a perfect safety record today. So there's nobody in
the planet that has a better safety record than
Skyeagle." Kenneth suggested Skyeagle could perform
subcontracting services for Bay:
There's dozens of ways Skyeagle can go to work. But
certainly given the ten-year and time that my two brothers
have had running it as officers and directors, it should have
insurance, it should have bonding capacity, it should have
the work, it should have profits. But there's absolutely
no reason that Skyeagle can't do work.
Defendant Directors Testimony
Directors countered that Kenneth was President of Skyeagle
for a substantial duration of the company's existence,
and apart from incurring a $176, 000 debt in the form of the
Easement, Kenneth is the reason the company did not prosper.
[Counsel:] How many notices of meetings in the 35 years that
Kenneth Berry was president of Skyeagle did you ...