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Texas P.M.R., Inc. v. Ripley

Court of Appeals of Texas, Fourth District, San Antonio

December 18, 2019

TEXAS P.M.R., INC. and John Ripley, Appellants
v.
Robert RIPLEY and Mary Guzman, Appellees

          From the 407th Judicial District Court, Bexar County, Texas Trial Court No. 2018-CI-23830 Honorable Aaron Haas, Judge Presiding

          Sitting: Patricia O. Alvarez, Justice, Irene Rios, Justice Liza A. Rodriguez, Justice

          MEMORANDUM OPINION

          PATRICIA O. ALVAREZ, JUSTICE.

         This interlocutory appeal involves a dispute among three siblings over the ownership of a Texas corporation, Appellant Texas P.M.R., Inc. Appellants John Ripley and Texas PMR sued appellees Robert Ripley and Mary Guzman seeking declarations that John is Texas PMR's sole shareholder and that Robert and Mary do not own any shares in that company. They also seek to enjoin any purported officers or directors of the corporation from taking certain specified actions. Texas PMR and John appeal from the denial of their request for a temporary injunction. We affirm.

         Background

         John, Robert, and Mary are the three children of Patricia Ripley, who died intestate in February 2008. Robert and Mary filed an heirship proceeding in 2018, which resulted in a judgment that John, Robert, and Mary are Patricia's heirs and that each owns one-third of her estate. The heirship judgment does not make any determination concerning the contents of that estate. The fundamental disputes in this case are whether Patricia owned 1, 000 shares in Texas PMR at the time of her death, and whether those 1, 000 shares constitute all the outstanding shares in the corporation.

         A. Events Occurring Prior to Patricia's Death

         Texas PMR has a rather convoluted history.

         1. Origin of P.M.R., Incorporated

         In October 1988, the company was incorporated as P.M.R., Incorporated. According to its Articles of Incorporation (AOI), it was authorized to issue 1, 000 shares of common stock with a par value of one dollar per share. The AOI also state that the initial board of directors consisted of one director: John. But the minutes of the December 31, 1988 organizational meeting of the board of directors identify three directors-Robert, Patricia, and John. Those minutes also reflect that the directors approved and adopted bylaws for the corporation, and that those bylaws contain provisions for calling shareholder meetings and conducting company business. The first shareholder meeting was also held on December 31, 1988, and that meeting's minutes state that resolutions were adopted ratifying the election of directors and the adoption of the bylaws. The bylaws themselves do not appear in our record and John denies that any bylaws were ever adopted.

         The minutes of the December 31, 1988 organizational meeting also show that John was named president and secretary of the company, and that the board accepted the following offer to purchase the company's shares:

         On that same day, Stock Certificate 1 was issued certifying that "Patricia Ripley (for PMR LTD) is the registered holder of one thousand shares in P.M.R. Inc."

         2. PMR Limited (Limited-1)

         In March 1989, a company named PMR LIMITED (Limited-1) was created in the Bahamas. There is evidence that the company was never funded, never transacted any business, and never issued any shares. It ultimately ceased to exist for failing to pay franchise taxes.

         3. P.M.R. Incorporated Becomes Texas P.M.R., Incorporated

         On September 26, 1991, John signed an amendment to the AOI as president and secretary of P.M.R., Incorporated. The amendment changed the name of the company to Texas P.M.R. Incorporated and reaffirmed that only 1, 000 shares had been issued and were entitled to vote. It further stated that "[t]he holders of all the shares outstanding and entitled to vote on said amendment have signed a consent in writing adopting said amendment." Consistent with this statement, appended to the amendment is a statement signed by Patricia on September 10, 1991, which reads, "I Patricia Ripley give my consent to change the name of P.M.R. Incorporated to Texas P.M.R. Incorporated."

         4. P.M.R. Limited (Limited-2)

         In December 1994, John caused a second company, P.M.R. Limited (Limited-2) to be created in the Bahamas. That company was struck off the Companies Register of the Bahamas in December 1998 for nonpayment of fees.

         5. February 1999 Texas PMR Events

         Minutes of a February 3, 1999 Texas P.M.R., Incorporated (Texas PMR) board meeting, which was attended by John and Patricia as directors, state that the board unanimously agreed to issue 4, 000 shares to John in consideration of funds advanced by the HA Ripley Trust, which were debited from John's inheritance, and properties transferred to the corporation by John.[1]

         The February 3, 1999 Texas PMR board meeting minutes also state that the 1, 000 shares previously issued to "Patricia Ripley/PMR Limited" are confirmed to be PMR Limited shares. But no iteration of PMR Limited existed on February 3, 1999, because both Limited-1 and Limited-2 were defunct.

         On February 4, 1999, Stock Certificate 3 was issued reflecting that John owns 4, 000 shares in Texas PMR.[2] The following day, a certificate was issued indicating that the bearer owns 1, 000 shares in PMR Limited, even though no such entity existed. This certificate is, and has always been, in John's possession.

         The purpose of this series of events was to divest Patricia of any ownership in the original 1, 000 shares, place ownership of those shares in John through his possession of the bearer shares in PMR Limited, and grant an additional 4, 000 shares to John. The intended result was for Texas PMR to have 5, 000 shares outstanding, all owned by John. Robert and Mary contest the validity of each of the February 1999 transactions.

         B. Events Occurring After Patricia's Death

         After Patricia died in February 2008, John continued to run Texas PMR, whose business is the operation and management of certain real properties in Texas.

         1. Robert and Mary's Demand Letter

         On September 8, 2017, Robert and Mary sent John a demand letter stating that they had become aware that John was claiming sole ownership of Texas PMR. Robert and Mary asserted that Patricia's shares had passed to her children and, consequently, the three siblings were equal share owners. They demanded that John (1) either resign as an officer and director of the company or be removed, (2) allow Robert and Mary to examine the company's books, and (3) voluntarily agree that each sibling owns one-third of the company.

         2. PMR Ltd. (Limited-3)

         Approximately two weeks after receiving this demand letter, John caused a third Bahamian company, PMR LTD. (Limited-3), to be created. Four days later, he sued Robert and Mary, seeking a declaration that he is the sole owner and shareholder of Texas PMR. John later nonsuited this declaratory judgment action while Robert's no-evidence motion for summary judgment was under advisement by the court.

         3. May 2018 Texas PMR Board Meeting

         In April 2018, John noticed a special meeting of Texas PMR's board of directors, to occur in May 2018. The notice is addressed to "shareholders," but does not indicate specifically to whom it was sent. John testified that he believed his attorney sent the notice to Robert and Mary, [3] but Robert denied having received any such notice.[4] In any event, only John, his attorney, and John's companion were present for the May 2018 special meeting. As a result of that meeting, John passed several corporate resolutions, including resolutions that purported to do the following:

• declare that any previous board consisting of anyone other than John was illegally constituted and had no authority to act;
• increase the number of shares the company is authorized to issue from 1, 000 to 5, 000;
• declare that no offer had been made to purchase the shares purportedly issued to Patricia in December 1988;
• cancel the 1, 000 shares issued to Patricia;
• ratify the 4, 000 shares issued to John in February ...

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