William H. Scurlock v. John M. Hubbard
06-15-00014-CV
| Tex. App. | Mar 20, 2015Background
- Pecan Point Brewing Co. is a for-profit Texas corporation with six shareholders; William Scurlock is the majority shareholder and John Hubbard is a minority shareholder and former director/employee who was removed by written consent on December 2, 2014.
- Hubbard sued (Dec. 2014) seeking declaratory relief, breach of fiduciary duty, breach of contract, books-and-records, a temporary injunction, and appointment of a receiver under Tex. Bus. Orgs. Code § 11.404; Scurlock answered and filed a counter application for a temporary injunction.
- After hearings on January 26 and January 30, 2015, the trial court (Feb. 3, 2015) issued a temporary injunction and appointed Randy Moore receiver, authorizing him to act as CEO/CFO and to take custody of Pecan Point’s operations and records beginning Feb. 3, 2015 at 3:00 p.m.
- The court’s order restrained Scurlock from entering the premises or controlling bank accounts, required Hubbard to post two bonds (individual $100,000 and shareholder $50,000), and set a $10,000 receiver bond; the receiver began administration though some bonds and formal receiver qualifications/oath were not in place.
- Appellant Scurlock’s brief argues the receivership and temporary injunction were reversible error because (1) Hubbard failed to prove statutory elements for a rehabilitative receivership (deadlock, irreparable injury, or oppression) under § 11.404; (2) the court failed to require and condition relief on required bonds and receiver qualification/oath; and (3) Hubbard failed to show likelihood of success, irreparable harm, or that the injunction preserved the status quo.
Issues
| Issue | Plaintiff's Argument (Hubbard) | Defendant's Argument (Scurlock) | Held (trial court action) |
|---|---|---|---|
| 1) Appointment of receiver under Tex. Bus. Orgs. Code §11.404 | Receivership necessary to rehabilitate Pecan Point due to deadlock, threatened irreparable injury, and oppressive conduct by Scurlock | No deadlock (majority acted by written consent), no evidence of irreparable injury to the entity, and no actionable oppression | Trial court appointed a receiver (Randy Moore) to act as CEO/CFO and manage the company |
| 2) Bonding and receiver qualification requirements | Relief ordered and bonds were set by court; injunction and receivership should take effect | Court failed to condition receivership/injunction on filing of applicant bond, failed to require proper fidelity receiver bond and oath before receiver assumed duties | Trial court fixed bond amounts but ordered receivership effective at a date certain; receiver began without all bonds/qualification having been secured |
| 3) Temporary injunction (likelihood of success; irreparable injury; preserve status quo) | Injunction necessary to prevent irreparable harm (loss of unique beer, loss of goodwill, denial of access to records) | Hubbard presented only speculation and apprehension, lacked proof of irreparable injury, lacked employment contract, lacks showing of probable right of recovery; injunction alters rather than preserves status quo | Trial court issued a comprehensive temporary injunction restraining Scurlock’s management and ordering turnover to receiver |
Key Cases Cited
- Williams v. Williams, 125 S.W. 937 (Tex. 1910) (receivership is a harsh, last-resort remedy)
- Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014) (definition and narrow standard for shareholder oppression under receivership statutes)
- Benefield v. State, 266 S.W.3d 25 (Tex. App.—Houston [1st Dist.] 2008) (appellant bears burden to prove circumstances justifying appointment of receiver)
- Tel. Equip. Network, Inc. v. TA/Westchase Place, Ltd., 80 S.W.3d 601 (Tex. App.—Houston [1st Dist.] 2002) (irreparable injury requires damages not compensable by money and not measurable by pecuniary standard)
- Walling v. Metcalfe, 863 S.W.2d 56 (Tex. 1993) (temporary injunctive relief is limited to preserving the status quo pending final trial)