GM Oil Props. Inc. v. Wade

GM OIL PROPERTIES, INC., GARY MOORES, AND BILL O. WOOD, Appellants

v.SHERIDAN WADE, Appellee

NO. 01-08-00757-CV

Court of Appeals For The First District of Texas

Opinion issued January 26, 2012

On Appeal from the 133rd District Court

Harris County, Texas

Trial Court Case No. 2006-53389

MEMORANDUM OPINION

In this interlocutory appeal, Bill O. Wood, challenges the trial court's August 4, 2010 order denying his motion to compel arbitration between himselfand Sheridan Wade. The order expressly applies only to Wade's claims against Wood in Wood's individual capacity.¹ Wood raises two issues in which he contends that Wade is required to arbitrate these claims pursuant to a provision found in the corporate bylaws of GM Oil Properties, Inc., a company of which Wood is a corporate officer, and Wade is a former shareholder.

We affirm the trial court's order denying Wood's motion to compel arbitration.

Background

A. Sheridan Wade's Claims against Bill Wood, Individually

Sheridan Wade sued Bill O. Wood in his individual capacity for acts and omissions related to an alleged business partnership between Wade and Wood pertaining to a business venture involving GM Oil. Among Wade's causes of action against Wood in his individual capacity are claims for breach of contract and for breach of fiduciary duty. Wade alleges that Wood breached two contractsthat he had entered into with her in the context of their business partnership and that he breached his fiduciary duty to Wade as her business partner.

With respect to her claims against Wood in his individual capacity, Wade makes the following allegations:²

• In early 2005, Wade formed a business partnership with Scott Davis, and they agreed "to a diverse business plan including real estate investments, financial services, and oil and gas investments."

• Wade and Davis met John Preston and Bill Wood with whom they "agreed to all join together to collectively as partners pursue . . . business opportunities."

• Wood represented to Wade, Davis, and Preston that "he was well versed in oil and gas and knew of a potential investment in Oklahoma—the 'GM Oil deal.'"

• Wood stated that he needed Wade's and Davis's "services and expertise to find potential investors, and he offered to work with them in obtaining the property for the benefit of his partnership with [Wade], Davis, and Preston."

• Wade and her three partners "agreed the first project of the partnership would for the purposes of obtaining the Oklahoma property (the GM Oil deal) and they would divide the partnerships' ownership interest as follows: [Wade] would own 10%, Davis 30%, Preston 30% and []Wood 30%."

• Wade was "convinced by Wood's assurances that the GM Oil deal would be extremely financially rewarding for her and all involved."

• Wade and Davis told "Wood that a private placement memorandum would have to be prepared, along with a detailed analysis of the project."

• Wade gathered "all pertinent information and assimilated the same into an organized and detailed format," "evaluated and studied the potential of the GM Oil deal, and prepared summaries of the data." Wade and Davis also worked to generate interest by investors "in the deal."

• Wade and Davis asked Wade's father to assist in obtaining a loan for the project.

• Wade, Davis, Preston and [] Wood offered Wade's father "4% of the venture and [sic] [GM Oil] company as compensation for locating the financing."

• Wade's father arranged "for a loan in the amount of $75,000 to provide the necessary capital to produce the [placement] memorandum."

• Investing much time and effort, Wade and Davis "sought out and met with numerous potential sources of significant financing needed to complete the [GM Oil] deal."

• Wood "consistently reassured his partners and told them their efforts would be rewarded" with "the ownership interests promised." Wade, however, was offered "employment as the Secretary of the corporate entity (GM Oil) with a salaried position in the company's offices."

• Closing on the GM Oil financing was set for August 25, 2005.

• Before the closing, "Wood met with [Wade], Davis and Preston in Texas and suddenly represented that the only way the closing could take place would be if it appeared that [] Wood held all the stock of the partners (excepting the 4% broker fee)" in "Steadfast Eastern Oklahoma LLC," the company the four partners had established for the purpose of acquiring GM Oil.

• Wood requested that each partner sign his or her interest in Steadfast Eastern Oklahoma LLC "over to him for purposes of the closing only."

• "Wood, in turn, promised that immediately after closing he would return the other parties' ownership interests by conveying to [Wade], Davis, and Preston each 10% of his ownership of GM Oil, or 10% of his purported 96% equaling a 9.6% ownership in the shares of GM Oil."

• Each partner transferred his or her shares in Steadfast Eastern Oklahoma to Wood with each retaining one percent interest in the company.

• Wood, Davis, Preston, and Wade signed a Stockholders' Agreement evidencing the agreement regarding the transfer of the Steadfast Eastern Oklahoma stock to Wood and reflecting Wood's agreement to tender a portion of his stock interest in GM Oil to his three partners.

• "After the closing, GM Oil issued 10,000 shares of GM Oil stock [to Wade] based on the 1% of ownership that was excluded from the agreement with Wood."

• Wade was "forced to sell these 1% shares back to the company after a few months because of the delay in actually receiving her promised job in Oklahoma."

• Wade received "value for the sale of those shares, and she is making no complaint about the issuance or repurchase of the 10,000 shares of GM Oil in this lawsuit."

• "Although Wood kept up the assurances and representations to [Wade] in Houston for a short period following the final closing, he has failed and refused to convey back the shares as he promised . . . ."

Wade sued Wood in his individual capacity for breach of contract, fraud, conversion, breach of fiduciary duty, and conspiracy. With regard to these claims, Wade asserts that Wood breached his oral partnership agreement with her by failing to transfer 10 percent ownership of GM Oil to her. Wade also claims that Wood breached the written Shareholder's Agreement by failing to transfer 10 percent of his GM Oil stock to her. Wade further asserts that Wood knowingly made false statements to her to induce her assistance in acquiring financing andinvestment funds for GM Oil, which she did. Finally, Wade asserts that Wood had a fiduciary duty to her as her business partner and that his conduct constituted a breach of that duty.

In addition to suing Wood in his individual capacity, Wade sued Wood as a representative of GM Oil and as a representative of its founder and corporate officer, Gary Moores. Wade also directly sued GM Oil and Moores for fraud and conspiracy. Wade contends that GM Oil and Moores "aided and abetted" Wood in much of the conduct for which Wade seeks to hold Wood liable.

B. Wood's Arbitration Claim

Wood answered the suit, asserting, inter alia, that Wade's claims were subject to an arbitration agreement. Wood also denied that he had entered into a partnership agreement with Wade or that he had promised that Wade would receive a 10 percent ownership interest in GM Oil. Moores, an Oklahoma resident, and GM Oil, an Oklahoma corporation, each filed a special appearance contesting personal jurisdiction.

Asserting that Wade's claims against them were subject to an arbitration agreement found in GM Oil's bylaws, GM Oil, Moores, and Wood initiated an arbitration proceeding in Oklahoma before the American Arbitration Association. In response, Wade requested and obtained a temporary restraining order in theinstant suit, prohibiting GM Oil, Moores, and Wood from proceeding with the Oklahoma arbitration.

Wade amended her petition to include a request for a judicial declaration that her claims are not subject to arbitration. Wade also filed a motion for partial summary judgment regarding the arbitration issue.

Wood filed a motion to compel arbitration in the trial court, relying on the following provisions in GM Oil's bylaws:

Section 12. Miscellaneous.

12.01. Resolutions of Controversies and Claims. In the event of any controversy of claim, whether based on contract, tort, statute, or other legal of equitable theory (including any claim of fraud, misrepresentation, or fraudulent inducement) between or among the parties and relating to the Corporation ("Dispute"), the parties agree as follows:

. . . .

(b) Arbitration.

If not resolved by mediation, the parties shall resolve the Dispute by arbitration pursuant to this Section and the then current rules and supervision of the American Arbitration Association. . . .

. . . .

(e) Covered Parties. The duties to mediate and arbitrate shall extend to any Director, officer, employee, Shareholder, principal agent, trustee in bankruptcy or otherwise, affiliate, subsidiary, third-party beneficiary, or guarantor of a party making or defending a claim that would otherwise be subject to this Section. . . .

Wood asserted that Wade's claims against him fell within the scope of the arbitration provision in the bylaws. Specifically, Wood averred that (1) Wade's claims "relat[ed] to the Corporation"; that is, they related to GM Oil, and (2) Wood was a "covered party" because she had been a shareholder in GM Oil "from approximately August 31, 2005 through November 16, 2005," during which time the bylaws were in effect.

GM Oil and Moores did not join in the motion to compel arbitration. Their special appearances remained pending before the trial court.

The trial court conducted a hearing on Wood's motion to compel arbitration on October 8, 2007. The parties, including Wade's counsel, made clear to the trial court that the only issue to be decided was whether Wood could compel arbitration. No determination would be made with respect to arbitration and Wade's claims against GM Oil and Moores because the...