Opinion
No. 05-07-00584-CV
Opinion field May 27, 2008.
On Appeal from the 193 Judicial District Court, Dallas County, Texas, Trial Court Cause No. 05-10426.
Before Justices O'NEILL, FRANCIS and WRIGHT.
MEMORANDUM OPINION
This is a breach of contract case. GSSF Master Fund, L. P. ("GSSF") purchased stock in Allis-Chambers Energy, Inc. ("Company") and became a party to the Company's Stock Purchase Agreement ("Agreement"). GSSF thereafter sued the Company. Both parties moved for summary judgment on the discrete issue of whether the Agreement accorded GSSF a claim against the Company if the Company did not use "best efforts" to obtain an effective registration statement before a specified date. The parties stipulated that whether the Company's conduct constituted "best efforts" was not an issue. The trial court granted GSSF's motion and denied summary judgment for the Company. The Company raises five issues all relating to construction of the Agreement as amended by two different amendments. We reverse and render summary judgment for the Company.
Background
The facts stated in this background section come from the parties' Stipulation of Facts.
On August 10, 2004, the Company and its investors, including GSSF, entered into the Agreement. Section 9.9 provides:
Consent of Investors. As used herein, a "Majority of the Investors" means Investors who have agreed to or have purchased a majority of the Shares pursuant to this Agreement. Any term or condition hereof may be waived or amended with Investors holding at least 66 . % of the shares to be purchased hereunder, provided that no such amendment or waiver of the provisions of Section 1 hereof may be made without the consent of all affected Investors.
Section 1 of the Agreement governs the purchase and sale of Company stock.
At GSSF's instigation, the Agreement was amended to add a provision for liquidated damages if the Company failed to timely obtain or thereafter maintain an effective registration statement. This first amendment was approved by investors holding at least sixty-six and two-thirds of one percent (the "Super Majority") of the shares as required by Section 9.9. The Company did not obtain an effective registration statement within the prescribed time period.
After the date when the Company was required to have a effective registration statement and the accrual of a claim to liquidated damages under the Agreement as amended by the first amendment, a Super Majority approved a second amendment ("Amendment 2") deleting the provision giving investors a claim for liquidated damages. The second amendment stated it was "effective retroactively to the date [of the Agreement]". GSSF did not agree to any of the changes effected by Amendment 2 and sued to recover the damages under the Agreement before it was modified by Amendment 2. The Agreement provides that its terms are to "be governed by, and construed and enforced in accordance with, the laws of the State of Delaware. . . ." The parties entered into a Stipulation of Facts and both filed motions for summary judgment as to whether Amendment 2 precludes GSSF's contractual claim. The trial court granted GSSF summary judgment and denied the Company's motion.
Standard Of Review
The standards for reviewing summary judgments are well established, and we follow them in reviewing this appeal. PACCAR Fin. Corp. v. Potter, 239 S.W.3d 879, 881-82 (Tex.App.-Dallas 2007, no pet.) (citing Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985) (summary judgment standards of review)). When both parties move for summary judgment, each party bears the burden of establishing that it is entitled to judgment as a matter of law. Id. (citing City of Garland v. Dallas Morning News, 22 S.W.3d 351, 356 (Tex. 2000)). If the trial court grants one motion and denies the other, the non-prevailing party may appeal the granting of the prevailing party's motion as well as the denial of its own motion. Holmes v. Morales, 924 S.W.2d 920, 922 (Tex. 1996). When the appellant raises issues as to both motions, we review the summary judgment evidence presented by both parties and determine all questions presented. PACCAR Fin. Corp, 239 S.W.3d at 881-882. The reviewing court should then render the judgment that the trial court should have rendered. Id.; Al's Formal Wear of Houston, Inc. v. Sun, 869 S.W.2d 442, 444 (Tex.App.-Houston [1st Dist.] 1993, writ denied).
Discussion
In its first issue, the Company argues that GSSF's contractual claim is barred because it is based on a provision of the Agreement which was validly deleted in Amendment 2. In response, GSSF contends that Amendment 2 does not preclude the claims it asserts because it had a property right in its accrued claim that could not be extinguished by the Company and third party investors in Amendment 2. In support of its contention, GSSF relies principally on two Delaware cases: Keller v. Wilson Co., 190 A. 115, 122-23 (Del. 1936), and Consolidated Film Indus. v. Johnson, 197 A. 489, 493 (Del. 1937). Both cases, however, involved the amendment of the company's corporate charter and the ability of non-voting holders of preferred stock to sue for accrued dividends. Keller, 190 A. at 122; Consolidated Film, 197 A. at 493. Delaware law holds that a corporate charter is a contract between the corporation and the state into which every pertinent provision of the state constitution and relevant law was impliedly written. STAAR Surgical Co. v. Waggoner, 588 A.2d 1130, 1136 (Del. 1991) (citing Aldrich v. Franco Wyoming Oil Co., 7 A.2d 753, 758-59 (Del.Ch. 1939)). Neither Keller nor Consolidated Films considered the validity of an amendment to a private stock purchase agreement approved by two-thirds of a corporation's shareholders.
To buttress its vested right argument, GSSF cites Chesapeake Util. Corp. v. Hopkins, 340 A.2d 154, 156 (Del. 1975), where the Delaware Supreme Court concluded an imprisoned felon could not be deprived of his right to sue for personal injuries without remedy by due course of law. GSSF's reliance is misplaced because its liquidated damages claim was created by a private agreement — not a state constitution.
Here, no state action is involved — only an agreement between a corporation and its investors. "It is well settled in Delaware that contractual requirements or conditions may be waived." AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 444 (Del. 2005) (citing Pepsi-Cola Bottling Co. v. Pepsico, Inc., 297 A.2d 28, 33 (Del. 1972)). We conclude GSSF has no vested property right in the breach of contract claim created by the first amendment and Amendment 2 eliminated the claim. We therefore sustain the Company's first issue.
Our resolution of the Company's first issue obviates any need to address its second, third, fourth and fifth issues.
Conclusion
We reverse the trial court's judgment and render summary judgment for appellant Allis-Chambers Energy, Inc., and order that appellee GSSF Master Fund, L.P. take nothing on its claims.