* Pursuant to Local Rule 47.5, the court has determined

that this opinion should not be published and is not precedent

except under the limited circumstances set forth in Local Rule

47.5.4.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_____________________

No. 95-10849

_____________________

In the Matter Of: SOUTHMARK CORPORATION

 Debtor

----------------------------------------------

SOUTHMARK CORPORATION

 Appellant

v.

CRESCENT HEIGHTS VI, INC;

GRAND CHATEAU REALTY VII, INC

 Appellees

_________________________________________________________________

Appeal from the United States District Court

for the Northern District of Texas 

(3:94-CV-60-P)

_________________________________________________________________

July 26, 1996

Before REAVLEY, KING, and EMILIO M. GARZA, Circuit Judges.

PER CURIAM:*

Southmark Corporation appeals the district court’s

affirmance of the bankruptcy court’s order granting summary

judgment to Crescent Heights VI, Inc. and Gran Chateau Realty
 

1 CHC was not itself a debtor in the Chapter 11 proceeding;

likewise, Crescent was not a creditor of Southmark in that

proceeding.

2

VII, Inc. on Southmark’s adversary claim for avoidance and

recovery of an alleged fraudulent transfer. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

In October 1988, Crescent Heights VI, Inc. and Gran Chateau

Realty VII, Inc. (collectively, “Crescent”) entered into a

purchase and sale agreement with Carriage House Corporation

(“CHC”), a wholly owned subsidiary of Southmark Corporation,

whereby Crescent agreed to purchase the Carriage House Apartments

from CHC for $23.5 million. In December, Crescent executed a

promissory note in this amount payable to CHC. The note was

secured by, inter alia, a mortgage on the Carriage House

Apartments in favor of CHC and an irrevocable letter of credit in

the amount of $1.5 million. According to Southmark, in April

1989, Southmark agreed with Crescent to accept approximately

$18.25 million as payment in full of the note.

In July 1989, Southmark filed for relief under Chapter 11 of

the United States Bankruptcy Code, 11 U.S.C. §§ 1101-74.1 As

representative of the bankruptcy estate, Southmark brought the

instant adversary proceeding against Crescent, alleging that

Crescent received a fraudulent transfer when it made the

discounted payoff of the note. Pursuant to 11 U.S.C.

§ 548(a)(2)(A), Southmark sought to avoid this transfer on the

grounds that it received “less than a reasonably equivalent
 

2Southmark asserted a similar claim under § 544, alleging

that the transfer was invalid under state law. See TEX. BUS. &

COM. CODE ANN. § 24.005(a)(2).

 

3The absence of an interest in the note would be fatal to

Southmark’s fraudulent transfer claims because the bankruptcy

court’s avoidance powers extend only to the “transfer of an

interest of the debtor in property” or an obligation incurred by

the debtor. 11 U.S.C. § 548(a).

 

4The affidavits submitted by Southmark were those of Robert

M. Galecke, a former officer of Southmark and CHC, Roger Hooten,

a Southmark officer, and Sue Seawell, a business records

custodian at First Bank National Association--Minneapolis who

authenticated records and statements for an account held by

Southmark.

3

value” in exchange for the transfer.2 With respect to its

connection to the transfer, Southmark stated in its complaint

that CHC was a wholly owned subsidiary of Southmark created to

own the Carriage House Apartments and that Southmark’s management

“exercised full and complete control and dominion over CHC.” 

Southmark attached copies of the purchase and sale agreement, the

promissory note, and the mortgage to its complaint as exhibits. 

Crescent moved to dismiss Southmark’s complaint, or

alternatively, for judgment on the pleadings. Specifically,

Crescent argued that Southmark’s complaint failed to state a

claim against Crescent because Southmark had no interest in the

note that was the subject of the alleged fraudulent transfer.3 

Rather, Crescent contended that Southmark was improperly

attempting to pierce its own corporate veil for its benefit. 

Southmark filed a response to this motion along with three

supporting affidavits.4 First, Southmark asserted that it had

stated a claim for relief under § 548 of the Bankruptcy Code
 

5Crescent filed a reply to this response in which it argued,

inter alia, that the bankruptcy court should not treat its motion

to dismiss as a motion for summary judgment.

4

because the allegation that it could recover the transfer placed

Crescent on notice that Southmark had an interest in the note; 

otherwise, Southmark contended that it did not have to plead why

or how it had an interest in the note. Alternatively, Southmark

noted that, if the court could not resolve the motion to dismiss

from reviewing the pleadings, it could convert the motion to

dismiss to a motion for summary judgment and consider extraneous

material such as affidavits. In this regard, Southmark argued

that there were fact issues with respect to several theories

under which it could have had an interest in the note, including,

inter alia, that CHC had assigned the note to Southmark, that

Southmark had controlled the note, and that CHC was Southmark’s

alter ego. In support of these theories, Southmark referenced

the affidavits accompanying its response. These affidavits

generally reported that CHC was essentially a paper corporation

created by Southmark as an accounting mechanism to track

transactions involving the apartment complex, that these

transactions, including the transfer, had been recorded on

Southmark’s ledgers, and that the funds transferred in connection

with Crescent’s discounted payment of the note were wired to a

Southmark account.5

After a hearing on Crescent’s motion, the bankruptcy court

issued its ruling from the bench. First, the court noted that it

had considered the affidavits submitted by Southmark and was
5

therefore analyzing Crescent’s motion as a motion for summary

judgment. The court then ruled that Crescent was entitled to

summary judgment because Southmark could not maintain an

avoidance action under § 548. Specifically, the court held that

there was no genuine issue of material fact with respect to the

various theories under which Southmark claimed an interest in the

note. The court noted that it was undisputed that CHC was the

party on the note and the mortgage, that CHC released the note

and the mortgage, and that CHC was a separate corporate entity

during all of the relevant transactions. With respect to

Southmark’s assignment theory, the court found that there was no

summary judgment evidence of a transfer of the note from CHC to

Southmark. In regard to the control issue, the court held that

Southmark’s control of CHC did not change the fact that CHC was a

distinct corporate entity and that Southmark could not ignore

that distinction. The court pointed out that, although Southmark

had possession of the note and recorded the transactions

involving the note on its ledgers, there was no endorsement of

the note to Southmark or any other evidence of transfer whereby

Southmark could claim ownership of the note. Finally, with

respect to Southmark’s alter ego theory, the court held that

Southmark could not pierce its own corporate veil for the purpose

of establishing an interest in property whereby it could commence

litigation against third parties.

The bankruptcy court later entered a written order granting

summary judgment to Crescent for the reasons stated from the
6

bench. Southmark timely appealed to the district court,

contending that the bankruptcy court erred in holding that there

were no genuine issues of material fact with respect to the

theories under which it claimed an interest in the note. The

district court affirmed the summary judgment. Specifically, the

court held that there was no evidence of a legitimate transfer of

the note from CHC to Southmark, that Southmark’s control of the

note did not confer an interest in the note, and that Southmark

could not pierce its own corporate veil to establish an interest

in the note. Southmark timely appealed. 

II. STANDARD OF REVIEW

Although the bankruptcy appellate process makes this court

the second level of review, we perform the identical task as the

district court. Heartland Fed. Sav. & Loan Ass’n v. Briscoe

Enters., Ltd., II (In re Briscoe Enters., Ltd., II), 994 F.2d

1160, 1163 (5th Cir.), cert. denied, 510 U.S. 992 (1993). We 

review findings of fact by the bankruptcy court under the clearly

erroneous standard and decide issues of law de novo. Henderson

v. Belknap (In re Henderson), 18 F.3d 1305, 1307 (5th Cir.),

cert. denied, 115 S. Ct. 573 (1994); Haber Oil Co. v. Swinehart

(In re Haber Oil Co.), 12 F.3d 426, 434 (5th Cir. 1994).

We review the granting of summary judgment de novo, applying

the same criteria used by the bankruptcy court in the first

instance. Meinecke v. H & R Block, 66 F.3d 77, 81 (5th Cir.

1995); Norman v. Apache Corp., 19 F.3d 1017, 1021 (5th Cir.
7

1994). First, we consult the applicable law to ascertain the

material factual issues. Meinecke, 66 F.3d at 81; King v. Chide,

974 F.2d 653, 655-56 (5th Cir. 1992). We then review the

evidence bearing on those issues, viewing the facts and

inferences to be drawn therefrom in the light most favorable to

the nonmoving party. Meinecke, 66 F.3d at 81; FDIC v. Dawson, 4

F.3d 1303, 1306 (5th Cir. 1993), cert. denied, 114 S. Ct. 2673

(1994). Summary judgment is proper "if the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party

is entitled to judgment as a matter of law." FED. R. CIV. P.

56(c).

Under Rule 56(c), the party moving for summary judgment

bears the initial burden of informing the bankruptcy court of the

basis for its motion and identifying the portions of the record

that it believes demonstrate the absence of a genuine issue of

material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323

(1986); Meinecke, 66 F.3d at 81. If the moving party meets its

burden, the burden shifts to the non-moving party to establish

the existence of a genuine issue for trial. Matsushita Elec.

Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986);

Meinecke, 66 F.3d at 81. The burden on the non-moving party is

to do more than simply show that there is some metaphysical doubt

as to the material facts. Matsushita, 475 U.S. at 586; Meinecke,

66 F.3d at 81. 
 

6Southmark also urges two other arguments on appeal: (1)

the bankruptcy court erred in failing to give Southmark notice of

its intent to convert the motion to dismiss to a motion for

summary judgment; and (2) the bankruptcy court impermissibly

shifted the burden on summary judgment to Southmark to prove that

it had an interest in the note. Southmark failed to raise these

arguments in its initial appeal to the district court. 

Typically, we will not consider an issue that was not raised

below unless the issue involves a pure question of law and our

failure to consider it would result in a miscarriage of justice. 

Hogue v. United Olympic Life Ins. Co., 39 F.3d 98, 102 (5th Cir.

1994), cert. denied, 115 S. Ct. 2248 (1995); Auster Oil & Gas,

Inc. v. Stream, 835 F.2d 597, 601 (5th Cir.), cert. dismissed,

486 U.S. 1027, and cert. denied, 488 U.S. 848 (1988). While

these two issues do involve pure questions of law, Southmark has

made no showing or argument as to why our failure to consider

these arguments under the circumstances of this case would result

in a miscarriage of justice. Such a showing requires more than

an assertion that a party might prevail on a issue that it failed

to preserve for appeal, for that is true in every case. Rather,

the import of the phrase “miscarriage of justice” is that there

are circumstances unique to this case that demand our examination

of an argument that has otherwise been waived. Accordingly, we

do not consider these arguments as properly before this court. 

 

7Neither party has adequately briefed the potentially

complex choice of law issues presented by the facts of this case. 

8

III. ANALYSIS

On appeal, Southmark argues that summary judgment was not

proper because there are genuine issues of material fact with

respect to the three theories under which it claims to have had

an interest in the note: (1) there was an equitable assignment

of the note by CHC to Southmark; (2) Southmark controlled the

note; and (3) CHC was Southmark’s alter ego. We address each of

these arguments in turn.6

A. Equitable Assignment

Under Texas law,7 “[n]o particular words or kind of
Several states have a connection to the lawsuit: Southmark is a

Georgia corporation; CHC is a Nevada corporation; Crescent

Heights VI is a California corporation; Gran Chateau Realty VII

is a Louisiana corporation; Southmark took possession of the note

and related documents in its offices in Texas; and the Carriage

House Apartments are located in Florida. Also, Southmark has

asserted three different theories of recovery, and the law

applicable to one may not govern the others. For example, the

alleged equitable assignment of the note may be governed by the

law of the state in which the transaction is claimed to have

occurred, whereas Southmark’s alter ego theory may be governed by

the law of the state of Southmark’s or CHC’s incorporation.

At most, Southmark has briefed its issues with reference to

some of the possible alternatives without attempting to resolve

the choice of law problem itself. For instance, with respect to

equitable assignment, Southmark applies Texas law because that is

where Southmark took possession of the note; alternatively,

Southmark applies Florida law because the note contains a choice

of law clause that states that the laws of the forum in which the

apartments are located shall “govern the note.” With respect to

the latter, such a clause may patently dictate that the language

of the instrument is to be construed according to Florida law;

however, it does not necessarily follow that activity outside of

the four corners of the instrument, such as a transfer of the

instrument, is also governed by Florida law. Southmark does not

recognize this distinction and simply sets forth Texas and

Florida law as equal alternatives. Further, when asked at oral

argument which law applied to Southmark’s alter ego theory,

counsel for Southmark simply replied that Southmark applied both

Texas and Nevada law in its brief.

The source of the fraudulent transfer actions asserted by

Southmark is federal bankruptcy law, but state law controls

whether Southmark has an interest in the note via equitable

assignment or alter ego. “Where disposition of a federal

question requires reference to state law, federal courts are not

bound by the forum state’s choice of law rules, but are free to

apply the law considered relevant to the pending controversy.” 

Crist v. Crist (In re Crist), 632 F.2d 1226, 1229 (5th Cir. 1980)

(citing 1A MOORE’S FEDERAL PRACTICE ¶ 0.325 (2d ed. 1979)), cert.

denied, 451 U.S. 986, and cert. denied, 454 U.S. 819 (1981). 

Still, we have “recognized that there may be issues which should

be resolved by application of the forum state’s choice of law

rules even where a federal court, in a federal question case, is

free to do otherwise.” FDIC v. Lattimore Land Corp., 656 F.2d

139, 148 n.16 (5th Cir. Unit B Sept. 1981) (citing Woods-Tucker

Leasing Corp. v. Hutcheson-Ingram Dev. Co., 642 F.2d 744, 748 n.8

(5th Cir. Apr. 1981)). Here, however, neither party has

advocated that we apply Texas’s choice of law rules to determine

which forum’s law we will apply to our analysis of Southmark’s

arguments.

9
Given our discretion in this regard, we choose to apply

Texas law where state law supplies the rule of decision. Our

choice of Texas law is motivated by several factors. First,

neither party has objected to the application of Texas law or

argued that the application of Texas law will produce a result

different from that which would obtain under the laws of another

state. Further, the majority of the parties’ arguments are

grounded in Texas law. Indeed, Southmark’s § 544 claim is based

on a Texas statute. Finally, the crux of this appeal is whether

Southmark had an interest in the note, which Southmark claims to

have taken possession of and held in its offices in Texas. 

10

instrument are necessary to effect an equitable assignment.” In

re Ashford, 73 B.R. 37, 39 (Bankr. N.D. Tex. 1987). Rather, the

requirements for an equitable assignment are: (1) evidence of

the transferor’s intent to assign; (2) consideration; (3)

delivery; and (4) the transferor’s complete surrender of control

over the funds or property assigned. Id. at 39-40; see also Pape

Equip. Co. v. I.C.S., Inc., 737 S.W.2d 397, 402 (Tex. App. --

Houston [14th Dist.] 1987, writ ref’d n.r.e.). “To make an

equitable assignment, an equitably constructive appropriation of

the subject matter should be made so as to confer a complete and

present right in the party for whose benefit the assignment is

meant, even where the circumstances do not admit of its immediate

exercise.” Pape Equip. Co., 737 S.W.2d at 402.

Here, there is simply no summary judgment evidence of a

transaction by which CHC assigned or otherwise transferred the

note to Southmark. In particular, there is no evidence of CHC’s

intent to assign the note, which is a critical element of an

equitable assignment. Of the affidavits submitted by Southmark,

only one was by an officer or director of CHC -- Robert M.

Galecke, who was CHC’s Treasurer from May 1988 to May 1991. 
11

Galecke makes no statement regarding CHC’s intent with respect to

the note. Otherwise, the record reveals no other evidence of

CHC’s intent to assign. Accordingly, the district court

correctly affirmed the summary judgment in this regard.

B. Control

Southmark next asserts that it had an interest in the note

because it controlled the note at the time of the transfer. In

support of this theory, Southmark cites our decisions in Coral

Petroleum, Inc. v. Banque-Paribas London, 797 F.2d 1351 (5th Cir.

1986), Security First Nat’l Bank v. Brunson (In re Coutee), 984

F.2d 138 (5th Cir. 1993), and Southmark Corp. v. Grosz (In re

Southmark Corp.), 49 F.3d 1111 (5th Cir. 1995), as well as

authority from other courts. According to Southmark, these cases

establish that control of property is sufficient to create an

interest in that property for the purpose of bringing avoidance

actions, notwithstanding the lack of legal ownership.

While it is true that the debtor’s control of property may

be such that the property is properly considered part of the

debtor’s estate in bankruptcy, our decisions make it clear that

such control must be unfettered and without restriction. For

example, in Coral Petroleum we affirmed the dismissal of an

avoidance action because, although the funds in question had been

placed in the debtor’s general account, their use was restricted

to repayment of a loan. 797 F.2d at 1359. In Coutee, another

avoidance action, we held that a law firm was not the “initial
12

transferee” of funds deposited in its trust account because it

held the funds only in a fiduciary capacity and “had no legal

right to put the funds to its own use.” 984 F.2d at 141. 

Finally, in Grosz we reversed the dismissal of a preference claim

because the payment that the debtor sought to avoid “was drawn on

[the debtor’s] Payroll Account, a general bank account containing

commingled funds, to which [the debtor] held complete legal

title, all indicia of ownership, and unfettered discretion to pay

creditor’s of its own choosing.” 49 F.3d at 1116. Further, in

Grosz there was “no evidence of any agreement . . . restricting

[the debtor’s] access to or use of the funds.” Id. at 1114.

In this case, however, Southmark’s control of the note was

not unfettered. As the district court noted:

[T]he testimony in the bankruptcy [c]ourt was that CHC

and not Southmark released the mortgage. This

testimony and evidence that CHC was eventually formally

merged with Southmark shows that Southmark was not free

to utilize the [n]ote without regard to CHC’s existence

and ownership of the [n]ote.

CHC’s necessary participation in the disposition of the note

demonstrates that Southmark did not possess the unrestricted

control that we have required to establish an interest in

property in avoidance actions. Further, CHC’s status as a

wholly-owned subsidiary of Southmark does not vest ultimate

control of the note in Southmark for these purposes. As we noted

in Coutee:

Dominion or control means legal dominion or control. 

Thus, the fact that the firm could have violated its

fiduciary obligation to the [debtors] by taking the

money out of the trust account and spending it as it

pleased would make no difference in the analysis.
13

984 F.2d at 141 n.4 (citations omitted). Similarly, the fact

that Southmark could have disregarded CHC’s corporate form in

disposing of the note does not establish that it had legal

control of the note. The district court properly affirmed the

summary judgment on this point.

C. Alter Ego

Finally, Southmark urges that CHC was its alter ego, such

that Southmark and CHC should be treated as one entity. 

Presumably, this entity would own both the fraudulent transfer

action asserted by Southmark as the debtor in this case and the

note made payable to CHC. This entity would then have the

requisite interest in the note to allow it to bring the

fraudulent transfer action against Crescent.

Under Texas law, “alter ego” is one of three distinct

theories under which a litigant may attempt to “pierce the

corporate veil.” Gibraltar Sav. v. LDBrinkman Corp., 860 F.2d

1275, 1286-89 (5th Cir. 1988) (describing three theories as

“alter ego,” “illegal purpose,” and “sham to perpetrate a

fraud”), cert. denied, 490 U.S. 1091 (1989). The “traditional

goal” of piercing the corporate veil is to hold a corporation’s

shareholders, officers, and directors individually liable for the

corporation’s obligations, including reaching the assets of those

individuals to satisfy the corporation’s liabilities. See Zahra

Spiritual Trust v. United States, 910 F.2d 240, 243 (5th Cir.

1990) (citing Castleberry v. Branscum, 721 S.W.2d 270, 271 (Tex.
14

1986), superseded on other grounds by TEX. BUS. CORP. ACT ANN. art.

2.21 (West Supp. 1996)). While such efforts are usually mounted

by creditors of a corporation, we have concluded that Texas law

would even permit a corporation seeking “to meet its corporate

obligations” to pierce its own corporate veil to “hold

accountable those who have misused the corporation.” S.I.

Acquisition, Inc. v. Eastway Delivery Serv., Inc. (In re S.I.

Acquisition), 817 F.2d 1142, 1152 (5th Cir. 1987). 

In the instant case, Southmark is not attempting to pierce

CHC’s corporate veil to hold itself accountable for CHC’s

obligations or to reach its own assets to satisfy CHC’s

liabilities. Also, Southmark is not trying to pierce its own

corporate veil to reach its shareholders, officers, and

directors. Rather, Southmark seeks to apply what we have

described as “reverse piercing” of the corporate veil. Zahra

Spiritual Trust, 910 F.2d at 243-44.

Typically, the goal of such reverse piercing is to reach the

assets of the corporation to satisfy the liabilities of its

individual shareholders, officers, and directors. See, e.g., id.

(government sought to use reverse piercing to assess tax lien on

corporate assets on account of alleged corporate owners’

individual tax liabilities); Zisblatt v. Zisblatt, 693 S.W.2d 944

(Tex. App. -- Fort Worth 1985, writ dism’d) (wife sought to use

reverse piercing in divorce proceeding to bring assets of

husband’s wholly owned corporation into community estate);

Dillingham v. Dillingham, 434 S.W.2d 459 (Tex. App. -- Fort Worth
15

1968, writ dism’d) (same); American Petroleum Exch., Inc. v.

Lord, 399 S.W.2d 213 (Tex. App. -- Fort Worth 1966, writ ref.

n.r.e.) (judgment creditor of majority shareholder in corporation

sought to use reverse piercing to proceed against corporation’s

assets to enforce judgment). A further distinction is that,

while one may attempt an ordinary piercing of the corporate veil

under any of three theories, supra, Texas law apparently permits

a reverse piercing only under the alter ego theory. Zahra

Spiritual Trust, 910 F.2d at 244. We have summarized the

application of the alter ego theory under Texas law as follows:

Based upon equitable concerns, an alter ego remedy

applies when there is such an identity or unity between

a corporation and an individual or another entity such

that all separateness between the parties has ceased

and a failure to disregard the corporate form would be

unfair or unjust.

S.I. Acquisition, 817 F.2d at 1152 (citing Castleberry, 721

S.W.2d at 272)).

In this case, Southmark seeks to use reverse piercing to

bring one of CHC’s assets -- the note -- into its estate so that

it may assert a fraudulent transfer action against Crescent based

on a transaction involving the note. This particular use of

reverse piercing, however, is distinguishable in at least one

critical respect from the Texas cases that have recognized the

reverse piercing remedy. In those cases, cited supra, it was a

third party that sought to employ reverse piercing to avoid the

inequity of allowing an adverse party to abuse the corporate form

by secreting its assets in a separate entity. In Southmark’s

case, the party seeking to disregard the corporate form is the
16

very party that abused that form in the first place. Applying

this equitable remedy under these circumstances would seem to

disserve its purpose, which is “to prevent use of the corporate

entity as a cloak for fraud or illegality or to work an

injustice.” Gentry v. Credit Plan Corp., 528 S.W.2d 571, 575

(Tex. 1975).

Further, although we held in S.I. Acquisition that a

corporation may pierce its own corporate veil, it does not follow

by analogy that a shareholder may employ reverse piercing to

reach assets owned by its corporation. When a corporation

pierces its own corporate veil, the corporation is not the party

with unclean hands; rather, the corporation is seeking to “hold

accountable those who have misused the corporation” -- i.e., the

shareholders, officers, or directors. S.I. Acquisition, 817 F.2d

at 1152. What Southmark proposes is to allow the party who

abused the corporate form to employ an equitable remedy to

disregard that form for its own benefit.

We do not hold that a shareholder could never use the

reverse piercing doctrine under any circumstances. Rather, we

simply note that the distinction between Southmark’s proposed use

of reverse piercing and its use in those few Texas cases that

have recognized this remedy is such that there is currently no

authority under Texas law for the application urged by Southmark. 

Accordingly, the district court correctly affirmed the summary

judgment with respect to Southmark’s alter ego theory.
17

IV. CONCLUSION

For the foregoing reasons, we AFFIRM the district court’s

affirmance of the judgment of the bankruptcy court.