Opinion issued March 1, 2016 

In The

Court of Appeals 

For The 

First District of Texas 

————————————

NO. 01-14-00305-CV

———————————

ROBERT HOVEL AND TANIA HOVEL, Appellants

V.

GAL BATZRI, Appellee

On Appeal from the 234th District Court

Harris County, Texas

Trial Court Case No. 2013-43259A

DISSENTING OPINION

There is an aphorism: “You can ignore reality, but you cannot ignore the 

consequences of ignoring reality.” This case requires this Court to determine 

whether, under Texas Tax Code section 171.255, appellee Gal Batzri, the sole 

shareholder, officer, and director of 7677 Real Street, L.L.C. (“7677”), should be 
2

held liable to appellants Robert and Tania Hovel for the torts of negligent 

misrepresentation and fraud committed against them by 7677 that were reduced to 

a liquidated judgment debt against the corporation after it forfeited its corporate 

charter. The majority has chosen to ignore the reality of seventy unbroken years of 

the Texas Supreme Court’s and appellate courts’ consistent construction of section 

171.255 and to substitute its own alternative meaning of the statute’s terms under 

its own chosen rules of construction. 

The purpose of section 171.255, as clearly stated by the Texas Supreme 

Court in 1946 and unchanged since then, is to prevent wrongful acts by culpable 

corporate directors and officers and to protect the public—particularly those who 

deal with corporations—by imposing personal liability on those officers for “debts 

of the corporation . . . created or incurred” after forfeiture of the corporate charter 

as a result of such wrongful acts. The Texas Supreme Court has required “strict 

construction” of the terms of section 171.255 to ensure that culpable corporate 

officers and directors are held liable for debts of the corporation created or incurred 

after forfeiture of a corporate charter to the same extent that a culpable partner may 

be held liable for the debts of a general partnership, including being held 

personally liable for wrongful acts of the corporation that occurred before 

forfeiture but were reduced to a debt of the corporation after forfeiture, as here. 
3

Following that law, I would reverse the trial court’s judgment and render judgment 

in the Hovels’ favor.

The majority in this case holds just the opposite. Based on its own new 

construction of the terms of section 171.255 under its own rules, the majority 

affirms the trial court’s judgment and absolves Batzri from liability to the Hovels 

for 7677’s judgment debt for fraud and negligent misrepresentation, effectively 

preventing them from recovering redress for the wrongs done to them.

Both the majority’s reasoning and its holding are exactly contrary to all 

precedent and to the statute’s clear meaning and purpose. Although recognizing 

that Texas Supreme Court law requires that section 171.255 of the Tax Code be 

strictly, or narrowly, construed in accordance with its language, the majority 

reasons that section 171.255 is not an unambiguous civil liability statute that must 

be strictly construed to impose liability on culpable corporate officers to prevent 

corporate wrong-doing, as the statute itself states. Rather, section 171.255 is an 

ambiguous “penal” statute that must be broadly construed to protect culpable 

officers under the virtually obsolete canon of construction of ambiguous criminal 

statutes known as “the rule of lenity”—a rule of construction which requires broad 

construction of ambiguous criminal statutes in favor of criminal defendants. 

Accordingly, Batzri, viewed leniently as a criminal defendant, is not liable

for 7677’s debt to the Hovels, since the corporation’s wrongful acts of fraud and 
4

negligent misrepresentation against the Hovels occurred prior to forfeiture of the 

corporate charter; it is those pre-forfeiture wrongful acts—not the post-forfeiture 

liquidated judgment entered on them—that constitute the “debt” of the corporation 

under section 171.255; and, under the plain language of section 171.255, corporate 

officers cannot be held personally liable for pre-forfeiture corporate debts. The 

public doing business with a corporation that commits a wrongful act and then 

forfeits its charter so that no judgment or penalty can be enforced against it must 

bear the loss—not the responsible officers and directors of the corporation.

The result is an opinion that contravenes the purpose and plain language of 

section 171.255, the previously uniform history of the statute’s construction, and 

the policy of the state of Texas. It also creates a conflict with all other Texas 

Courts of Appeals—including the Texas Supreme Court and our sister court, the 

Fourteenth Court of Appeals. This act of judicial will renders the law unreliable, 

puts this Court at odds with all other courts, wastes judicial resources, and greatly 

increases the delay and costs of litigation in this case, even as it invites review and 

reversal. Those are the consequences of ignoring the reality of the law. I, 

therefore, dissent.

I would reverse the judgment of the trial court in favor of Batzri and render 

judgment in favor of the Hovels. 
5

Background Facts

Because the majority opinion does not include all facts necessary for the 

proper disposition of this appeal, the material facts and their significance are 

restated below.

In 2008, the Hovels hired 7677 to build a house for them. Batzri was 7677’s 

sole shareholder, director, and president. After discovering numerous construction 

defects in the home, the Hovels filed a lawsuit in February 2010 against 7677 and 

others, asserting breach of contract, violation of the Deceptive Trade Practices Act, 

and other related causes of action. 7677 subsequently failed to pay its franchise tax 

and thus forfeited its charter on March 25, 2011, and its corporate privileges on 

July 29, 2011.

Almost two years after 7677’s forfeiture of its charter, the case was tried to a 

jury on March 18, 2013. 7677 did not appear at trial. The trial court therefore 

granted a default judgment against 7677 on March 28, 2013, and the trial 

proceeded against other defendants. The jury found that 7677, alone among the 

several defendants, committed fraud and statutory fraud against the Hovels, and it 

awarded them $59,000 in compensatory damages to repair their home. The jury 

also found that 7677 made a negligent misrepresentation on which the Hovels 

justifiably relied and was 100% liable for any negligent misrepresentation, and it 

awarded the Hovels $59,000 for “[t]he difference . . . between the value of what 
6

the Hovels received in the transaction and the purchase price or value given.” It 

also awarded them $183,000 for “[t]he economic loss . . . otherwise suffered in the 

past as a consequence of the Hovels’ reliance on the misrepresentation.”

On April 29, 2013, the trial court rendered its final judgment memorializing 

the default judgment against 7677 and incorporating by reference the jury charge 

and the jury findings, which the court acknowledged it had “received, filed, and 

entered of record.” The judgment stated that it “finally disposes of all claims and 

all parties and is appealable,” and it ordered that execution issue against 7677. 

On July 24, 2013, the Hovels filed this suit against Batzri personally, 

alleging that he had fraudulently transferred assets to avoid paying the judgment 

against 7677 and that he could be held personally liable for 7677’s judgment debt 

under Tax Code section 171.255. Following the filing of the underlying suit 

against him personally, on August 2, 2014, Batzri sought to reinstate 7677’s 

charter, shorn of the judgment debt to the Hovels.

On cross-motions for summary judgment, the trial court granted summary 

judgment in favor of 7677 and Batzri, holding him not liable for 7677’s judgment 

debt to the Hovels, and it denied the Hovels’ cross-motion on the ground that the 

“debt” was incurred before the forfeiture of corporate privileges—an error the 

majority repeats. 
7

Discussion

The resolution of this case turns on whether 7677’s “debt” to the Hovels was 

the judgment debt incurred by 7677 two years after it forfeited its charter or an 

unliquidated “debt” created by 7677’s wrongful acts of fraud and negligent 

misrepresentation committed by 7677 before it forfeited its charter and several 

years before that “debt” was reduced to the Hovels’ tort claims against 7677 and 

tried to a money judgment against the corporation. The trial court and the majority 

say that 7677’s “debt” to the Hovels was “created or incurred” at the time 7677 

committed its wrongs of negligent misrepresentation and fraud against the Hovels, 

before 7677’s forfeiture of corporate privileges, and thus Batzri is not liable for the 

debt. However, seventy years of construction of section 171.255 and its 

predecessor statute say that the debt was incurred when the Hovels’ claims against 

7677 were reduced to an enforceable liquidated obligation of the company in the 

form of a money judgment two years after 7677 forfeited its corporate charter. 

Following the law as historically developed, I would construe section 171.255 in 

accordance with its language and express purpose, and I would hold Batzri 

personally liable for the damages awarded to the Hovels in their judgment against 

7677. The majority does the opposite.
8

Construction of Tax Code Section 171.255

The first questions to be answered in construing Tax Code section 171.255 

are (1) what is a “debt of the corporation” and (2) when is a debt “created . . . or 

incurred” for purposes of the section? The final question is whether the money 

judgment obtained by the Hovels against 7677 two years after forfeiture of its 

corporate charter is a post-forfeiture debt of 7677 enforceable against Batzri, the 

sole officer and director of 7677, under section 171.255.

A. Standard of Review of Statutory Construction 

The primary objective of a court in construing a statute is to give effect to 

the legislature’s intent. State v. Shumake, 199 S.W.3d 279, 284 (Tex. 2006); Tex.

Prop. & Cas. Ins. v. Brooks, 269 S.W.3d 645, 649 (Tex. App.—Austin 2008, no 

pet.). In deriving intent, we rely on the plain meaning of the statutory text unless a 

different meaning is supplied by legislative definition or is apparent from the 

context, or the construction leads to absurd results. City of Rockwall v. Hughes, 

246 S.W.3d 621, 625–26 (Tex. 2008); Brooks, 269 S.W.3d at 649. 

Texas has long recognized that “the entire statute is intended to be 

effective,” that “a just and reasonable result” is intended, and that the “public 

interest is favored over any private interest.” TEX. GOV’T CODE ANN.

§ 311.021(2), (3), (5) (West 2013); see Brooks, 269 S.W.3d at 649. Therefore, in 

construing a statute, “we give effect to all its words” and avoid rendering any 
9

redundant or “mere surplusage.” Shumake, 199 S.W.3d at 287. Under the Texas 

Code Construction Act, courts are permitted to consider, among other things, 

(1) the object sought to be obtained by the statute, (2) the circumstances under 

which the statute was enacted, (3) the legislative history of the statute, (4) common 

law or former statutory provisions including law on the same and similar subjects, 

and (5) the consequences of a particular construction. TEX. GOV’T CODE ANN.

§ 311.023 (West 2013). 

B. Tax Code Section 171.255

Tax Code section 171.255 provides, in relevant part:

(a) If the corporate privileges of a corporation are forfeited for the 

failure to . . . pay a tax or penalty, each director or officer of the 

corporation is liable for each debt of the corporation that is created 

or incurred in this state after the date on which the report, tax, or 

penalty is due1and before the corporate privileges are revived. The 

liability includes liability for any tax or penalty imposed by this 

chapter on the corporation that becomes due and payable after the 

date of the forfeiture.

(b) The liability of a director or officer is in the same manner and to 

the same extent as if the director or officer were a partner and the 

corporation were a partnership.

(c) A director or officer is not liable for a debt of the corporation if

the director or officer shows that the debt was created or incurred:

 

1 For simplicity, I have used the terms “pre-forfeiture” and “post-forfeiture” 

throughout to refer to acts that occurred, in the precise terms of the statute, before 

and after “the date on which the report, tax, or penalty is due and before the 

corporate privileges are revived.” See TEX. TAX CODE ANN. § 171.225(a) (west 

2015).
10

(1) over the director’s objection; or

(2) without the director’s knowledge and that the exercise of 

reasonable diligence to become acquainted with the affairs of 

the corporation would not have revealed the intention to create 

the debt.

TEX. TAX CODE ANN. § 171.255 (a)–(c) (West 2015) (emphasis added).

Under subsection 171.255(a), enforceable obligations or “debt[s] . . . created 

or incurred” before forfeiture of a corporate charter (more precisely, in terms of the 

statute, created or incurred before the date a tax or penalty was due but was not 

paid, resulting in forfeiture of the charter) are not enforceable against corporate 

officers or directors after forfeiture of the charter. See id. § 171.255(a). This 

provision reflects the corporate shield doctrine. See Willis v. Donnelly, 199 

S.W.3d 262, 271 (Tex. 2006) (“A bedrock principle of corporate law is that an 

individual can incorporate a business and thereby normally shield himself from 

personal liability for the corporation’s contractual obligations”); see Portlock v. 

Perry, 852 S.W.2d 578, 582 (Tex. App.—Dallas 1993, writ denied) (“The general 

rule of corporate law is that officers of a corporation are insulated from personal 

liability arising from their activities performed in the scope of their duties for the 

corporation.”) (citing Delaney v. Fidelity Lease Ltd., 526 S.W.2d 543 (Tex. 1975)). 

However, a corporate officer may be held individually liable for a corporation’s 

tortious conduct if he knowingly participates in the conduct or has either actual or 
11

constructive knowledge of it. Leyendecker & Assocs., Inc. v. Wechter, 683 S.W.2d 

369, 375 (Tex. 1984).

Reflecting these bedrock principles of corporate law, subsection 171.255(b) 

provides that a director or officer of a corporation may be held personally liable for 

a debt of the corporation created or incurred after forfeiture of the corporate charter 

“in the same manner and to the same extent as if the director or officer were a 

partner and the corporation was a partnership.” See TEX. TAX CODE ANN. § 

171.255(b); TEX. BUS. ORGS. CODE ANN. § 152.304 (West 2012) (In general, “all 

partners are jointly and separately liable . . . for all obligations of the partnership 

unless otherwise provided by law.”); see U.S. Rest. Props. Operating L.P. v. Motel 

Enters., Inc., 104 S.W.3d 284, 293 (Tex. App.—Beaumont 2003, pet. denied) 

(partners are jointly and severally liable for debts of general partnership). 

However, under subsection 171.255(c) the defendant officer or director must have 

actual or constructive knowledge of the wrongful acts giving rise to the “tax or 

penalty” incurred as an enforceable debt after forfeiture and must not have 

objected to those acts. See TEX. TAX CODE ANN. § 171.255(c).

Because an officer or director of a corporation with knowledge of a debt of 

the corporation wrongfully created or incurred after forfeiture is jointly and 

severally liable for the debt, the questions of what constitutes a “debt” of the 
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corporation and when the debt is “created or incurred” are of paramount 

importance in construing section 171.255.

C. The Strict Construction Rule for Construing “Debt . . . Created or 

Incurred” in Section 171.255(a) and the “Relation-Back” Doctrine

1. Schwab and Silberstein and the strict construction rule

Texas case law prior to this case has consistently defined the “debt” of a 

corporation, as used in section 171.255, as “any legally enforceable obligation 

measured in a certain amount of money which must be performed or paid within 

an ascertainable period of time or on demand.” Taylor v. First Cmty. Credit 

Union, 316 S.W.3d 863, 867 (Tex. App.—Houston [14th Dist.] 2010, no pet.)

(quoting Act of May 30, 1987, 70th Leg., R.S., ch. 324, § 1, 1987 Tex. Gen. Laws 

1734, 1735 (defining “debt” as used in chapter 171 as formerly codified in Tax 

Code section 171.109(a)(3)), repealed by Act of May 2, 2006, 79th Leg., 3rd C.S., 

ch. 1, § 5, 2006 Tex. Gen. Laws 1, 23) (emphasis added). 

Taylor, decided in 2010, defined “debt” in the language of a statutory 

definition added to Tax Code Chapter 171 in 1987 and repealed effective 2008 as 

part of a recodification of Chapter 171 unrelated to section 171.255. In doing so, 

however, it relied on an unbroken history of binding case law construing section 

171.255 and defining “debt” as an enforceable financial obligation of the 

corporation that now dates back seventy years to the Texas Supreme Court case of 

Schwab v. Schlumberger Well Surveying Corp., 198 S.W.2d 79 (Tex. 1946).
13

In Schwab, the Texas Supreme Court construed the language “debt . . . 

created or incurred” with respect to the predecessor of section 171.255 to 

determine whether an officer of a corporation that had forfeited its charter could be 

held personally liable for payment of a promissory note of the corporation—that is, 

a legally enforceable obligation of the corporation measured in a certain amount of 

money—that was renewed after forfeiture of the charter. 198 S.W.2d at 80–82; see 

Taylor, 316 S.W.3d at 867. In construing the statute, the supreme court opined that 

“statutes . . . making the directors or other officers of a corporation liable for its 

debts where they are guilty of official delinquencies . . . though held to be remedial 

in some instances, are also penal in nature, and it is generally held that they must 

be strictly construed and cannot be extended beyond the clear import of their 

language.” Schwab, 198 S.W.2d at 80–81 (emphasis added).

The court reasoned that the word “created” means “[t]o bring into 

existence,” while the word “incurred” means “[b]rought on, occasioned, or 

caused.” Id. Using these definitions, the court held that no new debt of the 

corporation was created or incurred after forfeiture of the corporate charter and that 

the predecessor to section 171.255 had “no application to the renewal of 

obligations arising prior thereto” and therefore did not impose liability on 

corporate officers for such debts. See id. at 81–82. The court refused to hold the 

officer of the corporation whose charter had lapsed personally liable on the 
14

promissory note renewed after forfeiture because the note merely renewed an 

enforceable financial obligation of the corporation incurred in the regular course of 

business prior to forfeiture and was not attributable to “official delinquencies.” Id.

The Schwab court explained its construction of section 171.255 in 

accordance with “the clear import of [its] language” as appropriate to effectuate the 

purpose of the statute, stating, “The statute was meant to prevent wrongful acts of 

culpable officers of a corporation, and was for the protection of the public and 

particularly those dealing with the corporation.” Id. (emphasis added). The “strict 

construction” rule pronounced in Schwab provides that section 171.255 “cannot be 

extended beyond the clear import of [its] language” so that the purpose of the 

statute is achieved: to protect officers and directors of a corporation that has 

forfeited its charter from joint and several liability for the debts of the corporation 

only insofar as those debts arose from activities performed in the scope of their 

duties and, therefore, insulated those officers and directors from personal liability. 

See id. at 81; see also Portlock, 852 S.W.2d at 582 (stating general rule of liability 

of corporate officer). This strict construction rule has been consistently followed 

through the history of the construction of section 171.255—until now.

Twenty years after Schwab, the Texas Supreme Court again read section 

171.255 strictly in accordance with its plain language and purpose. In that case, 

however, it held officers and directors of a franchisee corporation that had forfeited 
15

its charter liable for a liquidated corporate debt of $1,867.58 incurred for the 

purchase of merchandise for the corporation four years after forfeiture. See First 

Nat’l Bank of Boston v. Silberstein, 398 S.W.2d 914, 915 (Tex. 1966). Citing 

subsections 171.255(a) and (c), the supreme court stated, “[P]ersonal liability is 

determined by the acts of [the directors and officers] in consenting to and 

approving the debts of the corporation where [it] is shown to have come to them in 

the regular course of business of the corporation” after forfeiture of the corporate 

charter. Id. at 916.

In 1992, the Austin Court of Appeals contrasted statutes imposing a 

corporate franchise tax—which are to be liberally construed in favor of the 

taxpayer to effectuate their purpose as revenue statutes—and “statutes making 

directors and officers liable for corporate debts,” like section 171.255, which “must 

be strictly construed and cannot be extended beyond the clear meaning of their 

language.” Wilburn v. State, 824 S.W.2d 755, 760 (Tex. App.—Austin 1992, no 

writ) (citing Schwab, 198 S.W.2d at 81). The Wilburn court further pointed out 

that “because § 171.255 is penal in nature, it must be strictly construed to protect 

those individuals against whom liability is sought.” Id. at 760–61. Thus, it held a 

corporate officer liable under section 171.255 for debts wrongfully created or 

incurred after the date franchise taxes were due. Id. at 761–62. The next year, the 

Austin Court of Appeals, using the same reasoning and reciting the same law in 
16

essentially the same situation, reached the same result. Davis v. State, 846 S.W.2d 

564, 570–72 (Tex. App.—Austin 1993, no writ) (strictly construing statute and 

holding corporation’s sole shareholder, president, and director liable for unpaid 

franchise taxes, penalties, and interest incurred in corporation’s name after 

forfeiture of corporate privileges). 

Up until the present, section 171.255 has consistently been strictly construed 

to ensure that an officer or director of a corporation that has forfeited its corporate 

charter is held personally liable only for a “debt” of the corporation, narrowly 

defined as an enforceable liquidated obligation of the corporation that is “created 

or incurred” after forfeiture for a wrongful act of the corporation of which the 

defendant had knowledge. See In re Trammell, 246 S.W.3d 815, 821–22 (Tex. 

App.—Dallas 2008, pet. denied) (refusing to extend liability under section 171.255 

beyond meaning of language and applying strict construction rule in holding that 

directors and officers of corporation may lose protection from liability provided by 

corporate form and become liable in same manner and to same extent as partner in 

partnership); PACCAR Fin. Corp. v. Potter, 239 S.W.3d 879, 882–83 (Tex. App.—

Dallas 2007, no pet.) (strictly construing statute and holding officers and directors 

of corporation that had forfeited charter not liable for corporate debt created at time 

when they were not officers and directors); cf. Williams v. Adams, 74 S.W.3d 437, 

440–41 (Tex. App.—Corpus Christi 2002, pet. denied) (explaining that strict 
17

construction “refuses to expand the law by implications or equitable 

considerations,” but rather confines interpretation of law to cases within its letter 

and spirit, resolving reasonable doubts against “applicability . . . to [a] particular 

case”; observing that purpose of statute was to prevent “wrongful acts of culpable 

officers”; and refusing to attribute to corporate officers “negligence liability” for 

“unintentional torts” of corporation). 

In none of this history is there any indication that the term “debt” in section 

171.255(a) is to be construed broadly so that it is “created or incurred” when the 

corporation commits a wrongful act, as the majority holds. Nor is there any 

indication that section 171.255 is to be construed in accordance with the criminal 

law rule of lenity to protect corporate officers and directors from personal liability 

for wrongful acts of the corporation of which they had knowledge, including 

intentional torts of the corporation, that result in a liquidated corporate obligation 

after forfeiture of the corporate charter. Rather, the established law is exactly the 

opposite.

The requirements of strict construction do, however, create a tension 

between section 171.255’s protection of corporate officers from liability for 

enforceable obligations of the corporation created or incurred as a result of the 

corporate officers’ activities within the scope of their duties in creating enforceable 

obligations of the corporation before forfeiture that are liquidated after forfeiture 
18

and its imposition of personal liability on corporate officers for liquidated debts of 

the corporation incurred after forfeiture as a result of wrongful acts of the 

corporation prior to forfeiture. The courts have resolved this tension by developing 

the “relation-back doctrine.”

2. Curry and Cain and the “relation-back doctrine”

Schwab’s strict construction rule requires both (1) that the phrase “debt . . . 

created or incurred” in section 171.255(a) must be strictly construed to hold 

“culpable officers” and directors of a corporation liable only for “debts . . . created 

or incurred” after forfeiture of the corporate charter to prevent wrongful acts of the 

corporation and (2) that the term “debt” must likewise be strictly construed as a 

legally “enforceable obligation measured in a certain amount of money,” in spite of 

the reality that not all lawful debts of a corporation are liquidated or reduced to a 

sum certain prior to forfeiture. 

In 1994, in Cain v. State, the Austin Court of Appeals addressed the courts’ 

resolution of the tension, discussing at length the historical development of the 

strict construction of section 171.255. 882 S.W.2d 515, 516–18 (Tex. App.—

Austin 1994, no writ). In reciting that history, starting with Schwab, the Cain court 

stated, “In legal usage, the word ‘debt’ refers ordinarily to a liquidated money 

obligation that is legally enforceable by the owner; that is to say, the legally 

enforceable obligation must be for a sum certain in money.” Id. at 516 n.1 (citing 
19

Seay v. Hall, 677 S.W.2d 19, 23 (Tex. 1984)) (emphasis in original). It pointed out 

that Schwab had concerned “a corporate obligation on open account—a liquidated 

sum and therefore an obvious ‘debt’ in legal usage.’” Id. at 516. However, some 

corporate debts lawfully incurred or created in the regular course of business prior 

to forfeiture were not reduced to a sum certain until after forfeiture. Therefore, the 

question arose whether corporate officers could be held liable for those debts, 

given the strict legal definition of “debt” applicable to section 171.255 cases. 

The Cain court focused its analysis of this problem on Curry Auto Leasing, 

Inc. v. Byrd, 683 S.W.2d 109 (Tex. App.—Dallas 1984, no writ), which it credited 

with first explicitly applying the rule of “strict construction” of the term “debt” 

employed in Schwab together with “the relation-back doctrine” to determine 

whether the officers and directors of a corporation that had forfeited its corporate 

privileges could be held liable under section 171.255 for a contractual obligation of 

the corporation that was entered in the scope of their duties before forfeiture of the 

corporate charter but was not liquidated until after forfeiture. Id. at 517. 

The relation-back doctrine, as expressed in Cain and Curry, holds that 

“[w]hen parties enter into a contract the law presumes they intend the 

consequences of its performance. It follows that performance or implementation 

of the contractual provisions relate back to and are authorized at the time of 
20

execution of the contract.” Id. (quoting Curry, 683 S.W.2d at 112) (emphasis 

added in Cain).

In Curry, a corporation entered a car-lease agreement in the regular course 

of business and breached it before forfeiture of its corporate charter, but the sums 

owed to the non-breaching party were not calculable until after the sale of the 

leased car, and that sale did not occur until after forfeiture of the corporate charter; 

thus, although an enforceable lease contract was entered in the regular course of 

business before forfeiture, no liquidated obligation came into existence until after 

forfeiture. See Curry, 683 S.W.2d at 110–11. The Curry court held that the 

officers and directors were not liable for the deficiency on the sale, reasoning that 

“performance or implementation of the contractual provisions relate[d] back to 

and [were] authorized at the time of execution of the contract.” See Cain, 882 

S.W.2d at 517 (quoting Curry, 683 S.W.2d at 112). In other words, the debt 

incurred was within the scope of the officers’ duties at the time it was created. 

Thus, for purposes of section 171.255, the contractual debt was created or incurred 

on the date of execution of the car-lease contract—which was a legally enforceable 

agreement to pay money satisfying the “strict construction” of the term “debt”—

and was not enforceable against corporate officers and directors after forfeiture of 

the corporate charter. Curry, 683 S.W.2d at 112.
21

The Cain court observed, “Other decisions have followed Curry in its 

application of the rule of ‘strict construction’ and the relation-back doctrine. In 

these decisions also, the corporation breached its contract before forfeiture but 

damages were not calculable or liquidated until after forfeiture of corporate 

privileges.” 882 S.W.2d at 517 (citing McKinney v. Anderson, 734 S.W.2d 173 

(Tex. App.—Houston [1st Dist.] 1987, no writ); River Oaks Shopping Ctr. v. 

Pagan, 712 S.W.2d 190 (Tex. App.—Houston [14th Dist.] 1986, writ ref’d n.r.e.); 

Rogers v. Adler, 696 S.W.2d 674 (Tex. App.—Dallas 1985, writ ref’d n.r.e.)). The 

court observed:

A common feature of Curry and the subsequent decisions is they 

(1) assume the word “debt” carries a narrow, restricted meaning of a 

liquidated money obligation that is legally enforceable but (2) apply 

the relation-back doctrine to hold against personal liability of officers 

and directors notwithstanding that assumption. Unless the courts 

acted under that assumption, the relation-back doctrine is 

meaningless.

Id. (emphasis in original). 

The Cain court stated, “All the relevant decisions after Schwab turn on the 

rule of statutory construction known as the ‘strict construction’ rule coupled with 

the relation-back doctrine.” Id. It pointed out,

Schwab adhered to the narrow or strict meaning of the word “create” 

and operated, moreover, on the assumption that the word “debt” also 

was similarly restricted to its technical meaning of a liquidated 

obligation that was legally enforceable against the corporation. The 

subsequent decisions mentioned previously also operated on that 

assumed meaning in applying the relation-back doctrine.
22

Id. at 518. 

Cain itself, however, like this case, presented the opposite situation from 

that in Curry for which the relation-back doctrine was devised—one in which a 

liquidated financial penalty was incurred by a corporation after forfeiture of its 

charter for wrongful acts of the corporation that occurred prior to forfeiture. In 

Cain, after ordering an oil-well operator corporation to plug a number of oil wells, 

which it failed to do, the Texas Railroad Commission authorized the expenditure of 

State funds to plug the wells. Id. at 516. Six months later, the corporation 

forfeited its corporate charter for failure to file its franchise-tax report. Id. 

Subsequently, the Commission paid nearly $50,000 to plug the wells and then 

sought to collect the state funds it had spent from Cain, an officer and director of 

the corporation. Id.

The court observed that Cain was “contend[ing] for a liberally expanded 

interpretation of the words ‘debt’ and ‘create’ so that they encompass legal 

obligations of all kinds, rather than liquidated money obligations only”—exactly 

like Batzri and the majority in this case. See id. at 519. But, the court concluded, 

So far as we are able to find, the word “debt” as used in [section 

171.255] has never been thought to include an obligation that is 

unliquidated. Indeed, it is difficult to see how such a meaning could 

be assigned the word if it is required to be construed strictly, that is to 

say, narrowly, literally, and technically.
23

Id. That being the case, the Cain court held that the relation-back doctrine did not

apply to protect Cain from liability under section 171.255 for the penalty incurred 

after forfeiture based on the wrongful acts of the corporation before forfeiture. 

Notably, with respect to this case, it did not describe the strict construction rule in 

terms of the rule of lenity but in terms of its opposite. 

Thus, under Curry and its progeny, money owed, or a liquidated debt 

incurred after forfeiture of a corporate charter on a legally enforceable contractual 

obligation of a corporation lawfully created in the exercise of corporate officers’ 

duties before forfeiture relates back to the creation of the enforceable obligation, 

even though the debt is not liquidated or not fully liquidated before forfeiture, and 

corporate officers are not personally liable for the debt. And under Cain and its

progeny, financial penalties and money judgments incurred as enforceable 

liquidated obligations of a corporation after forfeiture of its corporate charter due 

to the wrongful acts of the corporation, occurring either before or after forfeiture, 

do not relate back to the date of the unlawful act that generated the post-forfeiture 

penalty or judgment, and liability for the debt may be imposed upon the 

corporation’s culpable corporate officers and directors under section 171.255. 
24

3. Historical application of the “strict construction” rule and the 

“relation-back” doctrine

Since the time of Curry and Cain, the Texas appellate courts have 

consistently applied the strict construction rule and the relation-back doctrine as 

stated above.

In 1994, two months before deciding Cain, the Austin Court of Appeals, 

strictly construing section 171.255, held that a corporation’s directors and officers 

were personally liable for penalties assessed against the corporation after forfeiture 

of its charter, holding that the “debt” was created or incurred when the Texas 

Railroad Commission assessed the penalties. Jonnet v. State, 877 S.W.2d 520, 524 

(Tex. App.—Austin 1994, writ denied). In Jonnet, as in the subsequent decision in 

Cain, the court held that, for purposes of section 171.255(a), the corporation’s debt 

for failure to pay an administrative penalty assessed by the Texas Railroad 

Commission was “created or incurred” on the date the Commission entered an 

order directing the corporation to pay the administrative penalty, after forfeiture, 

and not on the date, nearly four years earlier, when the corporation began violating 

an administrative rule requiring that oil wells be plugged. Id. at 523–24. The court 

refused to apply the relation-back doctrine, holding that the penalties assessed by 

the Commission were based not just on the corporation’s initial violation of a 

Commission rule on a given date, but on its “ongoing violation of [the rule], which 

continued day after day for nearly four years.” Id. at 524. Thus, it held that, unlike 
25

cases to which the relation-back doctrine applies “in which the debt can be said to 

relate back to a single date—the date of the written instrument [creating the 

debt]—the conduct underlying the Commission’s order is of a continuous nature, 

with no single date to which the penalty can relate back.” Id. The court held the 

officers and directors liable for the penalty in their individual capacities under 

section 171.255(a). Id.

The Jonnet concurrence—authored by the same judge who would author 

Cain two months later—would have reached the same conclusion on different 

grounds by inquiring into the legislature’s intended meaning of the word “debt” in 

section 171.255. The concurrence pointed out that the word “debt” can have 

various meanings; “[i]n legal usage, however, the word ‘debt’ carries a narrower, 

restricted, and technical meaning,” namely “a liquidated money obligation that is 

legally enforceable.” Id. at 525 (Powers, J., concurring) (emphasis in original) 

(citing Seay, 677 S.W.2d at 23; 26 C.J.S. Debt 6 (1956)). It then pointed out that 

“[a]bsent legislative intent to the contrary, or other evidence of a different

meaning, legal terms in a statute are presumed to have been used in their legal

sense.” Id. (citations omitted). Moreover, “the word ‘debt’ must be confined to its 

narrow, restricted, and technical or legal sense because the statute and its operation 

are ‘penal in nature.’” Id. 
26

The Jonnet concurrence cited Schwab, 198 S.W.2d at 81, and Curry, 683 

S.W.2d at 112, as both employing the strict legal definition of “debt” and observed 

that “[o]ther decisions have followed Curry and Schwab with almost no real

discussion of the ‘strict construction’ rule and the relation-back doctrine,” but, in 

each, “the corporation had breached its contract before forfeiture but the resulting 

damages remained unliquidated until after forfeiture of corporate privileges.” Id. at 

525–26. Finally, it pointed out that “[a] chief feature of these decisions, as in 

Curry, is their assumption that the word ‘debt’ carries its narrow, restricted 

technical or legal meaning of a liquidated money obligation that is legally 

enforceable.” Id. at 526. The relation-back doctrine was thus required to preserve 

the “strict construction” rule of Schwab that a “debt” for which corporate directors 

and officers may be held liable under section 171.255 is a liquidated money 

obligation that becomes legally enforceable after forfeiture of the corporate charter 

and not one incurred before that. See id. Thus, the Jonnet concurrence’s 

application of the “strict construction” doctrine is, like Cain’s, exactly the opposite 

of the majority’s in this case.

Since these cases were decided, the Texas courts have consistently, until 

now, defined the term “debt” in section 171.255(a) as a legally enforceable 

liquidated obligation, and they have consistently applied the relation-back doctrine 

to save officers and directors from liability under 171.255 for legally enforceable 
27

financial obligations of a corporation created or incurred in the scope of their 

duties before forfeiture of the corporate charter, even if those obligations were not 

liquidated until after forfeiture. But they have never held that section 171.255 

protects culpable officers of a corporation from liability for penalties or judgments 

incurred after forfeiture as enforceable liquidated financial obligations of the 

corporation due to wrongful acts of the corporation before or after forfeiture.

Skrepnek v. Shearson Lehman Bros., Inc., 889 S.W.2d 578 (Tex. App.—

Houston [14th Dist.] 1994, no writ), is illustrative. There, the Fourteenth Court of 

Appeals, strictly construing section 171.255, held Skrepnek, a broker and officer of 

Panterra Resources, Inc. (“PRI”), individually liable in fraud under section 171.255 

for a judgment rendered against PRI after the forfeiture of PRI’s corporate charter 

on a debt owed to Shearson for stocks purchased by Shearson for PRI after PRI’s 

forfeiture of its charter. Skrepnek, 889 S.W.2d at 580–82. PRI represented that it 

would pay brokerage fees and margin interest that were not paid, resulting in a loss 

to Shearson. Id. at 580. The court affirmed the judgment, finding that Skrepnek 

was a participant in the post-forfeiture fraud. Id. at 580–82. 

Similarly, in Taylor, a lender brought an action against an automobiledealership corporation and its officer-director for the balance due on defaulted 

retail automobile installment contracts. See Taylor, 316 S.W.3d at 865. The 

lender alleged, and the trial court found, that the dealership breached its contractual 
28

obligations to the lender by failing to provide good title to the motor vehicles the 

dealership sold to its customers under the contracts assigned to the lender and by 

committing other similar acts. Id. The dealer’s wrongful acts breached its 

contractual obligations to both the vehicle-purchaser and the lender and provided 

the vehicle-purchaser with a defense against the lender as the holder of the retail 

installment agreement. Id. The corporation’s privileges were subsequently 

revoked for failure to file a required franchise tax report. Id. The lender sued the 

corporation and the corporation’s officer-director, Taylor. Taylor sought 

application of the relation-back doctrine to protect himself from liability for the 

money judgment entered against him in favor of the lender. Id. at 866–67. The 

trial court held against him, and, refusing to apply the relation-back doctrine, the 

appellate court affirmed the trial court’s judgment holding Taylor personally liable 

for the dealership’s wrongful acts. Id.

By contrast, Beesley v. Hydrocarbon Separation, Inc. falls into the line of 

cases in which the relation-back doctrine does apply and corporate officers and 

directors are not held liable for corporate obligations liquidated after forfeiture. In 

Beesley, the Dallas Court of Appeals held that the promoter and officer of a 

corporation that had forfeited its corporate charter could not be held personally 

liable for the corporation’s breach of a consulting agreement entered into by the 

corporation and its former owner before forfeiture. 358 S.W.3d 415, 423 (Tex. 
29

App.—Dallas 2012, no pet.). The court explicitly drew a distinction between the 

type of debt incurred in Cain (a penalty for “costs of plugging oil wells” that 

corporate officers were obligated by law to plug) and Taylor (damages for 

“breaches of warranty and failure to provide good title to automobiles”), which 

could not be “measured in a certain amount of money” at the time of contracting, 

and the debts incurred in Rogers, 696 S.W.2d 674 (losses due to post-forfeiture 

breach of purchase contract entered into long before forfeiture), Curry, 683 S.W.2d 

109 (corporate debts arising from failure to adhere to leasing contract), and the 

case at hand, Beesley itself (breach of employment agreement)—each of which

involved a contract that was entered in the regular course of business prior to 

forfeiture and “specified both the amount and the date due, so that at the time of 

contracting, a ‘debt’ was ‘created’ for purposes of section 171.255.” Id. at 423 n.7.

The distinction drawn in Beesley between types of debt to which the 

relation-back doctrine does and does not apply is informative here. It places the 

judgment entered against 7677 squarely within the category of liquidated judgment 

debts incurred by a corporation after forfeiture of the corporate charter as a result 

of acts of wrongdoing by the corporation that occurred prior to forfeiture. The 

relation-back doctrine does not apply to such acts of wrongdoing, and corporate 

officers and directors with knowledge of the wrongdoing may be held personally 

liable for the corporate debt under section 171.255.
30

I agree with the law as set out in Beesley and the other foregoing cases and 

find in them the correct construction of section 171.255. Thus, I disagree with the 

majority’s unique construction of section 171.255. Because the scenario in Cain

and its progeny—in which the relation-back doctrine was held not to apply—is 

materially the same as here, I would apply the same reasoning as in Cain, and I 

would hold that the debt in this case was incurred when the Hovels obtained a 

legally enforceable liquidated money judgment against 7677 two years after 

forfeiture of 7677’s corporate charter for its wrongful acts of negligent 

misrepresentation and fraud against them prior to forfeiture. Therefore, I would 

hold that Batzri, as 7677’s sole officer and director, is personally liable to the 

Hovels for that debt—exactly contrary to the majority opinion, but consistent with 

Schwab, Schlumberger, Curry, Cain, and their progeny.

D. The Majority’s “Strict Construction” of Tax Code Section 171.255 

Under the “Rule of Lenity”

The majority opinion contrasts sharply with the foregoing cases. The 

majority begins its analysis of Tax Code section 171.255 by characterizing Schwab

and Curry as support for a subtly but foundationally corrosive argument. It states,

“Although the statute imposes civil disability, Section 171.255 of the Tax Code 

operates as a penal statute” and “[b]ecause Section 171.255 is a penal statute, we 

must ‘strictly construe’ any ambiguity in favor of the party penalized by it.” Slip 

Op. at 8 (citing Schwab and Curry) (emphasis added). 
31

As shown above, neither Schwab nor Curry characterizes section 171.255 as 

a penal, or criminal, statute as opposed to a civil one, or as an ambiguous statute to 

be construed in favor of culpable defendants. Schwab says that “statutes . . . 

making the directors or other officers of a corporation liable for its debts where 

they are guilty of official delinquencies . . . though held to be remedial in some 

instances, are also penal in nature, and it is generally held that they must be strictly 

construed and cannot be extended beyond the clear import of their language.” 198 

S.W.2d at 80–81 (emphasis added). There is no assertion that section 171.255 is a 

criminal statute, no mention of any ambiguity in its language, and no mention that 

it is to be strictly construed in favor of culpable defendants. To the contrary, 

Schwab holds that the statute is “remedial . . . and also penal in nature” and that 

such statutes “cannot be extended beyond the clear import of their language.” Id. 

And Curry and Cain, as well as the other cases cited above, all carry forward the 

rule of Schwab that the term “debt” in section 171.255 must be strictly construed as 

a liquidated financial obligation of a corporation, merely adding the relation-back 

doctrine to this definition so that the corporate debt relates back to the lawful 

creation of the enforceable contractual obligation and corporate officers and 

directors are not personally liable for any part of the lawfully incurred debt that is 

liquidated after forfeiture. 
32

Nevertheless, undeterred by the text of Schwab and Curry, the majority 

states, “‘Strict construction,’ in the context of construing a penal statute, does not 

mean that each individual term must be read narrowly. It means that, when a 

statutory provision is unclear, the statute is read in its entirety in a way that 

benefits the party facing the possibility of a penalty. . . .” and that “strict 

construction of the entire statute, as opposed to strict construction of an isolated 

word, might require that an individual word be read broadly to accomplish a 

construction in favor of the party facing the penalty.”2 Slip Op. at 10–11 

(emphasis added; citations omitted). Schwab, however, requires that section 

171.255 be strictly construed to protect the public, rather than the corporate 

wrongdoer, stating, “The statute was meant to prevent wrongful acts of culpable 

officers of a corporation, and was for the protection of the public.” 198 S.W.2d at 

81–82. 

The majority bolsters its mischaracterization of Schwab and Curry with 

additional misleading and incorrect citations, beginning with a 1964 case that 

followed Schwab—Sheffield v. Nobles, 378 S.W.2d 391 (Tex. Civ. App.—Austin 

1964, writ ref’d). The majority quotes from Sheffield the phrase that section 

 

2

“When I use a word,” Humpty Dumpty said..., “it means just what I choose it to 

mean—neither more nor less.”

“The question is,” said Alice, “whether you can make words mean so many 

different things.”

LEWIS CARROLL, ALICE THROUGH THE LOOKING GLASS.
33

171.255 is a statute that is “highly penal in nature and one which could produce 

great hardship.” Slip Op. at 8. It does not quote the Sheffield court’s following 

statement that it had found no indication “that the statute should not be enforced 

according to its terms” and that “[t]he liability fixed by the statute under facts 

present here is the liability of partners.” Sheffield, 378 S.W.2d at 392 (emphasis 

added). In other words, it does not reference the Sheffield court’s recognition that 

section 171.255 is to be construed strictly, in accordance with its plain, 

unambiguous language so that it imposes on a defendant officer or director of a 

corporation that has forfeited its charter the same civil liability that a partner has to 

persons wronged by the partnership, just as the statute requires. See TEX. TAX 

CODE ANN. § 171.255 (b), (c). Sheffield does not support the majority’s 

construction of section 171.255 as an ambiguous penal statute meant to be 

construed broadly to protect culpable corporate officers. Like Schwab, it 

contradicts that construction.

The majority reaches the real crux of its argument, however, only in a 

footnote, citing a treatise of its choice instead of case law or the Texas Code 

Construction Act, and stating, “This rule [of strict construction] functions much 

like the rule of lenity.” Slip Op. at 8 n.7 (emphasis added). It explains: “The rule 

of lenity is ‘sometimes cast as the idea that “[p]enal statutes must be construed 

strictly” and sometimes as the idea that, if two rational readings are possible, the 
34

one with the less harsh treatment of the defendant prevails.’” Id. at 9 n.7 (quoting 

ANTONIN SCALIA & BRYAN GARNER, READING LAW: THE INTERPRETATION OF 

LEGAL TEXTS 296 (2012)). It then cites the same treatise for the proposition that 

“[t]he rule ‘applies not only to crimes but also to civil penalties.’” Id. at 9 n.7 

(quoting SCALIA & GARNER, READING LAW: THE INTERPRETATION OF LEGAL TEXTS

at 297). 

And for precedential support for these propositions in Texas law, it turns to a 

concurrence in a Texas Court of Criminal Appeals case, Cuellar v. State, 70 

S.W.3d 815 (Tex. Crim. App. 2002) (Cochran, J., concurring), in which the 

concurring judge would have applied the rule of lenity to an ambiguous criminal 

statute—not to an unambiguous civil statute. It is worth taking a look at Cuellar

for the actual treatment of the rule of lenity in Texas law.

In Cuellar, Judge Cochran joined the majority opinion, but she also 

concurred, adding that, in a case like Cuellar, in which a criminal statute is 

ambiguous, “the Rule of Lenity requires this Court to adopt the less harsh 

interpretation of penal statutes.” Id. at 821. She added, “Fortunately, Texas courts 

rarely need resort to the Rule of Lenity to construe its penal provisions, due to the 

drafting of the Texas Penal Code with clarity, precision, and straightforward, welldefined language.” Id. at 822. Thus, it is clear that Judge Cochran never 

conceived of the rule of lenity as applicable to a civil statute, or an unambiguous 
35

one, or one that must be strictly construed. Moreover, even as stated, her Cuellar

concurrence drew a sharp dissent from fellow Court of Criminal Appeals Judge 

Michael Keasler. Judge Keasler disagreed that the rule of lenity is available in 

Texas as a first resort to resolve an ambiguity in a criminal statute, much less to 

construe an unambiguous civil liability statute. See id. at 837–38 (Keasler, J., 

dissenting). After observing that Judge Cochran had cited “an 1886 Texas case 

and a 1955 United States Supreme Court case as authority,” Judge Keasler stated, 

“[B]oth our Court and the United States Supreme Court have since greatly limited 

the application of that rule.” Id. at 836–37. He pointed out how rare its use was in 

the criminal law and that it had been superseded in that law in almost all cases by 

the Code Construction Act. Id. at 837–38.3 Nevertheless, the majority forces this 

 

3

Judge Keasler pointed out:

Today, our leading case on statutory construction [of the Penal 

Code] is Boykin v. State. In Boykin, we explained that if the 

meaning of the statutory text should have been plain to the 

legislators who voted on it, we should give effect to that meaning. 

But if the plain language is ambiguous or leads to an absurd result, 

we should then consider extratextual factors. The extratextual 

factors include those listed in the Code Construction Act and 

mentioned above. No mention is made in Boykin of the rule of 

lenity. A year after we handed down Boykin, we analyzed a statute’s 

meaning by following the method outlined in Boykin, specifically 

rejecting the dissent’s reliance on the rule of lenity. That does not 

mean that the rule of lenity no longer exists in Texas. But it should 

not be used until all other avenues have been exhausted and a 

statute’s meaning remains ambiguous.

Cuellar v. State, 70 S.W.3d 815, 837–38 (Tex. Crim. App. 2002) (Keasler, J., dissenting).
36

rule of construction, as it understands it, upon the Tax Code as a rule of first resort 

for construing unambiguous civil liability statutes, thus undermining the substantial 

body of Texas precedent construing section 171.255 consistently over the last 

seventy years.

E. The Majority’s Analysis of the Case Law Construing Section 171.255

and the Effect of the Enactment and Repeal of the Statutory Definition

of “Debt” 

Two crucial errors drive the majority’s application to this case of the rule of 

lenity, miscalled “strict construction.” 

First, recognizing that section 171.255 has been consistently “strictly 

construed,” in accordance with the rule in Schwab, it purports to follow that rule, 

but, instead of following the plain language of section 171.255 and Schwab and the 

other cases construing and applying the requirements of the rule of strict 

construction—which would lead it to the opposite result from the one it believes 

warranted in this case—it redefines “strict construction” to mean its exact opposite, 

“the rule of lenity.” It then construes section 171.255—an unambiguous civil 

statute—as an ambiguous criminal statute to which it claims the rule of lenity 

applies as a rule of construction of the first resort. And, even though the Texas 

courts have consistently held that the rule of strict construction requires a narrow 

definition of the terms of section 171.255, the majority holds that the rule (being 

really the rule of lenity) requires extremely broad construction. Finally, it 
37

maintains that the Texas courts have actually construed section 171.255 as the 

majority currently does except when they have gotten pulled off track by the 

statutory definition of “debt” in Tax Code chapter 171, which is now repealed and 

therefore inapplicable.

Second, because the proper construction of section 171.255 turns on when 

the “debt of the corporation [was] created or incurred,” TEX. TAX CODE ANN.

§ 171.255(a), the majority not only has to redefine these terms broadly, especially 

the term “debt” in section 171.255, to conform to its conception of the 

requirements of the rule of lenity, but it also has to reconstruct the rationale and 

application of the relation-back doctrine. It does this in two ways. It declares that 

the creation of a “debt” relates back to the wrongful acts of culpable officers prior 

to forfeiture so that they are protected from liability for those acts under section 

171.255. It then declares that the case law has interpreted the terms of section 

171.255 and the relation-back doctrine in accordance with the rule of lenity, as the 

majority itself does, except from the period from 1987, when the legislature 

arbitrarily introduced a new definition of the term “debt” into the case law—one 

requiring that the term be construed narrowly rather than broadly in favor of 

defendants in accordance with the rule of lenity—until 2008, when, just as 

arbitrarily, the legislature withdrew the definition, eradicating it and leaving the 
38

courts—namely this one—free to reconstruct the definition of the terms of the 

statute at will and thus to restore the rule of lenity. 

The majority’s argument is analyzed below.

1. The three stages of construction of section 171.255

The majority divides the historical development of the construction of 

section 171.255 into three sections. The first it calls the “pre-1987 era,” i.e., the 

period before the legislature incorporated a statutory definition of “debt” into Tax 

Code Chapter 171. It describes this period as one in which “debts were considered 

created or incurred at the time the relevant contractual obligations were incurred” 

and unliquidated debts “were permitted to relate back to the contractual 

obligations.” Slip Op. at 12. At that time, the majority opines, “strict construction, 

in the sense of achieving a narrow application of a statute as a whole was first 

applied in a forfeiture case in Schwab.” Id. at 13. “Strict construction,” so 

defined, the majority states, “resulted in the officers of the corporation not having 

personal liability for the entity’s debts, consistent with the previously announced 

view that ‘before any one should be punished, either in a criminal or a civil action, 

. . . the offense should be clearly defined’ and ‘doubt as to the intention of the 

legislature should be resolved in favor of the defendant.’” Id. at 13–14. In support 

of its argument, the majority cites an inapposite 1892 case, Gulf, C. & S.F. Ry. Co. 

v. Dwyer, 19 S.W. 470 (Tex. 1892), on the construction of ambiguous statutes, 
39

which contains nothing that supports its construction of section 171.255, an 

unambiguous statute.

The majority’s reconstruction of the second stage of section 171.255 

interpretation, “1987,” is equally unprecedented. The majority describes 1987 as 

the year “when the Tax Code was amended to include a narrow definition of 

‘debt,’ limiting it to a liquidated obligation.” Id. at 12. Prior to that, the majority 

opines, the term “debt” in section 171.255(a) was ambiguous. Id. at 17. As 

support, it cites another 1892 case and a 1938 case, both of which long predated 

section 171.255 and neither of which supports its claim. See id. (citing Barber v. 

City of E. Dallas, 18 S.W. 438, 439 (Tex. 1892) (construing term “debt” in 

“common parlance” as including liability for damages resulting from tortious acts, 

while observing that term “has been differently defined, owing to the subjectmatter of the statutes in which it has been used” and “ordinarily . . . imports a sum 

of money arising upon a contract,” but may “include all obligations to pay money, 

whether arising from contract or implied by law, as a compensation for damages”), 

and Reconstruction Fin. Corp. v. Gossett, 111 S.W.2d 1066, 1073 (Tex. 1938) 

(following Barber in declaring that term “debt” is used in courts of this state “in a 

general, and not in a restricted, sense,” and “has been differently defined, owing to 

the subject matter of the statutes in which it has been used,” ordinarily 

“import[ing] a sum of money arising upon a contract,” but, in its more general 
40

sense, meaning “that which one person is bound to pay to or perform for 

another”)). 

Notably, both of the pre-section 171.255 cases cited by the majority as 

support for its broad reading of the term “debt” in section 171.255(a) are entirely 

compatible with established law construing section 171.255 strictly as an 

enforceable financial obligation for purposes of that section of the Tax Code, and 

neither case is relevant to show any ambiguity in the definition of the terms of 

section 171.255 or to meet any requirement that the term “debt” in that statute be 

construed broadly. Nevertheless, the majority opines, “By adding the narrow 

statutory definition, the term was no longer ambiguous or subject to broad 

interpretation by the courts.” Slip Op. at 18. 

The third period the majority views as pivotal, “post-2008,” is characterized 

by the majority—again without precedent—as a time in which, after repeal of the 

statutory definition of “debt” in Tax Code Chapter 171, the “basis for rejecting the 

‘relation-back’ doctrine is removed,” and, once again, “the pre-1987 view of this 

statute, which focused on broadly construing ‘created’ and ‘incurred’ and allowed 

unliquidated debts to relate back to the contractual obligations from which they 

arose, controls.” Id. at 21, 12. At that time, the majority opines, “the ‘relationback’ doctrine reemerged to avoid individual liability for pre-forfeiture acts that 

lead to post-forfeiture judgments.” Id. at 21.
41

2. The effect of repeal of the statutory definition of “debt”

The majority’s reconstructed three-stage history of the construction of 

section 171.255 turns not only upon the reinterpretation of the term “strict 

construction” as “the rule of lenity” but also upon the enactment of the statutory 

definition of “debt” and its repeal as marking a sharp turn in the proper analysis of 

the statute. To reach this conclusion, however, the majority must not only 

reconstruct the case law, as set out below, but it must also conclude “that the 

repealed statutory definition is not only no longer binding but, at this point, has 

become immaterial to our analysis of Section 171.255.” Slip Op. at 25. It supports 

this claim by again picking a canon of construction of its choice from the treatise 

Reading Law by Scalia and Garner, namely a rule which states, “‘When a statute is 

repealed, it falls irretrievably into oblivion,’ and has no effect.” Id. (quoting 

SCALIA & GARNER, READING LAW: THE INTERPRETATION OF LEGAL TEXTS at 334).

“As a result,” the majority opines, “we are not constrained by the narrow definition 

of a ‘debt’ as a liquidated sum certain. Instead, we look to the other pre- and postrepeal cases to analyze when 7677’s debt was created or incurred.” Id. at 25–26.

The Texas Supreme Court—whose instructions the majority essentially 

ignores—has, however, never held that whenever any statute, much less a general 

statutory definition applicable to many diverse statutes, has been repealed it “falls 

irretrievably into oblivion.” Instead, Texas law holds that when a statute has been 
42

re-codified and text omitted, with no clear statement by the Legislature that a 

substantive change is intended, and with no replacement by a clearly conflicting 

statement of law, the courts must “diligently attempt to ascertain legislative intent 

and shall consider at all times the old law, the evil, and the remedy.” Energy Serv. 

Co. of Bowie, Inc. v. Superior Snubbing Servs., Inc., 236 S.W.3d 190, 194 (Tex. 

2007) (quoting TEX. GOV’T CODE ANN. § 312.005 (West 2013)). Furthermore, 

“[a]bsent any identifiable reason for a substantive change to have been made in the 

statutory provision, or any extra-textual indication that one was intended, or any 

resulting change in industry practice, . . . the most reasonable construction of [the 

statute] is the same as its pre-[textual-change] predecessors.” Id. at 195 

(construing Texas Labor Code section 417.004). Such is the case here, and the 

instruction of the supreme court on construing a statute in these circumstances is 

exactly the opposite of the instruction the majority draws from the Scalia and 

Garner treatise and follows.

The statutory definition of the term “debt” in Tax Code Chapter 171 was 

repealed in 2008 during a recodification of the chapter. The amendments had 

nothing to do with section 171.255, which provides for the liability of officers of a 

corporation that has forfeited its charter for the corporation’s debt. Instead, as the 

majority itself acknowledges, it was “part of a series of amendments designed to 

fund Texas schools by adopting new methods to calculate businesses’ tax bills.” 
43

Slip Op. at 22 n.15 (citing Senate Research Center, Bill Analysis, Tex. H.B. 3, 79th 

Leg., 3d C.S. (2006)). The amendments to Chapter 171 were not intended to 

change the narrow definition of “debt” historically applied in section 171.255, a 

statute making directors and officers liable for corporate debts; they were intended 

to permit courts to apply a broader definition when calculating businesses’ tax 

bills. The definition of “debt” formerly applied to all of Chapter 171 did not need 

to be replaced for purposes of construing section 171.255 because the definitions 

of the terms “debt,” “created,” and “incurred” were all well established as strictly 

construed with respect to section 171.255 and its predecessor long before the 

chapter’s statutory definition of “debt” was enacted in 1987. The legislative history 

of the amendments did not indicate that any substantive change was intended with 

respect to the definition of “debt” for section 171.255 either when it was added or 

when it was repealed. Instead, it made clear that the amendments were intended 

for another purpose entirely. 

The Texas Supreme Court has instructed that, “[a]bsent any identifiable 

reason for a substantive change to have been made in the statutory provision, . . . 

the most reasonable construction of [the statutory term] is the same as its pre-

[amendment] predecessors.” See Energy Serv. Co., 236 S.W.3d at 195. The 

majority, however, disregards the readily “identifiable reasons” for repeal of the 

use of the narrow definition of debt applicable to section 171.255 for the entirety of 
44

chapter 171—reasons which have nothing to do with changing the definition of 

“debt” for purposes of section 171.255. And it errs in concluding that it has license

to rely on Scalia and Garner’s Reading Law to redefine the term “debt” in section 

171.255(a) in accordance with its own best lights, deeming the statutory definition 

to have fallen “irretrievably into oblivion.” Slip Op. at 25. It should have adopted 

the historic construction of the term.

3. The majority’s application of the rule of “strict construction” pre1987, 1987–2008, and post-2008

For the majority, if not for previous courts constrained by rule and 

precedent, the construction of section 171.255 changed dramatically from the time 

of Curry, when Schwab’s rule of lenity was incorporated into the relation-back 

doctrine, in 1987, when the narrow statutory definition of “debt” was enacted and 

the rule of lenity, with its broad interpretation of the terms of section 171.255, was 

pushed aside; and it changed dramatically again in 2008, when the narrow statutory 

definition of “debt” was repealed and fell “irretrievably into oblivion,” permitting 

the restoration of the rule of lenity as the rule of construction of section 171.255. 

The majority leads off its analysis of the pre-1987 construction of section 

171.255 with Schwab, stating, “The rule of strict construction, in the sense of 

achieving a narrow application of a statute as a whole was first applied in a 

forfeiture case in Schwab.” Slip Op. at 13. As shown above, this is incorrect. The 

majority then portrays Schwab as carrying forward under the rubric of “strict 
45

construction”—by which it really means “the rule of lenity”—the rule of

construction of ambiguous criminal statutes from the 1892 Dwyer case, stating that 

“‘before any one should be punished, either in a criminal or a civil action, . . . the 

offense should be clearly defined’ and ‘doubt as to the intention of the legislature 

should be resolved in favor of the defendant.’” Slip Op. at 13–14 (quoting Dwyer, 

19 S.W. at 471).

The majority then compounds the distorting effect of its reconstruction of 

the case law, characterizing the relation-back doctrine as set out in Curry as a 

further example of the rule of lenity (called, again, “strict construction”), claiming 

that, “‘[s]trictly construing’ Section 171.255, the [Curry] court held that the 

corporate officers were not personally liable because ‘the obligations, 

circumstances, conduct, or transactions that create[d] or incur[red] the debt in 

question pre-existed the forfeiture,’ even though the debt was, at that point, still 

unliquidated.” Slip Op. at 14 (quoting Curry, 683 S.W. 2d at 112). What Curry

actually said was that the relation-back doctrine applied as “strictly construed and 

limited by the facts of this case.” 683 S.W.2d at 112 (emphasis added). The facts 

in Curry reflected that the debt on which the corporate defendant had been sued 

was for “a sum of money . . . due Curry Auto” under a contract executed in the 

regular course of business prior to forfeiture of the corporate charter, and “[n]o 

argument [was] made that a sum of money [was] due Curry Auto under a new, 
46

different, separate, or independent agreement between the parties,” and thus, “[n]o 

debt for which the corporate officers are liable is shown to have been ‘created or 

incurred’ after the forfeiture.” Id. Thus, the majority’s claim that Curry applied 

the rule of lenity and held that corporate officers are not liable for “unliquidated” 

obligations of a corporation created prior to forfeiture of the corporate charter is 

simply incorrect.

Cain explains this, but the majority repudiates Cain, stating in a 

footnote:

We disagree with Cain v. State, 882 S.W.2d 515, 519 (Tex. App.—

Austin 1994, no writ), which held that a strict construction of Section 

171.255 requires courts to adopt the strictest possible definition of 

each statutory term. Indeed, the definitions given for “create” and 

“incur” in Schwab v. Schlumberger Well Surveying Corp., 198 S.W.2d 

79, 81 (Tex. 1946)—which are recited axiomatically in almost every 

Section 171.255 case—are remarkably broad. 

Slip Op. at 11 n.8. Thus, it condemns Cain as being in opposition to Curry, which 

it believes “is consistent with strict construction” as it sees it—namely consistent 

with the rule of lenity. It then states, “Many intermediate appellate courts have 

followed Curry.” Slip Op. at 15. Thus, while the bare statement that many courts 

have followed Curry is correct, it is profoundly misleading because it is based on 

an improper analysis of both the relation-back doctrine as propounded in Curry

and Cain and the rule of strict construction as propounded in Schwab.
47

The majority’s backwards understanding of the terms “strict construction” 

and “debt” and of the relation-back doctrine colors all the case law it addresses. 

As a result, the majority fails to discern the various types of debt distinguished by 

the case law construing section 171.255. It conflates those cases, and it attributes 

the holding in all of them to the rule of lenity under the rubric of “strict 

construction” or to its temporary suspension by the legislative imposition of a 

narrow definition of debt as a liquidated obligation between 1987 and 2008. 

The majority opines that Rogers and other section 171.255 cases that 

followed Curry support its arguments construing section 171.255 in terms of the 

rule of lenity. See Slip Op. at 15–16. Actually, however, in cases like Rogers and 

McKinney, as in Curry, the courts’ decisions gave effect to the lawful intentions of 

the parties to a preexisting contract, preserved rights that would otherwise have

been lost, or afforded a remedy to a creditor of the corporation when none would 

otherwise exist; thus, in each of these cases, the relation-back doctrine as 

traditionally understood applied. See Cain, 882 S.W.2d at 518 (discussing 

relation-back doctrine and citing these cases); McKinney, 734 S.W.2d at 174–75 

(holding that payments due under lease agreement incurred in regular course of 

business prior to forfeiture were created or incurred at time of execution of 

agreement, not at time when payments came due, and were not recoverable from 

corporate officers); Rogers, 696 S.W.2d at 674 (addressing losses due to post-
48

forfeiture breach of purchase contract entered into long before forfeiture); Curry, 

683 S.W.2d at 112. 

The majority cites Jonnet (which I have discussed above as explaining the 

rationale for the relation-back doctrine) only twice—both times citing the dissent. 

Slip Op. at 10–11, 18 (citing Jonnet, 877 S.W.2d at 537, 536 (Jones, J., 

dissenting)). And it claims Skrepnek (also discussed above) is consistent with its 

“rule of lenity” interpretation of “strict construction” and the relation-back doctrine 

and that it was decided on grounds that are “not an issue” in this case, without 

citing the similarity of the facts in Skrepnek to those in this case or its holding that 

corporate officers are liable for enforceable corporate obligations wrongfully 

incurred after forfeiture of a corporate charter. Slip Op. at 23–24. 

The majority also cites, in support of its “rule of lenity” analysis, cases 

decided after the Legislature repealed Chapter 171’s statutory definition of “debt” 

in 2008. These cases include Beesley (likewise discussed above). But the majority 

only says of Beesley, incorrectly, that “it does not address the issue we face” and 

that the analysis in that case “is consistent with applying the ‘relation-back’ 

doctrine.” Slip Op. at 24–25. 

The majority also includes Rossman v. Bishop Colo. Retail Plaza, L.P., 455 

S.W.3d 797 (Tex. App.—Dallas 2015, pet. denied), which it cites as support for 

the proposition that, “[w]ith that repeal, the ‘relation-back’ doctrine reemerged to 
49

avoid individual liability for pre-forfeiture acts that lead to post-forfeiture 

judgments,” although it points to no support for that claim in the Rossman opinion. 

Slip Op. at 21–22. Rossman actually stated that the 2008 repeal of the statutory 

definition of “debt” in Chapter 171 did not “impact the result” in the case, pointing 

out that the statutory definition of “debt” was “very similar to the one [in Seay and 

Rogers],” both pre-statutory cases. 455 S.W.3d at 804 (citing Seay, 677 S.W.2d at 

23; Rogers, 696 S.W.2d at 676–77). The Rossman court then applied the relationback doctrine to preserve a corporate director from liability arising out of corporate 

leases entered prior to forfeiture of the corporate charter. Id. (citing Curry, 683 

S.W.2d at 112). 

The majority finds only one exception to the restoration of the rule of lenity 

in construing section 171.255 following repeal of the statutory definition of debt in 

Chapter 171 of the Tax Code in 2008: Taylor (discussed above). See 316 S.W.3d 

at 867. The majority opines, correctly, that the Fourteenth Court of Appeals

“concluded that the Legislature must have intended to overrule the use of the 

‘relation-back’ doctrine in these Section 171.255 cases when it enacted such a 

narrow definition of a ‘debt.’” Slip Op. at 21 (citing Taylor, 316 S.W.3d at 865.) 

But it further opines that the facts in Taylor (a 2010 case) occurred before the 

repeal of the narrow statutory definition in Chapter 171 in 2008, and it brushes 

aside the fact that the Taylor court used the narrow definition of debt in deciding 
50

this section 171.255 case two years after repeal of the statutory definition. Thus, 

with Taylor’s definition of “debt” gone and the relation-back doctrine as it 

understands it restored, the majority is free to opine that, “with the repeal of the 

narrow definition that led to the Taylor result, courts have again concluded that a 

judgment-debt is created or incurred when the conduct or contract occurs, even if, 

at that point, the obligation remains unliquidated.” Slip Op. at 23 (emphasis

added). 

It is true that Taylor rejected the relation-back doctrine, but what it actually 

did was to reject the application of the doctrine in that case to relieve a corporate 

officer of liability for acts of wrong-doing that occurred prior to forfeiture but were 

reduced to a money judgment after forfeiture. See 316 S.W.3d at 869 (concluding 

that “the relation-back doctrine should not be applied in this case” and overruling 

issue premised on its applicability). Taylor is thus exactly in line with all those 

courts that have strictly construed the term “debt” as used in section 171.255 to be 

an enforceable liquidated obligation and that have used the relation-back doctrine 

to save from liability for corporate debt those non-culpable corporate officers who, 

acting within the scope of their duties, created or incurred an unliquidated but 

legally enforceable obligation of the corporation prior to forfeiture of the corporate 

charter, while rejecting the use of the relation-back doctrine to save corporate 
51

officers from personal liability for liquidated corporate obligations incurred after 

forfeiture because of wrongful acts of the corporation prior to forfeiture.

Finally, the majority cites, as support for its construction of section 171.255, 

Willis v. BPMT, LLC, 471 S.W.3d 27 (Tex. App.—Houston [1st Dist.] 2015, no 

pet.), a recent case from a panel of this Court, for “concluding that [the] debt on [a] 

lease agreement need not be for [a] sum certain, thus rejecting [the] repealed, 

narrow ‘debt’ definition in favor of [a] construction that favored [the] party facing 

[the] penalty.” Slip Op. at 22. And it claims, “We are bound by these precedents

from this Court.” Id. at 10. Actually, while Willis’s reasoning is similar to that of 

the majority in this case, and is, therefore, in my view, incorrect, its application of 

the law nevertheless illustrates the appropriate application of the relation-back 

doctrine, hence the continuing vitality of that doctrine since its development in 

Curry. 

Willis involved an action to recover unpaid rent from a corporation under a 

lease agreement entered in the ordinary course of business of the corporation well 

before forfeiture of its charter. 471 S.W.3d at 27–28. Thus, in Willis, the debt due 

on the lease was construed as a legally enforceable monetary obligation even if the 

exact amount was not determined until after forfeiture, and the debt related back to 

the date the lease was entered and could not be recovered from the corporation’s 

officers and directors. See id.; cf. Curry, 683 S.W.2d at 112; see also Cain, 882 
52

S.W.2d at 518–19 (construing Curry and its progeny). Thus, the panel correctly 

held that the corporate debt related back to the date of the lease and could not be 

recovered from the defendant officers and directors. Willis does nothing to support 

the majority’s holding in this case that Batzri is not liable for the wrongful acts of 

negligent misrepresentation and fraud committed by 7677 against the Hovels prior 

to forfeiture of the corporate charter and reduced to a liquidated money judgment 

after forfeiture. 

The majority, nevertheless, referring to the cases cited above and others, 

states, “All of these cases demonstrate application of the rule of strict construction 

[by which it actually means the rule of lenity] to protect a party facing a penalty 

through a construction of Section 171.255 in that party’s favor.” Slip Op. at 22. 

But this is not the case. Contrary to the majority’s claims, Texas courts have never 

followed its conception of either the strict construction rule applicable to section 

171.255 or the relation-back doctrine. And no other courts have held that all 

repealed statutes fall irretrievably into oblivion and that they are free to redefine 

the term “debt” in section 171.255 because the legislature repealed the statutory 

definition for that term in Chapter 171 in connection with broadening the tax base 

for businesses. Rather, the courts, almost without exception, have followed 

Schwab, Curry, and Cain as they really are. And, under that law, this case falls 

squarely within the scope of those cases in which the courts have held that the 
53

relation-back doctrine does not apply and section 171.255 does apply—namely, 

those cases in which a tax, penalty, or money judgment is incurred by a 

corporation after forfeiture of its corporate charter as a result of wrongful acts of 

the corporation either before or after forfeiture. Following its own lead, the 

majority rejects this conclusion.

F. The Result of the Majority’s Analysis of Section 171.255

The majority’s reconstruction of the law interpreting section 171.255 leads it 

to conclude that 7677’s debt to the Hovels “was created or incurred pre-forfeiture” 

and that Batzri is not liable for it. Id. at 27. Nevertheless, despite all it has done to 

justify its vision of the law, the majority still can find no support for its conclusion 

among published cases. Therefore, it relies on an unpublished 1998 case with no 

petition for review, Ballard v. Quinn, No. 14-97-01057-CV, 1998 WL 787558, at 

*2 (Tex. App.—Houston [14th Dist.] Sept. 10, 1998, no pet.) (mem. op., not 

designated for publication), as “persuasive” authority for its holding that Batzri is 

not liable to the Hovels under section 171.255 for 7677’s judgment debt. 

Rather than review the majority’s recitation of Ballard, I merely note that—

in a footnote several pages before setting out the “similarities between the Hovels’ 

claim and the one pursued in Ballard”—the majority states, “We recognize, of 

course, that Ballard lacks precedential value. But,” it continues, “as we explain, 

there are numerous similarities between the Ballard case and this one, and we 
54

believe the analysis is persuasive.” Slip Op. at 19 n.13. Thus, the majority

effectively decides to disregard the clear statement in the Rules of Appellate 

Procedure that “opinions issued prior to the 2003 amendment [to Rule 47, 

governing publication of appellate opinions] . . . and affirmatively designated ‘do 

not publish’ should be considered ‘unpublished’ cases lacking precedential value,” 

and to assign “persuasive” value to Ballard as its ultimate authority for its holding 

absolving Batzri from liability to the Hovels. See Slip Op. at 26–27; see also 

“Notes and Comments” following TEX. R. APP. P. 47.2. 

Thus, disregarding Rule 47.2, the historically narrow construction of the 

terms of section 171.255, the rule of law governing statutes repealed as part of 

inapplicable amendments as expressed in Energy Services Co., the purpose of 

section 171.255 as expressed in Schwab, and the historical development of the 

“strict construction” rule set out in Schwab and of the relation-back doctrine set out 

in Curry and explained in Cain, the majority finds Ballard controlling. It 

concludes,

Applying the rule of strict construction and utilizing the Supreme 

Court’s definition of the terms “created” and “incurred” from Schwab, 

we conclude that the debt evidenced by the default judgment obtained 

by the Hovels against 7677 was created or incurred pre-forfeiture at 

the time that the parties established their contractual and other 

obligations and, as such, Batzri is not individually liable for the 

entity’s debt.
55

Slip Op. at 27. Every part of this statement is legally unfounded. Nevertheless, the 

majority takes its statement to its logical conclusion and then adds, “Finally, even 

if we were to consider public policy, we would reject the Hovels’ contention that 

this interpretation is misguided.” Id. at 28. Rather, it claims, “public policy 

supports broadly construing ‘created or incurred’” and, of course, “debt.” Slip Op. 

at 28.

G. The Consequences of Ignoring Reality 

I find the majority’s opinion and holding so divergent from the mainstream 

of legal construction and precedent, so diametrically opposed to the purpose of the 

statute and the public policy of this state as expressed in Schwab and reiterated in 

its progeny, and so far from accurately presenting the law that I have nothing to 

say in conclusion other than to summarize the departures of the majority opinion 

from precedent and to note the consequences of this decision.

First, the strict construction of “debt . . . created or incurred” in Schwab and 

all subsequent section 171.255 cases, and the development of the relation-back 

doctrine traceable to Curry and Cain have long enabled courts to draw the 

distinctions necessary in a section 171.255 case to characterize the “debt” for 

which a plaintiff seeks to hold an officer or director of a defunct corporation liable 

as either wrongfully or lawfully “created” or “incurred.” They enable courts to

distinguish (1) enforceable financial obligations of a corporation created or 
56

incurred by corporate officers acting within the scope of their duties before 

forfeiture of a corporate charter, for which corporate officers may not be held 

personally liable under section 171.255 and the relation-back doctrine, even if the 

obligations are not liquidated until after forfeiture and (2) enforceable liquidated 

financial obligations of the corporation created or incurred after forfeiture of the 

corporate charter as a result of wrongful acts of the corporation that occurred either 

before or after forfeiture, for which section 171.255 makes culpable officers and 

directors of the corporation personally liable. Thus, they enable courts to 

determine whether or not their application of the statute will “prevent wrongful 

acts of culpable officers of a corporation . . . for the protection of the public and 

particularly those dealing with the corporation.” See Schwab, 198 S.W.2d at 81–

82 (stating purpose of statute). 

Correctly construed in accordance with its purpose, section 171.255 transfers 

liability for a liquidated obligation incurred by a corporation after forfeiture of its 

charter as a result of wrongful acts of the corporation to the corporation’s officers 

and directors with knowledge of the wrongful acts, but it does not transfer personal 

liability to corporate officers and directors for liquidated obligations incurred after 

forfeiture as a result of enforceable obligations of the corporation created by 

corporate officers acting within the scope of their duties prior to forfeiture. See

TEX. TAX CODE ANN. § 171.255; Schwab, 198 S.W.2d at 81. Under that law, 
57

liability for the judgment debt incurred by 7677 in favor of the Hovels after 

forfeiture of its charter for its acts of fraud and negligent misrepresentation prior to 

forfeiture should be transferred to Batzri, 7677’s only officer and director.

On the majority’s reading of section 171.255, however, if a corporation is 

held liable in a money judgment incurred after forfeiture of its corporate charter for 

its wrongful acts, the judgment cannot be enforced against the principals and 

officers of the corporation because the debt was “created or incurred” when the 

bad acts took place—prior to forfeiture. This is the exact opposite of the intent of 

section 171.255, which is to prevent the principals of a corporation from using 

forfeiture of a corporate charter to avoid liability for wrongful acts of the 

corporation, as Batzri seeks to do here. See Cain, 882 S.W.2d at 519–20 (in which 

defendant likewise “contend[ed] for a liberally expanded interpretation of the 

words ‘debt’ and ‘create,’” which court rejected as incompatible with all prior case 

law, starting with Schwab, and with purpose of statute). And it results in the 

exactly opposite conclusion from established law.

Second, the distinctions made by the case law through the application of the 

“strict construction” rule of Schwab and the relation-back doctrine of Curry allow 

courts to harmonize the subsections of section 171.255 to effectuate the purpose of 

the statute. Under partnership law, incorporated into subsection 171.255(b), 

partners in a partnership are generally liable for the debts of the partnership. See
58

TEX. TAX CODE ANN. § 171.255(b); U.S. Rest. Props., 104 S.W.3d at 293 (partners 

are jointly and severally liable for debts of general partnership). Under corporate 

law, corporate officers are protected by the corporate shield afforded by the 

corporate charter from personal liability for debts of the corporation created or 

incurred in the exercise of their duties, and are no longer protected once the shield 

is forfeited. See TEX. TAX CODE ANN. § 171.255(a); Portlock, 852 S.W.2d at 582. 

But a corporate officer may be held individually liable for the tortious conduct of a 

corporation in which he knowingly participates or of which has knowledge. TEX.

TAX CODE ANN. § 171.255(a); Leyendecker & Assocs., 683 S.W.2d at 375. The 

three subsections of section 171.255, read together and harmonized, as required by 

Texas law, provide that officers and directors of a corporation that has forfeited its 

charter may be held jointly and severally liable for the liquidated debts of the 

corporation incurred after the corporate charter and corporate shield are forfeited, 

but only insofar as they had knowledge of or participated in wrongful acts of the 

corporation giving rise to the debt. 

The majority, however, ignores subsections 171.255(b) and (c), which 

provide that only a director or officer of a corporation with culpable knowledge of 

a corporate debt “created or incurred” after forfeiture may be held liable under 

section 171.255 “in the same manner and to the same extent as if the director or 

officer were a partner and the corporation were a partnership.” See TEX. TAX 
59

CODE ANN. § 171.255(b), (c). And it ignores the strict construction rule that 

requires that the terms of section 171.255 be narrowly construed so that corporate 

officers are held personally liable only for those debts of the corporation incurred 

after forfeiture of the corporate charter as a result of wrongful acts of the 

corporation of which they had knowledge. It simply writes subsections 171.255(b) 

and (c) out of the statute in favor of applying the rule of lenity it has chosen as its 

own rule of construction, just as it fails to harmonize the terms of the statute, in 

violation of the genuinely applicable canon of construction requiring that all parts 

of a statute be rendered meaningful by a court’s construction and application of it. 

See TEX. GOV’T CODE ANN. § 311.021. 

The majority holds that corporate officers and directors may not be held 

liable for wrongful acts of the corporation of which they have knowledge that were 

committed prior to forfeiture because the “debt” was created when wrongful acts—

such as fraud or misrepresentation—occurred and not when an enforceable legal 

obligation was incurred by the corporation after forfeiture as a result of those acts. 

Thus, under the majority’s construction of section 171.255, a corporate officer 

cannot be held personally liable for the fraud or misrepresentation after forfeiture 

of the corporate charter, even though a partner would be personally liable for such 

acts committed by a partnership and even though the purpose of the statute requires 

that all terms and parts of the statute be given effect and harmonized.
60

Third, the majority substitutes an inapplicable and essentially obsolete canon 

of construction of ambiguous criminal statutes—the rule of lenity—for the rule of 

strict construction promulgated in Schwab for construing this unambiguous civil 

statute, in contradistinction to all prior case law. And it declares that it is not 

bound by any law in defining “debt” in section 171.255, contrary to Texas 

Supreme Court instruction. These actions result in the substitution of an 

unprecedented and extremely broad redefinition of the term “debt” in section 

171.255 as including unliquidated potential obligations of a corporation rather than 

the narrow definition of “debt” as an enforceable liquidated obligation of the 

corporation used historically, and they undermine the rationale for the development 

of the relation-back doctrine. 

In sum, the majority opinion deprives both this Court and any future court 

that adopts its redefinition of the operative terms in section 171.255 of all the 

precedential case law strictly construing a “debt” for purposes of section 171.255 

as a legally enforceable obligation to pay money. It deprives the Court of 

precedential case law relying upon the relation-back doctrine to distinguish among 

(1) debts lawfully created or incurred as enforceable obligations by a corporation 

that subsequently forfeits its charter, as to which no personal liability may be 

imposed on corporate officers and directors after forfeiture; (2) new debts incurred 

or created after forfeiture by officers with knowledge of the post-forfeiture debts, 
61

for which the officers or directors may be held personally liable; and (3) judgment 

debts or penalties incurred by a corporation for wrongful acts of the corporation 

that occurred prior to forfeiture but were not reduced to a legally enforceable 

obligation until after forfeiture, for which officers and directors with knowledge of 

the acts can be held personally liable. It creates division between this Court and all 

others. And, in so doing, it destroys the consistency and reliability of the law. 

The consequences of the majority’s ignoring legal reality are both perverse 

and severe. The majority opinion, therefore, in my view, has the potential to do 

much damage to established law.
62

Conclusion

I conclude that the conditions of Texas Tax Code section 171.255 for finding 

a corporate officer or director personally liable for the debts of a corporation that 

has forfeited its corporate charter were met in this case. Therefore, I would reverse 

the summary judgment of the trial court in favor of Batzri, and I would render the 

judgment the trial court should have rendered on the Hovels’ summary judgment 

motion, holding Batzri personally liable for the money judgment entered by the 

trial court against 7677 in favor of the Hovels.

Evelyn V. Keyes

Justice

Panel consists of Justices Keyes, Higley, and Brown.

Keyes, J., dissenting.