### NUMBER 13 - 11 - 00323 - CV COURT OF APPEALS THIRTEENTH DISTRICT OF TEXAS CORPUS CHRISTI - EDINBURG
SUNTIDE SANDPIT, INC., A TEXAS CORPORATION; MIKE HURST, INDIVIDUALLY; PHIL HURST, INDIVIDUALLY; AND ERMA STILLWELL, DECEASED , A ppellant s ,
v. H & H SAND AND GRAVEL, INC., A TEXAS CORPORATION, Appellee.

On appeal from the 148th District Court of Nueces County, Texas.



## MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Garza and Wittig 1



### Memorandum Opinion by Justice Wittig

1 Retired Justice Don Wittig was assigned to this Court by the Chief Justice of the Supreme Court of Texas pursuant to the government code. See T EX

. G OV ’ T C ODE A NN . § 74.003 (West 2005).2

This appeal stems from the trial court ’s grant of a summary judgment in favor of appellee, H & H Sand and Gravel, Inc. (“H & H”) , a Texas c orporation , against appellants , Suntide Sandpit, Inc . “(Suntide”) , a Texas c orporation, Mike Hurst, individually, Phil Hurst, i ndividually, and Erma Stillwell, deceased. In four issues, appellants challenge the summary judgment granted against the three individual appellants as well as the summary judgment granted against Suntide. We reverse and remand

. I. B ACKGROUND Appellee sued Suntide and the other appellants for breach of contract, breach of constructive trust, negligence , negligence per se, fraud and breach of constructive trust. The City of Corpus Christi was also a defendant but was dismissed following its plea to the jurisdiction in November 2006. 2 Be ginning in 1999, appellee provided concrete and sand in connection with a construction project fo r the City of Corpus Christi. Although
t he Cit y paid Suntide over $200,000, appellee contended that Suntide did not pay it a ba lance due of $57,251.07

. Appellee brought suit in 2002. Suntide failed to pay franchise taxes and its corporate charter was forfeited on February 9, 200 7. The charter was not reinsta ted. Appell ee moved for summary judgment against only Suntide but all appellants responded to the motion. The trial court entered judgment against all appellants, jointly and severally, for $57,252.07 in actual damages plus

2 The City’s plea to the jurisdiction was the subject of two interlocutory appeals to this court. See H & H Sand & Gravel, Inc. v. City of Corpus Christi , No. 13

- 06

- 00677

- CV, 2007 Tex. App. LEXIS 8878 (Tex. App.

— Corpus C hristi Nov

. 8, 2007, pet. denied); City of Corpus Christi v. H&H Sand & Gravel, Inc. , No. 13

- 05

- 306

- CV , 2005 Tex. App. LEXIS 10061 (Tex. App.

— Corpus Christi Dec . 1 , 2005, no pet.).3

$300,000 in punitive damages for conversion of trust funds, negligence per se, and gross, willful and wanton acts constituting actual or constructive fraud, plus attorney’s fees, and post judgment interest. II. S TANDARD OF R EVIEW We review a summary judgment de novo. Valence Operating Co. v. Dorsett , 164 S.W.3d 656, 661 (Tex. 2005). Summary judgment under rule 166a(c) is proper when a

m ovant establishes that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. T EX

. R. C IV

. P. 166a(c); Randall’s Food Mkts., Inc. v. Johnson , 891 S.W. 2d 640, 644 (Tex. 1995). When the trial court grants the judgment without specifying the grounds, we affirm the summary judgment if any of the grounds presented are meritorious. FM Props. Operating Co. v. City of Austin , 22 S.W.3d 868, 872

– 73 (Tex. 2000). Evidence favorable to the non

- movant will be taken as true in deciding whether there is a disputed material fact issue that precludes summary judgment. Nixon v. Mr. Prop. Mgmt. Co ., 690 S.W.2d 546, 548

– 49 (Tex. 1985). Every reasonable inference must be indulged in favor of the non

- movant and any doubt r esolved in its favor. Id . at 549. A party may move for summary judgment under rule 166a(i) on the ground that there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial

. T EX

. R. C IV

. P. 166a(i); Western Invs., Inc. v. Urena , 162 S.W.3d 547, 557 (Tex. 2005); Duvall v. Tex. Dep’t of Human Servs. , 82 S.W.3d 474, 477 (Tex. App.

— Austin 2002, no pet.). Unless the nonmovant produces summary judgment evidence raising a genuine issue of material4

fact on the challenged elements, the court must grant the motion. T EX

. R. C IV

. P. 166a(i) & cmt. 1997; Urena , 162 S.W.3d at 548; Duvall , 82 S.W.3d at 477

– 78. While appellee does not argue to us that its motion for sum mary judgment was b rought under Texas Rule of Civil Procedure 166a(i), and indeed the motion itself does
not specifically avail the rule, appellee ’ s mention of the rule prompts us to observe that a motion for no

- evidence summary judgment that only generally attacks a factual theory, without specifying the elements of the claims being attacked, is insufficient to support a no
- evidence summary judgment. See Garcia v. State Farm Lloyds , 287 S.W.3d 80 9 , 819 (Tex. App.

— C orpus Christi 2009 , pet. denied ) ( noting that i f a no

evidence motion for summary judgment is not specific in challenging a particular element or is conclusory, the motion is legally insufficient as a matter of law and may be challenged for the first time on appeal ); see also McConnell v. Southside Ind ep . Sch. Dist ., 858 S.W.2d 337, 342 (Tex. 1993) ( stating that a motion that fails to present grounds is legally insufficient as a matter of law ). Rule 166a(i) is clear in i ts requirement tha t the motion must state specifically the elements of the claim challenged, and the comment to the rule further provides that the "motion must be specific in challenging the evidentiary support for an element of a claim or defense; paragraph (i) does not au thorize conclusory motions or general no

- evidence challenges to an opponent's case." T EX

. R. C IV

. P . 166a cmt. 1997. We hold that appellee’s motion for summary judgment does not meet the requirements for a no

evidence motion and will accordingly be treat ed as a traditional motion for summary judgment

. Id. III. D ISCUSSION5

The gravamen of appellee’s summary judgment mo tion rests on Suntide’s forfeit u r e of its corporate charter. We first address the clai ms against the th r ee individual appellants . Appellee sought to have individual liability imposed upon them by virtue of the Texas Tax Code’s provision attributing personal liability in the event of the forfeiture of a corporation’s charter. The code provides: § 171.255. Liability of Director an d Officers (a) If the corporate privileges of a corporation are forfeited for the failure to file a report or 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 due and 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. T EX

. T AX C ODE A NN

. § 171.255 (West 2002)

. The supreme court in Schwab v. Schlumberger Well Surveying Corp ., 198 S.W.2d 79 ( Tex. 1946), construed a predecessor statute with provisions virtually identical in import to section 171.255. In that case , the officers o f the corporation renewed and ex tended a promissory note after the corporation's privileges had been forfeited. Id. at 80. D iscussing similar enactment s of comparable statutes in other jurisdictions, the supreme court observed that s uch statutes, though held to be remedial in so me 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. Id

. The language of the statute is concerned with the creation or incursion of debts by the corporation after the franc hise report is delinquent. See T EX

. T AX C ODE A NN . § 171.255(a) ( stating that a director or officer is liable for "each debt of the corporation that is created or incurr ed" after the date on which the re port, tax, or penalty is due); see6

also § 171.255(c) ( stating that a director or officer is not liable if they show "debt was created or incurred ” over director’s objection or without director’s knowledge ). It is the
act of creating or incurring a debt when the franchise report is delinquent that triggers personal liability once the corporate privileges are forfeited. Paccar Fin. Corp. v. Potter , 239 S.W.3d 879, 883 (Tex. App.

— Dallas 2007 , no pet. )

. “ If no debts are crea ted or incurred after the delinquency, there is no personal liability. Therefore, the date the corporate debt is created or incurred is crucial. We conclude the legislature intended that personal liability attaches only to those directors and officers of the corporation at the time the debt is created or incurred. ” Id. T hese directors and officers abused the corporate privilege by continuing to create and incur debts after the franchise tax is delinquent and are, therefore, "culpable." Id. ( citing Schwab , 98 S.W.2d 79, 81 ) (prior version of statute intended to "prevent wrongful acts of culpable officers of corporation"); see also First Nat'l Bank of Boston v. Silberstein , 398 S.W.2d 914, 916 (Tex. 1966) ("[P]ersonal liability is determined by the ac ts of [the directors and officers] in consenting to and approving the debts of the corporation where knowledge of their creation is shown to have come to them in the regular course of business of the corporation.")

. Because appellee offered no proof that any debt was created or incurred after Suntide’s charter was revoked in 2007, we hold the individual appellants are not personally liable under the tax code. See T EX

. T AX C ODE A NN

. § 171.255(a) ; see Beesley v. Hydrocarbon Separation, Inc. , 358 S.W.3d 415 , 423 (Tex. App.

— Dallas 2012 , no pet. ) (holding that a debt was created or incurred after forfeit ure of HSI's charter ; t herefore, officer and promoter wa s not individually liable under § 171.255).7

F urthermore, section 171.255 does not apply to tort judgments predicated on negligence liability. Williams v. Adams , 74 S.W.3d 437 , 442 (Tex. App.

— Corpus Christi
2002 , pet. denied )

. The rule of strict construction is applicable to a statute penal in nature, and as such, it should be strictly construed and must not be extended beyond the clear meaning of its language. See Schwab , 198 S.W.2d at 81; Davis v. State , 846 S.W.2d 564, 570 (T ex. App.

— Austin 1993, no writ). Th us, construing the statute strictly in a manner that limits its ap plication against the person upon whom the penalty is sought to be imposed, we held that section 1 71.255 cannot be used to impute personal liability to an officer or director of a corporation for a corporate debt when the "debt" at issue is a tort judgmen t based on negligence liability

. Williams , 74 S.W.3d at 442. With no citation to authority, a ppellee seem s to argue that the individual directors are burdened by section 171. 252(1) , providing that if corporate privileges of a corporation are forfeited, the corporation shall be denied the right to sue or defend. See
T EX

. T AX C ODE A NN . § 171.252 (West 2008). The plain language of the statute applies only to the corporation and the penalty to an officer or director under the forfeiture provision is to assign liability for corporate debt pursuant to section 171.255. See id. Appellee presented no evidence against the individual appellants on any of its other theories , and thus failed to sustain its summary judgment burden. See T EX

. R. C IV

. P. 166a. We sustain appellants’ three issues challenging the summary judgment against Mike Hurst, individually, Phil Hurst, i ndividually, and Erma Stillwell, deceased.
IV
. S UNTIDE In their fourt h issue, appellants assert the trial court erred in granting summary judgment against them for actual damages in excess of $43,200.10 , plus exemplary8

damages, attorney’s fees and costs. First , we observe that summary judgment under rule 166a(c) is proper when a movant establishes that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. T EX

. R. C IV

. P . 166a(c); Johnson , 891 S.W.2d at 644. It would appear to us th at appellee relied almost exclusively upon tax code section 171.252(1) to justify its summary judgment. See T EX

. T AX C ODE A NN . § 171.252(1). The record before us indicates no evidentiary hearing on attorney’s fees, punitive damages, or even actual damages allegedly suffered by appellee unde r its claims for conversion of trust funds, negligence per se, gross, willful and wanton acts constituting actual or constructive fraud, or negligence. Even a ss uming that Suntide could not defend against these claims after forfeiture of its charter, there are multiple fundamental problems with appellee’s motion for summary judgment and the trial court’s action in granti ng such motion without appellee having established its claims as a matter of law. First , as appellants point out, appellee did not establi sh the existence of fraud. Nor did appellee provide proof that appellants were negligent, negligent per se, that they committed gross, willful or want on acts, or converte d trust funds , et cetera

. Argu ably, appelle e proved its entitlement to brea ch of con tract damages in the lesser amount of $43,200.10 because that sum was admitted by Suntide. Appellee’s own pleadings show ed a discrepancy concerning the contract damages amount alle gedly owing between $57,251.07 and $47,213.73. An affidavit, not from Sunt ide, but from one of the individual defendants , indicated a credit was due to Suntide reducing the principal amount to $43,200.10. Thus, even the alleged contract damages of $57,251.07 were not established as a matter of law.9

Whether or not Suntide has any ability to defend the lawsuit i s problematic. First, the law is established that it may appeal. I n Bailey , the supreme c ourt held that a corporation that had ceased to exist could nevertheless appeal a trial court's judgmen t against it. See Vanscot Concrete Co. v. Bailey , 853 S.W.2d 525, 5 26

– 27 (Tex. 1993) (per curiam). The supreme court expressly disag reed with the court of appeals' dismissal of Vanscot Concrete's appeal on the grounds that a none xisting corporate appellan t cannot appeal. See id. The high court explained that "corporations have the same right to have judgments against them revised by the appellate courts as have persons, and that even extinguished corporations are entitled to a hearing before the appellat e courts." Id. at 526 ( citing Tex. Trunk Co. v. Jackson , 22 S.W. 1030, 1032 ( Tex. 1893)). Although Bailey did not concern the specific tax c ode provision at issue here, our sister court conclude d that the outc ome should be no different when a corporate ch arter was forfeited

. See Cruse v. O'Quinn , 273 S.W.3d 766 , 770

– 71 (Tex. App.

— Houston [14th Dist.] 2008, pet. denied). As th e supreme court broadly stated, "the reasoning for allowing a corporation which has ceased to exist to prosecute an appeal is appl icable in any circumstance." Bailey, 853 S.W.2d at 526

– 27. We observe that a number of cases i n addition to Cruse recognize that section 171.252 does not prevent a corporation that has forfeited its corporate privileges from defending claims against it. See Mello v. A.M.F. Inc ., 7 S.W.3d 329 (Tex. App.

— B eaumont 1 999, pet. denied) (stating that , despite the clea r language of § 171.252, the statute has historically been limited to prohibit defendants from bringing cross actions, not f rom merely defending lawsuits ) ( cit ing Midwest Mech. Contractors, Inc. v. Commonwealth Const. Co ., 801 F.2d 748, 752 (5th Cir. 1986); Bryan v. Cleveland Sand10

& Gravel Co ., 139 S.W.2d 612, 613 (Tex. Civ. App

— Beaumont 1940, writ ref ’d ) ) ; see also Rimc o Enters., Inc. v. Tex. Elec. Serv. Co. , 599 S.W.2d 362, 364 (Tex. Civ. App.

— Fort Worth 1980 , writ ref’d.n.r.e. ) (such a corporation may interpose a defense purely negative in character against a suit brought against it, and the plaintiff is still under the duty of establishing his cause of action, and the corporate defendant may offer proof which ne gates the plaintiff's case). We conclude that Suntide is not only entitled to appeal but can also interpose a defense purely negative in nature. However, we further conclude that d amages under appellee’s claims were not liquidated. Even a default judgment does not establish allegations pertaining to unliquidated damages. First Nat'l Bank v. Shockley , 663 S.W.2d 685, 689 (Tex. App.

— Corpus Christi 1983, no writ). “Unliquidated clai ms include damages for personal injuries, lost profits, consequential damages, exemplary damages, and reasonable attorney's fees.” Id. The plaintiff must present evidence of unliquidated damages, and this evidence must be both competent and consistent wi th the cause of action plead

. Id. ; see T EX

. R. C IV

. P . 243. Again, appellee did not meet its burden of proof on its alleged damages. See T EX

. R. C IV

. P. 166a(c). Suntide also argues appellee is not entitled to recover exemplary damages for breach of contract , citing Tony Gullo Motors I, L.P. v. Chapa , 212 S.W.3d 299, 304 (Tex. 2006). We agree. Furthermore, as appellants argue, exemplary damages require both a pleading and presentation of ev idence to show the extent of any knowing conduct and that it was so egregious as to warrant exemplary damages. See Herbert v. Greater Gulf Coast Enters. , 915 S.W.2d 866, 872

– 73 (Tex. App.

— Ho uston [1st Dist.] 1995, no writ)

. No such evidence was adduced h ere.11

Finally, to support an award of exemplary damages, the trier of fact “shall consider evidence, if any,” related to: (1) the nature of the wrong; (2) the character of the conduct involved; (3) the degree of culpability of the wrongdoer; (4) the situa tion and sensibilities of the parties concerned; (5) the extent to which such conduct offends a public sense of justice and propriety; and (6) the net worth of the defendant. T EX

. C IV

. P RAC

. & R EM

. C ODE A NN

. § 41.011 (a) (West 2008)

. The record does not disclose any evidence, hearing , or consideration by the trial court of the se mandatory factors. 3 Considering the multiple discrepancies in appellee’s motion for summary judgment and its failure to establish its claims and damages with no genuine issue o f material fact, we sustain appellants’ fo u rth issue. V. C ONCLUSION We sustain appellants ’ four issue s and reverse and remand.

Don Wittig Justice Delivered and filed the 19th day of July , 2012.

3 The trial court did not award the proposed $5,000,000.00 each for ex emplary damages and instead interlineated $300,000.00.