Court Opinion

ID: 4354049
Source: CourtListenerOpinion
Date Created: 2018-12-24 09:48:32.064563+00
Date Added: 2024-06-11T14:46:04.132765
License: Public Domain

Affirmed in Part; Reversed in Part; Remanded; and Opinion and Dissenting
Opinion filed December 21, 2018.

                                      In The

                     Fourteenth Court of Appeals

                               NO. 14-16-00715-CV

       MARY ANN YAMIN, TEXAS BLACK IRON, INC., AND 5310
                  WOODWAY, LLC, Appellants
                                         V.

                  CARROLL WAYNE CONN, L.P, Appellee

                    On Appeal from the 55th District Court
                            Harris County, Texas
                      Trial Court Cause No. 2013-47764

      CONCURRIUNG AND DISSENTING
               OPINION
      I agree with the court’s disposition of appellant Mary Ann Yamin’s appellate
issues. But, I part ways with the majority in its analysis of appellant Texas Black
Iron, Inc.’s reverse-veil-piercing issues. Even if the actual-fraud requirement in
Texas Business Organizations Code section 21.223(b) does not apply to an outsider-
reverse-veil-piercing theory by statute, an actual-fraud requirement analogous to the
statutory one should be a part of an outsider-reverse-veil-piercing theory as a matter
of common law.
Neither the Supreme Court of Texas nor this court has addressed whether Texas
               common law allows outsider reverse veil-piercing.
          As the majority and the parties recognize, the Supreme Court of Texas has not
yet addressed whether Texas common law allows reverse veil-piercing. Though this
court discussed the outsider-reverse-veil-piercing theory in Nugent v. Estate of
Ellickson, no party in that case asserted that Texas common law does not recognize
this theory, and the Nugent court did not need to address that issue because the court
held the evidence legally insufficient to support the jury’s finding under this theory.1
No party in Nugent asserted that the court failed to submit a proper outsider-reverse-
veil-piercing theory, nor did any party argue that the plaintiff had to show that any
party perpetrated an actual fraud on the plaintiff.2 Thus, the Nugent court did not
hold that Texas common law allows outsider reverse veil-piercing, nor did the
Nugent court’s holding address what elements a plaintiff must show to succeed under
this theory.3

    Whether the actual-fraud requirement applies to outsider reverse veil-piercing
                     appears to be an issue of first impression.
          Presuming for argument’s sake that Texas common law would permit a
plaintiff to pursue an outsider-reverse-veil-piercing theory, another issue is whether
section 21.223(b)’s actual-fraud requirement would apply to this theory by statute
or by analogy under the common law. Neither the parties nor the majority have cited
a case in which a Texas court decides the issue. The Eleventh Court of Appeals, in

1
    See 543 S.W.3d 243, 265–67 (Tex. App.—Houston [14th Dist.] 2018, no pet.).
2
    See id.
3
    See id.

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Clement v. Blackwood, recently stated that a plaintiff must satisfy the actual-fraud
requirement under section 21.223(b) before the plaintiff may recover based on an
outsider-reverse-veil-piercing theory.4 In that case, the appellate court held the trial
evidence legally sufficient to support the jury’s finding in favor of the plaintiffs on
their outsider-reverse-veil-piercing theory.5 In the Clement case, no party raised the
issue of whether the actual-fraud requirement applies to an outsider-reverse-veil-
piercing theory, and the court simply determined whether the trial evidence
supported the jury’s finding based on the charge, which required actual fraud.6 Thus,
whether the actual-fraud requirement applies to outsider reverse veil-piercing
appears to be an issue of first impression in Texas.

      The actual-fraud requirement should apply to outsider reverse veil-piercing
                              under Texas common law.

          The majority rejects Black Iron’s argument that Texas Business Organizations
Code section 21.224, entitled “Preemption of Liability,” makes the actual-fraud
requirement in section 21.223(b) apply to an outsider-reverse-veil-piercing theory.
Presuming that no statute imposes an actual-fraud requirement on an outsider-
reverse-veil-piercing theory, the Legislature’s failure to impose this requirement
does not mean that Texas courts cannot require actual fraud as part of the necessary
elements of a common-law outsider-reverse-veil-piercing theory.

          Today, this court holds for the first time that Texas common law allows
outsider reverse veil-piercing. In so doing, this court is free to articulate the essential
elements that a plaintiff must prove to succeed on that theory, including an actual-

4
  See No. 11-16-00087-CV, 2018 WL 826856, at *5–6 (Tex. App.—Eastland Feb. 8, 2018, pet.
denied) (mem. op.).
5
    See id.
6
    See id.

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fraud element. In articulating Texas common law in this area, this court should take
into account relevant statutes, even if those statutes do not apply to outsider reverse
veil-piercing and even if the Legislature adopted those statutes after some courts
began developing the outsider-reverse-veil-piercing theory under the common law.7

          If reverse veil-piercing is appropriate in circumstances analogous to those that
justify traditional veil-piercing, then the same actual-fraud requirement that applies
to traditional veil-piercing also should apply to reverse-veil piercing.8 Likewise, if
the law requires actual fraud to pierce the corporate veil between the owner of a
Texas corporation and the corporation to make the owner liable for an obligation of
the corporation, principles of consistency and equity justify requiring actual fraud to
pierce the corporate veil between the owner of a Texas corporation and the
corporation to make the corporation liable for an obligation of the owner.9

          Thus, this court should hold that, for appellee Carroll Wayne Conn, L.P. to
recover under a common-law outsider-reverse-veil-piercing theory, Conn must
prove that Stephen Yamin caused Black Iron to be used for the purpose of
perpetrating, and did perpetrate, an actual fraud on Conn, primarily for Stephen
Yamin’s direct personal benefit.10 Conn obtained a favorable jury finding to this

7
  See Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 528–31 (Tex.
1998) (considering statute applicable to certain claims, but not the claim in the case at hand, and
modifying the common-law rule to comport with the rule adopted by the Legislature, even though
the Legislature could have but did not make the statute applicable to the types of claims at issue
and even though the statute was not the same as the common-law rule the high court previously
had announced).
8
    See id.
9
    See id.
10
  See Tex. Bus. Orgs. Code Ann. § 21.223(b); Johnson & Higgins of Texas, Inc., 962 S.W.2d at
528–31.

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effect in response to Question 6, and this court should address whether the trial
evidence is legally and factually sufficient to support this finding. Because the court
does not do so, I respectfully dissent as to the majority’s analysis of Black Iron’s
issues.

                                        /s/       Kem Thompson Frost
                                                  Chief Justice

Panel consists of Chief Justice Frost and Justices Christopher and Jamison.
(Christopher, J., majority).

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