Court Opinion

ID: 9723757
Source: CourtListenerOpinion
Date Created: 2023-08-26 10:30:12.912969+00
Date Added: 2024-06-11T18:24:51.687937
License: Public Domain

GILBERT, J.
I respectfully dissent.
I agree with the majority that Texas law should be applied in this case. I also agree that our position is a unique if not an anomalous one. It is difficult *884enough deciding cases based on California law, but the majority suggests we are California judges deciding how Texas judges, relying on Illinois and Texas law would decide this case. Perhaps we are just California judges deciding a case based on Texas law. Under either of the above approaches, I would reach a different result.
I would apply equitable principles to the survival statute here, and I think Texas courts would do the same. Prior to the enactment of article 7.12 of the Texas Business Corporations Act, the equitable “trust fund theory” permitted creditors of a dissolved corporation to pursue the assets of that corporation which were held by third parties, including corporate officers, directors, and shareholders. The dissolution of the corporation did not therefore bar all suits involving that corporation. In Hunter v. Fort Worth Capital Corp. (Tex. 1981) 620 S.W.2d 547, 551 (dis. opn. of Spears, J.) the Texas Supreme Court held article 7.12 restricted the use of the trust fund theory to predissolution claims.
The Hunter court however, recognized that in some cases equitable relief was available to creditors of a dissolved corporation. The Hunter court held that article 7.12 took the place of the “trust fund theory” of recovery, but it did not say that in all causes of action involving a dissolved corporation, no equitable relief would ever be proper. In footnote 7 at page 552, the Hunter court suggests it might have reached a different result if the dissolution of the corporation had constituted a fraud on creditors or litigants.
Here, it is alleged a fraud has been committed on the shareholders of the dissolved corporation. Hunter involved a negligence cause of action and “the dissolution was accomplished for a legitimate purpose and in accordance with statutory requirements.” Here, the dissolution of the corporation was also accomplished for a legitimate purpose, but it is the shareholders who are the alleged victims of fraud. If the shareholders of a corporation dissolved for improper purposes might still be subject to an action at law after dissolution, then shareholders of a properly dissolved corporation should not be barred from bringing a legitimate cause of action for fraud after dissolution.
I think under Texas law, a tolling of article 7.12 would take place within the framework of the “open courts” doctrine. The open courts doctrine is inextricably bound to the principle of due process. (Nelson v. Krusen (Tex. 1984) 678 S.W.2d 918, 921.) The open courts doctrine prevents the legislature from keeping litigants out of the court house when it makes a remedy contingent on an impossible condition. (Ibid.) The Rileys are offered a remedy at law only if they bring an action before they are aware they have a cause of action. Clairvoyance should not be a prerequisite to a law suit.
*885Here, as in the Nelson case, the statute requires the plaintiffs “. . . to do the impossible—to sue before they had any reason to know they should sue. Such a result is rightly described as ‘shocking’ and is so absurd and so unjust that it not ought to be possible. [Citations.] Deferring to the legislative imposition of such an unreasonable condition would amount to an abdication of our judicial duty to protect the rights guaranteed by the Texas Constitution, the source and limit of legislative as well as judicial power. This we cannot do. We hold [the statute] unconstitutional, under the open courts provision, to the extent it purports to cut off an injured person’s right to sue before the person has á reasonable opportunity to discover the wrong and bring suit.” (Nelson v. Krusen, supra, 678 S.W.2d at p. 923.)
The Nelson case was a negligence case where culpability was less than it is here. As the Rileys point out, there is even a more compelling reason to apply the open courts doctrine to a case involving fraud. The effect of the majority decision is to reward intentional wrong doers for their cunning. The more adept they are at concealing their fraud, the more assured they are of escaping the consequences of their own acts.
The majority state that the open courts doctrine enunciated in Nelson v. Krusen, supra, 678 S.W.2d 918, 921 and Sax v. Votteler (Tex. 1983) 648 S.W.2d 661 applies only to common law causes of action. Therefore, since there was no common law cause of action on behalf of or against a dissolved corporation, the open courts principle enunciated in Nelson and Sax would have no applicability here. I disagree.
Texas courts would apply the open courts doctrine to this case as well as to actions at common law. In Fitts v. City of Beaumont (Tex.Civ.App. 1985) 688 S.W.2d 182, cited by the Rileys, the Texas Court of Appeals held that a 60-day notice requirement for suits against the city of Beaumont violated the open courts doctrine. The plaintiff’s claim in Fitts was based on a statutory right, the Texas Tort Claim Act. At common law the city had a defense of sovereign immunity. The Texas court had no difficulty in allowing plaintiff the right to file suit against the city even though she did not comply with the city’s 60-day notice ordinance, because the ordinance violated the state’s open courts doctrine. The Fitts court relied on Hunter and Sax. It had no difficulty in applying the open courts doctrine to an action based on a statutory right rather than a common law right. It would have had no difficulty doing the same thing here. Neither should we.
I don’t accept the reasoning of the majority that since the Rileys accepted the benefit of the survival statute, they may not ask for relief. As the Rileys point out, they received no benefit by way of protection from any liability that was extinguished as a result of the dissolution. Rather, they suffered *886the loss of a sizeable investment. People in the business world who are naive may not survive long, but we should not be so cynical as to expect them to anticipate fraudulent conduct on the part of people with whom they carry on business transactions.
The majority’s rigid adherence to common law may ignore the very jurisprudential foundation of the common law. “The net effect of the [majority’s] holding is to permit, and even encourage, the evasion of historic common law principles and sound public policy that wrongdoers respond jn damages to a person injured as a proximate cause of that wrong.” (Hunter v. Fort Worth Capital Corp., supra, 620 S.W.2d 547, 556.)
A petition for a rehearing was denied April 9, 1986. Gilbert, J., was of the opinion that the petition should be granted. Appellants’ petition for review by the Supreme Court was denied July 10, 1986. Bird, C. J., was of the opinion that the petition should be granted.