Court Opinion

ID: 9769425
Source: CourtListenerOpinion
Date Created: 2023-08-29 14:50:14.090655+00
Date Added: 2024-06-11T07:31:03.287558
License: Public Domain

*389AKIN, Justice,
dissenting.
I cannot agree that the garnishor established as a matter of law that the Heritage Corporation, the Heritage Building Company and the other corporate garnishees were the alter egos of Gerald Pointer so as to make each jointly and severally liable for the garnishor’s claim against the Heritage Building Company. Accordingly, I must dissent.
The majority opinion ignores both the legislative sanction of limited liability for corporate shareholders and extensive findings of fact made by the trial judge. To justify its alter ego result, the majority heavily relies upon a transfer of certain assets from Heritage Building Company to Pointer. The evidence fully supports, however, the trial judge’s conclusion that this transfer was made in payment of a legitimate debt owed by Heritage Building Company to Pointer. The majority completely negates the legal existence of several corporations in order to satisfy a contingent, contractual, de minimus liability of Heritage Building Company — a liability that was not established by Tigrett until two years after the alleged improper transfer of assets. " In my view, and in light of all authorities, this transfer does not, as a matter of law, justify ignoring these corporate entities, even if Heritage Building Company was insolvent at the time of the transfer. Accordingly, the judgment should be affirmed.

Findings of the Trial Judge

The extensive findings of fact made by the trial judge, all of which are supported by evidence, should not be disregarded. This is crucial because it has long been held that each alter ego case will turn on its particular fact situation. Since all of the findings of the trial court are amply supported by evidence, this court is bound by those findings unless they are against the great weight of the evidence in which case the proper judgment of this court would be to reverse and remand for a new trial rather than to reverse and render.1 The majority has held, however, that there was no evidence to support the trial judge’s findings and that the evidence conclusively establishes the contrary. With this, I cannot agree.
The trial court found that the transfer of assets by Heritage Building Company, the judgment-debtor, to Pointer was a valid and legitimate conveyance in payment of a legitimate corporate indebtedness and that the transfer was not made to avoid payment of any claim owed to any creditor, including the then unliquidated contract claim of Tigrett. The court further found that the Heritage Building Company, even after the transfer, was still legitimately indebted to Pointer for pre-existing debts in an amount in excess of $100,000 and that Tigrett’s claim was de minimus. More importantly, it found that each of the corporations held formal directors’ meetings and each maintained corporate minute books and records of these meetings, and each corporation maintained separate books, records, and bank accounts which were well-kept and more than adequate. The trial court also specifically found that the advancements both prior and subsequent to April 30, 1974, by Pointer to Heritage Building Company were for the benefit of Heritage Building Company, and that these advances were not investments of equity capital by Pointer in Heritage Building Company as plaintiff-garnishor had pleaded as her principal ground in support of her alter ego contention.
The majority has also mischaracterized the balance sheet of Heritage Building Company by stating that the loans from Pointer to the company aggregating $484,-218 are designated as “capital” on the balance sheet. The balance sheet of Heritage Building as of April 30, 1974, shows the following:

*390

6. M. P. Capital $508,117.73
G. M. P. Apartment
Operations — YTD 23,899.49-
Total Loans Pay—
G. M. Pointer $484,218.24
Capital
H. B. C. Capital Stock 1,000.00
H. B. C. Retained Earn—
6/81/73 74,780.44-
(. . accounts omitted) (sums omitted)
Total Capital $237,849.53-
A reader of this balance sheet can clearly see that the sum of $484,218.24 in question is listed as a liability rather than as capital. Although the word “capital” is used in the entry “G. M. P. Capital,” it is obviously not used in the sense implicit in the statement made in the majority opinion; instead, it is used in the sense of money. Since it was not listed under the capital section of the balance sheet but instead was listed under the liability section, it would mislead no one. This balance sheet comports with the undisputed testimony of Pointer and others that these were loans made by Pointer to the company, as found by the trial judge, rather than contributions of capital to that corporation as found by the majority. Indeed, the only evidence in this record was in accord with the trial court’s finding on this particular point.
In addition to her alter ego plea, plaintiff asserted in her pleadings and in this court that a de facto merger took place between Heritage Building Company and the Heritage Corporation. This was also determined by the trial judge against Tigrett. In this respect, the trial court found that there was no acquisition of assets by Heritage Corporation from Heritage Building Company; instead, there was a transfer of some assets and liabilities by Heritage Building Company to Pointer in payment of a valid existing indebtedness and then a separate transfer of those assets and liabilities by Pointer to Heritage Corporation. Indeed, the assets acquired by Heritage Corporation from Pointer were only a part of the assets and liabilities transferred by Heritage Building Company to Pointer in repayment of Heritage Building Company’s debt to Pointer. More significantly, the court found that after the conveyance of April 30, 1974, Heritage Building Company did not cease to do business and had not been liquidated or dissolved at the time of the trial of this cause in January of 1978. In October 1974, the Republic National Bank of Dallas loaned $200,000 to the Heritage Building Company. At least through the date of the trial, according to Pointer, the company maintained its own active bank accounts and its debt was rolled. This latter statement can be construed, as the trial judge apparently construed it, to mean that the company postponed the due dates of its indebtedness and thus was not legally insolvent since its debts never became due. Furthermore, in October of 1974, Heritage Building Company received income in excess of $92,000 and held title to substantial real estate holdings until late in 1976.
The $92,000 of income reported by Heritage Building Company in 1974, included $66,000 which was profit from the sale of an apartment complex. This apartment complex was one of the assets that had been transferred to Pointer on April 30, 1974, in part payment of the debt owed him by Heritage Building Company. When Pointer was asked why he voluntarily transferred this valuable asset back into Heritage Building Company, he replied that the company owed money and “I was trying to get money in there to pay those bills with.” This evidence amply supports the trial court’s finding that Heritage Building Company was not denuded 2 of assets by the transfer to Pointer on April 30, 1974, and was “at all pertinent times” a valid functioning corporation. Although the evidence does not show the net worth of Heritage Building Company after April 30, 1974, a valid functioning corporation may exist even with a negative net worth.
*391Since there is a dearth of evidence in the record here, this is an especially improper case in which to apply the alter ego principle. The majority has, however, compensated for the lack of evidence by apparently shifting the burden of proof on the alter ego question from plaintiff to defendants in that the majority draws all inferences from the lack of proof in favor of plaintiff rather than in favor of the defendants. Thus, the majority has cast the burden of proof upon the defendant corporations to prove that they are not the alter egos of Pointer, rather than upon the plaintiff to prove that the corporations are the alter egos of Pointer. Indeed, the majority opinion may leave the reader with the erroneous impression that the alter ego doctrine is the rule rather than the exception to the rule that a corporate entity may not be disregarded.
Accordingly, in my view, the trial judge correctly concluded that the Heritage Building Company had not been used by Pointer or any other entity to perpetrate a fraud, to evade an existing legal obligation, to achieve or perpetrate a monopoly, to protect a claim, to justify a wrong, to circumvent a statute, or as a mere business conduit of Pointer or of another corporation. Moreover, the trial court correctly found that there was no intent on the part of Pointer or Heritage Building Company to defraud this plaintiff or any other creditor of Heritage Building Company when the conveyance of April 30,1974, took place.
With respect to the evidence pertaining to the maintenance of separate financial books and records and the recordation and maintenance of minutes of directors and shareholders meetings, the majority concedes that the trial judge’s finding that these records were adequately maintained is amply supported by the evidence. Thus, it is established as a matter of law that the separate corporate existence has been maintained. Consequently, the majority is apparently holding that all of these corporations are Pointer’s alter egos because: (1) the resolutions that he recommended were passed, insofar as the witnesses could remember, thus showing his control of these corporations; (2) the capitalization of Heritage Building Company was apparently inadequate when it was capitalized in 1955, twenty-three years prior to this lawsuit; (3) Pointer used his corporate position to prefer himself as a creditor; and (4) Heritage Building repaid a legitimate debt to Pointer in 1974, at a time when the corporation was insolvent. Thus, the majority has not only substituted its findings for those of the trial judge, but has also misapplied the alter ego doctrine to its substituted findings. This I cannot accept since the majority’s holding undermines the juridical concept of a corporation as a separate entity which should not be judicially ignored, except in the most extraordinary situations not present here. The alter ego exception to this general rule has never been utilized to impose liability on a shareholder because of a perfectly legal transaction.
Acting on these undisputed facts, the trial court properly held in its conclusions of law that since the transfer of assets by Heritage Building Company to Pointer was a legitimate payment of a corporate indebtedness which was not effected to avoid payment of any claim owed to any creditor, including plaintiff, and, since there was no fraud whatsoever involved, Heritage Building Company was not the alter ego of Pointer or of the Heritage Corporation. Although the trial court did not make specific findings with respect to the other corporations controlled by Pointer, such as East Realty Company, South Management Corporation, and Heritage Apartment Company, we must under Tex.R.Civ.P. 279 deem a similar finding of fact with respect to each corporation. Lassiter v. Bliss, 559 S.W.2d 353, 358 (Tex.1977). Indeed, as noted in footnote four of the majority opinion, the evidence shows that although the stock in South Management Corporation was in the name of Pointer, fifty percent (50%) of that stock was beneficially owned by one John Taylor and had been beneficially owned by Taylor since the inception of that corporation. Nevertheless, the majority has even chosen to ignore this fact in its result-oriented opinion.

*392
Alter Ego Exception

Under these undisputed facts, as a matter of law, the alter ego exception does not control; instead, the general rule applies. The general rule prohibits disregard of the corporate entity by a court unless that corporate entity is used as a means of committing fraud or to justify wrong in the sense of a violation of law or of public policy. Drye v. Eagle Rock Ranch, Inc., 364 S.W.2d 196, 202 (Tex.1962); Pace Corp. v. Jackson, 155 Tex. 179, 284 S.W.2d 340 (1955); First National Bank v. Gamble, 134 Tex. 112, 132 S.W.2d 100, 103 (1939). Since the trial court found no fraud, and since the majority concedes that whether Pointer misled Tigrett or subjectively intended to defraud creditors is immaterial, the question then is whether these corporations were created and used in such a way as to violate public policy or to evade a statute or for another illegal purpose.
In support of its holding, the majority quotes the following from Justice Norvell in Bell Oil & Gas Co. v. Allied Chemical Corp., 431 S.W.2d 336, 340 (Tex.1968):
[T]he corporate arrangement must be one which is likely to be employed in achieving an inequitable result by bringing into operation a basically unfair device which in all probability will result in prejudice to those dealing with one or more of the units making up the corporate arrangement, or one which has actually resulted in the complaining party’s having been placed in a position of disadvantage by the exercise of inequitable means, of which the corporate arrangement is a part. [Emphasis added]
The majority seizes upon this language to buttress its holding that all of the corporations in question are alter egos of Pointer. In particular, the majority finds as the “inequitable result” the fact that Tigrett was not paid her contractual claim. Although it is inequitable, in a sense, that Tigrett’s claim was not paid, this is not the type of “inequitable result” that justifies ignoring the corporate entity. The majority, however, couples this simple “injustice” in the sense of nonpayment of a contractual debt of the Heritage Building Company with “inadequate capitalization” of the Heritage Building Company to arrive at its conclusion that these corporations are “unfair devices” and, consequently, should be ignored. This is not, however, the type of injustice or unfair device to which courts have applied the alter ego exception.
The majority’s reliance on Bell Oil & Gas is misplaced because the supreme court held, in reversing the court of civil appeals, that the alter ego exception was inapplicable to the facts of that case, even though those facts were much stronger than the facts now before us. In Bell Oil & Gas, the supreme court noted that there was no evidence that the corporation, which entity the court of civil appeals had ignored, “was originally incorporated for an illegal, improper or fraudulent purpose.” 431 S.W.2d at 340. Thus, it supports the view of Professor Hamilton in 19 Texas Practice: Business Organizations § 234 (1973) that we look at the corporation at the time of inception to determine whether it is a basically unfair device, and in so doing determine whether the corporation was created for an “improper or fraudulent purpose.” Additionally, the supreme court in Bell Oil & Gas noted that the subsidiary was probably undercapitalized. 431 S.W.2d at 341. Furthermore, the supreme court stated that plaintiff’s losses were due to an extension of credit to the subsidiary, which Bell controlled, rather than in reliance upon anything done by Bell. Thus, the supreme court refused to pierce the corporate veil of the subsidiary corporation and hold Bell liable because no fraud or detrimental reliance was shown. Similarly, no such detrimental reliance or fraud is present here. Instead, we are merely confronted with a contractual claim of Tigrett against Heritage Building Company. Indeed, the court of civil appeals in Bell Oil & Gas Co. v. Allied Chemical Corp., 420 S.W.2d 779, 787 (Tex.Civ.App.—Houston [1st Dist.] 1967), rev’d, 431 S.W.2d 336 (1968), had justified ignoring the corporate entity on the grounds of inadequate capitalization and the lack of corporate formalities, such as formal directors meetings. Here, of course, it is *393undisputed that Heritage Building Company and the other corporations faithfully observed all corporate formalities. Consequently, I regard the supreme court’s opinion in Bell Oil & Gas as supportive of this dissent rather than as authority for the majority’s position. The quotation in the majority opinion from Bell Oil & Gas is merely obiter dictum, not intended to be applied to a situation where a simple injustice occurs.
As this court noted in Hanson Southwest Corp. v. Dal-Mac Construction Co., 554 S.W.2d 712, 716-17 (Tex.Civ.App.—Dallas 1977, writ ref’d n. r. e.), “[t]he general rule is that courts will not disregard separate legal entities because of identity of ownership, directors and officers unless the purpose of the relationship is to defeat public convenience, protect fraud, defend crime, or justify wrongs, such as violation of antitrust laws” [Emphasis added]. State v. Swift & Co., 187 S.W.2d 127, 131-32 (Tex. Civ.App. — Austin 1945, writ ref’d). Although we have here an identity of ownership of all of the corporations save one, the purpose for the existence of these corporations was not shown to be within the ambit of any of the public policy prohibitions which trigger the application of the exception to the general rule. The trial court found and the evidence clearly establishes that each corporation in our case was incorporated and maintained for a legitimate business reason, which the supreme court in Bell Oil & Gas found to be decisive.
The question of when to apply the alter ego exception to the general rule has been much confused by metaphors used by courts in describing situations where the exception applies. As Justice Cardozo noted in Berkey v. Third Ave. Ry. Co., 244 N.Y. 84, 155 N.E. 58, 61 (1926): “Metaphors in law are to be narrowly watched, for starting as devices to liberate thought, they end often by enslaving it.” This, in my view, is exactly what the majority has done. They focus upon such metaphors as “injustice” and to “prevent wrongs” to support their conclusion rather than looking to the essential terms to be defined which are the act of operation of the corporation and the purpose of the corporation. If the purpose of the corporation is legitimate and if the activity of the corporation is such that no public policy is violated, then the general rule should apply. In other words, the alter ego doctrine should be applicable in only the most extraordinary situations, not present here. This principle and the reason for it was also delineated by Justice Cardozo in Berkey v. Third Ave. Ry. Co., 244 N.Y. 84, 155 N.E. 58, 61 (1926), where he stated:
“The logical consistency of a juridical conception will indeed be sacrificed at times, when the sacrifice is essential to the end that some accepted public policy may be defended or upheld. This is so, for illustration, though agency in any proper sense is lacking, where the attempted separation between parent and subsidiary will work a fraud upon the law” [Emphasis added].
See W. Fletcher, Cyclopedia of the Law of Private Corporations § 45 (rev. perm, ed., 1974). No such situation exists here since neither a fraud upon the law was attempted nor was there an accepted public policy to be defended. Instead, we have before us a simple unpaid contractual claim.

The Nature of Tigrett’s Claim

The majority refers to the fact that the name of Heritage Building Company remained on the door of the offices of these corporations and that the financial statement of Heritage Building Company on April 30, 1974, showed a negative net worth. The only significance that the sign on the door or the financial statement of Heritage Building Company could possibly have would be if these facts misled Tigrett to her detriment. The evidence shows, however, that this was not the case. Indeed, the claim of Tigrett, as well as the facts surrounding that claim, set forth in the opinion of the court of civil appeals in Tigrett v. Heritage Building Co., 533 S.W. 2d 65, 67 (Tex.Civ.App.—Texarkana 1976, writ ref’d n. r. e.), shows that facts mentioned by the majority are immaterial. In that case, the court noted that Tigrett was an employee of Heritage Building Company and the basis of her recovery was an oral contract between Heritage Building *394Company and Tigrett to pay her the same benefits as provided by workmen’s compensation insurance. She sued on this oral contract which a jury found in her favor. 533 S.W.2d at 69. There was no question but that Tigrett knew she worked for Heritage Building Company and that she had contracted with Heritage Building Company. Since she knew the entity with which she contracted and was in no way misled, and since she has been apparently unsuccessful in collecting on that judgment from Heritage Building Company,3 she is in poor position to assert the alter ego doctrine at this late date to collect the judgment from Pointer and the other corporate garnishees.
The very reasonable question presented here is whether a claimant who contracted with the corporation and then is disappointed should be permitted recovery from the sole shareholder and all other corporations in which that shareholder has at least a fifty-percent stock ownership. No case has ever extended the alter ego exception to such a situation. Indeed, courts have been more reluctant to ignore the rule of limited liability for shareholders in contract cases than they have in tort cases. Bell Oil & Gas Co. v. Allied Chemical Corp., 431 S.W.2d at 339; Hanson Southwest Corp. v. Dal-Mac Construction Co., 554 S.W.2d at 717. The reason for less stringent standards in tort cases is grounded upon the fact that in contract the aggrieved party selects the party with whom he contracts; in tort, no such selection is available. Gentry v. Credit Plan Corp., 528 S.W.2d 571, 573 (Tex.1975). Thus, the more stringent requirements for applying the exception must exist here than in a tort case before the corporate entity may be ignored. These requirements, of course, have not been met.

Grounds Asserted by Majority

A. Control by Sole Shareholder
The first ground asserted in the majority opinion for ignoring the corporate entities is that Pointer, as the sole shareholder, controlled all of these corporations. It has long been established that shareholder liability will not result even where there is but one shareholder. Massachusetts v. Davis, 140 Tex. 398, 168 S.W.2d 216 (1942) (per Alexander, C. J.); Hake v. Dilworth, 96 S.W.2d 121, 124 (Tex.Civ.App.—Waco 1936, no writ) (per Alexander, J.). As Chief Justice Alexander stated in Hake:
“A corporation is a legal entity entirely distinct from its members, and, in the absence of fraud or other misconduct sufficient to invoke the doctrine of estop-pel, its stockholders are not liable for the debts of the corporation. And the fact that all of the stock belongs to one stockholder does not alter the rule so long as the corporate existence is maintained.” 96 S.W.2d at 124 [Emphasis added].
Since, as the majority concedes, no question exists with respect to the maintenance of separate corporate records, and, since the majority also concedes that there is no actual fraud or intent to deceive, the question then becomes whether sufficient misconduct exists so as to invoke the doctrine of estoppel. Because there was admittedly no evidence of reliance by Tigrett on the financial soundness of the Heritage Building Company, estoppel cannot be asserted by her.
With respect to Heritage Corporation, East Realty Company, South Management Corporation, and Heritage Apartment Company, the only apparent ground in the majority’s opinion for ignoring each corporate entity is that they were all controlled by Pointer, had little business activity, and had the same directors. As we have noted, supra, control and identity of directors are not grounds to pierce the corporate veil. Nevertheless, the majority has waived its magic wand and these corporations have evaporated. As to Heritage Corporation, the majority also adds the additional criteria that it received certain assets and liabilities from Pointer that he had in turn received from Heritage Building Company in *395payment of its debt to him. Thus, the majority erroneously concludes ipso facto that Heritage Corporation is a “basically unfair device” because the transaction was “a basically unfair device.” Furthermore, the majority then finds, without evidence and contrary to the trial judge’s finding, that it “will result in similar prejudice to persons dealing with the business in the future.” I cannot accept this novel and extraordinary holding and no authorities support such a conclusion. The majority cites no authority for its holding and, indeed, none exists.
Neither do I regard Pepper v. Litton, 308 U.S. 295, 309-12, 60 S.Ct. 238, 84 L.Ed. 281 (1939), relied upon by the majority, as germane to the present case. In that bankruptcy case, the question presented was the order of payment in bankruptcy; no question of piercing the corporate veil was presented and, even had it been, Pepper v. Litton is distinguishable on its facts. The dominant shareholder in Pepper had permitted his salary claims to lie dormant for many years and then enforced them by obtaining, a state court judgment against the corporation when the debtor corporation was in financial distress. He then used this so that the rights of another creditor were impaired. The Supreme Court noted that Litton acquired most of the assets of the bankrupt not for cash or other consideration of value to creditors, but merely for an appraisal by him of his salary over several years which he then set up on the corporation’s books as a liability of the corporation. Thus, it appears that the retroactive salary appraisal was not shown on the bankrupt’s financial statement upon which unsecured creditors relied. Additionally, there was a specific finding by the trial judge that this act amounted to fraud. In our case it is undisputed that Pointer did not defraud anyone nor did he intend to defraud anyone. Additionally, actual monies were transferred to the corporation by Pointer. Consequently, I do not regard the quotations from Pepper v. Litton in the majority opinion as applicable to the facts in our case. Essentially, different considerations apply in a priority of claims question in bankruptcy where fraud is involved as opposed to an attempt to pierce a corporate veil to obtain payment of a claim whére no fraud is shown.
B. Undercapitalization of Heritage Building
The majority next relies upon the assertion that the corporation was inadequately capitalized and, therefore, an “unfair device.” The majority does not, however, specify at what point in time in the life of a corporation a court should look at a corporation’s capitalization to determine whether it is an “unfair device.” Is it at the time of inception of the corporation or at any point in time that a plaintiff or a court may choose? If it is the latter, then shareholders to avoid personal liability would have a corresponding duty to add additional capital so as to cover all existing liabilities and, under the majority’s view, even contingent liabilities. Although the majority does not discuss whether the question of “inadequate capitalization” is to be determined at the time of incorporation in 1955 or at the time the transfer to Pointer took place in 1974, this question should be viewed at the time of incorporation rather than at a later date. 19 R. Hamilton, Texas Practice: Business Organizations § 234 (1973). This is not only sound but logical since Heritage Building Company may have been adequately capitalized in 1955 but inadequately capitalized in 1974, depending upon its successes or failures within that period. As the California Court of Appeals observed in Harris v. Curtis, 8 Cal.App.3d 837, 841, 87 Cal.Rptr. 614, 617 (1970):
There is no question that the corporation was underfinanced, a condition not uncommon among new small businesses, including small corporations privately financed. It is common knowledge that many such corporations have been highly successful, that others have prospered but without legendary success, and that still others have failed in part, at least, because of inadequate capital. Such is the story of our American enterprise system.
*396This court, noting that no case had ever so held, specifically concluded that inadequate capitalization, per se, was insufficient to pierce the corporate veil.
In my view, the question of inadequate capitalization may be considered by a court in determining whether to pierce the corporate veil only where undercapitalization is a part of a general scheme to defeat the public convenience, protect fraud, defend crime, or circumvent public policy, such as violations of antitrust laws, none of which are present here. Indeed, there is no evidence here that the incipient capitalization of $1,000 in 1955 was inadequate then for whatever business that the Heritage Building Company may have conducted nor is there evidence that it was a basically unfair device. It does appear, however, that Heritage Building Company was successful during its first fifteen years of existence since it had obtained many large loans from major financial institutions in the conduct of its business. Thus, it seems absurd to me for the majority to rely upon “inadequate capitalization” in 1955 as a ground to pierce the corporate veil in 1978. As Professor Hamilton noted in 19 Texas Practice: Business Organizations § 234 at 228 (1974), “a corporation that was adequately capitalized when formed but has suffered losses is not undercapitalized.” If Tigrett had chosen to use this as a ground for piercing the corporate veil, she should have, at least, presented evidence on this ground. Nevertheless, the majority has found that Heritage Building Company was grossly undercapitalized because Pointer made periodic loans to that company. This conclusion not only usurps the trial judge’s function as fact-finder but also is logically unwarranted from a practical viewpoint since these loans were shown as such on financial statements submitted by Heritage Building Company before receiving loans from various commercial lending institutions. Certainly, no Texas court, nor any other, has measured the adequacy of corporate capital by examining the amount of subsequent indebtedness incurred by that corporation years after the initial incorporation date.
C. Payment of Debt to Pointer
The primary ground asserted by the majority to pierce the corporate veil of Heritage Building Company appears to be that the judgment-debtor, Heritage Building Company, partially repaid its debt to Pointer when it was insolvent without first paying other creditors, such as the unliquidated contract claim of Tigrett. This ground lacks merit in both fact and law. In the first place, insolvency was not pleaded nor presented to the trial court in the sense of alter ego and no finding on this point was made by the trial court. Indeed, the trial judge found that Heritage Building continued in existence through the date of trial. Secondly, even if it was insolvent, as a matter of law, the supreme court has long held that a conveyance of property by an insolvent debtor to an unsecured creditor in payment of a debt is valid notwithstanding Tex.Bus. & Com.Code Ann. art. 24.02 (Vernon 1968), if the value of the property so conveyed “does not exceed the amount of the debt and the grantee creditor receives the conveyance in good faith, meaning without a secret agreement to benefit the grantor in some way other than by discharge of his debt.” Hawes v. Central Texas Production Credit Ass’n, 503 S.W.2d 234, 235-36 (Tex.1973) (per Greenhill, C. J.); Adams v. Williams, 112 Tex. 469, 248 S.W. 673, 676 (1923); Ellis v. Valentine & Son, 65 Tex. 532, 546-48 (1886); Edrington v. Rogers, 15 Tex. 188 (1855). In Adams v. Williams, 248 S.W. at 676, that court stated:
It is settled law in this state that a creditor may receive payment of an honest debt in property of his debtor, though he may know at the time that the debtor’s intent in making the payment is to prefer him and to place the property beyond the reach of other creditors, provided that no more property is taken than is reasonably necessary to pay his debt. Every payment of a debt by an insolvent, whether the payment be made in money or property, tends in a popular sense to hinder, delay, or defraud other creditors in the collection of their respective debts. In the absence of a law declaring prefer-*397enees invalid, every debtor has the legal right to pay one or more of his just debts with any money or property he has. The intent to hinder, delay, or defraud creditors in the sense inhibited by above statutes cannot exist when the purpose and effect of the transfer of property is to apply it at its fair value to the satisfaction of a just debt and it is so received by the debtor.
Here, the evidence supports the trial judge’s finding that Heritage Building Company transferred assets to Pointer in cancellation of an existing indebtedness to Pointer. Under the long standing rule in Texas, whether Heritage Building was insolvent at that time is immaterial in determining whether the payment was wrongful. Since, as a matter of law, Heritage Building Company had the right to transfer the assets to Pointer on April 30, 1974, I see no justification for using such a legal right as a ground for not only disregarding the corporate entity of Heritage Building Company but also of all of the other named corporations in which Pointer had an interest.
D. Inconsistencies in the Majority Opinion
Preparation of this dissent has been more difficult than usual because the inconsistencies in the majority opinion have obscured their specific reasons for ignoring these corporate entities. For example, at one place the majority states that it does not rely upon the trust fund doctrine because it was not pleaded; yet in another section, they state that “this claim rests rather on the transfer of all the assets of the corporation to the dominant stockholder when the corporation was insolvent in violation of his duty to preserve the assets for the benefit of creditors.” This quoted statement, of course, is the trust fund doctrine. At yet another place, the majority concedes that Tigrett failed to introduce sufficient proof to apply the trust fund doctrine. Thus, it is unclear to me whether the majority is relying upon the trust fund doctrine to disregard these corporate entities. In any event, the majority’s position is not supported by authorities holding that facts establishing the trust fund doctrine may be used as grounds to pierce the corporate veil of Heritage Building, much less that of the other corporations not involved in this transaction.
E. Trust Fund Doctrine
If, as I suspect, the majority relies upon the trust fund doctrine as the primary ground for piercing the corporate veil, they err. This theory was neither pleaded by the plaintiff-garnishor nor presented to the trial judge. Secondly, it is impermissible to use this separate and distinct doctrine to support an alter ego theory of recovery. See Fagan v. La Gloria Oil & Gas Co., 494 S.W.2d 624 (Tex.Civ.App.—Houston [14th Dist.] 1973, no writ); L. Lebowitz, Recent Developments in Texas Corporation Law, 28 S.W.L.J. 641, 757-61 (1974).
The disparate remedies provided by the trust fund doctrine and the alter ego theory mandate that the former should not be used as a crutch in applying the latter. Under the trust fund doctrine, creditors may seek a pro rata recovery of the corporation’s assets, but under the alter ego theory, corporate assets are totally irrelevant and liability is imposed on the person or entity that attempts to assert the defense of limited liability granted by the corporate fiction. Wortham v. Lachman-Rose Co., 440 S.W.2d 351 (Tex.Civ.App.—Houston [1st Dist.] 1969, no writ). The trust fund doctrine can be summarized as follows:
[W]hen a corporation (1) becomes insolvent and (2) ceases doing business, then the assets of the corporation become a trust fund for the benefit, primarily, of its creditors. The officers and directors hold the corporate assets in trust for the corporate creditors. They are placed in a fiduciary relation to and owe a fiduciary duty to the creditors. That duty obliges them to administer the corporate assets for the benefit of the creditors and to ratably distribute them. The breach of that duty gives rise to a cause of action against the officers and directors which can be prosecuted directly by the creditors.
*398Fagan v. La Gloria Oil & Gas Co., 494 S.W.2d 624, 628 (Tex.Civ.App.—Houston [14th Dist.] 1973, no writ). The purpose behind the trust fund doctrine, according to another court, is “to prevent fraud upon creditors through removal of corporate assets that creditors had reasonably believed to be in the corporation.” Whisenhunt v. Park Lane Corp., 418 P.Supp. 1096, 1098 (N.D.Tex.1976). In my view, whether the trust fund doctrine is applicable to a set of facts is separate and apart from the question of whether the corporate entity should be ignored and liability imposed upon stockholders.
Furthermore, from the above definition, before the trust fund doctrine can be applied, there must be a finding that the corporation is insolvent. See 3 I Hildebrand, Texas Corporations § 932 at 480 (1942). According to the Tex.Bus.Corp. Act Ann. art. 1.02(a)(16) (1956), insolvency is defined in terms of the corporation’s inability to pay its debts as they become due in the usual course of its business. Although there was testimony that the Heritage Building Company was having trouble paying its debts, the trial court made no express finding that the company was insolvent at the time of the transfer in May 1974. Indeed, since Pointer testified that he put money into Heritage Building Company in order to pay its debts, there is some evidence that the corporation was not insolvent. The trial court did find, however, that Heritage Building Company had not ceased doing business in May 1974, and there is ample evidence in the record to support such a finding, which evidence has been set forth, supra.
Even more extraordinary is the utilization of the trust fund doctrine by the majority to impose personal liability on a shareholder under the alter ego doctrine. As noted earlier, the trust fund doctrine and the alter ego theory are conceptually different, each with its own remedy, and the two legal theories should be kept distinct. Additionally, it is illogical to permit plaintiff-garnishor a full recovery of her claim under the alter ego theory and rely on the trust fund doctrine to reach such a result. This is true because even if the trust fund doctrine applies, then other creditors have a pro rata interest in the assets allegedly misappropriated by Pointer from Heritage Building Company, and a full recovery by plaintiff will prevent these other creditors from receiving their pro rata share.
Another major problem, of course, in relying on the trust fund doctrine here is the plaintiff’s status at the time of the transfer of assets in May 1974. At that time, she was asserting a de minimus unliquidated claim against Heritage Building Company when, as the majority apparently finds, the directors of the company allegedly breached their fiduciary duty to her. Courts have generally limited the trust fund doctrine to situations where creditors with liquidated claims are harmed by the improper transfer of assets from the business entity. Accordingly, I doubt the efficacy of its application to the facts here, even if plaintiff had chosen to assert it.
CONCLUSION
From a policy perspective, the majority opinion may create more abuses and injustices then it stifles. For example, carefully framed statutes in the Texas Business Corporation Act may be rendered meaningless at the whim of a panacean court. Additionally, the rights of other unknown creditors of these corporations may be impaired, if not lost entirely, by the decision of the majority. Indeed, such a decision is detrimental to the entire statutory and juridical concept of a corporation as a separate entity and creates uncertainty for small, closely held corporations, by casting doubt upon their validity to such an extent that creditors would not likely extend credit. This is particularly true here since garnishor’s un-liquidated claim was first asserted in 1974 and finally reduced to judgment in 1976. Then, based upon another unrelated transaction in 1974, the corporate entity is ignored in 1978. Furthermore, the validity of all closely held corporations would be called into question many years after their birth at the caprice of a panacean court. Thus, the far-reaching effect of the majority’s *399erroneous holding will so adversely affect all such small, closely-held corporations that they may become as obscure as the dodo bird. Doubt will be cast where none existed before. The effect will be that the alter ego exception will devour the general rule that a corporation is a legal entity entirely distinct from its members, and, even if all of the stock belongs to one shareholder, in absence of fraud or other misconduct sufficient to invoke the doctrine of estoppel, the stockholders are not liable for the debts of the corporation, if its separate corporate existence is maintained. Hake v. Dilworth, 96 S.W.2d 121, 124 (Tex.Civ.App.—Waco 1936, writ dism’d); see Pace Corp. v. Jackson, 155 Tex. 179, 284 S.W.2d 340, 351 (1955). In conclusion, I believe that courts must be ever mindful of novel extensions of the law because as Justice Cardozo pointed out, “[t]he sentence of today will make the right and wrong of tomorrow.” B. Cardozo, The Nature of the Judicial Process, 21 (1921).

. Although the majority does not here render judgment for plaintiff, but remands with instructions for the trial judge so to do the result is the same.

. I recognize that a cause of action exists in Texas against directors and officers for denuding a corporation of its assets so as to defeat a creditor’s claim. Fagan v. La Gloria Oil & Gas Co., 494 S.W.2d 624, 632 (Tex.Civ.App.—Houston [14th Dist.] 1973, no writ). Plaintiff has not, however, pleaded this ground.

. There has been no showing that Tigrett did not have an adequate remedy at law such as execution against property in the name of Heritage Building Company or a garnishment action against the bank in which Heritage Building’s funds were kept. This point has not been raised.