Court Opinion

ID: 9640874
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:17:27.773555+00
Date Added: 2024-06-11T18:05:08.795444
License: Public Domain

HECHT, Justice,
dissenting.
I dissent. There is no evidence in this record from which the jury could have found that John C. Culpepper, Jr. was the alter ego of Culpepper Properties, Inc. The trial court reached this conclusion and rendered judgment notwithstanding the verdict for John Culpepper. The court of appeals reached the same conclusion and affirmed this portion of the trial court’s judgment. Now this Court concludes that there is evidence of alter ego. The Court cannot point to a shred of evidence which, by itself, implies that John Culpepper was the alter ego of Culpepper Properties. Instead, it takes various bits and pieces of evidence, each of which is no evidence of alter ego, adds them together, notes that Mancorp thought John Culpepper might be Culpepper Properties’ alter ego, and comes up with evidence of alter ego. Nothing plus nothing plus nothing is still nothing, *232no matter how hard you believe, or hope, that it may be something.
The Court states that to prove that a corporation is merely the alter ego of a person, one must show two things: first, that “there exists such unity between corporation and individual that the corporation ceases to be separate”, and second, that “holding only the corporation liable would promote injustice.” Supra at 228. Alter ego, the Court acknowledges, “is shown from the total dealings of the corporation and the individual”. Castleberry v. Branscum, 721 S.W.2d 270, 272 (Tex.1986) (emphasis added). The Court, however, does not review the total dealings between John Culpepper and Culpepper Properties; rather, it looks only to those dealings which support a finding of alter ego. This restricted review of the evidence is justified, the Court says, because legal sufficiency of the evidence must be determined by considering only the evidence and inferences favorable to the jury finding.1 Even under this restricted view, there is no evidence to support a finding of alter ego in this case.
Regarding the first showing required to prove alter ego, the Court holds that the following evidence is enough for the jury to find that there was such unity between John Culpepper and Culpepper Properties that the corporation ceased to be separate: Culpepper Properties did not observe all corporate formalities; John Culpepper paid *233some Culpepper Properties’ bills by checks drawn on his personal account; John Cul-pepper’s business card read “Culpepper Properties, Inc., John C. Culpepper, Jr., his self”; John Culpepper told Mancorp’s representative that he was personally behind the project Culpepper Properties was working on; and “other evidence in the record”. Supra at 228.
The evidence regarding Culpepper Properties’ observance of corporate formalities is not entirely clear. Even if it were, a corporation’s failure to observe corporate formalities is not alone enough to imply alter ego, especially when the corporation is closely held. Torregrossa v. Szelc, 603 S.W.2d 803, 804 (Tex.1980); see Castleberry, 721 S.W.2d at 272, 276. Indeed, observance of corporate formalities is now by statute not even a factor to be considered in determining alter ego. Tex.Bus. Corp.Act §§ 2.21(A)(3),2 12.37(F).3 John Culpepper testified without contradiction that Culpepper Properties was a closely held corporation.
The evidence regarding whether John Culpepper actually paid Culpepper Properties’ obligations with personal funds is likewise far from clear. The evidence is that some of Mancorp’s invoices to Culpepper Properties were paid with checks imprinted on the top left corner with “John C. Culpep-per, Jr.,” and below that in smaller print, “Bank Tower Project.” The checks were signed by John C. Culpepper, Jr. without any designation of his corporate capacity. Assuming that this is evidence that John Culpepper used his personal funds to pay the corporation’s bills, that fact in no way suggests that he and the corporation had ceased to be separate. Perhaps if the payments had run the other way, if Culpepper Properties had paid John Culpepper’s personal bills, or perhaps if the two of them had commingled their funds, one might infer alter ego. But there is no evidence whatever of either of these hypotheticals. It is certainly an odd rule that the Court employs to reward the principal in a corporation who chose to pay some of its bills out of his own pocket by making him personally liable for all of its obligations.
John Culpepper’s plainly facetious business card is at very best ambiguous. Moreover, there is no evidence that Man-corp ever saw John Culpepper’s business card before the day of trial when it was offered in evidence. By suggesting that the solecism, “his self”, implies that John Culpepper and Culpepper Properties are one and the same, the Court shows how far it is willing to grope for evidence of alter ego. Assuming the very most, that the business card actually states that John Cul-pepper and Culpepper Properties were the *234same, it is evidence only of what John Culpepper thought, and not of how he and the corporation dealt with one another.
Mancorp’s assertion that John Culpepper stated that he was “behind the project” Culpepper Properties was developing was certainly true. John Culpepper had, at the lender’s request, personally guaranteed the construction loan. He was personally involved in the work on the project at every stage. One could hardly assume from this statement, however, that John Culpepper treated Culpepper Properties as his alter ego. Mancorp was fully aware of the distinction between the two because its contract was with Culpepper Properties, Inc., and was signed by John Culpepper as president.
As if to concede the weakness of this evidence even taken altogether, the Court says simply that there is “other evidence in the record” to support a finding of alter ego. What this “other evidence” is is not entirely clear, only that it may be found in the dissenting opinion in the court of appeals. The Court has obviously mentioned specifically the evidence it finds most helpful and sought to bolster its conclusion with a general reference to the entire record. If there is other evidence on which the Court relies, it ought to point it out so that its opinion will state what evidence is enough to support a finding of alter ego. It does not choose to do so.
All this aside, however, and assuming that one could reasonably infer from the evidence in this record that John Culpepper did not treat Culpepper Properties as a separate entity, there is absolutely no evidence of the second showing required to prove alter ego, that holding only the corporation liable to Mancorp will promote injustice. The Court states that it is unjust not to hold John Culpepper personally liable to Mancorp because he guaranteed the construction loan and stated that he was behind the project. Why the construction lender’s obtaining a personal guaranty when it requested one makes it unjust for Mancorp not to have one when it did not ask for one is inexplicable. That the Court finds it unjust for Mancorp not to collect from John Culpepper, with whom it did not contract, a debt owed by Culpepper Properties, with whom it did contract, simply because John Culpepper and Culpepper Properties were both in business, is somewhat disturbing. Far more disconcerting, however, is the Court’s conclusion that justice, of all things, requires John Culpepper to pay Mancorp because “Mancorp thought it was doing business with Culpepper, the individual, and that he was paying for the job.” How Mancorp’s unilateral, subjective belief, not induced by John Culpepper, makes its claim more just than his is unfathomable.
The Court notes that the construction lender foreclosed on the project while trial was pending and that two other creditors went unpaid, for no specified reason. Supra at 229. Apparently, the Court means to suggest that if John Culpepper does not pay Mancorp himself, Mancorp will not be paid. Even if this were enough to show injustice, there is no evidence that it is true. At most, the evidence suggests that Culpepper Properties did not pay some of its bills. There is no evidence that it was incapable of paying Mancorp’s applications for payment. To the contrary, Mancorp has argued that the evidence establishes that Culpepper Properties had the funds to pay its claims at one time.
I agree with the Court that the dealings between John Culpepper and Culpepper Properties must be viewed in their totality, although the Court takes a much narrower perspective of the record here. Nevertheless, even if the evidence cited by the Court were all there was in this record on the issue of alter ego, it would not allow alter ego to be inferred. I agree that weak inferences, no one of which is alone enough to support a finding of alter ego, may together do so. But pieces of evidence from which nothing can be inferred cannot be combined somehow to produce an implication. That is the situation here. The jury could reasonably have suspected that John Culpepper treated Culpepper Properties as his alter ego, as I believe the Court does, but it could not have inferred alter ego from this record. Several smoldering sticks, no one of them flaming, may togeth*235er build a fire. But all the sticks there are, piled up without spark or heat, make neither smoke nor fire; they are nothing but a big pile of sticks, and one cannot infer from the pile that they must be afire. If the shield from personal liability which the corporate form affords shareholders can be overcome by sheer volume of evidence be: reft of substance, that shield is very little protection.
On remand, the court of appeals is left to determine whether the evidence of alter ego, of which it found none at all before, is factually insufficient to support the verdict. If that court is consistent with its prior opinion, it will remand this case for a new trial on the issue of alter ego. Because I would affirm the judgment of the court of appeals, I dissent.
PHILLIPS, C.J., joins in this dissenting opinion.

. The Court does not appear to notice the inherent inconsistency between the test for alter ego and its limited evidentiary review. In Castleber-ry the Court held that it was error to instruct the jury that it could find alter ego from "one or more” factors. 721 S.W.2d at 276. "[A] proper alter ego instruction should include all the relevant factors and consider the total dealings of the corporation and the individual." Id. If a jury must consider the total dealings between a corporation and an individual before it can find alter ego, it is hardly appropriate to review the propriety of an affirmative finding by looking only to those dealings which might imply alter ego.
The Court has previously encountered this same difficulty in reviewing findings of gross negligence. In Burk Royalty Co. v. Walls, 616 S.W.2d 911, 922 (Tex.1981), the Court stated:
In determining whether there is some evidence of the jury’s finding of gross negligence, the reviewing court must look to all of the surrounding facts, circumstances, and conditions, not just individual elements or facts.... At first glance there may appear to be some conflict in utilizing the traditional no evidence test and considering all the facts and circumstances to determine gross negligence.
Having noticed the inconsistency in using the no-evidence standard to review a finding which can be made only upon the totality of circumstances, the Court failed to resolve it. The concurring opinion suggested that the Court did not apply the traditional no-evidence review standard, despite language to the contrary in its opinion:
A part of the "traditional no evidence test” is that this Court disregards all evidence unfavorable to the jury's answers. The Court’s opinion, it seems to me, consciously removes that part of the “traditional" test and moves down to another; i.e., that [all] the evidence must be viewed in the light most favorable to the jury’s verdict.
Id. at 926 (Greenhill, C.J., concurring). The dissenting opinion, however, argued that the inconsistency had not been resolved, implicitly or explicitly:
It is held that the reviewing court should apply the "no evidence” test. Such review would require the reviewing court to consider only the evidence when viewed in its most favorable light that tends to support a jury finding of gross negligence and to disregard all evidence of care. This results in an abandonment of the long settled definition of “gross negligence.” It is fundamental that in applying the no evidence test, the reviewing court would not look at the totality of the evidence....
... The Court’s opinion leaves us with a definition of gross negligence that is called an “entire want of care,” but evidence of care by the defendant becomes irrelevant to determine if gross negligence has been established. If, on review, we disregard all evidence of care, we are clearly permitting recovery for less than an entire want of care.
Id. at 927-928 (McGee, J., dissenting). This inconsistency ought to be resolved. See City of Gladewater v. Pike, 727 S.W.2d 514, 525 (Tex.1987) (Kilgarlin, J., concurring). It certainly should not be extended to another area of law, the appellate review of alter ego findings.
The legal sufficiency of evidence to support an alter ego finding should be determined by reviewing all the evidence, not just the favorable evidence and inferences, in the light most favorable to the finding. Chief Justice Greenhill suggested that this is the test actually applied in reviewing gross negligence findings. 616 S.W.2d at 926-927. If that test were applied in this case, if the evidence supporting the alter ego finding were viewed in the context of all the dealings between John Culpepper and Culpep-per Properties, the legal insufficiency of that evidence would be virtually inescapable.

. "A holder of shares, an owner of any beneficial interest in shares, or a subscriber for shares whose subscription has been accepted shall be under no obligation to the corporation or to its obligees with respect to:
“(3) any contractual obligation of the corporation on the basis of the failure of the corporation to observe any corporate formality, including without limitation: (a) the failure to comply with any requirement of this Act or of the articles of incorporation or bylaws of the corporation; or (b) the failure to observe any requirement prescribed by this Act or by the articles of incorporation or bylaws for acts to be taken by the corporation, its board of directors, or its shareholders.”
This statutory provision did not become effective until August 28, 1989, after the trial in this case. See 1989 Tex.Gen.Laws 3610, 3617, 3664.

. “Lack of Formalities; Treatment as Partnership. Neither the failure of a close corporation to observe usual formalities or requirements prescribed for an ordinary corporation by this Act relating to the exercise of corporate powers or the management of a corporation’s business and affairs nor the performance of a shareholders’ agreement that treats the close corporation as if it were a partnership or in a manner that otherwise is appropriate only among partners:
"(1) shall be a factor in determining whether to impose personal liability on the shareholders for the close corporation’s obligations by disregarding the separate entity of the close corporation or otherwise;
“(2) is grounds for invalidating an otherwise valid shareholders agreement; or
"(3) shall affect the status of the close corporation under this Act or in law.”
This statute does not preclude consideration of Culpepper Properties' failure to observe corporate formalities in this case because, although the undisputed testimony is that Culpepper Properties is a close corporation, the record does not establish that it was a close corporation formed under the Texas Close Corporations Law, Part 12 of the Texas Business Corporation Act, which includes this provision.