Dick's Last Resort of the West End, Inc. v. Market/Ross, Ltd.

273 S.W.3d 905, 2008 Tex. App. LEXIS 9687, 2008 WL 5413080
CourtCourt of Appeals of Texas
DecidedDecember 31, 2008
Docket05-07-01220-CV
StatusPublished
Cited by23 cases

This text of 273 S.W.3d 905 (Dick's Last Resort of the West End, Inc. v. Market/Ross, Ltd.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dick's Last Resort of the West End, Inc. v. Market/Ross, Ltd., 273 S.W.3d 905, 2008 Tex. App. LEXIS 9687, 2008 WL 5413080 (Tex. Ct. App. 2008).

Opinion

OPINION

Opinion by

Justice WHITTINGTON.

Appellants Dick’s Last Resort of the West End, Inc. (Dick’s West End), Dick’s Last Resort of Dallas, Inc. (Dick’s Dallas), Dick’s Last Resort of Texas, Inc. (Dick’s Texas), Dick’s Last Resort of Chicago, Inc. (Dick’s Chicago), Dick’s Holding Company, Inc. (Dick’s Holding Company), and Steven Schiff appeal the trial court’s judgment on a jury verdict in favor of appellees Market/Ross, Ltd. and William H. Nabors. In seven issues, appellants allege error in the submission of alter ego and single business enterprise issues to the jury, 1 and *908 contend the trial judge erred by granting Market/Ross’s motion for directed verdict on appellants’ counterclaims and refusing to submit appellants’ affirmative defenses to the jury. Appellants also contend there is an irreconcilable conflict in the jury’s answers, and allege the trial judge erred by failing to require that appellees allocate their evidence of attorney’s fees. We affirm the trial court’s judgment.

Background

In 1986, Market/Ross and a predecessor of Dick’s Dallas entered into a lease agreement to operate a restaurant in a building owned by Market/Ross. In 1999, Market/Ross, Dick’s Dallas, and Dick’s West End entered into an agreement to extend the lease until December 31, 2009, under which Dick’s West End became the substitute tenant. This agreement, the Fourth Amendment of Office Building Lease and Assignment, is the basis for much of the parties’ dispute. In 2000, Dick’s Chicago signed a written guaranty of the lease. In 2005, the restaurant was relocated and rent payments ceased. Market/Ross sued Dick’s West End for breach of the lease and Dick’s Chicago for breach of the guaranty, and alleged Dick’s Texas, Dick’s Holding Company, and Schiff were responsible for its damages under theories of corporate veil piercing. Appellants asserted a counterclaim against appellees, alleging they were fraudulently induced into extending the lease.

The case proceeded to trial, and the trial judge granted Market/Ross’s motion for directed verdict on appellants’ counterclaim. The jury answered questions favorable to Market/Ross on all issues.

Actual fraud

Appellants’ first, fourth, and fifth issues are premised on the contention that “actual fraud” for purposes of piercing the corporate veil must be proven by obtaining findings on the traditional elements of common law fraud by misrepresentation or omission. We disagree and conclude the applicable standard, set forth in article 2.21 of the Texas Business Corporation Act, was properly submitted to the jury. See Tex. Bus. CoRP. Act Ann. art. 2.21(A)(2) (Vernon 2003). 2

We note at the outset that Market/Ross sought to recover for breach of contract, not fraud. While article 2.21 applies equally to contract and tort cases, see Tex Bus. CoRP. Act Ann. art. 2.21 cmt. at 177-78 (Vernon 2003), its provisions control when a plaintiff seeks to disregard a corporation’s structure and hold another entity responsible for the corporation’s obligations. See SSP Partners, 52 Tex. Sup. Ct. J. at 98. The liability of the corporation itself for the underlying obligation is not controlled by article 2.21. Here, Market/Ross claims Dick’s West End and Dick’s Chicago breached a written lease agreement and a guaranty. Market/Ross sued to recover amounts it claims it is owed under these agreements. Mar *909 ket/Ross did not attempt to set aside the lease or the guaranty on the basis of fraud or claim the agreements were induced by fraud. Market/Ross does not seek damages for fraud. But Market/Ross does seek to impose the contractual liability of Dick’s West End and Dick’s Chicago on Dick’s Holding Company, Dick’s Texas, and Schiff because they allegedly used the contracting entities to perpetrate an actual fraud. See Tex. Bus. Corp. Act Ann. art. 2.21(A)(2). Market/Ross did not allege separate substantive causes of action against Dick’s Holding Company, Dick’s Texas, or Schiff. See Cox v. S. Garrett, L.L.C., 245 S.W.3d 574, 582 (Tex.App.Houston [1st Dist.] 2007, no pet.) (various doctrines for piercing corporate veil are not substantive causes of action; rather, they are means of imposing on an individual a corporation’s liability for an underlying cause of action). With this clarification, we address appellants’ issues.

In their fourth issue, appellants contend Market/Ross waived “its alter-ego and single business enterprise claims” by failing to request instructions or definitions that properly defined “actual fraud,” because article 2.21(A)(2) requires proof of “fraud by misrepresentation, or fraud by omission.” In Instruction No. 4 of the jury charge, the trial judge instructed the jury that “ ‘actual fraud’ involves conduct involving either dishonesty of purpose or intent to deceive.” This instruction is included in the comments to the pattern jury charges for piercing the corporate veil, and is attributed to the opinion in Castleberry v. Branscum, 721 S.W.2d 270, 273 (Tex.1986). See, e.g., State Bar of Tex., Texas PatteRn Jury Charges, Business, Consumer, Insurance, Employment PJC 108.2 cmt. at 191 (2006 ed.). The supreme court recently discussed Castleben'y and article 2.21 in SSP Partners, noting, “[w]e have held that the limitation on liability afforded by the corporate structure can be ignored only ‘when the corporate form has been used as part of a basically unfair device to achieve an inequitable result.’ ” SSP Partners, 52 Tex. Sup.Ct. J. at 99 (quoting Castleberry, 721 S.W.2d at 271). The court emphasized that abuse of the corporate structure resulting in injustice is required in order to pierce the corporate veil. SSP Partners, 52 Tex. Sup.Ct. J. at 101. In addition, article 2.21 requires proof that the “holder, owner, subscriber, or affiliate caused the corporation to be used for the purpose of perpetrating and did perpetrate an actual fraud on the obli-gee primarily for the direct personal benefit of the holder, owner, subscriber, or affiliate.” Tex. Bus. Corp. Act Ann. art. 2.21(A)(2); see Solutioneers Consulting, Ltd. v. Gulf Greyhound Partners, Ltd., 237 S.W.3d 379, 389 (Tex.App.-Houston [14th Dist.] 2007, no pet.) (insufficient evidence of alter ego where no evidence of direct personal benefit to owner resulting from fraud).

We acknowledge that courts have sometimes used the elements of common law fraud by misrepresentation or omission in reviewing the sufficiency of the evidence to support a finding of alter ego. See, e.g., Menetti v. Chavers, 974 S.W.2d 168, 174 (Tex.App.-San Antonio 1998, no pet.); Cass v. Stephens, 156 S.W.3d 38, 59 (Tex.App.-El Paso 2004, pet. denied), cert. denied, — U.S. -, 128 S.Ct. 115, 169 L.Ed.2d 26 (2007).

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273 S.W.3d 905, 2008 Tex. App. LEXIS 9687, 2008 WL 5413080, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dicks-last-resort-of-the-west-end-inc-v-marketross-ltd-texapp-2008.