Kingston v. Helm, 13-00-327-CV.

• Decision Date: 25 July 2002
• Docket Number: No. 13-00-327-CV.,13-00-327-CV.
• Parties: Artie G. KINGSTON, Appellant, v. John F. HELM, Greenway Development, Inc., and Real Estate Investment Corporation, Inc., Appellees.
• Court: Texas Court of Appeals

82 S.W.3d 755

Artie G. KINGSTON, Appellant, v. John F. HELM, Greenway Development, Inc., and Real Estate Investment Corporation, Inc., Appellees.

No. 13-00-327-CV.

Court of Appeals of Texas, Corpus Christi.

July 25, 2002.

Rehearing Overruled September 5, 2002.

COPYRIGHT MATERIAL OMITTED

Vaughan Waters, Thornton, Summers, Biechlin, Dunham & Brown, Corpus Christi, for appellant.

David A. Sibley, Deborah R. Sundermann, Joseph E. Garcia, III, Corpus Christi, for appellee.

Before Justices DORSEY, HINOJOSA, and CASTILLO.

OPINION

Opinion by Justice DORSEY.

The issue in this case is whether John F. Helm may be held individually liable for conduct he undertook while acting as a representative for Greenway Development, Inc. We hold that the trial court erred by holding that Helm may not be held so liable. Accordingly, we reverse the judgment and remand the cause to the trial court for further proceedings consistent with this opinion.

Artie Kingston sued John F. Helm for fraud, DTPA, and negligent misrepresentation stemming from a transaction wherein Kingston purchased a town home unit from Greenway Development, Inc. (GDI). In that transaction, Kingston spoke with both a sales agent for GDI and with Helm, who is the president of GDI. Kingston alleges that Helm personally made false representations to him regarding the town home. The actual real estate sales contract was between GDI and Kingston, with Helm signing the sales contract on behalf of GDI, apparently in his capacity as a corporate officer.

The case went to trial. After Kingston presented his case, the trial court entered a directed verdict that Kingston take nothing against Helm in his individual capacity. That order stated that the evidence was insufficient as a matter of law to find Helm liable in his individual capacity. Kingston appeals this judgment.

STANDARD FOR REVIEWING DIRECTED VERDICT

A directed verdict is appropriate when reasonable minds can draw only one conclusion from the evidence. Collora v. Navarro, 574 S.W.2d 65, 68 (Tex.1978); Villarreal v. Art Inst. of Houston, Inc., 20 S.W.3d 792, 796 (Tex.App.-Corpus Christi 2000, no pet.). Where the plaintiff fails to present evidence in support of a fact essential to her right to recover, or where a defense against the plaintiff's cause of action is conclusively proved or admitted, a directed verdict for the defendant is proper. Villarreal, 20 S.W.3d at 796. On review, we examine the evidence in the light most favorable to the party against whom the verdict was rendered and disregard all contrary evidence and inferences. Qantel Bus. Sys. v. Custom Controls, 761 S.W.2d 302, 303-04 (Tex.1988); Villarreal, 20 S.W.3d at 796. When reasonable minds may differ as to the truth of controlling facts, the issue must go to the jury. Villarreal, 20 S.W.3d at 796. When no evidence of probative force on an ultimate fact element exists, or when the probative force of slight testimony is so weak that only a mere surmise or suspicion is raised as to the existence of essential facts, the trial court has the duty to instruct the verdict. Id. Moreover, the reviewing court may affirm a directed verdict even if the trial court's rationale for granting the directed verdict is erroneous, provided it can be supported on another basis. Id.

APPLICATION

Neither party to this appeal argues that there is no evidence to support Kingston's allegations that Helm made certain misrepresentations to him regarding the town home. Rather, both sides agree that the only question presented is whether Helm may be held liable for any such alleged misrepresentations in his individual capacity, or whether he is shielded from individual liability because he was acting solely as an agent of a corporation and not as an individual.

The appellee makes essentially two arguments. First, Helm argues that he was acting solely in his capacity as corporate officer, and, therefore, liability may only attach to the corporation, and not to him individually. Next, Helm argues that article 2.21 of the Texas Business Corporations Act now requires that the corporate veil be pierced in order to hold him individually liable for the causes of action alleged in Kingston's suit. We disagree with both propositions.

I. HELMS'S STATUS AS AGENT FOR GDI DOES NOT INSULATE HIM FROM PERSONAL LIABILITY FOR HIS OWN TORTIOUS CONDUCT.

Generally, a corporate officer's acts on the corporation's behalf are deemed to be acts of the corporation. See Leitch v. Hornsby, 935 S.W.2d 114, 117-18 (Tex.1996). Still, the longstanding rule in Texas is that "[a] corporation's employee is personally liable for tortious acts which he directs or participates in during his employment." Leyendecker & Assocs., Inc. v. Wechter, 683 S.W.2d 369, 375 (Tex.1984).¹ The law is well-settled that a corporate agent can be held individually liable for fraudulent statements or knowing misrepresentations even when they are made in the capacity of a representative of the corporation. See, e.g., Commercial Escrow Co. v. Rockport Rebel, Inc., 778 S.W.2d 532, 541 (Tex.App.-Corpus Christi 1989, writ denied).² In fact, this Court has stated:

A corporate officer who knowingly participates in tortious or fraudulent acts may be held individually liable to third persons even though he performed the act as an agent of the corporation. It is not necessary that the `corporate veil' be pierced in order to impose personal liability, as long as it is shown that the corporate officer knowingly participated in the wrongdoing.

Id. at 541. While this legal principle remains intact, a series of Texas Supreme Court cases decided in the 1980's have left the law in this particular area a bit muddled.

A. The Texas Supreme Court has held that Corporate Agents May Be Held Individually Liable for their Own DTPA Violations.

In a 1985 case, the Texas Supreme Court specifically affirmed the principle that DTPA misrepresentations made by a corporate agent can subject the agent to individual liability. Weitzel v. Barnes, 691 S.W.2d 598, 601 (Tex.1985). The court held that two corporate officers found to have made representations that violated the DTPA could be held individually liable for those representations, even though the representations were made in the course of a business transaction conducted in the course and scope of their employment with the corporation. Weitzel, 691 S.W.2d at 601; see also Kinkier v. Jurica, 84 Tex. 116, 19 S.W. 359 (1892); Seale v. Baker, 70 Tex. 283, 7 S.W. 742 (1888). Liability was predicated on the fact that the tortious conduct was committed by the agents themselves. Weitzel, 691 S.W.2d at 601.

The Weitzel court affirmed a legal principle that had been impliedly recognized in a case decided two years earlier, Glen W. Light v. J.M. Wilson, 663 S.W.2d 813 (Tex. 1983). In Light, the customer of a home building corporation brought DTPA and fraud actions against the corporation and the corporation's sole owner. Id. at 813. The trial court held both Light, individually, and his solely owned corporation jointly and severally liable for the damages. Id. The court of appeals affirmed the trial court's judgment, but the supreme court reversed, holding that because Light was not personally involved in the actual business transaction wherein the DTPA violations were committed, he could not be held personally liable for the damages that resuited therefrom. Id. at 814-15. The court reasoned that absent pleading and proof supporting some method of piercing the corporate veil, Light, a mere officer of the corporation, could not be held personally liable for the DTPA violations made by an agent of the corporation. Id. While the corporation was liable for the agent's conduct, Light was not. Id. Though this case did not specifically address the question of whether Light could have been held personally liable if he had made the representations himself, its reasoning seemed to imply that he could.

Certainly Justice Spears, in his concurring opinion, believed that to be the case, stating:

The rule in Texas has always been that an agent is personally liable for his own torts. This rule also applies when the agent is an officer or shareholder of the principal corporation.

Liability in these cases is based on the agent's own actions, not his status as agent. There is no sound reason to treat agents differently when they violate the Deceptive Trade Practices Act. It is not relevant that the contract was with the corporation ....

Id. at 815 (Spears, J., concurring) (internal citations omitted). We believe that to be a correct statement of the current law.

However, in Light, the supreme court did not expressly overrule another case handed down earlier that year which squarely contradicts the position taken by Justice Spears in his concurrence. In Karl & Kelly Co. v. McLerran, the court held that two individual corporate officers could not be held individually liable for DTPA violations because "any representations made by [the officers] were made as agents of the corporation," and some evidence that the corporation was used as the officers' alter ego would have to be presented in order to hold the officers individually liable. Karl & Kelly Co., 646 S.W.2d 174, 175 (Tex.1983). When the Court decided Light ten months after handing down its decision in Karl & Kelly Co., the majority did not address Karl & Kelly Co. However, Justice Spears was unequivocal in his concurrence, stating:

Karl & Kelly Co. was wrongly decided. This court held that when the contract was with the corporation, the agents were not personally liable for their own violations of the Deceptive Trade Practices Act, absent evidence that the corporation was merely their alter ego. The opinion inadvertently overlooked the import of our numerous common law decisions holding agents liable for their own misconduct, and the argument was neither briefed nor raised on the motion for rehearing.

Although considerations of stare decisis would normally couns...