Robbins v. Robbins

• Decision Date: 19 March 1987
• Docket Number: No. 11-86-118-CV,11-86-118-CV
• Citation: 727 S.W.2d 743
• Parties: Frank Harvey ROBBINS, Individually and as Administrator of the Estate of Harvey Robbins, et al., Appellants, v. Ernestlene ROBBINS, Appellee.
• Court: Texas Court of Appeals

Page 743

727 S.W.2d 743

Frank Harvey ROBBINS, Individually and as Administrator of the Estate of Harvey Robbins, et al., Appellants, v. Ernestlene ROBBINS, Appellee.

No. 11-86-118-CV.

Court of Appeals of Texas Eastland.

March 19, 1987.

Rehearing Denied April 30, 1987.

Jim Echols, Saunders, Schmidt, Echols & Weathers, Tyler, for appellants.

Richard Brooks Hardee, Hardee & Hindman, Tyler, for appellee.

OPINION

RALEIGH BROWN, Justice (Retired), Sitting by Assignment.

This is an appeal from the rendition of a declaratory judgment. Ernestlene Robbins, widow of Harvey Robbins, brought suit against his six children from a previous marriage to determine the status of 153,150 shares of stock owned by Harvey as his separate property before death. Harvey died intestate. The County Court at Law No. 2 of Smith County held that Ernestlene was entitled to receive 75,499.73 shares as her community interest in the stock. The children appeal. We reverse the judgment of the trial court and remand the cause for a new trial.

Harvey Robbins and Ernestlene Robbins were married on June 10, 1964. At the time of their marriage, Harvey owned substantially all of the stock of Lakeside Telephone Company (Lakeside). On January 10, 1983, Harvey traded his shares of Lakeside stock in exchange for 153,150 shares of Continental Telecom, Inc. (Contel) common stock. The court found that the value of Contel stock at the time of this trade was $18.625 per share for a total value of $2,848,590.00.

Harvey died on December 3, 1983. One of his children, Frank Harvey Robbins, was appointed and qualified as administrator of the estate. The administration was opened and was pending in the Constitutional County Court of Smith County until it was transferred to the County Court at Law No. 2 of Smith County when the present action was filed.

Harvey's widow, Ernestlene, brought the instant suit pursuant to the Uniform Declaratory Judgments Act, TEX.CIV.PRAC. & REM.CODE ANN. secs. 37.001-37.011 (Vernon 1986). In her petition, Ernestlene alleged alternatively that: (1) Lakeside was the alter ego of Harvey Robbins and the increase in value of Lakeside stock during the marriage of Harvey and Ernestlene was community property; (2) the community estate was entitled to shares of Contel stock equal to ninety percent (90%) of the increase in value of Lakeside stock; (3) the community estate was entitled to the income and increase in value of Contel stock; or (4) the community estate was entitled to reimbursement in an amount equal to ninety percent (90%) of the increase in value of Lakeside stock during marriage. Ernestlene also sought a declaration that she was entitled to one-half of the value of gifts or advancements made to the children by Harvey from community property and funds.

The court, sitting without a jury, found that Lakeside was the alter ego of Harvey and that Ernestlene was entitled to receive 75,499.73 shares of Contel stock as her community interest derived from the trade of Lakeside stock. The court also concluded that any transfers of money and personal property from Harvey to his children: (1) were gifts rather than advancements; (2) did not defraud Ernestlene; and (3) need not be accounted for.

The thrust of appellants' Points of Error Nos. 1, 2, and 3 is that there is no evidence or, alternatively, insufficient evidence to support the trial court's findings that Lakeside was the alter ego of Harvey Robbins.

We will first consider appellants' no evidence point. In reviewing the legal or factual sufficiency of the evidence supporting a trial court's findings of fact, we apply the same standard as is applied by a court reviewing the legal or factual sufficiency of the evidence supporting a jury's answer to a special issue. Raposa v. Johnson, 693 S.W.2d 43, 45-46 (Tex.App.--Fort Worth 1985, writ ref'd n.r.e.); Okon v. Levy, 612 S.W.2d 938, 941 (Tex.Civ.App.--Dallas 1981, writ ref'd n.r.e.). In determining a no evidence point, we must consider only the evidence and inferences which tend to support the finding of the court and disregard all evidence and inferences to the contrary. International Armament Corporation v. King, 686 S.W.2d 595, 597 (Tex.1985); Stodghill v. Texas Employers Insurance Association, 582 S.W.2d 102, 103 (Tex.1979); In re King's Estate, 150 Tex. 662, 244 S.W.2d 660, 661-62 (Tex.1951). If there is any evidence of probative force to support the court's finding, the no evidence point must be overruled, and the finding upheld.

In Castleberry v. Branscum, 721 S.W.2d 270, 271-72 (Tex.1986), the Supreme Court, considering the alter ego doctrine and whether the corporate form should be disregarded, stated:

We disregard the corporate fiction, even though corporate formalities have been observed and corporate and individual property have been kept separately, when the corporate form has been used as part of a basically unfair device to achieve an inequitable result. [Footnote omitted] Bell Oil & Gas Co. v. Allied Chemical Corp., 431 S.W.2d at 340. Specifically, we disregard the corporate fiction:

(1) when the fiction is used as a means of perpetrating fraud; [Footnote omitted]

(2) where a corporation is organized and operated as a mere tool or business conduit of another corporation;

(3) where the corporate fiction is resorted to as a means of evading an existing legal obligation;

(4) where the corporate fiction is employed to achieve or perpetrate monopoly;

(5) where the corporate fiction is used to circumvent a statute; and

(6) where the corporate fiction is relied upon as a protection of crime or to justify wrong. [Footnote omitted]

Pacific American Gasoline Co. of Texas v. Miller, 76 S.W.2d 833, 851 (Tex.Civ.App.--Amarillo 1934, writ ref'd). See also Roy E. Thomas Const. Co. v. Arbs, 692 S.W.2d 926, 938 (Tex.App.--Ft. Worth 1985), writ ref'd n.r.e. per curiam, 700 S.W.2d 919 (Tex.1985); Roylex, Inc. v. Langson Bros. Const. Co., 585 S.W.2d 768, 771 (Tex.Civ.App.--Houston [1st Dist.] 1979, writ ref'd n.r.e.); Wolf v. Little John Corp. of Liberia, 585 S.W.2d 774, 778 (Tex.Civ.App.--Houston [1st Dist.] 1979, writ ref'd n.r.e.); Sutton v. Reagan & Gee, 405 S.W.2d 828, 837 (Tex.Civ.App.--San Antonio 1966, writ ref'd n.r.e.).

Many Texas cases have blurred the distinction between alter ego and the other basis for disregarding the corporate fiction and treated alter ego as a synonym for the entire doctrine of disregarding the corporate fiction. See, e.g., William B. Roberts, Inc. v. McDrilling Co., 579 S.W.2d 335 (Tex.Civ.App.--Corpus Christi 1979, no writ); Dunn v. Growers Seed Ass'n, 620 S.W.2d 233, 236-37 (Tex.Civ.App.--Amarillo 1981, no writ). However, as Pacific American Gasoline Co. of Texas v. Miller indicates, alter ego is only one of the basis for disregarding the corporate fiction: "where a corporation is organized and operated as a mere tool or business conduit of another corporation."

Alter ego applies when there is such unity between corporation and individual that the separateness of the corporation has ceased and holding only the corporation liable would result in injustice. First Nat. Bank in Canyon v. Gamble, 132 S.W.2d 100, 103 (Tex.1939). It is shown from the total dealings of the corporation and the individual, including the degree to which corporate formalities have been followed and corporate and individual property have been kept separately, the amount of financial interest, ownership and control the individual maintains over the corporation, and whether the corporation has been used for personal purposes. See Lucas v. Texas Industries, Inc., 696 S.W.2d 372, 374 (Tex.1984); Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d at 573-75. Alter ego's rationale is: "if the shareholders themselves disregard the separation of the corporate enterprise, the law will also disregard it so far as necessary to protect individual and corporate creditors." Ballantine, Corporations sec. 123 at 294 (1946).

In Zisblatt v. Zisblatt, 693 S.W.2d 944 (Tex.App.--Fort Worth 1985, writ dism'd), the Fort Worth Court of Appeals approved the application of the alter ego doctrine to a divorce action where a spouse attempted to change the character of earned income by forming a corporation and then depositing the income into the corporate accounts. The court held that such actions were "clearly a fraud on the rights of the community." See also Uranga v. Uranga, 527 S.W.2d 761, 765 (Tex.Civ.App.--San Antonio 1975, writ dism'd). We are not aware of any case in which the alter ego doctrine has been applied to determine the status of a decedent's property; however, we conclude that the well-settled rules of law set forth above should be applied to govern such situations. Compare Trawick v. Trawick, 671 S.W.2d 105 (Tex.App.--El Paso 1984, no writ).

The alter ego theory will not be utilized to disregard the corporate entity unless: (1) it is made to appear that there is such a unity that the separateness of the corporation has ceased to exist; and (2) the facts are such that an adherence to the fiction of the separate existence of the particular corporation would, under the particular circumstances, promote injustice. Castleberry v. Branscum, supra at 272. See also Aztec Management and Investment Co., Inc. v. McKenzie, 709 S.W.2d 237, 239 (Tex.App.--Corpus Christi 1986, no writ); Roy E. Thomas Const. Co. v. Arbs, 692 S.W.2d 926, 938 (Tex.App.--Fort Worth), writ ref'd n.r.e. per curiam, 700 S.W.2d 919 (1985); Mortgage and Trust, Inc. v. Bonner & Co., Inc., 572 S.W.2d 344, 349 (Tex.Civ.App.--Corpus Christi 1978, writ ref'd n.r.e.). The courts of this State have been reluctant to pierce the corporate veil and impose personal liability upon an individual (such as its chief executive officer and controlling stockholder) thereby destroying an important fiction under which so much of the business of the country is conducted and have done so only under compelling circumstances. Aztec Management and Investment Co., Inc. v. McKenzie, ...