Schlueter v. Carey

• Decision Date: 05 June 2003
• Docket Number: No. 2-01-409-CV.,2-01-409-CV.
• Citation: 112 S.W.3d 164
• Parties: Mike SCHLUETER d/b/a Lancaster Bingo a/k/a Lancaster Bingo, Inc., and Mike Schlueter, Individually, and d/b/a Entertainment Properties, Inc. a/k/a Entertainment Properties, Inc., and Mike Schlueter, Individually, and d/b/a Lancaster Bingo a/k/a Lancaster Bingo, Inc., Appellants, v. Billie Jean CAREY, Appellee.
• Court: Texas Court of Appeals

112 S.W.3d 164

Mike SCHLUETER d/b/a Lancaster Bingo a/k/a Lancaster Bingo, Inc., and Mike Schlueter, Individually, and d/b/a Entertainment Properties, Inc. a/k/a Entertainment Properties, Inc., and Mike Schlueter, Individually, and d/b/a Lancaster Bingo a/k/a Lancaster Bingo, Inc., Appellants, v. Billie Jean CAREY, Appellee.

No. 2-01-409-CV.

Court of Appeals of Texas, Fort Worth.

June 5, 2003.

Bush & Motes, P.C., Carl J. Wilkerson, Arlington, for Appellant.

Law Offices of Mark S. Stewart, Mark S. Stewart, Magdalena Avila Villalobos, Fort Worth, for Appellee.

Panel A: CAYCE, C.J., LIVINGSTON and WALKER, JJ.

OPINION

JOHN CAYCE, Chief Justice.

Introduction

In this premises liability case, appellants Mike Schlueter and Entertainment Properties, Inc. appeal from the trial court's judgment for appellee Billie Jean Carey. In five issues, appellants contend that the judgment against Entertainment Properties is void because the trial court never acquired personal jurisdiction over Entertainment Properties and that the judgment against Schlueter is not supported by the law or the evidence. We will affirm in part and reverse and render in part.

Background Facts and Procedural History

At just after 10:30 p.m. on January 29, 1998, Billie Jean Carey tripped and fell over a speed bump in the parking lot in front of Lancaster Bingo. The owner of the property where Carey fell is not a party to this case. Entertainment Properties leased a portion of the building from the owner for use by Lancaster Bingo and had a joint right to use the parking lot. Schlueter was the sole shareholder of Entertainment Properties, and he had filed an assumed name certificate that stated he was doing business as Lancaster Bingo on the leased premises.

Carey originally sued "LANCASTER BINGO, INC." for her fall and resulting injuries. She then amended her petition to name as defendant "MIKE SCHLUETER, D/B/A LANCASTER BINGO, A/K/A LANCASTER BINGO, INC .... an individual residing in Tarrant County, Texas." Schlueter filed a verified denial, in which he denied liability in the capacity in which he had been sued.

The case was tried to the court beginning on April 2, 2001. During trial, Schlueter proffered a copy of the lease agreement between the property owner and Entertainment Properties. The trial court then continued the trial so that Carey could conduct discovery regarding Entertainment Properties "on the question of piercing the corporate veil."

On August 6, 2001, Carey amended her petition again and named as defendant "MIKE SCHLUETER, D/B/A LANCASTER BINGO, A/K/A LANCASTER BINGO, INC., and MIKE S[CH]LUETER Individually and D/B/A ENTERTAINMENT PROPERTIES, INC., A/K[/A] ENTERTAINMENT PROPERTIES, INC., AND MIKE SCHLUETER Individually and D/B/A LANCASTER BINGO[,] A/K/A LANCASTER BINGO, INC.... an individual residing in Tarrant County, Texas." Trial resumed on August 6, 2001, and the trial court eventually rendered judgment for Carey against "the Defendants," Schlueter and Entertainment Properties.

Alter Ego

In their fourth and fifth issues, appellants challenge the trial court's finding that Schlueter is the alter ego of Entertainment Properties. Appellants contend that Carey did not plead alter ego, but only sham to perpetrate a fraud, and that the alter ego finding has no support in the evidence.

The trial court's judgment must conform to the pleadings or it is erroneous. Tex.R. Civ. P. 301; Cunningham v. Parkdale Bank, 660 S.W.2d 810, 813 (Tex.1983). Texas follows a "fair notice" pleading standard, which looks to whether the opposing party can ascertain from the pleadings the nature and basic issues of the controversy and what testimony will be relevant at trial. See Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 896 (Tex.2000). "A petition is sufficient if it gives fair and adequate notice of the facts upon which the pleader bases his claim." Id. at 897 (quoting Roark v. Allen, 633 S.W.2d 804, 810 (Tex.1982)); see also Tex.R. Civ. P. 47 (providing that a pleading setting forth a claim for relief must contain a short statement of the cause of action sufficient to give fair notice of the claim involved, a statement that the damages sought are within the jurisdictional limits of the court, and a demand for judgment). In the absence of special exceptions, the petition should be construed liberally in favor of the pleader. Horizon/CMS Healthcare Corp., 34 S.W.3d at 897; Boyles v. Kerr, 855 S.W.2d 593, 601 (Tex.1993). A court should uphold the petition as to a cause of action that may be reasonably inferred from what is specifically stated, even if an element of the cause of action is not specifically alleged. Boyles, 855 S.W.2d at 601.

Alter ego and sham to perpetrate a fraud are separate bases for disregarding the corporate fiction, and each must be pleaded separately. Castleberry v. Branscum, 721 S.W.2d 270, 271-72, 275 & n. 5 (Tex.1986). Alter ego applies when there is such unity between the corporation and the individual that the separateness of the corporation has ceased and holding only the corporation liable would result in an injustice. Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 228 (Tex.1990); Castleberry, 721 S.W.2d at 272.

In this case, Carey pleaded:

Plaintiff would also show that both Lancaster Bingo (a/k/a Lancaster Bingo, Inc.) and Entertainment Properties, are solely owned by Defendant Mike Schlueter. That Mike Schlueter organized it as a Texas corporation but neither have been operated as a separate legal entity. That Mike Schlueter formed Entertainment Properties, Inc. and Lancaster Bingo, Inc. as a form to shield Mike Schlueter from any and all liability. That Mike Schlueter is running a sham corporation and thus need[s] to be held individually liable for any and all acts arising in connection with this petition.

Appellants did not specially except to Carey's pleadings. In addition, Carey briefed alter ego at the trial court's request, and appellants voiced no objection. Construing Carey's pleadings liberally, we hold that they gave appellants fair and adequate notice that Carey was relying on alter ego, in addition to sham to perpetrate a fraud, to pierce the corporate veil. We overrule appellants' fourth issue.

We now turn to appellants' no-evidence challenge to the trial court's alter ego finding. Findings of fact entered in a case tried to the court have the same force and dignity as a jury's answers to jury questions. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex.1991). The trial court's findings of fact are reviewable for legal and factual sufficiency of the evidence to support them by the same standards that are applied in reviewing evidence supporting a jury's answer. Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996); Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994).

In determining a no-evidence issue, we are to consider only the evidence and inferences that tend to support the finding and disregard all evidence and inferences to the contrary. Bradford v. Vento, 48 S.W.3d 749, 754 (Tex.2001); Cont'l Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex.1996); In re King's Estate, 150 Tex. 662, 244 S.W.2d 660, 661 (1951). Anything more than a scintilla of evidence is legally sufficient to support the finding. Cazarez, 937 S.W.2d at 450; Leitch v. Hornsby, 935 S.W.2d 114, 118 (Tex.1996). More than a scintilla of evidence exists if the evidence furnishes some reasonable basis for differing conclusions by reasonable minds about the existence of a vital fact. Rocor Int'l, Inc. v. Nat'l Union Fire Ins. Co., 77 S.W.3d 253, 262 (Tex.2002).

A corporation is a separate legal entity that normally insulates its owners or shareholders from personal liability. Pabich v. Kellar, 71 S.W.3d 500, 507 (Tex. App.-Fort Worth 2002, pet. denied) (op. on reh'g). The corporate fiction is disregarded based on alter ego, however, when a corporation is organized and operated as a mere tool or business conduit of another. Castleberry, 721 S.W.2d at 272. An alter ego relationship may be shown from the total dealings of the corporation and the individual, such as evidence of the degree to which corporate and individual property have been kept separate; the amount of financial interest, ownership, and control the individual has maintained over the corporation; and whether the corporation has been used for personal purposes. Mancorp, Inc., 802 S.W.2d at 228; Castleberry, 721 S.W.2d at 272. In a tort case, the financial strength of the corporate tort-feasor is an important consideration. Lucas v. Tex. Indus., Inc., 696 S.W.2d 372, 375 (Tex.1984). If the corporation sued is not reasonably capitalized in light of the nature and risk of its business, the need might arise to attempt to pierce the corporate veil. Id.

Alter ego's rationale is: "[I]f 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." Castleberry, 721 S.W.2d at 272. An individual may not, however, be held liable under an alter ego theory based simply on control or ownership of all the corporation's stock or on the corporation's failure to observe corporate formalities. Tex. Bus. Corp. Act Ann. art. 2.21, § A(3) (Vernon 2003);¹ Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455, 458 (Tex.1997); Howell v. Hilton Hotels Corp., 84 S.W.3d 708, 714 & n. 6 (Tex.App.-Houston [1st Dist.] 2002, pet. denied) (op. on reh'g); Commercial Escrow Co. v. Rockport Rebel, Inc., 778 S.W.2d 532, 540 (Tex.App.-Corpus Christi 1989, writ denied).

The record in this case shows that Schlueter owned all of the stock in Entertainment Properties and was one of its two officers. He signed the lease to the premises at issue on behalf of Entertainment Properties, and he filed an assumed name certificate showing that he was doing business at the leased premises as Lancaster Bingo. While testifying at trial, Schlueter often referred to himself and...