Tigrett v. Pointer

Decision Date29 December 1978
Docket NumberNo. 19601,19601
Citation580 S.W.2d 375
PartiesRuby Sears TIGRETT, Appellant, v. Gerald M. POINTER et al., Appellee.
CourtTexas Court of Appeals

Alfred W. Ellis, Woodruff & Ellis, Dallas, for appellant.

Shannon Jones, Jr., Mitchell Baddour, Jr., Passman, Jones, Andrews, Coplin & Holley, Dallas, for appellee.

Before GUITTARD, C. J., and AKIN and ROBERTSON, JJ.

GUITTARD, Chief Justice.

In this garnishment proceeding the holder of a judgment against a corporation seeks to pierce the corporate veil and hold its sole stockholder, and also other corporations owned by him, personally liable for the judgment. Trial without a jury resulted in a judgment for the garnishees. On this appeal, plaintiff attacks the trial court's findings that the judgment debtor and the other corporations were not alter egos of the sole stockholder, asserting that she had proved alter ego conclusively as a matter of law, and, alternatively, that the court's findings are against the great weight and preponderance of the evidence. We hold that the alter ego theory was established as a matter of law and that the trial court's findings to the contrary are not supported by the evidence. Consequently, we reverse and remand with instructions to render judgment for plaintiff.

Plaintiff Ruby Tigrett sued Heritage Building Company in April 1974. The company was then insolvent according to the testimony of its president and sole stockholder, Gerald M. Pointer. On May 1, 1974, substantially all its assets were transferred to Pointer in consideration of a reduction of the company's indebtedness to him. On the same day, he transferred the same assets to Heritage Corporation. No money changed hands. The consideration was shown on the books of the transferee, Heritage Corporation, as a loan to it by Pointer in the same amount as the reduction of Pointer's loan to Heritage Building Company.

Plaintiff's lawsuit resulted in a judgment against Heritage Building Company on August 10, 1976, for $49 per week for 401 weeks, 1 but no assets remained on which execution could be levied. She brought the present suit in the form of an application for writ of garnishment, based on that judgment, against Gerald M. Pointer, Heritage Corporation, and other corporations owned and controlled by Pointer, alleging that the garnishees were indebted to Heritage Building Company as a result of the fraudulent transfer of its assets. She further alleged that Heritage Building Company, Heritage Corporation, and the other corporate garnishees were the alter egos of Pointer and that all of the garnishees were jointly and severally liable for the judgment. 2 After rendering judgment for the garnishees, the judge filed findings of fact to the effect that neither Heritage Building Company nor Heritage Corporation was the alter ego of Pointer, that all of the corporate garnishees transacted business as separate corporate entities, that the corporate minute books were adequate, well maintained, and reflected the conduct of substantial business by the board of directors of each corporation, and that the transfer of assets by Heritage Building Company to Pointer was a legitimate payment of a legitimate indebtedness and was not a return of capital investment or equity. All of these findings are attacked on the ground that the opposite of each finding is conclusively established as a matter of law and on the alternate ground that each is so against the great weight and preponderance of the evidence that it is clearly wrong and manifestly unjust.

1. Summary of Evidence

The relevant facts are not in dispute. The only testimony in the record is that of the appellee Pointer and his employees, and all the documentary evidence, other than plaintiff's judgment, was produced from the appellees' files.

Heritage Building Company was chartered in 1955 for the purpose of purchasing, subdividing and selling real estate, erecting and repairing buildings, and accumulating and lending money for these purposes. It was capitalized for $1,000 in cash, and 10,000 shares of stock were issued, of which 9,800 were issued to Gerald M. Pointer in consideration of $980. Pointer has since become sole stockholder, and he has always served as president and as chairman of the board of directors. The company acquired land and buildings, mostly apartment complexes, and also acted as general contractor for buildings erected on lands owned by Pointer. The corporate offices were maintained in a building owned by Pointer. Approximately six regular employees were paid by the corporation, including a bookkeeper and office manager, who also supervised the keeping of Pointer's personal books. Two of these employees acted as members of the board of directors, along with Pointer. Meetings were held routinely, loans and other corporate acts were authorized, and minutes were kept, but Pointer's proposals were always adopted without question.

The corporation's ledger contains a "loan account" showing its indebtedness to Pointer. On April 30, 1974, the ledger showed this indebtedness to be $484,218.00. No notes were signed, no security taken, and no interest paid. The only written evidence of the indebtedness in the present record is the notation in the corporate books. Pointer testified that he considered this a loan rather than a capital investment. The corporate financial statement, however, designates it as "capital."

On April 30, 1974, at a special meeting of the board of directors of Heritage Building Company, six days after service of process in plaintiff's suit, a resolution was adopted authorizing transfer of substantially all its assets to its president and sole stockholder, Gerald M. Pointer, in consideration of a reduction of the company's debt to him. On the next day entries were made on the books of the company, showing the transfer and listing in detail both real and personal property. Corresponding entries were made in Pointer's personal books showing his purchase of these assets. At the same time entries were made on the books of Heritage Corporation, also solely owned by Pointer, showing a transfer of the same assets from Pointer to it. No money changed hands. The books of Heritage Building Company showed a reduction of $389,967.00 in its debt to Pointer. This figure was determined by the book value of the assets, less the debts against them. The books of Heritage Corporation showed a loan of the same amount to it by Pointer. No deeds were signed until September 1975 The transfer of assets from Heritage Building Company to Pointer and from Pointer to Heritage Corporation on May 1, 1974, was explained by Pointer as a change of the corporate name and as an effort to improve the "credit reputation" of the business. He testified that the company had acquired a bad credit reputation and was unable to obtain loans because three of its apartment projects had been lost by foreclosure. In 1973, when the financial problems of Heritage Building Company became apparent, Heritage Corporation was organized with an initial capital of $1,000 and Pointer as the principal officer and sole stockholder. Its corporate purpose was somewhat broader than that of Heritage Building Company. The assets transferred consisted principally of real estate and equipment used in the construction business, all of which were listed in the books of Heritage Building Company as transferred to Pointer and in the books of Heritage Corporation as transferred to it by Pointer.

when Heritage Building Company conveyed the various tracts of land listed directly to Heritage Corporation. The transfer was not announced, even to the employees of Heritage Building Company, who first learned of it when they received their paychecks from the new corporation. Operation of the business continued without change. The same employees continued to perform the same duties in the same suite of offices. New stationery was printed, but "Heritage Building Company" remained on the office door and was still there at time of this trial.

Pointer acknowledged that at the time of the transfer Heritage Building Company "owed a lot of other people," and that no provision was made for payment of other creditors. The corporation had no independent directors that were concerned about claims of creditors. Tom Fuller and Joseph Thompson, the employees who served as the other two directors at that time, testified that they were not concerned about the other debts of the corporation. Neither raised any questions in that respect. Their duties as directors had never been explained to them. They simply followed Pointer's instructions. They did not remember a meeting at which the resolution authorizing the transfer was approved, but they knew that Heritage Building Company was heavily indebted to Pointer, as were all of Pointer's corporations, and that the transfer would reduce that debt. Fuller testified that he knew that the transfer would strip the corporation of its assets, but Thompson said that he did not know it would have that effect and that the resolution was not explained to him.

The trial court made no finding as to whether Heritage Building Company was insolvent on May 1, 1974, when it transferred its assets to Pointer. No implied finding on that issue can be presumed because Pointer's testimony establishes as a matter of law that the company was insolvent and could not continue in business. He testified expressly that it was "insolvent," even before the transfer. This conclusion is supported by his factual testimony. Thus, he said that the transfer did not make the company insolvent because it was already insolvent and had "a large negative net worth." He said that the company "owed a lot of other people," but that no provision was made for payment of other creditors because "it had become obvious to us as directors that Heritage Building Company could not continue to function, so we had to shut the business down in...

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