Wilson v. Davis (Tex.App. - Houston [1st Dist.] Aug. 14, 2009)(Taft) (respondeat superior,
employer not liable for highly intoxicated employee's deadly wreck as driver was not acting in
course and scope of employment furthering business interest) (reverse corporate veil-piercing
theory, alter ego theory)
We hold that the trial court erred in rendering summary judgment on
appellants’ claims alleging that AWC was vicariously liable for the negligence,
gross negligence, and negligence per se of Jeannie Davis on the basis of its
being her alter ego.
We reverse the summary judgment in favor of AWC that was rendered on (1)
appellants’ theory that AWC was liable for Jeannie Davis’s tortious conduct
under the theories of ostensible agency, apparent agency, and agency by
estoppel; (2) appellants’ “permissive use” and vice-principal-liability
negligence claims against AWC; (3) appellants’ liability theory of alter ego;
and (4) the plaintiff appellants’ requests for declaratory relief. We affirm the
judgment rendered in favor of AWC in all other respects. We affirm the
judgment rendered in favor of Sam Davis on appellants’ negligent-
entrustment liability theory and on appellant Stevenson’s request that a
constructive trust be imposed for his alleged fraud. We reverse the summary
judgment rendered in favor of Sam Davis in all other respects.
REVERSE TC JUDGMENT AND RENDER JUDGMENT:
Opinion by Justice Taft
Before Justices Taft, Keyes and Alcala
01-06-00424-CV Rhonda Wilson and Thomas Stevenson, et al. v. Sam Davis, Amalgam Western,
et al Appeal from Probate Court No 1 of Harris County
RHONDA WILSON, INDIVIDUALLY AND AS REPRESENTATIVE OF ALL WRONGFUL DEATH
BENEFICIARIES AND AS HEIR AND LEGAL REPRESENTATIVE OF THE ESTATE OF REAVEN
WILSON; RICK WILSON, INDIVIDUALLY AND AS REPRESENTATIVE OF ALL WRONGFUL DEATH
BENEFICIARIES OF THE ESTATE OF RAINI WILSON; PAMELA MANN, INDIVIDUALLY AND AS
SURVIVING PARENT OF JUSTIN STOOKSBERRY, AS REPRESENTATIVE OF ALL WRONGFUL
DEATH BENEFICIARIES, AND AS THE LEGAL REPRESENTATIVE OF THE ESTATE OF JUSTIN
STOOKSBERRY; and TOMMY STEVENSON, INDIVIDUALLY AND AS LEGAL REPRESENTATIVE
OF THE ESTATE OF JENNIFER STEVENSON, DECEASED, AND AS REPRESENTATIVE OF ALL
WRONGFUL DEATH BENEFICIARIES, Appellants
V.
SAM D. DAVIS AND AMALGAMATED WESTERN CO., INC., Appellees
On Appeal from the Probate Court No. 1Harris County, Texas
Trial Court Cause No. 345,407-402
O P I N I O N
Appellants, Rhonda Wilson, Rick Wilson, Pamela Mann, and Tommy Stevenson, each individually
and in the representative capacities set out above, appeal from a take-nothing summary judgment
rendered in favor of appellees, Amalgamated Western Co., Inc. (“AWC”) and Sam D. Davis. We
determine (1) which aspects of the judgment appellants do not challenge; (2) whether AWC
conclusively disproved respondeat superior liability; (3) whether, in response to AWC’s no-
evidence summary-judgment motion, appellants raised some evidence to support their alter ego
“reverse-piercing” liability theory; and (4) whether AWC or Sam Davis was entitled to summary
judgment on claims or liability theories that were not expressly attacked in their summary-judgment
motions. We affirm the judgment in part, reverse it in part, and remand the cause.
Background
Jeannie and Sam Davis, husband and wife, were the sole shareholders of AWC. AWC was a
closely held, “Subchapter S” corporation that the Davises incorporated in February of 2000. AWC
was in the business of steel processing and, after the events of this suit, of steel brokering. Sam
Davis was AWC’s president and general manager, and Jeannie Davis was its secretary and
treasurer. The Davises were also employees of AWC.
In 2001, the Davises purchased a horse for Jeannie. On the night of January 27, 2002, Jeannie
went to tend to the horse until about 10:30 or 10:45. Her whereabouts and actions after then were
unaccounted for until 1:00 the next morning, when, as she drove the wrong way on the freeway,
she collided with the vehicle driven by the children of appellants, killing everyone in both vehicles.
At the time of the collisions, Jeannie Davis was highly intoxicated, allegedly at four times the legal
limit.
It is undisputed that Sam and Jeannie Davis used funds from an AWC account both to purchase
the horse and to pay for its upkeep. The Davises produced summary-judgment evidence showing
that the monies used to purchase and to care for the horse were early drawn dividends to them. In
response, appellants produced summary-judgment evidence showing that the same funds could
not properly be accounted for as advanced dividends to the Davises and that there was thus a
fact issue as to whether AWC or the Davises (or both) owned the horse.
The parties disputed who owned the vehicle that Jeannie Davis was driving at the time of the
accident. AWC produced the vehicle’s certificate of title and Sam Davis’s deposition testimony to
show that the vehicle was owned either by Jeannie or by the Davises, but not by AWC. Appellants
produced evidence that (1) the $5,000 down-payment for the vehicle’s purchase was made by a
check drawn on an AWC account; (2) all six monthly payments for the six-month-old vehicle’s
financing were made by checks drawn on an AWC account (and those payments could not be
considered dividends to the Davises); and (3) AWC sometimes paid for gasoline and maintenance
for the vehicle.
All appellants except Stevenson (“the plaintiff appellants”) sued the temporary administrator of
Jeannie Davis’s estate,1 Sam Davis, and AWC in probate court on February 25, 2004. Appellant
Stevenson later intervened. Throughout the course of the proceedings below, the plaintiff
appellants amended their petition five times, and appellant Stevenson amended his petition in
intervention three times. All appellants later added other defendants who are not parties to this
appeal because the claims against them were severed from the judgment rendered on the claims
against AWC and Sam Davis.
By June 7, 2005, the “live” pleading of the plaintiff appellants was their fifth amended petition, and
the live pleading of appellant Stevenson was his second amended petition in intervention. At that
point, the live petitions of the plaintiff appellants and appellant Stevenson alleged the following
causes of action and theories of liability against the administrator of Jeannie Davis’s estate, AWC,
and Sam Davis:
The temporary administrator was later replaced by Sam Davis, as administrator.
! Causes of action:
[ this section deleted ]
On December 28, 2004, Sam Davis filed a hybrid traditional and no-evidence summary-judgment
motion attacking only appellants’ negligent-entrustment claim. See TEX. R. CIV. P. 166a(c), (i). On
January 12, 2005, AWC filed its first amended summary-judgment motion, which was also a hybrid
traditional and no-evidence motion. The claims, liability theories, and damages of all appellants
that AWC attacked by this first amended summary-judgment motion were (1) negligent
entrustment; (2) negligence, gross negligence, and negligence per se (though AWC interpreted
the basis for these allegations as being solely negligent entrustment); (3) alter ego; (4) single
business enterprise; (5)respondeat superior; (6)fraud as the basis for a constructive trust; and (7)
exemplary damages.
The trial court granted Sam Davis’s summary-judgment motion verbally in early June 2005; the
record contains conflicting indications as to whether the trial court memorialized that verbal ruling
by written order on or about June 7, 2005, but if it did, no such order appears in our record. Take-
nothing summary judgment was rendered on all of the claims asserted by all appellants against
AWC on June 7, 2005.
On June 27, 2005, AWC moved to set aside the final summary judgment in its favor so that it
could file an additional summary-judgment motion (again, hybrid traditional and no-evidence) to
attack the plaintiff appellants’ joint-enterprise theory of liability, which it had neglected to attack in
its first amended summary-judgment motion. That same day, AWC filed its “second no-evidence
and traditional motion[] for summary judgment,” attacking the joint-enterprise theory of liability. On
June 30, 2005, the trial court granted AWC’s motion to set aside the summary-judgment order in
favor of AWC and ordered that appellants’ “pleadings . . . not be amended without good cause.”
That same day, the trial court granted AWC’s first amended traditional and no-evidence summary-
judgment motion, rendering a take-nothing judgment on all of appellant Stevenson’s claims and
theories against AWC and on the plaintiff appellants’ claims and theories of “negligent
entrustment, negligence, negligence per se, gross negligence, respondeat superior, fraud,
exemplary damages, single business enterprise and alter ego.”
About an hour and a half after the June 27 summary-judgment order in favor of AWC was signed,
the plaintiff appellants filed a supplement to their fifth amended petition,alleging “judicial estoppel,
estoppel, waiver and laches” against Sam Davis.
Likewise, on July 21, 2005, appellant Stevenson filed a third amended petition in intervention,
asserting the same claims, liability theories, and defensive theories against both AWC and Sam
Davis—despite the fact that take-nothing summary judgment had already been rendered on all of
appellant Stevenson’s claims and liability theories against AWC and despite the possible granting
of Sam Davis’s summary-judgment motion. The third amended petition in intervention merely
added allegations as to why the statute of limitations did not bar appellant Stevenson’s claims,
without adding additional claims or theories of liability. AWC moved to strike the third amended
petition in intervention for having reasserted claims against it that had already been determined
by the June 30, 2005 summary-judgment order in its favor; Sam Davis did not move to strike this
pleading.
The trial court did not grant AWC’s motion to strike, but on August 18, 2005, it granted AWC’s
June 27 “second” summary-judgment motion and rendered a take-nothing judgment on all claims
of all appellants against AWC. The trial court did not expressly dispose of the claims reasserted
against Sam Davis in appellant Stevenson’s third amended petition in intervention. On September
19, 2005, the trial court signed an order (1) severing the summary judgment rendered in favor of
AWC and (2) purporting to sever the summary-judgment order rendered in favor of Sam Davis
(though nothing in the record indicates that the trial court had signed such a summary-judgment
order yet) from the remaining claims and defendants; the trial court also abated the claims against
the other defendants until further order. This severance order did not contain any language
indicating that it purported to render a final judgment on the severed claims. On February 24,
2006, during the pendency of this appeal, the trial court signed a take-nothing summary-judgment
order on all appellants’ claims against Sam Davis, rendering the severed judgment final.
Standard of Review and Burden of Proof
We review summary judgments de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661
(Tex. 2005).
Traditional summary judgment under Texas Rule of Civil Procedure 166a(c) is proper only when a
movant establishes that there is no genuine issue of material fact and that it is entitled to
judgment as a matter of law. Randall’s Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex.
1995); see TEX. R. CIV. P. 166a(c). A defendant is entitled to summary judgment if the evidence
disproves as a matter of law at least one element of each of the plaintiff’s causes of action or if it
conclusively establishes all elements of an affirmative defense. Randall’s Food Mkts., Inc., 891 S.
W.2d at 644.
A party may move for no-evidence summary judgment under Texas Rule of Civil Procedure 166a
(i) “if there is no evidence of one or more essential elements of a claim or defense on which an
adverse party would have the burden of proof at trial.” Flameout Design & Fabrication, Inc. v.
Pennzoil Caspian Corp., 994 S.W.2d 830, 834 (Tex.App.—Houston [1st Dist.] 1999, no pet.); see
TEX.R.CIV.P.166a(i). “The trial court must grant the motion unless the nonmovant produces more
than a scintilla of evidence raising a genuine issue of material fact on the challenged elements.”
Flameout Design & Fabrication, Inc., 994 S.W.2d at 834.
In reviewing the granting of either type of summary-judgment motion, we indulge every reasonable
inference from the evidence in favor of the non-movant, resolve any doubts arising from the
evidence in its favor, and take as true all evidence favorable to it. Malcomson Rd. Util. Dist. v.
Newsom, 171 S.W.3d 257, 263 (Tex. App.—Houston [1st Dist.] 2005, pet. denied); Flameout
Design, 994 S.W.2d at 834. When a summary judgment does not specify the grounds upon which
the trial court ruled, we must affirm it if any of the summary judgment grounds on which judgment
could be based is meritorious. See Star-Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex. 1995).
Summary Judgment for AWC
In three issues, appellants challenge the summary judgment rendered for AWC.4
We note at the outset that, although appellants and AWC each objected to at least some
evidence presented by the other, no one obtained a ruling on any objections, and no one argues
on appeal that the other party’s summary-judgment proof may not be considered for any reason
raised as an objection below.
A. Bases for Summary Judgment that Appellants Do Not Challenge
First, at oral argument, appellants confirmed that they are not challenging the summary judgment
rendered on (1) their claims against AWC for “negligence, gross negligence, and negligence per
se,” except for their claims for “permissive use” negligence and vice-principal-liability negligence,
and (2) their vicarious-liability theories of negligent entrustment and joint enterprise. Consistent
with these representations, their brief does not challenge the rendition of judgment on the
vicarious-liability theories of negligent entrustment and joint enterprise.
Second, although AWC’s summary-judgment motion did not attack appellants’ claim that AWC was
negligent in controlling its intoxicated employee, Jeannie Davis, appellants do not challenge the
summary judgment for having disposed of this negligence claim.
Third, we note that, although appellant Stevenson pleaded that AWC was vicariously liable for any
direct liability that Sam Davis might have to appellants, appellants do not challenge the rendition
of judgment on this vicarious-liability basis; rather, their briefing focuses solely on AWC’s vicarious
liability for Jeannie Davis’s negligence under various liability theories.
Accordingly, we must affirm the summary judgment rendered on the following claims and liability
theories:
! any direct-liability claims against AWC for negligence, gross negligence, and negligence
per se, including that for negligent control of an intoxicated employee, but not those for
“permissive use” and vice-principal-liability negligence;
! joint-enterprise liability of AWC;
! vicarious-liability of AWC for its negligent entrustment of the vehicle to Jeanne Davis; and
! vicarious-liability of AWC for Sam Davis’s actions underlying all claims against him.
See Jacobs v. Satterwhite, 65 S.W.3d 653, 655 (Tex. 2001) (holding that court of appeals errs in
reversing summary judgment on claim when appellant does not complain of judgment’s rendition
on that claim); Bates v. Dallas Indep. Sch. Dist., 952 S.W.2d 543, 550 (Tex. App.—Dallas 1997,
writ denied) (providing that appellate court may refuse to consider issue conceded by party at oral
argument); accord Tourneau Houston, Inc. v. Harris County Appraisal Dist., 24 S.W.3d 907, 909
(Tex. App.—Houston [1st Dist.] 2000, no pet.).
B. Respondeat Superior
In issue two, appellants argue that the trial court erred in rendering summary judgment for AWC
on the basis of respondeat superior liability for Jeannie Davis’s negligence, gross negligence, and
negligence per se.
1. The Law
“Under the doctrine of respondeat superior, an employer is vicariously liable for the negligence of
an agent or employee acting within the scope of his or her agency or employment, although the
principal or employer has not personally committed a wrong.” Baptist Mem’l Hosp. Sys. v.
Sampson, 969 S.W.2d 945, 947 (Tex. 1998). “[A]n employer is liable for its employee’s tort only
when the tortious act falls within the scope of the employee’s general authority in furtherance of
the employer’s business and for the accomplishment of the object for which the employee was
hired.” Minyard Food Stores, Inc. v. Goodman, 80 S.W.3d 573, 577 (Tex. 2002). The employee’s
actionable conduct must be of the same general nature as the conduct authorized by the
employer or must be incidental to the conduct authorized by the employer. Id. Therefore,“if an
employee deviates from the performance of his duties for his own purposes, the employer is not
responsible for what occurs during that deviation.” Id.
2. The Relevant Facts
Jeannie Davis went to care for or to ride the horse at the stables of Ava Urbanovsky about one to
three times a week. She generally went to the stables from
6:00 to 9:00 p.m. on weekday evenings, after leaving work at AWC around 5:00 p.m., or during
the daytime on the weekends.
On February 27, 2002, a work day, Jeannie Davis went to the stables to tend to the horse some
time between 6:15 and 7:00 p.m. She called her husband from the stables at about 6:45 p.m.
Urbanovsky twice talked to Jeannie Davis in person at the stables: the first time, between 7:00 and
8:30 p.m.; the second time, about 30 to 40 minutes later. Urbanovsky and Jeannie Davis
continued working with the horses at the stable for another hour after Urbanovsky came out the
second time, until about 10:00 that evening. When Urbanovsky left, Jeannie Davis told her that
Jeannie would finish putting the horse up, braid his tail, and turn out the lights, all of which
Urbanovsky estimated would have taken Jeannie Davis only about another 30 minutes to
complete, so that Jeannie Davis might have finished with the horse between 10:30 and 10:45 p.m.
Urbanovsky testified that Jeannie Davis did not appear or smell intoxicated, and that Urbanovsky
did not observe Jeannie drink alcohol, either time that Urbanovsky spoke with Jeannie at the
stable that night. The accident occurred about 1:00 on the morning of February 28, 2002—
approximately two to two and a half hours after the time that Urbanovsky estimated that Jeannie
Davis would have left the stables. It was uncommon for Jeannie Davis to stay out past 11:00 or 11:
30 at night. Her normal practice was to return home after having tended to the horse. It would
have taken her only about 30 minutes to return home from the stables, but she did not go home;
instead, she drove in what appears to have been a completely different direction on the highway,
then had the accident two and a half hours later after having become highly intoxicated. No one
had any idea where Jeannie Davis went after having tended to the horse.
3. Discussion
Appellants contend that they presented summary-judgment evidence raising a fact issue on
whether the horse or the vehicle were owned by AWC or Jeannie Davis and, thus, on whether
Jeannie Davis was on her “employer[’s] business to feed and care for the company horse” at the
time of the accident. However, we need not determine if appellants raised genuine issues of
material fact concerning the ownership of the horse or vehicle in order to dispose of this
challenge, and we thus assume without deciding for the moment that appellants raised a fact
issue on these matters.
Our focus is instead on whether Jeannie Davis was in the course and scope of her employment
with AWC during the two to two and a half hours after having cared for the horse, in which time
period she deviated from her usual route home, became highly intoxicated, and had the accident.
The undisputed evidence is that Jeannie Davis did not appear intoxicated or smell of alcohol when
she tended the horse until at least 10:00 the night before the accident; that she was estimated to
have remained at the stables only about 30 or 45 minutes more; that she normally returned home
after caring for the horse, which was a 30-minute drive; and that she deviated from that usual
schedule and course that night for two to two and a half hours, during which time she became
highly intoxicated.
The summary-judgment evidence thus conclusively established that Jeannie Davis was not acting
“in furtherance of the employer’s business” after she finished caring for the horse and that she
deviated from her usual route home, for whatever her own purposes were, and became
intoxicated over the next two and a half hours. See Minyard Food Stores, Inc., 80 S.W.3d at 577.
We hold that AWC was entitled to traditional summary judgment on appellants’ vicarious-liability
theory that it was liable for Jeannie Davis’s negligence, gross negligence, or negligence per se
based on respondeat superior. Accordingly, we further hold that the trial court properly rendered
summary judgment on appellants’ theory that AWC was liable under respondeat superior.
We overrule issue two.
C. Alter Ego and “Reverse” Corporate Veil Piercing
In their first issue, appellants argue that the trial court erred in rendering summary judgment in
favor of AWC on the basis that no alter ego liability existed for Jeannie Davis’s tortious acts.
1. The Law
Piercing the corporate veil is not a cause of action, but is instead a means of imposing liability for
an underlying cause of action. Gallagher v. McClure Bintliff, 740 S.W.2d 118, 119 (Tex. App.—
Austin 1987, writ denied). In general, courts will “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.” Castleberry v. Branscum, 721 S.W.2d 270, 271 (Tex. 1986).5 Specifically,
courts disregard the corporate fiction in tort cases in six general instances:
(1) when the fiction is used as a means of perpetrating fraud;
(2) where a corporation is organized and operated as a mere tool or business conduit of another
. . . ;
(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
Castleberry has been limited by statute. See TEX. BUS. CORP. ACT ANN. art. 2.21(2), (3)
(Vernon 2003) (recodified effective January 1, 2006 at TEX. BUS. ORGS. CODE ANN. § 2.223 by
Act of May 13, 2003, 78th Leg., R.S., ch. 182, § 1, 2003 Tex. Gen. Laws 267, 427); see also Willis
v. Donnelly, 199 S.W.3d 262, 271–72 (Tex. 2006) (recognizing that article 2.21 limited Castleberry
in specific situations). However, this case does not involve a contractual obligation or anything
arising from it, which is the general application of article 2.21. See TEX. BUS. CORP. ACT ANN.
art. 2.21(2); see also Gerard Gaspard II, "Texas Guide to Piercing & Preserving the Corporate
Veil, 31-SEP Bull. Bus. L. Sec. St. B. Tex. 24, 34 (Sept. 1994) [hereinafter “Gaspard”] (“[T]he
amendments do not in any way limit the application of any of the possible corporate disregard
theories [from Castleberry] to a tort claim.”). Additionally, article 2.21 limits the use of alter ego
and like theories when a claimant seeks to hold a shareholder liable for a corporate obligation;
here, in contrast, appellants seek to hold a corporation liable for its shareholder’s tortious action
under a reverse-piercing theory. SeeIn re Moore, 379 BR 284, 292 n.7 (N.D. Tex. 2007); Glenn D.
West, W. Benton Lewis Jr., Corporations, 61 SMU L. Rev. 743, 746–47 (Summer 2008).
Accordingly, article 2.21 does not apply.
(6) where the corporate fiction is relied upon as a protection of crime or to justify wrong. Id. at 272
(footnotes omitted; emphasis added). The court also indicated that “[i]nadequate capitalization is
another basis for disregarding the corporate fiction.” Id. at 272 n.3. Disregard of the corporate
fiction on any of the bases identified above is “an equitable doctrine” to which “Texas takes a
flexible fact-specific approach focusing on equity.” Castleberry, 721 S.W.2d at 273. In large part
because of this focus on equity, “[t]he different bases for disregarding the corporate fiction involve
questions of fact,” which, absent “very special circumstances,” “should be determined by the jury.”
Id. at 277. “Courts have generally been less reluctant to disregard the corporate entity in tort
cases than in breach of contract cases.” See Lucas v. Tex. Indus., Inc., 696 S.W.2d 372, 375
(Tex. 1984). Nonetheless, the corporate fiction generally will not be disregarded absent
exceptional circumstances. See Lucas, 696 S.W.2d at 374. Each of the bases identified in
Castleberry for disregarding the corporate form “involve[s] some type of wrongdoing” —or in the
words of Castleberry, injustice or inequity. “By ‘injustice’ and ‘inequity’ we do not mean a
subjective perception of unfairness by an individual judge or juror; rather, these words are used in
Castleberry
Gaspard at 31; see SSP Partners v. Gladstrong Invs. (USA) Corp., 275 S.W.3d 444, 454 (Tex.
2008) (“Each example [of the six examples given in Castleberry] involved an element of abuse of
the corporate structure, including example (2), alter ego . . . .”).
as shorthand references for the kinds of abuse, specifically identified, that the corporate structure
should not shield—fraud, evasion of existing obligations, circumvention of statutes,
monopolization, criminal conduct, and the like.” SSP Partners v. Gladstrong Invs. (USA) Corp., 275
S.W.3d 444,455 (Tex. 2008) (citation and footnote omitted). Therefore, although “the relationship
between two entities” is one consideration to disregarding the corporate form, “[t]he other
consideration is whether the entities’ use of limited liability was illegitimate.” Id.
The alter ego theory of liability occurs under the second situation, italicized above, from
Castleberry: “where a corporation is organized and operated as a mere tool or business conduit
of another . . . .” Castleberry, 721 S.W.2d at 272. “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.” Id. 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.” Id. Its rationale is that “‘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.’” (quoting HENRY
WINTHROP BALLANTINE, BALLANTINE ON CORPORATIONS § 123 at 294 (1946)).
Appellants seek to hold AWC liable for its shareholder’s tortious acts, which is a theory of
“outsider reverse corporate veil piercing.” See Zahra Spiritual Trust
v. U.S., 910 F. 2d 240, 243–44 (5th Cir. 1990) (applying Texas alter ego law to reverse-piercing
situation); Glenn D. West, W. Benton Lewis Jr., Corporations, 61 SMU L. Rev. 743, 747, 748
(Summer 2008) (“In an outsider reverse veil piercing claim, the creditors of a shareholder of a
corporation attempt to execute upon the assets of that corporation in order to satisfy claims
against such shareholder.”) (citing Gregory S. Crespi, The Reverse Pierce Doctrine: Applying
Appropriate Standards, 16 J. Corp. L. 33, 37–38, 55–56 (Fall 1990)). Although an outsider
reverse-piercing case can involve some unique policy considerations, similar equitable principles
apply to both direct- and reverse-piercing, such as that the veil will be pierced only when
necessary to prevent an injustice and in “exceptional circumstances.” See e.g., Cappuccitti v. Gulf
Indus. Prods., Inc., 222 S.W.3d 468, 481–82 (Tex. App.—Houston [1st Dist.] 2007, no pet.)
(applying direct veil piercing alter ego principles to reverse corporate veil piercing situation); In re
Moore, 379 B.R. 284, 294–95, 296 (N.D. Tex. 2007) (same, although also noting considerations
that might apply in some reverse-piercing situations, such as consequences to creditors and
innocent stakeholders and priorities under bankruptcy law).
2. Application of the Law to the Facts
AWC argues on appeal that reverse corporate veil piercing is only a post-judgment collection
mechanism, but it did not raise this argument until its summary-judgment reply. “[A] movant may
not use a reply brief . . . to assert new grounds for summary judgment.” Comm’y Initiatives, Inc. v.
Chase Bank of Tex., N.A., 153 S.W.3d 270, 280 (Tex. App.—El Paso 2004, no pet.); see Sanchez
v. Mulvaney, 274 S.W.3d 708, (Tex. App.—San Antonio 2008, no pet.) (“[A] movant may not use a
reply brief . . . to assert new grounds for summary judgment. Therefore, we do not consider any
arguments raised in [the movant’s] reply and we will consider only those grounds specifically
raised in [his] motion for summary judgment in order to determine the basis on which he moved for
judgment.”).
AWC’s no-evidence summary-judgment motion attacked both elements of appellants’ alter ego
liability theory: (1) lack of separateness and (2) injustice. 7 See Castleberry, 721 S.W.2d at 272.
Appellants argue that the trial court erred in rendering summary judgment because they produced
some evidence to support each of these elements.
7 AWC also moved for traditional summary judgment on the ground that the only underlying claim
on which alter ego liability was premised was that of negligent entrustment, which AWC had
conclusively disproven. This ground does not support summary judgment, however, because
appellants’ allegations of alter ego liability were not premised solely on negligent entrustment.
a. Whether appellants presented some evidence that there was “such unity between
corporation and individual that the separateness of the corporation has ceased,” see
Castleberry, 721 S.W.2d at 272
When viewed in the light most favorable to appellants, the evidence showed the following: ! The
Davises severely undercapitalized AWC; ! The Davises’ personal expenses were repeatedly paid
from funds in AWC’s corporate accounts. ! A substantial number of those funds could not be
considered advance dividends because, for example, they exceeded profits. ! The Davises did not
adhere to corporate formalities like documenting corporate resolutions, such as for dividend
payments, adopting policies or procedures for paying out dividends, or maintaining AWC’s
financial records in conformity with generally accepted accounting principles. We hold that this
was some evidence that the Davises and AWC disregarded the corporate form of AWC from its
incorporation in 2000 until the 2002 accident to such an extent that AWC’s corporate
separateness ceased to exist. Accordingly, we hold that the trial court could not properly have
rendered summary judgment for AWC on this element of alter ego.
b. Whether appellants presented some evidence that “holding only [Jeannie Davis]
liable would result in injustice,” see Castleberry, 721 S.W.2d at 272
This case presents an unusual situation for reverse corporate veil piercing because the summary-
judgment evidence, when viewed in the light most favorable to appellants, showed that the
Davises disregarded the corporate form by using AWC’s assets to enrich themselves, rather than
by sheltering their personal assets in AWC and thereby limiting their personal liability. It also
showed that AWC was not making a profit and that, according to appellants’ own tax consultant,
AWC was severely undercapitalized and had a bleak future precisely because the Davises had
used AWC’s money for personal expenses even when AWC was not profitable.
Nonetheless (1) the determination of whether to pierce the corporate veil is a 8 question of fact
absent “very special circumstances”; (2) courts have been less reluctant to disregard the
corporate entity in tort cases than in breach-of-contract 9 cases; and (3) to carry their summary-
judgment burden, appellants had to produce only just more than a scintilla of evidence. 10 In
support of their summary-judgment response, appellants produced the inventory filed for Jeannie
Davis’s estate. That inventory showed that Jeannie had only around $23,000 of personal assets
to compensate appellants’ families for the death of their children—despite the fact that she had
allegedly benefitted from taking AWC’s assets. The inventory also recited that Jeannie’s shares in
AWC had no value, meaning that the sale of those shares could not be used to satisfy any
judgment for appellants.
8 Castleberry, 721 S.W.2d at 277.
9 See Lucas v. Tex. Indus., Inc., 696 S.W.2d 372, 375 (Tex. 1984).
10 See Malcomson Rd. Util. Dist. v. Newsom, 171 S.W.3d 257, 263 (Tex. App.—Houston [1st Dist.] 2005, pet.
denied).
Additionally, appellants’ summary-judgment evidence included a summary of insurance coverage
for the vehicle involved in the collision, which indicates liability coverage of only “25,000/50,000.”
This is some evidence that appellants would be harmed if the corporate veil that Jeannie herself
was alleged to have repeatedly and flagrantly disregarded was not pierced to allow appellants
whatever additional recovery they might obtain from AWC’s assets. See Mancorp, Inc. v.
Culpepper, 836 S.W.2d 844, 846 (Tex. App.—Houston [1st Dist.] 1992, no pet.) (applying pre-
Castleberry authority to hold that “[t]he ‘injustice’ to be avoided in [direct] alter ego cases is that of
leaving the plaintiff with an uncollectible judgment against the corporation, while allowing its alter
ego to go free.”) (emphasis added).11
Before Castleberry, in direct-piercing alter ego cases, it had been generally understood that the
plaintiff himself had to suffer harm before the corporation’s veil would be pierced, which in tort
cases often meant that the corporation was undercapitalized—in this reverse-piercing situation,
the equivalent would be Jeannie Davis’s having insufficient funds. See Lucas, 696 S.W.2d at 374–
75 (reasoning, for alter ego to apply in tort case, that “the financial strength or weakness of the
corporate tortfeasor is an important consideration” because “[i]f the corporation responsible for
the plaintiff’s injury is capable of paying a judgment upon proof of liability, then no reason would
exist to attempt to pierce the corporate veil and have shareholders pay for the injury,” but 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 and hold the parent corporation liable.”);
Roy E. Thos. Constr. Co. v. Arbs, 692 S.W.2d 926, 937–38 (Tex. App.—Fort Worth 1985), writ ref’
d n.r.e., 700 S.W.2d 919 (Tex. 1985); ROBERT W. HAMILTON et al., 20 TEXAS PRACTICE
SERIES, Business Organizations § 26.12 (2nd ed. 2004) [hereinafter “Business Organizations”].
We need not decide if Castleberry eased that burden by removing that requirement from
corporate veil piercing law—see, e.g., Pan E. Exploration Co. v. Hufo Oils, 855 F.2d 1106, 1132
(5th Cir. 1988) and Business Organizations, § 26.13—because, even if Castleberry did not relieve
a plaintiff from having to demonstrate harm to himself, appellants produced some evidence that
they were harmed.
Because appellants produced evidence that would demonstrate the type of injustice for which
reverse corporate veil piercing would lie, summary judgment on this basis would have been
improper.
4. Conclusion
We hold that the trial court erred in rendering summary judgment on appellants’ claims alleging
that AWC was vicariously liable for the negligence, gross negligence, and negligence per se of
Jeannie Davis on the basis of its being her alter ego.
We sustain appellants’ first issue.
D. Other Claims, Vicarious-Liability Theories, and Defensive Allegations That Were Not
Expressly Attacked By AWC’s Summary-Judgment Motion
In issue three, appellants argue that the trial court erred in rendering summary judgment on the
following claims, liability theories, and allegations because they were not addressed in AWC’s
summary-judgment motion: (1) the claims of “permissive use” and “vice-principal-liability”
negligence;(2) the vicarious-liability theories of ostensible agency, apparent agency, and agency
by estoppel; and (3) the plaintiff appellants’ three requests for declaratory relief.12
It is well settled that “[a] motion for summary judgment must itself expressly present the grounds
upon which it is made, and must stand or fall on these grounds alone.” Science Spectrum, Inc. v.
Martinez, 941 S.W.2d 910, 912 (Tex. 1997).
Accordingly, “[i]t is axiomatic that one may not be granted judgment as a matter of law on a cause
of action not addressed in a summary judgment proceeding.” Chessher v. Southwestern Bell Tel.
Co., 658 S.W.2d 563, 564 (Tex. 1983). It is thus generally reversible error for a trial court to
render summary judgment on a claim not addressed in the summary-judgment motion. See
Dubose v. Worker’s Medical, P.A., 117 S.W.3d 916, 922 (Tex. App.—Houston [14th Dist.] 2003,
no pet.).
Appellants also contend that their allegations of “estoppel byconduct, estoppel by action, estoppel
by oath, judicial estoppel, [and] equitable estoppel” regarding the Davises’ ability to claim
dividends were “theories of liability,” on which the trial court could not render summary judgment
sua sponte. However, these allegations are not theories of liability or claims; rather, they are akin
to affirmative defenses. See Stanolind Oil & Gas Co. v. Midas Oil Co., 143 S.W.2d 138, 141 (Tex.
Civ. App.—Austin 1940, writ ref’d) (concluding that allegation of estoppel by conduct was
allegation of affirmative defense); Sefzik v.City of McKinney, 198 S.W.3d 884, 895 (Tex. App.—
Dallas 2006, no pet.) (indicating that equitable estoppel is affirmative defense); Dallas Sales Co.
Inc. v. Carlisle Silver Co., 134 S.W.3d 928, 931 (Tex. App.—Waco 2004, pet. denied)(indicating
that judicial estoppel is affirmative defense). A defendant moving for summary judgment against a
plaintiff’s claims and theories of liability need not also attack the plaintiff’s “defensive” allegations
(e.g., this type of estoppel). See Dobbs v. Camco, Inc., 445 S.W.2d 565, 571 (Tex. Civ. App.—
Houston [1st Dist.] 1969, writ ref’d n.r.e.).
Nonetheless, some courts of appeals, including our own, have recognized a very limited exception
to the general rule. Although the exception’s application has been expressed in various ways,13 it
can be reduced to two: (1) when the movant has conclusively proved or disproved a matter
(usually corresponding to a claim’s element or to an affirmative defense) that would also preclude
the unaddressed claim as a matter of law or (2) when the unaddressed claim is derivative of the
addressed claim, and the movant proved its entitlement to summary judgment on that addressed
13 ! The unaddressed claim is a mere reiteration of a claim on which the
movant has already shown itself entitled to summary judgment. See,
e.g., Rotating Servs. Indus., Inc. v. Harris, 245 S.W.3d 476, 487 (Tex.
App.—Houston [1st Dist.] 2007, pet. denied).
! The movant has conclusively disproven an ultimate fact that is central
to the unaddressed causes of action. See Smith v. Heard, 980 S.W.2d
693, 697 (Tex. App.—San Antonio 1998, pet. denied).
! The motion conclusively disproves an element common both to the
claim that the motion attacked and to the claim that the motion did not
attack. See, e.g., Harris, 245 S.W.3d at 487.
! The unaddressed causes of action are derivative of the addressed cause
of action, see Dubose v. Worker’s Medical, P.A., 117 S.W.3d 916, 922
(Tex. App.—Houston [14th Dist.] 2003, no pet.).
! The motion’s grounds are broad enough to address (or to contemplate
or to encompass) the unaddressed claims. See, e.g., Harris, 245 S.W.3d
at 487; Blancett v. Lagniappe Ventures, Inc., 177 S.W.3d 584, 592 (Tex.
App.—Houston [1st Dist.] 2005, no pet.).
! The unaddressed claims were “contemplated” by the motion’s grounds.
See Judwin Props., Inc. v. Griggs & Harrison, 911 S.W.2d 498, 503
(Tex. App.—Houston [1st Dist.] 1995), writ denied, 11 S.W.3d 188
(Tex. 2000) (disapproving language unrelated to cited holding).
29
claim. (See citations in footnote 13, supra.) For the exception to apply, this Court has always
required a very tight fit between what was proved or disproved in the motion and what elements
the unaddressed claim, as it was alleged, required:14 otherwise, the exception could swallow the
rule.
Relying on the exception, AWC argues that the trial court properly rendered judgment on claims
and liability theories not challenged directly in its summary-judgment motion. For two reasons, we
conclude that the exception does not apply.
First, apart from appellants’ requests for declaratory relief, none of the unaddressed liability
theories or claims is derivative of any other. As for the requests for declaratory relief,AWC did not
conclusively prove its entitlement to judgment on the liability theories underlying these requests.
See, e.g., Harris, 245 S.W.3d at 487–88 (applying exception to newly added estoppel claims that were “but
alternative statements of [plaintiff’s] previously asserted claims to the [insurance] policy proceeds,” when motion
had conclusively established that plaintiffs were not entitled to policy’s proceeds); Hall, 177 S.W.3d at 651
(refusing to apply exception because assault claim, which motion had attacked, had different elements from
claim for intentional infliction of emotional distress, which motion had not attacked, even though both claims
arose out of same general incident); Blancett, 177 S.W.3d at 592 (“[T]he exception . . . does not apply . . . because
the two theories [relating to allegations that defendant created and maintained unsafe condition in stairway] that
[defendant] asserted in its summary judgment motion as to why it owed no duty to [plaintiff] do not conclusively
negate [plaintiff’s] assertion in her supplemental petition that [defendant] allegedly made negligent repairs or
failed to repair the alleged defect.”).
For example, two of the declaratory requests were derivative of appellants’ alter ego liability
theory against AWC, on which we have already held that there is a fact issue. The third
declaratory request asked for a determination of who owned the vehicle, making it derivative of
the “ownership” element of negligent entrustment,15 a ground on which AWC did seek summary
judgment. However, the certificate of title that AWC produced created only a rebuttable
presumption of the Davises’ ownership, see, e.g., Dean v. Lowery, 952 S.W.2d 637 (Tex. App.—
Beaumont 1997, pet. denied), and appellants rebutted that presumption with evidence that the
Davises had used funds from an AWC account to make all payments for the vehicle and that AWC
sometimes paid for gasoline and maintenance. See Kelly v. Circle K Corp., No. 01-87-00778-CV,
1988 WL 114030, at *2 (Tex. App.—Houston [1st Dist.] Oct. 27, 1988, writ denied) (not
designated for publication) (holding that summary judgment for lack of standing or capacity to sue
was improper because presumption of ownership in person other than plaintiff arising from car’s
title certificate was rebutted by testimony that plaintiff paid for car with her own money, drove car,
and was car’s actual owner).
See, e.g., Schneider v. Esperanza Transmission Co., 744 S.W.2d 595, 596 (Tex. 1987).
Second, as alleged, the elements of the claims and theories on which AWC sought summary
judgment were not exactly the same as those on which it did not. Compare Baptist Mem’l Hosp.
Sys., 969 S.W.2d at 947 (elements of respondeat superior) and Castleberry, 721 S.W.2d at 271
(elements of alter ego) with Baptist Mem’l Hosp. Sys., 969 S.W.2d at 947, 947 n.2 (elements of
various agency theories). Although there is some similarity in the abstract between the elements
of a vice-principal-liability negligence claim (not challenged here) and a respondeat superior
liability theory (challenged and conclusively disproved here),16 appellants’ allegations supporting
this claim and theory differed in one important respect: for the vice-principal-liability claim,
appellants also alleged that Jeannie Davis, as AWC’s vice principal and in a supervisory capacity,
negligently allowed herself, as employee, to drive drunk. The proof and arguments supporting
AWC’s respondeat superior summary-judgment ground do not fully address this vice-principal-
liability allegation. We will not evaluate the propriety of judgment’s rendition on the unaddressed
claim when the elements are not exactly the same, when any differences between the claim and
the theory were not fully explored below, and when the case must be remanded in any event.
Compare, e.g., Rhodes, Inc. v. Duncan, 623 S.W.2d 741, 744 (Tex. App.—Houston [1st Dist.]
1981, no writ) (“liability . . . is limited to those acts which are referable to the company’s business
to which the vice principal is expressly, impliedly or apparently authorized to transact”) with
Goodman, 80 S.W.3d at 577 (employee’s acts must be “within the scope of the employee’s
general authority in furtherance of the employer’s business and for the accomplishment of the
object for which the employee was hired”). Because “permissive use” has not been recognized as
a cause of action, it has no elements to compare against the elements of the claims and theories
on which AWC sought summary judgment. Compare Renfrow, 130 S.W.2d 70; Coronado, 596 S.
W.2d 502.
3. Disposition
We hold that the trial court erred in rendering summary judgment on (1) the claims of “permissive
use” and vice-principal-liability negligence; (2) the vicarious-liability theories of ostensible agency,
apparent agency, and agency by estoppel; and (3) the plaintiff appellants’ three requests for
declaratory relief. We sustain issue three to the extent that it complained of judgment’s rendition
on these claims, requests, and liability theories.
Summary Judgment for Sam Davis
Sam Davis moved for traditional and no-evidence summary judgment only on appellants’
negligent-entrustment liability theory against him. On appeal, appellants expressly state that they
do not contest the summary judgment rendered on this liability theory. They also advised the
Court at oral argument that they were not challenging the summary judgment rendered on “fraud,”
which we interpret to mean appellant Stevenson’s request that a constructive trust be imposed
because of Sam Davis’s alleged fraudulent waste of AWC’s assets. Accordingly, we must affirm
the summary judgment rendered on appellants’ negligent-entrustment liability theory and on
appellant Stevenson’s request for a constructive trust against Sam Davis. See Jacobs, 65 S.W.3d
at 655; Garcia, 4 S.W.3d at 889; Bates, 952 S.W.2d at 550.
Sam Davis did not move for summary judgment on any claim or theory of liability besides negligent
entrustment. In addition to alleging that liability theory, all appellants also alleged that Sam Davis
(presumably as the alter ego of AWC) was liable for AWC’s direct liability for (1) “negligent control
of [an] intoxicated employee” and (2) the “permissive use” of the vehicle by a corporate vice-
principal of AWC. Likewise, all appellants alleged that Sam Davis was vicariously liable (again,
presumably as the alter ego of AWC) for AWC’s vicarious liability (under theories of alter ego,
respondeat superior, “vice principal responsibility,” and various agency principles) for Jeannie
Davis’s negligence, gross negligence, and negligence per se. Finally, the plaintiff appellants
sought the same declaratory relief as discussed earlier. As stated, Sam Davis did not move for
summary judgment on any of these claims or liability theories. For the same reasons that we
declined to apply the exception to the rule that summary judgment cannot be rendered on a claim
not addressed in the motion to the claims and liability theories against AWC, we also decline to
apply them to the claims and liability theories against Sam Davis.
We hold that the trial court erred in rendering summary judgment on all claims and liability
theories against Sam Davis except for the liability theory of negligent entrustment and the request
for imposition of a constructive trust, the propriety of which we do not reach because the judgment
on them is not challenged on appeal. We sustain issue three with respect to Sam Davis.
Conclusion
We reverse the summary judgment in favor of AWC that was rendered on (1) appellants’ theory
that AWC was liable for Jeannie Davis’s tortious conduct under the theories of ostensible agency,
apparent agency, and agency by estoppel; (2) appellants’ “permissive use” and vice-principal-
liability negligence claims against AWC; (3) appellants’ liability theory of alter ego; and (4) the
plaintiff appellants’ requests for declaratory relief. We affirm the judgment rendered in favor of
AWC in all other respects. We affirm the judgment rendered in favor of Sam Davis on appellants’
negligent-entrustment liability theory and on appellant Stevenson’s request that a constructive
trust be imposed for his alleged fraud. We reverse the summary judgment rendered in favor of
Sam Davis in all other respects.
Tim Taft Justice
Panel consists of Justices Keyes, Alcala, and Taft.17
Justice Tim Taft, who retired from the First Court of Appeals on June 1, 2009, continues to sit by
assignment for the disposition of this case, which was submitted on April 22, 2008.