551 S.W.3d 875
Tex. App.2018Background
- Shadow Creek Bay, Inc. (a corporation owned by Mau and Mandy Hong and others) gave United Texas Realtors an exclusive listing (Dec 2010–Mar 2011) entitling United Texas to a 4% commission on any sale during the term.
- Shadow Creek sold a 6.24-acre tract in March 2011 to Avnee, L.P., through a different broker (PSL Realty / Fuertes) and refused to pay United Texas the commission.
- Havey (owner of United Texas) sued Shadow Creek and individual defendants (including Mandy) for breach of contract, common-law fraud, conspiracy, and alter-ego liability; jury found for Havey on breach, fraud, conspiracy, and answered yes to whether Mandy was responsible for Shadow Creek’s conduct (alter ego). Jury awarded $30,500 damages and $55,750 in attorney’s fees.
- Trial court entered judgment holding Shadow Creek and Mandy jointly and severally liable; Mandy appealed contesting individual liability and attorney’s fees proof.
- The court assumed arguendo that "actual fraud" was shown but held the evidence legally insufficient to show the fraud was "primarily for [Mandy’s] direct personal benefit," reversed Mandy’s individual liability under alter-ego, concluded statutory protections (Tex. Bus. Orgs. Code §§ 21.223–21.224) bar common-law fraud/conspiracy claims here, and reversed/remanded the attorney’s-fee award for insufficient lodestar detail.
Issues
| Issue | Havey’s Argument | Mandy’s Argument | Held |
|---|---|---|---|
| Alter-ego / individual liability under Tex. Bus. Orgs. Code §21.223(b) | Mandy caused Shadow Creek to perpetrate fraud (promise to pay commission with no intent to perform) and benefited by reducing personal guaranty exposure from the sale | Evidence is legally insufficient: no proof the alleged fraud was perpetrated primarily for Mandy’s direct personal benefit | Reversed as to Mandy: legally insufficient evidence that alleged fraud was primarily for Mandy’s direct personal benefit; render judgment for Mandy |
| Statutory bar to common-law fraud and conspiracy (preemption) | Fraud/conspiracy are independent torts supporting personal liability | Sections 21.223 and 21.224 preempt common-law theories seeking to impose personal liability for corporate contractual obligations unless statutory exception met | Held bars Havey’s common-law fraud and conspiracy claims against Mandy because they relate to a corporate contractual obligation and no showing the statutory exception applies; jury findings on those claims are immaterial |
| Sufficiency of fraud evidence generally | Jury found promise = misrepresentation; damages awarded | Mandy challenges factual and legal sufficiency | Court assumed actual fraud element could be met but found ‘‘primarily for direct personal benefit’’ missing; did not decide other sufficiency challenges |
| Attorney’s fees award (lodestar proof) | Testimony established hours and hourly rate; jury awarded fees | Fee proof lacked contemporaneous, task-level records and did not allocate hours to specific tasks/claims | Reversed and remanded: attorney’s-fee evidence failed El Apple lodestar specificity (no itemized task/time breakdown); remand for redetermination |
Key Cases Cited
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (legal- and factual-sufficiency review standards)
- El Apple I, Ltd. v. Olivas, 370 S.W.3d 757 (Tex. 2012) (lodestar proof requires documentation of services, who performed them, when, and time spent)
- Long v. Griffin, 442 S.W.3d 253 (Tex. 2014) (El Apple lodestar requirements applied; lodestar evidence must allow meaningful review)
- Priddy v. Rawson, 282 S.W.3d 588 (Tex. App.-Houston [14th Dist.] 2009) (section 21.223 precludes common-law claims imposing corporate-contract liability absent statutory exception)
- TecLogistics, Inc. v. Dresser-Rand Group, Inc., 527 S.W.3d 589 (Tex. App.-Houston [14th Dist.] 2017) (section 21.223 applies to corporate contractual obligations)
- Viajes Gerpa, S.A. v. Fazeli, 522 S.W.3d 524 (Tex. App.-Houston [14th Dist.] 2017) (insufficient evidence of direct personal benefit where corporate mismanagement not tied to the specific obligation at issue)