574 S.W.3d 50
Tex. App.2018Background
- Conn held a 2010 judgment against Stephen Yamin Sr. for unpaid landlord/guaranty debts; Stephen paid nothing.
- In 2006 Mary Ann formed Texas Black Iron, Inc.; the share certificate recites the shares as Mary Ann’s "sole & separate property." A 2006 Bill of Sale (purporting to transfer Stephen’s interest to Mary Ann) and a broader recorded 2013 Partition reiterated that characterization.
- Evidence showed Stephen ran Black Iron, signed/company checks, used a stamp of Mary Ann’s signature, paid family expenses from corporate funds, and the Yamins were insolvent in 2006.
- Conn sued (2013) seeking to void the 2006 Bill of Sale and 2013 Partition under the Texas Family Code and TUFTA and to levy on Black Iron via outsider reverse veil-piercing.
- A jury found the stock was not acquired by gift, the 2006 Bill of Sale and 2013 Partition were fraudulent (Family Code and TUFTA), and Black Iron was liable for Stephen’s debt under reverse veil-piercing; the trial court voided the transfers, permitted levy on Black Iron, and awarded Conn attorney’s fees.
- On appeal the Fourteenth Court affirmed all of the relief except the attorney-fee award, reversing and remanding only the fee issue (Black Iron not liable for fees; segregation of recoverable fees required).
Issues
| Issue | Plaintiff's Argument (Conn) | Defendant's Argument (Yamins / Black Iron) | Held |
|---|---|---|---|
| 1. Characterization of Black Iron stock (separate vs community / special community control) | Stock is not separate; transfers were fraudulent so shares subject to Stephen’s debt | Stock titled as Mary Ann’s separate property; alternatively community property under Mary Ann’s sole management | Jury finding that stock was not acquired by gift removed separate-property claim; evidence showed Stephen controlled the company, so shares were community and not under Mary Ann’s sole control — held against Mary Ann |
| 2. Validity of 2006 Bill of Sale and 2013 Partition under Family Code and TUFTA; limitations/discovery | Transfers were made to defraud preexisting creditor and are void/avoidable; discovery date Feb 28, 2012 | Limitations and pleading defects (no discovery rule pleaded); transfers legitimate | Family Code: jury supported intent to defraud; 2006 Bill of Sale void under Family Code. TUFTA: 2006 TUFTA claim time-barred because Conn discovered the bill of sale Feb 28, 2012; 2013 Partition deemed fraudulent and avoided under TUFTA |
| 3. Outsider reverse veil-piercing to reach Black Iron assets for Stephen’s debt | Reverse veil-piercing appropriate because corporation was Stephen’s alter ego; equity permits holding Black Iron liable | Reverse veil-piercing not recognized / should be left to legislature; statutory veil-piercing preempts common law; no fraud related to plaintiff’s transaction; Stephen not shareholder | Court affirmed recognition of common-law outsider reverse veil-piercing; statutory preemption did not apply to Conn’s theory; evidence showed unity of interest and misuse of corporate form, so Black Iron liable for Stephen’s debt |
| 4. Award of attorney’s fees to Conn | TUFTA authorizes "costs and reasonable attorney’s fees" in any proceeding under the chapter — recoverable here | No fee recovery for Family Code claims; Black Iron not party to TUFTA claim so should not be jointly liable; Conn failed to segregate recoverable vs non-recoverable fees | Trial court erred: Black Iron cannot be held jointly/severally liable for fees (no TUFTA claim against it); Family Code claims do not authorize fees; Conn failed to adequately segregate fees. Fee award reversed and remanded for retrial only on fees |
Key Cases Cited
- Henry S. Miller Co. v. Evans, 452 S.W.2d 426 (Tex. 1970) (recital of separate property can displace the community-property presumption)
- In re Hinsley, 201 F.3d 638 (5th Cir. 2000) (considering TUFTA badges of fraud in parallel Family Code/TUFTA challenge)
- Castleberry v. Branscum, 721 S.W.2d 270 (Tex. 1986) (piercing the corporate veil when corporate form used to perpetrate injustice)
- Willis v. Donnelly, 199 S.W.3d 262 (Tex. 2006) (discussion of veil-piercing principles)
- SSP Partners v. Gladstrong Invs. (USA) Corp., 275 S.W.3d 444 (Tex. 2008) (veil-piercing/alter-ego principles)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (standards for legal sufficiency review)
- Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006) (rules on segregation of attorney’s fees)
- Willacy County Appraisal Dist. v. Sebastian Cotton & Grain, Ltd., 555 S.W.3d 29 (Tex. 2018) (fees recoverable only by statute or contract)