Tryco Enterprises Inc., Sharon C. Dixon, James Dixon, Crown Staffing, Inc. and Troy Keith Dixon v. James A. Robinson , 2012 Tex. App. LEXIS 7810 ( 2012 )

Opinion issued September 13, 2012
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-10-00710-CV
———————————
TRYCO ENTERPRISES, INC., SHARON C. DIXON, JAMES DIXON,
CROWN STAFFING, INC. AND TROY KEITH DIXON, Appellants
V.
JAMES A. ROBINSON, Appellee
On Appeal from the 189th District Court
Harris County, Texas
Trial Court Case No. 2004-49672
CONCURRING OPINION
Because the majority opinion’s holding on appellants’ first issue is
dispositive of this appeal, it is unnecessary to address the Dixons’ third issue
concerning their personal liability for the judgment in the FLSA suit under Tax
Code section 171.255. However, because the dissent specifically addresses this
issue and partially accepts the Dixons’ arguments, I take the unusual, but not
unprecedented, step of authoring a separate concurring opinion to address the
dissent’s arguments on this issue. See, e.g., Mosqueda v. G & H Diversified Mfg.,
Inc., 223 S.W.3d 571, 584 (Tex. App.—Houston [14th Dist.] 2007, pet. denied)
(Seymore, J., concurring) (“Like other jurists before me, I take ‘the unusual, but
not unprecedented, step of concurring to my own opinion in order to add some
further observations.’”) (quoting Thurman v. State, 861 S.W.2d 96, 101 (Tex.
App.—Houston [1st Dist.] 1993, no pet.) (Cohen, J., concurring)); Alvarado v.
Wingfoot Enters., 53 S.W.3d 720, 727 (Tex. App.—Houston [1st Dist.] 2001)
(Taft, J., concurring), rev’d, 111 S.W.3d 134 (Tex. 2003). Were I to reach it, I
would overrule the Dixons’ third issue in its entirety.
In their third issue, James and Sharon Dixon argue that they are not
personally liable under Tax Code section 171.255 for the judgment entered against
Tryco in the FLSA suit. They argue, “Texas courts have consistently held that
individual liability on the officers of corporations after the forfeiture of their
corporate privileges does not apply to debts brought into existence, caused by,
resulting from, or arising out of actions occurring before forfeiture.” They contend
that, under the “relation-back” doctrine, Tryco’s debt to Robinson must be counted
2
as having “occurred” or been “created” when the actions on which Robinson’s
FLSA suit was based occurred—namely, each time Tryco wrongfully failed to pay
Robinson overtime in violation of the FLSA. They argue that these actions were
actions that occurred in the ordinary course of Tryco’s business, long before the
forfeiture of its corporate charter; that the “debt” on which damages were entered
against Tryco was, therefore, a pre-existing debt of the corporation incurred before
forfeiture; that the judgment in the FLSA suit entered after the forfeiture merely
memorialized this pre-existing corporate debt; that, under Texas law construing
section 171.255, the date of the debt for which Robinson was awarded damages
“relates back” to each of the dates on which Tryco incurred expenses for
Robinson’s unpaid overtime; and that, therefore, they cannot be held personally
liable for the judgment entered on those debts under Tax Code section 171.255,
which applies only to debts of the corporation incurred after forfeiture of the
corporate charter. The dissent accepts this argument and would hold the Dixons
personally liable only for that part of the judgment that does not reflect Robinson’s
recovery for unpaid overtime, namely, the attorney’s fees, court costs, expenses,
interest, and statutory liquidated damages for “willful violation of the Fair Labor
Standards Act.” See Dissent at 27–29.
Robinson, on the other hand, argues that the Dixons misread section 171.255
and the case law applying it. He argues that the debt he seeks to collect is not a
3
series of debts for unpaid wages incurred in the ordinary course of Tryco’s
business over a period of time, but a judgment debt, based on a jury verdict,
awarding him statutory damages for ongoing violations of the FLSA by Tryco’s
corporate officers entered after forfeiture of Tryco’s corporate charter and the
transfer of its assets. Under section 171.255, the officers of a corporation may be
held liable for their own wrongful acts that resulted in a debt of the corporation
incurred after forfeiture of its corporate charter.
Robinson points out that Tryco forfeited its corporate charter by failing to
pay franchise taxes on August 22, 2003, immediately after the verdict was reached
in the FLSA suit on August 13, 2003, and shortly before the judgment was entered
on September 11, 2003. Robinson contends that James and Sharon Dixon
fraudulently forfeited Tryco’s charter and transferred Tryco’s assets to Crown
Staffing to avoid paying the judgment in the FLSA suit. He argues that, under
established law, the judgment debt in the FLSA suit falls squarely within the
definition of a “debt” of a defunct corporation for which the corporation’s officers
and directors may be held personally liable under Tax Code section 171.255. I
agree with Robinson.
Tax Code section 171.255 provides:
(a) If the corporate privileges of a corporation are forfeited for the
failure to . . . pay a tax or penalty, each director or officer of the
corporation is liable for each debt of the corporation that is created
or incurred in this state after the date on which the report, tax, or
4
penalty is due and before the corporate privileges are revived. The
liability includes liability for any tax or penalty imposed by this
chapter on the corporation that becomes due and payable after the
date of the forfeiture.
(b) The liability of a director or officer is in the same manner and to
the same extent as if the director or officer were a partner and the
corporation were a partnership.
(c) A director or officer is not liable for a debt of the corporation if the
director or officer shows that the debt was created or incurred:
(1) over the director’s objection; or
(2) without the director’s knowledge and that the exercise of
reasonable diligence to become acquainted with the affairs of
the corporation would not have revealed the intention to create
the debt.
TEX. TAX CODE ANN. § 171.255 (Vernon 2008).
Thus, corporate officers and directors may not be held personally liable
under section 171.255 for lawfully contracted debts of the corporation that
occurred prior to forfeiture of the corporate charter or incurred after forfeiture
without their knowledge and approval. But they may be held personally liable for
“debt” created or incurred after forfeiture of the corporate charter.
A “debt” as used in section 171.255(a) “is defined as ‘any legally
enforceable obligation measured in a certain amount of money which must be
performed or paid within an ascertainable period of time or on demand.’” Taylor
v. First Cmty. Credit Union, 316 S.W.3d 863, 867 (Tex. App.—Houston [14th
Dist.] 2010, no pet.) (quoting Act of May 30, 1987, 70th Leg., R.S., ch. 324, § 1,
5
1987 Tex. Gen. Laws 1734, 1735 (defining “debt” as used in chapter 171, as
formerly codified in Tax Code section 171.109(a)(3)), repealed by Act of May 2,
2006, 79th Leg., 3rd C.S., ch. 1, § 5, 2006 Tex. Gen. Laws 1, 23); Cain v. State,
882 S.W.2d 515, 516 n.1 (Tex. App.—Austin 1994, no writ).
I agree with Robinson that the judgment entered against Tryco in the FLSA
suit for statutorily mandated damages, attorney’s fees, costs, and interest was a
“legally enforceable obligation measured in a certain amount of money” payable
by Tryco to Robinson within a specified time period or on demand. I further agree
that a legally-enforceable obligation for a sum certain was incurred by Tryco only
when the trial court entered judgment in the form of statutory damages on the jury
verdict in the FLSA suit after Tryco had failed to pay franchise taxes and had
forfeited its corporate charter. See Taylor, 316 S.W.3d at 867 (quoting former Tax
Code section 171.109(a)(3)). Thus, the debt at issue here was not, as the Dixons
argue, created by Tryco’s failures to pay Robinson’s overtime wages. There was
no employment contract between Tryco and Robinson that provided for the
payment of the sums of money the jury found were wrongfully withheld from
Robinson under the FLSA. Rather, the jury found that Tryco’s corporate officers
intentionally withheld from Robinson statutorily mandated overtime wages. To
avoid paying any judgment entered on the jury verdict, the Dixons immediately
forfeited Tryco’s corporate charter and transferred Tryco’s assets to Crown
6
Staffing. The trial court then entered judgment on the jury verdict against Tryco in
the FLSA suit in the amount of “$58,349.000 for unpaid wages [and] $58,349.00
for willful violation of the Fair Labor Standards Act”—precisely in accordance
with the FLSA, which permits recovery by employees whose employers have
violated the Act “in the amount of . . . their unpaid overtime compensation . . . and
in an additional equal amount as liquidated damages.” 29 U.S.C.S. § 216(b)
(LexisNexis 2010). The court also awarded Robinson attorney’s fees, court costs,
expenses, and interest, as permitted by the same statute. Thus, a legally
enforceable obligation measurable in a sum certain was created when the trial court
entered judgment awarding Robinson statutory damages.
The dissent draws a distinction unique to section 171.255 jurisprudence
between unpaid compensation awarded as liquidated damages under section 216 of
the FLSA and the doubling of that amount, also awarded as liquidated damages
under that same section of the FLSA, for the employer’s willful violation of the
FLSA. It construes the damages awarded by the jury for wrongfully withheld
statutorily mandated compensation as a series of lawful debts of the corporation
incurred in the ordinary course of Tryco’s operations and merely renewed in the
post-forfeiture judgment. It then construes the doubling of the damages award by
the jury for the willfulness of the violations, in accordance with the terms of the
7
statute, as a new debt incurred after forfeiture. I disagree with the dissent’s
reasoning and its conclusion.
“Liquidated damages” awarded for violations of the FLSA are not merely
the memorialization of accumulated pre-existing debts. The FLSA is set out in
Title 29 of the United States Code. Sections 206 and 207 of the Act regulate the
payment of wages and overtime compensation by employers. Section 216(b)
provides for damages for violations of the Act. It states, in relevant part: “Any
employer who violates the provisions of [section 206] or [section 207] of this Act
shall be liable to the employee or employees affected in the amount of . . . their
unpaid overtime compensation . . . and in an additional equal amount as liquidated
damages. . . .” 29 U.S.C.S. § 216 (LexisNexis 2010). The trial court’s duty to
award liquidated damages in an amount equal to the unpaid compensation due
under sections 206 and 207 of the FLSA is a ministerial duty under the terms of
section 216. Mireles v. Frio Foods, Inc., 899 F.2d 1407, 1414 (5th Cir. 1990).
This duty is made discretionary, however, by section 260 of the Act, which
provides:
In any action . . . to recover . . . unpaid overtime compensation, or
liquidated damages, under the [FLSA], if the employer shows to the
satisfaction of the court that the act or omission giving rise to such
action was in good faith and that he had reasonable grounds for
believing that his act or omission was not a violation of the
[FLSA] . . . the court may, in its sound discretion, award no liquidated
damages or award any amount thereof not to exceed the amount
specified in section [216].
8
29 U.S.C.S. § 260 (LexisNexis 2010) (emphasis added); Mireles, 899 F.2d at
1414–15. To be relieved of liability for liquidated damages under section 216, an
employer found liable under section 206 or 207 of the FLSA has the “substantial
burden” of proving to the satisfaction of the trial court both that its acts giving rise
to the employees’ suit were in good faith and that it had reasonable grounds for
believing it was not violating the FLSA. Mireles, 899 F.2d at 1415.
The debt owed in this case for Tryco’s FLSA violations was determined,
liquidated, and made enforceable by the judgment entered by the trial court in
accordance with the mandate of the FLSA. This required that the trial court
determine the amount of overtime compensation due Robinson under the statute
and that it double that amount to determine the liquidated damages due Robinson,
unless Tryco’s officers carried their “heavy burden” of showing to the satisfaction
of the court that they acted in good faith and had reasonable grounds for believing
that their acts in withholding overtime compensation from Robinson (and also for
retaliatorily firing him) did not violate the FLSA. See 29 U.S.C.S. §§ 216, 260.
Here, the trial court found both that Robinson was entitled to wrongfully withheld
unpaid overtime compensation and that Tryco was not entitled to the good faith
defense; thus, it entered judgment for the full amount of statutory damages made
mandatory by section 216 of the FLSA.
9
The Texas Supreme Court first defined a corporate debt for which corporate
officers may be held personally liable after forfeiture of the corporate charter with
respect to the predecessor of section 171.255 in the seminal case of Schwab v.
Schlumberger Well Surveying Corp., 198 S.W.2d 79 (Tex. 1946). That statute, like
the present statute, imposed personal liability on a director or officer of a
corporation whose right to do business had been forfeited for “any and all debts of
such corporation which may be created or incurred, with his knowledge, approval
and consent” after the forfeiture and before the revival of the corporation’s right to
do business. Id. at 80 (construing predecessor of section 171.255, article 1821 of
Revised Civil Statutes) (emphasis added).
In Schwab, the supreme court refused to hold the officers of a defunct
corporation personally liable on a note evidencing obligations of the corporation
when the note at issue merely renewed a debt after forfeiture of the corporate
charter. Id. at 81–82. The court held that the word “created” means “[t]o bring
into existence,” while the word “incurred” means “brought on, occasioned, or
caused.” Id. at 81. Under these definitions, it held, “the liability imposed under
the statute is only for debts contracted after the forfeiture of the right to do
business, and has no application to the renewal of obligations arising prior
thereto.” Id. (emphasis added). Rather, “[t]he statute was meant to prevent
wrongful acts of culpable officers of a corporation, and was for the protection of
10
the public and particularly those dealing with the corporation.” Id. (emphasis
added).
Subsequently, the supreme court, further construing that same predecessor of
section 171.255, held that the officers of a defunct corporation were personally
liable for debts of the corporation incurred for purchases of merchandise to which
the officers consented and which they approved after the corporation had forfeited
its right to do business. First Nat’l Bank of Boston v. Silberstein, 398 S.W.2d 914,
915–16 (Tex. 1966) (holding officers liable for debt “which results from and is
attributable to the acts of Respondents”).
Here, there was no “renewal” of Tryco’s pre-existing debts to Robinson after
the forfeiture of Tryco’s corporate charter. Rather, there was a judgment for a sum
certain for violations of the FLSA that resulted from and was attributable to the
wrongful acts of the Dixons, as corporate officers of Tryco. This case thus falls
squarely within the scope of section 171.255 as construed by the Texas Supreme
Court in Schwab and Silberstein.
An examination of Schwab and Silberstein and of the case law following
these two cases in construing section 171.255 and its predecessor statute makes it
apparent that the Dixons and the dissent have conflated the two different types of
corporate debt distinguished in these cases: (1) the lawful contractual debts of a
corporation, which may be renewed or reduced to judgment after forfeiture of the
11
corporation’s charter without changing the underlying nature of the debt as a debt
of the corporation incurred pre-forfeiture in the regular course of its business, and
(2) both (a) new debts incurred by the corporation and approved after forfeiture by
officers with knowledge of the forfeiture and (b) judgment debts or penalties
incurred by a corporation for the wrongful acts of its officers or directors that
occurred prior to forfeiture of the corporate charter but were not reduced to “a
legally enforceable obligation measured in a certain amount of money” in the form
of a legal judgment or penalty until after forfeiture. See Silberstein, 398 S.W.2d at
916 (distinguishing debts of defunct corporation “incurred in the regular course of
the business of the corporation,” for which officers and directors cannot be held
personally liable, and debts incurred after corporation “no longer has the right to
do business,” for which “the personal liability of officers and directors . . . is
limited to those debts of which they have knowledge and, with the opportunity
afforded thereby, which they have consented to and approved”); Schwab, 198
S.W.2d at 81–82 (discussing nature of corporate debt); see also Beesley v.
Hydrocarbon Separation, Inc., 358 S.W.3d 415, 422–23 & n.7 (Tex. App.—Dallas
2012, no pet.) (distinguishing between types of debts courts have examined in this
context).
Corporate officers and directors may be held personally liable for liquidated
damages awarded, or penalties assessed, in a post-forfeiture judgment as a result of
12
their own wrongful acts that occurred either before or after forfeiture to the same
extent a partner in a partnership may be held liable for his own acts. See TEX. TAX
CODE ANN. § 171.255(b) (“The liability of a director or officer is in the same
manner and to the same extent as if the director or officer were a partner and the
corporation were a partnership”); see also Silberstein, 398 S.W.2d at 915 (quoting
predecessor statute to section 171.255). Here, the Dixons’ actions in violating the
FLSA prior to forfeiture of Tryco’s corporate charter and then in terminating
Tryco’s charter and transferring its assets to Crown Staffing to avoid paying the
monetary judgment awarded to Robinson as a result of those statutory violations
are all acts for which a partner would be liable under the Texas Partnership Act.
See, e.g., Moore v. Sussdorf, 421 S.W.2d 460, 465 (Tex. Civ. App.—Tyler 1967,
writ ref’d n.r.e.) (recognizing liability of partner in joint venture to partnership for
termination of partnership for fraudulent purpose). They are thus actions for which
James and Sharon Dixon may be held personally liable under Tax Code section
171.255. See TEX. TAX CODE ANN. § 171.255(b).
The Dixons also argue, and the dissent agrees, that each wrongful failure of
Tryco to pay Robinson’s overtime wages “relate[s] back” to the date of the
separate and specific statutory violation, all of which occurred before forfeiture.
The Dixons contend that because the “individual liability of the officers of
corporations after the forfeiture of their corporate privileges does not apply to
13
debts brought into existence, caused by, resulting from, or arising out of actions
occurring before forfeiture,” they are not jointly and severally liable for the
judgment against Tryco.
The Dixons contend that Rogers v. Adler, 696 S.W.2d 674 (Tex. App.—
Dallas 1985, writ ref’d n.r.e.), and other section 171.255 cases support their
argument. This case is, however, sharply different from those section 171.255
cases to which the Texas courts have held the “relation-back” doctrine applies. It
belongs, instead, to the well-established line of cases in which Texas courts have
held that the relation-back doctrine does not apply.
“Broadly speaking, the relation-back doctrine may be applied to give effect
to the parties’ lawful intentions, preserve rights that would otherwise be lost, or
afford a remedy when none would otherwise exist.” Cain, 882 S.W.2d at 518
(citing Brandon v. Claxton, 30 S.W.2d 679, 680–81 (Tex. Civ. App.—Dallas
1930), aff’d, 47 S.W.2d 263 (Tex. 1932)) (emphasis added). Here, there were no
lawful intentions for the relation-back doctrine to preserve. And, if the Dixons and
the dissent were correct, Robinson would lose the right to recover the damages he
was awarded due to the Dixons’ wrongful acts, since Tryco was denuded of its
assets by them, and he would have no remedy for the FLSA violations committed
by the Dixons. This case is thus totally unlike those cases cited by the Dixons, and
by the dissent, to support their claims that Tryco’s judgment debt was really just
14
the renewal and memorialization of previously-incurred lawful obligations of the
corporation, for which its corporate offers may not be held liable.
By contrast, in Rogers v. Adler, the Dallas Court of Appeals applied the
“relation-back” doctrine and held that two officer–directors of a corporation were
not personally liable for a judgment rendered against the corporation after
forfeiture of its corporate charter for a debt of the corporation incurred on a
purchase contract where all the operative facts occurred at least four years before
the forfeiture and were “essentially claims based on contract despite the allegations
of fraud and breach of fiduciary duty.” 696 S.W.2d at 675–77. The pleadings and
evidence in that case made it clear to the court that the plaintiffs’ claims, which
were reduced to judgment after forfeiture, were actually claims for the payment of
contractual obligations of the corporation that were incurred in the regular course
of business after the corporate charter was forfeited and were not a judgment based
on the fraudulent actions or breach of fiduciary duty of the officers of the
corporation, as required for personal liability under section 171.255. Id. at 677; see
also TEX. TAX CODE ANN. § 171.255(b) (providing officers and directors liable to
same extent as if they were partners and corporation was partnership); Silberstein,
398 S.W.2d at 916 (“[T]he reasonable construction of the statute to the facts at
hand is that personal liability is determined by the acts of Respondents in
consenting to and approving the debts of the corporation where knowledge of their
15
creation is shown to have come to them in the regular course of the business of the
corporation.”); Schwab, 198 S.W.2d at 82 (“[T]he new agreement made on behalf
of the corporation did not create or incur a new debt within the meaning of the
statute. It merely created new evidence of the existing indebtedness.”). The debt
in Rogers was thus merely new evidence of an existing indebtedness.
The other cases upon which the Dixons and the dissent rely as authority for
applying the relation-back doctrine to this case are all inapplicable for the same
reason Rogers is inapplicable: all of the cases are cases in which the plaintiff
sought to collect from corporate officers or directors after forfeiture of the
corporate charter debts incurred in the regular course of the business of a
corporation prior to forfeiture; all are cases in which the court’s decision gave
effect to the lawful intentions of the parties to a preexisting contract, preserved
rights that would otherwise be lost, or afforded a remedy to a creditor of the
corporation when none would otherwise exist. See Cain, 882 S.W.2d at 518
(emphasis added). None are true fraud cases or breach of fiduciary duty cases
arising from the wrongful acts of corporate officers or directors for which partners
might be held personally liable if the corporation were a partnership. See
McKinney v. Anderson, 734 S.W.2d 173, 175 (Tex. App.—Houston [1st Dist.]
1987, no writ) (holding that payments due under lease agreement were created or
incurred at time of execution of agreement, not time when payments came due, and
16
were not recoverable from corporate officers); Curry Auto Leasing, Inc. v. Byrd,
683 S.W.2d 109, 112 (Tex. App.—Dallas 1984, no writ) (applying relation-back
doctrine to contract claims arising out of breach of car-rental agreement and
holding that, for purposes of section 171.255, contractual debt was created or
incurred on date of execution of rental contract, not date on which debt was
reduced to judgment, which occurred after forfeiture). Both McKinney and Curry
Auto Leasing, like Rogers, were cases for the collection of a debt due on a contract
that the corporation entered into long before it forfeited its corporate charter, and in
neither case was an allegation of fraud or breach of fiduciary duty sustained against
the corporation’s officers.
Similarly, in Williams v. Adams, 74 S.W.3d 437 (Tex. App.—Corpus Christi
2002, pet. denied), a judgment creditor attempted to collect from two officers of a
corporation a judgment in negligence for personal injuries the plaintiff had suffered
on condominium premises owned by the corporation, rendered against the
corporation five months after forfeiture of its charter for failure to pay franchise
taxes. Id. at 438–39. Although, in Williams, the debt—a judgment for negligence
of the corporation—was incurred after forfeiture of the corporate charter and was
not a debt owed pursuant to a lawful pre-existing contractual obligation of the
corporation, it also was not incurred as a result of any wrongful act of the
corporation’s officers or directors or incurred with their knowledge and approval.
17
Id. at 441; see also Silberstein, 398 S.W.2d at 915–16; Schwab, 198 S.W.2d at 81–
82.
In holding the officers not liable for the judgment in Williams, the Corpus
Christi Court of Appeals applied section 171.255(c)’s exception to the liability of
an officer or director of a corporation, which applies to preclude personal liability
for a debt of the corporation incurred without the director’s or officer’s knowledge
if the exercise of reasonable diligence would not have revealed the intention to
incur the debt. Williams, 74 S.W.3d at 441–42; see TEX. TAX CODE ANN.
§ 171.255(c). The court held that section 171.255 could not be used to impute
personal liability to an officer or director of a corporation for a corporate debt
when the debt is a tort judgment based on the negligence of the corporation.
Williams, 74 S.W.3d at 442. As was the case with the contract claims at issue in
Rogers, McKinney, and Curry Auto Leasing, negligence, unlike breach of fiduciary
duty or fraud, is not an intentional tort for which a partner might be held liable for
the acts of a partnership, as required for liability under section 171.255. See TEX.
TAX CODE ANN. § 171.255(b); TEX. BUS. ORGS. CODE ANN. §§ 152.204 (Vernon
2011) (stating partner’s duties to partnership and other partners), 152.210 (Vernon
2011) (stating remedies of partnership and partners); see also TEX. TAX CODE ANN.
§ 171.255(c) (“A director or officer is not liable for a debt of the corporation if the
director or officer shows that the debt was created or incurred . . . without the
18
director’s knowledge and that the exercise of reasonable diligence . . . would not
have revealed the intention to create the debt”).
This case, by contrast, like Cain, falls squarely within the scope of acts for
which a corporate officer or director of a defunct corporation may be held
personally liable under Schwab, Silberstein, and their progeny, and to which the
relation-back doctrine does not apply, namely, those cases in which a penalty or
judgment is incurred by a corporation after forfeiture of its corporate charter as a
result of the wrongful acts of the corporation’s officers or directors before or after
forfeiture.
Cain was an officer and director of an oil-well-operator corporation. 882
S.W.2d at 516. After ordering the corporation to plug a number of oil wells, which
it failed to do, the Texas Railroad Commission authorized the expenditure of State
funds to plug the wells. Id. Six months later, the corporation forfeited its
corporate charter for failure to file its franchise-tax report. Id. Subsequently, the
Commission paid nearly $50,000 to plug the wells, and it then sought to collect
from Cain personally the amounts it had spent. Id. The Austin Court of Appeals
determined that the debt was not liquidated until after forfeiture, when the
Commission filed suit to recover the amount of funds spent to plug the wells after
the corporation failed to do so, and it refused to hold that the debt related back to
the Commission’s authorization of the use of State funds to plug the wells. Id. at
19
519–20. The court stated that the corporation was under a statutory duty to plug
the wells and that Cain, as a corporate official, was responsible for ensuring that
the corporation performed that duty. Id. at 520. Quoting Schwab, the court
reiterated the purpose of section 171.255, stating, “The statute was meant to
prevent wrongful acts of culpable officers of a corporation, and was for the
protection of the public and particularly those dealing with the corporation.” Id.
(quoting Schwab, 198 S.W.2d at 81). It affirmed the trial court’s judgment holding
that Cain was liable to the Commission for the debt. Id.
The Austin Court of Appeals also followed this principle in Jonnet v. State,
877 S.W.2d 520 (Tex. App.—Austin 1994, writ denied). The court held that, for
purposes of section 171.255(a), the corporation’s debt for failure to pay an
administrative penalty assessed by the Texas Railroad Commission was “created or
incurred” on the date the Commission entered an order directing the corporation to
pay the administrative penalty, and not on the date, nearly four years earlier, when
the corporation began violating an administrative rule requiring that oil wells be
plugged. Id. at 523–24. The court held the officers and directors liable for the
penalty in their individual capacities under section 171.255(a). Id. at 524. The
court explicitly rejected the relation-back doctrine on the ground that the penalties
assessed by the Commission were based not just on the corporation’s initial
violation of a Commission rule on a given date, but on its “ongoing violation of
20
[the rule], which continued day after day for nearly four years,” so that, unlike
cases to which the relation-back doctrine applies, “in which the debt can be said to
relate back to a single date—the date of the written instrument [creating the
debt]—the conduct underlying the Commission’s order is of a continuous nature,
with no single date to which the penalty can relate back.” Id. (emphasis in
original).
Exactly the same reasoning applies here. Tryco’s acts of violating the FLSA
through the willful failure of the Dixons, its corporate officers, to pay Robinson
overtime compensation to which he was statutorily entitled constitute an ongoing
series of wrongful acts of violation of the FLSA prior to forfeiture of the corporate
charter, as did the Jonnet defendants’ ongoing violations of the Railroad
Commission rule. And the statutory damages due Robinson for the willful acts of
Tryco’s corporate officers were reduced to a liquid and enforceable debt only in
the judgment against Tryco entered in the FLSA suit after forfeiture of Tryco’s
corporate charter and the transfer of its assets. Thus, the Dixons, as officers of
Tryco, may be held personally liable for the damages awarded to Robinson in that
judgment, just as the defendant-officers in Jonnet and Cain were held personally
liable for the penalty assessed against the corporation and the cost of funds
expended by the State to plug abandoned oil wells, respectively.
21
Similarly, in Skrepnek v Shearson Lehman Bros., Inc., the Fourteenth Court
of Appeals rejected the application of the relation-back doctrine and held
Skrepnek, a broker and officer of Panterra Resources, Inc. (“PRI”), individually
liable in fraud under section 171.255 for a judgment rendered against PRI after the
forfeiture of PRI’s corporate charter on a debt owed to Shearson for stocks
purchased by Shearson for PRI after forfeiture. 889 S.W.2d 578, 580–82 (Tex.
App.—Houston [14th Dist.] 1994, no writ). PRI represented that it would pay
brokerage fees and margin interest that was not paid, resulting in a loss to
Shearson. See id. at 580. The court affirmed the judgment, finding that Skrepnek
was a participant in a fraud. Id. at 580–81.
This case is also similar to Taylor. Taylor was an action brought against an
automobile-dealership corporation and its officer-director by a lender to the
corporation for the balance due on defaulted retail automobile installment
contracts. See 316 S.W.3d at 865. The lender alleged, and the trial court found,
that the dealership breached its contractual obligations to the lender by failing to
provide good title to the motor vehicles the dealership sold to its customers under
the contracts assigned to the lender and by committing other similar acts. Id. The
dealer’s actions breached its obligations to both the vehicle-purchaser and the
lender and provided the vehicle-purchaser with a defense against the lender as the
holder of the retail installment agreement. Id. The corporation’s privileges were
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revoked for failure to file a required franchise tax report. Id. The lender sued, and
the corporation’s officer-director sought application of the relation-back doctrine to
protect himself from liability for the judgment entered against him in favor of the
lender. Id. at 866, 867.
The Fourteenth Court of Appeals rejected the application of the relation-
back doctrine in Taylor, stating that it conflicted with the Legislature’s 1987
definition of a debt as any legally enforceable obligation measured in a certain
amount of money. Id. at 869. Reasoning that this definition constituted an
intervening and material change in the statutory law, the court overruled its own
precedent applying the relation-back doctrine in River Oaks Shopping Center v.
Pagan, 712 S.W.2d 190 (Tex. App.—Houston [14th Dist.] 1986, writ ref’d n.r.e.).
Id. The court held that the officer-director of the dealership was personally liable
for each debt of the corporation that was created or incurred after the date on which
the corporate franchise tax report was due, including debt based on the dealership’s
breach of the dealership agreement. Id. at 867–70.
Finally, in Beesley, the Dallas Court of Appeals held that the promoter and
officer of a corporation that had forfeited its corporate charter could not be held
personally liable for the corporation’s breach of a consulting agreement entered
into by the corporation and its former owner before forfeiture. 358 S.W.3d at 423.
The court explicitly drew a distinction between the debts incurred in Cain (penalty
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for “costs of plugging oil wells” that corporate officers were obligated by law to
plug) and Taylor (damages for “breaches of warranty and failure to provide good
title to automobiles”)—which could not be “measured in a certain amount of
money” at the time of contracting—and the debts incurred in Rogers (losses due to
breach of purchase contract entered into long before forfeiture), Curry Auto
Leasing (corporate debts arising from failure to adhere to leasing contract), and the
case at hand in Beesley itself (breach of employment agreement)—each of which
“specified both the amount and the date due, so that at the time of contracting, a
‘debt’ was ‘created’ for purposes of section 171.255.” Id. at 422–23 & n.7.
The distinction drawn in Beesley between types of debt to which the
relation-back doctrine does and does not apply also applies here and places the
judgment against Tryco squarely in the category of debts to which the relation-
back doctrine does not apply. The amount of damages due to Robinson for
Tryco’s violation of the FLSA was not, and could not be, specified at the time
Robinson entered his employment contract with Tryco. Indeed, the amount of the
enforceable debt was not, and could not be, determined until Robinson’s case was
tried and the trial court had determined that the FSLA had been violated, that the
violations resulted in a sum certain payable to Robinson in form of unpaid
overtime compensation, and that the violation was willful, so that Tryco was not
entitled to the good faith defense but must pay, as statutorily mandated damages,
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double the amount of compensation wrongfully withheld. See 29 U.S.C.S. §§ 207,
216, 260; Mireles, 899 F.2d at 1414–15.
Like the defendants in Taylor, Cain, and Skrepnek, James and Sharon Dixon,
as corporate officers of Tryco, committed acts for which they could be held liable
if they were partners in a partnership. See TEX. TAX CODE ANN. § 171.255(b);
TEX. BUS. ORGS. CODE ANN. §§ 152.204, 152.210. They had both a fiduciary duty
to perform their functions as corporate officers in good faith and to act in the best
interest of the corporation, and they had a statutory duty to ensure that Tryco paid
Robinson in accordance with federal FLSA requirements. They breached those
common-law and statutory duties in an ongoing manner, and they retaliatorily fired
Robinson for taking the logs on which his unpaid overtime was recorded. See
Jonnet, 877 S.W.2d at 524 (citing ongoing nature of statutory violations in
concluding relation-back doctrine did not apply). Robinson sued Tryco for
statutory damages under the FLSA. When the jury delivered a verdict for damages
in favor of Robinson against Tryco for its statutory violations, Sharon and James
Dixon immediately forfeited Tryco’s corporate charter for failure to pay the
franchise tax then due and fraudulently transferred the corporate assets of Tryco to
Crown Staffing, leaving Tryco an empty shell unable to pay the judgment that was
entered against it two and one-half weeks later that reduced Robinson’s damages to
a sum certain.
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I, therefore, specifically disagree with the dissent’s construction of the
requirements of section 171.255 for the imposition of personal liability on
corporate officers for the debt of a defunct corporation, which goes even beyond
the arguments made by appellants. The instant suit to enforce the judgment in the
FLSA suit is not, as the dissent would have it, a suit to recover “unpaid overtime
compensation” that became a legally enforceable obligation “on each respective
payday or, with respect to the overtime that Robinson worked during the last work
period, on a date shortly after his termination”—an amount that was clearly not a
determined sum certain prior to the FSLA lawsuit. Dissent at 26. It is a suit to
enforce against the officers of a defunct corporation a judgment for liquidated
damages available only under a federal statute for the wrongful acts of those
officers—a judgment entered immediately after the corporate charter was forfeited
and the corporation denuded of its assets by those same corporate officers in the
wake of the adverse jury verdict on which the judgment was rendered..
I would hold that the foregoing actions satisfy the requirements for imposing
personal liability on James and Sharon Dixon for the judgment entered against
Tryco in the FLSA suit pursuant to Tax Code section 171.255 under well-
established law. See TEX. TAX CODE ANN. §§ 171.255 (a)–(b).
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I would overrule the Dixons’ third issue, and I would affirm the trial court’s
judgment holding James and Sharon Dixon personally liable under Tax Code
section 171.255 for all damages awarded to Robinson in the judgment entered
against Tryco in the FLSA suit.
Evelyn V. Keyes
Justice
Panel consists of Justices Keyes, Higley, and Massengale.
Justice Keyes, concurring.
Justice Massengale, concurring in part and dissenting in part.
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