Appeal from the 23rd District Court Brazoria County, Texas
Trial Court Cause No. 64417
consists of Chief Justice Frost and Justices Boyce and
William J. Boyce Justice
main issue on appeal addresses Mandy Hong's individual
liability for the actions of Shadow Creek Bay, Inc.
("Shadow Creek") in connection with its sale of a
Shadow Creek signed an exclusive listing agreement with
United Texas Realtors to sell the 6.24-acre tract, Shadow
Creek used a different real estate broker to sell it and
refused to pay a commission to United Texas Realtors. United
Texas Realtors and its owner, William Frances Havey, Jr.,
sued Shadow Creek and its owners, including Mandy Hong,
recover the commission due under its exclusive listing
agreement with Shadow Creek.
jury returned a verdict in favor of Havey on his breach of
contract claim against Shadow Creek; the jury also answered
"yes" to a question asking whether Mandy was
individually liable under an alter ego theory, and
"yes" to questions asking whether Mandy was
individually liable for common law fraud and conspiracy. The
jury awarded $30, 500 in damages for Havey's unpaid
commission and $55, 750 in attorney's fees. The trial
court signed a final judgment in conformity with the
reverse the trial court's final judgment with respect to
Mandy's individual liability in connection with Shadow
Creek's exclusive listing agreement with United Texas
Realtors. An affirmative answer to the alter ego question
required evidence that Mandy used Shadow Creek to perpetrate
an actual fraud "primarily for [her] direct personal
benefit . . . ." According to Havey, the fraud at issue
is a material misrepresentation in the form of Shadow
Creek's promise to pay him a commission under the
exclusive listing agreement made with an intent not to
perform as promised. Because there is no evidence that Shadow
Creek's failure to pay Havey's promised commission
was conduct done primarily for Mandy's direct personal
benefit, we reverse and render judgment in favor of Mandy on
alter ego liability. We reverse and render judgment in favor
of Mandy on common law fraud and conspiracy because these
claims are subject to a statutory bar. See Tex. Bus.
Orgs. Code Ann. §§ 21.223, 21.224 (Vernon 2012).
With respect to attorney's fees, we conclude that the
evidence is legally insufficient to support the
attorney's fee award in the trial court's final
judgment; we reverse and remand for a redetermination of
attorney's fees consistent with this court's opinion.
affirm the remainder of the judgment.
Creek is a corporation owned by Mau Hong, his wife Mandy
Hong, his niece Thu Ngo, and Thu Ngo's husband An Luu.
Mau is Shadow Creek's president.
Creek owned a 6.24-acre tract in Pearland, Texas. The
corporation financed the purchase of this tract through two
loans issued by First International Bank and personally
guaranteed by Mau, Mandy, Thu Ngo, and An Luu.
2010, Shadow Creek faced financial difficulties on two
fronts. Shadow Creek was behind on its property tax payments
and owed approximately $45, 000 to the Shadow Creek Ranch
Commercial Association. The corporation also was delinquent
on its loan payments and owed approximately $1.728 million to
the bank. These financial difficulties prompted efforts to
sell the 6.24-acre tract.
Creek entered into a listing agreement under which United
Texas Realtors would exclusively represent Shadow Creek in
the sale of the 6.24-acre tract. The listing agreement
provided that United Texas Realtors would earn a four percent
commission contingent on the tract's sale.
its exclusive listing agreement with United Texas Realtors,
Shadow Creek sold the 6.24-acre tract to Avnee, L.P. in March
2011, pursuant to a sales contract procured by Henry Fuertes,
a real estate agent with PSL Realty Enterprises, LLC, a
sued Shadow Creek, PSL Realty, Fuertes, Mau, Mandy, Thu Ngo,
An Luu, and Mui Ngo to recover a four percent commission on
the tract's sale pursuant to Shadow Creek's exclusive
listing agreement with United Texas Realtors. The jury
returned a verdict in favor of Havey on the questions
regarding his claims for breach of contract, common law
fraud, conspiracy, and alter ego liability.
facts underlying this dispute are discussed in greater detail
Mandy began working with Fuertes and PSL Realty in 2006. In
late 2010, Mandy and her sister-in-law Mui Ngo visited
Fuertes approximately once a week to discuss selling Shadow
Creek's 6.24-acre tract. Fuertes understood that Shadow
Creek was behind on its loan payments and property taxes; he
testified that Mandy and Mui Ngo were "pretty
anxious" to sell the tract.
attended a meeting at First International Bank with Mandy and
Mui Ngo in October 2010. Fuertes, Mandy, and Mui Ngo met with
loan officer Sally Li to discuss the status of Shadow
Creek's loans; Mandy and Mui Ngo hoped Fuertes would
"buy [them] more time because foreclosure seemed
imminent." After the meeting, Fuertes agreed to help
Mandy and Mui Ngo find a buyer for the 6.24-acre tract.
a real estate broker and the owner of United Texas Realtors,
also was approached in November 2010 by Mandy and Mui Ngo to
discuss selling the same 6.24-acre tract on behalf of Shadow
testified that Mandy and Mui Ngo told him they "were
being pressured by the bank because they were behind on the
payments and the bank was threatening to foreclose."
Havey agreed to help Mandy and Mui Ngo sell the 6.24-acre
Texas Realtors and Shadow Creek entered into a contract
identified as a "Commercial Real Estate Listing
Agreement Exclusive Right to Sell" in December 2010. The
listing agreement provided that United Texas Realtors would
represent Shadow Creek exclusively in the sale of the
6.24-acre tract, which would be marketed for $1.7 million.
The listing agreement was effective from December 8, 2010,
through March 31, 2011.
listing agreement entitled United Texas Realtors to a four
percent commission on the sales price if the 6.24-acre tract
was sold "to anyone at any price on any terms"
during the effective period. The listing agreement obligated
Shadow Creek to refrain from (1) negotiating with prospective
buyers who directly contacted Shadow Creek to purchase the
6.24-acre tract; and (2) entering into a listing agreement
with another broker for the sale or exchange of the tract
during the effective period.
Shadow Creek's president, testified that Mandy signed his
name to the listing agreement with United Texas Realtors. Mau
testified that he permitted Mandy to "make all the
decisions" and "run" Shadow Creek.
Mandy signed the listing agreement with United Texas
Realtors, Havey began efforts to find a buyer for the
6.24-acre tract. International Assistance Corporation
submitted a letter of intent to purchase the tract and
proposed a $1.3 million sales price. Havey reviewed the
letter of intent with Mau and Mandy; after additional
negotiations, the parties agreed on a $1.4 million sales
price. Mau and Mandy instructed Havey to go through with the
Li at First International Bank also reviewed International
Assistance Corporation's letter of intent to purchase. In
an email, Sally Li told Havey that the bank "want[ed] to
move forward" with the sale and instructed Havey to
"have the actual contract done and send to me
Creek and International Assistance Corporation signed a sales
contract on January 25, 2011; Mau signed as president of
Shadow Creek. Mau testified that he did not read the sales
contract before signing it. The sale to International
Assistance Corporation was scheduled to close on March 7,
continued to communicate with Mandy to facilitate the
sale's closing. Havey sent an email to Mandy in early
March 2011, addressing a discussion they had at an earlier
meeting regarding a separate buyer interested in purchasing
the 6.24-acre tract. Havey reminded Mandy of the listing
agreement's terms and told her that "[i]f another
group is interested in submitting an offer on the property
their agent needs to be talking to me and submitting any
offer through me." Responding to Havey's email,
Mandy said, "I know you will help us to sell with the
better price so we don't owe [the] bank too much, "
and assured him that "when [the other buyer is] ready
[to] make offer with contract then we will let them go
through you . . . I will keep you up to date don't worry
. . . ."
Mandy did not attend the March 7, 2011 closing and the sale
was postponed. Havey testified that Mau and Mandy represented
that "they were still negotiating with the bank on the
remaining balance and how to handle that." In an April
8, 2011 email, Mandy told Havey: "I think the Bank try
to sale [sic] [the 6.24-acre tract] by themselve [sic] or
foreclose we have not heard anything from them yet . . . I
let you know if I receive anything from them."
also communicated with First International Bank regarding the
6.24-acre tract's pending sale. In a March 14, 2011 email
sent to bank attorney Misty Coné, Havey encouraged the
bank to permit the sale to close instead of seeking to
foreclose on the tract. Havey stated that Mandy did not
"expect the bank to write everything above the $1.4
million off, " and instead was "willing to work
with the bank but is very limited on funds available to
handle the closing costs and is looking for some help with
regard to the remaining balance above the $1.4 million."
Coné replied the same day and told Havey that the bank
had "not heard any word relative to paying off the
deficiency" and "suggest[ed] that efforts to close
this deal begin with the sellers."
did not know that Mandy continued to work with Fuertes to
sell the 6.24-acre tract before and after the January 2011
sales contract with International Assistance Corporation was
signed. Fuertes procured an offer from Avnee, L.P. to
purchase the tract for $1.525 million; Shadow Creek and
Avnee, L.P. signed the sales contract on February 11, 2011.
the Avnee, L.P. sales contract was signed, Mandy continued to
communicate with Fuertes regarding the sale. Mandy asked
Fuertes "not to talk to [Havey]" and told him she
had the situation "handled." In a March 10, 2011
email, Mandy told Fuertes she informed the bank about the
"second buyer" and stated that "we will not
sign for the first buyer."
sale to Avnee, L.P. closed and the 6.24-acre tract was
conveyed on March 23, 2011. Fuertes received a $45, 750
commission on the sale.
learning of the sale to Avnee, L.P., Havey emailed Mandy and
Sally Li. He said he did "not understand the deceptive
manner by which you and 1st International Bank handled the
negotiations and the sale of the property when both you and
the bank knew of my Exclusive Right To Sell Listing
L.P.'s $1.525 million purchase price left approximately
$200, 000 remaining due on Shadow Creek's loans with
First International Bank. Sally Li testified that, after
additional negotiations, the bank agreed to "release its
lien" on the 6.24-acre tract in exchange for a $100, 000
note executed by Shadow Creek. Mau personally guaranteed the
sued Shadow Creek, PSL Realty, Fuertes, Mau, and Mandy in
August 2011, asserting claims for breach of contract and
tortious interference with contract. Havey amended his
petition to add Mui Ngo, Thu Ngo, and An Luu as defendants,
and to include allegations of common law fraud, statutory
fraud, and conspiracy to commit fraud. Havey also sought to
hold certain individual defendants individually liable as
alter egos of Shadow Creek.
parties proceeded to a jury trial on January 26-28, 2016. At
the close of trial, the jury answered a series of jury charge
jury answered "yes" as to Mau, Mandy, and Shadow
Creek in response to Question No. 1, which asked: "Did
any of the following persons or entities commit fraud against
William Frances Havey, Jr. d/b/a United Texas Realtors?"
The fraud finding is predicated on a "material
misrepresentation;" in turn,
"misrepresentation" is defined in Question No. 1 as
"a promise of future performance made with an intent, at
the time the promise was made, not to perform as
promised." The jury awarded Havey $30, 500 as fraud
damages in response to Question No. 2.
jury answered "yes" as to Mandy and Mui Ngo in
response to Question No. 3, which asked: "Were any of
the following people or entities part of a conspiracy that
damaged William Frances Havey, Jr. d/b/a United Texas
Realtors?" The jury awarded Havey $30, 500 as damages in
connection with this claim in response to Question No. 4.
jury answered "yes" in response to Question No. 5,
which asked whether Shadow Creek "fail[ed] to
comply" with the listing agreement it executed with
United Texas Realtors. The jury awarded Havey $30, 500 in
contract damages in response to Question No. 6.
jury answered "no" as to Mau and Mandy in response
to Question No. 7 on statutory fraud. The jury answered
"no" as to Fuertes and PSL Realty in response to
Question No. 10 on tortious interference.
No. 9 is a key charge question for purposes of this appeal.
The jury answered "yes" in response to Question No.
9, which reads as follows:
Is Mandy Hong responsible for the conduct of Shadow Creek
Mandy Hong is "responsible" for the conduct of
Shadow Creek Bay, Inc. if Shadow Creek Bay, Inc. was
organized and operates as a mere tool or business conduit of
Mandy Hong; there was such unity between Shadow Creek Bay,
Inc. and Mandy Hong that the separateness of Shadow Creek
Bay, Inc. had ceased and holding only Shadow Creek Bay, Inc.
responsible would result in injustice; and Mandy Hong caused
Shadow Creek Bay, Inc. to be used for the purpose of
perpetrating and did perpetrate an actual fraud on William
Frances Havey, Jr. d/b/a United Texas Realtors primarily for
the direct personal benefit of Mandy Hong.
In deciding whether there was such unity between Shadow Creek
Bay, Inc. and Mandy Hong that the separateness of Shadow
Creek Bay, Inc. had ceased, you are to consider the total
dealings of Shadow Creek Bay, Inc. and Mandy Hong, including
1. The degree to which Shadow Creek Bay, Inc.'s property
had been kept separate from that of Mandy Hong;
2. The amount of financial interest, ownership, and control
Mandy Hong maintained over Shadow Creek Bay, Inc.; and
3. Whether Shadow Creek Bay, Inc. had been used for the
personal purposes of Mandy Hong.
No. 9 tracks Texas Pattern Jury Charges 108.1 and 108.2
addressing standards for piercing the corporate veil based on
an alter ego theory. See Comm. on Pattern Jury
Charges, State Bar of Tex., Texas Pattern Jury Charges:
Business PJC 108.1, 108.2 (2016). This question
incorporates the statutory standards for imposing liability
on individuals under section 21.223 of the Texas Business
Organizations Code. See Tex. Bus. Orgs. Code Ann.
§ 21.223. Havey did not object to Question No. 9 at the
charge conference. Shadow Creek and Mandy objected to
Question No. 9 at the charge conference on no evidence
grounds. No party challenges Question No. 9's wording or
the correctness of the legal standards it sets forth.
jury awarded Havey $55, 750 as reasonable attorney's fees
in response to Question No. 12.
filed a motion asking the trial court to sign a final
judgment against Shadow Creek and Mandy for $30, 500 in
actual damages plus attorney's fees and costs. Shadow
Creek and Mandy responded to Havey's motion for entry of
judgment and asserted that (1) there is no evidence to
support the jury's response to Question No. 9, which
addressed Mandy's individual liability as Shadow
Creek's alter ego; (2) liability for common law fraud and
conspiracy is barred by Texas Business Organizations Code
sections 21.223 and 21.224 as a matter of law, which makes
the jury's responses to Questions No. 1 and 3 immaterial;
and (3) Havey's attorney's fee evidence did not
comply with itemization requirements.
trial court signed a final judgment on August 25, 2016,
awarding Havey $30, 500 in actual damages and $55, 750 in
attorney's fees. The final judgment holds Shadow Creek
and Mandy jointly and severally liable for the damages and
Creek and Mandy filed a motion for new trial, which was
overruled by operation of law. See Tex. R. Civ. P.