Petition for Writ of Mandamus =
Conditionally=20
Granted, in Part, and Denied, in Part, and Majority and Concurring =
Memorandum Opinions filed August 19, 2008.
In The
Fourteenth=20
Court of Appeals
____________
NO. 14-08-00203-CV
____________
IN RE BRIAN =
KENEFICK,=20
Relator
ORIGINAL=20
PROCEEDING
WRIT OF=20
MANDAMUS
M A J O R=20
I T Y M E M O R A N D U M O P I N I O=20
N
In this original =
proceeding, relator, Brian Kenefick, seeks a writ of mandamus =
ordering the=20
respondent, the Honorable Georgia Dempster, to vacate her February =
14,=20
2008 orders granting a motion to clarify and a motion to compel =
filed by=20
real party in interest, Maureen Irwin. We conditionally =
grant the=20
petition, in part, and deny it, in part.
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =
; =20
Background
On October 23, 2000, =
Judge=20
Dempster signed a nunc pro tunc final decree of divorce. In =
the=20
decree, Kenefick and Irwin were each awarded 50 percent of the =
stock of=20
KCO Enterprises, Inc., a check cashing company. In the =
decree, it=20
was ordered that Aeach party will =
receive a=20
monthly dividend equal to fifty percent (50%) of the month net =
cash=20
income, not to exceed $3,000 per month.@ Irwin gave up =
her voting=20
rights as a shareholder to a voting trust agreement. =
Kenefick is the=20
president and CEO of KCO.
On March 9, 2007, and =
January=20
22, 2008, Kenefick filed a petition and an amended petition to =
modify the=20
parent-child relationship, seeking modification of the nunc pro =
tunc final=20
decree of divorce. Kenefick claims that KCO was never a =
party to the=20
divorce proceeding. Therefore, Kenefick argued that the =
trial court=20
never had jurisdiction over KCO, and requested a declaratory =
judgment that=20
the portion of the decree pertaining to payment of the monthly =
dividend to=20
the parties be declared null and void.
On November 8, 2007, =
Irwin=20
filed a motion to enforce the nunc pro tunc final decree of =
divorce. =20
In the motion, Irwin stated that following entry of the divorce =
decree in=20
October 2000, until October 2006, Kenefick caused the corporation =
to remit=20
a $3,000 monthly dividend pursuant to the divorce decree. =
However,=20
in November 2006, Kenefick stopped remitting the monthly =
dividend. =20
Irwin requested that the trial court enter an order directing =
Kenefick to=20
cause KCO to pay her the contemplated $3,000 dividend in arrears =
and=20
prospectively. In his response, among other arguments, =
Kenefick=20
asserted that the trial court could not order KCO, a non-party=20
corporation, to pay dividends and could not order Kenefick, who =
was sued=20
only in his individual capacity, to pay the corporate =
dividend. =20
On December 13, 2007, =
the=20
Honorable Bruce Wettman held a hearing on Irwin=3Ds motion to =
enforce. =20
Judge Wettman was Ahung up and ha[d] a =
question=20
about the vagueness or ambiguity of the order.@ On December =
20, 2007,=20
Judge Wettman denied the motion to enforce.
On December 19, 2007, =
Irwin=20
filed a counter-petition to modify the parent-child relationship, =
in which=20
she alleged that Kenefick had abused his authority in conducting =
the=20
operations of KCO by (1) paying his personal expenses with =
corporate=20
funds, (2) paying corporate funds to his Agirlfriend(s),@ and (3) diverting =
corporate=20
opportunities for his personal gain. Kenefick also refused =
to allow=20
Irwin to examine KCO=3Ds books and =
records. =20
Irwin asserted claims against Kenefick for breach of fiduciary =
duty and=20
breach of contract. In his answer, Kenefick reasserted that =
KCO had=20
never been a party to the divorce proceedings, and =
Irwin=3Ds motives for seeing=20
KCO=3Ds books and records =
were=20
improper.
On January 8, 2008, =
Irwin filed=20
a motion to clarify the nunc pro tunc final decree of divorce to =
make=20
clear that Kenefick is obligated to cause KCO to pay at least a =
$3,000=20
monthly dividend out of KCO=3Ds net profits to =
Irwin, and an=20
annual dividend of 50% of any surplus of the net profit of =
KCO. In=20
his response, Kenefick argued that (1) the court never had =
jurisdiction=20
over KCO because the corporation was not a party to the mediated=20
settlement agreement, and (2) the requested clarification would be =
an=20
impermissible change in the property division.
On January 8, 2008, =
Irwin also=20
filed a motion to compel production of KCO=3Ds records, among =
other items,=20
she had requested from Kenefick on August 16, 2007. Kenefick =
objected that the requests are outside the scope of permissible =
discovery=20
because Irwin seeks information that is not relevant, or the =
requested=20
information will not lead to discovery of admissible evidence, and =
the=20
requests are unduly burdensome, harassing, and overly broad. =
On February 14, 2008, =
Judge=20
Dempster held a hearing, and granted Irwin=3Ds motion to clarify =
and motion=20
to compel. The clarified decree ordered that Kenefick =
Ashall cause KCO =
Enterprises,=20
Inc. to pay a monthly dividend $3,000 of the net cash =
income@ to both Irwin and =
him. =20
Kenefick was also ordered to pay Irwin the monthly $3,000 dividend =
from=20
November 2006, to date, totaling $48,000.
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =20
Standard of Review
To obtain mandamus =
relief, the=20
relator must show that the trial court clearly abused its =
discretion, and=20
the relator has no adequate remedy by appeal. In re Sw. =
Bell=20
Tele. Co., L.P., 226 S.W.3d 400, 403 (Tex. 2007) (orig.=20
proceeding). The trial court abuses its discretion if it =
reaches a=20
decision so arbitrary and unreasonable as to constitute a clear =
and=20
prejudicial error of law. Walker v. Packer, 827 =
S.W.2d 833,=20
839 (Tex. 1992) (orig. proceeding). Mandamus is appropriate =
if a=20
trial court issues an order beyond its jurisdiction. In =
re=20
Brookshire Grocery, Inc., 250 S.W.3d 66, 68 (Tex. 2008) (orig. =
proceeding).
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =20
Clarification Order
Kenefick contends the =
trial=20
court abused its discretion by rendering a clarification order =
directing=20
him to cause KCO to pay monthly dividends. Kenefick contends =
the=20
trial court does not have jurisdiction over the corporation to =
order it to=20
pay a dividend because KCO was not a party to the divorce=20
proceeding. There is no dispute that KCO was not served with =
process=20
in the divorce proceeding. Irwin, however, contends that KCO =
twice=20
made an appearance and subjected itself to the court=3Ds jurisdiction by =
making=20
appearances when the two mediation agreements were filed. =
Both=20
agreements provide:
Each signatory =
represents that=20
he or she has full authority to bind the party or parties for whom =
such=20
person and that no claims, suits, rights or interest which are =
included=20
within the settlement have been assigned, transferred or =
sold.
Irwin argues that =
both owners=20
of KCO, i.e., she and Kenefick, signed the agreements without =
limiting the=20
nature or type of their appearance; therefore, KCO entered an =
appearance=20
through its officers sufficient to bind the corporation. =
However,=20
there is nothing to indicate that either Kenefick or Irwin signed =
the=20
settlement agreements on behalf of KCO. Consequently, KCO =
did not=20
make an appearance by Irwin=3Ds and =
Kenefick=3Ds signing the =
settlement=20
agreements.
Irwin contends, =
alternatively,=20
that it was not necessary for the trial court to treat KCO as an=20
independent third party when the parties have disregarded =
KCO=3Ds separate corporate=20
structure. A corporation is a separate legal entity from its =
shareholders, officers, and directors. Walker v. =
Anderson,=20
232 S.W.3d 899, 918 (Tex. App.CDallas 2007, no =
pet.). =20
However, under certain circumstances the law will disregard the=20
separateness of the corporate enterprise to protect =
individual and=20
corporate creditors. See Tex. Bus. Corp. Act art. =
2.21=20
(Vernon 2003); Castleberry v. Branscum, 721 S.W.2d 270, 272 =
(Tex.=20
1986).
We note that Irwin =
did not=20
plead that KCO is Kenefick=3Ds alter ego. =
Alter ego=20
must be specifically pleaded or it is waived, unless tried by=20
consent. Town Hall Estates Whitney, Inc. v. Winters, =
220=20
S.W.3d 71, 86 (Tex. App.CWaco 2007, no =
pet.). At=20
the hearing before Judge Wettman, Kenefick specifically denied =
that he was=20
the alter ego of KCO. At the hearing before Judge Dempster, =
Kenefick=20
specifically argued that the corporate veil could not be pierced =
merely=20
because KCO is a closely held corporation. Moreover, there =
is=20
nothing in the record to show that alter ego was an issue in the =
original=20
divorce proceeding, particularly since the divorce was resolved by =
agreed=20
judgment.
At the hearing, Irwin =
argued,=20
and Judge Dempster agreed, that the corporate structure can be =
disregarded=20
because KCO is a closely held corporation. An alter ego =
relationship=20
may be shown from the total dealings of the corporation and the=20
individual. Mancorp, Inc. v. Culpepper, 802 S.W.2d =
226, 228=20
(Tex. 1990). This showing may include evidence of =
Athe degree to which =
corporate=20
formalities have been followed and corporate and individual =
property have=20
been kept separately, the amount of financial interest, ownership =
and=20
control the individual maintains over the corporation, and whether =
the=20
corporation has been used for personal purposes.@ =
Castleberry, 721=20
S.W.2d at 272. However, mere domination of corporate affairs =
by a=20
sole shareholder or financial unity between a shareholder and =
corporation=20
will not justify disregarding the corporate entity. =
Lifshutz v.=20
Lifshutz, 61 S.W.3d 511, 516 (Tex. App.CSan Antonio 2001, =
pet. denied);=20
see also Sparks v. Booth, 232 S.W.3d 853, 869 (Tex.=20
App.CDallas 2007, no pet)=20
(A[A]n =
individual=3Ds standing as an =
officer,=20
director, or majority shareholder of an entity alone is =
insufficient to=20
support a finding of alter ego.@); Leon Ltd. v. =
Albuquerque=20
Commons P=3Dship, 862 S.W.2d 693, 707 =
(Tex.=20
App.CEl Paso 1993, no =
writ)=20
(evidence that defendant was shareholder, sole officer, and =
employee of=20
corporation was insufficient to support finding of alter =
ego). =20
Merely showing that =
Kenefick is=20
one of two shareholders, and the president and CEO of KCO, is not=20
sufficient to establish alter ego. Irwin was required to =
produce=20
evidence reflecting the degree to which corporate and individual =
property=20
have been kept separate; the amount of financial interest, =
ownership, and=20
control the individual has maintained over the corporation; and =
whether=20
the corporation has been used for personal purposes. Irwin =
failed to=20
produce any evidence tending to establish that Kenefick is the =
alter ego=20
of KCO.
Finally, Irwin =
asserts that=20
Kenefick is estopped from challenging the provisions of the =
divorce decree=20
regarding KCO because he has accepted and exercised the authority =
to=20
operate KCO and to pay the dividend. Irwin further claims =
that=20
Kenefick induced her to enter into the mediated settlement =
agreement and=20
the voting trust agreement by agreeing to pay her the $3,000 =
monthly=20
dividend. Estoppel is an affirmative defense and must be=20
pleaded. Tex. R. Civ. P. 94. Irwin did not plead =
estoppel in=20
the trial court and, therefore, may not rely on it here. =
See City=20
of Univ. Park v. Van Doren, 65 S.W.3d 240, 251 (Tex. =
App.CDallas 2001, pet. =
denied)=20
(holding city could not rely on estoppel on appeal because it had =
not=20
pleaded the defense); Trevino v. Houston Orthopedic Ctr., =
831=20
S.W.2d 341, 344B45 (Tex. =
App.CHouston [14th Dist.] =
1992, writ=20
denied) (stating appellant must affirmatively plead estoppel to =
rely on it=20
on appeal); CKB & Assocs., Inc. v. Moore McCormack =
Petroleum,=20
Inc., 809 S.W.2d 577, 584 (Tex. App.CDallas 1991, writ =
denied)=20
(stating estoppel Ais lost if not =
specifically=20
pleaded@). =
Moreover, directing =
Kenefick to=20
cause KCO to pay a dividend is also unavailing. Kenefick was =
a party=20
to the divorce only in his individual capacity, not in his =
capacity as an=20
officer of KCO. See Werner v. Colwell, 909 S.W.2d =
866, 879=20
(Tex. 1995) (holding that to bind benefit planCa separate =
entityCplaintiff was =
required to serve=20
defendant in her capacity as trustee). We conclude that KCO =
was not=20
a party to underlying divorce proceeding, and the trial court had =
no=20
authority to order it to pay a dividend. See Glasscock v. =
Citizens Nat=3Dl =
Bank, 553 S.W.2d 411, 413 =
(Tex.=20
Civ. App.CTyler 1977, writ=20
ref=3Dd n.r.e.) (holding=20
husband=3Ds creditors could not =
be bound=20
by divorce decree because court, in divorce action, had no power =
to=20
disturb rights of creditors).
Kenefick also claims =
that the=20
clarification order alters the substantive division of property =
and,=20
therefore, is void. Following a finding by the trial court =
that the=20
original form of the division of the property is not sufficiently =
specific=20
to be enforceable by contempt, the trial court may render a =
clarifying=20
order setting forth specific terms to enforce compliance with the =
original=20
division of property. Tex. Fam. Code Ann. ' 9.008(b) (Vernon =
2006). =20
In the absence of an ambiguity, the trial court is without =
authority to=20
modify the judgment. Pearcy v. Pearcy, 884 S.W.2d =
512, 514=20
(Tex. App.CSan Antonio 1994, no =
writ);=20
see also Zeolla v. Zeolla, 15 S.W.3d 239, 242 (Tex.=20
App.CHouston [14th Dist.] =
2000, pet.=20
denied) (trial court was authorized to enter clarifying order =
because=20
agreement contained a latent ambiguity).
The trial =
court=3Ds clarification order =
must not=20
vary from the terms of the original decree. Young v. =
Young,=20
810 S.W.2d 850, 851 (Tex. App.CDallas 1991, writ=20
denied). A clarification order is consistent if it merely =
enforces,=20
with appropriate language the divorce decree. =
Id. =20
However, A[a]n order under this =
section=20
that amends, modifies, alters, or changes the actual, substantive =
division=20
of property made or approved in a final decree of divorce or =
annulment is=20
beyond the power of the divorce court and is =
unenforceable.@ Tex. Fam. Code =
Ann.=20
' 9.007(b) (Vernon =
2006).=20
Irwin responds that =
the trial=20
court merely added terms necessary to effectuate and implement the =
intent=20
of the parties. Terms necessary to effectuate and implement =
the=20
parties=3D agreement do not =
affect the=20
agreed substantive division of property and may be left to future=20
articulation by the parties or consideration by the court. =
Haynes=20
v. Haynes, 180 S.W.3d 927, 930 (Tex. App.CDallas 2006, no =
pet.); see=20
also Able v. Able, 725 S.W.2d 778, 779 (Tex. App.CHouston [14th Dist.] =
1987, writ=20
ref=3Dd n.r.e.) (finding =
trial court=20
merely interpreted certain language of divorce decree awarding =
appellee=20
reimbursement for liability assigned to appellant under language =
of decree=20
when it clarified language). We do not agree with =
Irwin=3Ds interpretation of =
the=20
clarification order.
The clarification =
order=20
provides, in relevant part:
Each party has been awarded fifty =
percent (50%) of=20
the stock of KCO Enterprises, Inc. and IT IS ORDERED AND DECREED =
that=20
BRIAN KENEFICK shall cause KCO Enterprises, Inc. to pay a monthly =
dividend=20
$3,000 [sic] of the net cash income of KCO Enterprises, Inc. to =
each=20
party, BRIAN KENEFICK and MAUREEN IRWIN. . . .
IT IS THEREFORE =
ORDERED that=20
Petitioner Brian Kenefick pay to Respondent the monthly dividend =
payments=20
from KCO Enterprises, Inc. from November, 2006, to date, totaling =
$48,000,=20
and that Petitioner continue to pay said dividend payments to =
Respondent=20
until otherwise directed by this Court.
The nunc pro tunc =
divorce=20
decree awards to each party:
Each party has been =
awarded=20
fifty percent (50%) of the stock of KCO Enterprises, Inc., and IT =
IS=20
ORDERED AND DECREED that each party will receive a monthly =
dividend equal=20
to fifty percent (50%) of the monthly net cash income, not to =
exceed=20
$3,000 per month per party. . . .
The nunc pro tunc =
final decree=20
of divorce unambiguously provides that each party will receive a =
monthly=20
dividend equal to Afifty percent (50%) =
of the=20
monthly net cash income, not to exceed $3,000 per=20
month.@ The dividend =
is a=20
contingent expectancy based on the amount of monthly net cash=20
income. The clarification order directs KCO to pay =
Aa monthly dividend=20
$3,000 [sic]of=20
the net cash income@ to each party. In=20
the clarification order, the dividend is a defined amount to be=20
paid. We hold the nunc pro tunc divorce decree is =
unambiguous with=20
regard to the award of a KCO dividend. The trial court =
exceeded its=20
authority by entering a clarification order that altered the =
property=20
division. Consequently, that order is void. See =
Pearcy,=20
884 S.W.2d at 514. Kenefick has established that he is =
entitled to=20
mandamus relief with respect to the clarification order. =
See=20
Brookshire Grocery, Inc., 250 S.W.3d at 68.
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =20
Order Compelling Discovery
Kenefick complains =
that the=20
trial court abused its discretion by granting Irwin=3Ds motion to compel=20
discovery. Irwin served a request for production of =
documents on=20
Kenefick, seeking, among other things, an accounting and full =
disclosure=20
of KCO=3Ds corporate =
records. =20
Kenefick objected to the requests, asserting that the information =
sought=20
is not relevant and will not lead to the discovery of admissible =
evidence;=20
and the requests are unduly burdensome, harassing, and overly =
broad. =20
Kenefick contends =
that Irwin=20
waived the requested discovery because she did not request a =
hearing after=20
he objected to the discovery. See Roberts v. =
Whitfill, 191=20
S.W.3d 348, 361 n.3 (Tex. App.CWaco 2006, no pet.)=20
(AIf neither party asks =
for a=20
hearing [on the objections], the party who sent the request for =
discovery=20
waives the requested discovery.@). At the =
February 14,=20
2008 hearing, the trial court granted the motion to compel without =
hearing=20
argument. Counsel for both parties then argued about the =
necessity=20
for the discovery based on Irwin=3Ds breach of fiduciary =
duty=20
claims. At the very least, the trial court implicitly =
overruled=20
Kenefick=3Ds objections to=20
discovery. We conclude that Irwin did not waive her =
discovery=20
requests by failing to request a hearing on Kenefick=3Ds objections.=20
Finally, Kenefick =
complains=20
that the order to compel is vague. Irwin requested 23 =
categories of=20
items for Kenefick to produce. The order states that the =
court=20
AGRANTS =
[Irwin=3Ds] Motion to=20
Compel,@ without specifying =
what items=20
must be produced. However, Kenefick has not shown that he =
presented=20
this complaint to trial court, and that the trial court refused a =
request=20
for correction. AA party=3Ds right to mandamus =
relief=20
generally requires a predicate request for some action and a =
refusal of=20
that request.@ In re =
Perritt,=20
992 S.W.2d 444, 446 (Tex. 1999) (orig. proceeding) (per curiam) =
(citing=20
Axelson, Inc. v. McIlhany, 798 S.W.2d 550, 556 (Tex.1990) =
(orig.=20
proceeding)). Therefore, Kenefick has not established that =
he is=20
entitled to the extraordinary remedy of mandamus with regard to =
this=20
complaint about the order granting Irwin=3Ds motion to compel=20
discovery.
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =
; =20
Conclusion
We conditionally =
grant the=20
petition for a writ of mandamus with respect to the clarification =
order=20
and direct the trial court to vacate its February 14, 2008 =
clarification=20
order. We deny the petition for writ of mandamus, without =
prejudice,=20
with respect to the order granting the motion to compel. The =
writ=20
will issue only if the trial court fails to act in accordance with =
this=20
opinion.
/s/ =20
Charles Seymore
Justice
Petition =
Conditionally Granted,=20
in Part, and Denied, in Part, and Majority and Concurring =
Memorandum=20
Opinions filed August 19, 2008.
Panel consists of =
Justices=20
Fowler, Frost, and Seymore. (Frost, J.,=20
concurring).
|