law-liability-of-directors-officers-of-corporation | forfeiture of corporate privileges | individual liability for debt |
liability based on personal guaranty agreement | alter ego theory |  

Section 171.255 of the Texas Tax Code provides in full as follows:

§ 171.255. Liability of Director and Officers

(a) If the corporate privileges of a corporation are forfeited for the failure to file a report or 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 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.

(d) If a corporation’s charter or certificate of authority and its corporate privileges are forfeited and revived
under this chapter, the liability under this section of a director or officer of the corporation is not affected by the
revival of the charter or certificate and the corporate privileges.

Tex. Tax Code § 171.255.

HOUSTON CASE LAW ON THIS LEGAL CONCEPT

McCarroll v. My Sentinel, LLC (pdf) (Tex.App. - Houston [14th Dist.] Dec. 10, 2009)(Hedges) (personal liability
imposed on officers and directors based on forfeiture of corporate charter, res judicata not applicable)
My Sentinel, L.L.C. sued Steven and Robbie McCarroll, among other directors and officers of 4M Security
Systems, Inc., to collect on a judgment previously obtained against that corporation.  My Sentinel alleged that
4M’s corporate charter had been forfeited, and on that basis, My Sentinel sought to
impose liability for the
corporation’s debt against its directors and officers pursuant to Texas Tax Code section 171.255.  At the
conclusion of the plaintiff’s case-in-chief, the McCarrolls moved for
directed verdict on the grounds that (1)
application of the doctrine of res judicata barred My Sentinel’s claim, and (2) the debt in question was not
created or incurred in Texas as required for the imposition of liability against a director or officer of a
corporation under section 171.255.  The trial court denied the motion, and at the conclusion of trial awarded My
Sentinel $58,406.89 jointly and severally against the McCarrolls.[1]  In their two issues on appeal, the
McCarrolls contend that the trial court erred in denying each of their grounds for directed verdict.  We affirm.
AFFIRMED: Opinion by
Chief Justice Hedges    
Before Chief Justice Hedges, Justices Seymore and Sullivan   
14-08-01171-CV  Steven and Robbie McCarroll v. My Sentinel, LLC.,   
Appeal from 405th  District Court of Galveston County
Trial Court Judge: Wayne J. Mallia



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