Ssp Partners and Metro Novelties, Inc. v. Gladstrong Investments (Usa) Corporation ( 2005 )

                                           NUMBER 13-02-671-CV

                                            COURT OF APPEALS

                                 THIRTEENTH DISTRICT OF TEXAS

                                     CORPUS CHRISTI-EDINBURG

________________________________________________________           ____

SSP PARTNERS and METRO NOVELTIES, INC.,                        Appellants,

                                                             v.

GLADSTRONG INVESTMENTS (USA)

CORPORATION,                                                                                Appellee.

_______ _____________________________________________________

                            On appeal from the 332rd District Court

of Hidalgo County, Texas.

____________________________________________________________

OPINION ON MOTION FOR REHEARING

                       Before Justices Hinojosa, Yañez, and Castillo

                                       Opinion by Justice Castillo  

Appellants SSP Partners ("SSP") and Metro Novelties, Inc. ("Metro") and Appellee Gladstrong Investments (USA) Corp. ("Gladstrong")  have all filed motions for rehearing.

Appellee Gladstrong asserts that the common law doctrine of "apparent manufacturer" is inconsistent with the statutory scheme of indemnity between manufacturers and sellers and did not survive enactment of the statute. Gladstrong therefore requests that we reconsider our previous ruling and affirm the trial court's no-evidence summary judgment for Gladstrong.

Appellant Metro asserts that the single business enterprise theory does not require joinder of all its members and that the failure to join Gladstrong Hong Kong is not a proper basis on which to reject that theory.  Metro further urges that Gladstrong qualifies in its own right as a statutory manufacturer, relying on the Federal Consumer Products Safety Act and enabling regulations  rather than the Texas statutory language presented in section 82.001(4) of the Texas Civil Practice and Remedies Code.  Tex. Civ. Prac. & Rem. Code Ann. ' 82.001(4) (Vernon 2005).  Metro further argues that the claim for common law indemnity should be remanded on all grounds, including status as an "upstream supplier," rather than solely on the basis of "apparent manufacturer."  Metro has also moved this Court to supplement the record.

Appellant SSP similarly argues that (1) it was not necessary to make Gladstrong Hong Kong a party to the underlying suit in order for the claim of single business enterprise to be viable, and (2) Gladstrong qualifies in its own right as a statutory manufacturer. SSP also argues that we erroneously failed to reach the issue of guardian ad litem fees and urges that the motion for rehearing be granted because all dispositive issues were not addressed.

Metro and SSP seek to employ the single business enterprise doctrine to have Gladstrong USA stand in the shoes of Gladstrong Hong Kong and be vicariously liable for Gladstrong Hong Kong's potential direct liability, particularly on their indemnity claim.  We have reviewed the cases cited for the proposition that joinder of Gladstrong Hong Kong was not required as a prerequisite to presenting a viable claim under the single business enterprise theory.  We nevertheless find those cases to be distinguishable.

Texas recognizes the "single business enterprise doctrine" to prevent an entity from relying upon corporate form to evade an existing debt or legal obligation.  See Paramount Petroleum Corp. v. Taylor Rental Ctr., 712 S.W.2d 534, 536 (Tex. App.BHouston [14th Dist.] 1986, writ ref'd n.r.e.) (sufficient evidence to support the single business enterprise theory, as well as the theory of partnership by estoppel,  to permit recovery on outstanding invoices); Byrne v. Harris Adacom Network Servs., 11 S.W.3d 244, 247-48 (Tex. App.BTexarkana 1999, pet. denied) (discussing that allegations included single business enterprise as well as piercing of corporate veil in order to collect on outstanding promissory notes).^[1] 

In Wildridge v. IER, Inc., 65 F. Supp.2d 429, 431 (N.D. Tex. 1999), the court denied joinder of a foreign entity but did permit the plaintiff to rely on the single business enterprise theory for the purpose of establishing a sufficient number of employees to trigger application of Title VII for her employment discrimination claim.  However, recovery was sought against the named defendant that was alleged to be directly liable.^[2]

In re U-Haul Intl., Inc., 87 S.W.3d 653 (Tex. App.BSan Antonio 2002, orig. proceeding) derived from a personal injury claim, rather than an already-existing legal obligation, but the question before the court on mandamus involved a discovery dispute and whether or not documents could be compelled from corporate affiliates and subsidiaries.  Id. at 656.  The plaintiff seeking the discovery relied upon the single business enterprise theory but failed to meet its burden to establish possession, custody or control.  Id. at 657.  In re Western Star Trucks US, Inc., 112 S.W.3d 756 (Tex. App.BEastland 2003, orig. proceeding), another mandamus action, similarly involved an effort to obtain discovery, but this time from a named defendant.  Id. at 760.  In issue was whether corporate form was being relied upon to avoid existing corporate debts and liabilities, joint and several liability, and whether net worth of a named defendant was discoverable based upon the single business enterprise theory. Id. at 760-61.  Mandamus was granted to rescind the trial court order deeming a finding of joint and several liability, and to address issues relating to a deposition; net worth was discoverable.  Id. at 764, 766. 

The cases cited by Metro and SSP are therefore distinguishable on a variety of grounds.  Even if the single business enterprise doctrine does not require that Gladstrong Hong Kong be a party to the suit, we decline to further extend the doctrine as currently understood, by analogy or otherwise, to the circumstances of this case where Metro and SSP seek to hold a named defendant vicariously liable for the potentially wrongful acts or conduct of a non-party. 

We further note the issue of guardian ad litem fees.  Because determination of which party or entity is ultimately liable for those fees may be altered upon remand,  we decline to find that this issue is ripe for consideration.

We deny Gladstrong's motion for rehearing.  We reconsider our denial of the motion to supplement the clerk's record, withdraw the denial, and grant the motion to supplement the record.  We deny Metro's motion for rehearing.  We deny SSP's motion for rehearing.

ERRLINDA CASTILLO

Justice

Opinion on Motion for Rehearing delivered

and filed this the 21st day of July, 2005.

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^[1] Butcher, Carter & Preston Co. v. Republic-Lagun CNC Corp., 2001 Tex. App. LEXIS 6028 (Tex. App.BHouston [1st Dist.] 2001) (unpublished), also cited by appellants, involved efforts to collect on a sworn account.

^[2] SSP also cites to Luedtke v. BHP Petroleum (Americas) Inc., 1999 Tex. App. LEXIS 2716 (Tex. App.BAmarillo 1999) (unpublished), which involved a complex network of foreign and domestic companies and subsidiaries, a merger and corporate restructuring.  Luedtke, suing under an employment contract, asserted that  BHP was liable either as his direct employer, or liable as the alter ego of or a participant in a single business enterprise with the entity that was his employer.  Id. at *1-*2.  The court found summary judgment inappropriate because there remained a fact issue as to whether BHP was his direct employer.  Id. at *14.  El Puerto de Liverpool, S.A. de C.V., v. Servi Mundo Llantero, S.A. de C.V., 82 S.W.3d 622 (Tex. App.BCorpus Christi 2002, pet. dism'd w.o.j.), cited by Metro and  SSP, focused on the alter ego theory.  Id. at *2.  Murphy Bros. Chevrolet Co. v. East Oakland Auto Auction, 437 S.W.2d 272, 275-76 (Tex. Civ. App.BEl Paso 1969, writ ref'd n.r.e.) similarly deals with the theory of alter ego.  See id.