pjc-family-2024-lib

D ISREGARDING C ORPORATE F ORM

PJC 205.2

PJC 205.2 Other Unfair Device A corporation is an entity distinct from its shareholders. However, the dis tinct corporate identity of the corporation may be disregarded even though the corporate formalities have been observed and even though corporate assets have been kept separated from individual property if one or more of the follow ing has occurred and if recognizing the distinct corporate identity would dam age the community: [Use only the items that are relevant in the particular case.] 1. The corporate form has been used as a sham to perpetrate a fraud; or 2. The corporate form has been resorted to as a means of evading an existing legal obligation; or 3. The corporate form has been employed to achieve or perpetrate a monopoly; or 4. The corporate form has been used to circumvent a statute; or 5. The corporate form has been relied on as a protection of crime or to justify wrong. COMMENT Source. The foregoing instruction is derived from Castleberry v. Branscum , 721 S.W.2d 270 (Tex. 1986), and Lifshutz v. Lifshutz , 61 S.W.3d 511 (Tex. App.—San Antonio 2001, pet. denied). The court in Lifshutz , 61 S.W.3d at 517, stated one of the requirements for disre garding the corporate identity to be that “the spouse’s improper use of the corporation damaged the community estate beyond that which might be remedied by a claim for reimbursement.” The words “beyond that which might be remedied by a claim for reimbursement” have been omitted from the charge because it is for the court to deter mine whether the damage to the community exceeds that which might be remedied by reimbursement. When to use. The foregoing instruction should be used with the question in PJC 205.3 (disregarding corporate identity of corporation owned entirely by spouses) if a party claims that the corporate form should be disregarded because “the corporate form has been used as part of a basically unfair device to achieve an inequitable result.” Castleberry , 721 S.W.2d at 271. See the comment below entitled “Caveat” and

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