TMX Finance Holdings, Inc. v. Wellshire Financial Services, LLC D/B/A Loanstart Title Loans D/B/A Moneymax Title Loans and D/B/A Loanmax Meadowwood Financial Services, LLC D/B/A Loanstar Title Loans and D/B/A Moneymax Title Loans And Integrity Texas Funding, LP

Opinion issued October 11, 2016

In The

Court of Appeals
For The

First District of Texas
————————————
NO. 01-16-00044-CV
———————————
TMX FINANCE HOLDINGS, INC., Appellant
V.
WELLSHIRE FINANCIAL SERVICES, LLC D/B/A LOANSTAR TITLE
LOANS D/B/A MONEYMAX TITLE LOANS AND D/B/A LOANMAX;
MEADOWWOOD FINANCIAL SERVICES, LLC D/B/A LOANSTAR
TITLE LOANS AND D/B/A MONEYMAX TITLE LOANS; AND
INTEGRITY TEXAS FUNDING, LP, Appellees

On Appeal from the 152nd District Court
Harris County, Texas
Trial Court Case No. 2013-33584
 OPINION

TMX Finance Holdings, Inc. (TMX-Holdings), an out-of-state holding

company, appeals the denial of its special appearance. The trial court denied the

special appearance based on its finding that TMX-Holdings was an alter ego of a

related entity—also a holding company—that had submitted to the court’s

jurisdiction.

In two issues, TMX-Holdings argues that an alter-ego theory cannot support

the trial court’s ruling because the plaintiffs failed to allege that theory in their

pleadings and, to the extent the plaintiffs are permitted to assert an alter-ego theory,

they failed to meet their burden to prove alter ego as a basis to deny TMX-Holdings’s

special appearance.

We reverse the trial court’s order denying the special appearance and render

judgment of dismissal of all claims against TMX-Holdings.

Background

This is a suit between competitors in the automobile title lending business.1

When the suit began, there were three named plaintiff entities—all of which are

1
Portions of the record were filed under seal following a Rule 76a sealing order in
the trial court. TEX. R. CIV. P. 76a. Because of the sealing order, some of our
references to the record are deliberately vague. See Kartsotis v. Bloch, No. 05-14-
01294-CV, 2016 WL 4582208, at *1 (Tex. App.—Dallas Sept. 2, 2016, no pet. h.)
(noting that some references in opinion are “deliberately vague” because of sealing
order). Nonetheless, we have responsibilities to the public as an appellate court to
resolve disputes through public opinions that explain our decisions based on the
record. See TEX. R. APP. P. 47.3 (“All opinions of the courts of appeals are open to
2
related—that were suing four named defendant entities—all of which are related—

and two individual defendants. The original named plaintiffs were (1) Wellshire

Financial Services, LLC d/b/a LoanStar Title Loans d/b/a MoneyMax Title Loans

and d/b/a LoanMax, (2) Meadowwood Financial Services, LLC d/b/a LoanStar Title

Loans and d/b/a MoneyMax Title Loans, and (3) Integrity Texas Funding, LP

(collectively, “Wellshire”).

The original named defendants were (1) TMX-Holdings; (2) its subsidiary,

which is also a holding company, TMX Finance, LLC (TMX-Finance); (3) TitleMax

of Texas, Inc., which is a credit service subsidiary of TMX-Finance; (4) TMX

Finance of Texas, Inc., another credit service subsidiary of TMX-Finance; (5) Felix

Deleon, individually, and (6) Ishmael Hernandez, individually (collectively, “the

TMX entities”). Other than TMX-Holdings, the TMX entities did not contest the

court’s jurisdiction over them. Wellshire did not sue Tracy Young, the individual it

alleges exerts control over both TMX-Holdings and TMX-Finance.

the public and must be made available . . . .”). To the extent we include any sensitive
information in this memorandum opinion, we do so only to the degree necessary to
strike a fair balance between the parties’ interest in keeping portions of the record
confidential and our responsibilities to the public as an appellate court. See R.V.K.
v. L.L.K., 103 S.W.3d 612, 614–15 (Tex. App.—San Antonio 2003, no pet.)
(attempting to “strike a fair balance” between parties’ interest in keeping sealed
portion of record confidential and court’s and public’s interest in court fulfilling its
responsibilities); Mi Gwang Contact Lens Co., Ltd. v. Chapa, No. 13-13-00306-CV,
2015 WL 3637846, at *6–7 (Tex. App.—Corpus Christi June 11, 2015, no pet.)
(mem. op.) (same).

3
 Wellshire alleged, in its original petition, that the TMX entities

“surreptitiously targeted and collected the license plate numbers of customers in [its]

parking lot, using that information to perform impermissible searches for customers’

personal information” as part of a business-development plan to contact and solicit

Wellshire’s customers. Wellshire sued the TMX entities for misappropriation of

trade secrets and tortious interference with existing contracts and prospective

business relations.

Regarding jurisdiction, Wellshire alleged that the trial court had jurisdiction

over TMX-Holdings because it purposefully availed itself of the privileges and

benefits of conducting business in Texas. Wellshire pleaded joint and several

liability on its claims.

In its special appearance, TMX-Holdings asserted that it has never conducted

any business activities in Texas. It also asserted that it has no employees, operations,

or revenue, and thus, no contacts with Texas. TMX-Holdings issues no paychecks,

pays no income taxes, and is not registered to do business in this or any other state.2

As TMX-Holdings explained it, its owners “formed [the entity] merely to facilitate

more efficient estate planning and tax reporting for [themselves].”

2
The TMX-Holdings officer deposed as its corporate representative, Christopher
Kelly Wall, testified that he did not receive a paycheck or any income from TMX-
Holdings.
4
 Wellshire responded by arguing that TMX-Holdings is the alter ego of TMX-

Finance and the two entities “lack [ ] any meaningful separation,” “have acted as a

single entity,” and have “ignored all corporate formalities” in their dealings. And,

according to Wellshire, because TMX-Finance is subject to jurisdiction, so is its alter

ego, TMX-Holdings.

TMX-Holdings responded by specifically denying that it is subject to the

jurisdiction of a Texas court under an alter-ego theory and asserting, instead, that it

is a “separate and distinct” entity from the other TMX entities identified in the suit.

According to TMX-Holdings, it is a mere holding company without any employees

or operations and, due to its limited role, does not exert authority over any of the

codefendant entities’ policies or operations. TMX-Holdings included an affidavit

from one of its two officers, its vice president, Christopher Kelly Wall, supporting

these statements.

The trial court denied TMX-Holdings’s special appearance. TMX-Holdings

filed an interlocutory appeal from that order.

TMX-Holdings’s Contention that Wellshire
Waived its Alter-Ego Argument

Before addressing the merits of TMX-Holdings’s jurisdictional argument, we

first consider its contention that Wellshire waived its alter-ego theory of personal

jurisdiction by including it only in the special appearance response and not in its live

5
petition and, as a result, the trial court’s order denying the special appearance on

alter-ego grounds was in error.

The Texas Rules of Civil Procedure do not limit a trial court’s review of a

special appearance to considering only the plaintiff’s petition. On the contrary, Rule

120a identifies multiple items a trial court may consider when ruling on a special

appearance: “The court shall determine the special appearance on the basis of the

pleadings, any stipulations made by and between the parties, such affidavits and

attachments as may be filed by the parties, the results of discovery processes, and

any oral testimony.” TEX. R. CIV. P. 120a(3). The plaintiff’s “pleadings” are not

limited to those in which it originally asserted that the defendant is subject to

personal jurisdiction in the forum: “The plaintiff’s original pleadings as well as its

response to the defendant’s special appearance can be considered in determining

whether the plaintiff satisfied its burden” to establish the necessary jurisdictional

facts. Touradji v. Beach Capital P’ship, L.P., 316 S.W.3d 15, 23 (Tex. App.—

Houston [1st Dist.] 2010, no pet.); see Henkel v. Emjo Invs., Ltd., 480 S.W.3d 1, 7

(Tex. App.—Houston [1st Dist.] 2016, no pet.) (rejecting argument that court

confines its consideration to jurisdictional facts contained in original petition and,

instead, considering plaintiff’s response to defendant’s special appearance to

determine if plaintiff satisfied its burden to allege jurisdictional facts).

6
 We conclude that the trial court did not err by considering Wellshire’s

response when it ruled on TMX-Holdings’s special appearance. See Henkel, 480

S.W.3d at 7. We overrule TMX-Holdings’s first issue and turn next to the merits of

the special appearance.

Special Appearance

In its second issue, TMX-Holdings argues that the trial court erred by denying

its special appearance because Wellshire did not overcome the presumption of

corporate separateness to establish personal jurisdiction under an alter-ego theory.

A. Standard of review

Whether a court can exercise personal jurisdiction over a nonresident

defendant is a question of law, and we review de novo a trial court’s ruling on a

special appearance to challenge personal jurisdiction. Kelly v. Gen. Interior Constr.,

Inc., 301 S.W.3d 653, 657 (Tex. 2010). “When [as here] a trial court does not issue

findings of fact and conclusions of law with its special appearance ruling, all facts

necessary to support the judgment and supported by the evidence are implied.” Id.

(quoting BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002)).

“When the appellate record includes the reporter’s and clerk’s records, these implied

findings are not conclusive and may be challenged for legal and factual sufficiency

. . . .” BMC, 83 S.W.3d at 795.

7
B. General law on minimum contacts to support personal jurisdiction

A nonresident defendant is subject to personal jurisdiction in Texas if (1) the

Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the exercise

of jurisdiction does not violate the due process guarantees of the federal and state

constitutions. Kelly, 301 S.W.3d at 657. The Texas long-arm statute allows the

exercise of personal jurisdiction to “reach as far as the federal constitutional

requirements of due process will allow.” Id. (quoting Moki Mac River Expeditions

v. Drugg, 221 S.W.3d 569, 575 (Tex. 2007)).

The exercise of personal jurisdiction is consistent with due process “when the

nonresident defendant has established minimum contacts with the forum state, and

the exercise of jurisdiction comports with traditional notions of fair play and

substantial justice.” Id. (quoting Moki Mac, 221 S.W.3d at 575). “A defendant

establishes minimum contacts with a state when it ‘purposefully avails itself of the

privilege of conducting activities within the forum state, thus invoking the benefits

and protections of its laws.’” Retamco Operating, Inc. v. Republic Drilling Co., 278

S.W.3d 333, 338 (Tex. 2009) (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78

S. Ct. 1228, 1240 (1958)).

The plaintiff and the defendant bear shifting burdens of proof in a challenge

to personal jurisdiction. Kelly, 301 S.W.3d at 658. The plaintiff bears the initial

burden to plead sufficient allegations to bring the nonresident defendant within the

8
reach of the long-arm statute. Id.; Retamco Operating, 278 S.W.3d at 337. Once the

plaintiff pleads sufficient jurisdictional allegations, the defendant seeking to avoid

personal jurisdiction bears the burden to negate all bases of personal jurisdiction

alleged by the plaintiff. Kelly, 301 S.W.3d at 658. “Because the plaintiff defines the

scope and nature of the lawsuit, the defendant’s corresponding burden to negate

jurisdiction is tied to the allegations in the plaintiff’s pleading.” Id.

If the plaintiff fails to plead facts bringing the defendant within the reach of

the long-arm statute, the defendant need only prove that it does not reside in Texas

to negate jurisdiction. Id. at 658–59. The Texas Supreme Court has held that a

defendant can negate jurisdiction on either a factual or legal basis:

Factually, the defendant can present evidence that it has no contacts
with Texas, effectively disproving the plaintiff’s allegations. The
plaintiff can then respond with its own evidence that affirms its
allegations, and it risks dismissal of its lawsuit if it cannot present the
trial court with evidence establishing personal jurisdiction. Legally, the
defendant can show that even if the plaintiff’s alleged facts are true, the
evidence is legally insufficient to establish jurisdiction; the defendant’s
contacts with Texas fall short of purposeful availment; for specific
jurisdiction, that the claims do not arise from the contacts; or that
traditional notions of fair play and substantial justice are offended by
the exercise of jurisdiction.

Id.

After the defendant negates the plaintiff’s jurisdictional allegations, the

plaintiff must respond with evidence “establishing the requisite link with Texas.” Id.

at 660. “Once the defendant has produced credible evidence negating all bases of

9
jurisdiction, the plaintiff bears the ultimate burden to establish that the Texas court

has personal jurisdiction over the defendant as a matter of law.” Vak v. Net Matrix

Sols., Inc., 442 S.W.3d 553, 558 (Tex. App.—Houston [1st Dist.] 2014, no pet.)

(quoting M.G.M. Grand Hotel, Inc. v. Castro, 8 S.W.3d 403, 408 (Tex. App.—

Corpus Christi 1999, no pet.)); Oryx Capital Int’l, Inc. v. Sage Apartments, L.L.C.,

167 S.W.3d 432, 441 (Tex. App.—San Antonio 2005, no pet.) (“If the defendant

produces evidence negating jurisdiction, the burden returns to the plaintiff to show

as a matter of law that the court has jurisdiction over the defendant.”).

C. Specific law on personal jurisdiction based on alter-ego status

When a plaintiff sues two related corporations, the law presumes that the two

are distinct corporations. PHC–Minden, L.P. v. Kimberly–Clark Corp., 235 S.W.3d

163, 173 (Tex. 2007). When one of the defendants is a subsidiary of the other, the

subsidiary’s in-state activities are not imputed to the out-of-state parent if “the

subsidiary’s presence in the state is primarily for the purpose of carrying on its own

business and the subsidiary has preserved some semblance of independence from

the parent and is not acting as merely one of its departments . . . .” 4A CHARLES

ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1069.4

(4th ed. 2016); Weatherford Artificial Lift Sys., Inc. v. A & E Sys. SDN BHD, 470

S.W.3d 604, 611 (Tex. App.—Houston [1st Dist.] 2015, no pet.) (applying standard).

The independence inquiry examines whether “the parent corporation exerts such

10
domination and control over its subsidiary that they do not in reality constitute

separate and distinct corporate entities”; if it does, and the subsidiary is subject to

personal jurisdiction in Texas, then, for jurisdictional purposes, the parent will be

considered the alter ego of the subsidiary and personal jurisdiction will attach. See

PHC-Minden, 235 S.W.3d at 173.

When a plaintiff asserts jurisdiction over a nonresident defendant under an

alter-ego theory, the plaintiff has the burden to overcome the presumption of

separateness by proving its alter-ego allegation. BMC, 83 S.W.3d at 798 (“[T]he

party seeking to ascribe one corporation’s actions to another by disregarding their

distinct corporate entities must prove this allegation.”); see Conner v. ContiCarriers

& Terminals, Inc., 944 S.W.2d 405, 418 (Tex. App.—Houston [14th Dist.] 1997, no

writ) (stating that burden is on plaintiff to prove existence of alter-ego relationship).

To prove alter ego and “fuse” these two entities for jurisdictional purposes, the

plaintiff must establish that the foreign parent exercised a degree of control over the

subsidiary that is “greater than that normally associated with common ownership

and directorship; the evidence must show that the two entities cease to be separate

so that the corporate fiction should be disregarded to prevent fraud or injustice.”

BMC, 83 S.W.3d at 799.

Our Supreme Court has identified four factors relevant to whether a parent

entity exercises a greater-than-normal degree of control over its subsidiary: (1) the

11
amount of the subsidiary’s stock owned by the parent corporation; (2) the existence

of separate headquarters; (3) the observance of corporate formalities; and (4) the

degree of the parent’s control over the general policy and administration of the

subsidiary. PHC–Minden, 235 S.W.3d at 175. The first three factors evaluate

whether corporate structure is such that excessive control could occur, while the

fourth measures actual control. Thus, the fourth factor is most closely aligned with

the ultimate question the factors address: actual control. See id. at 173 (“The

rationale for exercising jurisdiction is that the parent corporation exerts such

domination and control over its subsidiary that they do not in reality constitute

separate and distinct corporate entities but are one and the same corporation for

purposes of jurisdiction.”) (internal quotations and citations omitted); see id. at 176.

Evidence relevant to the first factor—common ownership—even

when combined with common corporate officers, does not demonstrate that a parent

and subsidiary are alter egos. PHC-Minden, 235 S.W.3d at 175; BMC, 83 S.W.3d at

799; Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d 571, 573 (Tex. 1975).

Likewise, evidence of the second factor—shared office space—is insufficient

without more. See All Star Enter., Inc. v. Buchanan, 298 S.W.3d 404, 423 (Tex.

App.—Houston [14th Dist.] 2009, no pet.). Common ownership and shared

headquarters are not enough because these factors merely present circumstances that

could lead to parental control over the subsidiary, without indicating whether actual

12
control was exercised. See id. (noting that common stock ownership and shared

office space and employees are insufficient to support jurisdictional veil-piercing

absent evidence that one entity “exercised meaningful, much less ‘complete,’

control” over the other entity’s “daily activities”) (quoting U.S. LED, Ltd. v. Nu

Power Assocs., Inc., No. H-07-0783, 2008 WL 4838851, at *6 (S.D. Tex. Nov. 5,

2008) (slip op.)); Conner, 944 S.W.2d at 419–20 (concluding that parent and

subsidiary are not alter egos even though they “maintain significant ties” because

they operate with level of independence such that corporate separation is not “pure

fiction”). Nor is it enough to show parental involvement in the subsidiary’s activities

typical of an investor. PHC-Minden, 235 S.W.3d at 176. Thus, a parent will not be

considered an alter ego of a subsidiary even if it monitors the subsidiary’s

performance, supervises its finance and capital budget decisions, and articulates

general policies for the subsidiary. Id.

Instead, the plaintiff must show something more—a “plus factor” “beyond the

subsidiary’s mere presence within the bosom of the corporate family.” Id. (quoting

Dickson Marine, Inc. v. Panalpina, Inc., 179 F.3d 331, 338 (5th Cir. 1999); see

Dickson Marine, 179 F.3d at 338 (“Invariably such clear evidence requires an

additional or a ‘plus’ factor . . . . There must be evidence of one corporation asserting

sufficient control . . . .”). It is this plus factor that converts, for jurisdictional

purposes, the typical parent-subsidiary relationship—which involves common

13
ownership, monitoring, reporting, and articulating of general policies—into an alter-

ego relationship. PHC-Minden, 235 S.W.3d at 176; cf. All Star, 298 S.W.3d at 422

(stating that four PHC-Minden factors “are not of uniform significance”). As the

Texas Supreme Court has explained, the level of actual control over the subsidiary

must rise to the level to be “abnormal” or “atypical.” BMC, 83 S.W.3d at 798, 800;

PHC-Minden, 235 S.W.3d at 176.

D. Whether TMX-Holding exercised an abnormal degree of control over
TMX-Finance

Wellshire asserts that TMX-Holding “completely controls” TMX-Finance. As

proof of that assertion, Wellshire points to statements in TMX-Finance’s Form 10-

K. After explaining that TMX-Finance is a limited liability company that exists

solely as a holding company to own the equity interests of its subsidiaries and that

its former sole member, Tracy Young, transferred 100% of his membership interests

to TMX-Holdings in exchange for shares of TMX-Holdings, the TMX-Finance

annual report states:

Tracy Young is our founder, Chairman of the Board, Chief Executive
Officer, President and the sole beneficial owner of our parent holding
company, [TMX-Holdings]. As a result . . . Mr. Young has the ability
to control substantially all matters of significance to the Company,
including the strategic direction of our business . . . regardless of
whether the holders of senior secured notes, or our “bondholders,”
believe that any such action is in their best interests.

As a result of Mr. Young’s complete beneficial ownership and control
of our Company, his interests could conflict with the interests of our
bondholders.
14
 Wellshire asserts that this language demonstrates TMX-Holdings’s control

over TMX-Finance. There are at least two problems with Wellshire’s interpretation.

First, the Form 10-K states that Tracy Young—not TMX-Holdings—is the party

with control. Wellshire sued various TMX-related entities and two individuals, but

it did not sue Young. Wellshire has not argued that TMX-Finance or TMX-Holdings

is the alter ego of Young. Instead, Wellshire argues that TMX-Holdings is the alter

ego of TMX-Finance. The Form 10-K does not support Wellshire’s argument that

TMX-Holdings controls TMX-Finance.3

3
That Wellshire did not argue that Young was the alter ego of these entities
distinguishes this case from Cappuccitti v. Gulf Indus. Prod., Inc., 222 S.W.3d 468
(Tex. App.—Houston [1st Dist.] 2007, no pet.). There, the appellate court concluded
that an individual, a parent company, and a subsidiary were alter egos of one another
and that the trial court had personal jurisdiction over all three. Id. at 484.
Cappuccitti, who was not a Texas resident, incorporated two Bahamian
corporations. He owned 100% of the parent company, and the parent company
owned 90% of the subsidiary. Id. at 482. The subsidiary entered into a contract with
a Texas corporation. Id. at 475. The Texas corporation ultimately terminated the
contract for non-performance and sued the subsidiary, its parent company, and
Cappuccitti. Id. at 475–78. Cappuccitti and the parent company filed special
appearances, which were denied. Id. at 473. The appellate court affirmed,
concluding that the plaintiff presented sufficient proof to pierce the corporate veil
for jurisdictional purposes. Id. at 484. The appellate court cited as supporting
evidence that Cappuccitti was the president of both corporations, the only employee
of the parent corporation, and one of only two employees of the subsidiary; both
companies operated out of Cappuccitti’s home; the subsidiary company paid
Cappuccitti $10,000 per month as a consultant; Cappuccitti negotiated with the
Texas-based manufacturer to grant rights of first refusal to both companies; on at
least one occasion, Cappuccitti paid the subsidiary’s bills with a check drawn from
his personal account; and Cappuccitti, the subsidiary, and the parent company were
15
 Second, the Form 10-K discloses only that Young “has the ability to control”

TMX-Finance. As stated above, although Young’s common ownership of TMX-

Holdings and TMX-Finance permits the possibility of control, it does not—without

more—establish alter ego because it provides no evidence of actual control of TMX-

Finance by TMX-Holdings to a degree that is abnormal or atypical. See PHC-

Minden, 235 S.W.3d at 175; BMC, 83 S.W.3d at 799; Gentry, 528 S.W.2d at 573.

Wellshire argues that TMX-Holdings controls “each and every aspect of TMX

Finance’s operations,” but the evidence, through the deposition of TMX-Holdings’s

vice president, Wall, reflects that TMX-Holdings has no involvement in TMX-

Finance’s operations, marketing efforts, personnel decisions, or internal policies and

procedures. Wellshire has presented no evidence to the contrary. TMX-Holdings

receives annual reports concerning TMX-Finance’s business, but that is entirely

consistent with TMX-Holdings’s status as owner of TMX-Finance’s membership

interests and constitutes “appropriate parental involvement.” See PHC-Minden, 235

S.W.3d at 176 (“Appropriate parental involvement includes monitoring the

used interchangeably to transfer assets from one to the other, which rendered the
subsidiary insolvent. Id. at 482–84. Here, by contrast, there is no evidence of
deliberate undercapitalization to defraud an insolvent subsidiary’s creditors or
payment of a subsidiary’s bills from a personal account. Nor is the individual who
allegedly controls the entities a named defendant.

16
subsidiary’s performance, supervision of the subsidiary’s finance and capital budget

decisions, and articulation of general policies.”).

Wellshire points to a single, substantial contribution TMX-Holdings made to

TMX-Finance. But a parent corporation’s infusion of capital to its subsidiary, which

in itself does not harm creditors or other third parties dealing with the subsidiary or

cause some other injustice to third parties, is insufficient to confer personal

jurisdiction over an out-of-state parent entity. See Conner, 944 S.W.2d at 419

(rejecting contention that parent entity was alter ego of its subsidiary when entities

had “significant ties” and subsidiary received its initial capital from parent).

Wellshire also points to evidence that TMX–Finance’s tax department

prepared annual financial statements for TMX-Holdings without TMX-Holdings

paying for those services. Yet reports from a subsidiary to a parent that allow a parent

to monitor its operations are insufficient to treat two separate entities as one entity.

PHC-Minden, 235 S.W.3d at 176; cf. SSP Partners v. Gladstrong Invs. (USA) Corp.,

275 S.W.3d 444, 454–56 (Tex. 2009) (stating, in rejecting single-business enterprise

doctrine, that affiliated entities that “coordinate their activities” and “pursu[e]

common goals” are “commonplace” and holding that “abuse” is required to

disregard the corporate separateness of two related entities).

Additionally, Wellshire maintains that the two entities have not complied with

all corporate formalities. For example, both entities list the same business address as

17
their headquarters, yet there is no evidence that either pays rent to the other. There

is also an undocumented, non-contractual financial liability TMX-Holdings has to

TMX-Finance. Further, there is evidence that TMX-Holdings has never had any

directors, despite being required by Delaware law to have at least one. While these

facts may indicate a dereliction of some corporate formalities, there is evidence that

other corporate formalities have been observed. For example, Wall averred that

TMX-Holdings “maintains separate corporate accounts and a separate bank account;

does not commingle assets; does not share business departments; [and] has its own

financial statements.” This evidence is mixed regarding observance of corporate

formalities, but the mixed character does not strongly suggest that their corporate

separateness is “pure fiction.” See PHC-Minden, 235 S.W.3d at 176 (with evidence

of some corporate formalities observed and others not, concluding that corporate

separation was not “pure fiction”). Further, each of the two distinct entities meets

regularly to discuss the business of that entity apart from the other, which counsels

against an alter-ego finding. See BMC, 83 S.W.3d at 798; cf. PHC-Minden, 235

S.W.3d at 176 (courts should consider all relevant facts and circumstances

surrounding operations of parent and subsidiary to determine whether two separate

and distinct corporate entities exist).

In any event, we decline to conclude that the failure to follow corporate

formalities, particularly for this family-held group of entities, is sufficient, in itself

18
to demonstrate that the two entities are one. Cf. TEX. BUS. ORGS. CODE ANN.

§ 21.730(1) (stating that, for liability purposes, failure to follow corporate

formalities for a closely held corporation is not “a factor” in determining whether to

disregard the corporate status); Id. § 21.223 (stating that corporate separateness may

not be disregarded “on the basis of the failure of the corporation to observe any

corporate formality”); Hoffmann v. Dandurand, 180 S.W.3d 340, 347 (Tex. App.—

Dallas 2005, no pet.) (stating that “[f]ailure to comply with corporate formalities is

no longer a factor in considering whether alter ego exists” for liability purposes);

Pinebrook Props., Ltd. v. Brookhaven Lake Prop. Owners Ass’n, 77 S.W.3d 487,

499 (Tex. App.—Texarkana 2002, pet. denied) (same); cf. also El Puerto de

Liverpool, S.A. de C.V. v. Servi Mundo Llantero S.A. de C.V., 82 S.W.3d 622, 634

(Tex. App.—Corpus Christi 2002, pet. dism’d w.o.j.) (noting that jurisdictional veil-

piercing involves different analysis than that used when “determining whether

separate corporate entities should be treated as one for liability purposes”).

As the party seeking to impute TMX-Finance’s contacts with Texas to TMX-

Holdings through an alter-ego theory of personal jurisdiction, Wellshire bears the

burden of establishing that TMX-Holdings “controls the internal business operations

and affairs of” TMX-Finance and that the degree of control TMX-Holdings actually

exercises is “greater than that normally associated with common ownership and

directorship” such that “the two entities cease to be separate so that the corporate

19
fiction should be disregarded to prevent fraud or injustice.” PHC-Minden, 235

S.W.3d at 175. Wellshire has not presented evidence that TMX-Holdings exercises

atypical control over “the internal business operations and affairs” of TMX-Finance

to subject it to personal jurisdiction in Texas courts based on TMX-Finance’s

contacts. Accordingly, Wellshire fails, as a matter of law, to overcome the

presumption of separateness to prove alter ego. See BMC, 83 S.W.3d at 799 (noting

that there must be degree of control “greater than that normally associated with

common ownership and directorship” for alter-ego based jurisdiction); All Star, 298

S.W.3d at 423 (requiring evidence of greater-than-normal control).

E. Role of inferred facts in support of judgment

Wellshire argues that, under the applicable standard of review, we must read

into the trial court’s order denying TMX-Holdings’s special appearance various

implied facts, including that TMX-Holdings actually exercised abnormal control

over TMX-Finance and, as long as there is more than a scintilla of evidence in

support of that implied finding, we may not reverse and render judgment in TMX-

Holding’s favor.

Wellshire overstates the role of implied findings. Our Supreme Court stated,

in BMC, that, “[w]hen a trial court does not issue findings of fact and conclusions of

law with its special appearance ruling, all facts necessary to support the judgment

and supported by the evidence are implied.” 83 S.W.3d at 795 (emphasis added); see

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Lockhart v. Garner, 298 S.W.2d 108, 110 (Tex. 1957) (“[I]f the evidence on the

issue raised a fact issue, although the trial court made no findings of fact, we may

infer [facts] in favor of the validity of the judgment . . . .”). We have already

concluded that there is no evidence that TMX-Holdings exercised actual atypical or

abnormal control over TMX-Finance. Accordingly, we do not imply a factual

finding that such control was exercised.

We conclude that, based on this record, Wellshire has not established that

TMX-Holdings controls the internal operations of TMX-Finance to such an extent

that the entities have ceased to be separate, justifying the imputing of TMX-

Finance’s consent to jurisdiction in Texas to TMX-Holdings. We therefore hold that

the trial court erred in denying TMX-Holdings’s special appearance on alter-ego

grounds.

We sustain TMX-Holdings’s second issue.

Conclusion

Because the alter-ego theory was the only basis for personal jurisdiction

asserted by Wellshire and we have concluded that TMX-Holdings is not an alter ego

of TMX-Finance, we reverse the order of the trial court denying TMX-Holdings’s

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special appearance and render judgment dismissing TMX-Holdings from the

underlying litigation.

Harvey Brown
Justice

Panel consists of Justices Keyes, Brown, and Huddle.

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