Capital Parks, Inc. v. Southeastern Advertising & Sales System, Inc.

United States Court of Appeals,

Fifth Circuit.

No. 93-8791.

CAPITAL PARKS, INC., Plaintiff-Appellant,

v.

SOUTHEASTERN ADVERTISING AND SALES SYSTEM, INC., Waco Memorial
Park, and Byron D. Reeves, Defendants-Appellees.

Sept. 2, 1994.

Appeal from the United States District Court for the Western
District of Texas.

Before REYNALDO G. GARZA, SMITH and PARKER, Circuit Judges.

ROBERT M. PARKER, Circuit Judge:

Appellant appeals the district court's granting of Appellees'

Motion to Dismiss for Failure to State a Claim Upon Which Relief

Can be Granted pursuant to FED.R.CIV.P. 12(b)(6) and denying

Appellant's Motion for Leave to Amend Complaint. The court held

that the plain language of the option contract between Capital

Parks, Inc. ("Capital") and Southeastern Advertising and Sales

System, Inc. ("Southeastern"), granting Capital a right of first

refusal, was not violated by the proposed sale of Southeastern to

Loewen Group International, Inc. ("Loewen"), and that there was no

evidence proving Southeastern is merely the alter ego of

Southeastern's shareholder Byron Reeves, or that Waco Memorial

Park, Inc. is the alter ego of Southeastern. The court also

concluded that Capital's attempt to amend its complaint would be

futile. We affirm.

FACTS AND PROCEDURAL HISTORY

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 On May 30, 1984, Southeastern contracted with Capital an

option which granted to Capital1 a right of first refusal "with

respect to the purchase of all the issued and outstanding capital

stock or substantially all of the operating assets of Waco Memorial

Park, Inc." ("Waco"). Waco is a wholly-owned subsidiary of

Southeastern.

On June 14, 1993, Loewen made an offer to the shareholders of

Southeastern to purchase "all the issued and outstanding shares" of

Southeastern "together with all of the real estate and business

assets used in connection with the operation of the Companies'

business and owned individually by the shareholders." When Capital

learned of the offer, it sent a letter to Southeastern to remind

and advise Southeastern of Capital's intention to exercise its

right of first refusal. Capital also requested Southeastern to

respond with its intentions with regard to Capital's right.

When Capital did not receive a response from Southeastern, it

filed suit on August 13, 1993 in state court against Southeastern

and Waco seeking to enforce, by specific performance, its right of

first refusal to purchase Waco and to enjoin the proposed

transaction between Loewen and Southeastern. Capital amended its

petition and added Byron D. Reeves, the President of Southeastern

and a shareholder, as a defendant. Two days later, the defendants

removed to suit to federal court.

1
The Agreement of Purchase and Sale was actually granted to
Donovan Miller, Trustee, and his assigns, acting as an agent for
Capital Memorial Park, Inc. Capital Memorial Park, Inc.
subsequently changed its name to Capital Parks, Inc.

2
 On September 1, 1993, Defendants filed a Motion to Dismiss for

Failure to State a Claim Upon Which Relief Can be Granted. After

conducting a hearing on Capital's request for a temporary

injunction following expedited discovery, the district court

granted the motion on October 14, 1993, entering a final judgment

on the same date. On October 20, 1993, Capital filed a Motion to

Amend Complaint, to Vacate Order and Judgment, and for

Reconsideration which was denied by the court on November 10, 1993.

On November 12, 1993, Capital filed notice of appeal of the

district court's final judgment dated October 14, 1993.

STANDARD OF REVIEW

Our review of a district court's dismissal pursuant to Rule

12(b)(6) is de novo. F.D.I.C. v. Ernst & Young, 967 F.2d 166, 169

(5th Cir.1992). A court's decision to dismiss for failure to state

a claim may be upheld "only if it appears that no relief could be

granted under any set of facts that could be proven consistent with

the allegations." Baton Rouge Bldg. and Constr. Trades Council

AFL-CIO v. Jacobs Constructors, Inc., 804 F.2d 879, 881 (5th

Cir.1986). We must accept all well-pleaded facts as true, and we

view them in the light most favorable to the plaintiff. O'Quinn v.

Manuel, 773 F.2d 605, 608 (5th Cir.1985).

RIGHT OF FIRST REFUSAL

Under Texas law, "[a] right of first refusal, as a preemptive

right, requires the property owner to first offer the property to

the person holding the right of first refusal at the stipulated

price and terms in the event the owner decides to sell the

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property." Riley v. Campeau Homes (Texas), Inc., 808 S.W.2d 184,

187 (Tex.App.—Houston [14th Dist.] 1991, writ dism'd by agr.)

(citing Holland v. Fleming, 728 S.W.2d 820, 822 (Tex.App.—Houston

[1st Dist.] 1987, writ ref'd n.r.e.)). The right is triggered when

an owner decides to sell to a bona fide purchaser. Id. (citing

Sanchez v. Dickinson, 551 S.W.2d 481, 486 (Tex.Civ.App. 4 Dist.,

1977, no writ)).

Capital contends that Southeastern breached its option

contract with Capital by failing to uphold its obligation to advise

Capital in writing of the bona fide written offer it received from

Loewen to purchase Waco's assets or stocks. Capital argues that in

paragraph three (3) of Loewen's written offer to Southeastern's

shareholders, the words "business of the Companies," used to

describe the assets to be sold by Southeastern's shareholders to

Loewen, includes the operating assets of Waco. Therefore, Loewen's

written offer not only includes the stocks of Southeastern but also

the assets of Waco. This bona fide offer triggered Capital's right

of first refusal, which cannot be lost by including Waco as part of

the larger merger/transaction between Loewen and Southeastern.

Waco, as a wholly-owned subsidiary, is a separate legal

entity possessing its own separate assets and liabilities. Engel

v. Telepromter Corp., 703 F.2d 127, 131 (5th Cir.1983) (citing

International City Bank and Trust Co. v. Morgan Walton Properties,

Inc., 675 F.2d 666, 669 (5th Cir.), cert. denied, 459 U.S. 1017,

103 S.Ct. 379, 74 L.Ed.2d 511 (1982)). Therefore, Southeastern

never succeeded to all of Waco's privileges, powers, rights and

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duties, and Southeastern cannot transfer the assets of Waco, as

such. Id.

After review of Loewen's written offer, we find that

Capital's right of first refusal was not triggered by Loewen's

offer to Southeastern's shareholders. The language of the offer

contemplates only a transfer of all of Southeastern's stock and

assets to Loewen. The use of the word "assets" in the introductory

paragraph, and in paragraph 3 of the offer, merely refers to the

assets of the parent corporation, Southeastern, not the subsidiary,

Waco.

Capital's right of first refusal triggers only when

Southeastern receives a bona fide written offer to purchase Waco,

which was not enumerated in Loewen's offer to Southeastern's

shareholders. The Loewen offer merely involves the transfer of the

parent corporation's stock and assets, and therefore does not

affect the ownership of assets held by the subsidiary. Engel, 703

F.2d at 134. Loewen's offer to Southeastern's shareholders

contemplates only a transfer of the control, but not the ownership,

of Waco's stock and assets. Id. at 135.

ALTER EGO

This Circuit has extracted three broad theories of corporate

disregard under Texas law providing when we may pierce the

corporate veil: 1) when the corporation is the alter ego of its

owners or shareholders; 2) when the corporation is used for

illegal purposes; and 3) when the corporation is used as a sham to

perpetrate a fraud. Villar v. Crowley Maritime Corp., 990 F.2d

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1489, 1496 (5th Cir.1993), cert. denied, --- U.S. ----, 114 S.Ct.

690, 126 L.Ed.2d 658 (1994) (quoting Fidelity & Deposit Co. of

Maryland v. Commercial Cas. Consultants, Inc., 976 F.2d 272, 274-75

(5th Cir.1992). The purpose of disregarding the corporate fiction

is to "prevent the corporation's owners from using the "corporate

entity as a cloak for fraud or illegality.' " Id.

Capital argues that Texas law does not require corporate

formalities to be disregarded; the corporate entity may retain its

form but still be a mere "alter ego" if it is used as part of an

unfair device to achieve an inequitable result.2 Therefore,

because facts exist demonstrating that the separate corporate

existence of Waco is no longer recognized by Southeastern, any

offer to purchase the stocks or assets of Southeastern necessarily

constitutes an offer to purchase the stocks or assets of Waco

sufficient to trigger Capital's right of first refusal.

The district court concluded that piercing the corporate veil

of Waco would have no bearing upon the option contract granting

Capital a right of first refusal with regard to the sale of Waco

because the option contract is binding only upon Southeastern. In

addition, the court found that there was no evidence that any of

Southeastern's shareholders created Southeastern as a corporate

fiction to avoid any type of liability as to the option contract

2
In making its alter ego argument, Capital relies on
Castleberry v. Branscum, 721 S.W.2d 270, 271 (Tex.1986), which
was legislatively overruled five years ago. See TEX.BUS.CORP.ACT
ANN. art. 2.21 (West 1994); Villar v. Crowley Maritime Corp.,
990 F.2d 1489, 1496 n. 8 (5th Cir.1993), cert. denied, --- U.S. -
---, 114 S.Ct. 690, 126 L.Ed.2d 658 (1994).

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between Southeastern and Capital. We find that the record fully

supports the district court's findings. Capital has not pleaded

facts sufficient to meet the standard required to show alter ego

under either theory recognized by this Court. Therefore, we must

affirm the court's findings.

MOTION TO AMEND

Capital's November 12, 1993 notice of appeal explicitly

appealed from "the Final Judgment entered in this action of the

14th day of October, 1993." The notice of appeal did not mention

the district court's denial of Capital's Motion for Leave to Amend

Complaint, Vacate Order and Judgment, and for Reconsideration filed

on October 20, 1993, after the court entered final judgment. Rule

3(c) of the Federal Rules of Appellate Procedure provides that

"[t]he notice of appeal shall ... designate the judgment, order or

part thereof appealed from." Therefore, Capital did not meet the

requirements of Rule 3(c).

Where the appellant notices the appeal of a specified judgment
only or a part thereof, ... this court has no jurisdiction to
review other judgments or issues which are not expressly
referred to and which are not impliedly intended for appeal.

Pope v. MCI Telecommunications Corp., 937 F.2d 258, 266 (5th

Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 1956, 118 L.Ed.2d

558 (1992) (quoting C.A. May Marine Supply Co. v. Brunswick Corp.,

649 F.2d 1049 (5th Cir.), cert. denied, 454 U.S. 1125, 102 S.Ct.

974, 71 L.Ed.2d 112 (1981)).

We thus conclude that because Capital's notice of appeal did

not specifically mention its motion to amend its complaint, filed

and denied after final judgment was entered on October 14, 1993,

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the issue is not properly before us.

CONCLUSION

For the following reasons the judgment of the district court

is AFFIRMED.

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