Rimade Ltd. v. Hubbard Enterprises, Inc.

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
October 7, 2004
FOR THE FIFTH CIRCUIT
_____________________ Charles R. Fulbruge III
Clerk
No. 03-11294
_____________________

RIMADE LTD., Via Alla Fontana 32,
6977 Ruvigliana, Switzerland;
GIAIT LTD., Alla Fontana 32, 6977
Ruvigliana, Switzerland; PNEUS ACQUI
S.P.A., Reg Barbato, 21, 15011 Acqui
Terme, Italia,

Plaintiffs - Appellants,

versus

HUBBARD ENTERPRISES, INC., Etc., ET AL.,

Defendants,

ROBERT M. HUBBARD, also known as
Bob M. Hubbard,

Defendant - Appellee.
__________________________________________________________________

Appeal from the United States District Court
for the Northern District of Texas
_________________________________________________________________

Before JOLLY, WIENER, and PICKERING, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

The Plaintiff tire companies sued Robert M. “Bob” Hubbard,

seeking to hold him liable for the debt of his company, Hubbard

Enterprises, Inc. (“HEI”), a tire wholesaler. After a bench trial,

the district court held that the evidence did not support the

Plaintiffs’ contention that Hubbard used HEI as a corporate sham to

defraud creditors, refused to hold Hubbard personally liable for

HEI’s debts, and entered a take-nothing judgment. The Plaintiffs
have appealed. In this fact-intensive case, we are bound by the

clearly erroneous standard of review, which is particularly

important on the question of Hubbard’s intent to defraud.

Accordingly, we are persuaded that the district court committed no

reversible error in concluding that, under Texas law, HEI’s

corporate veil should not be pierced to reach Hubbard’s personal

assets. We therefore affirm.

I

Rimade Ltd. (“Rimade”) and Giait Ltd. (“Giait”) are Swiss tire

manufacturers that supply tires to Pneus Acqui, S.p.A. (“Pneus

Acqui”), an Italian tire distributor and wholesaler (collectively,

the “Plaintiffs”). One of Pneus Acqui’s customers was Bob Hubbard

and his business, HEI, a Tennessee corporation with its principal

place of business in Fort Worth, Texas. Hubbard, who was the

president, sole shareholder and director of HEI during its rather

brief existence, sold tires in Texas and surrounding states.

Pneus Acqui sold HEI tires on credit from 1998 to 2001. It

negotiated terms with Hubbard alone and shipped tires from Europe

to Texas under standard invoices generated by Giait and Rimade.

The Plaintiffs required that Hubbard maintain a standard letter of

credit for a fixed amount that could be drawn on in the event that

he failed to make a payment. Hubbard opened a $350,000 letter of

credit (the “Letter”) with First Tennessee Bank (“First Tennessee”)

in April 1998, which the Plaintiffs allowed him to reduce to

$150,000 a year later.

2
 A

On June 20, 2000, Hubbard directed an HEI employee to email

Rimade and ask if HEI could cancel its Letter. Rimade refused the

request, as HEI owed Rimade about $300,000 at the time. As of

August 31, 2000, all invoices from the beginning of the business

relationship between the Plaintiffs and HEI, totaling over $4.3

million, had been paid in full. Shortly thereafter, HEI began to

fail to make payments, but Hubbard induced the Plaintiffs to

continue providing tires by promising that he would use the profits

from these new tires to pay overdue invoices.

On January 30, 2001, Pneus Acqui employee Loretta Ferrarin

emailed Hubbard to request that he increase HEI’s Letter to

$400,000 because the outstanding balance had reached over $1

million. Unknown to the Plaintiffs, however, their bank, SG Ruegg

Bank SA (“SG Ruegg”), had informed First Tennessee that the Letter

was no longer required. Accordingly, First Tennessee canceled the

Letter and informed Hubbard of the cancellation by fax the day

before Pneus Acqui sent its email. Hubbard responded to Pneus

Acqui by stating that he could not increase the Letter; as Hubbard

testified, he knew the Letter had been canceled but did not mention

this fact to Pneus Acqui. Hubbard testified that he never intended

to mislead the Plaintiffs, and that he made no effort to conceal

the Letter’s cancellation. Further tire shipments to Hubbard were

still accompanied by invoices stating they were covered by the

Letter.

3
 On April 24, still believing the Letter to be in place,

Ferrarin again wrote to Hubbard to state that, because HEI owed

nearly $700,000 and had a Letter for only $150,000, future

shipments would have to be paid for upon receipt. Sometime in May

or June, the Plaintiffs finally learned from SG Ruegg that the

Letter had in fact been canceled, at which point they stopped

selling tires to HEI. Ferrarin testified that the Plaintiffs never

would have made the on-credit sales to HEI between January and June

2001 had they known that the Letter had been canceled.

On August 30, after HEI had failed to pay down its overdue

invoices, and knowing the Letter was no more, Ferrarin met with

Hubbard in Texas to discuss resolution of the outstanding balance.

At the meeting, Hubbard signed summaries that reflected HEI’s debt

of $227,922.68 to Rimade and $224,647.51 to Giait. Hubbard also

signed a letter stating that he was giving Ferrarin six post-dated

checks totaling $105,000 to begin a payment plan. Only two of the

checks were honored, however, as Hubbard later instructed First

Tennessee to stop payment on the remaining four.

At the time the complaint was filed in this matter, HEI and

Hubbard stipulated that HEI owed the Plaintiffs $359,052 (exclusive

of interest) -- and this is where the balance stood in July 2003.

In sum, in the course of their dealings, the Plaintiffs sent tires

to HEI that were invoiced for a total of nearly $6 million, all of

which HEI either paid for or returned, with the exception of the

$359,000 worth of tires at issue in of this litigation.

4
 B

Hubbard also had extensive involvements with a number of other

businesses owned and operated by Hubbard and his relatives

(collectively the “Hubbard Businesses”), most of which sell and

resell tires in Texas.1 Hubbard and his sons, through their

controlling interests, caused the Hubbard Businesses to engage in

a variety of questionable business practices, including: 1) making

loans to each other that were never collected; 2) renting property

to each other without collecting the full rents; and 3)

overextending credit to each other.

Of particular relevance to this case, between October 2000 and

June 2001, the time when HEI was running up its debt to the

Plaintiffs, HEI transferred over $1 million in assets, including

the Plaintiffs’ tires, to Tire Dealers Warehouse (“TDW”), a

corporation owned and operated by Hubbard’s sons. From April to

August 2001, HEI transferred over $1.4 million in inventory to TDW

on credit. TDW paid several hundreds of thousands of dollars to

HEI during the first three quarters of 2001, but was unable to

continue paying its debts thereafter. TDW ceased doing business as

of March 2003, and sold all its assets to various entities,

including other Hubbard Businesses. TDW still owes HEI over $1.9

million, and it is making payments to HEI’s secured creditor.

1
In the light of the stipulations in the parties’ Joint
Pretrial Order, there is no dispute as to Hubbard’s involvement in
the Hubbard Businesses, or in the Hubbard Businesses’ activities.

5
 Hubbard never caused HEI to so much as issue a demand letter

to TDW, which is the only business to which HEI “overextended”

credit -- though he did file a security interest for HEI against a

TDW lease. Hubbard also never told the Plaintiffs that he was

selling tires on credit to his sons’ company, or that he was making

no efforts to collect on those sales. Ferrarin testified that the

Plaintiffs never would have continued making sales on credit to HEI

if they had known about Hubbard’s dealings with TDW.

According to Reginald Parr, the Plaintiffs’ accounting expert,

HEI was always insolvent by some definition during its short life,

and it owed Hubbard over $400,000 at the time of the trial.

Because HEI was a subchapter S corporation, its income was taxed as

Hubbard’s income, though Hubbard never received distributions as a

shareholder. He did receive salaries of $88,000 in 2000 and

$64,000 in 2001, as well as rental income from TDW (from his stake

in Berry Street Properties, a Hubbard Business).

C

On October 8, 2002, the Plaintiffs sued HEI and Hubbard,

charging that HEI breached its contract and that “HEI is the alter

ego of Hubbard who used HEI to defraud Plaintiffs.” In June 2003,

the Plaintiffs moved for summary judgment (which motion they later

supplemented) and Hubbard moved for partial summary judgment on the

sole question of his own personal liability. In July, the district

court denied the Plaintiffs leave to amend their complaint with new

counts based on new evidence from discovery.

6
 The district court then partially granted the Plaintiffs

summary judgment, entering judgment against HEI in the amount of

$359,052, plus interest and costs. It also denied the opposing

motions for summary judgment on the veil piercing issue. Hubbard

then stipulated that HEI ceased doing business in November 2002 and

had disposed of all its assets at that time.

The case proceeded to a one-day bench trial in November 2003

on the issue of whether Hubbard had used HEI to defraud the

Plaintiffs, thereby warranting veil piercing. The Plaintiffs

called Ferrarin, Parr, and Hubbard. The defense called only

Hubbard. The district court restated each of the five contested

issues of fact from the Joint Pretrial Order and then orally

announced that it was ruling for Hubbard in each instance without

making any specific findings.2 It then issued a brief Order,

2
The jointly stipulated contested findings of fact were:

1. Whether Hubbard used HEI to defraud the
Plaintiffs by convincing them to sell HEI
tires when Hubbard knew HEI would never pay
for them;

2. Whether Hubbard continued to order and
accept tires from the Plaintiffs while knowing
HEI could and would not make payment;

3. Whether Hubbard caused HEI to sell tires on
credit to TDW despite knowing that TDW would
never be able to pay;

4. Whether the Hubbards and Hubbard Businesses
routinely failed to follow “regular commercial
business practices”;

5. Whether Hubbard engaged in a strategy of

7
stating that the Plaintiffs should be denied recovery because it

could not find in their favor by a preponderance of the evidence as

to any of the contested issues. The Plaintiffs timely appealed.

II

The Plaintiffs contend that the evidence presented at trial

establishes as a matter of law that Hubbard used HEI to defraud the

Plaintiffs in two ways: by fraudulently misrepresenting to the

Plaintiffs the status of the Letter, and by transferring HEI’s

assets to TDW in fraudulent sales such that HEI would be unable to

pay either the balance owed or the judgment. As such, the

Plaintiffs argue, the district court erred in not piercing the

corporate veil and holding Hubbard personally liable for HEI’s

debts.

We review the district court’s conclusions of law de novo and

its findings of fact for clear error. Joslyn Mfg. Co. v. Koppers

Co., 40 F.3d 750, 753 (5th Cir. 1994). The clearly erroneous

standard does not apply to factual findings made under an erroneous

view of the controlling law. Maritrend, Inc. v. Serac & Co.

(Shipping) Ltd., 348 F.3d 469, 470 (5th Cir. 2003).

Under Texas law, “there are three broad categories in which a

court may pierce the corporate veil: (1) the corporation is the

defrauding creditors by using the Hubbard
Businesses to acquire assets on credit and
then selling the assets to other Hubbard
Businesses, leaving creditors without
recourse.

8
alter ego of its owners and/or shareholders; (2) the corporation is

used for illegal purposes; and (3) the corporation is used as a

sham to perpetrate a fraud.” W. Horizontal Drilling v. Jonnet

Energy Corp., 11 F.3d 65, 67 (5th Cir. 1994). The Texas Business

Corporations Act sets additional requirements for piercing the

corporate veil in cases based on claims of breach of contract. In

such cases, the veil may be pierced where the defendant shareholder

“caused the corporation to be used for the purpose of perpetrating

and did perpetrate an actual fraud on the obligee primarily for the

direct personal benefit of the holder.” TEX. BUS. CORP. ACT art.

2.21(A)(2). Thus the alter ego and illegal purposes considerations

are not at issue; as the present case is based on a breach of

contract, we focus only on Hubbard’s alleged use of HEI to

perpetrate fraud.

A

We must first determine whether Hubbard, using HEI as a sham,

perpetrated an actual fraud on the Plaintiffs when he failed to

disclose to them that their bank had canceled the Letter. Texas

law defines fraud as the “misrepresentation of a material fact with

intention to induce action or inaction, reliance on the

misrepresentation by a person who, as a result of such reliance,

suffers injury.” Trustees of the N.W. Laundry & Dry Cleaners

Health & Welfare Trust Fund v. Burzynski, 27 F.3d 153, 157 (5th

9
Cir. 1994) (internal quotation marks and citation omitted).3 “A

defendant’s failure to disclose a material fact is fraudulent only

if the defendant has a duty to disclose that fact.” Id. A duty to

disclose “can arise by operation of law or by agreement of the

parties,” or by “some special relationship between the parties,

such as a fiduciary or confidential relationship.” Id.

Notwithstanding the above, “there is always a duty to correct one’s

own prior false or misleading statements,” such that a speaker

making a partial disclosure assumes a duty to tell the whole truth

even when the partial disclosure was not legally required. Id.

(all citations omitted).

More recently, this Court reiterated that a duty to speak

arises by operation of law when “one party voluntarily discloses

some but less than all material facts, so that he must disclose the

whole truth, i.e., material facts, lest his partial disclosure

convey a false impression.” Union Pac. Res. Group, Inc. v. Rhone-

Poulenc, Inc., 247 F.3d 574, 586 (5th Cir. 2001) (citation

omitted). In Rhone-Poulenc, this Court reversed a judgment in

favor of the defendant with respect to a fraud claim because the

defendant, when it went beyond the minimal formal disclosures

3
See also Menetti v. Chavers, 974 S.W.2d 168, 175 (Tex. App.
-- San Antonio 1998) (“Actual fraud by misrepresentation consists
of a representation that is (1) material; (2) false; (3) knowingly
false or made with reckless disregard for its truth or falsity; (4)
made with the intention that it be acted upon by the other party;
(5) relied upon by the other party; [and] (6) damaging to the other
party.”) (citations omitted).

10
required by the partnership, “assumed an affirmative duty to make

full disclosures.” Id. The defendant “could not remain silent

after merely making partial disclosures that conveyed a false

impression.” Id.

The Plaintiffs argue that here, as in the cases where partial

disclosure was held to obligate full disclosure, Hubbard’s

communications about the Letter conveyed a false impression -- that

the Letter still existed after First Tennessee canceled it -- upon

which the Plaintiffs relied to their detriment. Specifically, even

though Hubbard knew that the Plaintiffs required a Letter to sell

tires on credit, and received invoices stating that they were

covered by the then-nonexistent Letter, he never disclosed that the

Letter had been canceled. When Hubbard emailed Ferrarin to say

that he could not increase the Letter, and when he made continued

promises to pay outstanding balances, he never corrected the

Plaintiffs’ impression that the Letter remained effective. And

Hubbard’s misrepresentation was material because it induced the

Plaintiffs to continue to sell to HEI on credit, sales for which

they were never paid.

The Plaintiffs also contend that this fraud by incomplete

disclosure should be attributed to Hubbard because his acts are

indistinguishable from HEI’s. They argue that, as HEI’s sole

director, shareholder, and president, Hubbard used HEI to take

actions harmful to HEI: It was Hubbard who caused HEI to make a

partial disclosure and thereby defraud the Plaintiffs. And it was

11
Hubbard who gained a direct personal benefit from the fraud in the

form of his salary and S corporation income, thus satisfying the

veil-piercing requirements of Article 2.21(A)(2).

Yet Hubbard had no duty to notify the Plaintiffs that their

own bank had caused the Letter’s cancellation. Moreover, both

Rhone-Poulenc and Burzynski were summary judgment cases, and

summary judgment is rarely proper in fraud cases because the intent

required to establish fraud is a factual question “uniquely within

the realm of the trier of fact because it so depends upon the

credibility of witnesses.” Beijing Metals & Minerals v. Amer. Bus.

Ctr., 993 F.2d 1178, 1185 (5th Cir. 1993). To that end, the Rhone-

Poulenc court stressed that the theory of fraud based on partial

disclosure, viewed in the light most favorable to the non-movant,

was sufficient to defeat summary judgment. 247 F.3d at 591.

Similarly, Burzynski was decided on cross-motions for summary

judgment where a doctor affirmatively seeking payment for

“chemotherapy” indisputably failed to disclose that this

chemotherapy was illegal. 27 F.3d at 156.

Here the case was tried to a judge who had an opportunity to

evaluate the evidence and judge the credibility of witnesses.

There was also direct, if self-serving, evidence of a lack of

intent to deceive that supports the district court’s determination:

Hubbard twice took the stand to say he never intended to mislead

the Plaintiffs. Under the circumstances here, where Hubbard paid

more than $6 million to the Plaintiffs and ultimately had an unpaid

12
balance of less than $400,000, the court was within its discretion

to believe him. Further, Hubbard caused HEI to pay over four times

the amount of the Letter after the Letter was canceled -- the

Letter guaranteed $150,000 and HEI paid down over $600,000. This

evidence further supports the trier of fact’s determination that

there was no intent to defraud. It also shows that the Plaintiffs

did not carry their burden to show that Hubbard’s failure to tell

them of the Letter’s cancellation actually damaged them, given that

Hubbard paid down more than the Letter’s worth after its

cancellation.

Indeed, if the Plaintiffs had immediately learned of the

Letter’s cancellation and at that point ceased doing business with

Hubbard, as they testified they would have, they would have been

worse off financially. This is so because Hubbard would have lost

his supply of tires to sell, and so would not have been able to use

the profit from the sale of new tires to pay old debts, as had been

his practice. As it stands, from the time the Letter was cancelled

until the Plaintiffs learned that the Letter had been cancelled

(January 30, 2001 until May or June 2001), HEI paid the Plaintiffs

a sum equivalent to all invoices during that time period plus some

$300,000. The Plaintiffs’ evidence thus does not establish proof

of damages.

As the trier of fact, the district court weighed all the

evidence, including Hubbard’s credibility, when making its

findings, and our examination of the record does not reveal clear

13
error with respect to Hubbard’s use of HEI to defraud the

Plaintiffs with respect to the Letter.

In sum, the district court correctly applied the law of

partial disclosure: While Hubbard did nothing to correct the

Plaintiffs’ mistaken impression about the Letter, he also made no

partial disclosures to cause or perpetuate that misunderstanding.

His simple refusal to increase the amount of the Letter did not

disclose a fact that would impose a legal duty to disclose his

knowledge of the Letter’s cancellation. It was, after all, the

Plaintiffs’ own bank that had canceled the Letter and had failed to

communicate that fact to the Plaintiffs. Thus the district court’s

implicit finding that Hubbard lacked the intent to use HEI as a

sham to defraud with respect to his personal letter of credit was

not clear error. Hubbard does not dispute that HEI breached its

contract with the Plaintiffs, or that he controlled HEI, but these

facts alone are insufficient to pierce the corporate veil in this

breach of contract case under Texas law.

B

Finding that the district court did not err with respect to

the alleged fraud surrounding the Letter, we now turn to the

Plaintiffs’ argument that HEI’s veil should be pierced because

Hubbard used HEI to defraud the Plaintiffs by shifting inventory to

TDW, with the knowledge that TDW would never pay. The Plaintiffs

point to the record as showing that between October 2000 and June

2001, when Hubbard was ordering but failing to pay for the

14
Plaintiffs’ tires, Hubbard was also transferring hundreds of

thousands of dollars worth of tires to TDW -- a company that paid

salaries to Hubbard’s relatives and also paid rent to Hubbard

himself. During a time of increasing demands for payment, the

Plaintiffs contend, Hubbard was literally “giving away the store,”

knowing that HEI would never be paid and that any judgment against

it would be worthless.

To support their argument, the Plaintiffs cite Texas courts

that have pierced corporate veils where the indebted company

transfers assets to a related company to avoid judgments or

collection efforts. One court found that a company was used as a

sham to perpetrate fraud when its owner shifted its funds to

another of his companies to avoid liability. Love v. Texas, 972

S.W.2d 114, 119-20 (Tex. App. -- Austin 1998). Another court found

a sole shareholder liable for company debts when he incorporated a

new business to continue the business of a foreclosed company where

the foreclosure sale was merely an attempt to avoid creditors.

Klein v. Sporting Goods, Inc., 772 S.W.2d 173, 176-77 (Tex. App. --

Houston 1989).

In these and other cases, the defendants used companies they

wholly controlled to defraud the plaintiffs for their own personal

benefit. Here, argue the Plaintiffs, Hubbard similarly gained --

through his and his relatives’ salaries and rental income -- by

causing HEI to transfer its assets and thereby defraud the

15
Plaintiffs, thus satisfying the veil-piercing requirements of

Article 2.21(A)(2).

Yet Hubbard did not have a personal interest in TDW, and

merely selling on credit to TDW cannot be a fraudulent business

tactic because TDW paid over $500,000 to HEI during the first three

quarters of 2001 (pre-9/11) -- a time when Goodyear was considering

investing in TDW. Surely selling on credit cannot be considered

fraudulent, as this is the way the Plaintiffs themselves transacted

business with HEI. Moreover, the receivables from TDW are being

collected to the extent they can be: 1) all payments to TDW are

currently going to First Tennessee, the secured creditor to which

HEI’s receivables are pledged; 2) HEI took a security interest in

a lease owned by TDW, and payments thereunder are going toward

TDW’s debt to HEI.

Further, the Plaintiffs need to prove actual fraud, and the

trier of fact evaluated Hubbard’s testimony and did not find that

the Plaintiffs had proved that actual fraud had occurred by a

preponderance of the evidence. See Coury v. Prot, 85 F.3d 244, 254

(5th Cir. 1996) (“The burden of showing that the findings of the

district court are clearly erroneous is heavier if the credibility

of witnesses is a factor in the trial court’s decision.”). The

Plaintiffs’ authorities are inapposite: Klein pre-dates the

applicable version of Article 2.21, while Love reinforces Hubbard’s

position that actual (not constructive) fraud must be proven to

16
pierce the corporate veil where corporate liability stems from a

breach of contract. Love, 972 S.W.2d at 118. We therefore hold

that it was not clear error for the district court implicitly to

find that HEI’s credit sales were not made with any intent to harm

Plaintiffs; therefore the Plaintiffs did not establish the actual

fraud necessary to pierce the corporate veil.

Moreover, Hubbard has not taken a salary from HEI since 2001,

lost money on loans to HEI, and also paid taxes on the company’s

earnings, which were deemed to be passed through to him as

shareholder income (though no money was distributed). Thus the

Plaintiffs cannot establish Hubbard’s direct personal benefit from

any fraud, nor indeed that they were harmed by sales to TDW because

they never requested or relied on any representations by HEI

regarding its customers.

In sum, the district court correctly applied the law of

fraudulent transfer of assets: Once the court (implicitly) found

that Hubbard lacked the intent to defraud with respect to the sales

to TDW -- a finding that is not clearly erroneous -- it could not

as a matter of law have found that he used HEI as a sham to

perpetrate fraud.

III

For the foregoing reasons, the judgment of the district court

is

AFFIRMED.

17
ENDRECORD

18
WIENER, Circuit Judge, dissenting.

I respectfully dissent. To me, the factual findings of the

district court, albeit they are terse, reflect that Hubbard

knowingly and intentionally misused and disregarded his one-man

corporation’s form to disadvantage these plaintiffs, with whom he

had done business for years. His corporation’s veil should be

pierced to expose it as Hubbard’s alter ego and make him personally

liable for his corporation’s debts to Plaintiffs-Appellants.

Even when Hubbard’s acts and omissions are viewed in the

context of the legal hurdles erected by the applicable law of

Texas, he emerges as anything but an innocent, unsophisticated tire

dealer. He fraudulently stood mute and continued to do “business

as usual” with these plaintiffs despite his certain knowledge of a

key fact that he was duty bound to disclose, viz., that unbeknownst

to his vendors, the letter of credit partially securing his

corporation’s obligations to them had been canceled. Knowing full

well that these plaintiffs were unaware that the security for these

transactions had ceased to exist and that they would not sell

merchandise to him in its absence, Hubbard not only continued to

make unsecured purchases of tires, but proceeded to orchestrate

duplicitous non-arms-length transfers of that merchandise from his

wholly owned and operated corporation to entities owned and

controlled by none other than his own sons. He deliberately put

this merchandise and its sales proceeds beyond the reach of his
uninformed, arms-length creditors and simultaneously made them

available instead to his corporation’s lending bank, a secured

creditor to which —— not so coincidentally —— Hubbard was

personally liable as guarantor. He obviously benefited personally

from these intra-family machinations, not just from rent received

and Sub-S corporation advantages realized, but from substantial

reduction or elimination of his personal liability to his bank as

well.

Like the district court, the panel majority errs by viewing

each discrete fact as a snapshot —— “in a vacuum” —— rather than as

a series of links in a continuous and evolving chain of ongoing

business transactions between the parties. Far too much is made of

the unrelated fact that the letter of credit happened to get

canceled through the inadvertence of the plaintiffs’ bank; far too

much emphasis is placed on meaningless statistics of in-and-out

sales and payments; far too little weight is given to the financial

advantages that Hubbard realized personally through the totality of

his manipulation of “his” corporation; totally ignored is the

concept of attribution, the ascribing of the acts of one party to

another closely related party; entirely unrecognized is the

commercial fact that the letter of credit was not meant to serve as

full collateral but as a safety net to hold the vendors’ potential

losses to a manageable risk level; unrealistic is the treatment of

the arms-length transactions between these litigants as

20
indistinguishable from the non-arms-length transactions among

family members.

Except for Hubbard’s wide-eyed, self-serving testimony that he

intended no fraud, all objective evidence demonstrates, to my

satisfaction at least, that this is the very kind of case that

cries out for the piercing of the corporate veil to hold its sole

shareholder personally liable to those he duped by interposing his

corporate alter ego and remaining silent in the face of his duty to

inform. If nothing else, we today re-affirm the age-old adage that

“debtors either die or move to Texas.” Despite my sincerely

genuine respect for the district court and my learned colleagues of

the panel majority, I am constrained to dissent.

21