PJC Business 2024

P IERCING THE C ORPORATE V EIL

PJC 108.4

PJC 108.4 Instruction on Sham to Perpetrate a Fraud PJC 108.4A Instruction on Sham to Perpetrate a Fraud in Cases Governed by Tex. Bus. Orgs. Code § 21.223(a)(2) Don Davis used [ name of corporation ] for the purpose of perpetrating and did perpetrate an actual fraud on Paul Payne primarily for the direct personal benefit of Don Davis . [or] PJC 108.4B Instruction on Sham to Perpetrate a Fraud in Cases Not Governed by Tex. Bus. Orgs. Code § 21.223(a)(2) Don Davis used [ name of corporation ] as a sham to perpetrate a fraud, and holding only [ name of corporation ] responsible would result in injustice . [or] COMMENT When to use. PJC 108.4 should be used as an instruction accompanying the ques tion in PJC 108.1 if it is alleged that a defendant used a corporation as a sham to perpe trate a fraud. Use PJC 108.4A in those contract-related matters governed by Tex. Bus. Orgs. Code § 21.223(a)(2) and PJC 108.4B in other matters. For additional discussion on section 21.223(a)(2), see PJC 108.2 . Use of “or.” If used with other instructions (see PJC 108.3 and 108.5–108.8), PJC 108.4 must be followed by the word or , because a finding of any one of the theories for disregarding the corporate fiction defined in the instructions would support an affirmative answer to the question. The common-law standard for sham to perpetrate a fraud. The Texas Supreme Court has not opined whether the Castleberry common-law standard still applies to claims of “sham to perpetrate a fraud” not governed by Tex. Bus. Orgs. Code §21.223(a)(2). In 1986, Castleberry held that “constructive fraud, not inten tional fraud, is the standard for disregarding the corporate fiction on the basis of a sham to perpetrate a fraud.” Castleberry v. Branscum , 721 S.W.2d 270, 275 (Tex. 1986); see also Menetti v. Chavers , 974 S.W.2d 168, 173–74 (Tex. App.—San Anto nio 1998, no pet.) (discussing when a showing of actual fraud is necessary after the 1997 amendments to the Texas Business Corporation Act). Under the Castleberry standard, “constructive fraud is the breach of some legal or equitable duty which, irre-

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