Corporation and officer both personally liable for government debt rules Third Court of Appeals.

Anderson Petro-Equipment, Inc. and Curtis Ray Anderson v. The State of Texas, No. 03-13-00176-CV (Tex. App. – Austin, October 22, 2013).

In this suit the State of Texas sued the Anderson defendants (corporation and individual officer) for costs associated with plugging an inactive oil/gas well. The trial court awarded the State $75,930 along with attorney’s fees and costs after granting the State’s summary judgment motion. The Anderson defendants appealed. The important thing for government attorney’s to take away from this case is that when dealing with corporations, those who run them can still be individually liable, even if they dissolve. Individual liability can be a strong negotiating tool and leverage when dealing with a stubborn corporation operating within the City.

Prior to forced plugging, the Texas Natural Resource Commission, through administrative proceedings, ordered Anderson to bring the well into compliance or to plug it. Anderson failed to bring it into compliance so the Commission plugged the well and sued for costs.  Of significant importance in this case is the timing of the Anderson corporation failure to pay its franchise tax resulting in a loss of corporate privileges in Texas. The Third Court of Appeals held that even though the Commission’s claim was not ripe until after the loss of privileges, the facts leading to the claim occurred prior to the loss of privileges.  The defunct corporation could then be liable through remaining assets. However, in a twist on the statutory language, the court held Mr. Curtis Anderson was still personally liable since the actual debt occurred after the corporation became defunct. In other words, the claim occurred before the loss of privileges (meaning corporation is still liable) but the debt occurred after the loss (so individual is liable). Kind of a double-whammy for the corporation and officer.

So, the moral of the story is to check whether the corporation paid its franchise tax and the exact date of non-payment, if any. Such knowledge can be significant when dealing with a corporate officer.

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