Motion for Summary Judgment in DFW COMMERCIAL CONSTRUCTION LLC vs. xxxxxx xxxxxxxxxxx GROUP LLC, et al| Trellis.Law

On September 21, 2022 a Motion-Secondary was filed involving a dispute between Dfw Commercial Construction Llc, and Davis, Keith, Xxxxxx Xxxxxxxxxxx Group Llc, Legend Clasic Homes Ltd, Mcgee, Terrence, for CNTR CNSMR COM DEBT in the District Court of Dallas County.

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FILED
3/20/2024 5:30 PM
FELICIA PITRE
DISTRICT CLERK
DALLAS CO., TEXAS
Elizabeth Ferguson DEPUTY

CAUSE NO. DC-22-13320

DFW COMMERCIAL CONSTRUCTION IN THE DISTRICT COURT
LLC D/B/A DFW COMMERCIAL LLC
Plaintiff,

vs. 134% JUDICIAL DISTRICT

xxxxxx xxxxxxxxxxx GROUP
LLC, KEITH DAVIS, AND TERRANCE
MCGEE
Defendants, DALLAS COUNTY, TEXAS

RESPONSE TO THE TRADITIONAL MOTION FOR
SUMMARY JUDGMENT FILED BY TERRANCE MCGEE

TO THE HONORABLE JUDGE OF SAID COURT:

COMES NOW, Plaintiff DFW Commercial Construction LLC d/b/a DFW Commercial

LLC (“Plaintiff’ or “DFW”) and subject to Plaintiff's Motion To Continue files this Response to

the Traditional Motion For Summary Judgment Filed by Terrance McGee and for such would

show the Court as follows:

Breach of Contract/Quantum Meruit/Sworn Account and Unjust Enrichment

Plaintiff has agreed by Rule 11 agreement that it is not suing Mr. McGee nor has it sued

Mr. McGee for Breach of Contract, Quantum Meruit, and Sworn Account so summary judgment

should not be entered in this regard as the matter is moot. Further, Plaintiff has dropped its

unjust enrichment claims against Davis and McGee with its most recent live pleading, also

making this matter moot.

IL.

Disputed Facts that Defendant McGee Asserts are undisputable.

1 Plaintiff agrees there is no contract between McGee and DFW.

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 1
2. Plaintiff asserts that McGee knew more than he is revealing and the proof of that

includes Mr. Davis representations to the Plaintiff’s representative Cesar Bugarin that Mr. Davis

was consulting with his partner. (See Affidavit of Cesar Bugarin attached.)

3 Plaintiff does not believe Mr. Davis and Mr. McGee when they assert that Mr.

McGee was passive and had no knowledge of the xxxxxx contract. In fact McGee participated

in transferring property from xxxxxx to Wintergreen Estates LLC which aided in the avoidance

of debt under TUFTA. (See Exhibit B the Affidavit of Michael Robinson with exhibits attached

showing participation of Mr. McGee as Managing Member and Individually, moving assets out

of xxxxxx to Wintergreen)

4 Plaintiff does not dispute the assertion that McGee did not speak directly with

anyone working with DFW.

5 Whether McGee schemed and conspired with Davis and xxxxxx is a disputed fact

issue. In fact McGee was a Manager of xxxxxx and shared responsibility with Davis for its

operation even if he wants to escape that responsibility at this time.

At the very least Mr. McGee did participate in the transfer of at least one asset of xxxxxx

directly and that was the Lancaster Property (see Affidavit with exhibits of Michael Robinson

attached hereto.) In addition, as the Managing Member of xxxxxx Mr. McGee had a

responsibility to ensure that funds were not transferred in violation of the law by his comanager

Mr. Davis. (See Exhibit A Affidavit of Francis Tucker with summary exhibits showing transfers

over $1.4 million dollars taken out of companies at times of owing debt to companies’ owner of

for the benefit of Mr. McGee and Mr. Davis as discussed in their attached deposition testimony).

6. To date there is no evidence of transfer to Mr. McGee but Mr. McGee testified he

intends to receive 50% of whatever Mr. Davis got and that he did not approve any salary and did

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 2
not realize at the time of his deposition that Mr. Davis had received those funds that were taken

from xxxxxx. In addition, Mr. Davis has testified that he gave Mr. McGee interest in other

corporations and properties with the intent of getting Mr. McGee a return for his losses on the

xxxxxx project. (See Deposition Excerpts attached to Affidavit of Michael Robinson in which

McGee expects to get back his 50% interest in whatever Mr. Davis has taken and Mr. Davis

statements about getting that back by giving McGee an interest in other projects and companies)
7
McGee by his pleadings claims that he was not a signatory on the bank account

but there is no bank records that have been produced to establish this fact.

8 Plaintiff does not dispute the assertion that DFW representatives did not

communicate with Mr. McGee.

9 The assertion in paragraph 9 that all of the facts are undisputed is just not true.

Please see responsive arguments set out above. There are fact issues to be determined by the

trier of fact as set out in 1 through 8 above and further with regard to conspiracy and violations

of TUFTA which do not require direct evidence but rather can be fully supported by

circumstantial evidence as well as direct evidence concerning Mr. McGee’s participation in the

transfer of the Lancaster Property (Wintergreen Deal) in anticipation of lawsuits for collection

that Mr. Davis would have anticipated at the time the transfers were done.

Hil.

Exhibits and Evidence of Response

Exhibit A — Affidavit of Francis Tucker (accounting expert) with Exhibits

Exhibit B — Affidavit of Michael E. Robinson with Exhibits

Exhibit C — Affidavit of Cesar Bugarin, representative of Plaintiff

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 3
IV.

Argument and Authorities

A. Defendant McGee (the now allegedly silent partner) May Be Held Liable.

There are various reasons why Defendant McGee may be held liable in this case. In fact,

most are explicitly premised on McGee’s own individual conduct, participation, and control of

the various limited liability companies at the heart of this case.

a. Conspiracy

McGee may be held liable under conspiracy. Under Texas law, a defendant may be held

liable under conspiracy where that person committed an overt act in furtherance of the

conspiracy. The key issue in this case is that Mr. Davis and Mr. McGee were funneling money

and properties out of the xxxxxx in furtherance of defrauding creditors and construction service

providers, including Plaintiff. Although Mr. Davis was the primary bad actor, bank records show

he was using the company bank account as his personal “piggy bank” buying expensive jewelry

for girlfriends and pillaging about $1.4 million for himself while claiming the company is

insolvent to dupe creditors and service provides. Mr. McGee also participated and acted in

furtherance of the scheme, specifically as to the Wintergreen deal, wherein it appears Mr. McGee

participated by signing transfer documents and moved property away from the reach of creditors.

The Wintergreen paperwork (which Defendants had tried dramatic efforts to hide) is now being

obtained after 3 motions to compel and finally subpoenaing them from an outside third party

who will actually produce them supposedly. This is the subject of the current motion to continue

this traditional motion for summary judgment hearing.

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 4
b. Texas Uniform Fraudulent Transfer Act

Mr. McGee is also liable under the Texas Fraudulent Transfer Act (TUFTA). TUFTA

makes it unlawful and actionable for any person or entity to move assets to the detriment of a

creditor. Again, in brief, the various entities set up by McGee and Davis were used to obtain the

services of construction providers, including Plaintiff, then instead of paying the construction

providers and other creditors, Defendant moved assets, properties and funds to Davis’s or related

entities bank accounts and/or paid loans due from other companies. (Davis to the tune of $1.4

million to entities owned or controlled by both Davis and McGee and to which Davis had

promised to pay McGee from in the future (see Deposition Excerpts showing 50% agreement

between Davis and McGee on future proceeds) and otherwise disposed of assets. Although now,

McGee seems to want to say it was all Davis, not him. Both McGee and Davis are represented

by the exact same attorneys and McGee a Managing Member (partner) in several of the various

limited liability company used in this scheme, and as a “managing member” giving him full

control and authority over several of the limited liability companies used. In addition, Mr. Davis

has testified that he has included Mr. McGee in other enterprises and companies with the idea he

would get Mr. McGee back his money in the future. (See Deposition Excerpt attached to

Affidavit of Michael Robinson) In fact, according to Davis and McGee, it was McGee that came

up with all the money for the project with Davis putting in only $20,000.00. Now, despite

McGee and Davis’ best efforts, after 3 motions to compel and subpoenas, proof is coming to

light that McGee was not as sharp as he thought in concealing his actions and did in fact

participate in at least one of the fraudulent transactions, the Wintergreen transfer which moved

real property in Lancaster from the ownership of xxxxxx to another corporation and then that

property was sold (See Affidavit of Michael Robinson with Exhibits attached).

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 5
IL.

Fraud by Nondisclosure and Fraudulent Misrepresentation by Conspiracy

Defendants have moved for summary judgment on behalf of Mr. McGee with regard to

fraud claims. Plaintiff does not assert a direct claim of fraud against Mr. McGee but only as a

conspirator with Davis acting as a comanager of xxxxxx at all times. The evidence with regard

to this conspiracy can be shown by circumstantial evidence.

The Defendants assert that the claim must rise and fall on whether there is a fiduciary

relationship between the Plaintiff and Mr. McGee but then points out in their own Motion that

this is not necessarily true if the person “is acting for a personal purpose of their own.” Plaintiff

asserts that Mr. McGee as well as Davis were acting for a personal purpose in taking funds from

xxxxxx and with the intent of not paying Plaintiff
for its work on this project.

Plaintiff would show that a fiduciary relationship is asserted in that xxxxxx received

funds for the xxxxxxxxxxx that were not used for xxxxxxxxxxx in violation of the Texas Property

Code or at least there is a fact issue in this regard. A fiduciary relationship is not a requirement

under all circumstances where fraud is alleged.

A. “Economic Loss/Independent Injury Rule” Do Not Apply in this Case.

The fraud complained of in this paragraph and the paragraph below is based on the

inducement into the contract by fraud and the continuation of that fraud during the contract

period and into the summer of 2021. In 1998, the Texas Supreme Court created an exception to

the economic-loss rule that allowed injured parties to recover in tort when they were fraudulently

induced into a contract. This exception allows plaintiffs to recover not only the economic loss of

the contract but also punitive damages. The economic loss rule does not therefore apply to the

complained of tort in this case.

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 6
Indeed, most states have adopted the broad fraud in the inducement exception to the

economic loss/independent injury doctrine. The broad exception provides that the fraud is an

intentional tort, and as such, the intentional misrepresentation is actionable as a tort,

notwithstanding that the contract losses are solely economic.

Specifically, in 1998, Texas made it clear that the “independent injury/economic loss

rule” does not apply to fraud in the inducement and every court since has followed this.

Formosa Plastics Corp. USA v. Presidio Eng’rs and Contractors, Inc., 960 S.W.2d 41, 47 (Tex.

1998). As the Formosa Court explained, in Texas, successful plaintiffs under a claim for

fraudulent inducement (i.e., pre-contract-formation fraud) may recover not only the economic

loss of the contract (i.e., the benefit of the bargain) but also punitive or exemplary damages for

the fraudulent tort itself. The Court explained why it allowed tort-based recovery (i.e.,

exemplary damages) for fraudulent inducement plaintiffs in addition to the benefit of the bargain

recovery, stating that “Since Graham, this Court has continued to recognize the propriety of

fraud claims sounding in tort despite the fact that the aggrieved party’s losses were only

economic losses.” /d.

The Court further explained that exemplary damages were appropriate for fraudulent-

inducement claims since it had already recognized such damages for tortious-interference-with-

contract claims. Since Texas law establishes that the benefit-of-the-bargain recovery is available

under tort law, it follows that Texas law affirms the possibility that fraudulent-inducement claims

may be used as a vehicle to recover punitive damages.

Since, 1998, it is well established in Texas law that the economic loss rule does not apply

to a “fraud in the inducement” claim and the Dallas Court of Appeals has repeatedly held such.

See, e.g. Lau v. Corbitt, No. 05S-00—1020-—CV, 2001 WL 910931, at *1 (Tex. App.—Dallas Aug.

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 7
13, 2001, pet. denied); and CExchange, LLC v. Top Wireless Wholesaler, No. 05-17-01318-CV,

2019 WL 3986299, at *7—-8 (Tex. App.—Dallas Aug. 23, 2019, pet. denied) (mem. op.)

B “Circumstantial Evidence” is Exactly How Fraudulent Inducement Is Proven.

The Texas Supreme Court has repeatedly held that “circumstantial evidence” is exactly

how a plaintiff proves fraudulent inducement. Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432,

434 (Tex. 1986); Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960

S.W.2d 41, 47 (Tex. 1998) (same) (also noting that “economic loss rule” does not bar claim for

fraudulent inducements).

As the Texas Supreme Court has noted while a party’s intent is determined at the time the

party made the representation, it may be inferred from the party's subsequent acts after the

representation is made. Spoljaric, 708 S.W.2d at 345 (Tex. 1986). While failure to perform,

standing alone, is not sufficient evidence of the promisor’s intent not to perform when the

promise was made, the fact is a circumstance to be considered with other facts to establish intent.

Id. As the Court further noted, since intent to defraud is not susceptible to direct proof, it

invariably must be proven by circumstantial evidence. /d. Thus, the Court held that even

ee
slight circumstantial evidence of fraud,’ when considered with the breach of promise to

perform, is sufficient to support a finding of fraudulent intent.” Jd.

In sum, it has been said repeatedly held that “breach combined with slight circumstantial

evidence of fraud constitutes some evidence of fraudulent intent and is legally sufficient to

support a verdict.” See, e.g. Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 305 (Tex.

2006); Dynegy, Inc. v. Yates, 345 S.W.3d 516, 530-32 (Tex. App.—San Antonio 2011), rev'd on

other grounds, 422 S.W.3d 638 (Tex. 2013) (same); Yeldell v. Goren, 80 S.W.3d 634, 637 (Tex.

App.—Dallas 2002, no pet.) (same); Hubicki v. Festina, 156 S.W.3d 897, 904 (Tex. App.—

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 8
Dallas 2005) (same) (also holding that even under heightened standard of review for exemplary

damages that sufficient evidence supported fraud finding underlying exemplary damages award

when finding was based on circumstantial evidence that defendant intended not to perform at

time of representation: specific testimony was that plaintiff believed that defendant never

intended to fulfill promise based on long-standing relationship between parties, plaintiff's

knowledge of defendant's business practices, and statements made by defendant when refusing to

fulfill promise and post breach acts by defendant), rev'd on other grounds, 226 S.W.3d 405 (Tex.

2007); Heydari v. El-Sarabi, No. 05-04-00794-CV, 2005 WL 1950823, at *5 n.1 (Tex. App.—

Dallas Aug. 16, 2005, no pet.) (same)

cC Piercing the Corporate Veil and Sham to Perpetrate a Fraud

a piercing the corporate veil

Plaintiff has also alleged piercing the corporate veil and McGhee may also be held liable

under piercing the corporate veil theories. What has come to light is that McGee and Davis set

up numerous shell limited liability companies. Then, using those limited liability company they

signed agreement and precured numerous construction services from contractors’ services; then

after obtaining the services, removed assets and real property, making the limited liability

companies broke, specifically Davis withdrew ~1.4 million in corporate funds, such conduct is a

sham to perpetuate a fraud, allowing veil piercing of each the numerous limited liability

companies McGee and Davis created. Moreover, the company in no way was maintained as

separate legal entities apart from the owners, as on numerous occasions, money was taken out of

the corporate bank accounts for personal expenses and purchases of gifts for girlfriend and used

for payment of loans on other properties held by other corporations. (See affidavit of Francis

Tucker and records attached showing loan payments made to benefiting other companies in the

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 9
amount so far equal to $240,680.61.) This is a second reason piercing the corporate veil is

allowed. It does not matter if the conduct was by Davis rather than McGee, once the corporate

veil has been removed, the owners become liable for the debts of the shell limited liability

entities that both Davis and McGee set up and then ran up bills under. Moreover, evidence is

coming to light that McGee was in fact more active then previously thought and on the

Wintergreen Estates LLC deal where the Lancaster 10 acre property was transferred out of

xxxxxx to Wintergreen, Mr. McGee personally took steps in the shell company scheme to move

assets. Such documents are still being obtained and are the subject of the pending motion for

continuance.

b. managing member of each limited liability company

McGee may also be held liable as a “managing member" of the shell limited liability

companies used in this scheme. Although McGee is now trying to distance himself from Davis

and Davis’ overt conduct in the scheme, its quite noteworthy and glaring that McGee is being

represented by the same lawyers in this case as Davis and shell entities. In addition, McGee was

positioned on some of the shell limited liability companies as a managing member of company,

giving McGee full control and authority over all of its actions and activities. This is abundantly

significant and powerful under the law. The Texas Limited Liability Act allows so called “silent

partners” or “passive investors” to be created in a limited liability company, what McGee now

seems to be arguing he was. To do this is very easy, a limited liability company can have two

classes of control positions, members (who just have ownership but no control) or managers (who

have both ownership and control). Here, McGee positioned himself not as a passive owner or

silent partner (i.e. a member) but instead as a managing member (with full control and authority)

over the activities of each of the shell entities. Now, what is coming to light in the Wintergreen

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 10
deal is that despite McGee’s best efforts to make it look like he was merely a “silent partner” or

“passive investor,” he did in fact have to use his managing member position in furtherance of the

scheme and his signature on behalf of the entity is on those documents in order to transfer

Lancaster property from xxxxxx to Wintergreen Estates, LLC. Such documents are still being

obtained and are the subject of the pending motion for continuance.

c. Tex. Bus. Orgs. Code § 101.114

Outside of piercing the corporate veil, the Texas Business Code also provides that a

member or manager of a limited liability company may also be held liable for the debts of the

LLC when the company was used for the purpose of perpetrating, and did perpetrate, an actual

fraud for the member or manager’s direct personal benefit. See Tex. Bus. Orgs. Code § 101.114

Yet, even under this provision, McGee may be held liable for the debts to plaintiff in this case.

What is undisputed is that McGee and Davis are continuing in their relationship, with Davis

telling McGee that he will get his money back in the future from other deals that Davis is

involved in.” What McGee seems to argue through the same attorneys as Davis, is that Davis

only received monetary benefits while he did not. However, what has now come to light is under

the Wintergreen deal, which McGee directly participated in, he likely received a direct financial

benefit. Such documents related to the Wintergreen deal are still being withheld by the attorneys

for Davis and McGee but Plaintiff is trying to obtain those documents via its current subpoena on

Wintergreen and are the subject of the pending motion for continuance.

Plaintiff would show that the corporate veil in this case was a sham and that the

fraudulent actions complained of provide justification for ignoring the corporate veil defense. In

Texas, attempts to break beyond the shield of protection that a corporation provides its

shareholders and affiliates can be traced at least as far back as the case of Castleberry v.

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 11
Branscum, 721 S.W. 2d 270 (Tex. 1986). In Castleberry, In Castleberry, the jury found that

corporate officers ran the business as a “sham to perpetrate fraud” against the plaintiff. Despite

previously held notions that a corporation shields its officers, shareholders, stockholders, and

other affiliates from liability, Branscum and By both, the officers guilty of fraud against

Castleberry, were held personally liable for a promissory note made by the corporate entity.

Ultimately, the Texas Supreme Court upheld the original verdict based on principles of equity,

arguing for a “flexible fact-specific approach...” when fraud is involved. /d. at 272-73 (quoting

Fletcher, Cyclopedia Corporations § 5 at 40 (1942).

Despite the modern day statutory prohibition of establishing fraud as a reason to breach

the corporate veil the statute does provide that Subsection (a)(2) does not prevent or limit the

liability of a holder, beneficial owner, subscriber, or affiliate if the obligee demonstrates that the

holder, beneficial owner, subscriber, or affiliate 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, beneficial owner, subscriber, or affiliate.

According to Castleberry, the definition of “actual fraud” is “dishonesty of purpose or

intent to deceive,” including all of the elements of fraud. In this case Davis has received over a

million dollars from xxxxxx at a time when it could not pay all its bills. Plaintiff asserts that the

evidence shows that the corporate structure was a mere funnel for Davis to benefit himself and

his partner McGee and when the deal went bad he moved funds to other enterprises and

companies for his and Mr. McGee’s benefit.

The company was undercapitalized and was used to defraud Plaintiff as a contractor and

a creditor of the company.

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 12
In the case at bar the Plaintiff will show that the individual owners enriched themselves,

or in McGee’s case will be enriched in the future, (See Deposition Excerpts attached to Affidavit

of Michael Robinson, wherein Davis made McGee member and/or Manager in other deals to get

him back his investment) from funds removed by Davis by taking funds from the corporation

while failing to pay Plaintiff and at the same time selling assets of the corporation to third party

corporations like Wintergreen Estates, LLC (see Affidavit of Michael Robinson with documents

evidencing this transaction participated in by Mr. McGee as Manager of xxxxxx) and taking

those proceeds for the individual members personal benefit through Wintergreen Estates, LLC.

Plaintiff’s claims against Mr. McGee who is one of the two principals in xxxxxx and is one of

two Managers of said company. Through discovery so far Plaintiff has determined that over

$1,464,812.23 of proceeds from sales of lots or other sources unknown to Plaintiff have been

paid out to Mr. McGee’s co-manager Mr. Davis from November 2020 to June of 2022. (See

summary of accounting attached hereto as Exhibit “B”.) Cash withdrawals by Mr. Davis are set

out in the summary as $138,471.01 and Check Payment totaled $248,250.00. There are still

withdrawals by credit card and payments to credit cards that need to be accounted for. Plaintiff

has continued to send discovery to find out the disposition of these funds after they were paid to

Mr. Davis. However, it stretches the bounds of credulity to imagine that Mr. McGee did not

know of these payments to Mr. Davis and to what they were being applied or that Mr. McGee

was not profiting by this fraudulent transfer of funds. At the very least the facts allow for

circumstantial evidence of Mr. McGee’s participation in these clearly fraudulent transfers at a

time when Mr. Davis was promising Plaintiffs that if they would release Phase 4 and 5 that they

would be paid from the sales of those phases as alleged in Plaintiff’s Petition herein.

Plaintiff incorporates herein all prior pleadings filed in this lawsuit against the

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 13
Defendants. Defendant Terrance McGee has filed his Special Exception asserting that the

pleadings are insufficient to state a cause of action for conspiracy to commit fraud for lack of

sufficiently specific allegations of participation in such conspiracy and/or fraud over and against

the Defendant McGee as alleged in the underlying Petition. The Court overruled this special

exception but ordered the Plaintiff to plead further in response Plaintiff filed a Supplemental

Petition stating as follows;

In this regard Plaintiff asserts that McGee was one of two Managing/Members of xxxxxx

xxxxxxxxxxx Group, LLC as established by the attached document from the Texas Secretary of

State’s Office. Plaintiff would show that as a Manager McGee knew or in the alternative had a

duty to know, that Plaintiff was being hired by xxxxxx to place infrastructure on the subject

property (i.e. Phase 3 of the project) and as a Manager McGee knew or should have known that

xxxxxx did not have sufficient funds to pay for the work being done by Plaintiff on the property.

Again, not one dime has been paid to the Plaintiff for the over $700,000.00 of work performed

on the project. Plaintiff would show, on information and belief, that McGee was the money

behind the scenes and had knowledge of the funding that was available for the project and knew

it was insufficient to pay the Plaintiff when the work was being done.

Further, in this case, the LLC structure was used as part of a basically unfair device to

achieve an inequitable result and therefore the corporate veil can be pierced to assert fraud over

and against the Managers (Castleberry vs. Branscum, 721 S.W.2d 270, 271 (Tex 1986); also see

Country Village Homes, Inc. vs. Patterson, 236 8.W.3" 413 (Tex. App.—Houston [1st Dist]

2007) holding actual fraud is required to impose liability in a case arising out of a contract under

the single business enterprise theory....evidence was sufficient to sustain jury’s finding of actual

fraud in connection with alter-ego liability. The type of abuse, inequity, or injustice that

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 14
occurred in this case, as alleged, can form the basis of a legal claim that the Managers of xxxxxx

are alter egos and liable as such for the fraud of the company. The Court in Castleberry listed 6

basis for allowing corporate piercing including (1) when the fiction is used as a means of

perpetrating fraud; (2) where a corporation is organized and operated as a mere tool or business

conduit of another corporation (alter ego) (3) where the corporate fiction is resorted to as a

means of evading an existing legal obligation; (4) where the corporate fiction is employed to

achieve or perpetuate a monopoly; (5) where the corporate fiction is used to circumvent a statute;

and (6) where the corporate fiction is relied upon as a protection of crime or to justify wrong.

Further, in a foot note the Castleberry court asserts a seventh reason to ignore the

corporate fiction was “undercapitalization” (Jd. at 272 n.3) as is alleged by Plaintiff in the

present case. Both Managers of the company have an obligation not to keep asking contractors

to supply labor and materials when they know, or in this case knew, of the undercapitalization of

xxxxxx and basically used the corporate fiction to commit a theft of services.

Further, the Tex. Bus. Orgs. Code Section 21.316(a) (See in Re Sheali, 490 B. R. 104

(N.D. Tex 2013)) holding that sole director/officer of corporation was personally liable under

the Texas Business Corporation Act and BOC for distributions he caused the corporation to

make to himself as sole shareholder in 2006 through 2011 and that the liability is to the

corporation, it appears that a creditor who desires to pursue the directors on this basis would be

required to assert the claim derivatively on behalf of the corporation. Smith vs. Chapman, 897 S.

W. 2d 399 (Tex. App.—Eastland 1995, no pet). The Plaintiff seeks such remedy herein as it

alleges on information and belief that distributions were made to the Manager/members when

they knew the corporation could not pay its debts. In Mr. McGee’s situation, even if he has not

been paid funds directly at this time, he has the anticipation of being paid at least 50% of

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 15
whatever Mr. Davis has received in the future as he testified to.

Further, recovery of distributions from shareholders under the Fraudulent Transfer Act

are allowed by a creditor directly from a shareholder who received distributions from an

insolvent corporation regardless of whether the shareholder knew that the corporation was

insolvent. Tex. Bus. & Com. Code Section 24.006(a). On information and belief, based on the

xxxxxxxxxxx of portions of the contiguous property to the subject property on which the Plaintiff

supplied labor and materials were continued to the shareholder’s benefit despite the Manager’s

knowledge that there were not enough funds in the company to pay for Plaintiffs labor and

materials after distributions to the shareholders or for their benefit.

It is also circumstantial inference that can be drawn from the fact that the two

manager/members in xxxxxx have participated together in other Limited Liability Companies, as

Manager/Members in the real estate field, namely Butcher 3 Investments, LLC, Parkerville

Meadows East HOA, xxxxxx Builders, LLC, 1050 Woodhaven GP, LLC, and Woodhaven

Senior Living, LLC and also formed other real estate LLC’s and/or corporations under which

Mr. Davis now continues to do business in the real estate field, ( i.e. Develop 3 Holdings, LLC,

Develop 3 Group, LLC,), leaving xxxxxx without funds to pay the Plaintiff for its services. It is a

further fair inference that each of the Manager/Members communicated with each other about

the progress of the xxxxxxxxxxx, the status as Manager/Members in the corporation/LLCs, and

the debts that were being incurred which could not be paid for from the xxxxxx company

accounts. It is also a reasonable inference based on the number of “real estate entities” that the

Defendants were involved with that the other entities, and therefore both Davis and McGee,

benefitted at the cost of xxxxxx with regard to funds available to pay xxxxxx’s debt to Plaintiff,

which were applied to other projects. Case Law has been developed in Texas which supports the

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 16
application of circumstantial evidence to support the fraud and conspiracy claims brought over

and against Manager/members of LLCs. See Guevara v. Lackner, 447 S.W.3d 566, 575-77 (Tex.

App.—Corpus Christi-Edinburg 2014, no pet.), Straehla v. AL Glob. Servs., LLC, 619 S.W.3d

795 (Tex. App.—San Antonio 2020, pet. denied).

WHEREFORE, PREMISES CONSIDERED, Plaintiff prays that Defendant McGee’s

Motion be denied and for such other and further relief to which the Plaintiff may show itself

entitled to at law or in equity.

Respectfully submitted,

THE ROBINSON LAW FIRM
2704 Sherrill Park Ct.
Richardson, Texas 75082
214-538-0926Office
email: mike@robinsonlawdfw.com

/s/ Michael E. Robinson

MICHAEL E. ROBINSON
Texas State Bar No. 17102700

CERTIFICATE OF SERVICE

I certify that on March 20, 2024 a true and correct copy of this document has been served

on all parties and counsel of record in accordance with the Texas Rules of Civil Procedure via

ECF filing of this document.

/s/ Michael E. Robinson

MICHAEL E. ROBINSON

PLAINTIFF’S RESPONSE TO DEFENDANT MCGEE’S
TRADITIONAL MOTION FOR SUMMARY JUDGMENT PAGE 17
EXHIBIT A
a

AFFIDAVIT OF FRANCIS TUCKER

I, FRANCIS TUCKER, have personal knowledge of the facts and allegations stated in this
Affidavit and they are true and correct. I have never been convicted of a felony or a crime of
moral turpitude. I was a CPA prior to my retirement and have upon the request of the Plaintiff
herein, reviewed the bank records of xxxxxx xxxxxxxxxxx Group, LLC represented as Account
# 3268, Origin Bank, that were supplied by Defendant xxxxxx. | am fully competent to make this
affidavit

After review of the records of the xxxxxx bank account supplied by xxxxxx I have
determined that the total sum that has been paid out, in one form or another, to benefit Mr. Davis,
or otter Davis-controffed entities, during the relevant time period is the following
amount: _$1.464.812.2

Attached hereto are summaries prepared by myself that identify the transfers and
payments that were initiated by Mr. Davis during the time period between November 20. 2020
and December 31, 2022.

Executed on this the ig day of pAAaAc\+ 2024

Vw Geto
“FRANCIS TUCKER

STATE OF TEXAS
COUNTY OF COLLIN

BEFORE ME, the undersigned authority this day personally appeared FRANCIS
TUCKER and after being duly sworn stated under oath that he executed the same this the
/§& dayof Morne 2024

Notary ¢ for the State of i
My commission expires:

i TR SUZANNE WALKER
ID #11174427
a My Commission Expires
March 30, 2026
xxxxxx xxxxxxxxxxx LLC
Summary of Fraudulent Transfers
November 1, 2020 through December 31, 2022

Dates Amount Description

11/10/2020 - 6/9/2021 240,680.61 Debt Payments benefitting other Davis companies

1/29/2021 - 6/10/2022 210,800.00 Tranfers Outto Non-xxxxxx Bank Accounts

2/1/2021 - 5/3/2021 15,400.00 Personal Expenses Involving Jewel King

5/26/2021 - 11/28/2022 606,831.62 Non-xxxxxx AMEX Acct Payments - No statements provided

2/8/2021 - 6/1/2021 18,400.00 ATM Withdrawals by K. Davis - Described by Davis as Compensation

10/31/2020 - 7/2/2021 247,000.00 Checks Written by K. Davis to Himself - Described by Davis as Compensation

11/10/2020 - 6/8/2022 125,700.00 Cash Withdrawals by K. Davis - Declared as Compensation

Total $ 1,464,812.23

Source: The Robinson Law Firm
Thursday, January 25, 2024
xxxxxx xxxxxxxxxxx LLC
Fraudulent Transfers
November 1, 2020 through December 31, 2022