The El Paso Court of Appeals has affirmed a judgment entered on a jury verdict finding that a business owner could be held personally liable in a negligence lawsuit against his bankrupt business.
Laboe Labrado v. Aurora Legarreta, (No. 08-23-00271-CV; May 30, 2025) arose from injuries suffered by a daycare center employee while on the job. She sued Labrado and his company, El Paso Bright Beginnings, LLC, for negligence. After Labrado and Best Beginnings repeatedly failed to answer discovery, the trial court granted Plaintiff’s motion for a directed verdict and death-penalty sanctions. The jury found that Plaintiff suffered $87,992 in damages. Although Bright Beginnings was insolvent, a jury found that Lobrado could be held liable as the sole member and manager of the entity under a corporate-veil-piercing theory. Labrado appealed.
In an opinion by Justice Soto, the court of appeals affirmed, finding the evidence sufficient to support the jury’s finding of alter ego. Plaintiff alleged that Labrado engaged in several fraudulent transfers in order to avoid her suit, which he characterized as salary payments. He also claimed that Bright Beginnings’ account was commingled with those of other LLCs he owned, though Bright Beginnings’ balance sheets didn’t show that. Labrado further argued that the evidence was insufficient to show that he was Best Beginnings’ alter ego for liability purposes.
To make that showing, a plaintiff may present evidence of payment of corporate debts with personal checks or commingling, making representations that the corporation will financially back the individual, the diversion of company funds to personal use, and inadequate capitalization. Labrado admitted to using a personal credit card for corporate expenses, as well as to make a down payment on company vehicles. He further argued that even if he had committed actual fraud, he didn’t benefit personally from it. The court of appeals, noting that he had more to lose from a judgment in Plaintiff’s favor than in his bankruptcy filing, specifically recovery of a $59,000 personal loan to Bright Beginnings, held that a rational jury could have concluded that he perpetuated a fraud to benefit himself.
