Southern Sash Sales and Supply Co., Inc. v. Wiley
| Decision Date | 21 January 1994 |
| Citation | 631 So.2d 968 |
| Parties | SOUTHERN SASH SALES AND SUPPLY COMPANY, INC., and Elton H. Darby v. Ann Hendricks WILEY and Nancy Wayne Hendricks. 1921262. |
| Court | Alabama Supreme Court |
James D. Hughston of Hughston, Hughston & Hughston, Tuscumbia, and F.A. Flowers III of Burr & Forman, Birmingham, for appellants.
Winston V. Legge, Jr. of Patton, Latham, Legge & Cole, Athens, for appellees.
Southern Sash Sales and Supply Company, Inc. ("Southern Sash"), and Elton H. Darby appeal from a judgment awarding $83,036.50 in compensatory damages and $12,500 in punitive damages in favor of Ann Hendricks Wiley and Nancy Wayne Hendricks. This judgment is based upon a prior lawsuit in which Wiley and Hendricks had been awarded $61,040 for past due rents and repairs on a building that they had leased to Southern Sash of Decatur, Inc. ("Decatur Company"), a company owned by Elton H. Darby.
Darby owns 93% of the outstanding stock in Southern Sash. He has been chairman of the board of directors and chief executive officer of Southern Sash since 1947. Darby also had owned 100% of the outstanding stock and had been chairman of the board of directors and chief executive officer of the Decatur Company. The Decatur Company is no longer in business.
In 1977 Darby took a security interest in the accounts receivable of the Decatur Company as security for a loan in the amount of $920,980.93 that he had made to that company. In July 1983, the parties amended the security agreement to include all of the Decatur Company's assets as collateral for the debt owed Darby. A financing statement was filed with the secretary of state on July 14, 1983. A continuation statement was filed five years later. On September 4, 1989, Darby made a written demand for full payment of the debt owed him by the Decatur Company, on December 31, 1989. On December 14, 1989, Wiley and Hendricks had obtained a judgment for $61,040 against the Decatur Company. The debt was not paid and, in January 1990, Darby sent a notice to the Decatur Company requesting that it assemble its assets for possession and sale by the creditor. The assets of the Decatur Company were sold to Southern Sash, by private sale, on February 15, 1990, for $411,295.25. The Decatur Company had no remaining assets after the sale of February 15, 1990. As a result, Wiley and Hendricks were unable to enforce the judgment they had previously obtained against the Decatur Company.
Wiley and Hendricks brought an action in the Limestone Circuit Court, seeking recovery from Darby, individually, and from Southern Sash, based on theories of alter ego or "mere instrumentality" and fraudulent conveyance. The jury found sufficient evidence to pierce the corporate veil and awarded Wiley and Hendricks the $95,536.50 that is the basis of this appeal. The trial court denied Darby and Southern Sash's motion for a judgment notwithstanding the verdict or for a new trial and entered a judgment on the verdict.
The dispositive issue on appeal is whether there was sufficient evidence for the jury to find that Darby and Southern Sash were responsible for the judgment indebtedness of the Decatur Company so as to permit the jury to pierce the corporate veil and hold Southern Sash and Darby liable for the indebtedness of the Decatur Company.
A corporation is a legal entity existing separate and apart from those who own and operate it. Cohen v. Williams, 294 Ala. 417, 420, 318 So.2d 279, 281 (1975). The corporate form may be set aside, however, as a means of preventing injustice or inequitable consequences. Cohen, 294 Ala. at 421, 318 So.2d at 281. This Court has held that a "separate corporate existence will not be recognized where a corporation is so organized and controlled and its business conducted in such a manner as to make it merely an instrumentality of another." Forest Hill Corp. v. Latter & Blum, Inc., 249 Ala. 23, 28, 29 So.2d 298, 302 (1947); see...
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