Ahmad Albakri, & Jorusa Int'l, Inc. v. A&M Oil Co., 2016-CA-000740-MR

• Decision Date: 27 October 2017
• Docket Number: NO. 2016-CA-000740-MR,2016-CA-000740-MR
• Parties: AHMAD ALBAKRI, AND JORUSA INTERNATIONAL, INC. APPELLANTS v. A&M OIL CO., INC. APPELLEE
• Court: Kentucky Court of Appeals

AHMAD ALBAKRI, AND JORUSA INTERNATIONAL, INC. APPELLANTS v. A&M OIL CO., INC. APPELLEE

NO. 2016-CA-000740-MR

Commonwealth of Kentucky Court of Appeals

OCTOBER 27, 2017

NOT TO BE PUBLISHED

APPEAL FROM JEFFERSON CIRCUIT COURT

HONORABLE CHARLES L. CUNNINGHAM JR., JUDGE

ACTION NO. 11-CI-007143

OPINION AFFIRMING IN PART, REVERSING IN PART, AND REMANDING

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BEFORE: KRAMER, CHIEF JUDGE; CLAYTON, AND THOMPSON, JUDGES.

CLAYTON, JUDGE: Ahmad Albakri and Jorusa International, Inc. appeal a judgment entered against them in the sum of $19,903.82 plus eight percent interest. After careful review of the briefs, record, and hearings below, we affirm in part and reverse in part and remand. First, we hold that under the facts presented below, the trial court should not have pierced the corporate veil and held Albakri personally liable for Jorusa's corporate debt, and we reverse the trial court's partial summary judgment order. Second, we affirm an evidentiary ruling regarding hearsay evidence. Finally, we reverse and remand for the trial court to enter written findings of fact and conclusions of law so an appellate court may review the remaining issues, should the parties choose to pursue further appellate review of the claims. We begin with a detailed recitation of the background information adduced below.

BACKGROUND

Albakri is the sole officer and stockholder of Jorusa, a Kentucky-incorporated corporation that owned a gas station named Tony's Food Mart. For a period of years, the gas station purchased gasoline from A&M Oil Co., Inc. To partially compensate A&M for fuel deliveries, A&M would automatically receive funds from credit card transactions for fuel at the service station. To cover the fuel transactions that were not paid for by credit card, A&M would send invoices to Jorusa for the outstanding balance. Jorusa would then remit checks to A&M. It is undisputed that Jorusa paid A&M hundreds of thousands of dollars - perhaps even a million dollars - during their business relationship. However, a ledger created by A&M shows that at the end of their business relationship, Jorusa had an unpaid, five-figure balance.

On November 2, 2011, A&M filed a Complaint in Jefferson Circuit Court against Albakri, seeking to collect $19,903.82 plus 18.00% interest.Attached to the Complaint was a "Credit Policy" and "Personal Guarantee" on A&M letterhead. The document was purportedly signed by Albakri as "President" and dated June 19, 2006. The document reads as follows:

CREDIT POLICY

We look forward to serving you as a customer. We extend credit to you as a matter of making it easier for you to do business with us. We request that you honor our credit terms that apply to your account. We take your account seriously and ask that you do the same with regards to payment. Any outstanding balance due A&M Oil, Inc., shall bear interest at a rate of 18% per annum. The parties agree that A&M Oil, Inc., shall be entitled to reimbursement for its costs and expenses, including a reasonable attorney's fees, in collecting the amount owed it, which costs and expenses shall bear interest at a rate of 18% per annum. In the event a payment by check is returned to us for any reason, there will be a $25.00 service charge added to your account. After the 3^rd such incident your account will be on prepaid allocation. Should you encounter problems with paying us and want to insure continued service, please call to make special arrangements.

This document must be signed and returned with your credit application in order to complete the credit approval. Thanks for your business and we look forward to doing business with you for many years to come.

PERSONAL GUARANTEE

In consideration of credit being extended by A&M Oil, Inc. for merchandise to be purchased whether applicant be an individual or individuals, a proprietorship, a partnership, a corporation, or other entity, the undersigned guarantor or guarantors each hereby contract and guarantee to A&M Oil, Inc. the faithful payment, when due, of all accounts of said applicant for the purchases made within five years next after the date of this application. The undersigned guarantor or guarantors eachhereby expressly waive all notice of acceptance of this guarantee, notice of extension of credit to applicant, presentment, and demand for payment on applicant, protest and notice to undersigned guarantor or guarantors of dishonor or default by applicant or with respect to any security held by A&M Oil, Inc., extension of time of payment to applicant, acceptance of partial payment of partial compromise, all other notices to which the undersigned guarantor or guarantors might otherwise be entitled and demand for payment under this guarantee. Absent written permission by creditor, this personal guarantee may not be revoked.

Also attached to the Complaint was a "Customer Ledger[] for the period from Jan 1, 2009 to Apr 21, 2011[.]" It showed the gas station received $354,454.24 worth of fuel during that time period and paid to A&M $339,502.23.

Albakri then filed an Answer denying the allegations and asserting multiple defenses, including a claim that the signature on the Credit Policy and Personal Guarantee was not his own.

The parties next propounded discovery requests on one another, including multiple sets of interrogatories and requests for production of documents. In the course of those interrogatories, Albakri admitted he was the sole officer and sole stockholder of Jorusa. He admitted he was the manager of Jorusa. He claimed he had been both shorted in fuel supplied and overcharged for fuel delivered by A&M. Albakri admitted that "Jorusa International, Inc. was ever capitalized in any amount." (Emphasis added). In response to whether Jorusa ever paid a dividend, Albakri stated, "I don't know if I paid a dividend or not." And in response to whether Jorusa twice had its corporate charter revoked for failing tofile an annual report, Albakri stated, "Admit. However, each time it was reinstated."

Following these interrogatories, on May 14, 2013, A&M was granted leave to file an amended complaint adding Jorusa as a defendant and claiming Jorusa and Albakri were jointly and severally liable for the $19,903.82 plus interest.

A&M next filed, on July 8, 2013, a motion for summary judgment. A&M moved the trial court for two items of relief: (1) to pierce Jorusa's corporate veil and hold Albakri personally responsible for Jorusa's debts; and (2) to find no genuine issue of material fact concerning the monetary claim for fuel delivered and enter a judgment accordingly. A&M claimed the veil should be pierced because multiple facts proved Jorusa only existed to shield Albakri from personal liability:

1. Albakri purportedly admitted "Jorusa International, Inc., was never capitalized in any amount."¹

2. Jorusa had its corporate charter revoked twice for failing to file an annual report.

3. Jorusa only issued stock to Albakri.

4. Jorusa never filed bankruptcy.

5. Albakri did not know if Jorusa had ever paid a dividend.

6. Albakri denied signing the individual guarantee with A&M oil.

A&M also moved the trial court to find that Albakri's defenses raised no material issues of fact and failed as a matter of law, and that Jorusa owed $19,903.82 to A&M.

Albakri and Jorusa filed a joint response. They first claimed various evidentiary errors with documents attached to A&M's motion for summary judgment. They next claimed the motion should not be granted because an affidavit attached thereto erroneously shortened A&M Oil Company, Inc. to AM Oil Co., Inc. Finally, they summarily asserted that the corporate veil should not be pierced because A&M failed to prove that any debt was owed to A&M by Jorusa or by Albakri.

A&M filed a reply, pointing out some typographical errors with Albakri and Jorusa's response and disagreeing with their legal arguments.

The trial court then "informally" ordered the parties to mediate. The parties' attempt to settle the case was unsuccessful.

On August 27, 2014, the trial court then entered an order denying in part and granting in part A&M's motion for summary judgment. The trial court's order focused on an eleven-part checklist for piercing the corporate veil as laid out in Inter-Tel Technologies, Inc. v. Linn Station Properties, LLC, 360 S.W.3d 152 (Ky. 2012). The trial court found and held that the three main factors from the Inter-Tel list were present in the instant action:

Here, Plaintiff directs the Court to the Defendant's answers to Requests for Admissions to support his contention that all three emphasized factors in Inter-Tel favor piercing the corporate veil. First, in the Plaintiffs [sic] Third Request for Admissions, Defendant admits Jorusa International was never capitalized in any amount. In those same admissions, Defendant admits that twice Jorusa's Corporate charter was revoked by the Secretary of State, only to eventually have it reinstated both times. Additionally, Jorusa never paid a dividend to anyone. Finally, concerning the third prong, Albakri had complete and unfettered control over Jorusa. He was the only stock-owner and made all decisions regarding the company. He likewise would have made any decisions regarding the payment of dividends and signed all the required incorporation documents filed with the Secretary of State. In his defense, Albakri contends that while some of the 11 factors of Inter-Tel are met, not all are present, thus creating a material issue of fact. The Court finds this statement of the law absurd. As stated above, not all 11 factors will come into play in every case. The Court understands the defendants' argument to be in cases where one or two factors are not applicable, summary judgment cannot ever be appropriate. Without stating which of the several factors fail and supporting that assertion with evidence, Defendant submits that a genuine issue of material fact exists. The Court disagrees and thinks that Plaintiff has met its burden under Inter-Tel to pierce the corporate

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