American Management Corp. v. Dunlap, Civ. A. No. EC 90-67-D-D.

• Decision Date: 24 January 1992
• Docket Number: Civ. A. No. EC 90-67-D-D.
• Citation: 784 F. Supp. 1245
• Parties: AMERICAN MANAGEMENT CORPORATION, d/b/a American Insurance Group and American Management Insurance Group, Plaintiffs, v. Samuel DUNLAP, d/b/a Sam Dunlap Insurance Agency and Robinson Insurance Agency, South Central Insurance Agency, Inc., Robinson Insurance Agency, Inc. and Various John Does, Defendants.
• Court: U.S. District Court — Northern District of Mississippi

784 F. Supp. 1245

AMERICAN MANAGEMENT CORPORATION, d/b/a American Insurance Group and American Management Insurance Group, Plaintiffs, v. Samuel DUNLAP, d/b/a Sam Dunlap Insurance Agency and Robinson Insurance Agency, South Central Insurance Agency, Inc., Robinson Insurance Agency, Inc. and Various John Does, Defendants.

Civ. A. No. EC 90-67-D-D.

United States District Court, N.D. Mississippi, E.D.

January 24, 1992.

John C. Henegan, Donna Brown Jacobs, Jackson, Miss., William C. Brazil, Conway, Ark., for plaintiffs.

J. Niles McNeel, Richard P. Ballard, Louisville, Miss., for defendants.

MEMORANDUM OPINION

DAVIDSON, District Judge.

This matter is currently before the court on the motion of defendant Samuel Dunlap, d/b/a Sam Dunlap Insurance Agency ("Dunlap"), for summary judgment against plaintiff. In opposing the motion, plaintiff (American Management Corporation, d/b/a American Insurance Group and American Management Insurance Group ("AMIG")), has cross moved for partial summary judgment on the issue of defendant Dunlap's individual liability on account of his personal guaranty. Based upon a thorough review of the parties' briefs, pleadings, affidavits, depositions, interrogatories, authorities, the record as a whole and its own research, the court now issues its opinion: The motion of defendant for summary judgment is hereby denied; plaintiff's cross motion for partial summary judgment on Dunlap's individual guaranty is hereby granted.

FACTUAL SUMMARY

This action consists of six counts and concerns several agency agreements between defendant Dunlap and plaintiff AMIG, some of which contain a guaranty signed by defendant Sam Dunlap. The first agreement between the parties arose out of their association with the Orion Group, Incorporated. Approximately in 1984, AMIG became a general managing agent of the Orion Group, according to the affidavit of AMIG's Chairman, Stephen L. Strange. Dunlap was a local agent for the Orion Group and wrote service station insurance coverage for it through Brentwood Insurance Brokers, Orion's California managing general agent. AMIG purchased this service station book of business and became responsible for marketing the service station policies which Brentwood issued.

About the same time, defendant Dunlap entered into a limited agency agreement with AMIG for the marketing of insurance products offered by the Orion Group. Under this agreement (as explained in the amended complaint), Dunlap was authorized to act as agent for certain insurance companies which had previously appointed AMIG as their general agent, such as Orion. Dunlap was further authorized to solicit, receive and transmit proposals for insurance to the companies through AMIG and was to remit all premiums to AMIG. As compensation, the agreement called for Dunlap to receive a commission.

AMIG entered another agency agreement with Dunlap as president of South Central Insurance Agency, Inc. ("SCIAC"); as its president, Dunlap owned one hundred percent (100%) of the Mississippi corporation's shares of stock. See Dunlap Deposition, June 10, 1991, p. 66. Pursuant to this agency agreement, SCIAC was authorized to market insurance product lines offered by AMIG in Mississippi, Alabama, Georgia, Louisiana, North Carolina, and South Carolina. An individual guaranty was included in the SCIAC/AMIG agency agreement on the final page of the contract; it was to be executed by Sam Dunlap as SCIAC's principal.¹

According to his deposition testimony, Dunlap, in July, 1988, formed another corporation, South Central Insurance Agency of Georgia, Inc. ("SCIAC-GA") to market insurance products in Georgia. As he had done with SCIAC, Dunlap, through SCIAC-GA, entered into another agency agreement with AMIG for marketing Orion insurance products. Dunlap signed both agency agreements as president of the respective companies. As he had done in the previous AMIG agency agreement, Dunlap executed an individual guaranty with the 1988 agency agreement, with respect to unaccounted premiums.

In his deposition testimony, Dunlap explains that in accordance with the agreements, employees of SCIAC and SCIAC-GA accepted applications for insurance coverage and submitted the applications to AMIG.² AMIG was the underwriter and the policies were then issued by the various insurers. Under the express terms of the agreements, SCIAC and SCIAC-GA, after retaining their commissions from the collected premiums, held the remaining amounts in trust for AMIG.³

AMIG's problems in collecting premiums owed by SCIAC and SCIAC-GA began approximately in 1988, according to the affidavit of AMIG's Treasurer, Alice Reidmueller. She explains that Dunlap's agencies were not remitting payment on all policies, would remit only partial payment or sometimes remit no payments for his monthly accounting statements.

Attempts by AMIG, over a two year period, to resolve these collection problems failed and on March 19, 1990, AMIG terminated SCIAC as a producing agent. AMIG later audited Dunlap's policy files and records, as permitted by the agency agreements and a consent decree entered in this cause on April 12, 1990, to verify policy charges. AMIG represents to the court that the audit performed by AMIG's treasurer supports its figures.

On March 28, 1990, AMIG instituted an action to recover the sums owed by SCIAC and Sam Dunlap, including attorneys fees and expenses, alleging breach of contract and breach of fiduciary duty. On June 13, 1991, AMIG amended its complaint to include an action for reformation of the guaranty dated on or about March 3, 1986, and to recover from Sam Dunlap on that guaranty. A second amended complaint was filed on July 17, 1991. Plaintiff also seeks $500,000 in punitive damages.

At issue is approximately $150,000 in insurance premiums which AMIG claims Dunlap never remitted; AMIG claims it is owed $114,147.24 for unpaid premiums and unauthorized credits on business placed with Orion and $17,453.80 for unpaid premiums and unauthorized credits on business placed with Great American Insurance Company. In addition, AMIG states that it incurred expenses of $8,898.44, resulting from the Dunlap audit.

CONCLUSIONS OF LAW

Defendant Sam Dunlap contends that there is no evidence indicating any involvement of Sam Dunlap, d/b/a Sam Dunlap Insurance Agency, with the litigation at hand; it is on this premise that he moves this court for summary judgment. The court finds that the motion is not well taken.⁴ Sufficient evidence exists to create several jury questions on the issue of Sam Dunlap's personal liability to AMIG⁵. One such issue is whether to disregard the corporate form of SCIAC and attach liability to Dunlap, its sole shareholder and president, for corporate debt and obligations.

A corporation is a legal entity that exists separate and apart from its shareholders, officers, and directors. As a general rule, the aforementioned individuals are spared liability for the corporation's debts and obligations because of the corporate fiction. FMC Finance Corp. v. Albert D. Murphree, Jr., 632 F.2d 413, 421 (5th Cir.1980). However, courts will "pierce the corporate veil" contrary to the established principle of limited corporate liability, under special circumstances. Id. For instance, neighboring states have applied the concept of piercing the corporate veil to remedy injustices, which arise when a party "has overextended his privilege in the use of a corporate entity in order to defeat justice ... or evade a contractual or tort responsibility." Randall v. Timberlake Associates, Inc., 199 Ga.App. 574, 405 S.E.2d 564 (1991).

In Randall, the Georgia Court of Appeals reversed summary judgment on the issue of corporate disregard. Although it was plaintiff who sought to have summary judgment upheld in Randall, the court finds that the case still has bearing here in Dunlap, where the defendant is moving for summary judgment. Whether it is a defendant who seeks to preserve a corporate shield over him, or a plaintiff who is attempting to pierce the corporate veil, corporate disregard often raises genuine issues of material fact, thus making summary judgment inappropriate. In other words, the court is of the opinion that reasonable jurors could find from the evidence presented that no true distinction exists between Dunlap and either of the various corporate entities he formed; therefore, the corporate veil should be pierced. Where appropriate to further the ends of justice, a corporation and individual who owns all of its stock and assets will be treated identical. TCL, Inc. v. LaCoste, 431 So.2d 918, 922 (Miss.1983).

In Thames & Company v. Eicher, 373 So.2d 1033 (Miss.Sup.Ct.1979) the court held that the sole shareholder of a corporation was personally liable in an action for breach of warranty and damages concerning purchase of a new home. TCL, Inc., 431 So.2d at 922. In that case, the proof showed that the corporation was no more than the alter ego of Mrs. Rogers who held all of the stock in the company and could not recall who the directors or officers or other stockholders of the corporation were. Id.

Some of the elements found in Thames are present in the case sub judice. For instance, Dunlap's testimony reveals that Dunlap was the 100 percent shareholder of SCIAC. Like Rogers in Thames, Dunlap could not recall who other officers of the corporation were. These and other factors make the question of whether defendant Dunlap is open to personal liability via corporate disregard one for the jury.⁶ Just as the court in Randall declined to affirm summary judgment and expose appellant Randall to personal liability on the basis of corporate disregard, this court declines to award summary judgment to defendant Dunlap that would absolve him of personal liability.

Apart from the issue of corporate entity disregard, there is sufficient evidence to create a separate jury question on the issue of Dunlap's personal liability as a corporate officer. Kitchens v....