C.T. Lowndes & Co. v. Suburban Gas & Appliance Co., Inc.
| Decision Date | 06 November 1991 |
| Docket Number | No. 1737,1737 |
| Citation | 307 S.C. 394,415 S.E.2d 404 |
| Parties | C.T. LOWNDES & COMPANY, Respondent, v. SUBURBAN GAS & APPLIANCE CO., INC., Southside Oil Co., Inc., Tucker W. McLaughlin, and Petrolane Gas Services, Inc., of whom Southside Oil Co., Inc., and Tucker W. McLaughlin are the Appellants. . Heard |
| Court | South Carolina Court of Appeals |
M. Dawes Cooke, Jr. and B.C. Killough, both of Barnwell, Whaley, Patterson & Helms, Charleston, for appellants.
Charles S. Bernstein, of Charles S. Bernstein, P.A., Charleston, for respondent.
C.T. Lowndes (Lowndes) brought this action to recover an indebtedness against Suburban Gas & Appliance Co. (Suburban). Lowndes also sought to pierce the corporate veil of Suburban to hold Southside Oil Co., Inc., (Southside) liable and then to pierce Southside to hold Tucker McLaughlin (McLaughlin) liable since he was the sole owner of both corporations. The case was tried before the judge without a jury and he awarded Lowndes a verdict of $18,398.62 and found that the corporate veils of both Suburban and Southside should be pierced. We affirm.
Did the trial judge err in piercing the corporate veils of Suburban and Southside?
Lowndes was an insurance agent of Suburban. Suburban was indebted to Lowndes for earned premiums which Lowndes had paid the insurance company.
On July 8, 1986, Southside purchased the stock of Suburban for $1.5 million. That same day Suburban sold the majority of its assets to Petrolane for $1,575,000. On the day of the closing Suburban had 35 trade creditors with unpaid bills. Lowndes filed this action on April 9, 1987. The case was tried as an action on account against Suburban and an action to pierce the corporate veils of Suburban and Southside and to hold McLaughlin personally liable for the debt. The trial judge, by the appealed order, found that Lowndes had earned premiums for insurance provided to Suburban and found as a matter of fact and law that the corporate veils of both Suburban and Southside should be pierced to establish liability for the debt against McLaughlin.
The trial court found that McLaughlin directed the payment of $626,073.35 for the use and benefit of himself, his family, friends, associates and Southside, which is wholly owned by McLaughlin. These payments were made out of Suburban's corporate account without invoices, records or corporate resolutions reflecting the basis or justification therefor. The court further found that Suburban, while under the exclusive control of Southside and McLaughlin, failed to retain sufficient assets to pay its creditors, failed to file tax returns for 1986 and 1987, failed to keep appropriate records or observe corporate formalities, functioned only through McLaughlin without the contribution of other officers and directors except his son, William W. McLaughlin, who did only what McLaughlin directed.
The court held as a matter of law that Southside and Suburban were under the exclusive control and domination of McLaughlin and that the corporations were merely facades for McLaughlin's personal activities and functioned solely for his financial advantage. The court further held that McLaughlin personally caused the assets of Suburban to be sold to Petrolane and siphoned the net proceeds of that sale out of Suburban for his own benefit and for the benefit of Southside, which he owned, and that the funds received by Southside inured solely to McLaughlin's benefit as its sole owner.
The court further found as a consequence, Suburban was left incapable of paying its creditors. Based upon these findings and holdings, the trial judge ordered that the corporate veils of both corporations be pierced so that McLaughlin individually was liable for the...
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