Crigler v. Salac

• Decision Date: 23 September 1983
• Citation: 438 So.2d 1375
• Parties: Paul CRIGLER v. Thomas E. SALAC and Fred Salac d/b/a Salac Brothers, et al. 81-822.
• Court: Alabama Supreme Court

Page 1375

438 So.2d 1375

Paul CRIGLER v. Thomas E. SALAC and Fred Salac d/b/a Salac Brothers, et al.

81-822.

Supreme Court of Alabama.

Sept. 23, 1983.

J. Don Foster and Thack H. Dyson of Foster, Brackin & Bolton, Foley, for appellant.

W. Boyd Reeves and Christopher I. Gruenewald of Armbrecht, Jackson, DeMouy, Crowe, Holmes & Reeves, Mobile, and Norborne C. Stone, Jr. of Stone, Partin, Granade & Crosby, and Taylor D. Wilkins, Jr. and Bayless E. Biles of Wilkins, Bankester & Biles, Bay Minette, for appellees.

PER CURIAM.

Defendant Paul Crigler appeals from both the judgment of the trial court on the jury verdict in favor of the plaintiffs' against him, and the trial court's judgment notwithstanding the verdict in favor of defendant Collateral Control on its cross-claim against him.

Plaintiffs, farmers who reside in Baldwin County, sued Collateral Control Corp. (Collateral Control), Paul Crigler, the principal owner of Modern Mix, Inc. (Modern Mix), and Birmingham Trust National Bank (BTNB), seeking compensatory and punitive damages for alleged conversion, fraud, conspiracy, negligence of a warehouseman, and wantonness of a warehouseman in committing fraud and converting personal property. Collateral Control cross-claimed against Crigler for indemnity based on a written indemnity agreement. The jury returned a verdict in the amount of $715,176 against Collateral Control and Paul Crigler and a verdict for Paul Crigler on Collateral Control's cross-claim against him. The trial court granted Collateral Control's motion for judgment notwithstanding the verdict on the cross-claim against Crigler.

Plaintiffs stored grain in bins owned by Modern Mix. Plaintiffs testified that they stored their grain on a "stored unpriced" basis and received weight tickets to that effect. According to plaintiffs, when they designated that they wished to have their grain "stored unpriced," they retained an option either to sell the grain to Modern Mix in the future, at a price offered by Modern Mix, or to obtain a return of their grain, or grain of similar grade or quality, when they desired. Plaintiffs paid a storage fee up until the time that they told Modern Mix to sell the grain.

BTNB extended a line of credit to Modern Mix, which was to be secured by Modern Mix inventory. Collateral Control provides services to lending institutions which lend against inventory or stock in trade. Collateral Control established an inventory certification control system and, under its agreements with Modern Mix and BTNB, was obligated to monitor the flow of inventory at Modern Mix and to report regularly to BTNB. The amount of company-owned inventory certified by Collateral Control to BTNB, at least theoretically, determined the amounts BTNB loaned to Modern Mix. Modern Mix transferred two employees to Collateral Control's payroll to act as "bonded agents" at the Modern Mix premises to monitor the flow of inventory. Modern Mix also leased its grain storage bins to Collateral Control.

Modern Mix suffered business setbacks in the fall of 1979. Paul Crigler testified that Modern Mix sold the grain and put the proceeds into its checking account. BTNB appropriated the proceeds of Modern Mix's accounts receivable for the repayment of loans which it had made to Modern Mix. Modern Mix repaid BTNB approximately $575,000 in the period from August 13, 1979, to November 13, 1979. By letter dated June 23, 1980, Modern Mix informed plaintiffs that there were no funds to pay them for their grain. Thereafter, Modern Mix filed a petition in bankruptcy in the fall of 1980.

We must initially consider the nature of the transaction in question. If the transactions were sales with passage of title, then there could be no recovery against Crigler under the theories of conversion, fraud, negligence, or wantonness of a warehouseman. This Court considered a similar arrangement in NYTCO Services, Inc., v. Wilson, 351 So.2d 875 (Ala.1977). In that case, the weight tickets received by plaintiffs indicated that their grain was being stored. In addition, plaintiffs had the option to require a return of the grain or to sell the grain. The Court in that case concluded that the transaction was a bailment. 351 So.2d at 879. We likewise find the transaction in the present case to be a bailment. It follows that the sale of the grain by Modern Mix was an unlawful conversion thereof to its own use, for which an action will lie. The question we must address relates to the individual responsibility of Crigler.

Defendant Crigler first claims that the trial court erred in denying his motion for directed verdict on the ground that his individual liability was not established. He later asserts that the trial court erred in granting a judgment notwithstanding the verdict on the cross-claim for indemnity. We address the lack of individual liability claim first because of its relationship to the issue of whether the trial court erred in granting the judgment notwithstanding the verdict on the cross-claim.

In deciding if Crigler's motion for directed verdict on the issue of individual liability was due to be granted, the trial court must view the evidence most favorably to the non-moving party, and if by any reasonable interpretation, it can support an inference of individual liability the non-moving party seeks to prove, the motion must be denied. Wadsworth v. Yancey Bros. Co., 423 So.2d 1343, 1345 (Ala.1982). There is evidence that would support the inference of personal liability of Crigler as to each count in the complaint.

It is well-established that a director of a corporation "may not participate in a tort perpetrated through the agency of a corporation, or in a fraudulent injury to another, without being civilly responsible." Rudisill Soil Pipe Co. v. Eastham Soil Pipe & Foundry Co., 210 Ala. 145, 150, 97 So. 219 (1923). See, Alabama Music Co. v. Nelson, 282 Ala. 517, 213 So.2d 250 (1968); Roan v. McCaleb, 264 Ala. 31, 84 So.2d 358 (1956); Finnell v. Pitts, 222 Ala. 290, 132 So. 2 (1930); Chandler v. Hunter, 340 So.2d 818 (Ala.Civ.App.1976). Fletcher's Cyclopedia of Corporations, § 1135, at 202-203 (1975), explains the rule as follows:

"It is thoroughly well settled that a man is personally liable for all torts committed by him, consisting in misfeasance--as fraud, conversion, acts done negligently, etc.--notwithstanding he may have acted as the agent or under directions of another. And this is true to the full extent as to torts committed by the officers or agents of a corporation in the management of its affairs. The fact that the circumstances are such as to render the corporation liable is altogether immaterial .... Corporate officers are liable for their torts, although committed when acting officially. In other words, corporate officers, charged in law with affirmative official responsibility in the management and control of corporate business, cannot avoid personal liability for wrongs committed by claiming that they did not authorize and direct that which was done in the regular course of that business, with their knowledge and with their consent or approval, or such acquiescence on their part as warrants inferring such consent or approval."

This rule does not depend on the same grounds as "piercing the corporate veil," that is, inadequate capitalization, use of the corporate form for fraudulent purposes, or failure to comply with the formalities of corporate organization. See L.C.L. Theatres v. Columbia Pictures Indus., 619 F.2d 455 (5th Cir.1980).

In order to hold an officer of a corporation liable for the negligent or wrongful acts of the corporation, "there must have been upon his part such a breach of duty as contributed to, or helped bring about, the injury; that is to say, he must be a participant in the wrongful act." Fletcher's Cyclopedia of Corporations, § 1137 at 208. It is the opinion of this Court that the evidence in this case is sufficient to connect Crigler with the conversion of plaintiffs' grain.

Defendant Crigler testified that the controlling interest in Modern Mix was owned by him and his father, that his father retired in 1976 or 1977, and that Crigler himself was president of Modern Mix and managed the business. The evidence indicates that Crigler made the decisions regarding acceptance of grain and sales of grain for Modern Mix. Both Crigler and a number of the plaintiffs testified that Crigler occasionally unloaded plaintiffs' grain. Crigler testified that he signed some of the collateral certificates prepared by Collateral Control. Crigler admitted that farmer-owned grain was certified to BTNB. The record also reveals that Modern Mix accepted plaintiffs' grain but never paid plaintiffs for it and that Modern Mix sold the grain and deposited the proceeds in its account. Furthermore, the evidence indicates that Crigler acquiesced in BTNB's takeover of the financial aspect of the business for the reduction of the loan balance. The evidence is sufficient to show that Crigler, in managing Modern Mix, authorized, directed, or actively participated in the wrongful conduct, i.e. the conversion of plaintiffs' grain.

Plaintiffs' complaint, as amended, alleges that defendant Crigler is liable to them under § 6-5-102, Code 1975, which provides:

"Suppression of a material fact which the party is under an obligation to communicate constitutes fraud. The obligation to communicate may arise from the confidential relationship of the parties or from the particular circumstances of the case."

Under § 6-5-102, an obligation to communicate material facts may arise from a confidential relationship or from the particular facts of the case. Harrell v. Dodson, 398 So.2d 272 (Ala.1981). A bailment has been defined as:

"[T]he delivery of personal property by one person to another in trust for a specific purpose, with a contract, express or implied, that the trust shall be faithfully executed, and the property returned or duly accounted for when the special...