Dania Jai-Alai Palace, Inc. v. Sykes

• Decision Date: 03 May 1984
• Docket Number: JAI-ALAI,No. 63394,63394
• Citation: 450 So.2d 1114
• Parties: DANIAPALACE, INC., Carrousel Concessions, Inc., and Saturday Corporation, Petitioners, v. Gladys SYKES, Respondent.
• Court: Florida Supreme Court

Page 1114

450 So.2d 1114

DANIA JAI-ALAI PALACE, INC., Carrousel Concessions, Inc., and Saturday Corporation, Petitioners, v. Gladys SYKES, Respondent.

No. 63394.

Supreme Court of Florida.

May 3, 1984.

Rehearing Denied June 27, 1984.

Guy B. Bailey, Jr. and Sara Soto of Bailey & Dawes, Miami, for petitioners.

Gilbert A. Haddad of Haddad, Josephs & Jack, Coral Gables, for respondent.

SHAW, Justice.

This cause is before the Court on petition for review based on grounds of express and direct conflict between the decision of the district court below, Dania Jai-Alai Palace, Inc. v. Sykes, 425 So.2d 594 (Fla. 4th DCA 1982), and numerous decisions of this Court. We have jurisdiction. Art. V, § 3(b)(3), Fla. Const.

Dania Jai-Alai Palace, Inc. (Dania) owns and operates a jai-alai fronton. Certain aspects of the business, including valet parking, are handled by a sister corporation, Carrousel Concessions, Inc. (Carrousel). Both Dania and Carrousel are wholly owned subsidiaries of Saturday Corporation (Saturday). Respondent Sykes arrived at the fronton on 15 December 1977. Respondent pulled into a short line of cars awaiting parking and purchased a parking ticket from a Carrousel attendant. Respondent alighted from her car and the attendant entered the car to park it. Respondent walked to the front of her car and turned right, between her car and the car ahead, toward the fronton entrance. Simultaneously, the attendant shifted the car into drive, saw respondent in the space (approximately four feet) between the two cars and attempted to brake. His foot slipped from the brake onto the accelerator and the car moved forward, crushing respondent between the two cars.

Respondent sued all three corporations. The theories of her case were that Carrousel was liable for the negligence of its parking attendant and for independent negligence, that Dania was liable under alternative rationales of premises liability, apparent agency or single business entity, and "alter ego" or "mere instrumentality," and that Saturday was liable because Carrousel and Dania were its mere instrumentalities. At the conclusion of the evidence, the trial court directed verdicts against Carrousel on employee negligence, against Dania on finding that the public had been led to believe the fronton was a single entity, and in favor of respondent on the issue of comparative negligence. The trial court submitted the issues of Saturday's liability for the acts of its subsidiary corporations and the amount of respondent's damages to the jury. The jury returned a verdict against Saturday and the two subsidiary corporations for $775,000.

On appeal, the district court affirmed the judgment against Carrousel for the negligence of its employee on the basis that there is a rebuttable presumption of negligence when the driver of a vehicle strikes another vehicle in the rear. Brethauer v. Brassell, 347 So.2d 656 (Fla. 4th DCA 1977); Lincoln v. Miggins, 249 So.2d 88 (Fla. 3d DCA 1971). We have no quarrel with the district court's statement of the law, but find it inapplicable to the facts of this case. Petitioners were sued by respondent, who walked between the two cars, not by the driver of the car ahead which was struck from the rear. In this connection, we note that the district court reversed the trial court's directed verdict finding that respondent was not comparatively negligent in walking between the two cars. This suggests that respondent might have prevented the accident by not walking between the cars. The basis for the rebuttable presumption is that the driver of the struck vehicle could have done nothing to prevent the collision. The presumption is inapplicable to a pedestrian who might have prevented the collision. We quash the district court's holding on this point.

The district court affirmed the judgment against Saturday on the ground that Carrousel and Dania were mere instrumentalities of Saturday and that it was not necessary to establish fraud or other wrongdoing on the part of Saturday under the mere instrumentality doctrine. At trial, respondent's counsel stipulated that there was no wrongdoing or fraud involving Saturday and that the theory of respondent's case was that the mere instrumentality doctrine alone, without improper conduct, was sufficient to permit piercing of the corporate veil. The issue of whether, as a matter of law, it was necessary to show wrongdoing or fraud on the part of Saturday in order to pierce the corporate veil was thus squarely posed. The district court recognized that there were conflicting lines of cases on this point, but relied on Vantage View, Inc. v. Bali East Development Corp., 421 So.2d 728 (Fla. 4th DCA 1982), and the cases cited therein (Levenstein v. Sapiro, 279 So.2d 858 (Fla.1973); Aztec Motel, Inc. v. State ex rel. Faircloth, 251 So.2d 849 (Fla.1971); Barnes v. Liebig, 146 Fla. 219, 1 So.2d 247 (1941); Mayer v. Eastwood-Smith & Co., 122 Fla. 34, 164 So. 684 (1935)), for the proposition that it is not necessary to show improper conduct in order to pierce the corporate veil. We acknowledge that there is language in this line of cases which seems to support the holding of the district court, but find on closer examination that each of them is distinguishable on fact or law from the present case.

In Vantage View, the district court reversed a trial court's dismissal for failure to state a cause of action against a parent corporation for the acts of its subsidiary. The court grounded its reversal on the mere instrumentality doctrine alone, without improper conduct. The court's justification for piercing the corporate veil ignores salient facts upon which it prefaced its analysis:

We said earlier that the ultimate facts alleged by appellant are: (1) the parent established the subsidiary as a mere instrumentality and a sham; and (2) the parent did so to mislead creditors and to avoid liability.

Vantage View, 421 So.2d at 733 (emphasis supplied). Thus, there was clearly an allegation of improper conduct on the part of the parent corporation. The issue which the court posed for itself was hypothetical and its answer dicta. However, its decision was correct because allegations of mere instrumentality and improper conduct clearly state a cause of action.

In Mayer, the seminal case on which the district court relied, an individual (Olds) loaned certain valuable bonds to a corporation in return for 25% of the net profits of the corporation. All of the stock of the corporation was given to Olds to hold as security for the amounts due him. When the corporation went bankrupt, Olds was sued for its debts under various theories: partnership; wholly owned corporation controlled by and run in interest of Olds; joint adventure; and undisclosed principal. All of these theories were rejected on the facts. In examining whether Olds used the corporate vehicle as a fiction to conceal his liability, we relied on Biscayne Realty & Insurance Co. v. Ostend Realty Co., 109 Fla. 1, 148 So. 560, 564 (1933).

So long as proper use is made of the fiction that corporation is entity apart from stockholders, fiction will not be ignored * * *. Where stockholders enter into a transaction in individual interests and utilize corporate name merely to mislead creditors or perpetrate fraud, legal entity will be ignored and stockholders held individually liable * * *. The rule that corporate entity will be disregarded where name of corporation is used by stockholders in transactions to mislead creditors or perpetrate fraud on them is but a logical sequence of the principle that a corporation cannot be formed for the purpose of accomplishing fraud or other illegal act, under the guise of fiction that the corporation is legal entity separate and distinct from its members, since when fraud or illegal act is attempted, fiction will be disregarded by the court and the acts of the real parties dealt with as though no corporation had been formed.

Mayer, 122 Fla. at 42-43, 164 So. at 687. We then went on:

The overwhelming weight of authority is to the effect that courts will look through the screen of corporate entity to the individuals who compose it in cases in which the corporation was a mere device or sham to accomplish some ulterior purpose, or is a mere instrumentality or agent of another corporation or individual owning all or most of its stock, or where the purpose is to evade some statute or to accomplish some fraud or illegal purpose.

Nothing like that exists in this case.

Mr. Olds was not one of the individuals composing that corporation; he owned none of the stock, and, in the end, he merely held the stock as security and never made use of or claimed any ownership in it. There is no evidence of any purpose on the part of Mr. Olds to evade any statute or accomplish any fraud. Nor did the evidence show any other illegal design or purpose. He did not direct the transaction with the plaintiff, nor is there any evidence that he even knew of any such deal until long after it was consummated.

Nor was Olds any more a joint adventurer then [sic] he was a partner. Drew v. Hobbs, 104 Fla. 427, 140 Sou.Rep. 211; Tidewater Const. Co. v. Monroe County, 107 Fla. 648, 146 Sou.Rep 209; Willis v. Fowler, 102 Fla. 35, 136 Sou.Rep. 358.

Id. at 43-44, 164 So. at 687 (emphasis supplied).

A close reading of the above excerpt leads to several conclusions. First, Biscayne Realty & Insurance Co., on which we relied in Mayer, requires improper action on the part of the corporation or its members before the corporate veil may be pierced. Second, the reference to "or is a mere instrumentality" (emphasis supplied) is drawn from unspecified authority. Its significance goes to the factual issue of whether Olds owned all or any of the corporate stock and the legal issues or theories of whether Olds was a stockholder, a partner, a joint adventurer, or an undisclosed principal. We found that Olds owned none of the stock, held it only as security, never made...