Forest Hill Corp. v. Latter & Blum

• Decision Date: 13 February 1947
• Docket Number: 1 Div. 266.
• Citation: 29 So.2d 298,249 Ala. 23
• Court: Alabama Supreme Court
• Parties: FOREST HILL CORPORATION v. LATTER & BLUM, Inc.

29 So.2d 298

249 Ala. 23

FOREST HILL CORPORATION v. LATTER & BLUM, Inc.

1 Div. 266.

Supreme Court of Alabama

February 13, 1947

McCorvey, Turner & Rogers and C. A. L. Johnstone Jr., all of Mobile, for appellant.

Frank H. Inge, Richard H. Inge, and Armbrecht, Inge Twitty & Jackson, all of Mobile, for appellee.

SIMPSON Justice.

Forest Hill Corporation, an Alabama corporation, has appealed from a judgment rendered against it in the circuit court of Mobile County on a suit by appellee, a real estate brokerage firm of New Orleans, Louisiana, for a broker's commission claimed to be due as a result of the purchase of real estate in New Orleans pursuant to a contract between them whereby appellant employed appellee to locate for it suitable lands in New Orleans for the construction of a housing project. The appellee did locate the property, but due to circumstances hereafter related, the sale of the property to appellant was never consummated and a Louisiana corporation by the same name, having the same president acquired the property.

Appellant contends that it was unable to consummate the purchase of the property, that the purchase by the Louisiana corporation was unrelated to the appellant or its contract with appellee and that the evidence to this effect was exclusive of adverse inference, entitling it to a favorable decision by the trial court.

The judgment against the appellant rested on the theory that appellee had fully performed its contract and that the Louisiana corporation after it was organized was merely the recipient of the fruits of appellant's contract and acquired title to the property either for convenience or because of certain local difficulties incident to transacting the contemplated business in Louisiana through the Alabama corporation. The appellee argues that the evidence afforded inferences sustaining such a theory warranting affirmance of the judgment.

We are largely, remitted to an interpretation of the facts for the purpose of this review. No technical legal principles are involved and as to the cases submitted in briefs of counsel, none seem to furnish an accurate juridical yardstick by which the case may be gauged. There is, therefore, no need to enter into an analysis of these authorities.

To determine the question thus presented it seems necessary to state the facts showing the connection between the two Forest Hill corporations and their several business associates and the events leading up to the final purchase of the property by the out-of-state Forest Hill Corporation. W. B. Nall in 1941, with the aid of a real estate broker in Mobile, one Rolston, organized the Alabama corporation for the purpose of acquiring real estate and constructing housing projects under FHA commitments in the vicinity of Mobile. He, as its president, and a first cousin, W. A. Smith, owned all but one share of stock, the one share being in the name of Rolston. Rolston was familiar with the character of business designed to be carried on by the corporation and located and acquired for it several pieces of property on which housing projects were eventually established under FHA commitments. Smith construction Company, of Nashville, Tennessee, a partnership composed of two brothers of W. A. Smith, also Nall's first cousins, were the contractors who built the first project. Later other projects were established by the corporation and the construction was accomplished by Oman-Smith Construction Company, a combination of Smith Construction Company and Oman Construction Company, the latter also of Nashville, and being a partnership composed of John Oman, Jr., and his two sons, Stirton Oman and John Oman, III. The consolidation of the two construction companies was for the purpose of erecting houses on FHA projects promoted by the Alabama corporation. The evidence indicates that Rolston was the person experienced in obtaining these FHA commitments and that he handled the details in this regard, including the acquisition of lands for the several projects undertaken by the corporation, for which services he received the customary broker's commissions from the corporation.

It may be said, here, that Nall, who later acquired all of the stock of appellant corporation, appears to have been acting so exclusively for the corporation in the transactions involved in this litigation as to have been practically its alter ego. In 1943 he decided to undertake a similar venture in New Orleans and, acting for the corporation, authorized Rolston to obtain suitable lands there for that purpose and to associate with him the appellee, Latter & Blum, Inc., a well-known real estate brokerage firm of that city to aid in this effort. Appellee assigned an experienced employee, one Polson, to the task and after considerable effort satisfactory property was located.

Rolston and the New Orleans brokers were to receive their commission from appellant when the purchase should be consummated, but during the negotiations to purchase the property which had been located by them, Nall requested permission to deal directly with the owners of the property, with whom he and some of his said associates had influence, with the view of obtaining a reduction in the purchase price. The brokers were assured that they would be protected in their commission.

From then on Rolston and Polson relaxed their activity in directly inducing the sale of the property, but Polson continued aiding appellant in the effort to expedite FHA approval of the project, on which the sale depended. In his plan to deal directly with the property owners, Nall procured an option and several extensions, but due to the delay in FHA approval, the corporation's option finally expired and a few days thereafter John Oman, Jr., acting through his son, John Oman, III, purchased the property and in turn a few days later conveyed it to a new Forest Hill Corporation, organized in Louisiana, of which Nall was also president.

If the foregoing were a complete depicture of the facts, the argument of able counsel that no inference of liability for the commission could be thereby deducible might be sustainable on the theory of distinct corporate existence. This, because the mere fact that some or all of the stockholders or officials of two corporations are identical or because one corporation dominates the other does not, of itself, destroy the corporate identity or merge one into the other. Brown v. Standard Casket Mfg. Co., 234 Ala. 512, 175 So. 358; State v. Pullman-Standard Car Mfg. Co., 235 Ala. 493, 179 So. 541, 117 A.L.R. 498; Pittsburgh & Buffalo Co. v. Duncan, 6 Cir., 232 F. 584; Ledlow v. Goodyear Tire & Rubber Co. of Alabama, 238 Ala. 35, 189 So. 78; Baker v. Bowie Lumber Co., 151 La. 598, 92 So. 129; Stephenson v. List Laundry & Dry Cleaners, 186 La. 11, 171 So. 556; Hollingsworth v. Georgia Fruit Growers, Inc., 185 Ga. 873, 196 S.E. 766, 768; Loewenthal v. White Paving Co., 351 Ill. 285, 184 N.E. 310; Donnell v. Herring-Hall-Marvin Safe Co., 208 U.S. 267, 28 S.Ct. 288, 289, 52 L.Ed. 481.

But the legal fiction of separate corporate entity should not be so extended 'as to enable the corporation to become a vehicle to evade just responsibility.' Jefferson County Burial Soc. v. Cotton, 222 Ala. 578, 583(4), 133 So. 256, 259; Brown v. Standard Casket Mfg. Co., supra; State v. Pullman-Standard Car Mfg. Co., supra.

We think the last stated principle controls the result here to be considered. Due to their successful ventures in Alabama through the appellant, the Omans, Smiths and Nall were all interested in the New Orleans transaction and according to the testimony of several of appellant's witnesses including its attorney, all had to be satisfied before the purchase could he accomplished and all, or their respective representatives, were most active in furthering the approval of the contemplated project by the FHA in order that the property could be purchased. But the predicate for such purchase was the sanction of this...