Glenn v. Wagner

• Decision Date: 03 April 1984
• Docket Number: No. 8221DC1206,B-B,8221DC1206
• Court: North Carolina Court of Appeals
• Parties: Richard H. GLENN, Earl C. Hood, Helen Hood, Cynthia Hood, Teaka Hood, Robert Hood, Erica Hood, Chauncey Hood by his g/a/l and Lekeithia Hood by her g/a/l v. Smilie WAGNER d/b/a Salem Manor Motel,om, Inc., and D & S Enterprises, Inc.

Page 832

313 S.E.2d 832

67 N.C.App. 563

Richard H. GLENN, Earl C. Hood, Helen Hood, Cynthia Hood Teaka Hood, Robert Hood, Erica Hood, Chauncey Hood by his g/a/l and Lekeithia Hood by her g/a/l v. Smilie WAGNER d/b/a Salem Manor Motel, B-Bom, Inc., and D &amp S Enterprises, Inc.

No. 8221DC1206.

Court of Appeals of North Carolina.

April 3, 1984.

Brenda Wagner-Sumner, Enfield, for defendant-appellant, B-Bom, Inc.

Legal Aid Society of Northwest N.C., Inc. by Ellen W. Gerber and Gwyneth B. Davis, Winston-Salem, for plaintiffs-appellees.

JOHNSON, Judge.

This appeal primarily involves the question of whether the trial court properly denied defendant B-Bom, Inc.'s (hereafter "B-Bom") motion for a directed verdict on the issue of whether the corporate entity of D & S Enterprises, Inc. (hereafter "D & S"), should be disregarded. Defendant's other arguments relate primarily to the form of the trial court's instructions to the jury on the eleven issues presented. No appeal was taken with regard to the verdict of the jury that trespass, breach of quiet enjoyment and conversion were committed against the plaintiffs as tenants at Salem Manor Motel when they were padlocked out of their apartments and their personal property was disposed of. Nor have defendants appealed from the award of compensatory and punitive damages, or from the conclusion that unfair trade practices had been committed.

I

The events forming the factual background of this action occurred between August, 1979 and January, 1980. They may be briefly summarized as follows: The owner of the Salem Manor Motel at all relevant times was the defendant corporation B-Bom. Salem Manor is located at 2500 Old Greensboro Road in Winston-Salem, North Carolina. Defendant corporation D & S had leased the subject property from B-Bom and operated the motel as an apartment/room rental business and ran the small general store located on the premises. Under the terms of the lease, the bulk of the Salem Manor rents and profits went to B-Bom in the form of rental payments. Defendant Smilie Wagner managed the business on a day-to-day basis, with the advice and consultation of his cousin David Wagner, a 50% stockholder and president of both defendant corporations.

Plaintiff Richard Glenn rented an apartment at Salem Manor Motel from D & S during the fall of 1979. When Glenn fell behind in his rent, his apartment was padlocked by a personal employee of Smilie Wagner's, Mr. Walter Robinson. Sometime after the padlocking of the apartment, Smilie Wagner directed that the personal property found in Glenn's room be moved to a storage room and the room formerly occupied by Glenn cleaned for new occupancy. Some items belonging to Glenn were discarded. Glenn's attempts to arrange for the return of his apartment and possessions were refused. Ultimately, with the aid of his attorney, he was permitted to search through the storeroom, and he recovered some portion of his property in damaged condition.

The plaintiff Hood family also rented an apartment at Salem Manor Motel during the fall of 1979. They were asked to vacate the premises, although they were not behind in their rent. When they did not do so voluntarily, their apartment was padlocked. Four members of the plaintiff family, including two infants, were inside the apartment when one of Smilie Wagner's employees at Salem Manor, Ms. Loretta Mack, demanded that they leave so that she could padlock the door. Later that night, the padlock was broken off by plaintiff Earl Hood and the family returned to the apartment and remained there until they moved. While plaintiffs were still residing at Salem Manor, Smilie Wagner took the family's mail and returned it to the post office, saying that the mail didn't belong there. Despite their demands, Smilie Wagner would not return their mail.

II

On 17 October 1980, David Wagner, an officer in both of the defendant corporations, was deposed by the plaintiffs' attorneys. Selected portions of this deposition were properly introduced into evidence as part of plaintiffs' case in chief pursuant to Rule 32(a)(3) of the Rules of Civil Procedure. Defendants introduced testimony by David Wagner and Smilie Wagner concerning the relationship between B-Bom and D & S.

The evidence presented at trial tended to show that B-Bom, Inc. ¹ was incorporated in 1973, with David Wagner as one of the original incorporators and member of the original Board of Directors. B-Bom was formed to acquire, lease and manage property, both real and personal. B-Bom owns several pieces of rental property, including Salem Manor. David Wagner and George Hill each own 50% of the stock of B-Bom; they are the only shareholders and selected themselves to be officers of B-Bom. David Wagner runs the company as its president and also acts as its registered agent, keeping the corporate seal in his law office. His law office also serves as the corporate office of both B-Bom and D & S.

At trial, Wagner testified that B-Bom purchased the Salem Manor property at a foreclosure sale in 1978 and leased it back to its original owners. Under the lease, the former owners operated the apartment rental business and paid B-Bom a monthly rental out of the proceeds. After that lease was terminated, D & S Enterprises, Inc. was organized to be the lessee of Salem Manor, and to operate the rental business and store located there. However, David Wagner also testified that D & S was "set up mainly to benefit Smilie and as well to help him make some additional funds." The Articles of Incorporation state that the objects of D & S are to lease, acquire and manage rental properties.

"D & S" stands for David and Smilie, that is David Wagner and Smilie Wagner. David Wagner was one of the incorporations and handled all the details of the incorporation process. However, less than 18 months later (at the time of his deposition) David Wagner had no recollection of the occurrence of any of the salient events in the corporate life of D & S, such as whether there was an organizational meeting, when the bylaws were adopted, who was present at the time of their adoption, who was on the initial Board of Directors, nor how many board meetings had been held. He could recall no formal shareholder meetings or annual meetings, but stated that, "Smilie and I met regularly dealing with business matters of that company."

The Articles of Incorporation show that David Wagner was the sole subscribing shareholder in D & S; subscribing 10 shares at a par value of $100.00 per share. David Wagner testified that as of 1980, he and Smilie each owned 50% of the company, however, he could not recall how many shares had been issued. There was no evidence showing whether and to what extent the shares had been paid in by either David or Smilie. David Wagner never received any income or profits from D & S. Smilie Wagner testified that his salary from D & S was lower in the beginning so that they could get the Salem Manor operation "off and running."

At the time D & S was incorporated, and during the period in question, Smilie Wagner was also employed as a property manager by Urban Housing, Inc., which is a corporation solely owned by David Wagner and located on the Salem Manor premises. David and Smilie were the officers of D & S; David Wagner "thought" that he was president and treasurer, and therefore, that Smilie "must be" vice-president and secretary. D & S had only one business and that was the operation of the rental business and store at Salem Manor. D & S derived its only funds from the rents and the store. At the time of this action, its only assets were some items of personal property.

The only formal instrument executed on behalf of D & S was the lease agreement with B-Bom. David Wagner drafted the lease and signed it both as president of B-Bom and as president of D & S on 1 January 1978. However, D & S was not incorporated until 8 May 1978. Pursuant to the lease, D & S was to pay a monthly rent to B-Bom for Salem Manor from the rentals collected there by D & S. B-Bom received the rent checks through David Wagner and, in part, the proceeds were used to meet the costs B-Bom incurred as owner of Salem Manor. As shareholder of B-Bom, David Wagner received the benefit of one-half of the residue. B-Bom's other shareholder, George Hill, was not involved with D & S itself and was concerned only when D & S defaulted on the lease for a time. B-Bom established the amount of rent to be charged for each of the rental units at Salem Manor.

In all other respects, Smilie Wagner controlled the finances of D & S. He acted as bookkeeper, hired employees, set his own salary and gave monthly accounting statements to David Wagner to review. David testified that he did not place any particular restrictions over Smilie's ability to take funds out of D & S and that Smilie "had a lot of latitude in the operation of that company [D & S], and I did not question too much what he did." David Wagner also testified that he never dealt directly with any of the tenants at Salem Manor and had no involvement with collecting their rents. He characterized his involvement in the apartment rental business as "more of an advisory nature because that business was operated exclusively by Smilie ... as a general rule he operated the business pretty much as he saw fit." David also testified that he and Smilie met often and did discuss D & S activities, as well as other business David and Smilie had in common, but that he "did not direct or attempt to direct or control the activities of D & S that much."

Both David and Smilie testified that Smilie operated the rental business on the day-to-day basis. Smilie testified that David "didn't set policies per se," but rather gave advice about the business generally. Smilie testified that he "set the policies" of the Salem Manor management. As to the policy of padlocking, Smilie stated that it had been done by the previous managers and "we just carried it over the new...