Humana, Inc. v. Kissun

• Decision Date: 15 March 1996
• Docket Number: No. A95A2781,A95A2781
• Citation: 471 S.E.2d 514,221 Ga.App. 64
• Parties: HUMANA, INC. et al. v. KISSUN et al.
• Court: Georgia Court of Appeals

Page 514

471 S.E.2d 514

221 Ga.App. 64

HUMANA, INC. et al. v. KISSUN et al.

No. A95A2781.

Court of Appeals of Georgia.

March 15, 1996.

Reconsideration Denied March 29, 1996.

Certiorari Granted July 12, 1996.

Smith, Gambrell & Russell, David M. Brown, S. David McLean, Jr., Atlanta, for appellants.

Butler, Wooten, Overby & Cheeley, James E. Butler, Jr., Joel O. Wooten, Jr., Columbus, Alston & Bird, Judson Graves, R. Clay Milling II, Atlanta, Floyd & Stanford, Jackson C. Floyd, Jr., Atlanta, for appellees.

BLACKBURN, Judge.

We granted Humana, Inc.'s (Humana) application for interlocutory review of the trial court's order denying its motion for summary judgment as to all plaintiffs' claims. Plaintiffs brought the underlying medical malpractice action against Humana and its wholly-owned subsidiary General Hospital of Galen Inc., (General) d/b/a Humana Hospital-Newnan (the hospital). ¹ Humana contends the trial court erred in denying its motion for summary judgment, thereby effectively disregarding its separate corporate status absent a showing that it had abused the corporate form or that adherence to its separate corporate identity would promote injustice or protect fraud. The first issue on appeal, therefore, is whether plaintiffs' evidence pierces the corporate veil between General and Humana.

1. In order for the plaintiffs' evidence to pierce the corporate veil, "it must be shown that [Humana's] disregard of the corporate entity made [General] a mere instrumentality for the transaction of [Humana's] affairs; that there is such unity of interest and ownership that the separate personalities of the [subsidiary] and the owners no longer exist; and to adhere to the doctrine of corporate entity would promote injustice or protect fraud." (Punctuation omitted; emphasis supplied.) Derbyshire v. United Bldrs. Supplies, 194 Ga.App. 840, 844, 392 S.E.2d 37 (1990).

Both factors must be found because "[o]ne reason the law establishes separate corporate identity is so that a corporation can hold itself independently apart and insulated from the existence of another related corporation even while it uses the related corporation or controls it to promote its own ends." Boafo v. Hosp. Corp. of America, 177 Ga.App. 75, 76, 338 S.E.2d 477 (1985). "For the issue to be submitted to a jury there must be evidence that the corporate arrangement was a sham, used to defeat justice, to perpetrate fraud or to evade statutory, contractual or tort responsibility." Derbyshire, supra at 844, 392 S.E.2d 37. See also Hogan v. Mayor, etc., of Savannah, 171 Ga.App. 671, 673(3), 320 S.E.2d 555 (1984); Kelley v. Austell Bldg. Supply, 164 Ga.App. 322, 325(3), 297 S.E.2d 292 (1982).

In Boafo, supra, the plaintiffs' attempt to pierce the corporate veil between the Hospital Corporation of America (HCA) and its wholly-owned subsidiary, Medical Center West, Inc. which operated Parkway Regional Hospital, the allegedly negligent hospital, was unsuccessful.

Therein, the evidence indicated "that the two corporations shared some officers, that they jointly purchased the hospital property from bankruptcy receivership, that Medical Center West, Inc. was not incorporated in Georgia until six days after the property was purchased, that HCA own[ed] 100% of the Medical Center West stock, that some officers were paid only by HCA and the hospital administrator was paid by HCA for security reasons while the amount was charged back against Parkway Regional Hospital, that major (not day-to-day) accounting and financial functions [were] performed by HCA through a national cash management system, that Medical Center West [had] insurance coverage of the hospital by an insurer who [was] another wholly owned subsidiary of HCA, that HCA operate[d] a Center for Health Studies which provide[d] non-mandatory educational seminars for hospitals which [was] available to Parkway Regional Hospital at less than full cost, that HCA employ[ed] a national purchasing director to negotiate purchasing agreements for HCA and subsidiary-owned hospitals but Medical Center West [was] free to, and [did], negotiate its own purchasing contracts if it [got] better rates." Id. at 75-76, 338 S.E.2d 477.

We determined that "no basis exist[ed] for disregarding HCA's separate identity unless its ulterior motive or purpose [was] to promote fraud and injustice or defeat a public convenience." Id. at 77, 338 S.E.2d 477. As there was no evidence of HCA's purpose, we affirmed the trial court's grant of HCA's motion for summary judgment. Id.

In the present case, the evidence likewise fails to produce any evidence that Humana sought to perpetrate fraud or evade contractual or tort responsibility. The evidence shows that General is incorporated under the laws of Utah and Humana is incorporated in the State of Delaware. Each corporation maintained separate minute books and separate corporate seals. The two corporations share officers in that all the officers of General are also officers of Humana, although Humana has many officers who are not officers of General. The hospital used the Humana national logo on its letterhead, sign, and advertising, but the hospital did its own local advertising. Humana hired attorneys for General to handle suits for or against the hospital. The hospital's chief executive officer, Jack Davis, was hired and supervised by Humana's regional vice president. Davis was responsible for the hospital's day-to-day operation. He exercised complete hiring, firing, and purchasing authority for the hospital, as long as the decisions were within the budget set by the regional vice president. Davis signed all contracts and leases on the part of General Hospitals of Humana, Inc. d/b/a Humana Hospital-Newnan. ²

Humana supported its motion for summary judgment by, among other things, the affidavit and deposition of Walter Neely, its vice president and general counsel. The overall import of Neely's affidavit was that although General was a wholly-owned subsidiary corporation of Humana, the two corporations were separate in all means and sustained independent identities. Upon being cross-examined regarding his affidavit, Neely admitted that his averments were based upon his general knowledge of Humana's relationship with its subsidiary corporations rather than any specific knowledge of Humana's relationship with General. As Neely's affidavit was not based upon personal knowledge, it is without probative value. See Williams v. Hajosy, 210 Ga.App. 637, 639, 436 S.E.2d 716 (1993). Further, where the testimony between Neely's affidavit and deposition is contradictory, it will be construed against him. See Prophecy Corp. v. Charles Rossignol, Inc., 256 Ga. 27, 30, 343 S.E.2d 680 (1986).

In Neely's deposition he testified as to the usual way Humana interacted with its subsidiaries. While we do not consider this as direct evidence of Humana's interaction with General, it is some evidence of their interaction, especially considering that no contradictory evidence was produced. Neely deposed that Humana operated a credit and charge back accounting system by withdrawing cash from its hospitals' depository accounts on a daily basis and creating an asset on the hospital's books in the intercompany account. Neely deposed that Humana was very scrupulous in accurately keeping the account. Neely further deposed that Humana would reduce any hospital's deficit by crediting its intercompany account or lessening its intercompany liability so that the hospitals were always funded with the amount necessary to meet their obligations. Additionally, the hospital was issued liability insurance of at least five million dollars. Although the existence of excess liability insurance was discussed during Neely's deposition, no admissible evidence of such insurance is contained in the record.

Our review of the evidence reveals very little difference between the present case and the evidence outlined in Boafo, supra, as to the issues raised in this division. The present case involves the use of the Humana name and logo by the hospital but such fact does not require a different result. The common use of advertising and the use of the same logo is not sufficient to pierce the corporate veil. See Cornwell v. Williams Bros. Lumber Co., 139 Ga.App. 773, 229 S.E.2d 551 (1976).

Most importantly, no evidence was produced indicating that Humana's interaction with its subsidiaries was calculated in any way "to promote fraud and injustice or defeat a public convenience." Boafo, supra at 77, 338 S.E.2d 477. See also Fla. Shade Tobacco Growers v. Duncan, 150 Ga.App. 34, 35, 256 S.E.2d 644 (1979). Compare Kelley, supra (sufficient evidence to authorize jury to find use of separate entities used to evade contractual responsibility).

The law allows a parent corporation to use its subsidiary to promote its own purposes and yet, to keep its separate identity.

See Boafo, 177 Ga.App. at 76, 338 S.E.2d 477. In order to disregard the separate corporate entity which the law has created, evidence that General was a "mere instrumentality for the transaction of [Humana's] affairs ... [and] that the separate personalities of the corporation and the owner no longer exist" in order to promote injustice or protect fraud must be presented. Plaintiffs have failed to present such evidence.

"A defendant who will not bear the burden of proof at trial need not affirmatively disprove the nonmoving party's case; instead, the burden on the moving party may be discharged by pointing out by reference to the affidavits, depositions and other documents in the record that there is an absence of evidence to support the nonmoving party's case. If the moving party discharges this burden, the nonmoving party cannot rest on its pleadings, but rather must point to specific evidence giving rise to a triable issue." Lau's Corp. v. Haskins, 261 Ga. 491, 405 S.E.2d 474 (1991).

In view of the absence of evidence outlined above, the trial court erred in...