Hutchison v. Anderson

• Court: Idaho Court of Appeals
• Writing for the Court: PERRY; LANSING, C.J., and SCHWARTZMAN
• Citation: Hutchison v. Anderson, 130 Idaho 936, 950 P.2d 1275 (Idaho App. 1997)
• Decision Date: 17 December 1997
• Docket Number: No. 23022,23022
• Parties: Kevin HUTCHISON and Robert Hutchison, Plaintiffs-Respondents, v. Hal T. ANDERSON and American West Enterprises, Inc., Defendants-Appellants.

Page 1275

950 P.2d 1275

130 Idaho 936

Kevin HUTCHISON and Robert Hutchison, Plaintiffs-Respondents, v. Hal T. ANDERSON and American West Enterprises, Inc., Defendants-Appellants.

No. 23022.

Court of Appeals of Idaho.

Dec. 17, 1997.

Ling, Nielsen & Robinson, Rupert, for appellants. Brent T. Robinson argued.

Ingram Law Office, Burley, for respondents. Mark A. Ingram argued.

PERRY, Judge.

Hal T. Anderson and American West Enterprises, Inc. appeal from the district court's judgment awarding back wages, treble damages, prejudgment interest, costs and attorney fees. For the reasons set forth below, we affirm the judgment in all respects, except that we vacate the award of attorney fees.

I. FACTS AND PROCEDURE

Anderson is the president of American West, and all of the shareholders of American West are in Anderson's immediate family. Anderson has placed most of his family's assets into the corporation, but there is little or no equity in the assets Anderson used to capitalize the corporation. American West's primary business is farming.

The Hutchison brothers, Kevin and Robert, began working for Anderson in April 1989. The agreement was that the Hutchisons would each be paid $6 an hour. In the first year of the Hutchisons' employment, Anderson fell behind in wage payments. Toward the end of that year, in September 1989, Anderson completely paid off his overdue debt. However, immediately thereafter, Anderson again went into arrears. Initially, Anderson gave the Hutchisons time sheets on which they recorded their hours. Anderson ran out of time sheets around June 1990, but the Hutchisons continued to record their time in individual notebooks. In June 1990, Anderson began making $500 payments to the brothers twice monthly.

Both brothers were eventually terminated. They each claimed Anderson owed them money for unpaid wages. When it became apparent that Anderson was not going to voluntarily pay their claims, Kevin and Robert filed separate complaints on the same day, each alleging breach of contract, naming both American West and Anderson as defendants.

The cases were consolidated and a court trial was conducted. Anderson testified that the original $6 an hour arrangement was modified in June 1990, and the Hutchisons then became salaried employees, to be paid $500 twice monthly. The district court, however, found that Anderson's testimony was not credible in this regard and determined that the agreement for the entire term of the employment relationship was that the Hutchisons would be paid $6 an hour.

At trial, there was no dispute that Kevin was terminated March 3, 1992. There was, however, a dispute regarding the date of Robert's termination. Anderson alleged that Robert was terminated November 27, 1991, because Anderson was no longer satisfied with Robert's services. The district court found Anderson's testimony was inconsistent with other testimony that Robert had moved into a house on Anderson's property and had made improvements to the house after November 27, 1991. Therefore, the district court determined that Robert was terminated December 23, 1991.

The district court made findings of fact and conclusions of law, and awarded judgment to the Hutchisons for back wages and attorney fees, in addition to treble damages pursuant to I.C. § 45-617(4), court costs and prejudgment interest. Following a motion by Anderson, the district court amended its judgment, ordering that Anderson and American West pay Kevin $10,428.30 for back wages and treble damages, plus $1,318.98 for prejudgment interest; pay Robert $10,841.49 for back wages and treble damages, plus $1,455.43 for prejudgment interest; pay Robert and Kevin $154.18 for court costs and $7,213.26 for attorney fees. Anderson and American West appeal.

II. DISCUSSION

Anderson raises several issues on appeal. Anderson claims there was not substantial evidence to support the district court's finding that Anderson should be personally liable for American West's debt and further argues that the district court made other findings of fact which were unsupported by the evidence. Anderson also claims the district court erred by awarding attorney fees.

A. Substantial Evidence

Anderson claims that there was not substantial evidence to support four different findings of fact made by the district court. First, Anderson argues that he should not be held personally responsible for American West's debt. Second, Anderson contends that Robert was terminated November 27, 1991, and therefore the statute of limitation ran on Robert's suit two days before it was filed. Third, Anderson claims there was insufficient evidence to support the district court's finding that the employment agreement remained hourly during the duration of the employment relationship. Finally, Anderson argues the district court failed to properly credit him with compensation Anderson provided to the Hutchisons.

First, we note that this Court will not set aside findings of fact of the district court if supported by competent and substantial evidence. Ernst v. Hemenway and Moser Co., Inc., 126 Idaho 980, 987, 895 P.2d 581, 588 (Ct.App.1995). Substantial evidence is that which a reasonable trier of fact would accept and rely upon in determining whether a point of fact has been proven. Id. The party challenging the findings has the burden of showing error, and this Court will review the evidence in the light most favorable to the prevailing party. Id.

1. Anderson's personal liability

Anderson argues that he should not be held personally liable for American West's debt. The district court found that there was such a unity of interest and ownership between Anderson and American West that the separate personalities of the individual and the corporation no longer existed and that if American West was held solely liable an inequitable result would follow.

We must review the law of corporate entities in order to determine whether there was substantial evidence to support the district court's finding that Anderson should be held personally liable. Generally, a corporate status limits liability. I.C. § 30-1-25. A court may disregard the corporate entity if two requirements are met. First, there must be such a unity of interest and ownership that the separate personalities of the corporation and individual no longer exist. Surety Life Ins. Co. v. Rose Chapel Mortuary, Inc., 95 Idaho 599, 601, 514 P.2d 594, 596 (1973); Baker v. Kulczyk, 112 Idaho 417, 420, 732 P.2d 386, 389 (Ct.App.1987). Second, there must be a showing that, if the acts are treated as those of the corporation, an inequitable result will follow or that it would sanction a fraud or promote injustice. Minich v. Gem State Developers, Inc., 99 Idaho 911, 917, 591 P.2d 1078, 1084 (1979); Baker, 112 Idaho at 420, 732 P.2d at 389. There are several factors we will review when considering whether the corporate veil should be pierced. For example, was the sole shareholder acting as president of the corporation; was there a lack of corporate formalities, such as directors' meetings; did the shareholders fail to submit corporate contract and inventory revisions to the board of directors; and were business transactions completed without approval by any director or officer of the corporation. These factors are not exclusive because the conditions under which a corporate entity may be disregarded vary according to the circumstances of the case. Surety Life, 95 Idaho at 601, 514 P.2d at 596.

After a thorough review of the record, we determine that there was substantial competent evidence to support the district court's finding that Anderson should be held personally liable for American West's debt. The first inquiry to pierce the corporate veil is whether the separate personalities of the person and the corporation were indistinguishable. The record reveals that Anderson was in complete control of the corporation. The district court noted that not only was he president, but all of the shareholders were members of his immediate family. Anderson testified that the corporation had annual meetings for its board of directors, but did not introduce minutes from those meetings into evidence. The district court found that Anderson held himself out as the owner of the farming business. With the exceptions of a truck which had the corporation's name on its door and checks which were drawn on a corporate account, there appeared to be no demonstration that Anderson represented to the community that American West was an entity separate from Anderson. The district court found that Anderson used his name interchangeably with the corporation's when dealing with third party vendors. Thus, there is sufficient evidence to support the district court's finding that a unity of interest existed such that there was no distinction between the personalities of Anderson and American West.

The second inquiry we must make to pierce the corporate veil is whether an inequitable result would follow if only the corporation was held liable. The district court found that American West was undercapitalized. Any attempt to collect on a judgment against American West would probably be futile. Therefore, we conclude that there was substantial competent evidence to support the district court's finding that the only equitable result would be to hold Anderson and American West jointly and severally liable.

2. Statute of limitation

Anderson asserts that the statute of limitation ran on Robert's claim for past due wages. Idaho Code Section 45-614 provides that when an employee has been paid wages, but seeks additional wages, the employee must file suit within six months of the accrual of the cause of action. Generally, the cause of action begins to accrue when the employee has a right to collect the salary or wages. Johnson v. Allied Stores Corp., 106 Idaho 363, 367, 679 P.2d 640, 644 (1984). However, if payments are made on account, rather than for a specific pay period, the cause of action...