Lawton v. Temple-Warren Ford, Inc., TEMPLE-WARREN

• Decision Date: 20 February 1992
• Docket Number: TEMPLE-WARREN,No. A91A2111,A91A2111
• Citation: 416 S.E.2d 527,203 Ga.App. 222
• Parties: LAWTON v.FORD, INC. et al.
• Court: Georgia Court of Appeals

Page 527

416 S.E.2d 527

203 Ga.App. 222

LAWTON v. TEMPLE-WARREN FORD, INC. et al.

No. A91A2111.

Court of Appeals of Georgia.

Feb. 20, 1992.

Reconsideration Denied March 6, 1992.

Certiorari Denied April 24, 1992.

Clarence L. Martin, Savannah, for appellant.

Inglesby, Falligant, Horne, Courington & Nash, Kathleen Horne, Savannah, Stein & Cauthen, James E. Stein, St. Marys, for appellees.

SOGNIER, Chief Judge.

Frank Lawton brought suit against Temple-Warren Ford, Inc. alleging, inter alia, that the dealership defrauded him by selling him a truck represented as a 1984 model when in fact the truck was a 1984 "glider kit" (cab, chassis, front wheels, etc.) built upon an older model truck's engine, transmission, and rear wheels. Lawton amended his complaint to add as defendants the dealership's officers and sole stockholders, R. Glen Temple and Ellis Warren. Partial summary judgment on the issue of liability was entered against the dealership. The trial court granted the stockholders' motion for summary judgment, and Lawton appeals.

Appellant contends the trial court erred by granting appellees' motion for summary judgment because as shareholders and officers of the dealership, appellees are liable for its misconduct, and questions of fact remain whether the evidence warrants piercing the corporate veil on the basis of either undercapitalization or fraud.

(a) Undercapitalization: Appellant points to the deposition of appellee Temple in which he stated that despite the $1 million initial investment he and appellee Warren put into the dealership, he nevertheless considered the dealership to have been "undercapitalized to start with" because appellees "never thought we were going to ever grow that quick." Even accepting appellant's argument that Temple's statement constituted an admission in judicio that the dealership was undercapitalized, "for undercapitalization of a corporation to justify piercing the corporate veil, it must be coupled with evidence of an intent at the time of the capitalization to improperly avoid future debts of the corporation." Hickman v. Hyzer, 261 Ga. 38, 39-40(1), 401 S.E.2d 738 (1991). There is no evidence of such intent in this case. Nor is there any evidence to controvert appellees' averrals that Warren withdrew $250,000 of the dealership's capital to cover problems in another business he was operating rather than for purposes of improperly avoiding future debts of the dealership. We note that although appellant alleged in his amended complaint that the dealership has ceased doing business and that appellees removed all of the corporate assets from Georgia, there is no evidence that appellees ceased doing business for any reason other than the fact that the dealership had been failing for many months. Nor does the record disclose any evidence that appellees removed the corporate assets from Georgia in order to strip the dealership of assets necessary to pay existing debts. Id. at 40(2), 401 S.E.2d 738.

(b) Fraud: We agree with appellant that the type of undercapitalization discussed in Hickman, supra at 39-40(1), 401 S.E.2d 738 provides only one rationale for piercing the corporate veil, e.g., Marett v. Professional Ins. Careers, 201 Ga.App. 178, 180-181(1)(b), 410 S.E.2d 373 (1991) (corporation as alter ego of individual; commingling personal and corporate assets), and that the separateness of the corporate entity will be disregarded to remedy injustices which arise where a party has overextended his privilege in the use of a corporate entity in order to perpetrate fraud or to avoid tort responsibility. Commonwealth Financial Corp. v. Sherrill, 197 Ga.App. 403, 404, 398 S.E.2d 438 (1990). However, we do not agree with appellant's second argument that the fact the dealership's liability for defrauding him has been legally established automatically entitles him to recover damages for that fraud from appellees. " 'A corporation possesses a legal existence separate and apart from that of its officers and shareholders so that the operation of a corporate business does not render officers and shareholders personally liable for corporate acts. (Cit.)' [Cit.]" Id. at 403(1), 398 S.E.2d 438. "A corporate officer 'who takes part in the commission of a tort by the corporation is personally liable therefor, but an officer of a corporation who takes no part in the commission of a tort committed by the corporation is not personally liable unless he specifically directed the particular act to be done or participated or cooperated therein (or if he disregarded the corporate form so as to authorize piercing of the corporate veil).' ... [Cit.]" Fussell v. Jones, 198 Ga.App. 399-400(1), 401 S.E.2d 593 (1991).

The record in the case sub...