Miles v. CEC Homes, Inc.

• Decision Date: 13 April 1988
• Docket Number: No. 86-284,86-284
• Citation: Miles v. CEC Homes, Inc., 753 P.2d 1021 (Wyo. 1988)
• Parties: Maurice MILES and Meadowbrook Development, Inc., a Wyoming corporation, Appellants (Defendants), v. CEC HOMES, INC., a Wyoming corporation, and Inberg Surveying, Inc., a Wyoming corporation, Appellees (Plaintiffs).
• Court: Wyoming Supreme Court

Page 1021

753 P.2d 1021

Maurice MILES and Meadowbrook Development, Inc., a Wyoming corporation, Appellants (Defendants), v.CEC HOMES, INC., a Wyoming corporation, and Inberg Surveying, Inc., a Wyoming corporation, Appellees (Plaintiffs).

No. 86-284.

Supreme Court of Wyoming.

April 13, 1988.

Robert O. Anderson and F.M. Andrews, Jr.(argued) of Andrews and Anderson, Riverton, for appellants.

Richard Kraemer of David B. Hooper, P.C., Riverton, for appellees.

Before BROWN, C.J., and THOMAS, CARDINE, URBIGKIT and MACY, JJ.

CARDINE, Justice.

In this contract action, appellantsMaurice Miles and Meadowbrook Development, Inc. appeal from judgments entered against them in favor of appelleesCEC Homes, Inc. and Inberg Surveying, Inc.Appellants present the following issues on appeal: (1) Whether there was sufficient evidence to pierce the corporate veil of Meadowbrook Development, Inc.; (2)Whether Meadowbrook Development, Inc. should have been excused from its duty to pay CEC Homes, Inc. because of the failure of a condition precedent; (3) Whether the trial court erred in finding Maurice Miles personally liable to Inberg Surveying, Inc. on an open account; (4) Whether the trial court erred in granting attorney fees to CEC Homes, Inc.; and (5) Whether the trial court erred in granting Inberg Surveying, Inc. prejudgment interest in the amount of 1.5 percent per month.

We affirm in part, reverse in part, and modify.

AppellantMeadowbrook Development, Inc.(Meadowbrook) and appelleeCEC Homes, Inc.(CEC) are Wyoming corporations which were engaged in the development of residential homes in Fremont County, Wyoming in the early 1980's.The two corporations owned subdivisions located on opposite sides of 18th Street in Riverton, Wyoming, and on December 3, 1980, they entered into an agreement to share the costs of developing the street.The common improvements contemplated by the agreement were the domestic water line, storm sewers, street construction and paving, and curb, gutter and sidewalk construction.The contract provided that there was "no priority as to which of the parties shall develop which common improvement" and that either party could proceed with development of the common improvements "as may be necessary for the development of the party's subdivision."

Early in 1981, Stanley Smalley, acting for CEC, and appellantMaurice Miles, president and majority shareholder of Meadowbrook, held discussions concerning the start of construction on the common improvements.CEC began developing the improvements in May 1981 and completed them in October or November of that year.On July 19, 1984, CEC billed Meadowbrook for its share of the costs, which amounted to $25,587.90.Meadowbrook failed to pay the bill.

AppelleeInberg Surveying, Inc.(Inberg) provided engineering services for both the Meadowbrook and CEC projects.The initial engineering and plat work for the Meadowbrook subdivision was completed by Inberg in 1981.Meadowbrook paid Inberg for those services in October 1981.In March 1983, market forces prompted a decision to replat the Meadowbrook land.The cost of Inberg's services for the replatting was $8,203.11.Meadowbrook never paid for those services.

On February 15, 1985, appellees CEC and Inberg filed an action to recover payment on CEC's contract with Meadowbrook and payment on the Inberg account.Both Meadowbrook and Maurice Miles were named as defendants.Appellees' claim against Miles was predicated on a theory of piercing the corporate veil.

After a bench trial, the court entered judgment against Meadowbrook and Miles.CEC was awarded $25,587.90, which represented the amount due under the cost-sharing contract, and $6,201.12 for attorney fees.Inberg was awarded $8,203.11 for services and $5,364.23 in interest on its account with Meadowbrook.

PIERCING THE CORPORATE VEIL

Appellants first contend that the trial court's decision to pierce the corporate veil of Meadowbrook was not supported by sufficient evidence.The standard of review we apply when evaluating such claims is well established:

"We have said that where the separate-entity doctrine is relied upon, each case must be governed by its own facts, Opal Mercantile v. Tamblyn, Wyo., 616 P.2d 776(1980).Fact questions must be decided by the trier of fact, Aetna Casualty and Surety Company v. Stover, 327 F.2d 288(8th Cir.1964);H.A.S. Loan Service, Inc. v. McColgan, 21 Cal.2d 518, 133 P.2d 391, 145 A.L.R. 349(1943);Opal Mercantile v. Tamblyn, supra.We will not substitute our judgment for that of the trier of fact, findings of fact will be presumed to be correct and we will set them aside on appeal only where such findings are 'clearly erroneous or contrary to the great weight of evidence,'Kvenild v. Taylor, Wyo., 594 P.2d 972, 976(1979);see also, Plains Tire and Battery Company v. Plains A to Z Tire Co., Inc., Wyo., 622 P.2d 917, 920(1981);Shores v. Lindsey, Wyo., 591 P.2d 895, 899(1979).Additionally, in examining a fact issue,

" ' "We must assume that evidence in favor of the successful party is true, leave out of consideration entirely evidence of the unsuccessful party in conflict therewith, and give to the evidence of the successful party every favorable inference which may reasonably and fairly be drawn from it." 'Peters Grazing Association v. Legerski, Wyo., 544 P.2d 449, 455(1975), reh. denied, 546 P.2d 189(1976), quoting fromStock v. Roebling, Wyo., 459 P.2d 780, 784(1969).

"See alsoOvercast v. Baldwin, Wyo., 544 P.2d 464, 465(1976)."Yost v. Harpel Oil Company, Wyo., 674 P.2d 712, 716(1983).

In Opal Mercantile v. Tamblyn, Wyo., 616 P.2d 776, 778(1980), we discussed the circumstances under which a corporate entity may be disregarded:

"Ordinarily, a corporation is a separate entity distinct from that of individuals comprising it.State ex rel. Christensen v. Nugget Coal Co., 60 Wyo. 51, 144 P.2d 944(1944);Durlacher v. Frazer, 8 Wyo. 58, 55 P. 306(1898).This is true although all or a majority of the stock is owned by a single individual.Durlacher v. Frazer, supra;W.D. Miller Lumber Corporation v. Miller, 225 Or. 427, 357 P.2d 503(1960).However, in an appropriate case and in furtherance of public policy or the ends of justice, the doctrine will be disregarded.Peters Grazing Association v. Legerski, supra;State ex rel. Christensen v. Nugget Coal Co., supra;Caldwell v. Roach, 44 Wyo. 319, 12 P.2d 376(1932)."

In AMFAC Mechanical Supply Co. v. Federer, Wyo., 645 P.2d 73, 77(1982), we said that

" ' "[b]efore a corporation's acts and obligations can be legally recognized as those of a particular person, and vice versa, it must be made to appear that the corporation is not only influenced and governed by that person, but that there is such a unity of interest and ownership that the individuality, or separateness, of such person and corporation has ceased, and that the facts are such that an adherence to the fiction of the separate existence of the corporation would, under the particular circumstances, sanction a fraud or promote injustice." ' "Quoting Arnold v. Browne, 27 Cal.App.3d 386, 103 Cal.Rptr. 775(1972)(overruled on other grounds).See alsoMinifie v. Rowley, 187 Cal. 481, 202 P. 673(1921).

We went on to list the following factors to be considered in determining whether a corporate entity may be disregarded:

" 'Among the possible factors pertinent to the trial court's determination are: commingling of funds and other assets, failure to segregate funds of the separate entities, and the unauthorized diversion of corporate funds or assets to other than corporate uses; the treatment by an individual of the assets of the corporation as his own; the failure to obtain authority to issue or subscribe to stock; the holding out by an individual that he is personally liable for the debts of the corporation; the failure to maintain minutes or adequate corporate records and the confusion of the records of the separate entities; the identical equitable ownership in the two entities; the identification of the equitable owners thereof with the domination and control of the two entities; identification of the directors and officers of the two entities in the responsible supervision and management; the failure to adequately capitalize a corporation; the absence of corporate assets, and undercapitalization; the use of a corporation as a mere shell, instrumentality or conduit for a single venture or the business of an individual or another corporation; the concealment and misrepresentation of the identity of the responsible ownership, management and financial interest or concealment of personal business activities; the disregard of legal formalities and the failure to maintain arm's length relationships among related entities; the use of the corporate entity to procure labor, services or merchandise for another person or entity; the diversion of assets from a corporation by or to a stockholder or other person or entity, to the detriment of creditors, or the manipulation of assets and liabilities between entities so as to concentrate the assets in one and the liabilities in another; the contracting with another with intent to avoid performance by use of a corporation as a subterfuge of illegal transactions; and the formation and use of a corporation to transfer to it the existing liability of another person or entity [citation].' "645 P.2d at 77-78(quotingArnold v. Browne, supra, 103 Cal.Rptr. at 781-82).See alsoYost v. Harpel Oil Company, supra674 P.2d at 717.

A number of these factors are present in this case.

There was evidence of inadequate corporate records and failure to maintain minutes.Miles' son, Matthew, testified that he took "notes" at annual meetings; these notes were never produced.Typewritten minutes of the meetings were prepared only after the lawsuit was filed.Apart from these "minutes" and several corporate tax returns, no other corporate records were produced.

The record...