National Distillers & Chemical Corp. v. American Laubscher Corp.

• Decision Date: 01 October 1976
• Citation: 338 So.2d 1269
• Parties: NATIONAL DISTILLERS AND CHEMICAL CORPORATION, a corporation v. AMERICAN LAUBSCHER CORPORATION, a corporation. SC 1482.
• Court: Alabama Supreme Court

Page 1269

338 So.2d 1269

NATIONAL DISTILLERS AND CHEMICAL CORPORATION, a corporation v. AMERICAN LAUBSCHER CORPORATION, a corporation.

SC 1482.

Supreme Court of Alabama.

Oct. 1, 1976.

As Corrected On Denial of Rehearing Nov. 19, 1976.

Robert McD. Smith and Joseph W. Mathews, Jr., Birmingham, for appellant.

Shores & McKerall, Foley, and Johnston & Shores, Birmingham, for appellee.

ALMON, Justice.

Appellant, National Distillers and Chemical Corporation, appeals from a judgment in favor of appellee, American Laubscher Corporation in the amount of $78,911.47 plus interest.

Appellee was a trade creditor of Brad's Machine Products, Inc., of Gadsden, Alabama, when Brad's failed financially in December of 1970. Brad's operated a machine shop in Gadsden. The principal product manufactured by Brad's was an M--125 booster fuse produced under direct contract with the United States Government. The body of the fuse was machined from brass rods. Brad's bought the brass rods from the appellant. Appellee sold certain Swiss screw machine parts to Brad's from 1967 until December, 1970. This suit arose from Brad's inability to pay appellee for these parts.

Appellee filed suit asserting multiple claims against appellant (which itself was Brad's creditor). After numerous amendments, the case was submitted to the jury on a claim asserting that appellant and Brad's had fraudulently conspired to induce appellee to sell goods to Brad's at a time when Brad's was insolvent or in failing circumstances and unable to meet its obligations within a reasonable time after they became due. The claim further asserts that the co-conspirators did not disclose the fact of Brad's insolvency or failing circumstances. The jury found in favor of appellee and assessed damages of $78,911.47 with interest from January 1, 1971, for a total of $99,231.17.

Appellant alleges first that the evidence failed to establish a prima facie case of conspiracy and that the jury verdict was contrary to the weight of the evidence. We disagree.

As appellant acknowledges in brief, a conspiracy may be established by circumstantial evidence. As this court stated in Barber v. Stephenson, 260 Ala. 151, 156, 69 So.2d 251, 255 (1954):

'. . . Concededly there was no positive evidence to that effect, but a conspiracy need not alone be established by that character of evidence. Indeed, seldom is such the case. It is only by looking to the conduct of the alleged conspirators during the progress of the conspiracy and the end result achieved that usually such a fact is established. And to that end it is proper to consider evidence extending over a considerable period, both before and after the date of the alleged combination and even after its termination, just so that the proof has a tendency to establish the ultimate fact.'

Roy Compton was Brad's plant comptroller when Brad arrived in Gadsden. Leon Rudd, an internal auditor for National Distillers, came to Gadsden to provide cash control assistance to Brad's.

We think the following testimony was pertinent on the question of conspiracy:

'A. (Roy Compton): We (Rudd and I) Both worked together. We didn't tell them diametrically opposed--We discussed what our problems were and how we were working them out, and we basically told each creditor the same thing.

'Q. That's right, you and Mr. Rudd basically told each creditor the same thing?

'A. Certainly.

'Q. What?

'A. That we were getting things worked out and that National was helping us and that we were going to have money on some new contracts coming in and That things were looking better and that we were going to be able to get our bills paid; that is all you could tell them.

'Q. Did you tell them about holding checks?

'A. No, sir.

'Q. You didn't ever hear Mr. Rudd tell them about holding checks?

'A. Well, no.' (Emphasis added.) At another point Compton testified:

'A. Well, we continued to make M--125 fuses for the government, and we--as I mentioned earlier in testimony, Mr. Rudd was a big help to me in staving off creditors and trying to reassure them and working with them and paying a little here and a little there, and trying to work out problems; and it was just a day to day battle.'

The record was replete with financial data which tended to show Brad's failing financial condition. There was also ample evidence showing appellant's complicity in the operation of Brad's. This was a proper case for a jury.

Appellant claims the fraud counts that were submitted to the jury were barred by the Statute of Limitations, Tit. 7, § 26, Code of Alabama 1940, Recompiled 1958. Appellee submits that the claims asserted in the amended complaint arose out of the same conduct, transaction or occurrence set forth or attempted to be set forth in the original complaint and therefore related back under the provision of Rule 15(c) A.R.C.P.

Rule 15(c), in pertinent part, reads as follows:

'Whenever the claim or defense asserted in the amended pleading arose out of the conduct, transaction or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading . . ..'

A review of the pleading is necessary to understand appellant's contention.

The original complaint filed in April, 1971, alleged in Court 1 that during the years 1969 and 1970 the appellant was engaged in a joint enterprise with Brad's in the operation of Brad's business and that the appellant owed the appellee for work and labor done. Count 2 was a common count and Count 3 alleged fraud in that the appellant misrepresented to appellee that Brad's was solvent and its credit was good.

Count 4 was added by amendment in March, 1972, alleging an instrumentality theory.

In October and November, 1972, appellee struck the first four counts and added Counts 5, 6, 7 and 8. The theory of the amended complaint so far as we are here concerned was that Brad's was so organized and controlled by the employees of appellant as to make Brad's merely an instrumentality and alter ego of appellant.

In February, 1973, appellee added Counts 9, 10, 11 and 12. ¹ The theory of these counts was that appellant conspired with Brad's to conceal from the United States Government the true financial condition of Brad's and that by virtue of that conspiracy to conceal the plaintiff was induced to extend further credit to Brad's.

In December, 1974, appellee amended the complaint by striking Counts 5, 6 and 8 and adding Counts 13, 14, 15 and 16. These counts were similar to Counts 9 through 12 except they added allegations that the appellant and Brad's conspired to wrongfully conceal from the appellee and the government the true financial condition of Brad's.

During trial, at the close of appellee's evidence, the court allowed appellee to amend the complaint by adding Counts 17 and 18 over appellant's objection. The essence of these two counts is that the defendant and Brad's fraudulently conspired to induce the plaintiff to sell goods on credit to Brad's at a time when Brad's was insolvent or in failing circumstances.

While several counts remained in the complaint, it was the theory of recovery asserted in Counts 17 and 18 that formed the basis of the trial court's charge to the jury.

Specifically, appellant argues that the amended fraud counts were barred by the Statute of Limitations because they departed from the facts and duty set forth in the original complaint and appellee failed to allege and prove late discovery. Tit. 7, § 42, Code of Alabama 1940, Recompiled 1958.

For this argument to be valid the amended counts must have arisen out of conduct, transactions or occurrences other than those attempted to be set forth in the original complaint. We do not think this was the case.

It is clear that Brad's was indebted to appellee and that appellant, through its agent, was involved in the everyday management of Brad's. For the appellee to recover that debt from the appellant, it was necessary to frame a complaint setting forth liability on the part of the appellant. We are of the opinion that the various amendments to the complaint was an effort on the part of the appellee to allege a theory which would allow recovery. In other words, the various amendments were merely changes in theory rather than declarations upon different conduct. Our conclusion is that the amendments related back to the time of the original filing of the complaint.

'. . . Rule 15(c) is based on the concept that a party who is notified of litigation concerning a given transaction or occurrence has been given all the notice that statutes of limitation are intended to afford. Thus, if the original pleading gives fair notice of the general fact situation out of which the claim or defense arises, an amendment which merely makes more specific what has already been alleged, such as by specifying particular acts of negligence under a general allegation of negligence, or remedies a defective pleading, will relate back even though the statute of limitations has run in the interim. Similarly, while it is still the rule that an amendment which states an entirely new claim for relief based on different facts will not relate back, if the pleading sufficiently indicates the transaction or occurrence on which the claim or defense is based, amendments correcting specific factual details such as time and place, as well as other items, will relate back.

'The . . . (A.R.C.P.) have broadened the meaning of the concept of 'cause of action,' shifting the emphasis from a theory of law as to the cause of action, to the specified conduct of the defendant upon which the plaintiff relies to enforce his claim. And an amendment which changes only the legal theory of the action, or adds another claim arising out of the same transaction or occurrence, will relate back. Thus, an amendment will relate back which changes the theory of recovery as to the type of negligence claimed, or adds additional grounds of negligence, changes the...