Sansone v. Moseley, WD

• Citation: 912 S.W.2d 666
• Decision Date: 19 December 1995
• Docket Number: No. WD,WD
• Parties: Joseph C. SANSONE, d/b/a Property Tax Research Company, Respondent, v. Richard F. MOSELEY, Appellant. 50723.
• Court: Court of Appeal of Missouri (US)

Page 666

912 S.W.2d 666

Joseph C. SANSONE, d/b/a Property Tax Research Company, Respondent, v. Richard F. MOSELEY, Appellant.

No. WD 50723.

Missouri Court of Appeals,

Western District.

Dec. 19, 1995.

Donald E. Bucher, Kansas City, for Appellant.

Curtis L. Tideman, Overland Park, for Respondent.

Before LOWENSTEIN, P.J., and ULRICH and SMITH, JJ.

SMITH, Judge.

Richard Moseley appeals the trial court's decision in favor of Joseph Sansone d/b/a Property Tax Research Company (PTR) to pierce the corporate veil and hold him personally liable for a judgment against Moseley Group Management Company (Moseley Group). ¹ The judgment of the trial court is affirmed.

Moseley Group was a Missouri corporation formed to provide fee management services to apartment complexes. The stock of the company was owned equally by Richard Moseley and Dr. David Moore. Dr. Moore was a passive investor in the company, while Mr. Moseley took care of its day-to-day operations.

PTR is a proprietorship engaged in the business of reducing property taxes for a fee. On December 2, 1988, PTR entered into a written contract with Moseley Group to research and evaluate the property taxes of an apartment complex managed by Moseley Group. The contract provided that PTR be paid a contingent fee based on the tax savings from a reduction of property taxes. Eventually, the assessed value of the apartment complex was reduced resulting in a tax savings. PTR claimed a fee from Moseley Group in the amount of $67,801.50 which Moseley Group refused to pay.

PTR sued Moseley Group to recover the unpaid fees and, on July 19, 1991, obtained a judgment against it in the amount of $67,801.50. On September 13, 1991, PTR garnished the bank account of Moseley Group in an effort to collect the judgment and received $4,403.73.

Four days later, Terrace Management, Inc. (Terrace) was incorporated by Mr. Moseley without the knowledge and consent of Dr. Moore. The equipment of Moseley Group was transferred to Terrace, and the former employees of Moseley Group became employees of Terrace. Terrace assumed a line of credit note with a balance of $7,000 owed by Moseley Group. Furthermore, the management contracts of Moseley Group were canceled, and new management agreements were entered into with Terrace.

PTR then filed a petition asking the trial court to pierce the corporate veil or disregard the separate corporate entity and hold Terrace, Mr. Moseley, and Dr. Moore liable for the unpaid balance of the July 19, 1991 judgment plus interest. Before trial, Dr. Moore entered into a settlement agreement with PTR whereby he paid PTR $10,000 and the claims against him were dismissed. The agreement provided that the $10,000 was to be applied to the collection costs of PTR, not to reduce the outstanding balance on the judgment. The trial court ruled in favor of PTR and entered judgment against Terrace and Mr. Moseley, jointly and severally, in the amount of $78,452.48. This appeal followed.

As his first point on appeal, Mr. Moseley claims that the trial court erred in finding him personally liable for the July 19, 1991 judgment against Moseley Group. He argues that there was insufficient evidence to support a finding that his wrongful acts caused damage to PTR. Furthermore, he contends that the evidence was insufficient to support the amount of damages.

In a bench-tried case, the judgment of the trial court will be upheld unless it is not supported by substantial evidence, it is against the weight of the evidence, it erroneously declares the law, or it erroneously applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976).

To pierce the corporate veil, a plaintiff must show:

(1) Control, not mere majority or complete stock control, but complete domination, not only of finances, but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; and

(2) Such control must have been used by the defendant to commit fraud or wrong, to perpetrate the violation of a statutory or other positive legal duty, or dishonest and unjust act in contravention of plaintiff's legal rights; and

(3) The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.

Collet v. American Nat'l Stores, Inc., 708 S.W.2d 273, 284 (Mo.App.1986) (citing National Bond Fin. Co. v. General Motors Corp., 238 F.Supp. 248, 255 (W.D.Mo.1964)). A court may pierce the corporate veil or disregard the separate corporate entity if the separateness is used as a subterfuge to defraud a creditor. Edward D. Gevers Heating & Air Conditioning Co. v. R. Webbe Corp., 885 S.W.2d 771, 773 (Mo.App.1994); K.C. Roofing Center v. On Top Roofing, Inc., 807 S.W.2d 545, 549 (Mo.App.1991). The existence of a corporate entity will be disregarded when it is operated while undercapitalized or when its assets are stripped to avoid the demands of creditors. Collet, 708 S.W.2d at 286-87. Further evidence of the use of a corporate identity to defraud creditors is the transfer by the debtor corporation of its property to a second corporation when both are controlled by the same person. Gevers, 885 S.W.2d at 773.

In this case, there is ample evidence of undercapitalization and fraudulent transfer of property. Mr. Moseley testified that Moseley Group had no substantial retained earnings, owned no real estate, and could just barely cover overhead and operating expenses. Moseley Group owned equipment with a value of only $500 and maintained a bank account with an average balance of just $1,500. After PTR garnished the bank account of Moseley Group, its assets were transferred to Terrace, another corporation controlled by Mr. Moseley. Moseley Group's management contracts were canceled and rewritten with Terrace, and employees of Moseley Group became employees of Terrace.

There is substantial evidence from which the court could infer that Mr. Moseley formed Terrace to continue the business of Moseley Group while avoiding the PTR judgment. Mr. Moseley admitted at trial that he was angry about the PTR judgment, that he did not want PTR to be paid, and that he made no effort to satisfy the judgment. The cancellation of...