Simmons v. Clark Equipment Credit Corp.

• Decision Date: 09 November 1989
• Citation: 554 So.2d 398
• Parties: George M. SIMMONS and Simmons Machinery Company, Inc. v. CLARK EQUIPMENT CREDIT CORPORATION. 88-987.
• Court: Alabama Supreme Court

Page 398

554 So.2d 398

George M. SIMMONS and Simmons Machinery Company, Inc. v. CLARK EQUIPMENT CREDIT CORPORATION.

88-987.

Supreme Court of Alabama.

Nov. 9, 1989.

Rehearing Denied Dec. 22, 1989.

William H. Mills of Redden, Mills & Clark, Birmingham, for appellants.

Michael L. Hall and John D. Saxon of Johnston, Barton, Proctor, Swedlaw & Naff, Birmingham, for appellee.

HOUSTON, Justice.

George M. Simmons ("Simmons") and Simmons Machinery Company, Inc. ("Corporation"), grantors in conveyances found to be fraudulent by the trial court, appeal from the trial court's "Order of Final [Summary] Judgment." Neither the George M. Simmons Trust ("Trust"), the grantee in all of the conveyances found to be fraudulent, the trustee thereof, nor any of the beneficiaries of the Trust appeal. The sole appellee is the plaintiff, Clark Equipment Credit Corporation ("Clark"), the creditor of Simmons and the Corporation.

The grantee, where it still retains title to the property (as the Trust did in this case), is a necessary party to an action by the grantor's creditors to set aside a conveyance as fraudulent. Kimball v. Greig, 47 Ala. 230 (1872); 2 Moore on Fraudulent Conveyances § 67, at 822 (1908); 1 Glenn, Fraudulent Conveyances and Preferences § 127, at 243 (1940); see also Gilmore, Farris & Associates, Inc. v. Pickens County Nursing Home, Inc., 292 Ala. 610, 298 So.2d 604 (1974). Grantors in a conveyance assailed as being fraudulent are not necessary parties defendant. Southern Ry. v. Hartshorne, 150 Ala. 217, 43 So. 583 (1907). "The only time the debtor [grantor] is a necessary party is when he has an outstanding interest in the property that was not included in the fraudulent conveyance." 1 Glenn § 127(a) at 245.

"This court said in Trotter v. Brown, 232 Ala. 147 , 167 So. 310 (1936):

" 'If the transfer passes the legal title, the grantor is not a necessary party ... but is a proper party, at the suit of a creditor in equity to vacate and subject the property to the payment of the debt. [Citing cases.] But if the legal title remained in the fraudulent grantor, he is a necessary party to bring that title before the court.' "

Gilmore, Farris & Associates, Inc. v. Pickens County Nursing Home, Inc., 292 Ala. at 612, 298 So.2d at 606.

Legal title to the property conveyed by Simmons to the Trust did not remain in Simmons, and legal title to the property conveyed by the Corporation to the Trust did not remain in the Corporation. Therefore, Simmons and the Corporation were not necessary parties, and they do not have an interest in the subject matter sufficient on appeal to challenge the trial court's finding that the conveyances were fraudulent.

Mr. Justice Beatty, in Sho-Me Motor Lodges, Inc. v. Jehle-Slauson Construction Co., 466 So.2d 83, 88 (Ala.1985), wrote:

"Who may appeal from a judgment? Ordinarily, one who is not a party to a cause cannot appeal. Security Life & Accident Ins. Co. v. Crescent Realty Company, 273 Ala. 624, 143 So.2d 441 (1962); Hunt v. Houtz, 62 Ala. 36 (1878). Moreover, when an error applies only to a party who does not appeal therefrom, another party cannot make any such error an issue on appeal. Rush v. Heflin, 411 So.2d 1295 (Ala.Civ.App.1982); Kirkland v. Kirkland, 281 Ala. 42, 198 So.2d 771 (1967). Although Southern Roof is a third-party defendant in this case, plaintiff Sho-Me is in no way aggrieved by the summary judgment entered in Southern Roof's favor and against Jehle-Slauson. Jehle-Slauson filed a third-party complaint against Southern Roof, seeking indemnity for any liability it might have to Sho-Me. Sho-Me has not asserted any claim directly against Southern Roof, and it has not been shown to us that Sho-Me has any interest in Jehle-Slauson's third-party action. When summary judgment was entered against it as to the third-party complaint, Jehle-Slauson, though it was the party aggrieved by that judgment, did not appeal. Sho-Me, for aught that appears, has looked to Jehle-Slauson for its recovery, and has been indifferent to the manner and means by which Jehle-Slauson, in turn, might protect itself. Fuller v. Branch County Commission, 520 F.2d 307 (6th Cir.1975); Bryant v. Technical Research Co., 654 F.2d 1337 (9th Cir.1981).

"Because Sho-Me was not a party aggrieved by the judgment entered against Jehle-Slauson in its third-party claim against Southern Roof, it could not appeal from that judgment. Therefore, the motion of Southern Roof to dismiss Sho-Me's appeal of that judgment must be, and is, granted."

The Trust, which was a necessary party to challenge the trial court's finding that the conveyances were fraudulent, is not a party to this appellate proceeding. Therefore, we will not review the trial court's finding that the deeds from Simmons to the Trust were fraudulent or its finding that the deed from the Corporation to the Trust was fraudulent. Jemison v. Brown, 281 Ala. 281, 202 So.2d 44 (1967), cert. denied 389 U.S. 1043, 88 S.Ct. 785, 19 L.Ed.2d 834 (1968). Moreover, where, as here, there are no disputed facts relating to the primary issue of setting aside the conveyances, the appellee is entitled to a judgment as a matter of law.

The trial court did err in its finding that the property the Corporation conveyed to the Trust was property out of which Clark could satisfy its judgment against Simmons. This would require a piercing of the corporate veil and a finding that Simmons was the alter ego of the Corporation, which is usually a question for the trier of fact, Baldwin County Savings and Loan Association v. Chancellor Land Co., 533 So.2d 217 (Ala.1988); Hamrick v. First National Bank of Stevenson, 518 So.2d 1242 (Ala.1987).

The trial court erred in granting the summary judgment motion permitting the piercing of the corporate veil. Piercing the corporate veil is not a power that is lightly exercised. The concept that a corporation is a legal entity existing separate and apart from its shareholders is well settled in this state. Co-Ex Plastics, Inc. v. AlaPak, Inc., 536 So.2d 37 (Ala.1988). Alorna Coat Corp. v. Behr, 408 So.2d 496 (Ala.1981). The mere fact that a party owns all or a majority of the stock of a corporation does not, of itself, destroy the separate corporate identity. Messick v. Moring, 514 So.2d 892 (Ala.1987); Forester & Jerue, Inc. v. Daniels, 409 So.2d 830 (Ala.1982). The fact that a corporation is under-capitalized is not alone sufficient to establish personal liability. Co-Ex Plastics, Inc. v. Alapak, Inc., supra; East End Memorial Association v. Egerman, 514 So.2d 38 (Ala.1987). To pierce the corporate veil, a plaintiff must show fraud in asserting the corporate existence or must show that recognition of the corporate existence will result in injustice or inequitable consequences. Washburn v. Rabun, 487 So.2d 1361 (Ala.1986); Cohen v. Williams, 294 Ala. 417, 318 So.2d 279 (1975).

The only evidence before the trial court in this case that in any way tends to support a judgment piercing the corporate veil is Simmons's testimony that he owned from 70% to 80% of the stock of the Corporation in 1980. Majority stock...