Title: Hardwick Morrison Co. v. Albertsson

State: vermont

Issuer: Vermont Supreme Court

Document:

NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
 that corrections may be made before this opinion goes to press.


                                 No. 90-079


 Hardwick-Morrison Co.                        Supreme Court

      v.                                      On Appeal from
                                              Bennington Superior Court

 Stig Albertsson                              September Term, 1991




 Francis B. McCaffrey, J.

 Peter H. Banse of Banse & McCoy, P.C., Manchester Center, for plaintiff-
   appellee

 James B. Anderson of Ryan Smith & Carbine, Ltd., Rutland, for defendant-
    appellant



 PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.



      Gibson, J.   Defendant Stig Albertsson appeals a jury award of the
 balance due, plus interest, on pumping equipment plaintiff sold to
 Albertsson-Hunter Corporation, a company controlled by defendant.  The jury
 found defendant Albertsson personally liable for the corporation's debt.  We
 affirm.
                                     I.
      At all times material, Albertsson-Hunter Corporation was in the
 business of selling water slides to amusement parks and recreation areas.
 It was owned by Albertsson Corporation, a holding company owned by defendant
 and his wife.  Albertsson Corporation provided administrative services for
 Albertsson-Hunter and four other subsidiary corporations, and paid many of
 their operating expenses, such as rent, heat, utilities, insurance, payroll
 and payroll taxes.  Defendant was a director of Albertsson Corporation and
 chairman of Albertsson-Hunter's board of directors.  It is fair to say that
 he controlled the finances of Albertsson-Hunter.
      In 1985, Albertsson-Hunter lost more than $200,000 on gross sales of
 $2,600,000.  In early March 1986, the company's directors were informed that
 sales for 1986 were projected to decline 50 percent because liability
 insurers would no longer provide insurance for use of the water slides.  The
 directors agreed the business had to be "reassessed."  At trial, defendant
 conceded that the company's outlook was "bleak" in March of 1986.
 Nevertheless, Albertsson-Hunter continued in operation, and by the end of
 May 1986, had sold six additional water slides incorporating approximately
 $60,000 worth of plaintiff's pumping equipment.  By mid July 1986,
 Albertsson-Hunter had completed work on all of its contracts, and by the end
 of that month, had been paid more than $580,000 for these six slides.  Its
 total receipts for June and July amounted to nearly $750,000, but through
 July, it had paid plaintiff only $21,451.
      In contrast, Albertsson-Hunter made substantial payments to Albertsson
 Corporation.  In June 1986, Albertsson-Hunter paid Albertsson Corporation
 $94,000, and in July an additional $125,000, to repay the parent
 corporation for operating expenses and cash transfers it had paid on behalf
 of Albertsson-Hunter.  At the end of July, Albertsson Corporation carried a
 balance due from Albertsson-Hunter of $77,963.  This figure included a
 charge of $51,330 for "administrative fees," the only time such a charge was
 ever made.  In addition to the payments to Albertsson Corporation,
 Albertsson-Hunter made substantial payments to the other four subsidiaries
 in June and July.  All told, out of total receipts of nearly $750,000 in
 June and July of 1986, some $327,500 went to Albertsson Corporation or its
 related subsidiary corporations.
      Fearing it would not be paid the balance owed to it, plaintiff
 threatened in August of 1986 to file liens against the projects containing
 its equipment.  The vice-president of Albertsson-Hunter asked plaintiff not
 to file the liens because they would delay payments from the projects to
 Albertsson-Hunter; he promised that defendant would provide a payment
 schedule forthwith.  Defendant did so in a letter dated August 13 that he
 signed as chairman of Albertsson-Hunter.  The letter set out a payment
 schedule running from August 31 through November 30.  Albertsson-Hunter made
 the first payment of $9,614 on September 2, and a $468.51 portion of the
 September 30 payment on September 5, (FN1) but made no other payments.
      On July 31, the books of Albertsson-Hunter showed losses of $116,765,
 cash on hand of $25,051, accounts receivable of $114,950, and trade debts of
 $307,760.  On August 31, the company's losses totaled $148,349, and there
 was no cash on hand.  Defendant decided in July or August that Albertsson-
 Hunter had to be liquidated, and in October he reached a tentative agreement
 to sell the business.  The deal fell through, however, and Albertsson-Hunter
 filed for bankruptcy in December.  By then the corporation had no assets of
 any value.
      In March 1987, plaintiff sued defendant, alleging defendant had
 constructively defrauded it by diverting money Albertsson-Hunter had
 received from water slide customers to Albertsson Corporation and its
 subsidiaries.  Plaintiff alternatively alleged that a Wisconsin statute
 required defendant to pay for labor and materials used in a project in that
 state before using funds received from such project for any other purpose.
 Wis. Stat. { 779.02(5).  Because we affirm the constructive fraud verdict,
 we do not consider the applicability of the Wisconsin statute.
      On the constructive fraud issue, defendant contends that (1) the trial
 court improperly denied his motions for directed verdict and judgment
 notwithstanding the verdict, (2) the court improperly instructed the jury,
 and (3) the court erred in the interrogatories it submitted to the jury.
                                     II.
      Defendant argues that his motions for directed verdict and judgment
 notwithstanding the verdict should have been granted because the jury could
 not properly find him personally liable for the debt owed plaintiff.  He
 maintains that he derived no benefit from plaintiff's loss, which was
 simply an unfortunate consequence of Albertsson-Hunter's demise.  He claims
 Albertsson-Hunter paid plaintiff the same proportion of its account as it
 paid its other creditors, including Albertsson Corporation and its sub-
 sidiaries.  Thus, defendant asserts, he should not be held personally
 liable to plaintiff, just as the owner or director of a bankrupt corporation
 should not be personally liable to its creditors.
      In reviewing the grant or denial of motions for directed verdict and
 judgment notwithstanding the verdict, we view the evidence in the light
 most favorable to the nonmoving party and exclude the effect of modifying
 evidence.  Center v. Mad River Corp., 151 Vt. 408, 413, 561 A.2d 90, 93
 (1989).  Where fraud is alleged, proof must be made by clear and convincing
 evidence.  Bardill Land and Lumber, Inc. v. Davis, 135 Vt. 81, 82,