Title: Estes Oil Company, Inc. v. Sam's Real Estate Business Trust, Inc. (Appeal from Lauderdale Circuit Court: CV-12-0139). Affirmed. No Opinion.

State: alabama

Issuer: Alabama Supreme Court

Document:

REL: 05/02/2014
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-
0649), of any typographical or other errors, in order that corrections may be made before
the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 2013-2014
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Estes Oil Company, Inc.
v.
Sam's Real Estate Business Trust, Inc.
Appeal from Lauderdale Circuit Court
(CV-12-0139)
STUART, Justice.
AFFIRMED.  NO OPINION.
See Rule 53(a)(1) and (a)(2)(E), Ala. R. App. P.
Bolin, Parker, Main, and Wise, JJ., concur.  
Moore, C.J., and Murdock, Shaw, and Bryan, JJ., dissent.
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MOORE, Chief Justice (dissenting).
Because I believe that the trial court incorrectly
construed the agreement the interpretation of which is at
issue in this case, I respectfully dissent from affirming its
judgment.
I. Facts and Procedural History
In 1991, Wal-Mart Stores, Inc. ("Wal-Mart"), and Estes
Oil Company, Inc. ("Estes"), entered into an "Access and
Facility Easements" agreement ("the agreement") regarding the
use of their adjacent properties in Florence. Wal-Mart's
property was termed "Tract 1" in the agreement; Estes's
property was termed "Tract 3." Paragraph 11 of the agreement
states: 
"Competing Businesses. Wal-Mart covenants that
as long as Estes or any affiliate of Estes is the
user of Tract 3, either as owner or lessee, no
portion of Tract 1 shall be leased or occupied by or
conveyed to any other party for use as an auto
gasoline station."
Wal-Mart built a Sam's Wholesale Club on Tract 1. On
October 21, 1996, Sam's Real Estate Business Trust, Inc.
("Sam's REBT"), was organized as a business entity in
Delaware. On October 31, 1996, Wal-Mart conveyed Tract 1 by a
warranty deed to Sam's REBT, which on March 13, 1997,
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registered to do business as a foreign corporation in Alabama.
In 2003, Wal-Mart recorded in Lauderdale County the warranty
deed conveying Tract 1 to Sam's REBT. In 2012, Sam's REBT
began building a gasoline station on Tract 1. Paragraph 9 of
the agreement states: "The rights and obligations contained
herein shall run with the title to Tract 1 and Tract 3 and
shall bind and insure [sic] to the benefit of the respective
successors and assigns of the parties hereto."
Upon discovering that Sam's REBT was building a gasoline
station on Tract 1, Estes, which had operated a gasoline
station on Tract 3 since 1984, sued Sam's REBT, seeking
injunctive relief to halt the construction of the gasoline
station. Sam's REBT counterclaimed, seeking a judgment
declaring that the agreement did not forbid its construction
of a gasoline station on Tract 1. The trial court, treating
Sam's REBT as the legal equivalent of Wal-Mart, denied
injunctive relief to Estes and entered a summary judgment for
Sam's REBT. Estes appeals.
II. Standard of Review
A summary judgment is reviewed de novo, and the judgment
is given no presumption of correctness. Baldwin v. Branch, 888
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So. 2d 482, 484 (Ala. 2004). A summary judgment is proper when
there is "no genuine issue as to any material fact and ... the
moving party is entitled to a judgment as a matter of law."
Rule 56, Ala. R. Civ. P.
III. Analysis
The dispositive issue is whether Sam's REBT qualifies as
"any other party" under paragraph 11 of the agreement. Sam's
REBT argues that as a wholly owned subsidiary of Wal-Mart it
is not "any other party" but is the same party as Wal-Mart.
Thus, it argues, paragraph 11 does not restrict its use of
Tract 1. The trial court, agreeing with Sam's REBT, stated in
its summary-judgment order:
"While paragraph 11 would appear to prevent an
'other party' from using [Wal-Mart's] property as an
'auto gasoline station,' [Estes] has offered no
viable legal or factual argument suggesting that
[Sam's REBT] is such an 'other party' or that
paragraph 11 has any application to [Sam's REBT's]
own use of its property."
However, in its opposition to Sam's REBT's summary-judgment
motion, Estes contended that Sam's REBT was an "other party"
to the agreement because, it argued, "Sam's is not an original
party to the [agreement], Sam's is a freestanding corporate
entity, Sam's has not been merged into Wal-Mart or any other
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corporate entity, and it does not claim to be the alter-ego of
Wal-Mart." 
A party is "[o]ne who takes part in a transaction."
Black's Law Dictionary 1231 (9th ed. 2009). In 1996, Sam's
REBT took part in a transaction with Wal-Mart, namely the
conveyance by a warranty deed of Tract 1 from Wal-Mart to
Sam's REBT. The deed was recorded in Lauderdale County in
2003. Sam's REBT is organized as a Delaware business trust and
is registered as a foreign corporation in Alabama under its
own name. If Sam's REBT were not a separate legal entity from
Wal-Mart, how could Wal-Mart convey Tract 1 to Sam's REBT? It
can hardly be argued under the law that the conveyance of
Tract 1 by a warranty deed was not a transaction between two
parties. No legal justification exists for one party to deed
to itself property it already owns. Nor, for example, would a
lien against Wal-Mart be filed against property in the name of
Sam's REBT. Sam's REBT, though a wholly owned subsidiary of
Wal-Mart, is nonetheless an "other party" to the agreement
between Estes and Wal-Mart and thus also a successor or
assignee of Wal-Mart under paragraph 9. 
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Had 
Wal-Mart 
desired 
to 
exclude 
affiliates 
or
subsidiaries from the scope of the term "any other party" in
the agreement, it could have bargained with Estes to add such
an exclusion to the agreement and thus protected from the
constraints of paragraph 11 any conveyance of Tract 1 to an
affiliated entity. However, as the agreement is worded and in
accord with common usage of the term "party," Sam's REBT is a
stranger to the agreement and thus an "other party" under its
terms. "Words used in a contract will be given their ordinary,
plain, or natural meaning where nothing appears to show they
were used in a different sense or that they have a technical
meaning." Ex parte Dan Tucker Auto Sales, Inc., 718 So. 2d 33,
36 (Ala. 1998). See also Strickland v. Rahaim, 549 So. 2d 58,
60 (Ala. 1989) (noting that "the parties [to a contract] are
presumed to have intended what the terms clearly state").
IV. Conclusion
Because Sam's REBT is a separate legal entity from Wal-
Mart and was not a party to the agreement, it qualifies as an
"other party" under paragraph 11 of the agreement. Therefore,
I respectfully dissent from affirming the trial court's
summary judgment for Sam's REBT.
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MURDOCK, Justice (dissenting).
The covenant at issue was made by Wal-Mart Stores, Inc.
("Wal-Mart"), in favor of Estes Oil Company, Inc. ("Estes"),
and it provided that Wal-Mart would not convey the parcel of
land at issue to any "other party" for use as a gasoline
station.  There is no evidence indicating that the parties to
this covenant meant anything by the term "other party" except
its plain and ordinary meaning.
Sam's Real Estate Business Trust, Inc. ("Sam's REBT"), is
not Wal-Mart; it is a separate legal entity.  It is not even
a wholly owned subsidiary of Wal-Mart.  It is a subsidiary of
a subsidiary of a subsidiary of Wal-Mart.  Thus, one might say
that it is indirectly owned and controlled by Wal-Mart.  The
plain language of the covenant here, however, contains no
exception for the conveyance of land to entities indirectly
owned or controlled by Wal-Mart.  By its plain language, it
prevents the conveyance of the property to any "other party"
-- any separate legal entity -- for use as a gasoline station. 
Wal-Mart has voluntarily used the separate "corporate"
form of Sam's REBT to gain tax advantages and/or to insulate
itself from potential liabilities.  Having voluntarily chosen
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the legal advantages offered by this "corporate veil," Wal-
Mart and Sam's REBT may not so readily ignore their separate 
status merely because it suits their purposes to do so in the
immediate controversy.  See, e.g., Joyce v. Super Fresh Food
Markets, Inc., 815 F.2d 943, 946 (3d Cir. 1987) ("[The
defendant] chose to construct a complex corporate family
structure. ...  This structure has afforded the [defendant
corporate] family various tax and labor advantages. ...  While
we certainly do not begrudge the [defendant corporate] family
these fruits, we will not sympathetically listen as they
complain 
of the other consequences."); Mitchell Co. v. 
Campus,
CIV.A.08-0342-KD-C (S.D. Ala. June 17, 2009) (not reported in
F. Supp. 2d) ("Even where the directors and officers of one
company decided to incorporate a separate company, whatever
the motive, they become 'bound by the disadvantages as well as
the advantages of separate incorporation.'") (quoting Diesel
Sys., Ltd. v. Yip Shing Diesel Eng'g Co., 861 F. Supp. 179,
181 (E.D. N.Y. 1994)).  As one authority put it recently,
courts view with "disfavor ... contradictory attempts to
secure the benefits of the corporate form while at the same
time seeking to avoid the disadvantages of same."  General
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Nutrition Corp. v. Gardere Wynne Sewell, LLP, 727 F. Supp. 2d
377, 387 n.10 (W.D. Pa. 2010). 
For that matter, and the most concerning aspect of our
decision today in my opinion, is the ease with which this
Court ignores the separate legal status of Wal-Mart and Sam's
REBT and thereby acts in a manner inconsistent with our own
decisions -- decisions in which we have been careful to
observe and to safeguard the separate legal status of a
corporation and its shareholders.  A substantial showing is
necessary to justify ignoring that separate status.  
"'"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)."'"
Econ Mktg., Inc. v. Leisure Am. Resorts, Inc., 664 So. 2d 869,
870 (Ala. 1994)(quoting Backus v. Watson, 619 So. 2d 1342,
1345 (Ala. 1993), quoting in turn Simmons v. Clark Equip.
Credit Corp., 554 So. 2d 398, 400–01 (Ala. 1989)(emphasis
added)).  Here, there is an absence of any showing by Sam's
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REBT that the corporate veil (actually, veils) between it and
Wal-Mart should be pierced.  In the absence of such a showing,
and given the absence of any evidence of some special meaning
of the term "other party" in the covenant, the Court's
decision today is at odds with long-established and important
precedent respecting the ability of parties to take on
separate corporate forms.
Finally, the violation of the restrictive covenant here
is a matter that may be the enforced against Sam's REBT
because the covenant is a recorded encumbrance and by its
terms is binding on the "successors and assigns" of Wal-Mart. 
See also West Town Plaza Assocs., Ltd. v. Wal-Mart Stores,
Inc., 619 So. 2d 1290, 1296 (Ala. 1993) (holding that "[t]he
Overlease and the Sublease granted Wal-Mart an easement in
land, a property right," entitling Wal-Mart to injunctive
relief).
I therefore must respectfully dissent.
Bryan, J., concurs.
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