# FILED
Novemb er 14, 1997 Cecil W. Crowson Ap pellate Cou rt Clerk AMER ICAN COLOR , a div

ision o f ) SULLIVAN GRAPHICS, INC., ) ) Robertson Chancery Plaintiff/Appellee, ) No. 12258 ) VS. ) ) Appeal No. INNOVO, INC., ) 01A01-9703-CH-00120 ) Defendant/Appellant. )

IN THE COURT OF AP PEALS OF

TENNESSEE MIDDLE SECT ION AT NASHV ILLE APPEA L FROM C HANCERY C OURT OF ROBERTSON COU NTY AT SPRIN GFIELD , TENNESSEE HONORABL E ALEX W. D ARNELL, J UDGE

Patrick Johnson Cavalier Building, Suite 508 95 White Bridge Road Nashville, TN 37205 ATTORNEY FOR PLAI

NTIFF/APPEL

LEE Lisa M. Sherri ll 509 West Court Square Springfield, TN 37172 ATTORNEY FOR DEFENDANT/APPEL LANT 

### MODIFIED, AFFIRMED AND REMANDED.

HENRY F. TODD PRESIDING

JUDGE, MIDDL

E SECTION

CONCUR: BEN H. CANTRELL , JUDGE CONCUR I

N RESUL

TS: WILL IAM C. KOCH, JR., JUDGE-2-

AMER ICAN COLOR , a div

ision o f ) SULLIVAN GRAPHICS, INC., ) ) Robertson Chancery Plaintiff/Appellee, ) No. 12258 ) VS. ) ) Appeal No. INNOVO, INC., ) 01A01-9703-CH-00120 ) Defendant/Appellant. )



## O P I N I O N
The defendant, Innovo, I

nc ., has ap pealed from a non jury judgment, in the amount of $58,856.26, in favor of the plaintiff, American Color, a division of Sullivan Gr aphics, Inc., for mercha ndise sold

and serv ices re ndered t o the def endant.

The complaint stat es that the suit is brought upon a sworn account as authorized by T.C.A. § 24-5-107, but no sworn ite miz ed state ment of a ccount isexhibited to

the compl aint. Instead, the compl aint, which is verified by the oath of its general manage r, narrates a series of charges represented by

invoices attached to the complaint on whi ch the co mp laint alle ges a balance of $58,856.26 is due.

In thirteennumbere d parag raphs, th e compla int alleg es amount s due from defendant upo n thirteen invoiceswhich ar

e exhibited

to the com

plaint.

The answer of defendant which is verified by the oath of its president, a dmits that it owes
someo f the invo ices, denies knowledge of two and, as to the re maining invoices, makes the following defense: The products weresupplied to Nasco Group, Inc., the

parent o f Inno va. Nasc o has sinc e chang ed its name to Spirco, Inc., and has filed for protection under the bankruptcy code.
This Court h as tabula

ted the a ssertionsof the co mplaint and answer as follow s:-3- Date Amount Defendants Answer 12/24/92 $ 116.37 Admit 12/29/92 1,339.05 Nasco received product 01/22/93 15,678.93 Nasco received product 01/22/93 841.10 Admit 01/29/93 1,603.18 Admit 01/29/93 624.60 Nasco received product 01/29/93 13,013.82 Nasco received product 01/29/93 815.12 Nasco received product 01/29/93 10,825.00 Nasco received product 01/31/93 11,120.82 Nasco received product 02/12/93 950.44 Nasco received product 02/15/93 1,190.75 Nasco received product

$58,118.88 It appears that def

endant’ s sworn a

nswer a dmitt ed o wing plaintiff $2,560.65, denied knowl edge of $11 ,640. 12 and , as to the rem ainde r of th e charge s, stated that the product was
su pp li ed to th e “ pa re nt ” o f d ef en da nt wh ic h i s i n b an kr up tc y.

The Tria l Judge fi led the f

ollowing memorandum: Thi s is an act

ion on an a

ccount th at is se verel y contestedon most of the general elements for which a debt may be cha

llenged. (1) There is a challenge to the amount due and whether the pleadings bar the Plaintiff from a judgment larger than a pray er of some $46,000.00. (2) There is some form of accord and satisfaction alleged. Th i s comes a

bout when

the defe nse alle ges tha

t a promissory

not e was substituted as satisfaction for a debt allegedly made. The substitution being a future guara nty of pay ment. (3) The Defend ant alleg es that the obligat ion, if an y, is not that of Innovo but of a subsidiary of Innovo, Nasco. The Plaintiff agrees that the work done was for Nasco, a subsidiary company

of Innovo. The Plaint

iff disag rees asto who is the obligor, claiming that I nnovo was the guarantor of the debt and that all of the proceedings, billings, char ges and pay ments were made in light of that type of arrangement. The Plaintiff sought an amendment to theprayer for damages and askedthat the amendment be allowed and that the judgment conform to the p roo f and there be no limit of $46,000.00 by virtue of the pray er in the complain t. AmericanColorprepared the advertising agenda and the products for

t he defendant. Kathrine Bahr, w ho was the-4- credit manager o f th e Plaintiff company, testified tha t the co mp an y, set up a ledger card on all its accounts and that the one ledger card maintained for the charges was in the name of Innovo. This ledger card then was supplemented by the charges and payments on the a ccount. Ms. Bahr said there was not a separate account for Nasc o in any

of its cap acities, whether Nasco Sportswear or Na s co Express. Ms. Bahr serves as the cr edit manager of the Plaintiff and she was persona lly responsible for and oversaw the accounts of the company and specifically the one involving Innovo. Before 1992 the bill of the

Plaintiff actually went to Zamora and Associates an d

th ey w ou ld th en pa y th e c om pa ny. Beginningin 1992, I

nnovo decided tohave the billings made direct to them or at least they we re m ad e to them at somebod y’s request. Ms. Bahr admitted that she had received a check from Nasco but she claims that the pay ment was made subsequent to a bill made to Innovo. Ms. Patricia AndersonLasko, the CEO and President of Inno vo testif

i ed with respect to the company ’s attempted financial arrangements with the Plaintiff co mp an y. This witness testifie d that I

nnovo wasa

holding company

andthat someof the sub sidiarie s were I nnovo, I nc., Nas c o, Inc., and Nasco Products. She testif ied that e ach one

of these companies had its own accounts and did its own receipts and disbu rsementsand handled its own business items. The witness acknowledged that there were so me credit p

roblems particularly

in 1992 an d t here was an attempt to have a funding of the debt and future re sponsibilities done by promissory

notes which would cover the debts and purchases of the three subsidiary

companies of Innovo. The substance of the testimony of Ms. L asko was that Nasco was the b eneficiary of the products furnished by the plaintiff an d Inn ovo did not have an obligation to pay for Nasco’s purchases. She insisted that each com pan y was independent

in its own op eration s and dea lings wit h AmericanColor and

Inno vo was not to be charged with the responsibility in view of the independe nce of Nasco. As part of the testimony in this cau se ther e was furnishedthe deposition of Ismael Za mor a . Mr. Za

mora is engaged as a graphic designer

and his wife is asales representative. They beg an doing business with In novo in 1990. He began doing

work for Innovo and then took a fulltime job wit

h Innovo and did work with American Color for the benefit of Innovo. Some of the ac counts or the billing by Amer ican Color was through Mr. Zamora and some w e n t another directio n but he did p articipa te in the p ayments to American Color. Weighing al l o f t he te st im on y i ncluding the aforementioned

highlights shows that

the balance falls to the Plaintiff. The Plaintiff has shown by a preponderance

of the-5- tes timonythat the Defendant is obligated in the amount of $58,856.25. (1) The motion to amend the prayer for damages to conform to the proof is allowed. (2) The Court finds that the offer of the promissory

note as s atisfaction to debt was not accepted by the Plaintiff. (3) The materials werefurnishedto the subsidiary Nasco; but Innovo, by

all the proof, is the entity to be charged with the de

bt. This Opinion shall be filed as a part of t h e recor d in this Cause, but is not to be copied in the decree herein.
The Trial Judge awarded judgment to plaintiff against the defendant for

$58,828.26, the amount alleged t

o be due in

the sworn

complain t.
On appeal, defendant presents the following issues for review: I. Did t he trial court err in disregarding the corpor at e form by holding the de

fendant, Innovo, I

nc., responsible for the debtsincurre d by

its sister c orporat

ions? A. Can corpora

tions be he

ld liable f or the de bts incurred by

their sist er corp orations ? B. When and how should the court determine whether it is appropriate to disregard t he corpora te form? C. Did

the evidence pre se nted by America n Colorjustify

disreg arding

the corp orate forms of t he subsidi ary

corpora tions?
Plaintiff present s its issuesin the foll owing f orm: 1. The trial court was correct in ruling that the appellant is liable for ch arges t o an open account made by itself and sister corporations when: (1) The “cou rse of dealing s” betweenthe parties indicated that the appellee l ooke d to the appellant for pay ment on thisaccount and

appellant made no objections thereto; (2) the ap pe llant, as agent for its sister corporations, is liable since credit was extended to it alone. 2. The trial court abused its discretion in failing to award prejudgment inter

est.-6- The def endant’ s only

defense to the “sworn amount” (sworn complaint with invoices),
was a sworn answer that

“the product” (the subject of the invoices), was de livered to a subsidiary of th e s am e c or po ra ti on of

wh ic h d ef

en da nt wa s a ls o a su bs id ia ry. Defend ant does not explain ho w i t, a s ub si di ar y, i s l it ig at in g i ts li ab il it y wh il e i ts pa re nt co rp or at io n i s i n b an kr up tc y.

Defendant’s sworn answer is not anunequivocal denial as contemplated by T .C.A. § 24- 5-107, but an ef

fort to shi ft the lia

bility t o a sister corporation when there is evidence tha t the
course of dealing between

the parties was that the goods and services would be furnished to the sister corporation “at

the request of defendant,” that defenda nt would pay plaintiff

for such goods andservices and collect from the sister corpora tion. Ther

e is evide nce of a n effor t to change the
course of dealing to direct billing and to collection from the sister corporation, but the permanent accomplishment of such change is not shown.

The evidence does not

preponderate against the finding s of the Trial Judge. However, this Court finds that part of the debt ($3,298.03) which defendant did not deny in its sworn
answer should bea

r pre-ju dgment in terest. Upon remand the amount of said interest will be computedand the judgment of the Trial Court will be increased

in this amount. The judgment
so rendered will bear statutory interest from the date of the original judgme nt October 28, 1996,
un ti l p ai d. Co st s o f t hi s a pp ea l w il l b e p ai d b y de fe nd an t a nd it s s ur et y.



### MODIFIED, AF FIRMED AND REMANDED .

HENRY F. TODD PRESIDING

JUDGE, MIDDL

E SECTION CONCUR:

BEN H. CANTRELL , JUDGE
CONCUR I

N RESUL

TS: WILL IAM C. KOCH, JR., JUDGE-7-