No. 80-73 

IN THE St1PRE:ME COURT OF THE STATE GF MONTANA 

198C: 

EVELYN M. F1,EMMER , Persorral Representative 

of the Estate of Jack Flemrner, Deceased, 

Plaintiff and Resportdent, 

-VSJOHN J. MING, Individual ly , JOUN J, MING, INC . , and INCOME PROPERTIES,INC., 

Defendant and Appellant. 

Appeal from: Cistrict Court of the Mineteenth Judicial District, 

In and for the County of Lincoln, The Honorable 

Rclbert M. Holter, Judge presiding. 

Counsel of Record: 

For Appellant:: 

Murray, Kaufman, Vidal & Gardon, Kalispell, Montana 

For Respondent : 

Fennecsy, Crocker, Harnan 6 Bostock, Libby, Montana 

Submitted an Briefs: August 13, 198Cc 

~ecided : D E C 1 1 19&) 

-P* 

Clerk 
Mr. Justice Daniel J. Shea delivered the Opinion of the 

Court. 

Defendants appeal the judgment of the Lincoln County 

District Court, entered after a jury verdict for plaintiffs, 

in the amount of $34,806 in actual and punitive damages and 

$7,727 in costs and attorney fees with interest to accrue at 

10 percent per year until paid. Plaintiffs Evelyn M. 

Flemmer , individually, and as the personal representative of 

her late husband, Jack Flemmer, sued the defendants for 

breach of contract and fraud for the nonpayment of a 

promissory note. On appeal, defendants allege that the 

trial court erred in denying their motions to dismiss and 

for summary judgment and in admitting evidence to vary the 

terms of the promissory note. Defendants also urge that 

there is insufficient evidence to support the jury's 

verdict. We find no error and affirm. 

In 1968, the Flemmers listed the Evergreen Motel, which 

they had owned and operated since 1948, with defendant John 

J. Ming, a real estate agent in Libby. After attempting for 

several months to sell the motel, Ming approached the 

Flemmers about buying it himself. The parties agreed on a 

purchase price of $110,000. Ming had his attorney draw up a 

contract for deed and a promissory note for $10,000 which 

represented the downpayment. The contract listed John J. 

Ming, Inc., as buyer and the promissory note was signed by 

John J. Ming as president of John J. Ming, Inc. Before the 

contract was prepared, Ming had not informed the sellers 

that he was not buying the property in his individual 

capacity, but rather that the buyer would be a closely-held, 

family corporation of which he was the president. Mrs. 

Flemmer testified at trial the designation "Inc." after 

Ming's name on the contract had held no special significance 
to either her or her husband and that they were lead to 

believe that Ming would make payments under the contract. 

After closing the sale, the Flemmers moved from Montana 

to Lodi, California, where they intended to retire. In 

March 1970, Ming wrote to the Flemmers and informed them 

that the motel was not as profitable as had been anticipated 

and that he would have to default unless the Flemmers were 

willing to renegotiate the purchase price and lower the 

monthly payments. Jack Flemmer was in poor health and did 

not want to take the motel back. Consequently, the Flemmers 

agreed to reduce the selling price from $110,000 to $85,000. 

Ming's attorney drew up the renewal contract and the new 

agreement was executed on April 1, 1970. When the Flemmers 

received the new contract in the mail, it showed the buyer 

to be Income Properties, Inc., and was signed by John J. 

Ming, as president of that corporation. Ming had at no time 

disclosed that a different buyer would be named in the 

contract. Moreover, the 1970 Corporation Annual Report 

filed by the corporation with the Secretary of State and 

introduced into evidence at trial by plaintiffs does not 

show that Ming was a corporate officer at all. The original 

promissory note with John J. Ming, Inc., became the 

downpayment for the new contract with Income Properties. 

Ming could not pay the promissory note when it became 

due on November 9, 1973, and therefore asked the Flemmers to 

accept a new note for $13,127.05, being the original $10,000 

downpayment plus accrued interest. The Flemmers assented. 

The maker was again John J. Ming, Inc. The terms of the 

renewal note called for monthly interest payments of $87.51 

to be made to the Flemmers, with the entire principal 

balance falling due on February 1, 1975. Ming sent the note 

to the Flemmers by mail on stationary of Treasure State 
Realtors, Inc. The letter was signed by Ming, ostensibly as 

an agent for Treasure State Realtors, Inc. This letter 

used--as did all correspondence from Ming to the Flemmers- 

-the plural pronoun "we" when referring to who was liable to 

make payments under the note. 

Only six interest payments were made on the new note, 

at least two of which were drawn on the checking account of 

Treasure State Realtors, Inc. 

Jack Flemmer died on July 31, 1975. On February 2, 

1978, Mrs. Flemmer instituted this action for collection of 

the balance due on the note. She alleged that Ming had 

devised a fraudulent scheme to defraud the plaintiffs of the 

money owed them under the 1973 promissory note. Plaintiffs 

also contended that the corporate defendants did not have 

any genuine or separate corporate existence and that they 

existed for the sole purpose of enabling Ming to transact 

his personal business in a corporate guise. 

We find no merit in the defendants' charge that the 

trial court erred in ruling on certain procedural and 

evidentiary questions. 

The lower court's denial of defendants' motion for 

summary judgment was entirely proper. An examination of the 

pretrial record clearly indicates that the following factual 

issues were in dispute and could only be resolved by a trial 

on the merits: (1) whether John J. Ming operated John J. 

Ming, Inc., Income Properties, Inc., and Treasure State 

Realtors, Inc., as his personal businesses; (2) whether 

Ming fraudulently represented to the plaintiffs that he 

would be liable on the contract and notes; (3) whether Ming 

acted as an agent for the defendant corporations; and (4) 

whether the corporate veils should be pierced so as to hold 

Ming, Treasure State Realtors, and Income Properties liable 
on the 1973 renewal note. Summary judgment is proper only 

where the pretrial record discloses that there are no 

genuine issues of material fact and that the moving party is 

entitled to judgment as a matter of law. Scott v. Robson 

(1979) I Mont . , 597 P.2d 1150, 1154; Rule 56(c), 

M.R.Civ.P. 

Neither did the trial court err in denying Income 

Properties, Inc., Treasure State Realtors, Inc., and John J. 

Ming's motion to dismiss on grounds that they were not 

"contractual" parties to the note. These defendants misconstrue the essence of the plaintiffs' action. The 

Flemmers' lawsuit is based not only on an action at law for 

breach of contract, but also on a claim in equity for fraud. 

Plaintiff alleged, in substance, that the defendants acted 

in concert to perpetrate a fraud. The lower court, ruling 

on a motion to dismiss, must take the allegations of the 

complaint as true, Gunderson v. Bd. of Commissioners of 

Cascade County (1979), Mont . 

and must construe them in a light most favorable to the 

plaintiff. Fraunhofer v. Price (1979), Mont . I 

594 P.2d 324, 327, 36 St.Rep. 883. A complaint will not be 

dismissed for failure to state a claim unless it appears 

beyond any doubt that the plaintiff can prove no set of 

facts in support of his claim which would entitle him to 

relief. Fraunhofer, supra, 594 P.2d at 327. Hence, the 

District Court is not to engage in fact-finding when ruling 

on a motion to dismiss. See Fraunhofer, supra, 594 P.2d at 

327. What evidence was later actually adduced in support of 

plaintiffs' position is of no consequence when reviewing the 

appropriateness of the lower court's denial of a motion to 

dismiss made prior to trial. 

Defendants urge that the trial court erred in admitting 
extrinsic evidence, chiefly letters from Ming to the 

Flemmers, relating to the circumstances leading up to the 

execution of the 1973 note. They contend that the parol 

evidence rule prohibits the admission of any and all 

extrinsic evidence contradicting or varying the terms of the 

note. There are numerous exceptions to the parol evidence 

rule. Evidence of the circumstances under which a written 

instrument was made or to which it relates is admissible to 

establish fraud. Section 28-2-905(2), MCA. There was 

therefore no error. 

Defendants also fault the trial court for not granting 

their motion to dismiss plaintiffs' claim of fraud at the 

close of the plaintiffs' case in chief. We will consider 

that assignment of error together with the defendants' 

charge that there was insufficient evidence to support the 

jury's conclusion that Income Properties, Inc., Treasure 

State Realtors, Inc., and John J. Ming, Inc., were the alter 

ego of John J. Ming and had no separate identities of their 

own. 

This Court has recognized two general theories under 

which the corporate identity may be disregarded: the socalled "agency" theory and the "identity" or "alter ego" 

theory. State ex rel. Monarch Fire Ins. Co. v. Holmes 

(1942), 113 Mont. 303, 307-08, 124 P.2d 994, 996. The 

court's instruction to the jury accorded with these 

recognized theories: 

". . . a corporation's separate identity may 

be disregarded when such corporation is under 

the control of another corporation or 

individual, and acted as that corporation's 

agent as to the particular transaction, or, 

when the corporation's identity is so 

identified with the other corporation or 

individual sought to be held liable as to 

make the two corporations one. Before you 

can disregard the separate identity of the 

corporation, however, you must also find. . . that the corporation is utilized as a subter- 
fuge to defeat public convenience, to justify 

wrong, or to perpetrate fraud." 

Where the corporate form is abused by an individual 

controlling shareholder in order to defraud creditors, 

equity may pierce the corporate veil. See, Stromberg v. 

Seaton Ranch Co. (1972), 160 Mont. 293, 502 P.2d 41; Shaffer 

v. Buxbaum (1960), 137 Mont. 397, 352 P.2d 83. 

The evidence supports a finding of fraud and justifies 

piercing the corporate veil. The record shows that all 

three of the corporate defendants were closely-held, family 

corporations. The officers, stockholders and members of the 

boards of directors consisted in each case of the same 

people: Ming, his wife, his son, and his daughter. The 

registered offices of all three corporations were located in 

Ming's personal residence. All three corporations were 

engaged in the same enterprise -- the purchase, sale and 

development of real estate. These facts, if they stood 

alone would not, of course, warrant abrogating a 

corporation's limited liability. However, the use to which 

the corporations were put does. In particular, when Ming 

asked to renegotiate the original contract, he never 

mentioned to the Flemmers that the renewal contract would be 

with Income Properties, Inc., or that the Flemmmers would be 

required to retain the original promissory note with John J. 

Ming, Inc., as the downpayment for the new contract. Ming 

regularly corresponded with the Flemmers under different 

business names. In those letters, he habitually used the 

word "we" when referring to the parties who were to make 

payment under the note. He made interest payments on the 

renewal note with checks drawn on different corporate 

accounts (Treasure State Realtors, Inc., and John J. Ming, 

Inc.). Under the circumstances, it was entirely reasonable 

for the Flemmers to conclude that the various corporations 
were all a part of Ming's personal business empire. 

In 1970, when the second contract for deed was 

executed, Income Properties, Inc., replaced John J. Ming, 

Inc., as the purchaser, Ming testified that no consideration was paid for that transfer. It is highly unlikely that 

one corporation would trans£ er income-producing property to 

another corporation gratis unless their interests were 

really the same. Ming, admitted on the stand, the unity of 

interest which he had with Income Property, Inc.: 

. It is not really good business sense, is , to sell property and still stay liable 

r ten or twelve thousand ($10,000.00 or 

$12,000.00) of the obligation? A. I was 

liable on the note whether I gave the motel 

back to the Flemmers or not; whether John J. 

Ming, Incorporated was. " 

Ming also admitted on the stand that at the time the renewal 

note was mailed to the Flemmers, John J. Ming, Inc. was 

financially incapable of paying off the note. 

The evidence showed that when Ming originally 

negotiated with the Flemmers to purchase their motel in 

1968, he had been engaged as their real estate agent. The 

law imposes an affirmative duty upon a real estate agent not 

only to refrain from taking advantage of his client, but 

also to act with the utmost good faith, and to fully 

disclose all material facts concerning a transaction that 

might affect the client's decision. Lyle v. Moore (1979), 

Mont. , 599 P.2d 336. Ming did not advise the 

Flemmers that Treasure State Realtors, Inc. was separate 

from John J. Ming, Inc., or that any of these were separate 

from John J. Ming, himself. Nor did he reveal, at the time 

of executing the second note, that the corporate maker, John 

J. Ming, Inc., could not pay it off. 

Under the circumstances, we cannot say that the trial 

court abused its discretion by denying the defendants' 
motion to dismiss plaintiffs' claim of fraud at the close of 

the plaintiffs' case in chief. Clearly, substantial 

evidence was introduced at trial to justify the jury's 

decision to pierce the corporate veil. 

Defendants next contend that the evidence fails to 

support an award of exemplary damages. There is no merit to 

this claim. Since there is substantial evidence of fraud, 

the jury was clearly within its province in awarding 

punitive damages. Section 27-1-221, MCA. 

Plaintiff requests this Court to allow her attorney 

fees for costs incurred resulting from the defendants' posttrial motions and appeal under our holding in Erdman v. C & 

C Sales, Inc. (1978 ) , Mont. , 577 P.2d 55, 59. 

We decline to do so. The award of reasonable post-trial 

attorney fees in Erdman was grounded upon section 39-3-214, 

MCA (formerly section 41-1306, R.C.M. 1947), a statute that 

is inapplicable to the present case. 

The judgment of the District Court is affirmed. 

We Concur: 

Chief Justice 

U3-k-L Justices - -2-+---