Opinion ID: 197524
Heading Depth: 5
Heading Rank: 4

Heading: Commonality of Corporate Officers

Text: 77 Fourth, Peters adduced sufficient evidence at trial that C & J and Anson had at least one common officer [viz., Considine or Jacobsen] who [was] instrumental in the [asset] transfer. H.J. Baker, 554 A.2d at 205. C & J responds, inappositely, that the respective ownership interests held by the principals in the divesting and acquiring corporations were not identical, as Considine owned 52% of the Anson stock, whereas Jacobsen and the Considine Family Trust were equal shareholders in C & J. 78 The present inquiry does not turn on a complete identity of ownership (i.e., shareholders ), however, but on a partial identity in the corporate managements (i.e., officers). Thus, the fact that Jacobsen not only held a corporate office in both Anson and C & J but was instrumental in negotiating the asset transfer to C & J was sufficient in itself to preclude a Rule 50 dismissal under the fourth prong, even if he were not an Anson shareholder. See H.J. Baker, 554 A.2d at 205 (noting that the management [of the two companies] remained substantially the same). 79 Further, the same result obtains even if we were to assume that the one common officer--referred to in Baker--must be a shareholder as well. Prior to Baker, the Rhode Island Supreme Court did not require complete identity between those who controlled the two corporations or the asset transfer, whether their control derived from stock ownership or from their management positions. For example, the court had upheld a judgment for plaintiff, following trial, even though the officers and incorporators of the divesting and acquiring corporations were not the same, on the ground that the principals involved in the sale all had a[ ] [common] interest in the transaction. Cranston Dressed Meat, 57 R.I. at 349, 190 A. 29; cf. Casey, 623 A.2d at 19 (finding no successor liability where two corporations shared no stockholders, officers, or directors); cf. also Glynwed, 869 F.Supp. at 277 ([C]ontinuity of ownership, not uniformity, is the test.); Park v. Townson & Alexander, Inc., 287 Ill.App.3d 772, 223 Ill.Dec. 163, 166, 679 N.E.2d 107, 110 (1997) (We note that the continuity of shareholders necessary to a finding of mere continuation does not require complete identity between the shareholders of the former and successor corporations.). Considine easily fits the bill here. After all, C & J stands for something and Jacobsen conceded at trial that Considine participates in the management of C & J Jewelry. Moreover, Considine admitted that no C & J decision could be taken without Considine's prior approval. 80 C & J heavily relies as well on the fact that Considine, individually, held no direct ownership interest in C & J, but instead had conveyed his interest to the Considine Family Trust. Once again, however, as equity looks to substance not form, see Glynwed, 869 F.Supp. at 275, the fact that Considine established a family trust to receive his ownership interest in C & J did not warrant a Rule 50 dismissal, especially in light of his concession that he actively participates in the management of C & J. See Fleet Credit Memo (10/14/93), at 1 ([T]hese transactions will be considered a Troubled Debt Restructure ('TDR') because of Considine's effective control of the assets both before and after the contemplated transaction.); id. at 14 (noting that Considine would be a Principal of C & J, although his involvement in day-to-day operations will be limited). Moreover, such intra-family transfers may be nominal only, and thus may constitute circumstantial evidence of a fraudulent, manipulative intent to mask the continuity in corporate control. See Park, 223 Ill.Dec. 163, 679 N.E.2d at 110 ([W]hile the spousal relationship between the owners of the corporations does not in itself establish a continuity of shareholders, it is certainly a factor which can be considered.); The Steel Co., 214 Ill.Dec. 1029, 662 N.E.2d at 600 (We cannot allow the law to be circumvented by an individual exerting control through his spouse.); Hoppa v. Schermerhorn & Co., 259 Ill.App.3d 61, 196 Ill.Dec. 877, 881, 630 N.E.2d 1042, 1046 (1994) (noting that the fact that former joint tenant shareholder's interest was reduced to 2%, and that an additional family member was shareholder of successor corporation, did not preclude finding of continuity); cf. Dickinson, 935 S.W.2d at 364 (recognizing a conveyance to a spouse or near relative as a badge of fraud); supra note 7 (The debtor retained possession or control of the property). Focusing on the transactional substance, rather than its form, therefore, we cannot conclude that a rational factfinder could not decide that Considine used the family trust to camouflage his ultimate retention of control over the Anson jewelry manufacturing business which C & J continued to conduct, without interruption, after Anson's demise. See National Gypsum, 895 F.Supp. at 337 (The intended result in all cases is the same, to permit the owners of the selling corporation to avoid paying creditors without losing control of their business.) (emphasis added). 81