Opinion ID: 1362879
Heading Depth: 1
Heading Rank: 1

Heading: the alter ego

Text: Appellants contend that the facts of this case call for the application of the doctrine of alter ego; that the interests of justice mandate that the fiction of separate corporate entities be ignored, and respondents J.J. Enterprises and Levin-Townsend Computer Corporation be held liable for the obligations of their subsidiary, Bonanza No. 2. We do not agree. The basic requisites for the application of the doctrine of alter ego have been well established. (1) The corporation must be influenced and governed by the person asserted to be its alter ego. (2) There must be such unity of interest and ownership that one is inseparable from the other; and (3) The facts must be such that adherence to the fiction of a separate entity would, under the circumstances, sanction a fraud or promote injustice. McCleary Cattle Co. v. Sewell, 73 Nev. 279, 282, 317 P.2d 957, 959 (1957), as quoted in Mosa v. Wilson-Bates Furniture Co., 94 Nev. 521, 583 P.2d 453, 454 (1978). A mere showing that one corporation is owned by another, or that the two share interlocking officers or directors is insufficient to support a finding of alter ego. Lipshie v. Tracy Investment Co., 93 Nev. 370, 566 P.2d 819 (1977). It must further be shown that the subsidiary corporation is so organized and controlled, and its affairs are so conducted that it is, in fact, a mere instrumentality or adjunct of another corporation. Savage v. Royal Properties, Inc., 4 Ariz. App. 116, 417 P.2d 925, 927 (1966). See also Pittsburgh Reflector Co. v. Dwyer & Rhodes Co., 173 Wash. 552, 23 P.2d 1114 (1933); Markow v. Alcock, 356 F.2d 194 (5th Cir.1966). Nor is mere mutuality of interest sufficient to make such a showing, without evidence of a commingling of funds or property interests, or of prejudice to creditors. First Nat. Bank v. Walton, 146 Wash. 367, 262 P. 984 (1928). In the case at hand, the evidence showed that separate corporate books and accounts were kept. Separate directors' meetings were held, and minutes recorded, with full corporate formalities observed. The corporations had independent headquarters, separate business responsibilities and operations. There was no showing that the parent companies had in any way impaired the assets of the company with which appellants had dealt. Indeed the evidence is that the parent companies poured some $10 million into Bonanza No. 2 before deciding to cut further losses. The trial court's determination that the doctrine of alter ego was not applicable to the respondent corporations is fully supported by the evidence and must be upheld. We therefore affirm. THOMPSON, GUNDERSON, MANOUKIAN and BATJER, JJ., concur.