Opinion ID: 1266394
Heading Depth: 1
Heading Rank: 5

Heading: Alter-Ego/Agency

Text: The Plaintiffs argue that the Corporation is the alter-ego of the School District. Accordingly, the Plaintiffs argue that the Corporation is subject to the general obligation debt limit the South Carolina Constitution imposes on a school district. We disagree. An alter-ego theory requires a showing of total domination and control of one entity by another and inequitable consequences caused thereby. Peoples Fed. Sav. & Loan Assoc. v. Myrtle Beach Golf & Yacht Club, 310 S.C. 132, 148, 425 S.E.2d 764, 774 (Ct.App.1992). Control may be shown where the subservient entity manifests no separate interest of its own and functions solely to achieve the goals of the dominant entity. Id. However, this theory does not apply in the absence of fraud or misuse of control by the dominant entity which results in some injustice. Id; see also Baker v. Equitable Leasing Corp., 275 S.C. 359, 367-68, 271 S.E.2d 596, 600 (1980) (holding that control, in and of itself, is not sufficient. It is necessary to show that the retention of separate corporate personalities would promote fraud, wrong or injustice, or would contravene public policy). A grant of 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(c), SCRCP; Tupper v. Dorchester County, 326 S.C. 318, 325, 487 S.E.2d 187, 191 (1997). Furthermore, when a motion for summary judgment is made and properly supported, an adverse party may not rest solely upon the allegations or denials in his pleading, but must set forth specific facts showing that there is a genuine issue for trial. Rule 56(e), SCRCP. To support their alter-ego cause of action, the Plaintiffs' amended complaint alleged that the School District or its agents would create the Corporation and select the Corporation's directors, and also that the Corporation would have no purpose other than to do the will of the School District. In their motion for summary judgment, the Defendants relied in large part on the affidavit of the chairman of SCAGO's board of directors which directly refuted the Plaintiffs' allegations. Specifically, this affidavit established that SCAGO, not the School District, would form the Corporation, appoint the board of directors, approve the Corporation's by-laws, and oversee the Corporation's functions. The affidavit further established that SCAGO is a South Carolina non-profit corporation that was formed in 2002 and that the School District does not have control over SCAGO, nor does it have financial ties to SCAGO. As the evidence illustrates, the affidavit offered by the Defendants in support of their motion for summary judgment directly refutes the allegations raised in the Plaintiffs' alter-ego claim. The Plaintiffs have not contested the substance of this affidavit, nor have they set forth any specific facts showing that there is a genuine issue for trial on this claim. Accordingly, there is no impediment to our deciding this claim on summary judgment. Viewing the evidence in the light most favorable to the Plaintiffs, there is simply no support for the conclusion that the Corporation is the alter-ego of the School District. Our alter-ego jurisprudence instructs that the issues of domination and control over one entity by another are two touchstones of the relevant analysis. In the instant case, there is no evidence suggesting the existence of either of these conditions. For this reason, we grant the Defendants' motion for summary judgment and hold that the Corporation is not the alter-ego of the School District. In addition to an alter-ago claim, the Plaintiffs allege that the Corporation will be acting as the agent of the School District. Accordingly, the Plaintiffs' contend that the Corporation is bound by the School District's general obligation debt limit because an agent may possess no more authority than the principal. We disagree. An agent is one appointed by a principal as his representative and to whom the principal confides the management of some business to be transacted in the principal's name, or on his account, and who brings about or effects legal relationships between the principal and third parties. Thompson v. Ford Motor Co., 200 S.C. 393, 414, 21 S.E.2d 34, 43 (1942) (quoting South Carolina v. W.T. Rawleigh Co., 172 S.C. 415, 174 S.E. 385 (1934)). Whether one person or entity is the agent of another is determined by examining whether the party alleged to be the principal has the right to control the conduct of the alleged agent. Newell v. Trident Med. Cent., 359 S.C. 4, 12, 597 S.E.2d 776, 780 (2004). In the instant case, the record contains no evidence indicating that the Corporation will be acting as the School District's agent in any capacity. As we have previously indicated, the evidence illustrates that SCAGO, not the School District, will form the Corporation, appoint the board of directors, approve the Corporation's by-laws, and oversee the Corporation's functions. Although the Corporation will raise money to fund the renovation of the School District's facilities, the Plaintiffs cite no authority supporting the proposition that this, in and of itself, creates an agency relationship. Similarly, the record does not contain any evidence indicating that the School District will have any right to control the Corporation's activities. Although the Plaintiffs' argument may accurately summarize the law regarding whether an agent may legally perform acts which, if done by the principal, would be illegal, the Plaintiffs do not present any evidence which tends to establish that the Corporation will serve as the School District's agent in any fashion. Absent such a showing, this axiom of agency law has no framework in which to apply. Accordingly, we grant the Defendants' motion for summary judgment and hold that the Corporation is not the agent of the School District.