Court Opinion

ID: 9649284
Source: CourtListenerOpinion
Date Created: 2023-08-23 14:47:29.065625+00
Date Added: 2024-06-11T18:12:09.558814
License: Public Domain

On the Merits
CAREY, Justice.
The appellants, Grace L. Walsh and Robert Walsh, her husband, sued appellee, Hotel Corporation of America (Hotel), a New York corporation, in the Superior Court seeking damages for injuries sustained by Mrs. Walsh at a motel in Massachusetts and allegedly caused by defendant’s negligence. Jurisdiction was obtained by foreign attachment. They have appealed from an interlocutory order which denied two motions, one for leave to amend the complaint, the other to vacate or reduce the amount of their attachment bond. We previously denied an application to dismiss the appeal. To understand the issues now presented, it is necessary to know the history of the proceedings which took place in the Court below. They will be described in the two subdivisions which' follow.
DENIAL OF THE PROPOSED AMENDMENT
The original complaint charged that Hotel was the operator of the motel where Mrs. Walsh sustained her injuries. The de*461fendant moved to dismiss under Superior Court Rule 12 (b) (6) on the ground that the complaint failed to state a claim against defendant upon which relief could be granted. The basis for this application was contained in an attached affidavit of a corporate officer stating that the motel was not operated by the defendant, but by its wholly owned subsidiary, Charterhouse of Massachusetts, Inc., a Massachusetts corporation. To that affidavit was attached a copy of a lease of the premises wherein defendant was the lessee, and an assignment of that lease by the defendant to its subsidiary. The plaintiffs filed interrogatories seeking information concerning, inter alia, the relationship between the defendant and its subsidiary and concerning the actual operation of the motel. The defendant then moved for a protective order against these interrogatories. In support of their opposition to that protective order, plaintiffs filed the affidavit of Mr. Walsh. In it he alleged an inability to refute, on the basis of personal knowledge, the allegations of defendant’s affidavit because the facts were solely within the knowledge and control of the two corporations and could be made available only by discovery. The Court below held that plaintiffs’ complaint was not broad enough to authorize the discovery requested and granted defendant’s application.
The plaintiffs then moved to amend their complaint so as to set forth an alternative theory, namely, that Charterhouse of Massachusetts, Inc. was nothing more than the alter ego and instrumentality of Hotel and has for present purposes, in contemplation of law, no separate existence. Defendant opposed this motion on the ground that plaintiffs have no knowledge or trustworthy information to support the allegations of the proposed amendment but have nothing more than a mere hope that they might possibly discover some facts to justify a recovery. The Court below refused to allow the amendment. Its reason for doing so does not appear in the record, but we assume that it adopted defendant’s contention.
The Walsh affidavit recited that, at the time of the accident, the announcement .board in the motel lobby prominently displayed the name “Hotel Corporation of America” and the name of its president, and made no mention of any other corporation or operator; that the motel stationery and postcards displayed the name and symbol of the defendant and no other corporation ; and that defendant’s listing in Moody’s Bank of Financial Manual showed the motel to be operated by this defendant. These statements are not denied in the record. We think they furnished reasonable grounds to suggest that the defendant, as the sole stockholder of its subsidiary, may have disregarded the separate existence of that subsidiary; at least, they warrant further investigation by the plaintiffs, who have no way of ascertaining the facts save through discovery proceedings. Even in the absence of fraud, there are cases which permit a direct action against the parent company where it has itself completely ignored the separate identity of its wholly owned subsidiary. See Rumig v. Ripley Mfg. Corp., 366 Pa. 343, 77 A.2d 360; Equitable Trust Co. v. Gallagher, 34 Del.Ch. 76, 99 A.2d 490; 1 Fletcher Cyc.Corps.1963, § 41 etc. This is not the time, however, to decide the general proposition as to when a Delaware law court may disregard the corporate structure, or the particular question of whether it should do so in this case; such matters must await a full factual foundation, which presently remains undeveloped in this case. We do not suggest that plaintiffs’ affidavit alone is sufficient to justify a finding of liability against Hotel; we hold only that it suffices to justify further investigation of the facts. Such discovery cannot be made until the complaint is amended because of the earlier ruling of the Court below, from which no appeal has been taken. We accordingly hold that the refusal to allow the amendment to the complaint was error and constituted an abuse of discretion.
*462THE ATTACHMENT BOND
As previously indicated, this suit was instituted by foreign attachment, under which Hotel’s stock in two Delaware corporations was seized. At that time, plaintiffs gave bond in the amount, of $1000 containing the condition required by Superior Court Rule 4 (b) (2) that, if the plaintiffs fail to prosecute their suit with effect or if judgment be rendered for defendant, plaintiffs “will pay any and all costs which may be awarded to a defendant”, together with “damages”. Later upon defendant’s application, the Court ordered the amount of the bond increased to $2500, apparently solely because of defendant’s allegation that considerable work had been done by its counsel and further work would be required, wherefore its counsel fees would probably exceed the amount of the original bond. Plaintiffs complied with that order; later, however, they moved that the attachment bond be cancelled or reduced in amount upon the theory that defendant had entered a general appearance by filing its motion under Rule 12(b) (6) and that defendant’s counsel fees are not recoverable as “costs” or “damages” under the terms of the bond. Defendant countered by moving that the amount of the bond be increased to $3500, denying that its Rule 12(b) motion constituted a general appearance*. The Court below denied both motions. Appellants have appealed from that ruling.
Concededly, the determination of the amount of bond required of a plaintiff in a foreign attachment case cannot be disturbed by us unless the lower Court has abused its discretion. Because there is no suggestion that any substantial loss has been or is likely to be sustained by defendant other than counsel fees, our consideration at this time is limited to the question of whether such fees are recoverable from an unsuccessful plaintiff in an action brought by foreign attachment when the plaintiff has sued the wrong defendant.
The problem here posed is the subject of an annotation in 65 A.L.R.2d 1426. The cases therein cited display wide disagreement, some Courts going so far as to allow fees for an actual trial on the merits resulting in a verdict for defendant. We cannot follow that reasoning. In Delaware, “ordinary Court costs are usually allowed to the prevailing party, but counsel fees as part of allowable costs are exceptions”. Everitt v. Everitt, 37 Del.Ch. 512, 146 A.2d 388. Wisely, our Courts have been very cautious in approving exceptions to that general rule.
Obviously, an error in the identity of a party defendant does not concern the type of process used to commence an action; it is an error which could as readily occur in one brought by summons as by attachment; yet counsel fees would not be allowed as costs or damages when the case is commenced by summons. We see no reason to make a distinction on the basis of the form of process. We are of the opinion that counsel fees should be allowed, in the absence of abuse of process, only for a victorious attack upon the attachment itself, and not for the presentation of defenses not predicated upon defects in the process. Great American Ind. Co. v. Sweetwater Min. Co., 74 Nev. 219, 326 P.2d 1105, 65 A.L.R.2d 1422. In our opinion, nothing said in either Moffat Tunnel Imp. Dist. v. United States F. & G. Co., 7 W.W.Harr. 473, 185 A. 186, or Town of Seaford v. Eastern Shore Pub. Serv. Co., 2 Terry 438, 24 A.2d 436, was meant to imply any disagreement with the foregoing view; if there be any such implication therein, we decline to accept it. Moreover, we disagree with defendant’s contention that the present motion is an attack upon the attachment itself; it is a defense which has no connection with the nature of the process.
*463Based upon the information now in this record, we think the refusal by the Court below to permit a reduction in the amount of the bond was an abuse of its discretion; a substantially smaller figure would be adequate to cover any reasonably foreseeable loss. Upon remand, the Court should reconsider the matter in the light of the principles herein announced.
The rulings made below must be reversed and the record remanded for further action in accordance herewith.

 As to the requirement of a special appearance to raise certain defenses in foreign attachment cases, see Canaday v. Superior Court, 10 Terry 456, 119 A.2d 347.