Court Opinion

ID: 7818651
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:45:46.321345+00
Date Added: 2024-06-11T16:30:40.533404
License: Public Domain

John A. Fogleman, Justice, dissenting. I cannot agree with the majority opinion, because it disregards the separate corporate identities of First Federal Savings & Loan Association and Silliman Agency, Inc., in order to find evidence that an employee of the former was an agent of the latter. The corporate structure is to be disregarded only when it has been illegally abused to the injury of another. Arkla Chemical Co. v. Palmer, 250 Ark. 405 (1971), 465 S. W. 2d 335. This rule has been recognized as being applicable even where the two corporations involved were parent and subsidiary. Rounds & Porter Lumber Co. v. Burns, 216 Ark. 288, 225 S.W. 2d 1. Control and ownership by the same persons are not a sufficient basis for disregard of separate corporate identity. In Lange v. Burke, 69 Ark. 85, 61 S.W. 165, we said: In supporting his contention the receiver lays much stress upon the fact that the two corporations were practically under the control of the same persons; Kaiser and Ohrndorf being directors and officers, and the owners of the large majority of the stock, in each company. But this fact does not prove that the two companies were in fact one corporation, and that the trustee, the appellant, was not a creditor of the lumber company. A corporation is an artificial being, separate and distinct from its agents, officers, and stockholders. Its dealings with another corporation, although it may be composed in part of persons who own the majority of the stock in each company, and may be managed by the same officers, if they be in good faith and free from fraud, stand upon the same basis, and affect it and the other corporation to the same extent, they would if each had been composed of different stockholders and controlled by different officers. Even those corporations with identical officers, stockholders and managers and with the same post office address are separate legal entities, and liability of one for the acts of the other must be predicated upon other facts, and the fact that such corporations have mutual dealings is not sufficient. Mannon v. R. A. Young & Sons Coal Co., 207 Ark. 98, 179 S. W. 2d 457; Ft. Smith Light & Traction Co. v. Kelley, 94 Ark. 461, 127 S. W. 975. See also, G. W. Jones Lumber Co. v. Wisarkana Lumber Co., 125 Ark. 65, 187 S. W. 1068; Mid-State Homes, Inc. v. Knight, 237 Ark. 802, 376 S. W. 2d 556. Although a subsidiary or auxiliary corporation created as an agency of the parent corporation, may sometimes be treated as identical with the parent, especially if the stockholders are substantially the same or their systems of operation unified, the corporate veil may be pierced when allowing the subsidiary or auxiliary to claim separate existence would constitute constructive fraud, but even then the rule is to be applied with extreme caution. Plant v. Cameron Feed Mills, 228 Ark. 607, 309 S. W. 2d 312; Banks v. Jones, 239 Ark. 396, 390 S. W. 2d 108. Special circumstances justifying piercing the corporate veil are neither alleged nor proved in this case. Appellee alleged that the transaction between her and the sellers was handled by First Federal Savings & Loan Association through James Joyce, who, she alleged, was its employee. The memorandum of assumption of the loan exhibited to the complaint recited a request that First Federal Savings & Loan notify the proper insurance agent of the transfer and that the policy in force be transferred. It was also alleged that Joyce agreed to do this. It was alleged that First Federal — not Joyce— acted as agent for the Silliman Agency and the Home Insurance Company, so that knowledge of the. transfer was imputed to Home and that the insurance company was estopped to deny its liability to appellee under the policy. The chancery court’s findings of fact include a finding that Joyce, not First Federal, was an agent of Silliman Agency, Inc., and acting for it as well as for First Federal. There is no evidence that the two corporations have more than one officer in common. The managers are not the same person. It is not shown that the ownership is even substantially the same. It would be surprising if such a thing were possible with a Federal Savings and Loan Association, in which the depositors are the equivalent of stockholders. A subsidiary or auxiliary corporation is not involved. The basis for invoking the rule for piercing the corporate veil is not even remotely present. The only evidence pertaining to Joyce’s alleged agency is that the Silliman Agency furnishes forms of its applications for insurance and for transfers of insurance to the First Federal office at Fordyce, which places insurance for its customers. These forms when filled in and signed are mailed to the Silliman Agency in Camden. Transfers are made there when the forms are received. I can find no evidence which met appellee’s burden in this regard. It seems obvious to me that this is the reason she did not rely on Joyce’s agency in her complaint. It must be remembered that this is not an action by appellee against the mortgagee, First Federal. Furthermore, appellant’s right to recover is not defended upon the ground that the right of the insurance company as subrogee was limited or destroyed because of any counterclaim appellee might have against appellant’s subrogor, First Federal. It has often been said that hard cases make shipwreck of the symmetry of the law. In my opinion, this case must take its place in the forefront of that category.