Opinion
No. 2:96-CV-16-BO (3).
May 21, 1998
ORDER
This matter is before the Court on defendants' Motion for Partial Summary Judgment pursuant to Rule 56(b) of the Federal Rules of Civil Procedure. For the reasons discussed below, defendants' motion will be granted in part and denied in part.
BACKGROUND
This matter stems from plaintiff's employment relationship with defendants. The corporate defendants are interrelated corporate entities engaging in yacht construction, sales, brokerage and the marine repair business. The individual defendants are the sole owners and officers of the defendant corporations.
In August of 1993, plaintiff was hired by the individual defendants to work as a salesman and broker for Buddy Davis Associates Yacht Brokerage, Inc. ("Yacht Brokerage"). Yacht Brokerage is alleged to have served as the exclusive sales agent for defendant Davis Boatworks, Inc., receiving 5% commission on all new boat construction contracts. On January 1, 1994, plaintiff was appointed president of Yacht Brokerage pursuant to an oral contract with defendant Buddy Davis on behalf of Yacht Brokerage. This contract was later memorialized in minutes from a Board of Directors meeting held on March 3, 1994. Plaintiff alleges that the oral agreement entitled him to receive commissions on sales he generated and one-half of the profits earned. Until his termination in December, 1994, plaintiff admits receiving between $30,000 and $40,000 from boat sale commissions.
Plaintiff filed this action on April 1, 1996 alleging breach of contract, fraud, liability as a result of actions through a dissolved corporation, piercing the corporate veil, violation of the North Carolina Wage and Hour Act, N.C. Gen. Stat. §§ 95-25.7(a) and 95-25.22, and unfair trade practices in violation of the North Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. § 75-1.1. Plaintiff alleges that defendants withheld commission payments, fraudulently induced plaintiff to enter an employment contract, and breached the agreement to pay plaintiff a share of the profits of the brokerage business. Plaintiff seeks damages in the amount of $77,000.
Although plaintiff's complaint seeks compensatory and punitive damages in excess of $500,000, as well as treble damages for the unfair and deceptive trade practices alleged, plaintiff's counsel informed the Court during the April 17, 1998 motions hearing that plaintiff was seeking to recover only for commissions and unpaid wages totaling $77,000. Plaintiff's separate claim for punitive damages was predicated on defendants' "wilfull[ ] and wanton[ ]" conduct. Pl. Am. Comp., at 7 ¶ 55. In light of plaintiff's representations to the Court at the hearing, plaintiff's claim for punitive damages is dismissed. The Court will consider $77,000 as the entire amount for which plaintiff prays in damages.
Defendants filed the instant motion on September 10, 1997, seeking summary judgment as to all defendants on plaintiff's claims of unfair trade practices, piercing the corporate veil, and liability as a result of actions through a dissolved corporation. Defendants Carson R. Davis, Jr., Barbara Davis, C.R. Davis Co., Thicket Lump Enterprises, Inc., and Carolina Yacht Interiors, Inc. move for summary judgment on all of plaintiff's remaining claims as to them.
A motions hearing was held before the Court on April 17, 1998. During oral argument, plaintiff conceded that his employment contractual relationship was solely with Yacht Brokerage. The parties' arguments during the hearing also made clear that defendant Buddy Davis, in executing an employment contract with plaintiff, did so as Yacht Brokerage's agent and not in his individual capacity. The existence of the oral contract were undisputed although the parties dispute what constitutes "profits" for purposes of plaintiff's compensation.
In addition to the claims that were the subject of defendants' summary judgment motion, plaintiff's remaining claims were raised. During oral arguments, defendants conceded that the breach of contract claim survives summary judgment, but only as to Yacht Brokerage. Defendants also conceded owing plaintiff approximately $10,000 as due and undisputed compensation and informed the Court that they had tendered this amount to plaintiff. Plaintiff admitted that the payment was in fact offered but that he had refused to accept it on grounds that he was entitled to $77,000. Finally, plaintiff's fraud claim was raised. Plaintiff conceded that the only evidence of fraudulent intent consists of circumstantial evidence of fraudulent intent manifested by defendants' acts committed subsequent to the alleged misrepresentation.
Plaintiff's Wage and Hour Act claim alleges that, although defendants admitted owing plaintiff at least $8904.83 representing commissions due him from the sales of two boats, defendants refused to remit payment. Plaintiff's claim seeks compensatory and liquidated damages plus fees as a result of defendant's failure to pay the amounts due and undisputed. Defendants' subsequent tender offer of this amount, which plaintiff does not dispute, moots the Wage and Hour Act claim as set forth in the amended complaint. Accordingly, plaintiff's Wage and Hour Act claim is dismissed as to all defendants.
DISCUSSION
Summary judgment should be granted if the record, taken as a whole, "together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The movant bears the burden of demonstrating "the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once the movant satisfies that burden, however, the burden then shifts to the nonmovant to set forth specific facts showing a genuine triable issue. Fed.R.Civ.P. 56(e). To create a genuine issue of material fact, the nonmovant must do more than present some evidence on a disputed issue. Unless there is sufficient evidence for a jury to return a verdict in the nonmovant's favor, there is no genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986). At all times during the inquiry, however, facts are to be viewed and reasonable inferences to be drawn in the light most favorable to the nonmovant. Id., at 255.
1. Unfair and Deceptive Trade Practices
Plaintiff alleges that defendants engaged in unfair and deceptive trade practices in violation of section 75-1.1 of the North Carolina General Statutes in relation to his employment. Because plaintiff's claim arises out of his employment status with defendants, it is excluded from coverage under the Act. See Brandis v. Lightmotive Fatman, Inc., 443 S.E.2d 887, 891 (N.C.Ct.App. 1994); see also Hajmm Co. v. House of Raeford Farms, 403 S.E.2d 483, 492 (N.C. 1991). Defendants are entitled to summary judgment. Plaintiff's claim is dismissed as to all defendants.
2. Piercing the Corporate Veil
Plaintiff alleges that the individual defendants dominated the ownership, finances and policies of the corporate defendants such that the corporations were mere instrumentalities and alter-egos of those individuals. As such, plaintiff urges the Court to pierce the corporate veil and hold the individual defendants personally liable for plaintiff's damages.
Courts may disregard the corporate form and extend liability for obligations beyond the confines of a corporation's separate entity whenever necessary to prevent fraud or to achieve equity.Glenn v. Wagner, 329 S.E.2d 326, 330 (N.C. 1985) (citation omitted). The benchmark is whether the corporation is "a mere instrumentality or alter ego of the sole or dominant shareholder and a shield for his activities. . . ." Henderson v. Security Mortg. Fin. Co., 160 S.E.2d 39, 44 (N.C. 1968).
Plaintiff has presented insufficient evidence on this claim to withstand summary judgment. That the individual defendants were the sole shareholders and exercised control over the day-to-day operations of Yacht Brokerage is insufficient to warrant disregarding its corporate status.
Nor does plaintiff present any grounds for disregarding the corporate status of the other corporate defendants with which he had no prior dealings and which have no relation to plaintiff's action other than common ownership and control by the individual defendants. Plaintiff has provided no persuasive nexus between the individual defendants' common ownership and the perpetration of some wrong or fraud. For these reasons, defendants' motion for summary judgment is granted. Plaintiff's claim is dismissed as to all corporate defendants. Having ruled out the possibility of personal liability, all claims against the individual defendants are likewise dismissed.
3. Fraud
Plaintiff alleges that defendants fraudulently induced him into accepting a position as president of Yacht Brokerage. Specifically, plaintiff alleges that defendants promised him specified compensation when, in fact, they had no intent to honor this promise.
To state a claim for fraud, the following elements must be alleged with particularity: (1) false representation or concealment of a material fact; (2) reasonably calculated to deceive; (3) made with intent to deceive; (4) which does in fact deceive; (5) resulting in damage to the injured party. Claggett v. Wake Forest Univ., 486 S.E.2d 443, 447 (N.C.Ct.App. 1997) (citation omitted). In order for a promissory representation to support an action for fraud, the fraudulent intent must be shown to have existed prior to, or contemporaneous with, the fraudulent misrepresentation. Allen v. Simmons, 394 S.E.2d 478, 482 (N.C.Ct.App. 1990).
The only evidence proffered by plaintiff is circumstantial evidence of fraudulent intent manifested by events occurring subsequent to the misrepresentation. Plaintiff's claim is without merit and is dismissed as to all defendants.
4. Liability for Actions Through a Dissolved Corporation
Plaintiff seeks to recover damages from the individual defendants for actions taken by them individually and in their official capacities through Yacht Brokerage.
Yacht Brokerage was administratively dissolved and placed under revenue suspension by the Secretary of State on December 16, 1993 for failure to file appropriate paperwork. Plaintiff became president of Yacht Brokerage in January, 1994 and was responsible for overseeing all operations, accounting procedures and methods and for complying with reporting requirements.
Throughout this period, plaintiff repeatedly acknowledged its corporate status. Not only did plaintiff enter into a contractual relationship with Yacht Brokerage, he accepted compensation and performed business dealings on its behalf. Plaintiff cannot now be heard to challenge said status. See Otis Elevator Co. v. Cape Fear Hotel Co., 90 S.E. 253 (N.C. 1916); see also Wickes Corp. v. Hodge, 172 S.E.2d 890 (N.C.Ct.App. 1970). Defendants' motion for summary judgment is granted. Plaintiff's claim is dismissed as to all defendants.
5. Breach of Contract
Plaintiff alleges breach of the oral employment contract arising out of defendants' failure to fully compensate him in accordance with the contractual terms. Because plaintiff's employment contract and business dealings were with Yacht Brokerage and because plaintiff presents no evidence that this claim implicates any defendant other than Yacht Brokerage, it is dismissed as to all defendants except Yacht Brokerage.
That an employment contract existed is undisputed. The general provisions of the contract are also undisputed. There is, however, a genuine dispute as to whether the corporation realized any "profit" during 1994 as contemplated by the contractual terms entitling plaintiff to compensation therefrom. For these reasons, plaintiff's breach of contract claim as to Yacht Brokerage survives summary judgment.
CONCLUSION
The uncontroverted evidence establishes that summary judgment is appropriate and is granted on all claims, except for breach of contract, and as to all defendants, except Yacht Brokerage.
SO ORDERED