Opinion
Civil Action No. 86-4475, Section "B".
April 22, 1991
This controversy arises out of a dispute between plaintiff, Riverside Maritime Enterprises, Inc., ("Riverside") and defendant, Calvin Ishmael d/b/a/ Point Houmas Fleeting Services., Inc. ("Ishmael"), in which Riverside obtained a judgment of default against Ishmael. Plaintiff now seeks the Court to find that certain Louisiana corporations are the alter egos of Ishmael and are liable for payment of the judgment previously rendered against him.
The Court, having heard the testimony at trial and having considered the evidence and the proposed findings of fact and conclusions of law and memoranda submitted by the parties, makes the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a), as hereafter set forth.
FINDINGS OF FACT
1. In the Spring of 1986, Riverside chartered the M/V HIAWATHA to Calvin Ishmael on behalf of Point Houmas Fleeting, Inc.
2. A dispute arose as to payment of charter and fuel expenses, and on October 14, 1986, Riverside filed suit against Calvin Ishmael d/b/a Point Houmas Fleeting, Inc. for payment of these expenses.
3. After collection efforts had begun, Riverside learned that Point Houmas Fleeting, Inc. ("Point Houmas I") had never been incorporated, but was the business name of Ishmael.
4. On December 3, 1986, a default judgment was entered against Calvin Ishmael d/b/a Point Houmas Fleeting, Inc. in the amount of $85,300.80 plus costs and interest.
5. Riverside filed supplemental and amending complaints on March 3, 1989 and March 27, 1991 alleging, inter alia, that Point Houmas Fleeting, Inc., Point Houmas Marine Service, Inc., Donaldsonville Leasing Co. and Big River Fleeting and Marine Services, Inc. were alter egos of Calvin Ishmael d/b/a Point Houmas Fleeting, Inc. and were created to shelter assets of the judgment debtors.
6. After suit was filed on October 14, 1986, Ishmael transferred the assets of Point Houmas I to his sister-in-law, Gloria Baker Henry ("Henry"). These assets included equipment, leases, account receivables, deposits and customers. The transfer of assets was without consideration.
7. On December 1, 1986, Henry incorporated Point Houmas Fleeting, Inc. ("Point Houmas II"). The business of Point Houmas I and Point Houmas II was unchanged. Ishmael continued to operate Point Houmas II in the same capacity as he had Point Houmas I.
8. The purpose for the incorporation of Point Houmas II was to attempt to avoid payment of the charter and fuel expenses in connection with the M/V HIAWATHA and to shield the assets of Point Houmas I from seizure.
9. Henry was the president and sole shareholder of Point Houmas II. However, she did not contribute any capital to Point Houmas I or II and admitted that she had no experience in fleeting operations.
10. On February 6, 1987, approximately 2 months after the default judgment was entered, Ms. Henry incorporated Point Houmas Marine Service, Inc. ("Point Houmas III").
11. Point Houmas III was capitalized with the assets of Point Houmas II.
12. Ms. Henry was the sole shareholder and officer of Point Houmas III. However, she did not contribute capital to the corporation and received the Point Houmas III stock without consideration.
13. The business of Point Houmas III was unchanged. Ishmael continued to operate Point Houmas III in the same capacity as he had Point Houmas I and II.
14. The purpose in transferring the assets of Point Houmas II to Point Houmas III was to attempt to take those assets beyond the default judgment against Point Houmas I and shield the assets from seizure.
15. On August 29, 1989, after Point Houmas III had filed for relief under Chapter 11 of the Bankruptcy Code, Ms. Henry incorporated Big River Fleeting and Marine Services, Inc. ("Big River"). Big River was capitalized with the assets of Point Houmas III.
16. The business of Big River was the same as the business of Point Houmas I-III. Ishmael continued to operate Big River in the same capacity as he had Point Houmas I-III.
17. The purpose in incorporating Big River and transferring the assets of Point Houmas II to Big River was to attempt to take those assets beyond the default judgment against Point Houmas I and shield the assets from seizure.
18. On December 1, 1986, the same day Ms. Henry incorporated Point Houmas II, she also incorporated Donaldsonville Leasing Company, Inc. ("Donaldsonville Leasing"). Ms. Henry is listed as the sole director of Donaldsonville Leasing. The company is owned by the Gloria Baker Henry Trust and the Calvin Ishmael Trust. Ms. Henry is the beneficiary of the Ishmael Trust and Mr. Ishmael is the beneficiary of the Henry Trust.
19. Prior to its incorporation, batture leases were held in the name of Donaldsonville Leasing Company. These leases were negotiated by Calvin Ishmael for Point Houmas I in January of 1986 and were used for the fleeting operations of Point Houmas I-III and Big River.
20. The vessels, M/V SANTA CLAUS and the M/V GLORIA A, were purchased and financed in the name of Donaldsonville Leasing Company prior to its incorporation.
21. Calvin Ishmael is the dominant person in Point Houmas II, III, Big River and Donaldsonville Leasing. He has held himself out as an officer when borrowing money on their behalf. Ms. Henry has no experience or training in fleeting operations and testified that she could not have run any of these businesses without Ishmael.
22. Neither Point Houmas II, III, Big River or Donaldsonville Leasing held regular directors or shareholders meetings. The only directors meetings that were held were special meetings required by banks in order for the corporations to borrow money or mortgage property.
23. The corporate charters of Point Houmas II and Donaldsonville Leasing were revoked on November 19, 1990 for failure to file annual reports required by the Secretary of State.
24. Funds from these various corporations have been used to pay personal expenses of Calvin Ishmael and his relatives.
CONCLUSIONS OF LAW
1. The alter ego doctrine may be applied "in reverse" to disregard the corporation to reach the corporate assets in order to satisfy the obligations of the individual. Dahl v. Gardner, 583 F. Supp. 1262, 1268 (D. Utah 1984); see also Boatmen's National Bank v. Smith, 706 F. Supp. 30, 31 (N.D. Ill. 1989).
2. Under Louisiana law and federal common law, a finding of control or domination by an individual and the use of the corporate fiction are prerequisites to the alter ego theory of liability. Talen's Landing, Inc. v. M/V Venture II, 656 F.2d 1157, 1161 (5th Cir. 1981); Bordagain Shipping Co. v. Saudi-America Lines, S.A., 1979 A.M.C. 1058, 1072 (E.D. La. 1978).
3. Once this connection is established, it is appropriate to "brush aside the corporate veil when it appears a corporation was organized for fraudulent purposes, illegality or wrongdoing."Talen's Landing, 656 F.2d at 1161 n. 6 (quoting Bordagain, 1979 A.M.C. at 1072).
4. It is also appropriate for the courts to pierce the corporate veil where the controlling entity of one corporation siphons off the assets of that corporation into another corporation in an attempt to place those assets beyond the reach of legitimate creditors. Talen's Landing, 656 F.2d at 1160-61;Bordagain, 1979 A.M.C. at 1073.
5. The corporate entity will be disregarded when it is necessary to promote justice or avoid inequitable results. Giuffria Realty Co. v. Kathman-Landry, Inc., 173 So. 2d 329, 334 (La.App. 1965)
6. Calvin Ishmael was and/or is the dominant and controlling individual in Point Houmas Fleeting, Inc., Point Houmas Marine Service, Inc., Big River Fleeting and Marine Services, Inc. and Donaldsonville Leasing Company, Inc.
7. These corporations were organized primarily for the purpose of putting their assets beyond the reach of legitimate creditors, and in particular, Riverside Maritime Enterprises, the holder of the default judgment against Ishmael d/b/a Point Houmas Fleeting, Inc.
8. In order to promote justice and to avoid inequitable results, it is appropriate for the Court to disregard the corporate entities of Point Houmas Fleeting, Inc., Point Houmas Marine Service, Inc., Big River Fleeting and Marine Services, Inc. and Donaldsonville Leasing Company, Inc., and hold these defendants liable for the judgment of Riverside Marine Enterprises, Inc. against Calvin Ishmael d/b/a/ Point Houmas Fleeting, Inc. in the amount of $85,300.80 together with costs and interest.
Accordingly,
IT IS THE ORDER OF THE COURT that judgment be entered in favor of plaintiff, Riverside Maritime Enterprises, Inc., and against Point Houmas Fleeting, Inc., Point Houmas Marine Service, Inc., Big River Fleeting and Marine Services, Inc. and Donaldsonville Leasing Company, Inc. in the amount of $85,300.80 together with costs and interest.
Counsel for plaintiff is requested to prepare a judgment in conformity with the findings rendered herein.