Ram Textiles, Inc. v. Hillview Mills, Inc.

VAUGHN, Judge. Plaintiffs’ claims against A.I.R. Industries were based on the grounds that it was the alter ego of Hillview Mills and that it had engaged in fraudulent conveyances of the assets of Hill-view Mills. We hold that the evidence considered in a light most favorable to plaintiffs does not entitle them to have the jury pass on the alter ego and fraudulent conveyance claims against A.I.R. Industries. Plaintiffs contend we should extend the liability for the obligations of Hillview Mills beyond the confines of its own separate existence and hold another separate corporate entity, A.I.R. Industries, liable for the debts of Hillview Mills. Plaintiffs’ evidence in a light most favorable to them must show that Hillview Mills and A.I.R. Industries were mere instrumentalities or alter egos of defendant Levine and a shield for the purpose of defrauding creditors in violation of the public policy of this State. If this were proven, Levine, Hillview Mills *598 and A.I.R. Industries should be treated as one. Henderson v. Finance Co., 273 N.C. 253, 160 S.E. 2d 39 (1968). Plaintiffs’ evidence in a light most favorable to them does not show that A.I.R. Industries dominated the policies and business practices of Hillview Mills to the extent that Hillview Mills had no existence of its own. The evidence shows that A.I.R. Industries’ products accounted for approximately fifteen percent of the employee time of Hillview Mills’ 250 employees. A.I.R. Industries was one of about 200 customers of Hillview Mills. Levine, the president and apparently the sole shareholder, and not A.I.R. Industries made all the policy decisions for the company. He possibly had the company as his alter ego and so used it as a mere instrumentality of his ends. There is, however, no evidence that A.I.R. Industries had such control. Plaintiffs have shown a certain degree of relationship among the officers and stockholders of Hillview Mills and A.I.R. Industries. The president and sole shareholder of Hillview Mills, Levine, was a forty-five percent shareholder in A.I.R. Industries. This common ownership, however, is not enough to place liability for Hillview Mills’ debts on A.I.R. Industries. Some additional circumstances of fraud are needed. Huski-Bilt, Inc. v. Trust Co., 271 N.C. 662, 157 S.E. 2d 352 (1967). No such additional circumstances arise on the evidence of this case. There is no evidence of fraudulent representations or wrongs by A.I.R. Industries or its employees to plaintiffs. A.I.R. Industries at one point apparently paid for some of the raw material purchased from Ram Textiles and used in the production of the surgical goods manufactured for A.I.R. Industries. This does not indicate a fraud. The trial court properly directed a verdict on the claim. We turn now to plaintiffs’ claim of fraudulent conveyance. A conveyance made with the actual intent to defraud creditors of the grantor which is participated in by the grantee is void. Aman v. Walker, 165 N.C. 224, 81 S.E. 162 (1914). Plaintiffs presented no evidence of any conveyance of assets owned by Hill-view Mills to A.I.R. Industries. The assets plaintiffs allege were fraudulently conveyed were purchased in April or May 1978 by *599 A.I.R. Industries from Congress Factors which sold them pursuant to a security agreement it had with Hillview Mills. There is no evidence that Congress Factors’ authorization of the transfer of the property in which it had a security interest in March 1977 and its subsequent sale of that property was a collusive or fraudulent conveyance made with the intent to defraud creditors. If it were, Congress Factors, which was not a party in this action, would be the defrauding party. There is no question that plaintiffs lost money in dealing with Hillview Mills but A.I.R. Industries, on the evidence presented, is not liable to them for that loss. Finally, we note that plaintiffs brought forward on appeal several assigned errors to the trial court’s rulings on certain offers of evidence. We find the trial court’s rulings proper. Affirmed. Judges Parker and Hedrick concur.