Pless, J.
The plaintiff’s first cause of action is based upon its claim that the American Defender Life Insurance Company was almost fully owned by the defendant and its three principal officers. It contends that when the bank required it to expend some $38,000.00 for insurance premiums, which went to its alleged subsidiary or alter ego, it constituted gross profit; that premiums were required to be paid for the entire length of the term of the deeds of trust assigned as security (in most cases ten years), although the loans to the plaintiff were for a term of only four years; that defendant covenanted with plaintiff that unearned premiums would be refunded if defendant released any of plaintiff’s mortgages assigned to defendant as security, and that on one occasion premiums were so refunded; that on March 17, 1965, plaintiff repaid all loans obtained from the defendant and defendant released to plaintiff all deeds of trust and notes held by it as security for the loan; that plaintiff has made numerous demands for refund of unearned premiums since that time and defendant has refused to make such refund. Therefore, it is claimed defendant is now indebted to plaintiff in the amount of the unearned premiums, to wit: $15,411.94.
Upon hearing the evidence, considering the motions, and the plaintiff’s requested findings of fact, the Court made its own findings of fact and entered its judgment to the effect that the parties entered into an agreement on 3 January 1961; that the defendant agreed to and did make loans to the plaintiff. The loans were secured by notes and deeds of trust upon the property of the plaintiff’s debtors guaranteed by Mr. and Mrs. Huskey, and that in addition the plaintiff obtained policies of credit life insurance upon the lives of its customers; that all policies were written by American Defender Life Insurance Company (formerly American Guaranty Life Insurance Company), and as each policy was issued it was delivered to the named insured; that they were written for the terms of the debtor’s indebtedness which are still in being and are in effect and enforce
able by the beneficiaries thereof. The Court further found that the premiums for these policies were paid by the plaintiff to the defendant, and the defendant then delivered the entire amount of the premiums to the insurance company.
The Court found as a fact that the bank and the insurance company were separate corporations; that if the plaintiff were entitled to any refund it was due by the insurance company (which is not a party to the action) and not by the bank.
The Court concluded as a matter of law that there were no unearned premiums due the plaintiff by the defendant, and the plaintiff was not entitled to recover anything from the defendant on this cause of action.
It is the rule in North Carolina that where the parties waive a jury trial and agree that the Court may find the facts, they thereby transfer to the Judge the function of weighing the evidence, and his findings are conclusive on appeal if supported by any competent evidence, notwithstanding the fact that evidence to the contrary may have been offered.
Young v. Insurance Company,
267 N.C. 339, 148 S.E. 2d 226 (1966);
Williams v. Williams,
261 N.C. 48, 134 S.E. 2d 227 (1964).
From the Court’s statement of facts, in which the evidence is summarized, it will be seen that the evidence, even though controverted, supports the findings of fact, which, in turn, support the conclusions of law.
Throughout the plaintiff’s case is its basic contention that since the bank and its officers owned substantially all of the stock of American Defender Life Insurance Company that the two were, in effect, one entity, and that the insurance company was merely an
alter ego
or puppet of the bank. Unless it can prevail upon that assertion, the plaintiff has no case. Upon the argument before us, counsel for the plaintiff, with his usual candor, said that without that contention, “we wouldn’t be here.”
The plaintiff is being realistic in his position. But it is confronted by almost unanimous authorities which afford little comfort. 1 Fletcher, Cyclopedia Corporations, § 28, p. 124, states the rule:
“That one person or corporation may own a majority or even all of the stock of a corporation does not establish a legal identity between the stockholder and it, so as to make acts by one the acts of the other. The powers of two such corporations are distinct and proper to each other, and the powers of a corporation are not denied to it merely because it is subsidiary to another.”
The Judge’s ruling upon the second cause of action was in accord. He found that the loans were made by the bank to the plaintiff upon the terms alleged in the first cause of action; that at the time each loan was made “the defendant deducted from the proceeds of such loan interest at a rate not exceeding six per cent (6%) per annum” and held as a matter of law that the payments of premiums by the plaintiff for credit life insurance did not constitute payments of interest to the defendant; that the defendant did not charge nor collect from plaintiff at any time interest at a rate greater than six per cent (6%) per annum, and the plaintiff was not entitled to recover anything on its second cause of action, and the cause was thereupon dismissed.
91 A.L.R. 2d 1349,
et seq.,
fully digests the law on this subject. It says:
“It has generally been held that the requirement by a lender, whether an insurance company or otherwise, that the borrower should, as a condition for obtaining the loan, take out and pay premiums on a policy of insurance, and assign it to the lender as additional security for the loan, . . . does not, though making the cost of the loan exceed the highest legal interest, necessarily constitute usury where there is no showing that the requirement is intended to be, or is exacted as, a mere shift or device to cover usury.”
Other sections of the above annotation say “the fact that a lender required its borrowers to purchase . . . credit life . . . insurance . . . and to place such insurance with companies wholly owned by it, did not render the loan transactions usurious where the evidence showed that the insurance was actually written and put in force by the insurance companies for the premiums customarily charged for like insurance, and that the premiums charged for the insurance were actually paid over to the companies and the borrowers were mailed the policies. . . .
“[T]he compensation which the lender might legally demand was determined not by what the borrower paid but what the lender received.”
Dealing with the subject of separate corporate entities, we find that in the recent case of
Accept. Corp. v. Spencer,
268 N.C. 1, 149 S.E. 2d 570, our Chief Justice Parker, writing the most thorough opinion we have found on the subject, said:
“Ordinarily, a corporation retains its separate and distinct identity where its stock is owned partly or entirely by another
corporation. 18 C.J.S., Corporations, § 5(j), p. 375. See
Troy Lumber Co. v. Hunt,
251 N.C. 624, 112 S.E. 2d 132.
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Pless, J.
The plaintiff’s first cause of action is based upon its claim that the American Defender Life Insurance Company was almost fully owned by the defendant and its three principal officers. It contends that when the bank required it to expend some $38,000.00 for insurance premiums, which went to its alleged subsidiary or alter ego, it constituted gross profit; that premiums were required to be paid for the entire length of the term of the deeds of trust assigned as security (in most cases ten years), although the loans to the plaintiff were for a term of only four years; that defendant covenanted with plaintiff that unearned premiums would be refunded if defendant released any of plaintiff’s mortgages assigned to defendant as security, and that on one occasion premiums were so refunded; that on March 17, 1965, plaintiff repaid all loans obtained from the defendant and defendant released to plaintiff all deeds of trust and notes held by it as security for the loan; that plaintiff has made numerous demands for refund of unearned premiums since that time and defendant has refused to make such refund. Therefore, it is claimed defendant is now indebted to plaintiff in the amount of the unearned premiums, to wit: $15,411.94.
Upon hearing the evidence, considering the motions, and the plaintiff’s requested findings of fact, the Court made its own findings of fact and entered its judgment to the effect that the parties entered into an agreement on 3 January 1961; that the defendant agreed to and did make loans to the plaintiff. The loans were secured by notes and deeds of trust upon the property of the plaintiff’s debtors guaranteed by Mr. and Mrs. Huskey, and that in addition the plaintiff obtained policies of credit life insurance upon the lives of its customers; that all policies were written by American Defender Life Insurance Company (formerly American Guaranty Life Insurance Company), and as each policy was issued it was delivered to the named insured; that they were written for the terms of the debtor’s indebtedness which are still in being and are in effect and enforce
able by the beneficiaries thereof. The Court further found that the premiums for these policies were paid by the plaintiff to the defendant, and the defendant then delivered the entire amount of the premiums to the insurance company.
The Court found as a fact that the bank and the insurance company were separate corporations; that if the plaintiff were entitled to any refund it was due by the insurance company (which is not a party to the action) and not by the bank.
The Court concluded as a matter of law that there were no unearned premiums due the plaintiff by the defendant, and the plaintiff was not entitled to recover anything from the defendant on this cause of action.
It is the rule in North Carolina that where the parties waive a jury trial and agree that the Court may find the facts, they thereby transfer to the Judge the function of weighing the evidence, and his findings are conclusive on appeal if supported by any competent evidence, notwithstanding the fact that evidence to the contrary may have been offered.
Young v. Insurance Company,
267 N.C. 339, 148 S.E. 2d 226 (1966);
Williams v. Williams,
261 N.C. 48, 134 S.E. 2d 227 (1964).
From the Court’s statement of facts, in which the evidence is summarized, it will be seen that the evidence, even though controverted, supports the findings of fact, which, in turn, support the conclusions of law.
Throughout the plaintiff’s case is its basic contention that since the bank and its officers owned substantially all of the stock of American Defender Life Insurance Company that the two were, in effect, one entity, and that the insurance company was merely an
alter ego
or puppet of the bank. Unless it can prevail upon that assertion, the plaintiff has no case. Upon the argument before us, counsel for the plaintiff, with his usual candor, said that without that contention, “we wouldn’t be here.”
The plaintiff is being realistic in his position. But it is confronted by almost unanimous authorities which afford little comfort. 1 Fletcher, Cyclopedia Corporations, § 28, p. 124, states the rule:
“That one person or corporation may own a majority or even all of the stock of a corporation does not establish a legal identity between the stockholder and it, so as to make acts by one the acts of the other. The powers of two such corporations are distinct and proper to each other, and the powers of a corporation are not denied to it merely because it is subsidiary to another.”
The Judge’s ruling upon the second cause of action was in accord. He found that the loans were made by the bank to the plaintiff upon the terms alleged in the first cause of action; that at the time each loan was made “the defendant deducted from the proceeds of such loan interest at a rate not exceeding six per cent (6%) per annum” and held as a matter of law that the payments of premiums by the plaintiff for credit life insurance did not constitute payments of interest to the defendant; that the defendant did not charge nor collect from plaintiff at any time interest at a rate greater than six per cent (6%) per annum, and the plaintiff was not entitled to recover anything on its second cause of action, and the cause was thereupon dismissed.
91 A.L.R. 2d 1349,
et seq.,
fully digests the law on this subject. It says:
“It has generally been held that the requirement by a lender, whether an insurance company or otherwise, that the borrower should, as a condition for obtaining the loan, take out and pay premiums on a policy of insurance, and assign it to the lender as additional security for the loan, . . . does not, though making the cost of the loan exceed the highest legal interest, necessarily constitute usury where there is no showing that the requirement is intended to be, or is exacted as, a mere shift or device to cover usury.”
Other sections of the above annotation say “the fact that a lender required its borrowers to purchase . . . credit life . . . insurance . . . and to place such insurance with companies wholly owned by it, did not render the loan transactions usurious where the evidence showed that the insurance was actually written and put in force by the insurance companies for the premiums customarily charged for like insurance, and that the premiums charged for the insurance were actually paid over to the companies and the borrowers were mailed the policies. . . .
“[T]he compensation which the lender might legally demand was determined not by what the borrower paid but what the lender received.”
Dealing with the subject of separate corporate entities, we find that in the recent case of
Accept. Corp. v. Spencer,
268 N.C. 1, 149 S.E. 2d 570, our Chief Justice Parker, writing the most thorough opinion we have found on the subject, said:
“Ordinarily, a corporation retains its separate and distinct identity where its stock is owned partly or entirely by another
corporation. 18 C.J.S., Corporations, § 5(j), p. 375. See
Troy Lumber Co. v. Hunt,
251 N.C. 624, 112 S.E. 2d 132.
“This is said in 19 Am. Jur. 2d, Corporations, § 717:
“ ‘The fact that a corporation owns the controlling stock of another does not destroy the identity of the latter as a distinct legal entity; and, ordinarily, no liability may be imposed upon the latter for the torts of the subsidiary corporation. The facts that corporations have common officers, occupy common offices, and to a certain extent transact business for each other do not make the one corporation liable for the action of the other, except upon established legal principles. However, a corporation which exercises actual control over another, operating the latter as a mere instrumentality or tool, is liable for the torts of the corporation thus controlled. In such instances, the separate identities of parent and subsidiary or affiliated corporations may be disregarded.’
“In
Whitehurst v. FCX Fruit and Vegetable Service,
224 N.C. 628, 32 S.E. 2d 34, it was held that the mere fact that one corporation owns all the capital stock of another corporation, and the further fact that the members of the board of directors of both corporations are the same, nothing else appearing, is not sufficient to render the parent corporation liable for the- contracts of its subsidiary. In order to establish liability on the part of the parent corporation on such contracts, there must be additional circumstances showing fraud, actual or constructive, or agency.
“In 1 Fletcher, Cyclopedia Corporations, perm, ed., p. 204
et seq.,
it is said: The control necessary to invoke what is sometimes called the “instrumentality rule” is not mere majority or complete stock control but such domination of finances, policies and practices that’ the controlled corporation has, so to speak, no separate mind, will or existence of its own and is but a business conduit for its principal.. It must be kept in mind that the control must be shown to have been exercised at the time the acts complained of took place in order that the entities be disregarded at the time.’
“The clearest statement we have found with respect to this area of the law is in
Lowendahl v. Baltimore & O. R. Co.,
247 App. Div. 144, 287 N.Y.S. 62, 76, affirmed 272 N.Y. 360, 6 N.E. 2d 56, where the Court said:
“ ‘Restating the instrumentality rule, we may say that in
any case, except express agency, estoppel, or direct tort, three elements must be proved:
“‘“(1) Control, not mere majority or complete stock con-' trol, but complete domination, not only of finances, but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; and
“ ‘ “ (2) Such control must have been used by the defendant to commit fraud or wrong, to perpetrate the violation of a statutory or other positive legal duty, or a dishonest and unjust act in contravention of plaintiff’s legal rights; and
“ ‘ “ (3) The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.” See Powell “Parent and Subsidiary Corporations,” chapters I to VI,
passim,
and numerous cases cited.’ ”
The plaintiff has not offered the proof to meet the above requirements. There is ample evidence to support the Judge’s finding that the bank and the insurance company were separate corporations and that the payment of premiums by the plaintiff for credit life insurance did not constitute payments of interest to the defendant. Upon the latter ruling, the Court’s finding is supported by G.S. 58-32 which provides that when an insurance company requires a borrower to insure either his life or that of another with the company as a condition of a loan, the premiums paid for the insurance shall not be considered as interest, and the loan will not be rendered usurious by reason of such requirement. The statute also includes this clause: “nor will any loan be rendered usurious by reason of any such requirements . . .” Without deciding that this broad provision would include a bank which required insurance as condition for a loan, we think it demonstrates the legislative intent which the cited decisions support.
In view of the foregoing, the plaintiff’s claim of usury can be sustained, if at all, only upon the payments made to the bank, disregarding payment for insurance premiums. A careful mathematical calculation demonstrates that the charges denominating interest by the bank, standing alone, amount in each instance to less than six per cent
(6%).
In fact, less than five per cent (5%) was charged upon several. The plaintiff claims that when it borrowed $33,000 and was required to add a sufficient amount to pay interest on the sum borrowed for a four-year period (which came to $7,920) and it was thus required to execute a note for $40,920, that this was a usurious requirement. However, G.S. 53-43(6) provides that a bank, upon making a loan, may deduct in advance from the proceeds of the
loan interest at a rate not exceeding six per cent (6%) per annum from the date of the loan until materialization of the final installment, even though the principal amount of the loan is to be repaid in installments. It is general banking practice to require that interest be paid in advance. The plaintiff wanted $33,000. Had it been required to pay the interest from that sum, it would have received $7,920 less than it sought to borrow. By adding the interest to the principal of the note, it paid only six per cent
(6%)
on the amount borrowed, and this would appear to be the most convenient method of payment. In
Ray v. Insurance Co.,
207 N.C. 654, 178 S.E. 89, a similar transaction was upheld, the Court saying: “None of the notes which plaintiff executed, and which were subsequently paid, were tainted with usury.”
Upon the claim of the plaintiff that the bank failed to refund unearned insurance premiums, it must be recalled (1) that
if
a refund were due it was (a) due by the insurance company and (b) that since the jjlaintiff was not the beneficiary in the policies, the ones who were, that is, the heirs and next of kin of the insureds, would be entitled to the refund; and (2) that under G.S. 58-44.7 the bank could not have legally made a refund of money which had gone, even through its hands, to the insurance company. That statute provides that it is unlawful for an insurance company writing credit life insurance in connection with a loan to permit any agent to pay any rebate or refund any premiums without the consent of the policy holders.
We have considered the many authorities cited by the plaintiff but find that they are either not applicable to the facts found in this case, or that they represent minority rulings.
The quotations and citations in this opinion are not in every instance unanimously accepted by all courts, but they do represent the general rulings and have been approved by a majority of the courts dealing with the subjects discussed. We are of the opinion that they are sound, and we have therefore adopted them.
All of the exceptions filed by the plaintiff have been properly considered. We find that there was evidence to support Judge Riddle’s findings of fact, that the rulings of law are correct, and that in the trial there was
No error.