¶1 Mike's Transport, Inc. (MTI) appeals summary judgment granted to Julie Stephens (Stephens), determining that a judgment against non-party L&S Trucking, Inc. (L&S) and its owner, Mike Ledford (Ledford), may be enforced against MTI under an alter ego theory of liability.
INTRODUCTION
¶2 On March 29, 2019, Stephens obtained a judgment of $96,000 against L&S and its owner, Ledford, on her claim for actual fraud in Case No. CJ-2017-3372 (Okla. Co.). In May 2019, L&S stopped operating. MTI was promptly formed by Ledford's sister Beard as owner and president with Ledford serving as Chief Executive Officer (CEO).
¶3 Thereafter, Stephens filed this action against MTI and Beard, alleging that they created MTI to shield assets and avoid paying the 2019 judgment. Stephens alleged that only $5,480.00 of the judgment had ever been collected. She sought a determination that MTI is the alter ego of L&S and Ledford and was liable for the judgment they owe to Stephens; that MTI was a recipient of fraudulent transfers from L&S and Ledford; and that Beard was a co-conspirator of Ledford and is likewise liable for unpaid portions of the judgment.
¶4 Stephens moved for summary judgment on each of her claims. She presented evidence of L&S's cessation and MTI's immediate formation. Among other things, Stephens offered evidence that MTI represented to L&S's customers that it had merely undergone a name change and continued to operate under L&S's DOT and motor carrier numbers, doing business with L&S's former customers using L&S's truck and the trailers it had leased. In response, MTI did not dispute the timing of its formation, its use of L&S's equipment, or that it had represented to L&S customers that it had merely changed its name. It did not successfully dispute with evidence a number of other facts, although it denied the evidence of record could be characterized to show MTI took over L&S's business, or is an instrumentality of L&S.
¶5 Following briefing and a hearing not of record, the trial court granted summary judgment, finding that MTI is the alter ego of L&S and "is so organized and controlled and its affair[s] so conducted that it is the mere instrumentality or adjunct of L&S," and is liable for the judgment in CJ-2017-3372. The trial court found its determination rendered Stephens' claims for fraudulent transfer moot but found a dispute of fact precluded summary judgment against Beard, entering judgment against MTI. MTI appealed after Stephens dismissed her claim against Beard on December 2, 2022.
STANDARD OF REVIEW
¶6 "Although a trial court in making a decision on whether summary judgment is appropriate considers factual matters, the ultimate decision turns on purely legal determinations, i.e., whether one party is entitled to judgment as a matter of law because there are no material disputed factual questions." Carmichael v. Beller, 1996 OK 48914 P.2d 1051de novo." Id. The Court will "examine the pleadings and evidentiary materials to determine what facts are material to plaintiff's cause of action, and to determine whether the evidentiary materials introduced indicate whether there is a substantial controversy as to one material fact and that this fact is in the movant's favor." Ross by and through Ross v. City of Shawnee, 1984 OK 43683 P.2d 535Id.
ANALYSIS
¶7 The trial court determined that MTI was the mere instrumentality and alter ego of L&S and should be responsible for the judgment against it. MTI proposes that the trial court applied the wrong standard to determine alter ego liability, that there was no evidence presented to support the court's judgment, that disputed facts remained on that issue, and that the trial court failed to take disputed facts in favor of MTI.
¶8 "When remedies in aid of execution appear inadequate, a prior judgment may be enforced in a new action founded upon it." Mayhue v. Mayhue, 1985 OK 68706 P.2d 890
¶9 Though MTI contests its liability, it offered the following insights and admissions in its briefing on summary judgment:
This lawsuit arises because Stephens has had a difficult time in collecting her judgment from L&S and Ledford. Ledford is a truck driver by profession. L&S was in the trucking business until its owner and the operator of its only truck quit. Ledford was that truck driver. L&S's only source of income came from Ledford's services as a truck driver. . . .
Stephens is upset because Ledford decided to go into business with his sister, Beard, to continue to drive a truck to earn a living.
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Although not entirely clear why Ledford shutdown L&S, as the collection issues would be the same, he entered into an agreement with his sister, Beard, to open a trucking business, Mike's Trucking [MTI]. As with most personal services, businesses develop relationships with the professional, not necessarily the business name. Thus, there are several businesses that used to work with L&S that now work with Mike's Trucking. Of the 36 businesses that worked with L&S, 7 have continued on with Mike's Trucking.
MTI further explained,
. . . L&S lost its economic driver--Ledford. Beard opened a trucking company with Ledford to help her brother--there is nothing nefarious about that.
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. . . it is not improper for Ledford to set up a new company to avoid the liability associated with L&S. That is a legal purpose--one that Stephens does not like, but that is the law. . . . L&S is under no obligation to continue to be in the trucking business to satisfy Stephens' debt.
(emphasis added). Regardless of the admission that L&S was shut down and MTI began to avoid L&S's debt, MTI contends the trial court erred by granting summary judgment because MTI and L&S are entirely separate entities and there is no evidence L&S controls MTI. We disagree.
¶10 "Corporations are distinct legal entities, and generally one corporation will not be held responsible for the acts of another." Gilbert v. Sec. Fin. Corp. of Oklahoma, 2006 OK 58152 P.3d 165Montgomery v. Airbus Helicopters, Inc., 2018 OK 17414 P.3d 824Id. at ¶ 22. "In other words, it must appear that one corporation is merely a dummy or a sham." King v. Modern Music Co., 2001 OK CIV APP 12633 P.3d 947See also Matter of Est. of Rahill, 1991 OK CIV APP 83827 P.2d 896 ("Oklahoma permits the court to disregard the corporate entity if used, (1) to defeat public convenience, (2) justify wrong, (3) to perpetrate fraud whether actual or implied, or (4) to defend crime.").
¶11 Much of Oklahoma case law on alter ego or veil piercing discusses liability as the instrumentality or agent of another, rather than upon a design or scheme to perpetrate a fraud.Gilbert, 2006 OK 58
(1) whether the dominant corporation owns or subscribes to all the subservient corporation's stock, (2) whether the dominant and subservient corporations have common directors and officers,
(3) whether the dominant corporation provides financing to the subservient corporation, (4) whether the subservient corporation is grossly undercapitalized, (5) whether the dominant corporation pays the salaries, expenses or losses of the subservient corporation,
(6) whether most of the subservient corporation's business is with the dominant corporation or the subservient corporation's assets were conveyed from the dominant corporation, (7) whether the dominant corporation refers to the subservient corporation as a division or department, (8) whether the subservient corporation's officers or directors follow the dominant corporation's directions, and (9) whether the corporations observe the legal formalities for keeping entities separate.
Id.
¶12 This case is not a typical veil-piercing analysis. The facts in this case do not simply suggest that L&S controls MTI, but that L&S actually is MTI, organized under a new name. MTI did not successfully dispute on summary judgment that it represented to L&S customers that MTI was merely a name change, that MTI operates under L&S's existing DOT and motor carrier numbers, and services L&S customers with L&S's truck.
¶13 Coupled with MTI's admissions noted above that Ledford shut down L&S and created MTI to avoid L&S's liability, these facts appear to lend themselves to an alter ego analysis based on a design or scheme to perpetrate a fraud by reforming or reorganizing under a new name to avoid L&S's creditors.
¶14 MTI did not dispute the outstanding judgment against L&S filed March 26, 2019. MTI did not successfully dispute that L&S authorized articles of dissolution on May 1, 2019, or that MTI was formed on May 2, 2019, though the articles were not signed by Ledford until June 2019.
¶15 Stephens also presented evidence that Ledford and Beard wrote to L&S's existing customers on MTI letterhead stating:
Our company has recently changed our name from L&S Trucking, Inc. to Mike's Transport Inc. All invoices will now reflect this information. . . . Our new tax identification number is [redacted]. All checks will need to be made out to Mike's Transport moving forward.
MTI did not dispute Beard and Ledford made these statements. However, it attempted to dispute the import of this representation by claiming that some companies required new contracts after this communication. It reasoned, therefore, that the only conclusion and inference the trial court could make was that MTI was a new and different business. Even if MTI had supported this assertion with evidence,reasonable inferences from the evidence presented. Nothing about the fact that customers required new contracts after MTI announced L&S's name change gives rise to an inference that they are separate companies.
¶16 Stephens also proposed as undisputed facts that MTI uses L&S's DOT and motor carrier numbers and presented a policy statement from the Federal Motor Carrier Safety Administration (FMCSA) website which she contended means that MTI would be permitted to use L&S's DOT number only in the case of a name change. The statement advised that "the FMCSA's policy is to assign a unique USDOT identification number to each person [or corporation] required to identify themselves,"
¶17 MTI responded that the FMCSA statement was a legal conclusion to which no response was required. It did not successfully dispute that MTI continued to operate under L&S's DOT and MC numbers, which was supported by evidence in the record. MTI simply contended that current FMCSA records indicate the number (formerly used by L&S) is registered to MTI. In short, MTI failed to dispute that MTI and L&S use the same numbers or to address FMCSA's apparent policy that they would use L&S's numbers only if they were virtually the same entity, or have simply changed its name or corporate form.
¶18 Though MTI disputed that it served all of MTI's former customers, it did acknowledge it serves seven of L&S's former customers. MTI asserted that some required it to enter into new contracts, though this fact does not dispute the inference that L&S merely changed its name to MTI and continued to operate serving L&S customers.
¶19 Stephens also proposed as undisputed fact that MTI operates out of Ledford's home address on 11817 Copper Trails Lane. MTI disputed that fact. There is nothing of record indicating that this address is necessarily Ledford's home address, as contended. However, documents attached to Plaintiffs' Motion for Summary Judgment and MTI's response show that MTI uses two addresses--an apparent mailing address on 10600 S. Pennsylvania Avenue, Oklahoma City, and the Copper Trails address. MTI's own exhibits on summary judgment show L&S's registered address was 11817 "Cooper Tralls Lane;" that Ledford's address as registered agent for L&S was at this address; and that the address of MTI's registered agent, Beard, is also the Copper Trails address. In other words, both entities share the same address, whether it is Ledford's home or not.
¶20 Stephens also presented a number of proposed statements of facts which, as a whole, indicated MTI paid Ledford's expenses and took over debts, assets and equipment of L&S to operate. Specifically:
i. MTI made payments on Ledford's personal vehicle. MTI did not dispute this fact, but claimed it was part of Ledford's compensation package with MTI, and that payments had since ceased.
ii. MTI made mortgage payments on Ledford's home. Again, MTI claimed these payments were part of Ledford's compensation package but have since ceased.
iii. MTI assumed the debt for L&S's trailers and agreed to pay the amount in arrears. Ledford's testimony presented in support stated that two trailers were being leased, and that MTI took over the lease.
iv. MTI took over payments for L&S's Kenworth truck and agreed to catch up L&S's late payments. Ledford specifically testified to these facts at the asset hearing regarding L&S's only tractor-trailer, now used by MTI. However, on summary judgment MTI disputes this fact, inexplicably on the basis that MTI was supposedly upside down on its loan and the truck has negative value.
v. The only trucks and trailers used by MTI are those formerly owned or leased by MTI. Again, this fact came directly from Ledford's own testimony, MTI's argument that the loan on the truck was upside down and the trailers were leased notwithstanding.
vi. Ledford/L&S gave his computer to MTI. Ledford disputes this fact. Ledford testified the computer was his personal computer, and that L&S did not have computer equipment. He also testified he used it for L&S and gave it to his sister because she might want to use it for her trucking business (MTI).
vii. L&S used to pay Ledford's personal expenses, which are now paid by Beard and MTI. As pointed out by Ledford, the attached testimony reflects simply that Beard pays Ledford's utilities since L&S went out of business.
¶21 Finally, Stephens proposed as undisputed fact that L&S received no payment from MTI in exchange for transferring the business, assets or accounts to MTI. MTI is correct that the evidence presented did not show a formal transfer of assets to MTI, and nothing of record indicates what may have happened to L&S's bank accounts. However, MTI's unsupported assertion that L&S had no assets to transfer is contrary to evidence that it owned a semi tractor-trailer, though encumbered, among other things one might arguably consider an asset or otherwise a thing of value.
¶22 The foregoing evidence firmly supports the judgment of the trial court. As stated, not every factor of control fits this factual circumstance or applies. L&S does not subscribe to stock in MTI, and there is no evidence of record from which one could conclude that MTI is grossly undercapitalized, that L&S provides financing to MTI, or that L&S pays the salaries of MTI's employees. MTI and L&S have separate corporate structures. However, many factors squarely apply. Ledford was an officer in both L&S and MTI. He was the sole owner and driver for L&S and is now the CEO and driver for MTI. MTI conducts its business with equipment previously used by L&S (its only truck and trailers) and serves L&S's customers from the same address as L&S.
¶23 Most significantly, MTI did not merely purchase an existing business and operate it separately. MTI represented to L&S's own customers that it, in fact, was L&S, but for the change in names. That conclusion is bolstered by the fact that MTI uses L&S's DOT and motor carrier number and, despite claiming it is a separate entity, has not been assigned its own number. The trial court's determination that MTI is the alter ego or mere instrumentality of L&S is supported by the undisputed facts and controlling law and is therefore affirmed.
CONCLUSION
¶24 The undisputed material facts of record establish that MTI is an instrumentality of L&S, or in reality is the same entity with a different name. We therefore affirm the trial court's judgment of August 31, 2021.
¶25 AFFIRMED.
BARNES, V.C.J., and WISEMAN, P.J., concur.