Abraham v. Lake Forest, Inc.

Anthony P. Abraham (plaintiff) was a sophisticated real estate entrepreneur who purchased an option to buy acres of land. Abraham negotiated with a Lake Forest, Inc. (Lake Forest) (defendant) representative to sell the option. Abraham sold the option to Lake Forest’s newly formed subsidiary, NEI Corporation, Alabama (Alabama), which it formed to acquire and develop the property. Alabama purchased the option for $375,500, consisting of $172,117.50 in cash, and a note for the remaining $203,382.50. Alabama made payments on the note totaling $50,845.64. To purchase the property, Alabama borrowed funds from a bank, secured by a mortgage on the property. Alabama’s plans to develop the property never materialized, so it sold the property. After deducting the mortgage balance and closing costs, Alabama received $33,185.36 by check payable to Alabama. Alabama endorsed the check, which was deposited in NEI Corporation’s (NEI) (defendant) bank account. Lake Forest was a wholly owned subsidiary of NEI, and Lake Forest owned all stock in Alabama. Abraham obtained a judgment against Alabama for $152,536.86, the remaining note balance, plus accrued interest, then sued Lake Forest and NEI, attempting to pierce Alabama’s corporate veil and make these corporations liable for Alabama’s debt. The lower court dismissed the lawsuit. Abraham appealed.