C M Corp. v. Oberer Development Co.

631 F.2d 536 (1980)

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C M Corp. v. Oberer Development Co.

United States Court of Appeals for the Seventh Circuit
631 F.2d 536 (1980)

Facts

C M Corporation (CM) (plaintiff) provided advice regarding nursing-home construction. CM’s executives were experienced businessmen. Gold Key Builders, Inc. (Gold Key) (defendant) was a subsidiary of the Oberer Development Company (defendant). The Creative Construction Company (Creative) provided design services. Oberer Development and Creative had common stockholders and directors until Creative’s 1977 merger into Oberer Development. Gold Key (and its predecessors, Enco, Inc. and Anco, Inc.), Oberer Development, and Creative were among the approximately 10–15 companies owned by George Oberer and his family. The Oberer-owned companies sometimes were referred to as Oberer Enterprises, but no such legal entity existed. CM contracted with Gold Key (or its predecessors) to build nursing homes in Piper City and Newman, Illinois, and West Liberty, Iowa; CM hired Creative for the West Liberty project. The projects were completed before 1977. CM sued Gold Key and Oberer Development in connection with the projects. With respect to Oberer Development, CM contended that Gold Key’s corporate veil should be pierced because (1) there allegedly was substantial confusion between Creative and Gold Key’s predecessors and (2) Gold Key’s predecessors did not have identities separate from Oberer Development due to the purported Oberer Enterprises. Regarding confusion, CM presented trial evidence about isolated instances in which third parties confused Gold Key’s predecessors with Creative (which Creative corrected in at least one instance). But CM presented no evidence that, for example, Gold Key’s predecessors controlled Creative or that Creative did not (1) maintain its own financial records and bank accounts, (2) hold its own board and shareholder meetings, or (3) do business with companies other than Gold Key’s predecessors. Nor did CM present evidence that Creative or Gold Key’s predecessors were grossly undercapitalized or attempted to avoid their obligations by hiding behind their respective corporate structures. Regarding the purported Oberer Enterprises, CM primarily relied on a letter from George Oberer in which he wrote that he considered a problem with a Gold Key predecessor to be an Oberer problem. But CM presented no evidence that, for example, any purported Oberer Enterprises company owned stock in another or that any such company (1) financed another or caused another to be incorporated, (2) was grossly undercapitalized, or (3) failed to observe corporate formalities. The jury found that Golden Key’s corporate veil should be pierced, but the trial court granted Oberer Development’s motion for judgment notwithstanding the verdict. CM appealed.

Rule of Law

Issue

Holding and Reasoning (Kilkenny, J.)

Dissent (Swygert, J.)

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