Smith v. McLeod Distributing, Inc.

Michael Smith (defendant) was the president of Colonial Mat Company, Inc. (Colonial Mat) (defendant) and Colonial Industrial Products Company, Inc. (Colonial Industrial). Colonial Mat’s certificate of incorporation stated that Colonial Mat engaged in sales, distribution, and services related to industrial products including floor coverings. Colonial Industrial’s certificate of incorporation stated that Colonial Industrial engaged in the sale and distribution of industrial products. Smith referred to his businesses generally as “Colonial,” and Smith’s business card had “Colonial Mat Co., Inc.” in one corner and “Colonial” in the opposite corner. Colonial Mat and Colonial Industrial had the same treasurer, the same office personnel, and the same address and telephone number. In 1987, wholesaler McLeod Distributing, Inc. (McLeod) (plaintiff) extended Colonial Mat a line of credit for purchasing flooring products. Smith signed a personal guarantee with McLeod for any debt incurred by Colonial Mat. In early 1989, Smith notified McLeod that going forward, Smith would be selling flooring products under the name Colonial Carpets. Colonial Industrial then notified the Indiana Secretary of State that it would be doing business as (d/b/a) Colonial Carpets. McLeod changed Colonial Mat’s name in its billing system to “Colonial Carpets, Inc.” and continued engaging in business with Colonial Industrial d/b/a Colonial Carpets. In 1990, McLeod was not paid on several invoices and sued Colonial Mat and Smith to recover. Colonial Mat argued that it was not liable because the unpaid invoices were addressed to Colonial Carpets, Inc., which Colonial Mat claimed was a separate corporate entity. McLeod argued that Colonial Mat was liable because Colonial Mat and Colonial Industrial d/b/a Colonial Carpets were effectively the same corporation. At trial, McLeod presented evidence of the connection between the corporations, including that Colonial Mat paid invoices and issued payroll checks for Colonial Carpets after the purported change in corporate structure in 1989. The trial court ultimately entered judgment in McLeod’s favor. Smith and Colonial Mat appealed.