Law School Case Brief
Zaist v. Olson - 154 Conn. 563, 227 A.2d 552 (1967)
Courts will disregard the fiction of separate legal entity when a corporation is a mere instrumentality or agent of another corporation or individual owning all or most of its stock. Under such circumstances, the general rule, which recognizes the individuality of corporate entities, the independent character of each in respect to their corporate transactions, and the obligations incurred by each in the course of such transactions, will be disregarded, where, as here, the interests of justice and righteous dealing so demand. The circumstance that control is exercised merely through dominating stock ownership, of course, is not enough. There must be 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.
Suppliers brought an action to recover for alleged services rendered and materials furnished against defendant companies alleging that they had supplied materials and furnished equipment to the companies for work on properties owned or leased by the companies. The Superior Court of New London County (Connecticut), which rendered judgment for plaintiff suppliers. The trial court concluded that one company was the agent of the other company and this agency relationship was not only denied by the companies, but it was also claimed that no services, materials or equipment furnished by the suppliers inured to the benefit of either company.
Were the suppliers entitled to recovery?
The court affirmed a decision of the trial court, which ordered that certain funds be paid to plaintiff suppliers. The court stated that the facts recited clearly enough that the companies received the benefit of the suppliers' services and the materials and equipment furnished to them. The court held that both companies benefited from the services of the suppliers and that one company so completely controlled the other that the controlled company had no separate mind. However, the court held that there was error in the form of the judgment, and it was set aside and the case remanded with direction to correct the judgment by adjudging that one particular company recover of the suppliers its costs.
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