Hiller v. Paris Mountain Utilities

THE STATE OF SOUTH CAROLINA

THE STATE OF SOUTH CAROLINA

In The Court of Appeals

 

Ex Parte:  Joe W.
Hiller and David N. Hiller,       
Appellants

IN RE: South Carolina
Department of Health and Environmental
Control,        Respondent,

v.

Paris Mountain Utilities,
Inc.         Defendant.

Appeal From Greenville County

Alison Renee Lee, Circuit Court Judge

Unpublished Opinion No. 2004-UP-061

Heard January 14, 2004 – Filed
January 29, 2004

AFFIRMED

Randall
Scott Hiller, of Greenville, for Appellants.

Mason
A. Summers, of Columbia, for Respondent.

PER CURIAM: Upon the motion of the
South Carolina Department of Health and Environmental Control (DHEC),
the trial court found Paris Mountain Utilities, Inc. and its officers
David Hiller and Joe W. Hiller in contempt.  The subject matter of this
action has been before this court previously when Paris Mountain attempted
to include the Hillers as appellants when it appealed the contempt order. 
We disallowed that effort, finding the notice of appeal did not name the
Hillers as appellants and Paris Mountain lacked standing to raise issues
concerning their contempt and personal liability because Paris Mountain
is separate and distinct from the Hillers.
[1]   DHEC thereafter served the Hillers with the contempt order. 
They now appeal.

FACTS

On April 24, 1999, Judge Joseph J. Watson ordered
Paris Mountain Utilities to comply with “all provisions of [the] National
Pollutant Discharge Elimination System Permit #SC0034398, the Federal
Water Pollution Control Act, the State Water Pollution Control Permit
Regulations (S.C. Code Ann. Regs. 61-9 (1976), as amended), and the provisions
of Administrative Order 96-110-WP.”  He also awarded judgment against
Paris Mountain in the amount of $39,750 for a civil penalty assessed by
DHEC against Paris Mountain in an unappealed administrative order. 

When Paris Mountain failed to comply with Judge
Watson’s order, DHEC sought an order seeking to have Paris Mountain and
its officers held in contempt.  Following a hearing, the trial court held
Paris Mountain and the Hillers in contempt and imposed a civil penalty
in the amount of $39,750 upon the Hillers in their individual capacities. 
The trial court also sentenced the Hillers to an indefinite term of imprisonment
in the event the civil penalty went unsatisfied. To reach the Hillers,
the trial court disregarded the corporate shield that protected the Hillers
from individual liability for corporate liabilities by piercing the corporate
veil. 

LAW/ANALYSIS

1.       The trial court committed no reversible
error in allowing testimony regarding the piercing of Paris Mountain’s
corporate veil and in subsequently ordering that the veil be pierced,
thus holding the Hillers personally liable for Paris Mountain’s contempt,
despite the fact that DHEC’s motion did not request piercing of the corporate
veil.  Both men had sufficient notice that DHEC would attempt to hold
each of them liable for the corporation’s disobedience of Judge Watson’s
order.  The motion filed by DHEC expressly stated that it would “move
the court for an order declaring Paris Mountain Utilities, Inc., and
its officers in . . . contempt for disregarding the order of the Honorable
Joseph Watson issued August 24, 1999.” [Emphasis added.]  Even though
Judge Watson’s order was addressed solely to Paris Mountain, its officers
were also subject to contempt for disobedience of its terms.
[2]   Moreover, since Paris Mountain was capable of violating
Judge Watson’s order only if its agents either acted or refrained from
acting, “it follows that the order directed at the corporation [was] binding
on agents authorized to act on its behalf, whether specifically named
in the order or not.” [3]

2.       The trial court committed no reversible
error in allowing evidence regarding events that occurred prior to August
24, 1999 when the issue before the court during the January 5, 2000 hearing
was whether the corporation and its officers had violated Judge Watson’s
order.  “Conduct of a trial, including admission and rejection of [evidence],
is largely within the trial judge’s sound discretion, the exercise of
which will not be disturbed on appeal unless appellant can show abuse
of such discretion, commission of legal error in its exercise, and resulting
prejudice to appellant’s rights.”
[4]   “The trial judge is given broad discretion in ruling on
questions concerning the relevancy of evidence, and his decision will
be reversed only if there is a clear abuse of discretion.” [5]   The Hillers failed to demonstrate
the trial court abused its discretion by allowing the questioned evidence
and determining the evidence was relevant.  Additionally, the Hillers
did not prove the court’s actions prejudiced them unfairly.  The trial
court viewed the evidence as “relevant as background information.”  We
cannot fault it for viewing it in that way. 

Furthermore, some of the challenged evidence
that related to matters occurring prior to Judge Watson’s August 24, 1999
order suggested a pattern of neglect by the corporation of its legal obligations.
[6]

3.       We hold the evidence, though admittedly
slight, and its reasonable inferences support the trial court’s finding
that the Hillers were officers of the corporation at the critical time. 
Judge Watson’s unappealed order of default, which upholds service upon
David Hiller, refers to him as president of the corporation and an affidavit
of service of the order of default upon David Hiller lists him as president
of Paris Mountain Utilities.  Although a letter dated September 9, 1999
addressed to Kelly Lowry states he no longer serves as president of the
corporation because it “does not exist,” the corporation had only been
administratively dissolved by the secretary of state pursuant to S.C.
Code Ann. § 33-14-200 (Supp. 2003)  for
failing to make required reports or pay taxes.  Under S.C. Code
Ann. § 33-14-210(d) (1990) , the corporation,
and hence its officers and agents, continued to exist, albeit for limited
purposes.  Joe W. Hiller is also listed on the articles of incorporation
as one of the Paris Mountain’s incorporators, but, more importantly, he
wrote a letter on May 25, 1999, just a few months before the date of Judge
Watson’s order, addressed to Altamont Forest residents threatening to
shut down the treatment plant if anyone took legal action or if anyone
failed to make a timely financial contribution to the treatment system,
a threat that only someone authorized to act on the behalf of the corporation
could legitimately make. 

Significantly, other than the letter to Lowry,
there is no evidence that David Hiller and Joe W. Hiller were not officers
and agents of the corporation on the critical date.  Neither of the Hillers
produced any evidence that weaken the prima facie case made
by DHEC that they were.
[7]

Finally, if a corporation continues to operate
as such after its administrative dissolution, those persons operating
the business become personally liable for its obligations.
[8]  The record contains evidence the corporation
continued its operations beyond October 26, 1996, with Joe W. Hiller sending
out bills for sewer service to Altamont Forest residents on May 25, 1999
and David Hiller receiving laboratory reports on March 21, 1997. 

4.       We need not address the question
of whether the trial court erred in making eleven findings of fact. 
This court previously affirmed these same findings in South Carolina
Department of Health and Environmental Control v. Paris Mountain Utilities,
Inc., [9] finding nine of them supported by
the record or by an unappealed administrative order.  The other two findings,
though not supported by the evidence, were found not to be prejudicial.

We are bound by that decision.
[10]   The Hillers stand in privity with Paris Mountain Utilities,
a party to the prior proceedings that involved the same litigation as
that with which we are involved here.

In any case, we reiterate the conclusions
reached in the prior proceedings and hold as did the panel in that case.

5.       We also need not address the question
of whether the trial court erred in appointing a receiver because it contained
findings of fact outside the record and granted relief beyond the scope
of DHEC’s motion.  Again, the previous panel determined this issue with
finality and we agree with the panel’s conclusions in both regards.

6.       We do not address the constitutional
question of whether the trial court erred in ordering imprisonment for
the payment of a debt.  It was neither raised to nor passed upon by the
trial court. [11]

AFFIRMED.

GOOLSBY and ANDERSON, JJ., and
CURETON, A.J., concur.

[1] See S.C. Dep’t of Health
and Envtl. Control v. Paris Mountain Util., Inc., Op. No. 2001-UP-371
(S.C. Ct. App. filed July 17, 2001).

[2] 17 C.J.S Contempt § 36, at 84-85
(1999).

[3] Id. at 85.

[4] Am. Fed. Bank, FSB v. Number One
Main Joint Venture, 467 S.E.2d 439, 442, 321 S.C. 169, 174 (1996)
.

[5] State v. Alexander, 303 S.C.
377, 380, 401 S.E.2d 146, 148 (1991) .

[6] The challenged evidence
includes a letter dated May 25, 1999 to Altamont Forest residents from Joe
W. Hiller threatening to shut down the sewer system “[i]f anyone takes any
legal action” or “if timely contributions are not received from everyone”;
a Declaration of Dissolution dated October 28, 1996, signed by the secretary
of state, stating that Paris Mountain Utilities, Inc. has failed to file
an annual report and pay its franchise tax or income tax; and an undated
bill, taped to an Altamont Forest resident’s mailbox on September 30, 1997
and sent to DHEC on April 20, 1998 by Paris Mountain, charging the resident
for sewer service from January 1, 1997 through June 30, 1997.

[7] See Mayhew
v. Mayhew, 519 S.E.2d 188, 195 (W.Va. 1999)  (noting the “burden of production merely requires
a party to present some evidence to rebut evidence proffered by the party
having the burden of persuasion”); McKenzie v. Hanson, 143 N.W.2d
697, 703 (N.D. 1966)  (stating that “[w]hen the plaintiff has, by evidence,
established a prima facie case, the burden of going forward
with the evidence, often referred to as the burden of evidence, shifts to
the defendant,” but “[i]f the defendant can impair the prima facie
quality of the case against him, the burden of evidence returns to the party
having the burden of proof”).

[8] 19 Am. Jur. 2d Corporations
§ 2887 , at 665 (1986).

[9] See note 1,
supra.

[10] See Huggins v. Winn-Dixie
Greenville, Inc., 252 S.C. 353, 357, 166 S.E.2d 297, 299 (1969)  (stating a finding by the appellate court contained
in a decision in a previous appeal in the same case is the law of the case).

[11] See Holy Loch Distribs,
Inc. v. Hitchcock, 340 S.C. 20, 24, 531 S.E.2d 282, 284 (2000)  (noting an issue must be both raised to and ruled upon
by the trial court to warrant appellate review).