Gulfstream Inc v. Palm Yacht Sales Inc

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

GULFSTREAM, INCORPORATED,
Plaintiff-Appellant,

v.

PALM YACHT SALES, INCORPORATED;
VISTA YACHT COMPANY, INCORPORATED;
VISTA YACHTS, INCORPORATED; CHARLES
No. 94-2155
AMANTE; VALERIE AMANTE,
Defendants-Appellees,

and

EAST END ENTERPRISES, INCORPORATED;
HORIZON YACHT COMPANY, LIMITED,
Defendants.

GULFSTREAM, INCORPORATED,
Plaintiff-Appellant,

v.

PALM YACHT SALES, INCORPORATED;
VISTA YACHT COMPANY, INCORPORATED;
VISTA YACHTS, INCORPORATED; CHARLES
No. 94-2381
AMANTE; VALERIE AMANTE,
Defendants-Appellees,

and

EAST END ENTERPRISES, INCORPORATED;
HORIZON YACHT COMPANY, LIMITED,
Defendants.
GULFSTREAM, INCORPORATED,
Plaintiff-Appellant,

v.

PALM YACHT SALES, INCORPORATED;
VISTA YACHT COMPANY, INCORPORATED;
CHARLES AMANTE; VALERIE AMANTE,
No. 95-1144
Defendants-Appellees,

and

VISTA YACHTS, INCORPORATED; EAST
END ENTERPRISES, INCORPORATED;
HORIZON YACHT COMPANY, LIMITED,
Defendants.

Appeals from the United States District Court
for the Eastern District of North Carolina, at Greenville.
Terrence W. Boyle, Chief District Judge.
(CA-92-51-4-BO)

Argued: December 6, 1995

Decided: April 12, 1999

Before WIDENER and NIEMEYER, Circuit Judges, and
BUTZNER, Senior Circuit Judge.

_________________________________________________________________

Affirmed by unpublished opinion. Judge Widener wrote the opinion,
in which Judge Niemeyer and Senior Judge Butzner joined.

_________________________________________________________________

COUNSEL

ARGUED: Stephen M. Valentine, WHEATLY, WHEATLY,
NOBLES & WEEKS, P.A., Beaufort, South Carolina, for Appellant.

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George Rountree, III, ROUNTREE & SEAGLE, L.L.P., Wilmington,
North Carolina, for Appellees. ON BRIEF: George K. Freeman, Jr.,
ROUNTREE & SEAGLE, L.L.P., Wilmington, North Carolina, for
Appellees.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

WIDENER, Circuit Judge:

Following a final order in this case, the plaintiff, Gulfstream, Inc.,
a North Carolina corporation, appeals the orders of the district court
that denied its motion to compel discovery, granted summary judg-
ment in favor of the defendant Charles Amante on the issue of pierc-
ing the corporate veil, dismissed the defendant Valerie Amante for
lack of personal jurisdiction, and denied its motion to amend its com-
plaint to add Altech Yachts, Inc. as a party defendant. We affirm.

I.

Charles and Valerie Amante are residents of Florida and the sole
shareholders, officers and directors of the defendant corporations
Palm Yacht Sales, Inc., Vista Yacht Company, Inc., and East End
Enterprises, Inc. Amante had been in the boat business since child-
hood. He built his first boat while in the seventh grade. Starting in
1980, the Amantes formed East End Enterprises as a charter manage-
ment company for a trawler which they owned. In 1983, East End
contracted with a boatyard in Taiwan to construct fiberglass vessels
for importation and sale in the United States. In that same year, the
Amantes formed another corporation, Eastern Yachts, Inc., with
Arthur and Ellen Dulik, to import and sell the vessels imported from
Taiwan.

The business was conducted so that East End imported the boats
from the boatyard which manufactured them in Taiwan and then

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transferred the boats to Eastern Yachts for marketing and sale. These
boats were called Vista Yachts, and in 1984 the Amantes formed a
third corporation, Vista Yacht Company, Inc., which they designated
as the manufacturer of the boats. After Vista Yacht Company was
formed, the boats were imported by East End, transferred to Vista
Yacht Company, then transferred to Eastern Yachts or other dealers,
who would hold the boats for retail sale.

Around 1986, East End began importing Vista Yachts from a sec-
ond boatyard in Taiwan, Horizon Yacht Company, Ltd. Horizon has
no connection with the defendants other than manufacturing boats for
delivery to them. In 1987, importation of the boats was taken over
entirely by Vista Yacht Company. Also in 1987, the Amantes formed
Palm Yacht Sales, Inc., a retail outlet for the boats, incorporated in
Florida and located in Fort Lauderdale. In July, 1989 the Amantes
formed Altech Yachts, Inc., a corporation also located in Fort Lauder-
dale which imports power boats from Argentina for sale in the United
States and serves as a brokerage for new and used boats of all makes.

On April 12, 1988 the plaintiff contracted with Palm Yacht Sales,
Inc. for the purchase of a Vista 50 foot sport fisherman vessel to be
constructed in Taiwan by the defendant Horizon Yacht Company
according to certain specifications and using fiberglass molds owned
by Vista Yacht Company. Upon completion, the vessel Crystal Sea
was imported into the United States by Vista Yacht Company and
transferred to Palm Yacht Sales, which delivered the boat to the plain-
tiff in Florida in November, 1988. Subsequently, the plaintiff discov-
ered and gave notice to Amante around January, 1989 of various
defects in the vessel. Notice of a defect in the hull was given to
Amante around August, 1989. Following unsuccessful efforts to cor-
rect the defects, Gulfstream brought suit on April 15, 1992 under
diversity jurisdiction in the District Court for the Eastern District of
North Carolina against the corporate defendants and against Charles
and Valerie Amante personally, alleging breach of express and
implied warranties, revocation of acceptance, and negligence. The
complaint also alleged that those defendant corporations which were
owned by the Amantes were sham corporations and the alter egos of
Charles and Valerie Amante.

On November 4, 1992, the district court granted Valerie Amante's
motion to dismiss for lack of personal jurisdiction. On August 1,

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1994, the court granted the plaintiff's motion for summary judgment
against Horizon Yacht Company in the amount of $682,190.92 and
granted summary judgment in favor of Charles Amante on the issue
of piercing the corporate veil. Following a bench trial on the merits,
on September 13, 1994 the court entered its judgment against Vista
Yacht Company and Palm Yacht Sales for breach of warranty of mer-
chantability in the amount of $316,000.00 plus prejudgment interest
from November 14, 1988. Vista Yacht Company is inactive and its
total assets are approximately $3,000.00 worth of office equipment
and furniture. Amante testified on July 28, 1993 that Palm Yacht
Sales was no longer active, that it had not conducted business with
third parties "for a couple of years," and that the corporation had no
assets.

II.

We first address Gulfstream's claim that the court erred in denying
its motion to compel discovery, which order we review for abuse of
discretion. Lone Star Steakhouse & Saloon v. Alpha of Virginia, 43
F.3d 922, 929 (4th Cir. 1995).

Gulfstream filed its complaint on April 15, 1992. Following the
disposition of personal jurisdiction issues, the defendants, Palm Yacht
Sales, Vista Yacht Company, East End Enterprises, Horizon Yacht
Company, Ltd., and Charles Amante, filed an answer to the complaint
on November 16, 1992. The parties filed a stipulation on discovery
on February 22, 1993, and the first scheduling order was filed on Feb-
ruary 25, 1993. The scheduling order stated that all defendants could
serve a maximum of 50 interrogatories including subparts and that the
defendants could serve 10 requests for production of documents. The
plaintiff had the same conditions. Each party could take a maximum
of 10 depositions. Discovery was to be concluded by August 12,
1993, and all motions were to be filed by September 13, 1993. The
order cautioned counsel not to be dilatory in pursuing discovery, as
motions for extensions were not favored.

On June 9, 1993, Gary Clemons, Esq. was granted permission to
withdraw as attorney for the defendants, being replaced by George
Rountree, III, Esq., defendants' present attorney, on June 23, 1993.

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The record shows that the plaintiff served its first set of 51 inter-
rogatories and six requests for production of documents on the defen-
dants on June 9, 1993, over three months after the entry of the
scheduling order. The defendants answered these on July 12, 1993.
The plaintiff did not file a motion to compel responses it now claims
were not made or were unresponsive, but rather served a second set
of 14 additional interrogatories and six more requests for production
of documents on July 19, 1993. The defendants never responded to
these, taking the position that they were deprived of the allowed time
period in which to respond. Again the plaintiff did not file a motion
to compel.

Over five months later, on January 10, 1994, the plaintiff filed a
motion to reopen discovery based on what it viewed to be a short dis-
covery period and the need to conduct further discovery following the
court's decision that New York and Florida law governed the issue of
piercing the corporate veil, as opposed to the law of North Carolina.
On February 7, 1994, the court granted the motion and allowed dis-
covery to be reopened for an additional period of about two months,
until April 6, 1994, and rescheduled the trial date for June 13, 1994.

Some three weeks later, on February 28, 1994, the plaintiff served
an additional 33 interrogatories and 26 requests for production of doc-
uments, and asked by letter if counsel for the defendants would let
him know if he intended to object to the additional requests. Counsel
for defendants responded in a letter dated March 14, 1994 that the
defendants did not intend to respond to the discovery requests and
that formal objections would follow. On March 31, 1994 the plaintiff
filed its first motion to compel discovery, six days before the expira-
tion of the extended discovery period. It asked that its second and
third requests for discovery be granted. On April 12, 1994, Amante
answered the request for admissions but objected to the interrogato-
ries and requests for production of documents on the grounds that
most of the information had already been provided during Amante's
previous deposition by answers already made to previous interroga-
tory questions or in documents already made available to plaintiff;
that many of the interrogatories sought information about a corpora-
tion or a person not a party to the litigation (Altech); that Amante had
offered to be available for a second deposition and the plaintiff had
not availed itself of such offer; and that a response to the third set of

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interrogatories and request for production of documents would be
unduly burdensome, expensive, and oppressive to Amante. In
response, the plaintiff filed a second amended motion to compel dis-
covery on April 29, 1994. Following a hearing on the motions, the
court denied both pending motions to compel, finding that the defen-
dants had reasonably complied with discovery requests and that each
side had ample time to conduct discovery. The court noted that the
case had been pending for approximately two years, that the court had
allowed discovery to be reopened once following expiration of the
initial discovery period, and that the second discovery period had also
expired.

The record shows that the plaintiff had ten months to draft interrog-
atories and requests for documents before the first discovery order
was entered February 25, 1993. The order then allowed over five
months for on-going discovery. The plaintiff waited until July 28,
1993 to take its first and only deposition. The plaintiff filed no
motions to compel prior to the cutoff date for discovery or prior to the
deadline for motions on August 15, 1993. It was not until almost six
months later, on January 10, 1994, that the plaintiff filed a motion to
reopen discovery. When the court granted the motion to reopen dis-
covery for an additional two months, the plaintiff again waited three
weeks to serve interrogatories and requests that were sure to draw
objection as they exceeded the number of allowed interrogatories and
requests for production. Although the plaintiff informed Amante's
counsel by letter that it intended to serve interrogatories and requests
for documents in excess of the number originally agreed upon and
ordered, it does not appear in the record that it secured a new stipula-
tion or asked the court for a new order increasing the number of inter-
rogatories or requests. It was not until the defendants objected to a
third set of interrogatories and requests that the plaintiff filed a
motion, on March 31, 1994, to compel discovery.

We also note as quite relevant in this appeal that the response of
Amante to the discovery request of the plaintiff was served on the
plaintiff's attorney July 12, 1993, and the discovery deposition of
Amante was taken on July 28, 1993. At that time, no question was
asked Amante about the records of Palm Yacht Sales which had been
found to be missing, as was known to plaintiff even at that time. Nei-
ther was Amante asked about any transfers, claimed to be without

7
consideration, of any property of the corporations involved in this
case, nor about claimed excessive salaries, nor the claimed deliberate
keeping of those corporations devoid of enough assets to conduct
their ordinary business. It is also especially worthy of note that
despite the opportunity to recall Amante to give another deposition
for more than two months in 1994, that was not done. Even more
worthy of note, especially in the setting of this case, is the fact that
the affidavit of one Steven Fialkow, a certified public accountant, was
filed in the case August 16, 1993. Fialkow was the accountant for
Vista Yacht Company, Inc., East End Enterprises, Inc., Mr. and Mrs.
Amante, and Palm Yacht Sales, Inc. for all of the period of time
involved in this case. For the corporations he provided the payroll-
related tax documents, computerization of operations, preparation of
compiled financial statements, and preparation of corporate tax
returns. For the Amantes personally he prepared their personal
income tax returns, and he provided advice and guidance in other tax-
related technical matters. He was in contact with the officers and
directors of each corporation on a monthly basis or more frequently
as required. He knew that the meetings of the directors and stockhold-
ers of the corporations were regularly held and was present at most,
but not all, of such meetings. In his judgment, the financial and busi-
ness records of each corporation reflected that the business of each
was conducted by its directors and officers in the name of such corpo-
ration and for its own account. He had never observed any co-
mingling of funds or assets of the corporations with any other, or with
the personal funds and assets of the Amantes. And while it may be
expected that the affidavit of the certified public accountant who
oversaw the corporations' tax-related, and most of their business,
affairs might be favorable to the corporations and their owners, we
cannot overlook the fact that Fialkow was not called by the plaintiff
to give any discovery deposition in this case. Doubtless, he had within
his personal knowledge most, even if not all, of the answers to all of
the questions the plaintiff now argues should have been answered
relating to whether or not the corporate veil should have been pierced.
And the failure of the plaintiff to ask the questions of the two people
who could have answered them, Fialkow and Amante, cannot be held
against the defendants, indeed quite the opposite is the case.

In sum, we are of opinion that the plaintiff had adequate opportu-
nity to perform all the discovery it needed in this case. The record

8
shows that dozens or hundreds of pages of data with respect to the
organization, and business affairs, and tax returns of the defendants
were in the hands of the plaintiff for weeks or months. For the occa-
sional interrogatory which may have been improperly objected to, or
not quite directly responded to, the opportunity of the plaintiff to cor-
rect and supply these omissions by way of depositions of Amante or
Fialkow cannot be taken otherwise than to mean that the factual
record, as now before us, is not subject to substantial contradiction.
Thus, we hold that the district court did not abuse its discretion in its
rulings on discovery. This case is not unlike Lone Star Steak House
& Saloon v. Alpha of Va., 43 F.3d at 928-29, and we follow that case.

III.

The district court entered summary judgment for Amante on the
issue of piercing the corporate veil.

Vista Yacht Company is a New York corporation, and the district
court correctly applied the law of New York in ascertaining whether
or not the corporate veil had been pierced. By the same token, Palm
Yacht Sales is a Florida corporation, and the court applied the law of
Florida. The parties are agreed that there was no error in this
approach.

In considering Vista Yacht Company, there was no failure to hold
corporate meetings to elect directors or otherwise to comply with cor-
porate formalities. Indeed, the record is to the contrary. The district
court considered that there was evidence that Vista may have been
under-capitalized, but there was no showing in the record that any
domination of Amante over the corporation Vista Yacht Company
was used to commit a fraud or like wrong against the plaintiff. The
district court found that any under-capitalization of Vista did not
result in the plaintiff's loss, relying on Musman v. Modern Deb Inc.,
50 A.D.2d 761, 762 (NY 1975). The facts stated by the district court
are correct, and we note that at the time the motion for summary judg-
ment was filed by Amante, August 16, 1993, the depositions of
Amante and Carver, the principal officer of Gulfstream, were filed,
as was the affidavit of Fialkow. The defendants had responded to all
discovery requests of the plaintiff, or had objected thereto, and there
were no outstanding objections before the court by Gulfstream with

9
respect to the manner or form of the defendants' responses to inter-
rogatories. Neither had there been made by Gulfstream any motion to
compel on account of any response or lack of response of the defen-
dants to discovery requests of Gulfstream. The district court pointed
out, in its opinion granting summary judgment, that the harm to Gulf-
stream arose from the defective manufacture of the yacht, something
which was done by the manufacturer of the yacht in Taiwan. Claims
against Vista, it correctly recited, had to do with breaches of warranty
and did not arise from any under-capitalization of the corporation.
Thus, it correctly decided that the corporate veil against Vista should
not be pierced.

With respect to Palm Yacht Sales, the court found that under Dania
Jai-Alai Palace, Inc. v. Sykes, 450 So.2d 1114 (Fla. 1984), Florida
law is clear that wrongdoing must be shown before a corporate veil
may be pierced. Florida law considers wrongdoing to be using the
corporation as a device or sham to accomplish some ulterior purpose
such as fraud or some illegal purpose. The district court found that
there was no showing that Amante engaged in any fraudulent, dishon-
est, or criminal behavior with respect to the operation of Palm Yacht
Sales or that he knew of the defects in the yacht and fraudulently con-
cealed them. Thus, it correctly held that the corporate veil should not
be pierced with respect to Palm Yacht Sales.

We should remark that Vista Yacht Company and Palm Yacht
Sales, so far as this record shows, were legitimate corporations
engaged in the legitimate boat business. The district court's summary
judgment in favor of Amante with respect to those corporations is
affirmed.1
_________________________________________________________________
1 About the only fact which has been brought to our attention which is
not explained in the record is the introduction into the record, on August
12, 1994, of an exhibit to a motion to reconsider the court's granting
Amante's motion for summary judgment. This exhibit was explained
only as newly discovered evidence and consists of two checks, one pay-
able to Valerie Amante in the amount of $68,345.xx, and one payable to
Charles Amante in the amount of $68,810.53, each dated November 26,
1990 with the blank labeled "For" filled in with "Pension." No other
explanation for the purpose of the checks was offered, and the court
overruled the motion. The trial commenced August 15, 1994, only three

10
IV.

On November 4, 1992, the district court filed its order dismissing
Valerie Amante from the case on the ground that it found no basis
upon which to assert personal jurisdiction over her. It found that
"plaintiffs have not shown any involvement by Mrs. Amante in the
sale, construction, or import of the Crystal Sea aside from her titular
status as an officer in the corporate defendants controlled by the
Amantes." The parties agree that this ruling was correct.

However, on August 16, 1993, Gulfstream filed its motion seeking
reconsideration of that order. The basis argued to the district court for
the reconsideration of the order was that Carver, the principal officer
of Gulfstream, had testified in a deposition that Valerie Amante
talked to him on the telephone about the Crystal Sea four, five or six
times, he being in his office in Washington, North Carolina, and she
being in the Vista office in New York. That deposition of Carver was
taken July 27, 1993 and was presented to the court at the time the
motion for reconsideration was filed, on August 16, 1993. The con-
versations referred to were with respect to the selection of fabrics and
_________________________________________________________________
days later. On questioning at oral argument, Amante's attorney advised
that these checks were refunds to the Amantes for their previous contri-
butions into a pension plan which had become defunct on account of lack
of sufficient members, required, apparently, by statute or regulation. We
express no opinion on the purpose for which the checks were written,
and the record does not disclose the purpose except that the order of the
district court overruling the motion held that "[n]ew evidence was not
available that would alter the court's previous grant of summary judg-
ment." That order referred to a hearing which was apparently not
reported, or, if reported, was not transcribed. Thus, we cannot say that
the district court was in error for its stated reason. We do note, however,
that the motion was quite late, long after discovery had closed and only
three days before trial. Additionally, Amante was asked no question in
his deposition with respect to any such transfer or like transfer, and he
was not recalled for a further deposition, although opportunity was
offered. Neither was Fialkow examined, and of all the people connected
with the case, Fialkow would have had knowledge of this transaction.
Thus, the mere filing of the two checks is no reason to further examine
the district court's decision with respect to piercing the corporate veil.

11
mini blinds, and Valerie Amante mailed to him samples of interior
finishes. On appeal, Gulfstream points out that the Samonds, a couple
in North Carolina who purchased a boat from Palm Yacht Sales in
Florida, had 12 similar conversations with Valerie Amante in 1988.

In a case on facts more persuasive in favor of service of process
than the one at hand, the North Carolina Court of Appeals held in
Stallings v. Hahn, 392 S.E.2d 632 (N.C. Ct. App. 1990), that an
advertisement placed in a periodical by the defendant, a resident of
Pennsylvania, which reached the plaintiff, a resident of North Caro-
lina, two telephone calls between the plaintiff and the defendant, and
a cashier's check sent by the plaintiff in North Carolina to the defen-
dant in Pennsylvania were insufficient contacts to provide good ser-
vice of process under the North Carolina statute and International
Shoe Co. v. Washington, 326 U.S. 310 (1945). See N.C. Gen. Stat-
utes, Art. 6A, § 1-75.4.

We have similar holdings in Stover v. O'Connell Ass'n, Inc., 84
F.3d 132 (4th Cir. 1996), and Wolf v. Richmond City Hosp. Auth., 745
F.2d 904 (4th Cir. 1984).

Accordingly, we are of opinion the decision of the district court
was correct and it is affirmed.

Along that line, we should say that because what little Valerie
Amante had to do with the purchase and sale of the Crystal Sea, it
was not nearly so much as that of her husband, Charles Amante, in
favor of whom summary judgment is affirmed. So even if the district
court erred in not bringing Valerie Amante back into the case, that
error is harmless.

V.

Finally, Gulfstream challenges the district court's order denying
leave to add Altech Yacht Co., Inc. as a defendant. The motion to
amend the complaint for that purpose was filed November 15, 1993,
some two or three months2 after the deadline for filing motions under
_________________________________________________________________
2 The deadline date, August 15 or September 13, appears both ways in
the record. We do not think the difference is of consequence here.

12
the pre-trial order. The motion contends that Altech is a successor
corporation to Vista Yacht Co., Inc., that it had assumed the functions
of importing and distributing boats, formerly performed by Vista, and
that assets of Vista had been transferred to Altech.

The district court found that Gulfstream's proffer was that Altech
was formed on or about July 11, 1989, but that the sales agreement
for the yacht involved in this case was signed April 12, 1988, more
than a year prior to the time Altech was created, and that the yacht
was delivered to the plaintiff on November 14, 1988, some eight
months before Altech was formed. It found there was no showing that
Altech had any involvement in the manufacture, distribution or sale
of the yacht. Consequently, the inclusion of Altech would have been
futile and would have added nothing to the merits of the case.

Additionally, the district court denied the motion to amend the
complaint because it was untimely, being filed two or three months
after the deadline for filing motions.

Consequently, we are of opinion the denial of leave to amend the
complaint was not an abuse of discretion. Nat'l Bank of Washington
v. Pearson, 863 F.2d 322, 327 (4th Cir. 1988).

The judgment of the district court is accordingly

AFFIRMED.

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