Casualty Insurance v. Rees Investment Co.

In June 1960, Rees Investment Co., herein called “Investment Co.,” leased an office building located in San Diego, California, to Casualty Insurance Company, herein called “Casualty,” for a term of 20 years. At that time, John H. Rees, herein called “Rees,” was the alter ego of Investment Co. and the chief executive officer of and a major stockholder in Casualty. In his capacity as chief executive officer, he executed the lease on behalf of Casualty. In August 1962, Rees resigned as an officer of Casualty, sold all of his stock in that company, and severed all connection with it. In November 1965, Investment Co. sold the property then under lease to Casualty to Edwin and Joan Hamlin, herein called “Hamlins,” and assigned the lease to the Hamlins. Casualty continued to occupy the leased premises and to make the monthly rental payments called for in the lease to Hamlins until February 1967. At that time, Casualty notified the Hamlins that it rescinded and cancelled the lease, predicating its right to do so upon an alleged conflict of interest on the part of Rees as an officer and shareholder of Casualty and the alter ego of Investment Co.

In April 1967, the Hamlins filed…