Dewitt Truck Brokers v. W. Ray Flemming Fruit Co.
540 F.2d 681.
Facts: Flemming’s company worked as a middleman between farmers and purchasers of fruit. Flemming paid the plaintiff trucking company to transport fruit. Flemming assured the trucking company that he would guarantee to pay them back even if his corporation didn’t. Flemming didn’t pay them in time, and the trucking company sued Flemming personally. Flemming tried to argue that he wasn’t personally liable, but instead only the corporation was liable. The trucking company, on the other hand, argued that they should be able to “pierce the corporate veil” so they could make Flemming personally liable. The district court found for the plaintiffs and Flemming appealed.
Issue: Did the district court correctly find that it was appropriate to “pierce the corporate veil” and make Flemming liable for the debts of his corporation?
Rule: When a person owns basically all the stock in a corporation, plus some other factors are present such as a lack of corporate formalities, undercapitalization and non-payment of dividends, or if the corporation is more or less a façade for an individual, the corporation may be disregarded for the purposes of liability and the dominant stockholder may be held liable.
Analysis: Flemming owned most of the stock. He never had a shareholder meeting, and he was the only real director. No one except Flemming ever got paid by the corporation. Flemming kept withdrawing whatever money the corporation had for his personal use. The corporation basically had no capital of its own. Given all this, plus Flemming’s personal assurance to the plaintiff creditor, the appellate court has no problem upholding the district court’s findings of fact.
Conclusion: The district court is upheld and Flemming is held personally liable for the debt.