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.