Case Title: Greenberg v. Commonwealth

Citation: 

Docket Number: 971472

State: virginia

Court: Virginia Supreme Court

Date: 1998-04-17T00:00:00Z

Document:
Present: All the Justices 
 
JEROME GREENBERG 
 
v. Record No.  971472  OPINION BY JUSTICE CYNTHIA D. KINSER 
 
 
 
 
 
 
 
 
April 17, 1998 
COMMONWEALTH OF VIRGINIA, EX REL. 
ATTORNEY GENERAL OF VIRGINIA 
 
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 
Theodore J. Markow, Judge 
 
 
In this case, the Commonwealth of Virginia seeks 
restitution from Jerome Greenberg, chairman of the board 
and majority shareholder of Allstate Express Check Cashing, 
Inc. (Allstate), of all amounts Allstate received from 
borrowers in connection with its cash advancement loan 
program in violation of the Consumer Finance Act (CFA).  
The Commonwealth proceeded on two theories under which to 
hold Greenberg personally liable:  (1) actively 
participating in the commission of the illegal conduct; and 
(2) piercing the corporate veil.  The trial court refused 
to pierce the corporate veil but held Greenberg personally 
liable by applying an active participation theory.  Because 
we find that Code § 6.1-308(B) precludes imposition of 
restitution on any entity or individual other than the 
lender, we will reverse the trial court’s judgment imposing 
liability on Greenberg.  However, we find, as a matter of 
law, that the evidence is insufficient to pierce the 
corporate veil and will affirm the trial court’s judgment 
on that issue. 
We will discuss each theory relied upon by the 
Commonwealth and the relevant facts seriatim. 
I. ACTIVE PARTICIPATION 
A.  Facts 
From February 10, 1992, until approximately February 
1, 1993, Allstate, a Virginia corporation doing business as 
Allstate Express Checking, operated a check cashing/cash 
advance business from four different locations in Hampton, 
Norfolk, and Virginia Beach.  Allstate provided two basic 
services to its customers.  One service involved cashing 
government, payroll, travelers, insurance, and personal 
checks for individuals without checking accounts.  
Allstate’s fees for this service started at 2% and varied 
depending on the type of check.  Only a small percentage of 
Allstate’s customers utilized this service. 
 
The second service that Allstate offered was for 
customers with a checking account and involved advancing 
cash against present-dated checks at a discount from the 
face amount of the checks and holding the checks for a 
specified period of time before cashing them.  The fee 
Allstate charged for this service was a fixed percentage of 
the amount advanced, such as 25% or 30%, depending on the 
 
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amount of the advancement.  The majority of Allstate’s 
customers used this service. 
The three major principals in Allstate were Greenberg, 
Loran S. Martin, and Joseph P. Lynch.  They comprised 
Allstate’s board of directors, with Greenberg serving as 
the chairman.  Martin was Allstate’s president and chief 
operations officer, and Lynch was Allstate’s secretary and 
treasurer.  All three were also shareholders of Allstate, 
with Greenberg being the majority shareholder. 
In early 1993, the Commonwealth brought suit against 
Allstate alleging that it had violated the CFA by making 
loans in amounts and at interest rates prohibited under 
Code § 6.1-249.1  In that suit, the Circuit Court of the 
City of Richmond determined that Allstate’s cash advance 
services constituted “loans” within the meaning of the CFA 
________________ 
1 The version of Code § 6.1-249 in effect in 1993 
provided in pertinent part: 
 
No person shall engage in the business of lending 
in amounts of the then established size of loan 
ceiling or less, and charge, contract for, or receive, 
directly or indirectly, on or in connection with any 
loan, any interest, charges, compensation, 
consideration or expense which in the aggregate are 
greater than the rate otherwise permitted by law 
except as provided in and authorized by this chapter 
and without first having obtained a license from the 
Commission.   
 
The General Assembly amended this section in 1995. 
 
 
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and that Allstate’s fees for these services exceeded the 
CFA’s statutory limits.  Accordingly, the trial court 
enjoined Allstate from violating the CFA and entered 
judgment for the Commonwealth, “as trustee for the use and 
benefit of affected borrowers,” against Allstate “for 
restitution of all amounts it received from borrowers in 
connection with its check advancement loan program.” 
On January 5, 1994, the Commonwealth filed a bill of 
complaint against Greenberg and alleged, inter alia, that 
Greenberg actively participated in the illegal acts 
perpetrated by Allstate.2  The Commonwealth sought to hold 
Greenberg individually liable for restitution to borrowers 
under Code § 6.1-308(B). 
The trial court found that Greenberg did actively 
participate in Allstate’s illegal conduct and that the 
Commonwealth could, therefore, obtain restitution from 
Greenberg for the benefit of Allstate’s borrowers.  In 
doing so, the court rejected Greenberg’s argument that Code 
§ 6.1-308(B) allows for restitution only from the “lender” 
for violations of the CFA.  Rather, in a letter opinion, 
the court reasoned: 
________________ 
2 The Commonwealth also included Martin and Lynch in 
its suit.  However, the claims against them were resolved 
and are not before this Court. 
 
 
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The liability has been imposed against the 
corporation, according to the statute, as a result of 
the illegal acts of the corporation.  Because it was 
actually individuals who committed the illegal acts, 
the individuals can be held responsible.  Mr. 
Greenberg is to be held personally liable, not because 
he was the “lender”, but because he was a responsible 
actor within the corporation which was the “lender.”  
The statute imposes the liability on the corporation 
as lender and the doctrine of active participation 
extends that liability to the individuals involved. 
 
Subsequently, in an order dated April 15, 1997, the trial 
court entered a permanent injunction against Greenberg and 
final judgment in favor of the Commonwealth in the amount 
of $237,154, as restitution in trust and for the benefit of 
Allstate’s borrowers, and $30,000 as attorney’s fees.  
Greenberg appeals. 
B.  Analysis 
Code § 6.1-303(A)(2) of the CFA provides that “[t]he 
Attorney General may seek and the circuit court may order 
or decree such other relief allowed by law, including 
restitution to the extent available to borrowers under 
subsection B of § 6.1-308.”  Code § 6.1-308 sets forth the 
penalties for CFA violations and provides as follows: 
A. Any person and the several members, officers, 
directors, agents, and employees thereof, who violate 
or participate in the violation of any provision of 
§ 6.1-249 shall be guilty of a Class 2 misdemeanor. 
 
B. Any contract of loan in the making or 
collection of which any act has been done which 
violates § 6.1-249 shall be void and the lender shall 
not collect, receive, or retain any principal, 
 
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interest, or charges whatsoever, and any amount paid 
on account of principal or interest on any such loan 
shall be recoverable by the person by or for whom 
payment was made. 
 
This Court has stated that “[a] corporation can act 
alone through its officers and agents, and where the 
business itself involves a violation of the law, the 
correct rule is that all who participate in it are liable.”  
Crall and Ostrander v. Commonwealth, 103 Va. 855, 859, 49 
S.E. 638, 640 (1905).  See also Bourgeois v. Commonwealth, 
217 Va. 268, 274, 227 S.E.2d 714, 718 (1976).  Relying on 
these cases, the Commonwealth argues that Greenberg is 
personally liable for Allstate’s violations of the CFA.  
Greenberg, however, contends that the trial court erred in 
using the active participation theory to hold him 
personally liable because Code § 6.1-308(B) precludes the 
imposition of restitution on any individual or entity other 
than the lender. 
A resolution of this issue necessarily requires us to 
examine Code § 6.1-308(B).  At the outset, we note that the 
CFA is a remedial statute.  Valley Acceptance Corp. v. 
Glasby, 230 Va. 422, 428, 337 S.E.2d 291, 295 (1985).  
Consequently, we construe it liberally so as “to avoid the 
mischief at which it is directed and to advance the remedy 
for which it was promulgated.”  Id.  In doing so, we 
 
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cannot, however, deviate from the language of Code § 6.1-
308, which we find to be plain and unambiguous. 
Our duty is “to construe the law as it is written.” 
Hampton Roads Sanitation Dist. Comm’n v. Chesapeake, 218 
Va. 696, 702, 240 S.E.2d 819, 823 (1978).  We assume that 
“the legislature chose, with care, the words it used when 
it enacted the relevant statute, and we are bound by those 
words . . . .”  Barr v. Town & Country Properties, Inc., 
240 Va. 292, 295, 396 S.E.2d 672, 674 (1990).  “To depart 
from the meaning expressed by the words is to alter the 
statute, to legislate and not to interpret.”  Faulkner v. 
Town of South Boston, 141 Va. 517, 524, 127 S.E. 380, 382 
(1925). 
We agree with Greenberg that Code § 6.1-308(B) permits 
a recovery of restitution only from the lender.  In Code 
§ 6.1-308(A), the General Assembly prescribed misdemeanor 
criminal liability for “[a]ny person and the several 
members, officers, directors, agents, and employees 
thereof.”  The CFA defines “person” to include 
“individuals, copartnerships, associations, trusts, 
corporations, and all other legal and commercial entities.”  
Code § 6.1-245.  Thus, “individuals, . . . corporations, 
and all other legal . . . entities” and their “members, 
officers, directors, agents, and employees” are subject to 
 
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misdemeanor penalties for violating the CFA.  The General 
Assembly explicitly created a broad category of individuals 
and entities subject to Code § 6.1-308(A). 
In contrast to subsection (A), Code § 6.1-308(B), 
provides that only the “lender shall not collect, receive, 
or retain any principal, interest, or charges whatsoever, 
and any amount paid on account of principal or interest on 
any such loan shall be recoverable by the person by or for 
whom payment was made.”  (Emphasis added).  Absent from 
subsection (B) is the broad category of entities found in 
subsection (A).  In other words, subsection (B) does not 
include any individual, officer, director, or entity other 
than the lender. 
“When the General Assembly uses two different terms in 
the same act, it is presumed to mean two different things.”  
Forst v. Rockingham Poultry Mktg. Coop. Inc., 222 Va. 270, 
278, 279 S.E.2d 400, 404 (1981).  As evident in subsection 
(A), the General Assembly knew how to broaden the range of  
liability, and the absence of any such provisions in 
subsection (B) indicates the General Assembly’s intent to 
limit those from whom borrowers may obtain restitution.  To 
determine otherwise would be to rewrite the statute and to 
contradict the General Assembly’s express intent.  Thus, we 
hold that the trial court erred in using the active 
 
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participation theory to allow the Commonwealth to recover  
restitution from Greenberg for Allstate’s violations of the 
CFA. 
Our decision is not inconsistent with other cases in 
which we used the active participation theory to impose 
individual liability on corporate officers or directors.  
The distinction between such cases and the present one lies 
in the language of the relevant statutes.  For example, in 
Bourgeois, a corporate officer was found guilty of grand 
larceny by obtaining money by false pretenses.  The statute 
at issue provided that “[i]f any person obtain, by any 
false pretense or token, from any person, with intent to 
defraud, money or other property which may be the subject 
of larceny, he shall be deemed guilty of larceny thereof; 
. . . .”  Bourgeois, 217 Va. at 269 n.1, 227 S.E.2d at 715 
n.1.  (Emphasis added).  Likewise, in Crall, the 
corporation’s vice-president was criminally liable under a 
statute which provided “[a]ny peddler who shall peddle for 
sale, or sell or barter, without a license, shall pay a 
fine . . . .”  Crall, 103 Va. at 858, 49 S.E. at 639.  The 
statute defined “peddler” as “[a]ny person who shall carry 
from place to place any goods, wares or merchandise, and 
offer to sell or barter the same, or actually sells or 
 
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barters the same . . . .”  Id. at 857, 49 S.E. at 639.  
(Emphasis added). 
In contrast to the above two statutes, Code § 6.1-
308(B) permits a recovery of restitution solely from the 
“lender” and does not impose liability on “any person.”  
Therefore, to allow the Commonwealth to obtain restitution 
from Greenberg would be to invade the province of the 
legislature and to expand the scope of liability in Code 
§ 6.1-308(B).3
II. PIERCING THE CORPORATE VEIL 
A.  Facts 
Greenberg first became involved in Allstate prior to 
its incorporation4 when Martin and Lynch gave Greenberg a 
business prospectus and asked him to provide the initial 
capitalization for Allstate.5  After consulting about the 
proposed business venture with his attorney, who did not 
________________ 
3 The Commonwealth summarily argued in its brief that, 
under Code § 6.1-303(A)(1), the Attorney General may sue 
“any person” who has violated the CFA for monetary relief.  
However, the Commonwealth did not bring this suit under 
Code § 6.1-303(A)(1).  Rather, it asked to be trustee for 
the benefit of the borrowers under Code § 6.1-303(A)(2). 
Therefore, we will not address this argument. 
 
4 Allstate was incorporated on January 22, 1992. 
 
5 Lynch, a CPA, had prepared the prospectus.  Martin 
had experience working in another check cashing/cash 
advance company. 
 
 
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advise Greenberg of any potential legal problems,  
Greenberg agreed to loan $60,000 to Allstate interest-free 
with the understanding that Allstate would repay Greenberg 
in full within six months.6
Martin, Lynch, and Greenberg each had different 
responsibilities in regard to Allstate’s business.  
Martin’s responsibilities included developing Allstate’s 
fee schedules, managing personnel, screening customers, and 
advertising.  Lynch handled all the bookkeeping, 
accounting, and record-keeping functions.  Greenberg was 
Allstate’s financial consultant for which he received $500 
a week as compensation.  As the financial consultant, 
Greenberg addressed start-up and expansion problems and 
kept “tabs on what [Martin and Lynch] were doing to protect 
his investment.” 
However, unlike Martin and Lynch, Greenberg, according 
to Martin, did not participate in the daily operations of 
Allstate in any substantial way.  Greenberg occasionally 
visited the four stores, and an Allstate employee testified 
________________ 
6 During the course of Allstate’s business, Greenberg 
actually loaned more than $60,000 to Allstate.  When it 
became apparent that Allstate could not repay Greenberg 
during the first six months of its operation, Allstate 
began paying interest to him at a rate of 4% per month, 
which was later increased to 5% after other individuals 
made similar investments in Allstate and received the 
higher interest rate. 
 
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that during one such visit, Greenberg instructed her not to 
use the terms “loan,” “interest,” and “advance” when 
speaking to customers.7  At times, Greenberg would also make 
bank deposits for Allstate and transfer cash between 
offices.  However, these activities were not part of his 
regular responsibilities and were considered a “rare 
event.”  Greenberg did attend meetings of the directors 
and, occasionally, those of the managers.  However, his 
participation at the meetings with the managers was 
minimal, and he was considered a “spectator.” 
 
In late November or early December 1992, Greenberg 
learned that the Commonwealth had filed suits alleging 
violations of the CFA by other companies similar to 
Allstate.  After discovering that other “cash-advance” 
companies had, in response to the suits, initiated a “gift 
certificate catalogue business,” Greenberg, Martin, and 
Lynch concluded that Allstate should do the same.8  At this 
________________ 
7 Martin testified that Greenberg’s attorney had 
advised against using these terms to avoid the implication 
that Allstate was a licensed lending institution. 
 
8 Prior to making this change, Greenberg consulted with 
his attorney to ascertain if the gift certificate program 
posed any legal problems or issues.  Greenberg’s attorney 
assured him that the program was “perfectly fine.”  
However, a former Allstate employee did testify that Martin 
referred to the gift certificates as a “front.” 
Under the gift certificate program, Allstate gave its 
customers a gift certificate in the amount of Allstate’s 
 
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point, however, Greenberg decided that he “want[ed] to get 
out of the business” and asked for a return of his money.9  
Allstate then began “winding down” its business and paid 
its trade debts and withholding taxes. 
 
After considering the testimony and exhibits, the 
trial court concluded that the evidence was insufficient to 
pierce the corporate veil.  In its letter opinion, the 
court stated that the evidence failed to show “that 
Greenberg incorporated [Allstate] for the purpose of 
disguising his wrongful actions and evading liability.”  
B.  Analysis 
In its assignment of cross-error, the Commonwealth 
argues that sufficient evidence exists to justify piercing 
the corporate veil to impose personal liability on 
Greenberg.  The Commonwealth contends, and we agree, that 
the trial court’s analysis focused only on Greenberg’s 
intent in incorporating Allstate and failed to address his 
subsequent use of the corporation.  Nevertheless, based 
upon our review of the record, we conclude that, as a 
____________ 
fee.  The customers could then use the certificates to 
offset the price of furniture that they bought at a 
furniture retail store owned by Greenberg. 
 
9 Allstate’s bank records show that Greenberg received 
a total of $183,163.04 from Allstate.  Of that amount, 
$126,462.01 was paid between November 25, 1992 and February 
19, 1993. 
 
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matter of law, the evidence is insufficient to disregard 
the corporate structure and impose personal liability on 
Greenberg. 
 
We have recognized that “no single rule or criterion 
. . . can be applied to determine whether piercing the 
corporate veil is justified.”  O’Hazza v. Executive Credit 
Corp., 246 Va. 111, 115, 431 S.E.2d 318, 320 (1993).  
Disregarding the corporate entity is usually warranted if: 
 
[T]he shareholder sought to be held personally liable 
has controlled or used the corporation to evade a 
personal obligation, to perpetrate fraud or a crime, 
to commit an injustice, or to gain an unfair 
advantage. . . . Piercing the corporate veil is 
justified when the unity of interest and ownership is 
such that the separate personalities of the 
corporation and the individual no longer exist and to 
adhere to that separateness would work an injustice. 
 
Id., 431 S.E.2d at 320-21.  Ultimately, a decision whether 
to disregard the corporate structure to impose personal 
liability is a fact-specific determination, and each case 
requires a close examination of the factual circumstances 
surrounding the corporation and the questioned acts.  Id., 
431 S.E.2d at 321. 
Only “an extraordinary exception” will justify 
disregarding the corporate entity, and no such exception is 
present here.  Cheatle v. Rudd’s Swimming Pool Supply Co., 
Inc., 234 Va. 207, 212, 360 S.E.2d 828, 831 (1987) (quoting 
Beale v. Kappa Alpha Order and Kappa Alpha Alumni Found., 
 
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192 Va. 382, 397, 64 S.E.2d 789, 797 (1951)).  The evidence 
showed that Greenberg did not develop Allstate’s policy or 
procedure; rather, Martin and Lynch approached Greenberg 
with a business plan detailing Allstate’s operation.  
Further, Greenberg, before becoming Allstate’s majority 
shareholder, sought advice from his counsel regarding the 
legality of the proposed business.  Thus, the trial court 
correctly concluded that Greenberg did not incorporate 
Allstate for the purpose of disguising wrongful actions or 
concealing a crime. 
Nor did Greenberg use the company to “evade a personal 
obligation, to perpetrate fraud or a crime, to commit an 
injustice, or to gain an unfair advantage.”  O’Hazza, 246 
Va. at 115, 431 S.E.2d at 320.  He did not determine the 
amount of or collect Allstate’s fees, solicit customers, or 
handle employment matters.  At most, as Allstate’s 
financial consultant, he addressed start-up and expansion 
issues.  When Greenberg instructed an employee not to use 
the words “loan” or “interest,” he did so because of advice 
he had received from his attorney.  He also sought legal 
advice before Allstate implemented the gift certificate 
program.  Finally, in recouping his loan to Allstate, 
Greenberg received interest only after Allstate could not 
abide by its initial agreement to repay the loan in six 
 
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months and increased the amount of the interest only after 
other investors started receiving the higher rate.  Thus, 
the evidence, as a matter of law, establishes that 
Greenberg, like any other shareholder, used the corporate 
structure to limit his liability to his initial investment 
and not to perpetrate or disguise illegal activities.10  In 
other words, Greenberg did not use the corporate structure 
“to mask wrongs” or to facilitate the commission of illegal 
acts.  Bogese, Inc. v. State Highway and Transp. Comm’r, 
250 Va. 226, 231, 462 S.E.2d 345, 348 (1995). 
Therefore, for the reasons stated, we will affirm in 
part and reverse in part the circuit court’s judgment, and 
enter final judgment in favor of Greenberg.  
Affirmed in part, 
reversed in part, 
and final judgment.  
________________ 
10 The Commonwealth also claims that the trial court 
erred by failing to consider whether Allstate was the alter 
ego of Greenberg.  Because we have determined, as a matter 
of law, that the evidence is insufficient to pierce the 
corporate veil, we do not address this argument. 
 
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