Present: All the Justices 

THOMAS W. DANA, ET AL. 

 OPINION BY 

v. Record No. 030450 JUSTICE LAWRENCE L. KOONTZ, JR. 

October 31, 2003 

313 FREEMASON, A CONDOMINIUM 

 ASSOCIATION, INC. 

FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK 

John C. Morrison, Jr., Judge 

In this appeal, we consider whether the trial court erred 

in piercing the corporate veil of a close corporation to assess 

liability for a judgment against the corporation upon its 

stockholders. 

BACKGROUND 

This case originated with a motion for judgment filed in 

the Circuit Court of the City of Norfolk (the trial court) on 

June 14, 2000, by 313 Freemason, a Condominium Association, Inc. 

(the Association) and the owners of four individual units of the 

condominium against Freemason Associates, Inc. (Freemason), and 

Thomas W. Dana and Conley J. Hall, the corporation’s sole 

stockholders. The motion for judgment alleged that the roof, 

chimneys, fireplaces, and flues of the condominium building were 

defective when the building was sold by Freemason to the 

individual unit owners or their grantors. Asserting theories of 

actual fraud, fraudulent misrepresentation, constructive fraud, 

false advertising under Code § 59.1-68.3, breach of contract, 
and breach of the statutory warranty provided by Code § 55-79.79 

of the Condominium Act, the Association and the individual unit 

owners sought compensatory damages of “no less than $200,000” in 

addition to punitive damages, costs, and attorney’s fees. 

By an order dated April 18, 2001, the trial court severed 

the claims of the Association and the individual unit owners and 

directed that each action thereafter proceed independently, 

except for purposes of conducting discovery.1 On June 2, 2001, 

the Association filed an amended motion for judgment asserting 

as its separate claims only the claim for breach of the 

statutory warranty provided by Code § 55-79.79 and a new claim 

for a violation of Code § 55-79.90, relating to the failure of a 

public offering statement to “disclose fully and accurately the 

characteristics of the condominium.” The amount of compensatory 

damages sought was $380,000 along with punitive damages, costs, 

and attorney’s fees. 

Subsequently, the trial court limited the issues to be 

resolved by the impending jury trial on the Association’s 

claims. The trial court ruled that the Association would not be 

permitted to assert a claim for the alleged defects in the 

 

1

 Appeals of two of the individual unit owners are also 

today decided. Our resolution of those appeals, however, has no 

direct bearing upon our resolution of this appeal. See Klaiber 

v. Freemason Associates, Inc., 266 Va. ___, ___ S.E.2d ___, 

(2003). 

2
chimneys, fireplaces, and flues. These claims were reserved to 

the individual unit owners upon the court’s conclusion that 

these structures were not common elements of the condominium. 

The court further ruled that Dana and Hall could not be held 

directly liable for a breach of the Condominium Act by Freemason 

in its corporate capacity because only that corporation was the 

declarant for the registration of the condominium. However, the 

court also ruled that the Association would be permitted to 

present evidence in support of its assertion that, in the event 

it obtained a judgment against Freemason, the corporate veil of 

Freemason should be pierced in order to impose personal 

liability upon Dana and Hall. 

On September 9, 2002, immediately prior to the commencement 

of the jury trial, the trial court entered an order in accord 

with its prior rulings. The court also dismissed the 

Association’s claim for punitive damages. Accordingly, the 

trial proceeded only on the issue of Freemason’s liability for 

the alleged defective roof of the condominium. At the 

conclusion of that trial, the jury returned a verdict in favor 

of the Association in the amount of $37,054.75, without 

designating the count or counts in the motion for judgment upon 

which the verdict was founded. 

After the jury returned its verdict, the Association filed 

a motion to pierce the corporate veil of Freemason and for an 

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award of attorney’s fees under Code § 55-79.53.2 After receiving 

briefs from the parties, the trial court, sitting without the 

jury, held an evidentiary hearing on November 6, 2002 on this 

motion. In an opinion letter dated November 22, 2002, the court 

first concluded that an award of attorney’s fees against 

Freemason in the amount of $61,213.17 was appropriate under the 

statute. The court then concluded that the evidence from the 

trial and the evidentiary hearing was sufficient to permit 

piercing the corporate veil of Freemason and to hold Dana and 

Hall liable for the judgment and award of attorney’s fees 

against Freemason. 

For reasons that will become apparent, we need not recount 

in detail the evidence or other incidents of the trial relevant 

to all the assignments of error in this case. For purposes of 

the resolution of this appeal, our focus is on the post-verdict 

determination by the trial court to pierce the corporate veil of 

Freemason. Accordingly, we will recite only the evidence from 

the trial and the post-verdict hearing relevant to that 

determination. 

 

2

 During trial, it was argued that because the award of 

attorney’s fees was a matter of statute, the Association should 

have been required to present evidence on that issue during its 

case-in-chief. The trial court ruled that as an award of 

attorney’s fees would not be appropriate in the absence of a 

finding of liability, the issue would be resolved by the trial 

court in the event of a verdict in favor of the Association. 

4
During trial, it was shown that in April 1997 Dana acquired 

the property located at 313 Freemason Street, a lot and an 

abandoned residential structure that had last been used as an 

apartment building, with the intent to renovate the building as 

a four-unit condominium. Dana encumbered the property with a 

deed of trust securing a $316,880 personal line of credit. 

Although he had no direct ownership in the property, Hall 

testified that “Dana handled the financing and [Hall] handled 

the renovation” of the building by hiring contractors and 

overseeing their work. Dana and Hall had previously worked 

together on similar renovation projects and had several other 

ongoing projects during the time the 313 Freemason building was 

being renovated. 

Hall, indicating that he was the “manager,” filed an 

application for registration of the condominium. The declarant 

on the application was listed as Freemason Associates, L.L.C. 

The application stated that Hall owned approximately fifty 

percent of the declarant. The application further stated that 

Freemason Associates, L.L.C. had no assets other than the 313 

Freemason property. 

In February 1998, Hall contacted the roofing contractor who 

had installed and subsequently made repairs to the roof of the 

condominium. Hall advised the contractor that the roof 

continued to leak and requested that it be replaced. The 

5
following month, although they did not advise him of the ongoing 

problem with the roof, Dana and Hall sought the advice of an 

attorney who advised them that “they would have decreased 

liability if they formed a corporation.” Shortly thereafter, 

Dana and Hall incorporated Freemason. On May 12, 1998, Hall 

filed a revised application for registration of the condominium 

substituting Freemason as the declarant in place of Freemason 

Associates, L.L.C. In April 2000, an attorney representing Dana 

and Hall, wrote to the same roofing contractor requesting that 

the roof be repaired because it “continues to leak since its 

installation” and “the roof contains major structural defects 

which have caused extensive damage.” 

In the November 22, 2002 opinion letter, the trial court 

summarized its findings of the pertinent facts established by 

the evidence introduced during the post-verdict hearing. Giving 

due deference to the trial court’s findings of fact, it was 

established that Freemason had maintained all the proper indicia 

and records for a corporation: articles of incorporation, bylaws, minutes of shareholder meetings, annual reports, and tax 

returns. However, the business of the corporation was actually 

conducted by Dana and Hall “entirely outside the corporation.” 

When Freemason acquired the 313 Freemason property from Dana, 

allegedly in exchange for assuming his personal debt on the 

property, the corporation never actually assumed the debt. 

6
Although the property was encumbered by the lien of a deed of 

trust to secure the payment of Dana’s indebtedness, the deed 

conveying the property from Dana to Freemason did not recite the 

existence of that indebtedness nor was Freemason ever 

contractually liable for the payment of it. 

Dana maintained a personal checking account designated by 

him as the “Rehab” account, which served as the deposit and 

payment account for the 313 Freemason property as well as 

several other properties Dana and Hall were renovating.3 None of 

these other renovation projects were owned by corporations, but 

were directly controlled by Dana. Dana maintained separate 

check registers for each project for which funds were deposited 

and disbursed from his personal account, but made no other 

effort to segregate the funds within the account. Freemason had 

no bank account of its own, and all funds received from the sale 

of its individual condominium units were deposited into Dana’s 

“Rehab” account. As a result, Freemason never had any liquid 

 

3

 During oral argument of this appeal, counsel for Dana and 

Hall attempted to characterize this account as being a personal 

account in name only, contending that because it was used only 

for Dana’s business interests, it was somehow distinct from a 

personal checking account. There is not the slightest 

suggestion that Dana used the funds deposited into this account 

for improper purposes. However, the fact remains that this 

account was established solely in Dana’s name in his capacity as 

a private person, and the corporation had no access to or 

control over the deposits to that account. 

7
assets, and a warranty reserve fund, which was to have been 

established following incorporation under the terms of the 

condominium declaration, was never funded. 

Based upon these facts and relying primarily upon O’Hazza 

v. Executive Credit Corp., 246 Va. 111, 431 S.E.2d 318 (1993), 

the trial court concluded that Freemason was “formed to evade 

any personal liability that Dana and Hall would have for the 

problems with the roof.” The court further concluded that there 

was an identity of interest and ownership between Freemason and 

Dana and Hall and that “the unity of interest and ownership is 

such that the separate personalities of the corporation and the 

individuals no longer exists, and to adhere to that separateness 

would work an injustice.” Accordingly, the trial court ruled 

that the corporate veil of Freemason would be pierced, and that 

Dana and Hall could be held personally liable for the amount of 

the jury verdict and the award of attorney’s fees and costs 

against the corporation. 

In a final order dated November 27, 2002, the trial court 

confirmed the jury verdict in favor of the Association and 

granted judgment against Freemason in the principal amount of 

$37,054.75, and under Code § 55-79.53 awarded attorney’s fees 

and costs to the Association in the amount of $61,213.17 against 

Freemason. Additionally, the trial court pierced the corporate 

veil of Freemason and granted judgment in favor of the 

8
Association against Dana and Hall, jointly and severally, in the 

principal amount of $37,054.75 in addition to attorney’s fees 

and costs of $61,213.17. This appeal followed. 

DISCUSSION 

Initially, we note that the procedural posture of this 

appeal bars our consideration of a number of assignments of 

error asserted by Dana and Hall. Dana and Hall filed their 

notice of appeal jointly. Freemason did not join in that notice 

and did not file a separate notice of appeal. In their petition 

for appeal, Dana and Hall assigned error challenging the trial 

court’s failure to strike the evidence as insufficient to 

support either claim in the Association’s motion for judgment, 

the trial court’s failure to grant an instruction regarding the 

reasonable opportunity to repair, and the trial court’s decision 

to disallow testimony during the trial regarding an award of 

attorney’s fees and costs and instead to decide that issue in a 

post-trial proceeding without a jury. All the actions 

complained of in these assignments of error relate to the 

judgment and the award of attorney’s fees and costs against 

Freemason. As to that corporation, however, both the judgment 

and the award are final and beyond appellate review. 

During oral argument of this appeal, Dana and Hall 

contended that because the trial court pierced the corporate 

veil of Freemason and imposed liability upon them, they have 

9
standing to appeal the judgment and award against the 

corporation. We disagree. 

“The proposition is elementary that a corporation is a 

legal entity separate and distinct from the stockholders or 

members who compose it.” Cheatle v. Rudd’s Swimming Pool Supply 

Co., Inc., 234 Va. 207, 212, 360 S.E.2d 828, 831 (1987). The 

whole corporate concept would be meaningless if such were not 

the case. Thus, it is also axiomatic that when a corporation 

causes injury as a result of an unlawful action, it is the 

corporation that is directly liable for any judgment obtained 

against it by the injured party. Although under appropriate 

circumstances, the injured party may seek to pierce the veil of 

the corporation to impose liability against its stockholders, 

such action is dependant upon first obtaining a judgment against 

the corporation. And it follows from this that it is the 

corporation, and not the stockholders, which has standing to 

challenge the judgment against the corporation on appeal. 

Accordingly, only Freemason has standing to challenge the merits 

of the judgment and award of attorney’s fees and costs rendered 

against it in the present case. For these reasons, we will not 

consider the assignments of error raised by Dana and Hall with 

respect to those issues despite the ultimate determination by 

the trial court to hold them liable for the corporation’s 

judgment debt under a piercing theory. See Prospect Development 

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Co. v. Bershader, 258 Va. 75, 94, 515 S.E.2d 291, 302 (1999) 

(defendants held jointly and severally liable did not have 

standing to appeal issues that were relevant only to one 

defendant who did not join in the appeal). In short, the 

validity of the judgment and award of attorney’s fees and costs 

against Freemason in favor of the Association is binding on Dana 

and Hall in this appeal. 

We now turn to the question whether the trial court 

properly pierced the corporate veil of Freemason and assessed 

liability on Dana and Hall personally. Although the underlying 

judgment against Freemason arises from a jury verdict, the trial 

court’s judgment to pierce the veil of the corporation was made 

post-trial by the trial court.4 Whether to allow piercing the 

veil of a corporation is a mixed question of law and fact and, 

accordingly, we review the trial court’s application of the law 

de novo while giving deference to the trial court’s factual 

findings. Caplan v. Bogard, 264 Va. 219, 225, 563 S.E.2d 719, 

722 (2002). 

Stockholder immunity “is a basic provision of statutory and 

common law and supports a vital economic policy underlying the 

whole corporate concept.” Cheatle, 234 Va. at 212, 360 S.E.2d 

 

4

 The parties agreed that the issue of piercing the 

corporate veil would be decided by the trial court without a 

jury. 

11
at 831 (1987); accord Beale v. Kappa Alpha Order, 192 Va. 382, 

397, 64 S.E.2d 789, 797 (1951). “The decision to ignore the 

separate existence of a corporate entity and impose personal 

liability upon shareholders for debts of the corporation is an 

extraordinary act to be taken only when necessary to promote 

justice.” C.F. Trust, Inc. v. First Flight Limited Partnership, 

266 Va. 3, 10, 580 S.E.2d 806, 809 (2003); see also O’Hazza, 246 

Va. at 115, 431 S.E.2d at 320; Cheatle, 234 Va. at 212, 360 

S.E.2d at 831. 

We have recognized that “no single rule or criterion . . . 

can be applied to determine whether piercing the corporate veil 

is justified.” O’Hazza, 246 Va. at 115, 431 S.E.2d at 320. 

Each case must be considered in the context of its own specific 

circumstances. In the present case, the trial court properly 

recognized that disregarding the corporate entity is usually 

warranted only under the extraordinary circumstances where 

the shareholder[s] sought to be held personally liable 

[have] 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[s] no longer exist and to adhere to that 

separateness would work an injustice. 

Id. at 115, 431 S.E.2d at 320-21 (citations omitted). 

The trial court determined as a matter of fact that the 

formation of Freemason as a corporate entity in 1998 was “to 

12
evade any personal liability that Dana and Hall would have for 

the problems with the roof.” The evidence in the record 

supports that finding. Both parties were aware that the roof 

continually leaked from the time it was installed and that the 

roof contained “major structural defects” which had caused 

damage to the condominium. Dana and Hall did not obtain their 

requested replacement or repair of the roof. Rather, the 

evidence supports the conclusion that they simply determined to 

form Freemason and, ultimately, to use that corporation to evade 

personal liability while the condominium continued to be 

marketed with a known defective roof. 

Similarly, the evidence amply supports the trial court’s 

findings of fact that the unity of interest and ownership was 

such that the separate personalities of Freemason, Dana, and 

Hall did not exist. The absolute control of Freemason by Dana 

and Hall is beyond question. But for the corporate existence of 

Freemason, Dana and Hall treated and conducted the 313 Freemason 

renovation just as they did all of their other renovation 

projects. There is no evidence in the record that Freemason 

ever conducted the business of a corporation independently from 

that of its shareholders. The trial court correctly determined 

that under those circumstances “[Freemason] was the . . . 

stooge, or dummy” of Dana and Hall. See Lewis Trucking Corp. v. 

Commonwealth, 207 Va. 23, 31, 147 S.E.2d 747, 753 (1966). 

13
It then only remains to be resolved whether the trial court 

properly concluded that as a matter of law piercing the veil of 

the corporation was necessary to avoid an injustice. One of the 

principal factors we look to in resolving the issue of piercing 

the veil of a corporation, and pertinent here, is whether the 

inability of the corporation to satisfy the judgment against it 

is the result of the deliberate undercapitalization by the 

incorporating stockholders. “If, from its inception, a 

corporation is unable to pay its costs of doing business because 

of grossly inadequate capitalization, its legitimacy is suspect. 

Under such circumstances, stockholders may not be entitled to 

the corporate shield.” O’Hazza, 246 Va. at 116, 431 S.E.2d at 

321. 

In O’Hazza, we held that an initial capitalization of 

$10,000 was not, as a matter of law, inadequate to capitalize 

the close corporation involved in that case. Here, however, the 

record shows that Freemason was never capitalized even in a de

minimis amount. The apparent inability of Freemason to satisfy 

the judgment against it in this case was not the result of poor 

business decisions, mismanagement, or unexpected liabilities 

such that an expected profit never materialized. Rather, 

because of the deliberate acts of the incorporating 

stockholders, Freemason suffered from nonexistent capitalization 

from its inception. Despite an obligation to do so, Dana and 

14
Hall never took any steps to establish the corporation’s 

warranty reserve. Moreover, the corporation never had any 

liquid assets because it had no bank accounts and Dana deposited 

all funds that were properly the corporation’s into his personal 

checking account. As a result, the corporation had no funds 

from which it could replace or repair the defective roof. 

Indeed, upon the conveyances to the various purchasers of 

individual units of the corporation’s only capital asset, the 

corporation ceased to have any function other than to serve as a 

shield for Dana and Hall against the civil suits which followed. 

This Court has been very reluctant to permit corporate veil 

piercing. We have made it clear that only an extraordinary 

exception justifies disregarding the corporate entity in order 

to hold individual stockholders personally liable for a judgment 

against the corporation. See, e.g., Greenberg v. Commonwealth, 

255 Va. 594, 604, 499 S.E.2d 266, 272 (1998). The conduct of 

Dana and Hall in clearly calculating to use the corporate entity 

of Freemason for an unjust purpose is just such an extraordinary 

exception. On this record, no other conclusion can be reached 

except that Dana and Hall formed a corporation not to operate a 

corporate business, but rather merely to avail themselves of a 

shield against their potential liability for the known defects 

in the roof. Accordingly, we hold, as a matter of law, that the 

trial court did not err in piercing the corporate veil of 

15
Freemason and concluding that to permit Dana and Hall to assert 

the protection of the corporate shield of Freemason would work 

an injustice in this case. 

CONCLUSION 

For these reasons, the judgment of the circuit court will 

be affirmed. 

Affirmed. 

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