Opinion ID: 2276728
Heading Depth: 1
Heading Rank: 5

Heading: Personal liability as a corporate officer.

Text: The conduct that led the trial judge to impose personal liability on Roy Littlejohn as a corporate shareholder also warranted imposition of liability as a corporate officer. It is essentially undisputed that Mr. Littlejohn dominated the two corporations and used his authority to engineer the actions which generated Urban Shelters' tax liabilities and caused the corporation to become unable to compensate its employees. Robin Littlejohn's testimony that she acted entirely at her father's direction provides further support for the judge's finding of domination. The judge found that Mr. Littlejohn was the principal actor in the operation and that he encouraged and ultimately decided to convert the funds of the employees, without their authorization, to use for his own personal gain. His motive in this case was to secure a job for himself and the continuation of his otherwise insolvent business. That these actions were ostensibly performed in the name of the corporation will not absolve Mr. Littlejohn from liability. In the final analysis, [w]e are not so interested in determining whether [Mr. Littlejohn's] actions fit the exact legal definition of fraud or misrepresentation [or conversion]. State ex rel. Stephan v. Commemorative Servs. Corp., 16 Kan. App.2d 389, 823 P.2d 831, 842 (1991). Mr. Littlejohn retained employees' money under the pretext that it was being paid to taxing authorities or to persons entitled to child support. To permit him to hide behind the corporate structure under these circumstances would be a miscarriage of justice. Id.
The trial judge found that Robin Littlejohn was actively involved, albeit at her father's direction, with the movement of funds between Urban Shelters and Valrob in order to shelter money owed to the IRS. This finding is amply supported by the record. In our view, Robin Littlejohn may properly be held personally liable to the plaintiffs for her own tortious conduct. In addition, as the sole shareholder of Valrob, she is subject to liability under the veil-piercing principles discussed above.
The trial judge imposed personal liability on Marilyn A. Littlejohn on the following grounds: As treasurer of Urban Shelters, the [c]ourt must infer that Marilyn A. Littlejohn knows what is going on with the financial transactions of the corporation, and that as treasurer, she either supported, encouraged, or at least allowed, the improper transactions. . . . The [c]ourt also notes that Marilyn A. Littlejohn did not testify, did not present any evidence on her own behalf, and did not even appear for the trial of this matter. Accordingly, there is no evidence in the record to refute that, as treasurer of the subject corporation, and as corporate secretary, she bears responsibility for the gross misuse of the corporate form and corporate assets. . . . Mrs. Littlejohn argues that her status as a corporate officer, standing alone, was insufficient to render her liable for the corporation's wrongful acts. As plaintiffs, the employees had the burden of proving that Marilyn A. Littlejohn was personally liable to them. Her failure to testify or to explain any involvement with the transactions at issue could not and did not create liability by default. [16] An officer's liability is not based merely on the officer's position in the corporation; it is based on the officer's behavior and whether that behavior indicates that the tortious conduct was done within the officer's area of affirmative official responsibility and with the officer's consent or approval. Camacho, supra, 620 A.2d at 247; Vuitch, supra, 482 A.2d at 821. Liability must be premised upon a corporate officer's meaningful participation in the wrongful acts. See Camacho, supra, 620 A.2d at 247. Sufficient [meaningful] participation can exist when there is `an act or omission by the officer which logically leads to the inference that he or she had a share in the wrongful acts of the corporation which constitute the offense.' Id. (quoting Snow v. Capitol Terrace, Inc., 602 A.2d 121, 127 (D.C.1992)). We have found nothing in the record to establish, or even to suggest, that Marilyn A. Littlejohn had anything to do with the conduct that led to the imposition of liability against her husband and daughter. The plaintiffs offered no evidence that Mrs. Littlejohn had any knowledge of or involvement in the financial affairs of the corporations. We are aware of no authority for the proposition that failure to prevent wrongful conduct committed by one corporate officer automatically imposes liability upon all other corporate officers. Although liability may in some circumstances be based upon a corporate officer's failure to act to prevent a wrong, the plaintiff must show that the officer's omission bears some relationship to that wrong, e.g., proof that a corporate officer was aware of a dangerous situation and nevertheless permitted reasonably preventable harm to occur. See Dwyer, supra, 297 P.2d at 493 (holding corporate president liable for failing to remove dangerous cable from roadway where president knew of the danger but failed to remedy the situation). No comparable evidence was presented in this case, and we conclude that Marilyn A. Littlejohn was entitled to judgment in her favor.