Opinion ID: 2520297
Heading Depth: 3
Heading Rank: 6

Heading: Were the trial court's instructions on the piercing the corporate veil prejudicial?

Text: Durkin argues the trial court erred in submitting Instruction 17  piercing the corporate veil  to the jury. He contends because the instruction was included in the group of instructions for breach of contract on the promissory note and because the debt on the promissory note was Durkin's personally, there was no reason to give the instruction to the jury. [1] Durkin also argues that the instruction was inappropriate for the other various torts claimed by VFP because personal liability is predicated upon the participation in the wrongful conduct or knowingly approving the wrongful conduct. Durkin contends corporations do not commit torts and therefore piercing the corporate veil theory is inapplicable to holding officers personally responsible for the corporation's involvement in fraudulent activity. Finally, Durkin concludes that even if the jury did not need this instruction in deciding personal liability, its inclusion misled and confused the jury. We disagree. Instruction No. 17 provided: There are times when the form of a corporate entity is disregarded and liability is imposed on a corporation's sole shareholder and president of a corporation. This is called the doctrine of piercing the corporate veil. Two requirements must be met. First, there must be such a unity of interest and ownership that the separate personalities of the corporation and individual no longer exist. Second, there must be a showing that, if the acts are treated as those of the corporation, an inequitable result will follow or that it would sanction a fraud or promote injustice. There are several factors which may be reviewed when considering whether the corporate veil should be pierced. For example, was the sole shareholder acting as president of the corporation; was there a lack of corporate formalities, such as directors' meetings; did the shareholders fail to submit the corporate contract and inventory revisions to he board of directors; and were business transactions completed without approval by any director or officer of the corporation. These factors are not exclusive because the conditions under which corporate entity may be disregarded vary according to the circumstances to the case. Piercing the corporate veil is [t]he judicial act of imposing personal liability on otherwise immune corporate officers, directors, and shareholders for the corporation's wrongful acts. BLACK'S LAW DICTIONARY 1184 (8th ed.2004). The theory allows the fact finder to disregard the corporate form, thereby making individuals liable for corporate debts or making corporate assets reachable to satisfy obligations of the individual. Minich v. Gem State Developers, Inc., 99 Idaho 911, 917, 591 P.2d 1078, 1084 (1979). While Durkin is correct that there was no corporate responsibility involved with the promissory note, he is incorrect about the other claims asserted by VFP. VFP asserted two theories to hold Durkin personally liable for fraudulently depositing and spending two of Fred Meyer's progress payments and the power transformer check. Under the first theory VFP explained to the jury that Durkin should not be allowed to use Dakota's corporation status as a shield to escape liability. That even though the jury may find Dakota committed the fraudulent act they may still find Durkin personally liable if they believe Dakota and Durkin are the same entity as provided in their instructions. In other words, even though Durkin blames Dakota for taking and spending the money, Durkin should be held accountable. Under the second theory of personal liability VFP asked the jury to hold Durkin personally liable for tortiously interfering with a contract between VFP and Fred Meyer even though the checks were run through Dakota's accounts. We find the district court properly allowed VFP to assert its theory under piercing the corporate veil to the jury. Piercing the corporate veil theory allowed the jury to ignore the corporate form, thereby making Durkin personally liable for Dakota's acts. Minich, 99 Idaho at 917, 591 P.2d at 1084. The jury instruction submitted to the jury on this theory was necessary and relevant. The instruction did not prejudice or confuse the jury. The district court did not err in submitting this instruction to the jury.