Opinion ID: 1948327
Heading Depth: 2
Heading Rank: 3

Heading: Piercing PFP's Corporate Veil

Text: Appellee argues that the trial court's decision should be affirmed because personal liability should be imposed upon appellant Bingham by piercing PFP's corporate veil. Appellee contends that Bingham used the corporation as an alter-ego and so dominated its affairs that she should be subject to personal liability for the debt owed by PFP to GMK. The trial court made no findings which would support the imposition of liability on this theory. Nevertheless, as appellee points out, this court may affirm on grounds shown by the record, whether or not relied upon by the trial court. See Marinopoliski v. Irish, 445 A.2d 339, 340 (D.C.1982); Joseph H. Munson Co. v. Secretary of State, 294 Md. 160, 448 A.2d 935, 939 (1982), aff'd, 467 U.S. 947, 104 S.Ct. 2839, 81 L.Ed.2d 786 (1984). Therefore, we consider briefly whether the record provides any possible support for a trial court finding in favor of appellee's claim. [28] The general rule has been that the corporate entity will be respected and that its obligations will not be imposed upon a particular individual unless a party seeking to disregard the corporate entity has proved by affirmative evidence that there is (1) unity of ownership and interest, and (2) use of the corporate form to perpetrate fraud or wrong. Vuitch v. Furr, 482 A.2d 811, 815 (D.C.1984) (citations omitted). We have recognized a modification to this rule which rejects the requirement that fraud must be shown. Id. Instead, considerations of justice and equity may justify piercing the corporate veil. Id. Whether there is a sufficient showing of a unity of ownership and interest will depend upon such factors as (1) whether corporate formalities have been disregarded, (2) whether corporate funds and assets have been extensively intermingled with personal assets, (3) inadequate initial capitalization, and (4) fraudulent use of the corporation to protect personal business from the claims of creditors. Id. at 816. When the evidence is viewed against these standards, there is no basis to conclude that there was a unity of ownership and interest. The record contains numerous documents evidencing the corporation's observance of corporate formalities. Among them are copies of the articles of incorporation, the D.C. Certificate of Incorporation, the Resolution for Bank Accounts, minutes of meetings of the Board of Directors and of shareholders, consent to postponement of meeting, corporate by-laws, and stock certificates. The undisputed testimony shows that final decision-making authority rested with the Board of Directors of the corporation, and it was the Board's decision to terminate publication of the paper. There is also no evidence that Bingham's personal funds were commingled with the corporation's assets or that the corporation made a preferential payment to her. What the evidence shows is that, in addition to her capital contribution to the corporation, Bingham loaned the corporation $300,000 and that she later forgave the debt. Contrary to appellee's assertion, there is no evidence that Bingham actually seized the corporation's computer equipment, although there is evidence that she had a security interest in it. Thus, we do not agree with appellee that there was either a commingling of assets or a preferential payment. Finally, there is no basis to conclude that the corporation was undercapitalized initially or that the transfer of assets to PFP was undertaken as a fraud on creditors. On the contrary, cash in excess of one million dollars was invested into the corporation initially. For the reasons previously stated, we find no attempt to defraud creditors in the formation of WWL and PFP's purchase of a general partnership interest in the partnership. Thus, the basic elements for disregarding the corporate entity are absent here. See Vuitch, supra, 482 A.2d at 816. Accordingly, the trial court's ruling imposing personal liability upon appellant Bingham cannot be premised upon piercing the corporate veil.