Opinion ID: 2276728
Heading Depth: 1
Heading Rank: 4

Heading: Shareholder liability.

Text: Roy Littlejohn argues that the evidence introduced at trial did not support imposition of personal liability against him for the wrongs and obligations of Urban Shelters. He contends that the employees failed to demonstrate the disregard of corporate formalities, [13] that the corporations were not shown to have been under-capitalized, [14] and that the record contains no evidence that personal assets were commingled with corporate assets. We do not agree with Mr. Littlejohn's position. The trial judge found that Roy Littlejohn's business decisions erased the boundaries between Valrob, Urban Shelters, and himself. There is ample evidence in the record to support this finding. Mr. Littlejohn acknowledged that in order to shield Urban Shelters' assets from the IRS and from other taxing authorities, he simply transferred its assets to Valrob, another Littlejohn-controlled corporation. The conclusion is inescapable that, as the judge found, Valrob's role in the operation of the Home was essentially to serve as a conduit of funds in order to ensure that the IRS would not seize funds from Urban Shelters and thus put the Littlejohns out of business. The funds of Urban Shelters and Valrob were routinely intermingled. In the judge's words, Valrob was no more than a `shell' corporation, used to provide another layer of protection to Roy Littlejohn, and Valrob had no other legitimate purpose. Under our deferential standard of review, we are in no position to second-guess these findings. Meanwhile, employees of the nursing home were falsely led to believe that portions of their wages were being withheld for child support payments, garnishments, and federal and state taxes, when in fact the creditors of the employees and of their employer were not being paid. Subsequently, for three and one half weeks, the employees were not paid at all. In the words of the trial judge: Having racked up significant tax burdens, the Littlejohns have left these corporations to wither. It would be an injustice to hold that the employees' right to redress cannot go beyond these shell corporations to attach funds of the individual wrongdoers. It is true, as Mr. Littlejohn points out, that much of the manipulation of the corporate form was designed to prevent the IRS and local taxing authorities from securing control over money with which Urban Shelters and Valrob were, inter alia, attempting to pay the employees. In that sense, Mr. Littlejohn's conduct might be viewed as defrauding the government in the interest of the plaintiffs who have now sued him. But as we stated in Vuitch, supra, 482 A.2d at 815, this court has held that considerations of justice and equity can justify piercing the corporate veil and has rejected the contention that in order to pierce the corporate veil there must be a showing of fraud directly tainting the obligation on which the plaintiff is suing. (Citation and internal quotation marks omitted.) [15] The judge could reasonably conclude, on this record, that the paper transfers between the corporations in order to thwart the tax collectors and the false entries which misled employees into believing that their obligations to the government and to other creditors were being satisfied, were all part of a single course of deceptive conduct which proximately led to the collapse of the corporations and their failure to pay the employees their wages. Having used, for his own purposes, funds that he pretended were going to the employees' public and private creditors, Mr. Littlejohn cannot now be absolved of the consequences of his conduct by attributing it to corporations wholly under his control.