Opinion ID: 1284947
Heading Depth: 1
Heading Rank: 2

Heading: Did trial court err in failing to hold Martha Voeltz personally liable for compensatory damages?

Text: The information Robert forwarded Dun & Bradstreet designated Martha Voeltz as vice-president and treasurer of Starr Sales. On deposition Scott identified his mother as a stockholder of the corporation. On deposition Robert testified Martha was secretary of the corporation, but denied this at trial. There is no dispute her signature remained on the corporate bank signature card as secretary, treasurer, or cashier until the account was closed January 31, 1975. Trial court held the evidence disclosed Martha to be an officer of said corporation and a stockholder. However, the court also found Briggs had failed to show by a preponderance of evidence that she had any active part in the incorporation or business of the corporation. It therefore concluded she should not be held personally liable to Briggs. Trial court may have been right in so holding on the theory of individual liability of a corporate officer for fraudulent corporate acts in which she or he participated, a theory we explored in division I. See 19 Am.Jur.2d, Corporations, § 1382, pp. 778-779 (1965). But Martha, as an officer and owner of a close corporation is not individually immune from personal liability for actual damages under the doctrine which permits piercing the corporate veil. As a major corporate officer she could not avoid liability by emulating the three fabled monkeys, hearing, seeing and speaking no evil. Nor could she ignore the reality Starr Sales had evaded the most basic aspects of corporate existence. See 19 Am.Jur.2d, Corporations, § 1276, pp. 683-684, § 1286, pp. 693-694 (1965). For example, she had a responsibility to know Starr Sales was without initial capital and that corporate books were nonexistent. See Lakota Girl Scout C., Inc. v. Havey Fund-Rais. Man., Inc., supra, 519 F.2d at 638; Minton v. Cavaney, supra, 56 Cal.2d at 580, 15 Cal.Rptr. at 643, 364 P.2d at 475-476; Ballantine, Corporations, supra, § 129, pp. 302-303. When the separate entity privilege is denied, as it should be in this situation, it is clear a shareholder or equitable owner who is also a major officer of a close corporation ordinarily cannot escape personal liability. Id. In division I we noted our basic rule that on appeal from a law action tried to the court, its findings are binding upon the appellate court if supported by substantial evidence. Rule 14(f)(1), R.Ap.P. However, this rule does not preclude inquiry into the question whether, conceding the truth of the facts found, a conclusion of law drawn therefrom is correct, nor are we bound by trial court's determination of the law. See Flexsteel Ind., Inc. v. Morbern Ind. Ltd., 239 N.W.2d 593, 598 (Iowa 1976); In re Estate of Northup, 230 N.W.2d 918, 921 (Iowa 1975); Whewell v. Dobson, 227 N.W.2d 115, 117 (Iowa 1975). In the case before us we are in accord with district court's factual findings relating to Martha's role in the corporation. We simply hold under those facts and the applicable rules of law relating to denial of the separate entity privilege, supra, she also is liable for the indebtedness owed Briggs. We affirm on the appeal and reverse on the cross-appeal. We remand to district court for entry of judgment in favor of plaintiff and against Martha Voeltz for $17,612.33, with interest at 5% from November 15, 1974 to December 31, 1974, and thereafter at 7% to date of payment. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.