Opinion ID: 886431
Heading Depth: 3
Heading Rank: 9

Heading: Whether the shareholder and corporation have the same address which is the address of shareholder's personal residence.

Text: 10. Whether the shareholder admits to third parties that the shareholder and the corporation are one in the same. 11. Whether the corporation's profits and earnings are distributed through means other than dividends. 12. Whether the corporation is undercapitalized. 13. Whether the parent and subsidiary have the same name. 14. Whether the parent and subsidiary have the same directors and officers. Meridian Minerals Co. v. Nicor Minerals, Inc. (1987), 228 Mont. 274, 284, 742 P.2d 456, 462. ¶ 26 The above is not an exclusive list, and a court is not required to that find all of the factors have been satisfied to conclude a shareholder is the real party in interest. Nor does this Court adhere to the above factors in any particular fashion. Rather, they are factors to be considered along with the other evidence and circumstances of each individual case. ¶ 27 In E.C.A. Environ. Management v. Toenyes (1984), 208 Mont. 336, 679 P.2d 213, this Court considered whether the veil of a subsidiary corporation, ECA, could be pierced to assign liability to the parent corporation, MMI. The record showed that MMI owned 100 percent of the capital stock in ECA; corporate formality had been abandoned; there were no minutes from corporate or shareholder meetings; MMI routinely transferred ECA funds to its own accounts; ECA was undercapitalized and owed MMI a significant amount of money; and ECA's operations were financed by MMI. Toenyes, 208 Mont. at 347, 679 P.2d at 218-19. The above factors established sufficient control and domination of ECA by MMI to support the conclusion that ECA was the alter ego of MMI. Toenyes, 208 Mont. at 347, 679 P.2d at 219. ¶ 28 In Drilcon, Inc. v. Roil Energy Corp., Inc. (1988), 230 Mont. 166, 749 P.2d 1058, Drilcon sued White individually, alleging that White was the alter ego of Roil, Inc., and prayed for judgment that the corporate veil be pierced. The record indicated that Roil, Inc., was not sufficiently capitalized; White was the majority shareholder, an officer and a director of the corporation; White controlled all corporate activity without consulting the other officers and directors; White used his personal funds to pay corporate debts; and corporate formalities were not adhered to. Therefore, we affirmed the district court and concluded that White was the alter ego of Roil and that the first prong required to pierce the corporate veil had been satisfied. Drilcon, Inc., 230 Mont. at 176-77, 749 P.2d at 1064. ¶ 29 In Berlin, 268 Mont. at 458, 887 P.2d at 1188-89, the defendant owned 97 percent of Boedecker Resources corporate stock; he was the president of the corporation; he exercised complete control of corporate operations; he executed all corporate transactions; he benefitted personally from many corporate transactions; and he intermingled personal and corporate assets and funds. Consequently, we concluded that the defendant was the alter ego of Boedecker Resources, satisfying the first prong of the inquiry. Berlin, 268 Mont. at 458, 887 P.2d at 1189. ¶ 30 Many of the determinative factors in Toenyes, Drilcon and Berlin are present in this case. Only three meetings were held concerning corporate decisions over a nine-year period; Colonna exercised absolute authority over all corporate activities as the sole director and officer; Colonna was the Corporation's sole shareholder; Colonna loaned the Corporation significant sums of money indicating that the Corporation was undercapitalized and unable to meet its day-to-day obligations; payments were made directly from corporate accounts to satisfy Colonna's personal obligations under the guise that they were loan repayments; and there are no records indicating that Colonna was an employee of the Corporation or that he received wages. Moreover, Colonna personally benefitted from suspect corporate transactions the vehicle lease and the Corporation's ten-year lease renting Colonna's own property. In each instant he was on both sides of the transaction and realized a personal benefit. ¶ 31 Colonna argues that the District Court placed too much weight on the fact that he did not strictly follow corporate formality. He argues that it would defy common sense to require the sole shareholder, director, and officer of a professional corporation to document every transaction and decision made on behalf of the corporation. We recognize that the corporation in this case was solely owned and run by Colonna, he was the only person authorized to make corporate decisions, and that some deviation from traditional corporate formality might be permitted, even though no election was made to make the Corporation a statutory close corporation under the Montana Close Corporation Act, § 35-9-101, et seq., MCA. However, a corporation must adhere to fundamental formalities, even when exclusively controlled by one individual, or the line between individual and corporation evaporates, as was the case here. ¶ 32 It was within the District Court's discretion to give substantial weight to the lack of corporate formality in its findings. This is not a case of minor deviations from corporate formality Colonna abandoned almost all corporate formality. Moreover, the abandonment of corporate formality is only one factor supporting the finding that Colonna was the Corporation's alter ego. When placed alongside the further findings that the Corporation made direct payments for Colonna's debts, it was undercapitalized and borrowed money from its inception, and Colonna realized personal gain from many of his dealings with the Corporation, the finding that virtually no corporate records were kept becomes more significant. ¶ 33 The District Court's finding that Colonna was the alter ego of the Corporation is supported by substantial evidence. Therefore, we affirm the District Court's judgment that Colonna was the true party in interest and the alter ego of the Corporation.