Opinion ID: 2305731
Heading Depth: 2
Heading Rank: 4

Heading: Individual Liability of Flannery

Text: [¶ 42] Blue Star argues that it presented sufficient evidence that Flannery operated CKF as his alter-ego and that, because it has no meaningful recourse against CKF as a corporate entity, an unjust or inequitable result would result if the court refused to pierce the corporate veil and hold Flannery liable for CKF's breach. Blue Star further contends that Flannery's statement that he would remove all tenants pursuant to the purchase and sale agreement was fraudulent given the side agreement signed after the closing permitting Postal Express to remain on the premises past the agreed date, and that fraudulent intent is a question of fact that can only be resolved by a jury. [¶ 43] To pierce the corporate veil and disregard the corporate entity, a plaintiff must establish that: (1) the defendant abused the privilege of a separate corporate identity; and (2) an unjust or inequitable result would occur if the court recognized the separate corporate existence. Advanced Constr. Corp. v. Pilecki, 2006 ME 84, ¶ 10, 901 A.2d 189, 194-95; State v. Weinschenk, 2005 ME 28, ¶ 19, 868 A.2d 200, 207. Whether the corporate form should be disregarded involves questions of fact for a fact-finder to decide. Advanced Constr., 2006 ME 84, ¶ 10, 901 A.2d at 195. [¶ 44] Separate from the issue of piercing the corporate veil, [c]orporate officers who participate in wrongful acts can be held liable for their individual acts, and such liability is distinct from piercing the corporate veil.... The individual liability stems from participation in a wrongful act, and not from facts that must be found in order to pierce the corporate veil. Id. ¶ 13, 901 A.2d at 195 (citing Donsco, Inc. v. Casper Corp., 587 F.2d 602, 606 (3d Cir.1978)). This also is a fact question for the fact-finder to decide. [¶ 45] In deciding whether, with the record evidence considered most favorably to Blue Star, there are any disputes of material facts that would support piercing the corporate veil or finding that Flannery participated in a wrongful act causing harm to Blue Star, the record demonstrates the following. [¶ 46] First, Flannery negotiated and signed the purchase and sale agreement including the requirement that he secure commitments from tenants to quit the premises within forty-five days after closing, and he reaffirmed that requirement at closing. Second, the week after the closing, Flannery entered into the side agreement, allowing one tenant to remain on the premises after the agreed time when the premises were to be free of tenants, and he received the rent paid by both tenants for the holdover period. Third, Flannery completely owned and controlled CKF, which was formed solely for the purpose of owning the Sebago Moc Mill, and the mill was CKF's only asset. Fourth, Flannery admitted at his deposition that he had rendered CKF judgment-proof because he had spent the $450,000 proceeds of the sale and any other assets of CKF and could not recall how the funds were spent. [¶ 47] These facts, taken in conjunction, indicate a genuine issue of material fact regarding whether: (1) Flannery was CKF's alter-ego and that Flannery abused the corporate form through CKF; and (2) limiting Blue Star's recovery to the assets of the judgment-proof CKF would lead to an unjust or inequitable result. Separately, these facts indicate a genuine issue of material fact regarding whether Flannery participated in a wrongful act by engaging in a fraud or promoting a breach of the purchase and sale agreement by signing the side agreement that directly frustrated compliance with the tenant clearance provision of the Blue Star-CKF contract. [¶ 48] These unresolved factual issues that must be decided at trial preclude deciding by summary judgment that: (1) the CKF corporate veil cannot be pierced; or (2) even if the corporate veil is not to be pierced, Flannery cannot be held individually liable for participation in wrongful acts causing damage to Blue Star. See Advanced Constr., 2006 ME 84, ¶¶ 10-13, 901 A.2d at 194-95. Accordingly, we must vacate the summary judgment in favor of Flannery on the individual liability claims. 23 The entry is: The judgment in favor of Timothy Flannery on the issue of personal liability is vacated. The judgment is affirmed in all other respects. No costs to either party. Remanded for further proceedings consistent with this opinion.