Opinion ID: 2639411
Heading Depth: 3
Heading Rank: 2

Heading: Harrison's Personal Liability for Fraud

Text: ¶ 19 Initially, we note that [a]n officer or director of a corporation is not personally liable for torts of the corporation or of its other officers and agents merely by virtue of holding corporate office, but can only incur personal liability by participating in the wrongful activity. 3A William Meade Fletcher, Fletcher Cyclopedia of the Law of Private Corporations § 1137, at 209 (rev. ed.2002). When fraud is alleged, a director or officer of a corporation is individually liable for fraudulent acts or false representations of his own or in which he participates, even though his action in such respect may be in furtherance of the corporate business. 37 Am.Jur.2d Fraud and Deceit § 322 (1968) (emphasis added). ¶ 20 Other states, considering the issue of corporate officer liability, have found that an officer cannot hide his or her own fraudulent acts behind the corporate veil. For example, Colorado courts hold that [t]o permit an agent of a corporation, in carrying on its business, to inflict wrong and injuries upon others, and then shield himself from liability behind his vicarious character, would often both sanction and encourage the perpetration of flagrant and wanton injuries by agents of insolvent and irresponsible corporations. Snowden v. Taggart, 91 Colo. 525, 17 P.2d 305, 307 (1932) (citation omitted). In Mecham v. Benson, 590 P.2d 304, 308 (Utah 1979), this court noted that a defendant, by attempting to hide behind the corporate entity, would not exculpate himself by proving that he was acting as agent of a corporation; he would only additionally inculpate his corporate principal. Thus, Harrison can be held liable for fraudulent acts that she personally committed or in which she participated, but she cannot be held liable for fraudulent acts that she did not know of or participate in that were committed by other agents of the corporation or by the corporation itself. ¶ 21 Harrison's position as a corporate officer whose duties generally included overseeing the business activities of the corporation does not alone establish facts supporting a claim that she is personally liable for fraud. However, in the complaint, this is the only fact pleaded to inculpate Harrison in RSI's fraudulent activities. In its memorandum in opposition to RSI and Harrison's motion for summary judgment, AFIE had the opportunity to allege additional facts establishing Harrison's personal involvement in RSI's fraud. However, the additional facts contained in AFIE's memorandum focus exclusively on RSI's actions and do not supply any information regarding Harrison's personal participation in fraud. Standing alone, AFIE's complaint fails to allege fraud against Harrison with the particularity required by rule 9(b). Because AFIE failed to allege facts in its complaint supporting its claim that Harrison personally committed fraud or that she personally directed any fraud committed by RSI, the trial court erred in failing to grant the motion for summary judgment.