Court Opinion

ID: 9686125
Source: CourtListenerOpinion
Date Created: 2023-08-24 15:30:37.980329+00
Date Added: 2024-06-11T18:18:15.228243
License: Public Domain

Krivosha, C.J.,
dissenting.
I must respectfully dissent from the majority opinion in this case. In my view the majority has reached an improper conclusion and is in error in reversing the decision of the district court. In reaching its conclusion the majority quotes from Scribner Grain & Lumber Co. v. Wortman, 204 Neb. 92, 94, 281 N.W.2d 394, 395-96 (1979), wherein we stated:
“ ‘ [A] corporation will be looked upon as a legal entity as a general rule, and until sufficient reason to the contrary appears; but, when the notion of a legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons.’ ”
*504I am unable to find any evidence in this record to justify a conclusion that the formation and operation of Viking Construction, Inc., were used to defeat public convenience, justify wrong, protect fraud, or defend crime. We recently said in ServiceMaster Indus. v. J.R.L. Enterprises, ante p. 39, 43, 388 N.W.2d 83, 86 (1986), that “ ‘where fraud is committed by a corporation it is time to disregard the corporate fiction and hold the persons responsible therefor in their individual capacities.’ ” Since the majority has made a factual finding that Dahlbeck in no way intended to use Viking as a vehicle for protecting himself, but was merely guilty of being an imprudent businessman, I am at a loss to understand why we have chosen to disregard the corporation and hold the sole stockholder personally liable.
The majority notes: “ ‘Some of the factors which are relevant in determining to disregard the corporate entity’ on the basis of fraud are:”
(1) Grossly inadequate capitalization; (2) Insolvency of the debtor corporation at the time the debt is incurred; (3) Diversion by the shareholder or shareholders of corporate funds or assets to their own or other improper uses; and (4) The fact that the corporation is a mere facade for the personal dealings of the shareholder and that the operations of the corporation are carried on by the shareholder in disregard of the corporate entity.
I do not believe the evidence justifies our reaching a conclusion that simply by adding up evidence in support of the factors, we may conclude that the immunity against suit granted by Nebraska statute to the shareholders of a corporation should be disregarded.
In the first instance, while there was evidence that the corporation was grossly inadequately capitalized, there was further evidence by the plaintiff’s own witness that such undercapitalization was not unusual. One is inclined to believe that a host of small corporations are regularly incorporated and undercapitalized and that few, if any, home construction businesses could meet the expert’s “industry standard” of a net equity ratio of 61.2 percent. Furthermore, the evidence establishes that, in addition to the paid-in capital, Dahlbeck *505loaned the corporation an additional $7,000, not uncommon or evidence of an intent to create a sham corporation.
Regarding the second factor, insolvency of the debtor corporation at the time the debt is incurred, while the evidence does support the conclusion that Viking’s average liabilities at book value throughout its existence exceeded its average assets at book value, the evidence is further uncontradicted that throughout the time that Viking was in existence and had sales, a period of about 8 years, it did pay its bills, though not always on time and not always in the full amount, similar to a host of other corporations doing business.
With regard to the third factor, diversion by the shareholder or shareholders of corporate funds or assets to their own or other improper uses, the evidence establishes that Dahlbeck did cause Viking to transfer to Dahlbeck some $11,000 in assets. The assets, however, did not remain with Dahlbeck but, rather, were immediately thereafter transferred to a creditor of the corporation. To therefore suggest that Dahlbeck should be personally liable for $15,895 as a result of having transferred $ 11,000 worth of assets out of the corporation and to a creditor, when, had he simply transferred the assets to the creditor in the first instance, no personal liability would attach, is difficult to understand. At most, one would be inclined to believe that Dahlbeck should not be liable for more than the amount of the assets that were transferred.
The most significant factor, however, is the majority’s conclusion regarding the fourth factor, that Dahlbeck did not use Viking as a mere facade for his personal dealings or that Viking’s operations were conducted by Dahlbeck in disregard of Viking’s corporate entity. This corporation was not a mere alter ego or business conduit of the stockholders, as was the case in Nebraska Engineering Co. v. Gerstner, 212 Neb. 440, 323 N.W.2d 84 (1982), cited by the majority. It was a legitimate corporation that went broke. It happens all the time. The evidence establishes that large salaries were never paid, and in fact for several years no salaries were paid to the officers. Each of the creditors, including the appellant, dealt with Viking Construction, Inc., with full knowledge that he was dealing with a corporation having limited liability. In view of the *506majority’s finding that the corporation was not a facade, I believe it inappropriate to “pierce the corporate veil,” as the majority has directed, absent evidence of an intent to create a corporation for a fraudulent purpose.
I find the instant case like the facts in Slusarski v. American Confinement Sys., 218 Neb. 576, 357 N.W.2d 450 (1984), where we refused to impose personal liability on two stockholders because the evidence failed to disclose that they actually participated in fraudulent or illegal acts. The “badges of fraud” attributed to Dahlbeck are no different than those which can be found in any business going broke.
Although the facts are somewhat different, I believe that a comparison of this case with our recent decision in ServiceMaster Indus. v. J.R.L. Enterprises, ante p. 39, 388 N.W.2d 83 (1986), now leaves the state of corporate law in utter confusion and raises serious questions as to whether anyone can rely upon the protection afforded by incorporation. I would have affirmed the decision of the district court.