Court Opinion

ID: 4303951
Source: CourtListenerOpinion
Date Created: 2018-08-15 16:06:17.515244+00
Date Added: 2024-06-11T14:34:12.709335
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                                   No. 17-1422
                              Filed August 15, 2018

WOODRUFF CONSTRUCTION, LLC,
    Plaintiff-Appellant,

vs.

K.W. "CASEY" CLARK,
      Defendant-Appellee.
________________________________________________________________

      Appeal from the Iowa District Court for Chickasaw County, James C. Bauch,

Judge.

      Plaintiff appeals the district court decision against piercing the corporate veil

to enforce a judgment debt. REVERSED AND REMANDED.

      Andrew B. Howie of Shindler, Anderson, Goplerud & Weese, PC, West Des

Moines, for appellant.

      Ronald C. Martin and Mark H. Rettig of Day Rettig Martin, PC, Cedar

Rapids, for appellee.

      Considered by Vogel, P.J., and Doyle and Bower, JJ.
                                           2

BOWER, Judge.

       Woodruff Construction, LLC (Woodruff), appeals the district court’s decision

not to pierce the corporate veil of Clark Farms, Ltd. (Clark Farms) and enforce a

judgment debt against K.W. Clark (Clark). We reverse.

       I.     Background Facts and Proceedings

       Clark Farms is an Iowa corporation, with articles of incorporation filed in

1997, then reincorporated in 2001 following an administrative dissolution.1 Clark

Farms is in the business of biosolids management. Clark Farms has also done

business under the name Clark Contract Services but never registered the name

with the Iowa Secretary of State. Clark is the president, secretary, and treasurer

of the corporation. He is also the sole owner and director of the corporation. Clark

owns and operates two other entities, Casey Clark Farms and White Pines Farm,

which are sole proprietorships.

       Woodruff is a commercial industrial construction company.               In 2009,

Woodruff contracted with the city of Leon, Iowa, to act as general contractor during

the construction of a wastewater treatment facility.         In April 2010, Woodruff

contracted with Clark Farms for lagoon sludge removal. Clark Farms began work,

then in 2011 abandoned the project when Clark determined he had underbid the

contract, leaving the work incomplete. In July 2012, Woodruff brought a breach of

contract action against Clark Farms. In September 2014, Woodruff obtained a

1
   Prior to being called Clark Farms, Ltd., the company had existed first as Stuart Menlo
Pit and Lagoon and then as a partnership run by Clark and a friend, whom he bought out
in 1996.
                                           3

judgment against Clark Farms for $410,066.83 plus interest.2 The court ruled on

a motion to amend and enlarge filed by Clark on January 15, 2015.

       Clark Farms failed to pay the judgment. In June 2015, Woodruff brought

suit to pierce the corporate veil of Clark Farms and recover personally from Clark,

and impose a constructive trust and equitable lien on all assets of Clark Farms. In

a deposition that July, Clark stated Clark Farms still existed but was not bidding

any projects and no longer had any employees aside from the bookkeeper. By the

time of trial, Clark Farms had no employees.

       In April 2017, the court held a bench trial. The court issued its ruling in

August, denying Woodruff’s request to pierce the corporate veil and denying the

request to impose a constructive trust and equitable lien on the assets of Clark

Farms. Woodruff appeals only the piercing the corporate veil issue.3

       II.    Standard of Review

       The parties in this case do not agree on the appropriate standard of review.

Woodruff argues piercing the corporate veil is to be reviewed de novo. Clark

identifies the standard of review as for correction of errors at law—that the question

is one at law to be decided by the trier of fact.

       Piercing the corporate veil has roots in both courts of equity and law. Int’l

Fin. Servs. Corp. v. Chromas Techs. Can., Inc., 356 F.3d 731, 736 (7th Cir. 2004).

Under our rules of appellate procedure, cases tried in equity will be reviewed de

2
     The judgment included the cost to have another contractor finish the work and a
liquidated damages penalty on Woodruff’s contract with Leon. Clark Farms did not receive
any payment for work completed. The court found any misunderstanding as to the
project’s scope or expense were Clark’s fault.
3
     As Clark Farms was not party to the suit, the court could not have imposed the
requested relief of the trust and lien.
                                            4

novo, while cases tried at law are reviewed for correction of errors at law. Iowa R.

App. P. 6.907. “Piercing the corporate veil . . . is not itself an action; it is merely a

procedural means of allowing liability on a substantive claim.” Int’l Fin. Servs.

Corp, 356 F.3d at 736. Some sources refer to the doctrine as an equitable one. 1

William Meade Fletcher, Fletcher Cyclopedia of the Law of Corporations § 41.29

(2017); 6 Matthew G. Doré, Iowa Practice Series, Business Organizations § 39:20

(“[A]lthough piercing the corporate veil is an equitable remedy, the Iowa courts

have held that factual questions related to piercing are for the jury.”).            The

imposition of “liability on a shareholder for corporate obligations where there is no

basis for liability at law is necessarily an equitable remedy.” Minger Constr., Inc.

v. Clark Farms, Ltd., No. 14-1404, 2015 WL 7019046, at *6 (Iowa Ct. App. Nov.

12, 2015) (McDonald, J., concurring in part and dissenting in part); see also

Stacey-Rand, Inc. v. J.J. Holman, Inc., 527 N.E.2d 726, 728 (Ind. Ct. App. 1988)

(noting a request to pierce the corporate veil to be equitable by nature).

       The issue before us is that of piercing the corporate veil, with no additional

claims at law requiring a different review.       The only remedy requested is an

equitable remedy—to shift liability to the owner of the corporation for equitable

reasons. Woodruff filed the claim in equity. Clark made no attempt to move the

case to a court at law. We will treat the case as it was tried below, as a claim in

equity.4

4
   Although some recent cases decided by this court were reviewed for correction of errors
at law, these cases were filed and tried at law. See, e.g., Laddie Nachazel Family Living
Trust v. JKLM, Inc., No. 16-2045, 2018 WL 739266, (Iowa Ct. App. Feb. 7, 2018) (“We
review actions tried at law for a correction of errors at law.”); Torstenson v. Birchwood
Estate, L.L.C., No. 16-0118, 2017 WL 1086222, at *3 (Iowa Ct. App. Mar. 22, 2017) (“Both
parties agree this case was filed and tried at law.”); see also Petition at Law, Minger
Constr., Inc. v. Clark Farms, Ltd., No. 03301LACV025440, 2012 WL 10703904, at *1 (Iowa
                                           5

       Our review of equitable proceedings is de novo. Iowa R. App. P. 6.907. We

may give weight to the court’s factual findings, but we are not bound by those

findings. Porter v. Harden, 891 N.W.2d 420, 424 (Iowa 2017). “We give respectful

consideration to the district court’s fact findings, especially when witness credibility

is an issue, but we are not bound by those facts.” Sun Valley Iowa Lake Ass’n v.

Anderson, 551 N.W.2d 621, 629 (Iowa 1996); Iowa R. App. P. 6.904(3)(g). We

have a duty to examine the entire record and adjudicate anew the issues properly

presented. Hensch v. Mysak, 902 N.W.2d 822, 824 (Iowa Ct. App. 2017).

       III.   Analysis

       Woodruff seeks to have us pierce the corporate veil on Clark Farms, and

hold Clark personally liable for the judgment against Clark Farms.

       The corporate veil is central to the concept of a corporation—separation

between the corporate entity and the stockholders, limiting their personal liability

to the extent of their investment. Ross v. Playle, 505 N.W.2d 515, 517 (Iowa Ct.

App. 1993); see also Iowa Code § 490.622(2) (2016) (“Unless otherwise provided

in the articles of incorporation, a shareholder of a corporation is not personally

liable for the acts or debts of the corporation.”). “But the corporate device cannot

in all cases insulate the owners from personal liability.” Ross v. Playle, 505 N.W.2d

at 517.

       Where the corporation is “a mere shell, serving no legitimate business

purpose, and used primarily as an intermediary to perpetuate fraud or promote

Dist. Ct. Dec. 14, 2012) (bringing claims at law against Clark Farms and Clark). Cf.
Algreen v. Gardner, No. 17-0104, 2018 WL 3057438, at *2 (Iowa Ct. App. June 20, 2018)
(reviewing de novo a corporate-veil-piercing case tried in equity).
                                         6

injustice[,]” the corporate veil may be pierced. Briggs Transp. Co. v. Starr Sales

Co., 262 N.W.2d 805, 810 (Iowa 1978).           Plaintiffs must prove exceptional

circumstances exist to warrant piercing the corporate veil. C. Mac Chambers Co.

v. Iowa Tae Kwon Do Acad., Inc., 412 N.W.2d 593, 597–98 (Iowa 1987).

      The burden is on the party seeking to pierce the corporate veil to
      show the exceptional circumstances required. Factors that would
      support such a finding include (1) the corporation is undercapitalized;
      (2) it lacks separate books; (3) its finances are not kept separate from
      individual finances, or individual obligations are paid by the
      corporation; (4) the corporation is used to promote fraud or illegality;
      (5) corporate formalities are not followed; and (6) the corporation is
      a mere sham.

In re Marriage of Ballstaedt, 606 N.W.2d 345, 349 (Iowa 2000); see also Cemen

Tech, Inc. v. Three D Indus., L.L.C., 753 N.W.2d 1, 6 (Iowa 2008). The six factor

list is not exhaustive, and we will pierce the corporate veil where necessary for

equitable purposes or to prevent injustice, fraud, or fundamental unfairness. Boyd

v. Boyd & Boyd, Inc., 386 N.W.2d 540, 544 (Iowa Ct. App. 1986).

      Woodruff makes several claims but primarily asserts Clark Farms was

undercapitalized.   Other factors claimed include failure to follow corporate

formalities, failure to keep separate books, commingled finances with Clark, and

that the corporation is a sham.

      A.     Undercapitalization

      Undercapitalization occurs when the business’s capitalization is insufficient

to support the business considering its nature and the risks. Cmty. Care Ctrs., Inc.

v. Hamilton, 774 N.E.2d 559, 565 (Ind. Ct. App. 2002). The Iowa Supreme Court

has examined why undercapitalization of a corporation would allow the court to

reach the shareholder for corporate debts:
                                           7

       If a corporation is organized and carries on business without
       substantial capital . . . [so] the corporation is likely to have no
       sufficient assets available to meet its debts, it is inequitable that
       shareholders should set up such a flimsy organization to escape
       personal liability. The attempt to do corporate business without
       providing any sufficient basis of financial responsibility to creditors is
       an abuse of the separate entity and will be ineffectual to exempt the
       shareholders from corporate debts.

Briggs Transp. Co., 262 N.W.2d at 810.

       When determining if a corporation is undercapitalized, we first examine the

adequacy of the capital at the time of formation. See Algreen v. Gardner, No. 17-

0104, 2018 WL 3057438, at *5 (Iowa Ct. App. June 20, 2018). We agree with the

district court that Woodruff did not provide sufficient evidence to show

undercapitalization at the time of the corporation’s creation in 2001. The company

had assets and was profitable. Nor did Woodruff provide sufficient evidence to

show Clark Farms was undercapitalized at the time it entered the contract with

Woodruff.

       However,    the    corporation’s   initial   adequate   capitalization   is   not

determinative of adequate capitalization for the remainder of the corporation’s

existence. A corporation may later become undercapitalized for any number of

reasons. Id. Exceptions permitting examination of capitalization after formation

might include a change in nature of the business, an inadequately-capitalized

expansion, capital transfers to the controlling shareholder which renders the initial

adequacy irrelevant, or losses resulting from fraudulent manipulation of the

corporation. 1 Fletcher, Fletcher Cyclopedia of the Law of Corporations § 41.33;

see also Scott v. AZL Res., Inc., 753 P.2d 897, 901 (N.M. 1988). These exceptions

allow courts to disregard the corporate veil where the shareholder purposely
                                              8

underfunds the business, while maintaining protections for a shareholder whose

business has suffered legitimate financial reversals.

       No evidence presented indicates a change in the nature of the work done

by Clark Farms, or an inadequately-capitalized expansion. Whether Clark made

capital transfers to himself which rendered the initial adequacy irrelevant is unclear

from the record.

       Conflicting testimony was presented that Clark Farms may have loaned

Clark hundreds of thousands of dollars after Woodruff brought its breach-of-

contract suit against Clark Farms in 2012, or that Clark loaned the money to Clark

Farms.     While deposition testimony of the corporation’s bookkeeper clearly

indicates the corporation loaned the money to Clark, and Clark himself was not

clear which way the money went, we note the Clark Farms 2012 taxes show a loan

from Clark to Clark Farms for over $500,000.5 It appears from the record that the

loan never entered the Clark Farms account but likely was used to pay off bank

notes taken out by Clark, Casey Clark Farms, or notes otherwise guaranteed by

Clark personally.

       Additionally, the bank records show Clark used Clark Farms funds to pay

the interest on all his notes—whether owed by the corporation or not. Clark also

testified in a deposition that he had started a new LLC in Iowa performing the same

work Clark Farms had previously done.

5
   If Clark Farms did loan Clark over $500,000 either during the lawsuit or after a judgment
had been made against Clark Farms, without other assets adequate to pay the judgment,
it would be the sort of transfer that would render the initial adequacy irrelevant. A
corporation may not simply transfer its assets to the controlling shareholder to render itself
judgment proof—such actions would merit disregarding the corporate entity.
                                          9

       It is unclear whether Clark Farms is undercapitalized based on the records

provided. What is clear to us is that the corporation was not so obviously and

purposely undercapitalized by Clark so as to merit disregarding the corporate entity

on its own. Despite the loan, testimony indicates Clark Farms continues to own

equipment of value Woodruff may request a lien on. We find Woodruff has not

proven Clark Farms to be undercapitalized.

       B.     Commingled finances

       Commingling of funds occurs when the same account is used to deposit

fees and pay for expenses for both personal and business use. See Iowa Supreme

Ct. Bd. of Prof’l Ethics & Conduct v. Sunleaf, 588 N.W.2d 126, 126 (Iowa 1999)

(discussing attorney trust account commingling).          Activities such as using

corporate funds for personal purposes, mixing corporate and personal accounts,

and commingling assets are factors weighed under this element. See 1 Fletcher,

Fletcher Cyclopedia of the Law of Corporations § 41.50.

       In C. Mac Chambers Co., 412, N.W.2d at 598, the court specifically noted

the facts that individual obligations of the family were routinely paid by the

corporation and that family finances were not separate from corporate accounts as

persuasive in finding the individual personally liable. In Briggs Transportation. Co.,

an owner failed to deposit proceeds into the corporate account and would use

corporate funds to pay personal expenses. 262 N.W.2d at 810 (“Corporate funds

were not segregated.”). “Single entities do not pay their left hand with their right

unless the exchange has little to no actual consequences . . . .” Tyson Fresh

Meats, Inc. v. Lauer Ltd., L.L.C., 918 F. Supp. 2d 835, 860 (N.D. Iowa 2013)

(applying Nebraska law). In another case, the use of the corporation to “juggle
                                        10

assets and liabilities” and payments on personal debts by the corporation without

explanation were among the factors leading the court to conclude the defendant

“show[ed] a consistent pattern disregarding the corporate entity when it suited

[Defendant]’s convenience and use of the corporate entity when such use was

advantageous to him personally.” Cent. Nat’l Bank & Trust Co. v. Wagener, 183
N.W.2d 678, 682 (Iowa 1971).

      Some elements the Eighth Circuit has examined as to commingling of

assets is the source of funds used to purchase equipment for other corporate

entities, lack of enforcement of promissory notes among the entities and individual,

advancing funds without accounting, failure to follow normal legal formalities, and

disposal of corporate assets without fair consideration. N.L.R.B. v. Bolivar-Tees,

Inc., 551 F.3d 722, 729–30 (8th Cir. 2008).

      Testimony from both Clark and his bookkeeper, Karen Halverson, indicate

the bank account for Clark Farms was used by Clark for personal purposes and

his sole proprietorships.   Clark testified, and the corporate ledgers and bank

statements produced show, money and revenues from Clark Farms, Casey Clark

Farms, and White Pines Farms all came into an account under Clark Farms. Bills

for each entity were paid out of the Clark Farms bank account, using Clark Farms

checks. The funds and expenses were identified and allocated to each entity per

Clark’s instructions to his bookkeeper, with book transfers via occasional

reconciliation entries. Likewise, the ledger for Casey Clark Farms shows deposits

for Clark Farms were deposited into Casey Clark Farms’s account, expenses paid,

and money transferred on paper. The bills paid and the notes held for all the

entities were tracked together. At any given time, the Clark Farms bank account
                                          11

and the Casey Clark Farms account each held assets for Clark Farms, Casey Clark

Farms, White Pines Farms, and Clark personally, with only an internal

bookkeeping transfer done periodically.

       The balance sheets for Clark Farms included a number of notes owed to

banks. Clark testified that some of those loans were to him personally, not to Clark

Farms, and that Clark Farms never had a loan from one of the banks that was

recorded in the Clark Farms books. However, the ledgers and balance sheets

show Clark Farms paid the interest on the loans, regardless of whether they were

the corporation’s loans or not.

       Halverson testified in deposition that Clark would often write a check on the

Clark Farms account to pay for things for Casey Clark Farms or for himself

personally, and the bookkeeper would then transfer the amount to an account

receivable under Clark’s name in the Clark Farms books. She explained, “It’s just

the way he did his business.” Halverson would determine which entity should pay

which invoice based on the type of expense. Clark would also deposit moneys

owed to Casey Clark Farms directly into the Clark Farms account to go toward a

receivable from personal funds. Halverson had to maintain a special file to track

the transfers between Clark’s personal and corporate accounts. According to

Halverson, at the end of 2013, Clark owed Clark Farms $665,422. She testified

that a signed promissory note exists in corporation records regarding Clark paying

back any expenses paid for him or that would be in the receivable account, but

that no dollar amount was specified. She also clearly testified that Clark owed

money to Clark Farms, that Clark Farms did not owe Clark.
                                         12

       In deposition, Clark agreed he owed money to Clark Farms and he would

repay “at some point in time.” Then in trial, Clark testified the account receivable

was money he personally owed the bank, not Clark Farms, then later testified it

was money Clark Farms owed him.

       Clark testified that he was required to personally sign some corporate loans

as guarantor. For these loans, he sold Casey Clark Farms assets, including land

and cattle, and applied the income to Clark Farms and Clark debts.            These

transactions were recorded in the corporation’s books as loans to the corporation

by Clark, despite Clark’s personal liability on the debts. From the balance sheet,

it appears several large bank notes were paid off around the time of Clark’s “loan”

to Clark Farms—but some of the debt paid off was held by a bank Clark testified

never held Clark Farms notes. Moreover, the notes’ payment was not recorded as

a loan from Clark in the balance sheet, but rather as a negative account receivable.

       While we concluded above that Clark Farms owed the money to Clark

based on the tax returns, we note Clark Farms’ bookkeeper was uncertain which

direction money was flowing between Clark and Clark Farms. Even Clark did not

appear to know whether he owed money or was owed money, changing his story

from his deposition through his trial testimony. Moreover, Clark clearly testified at

trial he would not make any effort to pay back any debt he did owe Clark Farms

“Because the corporation is owned by me.” This indicates he did not see the

corporation as a separate entity from himself and did not view personal debts to

the corporation as real.

       Separate finances are not merely the existence of an account with the

corporation’s name on it. Although the moneys may have been tracked, Clark
                                        13

clearly used the accounts for Clark Farms and Casey Clark Farms

interchangeably, with no regard for which company should be providing money for

expenses or benefitting from deposits. Clark Farms assets were kept under the

name Clark Farms, but also under Casey Clark Farms. Not all assets or debts

kept under the name Clark Farms were assets or liabilities of Clark Farms. We

find Clark Farms finances were commingled with Clark’s personal and sole

proprietorship finances.

      C.     Separate books

      Despite the commingling of assets and funds, the corporate books may still

be maintained separately. We examine evidence including the records of capital

transfers in and out of the company beyond a log book entry, promissory notes,

interest charged, recording personal purchases or sales on corporate books,

personal use of corporate assets, and failure to document corporate activities. See

Hystro Prods., Inc. v. MNP Corp., 18 F.3d 1384, 1389 (7th Cir. 1994) (applying

Illinois law); United States v. Walton, 909 F.2d 915, 928 (6th Cir. 1990). Cf. In re

Pohle, Bankr. No. 02-01327-rjh7, 2011 WL 1085787, at *3–4 (Bankr. S.D. Iowa

Mar. 21, 2011) (examining closely whether records were adequate to trace and

separate personal from corporate transactions in a bankruptcy discharge

determination).

      Little specific evidence was presented regarding separate books kept for

Clark Farms. However, the testimony tended to indicate they were not separate.

For example, Clark testified at trial some of the notes payable appearing on his

Clark Farms corporate balance sheet were for his farming operation (Casey Clark

Farms) and signed personally by him; these loans were not associated with the
                                          14

corporation, were not corporate notes payable. Numerous transactions for Casey

Clark Farms were tracked in the Clark Farms bookkeeping records. Clark testified

the books and balance statements for Clark Farms contained corporate debts and

personal notes because he was responsible for all of them. The records kept used

in the filing of taxes for the corporation included all the loans listed on the balance

sheets.

       Both Clark and Halverson testified regarding the effort to identify and track

the revenues and expenses relating to Clark Farms in the commingled accounts.

However, nothing indicates any effort was made to track the loans and

corresponding interest payments to personal or corporate loans, with Clark

admitting both were tracked on the Clark Farms books. No specific records were

kept tracking loans between Clark Farms and Clark and his sole proprietorships.

It does not appear any promissory note was executed for loans from Clark to Clark

Farms. According to Halverson, Clark executed a single, ongoing promissory note

with no specific loan amount or date to cover all loans to him from Clark Farms.

No note exists for loans from Clark to Clark Farms. Halverson entered periodic

reconciliation entries into the Clark Farms books without further explanation to

transfer moneys to Clark’s other entities.

       Based on the evidence presented, we find the Clark Farms books

inadequately distinguished, tracked, and recorded Clark Farms corporate activities

as a separate and distinct entity from Clark.

       D.     Corporate formalities not followed

       Clark Farms was incorporated as a domestic profit corporation under Iowa

Code chapter 490 in 1997. Shares were issued, officers and directors appointed,
                                          15

and bylaws adopted. Unsigned letters represented minutes for annual meetings

for 1997 through 2000, though two were dated in 1998, and two in 2000. The 1997

corporation was administratively dissolved by the Secretary of State as of

August 3, 1998, due to failure to file a biennial report. Clark did not apply to

reinstate that corporation, but instead refiled for incorporation.6 While it was

dissolved from 1998 to 2001, Clark Farms continued operations as if it were active.

       The district court held the 2001 incorporation of Clark Farms was a

reinstatement of the 1997 corporation. The court found determinative the new

Articles of Incorporation statement that Clark Farms desired to reinstate the

corporation. Because the 2001 corporation related back to the 1997 corporation,

the corporate formalities performed for the 1997 corporation, including the issuing

of shares, appointment of officers and directors, and the adoption of bylaws,

applied to the 2001 corporation.

       We find a new Clark Farms was incorporated in 2001. The reinstatement

of a corporation following an administrative dissolution is a statutorily-created

application process. Iowa Code § 490.1422(1). There is no statutory process to

reincorporate an administratively dissolved corporation.           See Iowa Code

§§ 490.1420–.1423 (governing administrative dissolutions); see also L.A.D., Inc.

v. R & S Xpress, Ltd, No. 4:12-cv-00164-RAW, 2014 WL 12601081, at *8 n.10

(S.D. Iowa Feb. 7, 2014) (“Under the Iowa Business Corporation Act an

administratively dissolved corporation may apply to be ‘reinstated’ but there is no

such thing as a ‘reincorporation’ of a dissolved corporation.”).

6
  Around the same time, Clark Farms also changed its tax status from a C corporation to
an S corporation.
                                         16

       Even if refiled articles of incorporation could be considered an application

for reinstatement, while Article XII of the 2001 articles of incorporation states an

intention to reinstate the prior Clark Farms, the statutory information requirements

for the application were not met. See Iowa Code § 490.1422(1). Moreover, even

if considered an application to reinstate the corporation, the filing was untimely, as

in 2001 a corporation had to apply for reinstatement within two years of the

effective date of the dissolution. See Iowa Code § 490.1422(1) (2001). Clark filed

the new articles of incorporation more than three years after the dissolution, on

August 27, 2001, creating a new corporation carrying the same name as his prior

corporation.

       By statute, the filing of the articles of incorporation in 2001 “is conclusive

proof that the incorporators satisfied all conditions precedent to incorporation.”

Iowa Code § 490.203(2) (2016). The articles names Clark as officer and director,

appoints Clark as registered agent, and specifies the agent’s address.

Subsequent proof of lack of corporate formalities may include no corporate bylaws,

failure to maintain registered office and agent, failure to hold an annual meeting,

no board of directors or officer, failure to issue shares, lack of minute book or

balance sheets, failure to file tax returns, and similar corporate governance

actions. See Minger Constr., Inc., 2015 WL 7019046, at *11 (McDonald, J.,

concurring in part and dissenting in part); Cass v. Sands, No. 05-1008, 2006 WL
229033, at *4 (Iowa Ct. App. Feb. 1, 2006) (regarding minute book, balance

sheets).

       No bylaws, corporate minutes book, or shareholder ledger were produced

for the 2001 Clark Farms. Shares of the 1997 corporation were issued at the initial
                                         17

meeting in 1997, and Clark appears to have considered those shares as shares of

the reincorporated company in 2001. Similarly, bylaws were adopted in 1997, but

not officially readopted by the 2001 corporation. No transfer of assets occurred

between the two corporations. Clark testified no documentation of shareholder

meetings following 2001 existed—at most interoffice correspondence and

meetings with the bank, which Clark considered to be corporate meetings but

which did not need written documentation.

       The Secretary of State administratively dissolved the new Clark Farms three

times for failure to submit the biennial report—in 2006, 2012, and 2014. Clark

Farms used the statutory procedure to apply for reinstatement each time (in 2006,

2013, and 2016), which was granted. Woodruff uses these dissolutions to allege

corporate formalities were not followed.      However, the reinstatement statute

specifically provides that a reinstatement takes effect as of the date of the

dissolution “as if the administrative dissolution had never occurred.” Iowa Code

§ 490.1422(3).

       Following the 2001 incorporation, Clark appears to have treated Clark

Farms in substantially the same way as his sole proprietorships.            The only

corporate formalities observed following reincorporation appear to be the filing of

the biennial report, which was only done sporadically (but included a listing of the

current registered agent and officers and directors), and the filing of taxes. Failure

to follow corporate formalities, though one of the recognized factors, “does not

necessarily justify piercing the corporate veil.” Tannahill v. Aunspach, 538 N.W.2d
871, 874–75 (Iowa Ct. App. 1995). While the lack of corporate formalities in this
                                          18

instance is not sufficient on its own to disregard the corporate entity, it lends weight

to other factors supporting Woodruff’s request.

        E.    Mere sham

        Woodruff claims Clark Farms was a sham corporation but treats the factor

as a summary of claims regarding corporate formalities, separate books, and

separate finances. While the other factors may indicate a sham corporation, a

corporation can be found to be a sham even if the other factors are not met. A

sham is “a false pretense[;] . . . something that is not what it seems; a counterfeit.”

Sham, Black’s Law Dictionary (10th ed. 2014). A corporation is a sham when it

has no business or corporate purpose. See Nelson v. Adams USA, Inc., 529 U.S.
460, 471 (2000) (examining when to pierce the corporate veil on a one-person

corporation) (citing Gregory v. Helvering, 293 U.S. 465, 469 (1935)). A sham

corporation must be an “instrumentality of, or conduit for” the owner to justify

piercing the corporate veil. Team Cent., Inc. v. Teamco, Inc., 271 N.W.2d 914,

923 (Iowa 1978); see also In re C.G.C. Stores, Inc., No. 87-516-DJ, 1988 WL
1568187 (Bankr. S.D. Iowa, Aug. 30, 1988) (noting businesses were not mere

shams, but “created with the intent of conducting legitimate business[ ]”). The

district court correctly examined whether Clark Farms was a mere instrumentality

of or conduit for Clark. The evidence clearly shows Clark Farms was a real, if

failing, business. We agree with the district court the corporate entity was not a

sham.

        Clark Farms successfully conducted business for a number of years,

employing workers and completing contracts. That business began to struggle

prior to 2010, and that struggle is not sufficient to pierce the corporate veil.
                                        19

However, Clark egregiously used the corporate bank account for non-corporate

purposes, writing as many checks for his other businesses and for himself as for

Clark Farms using the corporate account. The only corporate formalities that

appear to have been followed after the 2001 incorporation are the filing of taxes,

occasional biennial reports, and the officers named on those filings. Clark’s and

Halverson’s testimony demonstrate the corporate books were not entirely separate

from Clark’s other finances. Clark’s testimony and actions indicate he did not

consider the business or its finances to be a separate entity from himself and his

other businesses. For these reasons, we determine the corporate veil should be

pierced. Therefore, we reverse the district court.

      REVERSED AND REMANDED.