Court Opinion

ID: 9849141
Source: CourtListenerOpinion
Date Created: 2023-09-24 04:35:12.491697+00
Date Added: 2024-06-11T09:19:02.202494
License: Public Domain

MESCHKE, Justice,
concurring specially.
I concur in the careful and thorough analysis of the Chief Justice. I write separately only to emphasize the closely balanced nature of the evidence on the underlying factual issues in disregarding the corporate form in this case.
The initial capital was no doubt inadequate for the scope of the project undertaken. Where profits from the corporate venture are insufficient to further fuel the capital needs of the venture, it is difficult to view an initial capitalization this meagre in relation to the size of the project as anything but insufficient where substantial liabilities are left. However, the finder of fact might also have viewed the largely uncompensated services of Klemm, the principal officer and stockholder, as additional contribution to capital, rather than as simply another liability contributing to the insolvency of the corporation.
As to insolvency, the record indicates that, besides these claims, the remaining indebtedness of this corporation was substantially all owed to Klemm alone. In my view, debts to the sole stockholder should not count in piercing the corporate veil. It is the claims pursued in this action alone which sustain the finding of insolvency here. In another case, a single claim or class of claims would not necessarily, as a matter of fact, sustain a finding of insolvency when the insolvency arises near the end of corporate activity over a period of years.
It is only in the context of clearly inadequate capitalization that the accompanying findings of “siphoning” and “facade” can be considered sufficient. In another case, the finder of fact might well conclude that a fair profit on several transactions with the corporation would not lead to the inference of diversion of corporate funds by a sole stockholder, particularly where, as here, he drew no salary as an officer and rent owed to him went unpaid. The Chief Justice notes that the fact that Klemm “siphoned” any funds at all is more significant than the amount involved. That may well be true in some instances, but here the finding of “siphoning” seems sustainable only because the amounts exceed initial capital contributed.
Our sustaining the factual finding of “facade” in this case should not be understood as a rule that a sole stockholder cannot do business with his own corporation. That is not the law, nor should it be. Where services are furnished at cost, without gouging, and also are carefully documented, as they apparently were documented in this case, such circumstances alone would not *571support a finding of “facade” or “pass-through” corporation. I view the evidence in this case as barely sufficient on this point. In a similar case, with better capitalization, I believe such evidence would be insufficient.
There was no finding that there was a failure to observe corporate formalities, or that there was an absence of corporate records. Nonfunctioning of other officers in a closely held corporation is hardly significant. Therefore, the evidence in this case on the factual issues involved in disregarding the corporate form seems to me to be closely balanced.
But, merely because the evidence might also support other findings does not render the district court’s findings clearly erroneous. Walch v. Jacobson, 361 N.W.2d 617, 619 (N.D.1985). There is evidence to support the findings made. Therefore, I concur.