Court Opinion

ID: 2677897
Source: CourtListenerOpinion
Date Created: 2014-06-10 23:48:29.953102+00
Date Added: 2024-06-11T13:08:55.496698
License: Public Domain

IN THE SUPREME COURT OF NORTH CAROLINA

                                    No. 424A12

                           FILED 8 NOVEMBER 2013
MICHAEL A. GREEN and DANIEL J. GREEN,
                  Plaintiffs
            v.
JACK L. FREEMAN, JR., CORINNA W. FREEMAN, PIEDMONT CAPITAL
HOLDING OF NC, INC., PIEDMONT EXPRESS AIRWAYS, INC., PIEDMONT
SOUTHERN AIR FREIGHT, INC., and NAT GROUP, INC.,
                   Defendants
            v.
LAWRENCE J. D’AMELIO, III,
                   Third-Party Defendant

      Appeal pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel

of the Court of Appeals, ___ N.C. App. ___, 733 S.E.2d 542 (2012), affirming a

judgment entered on 2 June 2010 and an order entered on 8 July 2010, both by

Judge Edwin G. Wilson, Jr., and an order entered on 6 October 2008 by Judge

Ronald Spivey, all in Superior Court, Guilford County. Heard in the Supreme Court

on 12 March 2013.

      Thomas B. Kobrin for plaintiff-appellees.

      Rossabi Black Slaughter, P.A., by Gavin J. Reardon and T. Keith Black, for
      defendant-appellant Corinna W. Freeman.

      MARTIN, Justice.

      In this case we are presented with a failed corporate venture and asked what

remedy, if any, is available to plaintiffs. We hold that plaintiffs did not present
                                GREEN V. FREEMAN

                                 Opinion of the Court

evidence sufficient to establish a breach of fiduciary duty claim and reverse the

decision of the Court of Appeals on that issue. We reverse and remand to the Court

of Appeals for application of the piercing the corporate veil doctrine to plaintiffs’

agency claims.

      Defendant Corinna Freeman and her now-deceased husband founded

Piedmont Southern Air Freight (Piedmont Southern), a shipping company, and ran

it together until he became sick in 2001. That same year, Corinna signed a letter

“delegating responsibility and authority for making all corporate, financial,

operational and administrative decisions for [Piedmont Southern]” to her son Jack

Freeman, another defendant in this case who is not a party to this appeal. Corinna

remained owner of the company on the corporate paperwork filed with the Secretary

of State.   In 2005 Corinna applied to the Secretary of State to have Piedmont

Southern reinstated after an administrative dissolution. In that filing, she signed

as the owner of Piedmont Southern.       Also in 2005, Jack partnered with Larry

D’Amelio to create a new shipping company, Piedmont Express Airways (Piedmont

Express). Jack and Larry intended to structure Piedmont Express and Piedmont

Southern as subsidiaries of a new entity called Piedmont Capital Holding of North

Carolina (Piedmont Capital). Jack and Larry met with plaintiff Michael Green to

discuss investing in this new venture. Afterward, Michael and his brother Daniel,

also a plaintiff here, each gave the venture $200,000, which they believed would

serve as both a loan and an investment. Larry signed promissory notes to Michael

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                                GREEN V. FREEMAN

                                 Opinion of the Court

and Daniel on behalf of Piedmont Southern, Piedmont Express, and Piedmont

Capital (collectively, the Piedmont companies), promising to repay the funds within

the earlier of one year or when the cumulative billings of the companies equaled two

million dollars. Corinna was not involved in any of the conversations leading up to

the transfers of plaintiffs’ capital, and plaintiffs did not rely on her when making

their decision to invest. Additionally, Corinna’s signature was not on any of the

loan documents.

      Although Jack and Larry apparently intended that Piedmont Capital own

Piedmont Southern and Piedmont Express, the articles of incorporation for

Piedmont Capital and Piedmont Express did not establish a hierarchy among the

three companies.    The operating agreement for the three companies similarly

grouped the three entities together.    Moreover, the corporate names were used

interchangeably in corporate communications and discussions between the parties.

According to the operating agreement, Jack was CEO and Larry was President of

the three companies.      The agreement further provided that “[t]he initial

Chairperson shall be Corinna W[.] Freeman and Jack L. Freeman Jr.” In addition,

the agreement identified Corinna as holding thirty-three shares of the combined

companies, with a later amendment indicating she held eighty-eight shares. No

stockholders or directors meetings were ever held, and stock was never issued.

Corinna did not sign the operating agreement, but Jack signed “by Jack Freeman”

on a line designated for Corinna on the later amendment. Jack testified that he

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                               GREEN V. FREEMAN

                                Opinion of the Court

never told her about identifying stock in her name or about naming her

Chairperson. When plaintiffs asked to meet with Corinna or to learn about her

involvement in the companies, Jack told them he had authority to act on her behalf

and sign all documents in her name. Jack and Larry both testified that Corinna

was not involved in the management of the companies. Corinna did come to the

Piedmont offices on several occasions to train the staff and received compensation

for her services.

      The record contains evidence of several bank accounts operated for the

various Piedmont companies. In 2005 a Wachovia business checking account was

opened by Corinna as the “CEO/OWNER” of Piedmont Express. A First Citizens

checking account and a First Citizens money market savings account were in the

name of Piedmont Capital; these two accounts each received one of the Green

brothers’ $200,000 checks. Funds from these accounts were deposited into a First

Citizens checking account for Piedmont Express. An American Express business

credit card was issued to “C Freeman, PSA Airline” and was actively used at least

between December 2005 and July 2006.

      Between February 2006 and June 2006, payments were made on a Wachovia

credit card issued to “C Freeman” by eight checks written from the Piedmont

Express checking account with First Citizens Bank and signed by “signatory for C.

Freeman.”     In June 2006 three checks from the Piedmont Express Wachovia

checking account were signed by Corinna to repay loans. In 2007 Corinna wrote

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                                 GREEN V. FREEMAN

                                  Opinion of the Court

checks from a BB&T account in her name, totaling over $19,000, to Jack and

Piedmont Southern for company expenses. Mortgage and utility payments on a

house belonging to Corinna were paid from the Piedmont Express Wachovia

checking account.

         By June 2006, plaintiffs’ $400,000 had all been spent. In December 2006,

plaintiffs sued Jack, Larry, Corinna, and the Piedmont companies to recover the

funds. Plaintiffs originally claimed that they should be able to pierce the corporate

veil and that Corinna, along with Jack and, in some cases, the Piedmont companies,

had committed fraud, breach of contract, conversion, and breach of fiduciary duty,

engaged in unfair and deceptive practices, and received unjust enrichment.

Plaintiffs subsequently amended their complaint to include Larry as a third-party

defendant. The trial court granted summary judgment for Corinna on plaintiffs’

claims based on fraud, breach of contract, and unfair and deceptive practices, but

denied summary judgment for Corinna on plaintiffs’ claims based on conversion,

unjust enrichment, breach of fiduciary duty, and piercing the corporate veil. Upon

plaintiffs’ subsequent motion, the trial court allowed plaintiffs to amend the

complaint to include claims under the theory that Jack was acting as Corinna’s

agent.

         Thus, when this case went to trial, the claims against Corinna were as

follows: agency claims, based on Jack’s actions, for fraud, breach of fiduciary duty,

and unfair and deceptive practices; personal liability claims for conversion, unjust

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                                  GREEN V. FREEMAN

                                   Opinion of the Court

enrichment, and breach of fiduciary duty; and personal liability “for the debts and

obligations of the Piedmont Companies” through the piercing the corporate veil

doctrine. At the end of plaintiffs’ presentation of evidence, the trial court dismissed

the conversion claim against Corinna. At the close of all evidence, the trial court

granted in part Corinna’s motion for directed verdict, dismissing the agency claims

and the unjust enrichment claim. Thus, as for Corinna, only the breach of fiduciary

duty and piercing the corporate veil issues were submitted to the jury. The jury

found that Corinna “control[led] [the Piedmont companies] with regard to the acts

or omissions that damaged the plaintiffs” and that “plaintiffs [were] damaged by the

failure of [Corinna] to discharge her duty as a corporate director or officer.”

Corinna’s post-trial motions for judgment notwithstanding the verdict (JNOV) or a

new trial were denied.      Corinna then appealed from the trial court’s original

judgment and its denial of her motions for JNOV and a new trial. Plaintiffs cross-

appealed from the trial court’s rulings adverse to them.

      The Court of Appeals affirmed the trial court’s denial of Corinna’s motions.

Green v. Freeman, ___ N.C. App. ___, 733 S.E.2d 542 (2012). In so doing, the court

held there was sufficient evidence for a jury to find Corinna liable for breach of

fiduciary duty and liable under “plaintiffs’ claim for piercing the corporate veil.” Id.

at ___, 733 S.E.2d at 552-54. The court also affirmed the dismissal of plaintiffs’

unfair and deceptive practices claim. Id. at ___, 733 S.E.2d at 556. The court did

not address the merits of plaintiffs’ arguments that the trial court erred by

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                                  GREEN V. FREEMAN

                                   Opinion of the Court

dismissing plaintiffs’ agency claims and by not admitting the depositions of

defendants, stating, “[A]s we have affirmed the trial court’s judgment [regarding

plaintiffs’ claims based on breach of fiduciary duty and piercing the corporate veil]

. . . there is no need to address these additional arguments as we are affirming the

judgment for the reasons stated above and consideration of these issues would have

no effect upon the outcome.” Id. at ___, 733 S.E.2d at 556.

      The dissenting judge would have held that “plaintiffs failed to adduce

evidence of a fiduciary relationship, or evidence that Corinna personally breached

any duty to plaintiffs proximately resulting in their harm.” Id. at ___, 733 S.E.2d at

557 (Calabria, J., dissenting). The dissenting judge also would have held that “since

plaintiffs failed to prove Corinna exercised domination and control over Piedmont

that would subject her to individual liability, plaintiffs failed to prove her liability

for corporate obligations should extend beyond the confines of a corporate separate

entity.” Id. at ___, 733 S.E.2d at 563. Corinna appealed to this Court as of right on

the basis of the dissent. We reverse the decision of the Court of Appeals on the

breach of fiduciary duty issue, and we remand to that court for consideration of

plaintiffs’ cross-appeal from the trial court’s dismissal of their agency claims against

Corinna and the effect of the agency claims on the application of the piercing the

corporate veil doctrine. The other issues decided by the Court of Appeals are not

before this Court and are not addressed in this opinion.

      When considering the denial of a directed verdict or JNOV, the standard of

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                                  Opinion of the Court

review is the same. Davis v. Dennis Lilly Co., 330 N.C. 314, 323, 411 S.E.2d 133,

138 (1991). “The standard of review of directed verdict is whether the evidence,

taken in the light most favorable to the non-moving party, is sufficient as a matter

of law to be submitted to the jury.” Id. at 322, 411 S.E.2d at 138 (citation omitted).

If “there is evidence to support each element of the nonmoving party’s cause of

action, then the motion for directed verdict and any subsequent motion for [JNOV]

should be denied.” Abels v. Renfro Corp., 335 N.C. 209, 215, 436 S.E.2d 822, 825

(1993) (citations omitted). Further, “[i]f, at the close of the evidence, a plaintiff’s

own testimony has unequivocally repudiated the material allegations of his

complaint and his testimony has shown no additional grounds for recovery against

the defendant, the defendant’s motion for a directed verdict should be allowed.”

Cogdill v. Scates, 290 N.C. 31, 44, 224 S.E.2d 604, 611 (1976). Whether Corinna

was entitled to a directed verdict or JNOV is a question of law. Scarborough v.

Dillard’s, Inc., 363 N.C. 715, 720, 693 S.E.2d 640, 643 (2009) (citations omitted),

cert. denied, ___ U.S. ___, 131 S. Ct. 2456 (2011). We review questions of law de

novo. E.g., N.C. Farm Bureau Mut. Ins. Co. v. Cully’s Motorcross Park, Inc., ___

N.C. ___, ___, 742 S.E.2d 781, 786 (2013).

      The first issue before us is whether there was sufficient evidence, as a matter

of law, that Corinna breached a fiduciary duty owed to plaintiffs, proximately

causing injury to them. “For a breach of fiduciary duty to exist, there must first be

a fiduciary relationship between the parties.” Dalton v. Camp, 353 N.C. 647, 651,

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                                  GREEN V. FREEMAN

                                   Opinion of the Court

548 S.E.2d 704, 707 (2001) (citations omitted). A fiduciary relationship may arise

when “ ‘there has been a special confidence reposed in one who in equity and good

conscience is bound to act in good faith and with due regard to the interests of the

one reposing confidence.’ ” Id. (quoting Abbitt v. Gregory, 201 N.C. 577, 598, 160

S.E. 896, 906 (1931)).

      In North Carolina, directors of a corporation are required to act in good faith,

with due care, and in a manner they reasonably believe to be in the best interests of

the corporation.    N.C.G.S. § 55-8-30 (2011).       When these fiduciary duties are

breached, a shareholder may sue the offending director in a derivative action. Id.

§ 55-7-40 (2011). The shareholder must “[f]airly and adequately represent[ ] the

interests of the corporation in enforcing the right of the corporation.” Id. § 55-7-41

(2011).   The General Assembly has expressly indicated its intent “to avoid an

interpretation [of N.C.G.S. § 55-8-30] . . . that would give shareholders a direct right

of action on claims that should be asserted derivatively” and to avoid giving

creditors a generalized fiduciary claim. N.C.G.S. § 55-8-30 N.C. cmt. (2011); see

Russell M. Robinson, II, Robinson on North Carolina Corporation Law § 14.01[2], at

14-4 (7th ed. 2012) [hereinafter Robinson on Corporation Law].

      The general rule is that “[s]hareholders, creditors or guarantors of

corporations generally may not bring individual actions to recover what they

consider their share of the damages suffered by the corporation.” Barger v. McCoy

Hillard & Parks, 346 N.C. 650, 660, 488 S.E.2d 215, 220-21 (1997) (citations and

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                                    GREEN V. FREEMAN

                                    Opinion of the Court

quotation marks omitted). Shareholders may, however, bring a derivative lawsuit

against corporate officers and directors, in which case any damages flow back to the

corporation, not to the individual shareholders bringing the action.         Rivers v.

Wachovia Corp., 665 F.3d 610, 614-15 (4th Cir. 2011) (citations omitted); see 2

James D. Cox & Thomas Lee Hazen, Cox & Hazen on Corporations § 15.02 (2d ed.

2003) [hereinafter Cox & Hazen on Corporations].           Plaintiffs did not bring a

derivative suit.   Therefore, we examine two exceptions to the general rule:

shareholders, creditors and guarantors may bring an individual action against a

third party for breach of fiduciary duty when (1) “the wrongdoer owed [them] a

special duty” or (2) they suffered a personal injury “distinct from the injury

sustained by . . . the corporation itself.” Barger, 346 N.C. at 659, 661, 488 S.E.2d at

219, 221. Plaintiffs alleged they were both shareholders and creditors. We analyze

each alleged position separately.

      We begin by determining whether plaintiffs ever became shareholders of the

Piedmont companies.       “[T]he holder of the shares acquires the status of a

shareholder[ ] when they are issued, which is a fact to be determined upon the

intent of the parties as indicated by the pertinent corporate resolutions,

subscription or like agreement, or other relevant circumstances.”        Robinson on

North Carolina Corporation Law § 20.01, at 20-2; see N.C.G.S. § 55-6-03(a) (2011).

Shares are authorized in the articles of incorporation filed with the Secretary of

State, N.C.G.S. § 55-6-01 (2011), but then may be issued by the corporation’s board

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                                  GREEN V. FREEMAN

                                   Opinion of the Court

of directors, id. § 55-6-21 (2011); Cox & Hazen on Corporations § 16.13, at 1058;

Robinson on North Carolina Corporation Law, at 20-2 (noting it is “important to fix

the issue date of shares precisely by directors’ resolutions or in some other definitive

manner”).

      At trial Michael Green testified that he never received any stock and that he

did not know whether any stock was put in his name in the company books. The

only document in the record mentioning the issuance of stock is the operating

agreement, signed by plaintiffs, Larry, and Jack on 22 November 2005, which

states, “It is further agreed that Michael Alan Green and Danny Jay Green must

remain Shareholders in the Company for a period of 5 years before said shares will

be vested.” The 2006 amendment to the operating agreement includes the same

requirement.    Plaintiffs’ complaint was filed on 6 December 2006.           Plaintiffs

presented no evidence or alternative interpretation of the vesting schedule.

Accordingly, either because the authorized stock was never issued by a decision of

the board of directors or because the stock did not vest in plaintiffs, we conclude

that plaintiffs never became shareholders.

      When “plaintiff[s’] own testimony has unequivocally repudiated the material

allegations of [their] complaint . . . the defendant’s motion for a directed verdict

should be allowed.” Cogdill, 290 N.C. at 44, 224 S.E.2d at 611. Because plaintiffs

never became shareholders, Corinna could not have owed them, as shareholders,

fiduciary duties under either the special duty or the personal injury exception.

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                                   GREEN V. FREEMAN

                                    Opinion of the Court

Plaintiffs therefore lack standing to bring a claim as shareholders for breach of

fiduciary duty.

       In addition to alleging they were shareholders, plaintiffs alleged the $400,000

given to the Piedmont companies was a loan.            Thus, we next consider whether

plaintiffs can recover under the special duty or unique personal injury exception

based on the theory of liability that Corinna, as a director or officer, breached a

fiduciary duty owed to them as creditors.           To recover under the special duty

exception, there must be a special duty “that defendant[ ] owed . . . to plaintiffs that

was personal to plaintiffs as [creditors] and was separate and distinct from the duty

defendant[ ] owed the corporation.” Barger, 346 N.C. at 661, 488 S.E.2d at 221.

When considering claims by shareholders, we have recognized the creation of a

special duty “when the wrongful actions of a party induced an individual to become

a shareholder; . . . when the party performed individualized services directly for the

shareholder; and when a party undertook to advise shareholders independently of

the corporation.” Id. at 659, 488 S.E.2d at 220 (citations omitted). “This list is

illustrative; it is not an exclusive list of all factual situations in which a special duty

may be found.” Id. “We apply the same rules for establishing a special duty when

plaintiffs are [creditors] as we apply when plaintiffs are shareholders.” 346 N.C. at

661, 488 S.E.2d at 221.

       Plaintiffs’ testimony, standing alone, establishes that none of the scenarios

discussed in Barger apply. Plaintiffs testified that Corinna was not involved in the

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                                GREEN V. FREEMAN

                                    Opinion of the Court

meetings leading up to their $400,000 alleged investment, that they did not rely on

any representations made by her when choosing to invest, and that there was

almost no personal interaction between Corinna and plaintiffs. In fact, the most

contact plaintiffs had with Corinna was seeing her a handful of times and saying

nothing more than “hello.” Even viewed in the light most favorable to plaintiffs, the

evidence of plaintiffs’ contact with Corinna does not allow a reasonable inference

that they relied on or trusted in her when they chose to invest in the Piedmont

companies. While the Barger scenarios are not exclusive, the facts of this case do

not present an analogous situation meriting the recognition of a fiduciary duty

under the special duty exception.

      To establish a breach of fiduciary duty under the second exception, plaintiffs

had to present evidence that they suffered an injury peculiar or personal to

themselves. Id. There must be evidence “that the injury suffered by the [creditor]

is personal to him and distinct from the injury suffered by the corporation itself.”

Id. The loss of an investment “is identical to the injury suffered by” the corporate

entity as a whole. Energy Investors Fund, L.P. v. Metric Constructors, Inc., 351 N.C.

331, 336, 525 S.E.2d 441, 444 (2000); see also Cox & Hazen on Corporations § 15.02,

at 890.   Even when one person contributes a disproportionate amount of the

investment and thus bears a correspondingly greater loss, such an occurrence

“hardly makes for an ‘individual injury.’ ” Energy Investors, 351 N.C. at 336, 525

S.E.2d at 444. Here, plaintiffs’ injury is the loss of $400,000. Because plaintiffs’

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                                  Opinion of the Court

injury is the same as the injury suffered by the company itself, the evidence was

insufficient to support plaintiffs’ claim under the personal injury exception.

      Plaintiffs have failed to produce evidence showing either that Corinna owed

them, as shareholders or creditors, a special duty or that they suffered a personal

injury distinct from the injury suffered by the Piedmont companies as a whole.

Therefore, as a matter of law, plaintiffs could not assert individual claims that

belonged to the company. Energy Investors, 351 N.C. at 336, 525 S.E.2d at 444.

Accordingly, there was insufficient evidence to support plaintiffs’ claim, and

Corinna’s motions for directed verdict and JNOV should have been granted. See

Abels, 335 N.C. at 215, 436 S.E.2d at 825. We reverse the decision of the Court of

Appeals on this issue.

      The second issue Corinna raises on appeal is whether the Court of Appeals

erred in holding “the trial court did not err in denying defendant Corinna’s motions

for a directed verdict and JNOV as to plaintiffs’ claims for piercing the corporate

veil.” Green, ___ N.C. App. at ___, 733 S.E.2d at 555 (majority). “The general rule is

that in the ordinary course of business, a corporation is treated as distinct from its

shareholders.” State ex rel. Cooper v. Ridgeway Brands Mfg., LLC, 362 N.C. 431,

438, 666 S.E.2d 107, 112 (2008) (citation omitted). Piercing the corporate veil sets

aside that general rule and allows a plaintiff to impose legal liability for a

corporation’s obligations, or for torts committed by the corporation, upon some other

company or individual that controls and dominates a corporation. See Henderson v.

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                                  Opinion of the Court

Sec. Mortg. & Fin. Co., 273 N.C. 253, 160 S.E.2d 39 (1968). The doctrine allows

injured parties to bring claims against individuals who otherwise would have been

shielded by the corporate form. Courts will pierce the corporate veil “when applying

the corporate fiction would accomplish some fraudulent purpose, operate as a

constructive fraud, or defeat some strong equitable claim.” Ridgeway Brands, 362

N.C. at 439, 666 S.E.2d at 112-13 (citations and internal quotation marks omitted).

Disregarding the corporate form is not to be done lightly. Id. at 438-39, 666 S.E.2d

at 112.

      The aggrieved party must show that “the corporation is so operated that it is

a mere instrumentality or alter ego of the sole or dominant shareholder and a shield

for his activities in violation of the declared public policy or statute of the State.”

Henderson, 273 N.C. at 260, 160 S.E.2d at 44 (citations omitted). Evidence upon

which we have relied to justify piercing the corporate veil includes inadequate

capitalization, noncompliance with corporate formalities, lack of a separate

corporate identity, excessive fragmentation, siphoning of funds by the dominant

shareholder, nonfunctioning officers and directors, and absence of corporate records.

Glenn v. Wagner, 313 N.C. 450, 455-58, 329 S.E.2d 326, 330-32 (1985) (citations

omitted). Many of those elements are facially present here. The record contains

evidence that the names of the Piedmont companies were used interchangeably; no

shareholders or directors meetings were ever held; and funds from corporate

accounts were used to pay personal expenses, such as a home mortgage and utility

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                                    Opinion of the Court

bills.

         After the fact finder determines that the corporate veil should be pierced—in

other words, that the corporate identity should be disregarded—the next inquiry is

whether a noncorporate defendant may be held liable for her personal actions as an

officer or director. To succeed in this inquiry, plaintiffs must present evidence of

three elements:

                     (1) Control, not mere majority or complete stock
               control, but complete domination, not only of finances, but
               of policy and business practice in respect to the
               transaction attacked so that the corporate entity as to this
               transaction had at the time no separate mind, will or
               existence of its own; and

                      (2) Such control must have been used by the
               defendant to commit fraud or wrong, to perpetrate the
               violation of a statutory or other positive legal duty, or a
               dishonest and unjust act in contravention of [a] plaintiff’s
               legal rights; and

                     (3) The aforesaid control and breach of duty must
               proximately cause the injury or unjust loss complained of.

Id. at 455, 329 S.E.2d at 330 (citation and quotation marks omitted).

         In this case there was evidence, when taken in the light most favorable to

plaintiffs, from which a jury could conclude that Corinna exercised domination and

control over the Piedmont companies.               Despite Corinna’s designation as

Chairperson, no shareholders or directors meetings were ever held. Her name was

on a corporate credit card account and on at least one of the corporate checking

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                                   Opinion of the Court

accounts. She is the undisputed owner of Piedmont Southern and is designated in

corporate documents as majority shareholder of the Piedmont companies. Corinna

wrote checks totaling over $19,000 from a BB&T account in her name to Jack and

Piedmont Southern for company expenses. Finally, mortgage and utility payments

on a house belonging to Corinna were paid from a Piedmont Express checking

account.

       But sufficient evidence of domination and control establishes only the first

element for liability. There must also be an underlying legal claim to which liability

may attach. Id.; see Whitehurst v. FCX Fruit & Vegetable Serv., Inc., 224 N.C. 628,

637, 32 S.E.2d 34, 40 (1944). The only legal claim against Corinna considered by

the jury was breach of fiduciary duty, which we have held was erroneously

submitted to the jury. Plaintiffs’ complaint stated other claims against Corinna, but

they were dismissed by the trial court. Plaintiffs appealed the dismissal of their

agency claims against Corinna to the Court of Appeals, but the court did not

address the merits of that portion of the appeal because the court affirmed the trial

court’s judgment regarding plaintiffs’ claims for breach of fiduciary duty and

piercing the corporate veil. Green, ___ N.C. App. at ___, 733 S.E.2d at 556. Without

these agency claims, however, there was no legal claim still providing a basis for

liability.

       The doctrine of piercing the corporate veil is not a theory of liability. Rather,

it provides an avenue to pursue legal claims against corporate officers or directors

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                                  GREEN V. FREEMAN

                                   Opinion of the Court

who would otherwise be shielded by the corporate form. Without the agency claims

serving as the underlying wrongs that proximately caused plaintiffs’ harm, evidence

of domination and control is insufficient to establish liability. In other words, if the

trial court properly dismissed plaintiffs’ agency claims, it is irrelevant whether

Corinna exercised domination and control over the Piedmont companies. On the

other hand, if the trial court erred in dismissing the agency claims, the question

remains whether plaintiffs may recover against Corinna on those claims through

the piercing the corporate veil doctrine. Therefore, we reverse and remand to the

Court of Appeals for a determination of whether the trial court erred in granting

Corinna’s motion for a directed verdict on plaintiffs’ agency claims for fraud and

breach of fiduciary duty.

      In summary, plaintiffs’ evidence on their breach of fiduciary duty claim was

insufficient as a matter of law. Additionally, plaintiffs’ agency claims are the only

remaining claims to which personal liability may attach under the piercing the

corporate veil doctrine. Accordingly, the decision of the Court of Appeals is reversed

and this case is remanded for further proceedings not inconsistent with this opinion.

      REVERSED AND REMANDED.

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