University:
Toronto Metropolitan University
Course:
LAW 122 | Business Law
Academic year:

2021
Views:

232

Pages:

2
Author:

Charlee Buchanan

SEA-LAND SERVICES, INC. v. PEPPER SOURCE 941 F.2d 519 (7th Cir. 1991) FACTS: Parties: Appellant: Pepper Source (Δ) Appellee: Sea-Land (Π) Procedural History: District court entered default judgment against Δ for $86,767.70 Π brought second suit against Gerald J. Marchese, owner of PS Trial court granted Π motion for summary judgment Relevant Facts: Sea-Land shipped peppers for Pepper Source Pepper source did not pay Sea-Land for a freight bill Π filed suit in December 1987 Δ was dissolved in mid 1987 Δ had no assets Π filed suit against Δ owner Δ owned several corporations ISSUE: Whether Π can pierce the corporate veil that Δ allegedly used to defraud clients PARTIES’ ARGUMENTS: Plaintiff: Defendant: DISPOSITION OF THE COURT: RULE OF LAW: A corporate entity will be disregarded and the veil of limited liability pierced when two requirements are met o There must be such unity of interest and ownership that the separate personalities of the corporation and the individual [or other corporation] no longer exist o Circumstances must be such that adherence to the fiction of separate corporate existence would sanction a fraud or promote justice For determining whether a corporation is so controlled by another to justify disregarding their separate identities there are 4 factors o The failure to maintain adequate corporate records or to comply with corporate formalities o The commingling of funds or assets o Undercapitalization o One corporation treating the assets of another corporation as its own HOLDING: Δ showed shared control of interest and ownership but Π has not shown that some injustice would result COURT’S REASONING: Marchese is the sole shareholder of PS, Caribe Crown, Jamar, and Sales-caster He is one of two shareholders in Tie-Net Except for Tie-Net none of the corporations held a corporate meeting None of the corporations passed articles of incorporation, bylaws or other agreements All companies are run out of the same office with the same expense accounts Marchese borrows money from the corporations interest free, the corporations borrow money amongst themselves Marchese used corporate accounts to pay personal expenses There must be an injustice beyond a creditor not being able to collect