Brief Fact Summary. Plaintiff, Kinney Shoe Corp., subleased a building to a corporation owned by Defendant, Lincoln Polan. Plaintiff brought this action to hold Defendant personally liable for the money not paid on a sublease.
Synopsis of Rule of Law. A plaintiff can pierce the corporate veil if they demonstrated that the totality of the circumstances evidence that their was a unity of interest between the individual and the corporation, and that an inequitable result would occur if the individual was not held personally liable.
A corporation is an entity, separate and distinct from its officers and stockholders, and its debts are not the individual indebtedness of its stockholders.View Full Point of Law
Issue. The issue is whether Plaintiff can pierce the corporate veil and hold Defendant personally liable.
Held. Plaintiff can pierce the corporate veil and hold Defendant liable for the unpaid sublease. The lower court was incorrect when they tried to impose a duty upon Plaintiff to check the credit and background of Industrial prior to the agreement to ensure they were capitalized to perform their obligations. Defendant can not be relieved from his obligations by saying Plaintiff should have known better.
Discussion. This court generally follows the same two-step test as in Sea-Land Services, Inc. v. Pepper Source, but here they expressly decline to add the additional burden upon a plaintiff to perform background checks.