In Ziese & Sons Excavating, Inc. v. Boyer Const. Corp. and Boyer Construction Group Corp., 2012 WL 1066026 (Ind. Ct. App. 2012), the court stated that summary judgment was inappropriate after finding genuine issues of material fact as to both the questions of piercing the corporate veil and successor liability, addressing issues when a corporation is similar in name, operation, shareholders, owners, employees, and project ownership. In this case, Ziese had performed work for Boyer Construction Corporation (“Corporation”) on the Knode Creek Retail Development project (“Project”). After completing the Project, Corporation never paid Ziese. Two years later, Boyer Construction Group Corporation (“Group”) was formed, which performed the same business as Corporation. Further, Group purchased assets from Corporation, including two contracts and personal assets, and had the same individuals who owned, ran, or where employed by Corporation. Finally, Group used Corporation’s website, trademark and logo, and issued a check to Ziese for partial payment for its work on the Project. Pursuant to nonpayment and Group’s creation, Ziese sued both Corporation and Group for payment for services rendered.
The court first examined Ziese’s claim to pierce the corporate veil, asserting that Group was the “alter ego” of Corporation. When a court pierces the corporate veil, the court believes a corporation should not be absolved from liability for the acts of another corporation, as one corporation is so organized and controlled and its affairs are so conducted that it is a mere instrumentality or adjunct of another corporation. A subset of piercing the corporate veil is the corporate alter ego doctrine, which is a device by which a plaintiff tries to show that two corporations are so closely connected that the plaintiff should be able to sue one for the actions of the other. After evaluating the factors involved in both piercing the corporate veil and the alter ego doctrine, the court found the striking similarities between Group and Corporation created a genuine issue of material fact that precluded summary judgment. Specifically, the court based its conclusion on the following facts: that Group was created to conduct the same business as corporation, the name of the two corporations were nearly identical, Group assumed use of corporation’s website, trademark, and logo, despite not acquiring them in a purchase agreement, and that Group publically claimed ownership of Corporation’s building history and projects.
Next, the court examined Ziese’s claim that Group was liable for Corporation’s debt under the successor liability rule, namely fraudulent sale of assets and mere continuation. In general, when one corporation purchases the assets of another, the buyer does not assume the debts and liabilities of the seller. However, when fraudulent sale of assets or mere continuation are found, successor liability will be applied. As to the fraudulent sale of assets, the court found a genuine issue of material fact existed as to whether Ziese could recover for the same reasons enumerated under the alter ego doctrine, plus the fact that Group issued a check to Ziese for payment of a debt despite evidence that Group owed such debt to Ziese. As to the mere-continuation exception, where the court considered whether a predecessor corporation should be deemed simply to have re-incarnated itself, largely aside of the business operations, the court also found a genuine issue of material fact. The court reasoned the fact that the same individuals owned, ran, or were employed by both Corporation and Group, albeit in different combinations, was enough to create the genuine issue of material fact as to whether mere continuation existed.
Therefore, given the genuine issues of material fact as to both piercing the corporate veil and successor liability, the Indiana Court of Appeals remanded the case for further consideration, surmising that such similarities between corporations may not prevent a court from either piercing the corporate veil, finding successor liability, or both.
Jeremy Fetty is a partner in the law firm of Parr Richey Frandsen Patterson Kruse with offices in Lebanon and Indianapolis. He often advises businesses and utilities (for profit, non-profit and cooperative) on organizational, human resources, and transactional matters and drafts and reviews commercial contracts.
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