Long v. McGlon
| Decision Date | 30 January 1967 |
| Docket Number | Civ. A. No. 66-52. |
| Citation | 263 F. Supp. 96 |
| Court | U.S. District Court — District of South Carolina |
| Parties | Charles W. LONG, as Trustee in Bankruptcy of Columbus Supply Corporation, Bankrupt, Plaintiff, v. T. Patrick McGLON and Theresa Lydia McGlon, Defendants. |
Henry Hammer, and Isadore S. Bernstein, Columbia, S. C., for defendants.
The trustee of the bankrupt corporation instituted this action against the two named defendants as the sole shareholders, directors and officers of the bankrupt corporation seeking to hold them personally liable for the debts of the corporation on the basis that, as is alleged, the defendants at all times treated the corporation as if it were a proprietorship or a partnership. Most pertinently the trustee alleges that the defendants deposited corporation funds into their personal bank accounts or that corporation funds were received by the defendants personally and that corporation debts were paid out of the personal accounts of the defendants. The claims in the bankruptcy proceedings greatly exceed the amount of assets available, according to the allegations in the complaint, and the plaintiff asks that the defendants be held personally liable and that they be required to turn over to the trustee their joint and several assets for the benefit of creditors.
The defendants now move to dismiss the action before answering on the grounds that the complaint fails to state a claim against the defendants for which relief can be granted. The rationale of the movants is that (1) the complaint does not sufficiently allege facts which would support an action by the trustee for conversion of corporate funds, and (2) that while a creditor may pierce the corporate veil, a trustee may not. The court is of the opinion, and so rules, that the motion should be denied on both grounds.
Testing the motion to dismiss for failure to state a claim the allegations must be taken in the light most favorable to the party against whom the motion is directed, IA Barron & Holtzoff, Federal Practice & Procedure § 356 at 363 and cases cited n. 93 (Wright's ed. 1960), and the complaint should not be dismissed unless it is beyond doubt that the plaintiff could prove no set of facts in support of his claim which would entitle him to relief, Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). The allegations of the complaint, which are yet subject to amendment, and which even now must be liberally construed would permit proof by the plaintiff that corporate assets were converted to the injury of the corporation and creditors.
There is, of course, a great body of authority for the proposition that in the proper circumstances the corporate veil can be pierced — the fiction disregarded. See, e. g., 18 Am.Jur.2d, Corporations §§ 14-15 (1965); 1 Fletcher, Cyclopedia of Corporations § 41.1 (1963). It is undisputed that a creditor may look behind the corporate form in appropriate circumstances, Parker Peanut Co. v. Felder, 200 S.C. 203, 20 S.E.2d 716 (1942), but the defendant here maintains that the trustee may not do so in the same or similar instance. This conclusion is based on the reasoning that the existence of a trustee affirms the existence of a corporation; and that secondly a hardship would be worked on the creditors who have claimed against the corporation if their claims were to be shifted against individual shareholders. In the opinion of the court that position has no merit either in logic or law. The trustee represents the creditors as well as the corporation and no prejudice to corporate creditors is caused by seeking to hold individual shareholders of a nominal and insolvent corporation liable for its debts. Nothing in the Parker Peanut Co. case is persuasive to the defendant's position. In that case the United States District Court dismissed an involuntary petition in bankruptcy which had been...
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In re Western World Funding, Inc.
...particular dealings with the alleged alter egos, the trustee may so act in his creditor capacity under 11 U.S.C. § 544(a). Long v. McGlon, 263 F.Supp. 96 (D.S.C.1967) (trustee has standing pursuant to Act § 70(c), predecessor of Code § 544(a)); Henderson v. Rounds & Porter Lumber Co., 99 F.......
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Penntube Plastics Company v. Fluorotex, Inc.
...the dominant shareholder are identical one is the alter ego of the other and the corporate form may be disregarded." Long v. McGlon, D.S.C., 1967, 263 F. Supp. 96, 98. There is additional, well reasoned authority for piercing the corporate shield for purposes of establishing venue under 28 ......
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In re SI Acquisition, Inc., Bankruptcy No. 1-85-00421
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