McAuliffe v. C and K Builders

• Decision Date: 12 June 1958
• Docket Number: No. 2127.,2127.
• Citation: 142 A.2d 605
• Parties: Cornelius W. McAULIFFE, Olive B. McAuliffe, Appellants, v. C AND K BUILDERS, Inc., a Body Corporate, William Cohen, Charles Cohen, Appellees.
• Court: D.C. Court of Appeals

142 A.2d 605

Cornelius W. McAULIFFE, Olive B. McAuliffe, Appellants, v. C AND K BUILDERS, Inc., a Body Corporate, William Cohen, Charles Cohen, Appellees.

No. 2127.

Municipal Court of Appeals for the District of Columbia.

Argued January 27, 1958.

Decided June 12, 1958.

Samuel Intrater, Washington, D. C., with whom Albert Brick, Washington, D. C., was on the brief, for appellants.

Louis H. Cohen, Washington, D. C., with whom Samuel Gordon, Washington, D. C., was on the brief, for appellees.

Before ROVER, Chief Judge, and HOOD and QUINN, Associate Judges.

ROVER, Chief Judge.

Plaintiffs filed suit against C and K Builders, Inc., and the individual defendants for damages arising out of a contract for the purchase of a house. Predicating their claim on breach of contract and misrepresentation, plaintiffs allege that they were induced to enter the contract in reliance on representations made by agents of the corporate defendant that the purchase price included an air-conditioning unit in good working order and the cost of certain plastering work. Plaintiffs claim that a sum of $150 was expended to complete the plastering of basement walls and testimony was offered to show that the air-conditioning unit was defective. Additional evidence established that the purchase price of a house with air conditioning was $900 more than similar homes in the same development without such units.

The complaint further alleges that C and K Builders was organized by the individual defendants, who are corporate officers and major stockholders, for the purpose of avoiding personal liability. The allegations state that this corporation was but one of many formed and dissolved by these defendants with the intent to defraud creditors and other contracting parties in real estate transactions. Plaintiffs therefore sought to pierce the corporate veil and impose liability on these two stockholders.

After the evidence was in, the trial court directed a verdict in favor of the individual defendants and submitted the case to the jury as to the liability of the corporate defendant. A jury verdict was returned against the corporation and plaintiffs brought this appeal assigning principally as error the court's refusal to submit to the jury the issue of the individual defendants' liability.

As a general rule the corporate entity and the natural persons who compose the corporation will be looked upon as separate and distinct until sufficient reason to the contrary appears.¹ In Burrows Motor Co. v. Davis, D.C.Mun.App., 76 A. 2d 163, 165, this court stated:

"Before a corporate entity can be disregarded and the acts and obligations of a corporation can legally be recognized as those of particular persons, or vice versa, it must appear that the corporation is not only controlled by those persons, but also that the separateness of the persons and the corporation has ceased and the facts must be such that an adherence to the fiction of the separate existence of the corporation would sanction a fraud or promote injustice."

Thus, before the acts and obligations of a corporation can be legally recognized as those of a particular person, the party seeking to disregard the corporate entity has the burden of showing by affirmative proof that a unity of ownership and interest exists and that the corporation was created or used for the purpose of perpetrating fraud or wrong. Fraudulent activity will not be presumed, nor may it be based merely on suspicion, conjecture, or doubtful inference.

Viewing plaintiffs' evidence in the most favorable light, we cannot say that a sufficient foundation in evidentiary fact was made to warrant a probe of the...