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United States Court of Appeals for the Fourth Circuit
December 4, 1975, Argued ; May 13, 1976, Decided
[*683] RUSSELL, CIRCUIT JUDGE:
In this action on debt, the plaintiff seeks, by piercing the corporate veil under the law of South Carolina, to impose individual liability on the president of the indebted corporation individually. 2 The District Court, making findings of fact which may be overturned only if clearly erroneous, pierced the corporate veil and imposed individual liability. The individual defendant appeals. We affirm.
At the outset, it is recognized that ] a corporation is an entity, separate and distinct from its officers [**2] and stockholders, and that its debts are not the individual indebtedness of its stockholders. This is expressed in the presumption that the corporation and its stockholders are separate and distinct. Fishman v. State (1973), 128 Ga. App. 505, 197 S.E. 2d 467, 473. And this oft-stated principle is equally applicable, whether the corporation has many or only one stockholder. 3 [**4] But this concept of separate entity is merely a legal theory, "introduced for purposes of convenience and to subserve the ends of justice," 4 and the courts "decline to recognize [it] whenever recognition of the corporate form would extend the principle of incorporation 'beyond its legitimate purposes and [would] produce injustices or inequitable consequences.'" Krivo Industrial Supp. Co. v. National Distill. & Chem. Corp. (5th Cir. 1973), 483 F.2d 1098, 1106, modified factually 490 F.2d 916; Sell v. United States (10th Cir. 1964), 336 F.2d 467, 472; Stone v. Eacho (4th Cir. 1942), 127 F.2d 284, 288-9, cert. denied, 317 U.S. 635, 87 L. Ed. 512, 63 S. Ct. 54 (1942); Jennings v. Automobile Sales Co. (1917), 107 S.C. 514, 515, 93 S.E. 188. [**3] Accordingly, "in an appropriate case and in furtherance of the ends of justice," the corporate veil will be pierced and the corporation and its stockholders "will be treated as identical." 18 Am. Juris. 2d at 559.
] This power to pierce the corporate veil, though, is to be exercised "reluctantly" 5 [**5] and "cautiously" 6 and the burden of establishing a basis for the disregard of the corporate fiction rests on the party asserting such claim. Coryell v. Phipps (5th Cir. 1942), 128 F.2d 702, 704, aff., 317 U.S. 406, 87 L. Ed. 363, 63 S. Ct. 291 (1943); Aamco Automatic Transmissions, Inc. v. Tayloe (E.D. Pa. 1973), 368 F. Supp. 1283, 1299; Haynes v. Champagne Tile Corporation [*684] (E.D. La. 1964), 228 F. Supp. 157, 159.
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
540 F.2d 681 *; 1976 U.S. App. LEXIS 11359 **
DeWitt Truck Brokers, Inc., Appellee, v. W. Ray Flemming Fruit Company and W. Ray Flemming, Appellants
Prior History: [**1] Appeal from the United States District Court for the District of South Carolina, at Columbia. Robert W. Hemphill, District Judge.
stockholders, corporate veil, piercing, fiction, growers, formalities, promise, courts, stock, corporate entity, transportation, disregarded, charges, factors, individual liability, clearly erroneous, undercapitalization, salary
Business & Corporate Law, Shareholder Duties & Liabilities, Piercing the Corporate Veil, General Overview, Corporate Governance, Shareholders, Civil Procedure, Appeals, Standards of Review, Clearly Erroneous Review, Alter Ego, Corporate Formalities, Bankruptcy Law, Procedural Matters, State Insolvency Laws, Directors & Officers, Compensation, Corporate Finance, Dividends & Reacquisition of Shares, Declaration & Distribution of Dividends, Inadequate Capitalization, Controlling Shareholders, Contracts Law, Statute of Frauds