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"No concept of separate corporate personality will suffice to solve an actual problem." Cary, Supra, at 110. "What the formula comes down to, once shorn of verbiage about control, instrumentality, agency and corporate entity, is that liability is imposed to reach an equitable result."
Plaintiff supplier brought an action against defendants, corporation and related individuals, to recover damages for a deficiency due under conditional sales contracts entered into between plaintiff and defendant corporation. Individual defendants created defendant corporation, a no-asset corporation, for the sole purpose of taking title to the equipment that plaintiff sold, and its sole corporate activity was the transfer of funds into and out of its bank account for the purpose of meeting the installment payments under the contracts with plaintiff. Upon defendant corporation's failure to meet its payment obligations, plaintiff repossessed the equipment and sold it at a substantial deficiency. Plaintiff claimed that defendant corporation's veil should have been pierced and individual defendants held personally liable for the deficiency.
Was the piercing of the corporation’s corporate veil warranted in this case?
The court affirmed the district court's order and refused to disregard the corporate entity, holding that the district judge reached the proper result because plaintiff was aware or should have known that the dummy corporation was created for the limited purpose of purchase, and plaintiff obtained precisely what it bargained for.