Consumer's Co-op v. Olsen - 142 Wis. 2d 465, 419 N.W.2d 211 (1988)

Rule:

In order for the corporate veil to be pierced, in addition to undercapitalization, additional evidence of failure to follow corporate formalities or other evidence of pervasive control must be shown.

Facts:

Plaintiff Consumer's Co-op of Walworth County, a Wisconsin cooperative, commenced the present action against the defendants, Christian E. Olsen and Jack Olsen, seeking to impose liability on Chris and Jack Olsen for an unsatisfied judgment against a corporation, ECO of Elkhorn, Inc., in which Chris Olsen owned a majority of the issued stock. The trial court entered judgment in favor of plaintiff for the sum of $38,851.42, having found the case at bar to be an appropriate case to pierce the corporate veil. Defendants appealed. 

Issue:

Did the district court err in piercing the corporate veil to make the shareholders liable to the plaintiff? 

Answer:

Yes.

Conclusion:

The court held that the trial court erred when it pierced the corporate veil of a corporation in which plaintiff was a shareholder. The court found that the corporation was adequately capitalized when it was formed and that plaintiff's actions in continuing to extend credit to the corporation once it became delinquent on its account waived any right of plaintiff to assert a claim that the corporation subsequently became undercapitalized as a result of increased business. The court also held that there was inadequate evidence to establish that the corporation had no separate mind of its own or that the corporation disregarded corporate formalities.