Pazur v. Belcher
659 S.E.2d 804, 290 Ga.App. 703, 2008 Fulton County D. Rep. 1111 (2008)
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Rule of Law:
An officer's personal participation in a tort committed by the corporation is insufficient, by itself, to pierce the corporate veil. To hold a shareholder personally liable for corporate debts, there must be evidence of abuse of the corporate form, such as commingling assets or disregarding the corporation's separate identity, making it the shareholder's mere alter ego.
Facts:
- From 1991 to 1994, Theodore Pazur worked as a salesman for Med-Quip, Inc., a medical supply company.
- In August 1992, Vicki Belcher became the CEO and sole shareholder of Med-Quip following the death of her husband.
- As CEO, Belcher was responsible for the day-to-day operations of the company, including approving and writing commission checks for salespeople.
- A dispute arose between Pazur and Med-Quip regarding the company's practice of deducting unpaid customer invoices from salesmen's commissions.
- Pazur resigned from Med-Quip in February 1994 because of this commission dispute.
- While Pazur's subsequent lawsuit against Med-Quip was pending, Belcher sold the company in a stock-for-stock transaction, resigning her position and relinquishing all interest in Med-Quip.
Procedural Posture:
- Theodore Pazur sued Med-Quip, Inc. in the State Court of Fulton County for breach of contract and conversion.
- The trial court entered a default judgment against Med-Quip.
- Pazur's attempt to add Vicki Belcher as a defendant to that action was dismissed on statute of limitations grounds, a ruling that was affirmed by the court of appeals in a prior case.
- Damages on the default judgment against Med-Quip were adjudicated in the amount of $73,430.
- Pazur then filed a new, separate lawsuit against Belcher in the State Court of Cobb County, seeking to pierce the corporate veil and hold her liable for the judgment against Med-Quip.
- Both Pazur and Belcher filed motions for summary judgment, which the trial court denied.
- Both parties appealed the denial of their respective motions to the Georgia Court of Appeals.
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Issue:
Is a sole shareholder's personal participation in alleged tortious conduct committed by the corporation, without separate evidence of abusing the corporate form, sufficient to pierce the corporate veil and hold the shareholder personally liable for a corporate judgment?
Opinions:
Majority - Blackburn, Presiding Judge
No. A shareholder's personal participation in a corporation's tortious conduct is not, by itself, sufficient to pierce the corporate veil. Piercing the corporate veil is a separate legal remedy that requires proof that the shareholder abused the corporate form, not merely that the shareholder participated in the underlying tort. The court distinguished between two distinct legal theories: 1) holding an officer personally liable for a tort they directly participated in, and 2) holding a shareholder liable for a corporate debt by piercing the corporate veil. Pazur's direct tort claim against Belcher was barred by the statute of limitations. His remaining claim, piercing the corporate veil, requires evidence that Belcher disregarded the corporate entity and made it a 'mere instrumentality' for her own affairs through actions like commingling personal and corporate assets. Pazur failed to present such evidence; actions like providing loans between the owner and the corporation, or providing a company car as compensation, are not sufficient evidence of abuse. Therefore, Belcher cannot be held personally liable for the judgment against Med-Quip.
Analysis:
This decision reinforces the high legal standard required to pierce the corporate veil in Georgia, emphasizing the strong presumption of corporate separateness. It clarifies that the legal theory for holding an officer liable for their own torts is distinct from the theory of piercing the corporate veil to hold a shareholder liable for corporate debts, and that these theories require different elements of proof. The case serves as a strong protection for shareholders of closely-held corporations, confirming that active control and management, even by a sole owner, does not automatically expose them to personal liability for corporate obligations without evidence that they abused the corporate form itself.
