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Fremont Indemnity Co. v. Commencement International Corp.11/2/2004
Fremont Indemnity Company sued Bradford L. and Carolyn W. Schultz and Commencement International Corporation, alleging that the Schultzes used Commencement as a sham corporation to avoid their individual liability to creditors. Commencement had not paid Fremont for workers' compensation insurance it provided, and Fremont asked the court to disregard Commencement's corporate form and hold the Schultzes liable. The trial court granted the Schultzes' motion for summary judgment and Fremont appeals. Because Fremont presented no evidence that the Schultzes abused the corporate form, we affirm.
FACTS
In its complaint, Fremont alleged that Commencement constituted an alter ego of the Schultzes, existing as a mere 'shell' and sham without adequate capital, assets, stock, or stockholders. Clerk's Papers at 5. Further, Fremont alleged that the Schultzes used Commencement to avoid individual liability to creditors. Thus, Fremont asked the court to disregard the corporate form and make the Schultzes liable for the $23,084 in unpaid insurance premiums Commencement owed to Fremont. In support of the Schultzes' summary judgment motion, Carolyn Schultz declared that Commencement was incorporated in December 1993 and was liquidated in early 1999. During its years of operation, Commencement built small boats, refurbished and repaired small and large vessels, and constructed heliports. Between 1993 and 1999, Carolyn was a director and one of several Commencement shareholders. She also served as Commencement's president from 1993 to approximately 1996.
Carolyn also declared that at all times material to the suit, Commencement was a duly licensed corporation in Washington state and had complied with all requisite corporate formalities such as (1) filing annual reports; (2) maintaining and filing corporate records and forms; (3) maintaining corporate assets separate from those of the shareholders; (4) issuing stock; and (5) being capitalized.
Carolyn declared that she never transacted business in her individual capacity for Commencement; she did not personally arrange for Fremont's insurance; she never met or spoke with any Fremont representative; nor did she state orally or in writing, that she or her husband would answer for Commencement's debts; and finally, she never improperly diverted any of Commencement's assets to her husband or herself.
In his declaration, Bradford Schultz stated that he has never been an officer, board member, or shareholder of Commencement; he acted only as a consultant to Commencement between approximately 1993 and 1999; he provided management consulting services and technical consulting services for the heliport operations; he did not personally arrange for Fremont's insurance; he did not tell anyone at Fremont, either orally or in writing, that he or his wife would be individually liable for Commencement's debts; and he never improperly diverted any of Commencement's assets to himself or his wife.
Fremont countered with a declaration from James Shreve, who was the president and production manager of Commencement from June 1997 to November 1998. Shreve declared that, to the best of his knowledge, the Schultzes owned the corporation, and he considered Bradford the sole decision maker. Soon after he was hired, Shreve noticed that Commencement had not paid certain payroll taxes to the Internal Revenue Service and Washington state. When he told Bradford that the taxes needed to be paid, Bradford said that he did not want to pay the taxes because he wanted to use the money to pay off a personal line of credit.
But Shreve paid most of the taxes anyway. As a result, Bradford terminated his employment. Four months b
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