Turner v. Turner9/30/2002
isregard that entity.
Appellant provides several reasons as to why, in her view, the court should have pierced the corporate veil: (1) Under § 4-402 of the Md. Code (1975, 1999 Repl. Vol.), Corporations and Associations Article ("C.A."), the By-laws were supposed to provide for an annual meeting, but did not do so; (2) Under C.A. § 4-501, any additional issuance of shares must be approved by all shareholders, which did not occur; (3) the corporation did not hold meetings in over twenty years; and (4) appellee treated the corporation's assets as his own. Thus, appellant states:
Here, the fact that formalities were not observed, that Mr. Turner siphoned corporate funds and that the corporate records are unorganized, incomplete and inconsistent, all play into the argument that the veil should be pierced and the Court should have cast aside this fiction and rely on its equitable powers to determine ownership.
Appellees counter that appellant failed to allege a cause of action for piercing the corporate veil. Given the extraordinary nature of the relief, appellees argue that appellant had the burden to set forth her claim in a separate count, rather than in a general prayer for relief. See Md. Rule 2-303; Scott v. Jenkins, 345 Md. 21 (1997). Appellees also point out that BSL is a "solvent, viable corporation." Indeed, the expert valuations of both sides amply support that assertion.
To be sure, appellant included numerous claims in two suits. Even if we were inclined to overlook her omission of a separate claim, she would fare no better. We explain.
A corporation is regarded as a separate legal entity. Consequently, its shareholders are ordinarily insulated from liability for the debts of the corporation. See Ferguson Trenching Co., Inc. v. Kiehne, 329 Md. 169, 175 (1993); Rosenbloom v. Electric Motor Repair Co., 31 Md. App. 711, 720 (1976). Similarly, "when an official or agent signs a contract for his corporation it is simply a corporate act. It is not the personal act of the individual, and he is not personally liable for the corporate contract unless the matter is tainted by fraud . . . ." Ferguson, 329 Md. at 175 (quoting Ace Dev. Co. v. Harrison, 196 Md. 357, 366 (1950)); see Curtis G. Testerman Co. v. Buck, 340 Md. 569, 576-77 (1995); Bart Arconti & Sons, Inc. v. Ames-Ennis, Inc., 275 Md. 295, 312 (1975); Damazo v. Wahby, 259 Md. 627, 633-35 (1970); see also Gordon v. S.S. Vedalin, 346 F. Supp. 1178, 1180 (D. Md. 1972) (" nder Maryland law, an agent who makes a contract for and on behalf of a corporate principal is personally liable on the obligation only in the presence of fraud, and the burden of proof of the fraud rests upon the creditor.").
An individual who signs a contract on behalf of the corporation is cloaked in the mantle of the enterprise and is not personally liable for action taken in the corporate name. If the enterprise defaults on an obligation under the contract, the creditor normally cannot proceed against the individual. R. Thompson, Unpacking Limited Liability: Direct and Vicarious Liability of Corporate Participants for Torts of the Enterprise, 47 Vand. L. Rev. 1, 7 (1994).
In Residential Warranty Corp. v. Bancroft Homes Greenspring Valley, Inc., 126 Md. App. 294, cert. denied, 355 Md. 613 (1999), we said:
The standard for piercing the corporate veil is as follows:
" he most frequently enunciated rule in Maryland is that although the courts will, in a proper case, disregard the corporate entity and deal with substance rather than form, as though a corporation did not exist, shareholders generally are not held individually liable for debts or obligations of a corporation e
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