ARE BUSINESS OWNERS IN CHAPTER 7 LIABLE FOR CORPORATE DEBT

來源:楊清泉律師 時間:11/14/2012 瀏覽: 2446

If a corporation is not able to pay its debt, can creditors of the corporation demand payment legally from the owners of the business who filed for bankruptcy relief? For example, Nobama buys Kodak from the profits he made from Netflix stocks which doubled in the last 45 days. Kodak filed for Chapter 11 protection last week. Kodak rescinds its contract with the Kodak theatre for future sponsorship of the theatre. Kodak owes the Theatre $74 million for cancelling the contract. Nobama then files for Chapter 7 protection because he loses his job. Can Kodak theatre successfully sue Nobama in his Chapter case to collect the $74 million owed by Kodak?

 This was the question answered by the bankruptcy court in Coughlin Chevrolet v. Thompson. In this case, Mr. Thompson was an owner and operator of several businesses including a car-sales-and- leasing company called Florida Physicians Leasing Co. Inc. In August 2008, FPL contracted with the plaintiff for the purchase of a 2009 Toyota Camry. The contract was executed on behalf of FPL by an FPL salesperson. FPL was buying the car for resale to a client. FPL purchased an average of one car per month from the plaintiff. Mr. Thompson was not involved in negotiations of the sale, did not discuss the purchase of the Camry with the plaintiff, and was not any more closely involved in this transaction than any other done by FPL. In fact, the debtor rarely knew about the specific transactions unless the salesperson needed assistance that a supervisor could not provide. This transaction was the only one with the plaintiff that FPL defaulted on. After Mr. Thompson filed for bankruptcy protection, the plaintiff sued him asserting that it held a non-dischargeable claim against them for the purchase price of the car.

 This sounds like an absurd claim, doesn’t it? Plaintiff would have to pierce the corporate veil of FPL to get to debtor but it certainly looks like debtor kept himself separate and apart from FPL. The bankruptcy court found that the debt was owed by FPL, and that the plaintiff could not pierce the corporate veil to reach the debtor. Dealing with the plaintiff’s claim against the debtor, the court said: “Although debtor admittedly held ultimate control over the businesses, the Court cannot find that [his]control over FPL was so complete that the corporation had not separate mind, will, or existence of its own. There were multiple levels of management of the company, many of whom made important company decisions, such as hiring, and firing employees, negotiating sizable contracts, and handling company accounts.”

Imagine if the situation were reversed. Let’s say that Mr. Thompson was actually using FPL as his alter ego and inter-mingling his personal funds with company funds. For instance, he buys a house in Beverly Hills using company funds. He buys a twenty carat diamond ring for his wife using company funds. He also uses company funds to pay for his children’s college tuition and expenses. Because of these circumstances, the bankruptcy court allows plaintiff to piece the corporate veil of FPL and by so doing, allows the claim to proceed against Mr. Thompson, will plaintiff’s claim be excepted from discharge in Mr. Thompson’s bankruptcy?

 The court said NO. The court found no basis for basis for excepting the plaintiff’s claim from discharge, even if a basis for piercing the corporate veil existed. The court found that this was “simply an unfortunate situation whereby plaintiff was caught in the downward-slide of a business and left unpaid when insufficient funds were left at the end of the day to pay all of the company’s obligations.” The court ruled that Mr. Thompson was not personally liable for his company’s debt to the plaintiff, but even if he was, the debt was dischargeable. So, in our example, Nobama is off the hook. The Kodak theatre’s claim against him for $74 million will not be excepted from discharge in his Chapter 7 case.

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