Legal Question in Civil Litigation in California
How do you ''peirce the corprate veil'' ? and what is an ''alter ego'' ?
I am curently filing a cross-complaint a corporation and the CEO/pres. who is also the contractor I hired to do a complete remodel of the inside of my home. He breached the contract after his employees ran off and he told me that he would pay me back after I had finished what he left. I then contacted him to notify him of what he owed and he refused to pay. I then took him to small claims court, where he then served me with a complaint. I dissmised the case I had against him without prejudice. I am not worried about winning the case as much as I am worried about collecting(due to the fact that I had prepared myself in case this happened but I'm not sure how corporations work, they seem so fake in the real world). I know that if I win he will most likely will file ch.7 on his corporation, but how do you ''peirce the corporate veil''? and what does ''alter ego'' mean? I not only wrote him presonal checks, but also to his corporation. Does this mean anything?He also dosen't have any employees listed under his corporation?Also, what can I claim to his bond co.?(damage, unfinished work, the breach of contract,the judgement, etc.)If I have a release form that he gave me in return of 1,000$ can it be used as evidence in court? Thank you.
2 Answers from Attorneys
Re: How do you ''peirce the corprate veil'' ? and what is an ''alter ego'' ?
The corporate veil is the legal separation between a corporation and its owners. The reason corporations exist is so the owners, including shareholders, will not become personally liable for any of the company's obligations if the company itself is unable to pay.
Just calling a business a corporation and filing the appropriate forms with the state is not enough. The company also has to behave like a corporation. This means, among other things, that it has to be financially separate from its owners and from other business entities.
If an owner mingles the corporation's funds with his own (for example, by paying personal bills with company money or by placing personal funds in the business's bank account without buying more stock or signing a formal loan agreement), he can destroy the legal separation between himself and the business. In such cases it is fair to make the owner pay business obligations out of his own pocket.
When this happens the owner and the corporation are called alter egos of one another. The term is used because the owner and the company are really one financial entity trying to convince the world that they are two.
Piercing the corporate veil means proving that the business and the owner have so mingled their operations as to justify holding the owner liable for the business's debts.
Ordinarily the time to make these allegations is when you draft the complaint and not after you already have a judgment. It can sometimes be done after entry of judgment, but the process can be more difficult.
This is a highly simplified answer and is by no means a thorough explanation of anything, but it should be sufficient for your needs.
Good luck.
Re: How do you ''peirce the corprate veil'' ? and what is an ''alter ego'' ?
Contact the California Contractor's licensing board regarding this matter. The contractor may have violated the law regarding the amount of money he can collect before the job is completed. This agency will provide you with some information. If he violated the law they may take legal action against him.
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