Lifting the veil on veil litigation

Stover v. ADM Milling Co. involved several issues about corporate veil-piercing arising from a failed real estate deal. Two points in particular are worth noting:

• Standing. “Individuals found liable when the corporate veil is pierced do not have standing to appeal the findings of liability against a corporation if the corporation does not appeal. . . .  The individual shareholders are only injured when the corporate veil is pierced and whether the corporate veil is pierced is the only issue about which they have standing to complain with respect to the findings against the corporation.”
• Legal standard. While TBOC § 21.223 does not define the key phrase “primarily for the direct benefit” – “courts have concluded that evidence showing that funds derived from the corporation’s fraudulent conduct were ‘pocketed by or diverted to’ the individual defendant is sufficient to demonstrate the requirement of a direct personal benefit. On the other hand, evidence showing that the fraudulently procured funds were used for the corporation’s financial obligations refutes the notion that the fraud was perpetrated primarily for the direct personal benefit of an individual.” (citations omitted).

No. 05-17-00778-CV (Dec. 28, 2018) (mem. op.)