ALTER EGO DOCTRINE: 'Pierce the Corporate Veil'

ALTER EGO DOCTRINE: ‘Pierce the Corporate Veil’

ALTER EGO DOCTRINE: ‘Pierce the Corporate Veil’

A doctrine of law which disregards the principle of limited liability enjoyed by a corporate entity when it is proven that, in fact, no separate identity of the individual and corporation exists. The alter ego principle may also apply to relationships between corporate entities and their subsidiaries.

  • Litigants often invoke the alter ego doctrine but are rarely successful. Still, under the proper circumstances, it can be a powerful and effective equitable device for litigants before and after judgment.
  • Where the Creditor Directs Management of an Affiliated Transferee. Where the borrower has transferred title to a different entity controlled by the lender (or lenders, as the use of such entities at foreclosure is common in the participation setting), liability for an (unanticipated) uninsured loss often flows upward to the controlling parties anyway. Lender liability, alter-ego and other theories may be applied. See § (K)(1), infra (use of affiliates and  environmental liability). For a discussion of the liability of the affiliated secured lender, see Talley, § XIII(A)(3), supra.
  • Piercing the corporate veil in business is when a corporation performs an act through their officers or board of directors in good faith, so the company isn’t doing the deed themselves. In other words piercing the corporate veil has to do with the corporation through it’s officers and through the board of directors NOT acting in compliance with the corporation articles of incorporation and corporate bylaws require. And when they do that, they do that at the peril of the officers and the board of directors.

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9 Responses to “ALTER EGO DOCTRINE: ‘Pierce the Corporate Veil’”

  1. S. Adams says:

    Oh, that I were an attorney… “Fiduciary Responsibility” must be the biggest joke of our time. Why/how do investment banks that knowingly acquired CDOs of subprime mortgages that are riddled with TIL and RESPA irregularities through the miracle of MERS, hold no responsibility or liability for acquiring “tainted” investments? Other than this being a white-collar class crime – which of course, is somehow superior to stealing a case of whiskey – how does this differ from knowingly purchasing stolen property or forging stock certificates? How are such acquisitions not in violation of fiduciary responsibilities to shareholders? Under HAMP, joke that it is, how are such investors remotely entitled to collect or foreclose on face value on these “tainted” mortgages? How does forcing assets to generate no monthly ROI to go to foreclosure at sharply reduced market values maintain a fiduciary responsibility to asset value management when common sense modification arrangements are plausible outside of HAMP parameters?

  2. Gwen Caranchini says:

    Hi, I used to practice law–30 years–don’t anymore another story but I have been thinking on this with regard to Bank of America. BOA bought countrywide merrill lynch and has bank of america home loans whic)h is a servicer. when i sued in Mo. (a non judicial state so i instituted a quiet title, lender liability, fraud claims etc) boa entered an appearance thru bryan cave and also for mers even tho mers had not yet been served. They had Aegis lending anter an appearance to and aegis waas not served. I find that interesting. After they entered an app for mers, suddenly they claimed a conflict and had husch blackwell enter an appearance but they ahve basically been filing “me too” pleadings–literally. At any rate, I asked their counsel whether they are entering an app for ml and cw and there has been dead silence from them. I think there are problems of piercing the corporate veil in a lot of these caess especially between BOA and its servicer and other entities. I have seen nothing written on this–I’m usually ahead of the pack on allegations and filing lawsuits and always was as a civil rights lawyer–I sued novastar a sub prime lender for myself in 05 along with a foreclosure mill, the title company and the mortgage broker. They yelled and screamed after removing it but they wrote down the mortgage 50,000, redid the nnote, the rate, cleaned up my credit and the magistrate who was handling settlement in fed ct refused to make it confidential. The fed judge asked me in front of them whether I thought they should hire another 8 lawyers (they came in w/16) to make it fairer for them since I was beating the hell out of them on every motion. At any rate, I think this is an avenue I would like to see explored but again, although I am diong this for myself and have read over 500 hrs of filings and blog entries I havee not seen anything on this. I will check with some of my friends on this who are doing this. Have you checked with a guy known as airwave dave? Dave Krieger who sometimes makes comments on Neil’s blog. Dave is writing a book Clouded title which will be on line shortly. Very very bright and knowledgeable and he has been collecting huge amts of daata. Then there is Alina Virana???? also very good source.

  3. dinsfla says:

    Gwen,
    Thank you and please do check with your friends and pass on this information to Dave. I am sure we may have crossed paths at some point.

    Alina was my very first contact I made while I was going through my moment! She is amazing and full of excellent information.

    I have been trying to tap on this subject for some time but was never sure how to approach it. It makes a whole lot of sense. I could have gone on and on…

    I know there is someone out there who may touch on this in further detail.

    Damian-

  4. cynthia H says:

    I wa wondering if anyone has adressed the fact that all of countrywides notes and DOT’s are written in the ficticious name of “America’s Wholesale lender” As far as I can tell that was never a real entity but merely a fiction..for what reason? any thoughts?

  5. barbara g says:

    I am a 70 year old real estate broker in California, my husband works in drywall, did, when there was work. In 2005 we sold our farm in Bakersfield and invested the profits in real estate, thinking we were finally going to have an investment for our retirement. We put 20% down and more and all of our investment has been wiped out. We have been trying to get modifications, some of the loans are over 8% interest, our renters are mostly low income, have lost their jobs, we had to lower the rents, etc, etc. but we have got nowhere. Chase will not even lower our interest rate, on our main home, that has dropped to 3.125%, after we paid it at 6% for five years. I feel the lenders who caused the bubble and crash should be paying for ruining people’s lives. When I worked for American Savings in Los Angeles in the early 80’s (I was a loan agent), the bank was robbed the first week of my employment, the FBI came in, there was a full investigation and when the guys where caught, they went to jail as if they had committed a murder. Now we have these guys who have done a million times worse than some two-bit bank robber and the victims are suffering and no one going to jail . I have been trying to find a lawyer to help us, but most lawyers here in Tulare County are on the banks side and have told us, well you got the loans. Our lives have been ruined, we are about to be wiped out and there is no help in sight. They keep telling us this is a Democracy, the greatest in the world. This is no Democracy, this is an Oligarchy, run by the rich and it is getting more entrenched. A year ago, I thought it was in the banks best interest to modify loans, but now see they have no intention to modify, that must be because they have already been paid for the loans through the insurance they bought on the pools of securities. As California is a non-judicial state there is not much we can do. Is there?

  6. Adam S. says:

    “America’s Wholesale Lender” is a New York Corporation that is entirely separate from, and not affiliated in any way with, Countrywide. Countrywide has been using the term AWL quite without permission as some sort of unofficial trade name, which it is not entitled to do. Notes made out to America’s Wholesale Lender would legally belong to that New York entity. You should be making your payments to them, not to Countrywide.

  7. Dick says:

    Dick owns a New York based Sub S Corporation which is invested in TIC investments that pay rental distributions to Dick’s Holding Corp. (DHC). Dick is the sole shareholder of DHC and DHC has a long history of owning property. His daughter is the Sec./ Treasurer while he is the President. They recently converted to Sub S (in 2005) from a Sub C after Dick’s Mom (who had preferred shares while Dick had common shares) retired and asked to be bought out. DHC sold its asset (a building) and invested in TIC’s. There is another Corporation that was started in 2000. It is a consulting corp. Dick’s Consulting Corp. (DCC). It is a Sub S. Dick’s wife owns 55 shares and is the President, their daughter (from DHC) owns 10 shares and is not an officer, and another daughter also owns 10 shares and she is a Vice President. Dick, himself is also the Sec/Treasurer of DCC and owns 25 shares. Annual Corporate meetings are held each year. DHC pays DCC consulting fees. DCC has a health benefit plan for Dick, his wife and their 18 year old son. The health plan is offered to all officers of DCC, but the daughter (VP) in DCC has declined coverage as well as the other daughter (just a shareholder and not entitled). DCC has had a few opportunities to expand its consulting sphere (documented) but were unsuccessful and remains with DHC as its sole client. There are separate bank accounts, not only by DHC and DCC but by each of the TIC accounts within DHC. Each separate TIC pays its rent to an individual account which periodically transfers the rent to DHC which then distributes its consulting fees to DCC and repays loans to DHC by Dick and now (since loans have been repaid) is about to distribute money to Dick. DCC uses its fees to pay for health insurance for Dick and/or it officers and distributes a very small management fee to Dick, his wife and his daughter (all officers) of $150- $200 a year.

    Two questions:

    1) Being DHC is a Sub S, can the monies DHC receives from its rents (for liability concerns) be distributed to Dick with no designation, since it is already accounted in the IRS Taxable Income as Sub S income?

    2) Is DCC justified in having a health care program and can the Ins. company pierce the corporate veil, (claiming that DCC is a sham and is not entitled to Insurance at its discounted “Small Employee” rate) by using the Alter Ego Piercing and disclaim all claims previously paid by the Ins. Co. — leaving Dick and his wife to pay for ALL past medical claims?

  8. AL says:

    I heard that AG Tom Miller from Iowa spent a week in Hawaii with Bank of America officials…..no wonder he can’t prosecute them for fraud…can anyone say “Umbrellas in my Drinks”

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