Green v. Freeman , 367 N.C. 136 ( 2013 )

IN THE SUPREME COURT OF NORTH CAROLINA
No. 424A12
FILED 8 NOVEMBER 2013
MICHAEL A. GREEN and DANIEL J. GREEN,
Plaintiffs
v.
JACK L. FREEMAN, JR., CORINNA W. FREEMAN, PIEDMONT CAPITAL
HOLDING OF NC, INC., PIEDMONT EXPRESS AIRWAYS, INC., PIEDMONT
SOUTHERN AIR FREIGHT, INC., and NAT GROUP, INC.,
Defendants
v.
LAWRENCE J. D’AMELIO, III,
Third-Party Defendant
Appeal pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel
of the Court of Appeals, ___ N.C. App. ___, 733 S.E.2d 542 (2012), affirming a
judgment entered on 2 June 2010 and an order entered on 8 July 2010, both by
Judge Edwin G. Wilson, Jr., and an order entered on 6 October 2008 by Judge
Ronald Spivey, all in Superior Court, Guilford County. Heard in the Supreme Court
on 12 March 2013.
Thomas B. Kobrin for plaintiff-appellees.
Rossabi Black Slaughter, P.A., by Gavin J. Reardon and T. Keith Black, for
defendant-appellant Corinna W. Freeman.
MARTIN, Justice.
In this case we are presented with a failed corporate venture and asked what
remedy, if any, is available to plaintiffs. We hold that plaintiffs did not present
GREEN V. FREEMAN
Opinion of the Court
evidence sufficient to establish a breach of fiduciary duty claim and reverse the
decision of the Court of Appeals on that issue. We reverse and remand to the Court
of Appeals for application of the piercing the corporate veil doctrine to plaintiffs’
agency claims.
Defendant Corinna Freeman and her now-deceased husband founded
Piedmont Southern Air Freight (Piedmont Southern), a shipping company, and ran
it together until he became sick in 2001. That same year, Corinna signed a letter
“delegating responsibility and authority for making all corporate, financial,
operational and administrative decisions for [Piedmont Southern]” to her son Jack
Freeman, another defendant in this case who is not a party to this appeal. Corinna
remained owner of the company on the corporate paperwork filed with the Secretary
of State. In 2005 Corinna applied to the Secretary of State to have Piedmont
Southern reinstated after an administrative dissolution. In that filing, she signed
as the owner of Piedmont Southern. Also in 2005, Jack partnered with Larry
D’Amelio to create a new shipping company, Piedmont Express Airways (Piedmont
Express). Jack and Larry intended to structure Piedmont Express and Piedmont
Southern as subsidiaries of a new entity called Piedmont Capital Holding of North
Carolina (Piedmont Capital). Jack and Larry met with plaintiff Michael Green to
discuss investing in this new venture. Afterward, Michael and his brother Daniel,
also a plaintiff here, each gave the venture $200,000, which they believed would
serve as both a loan and an investment. Larry signed promissory notes to Michael
-2-
GREEN V. FREEMAN
Opinion of the Court
and Daniel on behalf of Piedmont Southern, Piedmont Express, and Piedmont
Capital (collectively, the Piedmont companies), promising to repay the funds within
the earlier of one year or when the cumulative billings of the companies equaled two
million dollars. Corinna was not involved in any of the conversations leading up to
the transfers of plaintiffs’ capital, and plaintiffs did not rely on her when making
their decision to invest. Additionally, Corinna’s signature was not on any of the
loan documents.
Although Jack and Larry apparently intended that Piedmont Capital own
Piedmont Southern and Piedmont Express, the articles of incorporation for
Piedmont Capital and Piedmont Express did not establish a hierarchy among the
three companies. The operating agreement for the three companies similarly
grouped the three entities together. Moreover, the corporate names were used
interchangeably in corporate communications and discussions between the parties.
According to the operating agreement, Jack was CEO and Larry was President of
the three companies. The agreement further provided that “[t]he initial
Chairperson shall be Corinna W[.] Freeman and Jack L. Freeman Jr.” In addition,
the agreement identified Corinna as holding thirty-three shares of the combined
companies, with a later amendment indicating she held eighty-eight shares. No
stockholders or directors meetings were ever held, and stock was never issued.
Corinna did not sign the operating agreement, but Jack signed “by Jack Freeman”
on a line designated for Corinna on the later amendment. Jack testified that he
-3-
GREEN V. FREEMAN
Opinion of the Court
never told her about identifying stock in her name or about naming her
Chairperson. When plaintiffs asked to meet with Corinna or to learn about her
involvement in the companies, Jack told them he had authority to act on her behalf
and sign all documents in her name. Jack and Larry both testified that Corinna
was not involved in the management of the companies. Corinna did come to the
Piedmont offices on several occasions to train the staff and received compensation
for her services.
The record contains evidence of several bank accounts operated for the
various Piedmont companies. In 2005 a Wachovia business checking account was
opened by Corinna as the “CEO/OWNER” of Piedmont Express. A First Citizens
checking account and a First Citizens money market savings account were in the
name of Piedmont Capital; these two accounts each received one of the Green
brothers’ $200,000 checks. Funds from these accounts were deposited into a First
Citizens checking account for Piedmont Express. An American Express business
credit card was issued to “C Freeman, PSA Airline” and was actively used at least
between December 2005 and July 2006.
Between February 2006 and June 2006, payments were made on a Wachovia
credit card issued to “C Freeman” by eight checks written from the Piedmont
Express checking account with First Citizens Bank and signed by “signatory for C.
Freeman.” In June 2006 three checks from the Piedmont Express Wachovia
checking account were signed by Corinna to repay loans. In 2007 Corinna wrote
-4-
GREEN V. FREEMAN
Opinion of the Court
checks from a BB&T account in her name, totaling over $19,000, to Jack and
Piedmont Southern for company expenses. Mortgage and utility payments on a
house belonging to Corinna were paid from the Piedmont Express Wachovia
checking account.
By June 2006, plaintiffs’ $400,000 had all been spent. In December 2006,
plaintiffs sued Jack, Larry, Corinna, and the Piedmont companies to recover the
funds. Plaintiffs originally claimed that they should be able to pierce the corporate
veil and that Corinna, along with Jack and, in some cases, the Piedmont companies,
had committed fraud, breach of contract, conversion, and breach of fiduciary duty,
engaged in unfair and deceptive practices, and received unjust enrichment.
Plaintiffs subsequently amended their complaint to include Larry as a third-party
defendant. The trial court granted summary judgment for Corinna on plaintiffs’
claims based on fraud, breach of contract, and unfair and deceptive practices, but
denied summary judgment for Corinna on plaintiffs’ claims based on conversion,
unjust enrichment, breach of fiduciary duty, and piercing the corporate veil. Upon
plaintiffs’ subsequent motion, the trial court allowed plaintiffs to amend the
complaint to include claims under the theory that Jack was acting as Corinna’s
agent.
Thus, when this case went to trial, the claims against Corinna were as
follows: agency claims, based on Jack’s actions, for fraud, breach of fiduciary duty,
and unfair and deceptive practices; personal liability claims for conversion, unjust
-5-
GREEN V. FREEMAN
Opinion of the Court
enrichment, and breach of fiduciary duty; and personal liability “for the debts and
obligations of the Piedmont Companies” through the piercing the corporate veil
doctrine. At the end of plaintiffs’ presentation of evidence, the trial court dismissed
the conversion claim against Corinna. At the close of all evidence, the trial court
granted in part Corinna’s motion for directed verdict, dismissing the agency claims
and the unjust enrichment claim. Thus, as for Corinna, only the breach of fiduciary
duty and piercing the corporate veil issues were submitted to the jury. The jury
found that Corinna “control[led] [the Piedmont companies] with regard to the acts
or omissions that damaged the plaintiffs” and that “plaintiffs [were] damaged by the
failure of [Corinna] to discharge her duty as a corporate director or officer.”
Corinna’s post-trial motions for judgment notwithstanding the verdict (JNOV) or a
new trial were denied. Corinna then appealed from the trial court’s original
judgment and its denial of her motions for JNOV and a new trial. Plaintiffs cross-
appealed from the trial court’s rulings adverse to them.
The Court of Appeals affirmed the trial court’s denial of Corinna’s motions.
Green v. Freeman, ___ N.C. App. ___, 733 S.E.2d 542 (2012). In so doing, the court
held there was sufficient evidence for a jury to find Corinna liable for breach of
fiduciary duty and liable under “plaintiffs’ claim for piercing the corporate veil.” Id.at ___, 733 S.E.2d at 552-54. The court also affirmed the dismissal of plaintiffs’
unfair and deceptive practices claim. Id. at ___, 733 S.E.2d at 556. The court did
not address the merits of plaintiffs’ arguments that the trial court erred by
-6-
GREEN V. FREEMAN
Opinion of the Court
dismissing plaintiffs’ agency claims and by not admitting the depositions of
defendants, stating, “[A]s we have affirmed the trial court’s judgment [regarding
plaintiffs’ claims based on breach of fiduciary duty and piercing the corporate veil]
. . . there is no need to address these additional arguments as we are affirming the
judgment for the reasons stated above and consideration of these issues would have
no effect upon the outcome.” Id. at ___, 733 S.E.2d at 556.
The dissenting judge would have held that “plaintiffs failed to adduce
evidence of a fiduciary relationship, or evidence that Corinna personally breached
any duty to plaintiffs proximately resulting in their harm.” Id. at ___, 733 S.E.2d at
557 (Calabria, J., dissenting). The dissenting judge also would have held that “since
plaintiffs failed to prove Corinna exercised domination and control over Piedmont
that would subject her to individual liability, plaintiffs failed to prove her liability
for corporate obligations should extend beyond the confines of a corporate separate
entity.” Id. at ___, 733 S.E.2d at 563. Corinna appealed to this Court as of right on
the basis of the dissent. We reverse the decision of the Court of Appeals on the
breach of fiduciary duty issue, and we remand to that court for consideration of
plaintiffs’ cross-appeal from the trial court’s dismissal of their agency claims against
Corinna and the effect of the agency claims on the application of the piercing the
corporate veil doctrine. The other issues decided by the Court of Appeals are not
before this Court and are not addressed in this opinion.
When considering the denial of a directed verdict or JNOV, the standard of
-7-
GREEN V. FREEMAN
Opinion of the Court
review is the same. Davis v. Dennis Lilly Co., 330 N.C. 314, 323, 411 S.E.2d 133,
138 (1991). “The standard of review of directed verdict is whether the evidence,
taken in the light most favorable to the non-moving party, is sufficient as a matter
of law to be submitted to the jury.” Id. at 322, 411 S.E.2d at 138 (citation omitted).
If “there is evidence to support each element of the nonmoving party’s cause of
action, then the motion for directed verdict and any subsequent motion for [JNOV]
should be denied.” Abels v. Renfro Corp., 335 N.C. 209, 215, 436 S.E.2d 822, 825
(1993) (citations omitted). Further, “[i]f, at the close of the evidence, a plaintiff’s
own testimony has unequivocally repudiated the material allegations of his
complaint and his testimony has shown no additional grounds for recovery against
the defendant, the defendant’s motion for a directed verdict should be allowed.”
Cogdill v. Scates, 290 N.C. 31, 44, 224 S.E.2d 604, 611 (1976). Whether Corinna
was entitled to a directed verdict or JNOV is a question of law. Scarborough v.
Dillard’s, Inc., 363 N.C. 715, 720, 693 S.E.2d 640, 643 (2009) (citations omitted),
cert. denied, ___ U.S. ___, 131 S. Ct. 2456 (2011). We review questions of law de
novo. E.g., N.C. Farm Bureau Mut. Ins. Co. v. Cully’s Motorcross Park, Inc., ___
N.C. ___, ___, 742 S.E.2d 781, 786 (2013).
The first issue before us is whether there was sufficient evidence, as a matter
of law, that Corinna breached a fiduciary duty owed to plaintiffs, proximately
causing injury to them. “For a breach of fiduciary duty to exist, there must first be
a fiduciary relationship between the parties.” Dalton v. Camp, 353 N.C. 647, 651,
-8-
GREEN V. FREEMAN
Opinion of the Court
548 S.E.2d 704, 707 (2001) (citations omitted). A fiduciary relationship may arise
when “ ‘there has been a special confidence reposed in one who in equity and good
conscience is bound to act in good faith and with due regard to the interests of the
one reposing confidence.’ ” Id. (quoting Abbitt v. Gregory, 201 N.C. 577, 598, 160
S.E. 896, 906 (1931)).
In North Carolina, directors of a corporation are required to act in good faith,
with due care, and in a manner they reasonably believe to be in the best interests of
the corporation. N.C.G.S. § 55-8-30 (2011). When these fiduciary duties are
breached, a shareholder may sue the offending director in a derivative action. Id.
§ 55-7-40 (2011). The shareholder must “[f]airly and adequately represent[ ] the
interests of the corporation in enforcing the right of the corporation.” Id. § 55-7-41
(2011). The General Assembly has expressly indicated its intent “to avoid an
interpretation [of N.C.G.S. § 55-8-30] . . . that would give shareholders a direct right
of action on claims that should be asserted derivatively” and to avoid giving
creditors a generalized fiduciary claim. N.C.G.S. § 55-8-30 N.C. cmt. (2011); see
Russell M. Robinson, II, Robinson on North Carolina Corporation Law § 14.01[2], at
14-4 (7th ed. 2012) [hereinafter Robinson on Corporation Law].
The general rule is that “[s]hareholders, creditors or guarantors of
corporations generally may not bring individual actions to recover what they
consider their share of the damages suffered by the corporation.” Barger v. McCoy
Hillard & Parks, 346 N.C. 650, 660, 488 S.E.2d 215, 220-21 (1997) (citations and
-9-
GREEN V. FREEMAN
Opinion of the Court
quotation marks omitted). Shareholders may, however, bring a derivative lawsuit
against corporate officers and directors, in which case any damages flow back to the
corporation, not to the individual shareholders bringing the action. Rivers v.
Wachovia Corp., 665 F.3d 610, 614-15 (4th Cir. 2011) (citations omitted); see 2
James D. Cox & Thomas Lee Hazen, Cox & Hazen on Corporations § 15.02 (2d ed.
2003) [hereinafter Cox & Hazen on Corporations]. Plaintiffs did not bring a
derivative suit. Therefore, we examine two exceptions to the general rule:
shareholders, creditors and guarantors may bring an individual action against a
third party for breach of fiduciary duty when (1) “the wrongdoer owed [them] a
special duty” or (2) they suffered a personal injury “distinct from the injury
sustained by . . . the corporation itself.” Barger, 346 N.C. at 659, 661, 488 S.E.2d at
219, 221. Plaintiffs alleged they were both shareholders and creditors. We analyze
each alleged position separately.
We begin by determining whether plaintiffs ever became shareholders of the
Piedmont companies. “[T]he holder of the shares acquires the status of a
shareholder[ ] when they are issued, which is a fact to be determined upon the
intent of the parties as indicated by the pertinent corporate resolutions,
subscription or like agreement, or other relevant circumstances.” Robinson on
North Carolina Corporation Law § 20.01, at 20-2; see N.C.G.S. § 55-6-03(a) (2011).
Shares are authorized in the articles of incorporation filed with the Secretary of
State, N.C.G.S. § 55-6-01 (2011), but then may be issued by the corporation’s board
-10-
GREEN V. FREEMAN
Opinion of the Court
of directors, id. § 55-6-21 (2011); Cox & Hazen on Corporations § 16.13, at 1058;
Robinson on North Carolina Corporation Law, at 20-2 (noting it is “important to fix
the issue date of shares precisely by directors’ resolutions or in some other definitive
manner”).
At trial Michael Green testified that he never received any stock and that he
did not know whether any stock was put in his name in the company books. The
only document in the record mentioning the issuance of stock is the operating
agreement, signed by plaintiffs, Larry, and Jack on 22 November 2005, which
states, “It is further agreed that Michael Alan Green and Danny Jay Green must
remain Shareholders in the Company for a period of 5 years before said shares will
be vested.” The 2006 amendment to the operating agreement includes the same
requirement. Plaintiffs’ complaint was filed on 6 December 2006. Plaintiffs
presented no evidence or alternative interpretation of the vesting schedule.
Accordingly, either because the authorized stock was never issued by a decision of
the board of directors or because the stock did not vest in plaintiffs, we conclude
that plaintiffs never became shareholders.
When “plaintiff[s’] own testimony has unequivocally repudiated the material
allegations of [their] complaint . . . the defendant’s motion for a directed verdict
should be allowed.” Cogdill, 290 N.C. at 44, 224 S.E.2d at 611. Because plaintiffs
never became shareholders, Corinna could not have owed them, as shareholders,
fiduciary duties under either the special duty or the personal injury exception.
-11-
GREEN V. FREEMAN
Opinion of the Court
Plaintiffs therefore lack standing to bring a claim as shareholders for breach of
fiduciary duty.
In addition to alleging they were shareholders, plaintiffs alleged the $400,000
given to the Piedmont companies was a loan. Thus, we next consider whether
plaintiffs can recover under the special duty or unique personal injury exception
based on the theory of liability that Corinna, as a director or officer, breached a
fiduciary duty owed to them as creditors. To recover under the special duty
exception, there must be a special duty “that defendant[ ] owed . . . to plaintiffs that
was personal to plaintiffs as [creditors] and was separate and distinct from the duty
defendant[ ] owed the corporation.” Barger, 346 N.C. at 661, 488 S.E.2d at 221.
When considering claims by shareholders, we have recognized the creation of a
special duty “when the wrongful actions of a party induced an individual to become
a shareholder; . . . when the party performed individualized services directly for the
shareholder; and when a party undertook to advise shareholders independently of
the corporation.” Id. at 659, 488 S.E.2d at 220 (citations omitted). “This list is
illustrative; it is not an exclusive list of all factual situations in which a special duty
may be found.” Id. “We apply the same rules for establishing a special duty when
plaintiffs are [creditors] as we apply when plaintiffs are shareholders.” 346 N.C. at
661, 488 S.E.2d at 221.
Plaintiffs’ testimony, standing alone, establishes that none of the scenarios
discussed in Barger apply. Plaintiffs testified that Corinna was not involved in the
-12-
GREEN V. FREEMAN
Opinion of the Court
meetings leading up to their $400,000 alleged investment, that they did not rely on
any representations made by her when choosing to invest, and that there was
almost no personal interaction between Corinna and plaintiffs. In fact, the most
contact plaintiffs had with Corinna was seeing her a handful of times and saying
nothing more than “hello.” Even viewed in the light most favorable to plaintiffs, the
evidence of plaintiffs’ contact with Corinna does not allow a reasonable inference
that they relied on or trusted in her when they chose to invest in the Piedmont
companies. While the Barger scenarios are not exclusive, the facts of this case do
not present an analogous situation meriting the recognition of a fiduciary duty
under the special duty exception.
To establish a breach of fiduciary duty under the second exception, plaintiffs
had to present evidence that they suffered an injury peculiar or personal to
themselves. Id. There must be evidence “that the injury suffered by the [creditor]
is personal to him and distinct from the injury suffered by the corporation itself.”
Id. The loss of an investment “is identical to the injury suffered by” the corporate
entity as a whole. Energy Investors Fund, L.P. v. Metric Constructors, Inc., 351 N.C.
331, 336, 525 S.E.2d 441, 444 (2000); see also Cox & Hazen on Corporations § 15.02,
at 890. Even when one person contributes a disproportionate amount of the
investment and thus bears a correspondingly greater loss, such an occurrence
“hardly makes for an ‘individual injury.’ ” Energy Investors, 351 N.C. at 336, 525
S.E.2d at 444. Here, plaintiffs’ injury is the loss of $400,000. Because plaintiffs’
-13-
GREEN V. FREEMAN
Opinion of the Court
injury is the same as the injury suffered by the company itself, the evidence was
insufficient to support plaintiffs’ claim under the personal injury exception.
Plaintiffs have failed to produce evidence showing either that Corinna owed
them, as shareholders or creditors, a special duty or that they suffered a personal
injury distinct from the injury suffered by the Piedmont companies as a whole.
Therefore, as a matter of law, plaintiffs could not assert individual claims that
belonged to the company. Energy Investors, 351 N.C. at 336, 525 S.E.2d at 444.
Accordingly, there was insufficient evidence to support plaintiffs’ claim, and
Corinna’s motions for directed verdict and JNOV should have been granted. See
Abels, 335 N.C. at 215, 436 S.E.2d at 825. We reverse the decision of the Court of
Appeals on this issue.
The second issue Corinna raises on appeal is whether the Court of Appeals
erred in holding “the trial court did not err in denying defendant Corinna’s motions
for a directed verdict and JNOV as to plaintiffs’ claims for piercing the corporate
veil.” Green, ___ N.C. App. at ___, 733 S.E.2d at 555 (majority). “The general rule is
that in the ordinary course of business, a corporation is treated as distinct from its
shareholders.” State ex rel. Cooper v. Ridgeway Brands Mfg., LLC, 362 N.C. 431,
438, 666 S.E.2d 107, 112 (2008) (citation omitted). Piercing the corporate veil sets
aside that general rule and allows a plaintiff to impose legal liability for a
corporation’s obligations, or for torts committed by the corporation, upon some other
company or individual that controls and dominates a corporation. See Henderson v.
-14-
GREEN V. FREEMAN
Opinion of the Court
Sec. Mortg. & Fin. Co., 273 N.C. 253, 160 S.E.2d 39 (1968). The doctrine allows
injured parties to bring claims against individuals who otherwise would have been
shielded by the corporate form. Courts will pierce the corporate veil “when applying
the corporate fiction would accomplish some fraudulent purpose, operate as a
constructive fraud, or defeat some strong equitable claim.” Ridgeway Brands, 362
N.C. at 439, 666 S.E.2d at 112-13 (citations and internal quotation marks omitted).
Disregarding the corporate form is not to be done lightly. Id. at 438-39, 666 S.E.2d
at 112.
The aggrieved party must show that “the corporation is so operated that it is
a mere instrumentality or alter ego of the sole or dominant shareholder and a shield
for his activities in violation of the declared public policy or statute of the State.”
Henderson, 273 N.C. at 260, 160 S.E.2d at 44 (citations omitted). Evidence upon
which we have relied to justify piercing the corporate veil includes inadequate
capitalization, noncompliance with corporate formalities, lack of a separate
corporate identity, excessive fragmentation, siphoning of funds by the dominant
shareholder, nonfunctioning officers and directors, and absence of corporate records.
Glenn v. Wagner, 313 N.C. 450, 455-58, 329 S.E.2d 326, 330-32 (1985) (citations
omitted). Many of those elements are facially present here. The record contains
evidence that the names of the Piedmont companies were used interchangeably; no
shareholders or directors meetings were ever held; and funds from corporate
accounts were used to pay personal expenses, such as a home mortgage and utility
-15-
GREEN V. FREEMAN
Opinion of the Court
bills.
After the fact finder determines that the corporate veil should be pierced—in
other words, that the corporate identity should be disregarded—the next inquiry is
whether a noncorporate defendant may be held liable for her personal actions as an
officer or director. To succeed in this inquiry, plaintiffs must present evidence of
three elements:
(1) Control, not mere majority or complete stock
control, but complete domination, not only of finances, but
of policy and business practice in respect to the
transaction attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or
existence of its own; and
(2) Such control must have been used by the
defendant to commit fraud or wrong, to perpetrate the
violation of a statutory or other positive legal duty, or a
dishonest and unjust act in contravention of [a] plaintiff’s
legal rights; and
(3) The aforesaid control and breach of duty must
proximately cause the injury or unjust loss complained of.
Id. at 455, 329 S.E.2d at 330 (citation and quotation marks omitted).
In this case there was evidence, when taken in the light most favorable to
plaintiffs, from which a jury could conclude that Corinna exercised domination and
control over the Piedmont companies. Despite Corinna’s designation as
Chairperson, no shareholders or directors meetings were ever held. Her name was
on a corporate credit card account and on at least one of the corporate checking
-16-
GREEN V. FREEMAN
Opinion of the Court
accounts. She is the undisputed owner of Piedmont Southern and is designated in
corporate documents as majority shareholder of the Piedmont companies. Corinna
wrote checks totaling over $19,000 from a BB&T account in her name to Jack and
Piedmont Southern for company expenses. Finally, mortgage and utility payments
on a house belonging to Corinna were paid from a Piedmont Express checking
account.
But sufficient evidence of domination and control establishes only the first
element for liability. There must also be an underlying legal claim to which liability
may attach. Id.; see Whitehurst v. FCX Fruit & Vegetable Serv., Inc., 224 N.C. 628,
637, 32 S.E.2d 34, 40 (1944). The only legal claim against Corinna considered by
the jury was breach of fiduciary duty, which we have held was erroneously
submitted to the jury. Plaintiffs’ complaint stated other claims against Corinna, but
they were dismissed by the trial court. Plaintiffs appealed the dismissal of their
agency claims against Corinna to the Court of Appeals, but the court did not
address the merits of that portion of the appeal because the court affirmed the trial
court’s judgment regarding plaintiffs’ claims for breach of fiduciary duty and
piercing the corporate veil. Green, ___ N.C. App. at ___, 733 S.E.2d at 556. Without
these agency claims, however, there was no legal claim still providing a basis for
liability.
The doctrine of piercing the corporate veil is not a theory of liability. Rather,
it provides an avenue to pursue legal claims against corporate officers or directors
-17-
GREEN V. FREEMAN
Opinion of the Court
who would otherwise be shielded by the corporate form. Without the agency claims
serving as the underlying wrongs that proximately caused plaintiffs’ harm, evidence
of domination and control is insufficient to establish liability. In other words, if the
trial court properly dismissed plaintiffs’ agency claims, it is irrelevant whether
Corinna exercised domination and control over the Piedmont companies. On the
other hand, if the trial court erred in dismissing the agency claims, the question
remains whether plaintiffs may recover against Corinna on those claims through
the piercing the corporate veil doctrine. Therefore, we reverse and remand to the
Court of Appeals for a determination of whether the trial court erred in granting
Corinna’s motion for a directed verdict on plaintiffs’ agency claims for fraud and
breach of fiduciary duty.
In summary, plaintiffs’ evidence on their breach of fiduciary duty claim was
insufficient as a matter of law. Additionally, plaintiffs’ agency claims are the only
remaining claims to which personal liability may attach under the piercing the
corporate veil doctrine. Accordingly, the decision of the Court of Appeals is reversed
and this case is remanded for further proceedings not inconsistent with this opinion.
REVERSED AND REMANDED.
-18-