CECIL S. HARRELL, APPELLANT,
v.
ACCURATE ORTHOTICS & PROSTHETICS, INC., A FLORIDA CORPORATION, D/B/A PAR-MED, AND JULES BAUER, APPELLEES
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A landlord sought to pierce the corporate veil to hold a corporate officer liable for the corporation's breach of a lease. The trial court dismissed the complaint, incorrectly requiring that the plaintiff allege the corporation was formed for fraudulent purposes, rather than merely used for such purposes. The appellate court reversed, holding that piercing the corporate veil requires only showing the corporation was formed or used for illegal, fraudulent, or unjust purposes.
To state a cause of action for piercing the corporate veil, a plaintiff need only allege that the corporation was formed or used for illegal, fraudulent, or unjust purposes—not that it was formed solely for such purposes. The trial judge's requirement that the complaint allege formation for fraud was an incorrect statement of law.
[1] A corporate veil may be pierced upon a showing that the corporation was formed or used for illegal, fraudulent, or unjust purposes.
[2] A trial court's dismissal of a complaint based on an incorrect legal standard is reversible error.
Previewing 2 of 4 headnotes on this case. FLexlaw’s editorially structured points of law — every proposition, pinpointed — are reserved for members.
Join FLexlaw to unlock all legal intelligence“the corporate veil may be pierced upon a showing of improper conduct or that the corporation was "formed or used for some illegal, fraudulent or unjust purposes"”
Establishes the correct legal standard for piercing the corporate veil—that use or maintenance for improper purposes is sufficient, not just formation
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Join FLexlaw to unlock all legal intelligenceHarrell, a landlord, leased property to Accurate Orthotics & Prosthetics, Inc. (doing business as PAR-MED). Accurate allegedly breached the lease. Har…
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CAMPBELL, Chief Judge.
Appellant, Cecil S. Harrell, appeals the final order dismissing, with prejudice, his complaint against appellee, Jules Bauer. Appellant, landlord/lessor, sought to pierce the corporate shield of Accurate Or-thotics & Prosthetics, Inc. (Accurate), the tenant/lessee, and hold appellee Bauer liable for Accurate’s alleged breach of the lease. The trial judge dismissed appellant’s complaint against Bauer on the sole basis that appellant failed to “allege that the corporate defendant, ACCURATE OR-THOTICS & PROSTHETICS, INC., doing business as PAR-MED, was formed for the purpose of committing a fraud.” The trial judge offered to dismiss the complaint without prejudice to allow appellant to re-plead to cure what the trial judge perceived as the deficiency in appellant’s complaint. Appellant argued to the trial judge that to state a cause of action for piercing a corporate shield a plaintiff must only allege that the corporation was used or maintained (rather than formed) for fraudulent or misleading purposes. Appellant, therefore, declined to replead because he could not allege as the trial judge required.
There is no question that the order of dismissal is based on an incorrect perception of the applicable law by the trial judge.
The issue here was specifically ruled upon in Futch v. Head, 511 So. 2d 314 (Fla. 1st DCA 1987). The court there ruled as follows:
We find Futch’s argument too restrictive because it intimates that “piercing” questions are determined solely through a consideration of the events surrounding formation of the corporation. However, the Florida Supreme Court has recognized that the corporate veil may be pierced upon a showing of improper conduct or that the corporation was “formed or used for some illegal, fraudulent or unjust purposes_” Dania Jai-Alai, Inc. v. Sykes, 450 So. 2d 1114, 1121 (Fla. 1984) (emphasis added) (quoting Robert’s Fish Farm v. Spencer, 153 So. 2d 718 (Fla.1963)).
Id. at 322. We approve of that holding in Futch.
Appellee Bauer in this appeal argues that even though the trial judge may have applied the wrong standard, the error is harmless. Appellee’s argument that the error is harmless is based on his allegations that appellant’s complaint lacks the specificity of facts to support an allegation of misuse of the corporate status for fraudulent or misleading purposes. While appellant’s complaint may well contain that deficiency, it was not that deficiency upon which the trial judge based his dismissal. Accordingly, the dismissal with prejudice must be reversed and remanded with instructions to allow appellant an opportunity to replead according to the correct and applicable principles of law.
Reversed and remanded for treatment consistent with this opinion.
SCHEB and LEHAN, JJ., concur.
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Langworthy & Assocs., Inc. v. Meadowlawn Pharmacy, Inc., 629 So. 2d 892 (Fla. 2d DCA 1993)…ten lease. [*894] Our examination of the pleadings and the evidence provides no basis for holding Lang-worthy personally liable to Meadowlawn. See Barkett v. Hardy, 571 So. 2d 13 (Fla. 2d DCA 1990); Harrell v. Accurate Orthotics & Prosthetics, Inc., 529 So. 2d 358 (Fla. 2d DCA 1988); Jewelcor Jewelers & Distribs., Inc. v. Southern Ornamentals, Inc., 499 So. 2d 850 (Fla. 4th DCA 1986), rev. denied, 509 So. 2d 1118 (Fla.1987). We, therefore, reverse the final judgment only insofar as it holds Langworthy indivi…
Authorities Cited
- Dania Jai-Alai Palace, Inc. v. Sykes, 450 So. 2d 1114 (Fla. 1984)
- Futch v. Head, 511 So. 2d 314 (Fla. 1st DCA 1987)
- Roberts' Fish Farm & Fla. Fish Farm, Inc. v. John Joseph Spencer & the Fla. Indus. Comm'n, 153 So. 2d 718 (Fla. 1963)