K.C. Roofing Center v. On Top Roofing, Inc.

807 S.W.2d 545 (1991)

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Nature of the Case

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Facts

Kansas City Roofing and Lumberman's (Ps) filed suit against On Top (D) and Russell (D1) and Carol Nugent (D2) to recover for unpaid roofing supplies delivered to D. Ps sought to pierce the corporate veil to hold D1 liable. After a bench trial, the judge found for Ps and held D1 liable for the corporate debt. From the facts at trial, it was deduced that D1 had been involved in the roofing business for over 25 years in the Kansas City area. His company was incorporated on March 1997, and the name was changed to D in 1985. D1 and D2 were the sole shareholders and were also husband and wife. D went out of business in August 1987. Another company was started by D1, and that went out of business in 1988. Still another company was started, Russell Nugent, Inc. D1 testified at trial that none of his roofing companies were doing business presently. Each was incorporated and located at the same business address, and all used the same phone number. The articles of incorporation required a board of three to be maintained. That was done in the early years, but for several years prior to 1987, D1 and D2 were the only two directors. The articles were never amended to provide for less than three directors. No annual meetings were held in 1988 or 1989 and no minutes were kept. From April through August 1987, Kansas City Roofing advanced $45,000 in roofing supplies to D. When D failed to pay, P sued both D and D1 and D2. D1 or one of his employees ordered 1,360 rolls of shakeliner from Lumberman on November 25, 1987 at a cost of $7,367.77. Lumberman got a default judgment. Unable to collect Lumberman also sued to pierce the corporate veil. D1 testified that he defaulted against Lumberman as D was no longer in business and the delivery was taken by his successor corporation and the judgment was against the wrong corporation. D1 admitted he was having trouble paying trade debts and only paid secured creditors who had personal guarantees or loans against his house. The corporate income tax return showed D1 and D2 getting $100,000 in salaries in 1986. D1 and D2 also owned the building and made the corporations they owned pay rent of $99,200 in 1986. The trial court found that D purchased supplies from Ps knowing that it owed almost $100,000 to other suppliers that it could not pay. D1 testified that he had five different roofing companies in five years and that every time he needed a fresh start, he would close down one company and open another. In October 1987, D1 and D2 sold all the assets of D to a company they owned. Once D stopped doing business, D1 still used the same phone and signs as late as of 1989 with very small d.b.a. designations that could hardly be seen. The trial court found that D1 exercised total control of D. The court found that D2 was not an active participant and that it would be improper to pierce the veil for her personal assets. Ps prevailed against D1. D1 appealed.