Kinney Shoe Corporation v. Polan

939 F.2d 209 (4th Cir. 1991)

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Nature of the Case

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Facts

Polan (D) created two corporations and constructed a leasing deal with Kinney (P). D was the sole owner of both corporations, he held no meetings, took no minutes, issued no stock and hired no officers or directors. D negotiated a lease with P using the first corporation (Industrial). Industrial then subleased its interest to D's second corporation. D personally signed for Industrial and the second corporation. It is undisputed that Industrial was inadequately capitalized upon formation and could not pay its debts. P filed suit against Industrial and obtained a judgment for $166,400. P then filed suit against D personally to collect this debt. The district court concluded P was damaged by D's failure to carry out corporate formalities and realty company's gross undercapitalization. However, it then concluded 'piercing the corporate veil' doctrine did not apply because P assumed risk of D's company defaulting.