Schlossberg v. Bell Builders Remodeling, Inc.

Roger Schlossberg, Chapter 7 Trustee v. Bell Builders Remodeling, Inc., et al., Misc. No. 5,
September Term 2014, Opinion by Greene, J.
Under Maryland law, where there is no allegation of fraud, evidence or finding of fraud, the
corporate veil, nonetheless, may be disregarded and personal liability established upon proof
of a paramount equity.
Case # 11-30672
Argued 2/5/15
IN THE COURT OF APPEALS
OF MARYLAND
Misc. No. 5
September Term, 2014
______________________________________
ROGER SCHLOSSBERG, CHAPTER 7
TRUSTEE
v.
BELL BUILDERS REMODELING, INC.,
ET AL.
______________________________________
Barbera, C.J.
Harrell
Battaglia
Greene
Adkins
McDonald
Watts,
JJ.
___________________________________
Opinion by Greene, J.
___________________________________
Filed: February 20, 2015
The United States Bankruptcy Court for the District of Maryland submitted to this
Court a Certified Question, pursuant to the Maryland Uniform Certification of Questions of
Law Act, Maryland Code (1973, 2013 Repl. Vol.), §§ 12-601 through 12-613 of the Courts
and Judicial Proceedings Article (“CJP”) and Maryland Rule 8-305. The question of law set
forth in the Certification Order is:
Would meeting the factors set forth in DeWitt Truck Brokers, Inc. v. W. Ray
Flemming Fruit Co., 540 F.2d 681 (4th Cir. 1976), be sufficient to establish
a paramount equity, in the absence of common law fraud, to warrant piercing
the corporate veil?
In the present case we are not asked to determine the underlying facts. Nor
are we required to assume the truth of the allegations contained in the Adversary
Complaint filed in the United States Bankruptcy Court for the District of Maryland
or to apply the law of Maryland to those facts.
Accordingly, we rephrase the question in order to provide the Bankruptcy
Court and the parties with a more definitive response to what we perceive to be the
crux of the fundamental issue provoking certification in this case. We reformulate the
question of law:
Under Maryland law, where there is no allegation of common law fraud, may
a court disregard the corporate entity and establish personal liability to enforce
a paramount equity?
Having reformulated the question, we answer it in the affirmative and hold that a
corporate entity may be disregarded when necessary to prevent fraud or to enforce a
paramount equity. See Hildreth v. Tidewater Equip. Co. Inc., 378 Md. 724, 838 A.2d 1204(2003). For clarity, under Maryland law, where there is no allegation of fraud, evidence or
finding of fraud, the corporate veil may be disregarded nonetheless and personal liability
established upon proof of a paramount equity. The analysis of the common factors
considered by our courts when addressing whether a complaint or set of facts are sufficient
to pierce the veil of a single corporation are delineated in Hildreth, 378 Md. at 732-37, 838
A.2d at 1208-1211. As we further pointed out in Hildreth with regard to the failure to adhere
to corporate formalities, “[t]he ‘alter ego’ doctrine must . . . take account of close corporation
laws, which commonly allow close corporations to elect not to have a board of directors and
to have the corporation run directly by the stockholders.” 378 Md. at 736 n.2, 838 A.2d at1211 n.2.
CERTIFIED QUESTION ANSWERED AS
SET FORTH ABOVE. PURSUANT TO § 12-
610 OF THE COURTS AND JUDICIAL
PROCEEDINGS ARTICLE, THE COSTS
SHALL BE EQUALLY DIVIDED BETWEEN
THE PARTIES.
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