Gentile v. DKD Construction, Inc.

A-7512-97T2 (N.J. Super. App. Div. 1999) (Unpublished)
  • Opinion Date: October 15, 1999

CORPORATIONS; SHAREHOLDERS; PERSONAL LIABILITY—Where a court could extract neither an individual shareholder from the corporation nor the corporation from the individual shareholder it pierced the corporate veil and held the shareholder personally liable for the corporation’s obligations.

A buyer of a new home found many deficiencies in the building. It sued the corporate builder and its sole shareholder and principal. The individual shareholder argued that he should not have been a defendant. Even though the Court was mindful that a “corporation is an entity separate from its stockholders,” and in the absence of fraud or injustice, “courts generally will not pierce the corporate veil to impose liability on the corporate principals,” it held against the individual shareholder. It did so because it found it difficult to extract the individual from the corporation and the corporation from the individual. The shareholder did not formally keep the corporation separate from himself. “When asked at trial to clarify whether he made oral promises to the plaintiff personally or on behalf of the corporation, he responded ‛I am the corporation.’” The builder further testified that the corporation had no assets, and although the corporate entity built the house, the individual shareholder financed its construction with a home equity loan on his personal residence. Given those facts, the Court concluded “that the trial judge did not err in concluding that [the corporation] was indistinguishable from [its shareholder] and that the corporate veil ought to be pierced. Here, it would be an injustice if the corporate veil was not pierced.”