William Carlton was the sole shareholder in ten New York City corporations, including Seon Cab Corporation. Each corporation owned two taxicabs, and each cab was covered by the minimum $10,000.00 automobile liability insurance required under New York State law. A taxicab owned by Seon Cab Corporation struck and severely injured John Walkovsky, who sued for damages.

Walkovsky named all ten corporations, Carlton individually, as well as the individual driving the cab that hit him, as defendants. The plaintiff alleged that the corporations, although seemingly independent of one another, operate as a single entity, unit and enterprise with regard to financing, supplies, repairs, employees, and garaging. The plaintiff asserted that the multiple corporate structure constituted an unlawful attempt to defraud members of the general public who might be injured by the cabs. He sought to hold Carlton, the sole shareholder of each corporation, personally liable for his injuries.

1. Is there any theory under which Carlton, the sole shareholder of a corporation, could be held personally liable? Explain.

2. If so, were sufficient facts alleged to state a valid claim?

3. Forming multiple corporations, each owning one or two taxicabs carrying the minimum required insurance, was common in New York in the 1960's. Is this practice, which can result in a corporation being under-capitalized, the equivalent of fraud upon the general public? Why or why not?

4. Suppose William Carlton's name was conspicuously displayed on the sides of the taxicabs owned by the corporations and that he, the sole shareholder, actually serviced, inspected, repaired, and dispatched the taxicabs. Would that make a difference as to whether he could be held personally liable?

Answer rating: 100% (QA)

Incorporation of the people in the company is the act in which an individual owner of ... View the full answer