Corporate Shield Holds Up Against Creditor

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There's no expression when speaking of football players to recognize a performance that hits three exceptional marks (like a hat trick in hockey or a triple double in basketball or the triple crown in baseball). 

Maybe there should be, because Joe Bostic, who played ten years in the NFL for the St. Louis Cardinals and who was formerly a member of the Guilford County Board of Commissioners, pulled off an extraordinary triple victory yesterday in the Business Court.  He got summary judgment in three cases in which he was the Defendant: Yates Constr. Co. v. Bostic, 2014 NCBC 19; Phillips & Jordan, Inc. v. Bostic, 2014 NCBC 18; and American Mechanical, Inc. v. Bostic, 2014 NCBC 17.

[Note:  Although Joe Bostic was originally a Defendant in these cases, he was successful on a motion to dismiss years ago.  It was his brother, Jeff Bostic, who was the Defendant who succeeded on summary judgment in the three cases I'm writing about.  Although Jeff Bostic did not serve on the Guilford County Board of Commissioners, he did play twelve years in the NFL, for the Washington Redskins.  He played on three Super Bowl winning teams.  Thanks to those who pointed out my mistake.]

All of the Plaintiffs were subcontractors on construction projects for Bostic Construction Inc., which Bostic owned.  When the company failed and they were not paid, the Plaintiffs sued Bostic personally, alleging that Bostic had engaged in constructive fraud by commingling and misusing the funds from construction loans and using those funds for personal purposes.

Those facts might give rise to a claim by a shareholder of the construction company, but each of these Plaintiffs was only a creditor.  They ran into this settled principle:

Generally, directors and officers of a corporation are not liable, solely by virtue of their offices, for torts committed by the corporation or its other directors and officers.

Phillips & Jordan Op. ¶19 (relying on Oberlin Capital, L.P. v. Slavin, 147 N.C. App. 52, 57, 554 S.E.2d 840, 845 (2001).

Before a director or an officer can be directly liable to a creditor, there must be "a tort personally committed by [him] or one in which he participated."  Id.

The problem for each of these Plaintiffs is that they had no direct communication or interaction with Bostic.  His ownership status, standing alone, therefore was "insufficient to hold him legally accountable for an injury to Plaintiffs [as] third party creditor[s] of" the corporation.  Ops. ¶ 22.

 

Topics:  Board of Directors, Creditors, Directors, Officers, Personal Liability

Published In: Business Organization Updates, Business Torts Updates, Civil Procedure Updates, General Business Updates, Construction Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Brooks Pierce | Attorney Advertising

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