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Piercing the Corporate Veil in Florida to Obtain the Damages Owed to You Under a Breach of Contract Judgment

Sometimes, when the entity with which you have contracted does not perform as it promised in your agreement, resolving that problem can be as straightforward as suing, obtaining a favorable verdict and damages award, and then receiving payment from the party that lost. At other times, though, deciding to bring a breach of contract lawsuit to resolve your commercial dispute is just the beginning. Whatever your commercial litigation case needs, make sure that you have Florida business litigation counsel who is familiar with all of the techniques and tools available to protect your interests.

The seeds of what would become a protracted commercial litigation case began with a real estate investor’s agreement to purchase several notes and mortgages for several properties. The purchaser wired more than $370,000 to the sellers, but they never transferred the notes or the mortgages. The failure led the buyer to sue for breach of contract and fraud. The crux of the buyer’s complaint was that the sellers didn’t actually own the mortgages and notes they purported to sell and had no intention of doing anything other than pocketing the payment provided by the purchaser.

The sellers did not take any action, and the buyer obtained a default judgment. The judgment called for the sellers to pay the buyer almost $430,000. The buyer eventually concluded that pursuing the seller companies directly was not going to yield actual payment, so it employed a new strategy. The buyer launched a supplemental legal action in which it attempted to “pierce the corporate veil” in order to go after the assets of the two individuals who owned the seller companies, as well as their other entities. The action also named the couple’s children.

After that, the sellers responded. One of the seller companies filed a document stating that it had filed for Chapter 7 bankruptcy and that that filing triggered an automatic stay of all proceedings. The company later dismissed the bankruptcy, and the supplemental action resumed. The trial judge concluded that the buyer had enough evidence to pierce the corporate veil. The court held the couple personally responsible for the $430,000 judgment.

What occurred when the couple was added as defendants was a legal process called “implead.” The primary question that the Third District had to resolve in the appeal was whether the bankruptcy filing triggered an automatic stay, such that the stay barred the impleading of the couple in the breach of contract lawsuit.

The appeals court stated that the automatic stay created under federal bankruptcy law did not preclude the impleading of the individual defendants in this case. The automatic stay precludes actions taken against a named debtor in a bankruptcy case. The debtor in the bankruptcy case was one of the two seller companies. The individuals and entities impleaded in the breach of contract case were the couple, their children, and their other companies (outside the two seller companies). Since the court’s impleader order targeted several people and entities, none of which was the debtor in the Chapter 7 bankruptcy case, that meant that the stay had no impact.

Whether your case needs an action to pierce the corporate veil or just needs an action against one entity for breach of contract, you need to have skilled representation on your side. The experienced South Florida contract litigation attorneys at Stok Folk + Kon have been helping clients achieve the results they need for many years and are ready to assist you.

Contact us online or by calling (305) 935-4440 to schedule your consultation and find out how this firm can help you.

More blog posts:

Contractual Limitations Period Stymies Swiss Trust’s Breach of Contract Lawsuit Against American Bank, Florida Business Lawyers Blog, May 7, 2018

How the Lack of a Skilled Florida Business Attorney Derailed One Plaintiff’s Breach of Contract Lawsuit, Florida Business Lawyers Blog, Feb. 14, 2018