PIERCING CORPORATE VEIL WAS THE APPROPRIATE REMEDY IN EQUITABLE DISTRIBUTION DIVORCE PROCEEDING
After the end of their marriage, wife sought equitable distribution of the marital assets, including payment on a judgment to her from ex-husband’s company for unpaid contributions. Because of undue influence and commingling of funds, among other reasons, the court found that piercing the corporate veil was appropriate in the present case. Partial payment of the judgment was awarded in the form of ex-husband’s share of the marital division, the remainder to be paid, plus interest.
The marriage between plaintiff Jan Knisley and defendant Richard Mizerny ended with their separation in May 2012 and decree in divorce in March 2015. Plaintiff brought action seeking the equitable distribution of the marital assets and payment on a judgment note by defendant on behalf of his company, co-defendant MDEX Designs Inc., originally a separate complaint. Since defendant Mizerny was president and majority shareholder of his company, plaintiff alleged she should recover the amount due from the individual by piercing the corporate veil, in addition to legal fees. The court was assigned to address the corporate veil by order.
Plaintiff invested a substantial amount of time and personal assets from pervious marriage and inheritance into two joint business ventures, an earlier franchise and MDEX both of which went bankrupt. Both she and her husband declared personal bankruptcy during that time. A judgment note from MDEX dated Sept. 9, 2009, was not paid. In that complaint, plaintiff sought to recover payment from defendant Mizerny personally, since he had the responsibility, as president and majority shareholder, to ensure the principal was paid. She alleged alter ego and disregard for corporate formalities, undercapitalization and intermingling of corporate and personal affairs of defendants. Defendant argued that the note pledged only corporate assets and bound only the corporation.
The court disagreed, under plaintiff’s testimony, that defendant Mizerny had mismanaged both corporate ventures and had also fraudulently taken out loans in her name, in addition to depositing monies into personal accounts with no identified source. Defendant denied her version, but obstructed discovery by failing to answer interrogatories or supply documents concerning assets, including MDEX, even under court order. The court found that, in the present case, defendant had “used his significant control of defendant MDEX to further his personal interests” and could not be allowed to let the corporation conceal his personal actions, “particularly… when defendant Mizerny is the only person with access to the supporting documentation and has failed to produce such documents.” Mizerny would be held personally responsible for MDEX’s note.
Both parties had contributed to defendant MDEX, which had no assets left, and both contributed to the purchase of the residence, which plaintiff held as residence and paid the relevant taxes. The court, after evaluation of the 11 factors of 23 Pa. C.S. A 3502(a), found that a 63-37 division was appropriate given defendant’s judgment debt, plaintiff’s physical state and future earning capacity of each. The court assigned defendant’s portion of the marital assets to plaintiff as a partial payment for the $100,000 judgment as breach of contract, the remaining ca. $37,000 to be paid with interest.
As for plaintiff’s request for legal fees for costs of her personal bankruptcy, the court determined that they were not proper since they were not a result of conduct in relation to the divorce or distribution proceedings. All other requests for costs, alimony, and legal fees were dismissed with prejudice.
Reference: Knisley v. Mizerny, PICS Case No. 16-0973 (C.P. Centre July 22, 2016), Digest of Recent Opinions, Pennsylvania Weekly, 39 PLW 785 (August 16, 2016)
Filed Under: Equitable Distribution; Piercing The Corporate Veil Allowed