Green v. Freeman
367 N.C. 136
| N.C. | 2013Background
- Corinna Freeman (owner on corporate filings) and her husband founded Piedmont Southern Air Freight; Jack Freeman (her son) operated management functions after 2001 and, with Larry D’Amelio, formed Piedmont Express and Piedmont Capital; plaintiffs Michael and Daniel Green each gave $200,000 to the venture believing it was a loan/investment.
- Corporate paperwork was informal: no shareholder/director meetings, overlapping use of corporate names, operating agreement referenced shares and named Corinna as chairperson but stock was never issued or vested to plaintiffs.
- Corporate accounts were opened in Corinna’s name or listed her as owner; company funds were used for payments that benefitted Corinna personally (checks signed by/for C. Freeman; mortgage and utilities paid from corporate account).
- Plaintiffs sued for fraud, breach of contract, conversion, unjust enrichment, breach of fiduciary duty, unfair/deceptive practices, and sought to pierce the corporate veil; many claims were dismissed pretrial, and at trial only breach of fiduciary duty and veil-piercing were submitted to the jury against Corinna.
- Jury found Corinna controlled the Piedmont companies and failed to discharge a duty as an officer/director; trial court denied Corinna’s JNOV. The Court of Appeals affirmed; the North Carolina Supreme Court reviewed de novo.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Corinna breached a fiduciary duty to plaintiffs (individually) | Greens: Corinna, as named owner/officer and chairperson, owed fiduciary duties to them as investors/creditors and breached those duties causing the $400,000 loss | Corinna: Plaintiffs were not shareholders (no issued/vested stock) and there was no special duty or personal injury distinct from corporate injury—claims belong to the corporation | Reversed; insufficient evidence of a fiduciary relationship or distinct personal injury—directed verdict/JNOV should have been granted for Corinna on fiduciary claim |
| Whether plaintiffs were shareholders entitled to bring individual fiduciary claims | Greens: Operating agreement and amendments show they were shareholders and thus owed direct fiduciary protections | Corinna: Shares were never issued/vested; plaintiffs’ testimony shows no shareholder status | Held: Plaintiffs never became shareholders; no direct shareholder claim allowed |
| Whether plaintiffs, as creditors, can sue individually under special-duty or personal-injury exceptions | Greens: Their $400,000 was a loan; Corinna had individualized interactions and control creating a special duty or distinct injury | Corinna: No individualized reliance or special-duty facts; loss mirrors corporate injury | Held: No special duty or distinct personal injury; creditors’ individual fiduciary claims fail |
| Whether the corporate veil can be pierced to impose personal liability on Corinna | Greens: Evidence of domination, commingling, noncompliance with formalities, and siphoning supports veil piercing to reach Corinna for corporate obligations | Corinna: Even if domination existed, there must be an underlying legal wrong to which veil-piercing attaches; fiduciary claim fails so no basis for personal liability | Held: Evidence could support domination, but veil-piercing requires an underlying actionable wrong; because fiduciary claim fails, remanded to resolve whether dismissed agency claims could supply that underlying basis |
Key Cases Cited
- Dalton v. Camp, 353 N.C. 647 (N.C. 2001) (standard for when fiduciary relationship exists)
- Barger v. McCoy Hillard & Parks, 346 N.C. 650 (N.C. 1997) (limits on individual suits by shareholders/creditors; special-duty and personal-injury exceptions)
- Energy Investors Fund, L.P. v. Metric Constructors, Inc., 351 N.C. 331 (N.C. 2000) (loss of investment is corporate injury, not distinct personal injury)
- Henderson v. Sec. Mortg. & Fin. Co., 273 N.C. 253 (N.C. 1968) (piercing corporate veil requires instrumentality/alter-ego showing)
- Glenn v. Wagner, 313 N.C. 450 (N.C. 1985) (factors supporting veil piercing: inadequate capitalization, siphoning funds, lack of formalities)
- State ex rel. Cooper v. Ridgeway Brands Mfg., LLC, 362 N.C. 431 (N.C. 2008) (corporate entity ordinarily distinct; veil piercing limited and disfavored)
- Abels v. Renfro Corp., 335 N.C. 209 (N.C. 1993) (standard for submitting case to jury — elements must have evidentiary support)
- Cogdill v. Scates, 290 N.C. 31 (N.C. 1976) (plaintiff testimony that repudiates complaint warrants directed verdict)