Sunlight Electrical Contracting Co. v. Turchi
39 Pa. D. & C.5th 113
Pennsylvania Court of Common P...2014Background
- Sunlight Electrical Contracting Co. filed a fraud action to pierce the corporate veil of 23S23 Construction Inc. to reach assets of Turchi and Turchi, Inc. relating to the Carriage House Condominium project in Philadelphia.
- 23S23 acted as construction manager and subcontracted electrical work to Sunlight; Sunlight alleges partial payment and diverted funds to Turchi and related entities.
- In 2009, Turchi caused 23S23 and CHC LP to file for bankruptcy; CHC LP’s plan was confirmed in 2010 and 23S23 was liquidated with debts in their schedules, but veil-piercing claims were not treated as assets of the estates.
- Sunlight and other subcontractors claim not to have been fully paid; veil-piercing claims potentially belong to the bankrupt estates, not individual creditors.
- Subcontractors pursued individual veil-piercing claims in state court rather than through bankruptcy court, seeking direct repayment.
- The court held that pursuing Sunlight’s veil-piercing claims in this state court action would undermine the bankruptcy process and must be dismissed without prejudice to refile in reopened bankruptcy proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can veil-piercing claims be pursued in state court when bankruptcy proceedings exist? | Sunlight's claims are assets of the estates and should be pursued to satisfy creditors. | Veil-piercing claims belong to the bankruptcy estates and must be addressed in bankruptcy court. | Dismissed without prejudice to refiling in bankruptcy. |
| Would allowing the suit elevate Sunlight to preferred creditor status? | Sunlight seeks recovery irrespective of other creditors. | Proceeding would disrupt equal distribution among creditors. | Dismissal appropriate to preserve bankruptcy equal treatment. |
| Is the court's dismissal without prejudice proper procedural vehicle here? | N/A | N/A | Court-approved dismissal without prejudice to reassert in bankruptcy. |
Key Cases Cited
- Lumax Indus., Inc. v. Aultman, 543 Pa. 38 (Pa. 1995) (factors for piercing the corporate veil include undercapitalization and intermingling)
- S. T. Hudson Engineers, Inc. v. Camden Hotel Dev. Associates, 747 A.2d 931 (Pa. Super. 2000) (alter ego theory applies when owner controls the corporation to be pierced)
- St. Paul Fire & Marine Ins. Co. v. PepsiCo, Inc., 884 F.2d 688 (2d Cir. 1989) (alter ego claims are property of the estate and injury is generalized)
- Union Bank v. Wolas, 502 U.S. 151 (1991) (purpose of preference provisions is equality of distribution among creditors)