968 N.W.2d 146
N.D.2021Background
- Lakeview Excavating (incorporated 2010) contracted with German Township; its president and sole shareholder was Brian Welken.
- In summer 2012 Lakeview employees removed fieldstones from the Taszareks’ property; the Taszareks sued for trespass, conversion, and unjust enrichment.
- A jury initially found Lakeview was Welken’s alter ego; appellate reversals remanded for proper juror instructions and later for fuller findings on veil-piercing factors.
- On the final remand the district court held an evidentiary hearing, found Lakeview was not Welken’s alter ego, and declined to pierce the corporate veil.
- Key financial facts: Lakeview was profitable 2010–2012 but suffered major losses in 2013 tied to a FEMA project, had insurance coverage denied for this claim, and was effectively insolvent by the end of 2014.
- The Taszareks appealed, arguing the court exceeded the remand scope and erred in refusing to pierce the corporate veil; the North Dakota Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether district court exceeded scope of remand by holding an evidentiary hearing | Taszareks: court should have made findings from existing record per remand | Welken/Lakeview: court may take additional evidence on remand | Court: remand did not prescribe procedure; taking additional evidence was within discretion; no abuse |
| Whether Lakeview was alter ego of Welken (pierce corporate veil) | Taszareks: unity of interest, undercapitalization, siphoning, and injustice justify piercing | Welken: Lakeview observed corporate formalities, was adequately capitalized initially, losses came from operations not siphoning | Court: findings not clearly erroneous; Lakeview not alter ego; veil not pierced |
| Undercapitalization at formation | Taszareks: capital was insufficient for corporate undertaking | Welken: adequately capitalized with line of credit and early profits | Court: Lakeview adequately capitalized at formation; finding not clearly erroneous |
| Timing of insolvency for veil-piercing analysis | Taszareks: insolvency measured at time judgment entered (2015) | Welken: transaction-in-question is 2012 tort; insolvency at time of tort is relevant | Court: insolvency considered with reference to the tort (2012) and subsequent insolvency; focus on whether insolvency resulted from siphoning—no error |
| Siphoning, corporate formalities, injustice element | Taszareks: transfers, shared resources, distributions and loans show siphoning and unfairness | Welken: loans documented, shared resources common between related companies, modest wages/distributions legitimate | Court: record shows corporate formalities, functioning officers, no credible siphoning, and no injustice—veil piercing not warranted |
Key Cases Cited
- Taszarek v. Welken, 883 N.W.2d 880 (N.D. 2016) (reversed and remanded for inadequate jury instructions on alter ego)
- Taszarek v. Lakeview Excavating, Inc., 930 N.W.2d 98 (N.D. 2019) (remanded for fuller findings on Hilzendager–Jablonsky factors)
- Hilzendager v. Skwarok, 335 N.W.2d 768 (N.D. 1983) (sets veil-piercing factors and general rule allowing disregard of corporate entity for fraud/wrong)
- Jablonsky v. Klemm, 377 N.W.2d 560 (N.D. 1985) (requires element of injustice or fundamental unfairness to pierce veil)
- Coughlin Constr. Co. v. Nu-Tec Indus., Inc., 755 N.W.2d 867 (N.D. 2008) (applies Hilzendager factors; siphoning and post-notice asset diversion supported piercing)
- Axtmann v. Chillemi, 740 N.W.2d 838 (N.D. 2007) (discussion of undercapitalization and insolvency in tort/context of veil piercing)
- Sorenson v. Slater, 806 N.W.2d 183 (N.D. 2011) (on district court discretion to take additional evidence on remand)