Corporations Keyed to Klein
Kinney Shoe Corp. v. Polan
Facts
Plaintiff had a lease on a building that they were no longer using. Plaintiff set up a sublease with Industrial Realty Company, which Defendant was the sole shareholder. Defendant was also the sole shareholder of Polan Industries, and after Industrial subleased Plaintiff’s building they turned around and leased out a portion of the building to Polan Industries. Industrial’s only asset was the sublease with Plaintiff. There was no evidence of any corporate formalities such as the keeping of minutes or holding meetings. Industrial only made one lease payment. Plaintiff obtained a judgment for $166,400 but Industrial claimed bankruptcy. Plaintiff then went after Defendant, claiming Industrial was an undercapitalized shell corporation to shield Plaintiff from liability. The trial court agreed that Plaintiff demonstrated that there was a unity of interest between Defendant and Industrial, and that an inequitable result would result if the corporate liability was to stand. However, the lower court believed that Plaintiff had a duty to check the background of Industrial before entering an agreement.
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