Veil Not Fail by Garrett Sutton

Author:Garrett Sutton
Language: eng
Format: epub
Publisher: RDA Press, LLC

Agreeing with the Communists’ arguments would lead to extremely bad precedent. If you had enough partisan ‘witnesses’ to claim that one corporation was intended to be owned by another, contrary to the written corporate documentation, what kind of litigation would ensue?

It wouldn’t be pretty. Or fair.

The appellate court stated that alter ego was used to prevent two parties with similar interests from using the corporate form to harm an independent third party. But in this case there was no third party. Instead there were two separate parties with opposing interests – the Communists wanted control of Valencia and Pacific, and Valencia and Pacific didn’t want to be taken over. Allowing alter ego to smother the rights of opposing entities was not to be tolerated.

The court also noted that: “Respondent cannot use the alter ego doctrine to “pierce the corporate veil” of a separate corporation which it claims it set up to conceal its property from the federal government and to circumvent the laws of the state concerning duties of corporate directors.”

The court’s statement raises the issue of unclean hands (sometimes called the clean hands doctrine). A party seeking judgment cannot be helped by the court if they have acted unethically. When a party has acted in bad faith – that is, with unclean hands – the court will not reward them. The doctrine is often stated as “equity must come with clean hands.”

In this case, if the Communists set up the two corporations in bad faith as a way to conceal their ownership from the federal government they can’t later go into court and essentially say “Okay, we’d like our assets back now.”

The courts will not help Communists or anyone else acting in bad faith.

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