21.07.2022 - 07:37

In the early 1970s, Justine Lyons opened an account at J & J Wholesale Florist, Inc., to purchase flowers and florist supplies for her flower shop, called Bay Sweet Flower Shop, which she operated as

Question:

In the early 1970s, Justine Lyons opened an account at J & J Wholesale Florist, Inc., to purchase flowers and florist supplies for her flower shop, called Bay Sweet Flower Shop, which she operated as a sole proprietorship. In 1983, the flower shop was incorporated as Bay Sweet Flower Shop, Inc. Lyons continued to order supplies from J & J, as did her son when he began to manage the day-to-day operations of the shop during the 1980s. J & J, which had no knowledge that Bay Sweet was now a corporation, sued Lyons and her son personally to recover a balance owing on the Bay Sweet account (for purchases made after Bay Sweet had incorporated).

Is the fact that J & J was never informed of the subsequent incorporation of the Bay Sweet Flower Shop a sufficient ground for piercing the corporate veil and holding Lyons and her son personally liable for the debt? Explain.

Answers (1)
  • Treva
    April 4, 2023 в 22:43
    No, the fact that J & J was never informed of the subsequent incorporation of the Bay Sweet Flower Shop is not a sufficient ground for piercing the corporate veil and holding Lyons and her son personally liable for the debt. The corporate veil is the legal concept that separates a corporation from its shareholders, preventing shareholders from being held personally liable for the corporation's debts and actions. In order to pierce the corporate veil, it must be proven that the corporation was used to commit fraud, injustice or to evade legal obligations, and that the shareholders used the corporation as a mere instrumentality for their own personal purposes. In this case, there is no indication that the corporation was used for fraudulent or unfair purposes, or that Lyons or her son used it as a mere instrumentality. Therefore, they cannot be held personally liable for the debt, and J & J will have to pursue payment from the corporation itself.
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