ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, August 18, 2008

Limerick of the Week: Sea-Land

Spices Sea-Land Services v. Pepper Source is another delightful case, a real joy to read.  I knew it would be a good one when Chief Judge Bauer began his opinion by calling it "spicy."  The case involves one Mr. Marchese (also the name of the driver in Walkovsky v. Carlton -- coincidence?  I don't think so!) who, as the court notes, really knew how to "'run' the expense accounts!"  Marchese "borrowed" money from his various corporations for personal expenses, such as child support and alimony, educational expenses for his children and maintenance of his automobiles and pets. 

So, seems like Marchese's corporate empire ought to be pierced.  But whether or not it could be turned on the "second prong," of the Van Dorn test, which governed the relevant jurisdiction.  That is, it was not enough that Marchese comingled funds, undercapitalized his corporations and failed to abide by corporate formalities.  Plaintiff also had to show that honoring the corporate form in this instance would "sanction a fraud or promote injustice."   So, here's the rule from the case:

Sea Land Services, Inc. v. Pepper Source

Veil piercing has a new hitch:
More than a corporate formality glitch
Must have occurred
If the court's to be stirred
To disgorge the unjustly enriched.

[Jeremy Telman]

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