Bart Arconti and Sons Inc v Ames Ennis Inc

Arconti

The issue here is that the two involved gentleman, Bart and George, were found to be responsible for punitive and compensatory damages based on the lower court's ruling that a fine of over $475,000 be imposed upon the two of them. The setting is that the two gentlemen being sued were owners and controllers of three separate legal business entities. A number of years ago the decision was made to allow one of the entities to remain dormant, since it was being litigated against. The gentlemen would continue to run the other two entities as legal businesses.

At the trial level, the finding was against the two gentlemen, essentially stating that the business entities were not separate at all, but were created to shield the assets maintained by the two gentlemen. This, the trial found, was illegal and the court therefore found that the purpose of these activities had been to "evade legal obligations devolving upon Arconti during the pendency of the present action." Other actions taken by Bart and George, the two defendants in this case, included using all the assets of Arconti to conduct business of the other two entities, as well as transferring an insurance policy with a surrender value of approximately $38,000 from Arconti to the two men. The court decided that since these actions ultimately was the cause of Arconti becoming essentially 'insolvent', then the court was able to 'pierce the corporate veil' in this case and found against the two gentlemen, holding them responsible for any fines and damages levied by the court against Arconti.

As authority for its action, the court relied exclusively on Brune, Maryland Corporation Law and Practice, a 371 (rev. ed. 1953). The appellate court found that the trial court's findings were based on erroneous assumptions and, therefore, reversed the trial court's findings, no longer holding Bart and George responsible for the fines levied against them and Arconti. Instead, Arconti (the company), was held liable for the fines and damages as levied by the trial court.

The reasons for the reversal against Bart and George according to the appellate court's findings were based on the contention that Bart and George are not individually responsible under a theory of tortious interference with the subcontracts; and that Bart and George did not intentionally waste the assets of Arconti. Bart and George were also not engaged in any fraudulent activities that were part of the reasoning behind the trial court's findings against them.

Maryland's law states that the shareholders will be held responsible if they fail to observe the corporate entity or they operate the business or deal with the corporation's property as if it were their own.

I just result in this particular case would probably have consisted of holding the two individuals responsible for their actions, or lack thereof. As compared to the Rule of Law, there is no Spirit of the Law, but if there were, the result in this case may have not been overturned by the appellate court. The scenario the two gentlemen may have found themselves in could have been a court that while giving them the nod of not violating the law as it was written, certainly their actions went against what the law was attempting to keep from happening.