7ASR3d92

Series: 7ASR3d | Year: () | 7ASR3d92
Print This

AMERICAN SAMOA

GOVERNMENT, Plaintiff,

 

v.

 

AMERIKA SAMOA BANK,

INSURANCE COMPANY OF SAMOA, LA FENIX BOLIVIANA S.A. DE SEGUROS Y REASEGUROS,

Defendants.

 

High

Court of American Samoa

Trial

Division

CA

No. 157-96

 

May

2, 2003

 

 

[1] A corporation is a legal fiction which exists as a

separate entity from its shareholders and exempts the shareholders’ property

from corporate debts.

 

[2] Shareholders are normally exempt from liability for

the corporation’s debts, but the exemption will be abrogated if there are

circumstances justifying disregard of the corporate entity, in order to prevent

abuse of corporate privileges, either by one or more individuals or by another

corporation.

 

[3] Piercing the corporate veil is justified when: (1) the

corporation is not only influenced and governed by the shareholder, but there

is such a unity of interest and ownership that the individuality, or

separateness, of said person and corporation has ceased; and (2) the facts are

such that an adherence to the fiction of the separate existence of the

corporation would, under the particular circumstances, sanction a fraud or

promote injustice.

 

[4]

Where defendant was the dominant, if not the only, stockholder of corporation,

where there was no evidence of a corporate structure or of adequate corporate

records and minutes, and where defendant admitted to paying off corporation’s

debt with his own personal funds, Court found that there was sufficient unity

of interest and ownership to satisfy first prong of test for piercing corporate

veil.

 

[5]

The inequity necessary to justify piercing the corporate veil must flow from

the misuse of the corporate form.

 

[6]

Where corporation was not authorized to transact insurance business as an

insurer, having obtained certificate of insurance through misrepresentations,

but shareholder nevertheless attempted to hold corporation out as a legitimate

insurer in the Territory so that he might personally gain from corporation’s

collection of deposit, court concluded that injustice would result if corporate

veil were not pierced. 

 

Before

RICHMOND, Associate Justice, and SAGAPOLUTELE, Associate Judge.

 

Counsel:  For Defendant La Fenix Boliviana, by its

Special Deputy

 Liquidator, Roy J.D. Hall, Jr.

 For Defendant Insurance Company of Samoa,

Deanna Sanitoa

 For Defendant Amerika Samoa Bank, William H.

Reardon

 

JUDGMENT

OF CONTEMPT

 

On December 2, 2002, the Court first heard the

application of Defendant La Fenix Boliviana (“LFB”), by its Special Deputy Liquidator

(“the Liquidator”), to hold Don Fuimaono (“Fuimaono”) in contempt for failing

to comply with the Court’s order of February 28, 2001, requiring Defendant

Insurance Company of Samoa (“ICS”) to pay the Liquidator $2,180.20, the amount

of earned interest paid to Fuimaono while the Defendant Amerika Samoa Bank

(“ASB”) held the $50,000 statutory insurance deposit on ICS’s behalf.  On January 15, 2003, the Court pointed out

that the order of February 28, 2001, was directed to ICS, not Fuimaono, and

that as of the December 2 hearing, no factual or legal basis was established to

hold Fuimaono personally in contempt for nonpayment.  We scheduled a second hearing on the

application, which took place on February 21, 2003.  The three counsel named above were present.

Fuimaono was present only by his counsel and not in person.

 

Non-payment of the $2,180.20 to the Liquidator, by

either ICS or Fuimoano, is a stipulated fact. 

We will not rehash the additional complicated facts that lead us to this

motion, but rely on evidence supporting the findings of fact in our prior

decisions in discussing the issues raised by the present contempt proceedings.

 

Discussion

 

[1-2]

The only issue before us is whether we

should pierce the corporate veil and hold Fuimaono responsible for the debts of

ICS, a corporate entity.  A corporation

is a legal fiction, which exists as a separate entity from its shareholders and

“exempt[s] the shareholders’ property from corporate debts.”  Amerika Samoa Bank v. Adams, 22

A.S.R.2d 38, 42 (Trial Div. 1992); see N.L.R.B. v. Greater Kansas City

Roofing, 2 F.3d 1047, 1051 (10th Cir. 1993).  Exemption from liability “is the norm, not

the exception,” N.L.R.B., 2 F.3d at 1051, but will be abrogated if

“there are circumstances justifying disregard of the corporate entity to

prevent abuse of corporate privileges, either by one or more individuals or by

another corporation.”  Amerika Samoa

Bank, 22 A.S.R.2d at 42.

[3] The following combination of circumstances justify

piercing the corporate veil:

 

First, that the

corporation is not only influenced and governed by that person, but that there

is such a unity of interest and ownership that the individuality, or

separateness, of said person and corporation has ceased; second, that the facts

are such that an adherence to the fiction of the separate existence of the

corporation would, under the particular circumstances, sanction a fraud or

promote injustice.

 

Amerika

Samoa Bank, 22 A.S.R.2d at 42 (quoting Minifie

v. Rowley, 202 P.2d 673, 676 (Cal. 1921)); N.L.R.B., 2 F.3d at 1052;

RRX Industries, Inc. v. Lab-Con, Inc., 772 F.2d 543, 545 (9th Cir.

1985).

 

[4]

As to the first requirement, there is no exhaustive or determinative list of

factors.  See, e.g., N.L.R.B.,

2 F.3d at 1052 n.6.  Instead, we look to

the totality of the circumstances. See Amerika Samoa Bank, 22 A.S.R.2d

at 43.  In the present case, we find that

a unity of interest between Fuimaono and ICS is apparent.  Fuimaono is the dominant, if not the only,

stockholder of ICS.  There is no evidence

of a corporate structure or of adequate corporate records and minutes.  Furthermore, he admitted to paying off ICS

debt with his own personal funds.  It was

even unclear, when he attempted to get the security deposit from ASB, and when

he actually succeeded in withdrawing the interest on the security deposit,

whether he was acting on his own behalf or as an agent for ICS.

 

In

fact, we had previously ordered that LFB was entitled to the original security

deposit, subject to any outstanding claims by defrauded policyholders.  In doing so, we allowed anyone with a claim

to file it with the Court.  Fuimaono

attempted to do so, alleging that he had paid some $30,000 of ICS’s debt out of

his own personal funds.[1]  He claimed that he was unable to produce any

documentation because it had been subpoenaed by a federal grand jury.  However, the entire incident buttresses our

factual findings, demonstrating how his own personal records and funds seemed to

be those of the corporations, and vice versa.

 

[5]

As to the second requirement for piercing the corporate veil, we find that

adherence to the corporate fiction would indeed promote an injustice.  “The showing of inequity necessary to satisfy

the second prong must flow from the misuse of the corporate form.”  N.L.R.B., 2 F.3d at 1053.  There is no better example of such a misuse

than the case at hand.

 

[6]

In our original order on the merits, we found that, in attempting obtain a

certificate of authority to transact insurance business in American Samoa, ICS

had “never submitted financial or business statements for evaluation.”  Am. Samoa Gov’t v. Amerika Samoa Bank,

4 A.S.R.3d 249, 256 (Trial Div. 2000). 

Any certificate ICS had received was “obtained by misrepresentation in

violation of A.S.C.A. § 29.0213, prohibiting false or misleading filings.”  Id. 

We concluded that ICS was not “authorized to transact insurance business

as an insurer.”  Id. at 11.  Yet, despite ICS’s status, it, or better yet,

Fuimaono, still attempted to collect the $50,000 security deposit, holding

itself out as a legitimate insurer in the Territory.

 

This

is not a simple case of a corporation incapable of paying its debts.  N.L.R.B., 2 F.3d at 1053.  Instead, it is the case of Fuimaono, acting

through ICS, misusing the corporate form for his own personal gain.  Accordingly, we find that it is in the

interest of justice to shed the corporate veil to hold Fuimaono and ICS

responsible and liable for each one’s actions.

 

The

order of February 28, 2001, requiring payment to the Liquidator of the

$2,180.40 collected from ASB by Fuimaono was duly issued.  At all times since issuance of the order,

Fuimaono had knowledge of and ability to comply with the order.  Neither ICS nor Fuimaono, ICS’s alter ego,

have complied with the order.  Fuimaono’s

failure to comply with the order was willful and contemptuous.

 

Order

 

1.  Fuimaono is in

contempt of this Court.

 

2.  Imposition of

punishment is suspended on condition that Fuimaono pay $2,180.40 to the

Liquidator not later than 60 days after entry of this judgment.  Payment shall be made to the Clerk of the

Court, who shall disburse the funds received to the Liquidator’s counsel on

behalf of the Liquidator. 

 

3.  This matter is

continued to July 10, 2003, at 9:00 a.m. for the purpose of reviewing

compliance with this Court’s orders and, if appropriate or necessary, imposing

punishment on Fuimaono for his contempt of this Court.  Fuimaono shall appear at the hearing on July

10, 2003, without further order, notice or subpoena.

 

It is so ordered.

 

**********

 



[1] On April 30, 2001, and again on December 2, 2001,

Fuimaono submitted to the Court copies of his post-judgment claim to the

Insurance Commissioner to a portion of the $50,000 insurance bond in the amount

of $21,900, and now contends that the Court has not addressed this claim.  Fuimaono had his opportunity to present his

claim against the $50,000 prior to and during the trial of this action on March

10 and 27, 2000.  Rights to the $50,000

were the primary issue during the trial. Those rights were determined in the

Liquidator’s favor by the Court in the opinion and order of December 4, 2000,

and reaffirmed by the denial of the motion for reconsideration or new trial on

February 28, 2001.  His post-judgment

claim was irrelevant, as he was not an unpaid or defrauded policyholder at

issue for identification during post-judgment claim proceedings undertaken

before transmitting the $50,000 to the Liquidator.