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Florida Third DCA reverses summary judgment allowing judgment creditor to pierce corporate veil of judgment debtor

On June 2, 2021, in Segal v. Forastero, Inc., No. 3d21-89, the Florida Third DCA addressed the issue of whether the judgment creditor in a supplemental proceeding in aid of execution was entitled to pierce the corporate veil of the judgment debtor, a limited liability company, and hold the LLC’s sole owner and member personally liable for the $500,000 judgment obtained against the LLC. The original judgment had been obtained in a breach of contract case involving the attempted purchased by the LLC of a parcel of property in Coral Gables. After the LLC failed to make a $500,000 initial deposit for the property called for in the purchase contract, the seller sued and obtained the judgment, only to find in post-judgment discovery that LLC had no assets to satisfy the judgment. The seller claimed that the corporate veil should be pieced in this case because third-party discovery produced by the broker in the failed purchase allegedly revealed that the proof of funds for the purchase submitted by the LLC pledged its owners own personal monies/assets. However, the evidence submitted to the Court in the seller’s summary judgment motion was somewhat less clear, simply consisting of letters from a bank and from an accountant that had been sent to the seller attesting to the LLC owner’s wealth and personal income. The Third DCA stated that to obtain a summary judgment piercing the LLC’s corporate veil, so as to hold the owner personally liable for the judgment, the seller was required to establish the non-existence of any genuine issue of materialfact, and prove that, when the owner executed the real estate contract on behalf of the LLC: (i) he dominated and controlled the LLC to such an extent that the LLC had no existence independent of him, and the LLC was his mere instrumentality or alter-ego (ii) he used the LLC’s corporate form fraudulently or for an improper purpose; and (iii) his fraudulent or improper use of the LLC’s corporate form caused injury to the seller. The Court cited in support BEO Mgmt. Corp. v. Horta, 45 Fla. L. Weekly D2576, 2020 WL 6751313 at *2 (Fla. 3d DCA Nov. 18, 2020); WH Smith, PLC v. Benages& Assocs., Inc., 51 So. 3d 577, 581 (Fla. 3d DCA 2010); and Gasparini v. Pordomingo, 972 So. 2d 1053, 1055 (Fla. 3d DCA 2008). The Third DCA distinguished this case from other cases in which companies had been determined to be mere instrumentalities, noting that the LLC had in the past purchased and managed real property, filed yearly tax returns and had a bank account. The Third DCA also rejected the argument that the LLC owner had pledged his personal assets, noting that this only could have been done legally under the statute of frauds through an agreement signed by the owner and that no such document existed. The Third DCA concluded that the trial court erred in determining that, as a matter of law, the evidence submitted below was sufficient to pierce the LLC’s corporate veil so that owner would be personally liable for the judgment the seller obtained against the LLC and remanded for further proceedings.

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