Eugene E. Taszarek, Marlys J. Taszarek, Trina F. Schilling, Steven E. Taszarek, and Michael E. Taszarek, Plaintiffs and Appellees
Lakeview Excavating, Inc., Brian Welken, German Township and Dickey County, Defendants Brian Welken, Appellant
from the District Court of Dickey County, Southeast Judicial
District, the Honorable Daniel D. Narum, Judge.
Gifford (argued) and Steven J. Lies (appeared), for
plaintiffs and appellees.
Douglas W. Gigler, for appellant.
1] Brian Welken appeals from a judgment entered after a jury
returned a verdict in favor of Eugene Taszarek, Marlys
Taszarek, Trina Schilling, Steven Taszarek, and Michael
Taszarek ("Taszareks") and against Lakeview
Excavating, Inc., ("Lakeview") and Welken. We
conclude Welken failed to preserve whether the district court
misapplied the law by allowing the jury to resolve whether
Lakeview was the alter ego of Welken. We further conclude,
however, that the court erred as a matter of law in
inadequately instructing the jury regarding the alter ego
doctrine. We reverse the judgment and remand for a new trial.
2] At the times relevant to this action, Lakeview was a
corporation primarily involved in flood control projects, and
Welken was Lakeview's president and sole shareholder. In
the spring of 2012, German Township in Dickey County
solicited bids for road construction projects to repair and
raise the grade of a road near the Taszareks' property.
Lakeview, acting through Welken, successfully bid and was
selected as the contractor for the road projects.
3] As part of the projects, Lakeview was responsible for
obtaining construction materials, including field rock.
Lakeview obtained most of its field rock for the German
Township project from area farmers and ranchers with rock
piles on their properties. Lakeview arranged with landowners
to harvest rocks from their fields and reclaim the ground so
it could again be farmed, and landowners allowed Lakeview to
remove rock piles. Herb Buerkley owns land in Dickey County
adjacent to land owned by the Taszareks, and Buerkley
permitted Lakeview to enter his family's property to
harvest field rock.
4] During the project, Welken directed Lakeview's
employees to enter property to take the materials for the
road project. While harvesting the rock piles from
Buerkley's land, Lakeview's employees crossed into
the Taszareks' land and harvested field rock. Both the
Buerkley land and the adjacent Taszareks' land were in
the Conservation Reserve Program without a fence separating
the land. The field rock taken from the Taszareks'
property was ultimately used for the German Township road
5] The Taszareks brought an action against both Lakeview and
Welken, asserting claims of intentional trespass, conversion,
and unjust enrichment arising from Lakeview's work on the
German Township road-raising project. The district court held
a jury trial on the Taszareks' trespass and conversion
claims against Lakeview and Welken. During trial, the
Taszareks' attorney asked the court to instruct the jury
on the theory that Lakeview was the "alter ego" of
Welken and that Welken should therefore be personally liable
for any judgment. Over the objection of Welken's
attorney, the court gave an instruction regarding the alter
6] The jury subsequently returned a verdict in favor of the
Taszareks, finding Lakeview was the alter ego of Welken and
holding both Lakeview and Welken liable for damages.
7] Welken raises two issues on appeal. He argues: 1) the
district court erred by giving the jury the alter ego
instruction, allowing the jury to pierce the corporate veil
to impose personal liability on him for Lakeview's debts;
and 2) even if the jury instruction was appropriate, there
were insufficient facts presented at trial to pierce
Lakeview's corporate veil and hold him personally liable.
8] Organizing a corporation to avoid personal liability is a
legitimate goal and a primary advantage of doing business in
the corporate form. Hanewald v. Bryan's Inc.,
429 N.W.2d 414, 415 (N.D. 1988). Generally, in a properly
formed and appropriately maintained corporation, a
shareholder's liability will be limited to the
shareholder's investment in the corporation. Id.
at 416. Further, "[a] corporation's officers and
directors generally are not liable for the corporation's
ordinary debts." Watts v. Magic 2 x 52 Mgmt.,
Inc., 2012 ND 99, ¶ 12, 816 N.W.2d 770; see
also Coughlin Constr. Co. v. Nu-Tec Indus.,
Inc., 2008 ND 163, ¶ 19, 755 N.W.2d 867;
Axtmann v. Chillemi, 2007 ND 179, ¶ 12, 740
9] We have held, however, that "the corporate veil may
be pierced when the legal entity is used to defeat public
convenience, justify wrong, protect fraud, or defend
crime." Coughlin Constr., 2008 ND 163, ¶
19, 755 N.W.2d 867. This Court has described specific factors
(" Hilzendager-Jablonsky factors") for a
district court to consider in deciding whether to pierce the
[F]actors considered significant in determining whether or
not to disregard the corporate entity include: insufficient
capitalization for the purposes of the corporate undertaking,
failure to observe corporate formalities, nonpayment of
dividends, insolvency of the debtor corporation at the time
of the transaction in question, siphoning of funds by the
dominant shareholder, nonfunctioning of other officers and
directors, absence of corporate records, and the existence of
the corporation as merely a facade for individual dealings.
Coughlin Constr., at ¶ 20 (quoting
Hilzendager v. Skwarok, 335 N.W.2d 768, 774-75 (N.D.
1983)); see also Jablonsky v. Klemm, 377
N.W.2d 560, 563-67 (N.D. 1985). Additionally, "an
element of injustice, inequity or fundamental
unfairness" must be present before a court may properly
pierce a corporation's corporate veil. Coughlin
Constr., at ¶ 20 (quoting Jablonsky, 377
N.W.2d at 564).
10] We have also described an "alter ego" approach
to piercing the corporate veil:
To apply the alter ego doctrine, there must be such a unity
of interest and ownership between the corporation and its
equitable owner that the separate personalities of the
corporation and the shareholder do not in reality exist, and
there must be an inequitable result if the acts in question
are treated as those of the corporation alone.
Red River Wings, Inc. v. Hoot, Inc., 2008 ND 117,
¶ 34, 751 N.W.2d 206 (internal quotation marks omitted)
(citing Axtmann, 2007 ND 179, ¶¶ 12-15,
740 N.W.2d 838; Jablonsky, 377 N.W.2d at 563-67;
Hilzendager, 335 N.W.2d at 774-75). This approach to
veil piercing simply recognizes there may be instances when a
corporation is in fact a mere instrumentality or alter ego of
its owner. Cf. Solid Comfort, Inc. v. Hatchett
Hosp., Inc., 2013 ND 152, ¶¶ 14-17, 836 N.W.2d
415; Mahana v. Westland Oil Co., 107 N.W.2d 353,
361-62 (N.D. 1960).
11] In deciding whether an alter ego claim has been
established, courts examine various factors "which
reveal how the corporation operates and the particular
defendant's relationship to that operation."
NetJets Aviation, Inc. v. LHC Commc'ns, 537 F.3d
168, 176-77 (2d Cir. 2008) (applying Delaware law). These
factors include those similar to our
Hilzendager-Jablonsky factors. See, e.g.,
NetJets Aviation, 537 F.3d at 177; Estate of
Raleigh v. Mitchell, 947 A.2d 464, 470-71 (D.C. 2008);
Hoyt Props., Inc. v. Prod. Res. Grp., 736 N.W.2d
313, 318-19 (Minn. 2007); T & R Trucking, Inc. v.
Maynard, 655 S.E.2d 193, 198 ( W.Va. 2007); In re
Phillips, 139 P.3d 639, 644 (Colo. 2006); Hildreth
v. Tidewater Equip. Co., Inc., 838 A.2d 1204, 1210-11
(Md. 2003); Meridian Minerals Co. v. Nicor Minerals,
Inc., 742 P.2d 456, 462-63 (Mont. 1987); see
also 1 William Meade Fletcher, Fletcher Cyc. of the
Law of Corp. §§ 41.10, 41.30 (2015 rev. vol.).
12] To the extent our case law may be unclear, we require an
examination of the Hilzendager-Jablonsky factors as
part of the analysis for deciding whether to pierce the
corporate veil under the alter ego doctrine. In addition to
those factors, an overall element of "injustice,
inequity, or fundamental unfairness" must also be
established before veil piercing is appropriate.
Jablonsky, 377 N.W.2d at 564. Moreover,
"[c]ourts generally apply the alter ego rule with great
caution and reluctance." 1 Fletcher Cyc. Corp.
§ 41.10, at 188.
13] "The burden of proving the requirements for piercing
the corporate veil is on the party asserting the claim."
Watts, 2012 ND 99, ¶ 13, 816 N.W.2d 770. We
have explained that "[r]esolving the issue is heavily
fact-specific and, therefore, ...