Realty Law Digest

Construction—School District’s Effort to Pierce Corporate Veil of Contractor Rejected

A school district had sued a contractor’s corporate entity and its president and principal owner. The primary issue on appeal was whether the complaint sufficiently stated a claim against “[owner] personally for the wrongs of the corporation under the doctrine of piercing the corporate veil.” The complaint had named the contractor and the owner as defendants and asserted claims “jointly against them, referring to them, for the most part, as ‘the defendants.’” In 2002, the district had entered into a contract with the defendants subject to a municipal bond offering, whereby the defendants would provide construction services to the district. However, the district’s board of education failed to ratify the agreement and the district abandoned it. In 2005, in anticipation of a new project, the district entered into an estimating services contract with the defendants. The complaint alleged that although the defendants had been paid $200,000, they never performed under the agreement, thereby delaying the project. Although the defendants had failed to perform under the 2005 contract, the district had proposed to the defendants a new construction management agreement. This new agreement was reached in principle in 2006. However, the proposed terms were less favorable to the defendants than the abandoned 2002 agreement.