THIRD DIVISION MCFADDEN, C. J., DOYLE, P. J., and HODGES, J.
NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. https://www.gaappeals.us/rules
DEADLINES ARE NO LONGER TOLLED IN THIS COURT. ALL FILINGS MUST BE SUBMITTED WITHIN THE TIMES SET BY OUR COURT RULES.
October 7, 2020
In the Court of Appeals of Georgia A20A1381. G & E CONSTRUCTION, LLC v. RUBICON CONSTRUCTION, INC. et al.
MCFADDEN, Chief Judge.
G & E Construction, LLC filed a suit on account against Rubicon Construction,
Inc., a construction company that has been administratively dissolved. G & E also
named as a defendant Jason Insogna, Rubicon’s founder, alleging that Insogna is
personally liable for the debt. The trial court granted Insogna’s motion for summary
judgment, and G & E filed this appeal.
G & E argues that Insogna is personally liable under OCGA § 14-2-204, which
imposes personal liability on a person who acts on behalf of a non-existent
corporation. But we hold that the undisputed evidence shows that Rubicon existed,
so the statute does not apply. G & E also argues that questions of fact preclude the grant of summary judgment on its claim for piercing the corporate veil. But we hold
that G & E fails to point to evidence creating a question of material fact on this issue.
So we affirm.
1. Summary judgment standards and undisputed facts.
Summary judgment is proper when there is no genuine issue of material fact
and the movant is entitled to judgment as a matter of law. OCGA § 9-11-56 (c). “On
appeal from the grant or denial of a motion for summary judgment, we review the
evidence de novo, and all reasonable conclusions and inferences drawn from the
evidence are construed in the light most favorable to the nonmovant.” Pazur v.
Belcher, 290 Ga. App. 703, 704 (659 SE2d 804) (2008) (citation and punctuation
omitted).
A defendant may demonstrate that there is no genuine issue of material fact, so
that he is entitled to judgment as a matter of law,
by either presenting evidence negating an essential element of the plaintiff’s claims or establishing from the record an absence of evidence to support such claims. . . . Where a defendant moving for summary judgment discharges this burden, the nonmoving party cannot rest on its pleadings, but rather must point to specific evidence giving rise to a triable issue.
2 Cowart v. Widener, 287 Ga. 622, 623 (1) (a) (697 SE2d 779) (2010) (citations and
punctuation omitted).
So viewed, the record shows that Insogna formed and incorporated Rubicon in
2002 and was its president. Rubicon was a general contractor that built and remodeled
residential properties. Rubicon hired G & E as a subcontractor to complete tile work
on various projects. Insogna and his wife hired Rubicon to renovate their personal
residence. Rubicon, in turn, hired G & E to work on the house.
Rubicon began experiencing financial problems in 2014. Insogna and his wife
divorced and sold the house. Half of the proceeds from the sale went to the former
wife’s bankruptcy and the other half was used to pay a judgment against Insogna.
Rubicon was dissolved in 2017. All the services for which G & E sued were
performed before Rubicon was dissolved.
2. Liability under OCGA § 14-2-204.
G & E argues that the trial court erred in granting Insogna summary judgment
because Insogna is liable for Rubicon’s debts under OCGA § 14-2-204. That statute
provides: “All persons purporting to act as or on behalf of a corporation, knowing
there was no incorporation under this chapter, are jointly and severally liable for all
liabilities created while so acting.” OCGA § 14-2-204. “This statute imposes personal
3 liability on one who, with culpable knowledge, incurs liabilities on behalf of a
non-existent corporation.” Zuberi v. Gimbert, 230 Ga. App. 471, 472 (1) (496 SE2d
741) (1998) (punctuation omitted). It applies only when a person purports to act for
a corporation while knowing that the corporation does not exist. Weir v. Kirby
Constr. Co., 213 Ga. App. 832, 835 (1) (446 SE2d 186) (1994).
Insogna demonstrated that he is entitled to judgment as a matter of law on G
& E’s claim under OCGA § 14-2-204. Insogna testified in his affidavit that he formed
and incorporated Rubicon. And G & E concedes that Rubicon was granted a
certificate of incorporation, which is “conclusive proof that the incorporators satisfied
all conditions precedent to incorporation except in a proceeding by the state. . . .”
OCGA § 14-2-203 (b). See also Ga. Comp. R. & Regs. r. 590-7-1-.01 (7)
(“‘Certificate of Incorporation’ means the certificate issued by the Secretary of State
certifying that articles of incorporation have been filed with the Secretary of State
pursuant to the Code.”).
In a situation where the existence of the corporate entity is questioned, the controlling factor in determining whether [an individual is liable for entering a contract on behalf of a non-existent corporation] is whether the entity on whose behalf the person entering into the contract purported to act had been issued a certificate of incorporation before the contract was executed. If not, then the contracting agent will be held
4 personally liable for the obligations of the purported corporation thus incurred.
Pinson v. Hartsfield Intl. Commerce Center, 191 Ga. App. 459, 461 (382 SE2d 136)
(1989) (citing predecessor to OCGA § 14-2-204). Thus the undisputed evidence that
Rubicon was granted a certificate of incorporation is conclusive evidence that
Rubicon was a corporation and defeats G & E’s claim against Insogna under OCGA
§ 14-2-204.
G & E argues that Insogna’s answers during his deposition when questioned
about Rubicon’s creation and adherence to corporate formalities — that he did not
know or did not remember whether Rubicon had an organizational meeting, had a
minute book, conducted a board of director’s meeting, or issued stock — raises an
inference that Rubicon was not properly organized as a corporation and did not
observe corporate formalities. See OCGA § 24-14-22. But G & E cites no authority
to support the contention that an individual can be held personally liable under
OCGA § 14-2-204 for an existing corporation’s liabilities simply because that
corporation does not observe corporate formalities. So even if the inference G & E
Free access — add to your briefcase to read the full text and ask questions with AI
THIRD DIVISION MCFADDEN, C. J., DOYLE, P. J., and HODGES, J.
NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. https://www.gaappeals.us/rules
DEADLINES ARE NO LONGER TOLLED IN THIS COURT. ALL FILINGS MUST BE SUBMITTED WITHIN THE TIMES SET BY OUR COURT RULES.
October 7, 2020
In the Court of Appeals of Georgia A20A1381. G & E CONSTRUCTION, LLC v. RUBICON CONSTRUCTION, INC. et al.
MCFADDEN, Chief Judge.
G & E Construction, LLC filed a suit on account against Rubicon Construction,
Inc., a construction company that has been administratively dissolved. G & E also
named as a defendant Jason Insogna, Rubicon’s founder, alleging that Insogna is
personally liable for the debt. The trial court granted Insogna’s motion for summary
judgment, and G & E filed this appeal.
G & E argues that Insogna is personally liable under OCGA § 14-2-204, which
imposes personal liability on a person who acts on behalf of a non-existent
corporation. But we hold that the undisputed evidence shows that Rubicon existed,
so the statute does not apply. G & E also argues that questions of fact preclude the grant of summary judgment on its claim for piercing the corporate veil. But we hold
that G & E fails to point to evidence creating a question of material fact on this issue.
So we affirm.
1. Summary judgment standards and undisputed facts.
Summary judgment is proper when there is no genuine issue of material fact
and the movant is entitled to judgment as a matter of law. OCGA § 9-11-56 (c). “On
appeal from the grant or denial of a motion for summary judgment, we review the
evidence de novo, and all reasonable conclusions and inferences drawn from the
evidence are construed in the light most favorable to the nonmovant.” Pazur v.
Belcher, 290 Ga. App. 703, 704 (659 SE2d 804) (2008) (citation and punctuation
omitted).
A defendant may demonstrate that there is no genuine issue of material fact, so
that he is entitled to judgment as a matter of law,
by either presenting evidence negating an essential element of the plaintiff’s claims or establishing from the record an absence of evidence to support such claims. . . . Where a defendant moving for summary judgment discharges this burden, the nonmoving party cannot rest on its pleadings, but rather must point to specific evidence giving rise to a triable issue.
2 Cowart v. Widener, 287 Ga. 622, 623 (1) (a) (697 SE2d 779) (2010) (citations and
punctuation omitted).
So viewed, the record shows that Insogna formed and incorporated Rubicon in
2002 and was its president. Rubicon was a general contractor that built and remodeled
residential properties. Rubicon hired G & E as a subcontractor to complete tile work
on various projects. Insogna and his wife hired Rubicon to renovate their personal
residence. Rubicon, in turn, hired G & E to work on the house.
Rubicon began experiencing financial problems in 2014. Insogna and his wife
divorced and sold the house. Half of the proceeds from the sale went to the former
wife’s bankruptcy and the other half was used to pay a judgment against Insogna.
Rubicon was dissolved in 2017. All the services for which G & E sued were
performed before Rubicon was dissolved.
2. Liability under OCGA § 14-2-204.
G & E argues that the trial court erred in granting Insogna summary judgment
because Insogna is liable for Rubicon’s debts under OCGA § 14-2-204. That statute
provides: “All persons purporting to act as or on behalf of a corporation, knowing
there was no incorporation under this chapter, are jointly and severally liable for all
liabilities created while so acting.” OCGA § 14-2-204. “This statute imposes personal
3 liability on one who, with culpable knowledge, incurs liabilities on behalf of a
non-existent corporation.” Zuberi v. Gimbert, 230 Ga. App. 471, 472 (1) (496 SE2d
741) (1998) (punctuation omitted). It applies only when a person purports to act for
a corporation while knowing that the corporation does not exist. Weir v. Kirby
Constr. Co., 213 Ga. App. 832, 835 (1) (446 SE2d 186) (1994).
Insogna demonstrated that he is entitled to judgment as a matter of law on G
& E’s claim under OCGA § 14-2-204. Insogna testified in his affidavit that he formed
and incorporated Rubicon. And G & E concedes that Rubicon was granted a
certificate of incorporation, which is “conclusive proof that the incorporators satisfied
all conditions precedent to incorporation except in a proceeding by the state. . . .”
OCGA § 14-2-203 (b). See also Ga. Comp. R. & Regs. r. 590-7-1-.01 (7)
(“‘Certificate of Incorporation’ means the certificate issued by the Secretary of State
certifying that articles of incorporation have been filed with the Secretary of State
pursuant to the Code.”).
In a situation where the existence of the corporate entity is questioned, the controlling factor in determining whether [an individual is liable for entering a contract on behalf of a non-existent corporation] is whether the entity on whose behalf the person entering into the contract purported to act had been issued a certificate of incorporation before the contract was executed. If not, then the contracting agent will be held
4 personally liable for the obligations of the purported corporation thus incurred.
Pinson v. Hartsfield Intl. Commerce Center, 191 Ga. App. 459, 461 (382 SE2d 136)
(1989) (citing predecessor to OCGA § 14-2-204). Thus the undisputed evidence that
Rubicon was granted a certificate of incorporation is conclusive evidence that
Rubicon was a corporation and defeats G & E’s claim against Insogna under OCGA
§ 14-2-204.
G & E argues that Insogna’s answers during his deposition when questioned
about Rubicon’s creation and adherence to corporate formalities — that he did not
know or did not remember whether Rubicon had an organizational meeting, had a
minute book, conducted a board of director’s meeting, or issued stock — raises an
inference that Rubicon was not properly organized as a corporation and did not
observe corporate formalities. See OCGA § 24-14-22. But G & E cites no authority
to support the contention that an individual can be held personally liable under
OCGA § 14-2-204 for an existing corporation’s liabilities simply because that
corporation does not observe corporate formalities. So even if the inference G & E
proposes could be drawn, the inference would not create an issue of material fact,
given the undisputed, conclusive evidence of incorporation.
5 2. Piercing the corporate veil.
G & E argues that Insogna’s use of Rubicon to renovate his personal residence
combined with the inference from Insogna’s personal deposition testimony creates
a question of fact on the issue of piercing the corporate veil. We disagree.
We have long recognized that great caution should be exercised by the court in disregarding the corporate entity. However, the court will disregard the separateness of the corporate entity where the corporation has overextended its privileges in the use of the corporate entity to defeat justice, to perpetrate fraud, or to evade statutory, contractual or tort responsibility.
Hickman v. Hyzer, 261 Ga. 38, 39 (1) (401 SE2d 738) (1991) (citation and
punctuation omitted). “One who deals with a corporation as such cannot, in the
absence of fraud, deny the legality of the corporate existence for the purpose of
holding the owner liable.” Amason v. Whitehead, 186 Ga. App. 320, 322 (367 SE2d
107) (1988) (citation and punctuation omitted).
Insogna testified in his affidavit that he and his then-wife personally purchased
the house with a bank loan; that they hired Rubicon to renovate the house; that
Rubicon was approved by the bank as the contractor; and that Rubicon received
draws directly from the bank and used those funds to renovate the house, including
6 to pay subcontractors. Insogna also testified that he never shared funds or assets with
Rubicon; that he never shared a bank account with Rubicon; and that he never took
or gave a loan to Rubicon.
That Insogna hired Rubicon to renovate his personal residence does not create
a question of material fact because
[s]ole ownership of a corporation by one person or another corporation is not a factor, and neither is the fact that the sole owner uses and controls it to promote his ends. There must be evidence of abuse of the corporate form. Evidence of such abuse can be shown by a commingling on an interchangeable or joint basis or confusing the otherwise separate properties, records or control.
Pazur, 290 Ga. App. at 708 (2) (citations and punctuation omitted). Insogna testified
that he hired Rubicon and that Rubicon was paid from draws from Insogna’s bank
loan, thereby refuting G & E’s assertion in its appellate brief that his use of Rubicon
to renovate his house amounted to a commingling of assets.
G & E also points to the inference that it claims can be drawn from Insogna’s
deposition testimony. G & E defines the inference in various ways: that Insogna
failed to maintain the corporate form; that Insogna never organized the corporation
and never complied with the corporate formalities required to establish or maintain
7 Rubicon’s corporate existence; that Rubicon was never formed as a corporation; and
that the corporation never existed. Assuming without deciding that any inference
regarding the formation of the corporation could be drawn from Insogna’s testimony
at the deposition taken in his personal capacity as opposed to his capacity as the
corporate representative of Rubicon, but see Fabe v. Floyd, 199 Ga. App. 322, 333
(2) (405 SE2d 265) (1991) (On Motion for Rehearing), disapproved in part on other
grounds, Martin v. Williams, 263 Ga. 707, 709-711 & 709 n.2 (3) (438 SE2d 353)
(1994) (rebuttable presumption that arises from a party’s failure to produce evidence
in his possession does not arise if the party has no burden of producing evidence),
that inference was rebutted by the undisputed evidence that Rubicon was granted a
certificate of incorporation. Consequently, such an inference would not defeat
Insogna’s motion for summary judgment. Spencer v. Gary Howard Enterprises, 256
Ga. App. 599, 601-602 (3) (568 SE2d 763) (2002), overruled on other grounds, TGM
Ashley Lakes v. Jennings, 264 Ga. App. 456 (590 SE2d 807) (2003) (defendant
rebutted with clear evidence the presumption that its employee committed tort in
scope of his employment, entitling defendant to summary judgment on respondeat
superior claim); Wade v. American Nat. Ins. Co., 246 Ga. App. 458, 462-463 (3) (540
SE2d 671) (2000) (defendants rebutted any presumption that they had superior
8 knowledge of dog’s propensity to bite, entitling them to summary judgment). See also
Allen Kane’s Major Dodge v. Barnes, 243 Ga. 776, 778 (257 SE2d 186) (1979)
(presumption that the servant is serving his master within the scope of his
employment may, unless supported and corroborated by other evidence, be overcome
by uncontradicted evidence, which will entitle employer to summary judgment on
claim of respondeat superior).
As for an inference that Rubicon did not comply with corporate formalities,
although “compliance with some corporate formalities does not preclude a piercing
of the corporate veil,” Unified Svcs. v. Home Ins. Co., 218 Ga. App. 85, 90 (5) (460
SE2d 545) (1995), G & E has cited no authority, and we have found none, that failing
to comply with corporate formalities, absent evidence of wrongdoing, fraud, or bad
faith, justifies piercing the corporate veil. Hickman, 261 Ga. at 41 (3). Cf. Jamal v.
Hussein, 237 Ga. App. 779, 783-784 (2) (515 SE2d 407) (1999) (defendants were not
entitled to summary judgment on issue of piercing the corporate veil when the record
showed no shareholders’ or directors’ meetings, no issuance of stock, and issues of
fact about the defendants’ taking cash that belonged to the business without
accounting for it).
9 G & E has failed to point to evidence creating a question of material fact on the
issue of Insogna abusing “the forms by which the [corporation] was maintained as a
separate legal entity apart from his personal business.” Bonner v. Brunson, 262 Ga.
App. 521, 522 (585 SE2d 917) (2003). “[T]his case is a classic example of a failed
business, and not a case of wrongdoing, fraud and bad faith on the part of a corporate
president. The present record does not create an issue of fact for the jury regarding
piercing the corporate veil.” Hickman, 261 Ga. 41 (3). Cf. Christopher v. Sinyard,
313 Ga. App. 866 (723 SE2d 78) (2012) (in non-jury trial, trial court did not err in
finding individuals to be personally liable for corporate debt when individuals
commingled properties, records, and control; ignored the corporate formalities
required by law; the corporation was undercapitalized; and one of the individuals
committed fraud).
Judgment affirmed. Doyle, P. J., and Hodges, J., concur.