Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 13

Case Problem with Sample Answer Tony Smith was the sole owner of Smith Services, Inc. Bear, Inc., operated Laker Express, a fueling station in London, Kentucky. Smith charged fuel to an account at Laker Express and owed approximately $35,000. There was no written agreement regarding who was liable in the event of default, but all invoices had been issued to Smith Services. Even though Smith Services ceased doing business and was dissolved, Smith continued his business as a sole proprietor after the corporate form had been abandoned. Laker Express sued Smith Services to collect on the debt, but there were no assets in the corporation. Laker Express sued Tony Smith personally and asked the court to pierce the corporate veil, claiming that Smith was engaged in fraud and was using the corporate form only to protect himself. The trial court dismissed the case, and Laker Express appealed. Should the court pierce the corporate veil and hold Smith personally liable for the unpaid corporate debt? Or should Laker Express have been more careful when dealing with clients? Explain. [ Bear, Inc. v. Smith, 303 S.W.3d 137 (Ky.App. 2010)]