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C.F. Trust, Inc. v. First Flight Limited Partnership

Supreme Court of Virginia
580 S.E.2d 806 (2003)


C.F. Trust, Inc. (plaintiff) held promissory notes totaling more than $6 million guaranteed by Barrie and Nancy Peterson (codefendants). After the Petersons defaulted, the circuit court entered judgment in C.F. Trust’s favor. Thereafter, C.F. Trust obtained a charging order against the Petersons’ interests in First Flight Limited Partnership (codefendant), in which Barrie held a 98-percent interest. Atlantic Funding Corporation (plaintiff) held one promissory note for $1 million guaranteed by Barrie, which Atlantic purchased with the right to enforce a preexisting judgment. A circuit court granted Atlantic a charging order against Peterson’s interest in First Flight. After the Petersons still failed to pay, C.F. Trust and Atlantic sued the Petersons and First Flight, seeking to pierce the corporate veil in reverse, and hold First Flight liable for the judgments. At trial, the evidence established that Peterson avoided paying the judgments in various ways. Peterson transferred funds from First Flight to Birchwood Holdings Group, Inc. (BHG), which Barrie wholly owned, and directed BHG to pay more than $2 million of Peterson’s personal expenses. Shortly after C.F. Trust and Atlantic obtained the judgment and charging orders, Peterson transferred half of his interest in First Flight to his son, Scott. Peterson then directed Scott to distribute First Flight’s funds to himself and then distribute those funds to Nancy or BHG to pay Peterson’s personal expenses. The district court found in C.F. Trust’s and Atlantic’s favor, concluding that it was appropriate to pierce the corporate veil in reverse. First Flight appealed.

Rule of Law


Holding and Reasoning (Hassell, C.J.)

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