Co-Ex Plastics, Inc. v. AlaPak, Inc.

Greg Gantt (defendant) was the founder of AlaPak, Inc. (defendant), which he incorporated as a successor to his sole proprietorship, Alabama Packaging and Supply. Gantt was AlaPak’s sole shareholder. Co-Ex Plastics, Inc. (Co-Ex) (plaintiff) was a supplier to AlaPak. When AlaPak fell behind in paying Co-Ex, Co-Ex sued AlaPak and Gantt, seeking payment of $35,000. Co-Ex alleged that Gantt was personally liable for AlaPak’s debt under a corporate-veil-piercing theory. At trial, Co-Ex presented evidence that Gantt (1) could not produce a stock certificate for AlaPak, (2) used the sole proprietorship’s bank account for AlaPak’s business, (3) used the sole proprietorship’s checks, (4) did not sign checks in a representative capacity, and (5) used varying names for the corporation, including names that were similar to the sole proprietorship’s name. Additionally, Co-Ex argued that AlaPak’s corporate veil should be pierced because AlaPak was undercapitalized. Gantt responded that Co-Ex knew or should have known that AlaPak was a corporation and thus that AlaPak’s nonobservance of certain corporate formalities could not have defrauded Co-Ex. Gantt further argued that (1) AlaPak’s capitalization was typical of one-person corporations, (2) Co-Ex did not rely on any representations regarding AlaPak’s financial condition, (3) Co-Ex inadequately investigated AlaPak’s financial condition (i.e., because Co-Ex conducted only a bank credit check), and (4) AlaPak’s assets exceeded its liabilities when AlaPak was incorporated. The trial court entered judgment for Co-Ex against AlaPak but rejected Co-Ex’s veil-piercing claim regarding Gantt. Co-Ex appealed.