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Hanewald v. Bryan’s Inc.

Supreme Court of North Dakota
429 N.W.2d 414 (1988)


Facts

Keith and Joan Bryan incorporated Bryan’s, Inc. to act as a retail clothing store. The company’s articles of incorporation authorized it to issue 100 shares of common stock with a par value of $1,000 per share. Bryan’s, Inc. issued 50 shares to Keith, and 50 shares to Joan, but did not receive any payment for the stock that was issued. Bryan’s Inc. purchased a dry goods store from Hanewald (plaintiff), for $55,000 in cash and a promissory note for $5,000. The $55,000 payment was made from a bank loan that was personally guaranteed by Keith and Joan Bryan. Bryan’s Inc. also leased the store building from Hanewald for five years at $600 per month. Bryan’s Inc. operated for four months, and was later dissolved. Bryan’s Inc. paid off the $55,000 bank loan, a $10,000 personal loan from the Bryans, and its other creditors. It did not pay the $5,000 promissory note to Hanewald, and attempted to avoid the remainder of its lease. Hanewald sued Bryan’s Inc. and the Bryans (defendants) for breach of the lease and the promissory note, seeking to hold the Bryans personally liable. The trial court entered judgment against Bryan’s Inc., but refused to pierce the corporate shield and hold the Bryans personally liable, concluding that the $10,000 loan was sufficient operating capital for the corporation, and that there was no evidence of bad faith by the Bryans. Hanewald now appeals the trial court’s refusal to hold the Bryans personally liable.

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Holding and Reasoning (Meschke, J.)

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  • The procedural disposition (e.g. reversed and remanded, affirmed, etc.).

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