Court of Chancery Holds Plaintiff's Breach Of Fiduciary Duty Claims Fail And Defendant's Loan and Veil Piercing Claims Fail
Ruggerio v. Poppiti, C.A. No. 18961, 2005 WL 2622716 (Del. Ch. Oct. 5, 2005).
Plaintiff, who was limited partner of partnership and sole stockholder of corporation controlled by Defendants, alleged that Defendants failed to report or account to him regarding his ownership interest in the entities, breached their fiduciary duties and commingled assets. Defendants counterclaimed for money loaned by limited partnership to corporation.
Plaintiff and Defendants formed a limited partnership to develop real estate with Plaintiff owning 33% and two of the Defendants owning 66%. After the Plaintiff suffered serious financial problems, one of the Defendants assisted him by using his strong credit to avoid foreclosure actions and allow adequate time to liquidate Plaintiff's properties in an orderly fashion. In order to do this, the defendant formed a corporation for the benefit of Plaintiff who was its only stockholder. At some point, the limited partnership paid money that the corporation owed to Wilmington Trust. The corporation never repaid the loan.
Plaintiff alleged that several of the Defendants owed fiduciary duties to him and that they improperly engaged in self-dealing and commingled funds. Plaintiff also alleged that Defendants failed to provide him with an adequate accounting of the limited partnership and corporation. Defendants counterclaimed for the money that the limited partnership paid on behalf of the corporation and alleged that Plaintiff acted as the alter ego of the corporation and was personally liable for its debts.
After trial, the Court held that Plaintiff, who appeared pro se at trial, failed to satisfy his burden of providing breach of fiduciary duty. The Court also found that the Defendants provided Plaintiff with an adequate accounting of the limited partnership and corporation. The Court held that the Defendants failed to establish the existence of a loan or a basis for piercing the corporate veil of the corporation in order to hold Plaintiff liable for the loan.