Consumer Law, Warranties Builder's Warranty, Breach Of Contract, and Piercing the Corporate Veil

[bwor]

On September 25 of 2007 I entered into a purchase agreement with a contractor for a house he had built and was selling. The contract included a list of items to be completed, a provision for a 1 year builder's warranty (with no exclusions in the contract), and a closing date of November 2nd.

The builder drug his feet on many of the issues. We amended the contract to move closing out in order for him to get things done. Eventually, we closed on the house with an agreement that some of the items would have to happen after closing (due to him not getting things done).

Of course, many things ended up not being done.

On top of that, now some issues have happened that should fall under the builder's warranty (again, no exclusions to what was covered was included in the original contract).

The builder was setup as an Arkansas corporation which as now gone defunct.

The builder, in my opinion, has committed gross negligence in upholding the original contract, performing the tasks outlined in the contract, and honoring the warranty. The question is, in this brief explanation (and can provide a lot more details), is this enough to pierce the corporate veil? I'm trying to wrap my mind around this concept and see if I have a chance in court (if I decide to pursue).

bwor

 

[lwpat]

Probably not. You usually need some type of fraud to pierce the veil and it will be expensive to try. Your attorney failed you by not holding enough money in escrow to take care of the problems.

 

[dee_dub]

The courts would use the law of the place of incorporation, i.e. Arkansas, to determine whether the veil should be lifted. Don't know exactly what Arkansas law is, and case authority is all over the map, but generally you'd need to prove that the corporation was just a formality: the owner was intermingling assets, failing to maintain arms-length relationships, using the company as the "alter ego" for their own personal business. Doing a really bad job isn't, as far as I know, grounds for lifting the veil.

Another consideration is, what will lifting the veil get you? What do you know about the owner? Do they have assets worth pursuing?

 

[bwor]

The corporation was just a shell. There were two principles: the builder and his wife. All money earned by the corporation flowed directly to him personally. The only reason it was setup as a corporation was to keep him from getting sued personally, I'm sure.

And yes, he'll have assets worth going after.

Its not that he has just done a "bad job" but rather not fulfilled the original contract and failing to perform on the builder's warranty as well. We communicated by email a couple of weeks ago where he pointed out what he would and would not do. Essentially, he'll do what does not cost anything, and anything that would take money from him (although it is his responsibility) he refuses to do.

I'm taking some other routes with this as well initially. I've contacted the state licensing board regarding what can be done (i.e. was there liability insurance, is there a surety bond, etc).

bwor