Sean Wood, LLC v. Hegarty Group, Inc., 2011 WL 1529730 (App. Div. April 25, 2011). These two commercial parties each accused the other of breach of contract in connection with plaintiff’s rigging out, loading and delivering industrial machinery and tanks to two of defendant Hegarty Group, Inc.’s customers. The case was tried for six days in the Special Civil Part. The most interesting thing about the case, and the likely reason that it was designated for publication, is its imposition of alter ego liability on defendant Kenneth Hegarty (“Hegarty”), a conclusion that the lower court had not reached. Judge Payne wrote the opinion for the panel.
The facts showed that Hegarty had signed, on behalf of Hegarty Group, Inc., the contract that had been breached. The basis for piercing the corporate veil and imposing liability on Hegarty as well as Hegarty Group, Inc. was found in Hegarty’s own testimony and written correspondence.
Hegarty testified that although the tanks and other equipment that were to be delivered to a Hegarty Group, Inc. customer were purchased in Hegarty Group, Inc.’ s name, they were purchased with his personal funds. In correspondence, Hegarty repeatedly used the first person, rather than referring to Hegarty Group, Inc., such as when he complained that “I would have received payment,” “I was penalized $18,069.00,” and “I will be sending copies of my contract.” Hegarty also referred to “my tanks.”
Hegarty also admitted that he funded Hegarty Group, Inc., that his wife was the company’s president, and that Hegarty Group, Inc. had only $700 in its bank account, not enough to satisfy the $2,500 judgment that the Special Civil Part entered against it. The Appellate Division reduced that judgment to $2,000, but ruled that, based on all the facts, the judgment would run against Hegarty as well, since he had used the entity “as his alter ego and to abuse the corporate form to advance his own personal interests.”