Roberto Martinez was the sole force behind In Over Our Heads, Inc., a corporation designed to run a year-round community swimming pool. The enterprise was incorporated in the correct manner in January, with Martinez as the sole director and shareholder. Martinez contributed $100,000 of starting capital, which was just enough to purchase the pool, finance initial advertising, and leave a reserve of $10,000. The corporation had no liability insurance.
On March 10, the pool opened for business. The corporation operated with a profit over the next few months. In June, Martinez took a two-week vacation in Europe and used a check from the company bank account to purchase his airline ticket. In November, he decided to have the pool repainted. Because business had slowed and the corporation?s bank account did not have sufficient funds, Martinez wrote a personal check for this job.
Martinez feared he would not make enough money through the winter to turn a profit, so he decided to take a part-time job as a telephone salesperson for a real estate company. He used the swimming pool?s office phone to make his calls and made a substantial profit.
On February 11, a child drowned in the pool. The parents brought a suit for wrongful death against the corporation and against Martinez in his individual capacity as owner. At the time of the suit, the corporation had the $10,000 reserve and less than $1,000 in its bank account. Because of these limited funds, the child?s parents hoped to recover most of their damages directly from Martinez.
What arguments can be made to hold Martinez liable for any debt of the corporation arising from this death? Should they prevail? How could Martinez have protected himself against such potential liability? Can an owner? manager of a small corporation guarantee that he or she will not be held liable for the corporation?s debts?
This question was answered on: Jul 11, 2017
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