On March 4. the daily operations of Cogen, Inc.com menced. In all of their transactions with third parties, the officers represented themselves as doing business for the corporation. One of these transactions was with Finlan Bank, which lent the company S5 million. The repen tations in the loan agreement stated that the corporation had been duly formed that it existed as a valid corpora tion under Texas law, and that the shares of stock owned by the various shareholders had been duly authorised and were fully paid. On May 5, the corporation began building its cogen- eration plant. Three months later, energy prices dropped drastically, and there was no longer a need for a cogenera tion facility in that location. The corporation was forced to default on the bank loan. The bank's lawyers, on being informed that the bank would not receive any more loan payments, reviewed the original loan documents, the arti- cles of incorporation, and the minutes of the first meeting of the incorporators. On reviewing these documents, they initiated an action directly against the three founders in their individual capacity for liability on the bank loan. a. Should the founders have done anything differently? b. Are the founders personally liable for the bank loan? 9.2 William Carlton was a shareholder in ten New York City corporations, including Seon Cab Corporation. Each cor- poration owned two taxicabs, and each cab was covered 608 UNIT V CORPORATE GOVERNANCE CORPORATE GOVERNANCE OWNERSHIP, AND CONTROL by only the minimum $10,000 automobile liability insur- ance required by New York law. A taxicab owned by Scon salaries. Sto use their b Cab struck and severely injured John Walkovszky, who sued for damages. director an specific pe Walkovszky named all ten corporations, as well as the the result: individual driving the cab that hit him, as defendants. 1934).) The plaintiff alleged that the corporations, although seemingly independent of one another. "operated ... 19.5 Water, as a single entity, unit and enterprise" with regard to and eng financing, supplies, repairs, employees, and garaging. The name" plaintiff asserted that the multiple corporate structure member constituted an unlawful attempt to defraud members of L.L.C. the general public" who might be injured by the cabs. He undert therefore sought to hold Carlton, their sole shareholder, In personally liable for his injury. possibi Is there any theory under which the sole shareholder work could be held personally liable? If so, were sufficient taurar facts alleged to state a valid claim? Forming multiple gave busin corporations, each owning one or two taxicabs carrying the a the minimum required insurance, was common in New busir York during the 1960s. Is this practice, which can result with in a corporation being undercapitalized, the equivalent of act fraud upon the general public? Why or why not? Suppose sery William Carlton's name was conspicuously displayed on LLC the sides of the taxicabs owned by the corporations and not that he, the sole shareholder, actually serviced, inspected, repaired, and dispatched the taxicabs. Would that make a difference as to whether he could be held person ally liable? [Walkovszky v. Carlton, 223 N.E.2d 6 (N.Y. 1966).] abe 11 On March 4. the daily operations of Cogen, Inc.com menced. In all of their transactions with third parties, the officers represented themselves as doing business for the corporation. One of these transactions was with Finlan Bank, which lent the company S5 million. The repen tations in the loan agreement stated that the corporation had been duly formed that it existed as a valid corpora tion under Texas law, and that the shares of stock owned by the various shareholders had been duly authorised and were fully paid. On May 5, the corporation began building its cogen- eration plant. Three months later, energy prices dropped drastically, and there was no longer a need for a cogenera tion facility in that location. The corporation was forced to default on the bank loan. The bank's lawyers, on being informed that the bank would not receive any more loan payments, reviewed the original loan documents, the arti- cles of incorporation, and the minutes of the first meeting of the incorporators. On reviewing these documents, they initiated an action directly against the three founders in their individual capacity for liability on the bank loan. a. Should the founders have done anything differently? b. Are the founders personally liable for the bank loan? 9.2 William Carlton was a shareholder in ten New York City corporations, including Seon Cab Corporation. Each cor- poration owned two taxicabs, and each cab was covered 608 UNIT V CORPORATE GOVERNANCE CORPORATE GOVERNANCE OWNERSHIP, AND CONTROL by only the minimum $10,000 automobile liability insur- ance required by New York law. A taxicab owned by Scon salaries. Sto use their b Cab struck and severely injured John Walkovszky, who sued for damages. director an specific pe Walkovszky named all ten corporations, as well as the the result: individual driving the cab that hit him, as defendants. 1934).) The plaintiff alleged that the corporations, although seemingly independent of one another. "operated ... 19.5 Water, as a single entity, unit and enterprise" with regard to and eng financing, supplies, repairs, employees, and garaging. The name" plaintiff asserted that the multiple corporate structure member constituted an unlawful attempt to defraud members of L.L.C. the general public" who might be injured by the cabs. He undert therefore sought to hold Carlton, their sole shareholder, In personally liable for his injury. possibi Is there any theory under which the sole shareholder work could be held personally liable? If so, were sufficient taurar facts alleged to state a valid claim? Forming multiple gave busin corporations, each owning one or two taxicabs carrying the a the minimum required insurance, was common in New busir York during the 1960s. Is this practice, which can result with in a corporation being undercapitalized, the equivalent of act fraud upon the general public? Why or why not? Suppose sery William Carlton's name was conspicuously displayed on LLC the sides of the taxicabs owned by the corporations and not that he, the sole shareholder, actually serviced, inspected, repaired, and dispatched the taxicabs. Would that make a difference as to whether he could be held person ally liable? [Walkovszky v. Carlton, 223 N.E.2d 6 (N.Y. 1966).] abe 11