§ 2 Preincorporation Transactions
§ 3 Piercing the Corporate Veil
4(2) Personal Debt and Corporate Assets
§ 5 Corporate Structure: Voting, Elections, Board Meetings, etc.
5(1) Shareholders
5(2) Directors
6(2) Public Corporation
§ 7 Duties of Directors, Shareholder and Officers
8(1) Shareholder’s Suits
8(2) Third Party Suits
§ 9 Organic Changes: Amendments, Mergers and Dissolution
§ 10 Partnerships
10(1) General Provisions
10(2) Formation
10(3) Service on a Partnership
One who has dealt with a church
as a corporate entity and has participated in church affairs for a period of
years is estopped from questioning the validity of the church's
incorporation. Ofa v.
Validity of a de jure or de facto
corporation may not be collaterally attacked in a proceeding brought to
determine title to property held by the corporation. Ofa v.
In the absence of an authorizing statute, the general rule at common law is that an unincorporated association is not a legal entity capable of holding or acquiring property. Alailima-Utu v. Tufele, 22 A.S.R.2d 34.
§ 2 Preincorporation Transactions
Trial court did not err in
holding party personally liable for rental payments when that party had
personally engaged in negotiations for the rental and had not formed a corporation
until about the time he took possession of the property, and where all
transactions were so informal that it was not clear property owner intended to
deal with a corporation rather than an individual. Filioali'i v.
Where a corporation with
outstanding debts and claims against it dissolves and reincorporates, equity
will hold all assets traceable to the original corporation liable to discharge
the debts and claims. Kneubuhl Maritime Services Corp. v.
§ 3 Piercing the Corporate Veil
Minority shareholder became
personally liable for a corporate debt where he made a written promise to pay a
past due balance owed by the corporation and the writing did not indicate that
the obligation was other than personal. Kneubuhl Maritime Services Corp.
v.
Minority shareholder became
personally liable for a corporate debt where he made a written promise to pay a
past due balance owed by the corporation and the writing did not indicate that
the obligation was other than personal. Kneubuhl Maritime Services Corp.
v.
Shareholders' immunity for
corporate debts is absolute unless circumstances justify disregarding the
corporate entity to prevent abuse of corporate privileges by an individual or
another corporation having domination or control; in such cases, the issue is
whether limiting corporate privileges will accomplish justice and defeat fraud
or other unfairness in a court's resolution of the issues before it.
A.S.C.A. § 30.0114(6). Amerika Samoa Bank v.
The court found that a
corporation was the alter ego of an individual and its assets subject to
garnishment when the totality of the circumstances showed that this individual
dominated and controlled the corporation and was its real owner. A.S.C.A.
§ 43.1811(a). Amerika Samoa Bank v.
The equitable alter ego doctrine is applicable in admiralty but will only disregard a corporate entity upon a proper factual showing. Interocean Ships, Inc. v. Samoan Gases, 24 A.S.R.2d 145.
A fundamental reason for
forming a corporation is to shield stockholders, officers, and directors from
personal liability for business debts. The corporate veil will not be
pierced to attach liability to such individuals unless the corporation is being
used as a shield for crime, fraud, or other practices inconsistent with the
purposes of corporations. Joseph D. Seagram & Sons, Inc. v. Comm.
Credit Corp. of
When an offer for bids to purchase stock shares owned by territorial government is extensively publicized, sale price was substantially higher than book value of shares, and evidence of poor financial performance of corporation suggests that shares might not be worth even their book value, the best evidence of the value of the shares is what they actually brought on the market. Fa'atiliga v. Lutali, 3 A.S.R.2d 139.
§4(2) Personal Debt and Corporate Assets
Court would allow assets of corporation to be garnished to satisfy judgment owed by ex-husband to ex-wife under divorce decree, where (1) business had been jointly owned and managed by husband and wife, (2) husband had formed a corporation in which he and another person owned all the shares and had secured wife's agreement to transfer the business to the corporation a few months before husband filed for divorce, (3) evidence suggested that corporation now owned assets formerly belonging to husband and wife, and (4) the amount garnished was less than the amount of payments long overdue on a property settlement which had been ordered by the court to compensate wife for her interest in the business now owned by the corporation. Dellumo v. Dellumo, 4 A.S.R.2d 48.
The appropriate remedy for a lack of financial support from an estranged spouse is a lawsuit against him at common law, not a self‑help resort to the assets of his corporation. Transpac Corp. v. Drabble, 25 A.S.R.2d 66.
§ 5 Corporate Structure: Voting, Elections, Board Meetings, etc.
Territorial statute providing that shareholder may either cast all his votes for one candidate for corporate office or divide his votes among as many candidates as there are positions did not leave corporate management free to choose which of these two methods would be followed; rather, it required that each shareholder be given the option of choosing how to cast his votes. A.S.C.A. § 30.0142. Fa'atiliga v. Lutali, 4 A.S.R.2d 1.
Where notice of corporate election was in the newspaper rather than by mail or personal delivery as required in the corporate by-laws, but where there was no testimony that any shareholder had not in fact received notice of the meeting, the alternative method of notice was not shown to have interfered with the shareholders' right to vote. Fa'atiliga v. Lutali, 4 A.S.R.2d 1.
In the absence of a provision in the constitution or bylaws of an unincorporated association giving its members a severable interest in the association's assets, the general rule is that a withdrawing member loses title to associational property, which stays with the members remaining in the association. Alailima-Utu v. Tufele, 22 A.S.R.2d 34.
A statutory provision that corporate directors be elected at the annual meeting does not preclude the shareholders from removing members of the board of directors and holding a special election to elect replacement directors. A.S.C.A. § 30.0141(a). Lutali v. Foster, 24 A.S.R.2d 39.
Title ownership of shares of stock is prima facie evidence of true ownership. Johnson v. Coulter, 30 A.S.R.2d 130.
Since corporation unrepresented by counsel was presumed to be a relatively sophisticated litigant, court would sign "stipulated judgment" agreed to by the corporation as long as its officers understood that the stipulated judgment was substantially greater than would be taken against the corporation if it simply did not appear. Wattie Exports Limited v. Pacific Industries, Inc., 6 A.S.R.2d 30.
Since trustees must jointly exercise all powers calling for discretion and judgment, if trustees of a trust whose corpus includes corporate stock call a shareholders' meeting without a co-trustee, the meeting is unauthorized, and its proceedings are of no effect. Beaver v. Craven, 19 A.S.R.2d 14.
A special board meeting held without due notice to all the directors as required by the corporation's bylaws, and in the absence of those directors without notice, is unlawful, and all acts done at such a meeting are void, absent ratification or estoppel. Beaver v. Craven, 19 A.S.R.2d 14.
A statutory provision that corporate directors be elected at the annual meeting does not preclude the shareholders from removing members of the board of directors and holding a special election to elect replacement directors. A.S.C.A. § 30.0141(a). Lutali v. Foster, 24 A.S.R.2d 39.
Corporate directors claiming economic loss are not entitled to a stay of an injunction pending appeal when they lack standing because they are not parties to the lawsuit against the corporation and when their individual economic interests are not coincidental with or necessarily those of the corporation; in any event, prospective monetary loss as a result of an injunction is insufficient to suspend an injunction. A.S.C.A. § 43.0803; T.C.R.C.P. 62(c); A.C.R. 8. Lutali v. Foster, 24 A.S.R.2d 81.
§6(1) Closely Held Corporation
RESERVED
A public corporation is an instrumentality of the state, founded and owned in the public interest, supported by public funds and governed by those deriving their authority from the state. Safety Systems of Haw. v. Pili, 30 A.S.R.2d 35.
Public corporations are not subject to the garnishment process in the absence of statutory provisions making them liable thereto. Safety Systems of Haw. v. Pili, 30 A.S.R.2d 35.
DBAS is a public body or agency exempt from garnishment without the prior approval of the Governor. A.S.C.A. § 48.1803(b). Safety Systems of Haw. v. Pili, 30 A.S.R.2d 35.
§ 7 Duties of Directors, Shareholder and Officers
Court should not interfere with business judgment of the management of a corporation on matters such as giving directors one free weekend a month at hotel owned by corporation, employing officer of corporation that had purchased an option to become majority shareholder, and letting him examine corporate books. Fa'atiliga v. Lutali, 3 A.S.R.2d 139.
Corporate management had a fiduciary duty to minority shareholders that precluded forgiveness of debts to corporation owed by associates of majority shareholder without some valid business purpose. Fa'atiliga v. Lutali, 3 A.S.R.2d 139.
Acts of self-dealing by corporate managers that are clearly detrimental to the corporation constitute a breach of fiduciary duty to the corporation. Haythornwaite v. Transpac Corp., 6 A.S.R.2d 110.
Where officials of organization provided an accounting with respect to disposition of the organization's property, minor discrepancies would not justify the expense of an accounting, but some such discrepancies reflected unlawful transactions for which officials were bound to make restitution. Tele`a v. Savea, 11 A.S.R.2d 110.
A corporate board of directors has a fiduciary duty to the corporation and its shareholders, and an attempt by a board to insulate itself from accountability to the shareholders is inconsistent with this duty. Lutali v. Foster, 24 A.S.R.2d 39.
§ 8 The Corporation and Litigation
Court would not grant motion to dismiss territorial government as defendant in shareholders' derivative suit on the ground of sovereign immunity where government had created bank, made loans, executed mortgages, acquired stock in corporation, assumed management of the corporation, voted in corporate elections, and undertaken to sell the bank's majority interest in the corporation, since such actions might have given rise to an implicit agreement to be held responsible for breach of obligations thus undertaken. Fa'atiliga v. Lutali, 3 A.S.R.2d 139.
In stockholders' derivative suit, where there was no evidence tending to prove diminution in value of minority stockholders' shares, minority stockholders could not complain that majority stockholder accepted too low a price for its shares. Fa'atiliga v. Lutali, 3 A.S.R.2d 139.
Minority shareholders are entitled to judicial relief against corporate managers or majority shareholders only upon proof that managers or majority shareholders have breached a fiduciary duty to the corporation; that the Court believes the business judgment of the managers or the majority to have been unsound is not a sufficient ground for relief. Haythornwaite v. Transpac Corp., 6 A.S.R.2d 110.
Even when minority shareholder has proved that she will probably prevail at trial on at least some charges of impermissible self-dealing by corporate management, she is not entitled to a preliminary injunction unless she also proves that she or the corporation will be irreparably injured if no interim relief is granted pending trial on the merits. Haythornwaite v. Transpac Corp., 6 A.S.R.2d 110.
Court denied a motion to dismiss for failure to state a claim which relied on plaintiff's failure to specially plead the elements needed for a shareholder's derivative action, since the pleaded causes of action were personal, not derivative, and plaintiff was seeking redress for herself from the corporation rather than suing on its behalf. T.C.R.C.P. §§ 12(b)(6), 23.1. Beaver v. Craven, 17 A.S.R.2d 6.
The High Court possesses the statutory authority to issue an injunction if it deems money damages to be an inadequate remedy; as such, it may order a special shareholders' meeting if a board of directors, though lacking any discretion in the matter, fails to call a meeting. A.S.C.A. § 43.1302. Lutali v. Foster, 24 A.S.R.2d 39.
Since corporation unrepresented by counsel was presumed to be a relatively sophisticated litigant, court would sign "stipulated judgment" agreed to by the corporation as long as its officers understood that the stipulated judgment was substantially greater than would be taken against the corporation if it simply did not appear. Wattie Exports Limited v. Pacific Industries, Inc., 6 A.S.R.2d 30.
Where defendant returned goods to one corporation owned by plaintiff, rather than to another similarly named corporation also owned by plaintiff with which defendant had a contract, and where both parties in their dealings with each other had shown only so much respect for corporate formality as suited their convenience, defendant was not liable to the second corporation for the goods he had returned to the first. Chang v. Fuiava, 13 A.S.R.2d 1.
Corporate directors claiming economic loss are not entitled to a stay of an injunction pending appeal when they lack standing because they are not parties to the lawsuit against the corporation and when their individual economic interests are not coincidental with or necessarily those of the corporation; in any event, prospective monetary loss as a result of an injunction is insufficient to suspend an injunction. A.S.C.A. § 43.0803; T.C.R.C.P. 62(c); A.C.R. 8. Lutali v. Foster, 24 A.S.R.2d 81.
§ 9 Organic Changes: Amendments, Mergers, and Dissolution
Corporation may not use
dissolution as a method to avoid creditors. Kneubuhl Maritime Services Corp.
v.
Where a corporation with
outstanding debts and claims against it dissolves and reincorporates, equity
will hold all assets traceable to the original corporation liable to discharge
the debts and claims. Kneubuhl Maritime Services Corp. v.
In the case of a corporate
merger, one of the combining corporations continues in existence and absorbs
the other. The merged corporation is dissolved or ceases to exist.
Interocean Ships, Inc. v.
Under the common law, when a
corporation ceases to exist, it ceases to have any capacity to sue or be
sued. Interocean Ships, Inc. v.
The common-law rule recognized
that a chose in action to enforce a property right upon merger vests in the
successor corporation and no right of action remains in the merging
corporation. Interocean Ships, Inc. v.
A dissolved corporation ceases to exist as a legal
entity, and therefore, has no capacity to be sued. Pacific Endeavors,
Ltd. v.
The corporate existence of a
federal credit union continues for a period of three years from the date of
such cancellation of its charter, during which period the liquidating agent, or
his duly appointed successor, or such persons as its board shall designate, may
act on behalf of a federal credit union for the purpose of collecting and
distributing its assets, and it may sue and be sued in its corporate name.
12 U.S.C. § 1766(b)(5).
The court will not enforce claimed
partnership gains derived while the parties were in violation of the
An agreement to violate or inhibit licensing laws is clearly illegal and contrary to public policy. A.S.C.A. §§ 27.0201 et seq. Papali`i v. Pen, 18 A.S.R.2d 82.
An owner of a sole proprietorship is liable for its debts, including debts that were incurred because moneys were advanced on an unfulfilled contract and were never returned. Wing Hop Lee, Ltd. v. Soo, 30 A.S.R.2d 76.
A partner is jointly and severally liable for partnership debts. Wing Hop Lee, Ltd. v. Soo, 30 A.S.R.2d 76.
When a business license is registered in a resident’s name to avoid the more restrictive licensing requirements placed on nonresidents, the resident does not escape liability for the debts of the business by claiming that he or she was merely "fronting" for another person who runs the business. Wing Hop Lee, Ltd. v. Soo, 30 A.S.R.2d 76.
When there is no written partnership agreement between the parties the court may look to circumstantial evidence offered by each party to back his oral claim of the presence or absence of a partnership. Johnson v. Coulter, 28 A.S.R.2d 218.
§10(3) Service on a Partnership
Service is made upon a partnership or other unincorporated association by delivering a copy of the summons and complaint to an officer, a managing or general agent, or to any other agent authorized by appointment or law to receive service, pursuant to T.C.R.C.P. Rule 4(d)(3). As such a partnership may be served by serving a person with substantial authority and responsibility over its activities. Pago Petroleum Products, Inc., v. Ye Ahn Moolsoan, Ltd., 25 A.S.R.2d 14.
Service on a representative of a partnership is valid only with respect to the partnership, and does not confer jurisdiction over a partner individually. Jurisdiction over each partner must be acquired by service on a person or entity representing the partner for process purposes. Pago Petroleum Products, Inc., v. Ye Ahn Moolsoan, Ltd., 25 A.S.R.2d 14.