Sometimes a powerful hypothetical is worth a thousand words.
In reversing and remanding the trial court's contrary judgment below, here's what Justice Earl says about the precise issue at hand; i.e., whether you can add an individual to the judgment as an alter ego despite the fact you previously lost your alter ego claim at trial:
Assume Corporation ABC (ABC) borrows $100 from John and fails to repay it. Assume further that ABC has one shareholder—Jane. John sues ABC and Jane to recover the $100, and he alleges Jane is the alter ego of ABC. At trial, John proves ABC owes him $100 but fails to prove Jane is the alter ego of ABC. Instead, the trial court finds ABC and Jane have never comingled funds; Jane has never treated ABC’s assets as her own or diverted its assets to herself to the detriment of creditors; corporate formalities were always observed; and ABC was adequately capitalized and had $1,000 in assets at the time of trial. The trial court also finds no inequitable result would follow if ABC’s corporate separateness from Jane was respected. The trial court enters judgment against ABC (but not against Jane) for $100.
After judgment is entered, Jane decides John will never collect a penny from ABC, and she transfers all of ABC’s assets to herself and dissolves the corporation. If John thereafter moved to amend the judgment to add Jane as a judgment debtor based on an alter ego theory, would collateral estoppel preclude him from doing so on the ground the alter ego issue had already been decided against him? We do not believe it would. Although the alter ego issue was litigated and decided, the relevant facts and circumstances materially changed after the judgment was entered. To put it another way: When the judgment was entered, Jane was not ABC’s alter ego, but based on postjudgment events, she became ABC’s alter ego, and it would be inequitable to continue to respect ABC’s corporate separateness from Jane."
Sounds exactly right to me. Well spoken.
