In 1962 W. Ray Flemming, his wife, and his attorney formed W. Ray Flemming Fruit Co. as a South Carolina corporation with 5,000 shares issued for one dollar each; after approximately 2,000 shares were retired, Flemming owned roughly 90 percent of the remaining stock.
The corporation acted as a commission agent, selling peaches and watermelons for Edgefield-area growers and collecting the sale price less transportation costs and its commission before remitting the balance to the growers.
The District Court found that the corporation never had a stockholders’ meeting. There were no corporate records of a real directors’ meeting in all the years of the corporation’s existence. The sole nominal director, Ed Bernstein, attended none and received no salary, fees, or expense reimbursement. Flemming alone received funds from the corporation, withdrawing between $15,000 and $25,000 annually even in years when the corporation reported no profit and possessed no working capital. No other stockholder or officer ever received a dividend, salary, or fee.
DeWitt Truck Brokers, Inc. performed transportation services for the corporation's shipments. After experiencing payment delays, DeWitt was told by Flemming that he would personally pay the charges if the corporation did not. The corporation nevertheless retained the transportation charges it had collected from growers and failed to remit them to DeWitt. The corporate defendant conceded it was not responsive to judgment.
DeWitt sued both the corporation and Flemming individually in the District Court. After trial the District Court made findings of fact and pierced the corporate veil, entering judgment against Flemming personally. Flemming appealed to the United States Court of Appeals for the Fourth Circuit.
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