## Facts

- Morris Gray held a long-term leasehold interest in waterfront property and leased the premises to Edgewater Landing, Inc. in 1977 for five years with a renewal option; Edgewater agreed to renovate and return the premises in good condition, reasonable wear and tear excepted.
- Edgewater operated a restaurant and lounge; ownership of Edgewater’s shares changed hands, ultimately involving shareholders Tom Bradley and Sandra Martin (with Martin’s husband managing the business).
- Edgewater renewed the lease, extending it to March 31, 1987.
- After Edgewater’s liquor license lapsed in September 1986 and could not be renewed, Gray took control of the premises on September 30, 1986, and found the building in poor condition (including roof leaks, damaged ceiling tiles, overgrown patio, missing or lifted floor tiles, and rotted exterior trim).
- Gray denied Edgewater’s personnel access to the premises to clean and retrieve property.
- Edgewater sued Gray for conversion; Gray counterclaimed for lease breach and sought to impose personal liability on Bradley and Martin by piercing the corporate veil.
- At trial, Gray admitted he understood he contracted with the corporation, not the individuals, and offered no evidence of fraud or failure to observe corporate formalities.

## Issues

1. Whether the evidence was sufficient to submit to the jury the question of piercing Edgewater Landing, Inc.’s corporate veil to hold shareholders Tom Bradley and Sandra Martin personally liable for lease-related damages.

## Decision

- The Mississippi Supreme Court affirmed the directed verdict for Bradley and Martin.
- The court held Gray failed, as a matter of law, to present evidence meeting Mississippi’s requirements for piercing the corporate veil.
- The corporate judgment against Edgewater for breach-of-lease damages remained undisturbed.

## Legal Principles

- A corporation is a separate legal entity; shareholder limited liability may be disregarded only in exceptional cases.
- Under Mississippi law, veil piercing requires proof of:
  - frustration of the plaintiff’s contractual expectations by the shareholders’ conduct,
  - flagrant disregard of corporate formalities such that the entity is effectively an alter ego, and
  - fraud or equivalent misfeasance in the use of the corporate form.
- Evidence of business mismanagement or negligence, without proof of abuse of the corporate form and fraud-like conduct, is insufficient to impose personal liability on shareholders.
- When a party knowingly contracts with a corporation and lacks proof of misrepresentation or abuse of the corporate form, claims of frustrated expectations as to shareholder liability generally fail.

## Conclusion

The court refused to impose personal liability on Edgewater’s shareholders because Gray did not prove frustrated contractual expectations, flagrant disregard of corporate formalities, or fraud or similar misfeasance, making a directed verdict appropriate and leaving liability solely with the corporation.


Gray v. Edgewater Landing, Inc., 541 So. 2d 1044 (Miss. 1989)