## Facts

- Ed McHugh was the majority owner of McHugh Mobile Home Park Partnership, LLC (the partnership), which refurbished mobile homes for lease or resale.
- McHugh and his wife formed Cloverleaf Systems, Inc. (the corporation).
- McHugh was the corporation’s sole shareholder, and the corporation had no other officers or employees.
- The corporation did not conduct ordinary corporate formalities or separateness, including:
  - no annual meetings,
  - no separate checking account from the partnership,
  - no separate tax and business records, and
  - no corporate tax returns.

- McHugh used the corporation only once to purchase a mobile home (the mobile home later sold to the Kings).
- In 2003, the Montana Secretary of State dissolved the corporation for failure to file its annual report.
- After the dissolution, McHugh, acting through the corporation, sold the mobile home to the Kings.
- The Kings paid using two checks: one payable to McHugh personally and one payable to the corporation.
- The corporation had no assets.
- The Kings later sued McHugh for alleged misrepresentations about the mobile home’s condition and sought to hold him personally liable.
- The Kings moved for partial summary judgment asking the court to pierce the corporate veil and disregard the corporation; McHugh opposed, arguing the corporation was not used deceptively to commit a wrong or fraud.

## Issues

1. Whether Cloverleaf Systems, Inc. was McHugh’s alter ego such that the court should disregard the corporation’s separate existence.
2. Whether recognizing the corporation would result in fraud, injustice, or an unfair outcome given the corporation’s lack of assets, lack of separateness, and dissolution before the sale.
3. Whether the Kings were entitled to partial summary judgment on veil piercing, permitting them to pursue McHugh personally for liabilities tied to the mobile-home transaction.

## Decision

- The district court granted the Kings’ motion for partial summary judgment on the veil-piercing issue.
- The court disregarded Cloverleaf Systems, Inc. as a separate entity for purposes of the case.
- As a result, the Kings were allowed to pursue McHugh personally on claims arising from the mobile-home sale, with the merits of the underlying claims to be resolved later.

## Legal Principles

- A Montana court may pierce the corporate veil when (1) there is a unity of interest and ownership showing the corporation is the shareholder’s instrumentality (alter ego), and (2) treating the corporation as separate would sanction fraud or produce an inequitable result.
- Facts supporting alter-ego treatment include failure to hold meetings, failure to keep corporate books and tax records, failure to file corporate tax returns, and commingling of funds through the absence of a separate corporate bank account.
- A corporation’s lack of assets and use as a one-off vehicle for a transaction can support veil piercing when the record shows the entity did not function as an independent business.
- Continuing to transact through a corporation that has been administratively dissolved is a factor a court may consider when evaluating whether the entity was being used as a liability shield rather than a real separate enterprise.
- Veil piercing can be decided on summary judgment when the material facts regarding the corporation’s nonseparateness and the risk of an unjust result are not genuinely disputed.

## Conclusion

In _King v. McHugh_, the Montana district court granted partial summary judgment piercing the veil of Cloverleaf Systems, Inc., a dissolved and assetless corporation that lacked basic corporate separateness and was used in the sale of a mobile home to the Kings, thereby allowing the Kings to pursue sole shareholder Ed McHugh personally for claims tied to that transaction.


King v. McHugh, 2009 Mont. Dist. LEXIS 469 (2009)