## Facts

- Manitoba Investment Advisors, Inc., a Wyoming corporation authorized in Colorado, leased commercial property from McCallum Family, L.L.C. for a mobile-home sales business under a triple-net lease requiring Manitoba to pay property taxes.
- Manitoba failed to pay Mesa County property taxes for 2003, 2004, and part of 2005, and vacated the premises seven months before lease end, defaulting on remaining rent.
- McCallum obtained a $76,224 judgment against Manitoba; the parties stipulated Manitoba was insolvent beginning September 2004, and it was administratively dissolved in May 2006.
- Marc Winger managed Manitoba’s operations and admitted he “managed the entire business,” but was not formally a shareholder, officer, or director.
- Marc routinely used corporate funds to pay personal expenses, including about $95,400 to satisfy a personal liability to the State of California stemming from a felony sales-tax conviction.
- Karen Winger (Marc’s mother) was a director, 50% shareholder, vice president, and secretary of Manitoba; the other 50% shareholder and president was not a party on appeal.
- McCallum sued Marc to pierce Manitoba’s corporate veil and sued Karen for breach of fiduciary duty as a shareholder/director.
- The trial court required clear and convincing evidence for veil-piercing, refused to pierce the veil against Marc based in part on his non-shareholder status, and entered judgment for Marc and Karen.

## Issues

1. What burden of proof applies to corporate veil-piercing claims under Colorado law: preponderance of the evidence or clear and convincing evidence?
2. May veil-piercing impose personal liability on a corporate insider who is not a shareholder, officer, or director?
3. What conduct satisfies the requirement that the corporate form was used to “defeat the rightful claims of creditors”?
4. When may a shareholder/director of an insolvent corporation owe and breach a fiduciary duty to a corporate creditor?

## Decision

- Affirmed in part, reversed in part, and remanded.
- Held the burden of proof for veil-piercing is preponderance of the evidence, not clear and convincing evidence.
- Held veil-piercing is not limited to formal shareholders, officers, or directors; it may reach a non-shareholder insider if the veil-piercing elements are proven.
- Clarified that diversion of corporate assets and misuse of the corporation during insolvency that impairs collection can constitute “defeating the rightful claims of creditors.”
- Remanded for reconsideration of veil-piercing against Marc under the correct standard and for further findings on Karen’s potential fiduciary-duty liability to a creditor in the insolvency context.

## Legal Principles

- Under Colorado’s general civil burden statute, veil-piercing must be proven by a preponderance of the evidence unless a higher standard is expressly required.
- Veil-piercing may apply to a de facto controller or insider who dominates and misuses the corporation, even without formal shareholder/officer/director status.
- Using corporate funds for personal obligations, commingling, and stripping assets while insolvent and facing creditor claims may support a finding that the corporate form was used to defeat creditors’ rights.
- When a corporation is insolvent, shareholders (and directors), in certain circumstances, may owe duties to creditors and may face liability where they participate in, knowingly permit, or fail to address asset diversion or self-dealing that harms creditors.

## Conclusion

The court corrected Colorado veil-piercing doctrine by requiring proof by a preponderance of the evidence and allowing veil-piercing against non-shareholder insiders who control and misuse a corporation, and it remanded for application of these rules and for further analysis of potential shareholder fiduciary-duty liability to a creditor where the corporation was insolvent.


McCallum Family L.L.C. v. Winger, 221 P.3d 69 (Colo. App. 2009)