“Contorts” and Limited Liability. Parker Oil Co. v. Mico Petro & Heating Oil, LLC (Pa. Super. Ct. 2009)

Parker Oil Co. v. Mico Petro & Heating Oil, LLC, 979 A.2d 854, 2009 PA Super 105 (Pa. Super. Ct. 2009) involves a routine breach of contract.  For several years, a gasoline station had been buying gasoline on open account from a supplier.  The station had been struggling, with earlier delays or irregularities in payment.  Eventually, the station failed, and did not pay for its last batch of gasoline.  Of course, the LLC that owned and operated the station had “shallow pockets” at best.  The supplier sued the LLC’s sole member (Singh), alleging that he had participated in the conversion of the oil.  The Court summarily rejected this argument:

¶ 9 The situation may well have been different if there was one large transaction and evidence that Singh knew the corporation (sic) could not pay for it. However, that is not the situation here. First, it is undisputed that Parker knew that Singh was operating through a corporation, and in fact had dealt with him for years, always in a corporate rather than individual relationship. Second, it is undisputed that Parker knew for a long time that Mico Petro was having financial difficulty, as many checks were drawn with insufficient funds but later made good. This is evidence of a corporation struggling to make it, and a supplier going along with this. When the corporation finally goes out of business, this does not turn a long-time contractual relationship into a tort. This is a classic situation where an individ-ual wishes to shield himself from personal liability and uses the classic corporate structure, and a supplier knows about both the corporate structure and the finan-cial difficulties of the corporation and chooses to take the risk. The decision by the trial court in this case could drastically undermine our business structure by allowing creditors to end-run the normal burden of piercing the corporate veil under the little used “participation” theory. The only participation here was that of a corporation trying to stay afloat and a creditor going along with it in the hope that ultimately it will get paid–incidentally making a profit for a number of years along the way.

¶ 10 We also note that in the current economic situation, this is something that is likely to happen more and more. While there is certainly evidence that Mico Petro owed a great deal of money to Parker, we cannot find any evidence that Singh accepted the oil planning not to pay for it. There is nothing more than a showing that finally the corporation came to the conclusion that it was not profitable and had to close.

979 A.2d at 857.  The only surprise here is that the dissent bought-in to the participation argument, reasoning that “products were received and resold and … there is principal due….”  Id. at 860.

posted by Gary Rosin

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