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Corporation's liabilities in a wrongful death case

Roberto Martinez was the sole force behind In Over Our Heads, Inc, a corporation designed to run a year round community swimming pool. The enterprise was incorporated in the correct manner in January, with Martinez as the sole director and shareholder. Martinez contributed $ 100,000 of starting capital, which was just enough to purchase the pool, finance initial advertising, and leave a reserve of $ 10,000. The corporation had no liability insurance.

On March 10, the pool opened for business. The corporation operated with a profit over the next few months. In June, Martinez took a two- week vacation to Europe and used a check from the company bank account to purchase his airline ticket. In November, he decided to have the pool repainted. Because business was slow and the corporation's bank account did not had sufficient funds, Martinez wrote a personal check for this job.

Martinez feared he would not make enough money through the winter to turn a profit, so he decided to take a part time job as a telephone salesperson for a real estate company. He used the swimming pools office phone to make his calls and made a substantial profit.

On February 11, a child drowned in the pool. The parents brought a suit for wrongful death against the corporation and against Martinez in his individual capacity as owner. At the time of the suit, the corporation had the $ 10,000 reserve and less than $ 1,000 in its bank account. Because of these limited funds, the child's parents hoped to recover most of their damages directly from Martinez.

What arguments can be made to hold Martinez liable for any debt of the corporation arising from this death? Should they prevail? How could Martinez have protected himself from such potential liability? Can an owner- manager of a small corporation guarantee that he or she will not be held liable for the corporation's debts?

Solution Preview

What arguments can be made to hold Martinez liable for any debt of the corporation arising from this death?

- The corporation and Martinez being the Director can be sued for wrongful death. However, the corporation can sue Martinez for mismanagement. The management can then collect the money from Martinez after due process.

Should they prevail?

Yes, the parent's case against the corporation and Martinez being the director will prevail (Nowak vs. Tak How Inv. Ltd. http://bulk.resource.org/courts.gov/c/F3/94/94.F3d.708.96-1006.html), (Kise vs. Meds IV, http://blog.al.com/spotnews/2011/03/wrongful_death_suit_filed_agai.html), John ...

Solution Summary

This solution discusses a company that operates a swimming pool business with Martinez as the director. The director moonlights and profits from the use of the company's resources for other purposes. The issue raised is whether a director himself or the corporation is entirely liable in case a wrongful death charge is brought about in the course of the business operation.

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