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May creditor sue charity as "alter ego" of debtor?

May creditor sue charity as "alter ego" of debtor?

Your Legal Questions Answered

A person who claims I owe him money has filed a lawsuit against my California charity in an effort to recover the claim. He alleges that the charity is an "alter ego" for me personally (which is untrue) and that entitles him to the money in the charity. Is this legal?

This sounds a little unusual.  Normally, when someone is trying to prove that an organization is the “alter ego” of an individual or another organization, the claimant is trying to “pierce the corporate veil” and impose liability upon the controlling individual or organization for the unjust acts of the controlled alter ego entity.  (See Ready Reference Page:  “How to Prevent Piercing the Corporate Veil”)  You seem to be saying that this person is claiming that you have a personal obligation but the charity should pay, apparently because you are hiding assets in your alter ego charity.  It doesn’t sound like a particularly promising theory, but one would have to look at the actual complaint to understand the claim.  Alter ego cases are generally tough to win, but there are some circumstances where they can be successful.  Without knowing more, I wouldn’t venture a guess on the odds of this one.

Monday, March 24, 2014

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