Automotriz etc. de California v. Resnick

In Automotriz etc. de California v. Resnick (1957) 47 Cal.2d 792, the shell corporation never issued stock, no bank account was opened for the corporation, although one was opened under a dba, the funds for the purchase of inventory were provided by the individual officers of the corporation, not the corporation, the corporation never held title to the inventory, and sales proceeds were deposited into the dba account for reimbursement to the officers. ( Automotriz etc. de California v. Resnick, supra, 47 Cal.2d at p. 795.) In upholding alter ego liability, the court pointed to the failure to issue stock as well as the manner in which the business was run as an extension of the individual directors. ( Id. at p. 798.) Lack of capitalization is indicative that the corporation is being used as a mere shell. (Ibid.) "The attempt to do corporate business without providing any sufficient basis of financial responsibility to creditors is an abuse of the separate entity . . . shareholders should in good faith put at the risk of the business unencumbered capital reasonably adequate for its prospective liabilities." ( Id. at p. 797.) Automotriz concluded that "if the capital is illusory or trifling compared with the business to be done and the risks of loss, this is a ground for denying the separate entity privilege." (Ibid.)