     The summaries of the Colorado Court of Appeals published opinions
  constitute no part of the opinion of the division but have been prepared by
  the division for the convenience of the reader. The summaries may not be
    cited or relied upon as they are not the official language of the division.
  Any discrepancy between the language in the summary and in the opinion
           should be resolved in favor of the language in the opinion.


                                                                   SUMMARY
                                                                April 16, 2020

                                2020COA69

No. 18CA1716, Dill v. Rembrandt Group, Inc.— Corporations —
Piercing the Corporate Veil — Horizontal Piercing

     As a matter of first impression, a division of the court of

appeals concludes that Colorado corporate law permits horizontal

veil piercing between entities that do not share direct common

ownership, but that share common ownership through another

entity. However, horizontal piercing may only occur if the veil of

each corporate entity and its owners is first pierced. Because that

did not occur here, we reverse the court’s judgment finding that

defendant Rembrandt Group, Inc., and intervenor Pikes Peak

Acquisitions, LLC are alter egos. The division further concludes

that the record does not support the district court’s finding that the

corporate form was used to defeat a rightful claim. Finally, the

division concludes that Pikes Peak Acquisitions and Rembrandt
Group are entitled to reasonable costs and appellate attorney fees

under the “Intercreditor and Subordination Agreement.” Therefore,

the district court’s judgment in favor of the plaintiff is reversed and

the case is remanded for further proceedings.
COLORADO COURT OF APPEALS                                           2020COA69


Court of Appeals No. 18CA1716
City and County of Denver District Court Nos. 15CV34604 & 16CV30289
Honorable Michael J. Vallejos, Judge


Ernest R. Dill and Julie D. Dill,

Plaintiffs-Appellees,

v.

Rembrandt Group, Inc., a Colorado corporation,

Defendant-Appellant,

and

Pikes Peak Acquisitions, LLC, a Colorado limited liability company, and Suvi
Hejbol Miller, as personal representative of the Estate of Robert D. Arnold,

Intervenors-Appellants.


                        JUDGMENT REVERSED AND CASE
                         REMANDED WITH DIRECTIONS

                                    Division VI
                            Opinion by JUDGE FREYRE
                          Richman and Grove, JJ., concur

                            Announced April 16, 2020


Miller & Law, P.C., Curtis R. Henry, Jonathan R. Slie, Littleton, Colorado, for
Plaintiffs-Appellees

Holland & Hart LLP, Sean M. Hanlon, Denver, Colorado, for Defendant-
Appellant

Mulliken Weiner Berg & Jolivet P.C., Murray I. Weiner, Colorado Springs,
Colorado, for Intervenors-Appellants
¶1    This appeal by defendant Rembrandt Group, Inc. (RGI), a

 Colorado corporation, and intervenor Pikes Peak Acquisitions, LLC

 (PPA), a Colorado single-member limited liability company (LLC),

 requires us to determine whether a court may find that two entities

 that neither are in a parent-subsidiary relationship nor have any

 ownership interest in each other, but share common owners

 through another LLC, can be alter egos.

¶2    RGI owes money to PPA, its current senior creditor, and to

 plaintiff Ernest R. Dill, a subordinate creditor. PPA is wholly owned

 by Intellitec Executives, LLC (Intellitec), which is not a party to this

 case. Intellitec, in turn, is owned by five individuals. The same five

 individuals also own 81.25 percent of RGI’s stock (the five common

 owners). Mr. Dill filed suit against RGI to collect on his subordinate

 indebtedness after learning that Rocky Mountain Mezzanine Fund

 II, L.P. (RMMF), the original senior creditor, had assigned RGI’s

 indebtedness to PPA. Mr. Dill argued that, because RGI and PPA

 (indirectly via Intellitec) shared common owners, they are alter egos

 of each other. Mr. Dill reasoned that the senior indebtedness was

 extinguished when RMMF assigned RGI’s debt to PPA for a

 discounted amount, which allowed RGI, through PPA, to effectively


                                     1
 acquire a debt payable to itself. Thus, under Mr. Dill’s argument,

 he can collect on his subordinated debt. The trial court agreed.

¶3    We conclude that RGI and PPA are not alter egos of each other

 because they are separate legal entities that lack common

 ownership or control and do not otherwise satisfy the alter ego

 factors. Further, because the trial court failed to find that (1) RGI is

 the alter ego of five of its twelve owners; (2) Intellitec is the alter ego

 of its owners (the same five common owners, who also own 81.25

 percent of RGI’s stock); and (3) Intellitec and PPA are alter egos of

 each other, it could not use “horizontal” veil piercing to find that

 RGI and PPA are alter egos of each other.

¶4    We further conclude that the record does not support the

 court’s finding that PPA acquired RGI’s indebtedness for the

 purpose of defeating Mr. Dill’s rightful claim. Therefore, the court

 erred by holding that RGI and PPA are alter egos and, thus, that the

 senior indebtedness was extinguished when PPA acquired it. We

 reverse the judgment.

                        I.    Factual Background

¶5    Mr. Dill sold several trade schools to RGI in 2000. RGI

 financed the purchase (and acquired working capital) by borrowing


                                      2
 $3.69 million from RMMF, as evidenced by a note (RMMF note)

 payable to RMMF, and by Mr. Dill’s agreement to carry back $3

 million of the purchase price. The RMMF note was and remains

 assignable.

¶6    As a condition of providing financing for RGI’s purchase,

 RMMF required Mr. Dill to execute an “Intercreditor and

 Subordination Agreement” (IC agreement). As relevant here, the IC

 agreement designated Mr. Dill the subordinate creditor and his debt

 the subordinated indebtedness, and it designated RMMF the senior

 creditor and the RMMF note the senior debt. As well, it authorized

 RMMF to issue a payment blockage notice to suspend RGI’s

 payments to Mr. Dill under any notes payable to him if RGI

 defaulted on the senior indebtedness. Such blockage would remain

 effective until RGI satisfied the senior indebtedness.

¶7    The IC agreement also expressly precluded Mr. Dill from

 commencing any legal action against RGI to collect on any notes

 payable to him “unless and until all of the Senior Indebtedness has

 been fully paid and satisfied.”

¶8    Importantly, the IC agreement allowed RMMF to assign the

 RMMF note to any third party without notice to or consent from Mr.


                                   3
  Dill. As pertinent here, the IC agreement provided that “if any third

  party satisfies the Senior Indebtedness owing to Senior Lender,

  Senior Lender may assign its rights and remedies hereunder to

  such third party, and such third party shall be deemed to be Senior

  Lender for all purposes of this Agreement.”

¶9     The IC agreement does not define “third party.”

¶ 10   In 2008, RGI defaulted on its obligations to Mr. Dill. As part of

  a settlement with Mr. Dill, RGI executed two new promissory notes

  payable to Mr. Dill (Dill notes). These notes are secured by a stock

  pledge agreement whereby RGI pledged one hundred percent of the

  schools’ outstanding stock Mr. Dill had originally sold to RGI. At

  that time, Mr. Dill reaffirmed the IC agreement. The Dill notes and

  stock pledge agreement are the focus of this litigation.

¶ 11   In 2011, the five common owners (who collectively own 81.25

  percent of RGI) formed Intellitec. In 2012, Intellitec’s owners (five

  common owners) formed PPA, with Intellitec as its single member.

  Using a portion of life insurance proceeds from one of Intellitec’s

  deceased members, in April 2012, PPA purchased the RMMF note

  (which, at the time, had an unpaid balance of $3 million owed to




                                     4
RMMF) for the discounted price of $1.5 million.1 RMMF assigned

its rights under the RMMF note and the IC agreement to PPA. At

the time of trial, PPA’s assets included the RMMF note, some cash,

and several shares of RGI stock.2 Figure 1 illustrates the corporate

structures and the relationships between Mr. Dill, RGI, and PPA.


                                                                1    2      3         4   5

                                                                         Owners
                          81.25% of RGI Shares

                                                                         Intellitec
                      1       2    3     4       5       6-12              (LLC)

                                        Owners                                   Single
                                                                                Member

                  Dill                 RGI (Corp.)                     PPA (LLC)
         (subordinate creditor)         (Debtor)                    (senior creditor)
                                             IC Agreement




                                             Figure 1




1 PPA eventually assigned twenty percent of the RMMF note to the
personal representative of the deceased member’s estate, Suvi
Hejbol Miller. PPA and Miller are both intervenors in this case. For
simplicity, we refer to them jointly as PPA. Because the trial court
did not rely on this finding, however, we do not further consider it.
2 RGI acknowledges in its brief that PPA owns some shares of RGI

obtained as consideration for giving RGI extensions to make
payments on the RMMF note. Because the trial court did not rely
on this fact, and neither party raised it on appeal, we do not
consider it.


                                                     5
¶ 12   After making $274,586 in payments to PPA under the RMMF

  note, RGI defaulted on the RMMF note in August 2012. The default

  did not initially affect Mr. Dill, as RGI paid him nearly $1.1 million

  under the Dill notes through April 2015.

¶ 13   In May 2015, RGI exercised its right to defer payment under

  the Dill notes for twelve months due to its “verifiable financial

  difficulties.”3 In August 2015, PPA and RGI entered into a

  forbearance agreement under which PPA agreed to “forbear and

  forgo interest and principal payments” so that RGI could sell some

  of its trade schools to reduce its total indebtedness. Then, on

  October 1, 2015, pursuant to the IC agreement, PPA issued a

  payment blockage notice to Mr. Dill prohibiting him, as the

  subordinate creditor, from receiving further payments on the Dill

  notes until the senior debt has been fully satisfied.

                      II.   Procedural Background

¶ 14   On December 30, 2015, Mr. Dill sued RGI for breach of the

  Dill notes, breach of the stock pledge agreement, unjust

  enrichment, breach of a lease agreement, and attorney fees. His


  3Mr. Dill disputed at trial that RGI properly invoked this provision.
  Because the trial court did not address this issue, neither do we.

                                     6
  complaint alleged that RMMF’s assignment of the RMMF note to

  PPA in 2012 extinguished the senior debt because the members of

  PPA’s owner (Intellitec) own 81.25 percent of RGI. Thus, he

  reasoned, PPA and RGI are alter egos and RGI had essentially

  purchased its own debt through PPA.

¶ 15   On February 29, 2016, PPA filed a complaint for injunctive

  relief in a separate proceeding, arguing that RMMF’s assignment of

  the RMMF note to PPA was valid. PPA sought a preliminary

  injunction barring Mr. Dill from prosecuting his case against RGI

  because the IC agreement precludes it. Mr. Dill countered that,

  because RGI and PPA are alter egos, they “basically owe[d] money to

  themselves.” The court consolidated the two cases and set a

  hearing on PPA’s motion for preliminary injunction.

¶ 16   After the hearing, the court denied PPA’s motion for a

  preliminary injunction, ruling that it was unclear “whether PPA has

  a reasonable probability of success on the merits.” The trial court

  found that success on the merits would depend in part on whether

  RGI and PPA are alter egos.

¶ 17   After a bench trial a year later, RGI and PPA moved to dismiss

  Mr. Dill’s claims under C.R.C.P. 41(b). The trial court dismissed the


                                    7
  breach of lease and unjust enrichment claims. On November 3,

  2017, the trial court issued a detailed written order setting forth the

  pertinent issue:

             There is no dispute that RGI has not made
             payment and is in “default” of the RMM[F] note
             and of the two [Dill notes]. There is no doubt
             that the Dills4 were junior lenders to [RMMF].
             Also, there is no dispute that the RMM[F] note
             was assigned to PPA. Again, the question at
             issue has been whether there was a valid
             assignment or, instead, whether there was
             actually a satisfaction of the debt. If PPA is
             simply an alter ego of RGI who is trying to
             avoid their obligations under the note, then the
             assignment was not valid, and the Dills may
             enforce their rights under the agreements. If
             PPA is not an alter ego of RGI, and the
             assignment was valid, then, PPA, by
             assignment, became the senior lender, and the
             Dills, pursuant to the [IC agreement], may not
             bring a lawsuit to enforce their rights.

¶ 18   Applying the three-part test for veil piercing set forth in

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

  the court first found that RGI and PPA are alter egos. In reaching




  4Mr. Dill’s complaint also listed his wife, Julie D. Dill, as a plaintiff,
  although she was not a party to the Dill notes or the stock pledge
  agreement. Although RGI argues that the judgment in favor of Mrs.
  Dill should be vacated because she was not a party to the Dill notes
  or the stock pledge agreement, we need not address this issue
  because we reverse on other grounds.

                                      8
  this conclusion, the court found that (1) PPA is a single-purpose

  LLC that operates as a distinct business entity; (2) PPA’s assets

  consist of the RMMF note, cash, and several shares of RGI stock; (3)

  PPA and RGI do not commingle funds; (4) PPA maintains adequate

  business records; (5) no evidence of misuse of the corporate form

  existed; (6) PPA followed all legal formalities; (7) PPA was formed for

  the sole purpose of acquiring the RMMF note; and (8) five of RGI’s

  shareholders formed Intellitec, which, in turn, formed PPA.

¶ 19   Next, the court found no evidence of fraud, relying on the

  undisputed evidence that RGI made regular payments to Mr. Dill

  even after defaulting on the RMMF note in 2012. Instead, it found

  that PPA is a “shell corporation,” formed by Intellitec for the

  purpose of avoiding creditors, including Mr. Dill. It also reasoned

  that PPA’s decision to execute the forbearance agreement in 2015

  so as “not to crush RGI” showed that PPA “indulged RGI’s default”

  in a manner “to which other creditors were unlikely to consent.” It

  noted that, if the deceased common owner’s personal representative

  had used the life insurance proceeds to allow RGI to pay RMMF

  directly, this would have represented a satisfaction of the debt, and

  Mr. Dill would have become the senior creditor under the IC


                                     9
  agreement.5 Instead, the members of Intellitec, who also are

  shareholders of RGI, formed PPA, funded PPA with the life

  insurance proceeds to purchase the RMMF note, and thereby

  defeated Mr. Dill’s rightful claim to collect on the Dill notes.

¶ 20     Finally, the trial court found that piercing the corporate veil

  would yield an equitable result by extinguishing the senior

  indebtedness and allowing Mr. Dill to obtain what he had bargained

  for.

¶ 21     RGI and PPA appealed the court’s ruling. The first appeal was

  dismissed without prejudice for lack of finality. The trial court then

  clarified that, having found that RGI was in default under the Dill

  notes, RGI had also breached the stock pledge agreement. The

  court also clarified that Intellitec is not a party to this litigation and

  that it had only found RGI and PPA (and not PPA and Intellitec) to

  be alter egos. RGI and PPA now appeal the final judgment.




  5 The trial court did not make findings explaining how a $1.5
  million payment could have satisfied the $3 million debt. Because
  the parties have not raised this discrepancy and the trial court did
  not consider it, neither do we.

                                      10
                      III.   Horizontal Veil Piercing

¶ 22   RGI and PPA contend that the trial court erroneously pierced

  the corporate veil to find that RGI’s indebtedness to PPA was

  extinguished when RMMF assigned the RMMF note to PPA. They

  argue that veil piercing cannot apply “horizontally” to two separate

  entities not in a parent-subsidiary relationship that share no

  common owners, an unresolved question in Colorado. Alternatively,

  they argue that if horizontal piercing applies, it may occur only if

  the veils separating each entity and a common parent or owner in

  the ownership chain are first pierced by establishing that each

  entity and its owner are alter egos.6

¶ 23   We hold that horizontal veil piercing may occur between

  entities that do not share direct common owners, but that indirectly

  share common owners through another entity in an ownership

  chain. However, the veils between the separate entities and their

  owners in the ownership chain must first be pierced. Because


  6 In addition to establishing that the entities are alter egos, a
  plaintiff must also establish the other two elements of veil piercing:
  whether the corporate form was used to commit a fraud or defeat a
  rightful claim, and whether equitable results will be achieved by
  disregarding the corporate form. McCallum Family L.L.C. v. Winger,
  221 P.3d 69, 74 (Colo. App. 2009).

                                     11
  nothing in the record shows that RGI is the alter ego of the five

  common owners, that Intellitec is the alter ego of the five common

  owners, or that PPA and Intellitec are alter egos of each other, the

  court erred by finding that RGI and PPA are alter egos of each other

  and, consequently, that RGI’s senior indebtedness was

  extinguished. Accordingly, we reverse the court’s judgment.

                             A.    Preservation

¶ 24   Mr. Dill disputes preservation of this issue. To preserve an

  issue for appeal, all that is necessary is that the issue “be brought

  to the attention of the trial court and that the court be given an

  opportunity to rule on it.” Berra v. Springer & Steinberg, P.C., 251

  P.3d 567, 570 (Colo. App. 2010).

¶ 25   Although neither RGI nor PPA explicitly used the term

  “horizontal veil piercing” in the trial court, PPA’s trial brief argued

  that “RGI and PPA have similar, but not identical, ownership” and

  that PPA was “operated as a distinct business entity.” Moreover,

  PPA argued in its Rule 41(b) motion that, to the extent any

  “commonality of ownership” existed, it was not between RGI and

  PPA, but between RGI and Intellitec. And RGI joined PPA in its

  closing argument before submitting its own Rule 41(b) motion.


                                     12
  Under these circumstances, we conclude that PPA and RGI

  sufficiently preserved for our review “the sum and substance of the

  argument [they] now make[] on appeal.” Berra, 251 P.3d at 570.

              B.    Standard of Review and Applicable Law

¶ 26   We review de novo a trial court’s legal conclusions in finding

  an alter ego and in piercing the corporate veil, and we examine its

  related factual findings for clear error. Sedgwick Props. Dev. Corp.

  v. Hinds, 2019 COA 102, ¶ 22. We defer to the trial court’s factual

  findings and disturb them only when they are not supported by the

  record. Amos v. Aspen Alps 123, LLC, 2012 CO 46, ¶ 25.

¶ 27   An LLC is a legal entity separate from the members who own

  it. Griffith v. SSC Pueblo Belmont Operating Co., 2016 CO 60M,

  ¶ 11; Sedgwick, ¶¶ 15-17. Thus, neither the members of an LLC

  nor its managers are personally liable for debts incurred by the

  LLC. § 7-80-705, C.R.S. 2019; Griffith, ¶ 11. Indeed, the corporate

  veil fiction “isolates ‘the actions, profits, and debts of the

  corporation from the individuals who invest in and run the entity[,]’

  [and] [o]nly extraordinary circumstances justify disregarding the

  corporate entity to impose personal liability.” Sedgwick, ¶ 15

  (quoting In re Phillips, 139 P.3d 639, 643 (Colo. 2006)).


                                      13
¶ 28   To pierce the corporate veil in Colorado, a court must conduct

  a three-part inquiry. Id. at ¶ 21. First, it must determine whether

  the corporate entity is the alter ego of the person or entity in issue.

  Id. An alter ego relationship exists when a corporation or LLC is

  merely an instrumentality for the transaction of the shareholders’ or

  members’ affairs and “there is such unity of interest in ownership

  that the separate personalities of the corporation [or LLC] and the

  owners no longer exist.” In re Phillips, 139 P.3d at 644 (quoting

  Krystkowiak v. W.O. Brisben Co., 90 P.3d 859, 867 n.7 (Colo.

  2004)).

¶ 29   To determine whether unity of interest exists, a court

  considers several factors, including whether (1) the corporation or

  LLC operates as a distinct business entity; (2) the two entities

  commingle funds and assets; (3) the two entities maintain

  inadequate corporate records; (4) the nature and form of the

  entities’ ownership and control facilitates misuse by an insider; (5)

  the corporation or LLC is “used as a ‘mere shell’”; (6) “the business

  [i]s thinly capitalized”; (7) legal formalities are disregarded; and (8)

  corporate funds or assets are used for noncorporate purposes. Id.

  (quoting Leonard v. McMorris, 63 P.3d 323, 330 (Colo. 2003));


                                      14
  Sedgwick, ¶ 32. Courts examine the specific facts of the case and

  need not find the existence of every factor to find an alter ego.

  Great Neck Plaza, L.P. v. Le Peep Rests., LLC, 37 P.3d 485, 490

  (Colo. App. 2001).

¶ 30      Second, upon finding that an entity is the alter ego of its

  owners, a court must determine whether the corporate fiction was

  used to perpetrate a fraud or defeat a rightful claim. Sedgwick,

  ¶ 21.

¶ 31      Third, a court must consider whether disregarding the

  corporate form would achieve an equitable result. Id. If it finds

  that the moving party has satisfied this three-part test by a

  preponderance of the evidence, then it may disregard the corporate

  identity and impute liability. Griffith, ¶ 14; Sedgwick, ¶ 21.

                  C.    Horizontal Veil Piercing in Colorado

¶ 32      RGI and PPA assert that the trial court erred by piercing the

  corporate veil because RGI and PPA have no parent-subsidiary

  relationship and do not exercise control over each other. The trial

  court found that, at the time RMMF assigned the RMMF note to

  PPA, neither RGI nor PPA possessed any ownership interest in the

  other, nor did either entity control the other. Rather, the five


                                       15
  common owners, who controlled 81.25 percent of RGI’s shares,

  were also the founders and only members of Intellitec, the LLC that

  wholly owned PPA.

¶ 33   Entities that share common shareholders, owners, or parents

  are sister companies. Black’s Law Dictionary 418 (10th ed. 2014)

  (defining sister corporation as “[o]ne of two or more corporations

  controlled by the same, or substantially the same, owners”); see

  also Minno v. Pro-Fab, Inc., 905 N.E.2d 613, 617 (Ohio 2009). RGI

  and PPA are therefore sister entities because the five common

  owners who own 81.25 percent of RGI also own the LLC that, in

  turn, owns PPA. Mr. Dill does not cite, nor have we found, any

  Colorado case that extends piercing the corporate veil horizontally

  to sister companies.

¶ 34   Some jurisdictions categorically bar piercing the corporate veil

  between entities that are not in vertical, or parent-subsidiary,

  relationships. See Minno, 905 N.E.2d at 617 (holding that “a

  plaintiff cannot pierce the corporate veil of one corporation to reach

  its sister corporation” because the “lack of ability of one corporation

  to control the conduct of its sister corporation precludes application

  of the piercing-the-corporate-veil doctrine”); see also Madison Cty.


                                    16
  Commc’ns Dist. v. CenturyLink, Inc., No. CV 12-J-1768-NE, 2012

  WL 6685672, at *4 (N.D. Ala. Dec. 20, 2012) (horizontal veil piercing

  cannot occur because “[s]ister corporations do not benefit from the

  corporate form of their siblings” and because, without evidence of

  ownership interest, complete domination and control necessary for

  the alter ego element cannot be established); Kiesel Co. v. J & B

  Props., Inc., 241 S.W.3d 868, 872 (Mo. Ct. App. 2008) (piercing the

  corporate veil doctrine “generally serves to reach shareholders, not

  horizontal affiliates, in cases involving fraud”). Unlike Colorado,

  these jurisdictions typically do not recognize reverse veil piercing.7

¶ 35   In jurisdictions where horizontal piercing is recognized, a

  plaintiff seeking to disregard the corporate formalities separating

  horizontal affiliates must first pierce the veils separating each entity



  7 The Colorado Supreme Court has held that Colorado law allows a
  corporate outsider to press an action against a corporate insider
  and subject corporate assets to such a claim by disregarding the
  corporate entity through reverse veil piercing. In re Phillips, 139
  P.3d 639, 645 (Colo. 2006). “Reverse piercing occurs when a
  claimant seeks to hold a corporation liable for the obligations of an
  individual shareholder.” Id. at 644. The court explained that the
  same three-factor test used in traditional veil piercing also applies
  to reverse veil piercing. Id. at 646. This is the opposite of
  traditional veil piercing, which “imposes liability on individual
  shareholders for the obligations of the corporation.” Id. at 644.

                                     17
  from their shared corporate parent. Capmark Fin. Grp. Inc. v.

  Goldman Sachs Credit Partners L.P., 491 B.R. 335, 349 (S.D.N.Y.

  2013); Outokumpu Eng’g Enters., Inc. v. Kvaerner EnviroPower, Inc.,

  685 A.2d 724, 729 (Del. Super. Ct. 1996) (refusing to pierce the veil

  between sister entities for personal jurisdiction without first

  piercing the veils to the common parent); see also Huntsville

  Aviation Corp. v. Ford, 577 So. 2d 1281, 1287-88 (Ala. 1991) (a

  sister corporation could be held liable for the debts and obligations

  of a corporation owned by the same parent because the parent used

  the corporations “interchangeably”). Except for Alabama, these

  jurisdictions typically recognize reverse veil piercing.

¶ 36   But even in jurisdictions that do not explicitly recognize

  reverse veil piercing, horizontal piercing between sister entities can

  still occur when the veil piercing elements are satisfied. See Tower

  Inv’rs, LLC v. 111 E. Chestnut Consultants, Inc., 864 N.E.2d 927,

  941 (Ill. App. Ct. 2007) (courts may also pierce the corporate veil

  between two affiliated, or “sister,” corporations when there is such

  unity of interest and ownership between the corporations that

  separate personalities between the corporations no longer exist, and

  adherence to the fiction of separate personalities would promote


                                     18
  injustice or inequitable circumstances); see also Greenspan v. LADT,

  LLC, 121 Cal. Rptr. 3d 118, 138 (Ct. App. 2010) (“Generally, alter

  ego liability is reserved for the parent-subsidiary relationship.

  However, under the single-enterprise rule, liability can be found

  between sister companies.” (quoting Las Palmas Assocs. v. Las

  Palmas Ctr. Assocs., 1 Cal. Rptr. 2d 301, 318 (Ct. App. 1991))).8

¶ 37   Because our supreme court has not explicitly barred

  horizontal piercing to find that sister entities are alter egos, and it

  recognizes the doctrine of reverse veil piercing, see In re Phillips,

  139 P.3d at 645, we reject RGI and PPA’s contention that Colorado

  courts may never pierce the veil to reach sister entities. See

  McCallum Family L.L.C., 221 P.3d at 75 (“‘[T]he mere existence or

  nonexistence of formal stock ownership is not necessarily

  conclusive’ in determining whether the corporate veil may be

  pierced.” (quoting William M. Fletcher, Cyclopedia of Corporations

  § 41.10, at 141 (2006))); see also Nursing Home Consultants, Inc. v.

  Quantum Health Servs., Inc., 926 F. Supp. 835, 840 n.12 (E.D. Ark.



  8 Colorado courts have not recognized the single-enterprise rule, nor
  have the parties raised it on appeal. Therefore, we do not consider
  it.

                                     19
  1996) (“horizontal” or “triangular” veil piercing “results from a

  sequential application of the traditional piercing doctrine and the

  ‘reverse piercing’ doctrine”), aff’d, 112 F.3d 513 (8th Cir. 1997).

  Indeed, another division of this court held an individual, who was

  not a shareholder, officer, or director, but who had some beneficial

  interest in a corporation, liable for the debts and obligations of the

  corporation over which he exercised dominion and control through

  its owners. McCallum Family L.L.C., 221 P.3d at 75; see also Cathy

  S. Krendl & James R. Krendl, Piercing the Corporate Veil: Focusing

  the Inquiry, 55 Denv. L.J. 1, 24 (1978).

¶ 38   However, we agree with RGI and PPA that horizontal veil

  piercing between sister entities may occur only if (1) the entities

  share a parent or common owners in the ownership chain and (2)

  the veils separating each entity from the parent or common owners

  are first pierced to find that each sister entity is the alter ego of its

  owners.

¶ 39   Recently, a division of this court considered circumstances

  involving piercing the veil between related entities. Sedgwick, ¶ 45.

  In Sedgwick, the plaintiff sought to pierce the veil between a single-

  member, single-purpose LLC (1950 Logan) and its manager


                                      20
  (Sedgwick, another LLC). Id. at ¶ 16. The division concluded that

  the trial court erred in finding that Sedgwick and 1950 Logan were

  alter egos in part because the court had failed to first find that

  Sedgwick was the alter ego of its principal, Paris, an individual who

  also controlled 1950 Logan through other business entities. Id. at

  ¶ 45.

¶ 40      We therefore conclude that Colorado corporate law permits

  horizontal veil piercing, under the traditional veil piercing test,

  between entities that share common ownership through another

  entity, but only if the veil of each corporate entity is also pierced.

                           D.   Alter Ego Analysis

¶ 41      In order to reach the conclusion that RGI and PPA are alter

  egos, three prerequisites would need to be satisfied. First, the veil

  separating RGI from the five common owners would need to be

  pierced to hold the five common owners liable for RGI’s actions.

  Next, the veil separating the five common owners and Intellitec

  would need to be pierced to hold Intellitec liable for the actions of

  the five common owners. And finally, the veil separating Intellitec

  and PPA would need to be pierced to hold PPA liable for the




                                     21
  obligations of Intellitec. See Capmark Fin. Grp. Inc., 491 B.R. at

  349.

¶ 42      Mr. Dill failed to present any evidence to support the multiple

  piercings required to disregard the separate corporate identities of

  RGI and PPA. See id. Nothing in the record shows that (1) RGI is

  the alter ego of the five common owners; (2) RGI’s corporate fiction

  was used to perpetrate a fraud or defeat a rightful claim; or (3)

  piercing the veil would achieve an equitable result. See Sedgwick,

  ¶ 21.

¶ 43      To be sure, the trial court found that the owners of Intellitec

  also collectively own 81.25 percent of RGI, but it is well settled that

  ownership alone is not a basis to find alter ego. See Indus. Comm’n

  v. Lavach, 165 Colo. 433, 437, 439 P.2d 359, 361 (1968) (“Even

  where all the stock is owned by a sole shareholder, there seems no

  adequate reason to depart from the general rule that the

  corporation and its shareholders are to be treated as distinct legal

  persons.” (quoting Box v. Roberts, 112 Colo. 234, 238, 148 P.2d

  810, 812 (1944))); McCallum Family L.L.C., 221 P.3d at 75 (“the

  mere existence or nonexistence of formal stock ownership is not

  necessarily conclusive” in determining whether the corporate veil


                                       22
  may be pierced (quoting Fletcher, § 41.10)). Moreover, no record

  evidence exists or even suggests that the five common owners

  exercise dominion and control over RGI to transact their own affairs

  or for any unlawful purpose. McCallum Family L.L.C., 221 P.3d at

  75.

¶ 44    As well, no record evidence supports the other alter ego

  factors, such as whether RGI is undercapitalized, fails to follow

  corporate formalities, commingles assets with the five common

  owners, or operates as a “mere shell.” Because the record does not

  support a finding that RGI and the five common owners, who also

  owned Intellitec, are alter egos, the corporate veil separating those

  owners and RGI cannot be pierced. And if the veil between RGI and

  the five common owners cannot be pierced, then RGI and PPA

  cannot be alter egos. We explain why next.

¶ 45    No one disputes that PPA is a single-member LLC and is not

  owned by the five common owners. Therefore, neither RGI nor PPA

  owns the other, and the only means of piercing the veil between

  them is to show that the five common owners exercise dominion

  and control over PPA via Intellitec. See id. at 77 (“When an

  individual demonstrates great dominion and control over a


                                    23
  corporation, and especially over corporate assets, the lack of such a

  formal role or title [such as a shareholder, director, or officer] will

  not necessarily impede a finding of personal liability for corporate

  activities.”).

¶ 46    Nothing in the record shows that Intellitec and its owners are

  alter egos, or that the owners formed Intellitec for a fraudulent

  purpose or to defeat a rightful claim. And, in a subsequent order,

  the trial court clarified that it had not found Intellitec was an alter

  ego of either RGI or PPA. Absent this finding, PPA cannot be the

  alter ego of the five common owners and, thus, PPA and RGI cannot

  be alter egos.

¶ 47    Mr. Dill’s factual allegations with respect to PPA, Intellitec, and

  the Intellitec ownership chain merely point to benign actions typical

  of parent-subsidiary relationships. Assuming, as Mr. Dill alleges,

  that Intellitec created PPA solely to hold the RMMF note, single-

  asset, single-member LLCs are permitted and may be formed for

  any lawful business purpose. § 7-80-103, C.R.S. 2019 (an LLC may

  be formed for any lawful business); § 7-80-204(1)(g), C.R.S. 2019

  (requiring the articles of organization of an LLC to have at least one

  member); see also Sedgwick, ¶ 17. Nothing in the record shows


                                     24
  that Intellitec formed PPA for an unlawful purpose, or that Intellitec

  has misused PPA’s corporate form. See In re Phillips, 139 P.3d at

  644 (holding claimant must prove the corporate structure was used

  to perpetrate a wrong).

¶ 48   Moreover, while the record shows that one of the common

  owners managed PPA for a period of time, this fact alone also

  cannot support veil piercing. See Sedgwick, ¶ 49 (a managing LLC

  did not exercise ownership and control over the LLC it managed

  under contract); see also United States v. Friedland, 173 F. Supp.

  2d 1077, 1092 (D. Colo. 2001) (overlapping directors and officers is

  insufficient to warrant piercing the veil); Sumner Realty Co. v.

  Willcott, 499 N.E.2d 554, 557 (Ill. App. Ct. 1986) (“The separate

  corporate entities of two corporations may not be disregarded

  merely because one owns the stock of the other or because the two

  share common officers . . . .”). While common officers and directors

  may be a prerequisite to piercing the corporate veil, commonality of

  officers and directors is a regular business practice that exists in

  most parent-subsidiary relationships. Judson Atkinson Candies,

  Inc. v. Latini-Hohberger Dhimantec, 529 F.3d 371, 381 (7th Cir.

  2008).


                                    25
¶ 49    Because the record lacks any evidence to show that RGI is the

  alter ego of the five common owners, that the five common owners

  are the alter ego of Intellitec, or that Intellitec and PPA are alter egos

  of each other, the trial court erred by piercing the veils of RGI and

  PPA to find they are alter egos. Accordingly, we reverse the

  judgment.

       IV.   Perpetrate a Fraud or Defeat a Rightful Claim Analysis

¶ 50    Even if RGI and PPA are alter egos, we would nevertheless

  conclude that insufficient evidence supports the court’s finding that

  PPA was formed to defeat Mr. Dill’s rightful claim.

¶ 51    “The mere fact that corporate creditors would go unsatisfied

  because they cannot reach a shareholder’s personal assets does

  not, alone, justify piercing the corporate veil.” McCallum Family

  L.L.C., 221 P.3d at 78. Nor is piercing the corporate veil justified

  “simply because a parent company receives a financial benefit from

  its subsidiaries.” Griffith, ¶ 15. As one leading treatise on the law

  of corporations summarizes, “[a]lthough wrongdoing by a parent

  corporation need not amount to plain fraud or illegality, the injured

  party must show some connection between its injury and the

  parent’s improper manner of doing business.” 1 Fletcher Cyclopedia


                                     26
  of the Law of Corporations § 43, Westlaw (database updated Sept.

  2019); see also McCallum Family L.L.C., 221 P.3d at 78 (“[T]he

  creditor seeking to pierce the veil must show an effect on its lawful

  rights as a creditor resulting from abuse of the corporate form.”);

  Guptill Holding Corp. v. State, 307 N.Y.S.2d 970, 973 (App. Div.

  1970) (using “control to commit the wrong complained of . . . and

  . . . an injury proximately caused by said wrong” are required to

  pierce the corporate veil); Krendl & Krendl, 55 Denv. L.J. at 27-28

  (“[T]here must be some reasonable relationship between the injury

  suffered by the plaintiff and the actions of the defendant. . . . [N]o

  plaintiff may avoid corporate limited liability unless he can prove

  injury resulting from misuse of the corporation . . . .”). “Thus, a

  party seeking to pierce the corporate veil must show that the

  financial setup of the corporation is a sham and causes an

  injustice.” Scott v. AZL Res., Inc., 753 P.2d 897, 901 (N.M. 1988).

¶ 52   We begin by noting that RMMF assigned its note and its rights

  under the IC agreement to PPA in April 2012. Although Mr. Dill

  complains that he was unaware of this assignment, he

  acknowledges that he was not entitled to notice of the assignment

  under the IC agreement, nor has he articulated any harm resulting


                                     27
  from PPA’s acquisition of the RMMF note. Moreover, he points to no

  evidence to indicate that this transaction was anything other than a

  lawful business transaction. And nothing in the record shows that

  the assignment was intended to defeat Mr. Dill’s claim against RGI

  on the Dill notes.

¶ 53   The record, additionally, shows that, following this

  assignment, RGI continued to pay both PPA and Mr. Dill. Indeed,

  the court construed the continuing payments to Mr. Dill as evidence

  that neither RGI nor PPA had engaged in fraud or wrongdoing. And

  even when RGI defaulted on its payments to PPA in 2012, PPA

  allowed RGI to continue paying Mr. Dill until 2015, rather than

  immediately issuing a blockage notice under the IC agreement that

  would have ceased payments to him. It also allowed RGI to reduce

  its total indebtedness, a benefit to both creditors. Cf. McCallum

  Family L.L.C., 221 P.3d at 79 (concluding the corporate form

  defeated a rightful claim where evidence showed the defendant left

  no funds in the corporation to satisfy the debt owed to plaintiff and

  demonstrated that profits should have been applied to business

  operations but were instead out of plaintiff’s reach).




                                    28
¶ 54    The trial court relied primarily on the fact that the five

  common owners own Intellitec and 81.25 percent of RGI, and on its

  conclusion that Intellitec formed PPA to defeat Mr. Dill’s rightful

  claim to repayment of the Dill notes. But it never explained how

  this corporate structure defeated Mr. Dill’s claim or harmed him,

  nor did it cite to any evidence that PPA was formed to avoid

  creditors. As previously noted, commonality of ownership, without

  more, is insufficient to pierce the corporate veil. See id. at 75.

¶ 55    None of the parties assert that it would have been improper for

  a third party that did not have common owners with RGI to have

  purchased the note from RMMF and to have taken actions identical

  to those taken by PPA. To the contrary, the court acknowledged in

  its order denying the preliminary injunction that “if [RMMF] were

  still the senior creditor, or if persons unrelated to RGI received the

  assignment, this litigation would not exist.” However, the harm (or

  lack thereof) in the trial court’s scenario is no different than that

  which exists here. Absent some evidence showing that transferring

  the RMMF note to PPA harmed Mr. Dill, Mr. Dill cannot show that

  the corporate fiction was used to a defeat a rightful claim. See id. at

  78.


                                     29
¶ 56   Moreover, the record contains no evidence that RGI’s and

  PPA’s conduct contravened the IC agreement. The trial court

  acknowledged that, although the ownership structure between RGI

  and PPA could facilitate misuse, PPA’s issuance of the payment

  blockage notice was consistent with the IC agreement, which Mr.

  Dill had negotiated and signed with the assistance of counsel in

  2000. And that agreement permitted RMMF to freely assign its note

  and to transfer senior creditor status to a third party, including the

  right to issue payment blockage notices and to bar Mr. Dill from

  bringing an action to collect his debt until the senior creditor’s debt

  was satisfied. Mr. Dill reaffirmed these terms when he settled RGI’s

  first default, and he testified that he understood the IC agreement’s

  terms.

¶ 57   The trial court never found that PPA breached the IC

  agreement, and the record shows that Mr. Dill actually benefited

  from PPA’s flexible conduct — namely, through PPA’s decision not

  to issue a payment blockage notice in 2012 — because it enabled

  Mr. Dill to receive payments from RGI between 2012 and 2015 in

  excess of $1 million. Far from defeating a rightful claim, PPA’s

  conduct enabled RGI to continue paying Mr. Dill.


                                    30
¶ 58   Consequently, in the absence of evidence that PPA’s purchase

  of the RMMF note harmed Mr. Dill, we conclude that the record

  does not support the court’s finding that PPA was formed to defeat a

  rightful claim.

                       V.    Remaining Contentions

¶ 59   Because we reverse the court’s alter ego and rightful claim

  findings, we need not address RGI’s or PPA’s remaining contentions

  about the admissibility of the Dill notes or about the scope and

  application of section 7-80-107(1), C.R.S. 2019. We also need not

  address RGI’s contention that the trial court erred by entering

  judgment in favor of Mrs. Dill on the breach of the Dill notes and

  breach of stock pledge agreement claims, because Mrs. Dill was not

  a party to either.

                       VI.   Appellate Attorney Fees

¶ 60   RGI and PPA request appellate attorney fees and costs, as the

  prevailing parties, pursuant to section 17 of the IC agreement and

  C.A.R. 39.1. As relevant here, the IC agreement provides as follows:

             Costs and Attorney Fees. If there is any claim
             or controversy litigated in any lawsuit between
             any of the parties hereto in connection with
             [the IC agreement], the prevailing parties in the
             lawsuit shall be entitled to recover from the


                                    31
            other parties their reasonable costs and
            attorneys’ fees.

¶ 61   Because we reverse the judgment, we conclude that RGI and

  PPA are the prevailing parties under section 17 and award them

  reasonable fees and costs under C.A.R. 39.1. Accordingly, we

  remand the case to the trial court to determine and award

  reasonable appellate attorney fees and costs.

                           VII. Conclusion

¶ 62   The judgment is reversed, and the case is remanded for entry

  of judgment in favor of RGI and PPA and the computation and

  award of reasonable attorney fees and costs.

       JUDGE RICHMAN and JUDGE GROVE concur.




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