Smith v. KelleyAnnotate this Case
In this case involving a final judgment entered against a professional corporation for the fraudulent activity of one of its associates, the Supreme Judicial Court held that, in the unique circumstances of this case, Plaintiff, who was defrauded by the associate, may pursue successor liability against the sole proprietorship of Defendant, the sole shareholder and officer of the professional corporation.
Plaintiff was defrauded by the corporation's associate in a mortgage scam. Defendant was the sole shareholder and officer of the corporation, RKelley-Law, P.C. (the P.C.). After the entry of final judgment against the P.C. Defendant voted to wind up the corporation and, that same day, began operating his law practice as a sole proprietorship. Thereafter, the P.C. was placed into bankruptcy proceedings. Because the P.C. had no assets, Plaintiff sought to recover from Defendant personally. The district court granted summary judgment in favor of Defendant, concluding that the doctrine of successor liability could not be applied where the successor in interest was a natural person rather than a corporate entity. The court of appeals affirmed. The Supreme Judicial Court reversed, holding that because Defendant's sole proprietorship was a mere continuation of the former professional corporation Plaintiff may pursue successor liability against the proprietorship.