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Starting almost immediately after its execution, petitioner
vigorously challenged the validity of the Guaranty.
Respondent also attempts to demonstrate that the funds in
the ANB accounts were used to satisfy petitioner’s personal
liabilities, and therefore remained under his personal dominion
and control, by emphasizing that Northwest had asserted claims of
fraudulent conversion and unjust enrichment against petitioner
personally. Since Northwest had asserted claims against
petitioner personally, respondent’s argument goes, use of the
funds in the custodial accounts to settle the Northwest
litigation satisfied petitioner’s personal liabilities.
Respondent in effect attempts to negate any significance of the
transfer of the funds to custodial control by arguing that
petitioner incurred personal liability by virtue of taking funds
from his corporation that were owed to the corporation’s
creditor, so that when the funds were paid over to the creditor,
the liabilities extinguished were those of petitioner rather than
the corporation. In the circumstances of this case, we think the
argument is specious. Any controlling shareholder who takes
funds from his corporation when it is insolvent will likely have
exposure to a claim of fraudulent conversion, unjust enrichment,
or similar charges from the corporation’s creditors. If, as
respondent argues, this factor means that the return of funds to
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