Colorado’s appellate courts have created unnecessary confusion concerning the burden of proof when a litigant seeks to pierce the corporate veil.
In 1972, the legislature enacted § 13-25-127, C.R.S., which provides, “(1) Any provision of the law to the contrary notwithstanding and except as provided in subsection (2) of this section, the burden of proof in any civil action shall be by a preponderance of the evidence. The provisions of this subsection (1) shall not apply to the burden of proof required in determining the validity of any legislative enactment.”
In Phillips, 139 P.3d 639 (Colo. 2006), the court held, “A claimant seeking to pierce the corporate veil must make a clear and convincing showing that each consideration has been met.” Citing, Contractors Heating & Supply Co., 432 P.2d 237 (1967). The Phillips court did not discuss § 13-25-127, C.R.S.
In McCallum Family L.L.C. v. Winger, 221 P.3d 69 (Colo. App. 2009), the court of appeals held that the holding in Phillips concerning the burden of proof was “dictum.” Citing § 13-25-127(1), C.R.S., the court of Appeals held that the burden of proof on one seeking to pierce the corporate veil is by a preponderance of the evidence.
In Swinerton Builders v. Nassi, 272 P.3d 1174 (Colo. App. 2012), the court of appeals, citing Phillips, held that the burden of proof is by clear and convincing evidence. The Swinerton decision did not mention the McCallum case.
In Griffith v. SSC Pueblo Belmont Operating Company LLC, 381 P.3d 308 (Colo. 2016), the supreme court concluded Phillips was dictum, and held that the burden of proof is by a preponderance of evidence.
But, then, in Stockdale v. Ellsworth, 2017, 407 P.3d 571 (Colo. 2017), citing Phillips, the Colorado Supreme Court ruled that the burden of proof is by clear and convincing evidence. The Stockdale opinion made no mention of § 13-25-127(1), C.R.S.
Most recently, in Sedgwick Properties Development Corporation v. Hinds, 456 P.3d 64 (Colo. App. 2019), certiorari denied, 2020 WL 301645, the Court of Appeals concluded the holding in Stockdale was dictum, and held that the burden of proof for establishing a claim to pierce the corporate veil is by a preponderance of the evidence.
A creative lawyer might argue that § 13-25-127(1), C.R.S. does not apply to veil piercing claims because piercing the corporate veil is an equitable remedy rather than a claim for relief. Great Neck Plaza, L.P. v. Le Peep Restaurants, LLC, 37 P.3d 485 (Colo. App. 2001); Equinox Enterprises, Inc. v. Associated Media Inc., 730 SW2d 872 (Tex. App. 1987). However, § 13-25-127(1) makes no mention of “claims for relief.” Moreover, at least one decision has held the statute also applies to motions. In re Marriage of Durie, 456 P.3d 463 (Colo. 2020).
The better view is that the burden of proof on one seeking to pierce the corporate veil is by a preponderance of the evidence. The statute is clear and contains only one exception. In statutory construction, the expression of one thing is the exclusion of another. Garman v. Conoco, Inc., 886 P.2d 652 (Colo. 1994). As the legislature chose to create only one exception, there are no other exceptions to the general rule.
