Wandering Trails, LLC v. Big Bite Excavation, Inc.

• Decision Date: 18 June 2014
• Docket Number: No. 40124.,40124.
• Citation: 156 Idaho 586,329 P.3d 368
• Court: Idaho Supreme Court
• Parties: WANDERING TRAILS, LLC, an Idaho limited liability company, and Liquid Realty Company, an Idaho corporation, Plaintiffs–Counterdefendants–Appellants–Cross Respondents, v. BIG BITE EXCAVATION, INC., an Idaho corporation, Defendant–Respondent, and Tim and Julie Schelhorn, Defendants–Respondents–Cross Appellants, and Piper Ranch, LLC, an Idaho limited liability company, Defendant–Counterclaimant, and Does 1–5, Defendants, and Schism Ablution, LLC, Intervenor–Appellant.

156 Idaho 586

329 P.3d 368

WANDERING TRAILS, LLC, an Idaho limited liability company, and Liquid Realty Company, an Idaho corporation, Plaintiffs–Counterdefendants–Appellants–Cross Respondents,

v. BIG BITE EXCAVATION, INC., an Idaho corporation, Defendant–Respondent,andTim and Julie Schelhorn, Defendants–Respondents–Cross Appellants,andPiper Ranch, LLC, an Idaho limited liability company, Defendant–Counterclaimant,andDoes 1–5, Defendants,andSchism Ablution, LLC, Intervenor–Appellant.

No. 40124.

Supreme Court of Idaho, Boise, February 2014 Term.

June 18, 2014.

Angstman, Johnson & Associates, PLLC, Boise, attorneys for appellant. Wyatt B. Johnson argued.

Dinius Law, Nampa, attorneys for respondents. Kevin E. Dinius argued.

W. JONES, Justice.

I. NATURE OF THE CASE

Appellants, Wandering Trails, LLC ("Wandering Trails") and Liquid Realty, Inc. ("Liquid Realty") (collectively the "Plaintiffs"), appeal the district court's entry of summary judgment and denial of their veil-piercing claims against Big Bite Excavation, Inc. ("Big Bite"), Piper Ranch, LLC ("Piper Ranch"), and Tim and Julie Schelhorn in their individual capacity (the "Schelhorns") (collectively the "Defendants"). Big Bite and Piper Ranch are both wholly owned by the Schelhorns. Wandering Trails was created for the purposes of obtaining and developing certain property (the "Wandering Trails development"). Wandering Trails entered into an agreement with Piper Ranch under which Piper Ranch agreed to pave the roadways for the development in exchange for a 25% interest in Wandering Trails. Piper Ranch did not do any work on the development. Wandering Trails and Liquid Realty brought suit and alleged an alter ego claim against Big Bite, Piper Ranch, and the Schelhorns. The district court granted summary judgment to Big Bite and the Schelhorns and refused the Plaintiffs' veil-piercing claims. Wandering Trails and Liquid Realty appeal. The Schelhorns cross-appeal.

II. FACTUAL AND PROCEDURAL BACKGROUND

Wandering Trails is an Idaho company managed by Liquid Realty. Wandering Trails was created for the purposes of obtaining and developing the Wandering Trails property for residential use.

Piper Ranch is an Idaho company formed pursuant to Idaho statutes. The sole members of Piper Ranch are Tim and Julie Schelhorn. Piper Ranch properly filed Articles of Organization and Annual Reports with the Idaho Secretary of State. Piper Ranch's contact information with the Idaho Secretary of State has remained current. The Schelhorns treated Piper Ranch as a pass-through organization claiming Piper Ranch's income on their own tax returns as permitted by IRS regulations. Piper Ranch has maintained a bank account at Valley Community Credit Union as "Tim Schelhorn, Julie Schelhorn DBA Piper Ranch, LLC." The checks for this bank account only list the name "Piper Ranch, LLC."

Wandering Trails sought bids from various companies for the excavation and paving work required to create the roadways for the development. Thomas Angstman, who was the president and owner of Liquid Realty, expressed interest in obtaining the paving work for the development in exchange for an ownership interest in Wandering Trails. Angstman drafted an Assignment of Limited Liability Company Interest in Wandering Trails to Tim and Julie Schelhorn as individuals. However, the Schelhorns requested that Angstman modify the assignment to substitute their company, Piper Ranch, as the assignee rather than the Schelhorns as individuals. Angstman made the requested corrections and the assignment was executed on behalf of Liquid Realty, Piper Ranch, and Wandering Trails (hereinafter "assignment agreement").¹ THE PLAINTIFFS NOTe THat this arrangement is similar to a project known as "Circle Z," in which Piper Ranch got an ownership interest in a project for work performed by Big Bite. During the relevant time in question, the Schelhorns' capital contribution to Piper Ranch was an initial $200 in May of 2009, $2,600 in December of 2008 to cover a payment to Alpha Lending, and $150 in May of 2009 to cover bank charges. The Schelhorns also own Big Bite Excavation, Inc. Big Bite was not engaged in the business of paving streets. The Plaintiffs maintain that the Schelhorns intended to use Big Bite to perform Piper Ranch's obligations under the assignment agreement.

Relying on the assignment agreement, in September of 2008, Wandering Trails informed Alpha Lending that it would not be taking a specific loan draw for the purposes of completing road construction for the Wandering Trails development. Piper Ranch did not perform the excavation work on the Wandering Trails development.

On May 26, 2009, the Plaintiffs filed a complaint against the Defendants for breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, and promissory estoppel. It appears that the Plaintiffs' claims have been assigned to Schism Ablution, LLC.

On October 28, 2009, Big Bite and the Schelhorns filed a complaint against Angstman and Angstman & Associates asserting breach of fiduciary duty and seeking a declaratory action to avoid the assignment agreement, contribution and indemnification, and respondeat superior. These cases were consolidated.

On March 3, 2010, the Plaintiffs sought to amend their complaint to include a veil-piercing claim against Big Bite. The district court denied that motion on July 14, 2010. On July 14, 2010, the Plaintiffs amended their complaint to include veil-piercing claims against Tim and Julie Schelhorn as members of Piper Ranch. The Plaintiffs moved for clarification on July 28, 2010. The district court clarified its order on December 3, 2010, but denied reconsideration. The Schelhorns moved for summary judgment on the claim that they are the alter ego of Piper Ranch on April 1, 2011. The Plaintiffs filed a cross-motion for summary judgment on April 14, 2011. The district court denied both motions on July 13, 2011. Piper Ranch and the Schelhorns filed additional evidence and sought reconsideration on February 23, 2012. The Plaintiffs did not request reconsideration. On May 3, 2012, the district court granted Piper Ranch and the Schelhorns' motion for reconsideration. The district court entered stipulated judgments against Piper Ranch totaling $260,000 on May 22, 2012. The Plaintiffs filed a notice of appeal on June 29, 2012. The Defendants filed a notice of cross-appeal on December 19, 2012.

III. ISSUES ON APPEAL

1. Whether the district court erred when it dismissed Big Bite from this litigation.

2. Whether the district court erred when it dismissed the Schelhorns from this litigation on the basis that Piper Ranch was not the alter ego of the Schelhorns and that the Plaintiffs could not amend their complaint to include a veil-piercing claim against Big Bite.

3. Whether the district court erred when it found Big Bite a prevailing party and awarded it attorney fees and costs.

4. Whether the district court erred when it found that the Schelhorns were not prevailing parties and denied their request for attorney fees and costs.

5. Whether either party is entitled to attorney fees and costs on appeal and cross-appeal.

IV. STANDARD OF REVIEW

An appeal from summary judgment is reviewed under the same standard a district court uses when granting a motion for summary judgment. Under Rule 56(c) of the Idaho Rules of Civil Procedure, summary judgment is proper if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. If the evidence reveals no disputed issues of material fact, then summary judgment should be granted. In making this determination, all disputed facts are liberally construed in favor of the non-moving party. Circumstantial evidence can create a genuine issue of material fact. Inferences that can reasonably be made from the record are made in favor of the non-moving party. However, the non-moving party may not rest on a mere scintilla of evidence. If the record raises neither a question of witness credibility nor requires weighing the evidence, then summary judgment should be granted. The moving party is entitled to judgment when the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to that party's case.

ParkWest Homes, LLC v. Barnson, 154 Idaho 678, 682, 302 P.3d 18, 22 (2013) (internal citations and quotations omitted).

This Court's opinions have been unclear regarding whether veil-piercing claims present a question for the jury or whether they are equitable issues to be tried by the court. In Vanderford Co. Inc. v. Knudson, 144 Idaho 547, 165 P.3d 261 (2007), this Court ruled that the district court erred when it failed to give a jury instruction on the issue of alter ego. Id. at 557, 165 P.3d at 271. This Court remanded the case for a new trial on the issue of alter ego because "the requested jury instruction[ ] w[as] a correct statement of the law, supported by a reasonable view of the evidence, and not adequately covered by the other instructions." Id. But this Court concluded by holding that "[t]he alter ego issue is equitable in nature to be determined by the trial court."

Other decisions by this Court, however, indicate that the issue of alter ego and veil-piercing are properly issues to be considered by the jury. See VFP VC v. Dakota Co., 141 Idaho 326, 335, 109 P.3d 714, 723 (2005) ("We find the district court properly allowed VFP to assert its theory under piercing the corporate veil to the jury."); Maroun v. Wyreless Sys., Inc., 141 Idaho 604, 617, 114 P.3d 974, 987 (2005) (holding that a jury "could find the corporation to be the ‘alter ego’ of Tucker and TKL but also that the required level of injustice to hold them liable was not present."). There are also a number of cases where a judge has decided the alter ego issue. See Surety Life Ins. Co. v. Rose Chapel...