Arts Rental Equipment, Inc. v. Bear Creek Construction, LLC
| Decision Date | 23 February 2012 |
| Docket Number | A0902785 |
| Parties | ARTS RENTAL EQUIPMENT, INC., Plaintiff, v. BEAR CREEK CONSTRUCTION, LLC, et al., Defendants. |
| Court | Ohio Court of Common Pleas |
DECISION
This case is before the Court on Defendants Bruce Baker, Nathan Bachrach, Daniel Lipson and Thomas Zemboch's ("the non-Schneider Guarantors") Motion for Summary Judgment against the Kraft Group's and Smith and Jolly's claims. For the reasons discussed below, the motion is granted in part and denied in part.
Summary judgment is appropriate when there are no genuine issues of material fact that remain to be litigated and the moving party is entitled to judgment as a matter of law. Civ. R. 56(C); Celotex Corp. v. Catrett (1986), 477 U.S. 317. Summary judgment should be granted if the pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence in the pending case, if any, timely filed in the action and construed most strongly in favor of the non-moving party, show that there is no genuine issue as to any material fact. Civ. R. 56(C). The burden of establishing that the material facts are not in dispute, and that no genuine issue of fact exists, is on the party moving for summary judgment. Vahila v. Hall (1997), 77 Ohio St.3d 421, 674 N.E.2d 1164. If the moving party asserts that there is an absence of evidence to establish an essential element of the non-moving party's claim, the moving party cannot discharge this burden with a conclusory allegation, but must specifically point to some part of the record which affirmatively demonstrates this absence of evidence., Dresher v. Burt (1996), 75 Ohio St.3d 280, 662 N.E.2d 264.
The Ohio Supreme Court has established three factors to be considered upon a motion for summary judgment. These three factors are:
(1) That there is no genuine issue as to any material fact; (2) that the moving party is entitled to judgment as a matter of law; and (3) that reasonable minds can come to but one conclusion, and that the conclusion is adverse to the party against whom the motion for summary judgment is made, who is entitled to have the evidence construed most strongly in his favor.
Bostic v. Connor (1988), 37 Ohio St.3d 144, 146 N.E.2d 881 (quoting Harless v. Willis Day Warehousing Co. (1978), 54 Ohio St.2d 64, 375 N.E.2d 46).
Once a motion for summary judgment has been made and supported as provided in Civ, R. 56(C), the nonmoving party then has a reciprocal burden to set forth specific evidentiary facts showing the existence of a genuine issue for trial and cannot rest on the allegations or denials in the pleadings. Wing v. Anchor Media, Ltd. Of Texas (1991), 59 Ohio St.3d 108, 111, 570 N.E.2d 1095.
This motion raises similar issues to Schneider's Motion for Summary Judgment. In fact, the Kraft Group filed a combined brief in opposition to both.
At the oral argument, the Kraft Group indicated it was not pursuing fraud, misrepresentation or civil conspiracy claims against the Guarantors. Additionally, for the reasons stated in the Court's decision as to Schneider, judgment is entered in favor of the non-Schneider Guarantors on these claims.
The Court addresses the remaining claims below.
Construing the evidence most strongly in favor of the Kraft Group, they cannot show they conferred a benefit directly upon the non-Schneider Guarantors. Rather, any benefit was to the property owner - KTP. The Court finds that the Kraft Group may be able to establish an unjust enrichment claim against KTP. (See discussion in Schneider opinion) The question is whether they can "pierce the corporate veil" to get to the non-Schneider Guarantors.
Because the Court finds that Kraft cannot as a matter of law succeed on the alter ego/piercing corporate veil claim against the non-Schneider Guarantors (see discussion below), they cannot succeed on their unjust enrichment claim. Thus, summary judgment is granted as to this claim.
The parties agree on the legal test for personal liability.
Tenable Protective Servs., Inc. v. Bit E-Technologies, L.L.C. (Ohio Ct. App. 8th Dist. Aug. 21, 2008), Case No. 89958, 2008-Ohio-4233, at ¶ 15 (emphasis added) ( claims including misrepresentation and fraud against the company's members and senior managers in their individual capacities); see also In Re ICLNDS Notes Acquisition, LLC, 259 B.R. 289 (Bankr.N.D.Ohio 2001). "The debts, obligations, and liabilities of a limited liability company, whether arising in contract, tort, or otherwise, are solely the debts, obligations, and liabilities of the limited liability company." Tenable Protective Servs., Inc., at ¶ 23 (emphasis added).
The Subcontractors can only reach Schneider, individually (or reach SFP and DOV), if they can demonstrate their conduct warrants piercing KTP's limited liability form. To pierce the corporate veil and hold an individual officer or shareholder of a corporation liable, a plaintiff must prove the following: (i) control over the corporation by those to be held liable was so complete that the corporation has no separate mind, will or existence of its own; (ii) control over the corporation by those to be held liable was exercised in such a manner as to commit fraud, an illegal act, or some similarly unlawful act against the person seeking to disregard the corporate entity; and (3) injury or unjust loss resulted to the plaintiff from such control and wrong. Dombroski v. Wellpoint, Inc. (2008), 119 Ohio St.3d 506, 510-11, 513. The burden rests with the "party seeking to impose individual liability on the shareholder to demonstrate that the grounds for piercing the corporate veil exist." Univ. Circle Research Ctr. Corp. v. Galbreath Company (Ohio Ct. App. 8 Dist. 1995), 106 Ohio App.3d 835, 840.
To demonstrate improper control over a corporation, a plaintiff must show that the defendant and the company "are fundamentally indistinguishable" and that the company "had no separate mind, will or existence of its own." Univ. Circle Research Center Corp., 106 Ohio App.3d at 840. Ohio courts have used the following factors in making this determination:
(1) grossly inadequate capitalization, (2) failure to observe corporate formalities, (3) insolvency of the debtor corporation at the time the debt is incurred, (4) shareholders holding themselves out as personally liable for certain corporate obligations. (5) diversion of funds or other property of the company property for personal use, (6) absence of corporate records, and (7) the fact that the corporation was a mere facade for the operations of the dominant shareholder(s).
LeRoux's Billyh Supper Club v. Ma (Ohio Ct. App. 6th Dist. 1991), 77 Ohio App.3d 417, 422- 23. ''Undercapitalization is just one of the factors that a court can consider in deciding whether the corporate fiction should be disregarded." Dombroski v. Wellpoint, Inc. (Ohio Ct. App. 7 Dist. 2007), 173 Ohio App.3d 508, 518, rev 'd, 119 Ohio St.3d 506 (2008); see also Southeast Texas Inns, Inc. v. Prime Hospitality Corp. (6th Cir. 2006), 462 F.3d 666, 680 ().
Unlike the case against Schneider, Kraft cannot establish that the non-Schneider Guarantors were the alter ego of KTP or that the corporate veil should be pierced. These non-Schneider Guarantors were passive investors, with no responsibility legally or factually for the operations of KTP. Thus, summary judgment is granted as to this claim.
The Court went through an extensive analysis of the Fraudulent Transfer Claim in its opinion as to Schneider's Motion for Summary Judgment. The Court attaches that opinion and incorporates it by reference.
For the reasons discussed, questions of fact remain as to whether KTP fraudulently transferred assets to the non-Schneider Guarantors. Thus, the motion for summary judgment is denied as to this claim.
The non-Schneider Guarantor's Motion for Summary Judgment is granted as to the unjust enrichment and piercing corporate veil claims of the Kraft Group and Smith and Jolly. It is denied as to the fraudulent transfer claims.
The parties are referred to Local Rule 17 for preparation of an entry.
This case is before the Court on the Schneider Defendants' Motion for Summary Judgment as to the cross claims of the Kraft Group and Smith & Jolly Landscape & Design. For the reasons discussed below, the Motion is granted in part and denied in part.
Summary judgment is appropriate when there are no genuine issues of material fact that remain to be litigated and the moving party is entitled to judgment as a matter of law. Civ. R. 56(C); Celotex Corp. v. Catrett (1986), 477 U.S. 317. Summary judgment should be granted if the pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence in the pending case, if any, timely filed in the action and construed most strongly in favor of the non-moving party, show that there is no genuine issue as to any material fact. Civ. R. 56(C). The burden of establishing that the material facts are not in dispute, and that no genuine issue of fact exists, is on the party moving for summary judgment. Vahila...
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