Axtmann v. Chillemi

• Decision Date: 14 November 2007
• Docket Number: No. 20070006.,20070006.
• Citation: 740 N.W.2d 838,2007 ND 179
• Parties: Thomas P. AXTMANN and Arel E. Axtmann, Plaintiffs and Appellees v. Geri CHILLEMI, Michael Jon Natwick, Mainland, Inc., a North Dakota corporation, Main Realty, Inc. d/b/a Main and Company Realtors, a North Dakota corporation, and Mainland Ventures Unlimited, a North Dakota General Partnership, Defendants and Appellants.
• Court: North Dakota Supreme Court

740 N.W.2d 838

2007 ND 179

Thomas P. AXTMANN and Arel E. Axtmann, Plaintiffs and Appellees v. Geri CHILLEMI, Michael Jon Natwick, Mainland, Inc., a North Dakota corporation, Main Realty, Inc. d/b/a Main and Company Realtors, a North Dakota corporation, and Mainland Ventures Unlimited, a North Dakota General Partnership, Defendants and Appellants.

No. 20070006.

Supreme Court of North Dakota.

November 14, 2007.

David D. Schweigert (argued), and Karen L. McBride (on brief), Bucklin, Klemin & McBride, Bismarck, ND, for plaintiffs and appellees.

Todd D. Kranda (argued), Arlen M. Ruff (on brief), and Daniel J. Nagle (on brief), Kelsch, Kelsch, Ruff & Kranda, Mandan, ND, for defendants and appellants.

VANDE WALLE, Chief Justice.

[¶ 1] Geri Chillemi, Michael Jon Natwick, Main Realty, Inc., and Mainland, Inc. (collectively referred to as "appellants") appealed from a district court judgment piercing the corporate veil of Main Realty, holding Chillemi, Natwick, and Mainland jointly and severally liable for a judgment against Main Realty, and voiding the assignments of real estate listings from Main Realty to Mainland. We affirm the part of the judgment piercing the corporate veil of Main Realty and reverse the part of the judgment imposing liability on Mainland.

I

[¶ 2] According to Chillemi, she and another individual incorporated Main Realty in 1985 to purchase the trade name Main and Company Realtors and "everything that was in it" for $20,000. Chillemi testified Main Realty was "established to put agents on as independent contractors to list and sell real estate," and since 1985, the number of agents working at Main Realty varied from three to fifteen. At the times relevant to this action, Chillemi was the sole shareholder, president, and treasurer of Main Realty, and Natwick was the vice president and secretary of Main Realty. Chillemi and Natwick resided with each other and are partners in Mainland Ventures Unlimited, a partnership that owns commercial property and leased office space to Main Realty.

[¶ 3] Main Realty's office policies identified Chillemi as the designated broker at Main Realty and required all associates to sign a contract with Chillemi to establish independent contractor status. Main Realty's office policies also provided:

3. GOAL: The goal of Main and Company, Realtors is to provide a good working atmosphere for Realtors who work here, and to provide a tool for the Realtors to earn 100% commissions at least cost to the Realtor.

....

7. COMMISSIONS: Any new agent at Main and Company, Realtors can opt to sign a contract to receive 100% earned commissions or 70% of earned commissions. All sales agents agree to comply with the contract provisions that they sign. If an agent opts to go on a 70% commission contract, they can stay on this contract until the company debt exceeds $5,000.00. At that time, the sales agent must either go on a 50%/50% split or transfer to another Company. If an agent opts to go on the 100% commission contract, their bill must be paid in full by the 10th of the month. There will be a $10.00 per day late fee after the 10th of the month. If the bill is not paid by the 10th of the month, the full bill plus late fees will be taken from their closings until it is paid in full. If the agent's pended closing commissions are not enough money to cover the bill and late fees, the agent can stay at Main and Company REALTORS on a 50/50 commission split, where agent will be entitled to only 50% of the commission. The 50% paid to the company will NOT be applied to the agent[']s bill. The bill plus late fees must be paid in full out of agent's share of commissions prior to again receiving 100% commissions.

8. EXPENSES: All Realtors on a 100% contract will be required to pay the following: Desk fee, all MLS dues, books, and listing fees, all advertising expenses, all their own promotional advertising, all individual office supplies, all business cards, stationary, envelopes, Purchase Agreements, Listing Contracts, Handy Pads, For Sale Signs, Open House Signs, Sign Installation fees, long distance phone calls, camera and film, and any other expenses incurred over and above the Company Expenses listed in paragraph 9.

9. OFFICE EXPENSES: The monthly office fee will pay for the office rent, office desk and chairs, secretary and related expenses such as FICA, Unemployment Insurance and Workmen's Compensation, telephones and local telephone service, office MLS fees, office Real Estate Commission fees. Copy machine supplies and service, Supra Locks, business liability insurance and office keys.

10. DESK FEE: The desk fee can be raised by the designated broker at Company only if office rent, secretary expenses, or another major expenditure is required by Company that benefits all Realtors at Company.

....

16. All listings belong to the listing agent. The listing agent can establish the commission he/she wishes to charge sellers and Main and Company, Realtors will not set any standard commission. Each agent must determine what they will pay to a selling agent, whether it is a seller representative or a buyer representative. Main and Company, Realtors urges all agents to get seller approval to cooperate commissions with buyer agents. Main and Company, Realtors also discourages any discrepancy in paying commissions differently between buyer and seller representatives, unless it is expressly stated that way by a seller in writing on the listing contract. As owners of your listings, you can transfer, co-list them, sell them, etc., provided that all expenses and rent at the company is paid up to date. If any charges are in arrears, no listings can be transferred either to another agent or to another Company, until payments are made current.

[¶ 4] Chillemi testified Main Realty used a "real estate salesperson contract" with its "sales agents," which said Main Realty was a duly licensed real estate brokerage firm in North Dakota; the parties agreed to comply with North Dakota laws relating to the real estate sales industry; the parties agreed the agent was an independent contractor; the agent "shall receive ONE HUNDRED PERCENT (100%) of any earned commissions, which earned commissions, upon receipt by [Main Realty], shall be paid over to Sales Agent" and "[i]n exchange for receiving these commissions, sales agent agrees to pay a monthly rent and expenses to" Main Realty; in consideration for receiving 100 percent of earned commissions, the agent agreed to pay Main Realty $600 per month in rent by the 10th of each month, which was increased to $650 per month effective May 1, 2002; the contract was month-to-month and could be terminated by Main Realty if the agent failed to pay monthly rent; and the agent automatically forfeited the 100 percent commission and immediately went to a 50 percent commission if the rent was not paid by the 10th of the month.

[¶ 5] The Axtmanns sued a Main Realty agent and Main Realty regarding the Axtmanns' purchase of a house. In May 2004, a jury decided Main Realty and the individual agent were jointly and severally liable to the Axtmanns for $75,000, plus interest, in economic damages, the individual agent was guilty of fraud and liable to the Axtmanns for $45,500 in exemplary damages, and Main Realty was guilty of fraud and liable to the Axtmanns for $19,500 in exemplary damages. A judgment was filed in that action on June 1, 2004.

[¶ 6] Meanwhile, the April 22, 2004, minutes of a special meeting of the board of directors of Main Realty, which consisted of Chillemi and Natwick, state that three agents had transferred to other companies in the last two weeks, the monthly rent generated from the remaining five agents was insufficient to cover Main Realty's cost of doing business, and it was impossible to get any new agents to transfer to Main Realty. A motion carried to dissolve Main Realty and to submit notice to its landlord, Mainland Ventures, that Main Realty would vacate the premises. Those minutes also state that Natwick would form his own company and transfer his real estate license to that company. Main Realty accepted Natwick's resignation as vice president and secretary and Chillemi filled those vacancies until the corporation was dissolved.

[¶ 7] On May 19, 2004, Natwick incorporated Mainland, Inc. In documents dated between May 21, 2004, and June 1, 2004, Chillemi, as president of Main Realty, signed several "assignment[s] of contract" for listing contracts for agents affiliated with Main Realty, in which Main Realty agreed to relinquish to Mainland all claims for any commissions for the sale of the real estate covered by those listings. The assignments said all commissions would be paid to Mainland at closing and Mainland would be responsible for the listing contract and all aspects of the transaction. Natwick signed the assignments as president of Mainland. According to both Natwick and Chillemi, Mainland did not pay Main Realty any consideration for the assignments of those listings and Chillemi subsequently began working as an agent and independent contractor for Mainland.

[¶ 8] On May 28, 2004, Chillemi closed Main Realty's bank account. According to Chillemi, she received $150.52 when she closed the account and she used that money to pay Main Realty's May phone bill, which was "around [$]400." On June 2, 2004, Chillemi signed a statement of intent to dissolve Main Realty, and the North Dakota Secretary of State subsequently issued a letter involuntarily dissolving Main Realty for failing to file an annual report.

[¶ 9] The Axtmanns subsequently levied on Main Realty's property and obtained $7.52 from a sheriff's sale of office equipment to apply to their judgment against Main Realty. The Axtmanns then sued Chillemi, Natwick, Mainland, Main Realty, and Mainland Ventures, alleging that after the Axtmanns obtained their judgment in the prior action, Chillemi dissolved Main Realty and Natwick incorporated Mainland and that the listing...