Bakke v. D & A Landscaping Co.

Decision Date16 August 2012
Docket NumberNo. 20110308.,20110308.
Citation820 N.W.2d 357,2012 ND 170
CourtNorth Dakota Supreme Court
PartiesRandall BAKKE and Shannon Bakke, Plaintiffs and Appellees v. D & A LANDSCAPING COMPANY, LLC, Rocks and Blocks, Inc., Andy Thomas, a/k/a Andrew Thomas, Rocks & Blocks Landscaping & Contracting, LLC, Defendants and Appellants.

OPINION TEXT STARTS HERE

Shawn Arlin Grinolds, Bismarck, ND, for plaintiffs and appellees.

William J. Delmore, Mandan, ND, for defendants and appellants.

CROTHERS, Justice.

[¶ 1] Andrew Thomas appeals the district court's judgment entered after a jury awarded Randall and Shannon Bakke $25,000 plus interest for breach of contract, negligence and fraud. Thomas argues insufficient evidence existed to pierce the corporate veil of D & A Landscaping Company, LLC and hold him personally liable for breach of contract and fraud. Thomas also claims that the district court committed plain error by failing to properly instruct the jury on the burden of proving fraud and that insufficient evidence existed to support the fraud verdict. We affirm, concluding the corporate veil was not pierced and the jury instruction on the burden of proof for fraud was law of the case.

I

[¶ 2] In 2006, the Bakkes considered expanding an elevated patio and replacing a boulder retaining wall that was part of the elevated patio. The Bakkes had experienced problems with sand and other materials passing through the boulder retaining wall and wanted a more permanent and less porous wall. The Bakkes visited the Bismarck landscape supply company Rocks and Blocks, Inc. Rocks and Blocks, Inc. recommended using particular building materials and employing Andrew Thomas of D & A Landscaping for project construction.

[¶ 3] The Rocks and Blocks' salesperson gave the Bakkes Thomas' business card containing the words “D & A Landscaping,” “Your front to back landscaping company,” the name Andy Thomas along with a telephone number, the email address “andy@ dalandscaping. com” and a website address “www. dalandscaping. com.”

[¶ 4] On August 24, 2006, Thomas provided the Bakkes with an initial estimate and a drawing for expanding the elevated patio, labor and specified materials. The proposal was [r]espectfully submitted D & A Landscaping 426–4982 Per Andy Thomas.” On March 22, 2008, the Bakkes received a second proposal submitted by “D & A Landscaping Per Andy Thomas.” The Bakkes accepted the March 22, 2008 Proposal on March 26, 2008.

[¶ 5] During the summer and fall of 2008, Thomas installed the retaining wall and paver patio and completed other landscaping at the Bakkes' home. The Bakkes claim they first learned D & A Landscaping was a legal entity when they received a July 15, 2008 invoice directing payment to “D & A Landscaping, Inc. After the fact, the Bakkes learned D & A Landscaping Company, LLC (a limited liability company and not a corporation) was formed in 2005 and dissolved in 2008.

[¶ 6] The Bakkes were not satisfied with the quality of the work on their patio and wall. On August 31, 2010, the Bakkes sued D & A Landscaping Company, LLC; Rocks and Blocks, Inc.; Andrew Thomas; and Rocks & Blocks Landscaping & Contracting, LLC for fraud, deceit, breach of contract and negligence. On September 3, 2010, D & A Landscaping Company, LLC and Thomas answered. Rocks and Blocks, Inc. and Rocks & Blocks Landscaping & Contracting, LLC did not respond to the complaint. On December 15, 2010, the Bakkes moved for default judgment against Rocks & Blocks Landscaping & Contracting, LLC. On January 18, 2011, Rocks & Blocks Landscaping & Contracting, LLC resisted the motion and answered the Bakkes' complaint. On January 24, 2011, the district court denied the Bakkes' motion for default judgment against Rocks & Blocks Landscaping & Contracting, LLC. On February 10, 2011, the Bakkes moved for default judgment against Rocks and Blocks, Inc. On February 28, 2011, D & A Landscaping Company, LLC; Thomas; and Rocks & Blocks Landscaping & Contracting, LLC responded that they did not oppose the motion but contended that Rocks and Blocks, Inc. was not a predecessor entity to Rocks & Blocks Landscaping & Contracting, LLC. On April 15, 2011, the district court entered default judgment against Rocks and Blocks, Inc. for $24,427.50 plus interest.

[¶ 7] On June 19–22, 2011, the district court held a jury trial. The jury found that neither D & A Landscaping Company, LLC nor Rocks and Blocks, Inc. was liable for damages to the Bakkes. The jury found Thomas was liable for breach of contract, negligence and fraud. The jury awarded the Bakkes $25,000 plus interest. The verdict form also contains a notation, apparently in the district judge's handwriting, that “Jury was polled. The defendant who committed fraud was Andrew Thomas.” Amended judgment was entered on August 10, 2011, and D & A Landscaping Company, LLC and Thomas timely appealed.

II
A

[¶ 8] Thomas argues insufficient facts exist to pierce the corporate veil of D & A Landscaping Company, LLC and hold Thomas personally liable. The Bakkes respond that the theory of piercing the limited liability company's veil does not apply because the jury determined Thomas was personally liable for transacting business in his individual capacity.

[¶ 9] A member or owner of a limited liability company generally is not liable for the debts of the limited liability company. N.D.C.C. § 10–32–29(1). “A member or owner of a limited liability company will be personally responsible, however, if the conditions and circumstances under which the corporate veil of a corporation may be pierced under North Dakota law are present.” Intercept Corp. v. Calima Fin., LLC, 2007 ND 180, ¶ 14, 741 N.W.2d 209 (citing N.D.C.C. § 10–32–29(3)).

[¶ 10] Here, the jury found D & A Landscaping Company, LLC did not breach its contract with the Bakkes, was not negligent and did not commit fraud. The precursor to piercing a legal entity's veil to impose liability on the owner is entity liability. See Pharmacia Corp. v. Motor Carrier Services Corp., Civ. No. 04–3724(GEB), 2006 WL 3533881, at *15 n. 10 (D.N.J. Dec. 7, 2006) ([b]efore invoking the doctrine [of veil-piercing,] a plaintiff must first establish an independent basis to hold the corporation liable”) (quotation omitted); City of Toledo v. Allen, No. L–04–1237, 2005 WL 859446, at *7 (Ohio App. 6 Dist. April 15, 2005) (A corporation's limited liability shield cannot be disregarded in order to find the shareholders liable if the corporation is not liable in the first instance[.] ). Because the jury found the limited liability company was not liable to the Bakkes for damages, the entity's liability was not transferred to the owner and the theory of veil piercing cannot apply.

[¶ 11] Rather than piercing the LLC's veil, liability was directly imposed on Thomas. The Bakkes' theory of Thomas' liability was that he acted individually and that Thomas never disclosed he was acting as an agent for D & A Landscaping Company, LLC. The jury was instructed without objection that [i]t is presumed that people act for themselves and not as agents.” A special verdict form also was used without objection and required the jury to find whether Andrew Thomas breached his contract” and whether Andrew Thomas was at fault.”

[¶ 12] Evidence supports the jury's finding Thomas was individually liable. That evidence included a business card, an estimate, a drawing and proposals, none of which indicated that D & A Landscaping Company, LLC was a limited liability company or that Thomas was acting as an agent for the company. The jury found that Thomas breached his contract with the Bakkes, that Thomas was at fault for negligence and that Thomas committed fraud on the Bakkes. These findings of Thomas' individual liability, coupled with D & A Landscaping Company, LLC being found not liable, inescapably lead to the conclusion D & A Landscaping Company, LLC's liability was not imposed on Thomas. Because the limited liability company's liability was not imposed on Thomas, Thomas' veil piercing argument fails and additional consideration whether evidence supported veil piercing is unnecessary.

B

[¶ 13] Thomas argues the district court judgment should be reversed because the jury was not instructed on the correct burden of proof for fraud. Fraud must be proved by clear and convincing evidence. American Bank Center v. Wiest, 2010 ND 251, ¶ 12, 793 N.W.2d 172 (“Fraud must be proven by clear and convincing evidence, and the party asserting fraud has the burden of establishing the elements of fraud.”) (citing Citizens State Bank–Midwest v. Symington, 2010 ND 56, ¶ 21, 780 N.W.2d 676;Erickson v. Brown, 2008 ND 57, ¶ 26, 747 N.W.2d 34;First Union Nat'l Bank v. RPB 2, LLC, 2004 ND 29, ¶ 22, 674 N.W.2d 1). In this case, the jury received an instruction stating, “The essential elements of a claim or an affirmative defense must be proven by the greater weight of the evidence.” The jury did not receive an instruction that fraud must be proved by clear and convincing evidence.

[¶ 14] Under N.D.R.Civ.P. 51(c)(1), [a] party who objects to a proposed [jury] instruction or the failure to give an instruction must do so on the record, stating distinctly the matter objected to and the grounds of the objection.” Generally, a party failing to object to the giving or the failure to give an instruction after having adequate time to take exceptions waives the objection, and the instructions become the law of the case. Wilson v. Gen. Motors Corp., 311 N.W.2d 10, 14 (N.D.1981). When no objection is made, [a] court may consider a plain error in the instructions affecting substantial rights that has not been preserved as required by Rule 51(d)(1).” N.D.R.Civ.P. 51(d)(2). Rule 51 was amended on March 1, 2005 by adding subsection (d)(2) regarding plain error. N.D.R.Civ.P. 51 Explanatory Note. North Dakota's changes to Rule 51(d) followed similar modifications to Federal Civil Rule 51 in December of 2003.

[¶ 15] This Court has not applied or discussed application of N.D.R.Civ.P....

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