Hibbs v. Berger

• Decision Date: 06 May 2014
• Docket Number: No. ED 100114.,ED 100114.
• Citation: 430 S.W.3d 296
• Parties: Steve HIBBS, Appellant, v. Brian BERGER, et al., Respondents.
• Court: Missouri Court of Appeals

430 S.W.3d 296

Steve HIBBS, Appellant,

v.Brian BERGER, et al., Respondents.

No. ED 100114.

Missouri Court of Appeals,

Eastern District,

Division One.

May 6, 2014.

John Hicks, Overland Park, KS, for Appellant.

Christopher C. Swenson, Elizabeth T. Gross, St. Louis, MO, for Respondents.

ROY L. RICHTER, Presiding Judge.

Steve Hibbs(“Plaintiff”) appeals after summary judgment was entered against him, on Plaintiff's Petition against Brian Berger(“Berger”) and Wood Nuts, Inc.(“Wood Nuts”)(collectively, “Defendants”).Plaintiff's Petition requests the court to pierce the corporate veil, and declare a tortious interference with a business relationship, a civil conspiracy, and a breach of fiduciary duty in an attempt to establish the personal liability of Defendants for Tavern Creek Door Company, LLC's (“Tavern Creek”) corporate debts.For the reasons explained herein, we affirm the trial court's grant of summary judgment in favor of Defendants.

I.BACKGROUND

This is an action by a creditor of Tavern Creek to pierce the corporate veil and establish personal liability on individuals and other business entities for Tavern Creek's corporate debt.To alleviate confusion, we begin with a sketch of the individuals and business entities involved and then proceed to the facts giving rise to Plaintiff's Petition.

A.The Individuals and Business Entities

Tavern Creek is a limited liability company (“LLC”), organized by Thomas Taylor(“Taylor”) in 1999 under the laws of the State of Missouri.For the entirety of this appeal, Tavern Creek was in the business of selling windows, doors, millwork, and other products of a similar type to contractors and individuals.

Wood Nuts is a holding corporation, incorporated in 1999 under the laws of the State of Missouri.At all relevant times herein, Wood Nuts was owned by Berger and Cheryl Barr(Berger's sister), and Berger was designated as the president.

Kirkwood Stair Company(“Kirkwood Stair”)¹ is a corporation organized under the laws of the State of Missouri.At all relevant times herein, Berger was designated as the president of Kirkwood Stair.

Besides Berger being the president of both Kirkwood Stair and Wood Nuts, the three companies were involved in some business transactions or relationships: (1) Tavern Creek bought materials manufactured by Kirkwood Stair; and (2) as a holding company, Wood Nuts held interests in Kirkwood Stair, and, eventually, Tavern Creek.

B.Tavern Creek's Business History

From the date of organization until November 1, 2006, Taylor was Tavern Creek's sole member.Around January 2006, Plaintiff entered into a written employment agreement with Tavern Creek, outlining the duties and functions of Plaintiff's position as a salesperson.The employment agreement also included such things as Plaintiff's base salary, commissions, and other additional fringe benefits.

Due to the business relationship that developed between Kirkwood Stair and Tavern Creek, Taylor approached Berger to determine Berger's interest in investing in Tavern Creek.Eventually, on or about October 31, 2006, Taylor sold 50% of his interest in Tavern Creek to Wood Nuts, memorialized in a document titled Operating Agreement of Tavern Creek Door Company, LLC(“Tavern Creek Operating Agreement”).Wood Nuts purchased a 50% interest in Tavern Creek for $148,000.This purchase price was satisfied by Wood Nuts forgiving a $100,000 line of credit extended to Tavern Creek prior to this purchase, and, additionally, Wood Nuts extended a $52,000 loan to Tavern Creek, via a promissory note (which Taylor personally guaranteed), secured by a security agreement (“Security Agreement”).This Security Agreement granted Wood Nuts a security interest in all of Tavern Creek's personal property as detailed and defined within the Security Agreement.

As set forth within the Operating Agreement, both Wood Nuts and Taylor, individually, were bestowed 50% of the voting interest and 47.5% of the economic interest of Tavern Creek.Contemporaneously with Wood Nuts becoming a member of Tavern Creek, Plaintiff entered into a new employment agreement (“Employment Agreement”) with Tavern Creek, wherein Plaintiff received a 5% economic interest as a non-voting member of Tavern Creek.Thus, as of November 1, 2006, Tavern Creek consisted of three members—Wood Nuts, Taylor, and Plaintiff—with the following interests:

Tavern Creek Member

% of voting rights

% of economic interests

Wood Nuts

50%

47.5%

Taylor

50%

47.5%

Plaintiff(Hibbs)

0%

5%

Additionally, per Tavern Creek's Operating Agreement, Tavern Creek was governed by a board of two managers.Both Wood Nuts and Taylor were afforded the right to each select one manager: Wood Nuts appointed Berger as a manager, and Taylor appointed himself as a manager.Each of Tavern Creek's managers was entitled to one vote on all voting matters.

Soon after Wood Nuts appointed Berger as a manager, Kirkwood Stair was contracted to undertake Tavern Creek's office functions (e.g., handling accounts receivable, client billing, collections, creating budgets, etc.) at a cost of $2000 per month.

By as early as 2007, Tavern Creek was experiencing financial difficulties.Throughout the next two years, in an apparent attempt to mitigate Tavern Creek's financial troubles, Wood Nuts made several other loans to Tavern Creek (totaling close to $300,000), via term notes or revolving loans, all of which were included in an amended Security Agreement (for all intents and purposes, this was the same Security Agreement as referenced, supra).The loans proved fruitless, and Tavern Creek defaulted on all the aforementioned notes and loans in 2009.As a result of Tavern Creek's defaults, Taylor and Wood Nuts foreclosed on Tavern Creek's assets.

Subsequently, Wood Nuts then exercised its rights under the Security Agreement.Tavern Creek voluntarily surrendered the collateral in which Wood Nuts had a security interest under the Security Agreement.Although, Wood Nuts was owed substantially more money than the value of the surrendered collateral, Wood Nuts accepted the collateral as full satisfaction of all obligations of Tavern Creek and Taylor (“Settlement Agreement”).This all occurred prior to the Johnson County Judgment, infra, entered in Plaintiff's favor.

C.Plaintiffs business relationship with Tavern Creek, Defendants, and Taylor

Plaintiff was employed by Tavern Creek from January 2006 until October 2008.As aforementioned, Plaintiff was a member of Tavern Creek commencing on November 1, 2006.Throughout the entirety of Plaintiff's employ with Tavern Creek, Plaintiff's salaries, car and phone allowances, and health insurance were fully satisfied.Additionally, Tavern Creek also fully paid Plaintiff for his commissions earned in 2006(albeit, late) and partially paid Plaintiff for his commissions earned in 2007(albeit, late again).Plaintiff was never compensated for the commissions allegedly earned by Plaintiff in 2008.

Plaintiff's Employment Agreement was terminated, in accordance with Tavern Creek's Operating Agreement, on August 29, 2008, and Plaintiff was hired as an at-will employee.Sometime thereafter, around October 2008, Plaintiff voluntarily terminated his at-will employment with Tavern Creek.

On September 17, 2008, Plaintiff filed a petition for damages in Johnson County, Kansas, against Tavern Creek, alleging breach of contract (“Johnson County Lawsuit”).The Johnson County Lawsuit resulted in a judgment for $166,273.24, against Tavern Creek and in favor of Plaintiff(“Johnson County Judgment”).Pertinently, the Johnson County Judgment was enabled by Tavern Creek's failure to respond to Plaintiff's statement of uncontroverted facts incorporated in Plaintiff's motion for summary judgment.²The Johnson County Judgment, inter alia, determined:

7.As set forth in plaintiff's statement of uncontroverted facts, all of which are deemed admitted pursuant to [Kansas]Supreme Court Rule 141(b), plaintiff should be awarded the following damages:

(a) Interest on commissions that were due to plaintiff in 2006 but not fully paid until 2008; $1,798.26 + 237.96 (interest from 4/18/08–8/14/09) = $2,036.22

(b) Commissions due to Plaintiff in 2007 and 2008 that remain unpaid; $30,430.57 + $134.38 + $3,640.16 (interest from 4/18/08–8/14/09) = $34,205.11

(c) IRA matching contributions from 2006 that were made late; $202.50 + $24.12 (interest from 4/18/08–8/14/09) = $226.62

(d) IRA matching contributions from 2007 that have not been made; $2,412.92 + 287.37 (interest from 4/18/08–8/14/09) = $2,700.29 (e) Salary from October 13 through October 31, 2008 that remains unpaid; $2,596.14 + 183.72 (interest from 10/31/08–8/14/09) = $2,779.86

(f) 5% of Tavern Creek's net profits from 2006; $11,912.38 + $2,808.06 (interest from 1/1/07–8/14/09) = $14,720.44

(g) Eight weeks of severance pay that remains unpaid; $6,923.04 + $438.71 (interest from 11/30/08–8/14/09) = $7,361.75

(h) Commissions from 2009[;] $44,325.14 + $2,808.88 (interest from 11/30/07–8/14/09) = $47,134.02

(i) Attorney's fees of $23,898.85; and

(j) Statutory penalties[:] $121.44 x 257 days = $31,210.08

Thereafter, on January 19, 2010, Plaintiff filed a suit in the Circuit Court of Jefferson County against Berger, Wood Nuts, and Thomas Taylor.³Plaintiff's Petition pled four counts: piercing the corporate veil (Count I), interference with a business relationship (Count II),⁴ civil conspiracy (Count III), and breach of fiduciary duty (Count IV).Defendants filed their motion for summary judgment.The trial court sustained Defendants' motion for summary judgment on all four Counts of Plaintiff's Petition.This appeal now follows.

Additional facts will be provided as needed during our analysis of the points presented by Plaintiff's appeal.

II.DISCUSSION

Plaintiff contends, in five separate points on appeal, that the trial court erred in granting Defendants' motion for summary judgment.An introductory recitation of each point relied on is unnecessary as we discuss,...