Kline v. Kline
| Decision Date | 17 March 1981 |
| Docket Number | Docket No. 50261 |
| Citation | 104 Mich.App. 700,305 N.W.2d 297 |
| Parties | Robert KLINE, Plaintiff, Robert L. Kline, D. D. S., P. C., Intervening Plaintiff-Appellant, v. Dorothy A. KLINE, Defendant-Appellee. |
| Court | Court of Appeal of Michigan — District of US |
Stanley R. Kirk, Treva S. Robertson, Detroit, for intervening plaintiff-appellant.
Frederick W. Lauck, Troy, for defendant-appellee.
Before RILEY, P. J., and HOLBROOK, and BREIGHNER, * JJ.
This is an appeal by leave granted from an order denying plaintiff-intervenor's motion to quash writs of garnishment. The intervenor claimed that the obligation of the garnishee was to it, the professional corporation, and not to its sole shareholder, Robert L. Kline.
Robert L. Kline and Dorothy A. Kline were parties to an action which ended in a judgment of divorce. As part of the property settlement, Dr. Kline agreed to pay a certain sum of money to defendant. He did not pay and defendant sought to garnish debts owed to him by, among others, Delta Dental Plan. Delta disclosed that it owed debts, not to Robert L. Kline, but to Robert L. Kline, D. D. S., P. C., a professional service corporation organized pursuant to M.C.L. § 450.221 et seq.; M.S.A. § 21.315(1) et seq., and owned wholly by Robert L. Kline. The lower court held that Robert L. Kline and the professional corporation should be treated as one and the same, disregarding the corporate entity.
Generally, the law treats a corporation as an entirely separate entity from its stockholders, even where one person owns all of the corporation's stock. Bourne v. Muskegon Circuit Judge, 327 Mich. 175, 191, 41 N.W.2d 515 (1950). Complete identity of interest between sole shareholder and corporation may lead courts to treat them as one for certain purposes. Williams v. America Title Ins. Co., 83 Mich.App. 686, 269 N.W.2d 481 (1978). Where the corporation is a mere agent or instrumentality of its shareholders or a device to avoid legal obligations, the corporate entity may be ignored. People ex rel. Attorney General v. Michigan Bell Telephone Co., 246 Mich. 198, 205, 224 N.W. 438 (1929). A court may look through the veil of corporate structure to avoid fraud or injustice. Schusterman v. Employment Security Comm., 336 Mich. 246, 57 N.W.2d 869 (1953). The community of interest between corporation and shareholders may be so great that, to meet the purposes of justice, they should be considered as one and the same. L. A. Walden & Co. v. Consolidated Underwriters, 316 Mich. 341, 346, 25 N.W.2d 248 (1946). When the notion of a corporation as a legal entity is used to defeat public convenience, justify a wrong, protect fraud or defend crime, that notion must be set aside and the corporation treated as the individuals who own it. Paul v. University Motor Sales Co., 283 Mich. 587, 602, 278 N.W. 714 (1938). The fiction of a corporate entity different from the stockholders themselves was introduced for convenience and to serve the ends of justice, but when it is invoked to subvert the ends of justice it should be and is disregarded by the courts. Paul, supra. A court's treatment of a corporate entity clearly rests on notions of equity, whether it is an action at law or at equity. Each case involving disregard of the corporate entity rests on its own special facts. Brown Brothers Equipment Co. v. State Highway Comm., 51 Mich.App. 448, 215 N.W.2d 591 (1974).
The lower court held that this professional corporation established for tax and pension purposes is a "hybrid" type of corporation and for that reason denied the motion to quash the writ of garnishment. We cannot agree that this is a sufficient reason for ignoring the corporate entity. We therefore remand to the trial court for a hearing on the issue.
The Professional Service Corporation Act, 1962 P.A. 192, as amended, M.C.L. § 450.221 et seq.; M.S.A. § 21.315(1) et seq., allowed certain licensed professionals to incorporate for the first time. Professional corporation laws were enacted largely as a result...
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