This summary also appears under Business Law
Issues: Whether "piercing the corporate veil" is a cause of action; RDM Holdings, Ltd. v. Continental Plastics Co.; Arevalo v. Arevalo (Unpub.); Quick-Sav Food Stores, Ltd. v. Estate of Mattis (Unpub.); DeWitt v. Sealtex Co. (Unpub.); In re RCS Engineered Prods. Co. (6th Cir.); Aioi Seiki, Inc. v. JIT Automation, Inc. (ED MI); Summary disposition under MCR 2.116(C)(7); Maiden v. Rozwood; Holmes v. Michigan Capital Med. Ctr.; Washington v. Sinai Hosp. of Greater Detroit; Estes v. Titus; Summary disposition under MCR 2.116(C)(8); Teel v. Meredith
Court: Michigan Court of Appeals (Unpublished)
Case Name: Kostopoulos v. Crimmins
e-Journal Number: 50562
Judge(s): Per Curiam – Saad, Stephens, and Ronayne Krause
The court held that piercing the corporate veil is not an independent cause of action, but rather, a means of imposing liability on an underlying cause of action. Thus, res judicata did not apply in this case. However, the trial court reached the right result in granting the defendant summary disposition because it was appropriate under MCR 2.116(C)(8) on the basis the plaintiff failed to state a cause of action in his complaint. Plaintiff alleged that defendant was the alter ego of a construction company and thus, personally liable for a consent judgment entered into in a prior case against the company (a corporation solely owned by defendant). Plaintiff and the construction company were defendants in a 2005 case asserting claims arising from the construction of plaintiff's home. Plaintiff filed a cross-claim in that case against defendant and the construction company. A consent judgment was entered awarding plaintiff a judgment in the amount of $125,000 against the company. A creditor's exam revealed that the company did not have a "valid builder's license, failed to follow corporate formalities, and had no inventory or equipment relating to its construction business." Defendant also testified that the company was insolvent at the time the trial court entered the consent judgment. As of 12/09, the company had not paid any portion of the consent judgment. Plaintiff then filed this case in an effort to collect on that judgment. The complaint contained one count, "Piercing the Corporate Veil." In granting defendant summary disposition, the trial court concluded that res judicata applied. The court noted that piercing the corporate veil "is an equitable doctrine that may fasten liability in a derivative manner to a nondebtor." Although there was no binding authority "explicitly stating that piercing the corporate veil is not, by itself, a cause of action, such a cause of action has never been recognized in Michigan." The court could not find support for the proposition "that piercing the corporate veil solely on an alter ego theory is in and of itself a cause of action." The court had issued several unpublished opinions holding to the contrary. "The Sixth Circuit has also concluded that, in Michigan, an action to pierce the corporate veil is not a separate cause of action." In Aioi Seiki, the U.S. District Court for the Eastern District of Michigan opined "that, under Michigan law, a claim seeking to pierce the corporate veil is not a cause of action, but rather, ‘a determination of whether multiple entities exist as separate entities or as mere alter egos of each other.'" Res judicata did not apply because it bars a subsequent cause of action between the same parties when the evidence or facts essential to the action are identical to those essential to a prior action, and piercing the corporate veil is not a "subsequent cause of action." However, the trial court did not err in granting defendant summary disposition because the complaint failed to allege a cause of action recognized in Michigan. Affirmed.
This summary also appears under Constitutional Law
Issues: Equal protection; Royce v. Chatwell Club Apts.; Shepherd Montessori Ctr. Milan v. Ann Arbor Charter Twp.; Plain error; In re Application of Consumer Energy Co.; Res judicata; Dart v. Dart; Collateral estoppel; Ditmore v. Michalik; Eaton Cnty. Rd. Comm'rs v. Schultz; VanDeventer v. Michigan Nat'l Bank; Knoblauch v. Kenyon; Great Lakes Soc'y v. Georgetown Twp.; Due process; Kampf v. Kampf; Cummings v. Wayne Cnty.; Abandoned issue; DeGeorge v. Warheit; Yee v. Shiawassee Cnty. Bd. of Comm'rs; Review of an unpreserved issue; Van Buren Twp. v. Garter Belt, Inc.; Motion to disqualify a judge; Cain v. Department of Corrs.; In re Contempt of Henry; Moore v. Secura Ins.
Court: Michigan Court of Appeals (Unpublished)
Case Name: Michigan First Credit Union v. Smith
e-Journal Number: 50642
Judge(s): Per Curiam – Murray, Talbot, and Servitto
The court held, inter alia, that the trial court treated both parties alike by correctly applying the law to the facts of the case when it declined to apply res judicata, and the court affirmed the trial court's order dismissing the defendant-Smith's counter-complaint. The case began when Smith defaulted on her car loan. Plaintiff-Michigan First Credit Union sued her in district court to repossess the vehicle. Then, Smith, in propria persona, began an extensive legal battle alleging that Michigan First illegally repossessed and sold her vehicle and took $40,000 from her checking account. Smith filed a counter-complaint in district court against Michigan First alleging conversion. She also picketed outside of Michigan First's place of business and handed out flyers to inform the general public that Michigan First had taken $40,000 from her checking account. Michigan First filed a complaint in Oakland County Circuit Court against Smith alleging defamation, libel, and slander. Meanwhile, in district court Smith asserted that the judge was biased, and she began picketing outside the district court building. Also, she filed a motion to disqualify the judge, which the judge granted. The case was then transferred to another judge, who dismissed Michigan First's original complaint as to the balance of the car loan because Smith had received a bankruptcy discharge and granted Michigan First's motion to transfer Smith's counter-complaint for conversion to the Wayne County Circuit Court. There, the judge placed a stay on the proceedings as to Smith's counter-complaint pending the resolution of Michigan First's defamation case in Oakland County. After Michigan First's defamation case was involuntarily dismissed on remand in Oakland County, and that dismissal was pending on appeal, the parties returned to Wayne County Circuit Court where the trial court lifted the stay on Smith's counter-complaint. Smith then filed a motion for summary disposition on her counter-complaint arguing that the involuntary dismissal of Michigan First's defamation case in Oakland County was an adjudication on the merits. The trial court denied Smith's motion. Later, the trial court granted Michigan First's motion to dismiss Smith's counter-complaint due to her failure to timely follow the final joint pretrial order as to submitting her witness list and exhibits for trial. On appeal, Smith argued that the trial court denied her both equal protection and due process when it denied her summary disposition motion. She compared herself to Michigan First and argued that because the trial court stated that res judicata would be applied against her on her counter-complaint if she lost Michigan First's defamation case, res judicata should be applied against Michigan First on her counter-complaint because the defamation case was involuntarily dismissed. Smith asserted that the elements of res judicata were satisfied because (1) Michigan First's defamation case in Oakland County was decided on the merits, (2) the issues raised in Smith's counter-complaint were resolved in the Oakland County case, and (3) both cases involved the same parties or their privies. However, her argument failed because the court reversed and remanded the trial court's involuntary dismissal of Michigan First's defamation complaint on 6/21/11. Thus, there had not been a final decision on the merits. "Rather, Michigan First's defamation complaint in Oakland Circuit was still pending at the time of the Wayne Circuit decision." Further, even when Michigan First's defamation case was involuntarily dismissed, the issue of conversion in Smith's counter-complaint was not resolved by the involuntary dismissal. Upon the parties returning to Wayne County Circuit Court, the trial court recognized that the involuntary dismissal of Michigan First's defamation case did not resolve the issue of conversion and properly denied Smith's motion for summary disposition. Affirmed.
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