Union Music Company Inc v. Allbco Inc ( 2016 )

STATE OF MICHIGAN
COURT OF APPEALS
UNION MUSIC COMPANY, INC., UNPUBLISHED
October 18, 2016
Plaintiff-Appellee,
v No. 327339
Wayne Circuit Court
ALLBCO, INC, LC No. 13-004505
Defendant,
and
DANIEL J. GRETKA and DANIEL W. GRETKA,
Defendants/Appellants.
Before: MURRAY, P.J., and CAVANAGH and WILDER, JJ.
PER CURIAM.
Defendants Daniel J. Gretka (Daniel J.) and Daniel W. Gretka (Daniel W.) appeal as of
right from the trial court’s orders granting judgment against them in favor of plaintiff in this debt
collection action. We affirm.
On appeal, Daniel J. and Daniel W. argue that the default judgment in this case against
Allbco, Inc., for which Daniel J. is resident agent, was improperly entered. This issue is pivotal
because both Daniel J. and Daniel W. were held to be personally liable for the default judgment
against Allbco, Inc. Specifically, Daniel J. and Daniel W. contend that plaintiff’s counsel misled
the trial court in representing the facts leading up to the entry of the default judgment,
particularly with regard to the relevant hearing dates. Daniel J. and Daniel W. also assert that
judgment was improperly entered against Daniel W. in particular where this case and a prior
action arising from the same facts were improperly consolidated. We disagree.
For an issue to be properly preserved for appeal, it must be raised before and decided by
the trial court. Fast Air, Inc v Knight, 235 Mich. App. 541, 549; 599 NW2d 489 (1999). Because
this issue was not first raised in the trial court, it was not properly preserved for this Court’s
review. Unpreserved issues are reviewed for plain error affecting substantial rights. Kern v
Blethen-Coluni, 240 Mich. App. 333, 336; 612 NW2d 838 (2000).
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To the extent Daniel W. and Daniel J.’s arguments challenge the trial court’s application
of MCR 2.505, addressing the consolidation of cases, this Court will review de novo the trial
court’s application of the court rules. Dextrom v Wexford Co, 287 Mich. App. 406, 416; 789
NW2d 211 (2010).
The court rule governing the entry of defaults and default judgments is MCR 2.603,
which provides, in pertinent part:
(B) Default Judgment.
* * *
(3) Default Judgment Entered by Court. In all other cases, the party entitled to a
default judgment must file a motion that asks the court to enter the default
judgment.
* * *
(4) Notice of Entry of Default Judgment. The court clerk must promptly mail
notice of entry of a default judgment to all parties. The notice to the defendant
shall be mailed to the defendant’s last known address or the address of the place
of service. The clerk must keep a record that notice was given.
We first note that this Court’s request for information not found in the lower court file
pertinent to this issue was not satisfied by Daniel J. and Daniel W. It was incumbent on Daniel
W. and Daniel J. to provide a copy of necessary transcripts. MCR 7.210(B)(1) (“The appellant is
responsible for securing the filing of the transcript as provided in this rule.”) Also, Daniel J. and
Daniel W. bore responsibility to ensure that this Court had a complete record to review their
claims of error on appeal. “[G]enerally, the appellant bears the burden of furnishing the
reviewing court with a record that verifies the basis of any argument on which reversal or other
claim for appellate relief is predicated.” Petraszewsky v Keeth, 201 Mich. App. 535, 540; 506
NW2d 890 (1993) (citation omitted).
However, after a close review of the existing lower court file, there is nothing to suggest
that the trial court erred in entering a default judgment against Allbco, Inc. While plaintiff
concedes that there was an error leading to confusion concerning the location of the July 12,
2013 hearing on its motion for entry of default judgment, the record reflects that a default
judgment was not entered until almost three months later, after service by mail was effectuated.
Further, the notice of hearing filed in the lower court file for the July 12, 2013 hearing confirms
that the hearing was to be held in the Wayne Circuit Court, not the Oakland Circuit Court.
Accordingly, there is nothing in the existing record that would lead us to conclude that the
default judgment was improperly entered. Also, Michigan courts favor a policy against setting
aside properly entered defaults and default judgments. Huntington Nat’l Bank v Ristich, 292
Mich. App. 376, 389-390; 808 NW2d 511 (2011). Under the circumstances, we are not persuaded
that plain error occurred in this case.
Daniel W. and Daniel J. also argue that the trial court erred in consolidating the first
action with the present case without an order. We have reviewed the lower court file and there is
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no indication that the first action and the present case were consolidated. During one of the
hearings on plaintiff’s motion for summary disposition, the trial court confirmed that its order
was holding Daniel W. personally liable only for the default judgment entered against Allbco,
Inc., not Con Del Properties, the entity involved in the first action. The argument, therefore,
lacks merit.
Daniel J. and Daniel W. next argue that the trial court erred in piercing the corporate veil
against Daniel J., holding him personally liable for the default judgment entered against Allbco,
Inc. We disagree.
This Court will review de novo the trial court’s decision regarding whether to pierce the
corporate veil “because piercing a corporate veil is an equitable remedy.” Florence Cement Co v
Vettraino, 292 Mich. App. 461, 468; 807 NW2d 917 (2011). Likewise, we review de novo a trial
court’s decision on a motion for summary disposition. Maiden v Rozwood, 461 Mich. 109, 118;
597 NW2d 817 (1999). This Court will review the entire record to determine if the moving party
was entitled to judgment as a matter of law. Id.
A motion under MCR 2.116(C)(10) tests the factual sufficiency of the
complaint. In evaluating a motion for summary disposition brought under this
subsection, a trial court considers affidavits, pleadings, depositions, admissions,
and other evidence submitted by the parties, MCR 2.116(G)(5), in the light most
favorable to the party opposing the motion. Where the proffered evidence fails to
establish a genuine issue regarding any material fact, the moving party is entitled
to judgment as a matter of law. MCR 2.116(C)(10), (G)(4). Quinto v Cross &
Peters Co, 451 Mich. 358; 547 NW2d 314 (1996). [Maiden, 461 Mich. at 120.]
In Gallagher v Persha, ___ Mich App ___, ___; ___ NW2d ___ (2016) (Docket No. 325471);
slip op at 3, this Court recently recognized that “Michigan law respects the corporate form[.]”
As has been said many times before today, Michigan law respects the
corporate form, and our courts will usually recognize and enforce separate
corporate entities. See, e.g., Wells v Firestone Tire and Rubber Co, 421 Mich.
641, 650-651; 364 NW2d 670 (1984) and Seasword v Hilti, Inc, 449 Mich. 542,
547-548; 537 NW2d 221 (1995) (“It is a well-recognized principle that separate
corporate entities will be respected”). But “usually” means not always, and when
the requisite evidence establishes that the corporate form has been abused, the
corporate form will be pierced so that creditors (and sometimes others) can seek
payment of a corporate debt (like the judgment in this case) from a responsible
corporate shareholder. See Florence Cement Co v Vettraino, 292 Mich. App. 461,
468-469; 807 NW2d 917 (2011). Consequently, piercing the veil of a corporate
entity is an equitable remedy sparingly invoked to cure certain injustices that
would otherwise go unredressed in situations “where the corporate entity has been
used to avoid legal obligations.” Wells, 421 Mich. at 651. [Gallagher, ___ Mich
App at ___; slip op at 3-4 (footnote omitted).]
When deciding whether to pierce the corporate veil, “a court must first examine the totality of
the evidence surrounding the owner’s use of an artificial entity and, in particular, the manner in
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which the entity was employed in the manner at issue.” Green v Ziegelman, 310 Mich. App. 436,
458; 873 NW2d 794 (2015). The court must then discern if the evidence supports a conclusion
that the owner operated the corporate entity “as his or her alter ego—that is, as a sham or mere
agent or instrumentality of his or her will.” Id. The court must then decide if “the manner of use
effected a fraud or wrong on the complainant.” Id.
In considering this element, it is not necessary to prove that the owner caused the
entity to directly harm the complainant; it is sufficient that the owner exercised
his or her control over the entity in such a manner as to wrong the complainant.
[Id.]
“Finally, the trial court must determine whether the wrong would cause the complainant to suffer
an unjust loss. If disregarding the separate existence would harm innocent third parties, it may
be just to allocate the loss to the complainant, notwithstanding the wrong.” Id. at 459 (citations
omitted).
Viewing the totality of the circumstances, the trial court correctly concluded that the
corporate veil should be pierced under the circumstances of this case. See id. at 458. The record
evidence confirmed that Daniel J. operated Allbco, Inc. in an informal and casual manner that
allowed him to use the corporation as an instrumentality to effectuate his will, and that by
exercising his control over Allbco Inc., this led to plaintiff being wronged. See id. Daniel J.’s
deposition testimony confirmed that Allbco’s business matters were conducted loosely, casually
and without basic required documentation. The record evidence also confirmed that Daniel J.
received significant cash proceeds from the sale of Allbco Inc.’s assets, which happened to take
place during the pendency of litigation by plaintiff to collect on debts Allbco Inc. owed. Under
these circumstances, the trial court correctly concluded that Daniel J.’s wrongful actions led to
plaintiff incurring a significant unjust loss. See id. at 459. We note that Daniel J. and Daniel W.
point this Court’s attention to evidence that was filed in the lower court after the trial court
rendered its decision in this matter, which does indicate that some formal recordkeeping was
done for Allbco, Inc. However, even viewing this documentary evidence in the light most
favorable to Daniel J. and Daniel W., Maiden, 461 Mich. at 120, this evidence does not alter our
conclusion that genuine issues of material fact did not exist concerning whether Daniel J. used
Allbco, Inc. as a mere instrumentality, amounting to a wrong that caused an unjust loss to
plaintiff. See Green, 310 Mich. App. at 458-459.
Daniel J. and Daniel W. next contend that summary disposition was improperly granted
in favor of plaintiff where the contracts at issue between plaintiff and Allbco, Inc. were paid. We
have thoroughly reviewed the evidence Daniel J. and Daniel W. refer to in support of their
assertion that the contracts at issue were satisfied. However, once the default judgment was
entered, this settled the question of Allbco Inc.’s liability regarding the allegations against it, and
Daniel W. and Daniel J.’s attempt to relitigate these issues is improper. “It is an established
principle of Michigan law that a default settles the question of liability as to well-pleaded
allegations and precludes the defaulting party from litigating that issue.” Wood v Detroit Auto
Inter-Ins Exch, 413 Mich. 573, 578; 321 NW2d 653 (1982).
Daniel W. and Daniel J. also assert on appeal that plaintiff’s counsel engaged in unethical
behavior in the trial court. Notably, Daniel W. and Daniel J. do not cite any authority, such as
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case law or the Michigan Rules of Professional Conduct, in support of their assertions. “It is not
sufficient for a party ‘simply to announce a position or assert an error and then leave it up to this
Court to discover and rationalize the basis for his claims, or unravel and elaborate for him his
arguments, and then search for authority either to sustain or reject his position.’” Wilson v
Taylor, 457 Mich. 232, 243; 577 NW2d 100 (1998), quoting Mitcham v Detroit, 355 Mich. 182,
203; 94 NW2d 388 (1959). After a thorough review of the lower court file, we have found no
indication of unethical behavior on the part of plaintiff’s counsel. Moreover, the court rules set
out a specific procedure for a complainant to follow when initiating professional disciplinary
proceedings against an attorney, therefore this Court is not the proper forum for Daniel W. and
Daniel J. to assert these matters, and it would be inappropriate for this Court to address these
matters further.
Affirmed.
/s/ Christopher M. Murray
/s/ Mark J. Cavanagh
/s/ Kurtis T. Wilder
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