Edward Gallagher v. Kathleen Persha , 315 Mich. App. 647 ( 2016 )

STATE OF MICHIGAN
COURT OF APPEALS
EDWARD GALLAGHER and JOAN FOR PUBLICATION
GALLAGHER, June 9, 2016
9:00 a.m.
Plaintiffs-Appellants,
v No. 325471
Oakland Circuit Court
KATHLEEN PERSHA, LC No. 2014-142057-CK
Defendant-Appellee.
EDWARD GALLAGHER and JOAN
GALLAGHER,
Plaintiffs-Appellants,
v No. 327840
Oakland Circuit Court
KAPER PROPERTIES, INC. and KATHLEEN LC No. 2012-130500-CK
PERSHA,
Defendants-Appellees.
Before: MURRAY, P.J., and STEPHENS and RIORDAN, JJ.
MURRAY, P.J.
In Docket No. 325471, plaintiffs, Edward Gallagher and Joan Gallagher, appeal as of
right an order granting defendant Kathleen Persha’s motion for summary disposition pursuant to
MCR 2.116(C)(8), on the basis that plaintiffs had failed to state a claim for fraud, and concluding
that plaintiffs’ sole remaining claim of “piercing the corporate veil” was not viable without an
underlying cause of action.
-1-
In Docket No. 327840, plaintiffs appeal by leave granted1 an order denying their motion
to reinstate a 2012 case against defendants, Kaper Properties, Inc., a Michigan real estate
investment corporation (“Kaper”), and Persha, the president and sole shareholder of Kaper. We
reverse the order in Docket No. 325471, and dismiss the appeal in Docket No. 327840 as moot.
I. FACTS AND PROCEDURAL HISTORY
This case arises from a purchase agreement through which Kaper purchased plaintiffs’
home subject to two existing mortgages. Plaintiffs owed more on the home than it was worth,
and agreed to pay Kaper $37,000 to make up the difference between the agreed upon purchase
price and the balance on the mortgages. Kaper, in turn, agreed to pay off the two existing
mortgages and release plaintiffs from their debt obligations by August 30, 2012, either through
the sale of the home or the refinancing of the mortgages. By August 30, 2012, plaintiffs had
transferred the home to Kaper by warranty deed and paid Kaper the $37,000 owed under the
purchase agreement. However, by that time the house had not been sold, Kaper had fallen
behind on the mortgage payments, and neither of the existing mortgages had been satisfied as
agreed.
A. THE 2012 CASE
Plaintiffs brought a two-count complaint alleging breach of contract against Kaper, and
breach of fiduciary duty against Persha, on November 13, 2012. Defendants denied that Persha
was ever a party to the purchase agreement, or that Kaper was obligated under the purchase
agreement to pay off the existing mortgages by a certain date. After plaintiffs’ breach of
fiduciary duty claim was dismissed as time barred under the statute of limitations, plaintiffs filed
an amended complaint adding two additional claims against both defendants; one for fraud and
misrepresentation and one titled “piercing the corporate veil.” A case evaluation panel
recommended an award of $290,000 to plaintiffs for all three remaining claims, against
defendants jointly and severally. Plaintiffs and Kaper accepted the award, but Persha rejected it.
After judgment against Kaper was entered in favor of plaintiffs in the amount of $283,110.88,
the parties stipulated to dismissal of plaintiffs’ remaining claims against Persha, without
prejudice.
B. THE 2014 CASE
On July 25, 2014, plaintiffs filed a three-count complaint against Persha only, raising
claims of (1) fraud and misrepresentation, (2) breach of fiduciary duty, and (3) piercing the
corporate veil of Kaper based on the facts presented in the 2012 case. The trial court dismissed
the breach of fiduciary duty claim based on the dismissal with prejudice of the same claim in the
2012 case, and Persha filed a motion for summary disposition pursuant to MCR 2.116(C)(8) on
the two remaining claims. Over plaintiffs’ objection, the trial court granted defendant’s motion,
finding no false statement of fact in the pleadings to support a claim for fraud. The trial court
1
Gallagher v Kaper Properties Inc, unpublished order of the Court of Appeals, entered on July
14, 2015 (Docket No. 327840).
-2-
dismissed the veil-piercing claim because it was no longer supported by an underlying cause of
action. However, the trial court suggested that plaintiffs might be able to bring a veil-piercing
claim based on a cause of action raised in the 2012 case:
It’s a dismissal with prejudice as to this action which is a separate cause of
action that you cannot have, but I don’t think it affects the original case; that if I
reopen the original case, I reopen it, is it -- it’s as if it was not closed, really, so
this really doesn’t -- even this will be without prejudice because you can’t have a
separate cause of action for piercing the corporate veil. If had of pled [sic], which
-- and I don’t remember the original complain [sic] -- if it was pled in the original
case, and I reopen the original case, I mean I have to take a look at the pleadings
and see. I don’t know (indiscernible). This dismissal with prejudice is not
necessarily gonna’ [sic] affect that.
C. MOTION TO REINSTATE THE 2012 CASE
As a result of the trial court’s comments in the 2014 case, plaintiffs filed a motion to
reinstate the 2012 case against Persha only, asking the trial court to reopen the prior lawsuit to
enable them to pierce Kaper’s corporate veil and hold Persha individually responsible for
Kaper’s judgment. The trial court denied plaintiffs’ motion, explaining that it would not
entertain the veil-piercing claim without an underlying cause of action because, under Michigan
law, “there is no independent cause of action for a claim for piercing the corporate veil.”
II. ANALYSIS
A. DOCKET NO. 325471
As noted earlier, in Docket No. 325471 plaintiffs challenge the trial court’s order
granting defendant’s motion for summary disposition in the 2014 case. According to plaintiffs,
the trial court erred when it concluded that piercing the corporate veil cannot be brought as a
separate cause of action. We agree with the general principle that piercing the corporate veil is
an equitable remedy rather than a cause of action, but we conclude that the rule does not apply to
this case. Accordingly, for the reasons explained below, we reverse the trial court’s order
granting defendant’s motion for summary disposition and remand for further proceedings.
This Court reviews de novo a trial court’s decision on a motion for summary disposition.
Willett v Waterford Charter Twp, 271 Mich App 38, 45; 718 NW2d 386 (2006). A party may
move for summary disposition under MCR 2.116(C)(8) to challenge whether the opposing party
has stated a claim on which relief can be granted. Henry v Dow Chem Co, 473 Mich 63, 71; 701
NW2d 684 (2005). A motion under MCR 2.116(C)(8) tests the legal sufficiency of the
complaint based on the pleadings alone. Maiden v Rozwood, 461 Mich 109, 119; 597 NW2d 817
(1999). Summary disposition under that court rule is appropriate only when the claims are “so
clearly unenforceable as a matter of law that no factual development could possibly justify
recovery.” Wade v Dep’t of Corrections, 439 Mich 158, 163; 483 NW2d 26 (1992).
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
-3-
Hilti, Inc, 449 Mich 542, 547-548; 537 NW2d 221 (1995) (“It is a well-recognized principle that
separate corporate entities will be respected”).2 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. It is therefore a remedy, and not a separate cause of
action, something which the federal courts applying Michigan law have previously recognized.
See In re RCS Engineered Prod Co Inc, 102 F3d 223, 226 (CA 6, 1996) and Aioi Seiki Inc v JIT
Automation Inc, 11 F Supp 2d 950, 953-954 (ED Mich, 1998).
But this case is not controlled by that principle, for what is at issue here is how may a
judgment-plaintiff procedurally pursue the piercing remedy once it is established that the
corporate entity cannot pay the judgment and there is some evidence or reason to believe that the
corporate form has been abused to avoid legal obligations. We know that supplementary
proceedings under MCR 2.621 and MCL 600.6104(5) cannot be utilized, see Green v Ziegelman,
282 Mich App 292, 303-304; 767 NW2d 660 (2009) (Green I), but must the remedy be plead as
part of the original case, or forever be barred? Or, can a new case be filed to enforce the
outstanding judgment against responsible shareholders if the facts allow piercing of the corporate
veil even if no separate cause of action is plead? We now turn to that dispositive issue.
Plaintiffs do not challenge the trial court’s order granting summary disposition in favor of
Persha on their 2014 fraud and misrepresentation claim. Instead, plaintiffs argue only that,
because they filed an action to pursue piercing the corporate veil of Kaper based upon the pre-
existing judgment against it, the trial court’s dismissal of their complaint was erroneous.
Plaintiffs principally rely on Green I and Green v Ziegelman, 310 Mich App 436; 873 NW2d
794 (2015) (Green II), in support of their assertion that a plaintiff may pursue an action to pierce
the corporate veil of a judgment debtor and reach a responsible individual.
In Green I, the circuit court allowed the plaintiff to initiate a supplemental proceeding
pursuant to MCR 2.621 and MCL 600.6104(5), in a closed case wherein the plaintiff had
received a judgment against a corporate entity, “NZA.” Id. at 293-294. This judgment had been
entered against NZA only, though Ziegelman, a shareholder of NZA, had been a party to the
prior case. Id. at 296-297. During the discovery period of this supplemental proceeding, the
plaintiff had an opportunity to depose Ziegelman and discovered evidence indicating
Ziegelman’s personal liability on the previously raised claims. Id. at 297. The circuit court
granted the plaintiff’s motion to pierce the corporate veil and hold Ziegelman liable for the
previous judgment against NZA, citing MCL 600.6104 as authority for its entry of a judgment
2
The Supreme Court has recognized the many social and economic benefits resulting from
respecting the corporate form. Klager v Robert Meyer Co, 415 Mich 402, 411 & n 5; 329 NW2d
721 (1982).
-4-
against Ziegelman individually. Id. at 298-299. This Court reversed the circuit court’s decision
and vacated the judgment against Ziegelman, explaining:
MCL 600.6104(5) begins with very broad language, allowing the court, at its
“discretion,” to make “any order” that “seems appropriate.” But these actions
must relate to “carrying out the full intent and purpose of these provisions to
subject any nonexempt assets of any judgment debtor to the satisfaction of any
judgment against the judgment debtor.” Id. (emphasis added). Ziegelman was
not a judgment debtor in regard to breach of the architectural agreement; the
judgment debtor was solely NZA. The circuit court essentially used a proceeding
supplementary to judgment to enter an additional judgment against a party not
previously subject to a judgment on the claim at issue. MCR 2.621 and [MCL
600.6104] do not provide any authority for such a ruling in the context of piercing
the corporate veil. [Id. at 303-304.]
Particularly important to this case, the Green I Court declined to answer “the questions whether
plaintiffs are legally entitled to file a new and separate action against Ziegelman, outside [MCL
600.6104], under a corporate veil piercing theory and whether res judicata or the compulsory
joinder rule, MCR 2.203, would bar such an action.” Id. at 305. See also, Green II, 310 Mich
App at 438 (recognizing that the Green I Court did not decide whether an independent action
could be filed to pierce the corporate veil). Consequently, the Green I Court did not answer the
question presented in this case.3
Interestingly, the parties in Green I were back before this Court six years later on an
appeal from a judgment entered against Ziegelman after the court pierced the corporate veil. In
Green II plaintiffs filed a suit in 2010 against Ziegelman and Ziegelman Architects, seeking to
pierce the corporate veil and hold Ziegelman responsible for the judgment entered against
Ziegelman Architects after an arbitration, but the parties eventually stipulated to dismiss the case
without prejudice. Id. But in 2012 plaintiffs reinstated the case, again asking the trial court to
disregard Ziegelman Architect’s corporate existence, and to hold Ziegelman liable for the
judgment. Id. at 439. Plaintiffs also alleged that certain transfers of Ziegelman Associates
monies violated two separate state laws, the Uniform Fraudulent Transfer Act, MCL 566.31 et
seq., and the Business Corporation Act, MCL 450.1101 et seq. Id. After a bench trial, the trial
court found that the corporate form should be disregarded, that the actions of defendants violated
the two state laws, and entered a judgment finding defendants’ jointly and severally liable for the
prior judgment. Id. at 442-443.
On appeal, our Court addressed two issues: the applicability of res judicata, and whether
the evidence was sufficient to pierce the corporate veil. This Court resolved the res judicata
3
Nor did Aioi Seiki Inc, 11 F Supp 2d at 953-954 (holding that because a piercing of the
corporate veil action is not a new cause of action but merely a means of determining whether
multiple entities exist as separate entities or were mere alter egos of each other, it is
supplementary in nature to the original action and should be brought pursuant to federal rules of
civil procedure 69(a)).
-5-
issue against Ziegelman, concluding that the request to pierce the corporate veil could not have
been made in the earlier lawsuit, id. at 444-445, and also upheld the trial court’s legal and factual
findings and its conclusion that the corporate veil for Ziegelman Architects should be pierced.
Id. at 465. And because of that resolution, the Court determined that it was unnecessary to
decide whether the trial court erred in finding Ziegelman liable for violating the two separate
statutes. Id. at 465-466. Consequently, the Green II Court neither addressed nor decided
whether a separate action can be filed seeking to pierce the corporate veil of a corporate entity in
order to hold an individual corporate member personally liable for a judgment against the
corporation.
Another case tangentially touching on this issue is Belleville v Hanby, 152 Mich App
548; 394 NW2d 412 (1986)4, where the plaintiff filed a lawsuit in 1980 against the corporate
entity Shape-Up Shoppe Inc., which resulted in a judgment in excess of $20,000. Several years
later, during a creditor’s exam in a federal bankruptcy proceeding, plaintiffs learned that there
was a complete identity of interest between the corporate entity and its stockholders, including
defendants Hanby and Stivers. Id. at 550. After that discovery, plaintiffs filed a new action
“through which they sought to impose the Shape-Up Shoppe’s liability on the personal injury
judgment upon defendants Hanby and Stivers.” Id. The complaint contained two counts, one
alleging that defendants ignored the corporate formalities and thus merged the identities of the
corporation and the individual defendants, while a second count alleged that defendants failed to
pay consideration for corporate stock and were therefore personally liable as creditors of the
corporation. Id.
The issue presented to the trial court was whether the three-year statute of limitation to
recover for personal injuries, MCL 600.5805(8), or the ten-year period of limitation for actions
found upon judgments, MCL 600.5809(3), applied. Id. at 551. The Court concluded that the ten-
year limitations period applied because the second suit was not one seeking recovery for a
personal injury, as that had already occurred when the judgment was entered in the earlier case,
but was instead one seeking to enforce the judgment against an individual:
The lawsuit filed by the plaintiffs against defendants Hanby and Stivers
was not one principally geared to establishing a right to recover for a personal
injury. Rather having already obtained a judgment against the corporation and on
their personal injury claim, plaintiffs sought, through the lawsuit at issue here, to
establish that the judgment obtained against the corporation was also a judgment
against the defendants and their individual capacities. The only issues presented
in the cause of action are those concerned with piercing the corporate veil and
establishing that defendants were the alter egos of the corporation . . . thus, in its
4
Belleville is the only published case that was cited by both federal courts for the proposition
that under Michigan law piercing the corporate veil is a remedy, and not a separate cause of
action. See In re RCS Engineered Prod Co Inc, 102 F3d at 226 and Aioi Seiki Inc, 11 F Supp 2d
at 953-954.
-6-
most basic sense, this was an action to establish an identity of interest between
these defendants and the Shape-Up Shoppe. [Id. at 552-553.]
Consequently, the Belleville Court recognized the distinction between the initial rights asserted
through a cause of action that lead to the original judgment against a corporate entity, and the
subsequent action to enforce that judgment against an individual because of the lack of formal
corporate identity. See also Bodenhamer Bldg Corp v Architectural Research Corp, 873 F2d
109, 112-113 (CA 6, 1989).
None of these prior decisions address the precise issue here, though they do provide some
insight on the issue. But appellate courts in our sister states have addressed the issue, and as
recognized by the Green I Court, one case, Miner v Fashion Enterprises, Inc., 342 Ill App 3d
405, 415; 794 NE2d 902 (2003), set forth the following principle:
We do note that in Miner, supra at 415, the Illinois Appellate Court ruled that “a
judgment creditor may choose to file a new action to pierce the corporate veil of a
judgment debtor in order to hold individual shareholders and directors liable for a
judgment against the corporation.” [Green I, 282 Mich App at 304-305.]
See also Westmeyer v Flynn, 382 Ill App 3d 952, 956; 889 NE2d 671 (2008) (recognizing
holding in Miner that a judgment creditor can file a new action to seek to pierce the corporate
veil of a judgment debtor and hold individual shareholders and directors liable).
The Kentucky Supreme Court has also opined on the issue. In Inter-Tel Technologies v
Linn Station Properties LLC, 360 SW3d 152 (Ky, 2012), defendant Linn Station Properties had
previously obtained a default judgment against Integrated Telecom Services, a wholly owned
subsidiary of plaintiff Inter-Tel Technologies. Linn Station then filed a new case seeking to
enforce the Linn Station judgment against Inter-Tel under a piercing the corporate veil theory,
which the Kentucky Supreme Court held was an appropriate procedure:
Beginning with the second point, there is nothing inappropriate about proceeding
first to secure a judgment as to the actual debtor and, upon determining that the
debtor has no assets and its corporate shield may be vulnerable, then bringing a
piercing suit against those who actually control the corporation and have rendered
it judgment-proof. Sea–Land is but one of many examples of piercing litigation
that followed earlier debt collection litigation against the actual debtor. 941 F 2d
at 519. See also Bodenhamer Bldg Corp v Architectural Research Corp, 873 F2d
109 (CA 6, 1989) (applying Michigan law); Wm Passalacqua Builders, Inc, 933
F2d at 131; Durrant v Quality First Mktg, Inc, 127 Idaho 558; 903 P2d 147
(Idaho Ct App, 1995); Davenport v Quinn, 53 Conn App 282; 730 A 2d 1184
(1999). * * * See also Miner v Fashion Enters, Inc., 342 Ill App 3d 405; 794
NE2d 902 (2003) (“[J]udgment creditor could use supplementary proceedings to
discover whether the judgment debtor corporation’s individual shareholders and
directors held assets of the corporation, or the judgment creditor could choose to
file a new action to pierce the corporate veil in order to hold the individual
shareholders and directors personally liable for the judgment of the corporation.”).
There is no valid basis for precluding a piercing action simply because the claim
-7-
was not part of the original debt collection suit. In some cases, the creditor may
know enough to proceed against all potentially liable parties but, in other
instances, it may be appropriate to obtain the judgment first and only when it
proves uncollectible then seek relief through veil-piercing litigation. [Inter-Tel,
360 SW3d at 168-169 (footnotes omitted)].
Importantly, there were no unique statutes, court rules, or other laws relied upon by the courts in
either Illinois, Kentucky, or the other states cited by the Inter-Tel Technologies court that
specified a procedural mechanism to initiate piercing the corporate veil, and that would
differentiate the circumstances in those states from those at issue in Michigan.
In light of all the foregoing, we hold that plaintiffs were entitled to bring a new action in
an attempt to enforce the prior Kasper judgment against Persha. While we continue to recognize
that piercing the corporate veil is merely a remedy to be applied in certain limited circumstances,
the concern that there be a separate cause of action to support this type of equitable relief does
not arise when, as in this case, there already exists a judgment based on one or more causes of
action. See Union Guardian Trust Co v Rood, 308 Mich 168, 172; 13 NW2d 248 (1944)
(recognizing that when a cause of action is reduced to a judgment, the cause of action is merged
into the judgment and thereafter only an action on the judgment exists). In other words, a party
certainly needs to successfully pursue a cause of action before it can pursue a remedy, but
“having already obtained a judgment against the corporation on their personal injury claim,
plaintiffs sought, through the lawsuit here, to establish that the judgment obtained against the
corporation was also a judgment against the defendants in their individual capacities.” Belleville,
152 Mich App at 553.
Courts from our sister states have similarly recognized the difference between the cause
of action needed to support a judgment, and the separate and independent requirements for
piercing the corporate veil. In Estate of Hurst v Moorehead I, LLC, 228 NC App 571; 748 SE2d
568 (2013), for example, plaintiff sued both a corporate and individual defendant (Blackmon),
and returned a verdict finding amongst other things that the corporate defendant breached a
promissory note. Estate of Hurst, 228 NC App at 574. Based on the jury verdict, the trial court
concluded that Blackmon was the alter ego of the corporate entity, and held both liable for the
damages awarded in the judgment. Id. Blackmon moved for judgment notwithstanding the
verdict, arguing that he could not be held liable for the damages because the jury did not find
liability against him on the promissory note, nor did it find he committed fraud or unfair trade
practices, as its findings on those were only against the corporate entity. Id. at 574-575. The
trial court denied the motion, and the court of appeals affirmed, holding that the findings by the
jury on the breach of contract and fraud claims were not necessary to support piercing the
corporate veil, which looked to different concerns and contained different elements:
First, while a finding that an individual member of a limited liability company
personally engaged in certain conduct, such as fraud or misrepresentation, is
necessary to support the imposition of individual liability against that member
under N C Gen Stat § 57C–3–30(a), a finding of actual fraud against an individual
member is not required to support the imposition of alter ego liability under the
instrumentality rule. Rather, the requisite element for piercing the corporate veil
under the instrumentality rule requires a finding that the individual member used
-8-
his control over the entity “to commit fraud or wrong, to perpetrate the violation
of a statutory or other positive legal duty, or a dishonest and unjust act in
contravention of [the] plaintiffs’ legal rights[.] ” Glenn, 313 NC at 455, 329 SE2d
at 330 (emphasis added) (internal quotation marks and citation omitted). A
showing of actual fraud, in its legal sense, is not a necessary element for the court
to pierce the corporate veil. Therefore, the jury’s findings addressing fraud are
immaterial to their findings addressing breach of contract and piercing the
corporate veil.
Similarly, an award of actual damages for claims of fraud and/or unfair
and deceptive trade practices is likewise inconsequential to imposing alter ego
liability under the instrumentality rule for a breach of contract claim. The
requisite element for piercing the corporate veil under the instrumentality rule
requires a finding that the individual member’s control over the entity and breach
of duty “must proximately cause the injury or unjust loss complained of.” Id.
(internal quotation marks and citation omitted). The jury awarded plaintiffs $4.9
million in actual damages on their breach of contract claim. The fact that the jury
awarded only nominal damages to plaintiffs on their claims for fraud and unfair
and deceptive trade practices has no bearing on the trial court’s ability to pierce
the corporate veil and hold Blackmon liable for the breach of contract damages
awarded by the jury against Moorehead I. [Id. at 579.]
Likewise, in Acadia Partners LP v Tompkins, 759 So2d 732, 740 (Fla App, 2000), the Florida
appeals court ruled that verdicts that (1) found no liability against the individual defendant, but
(2) pierced the corporate veil of the corporate defendant and held the individual liable for the
damages awarded against the corporate entity were not inconsistent since “there was no
impediment to a finding of liability on the corporate veil claim even where no liability was
assessed on the other claims.”
These cases make sense, as they are consistent with the theory of liability created through
piercing the corporate veil. A corporate veil is pierced and liability imposed upon an individual
shareholder or officer not because the shareholder or officer was necessarily liable under the
cause of action resulting in the judgment against the corporation. See Green II, 310 Mich App at
451-452 (rejecting argument that court could not pierce the corporate veil in the absence of
finding that individual caused the entity to commit the particular wrong at issue). Instead,
liability is imposed because the fact finder has concluded that the individual so misused the
corporation that it was unable to pay on the outstanding judgment and an injustice would occur if
it the corporate form was not ignored. Id. at 452-454. The Green II Court concluded as much
when reviewing Michigan Supreme Court precedent on the issue:
Because the evidence in [People ex rel Attorney General v Mich Bell Tel Co, 246
Mich 198; 224 NW 438 (1929)] showed that American Telephone and Telegraph
operated Michigan Bell as a mere instrumentality and did so “to avoid full
investigation and control by the public utilities commission of the State to the
injury of the public,” the Court disregarded the separate existence of Michigan
Bell and voided the contract between Michigan Bell and American Telephone and
Telegraph. Id. at 204–205. It was unnecessary to show that the owners used the
-9-
entity directly to commit a fraud or other wrong; it was sufficient to show that the
continued recognition of the entity's separate existence under the circumstances
would amount to a wrong or be contrary to public policy. [Id. at 452; emphasis
supplied in part.]
As a result, when a judgment already exists against a corporate entity, an additional cause of
action is not needed to impose liability against a shareholder or officer if a court finds the
necessary facts to pierce the corporate veil.
Other than to state that a separate cause of action is required in order to pursue the
remedy of piercing the corporate veil, and we have rejected that argument, defendants have
pointed to no law that prohibits plaintiffs from filing this second suit against Persha and seeking
to pierce Kasper’s corporate veil. Certainly Persha was not off limits to a new lawsuit, as the
first case against her was dismissed without prejudice. See Mable Cleary Trust v Edward-
Marlah Muzyl Trust, 262 Mich App 485, 509–510; 686 NW2d 770 (2004), overruled in part on
other grounds by Titan Ins Co v Hyten, 491 Mich 547 (2012). And, as we noted earlier, actions
to enforce judgments are specifically permitted by the common law. See Netting Co v Touscany,
247 Mich 279, 282; 225 NW 556 (1929) (recognizing a common law action to recover on a
personal judgment) and Union Guardian Trust Co, 308 Mich at 172. Judgment creditors like
plaintiffs should also not be required to pursue a piercing remedy in the first lawsuit or face
losing that remedy, as a party should first have facts to support any claim or remedy before
pursuing it. See MCR 2.114(E) and Inter-Tel, 360 SW3d at 169 n 11. A plaintiff cannot
presume at the time of filing that (1) a corporate entity will fail to pay a valid judgment entered
at the end of a case and (2) that the corporate form was being abused to subvert justice, and
therefore plead piercing the corporate veil as a remedy no matter the set of facts (again, see MCR
2.114(E)), as oftentimes the improprieties that lead to pursuing a piercing remedy do not come to
light during the initial lawsuit. See Belleville, 152 Mich App at 550. We therefore hold that the
trial court erred in dismissing the 2014 case, and remand for further proceedings.
Although plaintiffs discuss the merits of their veil piercing claim at length in their brief
on appeal, because the trial court’s order was based on plaintiffs’ failure to state a legally
cognizable claim, MCR 2.116(C)(8), it did not reach plaintiffs’ argument on its merits. Because
appellate review is limited to issues that the lower court actually decided, Detroit Leasing Co v
City of Detroit, 269 Mich App 233, 237; 713 NW2d 269 (2005), we choose not to review the
merits of the argument. On remand the trial court will have the opportunity to consider the
merits of plaintiffs’ arguments.
B. DOCKET NO. 327840
In Docket No. 327840, plaintiffs challenge the trial court’s order denying their motion to
reinstate the 2012 case against Persha. Plaintiffs argue that, because they “properly requested the
circuit court to pierce the corporate veil of Kaper and hold Persha liable” on the previous
judgment, the trial court erred when it denied their request. However, because plaintiffs will
now be allowed to pursue the piercing remedy in the 2014 case, they have obtained full relief and
we need not address the issues raised in this appeal.
-10-
In Docket No. 325471 we reverse the trial court’s order and remand for further
proceedings. We dismiss the appeal in Docket No. 327840 as moot. We do not retain
jurisdiction.
Neither party may tax costs, an issue of first impression being involved. MCR 7.219(A).
/s/ Christopher M. Murray
/s/ Cynthia Diane Stephens
/s/ Michael J. Riordan
-11-