Todor D. Simeonov & a. v. Twins Contracting, LLC & a.; Twins Contracting, LLC v. Tuida Enterprises, LLC & a. ( 2017 )

THE STATE OF NEW HAMPSHIRE
SUPREME COURT
In Case No. 2016-0488, Todor D. Simeonov & a. v. Twins
Contracting, LLC & a.; Twins Contracting, LLC v. Tuida
Enterprises, LLC & a., the court on September 20, 2017, issued
the following order:
Having considered the briefs and record submitted on appeal, we conclude
that oral argument is unnecessary in this case. See Sup. Ct. R. 18(1). We affirm.
The defendants, Twins Contracting, LLC (LLC) and Tammy Dunn
(member), appeal an order of the Superior Court (O’Neill, J.) in favor of the
plaintiffs, Tuida Enterprises, LLC and Todor D. Simeonov (homeowner). They
contend that the trial court erred by: (1) finding the LLC liable for the plaintiffs’
attorney’s fees; and (2) piercing the corporate veil.
We first address whether the trial court erred in awarding the plaintiffs
attorney’s fees. We note that the defendants do not contest the amount of the
fees. An award of attorney’s fees is appropriate, under the bad faith litigation
theory, when one party has acted in bad faith, vexatiously, wantonly, or for
oppressive reasons, when the litigant’s conduct can be characterized as
unreasonably obdurate or obstinate, and when it should have been unnecessary
for the successful party to have brought the action. Fat Bullies Farm, LLC v.
Devenport, 170 N.H. ___, ___ (May 26, 2017).
Such an award is appropriate when a party must litigate against an
opponent whose position is patently unreasonable. LaMontagne Builders v.
Bowman Brook Purchase Group., 150 N.H. 270, 276 (2003). A claim is patently
unreasonable when it is commenced, prolonged, required, or defended without
any reasonable basis in the facts provable by evidence or any reasonable claim in
the law as it is, or as it might arguably be held to be. Id. A party’s
unreasonableness is treated on an objective basis as a variety of bad faith and
made just as amenable to redress through an award of counsel fees as would be
the commencement of litigation for the sole and specific purpose of causing
injury to an opponent. Glick v. Naess, 143 N.H. 172, 175 (1998). When
attorney’s fees are awarded against a party that has acted in bad faith, the
purpose is to do justice and vindicate rights, as well as to discourage frivolous
lawsuits. Fat Bullies, 170 N.H. at ___.
We will not overturn the trial court’s decision concerning attorney’s fees
absent an unsustainable exercise of discretion. Id. To warrant reversal, the trial
court must have exercised its discretion for reasons clearly untenable or to an
extent clearly unreasonable to the prejudice of the objecting party. Id. In
evaluating the trial court’s ruling on this issue, we give tremendous deference to
the trial court’s judgment. Id. If there is some support in the record for the trial
court’s determination, we will uphold it. Id.
In this case, the jury rendered an advisory verdict finding that “the
Plaintiffs were forced to litigate this action due to oppressive, vexatious, arbitrary,
capricious, or bad faith conduct by the . . . LLC” and that “this action was
patently unreasonable, in that [the LLC’s] alleged refusal to remedy the situation
was asserted without any reasonable basis in the facts provable by evidence, or
any reasonable claim in the law.” We note that on appeal the defendants do not
challenge the trial court’s use of a jury in an advisory capacity.
Likewise, the trial court found that: (1) the LLC “insisted, without any legal
basis to do so, that it was entitled to payment for work that was either not
completed or was completed in such a manner as to require that it be redone”; (2)
the LLC’s claims against the plaintiffs were “entirely unsupported by the
evidence”; and (3) “the plaintiffs were forced to pursue this litigation due to [the
LLC’s] vexatious, arbitrary, capricious, and/or bad faith conduct.” Cf. id. at ___
(stating trial court did not find plaintiff had no evidence to support claim). To the
extent that the defendants argue that the trial court did not “specifically
delineate[ ]” the LLC’s conduct, we disagree. Furthermore, we assume that the
trial court made all findings necessary to support its decision. See Nordic Inn
Condo. Owners’ Assoc. v. Ventullo, 151 N.H. 571, 586 (2004).
The trial court’s findings were supported by the record. Calvin Dunn, Jr.,
who, although not employed by the LLC, negotiated its demand for payment with
the homeowner, testified that, pursuant to the parties’ contract, the plaintiffs’
final payment of $6,500 was due upon the project’s completion and that he told
the homeowner that he did not have to make the payment until then. Calvin
Dunn, Jr., the member, and the employee who worked on the project all testified
that the LLC did not complete the project. However, the LLC proceeded against
the plaintiffs for this money.
The LLC offered no evidence that it made any attempt to complete the
project. The defendants argue that there were no findings that the individual
defendants acted vexatiously or in bad faith. However, the individual defendants
were not ordered to pay the plaintiffs’ attorney’s fees; only the LLC was ordered to
pay them.
The defendants argue that the trial court did not find they had behaved
with rascality, pursuant to the Consumer Protection Act, RSA chapter 358-A
(2009 & Supp. 2016), or committed fraud, and that this was “a simple contract
dispute.” However, the nature of the underlying action does not control whether
an award of attorney’s fees is appropriate. Cf. Fat Bullies, 170 N.H. at ___
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(defining when attorney’s fees award is appropriate by nature of party’s conduct,
not nature of action).
The defendants argue that their claims were sufficiently pleaded to receive
a hearing on the merits. However, when a party continues to prosecute a claim
that is legally cognizable, but lacks any factual basis that is provable beyond that
party’s mere conclusory assertions, the trial court may properly exercise its
discretion to award attorney’s fees. Glick, 143 N.H. at 176. To the extent that
the defendants argue that their claims were factually supported because the LLC
worked on the site, this fact did not support the claim for the final contract
payment, which Dunn, Jr. told the homeowner was not due until the LLC
completed the project. Similarly, even if the member was unaware that much of
the LLC’s work had to be redone, this did not support the LLC’s claim to the final
payment. Because the record supports the trial court’s finding that the
defendants’ claims were “entirely unsupported by the evidence,” the defendants
were not, as they contend, “lawfully positioned to at least argue an offset for the
damages claimed by the Plaintiff.”
Accordingly, we conclude that the record supports the trial court’s decision
to require the LLC to pay the plaintiffs’ attorney’s fees. See Fat Bullies, 170 N.H.
at ___.
We next address whether the trial court erred by piercing the corporate veil
and finding the LLC’s sole member, who was also its manager, liable for its debts.
At the outset, although we have yet to address whether members and managers
of an LLC can be held personally liable for its debts under the veil-piercing theory
we have applied to corporations, the parties assume that our corporate veil-
piercing cases apply to LLCs, and, for the purposes of this order, we will do the
same. See Mbahaba v. Morgan, 163 N.H. 561, 568 (2012).
Ordinarily, LLC members and managers, like corporate owners, are not
liable for a company’s debts. Id.; see RSA 304-C:23 (2015). In particular cases,
however, a corporation and those owning its stock and assets will be treated as
identical. Mbahaba, 163 N.H. at 568. Thus, for instance, we will assess
individual liability for the corporation’s debts when the owners have used the
company to promote an injustice or fraud upon the plaintiff. Id. In such a case,
we will disregard the fiction that the corporation is independent of its
stockholders and treat the stockholders as the corporation’s “alter egos.” Id. We
do not hesitate to disregard the fiction of the corporation when circumstances
would lead to an inequitable result. Bielagus v. EMRE of New Hampshire, 149
N.H. 635, 643 (2003).
The corporate veil may be pierced when officers distribute the corporation’s
assets after claims have been made against it. Mbahaba, 163 N.H. at 569.
Piercing the corporate veil is an equitable remedy and, therefore, is particularly
within the province of the trial court. LaMontagne, 150 N.H. at 274. We will
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sustain the trial court’s decision unless it is clearly unsupported by the evidence.
Id. at 274-75.
In this case, after the plaintiffs filed suit against the LLC, the member
transferred for $1.00 a Chevy Tahoe pickup truck owned by the LLC, with a value
of $19,000 to $21,000, to a friend, who lived with the member and also operated
an excavating business. Although the defendants argue that there was no
evidence of the LLC’s equity in the truck, the member testified that the LLC had
paid approximately $38,000 on the purchase loan and that she transferred it to
her friend the month the loan terminated. The member argued that the friend
had been making the payments on the truck, but produced no evidence of such
payments.
Similarly, approximately one week after she was added as a defendant, the
member quitclaimed her personal real estate, in which the LLC had an equitable
interest, to herself and the same friend as joint tenants. Although the real estate
belonged solely to the member individually, the LLC had paid the $172,000
mortgage on the property since it was purchased, which payments totaled
approximately $116,000 at the time the member transferred her interest to her
friend. Again, the member claimed that her friend had been contributing to the
mortgage payments, but failed to produce evidence of such payments. To the
extent that the defendants argue that the LLC had its headquarters at the
property, this does not diminish its equitable interest in it.
Furthermore, the member continued to maintain and use the LLC’s bank
account and credit cards after the LLC ceased doing business and the plaintiffs
brought their action, and even after the member officially dissolved the LLC. The
member gave the LLC’s credit card to her friend and allowed her to make charges
on it, even though the member testified that her friend had nothing to do with the
LLC. The member testified that both before and after the plaintiffs instituted suit
the member charged things to the LLC’s credit card that were not for the LLC’s
benefit.
To the extent that the defendants argue that the trial court “overlooked
nearly all of the other factors identified by the First Circuit to determine if the
corporate form has been abused,” we note that they cite no authority adopting
those factors under New Hampshire law. Cf. Fat Bullies, 170 N.H. at ___.
Similarly, they cite no authority for their argument that “the essential time period
for analysis . . . [was] the time of the transaction.”
The defendants argue that there is no “nexus” between the member’s
“improper expenditures” and the plaintiffs’ harm because the LLC held itself out
as an LLC, conducted business, and was solvent at the time of the contract.
They contend that the homeowner did “not testify that he was harmed by any
fraud” and “chose to . . . litigate against a defunct company.” To the extent that
the defendants argue that the plaintiffs “chose not to secure a prejudgment
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attachment” on the LLC’s property, we note that the plaintiffs did obtain such an
attachment. To the extent that the defendants argue that the fraud must be
connected to the underlying transaction, this is not consistent with our cases.
See Mbahaba, 163 N.H. at 569 (stating that post-suit depletion of LLC assets
supported finding that LLC was being used to promote injustice). To the extent
that the defendants argue that the plaintiffs must show an intent to defraud in
order to pierce the veil, they do not cite, nor are we aware of, any controlling
authority establishing this requirement.
The defendants argue that the member testified that while the LLC was in
business her improper expenditures amounted to no more than five percent of its
total payments. However, she did not testify to the proportion of the LLC’s
expenditures that were improper after the LLC ceased doing business and the
plaintiffs filed suit. To the extent that the defendants argue that the trial court
“made only generalized findings relative to [the member’s] liability,” we disagree.
Furthermore, we assume that the trial court made all findings necessary to
support its decision. See Nordic Inn, 151 N.H. at 586.
Accordingly, we conclude that the trial court’s decision to pierce the veil
and make the member personally responsible for the LLC’s liabilities was
supported by the evidence. See LaMontagne, 150 N.H. at 274-75.
Affirmed.
Dalianis, C.J., and Hicks, Lynn, Bassett, and Hantz Marconi, JJ.,
concurred.
Eileen Fox,
Clerk
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