ridgerunner-llc-a-wyoming-limited-liability-company-and-sarah-a-carrelli , 2013 WY 31 ( 2013 )

IN THE SUPREME COURT, STATE OF WYOMING
2013 WY 31OCTOBER TERM, A.D. 2012
March 14, 2013
RIDGERUNNER, LLC, a Wyoming
Limited Liability Company; and SARAH
A. CARRELLI and CYNTHIA D.
PORTER, Individually,
Appellants
(Plaintiffs),
S-12-0118
v.
RICHARD MEISINGER and
MEISINGER INVESTMENTS, INC.,
Appellees
(Defendants).
Appeal from the District Court of Fremont County
The Honorable Norman E. Young, Judge
Representing Appellants:
Sky D Phifer, Phifer Law Office, Lander, Wyoming.
Representing Appellees:
Collin C. Hopkins and Cynthia Van Vleet of Hopkins & Van Vleet, LLC,
Riverton, Wyoming. Argument by Mr. Hopkins.
Before KITE, C.J., and HILL, VOIGT, BURKE, and DAVIS, JJ.
NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third.
Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building,
Cheyenne, Wyoming 82002, of any typographical or other formal errors so that correction may be
made before final publication in the permanent volume.
VOIGT, Justice.
[¶1] The appellants, Ridgerunner, LLC, Sarah A. Carrelli, and Cynthia D. Porter,
appeal the district court’s decision to dismiss on summary judgment their claims for
breach of contract and breach of the covenant of good faith against the appellees,
Meisinger Investments, Inc. and Richard Meisinger. The appellants claim that the district
court improperly converted the appellees’ motion to dismiss the complaint to a motion
for summary judgment and, therefore, the case must be reversed. After consideration, we
find that the district court did not properly convert the appellees’ motion to dismiss to a
motion for summary judgment, and that the appellants’ complaint is sufficient to survive
the appellees’ motion to dismiss.
ISSUE
[¶2] Did the district court properly dismiss the appellants’ complaint for breach of
contract and breach of the covenant of good faith brought against the appellees?
FACTS
[¶3] On July 15, 2005, appellants Sarah A. Carrelli and Cynthia D. Porter, through their
company, Ridgerunner, LLC, purchased Mom’s Malt Shop from appellee Meisinger
Investments, Inc. Approximately six years after the transaction, the appellants filed a
complaint against Meisinger Investments, Inc. and one of its owners, Richard Meisinger,
for breach of contract and breach of the covenant of good faith. The appellants alleged
that the appellees misrepresented the inventory of the equipment of Mom’s Malt Shop,
that much of the food included in the sale was outdated or spoiled, and that appellee
Richard Meisinger and Meisinger Investments, Inc.’s other owner, Kevin Meisinger, had
been telling customers that the appellants were serving bad food and that the appellees
were attempting to reclaim the business. The appellants also alluded to the fact that
Kevin Meisinger vandalized the business on several occasions.
[¶4] In response to the complaint, the appellees filed a motion to dismiss the complaint.
They asserted that the complaint failed to state a claim upon which relief can be granted
because all of the allegations of wrongdoing were directed toward Kevin Meisinger.
Kevin Meisinger, however, was not a named defendant in the complaint because he is
deceased. The appellees pointed out that the sale of Mom’s Malt Shop was between the
appellants and Meisinger Investments, Inc., and that the appellants had not made any
allegations that would justify piercing the corporate veil to hold Richard Meisinger
personally responsible for the actions of the corporation. In response to the appellees’
motion to dismiss, the appellants argued that Kevin Meisinger, Richard Meisinger, and
Meisinger Investments, Inc. were all acting as agents of one another when the contract to
sell Mom’s Malt Shop was finalized, and that the appellants could not make any
allegations regarding piercing the corporate veil until discovery had taken place.
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[¶5] After a hearing, the district court dismissed the appellants’ complaint. Although
the order was titled “Order Granting [Appellees’] Motion to Dismiss,” the district court
explained in the body of the order that it was converting the motion to dismiss to a
motion for summary judgment, pursuant to W.R.C.P. 12(c) and 56, because the district
court considered evidence outside of the pleadings when rendering its decision. The
district court found that the contract for the sale of Mom’s Malt Shop was between the
appellants and Meisinger Investments, Inc. Kevin Meisinger and Richard Meisinger
were the only shareholders, officers, and directors of the corporation. Meisinger
Investments, Inc. was dissolved and the business wound up in 2008, and Kevin Meisinger
is now deceased. Thus, the district court found that Richard Meisinger was the only party
on which the appellants could attempt to impose liability under the contract, but only if
Richard Meisinger could be held personally liable for the acts and obligations of
Meisinger Investments, Inc. The district court concluded that the appellants provided
nothing more than “mere allegations or denials” in their pleadings, which was insufficient
to survive a motion for summary judgment, and thereby dismissed the complaint. The
appellants now appeal that order.
STANDARD OF REVIEW
[¶6] This case is somewhat unique from many cases before this Court in that much of
the central issue must be resolved before we can determine what the appropriate standard
of review for the ultimate issue actually is. The appellees filed, and the appellants
responded to, a motion to dismiss. However, the district court converted it to a motion
for summary judgment. On appeal, the appellants claim that the district court improperly
converted the motion to one for summary judgment. Whether the district court’s
conversion was proper is fundamental to our standard of review. If the conversion was
proper, we will review whether summary judgment was granted appropriately. If the
requirements for a proper conversion were not accomplished, we must review whether
the dismissal was appropriate pursuant to a motion to dismiss standard. Torrey v.
Twiford, 713 P.2d 1160, 1162, 1164 (Wyo. 1986).
[¶7] Rule 12(b)(6) of the Wyoming Rules of Civil Procedure states that a party may file
a motion to dismiss a complaint if the complaint “fail[s] to state a claim upon which relief
can be granted[.]” W.R.C.P. 12(b)(6). The rule goes on to state:
If, on a motion asserting the defense numbered (6) to dismiss
for failure of the pleading to state a claim upon which relief
can be granted, matters outside the pleading are presented to
and not excluded by the court, the motion shall be treated as
one for summary judgment and disposed of as provided in
Rule 56, and all parties shall be given reasonable opportunity
to present all material made pertinent to such a motion by
Rule 56.
2
W.R.C.P. 12(b). We have explained that if the matters outside of the pleadings
considered are affidavits attached to the motion to dismiss, conversion occurs
automatically. Cranston v. Weston Cnty. Weed & Pest Bd., 826 P.2d 251, 254 (Wyo.
1992). However, if materials other than affidavits are considered, “such as discovery
documents, conversion does not occur automatically. The court may still treat the motion
as one for summary judgment, but the record must demonstrate that the parties had notice
of the conversion and that the nonmovant had an opportunity to respond.” Id. At a
minimum, the nonmoving party must have ten days to respond to the converted motion
for summary judgment. Shriners Hosp. for Crippled Children, Inc. v. First Sec. Bank of
Utah, N.A., 835 P.2d 350, 356 (Wyo. 1992).
[¶8] Here, the appellees filed a motion to dismiss, and it did not include any
attachments or affidavits. The appellants then responded to the motion, which also did
not include any attachments or affidavits. The record does not show that either party
filed any supplemental pleadings that contained attachments or affidavits in regard to the
motion or response. Therefore, the record does not support a conclusion that the motion
should have been converted automatically. This means, that in order for a conversion to
properly have taken place,
the record must adequately demonstrate that all counsel were
aware of the intentions of the district judge to treat the motion
as converted, together with a reasonable opportunity afforded
to the non-moving party to present, by way of affidavit or
otherwise, anything necessary to rebut the contention of the
moving party.
Torrey, 713 P.2d at 1163 (quoting Kimbley v. City of Green River, 642 P.2d 443, 445
(Wyo. 1982)).
[¶9] The record does not show that counsel for either of the parties was given any
advance notice that the district court planned to convert the motion to dismiss to one for
summary judgment. In fact, the first time the conversion is ever mentioned in the record
is in the district court’s order dismissing the appellants’ complaint. Further, we cannot
tell what the parties may have known or been told at the time of the motion hearing, or
what evidence outside of the pleadings the district court considered, because the hearing
was not reported. Therefore, we cannot say that the requirements of converting the
motion to dismiss to a motion for summary judgment were met. Consequently, we will
review “this case as [an] order[] to dismiss rather than as [a] converted order[] for
summary judgment.” Cranston, 826 P.2d at 254.
[¶10] We review a district court’s decision to grant a motion to dismiss de novo.
Swinney v. Jones, 2008 WY 150, ¶ 6, 199 P.3d 512, 515 (Wyo. 2008). Further:
3
When claims are dismissed under W.R.C.P. 12(b)(6),
this court accepts the facts stated in the complaint as true and
views them in the light most favorable to the plaintiff. Such a
dismissal will be sustained only when it is certain from the
face of the complaint that the plaintiff cannot assert any facts
that would entitle him to relief. Story v. State, 2001 WY 3,
¶ 19, 15 P.3d 1066, ¶ 19 (Wyo. 2001). Dismissal is a drastic
remedy and is sparingly granted; nevertheless, we will sustain
a W.R.C.P. 12(b)(6) dismissal when it is certain from the face
of the complaint that the plaintiff cannot assert any set of
facts that would entitle that plaintiff to relief. Robinson v.
Pacificorp, 10 P.3d 1133, 1135-36 (Wyo. 2000).
Bonnie M. Quinn Revocable Trust v. SRW, Inc., 2004 WY 65, ¶ 8, 91 P.3d 146, 148
(Wyo. 2004) (quoting Manion v. Chase Manhattan Mortg. Corp., 2002 WY 49, ¶ 6, 43
P.3d 576, 577 (Wyo. 2002)).
DISCUSSION
[¶11] The appellees filed a motion to dismiss based upon the contention that the
complaint did not make any allegations that Richard Meisinger engaged in wrongdoing
outside his capacity as an owner of Meisinger Investments, Inc., and further that the
appellants did not make any allegations as to why the district court should pierce
Meisinger Investments, Inc.’s corporate veil in order to hold Richard Meisinger
personally liable. The district court agreed and dismissed the appellants’ complaint,
albeit pursuant to W.R.C.P. 56 and not W.R.C.P. 12(b)(6). After a thorough review of
the complaint, and considering the allegations in a light most favorable to the appellants,
we find that the appellants have failed to assert any facts that even allege that piercing the
corporate veil to hold Richard Meisinger personally liable would be justified. However,
we also find that the district court erred when it dismissed the entire complaint after
stating that Meisinger Investments, Inc. could not be held liable because it was dissolved.
[¶12] We will begin our analysis with the appellants’ failure to plead any facts that
would support a piercing of the corporate veil. Rule 8(a)(2) of the Wyoming Rules of
Civil Procedure states that “[a] pleading which sets forth a claim for relief, whether an
original claim, counterclaim, cross-claim, or third-party claim shall contain . . . 2) a short
and plain statement of the claim showing that the pleader is entitled to relief[.]”
W.R.C.P. 8(a)(2). This rule is based upon the theory of notice pleading and only requires
that a plaintiff “plead the operative facts involved in the litigation so as to give fair notice
of the claim to the defendant.” Johnson v. Aetna Cas. & Sur. Co. of Hartford, Conn., 608
P.2d 1299, 1302 (Wyo. 1980). Further, “pleadings must be liberally construed in order to
do justice to the parties and motions to dismiss must be sparingly granted.” Id.
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[¶13] In their complaint, the appellants named Meisinger Investments, Inc. and Richard
Meisinger as defendants in their claims for breach of contract and breach of the covenant
of good faith. The contract for the sale of Mom’s Malt Shop was attached to the
complaint, and shows that all agreements regarding the sale were between appellants
Sarah A. Carrelli and Cynthia D. Porter and Meisinger Investments, Inc. Further, the
appellants state in their complaint that “at all times herein Kevin Meisinger and Richard
Meisinger were acting as agents of each other and as agents and officers of Meisinger
Investments, Inc.” (Emphasis added.)
[¶14] These points are important because, generally, “a corporation is a separate entity
distinct from the individuals comprising it.” Kaycee Land & Livestock v. Flahive, 2002
WY 73, ¶ 4, 46 P.3d 323, 325 (Wyo. 2002). However, this Court has recognized “the
concept that a corporation’s legal entity will be disregarded whenever the recognition
thereof in a particular case will lead to injustice.” Id.“‘Before a corporation’s acts and obligations can be legally
recognized as those of a particular person, and vice versa, it
must be made to appear that the corporation is not only
influenced and governed by that person, but that there is such
a unity of interest and ownership that the individuality, or
separateness, of such person and corporation has ceased, and
that the facts are such that an adherence to the fiction of the
separate existence of the corporation would, under the
particular circumstances, sanction a fraud or promote
injustice.’ Quoting Arnold v. Browne, 27 Cal.App.3d 386,
103 Cal.Rptr. 775 (1972) (overruled on other grounds [by
Reynolds Metals Co. v. Alperson, 25 Cal.3d 124, 129, 158
Cal.Rptr. 1, 3, 599 P.2d 83, 86 (1979)]).”
Id. Thus, this Court has long recognized that disregarding the corporate entity, or
piercing the corporate veil, is a judicially created equitable doctrine used in situations
where “corporations have not been operated as separate entities as contemplated by
statute and, therefore, are not entitled to be treated as such.” Id. at ¶ 6, at 326. When
considering whether to pierce the corporate veil, a court considers the following factors:
“‘Among the possible factors pertinent to the trial court’s
determination are: commingling of funds and other assets,
failure to segregate funds of the separate entities, and the
unauthorized diversion of corporate funds or assets to other
than corporate uses; the treatment by an individual of the
assets of the corporation as his own; the failure to obtain
authority to issue or subscribe to stock; the holding out by an
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individual that he is personally liable for the debts of the
corporation; the failure to maintain minutes or adequate
corporate records and the confusion of the records of the
separate entities; the identical equitable ownership in the two
entities; the identification of the equitable owners thereof
with the domination and control of the two entities;
identification of the directors and officers of the two entities
in the responsible supervision and management; the failure to
adequately capitalize a corporation; the absence of corporate
assets, and undercapitalization; the use of a corporation as a
mere shell, instrumentality or conduit for a single venture or
the business of an individual or another corporation; the
concealment and misrepresentation of the identity of the
responsible ownership, management and financial interest or
concealment of personal business activities; the disregard of
legal formalities and the failure to maintain arm’s length
relationships among related entities; the use of the corporate
entity to procure labor, services or merchandise for another
person or entity; the diversion of assets from a corporation by
or to a stockholder or other person or entity, to the detriment
of creditors, or the manipulation of assets and liabilities
between entities so as to concentrate the assets in one and the
liabilities in another, the contracting with another with intent
to avoid performance by use of a corporation as a subterfuge
of illegal transactions; and the formation and use of a
corporation to transfer to it the existing liability of another
person or entity [citation].’” [AMFAC Mech. Supply Co. v.
Federer,] 645 P.2d [73,] 77-78 [(Wyo. 1982)] (quoting
Arnold v. Browne, supra, 103 Cal.Rptr. at 781-82).
Id. at ¶ 4, at 325 (quoting Miles v. CEC Homes, Inc., 753 P.2d 1021, 1023-24 (Wyo.
1988)).
[¶15] Here, because the claims raised by the appellants stemmed from a contract that
was entered into with only Meisinger Investments, Inc., the appellants have to pierce the
corporate veil in order to impose individual liability upon Richard Meisinger. While
piercing the corporate veil is a “doctrine wherein liability for an underlying [cause of
action] may be imposed upon a particular individual,” Dombroski v. WellPoint, Inc., 879
N.E.2d 225, 231 (Ohio Ct. App. 2007), rev’d on other grounds by 895 N.E.2d 538 (Ohio
2008) (quoting Geier v. Nat’l GG Indust., 1999 WL 1313460 (Ohio App. 11 Dist.)), and
not a separate cause of action, the complaint must still “contain sufficient information to
indicate a desire to proceed under the doctrine of piercing the corporate veil.”
Dombroski, 879 N.E.2d at 231, rev’d on other grounds by 895 N.E.2d 538.
6
[¶16] The complaint, however, even when liberally construed, does not indicate a desire
to pierce the corporate veil. Although the appellants named Richard Meisinger as an
individual defendant, the complaint does not contain any information or allegations, such
as the factors the courts consider when determining whether it is proper to pierce the
corporate veil, which would put the appellees on notice of that desired intent. In fact, in
their motion to dismiss the complaint, the appellees interpreted the complaint to be
bringing a personal claim of slander against Richard Meisinger. In response to the
motion, the appellants clarified that there was not a claim of slander, only the breach of
contract claim and the breach of the covenant of good faith claim, which stemmed from
the original contract for the sale of the business. Further, in their response to the motion,
the appellants explained that they were unable to give information regarding the piercing
of the corporate veil because discovery had not yet taken place. While many factual
details that would support piercing the corporate veil may be discovered throughout the
process, it does not change the fact that the complaint must still contain sufficient
information to put the opposing party on notice that the party bringing the action is going
to attempt to pierce the veil. This complaint simply fails in that respect. Therefore, the
district court’s decision to dismiss the complaint against Richard Meisinger is affirmed.
[¶17] We do not find however that the complaint should have been dismissed in its
entirety. In its order dismissing the complaint, the district court explained that Richard
Meisinger was the only party who potentially could be liable in the lawsuit because
Kevin Meisinger is dead and Meisinger Investments, Inc. was dissolved and the business
had been wound up. The pleadings and record in this case do not support the district
court’s conclusion that Meisinger Investments, Inc. could not be held liable simply
because the corporation had been dissolved.
[¶18] At common law, a dissolved corporation could not sue or be sued in its corporate
name because the corporate entity no longer existed. 16A Carol A. Jones, Fletcher
Cyclopedia of the Law of Corporations § 8142, at 299 (perm ed., rev. vol. 2012 and Cum.
Supp. 2012-2013). Most states have adopted statutes that reverse the common law rule
and, instead, allow the commencement of proceedings by or against a corporation in its
corporate name, even if the corporation is dissolved. Id. at 302. In Wyoming, Wyo. Stat.
Ann. § 17-16-1405(b)(v) provides that “[d]issolution of a corporation does not: . . . (v)
Prevent commencement of a proceeding by or against the corporation in its corporate
name[.]” Wyo. Stat. Ann. § 17-16-1405(b)(v) (LexisNexis 2011); see also Catamount
Constr. v. Timmis Enters., 2008 WY 122, ¶ 18, 193 P.3d 1153, 1158 (Wyo. 2008). This
applies whether the dissolution is done voluntarily or administratively. See Wyo. Stat.
Ann. §§ 17-16-1405, -1421(c) (LexisNexis 2011).
[¶19] In order to allow dissolving corporate entities the ability to dispose of all potential
claims that may exist against them, the legislature has adopted procedures in which a
corporation can notify any potential claimants of its intent to dissolve. The potential
7
claimants then have a certain amount of time to respond to the notice, otherwise the
claims will become barred.1 See Wyo. Stat. Ann. §§ 17-16-1406, -1407 (LexisNexis
2011). Further, after utilizing those procedures, the dissolved corporation may petition
for a judicial determination of how much the corporation may owe in potential claims and
may then provide security in the amount and form ordered by the court to satisfy the
corporation’s obligations. In turn, this assures that claims against the corporation may
not be enforced against shareholders who received corporate assets during the liquidation
process. Wyo. Stat. Ann. § 17-16-1408 (LexisNexis 2011).
[¶20] If Meisinger Investments, Inc. had utilized these statutory procedures during the
dissolution and winding up process, we would agree with the district court’s conclusion
that the corporation could no longer be named as a defendant in the complaint. However,
the pleadings do not reveal whether the corporation used the available statutory
processes, and we cannot assume that it did. Consequently, we are left to conclude that
Meisinger Investments, Inc., although a dissolved corporation, may still be a named
defendant in a proceeding, in accordance with Wyo. Stat. Ann. § 17-16-1405(b)(v). We
find that the appellants have presented a claim in their complaint against Meisinger
Investments, Inc. that can withstand the appellees’ motion to dismiss.
CONCLUSION
[¶21] The district court improperly converted the appellees’ motion to dismiss to a
motion for summary judgment. Reviewing the motion as one to dismiss the complaint
under W.R.C.P. 12(b)(6), we agree with the district court that the appellants have failed
to present any facts or allegations that would put the appellees on notice that the
appellants were seeking to pierce the corporate veil in an attempt to hold Richard
Meisinger personally liable for the claims against Meisinger Investments, Inc. However,
we find that the appellants did present a proper claim against Meisinger Investments, Inc.,
despite the fact the corporation has been dissolved.
[¶22] We affirm in part, reverse in part, and remand to the district court for further
proceedings consistent with this opinion.
1
If a claim is not barred, the claim may be enforced in two ways. First, it may be enforced “[a]gainst the
dissolved corporation, to the extent of its undistributed assets[.]” Wyo. Stat. Ann. § 17-16-1407(d)(i)
(LexisNexis 2011). Second, it may be enforced against a shareholder that received corporate assets
through liquidation. Wyo. Stat. Ann. § 17-16-1407(d)(ii) (LexisNexis 2011). The shareholder’s liability,
however, cannot exceed the total amount of assets distributed to him. Id.8