DNS Allen, LLC d/b/a D and S Allen, LLC v. Alan Cox and Catherine Ann Cox Mikeal Scott Allen v. Alan Cox and Catherine Ann Cox (mem. dec.)

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be FILED
regarded as precedent or cited before any Jun 01 2017, 10:00 am
court except for the purpose of establishing
CLERK
the defense of res judicata, collateral Indiana Supreme Court
Court of Appeals
estoppel, or the law of the case. and Tax Court
ATTORNEY FOR APPELLANTS ATTORNEYS FOR APPELLEES
Casey D. Cloyd Gary G. Hanner
Indianapolis, Indiana Hanner Law Office
Rockville, Indiana
Hugh J. Totten
Law Office of Hugh J. Totten, P.C.
Valparaiso, Indiana
IN THE
COURT OF APPEALS OF INDIANA
DNS Allen, LLC d/b/a D and S June 1, 2017
Allen, LLC, Court of Appeals Case No.
61A01-1609-CC-2141
Appellant/Plaintiff/Counterclaim-
defendant, Appeal from the Parke
Circuit Court
v.
The Honorable Samuel A.
Alan Cox and Catherine Ann Cox, Swaim, Judge
Appellees/Defendants/Counterclaim- Trial Court Cause No.
plaintiffs. 61C01-1407-CC-233
Mikeal Scott Allen,
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Appellant/Third-party Defendant,
v.
Alan Cox and Catherine Ann Cox,
Appellees/Third-party Plaintiffs.
Bradford, Judge.
Case Summary
[1] DNS Allen, LLC (“DNS”), filed suit against Alan Cox and Catherine Cox
(“the Coxes”) on July 10, 2014, alleging that the Coxes owed money for work
performed on their home and seeking to foreclose on a mechanic’s lien. The
Coxes filed an answer to the complaint, a counterclaim against DNS, and a
third-party complaint against DNS’s owner Mikeal Scott Allen (“Allen”)
seeking relief for breach of contract, deceptive acts, violations of the Home
Improvement Contract Act (“HICA”), and slander of title.
[2] A bench trial was held on June 29, 2015. After three days of evidence and a
visit by the trial judge to the real estate, the judge found DNS liable for breach
of contract, violation of HICA, and slander of title. The trial court also pierced
the corporate veil and found Allen personally liable to the Coxes.
[3] On appeal, the appellants raise the following restated issue: whether the trial
court erred in piercing the corporate veil sua sponte. Despite there being ample
evidence that Allen’s construction work on the Coxes’ home was of extremely
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poor quality and directly contrary to their specifications, we must reverse the
trial court’s decision to pierce the corporate veil.
Facts and Procedural History
[4] DNS was a limited liability company with an address in Fishers, Indiana,
specializing in residential and commercial contracting. Allen was the owner of
DNS and the person with whom the Coxes dealt. In January, 2013, the Coxes
contracted with Allen to remodel their home and construct an addition as well.
The contract did not contain the Coxes’ street address, a start or end date for
the construction, or details regarding specific contingencies that would
materially change the completion date.
[5] Construction began in January 2013 and continued until May 21, 2013. The
Coxes paid $63,000.00 for the remodeling work and new construction. At
some point in time, the construction work stopped, DNS presented the Coxes
with a bill for an additional $17,000.00, and requested a punch list.1 The Coxes
did not provide a punch list, but did pay $5000.00.
[6] The Coxes, as some point, asserted that the construction work done by DNS
had not been done in a workman-like manner. Specifically, among other
things, the Coxes asserted that the new addition was unlevel, the doors were
1
A punch list is a list of “usually minor tasks to be completed at the end of a project.” “punch list.” Merriam-
Webster.com, (May 23, 2017), https://www.merriam-webster.com/dictionary/punch%20list.
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improperly hung, the roof tiles were the wrong color, a shower was improperly
installed, the kitchen cabinets were improperly installed, and an exterior door
was installed without the Coxes consent. The Coxes, through counsel, notified
DNS and Allen that they wanted their $63,000.00 back for the alleged
substandard work and for violations of HICA.
[7] On July 10, 2014, DNS filed a complaint alleging breach of contract and
seeking to foreclose a mechanic’s lien. On July 18, 2014, the Coxes filed a
counterclaim against DNS and a third-party complaint against Allen. The
Coxes made similar claims regarding breach of contract, HICA, and slander of
title against both DNS and Allen.
[8] A bench trial was held from June 29, 2016 to July 1, 2016 in Parke County. On
August 23, 2016, the trial court issued an order finding DNS liable for breach of
contract, a violation of HICA, and slander of title. The trial court made the
following findings regarding the defects in the construction:
25. Allen selected, purchased and installed a refrigerator in Alan
and Cathy’s new kitchen in a space poorly designed for said
refrigerator. One door of the refrigerator would not completely
open and Allen simply advised Cathy Cox that “she would get
use to it” and “mine is like that.” A skilled contractor would not
choose and purchase an appliance without consulting his clients
first, especially one that does not fit in the space he created.
26. Allen conceded that Alan and Cathy should have input into
what appliances would be installed but the kitchen appliances
were selected and purchased by Allen without allowing input
from Alan and Cathy. They were brought in and installed the
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last day he was at Alan and Cathy’s home and installed before
Cathy got home from work.
27. Allen was told by Alan and Cathy that they wanted gray or
black roofing to match their existing buildings. However, Allen
installed a red or maroon roof on Alan and Cathy’s home
without their approval.
28. Alan and Cathy told Allen that they wanted interior wood
trim installed in the kitchen, laundry room and bathroom to
match the existing oak trim in their home. Instead of wood trim,
Allen installed fiberboard. This includes the base, door and
window casing, door jambs, jamb extensions, wall caps, and
chair rail.
29. Allen was instructed to build a closet in the laundry room
and did not do so.
30. Allen installed a pet door and an exterior door to the laundry
room. Neither of these were requested by Alan and Cathy and
were not listed in the Contract.
31. Alan poured a cement porch incorrectly and it ponds water.
To correct it properly it must be torn out and re-poured.
32. As a result of the floors not being level, the walls are not
plumb and the door [jambs] are not plumb.
33. The pocket doors that Allen installed do not close properly.
34. The foundation for the new structure is not aligned with the
existing structure.
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Appellant’s App. pp. 14-15.
[9] The trial court also pierced the corporate veil and found Allen personally liable
to the Coxes. On appeal, appellants challenge only whether the trial court erred
in piercing the corporate veil and finding Allen personally liable to the Coxes.
Discussion and Decision
Standard of Review
[10] When, as here, the trial court enters findings of fact and
conclusions thereon, we apply the following two-tiered standard
of review: we determine whether the evidence supports the
findings and the findings support the judgment. Clark v. Crowe,
778 N.E.2d 835, 839 (Ind. Ct. App. 2002). The trial court’s
findings of fact and conclusions thereon will be set aside only if
they are clearly erroneous, that is, if the record contains no facts
or inferences supporting them. Id. at 839-40. A judgment is
clearly erroneous when a review of the record leaves us with a
firm conviction that a mistake has been made. Id. at 840. This
court neither reweighs the evidence nor assesses the credibility of
witnesses, but considers only the evidence most favorable to the
judgment. Id.
Thomas v. Thomas, 923 N.E.2d 465, 468-69 (Ind. Ct. App. 2010).
[11] The only question before us on appeal is whether the trial court erred by
piercing the corporate veil and finding Allen personally liable to the Coxes. In
this case, the trial court pierced the corporate veil due to “Allen’s gross
violation of the Indiana Home Improvement Contract Act.” Appellant’s App.
p. 21. There is no authority for the proposition that a HICA violation, however
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gross, can justify piercing the corporate veil by itself. Under HICA, the
legislature sought to place minimum requirements on home improvement
contracts in order to protect consumers; it is not an alternative method to
impose personal liability on the shareholder of a limited liability company. It
was clearly erroneous for the trial court to pierce the corporate veil due to
Allen’s HICA violations.
[12] Moreover, there is nothing in the findings of fact and conclusions of law that
supports piercing the corporate veil. As a general rule, shareholders are not
personally liable for the acts of a corporation. Aronson v. Price, 644 N.E.2d 864,
867 (Ind. 1994).
“While an Indiana court will impose personal liability to protect
innocent third parties from fraud or injustice, the burden is on the
party seeking to pierce the corporate veil to prove that the
corporate form was so ignored, controlled or manipulated that it
was merely the instrumentality of another and that the misuse of
the corporate form would constitute a fraud or promote
injustice.” Id.
In deciding whether a plaintiff has met this burden of proof, an
Indiana court considers whether the plaintiff has presented
evidence showing: (1) undercapitalization; (2) absence of
corporate records; (3) fraudulent representation by corporation
shareholders or directors; (4) use of the corporation to promote
fraud, injustice or illegal activities; (5) payment by the
corporation of individual obligations; (6) commingling of assets
and affairs; (7) failure to observe required corporate formalities;
or (8) other shareholder acts or conduct ignoring, controlling, or
manipulating the corporate form.
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Id.
[13] Piercing the corporate veil is highly dependent on the equities of the situation,
and our inquiry tends to be highly fact-driven. Reed v. Reid, 980 N.E.2d 277,
301 (Ind. 2010). After reviewing the record and considering the factors from
Aronson, we do not find sufficient grounds to overcome the presumption of
limited liability and pierce the corporate veil. Aronson, 644 N.E.2d at 86.
Finally, it is unclear if DNS and Allen were even on notice that the corporate
veil may be pierced due to the lack of evidence regarding such doctrine in the
pleadings and during trial and the fact that the Coxes apparently did not raise
the issue at the trial court level.
[14] The record does, however, provide ample evidence that DNS breached its
contract with the Coxes. There is also substantial evidence that DNS’s contract
did not comply with HICA. The work was not completed in a “workman-like”
manner. Between the HICA violations and the evidence that DNS breached its
contract, it is clear that the Coxes are entitled to damages and attorneys fees.
However, because it was inappropriate to pierce the corporate veil in this case,
judgement can only be entered against DNS not Allen individually.
[15] We reverse the trial court’s finding to pierce the corporate veil and find Allen
personally liable and remand with instructions to adjust the judgment
accordingly.
Brown, J., and Pyle, J., concur.
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