Court Opinion

ID: 4173560
Source: CourtListenerOpinion
Date Created: 2017-06-01 15:11:42.044025+00
Date Added: 2024-06-11T14:38:46.473147
License: Public Domain

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,

Court of Appeals of Indiana | Memorandum Decision 61A01-1609-CC-2141 | June 1, 2017          Page 1 of 8
      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
      Court of Appeals of Indiana | Memorandum Decision 61A01-1609-CC-2141 | June 1, 2017   Page 2 of 8
      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.

      Court of Appeals of Indiana | Memorandum Decision 61A01-1609-CC-2141 | June 1, 2017                  Page 3 of 8
      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

      Court of Appeals of Indiana | Memorandum Decision 61A01-1609-CC-2141 | June 1, 2017   Page 4 of 8
        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

       Court of Appeals of Indiana | Memorandum Decision 61A01-1609-CC-2141 | June 1, 2017   Page 6 of 8
       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.

       Court of Appeals of Indiana | Memorandum Decision 61A01-1609-CC-2141 | June 1, 2017   Page 7 of 8
       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.

       Court of Appeals of Indiana | Memorandum Decision 61A01-1609-CC-2141 | June 1, 2017   Page 8 of 8