Court Opinion

ID: 4309480
Source: CourtListenerOpinion
Date Created: 2018-09-03 07:08:51.85083+00
Date Added: 2024-06-11T14:42:56.426185
License: Public Domain

STATE OF MICHIGAN

                            COURT OF APPEALS

PSP STORES, LLC,                                                     UNPUBLISHED
                                                                     August 30, 2018
               Plaintiff-Appellant,

v                                                                    No. 338241
                                                                     Wayne Circuit Court
S. NEIL FORD and SERVICE ANYWHERE,                                   LC No. 16-009068-CB
INC.

               Defendants-Appellees.

Before: CAMERON, P.J., and RONAYNE KRAUSE and TUKEL, JJ.

PER CURIAM.

        Plaintiff, PSP Stores, LLC (“PSP”), appeals as of right the trial court’s order that granted
in part plaintiff’s motion for default judgment. For the reasons provided below, we affirm.

                                        I. BASIC FACTS

       This lawsuit involves the interactions between PSP and two companies (Omni-Care
Group, Inc. and defendant Service Anywhere, Inc.), both of which are owned by defendant S.
Neil Ford. Prior to this litigation, PSP had a contractual agreement (the “Service Agreement”)
with Omni-Care and, possibly, Ford,1 where Omni-Care was to have provided certain services to
PSP. Not having received the services it had bargained for, PSP brought suit against Omni-Care
and Ford, alleging, among other claims, breach of contract. On March 1, 2016, plaintiff, Omni-
Care, and Ford entered into a settlement agreement (the “Settlement Agreement”). The
Settlement Agreement provided that Omni-Care was to pay PSP a total of $20,000, with $10,000
due April 15, 2016, followed by monthly payments of $1,666.67 until the total $20,000 amount

1
  With no copy of the actual Service Agreement appearing in the lower court record and no copy
having been submitted to this Court, we do not know for certain whether Ford was a party to that
Service Agreement. But Ford was a listed party to the subsequent Settlement Agreement, which
stated that Ford also was a defendant to the lawsuit that arose from the alleged breach of the
Service Agreement. Thus, it appears that Ford may have been a party to the initial Service
Agreement, although it certainly is not clear what promises, if any, Ford was obligated to
perform.

                                                -1-
was paid. The Settlement also provided in the “Default on Payment Obligations” section, in
pertinent part, the following:

       Upon any such default that is not cured as expressly provided for above, Omni-
       Care hereby agrees to entry of a consent judgment against Omni-Care in favor of
       PSP in the amount of $31,110.24, plus interest, court costs, reasonable attorneys’
       fees, and other costs incurred or paid by PSP in protecting and/or enforcing its
       rights under this section, but less any payments previously made by Omni-Care to
       PSP pursuant to this Agreement.

       The Settlement Agreement also contained a “Mutual Release” section, where PSP agreed
to

       release and forever discharge Omni-Care and their respective heirs, beneficiaries,
       officers, directors, shareholders, employees, agents, successors, assigns and
       affiliated entities from any and all claims, actions, proceedings, debts, liabilities,
       agreements, controversies, promises, obligations, damages, costs, expenses,
       attorney fees, and demands in tort, contract or any other cause of action or theory
       of liability whatsoever, whether known or unknown, arising out of or related to
       the Service Agreement. Provided, however, PSP’s claims against Defendants
       arising out of breach of this Agreement are excluded from release hereunder.

        When it was time for the payment of the initial $10,000 to PSP under the Settlement
Agreement, no payment was received. PSP provided written notice of default and five days
later, Ford emailed PSP, proposing to amend the Settlement Agreement by modifying the
payment schedule. PSP responded that it would agree to the amendment if Ford agreed to
guarantee Omni-Care’s obligations under the Settlement Agreement. Ford refused, and instead
sent two checks, consistent with the modified payment schedule that Ford proposed.
Consequently, PSP received two checks: one post-dated April 29, 2016, in the amount of $5,000
and another post-dated May 15, 2016, also in the amount of $5,000. The two checks, however,
were drawn on an account of defendant Service Anywhere (and signed by Ford).

      Because PSP did not agree to the modification of the payment schedule, it filed a consent
judgment against Omni-Care, as outlined in the default section of the Settlement Agreement,
which was entered on May 23, 2016, in the amount of $32,760.24.2

        After the consent judgment was entered, PSP attempted to deposit the two checks it had
received from Service Anywhere, but both were returned for insufficient funds. PSP submitted
written demands to Ford to pay the amounts that were represented on the two checks. After
receiving no payments after 30 days, PSP brought the instant action against Ford and Service

2
  Recall that the Settlement Agreement provided that a consent judgment would be entered
against Omni-Care in the event of a breach of the Settlement Agreement for an amount equal to
“$31,110.24, plus interest, court costs, reasonable attorneys’ fees, and other costs . . . .”

                                                -2-
Anywhere. In its complaint, PSP brought six counts: I-Violation of MCL 600.29523 (for one of
the checks); II-Violation of MCL 600.2952 (for the other check); III-Fraud; IV-Alter Ego/Veil
Piercing; V-Promissory Estoppel; and VI-Unjust Enrichment. Defendants Ford and Service
Anywhere were personally served with the summons and complaint on October 14, 2016.

        On November 16, 2016, defaults were entered for both Ford and Service Anywhere. On
November 23, 2016, PSP moved for entry of a default judgment against Ford and Service
Anywhere. And on December 16, 2016, the trial court held a hearing on PSP’s motion for entry
of default judgment. At the hearing, the trial court expressed its doubt as to whether PSP could
pierce the corporate veil to obtain a judgment against Ford. When asked what facts there were to
support this alter ego theory, PSP relied on the fact that Ford signed the checks at issue and
owned both Service Anywhere and Omni-Care. The court found these facts to be insufficient to
pierce the corporate veil and denied PSP’s motion to enter a default against either defendant.
However, with respect to Service Anywhere, the trial court asked PSP to brief the issue of
jurisdiction, which PSP later did.

       On March 8, 2017, PSP filed another motion for entry of default judgment against Ford
and Service Anywhere. At the subsequent hearing, the trial court cited the release section from
the Settlement Agreement and determined that PSP had released Ford from any liability. The
court explained that it had no issue with entering a judgment against Service Anywhere for
writing the bad checks, but PSP could not obtain a judgment against Ford because (1) he was
released in the Settlement Agreement and (2) there were no facts to support a piercing-the-
corporate-veil theory.

        On April 17, 2017, the trial court entered an order consistent with its pronouncements
from the March hearing. Specifically, the trial court granted a default judgment against Service
Anywhere in the amount of $30,500 for violating MCL 600.2952,4 but denied PSP’s motion in
all other respects.

                                        II. ANALYSIS

        The only issue before us is whether the trial court erred when it denied PSP’s motion for
entry of default judgment against Ford. We conclude that the court did not err.

       This Court reviews a trial court’s decision to grant or deny a default judgment for an
abuse of discretion. ISB Sales Co v Dave’s Cakes, 258 Mich. App. 520, 526; 672 NW2d 181

3
 MCL 600.2952 “allows for treble damages for a dishonored check under some circumstances.”
Mich Deferred Presentment Servs Ass’n v Comm’r of Office of Fin & Ins Regulation, 287 Mich
App 326, 328; 788 NW2d 842 (2010).
4
 MCL 600.2952(4) provides that the damages for writing a bad check includes, the full amount
of the check, civil damages of two times the amount of the dishonored check, and costs of $250.
Thus, with two dishonored checks, and each written for $5,000, the court calculated damages of
$15,250 per check ($5,000 + $5,000 x 2 + $250) for a total of $30,500 for the two checks.

                                               -3-
(2003); Barclay v Crown Bldg & Development, Inc, 241 Mich. App. 639, 642; 617 NW2d 373
(2000). A trial court abuses its discretion when it selects an outcome that does not fall within the
range of reasonable and principled outcomes. Pontiac Fire Fighters Union v City of Pontiac,
482 Mich. 1, 8; 753 NW2d 595 (2008). But a trial court’s decision whether to pierce the
corporate veil is reviewed de novo. Foodland Distrib v Al-Naimi, 220 Mich. App. 453, 456; 559
NW2d 379 (1996). And whether a claim properly states a cause of action is a question of law
that we also review de novo. See Eason v Coggins Mem Christian Methodist Episcopal Church,
210 Mich. App. 261, 263; 532 NW2d 882 (1995).

       PSP contends that because it properly pleaded causes of action, including piercing the
corporate veil, against Ford, the trial court should have entered a default judgment against Ford.

         While entry of a default is the equivalent of an admission by the defaulting party, such
admission only extends to all well-pleaded allegations. American Cent Corp v Steven Van Lines,
103 Mich. App. 507, 512; 303 NW2d 234 (1981); see also Kalamazoo Oil Co v Boerman, 242
Mich. App. 75, 79; 618 NW2d 66 (2000). Thus, where a default has been entered, the defendant’s
liability is admitted. Kalamazoo Oil, 242 Mich. App. at 79. However, “a default does not operate
as an admission that the complaint states a cause of action. If the complaint fails to state a cause
of action, it will not support a judgment.” State ex rel Saginaw Prosecuting Attorney v Bobenal
Investments, Inc, 111 Mich. App. 16, 22; 314 NW2d 512 (1981); see also Lindsley v Burke, 189
Mich. App. 700, 702; 474 NW2d 158 (1991) (“[A] complaint that fails to state a cause of action
cannot support a judgment.”).

        In its complaint for claims against Ford, PSP purported to plead causes of action for
fraud, veil piercing, promissory estoppel, and unjust enrichment. At the outset, we note that
piercing the corporate veil is not a separate cause of action. Gallagher v Persha, 315 Mich. App.
647, 655; 891 NW2d 505 (2016). Instead, it simply is a remedy to allow a plaintiff to recover
“from a responsible corporate shareholder.” Id. at 654. As a result, in order to recover under a
piercing-the-corporate-veil theory, PSP had to have established a separate, viable cause of action
and the elements necessary to pierce the corporate veil against Ford.

       We first address whether PSP can pierce the corporate veil.

                A corporation—or other artificial entity—is a legal fiction. It is an
       artificial being, invisible, intangible, and existing only in contemplation of law.
       Absent some abuse of corporate form, courts honor this fiction by indulging a
       presumption—often referred to as the corporate veil—that the entity is separate
       and distinct from its owner or owners. Courts will honor this presumption even
       when a single individual owns and operates the entity. [Green v Ziegelman, 310
Mich. App. 436, 450-451; 873 NW2d 794 (2015) (quotation marks, citations, and
       brackets omitted).]

However, “[w]hen this fiction is invoked to subvert justice, it is ignored by the courts.” Wells v
Firestone Tire & Rubber Co, 421 Mich. 641, 650; 364 NW2d 670 (1984). In order to pierce the
corporate veil, the following elements must be satisfied: “(1) the corporate entity is a mere
instrumentality of another individual or entity, (2) the corporate entity was used to commit a
wrong or fraud, and (3) there was an unjust injury or loss to the plaintiff.” Lakeview Commons v

                                                -4-
Empower Yourself, 290 Mich. App. 503, 510; 802 NW2d 712 (2010). Here, PSP failed to plead
sufficient facts to show that Service Anywhere (or Omni-Care) was a mere instrumentality of
Ford. Instead, PSP’s complaint is filled with generalities and conclusory statements. See Eason,
210 Mich. App. at 263 (“[M]ere conclusions, unsupported by allegations of fact, will not suffice
to state a cause of action.”). When PSP’s counsel was asked point blank at the motion hearing at
the trial court what facts there were to support this theory of recovery, counsel responded that
Ford was the sole owner of both Omni-Care and Service Anywhere and that Ford was the one
who signed and sent the two $5,000 checks that bounced. We agree with the trial court that these
facts are insufficient to show that either company was a mere instrumentality of Ford. The fact
Ford signed the two checks drawn on Service Anywhere’s account is of little significance
because, as plaintiff has already alleged, Ford was the sole owner of Service Anywhere. Thus,
Ford simply signing checks on behalf of Service Anywhere does not demonstrate that he was
using Service Anywhere as a mere instrumentality for himself. Indeed, because Service
Anywhere apparently was attempting to pay the debts of Omni-Care, at best one could possibly
opine that Service Anywhere was a mere instrumentality of Omni-Care. But PSP was seeking to
obtain a judgment against Ford—not Service Anywhere—under a veil-piercing theory.5
Accordingly, with PSP failing to allege facts sufficient to show that Service Anywhere or Omni-
Care was a mere instrumentality of Ford, the trial court properly declined to enter a judgment
against Ford.

       Moreover, assuming PSP had pled sufficient facts to pierce the corporate veil to recover
from Ford individually, PSP failed to allege a viable underlying claim that would support
recovery. In its complaint, PSP alleged claims of fraud, promissory estoppel, and unjust
enrichment.6

        Regarding the fraud claim, PSP alleged that Ford committed fraud by intentionally
making false representations of material facts to PSP regarding his intention to pay according to
the Settlement Agreement. In other words, it appears that PSP alleges that Ford committed fraud
by saying he would perform under the terms of the contract. First, fraud must be pled with
particularity, Cooper v Auto Club Ins Ass’n, 481 Mich. 399, 414; 751 NW2d 443 (2008), citing
MCR 2.112(B)(1), and PSP’s general allegations with no specifics fall well short of meeting this
particularity requirement. Second, PSP’s fraud claim sounds in contract. “It is well settled that
the gravamen of an action is determined by reading the complaint as a whole, and by looking
beyond mere procedural labels to determine the exact nature of the claim.” Adams v Adams (On
Reconsideration), 276 Mich. App. 704, 710-711; 742 NW2d 399 (2007). Here, PSP’s fraud claim

5
 PSP did attempt to get a judgment against Service Anywhere, but that was based on violations
of MCL 600.2952, which was successful.
6
  However, in its brief on appeal, PSP only relies on its claims of fraud and promissory estoppel.
Accordingly, PSP has abandoned any argument related to the unjust enrichment cause of action,
and we decline to address it. See Prince v MacDonald, 237 Mich. App. 186, 197; 602 NW2d 834
(1999).

                                               -5-
purportedly arises from Ford’s promise that he would perform under the contract.7 As this Court
has explained:

       With respect to [fraud interwoven with the breach of contract], the
       misrepresentations relate to the breaching party’s performance of the contract and
       do not give rise to an independent cause of action in tort.

           Such fraud is not extraneous to the contractual dispute among the parties,
           but is instead but another thread in the fabric of [the] plaintiffs’ contract
           claim. . . . [It] is undergirded by factual allegations identical to those
           supporting their breach of contract counts. . . . This fraud did not induce
           the plaintiffs to enter into the original agreement nor did it induce them to
           enter into additional undertakings. It did not cause harm to the plaintiffs
           distinct from those caused by the breach of contract . . . . [Huron Tool &
           Engineering Co v Precision Consulting Servs, Inc, 209 Mich. App. 365,
           373; 532 NW2d 541 (1995) (citations omitted).8]

Accordingly, Ford’s failure to fulfill a promise to pay under the contract, even if done separately
before the contract was executed, is indistinguishable from his failure to fulfill the actual
contractual promise, which sounds in breach of contract. See id. Therefore, because PSP has not
stated a viable fraud claim in its complaint, no default judgment based on fraud can be entered.

       Likewise, PSP’s claim of promissory estoppel also fails.

       In order to invoke promissory estoppel, the party relying on it must demonstrate
       that (1) there was a promise, (2) the promisor reasonably should have expected
       the promise to cause the promisee to act in a definite and substantial manner, (3)
       the promisee did in fact rely on the promise by acting in accordance with its
       terms, and (4) and the promise must be enforced to avoid injustice. [Crown Tech
       Park v D&N Bank, FSB, 242 Mich. 538, 548-549; 619 NW2d 66 (2000).]

However, “[p]romissory estoppel is not a doctrine designed to give a party to a negotiated
commercial bargain a second bite at the apple in the event it fails to prove breach of contract.”

7
  Although PSP does not use this term, this type of fraud is “fraud in the inducement,” which is
fraud that “occurs where a party materially misrepresents future conduct under circumstances in
which the assertions may reasonably be expected to be relied upon and are relied upon.” Custom
Data Solutions, Inc v Preferred Capital, Inc, 274 Mich. App. 239, 242-243; 733 NW2d 102
(2006) (quotation marks and citations omitted).
8
  We note that the Michigan Supreme Court has adopted this rationale in Gen Motors Corp v
Alumni-Bunk, Inc, 482 Mich. 1080 (2008), where it agreed with the dissenting opinion of the
corresponding Court of Appeals opinion, Gen Motors Corp v Alumni-Bunk, Inc, unpublished per
curiam of the Court of Appeals, issued July 24, 2007 (Docket No. 270430) (KELLY, J.,
dissenting), which in turn relied heavily on Huron Tool.

                                                -6-
Gen Aviation, Inc v Cessna Aircraft Co, 915 F2d 1038, 1042 (CA 6, 1990) (quotation marks and
citation omitted). Thus, the written contract (the Settlement Agreement) at the center of this
dispute makes PSP’s promissory estoppel theory inapplicable. See ParaData Computer
Networks, Inc v Telebit Corp, 830 F Supp 1001, 1007 (ED Mich, 1993) (holding that the plaintiff
“cannot rely on promissory estoppel when it has a fully integrated contract for which it can seek
redress”).

         Therefore, with no viably pled underlying claim, PSP cannot recover from Ford
individually, see Lindsley, 189 Mich. App. at 702, the trial court did not abuse its discretion when
it declined to enter a default judgment against him.9

       Affirmed.

                                                              /s/ Thomas C. Cameron
                                                              /s/ Amy Ronayne Krause
                                                              /s/ Jonathan Tukel

9
  Because we have determined that PSP has failed to properly plead any viable causes of action
against Ford, we need not address PSP’s remaining arguments concerning (1) whether the trial
court had the authority to consider whether the Settlement Agreement released Ford from any
liability, and (2) if such authority did exist, whether the court erroneously interpreted and applied
the Settlement Agreement.

                                                -7-