Florence Cement Co. v. Vettraino
292 Mich. App. 461
| Mich. Ct. App. | 2011Background
- Florence Cement sues Shelby-related entities and individuals after Shelby failed to fully pay Florence for a concrete/asphalt contract.
- Shelby, initially with Essad, Bencivenga, and Vettraino as members, later added A.V. Investment replacing Vettraino; Florences’s contract arose in 2003–2006 development financing.
- Shelby obtained multiple Comerica Bank loans; members personally guaranteed and controlled funds and distributions to themselves.
- Essad and Bencivenga loaned money to Shelby; Shelby reimbursed them directly for certain preconstruction costs; some distributions were treated as loans.
- In 2005–2006, distributions and alter-ego/undercapitalization concerns prompted Florence to seek veil-piercing and recovery of funds; trial court entered partial judgment and dismissed other claims.
- On appeal, the court reverses, pierces the veil, and remands to address all unlawful distributions and joint/several liability under MCL 450.4308.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Piercing the corporate veil proper? | Florence seeks veil piercing due to instrumentality and fraud. | Defendants contend no veil piercing; Shelby’s separate existence protected. | Yes; veil pierced; Shelby treated as alter ego and fraud committed. |
| Distributions while insolvent were improper? | Florence argues all unlawful distributions must be compensated to Shelby. | Defendants contend only certain distributions were improper. | Court holds multiple distributions were improper; remand to recover all. |
| Joint and several liability of members? | Florence seeks joint and several liability for unlawful distributions. | Essad/Bencivenga argue limited liability as to distributions. | Members liable joint and severally under MCL 450.4308; remand for proper judgment. |
| Due process on amended pleadings (Essad cross-appeal) | Florence violated by not pleading distribution claim. | Consent via trial on statutory claim; amendment allowed post-trial. | Due process not violated; claim tried with consent; waiver did not prejudice. |
| Remedy and remand scope | All unlawful distributions should be refunded to Shelby so Shelby can satisfy Florence. | Remand limited to previously identified distributions. | Remand to modify judgment; refund all unlawful distributions to Shelby. |
Key Cases Cited
- Dressel v Ameribank, 468 Mich 557 (1963) (veil-piercing and statutory considerations; corporate form disregard when appropriate)
- Rymal v Baergen, 262 Mich App 274 (2004) (discussion of veil-piercing and undercapitalization factors)
- McManamon v Redford Charter Twp, 273 Mich App 131 (2006) (statutory and procedural considerations in remedies)
- Foodland Distrib v Al-Naimi, 220 Mich App 453 (1996) (statutory interpretation and distributions under corporate/LLC law)