MBAHABA v. Morgan
44 A.3d 472
N.H.2012Background
- Plaintiff Regina Mbahaba sues Thomas Morgan and Biren Properties regarding lead-paint injuries to her child in a rental unit managed by Morgan's LLC.
- Morgan owned Property Management Services LLC, which contracted with Biren Properties to manage the building; the LLC employed a receptionist/bookkeeper and operated the tenancy.
- Lead exposure hazards were found after a DHHS inspection; the child was poisoned by lead paint in the apartment rented June 2005–July 2006.
- Plaintiff asserted Morgan personally participated in the conduct causing injury, not merely acting as an LLC manager; claims against Morgan personally were dismissed, but LLC claims proceeded.
- Morgan created a new LLC with the same address/phone, moved clients to it, and ceased operation of the old LLC; the old LLC’s assets were minimal.
- Plaintiff amended the writ to pierce the LLC veil; the trial court granted summary judgment against veil-piercing claims but severed them from Biren Properties.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Morgan can be personally liable for negligent conduct | Mbahaba asserts Morgan’s personal duty to investigate and warn; his supervision and knowledge create personal liability. | RSA 304-C:25 bars personal liability merely from LLC membership/management; no individual duty absent independent tort. | Plaintiff’s negligent-duty claim survives; Morgan may be personally liable for his own tort. |
| Whether a tort duty arises independently of the contractual relationship | Sargent-style duties apply due to knowledge/control over dangerous conditions. | Duty arises only from contract to the extent of the LLC. | A tort duty can arise independent of contract; defendant may be liable for personal misfeasance. |
| Whether the LLC veil should be pierced to hold Morgan liable for the LLC's debts | Transfer of accounts to a new LLC and failure to insure indicate injustice; veil piercing warranted. | Right to form a new LLC and move assets; veil piercing not warranted absent injustice. | Genuine issues of material fact exist regarding asset transfer; summary judgment on veil piercing improper |
| Effect of transferring assets and client base to a new LLC on veil-piercing analysis | Fresh-start transfer demonstrates misuse of the corporate form to promote injustice. | New LLC formation is lawful; prior assets remain insufficient to pierce. | Summary judgment improper; issues remain to determine if piercing is warranted. |
Key Cases Cited
- Sargent v. Ross, 113 N.H. 388 (1973) (landlord negligence is ordinary tort liability, not special rule)
- Terren v. Butler, 134 N.H. 635 (1991) (veil-piercing tied to post-claim asset distribution and injustice)
- Druding v. Allen, 122 N.H. 823 (1982) (veIl-piercing considerations in corporate contexts)
- Norwood Group v. Phillips, 149 N.H. 722 (2003) (separate legal entities; veil-piercing when injustice or fraud)
- Kline v. Burns, 111 N.H. 87 (1971) (landlord knowledge supports duty to tenant)