524 S.W.3d 584
Mo. Ct. App.2017Background
- From 1996 a drive-through restaurant in Kansas City operated as Steak’m Take’m; in 2007 Steak’m Take’m LLC (Steak’m LLC) was formed with Tressie Lyman as organizer/registered agent.
- In 2009 the Missouri Family Support Division sent three income withholding orders to the restaurant to garnish wages of employee Ervin Ross III for child support; the employer did not withhold or remit payments until December 2013.
- Division communications in 2009–2013 included phone calls and certified mail; the restaurant did not produce payroll/lease records and failed to notify the Division of any employer change.
- In January 2013 Lyman purportedly transferred the restaurant to her brother Ervin Ross Jr., who formed Steak M & Take M LLC (Steak M LLC) and continued operating the same business at the same location, with the same name, employees, phone number, and menu.
- The Division sued to enforce the withholding orders; after a bench trial the circuit court entered joint and several judgment against Steak’m LLC (defaulted), Steak M LLC (successor liability), and Ross Jr. (personal liability) for $44,373.74.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Valid service/default judgment against Steak’m LLC | Division: Steak’m LLC was served and defaulted; judgment proper | Defendants: Steak’m LLC was never properly served (service defective) | Court: Entry of general appearance waived service objection; default judgment affirmed |
| 2. Successor liability of Steak M LLC for Steak’m LLC debts | Division: Steak M LLC is a mere continuation/fraudulent transferee and liable for predecessor's withholding debt | Defendants: Entities were separate, had officers/bookkeeping, no fraudulent intent | Court: Successor liability and fraudulent transfer found—Steak M LLC liable |
| 3. Personal liability of Ervin Ross Jr. | Division: Ross Jr. exercised complete control, undercapitalized the LLC, used it to avoid liability; veil should be pierced | Defendants: No proof of fraud, breach, or statutory violation to pierce veil; withholding began after notice | Court: Veil pierced—Ross Jr. personally liable due to domination, inadequate capitalization, and conduct causing Division's injury |
Key Cases Cited
- Murphy v. Carron, 536 S.W.2d 30 (Mo. banc) (standard of review for court-tried cases)
- Roper Elec. Co. v. Quality Castings, Inc., 60 S.W.3d 708 (Mo. App. 2001) (successor-liability factors and veil-piercing guidance)
- Med. Shoppe Int’l, Inc. v. S.B.S. Pill Dr., Inc., 336 F.3d 801 (8th Cir. 2003) (factors for mere-continuation/successor liability)
- Birkenmeier v. Keller Biomedical, LLC, 312 S.W.3d 380 (Mo. App. 2010) (indicia of fraudulent transfer when intent is rarely shown directly)
- 66, Inc. v. Crestwood Commons Redevelopm’t Corp., 998 S.W.2d 32 (Mo. banc) (three-part test to pierce corporate veil)
- Mobius Mgmt. Sys., Inc. v. W. Physician Search, L.L.C., 175 S.W.3d 186 (Mo. App. 2005) (under-capitalization and asset stripping as grounds for piercing veil)