672 N.E.2d 1021 | Ohio Ct. App. | 1996
Appellants, Elliot and Darlene Janos, appeal the Medina County Court of Common Pleas' grant of summary judgment in favor of appellee, Norman Murduck.
On August 21, 1993, the parties entered into a contract for the sale of the windows. Norman Murduck told the Janoses that prepayment in full was required before he would order the windows. Norman told the Janoses he would order the windows on August 23, 1993. Darlene Janos signed two checks payable to Berea Pre-Hung Door for a total amount of $3,913.30.
The Janoses never received their windows. Several weeks passed by and they contacted Susan Murduck about the delivery date. Susan represented that the windows would be delivered. Unconvinced, the Janoses drove back out to the business in the middle of October 1993. They discovered a closed store empty of merchandise. Berea Pre-Hung Door had by this time filed for bankruptcy and liquidated its inventory. Unable to get their payment refunded, the Janoses sued Berea Pre-Hung Door as well as all the Murducks.
During the litigation the Janoses dismissed their claims against Glenn and Susan Murduck. The remaining issue was whether the Janoses could hold Norman personally liable for their claims of fraud and violations of the Consumer Sales Practices Act. Norman moved for summary judgment and argued that only Berea Pre-Hung Door, as an incorporated business, could incur liability, because the Janoses had failed to assert any genuine issues of material fact necessary to pierce Berea Pre-Hung Door's corporate veil. The Janoses responded in opposition to the motion for summary judgment. The trial court agreed with Norman, finding that the Janoses "have not alleged any facts nor presented any evidence to hold Defendant Norman Murduck personally liable for the debts of Berea Pre-Hung Door, Inc." The Janoses appeal the trial court's grant of summary judgment. *587
A corporation is a legal entity, separate and apart from the natural persons who formed it, and it constitutes a legal fiction designed to promote the transaction of business. OhioBur. of Workers' Comp. v. Widenmeyer Elec. Co. (1991),
A court can permit a plaintiff to hold a shareholder personally liable for the debts of a corporation only if the shareholder is indistinguishable from the corporate entity.Belvedere, supra,
We first address the Janoses' allegation that Norman Murduck engaged in an unfair consumer sales practice. R.C.
"(A) It shall be a deceptive act or practice in connection with a consumer transaction for a supplier:
"(1) To advertise or promise prompt delivery unless, at the time of the advertisement, the supplier has taken reasonable action to insure proper delivery;
"(2) To accept money from a consumer for goods or services ordered by mail, telephone, or otherwise and then permit eight weeks to elapse without:
"(a) Making shipment or delivery of the goods or services ordered;
"(b) Making a full refund;
"(c) Advising the consumer of the duration of an extended delay and offering to send him a refund within two weeks if he so requests; or
"(d) Furnishing similar goods of equal or greater value as a good faith substitute."
Obviously, a corporation can incur liability for violating Ohio Adm. Code
The evidence introduced by the Janoses in their response in opposition to the motion for summary judgment indicates that a genuine issue of material fact exists as to whether Murduck violated Ohio Adm. Code
Pursuant to Ohio Adm. Code
The second issue is whether the Janoses can pierce Berea Pre-Hung Door's corporate veil to hold Murduck personally liable for potentially violating Ohio Adm. Code
At his deposition, Murduck testified that Berea Pre-Hung Door was incorporated under the laws of Ohio and that he was president and the sole shareholder. Murduck also testified that his former wife, Susan, was the secretary-treasurer. In her affidavit, Susan indicated that she did sign checks but that she did not take the Janoses' deposit. Furthermore, the evidence indicated that Norman ultimately approved the contract with the Janoses because he took their check, indicated an order date, and requested payment in full.
We believe that the state of this evidence demonstrates that Murduck exercised a degree of control over Berea Pre-Hung Door to render it indistinct as a corporate entity. Murduck was the owner and top executive, approved the transaction, and had the authority to represent to the Janoses that an order for the windows would be made. Furthermore, as Murduck testified in his deposition, he founded the company and did a substantial part of the work including customizing the windows and providing installation services. Therefore, Berea Pre-Hung Door did not exist separately from Norman Murduck.
Second, a genuine issue of material fact exists as to whether Norman used the corporate entity to deceive the Janoses. The Janoses' affidavits indicate that within weeks after the contract was entered into, Berea Pre-Hung Door closed for business and liquidated its inventory. In his deposition, Norman explained that he tried to get the windows but was forced into bankruptcy approximately a week before the Janoses returned to the store in October. He further testified that he did not know the bankruptcy would occur until that week prior to the Janoses' return because of a change in operation by his main supplier. He stated *590 that the supplier used to allow orders to go through without full payment up front. However, the supplier now required payment in full prior to filling orders. Norman testified that he did not have cash on hand to pay his main supplier for his customers' orders.
In addition to this testimony, the Janoses' affidavits stated that Norman never represented that Berea Pre-Hung Door was a corporation. Darlene indicated that Norman told her to make the check payable to "Berea Pre-Hung Door" without a corporate designation. Elliot stated that he never received any documents containing a corporate designation. Furthermore, the contract contained only the name Berea Pre-Hung Door without any corporate designation.
This court determines that the Janoses raised a genuine issue of material fact. First, the proximity of the bankruptcy to the sale gives rise to the inference that Norman sold the windows in anticipation of the bankruptcy. Although Norman testified in his deposition that the bankruptcy occurred without warning, this testimony does not eliminate the inference. Furthermore, the record does not reveal that Norman ever represented to the Janoses that Berea Pre-Hung Door was a corporation. This raises the issue of whether he can use the corporate form as a means to escape liability after the transaction.
The last element is whether Norman's actions resulted in an injury to the Janoses. The Janoses paid full price to Norman for windows they never received. The state of the evidence indicates that reasonable minds could conclude that Norman caused the loss of their money.
In sum, the Janoses raised a genuine issue of material fact concerning Norman's personal responsibility for the debts of Berea Pre-Hung Door for violating the Consumer Sales Practices Act. Therefore, the trial court improperly granted summary judgment as to this claim.
The trial court, however, correctly granted summary judgment as to the claim of fraud. In order to prove fraud, a plaintiff must show (1) a representation or, where there is a duty to disclose, concealment of a fact (2) that is material to the transaction at hand, (3) made falsely, with knowledge of its falsity, or with such utter disregard and recklessness as to whether it is true or false that knowledge may be inferred, (4) with the intent of misleading another into relying upon it, (5) justifiable reliance upon the representation or concealment, and (6) a resulting injury proximately caused by the reliance.Burr v. Stark Cty. Bd. of Commrs. (1986),
Unlike a claim brought under R.C.
"A cause of action for fraud is more difficult to prove because one of the essential elements that must be proven is the state of mind of the alleged perpetrator of the fraud. As we noted before, this difficulty was part of the reasoning behind the language of the Consumer Sales Practices Act. The legislature sought to make it easier for a consumer to recover damages from a supplier, without having to prove that the supplier possessed scienter." Id. Upon review of the record, this court determines that the Janoses failed to raise a genuine issue of material fact concerning scienter. Therefore, the trial court correctly granted summary judgment in favor Norman Murduck regarding the claim of fraud.
Judgment affirmed in part, reversed in part and cause remanded.
BAIRD, P.J., and SLABY, J., concur.