Christl SIMONS, Aрpellant, v. PARK CITY RV RESORT, LLC and Doug N. Sorensen, Appellees.
No. 20131181-CA.
Court of Appeals of Utah.
July 9, 2015.
2015 UT App 168
R. Stephen Marshall, for Appellees.
Judge STEPHEN L. ROTH authored this Memorandum Decision, in which Judges JAMES Z. DAVIS and MICHELE M. CHRISTIANSEN concurred.
Memorandum Decision
ROTH, Judge:
¶ 1 Plaintiff Christl Simons appeals from the grant of summary judgment in favor of Defendants Neil H. Sorensen Construction Co. (NSC), Park City RV Resort, LLC (PCRV), and Doug N. Sorensen (collectively, the Defendants) on her alter ego claim and to Sorensen individually on her unjust enrichment claim. We affirm.
¶ 2 Sorensen is the sole owner of NSC and serves as its president. Simons entered into a construction contract with NSC to build her home for $363,829, plus any additional costs incurred for any changes she requested to the original plans. The contract price included NSC‘s profit. In total, Simons paid NSC just over $404,000 for the project. After completion of construction, Simons noticed that several components of the home were unfinished, not built in accordance with the specifications, or defective. The most serious problems resulted in water and mold damage to Simons‘s home. Simons requested that NSC remedy these problems, but NSC refused. The cost of repairing those problems was $74,000.
¶ 3 Simons then filed this case against NSC and Sorensen, as well as against PCRV, a small limited liability company of which Sorensen is a member and the manager.2 Simons‘s complaint asserted a number of claims, including breach of contract, breach of the covenant of good faith and fair dealing, alter ego, and unjust enrichment. In response to two separate summary judgment mоtions, the district court granted summary judgment to the Defendants, dismissing all but the contract claims against NSC. When NSC failed to defend on the contract claims, the district court granted Simons judgment against NSC in the amount of $269,285, including, among other things, $100,000 for overpayment on the contract and $74,000 for repairs to be made by third parties after NSC refused to remedy the problems in Simons‘s home.
¶ 4 Simons now appeals, asserting that the district court erred in granting summary judgment to the Defendants on the alter ego claim and to Sorensen on the unjust enrichment claim. Summary judgment is appropriate only when “no genuine issue as to any material fact [exists] and ... the moving party is entitled to a judgment as a matter of law.”
I. Alter Ego
¶ 5 “‘Ordinarily a corporation [or limited liability company] is regarded as a legal entity, separate and apart from its stockholders.‘” Lodges at Bear Hollow Condo. Homeowners Ass‘n v. Bear Hollow Restoration, LLC, 2015 UT App 6, ¶ 13, 344 P.3d 145 (quoting Jones & Trevor Mktg., Inc. v. Lowry, 2012 UT 39, ¶ 13, 284 P.3d 630).3 “The purpose of such separation is to insulate the stockholders from the liabilities of the [corporate entity], thus limiting their liability to only the amount that the stockholders voluntarily put at risk.” Id. (citation and internal quotation marks omitted). A party “may pierce the corporate veil and obtain a judgment against the individual shareholders ... [for] a cause of action [that] arose from a dispute with the corporate entity” if the plaintiff proves that the corporation is acting as an alter ego of its shareholders. Id. (citation and internal quotation marks omitted). Courts grant such relief, however, “only reluctantly and cautiously.” Id. (citation and internal quotation marks omitted).
¶ 6 To make a case for piercing the corporate veil, the plaintiff must demonstrate both parts of what has become known as the Norman test. Id. ¶ 14. “The first part of the test, often called the ‘formalities requirement,’ requires the movant to show ‘such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist‘” Id. (quoting Norman v. Murray First Thrift & Loan Co., 596 P.2d 1028, 1030 (Utah 1979)). In Colman v. Colman, 743 P.2d 782 (Utah Ct. App. 1987), we identified “[c]еrtain factors which are deemed significant, although not conclusive, in determining whether [the formalities requirement] has been met.” Id. at 786. These factors include
(1) undercapitalization of a one-man corporation; (2) failure to observe corporate formalities; (3) nonpayment of dividends; (4) siphoning of corporate funds by the dominant stockholder; (5) nonfunctioning of other officers or directors; (6) absence of corporate records; [and] (7) the use of the corporаtion as a facade for operations of the dominant stockholder or stockholders....
Id. (footnotes omitted). “The second part of the [Norman] test, often called the ‘fairness requirement,’ requires the movant to show that observance of the corporate form would sanction a fraud, promote injustice, or condone an inequitable result.” Lodges at Bear Hollow, 2015 UT App 6, ¶ 14, 344 P.3d 145.
¶ 7 “‘To survive a motion for summary judgment on an alter ego theory, the party alleging alter ego liability must present evidence creating a genuine issue of disputed material fact with respect to both elements of the Norman alter ego test.‘” Id. ¶ 12 (quoting Jones & Trevor Mktg., 2012 UT 39, ¶ 25, 284 P.3d 630); see also Orvis, 2008 UT 2, ¶ 18, 177 P.3d 600 (explaining that when the party opposing summary judgment has the burden of proof at trial, that party “‘must set forth specific facts showing that there is a genuine issue for trial‘” (quoting
¶ 8 Simons contends that she did make а showing sufficient to withstand summary judgment. In support of her position, Simons cites her version of the facts and argues why her evidence demonstrates a dispute of material fact regarding alter ego.
¶ 9 The shortcomings in Simons‘s briefing are particularly apparent with respect to the formalities requirement of the Norman test. Simons contends that she “presented evidence of most, if not all, of the ... seven Colman factors.” She fails to demonstrate, however, that her evidence created a material dispute about any of these factors or, more broadly, about whether NSC, PCRV, and Sorensen shared a “‘unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist.‘” See Lodges at Bear Hollow, 2015 UT App 6, ¶ 14, 344 P.3d 145 (quoting Norman, 596 P.2d at 1030). Indeed, Simons makes only a limited effort to demonstrate how her evidence can be construed as establishing any particular Colman factor. She simply cites this evidence and contends that it supports the Colman factors with little specific analysis of how it does so.4 Three examples illustrate this problem.
¶ 10 First, in what appears to be an attempt to demonstrate primarily the first Colman factor, i.e., that NSC was an undercapitalized one-man corporation, Simons asserts that she presented evidence showing that Sorensen was the sole owner and president of NSC, that NSC allowed Sorensen‘s wife to keep its books but that Sorensen was ultimately responsible for all business and financial decisions, and that NSC failed to remedy the defects in Simons‘s home due to insolvency despite her having paid $404,000 to construct the home. This evidence, on its own, however, is insufficient to raise a material issue about whether NSC was undercapitalized. Indeed, “[t]o determine whether a corporation is adequately capitalized, one must compare the amount of capital to the amount of business to be conducted and obligations to be fulfilled.” Lodges at Bear Hollow, 2015 UT App 6, ¶ 17, 344 P.3d 145 (citation and internal quotation marks omitted). And “some courts have taken the view that where the party alleging alter ego has failed to establish what an adequate level of capitalization would be, its evidence on undercapitalization is insufficient to create an issue for the jury.” Id. (citation and internal quotation marks omitted). Simons does not merely fail to show “what an adequate level of capitalization would be,” see id. (citation and internal quotation marks omitted); she does not cite any evidence of NSC‘s capital, profits, or liabilities and instead relies solely on speculation that because NSC is solely owned by Sorensen, managed by Sorensen and his wife, and eventually ended up insolvent, it must have been undercapitalized in the first place.5
¶ 11 A second example involves Simons‘s claims regarding Sorensen‘s use of NSC funds. Simons alleges that the evidence
¶ 12 A final example is Simons‘s allegations regarding NSC‘s recordkeeping, which seem aimed at establishing failure to observe corporate formalities (the second Colman factor) and the absence of corporate records (the sixth Colman factor). Simons alleges that there was evidence that she had paid at least $404,000 for the home and NSC can only account for $276,005 in expenditures and profits for the construction in аccordance with their “cost plus fixed profit” arrangement. As support, Simons cites what appear to be some NSC ledgers from the time of construction as well as her own accounting of the project‘s costs. Simons contends that this evidence created a material dispute about whether NSC kept adequate corporate records and observed corporate formalities. But she provides no information about the scope of the ledgers or who created them and for what purpose. Indeed, by her own admission, Simons provided only NSC‘s incomplete accounting of her project. Thus, Simons seems to be asserting that the court could infer from the simple absence of a complete set of records that NSC failed to maintain records or to observe corporate formalities. As discussed above, however, Simons has not demonstrated that she made efforts to obtain this infоrmation; she does not actually focus on the issue of whether the incomplete records she describes are indeed the only records NSC kept. Thus, Simons has provided insufficient evidence from which such an inference can be made. See State v. Cristobal, 2010 UT App 228, ¶ 16, 238 P.3d 1096 (explaining that an inference can be made only when “the facts can reasonably be interpreted to support a conclusion that one possib[le explanation] is more probable than another“). Moreover, even if NSC did fail to keep accurate records of her house project, Simons has not made a meaningful attempt to analyze how the failure to maintain thorough accounting records on one project creates a material issue of fact about whether the entity failed to observe corporate formalities or keep corporate records per Colman.
¶ 13 In addition to these three examples, Simоns cites some additional evidence purporting to show irregularities in NSC‘s accounting. She does not explain, however, how that evidence establishes any particular Colman factor or is otherwise legally significant to her alter ego claim.6 Nor does she
¶ 14 It is true that a party need not show all the Colman factors to establish an alter ego claim because even a single factor may have conclusive weight under the particular circumstances. Lodges at Bear Hollow, 2015 UT App 6, ¶ 14, 344 P.3d 145. Simons, however, has simply failed to analyze the facts in any wаy that adequately demonstrates genuine issues of material fact regarding any particular Colman factor or an aggregation of those factors. Without such a showing, Simons has not established that there was a basis for denying summary judgment on her alter ego claim.8 Accordingly, we affirm the district court‘s grant of summary judgment to the Defendants on the alter ego claim.
II. Unjust Enrichment
¶ 15 Unjust enrichment is an equitable remedy that can be brought to bear where one person confers a benefit on аnother under circumstances where it would be inequitable for the other to retain the benefit without paying for it. Davies v. Olson, 746 P.2d 264, 269 (Utah Ct. App. 1987). “It is not enough that a benefit was conferred on the defendant, rather, the enrichment to the defendant must be unjust in that the defendant received a true windfall or something for nothing.” Richards v. Brown, 2009 UT App 315, ¶ 29, 222 P.3d 69 (citation and internal quotation marks omitted). Put another way, the plaintiff must show the defendant received a benefit and the value of that benefit, not simply that the plaintiff suffered a loss. Id.
¶ 16 Simons сontends that through payments made during the home construction, she conferred upon Sorensen a benefit of approximately $100,000.9 Simons reasons that Sorensen inequitably retained this benefit because she paid $404,000 to NSC to construct her home and because NSC failed to remedy the problems to her home, which ultimately cost an additional $74,000 to fix, despite the fact that NSC can only account for payments amounting to $276,005 for materials, subcontractors, and profit. While Simons‘s argument may support a conclusion that NSC received thousands of dollars more than it should have, she has not persuaded us that there are material facts in dispute about whether Sorensen was unjustly enriched so as to preclude judgment in his favor as a matter of law.
¶ 17 Specifically, Simons has failed to demonstrate that she conferred a benefit upon Sorensen under circumstances where it would be inequitable for him to retain that benefit. First, the undisputed evidence demonstrates that none of Simons‘s payments on the home construction project were made directly to Sorensen. Second, Simons fails to
¶ 18 First, Simons presented no evidence that she conferred a benefit upon Sorensen himself. In his motion for summary judgment, Sorensen identified undisputed evidence that shows that Simons entered into a contract with NSC to construct her home and that she made all payments to NSC, not to Sorensen. The undisputed evidence also demonstrates that Sorensen did not receive any payments under the contract, except to the extent that contract payments may have indirectly helped fund his salary as an employеe of NSC or other disbursements. See Lodges at Bear Hollow, 2015 UT App 6, ¶ 20, 344 P.3d 145 (explaining that, in cases where the party opposing summary judgment is the plaintiff, the party moving for summary judgment satisfies its initial burden by showing that there are no disputes of material fact). Although Simons purports to have disputed these claims in her opposition to summary judgment, she fails to identify any evidence that counters Sorensen‘s showing that she entered into a contract with NSC alone and that she made all payments to NSC, not Sorensen. Rathеr, Simons simply makes an argument about how the payments ought to be construed given NSC‘s and PCRV‘s relationship with Sorensen and their failure in Simons‘s view to observe corporate formalities.
¶ 19 Second, Simons has directed us to no evidence that supports her claim that Sorensen was inequitably benefitted by the $100,000 overpayment to NSC. Rather, this claim seems to be based on her assertion that Sorensen “personally stripped [the funds] out of NSC,” resulting in NSC being financially unable to pay the judgment she obtained against that corporation. But, as we discussed above, she did not provide any evidence in her opposition to the motion for summary judgment on the alter ego cause of action to establish such a claim as more than a mere assertion. And although Simons filed a separate opposition to summary judgment on the unjust enrichment claim, she does not brief the evidence presented in that opposition in any meaningful way on appeal.10 Rather, she merely makes bare statements of fact that, although perhaps suggestive of benefit to Sorensen (e.g., NSC‘s payment of Sorensen‘s personal credit cards, NSC‘s lending to Sorensen, and NSC‘s payments to PCRV), do not amount to evidence that Sorensen in fact benefitted under circumstances where it was inequitable for him to retain that benefit.
¶ 20 Without a showing that Sorensen was inequitably benefitted, Simons has failed to make out a claim for unjust enrichment that can survive summary judgment. See id. (explaining that once the moving party has made its initial showing of no material facts, “the burden then shifts to the nonmoving party, who may not rest upon the mere allegations or denials of the pleadings, but must set forth specific facts showing that there is a genuine issue for trial” (citation and internal quotation marks omitted)). Accordingly, we also affirm the district court‘s grant of summary judgment to Sorensen on the unjust enrichment cause of action.
¶ 21 In conclusion, Simоns has not carried her burden of showing that there were genuine disputes of material fact to preclude summary judgment on either the alter ego or unjust enrichment cause of action. Therefore, we affirm the grant of summary judgment to the Defendants on the alter ego