*1 (Aft Rem) Soloman v Wstrn Hills 1981] SOLOMANv WESTERN HILLS DEVELOPMENT COMPANY (AFTER REMAND) 4, 1981, February Lansing. Docket No. 47913. Submitted Decided 7, October 1981. Emily George brought J. Soloman and C. Soloman an action Development Company, the Western Hills Claude O. Jr., Darby, MacArthur, Son, Inc., Ivan A. & Claude O. Sr., Darby, Dorothy MacArthur, Banwell, J. Robert G. Banwell, seeking specific performance agree- Sheila T. of an or, alternative, property, ment to sell certain real in the for damages for breach that contract. The defendants moved for summary judgment ground plaintiffs on the that the failed to upon granted. plaintiffs state a claim which relief could be appealed Appeals, in the Court of which reversed the decision trial court and remanded the case for trial. Mich trial, Following the trial court found the sales valid, breached, to be that the contract had been specific performance impossible of a because sale of the property good-faith purchasers, Emily and awarded damages against Western and Ivan A. MacArthur and Claude Darby, Jr., capacities O. in their as Western stockholders. A against George of no cause of action was entered C. Western, Soloman in favor of all the defendants. Claude O. Jr., Darby, appeal. and Ivan A. MacArthur Held: disregarding corporate entity 1. The trial court erred to find defendants MacArthur and Claude O. liable damages. finding improper for No was made that an use of the inequity Emily form was involved. No J. Soloman limiting liability damages is involved in for to Western. Its merger Development Company with Elms Road renders that company any liable for of Western’s liabilities. properly damages 2. The trial court held that were [2] [3, [1] [4] [6] 29 Am Jur 77 Am Jur 22 Am Jur 18 19 Am Jur Am Jur 77 Am Jur 2d, Corporations 2d, 2d, 2d, Corporations 2d, Damages Reference 2d, Evidence §§ Vendor and Vendor and Purchaser § 296. Purchaser §§ § Points 1508. 142. 13-16. §§ Headnotes §§ 519, 529. 522. App 257 Emily the benefit J. Soloman so toas determined amount determination 3. The trial court’s requiring award *2 proof, of the vacation was based on insufficient of the to a determination trial limited remand for a new and damages. amount of part, remanded. part, in and in reversed Affirmed part. J., part He dissented in in and Beasley, concurred against judgment Western’s of the the reversal would hold that However, proper. the he would affirm stockholders is presented Western, holding that sufficient evidence support findings to amount of of the trial court as the the part part. damages. and reverse He would affirm Opinion of the Court Corporate Entity — Corporations — Stockholders. 1. entity entirely corporation Generally, as an law treats a the stockholders, its is separate even where all stock from its however, corpo- person; of a by a court’s treatment one owned equity entity of based on the facts on notions should rest rate ignored case, corporate entity may where the the be of the and its community between the and stock- of interest they justice great should be consid- so that to serve holders is same, corporate entity used to or where the is one and the ered justify confidence, legal obligations, a public avoid defeat fraud, crime, wrong, protect the ends of or to subvert defend justice. — Corporations Mergers — — Liabilities 2. and Consolidations Statutes. merger following surviving corporation, a or consolida- A new or obligations tion, of the is all the and of each liable for liabilities (MCL 450.1722[2]; merged corporations MSA or consolidated 21.200[722][2]). Bargain — Damages — — — 3. of the Contracts Breach Benefit Rescission. Generally, damages of a breach a the measure of seller’s bargain; of in cases involv- contract is the benefit the buyer ing is a the of land a not the breach of contract for sale bargain of unless the seller acted entitled to the benefit only be to the amount which would bad faith but is entitled rescission, money already paid, normally the reasonable on plus expenses. interest and v Wstrn Opinion of the Court Damages Property — — — 4. Real Contracts Breach. who, property, title, A seller of notwithstanding real seized of a sell, convey conveys nevertheless refuses to ato faith, party damages buyer third may acts in bad by measured benefit Damages Property — — — — 5. Real Contracts Breach Benefit Bargain.
Damages convey property for failure to real based on the benefit bargain generally by calculating are measured agreed-upon price difference between the sales and the value property breach, damages at the time of the but the need certainty. not be to a shown mathematical by Beasley, Partial J. Concurrence Partial Dissent Damages Appeal. — — — 6. Contracts Breach support ñnding Evidence to an action for breach property injured party of contract to sell real so as to bargain overwhelming the beneñt of the need not be to with- challenge appeal. stand a on *3 Kesten,
Sanford plaintiff. for Neithercut, Dillard, Klapp, Shegos & for defen- dants. C.J., Danhof,
Before: and R. M. Maher Beasley, JJ..
Per Curiam. Defendants Develop- Western Hills ment Company, Jr., Claude O. Darby, and Ivan A. Mac appeal Arthur by right the of the court, trial trial, entered following a bench award- ing plaintiff J. Emily Soloman in the $4,100 amount of for breach of a sell land. 15, 1969,
On October Emily J. Soloman entered purchase into a agreement with Western Hills (Western) Development Company for the sale of lot #141 the proposed Western Hills Subdivision No. 5 located agreement Genesee County. stated that the purchase was to be consummated App 257 Opinion the Court of purchase for the exchange of a deed by delivery Mrs. $8,000 plat is recorded”. price of "when executing a of when paid deposit $100 agreement. this two incorporated by and owned was
Western 50 percent owned A. MacArthur entities. Ivan was remaining percent stock, and the Corporation, Investment by the Genesee owned O. was shareholder. Darby, which Claude also as of Western but was president served Darby Inc., Son, Son, Darby & Inc. & Darby broker han- real business and estate engaged Sabuco, an Soloman. Gil V. Emily dled sale Son, Inc., pur- obtained the & employee Darby that Mrs. Soloman agreement and testified chase unplatted informed that land was owned Jr., signed pur- by Claude O. Western. Western, but did not agreement chase on behalf status. agency indicate his proceed decided not to
In June of Western plat. No formal development proposed held, to abandon meeting was decision Neithercut, Darby and Ed project by was made another officer. Western notified Sons, Inc., Mrs. & made to return and efforts were 29, 1972, Darby deposit. Soloman’s On June $100 Son, Inc., & executed a Mrs. Soloman and check to husband, George it Solo- plaintiff mailed to her re- plaintiffs they man. Both testified that never ceived the check. 11, 1974, April comprising
On the tract of land *4 proposed conveyed was to defen- subdivision MacArthur, MacArthur, Rob- dants Ivan Dorothy $55,000. Banwell, As ert and Sheila Banwell above, percent noted Ivan MacArthur was a that shareholder Western. MacArthur testified represent he much” authorized "pretty v Wstrn Opinion of the Court $55,- paid and in the interests his Mac- direction. Darby’s at purchase price plat recorded a Banwell Arthur and Robert 1974, 18, the land and December on subdivision sold previously The lot subdivided. eventually a good- was sold to Mrs. Soloman by Western on it. constructed and a house was purchaser, faith knowledge had no that he MacArthur testified pur- the time he plaintiffs by claims held any after the land was sold Sometime chased the land. Banwells, Western Arthurs and the to the Mac the Elms Road corporation, with another merged exist as a and ceased to Company, corporate entity. separate and to the MacArthurs land was sold After the to return again made Banwells, efforts were In June deposit. Mrs. Soloman’s $100 left them restaurant plaintiffs’ went Sabuco that Plaintiffs indicated deposit. a check for they that to them but a check Sabuco tendered any In agreement. performance insisted on never the check was event, undisputed that it is or cashed. returned 14, 1975, filed suit plaintiffs October
On defendants, specific performance seeking alternative, or, dam- in the agreement purchase initially of contract. Defendants ages for breach to GCR pursuant summary moved for 117.2(1) had plaintiffs ground on the relief could upon a claim which failed to state mo- defendants’ granted The trial granted. judge agreement purchase ruled that tion and did not it contract because not an enforceable this appeal, On performance. a time for specify remanded, holding reversed Court requiring into a valid had entered parties a reasonable within plat to record the the seller *5 App 257 262 110 Mich Opinion of the Court Co, Hills time. Soloman v Western (1979). 577 254; 276 NW2d Mich remand A trial was conducted on bench contract be- which the trial court found valid plaintiff Emily Soloman and defendant tween trial court further found that Western. The 1974, April contract was when breached land, containing the land described unplatted still Soloman, sold to agreement Emily in the Specific perfor- the MacArthurs Banwells. possible held not agreement mance of the good-faith since the land since had resold to a been purchaser, judgment so the trial court entered a against in favor of Soloman Emily Judgment against Western. also was entered de- fendants Ivan A. MacArthur and Claude O. Darby, capacities in their as shareholders Western. A of no cause of action was entered George C. plaintiff Soloman favor of all defendants. appeal, argue
On the individual defendants they should not be held liable and that personally disregarding the trial court erred in Western’s corporate form. This Court has summa- recently rized the corporate circumstances under which the disregarded: form be may "Generally, corporation the law treats a an en- as stockholders, tirely separate entity from its even where person one corporation’s owns all of the stock. Bourne v
Muskegon
Judge,
191;
Circuit
327 Mich
41 NW2d
(1950).
Complete identity of interest between sole
corporation
shareholder
may lead courts to treat
them
purposes.
as one for certain
Williams v American
Co,
(1978).
App 686;
Title Ins
fraud Comm, 57 NW2d The commu- corporation and shareholders nity of interest between that, purposes justice, great meet may be so L A as one and same. they should be considered *6 Underwriters, 316 Mich v Consolidated & Co Walden (1946). a 341, 346; 248 When the notion of 25 NW2d public legal entity is used to defeat corporation as a convenience, protect fraud or defend wrong, a justify crime, corpora- must be set aside and that notion v own it. Paul as the individuals who tion treated Co, 587, 602; 278 NW 283 Mich Motor Sales University (1938). entity corporate different The fiction a 714 was introduced the stockholders themselves from justice, when the ends of but should be convenience and to serve justice it ends it is invoked subvert Paul, supra. A court’s disregarded by the is courts. and clearly rests on notions corporate entity treatment of equity. or it an action at law equity, whether is disregard corporate entity involving Each case Equip- special Brown Brothers on its own facts. rests Comm, App 448; 215 51 Mich Highway Co v State ment (1974).” Kline, App Mich Kline v 104 NW2d (1981). 702-703; 305 NW2d Evangelical Brethren also Armenian See United 322 Mich 34 NW2d Kazanjian, Church v (1948), Co, 353; 262 Gledhill v Fisher & NW noted that
In instant case the trial court formalities ignored corporate regularly Western th and at that the line between blurry”. "very some of the shareholders was least Disregard finding. record this supports not, suffi- alone is corporate formalities addition, fraud, illegal- piercing. cient In justify forth in shown as set injustice need be ity, specifi- in the case Kline. The trial court instant no fraud or that cally held on several occasions 110 op Opinion the Court illegality had defen- been shown the individual corporate Instead, dants’ use of Western’s form. merger the trial court held Western’s Development Company Elms Road and its current separate entity required nonexistence as a find- ing liability equity”: of individual in order to "do corporate
"So the Court is satisfied that veil can pierced be MacArthur, to hold Claude O. A. Ivan individually, because of that failure to lines, follow those and also for the Court to be able to equity do in a really situation where there’s some question of whether Western Hills Com- pany any now has value left to it. And the Court deriving part from what Mr. has said about merged Western Hills has now into Develop- Elms Road ment, or some name corporation. is now another problem So the Court has no equity order to do pierce corporate veil.” regard In this we hold that the trial court erred. Although may it is clear that form *7 disregarded prevent injustice and to reach an equitable injustice result, we believe that sought prevented to be must in some manner corporate relate to a misuse of the form short of illegality. fraud or If otherwise, the rule were an equal injustice inequity or could result. in- The provides example. stant case an The trial court determined that Mrs. Soloman was entitled to damages from Western. Because Western no lon- ger existed, the trial court held MacArthur and Darby apparently believing judg- liable, against corporate ment could not be enforced yet defendant, Western. And the trial court also found that MacArthur and did not misuse dealings Western’s form in their Accordingly, Mrs. Soloman. the trial court’s find- ing liability any of individual in the absence of Soloman v Wstrn Opinion of the Court
improper use of the corporate form is inequitable to MacArthur and Darby. Under the trial court’s reasoning, individual shareholders always may be held liable for the acts of their corporation when- ever that corporation has merged with another corporation exist, and ceased to even where there has been no improper use of the corporate form and even where merger has not been found to have taken place order to avoid the corporate liability. We do not believe that such a rule is either just equitable. Furthermore, the injustice which the trial court believed would result to Mrs. Soloman should the judgment be limited to the corporation does not exist. necessarily Legisla- The ture provided has merger when a place takes surviving is liable on claims against the merged corporation. MCL 450.1722(2); 21.200(722)(2). MSA We also note that Elms Road had Company notice of the instant action since its agent resident is apparently Jr., Claude O. Darby, one of the individual defen- dants and a former shareholder of Western. The trial court’s judgment Ivan A. MacArthur Claude O. is reversed.
The appellants
raise additional
issues regarding
damages which we will
address
terms of defen-
dant Western.
general
rule of damages
for a
seller’s breach of contract
is to
to the buyer
the benefit
See S C Gray, Inc v
Co,
Ford Motor
92 Mich App
810; 286 NW2d
(1979),
lv den Tel-Ex
(1980),.
Mich 869
Plaza,
Inc v
Restaurants,
Inc,
Hardees
App 131, 134; 255
lv den (1977),
NW2d 794
(1977),
Mich 832
Allen v Michigan
Telephone
Bell
Co, Mich App
(1975),
bargain in bad which the seller has acted unless to the amount faith, instead limited but is normally rescission, on recoverable would be expenses. paid plus already money interest Damages, pp 178, The En- § 684-686. McCormick, Michigan recognized glish in Ham- rule was Rep 374, 384-390; 4 Am Hannin, 21 Mich mond v (1870).1 490 generally early involved the breach cases inability land due to the for the sale of
a contract question convey good title. The seller good centered on whether or bad faith the seller’s of defects in the title at the he or she was aware held, made. It was also time the contract was acts in "bad faith” sufficient that a seller having bargain justify when, to title, loss of convey, nevertheless refuses to seller convey due to a when the seller is unable party. voluntary conveying third act such as to a Atkinson, 363 See v 21 Mich Allen Muirhead, 206 NW Haukland v (1925),Hamburger Berman, 78, 84; 203 Mich v (1918), supra, Hammond, 387. This is NW instant case and the trial the situation court was correct determining damages on the plaintiff’s loss of basis buyer
In order to the benefit of bargain damages by usually are measured agreed price difference between the and the value great the matter in as detail More recent cases have not discussed Hammond, however, knowledge to our has not been as Hammond. specifically challenged by the defendant overruled. Hammond was (1913), Root, 418, 428-429; Way but the Court v 140 NW unnecessary question. found it to rule on the *9 Soloman v Wstrn 267 Opinion op the Court Dobbs, at the time of the breach. land Miller, Craine v
Remedies, 12.7-12.8, 832-836, pp §§ Zimmer- (1927), 359; 215 240 Mich NW Miller, man v 599, 607; 173 206 Mich NW Anderson, (1919), Port Investment Co v 103, 104; During trial it App NW2d undisputed proper was that this was measure damages. dispute, In active was the plaintiffs had question proven any whether At damages plain- under this standard. the close moved for dismissal on this proofs, tiffs’ defendants motion was denied. ground, and the depends Resolution of this issue on whether at the time of the breach is value of the land At the time of platted unplatted. determined as platted. land not in fact Based the breach the was the MacArthurs and the price paid by on the acreage, raw defendants Banwells the value of the lot covered the contract placed Since the contract with Mrs. Soloman at $900. $8,000, argued for this lot was defendants price responded Plaintiffs damage. that there was no referred to a lot price that the contract that of the land platted subdivision and the value breach, therefore, time of question at it platted. must be determined as if had been the value of the land at the trial court held though to determined as time of the breach had above, damages for agree. As noted platted we designed give Mrs. breach of this contract are bargained She Soloman the benefit of her $8,000 for a lot for such platted agreed pay though platted a lot. Even the land was not yet breach, the land at the time of the the value of though it were time be determined as must Soloman the benefit platted in order Mrs. good bargain, placing if her as any, of her 110 Opinion op the Court position as she would have been had the contract performed. Accepting position been defendants’ purpose would defeat the of the rule of applicable Testimony presented to this case. during trial sufficient to show that the value of the platted, greater land, $8,000 as than the con- price. Accordingly, adequately tract Mrs. Soloman damaged showed that she had been as a result of breach, and the trial court did not err in *10 denying the motion to dismiss. argued, however,
Defendants also that there was prove lot, insufficient evidence to the value of the platted, as at the time of the breach. While we testimony hold that there sufficient to estab- $8,000 lish that the land was worth more than the price, agree we that the actual value of platted, lot, breach, as at the time of the sufficiently not established. The trial court found $12,000 that the value of the lot was based on the testimony Darby, of defendant Claude O. Jr. that, had testified remembered, so far as he simi- lar $10,000 $12,000. lots had sold for between specifically He stated that he did remember, not however, when these similar lots were sold for prices. Damages such need not be shown to a certainty. Trading, mathematical See Device Ltd v 307 Viking Corp, The 526; Mich (1981). NW2d 362 hand, theOn other we are of the opinion that the in evidence the instant case was justify finding not sufficient to that the value of the land at the $12,000. time of the breach was Under circumstances, these where there is suffi- proof damage proof cient of but insufficient damage, actual amount of that we believe the best course is to remand for a new trial limited to the damages. issue of See Lawton v Gorman Furniture Corp, App 258, NW2d Wstrn v by Beasley, J. Partial Concurrence in damages that suggest not mean We do this to a to be determined be able ever case will that suggest we Nor do certainty. mathematical cannot of breach the time the land at the value $12,000. proofs may specific More to be be found $12,- was indeed the land value of show We do amount. than that or less or more be ascer- damages can believe, than certainty degree greater with tained exists. presently A. Mac- Ivan defendants against
The judgment is reversed. Darby, O. Arthur and Claude affirmed, is Western defendant against judgment and this vacated is the award but for a new trial trial court to the is remanded cause of dam- the amount determination limited to a opinion. this with consistent ages and re- part, in reversed part, Affirmed manded. dissenting (concurring part;
Beasley, J. reversing majority part). I join A. MacArthur Ivan defendants Jr. and Claude O. *11 would, affirm
I Company. defendant Western overwhelm- was not certainly the evidence While evidence enough I hold that there ing, would nonjury in this findings trial support judge’s trial.