Blackwell v. Superior Safe Rooms LLC

174 N.E.3d 1082

Craig BLACKWELL, Appellant-Plaintiff,

v.SUPERIOR SAFE ROOMS LLC, Michael M. Wharff, Wharff Excavating, LLC, John H. Byers, Jr., Appellees-Defendants.

Court of Appeals Case No. 20A-PL-2081

Court of Appeals of Indiana.

FILED July 7, 2021

Attorney for Appellant: R. C. Richmond III, Taft Stettinius & Hollister LLP, Indianapolis, Indiana

Attorneys for Appellee: B.J. Brinkerhoff, Alexandra J. Blackwell, Hannah K. Joseph, Jeselskis Brinkerhoff and Joseph LLC, Indianapolis, Indiana

Bailey, Judge.

Case Summary

[1] Craig Blackwell ("Blackwell") and Superior Safe Rooms, LLC ("Superior"), entered into a written proposal for Superior to sell a safe room to store valuables and serve as a storm shelter to Blackwell and install it in his residence. Blackwell subsequently sued Superior for breach of contract and obtained a default judgment against Superior due to its failure to comply with an order compelling it to respond to Blackwell's discovery requests. Blackwell filed motions for proceedings supplemental and ultimately added as garnishee defendants Wharff Excavating, LLC ("Wharff Excavating"), Michael M. Wharff ("Wharff"), and John H. Byers ("Byers") (collectively, "Garnishee Defendants"¹ ).

Blackwell now appeals the trial court's denial of his Motion to Pierce Judgment Defendant's Corporate Veil and Hold Garnishee Defendants Liable for Plaintiff's Judgment. The only issue is whether the trial court clearly erred when it refused to disregard Superior's corporate form and hold Garnishee Defendants liable.

[2] We reverse.

Facts and Procedural History

[3] In June of 2015, Wharff met with Blackwell at the latter's home and the two men discussed the installation of a safe room in Blackwell's home. During that discussion, Blackwell asked Wharff "who would be performing the work on the job and/or if there would be any subcontractors performing the work, [and] Wharff advised Blackwell that Wharff Excavating would be performing the work." Appealed Order at 1-2. On July 9, 2015, Superior issued to Blackwell a one-page document entitled "Proposal" (hereinafter, "the Contract") for a "Gun Safe Room Installation." Ex. v. 3 at 77. Wharff had an employee of Wharff Excavating prepare the Contract and send it to Blackwell. The top left corner of the Contract contains the following:

Superior Safe Rooms7869 David Ct.Brownsburg, IN 46112317-892-0074Fax 317-892-0074Wharffexcavating@yahoo.com

Id. The address documented on the Contract for Superior is the same as Wharff's home address at the time. The Contract contains no reference to Wharff Excavating other than in the email address listed for Superior.

[4] Blackwell accepted the Contract, and Wharff received a check for $20,000 as a down payment on the safe room project. The check was dated July 21, 2015,² made out to Wharff Excavating, signed by Vivian Blackwell—Blackwell's wife—and drawn on Blackwell's and his wife's joint bank account.

[5] Wharff Excavating performed all the work on Blackwell's safe room project, and its workers’ shirts, equipment, and trucks all contained Wharff Excavating's logo. However, all work on the project was suspended before its completion. On May 11, 2017, Blackwell filed a Complaint against Superior for, among other claims, breach of contract.³ On June 23, 2017, Superior filed a timely Answer in which it admitted that "Blackwell hired Superior to install and finish a water- and fire-proof safe room." Ex. v. 3 at 54; Appellant's App. at 25. Superior also filed a counterclaim against Blackwell for breach of contract in which it alleged, "In July of 2015, Blackwell and Superior Safe Rooms, LLC ("Superior") entered into a contract (the "Contract") whereby Superior would install a safe room in Blackwell's [home] in return for the payment of $28,975.00 (the "Project")." Ex. v. 3 at 59.

[6] On May 17, 2018, Blackwell served upon Superior its First Request for Admissions. Superior failed to timely respond and, on August 31, 2018, Blackwell filed a Motion for Summary Judgment in which he asserted that his Request for Admissions were deemed admitted due to Superior's failure to file a timely response. On November 1, 2018, Superior filed a response to the motion for summary judgment and a motion to withdraw its admissions. Superior also filed an affidavit by Wharff in opposition to Blackwell's summary judgment motion. In his affidavit, Wharff swore that "[a]t all applicable times," he was "a duly authorized representative for Superior Safe Rooms, LLC." Ex. v. 3 at 43. Wharff further swore that Superior and Blackwell "entered into an agreement for a Gun Safe Room installation" based on the Contract, and he attached the same to his affidavit. Id. On November 7, 2018, the trial court granted Superior's motion to withdraw its admissions and denied Blackwell's motion for summary judgment.

[7] On March 25, 2019, Blackwell served upon Superior a document entitled "Plaintiff's Second Request for Production of Documents." Id. at 9; Cause No. 32C01-1705-PL-60, Motion to Compel Exhibit 1 – Second Request for Production.⁴ That discovery request sought Superior's business records, such as tax documents, balance sheets, profit/loss statements, financial statements, bank accounts, documents "relative to any and all partners, members, owners ... in any business entity in which Superior has an interest ...," and documents "demonstrating a complete description and history of the business operations, including the nature of its products, product lines, and/or service pertaining to Superior." Id . On April 11, 2019, Blackwell also served on Wharff Excavating a Non-Party Subpoena for Production of Documents.

[8] Because Superior failed to respond to Blackwell's March 25 discovery request and informal attempts to compel a response, on May 15, 2019, Blackwell filed a Motion to Compel Superior's response. And because Wharff Excavating also failed to respond to Blackwell's Non-Party Subpoena, Blackwell also filed a motion to compel Wharff Excavating's response. The trial court granted Blackwell's motions and issued orders compelling Superior's and Wharff Excavating's discovery responses. Superior and Wharff Excavating failed to respond to Blackwell's discovery requests as ordered by the court. On June 7, 2019, Blackwell filed a motion requesting that the trial court issue a sanction of default judgment against Superior. On June 26, 2019, the trial court granted Blackwell's motion and issued an order entering default judgment against Superior on all counts of Blackwell's complaint and dismissing Superior's counterclaim. The trial court also granted Blackwell's subsequent motion for damages in the amount of $161,625.52.

[9] On October 17, 2019, Blackwell filed a Motion for Proceedings Supplemental, and a hearing was held on the motion on December 17, 2019. Wharff and Byers—who is Wharff's father-in-law—both appeared at the hearing. Wharff testified that he had been "operating" Superior since its formation in 2012 and thought he was an owner and member of Superior until Byers informed him otherwise in approximately September of 2019. Ex. v. 4 at 4. In fact, Byers was and always had been the sole owner and member of Superior. Wharff testified that Superior conducted no business, had no employees, had no physical place of business, had no equipment other than a pickup truck,⁵ had no income, and filed no tax returns. Superior had a bank account on which Wharff, Wharff's wife, and Byers were signatories. Superior was "just set up for convenience basically as a name to draw attention" to Wharff Excavating, which actually sold and installed the safe rooms. Id. at 7. Byers was named as the sole member of Superior "for convenience." Id. at 3. Similarly, Superior's website was created "to draw attention" and "direct business to" Wharff Excavating. Id. at 6.

[10] On March 3, 2020, Blackwell filed a second motion for proceedings supplemental in which he added Wharff, Wharff Excavating, and Byers as garnishee defendants. On the same day Blackwell filed a Motion to Pierce Judgement Defendant's Corporate Veil and Hold Garnishee Defendants Liable for Plaintiff's Judgment. On July 7, 2020, Blackwell took the depositions of Wharff and Byers. Wharff testified that he formed Wharff Excavating as a sole proprietorship in 2004 and, in 2011, changed it to a limited liability company. Wharff was, and always had been, the sole member of Wharff Excavating, LLC. Wharff Excavating originally did drainage and grading work and water and sewage line repair. In 2006, Wharff Excavating began to sell and install safe rooms as a small percentage of its business. Byers did some office work for Wharff Excavating for which he was compensated.

[11] Sometime in 2012, Byers formed Superior with the intention that it would market, design, and sell safe rooms that Wharff Excavating would then build. However, Superior never did any business at all other than entering into the Contract with Blackwell in 2015.⁶ In the years 2014 through 2020, Superior's accountant filed Business Entity Reports for Superior with the Indiana Secretary of State. Those records listed Wharff or Superior's accountant as Superior's registered agents and listed Wharff's home address as Superior's address. Superior had no documents related to its capitalization other than its one bank account opened by Wharff and on which Byers, Wharff, and Wharff's wife were signatories.

[12] At his July 7, 2020, deposition, Wharff testified for the first time that the Contract was not between Blackwell and Superior, but between Blackwell and Wharff Excavating. Wharff also testified for the first time that Blackwell "hand wrote a check ... for $20,000" and handed it to Wharff at the June 2015 meeting between Blackwell and Wharff at Blackwell's house. Ex. v. 4 at 50. However, Wharff acknowledged that the one and only check—contained in his deposition Exhibit 19, id. at 218—was dated July 21, 2015, made out to Wharff Excavating, and signed by Virginia Blackwell, Blackwell's wife.

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