Brummett v. Bailey

223 N.E.3d 1162

Anthony A. BRUMMETT, Cheers, Inc., Terry Lee Orrick, and John Doe, Appellants-Defendants,

v.Brian BAILEY, Appellee-Plaintiff.

Court of Appeals Case No. 23A-CT-683

Court of Appeals of Indiana.

Filed November 29, 2023

Appeal from the Delaware Circuit Court, The Honorable John M. Feick, Judge, Timothy R. Hollems, Master Commissioner, Trial Court Cause No. 18C04-2112-CT-150

Attorneys for Appellants: James J. O’Connor, Jr., Carta H. Robison, Barrett McNagny LLP, Fort Wayne, Indiana

Attorneys for Appellee: Mark R. McKinney, Vincent Walker, McKinney & Company Law, Muncie, Indiana

Brown, Judge.

[1] Anthony A. Brummett, Cheers, Inc., ("Cheers"), and Terry Lee Orrick (collectively, "Appellants")¹ appeal the trial court’s interlocutory order denying their motion for summary judgment. We reverse.

Facts and Procedural History

[2] On the evening of January 4, 2020, into the early morning of January 5, 2020, Brian Bailey, Lauren Segura, and Nelson Segura were at Cheers, a bar located in Muncie, Indiana. While seated at the bar, Bailey grabbed Lauren between her thighs, Nelson responded by grabbing him by his shirtfront and pushing him off his bar stool, and Bailey fell to the ground.

[3] On December 26, 2021, Bailey filed a complaint claiming that Nelson "perpetrated an assault" against him. Appellants’ Appendix Volume II at 12. The complaint also alleged Appellants were "willfully negligent, wantonly reckless and grossly negligent because of their or their employees’ acts, failures to act, and/or refusal to help [Bailey] on the night of the incident." Id. at 13.

[4] On August 23, 2022, Appellants moved for summary judgment asserting that the individual defendants were not liable and Cheers did not owe a duty to Bailey to protect him from the unforeseeable act of a third party. The designated evidence included Lauren and Nelson’s depositions, an affidavit by Brummett, and two surveillance video recordings of the incident. Brummett’s affidavit stated that he controls all shares of Cheers through purchase and assignment, he is purchasing Cheers, "all furnishings, fixtures, equipment, merchandise, inventory, furniture, supplies, Indiana Alcoholic Beverage Permit No. RR18-07633, and all other personal property related to the operation" and the associated real estate "on land contract, whereby Orrick financed the purchase and [he] make[s] monthly installment payments to Orrick beginning May 1, 2011, pursuant to the terms and conditions of that certain Promissory Note dated March 18, 2011." Id. at 44. He operates Cheers as manager "pursuant to the Management Agreement," he is "responsible for the operation and control of the assets of [Cheers]," "[a]s a shareholder of [Cheers], [he does] not operate [it] in [his] personal capacity," and Cheers "operates as an independent business structure and observes the corporate formalities." Id. at 45. On November 20, 2022, Bailey filed a response.

[5] On January 27, 2023, the trial court issued an Order Denying Defendant’s [sic] Motion for Summary Judgment, finding that "[g]iven that a potentially unjust or illegal act occurred on the property of [Cheers] and Brummett is the bar manager, summary judgment on this issue is inappropriate," Nelson had worked for Brummett’s Plumbing for about ten years, foreseeability is a fact-specific inquiry, and whether Cheers timely intervened was a question of fact for the fact finder. Id. at 9-10.

Discussion

[6] Appellants argue there is no genuine issue of material fact which supports piercing the corporate veil and holding Brummett and Orrick liable or finding that Cheers had a duty to care for Bailey because the actions of Nelson were not foreseeable. They claim the trial court "erred by focusing on facts that were immaterial in the analysis for determining whether a landowner has a duty to protect an invitee from criminal acts of a third party." Appellants’ Brief at 11. Appellants further contend that Bailey did not present evidence establishing that Cheers owed him a duty to prevent the exacerbation of his injuries. Bailey argues that piercing the corporate veil is a fact-intensive inquiry best left to the finder of fact and that "there exists a genuine dispute of material fact regarding whether the corporation was used to promote fraud, injustice, or illegal activity." Appellee’s Brief at 9. He claims the acts were foreseeable and that Appellants had a duty to prevent further injury because they knew Bailey was injured.

[1–6] [7] We review an order for summary judgment de novo, applying the same standard as the trial court. Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014). The moving party bears the initial burden of making a prima facia showing that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Manley v. Sherer, 992 N.E.2d 670, 673 (Ind. 2013). Summary judgment is improper if the party fails to carry its burden, but if it succeeds, then the nonmoving party must come forward with evidence establishing the existence of the genuine issue of material fact. Id. We construe all factual inferences in favor of the nonmoving party and resolve all doubts as to the existence of a material issue against the moving party. Id. Our review of a summary judgment motion is limited to those materials designated to the trial court. Mangold ex rel. Mangold v. Ind. Dep’t of Nat. Res., 756 N.E.2d 970, 973 (Ind. 2001).

[7–14] [8] Generally, a shareholder is not personally liable for the acts of the corporation. Aronson v. Price, 644 N.E.2d 864, 867 (Ind. 1994) (citation omitted). "While an Indiana court will impose personal liability to protect innocent third parties from fraud or injustice, the burden is on the party seeking to pierce the corporate veil to prove that the corporate form was so ignored, controlled or manipulated that it was merely the instrumentality of another and that the misuse of the corporate form would constitute a fraud or promote injustice." Id. (citing Winkler v. V.G. Reed & Sons, Inc., 638 N.E.2d 1228, 1232 (Ind. 1994)). "When a corporation is functioning as an alter ego or a mere instrumentality of an individual or another corporation, it may be appropriate to disregard the corporate form and pierce the veil." Blackwell v. Superior Safe Rooms LLC, 174 N.E.3d 1082, 1092 (Ind. Ct. App. 2021).

"While no one talismanic fact will justify with impunity piercing the corporate veil, a careful review of the entire relationship between various corporate entities, their directors and officers mayreveal that such an equitable action is warranted." Stacey–Rand, Inc. v. J.J. Holman, Inc., 527 N.E.2d 726, 728 (Ind. Ct. App. 1988). When determining whether a shareholder is liable for corporate acts, our considerations may include: (1) undercapitalization of the corporation, (2) the absence of corporate records, (3) fraudulent representations by corporation shareholders or directors, (4) use of the corporation to promote fraud, injustice, or illegal activities, (5) payment by the corporation of individual obligations, (6) commingling of assets and affairs, (7) failure to observe required corporate formalities, and (8) other shareholder acts or conduct ignoring, controlling, or manipulating the corporate form. Aronson, 644 N.E.2d at 867. In addition, when "a plaintiff seeks to pierce the corporate veil in order to hold one corporation liable for another closely related corporation’s debt, the eight Aronson factors are not exclusive." Oliver v. Pinnacle Homes, Inc., 769 N.E.2d 1188, 1192 (Ind. Ct. App. 2002), trans. denied. Additional factors to be considered include whether: "(1) similar corporate names were used; (2) the corporations shared common principal corporate officers, directors, and employees; (3) the business purposes of the [organizations] were similar; and (4) the corporations were located in the same offices and used the same telephone numbers and business cards." Id. (footnote omitted).

* * * * *

Piercing the corporate veil involves a highly fact-sensitive inquiry that is not typically appropriate for summary disposition.

Reed v. Reid, 980 N.E.2d 277, 301-302 (Ind. 2012).

[15] [9] The designated evidence reveals that Brummett owned Cheers and was employed by Cheers as the bar manager. Orrick had sold Cheers to Brummett, and Brummett was still making monthly installment payments to Orrick in connection with the sale. Brummett’s affidavit also stated that he does not operate Cheers in a personal capacity and that Cheers "operates as an independent business structure and observes the corporate formalities." Id. at 45. The evidence does not demonstrate that Brummett or Orrick were present for the interaction between Bailey, Lauren, and Nelson. Nelson had previously installed cameras for Cheers and worked for Brummett for ten years doing plumbing and construction. We cannot say, in light of the factors in Reed, that the designated evidence supports piercing the corporate veil.

[10] To the extent Brummett argues that Cheers did not owe Bailey a duty of care because the attack was not foreseeable, we note that we recently discussed foreseeability in Singh v. Singh, 155 N.E.3d 1197 (Ind. Ct. App. 2020), which discussed the Indiana Supreme Court’s holding in Cavanaugh’s Sports Bar & Eatery, Lt. v. Porterfield, 140 N.E.3d 837 (Ind. 2020). Specifically, in Singh, we held:

Landowners must "take reasonable precautions to protect invitees from foreseeable criminal attacks." Rogers v. Martin, 63 N.E.3d 316, 326 (Ind. 2016) (citation omitted). Ascertaining whether this duty extends to "the criminal act at issue," Goodwin v. Yeakle’s Sports Bar & Grill, Inc., 62 N.E.3d 384, 389 (Ind. 2016), in a "particular scenario," Rogers, 63 N.E.3d at 320, hinges on the foreseeability of the attack, requiring "a general threshold determination that involves an evaluation of (1) the broad type of plaintiff and (2) the broad type of harm," id. at 325. When considering these categories, courts should determine

...