Simons v. Park City RV Resort, LLC , 354 P.3d 215 ( 2015 )

2015 UT App 168THE UTAH COURT OF APPEALS
CHRISTL SIMONS,
Appellant,
v.
PARK CITY RV RESORT, LLC AND DOUG N. SORENSEN,
Appellees.
Memorandum Decision
No. 20131181-CA
Filed July 9, 2015
Third District Court, Silver Summit Department
The Honorable Ryan M. Harris
The Honorable Robert K. Hilder 1
No. 070500501
P. Matthew Muir, Attorney for Appellant
R. Stephen Marshall, Attorney for Appellees
JUDGE STEPHEN L. ROTH authored this Memorandum Decision, in
which JUDGES JAMES Z. DAVIS and MICHELE M. CHRISTIANSEN
concurred.
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
1. Judge Ryan M. Harris granted summary judgment in favor of
Doug N. Sorensen on Christl Simons’s unjust enrichment claim.
Judge Robert K. Hilder granted summary judgment in favor of
the Defendants on Simons’s alter ego theory.
Simons v. Park City RV Resort, LLC
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 motions, 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
2. PCRV operates a recreational vehicle park in Park City.
20131181-CA 2 2015 UT App 168Simons v. Park City RV Resort, LLC
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.” Utah R. Civ. P. 56(c).
“[E]ntitlement to summary judgment is a question of law.”
Macris & Assocs., Inc. v. Neways, Inc., 2002 UT App 406, ¶ 11, 60
P.3d 1176 (citation and internal quotation marks omitted). Thus,
“[w]e determine only whether the trial court erred in applying
the governing law and whether the trial court correctly held that
there were no disputed issues of material fact.” Id. (citation and
internal quotation marks omitted). In assessing whether there
were disputes of material fact, we “view[] the facts and all
reasonable inferences drawn therefrom in the light most
favorable to the nonmoving party.” Orvis v. Johnson, 2008 UT 2,
¶ 6, 177 P.3d 600 (citation and internal quotation marks omitted).
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
3. The parties assume that the alter ego doctrine applies to
limited liability companies as well as corporations, and we have
recognized that “[t]his appears to be the law in Utah.” Lodges at
Bear Hollow Condo. Homeowners Ass’n v. Bear Hollow Restoration,
LLC, 2015 UT App 6, ¶ 14 n.5, 344 P.3d 145.
20131181-CA 3 2015 UT App 168Simons v. Park City RV Resort, LLC
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]ertain 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 corporation 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.
¶7 “‘To survive a motion for summary judgment on an alter
ego theory, the party alleging alter ego liability must present
20131181-CA 4 2015 UT App 168Simons v. Park City RV Resort, LLC
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); see also Orvis,
2008 UT 2, ¶ 18 (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 Utah R. Civ. P. 56(e))). The district court
granted summary judgment in favor of the Defendants on
Simons’s alter ego claim because it concluded that Simons had
“failed to shoulder her burde[n]” of showing that “a genuine
and material factual dispute exists.”
¶8 Simons contends that she did make a 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. She then invites us to determine that, under the summary
judgment standard, these facts ought to be construed in favor of
sending to trial her claim that NSC and PCRV were acting as
Sorensen’s alter egos. Simons’s briefing fails to persuade us that
the district court erred in granting summary judgment. First, her
analysis of the alter ego claim consists of conclusory statements
of fact (which appear to be largely undisputed) without any
explanation of how those facts are material to the legal issues
regarding the validity of the alter ego claim. Second, Simons has
not persuaded us that the evidence that she describes legally
precludes summary judgment on her alter ego claim.
¶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,
20131181-CA 5 2015 UT App 168Simons v. Park City RV Resort, LLC
2015 UT App 6, ¶ 14 (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
4. Simons’s memorandum in opposition to summary judgment
had similar shortcomings, which appear to have played a
significant part in the district court’s decision to grant summary
judgment. Specifically, the court explained that Simons’s
opposition to summary judgment inappropriately contained
“pages of argument” in the section where Simons was to identify
which of the Defendants’ statements of facts were actually in
dispute. At the hearing, the court said to Simons, “You would
identify, [what fact statement] you dispute, but, then, you
would argue about it.” In this regard, the court reasoned, Simons
was “disagree[ing] with the force of the declaration,” which is a
“weight issue,” but she did not demonstrate how her evidence
created a material dispute of fact about her alter ego claim.
20131181-CA 6 2015 UT App 168Simons v. Park City RV Resort, LLC
Condo. Homeowners Ass’n v. Bear Hollow Restoration, LLC, 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
showed that Sorensen “took a $50,000.00 loan from NSC” and
that he “could not explain or account for how the ‘loan’ proceeds
were used.” According to Simons, this evidence demonstrates
that Sorensen was siphoning corporate funds (the fourth Colman
factor) and using the corporation as a facade for his own conduct
(the seventh Colman factor), ultimately resulting in NSC’s
insolvency. However, standing alone, a mere showing that NSC
was insolvent and that Sorensen took $50,000 from NSC is
insufficient as a matter of law to pierce the corporate veil. See
Jones & Trevor Mktg., Inc. v. Lowry, 2012 UT 39, ¶ 27, 284 P.3d 630.
Indeed, “[t]here are many legitimate reasons why shareholders
5. The fact that a corporation cannot afford to correct problems it
created and that the plaintiff “may have difficulty enforcing the
judgment against [the corporate entity] alone is not the type of
injustice that warrants piercing the corporate veil.” Lodges at Bear
Hollow, 2015 UT App 6, ¶ 21 (alteration in original) (citation and
internal quotation marks omitted).
20131181-CA 7 2015 UT App 168Simons v. Park City RV Resort, LLC
might draw funds from corporate accounts,” even financially
troubled ones, such as for payment of “salaries or bonuses,
loans, or dividends.” See id. To establish that Sorensen’s $50,000
withdrawal supported Simons’s alter ego claim, Simons had to
produce additional evidence that demonstrated that “the
withdrawals were not legitimate or that the company failed to
properly account for the withdrawals.” See id. She failed to do
this. And although Simons asserts that she could not have made
this showing because NSC failed to (and, in fact, cannot)
“provide a complete accounting for the Simons project,” she fails
to address what efforts she made to elicit NSC’s compliance. It is
worth noting that the district court gave Simons time to conduct
additional discovery, including obtaining the Defendants’
accountings, before granting summary judgment, but Simons
apparently chose not to do so.
¶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 accordance 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 information; she does not actually focus on the issue
20131181-CA 8 2015 UT App 168Simons v. Park City RV Resort, LLC
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, Simons 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 argue that any of
her evidence supports the remaining two Colman factors. 7
6. Simons asserts that much of the “evidence outlined in the
unjust enrichment section [of her brief] . . . supports an alter ego
theory” as well. She acknowledges, however, that because a
second summary judgment motion on unjust enrichment was
filed after the alter ego summary judgment decision, “[s]ome of
[the unjust enrichment] evidence was not in the record at
the time the district court granted summary judgment against
the alter ego claim.” Accordingly, Simons recognizes the need
“to segregate the evidence that was in the record at the time of
the summary judgment rulings.”
Although we appreciate Simons’s candor and her efforts
“to segregate the evidence,” we cannot accept her invitation to
rely on the unjust enrichment evidence presented after the
(continued…)
20131181-CA 9 2015 UT App 168Simons v. Park City RV Resort, LLC
¶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. Simons, however, has
simply failed to analyze the facts in any way 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.
(…continued)
district court granted summary judgment on the alter ego claim
in assessing the propriety of that decision. Cf. Rapela v. Green,
2012 UT 57, ¶¶ 42–45, 289 P.3d 428 (declining to consider, for the
first time on appeal, whether certain evidence supported the
second prong of a best interest standard where the evidence had
been offered in the district court only to support the first prong).
We further note that the district court provided Simons with an
extension of time after the initial hearing on the Defendants’
summary judgment motion to obtain such information and to
provide supplemental briefing before it dismissed the alter ego
cause of action, but Simons apparently failed to conduct any
additional discovery and filed no additional briefing. As a result,
the district court dismissed the alter ego claim based on the
parties’ original submissions.
7. Simons may have made such an argument in the district court,
but she has not done so on appeal.
8. Because we conclude that Simons failed to demonstrate any
genuine dispute of material fact concerning the formalities
requirement, we do not address the separate issue of whether
(continued…)
20131181-CA 10 2015 UT App 168Simons v. Park City RV Resort, LLC
II. Unjust Enrichment
¶15 Unjust enrichment is an equitable remedy that can be
brought to bear where one person confers a benefit on another
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 contends 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
(…continued)
Simons carried her burden with regard to the fairness
requirement. See Lodges at Bear Hollow Condo. Homeowners Ass’n
v. Bear Hollow Restoration, LLC, 2015 UT App 6, ¶ 13, 344 P.3d 145(requiring a showing of disputed material facts on both parts of
the Norman test to survive summary judgment).
9. Simons contends that the benefit was the difference between
the amount paid on the contract and the amount NSC could
actually account for as expenditure or profit on the construction,
which she asserts is a difference of at least $99,756. For ease of
reference, we have rounded up to $100,000.
20131181-CA 11 2015 UT App 168Simons v. Park City RV Resort, LLC
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 present evidence that
Sorensen was in fact enriched by any benefit she indirectly
conferred upon him. Rather, Simons’s unjust enrichment claim
appears to be more accurately viewed as a restatement of her
alter ego claim.
¶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 employee of NSC or other disbursements. See Lodges
at Bear Hollow Condo. Homeowners Ass’n v. Bear Hollow Restoration,
LLC, 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. Rather, Simons simply makes an argument about how
20131181-CA 12 2015 UT App 168Simons v. Park City RV Resort, LLC
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
10. In addition to not adequately briefing the unjust enrichment
claim, Simons fails to provide useful record citations. In a
footnote to the analysis section of her brief, Simons refers us to
350 pages of exhibits that she claims contain record evidence of
Sorensen’s stripping away of funds from NSC. Although Simons
provides specific references to evidence she deems pertinent at
an earlier point in her briefing, she refers specifically to NSC’s
pagination of that evidence, which does not align with the
appellate record’s pagination. In all, her approach places too
much of the burden of developing her factual contentions on this
court. See Allen v. Friel, 2008 UT 56, ¶ 9, 194 P.3d 903 (explaining
that the appellant must not treat the appellate court as “a
depository in which [a party] may dump the burden of
argument and research” (alteration in original) (citation and
internal quotation marks omitted)).
20131181-CA 13 2015 UT App 168Simons v. Park City RV Resort, LLC
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, Simons 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 claim and
to Sorensen on the unjust enrichment claim.
20131181-CA 14 2015 UT App 168