Add Multiple Defendants?

[sparty20]

What is the name of your state? MI

Some of this was posted under the Civil Litigation forum but my case was just moved to Small Claims so i'm posting here now.

I am the plaintiff in a Small Claims case against the owner of the company that poured my concrete patio. I am suing for a refund since the quality of the resulting patio is unacceptable. Before the suit the owner of the company agreed to re-pour the patio due to poor quality but soon after the company dissolved and the company and owner were unreachable.

So i ended up suing the owner of the company since the company is dissolved. But recently a lawyer advised me to amend the small claims case to add the defendant's company as another defendant so that i could go after assets of the company if i win. My question is if i add the defendent's company (which is dissolved) as a defendent then what are the possible outcomes of the case? Am i correct in assuming the following are the possibilities:

Judge rules in favor of the defendant.
Judge rules in favor of the plaintiff versus the company.
Judge rules in favor of the plaintiff versus the owner of the company.

If the judge finds in my favor against the company i would be worried the company has no assets. Then i would have no recourse to collect the judgement since the company is dissolved. But if the judge finds in my favor against the owner of the company then there's always a chance of collecting from a person. Is my logic flawed?

Is it possible if i add the company to the suit that the judge will rule in my favor versus BOTH the company and owner of the company? And if that's the case then how is the judgement divided between two different defendants?

Also, is there a way for me to find out what assets the company holds?

Thanks,
-jeff

 

[JETX]

My question is if i add the defendent's company (which is dissolved) as a defendent then what are the possible outcomes of the case? Am i correct in assuming the following are the possibilities:

Judge rules in favor of the defendant.
Judge rules in favor of the plaintiff versus the company.
Judge rules in favor of the plaintiff versus the owner of the company.

Option 4: Court awards judgment to Plaintiff against owner of the company AND the (now dissolved) company.

Oh, and since you have chosen to NOT post this to your original thread... I have to ask... what is the form of this 'company'?? Is it a proprietorship, partnership, corporation, etc.??

Also, is there a way for me to find out what assets the company holds?

Yep. Depose the former officers/managers of the company.

 

[sparty20]

Thanks for the reply. As for the form of the company, the Corporate Entity Details i found online lists it as a "Domestic Profit Corporation". And it's current Status is "Automatic Dissolution". There seems to be only one owner who also serves as the President, Secretary, & Treasurer. And it's also showing 60,000 common shares authorized. I'm not exactly sure what all of this means though.

If the "court awards judgment to Plaintiff against owner of the company AND the (now dissolved) company" how is that divided? In other words, if the judgement is for $3000 am i supposed to collect $1500 from the owner and $1500 from the company?

 

[JETX]

Thanks for the reply. As for the form of the company, the Corporate Entity Details i found online lists it as a "Domestic Profit Corporation". And it's current Status is "Automatic Dissolution". There seems to be only one owner who also serves as the President, Secretary, & Treasurer. And it's also showing 60,000 common shares authorized. I'm not exactly sure what all of this means though.

Presumably, that means that this was a 'for profit' corporation, that lost its corporate charter, usually due to failure to pay taxes or file required report(s).

If the "court awards judgment to Plaintiff against owner of the company AND the (now dissolved) company" how is that divided? In other words, if the judgement is for $3000 am i supposed to collect $1500 from the owner and $1500 from the company?

It isn't 'divided' at all. The judgment creditor is able to try to collect all from one, part from each, or all from the other.... each judgment debtor is individually and severably liable for payment of the judgment.... until paid in full.

However, it is important for you to understand the problems of naming both parties.
The individual cannot 'normally' be held liable for the debts of the corporation, so it is likely that if the corporation was valid at the time of the cause of action, the individual will likely file a motion to dismiss him from the case.
And since the corporation is no longer 'viable', it may not have any assets to pursue if you get a judgment naming the corporation only.

 

[sparty20]

So it seems either way it's not likely i will collect anything (assuming the corporation has no assets). If i don't add the corporation then the judge will probably rule the owner can't be held liable for the debts of the corporation and rule in favor of the defendant. If i do add the corporation then the judge may rule in my favor against the corporation but not the owner (for same reason as first possibility). So either way it's not likely i will get a judgement against the owner as an individual.

Does it matter the owner was somewhat at fault for the way my patio turned out? According to the foreman the owner refused to give him more manpower for the job which would have resulted in a better quality stamp job.

Thanks again for all the information.

 

[JETX]

So it seems either way it's not likely i will collect anything (assuming the corporation has no assets). If i don't add the corporation then the judge will probably rule the owner can't be held liable for the debts of the corporation and rule in favor of the defendant. If i do add the corporation then the judge may rule in my favor against the corporation but not the owner (for same reason as first possibility). So either way it's not likely i will get a judgement against the owner as an individual.

Regretably, it looks like you 'get it'. Anytime a lawsuit is considered, it is imperative that the plaintiff step back and take an objective look at the defendant.... and decide if it worth pursuing or not. On the surface, it would appear that yours may not be worth pursuing. However, the court, especially small claims, will often consider the reality of the matter rather than just the legality.... and sometimes offer a judgment against an individual operating as a corporation. Especially if you can show a 'pattern of abuse'.

I would suggest you sit down and look at ALL the facts. Create a timeline showing: first contact; bids; contract signing; corporate dissolution; who did what/when; etc. Sometimes you will find small things that help. For example, I have several cases where the corporations charter had been revoked BEFORE they signed the contract. That would allow you to go after the individual.

Does it matter the owner was somewhat at fault for the way my patio turned out? According to the foreman the owner refused to give him more manpower for the job which would have resulted in a better quality stamp job.

Nope. If that decision was made, and if the 'owner' was operating as a corporation, then it would be protected as a corporate decision.

Some other thoughts...
Michigan is a strong 'union' state. Is there a state or local requirement for licensed contractors on a project like this?? If so, was this guy licensed. Is there a bond to go after??

Some 'life lessons' to be learned from this...
- ALWAYS check out the contractor.
- ALWAYS require that the contractor be bonded.

 

[badapple40]

So it seems either way it's not likely i will collect anything (assuming the corporation has no assets). If i don't add the corporation then the judge will probably rule the owner can't be held liable for the debts of the corporation and rule in favor of the defendant. If i do add the corporation then the judge may rule in my favor against the corporation but not the owner (for same reason as first possibility). So either way it's not likely i will get a judgement against the owner as an individual.

Does it matter the owner was somewhat at fault for the way my patio turned out? According to the foreman the owner refused to give him more manpower for the job which would have resulted in a better quality stamp job.

Thanks again for all the information.

Not to get into too many specifics here -- but if the corporation was individually held, or had no will apart from the owner, or was underfunded (a possibility since they are out of business) there are ways to "pierce the corporate veil," and hold both the owner and the company liable. If the owner was personally involved in the pouring of the patio, bought low quality cement, or otherwise personally was involved in what you are complaining about, the "personal participation" theory also allows you to hold him jointly liable with the company (think of an auto accident with a truck, where the truck driver corporate employee AND the corporation are liable) -- it gets back to general agency principles.

It doesn't mean the end of the game -- it just means there are additional considerations.

 

[sparty20]

I did some research and could not find a license for the company or the owner so i doubt he was bonded. Right now i have a small claims hearing in March. The only thing i have to decide now is whether to add the company as a defendant. The only cost to me is the serving fee to have the ammended complaint served to the company. Which is basically just serving the owner again since he is the company's resident agent.

I'm just worried if i add the company as a defendant it will decrease my chance of getting a judgement against the owner? Ultimately i feel the best case scenario would be a judgement against the owner.

Once again, thanks for all your informative replies.

 

[JETX]

Not to get into too many specifics here -- but if the corporation was individually held, or had no will apart from the owner, or was underfunded (a possibility since they are out of business) there are ways to "pierce the corporate veil," and hold both the owner and the company liable. If the owner was personally involved in the pouring of the patio, bought low quality cement, or otherwise personally was involved in what you are complaining about, the "personal participation" theory also allows you to hold him jointly liable with the company (think of an auto accident with a truck, where the truck driver corporate employee AND the corporation are liable) -- it gets back to general agency principles.

It doesn't mean the end of the game -- it just means there are additional considerations.

Nice response.... in theory!! The problems, as I see them, are:
1) This is a small claims case. I doubt the OP is going to have the skills necessary in bringing such a case.
2) The 'piercing the corporate' veil is great.... in theory. In reality, such a lawsuit is expensive and time consuming..... far beyond practicality for a case like this. The last 'piercing' suit that I was involved in cost about $12,000 in time and expenses, we had them 'dead to rights' (corporate checks used for personal mortgage, car payments, grocery's, even vet bills for their family pet).... yet the court still ruled against us.

So, though your post is technically accurate, it is clearly NOT practical.

 

[badapple40]

Nice response.... in theory!! The problems, as I see them, are:
1) This is a small claims case. I doubt the OP is going to have the skills necessary in bringing such a case.
2) The 'piercing the corporate' veil is great.... in theory. In reality, such a lawsuit is expensive and time consuming..... far beyond practicality for a case like this. The last 'piercing' suit that I was involved in cost about $12,000 in time and expenses, we had them 'dead to rights' (corporate checks used for personal mortgage, car payments, grocery's, even vet bills for their family pet).... yet the court still ruled against us.

So, though your post is technically accurate, it is clearly NOT practical.

Piercing is a much harder case to make than is personal participation in the underlying tort. I'd like to see what the OP says about the owner's involvement - that is obviously the easiest way to go.

I practice in an area of law now with high stakes -- often in the seven or eight figures, almost all brought against large companies, and invariably a company will go under or out of business about the times our investigators and field agents start citing them for the violations and will be no longer operating by the time it gets up to us (the lawyers) for action. We have down almost to rote memory how to make such cases stick -- if not at trial, then on appeal (and have done well in that regard).

I'd start with the fact that they didn't observe corporate formalities by failing to keep their registration current, and see what else I could build on, see whether the corporate entity was anything other than purely the owner's will, see how they were funded (obviously not well since they are now out of business), see whether they had a board of directors, shareholders, and who those people wree -- this case just seems like it has those piercing issues in it.

I submit that, if as I suspect, the corporation here was just the owner, who was the sole shareholder and director, no court should hesitate to let him pierce.

 

[JETX]

I submit that, if as I suspect, the corporation here was just the owner, who was the sole shareholder and director, no court should hesitate to let him pierce.

I agree 100% and have numerous cases where it is clear that the individual was using the corporation as an alter ego. However, the reality is that for a small case (as in this one) it simply is not practical to even consider 'piercing the veil'. The case I cited previously was a $150k judgment against a family run (closely held) corporation. The 'bellied up' the corporation pretty much right after judgment. And like I said, the client had about 10% of the award tied up in the veil claim which, after reviewing the corporation account payables and their lack of corporate requirements (meetings, etc.), felt comfortable would prevail. Imagine my shock when after about a month of indecision (bench trial), the judge came back and ruled for the defense.

I think that these 'We incorporate you quick' websites and services should be shut down as the majority of their clients are scammers and dodgers looking for a way to protect themselves from their own conduct.