LANDMARK CONTRACTING CO V ATLANTIS DEVELOPMENT INC
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STATE OF MICHIGAN
COURT OF APPEALS
LANDMARK CONTRACTING COMPANY,
UNPUBLISHED
August 4, 2009
Plaintiff-Appellant,
v
ATLANTIS DEVELOPMENT COMPANY, INC.
and RAAD ASMAR, a/k/a ROBERT ASMAR,
No. 285779
Oakland Circuit Court
LC No. 2007-087045-CK
Defendants-Appellants.
Before: Talbot, P.J., and Fitzgerald and Hoekstra, JJ.
PER CURIAM.
The trial court granted summary disposition in defendants’ favor because in a previous
arbitration proceeding filed by Plaintiff, Landmark Contracting Company, against defendant,
Atlantis Development Company, Landmark failed to join defendant Raad Asmar, a defendant
named in the present case, and because res judicata precluded the present case. We reverse and
remand.
This case arises out of construction at the St. George Caldean Catholic Church in Shelby
Township. Defendant Atlantis Development, Inc., the general contractor for the project, entered
into a subcontract with plaintiff Landmark Contracting, Inc., on November 7, 2002, to perform
underground work on the project. Defendant Asmar is the agent and president of Atlantis and
signed the contract in that capacity.
However, a dispute arose between Landmark and Atlantis over the amount Atlantis owed
Landmark for the work it performed. Landmark sued Atlantis for breach of contract and filed a
demand for arbitration on June 13, 2002. Landmark received an arbitration award on January 5,
2006, in the amount of $261,767.02, which was confirmed in a judgment entered in Macomb
Circuit Court on July 24, 2006.1
Subsequently, Landmark filed a complaint against defendants in Oakland Circuit Court
alleging defendants violated the Michigan Builder’s Trust Fund Act (MBTFA), MCL 570.151, et
1
The judgment provided for additional interest for a total award of $267,970.54.
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seq., by not paying money owed to Landmark that was paid to defendants from the church.
Landmark noted in its complaint that it obtained a judgment against Atlantis in the amount of
$261,767.02. Landmark’s complaint alleged in part:
3. That Defendant Raad (Robert) Asmar (ASMAR) is an individual who
is the President and agent for Atlantis . . .
***
11. ATLANTIS was paid by the Owner, the Chaldean Catholic Church of
the USA (St. Joseph Chaldean Catholic Church) in the amount of over
$10,000,000.
12. The payment by the Chaldean Catholic Church of the USA (St.
Joseph Chaldean Catholic Church) to ATLANTIS constitutes a trust fund for the
benefit of the labor and material suppliers to the Project, St. George Chaldean
Catholic Church with ATLANTIS’ President and agent, Raad (Robert) Asmar, as
the trustee in accordance with the Michigan statute MCLA 570.151 et sec. [sic]
13. The failure of ASMAR to pay LANDMARK, the beneficiary of the
trust fund is a breach of the trust subjecting ASMAR To [sic] criminal sanctions
as provided in the Michigan statute.
14. LANDMARK has a civil remedy for the failure of ASMAR to pay
LANDMARK from the trust.
15. The failure of ASMAR to pay LANDMARK caused damage to
LANDMARK in the amount of $261,767.02 plus interest at the statutory rate
from July 24, 2006.
WHEREFORE, Plaintiff Landmark Contracting Company, Inc., prays that
this Honorable Court will find in its favor against Defendant ASMAR in the
amount of $261,767.02 plus interest, costs and attorney’s fees.
Defendant Raad moved for summary disposition, arguing that pursuant to MCR
2.203(A)2 he was entitled to summary disposition because Landmark failed to join him in the
arbitration action against Atlantis. Defendants also argued that res judicata precluded the suit.
In response, Landmark argued that Asmar was not a party to the breach of contract action, that
2
This compulsory joinder court rule states:
In a pleading that states a claim against an opposing party, the pleader
must join every claim that the pleader has against that opposing party at the time
of serving the pleading, if it arises out of the transaction or occurrence that is the
subject matter of the action and does not require for its adjudication the presence
of third parties over whom the court cannot acquire jurisdiction.
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the MBTFA claim had not yet ripened at the time of the prior action, and that the imposition of a
trust under the law creates liability in any corporate officer who received money and failed to
ensure that subcontractors were paid.
A hearing was held on the motion on May 14, 2008. The court held that res judicata
applied because the same parties or their privies were involved in both actions, the first action
was decided on the merits, and the MBTFA claim could have been litigated in the prior action.
The court also found that the MBTFA claim arose out of the same transaction or occurrence as
the original breach of contract arbitration because it was based on the failure of Atlantis to pay
Landmark after the church had paid Atlantis. The court ruled that the action under the MBTFA
was precluded by the compulsory joinder rule in MCR 2.203(A).
Landmark argues that the trial court erred by granting summary disposition in favor of
Asmar on the ground that Landmark’s claim under the MBTFA is precluded by res judicata or
the compulsory joinder rule. This Court reviews both applications of res judicata and decisions
on motions for summary disposition de novo as questions of law. Wayne Co v Detroit, 233 Mich
App 275, 277; 590 NW2d 619 (1998).3
The trial court erred in granting summary disposition for Asmar on the ground that he
was not joined in the Macomb County action against Atlantis. Res judicata—not the joinder
rules—was the proper analytical tool for deciding whether plaintiff was estopped from filing a
subsequent suit against Asmar. The analysis of the facts under res judicata indicates that
Landmark may file a separate action against Asmar for alleged MBTFA violations because his
individual liability under the act is not in privy with the interests of the company.
The trial court ruled that Landmarks’ claims against Asmar in the present case should
have been joined with Landmark’s claim against Atlantis. However, MCR 2.203(A) was not the
correct ground for dismissing this case in Asmar’s favor. The correct question that should have
been raised and decided by the trial court was whether plaintiff’s claim was barred by the
doctrine of res judicata.
“Michigan law defines res judicata broadly to bar litigation in the second action not only
of those claims actually litigated in the first action, but also claims arising out of the same
transaction that the parties, exercising reasonable diligence, could have litigated but did not.”
Peterson Novelties, Inc v City of Berkeley, 259 Mich App 1, 11; 672 NW2d 351 (2003)
(Emphasis added). In Rogers v Colonial S & L, 405 Mich 607, 618; 275 NW2d 499 (1979),
3
We initially note that both defendant Atlantis and defendant Asmar are named as defendants in
the complaint in the present case. However, a review of the complaint reveals that Landmark is
only seeking damages from defendant Asmar in his individual capacity in this action.
Additionally, contrary to Asmar’s assertion in his brief, Landmark is not seeking to get a “double
recovery.” Rather, Landmark is simply seeking to be paid for the work it performed as a
subcontractor on the project. Landmark is seeking in this action to be paid the amount of the
judgment rendered in the arbitration action.
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overruled on other grounds in Al-Shimmari v Detroit Medical Center, 477 Mich 280; 731 NW2d
29 (2007), our Supreme Court noted that MCR 2.203(A) is “grounded on the same general
policy considerations as the doctrine of res judicata.” However, this does not put the rule in a
category as a defense in subsequent actions. As will be demonstrated, whether a party is barred
from bringing a subsequent action in a separate suit against a party is a determination to be made
within the analytical framework of res judicata. As plainly noted above in Peterson Novelties,
supra, 259 Mich at 11, res judicata is the rule that bars “claims arising out of the same
transaction that the parties, exercising reasonable diligence, could have litigated but did not.”
Res judicata requires that: (1) the prior action was decided on the merits; (2) the decree in
the prior action was a final decision; (3) the matter contested in the second case was or could
have been resolved in the first; and (4) both actions involved the same parties or their privies.
Baraga County v State Tax Comm, 466 Mich 264, 269; 645 NW2d 13 (2002).
In this case, requirements one and two are satisfied here because a judgment was entered
in Landmark’s favor against Atlantis on July 24, 2006. Additionally, the third requirement, that
the present case could have been resolved in the Atlantis lawsuit, is also satisfied because it
stems from the same facts alleged by Landmark in this case: that defendants failed to pay it the
money it was owed after the church paid Atlantis for the work done by Landmark. Clearly, this
action could have been brought in the Macomb County action against Atlantis.
The critical inquiry then is whether Asmar, individually, was the same party or privy to
Atlantis. “Regarding private parties, a privy includes a person so identified in interest with
another that he represents the same legal right, such as a principal to an agent, a master to a
servant, or an indemnitor to an indemnitee.” Peterson Novelties, supra at 12-13. “In order to
find privity between a party and a nonparty, Michigan courts require “both a substantial identity
of interests and a working or functional relationship . . . in which the interests of the non-party
are presented and protected by the party in the litigation.” Id., quoting Phinisee v Rogers, 229
Mich App 547, 553-554; 582 NW2d 852 (1998).
In Wildfong v Fireman’s Fund Ins Co, 181 Mich App 110, 114; 448 NW2d 722 (1989),
the plaintiffs Edwin and Loula Wildfong, filed an action on behalf of their company, Wildfong
Aluminum Products, against its insurance company. The action was later settled at the direction
of the Wildfongs, but the plaintiffs then filed a separate action against the insurer in their
individual capacity alleging similar claims. Id. On appeal, the plaintiffs argued that the trial
court erred in granting the defendants’ motion for summary disposition because “the first action
against defendants was brought by the family-owned corporation and was settled by plaintiffs in
their corporate, not individual capacities, they remained free to file a second lawsuit . . . .” Id. at
114-115. The Wildfong Court noted:
Where a person brings an action or is sued in his individual right, a judgment
rendered for or against him is not operative under the doctrine of res judicata in a
subsequent action brought by or against the same person in a representative
capacity. Similarly, a judgment rendered in an action in which one of the parties
appears in a representative capacity is not operative under the doctrine of res
judicata in a subsequent action involving the same party in his individual right.
These rules have been denied application, however, where a party to one action
in his individual capacity and to another action in his representative capacity is
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in each case asserting or protecting his individual rights. [Id. at 115, quoting
Howell v Vito’s Trucking and Excavating Co, 368 Mich 37, 43; 191 NW2d 313
(1971).]
In this case, it is undisputed that Asmar was not named as a party in the arbitration action
against Atlantis. More importantly though, even if he had been named as a representative
member of Atlantis in that action, the claim asserted in this case is a claim against defendants’
individual liability. As will be demonstrated below, an action under the MBTFA may be
maintained against individual officers of a contractor that has violated the act. Asmar’s potential
individual liability also demonstrates that his private interest was not represented in the breach of
contract action against Atlantis.
Again, privity exists when the interests of the non-party are presented and protected by
the party in the litigation. Peterson Novelties, supra at 13. Atlantis’ company liability on a
breach of contract claim does not present Asmar’s individual liability interests under the
MBTFA. The trial court erred by granting summary disposition in favor of Asmar on the ground
that res judicata precluded the present action.
Although the MBTFA is a penal statute, this Court in DiPonio Constr Co v Rosati
Masonry Co, 246 Mich App 43, 48; 631 NW2d 259 (2001), stated the following on the civil
penalty allowed under the penal statute:
The builders' trust fund act is a penal statute that does not expressly provide a
civil cause of action. However, our Supreme Court has long recognized a civil
cause of action for violation of the provisions of the act. In B F Farnell Co v
Monahan, 377 Mich 552, 555; 141 NW2d 58 (1966), the Court cited the
longstanding principle that when a statute provides a beneficial right but no civil
remedy for its securance, the common law on its own hook provides a remedy,
thus fulfilling law's pledge of no wrong without a remedy." The Court therefore
recognized a "common-law remedy" in favor of those aggrieved by a contractor
or subcontractor's violation of the act. Id. at 557. The Court has twice reaffirmed
that decision. In re Certified Question, 411 Mich 727, 732; 311 NW2d 731
(1981); National Bank of Detroit v Eames & Brown, Inc, 396 Mich 611, 620-621;
242 NW2d 412 (1976).
The MBTFA imposes a trust on funds paid to contractors and subcontractors for products and
services provided under construction contracts. MCL 570.151. An individual officer of a
contractor or subcontractor on a construction project may be found liable for the diversion of
contract funds contrary to the provisions of the MBTFA. People v Brown, 239 Mich App 735,
740-741; 610 NW2d 234 (2000). The statute provides in its entirety:
Sec. 1. In the building construction industry, the building contract fund paid by
any person to a contractor, or by such person or contractor to a subcontractor,
shall be considered by this act to be a trust fund, for the benefit of the person
making the payment, contractors, laborers, subcontractors or materialmen, and the
contractor or subcontractor shall be considered the trustee of all funds so paid to
him for building construction purposes.
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Sec. 2. Any contractor or subcontractor engaged in the building construction
business, who, with intent to defraud, shall retain or use the proceeds or any part
therefore, of any payment made to him, for any other purpose than to first pay
laborers, subcontractors and materialmen, engaged by him to perform labor or
furnish material for the specific improvement, shall be guilty of a felony in
appropriating such funds to his own use while any amount for which he may be
liable or become liable under the terms of his contract for such labor or material
remains unpaid, and may be prosecuted upon the complaint of any persons so
defrauded, and, upon conviction, shall be punished by a fine of not less than 100
dollars or more than 5,000 dollars and/or not less than 6 months nor more than 3
years imprisonment in a state prison at the discretion of the court.
Sec. 3. The appropriation by a contractor, or any subcontractor, of any moneys
paid to him for building operations before the payment by him of all moneys due
or so to become due laborers, subcontractors, materialmen or others entitled to
payment, shall be evidence of intent to defraud. [MCL 570.151-153.]
According to Brown, supra at 741, an officer or employee of a corporation can be held
liable under the MBTFA.
[I]t is beyond question that a corporate employee or official is personally liable
for all tortuous or criminal acts in which he participates, regardless of whether he
was acting on his own behalf or on behalf of the corporation. Attorney General v
Ankersen, 148 Mich App 524, 557; 385 NW2d 658 (1986). This rule of law has
been used by this Court to extend criminal liability to corporate employees when
they, personally, caused their corporation to act unlawfully. [Id. at 739-740;
Emphasis added.]
In this case, it is undisputed that Asmar is a “corporate employee”—in some capacity,
and subject to potential individual liability under the MBTFA. However, in granting Asmar
summary disposition, the trial court did not rule on the merits of Landmark’s underlying claim
under the MBTFA. Instead, the trial court erroneously ruled on procedural grounds that plaintiff
failed to properly join Asmar in a previous action against Atlantis.
We reverse the order granting summary disposition in favor of Asmar and remand the
case to the trial court for further proceedings. Jurisdiction is not retained.
/s/ Michael J. Talbot
/s/ E. Thomas Fitzgerald
/s/ Joel P. Hoekstra
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