Paria Group v. Westchester

----ooOoo----

Paria Group and Stephen M. Zimmerman,
Plaintiffs and Appellants,

v.

Westchester Investment
Partners, Ltd.,
Defendant and Appellee.

MEMORANDUM DECISION
(Not For Official Publication)

Case No. 990035-CA

F I L E D
February 10, 2000

2000 UT App 019 -----

Fourth District, Provo Department
The Honorable Howard Maetani

Attorneys:
John G. Mulliner, Provo, for Appellants
Cameron S. Denning, Salt Lake City, for Appellee

-----

Before Judges Greenwood, Bench, and Billings.

BILLINGS, Judge:

Paria Group, a Utah corporation, brought suit against Westchester Investment Partners, Ltd., alleging breach by constructive eviction of Paria's lease agreement with Westchester. Westchester counterclaimed, alleging breach of the lease by Paria. Westchester's counterclaim also named appellant Stephen M. Zimmerman, alleging that Paria is Zimmerman's alter ego and seeking to hold Zimmerman jointly liable for Paria's breaches.

Following a bench trial, the trial court entered judgment for Westchester against Paria. The trial court also found that Zimmerman and PGM, Inc., another Utah corporation, were Paria's alter egos, and held Paria, PGM, and Zimmerman jointly and severally liable for Westchester's damages. Zimmerman appeals the trial court's finding of alter ego against himself and the trial court's entry of judgment against PGM. We affirm.

Zimmerman argues the trial court erred by piercing the corporate veils of Paria and PGM and declaring them Zimmerman's alter egos. "For purposes of appellate review, the trial court's decision to pierce the corporate veil will be upheld if there is substantial evidence in favor of the judgement." Colman v. Colman, 743 P.2d 782, 787 (Utah Ct. App. 1987) (citing Standage v. Standage, 711 P.2d 612, 614-16 (Ariz. Ct. App. 1985)); see also Hansen v. Green River Group, 748 P.2d 1102, 1106 (Utah Ct. App. 1988) (upholding trial court's alter ego finding where "supported by substantial record evidence") (citing State v. Walker, 743 P.2d 191, 193 (Utah 1987)). Furthermore, we accord "due regard . . . to the opportunity of the trial court to judge the credibility of the witnesses." Utah R. Civ. P. 52(a).

In order to justify piercing the corporate veil, the trial court had to find that: "(1) there [was] such a unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist, viz., the corporation is, in fact, the alter ego of one or a few individuals; and (2) the observance of the corporate form would sanction a fraud, promote injustice, or an inequitable result would follow." Salt Lake City Corp. v. James Constructors, Inc., 761 P.2d 42, 46-47 (Utah Ct. App. 1988) (quoting Norman v. Murray First Thrift & Loan Co., 596 P.2d 1028, 1030 (Utah 1979)). A number of factors may be relevant to determining whether a court is justified in piercing the corporate veil, including: (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; (7) the use of the corporation as a facade for operations of the dominant stockholder or stockholders; and (8) the use of the corporation entity in promoting injustice or fraud. Colman, 743 P.2d at 786 (citations and footnotes omitted).

In order to attack the trial court's finding of alter ego as not supported by substantial evidence, Zimmerman has the obligation to marshal all of the evidence supporting the findings and show that despite the supporting facts and in light of the conflicting evidence, the findings are not supported by substantial evidence. . . . Substantial evidence is that quantum and quality of relevant evidence that is adequate to convince a reasonable mind to support a conclusion. Beaver County v. Utah State Tax Comm'n, 916 P.2d 344, 355-56 (Utah 1996) (citations and internal quotations omitted).

We conclude that Zimmerman has failed to marshal the evidence in favor of the trial court's decision. Zimmerman cites selectively from the record and presents evidence favorable to his position as findings of fact, even though such evidence was either not adopted in the trial court's findings of fact or contrary to the trial court's findings of fact.

For example, Zimmerman argues that the evidence cannot support the trial court's finding that Paria ignored corporate formalities by failing to hold shareholders' and directors' meetings and by failing to keep corporate records. However, in so arguing, Zimmerman concentrates on questions that were not asked of witnesses rather than on the evidence that supports the trial court's findings. The evidence supporting the trial court's findings includes Zimmerman's failure to produce several years' worth of corporate records and his testimony that he had produced all of Paria's corporate records. Additionally, Paria's nominal corporate secretary testified that he could recall attending only one corporate meeting and could recall signing no minutes from corporate meetings. Furthermore, Zimmerman failed to ensure that either PGM or Paria were corporations in good standing with the state of Utah; both corporations were involuntarily dissolved by the state for failure to make required corporate filings. The trial court could reasonably find from this evidence that Paria ignored corporate formalities.(1)

Because Zimmerman fails to marshal the evidence that supports the trial court's findings of fact, we affirm the trial court's finding of alter ego.
 
 
 

______________________________
Judith M. Billings, Judge -----

WE CONCUR:
 
 
 
 

______________________________
Pamela T. Greenwood,
Presiding Judge
 
 
 
 

______________________________
Russell W. Bench, Judge

1. We conclude that Zimmerman does not have standing to appeal the trial court's entry of judgment against PGM. See Society of Prof'l Journalists v. Bullock, 743 P.2d 1166, 1171 (Utah 1987) ("[A]n appellant generally must show both that he or she was a party or privy to the action below and that he or she is aggrieved by that court's judgment.") (citing Olson v. Salt Lake City Sch. Dist., 724 P.2d 960, 962 (Utah 1986)) (emphasis added). However, we address the trial court's judgment against PGM in PGM's separate appeal in a related case. See PGM, Inc. v. Westchester Inv. Partners, 2000 UT App 020.