LAKEVIEW COMMONS LIMITED PARTNERSHIP V EMPOWER YOURSELF LLC
Annotate this Case
Download PDF
STATE OF MICHIGAN
COURT OF APPEALS
LAKEVIEW COMMONS LIMITED
PARTNERSHIP,
UNPUBLISHED
September 16, 2010
Plaintiff-Appellant,
v
No. 291728
Oakland Circuit Court
LC No. 2007-087084-CK
EMPOWER YOURSELF, L.L.C., HAMSA,
L.L.C., TROY SWALWELL and PHYLLIS
SWALWELL,
Defendants-Appellees.
Before: OWENS, P.J., and WHITBECK and FORT HOOD, JJ.
PER CURIAM.
Plaintiff appeals by leave granted the trial court’s order granting in part summary
disposition in favor of defendants. We affirm in part and reverse in part.
This action arises out of a breached lease agreement between plaintiff and Empower
Yourself, L.L.C. (Empower). On appeal, plaintiff argues that the trial court erred in granting
defendants’ motion for summary disposition because a genuine issue of material fact exists
regarding (1) whether Hamsa, L.L.C. (Hamsa) is a mere continuation of Empower, and (2)
whether the corporate veil of Empower and Hamsa should be pierced to hold defendants, Troy
Swalwell (Troy) and Phyllis Swalwell (Phyllis), personally liable. We agree there is a genuine
issue of material fact regarding whether Hamsa is the mere continuation of Empower, but find
that there is no genuine issue of material fact regarding piercing the corporate veil.
This Court reviews the grant or denial of a motion for summary disposition under MCR
2.116(C)(10) de novo. Allen v Bloomfield Hills Sch Dist, 281 Mich App 49, 52; 760 NW2d 811
(2008). A motion brought pursuant to MCR 2.116(C)(10) tests the factual support of a plaintiff’s
claim. Lind v Battle Creek, 470 Mich 230, 238; 681 NW2d 334 (2004). A motion brought under
MCR 2.116(C)(10) is reviewed by considering the pleadings, admissions, and other evidence
submitted by the parties in the light most favorable to the nonmoving party. Latham v Barton
Malow Co, 480 Mich 105, 111; 746 NW2d 868 (2008). Summary disposition is proper if there is
“no genuine issue regarding any material fact and the moving party is entitled to judgment as a
matter of law.” Latham, 480 Mich at 111. There is a genuine issue of material fact when
“reasonable minds could differ on an issue after viewing the record in the light most favorable to
the nonmoving party.” Allison v AEW Capital Mgmt, 481 Mich 419, 425; 751 NW2d 8 (2008).
-1-
This Court considers only that evidence which was properly presented to the trial court in
deciding the motion. Pena v Ingham Co Rd Comm’n, 255 Mich App 299, 310; 660 NW2d 351
(2003). Successor liability is derived from equitable principles and is reviewed de novo on
appeal. Zantel Mktg Agency v Whitesell Corp, 265 Mich App 559, 568; 696 NW2d 735 (2005).
The basic rule in Michigan regarding successor liability provides:
The traditional rule of successor liability examines the nature of the transaction
between predecessor and successor corporations.
If the acquisition is
accomplished by merger, with shares of stock serving as consideration, the
successor generally assumes all its predecessor's liabilities. However, where the
purchase is accomplished by an exchange of cash for assets, the successor is not
liable for its predecessor's liabilities unless one of five narrow exceptions applies.
The five exceptions are as follows:
‘(1) where there is an express or implied assumption of liability; (2) where the
transaction amounts to a consolidation or merger; (3) where the transaction was
fraudulent; (4) where some of the elements of a purchase in good faith were
lacking, or where the transfer was without consideration and the creditors of the
transferor were not provided for; or (5) where the transferee corporation was a
mere continuation or reincarnation of the old corporation.[citations omitted.]’
[Foster v Cone-Blanchard Mach Co, 460 Mich 696, 702; 597 NW2d 506 (1999),
quoting Turner v Bituminous Cas Co, 397 Mich 406, 417 n 3; 244 NW2d 873
(1976).]
Furthermore, Foster explained the mere continuation doctrine:
After examining the relevant policy concerns, this Court in Turner[, 397 Mich at
406,] concluded that a continuity of enterprise between a successor and its
predecessor may force a successor to ‘accept the liability with the benefits’ of
such continuity. Turner held that a prima facie case of continuity of enterprise
exists where the plaintiff establishes the following facts: (1) there is continuation
of the seller corporation, so that there is a continuity of management, personnel,
physical location, assets, and general business operations of the predecessor
corporation; (2) the predecessor corporation ceases its ordinary business
operations, liquidates, and dissolves as soon as legally and practically possible;
and (3) the purchasing corporation assumes those liabilities and obligations of the
seller ordinarily necessary for the uninterrupted continuation of normal business
operations of the selling corporation. Turner identified as an additional principle
relevant to determining successor liability, whether the purchasing corporation
holds itself out to the world as the effective continuation of the seller corporation.
[Foster, 460 Mich at 703-704.]
This Court recently held in RDM Holdings, Ltd v Continental Plastics Co, 281 Mich App 678,
717-719; 762 NW2d 529 (2008), that successor liability applies to corporations and LLCs in
purely commercial contexts, such as a breach of a lease agreement. In RDM Holdings, the
plaintiff was a commercial business that entered into a lease agreement with ContinentalLighting, L.L.C. (Lighting). Lighting filed for bankruptcy, and subsequently, Continental-2-
Coating, L.L.C. (Coating), was created. The trial court granted summary disposition, finding no
genuine issue of material fact regarding whether Coating was liable for the breach of the lease
agreement under a successor liability theory. This Court reversed, finding that the plaintiff had
presented sufficient evidence to create a genuine issue of material fact because the plaintiff had
presented evidence reflecting a continuation in management, personnel, assets, and general
business operations of Lighting by Coating. Id. at 682-383, 718-719.
In looking at the record in the light most favorable to plaintiff, there is a genuine issue of
material fact regarding whether Hamsa is the mere continuation of Empower. Empower ceased
operations the same month, August 2007, which Hamsa was created. Both Empower and Hamsa
were in the business of health, fitness, personal training, and yoga. Empower and Hamsa served
the same geographic area, Oakland County. Empower and Hamsa operated in the same manner.
Both provided a venue for independent contractor yoga teachers to teach classes to students.
Phyllis owned 80 percent and Troy owned 20 percent of Empower and Hamsa. Phyllis was the
president and managing member of both Empower and Hamsa, and Troy was the vice president
and registered agent of both Empower and Hamsa. Troy also signed the annual reports and
prepared the tax returns for both Empower and Hamsa. Empower and Hamsa did not keep a
corporate minute book or an operating agreement. Both held informal meetings and did not keep
minutes from the informal meetings. Neither Empower nor Hamsa distributed earnings to its
members. Troy and Phyllis were signatories on both Empower’s and Hamsa’s bank accounts.
Empower’s business telephone number became Hamsa’s business telephone number. Empower
had a website from 2004 until 2007. Then, in 2007, Hamsa created a website. Hamsa’s website
stated that it was formerly known as Empower and gave details on its new location. Reasonable
minds could differ regarding whether Hamsa was the mere continuation of Empower. Therefore,
the record provided raises a genuine issue of material fact regarding whether Hamsa was merely
a continuation of Empower.
Plaintiff also argues there is a genuine issue of fact regarding whether the corporate veil
of Empower and Hamsa should be pierced. An appellate court's review of a decision not to
pierce the corporate veil is de novo because of the equitable nature of the remedy. Foodland
Distrib v Al-Naimi, 220 Mich App 453, 456; 559 NW2d 379 (1996).
In general, “the law treats a corporation as an entirely separate entity from its
stockholders, even where one person owns all the corporation's stock.” Foodland Distrib, 220
Mich App at 456. However, the courts can ignore this corporate fiction when it is invoked to
subvert justice. Id. Traditionally, the “basis for piercing the corporate veil has been to protect a
corporation's creditors where there is a unity of interest of the stockholders and the corporation
and where the stockholders have used the corporate structure in an attempt to avoid legal
obligations.” Id.
The elements for piercing the corporate veil are (1) the corporate entity is a mere
instrumentality of another individual or entity, (2) the corporate entity was used to commit a
wrong or fraud, and (3) there was an unjust injury or loss to the plaintiff. Rymal v Baergen, 262
Mich App 274, 293-294; 686 NW2d 241 (2004). “There is no single rule delineating when a
-3-
corporate entity should be disregarded, and the facts are to be assessed in light of a corporation's
economic justification to determine if the corporate form has been abused.”1 Id. at 294.
In looking at the evidence in the light most favorable to plaintiff, there is no genuine
issue of material fact regarding whether Empower’s or Hamsa’s corporate veil should be pierced.
The corporate forms of Empower and Hamsa were respected. Troy stated that the activities of
Empower and Hamsa were not commingled. Empower paid its bills through its bank account
and Hamsa paid its bills through its bank account. Empower and Hamsa each filed separate state
and federal tax returns. Troy stated that the rent and other expenses incurred by Empower
exceeded its revenue, so he personally loaned Empower about $100,000. Troy would directly
deposit the loaned money into Empower’s bank account, and then Empower itself would pay its
monthly bills. Additionally, Troy personally paid for various assets of Empower, and then upon
Empower’s ceasing operations, left those assets with Empower. Troy stated than any check
written to Troy or Phyllis by Empower was for the partial repayments of Troy’s loans. Troy
stated that he personally paid for Empower’s leased vehicle for his personal use after Empower
ceased operations. Additionally, the record does not show that plaintiff will suffer an unjust loss
because plaintiff already has a valid judgment against Empower for breaching the lease
agreement. While Troy admitted that part of the reason Empower ceased operations was to
avoid the lease agreement with plaintiff, this alone is not sufficient to raise a genuine issue of
material fact regarding whether Empower’s or Hamsa’s corporate veil should be pierced.
Affirmed in part, reversed in part, and remanded for further proceedings. We do not
retain jurisdiction.
/s/ Donald S. Owens
/s/ William C. Whitbeck
/s/ Karen M. Fort Hood
1
This Court applied these same rules to determine whether the corporate veil of an LLC should
be pierced. RDM Holdings, 281 Mich App at 715.
-4-
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
