Salazar v. Thrifty Nickel

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Jose S. Salazar and
Mildred O. Salazar,
Plaintiffs and Appellants,

v.

Thrifty Nickel Inc., a Utah corporation;
Want Ads of Salt Lake City, Inc.;
Southern Cross, Inc.; Robert L. Christensen;
and Norman Wilkinson,
Defendants and Appellees.

MEMORANDUM DECISION
(Not For Official Publication)

Case No. 20010297-CA

F I L E D
March 7, 2002 2002 UT App 65 -----

Third District, Salt Lake Department
The Honorable J. Dennis Frederick

Attorneys:
Conrad B. Houser, Salt Lake City, for Appellants
Scott A. Call and James H. Tily, Salt Lake City, for Appellees -----

Before Judges Billings, Davis, and Thorne.

THORNE, Judge:

Appellants Jose S. Salazar and Mildred O. Salazar appeal from the trial court's grant of Robert L. Christensen's motion to dismiss, and the trial court's decision to grant the motion with prejudice. We affirm in part and reverse in part.

When examining whether dismissal under rule 12(b)(6) of the Utah Rules of Civil Procedure is appropriate, we assume that all of the facts alleged in a plaintiff's complaint are true and "draw all reasonable inferences in the light most favorable to the plaintiff." Whipple v. American Fork Irrigation Co., 910 P.2d 1218, 1219 (Utah 1996). We also note that rule 12(b)(6) is crafted to permit a litigant to "challenge the formal sufficiency of the claim for relief, not to establish the facts or resolve the merits of the case," and absent a demonstration that the "allegations of the complaint clearly demonstrate that the plaintiff does not have a claim," dismissal should not be granted. Id. 1220 (citation omitted).

In the present matter, dismissal was proper only if the Salazars' complaint failed to allege sufficient facts to permit the court to disregard the corporate form. For the court to disregard the corporate form, as requested by the Salazars, their complaint must plead

a concurrence of two circumstances: (1) there must be such 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.

Norman v. Murray First Thrift & Loan Co., 596 P.2d 1028, 1030 (Utah 1979) (footnote omitted); see also Werner-Jacobsen v. Bednarik, 946 P.2d 744, 748 (Utah Ct. App. 1997) (holding the alter ego doctrine inapplicable to relationships between individuals); Shafir v. Harrigan, 879 P.2d 1384, 1389 (Utah Ct. App. 1994) (concluding that absent sufficient evidence to support an alter ego claim, stockholders, and by analogy corporate officers, are insulated from liabilities created by the corporation); cf. United States v. Van Diviner, 822 F.2d 960, 965 (10th Cir. 1987) (outlining several factors that should be examined in determining whether a corporate veil can be pierced).

After carefully reviewing the Salazars' complaint, we conclude that the Salazars failed to plead the existence of "such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist."(1) Id. Accordingly, absent pleading sufficient facts to support their attempt to pierce the corporate veil, the allegations of the complaint clearly do not demonstrate that the Salazars have a claim. See Whipple, 910 P.2d at 1220. Therefore, the trial court properly dismissed the complaint.

However, "[d]ismissal with prejudice . . . is a harsh and permanent remedy when it precludes a presentation of a plaintiff's claims on their merits. Our rules of procedure are intended to encourage the adjudication of disputes on their merits." Bonneville Tower v. Thompson Michie Ass'n, 728 P.2d 1017, 1020 (Utah 1986). A motion predicated on rule 12(b)(6) is not intended to be a request for a judgment on the merits, seeWhipple, 910 P.2d at 1220 (stating "a rule 12(b)(6) motion is a challenge to the formal sufficiency of the claim for relief, not to establish the facts or resolve the merits of the case"), and, absent a consideration of the merits, "there [is] no reason for the court to dismiss with prejudice and prevent future consideration of the claims should the defect be corrected." Bonneville Tower, 728 P.2d at 1020; see also Intermountain Physical Med. Assocs. v. Micro-Dex Corp., 739 P.2d 1131, 1133 (Utah Ct. App. 1987) (reversing the trial court's dismissal with prejudice for failure to articulate sufficient grounds "to apply the 'harsh and permanent remedy'" (citation omitted)); Land v. Midwest Office Tech., 979 F. Supp. 1344, 1349 (D. Kan. 1997) (concluding that dismissal with prejudice following a rule 12(b)(6) motion was inappropriate because the court could not state with a certainty that the plaintiff would be unable to cure the defects in the pleading and properly plead facts supporting alter ego liability).

The Salazars also argue on appeal that the trial court erred in denying them leave to amend. Our reading of the record finds nothing to support this argument, and we cannot fault the trial court for failing to address issues not properly presented to it. We therefore do not address the Salazars' amendment argument.

Accordingly, we affirm the trial court's dismissal of the Salazars' complaint, but we reverse the trial court's decision to do so with prejudice.
 

______________________________
William A. Thorne Jr., Judge

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I CONCUR:
 

______________________________
Judith M. Billings,
Associate Presiding Judge

1. While we also have concerns regarding the adequacy of the Salazars' attempt to plead facts sufficient to demonstrate that "observance of the corporate form would sanction a fraud," Norman v. Murray First Thrift & Loan Co., 596 P.2d 1028, 1030 (Utah 1979), we conclude that the Salazars' failure to properly plead a "unity of interests," Id., between Christensen and Thrifty Nickel is sufficient to support the trial court's decision, and, therefore, we do not address the sufficiency of the Salazars' fraud pleadings. -----

DAVIS, Judge (concurring and dissenting):

I concur in the majority analysis with reference to the inadequacy of the pleadings and the efforts of the Salazars to amend.

I believe it is inappropriate, however, for the court of appeals to decide this case on an issue that was not addressed in the trial court, and not argued on appeal. The only reference to the dismissal with prejudice in the briefs is in the last three sentences of the Salazars' reply brief.

Even if the issue had been adequately briefed, the court of appeals will ordinarily not address an issue raised for the first time in a reply brief. See Coleman v. Stevens, 2000 UT 98,¶9, 19 P.3d 1122. In my view, this fleeting reference, coupled with the impropriety thereof, is insufficient to put Appellee on notice that the Salazars are seeking a reversal on that ground.

I have no quarrel with the authorities cited by the majority in support of its prejudice analysis, and may have shared that view if the issue had been specifically ruled upon by the trial court and properly briefed and argued to this court. To decide this case on the prejudice issue has the effect of our depriving the parties of one of the most fundamental aspects of due process: notice and an opportunity to be heard. See Dairy Prod. Servs. v. Wellsville City, 2000 UT 81,¶49, 13 P.3d 581 ("The minimum requirements [of due process] are adequate notice and an opportunity to be heard in a meaningful manner.").

Thus, not only is it inappropriate for us to reach this issue at all, see Snow Flower Homeowners Ass'n v. Snow Flower, Ltd., 2001 UT App 207,¶14, 31 P.3d 576 ("'This court has routinely declined to consider arguments which are not adequately briefed on appeal.'") (quoting Burns v. Summerhays, 927 P.2d 197, 199 (Utah Ct. App. 1996)); see also Utah R. App. P. 24(a)(9) (requiring appellant's argument to "contain the contentions and reasons of the appellant with respect to the issues presented . . . with citations to authorities, statutes, and parts of the record relied on"), but resolving the same against the Appellee amounts to a denial of due process.
 

______________________________
James Z. Davis, Judge