Facts
- A Westside Storage of Indianapolis, Inc. (Westside) owned and developed a self-storage facility in Indianapolis and hired Country Contractors, Inc. (Country) to perform excavation work.
- Country subcontracted a substantial portion of the work, including to O & M Excavating, but left the project before it was completed.
- Subcontractors filed mechanic’s liens against Westside’s property for unpaid work; Westside paid the subcontractors to obtain lien releases.
- After Westside paid O & M, Country (through its officer, Jahn Songer) recorded Country’s own mechanic’s lien against Westside’s property for $38,125, tied to the same unpaid subcontractor obligation Westside had already satisfied.
- Westside sued Country for breach of contract and added claims relating to the mechanic’s lien, including slander of title; Westside also sought to pierce the corporate veil to hold Country’s shareholders, Stephen and Jahn Songer (the Songers), personally liable.
- Country had operated as a corporation since 1983 (originally Country Concrete, Inc.), earning profits for many years; in January 2007 it amended its articles and changed its name to Country Contractors, Inc.
- During the 2007–2009 economic downturn, Country suffered continuing losses and later filed for bankruptcy protection.
- Evidence showed Country kept separate accounts through a bookkeeper; there was no evidence the Songers commingled corporate and personal funds or used corporate accounts for personal expenses.
- Country kept annual meeting minutes for 2007–2009; each set of minutes was one page with largely identical language and signatures.
- Westside admitted the Songers themselves were not involved in negotiating or performing the excavation contract; Westside dealt with another individual associated with Country who did not appear at trial.
- After a bench trial, the trial court found Country breached the contract and slandered Westside’s title, pierced the corporate veil, and entered judgment against both Country and the Songers, awarding completion costs, prejudgment interest, attorney’s fees, and delay damages.
Issues
- Whether the evidence supported piercing Country’s corporate veil to impose personal liability on Stephen and Jahn Songer.
- Whether Country’s recording of its mechanic’s lien supported a judgment for slander of title.
- Whether the trial court properly awarded attorney’s fees, delay damages, and prejudgment interest.
Decision
- Reversed the judgment piercing the corporate veil and vacated the personal judgment against the Songers.
- Affirmed the finding that Country slandered Westside’s title by recording the mechanic’s lien.
- Affirmed the award of attorney’s fees.
- Reversed the award of delay damages.
- Remanded for recalculation of prejudgment interest in light of the modified damages award.
Legal Principles
- Piercing the corporate veil is an equitable remedy used only in limited circumstances to prevent fraud or unfairness; ownership and control by shareholders, without more, does not justify disregarding the corporate entity.
- A plaintiff seeking veil piercing must show misuse of the corporate form and a connection between that misuse and the harm complained of; a creditor’s inability to collect (including because the corporation is bankrupt) is not, by itself, a valid reason to impose shareholder liability.
- Corporate history and real operations (including long-term existence and sustained profitability before a downturn), maintenance of separate books and accounts, and absence of commingling or personal use of corporate funds weigh against veil piercing even if corporate recordkeeping is imperfect.
- Slander of title requires a false statement that disparages another’s property interest, made with malice (including reckless disregard for truth), causing special damages.
- Recording a mechanic’s lien can constitute slander of title when the lien is materially false and recorded with knowledge of its invalidity or with reckless disregard, and the property owner incurs costs or legal expenses because of the cloud on title.
- Attorney’s fees may be awarded when permitted by law and supported by evidence; fees may be recoverable as part of the damages flowing from slander of title.
- Delay damages must be supported by non-speculative evidence linking the claimed loss and amount to the defendant’s breach.
- Prejudgment interest is tied to ascertainable amounts and must be recalculated when the underlying judgment changes on appeal.
Conclusion
The Indiana Court of Appeals held that Westside did not prove the kind of shareholder misuse needed to disregard Country’s corporate form, so the Songers could not be held personally liable simply because Country was insolvent and Westside had limited recovery options. The court left intact the judgment against Country for slander of title based on its recording of a mechanic’s lien after Westside had already paid the subcontractor debt reflected in the lien, affirmed the related attorney’s-fees award, reversed unsupported delay damages, and sent the case back to recompute prejudgment interest consistent with the revised damages.