2010-710, Regina Mbahaba, Individually and as Mother and Next Best Friend of Benita Nahimana v. Thomas Morgan d/b/a Property Management Services a/k/a Property Services Company, LLC

Seufert Law Offices, P.A.

THOMAS MORGAN d/b/a PROPERTY MANAGEMENT SERVICES a/k/a

No. 2010-710 Hillsborough-northern judicial district

remand. company managed by the defendant. We affirm in part, reverse in part, and judgment against her action seeking to pierce the limited-liability veil of a

claims against the defendant, Thomas Morgan, and granted summary Court (McGuire and Tucker, JJ.). The orders dismissed the plaintiff’s direct friend of her minor daughter, Benita Nahimana, appeals orders of the Superior page is: http://www.courts.state.nh.us/supreme. a.m. on the morning of their release. The direct address of the court's home DALIANIS, C.J. The plaintiff, Regina Mbahaba, individually and as next reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00 the brief and orally), for the defendant. Craven Sullivan & Splendore, PLLC, of Manchester (Jason M. Craven on

Murphy orally), for the plaintiff. Rojas on the brief), and Shaheen & Gordon, P.A., of Manchester (Francis G.

to press. Errors may be reported by E-mail at the following address:

editorial errors in order that corrections may be made before the opinion goes Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any Readers are requested to notify the Reporter, Supreme Court of New

well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule 22 as in order to hold the defendant individually liable. The defendant moved for

p. 2 plaintiff amended her writ to add a count seeking to “pierc[e] the company veil” Based upon, among other things, the original LLC’s lack of assets, the

approximately $16,500, and it ceased operations.

consisted of its remaining office furniture and two cars, worth in total

invested in the new company. As a result, the original LLC’s total assets furniture for $3,500, which was roughly the amount that the defendant over to the new company,” which they did. The old company sold its office

called “[a]t least four” of the LLC’s largest clients and invited them to “come

requesting to terminate the LLC’s management of their properties. Next, he The defendant then sent letters to the original LLC’s seven clients,

member in the new LLC.

The original company’s bookkeeper and receptionist stayed on, becoming a

address. The new LLC has the same telephone number as the original LLC. gave the new LLC a different name, but continued to operate it from the same formed a new LLC, of which he was also the managing member. The defendant With the actions against his original LLC still pending, the defendant

proceed. dismissed, but the trial court allowed the plaintiff’s claims against the LLC to

daughter].” Ultimately, the claims against the defendant individually were

participated in the activity that caused injury to the [plaintiff and her merely because of his official position in the LLC, but because he “personally The plaintiff responded that she did not seek to hold the defendant liable

could not be “held personally liable for the debts or actions of the company.”

arguing that, because he supervised the property on behalf of the LLC, he

Properties. The defendant moved to dismiss the action against him personally, contamination, the plaintiff filed lawsuits against the defendant and Biren As a result of the alleged injury to Benita caused by the lead

hazards” in the home. Department of Health and Human Services, which revealed “lead exposure living in the apartment, prompting an inspection by the New Hampshire

and bookkeeper. The plaintiff’s daughter, Benita, was poisoned by lead while

defendant, the LLC employed one other person, who served as its receptionist with the defendant’s LLC to provide management services. In addition to the 2005 to July 2006. Biren Properties, Inc. owned the building and contracted

building where the plaintiff and her family rented an apartment from June

Company, a limited liability company (LLC) that managed an apartment The defendant owned Property Management Services a/k/a Property Services We begin by summarizing the relevant facts as they appear in the record.

I. Background by reason” of his status within the LLC. We begin with first principles. p. 3 common law negligence and, therefore, the claims against him are not “solely The plaintiff counters that the defendant owed her family duties grounded in The defendant argues that this provision insulates him from liability.

acting as a manager of the limited liability company. limited liability company solely by reason of being a member or

member or manager of a limited liability company shall be obligations and liabilities of the limited liability company; and no arising in contract, tort or otherwise, shall be solely the debts,

II. The Defendant’s Direct Liability

meanings to the words used. Id

obligations and liabilities of a limited liability company, whether Except as otherwise provided by this chapter, the debts,

LLC members to third-parties and provides as follows: The controlling statute here, RSA 304-C:25 (2005), governs the liability of

pleaded do not constitute a basis for legal relief. Id include. Id. what the legislature might have said nor add words that it did not see fit to the light most favorable to the plaintiff. Beane v. Dana S. Beane & Co. face, its meaning is not subject to modification. Id. We will neither consider as alleged in the plaintiff’s pleadings and construe all reasonable inferences in. When the language of a statute is clear on its In reviewing the grant of a motion to dismiss, we assume the truth of the facts language of the statute, and, where possible, we ascribe the plain and ordinary the words of the statute considered as a whole. Id. We first examine the statutes, we are the final arbiter of the intent of the legislature as expressed in of Nicholas P., 162 N.H. 199, 203 (2011). When construing New Hampshire review the trial court's interpretation of a statute de novo. In re Guardianship Resolution of the issues in this case requires statutory construction. We judgment on her veil-piercing claim. dismissed her action against the defendant and when it granted summary. Properties. The plaintiff argues on appeal that the trial court erred when it N.H. 708, 711 (2010). We will uphold the granting of the motion if the facts

granted the motion to dismiss the actions against the defendant, individually. We begin with the plaintiff’s argument that the trial court erred when it

then severed the claim against the LLC from the claims against Biren summary judgment on this claim, which the trial court granted. The trial court p. 4 Greg Allen Const. Co., Inc. v. Estelle behalf is “sometimes framed as whether the duty arises solely from contract.” shareholder or officer can be liable for actions taken on a business entity’s

itself is. See 4

not render him personally liable under the contract.” Redmon v. Griffith

its nonperformance.”). As a result, the issue of whether a manager, member,

liable for a breach because they are not parties to the contract – only the LLC the company.” Id company if that liability is not based simply on the member’s affiliation with

contract, with or without a designation as to his representative capacity, does, 798 N.E.2d 171, 174 (Ind. 2003).

types of liability, such as common-law liability.” Sturm

principal whom he has the power so to bind, does not thereby become liable for making a contract only on behalf of a competent disclosed or partially disclosed

Restatement (Second) of Agency § 328, at 80 (1958) (“An agent, by

managers who disclose that they are contracting on an LLC’s behalf are not S.W.3d 225, 239 (Tex. App. 2006) (discussing corporations). LLC members and. . . does not preclude individual liability for members of a limited liability

“[w]here [an LLC] enters into a contract, the [manager’s] signature on the his authority to bind the [LLC].” Id. at 913 (discussing corporations). Thus, not impose liability, the statute’s use of the term ‘solely’ opens the door to other. . . protected from personal liability for making a contract where acting within By contrast, a manager or member, “acting as an agent of [an LLC], is

because he or she is a member of the LLC.” Allen characterized as “black letter, hornbook law.” Smith, 777 S.W.2d at 914.

. at 869 (quotation omitted). This distinction has been

liable personally for an obligation of the limited liability company. The statute statute has nothing to mean that a member “must do more than merely be a member in order to be to do with a manager’s personal liability (quotations and emphasis omitted). The court, therefore, construed the statute

member or manager,” noted that, “although being a member or manager does Connecticut Supreme Court, construing the phrase “solely by reason of being a

commits . . . because he or she personally committed a wrong, not ‘solely’ Therefore, “[a]n LLC member is liable for torts he or she personally

for his own negligence. See id.

S.W.2d 912, 913 (Ky. 1989) (discussing Kentucky corporations statute). The vicarious liability for an LLC’s debts or obligations. See Smith v. Isaacs, 777 personally liable for his own acts because RSA 304-C:25 governs a member’s Development, LLC, 2 A.3d 859, 866 (Conn. 2010). A member remains LLC, he is liable to third persons injured thereby. See Sturm v. Harb participates in the commission of a tort, whether or not he acts on behalf of his 1216, 1228 (Md. 2010). When, however, a member or manager commits or contractual obligations acquired by, the LLC.” Allen v. Dackman, 991 A.2d “A member of an LLC generally is not liable for torts committed by, or p. 5 In Sargent v. Ross

plaintiff and, therefore, cannot be individually liable for a breach. We disagree. contractually delegated duties to his LLC, he himself assumed no duty to the

argues that he had no such duty. He contends that although Biren Properties

warn” the plaintiff about the dangers of flaking lead paint. The defendant individual duty sounding in tort to “investigate, remedy, make safe and/or We construe the quoted paragraph to allege that the defendant had an

flaking lead paint present in the rental unit.

relations of individuals to each other.” Sargent ordinary case of liability for personal misfeasance, which runs through all the

make safe and/or warn Plaintiffs of the dangers of peeling and to exercise reasonable care under all the circumstances.” Id Defendants also owed a duty to plaintiffs to investigate, remedy, law ordinarily impose liability upon persons for injuries caused by their failure extends to the Plaintiff[s] as lawful tenants of Defendant. The 5

unreasonable risk of harm. Cf

nothing special to do with the relation of landlord and tenant. It is the

Sargent

“property manager,” “property owner,” or “landlord,” “[g]eneral principles of tort hazard as to make the apartment uninhabitable. Said duty

upon leasing property assumes a duty not to expose its tenants to an results in an injury.” Id. Certainly, a property owner, like Biren Properties, liability upon the part of a landlord when he demises dangerous property has negligent for exposing another to an unreasonable risk of harm that foreseeably simply an application of the common law principle that “[a] person is generally

thus clarified that what could be termed “landlord negligence” is

omitted). Therefore, whether or not one technically assumes the role of where children under six years old will reside, constitutes such a Peeling and flaking paint, which contains lead in an apartment, 113 N.H. at 392 (quotation maintain and rent the premises . . . in a habitable condition.

govern other persons in their daily activities.” We noted that “[t]he ground of the position of “landlord” from the “simple rules of reasonable conduct which tests for landlord negligence because they immunized individuals occupying

The defendant[s] and their property manager owed a duty to

we affirm the trial court’s order insofar as it dismissed them. See the trial court’s dismissal of the plaintiff’s other claims have been waived, and the defendant’s personal liability for negligence. As a result, any objections to

The negligence count of the plaintiff’s writ states the following:

N. Ins. Co. v. Argonaut Ins. Co., 161 N.H. 778, 785 (2011).

the plaintiff’s writ alleges multiple theories of liability, her brief addresses only With these principles in mind, we turn to the plaintiff’s claims. Although duty to avoid “exposing [the plaintiff] to an unreasonable risk of harm.” Id

p. 6 knowledge of its hazardous condition suffice to establish an individual tort The defendant’s management of the apartment and his superior

. . . and make safe the rental, or at least warn the plaintiff[ ].”

“[i]gnor[ed] this prior knowledge, and . . . wholly fail[ed] to further investigate . . . that probably contained lead.” She further alleges that the defendant “actual knowledge of the fact that the rental . . . had peeling and flaking paint

property; (2) he “had prior knowledge of lead paint dangers”; and (3) he had

negligence. Under Sargent

her negligence claim survives the defendant’s motion to dismiss. Specifically, she alleges that: (1) the defendant, personally, managed the 391. Thus, because these allegations state facts entitling the plaintiff to relief, defendant’s duty arises solely from the property management agreement. See. at

knowledge and authority of a landlord may be held liable for his own party without a direct contractual duty who nonetheless possesses the premises than the tenant.”). As the allegations in this case demonstrate, a person may be held to a greater degree of care than the defendant exercised. Kline v. Burns Here, the plaintiff alleges circumstances under which a reasonable contractual relationship to the tenant and neither the LLC’s duty nor the omitted). the party to whom he owes a duty of care. Sargent, 113 N.H. at 392 (quotation individuals to each other,” by abstaining from a contractual relationship with the protection of a vulnerable tenant. Indeed, the negligence that Sargent “liability for personal misfeasance, which runs through all relations of

that the landlord has a much better knowledge of the conditions of the

, 111 N.H. 87, 92 (1971) (“Common experience demonstrates

N.H. at 394 (“[T]he landlord is best able to remedy dangerous conditions.”); the tenancy, not purely from the contractual relationship. See however, the property owner’s duty does not arise solely by virtue of its Sargent, 113 addressed stems from a landlord’s ability to anticipate and avoid risks during agreement with Biren Properties. Contrary to the defendant’s argument, maintain the property in a safe condition when it entered into the management circumstances, a reasonable person would exercise a certain degree of care for exists, independent of any contractual obligation, because, under these

tort duty on agents of landlords). Stoiber v. Honeychuck, 162 Cal. Rptr. 194, 208-09 (Ct. App. 1980) (imposing

Similarly, as the defendant appears to concede, his LLC assumed a duty to that a duty of care may arise out of a contract . . . .” (quotation omitted)). p. 7 In Terren v. Butler

failure to insure has upon the veil-piercing analysis.

summary judgment improper, we do not address what impact, if any, the LLC’s

surrounding the LLC’s transfer of its accounts to the new company made veil piercing. Because we conclude that genuine issues of material fact and move his accounts to it and that a failure to insure cannot, in itself, justify

defendants were the sole officers and shareholders of the corporations. Terren be pierced. The defendant counters that he had a right to establish a new LLC permitted piercing of the corporate veil. In both cases, the individual company’s distribution of assets after a claim had been brought against it

disregarded some corporate formalities, while complying with others. Terren, 134 N.H. at 640; Druding, 122 N.H. at 824. In both cases, the officers

122 N.H. 823, 827-28 (1982), we addressed the circumstances under which a members and managers, are not liable for a company’s debts. Norwood Group

Id company to promote an injustice or fraud upon the plaintiff, as is argued here.

company after the plaintiff brought her claims and its failure to insure itself Here, the plaintiff argues that the LLC’s transfer of its accounts to a new LLCs, and we will do the same. Ordinarily, corporate owners, like LLC assumed for analytical purposes that our corporate veil-piercing cases apply to. (quotation omitted). under the veil-piercing theory we have applied to corporations, the parties have independent of its stockholders and treat the stockholders as the corporation’s . In such a case, we will disregard the fiction that the corporation is

pierce the veil and assess individual liability where the owners have used the stock and assets will be treated as identical. Id. Thus, for instance, we will matter of law, we will affirm. Id 724. In particular cases, however, a corporation and those owning all of its owners are considered separate legal entities. See Norwood Group, 149 N.H. at v. Phillips, 149 N.H. 722, 724 (2003); see RSA 304-C:25. The company and its

most favorable to the non-moving party. First Berkshire Bus. Trust v. Comm’r

members and managers of an LLC can be held personally liable for its debts Turning to the merits, although we have yet to address whether the

to the facts de novo. Id.

outcome of the litigation, and if the moving party is entitled to judgment as a not reveal any genuine issues of material fact, i.e., facts that would affect the N.H. Dep’t of Revenue Admin., 161 N.H. 176, 179 (2010). If this review does

judgment rulings by considering the affidavits and other evidence in the light LLC’s debts under the so-called “veil-piercing” doctrine. We review summary We now determine whether the defendant may be held liable for the

III. Piercing the Limited-Liability Veil p. 8 Affirmed in part; reversed in

Accordingly, the trial court erred in granting summary judgment.

cannot conclude that the defendant is entitled to judgment as a matter of law.

depositions and other evidence in the light most favorable to the plaintiff, we to promote an injustice upon the plaintiff. Thus, based upon our review of the to this case, could permit a finding that the limited-liability identity was used

that the defendant made this “fresh start” when his company remained a party

establish a new LLC and to transfer the original LLC’s clients to it. However, To be sure, the defendant correctly argues that he had every right to

wanted to start fresh.”

ostensibly arbitrary business decision, the defendant explained that he “[j]ust

RSA 490:3, concurred. CONBOY, J., concurred; GALWAY, J., retired, specially assigned under

address and telephone number. When asked to justify this unusual and a new LLC – also managed by him – with a different name, but with the same and that he simply decided to cease operations and move his largest clients to In this case, the defendant argues that the LLC never had many assets,

claims had been made against it.” In Druding

when a lawsuit jeopardized corporate solvency. In Terren The different outcomes resulted from how the officers handled assets

rendering of the judgments,” “corporate assets remained constant.” contrast, during “the period between the initial filing of the . . . actions and the

“the corporation continued to distribute its assets at a time when several

court’s decision to pierce the veil. corporate obligations, but in Druding, 122 N.H. at 828, we overturned the trial upheld the trial court’s decision to hold the officers personally liable for the corporation); Druding, 122 N.H. at 827-28. In Terren, 134 N.H. at 641, we 134 N.H. at 640 (defendants never paid stated consideration for their shares in