Acadia Resources Inc. v. VMS LLC

CourtSuperior Court of Maine
DecidedAugust 26, 2016
DocketPENcv-13-18
StatusUnpublished

This text of Acadia Resources Inc. v. VMS LLC (Acadia Resources Inc. v. VMS LLC) is published on Counsel Stack Legal Research, covering Superior Court of Maine primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Acadia Resources Inc. v. VMS LLC, (Me. Super. Ct. 2016).

Opinion

STATE OF MAINE DISTRICT COURT PENOBSCOT, SS. Docket No. NEW- DC- CV-13-18

ACADIA RESOURCES INC., ) Plaintiff, ) ) ) v. ) JUDGMENT ) ) VMS LLCand ) GENE VILLACCI ) Defendants. )

This matter came before the Comt for a jury-waived trial on ,June 28, 2016, after having been filed in the Newpott District Court. Attorney Economy represented the Plaintiff. Attorney Douglas represented the Defendants. 1

FACTS

Acadia Auto Auction (hereinafter Acadia Auto) is a wholesale business that sells used vehicles to dealers. VMS LLC (hereinafter VMS) was a dealer who sold used vehicles to consumers. In 2006, Acadia Auto and VMS began doing business together regularly.

Acadia Resources, Inc., (hereinafter Acadia Resources) provides Acadia Auction clients with financing. In August of 2006, VMS ei1tered into a financing agreement with Acadia Resources whereby Acadia Resources would provide financing to VMS, and the financing fee was $1.00 per day pe1· $1,000.00 bot'l'owed. For instance, if $20,000.00 was borrowed for one day, the financing fee would be $20.00. On August 3, 2006, Gene Villacci signed, on behalf of VMS, the "master" Acadia Resources Inc. Security Agreement. Plaintiff was initially satisfied to do business with VMS, without a personal guarantee from Mr. Villacci. Mr. Villncci also signed, on behalf of VMS, the separate "Security Agreement and Promissory Note" for each vehicle financed by Acadia Resources. According to Acadia Resources, the financing was designed for the quick turn-over of vehicles to consumers by used car dealers and was not designed as floor financing, and Mr. Villacci agreed that he understood this.

The "master" Security Agreement and the agreements with respect to each individual vehicle in dispute provided that VMS granted to Acadia Resomces a security interest in the vehicle and in the proceeds of the vehicle. According to Mr. Westcott, whose testimony the Court accepts, Acadia Resources could not effectively perfect its security interest in the vehicles it sold because the State of Maine refused to allowed it to do so (at the times relevant to this case).

I Attorney Douglus represented both VMS and Gene Villacci in this litigation . It appears that the relationship between Acadia Resources and VMS was mutually beneficial until 2008 - 2009. When VMS was struggling, Acadia Resources asked Mr. Villacci for a personal guarantee, and he refused. Until February 27, 2009, Mr. Villacci and his wife were both members of VMS. Thereafter Mr. Villacci was the only member.

The financing of thirteen vehicles by VMS through Acadia Resources is at the crux of this case. Ten of the thirteen vehicles were financed by VMS in 2008, and three in 2009. Financing and other fees were charged on these vehicles beginning on June 26, 2008 continuing through May, 2013, when Acadia Resources stopped charging fees.

In 2009, VMS continued to purchase vehicles from Acadia Auto. VMS struggled, but continued to pay Acadia Resources some amounts in 2009, and Acadia Resources continued to provide financing to VMS in 2009. During 2009, VMS paid Acadia Resources over $51,000.00, the last payment having been made in December of 2009.

In 2010, VMS transferred real estate it owned at 390 Middle Rd, Falmouth, Maine to VF.I, I.LC. Mr. Villacci was the sole membe1· of VEI. Mr. Villacci testified that this transfer was to prevent the property from being foreclosed upon.

There is no question that the economic do\\'Ilturn in 2008-2009 affected the business of both VMS and Acadia Resources. Acadia Resources was able to weather the downturn, and VMS was not. VMS was administratively dissolved in 2014.

As of May 1, 2013, VMS owed Acadia Resources $237,357.00, about $72,370.00 for the principal amount financed and about $164,987.00 in financing and other fees. There is no dispute that VMS owes Acadia Resources this amount. The real dispute in this case is whether Mr. Vi11acci should be held personally liable for this debt.

ANALYSIS

A member of a limited liability company is generally not individually liable for the debts of the LLC. 31 M.R.S. § 645. The concept of limited liability is a hallmark of corporate law. LaBelle v C1'epeau, 593 A.2d 653, 655 (Me. 1991) (principal benefit of incorporation is limited liability for shareholders).

However, in this case, Acadia Resources argues that the Court should "pierce the corporate veil" and hold Gene Villacci liable for VMS's debt to Acadia Resources. Alternatively, Acadia Resources argues that Mr. Villacci should be held personally liable for the Acadia Resources debt due to his pa1ticipation in wrongful acts.

A. Piercing the LJ.C veil

If a corporate entity is merely the "alter ego" of an individual or another corporation, the entity may be pierced. Stanley v. Libe1'ty, 2015 ME 21. Theberge v. Darbro, Inc., 684 A.2d 1298 (1996). However, courts must "disregard the legal entity of a corporation ... with caution and only when necessary in the interest of justice". Thebel'ge (court refused

2 to pierce the corporate veil despite co-mingling of business among defendants). Additionally, in the context of a contractual dispute, comts apply "more stl'ingent standards ... because the party seeking relief in a contract case is p1·esumed to have voluntarily and kno'\-\~ngly entered into an agreement vl'i.th a corporate entity, and is expected to suffer the consequences of the limited liability associated with the corporate business form". Id.

Disregarding the corporate veil has two prongs for analysis: (t) ,vhether the defendant abused the privilege of a separate corporate identity; and (2) whether an unjust or inequitable result would occur if the court recognized the separate corporate existence. Stanley. The same test applies to determination whether the LLC veil should be pierced. Town ofLebanon v. East Lebanon Auto Satles, LLC, 2011 ME 78.

To determine whether a shareholder abused the privilege of a separate corporate identity under the first prong of the piercing doctl'ine, courts examine a variety factors. The Law Court has cited with approval the following twelve factors: (1) common ownership; (2) pervasive control; (3) confused inte1·mingling of business activity[,] assets or management; (4) thin capitalization; (5) nonobservance of corporate formalities; (6) absence of corporate records; (7) no payment of dividends; (8) insolvency at the time of the litigated transaction; ( 9) siphoning away of corporate assets by the dominant shareholders; (10) non functioning of officers and directors; (11) use of the corporation for transactions of the dominant shareholders; Land] (12) use of the corporation in promoting fraud. Johnson v. Exclusive P1'ops. Unltd., 1998 ME 244.

The Court makes the following findings with t•espect to each of the above factors:

1. At the time the majority of the vehicles in question were financed, Mr. Villacci and Helena Hol1auer were both members of the LLC. On Febmary 27, 2009, Mr. Villacci became the sole member of VMS.

2. Mr. Villacci exercised exclusive control over VMS from Februa1y 27, 2009 forward. Prior to February, 2009, Mr.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Advanced Construction Corp. v. Pilecki
2006 ME 84 (Supreme Judicial Court of Maine, 2006)
Johnson v. Exclusive Properties Unlimited
1998 ME 244 (Supreme Judicial Court of Maine, 1998)
Blue Star Corp. v. CKF PROPERTIES, LLC
2009 ME 101 (Supreme Judicial Court of Maine, 2009)
Theberge v. Darbro, Inc.
684 A.2d 1298 (Supreme Judicial Court of Maine, 1996)
Town of Lebanon v. East Lebanon Auto Sales LLC
2011 ME 78 (Supreme Judicial Court of Maine, 2011)
LaBelle v. Crepeau
593 A.2d 653 (Supreme Judicial Court of Maine, 1991)
Mariello v. Giguere
667 A.2d 588 (Supreme Judicial Court of Maine, 1995)
James G. Stanley Jr. v. Michael A. Liberty
2015 ME 21 (Supreme Judicial Court of Maine, 2015)

Cite This Page — Counsel Stack

Bluebook (online)
Acadia Resources Inc. v. VMS LLC, Counsel Stack Legal Research, https://law.counselstack.com/opinion/acadia-resources-inc-v-vms-llc-mesuperct-2016.