Bitar v. Wakim

572 N.W.2d 191, 456 Mich. 428

• Court: Michigan Supreme Court
• Decided: January 21, 1998
• Docket: 103663, Calender No. 16
• Status: Published

Opinions

Brickley, J.

This case arises out of a slip and fall accident. The plaintiff, Ms. Fauzie Bitax, was working for Beirut Bakeiy, Inc. Beirut Bakery, Inc., is a Michigan corporation whose stock is solely owned by the defendant, Mr. Iskandar Wakim. At the time of the accident, Mr. Wakim also personally owned the property where the bakery was located and leased the property to the bakery.

On the night of December 23, 1991, Ms. Bitar was taking trash out of the bakery to a dumpster at the rear of the property. As she was walking across the property, she slipped and injured her ankle. Ms. Bitar applied for, and received, worker’s compensation benefits under the bakery’s insurance policy. Ms. Bitar then sued Mr. Wakim personally, claiming that accumulated ice and snow in the parking lot had caused her fall.

Mr. Wakim moved for summary disposition in circuit court asserting the exclusive remedy provision of the Worker’s Disability Compensation Act. MCL 418.131; MSA 17.237(131). Mr. Wakim’s motion was granted. Ms. Bitar then appealed to the Court of Appeals, which affirmed the trial court. 211 Mich App 617; 536 NW2d 583 (1995). The Court of Appeals found that Mr. Wakim was entitled to a “reverse piercing” of the corporate veil. Id. at 621-622. Accordingly, Mr. Wakim and Beirut Bakery, Inc., were regarded as the same entity, and both were entitled to rely upon the exclusive remedy provision. Id. at 622. The Court of Appeals also found that the plaintiff could not sue Mr. Wakim under a dual capacity theory. Id. at 624.

We would reverse the judgment of the Court of Appeals and find that Mr. Wakim is not entitled to a reverse piercing of the corporate veil. Rather, under the equities of this case, the corporate structure should not be disregarded. Thus, Mr. Wakim is not entitled to protection under the exclusive remedy provision. This finding makes it unnecessary to reach the dual capacity issue.

I. PIERCING OF THE CORPORATE VEIL

It is clear that a shareholder is a separate legal entity from the corporation. Bourne v Muskegon Circuit Judge, 327 Mich 175, 191; 41 NW2d 515 (1950). This is true even when the corporation’s stock is owned by one individual. Id.] see also Bill Kettlewell Excavating, Inc v St Clair Co Health Dep’t, 187 Mich App 633, 639; 468 NW2d 326 (1991). As a general principle, this separation of identities is to be respected. Wells v Firestone Tire & Rubber Co, 421 Mich 641, 650; 364 NW2d 670 (1984).

However, the corporate structure will be disregarded when the equities are compelling. Id. at 651. In such cases, the corporate veil is “pierced” and the shareholders are held liable for the acts of the company. Courts will grant this remedy where honoring the corporate structure would subvert justice or perpetuate fraud. Wells at 650; Klager v Robert Meyer Co, 415 Mich 402, 411; 329 NW2d 721 (1982), United Armenian Brethren Evangelical Church v Kazanjian, 322 Mich 651, 658; 34 NW2d 510 (1948). This decision is based on a consideration of the facts and equities of the case. Klager, supra at 411.

Normally, a plaintiff seeks to avoid the corporate structure to force a shareholder to accept responsibility for a corporation’s actions. However, this Court has recognized that the equities of a given case may allow the shareholder to ignore the corporate form. In such a reverse piercing case, the shareholder and the corporation are treated as the same entity. In Wells, the plaintiff worked for a wholly owned subsidiary of a tire company. Wells, supra at 645-646. He was injured at work by a product made by the parent corporation and collected worker’s compensation from that corporation. He also sued the parent company, asserting products liability. The plaintiff argued that his suit was not barred by the exclusive remedy provision because the subsidiary, not the parent corporation, was his employer. Id. This Court concluded that it would be wholly inequitable, and contrary to public policy, to allow the plaintiff to treat the parent corporation as his employer in order to receive worker’s compensation benefits, and then to deny that the parent corporation was his employer in order to avoid the exclusive remedy provision. Id. at 652. Thus, this Court pierced the veil between the parent and the subsidiary and dismissed the case based on the exclusive remedy provision. Id. at 650-654.

The Court made a similar finding in Pettaway v McConaghy, 367 Mich 651; 116 NW2d 789 (1962). In that case, the defendant was the majority stockholder and director of a corporation that had employed the plaintiff. Id. at 652-653. The plaintiff alleged that the defendant’s modifications to a machine had resulted in injuries to the plaintiff. Id. at 653. The Court found there to be “such a complete identity between the defendant and the corporation as to suggest that one was simply the alter ego of the other.” Id. at 654. The Court then stated that the plaintiff’s suit would be defeated by the exclusive remedy provision if the corporate structure were ignored. However, the Court explained that this analysis was not employed by the lower courts, nor was it pursued by the parties on appeal. Id.

n. application

We find that the equities of this case do not require the application of Wells and Pettaway. Unlike Wells, and the cases following it,¹ this case does not involve an attempt by an employee of a subsidiary company to state a cause of action against the parent corporation. Unlike the plaintiff in Wells, Ms. Bitar never claimed that Mr. Wakim was her employer in order to receive worker’s compensation benefits. Rather, she filed her worker’s compensation claim against the bakery, the entity that provided worker’s compensation coverage. Unlike Wells, there is no evidence that Ms. Bitar structured her cause of action in such a way as to reap all the benefits, and none of the drawbacks, of the Worker’s Disability Compensation Act. Rather, Ms. Bitar’s claims simply recognized the corporate structure established by the defendant. Further, we decline to follow the dicta found in Pettaway. Rather, we choose to approach this case in light of the facts presented. Klager, supra at 411.

The equities of this case do not merit a reverse piercing of Beirut Bakery’s corporate veil. First, Mr. Wakim chose to maintain the property in his own name and to lease it to the corporation. Presumably, this arrangement was advantageous to Mr. Wakim. We agree with the Court of Appeals statement in Williams v American Title Ins Co, 83 Mich App 686, 699; 269 NW2d 481 (1978), that those who create, and take advantage of, a corporate structure should not be allowed to disregard that structure when it suits their purposes.

Moreover, a reverse piercing of Beirut Bakery’s corporate veil is not required to prevent injustice. Ms. Bitar injured herself on property owned by a legal entity that was not her employer. Thus, she can bring a lawsuit against the owner of that property without violating the exclusive remedy provision of the Worker’s Disability Compensation Act. See 6 Larson, Workers’ Compensation, § 72.81(b), pp 14-290.93 to 14-290.94. The act prevents Ms. Bitar from filing a tort action against her employer because she is entitled to worker’s compensation benefits. However, it does not bar a premises liability action against a third party. Thus, neither the policies of the act, nor the interests of justice, require that Mr. Wakim be allowed to escape suit merely because he is the majority shareholder of Ms. Bitar’s employer.

in. CONCLUSION

Because Mr. Wakim is not to be viewed as Bitar’s employer, we do not need to reach Mr. Wakim’s defense under the dual capacity doctrine. Further, we note that the Michigan Self-Insurers’ Association, as amicus curiae, argued that subsection 827(1) of the act provides Mr. Wakim with a defense in this case, even if he is not found to be Ms. Bitar’s employer. However, this issue was not adequately developed by the lower courts or the parties. Therefore, we decline to comment upon it.²

Mr. Wakim and the Beirut Bakery were separate legal entities at the time of Ms. Bitar’s fall. As the employer, the bakery should not be sued because of the exclusive remedy provision. However, the Court of Appeals erred when it allowed Mr. Wakim to use this provision to protect himself from suit as the premises owner. Therefore, we would reverse the Court of Appeals and would remand this case for further proceedings.

Cavanagh and Kelly, JJ., concurred with Brickley, J.

1 See, for example, Nardi v American Motors Corp, 156 Mich App 275; 401 NW2d 348 (1986). In cases involving a parent-subsidiary corporate structure, an economic realities test is used to determine which entity, or both, is the employer under the Worker’s Disability Compensation Act. We agree with the parties that this test does not apply to the case currently before the Court.

2 In view of the interest of the parties in the dual capacity doctrine, the parties were directed to file supplemental briefs on the question whether plaintiff-appellant’s suit is barred by MCL 418.827(1); MSA 17.237(827)(1) because defendant is a “natural person in the same employ” as plaintiff. After receipt of the additional briefing, the Court concluded that it should not depart from the well-established rule that issues not presented to the trial court or the Court of Appeals are not preserved for review by this Court.