Opinion
No. 126 / 01-1013
Filed October 9, 2002
Appeal from the Iowa District Court for Des Moines County, John G. Linn, Judge.
Plaintiffs appeal from order granting summary judgment in favor of defendant in suit for alleged breach of employment contract. AFFIRMED.
Andrew S. Hoth of Hoth Law Offices, Burlington, and Margaret E. Haessler, Haessler Law Office, Burlington, for appellants.
Gerald D. Goddard of Cray, Goddard, Miller Taylor, Burlington, for appellee.
This is an appeal from an order granting summary judgment in favor of the defendant in a suit for alleged breach of an employment contract. We affirm.
The plaintiffs, Marcy Field n/k/a Marcy Knauss, Ron Freitag, John Jay, and Dan Smith, are former employees of AERS Midwest, Inc. James Jennison was chief financial officer. AERS was formed to develop, test, market, and manufacture a device used in airplane deicing. Technology for this device had been developed by Steve Palmer, the president of AERS, and he received stock in AERS in exchange for an assignment of the technology to the company. Jennison contributed working capital in exchange for AERS stock. The plaintiffs became employees of AERS at various times between 1992 and 1994.
Apparently due to financial problems with the corporation, all of the plaintiffs left before this suit was filed in June 1995. The plaintiffs joined as defendants the company, Palmer, and Jennison, alleging breach of various promises relating to their employment.
The case was tried to a jury, which returned a verdict in favor of the defendant corporation but against Palmer and Jennison on a theory of negligent misrepresentation. On the defendants' motion for judgment notwithstanding the verdict, the district court set aside the verdict and granted a new trial on the plaintiffs' breach-of-contract claim against Palmer and Jennison. The plaintiffs appealed the district court's posttrial orders, but did not appeal the judgment in favor of the corporation. This court reinstated the verdict against Palmer, rejected the judgment against Jennison, and remanded the case for trial of the contract claim against Jennison. See Field v. Palmer, 592 N.W.2d 347 (Iowa 1999). Following remand on the breach-of-contract claim, Jennison moved for summary judgment, which the district court granted. The summary judgment on the breach-of-contract claim is before us on the present appeal.
On an appeal from a summary judgment, our review is for correction of errors at law. Lubben v. Chicago, Cent. Pac. R.R., 563 N.W.2d 596, 597 (Iowa 1997).
Under Iowa Rule of Civil Procedure 1.981(5) (formerly 237(e)),
[w]hen a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials in the pleadings, but the response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered.
The plaintiffs claim they showed a genuine issue for trial on their theory that Jennison was a party to the employment contract in his own right or, in the alternative, that the plaintiffs generated a genuine issue of material fact on the issue of piercing the corporate veil.
The written agreements on which the plaintiffs rely to establish personal liability of Jennison do not support the plaintiffs' claim that Jennison contracted with the employees in his own right; in fact, they clearly show Jennison signed on behalf of the corporation. The opening paragraph of the agreement, for example, stated:
EMPLOYMENT AGREEMENT dated this ___ day of ___, 1993, between AERS/Midwest, Inc., an Iowa corporation, having its principal place of business at 106 Washington Street, Burlington, Iowa __________________ (Company) and ________________ (Employee).
The parties signed the agreements as follows:
AERS/Midwest, Inc.
by: /s/James Jennison____________
ITS:
_________________________________________________
Employee
Jennison's position with AERS suggested by the "ITS" under his signature line is not clear on the face of the contract; however, Jennison later stated in an affidavit that he was an officer and director of AERS.
The plaintiffs resisted the motion for summary judgment with affidavits stating that Jennison presented the contracts for the plaintiffs to sign and that he told them they "had" to sign them or they would not be employed. The plaintiffs' affidavits also stated that a corporation in which Jennison had a controlling interest offered insurance to AERS employees and that at times paychecks came from a corporation in which Jennison had a controlling interest.
Even accepting the plaintiffs' affidavits at face value, however, they do not generate a genuine issue of fact as to whether Jennison was personally responsible as the plaintiffs' employer. No affidavit or other evidence shows that Jennison signed the agreement in his own right, that he claimed to be the employer, or that he exercised any of the duties normally associated with an employer's position. Even if Jennison's other corporations provided insurance and payroll services for AERS, there is still nothing in the plaintiffs' evidence to show he was the de facto employer at AERS. In fact, nothing in the plaintiffs' evidence showed Jennison's role with AERS was anything other than what he described in his affidavit in support of the summary-judgment motion:
From 1992 to March 1994, I was an officer and director of Aers Midwest, but had little or no role in the hiring or payment of employees except that one of my companies processed the payroll and health insurance for Aers until early 1994, invoicing Aers for all costs.
The plaintiffs as resisters to the motion for summary judgment "must come forward with specific facts constituting competent evidence in support of the claim advanced." Winkel v. Erpelding, 526 N.W.2d 316, 318 (Iowa 1995). The most their affidavits could reasonably establish is grounds for speculation about whether Jennison was actually their employer; however, specific facts are required. See id. Considering the summary-judgment record in its entirety, we conclude the plaintiffs have failed to generate a genuine issue of fact on their claim that Jennison was their employer.
The plaintiffs also alleged that Jennison could be personally liable under the concept of piercing the corporate veil. See C. Mac Chambers Co. v. Iowa Tae Kwan Do Acad., Inc., 412 N.W.2d 593 (Iowa 1987). The general rule is that,
"[i]f a corporation is organized and carries on business without substantial capital . . . [so] the corporation is likely to have no sufficient assets available to meet its debts, it is inequitable that shareholders should set up such a flimsy organization to escape personal liability. The attempt to do corporate business without providing any sufficient basis of financial responsibility to creditors is an abuse of the separate entity and will be ineffectual to exempt the shareholders from corporate debts."
Briggs Transp. Co. v. Starr Sales Co., 262 N.W.2d 805, 810 (Iowa 1978) (quoting Henry W. Ballantine , Ballantine on Corporations § 129, at 302-03 (rev. ed. 1946)). However,
[a] corporate veil may be pierced only under exceptional circumstances, for example, where the corporation is a mere shell, serving no legitimate business purpose, and used primarily as an intermediary to perpetuate fraud or promote injustice.
Briggs, 262 N.W.2d at 810 (citing Newberry v. Barth, Inc., 252 N.W.2d 711, 714 (Iowa 1977)). The factors to be considered in an attempt to pierce the corporate veil are whether:
(1) the corporation is undercapitalized, (2) the corporation lacks separate books, (3) its finances are not kept separate from individual finances, or individual obligations are paid by the corporation, (4) the corporation is used to promote fraud or illegality, (5) corporate formalities are not followed, or (6) the corporation is a mere sham.Briggs, 262 N.W.2d at 810.
The plaintiffs' affidavits do not show "specific facts constituting competent evidence in support" of any of these elements. Winkel, 526 N.W.2d at 318. The district court properly sustained the motion for summary judgment on this ground as well. We affirm.
AFFIRMED.
This is not a published opinion.