JAMES A. DAILEY, III, NICOLE DAILEY, TRAVIS A. HILL, AND SCARLETT J. HILL, Plaintiffs Below, Petitioners
AYERS LAND DEVELOPMENT, LLC; A AND A HOMES, INC.; AYERS BUILDERS, INC.; ROGER E. AYERS; JERRY A. AYERS; RJM HOLDINGS, LLC; FRYE CONSTRUCTION, INC.; AND MICHAEL E. FRYE, Defendants Below, Respondents
Submitted: February 13, 2019
from the Circuit Court of Berkeley County Honorable
Christopher C. Wilkes, Judge Civil Action No. 15-C-59
R. Snowden, Esq. Jackson Kelly PLLC Martinsburg, West
Virginia Attorney for Petitioners
Victor Flanagan, Esq. Matthew R. Whitler, Esq. Benjamin P.
Warder, Esq. Pullin, Fowler, Flanagan, Brown & Poe, PLLC
Martinsburg, West Virginia Attorneys for Ayers Land
Development, LLC; A and A Homes, Inc.; Ayers Builders, Inc.;
Roger E. Ayers; and Jerry A. Ayers
Christopher C. Luttrell, Esq. Luttrell LC Martinsburg, West
Virginia Attorney for Frye Construction, Inc., and Michael E.
BY THE COURT
"A motion for summary judgment should be granted only
when it is clear that there is no genuine issue of fact to be
tried and inquiry concerning the facts is not desirable to
clarify the application of the law." Syl. Pt. 3,
Aetna Cas. & Sur. Co. v. Fed. Ins. Co., 148
W.Va. 160, 133 S.E.2d 770 (1963).
"The circuit court's function at the summary
judgment stage is not to weigh the evidence and determine the
truth of the matter, but is to determine whether there is a
genuine issue for trial." Syl. Pt. 3, Painter v.
Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994).
"'A joint venture or, as it is sometimes referred
to, a joint adventure, is an association of two or more
persons to carry out a single business enterprise for profit,
for which purpose they combine their property, money,
effects, skill, and knowledge. It arises out of a contractual
relationship between the parties. The contract may be oral or
written, express or implied.' Syl. pt. 2, Price v.
Halstead, 177 W.Va. 592, 355 S.E.2d 380 (1987)."
Syl. Pt. 5, Armor v. Lantz, 207 W.Va. 672, 535
S.E.2d 737 (2000).
"'While, legally speaking, a corporation constitutes
an entity separate and apart from the persons who own it,
such is a fiction of the law introduced for purpose of
convenience and to subserve the ends of justice; and it is
now well settled, as a general principle, that the fiction
should be disregarded when it is urged with an intent not
within its reason and purpose, and in such a way that its
retention would produce injustices or inequitable
consequences.' Syl. pt. 10, Sanders v. Roselawn
Memorial Gardens, [Inc., ] 152 W.Va. 91, 159 S.E.2d 784
(1968)." Syl. Pt. 2, Laya v. Erin Homes, Inc.,
177 W.Va. 343, 352 S.E.2d 93 (1986).
"W.Va. Code § 31B-3-303 (1996) (Repl. Vol. 2009)
permits the equitable remedy of piercing the veil to be
asserted against a West Virginia limited liability
company." Syl. Pt. 5, Kubican v. The Tavern,
LLC, 232 W.Va. 268, 752 S.E.2d 299 (2013).
"'[T]o "pierce the corporate veil" in
order to hold the shareholder(s) actively participating in
the operation of the business personally liable . . ., there
is normally a two-prong test: (1) there must be such unity of
interest and ownership that the separate personalities of the
corporation and of the individual shareholder(s) no longer
exist (a disregard of formalities requirement) and (2) an
inequitable result would occur if the acts are treated as
those of the corporation alone (a fairness requirement).'
Syllabus point 3, in part, Laya v. Erin Homes, Inc.,
177 W.Va. 343, 352 S.E.2d 93 (1986)." Syl. Pt. 6,
Kubican v. The Tavern, LLC, 232 W.Va. 268, 752
S.E.2d 299 (2013).
"To pierce the veil of a limited liability company in
order to impose personal liability on its member(s) or
manager(s), it must be established that (1) there exists such
unity of interest and ownership that the separate
personalities of the business and of the individual member(s)
or managers(s) no longer exist and (2) fraud, injustice, or
an inequitable result would occur if the veil is not
pierced." Syl. Pt. 7, in part, Kubican v. The
Tavern, LLC, 232 W.Va. 268, 752 S.E.2d 299 (2013).
"The propriety of piercing the corporate veil should
rarely be determined upon a motion for summary judgment.
Instead, the propriety of piercing the corporate veil usually
involves numerous questions of fact for the trier of the
facts to determine upon all of the evidence." Syl. Pt.
6, Laya v. Erin Homes, Inc., 177 W.Va. 343, 352
S.E.2d 93 (1986).
"The law presumes that two separately incorporated
businesses are separate entities and that corporations are
separate from their shareholders." Syl. Pt. 3, S.
Elec. Supply Co. v. Raleigh Cty. Nat'l Bank, 173
W.Va. 780, 320 S.E.2d 515 (1984).
"[T]he failure of a limited liability company to observe
the usual company formalities or requirements relating to the
exercise of its company powers or management of its business
may not be a ground for imposing personal liability on the
member(s) or manager(s) of the company." Syl. Pt. 7, in
part, Kubican v. The Tavern, LLC, 232 W.Va. 268, 752
S.E.2d 299 (2013).
James and Nicole Dailey and Travis and Scarlett Hill appeal
the December 19, 2017, order of the Circuit Court of Berkeley
County certifying as final the prior orders that granted
summary judgment to the respondents, Ayers Land Development,
LLC; A and A Homes, Inc.; Ayers Builders, Inc.; Roger E.
Ayers and Jerry A. Ayers (hereinafter collectively
"Ayers respondents"); Frye Construction, Inc., and
Michael E. Frye, in this civil action arising out of the
modification of covenants pertaining to a residential
subdivision developed by RJM Holdings, LLC
("RJM"). In this appeal, the petitioners assert
several assignments of error but primarily contend that the
circuit court erred by granting summary judgment because
genuine issues of material fact exist regarding whether the
respondents were engaged in a joint venture with RJM to
develop the subdivision and whether the veils of the
respondent corporations and limited liability companies
should be pierced to hold Roger Ayers, Jerry Ayers, and
Michael Frye, personally liable.
consideration of the parties' briefs and oral arguments,
the submitted record, and the applicable authorities, this
Court finds merit to the petitioners' arguments.
Accordingly, for the reasons set forth below, the circuit
court's final order is reversed, and this case is
remanded for further proceedings consistent with this
Facts and Procedural Background
Roger Ayers and Jerry Ayers are brothers who are engaged in
the business of real estate development and construction of
residential homes. To facilitate their business, they have
formed multiple limited liability companies and corporations
including Ayers Holdings, LLC, whose sole members are Roger
Ayers and Jerry Ayers; Ayers Land Development, LLC, whose
sole members are Jerry Ayers and his wife, Deborah Ayers;
Ayers Builders, Inc., with Jerry Ayers as president and his
wife, Deborah as vice president; and A and A Homes, Inc.,
with Roger Ayers as president and Jerry Ayers as vice
president. Ayers Holdings and Ayers Land Development are
holding companies for real estate; Ayers Builders and A and A
Homes are home contractors. Michael Frye is also a real
estate developer and home builder. His business is Frye
November 2004, Ayers Holdings and Michael Frye formed RJM for
the purpose of developing a 117-acre tract of land in
Berkeley County into a residential subdivision known as
Brookside. Michael Frye has a fifty percent interest in RJM,
and Ayers Holdings owns the other fifty percent. To finance
the project, RJM secured a $2.4 million dollar bank loan,
which Roger Ayers, Jerry Ayers and Michael Frye personally
30, 2007, RJM recorded a series of final plats for Brookside
that created thirty-eight individual single family lots at
least one acre in size with common areas, shared roads, and a
parcel for future development. Brookside was marketed as a
"premier, upscale subdivision." To that end, RJM
recorded a "Declaration of Covenants, Conditions and
Restrictions for Brookside" in 2007 ("the 2007
Covenants") in the Berkeley County Clerk's Office.
Pertinent to this case are the following requirements for
Brookside homes set forth in the 2007 Covenants:
All one-story Dwellings shall contain a minimum of 2, 800
square feet. All multiple-story Dwellings shall contain a
minimum of 3, 000 square feet, with at least 1, 500 square
feet on the first floor. Dimensions stated shall be exterior
wall dimensions excluding basements, garages, decks, porches,
eaves and other similar extension and overhangs.
The exposed surface of all exterior walls of any building
constructed upon any Lot may be clad with only the following
materials: brick, stone, solid wood, or stucco. Without
limitation of the foregoing, no vinyl or aluminum siding
shall be permitted on any exterior wall, and no concrete
shall be exposed.
29, 2007, Travis and Scarlett Hill purchased Lot No. 17 in
Brookside for $154, 900. They were provided a copy of the
2007 Covenants, but they have yet to build a home on the lot
they purchased. James and Nicole Dailey purchased Lot No. 18
in Brookside for $154, 900 on July 6, 2007. They began
construction of a home on their lot in August 2013 in
accordance with the 2007 Covenants.
2008 and 2011, RJM only sold one lot in Brookside. In 2010,
RJM began discussing amending the 2007 Covenants to lessen
the restrictive uses in an effort to sell more lots. On April
16, 2013, RJM executed a Supplementary Declaration of
Covenants, Conditions, and Restrictions ("the 2013
Covenants") for Brookside which amended the 2007
Covenants by decreasing the required minimum square footage
for homes and permitting the use of vinyl
siding. According to the petitioners, they were
not informed that the 2007 Covenants were going to be
amended. In fact, the Hills maintain that they were never
informed by RJM or any of the respondents of the amendments
to the covenants prior to filing their complaint. The Daileys
have stated that they received the 2013 Covenants by email
without any explanation on August 1, 2014, after leaving a
voicemail for the respondents inquiring about homes being
constructed in Brookside that did not comply with the 2007
petitioners contend that at least three homes have been built
in Brookside that fail to comply with the 2007 Covenants. RJM
has acknowledged that the houses on Lots 14 and 15 do not
comply with the 2007 Covenants. The record shows that A and A
Homes built the home on Lot 14. Michael Frye and Frye
Construction completed the excavation for Lot 14, and Roger
Ayers was the sewer installer. While the home on Lot 14 was
being built, Frye Construction was also doing excavation work
for the Daileys. According to the Daileys, they asked Michael
Frye about the square footage of the home being constructed
on Lot 14. The Daileys contend that Michael Frye "evaded
the question" and never mentioned that the 2007
Covenants had been amended.
2015, separate complaints were filed by the Daileys and the
Hills against RJM and Ayers and Ayers Holdings alleging,
inter alia, civil conspiracy, fraud and breach of the
covenants. The cases were consolidated by the circuit court.
In August 2016, the petitioners sought leave to amend their
complaints to add additional defendants, including the Ayers
respondents, Michael Frye, and Frye Construction.
request to amend was granted, and on January 18, 2017, the
petitioners filed "Plaintiffs' Consolidated Amended
Verified Complaint." The petitioners sought declaratory
judgment, asking the court to find that the 2013 Covenants
"destroy the Community Standard and [are] void ab
initio." In addition, the petitioners sought to
recover monetary damages for the actions taken by RJM and the
respondents in executing the 2013 Covenants. The petitioners
alleged that the respondents were members of a joint venture
with RJM making them "jointly and severally liable for
all acts and omissions ...