Best Roofing Co.

National Labor Relations Board - Board Decisions

May 27, 1993

311 N.L.R.B. 224 (N.L.R.B. 1993)

224
311 NLRB No. 31
DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
1 304 NLRB No. 92. The Board there granted the General Coun-
sel’s Motion for Partial Summary Judgment as to amounts of back-
pay owed by the Respondents as set out in the compliance specifica-
tion. The Board also remanded to the Regional Director the issue of
whether Respondent First Class Roofing and Remodeling was the
successor of Respondents Best and Belton. On January 30, 1992, the
Regional Director amended the compliance specification by deleting
all references to First Class and, after further investigation, decided
not to institute further proceedings with respect to it. Accordingly,
First Class’ status as a successor employer is not at issue here.
2 Roofers Local 20 v. Best Roofing Co., Case 89-0502-CV-W-9
(W.D.MO. Oct. 15, 1991). The district court’s order covers the same
fringe benefit contributions and union dues set forth in the compli-
ance specification. The district court proceeding did not involve
wages due employees under the collective-bargaining agreement.
3 On August 6, 1992, the General Counsel filed with the Board a
Statement in Support of Motion for Summary Judgment with exhib-
its attached. In his statement, the General Counsel contends that the
district court’s order is final and binding on the parties and therefore
should be accorded collateral estoppel effect by the Board. In this
regard, the General Counsel points out that on February 19, 1992,
the district court issued an order directing that final judgment be en-
tered against the Respondents and that no appeal was taken from
that final judgment.
Best Roofing Co., Inc. and Belton Roofing and Con-
struction, Inc. alter egos, John Krum, an Indi-
vidual and Susan Krum, an Individual and
United Union of Roofers, Waterproofers and
Allied Workers, Local No. 20, AFL–CIO. Cases
17–CA–14094 and 17–CA–14322
May 27, 1993
SECOND SUPPLEMENTAL DECISION AND
ORDER
BY CHAIRMAN STEPHENS AND MEMBERS
DEVANEY AND OVIATT
On August 27, 1991, the National Labor Relations
Board issued a Supplemental Decision and Order re-
manding the above-entitled proceeding1 to the Re-
gional Director for the purpose of arranging a hearing
before an administrative law judge as to the personal
liability of John Krum and Susan Krum for delinquent
wages and overtime, benefit contributions, and mem-
bership dues arising from the Respondent’s failure to
make timely payments of benefits, union dues, and
wages due and owing under the Respondent’s contract
with the Union. Thereafter, on October 15, 1991, the
Charging Party brought an action under Section 301 of
the Act against Respondents Best, Belton, John Krum,
and Susan Krum to collect union dues and fringe bene-
fit contributions due and owing under the Charging
Party’s collective-bargaining agreement with Respond-
ent Best. Subsequently, the United States District
Court for the Western District of Missouri issued an
order granting partial summary judgment, ordering,
inter alia, that John Krum and Susan Krum be held
personally liable for delinquent employee benefit con-
tributions and for delinquent union membership dues.2
On July 20, 1992, the General Counsel filed with
the Board a Motion to Transfer Proceeding to the
Board and for Summary Judgment, with exhibits at-
tached. The General Counsel’s motion requests the
Board to grant summary judgment with respect to the
allegations of the compliance specification concerning
the individual liability of John Krum and Susan Krum.
The General Counsel asserts that the district court’s
decision regarding the individual liability of John
Krum and Susan Krum has resolved the issue of their
individual liability and that the Board should afford
collateral estoppel effect to this district court proceed-
ing by granting the Motion for Summary Judgment.3
On July 22, 1992, the Board issued an order transfer-
ring the proceeding to the Board and a Notice to Show
Cause why the General Counsel’s Motion for Sum-
mary Judgment should not be granted. The Respondent
failed to file a response.
The National Labor Relations Board has delegated
its authority in this proceeding to a three-member
panel.
On the entire record in this case, the Board makes
the following
Ruling on Motion for Summary Judgment
The General Counsel submits that the only issue that
remains following the remand of the compliance speci-
fication is the individual liability of John Krum and
Susan Krum as a single integrated employer with Re-
spondents Best Roofing Co., Inc. (Best), and Belton
Roofing and Construction Inc. (Belton), and as alter
egos of those Respondents. As noted above, the Gen-
eral Counsel requests that we give collateral estoppel
effect to the district court’s order and grant summary
judgment in his favor on this issue. We grant the Gen-
eral Counsel’s Motion for Summary Judgment, but
only for the reasons set out below.
Initially, the question before us is the effect the dis-
trict court decision has on the instant proceeding. Al-
though we decline to afford collateral estoppel effect
to that decision, for reasons of judicial economy we
shall defer to the district court’s findings of fact and
adopt them as our own in this proceeding. We find
that the Respondent is not prejudiced thereby for the
following reasons. First, the issue presented here,
whether the corporate veil should be pierced to hold
John Krum and Susan Krum individually liable for the
amounts due and owing by the Respondents Best and
Belton, was squarely in issue in the district court pro-
ceeding and its resolution was necessary for the dis-
position of that case. Accordingly, the parties there had
every incentive to fully litigate the issue in that pro-
ceeding. Second, the district court’s factual findings
are undisputed. In this regard, the court’s findings of
fact included only facts that ‘‘either [had] been agreed
to or admitted by the parties or [had] been properly
225BEST ROOFING CO.
4 Roofers Local 20 v. Best Roofing Co., supra at fn. 1.
5 Susan Krum, who handled Best’s bookkeeping, did not know
how much money she and her husband borrowed from the Company,
but believed that they still owe money to Best.
6 Best issued a check dated January 5, 1989, payable to John Krum
in the amount of $3500. This check was drawn on Best’s general
account and signed by Susan Krum. On February 21, 1989, Best
issued a check drawn on its general account payable to John Krum
in the amount of $1837 and signed by Susan Krum. Both checks
have a notation that they are ‘‘loans’’ to John Krum. Susan Krum
had no independent recollection of the transactions, but based on the
notations concluded that they were company loans to John Krum.
John Krum testified that the checks reflected payment of back wages
owed to him by Best.
7 We have previously found that Belton and Best are alter egos.
See Best Roofing Co., 298 NLRB 754, 754 fn. 2 (1990).
8 At the time of the district court proceeding in 1991, Mike Krum
was 21 years old and Matt Krum was 18 years old. In the fall of
1989, Mike Krum dropped out of college and began working for
Belton full time. He had not worked for Belton prior to that time
and had worked for Best only on a part-time basis during vacations
from school. Matt Krum began working full time for Best after he
dropped out of high school in the 10th grade. Neither owned or op-
erated a business prior to the time that they became involved with
Belton.
presented by one party without objection from the oth-
ers.’’4 Third, as noted above, no appeal was taken
from the final judgment entered in the district court
proceedings. Thus, the factual findings set out there are
not subject to challenge in court. Finally, as noted
above, the Respondents failed to file an answer to the
Notice to Show Cause in the instant proceeding.
Therefore, the district court’s factual findings are not
challenged here and remain undisputed.
A review of the facts as set out in the district court’s
decision reveals the following. Best began operating in
1976 as a sole proprietorship and was incorporated in
1985. John Krum owns 249 shares of Best stock and
serves as its president. Susan Krum, John Krum’s wife,
owns the other 251 shares of Best stock and is its sec-
retary-treasurer. John Krum was the only salaried em-
ployee of Best, earning $1000 per week; all other em-
ployees were paid on an hourly basis. From mid-1988
to January 1989, Best maintained its office in one
room of the residence of John and Susan Krum (the
Krums). Best did its banking with Boatmen’s First Na-
tional Bank, where it maintained separate payroll and
general checking accounts. Best also had a $30,000
line of credit with Boatmen’s secured by a pledge of
the Krums’ residence. Best paid the Krums $322.38
per month as rent for storing materials and equipment
on a 20-acre tract the Krums owned in Peculiar, Mis-
souri. This amount corresponded to the amount of the
monthly mortgage payment the Krums owed on that
property.
Best regularly used four or five of the Krums’ trucks
for company business. These trucks were titled in John
and Susan Krum’s names. Best agreed to lease the
trucks for an amount equivalent to the amount of the
loan payments due on the trucks. When the loans on
some of the trucks were paid in full, Best ceased mak-
ing lease payments for the use of the trucks. Best also
made monthly loan payments to Ford Motor Credit
Company on two 1987 Ford Rangers titled in John and
Susan Krum’s names and used primarily by the
Krums’ sons, Matt and Mike.
The Krums borrowed money periodically from Best.
These loans were not evidenced by a promissory note
or loan agreement and did not have a stated interest
rate.5 The Krums were not required to provide security
for these loans and there was no provision for regular,
periodic repayment. The Krums used some of the
money to pay personal bills and expenses. The Krums
last borrowed money from Best in 1989.6 Best ceased
doing business in January 1989.
Belton began operation in late January 1989 after
Best ceased operations.7 Mike Krum is its president
and Matt Krum its vice president.8 Each owns 250
shares of stock. There are no other shareholders. Nei-
ther recalls paying any money to Belton for their
shares of stock. Neither contributed any money to the
Company to meet operating expenses. Neither partici-
pated in Belton’s incorporation process, which was
handled by Susan Krum. Susan Krum also arranged
with Boatmen’s Bank for general and payroll checking
accounts for Belton. Neither Mike nor Matt Krum par-
ticipated in making these arrangements. John and
Susan Krum personally guaranteed Belton’s line of
credit at Boatmen’s by pledging their home as collat-
eral. Belton drew on that line of credit to meet operat-
ing expenses.
Mike and Matt Krum are paid hourly wages by
Belton for the time that they spend working on roofs.
They are lower paid than more experienced Belton
roofers. Both complete timecards for the hours that
they work. They are not compensated for the time they
spend on duties performed in their capacities as cor-
porate officers. Mike Krum estimates and bids jobs for
Belton. He and Matt Krum make personnel decisions
for Belton. Mike Krum consults with Belton’s fore-
men, who are experienced roofers, about technical
problems.
John Krum works for Belton as ‘‘general manager
and consultant.’’ His duties are to provide instruction
and direction to Belton employees about roofing. He
also sometimes works as a roofer. He is compensated
for his services on a job-by-job basis rather than at a
specific hourly rate. He does not fill out a timecard.
He makes a ‘‘recommendation’’ to Matt and Mike
Krum concerning how much money Belton should pay
him. He bases his estimate on ‘‘how much [he has]
contributed to a particular job.’’ John Krum has loaned
money to Belton. Mike and Matt Krum do not know
how much money Belton has borrowed from him.
There is no written record of these transactions and no
226 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
9 Matt Krum believed that a portion of the loan may have been
repaid with checks payable to John Krum and drawn on Belton’s
general account.
10 Matt Krum stated that the check was a ‘‘bonus’’ to be divided
equally between himself and his brother Mike. John Krum said that
it was a gift to Matt.
11 The Board has ‘‘applied a Federal standard in determining
whether a person or entity should be liable for a backpay award in
an unfair labor practice case.’’ Greater Kansas City Roofing, 305
NLRB 720 fn. 3 (1991) (emphasis added).
12 Id.
13 Id.
written agreement regarding the amount of interest to
be charged or the schedule for repayment.
Susan Krum works for Belton without pay. She has
shown Mike, Matt, and Patricia Krum (Matt’s wife)
how to do the company bookkeeping. Susan Krum
continues to provide assistance because Patricia’s train-
ing is ‘‘not complete.’’ Matt and Mike Krum do not
regularly review Belton’s ledgers. Patricia Krum pur-
portedly reviews them, but makes no reports to either
Mike or Matt Krum regarding Belton’s financial status.
On February 23, 1989, Best issued a check payable
to Belton in the amount of $6000 drawn on Best’s
general account. Susan Krum signed the check. Ac-
cording to Matt Krum, the check was a loan from Best
to Belton to purchase roofing materials. There was no
loan agreement, promissory note, or other written doc-
ument memorializing this transaction. No repayment
schedule was established and no specific interest rate
was set. The Krums used some of this money to pay
various household expenses.9 Best issued a check on
its general account dated February 10, 1989, payable
to Matt Krum in the amount of $2725. Susan Krum
said that this was a ‘‘loan’’ to Matt Krum.10
Belton maintains its offices in the Krums’ home as
Best had done. Belton pays no rent for the use of this
space. Belton also continued Best’s practice of renting
the Krums’ Peculiar, Missouri property to store equip-
ment and materials. John Krum suggested a rental rate
of $322.38 per month. Neither Mike nor Matt Krum
made any effort to determine if this was a fair market
price or if Belton could rent storage space elsewhere
at a cheaper rate. Belton also continues Best’s practice
of making the loan payments on the Ford Ranger pick-
up trucks used by Mike and Matt Krum that are titled
in John and Susan Krum’s names. On February 16,
1989, Belton made a $4000 down payment on a 1989
Chevrolet pickup truck titled in John Krum’s name.
During calendar year 1989, Belton paid approximately
$2851 to GMAC on the pickup truck.
In determining whether the district court’s findings
of fact require that the Krums be held personally lia-
ble, we observe that the Board has applied the same
standard as the courts to determine whether the cor-
porate veil should be pierced.11 Thus, we will pierce
the corporate veil not only where the corporate status
is used to perpetrate a fraud, but also where justice so
requires, ‘‘where the individual’s personal affairs and
the company’s affairs have been so intermingled that
corporate boundaries have been effectively blurred.’’12
In determining whether justice requires that the cor-
porate veil be pierced, we examine several factors, in-
cluding the failure to observe corporate formalities; the
nonfunctioning of officers or directors; the absence of
corporate records; and the use of the corporation as a
facade for the operations of the dominant stock-
holder.13 For the reasons explained below, we find that
those factors are present here.
Applying the factors set out above to these facts, we
find that the evidence establishes that John and Susan
Krum’s personal affairs have been so intermingled
with Best and Belton’s affairs ‘‘that corporate bound-
aries have been effectively blurred.’’ In this regard, we
find that the Krums’ failure to observe corporate for-
malities is evidenced by their failure to keep written
corporate records of the amount of money loaned or
borrowed between the Krums and Best and Belton.
Thus, the loans from Best to the Krums were not evi-
denced by a promissory note or loan agreement and
had no stated interest rate. There were no provisions
for repayment and the Krums were not required to pro-
vide security for the loans. Likewise, there was no loan
agreement or promissory note for Best’s loan of $6000
to Belton.
The Krums’ dominance of Best and Belton is evi-
denced by their arrangement of these loans at will and
by their use of moneys from both loans to satisfy per-
sonal obligations. The Krums’ dominance of the cor-
porations is further established by the fact that the cor-
porations paid obligations that were actually the
Krums’ personal obligations. In this regard, the cor-
porations paid the monthly installments on the Krums’
trucks and each corporation ‘‘rented’’ a portion of the
Krums’ Peculiar, Missouri property for an amount
equal to the Krums’ monthly mortgage payment on the
property. Thus, it is clear that the Krums used the cor-
porations’ assets as their own.
Finally, the evidence establishes that Mike and Matt
Krum, Belton’s officers and shareholders, functioned
in neither capacity. It was Susan Krum who handled
Belton’s incorporation and who oversees its finances.
It is John Krum, in his role as ‘‘general manager and
consultant,’’ who oversees Belton’s actual operations.
Mike and Matt Krum play no part in the oversight of
Belton’s operations nor do they have any knowledge of
or concern for its financial affairs. In these cir-
cumstances, justice requires that the corporate veil be
pierced and that John Krum and Susan Krum be found
individually liable here. Accordingly, we grant the
General Counsel’s Motion for Summary Judgment.
227BEST ROOFING CO.
ORDER
IT IS ORDERED that the General Counsel’s Motion
for Summary Judgment is granted with respect to the
allegations of the compliance specification concerning
the individual liability of John Krum and Susan Krum
and that they are liable for the amounts set forth in the
compliance specification.
IT IS FURTHER ORDERED that the Respondents, Best
Roofing Co., Inc., and Belton Roofing and Construc-
tion, Inc., Belton, Missouri, their officers, agents, suc-
cessors, and assigns, and John Krum and Susan Krum,
shall make whole the individuals named below by pay-
ing the funds the amounts set forth below with interest
accrued to the date of payment as prescribed in
Merryweather Optical Co., 240 NLRB 1213 (1979),
and by paying the individuals the amounts following
their names, with interest accrued to the date of pay-
ment as prescribed in New Horizons for the Retarded,
283 NLRB 1173 (1987), minus tax withholdings re-
quired by Federal and state laws:
Health & Welfare Fund $10,803.75
Pension Fund Local 20 7,851.56
International Pension Fund 5,967.20
Apprenticeship Training
Program Fund 879.39
Roofers Local 20 Union Dues 1,441.71
James Keller 596.05
Craig Wilson 54.05
Lewis Buckner 156.97
John Evans 314.95
Tracy McMillan 457.00
Mike Fairall 3,594.03
Wendall Dennis 541.53
Tim Jackson 283.65
Stuart Stevens 194.82
Bryan Sheppard 82.62
Larry Crowder 9.18