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State ex rel. Family Support Division v. Steak'M Take'M LLC

Court of Appeals of Missouri, Western District, First Division

July 25, 2017


         Appeal from the Circuit Court of Jackson County, Missouri The Honorable Robert Michael Schieber, Judge.

          Before: James Edward Welsh, P.J., Lisa White Hardwick, and Gary D. Witt, JJ.


         Ervin Ross, Jr. and Steak M & Take M LLC ("Appellants") appeal the circuit court's judgment, following a bench trial, in favor of the State of Missouri's Family Support Division, ("Division") on its "Petition to Enforce Child Support Withholding Orders" against the Appellants. We affirm.


         In 1996, Ervin Ross Jr. ("Ross Jr.") and his sister, Tressie Lyman ("Lyman"), began operating a drive-through restaurant in Kansas City, Missouri. In 2007, the restaurant was organized as a Missouri limited liability company named Steak'm Take'm LLC ("Steak'm LLC"). The articles of organization listed Lyman as the organizer and registered agent.

         In 2009, the restaurant hired Ross Jr.'s son, Ervin Ross III ("Ross III"). Ross III owes child support in three different child support cases in Jackson County. In July 2009, the Division sent withholding orders to the restaurant directing them to withhold child support from Ross III's paycheck and to remit payments within seven working days of his pay date to the Missouri Family Support Payment Center ("Payment Center").

         The orders informed the employer: "If you have any doubts about the validity of the Order, contact the agency or person listed below. If you fail to withhold income as the Order directs, you are liable for both the accumulated amount you should have withheld from the obligor's income and any other penalties set by state law." The orders directed the employer to notify the agency if the obligor has never worked for or no longer works for the employer and to provide the name and address of the new employer, if known. Despite receiving all three income withholding orders, the restaurant did not contact the Division about any of these matters but, nevertheless, failed to withhold and pay any child support from Ross III until December 2013, when payment to the Division began.

         In August 2009, a child support specialist with the Division called the restaurant and spoke with Ross Jr. Ross Jr. stated that he owned the restaurant and that he had received the withholding orders and would start withholding from Ross III. Ross Jr. now maintains, however, that Lyman owned the restaurant between 2009 and December 2012 and that he had no involvement with the payroll at that time. On July 24, 2012, another Division specialist spoke with Nikki Lyman, who is Ross Jr.'s niece and a manager at the restaurant. Nikki Lyman expressed her belief that Ross III was paying the child support himself. The specialist informed her that the employer must honor the withholding orders.

         As of September 2012, the restaurant still had not complied with the withholding orders. On September 27, 2012, the specialist noted that she would resend the withholding orders by certified mail and "prep the file" for referral to the Attorney General. Counsel for the Division later sent the restaurant a letter warning about future litigation pursuant the applicable statutes.[1]

         Sometime in January 2013, Lyman purportedly gave Ross Jr. the restaurant for no consideration, and Ross Jr. simply "took over" the restaurant's lease. On January 22, 2013, Ross Jr. formed Steak M & Take M LLC ("Steak M LLC"), but continued to operate the restaurant at the same location and phone number with the same sign, menu, customer base, and employees. Ross Jr. did not notify the Division or any other governmental agency that Ross III's employer had changed.

         As of June 2013, the restaurant had paid nothing on the withholding orders, so the Division filed a petition against Steak'm Take'm restaurant to recover the amounts owed. In May 2014, defense counsel filed a general appearance on behalf of Steak'm Take'm restaurant. The Division later amended the petition to add the following potential owners of the restaurant: Steak'm LLC, Steak M LLC, Ross Jr., Lyman, and Tri-Star LLC. Defense counsel was granted leave to withdraw his representation of Steak'm LLC and filed an entry of appearance and answer on behalf of Steak M LLC and Ross Jr. The Division voluntarily dismissed Lyman and Tri-Star LLC as defendants after it was unable to obtain service on them.

         On June 5, 2015, the circuit court held a bench trial on the State's petition.[2] Based on the evidence and testimony presented, the court found, inter alia, that the Division properly served Steak'm Take'm restaurant in July 2009 with three orders to withhold child support from Ross III and to remit the money to the Payment Center and that Ross Jr. acknowledged receipt of the income withholding orders in August 2009. The court noted that the restaurant failed to contact the Division about the orders but, nevertheless, failed to withhold or remit any child support until December 2013. Pertinent to the points on appeal, the court found that Steak M LLC, as a successor company, is liable for Steak'm LLC's debts on the withholding orders, and that Ross Jr. is personally liable for Steak M LLC's debts on the withholding orders.

         The circuit court issued a default judgment against Steak'm LLC after finding that it "was served on July 16, 2013" but "has failed to file an answer [or] to appear at trial." The court issued a judgment against Steak'm LLC, Steak M LLC, and Ross Jr., jointly and severally, in the amount of $44, 373.74.

         Standard of Review and Statutory Framework

         As in any court-tried case, we will affirm the circuit court's judgment unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). We review the evidence and its reasonable inferences in the light most favorable to the judgment and disregard all evidence and inferences to the contrary. Roper Elec. Co. v. Quality Castings, Inc., 60 S.W.3d 708, 710 (Mo. App. 2001). We defer to the trial court's assessment of credibility, recognizing that it is free to accept or reject all, part, or none of the testimony presented. Id.

         Pursuant to the governing statute, when a support order has been entered, the Director of the Division shall issue an order directing any employer of a child support obligor to withhold and remit to the Payment Center money due or to become due the obligated parent in an amount not to exceed federal wage garnishment limitations. § 454.505.1, RSMo.[3] Subsection .3 of the statute provides that the orders shall be served on the employer by regular mail and shall be binding two weeks after mailing. § 454.505.3. The employer shall withhold from the earnings or other income of each obligor the amount specified in the order and shall transmit the payments as directed within seven business days of the date the earnings were payable to the obligor. Id. The order shall be a continuing order and shall remain in effect and be binding upon the employer until further order of the Director. § 454.505.6. Section 454.505.8 provides that an employer who fails to withhold or pay the amounts ordered shall be liable for the amount that should have been withheld and paid over; the Director is authorized to bring an action in circuit court to determine the employer's liability; and a court may enter judgment against the employer if it finds that a violation has occurred. "[T]he employer's liability is essentially strict." State Dep't of Soc. Servs., Family Support Div. v. Swank, 502 S.W.3d 722, 725 (Mo. App. 2016).

         Steak'm LLC's Default Judgment

         In Point I, the Appellants contend that the circuit court erred in granting a default judgment against Steak'm LLC because that entity was never properly served, in that "Tressie Lyman was never served with any petition."

         As noted, the circuit court issued a default judgment against Steak'm LLC after finding that it "was served on July 16, 2013 [but] failed to file an answer [or] to appear at trial." We need not address this point in any detail. The record shows that, in May 2014, defense counsel filed a general entry of appearance on behalf of defendant, Steak'm Take'm restaurant, without contesting service of process or personal jurisdiction, thereby waiving this objection. See Martin v. Martin, 196 S.W.3d 632, 634-35 (Mo. App. 2006) (an entry of general appearance without objection to service of process or personal jurisdiction waives objection to those matters on appeal). Thus, the circuit court did not err in entering a default judgment against Steak'm LLC.

         Point I is denied. [4]

         Steak M LLC's Successor Liability

         The Appellants argue in Point II that the trial court erred in granting a judgment against Steak M LLC, because "the evidence failed to support the State's argument that it was a sham corporation, in that there were separate corporate entities, officers and ...

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