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Hughey v. Hoffman Rosner Corp.

OPINION FILED SEPTEMBER 29, 1982.

CHARLES HUGHEY, PLAINTIFF-APPELLANT,

v.

HOFFMAN ROSNER CORPORATION ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. Myron Gomberg, Judge, presiding.

JUSTICE WILSON DELIVERED THE OPINION OF THE COURT:

Plaintiff, Charles Hughey, appeals from the trial court's order granting defendant's motion to dismiss. On appeal, plaintiff contends that: (1) The Hoffman Group, Inc. (Hoffman), is a distinct and separate corporate entity from the Western Construction Company (Western); (2) Western Construction Company and not Hoffman should be considered plaintiff's employer as a matter of law; and (3) since Western is a subsidiary of The Hoffman Group, Inc., it is not immune by virtue of the Workmen's Compensation Act (Ill. Rev. Stat. 1979, ch. 48, par. 138.5(a)) to an action for damages sustained in the course of plaintiff's employment. We affirm the trial court's decision.

The Hoffman Group, Inc., is a holding company and general contractor engaged in the business of developing, building and selling residential properties. It has a number of subsidiaries that do development work.

Western Construction Company, Inc., handles carpentry and concrete projects. Incorporated in January 1977, it was a wholly owned subsidiary of Hoffman Enterprises. Hoffman Enterprises is a wholly owned holding company of The Hoffman Group, Inc.

In June 1977, The Hoffman Group, Inc., merged Western and Tri-Co Builders Supply Company, another wholly owned subsidiary, into itself. All of Western's and Tri-Co Builders' stock was retired and cancelled to form a new corporation bearing the same name as the old one, Western Construction Company. Except for its president, the divisional officials of Western were elected to hold the same respective offices in the new corporation. All of the shares of the new corporation were owned by The Hoffman Group, Inc.

Plaintiff was hired as a carpenter by Western Construction Company prior to its merger in 1977. He was injured on October 10, 1978, while working on a scaffold. He subsequently filed a claim under the Workmen's Compensation Act as well as a cause of action for his injury in the circuit court of Cook County against The Hoffman Group. Although plaintiff received a lump sum settlement from the Workmen's Compensation Board, his action in the circuit court was dismissed.

In reaching its decision, the trial court stated that plaintiff had failed to present any counteraffidavits to rebut defendant's evidence that (1) at the time of plaintiff's injury, Western was no longer a subsidiary but had been merged to become a wholly owned division of The Hoffman Group, Inc., (2) that the sole purpose of the newly formed corporation was to protect the name of Western in Illinois, (3) that by virtue of the merger, The Hoffman Group and not Western was plaintiff's employer, and (4) plaintiff's cause of action against Hoffman was therefore barred by the workmen's compensation statute.

Plaintiff filed a motion for rehearing, which was granted. Upon rehearing, the trial court affirmed its earlier decision and denied plaintiff's motion to vacate the order of dismissal. Plaintiff appealed.

OPINION

• 1 Plaintiff's main argument is that The Hoffman Group is a distinct and separate corporation from Western Construction Company and that it should not be considered plaintiff's employer as a matter of law. This factual determination rests with the trial court since it is well established in Illinois that section 5(a) of the Workmen's Compensation Act (Ill. Rev. Stat. 1979, ch. 48, par. 138.5(a)) serves as a bar to all other remedies of an employee against his employer (Walker v. Berkshire Foods, Inc. (1976), 41 Ill. App.3d 595, 354 N.E.2d 626). We believe that the trial court correctly reached its decision that at the time of the injury Hoffman and Western were not separate corporate entities and that plaintiff is therefore barred by the workmen's compensation statute from bringing this cause of action.

There is ample evidence in the record to support the trial court's decision. A significant fact is that the merger changing Western's status from a subsidiary to a division occurred the year prior to plaintiff's injury, not during the aftermath of his workmen's compensation or circuit court claim for damages. The reason for the merger, aside from "protecting the name of Western Construction Company in Illinois," is not clear in the record, but, nonetheless, defendant's argument that the merger produced a new division was uncontradicted by counteraffidavits. Also, as the court pointed out upon rehearing, plaintiff did not present any persuasive information concerning the relationship between Hoffman and Western.

Except for its president, Western has the same officers as The Hoffman Group. Hoffman's treasurer, James K. Baumann, testified in a deposition that Western's payroll checks are issued with The Hoffman Group's name printed on them. These payroll funds are drawn under The Hoffman Group account. In addition, financial returns for Western were not filed separately after the merger with The Hoffman Group, Inc. The trial court properly relied on these unchallenged facts in reaching its decision to dismiss plaintiff's cause of action.

Plaintiff next contends that defendant should not be allowed to pierce its own corporate veil in order to disregard the separate entities of Western and Hoffman.

• 2 Defendants have uniformly been denied the opportunity to pierce their own corporate veil in order to avoid liability (see Thomas v. Hycon, Inc. (D.D.C. 1965), 244 F. Supp. 151). Moreover, the equitable doctrine of piercing the corporate veil has been used in Illinois as a remedy in instances where the facts establish that the existence of separate corporations is a mere fiction and the observance of this fiction would, in effect, sanction a fraud (Edwards v. Chicago & Northwestern Ry. Co. (1967), 79 Ill. App.2d 48, 233 N.E.2d 163). An allegation of fraud was not made in the instant case, however. Plaintiff merely states that non-recognition of Hoffman and Western as separate entities would present an obstacle to his cause of action. This statement, without more, is unpersuasive. Plaintiff failed to show how or in what way Hoffman, the principal corporation, treated Western as a separate, albeit wholly owned ...


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