United States District Court, Northern District of Illinois, E.D
January 15, 1985
PRO-LINE CORPORATION, A TEXAS CORPORATION, PLAINTIFF,
MIDWEST HAIR GOODS COMPANY, AN ILLINOIS CORPORATION, MIDWEST MERCHANDISERS DIV., DEFENDANT.
The opinion of the court was delivered by: Bua, District Judge.
On August 5, 1983, this Court entered judgment on plaintiff's
complaint in favor of plaintiff Pro-Line Corp. ("Pro-Line") and
against defendant Midwest Hair Goods Co. ("Midwest") in the
amount of $26,600.19. The judgment against Midwest remains
unsatisfied. On September 5, 1983, plaintiff filed a citation to
discover the assets of Chico Foote, the principal officer and
sole shareholder of Midwest. Plaintiff seeks to hold Foote
personally liable for the judgment against Midwest on the grounds
that Foote is the alter ego of Midwest.
After Foote produced his accountant for an "informal"
examination, plaintiff filed a petition requesting the Court to
enter judgment against Chico Foote individually in the amount of
$26,600.19 and that a turnover order be entered on five
automobiles allegedly owned by Foote and other property allegedly
owned by Midwest. Foote has answered plaintiff's petition; moved
for summary judgment in his favor; and requests an order denying
the relief requested by plaintiff. Plaintiff argues that factual
issues exist and that a hearing pursuant to Ill.Rev.Stat. ch.
110, § 2-1402 is required to determine whether the turnover order
and judgment against Foote are appropriate.
Rule 69 of the Federal Rules of Civil Procedure provides that
supplementary proceedings in aid of the Court's judgment are to
be conducted "in accordance with the practice and procedure of
the state in which the district court is held. . . ." Fed.
R.Civ.P. 69(a). Under Ill.Rev.Stat., ch. 110, § 2-1402, a
plaintiff may prosecute "supplementary proceedings for the
purpose of examining the judgment debtor or any other person to
discover assets or income of the debtor not exempt from the
enforcement of the judgment. . . ." Id. at § 2-1402(a). The
Court may compel "any person cited . . . to deliver up any assets
so discovered. . . ." Id. at § 2-1402(b)(3). If it appears,
however, that the assets discovered are claimed by a person other
than the judgment debtor, the Court shall permit the claimant "to
appear and maintain his or her right[s]" in the supplementary
proceedings. Id. at § 2-1402(e).
Under Illinois law, summary judgment is available to resolve
issues raised under Ill.Rev.Stat. ch. 110, § 2-1402. Federal
Ins. Co. v. Maritime Shipping, Etc., 64 Ill. App.3d 19, 20
Ill.Dec. 664, 380 N.E.2d 873 (1st Dist. 1978). In federal court,
however, summary judgment is appropriate only "if the pleadings,
depositions, and affidavits fail to disclose a genuine issue of
material fact." Gracyalny v. Westinghouse Electric Corp.,
723 F.2d 1311, 1316 (7th Cir. 1983). In deciding this question, the
Court must "resolve all doubts against the party seeking summary
judgment." Id. Applying this standard, the following facts are
assumed as true for purposes of this motion.
Chico Foote is the principal officer and sole shareholder of
defendant Midwest. Midwest is an Illinois corporation doing
business as a wholesale distributor of beauty and hair goods
supplies. Plaintiff's judgment against Midwest in the amount of
$26,600.19 remains unsatisfied. Although Midwest ceased doing
business in 1981, Foote continued to receive a substantial salary
from Midwest during 1981 and 1982. In addition, Midwest funds
were used to pay real estate taxes on property owned by Foote in
1981 and 1982. Finally, Foote converted five automobiles
belonging to Midwest without payment to Midwest.*fn1
Foote is also the president and owner of Peoples Discount
Corporation ("Peoples") and Halsted Liquors ("Halsted"), both
corporations doing business at the same location as Midwest.
Plaintiff alleges that Midwest funds were used to make
improvements on real estate occupied by Foote, Peoples and
Halsted. Additionally, Foote admits in his affidavit that the
payrolls of Halsted and Peoples were "funnelled through
defendant's [Midwest] checking and payroll accounts. . . ."
Answer to Petition, at 1.
In order to hold Foote personally liable on the judgment
against Midwest, plaintiff must establish that Foote is the
alter ego of Midwest. See Federal Ins. Co. v. Maritime
Shipping Agencies, Inc., 64 Ill. App.3d 19, 20 Ill.Dec. 664,
380 N.E.2d 873 (1st Dist. 1978). An officer of a corporation will be
considered the alter ego of the corporation where:
. . there is such unity of interest and ownership
that the separateness of the individual and
corporation has ceased to exist, and the facts are
such that an adherence to the fiction of separate
existence of the corporation would sanction a fraud
or promote injustice. . . .
Federal Ins. Co., 20 Ill.Dec. at 671, 380 N.E.2d at 880. In
order to hold Peoples or Halsted liable for the judgment against
Midwest, plaintiff must establish that either Peoples or Halsted
acted as the alter ego of Midwest. Id. See also In re Bowen
Transports, Inc., 551 F.2d 171, 179 (7th Cir. 1977). The
corporate veil of an affiliated corporation may be disregarded
when required in the interests of justice. In re Bowen Transport
Inc., 551 F.2d at 179.
Although Foote has filed a detailed affidavit in support of his
motion for summary judgment, factual issues have been raised
which cannot be resolved by affidavit. Accordingly, an
evidentiary hearing is required to determine whether Foote,
Peoples or Halsted acted as the alter egos of Midwest and,
therefore, are liable to plaintiff for the judgment against
Midwest. In addition, the Court must decide which entity has
ownership interests in the five automobiles sought by plaintiff
and whether they should be turned over to plaintiff in partial
satisfaction of the judgment against Midwest.
Defendant Chico Foote's motion for summary judgment is denied.
The issues raised by plaintiff's Petition and defendant Foote's
Answer will be set for an evidentiary hearing before a Magistrate
of this Court.
IT IS SO ORDERED.