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Dep't of Rev. v. Heartland Investments

OPINION FILED MARCH 22, 1985.

THE DEPARTMENT OF REVENUE, APPELLEE,

v.

HEARTLAND INVESTMENTS, INC., ET AL. (PETER S. VERMEIL, APPELLANT). — THE DEPARTMENT OF REVENUE, APPELLANT,

v.

HARTIGAN'S FINER FOODS, INC., ET AL., APPELLEES.



No. 60289. — Appeal from the Appellate Court for the Third District; heard in that court on appeal from the Circuit Court of Peoria County, the Hon. John D. Sullivan, Judge, presiding.

No. 60298. — Appeal from the Appellate Court for the First District; heard in that court on appeal from the Circuit Court of Cook County, the Hon. Louis J. Giliberto, Judge, presiding.

JUSTICE MORAN DELIVERED THE OPINION OF THE COURT:

Neil F. Hartigan, Attorney General, of Springfield (Edward M. Kay, Assistant Attorney General, of Chicago, of counsel), for appellant.

Raymond P. Carrol, of Chicago, for appellees.

Plaintiff, the Department of Revenue of the State of Illinois (Department), instituted each of the actions involved in this consolidated appeal, by filing a complaint for the collection of unpaid retailers' occupation taxes (Ill. Rev. Stat. 1979, ch. 120, par. 440 et seq.) In cause No. 60289, filed in the circuit court of Peoria County, the Department sought recovery of unpaid retailers' occupation taxes from Heartland Investments, Inc., d/b/a The Poison Apple. In a second count, the Department sought recovery, in the alternative, from defendant Peter S. Vermeil, the corporation's president, pursuant to section 13 1/2 of the Retailers' Occupation Tax Act (Act), under which personal liability of a corporate officer can be imposed for wilful failure to pay such taxes (Ill. Rev. Stat. 1979, ch. 120, par. 452 1/2). A two-count complaint was also filed in the circuit court of Cook County, in cause No. 60298, to recover unpaid retailers' occupation taxes from Hartigan's Finer Foods, Inc., or, alternatively, from defendants Bernard W. Hartigan and Patrick J. Hartigan, the corporation's president and vice-president, pursuant to section 13 1/2 of the Act.

In cause No. 60289, the circuit court of Peoria County entered a default judgment against the corporate defendant for $7,641.67 plus statutory interest and costs. Following cross-motions for summary judgment on count II, regarding individual liability, the court granted defendant Vermeil's motion and accordingly entered judgment in his favor. The circuit court of Cook County, in cause No. 60298, entered judgment on the pleadings as to count I against the corporation for $97,705.09 and in favor of the individual defendants, after a bench trial, on count II. The Department appealed the decisions in both cases, regarding the personal liability of the corporate officers.

In cause No. 60289, the third district appellate court reversed the decision of the circuit court, finding the defendant Peter S. Vermeil personally liable for the unpaid 1980 retailers' occupation taxes. Further, the court remanded the cause for a hearing relative to Vermeil's liability for the 1981 retailers' occupation taxes. (124 Ill. App.3d 28.) The first district appellate court, in cause No. 60298, on the other hand, affirmed the circuit court decision in favor of individual defendants, Bernard W. Hartigan and Patrick J. Hartigan, finding no personal liability for the unpaid retailers' occupation taxes. 123 Ill. App.3d 63.

We granted defendant Peter S. Vermeil's petition for leave to appeal (No. 60289). The Department's petition for leave to appeal (No. 60298) was also granted, and the causes have been consolidated for purposes of review.

Three issues are raised on appeal: (1) whether the actions of the individual defendants constitute wilful failure to make tax payments within the meaning of section 13 1/2 of the Act; (2) whether a genuine issue of material fact exists in cause No. 60289, relative to the defendant's personal liability for 1981 retailers' occupation taxes; and (3) whether the Department must reprove the amount of corporate tax liability in its suit against an individual defendant, under section 13 1/2 of the Act.

The record reveals the following facts. In cause No. 60289, the corporation, Heartland Investments, Inc., operated a discotheque and restaurant known as the "Poison Apple." Defendant Vermeil was the president and chief operating officer of the corporation. Further, defendant was responsible for filing returns and making payment of taxes imposed by section 3 of the Act (Ill. Rev. Stat. 1979, ch. 120, par. 442). The defendant filed such returns for May, June, July, and August of 1980, showing a total tax liability of $4,086.06. These returns indicate that retail sales were being made and taxes were being collected from customers. Nevertheless, the defendant failed to enclose tax payments with the May 1980 through August 1980 returns. Defendant Vermeil's affidavit filed in support of his motion for summary judgment indicates that funds were available during this period. These funds were insufficient, however, to make payments to both the Department and other suppliers and creditors. Therefore, the defendant stated, the other creditors and suppliers were paid in an effort to keep the business operative.

The defendant executed a "Taxpayer Payment Proposal," with the Department, and on behalf of the corporation, on December 16, 1980. Under the terms of the proposal, the defendant made a down payment of $1,161.72 and agreed to make monthly payments of $500 for the following six months. Only two payments, totaling $202.49, were subsequently made.

Retailers' occupation tax returns were filed by the defendant through April of 1981. Retailers' occupation tax returns were not filed, nor were tax payments made, for May through August of 1981. Thereafter, the Department, pursuant to section 5 of the Act (Ill. Rev. Stat. 1979, ch. 120, par. 444), determined, according to its best judgment and information, the amount of retailers' occupation tax due for May through August of 1981. A "Notice of Tax Liability" for $3,982.40 was issued by the Department on February 2, 1982, and was received by the defendant. The liability was neither paid nor protested.

A Department employee was notified by the defendant, in September of 1981, that the business had been discontinued. The corporation was dissolved on December 1, 1981. The defendant maintains, however, that business was permanently discontinued on January 31, 1981. Thus, in his affidavit in support of his motion for summary judgment, the defendant stated that the corporation did not incur retailers' occupation tax ...


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