Appeal from the Circuit Court of Kane County. No. 88-P-209. Honorable Gene L. Nottolini, Judge, Presiding.
McLAREN, Woodward, PECCARELLI
The opinion of the court was delivered by: Mclaren
Justice McLAREN delivered the opinion of the court
Pursuant to Supreme Court Rule 304(b)(1) (134 Ill. 2d R. 304(b)(1)), claimant, Fullco Lumber Company, Inc. (Fullco or claimant), appeals the denial of its claim against the estate of Roy K. Wallen (decedent) who died on April 2, 1988. On April 14, 1988, Peter M. Donat, an attorney, was appointed administrator of the estate with the will annexed. We affirm in part, reverse in part, and remand the cause for further proceedings.
On appeal, claimant contends that, because it obtained a money judgment against the lumber business of decedent, the judgment should be paid from assets of the estate. The thrust of claimant's first argument is that the trial court erred in refusing to "pierce the corporate veil" of R.K. Wallen Lumber Sales, Inc. (Wallen Lumber or corporation), and hold the estate liable for its claim where it was alleged that decedent, as sole stockholder, conducted the lumber brokerage business in such a manner that the personalities of the corporation and the individual no longer existed; thus, adherence to the fiction of a separate corporate existence would sanction a fraud or promote inJustice in defeating the creditor's claim.
Alternatively, claimant argues, with much less precision, that fairness and equity require that the estate be held liable for the debts of the business where the estate continued to maintain and operate the business as an asset of the estate for later sale.
Fullco based its claim on a foreign judgment of $178,163.31 obtained in Alabama against R.K. Wallen Lumber Sales, Inc., an Illinois corporation. The judgment was initially entered in cause No. CV-87-106 in the circuit court of Winston County, Alabama, on April 11, 1988, and was entered as a final judgment there on June 7, 1988. On November 10, 1988, the foreign judgment, plus interest and costs, was registered as a final Illinois judgment in the Kane County circuit court in cause No. 88-MR-195, and on October 11, 1988, a claim based on the judgment was filed against the estate.
The written claim first alleges that, due to the entry of the judgment in the Alabama court and the registration of the judgment in Illinois, Fullco has a claim and a lien on all the accounts receivable and other assets of Wallen Lumber which "are or have been a part of and property of the Estate of Roy K. Wallen."
Alternatively, the document alleged that there is a claim and a lien against the assets of the estate because:
"There was a sufficient unity of ownership between Roy K. Wallen and R.K. Wallen Lumber Sales, Inc. The applicable corporate formalities were not observed by R.K. Wallen Lumber Sales, Inc., and the absence of corporate records and inadequate capitalization of R.K. Wallen Lumber Sales, Inc. all justify the piercing of the corporate veil * * * and holding the Estate of Roy K. Wallen liable for judgment entered in favor of Fullco Lumber Company, Inc."
Prior to the hearing on the claim, on January 31, 1992, claimant served a notice to the administrator to appear and to produce the corporate records of Wallen Lumber; a list of all the shareholders of "R.K. Wallen" (Wallen Lumber) from the date of incorporation to the present; a listing of all the assets and accounts receivable of Wallen Lumber as of April 1, 1988; all bank statements, checkbooks and banking documents for any account in the name of "R.K. Wallen," Roy K. Wallen, and the estate of Roy K. Wallen or any account opened by the administrator from April 1, 1988, to the present; any bank statements or documents for any account through which receivables passed or bills of "R.K. Wallen" were paid from April 1, 1988, to the present; any stock certificates completed and issued to any stockholder; and any notes given by "R.K. Wallen" to Roy K. Wallen as evidence of loans made by Roy K. Wallen to "R.K. Wallen." Fullco also subpoenaed Harris Bank of Batavia for notes evidencing loans made by Harris Bank or its predecessor (First National Bank of Batavia) to Roy K. Wallen from January 1, 1987, through April 1, 1988, and any documents showing into what account at Harris Bank the loan proceeds from the loans were deposited.
Incomplete records were produced for the hearing. Copies of records from the Secretary of State (exhibit No. 3) showed that Wallen Lumber was incorporated in 1982, and the subscribers were Roy K. Wallen, Joseph Romano, Sr., and Joseph Romano, Jr. The number of shares proposed to be issued was 1,000 for a consideration of $2,000. The Secretary of State ultimately dissolved the corporation involuntarily on February 1, 1989. Exhibit No. 4 included the unsigned minutes of the first meeting of subscribers on May 10, 1982, and unsigned shares: 600 shares to Roy K. Wallen, and 200 each to Joseph Romano, Sr., and Joseph Romano, Jr. It appears that the administrator produced no other corporate documents from the period 1983 to 1988.
At the hearing on September 8, 1992, there was initially some objection by the administrator that the corporate records were incomplete and their admissibility questionable if the Dead Man's Act (735 ILCS 5/8-201 (West 1992)) was applicable and no one was present to testify regarding the documents. The court found that the documents were not covered by the Act and admitted them.
Richard D. Hughes testified that he was a senior vice-president of the Harris Bank Batavia National Association, a successor of the First National Bank of Batavia. He functioned as a lending officer and administrator of credit records of the bank. Hughes testified that a loan of $20,000 was made to decedent on February 9, 1987, and a second loan was made for $10,000 on June 9, 1987, as a renewal of a prior loan. A third loan to decedent was made on August 25, 1987, for $43,600 which was also a renewal of a prior loan. On ...