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05/25/94 FORREST W. FENTRESS v. TRIPLE MINING

May 25, 1994

FORREST W. FENTRESS, D/B/A FENTRESS TRUCKING CO., PLAINTIFF-APPELLEE,
v.
TRIPLE MINING, INC., AN ILLINOIS CORPORATION, AND CARL S. BACHTOLD, DEFENDANTS, AND JOHN T. HENRY AND GEORGE DOLLY, DEFENDANTS-APPELLANTS.



Appeal from Circuit Court of McLean County. No. 87LM186. Honorable Joseph H. Kelley, Judge Presiding.

As Corrected June 29, 1994.

Honorable Frederick S. Green, J., Honorable John T. McCULLOUGH, P.j., Honorable Robert J. Steigmann, J.

The opinion of the court was delivered by: Green

JUSTICE GREEN delivered the opinion of the court:

Plaintiff Forrest Fentress, d/b/a Fentress Trucking Company (Fentress), brought an action against defendants, Triple Mining, Inc., and its three officers and incorporators John T. Henry, George Dolly, and Carl S. Bachtold to recover $10,000 plus interest for a promissory note executed by Bachtold as an officer of Triple Mining payable to Fentress. Carl S. Bachtold was later dismissed from the suit. Following a bench trial, the circuit court entered a judgment in favor of Fentress against all remaining defendants, finding them jointly and severally liable in the amount of $21,778.28.

Defendants Henry and Dolly appeal, contending the circuit court erred in (1) piercing the corporate veil and holding them personally liable for a corporate debt; (2) finding that Bachtold had apparent authority to enter into the loan agreement with Fentress; (3) failing to find that there was no consideration to support the note; and (4) failing to consider the affidavit and exhibits submitted at the post-trial hearing by Henry. We affirm.

On December 9, 1991, Fentress filed a second-amended complaint against Triple Mining, Henry, and Dolly. Count I against Triple Mining alleged that (1) on February 22, 1985, Triple Mining by its agent executed a promissory note in the amount of $10,000 in favor of Fentress; (2) the "note was given for value to-wit: the payment of $10,000 to Brian Perry Enterprises, Inc., for the use of benefit of defendant Triple Mining, Inc."; (3) Fentress owned and held the note; (4) Triple Mining refused to pay the $10,000 owed on the note; and (5) interest on the note was accruing at the rate of $3.84 per day.

Count II against Henry and Dolly realleged the allegations in count I and further alleged that (1) "Triple Mining, Inc., has never had any capital contributions made by the shareholders, has no assets, has never carried on business as a corporation, has never observed corporate formalities and has used any assets that it has ever acquired for the sole benefit of shareholders and not for corporate purposes"; (2) Henry, Dolly, and Bachtold were the incorporators and shareholders of Triple Mining; (3) Henry, Dolly, and Bachtold were the real parties in interest and have used Triple Mining as an alter ego to shield them from personal liability; and (4) the purported corporate entity should be disregarded and individual shareholders liability should be imposed.

Counts I and II sought a judgment against Triple Mining, Henry, and Dolly jointly and severally in the amount of $19,333.36 plus any additional interest that would accrue up to the date of judgment. Attached to the amended complaint was a copy of the promissory note dated February 22, 1985, in favor of Fentress in the amount of $10,000 signed "Triple Mining, Inc., Carl Bachtold." Henry and Dolly filed affirmative defenses, which in part asserted (1) that the promissory note attached to the second-amended complaint was nonexistent or void due to a total want and failure of consideration; and (2) Bachtold, the maker of the promissory note, had no authority to bind Triple Mining to the loan agreement.

The undisputed facts established that on November 21, 1984, Henry, Dolly, and Bachtold entered into a partnership agreement with Bryan Perry Enterprises, Inc., wherein Henry, Dolly, and Bachtold agreed to act as brokers to sell coal derivatives produced by Perry Enterprises in Kentucky. The agreement set forth that one-half of the net profits from the coal venture would be distributed to Perry Enterprises and the other half would be distributed to Henry, Dolly, and Bachtold. The agreement indicated that Henry, Dolly, and Bachtold were to advance Perry Enterprises $15,000, which was to be repaid to Bachtold out of the share of net profits owed to Perry Enterprises. Apparently, Dolly advanced the $15,000 to Perry Enterprises. The evidence indicated that the coal venture with Perry Enterprises in Kentucky was the only coal venture in which Henry, Dolly, and Bachtold were involved.

On December 12, 1984, Henry, Dolly, and Bachtold formed an Illinois corporation known as Triple Mining, Inc. A corporate charter was obtained from the Secretary of State. Henry was president, Dolly was vice-president, and Bachtold was secretary and treasurer. There was evidence that Triple Mining was formed to carry on the coal venture established by the partnership agreement with Perry Enterprises and to limit any personal liability of Henry, Dolly, and Bachtold. There was some dispute as to the degree of corporate formalities maintained by Triple Mining and the amount of the initial capital paid into the corporation. Nonetheless, by action of the Secretary of State, Triple Mining was dissolved in 1986 for failure to file an annual report for the year 1985.

Prior to February 1985, Fentress became interested in providing the trucking transportation for the coal derivatives procured by Triple Mining from Perry Enterprises in Kentucky pursuant to their partnership agreement. On February 22, 1985, Fentress went to Kentucky with Bachtold and others to meet with Bryan Perry. Henry and Dolly were not present at that meeting. At that time, Fentress paid $10,000 to Perry Enterprises by check payable to Bryan Perry Enterprises, Inc. A preprinted promissory note in the amount of $10,000 dated February 22, 1985, was executed by Bachtold signed "Triple Mining, Inc., Carl Bachtold" in favor of Fentress. A "memo of receipt" signed by Bryan Perry and Carl Bachtold for Triple Mining, dated February 22, 1985, acknowledged the $10,000 "as payment in full per contract between Triple Mining, Inc., and Bryan Perry Enterprises, Inc., to secure permit and licenses" for the coal venture in Kentucky. Bryan Perry, Bachtold, and Fentress then entered into an agreement where Fentress was to truck the coal produced by the venture between Triple Mining and Perry Enterprises.

The evidence indicated that prior to February 22, 1985, Henry and Dolly never spoke to Bachtold about entering into a $10,000 loan agreement with Fentress, and there had never been a corporate resolution by Triple Mining authorizing Bachtold to borrow any money on behalf of Triple Mining.

Approximately two months after Bachtold executed the $10,000 promissory note, a second note evidencing the same $10,000 indebtedness as set forth in the first note, allegedly signed by Bachtold for Triple Mining, was signed by Henry in the form "John T. Henry, President." By letter dated March 26, 1985, Henry, Dolly, and Bachtold demanded the return of the $25,000 advanced to Perry Enterprises. Subsequently, the coal ...


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