agreed to the guaranty requirement because Kolson assured him that Robex would guarantee the notes only until the completion of the Sylvester Whey plant (id. 198-201). According to Vembu, that made sense because once it was capitalized Sylvester Whey would be in a far better position to cover the notes (id. 202), and the plant would be completed before the notes came due (id. 228-29). But Vembu acknowledged that the purported understanding was never reduced to writing (id. 199), and he said he discovered that omission for the first time when Kolson threatened to sue him personally (id. 201).
Whether one party fraudulently induced another party to enter into an agreement has generally been considered a jury question ( Sexton v. Southwestern Auto Racing Ass'n, Inc., 75 Ill. App. 3d 338, 340, 394 N.E.2d 49, 50, 31 Ill. Dec. 133 (5th Dist. 1979)). But Illinois courts have consistently refused to extend the doctrine of fraudulent inducement to vitiate contracts where the complaining party could have discovered the fraud by reading the instrument and had the opportunity to do so (see, e.g., Dickinson v. Dickinson, 305 Ill. 521, 527-28, 137 N.E. 468, 470-71 (1922); Belleville Nat'l Bank v. Rose, 119 Ill. App. 3d 56, 59-61, 456 N.E.2d 281, 284-85, 74 Ill. Dec. 779 (5th Dist. 1983); Hurley v. Frontier Ford Motors, Inc., 12 Ill. App. 3d 905, 911, 299 N.E.2d 387, 392 (2d Dist. 1973); and cases cited in each of those decisions). In such cases any reliance upon the claimed misrepresentation has been held to be unreasonable as a matter of law, so that the contract stands as written.
This case comes squarely within the due diligence rule of all of those cases (see Belleville Nat'l Bank, 119 Ill. App. 3d at 60-61, 456 N.E.2d at 284). Vembu fully recognized that Robex was guaranteeing the Sylvester Whey notes (Vembu Dep. 225). Though he said that he trusted Kolson and "felt that [the condition] would be there" (id. 202), he had more than ample opportunity to read the contracts before signing them--indeed, they were sent to him for execution (id. 217). In fact Vembu testified that he did read the documents, but he offers the lame (and unacceptable) excuse that he forgot to check for the alleged condition because there were a lot of other things to which he was paying attention (id. 218)
Robex' guaranties are not complicated--each is 1-1/2 typewritten pages in length, and the language as to duration of the undertaking appears in the sentences immediately following the recitations of the guaranty amounts, one of which was filled in by hand (P. 12(m) Ex. C). More specifically, the language extending Robex' liability on the notes until the "Maker" (Sylvester Whey) fulfills its obligations in full is perfectly straightforward, and the omission of any mention of earlier termination upon completion of the Sylvester Whey plant is glaringly obvious (id.). To render Vembu's contention even less tenable (if possible), it will be recalled that he signed the identical document on the two known occasions of January 5, 1986 and August 14, 1986, and all reasonable inferences (as already stated) tell us that he did the same in connection with the other three notes (as to the significance of such repeated failures to read documents, see Belleville Nat'l Bank, 119 Ill. App. 3d at 61, 456 N.E.2d at 285).
In candor, the feeble nature of the Vembu-Robex arguments strongly suggests that they represent an after-the-fact attempt to escape the impact of the unequivocal and unambiguous guaranty language--an attempt that would take advantage of the rule against weighing credibility on a Rule 56 motion. But that rule does not aid Vembu and Robex here, for Vembu's claim that he was misled into signing the guaranties, even when his version is credited, fails in light of his inexcusable failure to learn the contents of the documents before signing. Hence the Robex guaranties are enforceable as written, and Kolson and Weinsteins prevail on that issue as a matter of law.
Piercing the Corporate Veil
What has been said to this point might well have no practical effect in light of the fact that Robex cannot now (and, Vembu claims, never could) cover the $ 150,000 to honor the guaranties (Vembu Dep. 207). Hence Kolson and Weinsteins urge that despite Robex' corporate existence Vembu should be held personally liable for the entire amount due and owing. Vembu retorts that Robex complied with all applicable laws and operated as a distinct entity, so that its corporate form should insulate Vembu from such exposure. But because Vembu has failed to create a genuine issue of material fact in that respect, again Kolson and Weinsteins prevail as a matter of law, and Vembu is personally liable on the Robex guaranties.
As an initial matter, the choice of law question must be revisited.
Kolson and Weinsteins cite Illinois law without arguing why it should apply, while Vembu and Robex invoke this Court's opinion in CNC Serv. Ctr., Inc. v. CNC Serv. Ctr., Inc., 753 F. Supp. 1427, 1447-48 (N.D. Ill. 1991) for the proposition that Wisconsin law should apply because Robex is a Wisconsin corporation with its principal place of business in Wisconsin and Wisconsin citizen Vembu is its sole shareholder, director, president and treasurer.
In applying the law of the state of incorporation to determine issues of corporate identity, CNC Serv. Ctr. adhered to long-standing tradition (see Phillip Blumberg, The Law of Corporate Groups: Tort, Contract, and Other Common Law Problems in the Substantive Law of Parent and Subsidiary Corporations § 26.02, at 616-17 (1987); Restatement (Second) of Conflict of Laws §§ 302(2), 309 (1971)). In like fashion our Court of Appeals has recently followed the same approach, reviewing Connecticut law to ascertain whether a Connecticut corporation's veil should be pierced ( Mark I, Inc. v. Gruber, No. 94-1429, 38 F.3d 369, 1994 U.S. App. LEXIS 29696, at *5 (7th Cir. Oct. 24)).
To be sure, such recourse to the place of incorporation is not simply a matter of slavish adherence. For example, Hystro Prod., Inc. v. MNP Corp., 18 F.3d 1384, 1387 (7th Cir. 1994) teaches that the laws of a foreign state of incorporation will not necessarily govern issues of corporate identity where the most significant contacts of the corporation (in that instance the place of negotiation and performance of the contract at issue) were in Illinois (see also Secon Serv. Sys. Inc. v. St. Joseph Bank & Trust Co., 855 F.2d 406, 412-13 (7th Cir. 1988)).
That possibility need not be considered here, where all arrows point to the application of Wisconsin law. Both Sylvester Whey and Robex were Wisconsin corporation, each with its principal place of business in Wisconsin (p. 12(m) Ex. B; D. 12(n) Ex. A). As already stated several times, Vembu (the principal of both corporations) is a Wisconsin citizen (P. 12(m) P2). Though Kolson was approached in Illinois, the purpose was to obtain financing for the Sylvester Whey plant in Wisconsin (Kolson Aff. P3; D. 12(n)(2) P4).
There is thus no reason to depart from the traditional rule. Hence this opinion will look to the laws of Wisconsin, the state of Robex' incorporation.
Wisconsin courts are perfectly willing to pierce the corporate veil
to enforce contracts where equity so requires. Citing what it called a "standard approach," In re Kaiser, 791 F.2d 73, 75 (7th Cir. 1986) (citing cases) has observed:
Wisconsin courts have eschewed legalisms and allowed the corporate veil to be pierced, and the shareholder held personally liable, whenever limited liability would "defeat some strong equitable claim."