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People v. V & M Industries Inc.

September 09, 1998

THE PEOPLE OF THE STATE OF ILLINOIS, PLAINTIFF-APPELLANT,
v.
V & M INDUSTRIES, INC., DEFENDANT, AND VERNON LEIRER, DEFENDANT-APPELLEE.



The opinion of the court was delivered by: Justice Goldenhersh

Appeal from the Circuit Court of St. Clair County.

No. 95-CH-126

Honorable Robert L. Craig, Judge, presiding.

Plaintiff, the People of the State of Illinois, originally instituted this action against defendant V & M Industries, Inc. (V & M), for injunctive relief and civil penalties under the Illinois Environmental Protection Act (the Act) (415 ILCS 5/1 et seq. (West 1994)) after approximately 40,000 to 50,000 tires burned on property owned by V & M. V & M was dissolved by the time the suit was filed. Plaintiff subsequently added defendant Vernon Leirer (Vernon), personally. Plaintiff alleged that Vernon was actually the alter ego of V & M. The trial court, sitting without a jury, dismissed the cause as to Vernon, finding that Vernon was not personally liable for his actions or for violations of the Act. V & M was held accountable, so long as plaintiff requested relief within 14 days after the order was entered. Plaintiff decided against pursuing V & M, now a defunct entity with virtually no assets and no officers. On appeal, plaintiff contends the trial court erred (1) in failing to find Vernon responsible for air pollution and failing to grant injunctive relief and (2) in refusing to pierce the corporate veil and hold Vernon personally responsible. We reverse and remand.

FACTS

To understand the instant case, we must go back to the 1970s when Vernon was involved in various corporations, including Five Star Metal Fabricators, Inc., and Five Star Mechanical, Inc. In the late 1970s, Industrial Machinings and Metals, Inc. (Industrial Machinings), was incorporated for the purpose of repairing railroad cars. Vernon claimed that Industrial Machinings was 98% owned by his children and that his wife, Mildred, and he owned 1% each. Mildred, on the other hand, testified that Vernon runs Industrial Machinings. A review of Mildred's testimony shows that she was in the dark as to how any of the corporations, including the Five Star companies, Industrial Machinings, or V & M, actually operate. Mildred was sure, however, that Vernon runs the show.

On February 11, 1981, Industrial Machinings purchased 14 acres of property that borders Missouri Avenue in East St. Louis, commonly known as the Obear-Nester property, from the East St. Louis Port Authority (Port Authority). It was a bond-for-deed transaction. On October 15, 1986, V & M was incorporated in Illinois. At its inception, Vernon owned 99% of the corporation. Vernon, a daughter, and a son-in-law were listed as officers. After V & M was incorporated, Industrial Machinings transferred the Obear-Nester property to it. According to Vernon, V & M was incorporated for the sole purpose of renting out this property to various tenants. V & M had virtually no assets. It assumed the bond-for-deed from the Port Authority. Industrial Machinings loaned V & M the money to pay the Port Authority. Exhibit No. 50 shows the sale of the Obear-Nester property to V & M for $54,869.81, plus the unpaid Port Authority mortgage. Exhibit No. 51 shows the sales amount as $1,300, plus the unpaid mortgage. It is unclear why there are two sets of corporate minutes involving the sale of the Obear-Nester property. What is clear is that at the time of the purchase of this property, Vernon was president and secretary of Industrial Machinings and 100% owner of V & M. He later sold 1% of V & M to Abb Rhodes and 1% to James Rodriguez for $50 each. Secretary of State records confirm the addition of Rhodes and Rodriguez and the deletion of Vernon's family members.

One of the renters of the Obear-Nester property was David Mullinex. It was Mullinex who brought onto the property the tires that caught fire. A lease agreement was signed on March 9, 1989, between Mullinex and Vernon of V & M. Mullinex testified that Vernon was the only person he dealt with in negotiating the lease. According to Mullinex, Vernon told him that he owned the property. There was no mention of V & M. Mullinex and Vernon intended to start a tire-shredding operation at the site. According to Mullinex, Vernon offered to be a third partner with him and his brother, Mike. Mullinex and Vernon went to a St. Louis company to investigate tire shredders and to a tire seminar in the Ozarks. The agreement between Mullinex and Vernon fell apart, and the tire-shredding operation never materialized. Mullinex then abandoned the tires, but Vernon indicated continuing interest in the tire-shredding operation, as evidenced by the letters he sent to the Illinois Environmental Protection Agency (the Agency).

After Mullinex defaulted on the contract, the Agency got involved. The Agency wanted the tires removed and filed suit against V & M Industries and against Vernon individually. Vernon and the Agency negotiated a tire-removal agreement, incorporated into a court order in No. 90-MR-178. Vernon signed all the documents in conjunction with this agreement as an authorized representative of V & M. Notwithstanding his signature as an authorized representative of V & M, the record reflects that no one else from V & M conferred with the Agency except Vernon and that Vernon consulted with no other corporate officers about the tire-removal agreement. The agreement was signed on November 30, 1992. Vernon admits that V & M did not have the assets to remove the tires as agreed. In September 1993, the tire-removal agreement was in place, but when Doug Hayward of the Agency's used-tire program inspected the site in question, he found the site to be in noncompliance. Forty percent of the tires were to be removed at that time, but they were not. He estimated that there were 50,000 tires present on the property.

Abb Rhodes, who was president of V & M at the time of negotiations between Mullinex and Vernon, stated that he was aware of the agreement between Vernon and Mullinex to bring tires on the property; however, Vernon made all the arrangements. There was never a corporate meeting on this issue. Rhodes testified that he received no stock certificates. Vernon could not remember any stock being issued either. Rhodes also testified that corporate meetings consisted of standing around the yard and talking. According to Rhodes, no minutes were ever recorded. Rhodes was not aware how much money was being collected from various renters. Rhodes testified that Industrial Machinings took care of V & M financially for at least five years because V & M had no money. Vernon signed all the checks and had complete control of the checkbook.

Vernon testified that he transferred his 98% ownership in V & M around October 1, 1993, to James Rodriguez for $1. On January 8, 1994, Rodriguez transferred almost all of the 14 acres back to Vernon for no money. The 150-foot-by-150-foot area where the tires burned was not transferred back to Vernon but remained an asset of V & M. Rodriguez is now deceased and could not be called as a witness.

On October 6, 1993, a meeting was conducted between Rhodes and Vernon. Rodriguez was not present. Minutes were recorded at this meeting, the only V & M minutes ever discovered during the litigation. The minutes show that Vernon proposed to use any money available to pay the Port Authority $51,000 as final payment for the property. The resolution passed with votes by Vernon and Rhodes. However, according to the Secretary of State's records and Vernon's own testimony, Vernon was no longer an officer or a shareholder of the corporation. Vernon sold his ownership interest in V & M to Rodriguez for $1 by this time. Vernon testified that V & M did not have the money to pay the loan, so the money was borrowed from Industrial Machinings. Vernon wrote a check for $51,000 from the Industrial Machinings account, and the Port Authority released V & M from the bond for deed.

On November 1, 1993, the Agency sent Vernon a letter concerning noncompliance with the tire-removal agreement. On November 15, 1993, a land trust was created for the 14 acres of V & M property, commonly referred to the Obear-Nester property, excluding, however, the 150-foot-by-150-foot area where the tires later burned. Vernon is the sole beneficiary of this land trust. Prior to transferring the deed from V & M to Vernon's land trust, Rodriguez signed a $25,000 mortgage to Industrial Machinings dated November 15, 1993. It was notarized on January 8, 1994. On January 18, 1994, a warranty deed from V & M to a land trust, with Paul Chapman as the designated trustee, was notarized and signed by James Rodriguez and Abb Rhodes.

On November 18, 1993, V & M and Urioste Companies, Inc. (Urioste, Inc.), entered into a contract for the recycling of steel from a V & M building on the Obear-Nester property. The contract provided that Urioste, Inc., would pay $100,000 for the right to remove the steel. Vernon signed the contract as treasurer of V & M but listed his home address under the signature block. According to the Secretary of State's records and Vernon's own testimony, Vernon was not the treasurer of V & M on this date. Michael Urioste of Urioste, Inc., testified that he talked with only Vernon and no one else concerning the contract between V & M and Urioste, Inc. According to Urioste, Vernon made it very clear that he owned everything. On the date the contract was signed, Urioste gave Vernon a check made out to Vernon personally for $50,000 as a first installment. Another check for $49,000 was given to Vernon from Urioste on January 7, 1994. On February 5, 1994, two checks totaling $1,000 were paid to Vernon from Urioste. On March 7, 1994, a $1,500 check was ...


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