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  • Writer's pictureKirk Hartley

Easier to Succeed on Alter Ego Claims When Enforcing a Judgment

Asset shuffling between corporations has time and again produced issues regarding fraudulent conveyances, alter egos and veil-piercing the like. A recent Illinois appellate ruling holds that a post-judgment alter ego claim to collect on a judgment requires less proof than would have been needed to prevail at trial on the merits of a breach of contract claim. That is, it is easier to collect on a judgment when moving for post-judgment relief, as contrasted against proving up alter ego as part of a contract claim.   A.L. Dougherty Real Estate Management Co. v. Tsai, 2017 IL App (1st) 161949 (Dec. 29, 2017). The court explained the following:

“In breach of contract cases, “courts apply an even more stringent standard to determine when to pierce the corporate veil than in tort cases.” Saletech v. East Balt, 2014 IL App (1st) 132639. This is because “a party seeking relief for a breach of contract presumably entered into the contract with the corporate entity voluntarily and knowingly and expecting to suffer the consequences of the limited liability status of the corporate form.” Id. ¶ 26; 1 William Meade Fletcher, Cyclopedia of Corporations § 41.85 (1999).

“Where there is no evidence of any misrepresentation, no attempt to conceal any facts and the parties possess a total understanding of all of the transactions involved, Illinois courts will not pierce the corporate veil in a breach of contract situation.” Tower Investors, 371 Ill. App. 3d at 1034.”

“We find that the circuit court properly declined to evaluate plaintiffs’ veil-piercing claim under the principles applicable to breach of contract claims because the present dispute does not involve a breach of contract. Instead, this case involves the enforcement of a judgment: [P]laintiffs are attempting to hold Tsai and Cube Global liable for the underlying judgment obtained in the underlying action.

Under the merger doctrine, once the underlying judgment became final, the lease entirely merged into the judgment, and no further action at law or equity could be maintained on the lease. Poilevey v. Spivak, 368 Ill. App. 3d 412 (2006). The formation of the contract, therefore, is irrelevant.

This was not a contract action, and thus the circuit court was not required to find fraud, concealment or misunderstanding.”

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