Illinois appeals court says man can't sidestep judgment by transferring assets to firm nominally owned by daughter

By David Hutton | Jan 26, 2018

CHICAGO —  A state appeals court has upheld a Cook County judge's findings a businessman allegedly tried to sidestep a judgment against his business by transferring assets to a company owned on paper by his teenage daughter.

In late December, a three-justice panel of the Illinois First District Appellate Court in Chicago determined Cube Global LLC could be held responsible for a judgment entered against March Fasteners Inc., a company owned by businessman Su Chin Tsai.

Justice Daniel J. Pierce authored the decision, with justices Mary L. Mikva and John B. Simon concurring.

In 2011, A.L. Dougherty Real Estate Management Co. LLC obtained a default judgment in Cook County Circuit Court against March Fasteners for breaching a commercial lease.

Dougherty learned that while the action was pending, March had agreed to sell certain assets to Cube Global LLC, a company purportedly formed by Tsai’s 16-year-old daughter.

Dougherty filed a motion with the court, alleging Cube Global was, in fact, March's, and Tsai and Cube Global should be held liable for March’s alleged transfer of assets under the Uniform Fraudulent Transfer Act.

Further, Dougherty alleged Tsai conspired to keep them from collecting on the default judgment. The trial court entered a ruling in favor of Dougherty.

On his appeal, Tsai maintained the circuit court erred when it entered judgment in favor of Dougherty on a non-existent “stand-alone cause of action for alter ego liability, misapplied the law of veil piercing, admitted escrow and closing documents into evidence without adequate foundation, permitted [the] plaintiffs' expert to testify at trial to an undisclosed opinion, denied [the] defendants' request for an evidentiary hearing on the plaintiffs' attorney fees petition," according to the decision.

An alter ego is company or entity that serves as a legal shield for the individual who is really overseeing the operation. If a company is proven to be an alter ego, it usually weakens or removes the intended protection. Veil piercing, for its part, is when a court disregards the limited liability of a corporation and holds its shareholders accountable for actions that the company took. 

Pierce wrote in the Dec. 29 opinion that the panel found 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.”

As a result, Pierce noted the panel found no grounds to reverse the circuit court’s judgment that Cube Global was liable for the underlying judgment entered against March.

“The circuit court did not enter judgment on a stand-alone alter ego cause of action, and the circuit court was not required to evaluate plaintiffs’ veil piercing claims under breach of contract principles,” he wrote.

The appeals court also ruled "the circuit court did not abuse its discretion in admitting the escrow and closing documents into evidence because a reasonable trier of fact could conclude from Tsai’s testimony that the escrow and closing documents were authentic and were what plaintiffs' attorneys claimed they were," Pierce wrote in the decision.

The appeals court also stood with the circuit court, noting that Tsai’s response to Dougherty’s fee petition didn’t raise any factual disputes, leading to the rejection.

March Fasteners was represented in the action by the Chiang Li Nan Law Office, of Chicago.

Dougherty was represented by Cohen Cohen & Salk PC, of Northbrook.

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