2022 IL App (4th) 210599 FILED NO. 4-21-0599 June 9, 2022 Carla Bender IN THE APPELLATE COURT 4th District Appellate Court, IL OF ILLINOIS
FOURTH DISTRICT
LEWIS, YOCKEY & BROWN, INC., ) Appeal from the Plaintiff-Appellant, ) Circuit Court of v. ) McLean County MARK FETZER, KENNETH VERKLER, R. ) No. 16L47 MICHAEL HUNDMAN, and LAURENCE F. ) HUNDMAN, ) Honorable ) Rebecca S. Foley, Defendants-Appellees. ) Judge Presiding.
JUSTICE CAVANAGH delivered the judgment of the court, with opinion. Presiding Justice Knecht and Justice Turner concurred in the judgment and opinion.
OPINION ¶1 The plaintiff, Lewis, Yockey & Brown, Inc. (Lewis), sought to pierce the veil of an
Illinois limited liability company, Hundman Management, LLC. In other words, Lewis sought to
hold the members of the limited liability company—the defendants, Kenneth Verkler, R. Michael
Hundman, and Laurence F. Hundman—personally liable for a money judgment that Lewis had
won against the company. (Whereas owners of a corporation are called “shareholders,” owners of
a limited liability company are called “members” (see 805 ILCS 180/1-5, 35-10 (West 2020)).)
The circuit court of McLean County kept the veil intact, granting motions for summary judgment
in the defendants’ favor. Lewis appeals. In our de novo review (see Arris Group, Inc. v.
CyberPower Systems (USA), Inc., 2021 IL App (1st) 191850, ¶ 30), we affirm the summary
judgments because the record appears to lack evidence that the statutory conditions for holding the members liable have been met (see 805 ILCS 180/10-10(d) (West 2020)). Thus, the circuit court
was correct that, under the material undisputed facts, the defendants were entitled to judgment as
a matter of law. See Arris, 2021 IL App (1st) 191850, ¶ 30.
¶2 I. BACKGROUND
¶3 Hundman Management, LLC, was established in 2003 as a member-managed
limited liability company. (There are two kinds of limited liability company: a “manager-managed
company,” in which the members serve as passive investors, delegating management responsibility
to a manager, and a “member-managed company,” which is defined as “a limited liability company
other than a manager-managed company.” 805 ILCS 180/1-5 (West 2020).)
¶4 On October 20, 2004, the members of Hundman Management, LLC, amended the
company’s operating agreement so as to authorize the chairman of the company, Laurence F.
Hundman, to sign notes, eliminating a requirement that notes also be signed by the secretary of the
company.
¶5 On August 1, 2009, on behalf of Hundman Management, LLC, Laurence F.
Hundman issued a note to Lewis in the amount of $283,711.45—“in return for a loan,” according
to the note. It appears to be undisputed, though, that Lewis never lent Hundman Management,
LLC, any funds. Instead, Lewis had provided civil engineering services to other limited liability
companies managed by Hundman Management, Inc. For a time, Laurence F. Hundman made
payments on the note. Then he stopped making payments, and the note went into default. In a case
separate from this one, Lewis sued on the note and on October 23, 2013, won a judgment against
Hundman Management, LLC, in the amount of $218,925.73.
¶6 In 2016, Lewis brought the present action. In addition to suing Laurence R.
Hundman for fraud, Lewis sought to hold the other members liable for the judgment on the note—
-2- Lewis requested the circuit court to pierce the veil of Hundman Management, LLC. The second
amended complaint named Mark Fetzer, Verkler, R. Michael Hundman, and Laurence F.
Hundman as defendants but sought no relief from Fetzer.
¶7 On November 30, 2017, by the circuit court’s ruling on a motion for dismissal,
Fetzer was eliminated as a defendant, and only three counts of the second amended complaint
remained: counts I, V, and VIII. Count I was a piercing-of-the-veil count directed against Verkler,
R. Michael Hundman, and Laurence F. Hundman. Count V was a count of fraud directed against
Laurence F. Hundman. Count VIII was a count of constructive fraud directed against him.
¶8 On March 8, 2021, the circuit court granted a motion for summary judgment by
Verkler on count I, concluding that, contrary to Lewis’s claim, Hundman Management, LLC, had
been adequately capitalized.
¶9 On June 30, 2021, the circuit court granted a motion for summary judgment by R.
Michael Hundman on count I.
¶ 10 On September 16, 2021, the circuit court granted a motion for summary judgment
by Laurence F. Hundman on counts I, V, and VIII.
¶ 11 On October 15, 2021, Lewis filed an appeal from the three summary judgments.
¶ 12 II. ANALYSIS
¶ 13 On appeal, Lewis makes no argument on counts V and VIII of the second amended
complaint. Therefore, Lewis has forfeited its challenge to the summary judgment in Laurence F.
Hundman’s favor on those counts. See Ill. S. Ct. R. 341(h)(7) (eff. Oct. 1, 2020) (providing that
“[p]oints not argued [in the appellant’s brief] are forfeited”). The only question left in this appeal
is whether the circuit court should have pierced the veil of Hundman Management, LLC.
-3- ¶ 14 Our research reveals only one reported decision in which the reviewing court
affirmed a judgment that pierced the veil of a limited liability company. In Benzakry v. Patel, 2017
IL App (3d) 160162, the circuit court pierced the veil of KAP Family Investments, LLC (KAP),
holding that the sole member of KAP, Kalpita Patel (see id. ¶ 67), was “personally responsible for
the debts of KAP” (id. ¶ 21). Kalpita Patel appealed. Id. ¶ 1. The appellate court held that, for three
reasons, this piercing of the veil was not against the manifest weight of the evidence. Id. ¶ 69.
¶ 15 First, “KAP had inadequate capitalization.” Id. ¶ 66. The appellate court believed
that “[i]t [was] inequitable for shareholders to establish and maintain a corporation that carrie[d]
on business without sufficient assets available to meet its debt.” Id.
¶ 16 Second, “Kalpita was the sole member of KAP, but her testimony indicate[d] that
she was not involved with the activities of KAP.” Id. ¶ 67. One of the factors that courts took into
account in deciding “whether to pierce the corporate veil” was the “nonfunctioning” of officers
who supposedly were in charge of the corporation. Id. ¶ 65.
¶ 17 Third, “the record show[ed] [that] Kalpita [had] commingled funds.” Id. ¶ 68.
“[D]iversion of assets from the corporation by or to a shareholder” was yet another factor that
courts considered “in determining whether to pierce the corporate veil.” Id. ¶ 65.
¶ 18 Because of those three factors, the Benzakry court reasoned, “the jury’s verdict,
piercing KAP’s corporate veil and holding Kalpita liable for KAP’s damages, was not against the
manifest weight of the evidence.” (Emphasis added.) Id. ¶ 69.
¶ 19 We would respectfully suggest that this holding in Benzakry is problematic because
the limited liability company in that case, KAP, had no “corporate veil.” See id. The appellate
court in Benzakry seemed to regard a limited liability company as a type of corporation or as
interchangeable with a corporation. A limited liability company, however, is different from a
-4- corporation. An Illinois corporation is formed under the Business Corporation Act of 1983 (805
ILCS 5/1.01 et seq.
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2022 IL App (4th) 210599 FILED NO. 4-21-0599 June 9, 2022 Carla Bender IN THE APPELLATE COURT 4th District Appellate Court, IL OF ILLINOIS
FOURTH DISTRICT
LEWIS, YOCKEY & BROWN, INC., ) Appeal from the Plaintiff-Appellant, ) Circuit Court of v. ) McLean County MARK FETZER, KENNETH VERKLER, R. ) No. 16L47 MICHAEL HUNDMAN, and LAURENCE F. ) HUNDMAN, ) Honorable ) Rebecca S. Foley, Defendants-Appellees. ) Judge Presiding.
JUSTICE CAVANAGH delivered the judgment of the court, with opinion. Presiding Justice Knecht and Justice Turner concurred in the judgment and opinion.
OPINION ¶1 The plaintiff, Lewis, Yockey & Brown, Inc. (Lewis), sought to pierce the veil of an
Illinois limited liability company, Hundman Management, LLC. In other words, Lewis sought to
hold the members of the limited liability company—the defendants, Kenneth Verkler, R. Michael
Hundman, and Laurence F. Hundman—personally liable for a money judgment that Lewis had
won against the company. (Whereas owners of a corporation are called “shareholders,” owners of
a limited liability company are called “members” (see 805 ILCS 180/1-5, 35-10 (West 2020)).)
The circuit court of McLean County kept the veil intact, granting motions for summary judgment
in the defendants’ favor. Lewis appeals. In our de novo review (see Arris Group, Inc. v.
CyberPower Systems (USA), Inc., 2021 IL App (1st) 191850, ¶ 30), we affirm the summary
judgments because the record appears to lack evidence that the statutory conditions for holding the members liable have been met (see 805 ILCS 180/10-10(d) (West 2020)). Thus, the circuit court
was correct that, under the material undisputed facts, the defendants were entitled to judgment as
a matter of law. See Arris, 2021 IL App (1st) 191850, ¶ 30.
¶2 I. BACKGROUND
¶3 Hundman Management, LLC, was established in 2003 as a member-managed
limited liability company. (There are two kinds of limited liability company: a “manager-managed
company,” in which the members serve as passive investors, delegating management responsibility
to a manager, and a “member-managed company,” which is defined as “a limited liability company
other than a manager-managed company.” 805 ILCS 180/1-5 (West 2020).)
¶4 On October 20, 2004, the members of Hundman Management, LLC, amended the
company’s operating agreement so as to authorize the chairman of the company, Laurence F.
Hundman, to sign notes, eliminating a requirement that notes also be signed by the secretary of the
company.
¶5 On August 1, 2009, on behalf of Hundman Management, LLC, Laurence F.
Hundman issued a note to Lewis in the amount of $283,711.45—“in return for a loan,” according
to the note. It appears to be undisputed, though, that Lewis never lent Hundman Management,
LLC, any funds. Instead, Lewis had provided civil engineering services to other limited liability
companies managed by Hundman Management, Inc. For a time, Laurence F. Hundman made
payments on the note. Then he stopped making payments, and the note went into default. In a case
separate from this one, Lewis sued on the note and on October 23, 2013, won a judgment against
Hundman Management, LLC, in the amount of $218,925.73.
¶6 In 2016, Lewis brought the present action. In addition to suing Laurence R.
Hundman for fraud, Lewis sought to hold the other members liable for the judgment on the note—
-2- Lewis requested the circuit court to pierce the veil of Hundman Management, LLC. The second
amended complaint named Mark Fetzer, Verkler, R. Michael Hundman, and Laurence F.
Hundman as defendants but sought no relief from Fetzer.
¶7 On November 30, 2017, by the circuit court’s ruling on a motion for dismissal,
Fetzer was eliminated as a defendant, and only three counts of the second amended complaint
remained: counts I, V, and VIII. Count I was a piercing-of-the-veil count directed against Verkler,
R. Michael Hundman, and Laurence F. Hundman. Count V was a count of fraud directed against
Laurence F. Hundman. Count VIII was a count of constructive fraud directed against him.
¶8 On March 8, 2021, the circuit court granted a motion for summary judgment by
Verkler on count I, concluding that, contrary to Lewis’s claim, Hundman Management, LLC, had
been adequately capitalized.
¶9 On June 30, 2021, the circuit court granted a motion for summary judgment by R.
Michael Hundman on count I.
¶ 10 On September 16, 2021, the circuit court granted a motion for summary judgment
by Laurence F. Hundman on counts I, V, and VIII.
¶ 11 On October 15, 2021, Lewis filed an appeal from the three summary judgments.
¶ 12 II. ANALYSIS
¶ 13 On appeal, Lewis makes no argument on counts V and VIII of the second amended
complaint. Therefore, Lewis has forfeited its challenge to the summary judgment in Laurence F.
Hundman’s favor on those counts. See Ill. S. Ct. R. 341(h)(7) (eff. Oct. 1, 2020) (providing that
“[p]oints not argued [in the appellant’s brief] are forfeited”). The only question left in this appeal
is whether the circuit court should have pierced the veil of Hundman Management, LLC.
-3- ¶ 14 Our research reveals only one reported decision in which the reviewing court
affirmed a judgment that pierced the veil of a limited liability company. In Benzakry v. Patel, 2017
IL App (3d) 160162, the circuit court pierced the veil of KAP Family Investments, LLC (KAP),
holding that the sole member of KAP, Kalpita Patel (see id. ¶ 67), was “personally responsible for
the debts of KAP” (id. ¶ 21). Kalpita Patel appealed. Id. ¶ 1. The appellate court held that, for three
reasons, this piercing of the veil was not against the manifest weight of the evidence. Id. ¶ 69.
¶ 15 First, “KAP had inadequate capitalization.” Id. ¶ 66. The appellate court believed
that “[i]t [was] inequitable for shareholders to establish and maintain a corporation that carrie[d]
on business without sufficient assets available to meet its debt.” Id.
¶ 16 Second, “Kalpita was the sole member of KAP, but her testimony indicate[d] that
she was not involved with the activities of KAP.” Id. ¶ 67. One of the factors that courts took into
account in deciding “whether to pierce the corporate veil” was the “nonfunctioning” of officers
who supposedly were in charge of the corporation. Id. ¶ 65.
¶ 17 Third, “the record show[ed] [that] Kalpita [had] commingled funds.” Id. ¶ 68.
“[D]iversion of assets from the corporation by or to a shareholder” was yet another factor that
courts considered “in determining whether to pierce the corporate veil.” Id. ¶ 65.
¶ 18 Because of those three factors, the Benzakry court reasoned, “the jury’s verdict,
piercing KAP’s corporate veil and holding Kalpita liable for KAP’s damages, was not against the
manifest weight of the evidence.” (Emphasis added.) Id. ¶ 69.
¶ 19 We would respectfully suggest that this holding in Benzakry is problematic because
the limited liability company in that case, KAP, had no “corporate veil.” See id. The appellate
court in Benzakry seemed to regard a limited liability company as a type of corporation or as
interchangeable with a corporation. A limited liability company, however, is different from a
-4- corporation. An Illinois corporation is formed under the Business Corporation Act of 1983 (805
ILCS 5/1.01 et seq. (West 2020)), whereas an Illinois limited liability company is formed under
the Limited Liability Company Act (805 ILCS 180/1-1 et seq. (West 2020)). As one might surmise
by comparing the lengths of those two statutes, a limited liability company is a less onerous
business model. The very point of a limited liability company is that it will have greater
“ ‘informality of organization and operation’ ” than a corporation. Sandra D. Mertens, Can You
Pierce the Veil of an Illinois LLC? 103 Ill. B.J. 46, 47 (Jul. 2015) (quoting Revised Uniform
Limited Liability Company Act § 304 cmt. (Unif. Law Comm’n 2006)). Consequently, in the view
of the Uniform Law Commission, “ ‘the failure of a limited liability company to observe any
particular formalities’ ” should not make members or managers of the company liable as failure to
observe corporate formalities could make shareholders of a closely held corporation liable. Id.
(quoting Revised Uniform Limited Liability Company Act § 304(b) (Unif. Law Comm’n 2006)).
¶ 20 Despite this difference in formality between a limited liability company and a
corporation, the Illinois General Assembly, in 1994, passed an amendment making managers and
members of a limited liability company personally liable for the company’s debts “to the extent
that a shareholder of an Illinois business corporation is liable in analogous circumstances under
Illinois law.” 805 ILCS 180/10-10 (West 1994). If section 10-10 of the Limited Liability Company
Act (805 ILCS 180/10-10 (West 2020)) still read that way, Benzakry would be on firmer legal
footing. In 1998, however, the General Assembly revised section 10-10, eliminating the
analogous-liability language. Section 10-10(a) and (d) now reads as follows:
“(a) Except as otherwise provided in subsection (d) of this Section, the
debts, obligations, and liabilities of a limited liability company, whether arising in
contract, tort, or otherwise, are solely the debts, obligations, and liabilities of the
-5- company. A member or manager is not personally liable for a debt, obligation, or
liability of the company solely by reason of being or acting as a member or
manager.
***
(d) All or specified members of a limited liability company are liable in
their capacity as members for all or specified debts, obligations, or liabilities of the
company if:
(1) a provision to that effect is contained in the articles of
organization; and
(2) a member so liable has consented in writing to the adoption of
the provision or to be bound by the provision.” 805 ILCS 180/10-10(a), (d)
(West 2020).
¶ 21 We lack authority to impose any exception upon that statute. See Taylor v. Pekin
Insurance Co., 231 Ill. 2d 390, 395 (2008); Harshman v. DePhillips, 218 Ill. 2d 482, 501 (2006);
Village of Chatham v. County of Sangamon, 216 Ill. 2d 402, 429 (2005). We “will not read
exceptions, conditions, or limitations into a statute which the legislature did not express if the
statutory language is clear and unambiguous.” Harshman, 218 Ill. 2d at 501. The language of
section 10-10(a) and (d) of the Limited Liability Company Act is clear and unambiguous. Except
as section 10-10(d) (805 ILCS 180/10-10(d) (West 2020)) provides, the debts of a limited liability
company are solely the debts of the company instead of the debts of the company’s managers and
members. Id. § 10-10(a). Under section 10-10(d), the company’s debt is the debt of a member only
if both of the following conditions are met: (1) the operating agreement provides that the member
is personally liable for the company debt and (2) the member has consented in writing to the
-6- adoption of that provision or has agreed to be bound by it. Id. § 10-10(d). The record in this case
appears to lack evidence that the operating agreement of Hundman Management, LLC, provided
for the personal liability of members for the company’s debts, let alone that the defendants agreed
in writing to the adoption of such a provision or to be bound by it. We decline to effectively amend
section 10-10 (id. § 10-10) by imposing upon it an undercapitalization exception or any other
exception that the legislature did not express.
¶ 22 Admittedly, in granting the motions for summary judgment on count I of the second
amended complaint, the circuit court did not rely on section 10-10. Even so, “[t]he appellate court
reviews the judgment of the circuit court and not the reasons given for that judgment.” Arris, 2021
IL App (1st) 191850, ¶ 30.
¶ 23 III. CONCLUSION
¶ 24 Because the conditions in section 10-10(d) of the Limited Liability Company Act
(805 ILCS 180/10-10(d) (West 2020)) are unfulfilled, we affirm the circuit court’s judgment.
¶ 25 Affirmed.
-7-