DISCUSSION
A movant is entitled to summary judgment under Fed. R. Civ. P. 56 when the pleadings,
depositions, answers to interrogatories, and admissions on file, together with any affidavits, show
that there is no genuine issue of material fact and the movant is entitled to judgment as a matter

of law. See Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986);

Unterreiner v. Volkswagen of America, Inc., 8 F.3d 1206, 1209 (7th Cir. 1993). Once a moving
party has met its burden, the nonmoving party must go beyond the pleadings and set forth
specific facts showing there is a genuine issue for trial. See Fed. R. Civ. P. 56(e); Becker v.

Tenenbaum-Hill Assoc., Inc., 914 F.2d 107, 110 (7th Cir. 1990). The nonmoving party “must do

more than simply show that there is some metaphysical doubt as to the material facts.”

Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). “The mere

existence of a scintilla of evidence in support of the [nonmoving party’s] position will be
insufficient; there must be evidence on which the (finder of fact]? could reasonably find for the

[nonmoving party].” Anderson v. Liberty Lobby, Inc., 477 U.S, 242, 252 (1986).

Plaintiffs maintain that they are entitled to summary judgment on the issue of whether
Mozal disregarded the corporate form and treated Paragon’s assets as his own, rendering him
liable for the moneys owed to plaintiffs by Paragon. Under Illinois law, a corporation is a legal
entity separate and distinct from its shareholders, directors, and officers and, generally from other

corporations with which it may be affiliated. Van Dom Co. v. Future Chemical and Oil Corp.,

“Whether to pierce the corporate veil under Illinois law is, according to federal
procedural law, a question of equity.” International Financial Services Corp. v. Chromas
Technologies Canada, Inc., 356 F.3d 731, 740 (7" Cir. 2004). Therefore, plaintiffs have no
Seventh Amendment right to a jury trial on that question. Id.



Cognizant of Paragon’s debt to the Funds, defendant persisted in converting Paragon’s
assets for his personal use through August 2002, well after Paragon ceased working on projects.
After intentionally diverting funds from Paragon to cover his personal experises, including
payments on his and his wife’s luxury cars, defendant cannot now use Paragon as a shield to

avoid liability. See Sea-Land Services. Inc. v. Pepper Source, 993 F.2d 1309, 1312 (7" Cir.

1993) (“Since Marchese was enriched unjustly by his intentional manipulation and diversion of
funds from his corporate ehtities, to allow him to use these same entities to avoid liability ‘would

oe ii “if
’) (quoting Gromer, Witteristrom & Meyer, P.C. v. Strom, 140

aon

be to sanction an injustice.

Il App.3d 349, 354 (Ill. App. 2d Dist. 1986)). Accordingly, the court coneludes that piercing the

; €
corporate veil is warranted in the instant case and grants plaintiffs’ motion for summary

judgment.
CONCLUSION

For the reasons stated herein, plaintiffs’ motion for summary judgment is granted.
Plaintiffs are directed to prepare and submit by the close of business this date a judgment order
reflecting the amount currently due. Any petition for attorneys’ fees shall be governed by Local

Rule 54.3.

ENTER: March 24, 2004 Fe 7

~
Robert W. Gettleman
United States District Judge



$498,757.07 “due from Shareholder.” An examination of Mozal’s deposition testimony reveals
that these payments from Paragon’s corporate accounts - which included cash advances as well
as payments to a host of payees, including Honda Financial Corp., US Bank Home Mortgage,
John Mozal personally, and St. Charles Rec Center, among others - were intended to cover
Mozal’s personal expenses, such as Mozal’s wife’s car payments and the financing of his
condominium in Florida.

Mozal contends that these payments were actually a repayment by Paragon of debts owed
to him and his wife, Linda Morgan. According to Mozal, he and Morgan loaned approximately
$140,000 to Paragon, and Paragon repaid this debt through payments of assessments on the
condominium and car payments. As evidence of these loans, Mozal submitted an affidavit and
two “cash loan” registers chronicling his and Morgan’s loans to Paragon. Mozal further
maintains that Morgan made an additional $75,000 in loans to Paragon; in support of that
contention, Mozal attached handwritten exhibits chronicling Morgan’s contributions, as well as
copies of some of Morgan’s credit card statements.

Mozal also contends that he and his wife routinely used their personal credit cards for
business purchases on behalf of Paragon, and that numerous payments to their credit card
company by Paragon were intended to reimburse Mozal and his wife for those purchases. As

evidence of these credit card transactions made on behalf of Paragon, Mozal references the same

copies of Morgan’s credit card statements mentioned above.

7As plaintiffs point out, defendant fails to specify which purchases on those credit card
statements were for Paragon and which were personal.

3


753 F.2d 565, 569 (7" Cir. 1985) (citations omitted). A corporate identity may be disregarded,
and the corporate veil pierced, however, if, (1) there is such unity of interest and ownership that
the separate personalities of the corporation and the individual no longer exist, and (2)
"adherence to the fiction of separate corporate existence would sanction a fraud or promote
injustice." Id. at 569-570. To determine whether a unity of interest exists, Illinois law looks to
the following four factors: (1) the failure to maintain adequate corporate records or to comply
with corporate formalities; (2) the commingling of funds or assets; (3) under-capitalization; and

(4) treating the assets of the corporation as the individual’s own. Id, at 570.

In the instant case, defendant essentially acknowledges the commingling of corporate and
personal assets by conceding that his condominium payments and Morgan’s car payments were
made from corporate accounts. Defendant defends these transactions by asserting that the

payments were reimbursement for loans made to Paragon by defendant and his wife.

Assuming arguendo the admissibility of the cash loan registers (a highly dubious
assumption given defendant’s failure to establish that they fall within the business records
exception under Fed. R. Evid. 803(6) and his failure to provide supporting documentation), the
court concludes that Mozal disregarded the corporate veil and no reasonable factfinder, including
this court, could conclude otherwise. Even accepting defendant’ s representation that he and

t
Morgan loaned $215,000‘ to Paragon, the record reflects that Paragon made more than $498,000

‘Defendant’s representation that he routinely used his personal credit card for business
purchases does not support the conclusion that he and his wife lent Paragon sums in excess of
$215,000. The credit card statements that purportedly establish the “additional” loans are the
same credit card statements used to establish part of the $215,000 debt (in particular, the $75,000
allegedly lent to Paragon by defendant and Morgan after their other $80,000 and $60,000 loans).

5


’

Minute Order Form (06/97)

United States District Court, Northern District of Ilinois

N: f Assign e Sitting Judge if Other
vor Magistrate dude | Obert W. Gettleman — | “yen ssimed sudge
CASE NUMBER 01 C 9386 DATE March 24, 2004
CASE Laborers Pension v___ Paragon Paving, Inc.
TITLE

of the motion being presented.}

[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

MOTION:

DOCKET ENTRY:

(1) Oo Filed motion of [ use listing in “Motion” box above.]

(2) Oo Brief in support of motion due

(3) a Answer brief to motion due____. Reply to answer briefdue___.

(4) oO Hearing

(5) im) Status hearing

(6) Q Pretrial conference[held/continued to] [set for/re-set for]on___setfor___—at__—
7) Qo Trial[set for/re-set forlon___——sat__—

(8) o {Bench/Jury trial) [Hearing] held/continued to__at

(9) im This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OOPRCP4(m) OGeneral Rule 21 OFRCP41(a\(1) 0 FRCP41(a)(2).

ao) {Other docket entry]
Memorandum opinion and order entered.
Accordingly, plaintiffs’ motion for summary judgment is granted.

(dl) @ [For further detail see order attached to the original minute order.]

No notices required, advised in open court.

No notices required.
° ea umber of notices

X | Notices mailed by judge’s staff. MAR 26 2004
Notified counsel by telephone. date docketed
Docketing to mail notices.

Mail AO 450 form. dockkind teptyiNtal

Copy to judge/magistrate judge.

date mailed notice
courtroom

GDS deputy's
initials

Date/time received in ;
seul Clerk's Office mailing deputy initials

ei


in payments “due from Shareholder” in its last two fiscal years alone. Moreover, even if these
payments were somehow justified as the result of some agreement between Paragon and
defendant to repay monies owed to him and his wife (and then some), the fact remains that
Paragon failed to memorialize the terms of any such agreement in writing and maintain adequate

corporate records.

The interest-free, undocumented loans made by Paragon to Litwin and Doyle fall into the
same category. The terms of these loans, or lack thereof, were not reduced to writing or recorded
in any other meaningful manner. These failures to keep adequately detailed records of Paragon’s
finances support the court’s conclusion that there is a unity of interest that warrants the piercing

of the corporate veil in the instant case. See Chicago District Council of Carpenters Pension

Fund v. Ceiling Wal! Systems, Inc., 1999 WL 47078, at *9 (N.D.IIl. Jan. 20, 1999)

(characterizing failure to document loans as a failure to observe corporate formalities).

The court further concludes that plaintiffs have satisfied the second prong of the corporate
veil-piercing analysis, that adherence to the fiction of a separate corporate existence would
sanction a fraud or promote an injustice. Defendant continuously converted corporate assets for
his own personal use even after plaintiffs filed the instant suit. When asked at his deposition why
he converted assets of the corporation for his own use rather than pay his obligations to the
plaintiff Funds, defendant responded, “Well, I figured I might as well take my money. My
money was outstanding a lot longer than the union’s.” As noted above, however, Paragon made
payments on defendant’s behalf totaling more than twice the amount allegedly owed to defendant

and his wife.


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

LABORERS’ PENSION FUND and LABORERS’ )
WELFARE FUND OF THE HEALTH AND )
WELFARE DEPARTMENT OF THE
CONSTRUCTION AND GENERAL LABORERS’
DISTRICT COUNCIL OF CHICAGO AND
VICINITY, and JAMES S. JORGENSEN,
Administrator of the Funds,

Plaintiffs,

)
)
)
)
)
)
) No. 01C 9386
v. )
) Judge Robert W. Gettleman
PARAGON PAVING, INC., an involuntarily )
dissolved Illinois corporation, and JOHN W. )
MOZAL, individually, )
)
)

Defendants.

MEMORANDUM OPINION AND ORDER

Plaintiffs Laborers’ Pension Fund and Laborers’ Welfare Fund for the Hgalth and Welfare... ~**

BS yi”

Department of the Construction and General Laborers’ District Council of Chicago and Vicinity
and James Jorgensen (collectively, the “Funds”), filed the instant suit against defendants Paragon
Paving, Inc. (“Paragon”) and its President and sole shareholder, John Mozal, seeking monies
owed pursuant to a collective bargaining agreement. Defendant Paragon, which was
involuntarily dissolved by the Illinois Secretary of State on February 1, 2003, is in default: its
attommey was granted leave to withdraw on May 13, 2003, and the company failed to obtain new
representation. Defendant Mozal does not dispute that Paragon owes the Funds $17,624.88 in
unpaid contributions, dues, interest, liquidated damages and audit costs for the period of January

22, 2001, through September 30, 2002.


Plaintiffs have moved for summary judgment against Mozal, arguing that he disregarded
the corporate form and thus is personally responsible for Paragon’s debt to the Funds, as well as
attorneys’ fees. For the reasons stated below, plaintiffs’ motion for summary judgment is

granted.

FACTS'

Paragon was incorporated in 1986 and performed asphalt paving work and sewer
reconstruction. Paragon ceased working on projects in January 2002, and was dissolved by the
Illinois Secretary of State in February 2003.

The record presented by the parties in connection with plaintiffs’ motion for summary
judgment reflects that prior to its dissolution, numerous individuals received loans from Paragon
without any formal documentation and without any terms of repayment or interest. For example,
Dennis Doyle, who was a joint shareholder of Paragon with Mozal until June 2000, received
approximately $159,384 in loans from Paragon without any formal documentation and without
any terms of repayment or interest charged. When Doyle gave up his interest in Paragon to

’
Mozal, he received, among other things, forgiveness of that $159,384 debt. Similarly, Paragon
loaned $150,000, interest-free, to its attorney, Martin Litwin, without any formal documentation
regarding the terms of that loan. As of the date of the instant motion, the Litwin loan also has not
been repaid.

_The Transaction Detail by Account of Paragon Paving, Inc. for the fiscal years September

2000 through August 2001 and September 2001 through August 2002, lists payments totaling

'Unless otherwise noted, the following facts, taken from the parties’ L. R. 56.1
Statements and attached exhibits, are not in dispute.

2