Opinion ID: 1203071
Heading Depth: 1
Heading Rank: 2

Heading: Chart 1

Text: Turning to the series of transactions at the heart of the case, the first occurred on April 24, when King & Larsen and Lord & Essex executed an Assignment of Collateral and Satisfaction of Debt. In this agreement, King & Larsen assigned all of its assets to Lord & Essex, including $1.2 million in receivables, $80,000 in work in progress, $61,000 worth of shop materials, and perhaps $593,000 [4] worth of vehicles and heavy equipment. In exchange, Lord & Essex released King & Larsen from debts of about $423,000 and assumed $1.1 million in accounts payable and $326,000 in other notes owed by King & Larsen. As even the defendants concede, [n]otably, [Lord & Essex] declined to assume King & Larsen's tax liabilities and King & Larsen's obligations to the funds. Those liabilities remained in King & Larsen's otherwise empty shell. King & Larsen dissolved on July 2, 2001. The second set of transactions also took place on April 24. Lord & Essex borrowed from Lay-Com to pay off the outstanding debts it had acquired from King & Larsen, observing corporate formalities when it did so (the companies executed security agreements and promissory notes for the amounts borrowed). Lord & Essex and Lay-Com then executed their own assignment agreement, whereby Lord & Essex satisfied its nascent obligations to Lay-Com by transferring King & Larsen's assets on to Lay-Com. Again the companies observed corporate formalities. Both sides agree that Lord & Essex was merely a conduit between King & Larsen and Lay-Com, which had funded Lord & Essex's acquisition from King & Larsen in the first place. On May 1, the final transaction occurred. Lay-Com and M.A. King entered a Master Lease and Assignment Agreement, in which Lay-Com leased to M.A. King the vehicles and equipment formerly owned by King & Larsen (these are the assets the defendants valued at $593,000, supra n. 4) and assigned to M.A. King all of King & Larsen's other assets and liabilities. The assignment included the $1.2 million in King & Larsen receivables, the $80,000 in work in progress and the $61,000 in shop materials, as well as the $1.1 million in accounts payable and the $326,000 in other notes. In exchange, M.A. King agreed to make monthly payments of $17,805.24 to Lay-Com starting June 1 and continuing through May 1, 2008. M.A. King also agreed to pay an operations fee of 50% of its profits every other month starting July 1, with 15% interest payable on unpaid balances. The Master Lease and Assignment Agreement also contained a third-party distribution restriction (also incorporated in Mike King's employment contract), prohibiting M.A. King from making any payments (except taxes and payroll) to third parties greater than $2,500 without Lay-Com's consent. M.A. King never made any of the payments required under the Master Lease and Assignment Agreement, nor did it make payments on the April 1 $250,000 loan from Lay-Com. Lay-Com nonetheless continued to loan M.A. King money. Between April and October 2001, Lay-Com made another $268,000 in payments to M.A. King and its creditors, all subject to Mike King's guaranty and the security agreement applicable to the April 1 loan. The Lay Trust also issued five checks to M.A. King between April and August 2001, totaling $277,000. There is no corresponding note or other documentation covering these Lay Trust payments to M.A. King in the record. (The Lay Trust also issued a check to King & Larsen in October 1999 for $40,000.) As further evidence of the various companies' interrelatedness, Lord & Essex made two payments in August for prior King & Larsen servicesdue to M.A. King under the Master Lease and Assignment Agreementnot to M.A. King but instead to the Lay Trust. Lay-Com also made at least one payment to M.A. King for work performed for Lord & Essex. Throughout the summer of 2001, M.A. King operated in King & Larsen's stead, picking up its contracts and operating out of the same yard and office, using the same fax and telephone number, the same employees, the same equipment. That summer Mike King also began making payments to the funds for King & Larsen's past-due obligations. (Recall that he had personally guaranteed an installment note for unpaid contributions in February 2001. See supra, n. 1.) But King made those payments, totaling about $100,000, from M.A. King's accounts, not from his personal account or from any account of the defunct King & Larsen. Moreover, King paid only a fraction of the amount King & Larsen owed the funds at the time. In August, the funds sued King & Larsen, M.A. King and Mike King for the outstanding balance. In September, Mike King entered a new collective bargaining agreement on M.A. King's behalf, incurring new obligations to the funds. The Popps viewed Mike King's payments to the funds and the new union contract as violations of the third-party distribution restriction in the Master Lease and Assignment Agreement. As a result, the Popps resigned from M.A. King's board, and Lay-Com filed its own suit against Mike King and M.A. King, which led to a default judgment that apparently remains unsatisfied. M.A. King continued working for Lord & Essex until December 2001. M.A. King was dissolved in early 2002. The funds' lawsuit resulted in two more default judgments, against King & Larsen, M.A. King and Mike King, and the funds amended their complaint to add the current defendants. (The funds also added Gail and Doralee King as defendants, but they were voluntarily dismissed after the district court ruled on the parties' summary judgment motions.) On cross-motions for summary judgment, the district court found Lay-Com, Lord & Essex and the Lay Trust liable on a veil-piercing theory for $2,487,723.62, the amount that the district court found that M.A. King and King & Larsen collectively owed the funds. The district court found that Popp Jr. was not individually liable and dismissed him from the suit. This appeal followed.