A.G. Cullen Construction, Inc. v. Burnham Partners, LLC
29 N.E.3d 579
Ill. App. Ct.2015Background
- Cullen contracted Westgate for a Pennsylvania warehouse project; arbitration awarded Cullen roughly $457,416.37, later reduced to judgment, which Westgate could not satisfy due to asset disbursements.
- Westgate’s liquidation followed a sale proceeds distribution to S&T Bank, Northern Trust, Burnham’s $400,000 development fee, and Halpins’ loan reimbursements, depleting assets payable to Cullen.
- circuit court dismissed Cullen’s claims after bench trial, declining to pierce the corporate veil, rejecting fiduciary duty and UFTA claims, and finding no privity under Pennsylvania Act.
- Cullen requested adverse inference for missing corporate records; many records were claimed lost in moves; the court declined the adverse inference.
- Westgate filed bankruptcy; Cullen’s claims proceeded against Burnham, Halpins, and Westgate’s insiders in Cook County court; on appeal Cullen challenged fraudulent transfer, veil piercing, and fiduciary duty theories.
- Appellate court reversed, holding fraudulent transfers violated the UFTA, pierced the corporate veil, and held fiduciary duty owed; remanded to permit Cullen to satisfy its Pennsylvania judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraudulent conveyance under UFTA section 5 | Cullen argues transfers were fraudulent to hinder creditors | Burnham/Halpin contend transfers were lawful and within corporate structure | UFTA violated; transfers fraudulent; remanded for judgment toward Cullen |
| Piercing the corporate veil | Westgate and Burns were alter egos; veil should be pierced | Westgate and Burnham were separate entities with proper records | Veil pierced; Burnham and Halpins held personally liable |
| Fiduciary duty upon insolvency | Halpin owed fiduciary duty as Westgate’s manager to creditors | No fiduciary duty owed absent piercing or other theory | Duty recognized; breached through insider transfers; supports liability |
| Delaware LLC Act 18-804 applicability | Distributions improper under Delaware LLC Act when winding up | Act not violated; distributions allowed to creditors | Not necessary to address because UFTA violation established; remand |
Key Cases Cited
- Northwestern Memorial Hospital v. Sharif, 2014 IL App (1st) 133008 (Ill. App. 1st Dist. 2014) (illustrates missing documentation and lack of objective support for transfers)
- Apollo Real Estate Investment Fund, IV, L.P. v. Gelber, 403 Ill. App. 3d 179 (Ill. App. 2010) (badges of fraud support inference of fraudulent transfer)
- General Electric Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074 (7th Cir. 1997) (test for fraudulent transfer and value consideration)
- Staes & Scallan, P.C. v. Orlich, 2012 IL App (1st) 112974 (Ill. App. 1st Dist. 2012) (facts reviewed under manifest weight standard; badges of fraud)