Benzakry v. Patel
77 N.E.3d 1116
Ill. App. Ct.2017Background
- In 2007 Emil Benzakry (through Emil & Son, LLC) bought a Rock Falls, IL gas station from KAP Family Investments, LLC (owned by Kalpita; managed by Paresh) after seeing a LoopNet advertisement and receiving representations about tenant (Singh & Singh, LLC) strength and projected sales; purchase included an addendum requiring a personal guaranty and $12,000 security deposit.
- Shortly after closing, the tenant stopped paying rent, the station closed, and Benzakry suffered lost rental income and later damages from the business failure and related events; Benzakry sued for breach, common-law fraud, Consumer Fraud Act violations, and sought to pierce KAP’s corporate veil to hold Kalpita personally liable.
- At trial the jury found for plaintiffs on common-law fraud and pierced KAP’s veil, awarding $700,000 and holding Kalpita personally liable; defendants appealed and plaintiffs cross‑appealed on Consumer Fraud Act and pleading issues.
- Key contested evidentiary and legal issues included whether veil piercing must be decided by a court or could be submitted to a jury, admissibility of computer-generated bank records under the business‑records rule, proximate cause and justifiable reliance for fraud, and whether Consumer Fraud Act relief and amendment to pleadings (principal‑agent) were proper.
- The appellate court affirmed in part, reversed in part, entered judgment for plaintiffs on the Consumer Fraud Act claims, found the bank‑record evidence admission harmless, sustained the fraud and veil‑piercing verdicts (including against Kalpita), and remanded for recalculation of damages and attorney fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether piercing the corporate veil is for jury or court | Plaintiffs: jury may decide veil piercing; trial court properly submitted it | Defendants: veil piercing is equitable and must be decided by the court | Court: veil piercing is equitable but trial court may, in its discretion under 735 ILCS 5/2‑1111, submit the issue to a jury; here submission was proper |
| Admissibility of computer-generated bank records (business-records rule) | Plaintiffs: bank records show commingling and support veil‑piercing; admitted at trial | Defendants: inadequate foundation under Ill. R. Evid. 803(6) and Sup. Ct. R. 236; should be excluded | Court: admission lacked proper foundation (error) but error was harmless because testimony was cumulative; no reversal |
| Fraud—proximate cause and justifiable reliance on Paresh’s misrepresentations | Plaintiffs: Paresh’s false statements about tenant and sales induced purchase and caused lost rent | Defendants: no proof that Paresh’s misrepresentations proximately caused damages or were justifiably relied upon; merger/nonreliance clause bars reliance | Court: evidence supported proximate cause and justifiable reliance; no nonreliance language in agreement; fraud verdict not against manifest weight of evidence |
| Consumer Fraud Act standing and ability to amend pleadings to conform to proof (principal‑agent) | Plaintiffs: CFA claim available to real‑estate purchaser; 1990 amendment removes public‑injury requirement; trial court should permit amendment to add principal‑agent claim against Kalpita | Defendants: CFA requires market‑wide trade practice/public injury and plaintiffs aren’t consumers or dealing in merchandise; amendment prejudicial/time‑barred | Court: plaintiffs may sue under CFA without proving public injury here; judgment granted for plaintiffs on CFA counts; trial court abused discretion in denying motion to conform pleadings and judgment granted on principal‑agent claim; remanded for damages and attorney‑fee determination |
Key Cases Cited
- FMC Finance Corp. v. Murphree, 632 F.2d 413 (5th Cir. 1980) (federal case holding veil‑piercing jury issue under diversity practice)
- International Fin. Servs. Corp. v. Chromas Techs. Canada, Inc., 356 F.3d 731 (7th Cir. 2004) (Seventh Circuit treating Illinois veil‑piercing as equitable, for the court)
- Riley v. Jones Bros. Constr. Co., 198 Ill. App. 3d 822 (Ill. App. Ct.) (standards for admitting computer‑generated business records)
- Fontana v. TLD Builders, Inc., 362 Ill. App. 3d 491 (Ill. App. Ct.) (piercing corporate veil is an equitable remedy)
- Lazarus v. Village of Northbrook, 31 Ill. 2d 146 (Ill.) (no constitutional right to jury trial in equity)
- Benson v. Stafford, 407 Ill. App. 3d 902 (Ill. App. Ct.) (what constitutes a nonreliance clause in a contract)