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Painters District Council No. 2 v. Sustainable Construction Group, LLC

United States District Court, E.D. Missouri, Eastern Division

August 3, 2016

PAINTERS DISTRICT COUNCIL NO. 2, et al., Plaintiffs,
v.
SUSTAINABLE CONSTRUCTION, GROUP, LLC., et al., Defendant.

          MEMORANDUM AND ORDER

          E. RICHARD WEBBER SENIOR UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on Plaintiffs’ Motion for Creditor’s Bill in Equity and to Pierce the Corporate Veil. [ECF No. 37].

         I. BACKGROUND

         Plaintiffs filed a Motion for Creditor’s Bill in Equity and to Pierce the Corporate Veil on May 6, 2016. [ECF No. 37]. On October 8, 2013, this Court entered a Consent Judgment against Defendants Sustainable Construction Group, LLC (“Sustainable Construction”) and John O’Leary, in the amount of $83, 143.00 for delinquent contributions, liquidated damages, interest, attorney’s fees, and costs owed to Plaintiffs under collective bargaining agreements as a result of Plaintiffs’ lawsuit brought under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132, and the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185. [ECF No. 32]. To date, Plaintiffs have only collected $17, 357.97, leaving $65, 785.03 of the Consent Judgment amount unpaid. [ECF No. 37-1, p. 1]. Plaintiffs move the Court for equitable relief in the form of a creditor’s bill, to allow Plaintiffs to satisfy the judgment entered against Sustainable Construction. [ECF No. 37]. Plaintiffs seek to pierce the corporate veil of Sustainable Construction and to permit Plaintiffs to satisfy the judgment against its alleged alter ego, Sustainable Contracting Group, Inc. (“Sustainable Contracting”). [ECF No. 37]. Defendants did not file a response to the motion and Plaintiffs’ motion is unopposed.

         The two corporations hold many similarities related to their business. Sustainable Construction was operating as a construction company from approximately 2007 until 2010. [ECF No. 37-8, pp. 9-10]. Originally, Sustainable Construction was equally owned by four members; George Mathes (“Mathes”), John O’Leary (“O’Leary”), John Nighswander, and James Butler. Id. at p. 14. In 2009, Mathes and O’Leary bought the other two members out, and retained equal membership of Sustainable Construction. Id. Also in 2009, Sustainable Construction stopped accepting new contracts and worked to complete all outstanding contracts. Id. at p. 26. Towards the end of 2009, while Sustainable Construction was completing their final contracts, Sustainable Contracting was formed with Mathes and O’Leary as principal owners. Id. at p. 22. By early 2010, Sustainable Contracting assumed all functional aspects of Sustainable Construction, including leasing the equipment owned by Sustainable Construction. Id. at pp. 22, 26. Along with overtaking the functional aspects of Sustainable Construction, Sustainable Contracting also took over Sustainable Construction’s customer base. Id. at p. 37. Sustainable Contracting “picked up where Sustainable Construction left off, ” and Sustainable Construction has not performed any work since roughly the end of 2009. Id. at p. 38.

         Sustainable Construction primarily performed infrastructure repair using high-strength composites, did corrosion protection work, and general industrial fittings. Id. at p. 33. Sustainable Contracting primarily performs structural repair with the use of high-strength composites. Id. Both companies have employed the same employees in the same positions. Sustainable Construction initially employed Tim Irvin, the director of operations, Frank Bolin, the safety director, and Bob Durham, quality control, and when Sustainable Contracting took over Sustainable Construction’s operations, Tim Irvin, Frank Bolin, and Bob Durham retained their same position at Sustainable Contracting. Id. at p. 28. Sustainable Construction owns and leases a building located at 115 2nd Avenue, Edwardsville, IL 62025, to Sustainable Contracting, without a written lease. Id. at pp. 15-16. However, Sustainable Contracting continually pays rent to Sustainable Construction for their occupation of the building. Id. at pp. 15-17, 19.

         Sustainable Construction stopped all operations on January 1, 2010, transferring of all functions to Sustainable Contracting and the cessation of payroll from Sustainable Construction. Id. at pp. 25-26. Sustainable Construction had ceased all business operations over one year prior to signing the consent judgment with Plaintiffs on February 28, 2013. [ECF No. 30, p. 1]. On or about February 28, 2013, Sustainable Construction entered into a promissory note and settlement agreement with Plaintiffs in the amount of $83, 143.00. [ECF No. 37-7, p.1]. Sustainable Construction ceased performance under the promissory note and Plaintiffs moved for this Court to enter a consent judgment for the remainder of the promissory note. [ECF No. 31]. This Court entered the Consent Judgment against Sustainable Construction and O’Leary for the amount of $65, 785.03, on October 8, 2013. [ECF No. 32]. Plaintiffs registered the judgment in the U.S. District Court for the Southern District of Illinois, on March 4, 2015. [ECF No. 37-7, p. 2]. Plaintiffs filed a garnishment on March 10, 2015, with Scott Credit Union seeking any monies held in a bank account for Sustainable Construction and/or O’Leary. Id. On April 1, 2015, Scott Credit Union filed its answers to the garnishment interrogatories, thereby informing Plaintiffs no monies were contained in any accounts owned by Sustainable Construction or O’Leary. Id.

         On August 27, 2015, Plaintiffs filed a garnishment with Sustainable Contracting to recover the rental payments it was paying to Sustainable Construction. Id. Plaintiffs never received a certified mail receipt or any responses to the garnishment interrogatories from Sustainable Contracting. Id. On October 19, 2015, Plaintiffs filed another garnishment with Sustainable Contracting in an attempt to recover the rental payments made to Sustainable Construction. Id. at p. 3. The return date for the garnishment interrogatories was November 18, 2015, and the court did not grant Plaintiffs’ Motion to Appoint a Private Process Server until December 21, 2015, 33 days after the return date. Id. On November 30, 2015, Plaintiffs filed a third garnishment with Sustainable Contracting to recover the rental payments being paid to Sustainable Construction. Id. Sustainable Construction has no accounts receivable, no deposit accounts with any banks, and very few assets. [ECF 37-8, pp. 16-17]. O’Leary has a bank account with no balance and the only assets he possesses are personal in nature and not affiliated with Sustainable Construction. [ECF No. 37-9, pp. 9, 12].

         II. STANDARD

         In the absence of a controlling federal statute, the district court has the same authority to aid judgment creditors in supplementary proceedings as is provided to state courts under local law. United States ex rel. Goldman v. Meredith, 596 F.2d 1353, 1357 (8th Cir. 1979). The Court has supplemental jurisdiction, under 28 U.S.C. § 1367, regarding a motion for a creditor’s bill in equity which relates to an underlying ERISA delinquency. Greater St. Louis Construction Laborers Welfare Fund v. Sunrise Const., Inc., 2009 WL 73664, at *1 (E.D. Mo. 2009). The remedy of a creditor’s bill in equity is available under Missouri law. H.H. Robertson Co., Cupples Products Div. v. V.S. DiCarlo General Contractors, Inc., 994 F.2d 476, 477 (8th Cir. 1993).

         Issuance of a creditor’s bill in equity is an equitable remedy “available to a creditor who seeks to enforce the payment of debts out of assets which cannot be reached by traditional means of execution on a judgment established in a suit at law.” Shockley v. Harry Sander Realty Co., 771 S.W.2d 922, 924 (Mo.Ct.App. 1989) (citing Dobbs, Handbook on the Law of Remedies § 1.3 at 11 (1973); General Grocer Co. v. Ahlemeier, 627 S.W.2d 61, 64 (Mo. App. 1981); Publicity Building Realty Corp. v. Thomann, 183 S.W.2d 69, 72 (Mo. 1944)). A creditor’s bill in equity may be brought: (1) to set aside a fraudulent transfer; or (2) to discover assets the judgment debtor has hidden. Id. A creditor must exhaust her legal remedies before proceeding in equity to pierce the corporate veil. Buckley v. Maupin, 125 S.W.2d 820, 823 (Mo. 1939). A return of nulla bona, upon execution, is evidence of the exhaustion of remedies, but action on the execution may be dispensed where the judgment debtor has been shown to be insolvent. Id. Only creditors who have a judgment on the property, have the ability to maintain an action to set aside a fraudulent conveyance in order to receive the monies owed to them through their judgment. Buckley, 125 S.W.2d at 823-24. The alter ego corporation against whom the creditor’s bill is brought need not have been parties to, or even have had formal notice of earlier proceedings. H.H. Robertson, 994 F.2d at 476.

         III. DISCUSSION

         Plaintiffs argue they are entitled to a creditor’s bill in equity in order to satisfy the judgment against Sustainable Construction and John O’Leary from the assets of Sustainable Contracting. [ECF No. 37-1, p. 15]. Plaintiffs also contend the corporate veil of Sustainable Construction must be pierced because it is controlled by Sustainable Contracting and the formation of Sustainable Contracting has prevented Plaintiffs from collecting their debts. Id.

         In Missouri, the creditor’s bill enables a judgment creditor to trace the value of the goods and services rendered to an empty-shell corporation to the parties behind such corporation who have received and benefited from the property or services. Shockley, 771 S.W.2d at 925. Through a creditor’s bill in equity, a judgment creditor can pierce the corporate veil of its debtor and satisfy the judgment from the assets of the real parties in interest. Fleming Companies, Inc. v. Rich, 978 F.Supp. 1281, 1294 (E.D. Mo. 1997). The prerequisites to obtaining a creditor’s bill are the existence of a judgment, the issuance of execution against said ...


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