Perhaps the biggest change in legal philosopy over the past 50 years could be summed up in that the law has changed from a world of "caveat emptor" to one of "I am my brother's keeper".
There is no area of law where this shift can be demonstrated better than in the field of corporate law. Fifty to one hundred years ago, the likes of Conrad Black and Kenneth Lay would have roamed free like the captains of industry that preceded them. Today, the law favors consumer protectionism over the technical protection of corporate officers, directors and shareholders.
Corporations and other limited liability entities like limited liability companies and limited partnerships are formed by entrepreneurs in an effort to limit the entity's owner's risk. A properly formed and run entity should be able to insulate its owners, directors and agents from personal liability for the actions of the entity.
In certain cases, however, a court may still reach through the liability shield and reach the individuals behind a limited liability entity's actions. The concept, known as "piercing the coprorate veil", is one in which a plaintiff is able to break through the limited liability protection of the entity to receive relief from a shareholder, officer or other agent of that entity.
Illinois employs a two-prong for piercing the corporate veil: (1) there must be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist; and (2) circumstances must exist such that adherence to the fiction of a separate corporate existence would sanction a fraud, promote injustice, or promote inequitable consequences. People ex rel. Scott v. Pintozzi, 50 Ill. 2d 115, 128- 29 (1971).
So, generally, if it can be demonstrated that a person exercises control over a corporation such that the person running the corporation is using the corporation as an alter-ego in a situation where some person is harmed, then the corporation liability shield can be broken and the person in charge can be personally responsible for the corporate action.
The Illinois courts have indicated that a non-shareholder of an Illinois corporation can be found personall liable for the actions of and damages done by the corporation. In the case, Fontana v. TLD Builders, the Illinois courts found a non-shareholder personally liable for the actions of the corporation when it was demonstrated that the corporate officer and not his shareholding spouse was found to have a unity of interest with the corporation and the building contractor corporation had caused over one million dollars in damage to a customer. The corporation was not properly capitalized and failed to follow many of the typical corporate formalities.
Corporations and limited liability entities need to take a long hard look at how they conuct operations. Directors and shareholders need to understand and document what they are doing. In all cases, gross negligence is going to be subject to liability. However, if a corporation wants its liability protection to have real meaning, then the corporation will need to adhere closely to the corporate formalities in a material way.
Friday, August 3, 2007
Wednesday, July 18, 2007
Ever hear of the Chicago Residential Landlord Tenant Ordinance?
These days, I am finding more and more work related to the Chicago Residential Landlord Tenant Ordinance (CRLTO) from landlords who have run afoul of the provisions of the Ordinance without knowing that the ordinance exists!
Nearly all of these landlords have called me for reasons not related to their own issues with the ordinance. Instead, these issues are discovered during the course of discussions about tenant evictions, lease reviews or other "bad tenant" related issues and worse yet, when the issue comes up in regard to a real estate transaction!
Most of the folks I speak with are disappointed (and sometimes disbelieving) when I begin to explain the ordinance requirements and the penalties for failure to comply to them. The CRLTO governs most residential real estate tenancies in the City of Chicago (there are a few exceptions to the ordinance, but nearly all landlords must abide by the provisions). The ordinance supercedes any common law of Illinois and any terms of a lease or other agreement between the parties. The CRLTO governs all sorts of issues related to the landlord tenant relationship, from the proper care and feeding of security deposits to invalid, illegal or unenforceable lease terms all the way to the obligation of the landlord to make himself or herself known to a tenant. The penalties for violation of the CRLTO are severe.
After I inform a client of the serious repercussions of violating the CRLTO and, usually, a moment of silence and disbelief, the landlord asks me if I am serious. Unfortunately, I am. The CRLTO exists, it is real, it is slanted in favor of the tenant and Landlords need to comply with it. This has been confirmed time and again by the appellate courts and the Supreme Court of the State of Illinois.
While I don't want to discuss the merits of the CRLTO here, I do think that attorneys need to do a better job informing clients of the obligations under the CRLTO and landlords need to do a better job complying.
I will be writing in this blog regularly about the ordinance, its penalties and how landlords can better comply. I will also lobby herein for some reasonable amendments necessary to make the ordinance more "workable".
Nearly all of these landlords have called me for reasons not related to their own issues with the ordinance. Instead, these issues are discovered during the course of discussions about tenant evictions, lease reviews or other "bad tenant" related issues and worse yet, when the issue comes up in regard to a real estate transaction!
Most of the folks I speak with are disappointed (and sometimes disbelieving) when I begin to explain the ordinance requirements and the penalties for failure to comply to them. The CRLTO governs most residential real estate tenancies in the City of Chicago (there are a few exceptions to the ordinance, but nearly all landlords must abide by the provisions). The ordinance supercedes any common law of Illinois and any terms of a lease or other agreement between the parties. The CRLTO governs all sorts of issues related to the landlord tenant relationship, from the proper care and feeding of security deposits to invalid, illegal or unenforceable lease terms all the way to the obligation of the landlord to make himself or herself known to a tenant. The penalties for violation of the CRLTO are severe.
After I inform a client of the serious repercussions of violating the CRLTO and, usually, a moment of silence and disbelief, the landlord asks me if I am serious. Unfortunately, I am. The CRLTO exists, it is real, it is slanted in favor of the tenant and Landlords need to comply with it. This has been confirmed time and again by the appellate courts and the Supreme Court of the State of Illinois.
While I don't want to discuss the merits of the CRLTO here, I do think that attorneys need to do a better job informing clients of the obligations under the CRLTO and landlords need to do a better job complying.
I will be writing in this blog regularly about the ordinance, its penalties and how landlords can better comply. I will also lobby herein for some reasonable amendments necessary to make the ordinance more "workable".
Thursday, March 1, 2007
When do I call an attorney to help sell my house?
When do you need to get an attorney involved in selling your house? The quick answer is right away.
The first time you should consult an attorney is before you sign a listing agreement with a realtor. Many of the "standard" or "form" listing agreements are heavily slanted against the seller or contain provisions that surprise sellers when they actually find out what the agreement says, usually when it is too late to do anything about it.
Most of the listing agreements in the Chicagoland market indicate that a real estate broker's commission is earned once the broker has produced a "ready, willing and able" purchaser of your property. "But what if the deal does not close, I don't owe a commission, right?" Wrong. If your buyer defaults on the transaction after satisfying all of the buyer's contingencies (ie. the buyer defaults and fails to close), the seller likely owes the real estate brokers a commission.
In reality, many real estate brokers do not try to collect this commission. They want to keep goodwill with their seller client and they understand that they will get a commission when the property does eventually sell. But what about the selling agent who is out a commission and what about the listing agent who has had a falling out with the seller during the course of a deal. They may want their commission... and they are entitled to it.
There are more than a few reasons to take a look at the listing agreement before it is signed. Among others, the attorney can assist a seller to determine the rights and obligations of the seller if the seller finds the buyer without the help of the agent; if the seller has any right to avoid a commission for people who looked at the house before it was listed; and in the event that the real estate agent acts as dual agent. Other questions can be answered such as how does the seller terminate the agent relationship?; is a commission owed to the agent if the seller gets a contract after terminating the agent?; or are there any "hidden fees"? (sometimes a commission will actually be "5% of sale price plus a $225 processing fee). In most cases, under the terms of the "standard" listing agreement, the real estate agent will come out on top in regard to those issues.
Many real estate agents are excellent to work with and understand some of the shortcomings of the form listing agreement. In fact, many are very willing to make modifications to the agreement so that the seller can preserve some rights and better deal with some of the situations which can arise during the course of an agency agreement.
The first time you should consult an attorney is before you sign a listing agreement with a realtor. Many of the "standard" or "form" listing agreements are heavily slanted against the seller or contain provisions that surprise sellers when they actually find out what the agreement says, usually when it is too late to do anything about it.
Most of the listing agreements in the Chicagoland market indicate that a real estate broker's commission is earned once the broker has produced a "ready, willing and able" purchaser of your property. "But what if the deal does not close, I don't owe a commission, right?" Wrong. If your buyer defaults on the transaction after satisfying all of the buyer's contingencies (ie. the buyer defaults and fails to close), the seller likely owes the real estate brokers a commission.
In reality, many real estate brokers do not try to collect this commission. They want to keep goodwill with their seller client and they understand that they will get a commission when the property does eventually sell. But what about the selling agent who is out a commission and what about the listing agent who has had a falling out with the seller during the course of a deal. They may want their commission... and they are entitled to it.
There are more than a few reasons to take a look at the listing agreement before it is signed. Among others, the attorney can assist a seller to determine the rights and obligations of the seller if the seller finds the buyer without the help of the agent; if the seller has any right to avoid a commission for people who looked at the house before it was listed; and in the event that the real estate agent acts as dual agent. Other questions can be answered such as how does the seller terminate the agent relationship?; is a commission owed to the agent if the seller gets a contract after terminating the agent?; or are there any "hidden fees"? (sometimes a commission will actually be "5% of sale price plus a $225 processing fee). In most cases, under the terms of the "standard" listing agreement, the real estate agent will come out on top in regard to those issues.
Many real estate agents are excellent to work with and understand some of the shortcomings of the form listing agreement. In fact, many are very willing to make modifications to the agreement so that the seller can preserve some rights and better deal with some of the situations which can arise during the course of an agency agreement.
Wednesday, February 14, 2007
Hello!
This page will be the blog spot and brother site of www.illinois-attorney.com which is the website for Reda Ciprian Magnone, LLC, attorneys at law. Our firm practices in the areas of real estate law (residential, commercial, landlord-tenant); probate (deceased person's estates, minor's estates, disabled person's estates); corporate law (business organizations, purchase and sale of business, contracts); and estate planning (wills, trusts). I hope to periodically keep this blog up to date with information and musings on the law as related to those topics. As always, please know that you should not rely upon the information contained in this blog as "legal advice" as every factual situation is different. Please, always consult an attorney before acting to understand your rights and duties.
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