U.S. Bank National Association et al v. Londrigan, Potter & Randle, P.C. et al

Filing 248

OPINION BY RICHARD MILLS, United States District Judge. See written Opinion. Entered on 3/15/2021. (MJC)

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E-FILED

Tuesday, 16 March, 2021 10:01:42 AM
Clerk, U.S. District Court, ILCD

IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION

CSMC 2007-C4 EGIZII PORTFOLIO LLC,

)
)
and
)
)
U.S. BANK NATIONAL ASSOCIATION,
)
as Trustee for the Registered Holders of
)
the MEZZ CAP COMMERCIAL
)
MORTGAGE TRUST 2007 C-5,
)
COMMERCIAL MORTGAGE PASS)
THROUGH CERTIFICATES, SERIES
)
2007-C5,
)
)
Plaintiffs,
)
)
v.
)
)
SPRINGFIELD PRAIRIE PROPERTIES,
)
LLC, an Illinois limited liability company;
)
ROBERT W. EGIZII, an individual; THOMAS )
EGIZII, an individual; MICHAEL EGIZII, an )
individual; RODNEY EGIZII, an individual; )
JODI BAPTIST, an individual; JOHN PRUITT, )
an individual; PAMELA JOHNSON,
)
EXECUTOR OF THE ESTATE OF CLYDE )
BEIMFOHR; EEI HOLDING
)
CORPORATION, an Illinois
)
Corporation; and EGIZII PROPERTY
)
MANAGERS, LLC, an Illinois limited
)
liability company,
)
)
Defendants.
)

Case No. 15-3195
(consolidated)

OPINION
RICHARD MILLS, United States District Judge:
This matter is before the Court following a bench trial.
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The Court has reviewed the entire record, including the Parties’ proposed
findings of fact and conclusions of law, post-trial briefs, the exhibits and Court
transcripts.
I. BACKGROUND
(A)
In 2007, Defendant Springfield Prairie Properties, LLC (“SPP” or
“Borrower”) took out two loans totaling $23,340,000 from Column Financial, Inc.
to purchase seven properties. Six of the properties are located in the City of
Springfield, Illinois and one is located in Pana, Illinois. The State of Illinois was the
tenant in six of the buildings. Defendant EEI Holding Corporation (“EEI”), along
with its divisions Egizii Electric, Inc. and BRH Builders, leased the premises located
at 700 N. MacArthur until August 2015.
Defendant Egizii Property Managers (“EPM”) managed the real estate owned
by SPP. Defendant Robert W. Egizii is the primary stockholder of EEI, the majority
member of EPM and SPP’s majority member.1 The original Lender was aware of
the ownership structure of SPP, EPM and EEI when the loans were entered into in
2007.

1

On October 27, 2020, Egizii filed a Suggestion of Bankruptcy [d/e 247]. Under 11 U.S.C. § 362(a),
therefore, the proceedings are stayed against Egizii.
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SPP’s other members include Marriot Commerce Building, LLC, Fifth Street
Partnership, Egizii Family Limited Partnership, Warehouse Partners, LLC, Bell
Building, LLC and Marco Partnership III, and its managing partner is Springfield
Prairie Properties, SPE, Inc.
Other Defendants include Egizii’s family and friends who own the rest of the
interests in EPM, EEI and SPP. Michael Egizii (son) owns interests in all three.
Rodney Egizii (son), who was dismissed after filing for bankruptcy, owned interests
in all three. Jodi Baptist (daughter) owned interests in all three. Thomas Egizii
(cousin) owned an interest in SPP. John Pruitt and Clyde Beimfohr (since deceased
and substituted by his Estate) owned interests in SPP. These individuals were
referred to as the Constructive Members. They are the members of SPP’s members.
The loans were commercial mortgage backed securities, CMBS loans. The
promissory notes and the mortgages securing the loans were signed by Robert Egizii,
as president of SPP. Egizii guaranteed the loan. None of the other Defendants are
signatories to the promissory notes, the mortgages or the Indemnity and Guaranty
agreement. The Loan documents were drafted by the Lender. The Plaintiffs
acquired the right to recover the Loan through a series of assignments.
The Loan documents also included the Operating Agreement of SPP, the
Property Management Agreement between SPP and EPM, an organizational chart
showing the members of SPP, various tenant estoppel certificates including one from
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EEI, by which the tenant agreed to submit rents directly to the Lender if requested
in the event of default.
The Indemnity Clause, Section 18.5 of the Operating Agreement, provides as
follows:
The Company shall indemnify, defend and save harmless each Member
or former Member of the Company against expenses actually and reasonably
incurred by such Member in connection with the defense of an action, suit or
proceeding, civil or criminal, in which such Member is made a party by reason
or being or having been such Member, except in relation to matters as to which
such Member shall be adjudged in the action, suit or proceeding to be liable
for gross negligence or willful misconduct.
The Indemnity Clause, ¶6 of the Property Management Agreement, provides:
SPP agrees:
***
(d) To defend, indemnify, and save PM harmless from any and
all damages, claims, suits, or costs, whether for personal injury or otherwise,
arising out of PM’s management of the Property whether such claims are
filed or damages incurred before or after the termination of this Agreement.
The Loan documents contain no specific language prohibiting SPP from using prereceivership rents to pay legal fees to defend itself after a default.
Paragraph 1.5(e) of the Notes allows for partial recourse, i.e., recovery of
rents, issues, profits and revenues derived from any portion of the Property which
are not applied to the ordinary and necessary expenses of owning and operating the
Property, if the rents or profits are received after an Event of Default. It states:
[N]otwithstanding the foregoing provisions of this section, Borrower shall be
fully and personally liable and subject to legal action as follows . . . (e) for
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rents, issues, profits and revenues of all or any portion of the Property which
are not either applied to the ordinary and necessary expenses of owning and
operating the Property or paid to the Lender but only to the extent such rents,
issues, profits and revenues are received or applicable to a period after either
an Event of Default or notice from Lender that an event or circumstances has
occurred which, with the passage of time or giving of further notice or both,
would constitute an Event of Default.
Paragraph 1.5(Y) of the Notes provides in part that Lender may recover the full
amount due under the Loan if Borrower transfers any Property without Plaintiffs’
consent:
Notwithstanding anything to the contrary in this Note or any of the
other
Loan Documents. . . (Y) all such indebtedness evidenced by the Note and all
the other obligations of Borrower under the Loan Documents shall be
deemed fully recourse to Borrower in the event
that: . . . (iii) Borrower
fails to obtain Lender’s prior written consent to any assignment, transfer, or
conveyance of the Property or any interest therein as required by the
Mortgage.
The Notes define “Property” to include “all properties (whether real or personal),
rights, estates and interests now or at any time hereafter securing the payment of this
Note and/or the other obligations of Borrower under the Loan Documents.” Under
the Mortgages, Borrower “GRANTS A SECURITY INTEREST” in all “Property,”
as defined therein. The Mortgages define the “Property” to include “all rents,
royalties, issues, profits, bonus money, revenue, income, rights and other benefits
(collectively, the “Rents” or “Rents and Profits”) of the Land or the Improvements,”
along with other real and personal property.

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Section 1.13 of the Mortgages make it an event of default to sell, convey or
otherwise transfer the Property or any part thereof or interest therein without the
Lender’s consent:
[I]n the event that the Property or any part thereof or interest therein shall be
sold (including any installment sales agreement), conveyed, disposed of,
alienated, hypothecated, leased (except to tenants of space in the
improvements in accordance with the provisions of Section 1.12 hereof),
assigned, pledged, mortgaged, further encumbered or otherwise transferred or
Borrower shall be divested of its title to the Property or any interest therein,
in any manner or way, whether voluntarily or involuntarily, without the prior
written consent of Lender being first obtained, which consent may be withheld
in Lender’s sole discretion, then the same shall constitute an Event of Default
and Lender shall have the right, at its option, to declare any or all of the
indebtedness secured hereby, irrespective of the Maturity Date, immediately
due and payable.
The Guaranty at (l) incorporates the language of ¶1.5(Y) in the Notes, providing that
Egizii is personally liable for the full amount of the Loan under the same
circumstances as Borrower:
INDEMNITOR ACKNOWLEDGES THAT PHRASE (Y) IN SECTION
1.5 OF EACH OF THE NOTES DESCRIBES CIRCUMSTANCES
WHEREIN THE ENTIRE INDEBTEDNESS EVIDENCED BY SUCH
NOTE AND THE OTHER OBLIGATIONS
OF
BORROWER
UNDER THE LOAN DOCUMENTS WOULD BECOME
FULLY
RECOURSE TO BORROWER.
IF SUCH CIRCUMSTANCES
SHOULD OCCUR THEN INDEMNITOR SHALL ADDITIONALLY
BE DIRECTLY AND PRIMARILYLIABLE, ON A JOINT AND
SEVERAL BASIS, FOR THE ENTIRE INDEBTEDNESS
EVIDENCED BY THE NOTE AND FOR ALL OF
BORROWER’S
OBLIGATIONS UNDER THE LOAN DOCUMENTS AND SUCH
INDEBTEDNESS AND OBLIGATIONS SHALL BE INCLUDED
WITHIN THE TERM “COSTS” HEREUNDER.
The Guaranty also contains the following provision:
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1. INDEMNITY AND GUARANTY.
INDEMNITOR HEREBY
ASSUMES LIABILITY FOR, HEREBY GUARANTEES PAYMENT
TO LENDER OF, HEREBY AND AGAINST, AND HEREBY
INDEMNIFIES LENDER FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, COSTS AND
EXPENSES
(INCLUDING,
WITHOUT
LIMITATION,
ATTORNEYS’ FEES), CAUSES OF ACTION, SUITS, CLAIMS,
DEMANDS AND JUDGMENTS OF ANY NATURE OR
DESCRIPTION WHATSOEVER (COLLECTIVELY, “COSTS”)
WHICH MAY AT ANY TIME BE IMPOSED UPON, INCURRED
BY OR AWARDED AGAINST LENDER AS A RESULT OF:
***
(e) RENTS, ISSUES, PROFITS AND REVENUES OF ALL OR ANY
PORTION OF THE PROPERTY WHICH ARE NOT EITHER
APPLIED TO THE ORDINARY AND NECESSARY EXPENSES OF
OWNING AND OPERATING THE PROPERTY OR PAID TO
LENDER BUT ONLY TO THE EXTENT SUCH RENTS, ISSUES,
PROFITS AND REVENUES ARE RECEIVED
OR
APPLICABLE TO A PERIOD AFTER EITHER AN “EVENT OF
DEFAULT” (AS DEFINED IN SECTION 2.1 OF THE
MORTGAGE) OR NOTICE FROM LENDER THAT AN EVENT
OR CIRCUMSTANCE HAS OCCURRED WHICH, WITH THE
PASSAGE OF TIME OR GIVING OF FURTHER NOTICE OR
BOTH, WOULD CONSTITUTE SUCH AN EVENT OF DEFAULT.
Except for the foregoing provisions, the Loan documents do not set forth any
further definition of the word “transfer.” The Plaintiffs’ expert CPA, Jeffrey
Johnston, defined the word “transfer” to mean a disposal of or parting with interest
in property.”
The Plaintiffs’ corporate representative, William Clarkson, noted that the
Loan documents have no specific definition of “ordinary and necessary expenses.”
Clarkson testified that there is room for a borrower and a lender to disagree on the
definition of “ordinary and necessary expenses.” Clarkson interpreted the phrase to
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include “property-level expenses” such as “[u]tilities, electricity, janitorial,
landscaping, repairs and maintenance, real estate taxes, insurance.”
The Defendants’ expert CPA, Donald Wright, testified that legal fees are
deductible as “ordinary and necessary expenses” of operating the business under
generally accepted accounting principles and under §162 of the Internal Revenue
Code, even if incurred to keep a business alive temporarily. Wright testified that
paying the legal expenses of SPP member Egizii and the legal fees of the
constructive members is an ordinary and necessary expense of operating the business
under §18.5 of the Operating Agreement because SPP is a tiered pass through
organization where only individuals are taxed for the distributions they receive.
CPA Dorinda Fitzgerald testified that the legal fees of $143,464 and $683,194
incurred by SPP in 2013 and 2014 were deductible ordinary and necessary expenses
of operating the properties pursuant to §162 of the Internal Revenue Code. Wright
testified it is a common practice for pass through entities to distribute money to their
members at the bottom tier, individual level so that individuals can pay their income
taxes on their share of the taxable income reported by the LLC. Fitzgerald testified
that most pass through entities which report taxable income make distributions to
cover their members’ income tax liability because without those distributions,
members would have to pay taxes on their own.

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The Plaintiffs’ expert witness, Johnston, also testified it is a common practice
for LLCs to make distributions to their members for their share of the pass through
income tax liability, though he added it is not common for insolvent companies to
do so. Johnston opined that these expenditures were not ordinary and necessary
expenses of owning the property.
(B)
In 2008, the State of Illinois began having difficulty paying its rents. In turn,
SPP started having trouble making mortgage payments to the Lender as the
commercial real estate market in Springfield deteriorated. SPP fully complied with
the payment terms until October 11, 2012, when SPP failed to make the regularly
scheduled Loan payment on the A Note and the B Note. SPP did not make any
mortgage payments after the October 2012 payment. The Borrower did later make
certain payments to the Plaintiffs that were not contemplated by either of the Notes.
Under the Loan Documents, it is an Event of Default if “any sum payable
under this Note is not paid on or before the date of such payment is due.” The
Plaintiffs notified the Borrower of its defaults by letters dated December 6, 2012,
December 31, 2012, and March 28, 2013.
At the time, Torchlight Loan Services, LLC was the special loan servicer on
behalf of the Plaintiffs. A special servicer is in charge of dealing with defaulted or
distressed loans. William Clarkson, Torchlight’s corporate representative, testified
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that although foreclosure is one option, a special servicer is always looking for
something that provides a better recovery.
The Plaintiffs’ March 28, 2013 Demand Letter to SPP and Egizii notified them
that Plaintiffs were electing to accelerate the Loan’s maturity date, demanding
payment in full and invoking the default rate of interest. In the Letter, the Plaintiffs
stated they were entitled to all of the Egizii Portfolio’s income and that the rents and
cash collateral from the Properties could not be used to pay SPP’s attorney’s fees
arising out of the default. They demanded that all rents and cash collateral be
delivered to the Plaintiffs. Clarkson testified that SPP would be entitled to retain
some rents so that SPP could pay for ongoing repair and maintenance expenses of
the Properties.
By the end of 2012, the Borrower was insolvent. SPP was no longer making
its mortgage payments, but was still collecting rents, profits and revenues from the
other tenants. SPP’s sole source of income was rents and profits from the Properties
described in the mortgages. Therefore, SPP had to report income to the IRS in 2013.
SPP, a pass through tax entity, sent distributions totaling $416,255.48 to the
Constructive Members to cover tax liabilities arising out of SPP’s 2013 income.
SPP also made estimated tax distributions to the Constructive Members in
May 2014 ($196,915.92) and September 2014 ($95,619.24) based on anticipated
income for SPP in tax year 2014. The Borrower did not report income to the IRS
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for tax year 2014. The Constructive Members owed no taxes in connection with
their interest in SPP for tax year 2014. The Constructive Members are not actual
members of SPP. Its actual members are all entities.
William Clarkson reviewed the Plaintiffs’ Complaint and testified that he
believed the 2014 tax distributions to Constructive Members violated the Loan
documents because the Borrower was insolvent at the time.
(C)
SPP set up a client trust account at Scott & Scott, P.C. (“Scott”) on July 26,
2013, pursuant to a written trust agreement maintained in accordance with the
provisions of Rule 1.15(f) of the Illinois Rules of Professional Conduct.
In July 2013, EEI paid a $20,000 retainer to Perkins Coie LLP (“Perkins”) to
represent Egizii. In September 2013, the Borrower paid retainers to Londrigan,
Potter & Randle P.C. (“Londrigan”) of $20,000, Scott of $30,000 and Sgro,
Hanrahan, Durr & Rabin, LLP (“Sgro”) of $10,000.
Between June 20, 2013 and November 5, 2014, the Borrower made 16
transfers totaling $2,004,358 from its checking accounts to a trust account with
Scott. Between July 17, 2013 and December 23, 2014, SPP made 15 transfers
totaling $1,147,000 from its checking accounts to be held in an IOLTA trust account,
in accordance with Rule 1.15(f), in SPP’s name with Londrigan.

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SPP created the Scott and Londrigan trust accounts at the suggestion of
Lawrence Selevan of Chesterfield Faring, Ltd, who was retained by SPP in May
2013 to help work out a deal with the Lender to resolve the default. Attorneys R.
Stephen Scott and James R. Potter testified that the purpose of placing the rents into
the trust accounts was so that the money could be immediately available to transmit
to the Lender if a settlement was reached. SPP disclosed the existence of the trust
accounts to Plaintiffs’ counsel on October 16, 2013. SPP exercised dominion and
control over the contents of the Londrigan and Scott trust accounts and listed them
as assets on its financial records and tax returns. SPP could access these funds at
any time by making a phone call or email to Attorneys Scott or Potter. The trust
accounts were functionally no different than if SPP held the funds in a bank account
in its own name. Neither Attorney Potter, as trustee for the Londrigan trust account,
nor Attorney Scott, as custodian for the Scott trust account, made any disbursements
from those trust accounts without the approval of Robert W. Egizii acting on behalf
of SPP.
William Clarkson testified that SPP’s formation of attorney trust accounts was
the only action it took in 2013 which he believed violated the Loan documents.
Clarkson testified he thought the creation of the attorney trust fund accounts violated
the Loan documents because he did not believe the Lender had access to those funds.
He was unfamiliar with the operation of attorney escrow accounts.
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The Plaintiffs demanded a $250,000 payment from the trust funds to
demonstrate the Borrower’s good faith in entering into settlement discussions. That
payment was delivered on September 24, 2014. Over the course of the next month,
SPP paid a total of $625,000 to Plaintiffs from the Scott trust account.
Also on September 24, 2014, SPP caused $550,000 in retainers to be paid to
four law firms: Scott ($150,000), Londrigan ($150,000), Sgro ($150,000) and
Perkins ($100,000) from the Scott and Londrigan trust accounts. The Law Firms
had retainer and special retainer accounts for legal fees and costs that were separate
from the Scott and Londrigan trust accounts.
On September 30, 2014, SPP made a $15,000 advance payment to its
accounting firm, Pehlman and Dold (“Pehlman”) from the trust accounts. SPP
claims it received reasonably equivalent value for the $15,000 payment.
(D)
Before filing the two cases in federal court which were eventually
consolidated, the Plaintiffs on November 26, 2014 filed suit to foreclose and appoint
a receiver in the Circuit Court of Sangamon County, Case Number 2014-CH-456.
On December 19, 2014, the state court granted the Plaintiffs’ motion to appoint a
receiver for the Egizii Portfolio, while permitting the parties to negotiate certain
language. On December 23, 2014, the state court entered an Order Appointing
Receiver.
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In the state court Foreclosure Case, the Plaintiffs originally sought a
deficiency judgment in addition to an in rem judgment against SPP. On August 27,
2015, the Plaintiffs filed an amended complaint in the Foreclosure Case seeking only
an in rem judgment against SPP to permit the federal action to proceed in the face
of the Defendants’ objections that Plaintiffs were seeking the same relief in two
separate courts.
On June 13, 2017, a Judgment in rem Foreclosure and Sale was entered in the
state foreclosure action. A Judgment in the Foreclosure Case was entered on April
27, 2018, wherein the court held that the amount due on the Notes was the sum of
(i) on the A Loan, $31,902,226.45, plus $6,420.54 per day in interest after December
11, 2016; (ii) on the B loan, $2,587,785.73, plus $673.28 per day in interest after
December 11, 2016; (iii) attorneys’ fees and costs; and (iv) any advances permitted
by the Plaintiffs under the Loan Documents after December 11, 2016.
On April 17, 2018, an order was entered approving reports of sale of the
foreclosed Property resulting in a credit totaling $9,400,000 for any amounts due
and owing on the claims at issue in this lawsuit.
In the days and weeks before the receiver was appointed, several transactions
took place. On November 12, 2014, an internal Perkins email noted the possibility
of the appointment of a receiver and advised that any unallocated retainer funds be

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applied “as soon as possible.” On November 26, 2014, the Borrower issued a check
to EPM for $11,808.33. Between December 4 and December 24, 2014, SPP issued
seven checks to EEI (through divisions Egizii Electric and BRH) totaling
$11,979.30. On December 16, 2014, the Borrower delivered $100,000 to Londrigan
to hold in trust. On December 19, 2014, Londrigan deposited a $150,000 retainer
check that SPP had written to Londrigan on September 24, 2014. On December 23,
2014, the Borrower delivered $150,000 to Londrigan to hold in trust.
Following a 2016 dispute, Pehlman terminated its relationship with Egizii and
his various entities, including non-Defendants. At the time, Egizii and his entities
owed Pehlman $21,114.14. SPP owed Pehlman nothing. In February 2017, Egizii
and those entities worked out a settlement with Pehlman for $15,000. Despite owing
nothing to Pehlman, SPP funded the settlement--$3,617.50 using the remaining
balance of SPP’s advance payment and $11,382.50 using a check from the
Londrigan retainer account that held SPP’s $20,000 retainer from September 2013.
At the time of the trial, a balance of approximately $39,000 remained in the
Londrigan trust account and about $6,000 remained in the Scott trust account.
At trial, the disbursements from the Scott trust account challenged by the
Plaintiffs as not being ordinary and necessary expenses were the expenditures for
legal fees and tax distributions to the Members and Constructive Members. SPP

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authorized Attorney Scott to make a number of distributions. SPP authorized
Attorney Scott to make disbursements from the Scott trust in the amount of $100,000
for operating expenses, $708,000 in total tax distributions to the Members, a
$625,000 payment to the Lender on September 14, 2014, and $515,000 attorneys’
fees up through November 29, 2018. Of the $515,000 attorneys’ fees amount,
$320,000 was delivered to the Scott retainer account and $190,000 was delivered to
Perkins’ special retainer account.
On February 28, May 30 and September 10, 2014, SPP authorized
distributions from the Scott Trust Account to Robert W. Egizii, Michael Egizii,
Thomas Egizii, Rodney Egizii, Jodi Baptist, John Pruitt and Clyde Beimfohr based
on their percentage of ownership of SPP or of SPP’s pass through entity members,
in order to pay income taxes on income earned by SPP in 2013. Before receiving
the distributions, each distributee executed a refunding bond in which they agreed,
as a condition of receiving the distributions, to reimburse SPP and Egizii for the
amount of the distribution they received if the Lender recovered that amount from
SPP and guarantor because the distributions were not deemed to be an ordinary and
necessary expense of owning the properties. If the Lender obtained a Judgment
against SPP, the Lender could collect the amount of the distributions by means of a
citation to discover assets against SPP.
(E)
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On September 25, 2014, Londrigan opened a special retainer account with the
$150,000 disbursed from the Londrigan trust account at Egizii’s direction. The trust
accounting shows a total of $148,955 spent for legal fees beginning in January 2015
and continuing through August 16, 2017, and then another $86,000 disbursed
between April 17, 2018 and November 26, 2018. At the time of trial, the balance in
the Londrigan special retainer was $1,500.
On September 23, 2014, at the direction of Egizii, Attorney Scott deposited
$150,000 disbursed from the Scott trust account into a security retainer IOLTA trust
account at the Scott law firm.
On October 8, 2014, Attorney Greg Sgro deposited the Advance Payment
Retainer of $150,000 received from SPP into an IOLTA trust account. The trust
accounting shows a total of $95,050.36 spent for legal fees and costs between
September 19, 2013 and continuing through June 12, 2017. On November 30, 2017,
Attorney Sgro deposited an advance payment retained from the Londrigan trust
account at Egizii’s direction. The trust accounting for the special retainer account
shows a total of $164,949 spent on legal fees between November 2, 2017 and June
19, 2019.
On July 13, 2013, Perkins entered into a security retainer agreement with
Egizii with a payment of $20,000. On September 26, 2014, Perkins entered into an

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advanced special retainer account with SPP with the $100,000 dispersed from the
Londrigan trust account at Egizii’s direction.
(F)
SPP directed the Londrigan Trust Account to distribute a total of $196,245 for
repairs and maintenance to the properties including $71,245 for HVAC work to E.L.
Pruitt & Co., $100,000 for repairs due to flooding at the Bucari Building and $25,000
to CWLP for utility bills, and further directed the Londrigan firm to pay SPP another
$29,176.50 for other operating expenses of SPP. SPP also directed the Scott Trust
Account to distribute $100,000 for repairs and maintenance for the work of E.L.
Pruitt & Co. for replacement of cooling equipment at the Ridgely Building.
SPP did not have the prior written consent of the Lender for the deliveries
into the Trust accounts, or the distributions, retainers and payments paid from those
Trust Accounts.
In addition to the $625,000 in accumulated rents delivered to the Plaintiffs on
September 24, 2014, SPP in October 2014 sent to Plaintiffs a check for $130,000
which it had received as an insurance distribution. In January 2015, SPP gave to the
court-appointed receiver $80,000 from the balance of its checking accounts. On
February 14, 2019 Attorney Greg Sgro, on behalf of SPP, sent to the Plaintiffs a
belated rent check in the amount of $17,162.89 received from the State of Illinois.
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(G)
In March 2013, Egizii asked Attorneys Greg Sgro, James R. Potter and Steve
Scott to provide legal advice to SPP regarding a notice of default SPP had received
from the lender. Attorney Potter was to be SPP’s negotiator; Attorney Sgro was
engaged because of his expertise in real estate transactions, and Attorney Scott for
his expertise in bankruptcy matters. No written attorney fee agreements were
entered into at that time.
In June 2013, Egizii asked Attorney Potter to find an attorney from a national
law firm as additional counsel. Larry Selevan, the financial settlement advisor or
workout specialist, had recommended taking such action because the Plaintiffs were
represented by a large national law firm. SPP retained Attorney David Neff from
Perkins.
In September and October 2014, SPP and Egizii entered into written
attorneys’ fees agreements with the Londrigan, Sgro, Perkins and Scott law firms
because SPP had been sent a draft foreclosure complaint and it appeared litigation
was likely.
In the written attorney agreement with Londrigan, Egizii retained Londrigan
on behalf of SPP, himself, the constructive members, EEI and EPM. A $150,000
advance payment retainer was specified to become the property of Londrigan.
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In a written attorney agreement dated October 7, 2014 with Sgro, SPP per
Egizii retained Sgro to represent SPP in a dispute with its lender. An advance
payment security retainer of $150,000 was specified to become the property of the
Sgro firm, but any balance not used for legal fees was to be refunded to SPP.
On September 23, 2014, SPP per Egizii entered into a written advance
payment retainer agreement with Perkins in connection with its dispute with the
lender. An advance payment retainer fee of $100,000 was agreed to and specified
to be the property of Perkins.
On September 23, 2014, SPP per Egizii entered into a written retainer
agreement with the Scott firm in connection with its dispute with the lender. A
security retainer fee of $150,000 was agreed to with the amount specified to remain
the property of SPP until utilized for legal services in connection with SPP’s dispute
with the lender.
On August 6, 2015, all of the attorneys and parties entered into a “Joint
Defense and Common Interest Agreement.”

The Parties agreed that joint

investigations, sharing of discovery and research could be undertaken to benefit the
parties to the agreement.
On September 2, 2015, Londrigan entered into a new joint representation and
waiver of conflicts agreement with Robert Egizii and all of the individual
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constructive members of SPP in connection with the defense of this lawsuit.
Londrigan agreed to continue to represent Egizii and his various business pursuits.
The letter stated that the representation was joint, that Londrigan would represent
Egizii and all other constructive members simultaneously and that if any conflict
appeared, Londrigan would withdraw its representation of the constructive members
so that it could continue representing Egizii. The letter specified SPP would be
responsible for the legal fees.
Robert W. Egizii testified he and a bookkeeper reviewed every legal bill that
came from the attorneys to ensure that the items listed pertained only to the dispute
between SPP and the lender, and would call the attorney if there was uncertainty.
Attorneys Scott and Sgro testified they itemized every bill so that it would include
only services rendered for SPP.
(H)
All of the legal fees incurred from March 2013 through August 25, 2015 were
incurred for the direct representation of SPP arising out of its default on the Loans
because each of the four law firms represented SPP during that period. In a previous
Opinion on the Parties’ motions to dismiss, the Court found that SPP appeared to
have received reasonably equivalent value for the services provided by the attorneys.
SPP had a legal obligation to provide a defense to Egizii as a direct member of SPP

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under the indemnity provisions of ¶18.5 of the Operating Agreement. The tax
obligations of a pass through entity arise at the individual level. Paragraph 18.7 of
the Operating Agreement provides that the constructive members are assigns of the
direct members of SPP. Plaintiffs’ expert Johnston testified that the constructive
members “are not [Borrower’s] members” and the clause in the Operating
Agreement only applies to an actual member being sued by “by reason of it being or
having been made such Member.”
Londrigan represented Egizii and the constructive members jointly and
simultaneously from August 25, 2015. SPP owed a legal obligation to defend EPM
from any claims arising out of its property management services to SPP under ¶6(d)
of the Property Management Agreement. Sgro represented EPM and EEI jointly and
simultaneously after August 25, 2015 at the direction of SPP.
(I)
EEI’s shareholders include Egizii (92.43%) and his children: Michael
(0.45%), Rodney (6.6%) and Jodi Baptist (0.45%). No stock certificates exist. EEI
has Bylaws but does not hold annual shareholder meetings, nor does it hold regular
officer and director meetings, though all are required by the Bylaws. There are no
minutes of meetings. EEI’s only resolution since 2007 was executed in 2010,
electing officers and directors for two of its divisions, many of whom are no longer

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with EEI. While new persons fill some of those roles, no new resolutions have been
signed.
EEI’s employees between 2012 and 2014 included Susan Wesp (CFO),
Theresa Pennington, Julie Farrington/Long and Linda Wells. All were paid by EEI.
All maintained an email domain of “@eeiholding.com” and had email signature
blocks indicated they worked for either EEI Holding Corporation or Egizii Electric,
Inc.
Despite reporting losses in 2013 and 2014, EEI paid Egizii approximately
$395,000 in salary for each of the two years. Egizii had loaned $800,000 to EEI in
2013. EEI’s executive compensation was not reported on prior years’ tax returns
and is unknown.
Vince Toolen was an independent contractor for EPM. He also used an email
domain of “@eeiholding.com” and signed documents in various capacities on behalf
of EPM and SPP. Toolen sent letters on SPP letterhead, signing as “Leasing
Manager” or “Executive Assistant” of SPP. EEI, EPM and SPP all designated
Toolen as their representative witness at trial. Toolen’s hourly fee was paid by the
owner of the property for whom he was working (SPP or other Egizii-owned
enterprises).

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EPM is a limited liability company whose members are Egizii (85%) and his
children, Michael (5%) Rodney (5%) and Jodi (5%).

EPM has Articles of

Organization, but lacks a limited liability company (or operating) agreement. It has
no resolutions, never held a meeting of the members and has no minutes of meetings.
The Management Agreement contemplates that EPM will, among other tasks,
evict tenants and provide regular financial statements and inspection reports to SPP.
EPM did not perform those services. Toolen calculated EPM’s management fee
based on the Management Agreement and the Egizii Portfolio’s rent roll in 2007.
Toolen never looked at the Management Agreement or recalculated accruals after
2007 even after circumstances changed with rents significantly declining and certain
tenants not paying timely.
Actual cash payments to EPM were $165,316.62 in 2013 and $141,699.96 in
2014. This amounted to 6.04% of SPP’s gross income in 2013 and 5.28% of
Borrower’s gross income in 2014, while the Management Agreement allows fees of
3% to 4% of gross income (depending on the building). In total, the Borrower paid
$330,633.24 to EPM between October 11, 2012 and December 2014.
SPP and EPM had no employees.
separately.

SPP, EEI and EPM all functioned

The entities had separate bank accounts, separate books, separate

stationery and filed separate tax returns. Susan Wesp testified EEI did not pay

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attorney’s fees for SPP. EEI employees would go through the monthly bills for legal
fees to make sure that SPP only paid legal bills attributable to SPP. When EPM and
SPP needed administrative support or assistance with finances, Wesp or other EEI
employees would assist and did not charge EPM or SPP for their time. These
uncompensated tasks benefitted SPP. Wesp and Vince Toolen testified SPP treated
EEI the same as any other contractor that provided service to it. William Clarkson
testified he was not specifically aware of any instance in which EEI overcharged or
didn’t provide the repair and maintenance services for which it billed SPP. Although
it owned 700 North MacArthur and did not require a formal lease, SPP occupied part
of the space leased by EEI. EEI and SPP were insolvent in 2013-2014.
Vince Toolen testified SPP gave rent reductions to at least one tenant,
McLeod, similar to what it gave EEI in an effort to keep McLeod as a tenant.
Moreover, it was in SPP’s economic interest to reduce EEI’s rent because no other
tenants were available at the time. EEI was paying $7,400 for utilities per month
which otherwise would have been SPP’s responsibility.
EPM also occupied part of the space at 700 North MacArthur leased by EEI.
EPM did not have a lease or sublease for the space nor did its Management
Agreement permit it to occupy the premises. EPM paid no rent to SPP.

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EPM made loans to Egizii and the Egizii Family Limited Partnership, which
is composed of Egizii and his children and which also owns part of SPP. No loan
documents were signed and no repayment terms were established.
EPM paid $211,546, $314,914 and $277,641 to Robert W. Egizii in 2012,
2013 and 2014, respectively. All of the payments were characterized as “Contract
Labor” expenses on EPM’s tax returns. EPM did not make formal distributions to
its members (including Egizii) between 2012 and 2014.
SPP had an Operating Agreement. It has no resolutions after 2007 and never
held any member meetings. SPP never entered into any resolutions or held any
member meetings in connection with the distributions to the Constructive Members
in 2014. SPP had no employees. When it needed administrative support or
assistance with finances, EEI employees would assist and did not charge SPP for
their time.
According to the Operating Agreement, SPP’s members are 700 North
MacArthur, LLC (12.0263%), Egizii Family Limited Partnership (15.1176%), Fifth
Street Partnership (16.6967%), Marriot Commerce Building, LLC (27.7759%),
Marco Partnership III (4.4615%), Bell Building, LLC (8.1798%), Warehouse
Partners, LLC (12.7422%) and Marco (3.0%). SPP’s tax returns are similar, but
reflect Robert Egizii individually owning its 12.0263% interest (instead of 700 North

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MacArthur, LLC). The returns also do not reflect Marco owning any part of the
Borrower. Instead, Marriot Commerce Building, LLC owns 30.7759% of SPP, or
3% more than stated in the Operating Agreement. No assignments exist.
SPP’s Operating Agreement did not have any provisions in it exempting its
members from the rights and immunities provided by 805 ILCS 180/10-10(a).
Robert Egizii was the primary decisionmaker for EEI, EPM and SPP.
In June 2014, SPP paid $2,600 to Pehlman in partial satisfaction of its invoice
dated May 2, 2014. This invoice was issued to EEI and was for services performed
exclusively for EEI.
(J)
In May 2013, the Parties began settlement discussions. The Defendants
utilized the services of Larry Selevan, the financial workout specialist. Selevan was
terminated on November 12, 2013, because he was not able to get the settlement
accomplished. The Defendants also believed that his presence exacerbated instead
of facilitated settlement discussions. Following Selevan’s departure, David Neff of
the Perkins firm took the lead in conducting settlement negotiations for SPP and
Egizii. Ultimately, the settlement efforts were unsuccessful.

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(K)
In Count I, the Plaintiffs assert breach of contract claims seeking Judgment on
Note, full recourse, against SPP. The Plaintiffs also assert SPP, EEI and EPM were
alter egos of one another. The Plaintiffs allege they are entitled to Judgment against
Borrower for $31,380,470.40, plus $7,093.82 per diem through the date of judgment,
plus interest at the federal judgment rate thereafter.
In Count II, the Plaintiffs assert breach of contract claims seeking Judgment
on Note, partial recourse, against SPP. The Plaintiffs also assert SPP, EEI and EPM
were alter egos of one another. The Plaintiffs allege SPP failed to deliver to
Plaintiffs $2,771,917.45 in post-default rental income ($3,379,032.60 delivered to
the Law Firms plus the $1,667.81 and $16,217.04 left in the Borrower’s accounts
minus $625,000 paid to Plaintiffs). The Plaintiffs also seek entry of judgment
against Borrower, EEI and EPM based on alter ego theories of liability.
In Count III, the Plaintiffs allege a breach of contract claim seeking Judgment
on Guaranty, partial recourse, against Egizii.
In Count IV, the Plaintiffs allege a breach of contract claim seeking Judgment
on Guaranty, full recourse, against Egizii. As the Court noted, the proceedings are
stayed against Egizii pursuant to his bankruptcy filing.

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In Count V, the Plaintiffs asserted claims for breach of Illinois Limited
Liability Company Act against the Borrower and Members. In an Order entered on
August 15, 2016 [d/e 28], the Court dismissed Count V.
In Count VI, the Plaintiffs assert claims under the Illinois Uniform Fraudulent
Transfer Act (“UFTA”), Constructive Fraud, against SPP, Egizii and the
Constructive Members.

The Plaintiffs allege SPP committed constructively

fraudulent transfers in the amount of $4,748,465.84. They further contend that the
Constructive Members are liable under 740 ILCS 160/9(b)(1) as follows: Thomas
Egizii is liable for $59,172.32; Michael Egizii is liable for $18,125.76; Jodi Baptist
is liable for $13,797.72; John Pruitt is liable for $45,157.76; and the Estate of Clyde
Beimfohr for $123,298.57.
In Count VII, the Plaintiffs assert claims under the UFTA, Actual Fraud,
against SPP, Egizii and the Constructive Members. They allege the Borrower
committed actually fraudulent transfers, 740 ILCS 160/5(a)(1), in the amount of
$4,748,465.84.
In Count VIII, the Plaintiffs assert civil conspiracy claims against all
Defendants.
Count IX was a tortious interference with contractual rights claim asserted
against EEI that was dismissed prior to trial pursuant to that Parties’ joint motion.
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(L)
In an August 15, 2016 Opinion and Order on the Defendants’ motion to
dismiss, the Court granted the motion to dismiss of the four Law Firm Defendants,
concluding that “the Plaintiffs have no right to pre-receivership income to the extent
it is sought from the Law Firms,” and dismissed all of the claims asserted against the
Defendants’ Law Firms. [d/e 28 at 45] The Court also determined that Plaintiffs
could not assert any fraudulent transfer claims against the Law Firm Defendants
because the Plaintiffs could not establish that a retainer transferred to a law firm
lacks reasonably equivalent value or that payment of a retainer to a law firm
constituted a fraudulent transfer. The Court further concluded that, because the
Plaintiffs had no right to the pre-receivership income, SPP “could not have intended
to defraud the Plaintiffs by transferring property to the Law Firms.” Id. at 49.
In an August 14, 2018 Opinion and Order denying the Plaintiffs’ motion for
leave to file a second amended complaint, the Court noted it previously “dismissed
the fraudulent transfer claims asserted against the Law Firms on the basis that
Plaintiffs ‘had no right to the income prior to the appointment of a receiver on
December 23, 2014.’” [d/e 152 at 7]. The Court also determined that, because the
Law Firms were paid solely from pre-receivership income, the Plaintiffs’ fraudulent
transfer claims would be futile. The Court concluded that Plaintiffs aiding and

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abetting and conspiracy claims would also fail “[b]ecause the Plaintiffs have no right
to the pre-receivership income as the Court previously held.” Id. at 9.
In his December 23, 2014 Order appointing Receiver, Sangamon County
Circuit Judge John Madonia determined that Plaintiffs were not entitled to prereceivership rents under Illinois law. The Order defined the receivership property
to include only rents generated by the real estate after the appointment of the
receiver.
In an Opinion and Order entered on February 28, 2019, this Court granted
summary judgment in favor of Plaintiffs and against SPP on Count I and against
Egizii on Count IV in the amount of $34,490,012.18. The Court found that the
Borrower had transferred property without the Plaintiffs’ consent in violation of ¶
1.5(Y) and full recourse liability was triggered.
II. DISCUSSION
Legal standards
In order to establish a breach of contract as alleged in Counts I, II, III and IV,
the Plaintiffs must prove their allegations by a preponderance of the evidence.
As for Count VI, the Plaintiffs must prove constructive fraud by a
preponderance of the evidence. See Wachovia Securities v. Newhauser, 528 F.
Supp.2d 834, 859 (N.D. Ill. 2007).
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Regarding Count VII, the Plaintiffs’ actual fraud claims under 740 ILCS
160/5(a)(1) must be proven by clear and convincing evidence. See Ray v. Winter,
67 Ill.2d 296, 304 (1977).
As for Count VIII, civil conspiracy is almost always established by
circumstantial evidence and not direct evidence, though the circumstantial evidence
must be clear and convincing. See McClure v. Owens Corning Fiberglass Corp.,
188 Ill.2d 102, 134 (1999). “Clear and convincing evidence” has often been defined
as “the quantum of proof that leaves no reasonable doubt in the mind of the fact
finder as to the truth of the proposition in question.” See Bazydlo v. Volant, 164
Ill.2d 207, 213 (1995).
Breach of contract claims against SPP- Count I
Under Count I, based on the Court’s prior Opinion [d/e 173] and the affidavits
of Plaintiffs and its counsel, the Plaintiffs allege they are entitled to judgment against
the SPP for $31,380,470.40, plus $7,093.82 per diem through the date of judgment,
plus interest at the federal judgment rate thereafter. 2
The Defendants contend that SPP’s creation of the Londrigan and Scott trust
accounts and deposit of funds therein are not prohibited “transfers” under ¶1.5(Y) of

2

The Plaintiffs make the same arguments as to Robert Egizii and allege those parties are jointly and
severally liable. However, the proceedings are stayed as to Egizii due to his bankruptcy filing.
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the Loan Documents under whatever definition of “transfer” is used—whether a
dictionary definition or the IUFTA definition, which defines “transfer” as “every
mode, direct or indirect, absolute or conditional, voluntary or involuntary, of
disposing with or parting with an asset or an interest in an asset, and includes
payment of money, release, lease, and creation of a lien or other encumbrance.” See
740 ILCS 160/2(l). Because SPP did not relinquish control of the pre-receivership
rents, the Defendants claim there was no transfer and they are entitled to
reconsideration on Count I.
The Plaintiffs’ predecessor Lender was the drafter of the documents.
Therefore, any ambiguity in the Loan documents must be construed against the
Lender. See Phillips v. Lincoln Nat. Life Ins. Co., 978 F.2d 302, 311 (7th Cir. 1992);
Nicor v. Associated Elec. Gas. 223 Ill.2d 407, 417 (2006).
Because the record establishes that the Scott and Londrigan trust accounts
were subject to garnishment, remained the property of SPP and were listed as assets
on SPP’s balance sheets, the Defendants allege the Court should reconsider its prior
ruling that it would be more difficult to collect from the Law Firms than from a
borrower’s account. See d/e 173, at 31. The Plaintiffs were advised of the trust
accounts in October 2013, a few months after they were created. If the Lender had
chosen to proceed to judgment against SPP, SPP’s bank accounts and the attorney
trust funds would have been subject to garnishment.
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While the Borrower’s initial deposits into the attorney trust accounts might
not constitute prohibited transfers under ¶1.5(Y) given that the deposits were not a
parting of interest and SPP maintained control over the funds, there eventually were
prohibited transfers under the provisions when the funds were disbursed for
attorney’s fees and tax distributions without SPP’s first obtaining the Lender’s prior
written consent. The funds were typically distributed at Egizii’s direction. Because
SPP did not first obtain the Lender’s consent before making the distributions, “all
such indebtedness evidenced by the Note and all the other obligations of Borrower
under the Loan Documents [were] fully recourse to Borrower” under ¶1.5(Y).
The Plaintiffs have proven by a preponderance of the evidence that the loans
are fully recourse based on SPP’s prohibited transfers. Based on the foregoing, the
Court finds that it has no basis to reconsider its earlier ruling wherein it granted
summary judgment in favor of Plaintiffs and against SPP as to Count I. The Court
hereby modifies the previously ordered amount of $34,490,012.18, plus interest and
attorney’s fees, to $31,380,470.40.
Breach of contract claims against SPP- Count II
In Count II, the Plaintiffs seek Judgment on Note, partial recourse, against
SPP, in the amount of $2,771,917.45, in post-default rental income, based on SPP’s
failure to make payments required under the Note beginning with the payment due

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on October 11, 2012. Under Section 2.1 of the Note, the failure to make loan
payments as required constitutes an Event of Default. Following the defaults, the
Lender accelerated the maturity of the Loan and declared the entire Loan balance
due and payable.
Under ¶1.5(e), the Borrower agreed to be personally liable for certain losses,
including any post-default rent not paid to the Lender and “not applied to the
ordinary and necessary expenses of owning and operating the Property.” The
Plaintiffs claim SPP is liable for $2,771,917.45 in post-default rental income for the
amount it failed to deliver in post-default rents, less a credit for any money used to
pay “ordinary and necessary expenses of owning and operating the Property.”
The Loan documents have no specific definition of “ordinary and necessary
expenses.” The terms of an agreement should generally be enforced as they appear.
See Dowd & Dowd, Ltd. v. Gleason, 181 Ill.2d 460, 479 (1998). As the drafter of
the documents, any ambiguity must be construed against the Lender. See id. A
number of witnesses testified as to how the phrase might be interpreted. While
Plaintiffs’ representative Clarkson identified “property-level expenses” such as
“[u]tilities, electricity, janitorial, landscaping, repairs and maintenance, real estate
taxes, [and] insurance,” he acknowledged there is room for a borrower and a lender
to disagree on the definition of “ordinary and necessary expenses.”

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Defendants’ expert Wright testified that legal fees are deductible as “ordinary
and necessary expenses” of operating the business under generally accepted
accounting principles, even if incurred to keep a business alive on a temporary basis.
CPA Dorinda Fitzgerald testified the post-default legal fees incurred by SPP in 2013
and 2014 were deductible ordinary and necessary expenses of operating the
properties under § 162 of the Internal Revenue Code. SPP’s workout consultant,
Lawrence Selevan, stated that as a financial adviser, he did not believe that legal fees
arising out of Borrower’s default should be paid using the Property’s income. Only
legal fees that directly relate to the economic operation of the property could be paid
using rental income.
SPP also used $283,896.70 of its rental income to pay EPM’s legal fees.
SPP’s rental income was also used to fund EEI’s defense. The Defendants presented
testimony this was done because of the existence of claims asserting that SPP, EPM
and EEI were alter egos of one another, and SPP thus was acting to protect itself.
The Borrower also used rental income to pay the legal fees of the Constructive
Members on the basis that Paragraph 18.5 of the Operating Agreement expressly
indemnifies the Borrower’s “members.” However, Paragraph 18.7 provides that the
constructive members are assigns of the direct members of SPP.

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SPP transferred approximately $700,000 to Robert Egizii, Jodi Baptist,
Michael Egizii, Thomas Egizii, Rodney Egizii, Clyde Beimfohr and John Pruitt so
they could pay their personal income taxes. Dorinda Fitzgerald testified that pass
through entities which report taxable income make distributions to cover their
members’ income tax liability because without such distributions, the members
would have to pay taxes on their own. Plaintiffs’ expert Johnston stated it was not
common for insolvent companies to do that. As previously stated, SPP’s actual
members were entities and not those individuals. Accordingly, it is difficult to see
how those payments could constitute an ordinary expense for SPP.
The Plaintiffs further note that under the Operating Agreement, the 2014
distributions would not have been permitted because SPP by then was insolvent and
the Illinois Limited Liability Company Act bars companies from distributing money
while insolvent. Moreover, the Borrower did not report any income on its tax returns
in 2014 to pass through to its members.
Additionally, SPP acknowledged the fact that it had income in 2013 was
primarily because it had stopped making mortgage payments. It seems unlikely that
expenses arising out of such an act would be ordinary and necessary.
In Count II, the Plaintiffs seek $2,771,917.45 in SPP’s post-default rental
income, consisting of $3,379,032.60 delivered to the Law Firms plus $1,667.81 and

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$16,217.04 left in SPP’s accounts minus $625,000 paid to the Plaintiffs. The
Borrower is personally liable under ¶1.5(e) if this post-default rent was “not applied
to the ordinary and necessary expenses of owning and operating the property.”
The Court is unable to conclude that any of those funds were used for ordinary
and necessary expenses under ¶1.5(e). While the phrase is not defined, the Court
finds no ambiguity under the circumstances of this case. Legal fees which related
to the operation of the property might qualify as “ordinary and necessary expenses.”
Johnston testified that SPP’s legal expenses in 2011 were about $5,000 and were
also a very low number in 2012. Those fees would likely qualify as “ordinary and
necessary expenses of owning and operating the property.” Here, the Law Firms
held the money in trust and the funds were then sent to the firms for legal expenses
or to other Defendants or third parties.
Because it does not appear that any of the legal fees related to the ownership
and operation of the property, the Court concludes that SPP breached the contract as
alleged in Count II. Moreover, SPP’s transfer of funds while insolvent to the
constructive members—who were not actual members--so that they could pay legal
fees or income taxes also would not constitute “ordinary and necessary expenses of
owning and operating the property.”

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Based on the foregoing, the Court concludes that Plaintiffs are entitled to
judgment on Count II against SPP in the amount of $2,771,917.45 in post-default
rental income.
Counts III, IV, V and IX
Counts III and IV are asserted solely against Robert W. Egizii, and the
proceedings as to him are stayed due to his bankruptcy filing.
The Court previously dismissed the Illinois Limited Liability Act claims
asserted in Count V.
The tortious interference with contractual rights claims asserted in Count IX
were also dismissed prior to trial.
Constructive Fraud claims--Count VI
(1)
Count VI includes constructive fraud claims under UFTA against SPP and the
Constructive Members. 3

The Plaintiffs allege SPP committed constructively

fraudulent transfers in the amount of $4,748,465.84. This includes $2,004,358 to
Scott to hold in trust and $1,147,000 to Londrigan to hold in trust, along with
$819,841.28 paid to Scott and $577,933.32 it paid to law firms that represent other

3

Count VI is also asserted against Robert W. Egizii, but those proceedings are stayed.
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persons or entities.

Page 40 of 73

They also assert the constructive members committed

constructive fraud in various amounts.
Constructive fraud occurs when a transfer is made “without receiving a
reasonably equivalent value in exchange for the transfer or obligation,” and either
the debtor “was engaged in or was about to engage in a business or transaction for
which the remaining assets of the debtor were unreasonably small in relation to the
business transaction” or the debtor “intended to incur, or believed or reasonably
should have believed he would incur, debts beyond his ability to pay as they became
due.”

740 ILCS 160/5(a).

The value of a reasonably equivalent transfer is

determined at the time the transfer was made. See In re McCook Metals, L.L.C., 319
B.R. 570, 579 (Bankr. N.D. Ill. 2005). The plaintiff must prove that the debtor
received less than reasonably equivalent value. See Barber v. Golden Seed Co., Inc.,
129 F.3d 382, 387 (7th Cir. 1997).
The Plaintiffs cite the testimony of Vince Toolen, the Borrower’s designated
corporate witness, who stated that “Mr. Egizii transferred over $3.5 million to four
different law firms because he was worried about the lender seizing the account[.]”
The Plaintiffs contend the Act exists to prevent transfers such as this.
All of the transfers occurred when the Borrower was insolvent. The Plaintiffs
note there is no rational purpose for SPP to have paid $3.2 million to the Law Firms

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in 2013 and 2014, when SPP incurred legal fees of $5,577.60 in 2012. When the
Plaintiffs in December 2014 requested that the Law Firms turn over the trust funds,
the Scott and Londrigan firms claimed that the money was paid to them and
protected as advance payment retainers. In April 2015, the Plaintiffs sent another
letter demanding turnover of the trust funds only. Scott and Londrigan responded
that the funds were protected as advance payment retainers. The attorneys testified
at trial that they held security retainers, not advance payment retainers.
In Dowling v. Chicago Options Associates, Inc., 226 Ill.2d 277 (2007), the
Illinois Supreme Court warned that advance payment retainers could be abused in
cases where the debtor is resisting a creditor’s efforts to collect on a judgment: “We
are aware of the potential for abuse of advance payment retainers, particularly in
circumstances such as the instant case where a judgment debtor seeks to resist efforts
of a judgment creditor to collect on a judgment. No argument has been raised in this
case that the retainers paid to Piper were excessive in light of the services that the
parties anticipated Piper would render to Davis and Seibel.” Id. at 295.
At the time the $450,000 in advance payment retainers were paid in
September 2014, the Parties were discussing a potential settlement. The Law Firms
had been paid for all legal invoices to that point and had received $80,000 in
retainers. The Illinois State Court Foreclosure Case was filed in November 2014.

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This case was not filed until June 2015. The Plaintiffs contend the Borrower thus
did not receive reasonably equivalent value at the time of the transfer.
The Defendants claim that the issue of whether attorney’s fees constituted
fraudulent transfers was decided in an August 16, 2016 Opinion and Order [d/e 48]
allowing the motion to dismiss of the Law Firm Defendants, when the Court held
that Plaintiffs have no right under Illinois law to Trust Funds and Retainer Funds
paid to the Law Firms before December 23, 2014, the date on which a receiver was
appointed. The Court stated, “Because the Plaintiffs had no right to the income prior
to the appointment of a receiver on December 23, 2014, the Borrower could not have
intended to defraud the Plaintiffs by transferring property to the Law Firms.” [d/e
28, at 49].
Two years later, in denying the Plaintiffs’ motion for leave to file a second
amended complaint, the Court reiterated that Plaintiffs could not assert constructive
fraudulent claims against the Law Firms: “The Court finds that the Plaintiffs have
alleged no new evidence showing a lack of reasonably equivalent value regarding
payments made. Accordingly, the fraudulent transfers claims fail for the same
reason.”
The Defendants further allege that because the Court has already determined
there was both reasonably equivalent value and no intent to defraud creditors, it

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follows that the Constructive Members can have no liability for fraudulent transfers
related to those transfers. This is true even though the motion to dismiss the
fraudulent transfer claims as to SPP and the constructive members was denied in the
August 16, 2016 Order.
The Defendants note that, at the time the complaint was filed, the attorney’s
fees were only $149,000, while the advance payment retainers amounted to
$500,000. Since then, the circumstances have changed and attorney’s fees have been
incurred. The Defendants contend, therefore, that what might have seemed a
plausible fraud claim in 2016 is no longer viable.
At trial, Robert W. Egizii testified that SPP hired four law firms because the
law firm representing the Plaintiffs, Miller Canfield, had approximately 275 lawyers
and could overwhelm any single Springfield firm. Although only two lawyers from
Miller Canfield worked on the instant case, the Defendants note that ten attorneys
worked on the State Court Foreclosure Case for the Plaintiffs. Egizii testified the
Londrigan firm was hired so that Bud Potter could be the negotiator; the Sgro firm
was hired because of Greg Sgro’s real estate experience; the Scott firm was hired
due to Steve Scott’s bankruptcy experience; and David Neff of Perkins was hired
when Larry Selevan recommended that a national firm be retained. The four firms
collaborated and signed a Joint Defense Agreement.

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The delivery of funds by what was then an insolvent SPP to Scott and
Londrigan to hold in trust certainly looks suspicious under all of the circumstances—
when the funds were later used to pay the Law Firms, other entities and the
constructive members. This is particularly true when compared with the amounts
expended on attorney’s fees in previous years. However, the existence of the trust
funds was disclosed at the time the Parties were engaged in settlement negotiations.
If an agreement was reached, the funds in the trust accounts would have been a major
component of the settlement. Each of the Defendants’ settlement proposals was
rejected by the Plaintiffs. The Plaintiffs contend the Defendants never had any
intention of settling, which is why Selevan was terminated when he believed the
Parties were on the verge of settlement. It was also during active settlement
discussions that retainers were distributed to the Law Firms and funds were
distributed to the constructive members.
At the time the trust funds were created, a receiver had not yet been appointed
so the Borrower was not precluded from contracting for legal services. When
settlement was not reached, the funds were used to pay for the legal fees. The Court
has no basis to question that SPP received reasonably equivalent value for the
attorney’s fees that were paid. There was testimony SPP hired each of the four firms
to perform different tasks. The four firms represented SPP from the date of default
through August 25, 2015.
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(2)
After August 25, 2015, the Londrigan firm represented Robert W. Egizii, a
member of SPP, jointly with the constructive members. While the indemnity clause
of the SPP Operating Agreement creates a legal obligation for SPP to defend its
members such as Egizii, it would not appear to apply to the constructive members,
who are assigns of the direct members. Given that the Londrigan firm represented
Egizii simultaneously with the constructive members—none of whom were deposed
or called at trial and none of whom had a role in SPP’s management—any time spent
exclusively on the defense of the constructive members would have likely been
minimal.
Attorney Greg Sgro represented EPM and EEI jointly and pursuant to Defense
Counsel’s Joint Defense Agreement. It does not appear that SPP had a duty to
defend EPM under ¶6(d) of the Property Management Agreement because the
Parties’ dispute does not pertain to the management of the property. Attorney Sgro
testified it was for the benefit and protection of SPP that EPM and EEI be represented
in this case because of the alter ego allegations in the complaint. Because EPM and
EEI were alleged to be alter egos of SPP, a default judgment against EPM or EEI
would also constitute a default judgment against SPP. SPP thus received a benefit
from fees expended on EPM and EEI.

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Based on the foregoing, the Court finds that SPP received reasonably
equivalent value from Londrigan’s and Sgro’s representation of the related parties—
the constructive members, EEI and EPM. Because it finds that SPP received
reasonably equivalent value for the attorney’s fees that were paid, the Court is unable
to conclude there was constructive fraud as to the attorney’s fees.
(3)
The Plaintiffs allege the Borrower did not receive reasonably equivalent value
for the $708,790.64 it distributed to the constructive members in 2014. Under 805
ILCS 25-30(a), a limited liability company may not distribute money while
insolvent.

The Parties dispute whether the refunding bonds signed by the

constructive members promising to pay the money back if the expenses were not
ordinary and necessary expenses of operating the property constituted reasonably
equivalent value.
The Plaintiffs note that nothing in the Borrower’s Operating Agreement
mandates distributions. The Operating Agreement incorporates the Illinois Limited
Liability Company Act’s prohibition on distributions while insolvent.
There is no evidence that the constructive members delivered any tangible
assets or provided any services. The Defendants claim that the refunding bonds
signed by Robert Egizii and each constructive member before receiving the tax
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distributions provided reasonably equivalent value at the time the transfers were
made. Attorneys Scott and Sgro testified that by obtaining a judgment, the Lender
could have obtained access to these funds in a citation proceeding.
Plaintiffs’ expert Jeffrey Johnston described the refunding bonds as a
“contingent asset, and the value of that asset would need to be considered in the
context of whether or not it constituted reasonably equivalent value.” Johnston
testified that while the refunding bond may have some value, it is not “reasonably
equivalent value” because of the “uncertainty associated with it.”
At the time of the transfers, the value of the refunding bonds was, at best,
speculative. Because consideration is valued at the time of the transfer, see McCook
Metals, 319 B.R. at 579, and there was no judgment against SPP at the time, any
consideration that the refunding bonds had was not then in a form available to
creditors and does not constitute reasonably equivalent value under the UFTA.
Accordingly, the Court concludes that SPP committed fraud in the amount of
$708,790.64 by distributing the funds to the constructive members in 2014 when it
was insolvent.
To the extent that Plaintiffs allege the constructive members are liable for
constructive fraud as transferees under 740 ILCS 160/9(b)(1) for receiving funds
from SPP for tax distributions, the Court disagrees. A member generally is not liable

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for the debts or obligations of a limited liability company. See 180 ILCS 10/10(a).
A member may be liable if the articles of organization contain a provision
authorizing such liability and the member has consented or agreed to be bound by
the provision. See 180 ILCS 10/10(d). SPP’s Operating Agreement has no
provisions which makes SPP’s members or their assigns such as the constructive
members liable for any torts, debts or liabilities of the company.
The Plaintiffs rely on a recent Seventh Circuit case which confirmed that an
individual who is sued because of his individual acts as a participant in a fraudulent
scheme can be held liable, despite the language in the Illinois Limited Liability Act
That court stated:
Kaufman participated individually in each of the closings as counsel for the
seller. He also personally directed Traditional Title’s employees to conceal
the fraud from Fifth Third. In these dual roles he participated in the fraud for
his own personal gain. The judgment against Kaufman was not derived solely
from Traditional Title’s liability, based on his membership in the LLC.
Section 10-10 does not bar his liability here.
Fifth Third Mortgage Co. v. Kaufman, 934 F.3d 585, 589 (7th Cir. 2019).
The Plaintiffs claim the constructive members actively participated in the
conspiracy by signing the refunding bonds, with full knowledge of the Plaintiffs’
claims and the Borrower’s efforts to deprive Plaintiffs of their funds. Vince Toolen
had delivered the Plaintiffs’ March 2013 letter to the constructive members which
stated that Plaintiffs claimed a right in the rents.
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As noted earlier, the constructive members as members of the members of
SPP are at best indirect members. However, the Court is unable to conclude that the
constructive members are at all similar to an attorney who actively participated in
and directed concealment of a fraudulent scheme at real estate closings as in
Kaufman.

While the constructive members benefitted from SPP’s fraud, the

constructive members did not make the transfer and were passive actors. There is
no evidence they originated the plans to receive the distributions. Because of their
limited participation, the constructive members are not liable in Count VI for fraud.
The constructive members also are not liable for fraud under UFTA for the
same reason the Court determined in its August 15, 2016 Order that the Law Firms
had no liability for fraud. The Court noted that the Law Firms had not signed any
of the Loan Documents and had received pre-receivership rents. The constructive
members are in precisely the same position.
For the foregoing reasons, the Court concludes that the SPP’s constructive
members are not liable for constructive or actual fraud under UFTA.
(4)
On the eve of the final day of trial, the Plaintiffs sought to file an amended
complaint asserting fraud claims in Counts VI and VII against EPM and EEI based
on alter ego theories of liability. In the final Pretrial Order, the Plaintiffs assert
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damages under Counts VI and VII alleging post-default fraudulent transfers to EPM
in the amount of $330,633.24. The Plaintiffs also claim that SPP’s failure to collect
rent from EEI amounted to a transfer of $1,003,800 for which SPP did not receive
reasonably equivalent value.
The Court notes that neither EPM nor EEI is listed as a Defendant in Counts
VI and VII of the Plaintiffs’ original complaint. The Plaintiffs’ motion for leave to
file an amended complaint was denied. To the extent that Plaintiffs pursue those
legal theories against EPM and EEI in their final briefs, the Court declines to find
that EPM and/or EEI are liable for fraud under Count VI and VII.
The Plaintiffs also now allege that the Borrower did not receive reasonably
equivalent value for the $15,000 advance payment in September 2014 to Pehlman
or the $15,000 Pehlman settlement that Borrower fully funded in February 2017.
Because these allegations were not included in the complaint, the Court declines to
find that the payments to Pehlman constituted fraud under Count VI and Count VII.
Actual fraud claims- Count VII
Count VII includes actual fraud claims. The Plaintiffs must prove actual fraud
under 740 ILCS 160/5(a)(1) by clear and convincing evidence. See Ray, 67 Ill.2d at
304. A debtor makes a transfer or incurs an obligation that is fraudulent to a creditor
when done “with actual intent to hinder, delay, or defraud any creditor of the debtor.”
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740 ILCS 160/5(a)(1). Illinois recognizes the right of debtors to pay their attorneys
advance payment retainers before the debtor files for bankruptcy. See Dowling v,
Chicago Options Assocs., Inc., 226 Ill.2d 277, 289-290 (2007). Under such fees
arrangements, attorneys are required to promptly refund any unearned fees after the
representation concludes. See id. at 293.
To assist in determining actual intent, the statute contains a list of eleven nonexhaustive badges of fraud, or factors that may be considered in determining whether
a transfer was made with the requisite intent. See In re Grube, 462 B.R. 663, 664
(C.D. Ill. 2012). A number of those badges of fraud under 740 ILCS 160/5(a)(1) are
present in this case. Some of the transfers were made to insiders—the constructive
members, EEI and EPM. Some transfers were concealed and not disclosed. SPP
had been threatened with suit and engaged in the transfers while insolvent.
Moreover, the transfers occurred soon after the Loan was accelerated.
The Plaintiffs must show it was highly probable that the attorney’s fees
payments and other transfers were made to defraud the Lender. The Plaintiffs point
to testimony that SPP’s intent in delivering money to Scott and Londrigan to hold in
trust was to affect settlement negotiations with Plaintiffs and/or pay its operating
expenses while avoiding paying Plaintiffs and thereby staying in business.
Plaintiffs’ expert Johnston testified that the only reasonable explanation for SPP’s
course of dealing around the time the retainers were paid and immediately prior to
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the appointment of a receiver is that SPP was attempting to put its funds out of
Plaintiffs’ reach.
Certainly, there is some evidence of fraudulent intent. However, SPP’s
multiple settlement offers to Plaintiffs also suggests there was no actual or specific
intent to defraud the Lender. While the Court recognizes that Plaintiffs had to
investigate SPP’s financial position before accepting any settlement and no
settlement was reached, the offers tend to negate any actual intent to defraud the
Lender. In September 2014, SPP even paid $625,000 as a showing of good faith
during negotiations. While the Plaintiffs question SPP’s sincerity in pursuing
settlement, it was Plaintiffs who rejected the proposals. Although the offers were
not acceptable to the Plaintiffs, the Court has no basis to find that they were made in
bad faith.
Based on the foregoing, the Court finds that Plaintiffs cannot prove by clear
and convincing evidence that SPP’s transfers after becoming insolvent were done
with intent to defraud the Lender. Accordingly, the Plaintiffs have not proven the
Borrower committed actually fraudulent transfers as alleged in Count VII. To the
extent that actual fraud is asserted against the constructive members, the Court
concludes that Plaintiffs have not established by clear and convincing evidence that
constructive members committed actual fraud.

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Alter ego claims
In Count I, the Plaintiffs also seek to pierce the corporate veil of SPP on the
basis that EEI and EPM function as a mere instrumentality, alter ego and agent of
SPP. The Plaintiffs assert that allowing EEI and EPM to maintain separate corporate
identities would result in injustice to Lender because of assets transferred from the
Borrower to the Lender.
“Generally, before the separate corporate identity of one corporation will be
disregarded and treated as the alter ego of another, it must be shown that it is so
controlled and its affairs so conducted that it is a mere instrumentality of another,
and it must further appear that observance of the fiction of separate existence would,
under the circumstances, sanction a fraud or promote injustice.” See Main Bank of
Chicago v. Baker, 86 Ill.2d 188, 205 (1981). To pierce the corporate veil, Plaintiffs
must establish the following elements: (1) there must be such unity of interest and
ownership that the separate personalities of the corporations no longer existed; and
(2) the adherence to the fiction of separate corporate existences would sanction a
fraud. See Van Dorn Co. v. Future Chem. & Oil Corp., 753 F.2d 565, 569-70 (7th
Cir. 1985). “[P]iercing of the corporate veil on an alter ego theory is available only
where failing to provide such relief would promote injustice or inequity.”
International Financial Services Corp. v. Chromas Technologies Canada, Inc., 356
F.3d 731, 737 (7th Cir. 2004).
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(1)
The Defendants note alter ego liability in breach of contract cases is a very
difficult standard to meet, especially when the contracting parties knew of the
common ownership at the time of contracting.
organizational documents for each entity.

The Lender approved the

EEI was involved in the electrical

contracting business; EPM managed real estate for SPP and other properties and SPP
owned the real estate at issue.
The Plaintiffs state that because of the potential for abuse, it was very
important that the entities maintain arms-length relationships.

Therefore, the

Borrower’s Agreement and the Mortgage documents contain provisions which
include safeguards that must be observed for the Borrower to maintain its separate
identity.
There was testimony at trial that the three entities kept separate bank accounts,
separate books, separate stationery, filed separate tax returns, they did not
commingle funds; SPP and EPM kept their records in separate filing cabinets, EEI
kept its records in a separate office, EEI had a separate accounting system, servers
and logins. EEI employees examined the bills for legal fees to ensure that SPP only
paid legal bills attributable to SPP. Vince Toolen, who was the corporate witness

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under Federal Rule of Civil Procedure 30(b)(6) for each of the three entities, testified
that SPP treated EEI the same as any other contractor that provided services to it.
EEI and SPP were both insolvent after 2012 and there was also testimony that
safeguards were not always observed. SPP and EPM both occupied a portion of the
space leased to EEI at 700 North McArthur. Neither had a sublease or paid rent.
The three entities all shared the same administrative staff: Linda Wells, Julie
Farrington/Long and Theresa Pennington. All were employed and paid by EEI but,
according to Toolen, performed work for the Borrower “on a daily basis.” They
entered SPP’s accounting information into the computer. They directed the Law
Firms on how to dispose of funds in SPP’s trust accounts. Toolen testified they
helped him locate materials to respond to the Borrower’s discovery requests. The
three entities kept their books and records in the same office.
(2)
Vince Toolen testified he worked as an “independent contractor” for EPM,
though he did not receive his paycheck from EPM. EPM had no employees. Toolen
testified that in order to get paid, he would invoice whichever of Egizii’s properties
he happened to be working for, such as SPP. He would then give the invoice to one
of EEI’s administrative employees who would obtain Egizii’s approval for payment.

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Toolen spent approximately 90% of his time in the same office where the three
entities were all located.
At different times, Toolen held himself out as “Borrower’s Executive
Assistant,” when he advocated for a rent reduction on behalf of EEI, and Borrower’s
“Leasing Manager,” when communicating with the Plaintiffs’ representatives about
the Loan. On one occasion, he directed an EEI employee, Theresa Pennington, to
prepare a check to the Plaintiffs from the Borrower’s checking account to effect a
reduction in EEI’s rent, under EPM’s signature. Toolen testified he had access to
EEI’s financials as well as SPP’s. He reviewed SPP’s accounting information at the
end of each month.
Susan Wesp, EEI’s CFO from June 2008 to November 2013, testified she was
a signatory on EEI’s checking account and also an authorized signatory on the
Borrower’s checking account. Robert W. Egizii testified Wesp was an authorized
signatory for SPP because he was often away from the office and it was more
convenient. Wesp also helped Toolen respond to the Plaintiffs’ inquiries relating to
the Egizii portfolio. Wesp testified she also helped out with EPM if needed.
Vince Toolen testified he did not see a conflict with EEI’s CFO assisting with
SPP and described it as “free help.” This was around the time that EEI requested a
rent reduction. Egizii testified Wesp also provided information about SPP to Larry

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During this period, Egizii and Wesp

appeared to be the only officers or directors who played an active role for EEI.
(3)
The record establishes that each of the three entities was undercapitalized.
Undercapitalization is an important factor in determining whether the corporate
entity should be disregarded. See Fentress v. Triple Min., Inc., 262 Ill. App.3d 930,
938 (4th Dist. 1994). Plaintiffs’ expert Johnston testified that “[u]ndercapitalization
refers to the inability to pay debts as they become due, either presently or in the
future . . . due to a lack of capital.”

Johnston strongly believed SPP was

undercapitalized at least from 2012 on. The Borrower reported losses on its tax
returns in 2012 and 2014 and would have in 2013 if it had paid interest to the
Plaintiffs.
Johnston also testified that EEI was undercapitalized. The evidence showed
that EEI requested a number of rent reductions for the space it occupied at 700 North
MacArthur and eventually stopped paying rent altogether. EEI’s business was
failing due to the poor economy. It reported losses on its tax returns in 2012, 2013
and 2014.
EPM was also undercapitalized and claimed a loss on its taxes for years 2013
and 2014.
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This resulted in the financial interdependence of the entities. Johnston noted
that EEI was financially dependent on SPP because it owed rent to SPP and relied
on the Borrower’s grant of rent reductions. EEI owed the Borrower $325,000 in
annual rent and paid nothing in 2013 or 2014. EPM was tasked with enforcing leases
under the Management Agreement, though neither SPP nor EPM ever demanded
payment from EEI or sought eviction. EPM was financially dependent on the
Borrower.
(4)
The record also shows that none of the entities observed corporate formalities.
When the membership of SPP changed, it was not documented in the Operating
Agreement as required. The Operating Agreement provided that SPP shall hold
regular meetings. Toolen had no knowledge of regular meetings.
Section 8 of the Operating Agreement only permits distributions “[t]o the
fullest extent allowed by the Illinois Limited Liability Company Act[.]” The
Borrower did not issue distributions until it was insolvent in 2014. In 2014, it made
distributions to the constructive members, rather than SPP’s actual members.
Vince Toolen testified he and EEI employees Linda Wells and Susan Wesp
all had access to Borrower’s financials. Section 13(d) of the Operating Agreement
states that Borrower shall “hold itself out to creditors and to the public as a legal
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entity separate and distinct from any other entity.” It was also to “correct any known
misunderstandings regarding its separate identity.” However each officer, director
and employee of EEI, EPM and Borrower—including Egizii, Toolen, Wesp, Wells,
Farrington/Long and Pennington, used @eeiholding.com as their email domain,
thereby holding themselves out to the public as EEI employees. This confused the
Plaintiffs, who addressed two separate letters in February 2013 intended for the
Borrower to EEI employees Wesp and Wells.
All three entities used the same accounting firm, Pehlman, and EEI employees
communicated with Pehlman regarding all three entities.
In sum, SPP never held itself out to third parties as separate from the other
entities. Moreover, the officials who were affiliated with any of the entities also did
not treat SPP as separate from EEI and EPM.
EEI’s actions also did not reflect any provisions of its by-laws. Neither
Toolen nor Wesp recalled any formal meetings.
EPM did not have a formal operating agreement. It held no formal meetings
and kept no minutes of meetings.
EPM made no distributions but paid $314,914 and $277,641 in 2013 and 2014
to Egizii, its 85% owner, for “contract labor.”
(5)
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The record shows that at times, the three entities did not keep each other at
arm’s length as required under Illinois law and Section 13(g) of the Borrower’s
Operating Agreement.
When EEI’s lease began in 1998, Robert W. Egizii signed individually as
Lessor and also signed for Egizii Electric, one of EEI’s divisions. In the amendment
in 2002, Egizii signed as CEO of Egizii Electric and individually as Lessor. In Lease
Amendment No. 2 in 2006, Egizii signed as CEO of Egizii Electric and Manager of
700 North MacArthur, LLC. Lease Amendment No. 3 was signed in 2009 by Egizii
as President of Springfield Prairie Properties SPE, Inc., as Manager on behalf of
Borrower, and Wesp signed on behalf of EEI.
The leases show that Egizii was in control of both landlord and tenant. The
lease amendments do not recite anything about the landlord changes from Egizii,
individually, to 700 North MacArthur, LLC to Borrower. Toolen testified he was
unaware of any assignments of the initial lease. This suggests that before 2011 SPP,
EEI and EPM were not operating at arm’s length.
Lease Amendment No. 3 reduced EEI’s monthly rent from $27,100 to
$22,000 per month for a two-year period, at the end of which rent would return to
$27,100 per month. When the period expired in September 2011, SPP left rent at

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$22,000 per month. Neither the Borrower nor EEI requested an extension of the rent
reduction. This cost SPP more than $60,000 over the year that followed.
Lease amendments required the Plaintiffs’ approval after the loan was made.
When the Borrower sought approval for Lease Amendment No. 3 in 2009, Toolen
signed the letter as SPP’s executive assistant, even though he was an independent
contractor for EPM. EPM’s Management Agreement did not contemplate EPM
representing SPP in dealing with the Plaintiffs. Toolen spoke for the Borrower in
advocating for a rent reduction for EEI. The Plaintiffs approved Lease Amendment
No. 3, not knowing that Toolen was not actually employed or engaged by Borrower.
On October 31, 2012 Toolen, while acting as “Leasing Manager” for SPP,
wrote to the Plaintiffs asking to cut EEI’s rent in half from $22,000 to $11,000 per
month, even though the rent should have returned to $27,100 per month more than
one year earlier. Toolen’s letter regarding cutting EEI’s rent to $11,000 per month
does not include any discussion of whether the property could be re-leased and at
what rate. Susan Wesp, who signed the letter for EEI requesting a rent reduction,
was consulted regarding market conditions. Toolen testified that SPP never hired a
broker to market 700 North MacArthur for lease in order to try to find a tenant who
might pay a higher rent than EEI. The Plaintiffs did not approve the amendment
request because a further reduction would have worsened the Borrower’s precarious
financial position.
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Even though it was not approved by the Plaintiffs and neither SPP nor EEI
signed the lease documents, SPP reduced EEI’s rent obligation on SPP’s books to
$11,000 per month beginning on January 1, 2013. However, EEI stopped paying
rent altogether on January 1, 2013. Toolen testified that the reason EEI stopped
paying rent was to prompt the Plaintiffs to negotiate with SPP about the Loan. EEI
had a contract with SPP and it would not be an appropriate negotiation tool for a
third party to default to force settlement discussions.
Following EEI’s default, neither the Borrower nor EPM demanded payment
from EEI or sought to evict it from 700 North MacArthur. EEI stayed on site for
two years after defaulting until a receiver was appointed without paying any rent to
SPP. This cost the Borrower $650,000. During the same period, SPP paid EEI more
than $350,000 for EEI’s services without ever offsetting against rent. SPP even
provided a $55,000 credit against its back due rent.
As with EEI, SPP gave rent reductions to McLeod in an effort to keep them
as a tenant. Thus, some evidence was presented that another entity was treated
similarly to EEI. Toolen testified it was in SPP’s economic interest to reduce EEI’s
rent because other tenants were not available. The $7,400 per month in utilities paid
by EEI would otherwise have been SPP’s responsibility.

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Toolen testified that other State of Illinois tenants were in default and the
Borrower had to treat all tenants the same. He stated EEI was not evicted for that
reason. However, the State did not fail to pay entirely. The State was in arrears but
paid some of the funds it owed during the two years EEI paid nothing. As Plaintiffs’
expert Johnston testified, moreover, it was a failure of corporate formalities for
neither SPP nor EPM to enforce EEI’s lease.
There were also loans to Robert Egizii and Egizii Family Limited Partnership
(composed of Egizii and his children) which were reflected on EPM’s financial
statements, including its tax returns for 2012-2014 and its balance sheets. Loans to
Egizii Family Limited Partnership appear on EPM’s financial information but no
documents were produced and no one could identify the loans or their terms.
The record showed there was commingling of funds among the three entities.
Wesp acknowledged it would be commingling if SPP was paying the bills of EEI.
SPP was also required under the Operating Agreement to “maintain books and
records and bank accounts separate for any other person.” The evidence showed that
Borrower paid the expenses of other entities. SPP paid $350 annually for corporate
fees of RWE of Illinois, LLC and RWE of Springfield, Inc. It paid $650 to Pehlman
for an EEI invoice. It paid EEI’s $3,000 portion of a legal invoice issued by
Londrigan. In February 2017, the Borrower paid all of a settlement payment to
Pehlman which resolved over $20,000 in obligations owed by non-Borrower entities,
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$8,495.20 of which was owed by EEI. SPP also paid legal fees incurred to defend
EEI and EPM. EEI paid Egizii’s initial retainer to the Perkins firm.
(6)
Because of these actions diverting money among the three entities, the
Plaintiffs were deprived of significant funds. Robert W. Egizii personally received
$415,037.21 in distributions from the Borrower while it was insolvent.
constructive members received another $293,753.43.

The

Egizii received almost

$400,000 in annual salary from EEI during the time that EEI paid no rent. Egizii
personally received $211,546, $314,914 and $277,641 from EPM as “Contract
Labor” fees in 2012, 2013 and 2014, respectively, which is consistent with EPM’s
gross receipts of $232,485, $317,957 and $277,776 in the same years. Egizii and
the Egizii Family Limited Partnership owed loans to EPM that were never
documented or paid. These actions contributed to draining SPP of money, while
placing significant funds in Egizii’s pocket along with those of his family and
friends.
Based on the evidence presented at trial, the Court finds, therefore, under
Count I that SPP, EEI and EPM are alter egos of one another. The entities included
the same employees, paid by EEI exclusively. All three entities worked out of the
same office, which was leased exclusively to EEI. EEI’s officers and directors acted

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for all three entities and all three utilized the same designated corporate witness.
None held regular meetings or kept corporate minutes. SPP did not document
transfers of its membership interests from 700 North MacArthur, LLC to Robert
Egizii or from Marco Partnership to Marriot Commerce Building, LLC. Each entity
used the same email domain and otherwise held themselves out as one entity. When
the Borrower and EEI became insolvent and were unable to pay their regular
obligations—for the Loan and Lease, respectively—as they came due, SPP and EEI
commingled funds by paying for one another’s obligations, particularly legal
expenses. The Parties failed to maintain arms-length relationships. SPP and EPM
failed to enforce the terms of EEI’s lease, EPM did not perform the management
services required under its contract with SPP, among other things.
The Court further concludes that respecting the corporate form of SPP, EEI
and EPM would work a fundamental injustice. The breach of corporate formalities
and arms-length dealings systematically deprived SPP of funds by overpaying
management fees and underpaying rent without enforcing the terms of the lease. At
the same time, SPP engaged in other activities designed to deprive the Plaintiffs of
any recovery on their Notes. In 2013 and 2014, EEI paid a nearly $400,000 per year
salary to Egizii; EPM paid $592,555 to Egizii as “Contract Labor” fees, and SPP
distributed $415,037.21 to Egizii. Accordingly, EEI and EPM are jointly and

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severally liable as alter egos for the amounts for which the Borrower is liable on
Count I.
Civil conspiracy
(1)
In Count VIII, the Plaintiffs allege civil conspiracy claims as to all
Defendants, contending that two or more of the Defendants knowingly conspired in
a common scheme or plan to place the assets of Borrower, Egizii or both outside of
the reach of creditors such as the Lender—by engaging in collateral transfers and
lease transactions. The Plaintiffs assert the Borrower did this to avoid its obligations
to its creditors. They further contend this was accomplished through unlawful
means, including breaching contractual obligations, breaching the Illinois Limited
Liability Company Act and engaging in fraudulent transfers.
Illinois law defines civil conspiracy as “(1) a combination of two or more
persons, (2) for the purpose of accomplishing by some concerted action either an
unlawful purpose or a lawful purpose by unlawful means, (3) in the furtherance of
which one of the conspirators committed an overt tortious or unlawful act.” Fritz v.
Johnston, 209 Ill.2d 302, 317 (2004). “The participants in the conspiracy must share
the general conspiratorial objective, but they need not know all the details of the plan
designed to achieve the objective or possess the same motives for desiring the
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intended conspiratorial result.” Lenard v. Argento, 699 F.2d 874, 882 (7th Cir.
1983).
The Defendants claim that SPP, its members and constructive members, EEI
and EPM cannot conspire with each other because a corporation cannot conspire
with its agents. The general rule is that there cannot be conspiracy between a
principal and an agent because the acts of the agent are considered in law to be acts
of the principal. See Buckner v. Atlantic Plant Maintenance, Inc., 182 Ill.2d 12, 24
(1998). An exception to the general rule is when the interests of a separately
incorporated agent diverge from the interests of the corporate principal and the agent
at the time of the conspiracy is acting beyond the scope of his authority or for his
own benefit, rather than that of the principal. See Bilut v. Northwestern University,
296 Ill. App.3d 42, 49 (1998) (citing Pink Supply Corp. v. Hiebert, 788 F.2d 1313,
1317 (8th Cir. 1986)). The second exception is when the agent is acting not as an
agent but as a principal, in which case the agent can be liable for conspiring with the
principal. See Bilut, 296 Ill. App.3d at 49 (citing Morrison v. Murray Biscuit Co.,
797 F.2d 1430 (7th Cir. 1986)).
Because the constructive members are not actually members of SPP, the Court
is unable to conclude that the civil conspiracy claims asserted against them are barred
by the Illinois Limited Liability Company Act. By signing the refunding bonds three
different times, each of the constructive members were aware that they were required
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to refund the distributions due SPP’s obligations to Plaintiffs pursuant to the Loan
Documents. The refunding bonds signed by the constructive members expressly
state that Plaintiffs may have a claim under the Note and Guaranty to the money
being distributed.
However, the Court is unable to conclude that Plaintiffs have proved by clear
and convincing evidence that the constructive members were part of a conspiracy to
place the Borrower’s assets out of the reach of the Lender. The constructive
members may have believed that SPP received equivalent value based on their
promise to repay the full amount upon the Plaintiffs obtaining a judgment. As the
Court earlier noted, the constructive members were passive actors. Because it is
unknown precisely whether the constructive members knew of an unlawful purpose
or a lawful purpose by unlawful means, the Court concludes that Plaintiffs have not
established wrongful conduct sufficient to establish civil conspiracy as to the
constructive members.
(2)
The Court does find that Plaintiffs have established by clear and convincing
evidence that SPP, EEI and EPM actively participated in and engaged in a concerted
action for an unlawful purpose by breaching SPP’s contracts with the Plaintiffs.
SPP, EEI and EPM were aware that Borrower claimed a right to the rents dating

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back to at least April 2013. Specifically, each of the entities knew because Egizii
had major roles with each—as EEI’s primary stockholder, as EPM’s majority
member and he received the Demand Letter sent to SPP. The evidence showed that
other individuals who acted on behalf of the entities—such as Susan Wesp and Vince
Toolen—had also seen the Demand Letter and acted pursuant to it.
EEI and EPM ensured that EEI’s rent was booked at reduced rates and that
EEI occupied 700 North MacArthur without paying any rent at all. EEI never paid
$1 million in rent. Each collected significant money from SPP after SPP’s default.
SPP also paid significant funds to EEI’s divisions against the rent that EEI owed
without ever offsetting the amounts against the rent that EEI owed Borrower. All of
this resulted in less income and more expenses for SPP, which deprived the Plaintiffs
of funds to which they were entitled pursuant to the Loan Documents.
Because EEI and EPM were acting for their own benefit to the detriment of
SPP, the Court is unable to conclude that the conspiracy claims are barred because
of a principal-agency relationship.
The Plaintiffs have established civil conspiracy by clear and convincing
evidence as to SPP, EEI and EPM. The result was those Defendants paid themselves
instead of the Plaintiffs in violation of the contracts. Accordingly, the Plaintiffs are
entitled to Judgment on Count VIII as to the civil conspiracy claims asserted against

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SPP, EEI and EPM for the amount for which SPP is liable under the terms of the
Note.
III. CONCLUSION
To the extent that Defendants rely on laches, failure to mitigate damages
and/or equitable estoppel, the Court finds upon considering all of the evidence that
none of those affirmative defenses bar the Plaintiffs’ claims.
Under Count I, based on the Court’s prior Opinion [d/e 173] and the evidence
in the record and pursuant to the terms of the Note, the Court finds that the Plaintiffs
are entitled to Judgment against the Borrower in the amount of $31,380,470.40, plus
$7,093.82 per diem through the date of Judgment, plus interest at the federal rate
thereafter. EEI and EPM are jointly and severally liable for those amounts as alter
egos of SPP.
Under Count II, pursuant to the terms of the Note, the Court finds that SPP is
liable for $2,771,917.45 in post-default rental income that was not delivered to
Plaintiffs.
Counts III and IV are asserted solely against Defendant Robert W. Egizii. The
proceedings are stayed against Defendant Egizii pursuant to his bankruptcy filing.
The claims pursuant to the Illinois Limited Liability Act in Count V were
previously dismissed.
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Under Count VI, the Court finds that Borrower committed constructively
fraudulent transfers in the amount of $708,790.64 based on distributions to the
constructive members without having received reasonably equivalent value. The
constructive members are not liable for constructive fraud. The Court is unable to
find that SPP’s other transfers constituted constructive fraud. Moreover, the Court
did not consider any claims that were not asserted in the original complaint.
Under Count VII, the Court is unable to find by clear and convincing evidence
that the Borrower and Members committed actual fraud.
Under Count VIII, the Court finds that SPP, EEI and EPM are liable for civil
conspiracy. The Court does not find by clear and convincing evidence that the other
Defendants are liable for civil conspiracy.
The tortious interference with contractual rights claims asserted against EEI
in Count IX were dismissed prior to trial.
Ergo, the Clerk will enter Judgment in favor of Plaintiffs and against
Defendant Springfield Prairie Properties, LLC, on Count I in the amount of
$31,380,470.40, plus $7,093.82 per diem since March 28, 2013, through the entry
of Judgment, plus interest at the federal rate thereafter.
As to Count I, Judgment will also be entered against Defendants EEI Holding
Corporation and Egizii Property Managers, LLC, who are jointly and severally liable
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as alter egos of Springfield Prairie Properties, LLC, in the amount of
$31,380,470.40, plus $7,093.82 per diem since March 28, 2013, through the date of
Judgment, plus interest at the federal judgment rate thereafter.
The Clerk will enter Judgment in favor of Plaintiffs and against Defendant
Springfield Prairie Properties, LLC, on Count II in the amount of $2,771,917.45.
Because of the stay as to the continuation of any judicial proceeding against
Defendant Robert W. Egizii, no Judgment will enter as to Counts III and IV.
The claims asserted in Count V were previously dismissed.
The Clerk will enter Judgment in favor of the Plaintiffs and against Defendant
Springfield Prairie Properties, LLC, on Count VI in the amount of $708,790.64.
The Clerk will enter Judgment in favor of the Defendants and against the
Plaintiffs as to Count VII.
As to Count VIII, the Clerk will enter Judgment in favor of the Plaintiffs and
against Defendants Springfield Prairie Properties, LLC, EEI Holding Corporation
and Egizii Property Managers, LLC, jointly and severally, in the amount of
$31,380,470.40, plus $7,093.82 per diem since March 28, 2013, through the entry
of Judgment, plus interest at the federal rate thereafter.
The claims asserted in Count IX were previously dismissed.

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The Clerk will also enter Judgment pursuant to the Order [d/e 28] allowing
the Motion to Dismiss of Defendants Londrigan, Potter & Randle, P.C., Perkins
Coie, Scott & Scott, P.C. and Sgro, Hanrahan, Durr & Rabin.
Upon entry of Judgment, the Clerk will terminate this case.
IT IS SO ORDERED.
ENTER: March 15, 2021
FOR THE COURT:
/s/ Richard Mills
Richard Mills
United States District Judge

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