Las Villas Produce, Inc.

National Labor Relations Board - Board Decisions

May 8, 1986

279 N.L.R.B. 883 (N.L.R.B. 1986)

LAS VILLAS PRODUCE
Las Villas Produce , Inc. and Carmelo P. Caldero,
Individually and Produce, Fresh & Frozen
Fruits & Vegetables , Fish, Butter , Eggs, Cheese,
Poultry , Florists, Nursery , Landscape and
Allied Employees , Drivers , Chauffeurs, Ware,
housemen and Helpers Union , Chicago and Vi-
cinity , Local 703, International Brotherhood of
Teamsters, Chauffeurs , Warehousemen and
Helpers of America . Case 13-CA-19903
8 May 1986
SECOND SUPPLEMENTAL DECISION
AND ORDER
By CHAIRMAN DOTSON AND MEMBERS
JOHANSEN AND BABSON
On 23 October 1984 the National Labor Rela-
tions Board issued its Supplemental Decision and
Order' in the above-entitled proceeding in which it
ordered Respondent Las Villas Produce, Inc., Chi-
cago, Illinois, its officers, agents, successors, and
assigns, to pay its unit employees a total of
$746,877.44 in net backpay and health and welfare
and pension fund payments with interest computed
in a manner consistent with Board policy. The
Board Order was enforced by the Seventh Circuit
by a default judgment entered 10 April 1985. A
controversy having arisen over the personal liabil-
ity of Carmelo P. Caldero, also known as Carmelo
Caldero Padilla, for the sums owed by Las Villas
Produce, Inc., the Regional Director issued a
second backpay specification and notice of hearing
alleging , inter alia, that Carmelo Caldero is and
was the alter ego of Las Villas Produce, Inc., and
that he is jointly and severally liable for the full
amount of backpay and benefit fund payments
owed.
On 13 August 1985 Administrative Law Judge
Walter H. Maloney Jr. issued the attached second
supplemental decision. The General Counsel and
the Respondent filed exceptions and supporting
briefs, and the General Counsel filed an answering
brief to the Respondent's exceptions.
The National Labor Relations Board has delegat-
ed its authority in this proceeding to a three-
member panel.
The Board has considered the decision and the
record in light of the exceptions and briefs and has
decided to affirm the judge' s rulings , findings, 2 and
1 272 NLRB 915 (1984)
2 The Respondent has excepted to some of the judge 's credibility find-
ings The Board's established policy is not to overrule an administrative
law judge's credibility resolutions unless the clear preponderance of all
the relevant evidence convinces us that they are incorrect Standard Dry
Wall Products, 91 NLRB 544 (1950), enfd 188 F 2d 362 (3d Cir 1951)
We have carefully examined the record and find no basis for reversing
the findings
883
conclusions as further explained herein and to
adopt the recommended Order.
We agree with the judge that Respondent Car-
melo P. Caldero, as an individual, is and has been
the alter ego of the Respondent, Las Villas
Produce, Inc. We need to clarify, however, the
basis for this agreement. Contrary to the judge's
analysis, the appropriate test for alter ego status is
the same whether the alter ego issue arises in the
original unfair labor practice proceeding or in sub-
sequent backpay proceedings. The test includes a
case-by-case examination both of the group of fac-
tors reviewed by the judge as an initial "single em-
ployer" test and of the factor of a sham or dis-
guised continuance discussed by the judge as an ad-
ditional element of proof necessary to impose liabil-
ity on an individual corporate shareholder or offi-
cer "at the supplementary stage of an unfair labor
practice case." See, e.g., Watt Electric Co., 273
NLRB 655 (1984); Advance Electric, 268 NLRB
1001 (1984).
The General Counsel may litigate an alter ego
issue at any stage of Board proceedings under the
above-mentioned test. Southeastern Envelope Co.,
246 NLRB 423 (1979). The consequences of a
Board finding of alter ego status are the same
whenever the issue is adjudicated: joint and several
liability for the alter ego entities. In contrast, the
General Counsel may, without proving alter ego
status, seek to impose limited liability on corporate
officers or shareholders to the extent of specific
corporate assets wrongfully distributed to them in
avoidance of backpay liability. E.g., F & W Olds-
mobile, 272 NLRB 1150 (1984).
Although the General Counsel's original allega-
tions here pertaining to Respondent Caldero in-
volved only the theory of limited liability for spe-
cific assets transferred to him by Respondent Las
Villas, that theory was superseded by amended al-
legations of Caldero's alter ego status. Consequent-
ly, the judge's discussion of the precedent for im-
posing limited liability was unnecessary. We never-
theless find that the credible evidence fully recited
in the judge's decision clearly proves Caldero's
alter ego status under the appropriate test, and on
that basis we will adopt the recommended Order
imposing full backpay liability on him as an indi-
vidual.3
In the last line of p 1, the judge inadvertently stated that $37,447 was
found due to the pension fund That figure should be $39,447
3 Member Babson agrees that Respondent Caldero should be held per-
sonally liable for the entire backpay amounts involved herein In so
doing, Member Babson particularly relies on the judge's findings that
Caldero owned the Respondent corporation , made all of its decisions,
intermingled personal and corporate assets, caused the corporation to be
undercapitalized, and made use of corporate funds for personal needs In
Continued
279 NLRB No. 120
884 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
ORDER
The National Labor Relations Board adopts the
recommended Order of the administrative law
judge and orders that the Respondents, Las Villas
Produce, Inc., its officers, agents, successors, and
assigns, and Carmelo P. Caldero, a/k/a Carmelo
Caldero Padilla, jointly and severally, shall take the
action set forth in the Order.
these circumstances , Member Babson concludes that Caldero is an alter
ego of the Respondent corporation and, further , that piercing the corpo-
rate veil is warranted See Riley Aeronautics Corp, 178 NLRB 495, 501
(1969); D & I Trucking, 237 NLRB 55, 64 (1978), Carpet City Mechanical
Co, 244 NLRB 1031, 1034 (1979), G & M Lath & Plaster Co, 252 NLRB
969, 977 ( 1980) (McCaslin)
SECOND SUPPLEMENTAL DECISION
WALTER H. MALONEY JR., Administrative Law Judge.
This is the third proceeding before the Board in the
above-captioned case . On May 9, 1980, the above-cap-
tioned Union filed an unfair labor practice charge against
Las Villas Produce, Inc. (Las Villas), alleging that it had
violated Section 8(a)(1) and (5) of the Act by failing and
refusing to pay wages and benefits which were called for
under the terms of its contract with the Union. After the
issuance of complaint and a formal hearing, Administra-
tive Law Judge Philip P. McLeod rendered a decision
on March 31, 1982, finding the Respondent corporation
guilty of violating Section 8(axl) and (5) of the Act and
recommending that it be ordered to make whole its em-
ployees for losses in wages and benefits which they suf-
fered by reason of the violations found. His decision was
upheld by the Board on May 4, 1982, in a pro forma
order which was entered in the absence of exceptions.
This order was then enforced by the United States Court
of Appeals for the Seventh Circuit on August 18, 1982,
by the summary entry of a judgment against Respondent
Las Villas Produce, Inc. and "its officers, agents, succes-
sors, and assigns."
A supplementary proceeding then took place on a
backpay specification which sought additional wages for
a large number of employees who had been paid less
than the contract rate by the Respondent. It also sought
payments on behalf of several employees to the Team-
sters health and welfare fund and the Teamsters pension
fund. After a hearing before Administrative Law Judge
Bruce C. Nasdor on October 11, 12, and 13, 1983, a sup-
plementary decision was issued on July 27, 1984. That
decision was upheld by the Board on October 23, 1984,
272 NLRB 915, which found a total liability on the part
of Respondent Las Villas, of $746,877.44. Of that
amount , a total of $668,992.44 was found due to 35
named employees for wages. Some $38,439 was found
due to the health and welfare fund and $37,447 was
found due to the pension fund for the benefit of 28
named employees . The backpay order was enforced by
the Seventh Circuit by a default judgment which was en-
tered on April 10, 1985.1 The aspect of this case litigated
before me is in the nature of a proceeding in aid of exe-
cution, in which the General Counsel is attempting to
impose personal liability for sums owed by the Respond-
ent corporation on Carmelo P. Caldero, sometimes
known as Carmelo P. Caldero Padilla, the president,
treasurer, sole stockholder,2 and chief operating officer
of the corporation.3
In the second backpay specification and notice of hear-
ing, dated October 12, 1984, the General Counsel origi-
nally sought to impose backpay liability for corporate
debts on Caldero only in the amount of certain payments
made by the corporation to Caldero which are alleged in
the pleading. These include a bonus to Caldero in the
amount of $17,050 paid on December 15, 1982, a second
bonus in the amount of $37,500 paid on October 10,
1983, and some unspecified payroll checks issued by the
corporation to Caldero after December 3, 1983, the date
when the corporation had ceased doing business. The
evidence indicated that these checks included a $900
check issued on February 1, 1984, another check for
$900.40 issued on March 1, 1984, and a check for $16,000
issued on December 12, 1984. The last named check was
issued by the corporation after it had received a tax
refund from the Internal Revenue Service. The money
was used by Caldero to meet his personal income tax li-
ability to IRS.
Under the General Counsel's original theory of the
case , Caldero's personal liability, if established, would be
limited to the $72,350.40 which the corporation paid him
in certain named transactions. The fact that corporate li-
ability, as found by the Board, far exceeded this amount
was immaterial. These allegations were, in short, an at-
tempt to trace particular assets fraudulently conveyed
and to utilize them in partial satisfaction of a corporate
judgment. The General Counsel's theory justifying such
an imposition of personal liability was that Caldero was
and is an alter ego of a corporation which he personally
controlled and operated, and that a certain limited
amount of money should be available from his personal
assets to satisfy corporate debts, because these sums rep-
resented the amount of corporate assets which were si-
phoned off by Caldero in an effort to defraud employee
and union creditors. This contention is based on the
theory that certain fraudulent transfers had taken place
so that corporate assets in the form of cash should be
traced to the hands of the recipient. Accordingly, Cal-
dero's position with respect to personal liability would
essentially be no different from that of any stranger to
i The sums in question were also subject to interest on net backpay, as
computed in Florida Steel Corp, 231 NLRB 651 (1977), and interest on
fringe benefit fund payments computed according to Merryweother Optical
Co., 240 NLRB 1213 (1979)
2 There is testimony in the record from Carmelo P Caldero that he
owned 750 shares of stock in the corporation, while his brother, Jesus
Caldero Padilla , owned 250 shares However, corporate income tax re-
turns for several years which were introduced into evidence show that
Carmelo P Caldero is the sole stockholder in Las Villas Produce, Inc,
and that he purchased 1000 shares for a total capital contribution of
$1000 Caldero's credibility in this third proceeding was no greater than
it was in the two preceding hearings , so I will credit the information on
this point which is contained in the tax returns
3 Certain errors in the transcript have been noted and corrected
LAS VILLAS PRODUCE
the corporation who might hold corporate assets fraudu-
lently conveyed, because the limits of his liability would
not exceed the amounts wrongfully transferred.
On February 28, 1985, the General Counsel amended
the second specification and, in so doing, radically al-
tered the theory of her case. There is little merit in the
Respondents' contention that this amendment, to which
they consented, violated due process, inasmuch as an ex-
tended recess took place following the end of the hear-
ing on that day, during which time both Respondents,
corporate and individual, had ample opportunity to pre-
pare a defense. The hearing did not resume until May 8.
According to the amended specification, Caldero
should be held personally liable for the "total amounts of
net backpay, health and welfare and pension fund pay-
ments specified in the appendix to the Board's supple-
mental decision and order " The underlying theory for
this contention also presumes that Caldero was an alter
ego of Las Villas Produce, Inc., but maintains that the
corporate veil of this entity should be entirely pierced so
that Caldero might stand personally responsible for all
Board-imposed liabilities, without any limitation derived
from the amount of specific payments which he received.
The new theory seeks a true piercing of the corporate
veil, not a mere tracing of specified assets . Under the
facts of this case, the amendment to the General Coun-
sel's second specification creates a difference of about
$674,000 in potential personal responsibility.
There is little doubt that Carmelo Caldero is the alter
ego of Las Villas Produce, Inc. The test of alter ego
status has been set forth many times by the Board and
the courts. They are (1) interrelation of operations, (2)
common management, (3) centralized control of labor re-
lations, and (4) common ownership. NLRB v. Don Bur-
gess, 596 F.2d 379 (9th Cir. 1979); Operating Engineers
Local 627 v. NLRB, 518 F.2d 1040 (D.C. Cir. 1975), affd.
on this issue sub nom. South Prairie Construction Co. v.
Operating Engineers Local 627, 423 U.S. 800 (1976);
Samuel Kosoff & Sons, Inc., 269 NLRB 424 (1984). Cal-
dero is the sole owner of Las Villas, is its principal oper-
ating chief, and formulates and executes all labor rela-
tions policies. Accordingly, he meets the tests of an alter
ego.
However, it is not enough to establish, at the supple-
mentary stage of an unfair labor practice case, that an in-
dividual shareholder or officer is merely an alter ego in
order to impose personal liability for corporate debts. A
different rule might be followed if the individual in ques-
tion had been charged and was personally a respondent
during the trial of the unfair labor practice portion of the
case. Campo Slacks, 266 NLRB 492 (1983); Workroom
For Designers, 274 NLRB 840 (1985). In order to impose
backpay liability on a corporate officer or shareholder at
the present stage of this proceeding, it is necessary to go
further and to show that the officer or shareholder was
the disguised continuance of the corporation, or that he
dissipated corporate assets, or that he intermingled per-
sonal and corporate affairs or took some other action in
order to evade backpay liability. Riley Aeronautics Corp.,
178 NLRB 495 (1969); Chef Nathan Sez Eat Here, Inc.,
201 NLRB 343 (1973); Contris Packing Co, 268 NLRB
193 (1983). When such devious conduct has been estab-
885
lashed , derivative personal liability may be imposed in
the course of the backpay case . Concrete Mfg. Co., 262
NLRB 727 (1982); F & W Oldsmobile, 272 NLRB 1150
(1984). Respondents are correct in arguing that these two
decisions permitted the imposition of derivative personal
liability only to the extent of the amounts of money
wrongfully transferred by the corporation to its officers
or principals . As such, they are authority merely for
tracing assets in the hands of a wrongdoer . Although
these decisions speak in terms of piercing the corporate
veil, they disclose , on closer examination , little more
than a gentle probing of the corporate veil, because the
principals charged therein with corporate debts were not
exposed to the full panoply of corporate liability , as they
would be in a true piercing situation . Cera International
Corp., 272 NLRB 1360 (1984), appears to be authority
for the latter situation, although this fact is not entirely
clear from that decision.
However , there is ample general authority for imposi-
tion of full corporate liability on shareholders to prevent
fraud or injustice from being perpetrated on third parties
by use of the corporate device . When the corporate
entity is merely a facade and a shareholder utilizes the
corporation merely as an instrumentality for the transac-
tion of his own personal affairs , the corporate veil will
be completely pierced and the shareholder or sharehold-
ers will be held personally liable for all corporate debts.
Fletcher's Cyclopedia of Corporations, sec. 41 .10, 41.30. As
this authority points out (at sec . 44.1):
If a corporation is organized and carries on a
business without substantial capital in such a way
that the corporation is likely to have insufficient
assets to meet its debts , it is inequitable that stock-
holders should set up such a flimsy corporation to
escape personal liability . It will be ineffectual to
exempt shareholders from corporate debts . Share-
holders should put at risk capital reasonably ade-
quate for its prospective liabilities . If capital is illu-
sory or trifling compared to the business to be done,
this is grounds for denying the separate entity privi-
lege.
Intermingling of assets and the siphoning off of corpo-
rate funds by large payments from Las Villas to Caldero
throughout the period of the unfair labor practice litiga-
tion may properly be considered in determining whether
the corporate veil should be pierced , either on a limited
or complete basis , but examination may also be made
into the capitalization of Las Villas to ascertain whether
it was truly an independent entity or was merely a front
for Caldero's personal enterprise. In other words, the
present aspect of this case addresses the question of
whether Caldero used a corporate shell to shield himself
from financial liability for unfair labor practices which
he personally committed in its name.
Las Villas was in the wholesale grocery business at
83-85 South Water Market Street in Chicago . The build-
ing from which it operated its business is part of a larger
market area . Las Villas specialized in produce imported
from Mexico , Puerto Rico , and Central America espe-
cially to suit the tastes of the Hispanic community in
886 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Chicago. Most of its clientele were Spanish or Latin res-
taurants and grocery stores. It is apparent from the
record that Caldero was well known in his business com-
munity and enjoyed an excellent relationship with many
of his customers. His personal standing enabled him to
borrow significant sums of money from friendly custom-
ers without interest or fixed dates of repayment, without
security, and without the necessity of evidencing these
debts by any formal written documentation.
Las Villas began as Caldero's personal proprietorship
sometime early in the 1970s and was then incorporated
under the laws of the State of Illinois . The best measure
of the scope of the Las Villas business can be seen from
the entries on its latest corporate tax returns. They show
the following gross receipts for the last 3 full years of its
operation:
Fiscal Year Ending Gross Sales
Taxable
Income
9/30/81 $3,962,506 $ 49,042
9/30/82 3,704,168 16,230
9/30/83 2,986,613 (119,223)
The corporation ceased functioning in December 1983
and no return has yet been prepared for the period in
which it was closed out. Caldero's personal income tax
returns show the following wages and salaries for the
same general period of time. They are prepared on a cal-
endar-year basis, so the entries thereon vary slightly
from the deductions for salaries found in the Las Villas
returns.
Calendar Year Wages, Salary, etc.
1980 $100,406
1981 114,500
1982 100,000
1983 119,000
In short, Caldero's personal salary for calendar 1983 was
the equivalent of what Las Villas reportedly lost during
that year. During this year his salary increased as corpo-
rate sales and profits declined.4
As noted above, the capitalization of this corporation
was $1000. The principal asset utilized by the corpora-
tion during its existence was the building (Stalls) in
which it did business. This building was held in a land
° The record reflects that Caldero never bothered to include in his per-
sonal tax returns income derived or expenses incurred in the operation of
a shopping center which he owns in Bayamon , a section of San Juan,
Puerto Rico This fact was brought to light on the second day of this
proceeding When the hearing resumed in May, Respondent summoned
as its witness a Chicago accountant and tax attorney, who had, during
the recess, examined certain accountant 's worksheets supplied by Cal-
dero's San Juan accountant relating to Caldero's Puerto Rico enterprises
Apparently Caldero's Chicago income and his Puerto Rico income had
not previously been dovetailed for income tax purposes The witness ex-
pressed the opinion that Caldero did not owe any additional Federal
taxes as a result of his previous failure to integrate Chicago income with
Puerto Rico income , and, indeed , he might even be entitled to a refund
The record contains no explanation of why all Caldero's business activi-
ties were not reflected on single-person returns, and I leave this inquiry
to another branch of the Government
trust, an interesting if not unique form of ownership au-
thorized by Illinois law which permits the beneficial
owner of real estate to shield his interest in property
from disclosure by placing legal title in another person,
often a bank or savings and loan association, although se-
curing his interest through a privately held trust agree-
ment which alone discloses the nature of his interest. It is
the real estate equivalent of a numbered account in a
Swiss bank.
The beneficial interest in Las Villas' principal asset,
the land and building at 83-85 South Water Market
Street, was in the name of Carmelo P. Caldero personal-
ly, not Las Villas.5 This agreement was executed in
1971. When asked about the fact that the land trust was
in his name rather than in the name of Las Villas, Cal-
dero merely testified that apparently his accountant had
made a mistake. The accountant testified that the build-
ing passed to the corporation in 1971 as a nontaxable
transfer under section 351 of the Internal Revenue Code.
However, title to the property, either legal or equitable,
did not pass to the corporation and remained to the ben-
eficial use of Caldero. As noted, infra, this property was
later used by Caldero to secure both personal and corpo-
rate loans taken out with two other lending institutions.
The building in question was in fact depreciated in the
Las Villas corporate tax returns. In November 1983, it
was sold as part of the liquidation of the Las Villas busi-
ness at a sale price of $200,000. Of this sum, some
$61,735 was paid directly to the Oak Trust and Savings
Bank or others in satisfaction of some of Caldero's per-
sonal debts, although $118,298 was paid to Caldero per-
sonally. Caldero contributed this latter sum to the corpo-
ration in order to retire some of its indebtedness. Al-
though this asset was utilized in the operation of the
business and a portion of the proceeds of its sale was de-
voted to corporate purposes, it could not properly be
considered as a part of the Las Villas capitalization be-
cause, during the operation of the business, the property
was not at risk to satisfy corporate creditors. It was uti-
lized in part for corporate creditors in 1983 only by
virtue of a voluntary act on the part of Caldero during
the liquidation of corporate assets. The only other tangi-
ble assets of the corporation claimed in its tax returns
were certain trucks, autos, and office equipment which
were liquidated in 1983 to pay corporate debts. The total
sale price of these assets was $21,871.6 The record does
not disclose how these assets were acquired, so I pre-
sume they were purchased by Las Villas out of current
earnings.
s This trust agreement with the First National Bank of West Chicago
(now DuPage National Bank) is in evidence as R Exh 6
Las Villas terminated its business with more than $100,000 outstand-
ing in accounts payable, most of which were owed to the Company by
restaurants and small grocery stores Caldero suggested on the stand that,
if the Board wished, it could collect some of these bills for him and use
the money to pay the amounts owed by the corporation to employees
and the union trust funds These payables can hardly be deemed capitali-
zation, although a portion of them could conceivably be available to Cal-
dero as initial working capital at some future time should he decide to go
back into business , since many of them are owed by old customers who
have personal ties to Caldero Neither Caldero nor Las Villas has filed
for bankruptcy
LAS VILLAS PRODUCE
The sequence of events surrounding the termination of
Las Villas and the liquidation of its assets is closely tied
to the trial of earlier phases of this case. Both Caldero
and Ada Collazo, his office manager , in-house account-
ant, and common-law wife,7 testified that the reason Las
Villas went out of business was that its regular customers
stopped paying their bills when they learned that Las
Villas was involved in litigation with its employees
before the Board . Being deprived of this cash flow, the
corporation was assertedly without funds to make pur-
chases , so its credit -based operation was unable to func-
tion. The unwillingness of corporate customers to pay
their bills because of litigation which did not in fact con-
cern them personally is a difficult explanation to accept,
especially when it is uncorroborated by the testimony of
any defaulting customer. These statements come close to
an admission that the Respondent went out of business
because it was involved in Board litigation which could
result in large financial liability, and it preferred going
out of business to paying employees and the Union what
it owed them. Putting the onus for this decision on cus-
tomers is a peculiar twist which is absurd on its face.
One of the General Counsel's major contentions is that
the corporate veil should be pierced because Caldero and
Las Villas commingled funds and Caldero often met his
personal expenses from corporate money. In this connec-
tion it should be remembered that Caldero, being the
sole stockholder and one of two corporate directors, had
absolute and unqualified control over all activities of Las
Villas. From time to time, he met with his brother, the
other corporate officer, to discuss corporate business and
to take formal corporate actions but, as C. Caldero testi-
fied, his brother never voiced any objections to any com-
pensation which C. Caldero derived from the business.'
As noted above, the reason that Oak Savings and
Trust and the Washington National Bank were able to
insist on partial payment of loans from the proceeds of
the sale of the building at 83-85 South Water Market
was that the land trust on this building had been pledged
to secure various loans made by these institutions to Cal-
dero. One such loan from Oak Savings and Trust was
made to Caldero to permit him to purchase two vacant
lots at Western Avenue and North Avenue in Chicago,
near a building which he owned. This purchase was
wholly unrelated to corporate business . Caldero also bor-
rowed $50,000 from the Washington National Bank.
Some $40,000 of this loan went to Las Villas, presumably
for corporate activities, but $10,000 of this loan was paid
to Caldero personally so that he could purchase an auto-
mobile for his son. The terms of the loan did not differ-
entiate between corporate and personal uses of the
money. It had one repayment schedule, both as to princi-
pal and interest Interest on the entirety of the loan was
paid by Las Villas from corporate funds, although a por-
tion of the interest falling due was attributable to a per-
7 Caldero testified at the hearing that Collazo was his wife, although,
in his personal tax returns, he described himself as "single ." Collazo was
more candid in her testimony
9 Jesus Caldero Padilla was at one time an employee of Las Villas but,
in later years , he spent little time at the Company and earned his liveli-
hood from other pursuits
887
sonal use of the money advanced .9 A third loan repaid in
part from the We of the building actually went to Las
Villas for the corporate purpose of purchasing canned
goods.
In addition to these loans , Caldero borrowed $75,000
from the Oak Savings and Trust and secured it by a
mortgage on a building in Chicago which he now owns
in his own name . However, Oak Savings and Trust ap-
parently had sufficient leverage that it was able to obtain
a partial curtailment of this mortgage from the proceeds
of sale of the South Water Market Street building, even
though the Las Villas building had not been used as col-
lateral in this instance.
In addition to using corporate funds to repay private
loans , Caldero was in the habit of taking large personal
loans from the corporation and then converting them
into bonuses , so that the repayment of the loans appeared
on the books of Las Villas as merely an accounting
transaction . Only on a few occasions were these loans
actually repaid with cash. Although the account which
itemized these loans is entitled "loans to officers," Cal-
dero is the only officer to whom the corporation ever
lent money. In fiscal 1980, Caldero received a bonus of
$31,625 by this procedure. In fiscal 1982 and 1983, he re-
ceived $20,125 and $17,050, respectively, in bonuses
through this form of loan "repayment." In October 1983,
just before the backpay hearing before Judge Nasdor and
as the corporation was in the process of winding up its
affairs , Caldero received a bonus of $37,500, which
"repaid" a loan of a similar amount which was made to
him by Las Villas a few weeks earlier.
Corporate accounting records indicate that, during the
Company's fiscal year which ended September 30, 1981,
Caldero received 16 loans from Las Villas , totaling
$21,385.36. This sum was in addition to $54,596.48 in
loans to Caldero which constituted the beginning balance
on the corporate books for that fiscal year. The major
repayment for those loans was simply a bookkeeping
transaction which treated loans in the amount of $31,625
as salary for Caldero and wrote them off in that fashion.
The use of corporate cash by Caldero for' personal ex-
penses is well established in the record . Some examples
of this practice are as follows:
$1,500 spent for pay for repairs on a home in Ar-
lington Heights , Illinois , owned and occupied by
Caldero's former wife.
$759.94 to Sportsmart to purchase an exercise
bike for Caldero.
Three payments in 1981, totalling $10,602, to
Tropical Ranch Acres. Caldero's personal income
tax return for 1981 also shows a deduction of $3,169
for interest on a loan relating to Tropical Ranch
Acres.
$31.50 paid to a pharmacy for medication for
Caldero.
9 Caldero personally guaranteed the loan from the Washington Nation-
al Bank and is now being sued personally by the bank to secure repay-
ment, notwithstanding the fact that four-fifths of the money lent was de-
voted to corporate purposes
888 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Two payments of $20 each as trust fees on prop-
erties owned personally by Caldero on Madison
Street in Chicago.
As noted above, because of longstanding personal rela-
tionships with many of his customers, Caldero was able
to obtain long-term unsecured loans of substantial sums
without interest or written documentation . As Las Villas
was winding up its operation in the fall of 1983, Caldero
or Collazo made substantial cash withdrawals from the
Las Villas account to repay these loans. Some of the re-
payments were in cash. Caldero testified that many of
these loans were received in 1977 when a salesman for
Las Villas absconded with about $13,000 in company
funds, leaving the Company in a precarious cash flow
condition. The fact that such an event required substan-
tial personal loans illustrates a major flaw in the Re-
spondent's business insurance program as well as the
skimpy nature of its capitalization. When the South
Water Market Street property was sold, the following
loans were retired:
Rafael Cruz of La Voz Hispania-$6,000
Antonio Castillo-$15,000
Oreste Herrera-$ 15,000
Nicholas Lombardi (Las Casa Del Pueblo)-$7,000
The Lombardi loan was made to Caldero in 1983. The
others were made in 1976-1978. Other than the defalca-
tion of a salesman some 8 years ago, the exact nature of
this $43,000 in loans stands unexplained , and the fact
their repayment took place from the sale of an asset car-
ried on the corporate books (though retained in the bene-
ficial ownership of Caldero) is, at best, highly suspect.
After Las Villas went out of business in December
1983, Caldero continued to be paid from corporate
assets . On February 1, 1984, he received a check for
$900. The following month, he received a check for
$900.40. This latter check was written ostensibly to reim-
burse Caldero for expenses incurred in traveling about
the Greater Chicago area to collect outstanding bills due
to the corporation. No itemization was proffered to show
just what these expenses might be, when the trips in
question were taken , what destinations were visited, how
much mileage was covered, or what specific expenses
were incurred. Caldero's complaint during this period of
time was that few if any creditors were paying him. Late
in December 1984, when Las Villas received a tax
refund of $22,000, the entire amount was paid to him as
salary, and he used the net proceeds of this salary pay-
ment to meet an outstanding bill from the IRS for per-
sonal back taxes.1 °
It is clear from the above recitation of both corporate
and personal transactions that the corporate veil of Las
Villas should be entirely pierced and that Caldero should
10 In her original theory of the case, the General Counsel alleged as
items warranting a piercing of the corporate veil only the net amounts,
after taxes, of certain payments which Caldero received from Las Villas
Actually the gross amounts should be used under this theory because an
individual should not escape liability for corporate debts under the "trac-
ing of assets" theory simply because some of the money he improperly
received had to be paid to the Government in the form of withheld taxes
on income
stand personally responsible for all the backpay and trust
fund liability assessed against the corporation in the pre-
vious backpay proceeding . From its inception, Las Villas
was a corporate shell which was utilized by Caldero
merely as a facility for his personal undertakings after he
decided to transform his business from an individual pro-
prietorship into a corporation . The actual capitalization
at risk from his investment was $1000 . From that invest-
ment his corporation derived net taxable incomes in its
last years of operation which approximated $50,000, or a
net return to the corporation of 5000 percent on capital
stock in 1 year from gross receipts approximating $4 mil-
lion. Although such an achievement denotes astute man-
agement, it also discloses gross undercapitalization and a
withholding from potential corporate liability of a princi-
pal asset, namely, the building in which the business op-
erated. Funds were siphoned off, as needed , for Cal-
dero's personal needs , whether those needs be improve-
ments on a home, a car for his son, or just a minor item,
such as medicine from a pharmacy. Personal loans were
made to Caldero by old friends which were used for cor-
porate purposes. Corporate funds were used to pay inter-
est and principal on personal loans. Caldero borrowed
money from the corporation and discharged the liability
on corporate books by calling it salary. Even after the
corporation ceased to exist , he paid himself a salary
whenever funds became available , without any justifica-
tion for the compensation . This was all accomplished by
virtue of the fact that Caldero owned the corporation in
its entirety and made every significant decision in its op-
eration , ranging from finance to labor relations to the ul-
timate decision as to whether it should continue to exist.
In light of this intermingling , undercapitalization, and use
of corporate funds for personal needs, the corporate
form should not be available to defraud creditors, espe-
cially those who worked for him and the trust funds
which exist in order to protect those employees from the
vicissitudes of sickness , injury , and old age.
On these findings of fact and conclusions of law and
on the entire record, I issue the following recommend-
ed"
ORDER
The Respondents, Las Villas Produce, Inc., Chicago,
Illinis , its officers, agents, successors, and assigns, and
Carmelo P. Caldero, a/k/a Carmelo Caldero Padilla,
jointly and severally, shall pay to its employees the
amounts of net backpay, health and welfare fund, and
pension fund payments specified in the Appendix to this
Second Supplemental Order, with interest on the net
backpay as computed in Florida Steel Corp., 231 NLRB
651 (1977), and interest on the health and welfare and
pension fund payments according to Merryweather Opti-
cal Co., 240 NLRB 1213, 1216 fn. 7 (1979), less withhold-
ings for taxes and social security required by Federal and
state laws.
" If no exceptions are riled as provided by Sec 102 46 of the Board's
Rules and Regulations, the findings , conclusions, and recommended
Order shall, as provided in Sec 102.48 of the Rules , be adopted by the
Board and all objections to them shall be deemed waived for all pur-
poses
LAS VILLAS PRODUCE
APPENDIX
Health and Welfare Fund Payments and Pension Fund
Payments
Health &
Welfare
Fund
Payments
Pension
Fund
Payments
Louis Maldonado $ 294 $ 301
Gustavo Chavez 924 946
Antonio Diaz 84 86
Antonio Lozada 2,184 2,236
Juan A. Lozada 588 602
Felix Maysonet 553 567
Antonio Fernandez 1,442 1,478
Jose R Medina 2,665 2,730
Ramon Padilla 74 76
Rafael Reyes 874 896
Edwin Rodriguez 259 266
Efrain Roldan 3,141 3,219
Caledonio Santiago 481 494
Ismael Vasquez 3,775 3,870
Miguel A Velasquez 444 456
Wilfredo Velasquez 296 304
Francisco Cruz 32 33
Jose A. Garcia 596 614
Alvaro Garza 2,086 2,139
Unel Cintron 751 774
Gilberto Gomez 96 99
Rafael Maldonado 4,595 4,715
Ramon Rivera 781 804
Eulogio Rocha 1,190 1,225
Jacinto Roman 4,402 4,518
889
Net Backpay Payments
Francisco Cruz $ 2,904.54
Jose A. Garcia 13,607.07
Alvaro Garza 35,668.23
Gilberto Gomez 2,171.59
Rafael Maldonado 69,496.81
Carmelo Marquez 34,088.09
Luis Rots 48,795.37
Ramon Rivera 18,327 84
Eulogio Rocha 22,153.56
Jacinto Roman 77,408 37
Alberto Diaz 753.61
Antonio Fernandez 27,468.58
Jose R. Medina 35,137.94
Ramon Padilla 4,43064
Marion Portillo 452 50
Rafael Reyes 18,917.49
Edwin Rodriguez 7,411.04
Efrain Roldan 55,821 99
Caledomo Santiago 12,736.71
Ismael Vasquez 46,128.16
Miguel A Valesquez 9,582.65
Wilfredo Velasquez 7,636 16
Carlos Velez 3,560.31
Gustavo Chavez 17,034.40
Antonio Diaz 2,305 74
Gregono Diaz 1,785 95
Ramon Fiallo 1,989 70
Antonio Lozada 22,053 32
Rafael Rivera 23,762.12
Juan A Lozada 12,052.96
Felix Maysonet 10,463.80
Jorge Razo 256.86
Uriel Cintron 13,808 88
Herman Correa 785.68
Louis Maldonado 8,051 78