Aspling v. Ferrall

597 N.E.2d 1221, 232 Ill. App. 3d 758, 174 Ill. Dec. 9, 1992 Ill. App. LEXIS 1205
CourtAppellate Court of Illinois
DecidedJuly 29, 1992
Docket2-91-1110
StatusPublished
Cited by9 cases

This text of 597 N.E.2d 1221 (Aspling v. Ferrall) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Aspling v. Ferrall, 597 N.E.2d 1221, 232 Ill. App. 3d 758, 174 Ill. Dec. 9, 1992 Ill. App. LEXIS 1205 (Ill. Ct. App. 1992).

Opinion

PRESIDING JUSTICE INGLIS

delivered the opinion of the court:

Plaintiff, Eugene H. Aspling, appeals after the circuit court of Winnebago County dismissed his complaint against defendant, George R. Ferrall, pursuant to sections 2 — 615, 2 — 619, and 2 — 1005 of the Civil Practice Law (Code) (Ill. Rev. Stat. 1989, ch. 110, pars. 2 — 615, 2 — 619, 2 — 1005). Ferrall had filed a combined motion under section 2 — 619.1 of the Code (Ill. Rev. Stat. 1991, ch. 110, par. 2— 619.1). Aspling sought damages against Ferrall personally for a breach of lease with Ferrall’s company, Geri Corporation, under an alter ego theory. Geri Corporation was dissolved through bankruptcy proceedings. The issues on appeal are whether: (1) the bankruptcy trustee had the exclusive right to assert an alter ego claim; (2) the bankruptcy trustee abandoned the alter ego claim; (3) As-pling’s filing of a proof of claim in the bankruptcy action was an “election of remedies” which precluded the cause of action for breach of lease; and (4) the settlement in bankruptcy court was res judicata as to Aspling’s action. We affirm.

We will restate those facts that are evident from the record. On January 24, 1986, Geri Corporation filed a voluntary petition for bankruptcy in Federal court under chapter 7 of the Bankruptcy Code (11 U.S.C. §701 et seq. (1984)). Geri Corporation listed total assets of $3,713 and total liabilities of $293,766.40, of which $5,500 was secured debt. On June 23, 1986, Aspling filed a proof of claim against Geri Corporation in bankruptcy court for $178,215.27.

In November 1986, Aspling filed an action against Ferrall in State court seeking damages for a breach of lease with Geri Corporation under an alter ego theory. As support for the alter ego theory, the complaint stated that Ferrall managed the affairs of the corporation as if it were a proprietorship and for the purposes of defrauding Aspling. Aspling claimed that Ferrall, through Geri Corporation, leased properties to third parties that it had leased from Aspling and had received the rents from third parties without paying Aspling. Further, Aspling claimed that Geri Corporation made payments to Ferrall totalling $24,000 in 1985 when the corporation was insolvent.

In February 1987, the bankruptcy trustee filed a complaint to avoid a preference under section 547 of the Bankruptcy Code (11 U.S.C. §547 (1986)). The trustee claimed that Geri Corporation had transferred checks totalling $27,122.48 to Ferrall while the corporation was insolvent. The trustee sought a judgment because the payments were made to a corporate insider, for an antecedent debt, within one year prior to the chapter 7 filing.

On November 16, 1987, the complaint filed by the bankruptcy trustee was settled for $5,750. The bankruptcy judge entered an order dismissing the proceeding with prejudice. Aspling claims that he was informed of the settlement approximately one month before the judge formally dismissed the proceeding.

In January 1990, Aspling was paid $5,524.76 pursuant to the final report and account of the bankruptcy trustee. Aspling was the sole general unsecured creditor with a claim against Geri Corporation.

From June 1988 to February 1991, Aspling’s cause of action in the Winnebago County circuit court remained dormant. On February 6, 1991, Aspling continued discovery requests, filing a motion to compel production of documents. Ferrall then filed a combined motion to dismiss the complaint under sections 2 — 615 and 2 — 619 of the Code and pursuant to section 2 — 619.1 of the Code (Ill. Rev. . Stat. 1991, ch. 110, par. 2 — 619.1). Ferrall claimed that Aspling lacked standing to bring his claim because an alter ego claim could be pursued only by the bankruptcy trustee. Ferrall also claimed that the settlement of the preference claim in bankruptcy court between the bankruptcy trustee and Ferrall was res judicata with respect to Aspling’s cause of action. Ferrall later filed a supplement to the motion seeking summary judgment under section 2 — 1005 of the Code (Ill. Rev. Stat. 1989, ch. 110, par. 2 — 1005).

After a hearing on the motion, the trial court dismissed As-pling’s complaint. The trial judge stated that Aspling lacked standing to bring the action, that Aspling’s claim in the bankruptcy proceedings was an election of remedies, and the settlement of the preference claim was res judicata as to Aspling’s claim. Aspling filed a timely appeal on October 2, 1991.

“A motion to dismiss pursuant to section 2 — 619 of the Code admits all well-pleaded facts as well as reasonable inferences which may be drawn from those facts.” (Streams Condominium No. 3 Association v. Bosgraf (1991), 219 Ill. App. 3d 1010, 1013.) A section 2 — 619 motion should be granted only if no genuine issue of material fact exists. (Bosgraf, 219 Ill. App. 3d at 1013-14.) The standard is similar for a motion for summary judgment. (Purtill v. Hess (1986), 111 Ill. 2d 229, 240.) The court considers the pleadings, affidavits and depositions when ruling on a motion to dismiss (Bosgraf, 219 Ill. App. 3d at 1014) or a motion for summary judgment (Purtill, 111 Ill. 2d at 240).

STANDING

Aspling first contends that the trial court erred when it found that he lacked standing to bring the action. The trial judge stated that the bankruptcy trustee had the exclusive right to assert an alter ego claim in the bankruptcy proceedings. Aspling claims that his alter ego claim is a “personal” claim that a bankruptcy trustee has no standing to bring, citing, among other cases, Koch Refining v. Farmers Union Central Exchange, Inc. (7th Cir. 1987), 831 F.2d 1339. Ferrall counters that Koch Refining is authority for the proposition that Aspling’s claim is a “general” claim that may be brought only by the bankruptcy trustee.

We will begin our analysis with Koch Refining, where the court explained the role of the bankruptcy trustee:

“The trustee represents not only the rights of the debtor but also the interests of creditors of the debtor. *** [T]he trustee, in his capacity as a creditor, may bring suit to reach property or choses in action belonging to the estate that will then be distributed to all creditors.” Koch Refining, 831 F.2d at 1342.

Section 541 of the Bankruptcy Code defines what property belongs to the estate. Property of the bankruptcy estate is “all legal or equitable interests of the debtor in property as of the commencement of the case.” (11 U.S.C. §541(a)(l) (1986); Koch Refining, 831 F.2d at 1343.) Section 541 property includes property fraudulently transferred by the debtor before bankruptcy, creditors’ fraud claims under the Racketeer Influenced and Corrupt Organization Act (RICO) (18 U.S.C. §1961 et seq. (1982)), and rights of action against shareholders of a corporation for breaches of fiduciary duty. Koch Refining, 831 F.2d at 1343.

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Bluebook (online)
597 N.E.2d 1221, 232 Ill. App. 3d 758, 174 Ill. Dec. 9, 1992 Ill. App. LEXIS 1205, Counsel Stack Legal Research, https://law.counselstack.com/opinion/aspling-v-ferrall-illappct-1992.