Hamilton v. Conley

827 N.E.2d 949, 356 Ill. App. 3d 1048, 293 Ill. Dec. 68
Appellate Court of Illinois·Decided April 6, 2005·No. 2-04-0455·Published·Cited by 49 cases

Opinion

JUSTICE KAPALA

delivered the opinion of the court:

Plaintiff, Dean Hamilton, a former shareholder of Hahnaman-Albrecht, Inc. (HAI), a dissolved Illinois corporation, appeals the dismissal of his complaint against defendants HAI; Kristopher Conley (Conley), a former officer and director of HAI; and Conley Grain Company (Conley Grain) and Harmon Grain, LLC (Harmon Grain), entities that Conley allegedly controlled. Plaintiff argues that he may maintain an action alleging that, following HAI’s dissolution, Conley misappropriated HAI’s assets by transferring them to Conley Grain and Harmon Grain. We agree. Thus, we reverse and remand.

I. BACKGROUND

HAI operated grain elevators in several counties throughout Illinois. The real estate on which those elevators were located and the elevators themselves were encumbered by a $5.5 million mortgage. The title to the real estate was held in a land trust, the beneficial interest of which lay with HAI. Additionally, HAI had power of direction over the land trust.

Plaintiff alleged the following facts. In late 1996 and early 1997, HAI began experiencing financial difficulties. Then, in February 1997, Conley, who was then serving as one of HAI’s directors, offered a solution. Specifically, Conley proposed that the corporation make him its sole officer and director. In exchange, Conley said, he would lend or invest in HAI several million dollars from his father’s trust fund. HAI’s officers and directors agreed. At a special meeting on February 28, 1997, they resigned, and Conley was appointed sole officer and director of the corporation. However, time passed and the promised millions never arrived. Nor did HAI’s situation improve. On May 2, 1997, HAI was involuntarily dissolved by the Secretary of State for failure to file an annual report and pay annual franchise taxes. Not three weeks after HAI’s dissolution, Conley began dealing away HAI’s assets. On May 19, 1997, Conley caused HAI and the land trust to enter into a lease agreement with Conley Grain, which Conley owned and controlled. The lease agreement gave Conley Grain the option of purchasing both a portion of HAPs land and a number of its grain elevators by assuming HAI’s mortgage. In the four years after it entered into the lease agreement, Conley Grain entered into a number of subsequent transactions involving HAI’s assets. Eventually, Conley Grain assigned all of HAI’s rights to use the grain elevators and occupy the land to Harmon Grain, another company controlled by Conley. In the fall of 2001, Conley entered into several more transactions, eventually transferring all of HAI’s remaining assets to Harmon Grain.

In May 2003, plaintiff filed suit, individually and as a former shareholder of HAI, against Conley, Conley Grain, Harmon Grain, and HAI. 1 Plaintiff alleged that the other former shareholders of HAI, except Conley, had authorized him to pursue the action. He sought to have all of the assets allegedly misappropriated by Conley returned to him for distribution to the other shareholders; alternatively, he sought to have his individual share of those assets returned to him. For their part, defendants filed a combined motion to dismiss pursuant to sections 2 — 615 (735 ILCS 5/2 — 615 (West 2002)) and 2 — 619 (735 ILCS 5/2 — 619 (West 2002)) of the Code of Civil Procedure. See 735 ILCS 5/2 — 619.1 (West 2002). Defendants argued, among other things, that plaintiff lacked standing to bring his claims and that plaintiffs claims were untimely. As to the standing issue, defendants argued that, even assuming plaintiffs allegations were true, any claim against defendants would belong to the corporation, HAI, and therefore plaintiff, as a shareholder, had no standing to sue defendants. In other words, defendants argued, plaintiffs claims were derivative. As to the timeliness issue, defendants argued that section 12.80 of the Business Corporation Act of 1983 (805 ILCS 5/12.80 (West 2002)), also known as the Corporate Survival Statute (Survival Statute), limits to five years the time period after dissolution in which suits may be brought by or against a corporation. Because plaintiffs suit was filed over five years after HAI’s dissolution, defendants concluded, it was time-barred. In response, plaintiff contended that his claims were individual, not derivative. Regarding the timeliness of his complaint, plaintiff pointed out that, in several situations, courts have allowed suits to go forward, notwithstanding that they were filed beyond the period allowed under the Survival Statute. The trial court dismissed plaintiffs complaint. As relevant here, the trial court found (1) that plaintiffs claims were derivative and plaintiff therefore lacked standing to bring them; and (2) that plaintiffs claims were untimely pursuant to the Survival Statute. This timely appeal followed.

II. ANALYSIS

At the outset, we must address a motion by plaintiff to strike pursuant to Supreme Court Rule 341(e)(6) (188 Ill. 2d R. 341(e)(6)) the statement of facts appearing in defendants’ brief. 2 In his motion, plaintiff contends that defendants improperly engage in argument in their statement of facts. See 188 Ill. 2d R. 341(e)(6) (noting that a briefs statement of facts “shall contain the facts necessary to an understanding of the case, stated accurately and fairly without argument”). We agree with plaintiff that defendants’ statement of facts contains some improper argument. For example, in their statement of facts defendants attempt to persuade us to disregard plaintiffs assertions regarding the legal significance of a document entitled “Minutes of Special Meeting of Shareholders of Hahnaman-Albrecht, Inc.” Contentions such as this should be reserved for the “Argument” section of a party’s brief. However, we do not believe that these few improprieties require us to strike defendants’ statement of facts. See Friends of the Parks v. Chicago Park District, 203 Ill. 2d 312, 319 (2003) (“[a]lthough we believe the plaintiffs’ recitation of the facts to be generally accurate, it is certainly argumentative and in violation of the rule. While we decline to strike the plaintiffs’ factual summary, we admonish counsel to be mindful in the future of the requirement to eschew argument”). Instead, we will simply disregard the offending portions of that statement. P.J.’s Concrete Pumping Service, Inc. v. Nextel West Corp., 345 Ill. App. 3d 992, 997-98 (2004).

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Hamilton v. Conley, 827 N.E.2d 949, 356 Ill. App. 3d 1048, 293 Ill. Dec. 68 (Ill. Ct. App. 2005).

827 N.E.2d 949 (Hamilton v. Conley) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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