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Hermes v. Wm. F. Meyer Co.





APPEAL from the Circuit Court of Kane County; the Hon. BARRY PUKLIN, Judge, presiding.


The plaintiff, Nicholas A. Hermes, claiming as the legal and equitable owner of 20% of the stock of the Wm. F. Meyer Co., an Illinois corporation (hereinafter the Corporation), filed suit against the Corporation and against four of its directors, Melvin W. Meyer, Gretchen Kieso, William J. Meyer and Thomas Kieso, defendants, for an accounting and other relief. The defendants filed a motion to dismiss pursuant to section 48 of the Civil Practice Act (Ill. Rev. Stat. 1977, ch. 110, par. 48), contending that the plaintiff lacked the "legal capacity to sue" for the reason that he had divested himself of all interest in the corporate stock. The trial court granted the motion and dismissed the complaint with prejudice. Plaintiff appeals.

The trial court found that the plaintiff had disposed of all legal and equitable interest in the Corporation on or about August 9, 1977, because of the purported exercise by defendant Melvin W. Meyer of a purchase option agreement dated August 25, 1972. In this connection we first consider plaintiff's contention that the court erroneously construed section 48(1)(b) of the Civil Practice Act (Ill. Rev. Stat. 1977, ch. 110, par. 48(1)(b)) to include a motion to dismiss which did not allege incompetency, infancy or similar defenses which we have previously held to be encompassed by this section. (See Phillips Construction Co. v. Muscarello, 42 Ill. App.3d 151, 154 (1976); Patterson Heating and Air Conditioning Corp. v. Durable Construction Co., 3 Ill. App.3d 444, 446 (1972).) Defendants did not adduce any evidence of any legal inability in the plaintiff as contemplated by section 48(1)(b), and if the motion is strictly construed to be based only upon the defense of "legal capacity" it must fail.

• 1 The motion, however, was made generally under section 48 without reference to its subparagraphs. And, in any event, we are required to give the decree of the trial court a reasonable construction aided by that which is necessarily implied in the judgment. (Neidhardt v. Frank, 325 Ill. 596, 602 (1927); Pope v. Pope, 7 Ill. App.3d 935, 937 (1972).) In this view it becomes clear from the record that the trial court dismissed the complaint because it found that plaintiff no longer had any legal or equitable interest in the Corporation and hence had no standing to sue. The question then becomes whether the issue of lack of standing may be properly raised in a section 48 motion. See Ill. Rev. Stat. 1977, ch. 110, par. 48(1)(i).

• 2 The cited subsection provides that a cause may be dismissed on defendant's motion where the defendant can show "that the claim or demand asserted against defendant is barred by other affirmative matter avoiding the legal effect of or defeating the claim or demand." We have held that this portion of section 48 is broadly construed to encompass basic defenses to a claim. (Ingersoll v. Klein, 106 Ill. App.2d 330, 336 (1969); see also Kilbane v. Sabonjian, 38 Ill. App.3d 172, 175 (1976); Millsaps v. Bankers Life Co., 35 Ill. App.3d 735, 742 (1976).) We conclude that a showing of plaintiff's lack of standing to sue may be a basis for dismissal pursuant to section 48(1)(i) of the Civil Practice Act. This holding requires a review of the evidence bearing on the issue of standing.

The Corporation was incorporated as a wholesale plumbing supply business on March 1, 1953, with Hermes being the owner of 1000 shares of common stock representing 20% of the total shares issued and outstanding. On August 25, 1972, plaintiff and Melvin W. Meyer executed a voting trust and option agreement under which the plaintiff transferred legal title to his 1000 shares to the Aurora National Bank and to Melvin Meyer as co-trustees, retaining a beneficial interest. The trust by its terms was to expire on September 1, 1977, with legal ownership then reverting to the plaintiff. In the option agreement, plaintiff gave Meyer the "right and privilege" to purchase his interest in the stock at any time between March 1, 1975, and September 1, 1977, at a price of $60,000.

The circumstances of the execution of the voting trust and option agreement are in controversy. Mr. John Plain, the Corporation's legal counsel, testified at his deposition that one or two weeks prior to August 25, 1972, the plaintiff approached him and stated that he wanted to place the voting power of his shares of stock at the disposal of Melvin Meyer, expressing the purpose that plaintiff wanted to keep Ervin Kieso, a third shareholder, from controlling the corporation. Plain testified that plaintiff stated that he bore a personal antipathy toward Kieso and that "he wanted to do anything he could" to assist Meyer. Plain also stated that plaintiff told him at this time that he wanted to give Meyer an option to buy his 1000 shares of stock at $60 a share.

In May of 1977, Melvin Meyer drew up a notice of election to exercise the option. Plaintiff, however, denied that he ever received this notice. On June 8, 1977, the plaintiff sent a letter to Melvin Meyer by which he purported to withdraw the option created by the instrument of August 25, 1972. On June 10, 1977, plaintiff's attorney, John Lamont, wrote to Meyer advising him that he was representing the plaintiff and requesting that any communication should be made directly to the attorney. Lamont also advised the Aurora National Bank, as co-trustee, to the same effect. In response to a request made by Lamont on June 17, 1977, Zalmon Goldsmith, a lawyer for the defendants, on July 7, 1977, wrote to Lamont advising him that he represented Meyer and informing him that the plaintiff would be permitted to examine the books of the corporation. Lamont in a letter suggested the date of August 10 for the inspection which Goldsmith confirmed in his responsive letter on August 6.

On the same date of August 6, Meyer by a document prepared in Goldsmith's office mailed a signed notice of exercise of the option together with a certified check for $60,000 to the plaintiff by certified mail. No notice of the mailing was given to Lamont. The notice and check were received by plaintiff on August 9, 1977. On the following day Lamont and a certified public accountant examined the corporate books and records of the Meyer Company; and on that same day the plaintiff delivered to Lamont the notice and certified check he had received the previous day.

In a conference between Goldsmith and Lamont in Goldsmith's office on August 29, 1977, the subject of the option and its purported exercise was discussed. Goldsmith encouraged Lamont to discuss with plaintiff a settlement proposal including the payment of a sum of money over and above the $60,000 represented by the certified check then in the possession of Lamont. The plaintiff and defendants were, however, unable to reach a compromise in the following weeks.

On September 21, 1977, the plaintiff brought suit against the Corporation and the four members of its board of directors seeking to compel liquidation of the Corporation and the distribution of its assets to its shareholders; alternatively, the plaintiff sought a distribution of subchapter S (26 U.S.C. § 1371 et seq.) earnings of the defendant Corporation; also, alternatively, the plaintiff sought an order compelling the payment of dividends on the common stock of the Corporation.

The section 48 motion here in issue was filed on October 28, 1977. The evidence at the hearing on the motion consisted of the affidavit of Melvin Meyer, the affidavit of the plaintiff, the affidavit of John Lamont and the depositions of Melvin Meyer, Gretchen Kieso (Glessner) and John G. Plain. At the hearing plaintiff filed his response and requested a continuance of the hearing on the motion so that he could furnish the court transcripts of depositions that were scheduled for three days after the court date. The trial court denied the motion for continuance on the ground that the motion should have been argued before the merits of the section 48 motion had been reached.

On these facts we hold that the trial court erred in its conclusion that the plaintiff had no legal or equitable interest in the Corporation and that the court erroneously dismissed the suit.

The rationale of the trial court that the defendant Melvin Meyer possessed and exercised an enforceable option to buy plaintiff's shares of the ...

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