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Rahill Corp. v. Urbanski





Appeal from the Circuit Court of Cook County; the Hon. Albert S. Green, Judge, presiding.


This appeal is from a partial summary judgment for defendant Urbanski Van Service, Inc. (Van Service), allowing recovery of an amount allegedly due it under an equipment lease. The sole issue before us is the propriety of the trial court's denial of plaintiff's motion for modification or vacation of that judgment.

Van Service, an Illinois corporation, holds a certificate of public convenience and necessity from the Illinois Commerce Commission (the ICC certificate) which authorizes it to operate as a common carrier. On March 18, 1980, defendant Michael L. Urbanski (Urbanski), sole owner of the outstanding shares of Van Service, entered into two agreements with plaintiff Rahill Corporation (Rahill). In the first, Urbanski agreed to sell Rahill 49% of his shares of Van Service (the purchase agreement), with the purchase price to be paid in several monthly installments. The shares were to be held in escrow pending receipt of all payments due from Rahill. Under the second agreement, Rahill was granted an option to purchase the remaining 51% of the outstanding shares at any time prior to December 31, 1982 (the option agreement), the consideration therefor to be paid by Rahill in 14 monthly installments. It was further agreed that Urbanski would cooperate with Rahill, as its agent in managing Van Service, by entering into necessary contracts and agreements, including equipment leases, pending completion of the two agreements.

For reasons not pertinent hereto, Urbanski notified Rahill on January 28, 1981, that it was in default on the installment payments due under the purchase agreement, and that he was terminating that agreement, as well as the option agreement, pursuant to the terms thereof. Rahill denied that any breach had occurred and continued to tender the payments required under the agreements and to engage in business as a common carrier using the name of Urbanski Van Service, Inc., or some variant thereof, and purporting to operate pursuant to the authority granted by Van Service's ICC certificate. The only business conducted which is pertinent to the instant appeal involved the leasing of equipment. Rahill asserted that it purchased seven leases entered into between Van Service and G.T.S., Inc., on November 9, 1979, under which Van Service leased for a period of three years several vehicles owned by G.T.S. (the G.T.S. leases). Rahill's allegations are unclear, but it is assumed that Rahill purchased the equipment described in the leases, rather than merely the leases themselves, and was therefore G.T.S.'s successor in interest under those leases. Each lease is entitled "Illinois Commerce Commission Equipment Lease" and contains a description of the equipment to be leased and provides that it will be operated pursuant to the authority granted by Van Service's ICC certificate. Under the terms of the leases, the lessor (G.T.S.) is to receive "80%" as compensation for the use of the equipment; however, the leases do not further explain the compensation and, although each lease bears the notation "Instructions on Reverse Side," the reverse side of the copies which appear in the record are blank.

In addition to these seven G.T.S. leases, Rahill allegedly entered into four similar leases with Van Service on February 4, 1981; each of those leases lists Rahill as the owner of the equipment and Van Service as the lessee (the Rahill leases). The forms used again appear to be preprinted forms obtained from the Illinois Commerce Commission (ICC), and also provide that compensation shall be "80%." As with the G.T.S. leases, the term "80%" is unexplained and, although the forms state that the agreement between the parties "includes the provisions set forth herein and on the reverse side hereof along with such provisions as are made part of an addendum attached thereto," the copies of the leases contained in the record are blank on the reverse side and no addenda are attached thereto. These four Rahill leases are signed by Michael Moran (Moran) as authorized agent or employee of Van Service. It appears from the pleadings that Moran is president of Rahill.

On June 4, 1981, Van Service notified Moran that he was not authorized to act on its behalf, and demanded that he and Rahill cease doing business as Urbanski Van Service, Inc. He was further notified that Van Service would take immediate action to have the ICC cancel the above leases. Rahill thereafter brought an action for specific performance of the purchase and option agreements and for damages allegedly caused by cancellation of the G.T.S. and Rahill leases. In a counterclaim, Van Service alleged that Rahill and Moran, without its authorization, were doing business as Urbanski Van Service, Inc., and purporting to act pursuant to its ICC certificate. Van Service asked the trial court to enjoin use of its name and certificate by Rahill and Moran and sought an accounting of all funds received by those parties as a result of their unauthorized use of its name and certificate.

On June 15, 1982, the trial court granted Rahill's request for a preliminary injunction and prohibited Urbanski and Van Service from selling Van Service's stock or entering into any ICC equipment leases pending a final resolution on the merits. The court further ordered Van Service to reinstate the G.T.S. and Rahill leases with the ICC, ruling that "pending the final resolution of all factual and legal issues herein, the eleven (11) Illinois Commerce Commission equipment leases cited in and attached to plaintiff's Amended Complaint * * * are legally binding and effective between Rahill Corporation and Urbanski Van Service, Inc."

No appeal was taken from the preliminary injunction, and it appears that the merits of Rahill's complaint and Van Service's countercomplaint, as well as several third-party complaints, are still pending before the trial court. However, Van Service moved for partial summary judgment on its counterclaim for compensation allegedly due it for the unauthorized use of its name and certificate. It asserted therein that the trial court had declared the leases legally effective and binding; that the compensation in all of the leases was stated at "80%"; that by policy of the ICC and by trade usage, the 80% compensation term meant that the owner of the equipment, here Rahill, was to receive 80% of the gross receipts and that the lessee thereof, here Van Service, was to receive the remaining 20%; that Rahill, by its own admission, had never transmitted any of the gross receipts to Van Service or otherwise accounted therefor; and that, as a matter of law, it was entitled to judgment against Rahill in an amount equal to 20% of the gross receipts generated by the equipment leases.

In response, Rahill asserted that there was a genuine issue of material fact regarding whether it was required to pay any portion of the gross receipts to Van Service, alleging that during negotiation of the purchase and option agreements, the parties did not discuss the payment of compensation to Van Service under the equipment leases. Rahill further maintained that it was the parties' understanding that all funds generated by the leases and otherwise payable to Van Service were to be used to pay the cost of developing Van Service's business, and that this agreement was necessary to fulfill the main purpose of the leases; i.e., "to establish a course of business conduct, for the time period covered by [the agreement], in order to evidence to the Illinois Commerce Commission that [Van Service] is a vibrant and expanding business, and that [its] `authority' had been actively used during the 24 month period prior to the parties' intended application to transfer the stock of [Van Service] from [Urbanski] to [Rahill], which proofs are prerequisite to Commission approval of such application."

The trial court granted Van Service's motion on October 8, 1982, and entered judgment in its favor "for twenty percent of all trucking revenues which were generated by services performed under Illinois Commerce Commission equipment leases in which Urbanski Van Service, Inc. was the lessee, from March 18, 1980 to the present, and which were reinstated by Court Order of June 15, 1982." The trial court's reasoning is not set forth in the order, and no transcript has been provided. However, it appears that the agreement alleged by Rahill concerning disposition of Van Service's 20% of revenues is not contained in the equipment leases which the court ordered enforced pending a final disposition on the merits. Moreover, the enforceability of the alleged agreement as to Van Service's or Urbanski's duty to develop its business is a question to be resolved during a final hearing on the merits, and has no bearing on whether Van Service should receive the compensation provided in leases which the court has ordered it to perform. If it is ultimately found that Rahill breached the purchase and option agreements, as Urbanski contends, then Rahill's use of Van Service's name and certificate was wrongful, and Urbanski would have no duty to employ the revenues generated by that wrongful usage in any fashion. Conversely, if Rahill prevails on the merits and it is found that Urbanski breached the agreements, then Rahill may be entitled to damages, including damages for the failure to use the 20% of gross receipts to develop Van Service's business, if the existence of such an agreement is proved. In any event, Rahill raises no arguments on appeal concerning the alleged agreement regarding use of Van Service's revenues.

In the October 8 order, Rahill was directed to make its books and records available for inspection and to provide Van Service with a copy of an audit then in progress. Thereafter, a hearing was held to prove up the amount due under the October 8 order (no transcript of this hearing appears in the record), and on March 29, 1983, the court rendered judgment for Van Service in the amount of $250,684.36, which it found to be 20% of the gross trucking revenues received by Rahill under the equipment leases from March 18, 1980, through March 28, 1983. Rahill then moved, pursuant to section 2-1203 of the Code of Civil Procedure (Ill. Rev. Stat. 1981, ch. 110, par. 2-1203) for vacation or modification of the partial summary judgment, asserting that the trial court's order would jeopardize the contemplated transfer of the ICC certificate from Van Service to Rahill should the trial court ultimately order specific performance of the purchase and option agreements. It reasoned that, in order to obtain necessary ICC approval of the transfer, it must show that Van Service's operations have never been abandoned, suspended, discontinued, or dormant (Ill. Rev. Stat. 1981, ch. 95 1/2, par. 18-309(3)); that one of the factors considered by the ICC in making that determination is whether the transferor, here Van Service, has assumed the financial risk of its operations; and that, by failing to reduce the judgment by the amount of any operating expenses, the court had made it appear that Van Service was not financially responsible for operations under its certificate. Therefore, it posited, "the only way [the trial court] can insure that the application for transfer to the Commission will not be prima facie defective is to allocate the proper portion of operating expenses to [Van Service], in accordance with the custom and usage of the industry." Rahill asked that further hearings be held, and the trial court, taking its motion under advisement, allowed Rahill to supplement that motion with proof of what expenses, if any, Van Service was required to bear "under Illinois Commerce Commission General Order No. 24."

Thereafter, in support of the motion, Rahill filed the affidavit of its president, Moran, wherein he asserted that he had contacted a technical advisor of the ICC to obtain guidance as to the responsibilities of certificate holders for payment of expenses relating to equipment leases under ICC General Order No. 24. Based on the advisor's response, he calculated expenses allocable to Van Service, Inc., and determined that those expenses exceeded 20% of the gross revenues by $474,473.43. Attached to the affidavit were computer printouts of the revenues and expenses purportedly allocable to Van Service for the years 1980-82, which Moran averred were compiled by an accountant in preparing the combined balance sheets of Van Service and Rahill from information and documents supplied by Rahill. Each of the computer pages bears the notation "unaudited — see accountants' compilation report," but no such report is included. Also attached is a letter to Moran bearing the insignia of the ICC and signed by Clarence F. Hutches, Technical Advisor (the Hutches letter), which states in part: "This is in response to your inquiry concerning the nature of expenses which can fairly be attributable as between lessor and lessee. * * * [I]t is my informal opinion that the following items would appear to be chargeable as expenses to the parties * * *." The Hutches letter then enumerates the expenses purportedly allocable to the carrier and those related to the lessor's operations, but no basis is stated for the opinion. The trial court struck the affidavit and attached documents, denied Rahill's motion for modification or vacation of the partial summary judgment, and found that there was no just reason to delay enforcement or appeal. This appeal followed.


Initially we note that, in this appeal, Rahill no longer asserts, as it did before judgment was entered, that the parties had an agreement concerning the manner in which Van Service's compensation under the equipment leases was to be used, nor does it argue, as it did in its motion to vacate or modify, that failure to allocate expenses to Van Service might jeopardize transfer of the ICC certificate should Rahill prevail in its action for specific performance. Instead, it now maintains that ICC General Order No. 24 (Order 24), which purportedly prescribes the form for equipment leases, requires that certain expenses of operation be borne by Van Service as lessee. In effect, its position on appeal is that the trial court erred in ruling that the requirements of Order 24 are not incorporated in the equipment leases. This point was not raised in Rahill's response to Van Service's motion for summary judgment or included in its motion to vacate or modify that judgment, and ordinarily we will not consider issues which are raised for the first time on appeal (Snow v. Dixon (1977), 66 Ill.2d 443, 362 N.E.2d 1052, cert. denied sub nom. Smith v. Snow (1977), 434 U.S. 939, 54 L.Ed.2d 298, 98 S.Ct. 429); however, Van Service apparently concedes that reference to allocation of expenses "in accordance with the custom and usage of the industry" in Rahill's motion to vacate or ...

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