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Wilde v. First Fed. Sav. & Loan Ass'n.





Appeal from the Circuit Court of Cook County; the Hon. William R. Quinlan, Judge, presiding.


The circuit court sustained defendant's motion to strike plaintiff's complaint and dismiss the action grounded in an alleged breach of an employment contract. Subsequently, the court denied plaintiff's motion to vacate the dismissal order and for leave to file an amended complaint, which plaintiff identifies as error. We affirm for reasons set forth below.

Plaintiff filed an unverified complaint, consisting of three counts, on March 30, 1983. Count I alleged the facts which follow. Plaintiff entered into an employment contract with Glenview Guaranty Savings and Loan Association (Guaranty), whereby plaintiff would serve as president of Guaranty from January 1, 1982, to December 31, 1984. Pursuant to this contract, plaintiff was entitled to $190,633.32 in severance pay in the event his employment was terminated other than for cause. On or about September 18, 1982, Guaranty and defendant merged under a merger plan "approved by the necessary federal and state regulatory bodies." Upon completion of the merger, defendant "acceeded [sic] to all the rights, liabilities and obligations of Guaranty, including the Employment Contract." After the merger, defendant continued to employ plaintiff until he was terminated without cause on or about January 20, 1983. Plaintiff performed all conditions precedent required of him under the contract. Defendant, however, refused to pay him the severance benefits to which he was entitled. Count II, also based on an alleged breach of plaintiff's employment contract, alleged that, when his employment was terminated, plaintiff had not used any of the six weeks' vacation time to which he was entitled under the contract; accordingly, he was due payment for accrued but unused 1983 vacation time equal to $13,892.30. Count III sought a declaratory judgment determining plaintiff's rights with respect to defendant's profit-sharing program. Attached to the complaint as exhibits were plaintiff's employment contract and defendant's letter of termination to plaintiff.

On June 13, 1983, defendant filed a motion to strike the complaint and dismiss the action, accompanied by an affidavit of Jerome Maher, defendant's executive vice president and one of its directors, averring that plaintiff's employment contract never had been presented for approval to nor had it been approved by defendant's board of directors. Subsequently, defendant filed the affidavit of Edward A. Eckert, supervisory agent for the Federal Home Loan Bank Board (Board), attesting that, based upon his personal knowledge, and his participation in the consideration of defendant's application to absorb Guaranty by merger, the ensuing merger of Guaranty and defendant was a "Conditionally Approved Supervisory Merger," and "that the grounds set forth in 12 U.S.C. § 1464 (d)(6)(A)(i) existed or would exist in the future with respect to Glenview Guaranty in that it was insolvent or was about to become insolvent absent action by the Board. The Board therefore approved the supervisory merger * * *." Defendant also filed a copy of Board resolution No. 82-624, dated September 15, 1982, approving the instant merger.

On February 7, 1984, following a hearing on defendant's motion to strike and dismiss, the circuit court entered an order which: granted defendant's motion to dismiss counts I and II under section 2-619 of the Code of Civil Procedure (Ill. Rev. Stat. 1983, ch. 110, par. 2-619) (Code), but stayed entry of the order for 30 days until March 8, 1984, during which time plaintiff was permitted to file a motion to vacate and therein "demonstrate a new theory upon which the claims in Counts I and II of the complaint could be sustained"; and granted defendant's motion to strike count III under section 2-615 of the Code (Ill. Rev. Stat. 1983, ch. 110, par. 2-615), but granted plaintiff leave to amend within 28 days. On March 8, 1984, the court, among other things, stayed the dismissal as to counts I and II an additional 14 days until March 22, 1984, during which time plaintiff would be permitted to file a motion to vacate and an amended complaint, and dismissed count III of the complaint with prejudice.

On March 22, 1984, plaintiff filed a motion to vacate the dismissal of counts I and II and sought leave to file an unverified amended complaint, appended to the motion. After a hearing, plaintiff's motions were denied. Plaintiff appeals.


• 1 Federal statutes empower the Board to make rules and regulations respecting "reorganization, consolidation, liquidation, and dissolution of [savings and loan] associations, [and] for the merger of associations" with other institutions. (12 U.S.C. § 1464(d)(11) (1982).) By regulation, the Board must approve any merger involving a Federal savings and loan association or a savings and loan association insured by the Federal Savings and Loan Insurance Corporation (FSLIC). (12 C.F.R. sec. 546.2 (1984), See Federal Home Loan Bank Board v. Elliott (9th Cir. 1967), 386 F.2d 42, 51.) Employment contracts between covered institutions and their employees may be entered into "only in accordance with the requirements" of these Federal regulations. (12 C.F.R. sec. 563.39(a) (1984).) All such contracts must be in writing, be "approved specifically" by the institution's board of directors, and contain certain provisions, including the following (12 C.F.R. secs. 563.39(a) and (b)(5) (1984)):

"All obligations under the [employment] contract shall be terminated, except to the extent determined that continuation of the contract is necessary for the continued operation of the institution * * * by the Federal Home Loan Bank Board, at the time the Board or its Principal Supervisory Agent * * * approves a supervisory merger to resolve problems related to operation of the association or when the association is determined by the Board to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action."

Although the foregoing provision was not included in the contract at issue, the circuit court correctly read it into the contract as an implied term thereof. (Hindu Incense Manufacturing Co. v. MacKenzie (1949), 403 Ill. 390, 392, 86 N.E.2d 214; Bethel Terrace, Inc. v. Village of Caseyville (1976), 43 Ill. App.3d 276, 279, 356 N.E.2d 1269.) The court also properly found that the contract terminated by reason of this implied term.

Plaintiff initially argues that the evidence is inconclusive as to whether the merger here was "supervisory"; Eckert, supervisory agent for the Board who participated in considering the instant merger application, averred that it was. The accompanying Board resolution does not designate the merger as such, but instead certifies that the grounds set forth in 12 U.S.C. § 1464(d)(6)(A)(i) (1982) existed in that Guaranty was insolvent or about to become so absent Board action. The cited statutory provision does not deal with supervisory mergers, but rather with the grounds for the appointment of a conservator or receiver for an institution. 12 U.S.C. § 1464(d)(6)(A)(i) (1982).

• 2 The nature of a supervisory merger is not clearly defined by the applicable Federal statutes and regulations; however, one Federal court, discussing the purpose of such mergers, noted that the Board can step in to assist "seriously financially weakened S&Ls" and held that under such circumstances, "`supervisory' mergers preserve public confidence in the industry and avoid the harms to under or uninsured depositors resulting from liquidation." (Independent Bankers Association of America v. Federal Home Loan Bank Board (D.D.C. 1982), 557 F. Supp. 23, 25.) The Board's finding here that Guaranty was insolvent or about to become so, together with Eckert's uncontroverted affidavit, sufficed to establish the instant merger as "supervisory" within the meaning of 12 C.F.R. sec. 563.39(b)(5) (1984).

Although he had ample opportunity to do so, plaintiff failed to rebut effectively Eckert's affidavit, notwithstanding that the grounds relied upon by the court in dismissing the action were not raised explicitly in defendant's motion to dismiss. The court stayed entry of the dismissal for 30 days in order to permit plaintiff to file a motion to vacate "if there be another basis for asserting any rights against the merged corporation." The dismissal was subsequently stayed for another 14 days. Plaintiff's proposed amended complaint included an allegation that the merger was voluntary; however, he filed no counteraffidavit or other matter controverting Eckert's affidavit.

Plaintiff urges that, because the basis for dismissal took him by surprise, the circuit court should have permitted him to file the amended complaint, which thereafter should have been considered in light of Eckert's affidavit. He maintains that since all well-pleaded facts and reasonable inferences rising therefrom are admitted by a motion to dismiss (Kenneke v. First National Bank (1978), 65 Ill. App.3d 10, 12, 382 N.E.2d 309), the allegation in his amended complaint that the merger was voluntary accordingly would have been taken as true. Thus, he argues, Eckert's affidavit then would have created only a factual issue as to the nature of the merger (see Austin View Civic Association v. City ...

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