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Shute v. Chambers

OPINION FILED APRIL 11, 1986.

SHIRLEY E. SHUTE ET AL., PLAINTIFFS-APPELLEES,

v.

DENNIS L. CHAMBERS, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County; the Hon. Anthony J. Scotillo, Judge, presiding.

JUSTICE MURRAY DELIVERED THE OPINION OF THE COURT:

Plaintiffs Shute and Beerman, former shareholders of a dissolved corporation, sued to recover under a purchase agreement and note, executed by defendant Chambers in favor of the corporation. After a bench trial, judgment was entered against defendant-appellant in the amount of $59,096.23. Defendant contends that the action is barred pursuant to section 94 of the Business Corporation Act of 1933 (Ill. Rev. Stat. 1983, ch. 32, par. 157.94), which precludes actions by or against a corporation instituted more than two years from that corporation's dissolution. Defendant also contends that the trial court's decision is against the manifest weight of the evidence.

The original complaint, filed on March 9, 1979, by Shirley Shute and Jon L. Beerman (plaintiffs) against Dennis Chambers (defendant) and other parties who were dismissed from the cause, alleged an agreement between defendant and a corporation, B.M.S. Enterprises (B.M.S.), involving the sale of assets of a corporation, Federal Storage and Moving Company. The agreement and a note were signed by defendant and were dated June 17, 1973. B.M.S. was formerly known as Federal Storage and Moving Company (Federal) and changed its name so that defendant could use the Federal name. The agreement covered the purchase of the "old" Federal business including the corporate name, good will, customer accounts and certain personal property. The seller also agreed to convey Illinois Commerce Commission rights and to use its best efforts to obtain approval of the transfer to defendant. The purchase price, secured by an installment note, was to be $85,000, due when certain property was sold at which time defendant would be credited with his share of the sale proceeds. Defendant was an employee and 17 1/2% shareholder in the old Federal corporation. Plaintiffs were also shareholders in the old Federal corporation.

Although defendant disputes it, the record indicates that both parties were represented by counsel in the sale of the business. The property was sold in July 1974. Defendant made no payments on the note because he believed that he owed nothing. On July 2, 1975, B.M.S. executed articles of dissolution, and the Secretary of State issued a certificate of dissolution on July 15, 1975. In 1977, defendant's "new" Federal corporation went out of business when the Illinois Commerce Commission informed him he had no authority to operate. The facts indicate that at the time of the business transfer, neither defendant nor plaintiffs made any effort to effect a transfer of the operating license.

Plaintiffs' original complaint was filed on March 9, 1979, and was later amended. The amended complaint sought damages and injunctive relief based upon defendant's breach of the purchase agreement and promissory note. Defendant's denied breaching the agreement and amended his answer to deny executing the promissory note, which was admitted to in his original answer. Defendant's second amended answer set forth three defenses: (1) plaintiffs' failure to perform by failing to effect a transfer of the Commerce Commission license; (2) a failure of consideration since defendant never obtained Commerce Commission rights; and (3) the agreement violated section 18-309 of the Illinois Vehicle Code (Ill. Rev. Stat. 1983, ch. 95 1/2, par. 18-309) regarding transfer of a carrier license.

During plaintiffs' case, they offered into evidence a purported assignment of the note from the corporation to themselves. Over defendant's objections, the assignment which was dated July 10, 1975, was admitted into evidence. Also, at the close of plaintiffs' case, defendant, for the first time, raised the issue of the action being barred by section 94 of the Business Corporation Act of 1933 (Ill. Rev. Stat. 1983, ch. 32, par. 157.94).

The trial judge, in denying defendant's motion for a directed verdict on the basis of section 94, relied on Chicago Title & Trust Co. v. Ceco Corp. (1980), 92 Ill. App.3d 58, 415 N.E.2d 668, which stated the applicable standard for ruling on a motion for a directed verdict. The judge first determined that plaintiffs had established a prima facie case, and then weighed the evidence presented by plaintiffs. This standard was applied to the assignment and contract aspects of the case. The judge did not expressly rule on the section 94 issue. After judgment in plaintiffs' favor on the claim, defendant filed a motion to dismiss the action as being barred by section 94. The trial judge also denied this motion. He held that an action on the contract or on the note would both be choate claims, and therefore, were not barred by section 94. He further noted that either claim, standing alone, was sufficient to support plaintiffs' claim. Defendant then filed this appeal.

The issues on appeal are (1) whether the defense based on section 94 was timely made; (2) the applicability of section 94 to this cause; (3) whether the assignment dated five days before dissolution was valid; and (4) whether the trial court's decision regarding failure of performance and consideration was supported by the evidence.

We affirm the trial court's ruling for the following reasons.

• 1, 2 The court must first resolve the issue as to whether section 94 of the Business Corporation Act of 1933 (Ill. Rev. Stat. 1983, ch. 32, par. 157.94) is applicable to the present action. In addressing this issue, it is necessary to determine the validity of plaintiffs' contention that defendant waived the defense by not properly pleading it as an affirmative defense. Section 94 provides that any remedial action by or against a corporation, its directors, or shareholders must be instituted within two years of the corporation's dissolution.

Plaintiffs' waiver argument is based on section 2-613(d) of the Code of Civil Procedure (Ill. Rev. Stat. 1983, ch. 110, par. 2-613(d)). Section 2-613(d) provides, in part, that:

"The facts constituting any affirmative defense such as payment, release * * * that an instrument or transaction is either void or voidable in point of law, or cannot be recovered upon by reason of any statute * * * and any defense which by other affirmative matter seeks to avoid the legal effect of or defeat the cause of action * * * and any ground or defense, whether affirmative or not, which if not expressly stated in the pleading, would be likely to take the opposite party by surprise, must be plainly set forth in the answer or reply." (Emphasis added.) Ill. Rev. Stat. 1983, ch. 110, par. 2-613(d).

Both plaintiffs and defendant agree that section 94 is not strictly a statute of limitation but is a conditional limitation upon a plaintiff's right of action. It is in essence a survival statute. (See Sarelas v. McCue & Co. (1937), 291 Ill. App. 540, 10 N.E.2d 700.) Defendant cites several cases as authority that section 94 need not be pleaded as an affirmative defense. (See Canadian Ace Brewing Co. v. Joseph Schlitz Brewing Co. (7th Cir. 1980), 629 F.2d 1183; Gordon v. Loew's Inc. (D.N.J. 1956), 147 F. Supp. 398, aff'd (3d Cir. 1957), 247 F.2d 451; Poliquin v. Sapp (1979), 72 Ill. App.3d 477, 390 N.E.2d 974; Koepke v. First National Bank (1972), 5 Ill. App.3d 799, 284 N.E.2d 671.) However, in all of these cases, the defense was raised in pretrial motions.

The test as to whether a defense is affirmative is whether it gives color to the opposing party's claim and then asserts new matter by which the apparent right is defeated. The admission of the apparent right is inferable from the affirmative defense. (Worner Agency, Inc. v. Doyle (1984), 121 Ill. App.3d 219, 459 N.E.2d 633.) Section 2-613(d) of the Code of Civil Procedure is unambiguous in stating that a transaction that "cannot be recovered upon by reason of any statute * * * must be plainly set forth in the answer or reply." (Ill. Rev. Stat. 1983, ch. 110, par. 2-613(d).) Section 94 of the Business Corporation Act of 1933 (Ill. Rev. Stat. 1983, ch. 32, par. 157.94) certainly acts to defeat certain causes of action instituted after the two-year winding up period. Thus, it ...


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