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05/22/87 Franzen-Peters, Inc., v. Barber-Greene Company

May 22, 1987

FRANZEN-PETERS, INC., PLAINTIFF-APPELLANT

v.

BARBER-GREENE COMPANY, DEFENDANT-APPELLEE



APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

508 N.E.2d 1115, 155 Ill. App. 3d 957, 108 Ill. Dec. 538 1987.IL.667

Appeal from the Circuit Court of Du Page County; the Hon. Anthony M. Peccarelli, Judge, presiding.

APPELLATE Judges:

JUSTICE REINHARD delivered the opinion of the court. LINDBERG, P.J., and UNVERZAGT, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE REINHARD

Plaintiff, Franzen-Peters, Inc., appeals from the order of the circuit court of Du Page County which denied its motion to reconsider the dismissal of its amended complaint against defendant, Barber-Greene Company, pursuant to section 2-619(a)(6) of the Civil Practice Law (Ill. Rev. Stat. 1985, ch. 110, par. 2-619(a)(6)) because the asserted causes of action had been discharged in bankruptcy.

Plaintiff raises the following issue on appeal: whether the trial court erred in determining that the amended complaint should be dismissed pursuant to section 2 --619(a)(6) because the claims set forth in the amended complaint were discharged in bankruptcy.

Plaintiff filed a four-count amended complaint against defendant alleging breach of contract, breach of warranty, deceptive trade practices in violation of section 2 of the Consumer Fraud and Deceptive Business Practices Act (Ill. Rev. Stat. 1985, ch. 121 1/2, par. 262) and section 2 of the Uniform Deceptive Trade Practices Act (Ill. Rev. Stat. 1985, ch. 121 1/2, par. 312), and fraud by defendant in the 1981 sale of an asphalt plant to plaintiff. Defendant moved to dismiss the complaint pursuant to section 2-619(a) (Ill. Rev. Stat. 1985, ch. 110, par. 2-619(a)). It asserted in the motion that although the contract was entered into as alleged, plaintiff filed a voluntary petition for reorganization under chapter 11 of the United States Bankruptcy Code (Bankruptcy Code) (11 U.S.C.A. sec. 1101 et seq. (West 1979)). As a result of this petition, defendant contended, plaintiff lacked the legal capacity to sue because the claims embodied in the complaint were assets of the bankrupt's estate and were never listed or disclosed to creditors as an asset of plaintiff's, that it would be inequitable to allow plaintiff to assert these claims because it failed to disclose these claims to its creditors, and that these claims were satisfied in plaintiff's chapter 11 bankruptcy proceeding.

Additionally, defendant asserted that count III, which alleged fraudulent misrepresentation, was barred by the three-year limitation period of section 10a of the Consumer Fraud and Deceptive Business Practices Act (Ill. Rev. Stat. 1985, ch. 121 1/2, par. 270a(e)) and should be dismissed pursuant to section 2-619(a)(5) (Ill. Rev. Stat. 1985, ch. 110, par. 2-619(a)(5)) and asserted that the complaint was insufficient to state a cause of action as a matter of law (Ill. Rev. Stat. 1985, ch. 110, par. 2-615(a)). No affidavits were attached to this motion. During oral arguments before the trial court, however, defendant, upon the insistence of the trial Judge, chose to abandon the section 2-615 portion of the motion to dismiss and to proceed only on the issues raised in the section 2-619(a) portion of the motion. Each party filed memoranda in support of their respective positions, attaching several documents from the reorganization proceeding which included the schedule of debtor's assets and the debtor's plan of reorganization. No affidavits were filed with the memoranda either.

Following the issuance of its June 3, 1986, letter of opinion, the trial court entered an order on June 23, 1986, dismissing the complaint pursuant to section 2-619(a)(6) (Ill. Rev. Stat. 1985, ch. 110, par. 2-619(a)(6)). In its letter, the trial court found that these claims were assets of the bankrupt estate, that the description of these claims in the disclosure statement, "lawsuits of unknown value," was not "adequate information" under the Bankruptcy Code, and that it appeared that these claims were discharged in bankruptcy. Additionally, the court found that in view of this decision, it was unnecessary to consider the time limitation argument as to count III.

Plaintiff moved for reconsideration of this order. Attached to its motion were two affidavits attesting to the fact that, contrary to the trial court's Conclusions, the claims were adequately disclosed within the guidelines of the Bankruptcy Code, that the claims were disclosed to and dealt with by the creditors so that upon confirmation of reorganization the claims vested with plaintiff, and that the claims were not discharged in bankruptcy. Specifically, Thomas Franzen, president of plaintiff, stated in his affidavit, in pertinent part, that creditors had ample opportunity during meetings to elicit more information concerning the contingent claims, that during the informal meetings of the creditors' committee, the contingent nature of these claims, and specifically the claim asserted herein, were discussed, that during the formal meeting with creditors, questions about claims could have been raised by creditors, and that the disclosure was adequate for the bankruptcy court and the circuit court. Also attached was an order of the bankruptcy Judge approving the disclosure statement finding that it contained adequate information. Defendant replied to the motion arguing that it should be denied because plaintiff failed to raise any new issues and that the affidavits were conclusory, self-serving, unpersuasive, and not timely filed. The trial court denied the motion in a written order without specifying any particular basis for the denial or ruling on the sufficiency of the affidavits.

The contract for sale of the asphalt plant was entered into on October 8, 1981. On October 5, 1984, plaintiff filed a petition for voluntary reorganization under chapter 11 of the Bankruptcy Code (11 U.S.C.A. sec. 1101 et seq. (West 1979)). Under the Bankruptcy Code and Bankruptcy Rules, plaintiff was required to file a schedule of assets and liabilities in the bankruptcy proceedings. (11 U.S.C.A. sec. 1125(a) (West 1979); Fed. R. Bankr. 1007(b), 11 U.S.C.A. R. 1007(b) (West 1984).) Plaintiff's schedule of assets included "lawsuits of unknown value." On March 15, 1985, the bankruptcy court entered an order approving the disclosure statement and fixing time for acceptance or rejection of the reorganization plan. (In re Franzen-Peters, Inc. (Bankr. N.D. Ill. March 15, 1985), No. 84 B 12580.) The plan was apparently confirmed in April 1985.

Plaintiff contends that the trial court incorrectly determined that the claims in the amended complaint had been discharged in bankruptcy. In particular, it argues that the claims were adequately disclosed in the context of the bankruptcy proceeding to inform creditors, and defendant, of the existence of the claims, that although these claims were part of the bankrupt's estate during the reorganization proceeding, they vested in plaintiff pursuant to section 1141(b) of the Bankruptcy Code (11 U.S.C.A. sec. 1141(b) (West 1979)) upon confirmation of the reorganization plan, that it is beyond the authority of the trial court to determine that the disclosure was inadequate because the bankruptcy court's determination that plaintiff's disclosure provided adequate information is conclusive on the parties, and that the claims were not adjudicated, released, satisfied, or discharged in bankruptcy, but remained an asset in plaintiff's estate.

Defendant responds that the trial court correctly dismissed the complaint pursuant to section 2 -- 619(a). It asserts that the affidavits which plaintiff relies on to support its claim of adequate disclosure were not filed in opposition to the motion to dismiss, but in support of the motion to reconsider and should not be considered. It also asserts that, even if considered, the affidavits are self-serving and conclusory and do not comply with the supreme court rules. Therefore, based solely on the information in the written disclosure statement, it argues that plaintiff's "cryptic" disclosure was insufficient to meet the Bankruptcy Code requirements for adequate disclosure of assets to allow the claims to vest in plaintiff simply because the bankruptcy court did not deal with the undisclosed assets, that to allow plaintiff to now pursue the claims would be unjust, and that plaintiff must petition the bankruptcy court for leave to now ...


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