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09/16/88 Quad-L, Ltd., Et Al., v. Tastee-Freez of West

September 16, 1988





528 N.E.2d 1107, 174 Ill. App. 3d 544, 124 Ill. Dec. 216 1988.IL.1388

Appeal from the Circuit Court of Rock Island County; the Hon. John M. Telleen, Judge, presiding.


PRESIDING JUSTICE STOUDER delivered the opinion of the court. HEIPLE and SCOTT, JJ., concur.


The plaintiffs, Quad-L, Ltd., a corporation (Quad-L), and Kim and Veron Lombardi, appeal from the decision of the circuit court which granted the special appearances of Big T Corporation and DeNovo Corporation and found that Illinois did not have jurisdiction over Big T and DeNovo.

Big T Corporation (Big T), and DeNovo Corporation (DeNovo), are Michigan corporations with their principal offices in Michigan. Big T is a wholly owned subsidiary of DeNovo.

In 1982, Big T acquired the assets of International Service & Sales, Inc., a Missouri corporation. These assets included various trademarks and agreements licensing the use of those trademarks. Included in those agreements is one between the defendant, Tastee-Freez of West Central Illinois (Tastee-Freez), and Tastee-Freez International Services & Sales, Inc.

Kim and Veron Lombardi are officers of Quad-L, Ltd., a corporation with its principal office in Iowa. At some time prior to December 14, 1982, Quad-L received a franchise agreement entitled "Restaurant License Agreement" from Tastee-Freez with instructions to execute and return. The agreement identified Tastee-Freez as franchise holder, Quad-L as licensee, and Big T as franchiser.

Prior to executing the agreement, Big T and Tastee-Freez provided Quad-L with various circulars, alleged false profit and loss projections and earning claims in an effort to have Quad -L execute the agreement. On December 14, 1982, Quad-L executed the agreement and delivered it to Tastee-Freez for execution. The agreement was never executed by Tastee-Freez, Big T, or DeNovo.

Having executed the agreement, Quad-L paid Tastee-Freez the $5,000 franchise fee as required by the agreement. Once the restaurant opened, Tastee-Freez was paid additional fees as required by the agreement. The plaintiffs lost money as a result of the franchise agreement and have filed suit in Illinois against a number of parties, including DeNovo, Big T, and Tastee-Freez. Tastee-Freez has appeared in the cause and submitted to the jurisdiction of the Illinois courts. DeNovo and Big T filed special appearances in response to the complaint and the purported service of process on them. After hearing oral arguments and reviewing briefs, the trial court granted the special appearances. By written order entered on August 25, 1987, the court found that neither Big T nor DeNovo is doing business in Illinois nor have they transacted any business in Illinois. In addition the court stated that neither party committed a tort within the State of Illinois and thus is not subject to Illinois jurisdiction. The court felt that whatever business was conducted by DeNovo and Big T was conducted in Michigan concerning an Iowa business.

On appeal the plaintiff argues that the trial court erred in granting DeNovo's and Big T's special appearances. Specifically, the plaintiff argues the defendants are subject to Illinois jurisdiction under any of the following: (1) the doing of business in Illinois by Big T and DeNovo; (2) the provisions of the Illinois long arm statute (Ill. Rev. Stat. 1985, ch. 110, par. 2-209); and (3) the provisions of the Franchise Disclosure Act (Ill. Rev. Stat. 1985, ch. 121 1/2, par. 701 et seq.) (repealed by Pub. Act 85-551, eff. Jan. 1, 1988) (now Ill. Rev. Stat. 1987, ch. 121 1/2, par. 1701 et seq.)

In light of the view we take with regard to DeNovo and Big T doing business in Illinois it is unnecessary for the court to discuss whether the defendants would be subject to jurisdiction under the long arm statute or the Franchise Disclosure Act.

Under the "doing business doctrine," a nonresident corporation will be considered to have consented to being sued in Illinois if the nonresident corporation is doing business in Illinois. (Cook Associates, Inc. v. Lexington United Corp. (1981), 87 Ill. 2d 190, 429 N.E.2d 847; see also Hertz Corp. v. Taylor (1959), 15 Ill. 2d 552, 155 N.E.2d 610; St. Louis-San Francisco Ry. Co. v. Gitchoff (1977), 68 Ill. 2d 38, 369 N.E.2d 52; Braband v. Beech Aircraft Corp. (1978), 72 Ill. 2d 548, 382 N.E.2d 252 (where Illinois Supreme Court found corporations' activities to constitute doing business in Illinois).) Doing business for the purposes of jurisdiction has been defined as a corporation's operating within a ...

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