The opinion of the court was delivered by: BUCKLO
Eugene Horbach, the owner of a 93% interest in the now-dissolved Illinois corporation TyrRee Corp. ("TyrRee"), has brought this suit against Shred Pax, Corp. ("Shred Pax"),
also an Illinois corporation, and its president, Alvis Kaczmarek, for breach of contract, fraud, and conversion. The defendants have moved to dismiss the complaint. For the reasons stated below, their motion is granted in Part and denied in part.
In August of 1989, TyrRee was formed as an Illinois corporation to own and operate tire pyrolysis plants.
Horbach, a resident of the state of Washington, owned 71 percent of TyrRee's stock. Another TyrRee shareholder has assigned his right to Horbach, so Horbach now owns 93% of TyrRee's assets. TyrRee was dissolved on September 9, 1990.
In September of 1989, TyrRee and Shred Pax signed two contracts. The first of these contracts is a purchase order through which Shred Pax agreed to design, manufacture, and install certain tire pyrolysis and shredding equipment for TyrRee ("the Purchase Order"). This contract provided that Shred Pax would supply the equipment to TyrRee by February 1, 1990. According to Horbach, Shred Pax breached this contract by both failing to manufacture the equipment to meet contractual specifications and by failing to deliver the equipment on time. Horbach alleges that he first discovered Shred Pax's breach when he inspected the equipment in February of 1991.
In November of 1990, Horbach began negotiating with Kaczmarek for Horbach to purchase 80% of Shred Pax's outstanding stock, owned by Kaczmarek. They drafted a Stock Purchase Agreement, pursuant to which Horbach paid Kaczmarek a $ 580,000 deposit. The agreement was never signed, however, and Kaczmarek failed to return Horbach's deposit. Kaczmarek subsequently sold his stock in Shred Pax to another entity.
In Count I of his complaint, Horbach alleges that Shred Pax breached the Purchase Order. In Count II, Horbach alleges that both defendants breached the Option Contract. In Count III, Horbach alleges that both defendants committed fraud. With Counts IV and V, Horbach seeks the equitable remedies of rescission and constructive trust for Shred Pax's breach of the Purchase Order. In Count VI, Horbach alleges that both defendants are liable for conversion for failing to return his deposit to Kaczmarek for the Shred Pax stock. Finally, in Count VII, Horbach seeks a constructive trust for this deposit.
Horbach alleges that he may pursue this suit because TyrRee assigned him its rights under both contracts. As a resident of Washington, Horbach is diverse from the defendants. The defendants argue that I do not have diversity jurisdiction over this suit because under 28 U.S.C. § 1359, parties may not assign their claims in order to invoke diversity jurisdiction.
Under Illinois law, a dissolved corporation may pursue a civil action if that action "is commenced within five years after the date of such dissolution." 805 ILCS 5/12.80 (Smith-Hurd 1993). When that five year "wind-up" period expires, corporate property that has not been disposed of automatically passes to the shareholders. Matter of Morris, 30 F.3d 1578, 1582 n. 2 (7th Cir. 1994) (citing Shute v. Chambers, 142 Ill. App. 3d 948, 492 N.E.2d 528, 531-32, 97 Ill. Dec. 92 (1st Dist. 1986) (allowing shareholders to pursue an action in their own capacities on a purchase agreement and note naming the dissolved corporation as payee)). See also Dubey v. Abam Building Corp., 266 Ill. App. 3d 44, 639 N.E.2d 215, 218-19, 203 Ill. Dec. 176 (1st Dist. 1994) (allowing former shareholder of dissolved corporation to sue lessor to recover security deposit owed to corporation); Lake County Trust Co. v. Two Bar B, Inc., 182 Ill. App. 3d 186, 537 N.E.2d 1015, 1020-21, 130 Ill. Dec. 686 (1st Dist. 1989) (allowing shareholders, after "wind-up" period had expired, to maintain action on a note and assignment of rents with dissolved corporation as payee).
According to Horbach's complaint, TyrRee was dissolved on September 9, 1990. Thus on September 9, 1995 all of TyrRee's remaining assets, including its contracts with the defendants, passed to Horbach and the other TyrRee shareholders. The alleged assignment from TyrRee to Horbach was therefore unnecessary. It was not made to manufacture diversity jurisdiction, because two days before the complaint was filed Horbach already owned TyrRee's claims and could bring this diversity action. I am therefore not precluded from exercising diversity jurisdiction over this suit.