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06/25/97 CAMERON GENERAL CORPORATION v. HAFNIA

June 25, 1997

CAMERON GENERAL CORPORATION, PLAINTIFF/COUNTER CLAIMANT-APPELLANT,
v.
HAFNIA HOLDINGS, INC., HAFNIA INSURANCE CO., LTD., AND HAFNIA INSURANCE GROUP, DEFENDANTS/COUNTER PLAINTIFFS-APPELLEES.



Appeal from the Circuit Court of Cook County. Honorable Kenneth L. Gillis, Judge Presiding.

Released for Publication August 5, 1997.

The Honorable Justice Gordon Delivered The Opinion OF The Court. Cousins, Jr., P.j. and Leavitt, J., concur.

The opinion of the court was delivered by: Gordon

JUSTICE GORDON DELIVERED THE OPINION OF THE COURT:

NATURE OF ACTION:

Plaintiff Cameron General Corporation (Cameron General) filed the instant action against defendants Hafnia Holdings, Inc. (hereinafter Hafnia Holdings), Hafnia Insurance Co., Ltd., and Hafnia Insurance Group, premised upon theories of breach of contract and unjust enrichment. Cameron General sought reimbursement from the defendants for certain life insurance premium payments, recovery of office expenses arising from defendants' partial ownership of Cameron General, and an order requiring defendants to execute a change of beneficiary form in order to remove defendants as beneficiaries on certain life insurance policies. Defendants filed a counterclaim against Cameron General, also seeking reimbursement for certain life insurance premium payments. Thereafter, defendants filed a motion for summary judgment on both Cameron General's complaint and on their counterclaim. The trial court granted defendants' motion, holding that part of the relief sought in Cameron General's complaint was barred by the five-year statute of limitations contained in section 13-205 of the Illinois Code of Civil Procedure (735 ILCS 5/13-205 (West 1994)), and that judgment was required as a matter of law in defendants' favor on the remaining counts of Cameron General's complaint and on the relief sought in their counterclaim. Cameron General now appeals.

FACTS:

On February 20, 1992, Cameron General, a Chicago-based company engaged in various lines of insurance-related business, filed its original complaint against the defendants, who are also alleged to be engaged in various aspects of the insurance business and whose principal place of business is in Denmark. There is no dispute that defendant Hafnia Holdings, Inc. is a subsidiary of defendant Hafnia Insurance Group, which in turn is a subsidiary of defendant Hafnia Insurance Company, Ltd., and there is no dispute that defendant Hafnia Holdings was formed for the purpose of entering the business transaction which is the subject of this lawsuit. The original complaint thereafter underwent two amendments. On March 17, 1995, Cameron General filed its second amended complaint, which contained the same theories of recovery as alleged in its original complaint, and which in addition amended the amount of monetary relief requested in the prior complaints. In its second-amended complaint (hereinafter referred to as the complaint), Cameron General sought relief against defendants in five counts. At counts one and two, respectively premised upon theories of breach of an oral contract and unjust enrichment, Cameron General sought reimbursement for $16,449.04 in office expenses and services which it alleged it had paid on defendants' behalf in connection with defendants' operation of Cameron General between March 23, 1983 and September 5, 1986. At counts three and four, also respectively premised upon theories of breach of contract and unjust enrichment, Cameron General sought reimbursement from defendants in an amount in excess of $175,000 for its payment of certain life insurance premiums both before and after September 5, 1986, the date on which defendants terminated their ownership interest in Cameron General. At count five, Cameron General sought an order requiring defendants to execute a change of beneficiary form removing defendants as the named beneficiaries under certain life insurance policies on the grounds that defendants no longer maintained an ownership interest in Cameron General.

Cameron General further alleged that on March 23, 1983, the defendants and Fred Pearson, Cameron General's chief executive officer (CEO) and sole shareholder, entered into a shareholders' agreement, pursuant to which defendants purchased a controlling percentage of the outstanding Cameron General stock held by Pearson. (It would appear that Pearson retained his CEO position at Cameron General throughout the period in question in the instant case). Under the shareholders' agreement, Pearson agreed to purchase term life insurance on behalf of Hafnia Holdings and to name Hafnia Holdings as the beneficiary thereof, and Hafnia Holdings agreed to pay the premiums for that coverage. The agreement further provided that in the event of Pearson's death, Hafnia Holdings had a preemptive right to purchase Pearson's remaining shares in Cameron General using the proceeds of Pearson's life insurance. The correlative rights and duties of Pearson and Hafnia Holdings with respect to the purchase of life insurance by Pearson and the ultimate use of its proceeds for buyout purposes by Hafnia Holdings are set forth at paragraphs 21.1 and 21.2 of the shareholders' agreement which was attached to Cameron General's complaint. Those paragraphs provide in relevant part as follows:

"21.1 A. In the event of PEARSON's death during the term of this Agreement, HAFNIA [referring throughout the agreement to Hafnia Holdings shall *** have a right to purchase all *** of the shares held by PEARSON's estate at a purchase price per share equal to the greater of (i) 150% of the Net Book Value per Share or (ii) the price per share proposed to be paid for such shares by a proposed bona fide purchaser/ purchasers ***.

21.2 PEARSON shall if so requested by HAFNIA apply for and purchase on behalf of HAFNIA such amounts of term life insurance as is recommended by HAFNIA assuming such amounts are available. HAFNIA shall pay for and be the beneficiary of such insurance which may be used in whole or in part to purchase PEARSON's shares of Cameron in accordance with 21.1 above from his estate. PEARSON can assign existing life insurances that may be currently in force with the understanding that HAFNIA shall only be obligated to pay the term portion of any premiums paid for these life insurances. PEARSON shall be responsible for the portion of premiums allocated to the ordinary life features of these insurances. PEARSON shall be allowed to borrow cash values and shall pay interest on such loans provided however, that such loans if any, shall be repaid upon PEARSON's death if HAFNIA exercises its rights according to 21.1 above, deducted from the purchase price for the shares of Cameron. HAFNIA may, at any time request PEARSON to terminate the insurance and stop the payment of premiums. However, PEARSON can continue premium payment and HAFNIA will assign or amend the ownership and beneficiary provision of these life insurances as PEARSON desires."

The complaint avers that in March 1983, pursuant to the shareholders' agreement and the defendants' request, Pearson purchased life insurance on behalf of the defendants. The complaint states that Pearson maintained such insurance for the defendants' benefit until September 5, 1986, when the defendants sold their interest in Cameron General back to Pearson. During this period, the coverage limits on Pearson's life insurance coverage ranged from $5,000,000 to $7,000,000, pursuant to the defendants' instructions. The complaint recites that Cameron General paid the premiums for that coverage, for which it was partially reimbursed by the defendants, stating as follows:

"Cameron paid the premiums on the life insurance, and Hafnia [referring throughout to the defendants as Hafnia], beginning in or about March of 1983, partially reimbursed Cameron the term portion of the premiums of the life insurance obtained by Pearson for which Hafnia was the beneficiary."

According to the complaint, after the defendants sold their interest in Cameron General back to Pearson, they never asked Pearson to terminate the insurance or to stop paying premiums therefor.

The complaint further charges that from September 5, 1986 and onward, Cameron General and Pearson continually asked Hafnia Holdings and the other defendants to execute a change of beneficiary form to reflect that Hafnia Holdings was no longer the owner or beneficiary, and that they refused. Instead, the defendants purported to assign their rights as beneficiaries under the subject policies to Cameron General. The complaint further stated that Pearson's life insurance carrier did not consider that assignment to be an effective change of beneficiary and refused to remove defendants as beneficiaries without a properly executed change of beneficiary form.

In their counterclaim against Cameron General, filed with their answer on July 20, 1992, the defendants sought recoupment for payments they had made to Cameron General as reimbursements for Cameron General's payment of the subject life insurance premiums. The counterclaim purported to be premised upon a theory of unjust enrichment, and alleged in pertinent part as follows:

"1. Counterplaintiffs HAFNIA HOLDINGS, INC., HAFNIA INSURANCE COMPANY, LTD. and HAFNIA INSURANCE GROUP, paid counterdefendant, Cameron General, approximately $35,966 as reimbursement for premiums for certain term life insurance covering the life of Fred Pearson

2. As a condition for the payment described in paragraph 1 above, and pursuant to the Shareholders' Agreement, certain of the counterplaintiffs [Hafnia] were to have been named the beneficiary of the policies during the period of approximately March 1983 through September 5, 1986.

3. Counterdefendant [Cameron General] failed to properly name certain counterplaintiffs [Hafnia] as the beneficiary of certain of the life insurance policies during the ...


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