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Graebel/Los Angeles Movers, Inc. v. Johnson

March 1, 2006

GRAEBEL/LOS ANGELES MOVERS, INC., A CALIFORNIA CORPORATION, PLAINTIFF,
v.
COSTELLO JOHNSON AND EUNITA JOHNSON, JUDGE REBECCA R. PALLMEYER DEFENDANTS.



The opinion of the court was delivered by: Rebecca R. Pallmeyer United States District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff, Graebel/Los Angeles Movers, Inc. ("Graebel"), is a California company that stores and installs office furniture. Husband and wife Defendants, Costello and Eunita Johnson, are the sole shareholders and corporate officers of Corporate Office Systems, Inc. ("COS"), a company that supplies, installs and services office furniture. COS agreed to supply furniture for two corporate customers, furniture which Graebel agreed to store and eventually install. COS paid Graebel only a portion of the amount that Graebel charged for its services under this arrangement, and on January 20, 2004, Graebel sued COS. Graebel won a stipulated judgment in the amount of unpaid invoices plus pre-judgment interest, but COS has not satisfied the judgment-indeed, Graebel alleges that COS is insolvent. This case concerns whether Graebel may enforce COS's debt against Defendants.*fn1

FACTUAL BACKGROUND

The following facts are taken from Graebel's complaint and opposition memorandum. On a motion to dismiss, the court accepts all well-pleaded allegations as true. Jackson v. E.J. Brach Corp., 176 F.3d 971, 977--78 (7th Cir. 1999). Facts asserted in Graebel's opposition memorandum are relevant to the extent that they can be proven consistent with the allegations of the complaint. See Dausch v. Ryske, 52 F.3d 1425, 1427 n.3 (7th Cir. 1994)(citing Hishon v. King & Spalding, 467 U.S. 69, 73 (1984)).

As memorialized in purchase orders dated October 2002 through May 2003, COS agreed to supply office furniture for two corporate customers, A.C. Nielsen and Baxter Health Care ("Baxter"), furniture which Graebel agreed to store and eventually install.*fn2 Compl. ¶ 12. Pursuant to the parties' understanding and course of dealing, A.C. Nielsen and Baxter paid COS for the furniture, including the storage and installation, and COS agreed, in turn, to pay Graebel for its services. Id. at ¶ 13. Invoices issued by Graebel to COS for these services totaled $508,552.17. Id. ¶ 16. A.C. Nielsen and Baxter paid COS "at least that much" for the services that Graebel and COS rendered from October 2002 through May 2003. Id. at ¶ 15. COS paid Graebel only $180,899.43. Id. at ¶ 17.

On October 1, 2002-shortly before COS issued its first purchase order to Graebel-the Illinois Secretary of State involuntarily dissolved COS. Id. at ¶ 22. The Secretary of State reinstated COS on or about June 18, 2003 after Defendants filed "appropriate corporate documents." Id. at ¶ 23. Defendants did not notify Graebel that COS was dissolved, and instead held COS out as a corporation in good standing throughout their business dealings with Graebel. Id. at ¶ 22.

Graebel alleges that at all times relevant to this lawsuit Defendants were "intimately involved" in COS's business affairs. Id. at ¶¶ 18--21. In 2001, Defendants secured a $2,000,000 commercial loan by mortgaging two of their personal residences and executing personal repayment guaranties. Id. at 19. In a letter dated June 19, 2003, Costello Johnson notified Graebel that COS was "reviewing all of its business options due to financial and operational issues." See Johnson/Graebel Letter, Ex. C to Graebel's Compl. The letter further stated that COS would review its accounts payable, and prioritize outstanding debts, after satisfying its commercial loan. Id. Defendants sold one of their personal residences to pay COS' lender, thereby avoiding liability on their personal guaranties and foreclosure on another mortgaged property. Compl. at ¶ 21. Graebel alleges that throughout this period Defendants were drawing an "excessive salary" of $200,000, combined. See Pl.'s Resp. in Opp'n to Def.'s Motion to Dismiss for Failure to State a Claim Upon Which Relief Can Be Granted (hereinafter "Graebel Opp'n"), at 3.

On January 20, 2004, Graebel sued COS under "account stated" and quantum meruit theories in the United States District Court for the Northern District of Illinois, Case No. 04C 0411. See Prior Complaint, Ex. B to Defs. Motion to Dismiss for Failure to State a Claim Upon Which Relief Can Be Granted (hereinafter "Defs. Motion to Dismiss"), at ¶ 41--51. Graebel sought $327,652.84-the invoiced amount then outstanding-plus pre-judgment interest. Id. at ¶ 41, 51. On July 8, 2004, the district court entered a stipulated judgment for $327,652.84 plus $16,246.12 in pre-judgment interest. Compl. at ¶ 28. The Final Judgment Order states that it is "immediately enforceable, and final in all respects." Final Judgment Order, Ex. C to Defs. Motion to Dismiss. On October 1, 2004, the Illinois Secretary of State again involuntarily dissolved COS. See Graebel Opp'n at 2--3. COS has failed to make any payments on the outstanding judgment and Graebel alleges that the company is now insolvent. Id. at 3.

Graebel filed the current action against Defendants on December 23, 2004. Count I of Graebel's complaint, entitled "Individual Liability for Debt of Dissolved Corporation," alleges that Defendants, as COS's officers, directors and primary shareholders, are jointly and severally liable for debts that COS incurred "during the period of dissolution" under the Illinois Business Corporation Act of 1983. Compl. ¶¶ 29--45. Count II, entitled "Unjust Enrichment," alleges that Defendants have unfairly benefitted at Graebel's expense. Id. at ¶¶ 46--54. Graebel requests $327,652.84 plus pre-judgment expenses under both counts. Id. at ¶¶ 29, 54.

DISCUSSION

Defendants move to dismiss the Graebel's complaint pursuant to FED. R. CIV. P. 12(b)(6).

The purpose of a Rule 12(b)(6) motion is to test the sufficiency of the plaintiff's complaint, not to decide its merits. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990)(citing Triad Assoc., Inc. v. Chicago Hous. Auth., 892 F.2d 583, 586 (7th Cir. 1989)). On a motion to dismiss, the court accepts all well-pleaded allegations as true and draws all reasonable inferences in the plaintiff's favor. See Jackson, 176 F.3d at 977--78. A motion to dismiss will be granted only "if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which entitles him to relief." Conley v. Gibson, 355 U.S. 41, 45--46 (1957). Stated differently, a complaint will survive a Rule 12(b)(6) motion if it "narrates an intelligible grievance that, if proved, shows a legal entitlement to relief." United States Gypsum Co. v. Indiana Gas Co., 350 F.3d 623, 626 (7th Cir. 2003) (citations omitted). Moreover, a litigant need not anticipate potential defenses in its complaint. Id. (denying motion to dismiss predicated on issue preclusion and statute of limitations defenses). A litigant may, however, "plead itself out of court by alleging (and thus admitting) the ingredients of a defense." Id.

Defendants contend that the present lawsuit is barred by the res judicata and election-of-remedies doctrines. See Motion to Dismiss at 2. Graebel responds that under Illinois law an action to enforce a judgment against the shareholders of a judgment creditor ...


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