Thompson v. Whalen

226 N.E.3d 129

2023 IL App (4th) 220668

Barbara A. THOMPSON and Kathleen Jo Whalen, Plaintiffs-Appellees,

v.Bernard F. WHALEN, the Estate of Patrick T. Whalen, and Yetter Manufacturing Company, Defendants-Appellants.

NO. 4-22-0668

Appellate Court of Illinois, Fourth District.

Filed March 1, 2023

Appeal from the Circuit Court of McDonough County, No. 21LL13, Honorable Raymond A. Cavanaugh, Judge Presiding.

Christopher J. Jump, and David G. Lubben, of Davis & Campbell L.L.C., of Peoria, and James R. Carey, and Peter B. Allport, of Levin Schreder & Carey Ltd., of Chicago, for appellants.

Delmer R. Mitchell and Jonathan S. Hoover, of Schmiedeskamp Robertson Neu & Mitchell LLP, of Quincy, for appellees.

OPINION

JUSTICE KNECHT delivered the judgment of the court, with opinion.

¶ 1 In September 2021, plaintiffs, Barbara A. Thompson and Kathleen J. Whalen, filed suit asserting multiple counts against defendants over ownership of shares in Yetter Manufacturing Company (Yetter Manufacturing), a nonpublic corporation. Specifically, plaintiffs asserted a claim of "shareholder remedies" under section 12.56 of the Business Corporation Act of 1983 (Business Corporation Act) (805 ILCS 5/12.56 (West 2020)) against Yetter Manufacturing, conversion of corporate stock against Patrick Whalen’s estate and Bernard Whalen, and civil conspiracy against all defendants.

¶ 2 Defendants countered with motions to dismiss under section 2-619.1 of the Code of Civil Procedure (735 ILCS 5/2- 619.1 (West 2020)). The crux of defendants’ motions was that plaintiffs’ claims were barred as untimely filed.

¶ 3 The trial court denied defendants’ motions but, on its own motion, certified the following questions to this court for interlocutory review under Illinois Supreme Court Rule 308 (eff. Oct. 1, 2019): "a. What is the statute of limitations for claims of denial of shareholder status or oppression of shareholder interests under Section 12.56 of the [Business Corporation Act], as amended?

b. When does a claim for the denial of shareholder status or oppression of shareholder interests under Section

12.56 of the [Business Corporation Act] accrue for purposes of triggering the statute of limitations? and

c. When does a claim for the conversion of corporate stock accrue for purposes of triggering the statute of limitations under 735 ILCS 5/13-205?"

¶ 4 We answer two of the certified questions infra and remand for further proceedings.

¶ 5 I. BACKGROUND

¶ 6 The "facts" that serve as the background for this appeal originate in the complaint and its attachments. As of the certification of the above questions, no answer had been filed.

¶ 7 Harry G. Yetter and Etta Yetter, the maternal grandparents of the parties, founded Yetter Manufacturing in 1955. Fourteen hundred shares of stock in Yetter Manufacturing were issued. In this suit, 529 shares are involved. We note defendants in their appellant brief indicate the number of shares may be 519.

¶ 8 Harry died in 1975, bequeathing 529 shares of Yetter Manufacturing to his son, Gaylord Yetter. Harry left to his daughter, Joan Whalen, the mother of the parties, a vested remainder therein. In March 1980, Joan died testate. She predeceased Gaylord and their brother, Lloyd Yetter. Lloyd, in November 1989, informed the defendants they should distribute the 529 shares equally among Joan’s five children. These children include the two plaintiffs, as well as defendant Bernard and Patrick, whose estate is a defendant in this lawsuit. A third sister, Susan Nichols, is not a party.

¶ 9 In 1990, because plaintiffs claimed an interest in those 529 shares, Patrick and Bernard brought a declaratory action against plaintiffs and Nichols. Patrick and Bernard asserted they were the owners of those 529 shares. They based this assertion on the terms of Joan’s will, which is attached to the complaint. Unfortunately, the writing on Joan’s will that supports Patrick and Bernard’s assertion appears to have been highlighted in the original, making the electronic version unreadable. Due to the allegations in the action for declaratory judgment and the part of Joan’s will that is discernible, it seems Joan left Patrick and Bernard the right to purchase her "stock interest." The part of the will that was not highlighted reads as follows, in part: "My executor shall give notice of said right to buy to my sons within 14 days after his appointment to office and my son or sons, as the case may be, shall have 30 days from receiving said notice to accept in writing this option to purchase said stock interest and creditor’s claims."

¶ 10 In the declaratory-judgment action, the parties, which included the three sisters, moved for summary judgment. The trial court granted the summary-judgment motion to the sisters and denied Patrick and Bernard’s motion based on the following:

"Contrary to the Plaintiff’s position[,] I find no ambiguity in the will and four codicils of Harry Yetter as they [affect]the rights of these parties to the shares in question. The will and the codicils created insofar as we are now concerned, a vested remainder in Joan Whalen, which remainder was divested by her failure to survive the life tenant Gaylord Yetter. Her bequest of the right to purchase these shares to the Plaintiffs and their decision to purchase, was likewise subject to the same possibility of divestiture and when Joan died before Gaylord, divestiture occurred. Therefore, Bernard and Patrick Whalen lost the benefit of the purchase of her remainder interest in these shares upon her premature demise."

¶ 11 In their complaint, plaintiffs asserted, since the January 1992 ruling, defendants refused to acknowledge their interests in the 529 shares. No stock certificates were given to plaintiffs. No notices of shareholder meetings or votes were provided to plaintiffs. Plaintiffs had not received any financial benefits from those shares. Plaintiffs maintained they requested financial statements from Yetter Manufacturing multiple times in 1992 and defendants refused to provide that information. Plaintiffs asserted they "were at all relevant times stated herein, and still are, shareholders of [Yetter Manufacturing]." Plaintiffs maintained the directors of other shareholders acted in a manner that was oppressive, illegal, and fraudulent toward plaintiffs. Among the conduct plaintiffs challenged were Yetter Manufacturing’s failure to (1) distribute profits to shareholders in a timely manner, (2) allocate profits among its shareholders from 1987 to the present, (3) make corporate records available from 1987 to the present, (4) exercise reasonable care in the management of Yetter Manufacturing, and (5) notify plaintiffs of meetings. Plaintiffs also alleged Yetter Manufacturing denied plaintiffs’ shareholder interest and, as a result, they have been oppressed. Plaintiffs seek a full accounting, a custodian to manage the business and affairs of Yetter Manufacturing, compensatory damages, litigation costs, and other just and equitable relief.

¶ 12 In their section 2-619(a) motions to dismiss (735 ILCS 5/2-619(a) (West 2020)), defendants argued plaintiffs’ claims are barred by the five-year statute of limitations under section 13-205 of the Code of Civil Procedure (id. § 13-205). Defendants pointed to the allegations in the complaint showing plaintiffs knew of these alleged claims by 1992. Plaintiffs countered by arguing the general five-year statute of limitations of section 13-205 does not apply to claims brought under section 12.56 (805 ILCS 5/12.56 (West 2020)).

¶ 13 At the hearing on defendants’ motions, the court denied the motions, finding the claims not time-barred. The court stressed, "the events that are being alleged to have occurred that were the triggering [event] were the 2018 event where the stockholders were left out of the ownership materials."

¶ 14 In July 2022, the trial court entered a written order. In its order, the court observed the parties agreed a five-year statute of limitations applied to actions for conversion of corporate stock. The court summarized plaintiffs’ argument regarding conversion as it "would not accrue until the Defendant expressly claimed ownership of Plaintiff’s corporate stock." The court stated it found no binding precedent on whether the section 13-205 statute of limitations applied to section 12.56 actions and for when a claim for conversion accrued for limitations purposes. The court identified two "written orders" under Illinois Supreme Court Rule 23 (eff. Jan. 1, 2021) that reached different results as to the applicable statute of limitations for section 12.56 actions: Vizcarra v. LMR Home Healthcare, Inc., 2019 IL App (3d) 170713-U, 2019 WL 2323796, and Burke v. McKernan, 2020 IL App (1st) 190318-U, 2020 WL 5653549. The court found material questions of law on the aforementioned issues and determined substantial grounds for difference of opinion regarding these matters existed. The court, on its own motion, certified the above questions for appeal.

¶ 15 In September 2022, this court allowed the application for leave to appeal under Rule 308.

¶ 16 II. ANALYSIS

¶ 17 A. Rule 308

[1–3] ¶ 18 Rule 308 provides a means for parties to obtain interlocutory review of an order not otherwise appealable. See Ill. S. Ct. R. 308(a) (eff. Oct. 1, 2019). To obtain relief under Rule 308, the order involved must involve "a question of law as to which there is substantial ground for difference of opinion" and "an immediate appeal from the order may materially advance the ultimate termination of the litigation." Id. When an interlocutory appeal is brought under Rule 308, our review is limited to the certified question or questions presented. Spears v. Ass’n of Illinois Electric Cooperatives, 2013 IL App (4th) 120289, ¶ 15, 369 Ill.Dec. 267, 986 N.E.2d 216. Only if the certified question presents a question of law will this court answer that question. Id. When the ultimate resolution of the question turns on the resolution of factual predicates, we...