Glickauf v. Moss

• Decision Date: 07 October 1974
• Docket Number: No. 60092,60092
• Citation: 320 N.E.2d 132,23 Ill.App.3d 679
• Parties: Rudolph GLICKAUF, Plaintiff-Appellant, v. Jack MOSS et al., Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 132

320 N.E.2d 132

23 Ill.App.3d 679

Rudolph GLICKAUF, Plaintiff-Appellant, v. Jack MOSS et al., Defendants-Appellees.

No. 60092.

Appellate Court of Illinois, First District, First Division.

Oct. 7, 1974.

Arvey, Hodes & Mantynband, Chicago (Ralph A. Mantynband, Chicago, of counsel), for plaintiff-appellant.

Russell J. Topper, Chicago, for defendants-appellees.

GOLDBERG, Justice:

This appeal brings before us a dispute concerning a family owned business corporation. Rudolph Glickauf (plaintiff) is beneficial owner of approximately 23% Of the outstanding shares of Jack's Men's Shop, Inc. (Corporation). Equitable ownership of the balance of the stock is vested in Jack Moss, Rose Moss, Everett Moss, Sheila Moss, Earl Hyman and Muriel Hyman (defendants). Legal title to all of the corporate stock is held by a voting trust of which defendants Jack Moss and Rose Moss are trustees.

Plaintiff has filed a fourth amended complaint which prays primarily for liquidation of the Corporation. (Ill.Rev.Stat.1973, ch. 32, par. 157.86(a).) The trial court sustained a motion of defendants to dismiss the complaint and it was accordingly dismissed for want of equity.

At the commencement of the suit, plaintiff and the Corporation were designated as plaintiffs in the original complaint. The six named individuals were the only defendants. After a number of legal maneuvers and the entry of many orders, succeeding complaints involving the same alignment of parties and praying for varied types of relief were dismissed on motion of defendants. A later amended complaint sought to change the alignment and designation of parties by presenting Rudolph Glickauf as sole plaintiff with the designation that the suit was brought by him, individually, and for the benefit of the Corporation. In addition, this and subsequent amended complaints were filed which carred the designation of Rudolph Glickauf as the sole plaintiff and which added the Corporation as an additional defendant. The fourth amended complaint, which is the subject of this appeal, carries this same alignment and designation of parties. However, a minute search of the entire record discloses that, although plaintiff sought leave of court to realign the parties as indicated, no such order was ever entered by the court. Parties can be dropped and new parties added only 'by order of the court.' (Ill.Rev.Stat.1973, ch. 110, par. 26.) It follows necessarily that the Corporation is not presently a defendant herein and that the trial court never obtained jurisdiction over its person. No appearance was ever filed in its behalf.

On oral argument, plaintiff urged that the trial court had acquired jurisdiction over the Corporation by waiver. At one point in the proceedings, counsel for defendants had filed a brief for the defendants and included the name of the Corporation for the stated purpose of assisting the court in determining whether to grant plaintiff leave to file an amended complaint. We have doubts as to whether waiver of this type would apply to a party defendant under the circumstances which exist here where a corporate party has been transformed from a plaintiff to a defendant by unilateral action of plaintiff's counsel without order of court. Furthermore, as far as we can ascertain from the authorities, the filing of a brief of this kind signed by counsel should not be permitted to make a former plaintiff a party defendant to these proceedings. See Schumacher v. Klitzing, 353 Ill. 530, 533, 187 N.E. 458.

As regards the merits of the appeal, plaintiff advances various arguments to the point that the fourth amended complaint indeed states a cause of action sufficient to require liquidation of the Corporation. In addition to countering these arguments with the contention that the complaint is substantially defective, defendants raise the issue that the court has no jurisdiction over the Corporation. Our study has convinced us that the jurisdictional question is paramount here and that its proper determination eliminates the need for consideration of the remaining arguments at this particular time.

Actually, the jurisdictional issue raised by defendants leads to a consideration of the need for the trial court and this court to obtain jurisdiction over a necessary party before proceeding to a decision of the cause upon its merits. This inquiry must commence with a determination as to whether the Corporation is a necessary party to proceedings which seek its statutory liquidation and dissolution. In our opinion, this inquiry must necessarily receive an affirmative answer.

The authority and jurisdiction of Illinois courts to order the liquidation and dissolution of a corporation is entirely and exclusively statutory. (Central Standard Ins. Co. v. Davis, 10 Ill.2d 566, 572, 141 N.E.2d 45.) The Business Corporation Act of Illinois, as presently constituted, does not contain a specific requirement that a corporation is a necessary party defendant to a suit which seeks its liquidation and corporate death. However, the dictates of common sense and various language used in the statute require the conclusion that the Corporation is, indeed, a necessary party to these proceedings. The test of whether this Corporation is a necessary party is if it is 'legally or beneficially interested in the subject matter of the litigation' so that it would 'be affected by the decree * * *.' (Oglesby v. Springfield Marine Bank, 385 Ill. 414, 423, 52 N.E.2d 1000, 1004.) It is indeed difficult to imagine a more necessary party in an action for corporate dissolution than the affected corporation itself.

Further, there is a specific statutory requirement that these proceedings 'shall be brought in the county in which the registered office or the principal office of the corporation is situated.' (Ill.Rev.Stat.1973, ch. 32, par. 157.86.) At the same point in the statute, immediately following the above language, there is a provision which indicates that making the shareholders parties to such action is not necessary unless personal relief is sought against them. The Act provides that in these liquidation proceedings the court may appoint a receiver Pendente lite (Ill.Rev.Stat.1973, ch. 32, par. 157.87.) The statute directs the court, after completion of liquidation of corporate assets, to 'enter a decree dissolving the corporation, whereupon the existence of the corporation shall cease.' (Ill.Rev.Stat.1973, ch. 32, par. 157.91.) The conclusion is thus clear and definite that the Corporation is a necessary party to these proceedings. This conclusion...