Glob. Mail, Inc. v. White
| Decision Date | 06 December 2019 |
| Docket Number | No. 1-18-1778,No. 1-18-1865 (cons.),1-18-1778,1-18-1865 (cons.) |
| Citation | 2019 IL App (1st) 181778 |
| Parties | GLOBAL MAIL, INC., an Ohio Corporation, f/k/a Deutsche Post Global Mail (OH), Inc., and as Successor by Merger with Global Mail, Inc., a Delaware Corporation, Plaintiff-Appellee, v. JESSE WHITE, in His Official Capacity as the Illinois Secretary of State; and MICHAEL W. FRERICHS, in His Official Capacity as Illinois State Treasurer, Defendants-Appellants. |
| Court | United States Appellate Court of Illinois |
NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).
Appeal from the Circuit Court of Cook County.
Honorable Moshe Jacobius, Judge Presiding.
¶ 1 Held: A foreign corporation that merges with another foreign corporation must file articles of merger with the Secretary of State and apply for authority to transact business in the state, but the corporation that ceases to exist following the merger does not continue to accrue Illinois franchise taxes; a misstatement by a corporation as to its state of incorporation on an annual report is a factual error that can be amended by a statement of correction; and the Business Corporation Act does not provide for an interest charge on a late initial franchise tax payment made by a foreign corporation.
(Treasurer) (collectively, defendants), appeal from the circuit court's rulings granting in part a motion for summary judgment filed by plaintiff Global Mail, Inc. (Global Mail) and denying in part defendants' cross-motion for summary judgment. Global Mail is now an Ohio corporation, but at one time was a Delaware corporation. We refer to it here simply as Global Mail, identifying the state of incorporation where necessary.
¶ 3 In its ruling, the circuit court found that, pursuant to the State Officers and Employees Money Disposition Act (Protest Monies Act), 30 ILCS 230/1, et. seq., Global Mail was entitled to a refund of most of the taxes and penalties that it had paid under protest to the State of Illinois. The circuit court ruled that Global Mail had already paid the franchise taxes that it owed the State of Illinois from 2005 through 2016, that Global Mail was still required to pay the initial franchise tax it would have paid had it applied for authority to transact business in Illinois as an Ohio corporation, and that Global Mail also owed the State of Illinois a penalty for continuing to transact business here without paying that initial franchise tax. The circuit court further found, however, that Global Mail did not owe interest on that initial franchise tax and it rejected defendants' affirmative defenses. Defendants now challenge those rulings. For the reasons that follow, we affirm.
¶ 5 On August 4, 1987, Global Mail, Ltd., was incorporated under Delaware law. From 2001 through 2004, the Delaware corporation paid Illinois franchise taxes under the names Global Mail, Ltd., Deutsche Post Global Mail, Ltd., and finally Global Mail, Inc.
¶ 6 On December 20, 2004, a wholly owned subsidiary of Global Mail, Inc., was formed in Ohio, under Ohio law, and called Deutsche Post Global Mail (OH), Inc. On December 30, 2004, the Delaware corporation merged into the Ohio corporation, which then took on the name—GlobalMail, Inc.—of the Delaware corporation. The result of all of this was that Global Mail went from being a Delaware corporation to being an Ohio corporation.
¶ 7 After the merger, the new Ohio corporation, failed to provide the Secretary of State with a copy of its articles of merger or to apply for authority to transact business in Illinois. However, the company continued to pay Illinois franchise taxes as the Delaware corporation and to file annual reports with the Secretary of State that identified it as a Delaware corporation. In its 2012 annual report Global Mail failed to identify any state of incorporation and in its 2013 report it finally identified itself to the Secretary of State of Illinois as an Ohio corporation, something it continued to do until 2015.
¶ 8 On February 13, 2015, the Secretary of State sent Global Mail a notice of delinquency and levied against it a $368,845.32 franchise tax, $73,769.06 in penalties and interest, and a $75 annual report-filing fee for failing to file an annual report prior to January 1, 2015. Global Mail then submitted its 2015 annual report again listing Ohio as its state of incorporation. On July 15, 2015, the Secretary of State returned Global Mail's annual report from 2015 and the $17,998.93 the company had paid in franchise taxes for that year, explaining that the report and funds were being returned because Global Mail incorrectly listed itself as an Ohio corporation, instead of a Delaware corporation, and Global Mail owed additional franchise taxes.
¶ 9 The Secretary of State then sent a second notice on October 7, 2015, this time demanding $627,740.71 in payment. Global Mail responded on October 16, 2015, that it had already paid the applicable Illinois franchise taxes. As Global Mail explained, Global Mail, the Delaware corporation, no longer existed after December 30, 2004, and the franchise taxes the Secretary of State had credited to that now-defunct entity were really paid by the new Ohio corporation—the only Global Mail entity to survive the 2004 merger. The Secretary of State responded with a thirdand final notice on January 25, 2016, detailing the balance that he believed the Ohio corporation owed for its application for authority to transact business in Illinois, franchise taxes, and the filing fee, now totaling $650,072.09. The notice stated:
¶ 10 While acknowledging the merger in this notice, the Secretary of State maintained that, from 2005 through 2016, Illinois was owed franchise taxes from both the Ohio corporation and the Delaware corporation, whose application to transact business in the state had never been formally withdrawn. In response Global Mail filed its 2016 annual report, reporting its state of incorporation as Delaware, and, in order to avoid further action by the Secretary of State, paid the $650,072.09 under protest pursuant to section 230/2 of the Protest Monies Act. 30 ILCS 230/2 (West 2016). Then, on February 24, 2016, Global Mail filed the present action against defendants for a declaratory judgment or, in the alternative, equitable recoupment, arguing that the Ohio corporation had already paid all required franchise taxes since 2005—although those taxes had incorrectly been attributed to the now nonexistent Delaware corporation—and that the Secretary of State's failure to acknowledge this fact effectively subjected the Ohio corporation to a double tax.¶ 11 The following day, on February 25, 2016, Global Mail formally withdrew the Delaware corporation's authority to transact business in Illinois and filed a certified copy of the certificate of merger with the Secretary of State. Global Mail then moved for a preliminary injunction pursuant to the Protest Monies Act enjoining the Illinois Secretary of State, pending the final disposition of its action, from paying or depositing the $650,072.09 paid under protest to the Treasurer's general fund. 30 ILCS 230/2 (West 2016). The court granted Global Mail's injunction on March 22, 2016.
¶ 12 Defendants moved to dismiss Global Mail's complaint, but the circuit court denied their motion. Defendants then filed their answer, which included seven affirmative defenses: statute of limitations, voluntary payment doctrine, failure to exhaust administrative remedies, ripeness, mootness, laches, and equitable estoppel. They also filed a counterclaim arguing that "[t]he Delaware Corporation and the Ohio Corporation constituted separate and distinct corporations incorporated under the laws of different states" and thus separately owed franchise taxes for the privilege of doing business in Illinois.
¶ 13 Global Mail moved to strike defendants' counterclaim and affirmative defenses and filed a renewed motion for summary judgment arguing that no franchise tax was due because the Delaware corporation had not existed after 2004 and the Ohio corporation, as the only Global Mail still in existence, had been paying franchise taxes since that time. Global Mail argued that the Secretary of State's actions were arbitrary and capricious and Global Mail's payment made under protest should be returned. Defendants filed their own renewed motion for summary judgment arguing that Global Mail was not entitled to a refund and that each of their affirmative defenses precluded Global Mail from pursing its claim. On July 17, 2018, the circuit court issued a 60-page opinion ruling on these motions.
¶ 14 The circuit court granted Global Mail's motion to strike defendants' counterclaim, finding that defendants failed to state a cause of action, but denied Global Mail's motion to strike defendants' affirmative defenses. The court granted in part and denied in part both parties' motions for summary judgment.
¶ 15 The circuit court found that the Delaware corporation no longer existed...
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