Grunloh v. Effingham Equity, Inc.

• Decision Date: 13 September 1988
• Docket Number: No. 4-88-0120,4-88-0120
• Citation: 528 N.E.2d 1031,174 Ill.App.3d 508
• Parties: , 124 Ill.Dec. 140 Clifford H. GRUNLOH and Marian Grunloh, Plaintiffs-Appellants, v. EFFINGHAM EQUITY, INC., an Illinois Corporation, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 1031

528 N.E.2d 1031

174 Ill.App.3d 508, 124 Ill.Dec. 140

Clifford H. GRUNLOH and Marian Grunloh, Plaintiffs-Appellants, v. EFFINGHAM EQUITY, INC., an Illinois Corporation, Defendant-Appellee.

No. 4-88-0120.

Appellate Court of Illinois Fourth District.

Sept. 13, 1988.

Brent D. Holmes, Harlan Heller, Ltd., Mattoon, for plaintiffs-appellants.

Ryan, Cini & Bennett, Dale A. Cini, Mattoon, Parker, Siemer, Austin, Resch & Resch, Q. Anthony Siemer, Effingham, for defendant-appellee.

Justice McCULLOUGH delivered the opinion of the court:

The principal question in this case is whether an amendment to a complaint alleging the plaintiffs are suing in their capacities of assignees of a claim of a dissolved corporation, in addition to their individual capacities, relates back to the filing of the plaintiffs' original complaint, so that the claim which the corporation assigned is not barred by the statute which at the relevant times allowed a corporation two years from the date of its dissolution in which to file lawsuits. (Ill.Rev.Stat.1981, ch. 32, par. 157.94.) Additional issues are whether a chose in action, which was owned by a dissolved corporation, was properly assigned to plaintiffs; whether the defendant received proper notice of the assignment; and whether a claim for punitive damages arising out of alleged damage to property is assignable by a corporation and survives a dissolution of the assignor corporation which occurs simultaneously with the assignment.

The facts are relatively simple. On July 2, 1982, plaintiffs Clifford H. Grunloh and Marian Grunloh filed a complaint against defendant Effingham Equity, Inc., which alleged that plaintiffs are the owners of a golf course and country club known as "Park Hills" located in Effingham County. Defendant was, according to the complaint, the owner and operator of a feed, fertilizer, and chemical business located directly west of plaintiffs' property. Plaintiffs alleged Sur's Creek flows from defendant's property across plaintiffs' property, and that plaintiffs constructed a pond on their property to hold water from Sur's Creek. The water from the pond was utilized for watering the greens of the golf course located on plaintiffs' property. The plaintiffs alleged defendant polluted Sur's Creek with petroleum products and other toxic chemicals, and discharged toxic "exhaust scrubbers" into a tile which carried them onto plaintiffs' property and into the pond which was used for watering the greens. The plaintiffs asserted that as a result of the pollution of their pond, the pumping of water from the pond onto the greens totally destroyed the greens, causing plaintiffs to have to close the golf course. The plaintiffs further alleged that defendant's actions deprived plaintiffs of their investment in their golf course and country club and damaged the property to such an extent that no repair of the land is possible until the buildup of toxic materials in the soil has been broken down and dissipated. The plaintiffs finally alleged that they discovered the defendant's actions on or about July 1, 1981. Count I of plaintiffs' complaint alleged that defendant acted negligently in committing the above acts, which proximately caused damage to plaintiffs' property.

Count II alleged all of the above matters except for the defendant's purported negligent pollution of Sur's Creek and the pond on plaintiffs' property. In lieu of these allegations, the plaintiffs alleged that defendant wilfully and wantonly (1) discharged contaminants into the environment which caused pollution of Sur's Creek, contrary to section 12(a) of the Environmental Protection Act (Ill.Rev.Stat.1981, ch. 111 1/2, par. 1012(a)); (2) failed to take any precautions in the handling of toxic materials in order to prevent pollution of Sur's Creek; (3) failed and omitted to warn plaintiffs of defendant's continuous pollution of Sur's Creek; (4) concealed their acts of pollution from plaintiffs when they knew their discharge of materials into Sur's Creek would cause permanent and irreparable damage to plaintiffs' property; and (5) continued polluting Sur's Creek after obtaining knowledge that various of their activities would damage plaintiffs' property and would create damage that would be irreparable for many years. On the basis of the allegations of count II, plaintiffs requested punitive damages in addition to the actual damages requested in count I.

The defendant filed an answer denying the crucial allegations of plaintiffs' complaint, and the parties engaged in extensive pretrial discovery. This cause was set for jury trial on June 14, 1987.

On June 12, 1987, the defendant filed a motion in limine alleging that the golf course in question was owned and operated by a corporation (known from 1972 through 1976 as Grunloh Development, Inc., and from 1977 through 1981 as the Grunloh Corporation (hereinafter referred to as "the corporation")), as opposed to the individual plaintiffs, and that any losses which had occurred up to some time in 1981 which resulted from defendant's acts would be recoverable only by the corporation and not by the plaintiffs, who owned the corporation's stock. The motion further alleged allowing plaintiffs to recover for both the corporate losses prior to 1981 and their personal losses in connection with a diminution in value of the golf course property would impermissibly allow the plaintiffs to " 'stack' " claimed corporate losses on their claimed individual losses. Finally, the motion in limine stated that plaintiffs did not allege that they somehow acquired causes of action belonging to any corporate owner of the property in question, and that plaintiffs had no standing to assert any claims for an alleged loss of the corporation's profits or income. On this basis, defendant requested that plaintiffs be barred from placing before the jury any claims for losses suffered by the corporation during its operation of the golf course.

At a hearing held June 15, 1987, the circuit court allowed the above motion and ordered that plaintiffs' evidence be restricted to damages which they suffered after they acquired the Park Hills golf course and country club. However, the court did allow plaintiffs leave to amend their complaint so as to allege a May 28, 1981, assignment and conveyance to plaintiffs of all of the corporation's assets, which included choses in action. On the same date, the circuit court denied a motion by defendant for summary judgment, or alternatively, dismissal of plaintiffs' complaint with prejudice, on the basis that the corporation is a necessary party to this action.

On July 2, 1987, plaintiffs filed an amended complaint. In addition to listing additional breaches of duty on the part of defendant, including some premised on purported violations of Federal laws (e.g., 7 U.S.C. § 136j(a)(2)(G) (1976); 33 U.S.C. § 1311(a) (1976)), plaintiffs stated that they are the actual, bona fide owners of a chose in action of Grunloh Corporation against defendant, for the damages alleged in the complaint. The plaintiffs stated they obtained an assignment of the corporation's cause of action on May 28, 1981, by virtue of an assumption agreement and bill of sale of the same date. The plaintiffs asserted that they therefore had standing to maintain an action for all of the damages sustained by both the corporation and by them individually.

Copies of both the assumption agreement and bill of sale are attached to the plaintiffs' amended complaint. The assumption agreement provides:

"[F]or and in consideration of the surrender and cancellation of the stock owned by [plaintiffs], the conveyance [by the corporation] to [plaintiffs] of all assets, and for the sum of One Dollar ($1.00) and other good and valuable consideration, receipt and sufficiency of which is hereby acknowledged, the [plaintiffs] [do] hereby assume and agree to pay for and on behalf of [the corporation] any and all liabilities of [the corporation] * * *."

The bill of sale provides in part:

"KNOW ALL MEN BY THESE PRESENTS, that GRUNLOH CORPORATION, an Illinois Corporation, of the City of Effingham, County of Effingham and State of Illinois, for and in consideration of the surrender of stock of grantees in grantor corporation for cancellation and the further consideration of the sum of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, does hereby sell, transfer, quit-claim and convey unto CLIFFORD GRUNLOH and MARIAN GRUNLOH, all right, title and interest in and to the following goods and chattels and items of personal property, to-wit: An itemized list of such goods, chattels and personal property marked Exhibit "A" is attached hereto and incorporated herein by this reference as fully and completely as if the same had been completely set forth herein."

Exhibit "A" of the bill of sale describes the property transferred as: "[a]ll goods and chattels and personal and intangible property of every kind and description wheresoever the same may be situated, including, but not limited to, the following * * *." Choses in action are not among the property specifically listed in exhibit "A" of the bill of sale.

On August 3, 1987, the defendant filed a motion to dismiss the plaintiffs' amended complaint. The motion alleged plaintiffs were not entitled to assert the corporate causes of action for the reasons stated with respect to defendant's first motion in limine and defendant's motion for summary judgment and alternative relief. The motion further alleged that any cause of action owned by the corporation ceased to exist in May 1983, on the second anniversary of the corporation's dissolution, by virtue of section 94 of the Business Corporation Act of 1933 (Ill.Rev.Stat.1981, ch. 32, par. 157.94). Also, defendant contended that the claimed assignment of the corporation's causes of action for damage to the golf course did not increase the...