Home Depot USA v. Department of Revenue

• Citation: 355 Ill. App.3d 370,823 N.E.2d 625,291 Ill.Dec. 333
• Decision Date: 08 February 2005
• Docket Number: No. 2-04-0042.,2-04-0042.
• Parties: HOME DEPOT, U.S.A., INC., Plaintiff-Appellant, v. The DEPARTMENT OF REVENUE, Brian Hamer, Director of Revenue, and Judy Baar Topinka, Treasurer of the State of Illinois, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

823 N.E.2d 625

355 Ill. App.3d 370

291 Ill.Dec. 333

HOME DEPOT, U.S.A., INC., Plaintiff-Appellant, v. The DEPARTMENT OF REVENUE, Brian Hamer, Director of Revenue, and Judy Baar Topinka, Treasurer of the State of Illinois, Defendants-Appellees.

No. 2-04-0042.

Appellate Court of Illinois, Second District.

February 8, 2005.

Michael H. Woolever, Mary Kay M. Martire, Tracy D. Williams, Belinda S. Morgan, Foley & Lardner, Chicago, for Home Depot, U.S.A., Inc.

Lisa Madigan, Attorney General, Gary S. Feinerman, Solicitor General, Brett E. Legner, Assistant Attorney General, Chicago, for Judy Barr Topinka, Treasurer/State of Illinois. Brian Hamer, Director/IL Dept. of Revenue, Illinois Department of Revenue.

Justice BOWMAN delivered the opinion of the court:

Plaintiff, Home Depot, U.S.A., Inc., appeals from the trial court's interlocutory order granting a motion by defendants, the Department of Revenue (Department), Brian Hamer, Director of Revenue, and Judy Baar Topinka, Illinois State Treasurer, to transfer venue under section 2-103(a) of the Code of Civil Procedure (735 ILCS 5/2-103(a) (West Supp.2003)) from Du Page County to Cook County. On appeal, plaintiff argues that the trial court erred in granting the motion, because (1) the Department maintains a "principal office" in Du Page County and (2) a part of the transaction at issue took place in Du Page County. We affirm.

I. BACKGROUND

According to the record, plaintiff is a Delaware corporation headquartered in Atlanta, Georgia. Plaintiff operates more than 1,500 Home Depot stores in the United States, including 11 stores in Du Page County. The underlying case involves a dispute about plaintiff's Illinois income tax liability for four tax years. During the period in question, plaintiff filed taxes as a single company. After the Department audited plaintiff, it asserted that two of plaintiff's affiliate corporations, Home Depot International, Inc. (HD International), and Homer TLC, Inc. (Homer), were part of a unitary business group with plaintiff. These companies, along with plaintiff and other companies, are part of the Home Depot federal consolidated group (HD Group). The Department alleged that plaintiff had miscalculated its Illinois sales factor under section 304(a) of the Illinois Income Tax Act (35 ILCS 5/304(a) (West 2002)) by not including income from HD International and Homer.

On September 30, 2003, plaintiff paid, under protest, $17,447,504 to satisfy two proposed deficiency notices issued by the Department. It then filed the instant action in Du Page County, seeking declaratory and injunctive relief. Plaintiff alleged that HD International and Homer were not part of its unitary business group or, alternatively, that the Department incorrectly calculated its tax deficiency. Plaintiff's complaint also included the following allegations. During the tax years at issue, "Homer was engaged in the business of investment. Homer invested in intangible property, including intellectual property and marketable securities." Homer was not in the same general line of business as plaintiff and was not vertically integrated with plaintiff, because plaintiff operated retail stores while Homer invested in intangible property.

Plaintiff additionally alleged that during the relevant tax years, HD International was a "sales finance company" that was "primarily engaged in the business of making loans to other companies in the HD Group," including plaintiff, "for the express purpose of funding purchases of tangible personal property or services by the borrower." Plaintiff alleged that investment income earned by the HD Group had no "`operational'" connection to plaintiff's business in Illinois.

On November 4, 2003, defendants filed a special limited appearance and moved to transfer venue to Cook County under section 2-103(a) or, alternatively, under the doctrine of forum non conveniens. After a hearing on the motion, the trial court concluded that plaintiff's choice of venue in Du Page County was improper under section 2-103(a) because the Department did not maintain a "principal office" in Du Page County and because no part of the transaction giving rise to the suit occurred in Du Page County. The trial court granted defendants' motion and transferred the case to Cook County. Plaintiff petitioned for leave to appeal under Supreme Court Rule 306(a)(4) (Official Reports Advance Sheet No. 26 (December 24, 2003), R. 306(a)(4), eff. January 1, 2004), and we granted its petition.

II. ANALYSIS

A. Standard of Review

We first examine the proper standard of review for the grant or denial of a motion to transfer on the ground of improper venue. The appellate court has issued what appears to be conflicting decisions on this subject. In Lake County Riverboat L.P. v. Illinois Gaming Board, 313 Ill. App.3d 943, 951, 246 Ill.Dec. 499, 730 N.E.2d 524 (2000), this court held that a decision of whether a certain venue is proper should be reviewed de novo, provided that the facts are undisputed. Several other cases have also applied the de novo standard. See Reynolds v. GMAC Financial Services, 344 Ill.App.3d 843, 847, 279 Ill.Dec. 719, 801 N.E.2d 11 (5th Dist.2003); Boxdorfer v. DaimlerChrysler Corp., 339 Ill.App.3d 335, 339-41, 274 Ill.Dec. 15, 790 N.E.2d 391 (5th Dist.2003); Reichert v. Court of Claims, 327 Ill.App.3d 390, 393-94, 261 Ill.Dec. 432, 763 N.E.2d 402 (5th Dist.2002), vacated on other grounds, 203 Ill.2d 257, 271 Ill.Dec. 916, 786 N.E.2d 174 (2003)

. However, just one month after this court filed Lake County Riverboat L.P., we held that a trial court's determination of proper venue would not be overturned absent an abuse of discretion. Johnson v. Compost Products, Inc., 314 Ill.App.3d 231, 236, 247 Ill.Dec. 175, 731 N.E.2d 948 (2000). The use of such a standard is also supported by other appellate court cases. See Southern & Central Illinois Laborers' District Council v. Illinois Health Facilities Planning Board, 331 Ill.App.3d 1112, 1115, 265 Ill.Dec. 609, 772 N.E.2d 980 (5th Dist.2002); Long v. Gray, 306 Ill.App.3d 445, 449, 239 Ill.Dec. 744, 714 N.E.2d 1041 (1st Dist.1999).

We believe that both standards are applicable here. Section 2-103(a) provides, in relevant part:

"Actions must be brought against a public, municipal, governmental or quasi-municipal corporation in the county in which its principal office is located or in the county in which the transaction or some part thereof occurred out of which the cause of action arose." (Emphasis added.) 735 ILCS 5/2-103(a) (West Supp.2003).

The statute's use of the term "must" implies that proper venue is mandatory rather than discretionary. See Boxdorfer, 339 Ill.App.3d at 339-40, 274 Ill.Dec. 15, 790 N.E.2d 391. Although a defendant may waive the issue of proper venue (see 735 ILCS 5/2-104(b) (West 2002)), the trial court has no discretion to deny a motion to transfer, based on improper venue, when the plaintiff has failed to satisfy the statute's requirements. See Boxdorfer, 339 Ill.App.3d at 340, 274 Ill.Dec. 15, 790 N.E.2d 391. Whether the plaintiff has satisfied these statutory requirements raises a mixed question of law and fact. See Lake County Riverboat L.P., 313 Ill. App.3d at 951, 246 Ill.Dec. 499, 730 N.E.2d 524. Where, as in this case, there is no dispute concerning the facts upon which the trial court's venue ruling is based, only questions of law remain. See Du Page County Board of Review v. Department of Revenue, 339 Ill.App.3d 230, 233, 274 Ill. Dec. 145, 790 N.E.2d 918 (2003) ("Generally, whether a given set of historical facts satisfies a given constitutional or statutory standard is considered a question of law subject to de novo review" (emphasis in original)). Here, we must determine, as a matter of law, whether the Department maintains a "principal office" in Du Page County and whether some part of the transaction leading to this suit occurred there, within the meaning of section 2-103(a). Thus, de novo review is appropriate for these matters. See also Carver v. Sheriff of La Salle County, 203 Ill.2d 497, 506-07, 272 Ill.Dec. 312, 787 N.E.2d 127 (2003) (statutory construction is a question of law subject to de novo review).

Defendants argue that when reviewing a mixed question of law and fact, Illinois law requires deference to a trier of fact's decision. Defendants point out that administrative decisions involving mixed questions of law and fact are reviewed under a "clearly erroneous" standard. See Carpetland U.S.A., Inc., v. Department of Employment Security, 201 Ill.2d 351, 369, 267 Ill.Dec. 29, 776 N.E.2d 166 (2002); AFM Messenger Service, Inc. v. Department of Employment Security, 198 Ill.2d 380, 395, 261 Ill.Dec. 302, 763 N.E.2d 272 (2001). However, this standard applies to the review of administrative decisions in part due to long-standing deference to an agency's experience and expertise in interpreting its governing statutes. See AFM Messenger, 198 Ill.2d at 394, 261 Ill.Dec. 302, 763 N.E.2d 272. While some courts have used the supreme court's holding in AFM Messenger as an indication that the clearly erroneous standard should be applied to mixed questions in nonadministrative cases (see, e.g., Anderson v. First American Group of Cos., 353 Ill.App.3d 403, 288 Ill. Dec. 808, 818 N.E.2d 743 (2004)

), our supreme court has not held that this standard, or a largely deferential standard, applies to all mixed questions of law and fact. To the contrary, in some cases our supreme court has used a bifurcated standard for mixed questions of law and fact. See People v. Pitman, 211 Ill.2d 502, 512, 286 Ill.Dec. 36, 813 N.E.2d 93 (2004); People v. Crane, 195 Ill.2d 42, 51-52, 252 Ill.Dec. 687, 743 N.E.2d 555 (2001) (using bifurcated standard for mixed questions of law and fact); see also Franz v. Calaco Development Corp., 352 Ill.App.3d 1129, 1143-45, 288 Ill.Dec. 669, 818 N.E.2d 357 (2004) (mixed question of law and fact in which the issue of whether the law, as applied to the established...