Kaybill Corp., Inc. v. Cherne

• Decision Date: 07 November 1974
• Docket Number: No. 57555,57555
• Citation: 24 Ill.App.3d 309,320 N.E.2d 598
• Parties: KAYBILL CORPORATION, INC., et al., Plaintiffs-Appellees, v. John J. CHERNE and Helen Cherne, Defendants-Appellants.
• Court: United States Appellate Court of Illinois

Page 598

320 N.E.2d 598

24 Ill.App.3d 309

KAYBILL CORPORATION, INC., et al., Plaintiffs-Appellees, v. John J. CHERNE and Helen Cherne, Defendants-Appellants.

No. 57555.

Appellate Court of Illinois, First District, Third Division.

Nov. 7, 1974.

Jerome Berkson, Chicago, for defendants-appellants.

William J. Nellis, Chicago, for plaintiffs-appellees.

MEJDA, Justice.

Plaintiffs brought an action for a declaratory judgment to declare their rights as lessees of defendants' property. Defendant Helen Cherne died subsequent to the execution of the lease. Her death was suggested, and the proceedings continued as to her son John Cherne, defendant herein. Defendant appeals from the judgment of the trial court declaring plaintiffs to be lessees for an additional term of six years, and entering judgment against defendant as to his forcible detainer proceedings.

In mid-April 1965, plaintiffs William Ellis and Catherine Ellis, his wife (Ellises), as lessees, entered into a written lease with the defendants, John Cherne and Helen Cherne, his mother, as lessors for the first floor of the premises at 10349 South Pulaski Road, Chicago, for use as a tavern. The lease was for a period of six years, commencing May 1, 1965, and provided a monthly rental of $200 for the first three years and $225 for the remaining three years. Paragraphs 7 and 10 of the rider attached to the lease provided:

7. The lessee shall have the option of renewing the lease for an additional six years with a reasonable increase in rental.

10. The lessee must notify the lessor one month in advance of expire (sic) of lease.

Kaybill Corporation, Inc., an Illinois corporation (Kaybill), was incorporated on April 12, 1965. Catherine Ellis and Diana Ellis, her daughter, were sole stockholders. A liquor license was obtained from the City of Chicago by the corporate Kaybill and conspicuously displayed on the wall. The tavern was operated by the Ellises and their daughter under the name of The Ellis Pub. Rental payments were made by the corporation. Defendant John Cherne lived in the building and spent four to five evenings each week in The Ellis Pub.

The Ellises testified that after the corporation was formed on or about April 15, 1965, they assigned the lease to Kaybill and tendered the assignment to Helen Cherne for written consent. Catherine Ellis testified that on or about April 15, 1965, she gave the lease and assignment to Helen Cherne and told her that the corporation was formed; and that after several days Helen Cherne handed the lease back to her with the alleged signatures of both Helen Cherne and John Cherne to the consent. John Cherne denied both signatures. A handwriting expert and the sister of John Cherne testified that the signatures were not genuine.

Defendant John Cherne testified that he had frequented The Ellis Pub four or five nights each week during the leased period and was aware of the location of the liquor license. He stated that he did not know that the license was held in the name of Kaybill. The Ellises testified that John Cherne knew of the existence of the corporation and had on several occasions discussed it, and that John and Helen Cherne were aware of the assignment of the lease to Kaybill.

The Ellises further testified that during the latter part of April 1970, John Cherne approached them and demanded a $75 increase in monthly rental for the remainder of the original term of the lease; that the parties agreed to the increase, and John Cherne agreed that the rent for the period of the option would be $300 per month; and that Catherine Ellis advised Cherne that she was exercising the option on behalf of the corporation at that time. Cherne denied having any conversation concerning the exercise of the option. He testified that he demanded an increase in rental for the year then remaining; that the Ellises agreed and made payments in the amount of $300 per month for such year, and that the Ellises had not attempted to exercise the option until he received a letter dated April 29, 1971, from the Ellises' attorney purporting to exercise the option for six years at a rental of $300 per month. Cherne further testified that in late April 1971, he sent a one-year lease to the Ellises, providing for a rental of $300 per month. He testified that the lease had been rejected and that he knew Ellis would not sign it because of the option. Later, Cherne tendered a six-year lease providing a rental of $650 per month which was rejected by the Ellises.

Kaybill, the corporate plaintiff, originally commenced this action on October 5, 1971, as assignee of the Ellises. On November 10, 1971, an amended complaint was filed wherein William and Catherine Ellis were joined as plaintiffs. The named defendants were John Cherne and Helen Cherne, his mother. The death of Helen Cherne in 1967 was suggested prior to trial, and the proceedings continued as to John Cherne as the surviving joint tenant. A trial was had without a jury, and on December 20, 1971, the trial court entered the judgment order from which defendant has appealed.

The judgment order contained findings which provided substantially that:

3) Kaybill failed to sustain proof as to the consent to assignment of the lease, and that the consent is invalid but is not necessary, 'or in the alternative, if' necessary, defendant is estopped to deny such consent;

4) defendant received an additional $75 per month from Kaybill for a total of $900 prior to May 1, 1971, and also May 1971 payment of $300 which constituted partial performance of an oral lease between Kaybill and defendant beginning May 1, 1971 and ending April 30, 1977, at a reasonable monthly rental fixed at $300, and that partial performance takes the transaction out of the Statute of Frauds;

5) 'that in the alternative to the findings in (preceding) paragraph 4' the option agreement is enforceable by Kaybill against defendant, and specific performance may be ordered, reasonable rental being fixed at $300 per month;

6) 'that in the alternative to findings in (preceding) paragraphs 4 and 5 above, if as a matter of law, consent to the assignment to Kaybill' is found necessary and is further found not given, 'and if defendant . . . is not estopped from denying such consent,' then William Ellis and Catherine Ellis are found to have paid the additional $900 referred to above to defendant, and the Ellises are found to have made the May 1971 payment to defendant of $300, and said conduct is found to constitute partial performance of an oral lease between the Ellises and defendant, beginning May 1, 1971 and ending April 30, 1977, at a reasonable rental fixed at $300 per month, and that partial performance takes the transaction out of the Statute of Frauds;

7) 'that in the alternative to the findings in (preceding) paragraph 6,' the court finds that the option is found enforceable by the Ellises against defendant, and specific performance may be ordered, reasonable rental being fixed at $300 per month.

The judgment order then ordered, adjudged and decreed in substance:

1) that an oral lease for the six-year period from May 1, 1971 to April 30, 1977, exists between plaintiffs Kaybill and defendant John Cherne for a monthly rental of $300 pursuant to all other terms and provisions of the May 1, 1965 lease between the Ellises and Cherne;

2) 'that in the alternative, an extended lease exists' between plaintiff Kaybill and defendant Cherne for the six-year period at a reasonable rental fixed at $300 per month pursuant to the exercise of the option in the lease dated May 1, 1965;

3) 'that in the alternative, an oral lease' for the six-year period exists between William Ellis and Catherine Ellis as lessees, and John Cherne as lessor, at a reasonable rental of $300 per month pursuant to all other terms and provisions of lease dated May 1, 1965;

4) 'that in the alternative, an extended lease exists' between William Ellis and Catherine Ellis as lessees, and John Cherne as lessor, for the six-year period at a reasonable rental fixed at $300 per month pursuant to the exercise of the option in the lease dated May 1, 1965; and

5) that judgment be entered in favor of William Ellis and Catherine Ellis and against John Cherne and Helen Cherne as to the forcible entry and detainer action filed by the defendants.

On January 17, 1972, defendant filed a motion to vacate the order of December 20, 1971, and for a new trial. Thereafter, on January 31, 1972, defendant filed a supplement to the previous motion, therein alleging for the first time that Kaybill was involuntarily dissolved for failure to pay franchise taxes to the State of Illinois on December 17, 1968, being more than two years before commencing the present action, and that Kaybill was therefore incapable of maintaining this action. On February 3, 1972, plaintiffs filed a reply, attaching an order of that date which vacated the order of dissolution with the consent of the Attorney General of Illinois. On March 23, 1972, the trial court denied defendant's motion to vacate. Defendant appeals from the orders of December 20, 1971 and March 23, 1972.

I.

Defendant initially maintains that Kaybill, a corporation, did not commence the action within two years after the date of dissolution as provided by statute (Ill.Rev.Stat.1971, ch. 32, par. 157.94), and that the judgment in favor of a dissolved corporation is a nullity since there was no party plaintiff over whom the court could exercise jurisdiction, and that the order vacating the dissolution could not cure such defect.

We have consistently held that if a corporation which is delinquent in the payment of franchise taxes has started suit it may continue the prosecution of that suit by subsequent compliance with the statute. (Jorgensen v. Baker (1959), 21 Ill.App.2d 196, 157 N.E.2d 773; Sternberg Dredg. Co. v. Estate of Sternberg (1953), 351 Ill.App. 514, 115 N.E.2d 557 (Abst.); Sheffield S. & I. Co. v. The Jos. J. & B. Co. (1925), 238 Ill.App....