Pielet v. Pielet

• Decision Date: 25 February 2011
• Docket Number: 2–09–0242.,Nos. 2–09–0210,s. 2–09–0210
• Citation: 942 N.E.2d 606,347 Ill.Dec. 403,407 Ill.App.3d 474
• Parties: Dorothy PIELET, Individually and as Executor of the Estate of Arthur Pielet, Plaintiff–Appellee,v.James PIELET, J.P. Investments, Inc., Pielet Bros. Scrap Iron and Metal, Inc., Pielet Corporation, National Material, L.P., and N.M. Holding, Inc., Defendants (P.B.S. One, Inc., and Cyrus Tang, Defendants–Appellants).Dorothy Pielet, Individually and as Executor of the Estate of Arthur Pielet, Plaintiff–Appellee,v.James Pielet, J.P. Investments, Inc., Pielet Bros. Scrap Iron and Metal, Inc., Pielet Corporation, P.B.S. One, Inc., and Cyrus Tang, Defendants (National Material, L.P., and N.M. Holding, Defendants–Appellants).
• Court: United States Appellate Court of Illinois

407 Ill.App.3d 474

942 N.E.2d 606

347 Ill.Dec. 403

Dorothy PIELET, Individually and as Executor of the Estate of Arthur Pielet, Plaintiff–Appellee,

v.James PIELET, J.P. Investments, Inc., Pielet Bros. Scrap Iron and Metal, Inc., Pielet Corporation, National Material, L.P., and N.M. Holding, Inc., Defendants (P.B.S. One, Inc., and Cyrus Tang, Defendants–Appellants).Dorothy Pielet, Individually and as Executor of the Estate of Arthur Pielet, Plaintiff–Appellee,

v.James Pielet, J.P. Investments, Inc., Pielet Bros. Scrap Iron and Metal, Inc., Pielet Corporation, P.B.S. One, Inc., and Cyrus Tang, Defendants (National Material, L.P., and N.M. Holding, Defendants–Appellants).

Nos. 2–09–0210

2–09–0242.

Appellate Court of Illinois, Second District.

Nov. 29, 2010.Rehearing Denied Feb. 25, 2011.

Robert G. Black, Law Offices of Robert G. Black, Naperville, Matthew J. O'Hara, Hinshaw & Culbertson LLP, Chicago, Hillary W. Coustan, Reed Smith LLP, Chicago, for Cyrus Tang, P.B.S. One, Inc.Eugene J. Geekie Jr., Neil Lloyd, Amy M. Rubenstein, Matthew G. Schiltz, Schiff Hardin LLP, Chicago, for Estate of Arthur Pielet, Dorothy Pielet in No. 09–0210 and Dorothy Pielet, James Pielet in No. 2–09–0242.Robert G. Black, Law Offices of Robert G. Black, Law Offices of Robert G. Black, Naperville, Daniel J. Kubasiak, John Deiner, Manuel J. Placencia Jr., Kubasiak, Fylstra, Thorpe & Rotunno, P.C., Chicago, for N.M. Holding, Inc., National Material, L.P.Justice O'MALLEY delivered the opinion of the court:

[347 Ill.Dec. 407 , 407 Ill.App.3d 474] Defendants, P.B.S. One, Inc. (PBS One), National Material, L.P. (National Material), N.M. Holding, Inc. (NM Holding), and Cyrus Tang (Tang), appeal the order granting summary judgment in favor of plaintiff, Dorothy Pielet, on counts IX, X, and XI of her fifth amended complaint. The allegation basic to all three counts is that defendants failed to honor a consulting agreement mandating lifelong monthly payments to plaintiff's late husband, Arthur Pielet (Arthur), and, after his death, to plaintiff for life (Consulting Agreement). Defendants also appeal the award of attorney

[347 Ill.Dec. 408 , 942 N.E.2d 611]

fees to plaintiff pursuant to a fee-shifting provision in the Consulting Agreement. We reverse and remand.

PBS and Tang appealed in No. 2–09–0210, and National Material and NM Holding appealed in No. 2–09–0242. We consolidated the cases for review.

I. Plaintiff's Complaint

Plaintiff initiated this lawsuit in 1998 and filed her fifth amended complaint (complaint) on July 19, 2005. She pled 11 counts. Counts I, II, and III named James Pielet (James), who is plaintiff and Arthur's son, and alleged breach of contract, promissory estoppel, and equitable estoppel. Count IV named J.P. Investments, Inc., and alleged breach of contract. Count V named Tang and PBS One and alleged fraudulent conveyance. Counts VI, VII, and VIII alleged director liability, breach of fiduciary duty, and distributee liability against Tang. Counts IX and X named National Material and NM Holding and alleged breach of contract and successor liability, respectively. Finally, count XI named PBS One and alleged breach of contract.

Only counts IX, X, and XI are at issue in these appeals. The common allegations in these counts are as follows. In December 1986, Arthur entered into the Consulting Agreement with James, then president of Pielet Bros. Scrap Iron and Metal, Inc. (Pielet Inc.). In 1988, Pielet Brothers Scrap Iron and Metal LP (Pielet LP) was formed in a two-step transaction. First, Pielet Inc. ¹ sold an undivided one-half interest in its assets to PBS One, a company of which Tang was “the sole director, sole shareholder, and president.” PBS One “expressly assumed [Pielet Inc.'s] obligations * * * under the Consulting Agreement.” Second, Pielet Inc. and PBS One transferred their respective one-half shares in Pielet Inc. to Pielet LP and consequently each gained a 49.5% limited partnership interest in Pielet LP. The remaining 1% general partnership interest was owned by Pielet/Tang Enterprises (PT Enterprises). James owned 49% of the stock in PT Enterprises and Tang owned the remaining 51%. Pielet LP consistently made monthly payments to Arthur under the Consulting Agreement. On June 1, 1994, PBS One was dissolved by the Illinois Secretary of State.

In January 1991,² PBS One transferred its 49.5% share in Pielet LP to National Material. NM Holding was then the general partner of National Material. In 1993, Pielet LP changed its name to Midwest Metallics. Thereafter, Midwest Metallics made payments under the Consulting Agreement until July 1998, when payments ceased altogether.

Count IX, the breach-of-contract claim against National Material, alleged that, as part of the January 1991 transfer, National Material “assumed the right, title, interest[,] and obligations” of PBS One, including the Consulting Agreement. Plaintiff asserted that National Material's obligations under the Consulting Agreement were paid by Pielet LP and Midwest Metallics though the latter entities had “never contracted to assume the Consulting Agreement.” Plaintiff alleged that, when Midwest Metallics ceased paying under the Consulting Agreement in July 1998, National Material “remained obligated to satisfy those payments” but did not pay. Plaintiff further alleged that NM Holding

[347 Ill.Dec. 409 , 942 N.E.2d 612]

was liable as the general partner of National Material.

Count X alleged that National Material was liable under the Consulting Agreement as the “successor” of PBS One. Specifically, plaintiff asserted:

“Because National Material is a mere continuation of [PBS One] [and] expressly assumed [PBS One's] rights and obligations under the Consulting Agreement, and has acknowledged that it is the successor to [PBS One] in writing, all of the liabilities of [PBS One], including its liability under the Consulting Agreement, have been transferred and assumed to and by National Material.”

Plaintiff further alleged that National Material's liability as successor to PBS One extended as well to NM Holding, the general partner of National Material.

Count XI alleged that, after its dissolution in 1994, PBS One “remained obligated under the Consulting Agreement” and that PBS One breached the Consulting Agreement when payments under the Consulting Agreement ceased in July 1998.

On February 14, 2006, plaintiff moved for summary judgment against PBS One and Tang on counts V and XI, and for summary judgment against National Material and NM Holding on counts IX and X. PBS One and Tang together filed an opposition brief and also a cross-motion for summary judgment against plaintiff. National Material and NM Holding together filed their own opposition brief as well as a cross-motion for summary judgment against plaintiff.

II. Undisputed Facts On Summary Judgment

In support of their summary judgment motions, the parties filed their proposed statements of undisputed facts. From these the trial court distilled a statement of undisputed facts as a basis for resolving the summary judgment motions. Aside from one issue that defendants claim involves a factual dispute (which we explain below), the parties do not challenge the trial court's statement of undisputed facts. We follow that statement here and in some instances incorporate some additional undisputed factual material in order to amplify and clarify certain points.

Pielet Inc. was formed by Arthur and his brothers shortly after World War II. Pielet Inc. was in the scrap metal business. In December 1986, Arthur sold his interest in Pielet Inc. to his sons James and Robert Pielet (Robert). On December 23, 1986, James, president of Pielet Inc., and Arthur signed the Consulting Agreement. The Consulting Agreement provided that Arthur would “act as a general advisor and consultant” to Pielet Inc. and that he would receive a yearly fee of $130,000, “payable in equal monthly installments.” Arthur would be paid the fee until his death, after which his “widow” (unnamed) would receive the fee “for her life.” The Consulting Agreement provided that the “inability [of Arthur] to render [consulting] services * * * by reason of illness, disability or incapacity” would not be deemed “a breach or default by him.” The Consulting Agreement further provided that it was binding “upon the parties [thereto], and their respective heirs, legal representatives, successors[,] and assigns.”

In 1988, James, together with Tang, an outside investor with experience in the scrap metal business, agreed to form Pielet LP, a partnership. Tang was sole shareholder and owner of PBS One. Shortly before the reorganization that led to Pielet LP, Pielet Inc. changed its name to Pielet Corporation (Pielet Corp.) ³ and

[347 Ill.Dec. 410 , 942 N.E.2d 613]

James acquired Robert's shares, becoming sole shareholder. On April 12, 1988, several documents were executed to accomplish the restructuring. Each was signed by James as president of Pielet Corp. and by Tang as president of PBS One. The first was an “Asset Purchase Agreement” (Purchase Agreement). The preamble to the Purchase Agreement identifies Pielet Corp. as “Seller” and PBS One as “Buyer” and states:

“WHEREAS, Seller has its principal place of business in Argo, Illinois[,] and is engaged in the business of operating scrap metal shredding and recovery plants in Argo and McCook, Illinois[,] and Hammond and Indianapolis, Indiana (the ‘Business');

WHEREAS, Seller and Buyer desire to form a limited partnership * * * to own and operate the Business * * *.”

Article I is entitled “Purchase and Sale of Assets.” Section 1.1 under article I is entitled “Agreement to Sell and Purchase” and states:

“Upon the terms and subject to the conditions set forth herein, and in reliance on the respective representations and warranties of the parties, Seller shall sell an undivided one-half ( 1/2) interest in and to the Assets (as defined below) to Buyer * * *, and Buyer shall purchase such undivided...