de St. Aubin v. Johnson

Decision Date15 December 1986
Docket NumberNo. 85-2580,85-2580
Parties, 104 Ill.Dec. 97 Victor de ST. AUBIN, Jr., Individually and as Executor of the Estate of Lillian de St. Aubin, and as Successor to Victor de St. Aubin, Sr., Plaintiff- Appellant, v. Frederick L. JOHNSON, Ross Haeger, George Johnson, James Sullivan, the Burlingshire Management Corp., James Anderson, Richard Blankshain, Martin Green, Sheldon Krasnow, Virginia Palmer, and Eugene Krasnow, Defendants- Appellees.
CourtUnited States Appellate Court of Illinois

Schuyler, Roche & Zwirner, (Roger Longtin, of counsel), Chicago, for appellant.

Rosenthal & Schanfield (Rochelle S. Dyme, Joel A. Mullin, of counsel), Chicago, for appellees Sheldon Krasnow and Eugene Krasnow.

Shaheen, Lundberg, Callahan and Orr (Saul R. Wexler, of counsel), Chicago, for appellees Ross Haeger, James Sullivan, Frederick L. Johnson, George Johnson, James Anderson and Richard Blankshain.

Justice BUCKLEY delivered the opinion of the court:

Plaintiff, Victor de St. Aubin Jr., individually and as executor of the estates of his aunt and father, appeals a circuit court order denying him leave to file counts I and III of his second amended complaint against the former shareholders (defendants) of an allegedly wrongfully dissolved corporation. Plaintiff additionally appeals the granting of defendants' motionfor summary judgment with respect to count II of the amended complaint. For the following reasons, we affirm.

The record reveals that between 1969 and 1970, plaintiff acquired 32 shares of common stock in Burlingshire, Inc. ("Burlingshire"), a Wisconsin corporation which had as its principal asset certain resort property located in Burlington, Wisconsin. In addition to being a shareholder, plaintiff was a creditor of Burlingshire, as was his aunt, Lillian de St. Aubin, and his father, Victor de St. Aubin Sr., both of whom are now deceased. It is undisputed that during its corporate existence, Burlingshire was not a profitable operation.

In February 1976, the shareholders of Burlingshire held a meeting in which they considered various alternatives to remedy the corporation's financial situation. One option discussed was to change Burlingshire's form of ownership from a corporation to a limited partnership pursuant to section 333 of the Internal Revenue Code. (Internal Revenue Code 1976, 26 U.S.C. § 333.) By doing so, the shareholders would be able to retain limited liability while deducting their pro rata share of the resort's operating losses from their personal income, thus reducing tax liabilities. Plaintiff opposed converting Burlingshire into a limited partnership because he did not want to be part of a scheme designed to "gyp" the government.

Following the conclusion of the February meeting, a plan was commenced to effectuate the change in Burlingshire's form of ownership. The first step was to dissolve the corporation under section 180.765 of the Wisconsin Business Corporation Law. According to the Wisconsin statute, articles of dissolution may be executed only "[w]hen all debts, liabilities and obligations of the corporation * * * have been paid and discharged, or adequate provision has been made therefor * * *." (Wis.Stat.1976, § 180.765.) To meet these requirements, Burlingshire first offered all debenture holders the opportunity to exchange debentures for corporate stock, and then receive a proportionate interest in the limited partnership, and second, entered into various agreements between itself and Burlingshire Management Corporation, the general partner of the limited partnership, by which Burlingshire's remaining liabilities were assumed.

On June 21, 1976, after the Burlingshire Management Corporation was incorporated in Wisconsin and the limited partnership papers were executed, a special shareholders' meeting was called during which a resolution requesting the liquidation of corporate assets and dissolution of the corporation was ratified by more than two-thirds of the outstanding shares. The resolution provided in pertinent part as follows:

"RESOLVED, that the following plan of liquidation of The Burlingshire, Inc., be and it hereby is adopted:

1. The Corporation, by its duly authorized Officers, will distribute pro rata to its shareholders, or to their nominee named to receive same on their behalf, during the month of June, 1976, all of its assets, subject to any unpaid liabilities with the exception of a reasonable amount of cash to be retained for the payment of Federal and State taxes for the year 1976. Each shareholder shall assume, or cause to be assumed, his pro rata share of the said unpaid liabilities, and accept his interest in the real estate subject to a pro rata portion of the mortgages thereon.

Each shareholder will surrender all of his Certificates representing shares of the Corporation's stock for cancellation.

* * *

* * *

5. The Officers and Directors of the Corporation are empowered, authorized and directed to carry out the provisions of this Resolution, and to adopt any further resolutions that may be found necessary in liquidating the Corporation as provided in Section 333 of the Internal Revenue Code and dissolving it in accordance with the expressed intent of the shareholders and directors under the Plan adopted at this meeting."

While plaintiff, who owned approximately five percent of the outstanding shares, did not attend this meeting, he was represented by an attorney who abstained from voting on the resolution.

After the dissolution resolution was passed, another resolution was adopted at the meeting authorizing Burlingshire to distribute each shareholder's pro rata share of the corporation's assets to nominee Robert Graham Harles upon the shareholder's completion of a pre-printed designation form. A majority of the Burlingshire shareholders submitted these forms on June 22, 1976. Shortly thereafter, Burlingshire conveyed its resort property to Harles, who in turn conveyed it to the Burlingshire Management Corporation, the general partner of the limited partnership. Burlingshire's articles of dissolution were subsequently filed on August 23, 1976, and most of the corporation's former shareholders became limited partners in the new venture. Pursuant to a letter dated July 2, 1976, plaintiff, as well as his aunt and father, refused to participate in the limited partnership or have their notes assumed by it.

Plaintiff took no further action until nearly three years later, in March 1979, when he instituted suit against Burlingshire Management Corporation, his attorney, and the former directors of Burlingshire. On November 21, 1984, plaintiff filed a four count second amended complaint, the subject of this dispute, against the same parties named in his initial complaint as well as the following former shareholders of Burlingshire: Frederick Johnson, Ross Haeger, George Johnson, James Sullivan, James Anderson, Richard Blankshain, Martin Green, Sheldon Krasnow, Virginia Palmer, and Eugene Krasnow. In his complaint, plaintiff sought among other relief, damages, an accounting, and the imposition of a constructive trust on certain assets of defendants.

In count I of his second amended complaint, plaintiff alleged that defendants misappropriated his interest as a shareholder in Burlingshire. Count II alleged that defendants are personally liable to plaintiff, and to his aunt and father, for unpaid promissory notes. Count III is premised on the claim that defendants failed to make adequate provisions for Burlingshire's debts upon the corporation's dissolution in violation of section 180.757 of the Wisconsin Business Corporation Law. The trial court denied plaintiff leave to file counts I and III against defendants and granted defendants' motion for summary judgment with respect to count II. It is from these rulings that plaintiff appeals. 1

We first address plaintiff's contention that the trial court abused its discretion in precluding him from filing counts I and III of his second amended complaint against defendants, particularly since plaintiff was permitted to file these counts against Burlingshire's directors. In support of this argument, plaintiff asserts that count I sufficiently states a cause of action for conversion where corporate assets in which he had an interest were transferred to a limited partnership created by defendants without his consent. We disagree.

The elements necessary to establish a cause of action for conversion are: (1) an unauthorized and wrongful assumption of control, dominion, or ownership by a person over the property of another; (2) plaintiff's right in the property; (3) plaintiff's right to immediate possession of the property; and (4) a demand by plaintiff of possession thereof. (Scheduling Corp. of America v. Massello (1983), 119 Ill.App.3d 355, 74 Ill.Dec. 796, 456 N.E.2d 298.) Plaintiff has failed to establish the first element for such a cause of action, namely that the transfer of Burlingshire's assets and dissolution of the corporation were "unauthorized and wrongful."

Defendants here exercised their statutory right pursuant to section 180.753 of the Wisconsin Business Corporation Law to dissolve Burlingshire (Wis.Stat.1976, § 180.753), and in doing so,...

To continue reading

Request your trial
10 cases
  • Kauth v. Hartford Ins. Co. of Illinois
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • July 19, 1988
    ... ... Seventh Circuit ... Argued Feb. 12, 1988 ... Decided July 19, 1988 ... Page 952 ...         Armin Johnson, Jr., Mitchell, Williams, Holland & Rux, Chicago, Ill., for plaintiff-appellant ...         Bonnie M. Wheaton, Wylie, Wheaton & Assoc., ... Likewise, Kauth's conversion claim in Count III is also purely a matter of state law. See generally de St. Aubin v. Johnson, 151 Ill.App.3d 184, 502 N.E.2d 360, 104 Ill.Dec. 97 (1st Dist.1986); A.T. Kearney, Inc. v. INCA Int'l, Inc., 132 Ill.App.3d 655, 477 ... ...
  • Gabriel v. City of Edwardsville
    • United States
    • United States Appellate Court of Illinois
    • December 4, 1992
  • Runnemede Owners, Inc. v. Crest Mortg. Corp.
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • November 18, 1988
    ... ... What I say goes," is directly contrary to the specific limiting terms of the parties' written contract. Cf. Turner v. Johnson and Johnson, 809 F.2d 90, 96 (1st Cir.1986) ("a contractual provision flatly contradictory to prior oral assurances should cause most people--and ...         Eggert v. Weisz, 839 F.2d 1261, 1264 (7th Cir.1988) (quoting de St. Aubin v. Johnson, 151 Ill.App.3d 184, 188, 104 Ill.Dec. 97, 502 N.E.2d 360, 364 (1986)). See also Katz v. Belmont National Bank of Chicago, 112 Ill.2d 64, ... ...
  • Rosenstein v. CMC Real Estate Corp.
    • United States
    • United States Appellate Court of Illinois
    • March 11, 1988
    ...it cannot be said that there was anything "unauthorized and wrongful" about defendants' actions. de St. Aubin v. Johnson (1986), 151 Ill.App.3d 184, 188, 104 Ill.Dec. 97, 502 N.E.2d 360 (applying Wisconsin Finally, plaintiffs contend that the appraisal remedy is inadequate because there is ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT