Stap v. Chicago Aces Tennis Team, Inc.

• Citation: 379 N.E.2d 1298,63 Ill.App.3d 23,20 Ill. Dec. 230
• Decision Date: 21 July 1978
• Docket Number: No. 77-278,77-278
• Parties: , 20 Ill.Dec. 230 Susan STAP, an Individual, Plaintiff-Appellant, v. The CHICAGO ACES TENNIS TEAM, INC., an Illinois Corporation, Kaiser Investments, an Illinois partnership, Jordon H. Kaiser, an Individual, and Walter Kaiser, an Individual, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 1298

379 N.E.2d 1298

63 Ill.App.3d 23, 20 Ill.Dec. 230

Susan STAP, an Individual, Plaintiff-Appellant, v. The CHICAGO ACES TENNIS TEAM, INC., an Illinois Corporation Kaiser Investments, an Illinois partnership Jordon H. Kaiser, an Individual, and Walter Kaiser, an Individual Defendants-Appellees.

No. 77-278.

Appellate Court of Illinois, First District, Fifth Division.

July 21, 1978.

Rehearing Denied Aug. 29, 1978.

James J. Reagan, Northbrook, for plaintiff-appellant; Paul R. Jenen, Northbrook, of counsel.

Eugene L. Shepp, Chicago, for defendants-appellees.

SULLIVAN, Presiding Justice.

In this appeal, the trial court granted motions of certain defendants to dismiss Counts I and III of plaintiff's fifth amended complaint (the complaint), and we are presented here with questions as to whether causes of action were stated in those counts.

It appears that plaintiff, a professional tennis player, entered into a contract on January 24, 1974, to play with the Chicago Aces Tennis Team in participation with other teams in a league of World Team Tennis, Inc. (WTT). An addendum to the contract provided for the payment to plaintiff of a base salary and certain bonuses. The signators were plaintiff and the "CHICAGO ACES TEAM TENNIS, INC. (Club) By Jordon H. Kaiser, Pres." The document was a standard WTT player's contract form and, as required by its provision, it was approved by the WTT commissioner on February 27, 1974. The Club, however, was not incorporated until May of 1974, with Jordon H. Kaiser and Walter Kaiser (the Kaisers) as sole shareholders.

Thereafter, a change in plaintiff's bonuses was provided for in an amendment to the contract dated June 1, 1974, which stated that it was between "Chicago Aces Tennis Team, Inc., Owner and Sue Stap, Player." Signators were plaintiff and "Jock A. Miller General Manager Chicago Aces."

The contract was for one playing season, with the Club having an option under certain conditions to renew for an additional year. Plaintiff played throughout the season, but the Club did not participate in the WTT league thereafter, and her contract was not extended.

This action was brought by plaintiff for salary and bonuses due her under the contract. In Count I she seeks a recovery from Jordon H. Kaiser and alleges that she contracted to play tennis in exchange for his promise to pay a certain salary and bonuses; that he stated that she would be playing for his tennis team but would be employed by him individually; that he did not indicate that the Chicago Aces Tennis Team was to be a corporation; and that she did not understand her contract was between herself and a corporation to be formed.

In Count III, plaintiff seeks a recovery against the Kaisers and defendant Kaiser Investments, an Illinois partnership. She alleges in pertinent part that the Kaisers were the only shareholders of the Club and of Kaiser Investments; that they were also majority stockholders of four other corporations; that the Kaisers undercapitalized the Club; that Kaiser Investments abused the corporate entity of the Club by funneling funds between the other four corporations and the Club until the Kaisers determined the club would not be a viable corporation; and that the Kaisers, through Kaiser Investments, failed to carry on the business of Kaiser Investments and the other four corporations as separate interests to the extent that the observance of the fiction of separate interests would sanction a fraud by promoting injustice.

Count II, which is directed against the Club only, is not involved in this appeal and remains pending in the trial court.

Motions to strike and dismiss Counts I and III by all defendants except the Club were granted as not stating a cause of action.

OPINION

As to Count I, which seeks damages for breach of contract against Jordon H. Kaiser, plaintiff contends that she had contracted with him individually to play tennis for his promise to pay her a certain salary and bonuses. In the briefs filed in this court, both parties treat Jordon Kaiser as a promoter of the Club.

A promoter is one who alone or with others forms a corporation and procures for it the rights, instrumentalities and capital to enable it to conduct its business. (Goodwin v. Wilbur (1902), 104 Ill.App. 45; 1 W. Fletcher, Cyclopedia of the Law of Private Corporations, sec. 189 at 657 (perm. ed. 1974). A promoter's personal liability on a pre-incorporation contract entered into with a third party depends on the intention of the parties at the time of the contract (Whitney v. Wyman (1879), 101 U.S. 392, 25 L.Ed. 1050; H. F. Philipsborn & Co. v. Suson (1974), 59 Ill.2d 465, 322 N.E.2d 45; Martindell v. Lake Shore Nat. Bank (1958), 15 Ill.2d 272, 154 N.E.2d 683), and the court will look to the contract and other documents executed contemporaneously in determining the party's intent (Philipsborn; Illinois Match Co. v. Chicago Rock Island and Pacific Ry. Co. (1911), 250 Ill. 396, 95 N.E. 492).

Relying solely on Philipsborn, plaintiff maintains here that Jordon Kaiser is personally liable on the contracts he entered into. We see no support for plaintiff in Philipsborn, which involved a promoter's liability on a pre-corporation contract for a construction loan, the promoter having signed as president of a company which was not incorporated until two months later. There was a breach of the agreement, and the lender sued the corporation and the promoter. The court, after stating that the promoter's liability turned on the intent of the contracting parties at the time of the contract, concluded that the promoter was not personally liable because the contract terms disclosed that plaintiff looked solely to the corporation for satisfaction.

The contract in the instant case, which was attached to plaintiff's complaint as an exhibit, discloses that it is a standard WTT player's contract of five printed pages and a one page addendum. The first page states that "the Chicago Aces Tennis Team, Inc. ('Club') employs Sue Stap ('Player') to perform in or on behalf of the Club's participation in World Tennis Team, Inc. ('WTT' or 'League')." Throughout the remainder of the contract, the terms "Club" and "Player" were used and provisions concerning inter alia, compensation, benefits, employment duties, physical condition and injury, publicity, and arbitration. The contract was signed by plaintiff and "Chicago Aces Tennis Team, Inc., By Jordon Kaiser, Pres." A contract amendment which was executed after the Club was incorporated, provided for a change in plaintiff's bonuses and was signed by her and "Jock A. Miller, General Manager, Chicago Aces."

Where a written contract, attached to the complaint, is relied upon for a basis of recovery and there is a discrepancy between the allegations of the complaint and the exhibit, the exhibit controls and will be taken as the factual basis upon which the complaint is predicated. Tondre v. Pontiac School District (1975), 33 Ill.App.3d 838, 342 N.E.2d 290; Katz v. Diabetes Ass'n of Greater Chicago (1975), 31 Ill.App.3d 240, 333 N.E.2d 293.

In the instant case, the allegations of Count I that plaintiff entered into a contract to play tennis for Jordon Kaiser personally is contrary to the provisions of the contract, which clearly state that plaintiff agreed to play tennis for the Club. We see nothing nor has plaintiff pointed out anything in the contract indicating otherwise. That plaintiff intended to play for the Club is further evident from the amendment entered into after incorporation, which was signed by her and the general manager of the Club. In view of the foregoing, we agree that no cause of action was stated in Count I as to Jordon Kaiser.

Alternatively, in Count III, plaintiff sought to have the corporate entity disregarded. She argues that because the Club was undercapitalized as the result of the manipulation of funds through the other corporate interests controlled by the Kaisers and Kaiser Investments, there should be a piercing of the corporate veil and those defendants held liable.

A corporation is a legal entity that exists separate and distinct from its shareholders, officers, and directors, who are not as a general rule liable for the corporation's debts and obligations. (Bevelheimer v. Gierach (1975), 33 Ill.App.3d 988, 339 N.E.2d 299; Divco-Wayne Sales Financial Corp. v. Martin Vehicle Sales, Inc. (1963), 45 Ill.App.2d 192, 195 N.E.2d 287; see also, H. Henn, Handbook of the Law of Corporations, sec. 146, at 250 (2nd 1970).) However, a corporate entity will be disregarded and the veil of limited liability pierced where it would otherwise present an obstacle to the protection of private rights (Bevelheimer v. Gierach ) or when the corporation is merely the alter ego or business conduit of a governing or dominating personality (Shamrock Oil & Gas Co. v. Ethridge (D.Colo.1958), 159 F.Supp. 693, 696).

For the doctrine traditionally known as "piercing the corporate veil" to apply, two requirements must be met (1) there must be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist; and (2) circumstances must exist that adherence to the fiction of separate corporate existence would sanction a fraud or promote injustice. (...