Thompson v. Whalen , 2023 IL App (4th) 220668 ( 2023 )

2023 IL App (4th) 220668FILED
NO. 4-22-0668 March 1, 2023
Carla Bender
4th District Appellate
IN THE APPELLATE COURT Court, IL
OF ILLINOIS
FOURTH DISTRICT
BARBARA A. THOMPSON and ) Appeal from the
KATHLEEN JO WHALEN, ) Circuit Court of
Plaintiffs-Appellees, ) McDonough County
v. ) No. 21LL13
BERNARD F. WHALEN, THE ESTATE OF )
PATRICK T. WHALEN, and YETTER ) Honorable
MANUFACTURING COMPANY, ) Raymond A. Cavanaugh,
Defendants-Appellants. ) Judge Presiding.
JUSTICE KNECHT delivered the judgment of the court, with opinion.
Justices Cavanagh and Steigmann concurred in the judgment.
OPINION
¶1 In September 2021, plaintiffs, Barbara A. Thompson and Kathleen J. Whalen,
filed suit asserting multiple counts against defendants over ownership of shares in Yetter
Manufacturing Company (Yetter Manufacturing), a nonpublic corporation. Specifically,
plaintiffs asserted a claim of “shareholder remedies” under section 12.56 of the Business
Corporation Act of 1983 (Business Corporation Act) (805 ILCS 5/12.56 (West 2020)) against
Yetter Manufacturing, conversion of corporate stock against Patrick Whalen’s estate and Bernard
Whalen, and civil conspiracy against all defendants.
¶2 Defendants countered with motions to dismiss under section 2-619.1 of the Code
of Civil Procedure (735 ILCS 5/2-619.1 (West 2020)). The crux of defendants’ motions was that
plaintiffs’ claims were barred as untimely filed.
¶3 The trial court denied defendants’ motions but, on its own motion, certified the
following questions to this court for interlocutory review under Illinois Supreme Court Rule 308
(eff. Oct. 1, 2019):
“a. What is the statute of limitations for claims of denial of
shareholder status or oppression of shareholder interests under
Section 12.56 of the [Business Corporation Act], as amended?
b. When does a claim for the denial of shareholder status or
oppression of shareholder interests under Section 12.56 of the
[Business Corporation Act] accrue for purposes of triggering the
statute of limitations? and
c. When does a claim for the conversion of corporate stock
accrue for purposes of triggering the statute of limitations under
735 ILCS 5/13-205?”
¶4 We answer two of the certified questions infra and remand for further
proceedings.
¶5 I. BACKGROUND
¶6 The “facts” that serve as the background for this appeal originate in the complaint
and its attachments. As of the certification of the above questions, no answer had been filed.
¶7 Harry G. Yetter and Etta Yetter, the maternal grandparents of the parties, founded
Yetter Manufacturing in 1955. Fourteen hundred shares of stock in Yetter Manufacturing were
issued. In this suit, 529 shares are involved. We note defendants in their appellant brief indicate
the number of shares may be 519.
¶8 Harry died in 1975, bequeathing 529 shares of Yetter Manufacturing to his son,
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Gaylord Yetter. Harry left to his daughter, Joan Whalen, the mother of the parties, a vested
remainder therein. In March 1980, Joan died testate. She predeceased Gaylord and their brother,
Lloyd Yetter. Lloyd, in November 1989, informed the defendants they should distribute the 529
shares equally among Joan’s five children. These children include the two plaintiffs, as well as
defendant Bernard and Patrick, whose estate is a defendant in this lawsuit. A third sister, Susan
Nichols, is not a party.
¶9 In 1990, because plaintiffs claimed an interest in those 529 shares, Patrick and
Bernard brought a declaratory action against plaintiffs and Nichols. Patrick and Bernard asserted
they were the owners of those 529 shares. They based this assertion on the terms of Joan’s will,
which is attached to the complaint. Unfortunately, the writing on Joan’s will that supports Patrick
and Bernard’s assertion appears to have been highlighted in the original, making the electronic
version unreadable. Due to the allegations in the action for declaratory judgment and the part of
Joan’s will that is discernible, it seems Joan left Patrick and Bernard the right to purchase her
“stock interest.” The part of the will that was not highlighted reads as follows, in part: “My
executor shall give notice of said right to buy to my sons within 14 days after his appointment to
office and my son or sons, as the case may be, shall have 30 days from receiving said notice to
accept in writing this option to purchase said stock interest and creditor’s claims.”
¶ 10 In the declaratory-judgment action, the parties, which included the three sisters,
moved for summary judgment. The trial court granted the summary-judgment motion to the
sisters and denied Patrick and Bernard’s motion based on the following:
“Contrary to the Plaintiff’s position[,] I find no ambiguity
in the will and four codicils of Harry Yetter as they [affect] the
rights of these parties to the shares in question. The will and the
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codicils created insofar as we are now concerned, a vested
remainder in Joan Whalen, which remainder was divested by her
failure to survive the life tenant Gaylord Yetter. Her bequest of the
right to purchase these shares to the Plaintiffs and their decision to
purchase, was likewise subject to the same possibility of
divestiture and when Joan died before Gaylord, divestiture
occurred. Therefore, Bernard and Patrick Whalen lost the benefit
of the purchase of her remainder interest in these shares upon her
premature demise.”
¶ 11 In their complaint, plaintiffs asserted, since the January 1992 ruling, defendants
refused to acknowledge their interests in the 529 shares. No stock certificates were given to
plaintiffs. No notices of shareholder meetings or votes were provided to plaintiffs. Plaintiffs had
not received any financial benefits from those shares. Plaintiffs maintained they requested
financial statements from Yetter Manufacturing multiple times in 1992 and defendants refused to
provide that information. Plaintiffs asserted they “were at all relevant times stated herein, and
still are, shareholders of [Yetter Manufacturing].” Plaintiffs maintained the directors of other
shareholders acted in a manner that was oppressive, illegal, and fraudulent toward plaintiffs.
Among the conduct plaintiffs challenged were Yetter Manufacturing’s failure to (1) distribute
profits to shareholders in a timely manner, (2) allocate profits among its shareholders from 1987
to the present, (3) make corporate records available from 1987 to the present, (4) exercise
reasonable care in the management of Yetter Manufacturing, and (5) notify plaintiffs of
meetings. Plaintiffs also alleged Yetter Manufacturing denied plaintiffs’ shareholder interest and,
as a result, they have been oppressed. Plaintiffs seek a full accounting, a custodian to manage the
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business and affairs of Yetter Manufacturing, compensatory damages, litigation costs, and other
just and equitable relief.
¶ 12 In their section 2-619(a) motions to dismiss (735 ILCS 5/2-619(a) (West 2020)),
defendants argued plaintiffs’ claims are barred by the five-year statute of limitations under
section 13-205 of the Code of Civil Procedure (id. § 13-205 (West 2020)). Defendants pointed to
the allegations in the complaint showing plaintiffs knew of these alleged claims by 1992.
Plaintiffs countered by arguing the general five-year statute of limitations of section 13-205 does
not apply to claims brought under section 12.56 (805 ILCS 5/12.56 (West 2020)).
¶ 13 At the hearing on defendants’ motions, the court denied the motions, finding the
claims not time-barred. The court stressed, “the events that are being alleged to have occurred
that were the triggering [event] were the 2018 event where the stockholders were left out of the
ownership materials.”
¶ 14 In July 2022, the trial court entered a written order. In its order, the court observed
the parties agreed a five-year statute of limitations applied to actions for conversion of corporate
stock. The court summarized plaintiffs’ argument regarding conversion as it “would not accrue
until the Defendant expressly claimed ownership of Plaintiff’s corporate stock.” The court stated
it found no binding precedent on whether the section 13-205 statute of limitations applied to
section 12.56 actions and for when a claim for conversion accrued for limitations purposes. The
court identified two “written orders” under Illinois Supreme Court Rule 23 (eff. Jan. 1, 2021)
that reached different results as to the applicable statute of limitations for section 12.56 actions:
Vizcarra v. LMR Home Healthcare, Inc., 2019 IL App (3d) 170713-U, and Burke v. McKernan,
2020 IL App (1st) 190318-U. The court found material questions of law on the aforementioned
issues and determined substantial grounds for difference of opinion regarding these matters
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existed. The court, on its own motion, certified the above questions for appeal.
¶ 15 In September 2022, this court allowed the application for leave to appeal under
Rule 308.
¶ 16 II. ANALYSIS
¶ 17 A. Rule 308
¶ 18 Rule 308 provides a means for parties to obtain interlocutory review of an order
not otherwise appealable. See Ill. S. Ct. R. 308(a) (eff. Oct. 1, 2019). To obtain relief under Rule
308, the order involved must involve “a question of law as to which there is substantial ground
for difference of opinion” and “an immediate appeal from the order may materially advance the
ultimate termination of the litigation.” Id. When an interlocutory appeal is brought under Rule
308, our review is limited to the certified question or questions presented. Spears v. Ass’n of
Illinois Electric Cooperatives, 2013 IL App (4th) 120289, ¶ 15, 986 N.E.2d 216. Only if the
certified question presents a question of law will this court answer that question. Id. When the
ultimate resolution of the question turns on the resolution of factual predicates, we will not
answer it. See id.¶ 19 B. Question A
¶ 20 The first question certified to the court is the following: “What is the statute of
limitations for claims of denial of shareholder status or oppression of shareholder interests under
Section 12.56 of the [Business Corporation Act], as amended?”
¶ 21 Plaintiffs assert, under section 12.56, an oppression-of-shareholder-interests claim
is timely when said claim is initiated by a shareholder in the corporation. According to plaintiffs,
no matter the circumstances of the oppression or when the oppression began, there is no claim by
a shareholder of that corporation for oppression under section 12.56 that is untimely. Plaintiffs
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further contend, under section 12.80 of the Business Corporation Act (805 ILCS 5/12.80 (West
2020)), shareholder claims of oppression even extend to five years after the corporation’s
dissolution. In support, plaintiffs rely on two cases: Gidwitz v. Lanzit Corrugated Box Co., 20 Ill.
2d 208, 220 (1960), and Vizcarra,.
¶ 22 Defendants counter, as there is no statute-of-limitations period provided for in
section 12.56 or otherwise in the Business Corporation Act, the catchall five-year statute of
limitations found in section 13-205 of the Code of Civil Procedure (735 ILCS 5/13-205 (West
2020)) applies. Defendants emphasize the Business Corporation Act expressly provides the
practice in an action under section 12.56 “shall be the same as in other civil actions except as
may be otherwise provided in this Act” (805 ILCS 5/12.60(a) (West 2020)) and section 13-205 is
found in the Code of Civil Procedure. Defendants argue plaintiffs’ position of an unlimited
limitations period “completely fl[ies] in the face of the purpose of the statute of limitations” to
avoid stale litigation. See generally Milnes Plumbing v. Hunt, 311 Ill. App. 3d 977, 981, 725
N.E.2d 779, 782 (2000) (“Statutes of limitations are designed to prevent recovery on stale
demands,” providing “an opportunity to investigate factors upon which liability is based while
the evidence is still discoverable.”).
¶ 23 We note both parties cite competing written orders, as opposed to opinions, on the
applicable statute of limitations from the First and Third Districts of the Illinois Appellate Court:
Vizcarra and Burke. While we acknowledge the trial court pointed to these cases as evidencing
the absence of a conclusive decision on the matter of what limitations period applies, the parties’
reliance on these cases in this appeal as persuasive authority is prohibited by supreme court rule.
Specifically, Rule 23 bars a party’s use of written orders under Rule 23(b) for persuasive or
precedential purposes unless they fall within those cases identified in section (e)(1) of Rule 23:
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“An order entered under subpart (b) or (c) of this rule is not
precedential except to support contentions of double jeopardy,
res judicata, collateral estoppel, or law of the case. However, a
nonprecedential order entered under subpart (b) of this rule on or
after January 1, 2021, may be cited for persuasive purposes.” Ill. S.
Ct. R. 23(e)(1) (eff. Jan. 1, 2021).
As both cases precede January 1, 2021, the parties were not authorized to cite them for
persuasive or precedential purposes. We will not, therefore, consider their analyses or
conclusions to answer the certified questions presented in this appeal.
¶ 24 The resolution of the question as to the applicable statute of limitations turns on
the terms of statutory provisions of the Code of Civil Procedure and Business Corporation Act.
In matters of statutory interpretation, our review is de novo. Marsh v. Sandstone North, LLC,
2020 IL App (4th) 190314, ¶ 63, 179 N.E.3d 402. When tasked with interpreting a statute, our
main goal is to ascertain and give effect to legislative intent. Id. The most reliable indicator of
that intent is the statute’s language, to which we give its plain and ordinary meaning. Id. (citing
Van Dyke v. White, 2019 IL 121452, ¶ 46, 131 N.E.3d 511). When the language of the statute is
clear and unambiguous, we must give the statute the effect as written and not resort to other aids
of statutory construction. Thomann v. Department of State Police, 2016 IL App (4th) 150936,
¶ 25, 66 N.E.3d 834.
¶ 25 Section 13-205, oft referred to as a “catchall limitations period” (see, e.g., Tims v.
Black Horse Carriers, Inc., 2023 IL 127801, ¶ 21) provides the following:
“Except as provided in Section 2-725 of the ‘Uniform Commercial
Code’ [(810 ILCS 5/2-725 (West 2018))], approved July 31, 1961,
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as amended, and Section 11-13 of ‘The Illinois Public Aid
Code’[(305 ILCS 5/11-13 (West 2018))], approved April 11, 1967,
as amended, actions on unwritten contracts, expressed or implied,
or on awards of arbitration, or to recover damages for an injury
done to property, real or personal, or to recover the possession of
personal property or damages for the detention or conversion
thereof, and all civil actions not otherwise provided for, shall be
commenced within 5 years next after the cause of action accrued.”
735 ILCS 5/13-205 (West 2020).
The language of section 13-205 plainly does not expressly exclude actions under
the Business Corporation Act.
¶ 26 Three Business Corporation Act provisions relied on by the parties are section
12.56, section 12.60, and section 12.80. Section 12.56 is the basis for plaintiffs’ shareholder-
remedies claim. It is lengthy, but the relevant portion of that section states the following:
“(a) In an action by a shareholder in a corporation that has
no shares listed on a national securities exchange ***, the Circuit
Court may order one or more of the remedies listed in subsection
(b) if it is established that:
***
(3) The directors or those in control of the
corporation have acted, are acting, or will act in a manner
that is illegal, oppressive, or fraudulent with respect to the
petitioning shareholder whether in his or her capacity as a
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shareholder, director, or officer[.]” 805 ILCS 5/12.56(a)(3)
(West 2020).
No language within section 12.56 sets a limitations period for claims brought under its
provisions.
¶ 27 Section 12.60(a), relied upon by defendants, provides, “[t]he practice in actions
under Section[ ] *** 12.56 shall be the same as in other civil actions except as may be otherwise
provided in this Act.” Id. § 12.60(a). Section 12.80 states the following, in part:
“The dissolution of a corporation *** shall not take away nor impair any
civil remedy available to or against such corporation, its directors, or
shareholders, for any right or claim existing *** either prior to, at the time
of, or after such dissolution if action or other proceeding thereon is
commenced within five years after the date of such dissolution.” Id.
§ 12.80.
The last sentence further states, “This provision does not extend any applicable statute of
limitations.” Id.
¶ 28 The plain and ordinary meaning of the words in the statutory provisions reveal the
legislature intended the catchall provision of section 13-205 of the Code of Civil Procedure to
apply to claims filed under section 12.56 of the Business Corporation Act. Section 12.60(a)
indicates section 12.56 claims are civil actions to which the civil practice rules apply. Id.
§ 12.60(a). No other provision creating a different statute of limitations is identified by the
parties. While plaintiffs stress specific statutory provisions control over general ones (see LLC 1
05333303020 v. Gil, 2020 IL App (1st) 191225, ¶ 23, 186 N.E.3d 904), plaintiffs have provided
no specific statutory provision that renders section 13-205’s catchall limitations period
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inapplicable. Plaintiffs, by arguing sections 12.56 and 12.80 permit shareholders to bring such
action until five years after the dissolution of the corporation, appear to confuse the issue of
when a statute of limitations accrues and expires with the issue of which statute of limitations, if
any, applies.
¶ 29 We further find plaintiffs’ reliance on Gidwitz is misplaced. Plaintiffs contend
Gidwitz establishes an oppressed shareholder may seek a judicial remedy at any time while the
oppression continues. See Gidwitz, 20 Ill. 2d at 220. Gidwitz, however, is not a
statute-of-limitations case. Facts relevant to a statute-of-limitations claim are therefore
underdeveloped. See, e.g., id. at 210 (not specifying the date on which the suit was filed).
Moreover, the language emphasized by plaintiff, “when oppression is positively shown, the
oppressed are entitled to the protection of law,” does not follow a limitations argument but the
statement, “Corporate dissolution is a drastic remedy that must not be lightly invoked.” Id. at
220-21. Gidwitz does not support plaintiffs’ position there is no statute of limitations for claims
of shareholder oppression.
¶ 30 C. Question B
¶ 31 The second certified question to this court is as follows: “When does a claim for
the denial of shareholder status or oppression of shareholder interests under Section 12.56 of the
[Business Corporation Act] accrue for purposes of triggering the statute of limitations?”
¶ 32 Plaintiffs proposes the following answer:
“A claim for denial of shareholder status cannot begin to
accrue prior to the date shares owned by the shareholder are
actually taken from the shareholder, and any applicable statute of
limitations would begin to run only after (1) the shareholder’s
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shares were voided and/or reissued to another, and (2) the injured
party knows, or reasonably should have known, their shares in the
corporation were no longer in their possession and knows or
reasonably should know to inquire further.”
Plaintiffs thus assert, before a claim under section 12.56 may accrue, there must have been some
action to divest them of their shares. In addition, they maintain, each time a violation occurs,
there is a separate cause of action for violation of the statute. Plaintiffs’ only authority in support
of this claim is One Fish Two Fish, LLC v. Struif, 2021 IL App (1st) 191441, ¶¶ 47-48, which
plaintiffs rely upon to show the fact a shareholder did not receive distributions did not, as a
matter of law, mean the shareholder was divested of her ownership interest.
¶ 33 In the alternative, defendants propose the answer is as follows:
“[T]he statute of limitations begins to accrue under Section
12.56 of the [Business Corporation Act] when the shareholder has
enough information to alert the shareholder that his or her
shareholder interests or rights are not being recognized or state
alternatively, when the shareholder reasonably should know that
his or her shareholder interests or rights are not being recognized.”
Defendants cite the written order Burke, which we referenced above and found we would not
consider as such consideration was not authorized by Rule 23. Defendants further cite decisions
from other jurisdictions in which alleged-shareholder claims were deemed untimely on summary
judgment as those plaintiffs were on “inquiry notice” their status as shareholders was not
recognized. See Whitney v. Guys, Inc., 826 F.3d 1074, 1078 (8th Cir. 2016) (“Simply put, the
failure or refusal to honor shareholder rights, when clearly known by the purported shareholder,
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suffices to create inquiry notice.”); Egner v. Talbot’s, Inc., 214 P.3d 272, 280-82 (Alaska 2009);
Eluv Holdings (BVI) Ltd. v. Dotomi, LLC, No. 6897-VCP, 2013 WL 1200273, at *7, 10, 13 (Del.
Ch. Mar. 26, 2013).
¶ 34 As we found above, a five-year statute of limitations applies to claims under
section 12.56. The strict application of a statute of limitations can, at times, result in a harsh
result when the injury or wrongdoing was later discovered. In certain circumstances, to avoid
such harsh results, Illinois courts have applied the discovery rule. American Family Mutual
Insurance Co. v. Krop, 2018 IL 122556, ¶ 21, 120 N.E.3d 982. Under this rule, the start of the
limitations period is delayed until the claimant knew or reasonably should have known of the
injury and the injury was caused wrongfully. Id. When an “injured person becomes possessed of
sufficient information concerning his injury and its cause to put a reasonable person on inquiry to
determine whether actionable conduct is involved,” it is at that point “the running of the
limitations period commences.” Knox College v. Celotex Corp., 88 Ill. 2d 407, 416, 430 N.E.2d
976, 980-81 (1982).
¶ 35 Defendants contend, and we agree, the discovery rule applies to claims of a denial
of shareholder status and shareholder oppression. We find persuasive the authorities relied upon
by defendants that have applied the discovery rule to shareholder disputes. See Whitney, 826
F.3d at 1078; Egner, 214 P.3d at 282. We, therefore, answer the second question accordingly: a
claim for the denial of shareholder status or oppression of shareholder interests under section
12.56 of the Business Corporation Act accrues for purposes of triggering the statute of
limitations when the claimant knew or reasonably should have known his or her shareholder
rights were denied or had been oppressed and the denial or oppression was wrongfully caused.
¶ 36 We do not find persuasive plaintiffs’ argument they must be divested of their
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shares before the statute of limitations begins to run. A dispute of shareholder status or
oppression can occur without a divestiture of the claimant’s shares. In fact, plaintiffs’ claims
recognize as much. Plaintiffs assert in their complaint they were and are shareholders of Yetter
Manufacturing and their shareholder interest has been denied and therefore oppressed.
¶ 37 D. Question C
¶ 38 The third question certified to this court is the following: “When does a claim for
the conversion of corporate stock accrue for purposes of triggering the statute of limitations
under 735 ILCS 5/13-205?”
¶ 39 Plaintiffs urge this court not to answer the third question. Plaintiffs contend
defendants presented no evidence to show the conversion occurred before 2018 and, thus, under
the five-year limitations period, the question of whether that term expired is irrelevant. In the
alternative, plaintiffs propose the following answer: “[A] claim for conversion cannot begin to
accrue prior to the date the property was actually converted, and the five-year statute of
limitations begins to run only after (1) the property is converted and (2) the injured party knows,
or reasonably should have known, the property was converted, and knows or reasonably should
know to inquire further.”
¶ 40 Defendants argue the proper answer is the following: “[T]he statute of limitations
for a claim of the conversion of corporate stock begins to accrue under [section 13-205] when the
plaintiffs have inquiry notice that the defendants are failing to honor the plaintiffs’ shareholder
rights.”
¶ 41 Both proposed answers are problematic. Plaintiffs’ use of the term “actually
converted,” particularly when considered with their argument of the lack of evidence of an
“actual conversion,” implies a conversion of corporate stock cannot accrue until there has been
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an outward declaration of the transfer of ownership. That is not what the law requires, and
plaintiffs have cited no authority to establish otherwise. Rather, case law shows “[c]onversion
may be based on an exercise of control in a manner inconsistent with plaintiff’s right of
possession.” Connelly v. Estate of Dooley, 96 Ill. App. 3d 1077, 1082, 433 N.E.2d 143, 147
(1981).
¶ 42 Defendants’ proposal is unconvincing as it expands the question beyond what was
asked. There is not simply one means by which a conversion of corporate shares can occur. The
certified question to this court was not whether a claim for conversion accrues when the
plaintiffs have inquiry notice that the defendants are failing to honor the plaintiffs’ shareholder
rights. Instead, the question asked by the trial court broadly asks when a conversion of corporate
shares accrues.
¶ 43 Because plaintiffs suggest we not answer the question and defendant’s answer is
not responsive to the question without a consideration of the facts of the case, we decline to
answer it. Any answer would be necessarily overbroad and not necessarily helpful to the
termination of the parties’ litigation.
¶ 44 III. CONCLUSION
¶ 45 We answer two of the certified questions and remand for further proceedings.
¶ 46 Certified questions answered; cause remanded.
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Thompson v. Whalen, 2023 IL App (4th) 220668Decision Under Review: Appeal from the Circuit Court of McDonough County, No. 21-LL-
13; the Hon. Raymond A. Cavanaugh, Judge, presiding.
Attorneys Christopher J. Jump, and David G. Lubben, of Davis & Campbell
for L.L.C., of Peoria, and James R. Carey, and Peter B. Allport, of
Appellant: Levin Schreder & Carey Ltd., of Chicago, for appellants.
Attorneys Delmer R. Mitchell and Jonathan S. Hoover, of Schmiedeskamp
for Robertson Neu & Mitchell LLP, of Quincy, for appellees.
Appellee:
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