Justice O'MALLEY delivered the opinion of the court:
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
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.
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.
In January 1991,
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
Count X alleged that National Material was liable under the Consulting Agreement as the "successor" of PBS One. Specifically, plaintiff asserted:
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.
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.)
Article I is entitled "Purchase and Sale of Assets." Section 1.1 under article I is entitled "Agreement to Sell and Purchase" and states:
"Assets" is defined generally as "all the assets of Seller used or usable in connection with the Business." "Assets" specifically includes, inter alia,
Article II is entitled "Purchase Price and Payment Terms." Section 2.1 under article II is entitled "Purchase Price" and provides:
Under "Assumed Liabilities," the Purchase Agreement states: "Attached hereto as Schedule 3.1(t) is a correct list of Seller's liabilities as of March 31, 1988. The Seller's liabilities shall not exceed $200,000 of the liabilities listed on Schedule 3.1(t)." Schedule 3.1(t), entitled "Liabilities," states:
Under a section termed "Material Contracts," the Purchase Agreement states:
Among the contracts listed in schedule 3.1(m) is: "Consulting Agreement with Mr. Arthur Pielet dated December 23, 1986[,] providing for the payment of annual consulting fees of $130,000 for a term to end at the later to occur of the death of Arthur Pielet or his wife."
James and Tang also signed an "Assignment and Assumption Agreement" (Assignment Agreement), which identifies Pielet Corp. as "Assignor" and PBS One as "Assignee" and states:
Finally, the Assignment Agreement states that it shall "inure to the benefit of and bind the parties hereto and their respective successors and assigns."
The third of the three major documents signed by James and Tang on April 12, 1988, was a limited partnership agreement forming Pielet LP (Partnership Agreement). The Partnership Agreement specifies that, in exchange for their capital contributions, PBS One and Pielet Corp. each received a participating percentage of 49.5% and was made a limited partner.
Also on April 12, 1988, Tang sent a letter to Pielet Corp. stating:
(The trial court's statement of undisputed facts states: "[B]oth Pielet Corp. and PBS One conveyed their respective one-half interests to [Pielet LP] in exchange for a 49.5% limited partnership interest in that entity." Although the parties agree that this occurred, we have found no document in the record that purports to effect that transfer.)
Attorney Michael Zavis's law firm represented Pielet Corp. in connection with the formation of Pielet LP in April 1988. In a February 22, 1999, affidavit, Zavis described the two-step process by which Pielet LP was created:
Zavis described a conversation he had with Arthur before the April 1988 restructuring occurred:
At his September 21, 1999, deposition, Zavis was asked about the April 1988 formation of Pielet LP and about his conversations with Arthur and plaintiff beforehand:
On December 31, 1990, Tang signed a document with three sections: "Assignment," "Assumption," and "Consent," each with separate signatures (Assumption Agreement). Under the "Assignment" section, the document states:
Tang signed this section as president of PBS One.
Under the "Assumption" section, the Assumption Agreement states:
Tang signed this section as president of C.T. One (CT One), whose sole shareholder was Tang. CT One was the general partner of National Material. CT One controlled National Material. (CT One would later change its name to NM Holding.)
The third and final section of the Assumption Agreement, entitled "Consent," recited that PT Enterprises consented to the assignment and assumption. The section was signed by Tang as well. At his
In 1993, Tang purchased James' entire interest in Pielet LP. James then formed J.P. Investments. After James withdrew from Pielet LP, Tang restructured. On December 1, 1993, he signed an amendment to the Partnership Agreement. The document recited that Pielet LP had been renamed Midwest Metallics. The amendment provided that National Material was "successor" to PBS One, and M.T. Two, Inc., "successor" to Pielet Corp., under the Partnership Agreement. The amendment also recited that PT Enterprises had changed its name to S.D. Metals, Inc.
In 1994, Tang decided to have PBS One legally dissolved. In June 1994, PBS One was dissolved by the Illinois Secretary of State. At his deposition, Tang explained his decision to have PBS One dissolved:
Also in 1994, CT One changed its name to NM Holding but Tang remained sole shareholder.
After its creation, Pielet LP made payments to Arthur under the Consulting Agreement. After Pielet LP was renamed Midwest Metallics, Arthur continued to receive payments under the Consulting Agreement. In July 1998, Midwest Metallics ceased operations and stopped making payments under the Consulting Agreement. No payments have been made since July 1998. Arthur died in 1999. Also in 1999, Midwest Metallics filed for bankruptcy.
Plaintiff argued that PBS One was liable under the Consulting Agreement as a matter of law because PBS One expressly assumed Pielet Corp.'s liability under the Consulting Agreement when PBS One entered into the Purchase Agreement and Assignment Agreement with Pielet Corp. In response, PBS One and Tang
PBS One and Tang alternatively argued that, even if liability for the Consulting Agreement did pass to PBS One, plaintiff's claim still failed as a matter of law. PBS One and Tang noted that PBS One dissolved in 1994, four years before payments under the Consulting Agreement ceased. PBS One and Tang argued that, though section 12.80 of the Business Corporation Act of 1983 (805 ILCS 5/12.80 (West 2008)) (the Survival Statute) preserves certain claims against dissolved corporations, that section did not save plaintiff's claim. The Survival Statute provides:
Citing authorities suggesting that the Survival Statute preserves only causes of action that accrue before the corporation's dissolution, PBS One and Tang maintained that, since PBS One dissolved in 1994 and plaintiff's cause of action did not accrue until July 1998 when payments under the Consulting Agreement ceased, the Survival Statute did not preserve plaintiff's claim. PBS One and Tang further argued that none of PBS One's actions before it dissolved could be deemed the proximate cause of the later breach.
On the claims against National Material and NM Holding, plaintiff argued that they were liable as a matter of law under the Consulting Agreement because, when National Material signed the Assumption Agreement, it expressly assumed all "obligations" of PBS One, which, plaintiff suggested, naturally included the Consulting Agreement. Further, plaintiff argued that, even apart from the express assumption of liabilities, National Material and NM Holding were liable under principles of successor liability because (1) National Material "was merely a continuation of [PBS One]"; (2) the Assumption Agreement effected a "de facto merger or consolidation of [PBS One] and National Material"; and (3) the transaction "was carried out for the fraudulent purpose of evading liability for [PBS One's] debts."
On the breach-of-contract claim, National Material and NM Holding asserted that the Assumption Agreement made "no reference whatsoever to the Consulting Agreement, [Arthur], [plaintiff], or the general obligations of [PBS]" but by its express terms conveyed to National Material only a limited partnership interest in Pielet LP. Since in Illinois a limited partner is generally not responsible for the obligations of the partnership beyond the amount of the partner's investment, National Material could not be held liable under the Consulting Agreement, which was Pielet LP's obligation.
As for the claim of successor liability, National Material and NM Holding argued that the "mere continuation" argument
On August 3, 2006, the trial court entered a written order holding that plaintiff was entitled to summary judgment against PBS One, National Material, and NM Holding on counts IX through XI. The court found as a threshold matter that the Consulting Agreement was valid. The court next found that PBS One expressly assumed Pielet Corp.'s obligations under the Consulting Agreement. The court held that the Survival Statute
The court rejected PBS One's novation argument:
Finally, though count XI named only PBS One, the court said regarding Tang himself:
The court disposed as follows of the motions regarding count XI against PBS One:
As to National Material and NM Holding, the court found the breach-of-contract claim (count IX) subsumed by the successor-liability claim (count X):
The trial court found that exceptions (1) and (3) were met here. Exception (3) was met because "National Material was merely a continuation of [PBS One]." The court explained:
The court constructed this chart to show the commonality of ownership and control among the various entities:
------------------------------------------------------------Entity Tang's Relationship ------------------------------------------------------------ PT Enterprises "Controlling shareholder" ------------------------------------------------------------ PBS One "Sole shareholder and director" ------------------------------------------------------------ Pielet LP "Controlling shareholder by virtue of his 51% stake in PT Enterprises, which was [Pielet LP's] general partner, and his (via PBS One's) 49.5% stake in [Pielet LP]" ------------------------------------------------------------ NM Holding "Sole shareholder" ------------------------------------------------------------ National Material "Controlling shareholder by virtue of his control of NM Holding, which is National Material's general partner, possessing a 1% interest; Tang is also the Chairman and President of Tang Industries, which possesses the remaining 99% limited partnership interest in National Material." ------------------------------------------------------------
Responding to National Material and NM Holding's arguments, the court observed that the "mere continuation" exception to the general bar on successor liability does not require that "any particular business operation continue as it did before," and hence, the fact that PBS One was simply a holding company was immaterial as long as its "role as a holding company was continued by National Material." The court also rejected the contention that the "mere continuation" exception requires a court to "find an intent to defraud," as there is a separate exception for fraud.
The court then held that exception (4), the fraud exception, was not met here as a matter of law:
"Finally," the court noted, "it is necessary to return to * * * whether the [Assumption Agreement] constitutes an assumption by National Material of the Consulting Agreement." The court went on:
The court turned again to count IX and held, based on the Assumption Agreement, that National Material and NM Holding were liable not only for breach of contract (count IX) but also under successor liability based on implied or express assumption (count X). The court did not address plaintiff's remaining contention that there was successor liability because PBS One merged with National Material.
On August 2, 2007, the trial court set damages in the amounts of (1) $1,180,832.97, representing 109 outstanding payments under the Consulting Agreement of $10,833.33 each; and (2) $268,275.63 in prejudgment interest. The court assessed these damages "jointly and severally" against "each Defendant found liable on summary judgment under the respective Count or Counts against it."
Summary judgment is proper where "the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." 735 ILCS 5/2-1005(c) (West 2008). In considering a motion for summary judgment, the court must view the record in the light most favorable to the nonmoving party. Land v. Board of Education, 202 Ill.2d 414, 433, 269 Ill.Dec. 452, 781 N.E.2d 249 (2002). "Although summary judgment aids in the expeditious disposition of a lawsuit, it is a drastic measure and should be granted only if the moving party's right
We begin with PBS One and Tang's arguments in favor of reversing the trial court's judgment on count XI. As an initial matter, we note that PBS One and Tang do not argue that PBS One never assumed an obligation under the Consulting Agreement
The reason we stress what PBS One and Tang have not argued is that, in their briefs in appeal No. 2-02-0242, National Material and NM Holding state: "[I]f this Court deems PBS One not contractually liable to the plaintiff under the [Consulting Agreement], then National Material and NM Holding would have no successor corporate responsibility." This would depend on why we deemed "PBS One not contractually liable." If we held that PBS One was never obligated under the Consulting Agreement, then a fortiori National Material and NM Holding would have incurred no duties under the Consulting Agreement when the Assumption Agreement between PBS One and National Material was signed in December 1990. PBS One and Tang, however, do not ask us to determine whether PBS One was bound in the first instance. Essentially, their argument is, whatever obligations PBS One may have had under the Consulting Agreement prior to its dissolution in 1994, PBS One was not liable for the cessation of payments in 1998, several years after PBS One dissolved. We resolve that issue by assuming, without deciding, that PBS One assumed Pielet Corp.'s obligations under the Consulting Agreement in April 1988. Of the points that PBS One and Tang do argue, only the novation argument would also bear upon the liability of National Material and NM Holding. We could accept the Survival Statute argument yet hold National Material liable because the transfer to it (in 1990) occurred before PBS One's dissolution (in 1994).
We address first PBS One and Tang's argument that the trial court misconstrued
PBS One and Tang argue that the Survival Statute is more properly construed as preserving only causes of action that accrue prior to the dissolution of the corporation. Plaintiff agrees that her cause of action did not accrue until after PBS One dissolved, but asserts that it is enough for the Survival Statute that PBS One had an "existing liability" under the Consulting Agreement before PBS One was dissolved. The parties present us with a question of statutory interpretation, which, like a challenge to the grant or denial of a motion for summary judgment, is a question of law to be reviewed de novo. In re Estate of Gagliardo, 391 Ill.App.3d 343, 346, 330 Ill.Dec. 398, 908 N.E.2d 1056 (2009).
The fundamental goal for a court interpreting a statute is to give effect to the legislature's intent, and the best indicator of that intent is the statute's language, given its plain and commonly understood meaning. Gagliardo, 391 Ill. App.3d at 346, 330 Ill.Dec. 398, 908 N.E.2d 1056. The operative language of the Survival Statute, which as noted allows the survival of "any right or claim existing, or any liability incurred" prior to a corporation's dissolution (805 ILCS 5/12.80 (West 2008)), largely forecloses PBS One and Tang's position that the statute applies only to "causes of action" that accrue prior to dissolution. That the legislature stated that the Survival Statute applies to save any right "or" claim "or" any liability incurred prior to dissolution compels the inference that the legislature intended those terms to be viewed in the alternative. See Webb v. County of Cook, 275 Ill.App.3d 674, 678, 211 Ill.Dec. 893, 656 N.E.2d 85 (1995) (interpreting legislature's use of the word "or"). Indeed, any other interpretation would have the unsavory effect of rendering superfluous much of the quoted statutory language, so that a list of three items would be understood to refer to but one situation. We cannot conclude that the legislature intended such a redundancy. See Bonaguro v. County Officers Electoral Board, 158 Ill.2d 391, 397, 199 Ill.Dec. 659, 634 N.E.2d 712 (1994) ("Statutes should be construed, if possible, so that no term is rendered superfluous or meaningless"). Instead, we must conclude that the legislature intended the Survival Statute to apply to preserve corporate obligations of three distinct types: "claims," "rights," and "liabilities."
To support their argument that the reach of the Survival Statute should be limited to causes of action that accrued prior to dissolution, and not to rights or liabilities existing prior to dissolution but not abridged until after dissolution, PBS One and Tang direct us to several court decisions applying the Survival Statute. All of those cases, however, describe the Survival Statute's application to causes of action. As the trial court noted, regardless of whether plaintiff's "cause of action" accrued after PBS One's dissolution, a "right" to payment (or PBS One's "liability" to pay) under the Consulting Agreement existed prior to the dissolution.
Our interpretation fits squarely with the purpose of the Survival Statute. The Survival Statute, and statutes like it in several other states (see 19 Am.Jur.2d Corporations § 2418, at 514 (2004) (corporate survival statutes have been enacted "in virtually all jurisdictions")), are a response to the common-law rule that a corporation's dissolution immediately terminated its legal existence (Blankenship, 89 Ill.App.3d at 572, 44 Ill.Dec. 787, 411 N.E.2d 1153), just as a death would end a natural person's legal existence (J. Belcastro, Post-Dissolution Rights of Corporations: What Survives the Survival Statute?, 89 Ill. B.J. 120, 121 (March 2001) (hereinafter Belcastro)). Under the common-law rule, "[o]nce dissolved, [a] corporation could neither sue nor be sued, and even pending proceedings were abated." Blankenship, 89 Ill.App.3d at 572, 44 Ill.Dec. 787, 411 N.E.2d 1153; see also Poliquin v. Sapp, 72 Ill.App.3d 477, 481, 28 Ill.Dec. 615, 390 N.E.2d 974 ("At common law, a corporation's capacity to sue and be sued terminated when the corporation was legally dissolved"); Belcastro, 89 Ill. B.J. at 121 ("Dissolution utterly destroyed the right to pursue legal proceedings by or against the corporation such that even pending proceedings spontaneously abated"). The consequences of this rule were harsh for corporate creditors and shareholders alike. Belcastro, 89 Ill. B.J. at 121 ("Overwhelmingly, the detrimental impact of the abrupt termination of a corporation's life fell upon the corporation's creditors and shareholders"); cf. 19 Am.Jur.2d Corporations § 2418, at 514 (2004) (statutes allowing winding up of corporate affairs were enacted to "protect the creditors and stockholders * * * in the process of liquidation"). For creditors, a corporation's dissolution left them suddenly with no recourse to satisfy their claims, as all corporate debt was extinguished upon the termination of the corporate existence. 19 Am.Jur.2d Corporations § 2419, at 516 (2004). For shareholders, a corporation's dissolution left them with no means to pursue a corporation's personal property, which escheated to the State, or its real property, which devolved to the grantors. Consolidated Coal Co. v. Flynn Coal Co., 274 Ill.App. 405, 411 (1934) ("There is no dispute that by the common law doctrine of the status of a corporation after its dissolution for any cause, the corporation has no legal existence, and the real estate held by [it] reverts to the grantors or donors, and the personal property escheats to the king, and that no right of action can be maintained to enforce a
The first solution to this problem came via the equitable theory known as the trust fund doctrine. 19 Am.Jur.2d Corporations § 2419, at 515 (2004); see Blankenship, 89 Ill.App.3d at 572, 44 Ill.Dec. 787, 411 N.E.2d 1153 ("[t]he trust fund doctrine was promulgated by the equity courts to protect creditors when dissolution occurs"). Under this theory, "notwithstanding the dissolution of [a] corporation, its assets belong to [its shareholders], and are treated in equity as a trust fund, to be administered for the benefit of the bona fide holders of stock, subject to the just claims of creditors of the corporation." Wheeler v. Pullman Iron & Steel Co., 143 Ill. 197, 204, 32 N.E. 420 (1892). This trust fund doctrine supplanted the old common-law rule. See Gulf Lines Connecting R.R. of Illinois v. Golconda Northern Ry., 290 Ill. 384, 392, 125 N.E. 357 (1919) ("[e]ven in case of a dissolution of a corporation, the common law doctrine that upon such dissolution there remains no owner of the property is obsolete, and the assets of the corporation will be administered, subject to the rights of creditors, for the benefit of the stockholders"), citing Wheeler, 143 Ill. 197, 32 N.E. 420.
Corporate survival statutes, such as the Survival Statute at issue here, represent another, more comprehensive part of the solution to the problem of sudden corporate dissolution. See Consolidated Coal Co., 274 Ill.App. at 411 ("this common law doctrine has been so modified that the property of a dissolved corporation is to be used for the benefit of the creditors and stockholders after dissolution, and generally, by a saving clause, stockholders or creditors may maintain an action for that purpose, and in order to maintain an action it must be filed within the time fixed for such purpose"); Consolidated Coal Co., 274 Ill.App. at 409 (quoting Ill.Rev.Stat. 1929, ch. 32, par. 79, a precursor to the Survival Statute).
The Survival Statute does several things to change the common-law rule. First, "[o]ne of the main purposes of the survival statute is to extend the life of a corporation for [the statutory period] following dissolution so that suits which ordinarily would have abated may be brought by and against the corporation." Blankenship, 89 Ill.App.3d at 574, 44 Ill.Dec. 787, 411 N.E.2d 1153. At the same time, by setting a definite time after which a dissolved corporation will cease to exist, the Survival Statute avoids the problem of open-ended corporate liability that some authority had ascribed to the trust fund doctrine. See Blankenship, 89 Ill.App.3d at 574, 44 Ill.Dec. 787, 411 N.E.2d 1153 ("we believe that the survival statute reflects a legislative intent to establish a definite point in time when a corporation ceases to exist"); see also Moore v. Nick's Finer Foods, Inc., 121 Ill.App.3d 923, 925, 77 Ill.Dec. 364, 460 N.E.2d 420 (1984) ("the general policy behind the corporate dissolution statute is to set a definite point in time at which the existence of a corporation and the transaction of its business are terminated"). Thus, the Survival Statute defers the corporation's termination date and extends the life of a dissolved corporation so that it may wind up its affairs. 13 Ill. L. & Prac. § 350, at 626 (2000), citing In re Morris, 171 B.R. 999 (Bankr.S.D.Ill. 1993).
Once a corporation has been dissolved, and once the survival period has thus begun, the corporation may no longer "carry on any business except that necessary to wind up and liquidate its business and affairs." 805 ILCS 5/12.30 (West 2008). The corporation's activities during this "winding up" period are limited to those necessary to close the business, satisfy
A corporation's debts (and rights) extend into the survival period (19 Am.Jur.2d Corporations § 2450, at 538 (2004) ("Dissolution does not extinguish a corporation's debts")); indeed, as explained above, the policy favoring satisfaction of a dissolved corporation's outstanding debts is the very reason for the Survival Statute. Thus, since the corporation's debts and obligations persist into the survival period, and since the corporation continues to exist during the survival period, a corporation or its creditors may assert claims regarding those debts and obligations during the survival period. However, once the survival period has ended, the corporation ceases to exist. Since the corporation at that point no longer exists, it can no longer be subject to any claim, and any claims not raised against or by the corporation become forfeited.
This overview of the purpose of the Survival Statute, and the context that bore it, very clearly refutes PBS One and Tang's position that a party may recover from a dissolved corporation only if the party had a cause of action that accrued against the corporation before dissolution. The policy underlying the Survival Statute demonstrates that it was meant to preserve creditors' rights to collect on any outstanding corporate obligation, even if the corporation had not breached its obligation at the time of dissolution.
This overview also brings us into discord with one decision PBS One and Tang cite in their briefs. In Cornick v. Hi Grade Cleaners, Inc., 595 F.Supp. 718 (N.D.Ill. 1984), the plaintiff union trustees sought to recover from the defendant corporation for its failure to make scheduled pension and welfare plan payments for a six-month period in the two years following its dissolution. The plaintiffs argued that the Survival Statute permitted their claim, which they filed within the statutory period. The court rejected the plaintiffs' argument as follows:
Cornick's limited discussion of the Survival Statute indeed supports PBS One and Tang's view that the Survival Statute applies only to causes of action, and not to any rights or liabilities existing prior to dissolution. However, the cursory discussion also entirely overlooks the Survival Statute's language and its purpose, both of which extend the statute to allow recovery not just for accrued causes of action, but also for corporate debts and liabilities existing
Our reading of the purpose of the Survival Statute also puts us at odds with our decision in a case the parties do not cite, Henderson-Smith & Associates, Inc. v. Nahamani Family Service Center, Inc., 323 Ill.App.3d 15, 256 Ill.Dec. 488, 752 N.E.2d 33 (2001). In Henderson-Smith, the plaintiff corporation had entered into a contract with the defendant to perform accounting services, including year-end audits, for a specific fee. Henderson-Smith, 323 Ill.App.3d at 17, 256 Ill.Dec. 488, 752 N.E.2d 33. Approximately 17 months after the start of the contract, the plaintiff was administratively dissolved, but it continued to perform accounting services for the defendant. On appeal, we rejected the notion that the plaintiff's cause of action was preserved by the Survival Statute. Henderson-Smith, 323 Ill.App.3d at 20, 256 Ill.Dec. 488, 752 N.E.2d 33.
As in the Cornick decision, Henderson-Smith's discussion of the Survival Statute was quite limited. After quoting the statute, the court in Henderson-Smith devoted but one sentence to its application of the Survival Statute to the case at hand: "On the date that [the plaintiff] was dissolved the cause of action had not yet accrued and therefore there could not be a cause of action pending." Henderson-Smith, 323 Ill.App.3d at 20, 256 Ill.Dec. 488, 752 N.E.2d 33. To the extent the discussion in Henderson-Smith implies that the Survival Statute allows postdissolution claims only for causes of action that accrued before dissolution, and not for causes of action that accrued later based on rights or liabilities that existed prior to dissolution, we do not follow the decision. Instead, we agree with the trial court that the Survival Statute applies to rights and liabilities, not just causes of action, existing prior to a corporation's dissolution. Accordingly, we agree with the trial court that the Survival Statute allowed a cause of action based on the Consulting Agreement to be brought against PBS One within five years of PBS One's dissolution.
PBS One and Tang also argue that, even if Arthur's right to payment from PBS One could be enforced under the Survival Statute against PBS One, plaintiff's right to payment cannot be so enforced. To support this argument, PBS One and Tang assert that any right to payment plaintiff had was contingent—on her becoming Arthur's widow—at the time of PBS One's dissolution. Thus, PBS One and Tang reason, plaintiff had no existing right (nor PBS One any existing liability to her) when PBS One was dissolved, and PBS One's liability under the Consulting Agreement ended with Arthur's death. We disagree.
Even if we were to accept PBS One and Tang's position that plaintiff's right to payment from PBS One was contingent at the time of PBS One's dissolution, she possessed that contingent right (and PBS One had that contingent liability) at the time of PBS One's dissolution. After a corporation's dissolution, "[a] creditor whose claim is contingent is entitled to the same consideration and protection as a creditor whose claim is certain." 19 Am. Jur.2d Corporations § 2453, at 540 (2004). Thus, "[a]lthough it is not necessary for a corporation to satisfy its contingent liabilities upon dissolution, a corporation is required to make provision for the discharge of such liabilities before distributing its remaining assets to its shareholders." 19
PBS One and Tang also argue that PBS One cannot be held liable on the Consulting Agreement because their liability was not reasonably foreseeable. See, e.g., Cencula v. Keller, 180 Ill.App.3d 645, 650, 129 Ill.Dec. 409, 536 N.E.2d 93 (1989) (damages are recoverable for breach of contract only where they result naturally from the breach or are the consequence of circumstances within the parties' reasonable contemplation at the time of the contract). PBS One and Tang contend that the damages here were not foreseeable by PBS One because PBS One was never asked to pay under the Consulting Agreement and in fact was not an original party to the agreement. Neither of these assertions, however, affects the fact that the original parties to the agreement, which PBS One at one time took responsibility for, contemplated that Arthur and plaintiff would receive payment. The damages now asserted—the withheld payments— are the most natural and foreseeable consequences possible of a breach of the agreement. We therefore reject PBS One and Tang's foreseeability argument, and we move to their next argument.
The above discussions regarding the Survival Statute and foreseeability assume that PBS One retained the obligation to pay Arthur under the Consulting Agreement. However, PBS One and Tang also challenge the trial court's summary judgment ruling by arguing that the obligation passed from PBS One via a novation between Arthur and Pielet LP. PBS One and Tang observe that Michael Zavis's affidavit and deposition testimony show that he and Arthur understood that "upon the [1988] restructuring, Pielet Inc. [would be] effectively discharged from its obligations under the [Consulting Agreement], thereby obligating Pielet LP to substitute under the agreement." That understanding was borne out by subsequent events, claim PBS One and Tang, because payments under the Consulting Agreement came from Pielet LP and later from Midwest Metallics, and Arthur accepted them. PBS One and Tang argue that, "based * * * upon Arthur accepting payments without question for over 10 years from Pielet LP, a novation was effectuated, and PBS One was effectively never in [the] chain of assignment." PBS One and Tang contend that, if we do not find novation as a matter of law, we should at least conclude that material fact questions exist on the novation issue so as to preclude summary judgment in plaintiff's favor.
PBS One and Tang's exact argument on novation is somewhat difficult to pinpoint. At times, PBS One and Tang appear to argue that the novation occurred in April 1988 when Pielet LP was formed and that Arthur's acceptance of payments from Pielet LP and, later, Midwest Metallics was simply corroborative of Arthur's understanding in 1988, before the restructuring, that Pielet LP would substitute for Pielet Corp. An alternative construal, however, is that PBS One and Tang are arguing that Arthur's acceptance of payments from Pielet LP and Midwest Metallics effected the novation. As for their assertion that PBS One "was effectively never in [the] chain of assignment" (emphasis added), this would be the case only if the novation occurred before PBS One assumed a one-half interest in the obligations of Pielet Corp., but neither of the novation scenarios put forth by PBS One and Tang has the substitution occurring this early.
We disagree with the trial court that there is no genuine issue of material fact on the issue of novation. A triable fact question exists, we believe, on whether a novation occurred, either in April 1988 when Pielet LP was formed or later by virtue of Arthur's continued acceptance of payments from Pielet LP and Midwest Metallics.
We address first the possibility that the novation occurred in April 1988. The record is unclear as to the nature of the transactions in April 1988 between PBS One and Pielet Corp. on the one hand and Pielet LP on the other. A novation would require the assent of PBS One and Pielet Corp. as the original debtors or obligors. Alton Banking & Trust Co., 121 Ill.App.3d at 635, 77 Ill.Dec. 246, 460 N.E.2d 105 (original guarantor on bank loan did not consent to substitution of new guarantor). The trial court found it undisputed that "both Pielet Corp. and PBS One conveyed their respective one-half interests [in the assets and liabilities of Pielet Corp.] to [Pielet LP] in exchange for a 49.5% limited partnership interest in that entity." Just what this transfer effected is uncertain. Zavis, who represented Pielet Corp. in the April 1988 transactions, gave contradictory statements on whether Pielet LP substituted as obligor under the Consulting Agreement or simply accepted an assumption or assignment of liability under the Consulting Agreement. "An important distinction between an assignment, a delegation, and a novation is whether one of the original parties remains obligated
In his affidavit, Zavis stated that he told Arthur that Pielet LP "was assuming [Pielet Corp.'s] obligations under the Consulting Agreement" (emphasis added). As noted, an assumption or assignment leaves the original obligor liable for the obligation. In the same sentence, however, Zavis wrote that Pielet LP was "substituting itself for [Pielet Corp.]" (emphasis added). Zavis went on to assert "that [Pielet Corp.] would no longer be obligated to [Arthur] under the Consulting Agreement, and that [Pielet LP] would thereafter have such obligation." This is the language of novation. However, in his deposition, Zavis testified that, by the transfer of interests from Pielet Corp. and PBS One to Pielet LP, the former simply "assumed" the obligation under the Consulting Agreement and that Zavis never intended, nor was he asked, to secure a release from Pielet Corp. of its liability under the Consulting Agreement.
The remainder of the record does not settle whether the arrangement between Pielet Corp., PBS One, and Pielet LP was an assumption or a novation. In fact, we have found no document in the record that purports to effect the transfer of interests from Pielet Corp. and PBS One to Pielet LP. The only transfers the Partnership Agreement itself appears to contemplate are capital contributions of $6 million from each limited partner and $121,000 from the general partner. Indeed, the only document that appears to substantiate the transfer of interests is the April 12, 1988, letter from Tang to Pielet Corp. directing it, "[p]ursuant to the Partnership Agreement, * * * to transfer to the Partnership the undivided one-half (½) interest in and to all of the Company's Assets purchased by [PBS One]." "Assets," however, is not defined in the letter.
We note that, while Zavis apparently represented only Pielet Corp. in the April 1988 transactions, both his affidavit and deposition testimony mentioned that PBS One held a 50% undivided interest in the liabilities of Pielet Corp. Thus, his deposition testimony that the April 1988 transactions were not intended to release the "original entity," that is the original obligor, under the Consulting Agreement may reasonably be taken to apply to PBS One as co-obligor under the Consulting Agreement. Moreover, PBS One and Pielet Corp. are jointly mentioned in all documents that pertain to the formation of Pielet LP, and there is no reason to believe that PBS One was in a different posture after the April 1988 transactions than Pielet Corp. We conclude that there remains a material fact question whether the original obligors, Pielet Corp. and PBS One, intended a novation by the 1988 transactions.
There is also the question of Arthur's assent as creditor or obligee under the
Discounting the significance of Arthur's acceptance of payments from a source other than Pielet Corp. and PBS One, plaintiff points to the following principles:
While we agree with plaintiff that Arthur's acceptance of payments from Pielet LP does not establish a novation as a matter of law, we believe this conduct of Arthur, combined with Zavis's account of their meeting, raises a material question of fact as to whether Arthur assented to a novation in favor of PBS One and Pielet Corp. As we explain below, these considerations are equally relevant to the novation argument raised by National Material and NM Holding.
We also comment on PBS One and Tang's argument that the trial court erred by, as they claim, "declaring Cyrus Tang
The court really could do no more since it was plaintiff's responsibility to initiate proceedings against Tang if she wished, and she would have had to utilize the procedure under section 2-1402 of the Code of Civil Procedure (735 ILCS 5/2-1402 (West 2008)), which "provides a mechanism by which a judgment creditor may initiate supplemental proceedings to discover assets of a judgment debtor in the possession of a third party and apply those assets to satisfy the judgment." Tobias v. Lake Forest Partners, LLC, 402 Ill.App.3d 484, 488, 341 Ill.Dec. 860, 931 N.E.2d 757 (2010); see 134 Ill.2d R. 277(a) (supplementary proceedings under section 2-1402 "may be against a judgment debtor or any third party the judgment creditor believes has property of or is indebted to the judgment debtor"). Section 2-1402(a) provides that "[t]he procedure for conducting supplementary proceedings shall be prescribed by rules." 735 ILCS 5/2-1402(a) (West 2008). It is Supreme Court Rule 277 (134 Ill.2d R. 277) that "prescribes the procedure for implementation of the supplementary proceedings provided for in section 2-1402." Tobias, at 488, 341 Ill.Dec. 860, 931 N.E.2d 757. Rule 277(b) states that the "supplementary proceeding[s] shall be commenced by the service of a citation on the party against whom it is brought." 134 Ill.2d R. 277(b).
As PBS One and Tang note, no proceedings under section 2-1402 have been commenced against Tang, whom the trial court evidently believed was (for purposes of the judgment on count XI) a third party in whose possession might be the (former) assets of PBS One. To the extent that the trial court meant to enter a judgment against Tang pursuant to section 2-1402, that judgment was questionable because no citation was filed against Tang. Of course, since we hold that summary judgment for plaintiff and against PBS One on count XI was improper in any event, we need not reach any holding on the separate issue of Tang's liability.
To summarize, we hold that the Survival Statute preserves plaintiff's breach of contract claim against PBS One. Since, however, material questions of fact exist as to whether a novation occurred in favor of PBS One, summary judgment for plaintiff on count XI was improper. Moreover, since questions of material fact currently preclude a finding that PBS One is liable for breach of contract, we do not address whether there was a basis for holding Tang personally liable for the breach.
We proceed to the arguments of National Material and NM Holding against summary judgment on counts IX and X, alleging,
Plaintiff, however, seeks to forestall the challenge to the trial court's judgment on count IX. She claims that National Material and NM Holding have "no defense" to the breach-of-contract claim because "[i]n January 2000, after National Material had been joined as a defendant, the circuit court ruled that a breach of the Consulting Agreement had occurred in July 1998[,] and National Material did not appeal that order." Plaintiff supplies no context by which to understand this assertion but apparently leaves it for us to discern the context from her record citation. She cites to the trial court's order of January 2000 granting summary judgment against J.P. Investments on plaintiff's count IV, "on the grounds set forth in the Plaintiff's briefs." The order cited is not self-illuminating, and we decline to comb through the record to discern how, if at all, the January 2000 ruling might impact the proceedings here. Plaintiff's argument is forfeited for lack of development. See 210 Ill.2d R. 341(h)(7).
The trial court, in finding a breach of contract and successor liability based on an express assumption, reasoned that "obligations" as mentioned in the Assumption Agreement naturally included the Consulting Agreement. National Material and NM Holding, however, focus on the qualifying phrase "in and to the extent of * * * [PBS One's] limited partnership interest in [Pielet LP]." They argue that the Assumption Agreement by its unequivocal language conveyed only PBS One's limited partnership interest, which they emphasize is a limited-liability interest under Illinois law. National Material and NM Holding quote section 303 of the Uniform Limited Partnership Act (Partnership Act) (805 ILCS 215/303 (West 2008)), which states:
"The fundamental difference between the liability of general partners and limited partners * * * is that the former are responsible in solido for the debts and obligations of the firm, without regard to the amounts contributed by them to the capital, while the latter is not personally liable * * * because his cash contribution is substituted for personal liability." Allen v. Amber Manor Apartments Partnership, 95 Ill.App.3d 541, 547, 51 Ill.Dec. 26, 420 N.E.2d 440 (1981). In this spirit, the Partnership Agreement provides: "No Limited Partner shall have any personal liability whatever, whether to the Partnership, to any of the Partners or to the creditors of
A vital premise of National Material and NM Holding's argument is that the Consulting Agreement was "[a]n obligation of [the] limited partnership" (805 ILCS 215/303 (West 2008)), Pielet LP. They claim this was so because the Consulting Agreement was Pielet LP's debt, since Pielet LP "had assumed Pielet Corp.'s obligations to plaintiff under the [Consulting Agreement]." "Pielet LP had the legal obligation to make those payments," and neither Pielet Corp., PBS One, nor their successors were so obligated. The point here appears to be that the Consulting Agreement was "an obligation of [Pielet LP]" because there was a novation in favor of PBS One and Pielet Corp.
If, however, there was no novation, and PBS One and Pielet Corp. remained liable under the Consulting Agreement, then there would still be the question of whether the Consulting Agreement was one of the "obligations" assumed by National Material per the Assumption Agreement. In the interests of judicial economy, we determine whether, as the trial court found, the Assumption Agreement reflects an intent by the parties for National Material to assume liability under the Consulting Agreement. The primary goal in interpreting a contract is to ascertain and give effect to the intent of the parties. McHenry Savings Bank v. Autoworks of Wauconda, Inc., 399 Ill.App.3d 104, 111, 338 Ill.Dec. 671, 924 N.E.2d 1197 (2010). The best indicator of the parties' intent is the contract language itself, given its plain and ordinary meaning. Hensley Construction, LLC v. Pulte Home Corp., 399 Ill.App.3d 184, 192, 339 Ill.Dec. 490, 926 N.E.2d 965 (2010). The parties do not dispute that PBS One assumed one-half of Pielet Corp.'s liabilities, including the Consulting Agreement, and that (as the trial court phrased it) "both Pielet Corp. and PBS One conveyed their respective one-half interests to [Pielet LP] in exchange for a 49.5% limited partnership interest in that entity." It is reasonable to conclude that (1) PBS One's obligation under the Consulting Agreement became part of its limited partnership interest in Pielet LP; and (2) the limited partnership interest was assigned wholesale to National Material, under the provisions in the Assumption
National Material and NM Holding argue that liability under the Consulting Agreement was not assumed by National Material because the Consulting Agreement was not specified in the Assumption Agreement as one of PBS One's "obligations." They cite, however, no canon of contractual interpretation that would bar us from according the phrase, "in and to the extent of 100% of [PBS One's] limited partnership interest in [Pielet LP]," the inclusiveness it plainly conveys. This interpretation, not National Material and NM Holding's, gives effect to the parties' obvious intent of assigning PBS One's limited partnership interest in toto to National Material.
We conclude that, because the novation issue presents a genuine question of material fact that could preclude plaintiff's recovery under count IX, summary judgment on count IX was inappropriate. For the same reasons, the novation issue bars summary judgment on count X, alleging successor liability. Counts IX and X both assert liability based on the alleged succession of interests between PBS One and National Material, but where count IX is based on the allegedly express assumption provision in the Assumption Agreement, count X is based on a doctrine that recognizes various means, including express assumption, by which an entity may be deemed the successor of another. As we noted, if the novation in favor of PBS One occurred before the succession of interests from PBS One to National Material, then a fortiori liability under the Consulting Agreement could not have passed to National Material. If the novation occurred only later by virtue of Arthur's continued acceptance of payments from Pielet LP and Midwest Metallics, we suspect it would have occurred before plaintiff's cause of action arose. Therefore, as the novation issue potentially bars recovery against National Material, summary judgment on count X was improper.
In the interests of judicial economy, we review an aspect of the trial court's ruling on count X. Explaining the scope of our ruling first requires us to set forth the doctrine of successor liability. "The well-settled general rule is that a corporation that purchases the assets of another corporation is not liable for the debts or liabilities of the transferor corporation." Vernon v. Schuster, 179 Ill.2d 338, 344-45, 228 Ill.Dec. 195, 688 N.E.2d 1172 (1997). "The traditional rule of successor corporate nonliability `developed as a response to the need to protect bonafide purchasers from unassumed liability.'" Vernon, 179 Ill.2d at 345, 228 Ill.Dec. 195, 688 N.E.2d 1172, quoting Tucker v. Paxson Machine Co., 645 F.2d 620, 623 (8th Cir.1981). "`To offset the potentially
The trial court found successor liability on two separate grounds. First, the court found that the Assumption Agreement was an express assumption of liability under the Consulting Agreement. Second, the court determined that National Material was the "mere continuation" of PBS One. Above, in discussing count IX, we held that the Assumption Agreement does indeed constitute an express assumption by National Material of PBS One's liability under the Consulting Agreement. To facilitate proceedings on remand, we reach the alternative ground offered by the trial court and hold as a matter of law that National Material is the mere continuation of PBS One.
The mere-continuation exception applies "when the purchasing corporation is merely a continuation or reincarnation of the selling corporation." Vernon, 179 Ill.2d at 346, 228 Ill.Dec. 195, 688 N.E.2d 1172. "In other words, the purchasing corporation maintains the same or similar management and ownership but merely `wears different clothes.'" Vernon, 179 Ill.2d at 346, 228 Ill.Dec. 195, 688 N.E.2d 1172, quoting Bud Antle, Inc. v. Eastern Foods, Inc., 758 F.2d 1451, 1458 (11th Cir.1985). The continuation exception
Although the aim of the mere-continuation exception is to prevent fraud, the exception does not require specific proof of an intent to defraud creditors. Amjad Munim, M.D., P.A. v. Azar, 648 So.2d 145, 153 (Fla.App.1994) ("Proof of fraudulent intent is not an integral element" of the mere-continuation exception). The mere-continuation exception is a prophylactic measure that is independent of the fraud exception (exception (4)). The latter requires specific proof of intent to defraud and applies regardless of the ownership or control of the new entity. Therefore, for purposes of the mere-continuation exception, it is immaterial whether, as National Material and NM Holding claim, "nothing of record * * * demonstrates that it was the `specific purpose' of PBS One and National Material at the time of the asset sale in 1991 to place assets out of the reach of PBS One's creditors [citation]."
Illinois courts require "`identity of ownership'" for the mere-continuation exception. Vernon, 179 Ill.2d at 347, 228 Ill.Dec. 195, 688 N.E.2d 1172, quoting Nilsson v. Continental Machine Manufacturing
Tang, the trial court found, was the common denominator, as he "owned and/or controlled all of the entities through which the various transfers occurred." The court's chart, reproduced above, has Tang as (1) "sole shareholder and director" of PBS One; (2) "[s]ole shareholder" of NM Holding; and (3) "[c]ontrolling shareholder" of National Material. The court deduced (3) from the following: (a) Tang's control of NM Holding, which is National Material's general partner, possessing a 1% interest; and (b) Tang's status as "Chairman and President of Tang Industries, which possesses the remaining 99% limited partnership interest in National Material."
National Material and NM Holding do not specifically dispute any of these assertions. They admit that Tang "owned PBS One" but assert that Tang "did not own National Material." The only record citation they provide for the latter contention is to a page containing a copy of the Assumption Agreement. The Assumption Agreement bears what appears to be the signature of Tang as "President" of CT One (later NM Holding), general partner of National Material. The document suggests that National Material is a partnership but does not indicate ownership or control of National Material.
We add that National Material and NM Holding do not make any assertion to us about the ownership of Tang Industries, the limited partner of National Material. It appears as if Tang himself might not have been the majority owner of Tang Industries. Tang testified in his deposition that he himself did not own "that much" stock in Tang Industries and that the rest was owned by his family trust. (On the other hand, in their response below to plaintiff's statement of undisputed facts in support of summary judgment, National Material and NM Holding denied plaintiff's assertion that "Cyrus Tang and his family trust own all of the stock in Tang Industries.") Though, again, National Material and NM Holding make no issue of the ownership of Tang Industries, the fact that National Material was owned (to some unknown extent) by someone other than Tang would not of itself defeat a finding of mere continuation. "[T]he continuity of shareholders necessary to a finding of mere continuation does not require complete identity between the shareholders of the former and successor corporations." Park v. Townson & Alexander, Inc., 287 Ill.App.3d 772, 775, 223 Ill.Dec. 163, 679 N.E.2d 107 (1997). A change of shareholders is consistent with mere continuation as long as the former owners retain a controlling interest in the successor entity. See Hoppa, 259 Ill.App.3d at 66, 196 Ill.Dec. 877, 630 N.E.2d 1042 (facts that former joint shareholder's interest was reduced to 2% and that additional family member was shareholder of successor corporation did not prevent finding of continuity since former shareholders together had controlling interest in successor). Notably, also in response below to plaintiff's statement of undisputed facts in support of summary judgment, National
In so holding, we note Tang's own view of the transfer from PBS One to National Material. In his deposition, Tang stated that PBS One sold "everything" to National Material. When asked why he subsequently decided to have PBS One dissolved, Tang answered: "At that time we have no purpose for us to have P.B.S. One. * * * We just have another company." (Emphasis added.) It seems Tang himself regarded the shift as more of form than substance.
National Material and NM Holding claim it is significant that National Material gave valuable consideration, namely $5 million, for the partnership interest. They do not, however, cite any authority for the relevance of this fact. We will not search through Illinois law ourselves to test National Material and NM Holding's assertion, but are content simply to note that, in setting forth the general principles of successor liability, the supreme court in the seminal Vernon case repeatedly refers to a hypothetical "seller" and "purchaser," not just a "transferor" and "transferee," as if the giving of consideration is presumed and of itself no bar to successor liability.
NM Holding argues that judgment may not be entered against it even if National Material is found liable, because plaintiff did not allege in her complaint that "NM Holding either acted or failed to act, or that it directly or indirectly injured her," and "[t]here is no legal basis for holding a general partner liable for its limited partner's obligations to third parties." NM Holding cites no legal authority for the latter remark, which in any event is based on a false factual premise. National Material does not stand as a limited partner of NM Holding. Rather, National Material is itself a partnership of which NM Holding is general partner. As such, NM Holding is liable for the debts and obligations of National Material. See Amber Manor Apartments, 95 Ill.App.3d at 547, 51 Ill.Dec. 26, 420 N.E.2d 440 ("The fundamental difference between the liability of general partners and limited partners * * * is that the former are responsible in solido for the debts and obligations of the firm, without regard to the amounts contributed by them to the capital, while the latter is not personally liable * * * because his cash contribution is substituted for personal liability").
We emphasize that our holding that National Material is the successor of PBS One—a holding preliminary to whether PBS One is liable as a successor under one of the exceptions to successor nonliability—is not dependent on the Assumption Agreement, for it is undisputed that, as Tang acknowledged in his deposition, PBS One transferred all of its assets to National Material and, accordingly, as the December 1, 1993, amendment to the Partnership Agreement recognized, National Material was the "successor" of PBS One. On the further question of whether National Material is liable as successor for the obligations of PBS One, the Assumption Agreement is indeed material (as we found in discussing count IX), but an entirely independent basis for liability is the undisputed fact of continuity of ownership between PBS One and National Material.
In conclusion, we hold that there is no genuine issue of material fact that National Material is the successor of PBS One. Triable fact questions remain, however, on whether there was a novation in favor of National Material and NM Holding. Consequently, we reverse the grant of summary judgment for plaintiff on counts IX and X.
To summarize, we reverse the grant of summary judgment for plaintiff on counts XI (breach of contract—PBS One), IX (breach of contract—National Material and NM Holding), and X (successor liability— National Material and NM Holding). We affirm the denial of summary judgment on those counts for PBS One and Tang, National Material, and NM Holding. Since we are reversing the underlying judgments for plaintiff, we vacate the award of attorney fees to her. Consequently, we do not reach defendants' argument that the shifting of plaintiff's attorney fees to them was improper because the underlying fee agreement between plaintiff and her counsel was invalid.
For the foregoing reasons, we reverse the grant of summary judgment for plaintiff on counts XI (breach of contract—PBS One), IX (breach of contract—National Material and NM Holding), and X (successor liability—National Material and NM Holding). We affirm the denial of summary judgment on those counts for PBS One and Tang, National Material, and NM Holding. We remand this case for further proceedings consistent with this opinion.
Reversed and remanded.
SCHOSTOK and HUDSON, JJ., concur.
