Motels Bchaned cr corey, pact eres tae Prise eascy a Sees 2017 IL App (1st) 153300 FIRST DIVISION November 13, 2017 No. 1-15-3300 Iv.rne APPELLATE COURT OF ILLINOIS. FIRST DISTRICT 1550 MP ROAD LLC, ) Appeal fom the )—— Chreuit Court of Plains Appt, ) Cook County ) i 3 TEAMSTERS LOCAL UNION NO. 700; ) INTERNATIONAL BROTHERHOOD OF ) TEAMSTERS; JOINT COUNCIL 25 OF THE ) INTERNATIONAL BROTHERHOOD OF Wo. 101.5979 ‘TEAMSTERS; RANDY CAMMACK; JOHN COLL, } PATRICK W. FLYNN; FRED GEGARE, JAMEST, —) GLIMCO; MICHAEL HAFFNER; KEN HALL, >} TERENCE J, HANCOCK; CARROLL E HAYNES; ) JAMES P. HOFFA; C, THOMAS KEGEL; BRIAN) MEIDEL; FREDERICK P. POTTER IR; BRIAN} RAINVILLE; FRED SIMPSON; THOMAS STIEDE; and GEORGE TEDESKCHI, ) The Honorable ) Raymond W. Mitch, Defendants-Appellnts )——adge Presiding. PRESIDING JUSTICE PIERCE delivered the judgment ofthe cout, with opinion Justices Haris and Simon concurred in the judement and opinion, OPINION "1 2 BACKGROUND Jn May 2008, plaintiff 1550 MP Road LLC entered into a lease and purchase agreement (LPA) with Teamsters Local Union No, 726, an unincorporated association. The LPA wasexecuted by Thomas Cla, the Sccretary-Treasurer and principal officer of Local 726. Local 726's executive board was aware of the negotiation of the LPA, its scope, and the reasons for entering int it. After the LPA was executed, the board passed a resolution approving the LPA. Local 726, however, executed the agreement without complying with its bylaws, which called {for Local 726's members to be notified and vote to authorize the agreement. Local 726 wok possession ofthe premises in January 2008. 3... In February 2008, while the LPA was being negotiated, the Intemational Brotherhood of ‘Teamsters (International) initiated an investigation of its affiliate, Local 726. The Intemational ‘requested that John Coli, an International vice president, a member of the International's General Executive Board, a member of Joint Council 25 (JC25), and president of Teamsters Local Union ‘No. 727, investigate the financial condition of Local 726. Approximately two weeks after the LLPA’s execution, Coli, who had been given a copy of the LPA during his investigation, wrote to the Intemational with assurances that cost-cutting measures were being implemedted to improve Local 726's financial condition. Coli did not mention the LPA in is letter. 14 The International's Independent Review Board was conducting its own investigation of Local 726.' In June 2009, it issued a report rocommending that Local 726 be placed into ‘rusteeship, James Hoffa, the International's president, imposed an emergency trusteeship over Local 726 and appointed Becky Strzechowski as trustee with full control over the business activities of the Iocal. Strzechowski viewed the LPA as a financial desin on Lacal 726, ‘Strzechowski met with plaintiff to discuss modification of the LPA, but the parties failed to reach ‘an agreement, In September 2009, the Intemational voted to continue Local 726's trusteeship. "The Independent Review Board was established by content decree in United Stier », International Brotherhood of Teamsters, 22. Supp. 24.131 (SD.N.Y. 1998). The board has the authority to, among other things, recommend that local unions be placed info trusteship, 2No. 115-3300 415 The Intemational’s General Executive Board met in December 2009, Coli proposed Aissolving Locel 726 and Teamsters Local Uaion No, 714 (which was also under trusteship); ‘and transferring the membecship, asets, and lisbiltes of the two locals to @ newly-chatered local, Teamsters Local Union No, 700. Afr dissolution ofthe two Tocals, new Local 700 would consist of ebentally al of Local 726's members and the public sector members of Local 714 Shortly thereafter, the International's General Executive Board, including Coli, voted to revoke the charters of Local 726 an Local 714, snd charter anew pubic employee union, Local 700, to ‘stablish a single local that would beiter represent thir interests, Coli was appointed Local 700's teases. The Intemational advised Coli that “intially, (Locel 700} will be structured as consolidation of former [Local 714] and [Local 726)” The Intemational transfered all of Local 726's membership, books, documents, propery, and funds to Local 700. According to a 2009 uit, totl assets of $47,883 and toa bilities of $123,299 wer transfered to Local 700, 16 Local 726 was dissolved on December 31,2009. On January 1, 2010, Local 700 occupied the space formerly octupied by Local 726 in the subject premise. Although the plaintiff and Staechowski had engaged in negotiations to modify the LPA prior to Local 726 dissolution, Coli, Local 700's trustee, rejected any lability under the agreement signed by Local 726. Cali ‘was adamant that e would do nothing for plaintiff” that would result in Local 700 remeining, in the premises or perfoming under the LPA. Local 700 advised plaintiff tht it had taken possession ofthe premises and offered to create « month to month tnaney, Local 70 tendered & rent cheek, but plaintiff didnot cash or deposit the check. Plaintiff and Local 700 continued to ‘negotiate through April 2010, but filed to reach any agreement. At the end of April 2010, Coli ‘moved Local 700's business operations to another building owned by Loeal 727°s pension fund,No. 1-15-3300 117 Plaintiff sued for breach of coniract and sought damages specified in the LPA. In count I, plaintiff claimed that Local 700 was liable forthe breach of the LPA under a theory of corporate successor liability because Local. 726 merged into Local 700, and that Local 700 was a mere continuation of Local 726. In the altematve, plaintiff claimed in counts TI and III that Local 700 was liable to plaintiff because Local 726's transfer of its assets, including its collective ‘bargaining agreements (CBAs), to Local 700 was a fraudulent transfer under sections 5(a) and (6a) of the Uniform Fraudulent ‘Transfer Act (740 LCS 160/5(a), 6(a) (West 2014)). In the remaining counts, plaintiff claimed that Coli, the Internationsl, JC 25, and certain individual Teamster officials were liable for tortious interference with the LPA, with coimt VII direted at Coli 18 Following a bench tial, the circuit court found that: (1) the LPA was valid and ‘enforecable; (2) Local 700 was liable for Local 726's breach of the LPA under the merger, mere continuation, and fraud exceptions to the theory of successor corporate nonlisbility, (3) Local 700 was liable for Local 726's breach of the LPA because Local 726's transfer of its assets, including its CBAs, was a fraudulent transfer under the Fraudulent Transfer Act; and (4) Coli ‘was personally liable for tortious interference with the LPA. Judgment was entered in favor of ‘the Intemational, JC25, and the remaining Teamsters officials. The circuit court granted plaintiff nearly $2 million in damnages and over $320,000 in attomey fees and costs. 19 On appeal, defendants? argue that (1) the LPA is void ab itso and cannot be enforced Docause it was not executed in conformity with either Local 726°s bylaws ot the Property of ‘Unincorporated Associations Act (Act) (765 TLCS 115/0.01 et seq, (West 2010); (2) if the LPA. {snot void ab initio, then itis invalid and unenforceable because Clair lacked apparent authority Although this appeal was nominally filed on behalf of all ofthe defendants listed in the esption, ‘the only defendants tht advance any argument are Local 700 and John Col, 4No. 1-15-3300 to enter into the agreement; (3) the cient court eoneously imposed corporate successor lsbiltyagnnst Local 700; (1) a CBA isnot a transferable asset forthe purposes ofthe Uniform Fraudulent Transfer Act (5) Cli sno able for tortious interference with the LP; and (6) the LPA contains an unenforceable iqidated dameges provision. 110. We find that the LPA was an enforceable contrat, Locel 726's lure to comply with its bylaws or withthe Act didnot render the LPA void ab nto. Furthermore, Clair actd with apparent authority when exciting the LPA, snd Local 26's executive board afd the LPA. We further fnd that Los! 100 was liale for breach ofthe LPA based on corporate successor lability principles. We therefore afm the circuit court's judgment finding that Local 700 was lable to plaintiff for Local 726's breach ofthe LPA. We reverse the ctcuit cous Fraudulent Transfer Act jdements in fivor of plan because there was no transfer of an asset by a debtor within the meaning ofthe Freutulent Transfer Act, and even if there was, plaintiff filed fo prove the actual value ofthe CBAS at issue here. We reverse the iret courts jdgment aginst Coli for tortious interference with a contact because, a member of the Inemationl’s General Executive Board and as Local 700's tite, Calis conduct was privilege, Finally, we affirm ‘he circuit courts damages award in favor of paint because the LPA contained an enforceable liquidated damages provision. qu ANALYSIS. 42 A. Enforceabilily of die LPA, 3 1. Property of Unincorporated Associations Act and Local 726°s Bylaws 4114 First, we address defendants’ argument that the LPA is void ab initio and cannot be enforced because it was not executed in conformity with the Act or with Local 726's bylaws. Defendants contend that because the union's members never voted to authorize the LPA, andNo. 1-15-3300 because the LPA was not signed by the requisite numberof union officers, Local 726 could not ter into the LPA. Defendants rely primarily on Alliance Property Management, Lid . Foret Villa of Countryside Condominium Ass'n, 2015 IL App (st) 150169 to argue that “a contrat is Void abinitio where one of the parties exceeded its authority to enter into the subject agreement.” In the circuit cout, defendants rsisd an afiative defense challenging the enforceability of the LPA by asseting that it was entered into without the membership's approval, but did not specifically plead a violation of the Act as an affirmative defense. Defendants raised an argument that the LPA did nt comply withthe Act forthe fst time in their postal motion 115 On appeal, plaintiff contends that defendants have forfeited any argument under the Act by filing to raise it prior to trial. In respons, defendants argue thatthe enforceability of the [LRA was before the circuit court by virtue of defendans’ arguments tht Local 726's members ‘are neither given notie ofthe LPA nor voted to approve it, and defendants therefore pleaded facts that would form a defense under the Act. See Huszagh v. City of Oak Brook Terrace 1 I 24.387, 389 (1968) (finding that itis the facts of defense that must be alleged, not matters of law, and that “the question of whether a contract is void a contrary to state or public policy is one of law.” Furthermore, defendants argue that when a party challenges the validity of contract 2% being sgainst public policy, «challenge to the validity ofthe agreement is not waived by filing to plead it See Berge» Berge, 366M, 228, 230-31 (1937). We agree with defendants that there has been no forfeiture of an argument on appeal that the LPA is void due to Local 1726's failure to comply with the Act. Furthermore, even if defendants had forfeited an argument under the Act on appeal, forfeiture isa imitation on the partes, not on the cours. Gee ¥. Phoenix Co, of Chicago, 159 Il, 24 $07, $17 (1994),No. 1-15-3300 116 Tuming to the merits of defendants’ argument, we find that Local 726's failure to satisfy the requirements of the Act or its bylaws prior to entering into the LPA does not render the LPA. Void ab initio. First, the Act provides that “[a}ny unincorporated lodge or subordinate body of any society or order whichis duly chartered by is grand lodge or body may take, hold or convey i ‘eal estate for its own use and benefit, by lease, purchase, gant, legacy, gif or otherwise, *** according tothe register of the respective grand lodge or body.” 765 TLCS 115/1 (West 2016) ‘The Act further provides: “The presiding officer of such Iodge or subordinate body, together with the secretary or officer Kespng the records thereof, may execute mortgages and erocute or receive conveyances or leases of any rel esate by orto such lodge oF subordinate body when authorized by a vote ofthe members present at a regular ‘meeting held by suid lodge or subordinate boy, after at leat ten days notice has boon given to all members of sid lodge or subordinate body by maling a writen notice of suid proposed action to the lst known address of all such members Al conveyances, leases or mortgages executed hereunder shall be inthe name of the lodge atest by the presiding officer and secretary or other officer in charge ofthe records, and shall have afixed the seal, if any, of such lodge or subordinate body 765 TLCS 1159/2 (West 2016). Local 726's bylaws contained similar requirements: the signatures of both the Secretary: Treasurer and the President were required on ll contracts, and notice and membership authorization was necessary in connection with the lease ot purchase of real estateNo. 1-15-3300 117 Here it is undisputed that Local 726 isan unincorporated association and it dd not comply with section 2 ofthe Act o its bylaws in connection wih the LA: it id not provide ‘written notice to its members of the LPA and it did not hold a vote of its members to authorize the LPA. Furthermore, the statutory language requires the signature of two officers, and Cir ‘was the only Local 726 officer who signed the LPA. But the failure to comply wih the requirements of a statute does not auomatically render « contract unenforceable oF void ab initio, See K. Miller Consruction Co, Inc. v. McGinnis, 238 I. 24 284, 296 (2010). Ifthe statute provides that a contract that volts the state is unenforceable, then the contract is unenforceable, 1d, at 254. Where, however, a stitte is silent as to the consequences of @ Violation ofthe statute, we must balance the public poiey expressed in the statute aginst the countervailing policy in enforcing contacts! agreements. /d. Furthermore, where the statute does not pressive a particular consequence for non-compliance and non-compliance doesnot implicate a constiutionl right, we ar guided by our supreme cours observation that itmay be appropiate to “etermije] whether particular ost of circumstances justifies a court's exetise ofits equitable powers fo ameliorate the {void ab ino} doctine’s somtimes harsh rests. Perlstein v, Wolk, 218 I, 24.448, 467 (2006). We find this guidance pariulaly compelling here, where the subject matter of the contract (a commercial lease purchase agreemeat) is otherwise legitimate and contractually binding. 118 The Acti int sto the consoquenes for noi-comylate, Deena argue hat “the ‘Act isnot sien, but rather explicitly provides the only means by which an uninorported association may ener ino an enforceable contract” Bat defendans’ argument reads ito the statute the term “enforceable aterm the leislatare didnot use, The stattory language, as written, is silent as to the consequences for non-compliance, BeeNo. 115-3300 19 Therefore we must balance the public policy expressed in the Act agsinst the ‘countervailing policy of enforeng conrectul agreements, The partes acknowledge that prio to the Act, an unincorporated association was legally incapable of owning propery in is own name, Chicago Grain Tinmers Ass'n v. Murphy, 389 I 102, 107 (1945). Defendants argue that “the Act is expressly designed to authorize unincorporated associations to enter into rea estate contracts where they olherwise would be without the power to do so under common lav.” Defendants further contend thatthe Act provides importat protections to asoeation members who ate lisble for the debts and libilites of the association. Defendants, however, cite no authority to support their position that ou legislature intended to provide those protection, a8 opposed to simply enabling unincorporated associations to exeeute or receive conveyances of real estite in the name of the association. We find nothing inthe language of the Act that suggests that the legislature intended to remedy existing problems withthe manner in which ‘unincorporated associations owned eased, or conveyed real property. Instead, a plain reading of the Act indicates thatthe legislature intended to empower unincorporated associations to execute (or reesive conveyances of real property in the association's name, and made no statement as to the effect of non-compliance with the notice o signatory provisions of the Act. As sich we see ‘no sound reason to exempt an unincorporated astoiation fiom ordinary public policy considerations favoring enforcement of contacts or fiom general contract principle. 120 “Tradsionally, and ia hoops wilh the principle of freedom of contrat, this court has been reluctant to declare a private contact as void as contrary to public policy.” Vine St Cline» HealthLink nc, 222 I 24276, 99-300 (2006) iting HEM Commercial Drive Leasing, Ine v. Fox Valley Coniainers, nc. 209 Il. 24 52, $7 (2004)). Our supreme court has Jong held thatNo. 1-15-3300 “in considering whether any contract is against public policy it should be remembered that itis to the inlerests ofthe public that persons should not be ‘unnecessarily restrctd in thir eedom to make theit own contracts. Agreements se not held tobe voi, as being contrary to pubic policy, unless they be clearly contrary to what the constitution, the sates ofthe decisions ofthe courts have declared to be the public policy of unless they be manifest injurious to the Dublic welfare.’ ” Vine St Clinic, 222, 24 276 at 300 (quoting Schumann-Heine v. Folsom, 328 Il 321, 330 (1927). 121 Here, we find nothing expressed in the Act that would lead us to conclude that the pu policy embodied in the Act (an association's ability to-own and convey rel estate in its own same) outweighs our sate's prefered policy of enforcing otherwise legal private contracts entered nto fr lgititate purposes. There is nothing inthis trnsation that dictates a contusion that enforing the LPA results in manifest injury to te publi welfare and should be declared void ab nto, Therefor, we find thet an unincorporated association’ failure to comply with Act hen executing ot conveying an interest in real property docs no, on its own, render the contract void ab initio, 4122. We finther find tht Ailance is distinguishable. There, the question was whether a condominium board could enter nto a 36-month management contract when the condeasiium ‘ssociatio’s governing documents only yeni! the Dou io enter nm contracts for 24 maths or less, Alliance, 2015 IL App (Ist) 150169, $26, We found thatthe management contact was ‘oid because the board lacked authority to enter nto the agreement: the Condominium Property ‘Act required the board to comply with its ow bylaws, and the board had no authority to disregard the plain language of its governing documents. Id. $Y 30-33. The primary distinction 10