No. 3-06-0930

_________________________________________________________________ Filed October 31, 2007. IN THE APPELLATE COURT OF ILLINOIS THIRD DISTRICT A.D., 2007 CHARLES R. LOHR, ) Appeal from the Circuit Court ) of the 13th Judicial Circuit, Plaintiff-Appellee, ) La Salle County, Illinois, ) v. ) ) TERRY HAVENS, Individually and ) as a shareholder, director and ) officer of Phoenix Paper ) No. 03-CH-688 Products, Inc.; SAMUEL J. ) MORRIS, Individually and as ) a shareholder, director and ) officer of Phoenix Paper ) Products, Inc.; and PHOENIX ) PAPER PRODUCTS, INC., an ) Illinois Corporation, ) Honorable ) Eugene P. Daugherty, Defendants-Appellants. ) Judge, Presiding.

_________________________________________________________________ PRESIDING JUSTICE LYTTON delivered the opinion of the court:

_________________________________________________________________ Plaintiff Charles R. Lohr filed a complaint against defendants TerryHavens, Samuel J. Morris and Pho enix Paper Products, Inc., seeking nonpublic shareholder relief, including the purchase of all his shares, under the Business Corporations Act of 1983 (Act) (805 ILCS 5/12.56 (West 2002)). Havens filed an election to purchase plaintiff’s shares under section 12.56(f) of the Act. The trial court held that the election was defective and allowed plaintiff to voluntarily dismiss his statutory claim. We affirm. Lohr owns 44 shares of stock in Phoenix Paper, a privatelyheldcorporation. The majority shareholder, president andchairman of the board is defendant, Terry Havens, who owns 56 shares. Two2

other shareholders, James Durham and Tom T rucken broad, hold five shares each. In October 2002, Durham sent a letter to Havens on behalf of himself and Lohr, as directors and shareholders of Phonenix Paper, requesting information regarding the handling of corporate assets. Much correspondence followed i n whic h Durham and Lohr questioned the accounting methods and fiscal management of the company. The letters demanded a meeting of the directors and accused Havens and the compan y’ s accountant, Samuel Morris, of taking inappropriate action without shareholder approval. In November of 2003, after months of dissension among the directors, Lohr fileda six-count complaint against Havens, Phoenix Paper, and Morris, alleging that defendants were act ing in an il legal and oppressive manner and that the corporate assets we r e being misapplied. Count I asked the trial court, pursuant to sectio n 12.5 6 of the Act, to (1) instruct the company, or one or

more of its shareholders, to purchase all of Lohr’s shares for their fair val ue, or alternatively, (2) order the dissolution of the company. Havens filed a timely "Elec ti on to Purchase Shares of Plaintiff Charles R. Lohr Pursuant to 805 ILCS 5/12.56(f)." The election set forth four alternative amounts Havens offered to pay in exchange for all of Lohr’s shares. Within 30 days, Lohr responded to the offer. In addition to his response to the specific purchase amounts, Lohr noted that the Act required the company to give notice of an election to all the shareholders withi n 10 day s. Lohr stated that, in this case, he3

"didnot knowif the corporation [had] given written notice to all shareholders pursuant to 805 IL CS 5/12.56(f)(2)." See 805 ILCS 5/12.56(f)(2) (West 2002) (if an election to purchase is filed, the corporation shall give written notice within 10 days to all shareholders). After two years of discovery between the parties, Lohr moved to voluntarily dismiss count I of the complaint. Havens objected andargued that, under section (f)(4) of the Act, the election preventedLohr fromdismissing his statutoryclaim unless the court conducteda hearing and determined that it would be "equitable" to allow the dismissal. See 805 ILCS 5/12.56(f)(4) (West 200 2 ) (proceeding may n ot b e discontinued unless the court determines that it would be equitable to the corporation and the shareholders to permit the dismissal). In response, Lohr claimed that because notice of the election

was not provided to the other shareholders pursuant to section 12.56(f)(2), the election itself was defective, and the trial court hadno authority to consider the "equities" of the case. The trial court agreed that the election was invalid and allowed Lohr to dismiss count I of his complaint. ANALYSIS I. Section 12.56(f): The Illinois Election Remedy Statute Section 12.56(f) of the Business C orpo rations Act allows a closelyheld company or its shareholders to elect to purchase a petitioning shareholder’s shares as a remedy in lieu of dissolution. In relevant part, section 12.56(f) states:

(f) At any time within 90 days after the filing of4

th e petition under this Section, or at such time determinedby the court to be equitable, the corporation

or one or more shareholders may elect to purchase all , but not less than all, of the shares owned by the petitioning shareholder for their fair value.

*** (2) If the election to purchase is filed byone or more shareholders, the corporation shall, within 10 days thereafter, give written notice to all shareholders.

*** (4 ) After an election has been filed by the corporation or one or more shareholders, the proceeding filed under this Section may not be discontinued or settled *** unless the court determines that it would be equitable to the corporation and the shareholders. 805 ILCS 5/12.56(f) (West 2002). The l egislature based the provisions of section 12.56(f) o n section 14.34 of the M ode l Business Corporation Act (Model Act). See Hamlin v. Harbaugh Enterprises, Inc. , 324 Ill. App. 3d 612, 618-19 (2001); 3 ABA Model Business Corporation Act Ann. §14.34 (3d ed. Su pp. 2000, 2001, 2002). Section 14.34 of the Model A c t outlines the requirements for filing an election to purchase a petitionin g shar eholder’s stock. Like the Illinois Act, section 14.34(b) provides for an election to purchase within 90 days after the filing of a petition. Section 14.34(b) also requires notice to5

the other shareholders within 10 days. 3 ABA Model Business Corporation Act Ann. §14.34(b) (3d ed. Supp. 2000, 2001, 2002). The "historical background" of the Model Act states that section 14.34 was adde d as a n alternative to involuntary dissolution to avoid the potentially devastating consequen ce s of dissolution and to provide greater flexibility and certainty to closelyheld corporations. The comments note that the section does

so "b y providing the corporation or the other shareholders a limitedright to purchase at fair value the shares of the shareholder who has petitioned to dissolve the corporation." 3 ABA Model Business Corporation Act Ann. §14.34, historical background, (3d ed. Supp. 2000, 2001, 2002).

II. Notice Requirement under Section 12.56(f)(2) On appeal, we are asked to determine whether a corporation’s failure to provide notice of an election under section 12.56(f)(2) renders the election defective. We believe that while a proper election precludes a shareholder from dismissing a petition, a validelection must include notice to the other shareholders. Both the language and the intent of the Act support our conclusion. First, to ascertain the meaning of a statute, we must seek and, if possible, find the intention of the General Assembly in the express language used in the statute. Segers v. Industrial Commission , 191 Ill. 2d 421 (2000). The best evidence of legislative intent is the words of the statute itself, which should be given their plain and ordinary meaning. Krautsack v. Anderson , 223 Ill. 2d 541 (2006). Where the lan guage is clear and unambiguous, the statute will be given effect without resorting to6

other aids for construction. Krautsack , 223 Ill. 2d at 541. Courts shouldnot read language into a statute that does not exist. Hamlin , 324 Ill. App. 3d at 618. The statutory provision must be readas a whole and all relevant parts should be considered. Cole

v. State Department of Public Health , 329 Ill. App. 3d 261 (2002). T he plain language of the statute is clear and unambiguo us . Section 12.56(f)(2) states: "If the election to purchase is filed *** the corporation shall, within 10 days, give written notice to all shareholders." 805 ILCS 5/12.56(f)(2) (West 2002). Use of the word"shall" appearing in a statute ordinarily imposes an imperative duty. See Cole , 329 Ill. App. 3 d at 264 (use of the word"shall" will not be given a permissive meaning when usedwith reference to any right or benefit to anyone). As we noted in Hamlin , "courts must not depart from a statute’s plain language by reading into it exceptions, limitations or co nd itions the legislature did not express." Hamlin , 324 I ll. App. 3d at 618 , citing Newland v. Budget Rent-A-Car Systems, Inc. , 319 Ill. App. 3d 452 (2001). The legislature did not express any exceptions or limitations in sec tio n 12.56(f)(2). Accordingly, the notice requirement is mandatory, not permissive, and must be given to all shareholders within 10 days. Seco nd, th e intent and purpose of section 12.56(f) indicate that mandatory notice is required. The primary rule of statutory construction is to ascertain and give effect to the true intent of the legislature. Hamlin , 324 Ill. App. 3d 612. The purpose of the election remedy is to provide the other shareholders a right to purchase the shares of the petitioning shareholder’s stock at fair7

value in proportion to their percentage of shares. See 3 ABA Model Business Corpo ra tion Act Ann. §14.34, historical background, (3d ed. Supp. 2000, 2001, 2002). Statutory notice is essential to the nonpartyshareholders to protect that right. Notice to the nonpartyshareholders allows all shareholders to participate in the ele ction and protect their proportionate interest in t h e corporation. See generally 805 ILCS 5/12.56 (West 2002); 3 ABA Model Business Corporation Act Ann. §14.34, historical background, (3 ed. Supp. 2000, 2001, 2002). If other shareholders are aware of the number of shares a petitioning shareholder owns and the amount

an electing shareholder is willi ng to pay, they can determine whether they wish to participate in th e elec tion proceeding. Mandatory notification promotes that purpose. Therefore, we conclude that (1) notice of an election must be given to the other shareholders within 10 days, and (2) an election is invalid if the corporation fai ls to comply with section 12.56(f)(2). III. Consideration of Equities under Section 12.56(f)(4) Next, Havens claims under section 12.56(f)(4) the court wa s requiredto conduct a hearing to assess the equities before allowing a voluntary dismissal. We disagree. We determine the intent of the legislature by reading the statute as a whole andconsidering all of its relevant parts. See Sylvester v . Industrial Commission , 197 Ill.2d 225 (2001) (declining to read subsections of a statute in isolation). We must construe the statute so that each word, clause, and sentence is given a reasonable meaning and not rendered superfluous, avoiding8

an interpretation that would render any portion of the statute meaningless or void. Sylvester , 197 Ill.2d at 232

. Section 12.56(f)(4) prohibits the dismissal of a claim "after

an election has been filed by the corp oration or one or more

s har eholders *** unless the court determines that it would be equitable [to the parties] to permit the discontinuance." 805 ILCS 5/12.56(f)(4) (West 2002). When reading sect ion 12.56(f)(4) in light of section 12.56(f) as a whole, the term "after an election has been file d" bec omes crucial to our analysis. Section 12.56(f)(4) comes after section 12.56(f)(2) within the procedural scheme of the election statute. Its location within the election statute presumes notice required under the preceding subsection has been given to the remaining shareholders . We have already determinedthat the words chosen by the legislature in section 12.56(f)(4) assume that notice has been given and is p art of t he process of filing an election. If notice is not given, a valid election has not been made. Since the corporation failed to give the shareholders not ice of the election, the election was not effective. Thus, a hearing to determine the equities is not appropriate in this case. Nevertheless, Havens cites Hamlin as support for his position that the trial court is vested with discretion to determine whether the notification defect should be corrected. Hamlin , 324 Ill. App. 3d612. In Hamlin , we held that the trial court was requi red to conduct an evidentiary hearing to assess equities before allowing a corporation to file an untimely election. The relevant statute providedfor the filing of an election "at such time determined by9

the court to be equitable." 805 ILCS 5/12.56(f) (West 2002). Here, the trial court ref used t o conduct an evidentiary hearing becau se the election was defective, not untimely. Further, th e statutoryprovision at issue in this case does not contain a discretionaryclause requi ri ng the trial court to consider the equities before making its determination. We therefore decline to apply the holding in Hamlin to these circumstances. Because the election in this case was defe ctive, the trial court properly allowed Lohr to voluntarily dismiss count I of his complaint as a matter of law. CONCLUSION The judgment of the circuit court of La Salle County is affirmed. Affirmed. MCDADE and WRIGHT, JJ., concurring.