author: MR. CHIEF JUSTICE GOLDENHERSH

text:
    (No. 50975.
    JOHN W. SMITH, Appellee, v. METROPOLITAN SANITARY DISTRICT OF GREATER CHICAGO et al. (W. E. O’Neil Construction Company, Appellant).

      Opinion filed October 19, 1979.
    Rehearing denied November 30, 1979.

      Schaffenegger, Watson & Peterson, Ltd., of Chicago (Jack L. Watson, of counsel), for appellant.
    Cooney & Stenn, of Chicago (William J. Harte, of counsel), for appellee.
   MR. CHIEF JUSTICE GOLDENHERSH

delivered the

opinion of the court:

Plaintiff, John W. Smith, appealed from the judgment of the circuit court of Cook County entered in favor of defendant, W. E. O’Neil Construction Company, upon allowance of its motion for summary judgment. The circuit court made the requisite findings (58 Ill. 2d R. 304(a)), the appellate court reversed and remanded (61 Ill. App. 3d 103), and we allowed defendant’s petition for leave to appeal.

The relevant facts are adequately stated in the opinion of the appellate court and need not be repeated here. Defendant and S. J. Groves & Sons Company, a Minnesota corporation, entered into a joint venture which undertook to construct the Salt Water Creek Reclamation Plant of the Metropolitan Sanitary District of Greater Chicago. The joint venture agreement, inter alia, provided: “Each of the Joint Venturers may supply equipment for the project by mutual consent and shall pay therefore [¿7c] at the rate of Sixty Five Per Cent (65%) of the latest A.E.D. rental rates as revised annually.” Plaintiff, while employed by the joint venture, was struck by a truck leased by defendant to the joint venture and suffered injuries which resulted in the amputation of both his legs.

Plaintiff filed an application for adjustment of claim against the joint venture before the Illinois Industrial Commission, and instituted this action in the circuit court of Cook County against defendant and other parties not involved in this appeal. Plaintiff’s cause of action against defendant was pleaded in three counts. Count I alleged violations of the Structural Work Act (Ill. Rev. Stat. 1973, ch. 48, par. 60 et seq.), count II charged defendant with negligence, and count III pleaded an action in strict liability by reason of defendant’s having leased to the joint venture the vehicle which was allegedly defective and caused plaintiff’s injuries. In its motion for summary judgment, defendant contended that plaintiff’s cause of action against it was barred under the provisions of section 5 of the Workmen’s Compensation Act “for the reason that the plaintiff is an employee of this defendant, within the meaning of said Workmen’s Compensation Act, as a matter of law.” The circuit court allowed defendant’s motion for summary judgment and plaintiff appealed. Holding that section 5 of the Workmen’s Compensation Act did not bar plaintiff’s action because at the time of the injury he was employed by the joint venture and not by defendant, the appellate court reversed.

Section 5(a) of the Workmen’s Compensation Act in pertinent part provided:

“(a) No common law or statutory right to recover damages from the employer, his insurer, his broker, any service organization retained by the employer, his insurer or his broker to provide safety service, advice or recommendations for the employer or the agents or employees of any of them for injury or death sustained by any employee while engaged in the line of his duty as such employee, other than the compensation herein provided, is available to any employee who is covered by the provisions of this Act, to any one' wholly or partially dependent upon him, the legal representatives of his estate, or any one otherwise entitled to recover damages for such injury.” Ill. Rev. Stat. 1973, ch. 48, par. 138.5.

Defendant contends that as a member of the joint venture it was liable for the payment of benefits awarded under the Workmen’s Compensation Act to an employee of the joint venture, and that the provisions of section 5(a) which extended the “exclusive remedy” protection to directors and officers of corporate employers “would extend the same protection to the individual members of a joint venture.” It argues, too, that defendant was entitled to the protection of the “exclusive remedy” provision of the Act for the reason that in addition to being a member of the joint venture it was also acting as its agent. It is plaintiff’s position that even if section 5(a) confers upon defendant immunity to this action by reason of its being a member of the joint venture, as the lessor of the truck, it occupied a second status to which the immunity did not apply.

In Harmon v. Martin (1947), 395 Ill. 595, the court said:

“A joint adventure is not regarded as identical with a partnership, although, generally speaking, it may be said that practically the only distinction between the two is that the former relates to a single specific enterprise or transaction, while the latter relates to a general business of a particular kind.” (395 Ill. 595, 612.)

Ordinarily, a joint venture is an association of two or more persons to carry out a single enterprise for profit (Ditis v. Ahlvin Construction Co. (1951), 408 Ill. 416, 426), and the rights and liabilities of its members are tested by the same legal principles which govern partnerships. Section 9 of the Uniform Partnership Act (Ill. Rev. Stat. 1973, ch. 1061/2, par. 9) provides in pertinent part that “[e] very partner is an agent of the partnership for the purpose of its business,” and it would appear that the members of a joint venture would occupy the same relationship with the joint venture. Insofar as the actions upon which counts I and II were based, defendant’s duty to plaintiff, and any liability resulting from the breach thereof, would, as the agent of the joint venture, be coextensive with that of its principal, the joint venture. We hold, therefore, that as to the causes of action pleaded in counts I and II defendant, by reason of its status as a member of the joint venture, was entitled to the protection of section 5(a).

We consider next plaintiff’s contention that defendant as lessor of the truck which caused plaintiff’s injuries occupied a second capacity and in this role was not immune from suit under section 5 of the Workmen’s Compensation Act. This theory, known as the “dual capacity doctrine,” has been defined in the following terms: “[A] n employer normally shielded from tort

liability by the exclusive remedy principle may become liable in tort to his own employee if he occupies, in addition to his capacity as employer, a second capacity that confers on him obligations independent of those imposed on him as employer.” (2A A. Larson, Workmen’s Compensation sec. 72.80, at 14 — 112 (1976). See also Kelly, Workmen’s Compensation and Employer Suability: The Dual-Capacity Doctrine, 5 St. Mary’s L.J. 818 (1974).) Professor Larson explains that the decisive test in applying the dual capacity doctrine “is not concerned with how separate or different the second function of the employer is from the first but with whether the second function generates obligations unrelated to those flowing from the first, that of employer.” (2A A. Larson, Workmen’s Compensation sec. 72.80, at 14 — 117 (1976).) A mere separate theory of liability against the same legal person as the employer is not a true basis for use of the dual capacity doctrine; the doctrine, instead, requires a distinct separate legal persona. (2A A. Larson, Workmen’s Compensation sec. 72.80 (Supp. 1979).) Cited examples showing an employer in a dual capacity include: a shipowner employing stevedores (Reed v. Steamship Yaka (1963), 373 U.S. 410, 10 L. Ed. 2d 448, 83 S. Ct. 1349); a landowner employing persons to work on his property (Marcus v. Green (1973), 13 Ill. App. 3d 699); and a chiropractor treating his own employee’s work-related injuries (Duprey v. Shane (1952), 39 Cal. 2d 781, 249 P.2d 8).

The allegedly defective truck which caused plaintiff’s injuries was not a tool furnished by defendant as a member of the joint venture, but was equipment leased to the joint venture under the express terms of the joint-venture agreement. A lessor of a defective vehicle is held to the same strict liability standards as a manufacturer or seller. (Crowe v. Public Building Com. (1978), 74 Ill. 2d 10, 13; Galluccio v. Hertz Corp. (1971), 1 Ill. App. 3d 272.) The precise question presented is whether because, in addition to being the lessor of the vehicle involved, defendant was also a member of the joint venture by whom plaintiff was employed, it was immune to the liability imposed upon other lessors whose defective leased property causes injury.

In Laffoon v. Bell & Zoller Coal Co. (1976), 65 Ill. 2d 437, the court considered the question whether a contractor who, by reason of the provisions of section 1(a)(3) of the Workmen’s Compensation Act (Ill. Rev. Stat. 1975, ch. 48, par. 138.1(a)(3)), had been required to pay compensation benefits to the employee of an uninsured subcontractor was thereby rendered immune to an action under the Structural Work Act brought by the employee to whom the benefits were paid. The court pointed out that to grant such immunity could result in an irrational and arbitrary classification in that two workmen, injured under precisely the same circumstances, one of whom was employed by a subcontractor with adequate workmen’s compensation insurance and the other employed by a subcontractor with no insurance, would be subjected to different treatment in that the first employee could recover from the general contractor while the second employee could not. In our opinion the rationale of Laffoon is applicable here, and plaintiff’s right to bring this action should not depend upon whether the truck which struck him was leased to his employer by one of its members or by a lessor with no other relationship to the joint-venture employer. Likewise, pursuing further the rationale of Laffoon, defendant’s liability as a lessor of equipment should not be dependent upon whether it was solely a lessor or occupied the coincidental status of a member of the joint venture. As previously noted, earlier recognition in this jurisdiction of the concept of dual status is found in Marcus v. Green (1973), 13 Ill. App. 3d 699.

In Econo Lease, Inc. v. Noffsinger (1976), 63 Ill. 2d 390, 393, the court said:

“A motion for summary judgment will be granted if the pleadings, depositions, admissions and affidavits on file reveal that there is no genuine issue as to any material fact and that the movant is entitled to a judgment or decree as a matter of law. (Ill. Rev. Stat. 1975, ch. 110, par. 57(3); Carruthers v. B. C. Christopher & Co., 57 Ill. 2d 376.) A reviewing court must reverse an order granting summary judgment if it is determined that a material question of fact does exist.”

Clearly there are material questions of fact to be determined here, and the circuit court improperly allowed defendant’s motion for summary judgment.

For the reasons stated the judgment of the appellate court is affirmed.

Judgment affirmed.


source: Caselaw Access Project

author: MR. JUSTICE MORAN

license: Public Domain

text:
    (No. 51365.
    EVELYN PUCKETT, Appellant, v. THE INDUSTRIAL COMMISSION et al. (Augustana Hospital, Appellee).

      Opinion filed September 19, 1979.
    Rehearing denied November 30, 1979.

    Bernard Fleischman, of Chicago (Sidney Z. Karasik, of counsel), for appellant.

      Discipio & DeCarlo, of Chicago (Vito D. DeCarlo, of counsel), for appellee.
   MR. JUSTICE MORAN

delivered the opinion of the court:

An arbitrator, designated by the Industrial Commission, awarded claimant,, Evelyn Puckett, compensation for 32 weeks of temporary total disability, 50% permanent loss of the use of the right leg, and $665 of medical expenses unpaid by the employer, Augustana Hospital. The Commission, after hearing additional testimony by the claimant, affirmed the award for temporary total disability, increased the award for the permanent loss of the use of the right leg to 66 2/3% thereof, and increased the award for medical expenses to $977.50. The circuit court of Cook County confirmed the Commission’s decision. The claimant has appealed, contending that the Commission’s finding of less than total permanent disability is contrary to the manifest weight of the evidence.

We find it unnecessary to discuss the details of this case, as it would serve no useful purpose to do so. It is sufficient to note that each party presented the testimony of a single medical witness, that these witnesses differed on the extent of claimant’s disability, and that the resolution of this difference was within the particular purview of the Commission. After carefully reviewing this testimony and the other evidence, we hold that the decision of the Industrial Commission is not against the manifest weight of the evidence.

The judgment of the circuit court of Cook County is affirmed.

Judgment affirmed.


author: MR. JUSTICE CLARK

text:
    (No. 51026.
    ARNOLD I. KRAMER, Appellant, v. McDONALD’S SYSTEM, INC., et al., Appellees.

      Opinion filed October 2, 1979.

      Rehearing denied November 30, 1979.

      Donald L. Bertelle, of Chicago, for appellant.
    Foran, Wiss & Schultz, of Chicago (Richard G. Schultz and Jeff D. Harris, of counsel), for appellees.
   MR. JUSTICE CLARK

delivered the opinion of the court:

This cause was brought in the circuit court of Cook County by Arnold I. Kramer, plaintiff, as a declaratory judgment action seeking a declaration of the rights of the parties in certain equipment, inventory, accounts receivable, fixtures and furniture incidental to the operation of a McDonald’s restaurant in Midland, Texas. Moreover, Kramer sought a determination that the defendants, McDonald’s System, Inc., McDonald’s Corporation and a subsidiary, Franchise Realty Interstate Corporation (McDonald’s), the defendants, had converted property in which Kramer had a security interest when McDonald’s permitted the Bank of River Oaks (the bank) to sell the equipment at public sale and when McDonald’s leased the premises to a second franchisee.

The circuit court denied McDonald’s motions to dismiss and for summary judgment and granted Kramer’s motion for summary judgment against McDonald’s for $104,784.41. On appeal, the appellate court of Illinois affirmed that part of the lower court’s judgment denying McDonald’s motion to dismiss the complaint, reversed the order granting Kramer summary judgment, and rendered summary judgment in favor of McDonald’s. (61 Ill. App. 3d 947.) We thereafter granted Kramer’s petition for leave to appeal. We affirm the judgment of the appellate court, though we base our decision on different reasons.

On December 9, 1974, Ralph Baker entered into a franchise license agreement and a lease agreement with McDonald’s. Under the terms of the agreements Baker was given a 20-year leasehold interest in a McDonald’s hamburger restaurant in Midland, Texas. Prior to commencing operation of the restaurant, Baker obtained a loan from the bank for $107,000. Baker granted a security interest in the restaurant equipment he had purchased to the bank. It was agreed that McDonald’s would subordinate its landlord’s lien to the bank’s security interest. The landlord’s subordination agreement also specified that if Baker defaulted under the security agreement with the bank, McDonald’s would consent to the removal of the equipment from the restaurant, or else McDonald’s, at its option, could assume Baker’s payments to the bank. In December 1974 the bank perfected its security interest when it filed financing statements with the Secretary of State of Texas and the appropriate recorder of deeds.

On January 17, 1975, Baker, in order to obtain additional working capital, entered into several agreements with Arnold Kramer. On that day the following documents were executed: (1) a limited partnership agreement creating the B/K Limited Partnership, with Baker and his wife as general partners, and Kramer and four others as limited partners; (2) a landlord subordination agreement, similar to the one entered into with the bank, but with the additional provision that Kramer’s security interest would be subordinate to the bank’s; (3) a conditional assignment agreement, providing: (a) that in the event of Baker’s default, McDonald’s would consent to Kramer’s removal of the collateral, subject to the bank’s prior security interest; (b) that McDonald’s had an inferior lien to Kramer’s security interest; and (c) that if Baker defaulted, all his right, title and interest in and to the lease and license agreements would be assigned to McDonald’s; (4) a chattel mortgage in favor of Kramer; (5) a judgment note in the amount of $90,000 made by Baker and his wife, with Kramer as payee; and (6) a note and security agreement evidencing a principal debt of $90,000 and a finance charge for interest over the life of the note of $85,823.80. The security agreement granted a security interest in the restaurant equipment to Kramer, subject to the prior security interest of the bank in the same collateral. The security agreement also granted a security interest to Kramer in the franchise license and the lease with McDonald’s, as well as in the inventory, accounts receivable, proceeds and products therefrom, machinery, fixtures and furniture whether presently owned or after acquired by Baker. The security agreement and financing statement were duly filed in Texas with the Secretary of State and the Midland County recorder of deeds.

On January 22, 1975, the limited partners executed an indemnification agreement which also designated Kramer as their “nominee to appear as ‘Lender’ on all agreements with [McDonald’s] and as payee in all notes executed by [the Bakers].” Also contained in this agreement was a provision that the limited partners would “collect interest in their capital contribution only to the extent their capital contribution is not returned to them by payment of the Promissory Note given to guarantee the return of said capital contribution.” Additionally the agreement provided that Kramer would act as the representative of all of the limited partners in any litigation.

The certificate of limited partnership filed with the recorder of deeds of Cook County, Illinois, on February 3, 1975, reveals in paragraph 7 that the amount of cash “contributed” by the limited partners totaled $90,000, with Kramer contributing $54,000 and each of the other four limited partners contributing $9,000. Paragraph 8 states: “No additional contributions are to be made by any Limited Partner.”

Baker commenced business in March 1975, and closed the business in January 1976. He sent i telegram to McDonald’s on January 22, 1976, informing it he would abandon the restaurant January 24, 1976, at 12:01 a.m. On the same day he sent a telegram to Kramer and the other limited partners informing them they had until 11:59 p.m. on January 23, 1976, to take over the restaurant. Kramer did not reply. McDonald’s delivered a letter to Baker on January 23, 1976, stating it would take over the restaurant, sell it and distribute the proceeds to Baker and his creditors.

Baker did not turn over the restaurant to McDonald’s but did cease to operate it. On January 26, 1976, McDonald’s notified Baker he was in default under the license and lease agreements. McDonald’s eventually took possession of the restaurant. Kramer then notified McDonald’s that Baker was in default and demanded payment of the February installment from McDonald’s. McDonald’s subsequently entered into a franchise and lease agreement with Victor Moore, who began to operate the restaurant in April 1976.

Kramer filed the instant action in the circuit court of Cook County on April 12, 1976, seeking a declaratory judgment concerning his rights in the property in the restaurant and alleging that the defendant McDonald’s unlawfully converted his property.

The bank had notified Baker on February 4, 1976, that he was in default under the security agreement. Thereafter the bank gave public notice that a sale of the equipment in Midland, Texas, would occur on May 20, 1976. Upon receiving his notice of the sale, Kramer amended his complaint on May 18, 1976, adding the bank as a defendant, seeking a temporary restraining order to stop the sale, and asking for other relief. The court issued the temporary restraining order on May 18 and vacated it the next day, upon motion of the bank. The sale occurred as scheduled, with both Baker and Kramer represented. The bank was the only bidder and purchased the equipment for $104,000. The next day, May 21, 1976, McDonald’s purchased the equipment from the bank for $113,367.90, the total indebtedness Baker owed the bank.

Kramer filed a second amendment to his complaint on November 3, 1976, alleging that McDonald’s and the bank had acted in concert to convert the property in which Kramer had a security interest. Because the orders appealed from involve only Kramer and McDonald’s, the bank is not a party to this appeal.

The appellate court held that the law of Texas pertaining to conversion is applicable herein. The court applied the most significant relationship rule set forth in Ingersoll v. Klein (1970), 46 Ill. 2d 42. Since we decide the issue involved in this case under the Uniform Limited Partnership Act (ULPA) as adopted in Illinois, we need not decide which State’s conversion principles apply. Ill. Rev. Stat. 1977, ch. 106/4, pars. 44 through 73.

Kramer contends that summary judgment was improperly granted by the appellate court in favor of McDonald’s on the basis that section 13 of the ULPA absolutely prohibits a limited partner from taking collateral as security for a loan to the limited partnership. Kramer argues that the proper construction of this section is that a limited partner may take collateral as security for a loan unless, at the time the loan is made, the assets of the partnership are insufficient to discharge partnership liabilities to persons not claiming as general or limited partners. There is authority for this construction of section 13: A.T.E. Financial Services, Inc. v. Corson (1970), Ill. N.J. Super. 254, 268 A.2d 73; Hughes v. Dash (5th Cir. 1962), 309 F.2d 1. See Kratovil and Werner, Fixing Up the Old Jalopy — The Modern Limited Partnership Under the ULPA, 50 St. John’s L. Rev. 51, 62-66 (1975).

But the issue herein is not whether a limited partner may secure a loan but whether a limited partner may secure his capital contribution. We conclude that the answer is that he may not. Since there are no genuine issues of material fact, we decide as a matter of law that the appellate court properly entered summary judgment in favor of McDonald’s.

We think that the pleadings, depositions, affidavits and documents on record clearly evince that the $90,000 was intended as a contribution to the capital of the limited partnership. The word “contributions” as it is used in the ULPA is limited to the contribution made by a limited partner at the time of the formation of the partnership for the benefit of the partnership’s creditors. Silvola v. Rowlett (1954), 129 Colo. 522, 527, 272 P.2d 287, 290.

Kramer’s transfer to Baker of $90,000 was made at the time of the formation of the limited partnership. This is revealed in the limited partnership agreement executed on January 17, 1975, the certificate of limited partnership, as well as in the mutual agreement indemnifying the limited partners, signed on January 22, 1975.

The important distinction between the initial capital contribution and subsequent transfers of funds to the partnership has been noted elsewhere by courts which have been asked to decide whether limited partners may take collateral security for loans made to the partnership. Those courts have been careful to note that the initial contribution had been made previously, and that it was subsequent advances of money over which issue was joined. Park Cities Corp. v. Byrd (Tex. Civ. App. 1975), 522 S.W.2d 572, rev’d on other grounds (Tex. 1976), 534 S.W.2d 668; Hughes v. Dash (5th Cir. 1962), 309 F.2d 1; Clapp v. Lacey (1868), 35 Conn. 463.

Additionally, after the limited partnership was formed and, indeed, even after the instant action was commenced, Kramer still continued to treat the $90,000 as a capital contribution. The partnership income return for 1975 (IRS Form 1065) was signed by Kramer on June 12, 1976, two months after filing this action. On schedule K-l of form 1065 Kramer stated that his deductible share of the partnership’s loss for 1975 of $91,364.47 was $43,067.00. He also claimed a share in the investment tax credit on partnership property taken by the partnership. Clearly then, the $90,000 payment from Kramer to Baker was intended to be, was treated by the parties as, and must be considered to be, an initial capital contribution to the limited partnership. Accord, Salsul Co. v. Kohlmeyer (La. App. 1976), 325 So.2d 858.

A limited partner is prohibited from taking collateral to secure repayment of his capital contribution. (Ill. Rev. Stat. 1977, ch. 106½, par. 59(1).) To do so would give him an unfair priority over the creditors of the partnership contrary to the express provisions of section 16(1) of the ULPA:

“(1) A limited partner shall not receive from a general partner or out of partnership property any part of his contribution until
(a) All liabilities of the partnership, except liabilities to general partners and to limited partners on account of their contributions, have been paid or there remains property of the partnership sufficient to pay them.
(b) The consent of all members is had, unless the return of the contribution may be rightfully demanded under the provision of paragraph (2), and
(c) The certificate is cancelled or so amended as to set forth the withdrawal or reduction.” Ill. Rev. Stat. 1977, ch. 106y2, par. 59(1).

A limited partnership interest is in the nature of an investment. (Klein v. Weiss (1978), 284 Md. 36, 52, 395 A.2d 126, 136.) Through his contribution, the limited partner becomes entitled to share in the profits and losses of the partnership, though his share of the losses will not exceed the amount of capital initially contributed to the enterprise. (Klein v. Weiss (1978), 284 Md. 36, 52, 395 A.2d 126, 135.) However, when the limited partner makes the contribution, he is placing that amount at risk. He is not permitted to insure that risk or to guarantee a return to himself by taking some form of security. He may not vie with creditors for the assets available to pay the partnership’s obligations. “The ULPA was designed to prevent illegal competition between the limited partners and creditors of the partnership for the assets of the partnership.” (Hughes v. Dash (5th Cir. 1962), 309 F.2d 1.) It would therefore defeat the purpose of the ULPA to permit Kramer to enforce a security interest against the property purchased by the partnership to operate the restaurant.

We therefore hold that Kramer is prohibited by the express provisions of section 16 of the ULPA from accepting collateral as security for his capital contribution. The legal effect of the holding accords with the holding of the appellate court only to the extent that it held that Kramer was not a secured creditor, that he possesses no enforceable interest in the collateral, and that, therefore, Kramer may not maintain an action for conversion of the collateral. In light of our determination that the $90,000 is a capital contribution, we disagree with the appellate court’s statement that the promissory note is enforceable, and hold that it is not. Our holding renders it unnecessary to decide issues involving the default provisions of article 9 of the Uniform Commercial Code or the principles regarding conversion under Illinois law.

Kramer contends that because McDonald’s is not a creditor of the limited partnership, it does not have standing to raise the prohibitory sections of the ULPA as an affirmative defense. We find this contention to be without merit. It is unclear from the record whether McDonald’s is a creditor or not. However, there have been repeated avowals by counsel for McDonald’s that it is owed $26,511.75 by the partnership for unpaid rent, service fees, real estate taxes and moneys advanced by McDonald’s to pay Baker’s employees. In any event, we think the question whether McDonald’s is a bona fide creditor immaterial since we agree with the appellate court’s statement that section 43(4) of the Civil Practice Act recognizes “an instrument or transaction [that] is either void or voidable in point of law, or cannot be recovered upon by reason of any statute,” as an affirmative defense which “seeks to avoid the legal effect of or defeat the cause of action set forth in the complaint.” (Kramer v. McDonald’s System, Inc. (1978), 61 Ill. App. 3d 947, 961, citing Ill. Rev. Stat. 1977, ch. 110, par. 43(4).) Thus, McDonald’s is imbued with standing to raise the ULPA as a defense to Kramer’s allegations of conversion.

McDonald’s argues that it is entitled to be reimbursed by Kramer for attorneys’ fees and costs incurred in this action. McDonald’s cites section 13 of the Uniform Partnership Act (UPA) in support of its contention. Section 13 provides that where a partner, through a wrongful act or omission in the ordinary course of the partnership, causes loss or injury to any person, the partnership is liable therefor to the same extent as the parties so acting or omitting to act. Ill. Rev. Stat. 1977, ch. 10614, par. 13.

McDonald’s argues that section 13 applies to this case by way of section 6(2) of the UPA, which states that the UPA shall apply to limited partnerships except insofar as the statutes relating to such partnerships are inconsistent. (Ill. Rev. Stat. 1977, ch. 10614, par. 6(2).) McDonald’s states that under the lease and license agreements with Baker, it was agreed that Baker would pay McDonald’s attorneys’ fees if-Baker defaulted under either of those agreements. McDonald’s is attempting to attribute Baker’s default to Kramer. Moreover, McDonald’s argues that Kramer, as well as Baker, was involved in a wrongful act, namely, concealing the existence of the limited partnership from McDonald’s. We disagree with McDonald’s contentions.

We think that section 13 of the UPA is inconsistent with section 7 of the ULPA. (Ill. Rev. Stat. 1977, ch. 10614, par. 50.) Section 7 provides that a limited partner shall not be liable as a general partner unless he takes part in the control of the business. There is no indication that Kramer ever took part in the operation of the restaurant business. In fact, the record discloses that when, in January 1976, Baker offered Kramer the opportunity to take over the business, Kramer declined to do so. Thus, Kramer’s exposure to liability as a limited partner is limited solely to his capital contribution. Klein v. Weiss (1978), 284 Md. 36, 52, 395 A.2d 126, 135.

Moreover, we reject McDonald’s contention that Kramer is liable for attorneys’ fees and costs in the same way that a principal is liable for the deceit of his agent where the principal has authorized or participated in the deceit. A limited partner is neither a partner nor a principal in the business or transactions of the partnership. His liability is to the partnership in the form of his capital contribution, and not to the creditors. (6 Uniform Laws Annotated, Uniform Limited Partnership Act, Official Comment to section 1 (master ed. 1969).) Therefore, Kramer is not liable to McDonald’s for the attorneys’ fees and costs incurred by McDonald’s.

Accordingly, for the reasons given, the judgment of the appellate court granting summary judgment in favor of McDonald’s and denying summary judgment to Kramer is affirmed.

Judgment affirmed.


author: MR. JUSTICE MORAN MR. JUSTICE CLARK,

text:
    (No. 51449.
    ROBERT FREEMAN FORD et al., Appellees, v. JUDITH FORD NEWMAN et al. (John Robert Ford et al., Appellants).

      Opinion filed October 19, 1979.
    Rehearing denied November 30, 1979.

      CLARK, J., dissenting.
    W. M. Pinney, Jr., of Husted, Pinney, Ogg & Caccia, of San Francisco, and Edward J. Kionka, of Columbia, for appellants.
    Thompson & Strong, of Pontiac (R. D. Thompson and Kenneth L. Strong, of counsel) and Sidley & Austin, of Chicago (James E. S. Baker, Loren E. Juhl, Robert A. Malstrom, and Henry L. Mason III, of counsel), for appellees.
    Richard O. Erdmann, of Follmer, West, Erdmann 8c Clem, of Champaign, and Nicholas Stevenson, of Mandel, Lipton 8c Stevenson, Ltd., of Chicago, for amicus curiae Child Care Association of Illinois.
   MR. JUSTICE MORAN

delivered the opinion of the court:

This case involves a determination of the beneficiaries under a trust in which the plaintiffs, Robert Freeman Ford and the Bank of Pontiac, are cotrustees. The appellants-defendants (defendants) are the two adopted children of Tod Ford III, a named trust beneficiary, now deceased.

On July 16, 1969, the plaintiffs filed a complaint which averred, in part, that the defendants have no interest in the corpus or income of the trust. The circuit court of Livingston County entered summary judgment for the plaintiffs. The appellate court affirmed, with one justice dissenting. (64 Ill. App. 3d 528.) We granted the defendants leave to appeal.

On December 31, 1941, Lillian Ford Timken executed an irrevocable inter vivos trust in New York, the place of her domicile. The corpus of the trust consisted, principally, of Illinois realty. The substance of the trust provision which is pertinent to this appeal follows. One-half of the income from the trust was to be paid to the settlor’s two sons, Robert Freeman Ford and Tod Ford III, during their respective lives, and, upon the death of either, his share of the income was to be paid “to his lawful issue him surviving,” during their respective lives. If either son died “without leaving lawful issue him surviving,” his share of the income was to be paid to the other son or “to [the other son’s] lawful issue him surviving,” during their respective lives. The trust also specifically provided for “any issue of either of said beneficiaries [Tod Ford III and Robert Ford] not now in being.” The settlor appointed herself and her two sons as trustees. Both sons lived in California at the time of execution of the trust, and that is where the defendants were adopted.

The circuit court found that the settlor’s actual intent was to exclude adopted children. The appellate court affirmed the judgment, finding that Illinois law was applicable and that, under Illinois law, defendants were not included as beneficiaries.

Defendants urge that the settlor’s actual intent was to include adopted children in the term “lawful issue.” While defendants raise other arguments, we find, in fact, that resolution of the case can be made on the determination of the settlor’s actual intent.

Our object is to ascertain and give effect to the intention of the settlor. The evidence that we may consider to determine this intent is governed by the law of the forum, Illinois. (See Restatement (Second) of Conflict of Laws sec. 138 (1971); People v. Saiken (1971), 49 Ill. 2d 504, 509, cert. denied (1972), 405 U.S. 1066, 31 L. Ed. 2d 796, 92 S. Ct. 1499; People v. Kirkpatrick (1953), 413 Ill. 595, 597.) Under Illinois law, intent is to be ascertained, if possible, from the language of the instrument itself. Continental Illinois National Bank & Trust Co. v. Clancy (1959), 18 Ill. 2d 124, 127; Erwin v. Kruse (1959), 17 Ill. 2d 364, 370; Storkan v. Ziska (1950), 406 Ill. 259, 263.

In the case at bar, the settlor did not expressly refer to adoptees in the instrument. She did, however, with the aid of counsel, utilize the term “lawful issue,” to refer to the issue of her two sons. We must examine how, on the date of execution, the law defined “lawful issue” as the settlor employed that term.

The law which we must examine is that under which the settlor considered the trust provisions. She did not expressly designate which State’s law was to apply. Absent such an express designation, it is only reasonable to conclude that she expected that the laws of either New York — where she had long been domiciled and where the instrument was drawn and executed — or the laws of Illinois — the situs of almost all the realty which comprised the corpus of the trust — to apply. Examination of the laws in effect in 1941 in these two States reveals that a like result is reached under either.

New York had the following statutes in effect at the time of execution of the trust:

“1. ‘Foster parent’ shall mean a person adopting and ‘foster child’ shall mean a person adopted.” (N.Y. Dom. Rel., art. VII, sec. 109(1), eff. Feb. 17, 1941 (Supp. 1942).)

And, in pertinent part,

“As respects the passing and limitation over of real or personal property dependent under the provisions of any instrument on the foster parent dying without heirs, the foster child is not deemed the child of the foster parent so as to defeat the rights of remaindermen.” (N.Y. Dom. Rel., art. VII, sec. 115, eff. Apr. 13, 1040 (Supp. 1942).)

See New York Life Insurance & Trust Co. v. Viele (1899), 161 N.Y. 11, 55 N.E. 311; In re Accounting of Leask (1910), 197 N.Y. 193, 90 N.E. 652.

At the same time, the following statute was in effect in Illinois:

“A child lawfully adopted is deemed a descendant of the adopting parent for purposes of inheritance, except that the adopted child shall not take property from the lineal or collateral kindred of the adopting parent per stirpes or property expressly limited to the body of the adopting parent.” (Ill. Rev. Stat. 1941, ch. 3, par. 165.)

See Miller v. Wick (1924), 311 Ill. 269.

Under the law of both States, adopted children were deemed not to be included as “lawful issue” of the settlor’s sons within the trust provision in this case. Thus, the legal meaning attributed to the language used served to exclude adoptees, absent other evidence of a contrary intention.

Our careful examination of the record reveals no such evidence of a contrary intention on the part of the settlor. After first looking to the language of the trust instrument itself, we may consider the surrounding circumstances at the time of execution of the trust. (Continental Illinois National Bank & Trust Co. v. Clancy (1959), 18 Ill. 2d 124, 127.) The record here discloses that the defendants were not adopted until more than a year after the date of the instrument. The defendants allege, however, that the settlor knew that the adoptive parents, Tod and his wife, were incapable of having natural children. In support thereof, defendants correctly point out that Tod and his wife were 36 and 38 years old, respectively, at the time of the trust’s execution and had been childless since their marriage in 1929. But any knowledge by the settlor of their child-bearing capabilities at the time in question is not substantiated by the record. In fact, in a deposition taken in preparation for this case, Tod’s wife stated that she herself did not know that she was incapable of having natural children until sometime after she and Tod had adopted their first child, which, as stated, did not occur until more than a year after the settlor executed the trust.

For the foregoing reasons, the judgment of the appellate court is affirmed.

Judgment ajfirmed.

MR. JUSTICE CLARK,

dissenting:

I dissent from the majority opinion. The opinion not only leaves ambiguous which State’s law it applies, it also makes the erroneous statement that Illinois and New York law are the same. It is my opinion that New York law applies, and that under the law of that State, the adopted grandchildren of the settlor would be considered to be beneficiaries of the trust.

The majority opinion states: “Our object is to ascertain and give effect to the intention of the settlor. The evidence that we may consider to determine this intent is governed by the law of the forum, Illinois.” (77 Ill. 2d at 338.) Shortly thereafter, however, the majority opinion states that the law to be examined to define “lawful issue” “is that under which the settlor considered the trust provisions,” which would be either New York or Illinois. Then the majority opinion does not make a decision but states that “[e] xamination of the laws in effect in 1941 in these two States reveals that alike result is reached under either.” The majority then proceeds to apply New York law erroneously, and reaches a conclusion which is not only unsupported by fact, law or public policy, but one which is unfair.

If the majority had truly endeavored to discern the settlor’s intent, it would have applied the law of New York alone. That is the State where the settlor was domiciled; It is where the trust instrument was prepared and executed and, as Mr. Justice Craven said in his thoughful dissent in the appellate court: “It appears obvious that the law of the settlor’s domicile is likely to be the most helpful since it is the law with which she (and her scrivener) was the best acquainted.” (64 Ill. App. 3d 528, 535.) Moreover, I agree with the majority and dissenting opinions in the appellate court that section 277 of the Restatement (Second) of Conflict of Laws (1971), which was not mentioned by the majority herein, is helpful as a guide. But I do not think that it is determinative. Section 277 states that as to trusts involving interests in land the law of the situs of the land should apply. However, the comment to subsection (2) provides:

“The purpose of a rule of construction is to effectuate the intention of the settlor or testator, or what would most probably have been his intention if he had thought about the matter. Hence the courts of the situs, and other courts as well, should apply the rules of construction which the settlor or testator would most probably have wished to be applied.” (Emphasis added.) (Restatement (Second) of Conflict of Laws sec. 277, comment to subsection (2) (1971).)

See also section 268(2)(b).) It seems to me that we cannot indulge in the speculation that the settlor most probably would have wished to exclude her adopted grandchildren from becoming beneficiaries. I think if we are to make an inference about the settlor’s intention we should attribute to the settlor the attitude that she wished to treat each of her grandchildren alike, and not that she would discriminate among them on the basis of who was adopted and who was not. That inference is the fair and logical one to make, in the absence of any evidence indicating to the contrary. Application of New York law more closely carries out what it is fair to assume was the settlor’s intent.

The New York adoption statute passed in 1887 “unequivocally ordains that ‘the foster parents or parent and the foster child shall sustain toward each other the legal relation of parent and child and shall have all the rights and be subject to all the duties of that relation including the rights of inheritance from each other.’ ” (In re Will of Upjohn (1952), 304 N.Y. 366, 373, 107 N.E.2d 492, 494, citing N.Y. Dom. Rel. (1887), art. VII, sec. 115 [Supp. 1942]. This section, although renumbered in 1938 and 1961, remained unchanged from 1887 to 1963. The statute contains the additional paragraph quoted by the majority:

“As respects the passing and limitation over of real or personal property dependent under the provisions of any instrument on the foster parent dying without heirs, the foster child is not deemed the child of the foster parent so as to defeat the rights of remaindermen.” (N.Y. Dom. Rel., art. VII, sec. 115, eff. Apr. 9, 1938.)

However, this paragraph has been termed a “precautionary addendum” to the Domestic Relations Law (In re Bankers Trust Co. (1972), 31 N.Y.2d 322, 326 n.2, 327, 291 N.E.2d 137, 139 8c n.2) and has been given extremely limited effect by the New York courts. The precautionary addendum was finally deleted in 1963 and applies only to instruments executed prior to March 1, 1964. (In re Bankers Trust Co. (1972), 31 N.Y.2d 322, 326 n.2, 291 N.E.2d 137, 139 n.2, 338 N.Y.S.2d 895, 897 n.2.) In In re Will of Upjohn the issue was whether a testator intended to include the adopted daughter of his niece as a beneficiary under the terms of a testamentary trust. The language in the instrument indicated that if the niece predeceased the testator, the income was to be paid to her “lawful issue” or “descendants.” The court stated that the rule of construction in New York was that, in the absence of any indication of the testator’s intent, it will be assumed that the testator did not envisage adopted children taking under the limitation. Where, however, the testator’s intent to include an adopted child is clear, the limitation will be construed to comply with the intention. (In re Will of Upjohn (1952), 304 N.Y. 366, 375, 107 N.E.2d 492, 496.) The court found of surpassing significance the fact that the testator knew of the adoption. It stated, “Far more often than not, it is recognized, a testator ‘accepts the situation and relationship which the adopting parents have created.’ [Citation.]” (304 N.Y. 366, 375, 107 N.E.2d 492, 496.) The same factual situation is present herein. Finally, the court in Upjohn considered the applicability of the precautionary addendum to the facts presented. The court stated that section 115 was designed to prevent the perpetration of fraud on the rights of remaindermen by an adoption “for the very purpose of cutting out a remainder.” (304 N.Y. 366, 378, 107 N.E.2d 492, 498.) “The danger of fraud arises where the adoption takes place without the testator’s knowledge, especially when it occurs after his death. That was, we observe, the situation in Matter of Leask, 197 N.Y. 193, and is one circumstance that thoroughly differentiates that case from the one under consideration.” (304 N.Y. 366, 379, 107 N.E.2d 492, 498.) In re Accounting of Leask, cited by the majority, is also distinguishable from the instant case for the same reason.

Another New York case, In re Estate of Park (1965), 15 N.Y.2d 413, 207 N.E.2d 859, 260 N.Y.S.2d 169, went even further in supporting equal property rights for adopted children. There the issue was whether the adopted child and the natural child of the deceased grandson of the testator were to be treated alike. The testator died in 1909. He had created testamentary trusts for each of his surviving children, the income payable to a child for life, and as each child died, “the principal of the trust fund of such child *** shall be distributed among his issue him or her surviving in equal shares.” (15 N.Y.2d 413, 416, 207 N.E.2d 859, 859, 260 N.Y.S.2d 169, 170.) The testator’s daughter, a trust beneficiary, died in 1961. Her son had predeceased her. The son had a natural daughter and an adopted son. The testamentary trustee sought an accounting and construction of the will in order to decide whether each child would be entitled to a share of the principal of the trust or whether only the natural child could receive the principal.

The court departed from the former rule of construction which had previously prevailed in New York. It stated that, in light of New York policy embodied in section 117 (formerly section 115) of the Domestic Relations Law that an adopted child has the same legal relation to the parent as a natural child, the presumption arises that unless an intent to the contrary is expressed in the will or trust instrument an adopted child “must be deemed included, whether the word ‘heir’, ‘child’, ‘issue’ or other generic term” is used. (15 N.Y.2d 413, 417, 207 N.E.2d 859, 861, 260 N.Y.S.2d 169, 171.) The application of the precautionary addendum was limited by the court to cases where “the adoption itself and alone cut off a remainder.” (15 N.Y.2d 413, 418, 207 N.E.2d 859, 861, 260 N.Y.S.2d 169, 171.) It has been stated that the creation of the presumption in In re Estate of Park that adopted children be treated as natural children unless a contrary intent is expressed “appears to have overruled” In re Accounting of Leask (1910), 197 N.Y. 193, 90 N.E. 652, and even. In re Will of Upjohn (1952), 304 N.Y. 366, 107 N.E.2d492, as far as the presumption is concerned. (In re Estate of Grace (1965), 46 Misc. 2d 878, 879, 261 N.Y.S.2d 236, 238.) Also, New York Life Insurance & Trust Co. v. Viele (1899), 161 N.Y. 11, 55 N.E. 311, does not control because it was decided before the 1887 statute specifying that adopted children are to be treated as equal to natural children. (In re Estate of Grace (1965), 46 Misc. 2d 878, 879, 261 N.Y.S.2d 236, 238.) Leask and Viele are the only two New York cases cited by the majority herein.

I think therefore that it is abundantly clear that the majority has misstated the law of New York, as it existed in New York in 1941 and as it exists now. The presumption was created in In re Estate of Park where the court construed a testamentary trust of a testator who died in 1909. The court held that in the absence of an explicit purpose in the will or trust instrument to exclude a child, he must be deemed included. (15 N.Y.2d 413, 417, 207 N.E.2d 859, 860-61, 260 N.Y.S.2d 169, 171.) No reference to that presumption is made in the majority opinion. The operation of the presumption would require a different result than that which is reached under Illinois law; it would require that the defendants be considered beneficiaries under the trust agreement. I remain convinced that the result reached by applying New York law is the fair and correct one, and that the majority opinion is wrong.


author:
      MR. CHIEF JUSTICE GOLDENHERSH
      MR. JUSTICE UNDERWOOD,

text:
    (No. 51581.
    CHARLES A. GETTO, Appellee, v. THE CITY OF CHICAGO et al., Appellants.

      Opinion filed October 19, 1979.
    Rehearing denied November 30, 1979.

      UNDERWOOD and RYAN, JJ., dissenting.
    William R. Quinlan, Corporation Counsel, of Chicago (Daniel Pascale and Edmund Hatfield, Assistant Corporation Counsel, of counsel), for appellant City of Chicago.
    James R. Bryant, Jr., Edward A. Butts, and L. Bow Pritchett, of Chicago, for appellant Illinois Bell Telephone Company.
    Sidney Z. Karasik and Leonard E. Handmacher, of Chicago, for appellee.
    Joseph J. Butler, Jr., of Chicago (Asher, Goodstein, Pavalon, Gittler, Greenfield & Segall, Ltd., of counsel), for amicus curiae Illinois State Federation of Labor.
    Richard G. Ferguson, Laurence D. Lasky and James N. Nowacki, of Chicago (Isham, Lincoln & Beale, of counsel), for amicus curiae Commonwealth Edison Company.
    Peter B. Freeman, Garland H. Allan and Peter F. Lovato, III, of Hopkins, Sutter, Mulroy, Davis & Cromartie, of Chicago, for amicus curiae Peoples Gas, Light and Coke Co.
   MR. CHIEF JUSTICE GOLDENHERSH

delivered the opinion of the court:

Plaintiff, Charles A. Getto, “individually and on behalf of all persons similarly situated,” filed this action in the circuit court of Cook County against defendants, the city of Chicago and Illinois Bell Telephone Co. (Bell), alleging that defendants had erroneously collected from Bell’s customers sums greatly in excess of the amounts due under the defendant city’s municipal message tax. On behalf of all Bell customers in the city of Chicago, plaintiff sought a declaratory judgment, a temporary injunction, a permanent injunction, an accounting, a refund of tax moneys, and an award of attorney’s fees. The city and Bell filed separate and joint motions to dismiss the complaint; the circuit court denied the motions to dismiss and issued a preliminary injunction directing Bell to segregate and sequester that portion of the message tax alleged by plaintiff to be excessive. Both defendants appealed from the circuit court’s interlocutory order (58 Ill. 2d R. 307(a)(1)), and we allowed defendants’motions for direct appeal to this court under Rule 302(b) (58 Ill. 2d R. 302(b)).

There are several issues presented in this appeal, but the controlling question involves the construction of section 8 — 11—2 of the Illinois Municipal Code (Ill. Rev. Stat. 1977, ch. 24, par. 8 — 11—2),. which in pertinent part provides:

“The corporate authorities of any municipality may tax any or all of the following occupations or privileges:
1. Persons engaged in the business of transmitting messages by means of electricity, at a rate not to exceed 5% of the gross receipts from such business originating within the corporate limits of the municipality.
* * *
For the purpose of the taxes enumerated in this section:
‘Gross receipts’ means the consideration received for the transmission of messages, *** and for all services rendered in connection therewith valued in money, whether received in money or otherwise, including cash, credit, services and property of every kind and material and for all services rendered therewith, and shall be determined without any deduction on account of the cost of transmitting such messages, without any deduction on account of the cost of the service, product or commodity supplied, the cost of materials used, labor or service cost, or any other expenses whatsoever.”

Pursuant to this statutory authority, the city enacted an ordinance which imposed a tax “upon all persons engaged in the business of transmitting messages by means of electricity at the rate of five per cent of the gross receipts from such business [originating within the city of Chicago].” (Chicago Municipal Code sec. 132 — 31 (1978).) The definition of “gross receipts” in the Chicago Municipal Code (Chicago Municipal Code sec. 132 — 30 (1978)) is, for our purposes here, identical to the definition contained in the statute.

Section 36(a) of the Public Utilities Act (Ill. Rev. Stat. 1977, ch. 111 2/3, par. 36(a)) provides:

“Whenever a municipality pursuant to Section 8 — 11—2 of the Illinois Municipal Code, as heretofore and hereafter amended, imposes a tax on any public utility, such utility may charge its customers, in addition to any rate authorized by this Act, an additional charge equal to the sum of (1) an amount equal to such municipal tax, or any part thereof, (2) 3% of such tax, or any part thereof, as the case may be, to cover costs of accounting, and (3) an amount equal to the increase in taxes and other payments to governmental bodies resulting from the amount of such additional charge. Such utility shall file with the Commission a true and correct copy of the municipal ordinance imposing such tax; and also shall file with the Commission a supplemental schedule applicable to such municipality which shall specify such additional charge and which shall become effective upon filing without further notice. Such additional charge shall be made by the addition of a uniform percentage to the amounts payable for intrastate utility service in such municipality and shall be shown separately on the utility bill to each customer. The Commission shall have power to investigate whether or not such supplemental schedule correctly specifies such additional charge, but shall have no power to suspend such supplemental schedule. If the Commission finds, after a hearing, that such supplemental schedule does not correctly specify such additional charge, it shall by order require a refund to the appropriate customers of the excess, if any, with interest, in such manner as it shall deem just and reasonable, and in and by such order shall require the utility to file an amended supplemental schedule corresponding to the finding and order of the Commission.”

The term “gross receipts” upon which the 5% municipal tax is imposed has been construed by defendants to include not only customer billings for the transmission of messages originating within the city, but also all taxes assessed on those billings, including the municipal tax itself. For example, if a customer’s pretax monthly bill were $10 (ignoring, for the sake of simplicity, the existence of Federal and State taxes), the amount upon which the municipal tax is imposed would not be $10, but $10.50. This results in a municipal tax of 52Yz cents, instead of 50 cents, plus a correspondingly larger amount withheld by Bell for its accounting costs.

Exhibits contained in the record show that, immediately following the enactment of the enabling legislation, representatives of the public utilities operating in Illinois met with personnel of the Illinois Commerce Commission and a formula was approved for the addition of a percentage to be added to the net (pretax) billings “in order for them [the utilities] to retain the same amount of dollars after the municipal tax is applied as before the tax was applied.” These percentages, determined by means of an algebraic equation, are added to the billings and passed on to the customers. In this case they equal 6.5% of the customer’s pretax bill.

In his complaint plaintiff alleged that defendant’s computation of “gross receipts” to which the tax was applicable did not conform to the statutory definition of “gross receipts”; was capable of being compounded to infinity; was irrational, unreasonably burdensome, and oppressive; and deprived plaintiff of due process. Plaintiff also averred that the Illinois Commerce Commission had no power to adjudicate the validity and constitutionality of an ordinance or statute; that he was without an adequate remedy at law; and that the large number of Bell customers in Chicago, the common questions of law and fact, and the advantages of a single common judgment required that the suit be maintained as a class action. In his prayer for relief plaintiff sought a declaration that the part of the message tax constituting a tax on itself was illegal, invalid, and a violation of due process; he also asked that the circuit court temporarily and permanently enjoin defendants from collecting the alleged excess amounts, or, alternatively, that the court order the money paid into a protest fund, pending the outcome of the cause; that the court order Bell to make a complete accounting of the Chicago message tax collected by it; and that judgment be entered ordering refunds of excessive amounts paid by Bell’s Chicago customers.

Bell filed a motion to dismiss, asserting that the municipal tax was an occupational tax on the business of transmitting messages by electricity, and not a tax on the telephone subscribers. The amounts shown as city taxes in its bills, Bell argued, were, therefore, merely part of the total price for telephone service. Since plaintiff’s contention was, essentially, that an excessive amount was charged for service, Bell argued, plaintiff was required to seek a remedy before the Illinois Commerce Commission, which has primary jurisdiction over telephone rates. (Ill. Rev. Stat. 1977, ch. 111 2/3, pars. 36, 76.) The city filed a motion to dismiss, substantially similar to Bell’s motion, alleging also that the “taxpayer” was Bell and that the Illinois Commerce Commission was the proper forum in which plaintiff should seek a remedy.

Plaintiff filed a memorandum in opposition to the motions and defendants, upon leave of court, filed a joint motion to dismiss, averring that the factual allegations in plaintiff’s complaint failed to state a cause of action and were insufficient to support either a cause of action in the circuit court or a class action, and that the circuit court lacked primary jurisdiction to order refunds of excessive telephone rates. Alternatively, defendants maintained that if the complaint stated a cause of action it was for declaratory judgment rather than equitable relief and the cause should be transferred from the chancery division of the circuit court.

The circuit court, finding that defendants had improperly construed the gross receipts base of the city message tax to include the tax itself, entered an order denying the motions to dismiss the complaint and issued a preliminary injunction. The injunction directed Bell to pay into a special protest fund that portion of the municipal message tax charge which exceeded 5% of “gross receipts” and that part of the additional charge for collection and accounting based on the excessive tax. The court allowed the cause to proceed as a class action and reserved for later consideration the other items of relief sought by plaintiff.

Defendants contend that plaintiff lacked standing to bring this action for the reason that the tax was levied on Bell and that it, and not plaintiff, paid the city message tax; that the “additional charge,” if improperly collected, resulted in an excessive telephone rate; that the Illinois Commerce Commission, pursuant to section 36(a) and section 72 of the Public Utilities Act (Ill. Rev. Stat. 1977, ch. 111 2/3, pars. 36(a), 76), has primary jurisdiction to order refunds of excessive telephone rates; and that the proper forum for determining whether the rate was improperly collected is the Illinois Commerce Commission. Amicus curiae Commonwealth Edison Company argues that the defendants have correctly construed the statute and that “the legislature intended no deduction for amounts collected on account of the tax itself.” It argues, too, that “a tax computed on receipts which include charges made on account of the tax is constitutional.”

Amicus curiae People’s Gas, Light & Coke Company contends that plaintiff lacks standing to seek an interpretation of the ordinance; that the circuit court “lacks subject matter jurisdiction over plaintiff’s claim for refund”; that the complaint fails to state a cause of action; that the General Assembly and the city council “assumed the Illinois Supreme Court’s interpretation of ‘gross receipts’ in enacting the enabling act and ordinance”; that plaintiff is estopped from obtaining retroactive relief; and that his claim is barred by the statute of limitations.

We consider first the question of plaintiff’s standing to bring this action. We do not agree with defendants that because plaintiff is not the initial taxpayer he is without standing to challenge the validity of the ordinance. A similar question was involved in Crane Construction Co. v. Symons Clamp & Manufacturing Co. (1962), 25 Ill. 2d 521. In Crane, plaintiff, the lessee of certain construction equipment, challenged the amendments to the Retailers’ Occupation Tax Act and Use Tax Act that made those acts applicable to lease transactions as well as sales (held unconstitutional in International Business Machines Corp. v. Department of Revenue (1962), 25 Ill. 2d 503). Like the message tax in the present cause, the retailers’ occupation tax (Ill. Rev. Stat. 1977, ch. 120, par. 440 et seq.) was levied upon those engaged in particular occupations. Similarly, an accompanying use tax authorized the nominal taxpayer to pass on the entire tax to its customers. Addressing the defendants’ contention in Crane that plaintiff, since it was not the taxpayer, lacked standing to challenge the tax, the court, after noting the “complementary and interlocking nature” of the retailers’ occupation tax and the use tax, said that plaintiff was not compelled to rely upon the lessor for protection of its interest and that “To the extent to which the validity of the use tax and its application to plaintiff is dependent upon the validity of the retailers’ occupation tax, it may also challenge that tax.” (25 Ill. 2d 521, 528.) This observation is equally applicable to the present taxing scheme.

In support of their contention that Bell is the taxpayer and that plaintiff is without standing to bring this action, defendants cite Agron v. Illinois Bell Telephone Co. (7th Cir. 1971), 449 F.2d 906, cert. denied (1972), 405 U.S. 954, 31 L. Ed. 2d 231, 92 S. Ct. 1171.

Agron involved the question whether the Illinois message tax and the same Chicago city message tax considered here were properly includable in the tax base on which the Federal excise tax was computed. Agron contended that the State and city taxes were actually imposed on telephone subscribers and that the amounts paid for those taxes could not be included in “amounts paid for *** communication services” as provided by the Federal statute. The court disagreed; after discussing the Illinois precedents, without reference, however, to Crane Construction Co. v. Symons Clamp & Manufacturing Co. (1962), 25 Ill. 2d 521, the court determined that the message taxes were occupation taxes imposed upon Illinois Bell and that the charges passed along to subscribers could be included in the tax base for the Federal excise tax.

We do not consider Agron controlling. Unlike here, the question of the plaintiff’s standing to bring that action was neither raised by the parties nor decided by the court. Clearly Bell’s subscribers, who have fully borne the burden of the city’s message tax, have “a personal claim, status or right which is capable of being affected” (Underground Contractors Association v. City of Chicago (1977), 66 Ill. 2d 371, 376), and thus have standing to bring this action.

We consider next the contention of the defendants and amici that the Illinois Commere Commission has primary jurisdiction to order refunds of excessive telephone rates and that plaintiff has not exhausted his administrative remedies. In Illinois Bell Telephone Co. v. Allphin (1975), 60 Ill. 2d 350, the court considered the doctrine of exhaustion of remedies and concluded that exceptions to the requirement should be made only where an ordinance or statute is attacked as unconstitutional in its entirety, where there exist multiple remedies before an administrative body and at least one has been exhausted, or where irreparable harm will result from further pursuit of administrative remedies. (60 Ill. 2d 350, 358.) In Northwestern University v. City of Evanston (1978), 74 Ill. 2d 80, the court, citing Van Laten v. City of Chicago (1963), 28 Ill. 2d 157, and County of Lake v. MacNeal (1962), 24 Ill. 2d 253, recognized that “[a] party will not, of course, be required to exhaust his administrative remedies when it would be patently useless to seek relief before local bodies.” 74 Ill. 2d 80, 88.

It is not disputed that since the enactment of the enabling legislation the Illinois Commerce Commission has authorized utilities to compute the tax in the manner followed here. Although we do not read plaintiff’s attack on the ordinance as an assertion that it is “unconstitutional in its entirety” (Allphin), we are of the opinion that the undisputed facts demonstrate that an attack on the percentage permitted to be charged, on the grounds asserted here, would indeed be futile, thus invoking the exception recognized in Northwestern University v. City of Evanston.

The sole issue presented here is one of statutory interpretation, and there is no question which requires the Commerce Commission’s expertise. Although under section 36(a) of the Public Utilities Act the Commission has the power “to investigate whether or not such supplemental schedule correctly specifies such additional charge” (Ill. Rev. Stat. 1977, ch. 111 2/3, par. 36(a)), it has no power to suspend the additional charge. Its powers are limited to requiring a refund of the excess and ordering the filing of an amended supplemental schedule. Without the power to suspend the charge and with the subscriber’s recourse being limited solely to seeking a refund, it can hardly be said that the administrative procedure provides plaintiff an adequate remedy. Under these circumstances we hold that the circuit court properly exercised jurisdiction in this cause.

Finally we consider the question whether the city’s message tax itself should be included in the tax base on which the same message tax is calculated. Citing Vause & Striegel, Inc. v. McKibbin (1942), 379 Ill. 169, and Agron v. Illinois Bell Telephone Co. (7th Cir. 1971), 449 F.2d 906, defendants argue that the ordinance provides that the 5% tax is to be levied on “gross receipts,” which is defined as the consideration received for the transmission of messages, without any deduction for “any other expenses whatsoever.” In Vause the court considered a rule promulgated by the Department of Finance which provided that amounts added by retailers to the purchase price of goods in order to pay the 3% retailers’ occupation tax were to be included in the base on which the tax was computed. In the example given in the rule itself, if a retailer charged $1 for goods and added 3 cents to the price to reimburse itself for the tax, the “gross receipts” on which the tax would be levied would be $1.03. Plaintiffs contended that only $1 should be included in the “gross receipts.” The court disagreed and held the rule valid, pointing out that the General Assembly had made no distinction between amounts billed the customer as tax or as purchase price. The retailers’ occupation tax was later amended to allow the deduction of amounts taken by retailers for reimbursement of the tax. In Agron the Seventh Circuit held that the Illinois and Chicago message taxes were includable in the base on which the Federal excise tax was computed.

Defendants contend that both Vause and Agron stand for the proposition that a tax passed on to consumers is a part of the selling price charged them and is therefore includable in the receipts subject to the tax. As plaintiff points out, however, neither Vause nor Agron is dispositive of the present case. In Vause, unlike Bell here, the retailer, in passing the tax along to its customers, acted without statutory authority, and absent such statutory authority the additional charge merely increased the price of the goods sold. In Agron the court did not consider the propriety of assessing a tax on the tax itself; it decided that State and local occupational taxes were properly includable in the base on which the Federal excise tax was assessed.

In support of its contention that it has correctly included in “gross receipts” the amount of the municipal tax, Bell cites Old Colony Trust Co. v. Commissioner (1928), 279 U.S. 716, 73 L. Ed. 918, 49 S. Ct. 499, and Safe Harbor Water Power Corp. v. United States (Ct. Cl. 1962), 303 F.2d 928. In Old Colony Trust Co. the Supreme Court held that an employer’s payment of its employee’s income tax constituted additional taxable income to the employee. In Safe Harbor Water Power Corp. the Court of Claims held that successive payments of the additional tax until the tax obligation was reduced to an infinitesimally small amount were also taxable. Defendants argue that the factual situations in those cases are analogous to that here, and that if income tax reimbursements are deemed income upon which further taxes can be imposed, the tax paid by plaintiff and the members of the class was a portion of “gross receipts” on which the city message tax was properly levied. We do not so interpret those cases. In our opinion they are authority only for the proposition that reimbursement by a third person to a taxpayer of his income taxes paid was a benefit to the recipient substantially in distinguish able from other income and therefore taxable, and is not authority for defendants’ interpretation of the statute here considered.

The definition of “gross receipts” contained in section 1 of the Messages Tax Act provides that, “In case credit is extended, the amount thereof shall be included only as and when payments are received.” (Ill. Rev. Stat. 1977, ch. 120, par. 467.1.) Although no similar provision is contained in the Chicago ordinance, it is clear that services provided on credit are not includable in “gross receipts” until payment is actually received. The long-established rule is that the “Taxing laws are to be strictly construed and they are not to be extended beyond the clear import of the language used. If there is any doubt in their application they will be construed most strongly against the government and in favor of the taxpayer. Peoples Gas Light Co. v. Ames, 359 Ill. 152.” (Oscar L. Paris Co. v. Lyons (1956), 8 Ill. 2d 590, 598.) Although the tax was levied upon Bell, it was passed on to the subscriber, and no liability was incurred on Bell’s part until payment was actually received. It would appear, therefore, that plaintiff, as the one who paid the tax, is entitled to the benefit of the foregoing rule, and its application would proscribe the construction of the statute which would result in an increase, both in the amount of the tax paid the city and the “costs of accounting” permitted to be charged by the nominal taxpayer. We hold, therefore, that construing the term “gross receipts” to include the municipal tax is erroneous.

For the foregoing reasons the order of the circuit court of Cook County is affirmed and the cause is remanded to that court for further proceedings.

Order affirmed; cause remanded.

MR. JUSTICE UNDERWOOD,

dissenting:

My disagreement with the majority stems not from the resolution of the narrow tax question involved herein, but from the fact that my colleagues felt compelled to address that issue at all. In my opinion, the plaintiffs should be required to exhaust their administrative remedies before seeking judicial relief.

The majority refers to our recent decision in Northwestern University v. City of Evanston (1978), 74 Ill. 2d 80, as support for the conclusion that the plaintiffs should not be required to exhaust their administrative remedies before the Illinois Commerce Commission. While requiring exhaustion in the Northwestern University case, we cited Van Laten v. City of Chicago (1963), 28 Ill. 2d 157, and County of Lake v. MacNeal (1962), 24 Ill. 2d 253, for the proposition that “[a] party will not, of course, be required to exhaust his administrative remedies when it would be patently useless to seek relief before local bodies.” (74 Ill. 2d 80, 88.) The crucial determination which must be made, of course, concerns the precise meaning of the phrase “patently useless.”

In Van Laten, the plaintiff brought a declaratory judgment action seeking a judicial determination that a certain Chicago zoning ordinance which classified plaintiff’s property as residential was void. The court held that it was unnecessary for the plaintiff to exhaust his local administrative remedies where the city of Chicago had twice amended its zoning ordinance after the plaintiff had filed his declaratory judgment action, and the amendments retained the residential classification despite an adverse recommendation by the master after evidence had been taken. In County of Lake, the court held that where a municipality institutes an action in court against a property owner for violation of a zoning ordinance, the property owner is entitled to defend on the grounds that the ordinance is invalid even though he has not first sought local administrative relief, since the action of the municipality in filing a complaint indicates that such a step would be useless.

What is involved in the present case, however, is quite a different matter. Apparently, no one has appeared before the Commerce Commission to challenge the method of computation that is employed in calculating the amount of the municipal message tax. While it is true that the Commerce Commission staff was involved in the development of the present formula for computation of the tax, there is no evidence that, given the opportunity, the Commission . would not act fairly and competently in resolving a challenge to the tax. In short, under the facts and circumstances of the present case, I do not think it can be said that it would be “patently useless” for the plaintiffs to present their complaint to the Illinois Commerce Commission. Therefore, the narrow exception to the exhaustion requirement recognized by this court in the Northwestern University case would appear to be inapplicable here.

Furthermore, contrary to the conclusion of the majority, I think the administrative procedures set forth in the Public Utilities Act (Ill. Rev. Stat. 1977, ch. 111 2/3) provide plaintiffs with an adequate remedy. Section 72 of the Act provides in part, as follows:

“When complaint has been made to the Commission concerning any rate or other charge of any public utility and the Commission has found, after a hearing, that the public utility has charged an excessive or unjustly discriminatory amount for its product, commodity or service, the Commission may order that the public utility make due reparation to the complainant therefor, with interest at the legal rate from the date of payment of such excessive or unjustly discriminatory amount.” Ill. Rev. Stat. 1977, ch. 111 2/3, par. 76.

While plaintiffs could have proceeded under section 72, an alternative, and more specific, remedy is provided in section 36(a):

“The Commission shall have power to investigate whether or not such supplemental schedule correctly specifies such additional charge, but shall have no power to suspend such supplemental schedule. If the Commission finds, after a hearing, that such supplemental schedule does not correctly specify such additional charge, it shall by order require a refund to the appropriate customers of the excess, if any, with interest, in such manner as it shall deem just and reasonable, and in and by such order shall require the utility to file an amended supplemental schedule corresponding to the finding and order of the Commission.” (Emphasis added.) Ill. Rev. Stat. 1977, ch. 111 2/3, par. 36(a).

In contrast to the majority’s statement that the customer’s only remedy is a refund, this section clearly grants the Commerce Commission authority to investigate the “additional charge,” hold hearings on the matter, order refunds with interest, and require the utility to file an amended supplemental schedule in accordance with the Commission’s findings. It is difficult to conceive of a more complete and adequate remedy.

The majority’s concern about the Commission’s lack of power to “suspend the additional charge” is misplaced. Although the Commission is given the power to suspend certain rate schedules in section 36 of the Public Utilities Act, but not in section 36(a), this in no way impairs the effectiveness of the remedies provided in section 36(a). The procedure for suspension of a proposed rate change is set forth in section 36 as follows:

“Whenever there shall be filed with the Commission any schedule stating an individual or joint rate or other charge *** the Commission shall have power *** to enter upon a hearing concerning the propriety of such rate or other charge *** and pending the hearing and decision thereon, such rate or other charge *** shall not go into effect. *** All such rates or other charges *** not so suspended shall, on the expiration of 30 days from the
time of filing the same with the Commission *** go into effect and be the established and effective rates or other charges ***.” (Ill. Rev. Stat. 1977, ch. 111 2/3, par. 36).

The language was interpreted in Antioch Milling Co. v. Public Service Co. (1954), 4 Ill. 2d 200, 204, to mean “that the commission shall analyze a proposed rate change, and reach a conclusion as to whether it is to be permitted to go into effect without a formal hearing, or whether it is to be suspended until a formal hearing has been had.”

In contrast, section 36(a) provides that the supplemental schedule specifying the “additional charge” becomes effective upon filing and may not be suspended by the Commission. All this means, however, is that the supplemental schedule is effective pending any investigation and hearing by the Commission. If, after a hearing, the Commission determines that the supplemental schedule does not specify correctly the additional charge, it has the power to order a refund with interest and can require the utility to file an amended supplemental schedule correctly stating the additional charge. Despite the Commission’s lack of authority to suspend the supplemental schedule pending a hearing thereon, it can hardly be said that the plaintiffs lack an adequate remedy before the Commission.

Therefore, I would require the plaintiffs to exhaust their administrative remedies before the Commerce Commission.

MR. JUSTICE RYAN joins in this dissent.