                                                                                       Digitally signed by
                                                                                       Reporter of Decisions
                                                                                       Reason: I attest to the
                                                                                       accuracy and integrity
                            Illinois Official Reports                                  of this document
                                                                                       Date: 2016.01.08
                                                                                       09:13:51 -06'00'
                                   Appellate Court



        Gillespie Community Unit School District No. 7, Macoupin County, Illinois v.
                     Union Pacific R.R. Co., 2015 IL App (4th) 140877



Appellate Court        GILLESPIE COMMUNITY UNIT SCHOOL DISTRICT NO. 7,
Caption                MACOUPIN COUNTY, ILLINOIS; and THE BOARD OF
                       EDUCATION OF THE GILLESPIE COMMUNITY UNIT SCHOOL
                       DISTRICT NO. 7, MACOUPIN COUNTY, ILLINOIS, Plaintiffs-
                       Appellees and Cross-Appellants, v. UNION PACIFIC RAILROAD
                       COMPANY, Defendant-Appellant and Cross-Appellee (Illinois Mine
                       Subsidence Insurance Fund, Intervenor-Appellee and Cross-
                       Appellant).


District & No.         Fourth District
                       Docket No. 4-14-0877



Filed                  November 6, 2015
Modified upon
denial of rehearing    December 30, 2015


Decision Under         Appeal from the Circuit Court of Macoupin County, No. 09-L-22; the
Review                 Hon. Patrick J. Londrigan, Judge, presiding.



Judgment               Reversed and remanded.



Counsel on             Timothy G. O’Connell, Dan H. Ball, Eric D. Martin, and John Michael
Appeal                 Clear, all of Bryan Cave LLP, of St. Louis, Missouri, and Barry
                       Levenstam (argued) and Michael A. Scodro, both of Jenner & Block
                       LLP, of Chicago, for appellant.
                              Rick Verticchio and Gina Verticchio, both of Verticchio & Verticchio,
                              of Gillespie, and Thomas J. Verticchio (argued) and Matthew T.
                              Kinst, both of Swanson, Martin & Bell, LLP, of Chicago, for appellee
                              Gillespie Community Unit School District No. 7, Macoupin County,
                              Illinois.

                              James E. Betke, of James E. Betke, P.C., of Oak Park, for appellee
                              Illinois Mine Subsidence Insurance Fund.



     Panel                    JUSTICE APPLETON delivered the judgment of the court, with
                              opinion.
                              Presiding Justice Knecht and Justice Steigmann concurred in the
                              judgment and opinion.



                                                OPINION

¶1          There are three plaintiffs in this case. The first two plaintiffs are Gillespie Community
       Unit School District No. 7 and its board of education, and we will refer to those two
       plaintiffs, collectively, as “the School District.” The third plaintiff is the Illinois Mine
       Subsidence Insurance Fund (Fund). The defendant is Union Pacific Railroad Company
       (Union Pacific).
¶2          Plaintiffs brought this action to recover damages from Union Pacific for a coal mine
       subsidence, which happened in Benld in March 2009 and which destroyed an elementary
       school and damaged a house. The school belonged to the School District. The house
       belonged to William and Jennifer Carter. The Carters are not parties to this case, but the Fund
       is a reinsurer of their house, and it also is a reinsurer of the school.
¶3          The Fund seeks from Union Pacific the amounts it paid as a reinsurer, and the School
       District seeks to be compensated for the destruction of its school and the damage to its land.
¶4          Union Pacific protests, however, that it did not dig the coal mine. Rather, Superior Coal
       Company (Superior Coal) did so long ago. Even so, plaintiffs seek to hold Union Pacific
       liable on the theory that in 1956 Chicago and North Western Railway Company (Chicago
       and North Western) assumed Superior Coal’s liability for subsidences or, alternatively, on
       the theory that Superior Coal was, all along, Chicago and North Western’s mere
       instrumentality or alter ego. The School District also alleges that Chicago and North Western
       directly participated in Superior Coal’s mining activities. It appears to be undisputed that if
       any of those theories holds true, the liability ultimately got passed along, by merger, to Union
       Pacific.
¶5          In the trial court’s view, the alleged facts failed to support any of those theories, and the
       court granted Union Pacific’s motion to dismiss the complaints, with prejudice, for failure to
       state a cause of action (735 ILCS 5/2-615 (West 2010)). Plaintiffs appealed. We upheld the
       dismissal of some counts and reversed the dismissal of other counts. Gillespie Community


                                                   -2-
       Unit School District No. 7 v. Union Pacific R.R. Co., 2012 IL App (4th) 110142-U, ¶ 147. We
       could not say it was clear, on the face of the complaints, that no set of facts could be proved
       that would entitle plaintiffs to recover on the counts alleging assumption of liability, direct
       participation, and alter ego. Id. Looking at those counts in the light most favorable to
       plaintiffs, we decided to remand the case for further proceedings. Id.
¶6         On remand, the parties filed cross-motions for summary judgment. In the hearing on
       these motions, the trial court understood our discussion of plaintiffs’ theory of assumption of
       liability as leaving the court no choice but to enter a summary judgment in plaintiffs’ favor
       on that theory and to award them $9.85 million in damages, although the court made a
       summary determination in Union Pacific’s favor on the remaining theories of direct
       participation and alter ego (which could not logically coexist with a theory of assumption of
       liability).
¶7         Actually, our preceding decision left some room for proof on the question of assumption
       of liabilities: we observed that the term “liabilities” in Chicago and North Western’s
       resolution of 1956 could mean perfected liabilities, contingent liabilities, or both. Id. ¶ 82. On
       remand, Union Pacific presented extrinsic evidence that by assuming Superior Coal’s
       “liabilities,” Chicago and North Western intended to assume only perfected liabilities,
       liabilities that accrued before Superior Coal’s dissolution–not unaccrued, unknowable,
       contingent liabilities, such as liabilities for subsidences occurring after dissolution. Because
       the record appears to contain no evidence contradicting Union Pacific’s evidence in that
       respect, we conclude, de novo, that Union Pacific eliminated any genuine issue as to the
       meaning of “liabilities” in Chicago and North Western’s resolution of 1956, and
       consequently we reverse the summary judgment in plaintiffs’ favor. Chicago and North
       Western never assumed liability for future subsidences, that is, subsidences occurring after
       the dissolution of its subsidiary, Superior Coal.
¶8     That does not mean the case is over. Both plaintiffs and Union Pacific are only partly right in
       their cross-motions for summary judgment, and we only partly agree with their cross-appeals.
       Plaintiffs are entitled to a summary determination in their favor on Union Pacific’s third,
       sixth, and ninth affirmative defenses, as the trial court correctly concluded. Union Pacific is
       entitled to a summary determination in its favor on the theory of assumption of liability, and
       thus there is no occasion to reform Chicago and North Western’s resolution, as Union Pacific
       proposes to do. Union Pacific also is entitled to a summary determination on the theory of
       direct participation. But there still is a genuine issue of material fact as to plaintiffs’ alter ego
       theory. With that theory still at issue, it would be premature to address the School District’s
       remaining contention that it was entitled to prove the cost of grouting (filling the mine rooms
       with concrete). See Pielet v. Pielet, 2012 IL 112064, ¶ 57; Business & Professional People for
       the Public Interest v. Illinois Commerce Comm’n, 136 Ill. 2d 192, 228 (1989); In re Marriage
       of Osborn, 206 Ill. App. 3d 588, 600 (1990).
¶9         Because there still is a genuine issue as to whether Superior Coal was the alter ego or
       instrumentality of Chicago and North Western, we reverse the summary judgment in
       plaintiffs’ favor, and we remand this case for further proceedings.
¶ 10       We now will explain, in greater detail, how we arrived at this decision, beginning with
       the evidence in the summary judgment proceedings.



                                                     -3-
¶ 11                                        I. BACKGROUND
¶ 12                                  A. The Origin of Superior Coal
¶ 13       From about 1935 to 1947, Superior Coal was in litigation with the Illinois Department of
       Finance (Department). The Department claimed that Superior Coal owed a retailers’
       occupation tax in the total amount of $97,838 for coal Superior Coal had sold to its parent
       corporation, Chicago and North Western, from July 1933 to May 1935. Superior Coal
       contested this claim for back taxes because Superior Coal regarded itself as a department of
       Chicago and North Western, rather than a bona fide separate corporation, and the purported
       sales as intracorporate transfers for cost.
¶ 14       Much of our information about the relationship between those two companies in the early
       decades of the 20th century comes from documents filed in that litigation, both in the
       Department and in the supreme court. (None of the briefs disputes the admissibility of these
       or any other documents produced in discovery. In fact, there was a stipulation to
       admissibility.)
¶ 15       The richest source of information about the origin of Superior Coal is a document that
       Superior Coal filed with the Department on August 6, 1935: “Summary of History of the
       Superior Coal Company and Its Relationship With the Chicago and North Western Railway
       Company.” According to this “Summary,” Chicago and North Western came up with a plan,
       around 1900, to acquire coal more cheaply–coal that it needed to power its steam
       locomotives. Hitherto, when buying coal on the market, Chicago and North Western had to
       pay not only the seller’s price, which, of course, was set high enough to fetch the seller a
       profit, but also freight charges to transport the coal via foreign rails to Chicago and North
       Western’s own lines. This was expensive.
¶ 16       The first step Chicago and North Western took to free itself from its costly dependence
       on commercial coal suppliers and other railroads was to buy 25,000 acres of coal lands in
       Macoupin County. It then extended its lines to these coal lands.
¶ 17       The next step, in 1903, was to form a subsidiary, Superior Coal, and to convey the coal
       lands to it. Initially, Chicago and North Western capitalized Superior Coal in the amount of
       $1.5 million. Later, it increased the capitalization to $2 million, represented by 20,000 shares.
       Chicago and North Western owned 19,995 of these shares, and the directors of Superior Coal
       owned the remaining 5 shares, 1 apiece, as a condition of being qualified to serve as directors
       of Superior Coal. (In 1903, Illinois statutory law required that the directors be “bona fide
       shareholders in such association.” 1903 Ill. Laws 125.)
¶ 18       All 20,000 of these shares were voting shares. One share equaled one vote. Thus, for
       instance, in a special meeting of Superior Coal’s stockholders on July 14, 1947, a total of
       20,000 votes were cast on the question of whether Nye F. Morehouse and Arthur R. Seder
       should be elected directors of Superior Coal. The decision was unanimous. Chicago and
       North Western, by a proxy, Barret Conway, cast 19,995 votes in favor of Morehouse and
       Seder, and the 5 directors of Superior Coal cast the remaining 5 favorable votes.
¶ 19       If ever, in the history of Superior Coal, there was a dissenting vote in any meeting of its
       shareholders and board of directors, we have not found one in the minutes in the record. It
       appears that the five directors of Superior Coal always voted with the majority shareholder,
       Chicago and North Western. In fact, Superior Coal publicly stated that its directors held their
       shares for the benefit of Chicago and North Western–although, presumably, the purpose of


                                                   -4-
       requiring directors to be “bona fide shareholders” was to align their interests with the
       company they managed and cause them to be independent from outside influences. Id. In an
       “Additional Abstract of Record” in Superior Coal Co. v. Department of Finance, 377 Ill. 282
       (1941) (Superior Coal I), filed in April 1941, Superior Coal’s attorney, Nelson Trottman,
       represented to the supreme court: “These five director’s qualifying shares are held for
       [Chicago and North Western].”

¶ 20                              B. Common Officers and Directors
¶ 21       Superior Coal informed the Department that, since 1903, every director of Superior Coal
       had been simultaneously an officer or employee of Chicago and Northwestern. Likewise, the
       officers of Superior Coal, with one exception, were simultaneously officers of Chicago and
       North Western, usually in a corresponding position. The president of Superior Coal was Fred
       S. Pfahler, who also was the coal traffic manager of Chicago and North Western.

¶ 22                                  C. Selling Coal to the Parent at Cost
¶ 23       According to Pfahler’s testimony in the tax case, the routine was for Chicago and North
       Western’s general manager to send a memorandum each week to Superior Coal’s purchasing
       agent, designating the amount of coal to be mined and loaded for the next week. At the end
       of the month, tonnage statements would be prepared, and using these tonnage statements,
       Pfahler would “ ‘figure out what cash’ ” Superior Coal would “ ‘need to meet [its] current
       bills,’ ” that is, “ ‘the cost of operating.’ ” Having made his calculations, Pfahler then would
       write the purchasing agent, stating that Superior Coal would “ ‘need so much per ton’ ”: a
       figure that “ ‘[did] not represent anything beyond cost.’ ” Paying no more than cost, Chicago
       and North Western consumed all of Superior Coal’s production (except that Superior Coal
       sold trivial amounts of coal to its employees).
¶ 24       It appears that, at least from the early 1930s onward, Superior Coal charged Chicago and
       North Western, its sole customer, only the cost of production. We are unclear exactly how far
       back in time that cost-only policy went. Even from July 1932 to December 1934, when
       Superior Coal was charging Chicago and North Western 20 cents per ton in excess of
       Superior Coal’s cost of production, it still was charging, effectively, only the cost of
       production, because by prior agreement Superior Coal turned around and paid the excess to
       Chicago and North Western’s creditor, the Reconstruction Finance Corporation, as assigned
       dividends. In December 1934, Superior Coal resumed charging Superior Coal only the cost
       of production.
¶ 25       The contract of December 27, 1934, recited: “[F]or many years [Superior Coal] has,
       although constituting a separate corporation, been managed and operated, and its properties
       managed and operated, as a branch or department of [Chicago and North Western], and
       wholly in its interest ***.”
¶ 26       Superior Coal told the supreme court the same thing in the tax case, Superior Coal I. The
       additional abstract of the record in that case states: “At all times since its organization, the
       Superior Coal Company has been under the complete domination and control of [Chicago
       and North Western] as a mere branch or department of [Chicago and North Western’s]
       business.” As summarized in the supreme court’s decision, Superior Coal’s position was as
       follows:


                                                  -5-
              “[Superior Coal] maintains that it is, in fact, but a department or branch of the railway
              company [(i.e., Chicago and North Western)]; that it is merely an agent or
              instrumentality of the parent corporation; that coal mined by the plaintiff for use in
              the railway company’s business is, in reality, mined by the railway company itself,
              and that the transactions in question between the plaintiff and its parent are no more
              ‘sales’ than would be any interdepartmental transfer, or the direct mining by the
              railway company of coal for its own use through an agent, under any circumstances to
              which the law of agency is applicable.” Id. at 283-84.

¶ 27                          D. Pledging Collateral for the Parent’s Loan
¶ 28       In 1934, Chicago and North Western needed to borrow money from banks in New York
       City. The banks required collateral, and Chicago and North Western turned to its subsidiary,
       Superior Coal.
¶ 29       According to a resolution of Superior Coal’s directors, dated March 16, 1934, Chicago
       and North Western had requested Superior Coal to pledge some bonds as collateral. These
       were in fact some bonds of Chicago and North Western in which Superior Coal had invested.
       By resolution of the directors of Superior Coal, the bonds were turned over to the banks to
       secure Chicago and North Western’s loan. The consideration, if any, for Superior Coal is
       unclear.
¶ 30       Afterward, the loan was repaid, and the collateral was returned.

¶ 31                                          E. Dividends
¶ 32       From 1911 to 1952, Superior Coal paid a total of $14.725 million in dividends to Chicago
       and North Western. The dividends for the years 1932, 1933, and 1934 ($100,000 and
       $400,000 and $300,000, respectively), resulting from temporarily charging Chicago and
       North Western 20 cents a ton above the cost of production, were assigned to the
       Reconstruction Finance Corporation pursuant to the contract of July 22, 1932, to pay off
       Chicago and North Western’s loan.
¶ 33       From 1948 to 1952, Superior Coal’s total net income was $1,245,318, but it declared a
       total of $1.850 million in dividends during that period.

¶ 34                      F. Depressed Conditions in the Coal Mining Industry
                                   in the Late 1940s and Early 1950s
¶ 35       Throughout Superior Coal’s existence, until about 1947, Chicago and North Western
       consumed its entire coal production. Beginning in 1947, Superior Coal began selling a
       portion of its production commercially. Because the demand for Illinois coal was declining,
       these commercial sales went from a high of 463,000 tons in 1947 to 86,000 tons in 1952.
¶ 36       In the 1950s, when Chicago and North Western was switching to diesel engines, it began
       contemplating the dissolution of Superior Coal and the sale of its physical assets for salvage.
¶ 37       On May 24, 1954, in a special meeting, Superior Coal’s stockholders unanimously passed
       a resolution, which stated: “[I]t appears from reports presently before the stockholders that
       the continuation of coal production by the Superior Coal Company cannot be carried on
       profitably for the future and the Chicago and North Western Railway System’s greatly


                                                  -6-
       reduced requirements for coal may be obtained more reasonably from other sources.”
       Therefore, the stockholders “authorized and directed” the board of directors and president of
       Superior Coal to “take appropriate action to discontinue active mining operations *** and
       carry out a program for the permanent closing and abandonment of mine Nos. 3 and 4, and
       the orderly salvaging and disposition of materials and equipment thereof.”
¶ 38       Four days later, the directors of Superior Coal passed a resolution putting Pfahler in
       charge of the salvaging operations.

¶ 39                            G. Subsidence Claims During the Two Years
                                   Preceding Superior Coal’s Dissolution
¶ 40       On April 4, 1956, in a meeting of Superior Coal’s directors, the topic of subsidence
       claims came up. The minutes of the meeting stated as follows:
                   “Mr. Kiss reported that a new surface subsidence occurred at about 5:30 a.m. on
               Sunday, April 1, 1956, in a limited area in the southerly outskirts of Gillespie, in the
               area of operations of Mine 3. This subsidence brought probable damage to three
               houses, one of which is a farm house, and settling of about six acres of farm land.
                   General discussion was had with respect to the Company’s current situation in the
               matter of subsidence claims and the procedures involved in the processing of such
               claims. Mr. Kiss stated that there were 45 claims as a result of the October 1955
               subsidence, that 4 of these claims have been paid and 4 more are about ready for
               settlement. Based on the Company’s past experience in the settlement of subsidence
               claims he estimated the probable cost to the Company to dispose of all presently
               known claims and possible claims not yet made for repair of sewers, gas and water
               lines at $140,000.
                                                    ***
                   In the view of Mr. Kiss’s estimate of $140,000 as to present liability for
               subsidence damage and the Company’s past experience, it was agreed that the
               Company’s Surface and Subsidence Reserve in the amount of $172,926, as of
               December 31, 1955, is apparently adequate and not in need of any adjustment at this
               time.”
¶ 41       On August 28, 1956, the topic of subsidences came up again, in a memorandum that
       Lowell Hastings, vice president and general counsel of Chicago and North Western, wrote
       the chairman of the company, Ben W. Heineman. The purpose of the memorandum was to
       “recommend that the Superior Coal Company be dissolved, that its assets be transferred to
       the Chicago and North Western Railway Company and that the Railway Company assume
       such of its liabilities as cannot be fully liquidated prior to such dissolution.” Lowell did not
       believe that subsidence liabilities would be too great compared to Superior Coal’s assets.
¶ 42       The memorandum said: “In this connection we have not overlooked the problems with
       respect to subsidence claims. In recent years there have been a number of such claims, all of
       which have either been paid or provided for by a reserve which appears to be adequate.
       Although the possibility of further subsidences will continue to exist, we have been advised
       by Mr. Pfahler, former President of the Coal Company, who, of course, is very familiar with
       the properties, that there is no reason to anticipate further difficulty except to a limited extent


                                                    -7-
       adjacent to the present subsidences.” How “adjacent,” the memorandum did not specify.

¶ 43                            H. The Resolution to Dissolve Superior Coal
¶ 44       On September 14, 1956, the board of directors of Chicago and North Western passed a
       resolution that Superior Coal be dissolved. The resolution stated as follows:
                   “WHEREAS, this Company has adopted a policy of reducing the number of its
               subsidiary corporations, and in furtherance of that policy it has been determined to be
               in the best interest of this Company that the Superior Coal Company (all of whose
               outstanding shares are owned by this Company) be dissolved, that its assets be
               transferred to this Company, and that this Company assume its liabilities (in the event
               that such liabilities cannot be fully liquidated prior to the time a certificate of
               dissolution has been issued by the Secretary of State of Illinois);
                                                    ***
                   FURTHER RESOLVED, that this Company assume any liabilities of the Superior
               Coal Company (subject to applicable Statutes of Limitations) that cannot be fully
               liquidated prior to the time a certificate of dissolution has been issued by the
               Secretary of State of Illinois.”
¶ 45       Thus, by the terms of the resolution, Chicago and North Western was to acquire all of
       Superior Coal’s assets and also was to assume all of Superior Coal’s liabilities that remained
       unliquidated at the time of dissolution, provided that judicial enforcement of the liabilities
       was not barred by any statute of limitations.
¶ 46       On October 12, 1956, pursuant to section 75 of The Business Corporation Act (Ill. Rev.
       Stat. 1955, ch. 32, ¶ 157.75), the shareholders of Superior Coal executed a statement of intent
       to dissolve the corporation.
¶ 47       On December 28, 1956, Superior Coal quitclaimed to Chicago and North Western all its
       mineral rights in Macoupin County, including the No. 2 mine.
¶ 48       According to a general journal entry of Chicago and North Western for December 1956,
       Superior Coal’s subsidence reserve of $124,834.60 likewise was transferred to Chicago and
       North Western or to its books.
¶ 49       In February 1957, Superior Coal was dissolved. It was solvent at the time, as far as
       Chicago and North Western could tell. Solvency meant that Superior Coal had enough assets
       to pay its known liabilities. Trottman had written about six months earlier, in a
       memorandum:
                   “Because of the nature of the liabilities of the Superior Coal Company, it is
               impossible to finally liquidate all such liabilities in the immediate future. The
               liabilities include pension obligations to pensioned former employees, and subsidence
               claims. The pension liabilities have been actuarially computed and the subsidence
               claims estimated, and the amounts thereof placed upon the balance sheet. The present
               balance sheet shows a solvent condition. Accordingly, if the North Western were to
               assume the Superior Coal Company’s liabilities upon receiving its assets in
               liquidation, it would appear that such assets would be more than sufficient to take
               care of future liabilities. Conceivably, however, there might be potential but unknown
               liabilities of the Coal Company (e.g., unknown subsidence claims, or unknown and


                                                  -8-
              unasserted but potential federal tax deficiencies), which in the aggregate might, when
              added to the known liabilities, exceed the assets to be distributed in liquidation.”
       The memorandum added, in a footnote: “The balance sheet as of July 31, 1956[,] shows,
       under ‘Unadjusted credits,’ a ‘Pension reserve’ in the amount of $425,679, a ‘Personal injury
       reserve’ in the amount of $51,435, and a ‘Surface land subsidence reserve’ of $154,874.”

¶ 50                                I. The Succession of Ownership
                                   From Chicago and North Western
                                            to Union Pacific
¶ 51       In 1970, Chicago and North Western sold its assets to the newly formed North Western
       Employees Transportation Corporation, which agreed to assume “liabilities *** of any kind,
       nature and description, whether public or private, whether arising by or as a result of
       agreement, action, omission to act, law or violation of law, or otherwise, whether known or
       unknown, whether accrued or not accrued for any purpose, and whether or not disclosed by
       this Agreement or reflected in any book or record of any [sic] [Chicago and North Western].”
¶ 52       In 1972, North Western Employees Transportation Corporation changed its name to
       Chicago and North Western Transportation Company. The company afterward changed its
       name to Chicago and North Western Railway Company. (For the sake of simplicity, we will
       refer to both North Western Employees Transportation Corporation and Chicago and North
       Western Transportation Company as “New Chicago and North Western.”)
¶ 53       In 1995, New Chicago and North Western merged into Union Pacific, and Union Pacific
       was the surviving entity.

¶ 54                             J. Notice of the Risk of Mine Subsidence
                            at the Proposed Site of a New Elementary School
                         and the Expense and Uncertainty of Assessing That Risk
¶ 55       The School District operates schools in two small cities, located three miles apart,
       Gillespie and Benld. The elementary school in Benld was a brick building, built in the 1920s.
       It was outdated and in need of tuckpointing, and the citizens of Benld wanted to replace it
       with a new elementary school. They wanted the new school to be in Benld since both the
       middle school and the high school were in Gillespie.
¶ 56       The problem was that Superior Coal had pretty much honeycombed the ground under
       Benld (and, for that matter, the ground under Gillespie). Subsidences were occurring right
       across the street from the site in Benld where the School District proposed building the new
       elementary school. Union Pacific’s own tracks in Sawyerville, less than a mile from Benld,
       had sustained damage from a subsidence in 1998, as reported in Gillespie Area News. Indeed,
       the whole school district was undermined. In a board of education meeting in December
       1998, Jerry Schaefer, a geotechnician, “distributed a map of the school district showing that
       virtually all of the available sites [had] been undermined.” (We are quoting from Union
       Pacific’s exhibit No. 168: Area Coal Mining Heritage May Hamper Site Selection for New
       School, Gillespie Area News, Dec. 10, 1988, at 1.) Timothy McMinn, a principal in the FGM
       architectural firm, commented: “One of the problems with building on land prone to
       subsidence *** is that the specialized construction needed to establish a solid foundation can


                                                  -9-
       eat up dollars, reducing the amount of money the district can spend on actual classroom
       space.” Id. at 11.
¶ 57       The School District hired an architectural firm, Wight & Company (Wight), which in turn
       hired Hanson Engineers (Hanson), to write a foundation engineering report. In 1999, Hanson
       wrote its report, which Wight passed on to the School District. The report said, under the
       heading “Risk of Coal Mine Subsidence”:
                   “Due to the many unknown variables involved in predicting both the chance of
               subsidence and its possible magnitude, it is nearly impossible to quantify the risk
               involved in building on an undermined site. Surface investigations undertaken to
               predict the possibility of future subsurface [subsidence] are always very expensive
               and are generally inconclusive. The owner should consider the fact that there is no
               economically feasible corrective action that can be taken to guarantee against future
               subsidence.
                   The risk of future subsidence must be valued along with the other features of the
               site with the knowledge that it will not be possible to completely avoid similar risks
               in the area closely surrounding Benld, Illinois.”
¶ 58       In a couple of places in the record, there is mention that exploratory core-drilling to a
       depth of 300 feet, where the coal mines were, would have cost $200,000 and would have
       yielded no guarantees.
¶ 59       Wight did some relatively shallow drilling to assess the foundational adequacy of the
       surface, but this drilling could reveal nothing about the support hundreds of feet down.

¶ 60                          K. What the School District Should Have Done,
                                     According to Union Pacific’s Expert
¶ 61       Union Pacific presented an affidavit by David Newman, a mining engineer with expertise
       in mine roof stability. He stated that the primary mining method used in the school district
       was room-and-pillar mining. The barrier pillars in Superior Coal’s mines were located
       approximately 330 yards apart, and in his opinion, the risk of subsidence damage would have
       been reduced if, in 2002, the school had been built over or in close proximity to barrier
       pillars and if, in addition, the surface had been reinforced with underground grouting.
¶ 62       In his affidavit, Newman did not venture an estimate of how much these measures would
       have cost, but he said: “If grouting the mine had been used when building a two-story school
       with the same square footage as the 2002 School, and the school had been built in proximity
       to the existing barrier pillars, the cost of grouting would have been reduced by more than
       50%. The cost of grouting would have been further reduced if [the] column grouting method
       were feasible and used at this site instead of saturation grouting.”
¶ 63       In sum, Newman blamed the School District for failing to hire professionals with
       sufficient expertise and for failing, with the help of such professionals, to “evaluate the
       history of subsidence in the vicinity of the site, the geometry and characteristics of mining
       underneath the proposed site, the feasibility of alternative sites, and the cost and feasibility of
       grouting or other measures to mitigate the risk, such as moving the location or modifying the
       configuration of the building.”




                                                   - 10 -
¶ 64                     L. The Construction of the Elementary School in Benld
                         and the Destruction of the School by Mine Subsidence
¶ 65       In 2001, the School District entered into agreements for the construction of the
       elementary school in Benld over Superior Coal’s abandoned No. 2 mine. The school was
       constructed at a cost of $9 million in public funds, and it opened in August 2002.
¶ 66       In March 2009, 6½ years later, the ground beneath the school subsided, inflicting
       structural damage to the school. Within a few weeks, the Illinois State Board of Education
       determined that the damage was so severe that the school had to be condemned and
       demolished.

¶ 67                                          II. ANALYSIS
¶ 68                                   A. Assumption of “Liabilities”
¶ 69       When mining coal in Macoupin County from 1903 to about the mid-1950s, Superior Coal
       had an obligation to leave enough subjacent support, i.e., underground pillars, so that the
       ground surface, in its natural state, would not subside. See Wilms v. Jess, 94 Ill. 464, 467
       (1880); Restatement (Second) of Torts § 820(1), at 78 (1979); 9 Richard R. Powell, Powell
       on Real Property § 63.06(1), at 63-28 to 63-29 (Michael Allan Wolf ed., 2000). A cause of
       action for breach of that obligation would accrue when the land subsided (Treece v. Southern
       Gem Coal Corp., 245 Ill. App. 113, 118 (1923); Restatement (Second) of Torts § 820 cmt. g,
       at 80 (1979))–which, of course, could be a long time after the removal of the subjacent
       support and a long time after Superior Coal ceased to exist.
¶ 70       In 1957, Superior Coal was dissolved. A few months before its dissolution, Superior Coal
       quitclaimed to Chicago and North Western all its mineral rights in Macoupin County.
       (Chicago and North Western always had owned all of Superior Coal’s stock except for five
       shares, which the directors of Superior Coal owned in order to be qualified to serve as
       directors of that company.)
¶ 71       Despite its acquisition of Superior Coal’s assets, Chicago and North Western was not
       liable for Superior Coal’s obligations unless Chicago and North Western expressly or
       impliedly agreed to assume them (see Alexander v. State Savings Bank & Trust Co., 281 Ill.
       App. 88, 96 (1935)) or unless Superior Coal was, all along, Chicago and North Western’s
       alter ego, a question we will discuss in a moment. The parties in this appeal do not appear to
       dispute that in its resolution of September 14, 1956, Chicago and North Western agreed to
       assume “any liabilities” of Superior Coal. Union Pacific disputes, however, that, by this
       resolution, Chicago and North Western agreed to assume perpetual liability for any future
       subsidences over Superior Coal’s mines. Instead, according to Union Pacific, when the
       resolution is reasonably interpreted, Chicago and North Western agreed to assume liability
       for subsidences only insomuch as actions for such subsidences were allowable under any
       “applicable Statutes of Limitations”: a term Union Pacific regards as including section 94 of
       The Business Corporation Act (Ill. Rev. Stat. 1955, ch. 32, ¶ 157.94), otherwise known as the
       “corporate survival statute,” a statute that extended the life of a dissolved corporation for two
       years to enable it to sue or be sued during that two-year grace period.
¶ 72       Before discussing whether the phrase that Chicago and North Western used in its
       resolution, “applicable Statutes of Limitations,” actually applies to the corporate survival
       statute, we should do two things. First, we should explain why the parties care whether

                                                  - 11 -
       Chicago and North Western agreed to assume perpetual liability for future subsidences over
       Superior Coal’s mines. Second, we should state the conclusions of fact and law that appear to
       be undisputed with respect to plaintiffs’ theory of assumption of liability.

¶ 73                                      1. Why the Parties Care
¶ 74       Why do the parties care whether, more than half a century ago, a now defunct
       corporation, Chicago and North Western, agreed to assume liability for future subsidences
       over Superior Coal’s mines? The reason is this. It apparently is undisputed that if indeed
       Chicago and North Western agreed to assume Superior Coal’s liability for future
       subsidences, that liability gets passed along ultimately to the final successive owner of
       Chicago and North Western: Union Pacific.
¶ 75       Again, the succession of ownership from Chicago and North Western to Union Pacific
       was as follows. In 1970, Chicago and North Western sold its assets to New Chicago and
       North Western, which assumed Chicago and North Western’s “liabilities *** of any kind,
       nature and description, whether public or private, whether arising by or as a result of
       agreement, action, omission to act, law or violation of law, or otherwise, whether known or
       unknown, whether accrued or not accrued for any purpose, and whether or not disclosed by
       this Agreement or reflected in any book or record of any [sic] [Chicago and North Western].”
       New Chicago and North Western changed its name a couple of times. Then, in 1995, New
       Chicago and North Western merged into Union Pacific, and Union Pacific was the surviving
       entity.
¶ 76       The parties apparently do not dispute that the language whereby New Chicago and North
       Western assumed Chicago and North Western’s liabilities (“liabilities *** of any kind ***
       whether known or unknown, whether accrued or unaccrued”) was broad enough to assume
       any “unknown” and “unaccrued” liability for future subsidences that Chicago and North
       Western had assumed from Superior Coal–if indeed Chicago and North Western had
       assumed such liability from Superior Coal, which precisely is the question. After the merger,
       the absorbing corporation, Union Pacific, was responsible for any liabilities of the absorbed
       corporation, New Chicago and North Western. See Plaza Express Co. v. Middle States Motor
       Freight, Inc., 40 Ill. App. 2d 117, 124 (1963).
¶ 77       In short, when New Chicago and North Western merged into Union Pacific, Union
       Pacific absorbed the liabilities of New Chicago and North Western. Whether those liabilities
       included liability for future subsidences depends on whether, in the first place, Chicago and
       North Western agreed to assume that liability from Superior Coal (or whether, alternatively,
       Superior Coal was Chicago and North Western’s instrumentality or alter ego under a
       veil-piercing theory).

¶ 78                        2. Conclusions That Appear to Be Undisputed

¶ 79               a. The Resolution Is an Agreement by Chicago and North Western
                                 to Assume Liabilities of Superior Coal
¶ 80       Again, the law was that if Company A acquired Company B’s assets, Company A was
       liable for Company B’s liabilities only if Company A “agree[d,] express[ly] or implied[ly],”
       to assume them. (Internal quotation marks omitted.) Alexander, 281 Ill. App. at 96. It

                                                - 12 -
       apparently is undisputed that the resolution of September 14, 1956, was an agreement by
       Chicago and North Western to assume liabilities of Superior Coal. Id. In its brief, Union
       Pacific refers to the resolution as a “contract,” urging us to “read [it] as any other contract.”

¶ 81                 b. Among the “Liabilities” That Chicago and North Western Assumed
                                Was Liability for Predissolution Subsidences
¶ 82        Before the Secretary of State would issue a certificate of dissolution for Superior Coal, he
       had to be convinced that “adequate provision” had been made for Superior Coal’s “debts,
       liabilities, and obligations.” Ill. Rev. Stat. 1955, ch. 32, ¶ 157.80. Presumably, that is why, in
       its resolution of September 14, 1956, Chicago and North Western decided to “assume any
       liabilities of the Superior Coal Company” after deciding, earlier in the resolution, to assume
       immediate ownership of Superior Coal’s assets. If Chicago and North Western immediately
       assumed ownership of the assets out of which Superior Coal’s debts, liabilities, and
       obligations would have been satisfied, Chicago and North Western likewise had to assume
       those debts, liabilities, and obligations.
¶ 83        Note, however, that to justify the immediate transfer of Superior Coal’s assets to itself,
       Chicago and North Western had to assume only those debts, liabilities, and obligations of
       Superior Coal that accrued before Superior Coal’s dissolution. The reason was this. The
       corporate survival statute (Ill. Rev. Stat. 1955, ch. 32, ¶ 157.94), in derogation of the
       common law, extended the life of a dissolved corporation for two years for the limited
       purpose of enabling the corporation to sue and be sued, during that period, on claims that
       accrued before the dissolution. Under the common law, the right to sue Superior Coal would
       have abated the moment Superior Coal was dissolved, but the corporate survival statute (id.)
       changed that by putting the dissolved corporation on artificial life support for two years,
       enabling it, during that period, to sue and be sued. See Poliquin v. Sapp, 72 Ill. App. 3d 477,
       481 (1979); Consolidated Coal Co. of St. Louis v. Flynn Coal Co., 274 Ill. App. 405 (1934).
       But the cause of action, either against or in favor of the dissolved corporation, had to accrue
       before the dissolution. The corporate survival statute provided:
                “The dissolution of a corporation either (1) by the issuance of a certificate of
                dissolution by the Secretary of State, or (2) by the decree of a court of equity when
                the court has not liquidated the assets and business of the corporation, or (3) by
                expiration of its period of duration, shall not take away or impair any remedy
                available to or against such corporation, its directors, or shareholders, for any right or
                claim existing, or any liability incurred, prior to such dissolution if action or other
                proceeding thereon is commenced within two years after the date of such dissolution.
                Any such action or proceeding by or against the corporation may be prosecuted or
                defended by the corporation in its corporate name.” (Emphasis added.) Ill. Rev. Stat.
                1955, ch. 32, ¶ 157.94.
       Thus, “any rights, claims, or liabilities preserved by [the corporate survival statute] still [had
       to] be raised in a cause of action that actually accrued predissolution.” A Plus Janitorial Co.
       v. Group Fox, Inc., 2013 IL App (1st) 120245, ¶ 21.
¶ 84        Again, a cause of action for the removal of naturally necessary subjacent support accrued
       not when the support was removed but when the land subsided. Treece, 245 Ill. App. at 118.
       Thus, despite the corporate survival statute, it would have been impossible to sue Superior


                                                   - 13 -
       Coal for a subsidence that happened after dissolution. The common law was to that extent
       unmodified. It follows that, to justify the immediate transfer of Superior Coal’s assets to
       itself, Chicago and North Western did not have to assume liability for any subsidences that
       would happen after dissolution.
¶ 85       It appears to be undisputed that, by its resolution of September 14, 1956, Chicago and
       North Western assumed liability for subsidence claims that accrued before the dissolution of
       Superior Coal, provided that (1) a complaint was filed within two years after the dissolution
       and (2) no statute of limitations barred the claim. Union Pacific admits as much when it
       argues in its brief: “The Evidence Shows That the [Chicago and North Western] Resolution
       Was Intended To Assume Liabilities Limited to Those Permitted by Section 94.” But Union
       Pacific disputes that Chicago and North Western (unnecessarily and irrationally) assumed
       liability for future, postdissolution subsidences.

¶ 86                     3. The Meaning of “Any Applicable Statutes of Limitations”
¶ 87        In the resolution, Chicago and North Western “assume[d] any liabilities of the Superior
       Coal Company (subject to applicable Statutes of Limitations).” (Emphasis added.) On
       remand, in the summary judgment proceedings, Union Pacific presented extrinsic evidence
       that Chicago and North Western understood the words “applicable Statutes of Limitations” to
       include the corporate survival statute, section 94 of The Business Corporation Act (Ill. Rev.
       Stat. 1955, ch. 32, ¶ 157.94). Was such extrinsic evidence admissible? When deciding the
       meaning of “applicable Statutes of Limitations,” should a court consider evidence outside the
       four corners of the resolution?
¶ 88        Union Pacific urges us to interpret the resolution as one would interpret any contract.
       There is a well-established rule of contractual interpretation called “the four corners rule.”
       According to that rule, “[a]n agreement, when reduced to writing, must be presumed to speak
       the intention of the parties who signed it. It speaks for itself, and the intention with which it
       was executed must be determined from the language used. It is not to be changed by extrinsic
       evidence.” (Internal quotation marks omitted.) Air Safety, Inc. v. Teachers Realty Corp., 185
       Ill. 2d 457, 462 (1999). Unless language in a contract is facially ambiguous, the four corners
       rule requires us to determine the parties’ intention only from the language of the contract,
       without resorting to extrinsic evidence of intention. Id.
¶ 89        The supreme court has explained:
                     “In applying [the four corners] rule, a court initially looks to the language of a
                contract alone. See Rakowski v. Lucente, 104 Ill. 2d 317, 323 (1984) (stating that both
                the meaning of a written agreement and the intent of the parties is to be gathered from
                the face of the document without assistance from extrinsic evidence). If the language
                of the contract is facially unambiguous, then the contract is interpreted by the trial
                court as a matter of law without the use of parol evidence. [Citation.] If, however, the
                trial court finds that the language of the contract is susceptible to more than one
                meaning, then an ambiguity is present. [Citation.] Only then may parol evidence be
                admitted to aid the trier of fact in resolving the ambiguity. [Citation.]” Id. at 462-63.
¶ 90        The four corners rule, so described, sounds a lot like the parol evidence rule. Justice
       Posner points out, however, that although the parol evidence rule “overlaps” the four corners
       rule, the two rules are “not identical.” Richard A. Posner, The Law and Economics of


                                                   - 14 -
       Contract Interpretation, 83 Tex. L. Rev. 1581, 1603 (2005). The four corners rule, he
       explains, is more restrictive than the parol evidence rule. While the parol evidence rule
       “forbids only the use of evidence of the precontractual negotiations to contradict the written
       contract,” the four corners rule “goes further by prohibiting the use of extrinsic evidence to
       supplement rather than only to contradict the written contract.” Id.
¶ 91       “Extrinsic evidence” is, quite simply, evidence outside the four corners of the contract.
       Evidence “regarding the position of the parties, the surrounding circumstances existing at the
       time of execution, and the parties’ subsequent conduct” are all examples of extrinsic
       evidence. Harris Trust & Savings Bank v. La Salle National Bank, 208 Ill. App. 3d 447, 453
       (1990). Such evidence is admissible only if “the language of the contract is facially
       unambiguous” (Air Safety, 185 Ill. 2d at 462), that is, only if “the language used is
       susceptible to more than one meaning [citation] or is obscure in meaning through
       indefiniteness of expression [citation]” (Wald v. Chicago Shippers Ass’n, 175 Ill. App. 3d
       607, 617 (1988)).
¶ 92       It is true that in a case Union Pacific cites, Batteast v. Wyeth Laboratories, Inc., 137 Ill.
       2d 175, 182-83 (1990), the supreme court considered extrinsic evidence, “the
       circumstances,” to determine the meaning the parties intended to give a contractual term,
       “release,” without explicitly finding that term to be facially ambiguous. Afterward, however,
       in Air Safety, 185 Ill. 2d at 462, the supreme court reaffirmed its commitment to the four
       corners rule (which the supreme court never mentioned in Batteast). So, it appears that,
       currently the four corners rule is the law in Illinois. In re Marriage of Lyman, 2015 IL App
       (1st) 132832, ¶ 71. We are obliged to follow that rule.
¶ 93       The very first thing we must do, according to the four corners rule, is look at the language
       of the contract and decide whether it contains, on its face, any ambiguity. Air Safety, 185 Ill.
       2d at 462. This is a question of law for the court. Wald, 175 Ill. App. 3d at 617. Looking only
       at the resolution and attributing to its words their plain and ordinary meaning (see Founders
       Insurance Co. v. Munoz, 237 Ill. 2d 424, 436 (2010); Gallagher v. Lenart, 226 Ill. 2d 208,
       233 (2007)), we have to decide whether the term “Statutes of Limitations,” in the
       parenthetical phrase “subject to applicable Statutes of Limitations,” is facially ambiguous.
¶ 94       A dictionary is a good place in which to find the plain and ordinary meaning of words.
       Valley Forge Insurance Co. v. Swiderski Electronics, Inc., 223 Ill. 2d 352, 366 (2006); West
       Bend Mutual Insurance Co. v. DJW-Ridgeway Building Consultants, Inc., 2015 IL App (2d)
       140441, ¶ 37. Judging from a dictionary published in 1956, the year Chicago and North
       Western passed its resolution, the term “statute of limitations” was neither obscure nor
       “susceptible to more than one meaning.” Wald, 175 Ill. App. 3d at 617. A “Statute of
       Limitations” is “[a] statute which imposes time limits upon the right of action in certain
       cases, as by obliging a creditor to demand payment of a debt within a specified time.” Funk
       and Wagnalls New College Standard Dictionary 1142 (1956). This is the only definition the
       dictionary gives of “Statute of Limitations.” It is not that there is more than one definition to
       choose from. Because the term in the resolution of September 14, 1956, “Statutes of
       Limitations” has an unambiguous meaning, extrinsic evidence is inadmissible to prove what
       Chicago and North Western meant by that term. See Gallagher, 226 Ill. 2d at 233; Air Safety,
       185 Ill. 2d at 462-63.
¶ 95       We realize the parties disagree whether the corporate survival statute (Ill. Rev. Stat. 1955,
       ch. 32, ¶ 157.94) is a statute of limitations. Union Pacific insists it is a statute of limitations,

                                                    - 15 -
       whereas plaintiffs insist it is not. But that really is not a dispute over the meaning of “statute
       of limitations,” which is an unambiguous term. Instead, it is a dispute over whether the
       corporate survival statute conforms to the meaning of that unambiguous term. It is a dispute
       over the application of the resolution rather than its meaning. There is no doubt what “statute
       of limitations” means. The question is whether, from an objective point of view, the
       corporate survival statute fits the description of a “statute of limitations.”
¶ 96       Objectively, the corporate survival statute, section 94 of The Business Corporation Act
       (id.), is not a “statute of limitations” in the plain and ordinary sense of that term, because
       instead of “impos[ing] time limits” on a preexisting “right of action” (Funk and Wagnalls
       New College Standard Dictionary 1142 (1956)), as a statute of limitations would do, section
       94 expands the time within which to sue a corporation, by keeping the corporation alive for
       two years after the issuance of a certificate of dissolution. Granted, two years is a finite, or
       “limited,” period of time, but if that were enough to make section 94 a statute of limitations,
       the only way section 94 could have avoided being a statute of limitations was by extending
       the life of a dissolved corporation forever. One cannot plausibly call the corporate survival
       statute a “statute of limitations” simply because the statute does not keep the dissolved
       corporation alive indefinitely.
¶ 97       Another reason why it would be implausible to call section 94 a “statute of limitations” is
       that section 94 surely is subject to actual statutes of limitation, such as the five-year statutory
       limitation applicable to actions for property damage (Ill. Rev. Stat. 1955, ch. 83, ¶ 16). See
       Michigan Indiana Condominium Ass’n v. Michigan Place, LLC, 2014 IL App (1st) 123764,
       ¶ 26 (“Compliance with an applicable statute of limitations is merely an additional
       requirement that must be met when bringing suit against a dissolved corporation within the
       time period contained in [the corporate survival statute].”). Even if a claim accrued before
       dissolution and the plaintiff filed suit within two years after dissolution, the five-year statute
       of limitations could nevertheless bar the claim. It would be strange if two different
       conflicting statutes of limitations applied to the same claim of property damage.
¶ 98       It is true that, in Sarelas v. Fagerburg, 316 Ill. App. 606, 616-17 (1942), the appellate
       court referred to the corporate survival statute as a “statute of limitations,” but the issue in
       that appeal was not whether the corporate survival statute really was a statute of limitations,
       properly speaking. Besides, five years earlier, in the same case, the appellate court said:
       “[The corporate survival statute] is not strictly a statute of limitation but is a conditional
       limitation upon plaintiff’s right of action.” Sarelas v. McCue & Co., 291 Ill. App. 540, 545
       (1937) (citing Dukes v. Harrison & Reidy, 270 Ill. App. 372 (1933)).
¶ 99       In Dukes, a corporation was dissolved by judicial decree on September 17, 1928. Dukes,
       270 Ill. App. at 374-75. The corporate survival statute preserved judicial remedies against a
       dissolved corporation “ ‘for any liabilities incurred previous to its dissolution,’ ” provided
       that “ ‘suit *** [was] brought and service of process had within two years after such
       dissolution.’ ” Id. at 375. On January 28, 1930, within the two-year period, the plaintiff sued
       the dissolved corporation, but on September 15, 1930, the circuit court dismissed her case for
       lack of prosecution. Id. She refiled her complaint on September 14, 1931 (id. at 373), and the
       corporation pleaded the expiration of the two-year period in the corporate survival statute (id.
       at 375). The plaintiff countered that, under section 26 of the Limitations Act, “ ‘if the time
       limited for bringing such action shall have expired during the pendency of such suit,’ ” she
       had one year after she was “ ‘nonsuited’ ” to refile her case. Id. at 377. The appellate court

                                                   - 16 -
        was unconvinced. It held that, in section 26 of the Limitations Act, “ ‘the time limited for
        bringing such action’ ” had to be a time specified in a statute of limitations and that the
        corporate survival statute was “ ‘not a statute of limitations but [was] a condition of the
        liability itself.’ ” Id. at 380-81 (quoting Bishop v. Chicago Rys. Co., 303 Ill. 273, 277 (1922)).
        Because the corporate survival statute was not a statute of limitations, section 26 had no
        effect on the corporate survival statute. Id. at 381.
¶ 100        The corporate survival statute does something fundamentally different from a statute of
        limitations. Whereas a statute of limitations imposes a time limit on a right of action the law
        already recognizes, the corporate survival statute creates a new, temporally limited right: the
        right to sue a dissolved corporation (see Poliquin, 72 Ill. App. 3d at 481). “[W]here the
        statute creates a right that did not exist at common law and restricts the time within which the
        right may be availed of, or otherwise imposes conditions, such statute is not a statute of
        limitation[,] but the time element is an integral part of the enactment.” Smith v. Toman, 368
        Ill. 414, 420 (1938).
¶ 101        So, in 1956, when Chicago and North Western passed its resolution, it was settled law in
        Illinois that the corporate survival statute was not a statute of limitations, and hence the
        phrase in the resolution “subject to applicable Statutes of Limitations” did not include the
        corporate survival statute. See Ambarann Corp. v. Old Ben Coal Corp., 395 Ill. 154, 164
        (1946); Wilson v. Wilson, 268 Ill. 270, 273 (1915).

¶ 102                        4. “Any Liabilities of the Superior Coal Company”
¶ 103        Chicago and North Western resolved to “assume any liabilities of the Superior Coal
        Company.” (Emphasis added.) In our previous decision in this case, we observed that the
        word “liabilities” had an established legal meaning. Gillespie Community Unit School District
        No. 7, 2012 IL App (4th) 110142-U, ¶ 82. It meant “ ‘a legal obligation or responsibility
        enforceable by civil remedy or criminal punishment.’ ” Id. (quoting Loman v. Freeman, 229
        Ill. 2d 104, 121 (2008)). We further observed, however, that this obligation or responsibility
        could be either perfected or contingent. Id. It could be the obligation to do something “ ‘at
        once’ ” or it could be the obligation to do something “ ‘at some future time,’ ” subject to the
        occurrence of conditions. Id. (quoting White v. Green, 74 N.W. 928, 929 (Iowa 1898)).
¶ 104        Thus, although “liability” means, in a general sense, an obligation or responsibility
        enforceable by law, the question remains as to whether this obligation or responsibility is
        perfected or contingent. See Wald, 175 Ill. App. 3d at 617. Extrinsic evidence is admissible
        to clear up that ambiguity. See Gallagher, 226 Ill. 2d at 233; Air Safety, 185 Ill. 2d at 462-63.
¶ 105        According to Union Pacific, the extrinsic evidence eliminates any genuine issue as to
        whether the word “liabilities” in the resolution of September 14, 1956, meant anything more
        than perfected liabilities, e.g., liabilities for subsidences that already had happened, before
        the dissolution of Superior Coal. See 735 ILCS 5/2-1005(c) (West 2014) (“The judgment
        sought shall be rendered without delay if the pleadings, depositions, and admissions on file,
        together with the affidavits, if any, show that there is no genuine issue as to any material fact
        and that the moving party is entitled to a judgment as a matter of law.”). Union Pacific’s
        argument on the extrinsic evidence can be distilled to three points.
¶ 106        First, because section 157.79(b) of The Business Corporation Act (Ill. Rev. Stat. 1955,
        ch. 32, ¶ 157.79(b)) required a dissolving corporation to “pay[ ] or adequately provid[e] for


                                                    - 17 -
        the payment of all its obligations” before “distribut[ing] the remainder of its assets ***
        among its shareholders” and because the corporate survival statute (Ill. Rev. Stat. 1955, ch.
        32, ¶ 157.94) preserved only rights of action against the dissolved corporation that accrued
        before the issuance of the certificate of dissolution, it would have been unnecessary and
        irrational for the financially distressed parent corporation, Chicago and North Western, to
        assume any liabilities of its subsidiary, Superior Coal, other than those that accrued before
        the dissolution of Superior Coal.
¶ 107       Second, out of Superior Coal’s assets, Chicago and North Western received a reserve of
        only $172,926 for subsidence claims. According to calculations by Superior Coal’s officers,
        this was the approximate amount needed to cover the subsidences that already had happened,
        in 1955 and 1956, within a five-block area of Gillespie, insomuch as the claims had not yet
        been settled. The companies never set aside a reserve, and never attempted to calculate a
        reserve, for subsidences that had not yet happened.
¶ 108       Third, in its financial statements and other public disclosures, Chicago and North
        Western never mentioned it had assumed perpetual liability for future subsidences over
        Superior Coal’s mines–which surely would have been a material fact for current shareholders
        or anyone thinking of investing in Chicago and North Western, considering that, for half a
        century, Superior Coal had been mining 29 square miles of land.
¶ 109       “Where extrinsic evidence is introduced to aid in the interpretation of uncertain or
        ambiguous contract language, the question of the meaning of the language generally is left to
        the jury. If, however, after taking into account the extrinsic evidence, the court determines
        that a reasonable person could reach only one conclusion, then the issue should be decided by
        the trial court.” Wald, 175 Ill. App. 3d at 619. Given the extrinsic evidence, we are convinced
        that a reasonable person could reach only one conclusion: “liabilities” in the resolution of
        September 14, 1956, means only positive or perfected liabilities, such as liabilities for
        subsidences that happened before the dissolution of Superior Coal, and does not include
        contingent liability for subsidences that might happen after the dissolution. See In re
        Marriage of Hahn, 324 Ill. App. 3d 44, 47 (2001) (“When a term is susceptible to two
        different interpretations, the court must follow the interpretation that establishes a rational
        and probable agreement.”).
¶ 110       We find further support for this conclusion in the text of the resolution itself. The
        resolution speaks of “liabilities” in the plural. According to dictionaries published in the
        1930s, 1940s, and 1950s, the word “liabilities” in the plural, as opposed to “liability” in the
        singular, tends to mean existing pecuniary obligations–the opposite of “assets” in a balance
        sheet. Webster’s New International Dictionary of the English Language 1242 (1933) (“2. ***
        in the pl., one’s pecuniary obligations, or debts, collectively–opposed to assets” (emphasis in
        original)); Webster’s New International Dictionary of the English Language 1423 (2d ed.
        1934) (same); Walter A. Shumaker & George F. Longsdorf, Cyclopedic Law Dictionary 660
        (Frank D. Moore ed., 3d ed. 1940) (“All debts or obligations of a concern. The capital stock,
        funded or floating indebtedness, accounts payable, surplus, losses, etc.; are included in this
        term in a balance sheet, or statement of the condition of a business concern.”); Funk and
        Wagnalls New College Standard Dictionary 687 (1956) (“3. That for which one is liable or
        responsible; specifically, in the plural, debts as opposed to assets.” (Emphasis in original.)); 1
        Webster’s New Twentieth Century Dictionary of the English Language 1041-42 (2d ed.
        1958) (“3. [usually in pl.] a debt; as, accounts payable, surplus, losses, and capital stock are

                                                    - 18 -
        liabilities of a corporation: opposed to asset” (emphases in original)); see Swiss Colony, Inc.
        v. Commissioner, 52 T.C. 25, 31 (1969).
¶ 111        By contrast, “liability” in the singular tends to mean the “state” or “quality” of “being
        liable.” Webster’s New International Dictionary of the English Language 1242 (1933) (“1.
        State or quality of being liable; as, the liability of an insurer; liability to accidents; liability to
        the law.” (Emphases in original.)); Funk and Wagnall’s New College Standard Dictionary
        687 (1956) (“1. The state of being liable, or exposed to some accidental or incidental result or
        occurrence; as liability to disease. 2. The condition of being responsible for a possible or
        actual loss, penalty, evil, expense, or burden; as, liability for damages.” (Emphases in
        original.)); 1 Webster’s New Twentieth Century Dictionary of the English Language 1041-42
        (2d ed. 1958) (“1. The state of being liable. 2. anything for which a person is liable.”).
¶ 112        When the resolution speaks of “liabilities *** that cannot be fully liquidated prior to the
        time a certificate of dissolution has been issued,” the resolution does not mean states or
        qualities of being liable. Normally, one does not “liquidate” states or qualities of being liable.
        Rather, the resolution means existing pecuniary obligations: Superior Coal had existing
        financial obligations, but not all them had been paid or reduced to a specific dollar amount,
        i.e., liquidated. Because contingent liability for subsidences that might happen in the future is
        not an existing pecuniary obligation, as signified by “liabilities,” we conclude that Union
        Pacific was entitled to judgment as a matter of law on plaintiffs’ theory of express
        assumption of liability.
¶ 113        In its petition for rehearing, the School District objects that, by that conclusion, we
        violate the law of the case by contradicting our previous decision, specifically, paragraph 83,
        in which we stated: “When Chicago and North Western assumed all of Superior Coal’s
        liabilities, it assumed Superior Coal’s liability to provide subjacent support. That liability
        included the contingency that, decades in the future, the land might subside over Superior
        Coal’s mines.” (Emphasis added.) Gillespie, 2012 IL App (4th) 110142-U, ¶ 83. When so
        stating, however, we were reviewing the dismissal of the plaintiffs’ complaints for failure to
        state a cause of action, and we were obliged to interpret the complaints in the light most
        favorable to the plaintiffs. See In re Chicago Flood Litigation, 176 Ill. 2d 179, 189 (1997);
        Gillespie, 2012 IL App (4th) 110142-U, ¶ 4. Interpreted in the light most favorable to
        plaintiffs, the resolution, quoted in their complaints, meant that Chicago and North Western
        had assumed not only Superior Coal’s absolute or perfected liabilities but also, in perpetuity,
        its contingent liabilities. In the present case, by contrast, we are reviewing the trial court’s
        rulings on cross-motions for summary judgment, and our scrutiny no longer is limited to the
        complaints (interpreted in the light most favorable to the plaintiffs) but broadens to evidence
        outside the complaint. See 735 ILCS 5/2-1115(c) (West 2014).
¶ 114        It is true, as the School District points out, that in our previous decision, we said that
        “[t]he word ‘liabilities’ had an established legal meaning,” which was not limited to “a
        ‘perfected or absolute liability.’ ” Gillespie, 2012 IL App (4th) 110142-U, ¶ 82. But we did
        not intend to suggest that in each particular instance in which the word “liabilities” was used,
        it invariably meant both absolute and contingent liabilities. As we demonstrated, for
        example, by a quotation from a supreme court case, the word “ ‘liability’ ” was “ ‘more
        frequently used’ ” in the sense of “ ‘contingency’ ”; “ ‘more frequently’ ” meant usually, but
        not always. (Internal quotation marks omitted.) Id. (quoting Evans v. Illinois Surety Co., 298
        Ill. 101, 113 (1921)). And we also quoted an Iowa case, stating: “ ‘Liability in a legal sense,

                                                      - 19 -
        is the state or condition of one who is under obligation to do at once or at some future time
        something which may be enforced by action. It may exist without the right of immediate
        enforcement.’ ” (Emphases added.) Id. (quoting White, 74 N.W. at 929). So, even though
        “liability” had an unambiguous, well-established meaning of “ ‘a legal obligation or
        responsibility enforceable by civil remedy,’ ” that obligation or responsibility, as
        demonstrated by the quotations, could be absolute, or it could be contingent. Id. (quoting
        Loman, 229 Ill. 2d at 121). When, after quoting these cases, we stated that the assumed
        liability of Chicago and North Western “included the contingency that, decades in the future,
        the land might subside over Superior Coal’s mines” (id. ¶ 83), we merely were interpreting
        the complaints in the light most favorable to the plaintiffs, as we said at the outset we would
        do (id. ¶ 4). We did not intend to slam the door on any summary judgment contention,
        backed up by evidence, the “liabilities” actually meant only absolute liabilities.

¶ 115                                  B. Direct Participation Liability
¶ 116       The School District argues that because there was evidence that “Chicago and North
        Western mandated an overall business strategy of its subsidiary,” Superior Coal, the trial
        court erred by making a summary determination against the School District on its theory of
        direct participation liability. The School District quotes from Forsythe v. Clark USA, Inc.,
        224 Ill. 2d 274, 290 (2007): “[W]e hold that direct participant liability is a valid theory of
        recovery under Illinois law. Where there is evidence sufficient to prove that a parent
        company mandated an overall business and budgetary strategy and carried that strategy out
        by its own specific direction or authorization, surpassing the control exercised as a normal
        incident of ownership in disregard for the interests of the subsidiary, that parent company
        could face liability.” (Emphasis in original.)
¶ 117       In Forsythe, however, there arguably was a causal nexus between the parentally
        mandated budgetary strategy and the injuries of which the plaintiffs complained. When the
        evidence was viewed in the light most favorable to the plaintiffs, it was reasonably
        foreseeable that the “ ‘survival mode’ ” budgetary cuts the parent corporation required the
        subsidiary to make (id. at 305-06) had to come out of “staffing, safety, maintenance, and
        training” (id. at 291), which were the only areas that could have been cut (id. at 295), and
        because the oil-refining industry “inherently involve[d] a great amount of danger,” it likewise
        was reasonably foreseeable that cutbacks in those areas would lead to the injury of
        employees (id. at 291). And, in fact, that is what happened: the plaintiffs’ decedents were
        burned to death when other, apparently poorly trained, employees of the subsidiary attempted
        to replace a valve on a pipe without first making sure the pipe was depressurized. Id. at 278.
        Budget cuts led perhaps to less training, which in turn led to death.
¶ 118       In the present case, we do not see the causal connection between any budgetary decision
        by Chicago and North Western and the destruction of the school building. The wrongful act
        that caused the harm was the removal of naturally necessary subjacent support. The School
        District does not explain how the failure to leave enough coal pillars to support the ground
        surface had anything to do with Chicago and North Western’s “overall business ***
        strategy” for Superior Coal. Id. at 290.
¶ 119       It is true that Chicago and North Western gave Superior Coal a mission: mine coal for
        Chicago and North Western’s steam locomotives. In Forsythe, however, the parent was
        potentially liable as a direct participant not because the parent had required the subsidiary to

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        engage in the inherently dangerous oil-refining industry but because the parent had imposed
        a budgetary policy on the subsidiary that foreseeably enhanced the dangers of the oil-refining
        industry. Merely by requiring Superior Coal to mine coal, Chicago and North Western did
        not hinder or discourage Superior Coal from leaving adequate subjacent support, as far as we
        can see. Therefore, Union Pacific was entitled to a summary determination in its favor on the
        School District’s theory of direct participation liability.

¶ 120                                  C. Piercing the Corporate Veil

¶ 121                                           1. Not an Action,
                                    But an Equitable Remedy in an Action
¶ 122       In the event that Chicago and North Western did not expressly assume Superior Coal’s
        liability for future subsidences (and we have held that Union Pacific is entitled to a summary
        determination that Chicago and North Western did not do so), plaintiffs seek to pierce
        Superior Coal’s corporate veil and to impose liability on Chicago and North Western (and,
        ultimately, on Union Pacific).
¶ 123       Piercing the veil is not, in itself, an action. Rather, it is an equitable remedy in an action
        against an ostensible corporation–for example, a tort action or an action for breach of
        contract. Gass v. Anna Hospital Corp., 392 Ill. App. 3d 179, 185 (2009). The veil is the
        metaphorical equivalent of the corporate form, and in some circumstances, fairness might
        move a court to pierce the veil and to impose liability on the actor behind the veil, often the
        dominant shareholder.
¶ 124       The shareholder behind the veil need not be a natural person. It can be a parent
        corporation using a subsidiary as its instrumentality. “Generally, before the separate
        corporate identity of one corporation will be disregarded and treated as the alter ego of
        another, it must be shown that it is so controlled and its affairs so conducted that it is a mere
        instrumentality of another, and it must further appear that observance of the fiction of
        separate existence would, under the circumstances, sanction a fraud or promote injustice.”
        (Emphasis added.) Main Bank of Chicago v. Baker, 86 Ill. 2d 188, 205 (1981).

¶ 125                2. The Difference Between Normal Participation as a Majority Shareholder
                               and Using the Subsidiary as an Instrumentality
¶ 126       Chicago and North Western owned all of Superior Coal’s stock except for five shares
        (which the directors of Superior Coal owned in order to be qualified to serve as directors).
        Also, the two corporations had common directors and officers. It is relevant to an
        instrumentality analysis that Chicago and North Western owned almost all of Superior Coal’s
        stock and that the two corporations had common directors and officers (see Hystro Products,
        Inc. v. MNP Corp., 18 F.3d 1384, 1389 (7th Cir. 1994)), but those facts are insufficient, by
        themselves, to make Superior Coal a mere instrumentality of Chicago and North Western
        (Superior Coal I, 377 Ill. at 289).
¶ 127       The very definition of a “parent corporation” is “[a] corporation that has a controlling
        interest in another corporation (called a subsidiary corporation), [usually] through ownership
        of more than one-half the voting stock.” (Emphasis in original.) Black’s Law Dictionary 344
        (7th ed. 1999). Obviously, Superior Coal could not be regarded as the instrumentality of

                                                    - 21 -
        Chicago and North Western merely because Chicago and North Western owned almost all of
        Superior Coal’s stock. If, simply by owning a majority of the voting stock in a corporation,
        the stockholder reduced the corporation to an instrumentality, every subsidiary would be an
        instrumentality, lacking a genuine existence as a corporation in its own right. See Logal v.
        Inland Steel Industries, Inc., 209 Ill. App. 3d 304, 310 (1991) (“To hold otherwise would
        render virtually every subsidiary the alter ego of its parent.”); Eric J. Gouvin, Resolving the
        Subsidiary Director’s Dilemma, 47 Hastings L.J. 287, 287-88 (1996) (“Holding companies
        dominate our economy. In 1995, the ten largest companies on the Fortune 500 owned an
        average of 62 subsidiaries each. Many subsidiary corporations, though owned entirely by
        another corporation, are themselves gigantic corporate enterprises. For example, Philip
        Morris, the tenth largest U.S. corporation, owns such major businesses as the Miller Brewing
        Company, Kraft Foods, and the Philip Morris tobacco manufacturing operating unit.”).
¶ 128        “[B]y definition, a parent corporation is a corporation that has working control of the
        subsidiary corporation through stock ownership.” Fontana v. TLD Builders, Inc., 362 Ill.
        App. 3d 491, 503 (2005). The parent exercises this control by voting its shares. As the
        majority shareholder, the parent effectively gets to decide who serves on the subsidiary’s
        board of directors, because the parent will cast the most votes, corresponding to the number
        of shares it owns. No doubt the parent will choose directors sympathetic to its vision, and if
        they become unsympathetic, the parent will replace them. See Patrick L. Sealey, An
        Alternative Approach to Diversity Jurisdiction for Corporations: Parent-Subsidiary
        Corporations, 20 J. Corp. L. 497, 510 (1995) (“Even if a subsidiary has its own management
        team, it would be naive to expect the enterprise owners to remain silent if they disagree with
        the subsidiary’s policies; if heads roll, there is no doubt whose heads they will be.” (Internal
        quotation marks omitted.)).
¶ 129        When a parent exercises the power it has over a subsidiary by virtue of owning the
        majority of the voting shares, how do we know when the parent is just exercising “working
        control” over the subsidiary (Fontana, 362 Ill. App. 3d at 503), as it is only to be expected a
        parent will do, and how do we know when the parent is doing something more than that:
        using the subsidiary as its mere instrumentality (Gass, 392 Ill. App. 3d at 185). See Stephen
        B. Presser, The Bogalusa Explosion, “Single Business Enterprise,” “Alter Ego,” and Other
        Errors: Academics, Economics, Democracy, and Shareholder Limited Liability: Back
        Towards a Unitary “Abuse” Theory of Piercing the Corporate Veil, 100 Nw. U. L. Rev. 405,
        415 (2006) (“Since shareholders or parents always will have the potential to control, or will
        be controlling their corporations, to apply *** [a] control test is to evaporate the protections
        of limited liability.”).
¶ 130        The answer must lie in the different connotations of the terms “working control” and
        “mere instrumentality.” “Instrumentality” means something more than “control.” All
        corporations that are instrumentalities are under working control, but not all corporations
        under working control are instrumentalities. The proposition that a parent “controls” a
        subsidiary says nothing about the ends to which the parent exercises that control. By contrast,
        the proposition that a subsidiary is the “mere instrumentality” of the parent conveys not only
        the idea of control but control in the parent’s interest as opposed to the subsidiary’s interest.
        There is a difference between controlling a subsidiary in the subsidiary’s interest and
        controlling it in the parent’s interest. An “instrumentality” is “[a] means or agency through
        which a function of another entity is accomplished, such as a branch of a governing body.”


                                                   - 22 -
        Black’s Law Dictionary 802 (7th ed. 1999). When a subsidiary is the “mere instrumentality”
        of its parent, the subsidiary’s apparent mission is to accomplish the functions of its parent,
        such that the subsidiary’s separate corporate form is superfluous and the subsidiary might as
        well be a branch or department of the parent.
¶ 131        The question might be asked, though: Why would anyone buy a majority stake in a
        company merely to have an opportunity for self-denial? “In the shareholders’ minds, the
        function of the corporation is to serve and benefit its owners. Thus, they will cause it to act
        accordingly. It certainly seems nonsensical to suggest that shareholders should occasionally
        cause their corporations to act contrary to their interests so that the company will not be seen
        as their ‘instrumentality.’ ” Kent Bickham Payne, Piercing the Corporate Veil in Louisiana
        Absent Fraud or Deceit, 48 La. L. Rev. 1229, 1238 (1988). In other words, shares are private
        property. Cannot shareholders vote them however they desire? Is it not only to be expected
        that the parent, like any other majority shareholder, will act in its own best interest, even if
        that means acting against the best interest of the subsidiary?
¶ 132        Actually, if the subsidiary has minority shareholders, the parent has to think of them, too.
        The supreme court has held: “An action by a parent corporation injurious to its subsidiary is
        actionable as a breach of fiduciary duty.” In re Rehabilitation of Centaur Insurance Co., 158
        Ill. 2d 166, 174 (1994). “[A] parent corporation generally owes a fiduciary duty to its
        majority-controlled subsidiary or to the minority shareholders of its subsidiary.” 12B William
        Meade Fletcher, Fletcher Cyclopedia of the Law of Private Corporations § 5811.40, at 159
        (2000). In its dealings with the subsidiary, the parent must be fair and must refrain from
        oppressing the minority. Harry G. Henn & John R. Alexander, Laws of Corporations and
        Other Business Enterprises § 240, at 654 (1983). See also 18 C.J.S. Corporations § 398, at
        688 (2007) (“A parent corporation owes a fiduciary duty to its subsidiary when there are
        parent-subsidiary dealings, and transactions between a parent corporation and its subsidiary
        are subject to scrutiny for fraud, unfair dealing, or other inequitable conduct.”); 18A Am. Jur.
        2d Corporations § 674, at 503 (2004) (“In exercising its control and dominion over a
        subsidiary, the parent corporation is a fiduciary, invoking the requirement of fairness in its
        dealings with such subsidiary.”); cf. United States v. Jon-T Chemicals, Inc., 768 F.2d 686, 691
        (5th Cir. 1985) (“Where the subsidiary is wholly-owned by the parent and has the same
        directors and officers, operating the subsidiary independently of the parent company not only
        has little practical meaning, it would also constitute a breach both of the subsidiary’s duty to
        further the interests of its owner, and of the directors’ and officers’ duty towards the parent
        company.”).
¶ 133        It appears that Superior Coal had minority shareholders, namely, its directors–a tiny
        minority, but a minority, nevertheless. Therefore, when making decisions for Superior Coal,
        each of the directors on Superior Coal’s board owed a fiduciary duty not only to Chicago and
        North Western as the majority shareholder but also to the other directors as minority
        shareholders. Instead of “favor[ing] one intracorporate group to the detriment of another,” the
        directors of Superior Coal “owe[d] fiduciary duties to the corporation to exercise unbiased
        judgment in the best interests of the corporation as a whole.” Henn, supra, § 240, at 652.
        Therefore, it was not only to be expected that Superior Coal, having minority shareholders,
        would be the mere instrumentality of Chicago and North Western, the majority shareholder.
        (The instrumentality doctrine might be problematic in the case of a wholly owned subsidiary,
        considering that, in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 771


                                                   - 23 -
        (1984), the Supreme Court said: “A parent and its wholly owned subsidiary have a complete
        unity of interest. *** [T]heir general corporate actions are guided or determined not by two
        separate corporate consciousnesses, but one. They are not unlike a multiple team of horses
        drawing a vehicle under the control of a single driver.” Cf. Gajda v. Steel Solutions Firm, Inc.,
        2015 IL App (1st) 142219, ¶ 23 (“Courts are reluctant to pierce the corporate veil and will
        only do so when (1) there is such a unity of interest and ownership that the separate
        personalities of the corporations no longer exist and (2) circumstances exist so that adherence
        to the fiction of a separate corporate existence would sanction a fraud, promote injustice, or
        promote inequitable circumstances.” (Internal quotation marks omitted.)). Perhaps, in the
        case of a wholly owned subsidiary, the test is reduced to (2).)
¶ 134       Generally, when a subsidiary operates as the mere instrumentality of its parent, the two
        corporations have common directors and officers (Fontana, 362 Ill. App. 3d at 502), and
        when ostensibly acting as directors and officers of the subsidiary, these persons really have
        on their hats as directors and officers of the parent (see Gass, 392 Ill. App. 3d at 185). The
        people of the state, through their democratically elected representatives, have chosen to
        bestow corporate personhood on certain conditions, including the condition that the directors
        of the corporation serve the corporation (see 1903 Ill. Laws 125). When, in reality, the
        directors’ allegiance and loyalty are to the majority shareholder instead of to the corporation,
        the democratic will is subverted in a duplicitous way. The Supreme Court has said:
        “[D]irectors and officers holding positions with a parent and its subsidiary can and do
        ‘change hats’ to represent the two corporations separately, despite their common ownership.
        [Citations.] *** [C]ourts generally presume that the directors are wearing their ‘subsidiary
        hats’ and not their ‘parent hats’ when acting for the subsidiary ***.” (Internal quotation
        marks omitted.) United States v. Bestfoods, 524 U.S. 51, 69-70 (1998). In a footnote, the
        Supreme Court added: “Here, it is prudent to say only that the presumption that an act is
        taken on behalf of the corporation for whom the officer claims to act is strongest when the
        act is perfectly consistent with the norms of corporate behavior, but wanes as the distance
        from those accepted norms approaches the point of action by a dual officer plainly contrary
        to the interests of the subsidiary yet nonetheless advantageous to the parent.” Id. at 70 n.13.
        See also Forsythe, 224 Ill. 2d at 292-93 (quoting those passages from Bestfoods, 524 U.S. at
        69, 70 n.13).
¶ 135       Thus, it is not “consistent with norms of corporate behavior” for dual directors and
        officers, when they are acting purportedly on behalf of the subsidiary, to take actions “plainly
        contrary to the interests of the subsidiary [and] yet nonetheless advantageous to the parent.”
        (Internal quotation marks omitted.) Id. at 293. (Again, the rule might be otherwise in the case
        of a wholly owned subsidiary.) When that happens, the subsidiary has been reduced to a
        mere instrumentality of the parent. While transacting the subsidiary’s business, the dual
        directors and officers really are taking their orders from on high, or their loyalties are pointed
        in that direction, and they act in the parent’s interest. See Baker v. Raymond International,
        Inc., 656 F.2d 173, 180 (5th Cir. 1981) (“[w]hether the directors and officers of [the
        subsidiary] act independently in the interest of that company, or whether they take their
        orders from the [parent] and act in the [parent’s] interest”); Eric J. Gouvin, Resolving the
        Subsidiary Director’s Dilemma, 47 Hastings L.J. 287, 300 (1996) (“For most board
        decisions, therefore, the default rule appears to be that the directors owe their duties to the
        corporation as an entity. Although assessing the corporation’s interests necessarily requires


                                                    - 24 -
        evaluation of shareholder interests, directors ordinarily do not owe their primary duty to the
        shareholders.”); Brian Winrow, Director Liability: A Cliché in North Dakota, 84 N.D. L. Rev.
        1109, 1134 (2008) (“Directors help establish the independence between the corporation and
        the shareholder.”). The cases speak of a “unity of interest”: not just a unity of ownership but
        a “unity of interest.” South Side Bank v. T.S.B. Corp., 94 Ill. App. 3d 1006, 1009 (1981). It is
        as if the subsidiary has no interest of its own but exists primarily to serve the interests of the
        parent, so that, substantially, there is no difference between the subsidiary and a department
        of the parent. Formalistically, there might be a difference–the corporate rituals might be
        scrupulously observed–but substantially, in the underlying decisions ornamented by these
        corporate rituals, the subsidiary primarily serves the parent.

¶ 136                3. Factors, Many of Which Are More Relevant to the Question of
                         Corporate Neglect Than to the Question of Instrumentality
¶ 137       Union Pacific says that “[t]o establish the first element of a veil-piercing claim”–namely,
        that the subsidiary is the mere instrumentality of the parent–“certain factors are critical,” and
        Union Pacific lists 10 factors:
                “(1) inadequate capitalization[,] (2) failure to issue stock[,] (3) failure to observe
                corporate formalities[,] (4) nonpayment of dividends[,] (5) insolvency of the debtor
                corporation[,] (6) non-functioning of officers or directors[,] (7) absence of corporate
                records[,] (9) diversion of assets from the corporation by or to a shareholder[,] and
                (10) the failure to maintain an arm’s-length relationship among related entities.”
        Actually, none of the cases that Union Pacific cites–Main Bank; Cosgrove Distributors, Inc.
        v. Haff, 343 Ill. App. 3d 426 (2003); and Logal v. Inland Steel Industries, Inc., 209 Ill. App.
        3d 304 (1991)–says that all the factors are “critical.” Indeed, when the question is whether a
        subsidiary is the mere instrumentality of the parent, few of the factors even make sense.

¶ 138                                     a. Inadequate Capitalization
¶ 139       Union Pacific points out that, 112 years ago, in 1903, Chicago and North Western made a
        capital investment of $1.5 million in Superior Coal. See David Millon, Piercing the
        Corporate Veil, Financial Responsibility, and the Limits of Limited Liability, 56 Emory L.J.
        1305, 1337 (2007) (“When courts speak of undercapitalization, typically the reference is to
        the amount of capital contributed to the venture when it is launched.”). It is unclear what this
        capital investment has to do with the question of whether Chicago and North Western used
        Superior Coal as its mere instrumentality during the succeeding half century.
¶ 140       Inadequate capitalization would be relevant if Superior Coal still existed and plaintiffs
        sued it only to learn that it lacked any assets to collect from. “The consideration of whether a
        corporation is adequately capitalized is based on the policy that shareholders should in good
        faith put at the risk of the business unencumbered capital reasonably adequate for the
        corporation’s prospective liabilities. [Citation.] It is inequitable to allow shareholders to set
        up a flimsy organization just to escape personal liability.” Fontana, 362 Ill. App. 3d at 504.
        Plaintiffs are not claiming, however, that Chicago and North Western set up Superior Coal as
        a flimsy, undercapitalized organization so that when an injured party sued Superior Coal in
        lieu of Chicago and North Western, Superior Coal would be judgment-proof. Instead,
        plaintiffs are claiming that Chicago and North Western set up Superior Coal as a plausible

                                                    - 25 -
        organization, with the trappings, bureaucracy, and assets of a real corporation, only to use
        Superior Coal as its mere instrumentality.
¶ 141      Undercapitalized, Superior Coal would not have been of much use as an instrumentality.
        To be the coal-mining tool of Chicago and North Western, Superior Coal had to have
        employees, equipment, and mineral rights–all of which required a capital investment.

¶ 142                                    b. Failure to Issue Stock
¶ 143       The appellate court has said that when deciding whether a subsidiary is the mere
        instrumentality of its parent, a court should consider, among other factors, the “failure to
        issue stock,” apparently meaning that if the subsidiary had issued stock, that fact would go
        against an instrumentality theory. (Internal quotation marks omitted.) Gass, 392 Ill. App. 3d
        at 186.
¶ 144       This is another factor that makes absolutely no sense in an instrumentality case. “Stock
        control *** [is] generally [a] prerequisite” to an instrumentality theory. (Emphasis added.)
        Hystro, 18 F.3d at 1389. By the power that majority stock ownership confers, the parent
        makes the subsidiary its instrumentality. Obviously, the parent would not be able to do
        that–and would not even be a parent–unless the subsidiary had issued stock.

¶ 145                            c. Failure to Observe Corporate Formalities
¶ 146       A court might pierce the corporate veil because of a “failure to observe corporate
        formalities.” Gallagher v. Reconco Builders, Inc., 91 Ill. App. 3d 999, 1005 (1980). Often,
        the reason given for this factor is as follows: “[O]ne may view incorporation as a privilege
        conferred by the State, rather than as an ordinary incident of doing business. Since the State,
        by statute, authorizes the creation of a corporation and, pursuant to the same statute, sets
        forth certain rules for its operation, observance of such rules is a condition precedent to the
        benefit of limited liability.” 7 Charles W. Murdock, Illinois Practice § 8:17 (2d ed. 2015).
¶ 147       Observance of the corporate formalities, however, is only one condition precedent to
        limited liability. In the case of a subsidiary with minority shareholders, another condition
        precedent is having officers and directors who use these corporate formalities to conduct the
        subsidiary’s business rather than the parent’s business. Fontana, 362 Ill. App. 3d at 500.
        “[W]here corporate formalities are substantially observed and the parent does not dominate
        the subsidiary, a parent and subsidiary are two separate entities[,] and the acts of one cannot
        be attributed to the other.” (Emphasis added.) Central States, Southeast & Southwest Areas
        Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 944 (7th Cir. 2000).

¶ 148                                  d. Nonpayment of Dividends
¶ 149       Another factor that routinely shows up in the list is the nonpayment of dividends, the
        implication apparently being that if the subsidiary has paid dividends, it is less likely to be a
        mere instrumentality of the parent. Gass, 392 Ill. App. 3d at 186.
¶ 150       Actually, dividends are a two-edged sword. On the one hand, the argument could be
        made that if the subsidiary acquired the means to pay dividends, the parent must have
        allowed the subsidiary to act in its own self-interest and to make a profit. On the other hand,
        when the subsidiary consistently pays hefty dividends to the parent, those amounts enrich the


                                                   - 26 -
        parent instead of getting plowed back into the subsidiary. The parent, as the majority
        shareholder, would not necessarily be averse to getting paid dividends by its instrumentality.

¶ 151                             e. Insolvency of the Debtor Corporation
¶ 152       That the subsidiary is insolvent can be a sign that the subsidiary is a mere instrumentality
        of the parent if the parent’s policy is to exploit the subsidiary into oblivion. See Henderson v.
        Rounds & Porter Lumber Co., 99 F. Supp. 376, 384 (W.D. Ark. 1951). Not every parent,
        however, would want to do that to its instrumentality. If the subsidiary is on the road to
        bankruptcy, it will not be a serviceable instrument for long. To be a useful and durable
        instrument, the subsidiary must be solvent.
¶ 153       If Superior Coal had gone down, it is questionable how much longer Chicago and North
        Western would have lasted, because it would have had to buy coal at commercial rates and
        pay to have it shipped. Evidently, Chicago and North Western could not even afford to pay
        Superior Coal the cost of production. See Superior Coal I, 377 Ill. at 286 (“[Chicago and
        North Western] has long been in bankruptcy ***.”). To continue supplying coal to Chicago
        and North Western without profit, Superior Coal had to receive enough funding to survive.

¶ 154                       f. Nonfunctioning of the Other Officers or Directors
¶ 155        The next factor is the “nonfunctioning of the other officers or directors.” (Emphasis
        added.) “Other than whom?” the reader might wonder–until the reader realizes that this factor
        and, indeed, all the other factors in the list come ultimately from cases in which a corporation
        allegedly was the alter ego of an individual, a natural person. Cosgrove, 343 Ill. App. 3d at
        429; Fiumetto v. Garrett Enterprises, Inc., 321 Ill. App. 3d 946, 958-59 (2001); Ted Harrison
        Oil Co. v. Dokka, 247 Ill. App. 3d 791, 795 (1993); Gallagher, 91 Ill. App. 3d at 1005.
¶ 156        For instance, John Doe buys some online incorporation software, types in his name as
        president and director and types in the names of his Uncle Henry and Aunt Sally as other
        directors. Later, when Acme Corporation is sued, no board meetings have ever taken place,
        and the “other officers or directors,” Uncle Henry and Aunt Sally, have never participated in
        the management of the corporation and, for that matter, are unsure what a director even does.
        It is as if Acme Corporation had no formal existence beyond the certificate of incorporation.
¶ 157        By contrast, in a case in which a subsidiary serves as the instrumentality of a
        sophisticated parent, one would expect that, typically, the subsidiary will have a formal
        existence, maybe even an elaborate formal existence. “Since the parent/subsidiary situation is
        generally found in the context of larger corporations with more sophisticated counsel, there
        generally is not a problem with the corporate rituals.” 7 Charles W. Murdock, Illinois
        Practice § 8:19 (2d ed. 2015). After all, there has to be something that functions as an
        instrumentality of the parent. A mere piece of paper, a certificate of incorporation, would not
        be much of an instrumentality. There has to be a corporate apparatus, something for the
        parent to dominate. Formally, all the parts of a subsidiary corporation are there, just as the
        Manchurian Candidate has all his body parts. But the will has been taken over. The directors
        of the subsidiary “function,” in a manner of speaking. They attend board meetings and vote
        on corporate matters, but when doing so, they usually are working for the parent, at least
        when it comes to significant matters.



                                                   - 27 -
¶ 158                                  g. Absence of Corporate Records
¶ 159       Like the nonfunctioning of officers and directors, the absence of corporate records is
        “more probative of corporate neglect than intentional misuse of the entity.” Jeffrey K.
        Vandervoot, Piercing the Veil of Limited Liability Companies: The Need for a Better
        Standard, 3 DePaul Bus. & Com. L.J. 51, 98 (2004). The gist of an instrumentality theory is
        not so much neglect of the corporate form as misuse of the corporate form by turning the
        subsidiary into the self-sacrificing lackey of the parent. Minutes, contracts, and other
        documents are generated by a corporate apparatus devoted almost exclusively to the parent’s
        interest. In fact, generating corporate records is part of the instrumental function.
¶ 160       For example, a proposed contract is duly approved in the minutes of Superior Coal’s
        board meeting, and the contract is duly signed by the respective officers of their companies,
        but the contract agrees to sell coal to Chicago and North Western at merely the cost of
        mining the coal–as if the transaction were nothing but the funding of a department, not a
        negotiation between two separate corporations, each of which is intent on maximizing its
        own profit.

¶ 161                                       h. Diversion of Assets
¶ 162       A “diversion of assets from the corporation by or to a shareholder” (Cosgrove, 343 Ill.
        App. 3d at 429) is an “unauthorized use” of corporate assets (Black’s Law Dictionary 491
        (7th ed. 1999) (definition of “diversion”)). Again, this factor seems more relevant to the case
        of the unsophisticated individual shareholder who is neglectful of the corporate formalities.
¶ 163       For example, in Miles v. CEC Homes, Inc., 753 P.2d 1021, 1022 (Wyo. 1988) (cited in
        In re Estate of Wallen, 262 Ill. App. 3d 61, 69 (1994)), Maurice Miles owned a corporation,
        Meadowbrook Development, Inc. (Meadowbrook), which was in the business of building
        houses. The trial court pierced the corporate veil and held Miles liable for Meadowbrook’s
        debt. Miles, 753 P.2d at 1022-23.
¶ 164       One of the reasons why the Supreme Court of Wyoming upheld that decision was “the
        diversion of assets from [the] corporation by or to [the] stockholder ***, to the detriment of
        creditors.” (Internal quotation marks omitted.) Id. at 1024. Meadowbrook had built storage
        units and a retail office building for Miles personally, all “without profit.” Id. Meadowbrook
        also had built a garage on Miles’s property, and there was no record that Miles ever paid
        Meadowbrook for the labor, materials, and other expenses. Id. Miles even gave away a
        corporate dump truck in exchange for snow plowing services at his personal residence. Id.
¶ 165       Typically, in an instrumentality case, one would not expect a large parent corporation to
        resort to such crude, undocumented “diversions” of the subsidiary’s assets. That would be
        unnecessary. That would be highly irregular. Instead, the subsidiary, as the parent’s
        instrumentality, would pass resolutions to put up collateral for the parent’s loans or to sell its
        merchandise to the parent at cost or to pay dividends to the parent that exceed the
        subsidiary’s net income. Instruments would be drafted accordingly. Memoranda would be
        signed. All the i’s would be dotted, and all the t’s would be crossed. The exploitation of the
        subsidiary would be duly and meticulously self-authorized.

¶ 166                      i. Failure to Maintain an Arm’s-Length Relationship



                                                    - 28 -
¶ 167        The final factor in the list is the “failure to maintain [an] arm’s-length relationship[ ]
        among related entities.” Cosgrove, 343 Ill. App. 3d at 429. This factor is a little hard to
        understand in the case of a parent and a subsidiary because “arm’s length” means “[o]f or
        relating to dealings between two parties who are not related or not on close terms and who
        are presumed to have roughly equal bargaining power.” Black’s Law Dictionary 103 (7th ed.
        1999). A parent and its subsidiary are related corporations, and it would be naive to suppose
        they have roughly equal bargaining power. The parent may replace the directors and even
        dissolve the subsidiary.
¶ 168        A more apt question is the one posed by a factor that Union Pacific has omitted from the
        list: “whether the corporation [was] a mere facade for the operation of the dominant
        shareholder[ ].” Cosgrove, 343 Ill. App. 3d at 429.
¶ 169        Superior Coal was a coal-mining company, and from 1903 to 1947, in an age of
        steam-powered locomotives and coal-heated homes, Chicago and North Western was its only
        customer. Superior Coal “[sold] the entire output of its mines, except inconsequential sales to
        its own employees for their person use, to the parent corporation.” Superior Coal I, 377 Ill. at
        283. Except for some “limited amounts” Superior Coal received from royalties, rents, and
        investments, Chicago and North Western was its only source of income. Id. at 285. See
        Steven v. Roscoe Turner Aeronautical Corp., 324 F.2d 157, 161 (7th Cir. 1963) (One of the
        factors suggestive of instrumentality is that “[t]he subsidiary has substantially no business
        except with the parent corporation.” (Internal quotation marks omitted.)).
¶ 170        It appears that, from the early 1930s onward, Superior Coal charged Chicago and North
        Western, its sole customer, only the cost of production. That effectively was true even from
        July 1932 to December 1934, when Superior Coal was charging Chicago and North Western
        20 cents per ton in excess of Superior Coal’s cost of production, because by prior agreement
        Superior Coal turned around and paid that excess to Chicago and North Western’s creditor,
        the Reconstruction Finance Corporation. In December 1934, Superior Coal resumed charging
        Chicago and North Western only the cost of production.
¶ 171        The contract of December 27, 1934, recited: “[F]or many years said Coal Company has,
        although constituting a separate corporation, been managed and operated, and its properties
        managed and operated, as a branch or department of said Railway Company, and wholly in
        its interest ***.” See id. (“In the papers of the parent corporation or in the statements of its
        officers, the subsidiary is described as a department or division of the parent
        corporation ***.” (Internal quotation marks omitted.)). Superior Coal told the supreme court
        the same thing in Superior Coal I, 377 Ill. at 283-84.
¶ 172        Union Pacific dismisses these representations as rhetorical and conclusory. That Superior
        Coal was an instrumentality of Chicago and North Western is indeed a conclusion of fact, but
        it is unclear why Superior Coal and Chicago and North Western would feel the need to wax
        rhetorical in a private contract between themselves. If A says of B, “He is nothing but a
        yes-man for C,” the statement could be shrugged off as rhetorical and conclusory unless A
        offered evidence to back it up. If B, however, solemnly says of himself, “I’m nothing but a
        yes-man for C,” and if C solemnly agrees, the statement is not so easily dismissed, because,
        arguably, no one knows better than B and C themselves whether B is a yes-man for C. See
        Steven, 324 F.2d at 161 (“In the papers of the parent corporation or in the statements of its
        officers, the subsidiary is described as a department or division of the parent corporation
        ***.” (Internal quotation marks omitted.)).

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¶ 173        But the evidence does not point all one way. Some things could be said against the
        instrumentality theory. In the tax case, Superior Coal had an incentive to exaggerate its
        servility, to get out of paying the retailers’ occupation tax. Apparently, Superior Coal
        exercised some freedom to make decisions in its own interest. Throughout its existence,
        Superior Coal paid dividends, which, arguably, suggests enough autonomy to make a profit.
        It leased out properties to third parties. When investing in Chicago and North Western, the
        board of Superior Coal instructed its agents to buy securities and bonds at the “best prices
        obtainable.” From 1947 onward, Superior Coal sold coal to other customers, and Chicago
        and North Western no longer consumed 100% of its production. Superior Coal found salvage
        buyers for its physical assets. It is not for us, but it is for the trial court, to determine the
        weight to give these competing items of evidence. See Destiny Health, Inc. v. Connecticut
        General Life Insurance Co., 2015 IL App (1st) 142530, ¶ 22. Therefore, we reverse the
        summary determination in favor of Union Pacific on the instrumentality issue, and we
        remand this case for an evidentiary hearing on that issue.
¶ 174        Until the trial court, sitting in equity, resolves the factual question of whether Superior
        Coal was indeed a mere instrumentality of Chicago and North Western, the legal question of
        whether justice requires a piercing of the corporate veil is premature.

¶ 175                                        4. Superior Coal I
¶ 176       Union Pacific argues that even though, in Superior Coal I, Superior Coal insisted to the
        supreme court that it was merely a “department,” “branch,” “agent,” or “instrumentality” of
        Chicago and North Western (Superior Coal I, 377 Ill. at 283-84), the supreme court was
        unconvinced and said: “[T]he separate corporate existence of the two companies has been
        established and long preserved in the present case, and each corporation has obviously
        secured substantial economic benefits from its separate existence.” Id. at 291.
¶ 177       Read in isolation, that sentence does indeed appear to suggest that Superior Coal was a
        bona fide corporation, separate and distinct from its parent, Chicago and North Western. In
        context, though, “the separate corporate existence of the two companies,” “established and
        long preserved” (id.), meant only the “utiliz[ation of] separate corporate forms for nearly
        forty years,” including “the legal habiliments” (that is, the clothing) “incident to a sale in the
        transactions involved in this litigation” (emphases added) (id. at 295). For purposes of the
        retailers’ occupation tax, nothing else mattered but these corporate forms and the legal
        habiliments of sales. The supreme court was indifferent to the question of what will was
        animating Superior Coal’s corporate form. Superior Coal could candidly admit that, in
        reality, it was merely an “agent or instrumentality” of its parent, Chicago and North Western
        (id. at 283-84), but all the supreme court cared about was whether Chicago and North
        Western and Superior Coal had been going through the motions of being separate
        corporations, including the execution of what purported to be contracts for the sale of coal.
        After “observ[ing] the formalities incident to separate corporate existence and receiv[ing]
        substantial economic benefits therefrom” (emphasis added) (id. at 290), the purported
        corporation, Superior Coal, could not pierce its corporate veil for its own benefit, “for the
        purpose of avoiding the burdens likewise incident to the maintenance of separate corporate
        identities” (id.)–even if the “corporate entity” was indeed a “fiction,” as the supreme court
        seemed to grant in its statement of the issue (id. at 289).


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¶ 178        The contracts for the sale of coal at no more than production cost might well have been,
        in reality, “interdepartmental transfer[s],” as Superior Coal claimed (id. at 283-84), but the
        “legal habiliments” of sales between two “corporate forms” were enough to trigger liability
        for the retailers’ occupation tax (id. at 295). If the contracts were fake, Superior Coal had
        faked its way into taxation. That was what the supreme court was getting at, as it later made
        clear in Superior Coal Co. v. Department of Revenue, 4 Ill. 2d 459, 463 (1954) (Superior Coal
        II): “We *** held [in Superior Coal I] that the facts and circumstances did not warrant the
        disregarding of the fiction of the corporate entity.” (Emphasis added.) So, granting that
        Superior Coal’s separate corporate existence was a “fiction” as Superior Coal claimed, the
        fiction nevertheless would be observed because, under the circumstances, justice did not
        demand its nonobservance.
¶ 179        Recall that just because a subsidiary is the mere instrumentality of the parent and, as
        such, a “fictional” corporation, that is not enough to warrant piercing the corporate veil.
        Dregne v. Five Cent Cab Co., 381 Ill. 594, 603 (1943). There is an additional requirement:
        piercing the corporate veil must be necessary to thwart injustice or bad faith. Id. at 604. In
        Superior Coal I, piercing the corporate veil would have enabled bad faith rather than
        thwarted it.

¶ 180                                    D. Affirmative Defenses

¶ 181                                    1. Affirmative Defense No. 3:
                       the School Building as the Proximate Cause of the Subsidence
¶ 182       Union Pacific argues the trial court erred by making a summary determination in
        plaintiffs’ favor on Union Pacific’s amended third affirmative defense. That affirmative
        defense was as follows: “[T]he alleged mine subsidence would not have occurred but for the
        placement of the school on the site, [which] *** thereby became the immediate and/or sole
        proximate cause of such occurrence ***.”
¶ 183       Union Pacific thereby pleaded a defense the supreme court recognized in Wilms. The
        supreme court held: “The act of removing all support from the superincumbent soil is, prima
        facie, the cause of its subsequently subsiding, but if the subsiding is, in fact, caused by the
        weight of buildings erected subsequent to the execution of the lease of the mine [by the
        previous owner of the land], this is in the nature of contributive negligence, and may be
        proved in defence.” Wilms, 94 Ill. at 469. In other words, “this obligation to protect the
        superincumbent soil only extends to the soil in its natural state, and *** no obligation rests
        on the owner of the subjacent strata to support additional buildings, in the absence of express
        stipulation to that effect.” Id. at 468. The mine operator must leave “naturally necessary
        subjacent support.” (Emphasis added.) Restatement (Second) of Torts § 820(1), at 78 (1979).
¶ 184       As Powell explains, the weight of the building generally is trivial compared to the weight
        of the superincumbent soil, and proving that the building caused the subsidence could be like
        proving the addition of a straw caused the camel to collapse:
                    “Strict liability extends only to that support required by the land itself, and does
                not include additional support needed because of artificial structures. However, this
                distinction has little real significance in the law of subjacent support because the
                weight of artificial additions is generally slight compared with the weight of the fallen

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                supported land. Thus, some courts have held that if one withdraws subjacent support
                for the land of another, and subsidence would have occurred even in the absence of
                any artificial additions to the land, then the actor is strictly liable for harm to both the
                land and the structures. Moreover, the party removing subjacent support has the
                burden of proving that the subsidence would not have occurred but for the additional
                structures.” 9 Richard R. Powell, Powell on Real Property § 63.06(1), at 63-28 to
                63-29 (Michael Allan Wolf ed., 2000).
¶ 185        Union Pacific’s own expert, Newman, testified that the 2009 “subsidence would have
        occurred irrespective of what was on the surface” of the School District’s property. Robert D.
        Gibson, supervisor of the emergency section of the Illinois Department of Natural Resources
        Office of Mines and Minerals Abandoned Mined Lands Division, agreed that the weight of
        the building had nothing to do with the subsidence. The weight of the building, he testified,
        was “insignificant” compared to the weight of “all the rock and soils and stuff” above the
        mine, and the land would have subsided with nothing on the surface. It appears that no expert
        contradicted Newman and Gibson in that respect. Therefore, we find no genuine issue of fact
        as to Union Pacific’s amended third affirmative defense, which alleged that the “mine
        subsidence would not have occurred but for the placement of the school on the site,” and the
        trial court was correct to make a summary determination in plaintiffs’ favor on that
        affirmative defense.

¶ 186                               2. Affirmative Defense Nos. 6 and 9:
                                 Comparative Fault and Assumption of Risk
¶ 187      In its sixth affirmative defense, Union Pacific alleged as follows:
                     “(a) The School District knew or should have known of the risk of mine
                subsidence, but it and/or its agents failed to take proper care in the design,
                construction, maintenance, or use of the school.
                     (b) The School District knowingly and voluntarily assumed the risk of mine
                subsidence.
                     (c) The School District knew of the risk of mine subsidence, but it and/or its
                agents failed to take proper care in selecting a site for the school.
                     (d) The School District knew of the risk of mine subsidence and impermissibly
                counted on using the owner of the mineral rights as an insurer of last resort should
                subsidence occur, but did not give notice to the owner of the mineral rights as to the
                plans for new construction or consult as to possible methods to abate the risk of future
                subsidence.
                If judgment is rendered in the School District’s favor, such judgment must be reduced
                in amount or barred under the Illinois doctrine of comparative fault.” (Emphasis
                added.)
¶ 188      In its ninth affirmative defense, Union Pacific alleged as follows:
                     “(a) The School District knew of the risk of mine subsidence but it knowingly and
                voluntarily built on the site anyway.
                     (b) The School District knew of the risk of mine subsidence, built on the site
                anyway, and it and/or its agents declined to take necessary precautions in the design,


                                                     - 32 -
                 construction, maintenance, or use of the school to reduce or eliminate the risk of
                 subsidence.
                 If judgment is rendered in Plaintiff’s favor, such judgment must be reduced in amount
                 or barred under the Illinois doctrine of assumption of risk.” (Emphasis added.)
¶ 189       Union Pacific makes essentially two arguments in support of its sixth and ninth
        affirmative defenses. First, Union Pacific points out that in Wilms, 94 Ill. at 469, the supreme
        court recognized “contributive negligence” as a defense in an action for mine subsidence.
        Second, Union Pacific reasons that because comparative fault is a defense to strict product
        liability (see Coney v. J.L.G. Industries, Inc., 97 Ill. 2d 104, 119 (1983)), it likewise should be
        a defense to strict liability for mine subsidences.
¶ 190       The School District responds that in Wilms, 94 Ill. at 469, the supreme court stated that
        the causation of the subsidence by the weight of the buildings was “in the nature of
        contributive negligence,” which was not the same as saying it was contributive negligence.
        (Emphasis added.) As for Union Pacific’s other argument–that cases recognize comparative
        fault as a defense to strict products liability–the School District draws a distinction between
        “strict liability” and “absolute liability,” arguing that the operator of a mine is absolutely
        liable for mine subsidences, not strictly liable. “This right of support is absolute and without
        condition ***.” (Emphasis added.) Lloyd v. Catlin Coal Co., 210 Ill. 460, 468 (1904). A “coal
        company’s liability depends not on fault but arises from its absolute duty to provide the
        surface with support.” (Emphasis added.) Tankersley v. Peabody Coal Co., 31 Ill. 2d 496, 502
        (1964). Cases after Lloyd and Tankersley have drawn a distinction between “strict liability”
        and “absolute liability.” Korando v. Uniroyal Goodrich Tire Co., 159 Ill. 2d 335, 343 (1994)
        (“Strict products liability is not a doctrine of absolute liability; the manufacturer of a product
        is not an absolute insurer.”); Prince v. Galis Manufacturing Co., 58 Ill. App. 3d 1056, 1060
        (1978).
¶ 191       We will address those arguments and counterarguments in turn.

¶ 192                                   a. “Contributive Negligence”
¶ 193       The supreme court said in Wilms, 94 Ill. at 469: “The act of removing all support from
        the superincumbent soil is, prima facie, the cause of its subsequently subsiding, but if the
        subsiding is, in fact, caused by the weight of buildings erected subsequent to the execution of
        the lease of the mine, this is in the nature of contributive negligence, and may be proved in
        defence.” (Emphasis added.) Contributive negligence (or contributory negligence) barred
        recovery in a tort case. Willard v. Swansen, 126 Ill. 381, 384-85 (1888).
¶ 194       For two reasons, the supreme court could not have meant in Wilms that “contributive
        negligence,” strictly speaking, was a defense in an action for mine subsidence. Wilms, 94 Ill.
        at 469. First, even if a predecessor already had erected a building when the plaintiff acquired
        the land, the plaintiff, though himself innocent of any negligence, still would have been
        barred from recovery if it was the weight of the building that caused the land to subside.
        Second, under the doctrine of contributive negligence, the plaintiff had the burden of proving
        his or her own lack of contributive negligence (Broadbent v. Chicago & Grand Trunk Ry. Co.,
        64 Ill. App. 231, 233 (1896)), whereas, according to Wilms, 94 Ill. at 469, the mine operator
        had the burden of proving that the weight of the building had caused the subsidence.



                                                    - 33 -
¶ 195       A building cannot be contributorily negligent, and that probably is why the supreme court
        used the phrase “in the nature of contributive negligence.” Wilms, 94 Ill. at 469. It is one
        thing to say that something is contributive negligence, and it is another thing to say that
        something is “in the nature of” contributive negligence. The phrase “in the nature of” means
        “similar in type to or having the characteristics of.” The New Oxford American Dictionary
        1140 (2001). In Wilms, 94 Ill. at 469, the supreme court did not mean that the causal weight
        of the buildings was contributive negligence. Instead, the supreme court meant it was similar
        to contributive negligence in that, if the weight of the building caused the land to subside,
        recovery was barred. The weight of the building was relevant only to proximate cause, not
        contributory negligence, properly speaking.
¶ 196       In any event, in Alvis v. Ribar, 85 Ill. 2d 1, 27-28 (1981), the supreme court abolished the
        doctrine of contributory negligence and replaced it with the doctrine of pure comparative
        negligence, which reduced the plaintiff’s recovery by whatever percentage the plaintiff was
        negligent. If, for example, a trier of fact found that both the plaintiff and the defendant had
        negligently caused the harm and that the plaintiff was 90% negligent compared to the
        defendant’s 10% negligence, the plaintiff would recover only 10% of the damages the
        plaintiff had incurred. Id. at 25-26.
¶ 197       Later, in 1986, the legislature passed section 2-1116 of the Code of Civil Procedure (Ill.
        Rev. Stat. 1987, ch. 110, ¶ 2-1116), which established a rule of modified comparative fault.
        Under that rule, the plaintiff would be barred from any recovery if the plaintiff’s fault was
        more than 50% of the cause of the injury, whereas if the plaintiff’s fault was 50% or less, the
        plaintiff’s recovery would merely be reduced by that percentage. Section 2-1116 provided as
        follows:
                “In all actions on account of bodily injury or death or physical damage to property,
                based on negligence, or product liability based on strict tort liability, the plaintiff shall
                be barred from recovering damages if the trier of fact finds that the contributory fault
                on the part of the plaintiff is more than 50% of the proximate cause of the injury or
                damage for which recovery is sought. The plaintiff shall not be barred from
                recovering damages if the trier of fact finds that the contributory fault on the part of
                the plaintiff is not more than 50% of the proximate cause of the injury or damage for
                which recovery is sought, but any damages allowed shall be diminished in the
                proportion to the amount of fault attributable to the plaintiff.” Id.
        (Public Act 89-7 (Pub. Act 89-7, § 15 (eff. Mar. 9, 1995)) rewrote section 2-1116. In Best v.
        Taylor Machine Works, 179 Ill. 2d 367 (1997), however, the supreme court held Public Act
        89-7 to be unconstitutional in its entirety, with the result that the 1986 version of section
        2-1116 returned to force.)

¶ 198                           b. “Absolute Liability” and “Strict Liability”
¶ 199      The School District draws a distinction between “absolute liability” and “strict liability.”
        “Absolute liability” can mean different things, depending on the context in which the term is
        used. Sometimes it means a perfected liability as opposed to a contingent liability. Howard v.
        Swift, 356 Ill. 80, 85 (1934); Scholbe v. Schuchardt, 292 Ill. 529, 534 (1920). Sometimes it
        means liability even in the absence of negligence on the defendant’s part (Whitney & Starrett
        Co. v. O’Rourke, 172 Ill. 177, 184-85 (1898); Ciuferi v. Bullock Mining Co., 332 Ill. App. 1,
        11 (1947)): a synonym for “strict liability.” Black’s Law Dictionary 925 (7th ed. 1999). In

                                                     - 34 -
        products liability cases, “absolute liability” can mean, pejoratively, an extreme, unreasonable
        liability to which a manufacturer is not subject, namely, being “an absolute insurer of [the]
        product as to all injuries resulting from contact with or use of the product” (Prince, 58 Ill.
        App. 3d at 1060), regardless of whether “the injury or damage resulted from a condition of
        the product manufactured by the defendant, *** the condition was an unreasonably
        dangerous one, and *** the condition existed at the time the product left the manufacturer’s
        control” (Korando, 159 Ill. 2d at 343).
¶ 200       When imposing an “absolute” duty on a mining operator to provide naturally necessary
        subjacent support, Tankersley and Lloyd did not intend to make the mining operator an
        unconditional insurer against subsidences, regardless of what had caused the subsidences. By
        making the mine operator an insurer, Tankersley and Lloyd would have abandoned the rule in
        Wilms, a case which Tankersley and Lloyd cited with apparent approval. Tankersley, 31 Ill.
        2d at 502; Lloyd, 210 Ill. at 468. Rather, when speaking of the “absolute” duty to support the
        surface estate, Tankersley and Lloyd meant that the mine operator was strictly liable for
        subsidences resulting from the mine operator’s removal of naturally necessary subjacent
        support (Tankersley, 31 Ill. 2d at 502; Lloyd, 210 Ill. at 468), that is, the mine operator was
        liable regardless of “the degree of care that may [have been] used by [it] in the prosecution of
        its work” (id.). See Black’s Law Dictionary 926 (7th ed. 1999) (defining “strict liability” as
        “[l]iability that does not depend on actual negligence or intent to harm, but that is based on
        the breach of an absolute duty to make something safe”); Restatement (Second) of Torts
        § 820 cmt. b, at 78 (1979).

¶ 201                c. The Incompatibility of Comparative Fault With Subsidence Law
¶ 202       Section 2-1116 recognizes comparative fault as a defense to only one kind of strict
        liability, “product liability based on strict tort liability,” and to only one kind of property
        damage, “physical damage to property, based on negligence.” (Emphases added.) Ill. Rev.
        Stat. 1987, ch. 110, ¶ 2-1116. The present case meets neither description.
¶ 203       Not only would a comparison of fault in the present case be unauthorized by section
        2-1116, but it would be inconsistent with an essential principle of mine subsidence law. Fault
        in a subsidence case is either/or. The harm is the subsidence, and the subsidence is either the
        mine operator’s fault or not the mine operator’s fault. The options are digital, one or zero.
        Either the mine operator left enough subjacent support to hold up the land in its natural state,
        in which case the mine operator is blameless, or else the mine operator failed to do so, in
        which case the mine operator is entirely to blame.
¶ 204       Union Pacific is attempting to shift some of the blame onto the School District by arguing
        that because subsidence was occurring right across the street, a reasonable person would have
        perceived a high risk that the same lack of naturally necessary subjacent support existed on
        the School District’s side of the street. To be comparatively negligent, though, the School
        District would have had to do something that contributed to “the proximate cause of the
        injury or damage for which recovery is sought.” Id. The injury or damage is the subsidence.
        By building the school, the School District did not cause the subsidence. By filling the mine
        rooms with grout, the School District might have prevented the subsidence, but by omitting
        the grout, the School District did not cause the subsidence.
¶ 205       Granted, the damages would have been smaller (they would have been only to the land) if
        the School District had built elsewhere, but the duty to mitigate damages arises only after the

                                                   - 35 -
        injury has occurred, not before. Malanowski v. Jabamoni, 332 Ill. App. 3d 8, 15 (2002);
        Tsoukas v. Lapid, 315 Ill. App. 3d 372, 377 (2000); Brady v. McNamara, 311 Ill. App. 3d
        542, 547 (1999); Grothen v. Marshall Field & Co., 253 Ill. App. 3d 122, 128 (1993); TRW
        Title Insurance Co. v. Security Union Title Insurance Co., 887 F. Supp. 1029, 1030 (N.D. Ill.
        1995).
¶ 206       We can understand the argument that one should not knowingly and perversely pile up
        damages. But the School District did not know that Superior Coal had failed to leave
        naturally necessary subjacent support beneath the particular site of construction. According
        to the law of strict products liability, to which Union Pacific draws an analogy, a plaintiff
        injured by a defective product did not assume the risk of the injury unless, at the time, the
        plaintiff actually was aware of the dangerous defect in the product. Calderon v. Echo, Inc.,
        244 Ill. App. 3d 1085, 1091 (1993) (“[F]or assumption of risk to preclude recovery, plaintiff
        must be aware of the defect in the product ***.” (Emphases added.)); King v. American Food
        Equipment Co., 160 Ill. App. 3d 898, 908 (1987) (“[A] plaintiff assumes the risk of a
        defective product only if he is actually aware of the defective nature of the product ***.”).
¶ 207       The School District “had the right to assume that the coal would be mined and removed
        in a lawful manner and that sufficient coal or supports would be left to support the surface.”
        Morris v. Saline County Coal Co., 211 Ill. App. 178, 184 (1918). It strikes us as implausible
        that by breaching its duty toward some landowners in a city, a coal mining company could
        effectively deprive all the other landowners in the city of the right to make that assumption,
        with the consequence that, thereafter, all these other landowners would have to “earn” the
        right to build on their own land by first performing an expensive subterranean investigation
        and, if necessary, grouting. Otherwise, if a subsidence occurred, they supposedly would be at
        “fault” for purposes of section 2-1116 (Ill. Rev. Stat. 1987, ch. 110, ¶ 2-1116). Such a rule
        effectively would shift to the owners of the surface estate the mine operator’s duty to
        substitute artificial supports for the naturally necessary supports the mine operator has
        removed. See Seitz v. Coal Valley Mining Co., 149 Ill. App. 85, 89-90 (1909). It seems
        implausible that the law would do that. Therefore, we affirm the summary determination in
        plaintiffs’ favor on the sixth and ninth affirmative defenses.

¶ 208                                      III. CONCLUSION
¶ 209      For the foregoing reasons, we reverse the summary judgment in plaintiffs’ favor, and we
        remand this case for further proceedings.

¶ 210      Reversed and remanded.




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