No. 2--04--0042

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT

JUSTICE BOWMAN delivered the opinion of the court:

Plaintiff, Home Depot, U.S.A., Inc., appeals from the trial court's interlocutory order grantinga motion by defendants, the Department of Revenue (Department), Brian Hamer, Director ofRevenue, and Judy Baar Topinka, Illinois State Treasurer, to transfer venue under section 2--103(a)of the Code of Civil Procedure (735 ILCS 5/2--103(a) (West Supp. 2003)) from Du Page Countyto Cook County. On appeal, plaintiff argues that the trial court erred in granting the motion, because(1) the Department maintains a "principal office" in Du Page County and (2) a part of the transactionat issue took place in Du Page County. We affirm.

I. BACKGROUND

According to the record, plaintiff is a Delaware corporation headquartered in Atlanta,Georgia. Plaintiff operates more than 1,500 Home Depot stores in the United States, including 11stores in Du Page County. The underlying case involves a dispute about plaintiff's Illinois income taxliability for four tax years. During the period in question, plaintiff filed taxes as a single company. After the Department audited plaintiff, it asserted that two of plaintiff's affiliate corporations, HomeDepot International, Inc. (HD International), and Homer TLC, Inc. (Homer), were part of a unitarybusiness group with plaintiff. These companies, along with plaintiff and other companies, are partof the Home Depot federal consolidated group (HD Group). The Department alleged that plaintiffhad miscalculated its Illinois sales factor under section 304(a) of the Illinois Income Tax Act (35ILCS 5/304(a) (West 2002)) by not including income from HD International and Homer.

On September 30, 2003, plaintiff paid, under protest, $17,447,504 to satisfy two proposeddeficiency notices issued by the Department. It then filed the instant action in Du Page County,seeking declaratory and injunctive relief. Plaintiff alleged that HD International and Homer were notpart of its unitary business group or, alternatively, that the Department incorrectly calculated its taxdeficiency. Plaintiff's complaint also included the following allegations. During the tax years at issue,"Homer was engaged in the business of investment. Homer invested in intangible property, includingintellectual property and marketable securities." Homer was not in the same general line of businessas plaintiff and was not vertically integrated with plaintiff, because plaintiff operated retail stores whileHomer invested in intangible property.

Plaintiff additionally alleged that during the relevant tax years, HD International was a "salesfinance company" that was "primarily engaged in the business of making loans to other companiesin the HD Group," including plaintiff, "for the express purpose of funding purchases of tangiblepersonal property or services by the borrower." Plaintiff alleged that investment income earned bythe HD Group had no " 'operational' " connection to plaintiff's business in Illinois.

On November 4, 2003, defendants filed a special limited appearance and moved to transfervenue to Cook County under section 2--103(a) or, alternatively, under the doctrine of forum nonconveniens. After a hearing on the motion, the trial court concluded that plaintiff's choice of venuein Du Page County was improper under section 2--103(a) because the Department did not maintaina "principal office" in Du Page County and because no part of the transaction giving rise to the suitoccurred in Du Page County. The trial court granted defendants' motion and transferred the case toCook County. Plaintiff petitioned for leave to appeal under Supreme Court Rule 306(a)(4) (OfficialReports Advance Sheet No. 26 (December 24, 2003), R. 306(a)(4), eff. January 1, 2004), and wegranted its petition.

II. ANALYSIS

A. Standard of Review

We first examine the proper standard of review for the grant or denial of a motion to transferon the ground of improper venue. The appellate court has issued what appears to be conflictingdecisions on this subject. In Lake County Riverboat L.P. v. Illinois Gaming Board, 313 Ill. App. 3d943, 951 (2000), this court held that a decision of whether a certain venue is proper should bereviewed de novo, provided that the facts are undisputed. Several other cases have also applied thede novo standard. See Reynolds v. GMAC Financial Services, 344 Ill. App. 3d 843, 847 (5th Dist.2003); Boxdorfer v. DaimlerChrysler Corp., 339 Ill. App. 3d 335, 339-41 (5th Dist. 2003); Reichertv. Court of Claims, 327 Ill. App. 3d 390, 393-94 (5th Dist. 2002), vacated on other grounds, 203 Ill.2d 257 (2003). However, just one month after this court filed Lake County Riverboat L.P., we heldthat a trial court's determination of proper venue would not be overturned absent an abuse ofdiscretion. Johnson v. Compost Products, Inc., 314 Ill. App. 3d 231, 236 (2000). The use of sucha standard is also supported by other appellate court cases. See Southern & Central Illinois Laborers'District Council v. Illinois Health Facilities Planning Board, 331 Ill. App. 3d 1112, 1115 (5th Dist.2002); Long v. Gray, 306 Ill. App. 3d 445, 449 (1st Dist. 1999).

We believe that both standards are applicable here. Section 2--103(a) provides, in relevantpart:

"Actions must be brought against a public, municipal, governmental or quasi-municipal corporation in the county in which its principal office is located or in the county inwhich the transaction or some part thereof occurred out of which the cause of action arose." (Emphasis added.) 735 ILCS 5/2--103(a) (West Supp. 2003).

The statute's use of the term "must" implies that proper venue is mandatory rather than discretionary. See Boxdorfer, 339 Ill. App. 3d at 339-40. Although a defendant may waive the issue of propervenue (see 735 ILCS 5/2--104(b) (West 2002)), the trial court has no discretion to deny a motion totransfer, based on improper venue, when the plaintiff has failed to satisfy the statute's requirements. See Boxdorfer, 339 Ill. App. 3d at 340. Whether the plaintiff has satisfied these statutoryrequirements raises a mixed question of law and fact. See Lake County Riverboat L.P., 313 Ill. App.3d at 951. Where, as in this case, there is no dispute concerning the facts upon which the trial court'svenue ruling is based, only questions of law remain. See Du Page County Board of Review v.Department of Revenue, 339 Ill. App. 3d 230, 233 (2003) ("Generally, whether a given set ofhistorical facts satisfies a given constitutional or statutory standard is considered a question of lawsubject to de novo review" (emphasis in original)). Here, we must determine, as a matter of law,whether the Department maintains a "principal office" in Du Page County and whether some part ofthe transaction leading to this suit occurred there, within the meaning of section 2--103(a). Thus, denovo review is appropriate for these matters. See also Carver v. Sheriff of La Salle County, 203 Ill.2d 497, 506-07 (2003) (statutory construction is a question of law subject to de novo review).

Defendants argue that when reviewing a mixed question of law and fact, Illinois law requiresdeference to a trier of fact's decision. Defendants point out that administrative decisions involvingmixed questions of law and fact are reviewed under a "clearly erroneous" standard. See CarpetlandU.S.A., Inc., v. Department of Employment Security, 201 Ill. 2d 351, 369 (2002); AFM MessengerService, Inc. v. Department of Employment Security, 198 Ill. 2d 380, 395 (2001). However, thisstandard applies to the review of administrative decisions in part due to long-standing deference toan agency's experience and expertise in interpreting its governing statutes. See AFM Messenger, 198Ill. 2d at 394. While some courts have used the supreme court's holding in AFM Messenger as anindication that the clearly erroneous standard should be applied to mixed questions innonadministrative cases (see, e.g., Anderson v. First American Group of Cos., 353 Ill. App. 3d 403(2004)), our supreme court has not held that this standard, or a largely deferential standard, appliesto all mixed questions of law and fact. To the contrary, in some cases our supreme court has useda bifurcated standard for mixed questions of law and fact. See People v. Pitman, 211 Ill. 2d 502, 512(2004); People v. Crane, 195 Ill. 2d 42, 51-52 (2001) (using bifurcated standard for mixed questionsof law and fact); see also Franz v. Calaco Development Corp., 352 Ill. App. 3d 1129, 1143-45 (2004)(mixed question of law and fact in which the issue of whether the law, as applied to the establishedfacts, is or is not violated receives review under "clearly erroneous" standard. Some mixed issues aremore fact-based than others, and the determination of the standard of appellate review requires arecognition of the disparate institutional competencies of trial and appellate courts); K. Coles, MixedUp Questions of Fact & Law: Illinois Standards of Appellate Review in Civil Cases Following the1997 Amendment to Supreme Court Rule 341, 28 S. Ill. U. L.J. 13 (2003).

Defendants also argue that the fact that a statute appears to require a particular result ifcertain criteria are met does not compel de novo review. Defendants set forth the examples of classcertification and the decision to grant intervention as of right. Regarding class actions, section 2--801of the Code of Civil Procedure (735 ILCS 5/2--801 (West 2002)) states that "[a]n action may bemaintained as a class action in any court of this State and a party may sue or be sued as arepresentative party of the class only if the court finds" certain criteria. However, unlike section 2--103(a), which uses the compulsory language "must," the class action statute uses the permissivelanguage "may."

Defendants also provide the example of intervention as of right. Section 2--408 of the Codeof Civil Procedure (735 ILCS 5/2--408 (West 2002)) states that "anyone shall be permitted as of rightto intervene in an action" if the party satisfies certain criteria. We acknowledge that although thestatute uses the compulsory term "shall," the decision to allow or deny intervention, whetherpermissively or as of right, is within the trial court's discretion. People ex rel. Birkett v. City ofChicago, 202 Ill. 2d 36, 58 (2002). The word "shall" is generally construed as mandatory language,but this rule is not inflexible (People v. Felella, 131 Ill. 2d 525, 539 (1989)); "the word 'shall' may beheld to be merely directory only where no advantage is lost, no right is destroyed, and no benefit issacrificed, either to the public or to any individual" (Serpico v. Urso, 127 Ill. App. 3d 667, 670-71(1984)). This principle applies to section 2--408, as the purpose of intervention is to avoid themultiplicity of actions. See Birkett, 202 Ill. 2d at 57. In contrast, proper venue ensures that adefendant will not be forced to defend itself in a county, arbitrarily chosen by a plaintiff (Stambaughv. International Harvester Co., 102 Ill. 2d 250, 260-61 (1984)), that has little or no relation to thedefendant or the transaction leading to the case (Johnson, 314 Ill. App. 3d at 236). Proper venue isan important privilege that a defendant has a right to insist upon. Stambaugh, 102 Ill. 2d at 261. Thus, we believe that the term "must" in section 2--103(a) remains compulsory. In any event, webelieve that de novo review is the most appropriate standard of review to determine what constitutesa "principal office" in the context of this case; the evidentiary facts are uncontroverted, leaving aquestion of law as to this issue.

Returning to the more specific issue of the standard of review for the judgment rendered bythe trial court on the ultimate issue of venue, we recognize that a final judgment determining venueis properly reviewed for an abuse of discretion. Typically, there is more than one proper venue fromwhich the trial court may choose. For example, forum non conveniens is a concept distinct from thatof venue. V.G. Marina Management Corp. v. Wiener, 337 Ill. App. 3d 691, 693 (2003). Even if thecriteria for subject matter jurisdiction, personal jurisdiction, and venue have been met, the court maygrant a forum non conveniens motion if the court determines that an alternative forum can betterserve the parties' convenience and the ends of justice. V.G. Marina Management Corp., 337 Ill. App.3d at 693-94. Such a decision requires the exercise of discretion (see V.G. Marina ManagementCorp., 337 Ill. App. 3d at 695), in contrast to a decision of whether the plaintiff has met statutoryvenue requirements. See also Lake County Riverboat L.P., 313 Ill. App. 3d at 952 ("trial court isvested with forum non conveniens discretion only after it has made the legal determination that thereis more than one proper venue and the venue in which plaintiff chose to file the action is one of theproper venues").

Cases applying an abuse of discretion standard for decisions regarding improper venue haverelied on our supreme court's use of such a standard in Stambaugh. There, the supreme court did notdiscuss the proper standard of review but instead relied on Morrison v. Community Unit SchoolDistrict No. 1, 44 Ill. App. 3d 315 (1976), as authority. Stambaugh, 102 Ill. 2d at 263. However,Morrison involved a motion to change venue based on the potential prejudice of jurors in the county. Morrison, 44 Ill. App. 3d at 319-20. Such a situation requires a trial court to exercise its discretionin determining whether prejudice exists and could affect the trial, in contrast to the question ofwhether the venue is improper in that it fails to meet statutory requirements. See Boxdorfer, 339 Ill.App. 3d at 340; see also Gouker v. Winnebago County Board of Supervisors, 37 Ill. 2d 473, 475(1967) (trial judge has discretion to grant or deny motion to transfer venue based on alleged prejudiceof citizens). We believe that Stambaugh is applicable to our review of the ultimate judgment renderedby the trial court because, as established below, we determine that there was more than one propervenue to which the trial court could have transferred this cause.

B. Principal Office

We now consider in what counties, if any, the Department has a "principal office" forpurposes of section 2--103(a). We will apply de novo review relative to this issue. Plaintiff arguesthat venue in Du Page County is proper under section 2--103(a) because the Department maintainsa "principal office" in Du Page County.⁽¹⁾ The statute states, in relevant part, that an action against agovernmental entity must be brought "in the county in which its principal office is located." 735 ILCS5/2--103(a) (West Supp. 2003). The statute does not define the word "principal," nor has any courtdirectly addressed what constitutes the "principal office" of a state agency. However, both partiesassert that a governmental entity can have more than one "principal office" under section 2--103(a). Defendants maintain that the Department splits its duties between the State's capital, Springfield(Sangamon County), and its population and financial center, Chicago (Cook County). Plaintiff assertsthat the Department's division of duties is more widespread and that the Department's West Chicagooffice, located in Du Page County, is a "principal office."

The primary rule of statutory construction is to ascertain and give effect to the legislature'sintent. Carver, 203 Ill. 2d at 507. The best indication of that intent is the statute's language. Whilethe language should be given its plain and ordinary meaning, it should also be given the fullestpossible meaning to which it is susceptible. Carver, 203 Ill. 2d at 507. Courts must consider thereason for the law, the evil to be remedied, and the object to be obtained by the statute. Collins v.Board of Trustees of the Firemen's Annuity & Benefit Fund, 155 Ill. 2d 103, 111 (1993). We willpresume that in enacting the statute, the legislature did not intend absurdity, inconvenience, orinjustice. Carver, 203 Ill. 2d at 508.

The plain and ordinary meaning of "principal" includes the "most important, consequential,or influential." Webster's Third New International Dictionary 1802 (1986); see also Black's LawDictionary 1210 (7th ed. 1999) (defining "principal" as "[c]hief; primary; most important"); Black'sLaw Dictionary 1211 (7th ed. 1999) (defining "principal place of business" as "place of acorporation's chief executive offices, which is typically viewed as the 'nerve center' "). As mentioned,venue statutes reflect a legislative determination that a party should not have to defend an action ina county that has little or no relation to the party or to the transaction from which the case arises. Johnson, 314 Ill. App. 3d at 236. Venue statutes are designed to ensure that the case is brought ina forum convenient to the defendants, potential witnesses, or both. Tipton v. Estate of Cusick, 273Ill. App. 3d 226, 228 (1995). Courts should liberally construe venue statutes in order to effect, ratherthan defeat, a change of venue. Stambaugh, 102 Ill. 2d at 261.

While a municipality can have only one "principal office" under section 2--103(a) (see Countyof Fulton v. Prairie Plan Project, 80 Ill. App. 3d 441, 443 (1979)), we agree with the parties thatother public entities, such as the Department, can have more than one "principal office." Cf.Metropolitan Life Insurance Co. v. Estate of Cammon, 929 F.2d 1220, 1223 (7th Cir. 1991) (forfederal jurisdiction purposes, a corporation has a single principal place of business where its executiveheadquarters are located). As demonstrated by the facts of this case, more than one office canarguably qualify as the entity's most important office. Such an interpretation in no way defeats thepurpose of section 2--103(a)'s "principal office" requirement, which is to ensure that the case isbrought in a forum convenient to the defendants.

In determining the principal place of business for a corporation, Illinois courts have lookedat the location of the offices responsible for the entity's main activity, the location where the entity'sbusiness is carried out, the location where business decisions are made, the location where trusteesand beneficiaries reside, and the location of the entity's "nerve center." Westchester Fire InsuranceCo. v. G. Heileman Brewing Co., 321 Ill. App. 3d 622, 630 (2000); see also Skidmore v. GatewayWestern Ry. Co., 333 Ill. App. 3d 947, 955 (2002) (corporation's principal place of business is thebusiness's nerve center and location where it has chosen to centralize its activities); Annotation,Determination of Corporation's Principal Place of Business for Purposes of Diversity JurisdictionUnder 28 U.S.C.