APPEAL from the Circuit Court of Lake County; the Hon. BERNARD
M. DECKER, Judge, presiding.
MR. JUSTICE KLINGBIEL DELIVERED THE OPINION OF THE COURT:
Rehearing denied March 18, 1959.
This action was brought by Borg-Warner Corporation for specific performance or, in the alternative, money damages, on an alleged contract between plaintiff and Anchor Coupling Co. and its chief officers, Charles L. Conroy and Walter Fritsch. The amended complaint was dismissed on the ground that plaintiff had failed to allege a completed contract capable of specific performance or a cause of action for damages.
This appeal was transferred to this court from the Appellate Court, Second District, for the reason that a freehold is involved, certain real property being among the assets of defendant which were the subject of the alleged contract.
Since the propriety of the lower court's dismissal of the case depends solely on the sufficiency of plaintiff's amended complaint, it is necessary to set forth the facts as alleged in said complaint in some detail.
Plaintiff and defendant, Anchor Coupling Co., hereinafter called Anchor, are corporations organized under the laws of Illinois and engaged in the business of manufacturing. Anchor has issued and outstanding 4,400 shares of stock, owned as follows: Walter Fritsch 1,649 shares, John Fritsch (son of Walter Fritsch) 396 shares, Charles L. Conroy 2,045 shares, Wier (uncle of Charles L. Conroy) 145 shares, and Leubkeman 165 shares. Defendant Fritsch dealt with and represented the stock owned by his son, John Fritsch, as though it were his own, and defendant Fritsch, John Fritsch and defendant Conroy owned at all relevant times 92.96 per cent of Anchor's stock. For ten years defendants Conroy and Fritsch have constituted two of the three directors of Anchor and have dominated and exercised complete control over all the affairs and acts of Anchor with the acquiescence and consent of the other shareholders and the board. The third director, Albrecht, an employee of Anchor, has never owned any shares in the company.
Prior to February 20, 1956, plaintiff engaged in conferences and negotiations with defendants Conroy and Fritsch, as controlling shareholders of Anchor and its chief executive officers and directors, respecting the purchase by plaintiff of all of the property and assets of Anchor. As a result of these negotiations an oral agreement was reached that defendants would sell to plaintiff all of said property and assets for the sum of $4,023,500, if the results of a survey and investigation of Anchor's assets were satisfactory to plaintiff.
On February 20, 1956, plaintiff wrote a letter to Anchor setting forth a detailed agreement giving plaintiff a 60-day option to purchase all of Anchor's business and assets. This was not signed by Anchor, but instead, on February 29, 1956, a letter was sent to plaintiff on Anchor's letterhead and signed by defendants Conroy and Fritsch. Since the decision in this case turns chiefly upon the interpretation to be placed on this letter, we quote its significant parts in full:
This letter will outline and confirm our conversation at luncheon today with your Messrs. Porter, Murphy, Steg and Peifer.
We are unwilling to enter into a formal option with your company as proposed in your letter of February 20, 1956. This is not for the purpose of horse-trading, but rather to avoid the damage which a turn-down by you would cause both internally and in our market.
We would be willing to sell the assets of our company to you for $4,025,000 in accordance with the terms of paragraphs 3, 5, 6, 7, 8, 9, 11, 13, 14 and 17 of your letter of February 20, 1956, if such an offer were made today without the reservations elsewhere contained in that letter, and subject to the exceptions noted below.
You may consider this as a letter of intent authorizing you to make the survey you deem necessary to make your offer a firm and binding one; and we assure you of our full cooperation in making it. We suggest that it be completed as quickly as possible.
You are assured that should you make a firm offer within fifty days from this date, we are willing to enter into a contract with you on the basis of the terms of the above numbered paragraphs of your letter of February 20, 1956, with the following exceptions:
(a) That suitable assurances are given for the retention of the lower level executive personnel;
(b) That mutually satisfactory arrangements are made for the continued employment of Charles L. Conroy;
(c) That J.D. Leubkeman shall not be a party to any restrictive covenant as outlined in paragraph 8 of your letter of February 20, 1956; and
(d) That any purchase price adjustment mentioned in paragraph (7) of your letter of February 20, 1956, shall be made only by mutual agreement between us."
Plaintiff thereafter inquired of defendants whether their letter of February 29 was correctly understood by plaintiff as a firm offer which would not be revoked during the period stated in said letter (which period was later extended to April 26, 1956) and which plaintiff could accept within said period so as to create a binding contract of sale, and whether plaintiff could make its survey of Anchor's business operations in reliance thereon. In response thereto, defendants Conroy and Fritsch, by their agent, assured plaintiff that plaintiff had "in effect an option"; that said letter was "in legal effect * * * an offer by us [defendants] to enter into a contract with those four very minor things [referring to paragraphs (a) through (d) of defendants' letter of February 29] still to be agreed on'; that the further agreements referred to were not intended to prevent said offer from being a complete offer capable of acceptance but were minor details which, upon the acceptance of said offer, the parties would be obligated to work out in good faith in a reasonable manner, and that if plaintiff within fifty days made an offer in conformity with said letter, defendants would be obligated, subject only to the conditions that the acceptance be delivered within the time limited and that the investigation be conducted in secrecy, to accept such offer.
On March 14, 1956, plaintiff wrote a letter to Conroy, Fritsch and Anchor saying, "You indicate that our offer on the basis outlined will be accepted if made within fifty days from this date" and asking that the fifty days time be extended to April 26 and that the purchase price be adjusted to $4,024,000. This letter was initialed by Conroy and Fritsch and returned to plaintiff.
Finally, on April 26, 1956, plaintiff wrote to defendants saying that plaintiff had decided to proceed in the acquisition of Anchor's assets. This letter read in part: "Please consider this our formal offer, therefore, to enter into an agreement in accordance with our letters to you of March 14th, and February 20th and your letter to us of February 29th. Our letter to you of March 14th, the terms of which were accepted by you indicates that this offer will be accepted by you if mailed on April 26th."
Plaintiff alleges that at this point a completed contract came into existence. Plaintiff also alleges that in various subsequent conversations defendants represented and agreed that there was a complete contract between plaintiff and defendants until on August 1, 1956, defendant Conroy raised objections to the performance of said contract, and on September 27, 1956, refused to perform said contract.
Defendant Fritsch filed an answer admitting the allegations of plaintiff's complaint and stating that "he did believe that he did enter into a contract and agreement, that the same was fair, open and truly performed on its part by the plaintiff, and this defendant does again reiterate his willingness to perform the same for and on behalf of the shares of stock owned by him and by his son, ...