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Gidwitz, Exr. v. Lanzit Cor. Box Co.

OPINION FILED SEPTEMBER 29, 1960.

VICTOR E. GIDWITZ, EXR., ET AL., APPELLEES,

v.

LANZIT CORRUGATED BOX CO. ET AL., APPELLANTS.



APPEAL from the Superior Court of Cook County; the Hon. JOHN J. LUPE, Judge, presiding.

MR. JUSTICE HERSHEY DELIVERED THE OPINION OF THE COURT:

Rehearing denied November 30, 1960.

This action was brought by certain shareholders of Lanzit Corrugated Box Co., an Illinois corporation, under subparagraphs (1), (2), and (3) of paragraph (a) of section 86 of the Business Corporation Act of this State (Ill. Rev. Stat. 1955, chap. 32, par. 157.86) on the theory that both the directors and shareholders of this corporation are deadlocked and that the original defendants had committed illegal, oppressive or fraudulent acts.

Answers and counterclaims were filed to this by defendants asking for an accounting and other relief and later an amended complaint was filed to which answers and counterclaims were also filed.

Thereupon this cause was referred to a master, who, after many hearings commencing in January, 1955, and extending over some three years with several thousands of pages of testimony and voluminous exhibits, made his finding recommending the entry of a decree ordering a dismissal of this cause at plaintiffs' costs.

After several hearings on the master's report, the trial court rendered an oral opinion sustaining the master's finding that the complaint be dismissed and that no relief be granted on the counterclaims.

Following that and prior to the entry of the final decree in this cause, a supplemental complaint was filed on March 16, 1959, setting out certain other matters occurring earlier in 1959. It asked (1) for the appointment of a liquidating receiver for the corporation, and (2) for a dissolution of the corporation under subparagraph (1) of paragraph (a) of section 86 of The Business Corporation Act. Ill. Rev. Stat. 1955, chap. 32, par. 157.86.

To this supplemental complaint, answers and affirmative defenses were filed by the several defendants, and on August 17, 1959, without further evidence the trial court entered its final decree confirming the master's report in certain respects and overruling it to the extent inconsistent with the court's finding of facts as follows:

"1. The directors of the Corporation are now, and since 1950 have been deadlocked in the management of the corporate affairs.

"2. The shareholders of the Corporation are now, and since 1950 have been, unable to break the deadlock of the directors in the management of the corporate affairs.

"3. Irreparable injury to the Corporation is threatened by reason of the deadlock of the directors and the shareholders.

"4. The shareholders of the Corporation are deadlocked in voting power and have failed, for a period of ten consecutive annual meeting dates since 1949, to elect successors to directors whose terms have expired or would have expired upon the election of their successors.

"5. The acts of Defendants Joseph, Gerald and Willard have been and are oppressive in that, through the medium of the deadlock among the directors and the stockholders, said Defendants have been in control of the Corporation for the last ten years by reason of Joseph being President and chief executive officer."

The court then stated his conclusions of law as follows:

"1. Plaintiffs have established their right to have the assets and business of the Corporation liquidated pursuant to the provisions of Section 86(a)(1) of the Illinois Business Corporation Act.

"2. Plaintiffs have established their right to have the assets and business of the Corporation liquidated pursuant to the provisions of Section 86(a) (3) of the Illinois Business Corporation Act."

The court thereupon decreed that the assets and business of the corporation be liquidated under paragraphs 8 and E of the amended complaint and section 86(a) (1) and section 86(a) (3) of the Business Corporation Act; appointed a liquidating receiver; retained jurisdiction for certain matters; denied the relief asked in the counterclaim, and dismissed same.

Appeal was then taken to the Appellate Court for the First District and by order of that court on November 3, 1959, the cause was transferred to this court because the termination of a corporate franchise was involved.

From this voluminous record the undisputed facts appear to be that this is a family corporation, all shares being owned or controlled by the Gidwitz family, so that fifty per cent of the shares are owned by the defendants and the other fifty per cent owned or claimed to be under the control of plaintiffs.

Subparagraphs (1), (2), and (3) of paragraph (a) of section 86 of the Business Corporation Act (Ill. Rev. Stat. 1955, chap. 32, par. ...


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