Appeal from the Circuit Court of Cook County; the Hon. CHARLES
S. DOUGHERTY, Judge, presiding. Reversed.
MR. JUSTICE KLUCZYNSKI DELIVERED THE OPINION OF THE COURT.
Rehearing denied July 12, 1965.
An action for declaratory judgment was brought by James S. Van Pelt against Berefco, Inc. (formerly known as Berry Refining Company, an Illinois corporation, hereinafter called "old Berry"), Bird & Sons, Inc., and The Merchants National Bank of Boston (presently The New England Merchants National Bank of Boston), seeking a declaration that he was entitled to receive early retirement annuity benefits from a retirement trust of which Merchants was trustee. The case was submitted to the court upon a stipulation of facts, exhibits and briefs.
On June 3, 1964 the trial court entered an order awarding plaintiff his retirement benefits. The court found that defendants deprived plaintiff of his retirement benefits solely because of an alleged breach of section 205.07 of the trust indenture. Finding that section 205.07 was unconscionably broad, without any limit as to time or area, the court declared it null and void and ordered the trustee to pay annuity benefits to plaintiff to the date of the declaratory judgment and all future benefits without regard to that section, together with costs.
From the stipulation of facts it appears that prior to March 31, 1962, "old Berry" was an Illinois corporation engaged in the production and sale of petroleum products. It maintained a principal office in Chicago, Illinois and operated an oil refinery near Gary, Indiana. It was a wholly-owned subsidiary of Bird & Son, Inc., (hereinafter termed "Bird") which has its principal place of business in Massachusetts and is primarily engaged in the business of manufacturing and selling roofing materials. Plaintiff was an employee of old Berry for approximately 26 years and was president of said company from 1955 until March 27, 1962 in Chicago, Illinois. As president and an employee of old Berry, plaintiff was a participant in the Retirement Plan and Trust established for the benefit of employees of Bird and old Berry.
Parties to the trust indenture were Bird, old Berry, and The Merchants National Bank of Boston (now The New England Merchants National Bank of Boston) as trustee. The Indenture further provided that the name "Berry Refining Company included its successors and assigns."
In or about February 1962, Bird expressed an interest in selling its right in old Berry by contacting certain potential purchasers. Upon hearing of this, Van Pelt telephoned Ralph A. Wilkins, president of Bird in East Walpole, Massachusetts, reminding Wilkins of Van Pelt's desire to have the first opportunity of selling old Berry and of Wilkins' previous expression that Van Pelt would have such an opportunity. Van Pelt was then authorized by Bird to try to sell the company within the next ten days.
Van Pelt, with the aid of the personnel in the Chicago office of old Berry working under his direction, prepared a brochure which included estimates of profits from the refinery operations for periods subsequent to December 31, 1961, and estimates of anticipated production and production yields from the Gary refinery, which estimates Van Pelt and his staff believed were reasonably supported by the books and records of the corporation. Van Pelt thereafter contacted, among others, the Duncans of Oklahoma City who had previously expressed some interest in purchasing old Berry or its assets. The Duncans were and are Walter Duncan and his sons, J. Walter Duncan, Jr., Vincent J. Duncan and Raymond T. Duncan. Van Pelt later presented the brochure to the Duncans and discussed the sale with them in Oklahoma City.
Subsequently plaintiff met with J. Walter Duncan, Jr. in Chicago and made available to Duncan the books and records of old Berry which he might wish to examine. J. Walter Duncan Jr., on behalf of the Duncans, at that time agreed to purchase the assets of old Berry for a price which Bird had previously informed Van Pelt was acceptable to it. J. Walter Duncan, Jr. and Van Pelt discussed the creation of a new corporation which would purchase all the assets of old Berry and thereafter operate the petroleum business. It was plaintiff's understanding that he would be the president of the new corporation and his compensation was discussed. Van Pelt contends that he did not thereafter receive the full compensation then discussed.
Plaintiff, J. Walter Duncan, Jr., Robert A. Mason, Duncan's assistant, and Richard G. Taft, their attorney, went to East Walpole or Boston to meet with Wilkins, president of Bird, and the attorneys for that company. A tentative agreement of sale was reached whereby the new corporation owned by the Duncans, known as Berry Refining Company, a Delaware corporation (hereinafter referred to as "new Berry") would purchase all the assets of old Berry. Old Berry would change its name to Berefco, Inc., and would cease to be an operating company.
After approval by the various boards of directors, an agreement dated March 23, 1962 was executed on or about April 17, 1962, with a closing date of May 21, 1962, for the transfer of the assets of old Berry to new Berry by duly recorded deeds and assignments in return for cash, secured notes and a promise to pay the balance in cash in May 1962. The agreement provided that the employees of old Berry would become the employees of new Berry. The agreement also related that new Berry was taking over a going business including the obligations of the retirement plan. Plaintiff was made a director and president of new Berry and signed the agreement for the purchase of old Berry as president of new Berry. On March 27, 1962, stockholders of old Berry selected a board of directors making Wilkins president thereof and as of that day plaintiff ceased to be an officer or director of old Berry.
In regard to the retirement plan, old Berry and Bird agreed to take all necessary steps to cause the transfer of the retirement funds held by New England Merchants Bank, as trustee for the benefit of old Berry's employees, including all life insurance carried for the benefit of such employees under existing plans. New Berry agreed to assume all obligations which might accrue after the cutoff date of March 31, 1962, because of the continuation of the retirement plan as to its employees.
On March 31, 1962, old Berry closed its books and new Berry took over the oil business. The quarterly financial statements subsequently received by the Duncans from Bird prior to the date originally intended for the final closing showed lower profit and production levels than did the estimates compiled by plaintiff. Although the Duncans had an opportunity to examine the books and records of old Berry they claimed that there was a substantial variation between the two groups of figures which constituted a material adverse change in conditions contrary to the representations of the purchase agreement. The Duncans were unable to make the cash payments in May 1962.
After considering alternatives, the parties agreed to extend the installment dates for payment. Old Berry was given a note with interest for the unsecured balance and two positions on the new Berry board with a veto power over expenditures. Provision was made for the buying out of the Duncan interests in the event new Berry could not make its payments. Furthermore, the Duncans were allowed to renegotiate the agreement allowing them to walk away at any time and receive all the money which had been paid in, plus profits or ...