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Abbott v. Fluid Power Pump Co.

SEPTEMBER 9, 1969.




Appeal from the Circuit Court of Madison County, Third Judicial Circuit; the Hon. JOSEPH J. BARR, Judge, presiding. Judgment affirmed.


Rehearing denied October 7, 1969.

This action was brought to recover rent and for damages to property under a lease of industrial property. The corporate defendant has appealed from a judgment of the court, sitting without a jury, which awarded the plaintiffs $28,450 made up of an assessment of $26,950 for delinquent rentals under the lease and $1,500 for damages to the demised property.

It appears from the record that on April 1, 1961, plaintiffs, husband and wife, owned certain industrial premises at Alton, Illinois. William S. Abbott, the husband, also owned all of the issued capital stock of an Illinois business corporation named The Piasa Tool & Die Company. This corporation was engaged in a machine shop business in the premises. William S. Abbott was its president and manager; Frances Abbott was its secretary.

On April 1, 1961, plaintiffs entered into a written lease of the premises to the Piasa corporation. Plaintiffs signed as lessors; they also executed the lease for the Piasa corporation as its president and secretary, respectively. The basic term of the lease was for five years, from April 1, 1961, to March 31, 1966; but the lessee was given the option of renewing for an additional five years after March 31, 1966, i.e., to March 31, 1971. The lease also provided that the option would be exercised and the lease term extended unless at least six months prior to the expiration of the basic or initial term the lessee gave written notice that it did not elect to take the extension.

The rent reserved for the initial term under the lease was $600 per month; the rent for the extension, if any, was provided for at $1,000 per month.

On May 13, 1961, defendant Fluid Power Pump Company, a Delaware corporation, entered into a written contract with William S. Abbott to buy from him the entirety of the outstanding Piasa Tool & Die capital stock. This agreement provided that coincident with the sale of the stock the real estate owned by the plaintiffs would be leased to Piasa for five years at $600 per month with an optional renewal for an additional five years at $1,000 per month. Thereafter Abbott's stock was escrowed with First National Bank in Alton for ultimate delivery to Fluid Power and was, ultimately, so delivered. William S. Abbott remained as president of Piasa and Frances Abbott as secretary; but Paul Courtney and Robert C. McCarthy, officers of Fluid Power, were added to Piasa's roster of officers, Courtney as vice president and McCarthy as assistant secretary.

Although the Abbott-Fluid Power stock purchase agreement appeared to contemplate a new lease from the Abbotts, no new lease was formally executed; instead, on November 29, 1963, a document entitled "Supplemental Lease" was entered into. The amendment was signed by plaintiffs, William S. Abbott and Frances Abbott, as owners and lessors; the lessee corporation (Piasa) signed by and through Courtney and McCarthy, the new Piasa officers from Fluid Power.

The amendment, or Supplemental Lease, brought additional land within the lease coverage and raised the rents reserved for the initial five-year term to $950 (from $600) per month and for the optional extended five-year term to $1,350 (from $1,000) per month. All other terms of the original lease were to remain in full force and effect, the amendment specifically stated.

It should be noted that subsequent to the date of the original agreement for the sale of stock executed on May 13, 1961, Mr. Abbott acted as an officer of both Piasa and Fluid Power. He was also a member of the Board of Directors of both the defendant Fluid Power as well as Piasa subsequent to the sales agreement, all in accordance with the written agreement. Mr. Abbott continued to serve as a director of Piasa until its dissolution on April 9, 1964. He continued to serve as a director of Fluid Power until October 18, 1965. It should be noted also that the latter date is five months and thirteen days before the end of the original term of the lease between the plaintiffs and Piasa and 18 days after the option to renew the said lease was automatically exercised by failure to give notice of a desire not to exercise it. The minutes of the Board of Directors' meeting of Fluid Power entered into evidence by the defendant make no mention of the exercise of the option.

Subsequent to the lease amendment Fluid Power, having become the sole shareholder of Piasa, began steps to dissolve it. On December 2, 1963, a Statement of Intent To Dissolve by Voluntary Consent of Shareholders pursuant to section 75 of the Business Corporation Act was filed with the Secretary of State of Illinois. The Statement of Intent To Dissolve was signed by the plaintiffs as president and secretary of the corporation, respectively, at the direction of defendant's attorney who advised plaintiffs by letter accompanying the Statement of Intent To Dissolve that the minutes of a special meeting of Directors and shareholders of Piasa were being drafted which would authorize the dissolution.

Thereafter, on April 9, 1964, Articles of Dissolution, again executed by the plaintiffs as president and secretary, were filed by the Secretary of State and on the same date the Secretary of State issued the Certificate of Dissolution, thereby dissolving Piasa.

During the interim and after the dissolution, Fluid Power continued operations at the old Piasa plant which were the premises leased from the plaintiffs but referred to the site on its letterheads and literature as "Piasa Division (Formerly Piasa Tool & Die) Fluid Power Pump Company." Needless to say, no written notice was given to the plaintiffs to the effect that the five-year extension provided in the lease would not be desired. On April 20, 1966, the plaintiffs through their attorney informed the defendant Fluid Power, "as successor to Piasa" that the monthly rent effective April 1, 1966, would be $1,350 in accordance with the lease.

The defendant, Fluid Power, thereafter gave a Notice of Termination of Tenancy effective February 1, 1967, wherein the defendant contended after the original lease term ending March 31, 1966, it was ...

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