APPEAL from the Circuit Court of Cook County; the Hon. FRED G.
SURIA, Judge, presiding.
MR. JUSTICE DRUCKER DELIVERED THE OPINION OF THE COURT AS MODIFIED ON THE DENIAL OF PLAINTIFF'S PETITION FOR A REHEARING:
Rehearing denied March 28, 1972.
Plaintiff appeals from a judgment partially vacating a decree of divorce incorporating a property settlement agreement and modifying said decree by reinstating plaintiff's right to apply for alimony which had been waived in the settlement agreement. Defendant has filed a cross-appeal. Plaintiff filed this action under Section 72 of the Civil Practice Act. Ill. Rev. Stat. 1969, ch. 110, par. 72.
On appeal plaintiff contends (1) that the court had no jurisdiction to merely modify the decree as it related to the property settlement after it found defendant guilty of fraud in its procurement; (2) that the court erred in refusing to vacate all parts of the decree relating to property settlement after it found fraud; (3) that the court erred in finding that defendant was entitled to a writ of restitution after it found fraud; and (4) that as a matter of law plaintiff was subject to duress when she executed the property settlement.
In his cross-appeal defendant contends that the court erred in finding him guilty of fraud and seeks reinstatement of the property settlement in its entirety.
Plaintiff and defendant were divorced on February 11, 1969. The divorce decree incorporated a property settlement executed by the parties on February 7, 1969. The marriage had lasted for two years. It was the second marriage for each and no children were born of it.
On July 14, 1969, defendant (then the plaintiff) filed an action under the Forcible Entry and Detainer Act, Ill. Rev. Stat. 1969, ch. 57, par. 1, et seq., seeking to evict plaintiff (defendant in that action) from their former marital home, alleging that under the terms of the property settlement plaintiff was to have vacated the home on or before June 30, 1969.
On July 31, 1969, plaintiff filed a petition under Section 72 of the Civil Practice Act to vacate the decree approving and incorporating the property settlement. The petition alleged that plaintiff was subject to duress when she executed the settlement and that it was procured through fraud in that defendant misrepresented the value of his business assets at the time the parties were negotiating their property settlement. The alleged result of said misrepresentation was that plaintiff entered into a settlement under which she waived any right to alimony which she would not have done and accepted less money than she otherwise would have agreed to receive. *fn1
The forcible entry and detainer action and the Section 72 proceeding were consolidated and a hearing was held. Over the course of about five months the court heard 800 pages of testimony. It is significant to note which events occurred before the entry of the divorce decree on February 11, 1969, and those which occurred thereafter. Our resume of the relevant testimony will be divided along those lines.
Defendant was called to testify by plaintiff under Section 60 of the Civil Practice Act. For many years he had been the controlling shareholder of Garmisa Distributing Company, a record distributor for American Broadcasting Company (hereinafter ABC). Defendant's other relevant business interests consisted of an 85% ownership interest in John Roberts Company (hereinafter John Roberts), a partnership, and a 16 2/3% interest in Selected Tape and Record Company (hereinafter Selected Tape), also a partnership. The bulk of John Roberts' business came from being the exclusive purchasing representative for Sears Roebuck for most of the independent record labels. It operated on a year to year contract with Sears. (As established by other testimony the book value of defendant's equity interest in John Roberts as of December 31, 1968, was $124,640.) Selected Tape was formed in 1967. It distributed tape cassettes. Defendant purchased his 16 2/3% interest therein for $7500 in September 1968. Harry Beckerman, defendant's partner, owned the controlling interest in Selected Tape and handled the two large accounts that the company depended upon for success. (As established by other testimony, the book value of defendant's equity interest in Selected Tape as of December 31, 1968, was $9183.)
Garmisa Distributing Company began losing its profitability in 1967. In October 1968 defendant went to New York to discuss his business problems with ABC. He told Larry Newton, president of ABC records, that he would like to get out of the distributing business. Newton said, "Well, okay, if that's what you want. I think we can get you out." Just before defendant left Newton's office Newton told him, "I am going to buy your company." Defendant said, "Buy what companies? You don't even know what my companies are." Newton said, "I am going to buy your company. I am going to give you two million dollars." Defendant responded, "You are out of your skull. Do you know what you are talking about?"
Between October 1968 and January 1969 defendant talked to Newton by telephone five or six times but in none of these conversations did Newton mention the possibility of buying defendant's companies. Defendant next met with Newton on January 2 or 3, 1969, at a Florida meeting attended by ABC's record distributors. Defendant again requested that Newton get him out of the distributing business; that he had not made any money with ABC for two years.
The next day there was further discussion about the acquisition of defendant's companies. Defendant told ABC that it "would probably be difficult" to work for Larry Newton. He stated that:
"They [ABC] had no real idea what Selected Tape and Record did. They weren't sure of John Roberts. * * * We talked * * * about various things, on how to acquire my companies. * * * [I] could never * * * tell them anything concrete * * * they knew and I knew that there was no way that I could sell John Roberts Company without the Okay of Sears Roebuck and there was no way we could sell Selected Tape and Record without Goodyear and Western Auto's permission."
Employment of defendant by ABC was discussed. Defendant told them that he would probably be a lot more interested in selling if he didn't have to work for ABC. "[T]hey laughed; it was out of the question." Harry Beckerman's role was discussed:
"They were under the belief that Mr. Beckerman was a fairly minor employee there. He happened to be not. * * * They were very much surprised. They were not interested in one without the other. They were not interested in * * * [John Roberts] without Selected Tape. * * * [I] couldn't talk for Mr. Beckerman."
ABC requested that defendant send them audits of John Roberts and Selected Tape as of December 31, 1968.
Defendant then called his attorney Norman Gold and told him to come to Florida and sit in on the negotiations. Defendant and Gold met with Newton and another ABC executive (probably on January 7 or 8, 1969, as Gold later testified). Negotiations ensued. "There was never any price change." ABC quoted a price of two million dollars (29,000 shares of ABC stock, then selling at about $68.50 per share).
Defendant's final meeting with ABC officials prior to the entry of the divorce decree was in New York late in January 1969. (Other testimony revealed this to be January 20th.) There had been no communication with ABC since the Florida meetings. Defendant still wanted his distributorship terminated and also wanted to further pursue negotiations concerning the possible acquisition by ABC of John Roberts and Selected Tape.
On February 4, 1969, defendant sent ABC unreviewed audits, as of December 31, 1968, and his projections for 1969, for John Roberts and Selected Tape.
Defendant had only one meeting with his wife and their respective attorneys prior to the entry of the divorce decree. This was in December 1968. Defendant had represented to his attorney, William Sampson, that his net worth was approximately $500,000. Defendant supplied Sampson with current tax returns and financial statements of John Roberts and Selected Tape. The $500,000 figure was passed on to plaintiff's attorney at the December meeting. Defendant did not take into account the potential sale to ABC in computing his net worth. "That deal could have blown apart at any given time * * *, it could have in March, in May, * * *." He never mentioned the business negotiations to his wife or Sampson.
Norman Gold was called as a witness for defendant. He is a Chicago attorney and represented defendant in the negotiations with ABC. The first contact he had with the matter was in early January (7th or 8th) 1969 when at defendant's request he flew to Florida where ABC was having a meeting. Gold testified that ABC expressed an interest in acquiring both of defendant's enterprises (John Roberts and Selected Tape) and the services of Mr. Beckerman and defendant. The meeting lasted for a little more than one-half hour. No specific discussions took place although it was clear that employment contracts were important. It was also brought out that Harry Beckerman's role was a significant one and that his acquiescence to any transaction was essential.
The next meeting took place in New York on January 20, 1969. Present at the meeting were the defendant, Gold, Beckerman, Newton and two other ABC executives. "There was discussion with respect to a stock deal * * *." The meeting lasted for an hour and one-half or two hours. It was clear that long term employment contracts would have to be worked out by the attorneys.
Gold's final contact with ABC prior to the entry of the divorce decree was on January 28, 1969, in a telephone conversation with Larry Newton. Gold sent Newton a letter summarizing their conversation and describing certain terms upon which the parties might agree.
William Sampson testified for the defendant. He is a Chicago attorney and was hired by defendant in late October 1968 to represent him in the property settlement negotiations with plaintiff. From the information supplied to him by defendant he believed the defendant's net worth to be about $550,000. Defendant's 1967 income statement was given to Sampson. Sampson checked with Arthur Young and Company, defendant's accountant, to ascertain the net worth of defendant's interest in John Roberts and Selected Tape. On December 5, 1969, he along with the defendant, plaintiff and plaintiff's attorney met to discuss the terms of the settlement at the home of plaintiff's attorney. The figures Sampson had obtained were all ...