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Duval v. Severson

OCTOBER 23, 1973.

GLENN DUVAL ET AL., PLAINTIFFS-APPELLEES,

v.

BURT SEVERSON ET AL., DEFENDANTS-APPELLANTS.



APPEAL from the Circuit Court of Cook County; the Hon. NATHAN M. COHEN, Judge, presiding.

MR. PRESIDING JUSTICE STAMOS DELIVERED THE OPINION OF THE COURT:

Rehearing denied December 10, 1973.

Plaintiffs filed a complaint alleging breach of a preincorporation agreement. The trial court granted plaintiff's motions for preliminary injunctions and appointed a receiver pendente lite. From the orders of the trial court, defendants have filed two interlocutory appeals which have been consolidated. Defendants contend that the trial court incorrectly construed the agreement and abused its discretion by entering the preliminary injunctions and appointing a receiver.

Prior to April 1, 1971, Burt Severson was the sole proprietor and operator of three bicycle stores. Donald Schillo and Glenn Duval were employes of Severson. Negotiations between Severson, Duval, and Schillo regarding incorporation of the bicycle business resulted in the execution by them of a preincorporation agreement dated March 1, 1971. The agreement provided, in pertinent part, as follows:

"1. Severson will form a corporation in which all the parties will participate as stockholders and engage in the operation of said business.

2. A corporation shall be organized under the laws of the State of Illinois to be known as Severson's Schwinn Cyclery, Inc.

4. Upon incorporation the one hundred (100) shares of stock of the corporation shall be issued as follows:

(a) To Severson one hundred (100) shares of said authorized capital stock of which he shall retain fifty-one (51) shares and shall sell, transfer and deliver forty-nine (49) shares to Duval and Schillo to be shared equally between them.

5. Severson shall and will transfer to said corporation all of the assets of his present bicycle business including the Aurora property now used by said business, subject however to all business liabilities shown on his present business records (balance sheets) including any mortgage liability on the Aurora property, all as of December 31, 1970. Personal liabilities and taxes owed by Severson are not to be included.

7. Severson will accept as and for the shares of stock transferred to Duval and Schillo their respective personal notes for $25,725.00 each, payable in weekly installments of Fifty Dollars ($50.00) or more, said notes to be secured by and the satisfaction thereof limited to said corporate stock. In the event the weekly salary of the parties is increased the payments on said notes shall be increased proportionately.

9. Upon receipt of stock Severson, Duval and Schillo shall vote said stock so that the directors for the first year shall be Severson, Duval and Schillo and the officers for the first year shall be:

Burt Severson — President

Donald Schillo — Secretary — ...


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