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Debowski v. Shred Pax Corp.

OPINION FILED JANUARY 10, 1977.

MICHAEL DEBOWSKI ET AL., PLAINTIFFS-APPELLEES,

v.

SHRED PAX CORPORATION ET AL., DEFENDANTS-APPELLANTS.



APPEAL from the Circuit Court of Du Page County; the Hon. GEORGE W. UNVERZAGT, Judge, presiding.

MR. JUSTICE YONTZ*FN1 DELIVERED THE OPINION OF THE COURT: *FN1 CHIEF JUDGE OF THE TENTH JUDICIAL CIRCUIT SITTING BY ORDER OF ASSIGNMENT OF THE ILLINOIS SUPREME COURT.

Plaintiffs filed this action on December 16, 1975, complaining of a threatened breach of a contract which they entered into on March 28, 1975, with Shred Pax Corporation and its principal shareholder, Alvis Kaczmarek. Shred Pax is an Illinois corporation engaged in the business of manufacturing and selling refuse shredding machines under U.S. Letters Patent.

Prior to March 28, 1975, Shred Pax Corporation was managed under the terms of a voting trust agreement with plaintiff Debowski acting as president and drawing an annual salary of $25,000. At that time defendant Alvis Kaczmarek owned 55,000 of the 89,200 shares of common stock of Shred Pax Corporation. Plaintiffs owned 30,200 shares.

An agreement entered into March 28, 1975, dictated that plaintiffs convey their 30,200 shares of common stock to Alvis Kaczmarek in exchange for certain foreign patents and patent rights then personally owned by Kaczmarek together with an option to repurchase their stock. In addition, Shred Pax Corporation, under the terms of paragraph 5 of the March 28, 1975, agreement, acknowledged it was indebted to plaintiffs in the amount of $101,000. To secure these loans and certain promises and representations of defendant Kaczmarek, defeneants granted to plaintiffs a security interest in the stock of Shred Pax to the extent of $300,000.

On December 12, 1975, defendants entered into agreements entitled "License Agreement" and "Option Agreement to Buy Inventory and Fixed Assets" with Walter Klevay of the State of Ohio. The "License Agreement" had as its stated purpose the transfer of the refuse reducing machine operations of defendant Shred Pax to Klevay while the "Option Agreement" granted Klevay the option to purchase "all assets" of Shred Pax "in order to completely terminate its [Shred Pax'] ongoing business."

Plaintiffs filed suit complaining, inter alia, that the Klevay transaction threatened their security interest in the corporation given pursuant to the March 28, 1975, agreement. The trial court denied plaintiffs' motion for a temporary restraining order. A hearing was held on plaintiffs' petition for a preliminary injunction in early February 1976. While testimony was introduced by both parties, defendant Kaczmarek was absent from these proceedings. Subsequent to the proceedings the trial court entered an order enjoining defendants from receiving any revenue or consideration from the sale, transfer, or other alienation of property of Shred Pax and requiring such consideration to be paid to the Hawthorne Bank of Wheaton, Illinois. The court ordered Hawthorne Bank to permit payment to defendant Shred Pax of $6000 a month to meet its daily operating expenses. In reaching the conclusion that the issuance of a preliminary injunction was proper the trial court made the following factual findings, among others:

"* * * The transfer of the sole and exclusive right (P. Ex. 10) to make, use and sell the refuse reducing machines has destroyed and paralyzed the defendant Shred Pax's `business of manufacturing and selling refuse reducing machines in the United States under U.S. patents' and destroyed the value of plaintiff's options.

* * * The transfer of the assets of Shred Pax in partial exchange for paper stock, to a foreign jurisdiction, without consent and without full assumption of liabilities may hinder delay or defraud these creditor-plaintiffs, and substantially impair the value of their collateral."

On February 20, 1976, plaintiffs caused the injunction writ to issue and be served upon defendants and Klevay. On February 25, 1976, Walter Klevay, with defendant Kaczmarek's knowledge, paid Itasca State Bank the sum of $243,887.99 for a release of their lien on machinery, equipment and inventory owned by Shred Pax. The bank applied these monies to payment of debts of Shred Pax which were past due.

On March 10, 1976, defendants moved to vacate the preliminary injunction imposed by the order of February 19, 1976. This motion was denied by the trial court on March 30, 1976. From the order of March 30, 1976, defendants sought to appeal. Appeals were docketed in this court first under No. 76-167 and then under No. 76-272. After consideration of motions to dismiss filed in each appeal by plaintiffs, orders dismissing the appeals were entered by this court.

Defendants filed a second motion to dissolve the preliminary injunction on June 8, 1976. Also on June 8, 1976, plaintiffs filed a petition for rule to show cause why defendants should not be held in contempt for failing to have the proceeds of the sale of the inventory of Shred Pax paid to Hawthorne Bank as required by the order of February 19, 1976.

A hearing was held at which plaintiffs and defendant offered testimony. At the close of the hearing the trial court found defendants Kaczmarek and Shred Pax in contempt of court and refused to dissolve the preliminary injunction earlier entered. An order to such effect was entered on July 23, 1976.

On July 26, 1976, defendant Kaczmarek was sentenced to six months imprisonment in the Du Page County Jail, such imprisonment to be terminated upon payment by Kaczmarek to the Hawthorne Bank of $243,887.99, the amount paid the Itasca State Bank by Klevay. On July 28, 1976, the trial court entered an order denying a motion earlier filed by defendant seeking dismissal of plaintiffs' complaint for lack of jurisdiction of the subject matter.

On August 4, 1976, defendants filed a notice of appeal from the July 23, 1976, order of the trial court denying the petition of defendants-appellants to dissolve the preliminary injunction, the July 26, 1976, order committing defendant Kaczmarek to jail for six months and the July 28, 1976, order denying the motion of defendants to dismiss plaintiff's complaint for lack of jurisdiction of the subject matter.

Defendants attempted to bring an appeal to this court from the trial court's denial of a motion to dissolve the preliminary injunctive order entered on February 19, 1976. An order denying defendants' motion to dissolve the injunction was entered in the trial court at 12:59 p.m. on March 30, 1976. Defendants' notice of appeal from this order was filed in the trial court on the same day, but several hours before the time of entry of the order appealed from. Upon consideration of plaintiffs' motion to dismiss in this court, defendants' appeal was dismissed on the basis that the notice of appeal was not timely filed within the requirements of the Supreme Court Rules because it was filed before the time of entry of the order appealed from. (Ill. Rev. Stat. 1975, ch. 110A, par. 307; Ill. Rev. Stat. 1975, ch. 110A, par. 272.) This first appeal which was ...


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