APPEAL from the Circuit Court of Cook County; the Hon. JOHN D.
O'SHEA, Judge, presiding.
MR. JUSTICE MEJDA DELIVERED THE OPINION OF THE COURT:
This action was brought by plaintiff, Paul Joseph, a former employee of Wilson Leasing Company, to recover damages for breach of contract to purchase stock in the corporation from defendants, majority shareholders therein. After a trial by jury a verdict was returned in favor of plaintiff against all three defendants and damages were assessed at $30,000. Special interrogatories found that there was a valid contract and that it was not barred by the statute of frauds. Judgment was entered on the verdict.
Defendants appeal. The issues are: (1) whether the agreement constituted a contract of sale or an option to purchase contingent upon plaintiff's concurrent employment; (2) whether the damages awarded are excessive; and (3) whether all three defendants are bound by the agreement.
In 1967, Wilson Leasing Company, an automobile and equipment leasing concern, was a family-owned business. All the stock in the corporation was held by defendants, three members of the Wilson family. Defendant Milton Wilson was chairman of the board of directors, treasurer and secretary. Milton's son, defendant Lawrence Wilson, was president and chief executive officer. The third shareholder, Sylvia Wilson, Lawrence's mother, was never involved in the management of the company.
Lawrence Wilson hired plaintiff, Paul Joseph, as leasing manager of the company in 1967. During the employment negotiations plaintiff and Lawrence Wilson discussed the opportunity plaintiff would have to share in the company's growth. In 1968, plans were developed to sell stock in Wilson Leasing to the general public. Plaintiff and Lawrence Wilson discussed the likely capital structure of the company after going public, the class of stock available to employees as stock options and its price.
One class of common stock, Class A, was to be offered to the public. The Wilson family held Class B stock acquired at "base cost" convertible to Class A shares under a formula applicable if the company reached a certain profit level. It was contemplated that Class B stock would be available to certain employees, including plaintiff, at the same price paid by the Wilson family. Plaintiff testified that while the public offering was being arranged in 1968, Lawrence Wilson told him that he would receive 10,000 shares of Class B stock at the same cost as the Wilson family. The Wilson Company stock was offered to the public on February 5, 1969.
On March 21, 1969, Lawrence Wilson indicated that plaintiff would receive 2000 or 4000 shares of stock. Plaintiff testified that he then quit his employment since the amount was less than the 10,000 shares which had originally been promised to him. Plaintiff further testified that Lawrence Wilson telephoned him at home and asked if he would reconsider and return to work if he received 10,000 shares. Plaintiff agreed. On March 24, Lawrence Wilson drafted a memorandum to Ted Gaines, the Wilson's attorney, concerning the transfer of 10,000 shares to plaintiff. The memorandum, which the parties agree contains the basic provisions of their oral agreement reached on March 24, is set forth as follows:
3/24/69 "To: Ted Gaines Subject: Paul Joseph stock
Please arrange an immediate transfer of 2000 of my shares plus 1000 each from my parents.
Also draft an agreement to allow P.J. to buy 2000 add'l shares on 9/30/70-9/30/71 & 9/30/72. At 9/30/72 he'll have 10,000 shares of B convertible to 11,000 A all bought at our base cost.
Although the March 24 agreement called for the immediate transfer of 4000 shares, certificates for the 4000 shares were not delivered to plaintiff until November 7, 1969. Plaintiff paid for the shares upon delivery with a $400 check payable to Lawrence Wilson and a $400 check payable to Milton Wilson, being at a rate of 20¢ per share for a total payment of $800.
Although plaintiff had begun employment in 1967 as manager of the automobile leasing division, he had been promoted to vice president of the division in 1968. When the Wilson Company acquired an automobile agency in 1969, plaintiff was made executive vice president of the dealership. Plaintiff worked for the Wilson Company until he was asked to resign in May 1972. No stock other than the initial 4000 Class B shares has been transferred to him.
In the meantime certain business interests proved unprofitable for the Wilson Company, and the value of its Class A stock began to decline. Finally in 1975, Wilson Leasing "went private" in a transaction wherein outstanding Class A stock was exchanged for a note worth $2.50 per share. At ...