APPEAL from the Circuit Court of Cook County; the Hon.
REGINALD J. HOLZER, Judge, presiding.
MR. PRESIDING JUSTICE SULLIVAN DELIVERED THE OPINION OF THE COURT:
Plaintiff purchased 50 percent of the outstanding stock in the defendant 111 W. Division Operating Corporation (the corporation) which leased, operated and managed the Mark Twain Hotel in Chicago. The corporation refused to issue new certificates in plaintiff's name, asserting that he had acquired the stock in violation of a transfer restriction. Subsequently, defendants Harold Nyberg and Ralph Nyberg (president and vice-president respectively of the corporation and shareholders thereof) purchased the hotel, and the remaining shareholders were afforded the opportunity to acquire an ownership interest in the property in proportion to the amount of stock they held. However, when plaintiff sought to exercise this option to purchase a one-half interest, his request was denied on the ground that he was not a shareholder in the corporation.
Plaintiff then filed the instant action against the corporation, the Nybergs, and Cosmopolitan National Bank, as trustee, *fn1 seeking an order requiring the recordation of new certificates in his name, an order of specific performance requiring the Nybergs to sell plaintiff a 50-percent ownership interest in the building, an accounting by the Nybergs of income resulting from the purchase of the property with an award of 50 percent thereof to plaintiff, and for damages because of breach of contract. The trial court found for defendants on the ground that the transfer restriction was effective against plaintiff.
Plaintiff appeals from the judgment order, contending that the court erred in its findings that (a) plaintiff was not a bona fide purchaser of the shares in his own right; (b) plaintiff had actual knowledge of the transfer restriction; (c) plaintiff did not take certain of the shares with the rights of a bona fide purchaser, even though he may not have been a bona fide purchaser in his own right; (d) the transfer restriction was not waived; (e) defendants were not estopped from asserting the transfer restriction; and (f) an individual other than plaintiff was in fact the actual purchaser of the stock.
The facts in this case are not easily ascertainable, inasmuch as the testimony is conflicting or unclear on several key points. Nonetheless, it appears that in November of 1963, the corporation entered into a lease agreement for the operation and management of the Mark Twain Hotel. *fn2 The lease term extended from January 1, 1964, to December 31, 1978. Paragraph 17 of the lease, which became central to the instant litigation, provided:
"Lessee shall not allow or permit any transfer of this Lease or any interests under it or any lien upon Lessee's interest by operation of law, or assign or convey this Lease or any interest under it except upon the express consent in writing by the Lessor.
During the term of this Lease no transfer other than by encumbrance or sale of the shares of Lessee shall be made except among members of the immediate families of Ralph Naiburg [sic] and Henry Mann, and no encumbrance or sale of any shares of Lessee shall be made, without Lessor's prior written consent (it being understood that Lessor's consent shall not be unreasonably withheld). Every stock certificate of Lessee shall bear the following legend upon the face thereof; or in the alternative, there shall be bold notice on the face of said certificate referring to the following legend on the reverse side thereof:
This certificate and the shares of stock represented thereby are held pursuant to the terms of Lease * * * and no transfer of this certificate or any of said shares may be made except in accordance with the provisions of Paragraph 17 of said Lease."
Although the corporation's attorney, Maurice Lewis, discussed each provision of the lease with the Nybergs and Henry Mann, who collectively owned 37 1/2 percent of the outstanding stock at that time, no legend was ever printed on the certificates, and it appears that shares had been transferred without the lessor's written consent for several years following the execution of the lease. Specifically, the record reveals that when the lease was signed, 100 shares were outstanding 6 1/4 being owned by Ralph Nyberg, who was then and is now vice-president; 6 1/4 by Harold Nyberg, who became president in 1966; 12 1/2 by Abraham Nyberg, who was the father of Ralph and Harold; 25 by David Klafter; 25 by Arthur Ludwig; and 25 by Henry Mann. In 1966, Abraham Nyberg died the result being that Ralph and Harold each came to own 12 1/2 shares total, and when Klafter died his 25 shares passed to Lois Schubert, his heir. In 1974, Ludwig transferred his 25 shares to Samuel Rothbart, who in turn transferred 12 1/2 of those shares to his son Michael. No familial relationship existed between the Rothbarts, Nybergs, Klafter and Mann.
In 1976, plaintiff, without the permission of the lessor, acquired the shares of Mann and the Rothbarts for a total of 50 of the 100 outstanding shares. The details as to how and when plaintiff acquired such shares, which determine whether the transfer restriction was effective against plaintiff, are sharply disputed. In this regard, the record discloses that in early 1976 plaintiff inspected the property and made an offer to purchase it, contingent upon his being afforded the opportunity to read the lease; however, the offer was not accepted, and it appears that plaintiff did not review the lease at that time; that Ralph Nyberg testified to a meeting in early July 1976, at the Covenant Club with plaintiff and Julius Lopin (who is plaintiff's father-in-law) and, at this meeting, Lopin said he had purchased 50 shares from Mann and the Rothbarts, which he would sell to Ralph Nyberg for $25,000; that Nyberg told Lopin he "had no interest in buying his shares, buying the shares for $25,000; that there were restrictions in the lease agreement, and that Henry Mann, and Sam Rothbart, and Michael Rothbart had no business to sell those shares until they were offered to us first"; that Ralph testified that in a telephone conversation later that evening, he asked Mann why the shares were not first offered to him; that Mann replied that he did not think he (Nyberg) would be interested in the shares since the hotel was losing money and the lease would expire in a year and a half; and that Mann also said, "I sold the shares, and I don't care about any restrictions. If I did the wrong thing, I'll stand by it."
Ralph Nyberg also testified that two days after this conversation he met with Mann and his attorney, Sol Hoffman, at the Covenant Club, and that at this meeting Hoffman told Mann "that he was in error by selling to Mr. Lopin, or Mr. Erlich [plaintiff], and that it was a breach of the provision of that lease"; according to Ralph, Mann replied "that if that were the case, he would try to get the shares back." Hoffman's testimony essentially corroborated Nyberg's in this respect, although there is some indication that Hoffman was unsure as to whether the shares had actually been transferred at that point in time.
Three to four days later, as testified by Ralph Nyberg, at a meeting in Mann's office it was agreed that Mann would retrieve the shares and deliver them to Nyberg for $12,000. Ralph then telephoned Maurice Lewis, his attorney, and directed him to draft the necessary papers. However, Mann never delivered the shares.
According to plaintiff, however, his acquisition of the stock took place at a later time and under different circumstances; namely, that he met with Mann on July 26 in Mann's office and asked if he would be interested in selling his stock; that Mann was agreeable and immediately telephoned Samuel Rothbart, who also agreed to sell; that as he (plaintiff) left Mann's building, he ran into Lopin, told him of the purchase and asked him for a loan to pay for the stock; and that all stock certificates from Mann and the Rothbarts were endorsed over to plaintiff that same day July 26. Mann and the Rothbarts, testifying as court's witnesses, stated that they were unaware of any transfer restrictions when they sold their stock to plaintiff.
Plaintiff further testified that on July 29 he telephoned Lewis (the Nybergs' attorney) and asked if there was a buy-sell agreement in effect regarding the stock; that Lewis said there was no such agreement; that he (plaintiff) asked for an appointment to come in and pick up new certificates issued in his name; and that Lewis replied that this would not take place until he "cleared the board with Ralph Nyberg, because Ralph is the boss."
Plaintiff testified that on August 1, Lopin gave him three checks to pay for the stock; that on August 2 he went to Mann's office and paid him with a check; and that later that day he gave two checks to Sam Rothbart at "the club" one for Sam and the other for his son Michael.
Plaintiff says that on August 3, he went to Lewis' office with the endorsed stock certificates and asked that new certificates be issued in his name. Lewis refused, stating that he needed Ralph Nyberg's permission. Plaintiff then sent a letter to Ralph Nyberg, a copy of which was admitted into evidence, requesting the issuance of new certificates. Under section 60 examinations, the Nybergs admitted having received this letter on ...