APPEAL from the Circuit Court of Du Page County; the Hon.
EDWIN L. DOUGLAS, Judge, presiding.
MR. JUSTICE LINDBERG DELIVERED THE OPINION OF THE COURT:
Rehearing denied April 16, 1981.
Plaintiff, Ted Pecora, brought suit against defendants, Frank Szabo, John Schultz and Modern Car Wash Systems, an Illinois corporation (Modern), for certain sums alleged to be the balance due on the sale of Modern by plaintiff to the defendants, for breach of a sales commission agreement, and for the balance of the purchase price of a building constructed by plaintiff for defendants. Defendants counterclaimed for credits due them from plaintiff under the contract of sale for Modern, for the return of money paid plaintiff, for misrepresentation, for misappropriation of corporate assets by plaintiff, and for slander of title. At the conclusion of plaintiff's case, the Circuit Court of Du Page County directed a verdict for defendants and against plaintiff on his claim for part of the sums alleged due on the sale of Modern. Judgment upon a jury verdict was entered, awarding plaintiff the remainder of the sums alleged due on the contract of sale and the balance of the purchase price of the building constructed by plaintiff for defendants, but denying plaintiff's claim for damages for breach of the sales commission agreement. The jury granted defendants' counterclaims for credits due them from plaintiff, and for misappropriation of corporate funds, but denied their demands for the return of money paid to plaintiff, for damages for misrepresentation, and for slander of title.
In view of the several claims and counterclaims, a detailed recitation of the facts is in order. Plaintiff, Pecora, is an entrepreneur who, in 1971, owned various business concerns, including Modern, which manufactured car wash equipment, and Car Wash Engineering Company (Car Wash), which sold and installed such equipment. In December 1971, Pecora and Modern executed a note to the First National Bank of Chicago for $90,000. The disposition of the cash received in exchange for the note figures in the defendants' counterclaim for misappropriation of corporate assets and will be examined below. In July 1972, plaintiff sold to defendant, Szabo, 37 1/2% of Modern's stock for $30,000. The purchase price included consideration for the sale to Szabo of an option to purchase an additional 12 1/2% of Modern's stock for $10,000. A few months later, Pecora agreed to sell the remaining 50% of Modern's stock to defendant, Schultz, for $60,000.
Pecora, Szabo, and Schultz negotiated a sales agreement which was dated December 11, 1972, and which provided for the sale of stock to Schultz and for Szabo's exercise of his option to purchase the remaining 12 1/2%. Paragraph 4(d) of the agreement stated that the purchase price was predicated upon, inter alia, an assumption that accounts receivable equaled accounts payable as of December 11, 1972. If the former exceeded the latter, the purchase price would be increased by that amount; if the latter exceeded the former, then the price would be decreased. The sales agreement further provided that the plaintiff would construct a building on Westwood Avenue in Addison, Illinois. Plaintiff was to sell the building to defendants at an agreed price of $170,000 or if the defendants were without funds, rent it to them.
The transaction was completed on January 8, 1973. The shares of stock were transferred by Pecora; Szabo paid $10,000 exercising his option, and Schultz paid $50,000, executing a $10,000 note for the remainder of the $60,000 purchase price. The parties also entered into an agreement whereby Car Wash, the sales and installation business owned by plaintiff, would be Modern's sales agent in Illinois and receive commissions for sales made. The commission agreement provided for liquidated damages of $14,000 per year in the event of breach by Modern.
On this same date defendants executed a note for $58,411. The terms upon which this note was transferred are disputed by the parties, but they agree that the transfer occurred after some discussion as to the disposition of net profits from work in progress, i.e., sales of machines which were still being manufactured.
Plaintiff alleged that the $58,411 note represented defendants' agreement that plaintiff should share in both the actual and projected earnings of the corporation as of December 11, 1972. Defendants claim that though they signed the note it was with the understanding that the plaintiff would "tear it up" if the projected profits from work in progress did not materialize. It is undisputed that on February 22, 1973, defendants paid $30,000 on the note and executed a second note for the $28,411 balance. They claim that this payment was an "advance" on the contingent agreement to share in projected profits.
The building which plaintiff had agreed to construct for defendants was completed in April 1973, and on May 10, 1973, defendants exercised their option to purchase the structure. They procured a mortgage for $140,000 and executed a note to plaintiff in the amount of $30,794.02 for the remainder of the purchase price.
The relationship between plaintiff and defendants deteriorated. In July 1973, plaintiff began pressing for payment of the three notes given him by defendants (the first was the $10,000 note from Schultz for stock in Modern, the second was the $28,411 note representing the disputed obligation regarding profits from work in progress on December 11, 1972, the third for the price of the Westwood Avenue building in the amount of $30,794.02). At this time, plaintiff discovered he had lost all three notes.
Defendants, in turn, demanded repayment of the $30,000 "advance" given in February and claimed that accounts payable had been found to exceed accounts receivable by $24,534.81 and therefore they were entitled to a reduction in the purchase price of the stock pursuant to paragraph 4(d). Such a reduction, they told plaintiff, would cancel Schultz's note for $10,000 and create a debt in their favor for the balance.
Pecora instituted suit about one month later demanding payment of the notes for $28,411 and for $30,794.02 and, by his amended complaint, for payment of the $10,000 note given by defendant, Schultz and for liquidated damages under the sales commission contract between Modern and Car Wash. Defendants made various counterclaims, including demands for the $24,534.81 by which they alleged accounts payable exceeded accounts receivable at the date of the sale of Modern, for the return of the $30,000 "advance" they paid plaintiff, and for damages for fraudulent misrepresentations by plaintiff during the negotiations. Defendants also alleged misappropriation of corporate assets by plaintiff with regard to the December 1971 loan to Modern and Pecora by the First National Bank of Chicago and demanded $30,000 damages. Finally, defendant counterclaimed for damages for slander of title. The action arose out of plaintiff's filing of a notice of lis pendens with the recorder of deeds which claimed an equitable interest in the Westwood Avenue building and his alleged interference with defendants' attempts to sell the property. In the interval between the commencement of these claims and the trial, Modern went bankrupt, defendant defaulted on the mortgage, and Pecora bought the Westwood property at the foreclosure sale.
At the trial of the cause, the court ruled that evidence of the purported agreement by the parties to pay plaintiff $58,411, representing his share of the projected profits for work in progress at the date of the sale of Modern, including evidence of the execution of notes for $58,411 and for $28,411 and of the cash payment of $30,000, was barred by the parol evidence rule. At the close of plaintiff's case, the trial court directed a verdict for defendants on the claim for $28,411. The jury returned verdicts in favor of plaintiff on his actions on the $10,000 note given him by defendant, Schultz, and on the $30,794.02 note for the balance of the purchase price of the Westwood building, but denied plaintiff's claim for liquidated damages for breach of the sales commission agreement.
Defendants' counterclaims for the credit of $24,534.81 alleged due them under paragraph 4(d) of the sales contract and for misappropriation of corporate assets by plaintiff were granted by the jury. But the actions for the return of the $30,000 paid to plaintiff as an alleged "advance," for damages for fraudulent misrepresentation, and for slander of title were denied. Judgment was entered on the verdicts and all parties appeal.
Plaintiff alleges that the trial court erred in excluding evidence of an agreement between the parties that defendants would pay plaintiff $58,411, which represented plaintiff's share of projected profits to be received from work in progress. Plaintiff's amended complaint alleged this agreement and the execution by defendants of a note for that amount. The note was executed, contemporaneously with the written sales contract, on January 8, 1973. Plaintiff further alleged that the defendants made a cash payment of $30,000 on the note February ...