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Kaplan v. Kaplan





APPEAL from the Circuit Court of Cook County; the Hon. HAROLD A. SIEGAN, Judge, presiding.


Defendants, Laurence S. Kaplan and M.S. Kaplan Company appeal from preliminary and permanent mandatory injunctions entered by the trial court enforcing an "Employment Agreement" between Jay Kaplan (plaintiff) and M.S. Kaplan Company (Company). By order of October 20, 1980, we consolidated the appeals.

The issues presented for review are (1) the propriety of the preliminary injunction; (2) the propriety of the permanent injunction; and (3) whether the trial court improperly deprived Laurence of a jury trial. We reverse and remand. The pertinent facts follow.

The Company is a close corporation owned by members of the Kaplan family. Plaintiff Jay owns 26.45%, his brother, Robert, owns 29.52% and his sister, Helen Feldman, owns 29.52% of the Company's stock. The remaining stock is owned by Jay's son, Samuel, and his nephews, including Laurence.

In 1969, Benjamin Kaplan, one of Jay's brothers, died. At the time of his death he owned 51% of the Company's stock. Pursuant to a "Stock Alienation Agreement," Benjamin's widow was to sell this stock to the Company based on book value. A lawsuit ensued over the price at which the corporation's shares were to be purchased. (See Estate of Kaplan (1979), 67 Ill. App.3d 818, 384 N.E.2d 874.) While this litigation was pending, the Company amended its stock alienation agreement, and it was approved and signed by all shareholders.

Laurence testified that in the spring of 1977, Jay was in charge of the Company's metal plant and his son, Samuel, was his assistant. The plant was losing money and Laurence asked Samuel for his recommendations. Samuel suggested that he would like to manage the Company. Laurence indicated that he would take the matter up with the board.

Laurence stated that he received a call shortly thereafter from Aubrey, another son of Jay, who requested that his father not be cut off from the payroll. Laurence stated to Aubrey that the Company did not have a policy of making gratuitous payments to retired shareholders because this would be unfair to the other shareholders. Aubrey then questioned a particular accounting practice of the Company and the fact that the Company was spending money on a subsidiary that was losing money. Laurence stated that in reorganizing the subsidiary, it was suggested that Jay be given a contract for $25,000 a year. He further indicated that he would talk it over with the board of directors.

After a subsequent meeting with Aubrey and Steven, Laurence indicted he would recommend that Jay no longer be general manager of the metal's plant but nonetheless be given a contract with a salary of $25,000 a year. Jay was paid under this contract for about three years.

In 1979, Jay filed a petition to perpetuate his testimony stating that he believed that his consent to the 1972 amendment to the stock alienation agreement may have been induced by Laurence's fraud. To this, the Company filed a declaratory judgment asking the court to declare that the 1972 amendment to the shareholders agreement was in full force and effect.

Laurence testified that Aubrey declared at a meeting with him that if the Company insisted on the declaratory judgment suit, he and his father would bring a derivative action against him and Steven. Laurence further testified that Aubrey indicated the real reason for his meeting was that his father wanted to sell his stock to the Company for about $5 million while he was still alive, rather than at his death per the stock alienation agreement, at book value. Laurence pointed out that he could not propose such to the Company and the agreement under which Jay was given an employment contract in return for not bringing lawsuits was breached by Jay's perpetuation of testimony.

Subsequently, Jay's shareholders' derivative suit was filed seeking an accounting and unspecified sums from the Company. The Company ceased making payments to Jay under his employment agreement in April 1980. In response, he filed a motion for injunctive relief in the derivative suit alleging he had an employment agreement with the Company that provided $25,000 per year for life for making himself available for consulting services.

Jay presented his motion to the court on May 12, 1980 and although defense counsel requested a delay in order to file a response, the court ordered payments continued until the evidentiary hearing on June 13, 1980.

Subsequent to the preliminary injunction, Laurence and the Company appealed the injunction and filed a motion to strike and dismiss Jay's motion for a permanent injunction which was denied.

At the permanent injunction hearing, Jay testified that he had been in the hospital for approximately two months and now requires a full-time practical nurse. He admitted through counsel that no services had been performed under the contract and ...

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