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Sheldon v. Colonial Carbon Co.





Appeal from the Circuit Court of Cook County; the Hon. Albert S. Porter, Judge, presiding. JUSTICE SULLIVAN DELIVERED THE OPINION OF THE COURT:

Rehearing denied September 1, 1983.

This is an appeal from a final order granting reformation of an employment contract to state that plaintiff was entitled to payment of $40,000 upon the death of Gilbert R. Sheldon (Sheldon) as well as upon his retirement. Defendant contends that the order is against the manifest weight of the evidence. Plaintiff cross-appeals from the denial of prejudgment interest.

On December 16, 1970, Sheldon entered into an employment contract with defendant which provided in relevant part:

"3. The term of such employment shall be for a term commencing January 1, 1970 and ending on Sheldon's Normal Retirement Date under the Colonial Pension Trust Agreement of July 1, 1966, as amended, provided, however, that Sheldon may at any time retire from the employment of Colonial upon 90 days' notice in writing to Colonial.

5. When Sheldon's employment by Colonial terminates, either at the normal retirement date as specified by the Pension Plan or if he voluntarily elects early retirement, Colonial agrees to pay to Sheldon as deferred compensation hereunder the sum of $8,000 per year for five years, payable in equal semi-monthly installments so long as he shall be living, and in the event of his death the balance, if any, shall be paid to his estate in one lump sum. During such five year period, Sheldon shall render to Colonial such advisory and consulting services as its Board of Directors may reasonably request, but such services shall be performed in such places in the United States as he may designate and shall not exceed twenty-four hours in any month. Colonial will pay all travel and other expenses, if any, relating to these consulting services."

Sheldon suffered a severe heart attack on December 26, 1970, and died on January 13, 1971, before reaching the specified retirement age and without giving notice of an election to take early retirement.

Plaintiff filed this action, alleging that $40,000 was owed Sheldon's estate as deferred compensation. A hearing was held at which Earl Zitzler, through an evidence deposition, stated that he was defendant's president until 1971, then served as its vice-president until his retirement in 1976; that he, Sheldon, and Howard Collins, minority shareholders, brought suit on behalf of defendant against its controlling shareholder in 1970, alleging that certain of his management practices were harmful to the corporation and resulted in financial injury to them; that the parties to that action reached a settlement agreement in New York on December 16, 1970; that as a part of that settlement each of the minority shareholders, including Sheldon, was to receive compensation for five years after retirement; and that the settlement agreement was not considered as payment for anything in the past but was to form the basis of a new understanding on how the company was to be managed in the future. Zitzler also stated that "[a]t no time during these negotiations was it indicated by anyone participating in the negotiations that the employment agreements then agreed upon * * * would provide for the payment of deferred compensation in the event of the employee's death prior to retirement."

Zeamore Ader, called as an adverse witness by defendant, testified that he was attorney for the minority shareholders in the action against defendant's controlling shareholder; that during that time various settlement proposals were made, none of which discussed the disposition of deferred compensation should death occur before retirement; that the final negotiations, which he did not attend, were held in New York; and that he probably had an opportunity to examine the agreements before the releases were exchanged.

Ader testified in rebuttal that Zitzler indicated it was his expectation that, should he die before completion of the notice requirement, his wife or estate would be entitled to the money.

The trial court found that the deferred compensation agreement, the settlement agreement, and the release of Sheldon's claims were all part of one transaction; that the agreement was prepared by defendant's attorneys and signed by Sheldon without benefit of counsel; that no mention was made during negotiations or signing as to what would happen to the deferred compensation in the event of death before retirement; that Sheldon died before reaching retirement age and before giving notice of voluntary retirement; and that the parties intended that Sheldon should unconditionally receive $40,000 deferred payment. The deferred compensation agreement was reformed to read that "Sheldon's estate is entitled to $40,000 in the event of death before notice of retirement," and this appeal followed.


Defendant contends that the order of reformation is against the manifest weight of the evidence. It argues that the court made no finding of mutual mistake or mistake on plaintiff's part coupled with fraud on its part, and that the evidence would not support such a finding. Furthermore, defendant maintains, the order is contrary to the trial court's express finding that during negotiations of the contract, disposition of the deferred compensation in the event of death before retirement was never mentioned.

• 1 There is a presumption that a written instrument conforms to the intention of the parties thereto. (La Salle National Bank v. American Insurance Co. (1973), 14 Ill. App.3d 1027, 303 N.E.2d 770.) Therefore, in an action for reformation, plaintiff has the burden of proving by very strong, clear and convincing evidence (Parrish v. City of Carbondale (1978), 61 Ill. App.3d 500, 378 N.E.2d 243) that there has been a meeting of the minds (Harden v. Desideri (1974), 20 Ill. App.3d 590, 315 N.E.2d 235) resulting in an actual agreement between the parties (Phillips v. Salk, Ward & Salk, Inc. (1974), 20 Ill. App.3d 359, 314 N.E.2d 262); but, at the time the agreement was reduced to writing and executed (319 South La Salle Corp. v. Lopin (1974), 19 Ill. App.3d 285, 311 N.E.2d 288), some agreed-upon provision was omitted or one not agreed upon was inserted (Friedman v. Development Management Group, Inc. (1980), 82 Ill. App.3d 949, 403 N.E.2d 610) either through mutual mistake or through mistake by one party and fraud by the other (Texas Eastern Transmission Corp. v. McCrate (1979), 76 Ill. App.3d 828, 395 N.E.2d 624). The question whether plaintiff has presented sufficient evidence to meet this higher burden of proof and overcome the presumption that the instrument as written expresses the parties' true intention is primarily a question of fact (Texas Eastern Transmission Corp. v. McCrate,) and we will not disturb the trial court's decision unless it is against the manifest weight of the evidence (Parrish v. City of Carbondale.).

Initially, we note that the trial court made no express finding that a mutual mistake occurred. However, that omission is immaterial, since, in the absence thereof, all reasonable presumptions will be extended in favor of the order under review. (Stony Island Church of Christ v. Stephens (1977), 54 Ill. App.3d 662, 369 N.E.2d 1313.) Here, it is reasonable to presume that the court implicitly found that an agreed provision was omitted, either through a mutual mistake or mistake coupled with fraud, since one of them is a necessary element in an action for reformation. Compare Weigel v. O'Connor (1978), ...

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