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Coduti v. Hellwig

OPINION FILED JULY 20, 1984.

JAMES J. CODUTI, PLAINTIFF-APPELLANT,

v.

WERNER E. HELLWIG ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. Anthony Scotillo, Judge, presiding.

PRESIDING JUSTICE MEJDA DELIVERED THE OPINION OF THE COURT:

PRESIDING JUSTICE MEJDA delivered the opinion of the court:

This is an action by James J. Coduti (Coduti), a minority shareholder of Hudson Tool & Die Corporation (Hudson), a closely held Illinois corporation, seeking dissolution of the corporation and an accounting of allegedly improper benefits received from the corporation by its controlling shareholder and members of the family of and entities controlled by such shareholder. *fn1 The trial court sitting without a jury found for the defendants. Coduti raises the following issues on appeal: (1) whether the trial court erred in refusing to order dissolution of defendant corporation and (2) whether the trial court erred in refusing to order an accounting of the benefits received from defendant corporation by the other defendants. We affirm.

The trial court heard testimony in this matter on 24 separate days and received into evidence more than 150 exhibits, many of which were group exhibits consisting of more than one item. A repetition of all of the testimony would serve only to unduly lengthen this opinion; therefore, testimony will be recounted only insofar as it is necessary to our disposition of the instant issues. However, a brief statement regarding the parties is in order.

Defendant Hudson engaged in the tool and die and metal stamping business and was formed in 1954 by plaintiff Conduti and defendant Werner E. Hellwig (Hellwig). Defendant Kurt Hellwig (Kurt) is Hellwig's son and has held an executive position with Hudson since 1979. Defendant Hollywood Perforators, Inc. (Hollywood), is an Illinois corporation controlled by Hellwig and Kurt. *fn2

At the time of trial Hellwig owned approximately 60% of Hudson's stock and Coduti owned approximately 40%. Kurt owned one share of Hudson stock. Initially, the members of Hudson's board of directors were Hellwig, Coduti and James Southward. Upon his death, Southward was succeeded by Coduti's brother. Coduti's brother moved out of the area in 1977 and John Metropolos, a businessman and Hudson's insurance agent, became the third director. Thereafter, Hellwig and Coduti agreed to increase the board to five members and elected Kurt and Lorraine Allen, Coduti's daughter, as directors. Hellwig and Coduti later agreed to decrease the board to its present three members. At the time of trial the directors were Hellwig, Coduti and Kurt.

Hellwig has served as president since its incorporation; his responsibilities have been administrative in nature. Coduti has also served as an officer of Hudson; as an employee of the corporation he is principally responsible for supervising Hudson's production facilities. Neither Hellwig nor Coduti has ever accounted to each other for the hours they devote to business. Since the inception of the business it has been Coduti's practice to work many hours each week while Hellwig routinely spends long periods of time away from the plant, takes frequent vacations and long weekends, and spends several months each winter in Hawaii.

Salary adjustments for Hellwig and Coduti have over the years been effected without formal board action. In 1977 Hellwig voluntarily reduced his salary by 50% when, in his own judgment, he felt he was unable to continue at his previous level of performance because of personal pressures. He restored his salary to its former amount when he felt he was again working efficiently. The salaries and bonuses were paid to Hellwig and Coduti as follows:

Hellwig Coduti

1974 $36,200 $43,900 1975 22,100 37,100 1976 15,300 55,100 1977 30,900 53,200 1978 29,900 57,900 1979 18,000 65,100 1980 17,100 47,100 1981 40,400 49,900

Hellwig's expense account, including country club payments, has been approximately $10,000 per year for the past four years. Coduti has an unlimited expense account and four weeks of vacation pay annually, in addition to 52 weeks of salary. All corporate officers have had the use of cars owned or leased for them by Hudson. Although Coduti has pursued negotiations for such an agreement since 1977, the parties have never had a stock purchase agreement.

Since 1977 there have been a number of disputes between Hellwig and Coduti, culminating in the filing of the instant action wherein Coduti sought injunctive relief, dissolution or liquidation of Hudson, an accounting by certain defendants to Hudson, and imposition of a constructive trust concerning certain shares of Hudson stock owned by Hellwig or a declaratory judgment thereon. The trial court found all issues in favor of defendants and against Coduti, specifically, that there was no evidence of fraud, waste, mismanagement, illegality or oppression to warrant dissolution of the corporation and the liquidation of its assets and, further, that the evidence is insufficient to grant Coduti's request for accounting by the various defendants. Coduti appeals.

OPINION

The first issue is whether the trial court erred in refusing to order the dissolution of Hudson. The authority of courts> to dissolve a corporation is statutory. (Central Standard Life Insurance Co. v. Davis (1957), 10 Ill.2d 566, 572, 141 N.E.2d 45). Section 86 of the Illinois Business Corporation Act (Ill. Rev. Stat. 1983, ch. 32, par. 157.86) in relevant part provides:

"Circuit courts> have full power to liquidate the assets and business of a corporation:

(a) in an action by a shareholder when it appears:

(3) That the acts of the directors or those in control of the corporation are illegal, ...


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