Appeal from the Circuit Court of Perry County; the Hon. Roger
Scrivner, Judge, presiding.
JUSTICE HARRISON DELIVERED THE OPINION OF THE COURT:
This appeal involves an action for declaratory and injunctive relief, damages, and an accounting concerning ownership and operation of Call Publishing Company. The central question in the case is to whom the company's 300 shares of stock belong. On motions for summary judgment by plaintiffs and defendant Call Publishing Company, the circuit court of Perry County issued an order declaring the rights, title, and interest of the various parties in the company's shares. Neither plaintiffs nor defendants agree with the stock distribution specified in that order, and both sides now appeal. For the reasons set forth below, we reverse and remand for further proceedings.
Call Publishing Company (hereinafter referred to as The Call), publisher of the DuQuoin Evening Call newspaper, was founded in 1936. In early December of 1936, articles of incorporation were issued and a meeting of the shareholders and board of directors was held. The minutes of that meeting show the original incorporators to have been Augustus W. Essick, Emma Weinberg, and Leonard Knetzger. Each of these three individuals is recorded as holding 100 of the company's 300 shares of capital stock, and each was elected to be a director of the company.
No further corporate minutes, stock transfers, or elections were recorded in The Call's minute books until May 22, 1979, almost 43 years later, when a "reorganization meeting" was held. At that meeting, the shareholders elected Lucius Smith, Jr., Lucius Smith III and F. Mark Miller to be the new directors. The meeting was attended by Lucius Smith, Jr., who claimed to represent 200 shares of Call stock; F. Mark Miller, who claimed 50 shares; and representatives of the estate of Harry L. Miller, claiming the final 50 shares. A board of directors meeting was then convened, at which Lucius Smith, Jr., was elected president and treasurer; Lucius Smith III, vice-president; and F. Mark Miller, secretary. These new directors adopted a resolution authorizing issuance of "duplicate" share certificates in the following denominations: 200 shares to Lucius Smith, Jr., 50 shares to the estate of Harry L. Miller, and 50 shares to F. Mark Miller. These share certificates purportedly replaced lost and misplaced shares which the respective shareholders claimed, by affidavit, to own.
After the "duplicate" share certificates were issued, Lucius Smith, Jr., surrendered his certificate, and two new certificates were issued in its stead; one, in the amount of 199 shares, to Lucius Smith, Jr.; the other, for one share, to Lucius Smith III. Subsequently a series of shareholder and directors meetings was held at which all of the above post-reorganization actions were ratified, new by-laws were adopted, and various company business was transacted, including the re-election of Lucius Smith III as director for a three-year term.
Cooperation among the new directorship of The Call was short-lived. On November 17, 1981, plaintiffs Lucius Smith III and F. Mark Miller, in their capacities as directors of The Call, voted to remove Lucius Smith, Jr., from the company's board. Lucius Smith, Jr., responded by calling for a special shareholders meeting on January 7, 1982, and for election of a new board of directors at a meeting to be held on January 19, 1982. A shareholders meeting was held, and new directors were elected, ousting plaintiff Smith. This litigation ensued.
Plaintiff F, Mark Miller filed his original complaint in the circuit court of Perry County on January 19, 1982. Through later amendments, Lucius Smith III was added as a party plaintiff. As finally amended, plaintiffs' complaint is in five counts. Count I seeks an injunction to set aside the January 19, 1982, board meeting, reinstate the "proper" directors and officers, and prohibit Lucius Smith, Jr., from appearing at shareholder meetings and voting Call stock. Count II asks for a declaratory judgment that plaintiff Miller owns 75 shares of Call stock, plaintiff Smith owns 150 shares of stock and defendant estate of Harry L. Miller owns 75 shares of stock. Count III prays for compensatory and punitive damages against Lucius Smith, Jr., and an accounting of his expenditures on behalf of the corporation. Count IV is a derivative shareholders' action for the same relief as in count III. Count V requests a judgment declaring plaintiff Smith to be owner of the 100 shares of Call stock originally listed in Emma Weinberg's name.
Defendants counterclaimed. Count I seeks an accounting and punitive damages against plaintiffs. Count II seeks a judgment declaring the Smith family trust to be owner of the 100 shares of Call stock originally listed in Leonard Knetzger's name. (The Smith family trust is the successor in interest to Lucius Smith, Jr., who died after suit was filed.) Count III asks the court to declare that the Smith family trust owns 299 shares of Call stock, that plaintiff Smith owns one share, and that neither plaintiff Miller nor the estate of Harry L. Miller owns any shares. Alternatively, count IV prays for a judgment declaring ownership of Call stock to be as follows: plaintiff Miller, 50 shares; estate of Harry L. Miller, 50 shares; Smith family trust, 199 shares; and plaintiff Smith, one share.
Plaintiffs moved for summary judgment on count V of their complaint. Defendant The Call moved for summary judgment on count IV of its counterclaim. Admissions, affidavits, depositions, documents, and other evidence were filed with the court. A hearing on these motions, and others, was apparently held on November 21, 1984, although no court reporter was present, and the substance of the hearing is not contained in the record. In a summary judgment order filed December 26, 1984, the circuit court declared the ownership of The Call stock to be as follows: Smith family trust, 100 shares; estate of Harry L. Miller, 50 shares; F. Mark Miller, 50 shares; and Lucius Smith III, 100 shares. Pursuant to Supreme Court Rule 304(a) (87 Ill.2d R. 304(a)), the trial court found no just reason for delaying enforcement or appeal of this order. Defendants promptly filed this appeal, and plaintiffs have cross-appealed.
Defendants appeal only from that part of the circuit court's order finding plaintiff Smith to be the owner of 100 shares of Call stock. Our review of the court's judgment must therefore begin with a summary of the parties' respective positions regarding ownership of that stock.
The 100 shares at issue are those originally held by Emma Weinberg. Plaintiff Smith contends that the shares were actually paid for by his father, and that his father placed them in Weinberg's name in 1936 in order to defraud creditors with claims against him arising from a bank failure. Plaintiff Smith argues that this constitutes a fraudulent conveyance, that Weinberg never conveyed the shares back to Smith's father, and that Weinberg therefore possessed title to the shares valid against all but the defrauded creditors. Because plaintiff Smith purchased whatever interest Weinberg had in these shares from her estate in 1982, plaintiff Smith now claims ownership as Weinberg's successor in interest.
Defendants, for their part, deny that title to any shares was ever conveyed to Weinberg or that any fraud was involved. Under their theory, Weinberg simply held 100 shares in trust for Lucius Smith, Jr., and voluntarily relinquished any right she had in those shares when The Call was reorganized in 1979. Even if a fraudulent conveyance did take place in 1936, defendants nevertheless assert that Lucius Smith, Jr., regained ownership in the shares because Weinberg voluntarily reconveyed them to Smith in conformity with her moral obligations. Defendant Smith family trust, as Lucius Smith, Jr.'s successor in interest, therefore claims that the 100 shares now belong to it.
On this appeal, defendants argue that summary judgment should not have been granted because genuine issues of fact remain as to the ownership of the disputed 100 shares of Call stock. They further contend that plaintiffs are precluded from obtaining any equitable relief at all under the doctrine of laches and unclean hands, and that plaintiffs' complaint should therefore be summarily dismissed.
• 1 The standards governing the circuit court's award of summary judgment to plaintiffs are clear. Under section 2-1005(c) of the Code of Civil Procedure (Ill. Rev. Stat. 1983, ch. 110, par. 2-1005(c)), summary judgment is proper only "if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Illinois courts have repeatedly emphasized that the purpose of summary judgment is not to try an issue of fact, but to determine whether a triable question of fact exists. (See, e.g., Hadley v. Witt Unit School District 66 (1984), 123 Ill. App.3d 19, 23, 462 N.E.2d 877, 880-81.) Summary judgment is a drastic remedy. It must be awarded with caution in order to avoid preempting a litigant's right to trial by jury or his right to fully present the factual basis of a case where a material dispute may exist. (Holbrook v. Peric (1984), 129 Ill. App.3d 996, 998, 473 N.E.2d 531, 534.) In passing on a summary judgment motion, the trial court is therefore required to construe the pleadings, affidavits, depositions and admissions on file strictly against the moving party and liberally in favor of the opponent. (Wysocki ...