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01/13/87 Carefree Foliage, Inc., Et v. American Tours

January 13, 1987

CAREFREE FOLIAGE, INC., ET AL., PLAINTIFFS-APPELLEES

v.

AMERICAN TOURS, INC., ET AL., DEFENDANTS-APPELLANTS



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, SECOND DIVISION

505 N.E.2d 1039, 153 Ill. App. 3d 190, 106 Ill. Dec. 248 1987.IL.15

Appeal from the Circuit Court of Cook County; the Hon. Albert Green, Judge, presiding.

APPELLATE Judges:

Justice Stamos delivered the opinion of the court. Hartman and Bilandic, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE STAMOS

The trial court found that plaintiffs, Carefree Foliage, Inc. (Carefree), and Estelle Kriv (Kriv), were liable to defendant, American Tours, Inc. (American), for a promissory note in the amount of $46,084.74. American filed a petition for reasonable attorney fees and expenses. The trial court entered a directed finding in favor of plaintiffs and American now appeals.

On September 14, 1984, Foliage Sales, Inc., an Illinois corporation, now known as Carefree Foliage, Inc., and its president, Estelle Kriv, individually and as president of Foliage Sales, entered into an agreement to purchase assets of Carefree Foliage, Inc., an Illinois corporation, now known as American Tours, Inc. (American). The agreement provided, in pertinent part, for a purchase price of $122,500 plus cost of inventory, as determined by the parties. The contract further provided for a portion of the purchase price to be paid by a negotiable promissory note in the amount of $60,000 executed by Carefree, guaranteed by Kriv, and payable in monthly installments of $2,000 per month plus interest on the outstanding balance at a rate of 12% beginning on November 1, 1980, until the final payment due on October 1, 1982. The note was to be secured by the assets purchased by Carefree. In fact, the contract provided that the collateral pledged would include all machinery, equipment, formulations, and inventory enumerated in the bill of sale and sublease of the business premises.

In June of 1981, Carefree informed American that it would not continue making monthly installments payable under the notice. On July 2, 1981, American served both Carefree and Kriv with a notice of default requesting that default on the July 1, 1981, installment be cured within five days. On July 21, 1981, after receiving neither the installment payment nor assurance that the payment would be received, American, pursuant to the terms of the security agreement, took possession of the collateral for the purpose of maintaining, preserving, and preparing the same for sale.

On July 24, 1981, Carefree and Kriv filed an action against Carefree Foliage, Inc., and Mark Dalen. The action set forth two counts. Count I alleged fraud in the inducement for certain alleged financial misrepresentations as to income and profits and requested that the purchase agreement dated September 14, 1982, be declared null and void and that any and all obligations of Kriv and Carefree, pursuant to said agreements, be terminated and extinguished. Count I also requested restitution of all sums paid, including the installments paid pursuant to the promissory note.

Count II of the complaint requested a declaratory judgment and other relief, and alleged that Carefree was not in default on the note and that American had illegally declared a default on said note and repossessed the collateral. Count II also requested that the court enjoin American from damaging, selling, liquidating, or in any way disposing of the books, records, assets, inventory, and other property owned by and located on or used in connection with the business operated by Carefree. Lastly, count II requested the permanent abatement of any and all future obligations of plaintiffs to defendants pursuant to the agreement, note, and sublease.

On August 3, 1981, a hearing was held on plaintiffs' request for a preliminary injunction relating to Carefree's count II requested relief. The court entered a preliminary injunction against American prohibiting it from disposing of the collateral other than in the ordinary course of business and further ordered American to make payments to the lessee of Carefree's business premises. The court further ordered that Carefree's obligations to make payment to American pursuant to the terms of the agreement, notice, and sublease "shall abate during such times as [American] exercised possession and control over said business premise owned by [Carefree]." On August 24, 1981, the court entered a further order which provided that the abatements by American of payments of the promissory note and rent payments for the lease of the business premise would remain in force pending further hearing by the court. The court further authorized American, by its agent, Mark Dalen, to liquidate and sell all the assets of the business including but not limited to inventory and machinery in a public or private sale.

On December 2, 1981, Carefree and Kriv amended their complaint to add two additional counts. Count III requested $100,000 in compensatory damages for American's alleged erroneous default and improper repossession of collateral. Count IV requested $250,000 in damages for libel based on American's publication of a notice of sale of the collateral.

On April 26, 1982, American and Mark Dalen filed their answer and counterclaim against Carefree and Kriv, setting forth three counts. Count I requested payment on the $60,000 promissory note against defendant Carefree and requested monies due plus interest, cost of suit, and attorney fees based upon the note and inventory security agreement. Count II set forth a cause of action against Kriv on the guaranty, plus interest, costs, and attorney fees. Count III sought damages for services rendered by Mark Dalen to Carefree.

On June 24, 1984, the court issued its memorandum opinion and found in favor of American and Mark Dalen and against plaintiffs in count I through count IV of the amended complaint and dismissed the same. The court also found in favor of American on counts I and II of its counterclaim but against defendants on count III. The order further provided for American to present its petition for reasonable attorney ...


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