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01/26/88 Kaluzny Brothers, Inc., v. Mahoney Grease Service

January 26, 1988

KALUZNY BROTHERS, INC., PLAINTIFF AND COUNTERDEFENDANT AND, APPELLANT AND CROSS-APPELLEE

v.

MAHONEY GREASE SERVICE, INC., DEFENDANT AND COUNTERPLAINTIFF AND APPELLEE AND CROSS-APPELLANT AND THIRD-PARTY PLAINTIFF (JAMES MAHONEY ET AL., DEFENDANTS AND APPELLEES AND CROSS-APPELLANTS; RAYMOND KALUZNY



APPELLATE COURT OF ILLINOIS, THIRD DISTRICT

et al., Third-Party, Defendants)

No. 3-87-0260

518 N.E.2d 1269, 165 Ill. App. 3d 390, 116 Ill. Dec. 289 1988.IL.79

Appeal from the Circuit Court of Will County; the Hon. Herman S. Haase, Judge, presiding.

APPELLATE Judges:

JUSTICE STOUDER delivered the opinion of the court. BARRY, P.J., and SCOTT, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE STOUDER

The plaintiff, Kaluzny Bros., Inc. (Kaluzny), a corporation engaged in the rendering of animal products, processing grease, and sales of the resulting products, and the defendant, Mahoney Grease Service, Inc., a corporation engaged in the collection and sale of unprocessed grease, entered into a joint venture-partnership agreement (the Agreement). The Agreement was finalized and the parties began operations under the name of Midwest Recycling Co. (Midwest). Contemporaneously, the parties entered into a supply purchase and sale agreement, management agreement and lease agreement. The management agreement stated that the management and control of the business and affairs of the partnership were to be administered by a management committee. The committee consisted of two members of the Kaluzny family and two members of the Mahoney family. The day-to-day supervision and management was delegated to Kaluzny.

Although the Agreement proved to be profitable, the partners began having disagreements, resulting in Kaluzny's filing suit against Mahoney and Mendota Rendering, which is a rendering plant owned by Mahoney. Kaluzny alleges that Mahoney and Mendota, as their alter ego, have breached the joint venture's agreements. Specifically, Kaluzny alleges Mahoney and Mendota have breached the joint venture's covenant not to compete and the fiduciary duty arising out of the joint venture and have tortiously interfered with the joint venture's contract and supply agreement.

Mahoney filed a counterclaim alleging numerous complaints with regard to Kaluzny's noncompliance with the Agreement in reporting, payment of management fees, and pricing of the inedible grease. Mahoney also filed a third-party complaint against all shareholders of Kaluzny Bros., alleging they had violated the joint venture agreement's covenant not to compete by processing certain inedible grease at Kaluzny's own plant and that they had interfered with the joint venture agreement.

The two cases were consolidated for trial with the liability issue to be tried first, followed by the accounting and damages issues. The trial court issued its initial decision orally and found neither party at fault or in breach of contract commitments. The court further found that the parties, because of past disputes and differences, could not continue as a joint venture and ordered dissolution of the joint venture, which included sale of its assets, and the termination of the joint venture agreement, the supply purchase and sale agreement, management agreement, and except as required by a purchaser of the joint venture business and assets, the termination of the lease agreement. The court also appointed an independent accountant as a court officer to oversee the dissolution of the joint venture and perform other duties.

Prior to the reduction of the oral decision into a written judgment, Kaluzny filed a motion to reopen proofs to submit evidence not before the court due to the separation of the liability and damages issues. Kaluzny sought to submit evidence on the economic impact on Kaluzny by the court's ordering the dissolution and termination of the agreements contrary to their terms. The court denied the motion and issued a formal written judgment.

Kaluzny has appealed. On appeal, Kaluzny contends: (1) that the trial court was incorrect in finding that Mahoney did not breach the joint venture agreement; (2) that the trial court was incorrect in finding that Mahoney Grease and James and John Mahoney did not breach a fiduciary duty owed to Kaluzny; (3) that the Mahoneys should be found liable for tortious interference with the contractual relationship between Kaluzny, Midwest and Mahoney Grease; (4) that the trial court was incorrect in ordering the termination and dissolution of the joint venture agreement; and (5) the trial court's denial of Kaluzny's motion to reopen proofs was an abuse of discretion. Kaluzny's contentions will be addressed in the order they have been presented.

Initially, Kaluzny argues that the trial court's finding that defendant did not breach the joint venture agreement was contrary to ...


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