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03/04/88 Edward C. Adams, v. the Lockformer Company

March 4, 1988





520 N.E.2d 1177, 167 Ill. App. 3d 93, 117 Ill. Dec. 826 1988.IL.302

Appeal from the Circuit Court of Cook County; the Hon. Thomas P. Cawley, Judge, presiding.


JUSTICE MURRAY delivered the opinion of the court. LORENZ, P.J., and SULLIVAN, J., concur.


Defendant, The Lockformer Company (Lockformer), appeals from two orders entered by the circuit court of Cook County in favor of plaintiff, Edward C. Adams (Adams), in an employment contract dispute. In the first order, the jury found that Lockformer had breached a three-year oral contract of employment with Adams, and the court entered judgment thereon. In the second order, the court granted Adams' motion for a directed verdict on Lockformer's counterclaim against him for an alleged breach of his fiduciary duties as an employee of the corporation. On appeal, Lockformer argues that: (1) the alleged contract was not supported by sufficient consideration; (2) the contract was barred by the Statute of Frauds (Ill. Rev. Stat. 1985, ch. 59, par. 1 et seq.) because it was incapable of being performed within one year; (3) the trial court erred in granting Adams' motion for a directed verdict on its counterclaim; and (4) the trial court erred in permitting testimony as to the witnesses' "understanding" of the contract. For the reasons set forth below, we affirm.

Lockformer is a company engaged in the business of manufacturing and selling roll-forming machinery and other machinery related to the heating, ventilating and air-conditioning business. It is located in Lisle, Illinois. In 1973, Lockformer hired Adams as a sheet metal welder supervisor. In 1981, after a number of promotions, Adams became Lockformer's vice-president of manufacturing.

In June 1981, Lockformer was in a state of transition as a result of its president's unexpected resignation. At the same time, Lockformer's director of engineering, Robert Heilman, and vice-president of engineering, Leo Gale, began discussing setting up their own business to manufacture and market a traverse duct connector cleat (later called the "Quikduc") used in building construction to connect sections of duct work; the cleat was an alternative to a "more labor intensive-method of connector" known as a four-bolt system. To accomplish their goal, they needed sources to manufacture a machine to produce the cleat and to sell it. They invited Adams to become a participant in the venture. The group (referred to as the Chicago group) subsequently contacted two parties in California interested in the venture, Arthur Vlastnik, Lockformer's West Coast sales representative, and his friend, David Daw, who had previously worked for a company called Ductmate. Heilman proceeded to form the Illinois corporation of Quikduc, Inc.; he, Gale and Adams became the company's officers and shareholders. Gale and a patent lawyer began preparations to determine the patentability of the cleat which, if obtained, was to be placed in Daw's name. The group also conducted a number of other preparatory activities, such as opening a bank account in the name of Quikduc, preparing a pro forma monthly projection of income from operations, obtaining price quotations from other companies concerning the making of component parts for the cleat, conducting market research, etc. Vlastnik and Daw also formed a company in California called Quikduc of California, Inc. It was anticipated that the two companies would enter into a joint venture or partnership arrangement. During this time, Gale also contacted Harley Flagler, the owner of Flagler Corporation, a competitor of Lockformer's, to inquire about purchasing the company for the purpose of manufacturing the machine to produce the cleat. Flagler refused to sell but the parties began negotiating for a partnership between Flagler and the Chicago group.

In December, Gale traveled to California to negotiate an agreement with Vlastnik and Daw, but no agreement was reached. Gale returned to Illinois and subsequently met with Adams and Heilman. What transpired at the meeting is disputed. Gale testified the group decided they would remain with Lockformer, since they had been unable to obtain any agreements with Flagler or Vlastnik and Daw, that they would disclose their activities to Lockformer's new president, Arthur Link, on January 4, 1982, and that they would attempt to secure written contracts of employment. Adams' version was that the three agreed Gale would retire, he and Heilman would resign from Lockformer, and the group would pursue the Quikduc venture.

The day before the group's anticipated meeting with Link, however, the Quikduc venture was revealed to him by Vlastnik. Vlastnik allegedly told Link that the "deal" between the California and Illinois Quikduc companies had "fallen apart." When the group met with Link the next day, Link immediately advised them that he had been informed of their venture. What transpired after that is disputed. According to Lockformer, Heilman raised the issue of written employment contract, which Link summarily rejected, stating that the board of directors would not approve them. Heilman, apparently concerned about his continued position with Lockformer, then expressed his concern that Link would leave the company, Link assured him he would be with the company for at least three more years, and Heilman and Adams stated that such an arrangement suited them. Lockformer further contended that no contract of employment was ever offered to Adams and that he was never asked to give up his interests in the Quikduc venture. Adams, on the other hand, asserted that Link in fact agreed to his specific request for a three-year employment contract as vice-president of manufacturing on the condition that he, like Gale and Heilman, "get rid of Quikduc and Flagler." Subsequently, the parties divested themselves of their interests in Quikduc.

On August 2, 1982, approximately eight months later, Adams' employment at Lockformer was terminated. On December 6, 1982, Adams filed a six-count complaint against Lockformer, alleging, among other things, Lockformer's breach of the three-year oral contract of employment entered into between the parties on January 4, 1982. Lockformer filed an answer and a counterclaim in which it asserted that Adams had breached his fiduciary duties to the corporation. Subsequently, two counts of Adams' complaint were dismissed pursuant to an agreed order. The court dismissed three additional counts pursuant to a motion for summary judgment filed by Lockformer, but it denied the motion as to count I of Adams' complaint which sought damages for breach of the alleged three-year oral contract of employment. The court also denied a renewed motion filed prior to trial by Lockformer to dismiss count I of the complaint on the grounds of lack of consideration and the Statute of Frauds.

Trial of the action commenced on April 30, 1986, and, at the close of plaintiff's case, Lockformer's motion for a directed verdict, based on lack of consideration and the Statute of Frauds, was denied. At the close of all the evidence, Lockformer renewed its motion and it was again denied. Adams' subsequent motion for a directed verdict on Lockformer's counterclaim for his alleged breach of fiduciary duties was granted. On May 8, 1986, a verdict was returned by the jury in Adams' favor and judgment entered thereon. On July 16, 1986, Lockformer's post-trial motions seeking judgment notwithstanding the verdict or a new trial were denied. This appeal followed. I

That there was sufficient evidence to support the jury's determination that an oral agreement did exist between the parties does not appear to be an issue. The real issues raised by Lockformer are whether the asserted oral agreement lacked sufficient consideration to result in a binding contract and whether the oral agreement was enforceable under the Statute of Frauds (Ill. Rev. Stat. 1985, ch. 59, par. 1 et seq.).

It is axiomatic that a contract must be supported by sufficient consideration to be enforceable. (Moehling v. W. E. O'Neil Construction Co. (1960), 20 Ill. 2d 255, 170 N.E.2d 100.) In the present case, Lockformer argues that: (1) the relinquishment of another job opportunity, here Adams' ownership rights in a potential business, does not constitute valuable consideration; (2) even assuming Adams gave up his ownership rights in another business, as a fiduciary of Lockformer he had an obligation to do so as a condition of continued employment with it and, therefore, his action did not constitute a detriment sufficient to provide consideration; and (3) Adams in fact had no interest to give up at the ...

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