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03/29/88 Gyan P. Srivastava, v. Russell's Barbecue

March 29, 1988

GYAN P. SRIVASTAVA, PLAINTIFF-APPELLEE

v.

RUSSELL'S BARBECUE, INC., DEFENDANT-APPELLANT



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, SECOND DIVISION

523 N.E.2d 30, 168 Ill. App. 3d 726, 119 Ill. Dec. 562 1988.IL.441

Appeal from the Circuit Court of Cook County; the Hon. Robert L. Sklodowski, Judge, presiding.

APPELLATE Judges:

PRESIDING JUSTICE HARTMAN delivered the opinion of the court. STAMOS and BILANDIC, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE HARTMAN

Defendant appeals summary judgment granted to plaintiff in an action for declaratory judgment construing a stock purchase agreement. The issues properly presented for review include whether: (1) defendant's action in opening a third restaurant required a payment of $25,000 to plaintiff by the terms of the agreement; and (2) the agreement is ambiguous.

Plaintiff, Gyan P. Srivastava, Joseph Saly and Robert Pearlman were shareholders in two corporations operating restaurants specializing in barbecued foods: defendant Russell's Barbecue, Inc. (Russell's), and Russell's Barbecue of Elmwood Park, Inc. (Russell's of Elmwood Park). During 1982, Saly initiated negotiations between the shareholders concerning plaintiff's sale of his holdings, and on November 17, 1982, plaintiff, Pearlman, Saly, and the two corporations signed a stock purchase agreement. In return for the sale of plaintiff's 100 shares of stock in Russell's and his 5,000 shares of stock in Russell's of Elmwood Park, he would receive $200,000 plus a $52,000 consulting fee. Plaintiff also would obtain $105,000 in return for a covenant not to compete in five Illinois counties. The agreement further provided:

"VI. EXPANSION PAYMENTS

The Corporation shall have the option of adopting either of the following arrangements with Seller:

A. The sum of TWENTY-FIVE THOUSAND ($25,000.00) DOLLARS within twelve (12) months following the opening of a third 'RUSSELL's BARBECUE' format restaurant by either of the Corporations, SALY and/or PEARLMAN or a Corporation in which they or their nominees or agents own or control stock; or

B. In the event that within ten (10) years following the Closing, SALY or PEARLMAN convey all or a majority of their interest in the Corporations or cause the Corporations to convey their restaurants to a third party or parties and the compensation for such transfer or sale includes a continuing franchise fee, then PEARLMAN and SALY agree to pay to Seller a total sum equal to twenty (20%) percent of such franchise fees for the lesser of (a) the term of the franchise agreement, or (b) a period of ten years.

C. The corporation shall have no obligation to make either the payments hereunder, if at the time the payment becomes due, the Seller shall be engaged either directly or indirectly in a barbecue format restaurant."

According to deposition testimony, plaintiff was concerned with the expansion potential of the business and initially asked for $50,000 for each additional restaurant opened; he later agreed to accept $25,000 for a third restaurant and no money for any later restaurants. Plaintiff believed section VI meant he would benefit in case of expansion. Saly believed this section established alternative forms of payment with the choice up to purchasers. Plaintiff understood he would be paid if either event or both occurred.

In August 1984, a third Russell's restaurant opened. Plaintiff thereafter sought payment of the $25,000 under section VI. Russell's responded that it was electing to choose the ...


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