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05/13/88 Seymour Pielet Et Al., v. Pielet Brothers Scrap Iron

May 13, 1988

SEYMOUR PIELET ET AL., PLAINTIFFS-APPELLANTS

v.

PIELET BROTHERS SCRAP IRON & METAL, INC., DEFENDANTS-APPELLEES



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIFTH DIVISION

524 N.E.2d 971, 170 Ill. App. 3d 953, 120 Ill. Dec. 789 1988.IL.744

Appeal from the Circuit Court of Cook County; the Hon. Myron T. Gomberg, Judge, presiding.

APPELLATE Judges:

JUSTICE LORENZ delivered the opinion of the court. PINCHAM and MURRAY, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE LORENZ

Plaintiffs Seymour Pielet, Samuel Pielet, and Irving Pielet appeal from an order of the circuit court of Cook County requiring them to pay attorney fees and costs pursuant to section 2-611 of the Illinois Code of Civil Procedure (Ill. Rev. Stat. 1985, ch. 110, par. 2-611).

We affirm.

Plaintiffs were formerly owners and operators of the defendant corporation, along with another brother, Arthur. In March 1975, as part of a buy out of plaintiffs by Arthur, each of the plaintiffs signed identical employment contracts with defendant. Those contracts provided that plaintiffs would work for defendant from March 22, 1975, through January 1, 1977. For at least six months, and up to a maximum of one year, plaintiffs were to be employees of defendant, at a salary of $100,466 per year for the first six months and $151,949 per year for the second six months if plaintiffs continued as full-time employees for that additional period. For the remainder of the employment period, until January 1, 1977, plaintiffs would serve only as consultants, at a reduced salary of $2,500 per year. Apparently a primary purpose of these agreements was to permit plaintiffs to become fully vested in defendant's employee pension plan on January 1, 1977.

The parties modified these employment agreements in June 1975, immediately reducing their duties to those of consultants and also immediately reducing their salaries to $2,500 per year. The plaintiffs were still to remain on defendant's payroll as consultants until their interests in the pension plan fully vested on January 1, 1977.

The employment agreement had also included covenants by the plaintiffs not to compete with the defendant. On June 30, 1976, defendant discharged plaintiffs and terminated their interests in the pension plan because they had allegedly violated the covenants not to compete. Plaintiffs subsequently prosecuted a claim in Federal court alleging a violation of Federal law and also alleging breach of the March 1975 employment agreement. The defendant filed an answer and amended counterclaim asserting that plaintiffs had forfeited their pension rights and seeking, inter alia, restoration of over $50,000 which defendant alleged was paid to plaintiffs under the March 1975 employment agreements. Plaintiffs' answer to defendant's amended counterclaim denied that the salaries provided for in the March 1975 employment agreement were fully paid, stating that those agreements were amended June 2, 1975, and pursuant to the amendment the salary figures of $100,466 and $151,949 were no longer applicable. In a deposition relating to the Federal case plaintiff Irving Pielet admitted that in June 1975 he and the other plaintiffs had agreed to immediately go on a consultant basis because defendant could no longer afford their salaries. In the Federal trial itself the jury was informed by the Judge, pursuant to a stipulation of facts, that plaintiffs had agreed to modify the original agreement and had become consultants at greatly reduced pay scales. Also at trial plaintiff Seymour Pielet testified that beginning in June 1975 he had become a consultant for defendant at $2,500 a year.

Plaintiffs received a jury verdict in their favor of over $800,000, representing their accrued pension funds. The Federal district court also dismissed defendant's amended counterclaim, thus enabling plaintiffs to retain the $50,233.02 paid to them in salaries pursuant to the employment agreements. In the ensuing appeal plaintiffs in their appellees' brief noted that they had agreed to a written modification of the original employment agreement, immediately reducing their salaries to a nominal consulting fee. The Seventh Circuit Court of Appeals, in its opinion affirming the trial court's judgment, also noted that the written modification of the employment agreement immediately reduced plaintiff's salaries to a nominal consulting "salary." Pielet v. Pielet (7th Cir. 1982), 686 F.2d 1210, 1211.

Three years later the plaintiffs filed their complaint in the instant case, each seeking $166,486.32 in salaries allegedly past due under the March 1975 employment agreements. The complaint made no mention of the June 1975 modification reducing plaintiffs' salaries to $2,500 per year.

Defendant moved to dismiss on the basis of res judicata, citing the existence of the June 1975 modification and the numerous acknowledgements of that agreement in the prior Federal action. Defendant also contended that the entire premise of the complaint was false in that plaintiffs claimed entitlement to salaries which they knew had been reduced substantially by the June 1975 modification. In response plaintiffs contended that the June 1975 modification was lacking in consideration on the part of the defendant. Plaintiffs also contended that res judicata was not a bar because their entitlement to salaries was not actually litigated in the prior Federal action. However, in oral argument on the motion to dismiss, counsel for the plaintiffs admitted that the June 1975 agreement was a binding modification agreement. Counsel also did not dispute the court's statement that in the Federal action plaintiffs had admitted that pursuant to the modification agreement the prior salary figures were no longer applicable. The circuit court dismissed the plaintiffs' complaint with prejudice. Plaintiffs have not appealed from that determination.

Defendant then moved for the assessment of costs and fees against plaintiffs, again noting the res judicata bar and the numerous acknowledgements of the validity of the June 1975 modification by plaintiffs in the prior Federal action. Defendants argued that with the knowledge of what occurred in the prior Federal suit it was untruthful for plaintiffs to assert in this cause that they ...


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