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09/23/88 Robert P. Chapman, v. Freeport Securities

September 23, 1988

ROBERT P. CHAPMAN, PLAINTIFF AND APPELLEE AND COUNTERDEFENDANT AND CROSS-APPELLANT

v.

FREEPORT SECURITIES COMPANY, DEFENDANT-APPELLANT AND COUNTERPLAINTIFF (JACK W. CHAPMAN ET AL., DEFENDANTS AND CROSS-APPELLEES



APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

529 N.E.2d 6, 174 Ill. App. 3d 847, 124 Ill. Dec. 289 1988.IL.1436

Appeal from the Circuit Court of Stephenson County; the Hon. Francis X. Mahoney, Judge, presiding.

APPELLATE Judges:

JUSTICE INGLIS delivered the opinion of the court. LINDBERG P.J., and REINHARD, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE INGLIS

Plaintiff, Robert Chapman, initiated this action by filing a three-count complaint. Count I was against Freeport Securities Company (corporation) claiming compensation was owed him for two years and five months on a three-year employment contract. Count II was against Jack W. Chapman (Jack), and count III was against Marilyn C. Tibbits (Marilyn). Both of these counts were for interference with contractual relationship between plaintiff and the corporation. The corporation counterclaimed against plaintiff for damages it claimed it sustained both before and after his resignation. The trial court found for plaintiff on his compensation claim, against plaintiff on counts II and III, and found against the corporation on its counterclaim. The corporation appeals the judgment against it and for plaintiff on both the complaint and counterclaim. Plaintiff appeals the trial court's holding as to counts II and III. We reverse in part and affirm in part.

C. W. Chapman had organized the corporation and was its president until his death on April 2, 1980. C.W.'s children, plaintiff, Jack, and Marilyn, owned 646 of the 891 shares of Freeport Securities Company. The remaining shares were owned by 29 shareholders.

Eight days after C.W.'s death, Jack, Marilyn, and plaintiff made plaintiff president of the corporation, and attorney Richard Eckert was subsequently elected to the board.

Approximately one month prior to the annual meetings of the stockholders and the board of directors, Eckert and plaintiff discussed plaintiff's presidency. Eckert suggested that plaintiff ask for an employment contract with the corporation for a number of years. He also suggested that plaintiff might seek an incentive agreement, one that paid plaintiff a base salary and a percentage of company earnings if plaintiff's efforts produced more income.

Plaintiff made up a schedule on yellow legal paper which listed three salary options and had a chart at the bottom which compared the options given various profits. He and Eckert discussed the proposals shown so that Eckert could propose them at the annual meeting. Neither of them discussed the proposals with Jack or Marilyn prior to the board meeting. The proposal was not in any notices of the meeting.

After the stockholders meeting on January 27, 1981, the four directors met in Eckert's conference room. Eckert was elected corporate secretary, plaintiff was made president, and Jack was voted vice-president.

A 1980 financial statement was distributed and copies of plaintiff's schedule of options were handed around. Eckert explained that he thought it was in the best interest of the corporation for plaintiff to have a written contract as president. He also advocated a percentage arrangement as in the corporation's interest since such an arrangement would give plaintiff more money as he produced more money for the corporation. Marilyn testified that plaintiff said any of the three proposals outlined were agreeable to him and that each would pay him approximately $75,000 in 1981.

What happened after this is in dispute. All agree there was Discussion of the proposal. They all agree that a three-year contract was the length of time discussed. They all agree Eckert suggested the third option on plaintiff's schedule -- a $40,000 base salary with annual increases of 23% and a 23% incentive each year.

Marilyn stated she did not understand the inflation factor in the schedule or its implications but was in favor of giving plaintiff the security of a three-year written contract with an incentive. She stated that she asked Eckert and plaintiff to write up what they wanted and to give it to her.

Eckert stated that he, Jack and Marilyn all voted for the third option on the proposal. According to Eckert, plaintiff did not vote.

Neither Jack nor Marilyn remembers a vote of any kind on the salary proposal. Everyone left the meeting knowing Eckert was going to draft an employment contract. No minutes of the meeting were made and approved at the meeting. After the meeting, Marilyn made some calculations which showed that for 1981 a reasonable projection for plaintiff's income with the definition of "net income" being all income of the corporation would be $133,000. She called Jack, who said that was wrong, that only new business was involved, not all income, and that could not be right. Marilyn and Jack then called Eckert and made an appointment to see him about this.

Subsequent to the board meeting on January 27, 1981, Eckert made two drafts of an agreement. They were different on the increase in base salary due to inflation. Eckert did not recall why his second draft differed from his first one. He stated he did not discuss the first one with anyone but changed it on his own. ...


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