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01/13/89 Halil Puskar Et Al., Indiv v. David E. Hughes Et Al.

January 13, 1989

HALIL PUSKAR ET AL., INDI

v.

AND AS OFFICERS, DIRECTORS AND SHAREHOLDERS OF AMERICAN EAGLE MANUFACTURING COMPANY, INC., PLAINTIFFS-APPELLEES AND COUNTERDEFENDANTS,

v.

DAVID E. HUGHES ET AL., DEFENDANTS-APPELLANTS AND COUNTERPLAINTIFFS



APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

533 N.E.2d 962, 179 Ill. App. 3d 522, 127 Ill. Dec. 880 1989.IL.28

Appeal from the Circuit Court of Du Page County; the Hon. Robert D. McLaren, Judge, presiding.

APPELLATE Judges:

JUSTICE REINHARD delivered the opinion of the court. DUNN and INGLIS, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE REINHARD

Plaintiffs, Halil and Tahira Puskar, brought suit in the circuit court of Du Page County seeking, alternatively, specific performance or damages for the breach of a contract for the sale of a corporation to defendants, David and Charles Hughes. David Hughes filed a counterclaim seeking rescission of the contract and return of monies paid thereunder. Following a bench trial, the circuit court granted rescission of the agreement, offsetting against the return of the consideration tendered by defendants under the contract sums that the court found defendants owed to plaintiffs, and entered judgment in favor of plaintiffs in the amount of $3,640.

David and Charles Hughes were represented by separate counsel at trial. While both filed a notice of appeal, Charles Hughes has failed to prosecute his appeal and therefore his appeal is dismissed. Only David Hughes is a party to the instant appeal.

David Hughes raises the following issues on appeal: (1) whether the circuit court erred in finding that defendants owed plaintiffs certain sums after the court rescinded the contract; (2) whether the circuit court erred in assessing these sums based on the evidence adduced; and (3) whether the circuit court erred in granting relief to plaintiffs who had unclean hands.

Evidence adduced at trial establishes the following facts. On July 14, 1986, plaintiffs and defendants executed a written agreement for the sale of American Eagle Manufacturing Co., Inc. (American Eagle), a corporation of which plaintiffs were the sole shareholders, to defendants.

The agreement for the sale of American Eagle provided that defendants were to make a down payment of $100,000 upon execution of the agreement, to be followed by a final payment of $436,000 within 90 days of execution. As additional consideration, defendants agreed to forgive all debts owing them from plaintiffs which had arisen during the preceding 12 months. Plaintiffs agreed to sign over their stock certificates in American Eagle to defendants and place the certificates in escrow for delivery to defendants upon tender of the final payment of $436,000. The agreement provided that defendants were to take possession of the business and operate it according to their best business judgment as of the date of execution.

The agreement, as clarified by a supplemental agreement, represented that plaintiffs owned certain patents and assigned the patents to defendants. Further, the sale agreement represented that defendants were aware of certain lawsuits pending against American Eagle and lawsuits in which American Eagle had entered into settlement agreements; that defendants were accorded an opportunity to inspect American Eagle's books and records and were aware of American Eagle's outstanding liabilities; and that the written agreement constituted the complete agreement between the parties. Testimony at trial indicates that during the period preceding the execution of the sale agreement, Halil Puskar made representations as to the cost at which American Eagle's equipment had been purchased. Puskar further represented that American Eagle's equipment, with the exception of one particular machine, was not subject to any liens or encumbrances.

Shortly after execution of the sale agreement, defendants moved American Eagle's equipment from American Eagle's shop in Bensenville to a location in Rockford.

Halil Puskar and David Hughes had known each other for approximately a year and a half prior to the sale of American Eagle. David Hughes testified that he and Halil Puskar had developed a very close friendship prior to the transaction. David Hughes had, on several occasions, made substantial loans to Halil Puskar.

In 1984, Halil Puskar had purchased a used Giddings and Lewis machine from David Hughes. Puskar traded two machines he owned for a $14,000 credit against the purchase price of the Giddings and Lewis machine. Puskar testified ...


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