Appeal from the Circuit Court of Stephenson County. No. 90-L-67. Honorable Lawrence A. Smith, Jr., Judge Presiding.
Petition for Leave to Appeal Allowed December 6, 1995.
The Honorable Justice Hutchinson delivered the opinion of the court: McLAREN, P.j., and Thomas, J., concur.
The opinion of the court was delivered by: Hutchinson
JUSTICE HUTCHINSON delivered the opinion of the court:
This appeal arose out of a suit filed by plaintiff, Timothy Schirmer, against defendants, William F. Bear, William R. Bear Agency, Inc., and Lawrence Peck, seeking dissolution of defendant corporation (the Agency). In the alternative, plaintiff sought an order directing the Agency to buy plaintiff's shares from him.
After a bench trial, on December 16, 1993, the trial court filed a memorandum opinion denying plaintiff's prayer for dissolution of the Agency. While the trial court found that plaintiff failed to prove grounds for judicial dissolution under the Business Corporation Act of 1983 (Act) (805 ILCS 5/12.50 (West 1992)), it did find that "removal of the plaintiff as a corporate director and officer was obviously illegal, but the record is devoid of any evidence that the plaintiff was damaged thereby." The trial court also ruled that plaintiff was entitled to the alternative relief (see 805 ILCS 5/12.55 (West 1992)) of requiring the Agency to purchase his shares. The trial court then sought to reconvene the matter for initiation of an appraisal process in order to determine the amount plaintiff should be paid for his shares.
On January 28, 1994, defendant William F. Bear (Bear) filed a motion to reconsider the trial court's order that the plaintiff's shares be purchased. The trial court granted defendant's motion. On March 14, 1994, the trial court entered an order stating that "plaintiff has failed to prove the grounds for dissolution." The trial court also refused to order that the Agency purchase plaintiff's shares. The trial court reasoned that plaintiff's failure to prove grounds for judicial dissolution precluded him from being entitled to alternative relief. We disagree; we reverse and remand.
The Agency was incorporated in 1979, and in that year Bear purchased 250 shares in the Agency. Bear's parents retained the remaining 750 shares, for a total of 1,000 shares. On May 1, 1982, Bear's parents entered into an agreement to sell 231 of their shares. Of these 231 shares, 44 were sold to Bear; the other 187 shares were sold to plaintiff. The agreement to sell 187 shares to plaintiff requireda $10,000 down payment with the balance to be paid in monthly installments. The agreement also gave plaintiff an option to purchase an additional 53 shares at $410 per share "upon such terms and conditions as shall be agreed upon at the time of purchase." On May 1, 1982, Bear's parents also made an agreement to sell their remaining shares (519) back to the Agency. For these 519 shares, the Agency made monthly payments totalling over $200,000. Both plaintiff and Bear guaranteed payment for these shares "individually, jointly and severally." After Bear's parents sold their remaining shares back to the Agency, Bear owned 61.1% of the outstanding shares (294 shares) while plaintiff owned 38.9% (187 shares).
From May 1, 1982, until July 1990 plaintiff and Bear got along well. During that same period of time, the Agency's gross annual commissions from its insurance business rose from $180,653 to $285,000. On July 2, 1990, Mr. and Mrs. Bear's stock was paid off in full and retired as treasury stock. At that same time, plaintiff paid in full his contract to purchase 187 shares. There was also an annual shareholders' meeting held on July 2, 1990, at which time a board of directors was elected for a term of one year. This board consisted of Bear, Lawrence Peck, and plaintiff. At this meeting, Bear made a motion which plaintiff seconded to continue with the buy-sell agreement "until such time [as a] new Buy-Sell Contract is completed between William F. Bear and Timothy J. Schirmer." Bear also moved and plaintiff seconded a motion that the Agency be valued at $500,000.
On July 18, 1990, plaintiff wrote Bear expressing his intention to exercise his option to purchase the additional 53 shares of stock. In his letter, plaintiff enclosed a proposed payment plan for the purchase of the additional 53 shares. The terms of this proposed payment plan were as follows: "open ended with payment amounts and payment dates left to the discretion of the buyer." Two days later, Bear met with plaintiff and refused his offer to purchase the shares; Bear did not make a counteroffer. Bear also informed plaintiff that he had closed the books of the Agency.
Bear testified that the decision to close the books of the Agency and not to declare a profit for the officers was made early in July 1990. Bear testified that this decision was made because (1) the Agency was considering the installation of computers and (2) the landlord had given notice that the Agency might be required to move. The Agency later spent about $30,000 for computers and furniture. Bear also testified that he did not receive any bonus money in 1990, 1991, 1992 and 1993.
On August 10, 1990, plaintiff wrote Bear a letter which stated inpart: "The withholding of the profits for year end 6-30-90 was not in the best interest of the stockholders." The letter went on to state that Bear had spent Agency funds for family memberships to the YMCA, a dinner sponsored by the Kiwanis Club, tickets to a show and payments made to his brother-in-law for an insured fire loss. Lastly, plaintiff's letter set forth two options "for the betterment of each of us and for the betterment of the agency." The first option was that the Agency pay plaintiff $195,000, which represented 39% of the $500,000 Agency valuation established at the July 1990 meeting, and that plaintiff would terminate his employment relationship with the Agency. The second option was the same as the first except that plaintiff would stay on as an employee with an annual salary (equal to Bear's) of $66,000 plus benefits.
On August 11, 1990, Bear wrote a letter to plaintiff stating: "The terms and conditions of your letter dated August 10, 1990, are not acceptable to me." The letter went on to advise plaintiff to have his attorney contact Bear's attorney (Whiton). Coincidentally, Whiton is also corporate counsel to the Agency and his bill is paid with Agency funds.
On August 20, 1990, Bear notified plaintiff of an annual directors' meeting to be held on August 30, 1990. This communication does not contain any notice of an intention to (1) amend the corporate bylaws, (2) reduce the size of the board of directors, (3) ...