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05/05/95 DISCIPLINED INVESTMENT ADVISORS v. DANIEL

May 5, 1995

DISCIPLINED INVESTMENT ADVISORS, INC. AND FINANCIAL COMPUTER SERVICES, INC., PLAINTIFF-APPELLEES,
v.
DANIEL J. SCHWEIHS, DEFENDANT-APPELLANT AND COUNTERPLAINTIFF-APPELLANT (FINANCIAL COMPUTER SERVICES, INC., EUGENE M. LERNER, WILLIAM J. BREEN AND DISCIPLINED INVESTMENT ADVISORS, INC., COUNTERDEFENDANTS-APPELLEES).



Appeal from the Circuit Court of Cook County, Chancery Division. Honorable Sophia H. Hall, and Honorable Everette A. Braden, Judges Presiding.

The Honorable Justice McNULTY delivered the opinion of the court: Gordon and T. O'brien, JJ., concur.

The opinion of the court was delivered by: Mcnulty

JUSTICE McNULTY delivered the opinion of the court:

Disciplined Investment Advisors, Inc. (DIA) sued Daniel Schweihs in chancery court and Schweihs countersued around the time that he petitioned for divorce from his wife, Melinda. The domestic relations court found that Daniel's interest in the countersuit was a marital asset, and the court ordered sale of the asset to Daniel's opponents in the chancery litigation, in effect ordering a settlement of the case. Daniel appeals from the order for sale of the asset in In re Marriage of Schweihs (1st Dist. May 5, 1995), Nos. 1-94-0610 and 1-94-0829, consolidated, which we decide in a separate opinion. The chancery court stayed proceedings pending the outcome of the appeal of the domestic relations case, and Daniel appeals from the stay order. We find that the chancery court did not abuse its discretion by staying proceedings pending the divorce appeal.

In 1984 Eugene Lerner and William Breen hired Daniel to sell the services of a corporation they owned, Financial Computer Services, Inc. (FCS), which recommended investments for its clients. Later that year Daniel's wife, Melinda, gave birth to their second child.

In January 1986 Daniel, Lerner and Breen agreed to form an investment management corporation, DIA, with Daniel owning 100 shares and FCS owning the remaining 200 shares. Under the agreement DIA would pay half of its gross revenues to FCS as compensation for its services and products, especially for the continued work of Lerner and Breen in revising, updating, and creating new computer programs for investment selection. The other half of the revenues were to pay expenses, with the remainder "payable to Schweihs as compensation for his services." This arrangement left no sum for earnings, and therefore the parties made no provision for dividends.

The agreement also provided:

"DIA has an option to purchase for the sum of $1.00 the programs developed by FCS and used by DIA in its money management business, but excluding the historical data base."

On April 21, 1988, Lerner and Breen voted to terminate Daniel's employment with DIA. DIA and FCS sued in chancery court to enjoin Daniel from telling employees of DIA what duties to perform and from telling DIA's clients that he represented DIA. Daniel countersued FCS, Lerner and Breen for breach of contract, unjust enrichment, malicious interference with business relations, breach of fiduciary duty to Daniel, and, in a shareholders' derivative count, for breach of directorial duties to DIA.

Daniel petitioned for divorce from Melinda in November 1989. He admitted that he and Melinda owned marital property including their home, bank accounts, the DIA shares and a chose in action, the interest in the DIA litigation. Daniel admitted that he had a masters of business administration degree, and he earned $100,000 in 1986, $564,000 in 1987 and $293,000 in 1988 before DIA fired him.

Melinda sought temporary child support and maintenance, alleging that she last worked outside the home in 1980, when she earned $10,000 a year. She supported the motion with her affidavit which itemized her expenses of $9,800 per month, including $3,600 for mortgage, taxes and utilities, $730 for food, and more than $1,000 for clothing, education and other expenses exclusively for the children. Daniel responded that he could not earn a substantial living and provide support for Melinda and the children. He alleged that Melinda controlled a bank account with sufficient funds to support the children and he had no employment. He asked the court to order Melinda to sell the family home and find work.

Following a hearing for which no transcript or bystander's report is included in the record on appeal, the trial court found the children needed $2,300 per month in support from both parents. Without determining final allocation of the bank accounts, the court ordered Melinda to use $1,800 each month from the account under her control, and the court ordered Daniel to pay Melinda $500 from the marital bank account under his control, to meet the needs of the children.

In July 1990, after months of negotiations, La Salle National Bank offered to buy Daniel's stock in DIA for $1 million and to loan DIA another $4.2 million to be used to settle Daniel's counterclaim, on condition that Lerner and Breen commit themselves to long-term employment contracts with DIA. Lerner and Breen each agreed to add $1 million to the offer for settlement, giving Daniel the option of recovering $7.2 million if he would surrender his shares and all claims against DIA, FCS, Lerner and Breen. Daniel ultimately rejected the offer and the attorney who had represented him in the DIA litigation and negotiations withdrew.

Melinda received Daniel's tax refund check for 1988 and she moved for an order directing Daniel to sign the check over to her to pay for child support. Following a contested hearing, the court ordered Daniel to endorse the check to Melinda.

Daniel's mother, Veronica Schweihs, died in December 1990, leaving her four children an estate worth more than $400,000. That same month the Internal Revenue Service took the balance of the marital bank account under Daniel's control to cover his unpaid taxes from 1989.

Daniel petitioned for modification of the order for child support, stating that he had no income and no liquid assets. He did not allege any change in the needs of his children. Following a contested hearing, the court ordered Melinda to take out $2,300 per month from the marital funds under her control to meet the children's needs.

In July 1991 Melinda moved to compel Daniel to sell his stock and settle his lawsuit, and for "further relief as equity may require." She said her bank account held only $2,000 and she would soon have no resources from which to support the children.

Daniel moved to strike the motion to compel sale and settlement. He did not allege any change in the children's needs or Melinda's resources, but in his affidavit he said the support Melinda sought "simply is not available."

At the hearing on the motion to compel sale, held with notice on August 12, 1991, the court said:

"I have read what you have pleaded and argued in your motions and I am ready to rule on that basis; but if you have anything that is not contained in the motions or in the arguments contained therein that you wish this court to be advised of, I will give you the opportunity to address those."

Daniel did not seek to present any witnesses, nor did he argue that the children's needs had changed or that the parties had ...


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