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07/12/95 SHARON L. DOWELL AND P & A IRRIGATION v.

July 12, 1995

SHARON L. DOWELL AND P & A IRRIGATION, INC., AN ILLINOIS CORPORATION, PLAINTIFFS-APPELLANTS AND CROSS-APPELLEES,
v.
STEVEN BITNER, DEFENDANT-APPELLEE AND CROSS-APPELLANT.



Appeal from Circuit Court of Mason County. No. 89CH7. Honorable Carson D. Klitz, Judge Presiding.

As Corrected July 31, 1995. Rehearing Denied August 17, 1995.

Justices: Honorable Carl A. Lund, J. Honorable James A. Knecht, P.j. Honorable Frederick S. Green, J. Justice Lund delivered the opinion of the court: Knecht, P.j., and Green, J., concur.

The opinion of the court was delivered by: Lund

JUSTICE LUND delivered the opinion of the court:

Plaintiffs Sharon Dowell and P & A Irrigation, Inc. (P & A) filed this action against defendant Steven Bitner for breaches of fiduciary duty owed to Dowell and P & A. Bitner withdrew from P & A and a partnership with Dowell and established a competing company. The trial court granted, in part, a motion for summary judgment. At the close of the plaintiffs' case during the bench trial, the court granted Bitner's motion for a directed judgment. Dowell and P & A now appeal, and Bitner cross-appeals. We reverse and remand.

We relate those facts relevant to this appeal. Dowell and P & A filed a complaint on April 13, 1989. The complaint alleged the following. In October 1983, Dowell and Bitner commenced business as S & S Irrigation Company (S & S), pursuant to an oral partnership agreement, as a supplier of irrigation equipment. Bitner presented Dowell with a partnership agreement on March 13, 1989, which Dowell signed on March 15, 1989. The partnership agreement allowed either partner to terminate the partnership by giving 30 days of written notice to the other partner. Bitner delivered a signed termination notice to Dowell which was dated March 17, 1989, and made effective April 15, 1989. The termination notice provided only 29 days of notice.

The complaint further alleged that on March 19, 1984, Dowell, Bitner, and four others executed a preincorporation agreement to form P & A. P & A was formed to engage in the business of sales and service of irrigation systems, including parts, in a certain portion of central Illinois. Bitner was an officer, director, and employee of P & A until his resignations. Bitner first resigned as an employee of P & A as of March 17, 1989, and later resigned as an officer and director.

The complaint also alleged that Bitner owed Dowell, his partner, a fiduciary duty. In addition, as an officer, director, and employee of P & A, Bitner owed a fiduciary duty to P & A. The complaint alleged various ways in which Bitner breached his fiduciary duties, including: commencing his own business, signing an agreement with an irrigation supplier which competes with P & A and the partnership, and soliciting an employee of the business to go with him into his new business. The complaint asked for the equitable relief of voiding the partnership agreement and termination notice, dissolving the partnership, giving Dowell an accounting, and allowing Dowell to wind up the partnership's affairs. The complaint also asked for compensatory and punitive damages as a result of the breaches of fiduciary duties.

Bitner filed a counterclaim requesting the court to enforce the termination notice or, in the alternative, to dissolve S & S, take an accounting, dispose of S & S property, and divide the proceeds.

Bitner filed a motion for summary judgment or summary determination of major issues. Bitner attached several supporting documents to his memorandum in support his motion. One of those documents was Bitner's affidavit, which related the following. On March 18, 1989, Bitner informed Dowell and the three other principals in P & A that he was quitting P & A. On March 20, 1989, Bitner established Central Illinois Irrigation (Central) for the purpose of marketing and servicing irrigation equipment. Central performed its first job later that week. Bitner was not bound by any contractual noncompetition obligation to either S & S or P & A. Prior to March 18, 1989, Bitner's activities with respect to Central were limited to planning and formation. No commitments or agreements were made by Central until after March 20, 1989. Bitner performed no work for S & S after March 17, 1989. After March 18, 1989, Bitner did not control, attempt to control, or interfere with the operation of P & A; and he did not take any role as an officer or director in the government of P & A. Bitner owned 23% of the shares of P & A until July 1991.

In addition, Bitner attached excerpts from Dowell's deposition to his motion. In the deposition, Dowell stated there was a meeting in Dowell's office lasting five to seven minutes. Dowell, Leo Pfeiffer, Dean Pfeiffer, and Darrell Pfeiffer (all shareholders, officers, and directors of P & A) were present. Bitner walked in and stated he was quitting and going to work for the competition. They changed the locks the next day.

A hearing on the motion for summary judgment was held on October 17, 1994. After hearing argument from counsel, the court stated:

"No doubt the partnership terminated on March 17, 1989[,] at which time Mr. Bitner gave notice of termination ineffective to create or support the existence of the option[;] however[,] it was an act in furtherance[,] in my mind[,] the partnership was effectively terminated on that day. Further[,] by Mr. Dowell[,] he changed the locks and locked it up, his words, not mine, locked up the partnership office the very next day. To me, even if the notice was ineffective, the actions of Mr. Dowell[,] he assumed they were effective and treated as severance and therefore I find it did terminate on that date."

In addition, the court stated Bitner's duty to P & A as a shareholder terminated on March 18, 1989, but his duty as a director and officer ended when he reduced his resignation to writing on March 24, 1989.

The bench trial occurred on October 18 and 19, 1994. The plaintiffs called Bitner as an adverse witness, and he related the following. He is self-employed, and the name of his company is Central Illinois Irrigation. He was formerly employed by P & A. He first became affiliated with P & A in 1983 or 1984 when it was incorporated by Bitner and five other people: Sharon Dowell, Dean Pfeiffer, Leo Pfeiffer, Darrell Pfeiffer, and Dan Johnston. (Johnston sold his shares in 1988.) Bitner was a director and held the office of secretary. He sold his shares of P & A in July 1991. P & A sold and serviced Reinke pivots and pumps.

As an employee of P & A, Bitner was in charge of sales and service. Customers of P & A were more likely to know Bitner than other employees of P & A. As part of his job, Bitner regularly attended annual Reinke meetings for the purpose of learning more about Reinke systems and how to sell and service them. He also attended other irrigation-related meetings, such as Illinois Irrigation Growers (Illinois Irrigation) meetings. In the course of attending these meetings, Bitner became acquainted with various people, including other Reinke dealers. Bitner went to an Illinois Irrigation meeting in January 1989. At that meeting, he spent time talking to Clause McCullough, who is associated ...


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