The Honorable Justice McMORROW delivered the opinion of the court: Justice Harrison, specially concurring.
The opinion of the court was delivered by: Mcmorrow
JUSTICE McMORROW delivered the opinion of the court:
The question presented in this appeal is whether, under section 12.55 of the Illinois Business Corporations Act of 1983 (the Act) (805 ILCS 5/12.55 (West 1992)), a plaintiff shareholder in a close corporation must prove grounds which would justify dissolving the corporation as a prerequisite to receiving the statutory remedy of having the corporation purchase his or her shares. The appellate court concluded that a plaintiff does not have to establish that dissolution is justified before a corporation may be forced to buy a complaining shareholder's corporate stock. 271 Ill. App. 3d 778, 648 N.E.2d 1131, 208 Ill. Dec. 209. We allowed defendants' petition for leave to appeal. 155 Ill. 2d R. 315. For the reasons which follow, we affirm the judgment of the appellate court.
Defendant William R. Bear Agency, Inc. (the Agency), is an independent insurance agency located in Freeport, Illinois. The Agency was incorporated in 1979, at which time 1,000 shares of common stock were issued. Of these 1,000 shares, 750 were retained by Mr. William R. Bear, previously the Agency's sole owner, and his wife, Mrs. Jean M. Bear. The remaining 250 shares were purchased by Mr. and Mrs. Bear's son, defendant William F. Bear (William), who was also an employee of the Agency.
On May 1, 1982, the plaintiff, Timothy Schirmer, began working for the Agency as an insurance broker. On that same date, two stock purchase agreements were entered into. In the first, Mr. and Mrs. Bear agreed to sell William 44 of their shares in the Agency and to sell plaintiff 187 of their shares. In return for the 187 shares, plaintiff made a $10,000 down payment and agreed to pay the remaining balance of $66,670 in monthly installments at an interest rate of 9.25% per annum. Plaintiff'stotal obligation for the shares, including principal and interest, was approximately $106,000. Also, under the first agreement, plaintiff received an option to buy 53 additional shares of the Agency at $410 per share, with further conditions of the sale to be decided at the time of purchase.
Under the terms of the second stock purchase agreement, the Agency bought back all of Mr. and Mrs. Bear's remaining 519 shares for $212,790. This amount was to be paid in monthly installments of $3,450.65, which reflected a 9.25% annual interest rate. The Agency's total obligation for the shares was approximately $290,000. William and plaintiff guaranteed payment for the 519 shares both individually and jointly. Because of the two stock purchase agreements, as of May 1, 1982, plaintiff and William became the sole shareholders of the Agency. William owned 294 shares, representing 61.1% of the outstanding stock, and plaintiff owned 187 shares, representing 38.9%.
From May 1, 1982, until July 1990, plaintiff had a good working relationship with William. During this time, plaintiff earned an annual income from the Agency, plus annual bonuses for increasing revenues by developing new accounts. The gross annual commissions of the Agency, with plaintiff's help, increased from $180,653 to $285,000. In addition, during this period, plaintiff served as a corporate director of the Agency. William and defendant Lawrence Peck, a retired accountant and friend of Mr. Bear, also served as corporate directors.
The final installment payments under both of the 1982 stock purchase agreements were due at the beginning of July 1990. At a meeting held on July 2, 1990, William and plaintiff presented the final payments to Mr. and Mrs. Bear and, in return, received their stock certificates. At the same meeting, William and plaintiff, acting in their capacity as shareholders, elected the board of directors for the Agency. As in the past, this board consisted of William, plaintiff, and Lawrence Peck. The directors' term of office was to be for one year. Also during the same meeting, William and plaintiff agreed to extend the terms of the first stock purchase agreement until such time as a new agreement between William and plaintiff could be completed. In addition, the value of the corporation, later contested at trial, was declared to be $500,000.
On July 18, 1990, plaintiff wrote to William expressing a desire to exercise his option to purchase 53 additional shares of the Agency pursuant to the terms of the first stock purchase agreement. Plaintiff enclosed a proposed payment plan with his letter which stated that payment amounts and payment dates were to be left to the discretion of the buyer. Two days later, on July 20, 1990, William met with plaintiff and rejected the offer. At the same time, William informed plaintiff that, for business reasons, he had closed the books of the Agency, thereby forgoing any bonuses or profit sharing for the year.
On August 10, 1990, plaintiff wrote William a letter in which he strongly protested William's decision to close the books of the Agency and declared that doing so was not in the best interest of the stockholders. Plaintiff further alleged that William had wasted corporate assets. Plaintiff stated that he could not see himself continuing with the Agency under current conditions and requested that the Agency pay him $195,000 for his shares. This figure was based on his percentage interest in the Agency and the $500,000 valuation established at the July 2, 1990, meeting. Plaintiff also stated that once his shares were purchased, he would be willing to either terminate his relationship with the Agency or continue on as an employee with an annual salary equal to William's. The next day, August 11, 1990, William wrote plaintiff a letter in which he rejected plaintiff's proposals and advised plaintiff to have his attorney contact William's attorney, John B. Whiton.
On August 20, 1990, William sent plaintiff a letter notifying him of an annual directors' meeting to be held on August 30, 1990. The letter did not contain any notice of intent to hold a shareholders' meeting, to amend the bylaws, or to reduce the size of the board of directors.
On August 27, 1990, Whiton, who also served as counsel for the Agency, wrote to plaintiff, stating that plaintiff's letter of August 10 was deemed a resignation effective no later than September 15, 1990. Whiton also rejected plaintiff's asking price for his stock and instead offered the price of $76,670. This figure was derived from the first stock purchase agreement, which permitted Mr. and Mrs. Bear to reacquire plaintiff's shares for the principal price he paid if plaintiff resigned from the Agency or was discharged for his conduct. Whiton's letter also noted that if plaintiff refused to sell his stock, he faced the possibility of remaining, for quite some time, a minority shareholder with no input into how the Agency was run.
On August 30, 1990, at a meeting of the board of directors at which plaintiff was present, William moved to amend the Agency's bylaws to reduce the number of directors from three to one. William voted his 61.1% of the Agency's shares in favor of the motion and plaintiff voted his 38.9% against. The motion passed. William then nominated himself as sole director of the Agency and was elected, again on the strength of his ownership of 61.1% of the Agency's shares. As sole director, William appointed himself president and treasurer of the Agency, and appointed his wife secretary. William also removed plaintiff's name from all corporate ...