Appeal from the Circuit Court of Cook County. Honorable Edward C. Hofert, Judge Presiding.
Rehearing Denied April 15, 1997. As Modified on Denial of Rehearing April 22, 1997. Released for Publication May 12, 1997.
Presiding Justice Tully delivered the opinion of the court. Greiman and Gallagher, JJ., concur.
The opinion of the court was delivered by: Tully
MODIFIED ON DENIAL OF REHEARING
PRESIDING JUSTICE TULLY delivered the opinion of the court:
Plaintiffs, Gretchen Regnery (hereinafter Gretchen), Verla Regnery (hereinafter Verla), Lynn Regnery (hereinafter Lynn), Elisabeth B. Regnery (hereinafter Elisabeth), William H. Regnery II (hereinafter William), Peter B. Regnery (hereinafter Peter), Anne Regnery (hereinafter Anne), David B. Regnery, Patrick Regnery (hereinafter Patrick) and Bank of America N.T. and S.A. (formerly Security Pacific Bank) (hereinafter Bank of America), brought this action in the circuit court of Cook County against defendants, David R. Meyers and Frederick C. Meyers (hereinafter David and Frederick M., or collectively the Meyers), seeking damages for breach of fiduciary duty. The trial court found that David breached his fiduciary duties which he owed to plaintiffs and that Frederick M. induced, participated in and accepted benefits from such breaches. It is from this judgment that plaintiffs now appeal and defendants cross-appeal to this court pursuant to Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)).
For the reasons which follow, we affirm in part and reverse in part and remand with directions.
Joanna Western Mills Company (hereinafter Joanna) was a family-owned business, incorporated under the laws of Delaware, with its principal place of business in Chicago, Illinois. In 1980 and 1981, Joanna experienced financial difficulties and had a net operating loss of between 2 and 4 million dollars over the course of the 2 years. On August 12 and 13, 1981, shareholder meetings were held to discuss the future of the company. William, then president of Joanna, expressed concern over the 1,904.5 shares of Joanna stock that he had purchased from the Hoover Institute, one of Joanna's investors, in May of 1981, at $500 per share. As a result of the meetings, William resigned as president of Joanna upon the condition that the shares that he purchased from Hoover be repurchased by other Joanna shareholders for $500 per share. Also as a result of the meetings, a voting trust was established, and Verla, one of the majority shareholders, deposited 3,745 shares of Joanna stock into the voting trust. Those 3,745 shares constituted slightly more than half of the 7,483.5 then issued and outstanding shares of Joanna. Frederick Regnery (hereinafter Frederick R.), Henry Regnery (hereinafter Henry) and David were named trustees of the voting trust.
In 1982 and 1983, Joanna's financial condition began improving. In 1983, Frederick began discussing with Henry the possibility of Frederick M. and David, as executives, each purchasing 500 shares of Joanna at $500 per share. Henry refused to support such a sale but did agree to support a sale of 300 shares to each at $500 per share. On September 13, 1983, at a board of directors meeting, Henry proposed the sale to Meyers. The board passed a resolution to call a special stockholders meeting for purposes of allowing the sale to the Meyers. Notice of the special stockholders meeting was mailed to each stockholder of record. The notice informed the stockholders that the meeting was being held for the purpose of approving the sale of 600 shares of company stock to 2 executives of Joanna.
The special stockholders meeting was held on September 26, 1983. David, acting as trustee of the voting trust, voted the trust's 3,745 shares of stock, which constituted 71% of the company's total shares, in favor of the sale to the Meyers. The sale of stock to the Meyers was approved by the stockholders at the meeting by 98.8% of the total shares.
In 1986, Frederick R. and Kenner & Company (hereinafter Kenner) each made separate proposals for the purchase of Joanna. At a special meeting of the board of directors, the board voted to approve the Kenner offer and recommended that Alfred be appointed as the stockholders' agent in connection with the Kenner transaction. At the time, Frederick R. was still concerned about the prior sale of stock to the Meyers and threatened to assert a claim on behalf of himself and the company relating to that sale. Thus, the board authorized the payment of $150,000 to Frederick R. for, among other things, his covenant not to sue Joanna, its stockholders or directors in connection with the 1983 sale of stock to the Meyers.
The stockholders were notified of the settlement of Frederick R.'s claims. They were also asked to sign a consent which authorized the execution of the merger agreement, escrow agreement and agency agreement which appointed Alfred Regnery (hereinafter Alfred) as the shareholders' agent. The consent was signed by a majority of Joanna shareholders. As a result of the sale to Kenner, the Joanna shareholders received $7,766.50 per share owned, $7,097 of which was paid in cash and $669.50 of which was put into escrow to cover corporate liabilities. The shareholders also received stock rights for 10% of the common and preferred stock in the new corporation.
In July, 1987, Gretchen, Anne, Verla, Lynn and Peter filed the present action against defendants. Defendants contacted Alfred and requested that he release plaintiffs' claims against them pursuant to the agency and consent agreements. Thereafter, in a separate action, Alfred filed a complaint for declaratory judgment in the circuit court of Cook County, naming as defendants all parties in the present case and all former Joanna shareholders, requesting that the court enter a judgment authorizing him to execute a release of plaintiffs' claims brought in the present action. The two cases were consolidated and both Alfred and plaintiffs herein filed cross-motions for summary judgment on Alfred's claims. The trial judge granted Alfred's motion, thus allowing his execution of the release. Or appeal, this court reversed the trial court's order and remanded the case for further proceedings. On remand, several other Joanna shareholders requested and ...