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06/27/97 FLOYD RANSOM v. A.B. DICK CO.

June 27, 1997

FLOYD RANSOM, RANSOM S.A. DE C.V., A MEXICAN CORPORATION, AND ANGEL SAYAGO M., TRUSTEE OF RANSOM S.A. DE C.V. IN BANKRUPTCY, PLAINTIFFS-APPELLANTS/CROSS-APPELLEES,
v.
A.B. DICK CO., AN ILLINOIS CORPORATION, DEFENDANT-APPELLEE/CROSS-APPELLANT



Appeal from the Circuit Court of Cook County. No. 87 L 12284. Honorable Michael Gallagher, Judge Presiding.

Released for Publication August 5, 1997.

The Honorable Justice Hourihane delivered the opinion of the court. Cousins, P.j., and Mcnulty, J., concur.

The opinion of the court was delivered by: Hourihane

JUSTICE HOURIHANE delivered the opinion of the court:

Plaintiffs, Floyd Ransom, Ransom S.A. de C.V., a Mexican corporation, and Angel Sayago, as the trustee in bankruptcy of Floyd Ransom S.A. de C.V., brought an action for breach of contract, breach of fiduciary duty and interference with prospective economic advantage against the defendant, A.B. Dick Co. (A.B. Dick), an Illinois corporation. Defendant answered and counterclaimed seeking enforcement of two promissory notes executed by plaintiffs and payment of an outstanding account. A trial was held and the jury returned verdicts (1) awarding plaintiffs $1,050,000 on their breach of fiduciary duty claim, (2) finding for defendant on all of plaintiffs' other claims, and (3) awarding defendant $1,076,830.52 on its counterclaim. The verdict for the plaintiffs was offset against the verdict for the defendant and defendant was awarded $26,830.52. Plaintiffs now appeal from the denial of their post-trial motions and from those verdicts in defendant's favor. Defendant has also filed a cross-appeal from the judgment for the plaintiffs on their breach of fiduciary duty claim.

On appeal, plaintiffs seek resolution of the following issues: (1) Whether the trial court abused its discretion when it refused to grant comity to the Mexican Bankruptcy Court; (2) Whether the trial court committed reversible error in allowing evidence of post-bankruptcy interest on the promissory notes and subsequently directing the jury to award interest on those notes; and (3) Whether the trial court abused its discretion in offsetting the verdicts.

On cross-appeal, defendant argues that the verdict awarding plaintiff $1,050,000 was against the manifest weight of evidence.

BACKGROUND

The relationship between the parties began in 1968 when Ransom S.A. de C.V., a Mexican corporation engaged in the business of selling office equipment and supplies, obtained the exclusive rights to sell the reprographic and copier products of defendant, A.B. Dick, in Mexico. This functional arrangement derived from two agreements between the parties. First, on December 31, 1968, representatives of Ransom S.A. de C.V. and those of a Mexican subsidiary of A.B. Dick entered into an agreement to form a joint venture (Ransom A.B. Dick S.A. de C.V.). This agreement specifically provided that Ransom S.A. de C.V. would buy 51% of the stock of A.B. Dick's Mexican subsidiary and together the parties would attempt to expand A.B. Dick's share in the Mexican market. Second, on February 23, 1970 the parties entered a "Distributor Sales and Customer Service Contract" which provided that Ransom A.B. Dick S.A. de C.V. would be the exclusive distributor of A.B. Dick's products in Mexico.

After several years of successful and profitable operation, Floyd Ransom and Sons, the owners of Ransom S.A. de C.V., purchased defendant's 49% interest in the joint venture. Additionally, at this time the distributorship agreement between the parties was amended to include a five-year exclusive distributorship term with one automatic five-year renewal. Following this change in ownership, A.B. Dick representatives regularly attended Ransom A.B. Dick S.A. de C.V. business meetings and were furnished with the company's financial and business plans.

On August 31, 1976, the government of Mexico announced a devaluation of the peso. As a result, Ransom A.B. Dick S.A. de C.V. experienced an increase of debt and an increase in expenses associated with buying the defendant's products. In response, the Ransom family merged their various business ventures into a single entity, Ransom S.A. de C.V. (hereinafter "Ransom company"). Financial difficulties plagued the Ransom company in the following years. During this time, A.B. Dick guaranteed a loan to Ransom company which was used to pay A.B. Dick. By 1980, the Ransom company had recovered from the 1976 devaluation of the peso and was performing to the satisfaction of the defendant under the distributorship agreement.

In February of 1982 the Mexican government again devalued the peso. As a result, Ransom company faced another instantaneous increase of debts and expenses. Subsequent devaluations of the peso in the following years worsened the Ransom company's financial situation. In order to allay defendant's concerns, the Ransom company paid a part of its debt to defendant and obtained a loan for $350,000 from the El Paso National Bank which it used to satisfy its outstanding debt to defendant. Defendant again guaranteed this loan.

During this period of financial difficulties, representatives of A.B. Dick continued to attend Ransom company meetings and provided advice for solving its debt problems. A.B. Dick also sent Clifford Mack, its chief financial officer, to assist Ransom company in developing a business plan and prospectus to attract new investors. Around the same time, Mack wrote a letter to defendant which stated that it was "important to keep distributor alive as no other alternative distributor [has been] found as yet." When Ransom company became further indebted, representatives of the defendant advised that Ransom company should again refinance its debt rather than file for bankruptcy. In 1984, the promissory note was reissued by El Paso National Bank for $277,083.34 and defendant again guaranteed the loan (hereinafter known as "El Paso Bank Note"). A second promissory note was issued for the remaining $192,837 that plaintiff owed to defendant (hereinafter "Ransom Note").

The Ransom company continued as the defendant's exclusive distributor and was able to stay current on its interest payments for a short time. However, in 1985 Ransom company again experienced financial problems. On September 5, 1985, Ransom company sought and received a declaration of "suspension of payments" from the Mexican Bankruptcy Court. In November of 1985 Ransom company did not make the required interest payments on the El Paso Bank Note, and the bank sent Ransom company a notice of default which indicated the bank's intention to accelerate the debt. Thereafter, defendant paid the balance on the note and was assigned the bank's interest.

At about the same time, defendant instructed one of its employees, Rafael Alleguez, to assist Ransom company in finding a buyer for the company. Alleguez put Ransom company representatives in contact with Sanchez Y Compania (hereinafter "Sanchez company"). Ransom met with representatives of the Sanchez company and provided them with a variety of information on the Ransom company. At the conclusion of their meetings and discussions with the Ransom company, ...


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