Appeal from the Circuit Court of Cook County. No. 94 L 06456. Honorable Ian H. Levin, Judge Presiding.
The Honorable Justice Gordon delivered the opinion of the court. Cousins, P.j. and Leavitt, J., concur.
The opinion of the court was delivered by: Gordon
The Honorable Justice GORDON delivered the opinion of the court:
Plaintiff, Gerald Guice, filed a three-count amended complaint against defendant, Sentinel Technologies, Inc. (Sentinel), alleging tortious interference with a stock pledge agreement and conversion of a stock certificate evidencing the stock pledged. Plaintiff also sought punitive damages in a separate count. Plaintiff appeals from the section 2-615 dismissal of his second amended complaint. See 735 ILCS 5/2-615 (West 1996).
Plaintiff's second amended complaint alleged that he co-founded Sentinel, an Illinois corporation, in 1982 with Dennis Hoelzer. Prior to the filing of his complaint, plaintiff owned 51% of its outstanding stock. The plaintiff alleged that in 1988, after "bad feelings and antipathy" developed between himself and Hoelzer, he agreed to a buy-out of his interests in Sentinel.
The plaintiff further alleged that, on or about September 25, 1989, after the buy-out, he made a personal loan to Ajay Joshi, a 10% shareholder of Sentinel. In consideration for the loan, Joshi executed and delivered a secured demand note in the amount of $63,752.04. The note was secured by a pledge of 6,075 shares of Sentinel stock which amounted to 6.5% of all issued and outstanding common stock in Sentinel. Under the terms of the pledge agreement between Joshi and Guice, and for the purpose of allowing Guice to perfect his security interest in the pledged stock, Joshi agreed to deposit with Guice a stock certificate which was then in the possession of Sentinel. The demand note and pledge agreement were attached to plaintiff's complaint.
The second amended complaint next alleged that Sentinel was advised of the pledge agreement and note and that several requests were made to Sentinel to turn over to Guice the stock certificate representing Joshi's shares of stock. Specifically, the complaint alleged that "at the time the Pledge Agreement was entered into" Guice's attorney called Sentinel's attorney to advise him of the stock pledge and to request that the stock be turned over. The complaint also alleged that letters of direction were sent by Joshi to Sentinel on February 15 and March 13, 1991; that Guice's attorney sent Sentinel's attorney a letter on March 13, 1991 requesting delivery of the stock certificate; that Sentinel's president sent Joshi a letter on March 18, 1991 in which he stated that the February 15, 1991 notice to Sentinel "does not appear to be in compliance with the provisions of the [Stock Restriction] Agreement" and in which he requested "all documentation in connection with the pledge"; and that on May 6, 1991 Guice's attorney sent Sentinel's attorney copies of the pledge agreement and promissory note. All of the aforementioned letters and documents were attached as exhibits to plaintiff's second amended complaint.
The plaintiff further alleged that the stock restriction agreement between Sentinel and Joshi did not prohibit Joshi's stock pledge; did not require that Joshi obtain the consent of the other shareholders of Sentinel; and only required notice of the pledge. The plaintiff alleged that the notice requirements were complied with prior to Hoelzer's March 18, 1991 letter and that, if not fully satisfied then, were satisfied on May 6, 1991 when Sentinel was sent a copy of the pledge agreement and promissory note executed by Joshi. The plaintiff further alleged that "despite the repeated demands of Plaintiff and Joshi, Sentinel "continued to refuse to deliver over to Plaintiff the Pledged Shares although they were not subject to any other lien, limitation or restriction on transfer." According to the plaintiff's averment, Sentinel's failure to deliver the stock certificates "was intentionally designed to prevent Plaintiff from obtaining value for its security interest in the Pledged Shares." The plaintiff alleged that he was in fact deprived of that value when thereafter Joshi became insolvent and filed a bankruptcy petition in February 1993 and was deprived of recognition as a secured creditor since he did not have the stock certificate in his possession.
With respect to his tortious interference count, Guice alleged that Sentinel "deliberately, intentionally and unjustifiably induced Joshi to breach the Pledge Agreement" with Guice by preventing the delivery of the pledge shares to Guice. Guice alleged that Sentinel's actions were a "malicious and vindictive attempt by Hoelzer *** to punish Guice because of a prior business dispute." Guice alleged that his lack of possession of the stock certificates relegated him to the status of an unsecured creditor resulting in negligible recovery from Joshi's bankruptcy estate.
Plaintiff's punitive damages count adopted the above-stated allegations and sought punitive damages based upon Sentinel's "malicious" refusal to honor the requests for the transfer of stock to Guice. Plaintiff's conversion count also adopted those allegations and further alleged that Sentinel wrongfully and without legal justification maintained custody and possession of the pledged shares in contravention of plaintiff's immediate and absolute right to possession. That count alleged that Sentinel's wrongful possession denied Guice his collateral and prevented him from obtaining value for his security interest in the pledged shares.
In its motion to dismiss and memorandum in support thereof, Sentinel argued, inter alia, that the tortious interference count of plaintiff's second amended complaint failed to allege with requisite particularity Sentinel's "refusal" to deliver the stock certificates and failed to allege plaintiff's right to immediate and unconditioned possession of the certificates. Sentinel argued that the plaintiff was not entitled to possession of the certificates because, as stated in its March 18, 1991 letter, Joshi had not given Sentinel prior written notice of the stock pledge and was in violation of the Stock Restriction Agreement between Sentinel and Joshi, which also attached as an exhibit to plaintiff's complaint. Sentinel further argued that the plaintiff could not establish an enforceable contract between Joshi and himself because their stock pledge agreement required that the stock certificates be deposited with Guice before execution of the agreement.
With respect to the punitive damages count, Sentinel argued that the plaintiff failed to allege facts to support his conclusory allegations of willful or wanton conduct. It argued, inter alia, that the plaintiff's own allegations and exhibits showed that Sentinel's conduct was justified based on the lack of prior written notice and multiple citations to discover assets issued on Sentinel with respect to Joshi's stock.
As to plaintiff's conversion count, Sentinel argued that the complaint did not allege sufficient facts of an immediate, absolute and unconditional right to possession of the stock certificates. Sentinel argued that the exhibits attached to the amended complaint showed that Sentinel had rightfully obtained possession of the certificates and that Joshi had not given timely notice prior to the pledge. Sentinel also argued that the plaintiff failed to show his right to possession, rather than Joshi's right to possession and failed to show an affirmative refusal by Sentinel to turn over the stock.
To withstand a motion to dismiss, the complaint must allege facts setting forth the essential elements of a cause of action. E.g., Jones v. Eagle II, 99 Ill. App. 3d 64, 424 N.E.2d 1253, 54 Ill. Dec. 350 (1981). All well-pleaded facts in the complaint and those contained in exhibits made a part of the complaint are admitted and taken as true for purposes of the motion. E.g., Smith v. Prime Cable, 276 Ill. App. 3d 843, 658 N.E.2d 1325, 213 Ill. Dec. 304 (1995); Evers v. Edward Hospital Ass'n, 247 Ill. App. 3d 717, 617 N.E.2d 1211, 187 Ill. Dec. 490 (1993). A cause of action should not be dismissed on the pleadings unless it clearly appears that no set of facts can be ...