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Agan v. Cole

March 17, 1998


Appeal from the Circuit Court of Du Page County. No. 91--L--0298 Honorable Michael R. Galasso, Judge, Presiding.

The opinion of the court was delivered by: Justice Doyle


Plaintiff, Charles E. Agan, appeals from the dismissal of three of the four counts in his amended petition for a rule to show cause. The three counts were directed against defendants, Daniel E. Cole (Cole), Roy E. Smith (Smith), and Robert W. Boness (Boness), and another individual who is not a party to this appeal. The other defendants in the underlying case also are not parties to this appeal. The central issue in the appeal is whether the trial court erred when it ruled that plaintiff was barred from bringing the three counts in his amended petition for a rule to show cause because he was required to raise the same issues against defendants as a compulsory counterclaim in a prior bankruptcy proceeding but did not do so.

This action began on February 13, 1991, when plaintiff filed a complaint against Pioneer Engineers & Consultants, Inc. (the corporation), and certain officers, directors, and shareholders of the corporation (collectively, the corporate defendants). Plaintiff's complaint alleged that the corporate defendants breached a shareholders' agreement when they failed to purchase stock that plaintiff owned in the corporation following the termination of plaintiff's employment with the corporation. Defendants were shareholders of the corporation and were among the corporate defendants.

On September 27, 1991, the circuit court entered a summary judgment in favor of plaintiff and against the corporation. The Judgement was for the amount of $77,000 plus prejudgment interest. No Judgement was entered against the individual corporate defendants.

On December 23, 1991, the corporation filed a voluntary bankruptcy petition in the United States Bankruptcy Court for the Northern District of Illinois. This was one day before the circuit court granted plaintiff's motion for a turnover order that would have allowed plaintiff access to corporate funds in a bank account pursuant to a garnishment. Plaintiff subsequently filed a proof of claim in the bankruptcy case. The proof of claim was based on the September 27, 1991, judgment. Defendants were not parties in the bankruptcy case.

In February 1993, plaintiff filed a motion in the bankruptcy court to dismiss the bankruptcy petition. Plaintiff sought dismissal on the ground that the bankruptcy petition had not been filed by a duly authorized or constituted board of directors of the corporation. The motion alleged that Boness, who signed the bankruptcy petition, had illegally ousted the corporation's previous board of directors during an improperly called shareholders' meeting.

The parties in the bankruptcy case subsequently entered a stipulation agreement to dismiss the bankruptcy case and to authorize the disbursement of the corporation's funds that were being held by the bankruptcy trustee. The stipulation provided that plaintiff would receive the balance of the funds after other disbursements were made. Under the terms of the stipulation, plaintiff was to receive at least $83,465.94. The stipulation stated that the funds could be disbursed because "all matters have been fully settled, compromised and adjudicated."

On May 24, 1993, the bankruptcy court entered an agreed order. Under the agreed order, the bankruptcy case was to be dismissed subject to disbursement terms that were substantially the same as the disbursement terms specified in the stipulation agreement.

Plaintiff subsequently received funds from the bankruptcy trustee totaling more than $84,000. On July 1, 1993, the clerk of the bankruptcy court issued a notice of dismissal advising the debtors, creditors, and other parties in interest that an order had been entered dismissing the bankruptcy case.

On August 25, 1993, plaintiff filed a petition for rule to show cause in the circuit court. On August 5, 1994, plaintiff filed an amended petition for a rule to show cause (the amended petition). The amended petition contained four counts. Count IV was directed only against an attorney who had represented the corporate defendants. Count IV was litigated separately, and the circuit court entered an order finding the attorney in contempt. In a separate appeal, this court affirmed the trial court order that found the attorney in contempt. Agan v. Cole, No. 2-95-0591 (1996) (unpublished order under Supreme Court Rule 23).

Counts I, II, and III of the amended petition were directed against Cole, Smith, Boness, and the attorney who was the subject of count IV. However, the attorney has not directly participated in the proceedings regarding counts I, II, and III, and only Cole, Smith, and Boness moved to dismiss counts I, II, and III.

In the amended petition, plaintiff alleged that defendants violated certain circuit court orders. In counts I, II, and III of the amended petition, plaintiff set out conduct that defendants allegedly engaged in that, in plaintiff's view, violated the orders. The alleged conduct included the following: (1) holding an unlawful shareholders' meeting where Boness was elected president and sole director of the corporation, allowing Boness to wrongfully file the bankruptcy petition; (2) closing corporate bank accounts and transferring the funds in the accounts, thereby preventing garnishment of the funds by plaintiff; and (3) selling corporate assets for a price that was far less than the fair market value of the assets on the date of the sale, thereby impeding plaintiff's efforts to collect on his judgment.

In the amended petition, plaintiff sought a contempt order against defendants based on defendants' alleged violations of the circuit court orders. Plaintiff also sought $79,543.83 in attorney fees and expenses that he claimed he had incurred as a result of defendants' wrongful acts. Plaintiff also sought unquantified additional ...

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