Arachnid, Inc. v. Beall

• Decision Date: 03 April 1991
• Docket Number: No. 2-90-0868,2-90-0868
• Citation: 569 N.E.2d 1273,155 Ill.Dec. 662,210 Ill.App.3d 1096
• Parties: , 155 Ill.Dec. 662 ARACHNID, INC., et al., Plaintiffs and Counterdefendants-Appellees, v. Paul F. BEALL, Defendant and Counterplaintiff-Appellant (TBI Games Unlimited, Inc., Plaintiff).
• Court: United States Appellate Court of Illinois

Page 1273

569 N.E.2d 1273

210 Ill.App.3d 1096, 155 Ill.Dec. 662

ARACHNID, INC., et al., Plaintiffs and Counterdefendants-Appellees, v. Paul F. BEALL, Defendant and Counterplaintiff-Appellant (TBI Games Unlimited, Inc., Plaintiff).

No. 2-90-0868.

Appellate Court of Illinois,

Second District.

April 3, 1991.

Edward J. Enichen, G. Michael Scheurich, Guyer & Enichen, Thomas D. Luchetti, Rockford, for Paul F. Beall.

Scott C. Sullivan, Williams & McCarthy, Rockford, Joel T. Pelz, Jenner & Block, Chicago, for Arachnid, Inc., TBI Games Unlimited, Inc., Stephen M. Tillery and Michael L. Tillery.

Justice INGLIS delivered the opinion of the court:

Defendant, Paul F. Beall, appeals from the trial court's order entered April 24, 1990, dismissing certain counts of his counterclaim against plaintiffs, Arachnid, Inc. (Arachnid), Stephen M. Tillery and Michael L. Tillery (Tillerys). Defendant states that the appeal is taken pursuant to Supreme Court Rule 304(a) (134 Ill.2d. R. 304(a)), the trial court having declared its order of dismissal final as to fewer than all the claims set forth in the counterclaim and having stated that there was no just reason for delaying the appeal therefrom. Notwithstanding the trial court's declaration, we find that the order of dismissal does not meet the jurisdictional requirements of finality and appealability. We therefore dismiss defendant's appeal as premature.

Defendant and the Tillerys were stockholders in certain related and closely held corporations. On December 8, 1986, defendant and the Tillerys executed three agreements: "Arachnid Corporations Stock Restriction and Purchase Agreement" (Purchase Agreement), "Arachnid Corporations Stock Restriction and Purchase Agreement Regarding Stephen M. Tillery," and an "Employment Agreement." These agreements had an effective date of January 1, 1987. The Purchase Agreement provided a specified method by which one of the parties could either purchase or sell his stock to the other. The Employment Agreement was executed by defendant and by Arachnid through its vice-president, Michael Tillery. The Employment Agreement defined defendant's employment as president of Arachnid.

The record reveals that on or about January 27, 1989, by means of a notice to Michael L. Tillery, defendant triggered the buy-sell provisions of the Purchase Agreement. In accordance with those provisions, Michael Tillery agreed to purchase defendant's stock. The closing date of the purchase was to be within 60 days of the date of notice of the decision to purchase (February 24, 1989) or on a date mutually agreed upon. During this interim period until the closing date, defendant remained as president.

On April 7, 1989, plaintiffs, Arachnid, TBI Games, and the Tillerys, filed an emergency motion for a temporary restraining order along with a verified complaint alleging that defendant was taking certain actions detrimental to Arachnid and to the other shareholders. Count I of the complaint for injunctive relief averred, inter alia, that, to the detriment of plaintiffs, defendant removed the corporate checkbooks and checkwriting machine from Arachnid's offices, that he changed the authorized signatures of two corporate bank accounts so that his was the only authorized signature, that he terminated the employment of the purchasing agent, and that he paid himself a dividend of $288,000 without the approval of the board of directors. Plaintiffs sought to restrain defendant from taking certain enumerated actions in the conduct of corporate affairs without the consent of Michael Tillery and also sought to maintain the status quo until the rights of the parties could be determined. Count II sought a declaratory judgment to establish the rights of the parties during and after the closing and specifically prayed for a finding that Michael and Stephen Tillery had the right to operate the businesses during the period prior to closing.

In a temporary restraining order dated April 7, 1989, the trial court enjoined defendant from certain conduct involving the affairs of the corporations without the express consent of Michael Tillery and directed defendant to take certain specific actions with respect to the financial management of the corporations. Plaintiffs' motion for a preliminary injunction was set for hearing on April 17, 1989. On that same date, defendant sold his shares of stock in Arachnid and its related corporations to Michael Tillery and, pursuant to paragraph 21 of the Purchase Agreement, also resigned his position from all offices which he held. Nevertheless, by letter dated April 17, 1989, addressed to Michael Tillery as president, defendant asserted that he still considered himself an employee of Arachnid under the terms of the Employment Agreement.

On August 25, 1989, defendant filed his answer to the original complaint and also filed a four-count counterclaim. Count I of the counterclaim sought a declaratory judgment to establish the rights of the parties under the Purchase Agreement and the Employment Agreement. Defendant specifically asked the court to declare that the two agreements were separate undertakings, that Arachnid honor the provisions of the Employment Agreement, that the $288,000 distribution was valid, and that defendant be awarded the unpaid salary and accrued benefits due to him under the Employment Agreement.

Count II incorporated the allegations of the first 14 paragraphs of count I and sought damages against the Tillerys for their alleged tortious interference with defendant's employment contract with Arachnid.

Count III of the counterclaim incorporated the first 14 paragraphs of count I and sought to establish (contrary to the accusations of the Tillerys individually and on behalf of Arachnid that defendant had engaged in misconduct) that defendant had performed his duties faithfully as president. In this count, defendant sought a declaration that neither Arachnid nor the Tillerys had any claims against defendant related to his prior conduct as president.

Count IV of the counterclaim was based in replevin and sought damages from the Tillerys for their alleged conversion of defendant's personal property.

On September 28, 1989, Arachnid and the Tillerys moved to strike and dismiss all counts of the counterclaim. These plaintiffs argued that counts I and III for declaratory judgment improperly sought a declaration of nonliability for past conduct, and they argued that such a remedy should not supersede or preempt plaintiffs' right to obtain relief under other well-recognized remedies or causes of action arising from the contract of employment. Regarding count II (tortious interference), these plaintiffs argued that the Tillerys, as shareholders and directors, were conditionally privileged to take action with respect to defendant's employment agreement with Arachnid and that defendant's allegations in count II were insufficient in pleading the element of the Tillerys' lack of justification in inducing a breach of the employment contract. With respect to count IV, plaintiffs contended that none of defendant's property was being wrongfully detained at defendant's former office at Arachnid.

In response, defendant argued that, at least with respect to count I, he was properly seeking a declaration of his rights under the Employment Agreement. Defendant's response does not seem to address the issues raised with respect to count III. As to count II, defendant conceded that shareholders and directors were conditionally privileged to interfere with the contracts of the corporation. Nevertheless, defendant maintained that his allegation was sufficient in stating that the Tillerys, with knowledge of a valid agreement between defendant and Arachnid, "intentionally and unjustifiably induced the breach of that agreement." Citing HPI Health Care Services, Inc. v. Mt. Vernon Hospital, Inc. (1989), 131 Ill.2d 145, 137 Ill.Dec. 19, 545 N.E.2d 672, defendant asserted that, as a requisite element of the tort of intentional interference with a contract, "malice" meant only the intent to interfere without sufficient justification. Defendant did not respond to plaintiffs' argument concerning count IV of the counterclaim.

On April 24, 1990, the trial court granted the motion to dismiss counts I, II, and III, but excepted those claims in count I which had accrued through April 17, 1989, under the Employment Agreement. Count IV was allowed to stand. In its order, the court explained that both the Purchase Agreement and the Employment Agreement together defined defendant's contractual relationship with the other parties. The court noted that it was defendant who, on January 27, 1989, initiated the proceeding by which he was divested of all his stock in Arachnid and that this necessarily resulted in his resignation on April 17, 1989, which thereby terminated his employment as president of Arachnid. The court opined that defendant should not be heard to complain of the termination for which he was responsible and which he should have expected to occur. The language of the order also implied that the only properly justiciable issues remaining were those that had survived the motion to dismiss and those that had been placed in issue by his answer to the complaint.

On July 6, 1990, in response to defendant's request for findings pursuant to Supreme Court Rule 304(a) (134 Ill.2d. R. 304(a)), the trial court entered an order finding that its prior order of April 24, 1990, was "a final judgment as to the various causes of action set forth therein" and was "final as to fewer than all the claims set forth in the Counterclaim; there being no just reason for delaying appeal therefrom, the Court so orders." The order noted (erroneously, we believe) that count I had been dismissed. The order of April 24 actually left standing certain claims under count I which had accrued prior to April 17, 1989.

As this appeal taken pursuant to Supreme Court Rule 304(a) presents...