Debowski v. Shred Pax Corp.

• Citation: 3 Ill.Dec. 794,45 Ill.App.3d 891,359 N.E.2d 204
• Decision Date: 10 January 1977
• Docket Number: No. 76--380,76--380
• Parties: , 3 Ill.Dec. 794 Michael DEBOWSKI et al., Plaintiffs-Appellees, v. SHRED PAX CORPORATION and Alvis Kaczmarek et al., Defendants-Appellants.
• Court: United States Appellate Court of Illinois

Page 204

359 N.E.2d 204

45 Ill.App.3d 891, 3 Ill.Dec. 794

Michael DEBOWSKI et al., Plaintiffs-Appellees, v. SHRED PAX CORPORATION and Alvis Kaczmarek et al.,

Defendants-Appellants.

No. 76--380.

Appellate Court of Illinois, Second District, First Division.

Jan. 10, 1977.

Leonard Cuttone, Louis M. leider, Chicago, for defendants-appellants.

Dorsey L. Baker, Haight, Hofeldt, Davis & Jambor, Chicago, for plaintiffs- appellees.

IVAN YONTZ, ^* Judge:

Plaintiffs filed this action on December 16, 1975 complaining of a threatened breach of a contract which they entered into on March 28, 1975 with Shred Pax Corporation and its principal shareholder, Alvis Kaczmarek. Shred Pax is an Illinois corporation engaged in the business of manufacturing and selling refuse shredding machines under U.S. Letters Patent.

Prior to March 28, 1975, Shred Pax Corporation was managed under the terms of a Voting Trust Agreement with plaintiff Debowski acting as president and drawing an annual salary of $25,000. At that time defendant Alvis Kaczmarek owned 55,000 of the 89,200 shares of common stock of Shred Pax Corporation. Plaintiffs owned 30,200 shares.

An agreement entered into March 28, 1975 dictated that plaintiffs convey their 30,200 shares of common stock to Alvis Kaczmarek in exchange for certain foreign patents and patent rights then personally owned by Kaczmarek together with an option to repurchase their stock. In addition, Shred Pax Corporation, under the terms of paragraph 5 of the March 28, 1975 agreement, acknowledged it was indebted to plaintiffs in the amount of $101,000.00. To secure these loans and certain promises and representations of defendant Kaczmarek, defendants granted to plaintiffs a security interest in the stock of Shred Pax to the extent of $300,000.00.

On December 12, 1975 defendants entered into agreements entitled 'License Agreement' and 'Option Agreement to Buy Inventory and Fixed Assets' with Walter Klevay of the Sate of Ohio. The License Agreement had as its stated purpose the transfer of the refuse reducing machine operations of defendant Shred Pax to Klevay while the Option Agreement granted Klevay the option to purchase 'all assets' of Shred Pax 'in order to completely terminate its (Shred Pax') ongoing business.'

Plaintiffs filed suit complaining, Inter alia, that the Klevay transaction threatened their security interest in the corporation given pursuant to the March 28, 1975 agreement. The trial court denied plaintiffs' motion for a temporary restraining order. A hearing was held on plaintiffs' petition for a preliminary injunction in early February, 1976. While testimony was introduced by both parties, defendant Kaczmarek was absent from these proceedings. Subsequent to the proceedings the trial court entered an order enjoining defendants from receiving any revenue or consideration from the sale, transfer, or other alienation of property of Shred Pax and requiring such consideration to be paid to the Hawthorne Bank of Wheaton, Illinois. The court ordered Hawthorne Bank to permit payment to defendant Shred Pax of $6000 a month to meet its daily operating expenses. In reaching the conclusion that the issuance of a preliminary injunction was proper the trial court made the following factual findings, among others:

'* * * The transfer of the Sole and Exclusive right (P. Ex. 10) to make, use and sell the refuse reducing machines has destroyed and paralyzed the defendant Shred Pax's 'business of manufacturing and selling refuse reducing machines in the United States under U.S. patents' and destroyed the value of plaintiff's options.

* * * The transfer of the assets of Shred Pax in partial exchange for paper stock, to a foreign jurisdiction, without consent and without full assumption of liabilities may hinder delay or defraud these creditor-plaintiffs, and substantially impair the value of their collateral.'

On February 20, 1976 plaintiffs caused the injunction writ to issue and be served upon defendants and Klevay. On February 25, 1976 Walter Klevay, with defendant Kaczmarek's knowledge, paid Itasca State Bank the sum of $243,887.99 for a release of their lien on machinery, equipment and inventory owned by Shred Pax. The bank applied these monies to payment of debts of Shred Pax which were past due.

On March 10, 1976, defendants moved to vacate the preliminary injunction imposed by the order of February 19, 1976. This motion was denied by the trial court on March 30, 1976. From the order of March 30, 1976 defendants sought to appeal. Appeals were docketed in this court first under No. 76--167 and then under No. 76--272. After consideration of motions to dismiss filed in each appeal by plaintiffs, orders dismissing the appeals were entered by this court.

Defendants filed a second motion to dissolve the preliminary injunction on June 8, 1976. Also on June 8, 1976, plaintiffs filed a petition for rule to show cause why defendants should not be held in contempt for failing to have the proceeds of the sale of the inventory of Shred Pax paid to Hawthorne Bank as required by the order of February 19, 1976.

A hearing was held at which plaintiffs and defendant offered testimony. At the close of the hearing the trial court found defendants Kaczmarek and Shred Pax in contempt of court and refused to dissolve the preliminary injunction earlier entered. An order to such effect was entered on July 23, 1976.

On July 26, 1976 defendant Kaczmarek was sentenced to six months imprisonment in the DuPage County Jail, such imprisonment to be terminated upon payment by Kaczmarek to the Hawthorne Bank of $243,887.99, the amount paid the Itasca State Bank by Klevay. On July 28, 1976 the trial court entered an order denying a motion earlier filed by defendant seeking dismissal of plaintiffs' complaint for lack of jurisdiction of the subject matter.

On August 4, 1976 defendants filed a notice of appeal from the July 23, 1976 order of the trial court denying the petition of defendants-appellants to dissolve the preliminary injunction, the July 26, 1976 order committing defendant Kaczmarek to jail for six months and the July 28, 1976 order denying the motion of defendants to dismiss plaintiff's complaint for lack of jurisdiction of the subject matter.

Defendants attempted to bring an appeal to this court from the trial court's denial of a motion to dissolve the preliminary injunctive order entered on February 19, 1976. An order denying defendants' motion to dissolve the injunction was entered in the trial court at 12:59 p.m. on March 30, 1976. Defendants' notice of appeal from this order was filed in the trial court on the same day, but several hours before the time of entry of the order appealed from. Upon consideration of plaintiffs' motion to dismiss in this court, defendants' appeal was dismissed on the basis that the notice of appeal was not timely filed within the requirements of the Supreme Court Rules because it was filed before the time of entry of the order appealed from. (Ill.Rev.Stat.1975, ch. 110A, par. 307; and Ill.Rev.Stat.1975, ch. 110A, par. 272.) This first appeal which was dismissed was brought by defendants as an interlocutory appeal from the order of the trial court refusing to dissolve an injunction under Supreme Court Rule 307(a)(1). Ill.Rev.Stat.1975, ch. 110A, par. 307(a)(1).

Upon dismissal of defendants' first appeal, defendants filed a second appeal in this court from the order of March 30, 1976. Defendants represented this appeal to be an appeal from a final judgment of the circuit court under Rule 303 (Ill.Rev.Stat.1975, ch. 110A, par. 303) and sought an extension of time to file a notice of appeal under Rule 303(e) (Ill.Rev.Stat.1975, ch. 110A, par. 303(e)). Plaintiffs again filed a motion to dismiss the appeal. This court granted plaintiffs' motion stating that: 'Defendants-appellants' case is properly characterized as an appeal from an interlocutory order of court refusing to dissolve an injunction, as such it is governed by Supreme Court Rule 307,' and referring to the order of dismissal earlier entered.

The history of past proceedings in this case indicates that defendants have failed to perfect an appeal from the preliminary injunctive order entered by the trial court on February 19, 1976 and from the denial of their motion to dissolve the injunction entered on March 30, 1976.

On the present appeal defendants ask this court to examine the merits of the determination made by the trial court in entering the preliminary injunctive order of February 19, 1976. Plaintiffs claim that the doctrine of Res judicata bars this court's consideration of the merits of the February 19 order. In support of this assertion plaintiffs cite, Inter alia, Schien v. City of Virden (1955), 5 Ill.2d 494, 126 N.E.2d 201 and Field v. Field (1967) 79 Ill.App.2d 355, 223 N.E.2d 551.

In Schien the Illinois Supreme Court concluded that defendants' failure to appeal from the trial court denial of his motion to dissolve a temporary judgment had the effect of rendering that judgment a final judgment that the temporary injunction was properly issued. Upon the basis of the conclusion that the failure to appeal rendered the trial court determination the law of the case the Supreme Court went on to hold that there could be no entitlement to damages for the wrongful issuance of a temporary judgment, final determination having been made that the temporary injunction was not wrongfully issued.

In Field v. Field the appellate court considered circumstances where plaintiff did not timely appeal from an order of injunction entered by the circuit court on November 17, 1965, but rather filed several motions alleging, Inter alia, that an inappropriate forum had been availed of and that the court order of November 17, 1965 should be reversed. None of these orders was filed within the 30 day period provided by Supreme Court Rules 303 and 307. The court quoted at length from 28 Am.Jur., Injunctions, Sec. 316 as...