Gordon v. Dolin, 81-905

• Court: United States Appellate Court of Illinois
• Citation: 434 N.E.2d 341,61 Ill.Dec. 188,105 Ill.App.3d 319
• Docket Number: No. 81-905,81-905
• Parties: , 61 Ill.Dec. 188 Allen L. GORDON and Hydrox Chemical Company, Inc., an Illinois corporation, Plaintiffs-Appellants, v. Albert H. DOLIN, Barry M. Dolin and The Dolin Enterprises, Inc., an Illinois corporation, Defendants-Appellees.
• Decision Date: 25 March 1982

Page 341

434 N.E.2d 341 105 Ill.App.3d 319, 61 Ill.Dec. 188 Allen L. GORDON and Hydrox Chemical Company, Inc., an
Illinois corporation, Plaintiffs-Appellants,
v.
Albert H. DOLIN, Barry M. Dolin and The Dolin Enterprises,
Inc., an Illinois corporation, Defendants-Appellees. No. 81-905. Appellate Court of Illinois, First District, Fourth Division. March 25, 1982.

Page 342

[61 Ill.Dec. 189] Friedman & Koven, Robert J. Rubin and Kenneth Shepro, Chicago, of counsel, for plaintiffs-appellants.

[105 Ill.App.3d 320] Jann, Carroll, Sain & Dolin, Ltd. David A. Epstein, Gary A. Weintraub, Joseph R. Steiger, Chicago, of counsel, for defendants-appellees.

JIGANTI, Justice:

After a bench trial at which nine witnesses testified and fifty-one exhibits were received into evidence, the trial court made various findings of fact and conclusions of law which are here on appeal. Specifically, the court decided that the plaintiff-buyers, Allen L. Gordon and Hydrox Chemical Company, Inc. (Gordon) had failed to prove by clear and convincing evidence that there had been fraudulent misrepresentations by the defendant-sellers, Albert H. Dolin, Barry M. Dolin, and the Dolin Enterprises, Inc. (the Dolins). The court denied the various forms of relief prayed for by the plaintiffs including rescission of sale and Purchase Agreement, damages, and/or relief under the Illinois Consumer Fraud and Deceptive Business Practices Act. The trial court further held that the plaintiffs had failed to prove that the defendants had breached their warranties to the plaintiffs under the Purchase Agreement. On appeal, the plaintiffs contend that the trial court's findings of fact and conclusions of law are erroneous as a matter of law and that the trial court acted improperly when it denied them any form of relief.

These are some of the relevant facts concerning the four month negotiation period between Gordon and the Dolins eventuating in the purchase and sale of a small chemical company (Hydrox). In October, 1978, Gordon, an experienced businessman, telephoned Barry Dolin, the president of Hydrox, to express his interest in the company. During the same month Gordon toured the Hydrox plant and also met with an accountant who showed him Hydrox's financial records.

According to Gordon's testimony, the defendants made a number of statements to

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[61 Ill.Dec. 190] him in the month of October. Barry Dolin told him over the telephone Hydrox produced hydrogen peroxide basically in two strengths, 3% and 6%; that it was a very stable business; that the Walgreen Company accounted for the majority of that business; that over the years the business had lacked sales emphasis and that is what the business needed; that he and his father wanted to sell the company; and that he would be happy to meet with Gordon toward this end.

When Gordon first visited Hydrox, he toured the office and then the plant. He testified that while touring, Barry Dolin told him that there were many uses for peroxide that had not been explored by Hydrox; that the company sold 3% and 6% concentrations of hydrogen peroxide; and that the majority of the business, some 65 to 70% was with the Walgreen Company. Barry Dolin also told him that "the relationship with Walgreen went back some 20 or 25 years; that Hydrox had been the sole supplier (to Walgreen) of this material in both 3% and 6% concentrations for some 20 or [105 Ill.App.3d 321] 25 years; that the relationship between the two was an excellent one; and that there was no reason for it not to continue." Gordon further testified that Barry Dolin told him when he first visited the plant that "under no circumstances" was he to contact Walgreen "or any other customer." The reason which Barry Dolin gave Gordon for not contacting Walgreen was that his father, Albert Dolin, had had a "very bad experience along these lines some year or two prior and, as a result, was very, very cautious about this kind of move." Gordon testified that he was shown a small freight elevator on this first visit and was told that the "elevator was not always in working condition, but that it was minor and * * * there was another elevator elsewhere on the premises which might be used." During his visit, Gordon was given a pamphlet on the end uses of hydrogen peroxide and also a list of equipment in the plant. Gordon admitted that Barry Dolin had told him that no contract existed between Hydrox and Walgreen and that there was no commitment on Walgreen's part to make purchases from Hydrox.

Barry Dolin's testimony concerning the telephone call with Gordon and Gordon's follow-up visit to the plant differed from Gordon's in the following respects. Barry Dolin said he told Gordon that Walgreen's business was between 60 and 70% of Hydrox's sales, rather than 65 and 70%. He said that he told Gordon the relationship with Walgreen was long standing. In regard to whether Gordon should contact Walgreen, Barry Dolin said he told Gordon that since Walgreen was a long standing customer it would benefit Gordon not to contact Walgreen because it would be better if Walgreen did not immediately know that there was a change in ownership. Barry Dolin also explained to Gordon that when he and his father had first purchased the business from the prior owner it was some three years before Walgreen knew of the change in ownership.

In November, Gordon met with Albert Dolin to get down to the details of purchasing the business. Gordon testified that in his first meeting with Albert Dolin, Dolin told him the business was a "gold mine;" that "if you just sat there and essentially did nothing you could make a good living from the business because the orders continued to come in largely from Walgreen;" that it was profitable; that it was a good business; and that Barry had done nothing to make the business grow. Gordon further testified that Albert Dolin told him that Hydrox had been the sole supplier to Walgreen for some 20 or 25 years; "that there was an excellent relationship there;" that there had been no problems of any kind and that the business was stable but geared to the growth of the Walgreen Company. Gordon also quoted Albert Dolin as saying that projected Hydrox figures for 1978 indicated that $50,000 to $55,000 could be taken out of the business. Gordon conceded that he had no intention of relying entirely on the Walgreen account.

[105 Ill.App.3d 322] Albert Dolin's testimony concerning his first meeting with Gordon conflicted with Gordon's testimony. Albert said that he initially expressed his reluctance to sell the

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[61 Ill.Dec. 191] business to Gordon and emphasized that the business needed a real sales effort and a good deal of work and "without that which it requires, it would not be great." Albert further testified that he did not tell Gordon that the business was a "gold mine or words to that effect." Albert stated that he might have said Walgreen was an important customer, but that he mentioned other drug companies who were also important customers. Albert said that he had not told Gordon that $55,000 could be drawn out of the business in 1978.

Also in November, Gordon toured the Hydrox plant for a second time, this time with his wife. He then met with the Dolins to discuss arrangements for a sale. At this meeting, Albert Dolin said he told Gordon that the relationship between Hydrox and Walgreen was a "long term relationship." He denied ever characterizing the relationship as a "good relationship." Gordon and the Dolins met twice more in November and a sales price was agreed upon. On November 30, 1978, Gordon's attorney prepared the first draft of a proposed agreement for the purchase and sale of Hydrox's assets. Albert Dolin was sent a copy of this first draft and he made some changes in it. Specifically, Albert changed the term "notice" to "actual notice" to the sellers of a customer's intention to reduce or discontinue business. Only with this change would the Dolins agree to warranty to Gordon that there had been no change in such relationships. Albert testified that he made this change because he wanted the Agreement to be "clear, unambiguous, and precise" as it related to the reduction in business or loss of customers.

On December 15, 1978, approximately two and one half months after Gordon first contacted Barry Dolin by telephone, Albert Dolin met with Gordon's attorney to discuss contract terms and closing dates. A December 28 closing date was first suggested by Gordon, but Albert Dolin requested that the closing be delayed until January 16, 1979, to accommodate his vacation plans. At this meeting, a number of refinements in relation to the Agreement were worked out, including discussions regarding the handling of the accounts receivable. In particular, Albert Dolin requested that the receivables be paid to Gordon who would then remit them to the Dolins. Such a procedure would render it unnecessary to contact all of Hydrox's customers and inform them that the business had changed management. On December 27, Gordon and his wife met with the Dolins. This time both sides were represented by counsel. Gordon mentioned once more in December that he wanted to visit Walgreen to discuss the Hydrox account, but Albert Dolin testified that he again discouraged Gordon from doing so. The Purchase Agreement was finally signed on December 28, [105 Ill.App.3d 323] 1979. Relevant portions of the Purchase Agreement will be discussed later in this opinion.

The closing was held on January 16, 1979. The procedure took several hours and at one point the deal nearly fell apart because Albert Dolin would not sign until Gordon agreed to indemnify the Dolins as to liability to the landlord for the...