Court Opinion

ID: 9743122
Source: CourtListenerOpinion
Date Created: 2023-08-26 21:25:46.873302+00
Date Added: 2024-06-11T07:24:39.458753
License: Public Domain

Mr. JUSTICE STAMOS, dissenting: I would affirm the judgment of the circuit court of Cook County. As noted by the majority, the record discloses that defendant was operated as a close corporation with the ownership and control thereof vested, in principal part, in the Regnery and Volker families. In 1949, defendant’s board of directors was comprised of seven members, including William H. Regnery and four of his sons. Rumsfeld, a member of the Volker family, became associated with a parent company in 1924 and then was an officer of the corporation until his resignation in 1958. He continued as a member of the board of directors until his death in 1973. Also, as an employee of the corporation in 1949, Rumsfeld served as the General Superintendent of defendant’s Chicago plant at which he had supervisory authority over 700-800 employees who were engaged in the manufacture of diversified textile products. Jn 1948, William H. Regnery, who served as defendant’s vice-president in addition to being a member of the board of directors, requested one of defendant’s attorneys, Paul Tatge, to draft the redemption agreement in question. By deposition in this case, Tatge stated that W. H. Regnery related to him in 1948 “that it was the consensus among the members of the Regnery family who held the stock in JOANNA-WESTERN that it should not be publicly disposed of and there should be some restriction upon the employees’ sale of the stock owned in the company.” W. H. Regnery further advised Tatge that the purpose of the redemption agreement “was to provide incentive to Mr. Rumsfeld by providing a market for the stock and at the same time to restrict the disposition of the stock and keep it within the Regnery family.” Some 24 years elapsed from the date on which this redemption agreement was executed and Rumsfeld’s death. Shortly after his death, plaintiffs tendered the shares of stock owned by Rumsfeld to defendant and requested that defendant redeem the stock pursuant to the contract. On November 19, 1973, defendant’s board of directors considered plaintiffs’ request and, finding a lack of authorization for or ratification of the agreement contained in the corporate records, repudiated the redemption agreement. This action followed. When ruling on the parties’ respective motions for summary judgment which were accompanied by supporting affidavits, the trial court had before it the pleadings of record, the written and oral arguments of counsel, depositions, answers to written interrogatories, and responses to various requests to admit facts. In its memorandum opinion, the trial court stated several conclusions of law, including the findings that W. H. Regnery, as the chief operating executive of the corporation, had implied authority to negotiate and conclude the redemption agreement with Rumsfeld on behalf of the corporation without the need for specific authorization from the board of directors, and that the action taken by the board of directors at a meeting conducted on October 28, 1960, constituted a ratification of the acts of the officers who purported to act on behalf of defendant when the contract was executed. In my estimation, we need not dwell on the correctness of these particular findings by the trial court. After examining all matters of record, I respectfully submit that, under the circumstances of this case, the equitable principle of estoppel operates to preclude defendant from disaffirming or otherwise repudiating the redemption agreement. The rationale of the Illinois Supreme Court in Roth v. Ahrensfeld (1940), 373 Ill. 550, 554-55, 27 N.E.2d 445, 447, is applicable to the instant case. In Roth, the court noted: “Determination of the question of defendant’s liability rests in the final analysis on whether defendant’s directors or stockholders, other than Jones, had full knowledge of the disputed sale during the year and one-half it remained unchallenged on defendant’s records. Even though the defendant originally could have avoided the sale, it has lost that privilege if it later acquiesced in the transaction. (Golden v. Cervenka, 278 Ill. 409.) Defendant does not deny that its delay in disaffirming should be interpreted as approval, except by its contention that the other officers and stockholders had no knowledge of Jones’ transaction during the intervening period. A president is not disqualified from dealing with the corporation he represents, though his contracts with the corporation may be disaffirmed and will be set aside if tainted with the slightest unfairness. (Dixmoor Golf Club v. Evans, 325 Ill. 612.) If there is any delay in repudiating, the court will inquire whether avoidance will cause an injustice to any one. (Higgins v. Lansingh, 154 Ill. 301.) Although no rights of third persons would be prejudiced, such a contract, nevertheless, will be upheld if by affirmative ratification or by actions amounting to acquiescence the corporation has adopted it. (Louisville, New Albany and Chicago Railway Co. v. Carson, 151 Ill. 444.) When the corporation, through its disinterested officers or stockholders, has been completely informed of the contract over a long period of time and has not indicated its disapproval in any way, it may be concluded that the president’s action has been adopted. (Ashley Wire Co. v. Illinois Steel Co. 164 Ill. 149; Beach v. Miller, 130 id. 162.) Acquiescence thus inferred binds the corporation, preventing later disaffirmance. (Louisville, New Albany and Chicago Railway Co. v. Carson, supra.) The knowledge of the corporation may be determined from pertinent testimony of the officers or stockholders, or, if the corporate records contain a full disclosure and were available to the other stockholders and directors during the period in question, it will be presumed. Dixmoor Golf Club v. Evans, supra; Nat. Hollow Brake-Beam Co. v. Chicago Railway Equipment Co. 226 Ill. 28; Ashley Wire Co. v. Illinois Steel Co. supra.” Similarly, in Freeport Journal-Standard Publishing Co. v. Frederic W. Ziv Co. (1952), 345 Ill. App. 337, 350, 103 N.E.2d 153, 158-59, it was held: “A corporation can act only through its agents. As stated in 13 Am. Jur. 935, sec. 983: ‘The acquiescence of a corporation which will amount to ratification of an unauthorized act may be evinced by mere silence under circumstances giving rise to a duty to repudiate the transaction; a corporation cannot stand by, after it has learned of an unauthorized act or contract made or entered into by its officer or agent, and have its benefit if it should prove to be favorable and reject it if it should prove unfavorable.’ ” Due to the length of time between the date of execution of the Rumsfeld agreement and the date on which that contract was repudiated, the membership on defendant’s board of directors underwent numerous changes. In fact, by 1973 none of the directors involved with the negotiation and execution of the contract were alive; W. H. Regnery, W. F. Regnery and R. H. Jackson died prior to 1960. Of the six directors who voted to repudiate the contract, the record reveals that each of them acquired full knowledge of the Rumsfeld agreement by no later than 1967. F. L. Regnery, who served as president of the corporation in 1973, acquired knowledge of the contract from defendant’s accounting department in the early 1960’s when the contract was discovered in the corporate files. He related this information to Henry Regnery shortly thereafter, but he refrained from discussing the contract with Rumsfeld because he did not know if a copy of the contract had ever been delivered to Rumsfeld. Furthermore, he was fearful that if the Rumsfeld agreement was enforced, other employees would seek similar concessions. Morris Cox was advised in 1966 of the existence of the Rumsfeld agreement. At that time, he received a letter from another director who also served as general counsel for defendant. In this letter, the concern of other board members was expressed, particularly regarding the disparity between the contract price and the fair market value of the stock. The letter concluded “Perhaps if W. H. [Regnery] were here to defend his actions, he might do so on the basis that Herb Rumsfeld was an employee for many years and may very well have contributed to the growth of the company and for this reason he was more than just an investor.” David Meyers first learned of the contract from Walter Regnery in the early 1960’s. Although he discussed the situation with other members of the Regnery family, he never discussed the contract with Rumsfeld. The other two members of the board of directors who voted to repudiate the agreement acquired knowledge of the contract in 1967. They discussed the situation with defendant’s independent auditors and decided that the contract should not be referred to in the corporation’s annual audit report since they questioned the validity of the contract and desired to prevent this potential corporate liability from coming to the attention of the readers of the audit. It was decided that defendant would take no action with regard to the Rumsfeld agreement, but rather, defendant would await any action on the part of Rumsfeld’s estate following his death. Thus, from the date on which the entire board of directors became aware of the existence and the terms of the Rumsfeld agreement, more than 7 years elapsed before the board undertook formal action to repudiate the contract. At no time was the contract discussed with Rumsfeld. Instead, the directors engaged in a course of conduct calculated to conceal their opposition to the contract in expectation either that the contract had never been delivered to Rumsfeld, or that the representatives of Rumsfeld’s estate would be unable to enforce the contract upon his death. It was the imperative duty of the defendant toward its shareholders to repudiate the agreement entered into by W. H. Regnery if it were unauthorized. Silence under such circumstances that, according to the ordinary expressions and habits of men, one would naturally be expected to speak if he did not consent, is evidence from which ratification can be found. (Freeport Journal-Standard Pub. Co. v. Ziv Co.) For us to hold otherwise and permit defendant to avoid its obligation under the terms of the agreement would also cause great injustice to decedent’s estate. I acknowledge that questions of ratification and estoppel normally present issues of fact to be determined by the trier of fact, and thus, are not normally subjects for summary judgment. However, where, as in the instant case, all matters of record, together with any inferences to be drawn therefrom, lead to only one conclusion, a question of law is raised for the court’s determination. (2 Fletcher Cyclopedia Corporations §781 (perm. ed. 1969).) Consequently, the trial court’s rulings on the parties’ respective motions for. summary judgment, in my estimation, were proper.