{ "id": 5209902, "name": "M G D, INC., f/k/a Dalen Trading Company, et al., Plaintiffs-Appellants, v. DALEN TRADING COMPANY, f/k/a SP ACQ, Inc., et al., Defendants-Appellees", "name_abbreviation": "M G D, Inc. v. Dalen Trading Co.", "decision_date": "1992-06-08", "docket_number": "No. 1\u201490\u20141413", "first_page": "916", "last_page": "921", "citations": [ { "type": "official", "cite": "230 Ill. App. 3d 916" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "67 N.E.2d 265", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "394 Ill. 94", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2472793 ], "opinion_index": 0, "case_paths": [ "/ill/394/0094-01" ] }, { "cite": "351 F. Supp. 364", "category": "reporters:federal", "reporter": "F. 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App. 3d 995", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2483583 ], "year": 1987, "opinion_index": 0, "case_paths": [ "/ill-app-3d/197/0995-01" ] }, { "cite": "561 N.E.2d 1134", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "204 Ill. App. 3d 179", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2577553 ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/204/0179-01" ] }, { "cite": "395 N.E.2d 921", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1990, "opinion_index": 0 }, { "cite": "77 Ill. 2d 173", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5490363 ], "year": 1990, "opinion_index": 0, "case_paths": [ "/ill-2d/77/0173-01" ] }, { "cite": "552 N.E.2d 973", "category": "reporters:state_regional", "reporter": "N.E.2d", "pin_cites": [ { "page": "987" } ], "opinion_index": 0 }, { "cite": "135 Ill. 2d 220", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3256475 ], "weight": 2, "pin_cites": [ { "page": "249" }, { "page": "249" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/135/0220-01" ] }, { "cite": "545 N.E.2d 672", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "131 Ill. 2d 145", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5570227 ], "weight": 4, "pin_cites": [ { "page": "154-55" }, { "page": "157" }, { "page": "157" }, { "page": "159" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/131/0145-01" ] }, { "cite": "554 N.E.2d 1008", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "196 Ill. App. 3d 703", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2492016 ], "weight": 2, "pin_cites": [ { "page": "708" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/196/0703-01" ] } ], "analysis": { "cardinality": 631, "char_count": 12320, "ocr_confidence": 0.781, "pagerank": { "raw": 8.345269312870084e-08, "percentile": 0.4810405934863384 }, "sha256": "067eb446c97e8bd60dbd11f7d98c23d5ad00d83d4199fdfb3c000f98315d24b2", "simhash": "1:0223f111b74534c7", "word_count": 1942 }, "last_updated": "2023-07-14T21:56:33.012273+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "M G D, INC., f/k/a Dalen Trading Company, et al., Plaintiffs-Appellants, v. DALEN TRADING COMPANY, f/k/a SP ACQ, Inc., et al., Defendants-Appellees." ], "opinions": [ { "text": "JUSTICE CAMPBELL\ndelivered the opinion of the court:\nThis appeal arises from an action brought by plaintiffs, MGD, Inc. (MGD), formerly known as Dalen Trading Company (DTC-Blinois), and Mark Dalen (Dalen) against defendants Peter R. Harvey (Harvey) and The Vader Group, Inc. (Vader), for tortious interference with contractual relations. The trial court dismissed counts VII, VIII and IX of plaintiffs\u2019 second amended complaint pursuant to section 2 \u2014 619(aX9) of the Illinois Code of Civil Procedure (Ill. Rev. Stat. 1989, ch. 110, par. 2 \u2014 619(aX9)) for failure to state a cause of action. We affirm.\nThe following facts are relevant to this appeal. Vader, formerly known as Magic Silk, Inc. (Magic Silk), is a New York corporation authorized to do business in Illinois. Harvey is the owner and chief executive officer of Vader. Prior to December 30, 1987, Magic Silk was a vendor and supplier of goods to plaintiffs. Ozite Corporation (Ozite) is a Texas corporation, and SP ACQ, Inc. (SP ACQ), a Delaware corporation now known as Dalen Trading Company (DTC-Delaware), is a wholly owned subsidiary of Ozite. Silk Plants Etc. Franchise Systems, Inc. (Silk Plants), an Illinois corporation and a wholly owned subsidiary of DTC-Delaware is engaged in the business of wholesaling, purchasing, importing, selling and distributing silk plants, silk flowers, plant foliage and trees and franchising operations.\nOn January 7, 1987, Dalen, DTC-Illinois and Silk Plants, as sellers, entered into a \u201cStock Asset and Purchase Agreement\u201d with SP ACQ and Ozite as purchasers. Pursuant to the agreement, Dalen, DTC-Hlinois and SP ACQ agreed to sell all assets of DTC-Illinois and all outside shares of stock of SP ACQ owned by Dalen. SP ACQ agreed to pay DTC-Illinois and Dalen $5 million; $1 million at closing and the balance in four installments of $1 million, as evidenced by four promissory notes. In addition, Dalen entered into a \u201cConsultant and Non-Competition Agreement\u201d with SP ACQ, under which Dalen promised to provide his services as a consultant for a period of five years, at an annual salary of $250,000 and additional \u201cearnout\u201d compensation.\nOn January 8, 1987, MGD and Dalen entered into a \u201cSecurity Agreement\u201d as secured parties with SP ACQ and Silk Plants to secure payment and performance of the \u201cPromissory Notes and Consulting Agreement.\u201d In addition, Ozite entered into a subordinated pledge agreement with Dalen and MGD, whereby Ozite pledged 100% of shares of capital stock of SP ACQ to secure the performance and payments of the promissory notes and consulting agreement and other obligations. On that same date, SP ACQ entered into a similar \u201cSubordinated Pledge Agreement\u201d with MGD and Dalen, pledging 100% of the shares of capital stock of Silk Plants.\nBetween January and November 1987, Harvey sold the assets of Magic Silk and changed the name to Vader. After the sale, Harvey asked Dalen what amount he would require to be bought out of the stock asset and purchase agreement and the consulting and noncom-petition agreement. Dalen requested $7 million.\nOn December 1, 1987, the chief executive officer of Silk Plants informed Dalen that Silk Plants was losing money and that Harvey wanted Dalen to be a financial but not actual participant or consultant in a new ownership of Silk Plants and DTC-Delaware. Dalen rejected Harvey\u2019s offer. On December 17, 1987, defendants Ozite and DTC-Delaware (SP ACQ) announced their intention by letter to MGD and Dalen to breach the stock asset and purchase agreement.\nMGD and Dalen\u2019s first amended complaint, filed June 7, 1989, alleged tortious interference with contracts in counts VII, VIII and IX. Harvey moved to dismiss counts VII, VIII and IX under section 2\u2014 619(aX9) asserting that his actions were protected by a qualified privilege. The trial court granted Harvey\u2019s motion and granted plaintiffs leave to file amended counts VII, VIII and IX.\nOn December 20, 1989, plaintiffs filed their second amended complaint. In count VII MGD and Dalen allege that: (1) Harvey knew of the above agreements and that he \u201cintentionally interfered with the contractual relationship\u201d between plaintiffs and Ozite, DTC-Delaware and Silk Plants by appropriating revenues and funds from the assets of SP ACQ and Silk Plants and diverting funds to Magic Silk; (2) Harvey \u201cintentionally and knowingly without reasonable justification\u201d induced SP ACQ, Silk Plants and Ozite to breach their contractual obligations with MGD and Dalen; and (3) as a direct and proximate result of defendants\u2019 intentional interference, MGD and Dalen sustained over $4 million in damages. In counts VIII and IX plaintiffs allege the same facts, requesting punitive relief of $10 million, and an unspecified judgment for $10 million, respectively.\nHarvey moved to dismiss plaintiffs\u2019 second amended complaint asserting, as previously, that pursuant to section 2 \u2014 619(aX9) of the Code of Civil Procedure, plaintiffs\u2019 claim was barred by a qualified privilege. In addition, Harvey\u2019s motion incorporated his own affidavit and the transcript of the proceedings of the November 8, 1989, hearing on his previous motion to dismiss. In his affidavit, Harvey stated that he is on the board of directors of both Silk Plants and DTC-Delaware (SP ACQ), and is chairman of the board of directors, president and a major shareholder of Vader. Following a hearing, the trial court dismissed counts VII, VIII and IX on the ground that plaintiffs failed to adequately allege Harvey\u2019s intent to interfere with plaintiffs\u2019 contractual relationships. Plaintiffs\u2019 timely appeal followed.\nOn appeal, plaintiffs contend that the trial court erred in dismissing counts VII, VIII and IX of their second amended complaint for failure to state a cause of action for tortious interference with contract. Where the issue before the reviewing court is whether the trial court properly dismissed a complaint, all well-pleaded facts and all reasonable inferences that could be drawn from those facts are construed as true and correct. (Philip I. Mappa Interests, Ltd. v. Kendle (1990), 196 Ill. App. 3d 703, 554 N.E.2d 1008.) Although pleadings are to be construed liberally, plaintiff remains obligated to plead facts necessary for recovery. Liberal construction cannot cure a complaint which lacks sufficient factual averments. A complaint fails to state a cause of action if it does not contain factual allegations in support of every element of the particular cause of action. Mappa, 196 Ill. App. 3d at 708.\nIt is generally recognized in Illinois that the elements of the tort of intentional interference with existing contract rights are \u201c(1) the existence of a valid and enforceable contract between the plaintiff and another; (2) the defendant\u2019s awareness of this contractual relation; (3) the defendant\u2019s intentional and unjustified inducement of a breach of the contract; (4) a subsequent breach by the other, caused by the defendant\u2019s wrongful conduct; and (5) damages.\u201d H P I Health Care Services, Inc. v. Mt. Vernon Hospital, Inc. (1989), 131 Ill. 2d 145, 154-55, 545 N.E.2d 672.\nA qualified privilege bars liability for tortious interference. (Mittelman v. Witous (1989), 135 Ill. 2d 220, 249, 552 N.E.2d 973, 987.) Illinois courts recognize a privilege for corporate officers and directors to use their business judgment and discretion on behalf of their corporations. (H P I, 131 Ill. 2d at 157.) The duty of corporate officers and directors to their corporations\u2019 shareholders outweighs any duty they may have towards parties contracting with the corporation. H P I, 131 Ill. 2d at 157, quoting Swager v. Couri (1979), 77 Ill. 2d 173, 395 N.E.2d 921; Mannion v. Stallings & Co. (1990), 204 Ill. App. 3d 179, 561 N.E.2d 1134.\nIn the present case, Harvey is on the board of directors of both Silk Plants and DTC-Delaware (SP ACQ) and is chairman of the board of directors, president and a major shareholder of Vader. Harvey has a duty to the shareholders of these corporations to exercise business judgment in managing their affairs. Therefore, Harvey\u2019s conduct in this case was privileged.\nTo overcome the qualified privilege of a corporate officer, a plaintiff must show that the corporate officer\u2019s action was done without justification or with actual malice. (Mittelman, 135 Ill. 2d at 249.) \u201cActual malice\u201d is a positive desire or intent to injure another, and in the context of a charge of tortious interference with a contractual relationship, the plaintiff must show that the desire to harm was unrelated to the interests of the corporation. (See Chapman v. Crown Glass Corp. (1990), 197 Ill. App. 3d 995, 557 N.E.2d 256; Certified Mechanical Contractors, Inc. v. Wight & Co. (1987), 162 Ill. App. 3d 391, 515 N.E.2d 1047.) Bare allegations of actual malice, unsupported by facts, are not sufficient to negate the protections of privilege or unjustified conduct. Genelco, Inc. v. Bowers (1989), 181 Ill. App. 3d 1, 7, 536 N.E.2d 783.\nPlaintiffs rely on Mittelman to support the contention that the allegations in their second amended complaint are sufficient to overcome a qualified privilege. However, Mittelman is distinguishable on the facts. In Mittelman, the plaintiff\u2019s allegations of actual malice were supported by specific and definite factual allegations, which included details of specific actions taken by the plaintiff, and reported to the defendants, to establish that Witous\u2019 allegedly slanderous remarks were false and that the defendants knew them to be false. By contrast, plaintiffs\u2019 allegations here made no reference to any specific actions by Harvey supporting the allegations of actual malice.\nPlaintiffs\u2019 further reliance on General Capital Corp. v. United States Family Sporting Goods, Ine. (N.D. Ill. 1972), 351 F. Supp. 364, is unavailing. General Capital stands for the proposition that intentional and malicious interference may be found where an individual misappropriates corporate assets for his own personal use, in breach of his fiduciary responsibility to the corporation. General Capital, 351 F. Supp. at 368, citing Winger v. Chicago City Bank & Trust Co. (1946), 394 Ill. 94, 67 N.E.2d 265.\nIn the present case, plaintiffs have not alleged that Harvey appropriated any funds from his companies for his own personal use. Counts VII, VIII and IX of plaintiffs\u2019 second amended complaint merely allege that Harvey was aware of the contracts between plaintiffs and the various companies; that assets were transferred from SP ACQ and Silk Plants to Magic Silk; that Harvey caused the contracts between plaintiffs and the companies to be breached \u201cwithout reasonable justification\u201d; and that as a result, plaintiffs suffered damages. There are no allegations that Harvey\u2019s actions were illegal, motivated by a desire for personal gain, or intended harm to plaintiffs, as required to prove actual malice.\nThe trial court found that the allegations of plaintiffs\u2019 second amended complaint simply indicated that Harvey\u2019s action affected the financial integrity of the corporation, not an intention to induce a breach of a particular contract. Plaintiffs have not shown that Harvey\u2019s actions were totally unrelated to the interest of the corporations or unjustified. Thus, the allegations are merely conclusory statements, without supporting facts. As such, plaintiffs\u2019 allegations are insufficient to overcome Harvey\u2019s qualified privilege and state a cause of action for intentional interference with contractual rights. See H P I,131 Ill. 2d at 159.\nAccordingly, we affirm the trial court\u2019s order dismissing counts VII, VIII and IX of plaintiffs\u2019 second amended complaint for failure to state a cause of action for tortious interference with contractual relations.\nAffirmed.\nBUCKLEY, P.J., and O\u2019CONNOR, J., concur.\nCounts I through VI of plaintiffs\u2019 second amended complaint, directed against DTC-Delaware and Ozite, are not involved in this appeal.", "type": "majority", "author": "JUSTICE CAMPBELL" } ], "attorneys": [ "Hayes & Power, of Chicago (Joseph A. Power, Jr., Paul L. Salzetta, and David A. Novoselsky, of counsel), for appellants.", "Kwiatt & Silverman, Ltd., of Chicago (Scott E. Tuckman, of counsel), for appellees." ], "corrections": "", "head_matter": "M G D, INC., f/k/a Dalen Trading Company, et al., Plaintiffs-Appellants, v. DALEN TRADING COMPANY, f/k/a SP ACQ, Inc., et al., Defendants-Appellees.\nFirst District (1st Division)\nNo. 1\u201490\u20141413\nOpinion filed June 8,1992.\nHayes & Power, of Chicago (Joseph A. Power, Jr., Paul L. Salzetta, and David A. Novoselsky, of counsel), for appellants.\nKwiatt & Silverman, Ltd., of Chicago (Scott E. Tuckman, of counsel), for appellees." }, "file_name": "0916-01", "first_page_order": 936, "last_page_order": 941 }