Graebe v. Graebe

420 N.E.2d 1095, 95 Ill. App. 3d 1144, 51 Ill. Dec. 537, 1981 Ill. App. LEXIS 2576
CourtAppellate Court of Illinois
DecidedApril 30, 1981
Docket80-150
StatusPublished
Cited by5 cases

This text of 420 N.E.2d 1095 (Graebe v. Graebe) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Graebe v. Graebe, 420 N.E.2d 1095, 95 Ill. App. 3d 1144, 51 Ill. Dec. 537, 1981 Ill. App. LEXIS 2576 (Ill. Ct. App. 1981).

Opinion

Mr. JUSTICE HARRISON

delivered the opinion of the court:

This appeal followed a suit for declaratory judgment initiated by Robert H. Graebe against his brother William F. Graebe, Jr., and against the family corporation, Roho Research and Development, Inc. The elder Graebe sought to invalidate a shareholders’ agreement between himself and William which was executed on April 29,1977. The circuit court of St. Clair County entered an order dated February 2,1979, declaring that the approval of Robert’s wife, Norma Jean Graebe, was a condition precedent to a valid agreement. Besides holding the agreement unenforceable on that ground, the court cited numerous other factors which rendered the contract void. William F. Graebe appeals from the circuit court’s order. We affirm.

Roho was and is an Illinois corporation formed to manufacture balloon cushions for the prevention and relief of bedsores. A certificate of incorporation was filed on March 30, 1973, authorizing the issuance of 1000 shares of common stock. Robert Graebe, the only stock purchaser, bought stock certificate No. 1 for 510 shares at $10 per share. Officers of the corporation were elected: Robert Graebe, president; William Graebe, vice-president; and Robert’s wife, Normal Jean, secretary-treasurer. They also served as directors of the corporation.

Robert Graebe, who developed the product which Roho manufactures, received a degree in electrical engineering from the University of Delaware in 1957. He was employed by All-American Engineering in Wilmington after graduation. There, while working with Dr. Arthur Heather at the DuPont Memorial Convalescent Hospital, he became aware of the bedsore problem. In 1962, Robert began working for McDonnel-Douglas Aircraft Corporation and in 1965 he was assigned by McDonnel to a subsidiary, Conductron. During this period, he spent his spare time designing a product he hoped would alleviate the pain and discomfort connected with bedsores. He began working in his basement and garage on the development of a flotation device. He negotiated a patent exclusion contract with Conductron in 1966 and, by 1968, made his first application for patent. This was eventually granted to him in 1971.

The defendant, his brother William, participated from time to time in the early stages of the project, usually by loaning equipment. William earned an associate degree from Belleville Junior College in 1959, a BA in marketing from Southern Illinois University in 1964, and a master’s degree in marketing management from Southern Illinois University in 1970. From 1968 to 1972, William was assistant to the vice-president of Emerson Electric. After leaving Emerson, he worked briefly on his own, and then went to work for Intertherm as assistant merchandising and advertising manager. He was laid off in March of 1974 and thereafter went to work exclusively for Roho. Having already established contacts with the future distributors of the product that his brother was developing, he cultivated these contacts and enabled Roho to share booths with them at national medical supply conventions. With Robert’s help, William designed the Roho slide presentation used at the exhibits. The alliances formed at these conventions provided the major inroad for displaying and selling the Roho Cushion. William eventually assumed the bookkeeping duties for the corporation, as well.

In contrast to William’s more recent involvement, Norma Jean Graebe made major contributions to the development of this product from its beginning. Both Robert and Norma lived with the project on a daily basis. The initial assembly work was conducted in the basement and garage of their family residence in Belleville, Illinois. Norma devoted her physical labor by working with the rubber parts of the cushion. She also did a great deal of paperwork for the company, operating an office on the second floor of their residence and functioning as bookkeeper and typist. After Roho’s incorporation, she and Robert opened a Roho checking account. They were the only persons authorized to sign on this account. When her husband left McDonnel-Douglas in 1973 to spend more time on his invention, she obtained a real estate license and helped support the family with sales. Norma also shared the financial risks which were involved in forming a small family business. Together with her husband, she co-signed on loans totalling $10,000.

Since 1973, Robert Graebe and William Graebe received comparable salaries from the income of the corporation, without tax deductions. An employee, Otto Roberts, was paid personally out of the funds of Robert Graebe. During these same years, Norma Jean was not paid by Roho. Her husband testified that she drew no salary because the corporation had an insufficient amount of funds.

The small business functioned harmoniously for several years. Then, in the winter of 1976-77, a dispute arose over the balance of the 390 unissued shares. In August 1974, William had purchased 100 shares of stock at $10 per share. When William purchased these 100 shares, there was a discussion about the remaining 390 shares. Both men testified that William was to receive preference on their sale. Robert testified, however, that he believed the price would not be as low as $10 per share. William testified that he assumed the price would be $10 per share, unless the stock had to be sold elsewhere for financing purposes. When it became apparent that Robert did not wish to sell the remaining shares at $10 per share, hard feelings surfaced. Robert testified that his younger brother began missing work regularly and seemed overly obsessed with the situation. He maintained that William had, prior to that time, never invested any capital in the venture. He noted that his brother did not offer to loan any money to Roho during the critical stages when Robert and Norma needed support, even though he had been present during the discussion involving money. William testified that he was unaware of the project’s financial trouble and would have loaned money if asked. He also insisted that he continued to work regularly throughout the period of conflict.

Three months transpired between the initial dispute and the execution of the shareholders’ agreement. Repeated discussions took place in which the brothers sought to resolve the trouble by clarifying William’s role in the corporation. Norma Jean was aware of these discussions, but her brother-in-law would not allow her to attend or participate. Robert testified that he believed William was attempting to eliminate Norma Jean from the corporation through these negotiations.

The shareholders’ agreement, which forms the subject matter of the present lawsuit, marks the culmination of their negotiations. The three-part document was typed by William’s wife, Annette, pursuant to his instructions. It includes three lines at the bottom of page 2, and a date line. The date of April 29,1977, is handwritten. Two of the three lines bear the identified signatures of Robert and William Graebe. Annette Graebe testified that she typed the document, and that the third line was for a notary. There is no jurat or other indication that this was so intended. Robert testified that the third line was for Norma Jean’s signature. Robert and Norma Jean both testified that William knew that any resulting agreement concerning Roho Research and Development, Inc., could not be effective without Norma Jean’s approval.

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Bluebook (online)
420 N.E.2d 1095, 95 Ill. App. 3d 1144, 51 Ill. Dec. 537, 1981 Ill. App. LEXIS 2576, Counsel Stack Legal Research, https://law.counselstack.com/opinion/graebe-v-graebe-illappct-1981.