text:
      In re MARRIAGE OF NANCY LYTLE, Petitioner-Appellee, and JOHN J. LYTLE, JR., Respondent-Appellant.
    Second District
    No. 81-565
    Opinion filed May 5, 1982.

      Charles M. Travis, of Travis, Tucker, Pavesich & Associates, of Lombard, for appellant.
    Joseph V. Moschetti, of Moschetti & Meadowcroft, of Lisle, for appellee.
   PRESIDING JUSTICE SEIDENFELD

delivered the opinion of the court:

The impact of the automatic stay provision under the Federal Bankruptcy Act (11 U.S.C. sec. 362 (Supp. Ill 1979)) upon proceedings in the circuit court for enforcement of property distribution under a judgment for dissolution of marriage, is before us in this appeal.

The marriage of petitioner, Nancy Lytle, to respondent, John J. Lytle, Jr., was dissolved in 1981. On March 5, 1981, the court issued a supplemental judgment by whose terms petitioner was awarded the parties’ lakefront property in Michigan. Respondent was also to reimburse petitioner for all sums paid by her on account of the garnishment of her wages for a debt due to the Bank of Naperville and hold her harmless from all future garnishments arising out of that debt. By separate order entered the same date, respondent was ordered to pay the sum of $1,500 toward petitioner’s attorney fees.

On April 8, 1981, petitioner filed a petition for a rule to show cause, alleging that respondent had failed to make any payment toward petitioner’s attorney fees and had failed to communicate with respondent concerning the debts from which he had been ordered to hold her harmless. It was also alleged that petitioner had incurred a further garnishment proceeding by reason of respondent’s total failure to settle or pay the claim which had resulted in those garnishments. The rule was issued, and a hearing thereon was held on June 29, 1981. At that time, respondent’s counsel presented the court with a copy of a bankruptcy petition which had been filed on respondent’s behalf in the United States Bankruptcy Court for the Northern District of Illinois on June 25.

At the hearing, respondent testified on his own behalf that his conduct was not intended as contemptuous, but that his financial circumstances were poor. He had first learned of the garnishment of petitioner’s wages only three weeks before. An issue was raised as to whether respondent had improperly sold the boat dock at the Michigan property, and respondent, while admitting that the dock was not removed from the property until after the supplemental judgment, claimed that the sale had taken place beforehand, in February 1981.

Respondent’s counsel advised the court that the filing of a bankruptcy “generally should stay proceedings” in State courts concerning the debts of the bankrupt, but the court, after ascertaining that the bankruptcy court had not issued a stay order, found that the pending Federal action did not obviate respondent’s obligation to pay the debt for which petitioner’s wages were being garnished. The court found that respondent’s conduct concerning the sale of the boat dock and the “hold harmless” provision of the supplemental judgment was willful and contumacious. It ordered respondent incarcerated for 14 days beginning July 13, 1981, unless the dispute over these matters was resolved in the interim. The matter concerning respondent’s obligation for attorney fees, including the effect of the bankruptcy thereon, was continued to July 14, 1981, and the mittimus was stayed until that date. On July 17,1981, respondent filed a motion to reconsider and to stay further proceedings pending the outcome of the pending bankruptcy case. The court denied the motion, and respondent has appealed.

Respondent contends that the trial court erred in proceeding with an adjudication on the rule to show cause after being apprised that respondent had filed a petition for relief under Chapter 7 of the Bankruptcy Act. Respondent asserts that, as provided by section 362 of the Act (11 U.S.C. sec. 362 (Supp. Ill 1979)), the trial court was obliged to recognize that the filing of the bankruptcy petition operated as an automatic stay of State proceedings designed to enforce the property and attorney fees provisions of the supplemental judgment.

Section 362(a) provides that the filing of a petition under Chapter 7 of the Bankruptcy Act operates as a stay of

“(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;
(3) any act to obtain possession of property of the estate or of property from the estate;
(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title;

Exceptions to the automatic stay are set out in section 362(b) and, as herein applicable, include:

“(1) under subsection (a) of this section, of the commencement or continuation of a criminal action or proceeding against the debtor;
(2) under subsection (a) of this section, of the collection of alimony, maintenance, or support from property that is not the property of the estate;

# # # ”

Respondent asserts that the effect of this statute is to stay all proceedings relating to debts dischargeable in bankruptcy, and that since respondent’s debts in the present case relate to obligations which are dischargeable {i.e., the property settlement and attorney fees), the trial court was required to stay proceedings on the rule to show cause pending resolution of the bankruptcy case. Petitioner responds that the automatic stay does not prevent a State court from proceeding with a contempt action against the bankrupt, arising out of disobedience to a State court order made prior to the stay. Petitioner further contends that the award in this case is one “in the nature of alimony or maintenance,” since the Illinois Marriage and Dissolution of Marriage Act, while eliminating wherever possible maintenance in the traditional sense, provides for the distribution of marital property in accordance with factors traditionally considered with respect to the question of maintenance; i.e., the financial position of the parties and their ability to provide for their needs. Petitioner also asserts that respondent’s obligations should be nondischargeable because they constitute an injury willfully and maliciously inflicted by respondent within the meaning of 11 U.S.C. sec. 523(a)(6) (Supp. Ill 1979).

I

We first conclude that where, as here, contempt is invoked as a sanction for failure to pay a judgment for money, or to compel the expenditure of money from a bankrupt’s estate, rather than to uphold “the dignity of the court,” the proceedings are not exempt from the automatic stay. Guariglia v. Community National Bank & Trust Co. (E.D.N.Y. 1974), 382 F. Supp. 758, 761; aff'd without opinion (2d Cir. 1975), 516 F.2d 896.

David v. Hooker, Ltd. (9th Cir. 1975), 560 F.2d 412, relied upon by respondent, does not state a different rule. In David the issue was a litigant’s failure to comply with a prior discovery order. The court held that notwithstanding the intervening filing of a bankruptcy petition the litigant could be held in contempt and assessed a monetary sanction to compensate the other party to the case for expenses and attorney fees. The court did not, however, rule that contempt may be used to enforce any State ordered obligation, regardless of the existence of the automatic stay. To the contrary, the court quoted with approval language from In re Spagat (S.D.N.Y. 1933), 4 F. Supp. 926, 927, that the automatic stay did not affect the validity of State court contempt proceedings which “did not attempt in any way to interfere with the property which had passed to the control of the bankruptcy court; [the State court] sought merely to vindicate its dignity which had been affronted by the contumacious conduct of a person who ignored its order.” (560 F.2d 412, 418.) Thus, while a court may enforce obedience to its orders and impose sanctions, including a monetary penalty, for contempt, David does not support a claim that a judgment or decree requiring the payment of money may be enforced during the pendency of a bankruptcy by the sanction of contempt. Such a rule would place a bankrupt’s judgment creditors in a position superior to other creditors in clear violation of the policies underlying the Bankruptcy Act by requiring the bankrupt to pay claims which had been reduced to judgment in order to avoid contempt.

II

Petitioner also contends that respondent’s obligations should be nondischargeable because they constitute a debt “in the nature of alimony, maintenance, or support/’ which is exempted from discharge under section 523(a) (5) of the Bankruptcy Code (11 U.S.C. sec. 523(a) (5) (Supp. III 1979)). We conclude, however, that the debt in question is discharge-able and that the proceedings should have been stayed.

Whether a debt is nondischargeable as being in the nature of alimony, maintenance or support (see 11 U.S.C. sec. 362(b)(2), sec. 523(a)(5) (Supp. III 1979)) is a matter of Federal, not State, law. (In re Harrod (1982), 16 B.R. 711; In re Diers (1980), 7 B.R. 18, 20.) State law may be used to develop Federal standards or to ascertain the incidents or nature of the debt to determine whether it fits within the exception. (In re Hughes (1981), 16 B.R. 90, 92; In re Tilmon (1981), 9 B.R. 979, 987; In re Pelikant (1980), 5 B.R. 404, 407-08.) Federal and State courts have concurrent jurisdiction to determine whether debts are nondischargeable under section 523(a)(5). In re Romeo (1981), 16 B.R. 531, 534; In re Williams (1980), 3 B.R. 401, 403.

Exceptions to the rule of dischargeability are to be narrowly construed in line with the “fresh start” policy of the Bankruptcy Code. (In re Daiker (1980), 5 B.R. 348, 351, 352; In re Netherton (1979), 2 B.R. 50, 53.) The label attached to a decree and the language of the decree are not controlling in determining dischargeability; rather the court must look to the substance of the decree to determine the essential nature of the obligation. In re Smith (1980), 3 B.R. 224, 230.

Property settlement obligations to a former spouse are dischargeable in bankruptcy, while obligations to provide maintenance and support are nondischargeable. (In re LaFleur (1981), 11 B.R. 26, 28-29.) An obligation to hold an ex-wife harmless for certain debts may fall into either category (In re Massimini (1981), 8 B.R. 428, 430), and will be nondischargeable if it is actually in the nature of alimony, maintenance or support. In re Massimini (1981), 8 B.R. 428, 431; In re Miller (1981), 8 B.R. 174, 176; In re Daiker (1980), 5 B.R. 348, 351.

The criteria used to determine which category a given debt falls into include, among others, the nature of the obligation assumed, whether there are children to be provided for, the relative earning power of the spouses, and the adequacy of support absent the debt assumption. (In re Petoske (1982), 16 B.R. 412.) Courts are more likely to find a debt dis-chargeable where its assumption is over and above what is necessary for support and maintenance of the wife and any children (In re Breaux (1981), 8 B.R. 218, 220), where the spouse to whom the debt is owed was, at the time of the decree, young, healthy, employed and without dependents (In re Williams (1980), 3 B.R. 401, 404), where each spouse assumes considerable responsibility for servicing debts on marital property (In re Thompson (1981), 13 B.R. 830, 832), and where the obligation assumed does not terminate on the death or remarriage of the obligee spouse (In re Taff (1981), 10 B.R. 101, 104).

According to such criteria, the debt at issue here is in the nature of a property settlement and should not be excepted from the automatic stay provision of the Bankruptcy Act. The trial court’s decree specifically states that petitioner “is able-bodied, healthy, and currently employed and has those skills necessary to enable her to support herself.” The parties have no children, and the “hold harmless” agreement does not terminate on petitioner’s remarriage. The decree makes the petitioner responsible for all debts relating to the Michigan property and half of the debt to her parents, the latter amount by itself exceeding the total debt to the Bank of Naperville. It is manifest that the decree (and specifically the “hold harmless” provision here) did not constitute an attempt to equalize the spouses’ income or maintain the petitioner in the manner to which she was accustomed as respondent’s wife. In re Hughes (1981), 16 B.R. 90, 92; In re Mineer (1981), 11 B.R. 663, 665; In re Daiker (1980), 5 B.R. 348, 352.

Finally, petitioner argues that respondent’s obligations are nondischargeable because they constitute “willful and malicious injury” to petitioner within the meaning of section 523(a) (6) of the Bankruptcy Code (11 U.S.C. sec. 523(a)(6) (Supp. Ill 1979)). Whatever the merits of petitioner’s argument, we lack jurisdiction to determine whether respondent’s debts are exempt from discharge under this section. Such a determination is committed to the exclusive jurisdiction of Federal bankruptcy courts; a creditor desiring to have his claim held nondischargeable under section 523(a)(6) must file a complaint for such determination in bankruptcy court, or the debt will be discharged. In re Romeo (1981), 16 B.R. 531, 534; 11 U.S.C. sec. 523(c) (Supp. Ill 1979); 3 Collier on Bankruptcy sec. 523.16, at 523 —128 (15th ed. 1981).

The trial court did not rule on the applicability of the automatic stay to the enforcement of respondent’s obligation to pay petitioner’s attorney fees. We believe, however, that considerations of judicial economy justify our disposing of this issue, and hold that the obligation to pay these attorney fees is not exempt from the automatic stay provision of the Bankruptcy Code. Much of our discussion concerning the “hold harmless” provision is applicable here. There is no indication that the award of attorney fees was based on petitioner’s financial need, i.e., that it was necessary for her maintenance or support, and the extent of the burdens assumed by petitioner under the supplemental dissolution decree negates any such inference. The obligation to pay attorney fees would therefore not be in the nature of alimony, maintenance or support under Federal bankruptcy law. See In re King (1981), 15 B.R. 127, 130.

We are aware of several Illinois cases holding that an award of attorney fees in a dissolution proceeding is in the nature of alimony, maintenance or support and thus nondischargeable. (In re Marriage of Pedersen (1979), 77 Ill. App. 3d 716; King v. King (1978), 57 Ill. App. 3d 423; Morrey v. Morrey (1974), 24 Ill. App. 3d 77; see also In re Cornish (7th Cir. 1976), 529 F.2d 1363; Merriman v. Hawbaker (E.D. Ill. 1934), 5 F. Supp. 432.) These cases, however, were decided under the now-defunct rule that whether certain obligations were alimony, maintenance or support was to be determined according to State, not Federal, law. Moreover, the rationale of these cases, that payment of attorney fees springs from the duty of the husband to support his wife, rests on the assumption that attorney fees are granted in accordance with statute (Ill. Rev. Stat. 1979, ch. 40, par. 508, formerly ch. 40, par. 16), i.e., solely upon a finding that the financial resources of the parties are disparate and that payment of attorney fees by one spouse is necessitated by the other spouse’s financial inability to pay. (See In re Marriage of Miller (1980), 84 Ill. App. 3d 931, 935-36; In re Marriage of Sanborn (1979), 78 Ill. App. 3d 146, 152.) Here no such finding was made by the court or even urged by the petition for attorney fees, and such a finding would be inconsistent with the conclusions and obligations of the supplemental dissolution decree.

We thus conclude that the proceedings to enforce payment of attorney fees are not exempt from the automatic stay provision of the Bankruptcy Code, and were stayed by the filing of the bankruptcy petition.

The judgment is therefore reversed and the cause remanded with directions to enter the requested order of stay.

Reversed and remanded with directions.

UNVERZAGT and VAN DEUSEN, JJ., concur.


source: Caselaw Access Project

author: JUSTICE TRAPP

license: Public Domain

text:
    RANDY WOLFORD, Plaintiff-Appellant, v. HOUSEHOLD FINANCE CORPORATION, Defendant-Appellee.—(J. M. TRZASKA, Defendant.)
    Fourth District
    No. 17501
    Opinion filed May 5, 1982.
    Rehearing denied June 7, 1982.

      DePew, Grimes, Chesley, Wilson & Anderson, of Bloomington (George L. Chesley, of counsel), for appellant.
    John P. Schwulst, of Arnold, Gesell, Schwulst & Stevens, of Bloomington, for appellee.
   JUSTICE TRAPP

delivered the opinion of the court:

Plaintiff, Randy Wolford, appeals from an order of the trial court dismissing his two-count amended and supplemental complaint. The action involves a consumer credit transaction. Count I of the complaint was grounded on a theory of fraud, while count II alleged a violation of disclosure provisions of section 16 of the Illinois Consumer Installment Loan Act (Ill. Rev. Stat. 1979, ch. 74, par. 66). Two motions by the parties to strike portions of their respective briefs were ordered taken with the case.

Count I of the complaint alleged that prior to May of 1977, plaintiff delivered a note to defendant in the approximate amount of $4,100. From the date of delivery until May of 1977, plaintiff discharged all of his required obligations and at that time made a lump sum $1,000 payment on the note in consideration for which defendant released a mortgage on real estate owned by the plaintiff. In June of 1977, plaintiff alleges that an agent of defendant, J. M. Trzaska, called upon plaintiff to refinance the loan representing to plaintiff that he would pay less interest once the loan was refinanced. Plaintiff refinanced the note based on this representation.

Plaintiff then concludes that Trzaska’s representation was false and fraudulent because defendant knew that by refinancing plaintiff would pay additional interest expense of $1,000 or more in excess of that which he would have paid had he continued to make payments under the first loan agreement. Plaintiff additionally alleged that this misrepresentation was knowingly and intentionally made and that he justifiably relied upon these misrepresentations to his detriment. Actual damages of $1,000 and punitive damages of $10,000 were prayed for.

Count II of the complaint alleges that defendant violated section 16 of the Illinois Consumer Installment Loan Act (CILA) (Ill. Rev. Stat. 1979, eh. 74, par. 66) by failing to clearly identify the property to which the security interests of defendant attached in the subsequent refinanced note. Plaintiff prayed for damages of $1,429.06 relying upon section 20(b) of CILA (Ill. Rev. Stat. 1979, ch. 74, par. 70).

Separate motions to dismiss the two counts of the complaint were allowed by the trial court and this appeal followed. The issue presented to this court is the sufficiency of the complaint to state a cause of action.

For a complaint to state a cause of action for fraud, it must be pleaded with specificity, particularity, and certainty. The elements which must be alleged inclúde (1) that the party made a representation of material facts as opposed to opinion; (2) that the representation made was untrue; (3) that the party making the representation knew or believed the representation to be untrue; (4) the person to whom the representation was made had a right to rely on it and in fact did so; (5) that the representation was made for the purpose of inducing the other party to act, or to refrain from acting, upon it and; (6) that the representation made led to the injury to the person who relied upon it. (Goetz v. Avildsen Tool & Machines, Inc. (1980), 82 Ill. App. 3d 1054, 403 N.E.2d 555; Lincolnland Properties, Inc. v. Butterworth Apartments, Inc. (1978), 65 Ill. App. 3d 907, 382 N.E.2d 1250.) For purposes of review, defendant, by its motion to dismiss, admitted all facts well pleaded together with all reasonable inferences which can be drawn from those facts. (Denkewalter v. Wolberg (1980), 82 Ill. App. 3d 569, 402 N.E.2d 885.) Nevertheless, such a motion does not admit conclusions of law or conclusions of fact unsupported by allegations of specific facts upon which such conclusions rest. Denkewalter.

With these principles in mind we consider the adequacy of plaintiff’s allegations of fraud. Although plaintiff makes numerous arguments suggesting that each of the aforementioned elements of a cause of action have been stated and defendant, likewise, raises numerous challenges to the sufficiency of the allegations on all material points, we are persuaded that the trial court properly granted the motion to dismiss count I of the complaint for failure to state any facts sufficient to raise a cause of action for fraud. The well-recognized rule is that the facts which constitute an alleged fraud must be pleaded with sufficient specificity, particularity and certainty to apprise the opposing party of what he was called upon to answer. (Pinelli v. Alpine Development Corp. (1979), 70 Ill. App. 3d 980, 388 N.E.2d 943.) To properly allege a cause of action for fraud, the pleadings must contain specific allegations of facts from which fraud is the necessary or probable inference. (Pinelli; Wiersema v. Workman Plumbing, Heating & Cooling, Inc. (1980), 87 Ill. App. 3d 535, 409 N.E.2d 159.) Under this standard, plaintiff’s conclusory allegations of fraud were insufficient to allege a cause of action.

The only “facts” which count I of the complaint discloses are that prior to May 1977 plaintiff delivered a note to defendant, that he fulfilled the terms of the note until May of 1977 when he made a lump sum payment of $1,000 on the note in consideration for release of security, that defendant by its agent called upon plaintiff to refinance the note representing that plaintiff would pay less interest, and that plaintiff did so. There is nothing about these “facts” which would lead one to a conclusion that fraud is the necessary or probable inference.

Plaintiff argues, however, that his allegation that he would pay additional interest expense of $1,000 or more under the refinanced note is a “fact” which is sufficient to allow this case to proceed beyond the pleading stage. We disagree. The allegation concerning excess expense is merely conclusory. Plaintiff does not, for instance, set forth in the pleadings any specific monetary figures which represent his obligations under the original or the refinanced note. Without any delineation of plaintiff’s obligations under the notes, it is impossible to reach a conclusion that any excess expense has been incurred, irrespective of its amount.

As an ancillary matter it should be noted that attached to the complaint, but not otherwise referred to in the body of count I of the complaint, are two notes which purport to be copies, or at least parts thereof, of the original and refinanced notes. While we point out that attachment without specific reference to the identified instrument in the body of the complaint is a violation of section 36 of the Civil Practice Act (Ill. Rev. Stat. 1979, ch. 110, par. 36; Camp Creek Duck Farm, Inc. v. Shell Oil Co. (1981), 103 Ill. App. 3d 81, 430 N.E.2d 385), consideration of the attached notes effectively dispels plaintiff’s contention concerning the additional finance charge. The original note indicates a total finance charge of $1,408.36. The subsequent refinanced note indicates a total finance charge of $714.53. The notes, themselves, belie plaintiff’s claim that refinancing resulted in additional interest charges. Moreover, without any indication, from plaintiff as to the amount of finance charges he had already paid under the original note, it is impossible for defendant to discern what it must respond to in the subsequent litigation.

We disagree with plaintiff’s representation that the amount of excess interest is merely a question of evidence which either is, or is not, susceptible of proof at any later trial. The deficiency in the pleading does not relate to the amount of damages specified. Rather, it relates to the failure to state any facts supporting the legal conclusion that defendant’s actions have resulted in a detriment to plaintiff, namely, that he has incurred excess interest expense, in any amount. Plaintiff has simply not set forth any facts which logically connect up his claim that defendant’s suggested refinancing resulted in excess interest expense.

The problem is vividly demonstrated by consideration of certain computations present in both parties’ briefs which are the subject of respective motions to strike. Included in defendant’s brief as appendixes are a computation of finance charges, purportedly applying to the notes involved in this case; a Consumer Installment Loan Act actuarial formula for computing discount rates; and a letter to an agent of defendant from a supervisor at the Consumer Credit Division of the Department of Financial Institutions stating that the finance charges appearing in the two notes appear to have been correctly calculated.

With regard to this latter communication, plaintiff is correct that this is not part of the record and was not considered by the trial court, and thus may not be considered by this court.

The computations and actuarial table present a different problem. We do not agree with plaintiff that defendant is not entitled to argue, by way of reference to actual computations, that plaintiff has not demonstrated that the refinanced note would obligate him to pay additional interest charges. This would be a proper argument based on any facts which might appear in the pleading. However, we cannot agree that the computations which defendant relies upon are strictly based on the record. Therefore, this court cannot take them into consideration. We also note that this problem is specifically attributable to the lack of facts in the pleadings.

For instance, in the complaint, plaintiff alleges that he discharged all of his obliga.tions on the original note from October 1976 until May of 1977 when he made a lump sum payment of $1,000. Defendant’s calculations are based on the premise that plaintiff made six installment payments on the first note. Since the court must take the allegations of the complaint as true, any calculations would necessarily have to be based on the premise that plaintiff made either seven or eight payments, the period between October when the first installment became due through May, the date plaintiff alleges he discharged his obligations. Since there is an inherent inconsistency between the calculations and the allegations of the pleading, the calculations will not be considered by this court.

Defendant has also moved to strike portions of the plaintiff’s reply brief which relate to plaintiff’s computation of finance charges. An examination of these calculations reveals that plaintiff has based his computation on exactly the same figures relied upon by defendant which are not supported by the facts alleged in the pleadings. Since both sets of figures are premised on monetary amounts which are not supported by the pleadings, they are properly stricken.

In count II of the amended complaint, plaintiff alleges that defendant violated the disclosure requirements of section 16 of the Illinois Consumer Installment Loan Act (Ill. Rev. Stat. 1979, ch. 74, par. 66(m)) by failing to disclose that the refinanced note was also secured by security given to defendant pursuant to the original note.

The original note dated October 4,1976, indicates that the loan was secured by a chattel mortgage, a wage assignment, and a real estate mortgage. The chattel mortgage was a security agreement on household and consumer goods, and the note states that any chattel or real property which secures the loan may secure future or other indebtedness. Specifically enumerated on the original note is an automobile owned by plaintiff.

The second note again states that it is secured by a chattel mortgage. (The real estate mortgage was released in consideration for the $1,000 lump sum payment.) The same automobile is listed on the face of the refinanced note as security. In the portion of the refinanced note wherein specific property can be described, the words “SEE ATTACHED MEMO” appear. No attached memo is present in the record.

Though plaintiff acknowledges that he failed to produce the attached memorandum in his pleading, he nevertheless argues that since the face of the refinanced note does not reveal that the refinanced loan was also secured by the original security agreement, in addition to whatever other security may have been obtained on the second note, defendant did not properly disclose the type of security interest held or retained in connection with the subsequent loan. Section 16 (Ill. Rev. Stat. 1979, ch. 74, par. 66(k) and (m)) provides in pertinent part:

“(k) A description or identification of the type of any security interest held or to be retained or acquired by the licensee in connection with the loan and a clear identification of the property to which the security interest relates, e e e
(m) * * *. At the time disclosures are made, the licensee shall deliver to the obligor a duplicate of the instrument or statement by which the required disclosures are made and on which the licensee and obligor are identified and their addresses stated. All of the disclosures shall be made clearly, conspicuously and in meaningful sequence and made together on either
(i) the note or other instrument evidencing the obligation. Where a creditor elects to combine disclosures with the contract, security agreement, and evidence of a transaction in a single document, the disclosures required under Section 16 shall be made on the face of the document, on the reverse side, or on both sides, provided that the amount of the finance charge and the annual percentage rate shall appear on the face of the document, and, if the reverse side is used, the printing on both sides of the document shall be equally clear and conspicuous,. both sides shall contain the statement, ‘NOTICE: See other side for important information’, and the place for the customer’s signature shall be provided following the full content of the document; or
(ii) One side of a separate statement which identifies the transaction.”

We find plaintiff’s claim to be without merit. A prerequisite to consideration of the terms of a contract is a complete copy of the contract. Without the contract, a court cannot speculate as to its possible provisions or their meaning. Plaintiff has not provided a complete copy of the loan agreement in this case. Furthermore, he has not alleged that he cannot produce the complete document and has not provided any affidavit attesting to such a claim in accordance with section 36 of the Civil Practice Act (Ill. Rev. Stat. 1979, ch. 110, par. 36). Absent a complete copy of the contract, the trial court was left to speculate as to the provisions of the contract. Dismissal for that reason alone was proper and further consideration of plaintiff’s position in that regard by this court is unwarranted. See Schreiber v. Eastern Airlines, Inc. (1976), 38 Ill. App. 3d 556, 348 N.E.2d 218.

Notwithstanding this failure, plaintiff also argues that he was not required to attach these other documents because the Illinois statute requires that all disclosures be made on a single document. Since the security disclosure is not attached on the face of the refinanced note, plaintiff reasons that he has made out a prima facie case for violation of the Illinois statute recited above.

Plaintiff’s reliance upon Gennuso v. Commercial Bank & Trust Co. (3d Cir. 1977), 566 F.2d 437, is misplaced. Gennuso held that Regulation Z incorporated within the Federal Truth and Lending-Law (12 C.F.R. sec. 226.1 et seq. (1977)) requires that security disclosures be made on a single document. In reaching this conclusion, the third circuit pointed to language of the statute, which stated that disclosures were to be made either on:

‘“t> » « tjje note or other instrument evidencing the obligation on the same side of the page and above or adjacent to " * * the customer’s signature’ or on ‘(o)ne side of a separate statement which identifies the transaction.’ ” (566 F.2d 437, 441.)

The Federal court reasoned that references to “the page” and “a separate statement” read literally, indicate that the regulation required the disclosures to be made on one document. Irrespective of the Federal court’s reasoning, this court is not bound by it.

In the first instance, the court in Gennuso was interpreting a Federal statute which plaintiff does not claim defendant has violated. To the contrary, the sole question before this court is an interpretation of the relevant Illinois statute which is substantially distinct from its Federal counterpart.

Section 16(m) (i) (ii) clearly provides that all disclosures shall be made on the note or other instrument evidencing the obligation, including its reverse side under certain conditions or one side of a separate statement which identifies the transaction. To interpret the Illinois act to require disclosures on only a single document would make the second option provided by statute superfluous. Since Illinois law allows the use of a separate document and since the refinanced note affirmatively indicates a separate memorandum was provided and was originally attached to the refinanced note, dismissal of count II of the complaint was proper in light of plaintiff’s failure to incorporate or attach these documents to his pleadings.

For the foregoing reasons, the parties’ motions to strike portions of the briefs are granted and the order of the McLean County circuit court is affirmed.

Affirmed.

GREEN, P. J., and WEBBER, J., concur.


author: JUSTICE KASSERMAN

text:
    THE PEOPLE OF THE STATE OF ILLINOIS, Plaintiff-Appellee, v. MICHAEL ANDREWS, Defendant-Appellant.
    Fifth District
    No. 80-453
    Opinion filed April 6, 1982.

      John H. Reid and John W. McGuire, both of State Appellate Defender’s Office, of Mt. Vernon, for appellant.
    John Baricevic, State’s Attorney, of Belleville (Martin N. Ashley and Gillum Ferguson, both of State’s Attorneys Appellate Service Commission, of counsel), for the People.
   JUSTICE KASSERMAN

delivered the opinion of the court:

After a jury trial in the circuit court of St. Clair County, defendant, Michael Andrews, was found guilty of murder and was sentenced to 60 years’ imprisonment. On appeal defendant contends that: (1) certain photographs depicting defendant reenacting the offense were erroneously admitted into evidence on behalf of the State; (2) the trial court abused its discretion in considering, in aggravation of the offense, that defendant inflicted serious bodily injury upon the victim; and (3) defendant was improperly sentenced to an extended term. Following oral argument before this court, defendant sought leave to raise and brief an additional issue, that (4) the extended-term provisions of the present Illinois sentencing act are unconstitutionally vague. The State having concurred in that request, this court granted leave to both parties to brief the constitutional issue.

The evidence adduced by the State at trial was as follows: Lou Ann Laytham testified that her 16-month-old son, Samuel, was one of about 12 children left in the care of the defendant and an older child, who was 13 years of age. Samuel was in good health when she last saw- him alive. A pathologist who performed an autopsy on Samuel found numerous recent neck injuries including severe bruises, broken bones, and enough blood in the airways to have caused death by asphyxia. The windpipe was crushed. In the pathologist’s opinion, Samuel was alive when these injuries were caused; these injuries were inflicted by a “significant amount of force,” the cause of death being strangulation. A St. Clair County detective testified that defendant admitted that “he sat on the boy with his right leg across his face, his mouth, and used his hand, put his hand around his neck.” The detective asked defendant to explain how he sat on Samuel and drew a figure representing Samuel on two sheets of cardboard stapled together so that defendant might better demonstrate what had happened. When defendant demonstrated, another detective took photographs of the demonstration. Defendant was aware that he was being photographed. Three such photographs were admitted in evidence at trial and accompany the record on appeal. (People’s exhibits Nos. 6, 7, and 8.) Various other photographs were also admitted in evidence but do not accompany this record. These included photographs of Samuel taken just prior to the autopsy. A statement which defendant gave to the detectives and which one detective reduced to writing was read to the jury as follows:

“I was watching T.V. and I got up and went into the kitchen and got a glass of tea. When I got in the kitchen, Ricky and David were horsing around and stomped on my feet and I told them to settle it down, that there were kids sleeping. They went into the dining room. I then sat my tea down on top of the television and went over to the crib and put the nipple back into Katherine E. Andrew’s mouth. Then I went back and sat down to watch T.V. All of a sudden I got up and I wanted to hurt somebody, so I went to the couch and I sat across Samuel and put my leg, right, across his mouth, and put my hands around his throat and thought just how much I hated Mama’s boys. Samuel was on his back and I sat behind him with my legs across him. Still thinking how much I hated Mama’s boys. I squeezed his neck a little bit and he stopped kicking. Samuel went limp and I thought he had just lost his breath. When I got up he wheezed and kicked around a little bit, so I thought he was all right. Then I flipped him over on his belly. This is all — this all happened around one or 1:30 p.m.”

Defendant did not testify in his own behalf. A two-year acquaintance of his testified that defendant’s reputation in the community was that of a nonviolent person. The only other witness called in defendant’s behalf was one of the detectives present when defendant’s statement was taken.

Defendant contends on appeal that People’s exhibits Nos. 6, 7, and 8 were erroneously admitted in evidence contrary to the standard expressed in People v. Crowe (1945), 390 Ill. 294, 303-04, 61 N.E.2d 348, 353, where it was stated: “Photographs of a scene or objects which have been posed or arranged by one party, for the purpose of taking the photograph, in the way or manner sought to be shown are not admissible.” The State now argues that the contention is waived because defendant failed to object on this basis at trial, instead arguing only that the photographs were cumulative. We agree. An objection to evidence, based upon a specific ground, is a waiver of objection on all grounds not specified. People v. Washington (1962), 23 Ill. 2d 546, 179 N.E.2d 635.

Additionally, we find defendant’s contention to be without merit. The photographs were offered and admitted not because they accurately depicted the offense but rather because they accurately depicted a portion of defendant’s statement to the detectives. As such, and together with one detective’s testimony that the photographs accurately portrayed what he saw, the photographs satisfied the primary test of admissibility, (1) relevancy and (2) accuracy. (See People v. Donaldson (1962), 24 Ill. 2d 315, 181 N.E.2d 131; People v. Byrd (1976), 43 Ill. App. 3d 735, 357 N.E.2d 174.) In the instant case, defendant does not contend, nor do we believe, that the trial court erred in permitting the detective to describe defendant’s demonstration of the offense. The photographs in question were a proper visual aid to the jury in understanding that testimony. See People v. Ardella (1971), 49 Ill. 2d 517, 276 N.E.2d 302.

We find that defendant has misplaced his reliance on People v. Crowe and French v. City of Springfield (1976), 65 Ill. 2d 74, 357 N.E.2d 438. In both cases, the evidence was offered by one party to show a demonstration staged by that party to support its theory of the case. In the instant case, the party offering the exhibits is not the party which performed the demonstration. Further, defendant does not contend on appeal that his performance was involuntary or that the photographs are misleading.

Defendant next urges that the trial court erroneously considered, as an aggravating factor in imposing sentence, that defendant caused “serious bodily injury,” contending that such factor is necessarily present in every murder. Defendant argues that the infliction of bodily harm is implicit in every murder and that the legislature has provided what it considers the appropriate punishment for murder. However, defendant’s argument fails to recognize the fact that sections 5 — 5—3.1(a)(1) and 5 — 5—3.2(a)(1) of the Unified Code of Corrections (Ill. Rev. Stat. 1979, ch. 38, pars. 1005 — 5—3.1(a)(1), 1005 — 5—3.2(a)(1)) specify that the sentencing court may take into account in sentencing a defendant both the presence of and the absence of evidence that the defendant caused or threatened serious physical harm to another. The absence of such factor may be considered by the court in mitigation of punishment under section 5 — 5—3.1(a)(1), while its presence may be considered in aggravation of punishment under section 5 — 5—3.2(a)(1). When these two factors are applied to the case at bar, it seems obvious that they were a proper subject of consideration by the trial court. First, did defendant’s conduct neither cause nor threaten serious physical harm? It did because it led to the ultimate physical harm, the death of the victim. Second, since such conduct resulted in the victim’s death, it may be said that defendant’s conduct caused or threatened serious physical harm for the same reason. In this regard, although the consequences are identical, a defendant who tortures his victim to death should expect to receive a more severe punishment than a defendant who did not physically participate in terminating the victim’s life but who is guilty of murder on the theory of accountability. Therefore, we conclude that in a conviction for murder it is not impermissible for the sentencing court to consider the force employed and the physical manner in which the victim’s death was brought about. Cf. People v. Tolliver (1981), 98 Ill. App. 3d 116, 424 N.E.2d 44.

Next, we consider defendant’s contention that the statute permitting a court to impose an extended term of imprisonment, under which defendant was sentenced to 60 years’ imprisonment, is unconstitutional. Under the statute, an extended term of imprisonment for not more than 80 years may be imposed for murder only where the offense is “accompanied by exceptionally brutal or heinous behavior indicative of wanton cruelty.” (Ill. Rev. Stat. 1979, ch. 38, pars. 1005 — 5—3.2(b)(2), 1005 — 8—2(a).) Our legislature utilized the same language in section 5 — 8—1(a)(1) of the Unified Code of Corrections, which authorizes natural life imprisonment. (Ill. Rev. Stat. 1979, ch. 38, par. 1005 — 8—1(a)(1).) In People v. La Pointe (1981), 88 Ill. 2d 482, 431 N.E.2d 344, our supreme court held that that phrase, as used in section 5 — 8—1(a)(1), is not unconstitutionally vague. We find La Pointe dispositive of the instant issue.

Finally, defendant contends that the imposition of an extended term of imprisonment was not appropriate in the case at bar. Defendant urges that the victim’s death resulted from an instantaneous killing, and that, as such, it was not “accompanied” by exceptionally brutal or heinous behavior indicative of wanton cruelty. Again, we find La Pointe dispositive of the issue. In La Pointe the defendant was convicted of the murder of a cab driver during a robbery. As summarized by the supreme court, the evidence regarding the circumstances of the shooting consisted of defendant’s admission to a friend that he shot the driver in the head and police officers’ testimony that they found the victim shot twice in the head from behind. Our supreme court, reversing the appellate court, determined that the trial court had properly imposed a sentence of natural life imprisonment without parole. It does not appear that the behavior “accompanying” the murder in La Pointe was more reprehensible than that occurring in the instant case. We believe the instant offense was at least equally as brutal and heinous as that in La Pointe, in that it involved the senseless strangulation of a helpless infant. In our view, the trial court did not err in imposing an extended term sentence of 60 years’ imprisonment in this case.

For the foregoing reasons, the judgment of the circuit court of St. Clair County is affirmed.

Affirmed.

KARNS, P. J., and JONES, J., concur.


author: PRESIDING JUSTICE KARNS

text:
      In re ESTATE OF HENRY MONROE, Deceased.—(THE PEOPLE OF THE STATE OF ILLINOIS, Plaintiff-Appellant, v. THE FIRST TRUST BANK OF SHELBYVILLE, Ex’r of the Estate of Henry Monroe, Defendant-Appellee.)
    Fifth District
    No. 81-320
    Opinion filed April 6, 1982.

      Tyrone C. Fahner, Attorney General, of Chicago (Kathleen M. Lien, Assistant Attorney General, of counsel), for the People.
    Marshall A. Susler, of Owen, Roberts, Susler & Murphy, P. C., of Decatur, for appellee.
   PRESIDING JUSTICE KARNS

delivered the opinion of the court:

The State appeals from the judgment of the circuit court of Shelby County overruling the objections of the Attorney General to the inheritance tax return filed on behalf of the estate of Henry Monroe, deceased, and affirming the order assessing inheritance tax. On appeal, the State raises the following issues: whether the inheritance tax should be imposed upon the individual receiving property under a settlement agreement rather than the beneficiary taking property under a will; and, alternatively, whether a. charitable exemption should be allowed for the amount of the estate applied to settlement of a will contest where the recipient would not otherwise be entitled to a charitable exemption.

The controversy was adjudicated upon an agreed statement of facts. The decedent’s will was admitted to probate on June 26, 1979. The will provided for the payment of all the debts of the estate and left the residue to the Shelby County American Cancer Society, a registered charity. On December 18,1979, Florence Futch, decedent’s sister and sole heir, filed a contest of the will. Prior to trial of the will contest, Futch and the charity agreed to a compromise. The terms of the compromise provided that Futch would receive $75,000 and certain jewelry appraised at $3,825 in exchange for withdrawal of the will contest. There was no suggestion of collusion between the charity and Futch.

On February 10, 1981, First Trust Rank of Shelbyville, executor of decedent’s estate, filed the inheritance tax return. The return indicated that the entire net estate, $258,603.74, with the exception of expenses and annuities, passed to the Shelby County American Cancer Society and that no tax was due because the charitable exemption applied. Thereafter, the Attorney General filed an objection to the tax return. On April 23, 1981, the court disallowed the objections and found that the amount passing to Futch under the settlement agreement was not taxable. The order assessing inheritance tax was issued on May 12, 1981. The State then appealed this order to the circuit court. On June 19, 1981, the court entered judgment affirming the order assessing inheritance tax. This appeal followed.

The State first argues that an inheritance tax should be assessed against Futch for the amount she received in settlement of the will contest. In substance, the State argues that the inheritance tax should be imposed according to the terms of the compromise, rather than according to the terms of the will because it is more equitable to tax the person who actually received property from the estate. The State’s contention, however, is contrary to the weight of authority.

Section 1 of the Inheritance and Transfer Tax Law provides, in pertinent part, the following:

“A tax is imposed upon the transfer of any property, real, personal, or mixed, or of any interest therein or income therefrom, in trust or otherwise, to persons, institutions or corporations, not hereinafter exempted, in the following cases:
1. When the transfer is by will or by the intestate laws of this State, from any person dying while a resident of the State and having a legal or equitable interest in the property.
111. Rev. Stat. 1979, ch. 120, par. 375.

The Inheritance and Transfer Tax Law imposes a tax on the right of succession and not on the estate. The tax accrues when the property vests, either by the terms of a will or by statutory intestate succession, on the death of the decedent. (People v. McCormick (1927), 327 Ill. 547, 158 N.E. 861; People v. Flanagin (1928), 331 Ill. 203, 162 N.E. 848.) No transfers of estate property by agreement of those succeeding to the estate, among themselves or with others, can affect the tax. In re Estate of Graves (1909), 242 Ill. 212, 89 N.E. 978; People v. Upson (1930), 338 Ill. 145, 170 N.E. 276.

The instant issue was considered by the supreme court in Graves and Upson. In both cases, a sum was paid by the residuary legatees to a will contestant under a settlement agreement. The court held that the sums paid were subject to inheritance taxes and that the taxes were to be assessed against the residuary legatees. The court reasoned that the beneficial interest in the property vested in the residuary legatees on the decedent’s death and that the inheritance tax should be imposed upon the property as it vests.

Here, decedent’s will left the entire residue of his estate to the charity. The estate vested in the charity on the death of decedent and the inheritance tax accrued at the time the estate vested. The settlement agreement between the charity and Futch did not affect the tax. Therefore, in the absence of a charitable exemption, the sums paid to Futch under the settlement agreement would be taxable to the charity as residuary legatee.

The State contends, alternatively, that an inheritance tax should be assessed against the charity for the amount paid to Futch under the compromise. In this regard, the State argues that the exemption provided by section 28 of the Inheritance and Transfer Tax Law (Ill. Rev. Stat. 1979, ch. 120, par. 401) does not apply because the funds were not used for a charitable purpose.

Section 28 of the Inheritance and Transfer Tax Law provides, in pertinent part, the following:

“When the beneficial interests of any property or income therefrom shall pass to or for the use of the State of Illinois or any of its institutions, municipal corporations or political subdivisions for public purposes, any hospital, religious, educational, bible, missionary, tract, scientific, benevolent or charitable purpose, or to any trustee, bishop or minister of any church or religious denomination, institution or corporation, by grant, gift, bequest or otherwise, the same shall not be subject to any such duty or tax, ” °
0 0 e” 111. Rev. Stat. 1979, ch. 120, par. 401.

As the State correctly asserts, tax exemption statutes are to be construed strictly, and the burden of proof is placed on those claiming an exemption. (In re Estate of Schureman (1956), 8 Ill. 2d 125, 133 N.E.2d 7.) Here, it is not disputed that the Shelby County American Cancer Society is a public charity that benefits persons within the State. (See People v. O’Donnell (1927), 327 Ill. 474, 158 N.E. 727.) And, as discussed above, all questions concerning the inheritance tax are to be determined as of the time that the estate vests. (People v. Upson (1930), 338 Ill. 145, 170 N.E. 276.) On the death of decedent, the residuary estate vested in the charity. At that time, the exemption provided by section 28 of the Inheritance and Transfer Tax Law clearly applied. Therefore, we conclude that the later application of a portion of the estate to settle a will contest did not take that amount out of the purview of the exemption statute.

Finally, we note that an inheritance tax would not have been assessed against the charity had it not entered into the settlement agreement with Futch. Futch was the sole heir of decedent, and, if she had been successful in the will contest, then she may have received a greater portion of - decedent’s estate than she received under the compromise. There was no collusion between the charity and Futch or intent to evade the tax. Therefore, we do not believe that the charity should be taxed on the settlement whereby the charity saved the costs of litigation and the possible diminution of the charitable bequest.

Obviously, an argument may be made that a contrary result would be more equitable and in keeping with the general purpose of the Act, which is to tax the privilege of succeeding to the property of a deceased person. Considering the consistent construction placed upon the Act by the courts of this State, we believe any change in the law is properly directed to the consideration of the General Assembly.

Affirmed.

HARRISON and WELCH, JJ., concur.


text:
    JOAN ABBY ROMANIK et al., Plaintiffs-Appellants, v. LURIE HOME SUPPLY CENTER, INC., et al., Defendants-Appellees.
    Fifth District
    No. 80-577
    Opinion filed April 13, 1982.

      Charles C. Hines, of Carbondale, and Gayl S. Pyatt, of Pinckneyville (Twomey and Hines, of counsel), for appellants.
    Pat L. Simons, of Popkin, Stern, Heifetz, Lurie, Sheehan, Reby and Chervitz, of Clayton, Missouri, and Richard F. Nash, of Gundlach, Lee, Eggmann, Boyle and Roessler, of Belleville, for appellees.
   PRESIDING JUSTICE KARNS

delivered the opinion of the court:

This appeal arises from an action brought by the minority shareholders of Lurie’s Home Supply Center, Inc., an Illinois corporation, with a business located in East St. Louis, Illinois, against the corporation, its president and majority shareholder, and one of its directors, officers and legal counsel. Plaintiffs soiight redress for injuries incurred by the corporation as a result of alleged breaches of fiduciary duty involving various transactions and agreements between the corporation and defendants. Plaintiffs further sought to compel declaration of a dividend and for an accounting for any profits received as a result of the alleged wrongful actions. The circuit court of St. Clair County entered judgment granting partial relief. Specifically, the court declared the following to be void: an amendment to the articles of incorporation authorizing the issuance of 10,000 shares of preferred stock; three loans made by the corporation to the Peter Lurie Revocable Trust totaling $70,913.09; and a $5,000 gift to Edna Lurie, Peter Lurie’s widow. The court further awarded plaintiffs $5,000 in attorney fees. Plaintiffs appeal from that order and judgment seeking complete relief as prayed. Defendants cross-appeal, asserting that the portions of the court’s order granting plaintiffs relief were erroneous and seeking a reversal of the order and entry of judgment for defendants, or in the alternative, remandment for new trial.

On January 31, 1958, after existing for some years as a partnership, Lurie’s Home Supply, Inc., was incorporated under the laws of Illinois. Stock was issued to three brothers in proportion to their partnership interests with Peter Lurie receiving 50% (850 shares) and Bernard Lurie and Dan Lurie receiving 25% (425 shares) each.

Dan distributed his 425 shares among his children and his wife, Etta, and they, along with Dan, are plaintiffs in the instant case. Defendants are the corporation, Edna Lurie in her capacity as executrix of Peter Lurie’s estate, and Ronald Lurie as director, officer and legal counsel to the corporation.

It is undisputed that throughout the existence of the business, before and after incorporation, that of the shareholders, only Peter actively participated in management. Peter directed all corporate activity as the company president and chief executive officer and had maintained a profitable enterprise despite the fact that it was located in an economically depressed area, although no dividend was ever declared since incorporation.

Prior to 1974, the board of directors consisted of five members. Peter was a director from the inception of the corporation until his death in 1977. Bernard was a director from 1958 until his death in 1971, at which time his widow, who had succeeded to his stock interest, became a director. Dan served as a director until 1974. On May 30,1974, Bernard’s widow sold her 425 shares to Peter, making him the owner of 75% of the corporation’s stock.

At a special shareholder’s meeting on April 17, 1974, the following were elected to the board of directors: Peter Lurie, Edna Lurie (Peter’s wife), Robert Lurie (Peter’s son), Ronald Lurie (Peter’s son), and Jeffrey A. Rosenblum. Shortly thereafter, Edna Lurie and Jeffrey A. Rosenblum resigned as directors and the articles of incorporation were amended to reduce the board’s membership from five members to three. The newly assembled board of directors, composed of Peter, Robert and Ronald, named Peter as president, Robert as vice-president and Ronald as secretary and legal counsel. Prior to this time, Dan Lurie had served as corporate secretary.

On June 1, 1974, Peter Lurie entered into two agreements with the corporation, a lease and an employment agreement.

In 1968 Peter Lurie purchased the building and underlying property where Lurie’s Home Supply, Inc., is located for $125,000. He purchased the property from a third party from whom the company had leased the premises at an annual rental of 2ii% of gross sales in excess of $41,666.67 monthly after certain adjustments with a minimum of $12,500 per year. From this time until June 1, 1974, Peter leased the premises to the corporation pursuant to an oral agreement. As best we can determine from the record, the terms of the oral lease called for an annual rent of 2¡í% of gross sales in excess of $50,000 monthly with a minimum of $15,000 per year. The aggregate rentals for fiscal years 1975 and 1974 were $32,769 and $26,439, respectively. The corporation, as lessee, paid all utility costs on the leased premises. On June 1, 1974, the corporation entered into a written five-year lease with Peter Lurie as lessor, requiring a fixed monthly rental of $3,000. In addition the company paid all assessed taxes, insurance, maintenance, and utility charges on the leased premises.

On June 1, 1974, the corporation entered into an employment agreement with Peter Lurie, who was then 69 years old. The agreement provided for a five-year term, with an option for renewal exercisable by Peter, paying $54,600 annually, an amount which could be increased but not decreased. This represented a $15,000 increase over Peter’s 1973 salary. The agreement provided for deferred compensation in the event of Peter’s retirement, disability or death. In the event of his retirement or disability, he would receive 60% of his base salary subject to cost of living increases. In the event of his death, the payments would be made directly to his estate. The deferred compensation payments would continue for a period of 10 years. The agreement also contained a provision requiring Peter’s consent before the company declared a dividend.

On December 3,1975, plaintiffs filed a complaint against defendants seeking to have the following declared null and void: the lease agreement between the corporation and Peter Lurie; the salary increase pursuant to the employment agreement with Peter Lurie; and Peter Lurie’s purchase of stock from the estate of Bernard Lurie. The complaint further sought to enjoin the corporation and Peter Lurie from contracting in the future and to compel declaration of a dividend.

On January 25, 1977, a plan to recapitalize the corporation was submitted by the board of directors and thereafter approved by the shareholders. The amended articles of incorporation were properly filed on February 14, 1977. The amendment provided for the authorization of 10,000 shares of callable preferred stock which were subject to the terms and conditions of a consulting agreement to be executed between the corporation and Peter Lurie. The holders of the preferred stock were to receive a dividend preference on the first $1,000 of cash dividends declared and were entitled to one vote per share on any action requiring shareholder participation and approval. The shares contained transfer restrictions limiting the holders to transfer only to lineal descendants. In addition, the amendment eliminated preemptive rights for all classes of corporation stock.

On April 8, 1977, a consulting agreement, as referred to in the February 14,1977, amendment, was presented to the board of directors at its annual meeting. The agreement provided that upon Peter Lurie’s retirement from his employment as president of the company, that he would continue to perform “consulting duties” for the corporation. As consideration for the execution of the agreement and performance of consulting duties, the company would transfer to him 5,000 shares of the newly authorized preferred stock. The agreement further provided that if Lurie failed to perform the consulting duties, that he should forfeit all rights and interest in the 5,000 shares of preferred stock. This agreement was not signed by the company or by Peter Lurie individually.

At the April 8,1977, meeting a resolution was passed authorizing the issuance of the 10,000 shares of preferred stock to Peter Lurie “in consideration for his past services to the company and in order to assure itself of retaining his continuing services as a consultant subsequent to his retirement.” Peter Lurie died on May 16,1977, prior to retiring and, thus, prior to performing any consulting duties. One week after Peter Lurie’s death, the remaining directors (Ronald Lurie and Robert Lurie) authorized a $5,000 death benefit to Peter’s widow, Edna.

On June 3,1977, plaintiffs filed an amended complaint in which they prayed that the recapitalization amendment be declared null and void and that the corporation be enjoined from issuing the preferred stock in accordance with the amendment, or, in the alternative, that the corporation be required to rescind any such issuance.

Between February 16, 1978, and February 8, 1979, the corporation made three loans to the Peter Lurie Revocable Trust of $53,988, $5,571.04, and $11,353.05, respectively, to pay Peter Lurie’s estate taxes. These were short-term loans made on unsecured promissory notes bearing an 8% interest rate. The latter two loans were made while the former remained delinquent and past due.

On February 22,1979, plaintiffs’ final amended complaint was filed. The complaint restated the counts previously filed and further sought to enjoin the corporation from issuing any additional loans to the Peter Lurie Revocable Trust and requesting that the outstanding notes be immediately called for payment. Plaintiffs further prayed for other and further relief as the court deems equitable and proper.

Following trial, the court entered the following order:

“This matter coming before the Court and the Court being fully advised in the premises, does find that the following actions taken by or on behalf of the Defendant, Lurie Home Supply Center, Inc., by its directors, to be contrary to law and the same are hereby declared void:
1. The amendment to the Articles of Incorporation dated January 26, 1977 authorizing the issuance of 10,000 shares of preferred stock;
2. The $5,000 gift made by the corporation to Edna Lurie;
3. The loan of $53,988 made to the Peter Lurie Revocable Trust on February 16,1978;
4. The loan of $5,571.04 made to the Peter Lurie Revocable Trust on February 6, 1979;
5. The loan of $11,353.05 made to the Peter Lurie Revocable Trust on February 8, 1979.
IT IS THEREFORE ORDERED that the Defendants repay to the corporation the sum of Seventy-Five Thousand Eight Hundred Seventy-Eight Dollars and Nine Cents ($75,878.09) instanter, and further that the sum of Five Thousand Dollars ($5,000) be assessed against the defendants as and for reasonable attorneys’ fees incurred in the prosecution of this cause. Judgment is hereby entered in favor of the Plaintiffs and against the Defendants in said sums plus costs of court.”

On appeal, plaintiffs assert that the trial court erred in failing to grant complete relief as prayed. Specifically, plaintiffs assert that all of the transactions, as described above, should be declared null and void and transactions completed should be rescinded with the benefits therefrom to be recouped by the corporation. Plaintiffs further argue that the trial court erred in failing to compel declaration of a dividend and to make an award of attorney fees as requested. In their cross-appeal, defendants assert that the trial court erred in declaring null and void the amendment to the articles of incorporation authorizing the preferred stock, the loans from the corporation to the Peter Lurie Revocable Trust, and the death benefit to Edna Lurie.

Employment Agreement

Plaintiffs assert that in entering into the employment agreement, Peter Lurie breached his fiduciary duty as an officer and director of the corporation in that the agreement amounted to an exploitation of his corporate position to obtain corporate funds and was beyond mere bad business judgment. Plaintiffs challenge the following provisions of the employment agreement: the salary increase, the deferred compensation, and the dividend restriction.

Plaintiffs argue that the salary increase given to Peter Lurie when he was 69 years old was excessive in that there was no possibility that the corporation would get a fair return on its investment. They argue that there are no new duties or expertise involved but only more money; that the salary increase was unnecessary to retain Peter’s services; and that the board of directors should have consulted disinterested advisors for an independent appraisal. Defendants contend that the compensation was reasonable and that the amount was determined after investigation into salaries of presidents of comparable companies. Defendants state that the purpose of the salary increase was to acknowledge Peter’s contribution to the company and to insure continued services.

Whether compensation is reasonable is a question of fact. The factors to be considered in making such determinations include, inter alia, the employee’s ability, quantity and quality of services he renders, the time he devotes to the company, the difficulties involved and responsibilities assumed in his work, the success he has achieved, profitability due to his efforts, the company’s financial condition, and the compensation paid for comparable work by similar companies. (2 F. O’Neal, Close Corporations, ch. 8, at 100-101 (2d ed. 1971).) Although no generally accepted rule exists as to which party bears the burden of proof on the issue of reasonableness of compensation, when self-dealing is involved the recipient of the compensation has the burden. (See Santarelli v. Katz (7th Cir. 1959), 270 F.2d 762.) In the instant case, at the time the employment agreement was entered into, Peter Lurie was a director and officer of the corporation, owned 75% of the corporation’s stock, and the other directors were members of his immediate family. Considering these facts, Peter Lurie bore the burden of showing the reasonableness of the compensation. Implicit in the trial court’s inaction with regard to the employment agreement is a finding that the compensation was reasonable and that defendants had met this burden. Therefore, on appeal, we will reverse that finding only if it is contrary to the manifest weight of the evidence.

In the instant case, defendants presented the expert testimony of a certified public accountant who had directed the audits of the corporation. Hoops, the accountant, testified as to the reasonableness of the compensation for the purposes of allowing a business deduction to the corporation. He further testified as to the tax effects of the compensation and the relevant tax bracket of the corporation to show the actual costs to the corporation. Plaintiffs argue that this testimony lacks probative value and is irrelevant as to the fairness of the employment agreement. While we can find no Illinois case on this issue, we agree with courts of other jurisdictions that have found the effect of taxes on the income of the . individual, as well as on the income of the corporation, is properly to be considered in determining the reasonableness of salaries paid. (See Black v. Parker Manufacturing Co. (1952), 329 Mass. 105, 106 N.E.2d 544; Riddle v. Mary A. Riddle Co. (1948), 142 N.J.Eq. 147, 59 A.2d 599.) To hold otherwise would ignore the practicalities of modern business planning.

Generally, unless the majority shareholders and directors are clearly managing the affairs of the corporation dishonestly or the compensation is so unreasonable as to constitute “waste” or “spoliation”, courts have not substituted their judgment for that of the directors. (2 F. O’Neal, Close Corporations, ch. 8, at 101 (2d ed. 1971).) While we believe that this approach constitutes an exaggerated judicial deference to the business judgment of directors (see Executive Compensation Close Corporations: The Need for a Modified Judicial Approach to the Reasonableness Test, 1972 Duke L. J. 1251, 1253), in the instant case we find sufficient evidence to support the finding of reasonable compensation. It is undisputed that Peter Lurie had devoted his full-time effort to the company for almost 30 years and that the business had prospered despite the fact that it was located in a depressed area. We further note that Ronald Lurie, Peter’s son and the corporation’s legal counsel, testified that the corporation was in the 50% tax bracket and that the actual cost to the corporation was only half of the $54,600 salary because of the determination by the Internal Revenue Service that the compensation was reasonable for the allowance of a business deduction. Therefore, considering the evidence on the whole, the finding of reasonable compensation was not contrary to the manifest weight of the evidence.

Plaintiffs apparently argue that the deferred compensation provision of the employment agreement provided excessive benefits to Peter Lurie or his estate. The substance of the deferred compensation section provided that, upon termination of employment by retirement, disability or death, that Peter Lurie, or his estate, should receive 60% of his base compensation during the year of termination with such salary to continue for 10 years with cost-of-living increases.

In Illinois, corporations have the power to establish deferred compensation plans. (Ill. Rev. Stat. 1979, ch. 32, par. 157.5(g).) A salary continuation agreement is a common feature, in one form or another, of corporate executive compensation. (Galler v. Galler (1964), 32 Ill. 2d 16, 203 N.E.2d 577.) In Galler, the Illinois Supreme Court sustained a five-year salary continuation for the benefit of the widow of a corporate executive against an attack that it was an ultra vires gift of corporate property. The court noted that there were no shareholders, other than the parties to the contract, to complain and thus the objection was inapplicable. However, in the instant case the plaintiffs do have standing to complain; therefore, we must look to the legality of the payments. The legality of pension benefits based in whole or in part on past services has been recognized so long as the benefits “redound to the profitmaking power of the corporation.” The modern trend is to uphold expenditures even though the corporate benefits therefrom are indirect or even conjectured. (2 F. O’Neal, Close Corporations, ch. 8, at 92 (2d ed. 1971).) The following passage from O’Neal seems particularly appropriate to the instant case:

“One of the subtle dangers in a close corporation is the aging of the principal shareholder-officers. The rugged individualists who are responsible for the success of a closely-held enterprise are often reluctant to relinquish control. Any device which encourages their timely retirement is for the ultimate ‘profitmaking’ of the company.” (2 F. O’Neal, Close Corporations, ch. 8, at 93 (2d ed. 1971).)

In the instant case, if Peter Lurie had voluntarily retired or become disabled, the 10-year salary continuation, at 60% of his base pay, would have been a reasonable pension considering his service to the corporation. However, in that Peter Lurie died with the payments inuring to the benefit of his estate, we find the 10-year period to be unreasonable and therefore reduce it to five years.

The final issue raised with regard to the employment agreement involves the dividend restriction. The agreement provides that Peter Lurie’s consent be required prior to a declaration of a dividend. Plaintiffs argue that the provision takes away the legal right of the minority shareholders to have certain business affairs, in this case the payment of a dividend, decided by the board of directors and is therefore invalid. (Ill. Rev. Stat. 1979, ch. 32, par. 157.41.) Defendants contend that, because the deferred compensation benefits are unsecured by collateral, the corporation agreed that it would not pay dividends during the five-year period of the employment contract without Peter Lurie’s consent.

While there may be merit to plaintiffs’ argument as to the invalidity of the dividend restriction, we find it unnecessary to reach that issue as this power was personal to Peter and he has died. The record reveals that there was no occasion in which Peter Lurie was called upon to give his consent to the declaration of a dividend. The only evidence adduced with regard to dividends is that none have ever been declared during the life of the corporation.

Lease

Directors and officers of a corporation occupy a fiduciary relationship with the corporation. This fiduciary position imposes certain duties on the directors and officers in their management of the corporate business which include the duty to exercise prudent care, skill and judgment and the duty to act with undivided loyalty. (Patient Care Services, S.C. v. Segal (1975), 32 Ill. App. 3d 1021, 337 N.E.2d 471.) Where a director or officer transacts business with the corporation, the duty of undivided loyalty requires that the transaction be fair and places the burden of demonstrating fairness on the director or officer. Schlensky v. South Parkway Building Corp. (1960), 19 Ill. 2d 268, 166 N.E.2d 793.

On appeal, plaintiffs argue that the trial court erred in failing to set aside the lease transaction and to order an accounting for profits because defendants did not sustain their burden of establishing the fairness of the lease transaction. We agree.

Initially, we recognize that the lease transaction was an interested director transaction. It is undisputed that Peter was an officer and director of the corporation and dominated its affairs when he, as owner of the property, executed the lease with the corporation. The issue is whether the challenged lease was fair to the corporation when it was executed in 1974. In order to assess the fairness of the lease transaction, it is necessary to consider the following factors: whether the transaction was at market price, the corporation’s need for the property, whether the corporation could have obtained a better bargain in dealing with others, the possibility of corporate gain being diverted by the director, and whether full disclosure was made to the other directors and shareholders. Schlensky v. South Parkway Building Corp. (1960), 19 Ill. 2d 268, 166 N.E.2d 793.

The purchase of the property by Peter Lurie in 1968 and the oral lease to the corporation prior to June 1,1974, are not being challenged by the minority shareholders. It appears that the terms of the oral lease were similar to the terms of the lease from the previous owners of the property. Prior to June 1,1974, Peter leased the building to the corporation for 2}i% of gross sales in excess of $50,000 per month after certain adjustments with a minimum yearly rental of $15,000. According to the terms of the lease with the previous owners, the corporation paid 2¡í% of gross sales in excess of $41,666.67 per month after certain adjustments with a minimum yearly rental of $12,500.

The terms of the 1974 lease, however, differed substantially from the previous lease terms. The rental price was set at $36,000 per year and was no longer contingent on the amount of sales. In addition, the corporation was charged with the payment of all taxes and insurance on the property and the maintenance of the interior and exterior of the building. According to the terms of the lease with the previous owners, the corporation was charged only with any increases in the 1955 taxes and insurance and the maintenance of the interior of the building. Hoops, an accountant with the firm that prepared the corporation’s financial statements, testified for defendants that the net cost, over a four-year period of the new lease, as compared to the old lease, was $25,000 considering the corporation’s incremental tax rate.

The terms of the lease do not indicate perforce overreaching by Peter. The fairness of the transaction, however, cannot be determined in a vacuum. On March 30, 1974, one month prior to execution of the challenged lease, Peter acquired 7535 ownership of the outstanding shares of corporate stock. Ronald, who prepared the lease, testified that the rental price was determined after consideration of the costs incident to relocating, the availability of similar property in East St. Louis and the rental price of comparable properties in East St. Louis. No evidence was introduced, however, as to what the prevailing rental rates for similar properties located in East St. Louis were. Ronald, testifying as a section 60 witness, stated that prior to the execution of the lease, a real estate appraiser valued the property at $41,000. Hoops testified that at the time his accounting firm prepared that year’s financial statement, the firm'had no reason to believe that the rental price was unreasonable. Plaintiffs’ expert, an accounting professor at Southern Illinois University, whose expertise was questionable, testified that a reasonable rental price for property valued at $41,000 would be $12,000 per year. Defendants urge that the opinion stated by plaintiffs’ expert should be discounted because he failed to consider the fact that Peter purchased the property in 1968 for $125,000. The appraisal value at the time the lease was executed, however, is more pertinent to the reasonable rental value than the purchase price six years earlier. It is difficult to comprehend the fairness of Peter’s lease of property valued at $41,000 to the corporation for a yearly rental of $36,000. A fair inference from the evidence presented at trial was that Peter was shifting the burden of his poor investment, in property which had diminished substantially in value, to the corporation, and, thereby, diverting corporate gain for his own benefit.

In his testimony, Ronald stressed the importance of the corporation remaining located at 301 Collinsville Avenue in terms of the goodwill generated from that location for over 20 years and the costs incident to relocating. The corporation’s need for the property, however, does not justify the excessive rental price. The minutes of the special meeting held on April 30, 1974, indicated that the lease was approved and adopted by the board of directors. Dan, the minority shareholder, was no longer a director and was not informed of the terms of the lease prior to its execution. Upon learning of those terms, Dan objected to the lease.

Viewing the evidence as a whole, we conclude that the trial court’s finding that defendants sustained their burden of proving the fairness of the lease is against the manifest weight of the evidence. We hold that defendants breached the fiduciary duty owed to the corporation, and, therefore, must account for profits realized on the lease transaction. On remand, the trial court should determine the fair rental value of the property from the date of the lease, June 1974, to the present.

Preferred Stock Transaction

The trial court ordered that the amendment to the articles of incorporation, authorizing the 10,000 shares of callable preferred stock and eliminating preemptive rights, be declared null and void. On appeal, defendants argue that the transaction was regular on its face and in the best interests of the corporation. Specifically, defendants argue that the amendment benefited the corporation in two primary ways. First, by making the shares subject to the consulting agreement between Peter Lurie and the corporation, it assured itself of retaining Peter’s expertise at no cost to the corporation because no cash payments would be made in return for Peter’s consulting services. Second, by providing the corporation with a tax deduction which would reduce its tax payments it thereby benefited all shareholders. Defendants further note a related concern of continuity of management. Robert Lurie was the only family member, other than Peter, who had been involved in the day-to-day management of the company and, in fact, Robert became president after Peter’s death. Defendants argue that the elimination of preemptive rights benefited the corporation in that the corporation could issue stock to Robert in partial payment for his full-time services thereby minimizing cash outlays. Defendants admit that the authorization and the issuance of the preferred stock would impact adversely on the interests of the minority shareholders in the event of a declaration of a dividend or liquidation of the company.

Defendants cite Kimmel v. Gray (1915), 196 Ill. App. 406, and Hyman v. Velsicol (1951), 342 Ill. App. 489, 97 N.E.2d 122, for the proposition that closely held corporations commonly amend their articles of incorporation to create a new class of stock to serve corporate interests. We agree that a closely held corporation can recapitalize for valid business reasons and, after reviewing the reasons given, we will not interpose our judgment for that of the board of directors in the instant case.

However, we find that the issuance of the 10,000 shares to the Peter Lurie Revocable Trust was improper, and therefore we order divestiture of the shares and a return of them to the corporation to be issued, if at all, for valid consideration. Defendants admit that the preferred shares were restricted and made expressly subject to the terms of the consulting agreement between Peter Lurie and the corporation. The shares were to be consideration for the performance of consulting duties by Peter. Plaintiffs argue, and the record reveals, that the consulting agreement was never signed, Peter never retired and thus no consulting duties were ever performed. Nevertheless, the entire 10,000 shares (the consulting agreement called for 5,000) were issued to the Peter Lurie Revocable Trust. We further note that the consulting agreement contained a clause requiring the forfeiture of the 5,000 shares for failure to perform the consulting duties.

In light of the foregoing, we therefore order that the Peter Lurie Revocable Trust be divested of the 10,000 shares of preferred stock and that the shares be returned to the corporation.

Death Benefit

Shortly after Peter Lurie’s death, the remaining directors (Ronald and Robert) authorized payment to Peter’s widow, Edna, of a $5,000 death benefit. Plaintiffs argue that this is further evidence of defendants’ “oppressive tactics” and was not required by the employment agreement. Although it is not articulated, we assume that plaintiffs are also attacking the payment as ultra vires and a giving away or wasting of corporate assets. The trial court voided the death benefit.

After the death of a corporate executive or other key employee, corporate directors commonly authorize benefits to widows that are not required by the employment contract. (2 F. O’Neal, Close Corporations, ch. 8, at 118 (2d ed. 1971).) O’Neal further states that, in the absence of statutory authorization for such death benefits,

“* 5 * courts should sustain such payments against attacks by minority shareholders, if the payments are reasonable in amount, and the directors have exercised an honest and reasonable business judgment in granting them.” 2 F. O’Neal, Close Corporations, ch. 8, at 119 (2d ed. 1971).

In the instant case, while we recognize that the directors who authorized the death benefit were the sons of the recipient, the amount of the benefit was clearly reasonable. Other than plaintiffs’ argument that the payment was part of an “oppressive scheme,” there is no evidence that the directors did not exercise honest and reasonable business judgment in authorizing payment. Therefore, we find that the trial court erred in voiding the death benefit in that it was duly authorized and reasonable in amount.

Loans

In their cross-appeal, defendants contend that the trial court erred in declaring the loans made by the corporation to the Peter Lurie Revocable Trust void and in ordering defendants to repay the loans. In this regard, defendants initially argue that the trust and trustees were indispensable parties, and, therefore, plaintiffs’ failure to join them requires dismissal of that part of the action based on the loans. We find that the trust and trustees were not indispensable parties. The basis of plaintiffs’ cause of action is that defendants, as officers and directors of the corporation, breached the fiduciary duties owed by them to the corporation. Assuming that the loan transactions constituted a breach of duty, complete relief can be afforded plaintiffs by holding defendants personally liable to the corporation for the amounts of the notes until the notes are repaid by the trust. Therefore, it is unnecessary to declare the loans void and to consider the possibility of affecting the rights of persons not joined as parties to the litigation.

Defendants next argue that the weight of the evidence was that the loans were proper, interest-bearing investments within the lawful discretionary authority of the board of directors. We have examined the several cases cited by defendants in support of the proposition that a corporation has the power to lend money. That a corporation has the power to lend money, however, is not in dispute. The issue is whether defendants breached the fiduciary duties owed to the corporation in causing the three loans to be made to the trust. Directors must exercise that degree of care and prudence that men prompted by self-interest exercise in the management of their own affairs. A director, however, will not be held liable for mere errors in judgment as long as the decision does not involve fraud, illegality or conflict of interest. People ex rel. Illinois Racing Roard v. Blackhawk Racing Association (1979), 78 Ill. App. 3d 260, 397 N.E.2d 134; Shlensky v. Wrigley (1968), 95 Ill. App. 2d 173, 237 N.E.2d 776.

All three promissory notes were issued to the Peter Lurie Revocable Trust for the purpose of paying Peter’s estate taxes. The notes were unsecured. The first note, dated February 16, 1978, was for the principal sum of $53,988 with the interest rate stated at 8% per annum. It was undisputed that the current prime interest rate was 8%. We conclude that the evidence was insufficient to establish that the directors deviated from the requisite standard of care in issuing the first promissory note.

The second and third promissory notes were both issued at 8% interest and were both payable on November 1, 1979. The notes were dated February 6,1979, and February 8,1979, and were issued for the principal sums of $5,571.04 and $11,353.05, respectively. Ronald testified that the interest rates were low and that the current prime interest rate was about 10 or 10M8S. Ronald stated that he had prepared the notes by referring to the first note and had not realized that the interest rate was only 8%. Ronald admitted that issuance of the loans at an interest rate lower than the prevailing interest rate caused harm to the minority shareholders. Although payment on the first note was overdue at the time the subsequent notes were issued, these notes were unsecured. In addition, the terms of the latter two notes were clearly beneficial to the interests of a majority shareholder at the expense of the corporation, and, hence, the directors’ decision involved a conflict of interest. (See 2 F. O’Neal, Close Corporations, ch. 3, at 129 (2d ed. 1971).) Therefore, we hold that the trial court’s finding that the directors breached their duties toward the corporation in issuing the second and third promissory notes was not against the manifest weight of the evidence and these loans should be repaid at the then prevailing interest rate.

Finally, we note that section 42.4 of the Illinois Business Corporations Act provides the following:

“The directors of a corporation who vote for or assent to the making of a loan to an officer or director of the corporation shall be jointly and severally liable to the corporation for the amount of such loan until the repayment thereof.” (Ill. Rev. Stat. 1979, ch. 32, par. 157.42 — 4.)

It was undisputed that the purpose of the loans was to pay Peter’s estate taxes. Peter was a director and officer of the corporation during his lifetime. The loans, however, were made to the Peter Lurie Revocable Trust and not to Peter individually. No evidence was introduced as to the terms of the trust or the beneficiaries under the trust. Therefore, we are unable to conclude that the loans to the trust were, in effect, a prohibited loan to an officer or director. On remand, the court may determine that these were prohibited loans (Ill. Rev. Stat. 1979, ch. 32, par. 157.41b) and that the directors voting for or assenting to these loans are liable as provided in section 42.4.

Dividends

Plaintiffs contend that the trial court erred in failing to compel the board of directors to declare a dividend because legal funds were available and the board’s refusal to declare a dividend was arbitrary and unjustifiable.

The decision concerning the declaration of a dividend where a legal dividend fund is available rests within the sole discretion of the board of directors. Courts are reluctant to interfere with the exercise of the directors’ business judgment unless the withholding is fraudulent, oppressive or totally without merit. Hofeller v. General Candy Corp. (1934), 275 Ill. App. 89.

In support of the argument that the withholding of dividends was oppressive, plaintiffs stress the fact that no dividends have been declared since the time Peter acquired 75% ownership of the corporate stock. This argument ignores the important fact that no dividends have been declared in the history of the corporation.

Ronald testified that there were several business reasons for the board’s decision to not declare dividends. These reasons were as follow: the purchase of a warehouse, the expansion of inventory and the possibility that the company might have to finance its own inventory. We conclude that the trial court’s finding that the directors’ decision to retain earnings was not an abuse of their discretion is supported by the evidence.

Attorney Fees and Punitive Damages

Plaintiffs assert that the trial court erred in limiting recovery of attorney fees to $5,000 where the record reveals such expenses to be in excess of $32,000. Considering the nature and extent of the litigation and the substantial benefit to the corporation, we find the $5,000 to be unreasonably low and therefore, on remand, the trial court should determine and assess reasonable attorney fees. See Ross v. 311 North Central Avenue Building Corp. (1970), 130 Ill. App. 2d 336, 264 N.E.2d 406; Bingham v. Ditzler (1943), 320 Ill. App. 88, 49 N.E.2d 812.

Plaintiffs’ final assertion is that the trial court erred in failing to award punitive damages to plaintiffs in that the actions of defendants evince a fraudulent abuse of discretion, a willful, wanton and malicious breach of fiduciary duty as to justify punitive damages. (Zokoych v. Spalding (1976), 36 Ill. App. 3d 654, 344 N.E.2d 805.) However, in the instant case, we find no actions or circumstances to justify such an award.

Therefore, the judgment of the circuit court of St. Clair County is affirmed in part, reversed in part, and remanded with directions for determinations consistent with the views expressed herein.

Affirmed in part; reversed in part; and remanded with directions.

KASSERMAN and JONES, JJ., concur.