Hawkins v. Rehfeldt

CONLEY, P. J. In 1951, plaintiff K. C. Hawkins, an Illinois physician and surgeon, defendant Edward J. Rehfeldt, and one Hanson formed a corporation known as Transonic, Inc. to deal in electronic equipment; the three were then the sole owners of the capital stock of the organization. In 1957, [920]Mr Rehfeldt purchased the stock previously owned by Hanson, and in 1958, the stock of the plaintiff, Hawkins. The latter sale was accomplished on January 11, 1958, in Las Vegas, Nevada. Each of the two parties had his attorney with him in Las Vegas, but at the time of the execution of the agreement here in question the stockholders were alone, the attorneys not being in the room. The record indicates that Dr. Hawkins was then paid $7,000 for all of his stock, and that, in addition, Mr. Rehfeldt executed and delivered to Dr. Hawkins the following writing: “I, Edward J. Rehfeldt herewith agree that if in the next fifteen years, I sell fifty per cent or more of Transonic Inc. stock of which I am sole owner, I will pay Dr. K. 0. Hawkins or his heirs One Hundred Thousand dollars, if I sell Transonic stock for more than Two Hundred Thousand Dollars. Dr. Hawkins One Hundred Thousand dollar value will be paid less the capital gains tax on that amount.”

The trial court found that the contract in question was executed as part of the consideration for the purchase of Dr. Hawkins’ stock.

As a result of buying out his fellow stockholders, Mr. Rehfeldt owned all of the issued shares of Transonic, Inc. stock in 1958. After that time, by his adoption of the razzle-dazzle of commercial exploitation by stock splits and bonus payments, he mathematically expanded his identical stock into more than 200,000 shares of Transonic, Inc. stock. From time to time, he thereafter sold several blocks of the stock for a total of $161, 908.35; then, in 1962, Transonic, Inc. consolidated with Jamieson Laboratories, Inc. to form a new corporation known as Jamieson Industries, Inc. Rehfeldt testified that this was actually necessitated because a creditor bank called a $150,000 note, and that there was no alternative to such consolidation except bankruptcy. The consolidation as spelled out by the testimony of an attorney who had been secretary of Jamieson Laboratories, Inc., was effected pursuant to statute, the plan being that the two constituent corporations would go out of existence and a new corporation spring into being as the ‘‘ resulting corporation. ’ ’

Thereafter, in 1964, Rehfeldt sold some 5,500 shares of Jamieson Industries, Inc. stock from the sale of which he secured $18,000 or $19,000. As a result of the consolidation, Rehfeldt received what were said to be 119,000 shares of Jamieson Industries, Inc. in exchange for his 200,000 shares of Transonic, Inc.