Paulman v. Kritzer

This stockholders' derivative suit was initiated by the plaintiff, Edith Kritzer Paulman, and her sister for the benefit of the defendant Kritzer Radiant Coils, Inc., a Delaware corporation, herein called KRC, against a brother, Henry E. Kritzer, Sr. and others alleging that Kritzer violated the fiduciary duty owed by him to KRC, as an officer and director, and utilized certain corporate opportunities for his own benefit. Plaintiff's sister withdrew from this litigation before evidence was heard. Thereafter testimony was taken before a special master in the circuit court of Lake County, who recommended that defendant Kritzer be held to account for net profits from the purchase and sale of one tract of real estate, and that he be ordered to convey certain other real estate and stock to KRC, subject to certain credits. The trial court approved the findings of the master and entered a decree in accordance with his recommendations. The Appellate Court, Second Judicial District, affirmed the decree (74 Ill. App.2d 284), and we have granted leave to appeal. Kritzer, the owner of 50% of KRC stock, has been president and a director of KRC since 1954. The remaining shares are divided between plaintiff and her sister. KRC manufactured and sold heating equipment in its plant on Lawrence Avenue in Chicago, but was seeking a more desirable location. In 1954, Kritzer personally purchased an unimproved tract of land known as the Ebertt Tract to solve KRC's housing problem. All payments that were made on said tract were made from KRC's funds which Kritzer claimed were advances to him personally. He sold this property in 1957 while still unimproved for a substantial profit, which he personally retained. In October of 1955, Kritzer personally purchased a similar parcel of land adjoining the Ebertt Tract, known as the Bulaw Tract, ostensibly for the same purpose. The down payment and the first two installment payments were made by Kritzer from KRC funds. Kritzer still retains title to the Bulaw Tract.