Question

16.4 Duty of Loyalty Edward Hellenbrand ran a comedy club known as the Comedy Cottage in Rosemont, Illinois. The business was incorporated, with Hellenbrand and his wife as the corporation’s sole shareholders. The corporation leased the premises in which the club was located. Hellenbrand hired Jay Berk as general manager of the club. Two years later, Berk was made vice president of the corporation and given 10 percent of its stock. Hellenbrand experienced health problems and moved to Nevada, leaving Berk to manage the daily affairs of the business. Four years later, the ownership of the building where the Comedy Cottage was located changed hands. Shortly thereafter, the club’s lease on the premises expired. Hellenbrand instructed Berk to negotiate a new lease. Berk arranged a month-to-month lease but had the lease agreement drawn up in his name instead of that of the corporation. When Hellenbrand learned of Berk’s move, he fired him. Berk continued to lease the building in his own name and opened his own club, the Comedy Company, Inc., there. Hellenbrand sued Berk for an injunction to prevent Berk from leasing the building. Who wins? Comedy Cottage, Inc. v. Berk, 495 N.E.2d 1006, 1986 Ill. App. Lexis 2486 (Appellate Court of Illinois)

Answer 1

In this case, Edward Hellenbrand was the owner of the company and he has all the right reserved with him for the lease and other matters. Jay Berk was appointed as a general manager to look after the day to day affairs of the business. Later, he was given 10% of shares and appointed as vice president but he was not the owner of the company he was a shareholder of 10% of his shares. He had ruined the loyalty and taken steps which are not good for the company and not for himself. Hellenbrand will win because he was having 90% of the shares and that too he was the owner of the company. It is a case of clear cheating and Jay Berk will be found guilty with the presence of so many evidences of the lease papers and all other paperwork which will be in the name of Hellenbrand. Hence, Hellenbrand will win.