Glasser v. Essaness Theatres Corp.

• Decision Date: 04 February 1952
• Docket Number: Gen. No. 45370
• Citation: 346 Ill.App. 72,104 N.E.2d 510
• Parties: GLASSER et al. v. ESSANESS THEATRES CORP. et al.
• Court: United States Appellate Court of Illinois

Page 510

104 N.E.2d 510

346 Ill.App. 72

GLASSER et al. v. ESSANESS THEATRES CORP. et al.

Gen. No. 45370.

Appellate Court of Illinois, First District, First Division.

Feb. 4, 1952.

As Modified on Denial of Rehearing Feb. 18, 1952.

Johnston, Thompson, Raymond & Mayer, Chicago, for appellants.

Rosenberg, Stein & Rosenberg, Chicago, (Samuel W. Block, Edward E. Lynn, Joseph Rosenberg, Merwin S. Rosenberg, and Aaron L. Stein, all of Chicago, of counsel), for cross-appellant.

Edward Blackman, J. Frederick Hoffman and John B. Angelo, all of Chicago (Ode L. Rankin, Chicago, of counsel), for appellees.

NIEMEYER, Justice.

Plaintiffs and defendant-counterclaimant appeal from a decree entered after hearing by the chancellor, dismissing for want of equity the complaint and counterclaim seeking, with other relief, the declaration of a constructive trust in certain real property in the Chicago Loop alleged to have been purchased by defendant Essaness Theatres Corporation, hereinafter called Essaness, in violation of its fiduciary obligations as agent of appellants and defendant Velma Silverman, copartners in the management and operation of the Woods Theatre. June 18, 1951 the decree was reversed and the cause remanded by a divided court, Mr. Justice TUOHY writing the opinion and Mr. Justice FEINBERG concurring. On the same day Justices BURKE and FRIEND succeeded Justices TUOHY and FEINBERG as members of the court. July 19, 1951 within the time as extended by this court as now constituted, defendants filed a petition for rehearing. September 17, 1951, a rehearing was granted by a divided court, Mr. Justice FRIEND dissenting. Thereafter, on October 5, 1951, in their answer to the petition for rehearing, plaintiffs for the first time objected to the participation of Justices BURKE and FRIEND in passing on the petition. On the oral argument on rehearing they conceded the right of the justices to act but questioned the policy of acting.

Plaintiffs Altschuler, Melvoin and Glasser are, respectively, the wives of the three partners of Altschuler, Melvoin & Glasser, certified public accountants and the auditors for Essaness from 1931 to the filing of this suit, November 12, 1949. Plaintiff James Booth is an employee of Essaness and the husband of plaintiff Ruth G. Booth. Defendant and counterclaimant Stern is the wife of Emil Stern, an officer and stockholder of Essaness until 1945, and thereafter an executive of the corporation until January 1950. She admits the allegations of the complaint and by her counterclaim seeks the same relief that plaintiffs ask. Defendant Velma Silverman is the wife of defendant Edwin Silverman, president and sole stockholder of Essaness. Defendant Blackman is vice-president and attorney for Essaness. Defendant Woods Amusement Corporation was organized to take title to the property involved herein and is wholly owned by Essaness.

The property in question is improved by a ten-story building which contains ground-floor stores, offices, and the Woods Theatre. July 31, 1942 The Association of Franciscan Fathers of the State of Illinois, hereinafter referred to as Franciscans, purchased the fee and the lessors' interest in outstanding leases. The next day, August 1, 1942, they leased the theaftre portion of the building to the Woods Theatre Corporation, then owned by Sidney M. Spiegel, Jr., and Silverman, for fourteen months, expiring September 30, 1943. This lease was subsequently transferred to Spiegel and Velma Silverman, each having a one-half interest. They operated the theatre as a partnership. December 23, 1942 each sold a 12 1/2 per cent interest in the lease and partnership to Emil Stern, who transferred the interest thus acquired to his wife December 31, 1942. April 2, 1943 a lease from May 1, 1943 to April 30, 1946 was executed. This lease was superseded by a lease dated April 26, 1943 for the same period. Each of these leases gave the lessor an option to terminate the lease upon 60 days' written notice should it require the premises for ecclesiastical purposes--a fact to be determined in its sole discretion. November 5, 1943 Spiegel transferred his 37 1/2 per cent interest to plaintiffs herein in the following proportions: James Booth, 2 per cent; Ruth G. Booth, 5 1/2 per cent; Glasser, 10 per cent; Melvoin, 10 per cent; and Altschuler, 10 per cent. Velma Silverman and Minnie Stern retained their respective interests of 37 1/2 per cent and 25 per cent. These interests remained fixed during the transactions under consideration. On the same day the lessees formed a partnership, known as 'Woods Theatre, Not Incorporated', hereinafter called 'Woods partnership', for the operation of the theatre. The capital consisted of the lessees' interest in the lease of April 26, 1943, and $5,000, contributed by the partners in proportion to their respective interests in the lease. The term of the partnership was 'to and including April 30, 1946, or to such other date as the Woods Theatre lease may hereafter be extended.' On the same day the partners entered into an agreement with Essaness whereby the latter agreed 'to manage and supervise the operation of the Woods Theatre for and on behalf of second parties (partners) from the date hereof until April 30, 1946 (unless the lease should be sooner terminated) and during the term of any extension of the Woods Theatre lease,' on the terms and conditions specified therein. At the time this suit was started Essaness was receiving $500 a week for its services. The annual income from the theatre rose from $167,473.94 for the year 1943 to a maximum of $302,431.86 in 1947. In 1948 the income was $232,831.51.

Two more leases between the Franciscans and the partners were executed. By the lease dated December 31, 1943, for a term beginning January 1, 1944 and ending April 30, 1949, the lessor reserved an option to terminate the lease on April 30th in 1946, 1947 or 1948 by giving written notice on October 31, 1945, 1946 or 1947 respectively, and by payment of designated sums of money should the lessor in its sole discretion determine that it required the premises for ecclesiastical purposes. By the second lease, dated December 30, 1944, for a term beginning January 1, 1945 and ending April 30, 1951, the lessor reserved an option to terminate the lease on April 30, 1947 by giving written notice on or before October 31, 1946 of its intention to terminate the lease and by paying $23,333.33, provided lessees delivered up possession by April 30, 1947, and, to terminate the lease on April 30, 1948, 1949 or 1950 by giving written notice of intention so to terminate the lease on or before December 31, 1947, 1948 or 1949, respectively without payment of any money or other consideration and without a determination of the need of the premises for ecclesiastical purposes. The lessees paid a bonus to procure each of these leases.

Spiegel died in September 1944. Silverman acquired his stock in Essaness. In December 1945 he acquired the stock of Emil Stern. He became and remained the sole stockholder of Essaness. None of the partners of the Woods partnership took any part in the conduct of its business. The management of the partnership was left to Silverman and Stern, representing their respective wives, and Glasser, who acted for those who acquired the Spiegel interest. Glasser, a witness for plaintiffs, testified that he carried on all negotiations for the purchase of Spiegel's interest in the lease and former partnership after Silverman and Stern indicated they did not desire to purchase it; that until April 26, 1949 there had not been a meeting of the partners; that he, Stern and Silverman met many times and discussed partnership matters; that all negotiations for the partnership with the Franciscans and their agent Nash for a renewal or extension of the leases were carried on by Spiegel in his lifetime, and thereafter by Stern and Silverman; that prior to an extension of a lease he would discuss the terms of the extension with Silverman and Stern. Stern, called on behalf of his wife, hereinafter included in the appellation 'plaintiffs', adds that he sat in with Spiegel on the various renewals of the lease, and after Spiegel's death carried on the negotiations; that he did not think Silverman ever negotiated independently of him for renewals of the lease; that he believed Silverman was acting for the partners in approving the lease of December 31, 1943. Plaintiffs allege that continuously since November 5, 1943, Essaness has been and now is managing and supervising the operation of the Woods Theatre on behalf of the partnership, and among other things, negotiating for the theatre lease and renewals thereof. These allegations are admitted. Plaintiffs further allege that from 1945 to the latter part of 1948 the negotiations with the lessor for the removal of the lease were carried on 'for the partnership by Emil Stern, * * * an employee of Essaness and the husband of defendant Minnie Stern.' They further allege that 'in November 1948 Stern left Chicago for an extended stay in California. Prior to leaving he discussed the pending negotiations with Silverman and requested that in his absence Silverman in behalf of the partnership take over and follow up such negotiations with Nash for a renewal lease, to which request Silverman agreed.' Stern went to California in the early part of November 1948. He returned to Chicago in January 1949 and remained about three weeks. He then went back to California where he stayed until April 4, 1949. Silverman negotiated with Nash for the renewal of the lease after April 30, 1951. January 21, 1949, Nash wrote Silverman that the 'time was not ripe to make any suggestions regarding a lease.' This letter was shown to Stern within five days of its receipt. About February 28, 1949, Silverman and Nash had a talk, when, as plaintiffs say in their brief, 'Mr. Nash told Mr. Silverman flatly that no lease would be given on the property by the...