Sharps v. Stein

• Decision Date: 07 November 1980
• Docket Number: No. 79-1739,79-1739
• Citation: 90 Ill.App.3d 435,45 Ill.Dec. 742,413 N.E.2d 75
• Parties: , 45 Ill.Dec. 742 Jason SHARPS and Ben A. Borenstein, Plaintiffs-Appellants, v. Seymour STEIN and Lester Stein, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 75

413 N.E.2d 75

90 Ill.App.3d 435, 45 Ill.Dec. 742

Jason SHARPS and Ben A. Borenstein, Plaintiffs-Appellants, v. Seymour STEIN and Lester Stein, Defendants-Appellees.

No. 79-1739.

Appellate Court of Illinois, First District, Fifth Division.

Nov. 7, 1980.

[45 Ill.Dec. 744] Block, Levy & Becker, Chtd., Chicago, for plaintiffs-appellants

William P. Rosenthal and Ross P. Benjamin, Chicago (Rosenthal & Schanfield, Chicago, of counsel), for defendants-appellees.

MEJDA, Justice:

Plaintiffs, Jason Sharps and Ben A. Borenstein, filed a two-count amended complaint against defendants, Seymour Stein and Lester Stein, relative to a joint venture undertaking. In Count I Sharps sought an accounting, a certified audit, and judgment for a proportionate return of the compensation received by the Steins contrary to the venture agreement. In Count II Borenstein additionally sought an adjudication that his acceptance and release as to Steins' compensation was null and void. Steins' motion to dismiss the amended complaint as insufficient in law was granted. Sharps and Borenstein have appealed. We affirm.

The amended complaint contains the following pertinent allegations:

Count I : On July 10, 1970, Sharps and Borenstein entered into a joint venture agreement with the Steins and others regarding the construction, ownership and management of Americana Towers Apartments, a 32-story apartment building. Initially, Sharps and Borenstein each owned a 21/2 percent interest in the assets and net profits and losses. The Steins each owned 34 percent and were designated and acted as "managing venturers." Thereafter, additional investors were permitted to become venturers. Ultimately, the interest of Sharps and Borenstein was reduced to 1.88 percent each and the Steins to 16.84 percent each.

The apartment complex was erected and operated pursuant to the venture agreement until its sale in 1978. On September 26, 1977, the Steins, by letter to the venturers, advised of a proposed sale of the property for $15,000,000 to CMS Realty Corporation. It stated that if consummated the joint venture would incur certain expenses, including broker's commissions and finders' fees of $375,000 payable in equal portions of $125,000 each to Draper & Kramer, Lester Stein and Seymour Stein. A letter of October 5, 1977, contained a projected distribution of the proposed sale proceeds for expenses and to the venturers. It set forth that Steins additionally claimed an item of $250,000 (other than the finders' fee) for funds advanced to the venture over the past years and a further item of $110,000 as a balance of unpaid compensation for services during the construction period. By letter dated October 11, 1977, Sharps objected to the payment of any amount contrary to the venture agreement, denied any prior agreement of the venturers to pay the $110,000 claimed, and acknowledged that the $250,000 allegedly advanced was to be satisfactorily documented by the accountants. ¹

Following the sale, on December 22, 1978, the Steins by letter submitted a proposed distribution of all of the cash held by the venture except for a $100,000 contingency retention. Distribution was expressly conditioned upon return of an executed copy of the letter to indicate approval of the accounting and distribution, and also acknowledging fulfillment of any and all obligations of the "managing partners." Attached was a financial statement as of November 30, 1978, "prepared from the books without audit" by certified public accountants which concluded "Due to the limited scope of our engagement, we are unable to express an opinion on these statements." The financial statement did not disclose whether the Steins had paid themselves the claims for additional compensation.

All of the venturers were paid their distributive shares in January 1979 except Sharps, who had objected to executing the letter of approval and release. Subsequent to the filing of the original complaint, Steins paid him $46,417 without prejudice to Sharps' remaining claims for relief.

The aforementioned joint venture agreement, financial statements and correspondence were attached as exhibits and incorporated by reference in Count I. Sharps prayed for an accounting by the Steins for all compensation or remuneration received by them without his consent and contrary to section 8 of the agreement, for judgment on the accounting, and for a certified audit which would include the sale, distribution of proceeds, and all compensation paid to Steins at any time as provided by section 7 of the agreement.

Count II : Borenstein adopted the allegations and exhibits alleged in Count I, omitting only the paragraphs alleging Sharps' rejection of the letter of approval and release. He instead alleged receipt of his proportionate share of the sale proceeds remaining after retention and payment by Steins to themselves of the disputed $360,000, after executing the approval and release; that without its execution no venturer including him would have received any of the proceeds; and that the approval and release as to Steins' compensation is null and void in that the instrument is without consideration, a breach of Steins' fiduciary duties, contrary to section 8, and executed under duress upon threats that no funds would be disbursed to any venturer unless and until executed. Borenstein prayed that the release be declared null and void; that Steins account and provide a certified audit for 1977, 1978 and 1979, including the compensation received by Steins; and judgment on the accounting.

Steins filed a motion to dismiss the amended complaint as insufficient in law pursuant to section 45 of the Illinois Civil Practice Act. (Ill.Rev.Stat. 1977, ch. 110, par. 45.) The court granted the motion and dismissed the amended complaint with prejudice. This appeal followed.

OPINION

I.

The central question presented for review is whether the amended complaint sufficiently states a cause of action to withstand the motion to dismiss.

The motion admits all facts well pleaded and the reasonable inferences which may be drawn therefrom are taken as true for the purposes of the motion. (Giers v. Anten (1978), 68 Ill.App.3d 535, 539, 24 Ill.Dec. 878, 386 N.E.2d 82, 85; Horwath v. Parker (1979), 72 Ill.App.3d 128, 134, 28 Ill.Dec. 90, 390 N.E.2d 72, 77; Courtney v. Board of Education of the City of Chicago (1972), 6 Ill.App.3d 424, 425, 286 N.E.2d 25, 26.) The attached exhibits are an integral part of the complaint and must be so considered. (Fowley v. Braden (1954), 4 Ill.2d 355, 360, 122 N.E.2d 559, 562.) A reviewing court should interpret the facts alleged in the complaint in the light most favorable to the plaintiff. (Farns Associates, Inc. v. Sternback (1979), 77 Ill.App.3d 249, 32 Ill.Dec. 722, 252, 395 N.E.2d 1103, 1105; Cipolla v. Bloom Township High School Dist. No. 206 (1979), 69 Ill.App.3d 434, 437, 26 Ill.Dec. 407, 388 N.E.2d 31, 34.) Additionally, the complaint should not be dismissed unless the pleadings disclose that no set of facts could be proved that will entitle the plaintiff to relief. (Agee v. First National Bank of Maywood (1979), 68 Ill.App.3d 794, 25 Ill.Dec. 435, 386 N.E.2d 899; Patton v. T.O.F.C., Inc. (1979), 79 Ill.App.3d 94, 98, 34 Ill.Dec. 638, 398 N.E.2d 313.) In sum, the pleadings are to be liberally construed with the view of doing substantial justice between the parties. Ill.Rev.Stat. 1977, ch. 110, par. 33(3).

II.

Sharps contends that section 8 of the venture agreement requires the unanimous approval of all of the venturers to authorize the payment of compensation to the Steins as joint venturers. Steins maintain that the general requirements as to compensation were modified by the express terms of the venture agreement.

A joint venture is an association of two or more persons to carry out a single enterprise for profit. (Smith v. Metropolitan Sanitary District of Greater Chicago (1979), 77 Ill.2d 313, 318, 33 Ill.Dec. 135, 396 N.E.2d 524.) When a joint venture is found to exist, the legal principles pertaining to the relationship between partners govern. (Burtell v. First Charter Service Corp. (1979), 76 Ill.2d 427, 438, 31 Ill.Dec. 178, 394 N.E.2d 380, 384; Smith.) The duties and obligations of partners arising from their written agreement are concisely stated in SRI Corp. v. First National Bank of Rock Island (3rd Dist.1979), 75 Ill.App.3d 350, 355, 30 Ill.Dec. 940, 393 N.E.2d 1287, 1291-92, quoting 59 Am.Jur.2d Partnership § 33, at 956 (1971):

"The duties and obligations of partners arising from a partnership relation are regulated by the express contract as far as they are covered thereby. While a written agreement is not necessary, where it does exist it constitutes the measure of the partners' rights and obligations. The written agreement, or 'partnership articles' as it is usually called, may include practically any provision desired. And while the rights and duties of the partners in relation to the partnership are governed by the Uniform Partnership Act, the Uniform Act also provides that such rules are subject to any agreement between the parties."

The venture agreement includes the following pertinent provisions (emphasis added):

"Section 8. Venturers' Compensation. No salaries, fees, commissions or other compensation shall be paid to any Venturer by the Venture for any services rendered to the Venture, or in connection with its business, affairs, operations, assets or property, except as shall be agreed upon by Venturers.

Section 9. Management. Except as otherwise expressly provided herein, all questions relating to any and all of said Property and other assets of the venture and to the operation and conduct of the Venture, including without limitation, the purchase or other acquisition, improvement, use, sale, lease, operation, management, mortgage, withdrawal, distribution or other disposition (herein collectively referred to as 'management') of any part or all of said Property and...