Stoia v. Miskinis

• Decision Date: 02 June 1941
• Docket Number: No. 1.,1.
• Citation: 298 Mich. 105,298 N.W. 469
• Parties: STOIA et al. v. MISKINIS et al.
• Court: Michigan Supreme Court

298 Mich. 105

298 N.W. 469

STOIA et al.

v.MISKINIS et al.

No. 1.

Supreme Court of Michigan.

June 2, 1941.

Suit by Joseph Stoia and others against Joseph Miskinis and others for specific performance of a covenant. From an adverse decree, defendants Philip Gorelick and others appeal.

Remanded, with directions.

Appeal from Circuit Court, Wayne County, in Chancery; Guy A. Miller, judge.

Argued before the Entire Bench.

Beckenstein & Beckenstein and Paul J. Wieselberg, all of Detroit (Louis H. Fead, of Detroit, of counsel), for appellants.

Louis J. Colombo and Anthony A. Vermeulen, both of Detroit, for appellee.

BOYLES, Justice.

This case is a bill in chancery for specific performance of a covenant by the vendors in a buy-and-sell agreement, not to compete against the vendees therein, by ‘owning, operating or managing theatres' for a certain period and within a certain area. The suit was started July 1, 1940, by Joseph and Victoria Stoia against Joseph and Mary Miskinis, their son Joseph, Jr., and Philip Gorelick. Since that time other parties plaintiff and defendant have been added as will appear later. Complexity of the facts in the case makes an extended statement necessary.

Joseph and Victoria Stoia and Joseph and Mary Miskinis were associates (by means of a closed corporation) in owning and operating the Midway and Circle theatres in Detroit. They were quite successful in these ventures. In August, 1939, certain differences having arisen, the Stoias filed a bill in equity for a dissolution and accounting. When the case came on to be heard before Circuit Judge Guy A. Miller, the parties agreed that they would resolve their differences by having a sale of the assets, each party to bid therefore. Judge Miller, in the presence of all the parties and their attorneys, dictated a buy-and-sell agreement which was signed in open court by the parties, and which provided in substance that the parties were to submit alternate bids for the two theatre properties and the one who ultimately submitted the highest bid should become the owner. This agreement contained the following covenant: ‘The vendors at said sale agree that they will neither directly nor indirectly in any manner whatsoever enter into the business of owning, operating or managing theatres for the term of five years after said date, within a circuit of four miles from the location of either of said theatre properties. This agreement shall be construed as broadly as possible to cover every connection of any sort whatsoever with any form of theatre enterprise within said territory during said period.’

On February 16, 1940, the same day the agreement was signed, the parties went into court and the sale was held as agreed, in open court. The Stoias became the owners of the properties by reason of submitting the highest bid. The restrictive covenant thereby became effective against. the Miskinises as vendors.

In December, 1939, and January, 1940, Mrs. Miskinis had purchased 10 contiguous lots within the area now covered by the restriction, for $8,000, the deeds being taken in her maiden name. On the last day of February two more nearby lots were purchased by her in the name of Margaret Forest for $1,200, and during the spring of 1940 other nearby lots in the same restricted area were bought by the Miskinises. The purpose in using the maiden name of Mrs. Miskinis and the name ‘Margaret Forest,’ and the delay in recording the deeds, was claimed to be to avoid a rise in prices against the purchase of other adjacent lots. The purpose of the Miskinises in buying these lots was to put their only son, Joseph Miskinis, Jr., into the theatre business. Joseph, Jr., was then a 23-year old student about to graduate from college. In March, 1940, Joseph Miskinis, Jr., prepared a sketch of a theatre and in April he submitted it to an architect to prepare plans. On April 6th a contract was entered into between Joseph, Jr., and the architect to prepare plans, calling for payment of $1,100. The obligations of Joseph, Jr., under this contract were paid by him from money given to him by his parents. On April 13th, $500 was given to him, and, on May 23rd, $300 more was given. On June 22, 1940, $49,200 was given to Joseph, Jr., by his parents, making the total gift $50,000. This money was intended for construction of a theatre to set Joseph, Jr., up in business.

Philip Gorelick had been known to both Stoia and Miskinis since 1928 at which time he had built a theatre for them. In January of 1940, he had tried to interest Miskinis in a certain theatre site. Miskinis, Sr., in May, 1940, told Gorelick about Joseph, Jr., having an architect prepare plans for a theatre and asked him to submit an estimate of the construction cost. The plans were completed in June, 1940, and Gorelick then made a bid of $150,000 for constructing the theatre. This price, together with the fact that the Miskinises were contemplating a $170,000 theatre venture of their own, made in necessary to secure financial aid for Joseph, Jr., and Gorelick was accordingly invited to becomea partner in the new theatre venture. It was to be known as the Carmen theatre and was to be erected on some of the vacant lots owned by Mrs. Miskinis within the area restricted by the covenant.

On June 24, 1940, a partnership agreement was entered into by Gorelick and Joseph Miskinis, Jr., whereby, among other provisions, it was agreed:

(1) Joseph, Jr., was to contribute $50,000; Gorelick was to contribute 12 lots-secured from Mrs. Miskinis in a trade-worth $9,200, and his time, effort and experience in the operation of a theatre;

(2) The partnership was to contract with Gorelick as the builder for the construction of the theatre-the profit from which was to belong solely to Gorelick;

(3) The parties were to have equal interests;

(4) Gorelick was to arrange for a mortgage, or finance the balance personally.

A construction contract was entered into between the partnership and Gorelick individually, executed on the same day, which provided that the cost was to be $147,000. Joseph, Jr., deposited $50,000 in a partnership account in the names of Philip Gorelick and Joseph Miskinis, Jr. Philip Gorelick secured the 12 lots from Mrs. Miskinis by trading other real estate for them and then deeded the 12 lots to the partnership.

On June 26th, Mrs. Miskinis' deeds as grantee of the lots comprising the new Carmen theatre site, together with her deed to Philip Gorelick and the deed from him and his wife to the partnership, were recorded. A sign was erected near the premises advising the public of the construction by Gorelick and Miskinis, Jr., of a theatre thereon; and on June 28th excavation was begun. The next day (June 29th) Stoia discovered it and was informed by Gorelick that he was building a theatre. Gorelick until then had no knowleged of the covenant between the Miskinises and the Stoias restricting the Miskinises from being interested in a theatre at this location.

On July 1st, the bill was filed by the Stoias against the elder Miskinises, Joseph Miskinis, Jr., and Gorelick and an ex parte injunction secured restraining the construction. Answers of the then defendants were filed together with a motion to dissolve the injunction which was denied.

Gorelick, being desirous of continuing with the construction, then sought financial aid from others. He induced Ben J. Marshall (now a defendant) to invest $25,000. This will be referred to later.

On July 19th, Joseph Miskinis, Jr., decided to drop out of the venture. On July 26, 1940, a dissolution agreement was entered into between Gorelick and Joseph, Jr., whereby the lots were reconveyed by the partnership to Gorelick who also got the plans, excavation and other assets, the bank balance of $46,250 was given back to Joseph, Jr., and mutual releases were given. Joseph, Jr., has since retained this money, losing $3,750 in the venture. Plaintiffs claim the Miskinises still have an interest in the venture by reason of Joseph, Jr.'s failure to recover his entire investment. Plaintiffs ignore the fact that mutual releases of all liability were exchanged by Gorelick and Joseph, Jr., in the dissolution. Joseph, Jr.'s, failure to recover the $3,750 from the venture falls short of proving that the Miskinises still have an interest in the property or business of the Carmen theatre. There is no evidence of any promise to repay this money to Joseph, Jr., or of his retaining an interest in the project by reason of it. On this phase of the case, the evidence shows that Joseph, Jr., sacrificed this amount in withdrawing from the enterprise. Equity surely does not require that the court must order reimbursement to Joseph, Jr., or his parents-or find that they still have an interest in the venture on that account.

On July 31st, Joseph, Jr., withdrew the money from the partnership account, to be used on another theatre job with his father. This job was to be known as the Carthay theatre. The Carthay construction contract was given to Gorelick by the Miskinises of August 30, 1940, at a figure of $170,000. A construction contract for another theatre (the Civic) was also given to Gorelick by the Miskinises on September 18, 1940, at a figure of $86,000. Plaintiffs claim these contracts make it possible for Miskinis to put money into the Carmen theatre within the restricted area with Gorelick acting as a conduit. They claim that $15,000 was advanced by Miskinis on the Carthay job and $14,000 on the Civic, or a total of $29,000, not justified by the amount of work completed uponon these two theatres. However, Gorelick's undisputed testimony is, that some $45,000 had been put into these two jobs.

A deal was consummated July 29th between Gorelick and Ben J. Marshall for new capital, the agreement providing that a corporation with a capitalization of $50,000 be formed, that Gorelick and Marshall were each to have a one-half interest, that Marshall should put in $25,000 cash, Gorelick to put in $11,800 in...