Susman v. Venture

• Decision Date: 30 December 1982
• Docket Number: No. 81-1219,81-1219
• Citation: 114 Ill.App.3d 668,449 N.E.2d 143,70 Ill.Dec. 269
• Parties: , 70 Ill.Dec. 269 Bernard M. SUSMAN and Shadbush Venture, Plaintiffs-Appellees, v. Cypress VENTURE, Cedar Venture, Red Bud Venture, Catalpa Venture, Osage Venture, Holly Venture, Sweetbay Venture, Poplar Venture, Elm Venture, Linden Venture, Donald Asher, Gilbert Asher, Robert Asher, Norman Asher and Helen Asher, Defendants-Appellants, and Donald ASHER, Gilbert Asher, Robert Asher and Helen Asher, Counterplaintiffs- Appellants, v. Bernard M. SUSMAN, Caryl Susman and Shadbush Venture, Counterdefendants- Appellees.
• Court: United States Appellate Court of Illinois

Page 143

449 N.E.2d 143

114 Ill.App.3d 668, 70 Ill.Dec. 269

Bernard M. SUSMAN and Shadbush Venture, Plaintiffs-Appellees, v. Cypress VENTURE, Cedar Venture, Red Bud Venture, Catalpa

Venture, Osage Venture, Holly Venture, Sweetbay Venture,

Poplar Venture, Elm Venture, Linden Venture, Donald Asher,

Gilbert Asher, Robert Asher, Norman Asher and Helen Asher,

Defendants-Appellants, and Donald ASHER, Gilbert Asher, Robert Asher and Helen Asher, Counterplaintiffs- Appellants, v. Bernard M. SUSMAN, Caryl Susman and Shadbush Venture,

Counterdefendants- Appellees.

No. 81-1219.

Appellate Court of Illinois First District, Third Division.

Dec. 30, 1982.

Rehearing Denied May 31, 1983.

William J. Harte, Ltd., Kevin M. Forde, Ltd., Sperling, Slater & Spitz, Chicago (William J. Harte, Kevin M. Forde and Bruce S. Sperling, Chicago, of counsel), for appellants.

Greenberger, Krauss & Jacobs, Chartered, Chicago (James T. Ryan and Brian P. Lutterman, Chicago, of counsel), for appellees.

McGILLICUDDY, Justice:

This is an appeal from a judgment of the circuit court of Cook County which dissolved five partnerships and ordered that the assets of the partnerships be liquidated. The five partnerships are Cypress Venture, Cedar Venture, Red Bud Venture, Catalpa Venture and Osage Venture.

In October 1968 Bernard Susman and related entities (hereinafter Susman) and members of the Asher family and related entities (hereinafter Ashers) entered into a partnership to purchase and develop approximately 945 acres of property in Lake County, Illinois. Five partnership agreements (hereinafter agreement), the terms of which are essentially identical, defined the rights and obligations of the partners thereof.

In the agreement Donald, Gilbert and Robert Asher were designated as "general partners"; Susman was designated as a "limited partner." Norman Asher, who was not a party to the agreement, guaranteed the performance of his sons.

The purpose of the partnership was "to acquire, own, operate, maintain and lease the Real Property and the improvements made thereon and, as an investment, to develop, construct, own, operate, maintain and lease or otherwise sell the Real Property, in whole or in part, and the improvements made thereon, and to engage in such operations necessary or appropriate to the foregoing purposes."

Pursuant to the terms of the agreement, Susman was responsible for the management and development of the property. The Ashers were given the right to make all decisions for the partnership until such time as their capital was returned or until Susman contributed an equal amount of capital. Any profits generated were first to be distributed to the Ashers, until their capital contribution plus imputed interest was returned, and thereafter the profits were to be divided equally between the Ashers and Susman.

The basic dispute between the parties concerned whether the partnership intended to develop the residential portion of the property (approximately 800 acres). It is Susman's position that in 1969 and 1970 he formulated a development plan, to which the Ashers agreed, involving a sale of a portion of the property to a residential user who would bring in water, sewer and roads at the user's expense. Such a plan would benefit the partnership since the partnership could then use these facilities to develop the remaining property.

The Ashers, on the other hand, contend that it was the intention of the parties from the inception of the partnership to develop the residential property. They assert that they did not invest over 2.3 million dollars in order to permit Susman to earn half the profits by merely arranging a sale of the property. They further contend that Susman violated the agreement by failing to act as a developer.

After the property was acquired, the Ashers, with the concurrence of Susman, rejected various offers to purchase the property in its entirety. In 1972, advertisements were placed in the Wall Street Journal seeking users for the property. In 1973, Susman began negotiations with the Rossmoor Corporation, a developer of retirement communities, concerning the possible sale of a portion of the property. According to Susman, he and Norman Asher negotiated extensively with Rossmoor. However, the proposal was rejected. According to the Ashers, Susman did virtually nothing with respect to the property after this rejection.

In August 1974, a meeting occurred in the office of Norman Asher. The parties disagree as to what occurred at the meeting. According to Susman, Norman Asher announced that Susman had "too good a deal" and that he was no longer a partner. The Ashers, on the other hand, contend that Susman asserted at the meeting that it was not his responsibility to do anything other than arrange a sale of the property and insisted that the Ashers agree to the Rossmoor proposal.

The partnership property had been placed in land trusts with the Schaumburg State Bank as trustee. Gilbert Asher and Susman jointly possessed the power of direction for said trusts. Pursuant to a "Declaration of Nomineeship", Gilbert Asher and Susman acknowledged that they held the beneficial interest in said trusts only as nominees for the partnership and that they would "deal and treat" with the beneficial interest "as and only as and when directed" by the partnership.

On September 20, 1974, the Ashers sent a letter to Susman instructing him to execute certain directions to the trustee which would result in the transfer of the partnership property to another entity. It is undisputed that Susman would not have received a power of direction in the new land trust to be created. Susman refused to act. On September 27, 1974, the Ashers wrote Susman informing him that "by virtue of your failure to execute and deliver the directions to Schaumburg State Bank as requested * * * you have defaulted under your agreements * * *. These defaults are in addition to other previous defaults by you contrary to and in violation of your covenants, representations, and commitments in said five Venture agreements." The notice did not identify these "previous defaults."

In 1976 the Ashers filed a lawsuit against the Schaumburg State Bank in which they sought an order compelling the bank to assign the property to new entities. On May 26, 1976, the Ashers were granted judgment on the pleadings.

On May 28, 1976, Susman filed this action in which, among other allegations, he contended that the Ashers arbitrarily and capriciously refused to agree to develop the property in the manner he recommended and that the Ashers refused to deal with him as a partner. In their answer the Ashers affirmatively asserted that by his conduct, Susman had repudiated his obligations and thus abandoned the partnership. Subsequently, the Ashers filed a counterclaim in which they asserted that Susman's conduct not only constituted a repudiation and abandonment of the agreement but that his conduct had damaged the partnership.

On April 28, 1978, Judge John F. Hechinger ruled on a motion to dismiss Susman's complaint and a motion for summary judgment filed by the Ashers. Judge Hechinger found that the Ashers had not acted unreasonably in rejecting Susman's proposals to sell the property or had interfered with Susman's performance of his obligations under the agreement. The court further found that it could not, on a ruling for summary judgment, declare as a matter of law that Susman had or had not performed all of his duties under the agreement and, therefore, the agreement was still in full force and effect. The court ordered the Ashers to provide Susman with any documents required to be made available to him under the agreement.

In regards to the Ashers' counterclaim against Susman, Judge Hechinger found that Susman had not been properly served with notice of default and, therefore, the counterclaim was dismissed without prejudice.

Despite the commencement of the litigation, Susman continued his efforts to find a purchaser. In 1977, he procured an offer from the Zale Construction Company (Zale) to purchase the property. The Ashers indicated that they might consent to a sale of a portion of the property. In March 1978, Zale made a formal offer to purchase which was rejected by the Ashers. Thereafter, Susman notified the Ashers of his intention to invoke the "buy-out" provision of the agreement. This provision stated that if a partner obtained a "bona fide offer to purchase" the partnership's property and tendered it to the partnership, then the other partners had to either buy out that partner's interest for cash or accept the "bona fide offer." The Ashers rejected this demand because they believed that the Zale proposal was not a "bona fide offer." However, in August 1978, the Ashers sold a portion of the property to Zale without Susman's participation. Subsequently, Susman amended his complaint to add a count alleging a breach of the "buy-out" provision.

This matter proceeded to trial before Judge Albert Green on Susman's third amended complaint and the Ashers' amended counterclaim. Following the presentation of extensive evidence, Judge Green found that the conduct of the Ashers constituted an expulsion and "freeze-out" of Susman from the partnership. Said conduct included serving Susman with a notice of default, telling him that he was no longer a partner, removing his name from the partnership tax returns, and refusing to provide him with access to partnership books, records and information. The court further found that the Ashers' failure to accept or match the Zale offer constituted a breach of the agreement. The court also found that the Zale offer was a "bona fide offer" under the terms of the agreement.

On April 3, 1981, the court ordered the dissolution and winding up of the partnership, an accounting, and a judicial sale of the partnership property. In addition, the court stated that Susman was entitled to damages consisting of the amount he would have...