{ "id": 2550381, "name": "The State House Inn Corporation, an Illinois Corporation, Plaintiff-Appellant, v. Ben Polikoff, et al., Defendants-Appellees", "name_abbreviation": "State House Inn Corp. v. Polikoff", "decision_date": "1967-08-04", "docket_number": "Gen. No. 51,588", "first_page": "97", "last_page": "109", "citations": [ { "type": "official", "cite": "86 Ill. App. 2d 97" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "128 NE2d 883", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1955, "opinion_index": 0 }, { "cite": "6 Ill2d 365", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 2708300 ], "year": 1955, "opinion_index": 0, "case_paths": [ "/ill-2d/6/0365-01" ] }, { "cite": "182 NE2d 351", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1962, "opinion_index": 0 }, { "cite": "35 Ill App2d 276", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 5262034 ], "year": 1962, "opinion_index": 0, "case_paths": [ "/ill-app-2d/35/0276-01" ] }, { "cite": "115 NE2d 323", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1953, "opinion_index": 0 }, { "cite": "1 Ill 2d 72", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5314867 ], "year": 1953, "pin_cites": [ { "page": "78" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/1/0072-01" ] }, { "cite": "144 A2d 207", "category": "reporters:state_regional", "reporter": "A.2d", "year": 1958, "opinion_index": 0 }, { "cite": "51 NJ Super 482", "category": "reporters:state", "reporter": "N.J. Super.", "case_ids": [ 412414 ], "year": 1958, "opinion_index": 0, "case_paths": [ "/nj-super/51/0482-01" ] }, { "cite": "204 NE2d 807", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 2, "year": 1965, "opinion_index": 0 }, { "cite": "55 Ill App2d 229", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 5283768 ], "year": 1965, "opinion_index": 0, "case_paths": [ "/ill-app-2d/55/0229-01" ] } ], "analysis": { "cardinality": 805, "char_count": 19304, "ocr_confidence": 0.632, "pagerank": { "raw": 1.271629515714144e-07, "percentile": 0.6149122979756735 }, "sha256": "c6cb744744c999322d4ff20fe825531a8925d92bf4e8b704c9f3416c47bc8858", "simhash": "1:69ba44ec938e8d90", "word_count": 3210 }, "last_updated": "2023-07-14T19:02:06.497151+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "The State House Inn Corporation, an Illinois Corporation, Plaintiff-Appellant, v. Ben Polikoff, et al., Defendants-Appellees." ], "opinions": [ { "text": "MR. PRESIDING JUSTICE MURPHY\ndelivered the opinion of the court.\nThis is a declaratory judgment action in which plaintiff, an Illinois corporation, seeks a declaratory decree that it is the owner of all of the assets of a joint venture known as The State House Inn. The trial court granted the motion of the principal defendant, Ben Polikoff, for a summary decree of dismissal, and plaintiff appeals. No evidence was heard, and the material facts are set forth in the pleadings and exhibits.\nIn 1959 and 1960, Polikoff gave $57,500 to Maurice Levy, Louis C. Rappaport, Harry Miller and Sidney Miller, the four originators of a motel project in Springfield, Illinois. Approximately 49 other persons also gave money for the project. In Polikoff v. Levy, 55 Ill App2d 229, 204 NE2d 807 (1965), this court found the undertaking to be a joint venture \u201cto buy real estate and construct and operate a motel and to share in the profits,\u201d with a relationship so similar to that of partners that their rights and liabilities were to be tested by the same rules.\nThe instant complaint, filed September 30, 1963, shows that in June, 1961, \u201cArticles of Limited Partnership\u201d were signed by defendant Ben Polikoff. Later Polikoff \u201crefused to execute the required Certificate of Limited Partnership, and the same never became effective under the laws of Illinois.\u201d\nThe complaint alleges that on February 3, 1962, a charter was issued for the plaintiff corporation, \u201cand plaintiff thereupon took over the operation of the \u2018State House Inn\u2019; the assets of the enterprise were transferred to plaintiff by appropriate written instruments, and common stock issued by plaintiff to all the co-venturers in accordance with said resolution. Defendant Ben Polikoff and the said Alexander Polikoff have refused to accept the stock certificates tendered to them by plaintiff, and by his letter dated July 19, 1962, said defendant has disavowed his interest in the venture, and has determined all his transactions therein to be \u2018abrogated, annulled and at an end.\u2019 \u201d A photostatic copy of the letter was made a part of the complaint.\nThe prayer of the complaint was for a declaratory decree \u201cfinding plaintiff to be solely entitled to the ownership of all of the assets of the enterprise aforesaid and the \u2018State House Inn,\u2019 \u201d and that Polikoff be directed to join in necessary written directions to a trustee \u201cto convey all its right, title and interest in and to the property of said Trust to plaintiff.\u201d\nPolikoff filed a motion for summary decree on the ground that the property owned jointly by the members of the joint venture could not, as a matter of law, be validly transferred without the consent of all the joint venturers. The plaintiff also filed a motion for a summary decree. Polikoff\u2019s motion for a summary decree of dismissal was granted by the trial court, and judgment was entered against the plaintiff. The instant appeal followed.\nThe July 19, 1962, letter of Ben Polikoff, made a part of the complaint and addressed to the four originators, is as follows:\n\u201cDEMAND FOR REPAYMENT OF $57,500.00 AND NOTICE AND TENDER PURSUANT TO THE ILLINOIS SECURITIES LAW OF 1953, AS AMENDED.\n\u201cI hereby demand that you repay me the $57,500.00 I gave you as per three receipts bearing dates and for the amounts as follows: December 7, 1959, $25,000.00; February 2, 1960, $25,000.00; December 7,1960, $7,500.00.\n\u201cNotice is given that the transactions in which I gave you said $57,500.00 are voidable, and abrogated, annulled and at an end.\n\u201cSaid transactions related to a motel in Springfield, Illinois, which is referred to, in the first of said receipts, as \u2018State House Motor Motel\u2019 and, in the second and third receipts, as \u2018State House Motor Hotel.\u2019\n\u201cI hereby tender to you the \u2018securities sold\u2019 (as defined in The Illinois Securities Law of 1953, as amended), including said receipts given me for the money I gave you; and I also tender and offer to give you an assignment, quit claim deed, disclaimer, and such other instruments sufficient to effect the relinquishment of any interest in said motel (or hotel) and in all appurtenances thereto, and in all furniture and equipment therein, and in the parking lot or so-called \u2018vacant lot,\u2019 which you may suppose I have by virtue of such transactions, or otherwise.\u201d\nSubsequent to the writing of the letter, Polikoff brought suit, contending that the transaction came within the meaning of the Illinois Securities Law of 1953 and of the Federal Securities Act of 1933, and that since the sale had not been registered with the appropriate state and federal agencies, he was entitled to avoid the same and recover the payments he had made. In Polikoff v. Levy, 55 Il App2d 229, 204 NE2d 807, this court held that Polikoff had entered into a joint venture relationship and the securities law did not apply.\nBoth sides have asserted a number of contentions which do not require discussion, because of our concept of the principles to be applied to the undisputed facts appearing in the record.\nInitially, we agree with plaintiff that Ben Polikoff was a member of the State House Inn joint venture, and that partnership legal principles govern joint ventures.\nWe further agree that since no \u201cdefinite term\u201d had been specified by the co-venturers, the July 19, 1962, letter of Polikoff must be viewed as his express will to withdraw from the joint venture. The execution and delivery of his letter was tantamount to a \u201cceasing to be associated\u201d and caused a dissolution of the joint venture (Ill Rev Stats 1965, c 106%, \u00a7\u00a729 and 31).\nPlaintiff\u2019s basic contentions are: (1) \u201cWhen Ben Polikoff demanded the return of his payments into the project and refused to join in the transfer of title to all the joint venture assets to the plaintiff corporation, he virtually resigned as a member of the joint venture. He made his choice to be a monetary creditor and thereby waived his right to object to the title of the plaintiff corporation to the joint venture assets, and the title of the corporation to the motel assets were consequently of no concern to him.\u201d (2) \u201cWhen Ben Polikoff withdrew as a member of the joint venture, the other members continued the quasi-partnership. The previous existing quasi-partnership was deemed dissolved by his withdrawal, and a new partnership was formed in corporate form by the continuation of the project by the remaining members.\u201d (3) \u201cAssuming, but without conceding, that the principal defendant, Ben Polikoff, had a cause of action because he was deprived of his interest in the joint venture, or damaged by the transfer of title to its assets to the plaintiff corporation without his consent, the correct measure of damages is the value of his interest in the joint venture on either April 11, 1962, the date of the contract of transfer of title, or July 19, 1962, the date of his demand for the return of his payments into the enterprise.\u201d\nDefendant Polikoff, not conceding that his offer and demand under the Illinois Securities Law had been a \u201cvirtual resignation,\u201d contends that if his actions may be viewed as tantamount to withdrawal as a member of the joint venture, \u201csuch a withdrawal would have been cause for the dissolution, but not the termination, of the joint venture, and Polikoff would have retained his joint venture membership with all of his rights until the joint venture was wound up. \u2018Under the Uniform Partnership Act the relationship of partners may be said to continue after dissolution so far as necessary to wind up the business. . . .\u2019 1 Rowley on Partnership, p 583 (2nd ed, 1960). Since there has been no such windup, the Securities Law offer and demand \u2014 even viewing it as a withdrawal\u2014 would not have constituted a \u2018waiver\u2019 of Polikoff\u2019s rights as a joint venturer, including his right to object to the attempted transfer of the property to the plaintiff corporation. . . . Accordingly, even if a new joint venture had been formed without Polikoff, as plaintiff contends, the new joint venture (whether \u2018in corporate form\u2019 or not) would not own the property of the old.\u201d\nAs previously noted, we consider Polikoff\u2019s letter of July 19, 1962, to have been a withdrawal which caused the dissolution of the joint venture. Therefore, the next question to be determined is whether this relegated Polikoff to the \u201cstatus of an ordinary creditor,\u201d or did the relationship of partners continue until the winding up of the affairs of the joint venture had been completed (\u00a7 30).\nOn this point, absent an agreement to the contrary, defendant asserts that the formation of a new partnership following a change in membership of the old partnership does not affect a transfer of title to the property, and cites 68 CJS, Partnership, pp 748-749, where it is said:\n\u201c[W]here a firm dissolves by a change in its membership and a new firm is formed, the property interests of the old firm belong to the old firm and do not become the property of the new firm without a clear agreement to that effect. . . .\u201d\nDefendant further asserts that \u201cless than all the members of a joint venture do not have power to transfer all the property owned jointly by all the members to a corporation for stock in the corporation to be distributed by it to the members.\u201d Principally cited in support is Fortugno v. Hudson Manure Co., 51 NJ Super 482, 144 A2d 207 (1958), where partnership property was used to organize or acquire corporations without the consent of all the partners. There the court said (p 215):\n\u201cLess than all the partners in a partnership may not bind the partnership by an act or acts not performed for the purpose of carrying on the usual business of the partnership, unless authorized by the other partners. . . . This applies particularly to a situation where one or several partners, but not all, seek to incorporate a partnership and transfer the assets of the partnership to the new corporation. . . . Where such acts are not ratified by the other partners, the property remains that of the partnership and may be traced into the corporation .... It is, of course, basic that no one can be made a stockholder in a corporation without his knowledge and consent . . . .\u201d\nAnd at pp 218-219:\n\u201cWe hold, however, that the partnership agreement does not bind us to a distribution of the corporate stock itself. The agreement did not contemplate the transfer of partnership assets into corporations and a subsequent dissolution and distribution of the several corporate stocks, thereby transforming a full partner (here, Arthur) into a minority stockholder, denying him an effective withdrawal from the partnership enterprise upon liquidation, but instead compelling him to remain an unwilling minority stockholder in the several continuing corporations. . . . We therefore conclude that the assets of the partnership, including those of all the corporations, should be liquidated, and the proceeds distributed in cash.\u201d\nOther authorities include Lindley on Partnership, (10 Ed), Bk III, chapter 2, \u00a7 3, p 394:\n\u201cEach partner is entitled to say to the others, T became a partner in a concern formed for a definite purpose, and upon terms which were agreed upon by all of us, and you have no right, without my consent, to engage me in any other concern, nor to hold me to any other terms, nor to get rid of me, if I decline to assent to a variation in the agreement by which you are bound to me and I to you.\u2019 \u201d\nAlso, 8 Fletcher, Cyclopedia Corporations, 1966 Revised Volume, p 316 :\n\u201cAn association can act only through its representatives having authority to act for it in the matter of incorporation. Such authority can be derived only from the unanimous consent of the members or from a consent given by persons having the power to bind the rest. This rule applies particularly to a situation where one or several, but not all, seek to incorporate the partnership and transfer the assets of the partnership to the new corporation.\u201d\nPlaintiff argues that the Fortugno case is not applicable here and states, \u201cThe principal distinction is that in Fortugno, the court\u2019s ruling was for an immediate wind-up and liquidation of all the five-family partnerships so that the irascible brother, who started the litigation, would receive a distribution in kind of the partnership assets. That is not the situation in the case at bar, where Section 42 of the Illinois Uniform Partnership Act determines that Polikoff, the sole dissenting member of the group, and who wrongfully caused the dissolution of the joint venture, should have the value of his partnership interest determined as of July 19, 1962, the date of the dissolution that he precipitated, and he will thereby become an ordinary creditor for this amount, together with the other incidental benefits under this statutory remedy.\u201d\nPlaintiff further argues that Polikoff, as a joint venturer, was a fiduciary who wrongfully caused the dissolution and cites sections 38(2) (b), 41(3) (5), and 42 of the Partnership Act to show that Polikoff was \u201crelegated to the status of an ordinary creditor.\u201d\nAs to Polikoff\u2019s fiduciary status in the joint venture, we agree he had a fiduciary relation to the other members and was \u201cbound to the utmost good faith in all dealings and transactions that affected the other [s] in the partnership business.\u201d (Bakalis v. Bressler, 1 Ill 2d 72, 78, 115 NE2d 323 (1953).) However, we are not persuaded that the complaint alleges any facts which show that his conduct in resigning or retiring as a member of the joint venture was wrongful, therefor the Partnership Act sections which deal with a dissolution wrongfully caused by a partner do not apply here. We conclude the record here does not show that section 42 should be applied.\nIn Englestein v. Mackie, 35 Ill App2d 276, 182 NE2d 351 (1962), this court said (p 288) :\n\u201cDissolution does not terminate the partnership and does not end completely the authority of the partners. The order of events is: (1) dissolution; (2) winding up; and (3) termination. Termination extinguishes their authority. It is the ultimate result of the winding up and occurs at the conclusion of the wind up.\u201d\nWe believe the foregoing principles announced in Englestein v. Mackie apply here. Polikoff caused a dissolution, which required a \u201cwinding up of the partnership affairs,\u201d and this windup has not been accomplished. Although the remaining members of the joint venture have determined that the motel project should be operated in corporate form, their assignment of the joint venture assets was not binding on Polikoff, and as said in the Fortugno case (p 216):\n\u201cWhere such acts are not ratified by the other partners, the property remains that of a partnership and may be traced into the corporation.\u201d\nAlso, in Bonde v. Weber, 6 Ill2d 365, 128 NE2d 883 (1955), it is said (p 378) :\n\"... a partner\u2019s right in specific partnership property is not assignable except in connection with the assignment of all the partners in the same property. (Ill Rev Stats 1953, c 106%, par 25(2) (a) and (b).)\u201d\nBecause the matter in controversy is now being litigated in another lawsuit, we have tried to confine this opinion only to those facets of the controversy which we believe determinative of the issues here. For the reasons given, we conclude the motion of defendant for a summary decree was properly granted and, therefore, the judgment of the trial court is affirmed.\nAffirmed.\nADESKO, J., concurs.", "type": "majority", "author": "MR. PRESIDING JUSTICE MURPHY" }, { "text": "BTJRMAN, J.,\ndissenting:\nI agree with the majority of this court that by his letter of July 19, 1962, Polikoff elected to retire and withdraw from the joint venture he entered into with approximately forty-nine other persons. The actions of Polikoff clearly show that Polikoff, who is a quasi-partner of this joint venture, refused to execute a transfer of the legal title to the involved real estate solely because his money was not returned to him. He unsuccessfully attempted to force his co-venturers to repay to him the sum of $57,500 which he invested in the venture on the theory that the sale of units to him was in violation of the Securities Act because the sale of securities was not registered with the appropriate agencies.\nHaving failed in this attempt he now refuses to join in the transfer of the legal title to this real estate to the plaintiff corporation which was executed by forty-six of the forty-nine members of the joint venture. Having a fiduciary relation to the other joint venturers Polikoff is bound to the utmost good faith in their joint transactions. Instead he chose not to continue in the enterprise and retired from the business. The other joint venturers desire to continue the business. Under the circumstances I believe section 42 of the Illinois Uniform Partnership Act (Ill Rev Stats 1965, c 106^) applies. It provides, as follows:\n\u201cWhen any partner retires . . . and the business is continued under any of the conditions set forth in Section 41 (1, 2, 3, 5, 6) or Section 38 (2b), without any settlement of accounts as between him ... and the person or partnership continuing the business . . . he . . . may have the value of his interest at the date of dissolution ascertained, and shall receive as an ordinary creditor an amount equal to the value of his interest in the dissolved partnership with interest. ...\u201d\nSection 38 (2b) referred to above provides:\n\u201cThe partners who have not caused the dissolution wrongfully, if they all desire to continue the business . . . may possess the partnership property, provided they secure the payment by bond approved by the court, or pay to any partner who has caused the dissolution wrongfully, the value of his interest in the partnership at the dissolution. ...\u201d\nSection41(5) provides:\n\u201cWhen any partner wrongfully causes a dissolution and the remaining partners continue the business under the provisions of Section 38 (2b), either alone or with others, and without liquidation of the partnership affairs, creditors of the dissolved partnership are also creditors of the person or partnership continuing the business.\u201d\nThere was no specific term stipulated for the continuation of the joint venture. Section 31(b) of the Illinois Uniform Partnership Act provides that it is terminable at the will of any one of its members. (Ill Rev Stats 1965, c 106%, \u00a7 31(1) (b)), when no definite term is specified.\nThe surviving joint venturers should be permitted to continue its business without liquidation of the partnership affairs. Under equitable principles and in conformity with section 42 the Chancellor should have ascertained the date of dissolution and determined the value of Polikoff\u2019s interest on that date and directed that Plaintiff pay to him an amount equal to the value of his interest. In my judgment the summary decree should be reversed and the case remanded for trial in accordance with the views expressed herein.", "type": "dissent", "author": "BTJRMAN, J.," } ], "attorneys": [ "Rappaport, Clorfene & Rappaport, and Nat M. Kahn, of Chicago, for appellant.", "Tannenbaum & Polikoff, of Chicago (Julius A. Polikoff, of counsel), and Schiff, Hardin, Waite, Dorschel & Brit-ton, of Chicago (Alexander Polikoff, of counsel), for appellee." ], "corrections": "", "head_matter": "The State House Inn Corporation, an Illinois Corporation, Plaintiff-Appellant, v. Ben Polikoff, et al., Defendants-Appellees.\nGen. No. 51,588.\nFirst District, First Division.\nAugust 4, 1967.\nRehearing denied September 14,1967.\nBURMAN, J., dissenting.\nRappaport, Clorfene & Rappaport, and Nat M. Kahn, of Chicago, for appellant.\nTannenbaum & Polikoff, of Chicago (Julius A. Polikoff, of counsel), and Schiff, Hardin, Waite, Dorschel & Brit-ton, of Chicago (Alexander Polikoff, of counsel), for appellee." }, "file_name": "0097-01", "first_page_order": 103, "last_page_order": 115 }