APPEAL from the First Division of the Appellate Court for the
First District; heard in that court on appeal from the Superior
Court of Cook County; the Hon. JOSEPH A. GRABER, Judge,
MR. JUSTICE BRISTOW DELIVERED THE OPINION OF THE COURT:
Rehearing denied March 24, 1953.
This cause comes to this court as a result of our allowance of a petition for leave to appeal from a judgment of the Appellate Court, First Division, First District, affirming a final decree entered in the superior court of Cook County, dismissing plaintiffs' action for want of equity. In the intermediate tribunal, four different opinions were written. The first, reversing the lower court, was written by Justice Touhy, and concurring therein was Justice Feinberg, and rendering a dissenting opinion thereto was Justice Niemeyer. Following that, this division of the Appellate Court was reconstituted, and Justices Burke and Friend were assigned to this division in place of Justices Feinberg and Touhy. Thereafter, a petition for rehearing was granted. The dissenting opinion of Justice Niemeyer became the majority opinion, with Justice Burke concurring and Justice Friend dissenting. Thus, the score at present is one trial judge and two Appellate Justices have held the plaintiffs' cause of action to be without merit and three Appellate Justices have held the reverse.
In appellants' petition for leave to appeal much was said about the impropriety of the action of the Appellate Court, First Division as reconstituted, in giving consideration to the petition for rehearing. However, appellants, in their 151 pages of briefs and arguments, have had nothing to say about this alleged irregularity, so we will not burden this opinion with its consideration but will proceed to discuss the merits of the cause.
Plaintiffs, Beatrice Glasser, Selma Melvoin, Bessie Altschuler, James Booth, and Ruth G. Booth are all members of a partnership, and, together with defendant counterclaimant, Minnie Stern, and defendant Velma Silverman, the remaining members of the partnership, are lessees of the Woods Theatre located at 50-56 West Randolph Street, Chicago. The defendants are Essaness Theatres Corporation, a Delaware corporation, which managed and operated the Woods Theatre for the partnership under a written management contract from November 3, 1943, to April 30, 1951; Woods Amusement Corporation, an Illinois corporation, and wholly owned subsidiary of the Essaness Theatres Corporation; Edwin Silverman, President and sole owner of Essaness; Edward Blackman, Vice-President of and attorney for Essaness; Velma Silverman, wife of Edwin Silverman and a member of the partnership, and Minnie Stern, another partner. It is claimed in the complaint that the defendant Essaness Theatres Corporation, as managing agent of the Woods Theatre to whom was entrusted the negotiation of a renewal lease to the premises on behalf of the Woods partnership, breached a fiduciary relationship claimed to exist between the parties when it purchased the reversion of the lease and fee. It is sought in this proceeding to impose a constructive trust upon the theatre property which is in the hands of the defaulting agent, to remove the agent as manager of the theatre, and to declare a forfeit of management fees.
The Essaness Theatres Corporation, the Woods Amusement Corporation, Edwin Silverman, Edward Blackman, and Velma Silverman answer jointly and assert that the interests of said partners in said partnership are as follows: Beatrice Glasser, 10 per cent; Selma Melvoin, 10 per cent; Bessie Altschuler, 10 per cent; James Booth, 2 per cent; Ruth G. Booth, 5 1/2 per cent; defendant Velma Silverman, 37 1/2 per cent; and defendant Minnie Stern, 25 per cent. The defendants, further answering, set up many matters in explanation of their alleged prodition and denied all charges of bad faith. After the complaint was filed, the defendant Minnie Stern admitted its allegations and filed a counterclaim, which is substantially the same as the complaint, and sought the same relief. Her position, therefore, is identical with that of the other plaintiffs, and we shall include her in this opinion under that designation.
This cause was tried by the chancellor for many days, and the record is voluminous. At the conclusion of the trial, the bill and counterclaim were each dismissed for want of equity.
To make a fair determination of this involved controversy, it is essential that we present a rather detailed history of the transactions that underlie this dispute, the property involved, the relationship of the parties, the interest of lessors and many other factors. The property in question is improved by a ten-story building which contains ground floor stores, offices, and the Woods Theatre. On 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. On the following day, August 1, 1942, they leased the theatre portion of the building for fourteen months, expiring September 30, 1943, to the Woods Theatre Corporation, then owned by Sidney M. Spiegel, Jr., and Edwin Silverman. 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 on December 31, 1942. On April 2, 1943, a lease from May 1, 1943, to April 30, 1946, was executed. Each of these leases gave the lessor an option to terminate the lease on sixty-days' written notice should it require the premises for ecclesiastical purposes a fact to be determined in its sole discretion.
The Essaness Corporation was organized in 1930 by Edwin Silverman, Sidney M. Spiegel, Jr., and Emil Stern. It was organized under the Delaware laws and its purpose was to operate theatres in Chicago and its environs. The first two named incorporators held 37 1/2 per cent of the stock each, and the third, Mr. Stern, held 25 per cent. Since December, 1945, Mr. Silverman has owned all of the stock of this corporation. Mr. Spiegel died in 1944, and, thereafter, his executors and Mr. Stern sold their stock for $750,000 and $500,000, respectively. In April, 1938, Essaness negotiated with the Marshall Field estate, then owner of the property, for the acquisition of the Woods Theatre Building and Theatre, but, because of the indisposition of Emil Stern to make the purchase, the negotiations culminated in a transaction in which Silverman and Spiegel purchased the Woods building under a 99-year lease. They took title thereto through 54 West Randolph Corporation, a corporation newly formed for this purpose in which Silverman and Spiegel invested $100,000. After the Woods building and theatre were brought under control of Silverman and Spiegel without participation by Stern, the Woods Theatre Corporation employed Essaness to manage the theatre for a fixed compensation. This gave Essaness a loop outlet which both Silverman and Spiegel desired it to have. In connection with the management of the Woods Theatre from 1938 to 1942, Essaness booked the pictures, prepared the advertising, hired and discharged employees, supervised the collection and deposit of the daily box office receipts of the theatre and caused the necessary disbursements of the theatre to be made.
In July, 1942, the Franciscan Fathers desiring to use the Woods property for their religious purposes procured the entire ownership of the property in fee and all interest therein by purchase of the fee and lessor's interest in the ground lease from the Marshall Field estate. To accomplish this, 54 West Randolph Corporation assigned the lessee's interest in the 99-year lease and Woods Theatre Corporation assigned its theatre lease to the Marshall Field estate. On the day following, the Franciscan Fathers leased the theatre portion of said building to the Woods Theatre Corporation, then owned by Silverman and Spiegel for fourteen months expiring September 30, 1943, and Essaness continued its management of the theatre for Woods Theatre Corporation. On August 14, 1942, Silverman transferred to his wife, Velma Silverman, his fifty per cent of the stock of the Woods Theatre Corporation, and on September 1, 1942, the Woods Theatre Corporation assigned its lease of the Woods Theatre to Sidney Spiegel and Velma Silverman, each a one-half interest, who then through Essaness operated the theatre as a partnership until December 23, 1942. On December 23, 1942, Emil Stern purchased a 25-per cent interest in said partnership from the two partners for approximately $1500 and transferred it to his wife, Minnie Stern, on December 31, 1942. The Woods Theatre Corporation then had no further interest in the property and was subsequently dissolved.
On January 1, 1943, new articles of partnership were signed by Spiegel, Velma Silverman, and Minnie Stern and their interests were fixed at 37 1/2 per cent, 37 1/2 per cent, and 25 per cent, respectively, under the partnership name Woods Theatre, not incorporated.
On November 5, 1943, Sidney Spiegel sold his 37 1/2 per cent interest in the partnership lease to the plaintiffs as follows: Beatrice Glasser, 10 per cent; Bessie Altschuler, 10 per cent; Selma Melvoin, 10 per cent; Ruth Booth, 5 1/2 per cent; and James Booth, 2 per cent. Spiegel received from the plaintiffs therefor a note in the sum of $25,440 which was severally and jointly guaranteed by Maurice Glasser, Harry Altschuler, and Charles Melvoin, and contemporaneously, the plaintiffs received from Spiegel a rebate agreement which provided the repayment of a part of the purchase price in the event the lease was cancelled by the Franciscan Fathers prior to April 30, 1946. The execution of such guarantee conclusively indicated that the partners recognized that their lease with Franciscan Fathers was of uncertain duration. Also on the same day, Essaness and the new partnership entered into a written management contract which provided that Essaness manage the Woods Theatre for the partnership for the following period: "Second parties (partners) hereby engage first parties (Essaness) to manage and supervise the operation of the Woods Theatre, for and on behalf of the second parties, from the date hereof, until April 30, 1946, or during the term of any extension of the Woods Theatre lease, on the terms and conditions hereinafter contained and first parties hereby accept such engagement for the period and on the terms herein contained." The lease was then extended to December 1, 1949, and again to April 30, 1951, without any change in its provisions or conditions.
Mr. Spiegel had charge of the negotiations for the renewal of the lease for the partnership and after his death in 1944 this function was performed by Emil Stern. There is no question but what the partnership was doing well operating the Woods Theatre. An income statement reveals the following:
Year ending August 31, 1941 ..... $ 23,013.08 Year ending August 31, 1942 ..... 67,265.59 Year ending December 31, 1943 ... 167,473.94 Year ending December 31, 1944 ... 280,869.54 Year ending December 31, 1945 ... 269,654.98 Year ending December 31, 1946 ... 289,197.61 Year ending December 31, 1947 ... 302,431.86 Year ending December 31, 1948 ... 232,831.51
It is significant, however, to note in passing that the whole enterprise stemmed from the activities of Silverman and Spiegel. It was they who conceived the idea, risked their capital, laid the groundwork for this profitable venture. It was they who shared their interests with the present plaintiffs. During the early stages of ...