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Conley v. Echoles

FEBRUARY 2, 1970.




Appeal from the Circuit Court of Cook County; the Hon. SAMUEL B. EPSTEIN, Judge, presiding. Affirmed.


Plaintiff and defendant, desirous of engaging in a combination liquor and grocery store business venture on a partnership basis, executed two written agreements: (1) a preliminary agreement which stated that the plaintiff would pay the sum of $2,500 to the defendant for the privilege of becoming a partner of the defendant; and (2) articles of partnership. The instant action sought a partnership dissolution and "other and further relief." After a non-jury trial the court found that the partnership never materialized and there had been a failure of consideration and entered judgment in favor of plaintiff for $2,500, plus costs, from which defendant appeals.

On appeal defendant contends that (1) the trial court erred in basing its judgment on rescission when such wasn't pleaded or proved; (2) certain pronouncements of the court precluded her from offering further proof on an issue; (3) plaintiff was entitled only to an accounting; (4) plaintiff was bound by testimony of defendant called by plaintiff as an adverse witness; and (5) the court erred in striking plaintiff's counterclaim.

Defendant operated a cocktail lounge at 1715 East 71st Street in Chicago and in 1965 was desirous of going into the business of operating a combination grocery and package liquor enterprise. She rented a store at 1729 East 71st Street in Chicago for a term of five years, commencing September 1, 1965, "for the display of groceries, meats, and package liquors," at a rental of $150 per month. On September 28, 1965, plaintiff and defendant entered into a "Preliminary Agreement to the Execution of General Articles of Partnership," the provisions of which included:

"2. Lillian Conley acknowledges that prior hereto Dorothy Echoles expended time and money of the value of $2,500.00 in preparing the premises, to the date hereof, to be used in the proposed partnership business, and agrees to pay to Dorothy Echoles the sum of $2,500.00 for the privilege of becoming her partner and as reimbursement in full for expenditures of time and money made to the date hereof.

"3. It is further understood and agreed by and between the parties hereto that the $2,500.00 being paid by Lillian Conley to Dorothy Echoles as aforesaid, is not a contribution to the capital of the partnership to be formed, is not refundable under any circumstances, and is not a credit on any future partnership assets, except insofar as the leasehold improvements now existing and now in place in the premises have value, which value shall be shared equally upon formation of the partnership."

On the same date the parties signed "General Articles of Partnership" to establish the partnership.

Defendant, called under section 60 of the Civil Practice Act, testified that she spent $300 as rental security, $1,000 for remodeling the store front, $225.75 for floor tiling, $40 for welding work, upwards of $500 to have the store front extended, $100 for electrical work and $700 to $800 for other items. All of these payments were made prior to September 28, 1965, the date of the agreement preliminary to the partnership agreement, but plaintiff had paid $2,500 on that date for the privilege of becoming a partner. Also, subsequent to execution of the "General Articles of Partnership," fixtures and items of equipment were purchased and rent and other expenses were incurred, all of which were paid for by plaintiff and defendant.

Defendant further testified that the store did not open for business because plaintiff "just walked away and the store remained unoccupied for a whole year and all the improvements, including the check-out counter and the shelves, were in there for a whole year." Defendant also paid the rent for the entire year, during which time she did not get any money from plaintiff. In September or October of 1966 defendant began using the store for her own business, and has continued to pay rentals due during the term of the lease.

Plaintiff testified that she spent money from her own funds over and above the $2,500 and kept a record of these expenditures. She eventually received the key to the store in November of 1965. She terminated the partnership for the reason that "Mrs. Echoles didn't appear to be trying to open up a business; I didn't wish to turn in any more money on a business when I didn't know where my money was going to; I was never able to have a business conversation with her; I couldn't get her to show me anything concerning the bills that she was keeping."

At the close of the testimony and proofs, and after an extended discussion with counsel, the court found in favor of plaintiff and entered a decree for $2,500, plus costs.

The complaint, in substance, alleged that (1) on September 28, 1965, Articles of Partnership were executed; (2) the partners agreed to full disclosure and for consultation with each other; (3) defendant took exclusive possession of the books and assets of the partnership and refused to have books of account prepared and to keep them for inspection, nor was a general account of the affairs of the partnership prepared as of January 1, 1966; (4) that plaintiff invested a sum in excess of $5,000 in the partnership, which included an initial sum of $2,500 paid to the defendant on account of representations made by such defendant that she arranged for a lease and had made expensive leasehold improvements; (5) that the defendant was guilty of inequitable and unconscionable conduct toward the plaintiff; (6) that the partnership was heavily in debt and on account thereof the plaintiff is personally obligated on certain partnership obligations and that no equitable division of assets and goodwill of the partnership could be made without prejudice to the plaintiff's interest; and (7) that defendant conducted herself so as to make it appear that she desired to become the sole owner of the enterprise.

The complaint prayed for the following relief: (1) that the partnership be dissolved by decree of court; (2) that a receiver be appointed to dispose of the partnership property to pay the debts, costs, and expenses; (3) that the surplus proceeds of the sale to be paid to plaintiffs; (4) that judgment be entered against the defendant for an amount constituting the difference between plaintiff's investment and an amount to be received by her resulting from the sale of the partnership assets by the receiver; and (5) "for such other and further relief in the premises as the Court may deem equitable and proper."

Defendant's first contention is that the trial court erred in basing its judgment on contract rescission when such wasn't pleaded or proved and that "the complaint contained no allegation which if proven would require payment to the plaintiff by the defendant of such sum of $2,500.00."

Defendant argues that under the preliminary agreement the $2,500 was payment for the privilege of plaintiff becoming defendant's partner through the purchase of one-half of whatever defendant had, and was not refundable under any circumstances. She notes that the only possible mode of recovery would be a complaint for rescission, and since there was no pleading of this nature filed by plaintiff, the court was incorrect in awarding the $2,500 to her, absent an amendment of her complaint. Among the authorities cited are Broberg v. Mann, 66 Ill. App.2d 134, 213 N.E.2d 89 (1965); Leffers v. Hayes, 327 Ill. App. 440, 64 N.E.2d 768 (1945); and Field v. Field, 319 Ill. 268, 149 N.E. 757 (1925). In Field v. Field, it is stated (p 270):

"Before a party is entitled to a decree his allegations and proof must agree. If the allegations in a bill are not established by the proof, or if the proof establishes a state of facts not alleged in the bill, and no amendment of the bill to correspond with the proof is made, the bill must be dismissed. . . . The decree cannot give relief which facts disclosed by the ...

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