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Keeshin v. Levin

JUNE 30, 1975.




APPEAL from the Circuit Court of Cook County; the Hon. CHARLES R. BARRETT, Judge, presiding.


Plaintiff Keeshin and defendant Levin formed a corporation named Levin-Kreeshin, Inc., in which each owned 50 percent of the stock. Some 9 months later they entered into a written agreement for the sale of Keeshin's shares to Levin. Some 8 months thereafter, after the stock had been transferred, Keeshin filed an action in the chancery division of the circuit court of Cook County against Levin. In October of 1971, a partial summary judgment for Keeshin against Levin for $5,700 was entered (and paid) and in September, 1972, a final judgment for Keeshin against Levin for $52,550 was entered. The appeal now before us is from that judgment.

The defendant Levin contends: (1) that the promises in the contract are not severable and that the trial court therefore erred in allowing a rescission of only paragraph 8 of the contract; (2) that fraud or misrepresentation by the defendant was not established by clear and convincing evidence; (3) that the plaintiff did not prove that he relied upon any representation made by the defendant; and (4) that Levin-Keeshin, Inc., was a necessary party to the action. We conclude otherwise and affirm.

In January of 1969, the plaintiff and defendant formed a corporation, Levin-Keeshin, Inc., for the purpose of conducting a real estate business. Each party owner shares amounting to 50 percent of the outstanding stock of the corporation. It was purely a two-person corporation. Defendant Levin was the licensed real estate broker, and plaintiff Keeshin worked as a salesman under defendant's license.

A dispute arose shortly after formation of the corporation. It had to do with the division of a commission arising from the sale of certain real estate located in Oklahoma. Apparently, the defendant had laid the groundwork for the sale before formation of the corporation and had consummated the sale after formation. He felt he was entitled to the entire commission. Plaintiff disagreed and argued that the commission was a corporate profit. Defendant finally paid plaintiff $7,700. The parties now dispute whether this was payment of plaintiff's share of the commission or a loan. However, the back of the check contained the following rather interesting endorsement signed by the defendant which tends to support the plaintiff's version that it was a share of the commission,

"Commission on Tanglewood and Monterey Apartments, Oklahoma City, Oklahoma."

At any rate, to use the plaintiff's words, their relationship from that point on began to "go downhill."

The parties ultimately decided to end their business relationship. They consulted their respective attorneys and negotiations were initiated which resulted in an agreement by which defendant agreed to buy out the plaintiff's shares and interests in the corporation. In defendant's words, they generally decided that "whatever profits or whatever corporate assets there would be would be split down the middle. Any commissions there were would be split down the middle. Basically that's it, and, we would go our separate ways." The agreement contained 11 paragraphs dealing with (1) defendant's purchase of plaintiff's shares of stock; (2) splitting of the corporate bank accounts; (3) plaintiff's removal of the furniture and drapes in his office and compensation to defendant for them; (4) vacation of the premises by plaintiff; (5) renaming of the corporation; (6) division of real estate listings by formula; (7) division of commissions by formula except for the commission on the sale of real estate at 1000 Lake Shore Drive; (8) division of the commission on the Lake Shore Drive property; (9) arrangements for the closing and transfer of cash and other assets; (10) arrangements for future deliveries to the corporation; and (11) the effective date of the agreement, August 1, 1969.

All portions of the contract have been fully executed with the exception of paragraph 8 which is the subject of the dispute between the parties. It concerns disposition of the commission from the sale of real estate located at 1000 Lake Shore Drive. Sale of this property was negotiated by the defendant. Paragraph 8 provides as follows:

"The parties acknowledge that the commission payable in connection with the pending sale of 1000 Lake Shore Drive, Chicago, Illinois, is to be treated differently from the foregoing commissions and is to be treated as follows:

(a) The total commission payable is to be paid to LEVIN.

(b) When and as received, LEVIN will pay to KEESHIN the following amounts:

(i) Of the first Fifty Thousand ($50,000) Dollars received, which is expected to be received prior to the end of 1969, LEVIN will pay KEESHIN Twenty-Five Thousand ($25,000) Dollars.

(ii) Of the second Fifty Thousand ($50,000) Dollars received, which is expected to be received thirty (30) days after the first payment, LEVIN will pay KEESHIN Twenty-Five Thousand ($25,000) Dollars.

(iii) The balance of the commission payable at the rate of Twenty-Five Thousand ($25,000) Dollars per year for four (4) years between 1971 and 1975 shall belong solely to LEVIN and KEESHIN shall make no claim for payment of any part thereof."

Shortly after the agreement was signed, defendant notified the plaintiff that the buyers of 1000 Lake Shore Drive, a partnership named Parallel VI, were having trouble obtaining the necessary financing and that, therefore, the deal was in jeopardy. Defendant then proceeded to shore up the deal: he contacted a broker in New York who agreed to back Parallel VI at a cost of $40,000 to defendant. Defendant then drew up a supplemental agreement modifying paragraph 8 which reduced plaintiff's and defendant's shares of the first $100,000 of the commission to $30,000 per person. In other words, the $100,000 was reduced to $60,000 by the New York broker's fees and the $60,000 was then split 50-50 by plaintiff and defendant. Plaintiff was then entitled to receive his share of the commission in two $25,000 payments as per paragraph 8.

The first payment was made as agreed. But, the second payment was for only $5,700. It was accompanied by a note stating that the $5,700 was the net amount due to plaintiff because plaintiff had owed some $9,300 to defendant by virtue of previous loans made to plaintiff, one of which, allegedly was the previously mentioned $7,700 check to plaintiff by defendant which plaintiff claimed was due him as his rightful share of a corporate commission earned on the sale of property in Oklahoma. Defendant maintained that the balance of the $9,300 allegedly owed to him was to reimburse him for payments he made to one Martin Baskin in order to pay off plaintiff's debt to Baskin. However, at trial, Baskin denied that he had ever loaned money to plaintiff or received money from defendant in payment of any such loan.

At any rate, plaintiff returned the $5,700 check accompanied by a note denying that he owed defendant $9,300. He also did some investigating. Plaintiff then brought suit against defendant in the chancery division of the circuit court seeking rescission of paragraph 8 of the agreement on grounds of fraud and misrepresentation alleging that defendant had originally told him that the total commission on the sale of the Lake Shore Drive property would be $200,000 but that half of it was promised to third parties and that he had agreed to accept only half of the first $100,000 (later reduced to $60,000) and make no claim on the remaining $100,000 as per paragraph 8 because he was led by the defendant's representations to believe (contrary to the fact) that defendant was actually obligated to third parties in that amount. Plaintiff also asked that the court order the defendant to account for all dealings and transactions relating to 1000 Lake Shore Drive, and that the court direct the defendant to pay plaintiff 50 percent of the second $100,000.

The court in 1971, entered partial summary judgment as follows:

"THIS MATTER coming on to be heard on the Plaintiff's Motion for partial Summary Judgment (denial of said Motion on 9/25/70 having been vacated and the Motion reinstated by Order of 10/26/70) and the Court having considered the pleading, and having heard arguments of Counsel, and having considered the Memoranda filed by the parties, and being fully advised — the Court finds:

1. That Paragraph 8 of Plaintiff's Exhibit `A' of the Complaint is severable and subject to divided and separate consideration.

2. That the obligation under said Paragraph 8 of Exhibit `A' is a personal obligation of the Defendant to the Plaintiff.

3. That Paragraph 6 of the Defendant's Answer admits a personal tender, and alleges a personal set off.

4. That the issues of fraud and misrepresentation, and set off, can be separately tried without prejudice to the admission of ...

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