United States District Court, Northern District of Illinois, E.D
December 30, 1980
MERIDIAN HOMES CORPORATION, PLAINTIFF,
NICHOLAS W. PRASSAS & COMPANY, DEFENDANT.
The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiff Meridian Homes Corporation ("Meridian") has moved
for partial summary judgment on the issue of its right to
terminate the joint venture relating to the Hampton Park
Terrace Shopping Center property (the "Venture") in
Romeoville, Illinois. In opposition to that motion and in
support of its own cross-motion for summary judgment,
defendant Nicholas W. Prassas & Company ("Prassas") asserts
(1) Meridian never became a member of the
Venture and therefore has no right to dissolve it
or seek a decree of dissolution.
(2) In any event, the Venture was not
terminable at will.
For the reasons stated in this memorandum opinion and order,
Meridian's motion for partial summary judgment is granted in
part and denied in part and Prassas' cross-motion for summary
judgment is denied.
On April 25, 1961 Prassas (then known as George W. Prassas
& Company) entered into a joint venture agreement (the
with Alexander Construction Company ("Alexander") for the
proposed development in three approximately equal Project
Areas of acreage in Romeoville then owned by Alexander. At
issue in this action is the nine-acre tract referred to in the
Agreement as Project No. 1. In essence the Agreement provided
for Prassas to be the developer and Alexander to be the
financier. Title to the real estate was to be held in a
LaSalle National Bank land trust, with the beneficial interest
of Prassas to be assigned to Alexander (though not
specifically so stated, obviously as security for its
financial advances to the Venture).
Financial arrangements regarding the Venture were
straight-forward as such ventures go. After improvement of the
property the net cash flow was divided equally between the
venturers, with Alexander "to the extent permissible under the
Internal Revenue Code, [to] have the benefit of the entire
depreciation deduction available to the joint venture"
(Agreement ¶ 5). Upon sale of the real estate, the net proceeds
of sale after payment of mortgage and other indebtedness would
first be paid to Alexander to the extent of the agreed value of
the land and all funds advanced by Alexander, with any surplus
then to be divided equally between the venturers.
Agreement ¶ 4 provided:
It is agreed that First Party may develop Project
No. 1 in separate stages consistent with economic
operation and the terms and conditions of this
agreement shall apply separately to each stage
until the property in Project No. 1 shall have
been fully developed.
Agreement ¶ 7 gave Alexander an option to acquire Prassas'
joint venture interest within "ninety days after completion and
opening for business of a minimum of 500 front feet of store
units constituting the entire planned portion of Project No.
1. . . ." It went on to provide:
In the event this option is not exercised, the
joint venture shall continue and the parties
agree that thereafter they shall offer the
property for sale and [Prassas] shall be the sole
designated agent to offer the property for sale.
Agreement ¶ 8 required that "[i]n the event that the property
is sold as vacant, both parties must be in agreement. . . ."
Except for the provisions just quoted and summarized, the
Agreement was silent on the subjects of its term or its
Initial development of the property involved a small
shopping center (about 31,000 square feet of store area, with
a Jewel store of 15,000 square feet as the major tenant)
occupying about five of the nine acres, begun and completed
promptly after entry into the Agreement. No other development
took place until after 1970, when Prassas negotiated a new
Jewel lease calling for remodeling of the existing store and
a 25,000 square foot addition. Because that deal would have
required an estimated additional $300,000 capital contribution
by Alexander over and above the added mortgage financing
obtainable by Prassas, the affidavit submitted by Nicholas W.
Prassas ("Nicholas") with the current Prassas motion states:
Alexander initially objected to this second phase
of the development of Project 1 and proposed that
Prassas Company buy Alexander's interest in the
Prassas rejected that offer, Alexander ultimately proceeded
(with a somewhat smaller capital contribution) and the
addition was built in 1972. No other development has taken
place or is now planned, and now Meridian (which claims to be
the present successor to the Alexander joint venture interest)
Initial development of the property in 1961 comprised
approximately 281 front feet of store units. Another 175 front
feet were involved in the 1972 addition. Thus the development
to date aggregates 456 front feet, and the point (500 front
feet) that Agreement ¶ 7 called "the entire planned portion of
Project No. 1" and that would trigger the option under that
Paragraph has never been reached.
In August 1972 Prassas received a Notice of Assignment,
stating that Alexander had sold and assigned its entire
interest in the Agreement to Allister Construction Company
("Allister"). Without any formal consent being asked by
Allister or given by Prassas, Prassas thereafter treated
Allister in all respects as its fellow joint venturer. Some
two and one-half years later Allister found it necessary, as
part of a financing transaction with the Continental Bank, to
ask a formal acknowledgement of its succession to all of
Alexander's interest under the Agreement. Prassas immediately
complied with that request.
From the time of its incorporation in 1972 (just prior to
its transaction with Alexander) Allister was a wholly-owned
subsidiary of Meridian.*fn1 In connection with a 1977
transaction in which certain Allister employees were acquiring
a stock interest in that corporation (to give them an equity
participation in another real estate project), Meridian
required Allister to transfer to Meridian all of its other
property interests, including the interest in the Hampton Park
Shopping Center and the Venture.
Accordingly on February 7, 1978 the same lawyer who had
acted for Allister in notifying Prassas of the
Alexander-Allister transaction sent Prassas the following
On August 30, 1972 the undersigned advised you of
the assignment by Alexander Construction Company
to Allister Construction Company of the
beneficial interest of Alexander Construction
Company in the trust referred to above. Please be
advised that Allister Construction Company, by
assignment dated June 14, 1977 has assigned to
Meridian Homes Corporation the beneficial
interest of Allister Construction Company in said
In response to Nicholas' subsequent telephone call, the
attorney sent him on February 10, 1978 the copy of the
assignment of beneficial interest (the conventional LaSalle
National Bank form of assignment) covering "all our rights,
titles, powers, privileges and beneficial interest, in and to
all (100%) of the entire beneficial interest in, to and under"
the LaSalle National Bank land trust agreement (thus including
the Prassas collateralized interest). That assignment was made
subject to the Prassas power of direction as to leases,
mortgages and property operation, but specifically required
written approval of Meridian for any conveyances of the joint
venture real estate.
Again as with the Alexander-Allister transfer, no formal
consent was asked of or given by Prassas. However, the
following is reflected and uncontested in the parties'
submissions with their cross-motions for summary judgment:
1. Ever since the assignment 50% of the cash flow from the
property has been sent to Meridian not Allister. Meridian and
not Allister has been given "the benefit of the entire
depreciation deduction available to the joint venture" as
provided in Agreement ¶ 5.
2. Prassas has not communicated any requests for approvals,
any accountings or any other communications relating to the
Venture or its status to Allister since receiving notice of
3. After the notice of assignment Meridian's general
counsel, John Winston, has met on numerous occasions with
Nicholas "to discuss past dealings of the joint venture as
well as future dealings of same." Winston "has been the
representative of Meridian who has dealt with Prassas'
representatives with respect to the operation of the Venture."
At no time during those meetings or "in any communications
representatives of [Prassas] concerning the joint venture has
[Winston] been advised that Meridian . . . is not the joint
venturer of [Prassas]" (that position was first asserted by
Prassas December 13, 1979, in response to Meridian's December
3, 1979 notice that it wished to withdraw from and dissolve the
4. On December 7, 1978 certified public accountants P.L.
Crawford & Co., employed by Prassas as the outside auditors
for the Venture, issued to Prassas their certification of the
statements of cash receipts and disbursements of the Venture
for the year ended November 30, 1978, a copy of which has been
provided to Meridian. Those financial statements were based
solely on information derived from Prassas (no Meridian
personnel having provided any information to the Crawford
firm). Note 2 to the certified financial statements read:
Effective January 1, 1978 Meridian Home Corp.
acquired the interest of Allister Construction
Co. in Hampton Park Terrace Shopping Center.
Nicholas' December 23, 1980 affidavit, furnished in response
to the Court's request, states only with respect to Note 2:
That statement does not reflect any entry on the
books and records of the Joint Venture as
maintained by Prassas Company, nor does it
actually reflect any document in the possession
of Prassas Company or to which Prassas Company is
a party, nor is Note No. 2 referenced in the
statements.*fn2 Note No. 2 represents the
unsolicited conclusion of Crawford as to the
legal effect of transactions to which neither
Prassas Company nor the Joint Venture were
parties. Prassas Company does not agree with said
statement, and it is not material or relevant to
the accuracy of the Cash Receipts and
Disbursement Statement prepared by Crawford.
It is noteworthy that Nicholas' affidavit is wholly silent as
to any objection to, or attempted correction of, Note 2 having
been made by Prassas.
5. Among the post-assignment written communications from
Nicholas to John Winston of Meridian are the following:
(a) In an August 14, 1979 letter Nicholas wrote:
Thought it prudent that you should see a copy of
the Lease for the restaurant in Romeoville,
Hampton Park Terrace Shopping Center. This Lease
is before the tenants' attorney awaiting
Would like to call your attention to the fact
that these tenants had a right to assign to a
corporation in their previous Lease and were
released from liability after they had completed
five years of the term.
Enclosed for your perusal is a copy of page 8,
Section 11 of the previous Lease in case their
attorney makes a similar request. If you have any
doubts about acquiescing to that kind of a
change, please notify me.
(b) On August 29, 1979 Nicholas wrote:
In the event the Lease is executed by the tenants
tomorrow, it will be necessary to give them a
release, which is enclosed for your approval. In
this way, we could conclude the transaction.
In the event we encounter new crises, I will give
them a one-year lease, which will allow ample
time for them to find buyers who would make a
lease on new terms with us. At this point, I
think this is the best way to handle the
Please sign and return the letter of agreement
and retain the copy for your files.
(c) In the enclosed form of release (an August
30, 1979 letter addressed to the tenants),
Nicholas wrote (emphasis added):
Please be advised that we are authorized,
as the agents for the beneficiaries of LaSalle
National Bank Trust No. 24739, to agree with
you. . . .
Approval was provided for and executed by
Meridian (Prassas having prepared the form for such
(d) On June 20, 1980 Prassas sent the same
tenant's proposed release for Meridian's approval.
Such approval was provided for and executed by
Meridian (Prassas having added the provision for
Meridian's approval to the tenant's form of
release, which had not contained such a provision).
Meridian's Status as a Joint Venturer
It would be charitable to characterize Prassas' arguments on
this score as specious, for they lack even the surface
plausibility necessary to earn that label. There is no room in
this case for application of the partnership law distinction
between the sale of an interest in partnership assets (which
does not carry with it partnership status) and the assignment
of the partnership interest itself, which requires the consent
of the other partner before the assignee becomes a partnership
member (Ill.Rev.Stat. ch. 106 1/2, § 18(g)).
Based on the uncontroverted evidence submitted by the
parties, the Court concludes that the provisions of the
Illinois Uniform Partnership Act were satisfied because
Prassas consented to Meridian's becoming the successor joint
venturer to Allister.*fn3 Such consent was manifested by
Prassas' conduct, recited in detail in the "Facts" section of
this opinion and not necessary to be repeated here.*fn4
Indeed, Prassas seeks to rely on Ill.Rev.Stat. ch. 106 1/2, §
27(1) to contrast an entry into a partnership with the
assignee's mere right to receive partnership profits:
A conveyance by a partner of his interest in the
partnership does not of itself dissolve the
partnership, nor, as against the other partners
in the absence of agreement, entitle the
assignee, during the continuance of the
partnership to interfere in the management or
administration of the partnership business or
affairs, or to require any information or account
of partnership transactions, or to inspect the
partnership books; but it merely entitles the
assignee to receive in accordance with his
contract the profits to which the assigning
partner would otherwise be entitled.
Yet Prassas itself recognized and acted on Meridian's right to
participate in management and administration, to receive
information on account of partnership transactions and to
receive the Venture's financial statements. It accorded
Meridian the depreciation treatment specifically provided by
the Agreement for its fellow joint venturer, not for a mere
distributee of the money representing an assignor venturer's
share of profits. All these things flatly belie Prassas'
Moreover, even apart from the fact that Prassas consented by
its actions to Meridian's having become a member of the
Venture, there are two other independent grounds for the
rejection of Prassas' argument:
1. Meridian of course knew of the fact that its subsidiary,
Allister, had become a joint venturer, and was treated by
Prassas as such, simply by virtue of an instrument of
assignment from Alexander comparable to that later entered
into between Allister and Meridian. That earlier instrument
did not call for Prassas' consent to the assignment. Thus all
of the classic ingredients of estoppel are present against
Prassas regarding the Allister-Meridian assignment.
2. Under partnership law no partner has any assignable
interest in any specific asset of the partnership
(Ill.Rev.Stat. ch. 106 1/2, § 25(2)(b)), but a partner has an
assignable interest in the partnership itself (id. at § 27(1)).
It is an assignment of the latter interest that gives an
assignee the right to profits but not to partnership status.
But what Meridian received from Allister was an assignment of
the beneficial interest in the real estate, which was and is
the principal specific asset of the partnership. Prassas
honored and acted in accordance with that assignment, ratifying
its validity as a matter of law and thereby treating Meridian
as a partner-joint venturer. Thus the doctrine sought to be
invoked by Prassas does not in terms apply. These distinctions
are of course technical, but nothing more is due to the
hypertechnical — and equitably and legally unsound —
arguments advanced by Prassas.*fn5
Dissolution of the Joint Venture
One of the many flaws in the Erie v. Tompkins doctrine is
that it places the federal courts not on a parity with the
state courts in diversity cases (as its proponents claim), but
rather makes them subordinate. If a lower state court regards a
decision of its higher court as outmoded or too broad, it may
reach a different decision and leave review to the higher
court. That luxury is not permitted to the federal court, which
must slavishly follow the state precedent.*fn6
This action exemplifies the difference. In Maimon v. Telman,
40 Ill.2d 535, 538, 240 N.E.2d 652 (1968), the Illinois Supreme
This court has indicated that joint adventures
have, in general, the legal incidents of a
partnership. (Ditis v. Ahlvin Construction Company,
408 Ill. 416, 427 [97 N.E.2d 244]; Harmon v.
Martin, 395 Ill. 595 [71 N.E.2d 74].) Under
familiar rules of partnership, if no date is
specified in the agreement it may be terminated at
the will of either partner. (Ill.Rev.Stat. 1965,
chap. 106 1/2, par. 31.) Defendant contends that
some authorities do not apply the partnership rule
to termination and cites Eagle Picher Co. v.
Mid-Continent Lead & Zinc Co. (10th Cir.),
209 F.2d 917, as supporting such a view. In that case,
although the opinion stated that a joint adventure
is generally considered a partnership, the court
held that there could be no termination of a joint
adventure by unilateral action until its purpose
was accomplished. "As a general rule, if no date is
fixed by the contract of joint adventure for its
termination, the agreement remains in force until
its purpose is accomplished, or until such
accomplishment has become impracticable." (30
Am.Jur., Joint Adventures, sec. 28.) We think the
rule is sound.
It thus made a distinction (one of the few) between the law
applicable to joint venturers and partnership law generally,
under the latter of which an agreement lacking a termination
date or term makes the partnership terminable at will,
Ill.Rev.Stat. ch. 106 1/2, § 31.
Meridian seeks to rely on two Illinois Appellate Court
decisions, one before Maimon and the other after: State House
Inn Corp. v. Polikoff, 86 Ill. App.2d 97, 230 N.E.2d 283 (1st
Dist. 1967) and Polikoff v. Levy, 132 Ill. App.2d 492,
270 N.E.2d 540 (1st Dist. 1971). Despite Prassas' efforts to
distinguish the cases, this Court views the two Polikoff cases
as essentially inconsistent with the Maimon doctrine. But an
Illinois Appellate Court cannot of course overrule the Illinois
Supreme Court, as Prassas correctly observes, and this Court
therefore decide that it prefers Polikoff and therefore ignore
Because "no date is fixed by the [Agreement] for its
termination," the question as to termination becomes whether
the Agreement's purpose has been accomplished or
accomplishment has become impracticable. This Court finds
persuasive Prassas' argument that the 500 front foot provision
of Agreement ¶ 7 represents a floor for the concept of "fully
developed" in Paragraph 4, so that it cannot be said that the
Agreement's purpose as to all of Project No. 1 "is
accomplished." And though on a trial the finder of fact might
determine that "such accomplishment has become impracticable,"
on Meridian's motion for summary judgment it would be improper
to make such a determination.
However, the parties have paid insufficient attention in
their briefs to the Agreement provision this Court finds
dispositive of the present controversy, Paragraph 4 (emphasis
It is agreed that First Party may develop Project
No. 1 in separate stages consistent with economic
operation and the terms and conditions of this
agreement shall apply separately to each stage
until the property in Project No. 1 shall have been
Prassas (page 11 of its November 13 memorandum) and Meridian
(page 10 of its September 22 memorandum) agree that the
construction to date represents "separate stages" of the
development of the property, as indeed the realities of the
situation compel. What Prassas chooses to ignore in its
arguments is the provision underlined in the above quotation.
Prassas gives that provision no meaning, and it is fundamental
in contract law that a document is to be construed so as to
give meaning to each of its provisions.
This Court concludes that the underlined language means
clearly that where the joint venturers have chosen — as they
did here — to make the initial shopping center development a
separate stage, and the remodeling and expansion of the Jewel
store a separate stage (those being admittedly the "separate
stages consistent with economic operation" when they were
respectively constructed), the intention was to treat the
aggregate of those separate stages as a separate joint venture.
That is the normal thrust of the Agreement provision that "the
terms and conditions of this agreement shall apply separately
to each stage."
There is no question that the Agreement's purpose of
development "is accomplished" with respect to the portion of
the property involved in those stages, a discrete tract of
some five acres. That portion has been operated as an integral
and self-contained unit for another eight years without any
plan of further development. Accordingly, Maimon by its terms
permits termination of the joint venture between the parties as
to that portion of the property. As for the remainder of the
property, the joint venture may continue in effect until either
Maimon condition has been satisfied, or until the parties agree
in accordance with Agreement ¶ 8 to sell that property as
This Court finds that (1) with respect to (a) Meridian's
membership in the joint venture and (b) accomplishment of the
joint venture's purposes regarding the presently improved
portion of the property (the separate stages chosen by the
parties themselves), there is no genuine issue as to any
material fact and (2) with respect to the remainder of the
property, there are genuine issues as to material facts.
Meridian is therefore entitled to a judgment as a matter of
law with respect to its joint venture membership in the
approximately five acre tract now improved and operating as a
shopping center, but its motion for partial
summary judgment is denied as to the remaining joint venture
property. Prassas' cross-motion for summary judgment is
denied. Meridian is directed to submit a proposed form of
order for the dissolution of the joint venture relating to the
presently improved portion of the property on or before
January 20, 1981, and Prassas is ordered to submit any
comments on the proposed form of order on or before January