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Mogul v. Tucker





APPEAL from the Circuit Court of Cook County; the Hon. GEORGE J. SCHALLER, Judge, presiding.


Rehearing denied January 11, 1982.

Plaintiff filed a complaint for an accounting and for specific performance of an agreement under which he claims a 25% interest in a shopping center project. The trial court granted defendant's motion to dismiss the action as being barred by laches. The sole issue raised on appeal is whether the laches defense was properly applied under the circumstances of this case. We reverse and remand.

The facts, contained in the complaint and parties' affidavits, are undisputed and may be stated briefly. On October 15, 1974, plaintiff, defendant, Roy Gottlieb, and Alan Inbinder, as general partners, entered into a limited partnership agreement forming Kenroy Ventures, Ltd. One purpose of the partnership was to acquire real estate for investment and development. Concurrent with this agreement, the general partners executed a second agreement which provided a method by which the individuals could participate in the investment opportunities tendered to any one of them. In pertinent part, this agreement provided as follows:

"1. Without affecting any obligation imposed on a party hereto by reason of any other agreement or by operation of law, should an opportunity for investment in a real estate transaction be tendered to one of the parties hereto (`Offeror'), such opportunity shall be made available to the other parties hereto unless the Offeror elects to make such opportunity available to Kenroy Ventures, Ltd., or Kenroy, Inc., (`Kenroy'); providing, if the Partnership or KENROY rejects the opportunity, the Offeror shall then tender the same to the other parties hereto, and providing further, if the Offeror is MOGUL, only 70% of the opportunity need be tendered in accordance with the provisions hereof. All tenders shall be made within a reasonable time, depending upon the circumstances then involved.

2. Should a party hereto desire to take advantage of the tender, he shall be entitled to do so on the same basis as he participates in the Partnership, that is, an interest of 30% to Gottlieb, 30% to TUCKER, 30% to Inbinder and 10% to MOGUL. If one or more parties hereto decline the opportunity, the interest shall be reallocated among participants in the ratio which the interest of each bears to the aggregate interests of participants."

In early March 1977, defendant obtained the opportunity to acquire vacant land in Glenview, Illinois, for development as a shopping center. He offered participation in the venture to Kenroy Ventures, Ltd., Kenroy, Inc., Gottlieb, and Inbinder, all of whom declined the opportunity. By the terms of paragraph 2 of the agreement, therefore, plaintiff became entitled to acquire a 25% interest in the investment opportunity. The offer was never tendered to plaintiff, however, and plaintiff first learned of the matter on March 18, 1977. Plaintiff made repeated attempts to assert his participation right, but was rebuffed by defendant. On May 29, 1979, 26 months after learning of the investment opportunity, plaintiff filed his complaint.

Defendant moved the trial court to dismiss the action on the grounds of laches and certain other defenses which are no longer at issue in this case. In support of his motion, defendant filed his affidavit, which stated that the shopping center, known as Plaza Del Prado, was begun on March 1, 1977, when he and 23 others formed a limited partnership. Defendant was in charge of arranging and overseeing the financing, construction, and operation of the project. As a general partner defendant was responsible for over $6,000,000. In addition, he personally guaranteed more than $7,000,000. Defendant further stated in his affidavit that he saw plaintiff daily during the 2-year period and that plaintiff had expressed his intention to file suit to enforce his rights as early as the summer of 1977. Defendant told him to do so if he desired.

In opposition to defendant's motion and memorandum, plaintiff filed his own affidavit and response. In the affidavit, plaintiff stated that he had initially demanded participation in the venture approximately March 18, 1977, when he first learned of defendant's actions. Further, on April 8, 1977, and April 26, 1977, plaintiff had sent defendant memoranda in which he repeated his request to be allowed to participate in the investment. In response to the April 8 memorandum, defendant had written,

"I've gone through this with you more than once — and refuse to be harassed on any ongoing basis — This may have been handled poorly but I consider a majority agreement between the major stockholders sufficient to allow me to proceed in the fashion I feel is right * * *."

Plaintiff further averred that after making repeated attempts to resolve the controversy and obtain his participation interest, he resigned from Kenroy, Inc., in 1979 and shortly thereafter filed suit. The reason plaintiff gave for not suing earlier was that he feared reprisals from his employer, Kenroy, Inc., whose principal operating officers and major shareholders were defendant and Gottlieb. Further, he had hoped to obtain an amicable resolution of the controversy through his discussions with the other general partners.

Following a hearing on defendant's motion to dismiss the action, the trial court agreed that laches should be imposed as a bar to plantiff's action. In response to plaintiff's counsel's argument that defendant was not prejudiced by the delay, the court reasoned:

"You now have a * * * completed development that is completely in operation now and is ongoing, as compared against twenty-six months ago you had a[n] embryonic situation. That is ...

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