Appeal from the Circuit Court of Cook County; the Hon. Albert
S. Porter, Judge, presiding.
JUSTICE MCGLOON DELIVERED THE OPINION OF THE COURT:
Plaintiff filed an action seeking an accounting of partnership assets derived from trading on the International Monetary Market. The trial court held that an accounting was not warranted and entered judgment for defendant. The trial court also denied defendant's motions for attorney fees.
On appeal, plaintiff contends (1) the trial court erred in admitting extrinsic evidence to interpret the terms of a partnership agreement and (2) the finding that plaintiff allowed defendant to use a partnership asset for defendant's benefit is not supported by the evidence. In a cross-appeal, defendant argues the trial court erred in denying his motion for fees.
Plaintiff Melvin DeGraff and defendant Burton Kaplan were partners in the accounting firm of DeGraff, Kaplan & Company. In October 1973, they purchased a membership seat on the International Monetary Market (IMM), a division of the Chicago Mercantile Exchange. Each contributed one-half of the purchase price of $14,500. Their written agreement provided:
"Melvin H. DeGraff and Burton R. Kaplan hereby agree that they are equal partners in the below described venture. Any profits, expenses, or other obligations or receipts from the venture received or paid by either of the parties shall be held in trust for the benefit of the parties or paid on behalf of both parties. Name of Venture: Membership Seat on the International Monetary Market of the Chicago Mercantile Exchange. Other Parties involved, if any: None.
/S/ Melvin H. DeGraff /S/ Burton R. Kaplan"
The agreement was a blank partnership form. DeGraff filled in the name of the parties and the description of the venture.
Kaplan acquired the membership and opened the trading account in his own name. On the application for membership, Kaplan noted that he intended to assign the right of membership commission rates to DeGraff, Kaplan & Company when various future positions were closed. The condition never occurred and therefore the assignment was not made.
Near the time DeGraff and Kaplan purchased their membership seat, DeGraff purchased another IMM seat in his own name in order to conduct his own trading. Vittorio Laudati paid the purchase price. DeGraff applied for a membership but conducted no trading. The seat was eventually sold. The agreement entered into by DeGraff and Laudati distinguished between trading and the purchase of a seat. It provided that only Laudati would benefit from any increase in the value of the membership, but that Laudati would not participate in trading profits or losses.
In December 1974, Kaplan opened a trading account with his personal funds. Kaplan testified that DeGraff did not object and made no claim to the trading proceeds until July 1978. DeGraff never offered to contribute to the trading account nor did Kaplan ask for contributions from DeGraff. On the other hand, DeGraff testified that he asked Kaplan several times each year about the results of trading and that he relied on Kaplan's representations regarding trading profits and losses. In 1974, 1975, and 1976, Kaplan told him no profits or losses occurred. DeGraff further testified that in 1977 and 1978, Kaplan stated DeGraff would get his share of the profits, but no distribution could be made because he needed the funds for trading. Kaplan never produced trading records for the account when DeGraff requested them.
Kaplan reported the trading profits and losses on his personal tax returns. DeGraff neither listed profits or losses nor claimed any right to them on his tax returns. Richard Hoeh, a certified public accountant with a graduate degree in business administration and a former employee of the Internal Revenue Service, testified as an expert witness. He testified that if DeGraff believed he had an interest in the trading profits or losses, he was required to disclose this fact on his tax returns even if he did not know the specific amount. He further testified that he examined the returns filed by DeGraff and Kaplan in the years 1974 through 1977. Reporting capital gains and losses realized by trading on the IMM would have benefitted DeGraff in these years, but DeGraff ignored them. Only Kaplan reported them.
Lenore Annes, a secretary for the accounting firm of DeGraff, Kaplan & Company, testified that in 1977 and 1978, DeGraff stated he wanted to restructure the partnership agreement with Kaplan so that he would profit from the trading. DeGraff wanted an agreement similar to that entered ...