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Monteleone v. Monteleone

OPINION FILED AUGUST 28, 1986.

JERRY MONTELEONE, PLAINTIFF-APPELLEE,

v.

NICK MONTELEONE ET AL., DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Cook County; the Hon. Charles E. Freeman, Judge, presiding.

JUSTICE MCMORROW DELIVERED THE OPINION OF THE COURT:

Nick Monteleone and Lorenzo Monteleone (Nick and Lorenzo) appeal from the order of the circuit court of Cook County that directed the judicial sale of the Monte Auto Body Shop, of which Nick and Lorenzo are partners in conjunction with Jerry Monteleone (Jerry). The primary question presented for our review is whether the trial court erred in ordering a judicial sale of the partnership assets prior to adjudicating whether Nick and Lorenzo have a right to retain the partnership business and reimburse Jerry for the value of his interest in the partnership on the ground that Jerry wrongfully terminated the partnership.

For the reasons set forth below, we reverse and remand for further proceedings consistent with the views expressed herein.

BACKGROUND

Jerry instituted proceedings to dissolve his partnership with Nick and Lorenzo in the Monte Auto Body Shop on January 5, 1984. Thereafter Nick and Lorenzo filed an answer to Jerry's complaint and presented a counterclaim requesting dissolution of the partnership and recognition of their right to continue the business and to reimburse Jerry for his interest in the partnership, less damages for his wrongful termination of the partnership.

It is undisputed between the parties that Jerry, Nick, and Lorenzo formed an oral partnership in April 1979 to own and operate an automobile-body-repair business named Monte Auto Body Shop in Melrose Park. Jerry, Nick, and Lorenzo dispute who among them caused the dissolution of the partnership.

Jerry stated in his complaint that Nick and Lorenzo "wrongfully excluded [Jerry] from the partnership premises" on or about October 31, 1983, thereby effecting a dissolution of the partnership. He alleged that Nick and Lorenzo subsequently failed to conclude partnership business, but instead continued to operate the auto-body-shop partnership without complying with the requirements of section 38(2)(b) of the Uniform Partnership Act (Ill. Rev. Stat. 1985, ch. 106 1/2, par. 38(2)). Jerry's pleading requested dissolution of the partnership, judicial sale of partnership assets, an accounting of partnership funds, an award of one-third of the partnership's monies and proceeds of sale, and damages for the wrongful termination of the partnership by Nick and Lorenzo.

The counterclaim of Nick and Lorenzo claimed that it was Jerry's wrongful conduct that had caused the dissolution of the partnership. This behavior included, in essence, misappropriation of partnership funds, failure to contribute to the operation of the business, a wrongful demand that Jerry's son be made a partner in the business and that a certain employee be immediately discharged, and refusal to return partnership books and records. They stated that after the partnership "was dissolved in October of 1983 [by Jerry's wrongful termination]," Nick and Lorenzo, "being a surviving majority, formed a new partnership." Apparently this enterprise operates under the name Monte Auto Body Shop in the same location as the presently disputed partnership and continues ownership and operation of that partnership in auto-body-repair work. Based upon these allegations, Nick and Lorenzo requested that the court declare the partnership dissolved by virtue of Jerry's wrongful conduct in October 1983, the value of partnership assets be determined as of October 1983, Nick and Lorenzo be permitted to purchase Jerry's interest, Nick and Lorenzo "be decreed to be the surviving partners and to continue the partnership business," an accounting be performed, and Jerry "be assessed all damages and costs incurred by the partnership and/or [Nick and Lorenzo]" because of Jerry's wrongful termination of the partnership.

Although hearings on the parties' allegations had commenced, the trial court never made a final adjudication of the merits of their claims. Thereafter Jerry filed a motion requesting that the court order a judicial sale of partnership assets prior to the court's decision on the issues of the parties' interests in the business, the dissolution of the partnership and its wrongful termination, and the parties' rights upon dissolution. Following briefing and oral argument, the trial court granted the motion in a written order for the judicial sale of partnership assets. The court order found that the partnership was dissolved over two years ago. Based upon "the obvious dispute concerning the value of assets," the court ordered a judicial sale of "all of the partnership assets" with directions that, following the sale, "the sheriff shall * * * hold the proceeds subject to confirmation and appropriate proceeds order by this court based upon reasonable value and other equitable and legal considerations." The court found no just reason to delay enforcement of or appeal from its order of judicial sale. The timely expedited appeal of Nick and Lorenzo followed.

OPINION

As previously noted, the primary question presented for our review is whether the court could properly order a judicial sale of the "partnership assets" of Monte Auto Body Shop prior to a determination of the claim of Nick and Lorenzo that they could continue operation of the partnership business because of Jerry's wrongful termination of the partnership.

• 1 We conclude that the trial court's order of a judicial sale at this juncture in the proceedings was reversible error. Under section 38(2)(b) of the Uniform Partnership Act (Ill. Rev. Stat. 1985, ch. 106 1/2, par. 38(2)(b)), innocent partners have the right to continue partnership business where another partner has wrongfully terminated the partnership. Nick and Lorenzo thus may have the right to continue ownership and operation of the Monte Auto Body Shop partnership if they are able to establish at a subsequent proceeding that Jerry's conduct constituted a wrongful termination of the partnership. Accordingly, we reverse and remand for further proceedings.

The rights of partners upon a partner's wrongful termination of the partnership are governed by section 38(2) of the Uniform Partnership Act (Ill. Rev. Stat. 1985, ch. 106 1/2, par. 38(2)). This section provides in relevant part:

"(2). When dissolution is caused in contravention of the partnership agreement the rights of the ...


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