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11/13/87 Kenneth R. Hoover, v. Kent R. Crippen Et Al.

November 13, 1987

KENNETH R. HOOVER, PLAINTIFF-APPELLEE

v.

KENT R. CRIPPEN ET AL., DEFENDANTS-APPELLANTS



APPELLATE COURT OF ILLINOIS, THIRD DISTRICT

516 N.E.2d 722, 163 Ill. App. 3d 858, 114 Ill. Dec. 567 1987.IL.1682

Appeal from the Circuit Court of Rock Island County; the Hon. Edward Keefe, Judge, presiding.

APPELLATE Judges:

JUSTICE HEIPLE delivered the opinion of the court. SCOTT and STOUDER, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE HEIPLE

In 1982, Kenneth Hoover, the plaintiff, and Crippen, Reid and Bowen, the defendants, established a partnership for the practice of accounting. The firm name was Crippen and Hoover. Paragraph 11 of the partnership agreement provided in part:

"Each partner shall be entitled to an allocation of his proportionate share of the profits in excess of any profits specially allocated (referred to herein as base salaries, but not in a taxation sense) to Partners of the Partnership as his interest in the capital in the Partnership bears to the total capital . . .."

The partnership also entered into a cross-purchase agreement pertaining to the partners' respective rights and liabilities in the event of disability, death, withdrawal, retirement or dissolution. The cross-purchase agreement provided that a partner had the right to retire at age 60, but the plaintiff began contemplating retirement at an earlier age if two matters could be worked out: (1) development of a retirement or pension payment and (2) sale of his 50% interest in the building occupied by the partnership or rental of the premises on a commercially acceptable basis.

While these two things were supposedly being worked out, the partners entered into an addendum to the partnership agreement effective October 1, 1983, the beginning of the partnership's fiscal year. It reflected their agreement that Hoover would no longer be obligated to spend full time in the practice, and provided that the plaintiff would receive an agreed hourly rate of $25 an hour for 1,000 to 1,100 hours of guaranteed work for October 1, 1983, through September 30, 1984. A second written addendum was executed for the period of October 1, 1984, through September 30, 1985. It provided that the plaintiff would receive $26 an hour for 1,100 hours of work. A third addendum was executed for October 1, 1985, through September 30, 1986. It guaranteed the plaintiff 400 hours of work for October through April 15, 1986, at $28 per hour. The final addendum further provided that no work was to be performed by the plaintiff subsequent to April 15, 1986, except on a requested basis, and that all parties contemplated the retirement of the plaintiff effective September 30, 1986.

All three addenda continued to refer to the plaintiff as a partner, and stated that the lesser number of hours to be worked by him were not to be construed as incapacity or retirement, but as unpaid vacation. The three addenda further provided:

"If partners Crippen, Reid, and Bowen, or [the plaintiff], decide that the above detailed arrangement is not properly working, or is not in the best interests of the Partnership, the parties agree to compensate [the plaintiff] his hours to date and revert to the original Partnership Agreement and Partners Cross Purchase Agreement for remedies."

In June of 1986, the defendants notified the plaintiff that an agreement had been prepared for his signature which indicated that he had withdrawn from the partnership on April 30, 1986. When the plaintiff learned that the document contained no provision for a retirement or pension payment and no provision for the sale of his 50% interest in the partnership building, or rental of the premises on a commercially acceptable basis, he refused to sign the withdrawal agreement. The remaining partners then sent the plaintiff a letter, dated June 27, 1986, indicating that his status as partner had been terminated as of April 30, 1986. They also tendered a check for the balance of his capital account.

Deciding that the addenda agreements were not working properly, the plaintiff notified the partnership, via letter dated July 14, 1986, that he was electing to revert to the original partnership agreement and cross-purchase agreement and that he would be resuming full-time duties. Before he could resume such duties, however, the defendants elected to withdraw from the partnership effective July 31, 1986. The withdrawal of a majority of the partners automatically dissolved the partnership, according to the partnership agreement, and thereby required liquidation.

When the plaintiff and the defendants could not agree to a division of the partnership assets, the plaintiff filed this action for liquidation. In his prayer for relief, the plaintiff asked the court to supervise the division of the assets of the partnership, to order an accounting of the partnership for its last 10 months in operation, and to distribute the assets of the partnership to the partners in their fair share. There were initial proceedings whereby the plaintiff obtained an injunction prohibiting the defendants from taking certain actions. This court affirmed the granting of the injunctions. (Hoover v. Crippen (1987), 151 Ill. App. 3d 864.) During trial, the court heard and received evidence concerning the agreements entered into by the parties and evidence concerning the proper liquidation of a partnership. Following trial, the court found that the defendants' letter of June 27, 1986, wherein the defendants stated that the plaintiff's status as partner was terminated, and the plaintiff's letter of July 14, 1986, whereby he reverted to the original partnership agreements, effectively reinstated all provisions of the partnership agreement and cross-purchase agreement for the fiscal year beginning October 1, 1985, and ending with dissolution on July 31, 1986. Based on this finding, the court further found that the plaintiff was ...


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