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06/23/88 Robert F. Atkins Et Al., v. Rustic Woods Partners Et

June 23, 1988

ROBERT F. ATKINS ET AL., PLAINTIFFS-APPELLANTS

v.

RUSTIC WOODS PARTNERS ET AL., DEFENDANTS-APPELLEES



APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

525 N.E.2d 551, 171 Ill. App. 3d 373, 121 Ill. Dec. 493 1988.IL.994

Appeal from the Circuit Court of Du Page County; the Hon. John S. Teschner, Judge, presiding.

APPELLATE Judges:

JUSTICE NASH delivered the opinion of the court. INGLIS and DUNN, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE NASH

Plaintiffs Robert Atkins, Sheldon Bulwa, William Mueller, Richard Tyska, Paul Green, Nina Maslow and George Keyser, who are partners in Rustic Woods Partners, a limited partnership, appeal from an order of the circuit court granting the motion of defendants Rustic Woods Partners, Harold Benware, and Daniel Mesch to dismiss count III of plaintiffs' second amended complaint which sought compensatory and punitive damages for an alleged breach by defendants of fiduciary duties in connection with the sale of partnership real estate and directed plaintiffs to proceed to arbitration of their claim. Plaintiffs contend that the terms of the partnership agreement did not require arbitration and, alternatively, that defendants had waived any right to arbitration by their delay and inconsistent conduct.

Plaintiffs entered into a partnership agreement to purchase an apartment building as limited partners, and defendants Benware and Mesch subsequently became the general partners of Rustic Woods Partners. On July 6, 1979, the general partners entered into a contract for the sale of the real estate to Randolph Marsh, who, before the sale, was the attorney who had represented the partnership. This contract was consented to by partners, representing the requisite partnership percentage interests, but was later rescinded when a fire destroyed a number of the apartments. In April 1980, the general partners and Marsh entered into a new contract for the sale of the apartment building with terms and conditions substantially different than the original contract, and the limited partners did not consent to the new contract. Certain limited partners requested that the contract be rescinded because they did not consider it to be in the best interests of the partnership.

Plaintiffs commenced this action in May 1984, and in an amended complaint sought a rescission of the contract entered into between the general partners and Marsh (count I), an injunction restraining the general partners and Marsh from performing the contract (count II), compensatory and punitive damages from the general partners and Marsh for a breach of fiduciary duties in connection with the transaction (count III), and an accounting from the general partners of all partnership transactions since 1975 (count IV). The general partners moved to dismiss plaintiff's amended complaint on the grounds that under the partnership agreement they had the sole right and authority to dispose of partnership real estate, that plaintiffs failed to name all limited partners as parties to the action, and they were indispensable parties, and, to the extent plaintiff's amended complaint alleged fraud, that it failed to allege all elements of that cause of action. The trial court dismissed counts I, II and III, with leave to further amend count III, and the general partners withdrew their motion as to count IV.

Plaintiffs appealed from the trial court's orders dismissing counts I, II, and III of their amended complaint, and this court affirmed the

Subsequent to plaintiff's first appeal, the apartment building was sold, and on June 23, 1987, the general partners petitioned for an order to allow distribution of the sales proceeds and to dissolve the partnership. Defendants also moved to dismiss count III of plaintiff's second amended complaint, asserting that its allegations were moot because immediately after the sale of the property, the limited partners had been advised of their respective shares of the sales proceeds, were asked to sign a release and acknowledgement in exchange for their share of the proceeds, and five of the seven plaintiffs in this case either signed and returned the release and acknowledgement or had given it to their attorney to be exchanged for a certified check. Alternatively, the general partners asserted that the following provision from the partnership agreement dated December 9, 1975, required plaintiffs to arbitrate any dispute between partners and that the allegations contained in count III of plaintiff's complaint were a proper subject for arbitration.

"1. In the event of any dispute or disagreement between any of the Partners affecting their respective rights in this Partnership, the disputing parties shall set forth their respective positions and disagreements in writing, informally, and give them, together with written notice of the same, to the General Partners, to the effect that such dispute exists. The General Partners will then make a good faith effort to resolve the dispute or disagreement. If the dispute is not resolved at the expiration of fifteen (15) days from the time the General Partners receive such notices and statements, the entire matter shall then be submitted to arbitration as set forth in the paragraph immediately herein below.

2. If the dispute or disagreement between any of the Partners has not been resolved in accordance with the provisions of Paragraph 1 of this Article, then any such controversy or claim arising out of or relating to this Partnership Agreement, or the breach thereof, shall be settled by Arbitration to be held in Chicago, Illinois, in accordance with the rules of the American Arbitration Association then obtaining. Any decision rendered therein shall be final and binding on each and all of the Partners, and judgment may be entered thereon in the appropriate state or federal court. The arbitrators shall be bound to strict interpretation in observation of the terms of this Partnership Agreement. The successful party to any arbitration shall be awarded all costs and attorneys' fees attributable to the arbitration and the controversy to which it relates."

The trial court granted the general partners' motion to dismiss, finding that the partnership agreement mandated arbitration of plaintiffs' claim, and ordered a stay of proceedings pending arbitration. Plaintiffs again appeal, contending that the arbitration provision only applied to disputes among limited partners, that claims for a breach of a fiduciary duty are not disputes or disagreements between partners affecting their respective rights in the partnership, and that defendants waived any right to arbitration by their delay and inconsistent conduct.

Initially we note that Supreme Court Rule 307(a) permits appeal of an interlocutory order granting an injunction (107 Ill. 2d R. 307(a)), and as an order granting a stay of proceedings and compelling arbitration is analogous to an injunction, we have jurisdiction to consider this appeal. See Property Management, Ltd. v. Howasa, Inc. (1973), 14 Ill. App. 3d 536, 539, 302 N.E.2d 754; see also Cencula v. Keller (1987), 152 Ill. App. 3d 754, 756, 504 N.E.2d 997 (the trial ...


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