APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. HONORABLE EVERETT A. BRADEN, JUDGE PRESIDING.
Murray, McNULTY, Cousins, Jr.
The opinion of the court was delivered by: Murray
PRESIDING JUSTICE MURRAY delivered the opinion of the court:
Thomas Argianas (Argianas), filed a verified complaint for dissolution of the partnership known as the V-31 account. Argianas asserted that a two-page handwritten document dated January 20, 1989, attached to the complaint, was a partnership agreement, which gave him a partnership interest in the V-31 account. Defendant, Joel Chestler (Chestler), filed a verified answer and counterclaim. Defendant's answer denied the material allegations of the complaint insofar as the plaintiff contended that the exhibit attached to the complaint was a partnership agreement. In addition, Chestler filed a counterclaim for alleged breach of an employment agreement. Defendant asserted that the same document which plaintiff contended was a partnership agreement, was an employment agreement, which established plaintiff's compensation as a combination of salary plus commissions based on percentage of profits. Defendant alleged that on or about May 25, 1990, plaintiff's employment was terminated byChestler for cause when he discovered that plaintiff had been involved in trading violations.
On February 16, 1992, subsequent to the filing of the complaint, Thomas Argianas passed away. Plaintiff's wife, Cheryl Argianas, as Special Administrator of the Estate of Thomas Argianas, was substituted as the plaintiff. Cheryl continued to prosecute the case in said capacity.
At a time when Judge Hall was the presiding trial court Judge of this case, the parties filed cross-motions for summary judgment. Judge Hall denied said motions, finding that there were material issues of fact that required a trial. Subsequent to this ruling, Judge Braden presided over the remainder of the proceedings in this case. After trial, the court found in favor of the defendant and against the plaintiff.
Plaintiff presents the following issues for review: (1) Whether the January 20, 1989, agreement signed by Thomas Argianas and Joel Chestler was a partnership agreement or an employment agreement; (2) Whether the Dead Man's Act should have barred defendant's references to conversations with Thomas Argianas (see 735 ILCS 5/8--201 (West 1992); and (3) Whether the trial court erred in relying on the fact that the parties failed to register their agreement with the Midwest Stock Exchange (MSE).
Attached to the complaint were two documents, a handwritten agreement signed by Argianas and Chestler dated January 20, 1989, and a letter from Argianas to Chestler dated June 1, 1990. The January 20, 1989, agreement provides:
This agreement is made between Joel Chestler and Thomas Argianas dated January 20th 1989. For the sum of fifteen thousand dollars (15,000.00) Thomas Argianas shall receive (40%) forty percent ownership in the stocks listed in the V31 account held by First Options of Chicago. Thomas C. Argianas will be listed as the registered co-specialist for these issues and he will be responsible for transactions made in these issues.
Thomas C. Argianas will also receive forty-percent ownership of any issues added to the above list that are held in the (V31) account.
Thomas C. Argianas will also receive forty-percent ownership of any issues added to the above list that are held in the (V31) account.
Thomas C. Argianas has no percentage of ownership or participation in the profits that are in the V30 account held by first options of Chicago. (sic) for C & A trading.
Thomas C. Argianas shall receive one-thousand five-hundred dollars (1500.00) per month as salary for the first six months of operation ending June 31, 1989. He will also receive (40%) forty-percent of the profits of the V31 account after expenses have been deducted.
If Thomas C. Argianas is unable to fill his responsibilities as co-specialist for more than 30 days his participation in the profits will be reduced to (20%) twenty-percent until he is able to continue upon which his participation will be (40%) forty percent.
The June 1, 1990, letter provides in relevant part:
Your recent conduct has left me with no choice but to terminate our V31 Account Partnership. Therefore, I have terminated this partnership effective immediately.
Pursuant to Ill. Rev. Stat., ch. 106, sec. 33, you are no longer authorized to act for the partnership 'except so far as may be necessary to wind up partnership affairs or to complete transactions begun but not . . . finished.'"
The testimony at trial disclosed the following facts.
The plaintiff called Chestler as an adverse witness. Chestler testified that his occupation is a trader, however, in the past he had been involved in various other types of businesses. Chestler had been a trader at the MSE for 10 years and on a day-to-day basis he makes markets on stats and trades paper that comes in from all over the country. He first meet Argianas six to eight years ago. They started to work together in approximately 1987 and continued to work together on a daily basis from 1987 to about 1988 (except for a three or four month period when Argianas was in the hospital). Thereafter, Chestler terminated the partnership. Argianas worked for Chestler for approximately a year after that. The parties worked together again all of 1989 and until approximately 1990.
Chestler identified the agreement the parties signed on January 20, 1989, stating that Argianas had prepared the document. Although Chestler read the document before he signed it, he did not have an attorney review it at that time. The last paragraph of the document which had stated that the $15,000 would be deposited in C&A's account at First Options was stricken and initialed by both parties. The parties had mutually agreed to strike the paragraph. When asked if, for the sum of $15,000, Argianas was to receive a 40% ownership in the stocks listed in the account, Chestler replied:
"You are asking me a question that I really can't answer. You aresaying 40 percent ownership in the stocks? No one has ownership in the stocks."
Chestler stated that Argianas was to receive a commission. The V-31 account was owned. Chestler owned 24 accounts, of which the V-31 was a sub-account. Chestler stated that Argianas absolutely did not own part of the V-31 account.
Chestler identified a check for $15,000, the check that Argianas gave Chestler when they signed the January 20, 1989, agreement. Chestler had deposited the $15,000 in his personal account.
After January 20, 1989, Argianas worked for the V-31 account, while Chestler managed and supervised the V-31 account. The V-31 account is a group of particular stocks (those stocks listed on the agreement of January 20, 1989). Argianas worked on those stocks on a day-to-day basis from January 20, 1989, to his termination.
After January 20, 1989, and prior to Argianas' termination, the V-31 account was at First Options. If First Options clears a trader's trades, First Options guarantees the trades. Somewhere during the aforementioned time frame, Chestler moved all the accounts to Lakeside Bank and opened a clearing account. Chestler guaranteed all the accounts. At some point during this time frame the name of the account changed, and this was the reason for the name change. Since January 20, 1989, some of the stocks in the account have stopped trading and a few other stocks were added to the account.
First Options handled the money between Chestler and Argianas generated by the V-31 account. After January 20, 1989, Chestler possessed all the rights concerning the handling of the money and the distribution to himself and Argianas. Chestler decided if distributions should or should not occur; Argianas could not take distributions without Chestler's consent.
Chestler identified the June 1, 1990, letter, wherein Argianas purported to terminate the partnership. Chestler believes that after he received the letter, he called Argianas. Chestler did not make any attempt to sell the account or liquidate his right to deal with said group of stocks. After June 1, 1990, Argianas did not receive any benefit from that same group of stocks. Chestler claimed Argianas was demanding something that he did not have the right to do.
After Argianas was told not to return, Chestler hired a clerk and another trader (Jay Kaplan). Jay Kaplan received a salary. Ultimately there was a 75 - 25 % split between Chestler and Kaplan with regard to this particular group of stocks. Kaplan did not have a written employment agreement.
Chestler did not direct the accountant to prepare a W-2 form for Argianas for 1989. Chestler did direct the accountants to prepare the1099 form for Argianas for 1989 and 1990. The form indicates that the compensation received by Argianas both in 1989 and 1990 was "non-employee compensation." The compensation represented commissions relating to the stocks Argianas worked on.
When asked if he ever repayed the $15,000 to Argianas after he terminated him, Chestler replied he gave Argianas $9,000 back, he never gave back the entire $15,000.
In the nature of rehabilitative testimony, Chestler testified that the concept of "ownership" as he understood it in terms of the January 20, 1989, agreement was as follows:
"C&A [Chestler & Argianas] is composed of three or four separate units, which is a set of stocks that each co-specialist has a right to trade. The competition in a company for the better stocks is so aggressive that co-specialists tend to feel an ownership of the stock. In other words, I have a right to trade IBM. You can't take it away from me and give it to a co-worker. IBM, you may be able to make a lot of money off it trading. In other words, what he was saying is: If I trade these stocks from the Midwest Stock Exchange --
Co-specialists become very possessive, and they feel as if they own the right to trade stock and don't want it given to somebody else. That's the concept of 'ownership' that I have."
To Chestler's knowledge and based on his experience it was not possible for Argianas, or himself, or anyone else, to actually own the stocks listed on the January 20, 1989, agreement. The statement in the agreement: "Thomas C. Argianas will be listed as the registered co-specialist for these issues, and he will be responsible for transactions made in these issues" would mean that Argianas would be in charge of the particular group of stocks for the purpose of trading. Argianas received $1,500 per month and commissions. After deducting overhead and expenses, Argianas received 40% of the net profits per month as commission.
Regarding the fact that the $15,000 was paid to Chestler individually instead of C&A trading, Chestler testified that he had come to an agreement that the $15,000 was his and that he would reimburse Argianas $1,500 for six months. Due to troubles Argianas had in the past with the MSE, the balance was held in escrow for any future penalties that might have been incurred by Chestler for either lack of supervision or some discretionary thing that he did wrong. Chestler held the balance.
Prior to June 1, 1990, there was no communication between Argianas and himself about any partnership.
On re-direct, Chestler testified that Argianas' 1099 forms for 1989 and 1990 were prepared after this lawsuit was filed.
Cheryl Argianas (Cheryl) testified that she had brought this action on behalf of the Estate of Thomas Argianas. The Estate consisted of Cheryl and her two daughters. Thomas Argianas died on February 16, 1991. Argianas went to college for about three and a half years, after which he started working for Chestler. He was an institutional broker for Mr. Tomasso and he continued to do brokerage work all of his life. Cheryl knew Chestler. After May 1990 C&A Trading did not send any of either the 40% profits or the 20% profits described in the agreement to Argianas at home.
On an offer of proof, Cheryl testified that Argianas told her the January 20, 1989, document was his partnership agreement with Chestler. She was told this numerous times.
Michael Cardin testified that he is the manager of the Market Regulation Department at the MSE. He was in charge of the financial and operational compliance of the MSE's designated members. His job includes assisting the stock exchange in enforcing its rules and regulations with respect to financial and operational issues. He knew both Argianas and Chestler. The MSE keeps "permanent exam files" on companies and individuals that are registered. The file is a record of the member or the member organization, their structure, their financial wherewithal, and all the history of that member broker-dealer registered with the market regulation department.
A broker-dealer is registered with the SEC and is a member of an exchange or a self-regulatory organization, to trade securities and other kinds of securities under law. A broker-dealer could be both an individual and a company. A specialist at the MSE is a unit assigned stocks listed on the MSE and could be a company or an individual. The specialist is responsible for the trading of those. The term for the unit is specialist. The individual that trades the stock is called a co-specialist. The specialist that's assigned that particular stock or stocks is called the specialist unit. The terms are interchangeable.
The exchange maintains the permanent exam file for regulatory purposes. Cardin is one of the custodians of the permanent exam file of C&A Trading as well as Argianas Securities, Inc. ...