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Tahir Hassan v. Aqeel Yusuf and Mohammed F. Siddiqui

February 25, 2011

TAHIR HASSAN,
PLAINTIFF-APPELLEE,
v.
AQEEL YUSUF AND MOHAMMED F. SIDDIQUI,
DEFENDANT-APPELLANTS (PAK ASSOCIATES, INC. AND PRIME PETROLEUM, INC., DEFENDANTS).



Appeal from the Circuit Court of Cook County, Illinois. No. 06 CH 22974 Honorable Rita M. Novak, Judge Presiding.

OPINION

JUSTICE JOSEPH GORDON delivered the judgment of the court, with opinion. Justices Howse and Epstein concurred in the judgment and opinion.

Defendants Aqeel Yusuf and Mohammed Siddiqui appeal from a judgment of the circuit court of Cook County against defendant Yusuf for fraud, and against defendant Siddiqui for breach of contract, in which the court entered an award of rescission in favor of plaintiff and ordered a return to plaintiff of $168,724.31 for damages. Defendants contend that the judgment of the trial court against defendant Yusuf for fraud should be reversed because the evidence presented at trial was not clear and convincing. Defendants also maintain that, in any event, rescission was not an appropriate remedy in this case, and they further argue that, having awarded plaintiff rescission of the contract, the court's award of damages was unwarranted and inappropriate. Plaintiff cross-appeals from an order of the circuit court of Cook County denying his postjudgment motion to amend his complaint to join Siddiqui as a defendant in the count for fraud. Concomitantly, plaintiff cross-appeals from an order granting defendants' postjudgment motion to clarify its prior ruling, pursuant to which the court then found that Siddiqui was not liable for fraud.

BACKGROUND

This controversy arose out of the purchase of a gas station located at 16836 Oak Park Avenue, Tinley Park, Illinois, pursuant to an oral contract between plaintiff and defendants, a fact not in dispute. On November 6, 2006, after a disagreement with Yusuf and Siddiqui, plaintiff filed a complaint against defendants Yusuf, Siddiqui, Pak Associates, Inc., and Prime Petroleum, Inc., which was amended on March 12, 2007.*fn1 In the amended complaint, plaintiff states that he entered into an oral agreement with Yusuf and Siddiqui to purchase a gas station and the real property on which it was located, for which each of them would contribute $120,000. Plaintiff alleged that Yusuf falsely represented to plaintiff that "they would jointly acquire an automotive service station property and business enterprise." Plaintiff stated that "Yusuf failed to secure titled to the [p]roperty to be jointly held by the co-owners of the enterprise but instead caused such title to be conveyed solely to his corporation, Pak [Associates], Inc.," a company which is owned only by Yusuf and Siddiqui. According to the complaint, on or about August 18, 2003, "Yusuf, acting without [plaintiff's] knowledge or consent, turned the accounting and financial operation of the business over to Yusuf's corporation, Prime [Petroleum], Inc." Plaintiff alleged that Yusuf's misrepresentations were made "for the purpose of inducing [plaintiff] to invest in what he reasonably believed was to be joint ownership in the [e]nterprise, including ownership of the [p]roperty," and that plaintiff, in fact, invested $120,000 relying on those misrepresentations. In light of those allegations, plaintiff sought a judgment against Yusuf for fraud (count I) and breach of fiduciary duty (count II), and a judgment against Yusuf and Siddiqui for breach of contract (count III). He also sought a declaratory judgment that plaintiff is the owner of one-third of the gas station and the real estate (count IV), and an accounting to plaintiff of one-third of any income earned by the gas station (count V).

Defendants filed an answer in which they disputed that plaintiff purchased any interest in the gas station's underlying real estate and in which they maintain that plaintiff did not pay his share of the losses incurred by the gas station. On March 7, 2007, defendants Yusuf and Siddequi filed a counterclaim, in which they sought to recover one-third of the losses incurred by the gas station, which they alleged plaintiff was responsible for under the terms of their contract. They claim to have paid a total of $128,206 in shortages and seek reimbursement for one-third of that sum, or $42,735, from plaintiff.

The parties do not dispute that Pak Associates is a company owned only by Yusuf and Siddiqui and that the gas station in question was originally acquired in the name of Pak Associates. They also do not dispute that the financing was secured to purchase the gas station through Midwest Bank and Trust, in the name of Pak Associates. In addition, it is undisputed that the gas station's business operations were later transferred to Prime Petroleum, a company created after the purchase of the gas station, and that Pak Associates retained its underlying real estate.

At trial, plaintiff testified on his own behalf during his case-in-chief, was later called by defendants as an adverse witness during defendant's case-in-chief, and subsequently testified during his rebuttal. For the sake of composition brevity, we shall combine all of his testimony given during the various stages of trial. Plaintiff testified that he was born in Pakistan, where he acquired an associate's degree in accounting at Karachi University. Since coming to the United States in 1990, plaintiff had acquired real estate of his own and had worked at his brother's gas station for about 10 years before entering into a business relationship with defendants. According to plaintiff, he worked at his brother's gas station as a regular employee, but did not manage it. Plaintiff also testified that he met defendant Yusuf in the1990s, when they lived in the same apartment complex and they both worked at gas stations. Plaintiff explained that he developed a friendship relationship with defendant Yusuf and that their families spent time together regularly. Plaintiff acknowledged that Yusuf moved away two years before they went into business together, but maintained that they continued to see one another on a weekly basis.

Plaintiff further testified that, in 2003, he and Yusuf discussed the purchase of a gas station, and after plaintiff and defendants looked at a few stations in the Chicago area, Yusuf became interested in the Clark station in Tinley Park because it was not far from his home and it was available for purchase. According to plaintiff, his initial discussion to purchase the Clark station was only with Yusuf, but he later agreed to include Yusuf's business partner, Siddiqui, in the purchase of that gas station. Plaintiff understood that Yusuf and Siddiqui already owned a BP gas station. Plaintiff later met with defendants Yusuf and Saddiqui at their BP gas station, at which time the parties agreed that they would each contribute $120,000 to buy the Clark gas station. According to plaintiff, the parties also agreed that they would each own a one-third interest in the gas station, and defendants never mentioned to plaintiff or indicated to him that he would not acquire his own interest in the real estate on which the station was located. Under that agreement, plaintiff was to run the gas station and receive a salary as a manager and additionally, to share one-third of the profits and losses as a partner. According to plaintiff, Yusuf told him that the Clark station would cost about $800,000 and that the parties would make a down payment of $300,000 and "take a loan" from Midwest Bank for the remainder of the purchase price. Plaintiff also stated that, under the agreement, the Clark station would make the payments due on the mortgage directly to the lender, which would be deemed to satisfy "rent" payments to Pak Associates, apparently in whose name the company was originally acquired. According to plaintiff, Yusuf claimed that this arrangement would save money in taxes.

Plaintiff does not dispute that Pak Associates is owned only by Yusuf and Siddiqui. However, during plaintiff's testimony, he referred to Pak Associates as "our company" and stated that at the time of the parties agreement, he believed that he was becoming an owner of Pak Associates because Yusuf directed him to deposit his money in Pak Associates' bank account, and that was the company that took the mortgage. Although plaintiff's testimony is less than fully articulate on this point, he appeared to state that he believed that Pak Associates was taking the mortgage and holding the Clark station for the benefit of all three parties because they each were to contribute an equal amount to purchase the Clark station.

Plaintiff further testified that he learned from Yusuf that their bid to purchase the gas station was successful, and he acknowledged that he had no involvement with Bettie Smith, the realtor who assisted defendants in submitting the bid. Plaintiff also acknowledged that he had no dealings with Midwest Bank, the mortgagee, because Yusuf advised plaintiff that the "loan" would be taken in the name of Pak Associates, an accountant was retained to handle it, and neither plaintiff nor defendants needed to participate. Plaintiff averred that Yusuf told him that plaintiff did not need to be present at the closing of the transaction because the "gas station [was] in [the] company['s] name," apparently meaning that the Clark station would be acquired under Pak Associates' name. Plaintiff further testified that he "trusted" Yusuf and did not ask him about signing documents that show his investment. According to plaintiff, as of the closing date, on August 18, 2003, he had paid defendants a total of $70,000 by funding Pak Associates in that amount at defendants' direction.

Plaintiff further testified that when the parties began operating the Clark station in August 2003, Yusuf told plaintiff that they would form a separate company named Prime Petroleum and "keep Prime Petroleum for this gas station," apparently meaning that the ownership of the Clark station's business would be transferred to Prime Petroleum. However, nothing in the record indicates that plaintiff was told that the real estate on which the Clark station was located was held under separate ownership from the station's business. Plaintiff also testified that he "was thinking at that time Pak and Prime are the same."

Continuing his testimony, plaintiff stated that after closing, plaintiff began working the morning shift at the gas station, managing some of its day-to-day activities, such as working as a cashier, purchasing merchandise and paying bills by writing checks on the bank account of Prime Petroleum, which Yusuf had opened. Plaintiff also testified that he, Yusuf and Siddiqui regularly deposited cash from revenues into Prime Petroleum's account. According to plaintiff, all workers were paid in cash, which is also how he received his share of the profits when Siddiqui distributed it among the three parties each month. He also stated that he never saw any documents reporting the gas station's finances. Plaintiff further testified that revenues from cash purchases were placed in the gas stations's safe, to which he, Yusuf and Siddiqui had a key. Plaintiff also testified that Yusuf sometimes took cash from that safe and merchandise from the gas station's store. Plaintiff also testified that he used the station's revenue proceeds to make payments to Midwest Bank on Pak Associates' behalf for the mortgage on the Clark station. Plaintiff acknowledged that one of the checks written to Midwest Bank was returned for insufficient funds, and Yusuf later covered that payment.

Plaintiff also testified that in 2005, he asked Yusuf for proof of plaintiff's co-ownership of the business, and Yusuf directed plaintiff to his accountant, Asif Waheel. Waheel then showed plaintiff a document entitled "Minutes of the first meeting of the board of directors of Prime Petroleum, Inc.," and was dated May 24, 2004. Plaintiff testified that he asked Waheel where in the document it appeared that plaintiff was an owner of the property, and Waheel then told plaintiff that his name was on the document as a shareholder of Prime Petroleum and that the gas station was held in that company's name.*fn2

Plaintiff further stated that in that same year, he began to distrust defendants because he felt that he was not being "respected"as a co-owner of the Clark station, so he consulted an attorney, Mr. Michael Moses. It appears that Moses then wrote a letter to Yusuf demanding documentation of the gas station finances and of plaintiff's ownership of that station. Yusuf did not respond to the letter, reprimanded plaintiff for consulting a lawyer, and told plaintiff that they could resolve their issues among themselves.

Plaintiff further testified that he later met one individual named Mr. Javaid Khan (later identified by another witness as a real estate broker) at the gas station, who told plaintiff that he was "buying" the station and that he had already met the station's two owners. When plaintiff asked Yusuf about that matter, Yusuf confirmed that he was selling that property and told plaintiff that he would let him know when the deal is finalized. According to plaintiff, he told Kahn that if Kahn bought the Clark station, plaintiff wanted to remain a co-owner of the station and work with Kahn. Accordingly, plaintiff stated that he signed a contract with Kahn describing himself as one of the buyers of the station, along with another buyer named Jana Ignatova, on whose behalf Kahn would purchase the station. Plaintiff subsequently had a meeting with Yusuf, Siddiqui and Khan, at which time defendants told Khan that plaintiff had an ownership interest only in the gas station business, a statement that plaintiff did not appear to understand at the time, but which apparently meant that plaintiff was not a co-owner of the real estate. Defendants also, for the first time, accused plaintiff of stealing $60,000 from the gas station in cash.

Although these facts do not appear in any other context aside from the trial court's judgment order, plaintiff also testified that in June 2006, Yusuf directed plaintiff to sign a contract with Four Seasons Heating and Air Conditioning, for the purchase and installation of an air conditioning system at the Clark station. After doing so, plaintiff was required to personally pay for the air conditioning system. After making several payments, plaintiff was sued for the remainder of the purchase price. Defendants refused to reimburse plaintiff for the amount paid and his continuing liability to Four Seasons.

Plaintiff averred that later in 2006, Yusuf told him that the gas station was losing money, which plaintiff attributed to Yusuf's removal of cash and merchandise from the business. However, plaintiff acknowledged that an increase in cigarette taxes in Cook County caused some customers to buy their cigarettes in Will County. Plaintiff also testified that he was not paid for two months in 2006. Furthermore, Yusuf advised him that because the gas station had incurred losses, plaintiff had to invest more capital as his share of those losses, otherwise he could no longer work at the gas station. Plaintiff then told defendants that he would not make that additional contribution until defendants produced an audited statement showing the business' losses because at that time, plaintiff believed that he was being "cheated." Defendants never produced such an audit, and plaintiff said that since date, he has not worked at the Clark station.

Plaintiff next called Kahn to testify. Kahn testified that he is a real estate broker, and that in April of 2006, he saw the Clark station listed for sale. He subsequently had a meeting with defendants Yusuf and Siddiqui to discuss purchasing the station. Defendants told Kahn that they were the only owners of the Clark station, and they entered into a contract with Kahn to sell the Clark station to an individual named Jana Ignatova, a buyer secured by Kahn. Kahn further testified that he later met plaintiff, who claimed to be an owner, and to have invested $120,000 in the Clark station. When he asked defendants why plaintiff was not listed as an owner on the contract, defendants told Kahn that plaintiff's investment was for his "job security," even though his salary as a manager was only about $8 per hour. Although Kahn was informed of the fact that plaintiff had a pre-existing interest in this gas station, Kahn testified that plaintiff signed the contract as a co-buyer in late April 2006. At that time, Kahn suggested that plaintiff should pledge $100,000 of his pre-existing equity in the gas station as earnest money. Kahn said that defendants had first produced a profit and loss statement showing that the business was profitable, but at a later meeting with defendants and plaintiff, Yusuf and Siddiqui gave Kahn a new profit and loss statement which showed that the Clark station was operating at a loss. The transaction was thereafter aborted.

Plaintiff next called defendant Siddiqui as an adverse witness. Siddiqui actually testified three times over the course of trial. First, as plaintiff's adverse witness, next as defendants' witness during their case-in-chief, and last as defendants' rebuttal witness. Since there does not seem to be any special significance arising from the stage of trial at which testimony was given, we combine Siddiqui's testimony at each of these stages, as we did with plaintiff. Siddiqui testified that he has a bachelor's degree in accounting from Northeastern University. He averred that prior to owning the gas station here at issue, he and Yusuf had operated a BP gas station since 1993. He stated that he purchased the subject Clark station in 2003 and that this purchase was made with Yusuf from funds held in the name of Pak Associates, a company he jointly owned with Yusuf. According to Siddiqui, in the acquisition of the Clark station, he and Yusuf were required to submit $19,500 when they bid for the Clark station in June 2003, and an additional $54,000 when the bid was accepted on July 21, 2003. Both payments came from a bank account maintained in the name of Pak Associates. Siddiqui stated that the total amount paid when their bid was accepted came from Yusuf and Siddiqui, and none came from plaintiff.

Siddiqui stated that it was only after the bid had been accepted that he first learned that plaintiff was interested in owning part of the Clark station.

Siddiqui stated that before closing, he had a meeting with Yusuf and plaintiff, when the parties agreed that plaintiff would buy one-third of the Clark station business for $120,000. According to Siddiqui, plaintiff would not acquire any interest in the real estate, but the business would pay for the mortgage on the premises in the form of rent. Of plaintiff's $120,000 investment, $100,000 would be the price of plaintiff's interest in the business, and $20,000 would be his contribution to one-third of the gas station's inventory. According to Siddiqui, defendants made it clear to plaintiff that he was acquiring one-third of the gas station's "business," and defendants told plaintiff that he not have an ownership interest in real estate. Siddiqui stated that the realtor, Bettie Smith, helped defendants determine that the fair market value of the station's "business," without the real estate, was about $300,000, and that the real estate was valued at about $400,000. Thus, according to Siddiqui, plaintiff's commitment to invest $100,000 was to acquire one-third of the business only, and $20,000 was to pay for his share of the inventory.

Siddiqui further testified that he supervised the Clark station and, when necessary, helped plaintiff manage the station, and that he was the secretary of Prime Petroleum, which was the corporation to whom the Clark station business was transferred after its initial acquisition. Siddiqui further testified that at the end of each month, he, Yusuf and plaintiff calculated the station's "profit" based on the cash that was accumulated in the station's safe, and divided it among the three of them. According to Siddiqui, the "profit" was distributed in cash, there was no record of how much cash was distributed, and he never gave Yusuf or plaintiff W-2 forms showing how much money had been taken. Siddiqui stated that the business was profitable in 2003, and in the beginning of 2004, but declined thereafter. Siddiqui also testified that at some point, plaintiff apparently stopped making mortgage payments on behalf of Pak Associates, which continued to hold the real estate, with money from Prime Petroleum, and as a result, either Siddiqui or Yusuf took money from the Clark station to make those payments.

Siddiqui further testified that at some point in February 2005, the gas station ran out of gas when their supplier, Texor, did not get paid. At that time, defendants told plaintiff that the gas station sustained losses, and they each had to pay their share of the gas bill or the station would close. Siddiqui also testified that plaintiff did not have the money, so he and Yusuf ultimately used money from Pak Associates to pay for the gas. The Clark station ran out of gas again in 2006, and in September of that year, defendants told plaintiff that he had to pay for his share of losses sustained by the gas station, which at that time, amounted to $38,612, so they could restock the station. Siddiqui testified that he determined that amount to be one-third of the total losses that the station had incurred over the course of several months up to that point. Those total losses later grew to $128,206, and reflected amounts owed to several other creditors. These debts were paid by himself and Yusuf with funds from Pak Associates. After that meeting, plaintiff left the gas station, and defendants later received a letter from his attorney. Siddiqui also stated that the Clark station continued to suffer ongoing losses thereafter and that plaintiff would be liable for one-third of those losses.

According to Siddiqui, he prepared the company's monthly profit and loss sheets, and he also prepared other "profit and loss sheets," which he gave to Kahn in connection with the possible sale of the station. He denied that the numbers on the sheets, which showed a profit, were false. He stated that the numbers on those sheets were "estimates," based on the assumption that the new purchaser would obtain a long-term mortgage with lower monthly costs. Siddiqui admitted that he did not inform Kahn of that assumption. Moreover, Siddiqui testified that he did not learn that plaintiff was claiming ownership of the real estate after he and Yusuf signed a contract with Kahn to sell the station.

Plaintiff next called defendant Yusuf as an adverse witness, who also testified later during defendants' case-in-chief and defendants' rebuttal. As with Siddiqui, we also combine his testimony as given throughout the various stages of trial. Yusuf testified that he met plaintiff in 1992 when they lived in the same apartment complex, and that their families sometimes socialized together. According to Yusuf, he saw plaintiff about 10 times a year when they lived in that complex, and he moved 35 miles away from plaintiff eight years before buying the Clark station with plaintiff. After moving, Yusuf stated that he saw plaintiff maybe once a year.

Yusuf testified that he has a bachelor's degree in business management from Northeastern University and that he and Siddiqui have operated a BP Amoco gas station since 1992. Pak Associates, which Yusuf owns jointly with Siddiqui, leased the BP gas station's underlying real estate from BP from 1992 until 2009, when defendants purchased the premises as well. Yusuf further testified that when he and Siddiqui learned that the Clark gas station was for sale, they contacted their realtor, Bettie Smith, who helped them file their bid for the Clark station, which was then in bankruptcy. Yusuf signed the bid as the president of Pak Associates, on whose behalf the bid was made. According to Yusuf, he and Siddiqui offered $735,000 in their bid for the Clark station, having calculated that the business was worth about $300,000 and the value of the real estate was $400,000. Yusuf also testified that he paid $19,500 when the bid was submitted, and an additional $54,000 when the bid was accepted on July 21, 2003 -- all with a check from Pak Associate's account. Yusuf stated that the those payments were made before any money was received from plaintiff, because defendants did not receive any money from plaintiff until July 28. Plaintiff had no involvement with the realtor, or the bidding process. On July 24, 2003, Yusuf applied for a loan of about $600,000, from Midwest Bank to fund the acquisition of the Clark station, and it was after that date that plaintiff contacted Yusuf in regard to participating in that new business venture.

Yusuf testified that before closing, he had a meeting with Siddiqui and plaintiff, at which time defendants offered to sell plaintiff one-third of the Clark station's "business," but specifically told him that he was not receiving any interest in the underlying real estate. According to Yusuf the parties then agreed that plaintiff would pay $100,000 for one-third of the "business," $20,000 for one-third of the inventory, and that he would manage the Clark station's day-to-day operations. Yusuf denied telling Kahn that the money invested by plaintiff was for job security. Yusuf acknowledged that he and Siddiqui each invested the same amount from their own capital. The parties also agreed to split the profits among the three, and that the Clark station would make the payments on the Pak Associates mortgage to Midwest Bank, which would be credited as rent of ...


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