Court Opinion

ID: 4172345
Source: CourtListenerOpinion
Date Created: 2017-05-26 21:11:40.367661+00
Date Added: 2024-06-11T14:39:26.464707
License: Public Domain

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                                Appellate Court                             Date: 2017.05.19
                                                                            11:18:24 -05'00'

                   Palmer v. Mellen, 2017 IL App (3d) 160022

Appellate Court    MARTHA E. PALMER, MICHELE L. GREEN, LUANN L.
Caption            CLARK, JOEL L. WATKINS, MATTHEW B. WATKINS,
                   JENNIFER L. McCARTHY, ASHLEY WATKINS, JOHN W.
                   WATKINS, MARY J. CARLSON, RICHARD L. WATKINS, ROSE
                   M. MURPHY, RONALD P. WATKINS, DANIEL B. WATKINS,
                   ROBERT J. WATKINS, ALBERT K. WATKINS, JAMES L.
                   WATKINS, STEPHEN N. WATKINS, JO GREENSLET JONES,
                   JANE MARIE GREENSLET, KENNETH A. GREENSLET, and
                   JOHN M. GREENSLET, Plaintiffs-Appellees, v. CHRIS E.
                   MELLEN, PAUL H. MELLEN, DENNIS L. MELLEN, CYNTHIA
                   A. PARRY, and DAVID L. MELLEN, Defendants-Appellants.

District & No.     Third District
                   Docket No. 3-16-0022

Filed              February 17, 2017
Rehearing denied   March 21, 2017

Decision Under     Appeal from the Circuit Court of Marshall County, No. 14-MR-34;
Review             the Hon. Michael P. McCuskey, Judge, presiding.

Judgment           Affirmed.

Counsel on         Angela Evans (argued), of Angela Evans Law, of Peoria, for
Appeal             appellants.

                   Janaki Nair (argued), John S. Elias, and Lauren A. Christmas, of Elias,
                   Meginnes & Seghetti, PC, of Peoria, for appellees.
     Panel                     JUSTICE LYTTON delivered the judgment of the court, with opinion.
                               Justices O’Brien and Schmidt concurred in the judgment and opinion.

                                                 OPINION

¶1          Plaintiffs, Martha E. Palmer and other relatives, filed a complaint seeking dissolution of a
       family land trust and partnership against the remaining partners, Chris E. Mellen and his
       siblings. The trial court granted summary judgment in favor of plaintiffs. On appeal,
       defendants argue that the trial court erred in (1) ruling, as a matter of law, that the partnership
       should be dissolved, (2) ignoring provisions of the partnership agreement, (3) denying their
       motion to strike plaintiffs’ affidavits, and (4) ordering the trust property sold at public auction
       by a named auctioneer. We affirm.
¶2          In 1977, Albert Leslie Watkins and Rose Frances Watkins (grantors), as husband and wife,
       formed the “Watkins Enterprises Land Trust/Partnership Agreement.” Albert passed away a
       few months after the partnership agreement was created, and Rose died in 1989. Under the
       terms of the agreement, 1112 shares were initially issued to Albert and Rose’s children and
       their then-living grandchildren. Their children have since distributed portions of their shares to
       their descendents. The partnership’s primary asset is 450 acres of land, of which 280 acres are
       tillable and 120 acres are covered in trees and include a cabin.
¶3          The partnership agreement provides that “[w]hen two or more Persons own Shares, a
       Partnership shall thereupon be created and be governed, except as otherwise provided in this
       Agreement, by the Partnership Act.” Article 2 of the partnership agreement defines the
       business of the partnership as “farming and related activities.” Article 9 describes the
       termination process and states that the partnership “shall terminate upon the first to occur of the
       bankruptcy, receivership or dissolution of the partnership, or the written agreement of all the
       Shareholders.”
¶4          The trustee of the partnership is assigned certain duties under article 11 of the agreement.
       Specifically, section 11.08 states:
                “The Trustee shall have the following powers and discretions and, except to the extent
                inconsistent herewith, any others that may be granted by law:
                        (a) To sell any portion of the Property for cash or on credit, at public or private
                    sales; to exchange any portion of the Property for other property; to grant options to
                    purchase or acquire any portion of the Property and to determine the prices and
                    terms of sales, exchanges and options.”
¶5          Currently, there are 26 partners under the trust and partnership agreement. Plaintiffs
       comprise 21 of the 26 partners and collectively hold 926.67 shares in the partnership (83.33%).
       Defendants, the remaining 5 partners, hold 185.33 shares (16.67%). Plaintiffs include two of
       the grantors’ three living children, Martha E. Palmer and Joel L. Watkins, 23 grandchildren,
       and one great-grandchild. The five defendants are all children of the grantors’ third child,
       Georga Mellen. The trustee of the partnership is plaintiff Robert J. Watkins, who is also a
       partner. According to the terms of the agreement, the partnership is governed by a management
       committee made up of five partners, including defendant Chris Mellen.

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¶6         In 2012, several partners indicated to the trustee that they would like to be “bought out” by
       the partnership, but the partnership did not have sufficient funds to purchase the partners’
       shares. On July 3, 2012, four of the five members of the partnership’s management committee
       voted in favor of selling the property at public auction in an attempt to raise funds for the
       buyout and to allow any interested partner an equal right to purchase the property. Chris
       Mellen voted against the sale and requested, instead, that the property be appraised.
¶7         Three appraisals were then completed. They indicated that the entire 450 acres, including
       the cabin, were valued at (1) $2,634,000, (2) $3,160,000, and (3) $3,256,000. The appraisals
       also provided subdivided parcel reports that valued the pasture and timber areas at (1) $3960
       per acre, (2) $3075 per acre, and (3) $3412 per acre.
¶8         Shortly thereafter, Chris Mellen and Paul Mellen made several offers to purchase the
       timbered portions of the property or, in the alternative, the entire parcel. The first offer to
       purchase the entire parcel proposed a purchase price based on the average of the three
       appraisals, $3,016,666, minus the average value of the cabin and 50% of the closing costs for
       2012. The second offer did not include a reduction for 50% of the 2012 closing costs. All of
       their offers were rejected by the partners.
¶9         In the summer of 2013, Trustee Watkins began making plans to sell the partnership
       property. He contacted Doug Hensley, a local real estate agent and auctioneer, and asked him
       to work on a proposal for public auction.
¶ 10       On November 21, 2014, plaintiffs filed a complaint seeking judicial dissolution of the
       partnership and supervision of the partnership’s winding up. In the complaint, plaintiffs
       alleged that the partnership’s economic purpose has been unreasonably frustrated and that
       defendants had engaged in conduct making it impracticable to continue carrying on
       partnership business. As such, plaintiffs requested dissolution and a sale of the partnership real
       estate on the open market under section 801(5) of the Uniform Partnership Act (1997) (Act)
       (805 ILCS 206/801(5) (West 2014)). Defendants moved to dismiss the complaint pursuant to
       sections 2-615 and 2-619 of the Code of Civil Procedure (735 ILCS 5/2-615, 2-619 (West
       2014)).
¶ 11       Plaintiffs filed a motion for summary judgment. Attached to the summary judgment
       motion were numerous affidavits submitted by plaintiffs as partners. The affidavits stated that
       defendants Chris Mellen and Paul Mellen had verbally and physically intimidated and
       threatened individual plaintiffs, were vocally aggressive at committee meetings, and refused to
       participate in partnership meetings. The affidavits further averred that all five defendants had
       failed to respond to any correspondence from the partnership to participate in the business of
       the partnership.
¶ 12       The trial court denied defendants’ motion to dismiss. Defendants then filed an answer to
       the complaint and a response to plaintiffs’ motion for summary judgment. In their responsive
       pleading, defendants argued that the partnership agreement required the written consent of all
       the partners, except for ministerial acts, and that before the real estate could be sold, all of the
       partners had to agree that a public sale was appropriate. They also filed a motion to strike the
       affidavits attached to plaintiffs’ summary judgment motion, which was denied. Both parties
       subsequently filed supplemental affidavits in support of their summary judgment pleadings.
¶ 13       Following arguments by counsel, the trial court granted summary judgment in favor of
       plaintiffs. The trial court found that the value of the partnership real estate was decreasing to
       the prejudice of the parties and that it was in the best interests of the partners to sell the

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       property. In reaching its decision, the court noted that relationships among the partners had
       irreparably deteriorated and that defendants Chris Mellen and Paul Mellen had engaged in
       conduct related to the partnership business that made it “not reasonably practicable” to carry
       on the business in partnership with them. The court ruled that the events requiring dissolution
       under section 801(5) of the Act had occurred, finding that (1) the economic purpose of the
       partnership was likely to be unreasonably frustrated, (2) partners had engaged in conduct
       related to the partnership business that made it not reasonably practicable to carry on the
       business in partnership with that partner, and (3) it was not otherwise reasonably practicable to
       carry on the partnership business in conformity with the partnership agreement.
¶ 14       The trial court ordered that the partnership be dissolved pursuant to section 801(5) of the
       Act and that the winding up of the business be subject to judicial supervision as requested
       under section 803(a). The court further ordered that the land trust property be sold at public
       auction “by Gorsuch-Hensley Real Estate and Auction, Inc., or by an alternative suitable
       auctioneer or agent selected by the Trustee of the Partnership and approved by the Court.”

¶ 15                                              ANALYSIS
¶ 16                                                    I
¶ 17       Defendants argue that the trial court erred in dissolving the partnership under section
       801(5) of the Act at the summary judgment stage. They claim that the trial court erred in
       finding that defendants engaged in conduct related to the partnership making it not reasonably
       practicable to carry on business with other partners or in conformity with the land trust
       agreement under sections 801(5)(ii) and (iii). They also maintain that dissolution was
       inappropriate under section 801(5)(i) because the economic purpose of the business
       partnership is still profitable.
¶ 18       Section 801 of the Uniform Partnership Act provides:
               “Events causing dissolution and winding up of partnership business. A partnership is
               dissolved, and its business must be wound up, only upon the occurrence of any of the
               following events:
                                                      ***
                       (5) on application by a partner, a judicial determination that:
                            (i) the economic purpose of the partnership is likely to be unreasonably
                       frustrated;
                            (ii) another partner has engaged in conduct relating to the partnership
                       business which makes it not reasonably practicable to carry on the business in
                       partnership with that partner; or
                            (iii) it is not otherwise reasonably practicable to carry on the partnership
                       business in conformity with the partnership agreement[.]” 805 ILCS
                       206/801(5) (West 2014).
¶ 19       The Act was enacted in Illinois in 2002. See Pub. Act 92-740, art. VIII, § 801 (eff. Jan. 1,
       2003). Prior to the Act, the partnership statute provided that:
                   “(1) On application by or for a partner the court shall order a dissolution whenever:
                                                      ***

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                   (c) a partner has been guilty of such conduct as tends to affect prejudicially the
               carrying on of the business,
                   (d) a partner willfully or persistently commits a breach of the partnership or
               agreement, or otherwise so conducts himself in matter relating to the partnership
               business that is not reasonably practicable to carry on the business in partnership with
               him[.]” 805 ILCS 205/32(1) (West 2000).
¶ 20       While there are few cases interpreting section 801(5) of the current act, there are a number
       of cases interpreting similar provisions found in section 32(1). Courts interpreting the pre-2002
       statute have held that where the relations among partners had deteriorated to such an extent that
       the partners no longer functioned in partnership with each other, the partnership should be
       dissolved. See Tembrina v. Simos, 208 Ill. App. 3d 652, 658 (1991); Susman v. Cypress
       Venture, 114 Ill. App. 3d 668, 675 (1982). In Tembrina, the court ordered the dissolution of the
       partnership. In doing so, the court stated that it was apparent that animosity existed between the
       partners and that they were unwilling to cooperate with each other. The appellate court also
       took note of the actions of one partner in causing the partnership property to be conveyed into
       his individual name and failing to pay real estate taxes. Tembrina, 208 Ill. App. 3d at 658; see
       also Susman, 114 Ill. App. 3d at 675 (when relationship existing between partners renders it
       impracticable for them to conduct business beneficially, dissolution is proper).
¶ 21       Courts in other jurisdictions have also interpreted provisions identical to the language of
       the Act and have reached similar conclusions. In Kirksey v. Grohmann, 2008 SD 76, 754
N.W.2d 825, plaintiffs sought dissolution under the state’s partnership statute and the South
       Dakota Supreme Court discussed what it meant to be “reasonably practicable.” Id. ¶¶ 13-17.
       The court recognized that while forced dissolution is a drastic remedy, it is appropriate where
       the economic purpose of the company is reasonably frustrated and it is not reasonably
       practicable to carry on the partnership business. In that case, four sisters inherited their
       family’s ranch. They formed a limited liability company conveying interest in the property to
       the company in exchange for equal ownership. Two sisters leased the property at a rate set in
       the operating agreement, which had fallen below market value. As a result, the two other
       sisters wanted to raise rent prices. The sisters could not communicate regarding the company
       except through legal counsel, and they refused to reach an agreement. Id. ¶¶ 7-8.
¶ 22       The court determined that it was not reasonably practicable to carry on company business,
       defining “reasonably practicable” under its plain and ordinary usage as “capable of being done
       logically and in a reasonable, feasible manner.” Id. ¶ 15. It noted that the sisters did not trust or
       cooperate with each other and were unable to conduct business efficiently. The court agreed
       that the company business of ranching could carry on despite the sisters’ dissension but that the
       unequal distribution of financial gain and the inability to agree on a company vote meant that
       “the operation of the company cannot be a reasonable and practicable operation of a business.”
       Id. ¶ 27. The court reiterated that the standard set forth was one of reasonable practicability,
       not impossibility. It concluded that dissolution and the winding up of company business was an
       appropriate remedy given the unrelenting impasse the company faced. Id. ¶ 26.
¶ 23       Similarly, in Brennan v. Brennan Associates, 977 A.2d 107 (Conn. 2009), the Connecticut
       Supreme Court considered a demand for judicial dissociation of a partner from a partnership
       based on language parallel to that in sections 801(5)(ii) and (iii). Id. at 120. Two partners no
       longer trusted the third partner, who was the majority shareholder following the death of the
       fourth partner. The court found that the mistrust was justified and was relevant in determining

                                                     -5-
       whether the acrimony in the partnership was so pervasive that dissociation was warranted. Id.
       at 119-20. The court held that “an irreparable deterioration of a relationship between partners is
       a valid basis to order dissolution” and, therefore, was a valid basis for the alternative remedy of
       dissociation. Id. at 120.
¶ 24       Here, defendants refused to agree to the sale of the property and will not directly
       communicate with plaintiffs. It has become impracticable for plaintiffs to carry on the
       partnership with them. Under the terms of the partnership agreement, a unanimous vote is
       required for a decision to dissolve, and the partners are unable to reach a unanimous decision.
       Moreover, it is undisputed that defendants have harassed individual plaintiffs, refused to
       correspond regarding partnership business, and refused to participate in necessary meetings
       and voting procedures. It is also undisputed that personal and professional relationships
       between defendants and plaintiffs have suffered irreversible damage. Defendants’ tactics have
       deprived the majority of the partners of realizing any benefit from the partnership.
¶ 25       Under these circumstances, there is no genuine issue of fact that (1) the partners have
       engaged in conduct relating to the partnership that has made it not reasonably practicable to
       carry on the business in partnership and (2) it is not otherwise reasonably practicable to carry
       on the land trust business in conformity with the family’s partnership agreement. Section
       801(5) of the Act clearly denotes that a judicial determination of only one factor is required to
       support an order dissolving a partnership. See 805 ILCS 206/801(5)(i)-(iii) (West 2014);
       Elementary School District 159 v. Schiller, 221 Ill. 2d 130, 145 (2006) (use of the word “or” is
       disjunctive and denotes different alternatives). Accordingly, the trial court did not err in
       granting summary judgment in favor of plaintiffs and dissolving the partnership under section
       801(5).

¶ 26                                                 II
¶ 27       Defendants also argue that the trial court’s order dissolving the partnership impermissibly
       circumvented the language of the agreement. They claim the agreement provides that plaintiffs
       can transfer shares back to the partnership as a buyout if they wish to leave the partnership and
       the agreement does not contemplate the sale of partnership property unless the partners
       unanimously consent.
¶ 28       Partnership agreements may be used to govern relations among and between the partners in
       derogation of the Act. However, the statute lists several nonwaivable provisions that cannot be
       varied or altered by a partnership agreement, including the requirement to wind up the
       partnership business as specified in section 801(5). 805 ILCS 206/103(b) (West 2014); see
       generally 1515 North Wells, L.P. v. 1513 North Wells, L.L.C., 392 Ill. App. 3d 863, 868 (2009)
       (partnership agreement, stating that general partner could engage in “whatever activities” he
       chose, did not contract away the fiduciary duty general partner owed limited partners under the
       Act).
¶ 29       Here, the plain language of the partnership agreement demonstrates that defendants’
       arguments must fail. No provision in the partnership agreement allows a partner to voluntarily
       tender his or her shares back to the partnership or to the other partners in exchange for their
       value unless that partner receives a bona fide purchase offer for the shares from a person who is
       not a descendent of the grantors or a partner dies. Article 7 of the partnership agreement
       provided that if a partner receives an offer to purchase his shares from someone other than a
       descendent of the grantors, the right of first refusal provision applies. In the event of an

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       interested buyer, the partner must transmit an offer to both the partnership and the other
       partners first as provided in section 7.01 of the agreement. Article 7 also provides for the
       purchase of partnership shares upon the occurrence of a “trigger event,” defined as “the death
       of a [p]artner.” Article 8 describes the procedure to determine the purchase price of shares sold
       under the agreement. It does not provide a partner with the right to force a sale of his shares to
       the partnership or to the other partners. Thus, nothing in the agreement gives plaintiffs the
       ability to force the partnership or the remaining partners to “buy out” their shares.
¶ 30        Even if the agreement contained a buyout provision or a provision for dissolving the
       business and selling the land trust property, certain provisions of the Act cannot be varied or
       altered by any partnership agreement, including dissolving the partnership and the winding up
       of partnership business as specified in sections 801(4), (5), or (6). See 805 ILCS 206/801(5),
       103(b)(7) (West 2014). Thus, the terms of the agreement do not prevent the partners from
       filing a petition to judicially dissolve the partnership under section 801(5) of the Act or the
       court from entering a dissolution order where a provision in section 801(5) has been met.

¶ 31                                                    III
¶ 32       Defendants next contend that the trial court erred in denying their motion to strike
       plaintiffs’ affidavits submitted in support of plaintiffs’ motion for summary judgment.
       Defendants argue that the affidavits fail to comply with Illinois Supreme Court Rule 191 (eff.
       Jan. 4, 2013), which requires that such affidavits set forth with particularity the facts upon
       which the affiant relied, and should have been stricken by the trial court.
¶ 33       Illinois Supreme Court Rule 191 provides in relevant part:
                “Affidavits in support of *** a motion for summary judgment under section 2-1005 of
                the Code of Civil Procedure *** shall be made on the personal knowledge of the
                affiants; shall set forth with particularity the facts upon which the claim, counterclaim,
                or defense is based; shall have attached thereto sworn or certified copies of all
                documents upon which the affiant relies; shall not consist of conclusions but of facts
                admissible in evidence; and shall affirmatively show that the affiant, if sworn as a
                witness, can testify competently thereto.” Ill. S. Ct. R. 191(a) (eff. Jan. 4, 2013).
       In general, this court reviews a circuit court’s decision on a motion to strike an affidavit for an
       abuse of discretion, but when the motion “was made in conjunction with the court’s ruling on a
       motion for summary judgment,” we employ a de novo standard of review with respect to the
       motion to strike. Jackson v. Graham, 323 Ill. App. 3d 766, 773 (2001).
¶ 34       Here, we find no error in the trial court’s denial of defendants’ motion to strike plaintiffs’
       affidavits. Plaintiffs’ affidavits established several material facts that were undisputed. They
       set forth averments containing specific examples of tenuous situations between the partners.
       They also provided facts regarding partnership procedures and committee meetings and
       plaintiffs’ failed attempts to correspond with defendants. All of the affidavits established that
       there had been an irreparable deterioration of the relationship between plaintiffs and
       defendants as partners. The trial court’s denial of the motion to strike is affirmed.

¶ 35                                               IV
¶ 36      Last, defendants claim that the trial court erred in ordering that the real estate be sold at
       public auction and naming the auctioneer sua sponte.

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¶ 37       On application of a partner, the court may, “for good cause shown,” order judicial
       supervision of liquidation of the partnership or, as the statute provides, the “winding up” of
       partnership business. 805 ILCS 206/803(a) (West 2014). In this case, the trial court found that
       good cause had been shown for judicial supervision and ordered that the partnership property
       be sold at public auction by Gorsuch-Hensley Real Estate and Auction. Defendants do not
       challenge the trial court’s finding of good cause. Accordingly, we find that the trial court’s
       supervision of the winding up of business was proper and that its order directing the sale of
       partnership property was appropriate. See 805 ILCS 206/803(a) (West 2014).
¶ 38       Defendants also argue that the court erred in specifically naming an individual auctioneer.
       The affidavit of Doug Hensley, the auctioneer assigned by the court, demonstrated that his firm
       had prepared marketing materials for the auction in 2013 and had entered into a prior contract
       with the partnership to conduct the auction. Appointing an auctioneer who was familiar with
       the property is financially advantageous to the partnership and its assets. See Higgins v.
       Higgins, 72 Ill. App. 2d 179, 190-91 (1966) (economic conditions and financial benefits are
       important factors in decisions liquidating partnership property). Under the circumstances, we
       find that the trial court did not abuse its discretion in appointing Hensley as the auctioneer, or
       in the alternative, providing the trustee with the power to select another suitable auctioneer.

¶ 39                                       CONCLUSION
¶ 40      The judgment of the circuit court of Marshall County is affirmed.

¶ 41      Affirmed.

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