Beatrice Glasser, Selma Melvoin, Bessie Altschuler, James Booth, and Ruth G. Booth, Appellants, v. Essaness Theatres Corporation, Woods Amusement Corporation, Edwin Silverman, Edward Blackman, Velma Silverman, Appellees and Cross-Appellees. Minnie Stern, Cross-Appellant.
Gen. No. 45,370.
Appellate Court of Illinois
February 4, 1952
Rehearing denied February 18, 1952
72
Opinion filed June 18, 1951. Rehearing opinion allowed September 17, 1951. New opinion filed February 4, 1952. Released for publication March 25, 1952.
JOHNSTON, THOMPSON, RAYMOND & MAYER, and ROSENBERG, STEIN & ROSENBERG, all of Chicago, for cross-appellant; SAMUEL W. BLOCK, EDWARD E. LYNN, JOSEPH ROSENBERG, MERWIN ROSENBERG, and AARON L. STEIN, all of Chicago, of counsel.
EDWARD J. BLACKMAN, and J. FREDERICK HOFFMAN, both of Chicago, for appellees; ODE L. RANKIN, of Chicago, of counsel.
MR. JUSTICE NIEMEYER delivered the opinion of the court.
Plaintiffs Altschuler, Melvoin and Glasser are, respectively, the wives of the three partners of Altschuler, Melvoin & Glasser, certified public accountants and the auditors for Essaness from 1931 to the filing of this suit, November 12, 1949. Plaintiff James Booth is an employee of Essaness and the husband of plaintiff Ruth G. Booth. Defendant and counterclaimant Stern is the wife of Emil Stern, an officer and stockholder of Essaness until 1945, and thereafter an executive of the corporation until January 1950. She admits the allegations of the complaint and by her counterclaim
The property in question is improved by a ten-story building which contains ground-floor stores, offices, and the Woods Theatre. July 31, 1942 The Association of Franciscan Fathers of the State of Illinois, hereinafter referred to as Franciscans, purchased the fee and the lessors’ interest in outstanding leases. The next day, August 1, 1942, they leased the theatre portion of the building to the Woods Theatre Corporation, then owned by Sidney M. Spiegel, Jr., and Silverman, for fourteen months, expiring September 30, 1943. This lease was subsequently transferred to Spiegel and Velma Silverman, each having a one-half interest. They operated the theatre as a partnership. December 23, 1942 each sold a 12½ per cent interest in the lease and partnership to Emil Stern, who transferred the interest thus acquired to his wife December 31, 1942. April 2, 1943 a lease from May 1, 1943 to April 30, 1946 was executed. This lease was superseded by a lease dated April 26, 1943 for the same period. Each of these leases gave the lessor an option to terminate the lease upon 60 days’ written notice should it require the premises for ecclesiastical purposes—a fact to be determined in its sole discretion. November 5, 1943 Spiegel transferred his 37½ per cent interest to plaintiffs herein in the following proportions: James Booth, 2 per cent; Ruth G. Booth, 5½ per cent; Glasser, 10 per cent; Melvoin, 10 per cent; and Altschuler, 10 per cent. Velma Silverman and Minnie Stern retained their respective interests of 37½ per cent and 25 per cent. These interests remained fixed during the trans-
Two more leases between the Franciscans and the partners were executed. By the lease dated December 31, 1943, for a term beginning January 1, 1944 and ending April 30, 1949, the lessor reserved an option to terminate the lease on April 30th in 1946, 1947 or 1948 by giving written notice on October 31, 1945, 1946 or 1947 respectively, and by payment of designated sums of money should the lessor in its sole discretion determine that it required the premises for ecclesiastical purposes. By the second lease, dated December 30, 1944, for a term beginning January 1, 1945 and ending April 30, 1951, the lessor reserved an option to terminate the lease on April 30, 1947 by giving written notice on or before October 31, 1946 of its intention to terminate the lease and by paying $23,333.33, provided
Spiegel died in September 1944. Silverman acquired his stock in Essaness. In December 1945 he acquired the stock of Emil Stern. He became and remained the sole stockholder of Essaness. None of the partners of the Woods partnership took any part in the conduct of its business. The management of the partnership was left to Silverman and Stern, representing their respective wives, and Glasser, who acted for those who acquired the Spiegel interest. Glasser, a witness for plaintiffs, testified that he carried on all negotiations for the purchase of Spiegel‘s interest in the lease and former partnership after Silverman and Stern indicated they did not desire to purchase it; that until April 26, 1949 there had not been a meeting of the partners; that he, Stern and Silverman met many times and discussed partnership matters; that all negotiations for the partnership with the Franciscans and their agent Nash for a renewal or extension of the leases were carried on by Spiegel in his lifetime, and thereafter by Stern and Silverman; that prior to an extension of a lease he would discuss the terms of the extension with Silverman and Stern. Stern, called on behalf of his wife, hereinafter included in the appellation “plaintiffs,” adds that he sat in with Spiegel on the various renewals of the lease, and after Spiegel‘s death carried on the negotiations; that he did not think Silverman ever negotiated independently of him for renewals of the lease; that he believed Silverman was acting for the partners in approving the lease of De-
Father Weir, Provincial of the Province of the Franciscan Fathers, Father Swoboda, Secretary of the Province and of Father Weir, and Father Thomas, who within a month after the purchase of the Woods property in July 1942 had been put in charge of plan-
Stern testified that around April 21st or 22nd Silverman told him that he was trying to purchase the Woods building and fee; that a lot of other people were trying to do the same thing; that Silverman cautioned him against saying anything to anybody, including his wife; that on April 25th, after a meeting with Silverman, Blackman and a representative of the New England Mutual Life Insurance Company, Stern suggested that Glasser be acquainted with what was going on, and Silverman asked Stern to reach Glasser. Glasser testified that pursuant to a message left at his home he called Silverman and talked with him over the phone about midnight on April 25th and was told that the Franciscans had some negotiations
Under date of April 25, 1949 Silverman signed an application for a loan of $750,000 on the property. April 26th Blackman sent to the Franciscans a form of contract of purchase by Essaness at a price of $1,200,000, of which $10,000 as earnest money was to be paid concurrently with the execution of the agreement, and the balance of $1,190,000 on delivery of deed. If the purchaser defaulted the earnest money was to be forfeited as liquidated damages. In addition Essaness was to pay Nash $50,000 commission in yearly instalments of $10,000. The transaction was closed through an escrow agreement dated June 30, 1949. The property was conveyed to Woods Amusement Corporation by deed dated June 29, 1949. A mortgage of $750,000 dated June 30, 1949 to the New England Mutual Life Insurance Company was executed by the purchaser. The indebtedness secured thereby was guaranteed by Essaness. Pending the completion of the transaction Stern and Glasser sought to interest two investors of financial means and a well known real estate operator in taking over the purchase of the property and giving a lease of the theatre to the partnership. Silverman consented to these efforts. They failed. At no time did the partnership offer to take over the purchase. Glasser testified that the partnership could not pay the $450,000 paid by Essaness over and above the proceeds of the mortgage. This mortgage could not have been obtained without the guarantee of Essaness. Plaintiffs objected to an agreement whereby the profits of the operation of the
Plaintiffs’ action is based on an alleged destruction of the partnership expectancy of the renewal or extension of the theatre lease by the purchase of the property in which the theatre is located, in violation of the duty of Essaness and Silverman as agents of the Woods partnership. It is unquestionably the law that a managing agent such as Essaness, or an agent expressly charged with procuring the renewal or extension of the lease, could not negotiate for a lease for his own benefit so long as the principal has a right or expectancy of renewal of the lease. Davis v. Hamlin, 108 Ill. 39. The reason for the rule ceases when the right or expectancy is extinguished, without deception or fraud by the agent, by the refusal of the landlord to renew or extend the lease to the tenant. The principle is clearly stated in Crittenden & Cowler Co. v. Cowler, 66 App. Div. 95, 72 N. Y. Supp. 701. The corporation was in possession under an assignment of a lease. The landlord had refused to accept it as a tenant and refused to renew the lease to it. A lease was given to a director. The court refused to hold that the director held the lease in trust for the use of the corporation, and said:
“Here there was no secret leasing, no act done ‘behind the back.’ Here we have a positive refusal on the part of the landlord to accept the corporation as a tenant. This refusal, after application made and considered, disposed of and cut off that ‘expectancy’ which is declared by some authorities to run with every lease, —the expectancy of a renewal. . . . But the rule ceases to operate when such expectancy no longer exists. It will hardly be claimed that a landlord may
not exercise his own discretion in the selection of a tenant. He may or may not renew, as he chooses. When once he has declared against renewal, the tenant, then in occupation, has no more an expectancy which can be dealt with. Whoever thereafter leases does the tenant no injury, and takes from him no property or property rights. I see no reason in law or equity in excluding a co-partner or a director in a corporation from dealing with the landlord in respect to the premises after a renewal to the occupying tenant has been refused by the landlord.” (Emphasis added.)
In Poy v. Allan, 231 Mich. 472, the landlord refused to lease to a tenant and thereafter leased to an agent of the tenant. In denying relief to the tenant the court said:
“The offer was rejected finally and absolutely and the rejection was in no way affected by fraud or collusion of defendants or any of them. . . .
The promptness of Allan in applying for lease after his clients’ offer had been rejected doubtless made them suspicious and gave color of merit to their claims. But the Boyntons had the undoubted right to refuse plaintiffs’ offer. The reason for refusal need not be stated. But being refused finally, and such refusal being free from fraud or other infirmity, plaintiffs were not concerned in the lease subsequently made.” (Emphasis added.)
To the same effect are Washer v. Seager, 272 App. Div. 297, 71 N. Y. S. (2d) 46; Davis v. Pearce, 30 F. (2d) 85; Robinson v. Eagle-Picher Lead Co., 132 Kan. 860.
In the instant case the refusal of the Franciscans on February 28, 1949 to renew or extend the lease was final. That refusal was never deviated from. The decision to refuse renewal or extension of the
Thanos v. Thanos, 313 Ill. 499, was a suit for dissolution of a partnership and an accounting. The business of the partnership was buying, selling and operating restaurants in Chicago. The firm operated a restaurant in leased premises at 3905 Cottage Grove avenue. The defendant bought the property with his own funds and took title in his own name. The plaintiff claimed the property as a partnership asset. The court said:
“The evidence shows that this property was not bought with partnership funds, but that the purchase price was paid by appellant from private funds which had been set aside to him as his share of the profits from the partnership business. While the lease on this building and the right of the partnership to renew the same are partnership assets, this does not affect the right of appellant to secure and hold as his individual property the fee to the premises. The mere fact that appellant and appellee were partners in the restaurant business did not make real estate purchased by one of them partnership property.”
This case was cited with approval in Lipinski v. Lipinski, 227 Minn. 511, where the parties were engaged in a wholesale fishing enterprise. They leased certain land on the shore of a lake. Adjacent to this land was a small tract which they also used in their operations. A partner bought this tract with his own funds and took title in his own name and his wife‘s. The court held that the parties stood in the relation of fiduciaries to each other but denied plaintiffs’ claim that the tract was held in trust for the partnership or joint enterprise. In respect to the agreement of the parties the court stated:
“We can find nothing in this agreement to indicate that the acquisition of additional real estate was one of the objects or purposes of the business. . . . The
undertaking involved was definitely that of a fishing enterprise and not one involving the acquisition, improvement, or development of real estate. It was limited to four years, and there was no provision for any renewal.”
After considering several authorities, the court said:
“Consequently, it has been held that, while a lease held by a partnership and the right to renew it are partnership assets, the title of a landlord is not so adverse to that of his tenant as to prevent a partner from purchasing the fee to the premises which the partnership leased, provided he practices no fraud or deception upon his copartners and holds his fee subject to the lease for the duration thereof. Thanos v. Thanos, 313 Ill. 499, 145 N. E. 250; Sonek v. Hill B. & L. Assn., 138 N. J. Eq. 108, 52 A. (2d) 852; Anderson v. Lemon, 8 N. Y. 236, affirming 4 N. Y. Sup. Ct. (Sandf.) 552.”
In opposition to these cases plaintiffs cite Meinhard v. Salmon, 249 N. Y. 458. The parties were co-lessees. Before the expiration of the lease the defendant secretly obtained a lease of the demised premises and contiguous property for a long term, commencing on the expiration of the existing lease, and excluded plaintiff from participation in the new endeavor. The court held that in respect to the new lease the defendant stood in a fiduciary relation to plaintiff. If the case be construed as holding that a partner or agent cannot purchase the fee in property under lease to the partnership or principal, it is in conflict with Thanos v. Thanos, supra, which must control our decision. Moreover, relief was granted in the Meinhard case because defendant secretly negotiated with the landlord for a new lease before the expectancy of renewal of the existing lease had been extinguished. That vice is not present
The chancellor did not err in dismissing the complaint and counterclaim for want of equity.
Plaintiffs object to the participation of the newly appointed justices in the consideration of the petition for rehearing. Although the question is no longer important in this case, we have given it careful consideration. We start with certain general propositions of law. Where a petition for rehearing is filed, the judgment of the Appellate Court does not become final until the petition is denied. (Rule 32 of the Supreme Court.) The power to vacate a judgment during term is inherent in all courts, appellate and nisi prius. Marshall Field & Co. v. Nyman, 285 Ill. 306, Brant v. Chicago & Alton R. Co., 294 Ill. 606. The orders entered are the orders of the court and not the judge. The court remains the same notwithstanding a change in the incumbent judges, and such a change cannot and ought not to endanger the rights of litigant parties. 30 Am. Jur., Judges, sec. 38. If the successor judges are to be barred from considering the petition on its merits, defendants will be denied consideration of their application for a rehearing. Because a quorum will be lacking the petition will have to be denied. It can be granted only by the vote of two judges. Metropolitan Water Dist. v. Adams, 19 Cal. (2d) 463; Flaska v.
No relevant Illinois cases are cited in support of plaintiffs’ position. Garrett v. Peirce, 84 Ill. App. 31. is not in point. The case was before the Appellate Court three times. On the first appeal (65 Ill. App. 682) the Appellate Court sustained the complaint. On the second appeal (74 Ill. App. 225) the court held that it should not treat the legal propositions announced on the first appeal as open to further consideration in the same case. This ruling is in accord with a long line of decisions based in part on section 17 of the Appellate Court Act then in force, making the first opinion a binding authority in the case. (Gillum v. Central Ill. Pub. Serv. Co., 250 Ill. App. 617.) On the third appeal the binding effect of the first decision was again upheld. There had been a change in the membership of the Appellate Court and JUSTICE DIBELL, who wrote the opinion on the second and third appeals, said: “As an ordinary rule a mere change in the membership of an appellate tribunal ought not to reopen in the same case questions once settled by it.” With this statement there is no quarrel. A mere change in the membership of a court should not open for reargument any
The foreign cases cited are not harmonious. Each case defines the practice of its jurisdiction. The rule stated in Brown v. Aspden, 14 How. Rep. 25 (55 U. S.), and Ambler v. Whipple, 23 Wall. Rep. 278 (90 U. S.),
that no rehearing will be granted in any case unless a member of the court who concurred in the judgment desires it, is practical in federal jurisdictions, where the judges are appointed for life and new judges come to the court singly and at irregular intervals. It is impractical in Illinois where five of the seven judges of the Supreme Court may be replaced at an election every nine years and where the entire membership of the Appellate Courts is subject to change every three years. If the federal rule were adopted in Illinois a change in the majority of the court might deny a defeated party the right to a rehearing. The possibility of that change is demonstrated by the June 1951 election when three new judges were elected, with a fourth judge the successor to MR. JUSTICE WILSON, deceased, by appointment several months before the election. Moreover, the federal cases do not hold that new judges cannot pass on petitions for rehearing. In the Ambler case MR. JUSTICE MILLER said:
“It is the well-settled rule of this court, to which it has steadily adhered, that no rehearing is granted unless some member of the court who concurred in the judgment, expresses a desire for it, and not then unless the proposition receives the support of a majority of the court.” (Emphasis added.)
He did not say a majority of the judges participating in the decision. The “majority of the court” necessarily meant the majority of the court as constituted when the petition for rehearing is to be decided. In Metropolitan Water Dist. v. Adams, supra, where the court sustained the right of a member of the court who did not participate in the decision of the case to pass on a petition for rehearing, the court quoted from Luco v. De Toro, 88 Cal. 26, as follows:
“The rule has always been, with respect to petitions for rehearings, that as many justices as are necessary
to pronounce the judgment must concur in granting a rehearing, or the petition will be denied,”
and added:
“It is significant that the phrase ‘as many justices,’ and not, ‘as many of the justices who were present at the argument,’ was used.”
In Peoples v. Evening News Assn., 51 Mich. 11, and McCutcheon, Admr. v. Common Council of the Village of Homer, 43 Mich. 483, the question presented here was not decided. In the first case, in a per curiam opinion, the court said:
“Held, unanimously, that a rehearing will not be ordered on the ground merely that a change of members of the bench has either taken place or is about to occur.” (Emphasis added.)
In the second case a party endeavored to have the court re-examine its decision in City of Detroit v. Blackeby, 21 Mich. 84, and permit a reargument of that case many terms of court after the decision had been rendered. In People v. Mayor, etc., of New York, 25 Wend. 252, an opinion by a divided court was filed December 28, 1840; a motion for reargument on the merits, presented February 2, 1841, after a change in the members of the court and after final judgment was denied. The court held that the judgment was settled at the December term and was final, nothing remaining to be done except for the attorney to get a copy of the record of judgment and file it in the Supreme Court, which he had a right to do without further action of the reviewing court, and that the “court has no legal right to grant a rehearing upon a writ of error, after a final judgment has been pronounced here upon the merits of the case, and has been regularly settled and entered of record, in the form required by law.” The only reference to the new members of the court was
“The mere fact that there has been a change in the membership of the court does not afford any reason for a rehearing. Carol v. New York L. Ins. Co., 49 N. D. 813, 814.” (Emphasis added.)
In the Carol case a petition for rehearing was denied after change in membership of the court, the new judges participating in the consideration of the petition and the decision thereon. Woodbury v. Dorman, 15 Minn. (Gil.) 274, Gas Products Co. v. Rankin, 63 Mont. 372, Cordner v. Cordner, 91 Utah 474, 64 P. (2d) 828, and Flaska v. State, 51 N. M. 13, support plaintiffs’ contention that successor judges should not act on a petition for rehearing of a case decided during the incumbency of their predecessors. These decisions are based on grounds of expediency: that a change of a decision (not final) by the votes of successor judges would tend to destroy respect for and confidence in the courts. Woodbury v. Dorman clearly states the theory of these decisions and exposes its weakness. After stating that there is not the slightest reason to suppose that the decision would be changed if the court were constituted as it was when the decision was rendered, and that if reargument were allowed and the decision reversed the result would follow, not “from the consideration of
“The application for the reargument must therefore be denied. To prevent any misapprehension of the effect of the denial, the chief justice and myself deem it proper to say, however, that with the highest respect for the able and learned chief justice who pronounced the prevailing opinion in this case, as well as for our brother McMillan, who concurred with him, we believe the decision to be erroneous in respect to the validity of the mortgage. And, in view of the disastrous consequences which in our opinion may result from what we conceive to be a mistaken rule of real property, we deem it proper to add that we should not feel bound, in any future case which might come before the court, to follow the decision, but should feel at entire liberty to re-examine the question involved as res nova, and to overrule the decision, if our present views should remain unchanged.”
Surely it would have been better for the court, the litigants and the business interests of the State, if the court had re-examined the question involved as to the validity of the mortgage as res nova. Its decision then would have rested on the sound judgment and conviction of the court and not on judicial courtesy. In Flaska v. State, supra, the case was decided by a divided court, 3-2, and a petition for rehearing denied by the same division of the court. After the appointment of a successor of a judge of the majority a second petition for rehearing was filed, posing no ques-
“But the application for a rehearing had never been submitted to him. The matter of the pronouncement of judgment had been submitted to him and he had acted on the matter so submitted. But the question whether the judgment should be set aside and further consideration be given to the appeal in accordance with the showing made by the plaintiff district in its petition for a rehearing was a question separate from and independent of the question of the prior pronouncement of judgment. The question whether a
rehearing should be granted was, as above stated, presented to the court with its regular membership participating, and JUSTICE HOUSER had the power to act on the matter unless disqualified. No disqualification, constitutional, statutory or otherwise, has been shown.” (Emphasis added.)
After discussing prior California cases, including Luco v. De Toro, 88 Cal. 26, heretofore referred to, the court said:
“The matter of setting aside the submission of the cause has always been considered as one requiring court action, and the vote of four of the justices constituting the court at the time the order is made as necessary to its effectiveness. This is the uniform practice. It is safe to say that no order setting aside a submission has otherwise heretofore been made. The parties, of course, have the constitutional right to a judgment herein by a duly constituted court, but they have no right, constitutional or otherwise, to a decision by any particular judge or group of judges.” (Emphasis added.)
In respect to cases in foreign jurisdictions, the court said:
“There is nothing in the cases in other jurisdictions, relied upon by the defendants, that is controlling. They cite cases following the practice in the United States Supreme Court to the effect that no rehearing will be granted unless a member of the court concurring in the majority opinion desires such reconsideration. That rule is one of judicial policy and works no compulsion on courts of other jurisdictions to adopt it, and involves no fundamental rights. Cases in other states, such as Cordner v. Cordner, 91 Utah 474 (64 Pac. (2d) 828); Woodbury v. Dorman, 15 Minn. (Gil. 274) 341; and Gas Products Co. v. Rankin, 63 Mont. 372 (207 Pac. 993, 24 A. L. R. 294), also cited by the defendants, like-
wise reflect policies in state practice with which we are not here concerned, at least to the extent that they should be adopted in preference to a practice in this state under which the courts and litigants have proceeded with apparent general satisfaction.”
We have quoted extensively from this decision because it is consistent with Illinois practice. We find no reported Illinois case in which the question presented by plaintiffs has been decided. However, in at least two cases newly elected justices of the Supreme Court have participated in the disposition of petitions for rehearing of cases in which the opinion had been filed prior to their election and qualification. In Lees v. Chicago & N. W. Ry. Co., 409 Ill. 536, the opinion of the court, written by MR. JUSTICE GUNN, was filed May 24, 1951. Neither he nor MR. JUSTICE THOMPSON were candidates for re-election on June 4, 1951. A petition for rehearing was denied September 20, 1951, and their successors were noted as dissenting from the opinion filed. In People ex rel. Lawrence v. Village of Oak Park, 356 Ill. 154, the first opinion, concurred in by all of the justices of the court except JUSTICE DEYOUNG who dissented, was filed prior to the qualification of the judges elected in June 1933. JUSTICE DEYOUNG was re-elected. Three new justices were elected. They participated in the decision granting a rehearing October 4, 1933 on petition filed July 11, 1933. Only three of the justices concurring in the opinion were then members of the court. Undoubtedly there are other cases. The action of the newly elected judges in these cases is consistent with the practice in the trial courts, approved by the Supreme Court.
A motion for a new trial and a petition for rehearing are akin. The determination of each requires an examination of the proceedings theretofore had in the court in which the motion or petition is filed. On a motion for new trial the rulings of the trial judge on
” . . . we are of opinion that under the modern practice in our courts the better rule, and the one sustained by perhaps the weight of more recent authority, is, that the succeeding judge, presiding in the same court, has power to decide a motion for a new trial, and to grant or overrule the same, and enter such judgment or order as shall to justice appertain. (Citing cases.) The court is required to pass upon and determine the motion for a new trial. The determination is a judicial one, to be made by the court and not by the particular judge who may, at a particular time, have presided therein.” (Emphasis added.)
See also People v. Ficke, 343 Ill. 367, 387. The power and duty of a trial judge to re-examine and correct what he deems to be erroneous rulings of his predecessor is firmly established. In Fort Dearborn Lodge v. Klein, 115 Ill. 177, 181, the court said:
” . . . we are of opinion that under the present liberal practice, the court has the power, and that it is its duty at any time before trial, when it becomes satisfied that an erroneous ruling has been made with respect to the sufficiency of a pleading, or other similar matter, to promptly set aside the order and correct the error. . . . The fact that the order was made by another
judge is a matter of no consequence whatever. The power of the trial judge was precisely the same as if he had made the ruling himself. The ruling in either case would be the act of the court.”
See also Dowie v. Priddle, 216 Ill. 553, Shaw v. Dorris, 290 Ill. 196, 204, where the judge acted on his own motion, and Roach v. Village of Winnetka, 366 Ill. 578.
The position taken by plaintiffs on the argument on rehearing, namely, that the successor justices had the right or power to take part in the decision on the petition for rehearing, but that it was not good policy to do so, makes the questions raised by them academic. The decision of this court on the merits of the controversy will be judged on appeal, if any is taken, on its merits. In Marshall Field & Co. v. Nyman, supra, the court had under consideration the right of a branch Appellate Court to overrule and vacate an order entered by the main court. The main court had denied a motion to strike a stenographic report. It then assigned the case to the first branch of the court, where the motion to strike was renewed. The court allowed the motion and affirmed the judgment. For the purposes of review the Supreme Court assumed that the motions were identical and the record the same on both motions. It said:
” . . . while we are clearly of the opinion that it is not good practice nor in consonance with orderly procedure, after an order is duly entered by one branch of the Appellate Court for another branch to overrule or set aside such order, we are disposed to hold that the court, under circumstances as presented in this record, was not without power to enter the order entered here.”
The Supreme Court then examined the ruling of the branch court on its merits and affirmed its action in
The decree appealed from is affirmed.
Affirmed.
BURKE, P. J., concurs.
FRIEND, J., dissents.
MR. JUSTICE FRIEND DISSENTS.
I dissent both (1) from the procedure adopted by the majority of the court in granting the petition for rehearing through participation of a new member of the court, and (2) from the conclusions of the majority upon the merits of the case.
1. The petition for rehearing was filed after the reassignment of JUDGES TUOHY and FEINBERG to other divisions of the Appellate Court on June 18, 1951. There remained of the former members of the division as of that date only one justice, JUDGE NIEMEYER, who had filed a dissenting opinion. JUDGE BURKE and I, who were assigned to sit with JUDGE NIEMEYER as the reconstituted division, had been members of the third and second divisions, respectively, and took no part whatever in the original consideration or decision of the case. When the petition came up for disposition in executive session on September 17, 1951, I dissented from the order granting the petition because it seemed to me that the establishment of such a precedent, under the prevailing circumstances, was fraught with danger
After the petition was allowed, plaintiffs filed their answer with supporting authorities, in the forepart of which they cited and discussed numerous decisions in various jurisdictions holding that upon basic principles underlying orderly judicial administration, new members of the court should, as a matter of propriety, refrain from considering a petition for rehearing where they had taken no part in the decision of the cause. The case was then reargued and the question under
The functions of a petition for rehearing are well understood by bench and bar, and the fundamental principles governing the attitude of courts toward rehearings and rearguments are well established. Most reviewing courts prescribe the conditions under which a rehearing may be sought. In this district Rule 13 of the Appellate Court provides that the petition “shall state concisely the points supposed to have been overlooked or misapprehended by the court” and that “in no case will any argument be permitted in support of such petition.” The paradox is self-evident in procedure which calls upon two new judges of a court of three to consider points supposed to have been overlooked or misapprehended by them in a decision in which they had no part. The impropriety of considering a petition for rehearing by a newly constituted court was early recognized by CHIEF JUSTICE TANEY in Brown v. Aspden, 55 U. S. 25 (1853). In passing upon a motion for rehearing he announced the rule of the court that no reargument would be heard in any case
I have carefully studied the decisions presented by plaintiffs in their answer to the petition, as well as those cited in the majority opinion, and comments therein on plaintiffs’ authorities. With the exception of Metropolitan Water District v. Adams, 19 Cal. (2d) 462, 122 P. (2d) 257 (1942) (following an earlier decision in that state, Luco v. DeToro, 88 Cal. 26, 25 Pac. 983), wherein the court merely held that in the absence of any constitutional or statutory restrictions it had the “power” or right to grant rehearings without considering the propriety of doing so, I find no case in any jurisdiction, State or Federal, which, upon similar facts, sanctions the procedure allowed in the case before us. The authorities are almost unanimously to the contrary.
The precise question arose in Cordner v. Cordner, 91 Utah 474, 64 P. (2d) 828 (1937), wherein three members of the court concurred in the majority opinion and two members dissented. A petition for rehearing was filed. In the meantime one of the majority judges retired and a new member was appointed to his position. After a full consideration of the matter and review of the cases of other jurisdictions, the court
Following Cordner v. Cordner, the Supreme Court of New Mexico in Flaska v. State, 51 N. M. 13, 177 P. (2d) 174 (1946, 1947) considered the identical problem of passing upon a petition for rehearing when there had been a change in the court personnel after an initial decision by a divided court. Originally three judges had concurred in the majority opinion and two had dissented. There were two motions for rehearing.
In Gas Products Co. v. Rankin, 63 Mont. 372, 207 Pac. 993 (1922), one of the justices of the Montana Supreme Court was incapacitated by illness and a district court judge was called in to sit in his stead. The decision was rendered by a divided court, the district judge voting with the majority. Before the petition for rehearing was heard, the incapacitated justice had died and his vacancy was filled by an appointment. The
Golden Valley County v. Greengards, 69 N. D. 171, 284 N. W. 423 (1938, 1939), was decided by a divided court, three members concurring in the majority opinion and two dissenting. Before the petition for rehear-
The principles enunciated by the Utah, New Mexico, Montana and North Dakota courts had been earlier established and followed in New York (People v. Mayor of New York, 25 Am. Decisions 669 (1840)); in Michigan (McCutcheon, Adm‘r v. Common Council of Village of Homer, 43 Mich. 483, 5 N. W. 668 (1840); People v. Evening News Ass‘n, 51 Mich. 11, 16 N. W. 691 (1883)); and in Minnesota (Woodbury v. Dorman, 15 Minn. (Gil.) 274 (1870)).
The majority opinion readily concedes that ”Woodbury v. Dorman, 15 Minn. (Gil.) 274, Gas Products Co. v. Rankin, 63 Mont. 372, Cordner v. Cordner, 91 Utah 474, and Flaska v. State, 51 N. M. 13, support plaintiffs’ contention that successor judges should not act on a petition for rehearing of a case decided during the incumbency of their predecessors,” but it seeks to minimize the force of these cases, which are precisely in point, by summarily disposing of them with the statement that “these decisions are based on grounds of expediency.” Woodbury v. Dorman is referred to as stating the theory of these decisions and exposing “its weakness.” In that case two members of the court who joined in denying the application for rehearing because, as they said, a reargument would be a violation of proprieties in the administration of justice and tend to destroy respect for and confidence in judicial tribunals, reserved the right in any future case
Although the precise question has never been decided in this State, the fundamental principle of the foregoing decisions was enunciated and adhered to in Garrett v. Peirce, 84 Ill. App. 31 (1899). Plaintiffs there had originally filed a bill to foreclose a mortgage. The trial court sustained a demurrer and dismissed the bill. On appeal the Appellate Court reversed the trial court, held that the bill stated a cause of action and remanded the cause (Peirce v. Garrett, 65 Ill. App. 682). The case then proceeded to a decree which was reversed in Garrett v. Peirce, 74 Ill. App. 225, for errors
In all the cases cited herein there remained on the court a substantial number of the members who had joined with the majority in the decision of the appeal. I find no case in any jurisdiction where there remained in the reconstituted court only the dissenting member. In the instant case there is less justification for entertaining and allowing the petition for rehearing than in any of the reported decisions.
As to the merits of the case.
2. Without unduly extending these combined opinions, I wish to emphasize, as briefly as possible, the sharp variations between the original and the present majority opinion, both as to the interpretation of the salient facts and the law applicable thereto.
Defendants take the position, and the majority now hold, that when the hope or expectation of renewal of the lease was extinguished, Silverman, who had acquired and become the owner of all the stock of Essaness, acting in his own interest, was “free to negotiate
The original opinion, written by JUDGE TUOHY and concurred in by JUDGE FEINBERG, and the record as I view it, present an entirely different picture. According to the testimony of Arthur Rubloff, a Chicago realtor whose recollection was refreshed by a memorandum made at the time, Silverman, as early as June 11, 1946 told Rubloff in a telephone conversation that he planned a new corporation to take over the theatre property at a price of $1,800,000 in the expectation of giving a twenty-year lease on the theatre at $100,000 a year; that the then effective lease was controlled by a number of interests with which he was “not concerned“; that he would go along with those interests until 1951, when the new corporation would take over. He offered Rubloff ten per cent of the new corporation. This evidence is significant as indicating that three years before the actual negotiations began, Silverman was even then considering acquiring the property, not for his beneficiaries but for himself or a corporation which he would control. On September 22, 1948 Nash, an officer of The Real Estate Corporation which throughout the entire transaction acted on behalf of the Franciscans, notified Stern, an employee of Essaness, that the Franciscans would not exercise their right of termination in the year 1949. After the re
“Q. What did he say? A. He told me he was dealing and trying to purchase the Woods building and fee, and there were a lot of other people trying to do the same thing, and he cautioned me not to say anything to anybody, including my wife. . . . Q. Did you tell your wife? A. I did not, no. Q. Did you tell anyone about it at that time? A. I did not.”
Stern was not a member of the Woods Theatre partnership, but his wife was. This is significant in view of defendants’
There is no question that a principal-and-agent relationship existed between the Woods partnership and Essaness. As to all matters within the scope of its agency, Essaness acted in a fiduciary capacity and was bound to the exercise of the utmost good faith in dealing with and concerning the interests of its principals; it could not regard the Woods property as fair game to acquire in competition with its principal, the partnership; and when it undertook to carry on negotiations for purchase of the property in competition with others who were seeking to acquire it, thereby defeating any possibility of the extension of the leasehold for the partnership, it violated a fundamental rule of the
“Where one voluntarily assumes the confidential relation towards another, he will not be permitted, at the expense of such relation, to deal in the property of the opposite party for his own pecuniary profit. . . . The burden is on the fiduciary to show the fairness of any transaction between him and the grantor, . . . Before a court of equity will permit a transaction between parties occupying a fiduciary relation to stand, the dominant party who has profited thereby must overcome the presumption of fraud by clear and convincing proof that he has exercised good faith and has not betrayed the confidence reposed in him.”
The reasons for the rule are well stated in Trice et al. v. Comstock et al., 121 Fed. 620, as follows:
“For reasons of public policy, founded in a profound knowledge of the human intellect and of the motives that inspire the actions of men, the law peremptorily forbids every one who, in a fiduciary relation, has acquired information concerning or interest in the business or property of his correlate from using that knowledge or interest to prevent the latter from accomplishing the purpose of the relation. If one ignores or violates this prohibition, the law charges the interest or the property which he acquires in this way with a trust for the benefit of the other party to the relation, at the option of the latter, while it denies to the former all commission or compensation for his services. This inexorable principle of the law is not based upon, nor conditioned by, the respective interests or powers of the parties to the relation, the times when that relation commences or terminates, or the injury or damage which the betrayal of the confidence given entails. It rests upon a broader foundation, upon that sagacious public policy which, for the purpose of removing all temptation, removes all pos
sibility that a trustee may derive profit from the subject-matter of his trust . . . .”
In the early case of Davis v. Hamlin, 108 Ill. 39, the basis for the rule was cogently explained:
“Public policy, we think, must condemn such a transaction . . . To sanction it would hold out a temptation to the agent to speculate off from his principal-to the latter‘s detriment. . . . If a manager of a business were allowed to obtain such a lease for himself, there would be laid before him the inducement to produce in the mind of his principal an underestimate of the value of the lease, and to that end, may be, to mismanage so as to reduce profits, in order that he might more easily acquire the lease for himself. . . . Although there was here no right of renewal of the lease in the tenant, he had a reasonable expectation of its renewal, which courts of equity have recognized as an interest of value, secretly to interfere with which, and disappoint, by an agent in the management of the lessee‘s business, we regard as inconsistent with the fidelity which the agent owes to the business of his principal.”
Numerous other cases cited in plaintiffs’ brief and in the original majority opinion approve the well-established law of trusts enunciated in the foregoing decisions.
“Here there was no secret leasing, no act done ‘behind the back.’ Here we have a positive refusal on the part of the landlord to accept the corporation as a tenant. This refusal, after application made and considered, disposed of and cut off that ‘expectancy’ which is declared by some authorities to run with every lease,-the expectancy of a renewal.”
Barber did nothing to accelerate the end of the expectancy, as Silverman did in the instant case by destroying all hope of renewal through negotiation with the Franciscans, while the expectancy still existed. In Thanos v. Thanos, the question was whether a leasehold was purchased with partnership funds or with the funds of an individual defendant, and it was held in effect that if the property was not purchased with partnership funds, such fact would constitute evidence that it was the intent of the partners that the property should not belong to the partnership. The facts in that case clearly distinguish it from the one at bar.
The classic pronouncement of JUDGE CARDOZO in Meinhard v. Salmon, 249 N. Y. 458, expresses the standard of conduct to which fiduciary in the instant case should be held:
“Many forms of conduct permissible in a workaday world for those acting at arm‘s length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the ‘disintegrating erosion’ of particular exceptions (Wendt v. Fischer, 243 N. Y. 439, 444). Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd. It will not consciously be lowered by any judgment of this court.”