StoryImage( ‘/Images/Story//Auto-img-11273279724373.jpg’, ‘Photo by Frank Schier’, ‘The three historic properties of the Bruno-Bystrom partnership are surrounded by car dealership parking lots. In the foreground, with the pickup truck, is the site of the now demolished Ing Skating Palace, built in 1918.’);
StoryImage( ‘/Images/Story//Auto-img-11273281274252.jpg’, ‘Image courtesy of Burpee Museum’, ‘"Along Market Street,"1945 oil painting by Rockford Illustrator William Hallquist, which won the First Prize in a contest by Rockford artists.’);
I am very worried about three historical properties owned by Jon Bystrom and Doug Bruno. Jon is a personal friend of mine, and has been an employee of this paper since its second issue, almost 13 years ago.
Now, Jon Bystrom is the defendant in a dissolution of partnership lawsuit filed by plaintiff Doug Bruno on May 9, 2002.
Bystrom and Bruno have been partners since 1979. In 1978, Bystrom, a senior in high school, and his brother, Arlan, six years older than Jon, had purchased 129 N. 2nd St., a six-unit apartment building, built as a single family residence in 1870. John Ennett, father of 11 children, built the red brick Victorian-Italianate at the corner of North Second and Market streets as his residence. A masonry contractor, he also built Old City Hall at the corner of Walnut and First streets.
The Bystrom brothers had been saving money for four years and first purchased a two-family together, before they acquired the North Second Street property.
In a Sept. 16, 1978, letter, Bruno asked to join the partnership, writing: If you dont want me as a partner, I will end up as competition, so you better get me while you can. He joined the partnership a year later. Bruno entered the partnership on the North Second property only.
Arlan left the partnership in 1981.
In 1986, Bystrom and Bruno acquired the single-family across the street at 201 N. Second St. That house, built in 1842 by Jacob Posson, is very likely the oldest home in Rockford, according to The Rockford Historical Societys Nuggets of History, Vol. 1, Fall, 1976, No. 4.
At the same time, they also acquired the four-family brownstone at 510-512 Market St., next door to the Posson homestead, which was also built by Ennett about 1900. It is built with the same stone as Old City Hall. Both the Posson home and the brownstone were purchased from Beryl E. Cridlebaugh, through her daughter, Barbara Ann Clark, the great-granddaughter of Ennett.
To the south of 129 N. Second St. used to be the Ing Skating Palace. About one year ago, the Ing, originally known as the Inglaterra Ballroom and host to performances by Lawrence Welk, Lauries Orchestra and Jimmy Dorsey, was demolished. Fran Kral Lincoln-Mercury-Volvo purchased the property and tore down the Ing. Fran Kral also owns the entire northeast side of the block that the Ing property and 129 N. Second St. face on the west. Fran Kral also recently acquired 511 Market St., a single-family home that was torn down a few months ago after a fire which was supposedly caused by a lightning strike. That home was across the street from the brownstones, east of 129 N. Second St. and north of the Ing property. The Ing and the 511 Market St. property are now benefiting from a new gravel parking surface, that looks like preparation for blacktop for the dealership, with extensive landscaping.
In short, the partnership property is surrounded by the old, empty Humphrey Cadillac & Olds car dealership building and active car dealership lots that would make it prime property for development if the buildings were torn down.
For more than three years, this complicated lawsuit has been in Winnebago County Chancery Courta court of equity.
Bystrom, by his attorney Larry Morrissey, filed his counterclaim on Feb. 19, 2004, for dissolution of partnership, breach of fiduciary duty, breach of contract, fraud and spoilage of evidence.
The case was first before Judge Ron Pirrello, who recused himself on April 7, 2004. The case is now before Judge Janet Holmgren.
The crux of Bystroms counterclaim lies in the accounting.
In this regard, her last two rulings affecting this accounting are disturbing.
The latest ruling
On Aug. 1, Holmgren granted the withdrawal of Ann Dempsey as Jon Bystroms attorney and accepted the substitution of Jim Hess.
What is disturbing is on Aug. 26 the judge denied a Motion for Continuance by Hess to allow him to review three years worth of case files and motions because the case was scheduled for trial Sept. 27, only one month away.
After putting her face in her hands, she looked up and said, Im sorry.
The entire hearing was almost inaudible because of the conversations of other lawyers present and the low voices at the bench. A speaker and microphone system exists in the courtroom, but was not operating.
From what was audible, she rightly pointed out the case had been before the court for more than three years; unfortunately, she also based her ruling on the number of attorneys Bystrom had had.
Bystrom is a victim of circumstance.
He says attorney Jeff Heckinger accompanied him to court on his first appearances before Pirrello.
Bystrom then retained Atty. Larry Morrissey, who had to remove himself from the case because he became the mayor of the City of Rockford. Morrissey did more than a fine job of representing Bystrom, and wrote all of the basic motions and counterclaims for Bystrom from October 2002 until he was elected in April of this year.
Morrissey transferred the case to Ann Dempsey.
Bystrom felt Dempsey was not grasping all the details of this complicated case.
On Aug. 12, 2005, Hinshaw and Culbertson, LLP, counsels for Bruno, filed a Motion for Foreclosure on Brunos behalf. Morrissey had successfully argued you cant foreclose on yourself, on the undivided interests of the partnership, yet the same motion was again before the court.
Considering the lack of evidence presented by Dempsey during the July 26 Motion to Compel Accounting, Bystrom became very concerned and retained Hess to augment Dempsey.
Dempsey filed a Motion to Withdraw when Hess was brought on as additional counsel.
Dempsey refused to comment on her withdrawal based on attorney-client privilege.
Bystrom has had three separate attorneys. Bruno has had four attorneys, three concurrently.
Brunos first attorney was Brian Larkin, who composed the original May 29, 2002, Dissolution of Partnership lawsuit.
Larkin also formerly represented both Bystrom and Bruno in a tenant dispute in 1989. He also drew up a so-called partnership agreement in 1991 that is in dispute.
Larkin recused himself, when named in the counterclaim filed by Morrissey. At the same time, Judge Ron Pirrello recused himself on the same day, April 7, 2004.
Morrissey argued in Counter-Plaintiff Jonathan Bystroms Second Amended Counterclaim, Misrepresentations Regarding the 1991 Dispute, #14: Based on information and belief, however, Bruno misrepresented the Partnership capital accounts in 1991 during the meeting with Mr. Bystrom, where Attorney Larkin was present, by not accurately reporting and disclosing the higher actual value of capital contributions made by Mr. Bystrom and overvaluing the capital contributions of Mr. Bruno.
In depositions, Larkin admitted he was at the 1991 agreement meeting on behalf of Bruno only. In depositions, Bruno said Larkin was paid for that meeting out of the partnership checking account.
Bystrom said he had been demanding the partnership agreement for six years, and at the 1991 meeting he thought Larkin was the partnership attorney, and he felt coerced into signing a partnership agreement that gave Bruno at least $20,476 more capital credit than Bystrom. To equalize the capital credit between them, the alternative was, as Bystrom alleged in depositions: Specifically, he told me, You go get a mortgage today for $10,000 and pay me, or there might be an action, as in a legal action.
After Larkin recused himself, Bruno retained Tom Lester of Hinshaw and Culbertson, LLP.
Hesss Motion For Continuance read, in part: Bystrom has filed a First Amended Counterclaim containing five counts sounding dissolution of partnership, breach of fiduciary duty, breach of contract, fraud, and spoilage of evidence… to require Bystrom to proceed to trial on Sept. 27, 2005, despite his attorneys notification of withdrawal, would be extremely prejudicial to him.
As to Holmgrens denial of Hess motion and the complexity of the case, Lester, Brunos attorney, said in a phone conversation with Schier Sept. 20: I think the courts ruling was absolutely correc
t. This case has been going on long enough. A party cannot thwart or cannot stop judicial proceedings simply by continually switching attorneys. And I disagree the case is complex. In all due respect, Im not going to get into a dispute with you over the merits of the case.
Other attorneys from Hinshaw and Culbertson have appeared on Brunos behalfMatt Hevrin and, most recently, J. Allen, who argued against the continuance without Lester present.
The Motion to Compel Accounting
The other decision of concern was made by Judge Holmgren on Aug. 1. She denied Bystroms Motion to Compel an Accounting by Bruno, ruling: Defendants Motion to Compel an Accounting is heard and denied. The evidence presented by Plaintiff at hearing establishes to the Courts satisfaction that the standards for an accounting have been met by the financial information provided by the Plaintiff to the Defendant and that there is no basis to compel Plaintiff to provide any additional information or to reformat the financial information.
Neither the plaintiff nor defendant ordered a court reporter; therefore, the judge ordered the bailiff to get one.
Bruno has admitted he has destroyed all the financial records of the partnership from 1979 to 1991. He says Bystrom gave him permission to do so; Bystrom denies he gave his permission. That matter and time period is on reserve by the court and was not the subject of the July 26 hearing. On Feb 25, 2005, Holmgren said in a Memorandum of Decision: Being fully apprised in the positions of the parties with respect to the accounting in this cause, I hold that the scope of the accounting is not restricted by the 1991 document at issue and that the accounting may encompass the entire duration of the partnership.
Bystrom asserts he has documents to prove up his claim prior to 1991.
During the hearing on the 1991-2002 accounting, Dempsey did not present any evidence on Bystroms behalf to the court.
We had evidence, but Dempsey told me this was not an evidentiary hearing, Bystrom said.
Lester brought at least six or seven boxes of records into court, consisting of records since 1991. Lester called Bruno as a witness. Bruno testified he had monthly cost receipts and income as well as check stubs in according envelopes, with yearly summaries. Those records and rent receipt books and bank statements from 1992-2001 were entered as evidence.
Bystrom alleges he requested to see these records throughout the partnership, but was only given a yearly E-1 tax statement, which Bystrom says was totally incomplete, which did not include capital equity accounting.
When Bystrom requested to see the rent receipt or income books, he was told Judge Holmgren had them and they were unavailable. Holmgren had courtesy copies, which were returned when she ruled the case could not be continued. When Dempsey turned over her files to Hess, an extra copy of the rent receipt book was included.
After the first several court appearances, Bystrom alleges he never saw an owners equity statement which would show capital debt retirement. In November, 2002, Morrissey demanded the document be produced and a hand written, five-page document was produced, for the years 1991-2001.
Bystrom alleges he has never seen a formal profit and loss statement, or a yearly balance sheet that would show assets and liabilities.
If these were presented to the court, Bystrom alleges he did not receive them.
Since 1984, Bruno collected the laundry money from a washer and dryer. Each cost $1 to operate. Around 1993, the dryer was provided to the tenants at no cost.
Bruno provided records of this money that only begin in 1994-$1,409; 1995-$94; 1996- $903; 1997-$593; 1998-$419; 1999-$152; 2000-$1,069; 2001-no report; 2002-$1,804 for a total of $6,443 in laundry money. This money was never deposited into the partnership checking account.
Bystrom alleges that since 2002, no written report has been made of the laundry money; however, he said Bruno did show him deposit slips for laundry money in December 2004 for $172.50, March of this year for $153, and August for $140.75.
Bruno testified that he and Bystrom had agreed to hold this money as an emergency fund. Bystrom denies he made such an agreement, and asserts Bruno represented to him the money had been deposited into the partnership checking account.
Through Brunos attorney at the time, Brian Larkin, this money came to light in a Nov. 14, 2002, court date.
At the same court appearance, Larkin announced Bruno also had $1,493.24 in Rockford School District 205 tort fund property tax protest money.
Bystrom alleges he had received a tort fund refund check for $1,493.24 and took it to Bruno for his endorsement. Bystrom then alleges he deposited the check in the partnership checking account. Bystrom also alleges that the $1,493.24 Larkin announced was another tort fund refund check issued previously to the check Bystrom received. Bystrom says he doesnt remember endorsing the check for cashing Bruno received.
Part of the entry in the court docket for Bruno v. Bystrom reads for the date Nov. 14, 2002: …ATTY LARKIN TO DEPOSIT $8,000 IN HIS TRUST ACCOUNT OR AN ACCOUNT AGREEABLE BETWEEN COUNSEL….
Bystrom alleges that when Larkin announced this money Bruno said it was all in coins in a drawer in Brunos home. Two and a half years later, in the Motion to Compel Accounting, Bruno testified in court that it was kept in a safe in his house.
Considering the total of this excess tort cash and the alleged emergency fund, equalling almost $8,000, Bystrom asks why Bruno sued him over withdrawing $1,900 from the partnership account more than Bruno. Bruno sued alleging Bystrom withdrew excessive amounts, and the partnership could not meet its obligations. Three years after Bruno filed to dissolve the partnership, the properties are still going with money in the bank.
Expert witness CPA Craig Coots was on vacation during the July 26 hearing on the Motion to Compel Accounting and could not appear to testify.
Coots had written excellent correspondence to Dempsey on the question of the laundry money and the assertion that Bruno had been charging the partnership double rent for Bystroms use of his apartment. In correspondence, Coots also addressed the question of labor in lieu of rent credited to Bruno for tenant Peter Dutiles apartment, but not reported to Bystrom since August 2001.
Again, at the July 26 hearing, unlike Lester, Dempsey did not present any exhibits of evidence, despite all the accounting summaries Bystrom compiled.
As to the questions about accounting and amount of evidence presented on behalf of Bystrom, Lester said by phone Sept. 20: We have made all of our arguments in the court pleadings in the court. I am not going to make them in the press. Im not going to comment on it. Its litigation and a matter before the court.
As Morrissey wrote in Counter-Plaintiff Jonathan Bystroms Second Amended Counterclaim, Count I, 37: Pursuant to 805ILCS 205/22, a partner has a right to a formal account as to partnership affairs if he is wrongfully excluded from the partnership business or possession of its property by his copartners; when a partner had held funds without the consent of the other partner and as such is holding them in trust for the other partner or when circumstances render it just and reasonable.
Bystrom alleges he has done the lions share of the work on maintaining and restoring the properties and has not been compensated as promised for the majority of that work.
Bruno alleges the same.
Bystrom says he thinks the rule of law delineating The Clean Hands Doctrine is very important in this case, which reads: The Clean Hands Doctrine holds that he who comes into equity must come with clean hands or, as otherwise stated, one seeking equitable relief cannot take advantage of his own wrong. Equitable relief may be denied if the applicant is guilty of misconduct, fraud or bad faith toward the party against whom relief is sought, provided that it is in connection with the transaction under consideration.
Automotive Repair V. Car-X Service Systems, 1984, 2nd. District, 128 Ill. App. 3rd 763, 767, 768.
The matter before Judge Holmgren on Tuesday, Sept. 27, The Rock River Times deadline day, is submitted to the court by Hess in his Response to Motion to Schedule Sale of Partnership Assets, largely as follows:
1. The pleadings in these consolidated cases are multifarious and complex.
2. The gist of all these pleadings is to (1) dissolve the partnership, (2) account for its assets, (3) decide the issues in the counterclaim, (4) determine the share of the partners, and (5) distribute the assets. …
4. The natural and most expedient manner of handling these issues is to take them up in the order stated above.
5. In following this order of proceeding, the Court would not only dispose of this case systematically but it would also protect the assets of the partnership for ultimate distribution.
6. The Motion to Schedule Sale of Partnership Assets is premature and unnecessary.
7. It is premature given Bystroms allegations that Brunos self-dealing and fraud resulted in a wrongful dissolution and given that a hearing on the accounting is set for September 27, 2005. This step is necessary to wind up the affairs of the partnership, Thanos v. Thanos, 313 Ill. 499 (1924). To do that, the capital contributions of the parties must be determined in addition to other financial issues. Hildebrand v. Topping, 240 Ill. App. 3rd 104 (1992).
8. It is unnecessary because the partnership has a positive cash flow and no such assets are in jeopardy.
9. Furthermore, an auction of the real estate assets of the partnership is not commercially reasonable; an auction is more suitable for real estate which could not be sold by conventional methods.
WHEREFORE, the Defendant-Counterplaintiff prays that the Court deny the Motion to Schedule Sale of Partnership Assets and for such other and further relief as may be just and equitable.
Please note: Watch our Online Exclusives at www.rockrivertimes.com for the posting of public documents concerning this case.
From the Sept. 21-27, 2005, issue