Court Opinion

ID: 9706578
Source: CourtListenerOpinion
Date Created: 2023-08-26 01:46:50.202488+00
Date Added: 2024-06-11T18:22:23.724727
License: Public Domain

Supplemental Opinion on Rehearing Niemeyer, Presiding Justice.  The Continental, as trustee, and the bondholders, justly complain that in their petition for rehearing plaintiffs violate the rules of this court and the well established laws of the State by arguing the case and raising and arguing points neither presented nor argued in the original briefs. We did not discuss in our original opinion a point suggested in a single paragraph of seven lines in plaintiffs’ original brief but argued extensively in their petition, namely plaintiffs’ right to show by parol evidence that it was not the intention of the interested parties, including Continental as trustee, to hold Barkhausen and Bohrer, beneficiaries of the Brash trust, personally liable, because the trustee is not a party to the assumption agreement. As this contention of plaintiffs, if sustained, would require remandment of the cause for further proceedings, including the taking of testimony, instead of entering judgment here as directed in our original opinion, we have disregarded the irregularity of plaintiffs’ petition and granted a rehearing primarily for the purpose of giving further consideration to this question. The promisee is not named in the assumption agreement. Plaintiffs give no record references supporting their assertion that the mortgagor, and not the trustee in the mortgage indenture, is the promisee or second party to the contract. This case does not present the usual situation where the owner of mortgaged property, wishing to protect other assets presently owned or to be acquired, exacts from the grantee of the mortgaged property an assumption of the mortgage obligations generally recited in the deed of conveyance. Here the mortgagor is a corporation, created pursuant to a reorganization plan to take and hold title to the mortgaged property and execute the mortgage indenture involved herein for the benefit of the bondholders under a prior mortgage. Its purpose would be fulfilled with the transfer of the mortgaged property and the disbursement of the purchase price as a liquidating dividend. Its existence would end. Having no assets and no future, it had no need for or interest in an assumption of its mortgage obligations. There is neither allegation nor proof that the assumption agreement was negotiated by or on behalf of the mortgagor, or that it was delivered to the mortgagor. There is no mention of an assumption of the mortgage obligation in the offer to purchase or in the communications from the voting trustees to the holders of voting trust certificates to secure acceptance of the offer. Plaintiffs say in their reply brief on rehearing, “It (the assumption agreement) was no part of the offer or acceptance.” They allege in their complaint that by an instrument dated January 29, 1946 Brash, “not in his individual capacity but in his capacity as Trustee,” assumed all of the covenants of 32 West Randolph Corporation in the mortgage indenture, and that the mechanics of. the transaction whereby the mortgaged property was transferred to Brash as trustee, who in the manner aforesaid assumed the covenants and conditions of the mortgage indenture, were, as all parties in interest, including Continental as trustee, well knew, “devised to and did constitute a formal compliance with the provisions of the Mortgage Indenture which required the transferee of 32 West Randolph Corporation to assume the covenants and conditions of the Mortgage Indenture.” In support of their motion for summary judgment plaintiffs filed the affidavit of Bohrer in which affiant stated that in November or December 1945 he informed Canright and Stofft, officers of Continental, that he and Barkhausen were prepared to purchase the assets of the mortgagor, subject to its liabilities, providing the transaction was arranged so that they could have the benefit of the depreciation of the building for income tax purposes and would not incur or assume any liability for the payment of the principal or interest of the bonds or the performance of any of the covenants and obligations of the mortgage indenture; that the Continental officers suggested the formation, of a corporation to assume the mortgage indenture; that he, Bohrer, pointed out that this would not meet their requirements because they would be unable individually to take the benefit of the depreciation deduction; that he, Bohrer, then suggested the use of a land trust, with the trustee assuming the mortgage indenture as trustee only and not individually, thereby avoiding completely any personal liability upon the mortgage indenture on the. part of the beneficiaries of the trust and the trustee individually; that the Continental officers told Bohrer that a land trust would comply with the mortgage indenture and that they on behalf of the Continental would approve such procedure.  The only provision in the 85-page mortgage indenture requiring the assumption of the mortgage obligation, called to our attention, is section 12.05, which required such assumption by “an indenture supplemental hereto, executed and delivered to the trustee” (emphasis added) on the consolidation or merger of the mortgagor with or into another corporation, or the conveyance of the mortgaged property to another corporation. As shown by Bohrer’s affidavit, he and Barkhausen were attempting to comply with this provision so the Continental would not object to or attempt to thwart the transfer of the mortgaged property to them. Compliance with the section required delivery of the assumption agreement to the trustee. Delivery completed the contract between the obligors, contracting under the name of Brash, etc., and the trustee in the mortgage indenture. This litigation, being between the parties to the contract—Barkhausen and Bohrer contracting through their, agent, and the Continental as trustee—parol evidence is not admissible to show that Barkhausen and Bohrer were not to be bound by the assumption agreement. This rule is so universally recognized we thought it unnecessary to cite more than one authority in support of it. Farmers and Merchants Bank v. Narvid, 259 Ill. App. 554, cited in plaintiffs’ original brief, and Northern Assur. Co. v. Chicago Mut. Building Loan Ass’n, 198 Ill. 474, Harts v. Emery, 184 Ill. 560, Washburn & Moen Mfg. Co. v. Chicago Galvanized Wire Fence Co., 109 Ill. 71, and C. Lane & Co. v. Western Union Teleg. Co., 149 Ill. App. 562, cited in the petition for rehearing, recognize the rule in actions between parties to the contract. Woerter v. Mahler, 314 Ill. App. 324, cited in the reply brief on rehearing, was a suit on a negotiable note in which this court followed its prior decisions in similar cases where section 20 of the Negotiable Instruments Act was controlling. It has no application to the facts before us. Plaintiffs do not contest the rule in suits between parties to the contract. There is no ambiguity in the assumption agreement warranting the introduction of parol evidence as to the parties assuming the mortgage obligations. The agreement plainly states that Brash, not individually but in his capacity as trustee under the Brash trust agreement in which Barkhausen and Bohrer are the beneficiaries, assumed the mortgage obligations. The agreement creating the Brash trust is unambiguous. Under that agreement, as construed by this court, Brash was the agent of the beneficiaries in assuming the mortgage obligation at their direction. He was acting for disclosed principals.  Plaintiffs further argue on rehearing, for the first time, that defendant has waived its objection to parol evidence as to the intention of the parties because the objection was not raised in the trial court. This contention is based on a misconception of the rule prohibiting parol evidence. It is a rule of substantive law, not of evidence. 20 Am. Jur., Evidence, sec. 1100; Wigmore on Evidence (3d ed. 1940) secs. 2400 and 2425. Or, as stated by this court in Air Conditioning Corp. v. Honaker, 296 Ill. App. 221, 225, “The parol evidence rule is not a rule of evidence but of interpretation or construction.” It need not be objected to in the trial court. 20 Am. Jur., Evidence, sec. 1101. Moreover, in answering the allegations of the complaint as to the intention and knowledge of the parties, defendant denied the allegation, and further “denies that said allegations are material and denies that knowledge or intention have any importance or materiality to the legal effect of the instruments referred to and refers to the documents themselves for the legal purport and effect thereof.”  In their petition for rehearing plaintiffs urge for the first time in this court that neither the trustee nor the bondholders can maintain an action on the assumption agreement because it is under seal. The bondholders say that this point was urged in the trial court. Plaintiffs ignore the statement. This contention, if valid, comes too late. As said by the Second Division of this court, speaking through Mr. Justice Friend in Chicago City Bank & Trust Co. v. Johnson, 293 Ill. App. 564, 575: “The law is well settled that the parties cannot for the first time on petition for rehearing raise questions which were not urged. or argued on appeal. Welch v. City of Chicago, 323 Ill. 498, 508.)” The court will not go beyond the questions presented at the original hearing, even though the order granting the rehearing is general. Pitek v. McGuire, 51 N. M. 364.  In their reply brief on rehearing the plaintiffs urge that in the absence of a seal the assumption agreement is without consideration. They overlook the fact that the agreement recites the receipt of consideration of “Ten Dollars ($10.00) and other good and valuable considerations” (probably including in the latter the acquiescence of the Continental, as trustee, in the transfer to Barkhausen and Bohrer). They also urge that the case should be remanded to permit them to amend their pleadings and pray for reform of the assumption agreement upon the ground of mistake. It may be that in a proper suit relief could be obtained. It is a question which we need not and do not decide. It indicates a departure from the original theory of plaintiffs’ case. We are not warranted in remanding the case for this purpose.  Finally, plaintiffs insist that the court cannot enter judgment for defendant. Plaintiffs put in issue the rights of the parties under the assumption agreement. Defendant answered, asserting the liability of Barkhausen and Bohrer as individuals. The judgment directed in our .original opinion is responsive to the issues made. In denying the relief sought by plaintiffs, judgment is properly entered in accordance with the court’s construction of the contract. 16 Am. Jur., Declaratory Judgments, sec. 72; Strype v. Lewis, 352 Mo. 1004; Northland Greyhound Lines v. Amalgamated Ass’n, 66 F. Supp. 431, 433; American Auto Ins. Co. v. Indemnity Ins. Co., 108 F. Supp. 221, 224. The judgment entered is in accordance with the prior practice of this court. People ex rel. Cohen v. Barrett, 349 Ill. App. 236. The opinion heretofore filed herein is adhered to and readopted as the opinion of the court. The judgment appealed from is reversed and judgment is entered here that Barkhausen and Bohrer, individually and as copartners doing business as The Doubleby Co., are liable for the payment of the principal, interest and all other obligations of all bonds and interest coupons issued and outstanding pursuant to the mortgage indenture. Reversed and judgment here. Burke and Friend, JJ., concur.