Court Opinion

ID: 9721359
Source: CourtListenerOpinion
Date Created: 2023-08-26 08:57:19.18853+00
Date Added: 2024-06-11T18:24:25.146659
License: Public Domain

JUSTICE EGAN, dissenting in part and specially concurring in part: I respectfully dissent. I would reverse the order of the trial court’s dismissal of counts I and II of the complaint. Since count I is pleaded alternatively to count II, I will discuss count II first. Reduced to the essentials of the complaint, the facts are these: The plaintiff learned that the Village of Glenview intended to annex properties including those owned by the plaintiff and the defendant. The plaintiff asked the defendant to join with him in resisting annexation by Glenview. They agreed that if the plaintiff was successful in negotiating a settlement which would increase the value of their properties, the defendant would sell his property to the plaintiff at a price to be based on the favorable annexation terms. The plaintiff retained a lawyer to represent both him and the defendant in the negotiations with Glenview. After months of negotiations with Glenview, the plaintiff successfully completed an annexation agreement resulting in an increase in the value of the defendant’s property as well as the plaintiff’s property. On January 5, 1988, the defendant, represented by his own counsel, executed a letter of direction directing the trustee bank to enter into an annexation agreement with Glenview. On the same day the defendant signed the real estate contract in issue here as agent of the trustee, but the defendant made it clear, and the plaintiff knew, that the defendant was the sole beneficiary of the trust. The parties also entered into an escrow agreement and the plaintiff issued a check in the amount of $40,000 payable to the Intercounty Title Company. The defendant caused the trustee bank to issue a trustee deed to the Bank of Ravenswood under a land trust created by the plaintiff, an ALTA statement and a proceeds letter authorizing the Bank of Ravenswood to pay the trustee bank and the defendant the entire proceeds from the sale of the property. The proceeds letter said that the authorization for the distribution was given pursuant to the direction of the defendant beneficiary. The defendant refused to appear on the designated date for the closing. From this record two overriding facts appear: Through the efforts of the plaintiff the defendant now is richer, and the defendant has insulated himself from any liability, for specific performance because he misrepresented his authority to the plaintiff. Such a result, in my judgment, violates fundamental principles of equity and fair dealing. The two cases relied upon by the defendant and accepted by the majority are Seaberg v. American National Bank & Trust Co. (1976), 35 Ill. App. 3d 1065, 342 N.E.2d 751, and Feinberg v. Great Atlantic & Pacific Tea Co. (1970), 131 Ill. App. 2d 1087, 266 N.E.2d 401. Seaberg depended on Feinberg and another case cited in Feinberg, Madigan v. Buehr (1970), 125 Ill. App. 2d 8, 260 N.E.2d 431, which is also cited by the defendant here. Since Madigan is -the precedential underpinning of Feinberg and Seaberg the appropriate discussion should begin with that case. In Madigan, the plaintiff was a beneficiary of a land trust who contracted with the defendants for the sale of land. The plaintiff held herself out as the owner of the property. The defendant defended on the ground that the plaintiff was not the owner of legal title to the property, the trustee was. The appellate court upheld judgment for the defendants. It distinguished the cases cited by the plaintiff because “the purchaser [in each of those cases] knew that he was dealing with the beneficiary.” (125 Ill. App. 2d at 16.) In this case, I repeat, the purchaser knew he was dealing with the beneficiary. In Feinberg, it was the beneficiary lessor who sued the lessee for breach of a lease. The appellate court denied relief to the plaintiff on the ground that the plaintiff beneficiary had signed the lease as an agent of the trustee. In so ruling the court relied on Madigan. It should be noted that in both Feinberg and Madigan, unlike this case, it was the plaintiff who had arguably misrepresented his authority. In Seaberg, the defendant, a beneficiary of a land trust, entered into a lease with the plaintiffs. The beneficiary signed the lease as agent of the trustee. The lease provided for an option to purchase the property. Correspondence was exchanged between the parties through which the plaintiffs maintained that they had exercised the option to purchase the property. A majority of the appellate court upheld the denial of specific performance to the plaintiffs on two grounds: the lack of authority of the beneficiary to act as an agent and the legal insufficiency of the “option” exercised by the plaintiffs. In holding that the beneficiary lacked authority to act as the agent, the majority depended upon Feinberg and Madigan. The special concurring opinion, however, agreed with the majority that the option had not been properly exercised but dissented from the holding that the actions of the beneficiary did not bind the trustee, thereby requiring specific performance. The special concurring opinion made these pertinent observations: “I disagree with the court’s opinion, however, because it follows the traditional approach to land trusts which is to view the actual owner separate and apart from the title holder, thus permitting the owner to use the land trust as an escape from obligations he has assumed with respect to his real estate. The court’s opinion points up the artificialities resorted to in dealing with land trusts to mask the realities of the relationship between the trustee holding legal title and the one who has the power to say what should be done with the property. [The defendant] had the sole power to direct the trustee, and he and his wife were the beneficiaries of the trust. Had [the defendant] and his wife styled themselves as beneficiaries, signed the lease as beneficiaries and incorporated a provision agreeing to cause title to be conveyed when the option was exercised by the lessee, the option would have been valid under the holding in House of Realty, Inc. v. Ziff (1973), 9 Ill. App. 3d 419, 292 N.E.2d 71. Because [the defendant] departed from those formalities by identifying himself instead as ‘duly authorized agent’ for the trustee who was named in the lease, signed the lease in his own name and did not specifically agree to cause title to be transferred, [the defendant] is excused by the court’s opinion from performing an arrangement he entered into with respect to property which he and only he could direct be conveyed to plaintiffs. [The defendant] managed the real estate and collected rent from the plaintiffs for several years. He gave them two leases, one in 1969 for a term of 1 year with an option to extend for an additional 15 months at an increased rental and the second in 1972 for a term of 2 years, again with an increased rental and with the option to purchase which gives rise to the controversy between the parties. All of this was with the acquiescence of [the wife of the defendant] who during the years involved gave her husband full authority to manage the property and to deal with the trustee. Under these circumstances, I regard the land trust as abused by applying the line of cases [including Feinberg and Madigan] that permit [the defendant] to separate himself from the land trust, cast himself in the role of a stranger to it and in effect use the land trust device to shield himself from his own actions with respect to the property held for his benefit in the land trust.” (Emphasis added.) Seaberg, 35 Ill. App. 3d at 1074-75. I adhere to the conclusion and reasoning expressed in the special concurring opinion which refused to follow Feinberg and Madigan. In addition, I believe that the facts in this case are stronger for the plaintiff’s position than in Seaberg in that under the agreement in this case the defendant agreed “to convey or cause to be conveyed to [the plaintiff] *** a recordable trustee’s deed.” (Emphasis added.) A final word about Feinberg. The defendant emphasizes that leave to appeal from the appellate court was denied by the supreme court. Our supreme court has held that a denial of leave to appeal carries no connotation of approval or disapproval of the appellate court action and signifies only that four members of the court, for reasons satisfactory to them, did not vote to grant leave. People v. Vance (1979), 76 Ill. 2d 171,183, 390 N.E.2d 867, 872. Another case which criticized and refused to follow Madigan is Lampinen v. Hicks (1979), 73 Ill. App. 3d 376, 391 N.E.2d 1105. In Lampinen, the facts were the same as those in Madigan: A beneficiary seller held himself out as the owner of the property. The appellate court reversed the judgment for the purchaser and expressly refused to follow the ultimate finding in Madigan. The plaintiff has cited Rizakos v. Kekos (1977), 56 Ill. App. 3d 404, 371 N.E.2d 896, which the majority seek to distinguish because the buyer in Rizakos did not know that a trust was involved. I believe the distinction noted by the majority is insignificant and does not detract from the case’s compelling applicability here. In Rizakos the plaintiff purchaser sued the beneficiaries of a land trust for specific performance of a sale of real estate. The defendants signed the sale contract as “sellers.” The appellate court reversed the order dismissing the complaint and relied in part on the equitable principle of estoppel (although estoppel was not expressly pleaded). The appellate court held that the sellers should not be permitted to take advantage of their failure to inform the buyer that they were beneficial instead of legal owners. I believe the same argument can be made here: The defendant should not be permitted to take advantage of the fact that he misrepresented to the plaintiff that the defendant was an agent of the trustee. The majority also state that “the Statute of Frauds applies in sales contracts even where the person seeking protection has contrived to defraud the plaintiff. The point is preventing greater evil.” (202 Ill. App. 3d at 1031.) In support of what appears to me to be an astonishing pronouncement, the majority cite Davito v. Blakely (1968), 96 Ill. App. 2d 196, 238 N.E.2d 410, and Loeb v. Gendel (1961), 23 Ill. 2d 502, 179 N.E.2d 7. I believe the majority have misinterpreted the language of those cases. The only reasonable interpretation of those cases is that the mere fact that one enters into an agreement which is unenforceable under the Statute of Frauds does not itself constitute a fraud. After the supreme court made the remark referred to in the majority opinion, the supreme court added the following: “This court has long recognized the inequity of allowing one to utilize the Statute of Frauds to work an injustice or fraud, and has refused in such cases to permit its assertion as a defense. [Citations.] The courts of equity will not permit the Statute of Frauds, the only purpose of which is to prevent fraud, to be used where the effect will be to accomplish a fraud, and if the facts are such that it would be a virtual fraud to permit the defendant to interpose the statute, a court of equity will not listen to that defense. [Citations.] Appropriate here is the following language of this court in National Importing and Trading Co. v. Bear & Co. [(1927),] 324 Ill. 346, 358: ‘It is a principle reaching to the very roots of justice that no man shall be allowed to take advantage of another’s omission which has been induced by his own request. The Statute of Frauds was not designed or intended to afford an opportunity for escape from the fundamental principle that no one shall be permitted to found a claim upon his own iniquity or take advantage of his own wrong.’ ” (23 Ill. 2d at 505.) Those cases cited by the majority do not mean that one may make with impunity an intentional misrepresentation to induce another to enter into a sales agreement to his detriment and then seek the protection of the Statute of Frauds. The majority also say that they would not speculate on the viability of other forms of action, such as breach of implied warranty of authority or fraud, since the plaintiff made no attempt to plead other forms of action. This seems a suggestion by the majority that the blow of denying specific performance is softened by the availability of other relief but that the plaintiff negligently failed to seek the other relief. To me it is unrealistic to ignore the difficulties that the plaintiff would face in attempting to prove fraud or breach of implied warranty of authority. It is reasonable to assume that the defendant would maintain that he did not intentionally make a misrepresentation of his authority with an intent to deceive the plaintiff; that the plaintiff knew or in the exercise of due diligence could have learned of the lack of authority; and that the plaintiff suffered no damage. In sum, in my judgment, a beneficiary of a land trust who signs a lease or a contract for the sale of land should be bound regardless of whether he represents himself as owner, beneficiary or agent of the trustee. In the context of a land trust, they are artificial distinctions and should not be recognized. In Lampinen v. Hicks, the appellate court, as noted, refused to follow Madigan. It disagreed with the expression in Madigan that the land trust is of such importance that it must be preserved by the courts. The court added, “It may well be that the time has come to void or avoid land trusts in Illinois.” (Lampinen, 73 Ill. App. 3d at 379.) If the result reached in this case may stand, I would join in that expression of the appellate court in Lampinen. COUNT I I disagree also with the majority’s opinion that count I was properly dismissed. As the majority note, a complaint may not be dismissed “unless it clearly appears that no set of facts could be proved under the pleadings which would entitle the plaintiff to some type of relief.” (Paine/Wetzel Associates, Inc. v. Gitles (1988), 174 Ill. App. 3d 389, 393, 528 N.E.2d 358; see 202 Ill. App. 3d at 1028.) The issue is whether under count I the plaintiff could prove a set of facts which would establish ratification of the acts of the defendant by the trustee. I believe that it is possible for the plaintiff to prove such a set of facts. Ratification is a question of fact where the evidence admits of different interpretations. (3 C.J.S. Agency §549 (1973).) Ratification rests on the intentions of the principal and requires that the principal possess full knowledge of the facts. (Wing v. Lederer (1966), 77 Ill. App. 2d 413, 222 N.E.2d 535.) At this point I note the observation of the majority that “[tjhere are no allegations in the complaint that the Trustee Bank signed the documents with full understanding that these papers were connected with the Prodromos-Poulos contract.” (202 Ill. App. 3d at 1030.) The majority also say that, “[the plaintiff] argues that although this fact is not specifically pleaded, we should infer it from other facts which are.” (202 Ill. App. 3d at 1030.) The majority conclude that it cannot be inferred from the pleadings, including the three documents relied on by the plaintiff, that the trustee had knowledge of the contract. I disagree with the majority for a number of reasons. First, the dismissal order recited that “the complaint was dismissed with prejudice without further leave to amend by the Plaintiff on the grounds that all Counts therein are insufficient as a matter of law and are fatally defective.” (Emphasis added.) The defendant never argued in the trial court, nor does he in this court, that the complaint failed to allege knowledge of the contract on the part of the trustee. Moreover, the only reference to the bank’s knowledge was made by the plaintiff himself in his opening brief when he said, “Although ratification generally requires the principal to have full knowledge of all the material facts, silence under a certain set of circumstances can equate to the requisite ratification.” The defendant’s argument in the trial court was, and is in this court, that the documents were never delivered to the plaintiff and that they did not refer to the contract of sale. It is unfair, therefore, for this court, on its own initiative, to penalize the plaintiff for failing to expressly plead that the trustee had knowledge of the contract of sale, an argument not advanced by the defendant here. Any deficiency in the pleading, if called to the attention of the plaintiff in the trial court, could have been corrected by amendment. Second, I disagree that it is not a proper inference to be drawn from the circumstances pleaded that the trustee had knowledge of the contract. The trust of which the defendant was the beneficiary was with the Bank of Skokie as trustee under trust number 50102T. On January 5, 1988, the trustee Bank of Skokie prepared and signed a trustee’s deed and identified the trust as 50102T. It recited that the conveyance was made pursuant to direction. (The defendant had the sole power of direction.) The. complaint alleges that the defendant signed a letter directing the trustee to execute a trustee deed conveying the property to the Bank of Ravenswood. It also alleges that the trustee did execute the document at the written direction of the defendant and that the defendant “caused” the trustee to execute the documents. The grantee was the Bank of Ravenswood as trustee. The ALTA statement was also prepared and signed by the bank as trustee under trust number 50102T. On January 5, 1988, the same date that the trustee deed was executed (and the contract was signed), the agent of the Bank of Skokie under trust 50102T signed the proceeds letter authorizing the Bank of Ravenswood as trustee, the grantee of the property, to pay the proceeds of the sale of the property to the Skokie Bank and the defendant. It is inconceivable to me that these facts do not, as a matter of law, circumstantially establish that the trustee had knowledge of the contract of sale between the plaintiff and the bank’s beneficiary. The documents were not generated out of thin air or through the whim or caprice of the trustee. In like vein, I believe the complaint, including the documents, created a question of fact whether the trustee, by executing the documents, intended to ratify the act of the defendant. The rule requiring written ratification is satisfied if several writings are so connected, either physically or otherwise, as to show by internal evidence that they relate to the same contract. Mid-Town Petroleum, Inc. v. Dine (1979), 72 Ill. App. 3d 296, 390 N.E.2d 428. The same assistant vice-president and trust officer signed all three documents; it is clear that at least the trustee deed and proceeds letter were signed on the same date that the contract was signed. All three documents are signed in the capacity as trustee under trust number 50102T. The bank knew that the defendant was the beneficiary of the trust and that only he had the power of direction. It knew that the property could be conveyed pursuant only to a written agreement and that the bank itself had not executed any written agreement. Consequently, the only reasonable inference to be drawn is that the bank knew that the defendant had executed a written agreement. The bank expressly stated that it was executing the conveyance pursuant to direction. In my judgment, the documents created at least a question of fact whether they represented an intention on the part of the bank to ratify the actions of its beneficiary. The rule that authority of an agent to execute a written contract must also be in writing was designed to protect the principal and to permit the principal to avoid obligations created by an agent. The terms of the land trust agreement itself protect the principal regardless of the actions of the beneficiary. To hold here that the record fails to establish as least a fact question as to whether or not the trustee ratified the actions of the beneficiary would not redound to the protection of the trustee but would only permit the beneficiary to avoid his obligations. I do not believe the case cited by the defendant, Cosmopolitan National Bank v. Kobialka (1980), 85 Ill. App. 3d 1, 406 N.E.2d 150, is apposite. In that case the lawyer for the beneficiaries signed the contract of sale. The purchasers argued that certain writings constituted the necessary written ratification by the beneficiaries of their attorney’s action. The writings included a letter sent by the attorney for the purchasers to the attorney for the beneficiaries who had signed the contract and a letter from the attorney for the beneficiaries to the attorney for the purchasers stating that a check was enclosed to return the earnest money of the purchasers and stating that the letter “shall stand as cancellation” of the contract that had been signed by the attorney. The second letter also stated that if the lawyer for the purchasers prepared documents concerning the right of first refusal, the attorney for the beneficiaries would “cause them to be executed by [his] clients.” The last document was a written direction to the trustee bank instructing the bank to execute a “Grant of Right of First Refusal” to one of the purchasers. The document was signed by the beneficiaries. The documents relevant to the right of first refusal were never executed. The purchasers argued that the conduct of the beneficiaries in directing the execution of documents promised by their attorney ratified their attorney’s execution of the real estate contract. Factually, Kobialka is wide of the mark in this case. The letter of direction in that case can hardly be equated with the trustee deed and proceeds letter signed by the trustee in this case. I note that the appellate court pointedly observed that there was no allegation that the beneficiaries themselves misrepresented anything. Parenthetically, I find it interesting that the beneficiaries did not argue that there was no ratification because the trustee had not ratified the actions of the beneficiaries’ agent. The defendant has referred to a number of variances between the contract and the documents. For example, the contract names the plaintiff, John Pródromos, as the purchaser and the trustee deed and the proceeds letter refer to the Bank of Ravenswood as purchaser. I believe that the differences between the documents go only to the weight of the evidence. They do not establish, as a matter of law, that no question of fact exists as to whether the bank intended to ratify the actions of the defendant by executing the documents. Last, although the majority did not address the question, I wish to make it clear that I do not accept the defendant’s argument that the documents may not be considered because they were not delivered to the plaintiff. He cites no authority in support of the argument, and I do not believe one exists. COUNT III The majority affirm the dismissal of count III on the ground that specific performance may be granted only where the contract is fully performed by the party seeking relief and that the plaintiff had not performed. Count III, however, does not seek specific performance; it seeks damages. For that reason, I cannot agree with the majority’s reasoning. I am unable to determine with reasonable certainty from the complaint and the plaintiff’s briefs exactly what the basis of his claim is. All the factual allegations of counts I and II are repeated in count III. Count III adds that the defendant was “unjustly enriched to the detriment of the plaintiff” as a result of the negotiations performed by the plaintiff with the Village of Glenview. I would guess that the relief sought is not dependent on the written contract, but I am not sure. If the plaintiff is claiming damages from the defendant based on the work and time that he expended in the negotiations with the Village of Glenview pursuant to an agreement with the defendant and that the defendant was thereby enriched, that is one thing. It is another thing, however, if the plaintiff is seeking damages for unjust enrichment based on the written contract that he entered with the defendant which is now repudiated. If the claim is based on the written contract, then, in my judgment, the order dismissing count III should be affirmed. The plaintiff’s argument in his brief on this point consists of the following three sentences: “It is apparent that the Defendants failed to notice Count III of the Amended Complaint was pled in the alternative. Although Plaintiff is aware that a quasi-contractual claim cannot arise from a written agreement between the parties concerning the same subject matter, the Defendants in this proceedings [sic] have expended great effort to convince this court that the real estate contract is not valid and thus does not exist as a contract. For the Defendants in Count III to now claim that the quasi-contractual claim for unjust enrichment is barred by the real estate contract only demonstrates the bizarre circuitous illogic of the defendant’s arguments.” Since I am unable to determine what the plaintiff’s claim is based on, I conclude that he has failed to properly preserve the point for review. I therefore would affirm the dismissal of count III.