APPEAL from the Circuit Court of Winnebago County; the Hon.
WILLIAM R. DUSHER, Judge, presiding.
MR. JUSTICE HOUSE DELIVERED THE OPINION OF THE COURT:
This is an appeal from a decree of the circuit court of Winnebago County in favor of the plaintiff, impressing a resulting trust on an undivided one-third interest in real estate, the title to which had been taken in the name of the defendants. A freehold being involved, defendants have appealed directly to this court.
Plaintiff, an automobile dealer, was manager of a used car lot on property owned by the defendant Harold E. Shippee. He learned that the Rockford Auto Auction, owned and operated by Hanley and Dwight Clark, was for sale. The auction was conducted on approximately 8 1/4 acres of land located in an industrial and commercial area northeast of Rockford and was improved with buildings suitable for auto auctions. Business assets, exclusive of the real estate, consisted of a sign, some fencing and office and shop equipment valued at approximately $3,000.
Tilley and Shippee had, on several occasions, discussed the purchase of other auto sales businesses. About two months prior to May 1, 1955, Tilley, after preliminary negotiations with the Clarks, informed Shippee of the possibility of purchasing the subject property. He was authorized by Shippee to investigate further. While there is some dispute as to facts, it appears that on May 8, 1955, Tilley and Shippee negotiated for the purchase with the Clarks at the business premises. They agreed upon a price of $60,000, plus $2,500 payable from future auction fees.
On the following day, Tilley and Shippee met with the latter's attorney, Louis Schultz, in the office of Foster Smith, attorney for the Clarks, for the purpose of executing a contract of purchase and sale of the auto auction business. A written agreement was executed by Shippee, Tilley and Hanley S. Clark, the pertinent provisions of which are as follows:
"THIS AGREEMENT, made May 9, 1955, between [the names of the buyers were omitted], hereinafter referred to as Buyers, and Hanley S. Clark and Dwight M. Clark and their wives, hereinafter referred to as Sellers, witnesseth: that the Buyers agree to purchase the following described property: [here follows a description of the real estate] and the business commonly known as, Rockford Auto Auction, Route No. 173, Rockford, Illinois, operated by sellers as a partnership. Included in said purchase and sale shall be the items of personal property listed on the inventory attached hereto, and, shall include the exclusive right to use the name Rockford Auto Auction.
"Said purchase and sale shall include all of the buildings on the above described property, except, the smaller frame office building located on the northerly portion of said property, and, shall include all fencing, exterior lighting, and all exterior signs of every type and character.
"The Sellers shall deliver Abstracts of Title evidencing merchantable title in Sellers, and, shall convey all of said realty by good and sufficient Warranty Deed, and, all of said personalty by Bill of Sale, or, such other evidence of ownership as Buyers may require. Further, Sellers, shall give possession of said premises on or before the 15th day of May, 1955, and at the time of full payment. The purchase price for said property, both real and personal, shall be the sum of Sixty Thousand Dollars ($60,000.00) payable on delivery of possession.
"Conveyance shall be to such persons or partnership or corporation as designated by Buyers.
[Signed:] Harold E. Shippee Rockford Auto Auction Hanley S. Clark Arthur L. Tilley."
There was attached to the agreement a list of shop and office equipment valued at approximately $3,000.
On May 11, 1955, Shippee, Tilley, the Clarks, and their respective attorneys, met at the bank to close the transaction. The Clarks delivered a warranty deed conveying legal title to the real estate to Harold E. Shippee and his wife Amelia R. Shippee as joint tenants. The latter took no part in the transactions and asserts no claim other than as a joint tenant with her husband. The defendants executed and delivered to the bank their promissory note for $30,000, secured by a trust deed on the premises. Thereupon, Tilley paid $10,000 to the Clarks and Shippee paid them $50,000, of which $30,000 came from the money borrowed on the premises.
In the meantime attorney Edward J. Fahy organized the Rockford Auto Auction, Inc., to which corporation Tilley and Shippee transferred the personal property and good will of the auto auction business. Tilley was made president and Shippee vice-president, with Tilley owning one third of the stock and Shippee two thirds. The minutes book of the corporation reflects that Shippee was owner of the real estate. Shippee then leased the real estate to the corporation at a specified rental, the lease granting an option to the corporation to purchase the real estate for $30,000 any time after six months.
The auto auction business conducted by the corporation was not prosperous and it ceased operations in August, 1955. The property was later sub-leased to third parties who also were unsuccessful. On December 19, 1955, the defendants gave notice to the corporation that its lease was cancelled for nonpayment of rent. Upon learning that the defendants intended to assert complete and absolute ownership of the real estate, the only substantial asset remaining, plaintiff filed this action to establish a resulting trust to an undivided ...