APPEAL from the Superior Court of Cook County; the Hon. JOHN
LUPE, Judge, presiding.
MR. JUSTICE KLINGBIEL DELIVERED THE OPINION OF THE COURT:
Rehearing denied September 22, 1959.
Plaintiff, Bernard Majewski, instituted proceedings to have a constructive trust declared on certain property of which defendants, Vincent J. Gallina and Frank Rusin, and Marion Kogut, now deceased, allegedly defrauded him. The superior court of Cook County entered a decree confirming the master's findings and conclusions that defendants had conspired to defraud plaintiff of the property, and ordering defendants Vincent J. Gallina and Frank Rusin to pay plaintiff the sum of $5,375 as part of the purchase price, and to pay the litigation costs. Defendants appealed therefrom to the Appellate Court, First District, and plaintiff filed a cross appeal on the ground that defendants' fraud warranted the imposition of a constructive trust, rather than the money decree. The cause was transferred to this court on the ground that a freehold is involved.
The essential issue on this appeal is whether the findings and conclusions of the chancellor, relating to defendants' alleged fraud and the remedy therefor, are supported by the evidence and the law.
From the voluminous record of controverted testimony, it appears that on September 18, 1952, plaintiff Bernard Majewski and Narcyz Orlowski purchased a three-flat apartment building and garage located at 3610 N. Cicero Avenue, Chicago, at a price of $23,000. On January 5, 1955, Bernard Majewski purchased Narcyz Orlowski's half interest in the property for the sum of $6,700, subject to a mortgage of $7,200. In both of these transactions, plaintiff was represented by defendant Marion Kogut, a licensed attorney and real-estate broker, whom plaintiff had known for some 20 years, during which she had filed numerous income tax returns for plaintiff, and had drafted his will.
According to plaintiff's testimony, after his purchase of Orlowski's half interest, defendant Kogut urged plaintiff to sell the property, stating that it was going down in value. On January 21, 1955, while plaintiff was in defendant Kogut's office, she had her husband go upstairs and bring down Frank Rusin, a wealthy real-estate man and investor in business opportunities. Rusin had his offices in the same block, and knew Marion Kogut for over two years, during which he had purchased three parcels of real estate through her office. Plaintiff refused Rusin's offer of $18,500 for the building, which Rusin stated would soon be worth only $14,000, and Rusin refused to sign the contract Kogut drew up for the sale of the property for $20,000.
Within the next two weeks, however, Rusin secured an oral commitment from the Supreme Savings & Loan Association for a $19,100 mortgage on the property, after the company had appraised it for $25,500. Rusin paid for that appraisal. During this same period, Rudolph Bartel, a client of Kogut's, who was in her office when plaintiff mentioned that he was trying to sell his property, also offered to try to sell it. In his testimony for defendants Bartel stated that he had tried to sell the property for $21,500, and admitted that the property was worth $22,500 to $23,000 at that time.
On February 10, 1955, defendant Kogut telephoned plaintiff that she had a cash buyer for his property. When plaintiff came to her office, despite his not feeling well, he met defendant Vincent J. Gallina, who was employed by Rusin as a salesman of business opportunities and new accounts, and as a general messenger. When plaintiff inquired about the pending contract with Rusin, Kogut told him that it was "waste." She prepared a contract in their presence for the sale of the property to Gallina for $19,500, of which she was to receive $500 as a commission, and plaintiff was to be paid in part by a note, secured by a second mortgage, for $5,000 at an interest rate of 4 per cent. The figure "4" was written over after the figure "5" had been crossed out. Plaintiff claimed, and Gallina denied, that the figure was changed by Kogut without plaintiff's knowledge and after he signed the contract. No earnest money was required, and the contract did not specify the amount of the first mortgage to be secured by Gallina.
Plaintiff stated that he thought Gallina was going to assume the existing mortgage, but defendant Gallina, who knew of Rusin's commitment for the $19,100 mortgage at the time, stated that he indicated no such intention. Plaintiff signed the contract in Kogut's office, after, according to his testimony, Kogut repeatedly urged him to sign it, or else she would not bother with him later, because the property was going down in value. Gallina, however, signed the contract subsequently in Rusin's office, although he did not recall whether Rusin was present at the time.
On February 21, 1955, Gallina submitted a formal mortgage application for a $19,100 mortgage to the Supreme Savings & Loan Association, alleging a purchase price of $26,500 for the property, and giving Marion Kogut as a reference, even though he claimed that he had met her only on that one occasion. The loan application was approved. On March 4, 1955, plaintiff, accompanied by defendants Kogut, Rusin and Gallina, went to the office of the loan association to close the deal, with Kogut the only lawyer in the transaction. Plaintiff, believing that Gallina was taking over his old mortgage, handed Gallina the mortgage payment book. At Rusin's direction, the new mortgage was disbursed by the issuance of separate checks: one to Avondale Savings & Loan Association in payment of the balance of the existing mortgage; one for $500 to defendant Kogut; one for $6,389.54 to plaintiff; and two checks payable to defendant Gallina, one for $2,800 and one for $1,385.33. Gallina paid Rusin $2,800 in cash immediately thereafter, apparently as a commission for procuring the loan for him. Rusin was also paid $191 for getting the loan by the Supreme Savings & Loan Association. Although plaintiff's deed bore revenue stamps in the amount of $29.70, indicating a consideration of $26,500, the closing statement prepared by defendant Kogut charged plaintiff only $21.45 for revenue stamps, as would pertain to a sale for $19,500.
By virtue of this transaction, Gallina became the owner of the premises without paying out any of his own funds, and also received the mortgage surplus of $4,185.33, of which Rusin was given $2,800; and plaintiff exchanged his ownership of the premises subject to a $7,200 first mortgage, for a check for $6,389.54 and a note and second mortgage for $5,000, subject to a first mortgage of $19,100, neither of which bore any legend that it was a junior encumbrance.
On April 4, 1955, when the first payment on the second mortgage fell due, Gallina failed to pay it, claiming that plaintiff owed him an additional sum. However, when Gallina learned that plaintiff secured a new lawyer, Gallina immediately offered the payment on the second mortgage, which plaintiff then refused and returned.
On May 5, 1955, plaintiff filed suit alleging that he conveyed the real estate in question to Gallina as a result of undue influence, fraud, inadequate consideration, and as a result of a breach of the confidential relationship, and requesting that the court decree that a constructive trust exists between defendant Vincent J. Gallina and plaintiff, and that Gallina is holding title as trustee ex maleficio for the benefit of plaintiff. The complaint also requested that a receiver be appointed and an accounting be made; that plaintiff and defendants deposit all the cash proceeds in connection with the transaction in court; and that a deed be deposited designating plaintiff as grantee, subject only to an amount of money equal to the actual indebtedness existing on February 10, 1955, so that the parties may be restored to the status quo as of that date.
Plaintiff thereafter amended the complaint to state that the $5,000 note and mortgage were void, since they did not bear the legend required by the Illinois Securities Act of 1953 that they were junior encumbrances. (Ill. Rev. Stat. 1953, chap. 121 1/2, par. 137.3K.) The court granted plaintiff's request to deposit the securities with the court, and authorized the clerk to surrender the securities to defendants upon payment of $5,000 ...