APPEAL from the Circuit Court of Madison County; the Hon.
HAROLD R. CLARK, Judge, presiding.
MR. JUSTICE BRISTOW DELIVERED THE OPINION OF THE COURT:
Rehearing denied November 16, 1959.
John Tarpoff, plaintiff, brought this action in the circuit court of Madison County to impress a constructive trust on two parcels of real estate title to which is in the name of Henry D. Karandjeff, herein referred to as the defendant. At the conclusion of the plaintiff's case, the master-in-chancery recommended that the complaint be dismissed for want of equity, and the court entered a decree in accordance with that recommendation. A freehold is involved.
It is charged in the complaint filed on February 20, 1950, that the defendant fraudulently induced the plaintiff to convey his undivided one-half interest in the two improved business properties to him. It is claimed that there existed between plaintiff and defendant a fiduciary relationship, both in fact and in law, and that this relationship was breached by the defendant resulting in the loss of the involved property, which property now should be impressed with the constructive trust.
Plaintiff, his wife, Pareskeva Tarpoff, and son Vasil were the principal witnesses testifying before the master-in-chancery who heard the evidence in this case in September and October, 1954, September and December, 1955, August and October, 1956. The defendant was called as an adverse witness under section 60 of the Civil Practice Act, (Ill. Rev. Stat. 1957, chap. 110, par. 60,) and was examined rather extensively. Since it is claimed here that the court below failed to properly evaluate the testimony adduced, overlooking completely its legal and evidentiary force, we are called upon to present the complete factual picture as revealed by this record.
Tarpoff and Karandjeff, natives of Macedonia, came to this country as mere boys early in this century. They soon became citizens of this country, married and each had three children. The defendant was a second cousin of plaintiff's wife. The two families were both living in Granite City, Illinois, and were extremely close socially, visiting back and forth frequently, always conversing in their native tongue. Plaintiff's boys would call the defendant Uncle Henry, and they referred to his children as their cousins. Defendant was an active Presbyterian and Sunday school teacher. He would often pick up plaintiff's children and take them to Sunday school. In 1927 the defendant visited plaintiff's relatives in Europe, and upon his return he exhibited movies of the occasion and talked freely of the hospitality and cordiality extended him by plaintiff's father and other relatives.
The defendant was enterprising and ambitious, was determined to receive an education, went to night school and applied himself industriously on the road to success. He was employed in the Granite City Trust & Savings Bank as a bookkeeper, then as assistant cashier, cashier, trust officer and finally its president, all in a relatively brief period. On the other hand the plaintiff used his energies on a different course. He did not lack thrift, but was not interested in further education. He had only completed the second grade in Macedonia. He read, wrote, and spoke English with much difficulty. At first he worked in a machine shop, then opened a neighborhood grocery market, then started a slaughter house and meat packing business, selling meats to the neighborhood groceries at more or less wholesale. This was his principal business for many years. It appears that, notwithstanding his limited schooling, he was fairly successful financially.
In 1915 the defendant prevailed upon the plaintiff to transfer his bank account from the First National Bank of Granite City to the Granite City Trust & Savings Bank. There defendant would frequently help plaintiff in making his deposits, occasionally writing checks for him, advising him in real estate transactions, and serving on ten occasions between 1921 and 1927 as a notary public where plaintiff was either the grantor or grantee. In light of the foregoing it is most natural that plaintiff should have a high regard for his fellow countryman who had become one of the leaders in this small community. He had confidence in his integrity and business judgment.
With this in mind let us move on to the first transaction that ultimately led to difficulties. In 1922 these parties purchased a rental business property in the heart of Granite City for the sum of $18,750, taking the title in themselves as tenants in common. It was a two-story building with store rooms on the first floor and offices on the second floor. The defendant secured a loan of $9,000 at his bank, but because he did not have the available cash to pay his share of the balance of the purchase price the plaintiff loaned him $2,000, taking his note bearing 6 per cent interest, which note was not repaid until July, 1927. This business enterprise was entered into at the suggestion of the defendant; however, there is no claim that the plaintiff had been overreached in any way. It was agreed that plaintiff would look after the matter of repairs on the building and the defendant would take charge of the business end, such as negotiating leases, collecting rents and keeping a record. He kept the income from the building in a partnership account at his bank. Three years later plaintiff and defendant increased their project by purchasing two lots adjoining their building and erecting thereon another business property. The purchase price of the two lots was $6400, one half of which was paid in cash, the remainder was secured by a mortgage on the tract. Again the defendant borrowed his share of the down payment from the plaintiff, and also borrowed another $600 about that time from the plaintiff. All loans were represented by promissory notes bearing 6 per cent interest, and all were paid off in due course.
In 1926 a two-story brick building was erected on the lots at the cost of $18,000. Since there were other expenses of considerable size, a new mortgage was negotiated in the sum of $35,000 which covered the liquidation of the building costs as well as the two existing mortgages in the sum of $9,000 and $3,200. All negotiations for the loans were handled by the defendant. He kept all the papers, collected the rents and purportedly applied the proceeds to the payment of interest and expenses.
In the early thirties came the recession which created some problems. Rents declined and delinquencies in the payment under the mortgages occasioned some refinancing. On November 1, 1935, the parties borrowed $14,000, by giving a second mortgage on the buildings to defendant's bank, as trustee, but the money actually came from Maum Gitcho, a cousin of defendant and a relative of plaintiff's wife. Gitcho, allegedly, did not want plaintiff to know that he had made this loan. The proceeds of this loan were applied on the balance due the holder of the first mortgage and reduced that indebtedness to $19,000. In 1939 the total indebtedness of the parties was $38,781.63, including the $19,000 first mortgage, the $14,000 second mortgage.
In the month of February, 1940, the defendant came to plaintiff's home where, in the presence of the plaintiff, his wife and adult son Vasil he stated: "I got bad news" and presented essentially the following proposition: "We owe $48,000 on our property, the holders of the mortgages are demanding payment, if they foreclose they will ruin the both of us, they will take your home and your business and ruin my name as president of the bank. I have a friend Mr. X who can rescue us for $5,000. He will take the property off of our hands, pay all outstanding liens and save us from financial disaster and protect my name." Many times the defendant was asked by plaintiff, his wife and Vasil who this good Samaritan might be, but steadfastly the defendant insisted that his name must be kept a secret and that this entire arrangement must be kept secret. The plaintiff and his family were shocked and saddened by this news. Tarpoff did not want to surrender the property that they had managed to hold on to all through the thirties and stated that he could raise $5,000 and asked if that would not appease the creditors. The defendant said "That is impossible, we cannot do it." The plaintiff then suggested that an effort be made to sell the buildings or negotiate a new loan. The defendant said that was impossible, that the buildings are only worth at most $75,000 and that figure would not justify a $48,000 loan. The foregoing is only a brief but fair synopsis of what was said in the course of the three hours in the plaintiff's home in February, 1940. However, shortly thereafter the deeds were executed and the plaintiff paid his share of the $5,000, supposedly for the benefit of Mr. X.
Bernice Jilek, who was a notary public in the defendant's bank is alleged to have taken the acknowledgment on each deed, but there is no claim that she was ever in the Tarpoff home. It is claimed by the plaintiff that the deeds did not contain the names of any grantee. The wife and Vasil supported this contention. Nevertheless, defendant testified that the deeds did contain the names of himself and his wife as grantees, and that he exhibited to plaintiff evidence of the cancellation of the mortgage indebtedness, thus exonerating plaintiff from all liability on the mortgages executed by them on the property.
Friendly relations continued between plaintiff and defendant and their families until 1946 or 1947 when Vasil returned from war and only by accident discovered that defendant was collecting the rents on the buildings in question and that the real Mr. X had been defendant himself. A lawyer was employed, ...