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Funderburg v. Shappert





APPEAL from the Appellate Court for the Second District; — heard in that court on appeal from the Circuit Court of Boone County; the Hon. DAN H. McNEAL, Judge, presiding. MR. JUSTICE HERSHEY DELIVERED THE OPINION OF THE COURT:

Rehearing denied November 29, 1961.

Plaintiff, Hugh K. Funderburg, filed suit in the circuit court of Boone County against the defendants, Frederick W. Shappert, Jr. and his wife, Verona M. Shappert, praying the dissolution of a newspaper partnership, the sale of its assets, and its liquidation. Defendants filed a counterclaim praying that plaintiff's 1/4 interest in the business be impressed with a constructive trust in their favor because of the abuse by plaintiff of a confidential or fiduciary relationship with defendants. After hearing testimony, the trial court entered a decree dismissing Funderburg's complaint for want of equity and declaring a constructive trust as prayed in defendants' counterclaim. The Appellate Court affirmed the trial court, (Funderburg v. Shappert, 24 Ill. App.2d 566), and this court granted leave to appeal.

Plaintiff in his petition for leave to appeal set forth three claimed grounds therefor, (a) the Appellate Court erred in finding a constructive trust to exist; (b) the defendants came into a court of equity with unclean hands, and (c) the Appellate Court judgment divests plaintiff of property without due process. In such petition for leave to appeal plaintiff conceded that the facts of the case as stated in the Appellate Court opinion were substantially correct with two exceptions, hereafter noted. The plaintiff's brief and argument in this court does not present or touch upon the question of due process, and we therefore consider that question waived and not before us for consideration.

In summary, plaintiff's basic position in this case is that although a relationship of confidence and trust existed between him and Fred Shappert, yet Fred Shappert betrayed the trust first, thus ended the confidential relationship, and the plaintiff's acquisition of the 1/4 newspaper interest thereafter should not be impressed with a constructive trust. Such contentions present matters of fact to be determined from an appraisal of all the circumstances of the relationships between the parties. Carroll v. Caldwell, 12 Ill.2d 487; 35 ILP, Trusts, sec. 67.

In reviewing this case, therefore, we must keep before us the basic juridical fact that the evidence was heard in open court by the chancellor, who made findings of fact on disputed questions, and whose conclusions have been affirmed by the Appellate Court after a full and extensive consideration of the record. The findings of the chancellor, affirmed by the Appellate Court, will not be disturbed unless clearly and palpably contrary to the manifest weight of the evidence and clearly erroneous. Mortell v. Beckman, 16 Ill.2d 209; Lux v. Lelija, 14 Ill.2d 540; Gilbert v. Chicago Title and Trust Co., 7 Ill.2d 496; Miethe v. Miethe, 410 Ill. 226; Wynekoop v. Wynekoop, 407 Ill. 219.

A reading of the entire record in this case discloses in substance the factual situation as hereafter set forth. From 1892 to December 10, 1948, Frank T. Moran and his wife, Edna Moran, owned, operated and published the Belvidere Daily Republican through a partnership known as Frank T. Moran and Company. They had two children, Berneita and Verona. Berneita married Dr. D.J. Martin. Verona married Frederick W. Shappert, Jr., and they are the defendants in this case.

Frank Moran was editor, publisher and manager of the newspaper until 1941, when the partnership appointed Shappert, Jr., general manager, with Frank Moran continuing as editor until his death in 1949. Prior to his death, Frank T. Moran had assigned his 1/2 interest in the partnership to his two daughters. The partnership had continued with Edna Moran owning 1/2 and each of the two daughters 1/4, with Shappert, Jr. managing the paper and the partners each drawing a certain sum of money every month.

For a period of over 30 years prior to November 30, 1957, the plaintiff had been a close personal friend, financial advisor and business counselor of Shappert, Jr. Funderburg had also been a close friend with Frank Moran during his lifetime for many years, and he was well acquainted with Frank's wife, Edna, and with the two daughters. During this period of over 30 years plaintiff and Shappert, Jr., were associated as partners or corporate shareholders from time to time in various and numerous joint business ventures. Funderburg during this period, either personally or through a bank of which he was president or chairman of the board, or through corporations which he owned or controlled, loaned Shappert or Shappert's business interests over five million dollars. Shappert became a director of a canning corporation owned by Funderburg and of a bank directed by him. Funderburg advised and counseled with Shappert as to Shappert taking certain large construction jobs and as to buying certain farm properties. Shappert also discussed with and obtained advice from Funderburg as to the operation and financing of the newspaper. Shappert's counterclaim alleged and Funderburg's answer admitted that Funderburg had been intimately acquainted with the details of each and every one of Shappert's business affairs, had served as his business adviser, counselor and financier, and that Shappert had never made a significant move in any business venture without first consulting Funderburg for his advice, recommendation and approval.

Early in August, 1957, Berneita Martin through her attorney requested financial information concerning the newspaper and an increase in her drawing account. Shappert discussed the situation with Funderburg, said he was afraid he was going to get into a lawsuit with her and asked Funderburg whether or not he thought it would be advisable to buy Mrs. Moran's 1/2 interest. Shappert told Funderburg he was going to offer $100,000 for the 1/2 interest but he thought it was $25,000 more than her interest was worth.

According to Funderburg, Shappert at this time asked him to talk to Mrs. Moran about this and Funderburg said he would provided Shappert would take Berneita Martin out on the same basis because it would be a tragedy to leave her with a minority interest. According to Shappert, it was Funderburg who suggested that he buy out Mrs. Moran and volunteered to talk to Mrs. Moran on his behalf, but at no time was Berneita Martin's interest mentioned.

A few days later, Verona Shappert and Funderburg talked with Verona's mother, Mrs. Moran, in Mrs. Moran's home. Funderburg's testimony was that he recommended that Mrs. Moran accept Shappert's offer of $100,000 for her 1/2 interest provided Shappert took Berneita Martin out on the same basis. Both Mrs. Moran and Mrs. Shappert testified that nothing was said by Funderburg in this conversation about Mrs. Martin's interest.

On October 1, 1957, Mrs. Moran called her attorney, who was a neighbor, to her home for a conference at which she showed him a written offer from Shappert to purchase her 1/2 interest for $100,000. The attorney testified that Mrs. Moran told him that Funderburg had advised her to sell, and that if she did Shappert would buy Mrs. Martin's interest on the same basis. The attorney advised Mrs. Moran to accept the offer and sell. However, this same attorney was also attorney for Funderburg and represented Funderburg in his later transaction with Mrs. Martin.

Following such discussions, Shappert did purchase Mrs. Moran's 1/2 interest in the newspaper partnership on October 7, 1957 for $100,000, plus a payment of $350 per month to her during her lifetime.

Thereafter at a meeting between Mr. and Mrs. Shappert, Mrs. Martin and Mrs. Martin's attorney, Shappert explained that the business needed additional capital of about $200,000 to acquire land, build a new building and replace equipment. He suggested that the business be incorporated, with himself owning 1/2 interest, his wife 1/4 and Mrs. Martin 1/4 since the partnership couldn't borrow that kind of money. Mrs. Martin offered to sell her 1/4 interest to Shappert. Shappert said her interest ...

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