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Karetzkis v. Cosmopolitan Nat. Bank

OCTOBER 29, 1962.




Appeal from the Superior Court of Cook County; the Hon. JOHN J. LUPE, Judge, presiding. Affirmed.


This is a proceeding for the foreclosure of a trust deed. Plaintiff, Albin Karetzkis, appeals from a decree, entered upon a master's report, dismissing the complaint for want of equity.

In January, 1953, plaintiff, in response to an advertisement and after consulting his friend and attorney, defendant Francis D. McGuire, purchased the subject $12,500 promissory note and trust deed for $6,000. The unpaid principal balance was $7,300. The trust deed and installment note, both dated February 22, 1950, were executed by Arthur C. Cimaglia. The security was 1367 North Sedgwick Street, Chicago, improved with a 4-story brick building, containing stores and apartments. A photograph in evidence indicates it was built in 1882. On January 8, 1953, plaintiff and Cimaglia entered into an extension agreement, providing for monthly installments.

On August 3, 1953, Cimaglia died intestate, and letters of administration for his estate were issued by the Probate Court of Cook County. Subsequently, on February 2, 1956, by way of a proceeding to sell real estate to pay debts, the interest of the decedent in the real estate was conveyed to defendant Walter D. Gainer, for $150, subject to outstanding obligations of $19,640.99, and unpaid taxes since 1948. Thereafter, the legal title was placed in a land trust, with defendants Walter D. Gainer and William H. Suchier as joint beneficiaries, and the defendant Cosmopolitan National Bank of Chicago as trustee.

In July or August of 1953, as the note was in default, plaintiff delivered to McGuire, as his attorney, the mortgage papers and a fee of $400, with instructions "to start collecting on that debt for me," and McGuire told him he was going to start foreclosure proceedings. McGuire never commenced foreclosure proceedings and, although plaintiff in the following three years frequently demanded his mortgage papers, McGuire never returned them.

Early in 1957, plaintiff retained another attorney, Harry George. He then, for the first time, learned that in August, 1956, McGuire had sold and delivered the mortgage papers to defendant Gainer for $5,000. Gainer had delivered to McGuire two checks, totaling $5,000. One check was a cashier's check, dated December 16, 1955, for $4,500, and was restrictively endorsed to plaintiff. The other check, for $500, dated August 6, 1956, and payable to plaintiff, has typed across the face thereof "Balance in full for first mortgage on 1367-69 N. Sedgwick Street." Plaintiff further learned that McGuire had forged plaintiff's signature to the two checks and wrongfully appropriated the funds. In exchange for the checks, McGuire gave to Gainer the mortgage papers and an assignment of the trust deed, purporting to bear the signature of plaintiff. The assignment was dated and acknowledged before a notary public on August 6, 1956.

Plaintiff commenced the instant proceedings in March, 1957. He also filed a petition in bankruptcy against McGuire and went to the State's Attorney's office and complained about McGuire having forged his name on the two checks. He signed a complaint and a warrant was issued for McGuire in connection with the purported forgery of plaintiff's signature.

An amended and supplemental complaint, filed July 17, 1957, in substance alleges that defendant McGuire fraudulently sold the mortgage papers and forged plaintiff's signature to checks totaling $5,000, and wrongfully appropriated the funds; and that plaintiff had demanded, from certain of the defendants herein, the return of the mortgage papers. Primarily, the relief sought was in the alternative: (1) foreclosure of the trust deed and note, or (2) that McGuire be required to pay to plaintiff "the sum of $5,000, interest and costs, as a result of the wrongful misappropriation of said funds and the failure to pay said funds to the true owner thereof."

On July 17, 1957, an order was entered in the proceedings, which recited that it was entered in compromise and settlement of the claim of plaintiff. All defendants except McGuire were dismissed without costs, and judgment was entered against McGuire and in favor of plaintiff for $5,000, with a finding that malice was the gist of the action. Subsequently, on July 24, 1957, an order was entered, deleting that part of the prior order which dismissed all defendants except McGuire.

Thereafter, plaintiff's attorney, Harry George, accepted from McGuire's attorney, Herbert Wetzel, a cashier's check, dated August 5, 1957, for the sum of $5,000, and payable to plaintiff's order. This check, endorsed in blank by plaintiff, was deposited in the account of Harry George, plaintiff's present attorney. On August 8, 1957, garnishment proceedings, then pending in the instant case on the McGuire judgment, were dismissed by a stipulation entered into by Harry George, attorney for plaintiff, and Herbert Wetzel, who was the attorney for McGuire.

On March 4, 1958, the cause was referred to a master in chancery for hearing, and his report was filed June 13, 1961. A decree, entered December 6, 1961, approved and confirmed the master's report in all respects, and found that defendant Suchier was the legal and equitable owner of the subject note and trust deed, and "that the said Trust Deed was properly released of record." It also found that a tax deed for the premises, issued to Arlyne Hamil (nominee of Suchier) on October 5, 1959, created a new and paramount title to the property, in fee simple, in Arlyne Hamil, "free and clear of all claims of every kind or nature by any of the parties to this proceeding." The amended and supplemental complaint was dismissed for want of equity. It is from this decree that plaintiff has appealed.

The contentions of plaintiff are (1) that defendants Gainer and Suchier acquired no title to the trust deed and note from McGuire, as he had no authority to sell or assign; (2) that none of the circumstances relied upon to show apparent authority in McGuire were ever communicated to Gainer or Suchier, or relied upon by them; (3) that the attempt of plaintiff to collect $5,000 from McGuire, and its ultimate collection, has no tendency to show ratification of the sale of the trust deed and note to Gainer and Suchier; also, that plaintiff tendered the $5,000 to Gainer and Suchier in open court, for the trust deed, note, and assignment of rents; and (4) that Arlyne Hamil, as the nominee of Suchier, could not by her trust deed acquire an interest superior to the lien of the trust deed securing the note. On all of these points the decree is adverse to plaintiff.

We agree with plaintiff that authority to prosecute a suit does not involve authority to compromise it. Before an attorney can compromise a suit, he must have special authority for that purpose. (Danziger v. Pittsfield Shoe Co., 204 Ill. 145, 149, 68 N.E. 534 (1903).) He has no power to assign or sell a claim or judgment of his client without special authority. (Schroeder v. Wolf, 227 Ill. 133, 136, 81 N.E. 13 (1907).) Similarly, in a case in which liability of a principal for the acts of another is sought to be predicated upon the apparent authority of the latter to act for the former, the rule is that the party dealing with the agent must prove that the facts giving color to the agency were known to him when he dealt with the agent. If he has no knowledge of such facts, he does not act in reliance upon them and is in no position to claim anything on account of them. (Alton Mfg. Co. v. Garrett Biblical Institute, 243 Ill. 298, 312, 90 N.E. 704 (1910).) However, the above rules are not determinative here.

We believe the decisive question is whether the activities of plaintiff constitute a ratification of the sale of the mortgage papers by McGuire. The master found that plaintiff ratified the sale of the mortgage by his collection, from McGuire, of the $5,000 proceeds of the sale and by "the pressing of criminal charges against McGuire for forgery of the checks," and that "the record shows . . . a desire and ...

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