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Gately v. Gately

April 26, 1963


Author: Schnackenberg



In this diversity action, commenced November 20, 1958, defendant, John Howard Gately, sometimes referred to as John H. Gately or defendant, has appealed from an order of the district court setting aside a jury verdict in favor of defendant and granting the motion of Madeleine D. Gately, plaintiff, for judgment, and an order that La Salle National Bank, a national banking association, deliver to plaintiff an instrument of conveyance transferring an undivided one-half interest in certain lands and ordering that plaintiff is entitled to an accounting from defendant.

This case was heard by the district court and a jury upon plaintiff's second amended complaint*fn1 which charged defendant with inducing plaintiff, by deceit and fraud, to sign a deed of trust conveying her interest in property located in Elgin, Illinois, held by them as joint tenants, to La Salle National Bank,*fn2 as trustee, on December 29, 1949, without explaining the document to her; and on the same date defendant entered into a trust agreement with La Salle National Bank, Trust No. 12080, in which he was named as the person entitled to the earnings, avails and proceeds of said real estate. The trust agreement provided that the trustee would make "deeds for or otherwise deal with the title to said real estate * * * on the written direction of John H. Gately * *."

Said complaint also alleged that, under date of January 16, 1950, defendant assigned his interest in the trust to James D. Walsh, who was an officer of Continental Illinois National Bank, to secure defendant's loan of $90,000 from said bank. This loan was paid on November 10, 1958.

In her second amended complaint, plaintiff also alleged she was unaware of trust No. 12080 until August 28, 1958, and that the trust was established by defendant for the purpose of defrauding her.

She prayed, inter alia, that the court impose a constructive trust in her favor, upon the real estate and also upon trust No. 12080, that the deed of trust be declared a mortgage, that the trustee be required to convey said real estate to plaintiff and defendant and to cancel the deed of trust, and for an accounting of rental income.

The court entered findings of fact and conclusions of law.

The parties hereto were married on June 25, 1929 and five children were born of the marriage. They lived in the Beverly Hills part of Chicago until 1941, when they moved into a rented house in Elgin, Illinois. Plaintiff did not have any business experience prior to her marriage.

It appears from uncontradicted evidence that defendant purchased a ranch in December 1949 and moved to Colorado, and that the obtaining of financing for this purchase was in part procured at the Continental Illinois National Bank of Chicago by placing title to the Elgin property in trust, as requested by that bank.

From defendant's sworn and uncontradicted motion to dismiss the instant case in the district court, it appears that plaintiff instituted action for divorce*fn3 against defendant in the District Court of the County of El Paso, State of Colorado, and, following a hearing in that court, defendant on November 14, 1958 was found guilty of extreme cruelty, and the question of property rights in the alleged fraudulent transfer was reserved by the court to a later date.

It is not disputed that, under the Colorado divorce act, an interlocutory decree is first entered, followed by a waiting period of six months, when a final decree is entered. In the case at bar it is admitted that the interlocutory decree was entered November 14, 1958 and it became final May 14, 1959. On June 8, 1959 the Colorado court adjudicated the property rights of the parties in and to several items of personal property, such as automobiles, and an insurance policy on defendant's life.

Defendant contends that the Colorado court had complete jurisdiction of the parties and the subject matter, being the certificate of beneficial interest, which is personalty,*fn4 as well as the charges of fraud later set forth in the complaint filed in the federal court in Chicago.*fn5 In her brief in this court plaintiff admits that in the district court defendant by motion presented the defense that the Colorado court had taken jurisdiction over the parties and the subject matter, precluding the exercise of jurisdiction by the United States District Court in this case. While she argues rather obscurely that defendant's position was stated ambiguously, we do not find any ambiguity. He contends that when, during the course of the hearings, the Colorado court indicated that it was not going to find the transfer fraudulent and that plaintiff had no legal interest in the "Elgin Building", plaintiff then filed this action in Illinois.

Plaintiff argues that, until the interlocutory decree became final, when the Colorado court might order a division of property, plaintiff could continue her litigation in the district court in Illinois. She also admits that her "motion was made long before the Colorado decree became final." Plaintiff in her brief relies on defendant's alleged failure to show in the proceedings in the district court below what, if any, disposition was made by the Colorado court of the property in question upon the decree becoming final. She speculates that, if she had sought from the Colorado court a transfer of the Illinois property to her, she may have abandoned it before the decree became final, and that the court would not have adjudicated the issue, or the parties may have made a settlement with a stipulation that the question be litigated in Illinois instead of Colorado. We need not resolve these hypothetical situations. We agree with defendant's contention that, under the laws of Colorado, its courts have jurisdiction to pass on all questions of property arising between the ...

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