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Wilkinson v. Johnson

OPINION FILED NOVEMBER 26, 1963.

LESLIE E. WILKINSON ET AL., APPELLANTS,

v.

MYRTLE JOHNSON, FORMERLY KNOWN AS MYRTLE MCELMEEL, APPELLEE.



APPEAL from the Superior Court of Cook County; the Hon. WALKER BUTLER, Judge, presiding.

MR. JUSTICE HERSHEY DELIVERED THE OPINION OF THE COURT:

Plaintiffs, Leslie E. Wilkinson and Emily J. Wilkinson, brought suit in the superior court of Cook County to declare that two absolute deeds to certain real estate were in fact intended as mortgages and were given to secure an indebtedness that had since been fully repaid, which suit sought a recoveyance of the property. Defendant had previously brought suit against plaintiffs in forcible entry and detainer and for certain back rent, which suit was consolidated with plaintiffs' case. The cause was referred to a master in chancery, and the court, upon the master's recommendation, entered a decree dismissing plaintiffs' complaint and finding that the plaintiff Leslie Wilkinson was unlawfully withholding possession of the premises and was indebted to defendant for $4,051. A freehold being involved, this court has jurisdiction. Robnett v. Miller, 303 Ill. 515.

Prior to June 22, 1950, Leslie E. Wilkinson, a building contractor, owned the property in question, which consisted of two small factory buildings and an office building. At that time Wilkinson was involved in an improvement program and was heavily indebted to the Franklin Park Lumber & Fuel Co. (hereinafter referred to as Franklin) and also owed lesser sums to that company's president, Louis E. McElmeel, as well as to other builders and suppliers. On June 22 Wilkinson entered into a written trust agreement with these creditors under which the property was conveyed to the American National Bank and Trust Company of Chicago as trustee for Wilkinson and the various creditors.

The trust agreement as amended provided among other things: (1) that prior to August 15, 1950, Wilkinson would have the right to direct the trustee to convey the property to a purchaser for not less than $22,000, the approximate total then owed to all creditors; (2) that after August 15, 1950, all power of sale conferred upon Wilkinson would cease, and the trustee was then authorized to sell the property for the same minimum price upon written direction of the creditors' representatives, and that any of the trust beneficiaries, including Wilkinson, could be purchasers at the sale; (3) that if the property was not sold by the trustee on or before January 1, 1951, the trustee was authorized, without direction from any party, to offer the property for sale at public auction to the highest bidder for cash; (4) that the proceeds of sale were to be first distributed among the various creditors, with the balance if any to be paid to Wilkinson; and (5) that the conveyance from Wilkinson to the trustee was intended to be an outright conveyance for the purpose of liquidating the property.

Wilkinson did not direct that the trustee convey to any buyer by August 15, 1950, and on November 21, 1950, the trustee was directed by the creditors to convey the property to the defendant, Myrtle McElmeel, the wife of Louis McElmeel, at a sales price equal to the amount necessary to pay the creditors and to credit the purchaser with the amounts owing to Franklin and Louis McElmeel. On November 25, 1950, this direction was approved in writing by the plaintiffs as residuary beneficiaries. Between November 28, 1950, and December 29, 1950, the plaintiff Wilkinson's total debt to Franklin, which by then had increased to $31,108.73, was paid by McElmeel and was taken off the company books. On December 11, 1950, the trustee deeded the property to Myrtle McElmeel. Wilkinson continued in possession of a portion of the premises used for his office and did not immediately pay any rent therefor. Within the first two and a half months following the execution of the deed to Mrs. McElmeel, Wilkinson completed the building program already begun at his own expense.

Plaintiff Leslie E. Wilkinson testified that prior to his execution of the approval of sale to the defendant on November 25, 1950, he had had various conversations with Louis J. McElmeel in which it was agreed that McElmeel would loan Wilkinson a total of $36,000 and that Wilkinson as security for this loan would sign the property over to McElmeel's wife. It was agreed that Wilkinson would have no written evidence to show that he was still the owner of the property. Wilkinson claimed that he was willing to enter into this type of agreement with McElmeel because of a long standing relationship with McElmeel, the exact nature of which he did not mention.

Wilkinson further testified that during these conversations it was disclosed that the rentals on the property paid by the various tenants amounted to $520 a month and it was agreed that McElmeel would keep these rentals, which were to include $75 a month to be paid by Wilkinson, and, after charging 5% annual interest, would apply the balance to the repayment of principal until same was paid.

On cross-examination, Wilkinson testified that McElmeel loaned him $25,000 around November 25, 1950, in connection with the bills with Franklin and that McElmeel loaned him the balance about two weeks later, all in connection with same deal. He repeated that of the total of $36,000 loaned to him, $31,108.72 went to Franklin. Although the record is not altogether clear as to the purpose of the additional $5,000 either loaned or paid by McElmeel, it is noted that the total amount of all other creditors' bills paid to the trustee by McElmeel as a part of the purchase price approximated that amount.

Plaintiff Wilkinson also paid to Franklin some $4,200 in two checks after the execution of the deed of December 11, 1950. Both checks were marked "L.E. Wilkinson Special Account" and were paid by Franklin to McElmeel. Wilkinson did not, however, assert that these two payments constituted a partial repayment of the alleged loan, but claimed instead that that loan was fully repaid from the receipt by the defendant of the $520 monthly rentals.

On July 12, 1951, Wilkinson filed a mechanic's lien against the defendant, the American National Bank and Trust Co., and the Baltimore and Ohio Terminal Railroad claiming that $34,000 was due him on a contract entered into in March of 1949 with the above as owners to erect a building for $37,000. Actually Wilkinson still owned the property in 1949 and it does not appear that any agreement prior to the trust deed of June 22, 1950, was ever entered into. No suit for this sum was commenced by Wilkinson nor does the record contain any further evidence that any building was ever erected by Wilkinson for the defendant. In November of 1951, some four months after the above lien was filed, the plaintiffs executed a quitclaim deed conveying all their right, title and interest in the property to Mrs. McElmeel. They testified that this was done at Mr. McElmeel's request and as additional security for the money that he had already loaned Wilkinson.

On January 19, 1952, Wilkinson entered into a written contract with Myrtle McElmeel and Louis J. McElmeel, her husband, as sellers, wherein he contracted to repurchase the real estate for $41,000, and an earnest money deposit of $1,000 was paid by Wilkinson. This contract called for the balance to be paid by March, 1952, which was not done and the contract was thereafter forfeited. Regarding this transaction, Wilkinson testified that, although his debt to McElmeel was only $36,000 and had through the collection of rentals been reduced, McElmeel demanded the sum of $41,000 in complete repayment of the alleged loan. Thereafter, on August 28, 1952, Wilkinson entered into a lease as lessee with the defendant as lessor of an office building located on the property for a term of five years at a rental of $85 per month. Rent was paid by Wilkinson pursuant to the terms of the lease until January 1, 1956, and the defendant's present claim against the plaintiff is based upon this lease. Wilkinson testified that Mr. McElmeel agreed that the "rent" paid would be applied in repayment of the debt.

The income tax returns of Louis and Mrytle McElmeel for the years 1951 through 1956 were introduced into evidence and in each the income from the real estate was shown by them as rent, and not as interest or the return of principal loaned, and the cost of the property upon which depreciation was taken was shown as $35,000.

The property was appraised at $54,000 by the defendant's expert appraiser as of November, 1950, and by the plaintiff's expert appraiser as of that date at $74,000. It is undisputed that the property has subsequently risen in value.

The defendant testified as an adverse witness under section 60 of the Civil Practice Act and admitted that she acquired the property as a gift from her husband and not by purchase from Wilkinson. It is, therefore, undisputed that she held title subject to any outstanding equitable interest owned by the plaintiffs as a result of their dealings with her husband. The defendant also testified that she did not know the terms or conditions under which her husband acquired the property, excepting that her husband said Wilkinson owed Franklin money and that her husband paid off his debt. She admitted that she didn't go near the ...


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