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Mcguire v. Cohen

DECEMBER 9, 1963.

THOMAS B. MCGUIRE, APPELLANT,

v.

RALPH A. COHEN, ET AL., APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. THOMAS E. KLUCZYNSKI, Judge, presiding. Reversed and remanded.

MR. JUSTICE MURPHY DELIVERED THE OPINION OF THE COURT.

Rehearing denied January 21, 1964.

Plaintiff, in an equity action, seeks to redeem collateral which was sold at an extra-judicial private sale, after the maturity and nonpayment of his collateral note. By a judgment order, the trial court rejected plaintiff's right of redemption claim and confirmed title in defendants to plaintiff's country club membership certificates and to plaintiff's interest, as lessee, in a 99-year lease on real estate. Plaintiff's direct appeal to the Supreme Court, contending freehold interests were involved, was found to be "wrongfully appealed" to that court and was ordered transferred to this court.

On November 9, 1960, plaintiff executed a $45,000 commercial form "collateral note — judgment clause," payable to defendant Joseph R. Friedman "on or before six (6) months after date," with interest at 6% per annum. The collateral is identified in the note as "1. Assignment of beneficial interest in Trust No. 41310, under which Chicago Title & Trust Co. is Trustee and holds title to the following described real estate: . . . [Plaintiff's home]. 2. Twenty-eight (28) certificates of membership, being all of the memberships in the Brookwood Country Club, all with stock power attached. 3. Assignment of Thomas McGuire of all his interest in and to leasehold dated 6-21-48 and recorded 8-3-48 as Document No. 551054 demising for a period of 99 years lots 7, 8 and 9 in Addison Township Supervisor's Assessment plat No. 7, being a part of the South 1/2 of Section 16, Township 40 North, Range 11, according to plat recorded 1-10-45, as Document No. 472363, in DuPage County, Illinois."

The note provides for the sale of the collateral "at or after maturity of this note . . . at public or private sale . . . and at such sale the payee or any holder hereof may become the purchaser of said collateral free from any right of redemption; . . . ." The note also includes the right to confess judgment for the unpaid amount and reasonable attorney's fees.

After three extensions of the time of payment, a letter of default was sent to plaintiff on November 27, 1961, more than a year after the debt was originally incurred. Payment not being made, the collateral was sold to defendant Ralph A. Cohen on December 4, 1961, for $50,403.75, representing principal — $45,000, interest — $2,925, and attorney's fees and expenses — $2,478.75. The note, in evidence, is marked "Paid and satisfied, Ralph A. Cohen." As to the collateral sold, plaintiff argues that the three items were sold. Defendants insist that only two items were sold, being the certificates of membership and the 99-year leasehold. Defendants have repeatedly stated that "plaintiff's home was not sold at the private sale," and that they have offered to return to plaintiff the assignment "representing the beneficial interest in the residence occupied by plaintiff."

The complaint filed March 14, 1962, alleges that the total value of the collateral is $550,000, and that on February 28, 1962, plaintiff tendered a cashier's check for $53,578.75 "to redeem all of the property . . .," which tender was refused by Friedman as attorney for Cohen. The prayer of the complaint is "that the Court direct the Defendants to accept the sum found to be due and owing to them and upon payment of the same out of the deposits hereby tendered to execute such documents as will restore Plaintiff to his ownership of said property and to cancel the evidence of indebtedness on which the Defendants claim to have become owners of the property."

The answer of defendants denies that the value of the collateral is $550,000 and alleges on information that the check for $53,578.75, allegedly tendered, "was advanced by one John Doe, as a down payment toward the purchase of the properties of the Plaintiff. . . ."

After an extended trial before the chancellor, which included the testimony of the parties and numerous exhibits, the court entered a "judgment order," finding that plaintiff had failed to sustain the material allegations of his complaint, and that he was not entitled to the relief demanded; that "defendants have tendered to plaintiff in open Court" an assignment of the beneficial interest of the legal title to plaintiff's residence; that the promissory note "has been canceled and that the debt evidenced thereby has been paid"; that "the defendant, Ralph A. Cohen, is the rightful and legal assignee of lessee's interest in the written lease dated June 21, 1948, . . ." and the legal owner and holder of the "certificates of membership in Brookwood Country Club. . . ." The chancellor then decreed that plaintiff's prayer for relief be denied for want of equity. This appeal followed.

Plaintiff's contention is that under statutory provisions and authorities cited, all of the interests "pledged" by the note were interests in lands, and two of them were freehold interests, his home and the certificates of membership, and, therefore, as a matter of law, "such interest cannot be sold in foreclosure of a lien securing an indebtedness except in pursuance of a decree of a court of equity, with statutory rights of redemption. This is true even though the parties agree ever so clearly to the contrary in the note, creating and securing the indebtedness."

Defendants' principal contentions are (1) that plaintiff has no substantial interest in the collateral cognizable in a court of equity; (2) that plaintiff's acts are "tainted with inequitableness and bad faith" in the very matter on which he prays for aid; and (3) that the 99-year leasehold was personalty and, as such, "it was susceptible of sale in accordance with the powers granted to the holder of the collateral note."

Initially, as to any freehold interest being here involved, we believe the order of the Supreme Court transferring this appeal to this court inferentially disposed of plaintiff's freehold contentions. The record is sufficient to show that defendants are not asserting any claim of ownership as to the beneficial interest of plaintiff's home. Also, we do not believe that the Brookwood Country Club membership certificates are to be considered within the rules which apply to trusts of which the corpus is real estate and of which "beneficial interests" of the "cestuis" are considered to be freehold interests in lands. (DeVoigne v. Chicago Title & Trust Co., 304 Ill. 177, 136 N.E. 498 (1922); Horney v. Hayes, 11 Ill.2d 178, 142 N.E.2d 94 (1957).) Neither do we believe that these membership certificates give rise to any rights of redemption here to plaintiff.

Plaintiff's determinative contention is that the 99-year leasehold, although not a freehold, and usually denominated as a "chattel real," is "nevertheless `real estate' and not `personal property' within the provisions of the Illinois Mortgage Act forbidding the foreclosure of mortgages upon real estate otherwise than by judicial proceedings and is within the Illinois statute concerning judgments, decrees and executions providing for redemption by the mortgagor from foreclosure sales upon `real estate mortgages.'"

Plaintiff cites various Illinois statutes to prove that the lien of the instant note "could be foreclosed only by judicial sale, with statutory right of redemption." (1) Section 38 of "An Act concerning conveyances" (c 30, § 37): "The term `real estate,' as used in this act, shall be construed as co-extensive in meaning with `lands, tenements and hereditaments,' and as embracing all chattels real. This act shall not be construed so as to embrace last wills and testaments, except as herein expressly provided." (2) Section 3 of the Act on Judgments, Decrees and Executions (c 77), provides as follows: "The term `real estate,' when used in this act shall include lands, tenements, hereditaments, and all legal and equitable rights and interests therein and thereto, including estates for the life of the debtor or of another person, and estates for years, and leasehold estates, when the unexpired term exceeds five years." (3) Section 1 of the Illinois Mortgage and Foreclosure Act (c 95, § 23), which provides that "no real estate" shall be "sold to satisfy any . . . mortgage, trust deed or other conveyance in the nature of a mortgage, except in pursuance of a judgment or decree of a court of competent jurisdiction." (4) Section 18 of Chapter 77 provides for the mortgagor's statutory right of redemption from sales of mortgages upon "real estate," redeeming the real estate so sold "within twelve months from ...


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