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Tarpoff v. Karandjeff

SEPTEMBER 19, 1964.




Appeal from the Circuit Court of Madison County; the Hon. JOSEPH J. BARR, Judge, presiding. Affirmed.


Plaintiff, John Tarpoff, brought this action in the Circuit Court of Madison County, Illinois, to impress a constructive trust upon two parcels of real estate, title to which is in the name of the defendant, Henry D. Karandjeff. The complaint was filed on February 20, 1950, and after issue was joined by responsive pleadings the matter was referred to a Special Master in Chancery for the hearing of evidence and making findings. At the conclusion of the plaintiff's evidence, the Master in Chancery filed a report with the trial court recommending that the complaint be dismissed for want of equity. The trial court entered a decree in accordance with the recommendation of the Master in Chancery and the plaintiff appealed to the Supreme Court of Illinois. On appeal, the Supreme Court of Illinois found that based upon the evidence at the close of the plaintiff's case, there was a fiduciary relationship between the plaintiff and the defendant, Henry D. Karandjeff, at the time the property was conveyed to the defendant and that the defendant had not, at that point, proved that he had made a full and frank disclosure of the financial condition surrounding the transaction. The decree of the trial court was reversed and remanded. Tarpoff v. Karandjeff, 17 Ill.2d 462, 162 N.E.2d 1.

The trial court referred the matter back to the Special Master in Chancery who, after hearing all of the evidence, filed his report of proceedings and findings of law and fact wherein and whereby he again recommended that the complaint be dismissed for want of equity. The trial court reviewed the findings of the Master, heard arguments of counsel on the exceptions to the finding, requested and reviewed briefs, and filed a written opinion confirming the findings of fact and law of the Master. On June 26, 1963, the trial court entered a final decree approving and confirming the Master's recommendations and dismissing the complaint for want of equity. It is from the final order of June 26, 1963, that plaintiff brings this appeal.

[1-4] A constructive trust is raised not by any agreement or understanding of the parties but by the operation of law and is imposed by a court of equity upon the broad ground of public policy. Its purpose is to prevent a person from holding, for his own benefit and advantage, property which he has gained by reason of a special trust or confidence placed in him by an innocent party. However, before a court of chancery will declare a constructive trust, there must exist either fraud, actual or constructive, or an abuse of a confidential or fiduciary relationship. Equity looks to the substance of a transaction rather than the form or nomenclature and whether or not a fiduciary relationship exists between the parties, or whether or not there has been an abuse of that relationship depends upon all of the facts and circumstances pertaining to the particular case. Compton v. Compton, 414 Ill. 149, 111 N.E.2d 109; Stephenson v. Kulichek, 410 Ill. 139, 101 N.E.2d 542.

[5-8] The mere existence of a confidential or fiduciary relationship does not, of itself, give rise to a constructive trust. The facts and circumstances must also disclose fraud or an abuse of that confidential or fiduciary relationship. Jones v. Washington, 412 Ill. 436, 107 N.E.2d 672. The burden of proving the existence of such a confidential or fiduciary relationship and the abuse thereof rests squarely upon the party who asserts such a relationship as a basis for the imposition of a constructive trust. Maley v. Burns, 6 Ill.2d 11, 126 N.E.2d 695. Where, however, the confidential or fiduciary relationship is shown to exist, the person seeking to impose a constructive trust is aided in his proof by a presumption that the transaction complained of resulted from fraud or undue influence and the burden of affirmatively proving the good faith or the absence of undue influence in the transaction rests upon the party denying the existence of the trust. Tarpoff v. Karandjeff, supra; McCartney v. McCartney, 8 Ill.2d 494, 134 N.E.2d 789. To overcome this presumption, the fiduciary must show that he has made a free and frank disclosure of all of the relevant information which he had and that the consideration for the transaction was adequate. Schueler v. Blomstrand, 394 Ill. 600, 69 N.E.2d 328; Masterson v. Wall, 365 Ill. 102, 6 N.E.2d 161.

In this case the record of evidence is long, involved and conflicting on many points. A detailed review of the testimony of all the various witnesses and the many exhibits offered and accepted would only serve to unduly burden this opinion. Suffice to say, however, that the detailed findings of both the Master in Chancery and the Chancellor contained in the record are amply supported by the evidence.

Briefly stated, the facts disclose that the plaintiff, John Tarpoff, is a native of Macedonia, who came to this country in 1905. Although he had little formal education, he was an able businessman. From 1907 to 1921 he successfully conducted a grocery business in the City of Granite City, Illinois, and acted as a business advisor to his fellow countrymen in that city. He retired from the grocery business in 1921, and thereafter, actively engaged in the buying and selling of real estate in and about Granite City. From 1928 through 1940, he conducted a meat packing business along with these real estate activities and the record shows that from 1911 to 1940, he executed deeds, leases, mortgages, notes, checks, extension agreements, time deposit certificates and other business instruments. Throughout the period in question, he spoke the English language as well as his native tongue of Macedonia, and was familiar and could converse in several other languages. At the trial, he was able to identify with a great deal of accuracy some one hundred or more exhibits.

The defendant, Henry D. Karandjeff, was also a native of Macedonia and came to this country in 1906 at the age of twelve. He received an equivalent to a sixth grade education in his native country and from 1906 to 1911, he worked at various places as a porter and an errand boy in Granite City, Illinois. He began working for the Granite City Trust & Savings Bank of Granite City, Illinois, in 1911 as a janitor and worked his way up until he became President of the bank in 1937.

Plaintiff, John Tarpoff, first began doing business with Granite City Trust & Savings Bank on a limited basis in 1911. The record discloses that he had made time deposits and received time certificates from the Granite City Trust & Savings Bank during the period of 1911 to 1913. Soon thereafter, he became acquainted with the defendant, Henry D. Karandjeff, and the defendant induced him to transfer his banking business to the Granite City Trust & Savings Bank. From 1915 to 1933, the defendant, Henry D. Karandjeff, assisted the plaintiff, John Tarpoff, in the preparation of deposit tickets, the depositing of checks, the filling in of check stubs and in other banking business.

From the time the plaintiff and defendant became acquainted until the early 1940's, the Tarpoff Family and Karandjeff Family were friendly but were not close socially. The record discloses that in 1928, the defendant returned to Europe for the purpose of visiting his father, who was then ill, and while in Europe he visited the father of the plaintiff. Although there is conflicting evidence as to some alleged moving pictures taken on this trip, the record clearly shows that plaintiff, John Tarpoff, and defendant, Henry Karandjeff, were friendly and had many social and business contacts over a period of 25 or 30 years.

The business transactions leading up to this litigation began in 1922, when plaintiff and defendant purchased a building at 1314 Niedringhaus Avenue, Granite City, Illinois, as tenants in common. The purchase price was $17,474.80 of which the plaintiff paid $4,237.70 and the defendant paid $4,237.40. The balance of $9,000 was financed by a mortgage with the Granite City Trust & Savings Bank. Of the amount paid by defendant, he borrowed $2,000 from the plaintiff which was evidenced by a note and mortgage to the plaintiff. This note was later paid with interest.

In 1925, plaintiff and defendant purchased an adjoining lot as tenants in common, and in 1926, erected a building thereon which has become known as 1310 Niedringhaus Avenue, Granite City, Illinois. There were various financing deals carried on between the parties at this time, which culminated in a $35,000 mortgage to St. Louis Union Trust Company, later assigned to the First National Company of St. Louis, Missouri, which was evidenced by a series of notes dated in 1926 and secured by a mortgage on the two parcels of real estate. The notes and mortgages were signed by the parties and their wives.

In the operation of the two parcels of real estate, the defendant, Henry Karandjeff, took care of the renting of the property, the accounting, and paper work and the plaintiff, John Tarpoff, looked after the maintenance and repairs. Defendant prepared and submitted to the plaintiff an annual report of receipts, disbursements and the financial condition of the business venture. The business venture went well until 1932. The first three notes were paid at maturity. Two were paid for $1,500 and one for $2,000. The parties first began to have difficulties with the property and the mortgage in 1932 and at this time they executed a series of three extension agreements with the First National Company. No payments of principal were made after 1931.

In October of 1935, the property was refinanced. A second mortgage in the amount of $14,000 was made to Granite City Trust & Savings Company and assigned to Naum Gitcho. The proceeds of this second mortgage were used to pay $10,000 on the principal and $4,000 on the interest under the first mortgage to First National Company. An additional check from Karandjeff for $125 also was applied on interest. Also, at that time, Henry Karandjeff and wife, Ethel Karandjeff, and John Tarpoff and wife, Pareskeva Tarpoff, entered into an agreement with the First National Company whereby the parties assigned all rents to the First National Company and the First National Company extended the due date on the principal indebtedness to October, 1938. The principal ...

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