Appeal from the Superior Court of Cook County; the Hon. JOHN
J. LUPE, Judge, presiding. Affirmed.
MR. JUSTICE MCCORMICK DELIVERED THE OPINION OF THE COURT.
Rehearing denied and opinion modified February 26, 1969.
On August 18, 1961, plaintiffs, Mitchell Miller, Leon Lieberman, Nathan Kosoy, Burton S. Rose and Sy Sussman, on behalf of Clearview Manor, Inc., filed a complaint in chancery for an accounting and to declare in effect a constructive trust with reference to an interest in certain property. The complaint was in two counts. *fn1 On March 26, 1963, in the Circuit Court of Cook County, an order was entered dismissing Count II and the supplement and amendment thereto as against Castle Terrace, Inc., Edward Hochman, Leonard Brenner, George Rongner, Nathan Browdy and Edward Browdy, defendants (hereafter referred to as Castle defendants). The order also freed the land involved in the proceedings from lis pendens. On May 3, 1963, the plaintiffs made a motion to vacate these orders, which motion was denied. From that order this appeal is taken. *fn2
In this court plaintiffs' theory is that (1) the finding and ruling of the master pertaining to a motion to dismiss must be given great weight and cannot be reversed by the chancellor if there is any evidence presented in support of plaintiffs' case, especially where, as here, the chancellor heard no evidence and the master was in a superior position to the trial court to pass on the evidence; (2) that a constructive trust arises where one party takes title to property with knowledge of the fact that he is using funds or credits belonging to another, and that such a trust, under the circumstances present in the instant case, should have been imposed upon the subject property with the Castle defendants as constructive trustees for the use and benefit of the plaintiffs.
Defendants' theory is that the chancellor, in passing on defendants' motion made at the close of plaintiffs' case under section 64(5) had the power to weigh the evidence; that the evidence submitted by plaintiffs did not establish either a resulting or constructive trust; that plaintiffs did not establish their case by the proof required of them under the law; that the chancellor properly entered a decree in favor of Castle defendants on the evidence submitted by the plaintiffs; and that the plaintiffs' purported claim is barred by laches.
Count II of the complaint set out that on July 10, 1959, after Clearview Manor was incorporated, *fn3 it entered into articles of agreement to purchase certain land from Irving Berkson, and a down payment of $25,000 was made to Berkson; and that on July 29, 1960, Berkson entered into a release agreement releasing the purchaser, Clearview Manor, from any obligations under the articles of agreement. Clearview Manor also released Berkson, and Berkson was to retain as liquidated damages the $25,000 theretofore paid. The complaint also set out that on July 29, 1960, Heller induced Castle Terrace, Inc. to purchase the same land from Berkson, and Heller aided in negotiating the deal; that under the unrecorded articles of agreement for deed, Castle Terrace received a credit of $25,000 against the total price agreed on to be paid by it, and that the said credit was given by Berkson in order to give Heller an opportunity to offset the loss of $25,000 incurred by Clearview Manor by its inability to complete the purchase of land referred to, and on the specific understanding that Heller would receive an equity in the land in an amount or a percentage satisfactory to him; that Castle Terrace, Inc. agreed to give up to Heller 20 percent of the equity in the land referred to for the use by Castle Terrace, Inc. of the $25,000 credit against the total purchase price of the land; and that Leonard Brenner, a director, officer and principal stockholder of Castle Terrace, told the Clearview Manor plaintiffs that Heller had received a 20-percent equity in the land for permitting the 25,000 credit allowed by Berkson to go to Castle Terrace, to be applied against the total purchase price of the land.
It is then alleged that the $25,000 credit allowance by Berkson to Castle Terrace is not the asset and property of Heller, but is the asset, property and right of Clearview Manor, and that the transaction between Heller and Castle Terrace should be cancelled as to a 20-percent equity in the land, and those rights should be decreed to be the rights of Clearview Manor; that Castle Terrace commenced and is still erecting townhouses on the property; and the plaintiffs pray that the court decree that the 20-percent equity in the land held by Heller shall be decreed to be the asset and property of Clearview Manor; that the defendants should be ordered to pay Berkson the balance due, or, in the alternative, that in case defendants fail to make the payments and Berkson declares a forfeiture, the court enter judgment for 20 percent of the present value of the land and improvements in the sum of $75,000 or more, against the defendants, subject to Clearview Manor conveying to Castle Terrace all of its interest in the remaining land.
On September 8, 1961, plaintiffs asked leave to file an amendment and supplement to Count II, which was allowed. Among other things the amendment impleaded the Castle defendants as additional defendants. The amendment and supplement to Count II set out that the contract dated November 28, 1960, between Hochman as purchaser and Berkson as seller for the land described, called for the purchase of the land for the total price of $136,800, and that Hochman, in the execution of the contract, was acting for Castle defendants.
It is also set out in the amendment that the $25,000 was in fact the asset of Clearview Manor and that all the Castle defendants knew, or should have known that fact, and that the $25,000 was not forfeited either by Heller or Clearview Manor, but was permitted by Clearview Manor to be retained by Berkson as liquidated damages; that Heller had no interest or right to that sum. The plaintiffs pray that the court find and decree that the subscription agreement entered into between Seymour Heller and the Castle defendants should be void as against Clearview Manor, and that the court decree that an accounting of all receipts and disbursements to this date be given by defendants Heller and Castle Terrace.
Defendant Heller filed an answer to the entire complaint and supplement thereto, and the Castle defendants filed a sworn answer and counterclaim to Count II of the complaint. Attached to it was the release heretofore referred to, given by Berkson and Clearview Manor, by Heller as president.
The case was assigned to a master in chancery for hearing. Evidence was offered by the plaintiffs in support of Count II of their complaint as amended. At the close of plaintiffs' proofs before the master, Castle Terrace, Inc., and the Castle defendants moved for a finding in their favor and that Count II of the complaint be dismissed as to them. The master overruled the motion on July 26, 1962, and on July 31, 1962, they filed a petition requesting that the master in chancery be required to certify the report of the proceedings, together with the exhibits, and that the chancellor then review the ruling of the master and determine the motion of the petitioners made at the close of the case.
At a hearing before the chancellor on March 26, 1963, a decree was entered overruling the order entered by the master in chancery refusing to dismiss Count II as to Castle Terrace, Inc., and the Castle defendants, and ordering that Count II and supplement be dismissed as to Castle Terrace, Inc., and the Castle defendants. A motion to vacate the decree was overruled on May 3, 1963, and plaintiffs appealed.
On the same day the court entered an order passing on the motion of Heller to review the master's finding on his motion which had been presented before the master in chancery at the close of plaintiffs' case in chief. Heller's motion before the master was to dismiss Count II of the complaint as to him. The master overruled that motion and the court ordered that the ruling of the master as to Heller be sustained, and that Heller might proceed before the master in chancery to adduce evidence in support of his defense to Count II and the amendment and supplement thereto. Heller did not appeal.
The evidence shows that on July 10, 1959, Clearview Manor, Inc., upon whose behalf plaintiffs as shareholders brought this action, entered into articles of agreement with Irving L. Berkson to acquire vacant land in Waukegan, Illinois for $125,000. The defendant, Seymour Heller, who was a building contractor and the sole proprietor of Heller Construction Co., was the president, a director and shareholder in Clearview Manor, Inc. Clearview Manor deposited $25,000 as earnest money with Irving Berkson on account of a land purchase and constructed townhouses on some of the property, but concluded that the venture was not financially profitable. In April and May 1960, Heller tried to sell the unimproved property, and in July 1960, Clearview Manor, Inc. negotiated with the seller, Berkson, for a release of its obligations to pay the remainder of the purchase price for the unimproved property under its articles of agreement. On July 29, 1960, Clearview Manor and all of its shareholders (which included all of the plaintiffs) entered into a release agreement with Berkson wherein Berkson released Clearview Manor ...