Appeal from the Circuit Court of Cook County; the Hon. THOMAS
H. FITZGERALD, Judge, presiding. Remanded with directions.
MR. JUSTICE MCCORMICK DELIVERED THE OPINION OF THE COURT.
The defendant, Vernon J. Knox, was tried before a judge and jury in the Criminal Court of Cook County. The jury returned a verdict finding him guilty of larceny, upon which verdict the court entered judgment and sentenced Knox to the penitentiary for a term of two to five years. From that judgment this appeal is taken.
On June 6, 1962, Knox had been indicted by the Grand Jury of Cook County, together with Robert W. Pfeiffer. The indictment had 11 counts, in all of which Pfeiffer was indicted as principal and Knox either as principal or as aiding and abetting Pfeiffer in charges of embezzlement, larceny by bailee, larceny, and obtaining money by use of the confidence game.
In this court the defendant alleges that he was tried and convicted of a crime for which he was not indicted; that his conviction resulted from the State's use of other alleged crimes in the proof that he had committed this one; that the State introduced too much evidence, much of which was irrelevant; that the closing argument of the prosecutor was improper; and that the court failed to hold a hearing after a challenge to the involuntary character of the two statements of defendant.
The evidence is that Knox was a lawyer, also a licensed real estate broker, and secretary of his family-owned corporation, Random Realty Company. Hillside Savings and Loan Association, a state-chartered association, was located in Hillside Shopping Center, Hillside, Illinois. It was organized in April 1957, and on April 30, 1963, merged with a Federal savings and loan association. Pfeiffer was its president and managing officer from the time of its organization in 1957 to May 1959, and from May 1959 until November 1960, he was chairman of the board. He was also a member of the board's loan committee.
During 1959 and 1960 the defendant, Knox, had over 100 mortgage transactions with Hillside Savings and Loan. On June 9, 1959, among the applications for loans pending with Hillside was one of a vacant lot in Crystal Lake, which was submitted by Knox. As a part of the transaction he executed a note secured by a mortgage in the sum of $20,500, and as a part of the transaction for the approved loan Hillside issued a check for $19,250; the difference is reflected in charges for making the loan. The $19,250 was deposited in Knox's account on June 12, 1959. This loan will be referred to as Loan No. 1 (File No. 60290). At about the same time Knox gave Pfeiffer his own check for $20,000.
It is claimed that the property in question then had a market value of $3,000. Another loan, which will be referred to as Loan No. 2 (File No. 60369), was made by Knox on February 20, 1960, about eight months after the transaction for which he was indicted and tried.
Two statements were made by Knox before the trial; one to the Attorney General concerning Loan No. 1, wherein Knox said he went to the Attorney General's office of his own free will and volunteered to make the statement; that the beneficial interest in trust covering the property was in the Random Realty and Finance Corporation, and that he had authority of direction under that trust agreement; that he had signed the application for a loan on the property in question in the amount of $21,500 for new construction; that the value of the lot was $3,000 or $4,000; that Pfeiffer accepted the application and gave the money in a lump sum without following customary procedures; that is, he released the money without asking for waivers or a contractor's statement; that Knox felt that Pfeiffer knew he was loaning a lump sum of money on a vacant piece of property because the application showed that it was for new construction. Knox further stated that he could not explain how a picture of a home on the property in question was attached to the appraisal report of Frank Starek, who had been employed by Knox.
Knox stated that when the money for Loan No. 1 was given to him he turned it over to Pfeiffer; that he planned to build a new home on the lot when Pfeiffer returned the money to Hillside and released the mortgage. Knox also stated that there was an understanding between himself and Pfeiffer that part of the money Knox received as a loan on the property was to be given to Pfeiffer as a loan. Knox stated that he received the check for $19,250 and cashed it; he endorsed it and put it either in his business account or the Random Realty account, but did not keep the money; that on the same day he issued a check to Pfeiffer for $20,000 as a loan. He stated that this check was written out of the Vernon J. Knox Trust Account in the Home State Bank of Crystal Lake; that there was an agreement between him and Pfeiffer that Pfeiffer would make the payments on the mortgage; that he was certain Pfeiffer was making the payments because he had agreed to do so; that Pfeiffer told him he was unable to make payments after June 23, 1961, but that he would pay them and bring them up to date. Knox further stated that on March 29, 1960, the loan ledger on Loan No. 1 indicated an indebtedness in the sum of $20,456.44, and he could not explain how the entire amount of this mortgage was released as evidenced by a document signed by Pfeiffer and Anthony Montalbano, secretary and assistant treasurer of Hillside. Random Realty was indebted to John Laures, and after the release had been secured on the property in question the lot was conveyed to Laures as a part payment of the obligation.
Knox also made a statement to the State's Attorney with reference to Loan No. 1, in which he said that the statement was given voluntarily and without any promise or threat of any kind; that the documents concerning the loan were acknowledged by Knox to be true and correct and bore his signature, and that he had submitted them to Pfeiffer; that Pfeiffer had asked Knox for a loan of $20,000; that the loan which Knox applied for from Hillside was to enable him to make the loan to Pfeiffer; that Knox received $19,250 on the loan he applied for, and that Pfeiffer was the only person at Hillside who handled and processed that particular loan. Knox stated that on the same day he drew a check to the order of Pfeiffer in the amount of $20,000 from a trust account controlled by him; that Knox deposited the check for $19,250 in the trust account at the Home State Bank in Crystal Lake for the purpose of covering substantially the check for $20,000 issued to Pfeiffer; that Knox and Pfeiffer had a conversation in which Pfeiffer stated he would make the payments at Hillside on the particular loan because Pfeiffer was to receive the benefits of the loan; that Knox presented no mechanics' lien waivers with respect to any proposed construction or improvements to be made on that property; that Pfeiffer took care of the insurance and that Knox had never made any payments on that loan; that prior to the release of the mortgage he had a conversation with Pfeiffer to the effect that it was desirable to release the mortgage in order to improve the particular property. Knox stated that prior to the release of the mortgage he had a conversation with Pfeiffer to the effect that by releasing the mortgage on that particular lot there would be less risk of anyone discovering anything improper with respect to the loan made in June 1959 on account of a too low tax bill or of any physical inspection of the property and finding that it was vacant instead of improved; that at the time in March 1960 that the release was secured and recorded, the loan secured by the mortgage which was the subject of that release, was still outstanding and for the most part in principal amount unpaid; that Pfeiffer kept the payment book covering the loan of June 9, 1959, for the purpose of making the loan payments. Knox stated that he had secured the loan with the knowledge that the particular lot on which the loan was made was not in fact improved, and that the release of the mortgage securing the loan was made with Knox's knowledge that the loan secured by the mortgage had not in fact been paid, and that when the lot was conveyed to Laures, Knox knew that the loan was not paid off and that Pfeiffer had no authority to release that particular mortgage at that time.
Knox also made a statement to State's Attorney Bowles with reference to Loan No. 2. Again Knox stated therein that it was given voluntarily and without any promises or threats of any kind; that the application for the loan on Lot 61 in Edgebrook Heights Addition in McHenry was true and correct and bore his signature; that he had secured the appraisal of John W. Fink, Jr., and had submitted it in connection with the application for the loan; that the check of Hillside Savings & Loan Association CN-4245, dated February 20, 1960, in the sum of $23,848.57, payable to the order of Vernon J. Knox, represented the proceeds of Loan No. 2; that the property which was the subject of the loan was not in fact improved but vacant at the time the loan was made; that the application for the loan was made out to show the age of a house allegedly on the lot as one year for the purpose of concealing from Hillside the fact that the property was not improved. Knox stated that the appraisal report also was presented in such form as to be at least somewhat ambiguous and not to show the fact that the property was not improved; that the release of the mortgage was secured by Knox and recorded by him in May 1960; that at the time that particular release was secured and recorded, Loan No. 2, secured by the mortgage which is the subject of the release, was still outstanding and in the most part unpaid; that Knox knew this at the time the release was secured; that Knox secured the release to conceal from Hillside the fact that such release was being secured with respect to a mortgage securing a loan which at that time was unpaid.
These statements were admitted in the trial of the case by the court, over the objection of Knox, a matter which we will take up more fully later on in this opinion. Knox testified in the trial that he had first met Pfeiffer in December 1958, when Pfeiffer was president and general manager of Hillside; that Pfeiffer told him he would be glad to consider any applications he would care to make for loans. He stated that on June 9, 1959, Pfeiffer told Knox about the possibility of Knox's making him a loan; that Pfeiffer said he would have to have $20,000 soon and would pay it back in 30 or 60 days. Knox said he made out a check for $20,000 and gave it to Pfeiffer on June 9, 1959, at which time Knox had a balance in the Cary State Bank of $35,000 or $40,000. After that he talked to Pfeiffer many times about the loan, and on August 20, 1959, he told Pfeiffer he would have to give him a note or he would sue him for it; that payments were coming due on Loan No. 1, and Knox had to start building a house, and would like to have Pfeiffer assume the loan from Hillside, which Pfeiffer agreed to do. Pfeiffer also agreed to make monthly payments of $136 on the note to Hillside, and said if he did that he would have to sign an assumption agreement, which he did.
In March 1960, Knox told Pfeiffer he would like him to pay off the loan since he had a buyer for the lot. He stated that he received the release of the mortgage in the mail about the first of March; that he recorded the release, then sold the lot to Laures around the first of April; that in March 1961 he talked to the bookkeeper at Hillside regarding the mortgage, and she told him the loan had not been paid off; that he told her he had understood it had been paid off a year before. On rebuttal this testimony was contradicted by the Hillside bookkeeper. Knox stated that he talked to Pfeiffer on April 30, 1961, at which time he asked Pfeiffer about paying off the loan and Pfeiffer said he would do it very soon; that in March 1962 he again talked to Pfeiffer and told him he had not lived up to his agreement to assume the loan and pay it off. Knox identified the appraisal of Starek.
Questioned about the statement he gave to the Attorney General, Knox said those statements were given on the advice of his attorney, but that he did not tell the truth in the statements, although they were fundamentally correct; that when he received the release of the mortgage in March 1960 he believed that Pfeiffer had paid off the loan and that it was his belief until May 1961; that it was still his belief at the time he conveyed the property to Laures; that when he told the State's Attorney he knew the loan had not been paid off it was because the ...