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Franks v. North Shore Farms

SEPTEMBER 22, 1969.

JOHN FRANKS AND GENEVIEVE FRANKS, PLAINTIFFS-APPELLANTS,

v.

NORTH SHORE FARMS, INC., AND HOWARD A. MCKEE, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. DAVID A. CANEL, Judge, presiding. Reversed and remanded with directions.

RYAN, J.

The plaintiffs entered into a contract to purchase certain real estate from the defendant-seller, North Shore Farms, Inc. (North Shore). Fifteen Thousand Dollars as earnest money was deposited with the defendant, Howard A. McKee (McKee). The plaintiffs' Complaint was filed December 5, 1962, and prayed judgment against defendant, North Shore, and defendant, McKee, in the amount of the earnest money, plus interest and costs. On April 30, 1963, defendant, McKee, filed a Counterclaim for Interpleader in which he alleged that he was holding the earnest money for the benefit of both parties to the real estate contract and that both the plaintiffs and the defendant, North Shore, had claimed the earnest money. He also alleged that George H. Carlson and Happ Realty, Inc. were real estate agents who likewise claimed to be entitled to a commission payable out of the earnest money. McKee then asked that he be permitted to pay the money into court and that he be discharged from any and all claims with regard to the earnest money. The court, pursuant to this prayer on November 4, 1963, ordered defendant, McKee, to deposit the earnest money less costs of $18.30 with the Clerk of the Court, subject to further order of the court and dismissed defendant, McKee, from the case. Thereafter, with leave of court, plaintiffs filed an Amended Complaint and still later a Second Amended Complaint, which contained four counts. Count I charged the defendant, North Shore, with the failure to perform under the contract and prayed for a judgment against North Shore in the amount of the earnest money, plus interest and costs. Count II alleged a conspiracy between the defendant, North Shore, and the defendant, McKee, and asked for a judgment against both defendants in the amount of the earnest money, plus interest and costs. Count III charged the defendant, McKee, with the violation of his fiduciary duties and a refusal to return the earnest money, and prayed for judgment against McKee in the amount of the earnest money, plus interest and costs, and for punitive damages. Count IV charged North Shore and McKee with conspiracy and prayed for punitive damages against both defendants. On motion of McKee, the court dismissed him from the case. The court also granted North Shore's motion to strike Counts II and IV and granted leave to the plaintiffs to file a Third Amended Complaint as to North Shore. The Third Amended Complaint was never filed. The case went to trial before a jury on Count I of the plaintiffs' complaint which prayed for judgment against North Shore in the amount of earnest money, plus interest and costs. The jury returned a verdict in favor of the plaintiff and against North Shore. At the close of all the evidence, North Shore filed a motion for a directed verdict. The court reserved its ruling on this motion. After the verdict, defendant, North Shore, filed its Post-Trial Motion asking: (1) for a judgment for the defendant, notwithstanding the verdict of the jury, "in accordance with defendant's motion for a directed verdict," and (2) in the alternative for a new trial. The trial court granted the defendant's motion for judgment notwithstanding the verdict and entered judgment for the defendant, but did not rule on the defendant's motion for a new trial, though requested to do so at the hearing thereon.

The plaintiffs have appealed from the order of the court granting defendant, North Shore's motion for a judgment notwithstanding the verdict and also from the order of the court dismissing the case against defendant, McKee, under Counts II and III.

We shall first consider the correctness of the court's dismissal of the case against defendant, McKee, under Counts II and III of the Second Amended Complaint.

Money deposited to be held until the performance of a condition has been treated as a deposit in escrow, although this concept is contrary to the generally accepted or common-law meaning of the term. 30A CJS, 971. In this case, McKee was a stakeholder, depositary, or escrowee having custody of funds belonging to the plaintiffs. Title of the plaintiff to these funds would be divested upon defendant, North Shore, performing under the terms of the contract. McKee held the money for the mutual benefit of both parties. Upon the failure of defendant, North Shore, to perform, plaintiffs had the right to the return of the money. Should the escrowee, McKee, fail to return the same, he became a necessary party to any action by the plaintiffs to recover the deposit. Had there been no conflicting claims to the money deposited, then McKee would have been the only necessary party-defendant. However, where there are conflicting claims to the deposited fund by the parties to the contract, in an action by one party against the escrowee for the recovery of the deposited fund, the other party to the contract is a necessary party to the litigation. Hilyard v. Krisolofsky, 337 Ill. 584, 169 N.E. 765.

The original Complaint sought only the recovery of the earnest money and named both North Shore and McKee party-defendants. The defendant, McKee, then filed a Counterclaim for Interpleader pursuant to the provisions of section 26.2 of the Civil Practice Act, alleging the conflicting claims of the plaintiffs and the defendant, North Shore. On November 4, 1963, the court, acting on this motion, authorized the defendant, McKee, to deposit the fund he held with the Clerk of the court and dismissed him from the case. McKee by the counterclaim admitted he had no claim to the fund. He, therefore, should be permitted to bring the money into court and go free, leaving the rival claimants to settle their contest in a proceeding wherein a final judgment will be a termination of the controversy between all parties. Platte Valley State Bank v. National Live Stock Bank, 155 Ill. 250, 40 N.E. 621. The order of November 4, 1963, disposed of the defendant, McKee, as to any claim by the plaintiffs for the return of the earnest money and he was properly dismissed from the case.

When there are conflicting claims to the deposited fund, the escrowee is not required to act upon his own responsibility in making a determination as to the rights of the rival claimants. Stark v. Chicago Title & Trust Co., 316 Ill. App. 353, 45 N.E.2d 81. If the escrowee were to prefer one claimant over the other without the protection of a court order, he would be acting at his peril. Nathan v. Rehkopf, 57 Ill. App. 212.

Count II of the Second Amended Complaint, although containing general allegations of conspiracy and wrongdoing by both McKee and North Shore, nonetheless, seeks to recover only the earnest money that had been deposited with McKee. The order on the counterlcaim for interpleader which had previously been entered disposed of that issue as to the defendant, McKee, and the court accordingly properly dismissed Count II as to McKee.

Count III of the Second Amended Complaint appears to be an attempt to allege a cause of action sounding in tort based on McKee's willful and malicious violations of his duties as escrowee and seeks to recover judgment against McKee (and North Shore) in the amount of the earnest money and also seeks to recover punitive damages from McKee. Count III was properly dismissed for two reasons: First, it again seeks to recover from McKee the $15,000 he had previously deposited with the court pursuant to the order of November 4, 1963, and second, this count though sounding in tort, fails to allege any damage to the plaintiffs which resulted from the alleged wrongful acts of the defendant, McKee. A legal injury is a wrongful act resulting in damages. As a general rule, to constitute a valid cause of action, there must be both injury and damages. An action cannot be maintained for an injury without damage.

Injuria absque damno does not constitute a cause of action, 1 Am Jur2d, 597, 598; Kane v. Nomad Mobile Homes, Inc., 84 Ill. App.2d 17, 228 N.E.2d 207. Accordingly, the court properly dismissed Counts II and III of the Second Amended Complaint as to the defendant, McKee.

In considering the propriety of the order of the court entering judgment for the defendant, North Shore, on defendant's post-trial motion notwithstanding the verdict for the plaintiffs, we must examine the evidence.

Under the terms of the contract which was entered into July 26, 1962, the plaintiffs agreed to buy and the defendant, North Shore, agreed to sell approximately 10 acres of real estate located in the Northwest portion of Cook County, Illinois. The property was to be used by the plaintiffs as a riding academy. The contract provided:

"Within sixty days from the date hereof seller shall deliver to purchaser or his agent (which delivery may be made at the office of the Buyers' attorney) a title insurance policy of the Chicago Title and Trust Company in the amount of the purchase price covering the date hereof, or its customary preliminary report on title, showing title in seller (or grantor), subject only to the matters to which this sale is subject by the terms hereof, and to the usual objections contained in owners' policies issued by said Company. . . .

"It is agreed and understood that the buyer is purchasing the subject property for use as a private riding club and stable for training and boarding horses. Seller represents that the present zoning on said property is agricultural even though said property has been used for some 20 years for commercial purposes by seller. This contract is subject to seller obtaining zoning for buyer that would be suitable for buyer's use as outlined above. Time being of the essence, it is agreed by the Parties that rezoning order necessary for the buyer's business must be obtained on or before October 15, 1962. Failure by the Seller so to do shall render the contract null and void and the earnest money deposit shall be returned to the Buyer."

The plaintiffs' Second Amended Complaint alleged as breaches of the contract North Shore's failure to procure the title insurance policy and the failure to procure the change in zoning within the time limits prescribed in the contract. Defendant, North Shore, in its answer alleged facts constituting a waiver of the performance of the two requirements within the time limits. Plaintiffs filed no reply denying the affirmative allegations of the answer. The defendant, North Shore, now contends that the affirmative allegations of waiver stand admitted by virtue of sections 32 and 40(2) of the Civil Practice Act. Without holding that the affirmative allegations involved required a denial, we are of the opinion that the defendant, North Shore, is not in a position to rely upon plaintiffs' failure to reply to these allegations. The theory upon which North Shore defended the action was waiver by the plaintiffs of the contract requirements. North Shore introduced considerable evidence to prove waiver. It offered instructions on waiver and it argued waiver to the jury. The defendant thereby abandoned its position that the affirmative allegations of the answer stand admitted by the plaintiffs' failure to deny the same. Laegeler v. Bartlett, 10 Ill.2d 478, 140 N.E.2d 702; Sottiaux v. Bean, 408 Ill. 25, 95 N.E.2d 899.

The defendant, in an attempt to prove waiver of the contract provisions relating to the furnishing of a title insurance policy, relied upon the acts, words, and conduct of the plaintiffs and their attorney. The defendant contends that the plaintiff treated the contract as still being in effect even after the expiration of the 60-day period and led the defendant to believe that this requirement would not be insisted upon. The defendant contends that the plaintiffs thereby waived performance of this part of the contract. The conduct relied upon by the defendant is the same conduct which it claims constituted waiver of the contract requirement to procure a change in zoning of the property within the time specified. The discussion hereinafter contained concerning the waiver of ...


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