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City of Chicago v. Hart Bldg. Corp.

OCTOBER 21, 1969.




Appeal from the Circuit Court of Cook County; the Hon. RICHARD A. NAPOLITANO, Judge, presiding. Decree affirmed.


Richard A. Keefe, the respondent in a contempt proceeding, appeals from a decree finding him guilty of contempt and imposing a fine of $5,000 and additional penalties which will be discussed later in this opinion. In this appeal, the respondent attacks the jurisdiction of the trial court, the sufficiency of the evidence, particularly with regard to the element of criminal intent and the severity of the punishment.

In 1959 the City of Chicago (hereinafter referred to as the City) filed numerous suits against various corporations owned and controlled by Jack and Jules Winkler seeking to correct Building Code violations in a group of twenty properties owned by the corporations. In 1963 the City petitioned the court for the appointment of a receiver to correct these violations since the Winklers had not cooperated. In February, 1963, Keefe was appointed receiver for fourteen of these properties and was given directions to take possession of the premises; preserve the properties; collect the rents; and with the prior authorization of the court, borrow money and encumber the buildings so that the borrowed funds could be used to repair the structures and bring them into compliance with the Building Code of Chicago. These were the only express powers given to the receiver. Keefe's receivership period extended from 1963 to March, 1964, as to one of the four properties involved in this appeal and from 1963 to July, 1965, as to the other three properties. On these latter dates, Keefe filed his final report and account as receiver for the specific property or properties involved; received court approval of his final account; and was discharged as receiver for each of these properties. During his period of receivership, three of the four buildings were demolished pursuant to court order.

In three of his final reports, Keefe represented under oath that the present owner of the property was a financial institution, naming the bank, which held legal title as trustee under a land trust, giving the trust number. In the fourth report, Keefe represented under oath that Austin Carter was the present owner. In all of these final reports, Keefe recommended, again under oath, that possession of the premises be taken from him as receiver and given immediately to the new owner.

On November 3, 1965, after Keefe had been discharged as receiver of the four properties involved in this appeal, the City filed its verified petition for disclosure alleging that Keefe was appointed receiver of the enumerated properties in February, 1963; that he went into possession and managed the premises thereafter; that during the period of his receivership a fiduciary relationship existed between the City of Chicago, the Hart Building Corporation, the court, and Keefe, as receiver; and that it was unable to determine from the facts available to it if Keefe, as receiver, had breached this fiduciary relationship. The petition closed with a prayer that the court enter a rule on Keefe, as receiver, requiring him to make a complete disclosure of his interest in and to each and every piece of property entrusted to him as receiver from the date of his appointment to the date on which this petition for disclosure was filed.

In response, Keefe filed a special appearance and motion to strike alleging, inter alia, that the court had no jurisdiction over him or the subject matter since his final reports and accounts had been approved after due notice to all interested parties and the court had discharged him as receiver. Keefe also alleged that the petition for disclosure was an improper pleading since it could not be regarded as ancillary to any pending proceedings.

After a hearing, this motion to strike was denied and Keefe was ordered by the court to make a full disclosure in writing and under oath. After he had filed a statement and a supplemental statement, both of which were rejected by the court as being incomplete, Keefe presented his amended statement in which he stated, under oath, that on or about November 6, 1963, which was after he had been appointed receiver, his attorney, unnamed, had executed a written contract of purchase with one Harry Eager concerning three of the four properties involved in this litigation; that Eager was the holder of the first mortgage on each of these properties and had instituted foreclosure proceedings against them; and that Keefe, through this unnamed attorney, was to purchase Eager's interests therein. The amended statement went on to mention that Keefe did not acquire title from himself as receiver or through any proceedings in the receivership but rather that Harry Eager was the successful bidder at the various foreclosure sales and that Keefe paid Eager in exchange for the delivery of Eager's master's deed to each one of the three properties. In addition, a judgment creditor of one of the corporations owned and controlled by the Winklers had exercised its equity of redemption pertaining to one of the properties involved in the foreclosure sales and Keefe had to pay it a certain sum for its interest therein, as well as purchasing the tax deed interest of another party who had been the highest bidder in a tax foreclosure sale applicable to another one of the properties which had been involved in the foreclosure proceedings. Keefe admitted that in time the legal title to these three properties passed into three land trusts in which he was the sole beneficiary and that he had paid exactly $41,529.80 to acquire these three properties.

As for the fourth property involved in this appeal, Keefe admitted that the first mortgagee, Lincoln Park Federal Savings and Loan Association, also had foreclosed and that Keefe's agent and nominee, Austin Carter, was the highest bidder ($15,000) at the foreclosure sale, after which Carter passed the legal title to a land trust in which one Gene Byrne was the sole beneficiary but he, Keefe, held a partnership interest therein. In conclusion, Keefe denied that he had violated his duties as receiver or any fiduciary relationship but admitted that he had paid the Winkler brothers, through their attorney, the sum of $15,000 "for their peace herein although they had no equity interest." The total sum which Keefe apparently paid for these four properties was $71,527.80.

After this amended answer was filed, lengthy evidentiary hearings were held on many occasions. A transcript exceeding 1,600 pages has been filed in this court. Eighteen witnesses testified and more than thirty exhibits were received in evidence. The chief witnesses for the City were Harry Eager; Jack Winkler; Marvin Patrick Cohen, attorney for the Winklers; Austin Carter; and Gene Byrne. Keefe was served with a subpoena but the City, apparently recognizing that the privilege against self-incrimination is applicable to the type of contempt proceedings involved in this appeal, did not compel him to testify. Keefe did not testify in his own behalf. The defense presented no witnesses.

Harry Eager testified that he was a mortgage broker operating under the name of Illinois Mortgage Company, a sole proprietorship, and that on November 6, 1963, he sold his mortgage interests in three of the instant properties to an attorney, Harold Ginsburg, who was referred to in the written contract as "Ginsburg or his nominee." After the contract was signed, Eager asked Ginsburg if Keefe was interested in the purchase and received an affirmative reply. The signed, written contract between Eager and Ginsburg was admitted into evidence. It provided, among other things, for the continued use of Eager's name as plaintiff in all of the pending mortgage foreclosure proceedings if Ginsburg or his nominee so requested.

Jack Winkler testified that in February, 1964, he had a meeting with Keefe and Winkler's attorney, Marvin Patrick Cohen, in the latter's office at which time Keefe told Winkler that he would pay Winkler $35,000 if he would not attend the foreclosure sales pertaining to three of the four properties involved in the instant appeal. Payment was to be $5,000 in cash payable every thirty days beginning in March, 1964. Winkler agreed to this oral proposal, received $5,000 a month in cash from March through June, 1964, never attended the foreclosure sales at which Eager was the successful bidder, and maintained that Keefe still owed him $20,000 based upon his oral promise. Winkler's attorney, Cohen, corroborated much of this testimony.

Austin Carter stated that he was a real estate broker in Chicago; that he had known Keefe for more than four years; that he had acted as nominee for Keefe at the latter's request in the purchase, at a foreclosure sale, of one of the properties involved in this appeal; that he did not know that Keefe was the receiver for the building at the time of the foreclosure sale; that thereafter he conveyed legal title by way of a land trust to a bank with Gene Byrne as beneficiary; and that he had used Keefe's money to purchase the property.

Gene Byrne testified that he was a real estate salesman in a corporation owned and controlled by Keefe; that he was the beneficiary of a land trust relating to one of the properties involved in this appeal but that he had paid no consideration for his interest; that Keefe had paid for the property using Carter as Keefe's nominee at the foreclosure sale and Byrne as his nominee in the land trust transaction; that there was an oral agreement between him and Keefe specifying that Byrne's interest in the trust was to be 5% and Keefe's was to be 95%; and that Keefe used this land trust device to conceal his ownership in various properties on North Wells Street in Chicago since he was ...

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