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Madigan v. Buehr

MAY 21, 1970.

ELAINE MADIGAN, PLAINTIFF-APPELLANT,

v.

GEORGE BUEHR AND MARGO HOFF BUEHR, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. RAY E. WESNER, Judge, presiding. Affirmed.

MR. PRESIDING JUSTICE DEMPSEY DELIVERED THE OPINION OF THE COURT.

Rehearing denied June 26, 1970.

The issue in this appeal is whether the beneficiary of a land trust has the right to contract for the sale of the trust property.

The plaintiff, Elaine Madigan, agreed to sell a two-apartment building to the defendants, George and Margo Buehr, for $30,000. At the time the contract was executed the real estate was in a land trust of which Mrs. Madigan was the sole beneficiary. The Buehrs deposited a $4,000 check with Mrs. Madigan's agent as earnest money, with the written understanding that if they defaulted on the terms of the contract the money would, at the option of Mrs. Madigan, be forfeited as liquidated damages. The Buehrs defaulted; their $4,000 check was returned because of insufficient funds and Mrs. Madigan sued for damages.

In their answer to Mrs. Madigan's complaint, the Buehrs asserted that she was not the owner of the real estate specified in the contract and was without authority to sell the property because the title was in the name of the trustee. Mrs. Madigan replied that she was the owner of the entire beneficial interest in the property and that under the terms of the trust she had the power to contract for its sale. At the trial the parties stipulated to the evidence and also stipulated that Mrs. Madigan was at all times ready, willing and able to direct the trustee to execute a deed to the Buehrs and that she would have done so but for the fact that the check deposited by them was returned for lack of sufficient funds. The trial court held for the Buehrs and dismissed the suit.

The agreement between Mrs. Madigan and the trustee contains the following pertinent provisions:

"[T]he interest of any beneficiary hereunder shall consist solely of a power of direction to deal with the title to said real estate and to manage and control said real estate as hereinafter provided. . . .

"While [the trustee] is the sole owner of record of the real estate referred to herein, and, so far as the public is concerned, has full power to deal therewith, it is understood and agreed by the parties hereto . . . that [the trustee] will . . . convey title to said real estate, execute and deliver deeds for or otherwise deal with the title to said real estate only when authorized to do so in writing and that it will . . . on the written direction of . . . such person . . . as may be beneficiary . . . at the time, make deeds for, or otherwise deal with the title to said real estate. . . .

"The beneficiary . . . hereunder shall in . . . her . . . own right have the full management of said real estate and control of the selling . . . thereof . . . ."

The land trust, which is indigenous to Illinois, permits a trustee to hold the legal and equitable title of the trust property while the beneficiary controls its management and retains the power of direction over the trustee. The trust has been approved, and the powers of the trustee and beneficiary distinguished and their responsibilities defined, in many cases starting with Kerr v. Kotz, 218 Ill. App. 654 (1920). It has been uniformly held that the interest of the trustee is confined to the title and the interest of the beneficiary is personal property. In re Estate of Peters, 34 Ill.2d 536, 217 N.E.2d 3 (1966); Sterling Savings & Loan Ass'n v. Schultz, 71 Ill. App.2d 94, 218 N.E.2d 53 (1966). The trustee's power over the title is set out in the trust deed and is complete as far as the public is concerned. The power is limited, however, by the trust agreement which provides that the trustee must deal with the title as the beneficiary directs.

It has been said that only the trustee can accept an offer to purchase or contract to sell the trust property. In Marshall Savings & Loan Ass'n v. Chicago Nat. Bank, 56 Ill. App.2d 372, 206 N.E.2d 117 (1965) a family named Smith entered into a sales contract with Leonard Gervasio for the purchase of a vacant lot and a house which was to be constructed by him. The real estate was held in a land trust and Gervasio was the beneficiary of the trust. The Smiths made three payments to Gervasio totaling $3,390. Prior to its final completion, the residence was destroyed by fire. The property had been mortgaged by the trustee and the mortgagee foreclosed. The trial court ruled that the Smiths had an equitable lien for $3,390 in the real estate. On appeal the mortgagee contended that the Smiths had no right that attached to the real estate. In upholding this contention the Appellate Court noted that the Smiths had no dealings with the land trustee — only with Gervasio, the beneficiary. The court stated:

"It is well established under the Illinois law that the beneficiary of a land trust can neither contract to sell the real estate nor accept an offer to purchase it. Schneider v. Pioneer Trust & Savings Bank, 26 Ill. App.2d 463, 168 N.E.2d 808; Chicago Federal Savings & Loan Ass'n v. Cacciatore, 33 Ill. App.2d 131, 178 N.E.2d 888."

The cases cited do not support this broad declaration of the law. Although there is language in both cases to this effect, Schneider held that a beneficiary could not accept a written purchase offer addressed to a trustee and Cacciatore held that a Federal tax lien against a beneficiary did not attach to the real estate.

Other than the Marshall case, we know of no definitive decision holding that a beneficiary cannot contract to sell the trust property. In fact, there are decisions which indicate the contrary. In Burns v. Epstein, 413 Ill. 476, 109 N.E.2d 774 (1952), the beneficiary contracted to sell the trust property. He received a down payment of $500 but did not follow through on his commitment to sell. The purchaser filed a suit for specific performance and tendered the payment called for by the contract. The beneficiary, in moving to dismiss the complaint, urged that ...


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