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A.s.s. Wrecking Co. v. Guaranty Bk. & T. Co.

OCTOBER 12, 1971.




APPEAL from the Circuit Court of Cook County; the Hon. WALTER P. DAHL, Judge, presiding.


This is an appeal from a judgment that rejected affirmative defenses, adjudicated counterclaims and ordered foreclosure and sale of two parcels of real estate. The issues arise out of a controversy concerning contracts to demolish two slum buildings.

On February 18, 1963, Richard A. Keefe was appointed receiver of two parcels of real estate, a four-story building at 938-944 North Wells and a five-story building at 1001-1005 North Wells, Chicago. In 1964, Keefe was ordered to demolish the buildings. Accordingly, Keefe and plaintiff entered into two contracts to wreck each building "[d]own to grade level, leaving only solid debris, and removing all burnable materials." The costs for 938-944 North Wells were $8,000; those for 1001-1005 North Wells were $10,775, later increased to $12,540.

On May 14, 1965, plaintiff filed intervening petitions and obtained two orders in which the trial court found that the two buildings had been demolished. Keefe, as receiver, was ordered to execute two trust deeds, one to secure receiver's certificates in the aggregate amount of $8,000 to pay for demolition costs of 938-944 North Wells. The other to secure receiver's certificates in the aggregate amount of $15,775 to pay for the demolition costs of 1001-1005 North Wells. Both orders were "[e]ntered under and by virtue of the authority of Sections 11-31.1 and 11-32.2 [sic] of Chapter 24 of the Illinois Municipal Code in connection with dangerous conditions on [sic] the building on the premises in question, * * *." *fn1

On May 21 and June 29, 1965, Keefe, in two trust deeds, "[n]ot individually but as Receiver for the following described real estate, * * *" conveyed and warranted by legal description 938-944 and 1001-1005 North Wells Street in Chicago. The two trust deeds were recorded in the offices of the Recorder of Deeds of Cook County. Each document had stapled to it a typewritten statement that "[t]he Mortgagor has issued the Principal Promissory Notes hereinafter described and intends to transfer them, for good and valuable consideration relating to the demolition and other services performed * * *" on the described real estate.

The receiver's certificates were not paid. On August 23, 1967, using the short form provided by statute, plaintiff filed two complaints to foreclose the trust deeds. Keefe was described at the mortgagor. It was alleged that each parcel of real estate was conveyed in fee simple and plaintiff prayed for a foreclosure of each trust deed. Attached to each complaint, as exhibits, were the trust deed and the receiver's certificates. In the complaint concerning 938-944 North Wells, defendant Guaranty Bank and Trust Co., as Trustee under Trust No. 11013 was named defendant. In the complaint concerning 1001-1005 North Wells, National Boulevard Bank of Chicago, as Trustee under Trust No. 1613 was named defendant. Richard Keefe, receiver and Chicago Title and Trust Company, the trustee in each trust deed, were named defendants in each complaint. They were defaulted for failure to appear and answer.

Guaranty and National Boulevard appeared in their respective suit. They filed an answer which included two affirmative defenses and a counterclaim. As their first affirmative defense, Guaranty and National Boulevard alleged that plaintiff's cause of action accrued on August 5, 1965, when there was default in payment of the receiver's certificates. *fn2 Both alleged that because plaintiff's action as to each of them was not commenced until August 23, 1967, the suits were barred by Ill. Rev. Stat. 1965, ch. 24, par. 11-31-2 "[w]hich provides that actions to foreclose such a trust deed must be commenced within two years after the date of default." Each answer contained a second affirmative defense which alleged that plaintiff breached its contract of demolition because "[i]t failed to fill the property with solid fill to grade level. To the contrary, plaintiff filled the property with unfit, combustible materials in violation of the contract." In addition to the answer and affirmative defenses, Guaranty and National Boulevard each filed a counterclaim in which it was alleged that there were breaches of the demolition contract by the plaintiff and prayed for damages, Guaranty as to 938-944 North Wells, $10,000; National Boulevard, as to 1001-1005 North Wells, $8,000.

Prior to trial, plaintiff moved to strike the first affirmative defense and the counterclaims. The motion to strike was allowed as to the first affirmative defense and denied as to the counterclaims. Defendants were granted leave to amend their counterclaim. The complaints were consolidated for trial. The court then heard evidence on the counterclaims.

To support their allegations that plaintiff breached the demolition contracts, defendants called four witnesses: a photographer, the president of a building wrecking company, a project engineer for a soil testing service and Keefe, the receiver. 43 exhibits were included in their proof. In addition, they requested, and the trial court took judicial notice of section 76-6.4 of the Revised Building Ordinance of the City of Chicago which provided that "[o]n completion of demolition, the site shall be filled where necessary with clean soil, cinders or other inorganic material and graded to a level not lower than nor more than twelve inches above the level of sidewalks, alleys, or adjoining property with proper allowance for settlement."

Keefe testified that after he entered into the demolition contracts, and while the work was in progress, he visited the sites but did not see anything unusual. After he issued the receiver's certificates and delivered the trust deeds to plaintiff, problems arose with the fill materials that had been used. For example, a car parked on one of the lots sank into the ground on its axle, requiring a tow truck to get it out. In the spring or summer of 1966, portions of the sidewalk of 1001-1005 North Wells collapsed. Sidewalk cave-ins also occurred at 938-944 North Wells. The City of Chicago filled and repaved the sidewalks. Later, in the spring and summer of 1967, cinders had to be brought in to fill the "cavities" and "voids" which had occurred on the two properties. Keefe estimated that wood was approximately 25 to 50% of the fill which plaintiff used to grade and level the two properties. Keefe said he hired a soil testing firm to analyze the fill which plaintiff had used.

The supervising project engineer of the soil testing firm testified that two borings were made on each property. On 1001-1005 North Wells the quantity of wood in the fill ranged from none to 50%. On 938-44 North Wells, wood in the fill ranged from none to 35%. This witness testified that wood is an improper fill material because it lacks compactability, it is subject to decay, causes settlement of the filled land, requiring reexcavation before any building of substance can be constructed on a site with wood as fill material. The president of the building wrecking company testified that he inspected the lots at 938-944 and 1001-1005 North Wells after plaintiff completed the demolitions, grading, leveling and filling. He estimated that the cost of reexcavating and re-filling the properties "[w]ould be in the neighborhood between 15 to $20,000." Of defendant's exhibits, 10 were photographs of the two lots showing the fill material that had been used.

Plaintiff called three witnesses: an administrative assistant in the trust department of National Boulevard Bank, the building inspector of the City of Chicago who approved the demolitions and Richard Keefe, called as an adverse witness. The trust department administrative assistant testified concerning trust documents. Keefe explained why payments on the receiver's certificates were discontinued. He said, "There were two substantial reasons: One, we found difficulty with the wood, was part of the reason; the other part of the reason was that he entered into a, sort of a general agreement with some of the principals of A.S.S. Wrecking in the formulation of a dump company * * *." The building inspector testified that while demolition of the buildings on 938-944 and 1001-1005 North Wells was in progress, he visited the properties but saw no wood put in as fill material. Fifteen exhibits were offered by plaintiff and received in evidence.

After hearing the witnesses and receiving the exhibits, the trial court rejected the affirmative defenses, found against defendant on the counterclaims and ordered foreclosure and sale of the two parcels of real estate. *fn3 In this appeal defendants present three issues.

1. Whether the trial court erred in striking defendants' first affirmative defense which alleged that each of plaintiff's complaints to foreclose the trust deeds were barred by the statute of limitations which requires that a suit to foreclose the lien of a receiver's ...

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