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Reese v. Melahn





APPEAL from the Appellate Court for the Second District; heard in that court on appeal from the Circuit Court of Lake County; the Hon. CARRIE L. WINTER, Judge, presiding.


In this action filed in the circuit court of Lake County, plaintiffs, Norman Reese and Mark Doyle, sought the imposition of a constructive trust on certain land and an accounting of the assets, receipts and disbursements of a cemetery business which they alleged was formed as a joint venture between plaintiffs and defendant E.H. Melahn. By its decree the circuit court imposed a constructive trust in favor of plaintiffs to the extent of 20% of the assets and profits of the cemetery business and ordered defendants Melahn and Highland Memorial Park, Inc., the corporation to which the land where the cemetery was situated had been conveyed, to make an accounting of assets, receipts and disbursements. The defendants appealed, the appellate court reversed the decree (1 Ill. App.3d 63), and we allowed plaintiffs' petition for leave to appeal.

The evidence shows that plaintiff Doyle had worked as a cemetery-lot salesman and plaintiff Reese had been employed by several banks and finance companies in connection with the financing of installment-purchase contracts. They made plans to go into the cemetery business and agreed that Doyle would handle sales and development and Reese would handle the financial aspects of the enterprise. In their search for a suitable tract of land, they made the acquaintance of Arthur B. McDonald, a realtor, who showed them a number of parcels of land, among them being a 70-acre parcel known as the Clark property. He also introduced them to several prospective investors, including the defendant Melahn.

Melahn was a general contractor engaged primarily in the construction of roads and bridges. He had known McDonald, who was also the secretary of the Illinois Road Builders Association, on a social basis for almost 35 years. McDonald arranged a meeting at Melahn's office for October 24, 1963. Present at this meeting were Reese, Doyle, McDonald and Melahn. Reese and Doyle were introduced to Melahn and they told him they had located a site suitable for a cemetery. They presented brochures of memorial garden cemeteries and the facts which showed a need for this type of cemetery in Lake County and gave him a resume of Doyle's background in the cemetery business and Reese's background in financial transactions. They proposed that Melahn finance the venture, that they develop and operate the cemetery and that the ownership be on the basis of 50% to Melahn and 50% to Doyle and Reese. Melahn said he would consider the proposal and would notify them through McDonald.

Melahn, through McDonald, rejected the proposal and made a counterproposal. Plaintiffs, also through McDonald, first refused, then accepted the counteroffer.

Melahn testified that although plaintiffs had rejected his counteroffer, he permitted it to remain open and, although the record does not reflect when or in what manner plaintiffs were advised that the counteroffer had been withdrawn, there is no question that a counterproposal was made by Melahn and accepted by Reese and Doyle; this litigation arises from a dispute as to the terms of that counterproposal.

On January 23, 1964, Melahn purchased the Clark property subject to the issuance of a special permit for cemetery use. Reese and Doyle contacted ministers and churches in the area to urge acceptance of the new cemetery, made a house-to-house canvass to secure "preneed leads" on families who did not own cemetery lots, and obtained 500 leads which were turned over to McDonald. They testified at the zoning hearing as to the need for the cemetery, met with the attorney employed to obtain the special-use permit and with the county planning commission, and interviewed and negotiated with adjoining landowners for consents to the special use. Litigation to obtain the special-use permit, which included an appeal to the appellate court (Brown v. County of Lake, 67 Ill. App.2d 144), was concluded early in 1966.

At the time of the trial McDonald had died. Plaintiffs testified, over objection, that McDonald stated to them that Melahn had rejected their proposal and offered as a counterproposal that they were to be paid $7500 each for their full-time services and were to receive 20% of the venture, and Melahn was to retain an 80% ownership interest. They testified that it was this counterproposal which they first rejected and subsequently accepted. Called for adverse examination under section 60 of the Civil Practice Act, Melahn testified that the counterproposal, which he made and which McDonald advised him had been accepted, was that Doyle and Reese would be employed on a full-time basis, each would be paid $7,500 per year and that he would set aside 20% of the stock of the corporation that would operate the cemetery, which stock Reese and Doyle would be permitted to purchase if they could make the venture profitable.

A chronology prepared for Melahn by McDonald from his diary at the time the zoning litigation was pending was offered by plaintiffs and admitted into evidence without objection, and there are no contentions on appeal with respect to either its admissibility or the purposes for which it could be considered by the trial court. The pertinent portion of this chronology reads:

"October 24, 1963-Norm [Reese] and Mark [Doyle] and I drive to Algonquin for conference with Mike [Melahn] from 10 to 11:30 A.M. Mike shows real interest. Will see him in Springfield November 1.

October 25, 1963-Mike calls — says Reese and Doyle are nuts on 50%-lucky to get 20%. Will give memo.

November 8, 1963-Call Mike to return Norm Reese data.

November 12, 1963-Wire Mike to return Memorial Park data. November 15, 1963-Meet Mike for lunch at Wauconda regarding Memorial Park.

November 18, 1963-9:30 Norm and Mark (and Joe) here and I tell them Mike's offer is 20% for them plus ...

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