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Rankin v. Hojka





APPEAL from the Circuit Court of Cook County; the Hon. ROBERT McAULIFFE, Judge, presiding.


This appeal is from a judgment in the amount of $35,705.68 in favor of plaintiff, Robert S. Rankin, on a complaint for the breach of an oral agreement to form a joint venture to develop a parcel of real estate. The breach was occasioned by defendant's failure to convey the property into a land trust in which plaintiff would own one-half the beneficial interest.

The defendant presents two issues for our determination, contending that the verdict was against the manifest weight of the evidence and that the damages were calculated incorrectly.

The testimony at trial discloses that plaintiff and defendant first met in the summer of 1968 when plaintiff and his father were looking for vacant land where the family-owned business, Harco Steel Erectors, could park its equipment. After several discussions, defendant agreed to allow Harco to park the equipment on his land located adjacent to the Cal-Sag Road in Crestwood, Illinois. Although the question of rent was discussed, the amount was left open at that time.

Later in 1968 Rankin and Hojka began to discuss the possibilities for the joint development of a portion of defendant's vacant property. Plaintiff indicated that an acquaintance, Joseph Eschbach, for whom plaintiff had once done work, was seeking a building suitable for use in the steel fabrication business. Eschbach was brought into the negotiations, and after four to six meetings, the three men reached an oral agreement to form Northern Industrial Steel Corporation in December of 1968, with Eschbach owning 51 percent of the stock, and plaintiff and defendant each owning 24 1/2 percent of the stock. At the same time plaintiff and defendant agreed to form a joint venture to construct a steel fabrication building on defendant's land and rent it to Northern Industrial Steel Corporation.

Defendant agreed to cause land valued at $30,000 to be conveyed into a land trust in which plaintiff would own one-half the beneficial interest. Plaintiff agreed to supervise the construction of the building and obtain a tenant. The monetary consideration to be tendered by plaintiff as his share of the venture is disputed. Defendant contends that plaintiff agreed to contribute $30,000 in cash, an amount equal to the agreed upon value of the land. The cash was to be the basis for obtaining a construction loan and would be applied to the construction of the building. Plaintiff contends that he agreed to pay defendant an amount equal to one-half the value of the land. In support of this contention plaintiff and Eschbach both testified that defendant had originally proposed that defendant, plaintiff and Eschbach each take a one-third interest in both the building and the steel business. Each partner would have contributed $10,000 to the building venture. However, Eschbach indicated that he wanted a 51 percent interest in the business itself, and that he would have insufficient remaining funds to invest in the building. Accordingly, at the December 1968 meeting plaintiff and defendant decided to form the steel fabrication building venture without Eschbach.

Plaintiff testified that defendant pressed him as to how he would obtain the $15,000 for his share of the venture, and that he had replied that he would influence his father to have Harco Steel give defendant a check for $15,000, and that defendant could "count it as rent or anything."

Defendant's son testified that his father had originally proposed that an acre of land valued at $40,000 be used in the venture, but that plaintiff had indicated that he had been thinking more in the area of a $30,000 contribution. Defendant had then suggested that they cut the size of the property to be included in the venture down to three-quarters of an acre. Defendant's son also testified to a conversation in 1969 where plaintiff had allegedly told defendant that he was having difficulty in obtaining the $30,000, and proposed an alteration in the agreement whereby plaintiff would pay $15,000 in return for half the land. Defendant agreed to consider this proposal but never accepted it.

Pursuant to the agreement, the parties went to the First National Bank of Blue Island to arrange financing for the construction of the building. Defendant stated that when he and plaintiff had gone to discuss the construction loan, he had told the loan officer that plaintiff would be putting up $30,000 in cash, and that plaintiff had not contradicted this statement. The construction loan was obtained in March 1969, and plaintiff and defendant both signed the note.

Approximately one month after the loan was opened, a land trust was established at the First National Bank of Blue Island. The trust agreement recited that the bank was about to take title to certain described real estate, *fn1 and that Josephine Hojka (defendant's wife) and plaintiff were the beneficiaries of the trust. Plaintiff, defendant and Mrs. Hojka later executed a security assignment of the beneficial interest in the trust to secure a second construction loan obtained in June 1969. However, the land in question was never conveyed into the trust. *fn2

Defendant claimed that while he was in Florida, plaintiff had started construction of the building without putting up the $30,000, but that plaintiff had assured him then, and on numerous subsequent occasions, that he would pay him the money. Defendant also claimed that plaintiff had at one point offered to pay most of the $30,000 by charging the purchase price of some warehouse cranes to Harco Steel, but that this proposal had fallen through.

The building was completed in May 1969, and the tenant took possession. On July 29, 1969, plaintiff delivered a $15,000 check to defendant from Harco Steel Erectors. The check had the words, "For Rent Due to July 1969" typed upon it and the words, "Rent for 3 Year [sic] From 68/70" printed in ink in the margin by defendant. Plaintiff contends that this check was the consideration for defendant's agreement to convey the land into the trust. On cross-examination plaintiff admitted that he had stated in his deposition that the $15,000 check he had given to Hojka on July 29, 1969, was rent for the land Harco Steel had used to park its equipment, and that it was not for any other purpose. He stated that defendant had written the words in the margin outside of his presence. However, he maintained that the payment was "paid for rent under the deal for me to conclude my agreement with Mr. Hojka that I was to get Harco to produce $15,000, and I did it."

Defendant's version of the $15,000 rent check transaction was sharply at variance with plaintiff's testimony. Defendant testified that plaintiff had again told him that he did not have the $30,000, and that defendant had asked him if he would at least pay the rent due on the land used for parking Harco Steel's equipment. When plaintiff handed him the check, he told defendant to "mark the thing rent," and that he marked it in plaintiff's presence. Defendant also claimed that he had reported the $15,000 as rental income on his tax return for 1969.

Plaintiff attempted to show that defendant had not reported this $15,000 as rental income, and that he never considered it to be rent. The evidence disclosed that defendant reported $24,500 in rental income for 1969. Defendant claimed that $14,000 of the $15,000 received from Harco Steel was included in that figure, and that the balance, or $10,500, was received as rent for the building. Plaintiff introduced cancelled rent checks from Northern Industrial Steel Corporation which totaled $25,500 for 1969. Defendant subsequently introduced two bank ledgers into evidence which listed loan payments of $25,500 for 1969. Plaintiff argues that this figure corresponds exactly with the amount of rent received by defendant from the building and pointed out that defendant's figure of $10,500 was arrived at by using the entries in the second ledger only, reflecting payments for November and December 1969. *fn3

Northern Industrial Steel continued to pay rent until September 1971 when it vacated the building. The rental payments were credited to the construction loan and the balance used to pay taxes and insurance. After Northern left the building, plaintiff met with defendant and offered to pay half of the loan installments. Defendant replied that he considered plaintiff to have no interest in the building or the trust. Plaintiff then instituted these proceedings.

This action was originally brought to declare a trust over the subject property. The court dismissed that complaint, holding that plaintiff had an adequate remedy at law for money damages. An amended complaint at law was then filed. Defendant filed a counterclaim alleging that the land in question was to be valued at $60,000, and that plaintiff was to contribute the sum of $30,000 for a half interest in the venture. At trial the court treated this pleading as a judicial admission and observed that it contained facts directly contrary to both plaintiff's and defendant's testimony. Defendant and his attorney both admitted that the allegation that the land was valued by the parties at $60,000, as well as other allegations in the counterclaim, was incorrect. Plaintiff amended his complaint at trial to correct the legal description of the property to conform to that set out in the trust agreement. *fn4

At trial the testimony and exhibits set forth above were received, and the court found that plaintiff and defendant had entered into a valid oral agreement to develop the real estate, and that plaintiff's contractual obligations were to invest $15,000 in cash, supervise construction of the building and obtain a tenant for the premises. Defendant's obligation was to convey the property in question into a land trust in which plaintiff would be a 50 percent beneficiary.

The court further found that the $15,000 check from Harco Steel to defendant was intended by the parties to be plaintiff's contribution to the joint venture and was not considered to be rent. The court therefore held that the plaintiff had substantially performed his part of the agreement, and that defendant breached the agreement ...

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