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Jacobs v. Carroll

OPINION FILED FEBRUARY 14, 1977.

EDWARD C. JACOBS, TRUSTEE, ET AL., PLAINTIFFS-APPELLEES,

v.

JAMES L. CARROLL, DEFENDANT-APPELLANT.



APPEAL from the Circuit Court of Lake County; the Hon. LLOYD A. VAN DEUSEN, Judge, presiding.

MR. PRESIDING JUSTICE GUILD DELIVERED THE OPINION OF THE COURT:

On August 20, 1974, the plaintiffs, Edward C. Jacobs, as trustee, and Arnold W. Shunneson and his wife, filed their complaint to recover possession of resort property on Channel Lake, Illinois, sold to the defendant, James L. Carroll, under contract. No explanation has been made as to what interest Jacobs would have in the suit since he was not the trustee under the trust at the time suit was filed. Defendant filed a counterclaim for rescission and return of the money paid pursuant to said contract or articles of agreement. Plaintiffs filed an amended complaint adding the Chicago Title and Trust Company, as trustee under Trust No. 59715, the title holder of record, as a party plaintiff. The case was heard by the court without a jury and judgment for possession was entered for the plaintiffs on their complaint and against the counterplaintiff on his counterclaim. The defendant, Carroll, appeals. We shall hereinafter refer to defendant Carroll as purchaser and all other parties by their names.

From the testimony of Mr. Shunneson and the plaintiffs' other witnesses, and the undisputed evidence, the following facts appear. The property in question is a resort business called Channel Lake Boat House. Sometime in 1971 the Shunnesons and the purchaser began discussing the possible sale of the real estate and: (1) the sale of personal property valued by the parties at $55,000; (2) the transfer of a liquor license; (3) the transfer of an Evinrude franchise; and (4) a covenant by the Shunnesons not to engage directly or indirectly in the tavern and boat business for a period of five years within a radius of five miles from the premises. Thus, the real estate was but a part of the total contract. Both parties were represented by attorneys, Jacobs representing the Shunnesons and Katz representing the purchaser.

It would appear that on April 6, 1972, the purchaser and Katz met with the Shunnesons in Jacobs' office. The articles of agreement for warranty deed and the sale of the personal property were signed on that date, although the contract itself was dated April 1, 1972. The articles of agreement were prepared by Jacobs except for paragraph 35 which was added thereto by Katz. Paragraph 35 provides:

"After the execution of this Agreement Seller shall place the title to said real estate in an irrevocable land trust with the Chicago Title and Trust Company. The parties shall open an escrow with the Chicago Title Insurance Company through which this transaction shall be closed. Sellers shall deposit in said escrow an irrevocable direction to said land trustee to convey to Purchaser title to said real estate upon payment of the full purchase price. All trust fees and escrow money shall be paid by Purchaser."

In the contract the Shunnesons were listed as the sellers and Carroll or his nominee as the purchaser. In addition to the obligations assumed under paragraph 35 the Shunnesons agreed to convey the personal and real property to the purchaser upon the payment of $180,000, together with interest at 7% and to furnish an owner's title insurance policy by Chicago Title Insurance Company showing merchantable title.

At the time the negotiations commenced for the purchase of the property in 1971 the title to the premises was in Arnold W. Shunneson. Subsequently, on May 27, 1971, prior to the date of the articles of agreement herein, title to the premises had been conveyed by the Shunnesons to Edward C. Jacobs as trustee under Trust No. 52771. However, the contract of sale referred to a title commitment report dated August 4, 1971, which originally showed title in Arnold W. Shunneson. On April 19, 1972, Mr. Jacobs' office sent Mr. Katz a title commitment report of the Chicago Title Insurance Company dated August 4, 1971, updated to April 17, 1972, showing title to be in Jacobs as trustee. Katz admitted receiving this document.

On April 18, 1972, Mr. Jacobs, as trustee, at the oral but not written direction of Mr. Shunneson, conveyed the property to Chicago Title and Trust Company as trustee under the provisions of a new trust agreement. Basically the new trust agreement has the same terms as the previous trust document except that the Chicago Title and Trust Company, as trustee, was given the power of direction. The conveyance was recorded. Also, on April 18 an escrow agreement, pursuant to the requirements of paragraph 35 of the contract, was prepared by the Chicago Title and Trust Company and was mailed to both Katz and Jacobs at that time and again on September 14, 1972. It provided, inter alia, that the signed direction by both parties authorizing the escrow agent to direct the land trust to convey the premises, would be deposited once the purchase price was paid in full. The escrow agreement was never signed by either party. Katz testified he put the escrow agreement in his file and did not act because the seller had not. Katz did pay the escrow fee.

The sales contract provided for a $25,000 down payment, a $10,000 payment in November 1972 and an annual payment of $15,000 every June thereafter until full payment was made. The down payment of $25,000 was not made at the time the contract was executed, the purchaser intending to withhold payment until receipt of a survey and the placing of the title with Chicago Title and Trust Company. However, according to Mr. Shunneson's testimony, purchaser took possession on April 15 and paid him the $25,000 around April 18 because Shunneson threatened not to perform his agreement to make certain improvements unless he was paid. The survey was delivered to the purchaser but there was no evidence as to when it was delivered. The next payment of $10,000 was made by the purchaser in November 1972. In June 1973 no payment was made on the principal but the purchaser with the seller's consent, paid the sum of $10,151 for interest due and owing. When the June 1974 payment was due and the same was not paid by the purchaser, the plaintiffs herein brought this action for possession of the property in question.

The amended complaint alleged the making of the contract of sale on or about April 1, 1972, the previous disclosure that title was actually in Jacobs as trustee, the subsequent conveyance to Chicago Title and Trust Company as trustee, and the default. In his answer and counterclaim the purchaser alleged that the contract was void, ab initio, that no disclosures had been made before the sale, that the Shunnesons had failed to perform paragraph 35 of the agreement, and denied that he had breached the agreement or that the notice of forfeiture was legal and served by the proper parties. The plaintiffs, in their reply, denied all of the purchaser's allegations and alleged that the contract was valid since full disclosure was made prior to the signing of the contract and alleged full performance of paragraph 35.

The purchaser has raised five issues. The first issue is whether the court erred in allowing parol evidence to show the Shunnesons did not have title to the property at the date of the execution of the articles of agreement for warranty deed. Secondly, the purchaser contends that the findings of the trial court — that disclosure was made of the status of the title prior to the execution of the articles of agreement and that the purchaser was aware at the time of the consummation of the purchase that he was dealing with Shunneson as beneficiary with power to direct conveyance of the property rather than Shunneson as titleholder of record — were in error. The third issue is whether the articles of agreement for warranty deed were void or voidable. The fourth is whether there was an effective transfer of title from Jacobs as trustee to Chicago Title and Trust Company as trustee. The purchaser's fifth contention is that the contract was breached by the Shunnesons because the trust agreement with Chicago Title and Trust Company was not irrevocable and an escrow was not created pursuant to paragraph 35 of the contract.

The purchaser first contends that the contract was invalid and unenforceable since the Shunnesons signed the contract as owners when, in fact, they were only beneficiaries of a land trust. The plaintiffs respond that parol evidence is admissible to prove that the purchaser knew of the Shunnesons' true status and that, because he knew, the contract was valid.

In transactions involving property held by a land trust there is, as was pointed out by the court in Madigan v. Buehr (1970), 125 Ill. App.2d 8, 16, 260 N.E.2d 431, 434-35, a natural tendency to blend the power of the beneficiary with that of the trustee since the beneficiary is the person interested in the sale. It is the beneficiary who determines the price and the terms and he generally is the one who conducts the negotiations, but the nature of the land trust is such that, if the trust is to be preserved, the powers of the beneficiary and the trustee must be kept distinct. Accordingly, if a beneficiary of a land trust ...


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