APPEAL from the Circuit Court of Cook County; the Hon. EARL
ARKISS, Judge, presiding.
MR. JUSTICE MCNAMARA DELIVERED THE OPINION OF THE COURT:
Rehearing denied November 3, 1977.
This suit, commenced in 1959, was brought by the plaintiff, Robert P. Markman, requesting the reinstatement of certain cancelled special assessment bonds, vouchers, and coupons issued by the defendant, city of Harvey (hereinafter the city). Plaintiff also asked that the city be compelled to make an accounting of special assessment funds allegedly improperly withheld by the city. The city filed a counterclaim charging that certain checks drawn by plaintiff to pay for special assessments had been dishonored. The matter was referred to a Master in Chancery in 1959, and in 1975 the master issued his findings recommending judgment for plaintiff on his complaint. The master also recommended judgment for the city on its counterclaim. The trial court disapproved the master's report as to his recommendations on plaintiff's complaint and accepted his findings on the city's counterclaim. On appeal, plaintiff has raised the following issues: whether the 1954 agreement between plaintiff and the city to pay plaintiff his proportionate share of special assessment monies in return for cancellation of certain bonds is void because the city as trustee for all bondholders did not possess the right to effect a settlement for payment of the funds collected and owing to the owners of the bonds; whether the trial court ruled correctly that the master's determination of illegality as to the 1954 contract exceeded the parameters of the pleadings; and whether the trial court erred in denying plaintiff leave to file an additional answer to the city's counterclaim.
The pertinent facts are as follows. In March 1953, the city conducted a sale and assignment of the liens under certain special assessment bonds issued by it in the 1920's. The proceeds of the sale amounted to $200,000 out of which plaintiff was paid $120,000 which amount corresponded to the percentage of bonds owned or controlled by plaintiff in the area sold and assigned. At the time of the sale, plaintiff also owned bonds outside that area. The face value of his holdings of special assessment bonds issued by the city totaled $265,534.93 or $278,062.98. (The uncertainty as to the total exists because the evidence is unclear as to when plaintiff acquired the paper in a certain warrant.)
At the sale plaintiff represented certain investors as well as himself and was authorized to bid up to a designated amount for the liens. Having been overbid at the sale, he entered into an agreement with the investors whom he represented whereby plaintiff retained the paper and the investors received $120,000, the proceeds of the sale.
In November 1954, plaintiff entered into an agreement with the city concerning all the bonds owned by him throughout the city. This agreement related to the special assessment funds held by the city and payable to the owners of the outstanding bonds. The contract is evidenced by the minutes of the city council and its essence is set forth in paragraph 2 of a letter written by plaintiff to the city commissioner of finance and city treasurer:
"2. In return for my proportionate share of special assessment funds held by the City of Harvey, excepting any proceeds which might be due from the sale and assignment, I propose to surrender any and all rights which might have accrued on any such bonds, from the past up to the present, retaining only the right to collect funds coming into the City's hands after the agreed amount of distribution has been reduced on the bonds themselves. I would specifically be entitled to any funds received by the City of Harvey from the County Treasurer before the date of distribution of past funds has been endorsed on my bonds, but received from the County Treasurer by the City of Harvey, after said date."
Plaintiff also agreed to deposit all his outstanding bonds with the city and secure a performance bond for the agreement. As to his holdings within the area sold and assigned, plaintiff relinquished all rights except to foreclosure monies collected and he agreed to the cancellation of the bonds by the city. Regarding the other bonds, it was agreed that the city would hold them in escrow and that plaintiff would be entitled to his share of future collections.
Pursuant to the 1954 agreement, the city paid plaintiff a total of $34,680 out of the $129,099.99 on hand in the special assessment fund. The final payment of special assessment funds to plaintiff occurred in February 1955. In a letter to the city treasurer dated February 18, plaintiff relinquished all claim to past-due funds on the balance of his bond holdings as of March 15, 1953, except for foreclosure monies. Subsequent to the final payment of foreclosure monies, plaintiff, on June 11, 1957, again wrote authorizing cancellation of the bonds within the area sold and assigned.
On April 13, 1959, plaintiff filed the present action to set aside the cancellation of his special assessment bonds on the grounds of misrepresentation, duress, and breach of trust by the city in causing him to surrender his bonds. He also requested an accounting of special assessment funds since payments of the bonds were alleged to have been improper. In an amended complaint, plaintiff charged that the city improperly deducted a two-percent collection fee and demanded interest because of the alleged delay in paying him the proper amount owed. In another amended complaint, plaintiff sought a declaration that there had been no agreement between the parties and requested that the parties be returned to their original positions. In the alternative, if such an agreement was found to exist, a declaration was sought that the city had failed to pay plaintiff his full share as agreed.
The city denied plaintiff's allegations and pleaded the affirmative defense of settlement, release, or waiver. As already noted, the city also filed a counterclaim.
The hearings commenced before the master in December 1966 and continued until August 1974. Plaintiff's case was presented essentially through his own testimony. While that testimony varied somewhat over the course of the hearings and is difficult to summarize, it appears that his claim is that the city had agreed to pay him 50 to 60 percent of the special assessment funds on hand at the time the agreement was executed in 1954. He stated that the city paid him less than the amount to which he was entitled under the 1954 agreement. He stated that in 1957 he first discovered that he had not been paid what he claimed was his full share of the funds. At that time he was working on another special assessment matter in the city treasurer's office when he came across what he testified were the "black balances" for cash register No. 1. Plaintiff testified that those figures evidenced an $80,000 surplus, a percentage of which should have been paid him under the 1954 agreement.
Anthony M. Fredericks, a certified public accountant, testified for the city that his inspections of the city's books and records revealed that in 1954 plaintiff held approximately 23 percent of the outstanding bonds issued by the city. On November 1, 1954, the total special assessment monies on hand totaled $129,099.99, and 23 percent of that amount equaled $29,692.77. Pursuant to the 1954 agreement, the city paid plaintiff $34,680.00 from that fund. The witness reviewed the payments to plaintiff and testified that in several instances plaintiff was paid in excess of his pro rata share owing on the warrants.
George Gilley, former commissioner of finance, testified for the city that in 1954 it entered into an agreement with the plaintiff whereby it would pay him a proportionate share of the special assessment funds on hand. According to the witness, there never was any agreement or understanding to pay plaintiff 50 percent of the special assessment funds held by the city at that time. Gilley also testified that at all times plaintiff was afforded access to the books and records of the city.
Regarding the counterclaim, the city presented the testimony of the city clerk that plaintiff had issued two checks to the city in payment of certain special assessments. The checks were dishonored by the drawee bank and the amounts owed by plaintiff ...