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Galante v. Steel City Nat'l Bk. of Chicago





APPEAL from the Circuit Court of Cook County; the Hon. PAUL F. ELWARD, Judge, presiding.


Plaintiffs appeal from an order dismissing their complaint and entering a default judgment against them on defendants' counterclaim. On appeal they contend that the trial court erred in refusing to recognize their right to assert the Fifth Amendment privilege against self-incrimination during their pretrial depositions.

The following facts pertinent to this appeal appear in the record.

Plaintiffs brought this action to recover insurance proceeds after certain property in which they claimed an interest was destroyed by fire. In their complaint they alleged that they were contract purchasers of a certain tract of land, including the buildings and structures thereon, located at 8305 West North Avenue, Melrose Park, Illinois. They also owned or were contract purchasers of certain personal property located on the premises. Defendant Steel City National Bank of Chicago (Steel City) was the trustee of the real property and held legal title thereto while Bernard Grizaffi held the sole beneficial interest in the property. The remaining defendants were various insurance companies which had issued insurance policies in name of Steel City and the plaintiffs. These various insurance policies covered the said premises, including the buildings, improvements, furnishings and personal property for losses resulting from "fire, lightning, or other calamitous events."

The complaint further alleged that on April 30, 1975, a fire "of unknown origin" destroyed the buildings and contents located on the premises. Plaintiffs claimed both a legal and an equitable interest in and to the proceeds from the aforementioned insurance policies. Although plaintiffs claimed to have performed the necessary conditions precedent to recovery under the policies, the insurance companies refused to acknowledge their interest in the proceeds. Furthermore, defendants Steel City and Bernard Grizaffi also claimed that plaintiffs had no interest in the proceeds. In their prayer for relief plaintiffs sought recovery under the policies from each of the defendant insurance companies.

Defendant insurance companies answered the complaint, denying any liability to the plaintiffs. In addition, defendants National Ben Franklin Insurance Company and Reserve Insurance Company in their answer also raised the affirmative defense of arson, alleging in pertinent part that:

"[T]his lawsuit is an attempt on the part of Plaintiffs to cheat and defraud these Defendants since * * * the Plaintiffs or their duly authorized agents, servants or employees, did set fire to or cause to be set fire to, burned or caused to be burned, the property described * * *."

Plaintiffs filed a reply denying the affirmative defense. Defendants Steel City and Grizaffi brought a counterclaim against the plaintiffs and the insurance companies. In their counterclaim they alleged that on August 16, 1974, Steel City had entered into articles of agreement for trustee's deed with the plaintiffs. Plaintiffs agreed to purchase the real estate described in the complaint for a total purchase price of $200,000 with $40,000 down payment and the balance payable in monthly installments of $1,720 plus interest at the rate of 10% per annum on the unpaid balance. They also agreed to pay the annual taxes on the real estate and the monthly insurance premiums. Steel City and Grizaffi alleged that commencing October 1, 1974, plaintiffs failed to make the monthly payments as agreed. As a result of this default in payments, Steel City and Grizaffi claimed that plaintiffs owed them a total of $203,099.45, including the unpaid balance of the purchase price, interest, real estate taxes, insurance premiums, attorney's fees and late charges. In their counterclaim they sought an order compelling defendant insurance companies to pay the insurance proceeds from the fire loss to Steel City and a declaratory judgment as to the rights of the parties in and to the real estate described in the complaint.

Plaintiffs answered the counterclaim, denying that they had failed to make all of the monthly contract payments to Steel City and that they had failed to pay the insurance premiums and real estate taxes. In their answer to the counterclaim plaintiffs also requested that the court dismiss the counterclaim.

Subsequently, on July 14, 1976, plaintiffs appeared for their discovery depositions pursuant to notice by the defendants. The deposition of Galante proceeded first. After being duly sworn under oath and stating his name, Galante invoked the Fifth Amendment privilege against self-incrimination to each of numerous questions propounded by the respective defendants. *fn1 To each such question Galante replied, "I decline to answer that question on the grounds that any answer I give may tend to incriminate me."

Plaintiff Messina, after being duly sworn under oath, was next deposed and also refused to give any answers other than his name. After he refused to give his address and state whether he had heard the questions asked of Galante, his attorney stipulated that Messina was present during the Galante deposition and would invoke the Fifth Amendment privilege against self-incrimination if asked the same or similar questions as were propounded to Galante.

Thereafter, on August 13, 1976, defendants presented motions to dismiss plaintiffs' complaint or for other sanctions pursuant to Illinois Supreme Court Rule 219 (Ill. Rev. Stat. 1975, ch. 110A, par. 219) as a result of plaintiffs' refusal to answer questions at their depositions. On March 10, 1977, the trial court, after reviewing the briefs submitted by the interested parties and hearing arguments of counsel, ordered in pertinent part that:

"[A]ll matters pending be and hereby are continued for further hearing to Tuesday, April 4, 1977, at 3:00 P.M., at which time plaintiffs or their counsel will indicate whether plaintiffs, separately or together, will respond to proper questions at a deposition * * *. IT IS FURTHER ORDERED, ADJUDGED AND DECREED that should and in the event plaintiffs, separately or together, indicate an intention not to answer questions propounded, then and in that event the Court will on April 4, 1977, strike and dismiss the cause of action of plaintiffs, Galante and Messina, and to enter default judgment against plaintiffs in their capacity as counterdefendants."

At the hearing on April 4, 1977, the trial court asked their counsel whether the plaintiffs were "prepared to answer proper questions at a deposition, proper being referred to as relevant and material to this case." Plaintiff's counsel replied that "my clients persist in their Fifth Amendment privilege" and that "in the absence of prosecutory immunity they are ...

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