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Garvey v. Parrish





APPEAL from the Circuit Court of Cook County; the Hon. IRWIN COHEN, Judge, presiding.


This was a garnishment suit brought by plaintiff, Bernard Garvey, against garnishees Gateway National Bank and Harris Trust and Savings Bank, as trustee, to reach the assets of Lehman E. Parrish in order to enforce a judgment which had been entered against Parrish and two other parties for $39,612.48. After conducting hearings without a jury, the trial court entered judgment directing Gateway to pay plaintiff $4,633.81 from a certain account. The court also ordered Linda M. Storey to execute an assignment of the beneficial interest in a Harris land trust to the sheriff to be sold for plaintiff's benefit.

Gateway filed an amended garnishment answer indicating that it had $7,533.81 in an account entitled "Parrish Realty Escrow Account." Gateway claimed a $2,900 set off for a cashier's check issued on June 8, 1978, leaving a balance of $4,633.81. On September 6, 1978, the court conducted a hearing to determine ownership of the funds in the account.

Storey testified that on June 9, 1978, she purchased property at 10701 South Champlain Avenue in Chicago from Leonard J. Panfil. She paid $15,000, using her own funds. The closing was held at Harris, where the property was placed in trust. At the closing, Storey was represented by Mr. Bloom, Parrish's attorney in the present proceedings. In purchasing the property, she used the $2,900 cashier's check issued by Gateway, payable to her order and bearing her endorsement. Parrish, her real estate broker, purchased this check with $3,100 cash which she had given him on June 8, for which he issued a receipt. Storey received the $200 difference after the closing.

On cross-examination, Storey stated that she borrowed the $3,100; that Parrish arranged the financing; that she signed a promissory note for the loan; that she did not know the source or terms of the loan; and that she had not yet repaid the loan. She subsequently testified that the $3,100 loan was given to her in cash by Parrish. The remaining $11,900 of the purchase price came from a loan from William McGee, whom she met for the first time just before her testimony in the present matter. Parrish also arranged for that loan. Storey signed a note for this loan but had not made any payments on it and did not know the interest rate. She believed that the loan was to be paid from income derived from the property. Storey at first testified that she retained a $666.44 refund from Prorok Realty Co., but subsequently stated that she gave the refund to Parrish. After stating that she did not know what a land trust was, Storey claimed that she owned the building and collected the rent. Parrish did not receive a real estate commission from the transaction.

Subsequent to her purchase, Storey applied to Seaway National Bank for a $22,500 mortgage on the property. She was accompanied by Mr. Stark, sent by Parrish, who informed the bank that she was buying the property for $32,500. The only real estate sales contract signed by Storey recited this latter amount.

Parrish, a licensed real estate broker, testified that Storey was the owner and beneficiary of the Champlain property. Parrish executed the contract of purchase as her agent. Parrish testified that on June 8, 1978, Storey gave him $3,100 in cash, $3,000 of which was borrowed in cash from McGee in return for a short-term note. After learning that $2,900 would be required at the closing, Parrish purchased the cashier's check drawn on McGee's funds in the "escrow account." On the day after the closing, Parrish deposited Storey's cash into the escrow account to replace McGee's funds. The purchase was completed with $100 provided by Storey and additional funds loaned by McGee. The loan from McGee was to be repaid through a future sale or refinancing of the property.

Parrish stated that the funds in the escrow account belonged to his customers. In March 1978, he placed $10,000 from McGee in the account. He repaid McGee $4,900 and $5,100 of McGee's money remained in the account. McGee originally gave him $10,000 to purchase a condominium, but the transaction was not completed. Parrish did not have any records to show the total amount of money received from McGee or other customers. At times Parrish would designate who or what the money was used for on the face of the checks drawn on the account.

William McGee testified that he lent Storey $15,000 paid by checks made payable to Parrish. McGee received a promissory note for the loan which, although due, had not yet been repaid. He thought Parrish was going to secure the loan. McGee stated that he gave Parrish $10,000 for a real estate transaction which fell through. He had been repaid $4,900. McGee later testified that he gave Parrish the $10,000 to hold for the purpose of investment on McGee's behalf. McGee also stated he did not care how Parrish used the money, provided McGee would get his money back. Parrish did not have to account to McGee as to how the money in the account was used.

Following that proceeding, but prior to the court's decision, plaintiff, on September 18, 1978, filed a petition. It alleged that in purchasing the property in trust, Storey, the named beneficiary, used Parrish's funds and was acting solely as Parrish's nominee and agent. It also alleged that Parrish was the true owner of the beneficial interest. Plaintiff asked that the beneficial interest be transferred to him in partial satisfaction of the judgment, and that summons issue against Storey serving her with the petition. On October 13, 1978, plaintiff filed a petition alleging, in part, that Storey had been served with a citation. On November 27, 1978, the trial court declared that it viewed the funds involved in the garnishment contest as related to the subject real estate purchase. Storey and Parrish then furnished additional testimony regarding the real estate transaction.

Storey, called as a witness under section 60 of the Civil Practice Act (Ill. Rev. Stat. 1977, ch. 110, par. 60), testified that Bloom, her attorney at the closing, was recommended by Parrish. She met Bloom for the first time at the closing, and she did not pay him a fee for his representation. The land trust agreement indicating that she owned 100% of the beneficial interest was shown to Storey as she testified. Upon examining the document, Storey stated she did not know why Parrish was listed as the beneficiary in the event of her death or why he was given the power of direction. She suggested that Parrish may have been afraid that he would not realize his commission if she later sold the property. Also introduced was the promissory note, due on August 26, 1978, in which Storey agreed to pay $17,250 for the $15,000 loan. Storey first became aware in July 1978 of having signed the note while she was in the process of obtaining a remortgage. She did not know she was delinquent on the note, and no one had demanded repayment. Storey signed all the documents at the closing at the direction of Bloom and Parrish.

Parrish testified that he asked Bloom to prepare the trust agreement naming him successor beneficiary and giving him the power of direction in order to protect McGee. He subsequently testified that it was to protect "everybody." Parrish indicated that the $664 refund was not applied to the note, stating, "I didn't elect to do it and I was in control of it * * *." Parrish testified that there was no writing between McGee and himself other than a receipt for $10,000. Parrish stated that as a practical matter, he was a dual agent for Storey and McGee.

On January 10, 1979, having considered the evidence and arguments of counsel, the trial court rendered its decision. It reasoned that Parrish was the man "behind the scenes and the true owner and mover of everything that was involved in here." The court held that the funds at Gateway were not held pursuant to any escrow agreement, but were the sole property of Parrish. The court found that the funds were subject to garnishment and directed Gateway to pay plaintiff $4,633.81. The court concluded that Storey used Parrish's funds and acted as his nominee and agent in the real estate transaction; that Parrish was the true owner of the beneficial interest; and that Storey was designated beneficiary to defraud Parrish's creditors. Accordingly, the court directed Storey to execute an assignment of the beneficial interest to the sheriff to be sold for plaintiff's benefit. Upon Storey's failure to comply, the court executed the assignment of the beneficial interest. Parrish, Storey, and McGee appeal.

Appellants contend that the trial court erred in entering judgments affecting the property of Storey and McGee without requiring that they be made parties to the proceedings. They charge that Storey and McGee were necessary parties over whom the court did not acquire jurisdiction, and therefore ordering the sale of the beneficial ...

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