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Estate of Reinhold v. Mansfield

OPINION FILED NOVEMBER 13, 1980.

ESTATE OF GORDON M. REINHOLD, DECEASED, PLAINTIFF-APPELLANT,

v.

HARRISON MANSFIELD ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Richland County; the Hon. ROBERT W. WHITMER, Judge, presiding.

MR. JUSTICE KARNS DELIVERED THE OPINION OF THE COURT:

The plaintiff, estate of Gordon M. Reinhold, deceased, brought a petition for citation in Richland County. The petition sought the return of the estate's assets held by the defendants, Harrison Mansfield, Clyde Cazalet and Barbara Cazalet. The First Trust and Savings Bank of Taylorville (First Trust or Bank) was also joined as a defendant because of its status as escrowee. The trial court denied the plaintiff's petition and found in favor of all the defendants.

Gordon Reinhold, prior to his death on April 8, 1977, sold to Mansfield and the Cazalets working interests in oil and gas wells. Subsequently, a dispute arose between Reinhold and the defendants as to allocation of drilling and operation costs. The parties reached an agreement whereby Reinhold executed repurchase agreements, one to Mansfield and the other to the Cazalets. Each agreement was secured by a promissory note for $11,000, executed by Reinhold on November 1, 1976, and due in 120 days.

The repurchase agreements provided that the defendants would assign their respective interests back to Reinhold, who would repurchase the interests from each of the defendants for $11,000. When the terms of the agreement were fulfilled each party was to be released from all claims arising out of the purchase or operation of the assignment of interests. The trial court found that this agreement was a settlement of a disputed claim between the parties.

The transaction between Reinhold and the defendants was to be carried out by means of an escrow. Escrow instructions were prepared and initialed by Reinhold and Mansfield, but the escrow instructions governing the transaction between Reinhold and the Cazalets were not initialed by either party. The record indicates that both sets of escrow instructions were prepared by Reinhold.

The substance of both sets of escrow instructions was the same. First Trust was to hold the assignment of interests until Reinhold had paid $11,000 to both Mansfield and the Cazalets. Once the $11,000 was paid, the assignment of interests was to be transferred by the escrowee to Reinhold. If $11,000 was not paid by Reinhold to the respective defendants within 120 days, the assignment of interests was to be returned to the defendants. The escrow instructions omit any requirement that the money be deposited with First Trust, or that if paid to First Trust when payments would be made to the defendants. The instructions limit First Trust's liability to the safekeeping of the documents entrusted to it.

No payment was made by Reinhold within 120 days of the agreement. Neither defendant demanded a return of the assignment of interests held by First Trust. Between March 7, 1977, and April 4, 1977, Reinhold paid $9,000 to First Trust on each purchase agreement, a total of $18,000. Reinhold died on April 8, 1977, without fulfilling his obligation under either purchase agreement.

Subsequently, a demand by the defendants was made on First Trust to release the money paid by Reinhold. On April 19, 1977, First Trust paid $9,000 to Mansfield and $9,000 to the Cazalets. First Trust retained the assignment of interests, indicating that it would transfer them to Reinhold's estate when the remaining $2,000 owing under each purchase agreement was paid.

Plaintiff contends that the trial court's judgment was against the manifest weight of the evidence. Specifically, plaintiff maintains that the trial court should have found that the escrow agent had no authority to release the $9,000 given to it to Mansfield and the Cazalets. Furthermore, it is contended that the defendants should each be required to return $9,000, $18,000 total, to Reinhold's estate.

In support of its position, plaintiff first alleges that the escrowee, First Trust, had no authority under the escrow instructions to distribute the funds given to it by Reinhold. Second, plaintiff maintains that the escrowee was an agent for Reinhold and that the agency terminated upon Reinhold's death while Reinhold was in default and that under these circumstances the escrowee bank was only authorized to return the money paid to Reinhold's estate and return the assignments to the respective defendants.

• 1 An escrowee must follow the directions of the parties who establish the escrow. (Chicago Title & Trust Co. v. Walsh (1975), 34 Ill. App.3d 458, 340 N.E.2d 106.) In this case, however, the escrow instructions did not specify that funds were to be paid to the escrowee. As a consequence, payment by Reinhold to the escrowee rather than to the defendants was not provided for in the escrow instructions.

Plaintiff asserts that a notation found with the bank's records of the escrow is dispositive as to any ambiguity in the escrow instructions. The notation provided,

"Instructions Mar. 4, 1977 $3,000.00 to be paid today $4,000.00 on each Friday thereafter Put into cashier's checks so that checks may clear. Make CC [cashier's checks] payable to this bank and hold till the notes are paid off."

• 2 It is not clear whether this notation was given to First Trust by the parties as a direction for administering the escrow, or whether it was provided by an employee of First Trust and was simply an internal record. We believe that the plaintiff, in seeking to prove that the bank had violated the terms of the escrow, had the burden to prove that the notation was a part of the escrow instructions. (Chicago Title & Trust Co. v. Cleary (1943), 319 Ill. App. 83, 48 N.E.2d 576, cert. denied (1949), 336 U.S. 904, 93 L.Ed. 1069, 69 S.Ct. 490.) No proof appears in the record that the notation was considered a binding instruction. On its face, the notation was entered over four months after the escrow was established. The plaintiff refers to the notation as an internal record. From these facts it is reasonable to infer that the notation was not an instruction given by the parties which the bank was bound to follow. The notation was merely ...


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