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Beaver v. Union Nat'l Bk. & Trust Co.





APPEAL from the Circuit Court of Will County; the Hon. THOMAS W. VINSON, Judge, presiding.


This is an appeal from an order of the circuit court of Will County which dismissed an amended count V of the second amended complaint of the plaintiff, Mary Beaver. The dismissed count alleged certain acts and omissions taken by the defendant Union National Bank and Trust Company of Joliet in its administration of a trust and further alleged that such conduct constituted negligence and that the plaintiff sought damages in the amount of $3,000,000.

A recitation of the events which culminated in this appeal are as follows. On February 27, 1976, land trust No. 2198 was created with the defendant Union Bank as trustee and Anton Grate being the 100 percent owner of the beneficial interest of the trust. Anton Grate was further named as the sole party having the power of direction over the trust.

On June 14, 1977, the plaintiff conveyed to the Union Bank in its capacity as trustee of trust No. 2198 a 70-acre parcel of real estate. On July 6, 1977, Anton Grate assigned all of his interest in trust No. 2198 (being 100 percent of the interest in the trust) to the B.G.H. Partnership. This assignment was filed with and accepted by the bank on July 7, 1977.

The instrument creating the "B.G.H. Partnership" discloses that on June 22, 1977, the plaintiff, defendant Anton Grate, and another defendant, Robert Hoster, formed the partnership, each having a one-third interest in the same, for the purpose of engaging in the ownership, operating, leasing and improvement of the 70 acres of land which the plaintiff conveyed to trust No. 2198. The agreement further provides that the said 70 acres be kept in the trust but provides that Anton Grate would be the managing partner with power, inter alia, to direct on behalf of the "B.G.H. Partnership" conveyances of the partnership property.

On August 12, 1977, at the direction of the B.G.H. Partnership, the Union Bank as trustee was directed to convey the 70-acre tract of land to Nancy O'Connell, another defendant in this case. The document directing this transfer was entitled "Direction to Convey" and was signed by Anton Grate on behalf of the partnership, acting in his capacity as managing partner.

Pursuant to this direction the land was conveyed by Union Bank, acting as trustee, to Nancy O'Connell on August 12, 1977.

As noted in the caption of this appeal, the plaintiff filed an action against several defendants in which she makes a voluminous number of allegations of misconduct allegedly practiced upon her by the defendants Hoster and Grate; however, in this appeal we are only concerned with the question as to whether amended count V of the plaintiff's second amended complaint stated a cause of action against the defendant Union Bank.

In examining amended count V of plaintiff's complaint and the brief filed by her with this court, we note that the alleged misconduct of the bank is described as both negligence and fraud.

Amended count V is quite lengthy, and no useful purpose would be served by setting it forth in its entirety. The count contains allegations pertaining to plaintiff's one-time ownership of the 70-acre tract of real estate and a multitude of allegations of fraud practiced upon her by Robert Hoster and Anton Grate. An examination of amended count V discloses that there are no allegations of fact which would in any way connect the bank or its personnel with any of the alleged fraudulent acts. There are no allegations in the count of any contractual relationship between the plaintiff and the bank or that the plaintiff ever had any dealings with the bank.

Although amended count V is couched in terms of negligence, the many allegations of fraud directed at Grate and Hoster compel a determination as to whether they are sufficient to ensnare the defendant bank. They are not, for there is an abundance of authority to support the proposition that to be held liable in an action for fraud a defendant must have participated in the fraud or at least have had some knowledge of it. Corpus Juris Secundum in its treatise on Fraud contains the following statements:

"The mere fact that defendant owned or had an interest in property which was transferred through fraud will not impose liability in the absence of participation or ratification, and this is especially true where defendant's interest was of a nominal character * * *." 37 C.J.S. Fraud § 61, at 347 (1943).

In the instant case the defendant Union Bank's interest in the 70-acre tract of real estate was nominal in that it received title as trustee of a land trust. There are no allegations in amended count V of plaintiff's complaint that the bank as trustee in any way participated in the alleged machinations of Grate or any of the other defendants. The same is true as to allegations that the bank had any knowledge of the alleged fraud, and without knowledge there can be no ratification.

A case quite similar to the instant case is Bahen v. Furley (1919), 44 Cal.App. 134, 186 P. 185. In the case of Bahen the plaintiff brought an action in damages in deceit against certain defendants including one Brown. The evidence disclosed that Brown had authorized two defendants to use his name in their negotiations to purchase property from the plaintiff and that he further allowed the defendants to prepare the deed from the plaintiff to himself. The court found that certain defendants had committed fraud on the plaintiff but reversed a judgment against Brown since there was no evidence that he had participated in or had any knowledge that the plaintiff had been deceived. The court addressed itself to the question as to ...

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