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Badger Building Corp. v. Gregoric

OPINION FILED DECEMBER 14, 1981.

BADGER BUILDING CORPORATION, PLAINTIFF AND COUNTERDEFENDANT-APPELLANT,

v.

KARLO GREGORIC, DEFENDANT AND COUNTERPLAINTIFF-APPELLEE. — (JULIE PRAZNIK, INDIV. AND AS NEXT FRIEND OF MICHAEL DOBBS ET AL., INTERVENOR-APPELLEE.)



APPEAL from the Circuit Court of Cook County; the Hon. JOSEPH S. WOSIK, Judge, presiding.

JUSTICE MCGLOON DELIVERED THE OPINION OF THE COURT:

Badger Building Corporation filed a complaint for specific performance of a contract against Karlo Gregoric. Karlo Gregoric had been deeded the property which is the subject matter of this lawsuit pursuant to the terms of a sales contract, which contract provided that in the event Gregoric was unable to secure mortgage financing within 60 days, the property would be deeded back to the grantor, Badger Building Corporation.

Karlo Gregoric filed a counterclaim against Badger Building Corporation claiming monies were due and owing to him based upon certain N.S.F. checks and services rendered.

Julie Praznik filed an intervening complaint, on behalf of herself and as next friend of certain minor grandchildren of herself and her then deceased former husband, Anton Konchan. In her complaint, she claimed a constructive trust in the subject real property.

The trial court ruled against Badger Building Corporation on its complaint and in favor of Julie Praznik on her intervening complaint, and also in favor of Karlo Gregoric on the counterclaim and against Badger Building Corporation in the sum of approximately $14,000 plus interest.

On appeal, Badger Building Corporation and Karlo Gregoric argue that the trial court erred in declaring Julie Praznik constructive trustee of the real property for the benefit of her grandchildren. Badger Building Corporation additionally argues that the trial court erred in awarding Karlo Gregoric approximately $14,000 in money damages.

We affirm in part, reverse in part, and remand.

Anton Konchan (Anton) emigrated to the United States and established a successful manufacturing business known as Badger Manufacturing Company (Badger Manufacturing) and a smaller company known as Badger Building Corporation (Badger Building). During his lifetime, Anton acquired a number of assets, including a six-acre tract of property in Vilas County, Wisconsin, which he and his family used as a summer vacation home. Badger Manufacturing held title to the property. Four acres of the six-acre tract of land is the subject matter of this dispute (the four acres will be referred to as "the Wisconsin property").

Anton died in 1977. He was survived by his former wife Julie Konchan-Praznik (Julie), his son William Konchan (William), William's two children and the five children of his deceased daughter Antoinette Konchan-Dobbs (Antoinette).

Julie and Anton were divorced in 1950. For more than 25 years after the divorce, Julie regularly visited the family residence in Wisconsin and spent much of her time there with Anton, their children and grandchildren. After the divorce, Julie remained an officer, and for a time, a director of the Badger companies. When Antoinette died in 1969, Julie cared for her daughter's five children. She later adopted them.

Karlo Gregoric (Karlo) emigrated to this country in 1966 and lived with his aunt, who was Anton's housekeeper. In January 1967, Karlo began working as a punch-press operator at Badger Manufacturing. He worked at the company for two years without pay. Later, he was paid approximately $5,000 for his two years of full-time service. He was promoted to foreman in 1969 and then to a plant manager in 1972. In addition to working at Badger Manufacturing, Karlo worked at Badger Building and another company known as Badger Motel Corporation. He also worked evenings and weekends for 1 1/2 years without compensation helping William build his home.

William was the only son of Anton and Julie. In 1959, Anton transferred to William by way of gift all of the stock of Badger Building. In 1968, Anton transferred to William all of the stock of Badger Manufacturing and the Wisconsin property. According to Julie, the latter transfer was subject to certain conditions which were intended to protect Anton's own interests and those of his grandchildren and Antoinette. Julie testified that among other things, William and Anton agreed that the Wisconsin property would never be used for business purposes or as security for any company indebtedness.

The Badger ventures under William's control began to experience economic troubles in early 1974. William used the Wisconsin property as collateral for a loan to the Badger companies. Title was transferred from Badger Manufacturing to Union Realty Company. Eventually, Union Realty reconveyed title to Badger Manufacturing. In February 1975, title to the Wisconsin property was transferred from Badger Manufacturing, which was experiencing substantial financial difficulty, to Badger Building. The purpose of this transfer was to extinguish a debt owed to Badger Building by Badger Manufacturing in the amount of $180,000.

The financial difficulties of Badger Building increased. William asked Karlo to accept title to the Wisconsin property to protect it from creditors of Badger Building. Karlo agreed. In order to make the conveyance appear to be a bona fide transaction, William had a contract drawn up. The contract indicated that Karlo had paid $30,000 in earnest money. Karlo wrote a $30,000 check, but the check was never negotiated. William was aware that Karlo did not have funds sufficient to back up the check. Despite the lack of initial consideration for the contract, the contract and deed of sale were executed. A rider to the purported contract called for a reconveyance to Badger Building in the event that Karlo was unable to obtain mortgage financing within 60 days. On April 11, 1975, the deed was signed ...


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