Appeal from the Circuit Court of Cook County; the Hon. Richard
L. Curry, Judge, presiding.
PRESIDING JUSTICE MEJDA DELIVERED THE OPINION OF THE COURT:
Defendants, Daniel P. Sternberg and James F. Schmidt, *fn1 appeal from an order awarding plaintiffs judgments for compensatory and punitive damages upon a finding that defendants' wilful substitution of a note and trust deed with different dates of payment and an altered subordination clause caused loss of plaintiffs' senior security interest in the subject property. Defendants contend that: (1) plaintiffs failed to prove fraud by failure to prove the essential element of actual damages; and (2) because of the lack of proof of actual damages, the court erred in awarding punitive damages. We affirm.
The pertinent facts are as follows. Plaintiffs, Eunice S. Hutchings and Robert A. Hutchings, were the owners of a two-acre parcel of real estate, title to which was registered in the office of the registrar of titles of Cook County. On September 30, 1978, plaintiffs entered into a contract for the sale of the property to defendant Schmidt for the sum of $225,000. The contract provided for a cash payment upon closing of $65,000, and the balance of $160,000 "as set forth in the note of the purchaser (grantee) * * * secured by a part-purchase mortgage (trust deed), the latter instrument and the note to be in the form hereto attached." Attached were the note and trust deed completed except for the signatures of the La Salle National Bank, as trustee under Trust No. 100077 (the maker and grantor, respectively), and the identification by Chicago Title & Trust Company, as trustee under the trust deed. The note attached provided for the payment of the balance of $160,000 in installments of $53,333 plus interest of 8% per annum on May 1, 1980, and May 1, 1981, and the balance on January 10, 1982. The attached trust deed contained a typewritten paragraph 11 which provided:
"11. The holder of the Installment Note of even date herewith which is secured by this Trust Deed agrees by the receipt of such Installment Note that such Trust Deed shall be junior and subordinate to subsequent notes and mortgages or trust deeds securing such notes which evidence either `construction' or `permanent' loans on the real estate. The holder further agrees to execute and deliver such further documentation as the holder of subsequent notes may require to evidence the subordination required hereunder."
Defendant Sternberg, an attorney and a partner with defendant Schmidt in a proposed development of the property, prepared the documents attached to the contract. The closing of the contract was scheduled for May 2, 1979, at 2:30 p.m. at the La Salle National Bank. Because of an inability to reschedule the time, plaintiffs' attorney, Ronald Hankin, arranged for a preclosing with Sternberg in the latter's office attended only by the two attorneys. Sternberg indicated that the note and mortgage had not yet been identified by Chicago Title & Trust Company and that he would undertake to have the document identified and register the trust deed with the registrar of titles. Plaintiffs' attorney tendered the necessary documents for transfer of title to La Salle National Bank on behalf of plaintiffs as sellers. Sternberg acknowledged receipt on a closing statement and agreed to deliver the sellers "following filing" a check for $58,430.92 and $268; the original note to Hutchings in amount of $160,000; trust deed with copy of filing receipt; and a signed closing statement. Neither plaintiffs nor their attorney attended the further closing, execution of documents, filing of documents in the registrar's office, or completion of the transaction had later on May 2, 1979.
Defendants Sternberg and Schmidt prepared a note and trust deed and caused it to be executed by La Salle National Bank and to be identified by Chicago Title & Trust Company, which note and trust deed were substituted for and differed from those attached and made a part of plaintiffs' contract. The dates of the payments due May 1, 1980, and May 1, 1981, were changed to October 1, 1980, and October 1, 1981, and the typewritten paragraph 11 in the trust deed as hereinbefore set forth was changed by adding the following:
"* * * and acknowledges that the lien created hereby is specifically subordinated to the lien by the trust deed dated April 26, 1979, securing a note of even date in the principal amount of $225,000, such trust deed being filed with the Cook County registrar of titles as Document No. ________."
Thereafter, on May 2, 1979, Sternberg caused to be registered with the registrar of titles the deed of conveyance from plaintiffs to effect title in La Salle National Bank, as trustee under Trust No. 100077, under which trust defendants are the beneficial owners. Defendant Sternberg then also registered as Document No. 3089317 a mortgage trust deed dated April 20, 1979, from La Salle to Glenview State Bank, conveying plaintiffs' parcel and an adjoining parcel to secure a mortgage loan of $225,000. The loan was granted for the purpose of providing the initial cash payment of $65,000 for acquiring plaintiffs' parcel and except for $10,000 applied for working capital, the balance was for the purchase of the adjoining parcel. Defendant Sternberg, concurrently with the foregoing filing, further registered the mortgage trust deed from La Salle to Chicago Title & Trust Company as Document No. 3089318, in which the payment dates had been altered and language added expressly subordinating plaintiffs' security interest to that of the Glenview State Bank mortgage trust deed.
Plaintiffs commenced this action by filing a petition requesting: (1) that an order be entered directing the register of titles to correct the payment dates in plaintiffs' trust deed which had been registered or to strike the trust deed and permit the filing of a proper trust deed; (2) that an order be entered that the mortgage to Glenview is subordinate to the trust deed which secures plaintiffs' interest; and (3) damages and attorney fees. Plaintiffs thereafter filed a second amended complaint alleging, inter alia, that the fraudulent acts of defendants had defeated the rights of plaintiffs in their security interest and praying for injunctive and other relief.
After a bench trial at which evidence was presented, the court found that the note and trust deed which subordinated plaintiffs' security interest to that of Glenview had been substituted for the note and trust deed as provided in the contract and as originally submitted by attorney Hankin, which was to provide plaintiffs with a superior security interest; further, that as a result defendants obtained a mortgage loan of $225,000 from Glenview by mortgaging plaintiffs' land and placing their trust deed in a junior security position. The court on June 21, 1982, entered an order: (1) granting judgment for plaintiffs against defendants for $160,000 with interest from the closing date of May 2, 1979, until paid, for obtaining the property of the plaintiffs by actual fraud; (2) ordered that the subject property be held in constructive trust for plaintiffs until the $160,000 is paid; and (3) granting judgment for plaintiffs and against defendants for punitive and exemplary damages of $50,000 for the actual fraud committed by them. *fn2
Plaintiffs initially filed an appeal from the prior judgment entered June 8, 1982, which dismissed Glenview State Bank, finding in its favor and granting priority to its mortgage. Defendants subsequently filed a notice of appeal from the judgments entered June 21, 1982, against them in favor of plaintiffs for compensatory damages of $160,000 and for punitive and exemplary damages of $50,000. All of the parties thereafter entered into an agreement whereby plaintiffs satisfied the judgment for $160,000 and interest and released their trust deed and the constructive trust on the subject property, and defendants agreed to dismiss their appeal from the order of June 21, 1982, excepting the judgment for punitive and exemplary damages. On October 22, 1982, pursuant to motion, this court dismissed the entire appeal. Thereafter, on defendants' motion, the dismissal was partially vacated to reinstate defendants' appeal limited, in accordance with the agreement, to the judgment in favor of plaintiffs for punitive and exemplary damages of $50,000.
Defendants' appeal is limited to the judgment entered against them for punitive and exemplary damages. They contend that plaintiffs failed to prove actual damages to sustain an action for fraud and that therefore the trial court erred in awarding punitive and exemplary damages.
"Punitive damages" and "exemplary damages" (as well as "vindictive damages") are synonymous. (Madison v. Wigal (1958), 18 Ill. App.2d 564, 153 N.E.2d 90.) In general, punitive damages may not be awarded in the absence of compensatory damages. (Lowe v. Norfolk & Western Ry. Co. (1981), 96 Ill. App.3d 637, 421 N.E.2d 971.) Punitive or exemplary damages are in addition to compensatory damages and cannot be allowed unless actual damage is shown. Florsheim v. Travelers Indemnity Co. (1979), 75 Ill. App.3d 298, 393 N.E.2d 1223; Tonchen v. All-Steel Equipment, Inc. (1973), 13 Ill. App.3d 454, 300 N.E.2d 616.
The trial court order, inter alia, entered a judgment in favor of plaintiffs and against defendants for compensatory damages of $160,000 with interest computed from May 2, 1979, until paid, "for obtaining the property of the plaintiffs by actual fraud." Nonetheless, defendants ...