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Heller v. Jonathan Investments





Appeal from the Appellate Court for the First District; heard in that court on appeal from the Circuit Court of Cook County, the Hon. Richard L. Curry, Judge, presiding.


Plaintiff, Theodore Heller, filed this action against Jonathan Investments, Inc. (Jonathan), Reynolds Realty, and Gerri-Sue Livers (defendants) seeking a rescission of two deeds transferring property from plaintiff to Jonathan; a declaration that the property had been operated as a constructive trust in favor of plaintiff; and an accounting to plaintiff as to income generated by the property whilst operated by defendants. Jonathan's accountant and several banks were also named as defendants in the complaint in counts which asked for temporary relief preventing the transfer of certain of defendants' assets. These latter counts, however, are not at issue in this appeal.

The suit proceeded to a trial in the circuit court of Cook County. Since plaintiff's claims involved equitable relief, the cause was heard before the court alone. At the close of plaintiff's case in chief defendants moved for judgment, which the court granted. Plaintiff appealed, and a majority of the appellate court reversed, holding that (1) the trial court had applied an improper standard of proof in deciding defendants' motion for judgment, (2) plaintiff's evidence was sufficient to withstand the motion, and (3) the trial court had improperly excluded certain evidence. (135 Ill. App.3d 350, 356-59.) This court granted defendant's petition for leave to appeal.

Defendants raise two issues for review: (1) Did the appellate court improperly decide an issue which was not raised by the parties on appeal? and (2) Did the trial court properly grant defendants' motion for judgment? Plaintiff, on the other hand, urges us to find the allegedly erroneous exclusion of evidence to be independent grounds for granting a new trial.

The two properties in question were originally owned by plaintiff's father, who died in 1973. Upon his death the property was placed in the Adeline Heller Trust, a trust for the benefit of plaintiff's mentally incompetent mother. Plaintiff was named trustee and operated the properties on behalf of the trust. He succeeded to the ownership of the properties upon his mother's death in December of 1977.

Although plaintiff had had no prior experience with real estate management, he began managing the two properties upon his father's death. His duties included collecting rents, negotiating leases, arranging for maintenance, and paying expenses. In 1975 he began having problems with city building inspectors who cited one of his buildings for numerous building-code violations. He increasingly turned for advice to a personal acquaintance, John Reynolds, who at the time was in the business of selling real estate. According to plaintiff he began entrusting decisions to Reynolds and changed his attorney and accountant on Reynolds' advice.

In October 1976 plaintiff was struck by a taxicab and suffered a serious leg injury. He eventually had surgery on his leg in December of 1977, and for a substantial period was unable to work at his normal job with the city of Chicago. During this period, plaintiff testified, he had a number of other personal problems. His son was having trouble at school, his mother's "hollering" would keep him awake at night, and his financial situation was critical due to alimony payments and skyrocketing expenses on the property he managed. Plaintiff testified that he was "virtually disoriented" from 1977 onward.

Beginning in November of 1977 plaintiff testified that he entrusted the "management" of the property to Reynolds. While he claimed that he did not negotiate leases or consult attorneys regarding the property, he stated that he continued to be involved in the "operation" of the property, which included collecting rents, "watching over" the property, and making minor repairs and emergency purchases.

Plaintiff also testified that in December of 1978 he signed deeds transferring each of the two properties to Jonathan. Reynolds was both president of Jonathan and the sole shareholder. Plaintiff stated that he signed the deeds at the county recorder's office just before they were recorded. He claimed that he did not voluntarily sign the deeds but instead did so because he was in fear of his life. Since Reynolds died before the suit was filed, the Dead Man's Act (Ill. Rev. Stat. 1983, ch. 110, par. 8-201) prevented plaintiff from testifying directly as to Reynolds' statements and actions which led to plaintiff's fear.

Plaintiff also claimed that there was no consideration for the transfer. He testified that Jonathan had paid for thousands of dollars due on his credit card bills; however, he claimed these payments were for Reynolds' personal expenses which plaintiff had charged to his credit cards. He also testified that he received a $25,000 check from Jonathan in December 1979, but claimed that he kept only half of the proceeds of the check and delivered $12,500 in cash to Reynolds. He explained that the $12,500 he received himself was because he was in a desperate financial condition at the time, but inexplicably claimed that the money was neither a loan nor a payment. He also admitted he had received numerous smaller checks from Jonathan, but claimed that none of these checks represented consideration for the property deeded to Jonathan.

Plaintiff also claimed that neither he nor the Adeline Heller Trust had ever borrowed money from John Reynolds, Jonathan Investments, or Reynolds Realty. On cross-examination, however, he admitted that on December 8, 1978, two days after deeding the properties in question to Jonathan, he signed a check, as trustee, paying $7,824.26 to Reynolds. The check bore the notation "ACCRUED INTEREST TO DATE ON LOANS." The check stub for the check bore the notation "MERGED INTEREST ON MERGED NOTES, 1972 THRU 1975-1976-1977 THRU & INCLUD. 12/8/78 TOTAL $60,000 ACCRUED." Moreover, he admitted that the trust's 1978 ledger listed the $7,824.26 payment as "INTEREST ON LOANS FROM J. REYNOLDS." He also admitted that there were no payments to Reynolds listed as loan repayment subsequent to the transfer of the two properties.

Plaintiff also presented the testimony of defendant Gerri-Sue Livers, called as an adverse witness. Livers was Reynolds' daughter and had inherited all of the stock of Jonathan Investments. She had previously been listed as corporate secretary for Jonathan, although she testified that she had no actual involvement in Jonathan prior to her father's death. She testified that she had examined Jonathan's books and could find no record of Jonathan extending loans to anyone. She testified that to her knowledge Reynolds had not personally loaned anyone more than $1,000.

Adam Bourgeois, attorney for a tenant in one of the properties in question, testified that he approached plaintiff in May 1978 in order to negotiate a new lease. Plaintiff told him to discuss the matter with ...

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