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In Re Estate of Wernick





Appeal from the Circuit Court of Cook County; the Hon. Henry A. Budzinski, Judge, presiding.


Petitioners-appellants and cross-appellees, Garson Wernick, executor of the estate of E. Davis Wernick, deceased, and Samuel S. Wernick, son of the decedent and beneficiary under his will (petitioners), brought proceedings in probate court in 1979 against respondent-appellee and cross-appellant, Mitchell Macks (Macks), to recover from Macks either the decedent's interest in two parcels of real property jointly held in a land trust with Macks or fair and adequate consideration for the decedent's interest in those properties. After protracted litigation, including a previous appeal to this court (In re Estate of Wernick (1983), 117 Ill. App.3d 855, 454 N.E.2d 20), the probate court found that in 1977, more than seven years prior to trial, Macks had breached a fiduciary duty which he owed to the decedent, necessitating the instant proceedings by petitioners to recover the decedent's interest in the subject properties, and that Macks had vexatiously delayed the litigation and petitioners' recovery of those interests. The court awarded petitioners one-half of the proceeds realized by Macks in 1978 through his sale of one of the properties plus statutory interest at the rate of 5%, and one-half of the beneficial interest in the other property still held in trust. The court failed to award petitioners any amount to compensate for the unjust enrichment and profit that had accrued to Macks over the lengthy period during which he had wrongfully exercised the sole and exclusive use of the properties and sale proceeds. The court also denied the petitioners' request for interest, litigation expenses and attorney fees, punitive damages, and sanctions under section 2-611 of the Code of Civil Procedure (Ill. Rev. Stat. 1985, ch. 110, par. 2-611). We affirm in part, reverse in part, and remand for further proceedings.

The nature of the issues now before this court requires close scrutiny of the drawn-out sequence of events leading up to this appeal. During his lifetime, E. Davis Wernick was a physician engaged in the general practice of medicine. At the time of trial, Macks was a licensed attorney primarily engaged in real estate investment and was chairman of the board of Jefferson State Bank. He did not maintain a law office, although he did handle the legal matters relating to his real estate transactions.

Macks and the doctor were cousins and close personal friends, who socialized with their wives and owned property as neighbors in Michiana Shores. Macks testified that he and the doctor were "like brothers."

Beginning in 1962, the parties invested equally in six properties. There was no written agreement as to the relationship, but the parties filed partnership returns for the properties. The doctor handled all day-to-day management of the properties, including the collection of rents, payment of expenses, keeping of records, and the maintenance of a separate checking account, while Macks handled all of the legal work relating to the real estate, including the preparation of contracts, closing statements, leases, and eviction notices and represented the parties in lawsuits relating to eviction and building violations. Macks also found suitable properties for purchase, screened all new tenants, and signed the doctor's name on various documents, including leases and contracts, when required.

In addition, Macks represented the doctor in the purchase of his primary residence, prepared wills for the doctor and his wife, and was the attorney for the doctor's wife's estate.

Late in 1976, the doctor was diagnosed as suffering from lung and brain cancer. Approximately six months prior to the doctor's death, Macks met with the doctor, the doctor's son, Garson, and his accountant to discuss the disposition of certain properties which Macks and the doctor held jointly. At that time it was agreed that the doctor's interests in certain properties would be purchased by Macks for the sum of $46,502.70. Another meeting was subsequently held, during which Macks alleged to have offered either to buy the doctor's one-half interest in a parcel of property commonly known as 60 East Cedar Street in Chicago (the Cedar property) or, alternatively, to sell his interest to the doctor. No agreement was reached at this meeting, however, and the doctor's son, Garson, testified before the trial court that in June 1977, his father told him that he would not sell the Cedar property because he knew it would increase significantly in value, and he intended to leave it to his sons.

There is no question but that both Macks and the doctor knew of the increased value of the Cedar property. The property was offered for sale in 1971-72 at prices ranging from $350,000 to $500,000 and was appraised at $325,000 in 1974 for the doctor's wife's estate. The doctor died on July 17, 1977. Two months later, the property was appraised at $405,000. Shortly thereafter, Macks put the property up for sale, and in July 1978, unbeknownst to the estate, Macks sold the property for $400,000.

Still proceeding under the assumption that the Cedar property and an additional property, commonly known as 1615 South Wabash Avenue (the Wabash property), were assets of the estate, counsel for the executor wrote a letter to Macks in April 1979, requesting an accounting for the income, expenses, and profits on the Cedar property. Macks responded in a letter dated May 3, 1979, advising the estate that he had purchased all of the doctor's right, title, and interest in the Cedar property many months prior to his death and that the estate therefore had no remaining interest. A citation proceeding was then filed on behalf of the estate which Macks answered in an official pleading in March 1980. In his answer, Macks again denied having possession of any property belonging to the estate.

The executor then filed a request for production, seeking all documents supporting Macks' claim to full ownership of the Cedar property. Macks filed his initial response to the request in May 1980, claiming for the first time that he had given the doctor a $90,000 promissory note in exchange for the doctor's interest in the Cedar property. Macks had no copy of said note in his possession, however, and has at no time during the pendency of these proceedings produced evidence of any such note. Attached to Macks' response was a copy of an assignment of beneficial interest dated November 1976 by which Macks alleged that the decedent had transferred all of his interest in the Cedar property to Macks and Macks' wife. Macks further stated in the response that the alleged transaction was witnessed by Patrice Lane, the doctor's office nurse. Less than two weeks later, Macks filed an amended response to the executor's request for production, attaching a different assignment by which the doctor purportedly transferred all of his interest in the Cedar property to Macks. The new assignment was dated July 7, 1977, only 10 days before the doctor's death. In his amended response, Macks abandoned his former contention that Patrice Lane had witnessed the transaction and instead claimed to have been alone with the decedent at the time of the assignment. Macks subsequently produced another copy of the purported assignment bearing a different signature.

On June 9, 1980, Macks testified before the trial court with regard to the discovery proceedings. Macks stated that he and the decedent had purchased the Cedar property for $180,000 some seven or eight years previously, each party contributing one-half of the purchase price. Macks further stated that the decedent had executed the assignment on July 7, 1977, at which time Macks knew that the decedent was ill and undergoing treatment for cancer. He also claimed to be unsure as to whether anyone else had witnessed the purported transaction. Macks admitted having paid no money in exchange for the transfer.

At the conclusion of the hearing, petitioners were given leave to file a citation to recover property in which they alleged that the subject real estate had been conveyed to Macks for less than adequate consideration only days before the doctor's death, that the doctor had not been represented by an attorney, and that the conveyance was not at arm's length and constituted a breach of fiduciary duty by Macks. Petitioners also alleged that Macks had never paid for the property and that title to the property was an asset of the estate. Macks denied each of these allegations in his answer to the citation.

Petitioners then filed an amended citation to recover, again alleging that a one-half interest in the land trust holding title to the Cedar property, or its monetary equivalent, was an asset of the estate which Macks had refused to transfer. Macks answered the amended citation in April 1982, denying a duty on his part to transfer any interest to the estate. In denying his failure to tender compensation for the interest, Macks alleged that he had given the doctor a $90,000 promissory note in exchange for the doctor's assignment of beneficial interest in a certain land trust which held title to the Wabash, as well as the Cedar, property. This representation was in direct conflict with Macks' subsequent deposition testimony wherein he represented that only the Cedar property was held in the subject land trust.

Petitioners then filed a motion for partial summary judgment which was the subject of a previous appeal to this court. Basically, without conceding the existence of any note, petitioners sought to recover $90,000 from Macks based solely upon Macks' admissions that the doctor's interest in the Cedar property had undisputed value of at least that amount. The trial court granted petitioners' motion and subsequently granted a motion by Macks converting the partial summary judgment to a total summary judgment which fully and finally adjudicated the rights and liabilities of the parties with respect to the subject property. On August 31, 1983, this court reversed the total summary judgment, affirmed the trial ...

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