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02/19/87 Alfred J. Mateyka, v. Herman O. Schroeder

February 19, 1987





504 N.E.2d 1289, 152 Ill. App. 3d 854, 105 Ill. Dec. 771 1987.IL.179

Appeal from the Circuit Court of Madison County; the Hon. Clayton R. Williams, Jr., Judge, presiding.


JUSTICE KASSERMAN delivered the opinion of the court. JONES and WELCH, JJ., concur.


Plaintiff, Alfred J. Mateyka, brought this action for the collection of a debt arising out of a real estate transaction. At trial, plaintiff contended that he was entitled to recover from the defendants either on the theory of contract or on the theory of estoppel. After a bench trial, the trial court found that plaintiff could recover either on the theory of contract or estoppel and entered judgment against the defendants jointly and severally in the amount of $18,302.41 principal and $2,506.66 interest. Defendants Walter Greathouse, Mildred I. Greathouse, Otis G. Gosnell, Sandra F. Gosnell, and Kathryn M. Pomeroy have perfected this appeal. Defendant Herman Schroeder is not a party to the appeal.

Defendants' contention on appeal addresses both of plaintiff's theories. With respect to plaintiff's theory of contract, defendants' argument is twofold: first, that the court erred in finding them liable on a contract which they contend contains no promise to pay; and second, that the court erred in finding that an agency existed authorizing defendant Herman Schroeder to bind the defendants personally to pay $34,000 jointly and severally. With respect to plaintiff's theory of estoppel, defendants contend that the plaintiff did not meet his burden of proof in establishing the requisite elements of estoppel. For the reasons stated below, we affirm with respect to all defendants except Kathryn M. Pomeroy.

The transaction at issue in this case involved the sale of approximately 200 acres of farmland in Calhoun County, together with farm equipment located on the real estate. The eight buyers were four men involved in a real estate business known as Granite City Realty and their wives. The transaction took place in July of 1977 after some months of negotiation between defendant Herman Schroeder and the plaintiff. Plaintiff alleges that it was agreed that Herman Schroeder and the other defendants would purchase the 200-acre tract of land plus the equipment located thereon for the sum of $115,000. Prior to the closing, the plaintiff knew that Herman Schroeder was representing other people in the transaction who were "going in on it with him"; however, he did not know who they were until they signed a lease agreement with him and he signed the warranty deed to the property.

Defendant Herman Schroeder was a real estate broker doing business as Granite City Realty. He failed to appear at the trial and was defaulted and is not a party to this appeal. Defendant Walter Greathouse is a licensed real estate salesman who worked for Herman Schroeder selling real estate from 1975 to 1979. Defendant Otis Gosnell also worked at Granite City Realty as a salesman. Until his death in 1978, Ivon Pomeroy, husband of defendant Kathryn M. Pomeroy, was the office manager of Granite City Realty. Prior to closing the real estate transaction which is the basis of this suit, plaintiff never talked with the Gosnells, Pomeroys, or Greathouses but, rather, dealt solely with Herman Schroeder.

At the time of the closing, the plaintiff received $80,102.50, which represented the difference between the sale price of $115,000 and a second mortgage in the amount of $34,000 and closing costs of $897.50. The purchasers of the property made the down payment by borrowing $83,500 from Madison County Federal Savings and Loan Association. At the time of the closing, plaintiff received a Granite City Realty check for $80,102.50 and was given a lease from the defendants which allowed plaintiff to stay in a trailer on the farm for a period of five years in exchange for mowing and maintaining the property.

The relevant documents at the closing include a warranty deed from plaintiff to the defendants and Norma J. Schroeder and Ivon J. Pomeroy, dated July 5, 1977; a lease agreement from the grantees in the warranty deed back to plaintiff, dated July 1, 1977; and a mortgage on the property from the grantees in the warranty deed to Madison County Federal Savings and Loan Association, securing a loan of $83,500, dated July 5, 1977. The other relevant document, which is the crux of this appeal, is a second mortgage to the plaintiff purportedly signed by the eight buyers and dated July 8, 1977. There was no promissory note with this second mortgage. At trial defendant Kathryn M. Pomeroy denied signing the second mortgage and the lease, and this testimony was uncontradicted. She further testified that the lease and second mortgage did bear her deceased husband's signature but that the only document that she signed was the mortgage to Madison County Federal.

The second mortgage contained a provision that the sum of $34,000, with interest at the rate of 7% per annum, was to be payable each year in the amount of $4,000, to become fully due and payable January 1, 1982. The term of the mortgage was five years. Payments were made to the plaintiff roughly in accordance with this schedule set forth in the second mortgage, although in a slipshod and dilatory manner. Plaintiff received payments for principal and interest totaling $23,028 in four installments on January 4, 1979, August 30, 1979, July 10, 1980, and February 23, 1981. The payments plaintiffs received were made by Herman Schroeder by checks drawn on Granite City Realty. Schroeder was the only person with whom the plaintiff dealt up until the time of the default in payments around January 1, 1982. However, payments were deducted from monthly commissions received by Greathouse and Gosnell from Schroeder's real estate company. As of December 23, 1982, there was due and owing under the second mortgage the sum of $18,302.41.

After the default, plaintiff approached defendant Greathouse on various occasions and had at least two meetings with him, one of which included Herman Schroeder. Defendant Greathouse attempted to put together an arrangement whereby a third party would take over the land and the payments associated with it. Nothing came of these efforts, and Madison County Federal Savings and Loan Association foreclosed on the property. There was not sufficient equity in the land to pay Madison County Federal Savings and Loan Association and then plaintiff on his second mortgage. Apparently the lack of sufficient equity to cover both loans is explained by the fact that the purchase price alleged to have been agreed upon between the parties included $20,000 worth of farming equipment. Herman Schroeder later went through bankruptcy proceedings and was discharged in bankruptcy. Although Schroeder was served with process in the instant case, he failed to appear and was defaulted.

After considering the evidence, the trial court found that the plaintiff agreed to sell and defendants agreed to purchase the real estate in question, along with certain personal property, for $115,000; that the real estate was conveyed to defendants by warranty deed; that the real estate was partially paid for by defendants obtaining a loan for $83,500 from Madison County Federal Savings and Loan in which the land was mortgaged as security; that $80,102.50 was paid out of this $83,500 to the plaintiff; that defendants gave plaintiff a second mortgage on the land for $34,000 to secure payment of the balance due on the transaction from the purchasers for the land and personal property; that all of the defendants either signed all of the pertinent documents involved or authorized their spouses to sign them; and that defendants, through their agent, Herman Schroeder, promised to pay for the land and personal property. The trial court found ...

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