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07/17/87 Jutta Stone, v. Daniel F. Mccarthy

July 17, 1987





511 N.E.2d 780, 158 Ill. App. 3d 569, 110 Ill. Dec. 603 1987.IL.1008

Appeal from the Circuit Court of Cook County; the Hon. Albert Green, Judge, presiding.


PRESIDING JUSTICE SULLIVAN delivered the opinion of the court. PINCHAM and MURRAY, JJ., concur.


This appeal is from the dismissal of a complaint for a declaratory and injunctive relief, an accounting, the imposition of a constructive trust and damages.

Plaintiff, Jutta Stone, filed a three-count amended verified complaint alleging, essentially, that defendant, Daniel McCarthy, committed a breach of a fiduciary duty arising out of an oral agreement reached by them concerning the purchase of a certain parcel of land. Specifically, Stone alleged that in March 1986 she discussed with McCarthy -- a builder who had constructed a home for her in 1978 -- the estimated cost of a new home she planned to have built and thereafter began looking for a suitable lot located within a particular school district in Evanston, Illinois. Upon finding a lot she liked, she had architectural plans drawn and submitted them to McCarthy to use in calculating the ultimate cost, which he estimated would be $105,000 excluding the land, but the owners subsequently refused to sell the lot to her. On May 19, 1986, McCarthy telephoned her suggesting she look at a lot advertised for sale on the corner of Princeton Avenue and Old Orchard Road (the corner lot), but when she saw it, she did not like its location. As she continued driving, however, she noticed an unimproved, landscaped lot further down Princeton Avenue (the Princeton lot). Seeing no "for sale" sign, she went to the house next door, where she spoke to Mae Doetsch and her daughter, Phyllis Coulam, who informed her that both the corner and Princeton lots were held in the same trust of which Doetsch was beneficiary and Coulam and her sister, Patricia Elias, were trustees. Doetsch and Coulam informed her that they had received no prior inquiries regarding the Princeton lot and agreed to sell it to her. She offered to write a check as earnest money, but they told her it was unnecessary to do so at that time. She then contacted McCarthy and told him what had occurred. In the course of their conversation he suggested that he contract to purchase both lots, buying the corner lot for himself and acting as her agent and builder in acquiring the Princeton lot for her and constructing her home on it. She advised him that the lots had been appraised at approximately $42,000 and $52,000, respectively, and they agreed to equally divide any savings they might realize by purchasing both pieces of property in one transaction. However, she further instructed him not to bargain too much with the sellers as she was willing to pay the full price for the Princeton lot. Later that day, she took McCarthy to see the Princeton lot and to meet Coulam. While there, they informed Coulam of their decision that McCarthy would purchase both parcels and thereafter build a home for her on the Princeton lot. On May 22, she discussed with her architect some possible modifications in the house plans since the Princeton lot was larger than the one for which they had originally been drawn. He advised her to retrieve the plans from McCarthy so that the appropriate changes could be made. The first time she spoke with McCarthy that same day, concerning an unrelated matter, he said nothing to indicate that he did not intend to go through with their agreement, but later that afternoon, he informed her that he would not allow her to have the Princeton lot. When they met, he explained that his wife had wanted him to build a house for them for a long time and, because he liked the Princeton lot more than the corner lot, he was keeping it for himself. As of that afternoon, Doetsch and Coulam still believed that McCarthy had contracted to buy the Princeton lot for her.

In response thereto, McCarthy filed a motion to dismiss the complaint under section 2-619(a)(9) of the Code of Civil Procedure (Code) (Ill. Rev. Stat. 1985, ch. 110, par. 2-619(a)(9)), on the ground that Stone's claim was barred by affirmative matter, the lack of a written agreement and by the Statute of Frauds (Ill. Rev. Stat. 1985, ch. 59, par. 1 et seq.). The motion was supported by McCarthy's affidavit wherein he denied having agreed to build a house for Stone or having undertaken to act as or to represent himself to be her agent in the purchase of the property at issue.

At a hearing on August 18, 1986, the trial court granted McCarthy's motion to dismiss the complaint, finding that Stone had failed to allege facts sufficient to establish an agency relationship which would give rise to fiduciary obligations on the part of McCarthy, and that even assuming a fiduciary relationship did exist, agreements for the purchase of land must be in writing.


Relying primarily on Ray v. Winter (1977), 67 Ill. 2d 296, 367 N.E.2d 678, Black v. Gray (1949), 403 Ill. 503, 87 N.E.2d 635 (appeal from the dismissal of the action), and Black v. Gray (1952), 411 Ill. 503, 104 N.E.2d 212 (appeal from the judgment for defendant following remandment of the action), Stone contends that her complaint adequately states a cause of action for breach of a fiduciary relationship for purposes of imposing a constructive trust upon the Princeton lot.

In Ray v. Winter, the plaintiff, Ray, became interested in a 60-acre tract of farmland to expand his farming operations. He contacted the owner and agreed, in July 1972, to purchase the entire tract for $8,000, but because he lacked adequate finances at that time he and the owner further agreed that the sale would take place in the fall after he sold some cattle. Shortly thereafter, Ray learned that defendant Winter, who was married to a friend of his wife's, was also interested in acquiring some farmland in that area. Ray informed Winter of the availability of the farmland and took him to view the property, which was divided by a road into two parcels of 40 and 20 acres, respectively. Ray agreed to sell the 20-acre parcel to Winter for the same price per acre that he had agreed to pay the owner, explaining, however, that no purchase could be made until the fall. They then drove to the owner's house and informed him of the arrangements they had made. In mid-August Ray learned, and advised Winter by letter, that another party was interested in the property, whereupon Winter telephoned Ray and expressed concern over the possibility of losing the land. During their conversation, it was agreed that Winter would purchase the entire 60-acre tract immediately. Ray testified that Winter agreed to purchase the 40 acres for his (Ray's) benefit and to convey the property to him following the sale of his cattle and that on the basis thereof, he contacted the owner, informed him of the arrangement and gave him permission to sell the land to Winter; but that when he subsequently requested conveyance of the land, Winter refused, having decided to keep all 60 acres for himself. Winter denied the existence of the agreement to which Ray testified. Following a trial before an advisory jury, the trial court entered judgment imposing a constructive trust in Ray's favor and ordered Winter to convey the 40 acres upon Ray's payment of the purchase price. The appellate court reversed, finding the evidence insufficient to demonstrate either actual fraud or breach of a fiduciary duty. The supreme court reversed the appellate court and reinstated the judgment for Ray, holding that while the evidence did not support a finding of actual fraud, it did establish the existence of a fiduciary relationship and a subsequent breach thereof by Winter giving rise to a constructive trust.

In so holding, the court noted that constructive trusts arise in two general situations: where there is actual fraud or where there has been a breach of a fiduciary relationship (Ray v. Winter (1977), 67 Ill. 2d 296, 303, 367 N.E.2d 678, 682), the latter of which requires a showing that one person has reposed trust and confidence in another who by reason thereof gains a resulting influence or superiority over the other. "Generally, this is accomplished by establishing facts showing an antecedent relationship which gives rise to trust and confidence reposed in another." (67 Ill. 2d 296, 304, 367 N.E.2d 678, 682.) The Winter court further stated that although in most cases an oral agreement does not give rise to a confidential or fiduciary relationship, where one voluntarily acts as an agent for another a fiduciary relationship exists as a matter of law and that if the one who has undertaken to purchase land for another subsequently refuses to convey it, "equity will raise a constructive trust and compel him to turn it over to the one equitably entitled to it." (67 Ill. 2d 296, 305, 367 N.E.2d 678, 683.) Noting that Ray had located the property, contacted its owner, negotiated the purchase terms and secured the owner's promise to hold it for him until fall, the Winter court determined that Ray had a prior existing interest in the property and that when Winter undertook to purchase it for him, the relationship of principal and agent was created.

Numerous other cases, both before and since Ray v. Winter, have enunciated and relied upon these same principles as the basis for the decisions reached therein regarding constructive trusts arising out of an agency relationship. For instance, in Black v. Gray (1952), 411 Ill. 503, 104 N.E.2d 212, evidence was presented that the defendant orally agreed to purchase on the plaintiff's behalf the interest owned by another in a parcel of real estate adjoining plaintiff's property for a sum not exceeding $1,000. Defendant was to receive a commission of one-half of the difference, if any, between $1,000 and what he paid. Using his own funds, defendant purchased the interest but thereafter refused to convey it to plaintiff. Although the defendant denied both the agreement and the agency relationship, the trial court declared a constructive trust in plaintiff's favor and ordered that the ...

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