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12/29/88 Spomenka Rybak, v. Orrin Dressler Et Al.

December 29, 1988

SPOMENKA RYBAK, PLAINTIFF AND COUNTERDEFENDANT AND, APPELLANT AND CROSS-APPELLEE

v.

ORRIN DRESSLER ET AL., DEFENDANTS AND COUNTERPLAINTIFFS AND, APPELLEES AND CROSS-APPELLANTS



APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

532 N.E.2d 1375, 178 Ill. App. 3d 569, 127 Ill. Dec. 366 1988.IL.1905

Appeal from the Circuit Court of Du Page County; the Hon. Fredrick Henzi, Judge, presiding.

APPELLATE Judges:

JUSTICE UNVERZAGT delivered the opinion of the court. LINDBERG, P.J., and REINHARD, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE UNVERZAGT

In the circuit court of Du Page County, plaintiff, Spomenka Rybak (Rybak), filed a complaint for a constructive trust, mandatory injunction, and a judgment in the amount of $352,000 plus interest and 50% of the value of improved real estate (a residence) against defendants, Orrin D. Dressler individually and doing business as Orrin Dressler, Inc., a corporation (defendants, Dressler or O.D., Inc.). Defendants counterclaimed for a constructive trust and fraud. This court affirmed the trial court's dismissal with prejudice of the defendants' fraud claim for legal insufficiency. (Rybak v. Dressler (2d Dist., 1984), No. 2 -- 84 -- 0002 (unpublished Rule 23 order), 127 Ill. App. 3d 1167.) The cause proceeded to bench trial and concluded with entry of a judgment awarding Rybak $201,831.59 ($125,464.02 plus interest) and denying her all other relief requested. The court's judgment also found for Rybak and against the defendants on their counterclaim for a constructive trust seeking $300,000 from her. Both sides appeal.

Rybak's appeal presents these issues: (1) whether the trial court's determination there was no valid promissory note in the amount of $325,000 was against the manifest weight of the evidence; (2) whether the trial court committed reversible error in failing to rule that the defendants admitted the genuineness of the documents attached to her first Rule 216 (107 Ill. 2d R. 216) request where said request was not denied in a timely fashion; and (3) whether the trial court erred in calculating the total value of loans from her to Dressler.

The defendants' cross-appeal presents these further issues: (1) whether the trial court erred in finding Rybak made loans to the defendants; (2) whether the trial court's finding that Rybak did not convert Dressler's business funds to her own use is contrary to the manifest weight of the evidence; (3) whether the trial court abused its discretion in denying defendants' post-trial motion to vacate the judgment on the grounds of newly discovered evidence; and (4) whether the court erred in awarding prejudgment interest.

Facts necessary for an understanding of the issues will be presented as necessary in conjunction with analysis of each issue. Suffice it to say that Rybak, an Illinois-licensed dentist, met Dressler, an Oak Brook land developer, in the summer of 1975 and the parties engaged in a social relationship which evolved into cohabitation. In late 1976, Dressler, Rybak and Rybak's young son, William, lived together first in Rybak's apartment, then in 1978, in an apartment in Burr Ridge and then, in 1980, in a house in Oak Brook which Dressler also used as an office. Rybak moved out of the house in August 1982, and these lengthy, bitter proceedings ensued.

Rybak's second amended complaint against the defendants alleged that she was employed in various capacities by the defendants and that the defendants agreed in 1978 by execution of a written employment agreement to compensate her for her past and future services; that between 1976 and 1982 she made various business and personal loans to Dressler and O.D., Inc., which each agreed to repay to her with interest; that on March 2, 1981, the defendants executed a promissory note payable to her in the amount of $87,918 as repayment for loans made by her to them to date, with interest, and promising to convey or cause to be conveyed to her lots 4, 27, and 43, in the Lakewood subdivision in Burr Ridge; that as further inducement to her to continue to make loans and provide services to the defendants, they promised to convey title to Dressler's Oak Brook residence and property to a land trust and assign the beneficial interest in said land trust to her and apply the proceeds of sale of the residence to repayment of their indebtedness to her and pay her one-half of the capital gain from the sale of the residence; that she continued to make loans to the defendants; that in January 1982 she demanded from Dressler an accounting, repayment of the loans, and payment for services rendered, and Dressler and she agreed on March 10, 1982, that the total sums due her including interest totaled $325,000 whereupon Dressler executed and delivered to her a promissory note due on demand for $325,000 and agreed to pay interest on the indebtedness evidenced by said note at the prime rate of interest charged from time to time by the Bank of Clarendon Hills; that she subsequently loaned Dressler $27,700, which defendants agreed to pay with interest; that on numerous occasions she demanded repayment of the loans evidenced by the promissory note, conveyance of title to the lots and pledge of the collateral but that she has not received and defendants have failed and refused to honor the promissory note, convey title to the lots, pledge the collateral or repay the loans made subsequent to March 10, and Dressler has advised her that he never intended to do so having made all the above promises only to induce her to loan him and O.D., Inc., additional sums and provide them with additional services. Rybak requested judgment against the defendants in the sum of $352,700 plus interest from March 10, 1982, court costs and reasonable attorney fees. She also requested a declaratory judgment declaring a constructive trust and equitable lien upon the lots and the residence and a mandatory injunction directing defendants to sell the lots and residence and pay her the sums due from the proceeds or convey title to the lots to her, credit the fair market value thereof against the sum due her and sell the residence, paying her the balance due her from the proceeds of the sale.

Count I of the defendants' amended counterclaim against Rybak alleged that during the period from approximately 1977 to August 1982, Rybak, acting in the capacity of corporate secretary for O.D., Inc., for no compensation at her insistence, owed a fiduciary duty to O.D., Inc., and its shareholders; that Rybak, while cohabiting with Dressler and acting as an officer of O.D., Inc., had ready access to cash, checking accounts, and various goods and chattels belonging to defendants; that during said time period, Rybak, without the knowledge or consent of the defendants, took for her own use and benefit cash, assets and other goods and chattels totaling $300,000. Defendants requested a constructive trust be imposed upon Rybak's assets and that they be awarded judgment against her in the amount of $300,000 plus costs and attorney fees, and that the court award such other relief as it deemed just and equitable. As noted above, count II of defendants' amended counterclaim for fraud was dismissed with prejudice and that judgment was affirmed by this court on appeal.

$325,000 PROMISSORY NOTE

In its letter of opinion upon which its judgment was based, the trial court found:

"There was no valid note for $325,000. The original of the purported note is missing. Even if the note was signed by the defendant, a finding this court did not reach, its non-existence, the lack of full consideration and the circumstances under which it was allegedly executed would require a finding that it was not valid. This court so finds."

Rybak argues the court's finding is against the manifest weight of the evidence where (1) the note clearly does exist; (2) Dressler's theory as to how his signature came to be on the note is not supported by the record; (3) the stated basis for the defendants' expert witness' opinion that the note was a "raised" note (that is, a note on which the amount has been raised) were irrelevant, nonsensical and immaterial; and (4) defendants failed to rebut the presumption that consideration is presumed in an action on a validly executed negotiable instrument.

Defendants admit the note exists and that the signature on the note is Dressler's but that the court's finding that there was no valid note was not against the manifest weight of the evidence where (1) Dressler testified the note he signed was in the amount of $325 not $325,000 and was signed at Rybak's request and upon her representation that the note was to secure O.D., Inc.'s, obligation to a gravel hauler; (2) where he met his burden of proving that the note was altered; (3) where the evidence showed he was elsewhere at the alleged time and place of the signing of the note; (4) where his theory of how his signature came to be on the note is not rebutted by the evidence; (5) where Rybak's testimony concerning the circumstances of the signing of the note was inherently improbable; (6) where there was testimony that Rybak disclosed to neighbors that she had his original signature on a note and that she intended to "fix" him and "get everything" he owns; and (7) where there was no consideration for the note in light of Rybak's conflicting versions of what the basis for such consideration was and there was no bargained-for forbearance.

We reverse the judgment of the trial court. Generally, "[the] trial Judge as trier of fact is in a position superior to a court of review to observe the conduct of witnesses while testifying, to determine their credibility, and to weigh the evidence, especially where testimony is contradictory. [Citation.] Where the factual findings of the trial court are not against the manifest weight of the evidence, they must be accepted by [the reviewing] court. [Citation.]" (In re Department of Transportation (1988), 173 Ill. App. 3d 730, 734.) For a trial court's finding to be against the manifest weight of the evidence, it must appear that a Conclusion opposite to that reached by the trier of fact is clearly evident. (Tharp v. Critton (1985), 135 Ill. App. 3d 796; Gary-Wheaton Bank v. Meyer (1984), 130 Ill. App. 3d 87.) Such an opposite Conclusion is clearly evident here.

At the outset, the court's finding that the note was either "missing" or "non-existent" is plainly erroneous. During trial, the court allowed a photocopy of the original note to be used during trial, and, per stipulation of the parties, this court granted leave on November 1, 1988, to supplement the record to include the original of plaintiff's exhibit No. 163, the original promissory note, which was done.

As Rybak points out in her reply brief, the trial court did not specify exactly what it meant by the "circumstances under which [the note] was allegedly executed." However, taken literally, its reference must have been to the circumstances of how Dressler's signature came to be on the note and, as to those circumstances, the evidence does not support Dressler's proffered explanation.

Under article 3 of the Uniform Commercial Code-Commercial Paper (the Code) (Ill. Rev. Stat. 1985, ch. 26, par. 3-101 et seq.), where a signature on a note is admitted, production of the instrument entitles the holder to recover on it unless the defendant establishes a defense. (Ill. Rev. Stat. 1985, ch. 26, par. 3-307(2); Swerdlow v. Mallin (1985), 131 Ill. App. 3d 900; American National Bank & Trust Co. v. Scenic Stage Lines of Savanna, Inc. (1971), 2 Ill. App. 3d 446.) "The defendant has the burden of establishing any and all defenses, not only in the first instance but by a preponderance of the total evidence." (Ill. Ann. Stat., ch. 26, par. 3-307, Uniform Commercial Code Comment, at 204 (Smith-Hurd 1963); see also State Bank v. Young (1986), 149 Ill. App. 3d 460; Tuttle v. Rose (1981), 102 Ill. App. 3d 865; In re Estate of Ruebush (1964), 53 Ill. App. 2d 54.) Further, where alteration is not apparent on the face of the instrument, the party alleging that the note sued on has been altered has the burden of proof on that issue. (Bowers v. Heflebower (1926), 243 Ill. App. 129.) When a person signs and executes a form instrument without filling in all the blanks, such person by implication authorizes the holder of the instrument to fill in the blanks in accordance with the underlying agreement; in the absence of evidence tending to show that completion of the instrument was unauthorized, it will be presumed that the instrument incomplete when executed is properly filled out. (Hutcheson v. Herron (1970), 131 Ill. App. 2d 409.) Ambiguous evidence is insufficient to dispel the absolute and unconditional obligations that are represented by a promissory note. First National Bank v. Achilli (1973), 14 Ill. App. 3d 1.

Dressler's contention the note was to be for $325 for a trucker to deliver stone to the residence of Federal Judge Charles Korcoras is contradicted by Judge Korcoras' evidence deposition and exhibits, which show that he did not receive any stone after December 1981 and that the second of only two invoices he ever received from Dressler, dated December 20, 1981, included a $354 charge for stone from Bob's Trucking. Dressler testified the March 10, 1982, promissory note for $325 was to ...


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