APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. HONORABLE JOHN N. HOURIHANE, JUDGE PRESIDING.
Rehearing Denied October 25, 1995. Released for Publication November 3, 1995. Petition for Leave to Appeal Denied January 31, 1996.
Presiding Justice Hoffman delivered the opinion of the court: Cahill and Theis, JJ., concur.
The opinion of the court was delivered by: Hoffman
PRESIDING JUSTICE HOFFMAN delivered the opinion of the court:
The plaintiffs, Sandra Solomon Kurtz and Susan Kurtz, appeal from the trial court's judgment in favor of the defendants, Gary Solomon and Gary Solomon & Company, on their complaint seeking an accounting for investments the defendants made on the plaintiffs' behalf. We consider whether it was against the manifest weight of the evidence for the trial judge to find that: (1) there was no express trust between the plaintiffs and Solomon; (2) there was no fiduciary relationship between the plaintiffs and Solomon and therefore, no basis for a constructive trust or accounting; and (3) the plaintiffs' cause of action for an accounting was barred by laches. For the following reasons, we affirm in part, reverse in part, and remand for proceedings consistent with this opinion.
On October 16, 1981, Kurtz filed a verified complaint on behalf of herself and her minor daughter, Susan, against Solomon and his company. Solomon was Kurtz's brother and Susan's uncle. A few days after the original complaint was filed, Susan turned 18 years old. An amended verified complaint was subsequently filed in 1992 which alleged in count I that Solomon breached an express trust and requested an accounting for the investments the defendants made for the plaintiffs from 1968 to 1981. In count II, the plaintiffs alleged that Solomon breached a fiduciary relationship in handling those investments and requested an accounting and a constructive trust. The defendants answered the complaint and asserted several affirmative defenses including laches.
The following evidence was presented in a bench trial. In 1968, Kurtz and Susan, who was five years old at the time, inherited $40,000 and $5,000 respectively from a relative. Kurtz testified that after much discussion with Solomon, she agreed to give him the inheritances to invest as their trustee. Solomon testified that he did not agree to act as their trustee but held Kurtz's money to keep it from her creditors and so she would not spend it. From 1968 to about 1980, Solomon invested the money in stocks and real estate.
Kurtz had an undergraduate degree in teaching and a master's degree in early childhood education. She was a teacher. Solomon had some college education, although apparently no degree, and was a real estate investor and developer. By the time of trial, Solomon had acquired about $16 million in assets. Kurtz had tax liens against her for several thousand dollars at the time of the inheritance.
Kurtz testified that on July 1, 1971, she signed a trust agreement with Solomon which stated that he would continue to act as her trustee as he had been since she inherited the money in 1968. Kurtz was not given a copy of the agreement and did not make notes of it; she gave the agreement back to Solomon. She recalled that the agreement listed real estate which was the only property subject to the agreement. She remembered the date of the agreement because she subsequently received dividend checks with that date on them. Kurtz admitted that she never told anyone of the trust agreement, including an accountant and a lawyer who would have needed that information. She did not disclose the trust to lenders when she purchased her house in 1972 or when she refinanced it in 1978. Solomon testified that they never entered into a written trust agreement and that he made up the July 1, 1971 date to purchase stock from which Kurtz received dividends.
Solomon sent Kurtz monthly statements of the condition of their investments beginning in August 1968. He sent only one statement for Susan's investment, in November 1968, and did not separate Kurtz's and Susan's investments. Kurtz testified that she only received the statements until about 1972; she did not read them but threw them away. Solomon testified that he sent the statements until 1975 and he threw his copies of the statements away in 1975. Also, he did not think he had to keep the statements because Kurtz was his sister. Only two statements of condition were produced at trial: one dated October 31, 1968 and the other dated November 31, 1968.
During the relevant time period of the complaint, Solomon had acquired an interest in about 32 buildings. Kurtz testified that she had an interest in all of these buildings; however, she only reported income on her tax returns from five buildings: Cullom/Kedzie, Whipple/Ainslie, Argyle/Kedzie, Southeast Village, and Clark Street. Her tax returns did not indicate an interest in any of the other real estate in which Solomon had acquired an interest. Her mortgage application for her house listed only these five properties. Solomon sent Kurtz monthly operating statements for the five buildings but Kurtz did not look at them and threw them away. Solomon admitted that he used some of Kurtz's draw checks from the building accounts but he had Kurtz's permission to do so. Kurtz denied that she gave Solomon such permission.
Kurtz acquired a 25% interest in the Cullom/Kedzie property in July 1968. When they bought it, Solomon paid Kurtz's share and she later repaid him. Solomon also owned a 25% interest and the remaining interest was owned by third parties. In 1974, Kurtz and Solomon swapped their interests in the Cullom/Kedzie property for William Levy's 40% interest in the Clark Street property. Solomon signed Kurtz's name, with her permission, to the agreement and Kurtz signed the actual assignment. Kurtz's income from this property was about $3,400. Kurtz admitted that in her deposition she testified that she did not think Solomon held this property as her trustee.
Using Kurtz as a nominee, Solomon purchased the Whipple/Ainslie property in July 1971 and Kurtz then assigned 80% of the interest to Solomon. The property was sold in 1975, repurchased after default, and then sold again in 1978. Kurtz's income from the property was $17,775.
Solomon acquired a 40% interest in the Argyle/Kedzie property in 1972 and Kurtz subsequently purchased a 20% interest for $6,000. The property was sold ...