Aaron v. Dausch

• Decision Date: 18 March 1942
• Docket Number: Gen. No. 41674.
• Citation: 40 N.E.2d 805,313 Ill.App. 524
• Parties: AARON v. DAUSCH ET AL. DAUSCH v. AARON ET AL.
• Court: United States Appellate Court of Illinois

313 Ill.App. 524

40 N.E.2d 805

AARON

v.DAUSCH ET AL.

DAUSCH

v.AARON ET AL.

Gen. No. 41674.

Appellate Court of Illinois, First District, Third Division.

March 18, 1942.

Appeal from Superior Court, Cook County; John C. Lewe, Judge.

Action to foreclose trust deed by Florence Aaron against Mary Dausch and others. Mary Dausch filed a counterclaim. From the judgment, Mary Dausch appeals.

Affirmed. John A. Cooke and Irving G. Zazove, both of Chicago, for appellant.

Ira S. Kolb, Arthur J. Goldberg, Nathan Schwartz, Kargman & Kargman, Benjamin Robert Cohen, Saul H. Friedman, Tannenbaum, Polikoff & Schmidt, and Hirsch E. Soble, all of Chicago, for appellees.

HEBEL, Justice.

This is an appeal by the cross-plaintiff from an order of the Superior Court entered December 3, 1940, striking cross-plaintiff's second amended counter-claim and dismissing cross-plaintiff's action, and for costs against cross-plaintiff in favor of each of the cross-defendants who are appellees here.

On May 7, 1940, a complaint was filed by Florence Aaron to foreclose a trust deed dated October 8, 1930, conveying certain real estate to Chicago Title & Trust Company to secure an indebtedness of Mary Dausch, in the sum of $8,500. Mary Dausch, a defendant, filed her appearance and answer, with a counter-claim. Her answer and counter-claim were stricken on motion and an amended answer was filed July 9, 1940. Her amended counter-claim was filed July 27, 1940. On September 17, 1940, Mary Dausch was granted leave to make additional defendants to the counter-claim, and for summons to issue and leave was also granted to file her second amended counter-claim.

The second amended counter-claim alleged in substance that Harry A. Lipsky, Seymour W. Schiff, Barney Linenthal, Barnett Faroll, Isadore Ossey, Benjamin J. Schiff, Jacob Glassman, A. Oswianza, I. B. Ury, George Skurow, and S. Jesmer, acting as a bondholders' committee, were stockholders, officers, and employees of Schiff Trust & Savings Bank, in August, 1928, and that said bank made real estate loans in Chicago, secured by first and second mortgages, in which said bank was named as trustee; that on or about August 14, 1928, Mary Dausch, a widow, obtained a loan from said Schiff Trust & Savings Bank and executed a trust deed conveying premises then owned by her and located at 651-55 Melrose Avenue, Chicago, to said bank as trustee to secure the payment of a large number of notes executed by her at the request of the agents and employees of said bank; that there was a fiduciary relation existing between her and said bank and she had implicit faith and trust in all the bank's employees, and signed all documents, trust deeds or mortgages necessary to finance the building owned by her. It was alleged that said bank sold real estate gold bonds on a large number of buildings including that owned by cross-plaintiff and retained a list of the owners of the bonds sold by the said bank; and that thereafter the bank closed in the latter part of 1929, and immediately thereafter the heretofore mentioned persons designated Bondholder's Committee, former officers and employees of the bank, devised and conceived a scheme to obtain large fees through wholesale foreclosures, and to obtain title to the real estate upon which said bank had made loans. This second amended counter-claim charges a large number of acts to have been done in furtherance of the alleged scheme to obtain title to properties and to deprive the bondholders of the value of their bonds.

The cross-plaintiff in effect charges in her second amended counter-claim that she, as owner of the property in question, having faith and confidence in the officers and employees of the Schiff Trust & Savings Bank, accepted their offer to act as her fiduciary in financing her building in 1928; that the bank officers undertook to issue and sell real estate bonds on her building, and the bank became trustee in the trust deed given to secure their payment; that before default the bank was trustee for her, and, therefore, a confidential relationship existed; that she was ready, willing and able to meet her payments; that the bank failed in 1929, and the Schiff Bondholders' Committee was organized to create defaults and bring about foreclosures so that the individual members and their affiliates could buy up bonds at a discount, squeeze out non-depositors, buy in the property cheap, and by getting the title of the equity owner, could purchase at a non-competitive bid; that they organized a side company to represent owners, and other affiliates to manage properties foreclosed by them, and operated a sort of “shell game” on bondholders and equity owners, through friendly attorneys of their selection, so that they could discourage bondholders and owners through prolonged and confused litigation in which “they held the reins of each adversary's chariot in the sham battle for fees and for the income and property”.

The cross-plaintiff charges that cross-defendants not only conspired to, but did, carry out their plans and scheme to deprive her of her property; that they did it by pretending to act for her; that they had a bondholder file a foreclosure suit on a first mortgage bond; that they had cross-plaintiff, an old woman of sixty-eight years of age, placed in possession and management of the property; that they advised her to use the funds to buy up bonds; that they pretended to assist her, but bought up bonds at a low price and sold them to her at a high price; that she was thereby led by them to place herself in a position where she could not meet her interest and principal payments; that they did it to cause her to create a default so they could declare a default and accelerate the maturity of the issue; that the Chicago Title & Trust Company, and the various attorneys who represented cross-plaintiff, aided and abetted the cross-defendants connected with the Schiff Bondholders' Committee and its affiliates to carry out the scheme, and thereby became parties to the fraud and conspiracy; that various steps were taken in the perpetration of the fraud, which included the foreclosure of a second mortgage, while the first mortgage foreclosure was pending in another court, so as to squeeze out the cross-plaintiff's equity of redemption before a sale was made on the first mortgage foreclosure; that by such means a sale of $20,000 was voluntarily set aside, another for $18,000 was voluntarily set aside, and a final sale was approved to a nominee of the committee for $13,500, after a long delay, which caused interest to accumulate, and fees to multiply, resulting in a very large deficiency decree against cross-plaintiff, all because she refused to accept their offer to purge her of a trumped up charge of contempt, and to give her two years' free rent for a quit-claim deed.

Cross-plaintiff contends that if her second amended counter-claim is insufficient because the allegations are vague, indefinite and uncertain--as contended by cross-defendants--then the court should have permitted a further amendment to supply the particulars required. The cross-defendants, who filed motions to strike, contend that the second amended counter-claim is insufficient in law to state a cause of action; is vague, indefinite and uncertain; that it seeks to collaterally attack foreclosure decrees, and that no proper measure of damages is alleged.

Cross-plaintiff's theory is that the cross-defendants have entered into a conspiracy to cheat and defraud her, and that, if the allegations sustain the charge, either by facts directly alleged or by circumstances and the inferences reasonably deducible therefrom, then the court erred in striking the counter-claim, dismissing the case and rendering judgment against the cross-plaintiff. The law in this state is that a conspiracy between defendants to defraud a person of her real estate may be proven by facts and circumstances surrounding the parties at the time of the transaction, and that all persons who aid or advise in the commission of a fraudulent act by another, or who approve of it after it is done for their benefit, are liable in the same manner as they would be had they themselves performed the same act. Miller v. John, 208 Ill. 173, 70 N.E. 27.

One of the questions called to the attention of this court is that it was argued in the trial court that the counter-claim should be dismissed because it could not be properly filed in the foreclosure suit. It would appear that section 38 of the Civil Practice Act, Ill.Rev.Stat.1941, c. 110, § 162, clearly permits the filing of such a counter-claim in a suit to foreclose a mortgage, as was held in State Bank of St. Charles v. Burr, 372 Ill. 114, 22 N.E.2d 941. In that case the Supreme Court held that a judgment obtained by the defendant mortgagor on a counter-claim filed in a foreclosure suit may, in the foreclosure decree, be set off against the mortgage indebtedness, and such action does not amount to the entry of an unconditional personal decree against the mortgagor before sale. Therefore, under this decision, the cross-plaintiff seems to be supported in her contention that she may recover any amount established by the evidence under her counter-claim in this action which may be due her on the facts alleged.

Cross-defendants in their motions to strike seek to apply to the counterclaim the common law test of sufficiency. Cross-plaintiff cites Anderson v. Biesman & Carrick Co., 287 Ill.App. 507, 4 N.E.2d 639, and point out that in that case the Court said that there has been a steady effort in this state to get away from the so-called technicalities of common law pleading. The conclusion argued for by cross-plaintiff is that her counter-claim should be tested not by the technical rules applied under the common law but by the inquiry as to whether or not the direct allegations of fact pertaining to her cause of action are such that the law infers the legal conclusion from such direct...