Callner v. Greenberg

• Decision Date: 02 April 1941
• Docket Number: No. 25772.,25772.
• Citation: 376 Ill. 212,33 N.E.2d 437
• Parties: CALLNER v. GREENBERG et al.
• Court: Illinois Supreme Court

376 Ill. 212

33 N.E.2d 437

CALLNER

v.GREENBERG et al.

No. 25772.

Supreme Court of Illinois.

Feb. 14, 1941.

Petition for Rehearing Stricken April 2, 1941.

Suit by Milton H. Callner against Samuel Greenberg and others to redeem from a mortgage foreclosure sale and for other relief. An order dismissing the cause for want of equity was affirmed by the Appellate Court, 304 Ill.App. 501, 26 N.E.2d 675, after the cause was transferred from the Supreme Court, 372 Ill. 176, 23 N.E.2d 29, and plaintiff appeals.

Reversed and remanded with directions.Appeal from Third Division Appellate Court, First District, on Appeal from the Circuit Court, Cook County; Stanley H. Klarkowski, Judge.

Levisohn & Levisohn, of Chicago, for appellant.

Morton C. Chesler, Morris L. Kilmnick, and B. P. Traynor, all of Chicago (Ernest A. Braun, of Chicago, of counsel), for appellees.

GUNN, Chief Justice.

Appellant, Milton H. Callner, filed a complaint in the circuit court of Cook county as a junior mortgagee to redeem from a mortgage sale. The complaint was dismissed for want of equity on motion of appellees. Appeal was taken to the Appellate Court for the First District, where the decree of the circuit court was affirmed. A petition for leave to appeal to this court has been granted.

From the complaint it appears that Samuel Greenberg and Esther Greenberg executed a trust deed in 1926 on certain real estate to secure an indebtedness of $50,000. About the same time a junior trust deed in the sum of $5,000 was executed, and appellant is the owner of the note secured by it. The appellees in the case are the Greenbergs, the People's Trust & Savings Bank of Chicago, as trustee under the first trust deed, Wm. G. Murray, the purchaser at the foreclosure sale, and the American National Bank & Trust Company, as trustee under a trust deed executed by Wm. G. Murray, after the sale.

The complaint, in substance, alleges that in the foreclosure proceeding the plaintiffs, although they knew the name and address of the appellant as the holder and owner of the note under the second mortgage, made him a party as an ‘unknown owner,’ and caused no service of summons to be made upon him. The complaint further alleges that the purchaser at the mortgage sale, together with those holding under him, had full knowledge of this fact and conspired with the plaintiffs in the foreclosure suit to make appellant a party in this manner so that he would be bound by the judgment and would have no knowledge of the proceeding to enable him to bid at the foreclosure sale or to redeem from the same under the statute. The foreclosure sale was held in 1933, and Murray was the purchaser at the sale. Appellant's right of redemption under the statute expired in October, 1934, but he did not learn of the foreclosure proceeding until August, 1937. The property was sold for $8,500, and appellant, at the time of filing his complaint, tendered said sum, with interest at six per cent, in open court to redeem from said sale.

Appellant contends that the motion to dismiss allowed by the court admits that a fraud was thus perpetrated upon appellant, which would authorize the court to enter a decree permitting redemption to be made by paying the amount of the prior mortgage sale, with interest, or have other relief which would produce substantially the same result. Appellees, on the other hand, contend that, admitting all of the facts set forth in the complaint, it merely shows the plaintiff was not properly served with process in the foreclosure suit, and, therefore, was not a party to the proceedings, and hence, not being a defendant, was not entitled to make a statutory redemption. Appellees further claim that the necessary result would leave appellant in the position of merely having a right of redemption in equity as a person not made a party defendant, which would require appellant to pay the full amount of the first mortgage debt rather than the amount paid at foreclosure sale. In this event, appellant would be required to pay in excess of $50,000 instead of the amount for which the property sold, with interest.

For a service of publication to be binding upon the parties as unknown owners there must be a well directed effort to ascertain the names and addresses of the unknown owners and parties, and inquiry must be as full as the circumstances of the situation will permit. If this is not done the proceeding is not binding upon the parties named as unknown owners. Graham v. O'Connor, 350 Ill. 36, 182 N.E. 764. The allegations in the complaint show that plaintiffs had full knowledge of appellant's ownership of the second mortgage security and where he resided, and had frequent business relations with him, and we concur with the Appellate Court in its view that the facts alleged in the complaint were sufficient to show that the process in the foreclosure suit was not binding upon appellant. We think the effect of the admitted facts goes further, and establishes that the plaintiffs in the foreclosure suit and the purchaser committed a fraud, not only upon the court, but upon the holder of the second mortgage security.

The question to be determined is whether appellees will be permitted to assert that the only effect of their action was to leave the case as though appellant had never been a party, or whether the court, upon appellant's petition, should decree the rights of the parties to be considered as though appellant had been legally made a party so he could redeem within the statutory period, as such.

The law is well settled that equity will not permit a person to derive any benefit from a fraud perpetrated by him. Duncan v. Dazey, 318 Ill. 500, 525, 149 N.E. 495;Plenderleith v. Glos, 329 Ill. 382, 160 N.E. 745. This principle applies to inequitable defenses as well as the maintenance of an action. Broom's Legal Maxim's, 3rd Ed., p. 207; Marshall v. Holmes, 141 U.S. 589, 12 S.Ct. 62, 35 L.Ed. 870. Appellant had his election on how he should proceed. In Pomeroy's Equity Jurisprudence, fourth edition, volume 2, page 1867, the author says: ‘Wherever an agreement or other like transaction has been procured by means of a material fraudulent misrepresentation by one of the parties, the other has an election of equitable remedies. The injured party may, at his option, compel the fraudulent party to make good his representation-that is, to carry in into operation in the nature of a specific performance-when it is of such a nature that it can be thus performed; or he may rescind the agreement, and procure the transaction to be completely canceled and set aside.’ We think the principle applies to fraudulent concealments as well as active misrepresentations. One who is...