Lincolnland Properties, Inc. v. Butterworth Apartments, Inc.
| Decision Date | 08 November 1978 |
| Docket Number | No. 51-0633-0,No. 14271,T,51-0633-0,14271 |
| Parties | , 22 Ill.Dec. 552 LINCOLNLAND PROPERTIES, INC., an Illinois Corporation, Plaintiff-Appellee, v. BUTTERWORTH APARTMENTS, INC., a corporation, University Apartments, Inc., of Normal, a corporation, the Landmark Apartments of Urbana, Inc., a corporation, West Townhouse Apartments of Champaign, Inc., a corporation, Golfview Apartments of Peoria, Inc., a corporation, Ginkids Investment, Inc., a corporation, Russel J. Lesperance, Virginia K. Lesperance, Todd Builders, Inc., a corporation, formerly known as Lesperance Builders, Inc., Defendants-Counter Plaintiffs- Appellants, v. BANK OF COMMERCE OF MILWAUKEE, W. Joseph Gibbs, Springfield Marine Bank as Trustee under the provisions of a trust agreement dated the 1st day of March, 1968, known as Trusthird-Party Defendants-Appellees. |
| Court | United States Appellate Court of Illinois |
Olsen & Olsen, Springfield, for defendants-counter plaintiffs-appellants.
Londrigan & Potter, P. C. by Thomas F. Londrigan, Springfield, Brown, Hay & Stephens, Springfield (Edward J. Cunningham, Springfield, of counsel), for third-party defendants-appellees.
A real estate deal.
Plaintiff won.
We affirm almost In toto.
But first, a synopsis of the tedious and the prolix facts.
Russel Lesperance was a shareholder in the defendant corporations which owned seven apartment properties. Lesperance contacted W. Joseph Gibbs concerning the purchase of those properties and (after some preliminary negotiations) Gibbs formed Lincolnland Properties, Inc., in order to acquire them. Their designations will be helpful:
7. Golfview Apartments of Peoria, Inc. (Golfview 42).
Shortly before the closing, Gibbs discovered that Urbana 118 was subject to a recorded, but unlisted, third mortgage in the amount of $300,000. That mortgage was from Landmark Apartments of Urbana, Inc., to Russel Lesperance and Lesperance Builders, Inc. (a wholly owned corporation of Lesperance), and had been assigned to the Bank of Commerce of Milwaukee, Wisconsin. Or, a chart might show it this way:
(mortgagees)
Lincolnland Properties, Inc. Bank of Commerce
(purchaser) (assignee)
Gibbs testified that Lesperance advised him that this encumbrance was not a valid debt since it was owed to himself and one of his solely owned corporations and that he could get the mortgage released. Lesperance denied making the statement.
Then on March 24 and 25, 1967, Lincolnland Properties (Gibbs) entered into seven separate contracts for the purchase of each apartment complex and gave the defendants notes evidencing an aggregate indebtedness of $465,000. The contracts were signed by: Russel J. Lesperance, as president of the defendant corporations; Russel J. Lesperance, individually and as shareholder; Virginia K. Lesperance, individually and as shareholder: and Lincolnland Properties, Inc., by W. Joseph Gibbs, as president. The addendi to the agreements were signed by the defendant corporations by Russel J. Lesperance; and by Russel J. Lesperance, personally; and by Lincolnland Properties, Inc., by W. Joseph Gibbs, as president; and as to paragraph 5 only, by W. Joseph Gibbs, personally.
In April 1967, Champaign 45, which was in foreclosure at the time of the March sale to Lincolnland Properties, Inc., was sold to the First Illinois Trust for $686,000. Lesperance testified that he was not aware until December 8, 1968, that this sale had occurred. Donald Snodgrass (an in-house contractor for First Illinois Trust and a general contractor for Lesperance) testified that he had been warned by Gibbs not to tell Lesperance that First Illinois Trust had purchased the Champaign 45 property. However, Lesperance had executed an assumption agreement on April 1, 1967, wherein he acknowledged that the trustees of the First Illinois Trust had assumed the first mortgage to Metropolitan Life Insurance Company on Champaign 45. On April 21, 1967, Gibbs wrote Lesperance that he was "in the process of closing on West Townhouse Apartments of Champaign, Inc." (Champaign 45.)
Gibbs invested in certificates of deposit $67,400 that had been received from rentals and the sale of Champaign 45. Lesperance maintained that Gibbs at that time represented that he was without funds. Donald Snodgrass testified that during this period Gibbs admonished him not to give Lesperance any information, told him that Lesperance was in financial difficulty and said that if Lesperance was forced into bankruptcy, less would have to be paid on the obligations. On the other hand, Gibbs testified that Lesperance knew of the Champaign 45 sale and the funds, but that there were other usages to be made of the money.
As time progressed, Gibbs believed he could not operate the apartment properties without refinancing the Kirkaby-Natus mortgage which was a second mortgage on some of the properties. However, because of the $300,000 mortgage on Urbana 118, refinancing could not be obtained without Gibbs' personal guarantee. Gibbs claimed the right to offset payment of the $300,000 mortgage on his $465,000 obligation to the defendant corporations, but Lesperance maintained that the $300,000 mortgage was a valid debt assumed by Lincolnland Properties, Inc.
So in October 1967, Lesperance and his attorneys met with Gibbs in an effort to settle their differences. The parties reached an agreement commonly known as the October 5, 1967, agreement. Under the agreement, Gibbs was to arrange the assignment of the Kirkaby-Natus mortgage to the Springfield Marine Bank to refinance the Kirkaby-Natus mortgage and, if necessary, he was to personally guarantee the mortgage note. Provided that Lesperance refinanced the Kirkaby-Natus obligation thus releasing Gibbs from his personal liability to Springfield Marine Bank, Lesperance had the option to purchase the capital stock of Lincolnland for a sum of $42,500. If the refinancing could not be obtained on or before March 1, 1968, the option to purchase said stock would expire and all the notes previously issued by Lincolnland to Lesperance were to be paid by applying one-half of the net cash flow to the purchase price under the original contract dated March 24, 1967.
Gibbs obtained a personal loan and bought the Kirkaby-Natus mortgage, but Lesperance failed to obtain a refinancing commitment.
When Lesperance refused to acknowledge the validity of the October 5 agreement, plaintiffs filed this action for an injunction and declaratory judgment. And a plethora of pleadings and motions followed! For our purposes, the lawsuit essentially evolved as follows: Lincolnland Properties, Inc., filed a complaint seeking to enforce the October 5, 1967, agreement. After a stipulation and settlement agreement had been entered into, Ginkids Investments, Inc. (the successor to the apartment properties), confessed judgment against Lincolnland on the judgment notes in Wisconsin and brought garnishment proceedings in Illinois. Lincolnland filed a petition seeking a temporary injunction against Butterworth, University, Landmark, West Townhouse, and Golfview Apartments and Ginkids Investments, Inc. In a second supplemental petition, Lincolnland added the Bank of Commerce of Milwaukee, Wisconsin, and the Cultural, Educational Research Foundation, Inc., and sought the release of the $300,000 mortgage on Urbana 118. The Bank of Commerce then filed a third party complaint against Lesperance Builders and Russel J. Lesperance. Ginkids Investments, Inc., and Russel and Virginia Lesperance filed a counterclaim against Lincolnland Properties, Inc., and W. Joseph Gibbs.
The case was called for trial and after Lincolnland and Gibbs rested, the Bank of Commerce was dismissed from the case. Lincolnland then filed an amended complaint against the apartments, Lesperance, and the Bank of Commerce. Lesperance and the apartments then filed a counterclaim against the Bank of Commerce.
On November 13, 1975, the trial court found that the October 5, 1967, agreement was valid and held that the judgment notes payable to the apartments, and debts owing to Brozan Interior Decorators, be paid in accordance with that agreement. The court also found that the junior mortgage ($300,000) as between Lincolnland Properties, Inc., and Russel J. Lesperance and Lesperance Builders, Inc., was null and void. Consequently, the court held that the plaintiffs must be given credit for monies expended in obtaining the release of the junior mortgage.
Now to the substance of this review.
Defendants first contend on appeal that the amended complaint does not state a cause of action because no equitable basis is alleged such as fraud. We agree. Fraud should be pleaded with specificity, particularity, and certainty. (In re Estate of Hansen (1969), 109 Ill.App.2d 283, 248 N.E.2d 709.) However, even though a conduct is not expressly labeled "fraudulent," fraud is well pleaded if the facts alleged constitute or necessarily imply fraud. (Newco Laundromat Co. v. A L D, Inc. (1958), 16 Ill.App.2d 494, 148 N.E.2d 820.) In order to establish fraud, it must be alleged and proved that:
"* * * the statement made was of a material fact and not opinion; it must be untrue; the party making the statement must know or believe it to be untrue; the person to whom the statement is made must believe and rely on it, and have a right to do so; it must have been made for the purpose of inducing the other party to act; and the...
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