Russell v. Klein

• Decision Date: 28 September 1973
• Docket Number: No. 57558,57558
• Citation: 14 Ill.App.3d 856,303 N.E.2d 241
• Parties: William E. RUSSELL, Plaintiff-Appellant, v. Reuben I. KLEIN and Yvonne Klein, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 241

303 N.E.2d 241

14 Ill.App.3d 856

William E. RUSSELL, Plaintiff-Appellant, v. Reuben I. KLEIN and Yvonne Klein, Defendants-Appellees.

No. 57558.

Appellate Court of Illinois, First District, Fifth Division.

Sept. 28, 1973.

Rehearing Denied Oct. 24, 1973.

Moriarty, Rose & Hultquist, Ltd., Chicago (Maurice James Moriarty, Robert C. Hultquist and Joseph M. Ladd, Chicago, of counsel), for plaintiff-appellant.

George B. Collins and Jeffrey Schulman, Chicago (Collins & Amos, Chicago, of counsel), for defendants-appellees.

DRUCKER, Presiding Justice.

On September 23, 1966, a judgment by confession was entered in favor of the plaintiff, William Russell (Russell), and against the defendants, Yvonne Klein (Mrs. Klein) and her husband, Reuben Klein, in the sum of $75,316.84. On June 9, 1970, defendants filed a motion to vacate the judgment alleging that it had been satisfied by an oral agreement between Russell and Mrs. Klein in late 1967 which had been duly performed by Mrs. Klein. The motion to vacate was amended so as to read 'a motion for entry of order of satisfaction of judgment.' The cause was heard by the court sitting without a jury, and on March 24, 1972, it was ordered that plaintiff's judgment had been satisfied. Plaintiff filed a notice of appeal on April 3, 1972. On April 28, 1972, defendants requested that plaintiff return $22,000 which they had previously given to plaintiff as partial satisfaction of the judgment. The court granted the requested relief and on April 28, 1972, entered judgment in favor of the defendants and against plaintiff for $24,880 ($22,000 plus interest). On May 10, 1972, plaintiff filed an amended notice of appeal.

On appeal plaintiff contends that: (1) defendants' request for an order of satisfaction of judgment was an action under section 72 of the Civil Practice Act (Ill.Rev.Stat.1971, ch. 110, par. 72) and therefore barred by the two year limitation provision therein (Ill.Rev.Stat.1971, ch. 110, par. 72(3)); (2) the alleged oral contract which defendant relief upon was unenforceable because it was in violation of the Statute of Frauds; (3) the findings of the trial court were against the manifest weight of the evidence; and (4) the trial court had lost jurisdiction over the matter prior to the time it entered judgment in favor of the defendants for $24,880.

In 1964 Mrs. Klein was the owner of a newly built apartment complex in Mount Prospect, Illinois, called the Galaxy Apartments. She planned to construct six additional apartment buildings on the site and to this end sought financial help from Russell. From September 1965 to December 1965 Russell issued six checks to Mrs. Klein totaling $67,800. Mrs. Klein claims that this sum was advanced to her as part of a joint venture between herself and Russell. Russell claims the sum was a loan to Mrs. Klein and that no joint venture ever existed.

Mrs. Klein testified that the joint venture agreement was reached over the course of several meetings in the summer of 1965. The terms of the agreement were as follows: that Russell was to supply the venture with funds, his financial statement and good name; that she would contribute her existing equity in the project; that Russell was to receive his capital back before she would; and that they would share equally in the profits. At least part of the above agreement was reached in September 1965 at the apartment of Marie Farella, an employee of Mrs. Klein at the time. Y-K Builders, Inc., a construction company owned by Mrs. Klein, was to serve as general contractor on the project. Pursuant to the agreement Russell arranged for a meeting with Dwinn-Shaffer and Co., a mortgage banker, to secure permanent financing. Two mortgage applications were filled out; the first was signed by both Mrs. Klein and Russell and the second by only Mrs. Klein. Russell gave Dwinn-Shaffer and Co. his check for $6500, its fee. This was the first of the six checks referred to earlier which were advanced by Russell. The other five checks were issued to Mrs. Klein for mortgage fees, interest payments on a loan of Mrs. Klein's and for building permits. Mrs. Klein further testified that from December 1965 to January 1966 Russell took part in selecting subcontractors for the project. Construction began in early 1966. In March 1966 Mrs. Klein told Russell that she needed more money. Russell told her that he wanted to withdraw from the venture. At Russell's request Mrs. Klein and her husband signed a note payable to Russell for $68,000. It was back-dated to December 1, 1965, because of advice Russell had received from his attorney. (Plaintiff's exhibit #2, a letter from Mrs. Klein to Russell which accompanied the note, reads as follows: 'Enclosed is a note for a loan of $58,000.00.' The error in the amount set forth, i.e., $58,000, as opposed to $68,000, was subsequently acknowledged by Mrs. Klein.)

Marie Farella, the resident manager of the Galaxy Apartments in 1965 and 1966, testified for the defendants. She is no longer employed by Mrs. Klein. In september 1965 she was present during a conversation between Mrs. Klein and Russell at the Galaxy Apartments. Russell mentioned that he was an equal partner with Mrs. Klein and that he was to supply $60,000 to $65,000. The witness saw Russell at the complex many times in late 1965. He and Mrs. Klein disagreed as to the color of bricks to be used and the appropriate subcontractor for the installation of windows. Russell supplied the site with a construction trailer. In January 1966, in the trailer, Mrs. Klein told Russell that a trust agreement would be drafted which would not reveal Russell as a partner. Russell said this would conform to his wishes.

William Russell testified that he and Mrs. Klein were both shareholders in R.S.P. Enterprises, Inc., which manages real estate. From September 1965 to December 1965 he made loans to Mrs. Klein who had told him that she was quite wealthy but needed $60,000 to $70,000 in ready cash. He issued checks to Mrs. Klein and made notations regarding the purpose for which funds were advanced. Mrs. Klein promised to repay Russell from the first proceeds of the project. The loan was made at the going rate of interest (7%) and with the expectation that R.S.P. Enterprises, Inc., would have the leasing and managing rights to the apartments. The note, plaintiff's exhibit #1, did bear 7% Interest. Russell denied the existence of the joint venture and denied that he frequently visited the construction site or argued about which subcontractors to use. He did lend Mrs. Klein a construction trailer as an act of friendship.

After Mrs. Klein gave the note to Russell, she unsuccessfully attempted to secure financing for the project. Mechanics' liens were filed against the project in the fall of 1966 and litigation ensued. Meanwhile, on September 23, 1966, Russell obtained a judgment by confession against the Kleins on the note they had signed in the amount of $75,316.84 (which included interest and attorneys' fees). Mrs. Klein testified that she first beceame aware of the judgment when it turned up on her credit report when she sought further financing for the project. In June 1967 Thomas Coneely, Russell's attorney, initiated citation proceedings to discver Mrs. Klein's assets, but they were terminated after unsuccessful attempts to obtain certain financial documents from Mrs. Klein.

In the fall of 1967 litigation regarding the mechanics' liens was still in progress and Mrs. Klein testified that she informed Russell that attorneys for creditors of the joint venture were trying 'to pierce the corporate veil' and impose personal liability against her. She further testified that in late fall of 1967 she told Russell of her plan to turn over all completed portions of the project to the creditors to avoid further litigation; that Russell would not be exposed to liability if she did this, but that he would have to release her from the judgment against her; and that Russell agreed to do so. The agreement was not reduced to writing. Russell testified that the above alleged conversations never took place, and that no agreement to release his judgment...