Yugoslav-American Cultural Center, Inc. v. Parkway Bank and Trust Co.

• Decision Date: 30 June 1997
• Docket Number: No. 10066,1-95-0048,Nos. 1-94-4450,V,YUGOSLAV-AMERICAN,10066,s. 1-94-4450
• Citation: 224 Ill.Dec. 840,289 Ill.App.3d 728,682 N.E.2d 401
• Parties: , 224 Ill.Dec. 840 CULTURAL CENTER, INC., Plaintiff-Appellant, v. PARKWAY BANK AND TRUST CO., Individually and as Trustee under Trustucko Barjactarevic, Petar Pavlovic, Branko Tupanjac, and Unknown Owners, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 401

682 N.E.2d 401

289 Ill.App.3d 728, 224 Ill.Dec. 840

YUGOSLAV-AMERICAN CULTURAL CENTER, INC., Plaintiff-Appellant, v. PARKWAY BANK AND TRUST CO., Individually and as Trustee under Trust No. 10066, Vucko Barjactarevic, Petar Pavlovic, Branko Tupanjac, and Unknown Owners, Defendants-Appellees.

Nos. 1-94-4450, 1-95-0048.

Appellate Court of Illinois,

First District, Sixth Division.

June 30, 1997.

Jon R. Flynn and Keith E. Morehead, Morehead and Flynn, Chicago, for Plaintiff-Appellant.

Hinshaw & Culbertson, Chicago (William J. Holloway, Joshua G. Vincent, of counsel), for Defendants-Appellees.

Justice ZWICK delivered the opinion of the court:

This suit was brought as a four count complaint by plaintiff, Yugoslav-American Cultural Center, Inc. (hereinafter, "YACC"), an Illinois not-for-profit corporation. The principal defendants were YACC's president, Petar Pavlovic and its secretary, Vucko Barjactarevic. YACC claimed that Pavlovic and Barjactarevic conveyed land and a building owned by YACC without membership approval. Further, YACC claimed that Pavlovic and Barjactarevic fraudulently sold the building to a corporation Barjactarevic controlled with defendant Branko Tupanjac. Although YACC's complaint sounded, in part, on claims of fraud, Count I sought only to quiet title to the property. Following a bench trial on count I (Action to Quiet Title) and Count IV (Conspiracy to Defraud), the trial court found in favor of defendants and confirmed the sale based upon apparent authority principles. Only count I is currently on appeal pursuant to Supreme Court Rule 304(a) (134 Ill.2d 304(a)).

YACC was initially formed on April 6, 1982, by combining three organizations, "Yugoslav Club of Chicago," "Crna Gora," and "Human Society Boka." At that time, the three clubs passed a resolution by their memberships approving the acquisition of the subject property located at 3936 North Lincoln Avenue in Chicago. The building was a large commercial structure which included stores and a meeting hall. The purchase price was $145,000. The plan was to have the building serve as the new organization's headquarters. YACC's by-laws mirrored Illinois law in providing that the building could only be sold upon proper vote of the entire membership. See Illinois Not For Profit Corporation Act, 805 ILCS 105/111.60 (West 1994).

YACC funded the purchase of its building with contributions from its members and from loans. In addition, certain members donated their labor to renovate the building. Defendant Pavlovic testified variously that his loans to YACC totaled $11,500, $15,000 and $17,000. He was impeached with an inconsistent prior statement that he lent YACC a total of $12,500. Pavlovic testified that his co-defendant, Barjactarevic, loaned YACC a total of between $11,000 an $11,500.

Sometime prior to April 1990, YACC established a five member special committee. The purpose of the committee was to explore the prospects of selling the property, to list the property for possible sale and thereby gain offers, and to provide information regarding sale prospects to YACC's membership for their consideration. The committee consisted of defendants Pavlovic and Barjactarevic, along with three other YACC members.

In April, 1990, at a general meeting, the membership debated the prospects of marketing the property for sale. There was dissension among the membership and no resolutions by either the special committee or the members could be adopted.

Sometime after the April, 1990 meeting, Barjactarevic commenced discussions about the building with his long-time friend, defendant Branko Tupanjac. Tupanjac was a Yugoslavian-American real estate developer involved in various projects, as well as an owner of several business entities involved in property management. Although Tupanjac was not a member of YACC, he was told that unless the building was purchased by him, all of his fellow countrymen who were members of YACC and who had invested in the project would lose their money due to the existence of unpaid tax liens on the property.

Sometime in 1991, Tupanjac agreed to purchase the building for a price of $130,000. He directed Barjactarevic to contact his attorney and family friend, Nicholas Duric, to arrange the sale. According to the testimony of Pavlovic, only he and Barjactarevic discussed the sale with Tupanjac. YACC's membership was never consulted.

Exactly what Pavlovic, Barjactarevic and Tupanjac understood about how the sale was to be accomplished was, and is, disputed by the parties. Each of the individual defendants testified that he understood very little about the sale and that Duric handled all the details.

Duric, as Tupanjac's attorney, testified that he prepared and presented Barjactarevic with various documents, including an application for the incorporation of an Illinois corporation known as "Golden Pine, Inc." The articles of incorporation for Golden Pine listed Barjactarevic and Tupanjac as Golden Pine's incorporators. Duric also drafted a land trust application the corpus of which was the property now at issue. Defendant Parkway Bank & Trust Co. (Parkway) was designated as the trustee, Golden Pine the beneficiary and Barjactarevic was granted the sole power of direction. The land trust application further describes Duric as the attorney or agent for the trust and states that the approximate value of the property was $200,000. Duric also prepared a Warranty Deed In Trust, the document which is now central to the dispute between the parties. Finally, Duric prepared the Illinois Real Estate Transfer Declaration and a Cook County Real Estate Transfer Declaration.

The Warranty Deed in Trust prepared by Duric was signed by Barjactarevic and Pavlovic in their individual names, without designation of any corporate capacity. It named YACC as grantor and Parkway Bank & Trust Company, as Trustee u/t/a 10066, as grantee. Barjactarevic testified that he signed the Warranty Deed at Tupanjac's direction and that he signed whatever Duric gave him. He did not tell any member of YACC that the property was being conveyed into a land trust. Pavlovic testified similarly that he did not know what the Warranty Deed in Trust was when he signed it. In addition, Pavlovic testified that Barjactarevic never told him that the property was being sold to Golden Pine, only that Barjactarevic had found a purchaser for the property. The Warranty Deed in Trust was recorded in the offices of the Cook County Recorder of Deeds on July 11, 1991.

In addition to the Warranty Deed, Barjactarevic signed a document purporting to be a corporate resolution of YACC which granted Barjactarevic and Pavlovic authority to sell the property. This document is not actually a corporate resolution, but rather, a certificate by Barjactarevic as YACC's secretary that a meeting of YACC's membership was held April 22, 1990, at which time YACC's membership agreed to sell the property. The parties now agree that no such meeting was ever held.

Tupanjac testified that he had never asked, and his attorney Duric never told him, whether Barjactarevic or Pavlovic had authority to sell the property. He testified that he never considered the question of YACC's authority to sell the property because he did not believe it was his problem.

Tupanjac's attorney, Duric, testified that Tupanjac told him Barjactarevic and Pavlovic had proper authority to sell the property. Barjactarevic and Pavlovic confirmed this to Duric who made no independent investigation as to the ownership of the building. Duric also testified that the only reason he had included Barjactarevic's name on the documents was because he wanted YACC's secretary on the papers in the event there was a problem with the property. Duric further stated that he declared the "Full Actual Consideration" for the sale on the Cook County and Illinois tax declarations as being $0 because he then believed the sale was tax exempt due to YACC's non-profit status. These tax declarations list Barjactarevic as both "Seller or Agent" and as "Buyer or Agent."

In addition to the other documents, the evidence established that Barjactarevic and Pavlovic also signed a "Letter of Direction" which had been prepared by Duric. This document directed Duric to make repayment of various sums to certain individuals who had loaned money to YACC, as well as payments to release the tax liens. The payments to individuals were in various amounts, mostly between $500 and $1,000. Pavlovic testified that there was no meeting of the members concerning the distributions which were the subject of the "Letter of Direction," and that such a meeting was not necessary. Included were orders to Duric to pay Barjactarevic $25,000, to pay Pavlovic $28,000, and to pay himself $1,000.

On August 22, 1991, approximately one and one-half months following the recording of the Warranty Deed in Trust, Tupanjac and Barjactarevic, as "President Golden Pine, Inc.", executed an "Amendment to Trust Agreement," pursuant to an August 22, 1991 resolution of Golden Pine. The amendment states that the directors of Golden Pine had resolved to change the power of direction in the land trust from Barjactarevic, solely, to Barjactarevic and Tupanjac, jointly.

Three days later, Tupanjac wrote a check in the sum of $130,000 which he gave to Duric. Duric testified that he deposited the check in his business account and made disbursements of all but approximately $2,000 by check as indicated under the previously signed Letter of Direction. Of the members listed in the Letter of Direction, Duric testified that only those members who had returned to Yugoslavia were not repaid. Duric testified that this unpaid money remained in his business account. No check was ever written or given by Duric to YACC.

Barjactarevic testified that Tupanjac's payment of $130,000 was received for Barjactarevic's transfer of 50 shares of the stock in Golden Pine, Inc. to Tupanjac.

Consistent with the...