Zeilenga v. Stelle Industries, Inc.

• Decision Date: 26 September 1977
• Docket Number: No. 14397,14397
• Parties: , 10 Ill.Dec. 581 Craig A. ZEILENGA, Plaintiff-Appellant, v. STELLE INDUSTRIES, INC., a corporation, and the Stelle Group, a not-for-profit corporation, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 1347

367 N.E.2d 1347

52 Ill.App.3d 753, 10 Ill.Dec. 581

Craig A. ZEILENGA, Plaintiff-Appellant, v. STELLE INDUSTRIES, INC., a corporation, and the Stelle

Group, a not-for-profit corporation, Defendants-Appellees.

No. 14397.

Appellate Court of Illinois, Fourth District.

Sept. 26, 1977.

Rehearing Denied Oct. 27, 1977.

Walter L. Stodd, Pontiac, for appellant.

Ronald V. Hirst, Strock & Hirst, Pontiac, for appellee.

MILLS, Justice.

Fraud case.

Jury trial.

Verdict for plaintiff.

Judgment n. o. v.

We affirm.

Craig Zeilenga brought suit against Stelle Industries, Inc. and The Stelle Group alleging fraud and the jury returned a verdict for plaintiff in the amount of $10,000 plus $25,000 punitive damages. The trial judge, however, granted defendants' motion for a judgment notwithstanding the verdict.

The facts are these:

The Stelle Group was founded by Richard Kieninger in 1963 and organized as an Illinois not-for-profit corporation. It is an organization bound together by a philosophy espoused in a book entitled The Ultimate Frontier which functions as a bible for the group members and must be read and its precepts accepted by applicants to The Stelle Group before membership is granted. The major endeavors of The Stelle Group are the formation of Stelle Industries and the building of Stelle City. The former comprises a manufacturing concern in Ford County, Illinois, whereas the latter is a community also located in Ford County in which The Stelle Group members can live and work.

Plaintiff came into contact with The Stelle Group in October 1971, and, after attending orientation sessions and reading The Ultimate Frontier, was accepted as an "associate participant." Before becoming an "associate participant," Zeilenga had also read a pamphlet entitled Stelle, A City For Tomorrow, and was cognizant that he would not be accorded full membership status in The Stelle Group until he had spent a six-month associate period and had signed the "Social Contract".

After becoming an associate member, plaintiff a tool and die maker began spending his weekends at Stelle City and working on construction of the city. The following year he quit working on the construction of Stelle City and instead begun working two jobs and donating the entire pay from one of these jobs to The Stelle Group as a tithe. In return for donating his wages, he was given "priority points" which were to be used to determine housing priority at the Stelle City. Plaintiff contends that his motive in donating his time and money to defendants was in an effort to achieve priority in the housing accommodations, although he never expected to have the money returned or to be compensated for his time.

At the end of his six-month associate period with The Stelle Group, Zeilenga received a letter from Gail Kieninger (the sole member of the "admissions committee") informing him that the associate period was over and requesting that he submit an essay to the "admissions committee" articulating what he had learned as an associate and what he believed The Stelle Group was trying to teach. The letter also informed plaintiff that after the essay was submitted, he would be interviewed, his status as an associate would be reviewed, and consideration would then be given to granting him full membership. Despite this letter, and a subsequent letter of the same tenor, plaintiff did not submit an essay. Although his six-month associate period was over, his affiliation with The Stelle Group was not terminated until 21/2 years later. During this time, he quit his two jobs and started his own tool and die business at Stelle City. Furthermore, he bought 33 shares of stock at $100 per share in Stelle Industries at the solicitation of Richard Kieninger and endorsed these shares over to the voting trustee (Richard Kieninger).

On May 12, 1975, plaintiff received a letter from Gail Kieninger terminating his participation with the group. That letter detailed no reason for the termination, nor did The Stelle Group termination procedure contain any provision for appeal by disassociated participants. Plaintiff then commenced this action demanding return of his donations, compensation for his time, and punitive damages for the defendants' alleged fraud.

On appeal, Zeilenga contends that the trial judge erred when he set aside the jury verdict and entered judgment n. o. v. for defendants. Such judgments should be entered only when all of the evidence, viewed in its aspect most favorable to the opponent, so overwhelmingly favors the movant that no contrary verdict based on that evidence could ever stand. (Pedrick v. Peoria & Eastern R. R. Co. (1967), 37 Ill.2d 494, 229 N.E.2d 504.) This is the standard that the trial judge applied and we find that he correctly applied that standard to the facts of this case. We affirm.

There was no actual fraud in the instant case. In order to prove actual fraud it is incumbent upon plaintiff to establish that defendants' misrepresentation was an untrue statement of material fact, made with knowledge of its falsity for the purpose of influencing the other party who relied upon the statement. (Metropolitan Bank & Trust Co. v. Oliver (1972), 4 Ill.App.3d 975, 283 N.E.2d 62; see Broberg v. Mann (1965), 66 Ill.App.2d 134, 213 N.E.2d 89.) Here, there was absolutely no direct proof that any of defendants' agents ever told plaintiff that he was assured of getting a house at Stelle City or would definitely become a member of The Stelle Group.

Although no actual fraud is present, however, this does not necessarily preclude a finding of constructive fraud. Plaintiff argues that there was a fiduciary relationship between the parties and that defendants breached this fiduciary duty, thereby committing constructive fraud. Constructive fraud is presumed from the circumstances and condition of the immediate parties to the transaction. Winger v. Chicago City Bank & Trust Co. (1946), 394 Ill. 94, 67 N.E.2d 265.

We are...