author: Mr. PRESIDING JUSTICE McNAMARA

text:
    Suzanne G. Gowdy, Individually and as Adm’r of the Estate of Howard F. Gowdy, Deceased, Plaintiff-Appellee, v. Walter H. Richter et al., Defendants-Appellants.
    (No. 57691;
    First District (3rd Division)
    June 20, 1974.

      Stephen C. Shamberg and Friedman, Koven, Shapiro, Salzman, Koenigsberg, Specks & Homer, both of Chicago, for appellants A. C. McClurg & Co. and Philip Weisman.
    John L. Fogel, of Chicago, for appellant Robert H. Greenberg.
    Samuel E. Hirsch, of Chicago, for appellant Walter H. Richter.
    Querrey, Harrow, Gulanick & Kennedy, of Chicago (Donald C. Gancer and Francis B. Stine, of counsel), for appellees.
   Mr. PRESIDING JUSTICE McNAMARA

delivered the opinion of the court:

Howard F. Gowdy filed an action under the Illinois “Blue Sky” Law (Ill. Rev. Stat. 1967, ch. 12172, par. 137.1 et seq.) in the circuit court of Cook County seeking to rescind his $20,000 purchase of 200 shares of allegedly unregistered stock in Continental-Harrison Company, a Delaware corporation. Joined as defendants in the suit were Walter H. Richter, chairman of Continental’s board of directors; A. C. McClurg and Company, an Illinois corporation; Philip Weisman, McClurg’s president; and Robert H. Greenberg, a member of Continental’s board of directors. The defendants rejected Gowdy’s tender of the stock prior to trial and disclaimed liability under the statute. Gowdy died during the pendency of this action, and his widow, Suzanne G. Gowdy, was substituted as plaintiff in her capacity as special alministrator of Gowdy’s estate. At the conclusion of the trial, the court also granted her motion to be named as an individual plaintiff. After a bench trial, the court entered judgment for plaintiff imposing joint and several liability against all defendants for $28,500. The facts follow.

On July 29, 1965, a letter agreement was consummated between Weisman as president of McClurg and Richter regarding the purchase of the merchandise division of McClurg. Although a formal business contract was later executed, the letter contained the essential terms of the purchase. Richter and his unnamed associates were to create Continental-Harrison, which would buy the division of McClurg; arrange for the sale of $500,000 worth of capital stock of the buyer; deliver to McClurg an additional $500,000 worth of fully paid stock; pay McClurg $600,000 in cash prior to the closing date and $100,000 thereafter; allow McClurg to nominate three people to the buyers board of directors; compel the buyer to purchase a division of Luminator-Harrison Corporation; and establish a closing date between November 1 and December 15, 1965.

To meet these prerequisites, Richter caused Continental-Harrison to be incorporated in August, 1965; helped to elect three nominees of Weisman to Continental’s board of directors; had Continental acquire Luminator-Harrisoris assets; made Continental’s necessary cash payments; directed Continental’s secretary to issue 10,000 shares of Class A common stock, par value $100, by the December 3 closing date. One-half of the shares, fully paid, were given to McClurg; the remaining half were purchased by a few people, with Richter owning at least 25 percent of the outstanding stock.

Gowdy, then unemployed, interviewed with Richter for employment in late December, 1965, or early January, 1966. Based upon his years of experience in marketing and sales promotion, he hoped to join Continental. An agreement was worked out whereby Gowdy would purchase a substantial amount of shares of stock in Continental. In turn, Richter would hire Gowdy. A cashier’s check for $20,000 was issued on January 14, 1966, naming as payee “Walter Richter C-H-A-C,” and was given to Richter by Gowdy on January 16. The check identified Gowdy as the remitter. The check, introduced into evidence, bore on the reverse side the restrictive endorsement “For deposit only Walter Richter C-H.” Richter testified that the initials referred to a bank account set up to act as a clearing house for funds used to purchase capital sock in Continental.

A letter signed by Richter and bearing the date January 17, 1966, was introduced into evidence. It contained directions to the corporate secretary to cancel an enclosed certificate for 200 shares of common stock, par value $100, listed in the name of Edward Lutz, and to issue a new certificate for 200 shares of the same stock to Howard and Suzanne Gowdy as joint tenants. The Gowdy certificate was issued, and Gowdy commenced work as a sales manager of a Continental subsidiary on January 17.

On May 11, 1966, Continental petitioned for bankruptcy and was placed in receivership. In 1966 Gowdy visited his attorney regarding a promissory note owed to him by Richter. On March 20, 1968, Gowdy notified Richter of his election to rescind the stock purchase, tendered the stock, and demanded repayment of the purchase price. A similar notice and tender were given to the other defendants on September 26 or 27, 1968. Mrs. Gowdy also made a tender of the stock at trial, but it was again rejected by the defendants.

At the conclusion of the trial, after receiving proposed findings of fact and conclusions of law, the trial court found in favor of the plaintiff and entered judgment against all four defendants in the amount of $28,500, consisting of the $20,000 purchase price, $6000 in accrued interest, and $2500 in attorneys’ fees.

Defendants McClurg, Weisman, and Greenberg contend that the trial court erred in finding that the purchased stock had not been properly registered; in holding that the plaintiff had complied with the tender and notice provisions set forth in the Illinois Securities Act; in granting attorneys’ fees to plaintiff; and in holding that the evidence sustained their substantive Kability under the statute. Richter has filed a separate brief adopting the first three contentions of the other defendants, but does not contest his substantive liability. Richter additionally argues that he should escape any Hability for selling unregistered securities because strict comphance with section 4G, one of the registration exemption provisions, is not required, and because the plaintiff should be estopped from rescinding the purchase.

Pursuant to section 13 of the Securities Act (Ill. Rev. Stat. 1967, ch. 121%, par. 137.13 A & B), a purchaser may elect to rescind a sale of securities made in violation of the provisions of the securities law upon the giving of timely notice and upon the tendering back of the securities to certain designated persons. All securities except those exempt are required to be registered with the Secretary of State’s office prior to being offered or sold in this state. (Ill. Rev. Stat. 1967, ch. 121%, par. 137.5) Failure to comply with the requirement constitutes a violation of the Act. (Ill. Rev. Stat. 1967, ch. 121%, par. 137.12 A & D) A defendant bears the burden of showing that an unregistered security qualifies as an exemption under the Act. Ill. Rev. Stat. 1967, ch. 121%, par. 137.15A.

Defendants initially contend that the trial court erred in finding that the securities sold in the present case were not registered at the time of sale and were thus sold in violation of the Act.

Plaintiffs complaint alleged that the stock had not been registered at the time of the sale in violation of the Securities Act. Richter’s answer admitted the averment. The other defendants framed their answers in the alternative, stating that they did not have sufficient knowledge to form a belief as to the truth of the allegation, but that “if a certificate was issued to plaintiff, it represented the transfer of all or part of a previously issued certificate that was owned by a person other than defendants [Weisman, McClurg, or Greenberg].”

An admission in an answer constitutes a judicial formal admission, conclusive as to the admitted fact on the person making it. Thus, Richter’s specific admission is binding upon him. Coss v. Magdziasz (1965), 65 Ill.App.2d 40, 212 N.E.2d 717.

In evaluating the recitals in the answers of the other three defendants, we must determine if the answers fairly respond to the substance of the allegation denied. (Ill. Rev. Stat. 1967, ch. 110, par. 40(3).) The failure of a defendant to explicitly deny a specific allegation in the complaint will be considered a judicial admission and will dispense with the need of submitting proof on the issue. Continental Casualty Co. v. Fleming (1964), 46 Ill.App.2d 276, 197 N.E.2d 88.

The second part of defendants’ answers responds only to the question of who the seller was and fails to address itself to the charge that the stock was not registered at the time of sale. Since the evidence adduced at trial clearly showed that a certificate for 200 shares of stock had been issued to Mr. and Mrs. Gowdy for consideration, the failure of the defendants to explicitly deny the allegation that the stock was not lawfully registered at the time of sale appears to be a binding admission of that fact. Moreover, even if the answers were sufficient to create an issue of fact, defendants’ position has no merit. Although plaintiff did not introduce direct proof that the stock sold was not registered at the time of sale, it is equally clear that defendants never disputed plaintiffs charge that the stock was non-registered. Defendants stipulated at trial that a report of sale had never been filed by anyone. The fifing of a report of sale is one condition set out in section 4G of the Act to qualify an unregistered security as an exemption from the registration requirement. The defendants, in their proposed findings of fact, later reiterated their assertion that a report of sale had not been filed. Although defendants now characterize their statement in the proposed finding as an “informal suggestion,” we perceive it as an admission (see Allen v. United States Fidelity & Guarantee Co. (1915), 269 Ill. 234, 109 N.E. 1035), since the purpose of proposed findings of fact is to enable the trial court to perceive and decide facts that are in issue. (Dendor v. Board of Fire & Police Commissioners (1973), 11 Ill.App.3d 582, 297 N.E.2d 316.) Furthermore, when specifying in their proposed conclusions of law the various elements plaintiff had to prove to prevail in this case, defendants totally omitted any mention of a violation of the Act. It seems clear that defendants conceded the fact that the stock was not registered at the time of sale.

Defendants next contend that the trial court erred in holding that the "purchaser” of the stock, for the purposes of making a tender of the stock and of supplying timely notice under the statute, was solely Mr. Gowdy. Defendants argue that the manifest weight of the evidence establishes Mrs. Gowdy as a joint purchaser with her husband, and hence a necessary party in the making of a tender and in the giving of timely notice. The record shows that Mr. Gowdy alone gave defendants notice of the rescission, and that Mr. Gowdy prior to trial, and Mrs. Gowdy during trial, made a tender of the stock to the defendants, although the parties disagree as to her capacity at the time she made the tender.

Richters answer to the complaint admitted that the stock was sold to Mr. Gowdy. Since sale and purchase are complementary terms (see Ill. Rev. Stat. 1967, ch. 121½, par. 137.2 — 5), we consider his answer a formal judicial admission uncontestable on review.

Since the other defendants denied all the charges contained in the purchaser allegation of the complaint, we must analyze the evidence offered at trial.

Mr. Gowdy, unemployed at the time, wrote Richter seeking to join Continental in a position commensurate with his experience. After the two men met, they agreed that Gowdy would be employed by Continental or one of its subsidiaries at an administrative or executive level. Gowdy, in turn, would purchase a substantial amount of stock. On January 14, 1966, Gowdy had a cashier’s check drawn specifying “Walter Richter C-H-A-C” as payee, which was tendered to Richter on January 16. Gowdy was listed as remitter on the face of the check. The check was endorsed on the reverse “For deposit only Walter Richter C-H.” The C-H account was set up by Richter upon the advice of his bank as a clearing house account for capital stock transactions involving Continental. On January 17, Richter directed the corporate secretary to cancel an outstanding certificate issued in the name of Edward Lutz and to issue a new one, pursuant to Gowdy’s instructions, in the name of Mr. and Mrs. Gowdy as joint tenants with right of survivorship. At the same time, Gowdy began work as sales manager of Continental’s subsidiary corporation.

Mrs. Gowdy testified that all the funds making up the purchase price were borrowed. The moneys were derived from three sources: her father, Mr. Gowdy’s brother, and a bank. The loan from the bank was obtained by increasing the mortgage on the Gowdy residence, which was held in joint tenancy. She also testified that she had participated in raising the funds and that she considered herself to be a joint owner of the stock.

The trial court’s finding as to the purchaser in a securities transaction will not be overturned on review unless contrary to the manifest weight of the evidence. (Frenzel v. Lonnquist Co. (1940), 304 Ill.App. 377, 26 N.E.2d 687.) Although the term “purchaser” is not defined in the statute, we think a proper definition is a party to a transaction wherein he assumes ownership in exchange for valuable consideration. See Williamson v. Berry (1850), 49 U.S. 495.

We believe that the trial court properly found that Mr. Gowdy alone had purchased the stock. We consider it important to focus upon the actions and conduct of Richter, the man who directly negotiated the sale to Gowdy, Richter alone would know with whom he was negotiating, particularly in light of the fact that defendants claim neither fraud on the part of Gowdy nor an undisclosed principal-agent relationship between the Gowdys.

At all times, the negotiations for the stock purchase were handled solely by Richter and Gowdy. The employment contract concerned only Gowdy. His was the only name listed as remitter on the check used to buy the stock. Gowdy gave the check to Richter. When Gowdy instructed Continental to issue the stock in the names of himself and his wife as joint tenants, no objection was raised by Continental regarding Gowdy’s authority to issue directions concerning the stock.

Since she was totally outside the contract negotiations for the purchase of stock, the largest role that Mrs. Gowdy can assume in the transaction is one of financier. Yet a financing party may assume a variety of legal roles with regard to the benefited party, such as donor, lender, or beneficiary of a resulting trust, that have no relationship whatever to the agreement between the contracting parties.

Defendants correctly point out that Mrs. Gowdy considered herself to be an owner of the stock. Indeed, she was the owner of an undivided one-half interest in the property. However, a person may become an owner of property without having been involved in the original sales contract. In the instant case, the person having the sole interest in making this deal was the purchaser and contracting party, Howard Gowdy. The court did not err in holding that Gowdy alone was the purchaser, and that his tender of the securities, and notification to the defendants satisfied the statute.

Defendants next urge that Mr. Gowdy’s notification to them of his election to rescind the purchase was not in timely accord with the statute. The relevant provision, section 13B, states that the purchaser must give notice to those from whom he intends to seek recovery “within six months after the purchaser shall have knowledge that the sale of the securities to him is voidable.” The record discloses that Gowdy tendered notice to Richter on March 20, 1968, and to the other defendants on either September 26 or 27, 1968.

Richter cannot contest the timeliness of the notice. Plaintiffs complaint alleged that Mr. Gowdy on March 8, 1968, first learned that the sale of the stock was voidable as to Richter, and notice was given Richter 12 days thereafter. Richters answer admitted this allegation, denying only its legal relevancy. Richter thus made a formal, binding judicial admission.

The other defendants denied that the notice tendered to them on September 26 or 27, 1968, was timely. They contend that the defendant knew or should have known of their possible involvement in the sale at a much earlier time based upon the following facts in the record: 2 months after the sale to Gowdy, Continental petitioned for bankruptcy; Gowdy visited with his attorney in the fall of 1966 regarding a matter involving Richter; the notice to them was tendered 25 weeks after Richter received his notice.

The 6-months rule regarding notice is not a statute of limitations. Rather, it is an equitable feature built into the statute to protect against stale claims. The issue of when a purchaser has sufficient knowledge to realize a sale is voidable against a particular defendant is a mixed question of law and fact on which a layman is entitled to acquire his first knowledge from an attorney. Curtis v. Johnson (1968), 92 Ill.App.2d 141, 234 N.E.2d 566.

Donald. Gancer, one of plaintiffs attorneys, testified that he first learned of a possible securities violation on March 8, 1968, when in response to his letter of inquiry the Secretary of State informed him that no report of sale had ever been filed by Richter or Continental regarding the stock. Notice of election to rescind was given Richter on March 20, and this complaint was filed against Richter alone on March 27, 1968. Gancer testified that it was not until July 17, 1968, during the taking of Richter’s deposition relating to the suit, that the witness obtained knowledge, based upon the letter agreement and subsequent contract, of the possible involvement of the other defendants. Gancer then gave notice to the other defendants on September 26 or 27.

The testimony was sufficient to establish the time that Gowdy and his attorney obtained knowledge of the possible involvement of the other defendants. The attorney was a competent witness. Where an attorney for a party takes the stand to testify, the fact of his employment goes to the weight, not the competency, of his testimony. (Manion v. Chicago, Rock Island & Pacific Ry. Co. (1956), 12 Ill.App.2d 1, 138 N.E.2d 98.) Nor were defendants improperly restricted in their attempt on cross-examination to show Gancer was an interested witness. The pleadings revealed that plaintiffs attorneys were seeking fees of $6000. Defendants attempted to leam whether the attorneys had already been paid their fees, and the court sustained plaintiffs objection. The fact of interest had already been shown, and the trial judge did not abuse his discretion in limiting the extent of the examination. (See Noncek v. Ram Tool Corp. (1970), 129 Ill.App.2d 320, 264 N.E.2d 440.) In any event, it would not be reversible error.

The passage of time in and of itself cannot be deemed constructive notice on the part of Gowdy of defendants’ possible involvement, especially in a complicated securities case such as this. (Compare Moran v. Union Bank (1933), 352 Ill. 503, 186 N.E. 182.) Furthermore, we can conceive of no constructive notice to Gowdy as to the non-registered nature of the stock by virtue of Continental’s bankruptcy petition. Nor is there any basis to suggest that Gowdy’s visit to an attorney in 1966 should have put him on notice of the possible voidability of. the stock sale as to these defendants. Gowdy talked to the attorney then about an unrelated matter, a promissory note owing to him by Richter. Gowdy’s only contact was with Richter, and Richter testified that Gowdy had no knowledge of any of the financial transactions involving the other defendants. We will not assume, without evidence, that Gowdy knew not only that the sale was voidable but also that all these defendants were involved. We will not engage in such speculation, especially since the purpose of the statute is to protect the inexperienced investor against the irresponsibility of persons engaged in the business of disposing of securities of uncertain value. Stein v. Twilight Motel, Inc. (1961), 29 Ill.App.2d 131, 172 N.E.2d 642; Silverman v. Chicago Ramada Inn, Inc. (1965), 63 Ill.App.2d 96, 211 N.E.2d 596.

We will now consider contentions advanced by Richter, but not urged by the other defendants.

Richter argues initially that strict compliance with most of the conditions set out in section 4G should not be demanded in determining whether the sale of an unregistered security qualifies under the protective features of this exemption provision. In short, he maintains that the requirement of the statute dictating the filing of a report of sale should be read in a directory and not mandatory fashion. This contention was not advanced in the trial court, and thus must be deemed waived for purposes of review. (Woman's Athletic Club v. Hulman (1964), 31 Ill. 2d 449, 202 N.E.2d 528.) Moreover, the language of the statute is specific in mandating the filing of the report and absent total compliance with its directives precludes one from claiming the exemption. See Mark v. McDonnell & Co. (7th Cir. 1971), 447 F.2d 847.

Richters contention that the “offering of sale” provision in section 4G is void for vagueness also was not made in the trial court and must be considered waived. Furthermore, this portion of the section did not become law until 3 years after the instant sale and hence Richter has no standing to challenge it.

Richter’s final separate contention appears to be that since Gowdy conditioned his purchase of stock on obtaining an employment contract from Continental, he should be estopped from rescinding his purchase of the securities. No legal authority is cited in support of this proposition.

The law in Illinois is clear in allowing only statutory, not equitable, defenses to be raised by a defendant in a case involving a blue sky violation. The penal character of the statute negates the utilization of in pari delicto or estoppel defenses. (Hudson v. Silver (1933), 273 Ill.App. 40; Wehrwein v. Eastman Springs Beverage Co. (1925), 238 Ill.App. 443.) Additionally, the estoppel argument is predicated on the proposition that the quid pro quo arrangement between Gowdy and Richter was improper. To be deemed illegal, a contract must expressly contravene the law or known public policy. (Simmons v. Columbus Venetian Stevens Buildings, Inc. (1958), 20 Ill.App.2d 1, 155 N.E.2d 372.) The instant contract did neither. In our opinion, the estoppel argument is without merit.

We next consider the substantive features of section 13A in weighing the contentions of McCIurg, Weisman, and Greenberg that the findings of their liability were against the manifest weight of the evidence. Richter does not contest his substantive liability.

Section 13A provides that joint and several liability will be imposed upon

“the issuer, controlling person, underwriter, dealer or other person by or on behalf of whom said sale was made, and each underwriter, dealer or salesman who shall have participated or aided in any way in making such sale, and in case such issuer, controlling person, underwriter or dealer is a corporation or unincorporated association or organization, each of its officers and directors (or persons performing similar functions) who shall have participated or aided in making such sale * *

A “controlling person” is defined by statute to be

“any person selling a security, or group of persons acting in concert in the sale of a security, owning beneficially * * * either (i) 25% or more of the outstanding voting securities of the issuer of such security where no other person owns or controls a greater percentage of such securities, * *

(Ill. Rev. Stat. 1967, ch. 121%, par. 137.2 — 4.) A “person” includes a corporation. Ill. Rev. Stat. 1967, ch. 121%, par. 137.2 — 3.

Among the several findings of liability against Richter and McClurg, the trial court found that both acted as a controlling person on whose behalf the stock was sold pursuant to the agreements entered into between them, and that both “participated or aided” in making the sale. The statute clearly reads that liability is established if either of the findings is correct.

In our judgment, the trial court was justified in finding that the Mc-Clurg corporation was a controlling person on whose behalf the stock was sold. McClurg and Richter owned 50 percent and a minimum of 25 percent, respectively, of the outstanding voting shares of Continental at the time of the sale to Gowdy. Richter was contractually obligated to perform several condition precedents within a short time in order to purchase McCIurg’s subsidiary. Large sums of money had to be furnished by a newly formed corporation, and the bulk of the money was to be obtained through the sale of Continental’s capital stock. Although McClurg may not have been directly obligated to sell Continental’s stock, there can be no doubt that any stock issued through Richter’s efforts up to the time the letter agreement and contract were satisfied were performed on McCIurg’s behalf as well. Direct benefit inured to McClurg because the proceeds derived from the sale of stock would go to Mc-Clurg in satisfaction of the contract terms.

In a case in point, Abrams v. Love (1929), 254 Ill.App. 428, the plaintiff purchaser attempted to rescind the sale of stock made by subsidiary corporations of the defendant. Since the statute at that time permitted rescission only as to the “seHer,” defendant disclaimed Hability. This court sustained plaintiff”s position, holding that defendant sponsored the organization of the subsidiaries. Moreover, the parent, in developing the subsidiaries, knew it could pay for the development costs only out of the proceeds from the sale of the subsidiaries’ stock. In the present case, McClurg, for all practical purposes, sponsored-Continental, a new corporation. It also knew that Continental would be able to obtain enough money to fulfiH its obligations to McClurg only by the sale of large amounts of capital stock.

McClurg argues, however, that it was impossible for the sale of stock to Gowdy on January 17, 1966, to have been on its behalf since at the time of closing on December 3, 1965, the requisite stipulated amount of 10,000 shares of stock had been issued and fully paid for.

We befieve that the record shows otherwise. The transfer record book of Continental, detailing the issuance of stock up to December 3, 1965, recited that the stock was issued and all the money received. However, Edward Lutz, a disinterested and uncontradicted witness, listed as having purchased 700 shares of stock on August 31, testified that after receiving his certificate he protested to Continental that he had only purchased 500 shares of stock. On December 21 Continental attempted to cure the error, but merely cancelled the certificate for 700 shares and issued to Lutz two certificates for 500 and 200 shares. Lutz again informed Continental of the fact that he had purchased only 500 shares. The error was not corrected until the Gowdy purchase. Richter then instructed the secretary to cancel the Lutz certificate for 200 shares and issue a new one for the same amount to the Gowdys.

We believe that plaintiff met her burden of showing that the sale of securities to her husband was made pursuant to the June 29 letter agreement. Although the McClurg contract recited that the 10,000 shares were to have been issued and paid for by the December 3 closing date, it is clear that as to at least 200 shares that had not been accomplished. It was not plaintiff’s burden to detail how the corporation received the extra $20,000 in making up the $400,000 tendered to McClurg on August 31. A corporation intent on fulfilling its contract could have received the money in a variety of ways and issued the extra stock with the intent of “floating it” until a buyer could be found.

Richter himself testified that the proceeds from the Gowdy stock sale ultimately became part of the $400,000 supplied to McClurg. Although defendants argue that this testimony was conclusionary and should not have been admitted into evidence, we do not agree. Richter played the key role in the promotion of Continental’s stock and was definitely in the position of knowing which persons were supplying the needed consideration. In any event, even if it were considered to be the witness’ opinion, the fact that the witness had special knowledge of the matter in question and testified without analyzing the reason for the opinion or noticing its elements qualifies the testimony as an exception to the traditional lay witness opinion exclusion rule. State Farm Mutual Automobile Insurance Co. v. Short (1970), 125 Ill.App.2d 97, 260 N.E.2d 415.

McClurg suggests that the stock sold to Gowdy was probably owned by Richter himself and thus benefited him alone. McClurg notes that Lutz signed his name to the back of the erroneously issued stock certificate and that it eventually wound up in Richter’s hands. The purchase money for the Gowdy sale was placed in the “Walter Richter C-H” bank account.

We do not believe that the foregoing facts warrant the legal conclusions offered by McClurg. The corporate secretary testified that Richter would instruct him to whom a certificate should be issued. Richter also was the person who handled the purchase money for the stock. Thus it would not be unusual for Richter in his corporate capacity to receive an erroneously issued certificate. Moreover, we do not consider it significant that Lutz’ signature appears on the back of the certificate. Lutz never claimed ownership of the certificate ascribing 700 shares to him. His signature could not be considered a blank endorsement. Richter also testified that the designated bank account was a corporate accoimt used as a clearing house for the sale of capital stock. Although the other defendants sought to impeach him on this issue by his testimony in another trial, he sufficiently explained his prior testimony to the degree that the trial court in tire present case could properly find that the account was used for Continental’s corporate activities. The trial court’s finding of liability as to McClurg was not contrary to the manifest weight of evidence.

We next consider the correctness of the liability imposed personally upon Philip Weisman, the president and 90 percent shareholder of Mc-Clurg, a closely held Illinois Corporation. In imposing personal liability on Weisman, the court found McClurg to be the alter-ego of Weisman.

A corporation is an entity separate and distinct from its members. Liability cannot be imposed on an officer or director of a corporation because he held that position at the time a certain action occurred, or because he, as an agent of the corporation, was the person the aggrieved party dealt with regarding a particular transaction. (Krumrine v. Wilbur E. Howett Co. (1941), 311 Ill.App. 243, 35 N.E.2d 395 (abstract opinion).) In addition to grounds of fraud and inadequate capitalization, the corporate veil will be pierced only when the existence between the director or officer and the corporation has attained “such unity of interest and ownership that the separateness of the individual and corporation has ceased to exist, and the facts are such that an adherence to the fiction of separate existence of the corporation would sanction a fraud or promote injustice." People ex rel. Scott v. Pintozzi (1971), 50 Ill.2d 115, 128-129, 277 N.E.2d 844.

In the present case, plaintiff does not claim fraud, under-capitalization, or the promotion of injustice. She maintains that McClurg is the alter-ego of Weisman solely because of one clause contained in the letter agreement. That clause gave Richter and his associates the right to purchase back from McClurg the shares of Continental stock bought by McClurg “in the event that the Philip Weisman family at any time ceases to control A. C. McClurg.”

We deem this reference insufficient to pierce the corporate veil. The Continental stock was given to McClurg, not to Weisman. If and when the Weisman family ceased to control McClurg and Continental chose to exercise its option, the proceeds of the sale would accrue to McClurg. We do not believe that plaintiff established the existence of such unity of interest and ownership that the separateness of Weisman and Mc-Clurg had ceased to exist. The trial court erred in imposing liability upon Weisman personally.

We next discuss the issue of Greenberg’s liability under the statute. The trial court found that Greenberg, a director of Continental, had actual knowledge of the sale to Gowdy and that such knowledge, absent his dissent, was sufficient to prove he “participated or aided” in the sale.

Prior to his election to Continental’s board of directors as one of McClurg’s nominees, Greenberg served as financial consultant to both McClurg and Continental. His chief duties as director were directed toward the arranging of financing for Continental. Greenberg testified that he was never consulted concerning the possibility of Howard Gowdy buying stock in Continental. He stated that the first time he heard of Gowdy was when he received the latter’s notice of rescission and complaint in this action.

The sole testimony relating to Greenberg’s possible knowledge came from Richter. He stated that the Gowdy sale came up at a meeting attended by himself and “Greenberg or Weisman.” Richter further stated he could not remember any conversation he had with Greenberg concerning the Gowdy sale. However, under persistent questioning by plaintiff’s counsel, Richter finally stated “that under the circumstances, looking retroactively, that the matter came up and we probably discussed the issuance of the stock.” Defendant’s request that the answer be stricken as conjecture was overruled by the trial court.

The trial court erred in allowing the foregoing answer to stand. The answer was totally speculative and possessed no probative value. (Kanne v. Metropolitan Life Insurance Co. (1941), 310 Ill.App. 524, 34 N.E.2d 732.) Since there was no competent evidence to establish that Greenberg had knowledge of the Gowdy sale, the trial court erred in imposing personal liability upon Greenberg. In so holding, it is unnecessary to reach the question whether knowledge alone plus failure to object to the sale would have been enough to establish that Greenberg “participated or aided” in the sale.

The final contention raised by all the defendants is that the trial court erred in awarding $2500 in attorneys’ fees when the attorneys had a contingent fee contract with plaintiff.

The pertinent statutory provision is section 13A(2). It states that in addition to the full amount paid for the securities and interest, a purchaser of a voidable security is entitled to an award for “reasonable fees of such purchaser’s attorney incurred in any action brought for recovery of the amounts recoverable hereunder,”

In Spiegel v. Frangoulis (1933), 271 Ill.App. 526, the only case in point, this court interpreted a provision of like substance and held that, where plaintiffs attorney is operating on a contingent fee basis with his client, separate damages for attorney’s fees should not be awarded. The court stated at page 531:

“It seems clear to us that the attorney’s fees contemplated by this section are those which the purchaser of the securities either has paid to his attorney for the service or the amount which he has become obligated to pay therefor, and does not refer to situations like the present case, where the client has not paid, nor engaged to pay, the attorney for the service rendered, but has agreed to give him therefor a portion of what he may recover, it being contingent upon his prevailing in the suit ***."

We are not persuaded by the reasoning in Spiegel and respectfully decline to adopt its holding. Overlooking what appears to be an internal inconsistency in the holding since a purchaser on a contingent fee basis becomes “obligated to pay” once a verdict is returned in his favor, we believe that to impose an interpretation of this section as advocated by defendants would discourage suits of tins nature. The statute itself does not state that a purchaser must make a choice regarding the manner in which he will compensate his attorney. The clear purpose of the provision is to warn violators of the securities law that based upon the penal character of this law they will be responsible for reasonable attorney’s fees incurred in returning the purchaser to his status quo. As our supreme court observed in Foreman v. Holsman (1957), 10 Ill.2d 551, 553-554, 141 N.E.2d 31:

“The fact that upon rescission one may recover attorneys’ fees, as well as the purchase price, indicates that this civil remedy is intended to afford an additional punishment for an offending party. To permit this remedy to be “waived” or “released” prior to or contemporaneously with the sale of unregistered securities could thwart the very objective of the statute and violate the declared public policy of this State.”

The trial court correctly awarded reasonable attorneys’ fees.

For the foregoing reasons, the judgment of the circuit court of Cook County in favor of plaintiff in the sum of $28,500 against Walter H. Richter and A. C. McClurg and Company is affirmed. The judgment against Philip Weisman and Robert H. Greenberg is reversed.

Affirmed in part; reversed in part.

McGLOON and MEJDA, JJ., concur.


source: Caselaw Access Project

author: Mr. JUSTICE McGLOON

license: Public Domain

text:
      In re Application of Bernard Korzen, County Collector — (Geraldine D. Hoffman, Objector-Appellant.)
    (No. 59262;
    First District (3rd Division)
    June 20, 1974.
    Thomas E. Brannigan, of Price, Cushman, Keck, Mahin & Cate, of Chicago, for appellant.
    Bernard Carey, State’s Attorney, of Chicago, for appellee.
   Mr. JUSTICE McGLOON

delivered the opinion of the court:

The Cook County Collector made application in the circuit court of Cook County for judgment and order of sale against certain real property for delinquency in the payment of general taxes for 1971. Geraldine D. Hoffman filed objection no. 508 to the application, alleging that the assessed valuation of the property in question was excessive. The County Collector filed a motion to dismiss objector’s “amended valuation and tax rate objection” on the basis that objector failed to exhaust her administrative remedies. The circuit court sustained the county’s motion to dismiss the amended objection. Objector has appealed from that order.

Objector presents two related issues for review. First, she questions whether a holder of a certificate of purchase from a tax sale of property is required to file an overvaluation complaint with the Board of Appeals as a prerequisite to objecting to the assessed valuation of property. Second, she questions whether as a holder of a certificate of purchase she was required to file an overvaluation complaint with the Board of Appeals where the assessment list for the township where the property was located was published after the time for filing overvaluation complaints with the Board had expired.

We affirm.

On December 29, 1972, objector paid the 1971 real estate taxes on a certain parcel of real estate located in Chicago, Illinois in full and under protest. At this time objector was tire owner of the property, having acquired a tax deed on May 12, 1972. Before this date objector was the holder of a certificate of purchase for the property. During the period of time objector was a holder of a certificate of purchase the Property Tax Appeal Board was hearing complaints regarding property located in Hyde Park Township. The Board held their official meeting during the period of January 3, 1972, to January 14, 1972, pursuant to statutory notice. The Cook County Assessor published the assessment list for the instant property located in Hyde Park Township on January 19, 1972. This assessment forms the basis of Hoffman’s objection. At the time objector filed her amended objection to the application for judgment and order of sale she was no longer the owner of the property which she had sold on January 11, 1973.

The amended objection alleged in essence that the 1971 assessment was so excessive as to be constructively fraudulent. Objector based this allegation on the difference between the assessed valuation and the sale price of the property on January 11, 1973. The sole ground of the County’s motion to dismiss was that objector had failed to exhaust her administrative remedies.

In regards to objector’s first contention that a holder of a certificate of purchase, as opposed to an owner, need not file a complaint before the Property Tax Appeal Board, section 117 of the Revenue Act of 1939 provides in pertinent part:

“In counties containing 1,000,000 or more inhabitants, complaints that any particular property, real or personal, described therein, is over assessed or under assessed or is exempt may be made by any taxpayer.” (Ill. Rev. Stat. 1971, ch. 120, sec. 598.)

The statute speaks in terms of “any taxpayer” and does not, on its face, distinguish between the owner of property and the holder of a certificate of purchase. As a taxpayer who was objecting to the valuation of the property objector was required to file a written complaint with the Board of Appeals. Objector has cited no authorities in support of her position.

Assuming that the statute allows persons other than owners to file complaints, objector next urges that we relax the doctrine of exhaustion of administrative remedies in the instant case because that doctrine was based on a constitutional provision on longer in force. A statement of the general rule of exhaustion as applicable to the instant case can be found in People ex rel. Brittain v. Outwater, 360 Ill. 621, 624, 196 N.E. 835, 836, wherein the court stated:

“Courts have no power to fix the value of property for taxation, and before a taxpayer may resort to the courts for relief he must show that he has been diligent in pursuing his remedy to have the assessment corrected by the board of review or that he was prevented from pursuing such remedy by fraud, accident or mistake. (Kinderman v. Harding, 345 Ill. 237; People v. Hart, 332 id. 467).”

This rule has been applied to situations where relief was sought on the ground that the assessment was so excessive as to be constructively fraudulent. See Budberg v. County of Sangamon, 4 Ill.2d 518, 123 N.E. 2d 479.

Objector argues that the exhaustion requirement has been mitigated by the 1970 Constitution. She points out that the line of cases which support the exhaustion requirement rest upon the provision of the 1870 Illinois Constitution which provided that the value of property for taxpayers shall “be ascertained by some person or persons, to be elected or appointed in such manner as the general assembly shall direct, and not otherwise; * * (Ill. Const. art. IX, sec. 1 (1870); People ex rel. Nordlund v. Lans, 31 Ill.2d 477, 202 N.E.2d 543.) The 1970 Constitution does not have this exact language. The comparable section of the 1970 Constitution provides: “Except as otherwise provided in this Section, taxes upon real property shall be levied uniformly by valuation ascertained as the General Assembly shall provide by law.” (Ill. Const. art. IX, sec. 4 (1970).) Objector has not persuaded us that the difference in the two sections suggests any erosion of the exhaustion requirement. The legislature has provided a comprehensive system for revision of assessments by the Board of Appeals. (Ill. Rev. Stat. 1971, ch. 120, secs. 593-606). The legislature amended all of these sections in 1970. The exhaustion doctrine is still alive. See In re Application of County Treasurer, 5 Ill.App.3d 694, 283 N.E.2d 905.

Objector’s second contention is that she was excused from filing a complaint with the Property Tax Appeal Board because the assessment list was published after the time for filing complaints with the Board of Appeals had expired. Objector did not attempt to file a complaint with the Board of Appeals. She does not allege that she was prevented from filing a complaint by fraud, accident, or mistake. (People ex rel. Brittain v. Outwater, supra.) In the case of In re Application of County Collector, supra, objectors alleged that they appeared at the office of the Board of Appeals on five separate occasions to file a complaint but were given a “run around.” Nevertheless the court held they could not file their objection to the excessive valuation for the first time in an application for judgment and order of sale. The court noted that objectors should have compelled the Board of Appeals to hear their complaint by means of a mandamus action.

In the instant case the record is devoid of any allegation that objector attempted to file a complaint with the Board of Appeals. A demand upon the Board of Appeals to consider the complaint in the first instance would have been appropriate. (See First National Bank v. Board of County Commissioners, 264 U.S. 450.) Mandamus was not yet necessary. See White v. Board of Appeals of Cook County, 45 Ill.2d 378, 259 N.E.2d 51.

For the above reasons, the order of the circuit court dismissing objection no. 508 is affirmed.

Judgment affirmed.

McNAMARA, P. J., and MEJDA, J., concur. .


text:
    Douglas Middleton et al., Plaintiffs-Appellants, v. The License Appeal Commission of the City of Chicago et al., Defendants-Appellees.
    (No. 59316;
    First District (3rd Division)
    June 20, 1974.

      Reibman and Hoffman, Ltd., of Chicago, for appellants.
    Richard L. Curry, Corporation Counsel, of Chicago (Daniel Pascale and Dennis James Stolfo, Assistant Corporation Counsel, of counsel), for appellees.
   Mr. PRESIDING JUSTICE McNAMARA

delivered the opinion of the court:

Plaintiffs filed an administrative review action in the circuit court of Cook County to set aside an order of the local liquor control commissioner of the City of Chicago. The order, which was affirmed by the city’s License Appeal Commission, suspended for 15 days the retail liquor license held by plaintiffs. The trial court sustained the order, and plaintiffs appeal. The charge against plaintiffs was that they permitted an assault to take place upon one of their patrons in their licensed premises, in violation of the Liquor Control Act of Illinois (Ill. Rev. Stat. 1971, ch. 43, par. 110) and Rule 3 of the Rules and Regulations adopted by the Commission.

The pertinent facts are undisputed. David Hadley visited plaintiffs’ tavern located in the City of Chicago at 10:30 P.M. on November 27, 1971. Hadley testified at the hearing that when he walked up to the bar to purchase a drink, an unidentified patron approached him and began “fussing” with him for no apparent reason. Hadley further testified that he and the patron then went outside and began fighting "far away” and “to the left” of the tavern. During the fight, the patron pulled a knife and stabbed Hadley in the back. Hadley later took a taxi to a hospital, from which he was released two hours later.

Douglas Middleton, a co-licensee and co-plaintiff, testified that he and two bartenders were behind the bar serving drinks on the evening in question. The other owner, John Boyd, was not present when these events occurred. Although the tavern was crowded and Middleton did not wait on Hadley, Middleton recalled catching a glimpse of Hadley at the opposite end of the bar. At some point that evening, the bartender closest to Middleton told him that there was “some confusion” at the end of the bar. Middleton looked up just in time to see one man run out the door. This was all Middleton knew. He denied knowledge of the occurrences which took place outside.

The Commission made two findings:

1. That on November 27, 1971, during an altercation on the licensed premises, David Hadley was assaulted by unknown persons with a deadly weapon, to-wit: a knife.

2. That on November 27, 1971, the co-licensee, Douglas Middleton, failed to protect said victim, failed to render aid to said victim, and failed to notify the Police Department of the above altercation.

Plaintiffs contend that the action of the Commission is against the manifest weight of the evidence, and that the finding that the licensee failed to protect a patron and notify the police of the incident is insufficient grounds for suspension of a liquor license. Because of our view of the proceedings, we deem it necessary to consider only the argument that the findings are against the manifest weight of the evidence.

Judicial review of a decision of an administrative agency must always begin with the realization that a court must consider the agency’s findings and conclusions to be prima facie true and correct. (Ill. Rev. Stat. 1971, ch. 110, par. 274 et seq.) Such a rule, however, does not relieve a court of its duty to examine the evidence in an impartial manner and to set aside an order unsupported in fact. (Wheeler v. County Board of School Trustees (1965), 62 Ill.App.2d 467, 210 N.E.2d 609.) Where the findings of the administrative body are against the manifest weight of the evidence or where they are unsupported by substantial evidence in the record, a court is compelled to set aside the order. Daley v. Ryan (1967), 80 Ill.App.2d 44, 225 N.E.2d 143 (abstract opinion).

A review of the record indisputably demonstrates that the first finding of the Commission that Hadley was assaulted with a knife on the premises is without foundation. No one testified to seeing the assailant brandish a knife inside the tavern. On the contrary, Hadley himself asserted that the first time he saw the knife was outside during the fight.

The appellees urge that the Commission “obviously” determined a simple assault was committed inside the tavern which, by Middletons failure to respond, was permitted to become aggravated outside. There is no basis in the record to support a conclusion that an assault or altercation of any type took place inside the tavern. Hadley’s sole testimony concerning his confrontation with the person inside the tavern was that the latter began “fussing” with him. To infer an assault from that testimony would require conjecture and surmise. Evans v. License Appeal Com. (1968), 95 Ill.App.2d 121, 237 N.E.2d 817.

Our conclusion that there was a complete absence of competent proof regarding the first finding applies equally as well to the second finding that Middleton failed to protect a patron and to notify the police.

There is no competent evidence to support an inference of Middleton’s knowledge, permission, or acquiescence in the assault outside the tavern. As he looked up upon being informed of some confusion at the end of the bar, he saw one man run out a nearby door. Nothing in the record indicates that Middleton saw him chasing a person or being chased. Middleton observed no weapon. Plaintiffs cannot be charged with conduct over which they had no control. (See Childers v. Illinois Liquor Control Com. (1966), 67 Ill.App.2d 107, 213 N.E.2d 595.) Since the record clearly shows the plaintiffs had no knowledge of a criminal offense taking place on the licensed premises or in the conduct of their business, they were incapable of rendering any assistance to the victim or of notifying the police.

For the foregoing reasons, the judgment of the circuit court of Cook County is reversed.

Judgment reversed.

DEMPSEY and McGLOON, JJ., concur.


author: Mr. PRESIDING JUSTICE HAYES

text:
    Mary Chiappetti, Plaintiff-Appellee, v. Anne Knapp, Formerly Anne Chiappetti, Defendant-Appellee — (Thomas A. Mass et al., Petitioners-Appellants. )
    (No. 56796;
    First District (2nd Division)
    June 25, 1974.
    Richard F. McPartlin, of Chicago (Thomas A. Mass, of counsel), for appeUants.
    Kent R. Brody, of Chicago (Bernard B. Brody, of counsel), for appellee.
   Mr. PRESIDING JUSTICE HAYES

delivered the opinion of the court:

This appeal arises from a series of lower court rulings relating to attorneys’ fees, culminating in an order of 24 September 1971, which was regarded as dispositive of the issue and from which this appeal in part was taken.

The principal action was brought in the Circuit Court of Cook County, Chancery Division, by Mary Chiappetti (plaintiff below, hereafter plaintiff, and not a party to this appeal) against Anne Knapp (appellee and defendant below, hereafter defendant) to declare plaintiff the sole beneficial owner of certain property standing in the name of defendant (which property is located at 6616 West Roscoe Street, Chicago, Illinois, hereafter the Roscoe Street property). Defendant retained as counsel Thomas A. Mass (appellant and petitioner below, hereafter petitioner) to defend her in this action. All parties involved concede that there was an agreement of some sort regarding attorneys’ fees entered into between petitioner and defendant at that time, and that a retainer fee of $600 was then paid.

During the course of the trial, plaintiff and defendant agreed to compromise and settle their differences. A decree effectuating the settlement agreement was entered by the trial court on 5 May 1971. It reads in pertinent part as follows:

‘WHEREFORE, it is ordered, adjudged and decreed by the Court as follows:
***
3. The Defendant Anne Knapp shall further direct said escrowee to make disbursements of the net proceeds from the sale of the real estate aforesaid as follows:
***
c) To pay to the Defendant’s attorneys Mass & Miller a sum to be determinéd by the Court and to be payable on depositing in said escrow a certified copy of said Order relating to said fees.
# # #
7. That the Court expressly retain jurisdiction of this matter in order to effectuate the agreement between the parties and to provide for the best interests of the parties hereto, more specifically:
a) To determine the amount of fees for the attorneys of record and other related costs thereto; ” *

On 15 July 1971, petitioner, alleging an express oral agreement with defendant to pay for his services at the rate of $40 an hour, stated in a petition to the court that he had expended 100 hours of time “in connection with defending the wrongful claim made by the plaintiff.” He asked the court to award him $4000 in attorneys’ fees from the escrow fund provided for in the decree of 5 May 1971, or, if the court determined that a lesser amount was due from the escrow fund, that plaintiff’s attorneys pay the difference.

In response to this petition, the trial judge entered an order on 21 July 1971. It read in pertinent part as follows:

“It is further ordered that the attorneys’ fees of said Mass and Miller is ordered to be in the sum of one thousand and nine hundred ($1900.00) dollars and the Escrowee shall pay said $1900.00 to said Mass and Miller forthwith.”

On 4 August 1971, the trial judge entered an order in response to a “Petition for Instructions” by the trustee appointed under the decree of 5 May 1971. It reads in pertinent part as follows:

“It is hereby ordered as follows:
1. The amount set as attorneys’ fees for Mass, Miller & Josephson and Ader & Ader in the order entered July 21, 1971 are [sic] conclusive as to all sums of money owed to such attorneys by any party in interest in this cause, including fees and costs, except as herein provided.
# # #
3. With the exception of Mary Chiappetti and with the exception of moneys being paid hereunder, all claims of all other parties to the trust fund are barred and are deemed to be full paid, including all clients of Mass & Miller as well as those of Ader & Ader.”

Troubled by the language of the above-quoted parts of the 21 July and 4 August orders, petitioner on 3 September 1971 requested the trial judge to vacate “so much of paragraphs 1 and-3 of the Order of August 4, 1971 as purports to determine the amount due petitioners, as attorneys’ fees from Ann Knapp * * *” and to clarify the order of July 21, 1971, “* * * to show that the amount awarded Mass and Miller * * * as attorneys’ fees from the proceeds of the escrow, was solely from the proceeds of the escrow, and not determinative of the value of the services rendered on behalf of the defendant * ” * and that said Order should not be construed to affect the contractual relationship between the defendant * * and her attorneys, nor set a total fee due from said defendant * *

On 24 September 1971, the trial judge entered an order denying petitioner’s request without a hearing. The order stated no reason for the denial.

The notice of appeal filed in the instant case discloses that petitioner is appealing both from the denial of the petition of 3 September 1971 and from Paragraphs 1 and 3 of the order of 4 August 1971. The specific relief sought by the appeal is the reversal of the order of 24 September 1971 denying the petition of 3 September 1971, and the granting of the said petition.

The only real issue before us is whether the decree entered by the trial judge on 5 May 1971 and his subsequent orders of 15 July, 4 August, and 24 September 1971, had the effect of rendering the question of total attorneys’ fees due petitioner from defendant in connection with this case res judicata.

Petitioner claims to have entered into an oral agreement with defendant relating to attorneys’ fees when petitioner was first retained. Petitioner further asserts that, when the settlement agreement was entered into, petitioner and defendant agreed that the provision in the settlement agreement for the court to set the attorneys’ fees which were to be paid out of the proceeds of the sale of the Roscoe Street property would in no way affect their existing oral agreement. As evidence supporting this assertion, petitioner points to a payment of $500 made by defendant to him after the settlement agreement. Petitioner’s main contention on appeal is that the trial judge’s decree and subsequent orders could not have been res judicata as to the question of total attorneys’ fees since petitioner was not a party to the settlement agreement and, even if he were, the decree and orders in fact were only determinative of the amount of attorneys’ fees which were to come from the sale of the Roscoe Street property.

Defendant, on the other hand, while denying any express agreements regarding attorneys’ fees, contends that, even if there were such an agreement, petitioner, by approving the decree in question with his own signature, became a party to it and is thereby estopped by the doctrine of res judicata from asserting any claim for attorneys’ fees not provided for in the decree. Defendant also asserts the common law doctrine of merger, insisting that, whatever prior agreements there had been between her and petitioner, such agreements were merged into the subsequent decree upon petitioner’s approval of it.

Examining petitioner’s signature as it appears on the 5 May decree, it reads in context as follows:

“Approved:
Ader & Ader
by (signature of Mr. Ader)
Attorneys for Plaintiff
MASS & MILLER by (signature of Petitioner)
Attorneys for Defendant” (Emphasis ours.)

The legend under the signature of the petitioner on this document makes it clear that he intended to approve its contents as attorney for the defendant. The client-attorney relationship is one of principal-agent. (Feiertag v. Reichmann (1959), 21 Ill.App.2d 215, 157 N.E.2d 818.) It is an established rule of law that an attorney employed to defend a suit has no authority to compromise, to give up any right of his client, or to consent to judgment against his client without the express consent or authorization of that client. (City of Des Plaines v. Scientific Machinery Movers, Inc. (1972), 9 Ill.App.3d 438, 292 N.E.2d 154.) As an agent, an attorney has no right to prosecute a claim contrary to the wishes of his client. Hie attorneys interest in his fees is subordinate to the client’s wishes with regard to the prosecution of the suit. Feiertag v. Reichmann, supra.

Such authority compels us to conclude that petitioner’s signature, as attorney for defendant, on the 5 May decree was approval on behalf of defendant of the provisions of that document. As such, petitioner was not individually bound to any of the provisions of the decree. This fact is further established by the absence of defendant’s own signature on the document, as well as by the absence of plaintiff”s own signature and by the fact that plaintiff’s attorney signed on behalf of plaintiff. Moreover, petitioner was not shown to have had any interest of his own in the funds from the sale of the Roscoe Street property prior to the time of the settlement. See National Rank of Albany Park in Chicago v. Newberg (1972), 7 Ill.App.3d 859, 289 N.E.2d 197, where the court held that attorney’s approval of an order disposing of funds in which the attorney had such a prior interest made him a party thereto.

However, even in the event petitioner’s signature had been intended as his individual approval of the 5 May decree, this document in fact only limited the amount of the attorneys’ fees available from a specific source (the net proceeds of the sale of the Roscoe Street property). Nowhere does the document purport to be determinative of the total amount of attorneys’ fees due petitioner from defendant in connection with this case.

The foHowing language contained in the 5 May decree is Hlustrative of this fact:

“The defendant Anne Knapp shall further direct said escrowee to make disbursements of the net proceeds from the sale of the real estate aforesaid as follows: e e #
c) to pay to the defendant’s attorneys Mass & Miller a sum to be determined by the Court and to be payable on depositing in said escrow a certified copy of said Order relating to said fees.”.(Emphasis ours.)

The “said Order” providing attorneys’ fees “determined by the Court” . was entered on 21 July 1971. It provided: * * It is further ordered that the attorneys’ fees of said Mass & Miller is ordered to be in the sum of one thousand nine hundred ($1,900) dollars and the escrowee shall pay said $1,900 to said Mass & Miller.” (Emphasis ours.)

Considering the 5 May decree together with the 21 July order, it is clear that the trial judge only purported to determine the amount of attorneys’ fee to be made available from the proceeds of the sale of the Roscoe Street property. Both documents refer to the escrowee making payment to petitioner, and the only funds ordered to be deposited in escrow in this action were the net proceeds of the sale of the Roscoe Street property. There is no language in either of these documents, when taken together, that could support the defendant’s contention that the trial judge intended his order to be determinative of the issue of the total amount of attorneys’ fees due petitioner from defendant. It is necessary to understand this fact in order more clearly to focus on the meaning of the trial judge’s subsequent orders.

The 4 August order was entered in response to a “Petition For Instructions” by the trustee-escrowee appointed by the court under the provisions of the 5 May decree creating a trust for the benefit of plaintiff. With regard to attorneys’ fees the order stated:

“The amounts set as attorneys’ fees for Mass, Miller & Josephson * * * in the order entered July 21, 1971 are conclusive as to all sums of money owed to such attorneys by any party in interest in this cause, including fees and costs * *

On its face, this language of the order could be construed as dispositive of the issue of the total amount of attorneys’ fees owed petitioner by defendant. But, considering that the order is a response to a request for instructions by the trustee appointed under the provisions of the 5 May decree as to how to properly effectuate that decree, which decree did no more than set the amount of attorneys’ fees to be made available from the trust fund, it is clear that this order can purport to do no more than to so instruct the trustee. This is sustained by language further on in the order where the trial judge states: “* * * all claims of all other parties to the trust fund are barred and are deemed to be full paid, including all clients of Mass and Miller * * (Emphasis ours.) These two provisions of this order, considered together and in light of the prior decree and orders entered in this case, demonstrate that the trial judge was only reiterating his rulings of 5 May and 21 July, limiting the amount of attorneys’ fees to be made available from the proceeds of the sale of the Roscoe Street property. And this can be the only reasonable interpretation. The trust was to be for the benefit, care, and use of the elderly plaintiff, and its res was to come from the proceeds of the sale of the Roscoe Street property. Actual total attorneys’ fees might well have been great enough to defeat the purpose of the trust. Therefore, the trial judge reasonably set a limit on the amount of the attorneys’ fees to be made available from the sale of the property.

Accordingly, we hold that the trial judge’s decree of 5 May 1971 and his orders of 21 July and 4 August 1971 were res judicata only as to the amount of attorneys’ fees available from the proceeds of the sale of the Roscoe Street property. See National Bank of Albany Park in Chicago v. Newberg, supra, at page 686, footnote 3.

The trial judge’s order of 24 September 1971 denying without a hearing petitioner’s petition of 3 September 1971 (wherein petitioner alleged an oral contract with defendant relating to attorneys’ fees in this case and asked the court to vacate so much of the 4 August and 15 July orders as purported to be determinative of the total amount of attorneys’ fees due him from defendant in this case) in no way reflects on the allegations contained in the petition, since there was no reason given for the denial, and since the petition itself was basically only a request for clarification, not for a determination on the merits. Even if the petition of 3 September 1971 could reasonably be construed (which we think it could not be) as tendering issues as to that alleged contract to the Equity Court for final disposition, thereby invoking the exercise of the jurisdiction of the court, the record nowhere discloses any exercise of such jurisdiction; there was no hearing on, or findings as to, any such issues. Petitioner is, therefore, free to pursue an action at law based on any alleged contract he may have had with defendant for attorneys’ fees in connection with this case. Any judgment he may receive must, of course, be reduced by the amount ($1,900.00) he received under the order of 15 July 1971, as well as by the payments of $600 and of $500 which he has already received.

For the foregoing reasons, the order of 24 September 1971 is reversed and the cause is remanded to the trial court with directions to grant the petition of 3 September 1971.

Order reversed and cause remanded with directions.

STAMOS and LEIGHTON, JJ., concur.