author: JUSTICE STOUDER JUSTICE ALLOY,

text:
      In re MARRIAGE OF LOUELLA SMITH, Petitioner-Appellee, and RAYMOND SMITH, Respondent-Appellant.
    Third District
    No. 81-288
    Opinion filed April 15, 1982.
    ALLOY, J., concurring in part and dissenting in part.
    Bernard C. Gillman and Dorothea O’Dean, both of Rock Island, for appellant.
    Peter C. Fieweger, Samuel S. McHard, and John C. Me Andrews, all of Katz, McAndrews, Durkee, Balch & Lefstein, of Rock Island, for appellee.
   JUSTICE STOUDER

delivered the opinion of the court:

Petitioner Louella Smith filed a petition for separate maintenance, which was amended to a petition for dissolution of marriage. After a bifurcated hearing on the merits,- the circuit court of Rock Island County granted the petition and made the award of maintenance and division of property which are the subjects of this appeal.

The Smiths were married in 1950 and have seven children, two of whom are minors. Petitioner, 50, is in good health and is employed as a free-lance correspondent for the Rock Island Argus, where she earns approximately $2,600 per year. She is also the village clerk of Coal Valley and earns $1,000 per year in this capacity. Respondent, 51, is a borderline diabetic and is employed as a serviceman for Iowa-Illinois Gas and Electric Company, where he earns approximately $26,500 per year. Petitioner has been employed by the Argus since 1962 and has also had other positions. Respondent has been employed by Iowa-Illinois since 1951.

The Smiths’ marital property totalled approximately $136,000. While we find it unnecessary to detail the various properties set forth in the trial court’s memorandum opinion, we do note the presence of two residences which are currently occupied by daughters of the parties. Amy Goswick is in possession of a home in Coal Valley which the Smiths purchased for her in 1974 or 1975. The parties made a $3,500 down payment and assumed a $11,500 mortgage. Amy and her parents have an oral agreement under which she is responsible for the payments on the mortgage and will be deeded the residence “when she can pay back the downpayment.” Her former husband currently makes the mortgage and insurance payments, and when he falls behind, the Smiths make them and adjust the debt’s principal accordingly. Jody Peterson is in possession of a home in Moline which the parties purchased for her in 1979. The Smiths made a $12,000 down payment and assumed a $39,000 liability on a contract for deed. The arrangement between Jody and her parents is essentially the same as with Amy; however, there is a written agreement between the Smiths and Jody and her former husband waiving repayment of the $12,000 for five years. The court found the above receivables were marital property.

The Smiths’ total net income approximately equaled their monthly needs. Petitioner’s needs were approximately $900 per month and respondent’s, approximately $800 per month. The court, noting petitioner’s income of approximately $300 per month, awarded her a rental property producing $200 in monthly income, $225 per month child support, and $200 per month maintenance. Noting the length of the marriage and petitioner’s contributions to the family unit, the court found an equal division of marital property to be equitable. Property valued at approximately $84,000 was awarded to petitioner, with property valued at approximately $52,000 being awarded to respondent. As this was not the adjudicated equal division of marital property, approximately $16,000 of petitioner’s award was designated property in lieu of 80 months’ maintenance. On appeal, respondent contends the award of maintenance and division of marital property constitute abuses of discretion.

Considering first the award of maintenance, the thrust of respondent’s contention appears to be that petitioner has many skills and talents which would make her a desirable employee “who would be well able to work full [t]ime and to support herself ° * Two points are here germane. In addition to her present positions, petitioner has been employed as a census enumerator, a “Project Now” intake worker, and a holiday season retail clerk. Her greatest gross hourly wage has been $3.25. Considering this and her age, it is improbable that petitioner could so support her family unit. The second point is that she was granted custody of her 10-year-old daughter, who has had emotional problems requiring professional assistance. Section 504(a) (2) of the Illinois Marriage and Dissolution of Marriage Act (Ill. Rev. Stat. 1979, ch. 40, par. 504(a)(2)) requires the consideration of whether a party seeking maintenance is “the custodian of a child whose condition or circumstances make it appropriate that the custodian not be required to seek employment outside the home.” Considering these two points, and the fact that petitioner will have to manage a rental property and serve in an elected office, we find an award of maintenance to supplement the income from two part-time jobs to be appropriate. Respondent alternatively contends the award should be reduced. Not only is the award similar to that sanctioned where income and expense were much the same (cf. In re Marriage of Westphal (1981), 99 Ill. App. 3d 1042, 426 N.E.2d 303 ($50 per week for two years)), the award is the minimum amount necessary for petitioner to meet her expenses. We find the trial court considered the factors enumerated in section 504 of the Act (Ill. Rev. Stat. 1979, ch. 40, par. 504) and wisely exercised its discretion.

Considering last the division of marital property, the thrust of respondent’s contention is that he should have been awarded more than half of the property as he was the primary financial contributor to the marriage, and that he was not even awarded half. The Act does not mandate an equal division of marital property (In re Marriage of Aschwanden (1980), 82 Ill. 2d 31, 411 N.E.2d 238), and our supreme court has addressed the matter of financial contribution:

“While we perceive some difficulty in assessing the value to be placed on the different forms of contribution, we caution against placing too much emphasis on monetary contributions over non-monetary contributions. At all times, the court is to keep in mind that the ultimate objective is to achieve a division of property which is in ‘just proportions.’ ” (In re Marriage of Aschwanden (1980), 82 Ill. 2d 31, 38, 411 N.E.2d 238, 242.)

Citing Aschwanden, the court further stated that a trial court “must recognize substantial contributions made by a spouse as homemaker and parent” and that “[t]he decision in essence recognized the importance of viewing the marital relationship as a shared enterprise upon which the distribution of marital property should be based.” In re Marriage of Komnick (1981), 84 Ill. 2d 89, 94, 417 N.E.2d 1305, 1308.

The trial court considered the factors enumerated in section 503(c) of the Act (Ill. Rev. Stat. 1979, ch. 40, par. 503(c)) and concluded that an equal division of marital property represented a just apportionment. It took into account, inter alia, the 30-year marriage, petitioner’s role in raising seven children and as homemaker to the family unit, and her limited opportunity for future acquisition of assets and income. Considering these factors and the caution against placing too much emphasis on monetary contribution, we find an equal division of marital property to be an appropriate exercise of discretion. The court awarded both the family home and the rental property to petitioner as it found these transfers resulted, respectively, in reduced expense and added income to her. This caused an unequal distribution; however, the fact that respondent is excused from 80 months of maintenance restores the equality of the overall settlement.

The final matter presented for our consideration concerns certain specific assets. These include the “receivables” due from the Smith children and the residences occupied by the daughters. Before reaching this matter we must address petitioner’s contention that consideration of these matters has been waived for failure to mention them in respondent’s motion to reconsider. Except as otherwise provided, the provisions of the Civil Practice Act (Ill. Rev. Stat. 1979, ch. 110, par. 1 et seq.) apply to these proceedings. (Ill. Rev. Stat. 1979, ch. 40, par. 105(a).) Supreme Court Rule 366(b)(3)(ii) (Ill. Rev. Stat. 1979, ch. 110A, par. 366(b)(3)(ii)) provides that neither the filing of, nor the failure to file, a post-trial motion limits the scope of review of a nonjury case. Under its power to make rules (Ill. Rev. Stat. 1979, ch. 110, par. 2) and pursuant to its policy of covering matters of appellate procedure by rule (see Ill. Ann. Stat., ch. 110, par. 68.3, Supplement to Historical and Practice Notes, (Smith-Hurd 1981 Supp.)), the court moved this provision from the Civil Practice Act to the rules. We therefore find it applicable and will not limit our review.

Approximately 5125 of the marital property awarded to respondent consisted of debts of the Smith children. We have previously discussed the debts of Amy and Jody and note that, not only are they interest free, neither of the principal amounts are being repaid. In addition to these debts, a third daughter, Louella Heiman, received a $6,000 loan for the down payment of a home in Fort Dodge, Iowa, and a son, Randy Smith, received a $5,000 loan. In order to extend the loan to Louella, respondent himself was forced to borrow $4,000 which he is presently repaying to the Orion State Bank.

Three factors are here noteworthy. The first is that the loans produce neither income in the form of interest nor revenue in the form of repayment of principal. This situation follows from the second factor, which is that the loans are not the result of arm’s length transactions. They are rather the result of caring parents attempting to help their children, and it could even be argued that the transactions were in the nature of gifts. Regardless of characterization, it is clear the monies were jointly' advanced by both parties. The third factor is that respondent might be forced by economic circumstances to demand payment from his children and, to the extent the loans may be enforceable obligations, to initiate litigation.

There is an additional consideration. While the trial court expressly found it was preferable to terminate all the parties’ joint estates, this was not done in the cases of the daughter-occupied residences. There are thus no contingent dispositions of the properties in the event of surrenders of possession. There are also no contingent provisions in the event of defaults in the monthly payments. The latter situation might translate into a down-payment forfeiture in the case of the contract property, and personal liability of both parties in the case of the mortgaged property.

Considering the three factors concerning the loans and the daughter-occupied residences, we believe the trial court abused its discretion in dividing the marital property as if the obligations from the daughters represented bona fide accounts receivable with values established with equal certainty to other marital assets. Since the daughters’ obligations were of doubtful value, both parties should share in the risks of the uncertainties existing with such risks to be adjusted or compensated for in the disposition made of other items of marital property. As the underlying transactions were jointly entered into by the parties, and the present award gives respondent questionable assets which threaten to place him in an adversarial relationship with his children, we find that the court failed to consider “all relevant factors” (Ill. Rev. Stat. 1979, ch. 40, par. 503(c)) in dividing the marital property herein.

We therefore remand this cause to the trial court so that the “receivables” may be awarded to the parties in approximately equal proportions, and the overall settlement adjusted accordingly. At this time, we direct the court to provide for the contingencies discussed herein and to award the bank stock earlier overlooked.

Accordingly, the judgment of the circuit court of Rock Island County is reversed and remanded for further proceedings consistent with our views herein.

Reversed and remanded with directions.

SCOTT, J., concurs.

JUSTICE ALLOY,

concurring in part and dissenting in part:

While I agree with our decision concerning the trial court’s award of maintenance and its equal division of property, I cannot agree with the majority’s treatment of the children’s contract obligations to the parents.

Mr. Smith complains that he has not received an equal division of the property, because the obligations of the children are doubtful assets and he would be in the awkward position of having to sue them to recover the money in the event of the children’s default. The majority agrees, and orders the trial court to reconsider the property division and award these receivables in equal proportions.

Although these receivables are not the result of arm’s length transactions, there is no reason to believe these assets are weak, doubtful or worthless. The parties may have been trying to help their children, but that fact does not require any alteration in the equitable rules concerning divisions of marital property. Indeed, Mr. Smith listed these obligations as assets in his affidavits. Certainly, the trial court was entitled to treat these obligations in a similar fashion.

More significantly, the majority’s position has no support in the law. The majority cites no authority, and I know of none, that requires the risk of diminution of value of assets to be shared equally by the former parties to a marriage. On the contrary, this doctrine could lead to inequitable results. Divorce proceedings can become entangled in collateral issues concerning the relative potential of various assets. Even the most simple property order could suddenly become burdensome. If a couple has two assets, for example, a piece of land worth $10,000 and stock worth $10,000, a trial court may no longer simply give the stock to one party and the land to the other.

Finally, even if the court were to consider the relative factors of risk in diminution of assets, the disposition here is amply supported by the evidence. As the majority’s recitation of the evidence indicates, Mrs. Smith earns approximately $3,600 per year. Mr. Smith earns over seven times that amount. Mrs. Smith is 50 years old and has never earned a gross wage over $3.25 per hour. It is unlikely she will be able to earn enough even to support herself. Additionally, Mrs. Smith has custody of an emotionally disturbed daughter. Clearly, the trial court could conclude that Mr. Smith is in a far better position to withstand the default of one of the children’s obligations. He is in a better position to absorb any loss as well as to institute proceedings to recover the money or property, if that becomes necessary. The majority notes that there are no contingent provisions in the trial court order in the event of a surrender of possession of the real estate. Rather than disrupt the property division, this problem can be easily remedied by directing the trial court to order conveyance of all interests the Smiths have, in the properties involved, to Mr. Smith, if this disposition is ordered.

I would affirm the judgment of the trial court.


source: Caselaw Access Project

author: JUSTICE HEIPLE

license: Public Domain

text:
    PATRICIA RATHMELL, Plaintiff-Appellant, v. MALCOLM GARDNER, Defendant-Appellee.
    Third District
    No. 81-537
    Opinion filed April 15, 1982.
    John A. Barra, State’s Attorney, of Peoria (Louise Natonek, Assistant State’s Attorney, of counsel), for appellant.
    No brief filed for appellee.
   JUSTICE HEIPLE

delivered the opinion of the court:

This cause originates under the Revised Uniform Reciprocal Enforcement of Support Act (URESA) (Ill. Rev. Stat. 1979, ch. 40, par. 1210). Plaintiff, Patricia Rathmell, seeks to compel her ex-husband, Malcolm Gardner, the defendant, to pay support for the couple’s children.

The parties were divorced in Summit County, Ohio, on August 15, 1968. As part of the dissolution decree, plaintiff obtained custody of the couple’s three children. Defendant was ordered to pay child support of $60 per week. A subsequent support order, entered in an Illinois circuit court on May 10,1976, increased the support allocation to $250 per month.

Mrs. Rathmell lives in Ohio. Mr. Gardner resides in Peoria, Illinois. On March 2, 1978, plaintiff filed a petition in the common pleas court, Medina County, Ohio, to enforce the support order of the Ohio dissolution decree. By letter, the petition was transmitted to the Peoria circuit court. The State’s Attorney prosecuted the petition which was filed in Peoria County on March 19, 1979. On December 9, 1980, a trial judge entered an order that Mr. Gardner was $15,908.77 in arrears for child support. He was ordered to pay $5,000 within 45 days and the balance at $40 per week. Also, commencing December 15, 1980, defendant was ordered to pay $60 a week child support as his current obligation.

Over the next eight months, Mr. Gardner, for the most part, ignored this order. He either failed to appear in court, or when he did, sought continuances. Finally, he was held in contempt and bond was set. Eventually this bond money was used to pay some of the support owed. On July 31,1981, Mr. Gardner filed a * 0 Motion to Abate Child Support e # o » Therein, he said he did not pay child support because his former wife would not let their minor son come to Illinois to visit him. Purportedly, this denial of visitation occurred over the prior four years.

On August 11, 1981, defendant’s petition was granted. The court ordered Mr. Gardner to pay $130 a month child support as a current obligation and $175 a month for arrearages. The money was to be paid to the Peoria County circuit court clerk to be held in escrow until the parties could agree on visitation.

Mrs. Rathmell appeals. She contends the trial court abused its discretion when it conditioned the release of child support payments to her alleged interference with Mr. Gardner’s visitation rights. The defendant did not respond nor file a brief. We reverse.

A trial judge has inherent authority to shape equitable remedies which promote the ends of justice. Also, the statute itself recognizes this. (Ill. Rev. Stat. 1979, ch. 40, par. 1203.) But in this cause the trial judge went too far. The single issue before the court was defendant’s nonpayment of child support. URESA was implemented for the solitary purpose of enabling a dependent in another locale to enforce existing duties of support against those persons legally liable for that support. Whether defendant’s visitation rights were violated was not the issue before the court. In fact, the record is completely silent on the extent of defendant’s visitation rights. Moreover, violation of visitation rights does not suspend or excuse Mr. Gardner’s failure to comply with his child support obligation. Hess v. Hess (1980), 87 Ill. App. 3d 947, 952.

Essentially, defendant is attempting to inject into this URESA proceeding a post-judgment action for a modification of the terms of the original custody order. But a URESA petition is distinct and apart from prior or contemporaneous actions in other related proceedings. (Ill. Rev. Stat. 1979, ch. 40, pars. 1211(b) and 1230; People ex rel. Kerl v. Kerl (1979), 75 Ill. App. 3d 347, 349.) Existing duties of support have been established and admitted. Our circuit court confirmed them, and it is defendant’s obligation to pay them.

The cause at bar is largely similar to People ex rel. Winger v. Young (1979), 78 Ill. App. 3d 512. In Winger the noncustodial parent claimed his duty to continue child support payments was negated by the wife having removed herself to Wisconsin and concealing the whereabouts of the couple’s child. The trial court ordered child support payments held until the wife granted the husband visitation rights. The Second District Appellate Court reversed, declaring that a responding court lacks authority to withhold child support payments while the parents work out visitation problems. We agree. The Peoria County Circuit Court, as a responding court, has no authority under URESA to make the payment of child support contingent upon any obligation of the custodial spouse. Child support payments are for the maintenance of the children’s welfare, not a lever upon which divorced adults can be made to resolve their differences over when or where they will visit their children. Accordingly, we reverse the trial court’s order granting the motion for abatement of child support and establishing an escrow account for the payment of such funds. All child support payments paid to the circuit court clerk of Peoria County are to be transmitted without delay to the initiating court in Medina County, Ohio, as they are paid.

For the reasons stated, the order of the trial court is reversed. This cause is remanded to the Circuit Court of Peoria County for further proceedings consistent with views expressed in this, opinion.

Reversed and remanded.

BARRY, P. J., and SCOTT, J., concur.


text:
    THE PEOPLE OF THE STATE OF ILLINOIS, Plaintiff-Appellee, v. JOHN A. KRANKEL, Defendant-Appellant.
    Third District
    No. 81-478
    Opinion filed April 16, 1982.

      Robert Agostinelli, of State Appellate Defender’s Office, of Ottawa, for appellant.
    James R. May, State’s Attorney, of Princeton (John X. Breslin and Rita Kennedy Mertel, both of State’s Attorneys Appellate Service Commission, of counsel), for the People.
   JUSTICE HEIPLE

delivered the opinion of the court:

The defendant, John A. Krankel, was charged by information with the offenses of burglary and theft. Following a jury trial, Krankel was convicted of both offenses and subsequently sentenced to concurrent terms of five years imprisonment. Krankel’s sole issue on appeal is that the trial court erred in permitting Krankel’s former wife to testify to communications between her and Krankel during their marriage. Krankel claims that such testimony is barred by the Illinois marital privilege statute.

This issue was presented to the trial court initially as a pretrial motion in limine when Krankel became aware that the State intended to call the former Mrs. Krankel as a witness. The trial court denied Krankel’s motion because the evidence indicated that the crime charged was committed in concert with the former wife and this waived the marital privilege.

Krankel’s case proceeded to a jury trial. Krankel’s former wife, Kelly Carr, testified that at Krankel’s insistence, she and Krankel drove to her grandmother’s house. She testified that Krankel had previously discussed taking the grandmother’s silverware. Once there, Krankel opened the front door lock with a plastic credit card. Both she and Krankel entered her grandmother’s house. Her grandmother was not at home and had not given them permission to enter. Kelly Carr further testified that she then left the house but reentered at Krankel’s command. She remained in the dining room and eventually went back outside and sat in the car with her two small children. Krankel emerged from the house upon discovery of the silverware and queried about a device to transport it from the house. Kelly Carr advised him that there were towels in the kitchen. Krankel then returned with the silverware wrapped in a towel. They drove to Peoria, located a pawn shop and sold the silverware.

The former Mrs. Krankel finished her testimony by saying that in her first meeting with police she had denied all involvement but later admitted her participation claiming that her participation in the crime was against her will.

The second witness for the State was Charles Bailey, the pawn shop owner. He testified that the former Mrs. Krankel, now Kelly Carr, telephoned him for an appointment to sell a 12-piece set of silverware. Bailey testified that the Krankels arrived at his home with John Krankel carrying the silverware and the former Mrs. Krankel carrying a baby. Bailey offered them $1,478.90 for the silverware. According to Bailey, Krankel told his wife that the decision was hers because he did not want to cause trouble with her family for selling their silver. The money was then given to the former Mrs. Krankel. Bailey’s business practice is to require identification of the signatory of the sale receipt. Krankel produced his identification and signed the receipt as the former Mrs. Krankel fumbled unsuccessfully in her purse for her identification.

The final witness for the State was Larry Hoyd, the police officer who had investigated the incident. He testified that no signs of forced entry were evident at the grandmother’s house and that no fingerprints had been found. The State thereafter rested its case, and defendant’s motion for directed verdict was denied.

Krankel then assumed the stand, the only witness in his defense. Krankel denied accompanying his wife to her grandmother’s house on the day in question or taking the silverware. Krankel testified that on that day he worked. When he returned home at noon for lunch he found his wife, Kelly, sitting at the table with a set of silverware. Upon his inquiry, Kelly told him that the silverware was a gift from her grandmother. Kelly then asked to use his car to sell the silverware. Since Krankel did not allow her to drive his car, he drove her. Krankel testified they took the silverware to the home of Charles Bailey, a buyer of gold and silver. Krankel testified the decision to sell the silverware rested solely with his wife since he wanted no more trouble With her family for selling a gift. Kelly accepted . the price quoted by Bailey and, while holding their baby, fumbled in her purse for identification as required by Bailey. To expedite the transaction, Krankel offered his identification and signed the receipt.

According to Krankel’s testimony, his father-in-law accused him of stealing the grandmother’s silverware. Kelly told him not to worry about it. Krankel then told Kelly that he was leaving because he was not going to be charged with something he did not do. Krankel felt the police would doubt his side of the story because of his prior criminal convictions. He later turned himself in when he learned that the police were looking for him.

After Krankel’s testimony, the defense rested. The jury deliberated approximately 5% hours to reach their verdict of guilty on all counts.

It is clear from the record that Kelly Carr, Krankel’s wife at the time of the incident, testified about activities and conversations beween herself and Krankel during their marriage. Before the trial commenced, Krankel sought to have such testimony barred pursuant to section 6 of division XIII of the Criminal Code of 1874 (Ill. Rev. Stat. 1979, ch. 38, par. 155 — 1), which prohibits testimony by one spouse concerning any communication made by the other. The State opposed Krankel’s motion on two grounds: (1) Kelly Carr would testify as to conduct of Krankel and conduct is not “communication” within the provisions of the statute; (2) the marital privilege statute does not extend to communications between spouses when the spouses are jointly involved in criminal activity.

The trial court found that the marital privilege is waived where there is evidence indicating a crime was committed in concert by the husband and wife. Accordingly, the trial court permitted the testimony of Kelly Carr as to both conduct of Krankel and conversations between herself and Krankel. We do not believe that to be the law in Illinois.

Under the Illinois marital privilege statute (Ill. Rev. Stat. 1979, ch. 38, par. 155 — 1), husband and wife may testify for or against each other in all criminal cases provided that:

“[N]either may testify as to any communication or admission made by either of them to the other or as to any conversation between them during marriage, except in cases where either is charged with an offense against the person or property of the other, or in case of spouse abandonment, or where the interests of their child or children are directly involved, or as to matters in which either has acted as agent of the other.” (Emphasis added.)

The statute is clear on its face: a spouse may not testify as to intraspousal communications during marriage. Of the four exceptions provided, none include joint criminal activity, the exception announced by the trial court. While other States have held that the marital privilege does not extend to communications between spouses while engaged in a joint criminal enterprise, the Illinois statute does not so provide. A spouse may not testify in Illinois about communications with the other spouse during marriage even though they were engaged in a joint criminal enterprise.

The statute is equally clear as to what testimony is barred by the marital privilege: communications made by either to the other during marriage. We believe it established that communications protected by the marital privilege are required to be confidential and made in reliance upon the intimacy of the marital relationship. Thus, conversations in the presence of third persons are not privileged. People v. Borchelt (1977), 46 Ill. App. 3d 286.

Implicit in the term “communication” is speech. Certain acts may constitute a communication to the other spouse. Such acts might include a wave of a hand or a nod of the head. However, the mere description by one spouse of general, noncommunicative conduct is not protected by the marital privilege statute. (People v. Rettig (1980), 88 Ill. App. 3d 888; People v. Simpson (1976), 39 Ill. App. 3d 661.) Thus, the testimony of Kelly Carr as to Krankel’s conduct was permissible testimony and not protected by the privilege. However, her testimony as to their private conversations was protected by marital privilege, and it was error for the jury to have considered it. As her testimony was a melding of permissible and impermissible evidence, we must remand for a new trial.

For the reasons herein stated, the judgment of the Bureau County circuit court is reversed and the cause remanded for a new trial in conformance with this opinion.

Reversed and remanded.

ALLOY and SCOTT, JJ., concur.


author: JUSTICE ALLOY JUSTICE HEIPLE,

text:
    SHANE PETERSON et al., by Maggie Peterson, their Mother and Next Friend, Plaintiffs-Appellees, v. JAMES G. CAMPBELL, Indiv. and d/b/a The Central Tap, Defendant-Appellant.
    Third District
    No. 81-363
    Opinion filed April 20, 1982.

      HEIPLE, J., dissenting.
    Roger L. Williamson, of West, Neagle & Williamson, of Galesburg, for appellant.
    Charles M. Bell, of Bell & Pepmeyer, of Galesburg, for appellees.
   JUSTICE ALLOY

delivered the opinion of the court:

On the evening of June 26,1978, as James Jenkins and Gale Peterson (the decedent) left the Central Tap, a tavern run by the defendant, James G. Campbell, Jenkins fatally stabbed the decedent with a folding knife. The plaintiffs thereafter brought the instant two-count action, charging the defendant with violation of the Dramshop Act (Ill. Rev. Stat. 1979, ch. 43, par. 94 etseq.) and the Wrongful Death Act (Ill. Rev. Stat. 1979, ch. 70, pars. 1, 2). Following a jury trial in the circuit court of Knox County, the jury returned verdicts in favor of the plaintiffs on both counts. The defendant now appeals from the wrongful death verdict only. He presents two issues for review: whether the plaintiffs made a prima facie showing that their decedent had exercised due care for his safety and whether the decedent was contributorily negligent as a matter of law. We affirm.

The only witness testifying to the occurrence was the assailant, Jenkins. He testified that he entered the Central Tap in Abingdon, Illinois, at approximately 11:30 a.m. and drank two or three bottles of beer served by the defendant or his wife. After leaving the establishment for a little more than one hour, Jenkins returned and consumed several more bottles of beer. At approximately 4 p.m. Jenkins and an individual started playing pool as a team against the decedent and another person. Although the decedent and Jenkins were not friends, they were acquainted. The pool table was located in a corner of the defendant’s tavern. Jenkins’ team generally won, and as a consequence the losing team bought the winners more distilled spirits. Jenkins by this time was drinking whiskey as well as beer, and, by his own admission, he was intoxicated. The decedent was also drinking, although Jenkins did not testify as to whether the decedent was intoxicated. After playing pool for about one hour, the decedent and Jenkins began to argue. The decedent shouted threats at Jenkins. In response, Jenkins withdrew a folding hunting knife from his pocket and brandished it at the decedent. The decedent then told Jenkins that if he were to put away his knife, the decedent would “beat up” Jenkins. At this moment the defendant intervened and ordered Jenkins to put down his knife and cease arguing. Both men obeyed and continued to play pool. Meanwhile, the defendant returned to his position behind the bar. He made no call to the police. Calm prevailed for the next hour until the decedent and Jenkins, both of whom had consumed more of the defendant’s alcohol in the interim, again began to argue. Jenkins testified that, because of his inebriation, he was unable to remember about what they argued. Again Jenkins brandished his knife while the decedent shouted badinage and threats in return. Jenkins testified that the decedent never attacked him nor threatened to attack him except for saying that if he were to lay down the knife, he would “beat up” Jenkins. Jenkins also testified that, other than that one reference, the decedent’s language was not overly abusive. Again, the defendant interceded between the two men and soon their tempers cooled. The defendant returned to the bar, but he made no call to the police nor did he ask the two ruffian patrons to leave the tavern. Jenkins then ordered more beer and whiskey and played more pool with the decedent, who also drank more alcohol. Finally, one hour later, they again began to argue and shout. After the decedent made a threatening remark, Jenkins brandished his knife for a third time. According to Jenkins, he had by then drunk more than 16 bottles of beer and several whiskey drinks since 11:30 a.m. The defendant separated the two and ordered them to leave. Jenkins returned the knife to his pocket and walked to the door. Just as he reached the door, the decedent, who stood about 50 feet from Jenkins, shouted threateningly at him. Jenkins was unable to recall exactly what the decedent said, but his threat made Jenkins “wary.” Again Jenkins pulled his knife from his pocket, but this time he ran back to the decedent and killed him with a single thrust of the knife. He was subsequently arrested and charged with voluntary manslaughter to which he pleaded guilty. At the time he testified in the instant case, he was serving his seven-year term of imprisonment. He admitted on the witness stand that were it not for the alcohol sold to him by the defendant, he would not have killed the decedent.

The only other testimony was that of the decedent’s former wife, who said she briefly visited the decedent at the tavern on June 26 at approximately 5:30 p.m. Although the decedent was then drinking alcohol, she testified that he did not appear to be intoxicated. She did not observe Jenkins.

As to the wrongful death count, the court read to the jury Illinois Pattern Jury Instructions, Civil, No. 21.02 (2d ed. 1971), which states that the plaintiffs had the burden of establishing the decedent’s use of ordinary care for his own safety before and at the time of the occurrence. Thereafter, the jury returned a verdict in favor of the plaintiffs on both counts.

As a preliminary issue, the plaintiffs ask this court to rule on whether the comparative negligence doctrine announced in Alvis v. Ribar (1981), 85 Ill. 2d 1,421 N.E.2d 886, affects their rights in the instant cause. It does not. The supreme court declared that the Alois rule applies to all causes in which trial commences on or after June 8,1981; here, the cause came to trial and judgment was entered therein prior to that date. Thus, the issues raised concerning the decedent’s possible contributory negligence are properly before this court.

The defendant raises two objections on appeal, both of which concern the sufficiency of the plaintiffs’ evidence establishing the decedent’s freedom from contributory negligence: whether the evidence established contributory negligence as a matter of law and whether the plaintiffs made a prima facie showing that their decedent exercised due care for his safety. Upon careful review of the entire record, we conclude that the evidence was insufficient to support a directed finding in favor of the defendant on the issue of the decedent’s contributory negligence and that the evidence supported the jury’s finding that the decedent exercised due care for his safety. Accordingly, we affirm the judgment in favor of the plaintiffs.

Before proceeding to a discussion of the sufficiency of the evidence, we believe one comment is in order. Contributory negligence would bar recovery in a negligence action only; it is no defense where the defendant’s misconduct is intentional or wilful and wanton. (Lake Shore & Michigan Southern Ry. Co. v. Bodemer (1892), 139 Ill. 596, 29 N.E. 692.) Had the decedent’s survivors brought the instant wrongful death action against Jenkins for his battery, the defense of contributory negligence would have absolutely no application. Here, however, they charged the defendant, James Campbell, owner of the Central Tap, with negligence in that he failed to exercise reasonable care in preventing Jenkins’ attack on the decedent. Thus, the issue of the decedent’s contributory negligence was properly made a part of the present wrongful death action.

According to pre-Alois Illinois law, a plaintiff seeking to recover for injuries caused by the defendant’s negligence must plead and prove his own freedom from contributory negligence, in addition to proving the fault of the defendant. Likewise, in a wrongful death action alleging that the decedent’s death was caused by the defendant’s negligence, a decedent’s survivor must plead and prove that his decedent was free from contributory negligence. (Maki v. Frelk (1968), 40 Ill. 2d 193, 239 N.E.2d 445.) Contributory negligence has generally been defined as “conduct on the part of the plaintiff, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection.” (W. Prosser, Torts sec. 65, at 416-17 (4th ed. 1971).) A plaintiff’s negligence contributes as legal cause to the harm he has suffered if, but only if, it has been a substantial factor in bringing about his harm. (Restatement (Second) of Torts sec. 465(1) (1965).) Two types of contributory negligence are recognized: first, where the plaintiff intentionally and unreasonably exposes himself to danger created by the defendant’s negligence of which the plaintiff knows or has reason to know, and second, where the plaintiff’s conduct falls short of the standard to which the reasonable person should conform in order to protect himself from harm. (Restatement (Second) of Torts sec. 466 (1965).) Ordinarily, the question of contributory negligence is for the trier of fact when the question arises upon facts from which reasonable persons might draw different conclusions either as to the facts or as to the conclusions or inferences to be drawn from the facts. Furthermore, the issue of proximate cause of an injury is almost always a question reserved for the trier of fact. (Wainwright v. Truckenmiller (1981), 96 Ill. App. 3d 1127, 421 N.E.2d 1026.) A court should direct a verdict on the issue of contributory negligence or negligence only “in those cases in which all of the evidence, when viewed in its aspect most favorable to the opponent, so overwhelmingly favors movant that no contrary verdict based on that evidence could ever stand.” Pedrick v. Peoria & Eastern R.R. Co. (1967), 37 Ill. 2d 494, 510, 229 N.E.2d 504, 513-14.

Applying these principles to the instant case, we conclude that the issue of the decedent’s contributory negligence was properly before the jury and that the evidence supported the jury’s finding that the plaintiffs’ decedent was free from contributory negligence. It is gtenerally recognized that, in order to lessen the egregious results sometimes occasioned by the operation of the defense of contributory negligence, courts apply a more restrictive definition of negligence where it bars the plaintiff’s recovery than where it is used to establish the defendant’s liability. (Testa v. Kaluzny Brothers, Inc. (1974), 23 Ill. App. 3d 841, 320 N.E.2d 114; Restatement (Second) of Torts sec. 468, comment c, at 518 (1965).) A plaintiff need not be a “super-perfect” human. (J. Mirza & J. Appleman, Illinois Tort Law and Practice sec. 18:1 (1974).) He need only be an ordinary man, with the frailties, errors of judgment, and mistakes of which such a person is susceptible. Accordingly, we have held that contributory negligence must be substantial to bar recovery. (Schmidt v. Anderson (1939), 301 Ill. App. 28, 21 N.E.2d 825.) Here, the decedent’s final shout, his last bit of braggadocio, directed at Jenkins as he left the tavern cannot be considered a substantial act of negligence. Although he was aware that Jenkins was armed with a knife, which he previously brandished without ever directly threatening the decedent’s life during their earlier arguments, no reasonable person would have expected that Jenkins would have retaliated with violence, rather than with his own kind of harmless braggadocio, as he left the tavern. When the decedent shouted at the assailant, they were more than 50 feet apart, and Jenkins was about to leave the defendant’s premises. Furthermore, no threatening movement or actions accompanied the decedent’s shout. Given these circumstances, we cannot say that no question of fact remained which inevitably indicated that the decedent was contributorily negligent. Moreover, we cannot say as a matter of law that the decedent’s shout was conduct constituting exposure to a known danger or conduct falling short of the standard to which a reasonable person should conform in order to protect himself from the harm which causes his injury. We will not bar recovery as a matter of law where the decedent failed to foresee that his assailant would turn from the door, run 50 feet back to the decedent, and, instead of merely displaying his knife, as he did in the past, attack and kill the decedent.

For these foregoing reasons, we affirm the judgment entered in the circuit court of Knox County.

Affirmed.

BARRY, J., concurs.

JUSTICE HEIPLE,

dissenting:

Although this appeal concerns a negligence verdict against a tavern owner, it does not involve any issue under the Dramshop Act. One patron of a tavern was stabbed and killed by another patron. The decedent’s children brought a wrongful death action against the tavern owner alleging negligence. The jury returned a verdict of $30,000 in favor of plaintiffs.

As is noted in the majority opinion, this appeal is addressed to only two issues: First, whether a showing was made that decedent had exercised due care for his own safety; and, almost the same issue stated differently, whether the decedent was contributorily negligent as a matter of law.

The majority opinion concludes both issues in favor of the plaintiffs. I dissent. A recitation of the situation as it existed on the day of the stabbing will illustrate, I hope, why I dissent.

Gale Peterson and James Jenkins were shooting pool and drinking in the Central Tap in Abingdon. As the day wore on they became inebriated. The men were pugnacious, arguing steadily. The record does not indicate why. During this wrangling, on three separate occasions, Jenkins pulled a knife on Peterson. On two such occasions the defendant barkeeper intervened telling Jenkins to put the knife away. Peterson had been threatening to beat Jenkins, and told him if he put the knife away he would do so. Jenkins pulled the knife again. Defendant told him to get out. As Jenkins exited, Peterson again baited Jenkins, threatening him with a beating. Jenkins turned, walked up to Peterson, and killed him with a single thrust of his knife.

We admonish jurors that in considering the evidence they are not required to set aside their own observations and experience in the affairs of life. (Illinois Pattern Jury Instructions, Civil, No. 1.04 (2d ed. 1971).) Should appellate courts be held to a lesser standard?

It defies everyday knowledge to conclude decedent did not knowingly expose himself to personal harm and grave danger. His repeated ranting that he would beat Jenkins was not only unreasonable but extreme. Peterson was aware before the stabbing that Jenkins had three times threateningly brandished the knife. This display came during the course of a verbal clash which was ongoing and petulant. Regardless, Peterson continued to bait Jenkins. If the tavern owner had a duty to remove Jenkins from the premises, then decedent had no less an obligation to prevent injury to himself by ceasing his taunting assertions.

The majority’s comment that decedent need not be “super-perfect” says nothing at all, let alone anything new. Nobody is perfect. We all know that. The conduct of an individual and his personal responsibility for his own safety is measured by what an ordinary man would do under the circumstances. To say “* 0 * no reasonable person would have expected that Jenkins would have retaliated with violence ” ” *” is preposterous. Defendant and his wife thought Jenkins pulling the kniti was serious enough to tell him to leave the tavern, after he had twice been told to put the knife away. The fact that Mr. Peterson could not heed the peril because of his drunkenness does not alter the standard of care upon which his responsibility to prevent harm to himself is adjudicated. Yet, even if one allows for Mr. Peterson’s personal alcoholic state, it is quite evident that he was aware that Jenkins was armed, pugnacious and dangerous.

Because Gale Peterson was contributorily negligent as a matter of law, judgment should be entered for the defendant.


author: JUSTICE STOUDER

text:
    THE HARTFORD, Plaintiff-Appellant, v. RONALD DOUBLER et al., Defendants-Appellees.
    Third District
    No. 81-382
    Opinion filed April 22, 1982.

      Pamela M. Anderson and John V. Patton, both of Bozeman, Neighbour, Patton & Noe, of Moline, for appellant.
    Phillip Steele, of Massie and Steele, of Alpha, for appellees.
   JUSTICE STOUDER

delivered the opinion of the court:

Plaintiff, the Hartford, brought this action against defendants, Ronald and Roberta Doubler, its insureds, to recover money it paid to them under a contract of insurance. The circuit court of Mercer County granted the defendants’ motion for summary judgment.

During the year of 1979, the plaintiff insured the defendants under a farmowners-ranchowners policy. This policy contained a coverage exclusion for loss of livestock while in a public sale barn.

On June 11, 1979, three steers belonging to the defendants were stolen from the Viola Livestock Sale Barn, Viola, Illinois. The next day, the defendants notified the Mercer County sheriff’s office and their insurance agent of the loss. On both the offense report given to the Mercer County sheriff and the property loss notice given to the insurance agent, the defendants stated the loss occurred at the Viola Livestock Sale Barn.

The plaintiff, after receipt of the property loss notice and the offense report, paid the defendants the sum of $1,795.00 for the loss of the three steers.

In September of 1979, an additional 13 steers belonging to the defendants were stolen from the Viola Livestock Sale Barn. The defendants reported the loss to their local insurance carrier the following day and completed a second property loss notice which again stated that the loss occurred at the Viola Livestock Sale Barn. This property loss notice was forwarded to the plaintiff.

In addition, defendant Ronald Doubler was interviewed by Jana Cleveland, a claims adjustor for the plaintiff. During this interview Mr. Doubler again stated the steers were stolen from the sale barn. On October 12, 1979, the plaintiff paid defendants the sum of $6,013.25 for the loss of the 13 steers.

Over a year later, the plaintiff instituted this lawsuit seeking reimbursement of the insurance monies paid the defendants for the loss of the livestock. The plaintiff alleged that the payments had been mistakenly made in that Jana Cleveland had. approved the claims without any knowledge of the public sale barn exclusion contained in the defendants’ insurance policy.

The plaintiff and the defendants both filed motions for summary judgment. After a hearing, the trial court granted defendants’ motion for summary judgment and denied the motion of the plaintiff, stating that the payments by the plaintiff to the defendants were a mistake of law and that the plaintiff had waived the provisions of the insurance policy relating to the exclusion of coverage for livestock loss while in a public sale barn.

The plaintiff has raised the following issues for our review: (1) whether the plaintiff’s mistaken payments of insurance monies to the defendants were a mistake of fact, entitling plaintiff to recovery of the monies, or a mistake of law, precluding any such recovery; and (2) whether the plaintiff’s payments to the defendants under the contract of insurance constituted a waiver of the applicable policy exclusion.

It is a well-established proposition of law that money paid under a mistake of fact can be recovered by the payor; however, money paid under a mistake of law cannot be so recovered. Groves v. Farmers State Bank (1937), 368 Ill. 35, 12 N.E.2d 618.

As to what constitutes a mistake of law, it has been held that an erroneous conclusion of the legal effect of known facts is a mistake of law and not of fact. Purvines v. Harrison (1894), 151 Ill. 219.

The defendants have relied on the case of Western & Southern Life Insurance Co. v. Brueggeman (1944), 323 Ill. App. 173, 55 N.E.2d 719, in support of their position that the plaintiff’s inadvertent payment to the defendants in disregard of a policy exclusion was a mistake, of law rather than of fact. In Western, the insurance company, by its claims agent, approved payment of the full face value of an insurance policy insuring the life of a private in the United States Army, overlooking the fact that the policy contained a military and naval service exemption clause, entitling the beneficiary to recover only the premiums paid plus interest thereon. The claims agent testified she was familiar with the military and naval service exemption clause contained in the policy; however, in concentrating her attention on a suicide exemption clause also contained in the policy, she overlooked the fact the insured was in the military at the time of his death.

The court in Western found that the payment of the claim had been voluntarily made without any fraud or misrepresentation on the part of the defendant and that the insurance company in passing on such claim, by its duly authorized agents, did so with, full knowledge of the insured’s death while in the military and of the policy provisions relating thereto. Therefore,, because approval and payment of the claim were voluntary and without lack of knowledge or mistake of fact, the insurance company had waived all provisions concerning military service.

The case at hand is quite similar to Western. The plaintiff, by its duly authorized agent, Jana Cleveland, approved payment for the defendants’ loss of livestock voluntarily with full knowledge of the circumstances surrounding those losses. The defendants neither withheld information nor distorted the facts presented to the plaintiff.

We cannot agree with the plaintiff’s argument that since its claims adjustor was not familiar with all the policy provisions, the plaintiff should be allowed to recover the monies paid the defendants on the theory that such payments were made under a mistake of fact. The plaintiff, having drafted the contract of insurance and having been requested to act under its terms, is deemed to have knowledge of the policy provisions. Therefore, any payment made was with the full knowledge of the sale barn exclusionary clause contained in the defendants’ insurance policy, and the plaintiff’s mistaken application of the policy terms was a nonrecoverable mistake of law.

Because approval and payment of the defendants’ claims were made voluntarily and without lack of knowledge or mistake of fact, any policy provisions exempting coverage have been waived.

Waiver is the intentional relinquishment of a known right, and in the field of insurance law, waiver is generally not expressed or intentional but rather implied from the conduct of the insurer or its agents. Allstate Insurance Co. v. National Tea Co. (1975), 25 Ill. App. 3d 449, 323 N.E.2d 521.

Here, the plaintiff’s conduct of repeated payments for the loss of defendants’ livestock while in a public sale barn, with full knowledge of the circumstances surrounding the losses and its own policy provisions, evidences waiver of the applicable policy exclusion.

For the foregoing reasons, we hold that the summary judgment granted the defendants be affirmed.

Affirmed.

BARRY and HEIPLE, JJ., concur.


author: JUSTICE McNAMARA

text:
    ERVIN PRUETER, Plaintiff-Appellant, v. BERNICE PRUETER BORK, Indiv. and as Ex’r of the Estate of Herman Prueter, et al., Defendants-Appellees.
    First District (3rd Division)
    No. 80-2040
    Opinion filed November 4, 1981.
    Modified on denial of rehearing May 19, 1982.

      Leon E. Lindenbaum and Darwin P. Bromley, both of Chicago (Walsh, Case, Coale, Brown & Burke, of counsel), for appellant.
    Gerald J. Mannix, Richard H. Kane, and Deborah J. Kottel, all of Chicago (Swanson, Ross, Hanfling & Block, of counsel), for appellees.
   JUSTICE McNAMARA

delivered the opinion of the court:

Plaintiff, Ervin Prueter, brought this action against his sister, Bernice Bork, individually, as executor of the estate of their deceased father Herman Prueter, and as trustee of Prueter Trust No. 3. Other beneficiaries of the trust, Melinda Bork, Maureen Bork, and Marilyn Bork were also named as defendants. Plaintiff alleged that he had a right to certain trust property based on various theories: breach of contract; promissory estoppel; breach of fiduciary duty; and allegations challenging the authenticity of the trust document itself. After a trial without a jury judgment was entered for defendants. Plaintiff appeals.

During his lifetime, Herman Prueter set up a series of trusts for the benefit of his two children, plaintiff and Bernice, designating himself as trustee. The original Prueter Trust, dated March 23,1939, named plaintiff as the sole beneficiary. Plaintiff had the right to all income as well as the proceeds from any disposition of trust assets. In addition, plaintiff had the power to alter, amend or revoke this trust. A similar trust, Prueter Trust No. 2, dated January 20,1951, designated Bernice as sole beneficiary with the same rights and powers as plaintiff had in the Prueter Trust.

In May 1965 Herman visited plaintiff in his home and, in the presence of plaintiff’s wife and children, asked him to “sign off” on the Prueter Trust. Herman explained that he had acquired additional real estate and wanted to set up a new trust which would divide the property equally between plaintiff and Bernice. Plaintiff then signed two documents, one revoking his interest in the Prueter Trust and directing the trustee to convey the assets to Edwin D. Lawler; and the other directing Lawler to convey the assets to Herman as trustee of Prueter Trust No. 3. Plaintiff, his wife and children all testified that plaintiff did not read the documents before signing them. Bernice executed similar directions under Prueter Trust No. 2, and both plaintiff and Bernice signed Prueter Trust No. 3 as beneficiaries.

We first consider plaintiff’s contention that the trial court erred in failing to find that Herman, as trustee of Prueter Trust, breached his fiduciary duty to plaintiff, as beneficiary, when he asked plaintiff to revoke that trust in favor of the later trust. Plaintiff also argues that the court erred in not imposing a constructive trust on all the property which was part of the Prueter Trust and in not ordering Bernice to render an accounting as to such property.

The duty of loyalty owed by a trustee to a beneficiary in a trust relationship is more intense than in any other fiduciary relationship. (Sauvage v. Gallaway (1946), 329 Ill. App. 38, 66 N.E.2d 740.) Such duty prohibits the trustee from seeking any benefit for himself during the course of that relationship. (Suchy v. Hajicek (1936), 364 Ill. 502,4 N.E.2d 836.) Where the trustee does benefit from a transaction with a beneficiary, such transaction is presumed to be fraudulent. The conclusion is not conclusive but may be rebutted by clear and convincing proof that the transaction was fair and that the trustee did not breach his duty of loyalty to the beneficiary. Curtis v. Fisher (1950), 406 Ill. 102, 92 N.E.2d 327.

While the trial court properly recognized that a fiduciary relationship existed as a matter of law between Herman as trustee of Prueter Trust, and plaintiff as its sole beneficiary, it erred in finding that Herman did not benefit from plaintiff’s revocation of Prueter Trust. Consequently, the court failed to shift to defendants the burden of proving the fairness of the transaction. Under the original trust plaintiff had the “right to receive the proceeds from income, sales or other disposition of assets * * In addition he held the power to “alter, amend or revoke * * * and [to] withdraw any parcel of real or personal property.” Defendants’ theory that these powers were illusory has no merit. Although in the original trust Herman did retain the power of trustee “to sell any of the trust property on any terms, [and] to convey with or without consideration * * his power to so deal with the property was strictly limited by his fiduciary duties of care and loyalty to plaintiff as beneficiary. All transactions were required to be solely for plaintiff’s benefit.

Conversely, in Prueter Trust No. 3, it was Herman, not plaintiff, who had the power to “alter, amend or terminate * * * [the] trust and * * * [to] withdraw any ° e e property therefrom * * Likewise, it was Herman, not plaintiff, who had the present right to all trust income. Although plaintiff was initially named as a beneficiary of Prueter Trust No. 3, he had no right to receive income during Herman’s lifetime. Furthermore, plaintiff’s future rights to trust property were at all times subject to Herman’s right to revoke, a right which Herman did exercise, thus depriving plaintiff of all trust benefits.

When plaintiff revoked the original trust and directed the assets to be transferred to Prueter Trust No. 3, plaintiff suffered a detriment while Herman profited. Since a fiduciary relationship existed between them, this transaction is presumed to be fraudulent. The burden was on defendants to show the fairness of the transaction so as to negate the presumption that Herman breached his fiduciary duty of loyalty to plaintiff. Defendants completely failed to meet this burden.

Important factors in determining whether a particular transaction is fair include a showing by the fiduciary that he made a full disclosure of all relevant information to the subservient party; that the consideration was adequate; and that the principal had competent and independent advice before completing the transaction. (Curtis v. Fisher (1950), 406 Ill. 102, 92 N.E.2d 327.) Plaintiff was not informed of the difference between his rights under Prueter Trust and Prueter Trust No. 3. Herman’s failure to disclose to him this relevant information was fatal to the validity of this transaction. Nor did plaintiff receive any advice prior to executing the documents. Furthermore, a comparison of the interest plaintiff received in Prueter Trust No. 3 with that surrendered by him in Prueter Trust reveals that the consideration was inadequate.

Citing Simpson v. Adkins (1941), 311 Ill. App. 543,37 N.E.2d 355, and Pernod v. American National Bank. & Trust Co. (1956), 8 Ill. 2d 16, 132 N.E.2d 540, defendants argue that since plaintiff had an opportunity to read the documents and to ascertain the facts for himself he cannot now complain because he failed to do so. Both cases are clearly distinguishable from the present case. In Simpson no fiduciary relationship existed. While in Pernod there was a fiduciary relationship, the trustee did not profit by the terms of the trust and thus no presumption of invalidity arose. Failure to read a document is normally no excuse for a party who signs it. Where however, as here, a fiduciary relationship exists and where the dominant party benefits from execution of the document by the subservient party, a presumption of invalidity arises. The burden was on defendants to show that plaintiff revoked Prueter Trust with full knowledge of the facts, including knowledge of the legal effect of his signature on the relevant documents. (In re Estate of Lightner (1967), 81 Ill. App. 2d 263, 225 N.E.2d 417; G. Bogert, Trusts and Trustees §941, at 389-91 (2d ed. 1962).) Defendants have failed to meet this burden.

Defendants also maintain that plaintiff’s signature on two subsequent documents, an amendment to the trust and a petition for a condemnation proceeding, to both of which a copy of Prueter Trust No. 3 was attached, indicate his consent to or ratification of the terms of the trust. Absent a showing by defendants that plaintiff had full knowledge of the trust terms when he executed these documents these transactions enjoy the same presumption of invalidity accorded his signature on the original documents. (G. Bogert, Trusts & Trustees §942, at 403-04 (2d ed. 1962).) Defendants failed to offer any evidence that plaintiff had such knowledge or that the transactions were fair.

Defendants finally contend that plaintiff’s action is barred by laches. Although the period of time on which laches is predicated normally begins to run either when the plaintiff learns of the facts on which his rights are based or when a reasonable person would acquire such knowledge (Bobin v. Tauber (1976), 45 Ill. App. 3d 831, 360 N.E.2d 368), a different rule applies where a fiduciary relationship is involved. Where a fiduciary has a duty to disclose certain facts to the plaintiff but fraudulently fails to do so, plaintiff’s failure to use diligence to ascertain these facts is excused. In such cases, the running of time begins when the fraud is actually discovered by plaintiff. Highway Insurance Co. v. Korman (1963), 40 Ill. App. 2d 439,190 N.E.2d 124; Winger v. Chicago City Bank & Trust Co. (1945), 325 Ill. App. 459, 60 N.E.2d 560.

In the present case it does not appear that plaintiff had actual knowledge of the implications of his revocation of Prueter Trust prior to Herman’s death. Since plaintiff filed suit within a reasonable period after Herman’s death, laches has no application.

In light of our finding that Herman breached his fiduciary duty to plaintiff, it is unnecessary to consider plaintiff’s other contentions of breach of contract, promissory estoppel, and the invalidity of the trust agreement itself.

For the reasons stated, the judgment of the circuit court of Cook County is reversed and the cause is remanded with directions to enter judgment for plaintiff, to order Bernice Bork to enter an accounting with regard to that property and income in Prueter Trust No. 3 which was fraudulently derived from Prueter Trust, and for further proceedings consistent with the holdings of this opinion.

Reversed and remanded with directions.

McGILLICUDDY and RIZZI, JJ., concur.


author: JUSTICE JIGANTI

text:
    AL KAISER et al., Plaintiffs and Counterdefendants-Appellees, v. CHARLES W. OLSON III et al., Defendants and Counterplaintiffs-Appellants.
    First District (4th Division)
    No. 80-1939
    Opinion filed December 10, 1981.
    Modified on denial of rehearing May 20, 1982.
    Larry D. Blust, of Jenner & Block, and Mitchell S. Rieger and Reuben A. Bernick, both of Schiff, Hardin & Waite, both of Chicago, for appellants.
    Abramson & Fox, of Chicago (James Fox and David Kozak, of counsel), for appellees.
   JUSTICE JIGANTI

delivered the opinion of the court:

The plaintiffs, A1 Kaiser, Fred Kaiser and Harvey Kaiser (Sellers) filed an action in the circuit court of Cook County to recover the unpaid balance on a promissory note. The defendants, Gerald A. Finkle and Charles W. Olson III (Buyers), had given the note to the Sellers in partial payment for 494, 444 shares of stock of Kaiser Diversified Enterprises, Inc. (KDE), pursuant to a written purchase agreement. The Buyers denied liability on the note and counterclaimed for rescission. The Buyers sought to rescind the purchase agreement and recover the amount of the purchase price paid on the grounds that the Sellers had sold the stock in question to the Buyers without registering it or perfecting an exemption from registration in violation of the Illinois Securities Law of 1953 (Ill. Rev. Stat. 1973, ch. 121/2, par. 137.1 et seq.) and that the Sellers had induced the Buyers to enter into the purchase agreement by untrue statements and by failure to disclose material facts in further violation of the 1973 Illinois Securities Law of 1953 (Ill. Rev. Stat. 1973, ch. 121M, par. 137.1 et seq.). Alternatively, the Buyers sought damages on a theory of common law fraud.

The Sellers moved for summary judgment on the complaint and on all counts of the Buyers’ counterclaim. The Buyers resisted the Sellers’ motions on the complaint and on the counterclaim and filed a cross motion for summary judgment on their counterclaim. The circuit court granted the Sellers’ summary judgment on their complaint on the note and entered judgment in the amount of $48,783.77 on the note. The court also denied the Buyers’ motion for summary judgment on their counterclaims and entered judgment in favor of the Sellers and against the Buyers on the Buyers’ counterclaims both under the securities laws and under the theory of common law fraud. The court also awarded the Sellers’ attorney fees of $25,056.50, including fees for time spent defending against the Buyers’ counterclaim.

A chronology of relevant events in this case begins in 1972 when the Sellers signed a finance agreement with Associates Credit Corporation of South Bend (Associates). Pursuant to this agreement, Associates financed KDE’s inventory, land, building and other items. As KDE’s major creditor, Associates was in a position to participate in major policy decisions involving KDE management from 1973 to 1979, the dates inclusive in this case.

In May 1973, the Sellers entered into a purchase agreement with an initial group of buyers (not the defendants) for the sale of approximately two-thirds of the stock which the Sellers owned in KDE. The Sellers took their remaining one-third shares of stock and exchanged them with KDE for the purchase of a KDE subsidiary. These two transactions not only divested the Sellers of all their KDE stock ownership, but the Sellers at the same time resigned as officers and directors of KDE and moved their offices and the subsidiary which they had purchased to a new location some distance removed from the premises of KDE.

Then, in July 1974, after the initial group of buyers defaulted on their payments to the Sellers, a second group of Buyers (defendants here) was formed to substitute for the first group. Although one of the new Buyers was also a member of the first group, an Irving Zitowsky, the new transaction was structured as a substitute sale. The second group of Buyers (defendants Olson and Finkle along with Zitowsky, an undisclosed one-third participant) signed a new purchase agreement with the Sellers for the purchase of the 494,444 shares of KDE stock.

By the terms of the substitute purchase agreement, the total purchase price of the KDE stock was $100,000. The Buyers gave the Sellers a down payment of $35,000 and signed a promissory note for the balance which was to be paid over the next three years. Under this purchase agreement, the Sellers disclaimed any warranties to the Buyers. The Buyers, however, warranted to the Sellers that they were completely familiar with the financial conditions and operations of KDE and acknowledged that they were accepting stock which was unregistered under Federal securities laws. The purchase agreement contained no mention of Illinois securities laws.

The promissory note that the Buyers gave the Sellers provided that the Buyers would pay “all costs of collection, legal expenses and attorneys’ fees” incurred or paid by the Sellers in collecting the note.

At the time of the July 1974 sale, Finkle was a full-time consultant to KDE and was deeply involved in the management of the corporation. Finkle’s full time office was located at-KDE. Although the record is not entirely clear on this point, Finkle had apparently been identified by Associates as the appropriate person to oversee KDE operations and help insure the value of Associates’ security interest in KDE. Finkle became president of KDE nine months after the July 1974 purchase agreement was signed.

Olson decided to invest in KDE in the spring of 1974 when he was approached by Zitowsky and Donald J. Brumlik. (Brumlik was Olson’s attorney and also served as counsel to KDE.) Zitowsky and Brumlik encouraged Olson to join with Finkle and Zitowsky in the purchase of KDE stock. Olson agreed to join with Finkle and Zitowsky in buying the stock, but made it clear that he did not wish to actively involve himself in KDE.

Zitowsky at the time of the transaction had his office at KDE and served as its sales manager. Zitowsky declined to be named as a principal in the purchase agreement and designated Finkle and Olson as his nominees in this transaction. Unlike the Buyers’ side of the 1974 purchase agreement, which included Finkle and Zitowsky as active participants in KDE, the Sellers never reinvolved themselves in KDE after initially selling out in 1973.

Simultaneously with signing the purchase agreement, the Buyers signed a voting trust agreement and placed their newly acquired stock in the hands of a trustee. This voting trust remained in effect until July 1977, when it was dissolved as part of the Buyers’ attempt to tender the stock back to the Sellers and recover that part of the purchase price already paid.

The remaining relevant facts involve the setbacks suffered by KDE and the Buyers after the purchase agreement took effect. On July 10, 1974, S. D. Leidesdorf & Co., an independent auditor, completed KDE’s 1973 audit and submitted a copy of this report to Finkle. The report indicated that there were serious errors in the 1972 audit which had been prepared by the firm of Borenstein, Louis, and Price, also an independent auditor. Through the Leidesdorf report, Finkle learned that KDE’s inventory and accounts receivables had been overstated for 1972. In September 1974, Finkle also learned of the existence of an IRS tax lien on KDE which dated back to 1968. Olson also learned of these problems sometime between July and December of 1974.

After learning of the audit and tax problems and after conferring with counsel, the Buyers decided to continue making installment payments to the Sellers. The Buyers issued no notice of protest to the Sellers upon learning of these problems in 1974 and continued making installment payments through 1975. In July 1976, the Sellers’ attorney sent a collection note to the Buyers concerning late payments on the promissory note. In August 1976, Olson responded to the collection note by sending the Sellers one-third of the amount due on the installment. The remaining two-thirds was not paid. Finally, in December 1976, the Sellers filed their complaint. Shortly after this complaint was filed, the Buyers’ attorney dispatched a letter to the Illinois Secretary of State requesting information as to whether or not the KDE stock which the Buyers had bought was registered. On January 17, 1977, the Secretary of State issued his certificate certifying that the KDE stock was unregistered. The same month, the Buyers notified the Sellers that they intended to void the sale and tender the KDE stock back to the Sellers pursuant to the procedure outlined under the Illinois Securities Law of 1953 (Ill. Rev. Stat. 1973, ch. 121M, par. 137.13). The Buyers then filed their answer and counterclaim.

In July 1977, the Buyers dissolved the voting trust. Finally, on September 27, 1977, Associates foreclosed its security interest in KDE because the corporation was in serious financial trouble. Then KDE was involuntarily dissolved.

The Sellers contend that the Buyers did not give timely notice of their intent to rescind under the Act, that the Buyers did not make a proper tender under the Act and also that this was the sale of a business and therefore was not the sale of a security under the securities act. We find the last of the Sellers’ contentions dispositive and will not consider the other matters raised.

Condux v. Neldon (1980), 83 Ill. App. 3d 575, 404 N.E.2d 523, is cited by both parties on the issue of whether or not the sale of the KDE stock was a sale of securities under the Illinois act.

In Condux, the court examined the purpose of the Illinois securities laws and explored the scope of these laws as they apply to sales of unregistered securities. The purpose of the laws according to the Condux court is as follows:

“ ‘Since 1919, the clearly indicated purpose of the Illinois securities laws has been “to furnish information, to protect credulity and ignorance from deception * * * prevent fraudulent and deceitful sales of securities e * *” [citations], and “to protect innocent persons who may be induced to invest their money in speculative enterprises over which they have no control.” [Citation.] * * ” (Emphasis added.) 83 Ill. App. 3d 575, 578, 404 N.E.2d 523, 526.

Condux involved a sale of all the stock of a gun shop. The sale of the stock passed control of the business from the defendants to the plaintiffs. The plaintiffs assumed control of the business and operated it for two and one-half years. Dissatisfied with the results, they sued to rescind the sale, claiming it was a sale of unregistered securities in violation of the Illinois Securities Law of 1953 (Ill. Rev. Stat. 1973, ch. 121M, par. 137.1 etseq). In Condux the court rejected the buyers’ attempt to use the securities laws to rescind the sale and held that the sale of stock to a small group of affiliated buyers who are to share in the control and management of the corporation, whether personally or through a nominee independent of the seller, is not a sale of securities within the Illinois Securities Law, but is no more than an outright sale of the business. 83 Ill. App. 3d 575, 585, 404 N.E.2d 523, 531.

The Buyers give two reasons why Condux is not dispositive of this case and why a reviewing court should not decide that the transaction here involved was the sale of control of a business. The Buyers’ first reason is that the type of control referred to in Condux only exists when 100% of the stock in a company is purchased, when the purchasers have “ultimate authority” for management, and when a determination of whether such control exists has been decided as a question of fact and not as a question of law by a summary judgment. The second reason given by the Buyers as to why Condux is not dispositive of this case is that the issue of control was not properly raised in the court below and cannot be raised for the first time on appeal.

We believe that Condux is not limited exclusively to buyers of 100% of the stock of a company and that this is a matter properly decided on a summary judgment. Although the sale of the business in Condux involved the sale of 100% of the stock in a gun shop, the court held that the basic determination as to whether the transaction involved the sale of stock or constituted the sale of a business must be made on a case-by-case basis. The court said that the substance of the transaction and the relationship between the parties should be paramount with emphasis on the economic reality of the transaction. The realities of the situation under the instant facts are that the Buyers paid the Sellers $100,000 and in return obtained stock which represented more than half of the entire stock of the corporation. The Buyers were also actively involved in the management of the corporation both before and after the transaction with the Sellers. Thus, the conditions of management and control which are set out in Condux are met here. The record is sufficiently clear on the subject so as to make it properly determinable on the summary judgment.

We also disagree with the Buyers’ contention that the issue of control as set out in Condux was not properly addressed in the trial court. Since Condux had not yet been decided at the time of this case, it could not have been argued in the court below. Furthermore, the underlying issue of Condux is control and the record is abundantly clear on the issue of control.

Olson argues in his reply brief that the court should treat him differently than it treats Finkle in deciding this case. Olson claims that unlike Finkle, who participated in KDE’s management, he was only a “passive investor” and thus deserves the full protection afforded passive investors under the securities law.

The “passive investor test” to which Olson refers is set forth in Polikoff v. Levy (1965), 55 Ill. App. 2d 229, 204 N.E.2d 807, cert. denied (1965), 382 U.S. 903, 15 L. Ed. 2d 156, 86 S. Ct. 237, and speaks to the question of who is to be protected under the Illinois Securities Law. In Polikoff the court set forth the test as an investor who expects to receive profits “solely from the efforts of others.” More specifically the court stated:

“Both the Illinois and federal courts have emphasized that a security within the meaning of the acts is a contract, transaction or scheme whereby one person invests his money in a common enterprise on the theory that he expects to receive profits solely from the efforts of others.” 55 Ill. App. 2d 229, 234, 204 N.E.2d 807, 809.

We have already decided that Olson was part of a small group of affiliated buyers who purchased legal control of the business. Thus, his purchase was outside the scope of the Illinois Securities Law. Under the facts of this case, we also believe that Olson does not qualify for any special protection under the “passive investor test.” Olson participated in purchasing control of the business but chose not to participate in the active management of the business. Finkle and Zitkowsky initially asked Olson if he would like to be on the board of directors of KDE and Olson declined. We do not believe that the Illinois Securities Law is designed to protect as “passive investors” those who are in a position to elect whether they will be “active” or “passive” investors.

In addition, Olson was relying by choice on the efforts of “others” to receive his profits. However, the “others” whose efforts he was relying upon were his own affiliates in the voting trust, Finkle and Zitowsky and not the Sellers. These were the same “others” who had initially promoted KDE stock to Olson and induced him to buy the shares. Therefore, because Olson elected to be a “passive investor” and because the “others” he was relying upon for his profits were his own compatriots, we do not agree that Olson qualifies as a “passive investor.”

Having once decided that the Illinois Securities Law does not apply in this case, the Buyers’ arguments relating to their efforts to rescind the purchase agreement through timely notice and retender of the stock certificates to the Sellers become irrelevant.

Furthermore, the Sellers claim that the trial court properly granted their summary judgment motion on the issue of common law fraud because the Buyers waived any alleged misrepresentations. The Buyers, however, contend that the doctrine of waiver only applies to an action for rescission and that it is impossible to waive a cause of action for fraud as long as an injured party elects to affirm the contract and sue for damages within the statute of limitations. We do not agree with this contention.

The doctrine of waiver has worked its way over into actions at law. (D. Dobbs, Remedies, sec. 2.3, at 44 (1973); see “Waiver,” Black’s Law Dictionary 1417 (5th ed. 1979).) It is a well-established principle that a person defrauded in a transaction may, by conduct inconsistent with an intention to sue for damages for fraud, waive the right to sue. (37 C.J.S. Fraud secs. 69, 72 (1943); 37 Am. Jur. 2d Fraud and Deceit §386 (1968); Annot.) Specifically, waiver will apply if a party, after discovering the alleged fraud and with full knowledge of its material aspects, engages in conduct which is inconsistent with an intention to sue. This is particularly true when the conduct engaged in affords the defrauded party an advantage or misleads or prejudices the opposite party. (Harris v. Egger (6th Cir. 1915), 141 C.C.A. 219, 226 F. 389; cited in Annot., 52 A.L.R. 1153, 1156 (1928).) One is not permitted to lie back and speculate as to whether avoidance or affirmance of a contract will ultimately prove more profitable. Restatement (Second) of Contracts sec. 381, Comment a (1981).

Under Illinois law, nine months of silence and unreasonable delay on the part of a party has been held to be grounds for waiver of damages for fraudulent misrepresentation. (Bulley & Andrews, Inc. v. Symons Corp. (1975), 25 Ill. App. 3d 696.) However, in the instant cause, the record clearly shows silence and unreasonable delay on the part of the Buyers of almost three years after the discovery of the alleged fraud. Moreover, the record shows other conduct on the part of the Buyers which is inconsistent with an intention to seek damages for fraudulent misrepresentation. The Buyers discovered the alleged fraud within months after signing the purchase agreement, while their performance was still largely executory. The Buyers conferred with counsel and still continued to make installment payments. When the Sellers’ attorney sent a collection note two years after the contract was signed, Olson responded by sending part payment on the installment. The Buyers ran the company until it was finally dissolved in 1977. The Buyers did not bring an action for damages for fraudulent misrepresentation until the Sellers sued them for the purchase price and they then counterclaimed.

The Buyers’ conduct here closely parallels the conduct of the defendants in Nathan v. McKernan (1960), 170 Neb. 1, 101 N.W. 2d 756, cited in 37 Am. Jur. 2d Fraud & Deceit sec. 386 n.18 (1968). There the defendants purchased a business from the plaintiffs, took possession of the business, immediately discovered the alleged fraud, remained silent about the discovery for four years, ran the business until it finally folded, and then counterclaimed for damages for fraudulent misrepresentation when the sellers sued for payment. In Nathan, the court held as a matter of law that a suit for damages for fraudulent misrepresentation can be lost through waiver when a party with full knowledge of the fraud and all the material facts related to it engages in conduct inconsistent with the maintenance of such an action. We believe that this is the correct result.

We do not think that the cases cited to us by the Buyers, which involve the right of a defrauded party to affirm a contract and sue for damages, deal directly with the issue of waiver. These cases do not concern inconsistent conduct on the part of defrauded plaintiffs or prejudice to the opposing parties which would waive a cause of action for fraud. The Buyers cite Allen v. Henn (1902), 197 Ill. 486, 64 N.E. 250, where the court held that it was entirely appropriate for buyers to delay in their cause of action for fraud until the sellers instituted a suit for mortgage foreclosure. We have held such delay is inappropriate under the instant facts because it equates with conduct inconsistent to pursuing an action for fraud. Also, in Henn, the buyers did not engage in speculation which caused a diminution of the value of the property in their hands which would prejudice the sellers. In the instant cause, the Buyers controlled and managed the business until it became insolvent.

The Buyers also rely on Vance Pearson, Inc. v. Alexander (1980), 86 Ill. App. 3d 1105, 408 N.E.2d 782. In Pearson the issue of waiver was not before the court because it had not been pleaded in the answer and the court would not allow an amendment to the answer. This is not the situation here. Furthermore, buyers in Pearson filed their action within a short time after the defendant had promised to complete performance after allowing a reasonable delay for the completion of the work which the sellers promised to perform. The buyers in Pearson did not engage in conduct inconsistent with an action for fraud. Therefore, since the courts in these cited cases did not consider issues of inconsistent conduct or prejudice, we do not consider them controlling here.

Finally, the Buyers allege that the court erred in the amount of the award of the Sellers’ attorney fees because the award included the costs of defending against the Buyers’ counterclaim. A resolution of this issue depends upon the meaning of the words “all costs of collection, legal expenses and attorneys’ fees” incurred by the Sellers “in collecting this note” which appear in the promissory note. The parties agree that the meaning of these words are matters of law to be decided by the court. The function of the court in such situations is to construe the contract and determine its legal effect. (See 17 C.J.S. Contracts §16, at 1248 (1963).) More specifically, a court must seek to ascertain the intentions of the parties and this intention, once found, will be given effect if it is consistent with the language used, with the law and with public policy. 4 Williston, Contracts sec. 600, at 281 (3d ed. 1961).

We believe that the proper legal construction of the language used is that attorney fees are not appropriate on the Buyers’ claim for rescission. In our judgment, the intention of the parties when they employed the language “all costs of collection * * * in collecting this note” meant the ordinary costs of collection which would be incurred merely by the nonpayment of the note. Our interpretation of the intention of the parties in this contract is consistent with the standard for interpretation of integrated bilateral contracts which is set out in Williston. (4 Williston, Contracts sec. 603, at 342 (3d ed. 1961).) The standard to be applied is that of “reasonable expectations”; that meaning that a reasonably intelligent person acquainted with the operative usages of the words and knowing all the circumstances would give them. (4 Williston, Contracts sec. 603, at 342, 344 (3d ed. 1961).) We do not believe that the parties reasonably expected that the costs of collection on the note would include a suit whereby the purchasers would seek to obviate the entire transaction.

Our construction of this language appears consistent with existing case law. The same language, “all costs of collection” was interpreted by the court in Jackson v. Oppenheim (2d Cir. 1976), 533 F.2d 826, as not including attorney fees for a defense of all actions “incidental” to the integrity of the note. The “incidental” action in Jackson was the defense of a separate claim regarding the validity of the underlying sale transaction under Federal securities laws. The rationale for the court’s finding in Jackson was that some language more express than “costs of collection” should have been employed to have placed the party charged on notice that he was undertaking to protect the obligee from costs incurred in defending against a separate claim and not just the ordinary collection expenses in recovering upon a defaulted promissory note. 533 F.2d 826, 831.

Therefore, we hold that it was error for the trial court to award Sellers’ attorney fees for defending against the counterclaim and limit the award of attorney fees to the Sellers’ expenses in collecting upon the defaulted promissory note.

For the above and foregoing reasons, the judgment of the circuit court is affirmed in part, reversed in part and remanded in part.

JOHNSON, P. J., and ROMITI, J., concur.