{
  "id": 5241806,
  "name": "Thomas B. McGuire, Appellant, v. Ralph A. Cohen, et al., Appellees",
  "name_abbreviation": "McGuire v. Cohen",
  "decision_date": "1963-12-09",
  "docket_number": "Gen. No. 49,096",
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    "judges": [
      "ENGLISH, P. J. and BURMAN, J., concur."
    ],
    "parties": [
      "Thomas B. McGuire, Appellant, v. Ralph A. Cohen, et al., Appellees."
    ],
    "opinions": [
      {
        "text": "MR. JUSTICE MURPHY\ndelivered the opinion of the court.\nPlaintiff, in an equity action, seeks to redeem collateral which was sold at an extrajudicial private sale, after the maturity and nonpayment of his collateral note. By a judgment order, the trial court rejected plaintiff\u2019s right of redemption claim and confirmed title in defendants to plaintiff\u2019s country club membership certificates and to plaintiff\u2019s interest, as lessee, in a 99-year lease on real estate. Plaintiff\u2019s direct appeal to the Supreme Court, contending freehold interests were involved, was found to be \u201cwrongfully appealed\u201d to that court and was ordered transferred to this court.\nOn November 9, 1960, plaintiff executed a $45,000 commercial form \u201ccollateral note \u2014 judgment clause,\u201d payable to defendant Joseph R. Friedman \u201con or before six (6) months after date,\u201d with interest at 6% per annum. The collateral is identified in the note as \u201c1. Assignment of beneficial interest in Trust No. 41310, under which Chicago Title & Trust Co. is Trustee and holds title to the following described real estate: . . . [Plaintiff\u2019s home]. 2. Twenty-eight (28) certificates of membership, being all of the memberships in the Brookwood Country Club, all with stock power attached. 3. Assignment of Thomas McGuire of all Ms interest in and to leasehold dated 6-21-48 and recorded 8-3-48 as Document No. 551054 demising for a period of 99 years lots 7, 8 and 9 in Addison Township Supervisor\u2019s Assessment plat No. 7, being a part of the South % of Section 16, Township 40 North, Range 11, according to plat recorded 1-10-45, as Document No. 472363, in DuPage County, Illinois.\u201d\nThe note provides for the sale of the collateral \u201cat or after maturity of this note ... at public or private sale . . . and at such sale the payee or any holder hereof may become the purchaser of said collateral free from any right of redemption; . . . .\u201d The note also includes the right to confess judgment for the unpaid amount and reasonable attorney\u2019s fees.\nAfter three extensions of the time of payment, a letter of default was sent to plaintiff on November 27, 1961, more than a year after the debt was originally incurred. Payment not being made, the collateral was sold to defendant Ralph A. Cohen on December 4,1961, for $50,403.75, representing principal \u2014 $45,000, interest \u2014 $2,925, and attorney\u2019s fees and expenses \u2014 $2,-478.75. The note, in evidence, is marked \u201cPaid and satisfied, Ralph A. Cohen.\u201d As to the collateral sold, plaintiff argues that the three items were sold. Defendants insist that only two items were sold, being the certificates of membership and the 99-year leasehold. Defendants have repeatedly stated that \u201cplaintiff\u2019s home was not sold at the private sale,\u201d and that they have offered to return to plaintiff the assignment \u201crepresenting the beneficial interest in the residence occupied by plaintiff.\u201d\nThe complaint filed March 14, 1962, alleges that the total value of the collateral is $550,000, and that on February 28, 1962, plaintiff tendered a cashier\u2019s check for $53,578.75 \u201cto redeem all of the property . . . wMch tender was refused by Friedman as attorney for Cohen. The prayer of the complaint is \u201cthat the Court direct the Defendants to accept the sum found to be due and owing to them and upon payment of the same out of the deposits hereby tendered to execute such documents as will restore Plaintiff to his ownership of said property and to cancel the evidence of indebtedness on which the Defendants claim to have become owners of the property.\u201d\nThe answer of defendants denies that the value of the collateral is $550,000 and alleges on information that the check for $53,578.75, allegedly tendered, \u201cwas advanced by one John Doe, as a down payment toward the purchase of the properties of the Plaintiff . . . .\u201d\nAfter an extended trial before the chancellor, which included the testimony of the parties and numerous exhibits, the court entered a \u201cjudgment order,\u201d finding that plaintiff had failed to sustain the material allegations of his complaint, and that he was not entitled to the relief demanded; that \u201cdefendants have tendered to plaintiff in open Court\u201d an assignment of the beneficial interest of the legal title to plaintiff\u2019s residence; that the promissory note \u201chas been canceled and that the debt evidenced thereby has been paid\u201d; that \u201cthe defendant, Ralph A. Cohen, is the rightful and legal assignee of lessee\u2019s interest in the written lease dated June 21, 1948, . . .\u201d and the legal owner and holder of the \u201ccertificates of membership in Brook-wood Country Club . . . .\u201d The chancellor then decreed that plaintiff\u2019s prayer for relief be denied for want of equity. This appeal followed.\nPlaintiff\u2019s contention is that under statutory provisions and authorities cited, all of the interests \u201cpledged\u201d by the note were interests in lands, and two of them were freehold interests, his home and the certificates of membership, and, therefore, as a matter of law, \u201csuch interest cannot be sold in foreclosure of a lien securing an indebtedness except in pursuance of a decree of a court of equity, with statutory rights of redemption. This is true even though the parties agree ever so clearly to the contrary in the note, creating and securing the indebtedness.\u201d\nDefendants\u2019 principal contentions are (1) that plaintiff has no substantial interest in the collateral cognizable in a court of equity; (2) that plaintiff\u2019s acts are \u201ctainted with inequitableness and bad faith\u201d in the very matter on which he prays for aid; and (3) that the 99-year leasehold was personalty and, as such, \u201cit was susceptible of sale in accordance with the powers granted to the holder of the collateral note.\u201d\nInitially, as to any freehold interest being here involved, we believe the order of the Supreme Court transferring this appeal to this court inferentially disposed of plaintiff\u2019s freehold contentions. The record is sufficient to show that defendants are not asserting any claim of ownership as to the beneficial interest of plaintiff\u2019s home. Also, we do not believe that the Brookwood Country Club membership certificates are to be considered within the rules which apply to trusts of which the corpus is real estate and of which \u201cbeneficial interests\u201d of the \u201ccestuis\u201d are considered to be freehold interests in lands. (DeVoigne v. Chicago Title & Trust Co., 304 Ill 177, 136 NE 498 (1922); Horney v. Hayes, 11 Ill2d 178, 142 NE2d 94 (1957).) Neither do we believe that these membership certificates give rise to any rights of redemption here to plaintiff.\nPlaintiff\u2019s determinative contention is that the 99-year leasehold, although not a freehold, and usually denominated as a \u201cchattel real,\u201d is \u201cnevertheless \u2018real estate\u2019 and not \u2018personal property\u2019 within the provisions of the Illinois Mortgage Act forbidding the foreclosure of mortgages upon real estate otherwise than by judicial proceedings and is within the Illinois statute concerning judgments, decrees and executions providing for redemption by the mortgagor from foreclosure sales upon \u2018real estate mortgages.\u2019 \u201d\nPlaintiff cites various Illinois statutes to prove that the lien of the instant note \u201ccould be foreclosed only by judicial sale, with statutory right of redemption.\u201d (1) Section 38 of \u201cAn Act concerning conveyances\u201d (e 30, \u00a7 37): \u201cThe term \u2018real estate,\u2019 as used in this act, shall be construed as co-extensive in meaning with \u2018lands, tenements and hereditaments,\u2019 and as embracing all chattels real. This act shall not be construed so as to embrace last wills and testaments, except as herein expressly provided.\u201d (2) Section 3 of the Act on Judgments, Decrees and Executions (c 77), provides as follows: \u201cThe term \u2018real estate,\u2019 when used in this act shall include lands, tenements, hereditaments, and all legal and equitable rights and interests therein and thereto, including estates for the life of the debtor or of another person, and estates for years, and leasehold estates, when the unexpired term exceeds five years.\u201d (3) Section 1 of the Illinois Mortgage and Foreclosure Act (c 95, \u00a7 23), which provides that \u201cno real estate\u201d shall be \u201csold to satisfy any . . . martgage, trust deed or other conveyance in the nature of a mortgage, except in pursuance of a judgment or decree of a court of competent jurisdiction.\u201d (4) Section 18 of Chapter 77 provides for the mortgagor\u2019s statutory right of redemption from sales of mortgages upon \u201creal estate,\u201d redeeming the real estate so sold \u201cwithin twelve months from said sale, ... by paying to the purchaser thereof, . . . the sum of money for which the premises were sold or bid off, with interest thereon at the rate of six per centum per annum from the time of such sale, whereupon such sale and certificate shall be null and void.\u201d Neither side has cited any authorities which are directly in point on this contention.\nIn Knapp v. Jones, 143 Ill 375, 32 NE 382 (1892), onr Supreme Court, in an action for the foreclosure of a trust deed, in which was described \u201ca large amount of real estate in LaSalle county, together \u2018with the grain elevator and the leased ground upon which it was erected,\u2019 \u201d quoted and affirmed the Appellate Court opinion, where it is said (p 379):\n\u201cWe think that question settled, at least in this State, and that the property in question is a \u2018chattel real,\u2019 and under our statute is classed as real estate. ... It is apparent, therefore, that by the express terms of the statute the elevator and leasehold interest of Blanchard were \u2018chattels real,\u2019 and the deed of trust was valid as a real estate mortgage, and the circuit court properly so held.\u201d\nIn Barrett v. Trainor, 50 Ill App 420 (1893), where a claim was made based upon a sale by the sheriff on an execution issued upon a judgment against the plaintiff in error, the court said:\n\u201cThe subject of the sale here was an unexpired term of thirty months. Chattels real are subject to sale on execution (\u00a740, c 77, RS); and, when the unexpired term does not exceed five years, without redemption.\u201d\nThe question of categorizing a 99-year leasehold arose in Imperial Bldg. Co. v. Chicago Open Board of Trade, 238 Ill 100 (1909), where the court said (p 107), 87 NE 167:\n\u201cIt is true that a leasehold interest in land is for some purposes treated as personal property, but generally it is considered a chattel real.\u201d\nDefendants contend, however, that a chattel real is a mixed concept, the two words themselves being opposed to one another, and therefore the attitudes of the parties towards the collateral is important in considering an asset of dual nature susceptible of varied interpretations and definitions. Defendants concede that \u201cin some instances\u201d a chattel real is viewed as real estate but that under Zimmermann v. Dawson, 294 Ill 380, 128 NE 546 (1920), \u201csuch a leasehold as the one here involved has been held to be a chattel real and reckoned as part of the personal estate.\u201d However, in that case the Supreme Court was passing on the question of whether a freehold was involved for a direct appeal to the Supreme Court and the property involved was a 99-year lease which was part of a personal estate of a decedent.\nDefendant also cites Pierce v. Pierce, 4 Ill2d 497 (1955), where it is said (p 499), 123 NE2d 511:\n\u201cThere is of course no question but that a leasehold interest is not a freehold at common law, but is treated in most respects as personal property.\u201d\nNevertheless, it was there held (p 503) that a 99-year leasehold \u201cis subject to a partition. That conclusion is in harmony with the decisions reached by the courts of other States.\u201d The Appellate Court, in considering the same case (351 Ill App 336), said (p 340):\n\u201cIt is our opinion that both by statute and by decision, Illinois has not adhered to the strict, technical, feudal definition of the term \u2018real estate.\u2019 Chapter 30 of the Illinois Revised Statutes, dealing with conveyances, defines \u2018real estate\u2019 . . . \u2018as embracing all chattels real.\u2019 A 99-year lease, being a chattel real, would come within the provisions of the above statute.\u201d\nAnd on page 343 said:\n\u201c. . . Long-term leases have become a common method of land holding in our country, and under such leases, great industrial, commercial and residential enterprises have been built. For many purposes, only some of which have been herein described, they have the stature of real estate and are treated as within the definition of \u2018lands, tenements and hereditaments.\u2019 It would in our opinion be inequitable to deny a part owner of such an interest the right to partition.\u201d\nPlaintiff, admitting that \u201cthe parties themselves agreed that the properties in this note should be \u2018considered\u2019 as \u2018collateral, subject to the laws of the pledge, and to be sold under the laws of the pledge,\u2019 \u201d cites Warner v. Gosnell, 8 Ill2d 24 (1956) at p 30, 132 NE2d 526, where the court said:\n\u201cSection 12 of the Mortgage Act (Ill Rev Stats 1953, c 95, \u00a7 13,) provides that every deed conveying real estate, which shall appear to have been intended only as a security in the nature of a mortgage, though it be an absolute conveyance in terms, shall be considered as a mortgage. The burden of proof rests upon the one asserting a deed absolute in form to be a mortgage to show that fact by clear, satisfactory and convincing proof. Deadman v. Yantis, 230 Ill 243; Rankin v. Rankin, 216 Ill 132; Novak v. Kruse, 288 Ill 363.\n\u201cThere can be no question that a deed takes effect from its delivery and that its character at the time of such delivery becomes fixed as of that time. The question whether a deed which is absolute in form is to be taken as a mortgage depends upon the intention of the parties in that regard at the time of its execution. The intention may be found from the papers themselves or by aid of extraneous evidence, which, when ascertained, will govern the decision.\n\u201cThe law is well settled that the true character of the transaction may be shown by parol, and if, upon consideration of the facts, it clearly appears that the deed, though absolute in its form, was taken as security for the payment of money, it will in equity be held a mortgage.\u201d\nThese pronouncements are repeated in Schwartzentruber v. Stephens, 8 Ill2d 222, 228, 133 NE2d 33 (1956), and we believe they apply here.\nIt is obvious from the terms of the instant collateral note that, at the time of delivery of the 99-year lease, a chattel real with an unexpired term exceeding five years, it was intended to be security \u201cin the nature of a mortgage\u201d for an existing debt, payable in the future and \u201cfree from any rights of redemption.\u201d However, the true character of the transaction became fixed as of that time with statutory redemption rights. This is so, \u201cwhatever language the parties may have used and whatever stipulations they may have inserted in the instrument.\u201d (Warner v. Gosnell, 8 Ill2d 24, 31, 132 NE2d 526.) Therefore, we hold that the 99-year leasehold comes within the provisions of section 3 of Chapter 77, and here must be considered to be \u201creal estate.\u201d This determination makes the transaction subject to the provisions of: (1) section 1 of the Illinois Mortgage and Foreclosure Act (e 95, \u00a723), and the leasehold should not have been sold to satisfy the unpaid collateral note, \u201cexcept in pursuance of a judgment or decree of a court of competent jurisdiction\u201d; and (2) section 18 of Chapter 77, which provides for the mortgagor\u2019s statutory right of redemption from mortgage sales of real estate.\nDefendants, not conceding that the 99-year leasehold comes within the foregoing statutory provisions, argue (1) that the plaintiff was not the real party in interest in the disputed two items of collateral, and (2) that \u201cplaintiff has sought the aid of a court of equity with unclean hands, and that the trial court did and this court should decline and refuse to extend such aid to him, regardless of all other circumstances in the case.\u201d\nThese contentions are made because plaintiff did not make any reference to the Levatino agreement in his complaint nor in the presentation of his case in chief. It was only after plaintiff was served with a subpoena duces tecum during defendants\u2019 case that he disclosed to the court that under date of February 28,1962, he had entered into an agreement with Jerome J. Levatino, an attorney, concerning the certificates of membership and the 99-year lease. The agreement, in evidence, shows that in consideration of the sum of $175,000, plaintiff agreed \u201cto execute proper assignments\u201d of the certificates of membership \u201cfor the purpose of transferring ownership of said memberships to the nominee of Jerome J. Levatino,\u201d and \u201cto execute proper assignment of Lessee\u2019s interest in the heretofore mentioned ninety-nine (99) year lease.\u201d The agreement covered other items which had to do with the \u201cBrookwood Country Club\u201d and reorganization proceedings then pending in the U. S. District Court. Of the $175,000, $60,000 was acknowledged \u201cin hand paid\u201d and the balance of payments was to be made in subsequent installments. Also in evidence, on the stationery of Levatino, dated March 6, 1962, is a 90-day extension of the agreement in order to permit plaintiff \u201cto take such action as you deem necessary to force the return of 28 equity memberships of Brook-wood Country Club, and your interest in a certain 99 year leasehold described more completely in the contract between us, which you have previously posted as collateral for a loan to Joseph Friedman.\u201d\nThese contentions of defendants were considered at length by the chancellor in his oral opinion, in which he stated: \u201cThe Court does feel that McGuire did come into this court in bad faith. He filed his lawsuit charging that he was the owner, claiming that he had the right thereto, and seeking equitable relief, from what he contended was an unconscionable sale or arrangement, or unconscionable dealing with his property. At no time was he able by loan or in his own right to raise the money to satisfy this note. The true party interested in this action developed through adverse proceedings, through Section 60, when the defendants brought out the fact that there was the Levatino Contract as of February 28, 1962, why he didn\u2019t divulge to the court prior thereto and why the defendants had to bring it out by adverse proceedings, I can only conjecture and guess. . . . By this contract [Levatino contract], he immediately divests himself of any property . . . that he asked the Court to give him; because the contract he considers, and the Court conceded can be considered as valid and binding upon the plaintiff; and, therefore, his interest would be about the smallest interest of that of extricating himself out of a transaction that he got himself into, which was legally and lawfully sound. . . .\u201d\nThe court concluded its opinion by stating: \u201cNow, for all of those reasons, and the other reasons that the Court has considered from the testimony and the argument of counsel, and authorities cited, the Court must hold that the plaintiff cannot prevail. . . . The Court has two choices here: the Court may either dismiss the suit for want of equity or all the rights of the party before it, or it may dispose and adjudicate those rights. The Court finds that it is proper for the best interest to adjudicate and conclude all rights between the parties; . . . .\u201d\nWe believe these opinion excerpts indicate that the chancellor did not find the unclean hands of the plaintiff as the determinative issue in the case, because he did proceed to \u201cadjudicate and conclude all rights between the parties.\u201d\nWe concur with, the conclusion of the court to adjudicate the rights of the parties. It is in accordance with pronouncements made in this state. The origin of the claim was equitable. Plaintiff\u2019s alleged misconduct did not in any measure affect the equitable relationship between the parties and did not arise out of the transaction. (7 ILP Chancery \u00a7\u00a7 95 and 96.) Defendants had some knowledge of the real interest question early in the litigation. In their answer they allege, on information, \u201cthat Plaintiff is without funds, and that the check, if any, which was allegedly tendered at the hearing in the United States District Court was advanced by one John Doe, as a down payment toward the purchase of the properties of the Plaintiff, . . . which Contract is a breach of the verbal option to purchase heretofore granted to the Defendants herein.\u201d\nWe agree, as stated by the chancellor, that \u201cit was not fair play with the Court for the plaintiff to come in on one theory and then it develops that he was not the true party in interest desiring the return of this property.\u201d But we are not persuaded that the alleged lack of substantial interest in plaintiff or his \u201cbad faith\u201d with the court warrant a denial of his substantial right to contend for \u201cthe true character of the transaction,\u201d and the correct legal status of the leasehold at the time it was delivered as collateral. This status determination had to be made sometime, even if the chancellor had decided to deny plaintiff equitable relief because either he was not the \u201creal party in interest,\u201d or did not come into equity in \u201cgood faith\u201d or with clean hands.\nWe conclude that the private sale of the collateral was void as to both properties, because the \u201ctrue character\u201d of one of the items of the unit sale, the instant leasehold, is real estate, which requires that it be sold \u201cin pursuance of a judgment or decree of a court of competent jurisdiction,\u201d as provided in section 1 of the Illinois Mortgage and Foreclosure Act, and with right of redemption as provided in section 18, Chapter 77. This holding as to both items is necessary, because they were sold as a unit and not as separate items for separate sums of money.\nFor the reasons stated, the judgment order appealed from is hereby reversed and the matter is remanded to the trial court for further proceedings in accordance with the views expressed herein.\nReversed and remanded.\nENGLISH, P. J. and BURMAN, J., concur.",
        "type": "majority",
        "author": "MR. JUSTICE MURPHY"
      }
    ],
    "attorneys": [
      "William C. Wines and Robert J. Nolan, of Chicago, for appellant.",
      "Courshon & White, Jacob B. Courshon and Gerald White, of Chicago, for appellees."
    ],
    "corrections": "",
    "head_matter": "Thomas B. McGuire, Appellant, v. Ralph A. Cohen, et al., Appellees.\nGen. No. 49,096.\nFirst District, First Division.\nDecember 9, 1963.\nRehearing denied January 21, 1964.\nWilliam C. Wines and Robert J. Nolan, of Chicago, for appellant.\nCourshon & White, Jacob B. Courshon and Gerald White, of Chicago, for appellees."
  },
  "file_name": "0375-02",
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}
