Berkowitz v. Urso

2014 IL App (1st) 121662, 24 N.E.3d 196

• Court: Appellate Court of Illinois
• Decided: December 19, 2014
• Docket: 1-12-1662, 1-12-1756cons.
• Status: Unpublished

Opinion

2014 IL App (1st) 121662

Nos. 1-12-1662, 1-12-1756 (consolidated)

SIXTH DIVISION December 19, 2014

IN THE APPELLATE COURT OF ILLINOIS FIRST JUDICIAL DISTRICT

GREGORY BERKOWITZ, as Trustee of ) Appeal from the the W.F.T. Trust, ) Circuit Court of ) Cook County. Plaintiff-Appellant and Cross-Appellee, ) ) v. ) No. 04 CH 5166 ) RICHARD J. URSO, JR., as Administrator ) of the Estate of Richard Urso, Deceased, ) ) Defendant-Appellee and Cross-Appellant, ) ) ) (Banco Popular North America and Unknown Owners, ) The Honorable ) Richard J. Billik, Jr., Defendants). ) Judge Presiding.

JUSTICE LAMPKIN delivered the judgment of the court, with opinion. Justices Hall and Rochford concurred in the judgment and opinion.

OPINION

&1 Following a bench trial, the circuit court found that a joint venture agreement existed for

the ownership and operation of a rental property between plaintiff, Gregory Berkowitz, as trustee

of the W.F.T. Trust (Trust), and Richard Urso (Urso), who had since died. The circuit court,

however, found the Trust was barred or precluded from enforcing any claimed right to one-half Nos. 1-12-1662, 1-12-1756 (consolidated)

of the property interest because the property was acquired vis-a-vis a fraudulent or improper

purpose and in violation of the Frauds Act (740 ILCS 80/2 (West 1998)). Notwithstanding, the

circuit court concluded that the evidence supported the enforcement of the Trust and Urso's

agreement for the operation of the rental property. The circuit court, therefore, ordered plaintiff

and defendant, Richard J. Urso, Jr. (Richard Jr.), as administrator of the estate of Richard Urso,

deceased, to wind up the operation of the joint venture arrangement for the rental of the property

and to provide an accounting to each other for the operation of the business since Urso's death.

The parties have cross-appealed.

&2 Plaintiff contends the circuit court erred in finding the joint venture agreement for the

ownership of the subject property was unenforceable based on an improper or fraudulent purpose

and is barred by the Frauds Act. In contrast, defendant contends the circuit court erred in even

finding a joint venture agreement existed. In the alternative, defendant contends the circuit court

erred in finding the joint venture agreement as to the operation of the property, i.e., the renting of

the property, was not unenforceable based on a fraudulent or improper purpose, was not barred

by the statute of frauds, was not void based on public policy, or was not barred by the Probate

Act of 1975 (Probate Act) (755 ILCS 5/18-2, 18-3 (West 1998)). Based on the following, we

affirm in part and reverse in part.

&3 FACTS

&4 The undisputed facts are these. In 1998, the subject property, 750 S. Clinton Avenue, in

Chicago, Illinois, was purchased. On April 30, 1998, the title to the property was placed in a

land trust with Metropolitan Bank and Trust Company, trust number 2153 (land trust). The

designated beneficiary of the land trust was Urso, having sole power of direction. The land trust

then entered into a mortgage loan agreement with Banco Popular North America (Banco

2 Nos. 1-12-1662, 1-12-1756 (consolidated)

Popular). 1 The property was leased to Scarlett's G.P., Inc. (Scarlett's), a gentlement's club, for a

nine-year term with a five-year option to renew. The May 12, 1998, lease listed the land trust as

the landlord with the address of "c/o G.B. Management, 1307 S. Wabash, Suite 200, Chicago,

Illinois 60605." The lease contained an "option to purchase" provision, in which Scarlett's had

the option to purchase the property until May 31, 1999. In the event Scarlett's wished to exercise

the purchase option, pursuant to the terms of the lease, an executed contract was to be sent to

"c/o G.B. Management, 1307 S. Wabash, Suite 200, Chicago, Illinois 60605." 2

&5 The "buyer's settlement statement," dated July 22, 1998, listed the purchase price of the

subject property as $627,500. The settlement statement revealed credits for $25,000 in earnest

money, $25,955.17 in tax credits, and $472,500 in loan proceeds. The settlement statement also

listed "W.F.T. Contribution,[ 3] $50,000" as a line item reducing the overall balance required to

close the property. The statement listed the "total due from Urso" as $134,769.83. 4 The

settlement statement contained a signature line with the name Richard Urso printed below the

line and a completed signature on the line. The record contains a copy of a cashier's check dated

July 27, 1998, for $50,000 made out to "C. T. and T." 5 with "WFT Trust" as the remitter.

&6 Urso annually reported the income generated from the property on his personal joint tax

returns that he filed with his wife. Urso died on April 15, 2003. As the administrator of Urso's

estate, Richard Jr. has acted as the beneficiary of the land trust since the time of his father's

death.

1 Banco was dismissed from the underlying lawsuit prior to trial. 2 The purchase option was not exercised by Scarlett's; the provision is highlighted due to the address listed in the event the option was exercised. 3 Testimony indicates that W.F.T. Trust stands for Wolf Family Trust. 4 Another figure for $135,700 is hand written on the signed settlement statement directly below this figure; Wolf testified that Urso contributed $135,700. 5 Chicago Title and Trust Company.

3 Nos. 1-12-1662, 1-12-1756 (consolidated)

&7 On March 24, 2004, plaintiff, as trustee of the W.F.T. Trust, filed suit against defendant

alleging that Urso and Louis Wolf, the former trustee of the Trust, entered into an oral joint

venture agreement for the purchase and operation of the subject property. The Trust alleged it

was entitled to partial ownership and a share in the rents received from the subject property.

Plaintiff subsequently filed four amended complaints. In its fourth amended complaint, the

subject of which underlies this appeal, the Trust alleged that, in January or early February of

1998, Wolf, acting for the Trust, and Urso verbally agreed to purchase the subject property

together. The terms of the agreement were such that the Trust would provide $25,000 in earnest

money and an additional $50,000 at the time of closing, while Urso would obtain financing for

the property and provide any funds necessary to close over and above the available financing.

Moreover, the property would be held in a land trust to which Urso would be the beneficiary.

According to the fourth amended complaint, Wolf and Urso agreed that any profits, i.e., the

surplus of rents and receipts over the expenses including interest, would be divided and any

profits derived from the sale of the property, either by Scarlett's exercising its option to purchase

or the ultimate dissolution of the venture, would be divided equally. Defendant filed an answer

denying the existence of a joint venture agreement and asserted affirmative defenses based upon

illegality/fraudulent purpose, the Frauds Act, the Probate Act, the statute of limitations, and as

against public policy. The case proceeded to trial.

&8 Louis Wolf testified at trial that he started the Wolf Family Trust in 1975. The Trust was

involved in all aspects of commercial real estate. Wolf testified that Berkowitz was the trustee of

the Trust and Wolf's wife and children were the named beneficiaries. Wolf said that he acted on

behalf of the Trust in the acquisition of properties and all negotiations related thereto.

4 Nos. 1-12-1662, 1-12-1756 (consolidated)

&9 Wolf testified that he met Urso in 1995. Urso was a neighbor and became a close friend.

According to Wolf, he and Urso had a business relationship for the acquisition of real estate.

Specifically, Wolf and Urso purchased three parcels of property together: one on Clark Street,

one on Harlem Avenue, and the subject property. The owners of the Clark Street property were

Wolf, Urso, and Albert Berland, who had since passed away. Wolf testified that he could not

recall who held title to the Clark Street property, but he knew that neither he nor the Trust were

named on the title. Wolf said that they held the Clark Street property for three or four years

before selling it and splitting the proceeds equally amongst the three men. Wolf testified that

there was no written agreement related to the Clark Street property. According to Wolf, he and

Urso purchased the Harlem Avenue property in 2002. Wolf and Urso each contributed half of

the purchase price, but title was held by a corporation to which Urso controlled the ownership

shares. Wolf testified that he and Urso had the Harlem Avenue property for "several years and

then Mr. Urso sold the property." Wolf and Urso split the proceeds equally. There was no

written agreement attached to the Harlem Avenue property.

&10 Wolf additionally testified that in 1998 he learned of the subject property. Mark Vajdik,

operator of Scarlett's, suggested Wolf purchase the property because, as the lessor of the

premises, Vajdik was having issues with the owner at the time. After viewing the property, Wolf

told Vajdik that he was interested in purchasing the parcel. As a result, Wolf began negotiating a

lease with Vajdik. While negotiating the lease, Wolf contacted Daniel Kravetz, whom he had

known for 15 years, to inquire if Kravetz was interested in partnering on the deal. Wolf also

retained the services of attorney Charles Goodbar. Wolf provided Goodbar with a $25,000 check

from the Trust for purposes of earnest money. Meanwhile, Kravetz contacted Larry Slonina, a

loan officer at Banco Popular, in an effort to obtain a loan to purchase the subject property.

5 Nos. 1-12-1662, 1-12-1756 (consolidated)

According to Wolf, he and Kravetz planned to be equal owners of the subject property, but

Kravetz was going to hold title and obtain the loan in Kravetz's name only.

&11 Wolf testified, however, that Kravetz met him and a group of men for a weekly breakfast

meeting at which time Kravetz told Wolf that he could not proceed with the deal. Kravetz was in

the currency exchange business and his partners in that business had a problem with Kravetz

entering a partnership for the purchase of the subject property. Urso attended the breakfast as

well and expressed interest in taking over Kravetz's position in the deal. Specifically, Urso

would become an equal partner with Wolf in the transaction and would proceed to get financing.

Wolf testified that Urso ultimately signed the lease agreement as the landlord. According to

Wolf, the Trust contributed $75,000 to the purchase of the subject property and Urso contributed

$135,700. Wolf acknowledged that the settlement statement did not expressly denote that the

Trust contributed $25,000 for earnest money. Rather, there was no identifiable source for the

$25,000 listed on the settlement statement. Moreover, Wolf acknowledged that the $50,000 line

item from the Trust was not designated as a contribution to the partnership. Wolf testified that

Goodbar represented both the Trust and Urso at the closing for the property.

&12 Wolf acknowledged that Urso was named as the beneficiary of the land trust, which held

title to the subject property. Wolf stated that he was not named on the title of the property

because, at the time, he "had several judgments against [him] that [he] was paying on. And [he]

didn't want to complicate financing." According to Wolf, if the Trust was on the title "there

would be a problem." In particular, Wolf had a judgment against him for $2.2 million related to

an Environmental Protection Agency violation concerning one of his properties and a judgment

against him for $1.8 million related to a property tax violation related to another of his

properties.

6 Nos. 1-12-1662, 1-12-1756 (consolidated)

&13 Wolf testified that, after its purchase, he visited the subject property several times. On

one occasion, Wolf introduced Vajdik to Urso and directed him to pay rent to Urso. Wolf added

that he went to the property once or twice because the lessee was not making the proper payment

to cover the tax escrow. Wolf also visited the property to collect rent on one occasion after

Urso's death. Wolf forwarded the rent check to defendant because Richard Jr. was managing the

property and collecting rent after Urso's death. Wolf believed that defendant had taken the place

of Urso in managing the subject property on behalf of the partnership. Wolf admitted that no

written partnership agreement existed for the subject property, but maintained that there was an

oral partnership agreement.

&14 Wolf further testified that in August 2000 Berkowitz sent Urso a letter to obtain an

accounting of the rent from the subject property for purposes of income taxes. Wolf added that

he subsequently sent Goodbar a facsimile stating:

"I spoke to Mr. Urso after Greg had a problem with him regarding

partnership returns. He advised me as to the closing statement, just how much I

owe to him for my fifty percent interest. And I will bring you a check for the

W.F.T. interest in this property. I have asked Urso on three occasions to give me

that figure with no success. After his conversation with Greg I want this matter to

be disposed of one way or another."

According to Wolf, he annually reported an interest in the subject property on his "Schedule E"

tax return. The returns do not appear in the record.

&15 Gregory Berkowitz testified that he was a licensed real estate broker and the trustee for

the W.F.T. Trust, but not the beneficiary of the Trust. Berkowitz was also the president of GB

Property Management, Inc., which managed Wolf's properties. Berkowitz testified that he

7 Nos. 1-12-1662, 1-12-1756 (consolidated)

managed the real estate for the Trust and handled the maintenance for the Trust's buildings.

According to Berkowitz, the Trust had "well over 100 pieces of property." The Trust maintained

office space, first at 1307 South Wabash Avenue in Chicago, Illinois, and later at 770 North

LaSalle Street in Chicago, Illinois. Berkowitz had known Wolf since Berkowitz was a teenager

and began working for him in 1984. Berkowitz said he met Urso when he started working for

Wolf. Berkowitz described Wolf and Urso as old friends and neighbors with a business

relationship. The office had business records for the properties in which Wolf or the Trust held

an interest. According to Berkowitz, the Trust's accountant advised the Trust not to file tax

returns.

&16 Berkowitz testified that he personally owned eight or nine properties with Wolf.

Berkowitz stated that Wolf or the Trust had a number of properties, other than the subject

property, for which he was not of record but claimed an interest. For example, "dealings with

Dan Kravetz where [Wolf] had an ownership interest in properties that were not—and his

interest was not of record, as well as Richard Urlich. Same scenario. And even an instance

where [Wolf] and [Berkowitz] had a property together where [Wolf's] interest was not of

record." The property Berkowitz owned with Wolf was located in Florida. Wolf had an 80%

ownership interest, but he was not the owner of record. Berkowitz testified that there was a loan

obtained for the property through Slonina at Banco Popular.

&17 In relation to the subject property, Berkowitz testified that he did not have a personal

interest. Based on conversations with both Wolf and Urso, Berkowitz understood that Wolf and

Urso were equal partners in the acquisition of the subject property. Berkowitz testified that Wolf

provided $25,000 as earnest money for the subject property. After the property was acquired,

title was held in a land trust with Urso as the beneficiary pursuant to the agreement between Urso

8 Nos. 1-12-1662, 1-12-1756 (consolidated)

and Wolf. Urso received the rental payments from the lessee. Berkowitz testified that the

Trust's office maintained documentation related to the subject property. According to

Berkowitz, the file for the subject property contained a letter addressed to Urso dated August 17,

2000. The letter was prepared by Berkowitz on behalf of the Trust. The letter claimed that the

Trust had 50 percent ownership of the subject property. Over defense counsel's objection based

on the Dead Man's Act, Berkowitz testified that Urso never responded to the letter. According to

Berkowitz, the letter was sent after a conversation with the Trust's accountant. Berkowitz was

attempting to compile documentation to accurately show the Trust's 50% interest in order to

document the property on Wolf's tax return. Berkowitz testified that Wolf had an "active role in

the management" of the subject property. Berkowitz stated that he arranged to have his "roofing

people repair the roof" of the subject property at the request of Wolf. Berkowitz, however,

admitted that in his deposition testimony he testified that he never got involved in the

maintenance of the subject property. Berkowitz later testified that, during his deposition

testimony, he failed to recall the roof repair of the subject property, but had since been reminded

of it.

&18 Berkowitz further testified that Wolf and Urso partnered on a property on Harlem

Avenue in Bedford Park. According to Berkowitz, he learned from Wolf that the Harlem

Avenue property subsequently was sold and Wolf and Urso split the funds equally.

&19 Mark Vajdik testified at trial that he negotiated the terms of his lease of the subject

property with Wolf. Initially, Vajdik sent his rent payments to "GB Management," which he

understood was "the operating entity for" the Trust. Vajdik testified that Wolf introduced him to

Urso in 1998, sometime after the closing on the property. According to Vajdik, Wolf and Urso

held themselves out as partners. After meeting Urso, Vajdik was instructed to direct all building

9 Nos. 1-12-1662, 1-12-1756 (consolidated)

related issues, such as repairs, to Wolf and to remit all rent payments to Urso. Vajdik then sent

rent payments to Urso. In addition, Vajdik testified that he called Wolf when the roof leaked at

the property and Wolf provided roofers to repair the damage.

&20 Daniel Kravetz testified that he had a professional and personal relationship with Wolf.

In their first business relationship, Kravetz and Wolf purchased a building together in 1987 or

1988. Kravetz was responsible for the loan. Wolf's name did not appear on the loan. Kravetz

testified that he and Wolf were equal partners, providing some of their own money as equity and

borrowing the rest in the form of a mortgage that was eventually satisfied. According to

Kravetz, he and Wolf initially did not memorialize their partnership agreement, but did so

sometime after 2000. Kravetz testified that he and Wolf were involved in the ownership of

several properties.

&21 According to Kravetz, Wolf approached him in 1998 with a business opportunity to

purchase the subject property together. The terms of the agreement were that Kravetz and Wolf

would each contribute at least $100,000 to purchase the $800,000 building and act as equal

partners. Kravetz, however, would hold title in his name alone or in the name of one of

Kravetz's entities, and Kravetz would obtain the loan for the property. After performing his "due

diligence" by inspecting the property, Kravetz informed Wolf that he was interested in moving

forward with its purchase. Kravetz contacted Slonina, with whom he had an established

relationship as a "preferred borrower." Kravetz testified that he informed Slonina that Wolf was

involved in the purchase of the subject property, but that Kravetz would be responsible for the

loan.

&22 Kravetz, however, said he ultimately stepped away from the deal because his partners in

another line of business did not want him to become a landlord for a gentlemen's club. Kravetz

10 Nos. 1-12-1662, 1-12-1756 (consolidated)

testified that, at that time, he attended weekly lunch gatherings on Sundays at the Atrium

Restaurant located on the corner of Monroe Street and Wacker Drive in Chicago. The following

Sunday, his group, including Wolf, Urso, the owner of the restaurant, and a man that has since

died, gathered and the subject property was discussed. Urso expressed a desire to purchase the

subject property. According to Kravetz, Wolf stated that Urso would step into Kravetz's shoes in

the deal as an equal partner. Kravetz replied that he had to inform Slonina that he was no longer

interested in proceeding with purchasing the property and instead he would recommend that the

bank extend a loan to Urso. Kravetz completed the phone call to Slonina, and Slonina advised

Kravetz to have Urso call Slonina. Thereafter, Kravetz was no longer involved in the acquisition

of the subject property.

&23 Charles Goodbar testified that in February 1998 he issued a $25,000 check on behalf of

Wolf to the seller's attorney for earnest money for the subject property. The check, however,

was returned in late February 1998 or early March 1998 because the sale of the property fell

through. According to Goodbar, Wolf then returned to Goodbar's office sometime in May 1998

with an executed purchase and sales agreement for the subject property, along with a lease. Wolf

set up a meeting between himself, Urso, and Goodbar. During the meeting in May 1998, Wolf

introduced Goodbar to Urso. In Goodbar's presence, Wolf asked Urso whether he would like to

purchase the subject property together and to partner in leasing the property. Urso replied in the

positive. Goodbar testified that he considered himself to represent the partnership between Wolf

and Urso. At the meeting, Wolf and Urso decided the subject property would be vested in a land

trust with Urso as the sole beneficiary "so they could attempt to get a loan." They discussed

contacting Slonina at Banco Popular to obtain the loan. Goodbar testified that Wolf did not want

11 Nos. 1-12-1662, 1-12-1756 (consolidated)

to be named in conjunction with the property because the property had a special use license

issued by the city of Chicago.

&24 When asked whether Urso was the "only buyer" of the subject property, Goodbar

responded in the negative. Goodbar elaborated:

"Mr. Wolf was not involved as beneficiary of the land trust. Mr. Wolf was

not involved in the application.

***

Mr. Wolf was involved in the negotiation of the lease. Mr. Wolf was

involved in putting the deal together.

I do not know who made the earnest money deposit. Mr. Wolf attended

the closing. And as we discussed, Mr. Wolf made a deposit at closing towards the

downpayment of the property."

Goodbar admitted that Urso was his only client in terms of taking title as a beneficiary of the

land trust and applying for the loan to purchase the subject property. According to Goodbar,

Wolf and Urso both attended the closing of the subject property. The Chicago Title and Trust

settlement statement listed three deposited checks: one from the Wolf Family Trust for $50,000,

one from Urso for $25,000, and one from an unnamed source for $25,000. Goodbar testified that

he signed the settlement statement as the buyer with permission from Wolf and Urso.

&25 According to Goodbar, neither Wolf nor Urso requested that the terms of their

partnership be reduced to writing. Goodbar understood that Wolf and Urso were equal partners,

but he did not know the details of the partnership. Goodbar testified that he had a series of

conversations with Wolf and Urso at the end of 2002 and in early 2003 "to try to determine the

amount of capital each partner had in their account." Goodbar prepared a document "at the

12 Nos. 1-12-1662, 1-12-1756 (consolidated)

direction of Mr. Wolf of putting the numbers together." According to Goodbar, there was an

issue regarding who provided the $25,000 in earnest money for the property. Both Wolf and

Urso claimed to have provided the $25,000 earnest money, but neither could produce a canceled

check to substantiate his claim. Goodbar testified that Urso borrowed $468,237.50 from Banco

Popular to purchase the property. The loan was guaranteed by Urso only.

&26 Goodbar further testified that Wolf and Urso partnered on another real estate purchase

after the subject property, sometime in 1999, 2000, or 2001. The property was on Harlem

Avenue in Bedford Park, Illinois, and title was purchased by a corporation with Urso as the sole

stockholder. The corporation was the borrower in the acquisition. According to Goodbar, the

Bedford property was sold approximately 15 months after it was purchased and the proceeds

were divided equally by Wolf and Urso. Wolf and Urso did not have a written agreement for the

Bedford property venture.

&27 Larry Slonina testified that, in 1998, he was a senior vice president at Banco Popular.

His duties included those of a commercial loan officer, in that he analyzed loan applications for

creditworthiness. According to Slonina, a creditworthiness assessment included a cash flow

analysis, as well as performing a search for liens, pending lawsuits, or judgments against the

applicant. Slonina testified that he was the loan officer for Urso's loan application for the subject

property. Slonina testified that Kravetz introduced him to Urso. Kravetz was an individual with

whom Slonina had conducted business previously. Urso's loan application provided that the

primary source of repayment for the loan was rental payments on the property and the secondary

source was Urso. Wolf's name did not appear on the application. The loan application contained

a section entitled "monitoring covenants," which listed three documents that Urso was obligated

to provide on an ongoing basis, namely, annual operating statements of the building, annual

13 Nos. 1-12-1662, 1-12-1756 (consolidated)

compiled statements of one of Urso's business entities, and Urso's annual personal financial

statements and tax returns. No assets or contributions by Wolf or the W.F.T. Trust were

included on the loan application. According to Slonina, the land trust and Urso were the

borrowers on the promissory note provided to Banco Popular. A mortgage document was

executed by Slonina with the land trust and Urso: the mortgagor was the land trust with Urso as

the sole owner of the beneficial interest of the land trust. Slonina did not attend the closing for

the subject property.

&28 Larry Starkman testified that he was a real estate appraiser, broker, manager, and

developer. Starkman was longtime friends with both Wolf and Urso. Starkman testified that he

presented Wolf and Urso with the opportunity to purchase the property located at 6375 Harlem

Avenue in Bedford Park, Illinois. Starkman acted as the real estate broker in the purchase. For

that property, Urso borrowed the money for the deal. When Wolf and Urso sold the property,

Starkman again acted as the real estate broker. According to Starkman, both Wolf and Urso paid

Starkman's $25,000 commission for the sale. Starkman assumed the remaining gain from the

sale "was divided equally between the two." Starkman discussed the equal partnership with both

Wolf and Urso in separate conversations.

&29 Starkman testified that he participated in weekly lunches with Wolf, Urso, Kravetz, and

others. According to Starkman, the lunches occurred on recurring Saturdays and took place in

various restaurants. Starkman recalled Wolf discussing the terms of the deal with the subject

property over the course of a number of lunches. According to Starkman, Kravetz was initially

linked to the deal with Wolf, but it "evolved" into Urso "doing the deal with" Wolf. Starkman

testified that Urso said "it sounded like an excellent deal and he would love to be a partner."

According to Starkman, it was a "common practice" for Wolf not to be included in the financing

14 Nos. 1-12-1662, 1-12-1756 (consolidated)

on his property acquisition deals. Starkman understood that Wolf did not want to be named on

the title or financing for the subject property because there were outstanding judgments against

him and because of the notoriety of the property lessee. During the lunches, Wolf also expressed

concern with linking his name to the subject property because the city of Chicago was involved

and concerned with a liquor license for the premises and because the property had a special

entertainment license. After the subject property was purchased, Starkman said Urso was tasked

with the day-to-day management while Wolf maintained an advisory role. According to

Starkman, "Wolf was always advising. Richard Urso had great respect for Lou's opinion. ***

[Wolf] had nothing to do with bookkeeping, but I think any decisions that came up *** [Wolf]

primed [Urso's] decisions. [Urso] really relied on [Wolf] for advice like that. And [Wolf] had

excellent judgment when it came to these types of transactions dealing with the tenants."

&30 Starkman further testified that he regularly appraised properties for Wolf. Starkman also

appeared as an expert witness on Wolf's behalf. In a bankruptcy proceeding, Starkman testified

regarding the value of 10 parcels of property to which Wolf did not hold title but claimed an

interest.

&31 Joanne Urso, the decedent's wife, testified that the subject property was owned by the

land trust. According to Joanne, she filed joint tax returns with her husband and in the years

from 1998 until 2001 the returns included the subject property. Joanne had no knowledge that

the Trust had an ownership interest in the subject property.

&32 Richard Jr. testified that, prior to Urso's death, he picked up rent checks at the subject

property "probably about fifteen or twenty times and paid the real estate taxes on the property."

Richard Jr. testified that the rent checks were made payable to "750 South Clinton," the address

of the property. Richard Jr. said he gave the rent checks to Urso, never to Wolf, Berkowitz, or a

15 Nos. 1-12-1662, 1-12-1756 (consolidated)

representative of W.F.T. Trust. Richard Jr. testified that he was unaware of anyone claiming a

partnership interest in the subject property. After Urso's death, Richard Jr. collected the rent

checks from the subject property, paid the mortgage and real estate taxes, and was in charge of

building maintenance. Richard Jr. never consulted with Wolf, Berkowitz, or any representative

of the Trust regarding those activities. According to Richard Jr., Banco Popular decided not to

renew the mortgage on the subject property and the mortgage was taken over by Mutual Bank.

Neither Wolf, Berkowitz, nor any representative of the Trust were consulted regarding the

purchase of the mortgage. Richard Jr. testified that the mortgage had since been paid off.

&33 In its written order, the circuit court concluded, in part:

"Under either a preponderance of the evidence or a clear and convincing

standard, the evidence has shown that Wolf and Urso intended to enter into an

arrangement to acquire and operate the Property. The Trust has demonstrated that

Wolf and Urso reached an understanding regarding the Property, even though the

evidence indicates that after the acquisition, there were certain unresolved matters

that arose, including whether the Trust paid a total of $50,000 or $75,000 at or

prior to the closing on the Property.

Urso, Jr. has not rebutted the showing made by the Trust that an

understanding was reached and it ripened into the Agreement regarding the

Property. Notwithstanding, Urso, Jr. has asserted affirmative defenses and other

matters in an attempt to bar the enforcement of the Agreement.

The Trust is asking this court to order the sale of the assets of the venture,

including the Property, even though neither the Trust nor any entity comprising

16 Nos. 1-12-1662, 1-12-1756 (consolidated)

the venture holds title to the Property, owns or holds a beneficial interest under

the land trust that does hold title to the Property or has proven a contractual right

under any writings signed by Urso to require Urso, Jr. to sell the Property in order

for the Trust to receive an equal share of the proceeds of the sale. Both Wolf and

the Trust, who had access to Attorney Goodbar, could have arranged for the

preparation of the necessary documentation to create an entity or a venture to take

title or hold title to the Property. Wolf and the Trust, who had access to Attorney

Goodbar, could have arranged for either of them to be placed on title or be

designated as beneficiary under the land trust with Urso, but they chose not to do

so. Wolf and the Trust could have had a written agreement prepared evidencing

the oral understanding they assert the parties had with respect to [the] Trust's

claimed right to an interest in the Property with Urso, but Wolf and the Trust did

not do that either. The only reasonable evidentiary inference is that such action

was not taken by Wolf and the Trust in order to conceal or not disclose the

claimed right they now assert to an interest to the Property or to the proceeds of

its sale.

Urso, Jr. has shown that any term or understanding in the Agreement to

acquire the Property in such a manner so as not to disclose the claimed interest

that Wolf and his Trust are now asserting in the Property sought to 'accomplish an

improper or fraudulent purpose' and is unenforceable for certain reasons argued

by Urso, Jr. ***

17 Nos. 1-12-1662, 1-12-1756 (consolidated)

The evidence and reasonable inferences therefrom demonstrate that the

manner in which the Property was acquired and maintained, titled not in the name

of the Trust or in a venture identifying the Trust or Wolf, and the loan secured,

through the name of Urso only, served an 'improper' or 'fraudulent' purpose as the

record shows that there was an effort to keep the Property out of reach from the

judgment creditors and an effort to facilitate the issuance of licenses from the City

of Chicago for the Property's operation. In view of these circumstances that have

support in the record, the Trust's pursuit of an order under the Agreement to

require a sale of the Property to allow for a distribution of the proceeds to the

Trust as if it held a right to an interest in the Property that the Trust is claiming

has not been shown to be justified and the term of the Agreement that the Trust is

relying upon to claim such relief cannot be enforced on such a deceptive or

improper premise. ***

Urso, Jr. seems to advocate the position that under the circumstances

presented in this record that a court of equity 'should leave the parties where it

finds them.' *** After considering Urso, Jr.'s position, this court finds that after

Urso's death, Urso, Jr. is the holder of the beneficial interest of the land trust that

holds title to the Property and that neither the Trust nor any venture is so named in

the land trust. This court further finds that the parties should be left to the

arrangement of operating the business as the Property together under the

Agreement. *** The parties' arrangement under the Agreement has involved, the

leasing of the premises. ***

18 Nos. 1-12-1662, 1-12-1756 (consolidated)

The contention raised by Urso, Jr. that 'the purported agreement between

Wolf and Urso is not severable and should not be enforced' for purposes of

fashioning a remedy has not been shown to be convincing. *** The evidence

adduced as trial substantiated the operation and management of the Property

under such an understanding. The record simply does not support Urso, Jr.'s

contention that the parties' arrangement to operate the business at the Property

together cannot be treated separately from the Trust's claim right to share in the

proceeds from the sale of the Property because of an alleged interest in it. ***

The evidence has established that Wolf for his benefit and acting on behalf

of the Trust reached an oral understanding with Urso regarding the joint operation

of the business at the Property, that has involved the leasing of the premises to a

tenant. With respect to the operation of the business at the Property, the Trust is

entitled to a dissolution of that arrangement in view of Urso's death. ***

The Trust and Urso, Jr. shall wind up the operation of the business at the

Property that both the Trust and Urso agreed to operate jointly, unless Urso, Jr.

and the Trust consent in writing and present a proposed agreed order regarding

the same to the court ***. In connection with the winding up process, the parties

shall take account of each other for operation of the business at the Property since

Urso's death. However, the $75,000 in payments the Trust made in 1998 shall be

taken into consideration for purposes of the accounting."

&34 With regard to Richard Jr.'s affirmative defense of the statute of frauds, the circuit court

found that Wolf's and Urso's acquisition of the property was unenforceable as a violation of the

19 Nos. 1-12-1662, 1-12-1756 (consolidated)

Frauds Act, but that the Frauds Act did not bar the arrangement involving the operation of the

rental property. The circuit court denied Richard Jr.'s remaining affirmative defenses based on

violations of the federal banking law, the Probate Act, and the statute of limitations. The parties

have cross-appealed.

&35 ANALYSIS

&36 We immediately turn to the issues related to the Frauds Act, as they are dispositive to the

case. The Trust contends that the circuit court erred in finding that the acquisition of the subject

property was barred by the Frauds Act. Richard Jr., on the other hand, contends the circuit court

erred in finding the operation of the oral rental agreement for the subject property was not barred

by the Frauds Act.

&37 The Frauds Act provides:

"No action shall be brought to charge any person upon any contract for the sale of

lands, tenements or hereditaments or any interest in or concerning them, for a

longer term than one year, unless such contract or some memorandum or note

thereof shall be in writing, and signed by the party to be charged therewith, or

some person thereunto by him lawfully authorized in writing, signed by such

party." 740 ILCS 80/2 (West 1998).

The supreme court has advised that "Illinois' statute of frauds seeks to do the same [as the

English statute enacted by Parliament] by barring actions based upon nothing more than

loose verbal statements." McInerney v. Charter Golf, Inc., 176 Ill. 2d 482, 489 (1997).

The supreme court further advised:

"The period of one year, although arbitrary, recognizes that with the

passage of time evidence becomes stale and memories fade. The statute proceeds

20 Nos. 1-12-1662, 1-12-1756 (consolidated)

from the legislature's sound conclusion that while the technical elements of a

contract may exist, certain contracts should not be enforced absent a writing. It

functions more as an evidentiary safeguard than as a substantive rule of contract.

As such, the statute exists to protect not just the parties to a contract, but also-

perhaps more importantly-to protect the fact finder from charlatans, perjurers and

the problems of proof accompanying oral contracts." Id.

The interpretation of a statute is a question of law that we review de novo. Lucas v.

Lakin, 175 Ill. 2d 166, 171 (1997).

&38 The Trust argues that there were two writings signed by Urso that satisfy the

Frauds Act. In particular, the settlement statement, signed by Urso, reflected the Trust's

$50,000 "contribution" to the purchase of the subject property, and the lease, also signed

by Urso, listed the office of the Trust as the location for rental payments and for the

exercise of the lease's purchase option. According to the Trust, the evidence

demonstrated that the subject property was purchased by the Trust and Urso for profit

after they entered into a joint venture agreement, which does not violate the Frauds Act.

&39 In order for a writing to satisfy the statute of frauds, the writing must demonstrate

the existence of a contract and contain all of its essential terms and conditions. Storm &

Associates, Ltd. v. Cuculich, 298 Ill. App. 3d 1040 (1998). Neither of the writings in this

case satisfies the statute of frauds. The $50,000 "contribution" remitted by "W.F.T.

Trust" listed "C.T. and T," i.e., Chicago Title and Trust, as the recipient of the funds. The

settlement statement provided a $50,000 line-item credit recorded as "W.F.T.

Contribution." No other information regarding the alleged contract was contained within

the settlement statement. With regard to the second writing, the lease listed the land trust

21 Nos. 1-12-1662, 1-12-1756 (consolidated)

as the landlord, but provided the address of "c/o G.B. Management, 1307 S. Wabash,

Suite 200, Chicago, Illinois 60605" for the remission of rental payments and for the

exercise of the purchase option. However, other than the address, which plaintiff

contends was the address for the Trust's property management company, there was

absolutely no information demonstrating a connection between the property and the

Trust, let alone the existence of the alleged contract or its terms and conditions. As a

result, neither of the writings supports the Trust's position that the parties' intent to

establish a joint venture to own and operate the property was clearly demonstrated vis-a-

vis the settlement statement and the lease.

&40 The basic facts of this case are similar to those in Morton v. Nelson, 145 Ill. 586

(1893). In Morton, the two plaintiffs alleged that they and the defendant entered an

agreement for the purchase of a parcel of land and the erection of a building for which the

parties were to share equally in the net profits. Id. at 591. The land was purchased by

and deeded solely to the defendant, as was the case for the subject property. Id. Unlike

in our case, though, the evidence demonstrated that the plaintiffs in Morton did not

"advance[] a single dollar in payment of the purchase money, or in payment of the cost of

the building" and, therefore, the supreme court found there was not a partnership between

the parties. Id. at 591-92. Notwithstanding, the plaintiffs alleged the parties had a verbal

agreement wherein the defendant was to deed or execute and deliver a declaration of trust

to invest each of the three men in one-third interest in the property. Turning to the statute

of frauds defense advanced by the defendant, the supreme court concluded the alleged

verbal agreement was unenforceable because it related to the sale of or interest in land,

which, under the statute, required a writing signed by the party alleged to have made the

22 Nos. 1-12-1662, 1-12-1756 (consolidated)

agreement, i.e., the defendant, and no such writing existed. Id. at 593. "[A] verbal

agreement to purchase land for the benefit of another is void under the Statute of Frauds,

and can not be enforced against a purchaser who, in the absence of fraud, has paid for the

land with his own money, and taken a conveyance in his own name." Id. at 593-94

(citing Stephenson v. Thompson, 13 Ill. 186, 188 (1851)).

&41 We acknowledge that, in the case at bar, the circuit court found the Trust

contributed $75,000 to the purchase of the property; however, Urso purchased the

property by receiving $472,500 in financing for which he was solely responsible, as well

as contributing approximately $135,000 of his own money. The ownership of the

property was placed in the land trust for which Urso was the sole beneficiary. Therefore,

Urso financed the vast majority of the purchase price in his name alone and owned the

property in his name alone. In order to avoid the statute of frauds, the Trust was required

to advance a written document evidencing the alleged oral contract, which, as stated

above, the Trust failed to provide.

&42 More recently, the Second District stated that "Section 2 [of the Frauds Act] does

not govern a joint venture agreement if the partnership engages in the purchase or sale of

real property that is owned by the partnership. However, the statute is applicable to the

joint venture agreement if the partners agree to share the proceeds of a sale of land that is

owned by one partner alone." B&B Land Acquisition, Inc. v. Mandell, 305 Ill. App. 3d

1068, 1073 (1999) (citing Goldstein v. Nathan, 158 Ill. 641, 646-47 (1895)). In this case,

the alleged partnership did not purchase the property. Instead, the Trust merely

contributed a small percentage of the purchase price. Moreover, the property was not

23 Nos. 1-12-1662, 1-12-1756 (consolidated)

owned by the alleged partnership. Urso was the sole beneficiary of the land trust. As a

result, the statute of frauds applied.

&43 In the alternative, the Trust contends the Frauds Act does not apply where it fully

performed under the oral contract. According to the Trust, the agreement at issue was for

the purchase and leasing of the subject property. The Trust argues it fully performed

because Wolf found the property, negotiated its purchase and the lease thereof,

contributed the “agreed amount” toward the purchase, and “helped with the collection of

rent and repairs.”

&44 We recognize that there is an exception to the statute of frauds’ writing

requirement where one party completely performs under a contract (Anderson v. Kohler,

397 Ill. App. 3d 773, 785 (2009)); however, we find the exception does not apply in this

case. Based on the trial testimony, Wolf chose the subject property and negotiated its

purchase and lease prior to entering into the alleged oral agreement with Urso. As a

result, these actions were not performed in furtherance of completing an agreement that

had not yet been made. Moreover, the Trust’s contribution to the purchase price does not

constitute full performance rendering the Frauds Act inapplicable. See Cain v. Cross,

293 Ill. App. 3d 255, 259 (1997) (partial payment for the purchase of a property is

insufficient to bar application of the Frauds Act). Finally, the trial testimony

demonstrated that Wolf had little involvement in the operation of the subject property

during Urso’s lifetime and had no involvement when Richard Jr. took over the operation.

Overall, we cannot say the Trust fully performed under the alleged oral agreement.

&45 We further conclude that the circuit court erred in finding the alleged oral

agreement to operate the subject property did not violate the statute of frauds. Without

24 Nos. 1-12-1662, 1-12-1756 (consolidated)

providing any reasoning, the circuit court held that the Frauds Act did not bar the Trust’s

ability to enforce the alleged oral arrangement involving the operation of the subject

property. The circuit court’s ruling that the Trust was entitled to an interest in the rents

received from leasing the property directly conflicts with its ruling that the Frauds Act

barred the Trust from exercising an ownership interest in the property. The Frauds Act

requires a writing for agreements involving real property and the rights associated

therewith. More specifically, the Frauds Act provides that “[n]o action shall be brought

to charge any person upon any contract for the sale of lands, tenements or hereditaments

or any interest in or concerning them” unless there is a writing signed “by the party to be

charged therewith.” 740 ILCS 80/2 (West 1998). The right to collect rent has long been

established as a right of property ownership. The collection of unaccrued rents is an

incorporeal hereditament that passes with the sale or devise of land. Lipschultz v.

Robertson, 407 Ill. 470, 474 (1950); see Black’s Law Dictionary 794 (9th ed. 2009)

(incorporeal hereditament is defined as “[a]n intangible right in land” and rent is listed as

a type in common law). Indeed, it has been determined that hotel receipts constitute rent

and, therefore, are an interest in real property. Travelers Insurance Co. v. First National

Bank of Blue Island, 250 Ill. App. 3d 641, 645 (1993). In sum, the right to receive

collected rents is incident to ownership and, therefore, is governed by the statute of

frauds. Because there was no writing demonstrating any agreement for collecting rents

on the property, the alleged oral agreement is barred by the Frauds Act.

&46 CONCLUSION

&47 We conclude that the alleged oral agreement for the ownership and operation of the

subject property was precluded by the Frauds Act. We, therefore, affirm the circuit court's

25 Nos. 1-12-1662, 1-12-1756 (consolidated)

judgment that the Trust was barred from enforcing a one-half property interest in the subject

property; however, we reverse the circuit court's judgment finding that the Trust was entitled to

enforce an interest related to the leasing of the subject property.

&48 Affirmed in part and reversed in part.