Key v. Key

443 N.E.2d 812, 111 Ill. App. 3d 151, 66 Ill. Dec. 886, 1982 Ill. App. LEXIS 2576

• Court: Appellate Court of Illinois
• Decided: December 29, 1982
• Docket: No. 4-82-0178
• Status: Published

Opinions

JUSTICE TRAPP

delivered the opinion of the court:

Plaintiff filed a complaint for partition of certain land located in Coles County. Defendant, Minnie Key, plaintiff’s mother, counterclaimed, seeking to impose a trust on the entire acreage. The trial court found that plaintiff held the land in trust for Minnie, dismissed the complaint for partition, and ordered plaintiff to convey to Minnie any interest he might have in the premises. We affirm the trial court.

The derivation of the parties’ title may be briefly stated. In 1947, plaintiff’s father and Minnie’s husband, Charles Key, was desirous of purchasing the land, but was unable to secure a sufficient loan. Plaintiff and his brother, Eugene, had recently been discharged from military service and had available to them certain provisions of the Soldiers’ and Sailors’ Civil Relief Act, commonly called the “G.I. Bill,” by which they could obtain government-guaranteed mortgages. The purchase price of the land was $15,250; Charles, the father, provided a down payment of $2,250; plaintiff obtained a G.I. loan of $6,500 from the Veterans’ Administration; Eugene, the brother, was only 19 years of age at the time and hence it was necessary under Federal regulations that a guardian be appointed for him in order to obtain his loan.

Charles filed a petition for guardianship in the circuit court of Douglas County, seeking to have himself appointed as guardian for Eugene. The court allowed the petition and Charles then signed the mortgage as guardian for Eugene. The conveyance was then made to plaintiff and Eugene as cotenants; the mortgage to Prudential Insurance Company in the amount of $13,000 was signed by plaintiff and Charles in his capacity as guardian.

In the verified petition filed by Charles for appointment as guardian of Eugene, it is said:

“[T]hat upon the consummation of the purchase of said real estate, the title and ownership thereto will be in the said Charles Eugene Key and Frank Clarence Key, in fee simple, as tenants in common, each owning an undivided one-half interest thereof, and the farming equipment and farming enterprise and the profits therefrom will be shared equally between them.”

Charles did not sign the mortgage in his individual capacity. The signatures appearing on that document in the record are: “Charles Eugene Key, a minor, by Charles H. Key His Guardian Frank A. Key” (handwritten portions underscored, the rest typewritten).

Upon consideration of the opinions in Bowman v. Pettersen (1951), 410 Ill. 519, 102 N.E.2d 787, Wright v. Wright (1954), 2 Ill. 2d 246, 118 N.E.2d 280, West v. Scott (1955), 6 Ill. 2d 167, 128 N.E.2d 734, and Suwalski v. Suwalski (1968), 40 Ill. 2d 492, 240 N.E.2d 677, we affirm the determination of the trial court that the transaction created a resulting trust in favor of the father, and his devisee.

In each opinion the essential characteristic is that a resulting trust was employed by the court to protect and preserve the interest of the party who paid the consideration and the expenses incident to the acquisition of the property.

In Bowman v. Pettersen, heirs sued to establish a resulting trust as to a dwelling in joint tenancy by the ancestor. When the ancestor was of advanced years he purchased the property directing that the deed be placed in joint tenancy with a young woman associate. Distinguishing the presumption which exists when a husband purchases real estate and places it in joint tenancy with his spouse, the supreme court noted that the chief factual issue was which joint tenant had paid the consideration for the real estate.

It appears that in Pettersen the conveyance was substantially a cash transaction. The opinion states:

“A resulting trust arises by operation of law where one person pays or furnishes the consideration for a deed conveying real estate to another. Whether or not such a trust arises depends in every instance on the intention, at the time of the conveyance, of the person who furnishes the purchase price. [Citations.] Such a trust arises, if at all, the instant the legal title is taken, and is founded upon the natural equity that he who pays for the property should enjoy it, unless he intended by the vesting of title to confer a beneficial interest upon the grantee. [Citations.] The payment of consideration raises a prima facie presumption in favor of a resulting trust. This presumption may be rebutted by parol proof of an intention on the part of the payor that the grantee shall take the beneficial interest and not merely the legal title.” (Emphasis added.) 410 Ill. 519, 524, 102 N.E.2d 787, 790.

With the citation of Kane v. Johnson (1947), 397 Ill. 112, 73 N.E.2d 321, the court stated:

“[T]he expressed intent as shown by the direction and the deed, standing alone, must give way to the rule of equity which protects the party paying the purchase price by raising a re-suiting trust in his favor.” 410 Ill. 519, 531-32, 102 N.E.2d 787, 794.

In West v. Scott, the application of a prima facie presumption of a resulting trust was reiterated. By reason of the age of the plaintiff, the lender required a cosignor of a note and mortgage. Hence, title was placed in joint tenancy with a niece who so cosigned. Upon plaintiff’s action to quiet title, the court directed the niece to convey her claimed interest to plaintiff. The court stated:

“It is argued here that the necessity of a cosigner on the mortgage note takes this case out of the ordinary rule of resulting trusts because the signing of the note was consideration for the conveyance to defendant. It is conceded in the testimony that plaintiff furnished the entire consideration for the purchase of the property and that defendant has made no payments on the mortgage note and does not anticipate doing so. Thus, the cosigning did not constitute a quid pro quo for the conveyance” (6 Ill. 2d 167, 173, 128 N.E.2d 734, 737)

and continued:

“Taking the evidence as a whole, we feel that plaintiff has clearly and convincingly proved that she paid the entire price for the property placed in the joint names of the plaintiff and the defendant and has paid for all improvements thereon, the taxes and all mortgage note payments. Such facts raised a prima facie presumption in favor of a resulting trust and imposed the burden upon the defendant to show that she was to have some beneficial interest in the property.” 6 Ill. 2d 167, 175, 128 N.E.2d 734, 738.

In Suwalski v. Suwalski (1967), 88 Ill. App. 2d 419, the trial court imposed a resulting trust upon the real estate held in joint tenancy. Plaintiff’s father sought to purchase a home by a substantial down payment and a mortgage. By reason of his then age, he was unable to procure the full amount of the loan required. The defendant, a son, cosigned the contract note and mortgage and at the closing of the sale paid $1,500 to the lending institution. Title was taken in joint tenancy. Later, the father tendered $1,500 to the son and demanded conveyance. The latter then contended that he was a purchaser for value and an owner in joint tenancy.

The record showed that apart from the $1,500 initially paid, the son had not paid any of the mortgage payments, taxes, repairs, or improvements. The appellate court (Suwalski v. Suwalski (1967), 88 Ill. App. 2d 419, 424, 232 N.E.2d 64) reversed the judgment of the trial court, noting the principle that “a resulting trust arises, if at all, at the time of purchase and is based upon the intention of the parties at that time” and commented, that plaintiff’s evidence of payment “relates to the actions of the parties after the transactions in dispute.”

The supreme court reversed the appellate court and affirmed the trial court with a finding of a resulting trust for the reason that the record disclosed that the payment of $1,500 by the son to the grantor and the fact that he was named as grantee in the deed did not make the son a joint tenant, because the intention of the parties was that the $1,500 was considered a loan. The opinion quoted from 3 Scott on Trusts sec. 448, in part:

“Suppose that B lends money to A in order that A may purchase land from X, but B pays the purchase money directly to X and takes title in his own name. It is true that in that case the money which was advanced by B never actually belonged either legally or equitably to A. Just before B paid it over to X, the money belonged to B; just after B paid it over to X, the money belonged to X. There were not two separate transactions in which B first lent the money to A, and A subsequently paid it over to X, in which case it would have been clearly A’s money which was paid to X. The courts have rightly held, however, that it is immaterial that the loan to A and payment to X constitute a single transaction. A loan may be made in other ways than by handing the money over to the borrower. It may be made by paying it to another at the borrower’s request. Hence although B pays the purchase money directly to X, yet in substance it is A’s money, being lent to A by B. There is therefore a resulting trust for A.” (40 Ill. 2d 492, 498, 240 N.E.2d 677, 680.)

As to the relevant facts supporting the conclusion, the court stated:

“There was a question about appellant’s credit for the full loan. The appellee made no contribution to the mortgage payment (though without corroboration he claimed a payment of $10 per week) and did not contribute to insurance premiums, real-estate taxes or water-bill payments. He did not claim or exercise any ownership rights, ***.” 40 Ill. 2d 492, 499, 240 N.E.2d 677, 681.

The opinion in Wright contains many factual matters similar to those found on this appeal. Plaintiffs wished to purchase the house, which she then leased and rented as student housing. She was unable to procure conventional financing but her son was eligible for a “G.I. loan.” It was arranged that he procure the loan for such amount as he was eligible, and a supplemental loan secured by a second mortgage was obtained from a friend. The conveyance and mortgage were solely in the name of plaintiff’s son, but following the conveyance plaintiff paid all mortgage payments, taxes, and expenses concerning the real estate. After five years, the son claimed to own the property. Plaintiff’s action to establish a resulting trust was dismissed for want of equity in the trial court.

The supreme court reversed the trial court, saying:

“Defendant maintains that he furnished' the entire consideration for the purchase of the property. Literally, this is true; he alone signed the two notes and the mortgages securing them. An examination of the entire transaction shows, however, that the proceeds of the mortgage notes were paid to the seller for the direct benefit of plaintiff. The situation is essentially the same as if the payment to the seller was a payment by the plaintiff of the funds borrowed by the mother from the son. Under such circumstances, the prerequisites to the raising of a resulting trust have been met. The evidence is clear and convincing that at no time did either plaintiff or defendant intend that he should have any beneficial interest in the property. He alone took title; he alone signed the notes and mortgages. His every act was, nevertheless, for and on behalf of plaintiff. His function in the transaction was to extend to plaintiff his credit, which he enjoyed because of his status as a veteran.” (2 Ill. 2d 246, 252-53, 118 N.E.2d 280, 284.)

The opinion continued to recite the Restatement of the Law of Trusts sec. 448 (1935), that the form of the transaction would produce a resulting trust with the named grantee holding the property as security for the loan as a transaction in the nature of a mortgage.

The court held that in the light of the circumstances that the plaintiff paid all of the mortgage payments and other expenses, the defendant son held title under a resulting trust subject to the security interest in the defendant for the mortgage loan.

Here, as in Wright, the conveyance was in the names of the plaintiff and his brother. However, the plaintiff’s father, who was the predecessor in title of defendant mother, made a substantial cash payment at the time of the conveyance and thereafter effectively made all payments upon the mortgages, taxes, and repairs, and the record shows that certain sums advanced by plaintiff upon the mortgage were shortly reimbursed. The trial court found that the plaintiff made no claim to the ownership of the real estate from the date of the conveyance in 1947 until the death of the father in December 1973. Such conclusion is sustained by the record.

This case differs from Wright in that there the evidence was uncontradicted that neither during the negotiations for the sale nor at the time of conveyance was there any intent on the part of the mother or the son that the son would have any beneficial interest in the property. All of the evidence indicated that the son was to be the owner in name only. Here, the direct statement at the time of conveyance was that the sons, as named grantees, were to have the beneficial interest. However, a comparable direction was held not to control in Petterson. Under Wright, Suwalski, and West, the supreme court has examined the conduct of the parties subsequent to the questioned conveyance to determine the intent of the parties at the time of the conveyance. The subsequent payments by the father and then the mother of the principal and interest on the mortgage indebtedness and those for repairs, insurance, and taxes and their receipt of the crops was evidence of this intent. So was evidence that plaintiff made no claim to the ownership of the property from 1947 until the death of his father in December 1977.

The memorandum opinion of the trial court refers to plaintiff’s claim that the “G.I. loan” was obtained through fraud, so that the defendant should not be permitted to recover. The trial court held that the defense was not applicable under the circumstances. The issue of “unclean hands” in obtaining a loan was not initially raised in plaintiff-appellant’s brief, but was referred to in appellee’s brief, and again, in the reply brief.

The trial court’s determination is supported by the opinion in Evangeloff v. Evangeloff (1949), 403 Ill. 118, 85 N.E.2d 709. In an action to establish a resulting trust, it was contended that the transaction was in fraud of creditors and that relief should be barred by the doctrine of “unclean hands.” The opinion quoted from Mills v. Susanka (1946), 394 Ill. 439, 445-46, 68 N.E.2d 904, 907, as follows:

“What was said in the Mills case applies here, ‘The dirt upon plaintiff’s hands must be his bad conduct in the transaction complained of. If he is not guilty of inequitable conduct toward the defendant in that transaction his hands are as clean as the court can require. *** The wrong must have been done to the defendant himself, ***.’ Had the alleged fraud been established as a fact, the maxim could not have been applied by the chancellor because no wrong would have been done to defendants by Naum.” (403 Ill. 118, 126, 85 N.E.2d 709, 714.)

The rule was reiterated in Mascenic v. Anderson (1977), 53 Ill. App. 3d 971, 369 N.E.2d 172. There plaintiff brought an action to establish a resulting trust. The trial court denied relief upon a conclusion that the plaintiff has established the trust to prevent his wife from obtaining any marital interest, and noted that the doctrine of “unclean hands” required such action. The reviewing court reversed and remanded upon the finding that there was no evidence that plaintiffs conduct with regard to his wife had affected the parties against whom relief was sought, and said:

“We deem it well settled that misconduct on the part of a plaintiff which will defeat a recovery in a court of equity under the doctrine of ‘unclean hands’ must have been conduct in connection with the very transaction being considered or complained of, and must have been misconduct, fraud, or bad faith toward the defendant making the contention. (Evangeloff v. Evangeloff (1949), 403 Ill. 118, 126, 85 N.E.2d 709, 714.) The ‘clean hands’ doctrine is not a judicial straightjacket, is not favored by the courts, is not intended to prevent equity from doing complete justice, and its application is a matter for the sound discretion of the trial court.” 53 Ill. App. 3d 971, 972, 369 N.E.2d 172, 173.

Upon such authority, we conclude that the trial court correctly refused to consider the argument of “unclean hands” and we affirm the trial court.

Affirmed.

GREEN, J., concurs.