789 F.2d 601 (7th Cir. 1986), 85-1081, Johnson v. Levy Organization Development Co., Inc.

Docket Nº85-1081.
Citation789 F.2d 601
Party NameClark E. JOHNSON, Plaintiff-Appellant, v. The LEVY ORGANIZATION DEVELOPMENT COMPANY, INC., Defendant-Appellee.
Case DateApril 30, 1986
CourtUnited States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 601

789 F.2d 601 (7th Cir. 1986)

Clark E. JOHNSON, Plaintiff-Appellant,



No. 85-1081.

United States Court of Appeals, Seventh Circuit

April 30, 1986

Argued Oct. 23, 1985.

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Marty J. Schwartz, Johnson & Schwartz, Chicago, Ill., for plaintiff-appellant.

Bruce S. Sperling, Mitchell H. Macknin, Sperling, Slater & Spitz, Chicago, Ill., for defendant-appellee.

Before CUDAHY, ESCHBACH, and COFFEY, Circuit Judges.

COFFEY, Circuit Judge.

The plaintiff-appellant, Clark Johnson, commenced this action against the defendant-appellee, the Levy Organization, seeking to rescind a condominium Purchase Agreement contending that the Levy Organization failed to substantially perform its contractual obligations. The district court granted Levy's motion for summary judgment and Johnson appeals. We affirm.


This diversity action arises from the sale of a condominium unit at the "One Magnificent Mile" condominium project in Chicago, Illinois. Johnson met with Lawrence Levy

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and Helen Jaeger, President and Vice President of the Levy Organization, in September of 1980, to discuss the purchase of a condominium unit at this new development. The Levy Organization, the seller and developer of the project, made a property report available to Johnson, in compliance with the Municipal Building Code of Chicago (Municipal Code of Chicago Sec. 100.2-5), that described the proposed condominium project including the unit price, size and other details of the various condominium units offered for sale. The sales price for Johnson's unit number 51C was $590,000. An asterisk located next to this price directed the buyer's attention to a footnote at the bottom of the page that stated "10' ceiling."

On December 11, 1980, Johnson executed a Purchase Agreement with the Levy Organization for the purchase of condominium unit number 51C. The Agreement provided in paragraph 5 that the "Estimated Completion Date" of the unit was August 3, 1983, subject to extension for delays "occasioned by strikes, material shortages, labor shortages, casualties, inclement weather conditions, acts of God and other causes beyond the reasonable control of the seller...." The Purchase Agreement further provided that "[i]n the event that closing does not occur on or before December 31, 1985 (the 'Outside Closing Date' )" the purchaser may notify the seller "of its election to terminate" the agreement. The Purchase Agreement also contained a notation stating the "purchaser acknowledges that the Seller delivered ... the property report ("Property Report" ) required by Chapter 100.2 of the Municipal Code of Chicago prior to the purchaser's execution of the Purchase Agreement." Paragraph 19 of the Purchase Agreement contained an all-inclusive contract clause reciting that:

"19. Entire Agreement. This Purchase Agreement constitutes the entire agreement between Purchaser and Seller. No representations, warranties, undertakings, or promises, whether oral, implied or otherwise, can be made or have been made by either Seller or Purchaser to the other unless expressly stated herein or unless mutually agreed to in writing signed by both parties. All agreements, representations and warranties made herein shall survive the closing of this transaction. Notwithstanding anything herein to the contrary, in the event that the transaction provided for herein shall not have closed prior to such date as shall seven years from the date of Seller's acceptance hereof, then this Purchase Agreement and all obligations of the parties hereunder shall be automatically terminated without the further act of either party hereto."

Finally, paragraph 23 of the Purchase Agreement stated that "Exhibits A, B, C, D, E and F attached hereto are incorporated herein and made a part hereof [the Purchase Agreement]." Exhibit B was a diagram of Unit 51 that indicated, through the use of dotted lines, that the kitchen, foyer, hallways, and bathrooms had suspended ceilings below ten feet. 1 Exhibit C detailed the special features of the condominium unit, and stated that the "foyers, kitchens, baths, halls, and closets where indicated will have suspended ceilings...." Johnson admitted in his deposition that he should have "asked about" the dotted lines on the floor plan.

The record reveals that Johnson, whom the district court characterized as a highly sophisticated real estate dealer, purchased the condominium unit because he believed it to be a sound investment that would increase in value over time. In the spring of 1982, the Chicago, Illinois condominium real estate market deteriorated, as did Johnson's financial condition. Johnson called Levy in the Spring of 1982 and asked to be relieved of his contractual obligation due to his financial difficulties, but Levy refused to release him from the contract. Thereafter, in August of 1982, Johnson visited

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Levy's model kitchen to select colors for the kitchen, in unit 51C, and spoke with Helen Jaeger, the vice president of the Levy Organization, who advised Johnson at that time that the foyer had an eight and one-half foot ceiling. Johnson made no response to this informational statement of Jaeger regarding the eight and one-half foot ceiling height. During this same conversation with Jaeger, Johnson informed her that he was "going to buy the unit anyway" in spite of his financial condition since Levy had refused to release him from the contract. On March 3, 1983, Levy advised Johnson by letter that the unit's "Estimated Completion" date would have to be extended four months, from August 3, 1983 to December 5, 1983, "due to adverse winter weather conditions last year and other causes beyond our control." Johnson responded with a letter from his attorney demanding rescission of the contract for failure to timely complete the condominium unit. This letter failed to mention that the eight and one-half foot ceiling in the foyer did not comply with Johnson's understanding of the contract, in spite of the fact that Johnson had earlier received exhibits B and C of the Purchase Agreement, indicating (through the use of dotted lines) that the kitchen, foyers and hallways would have suspended ceilings, and that Jaeger had informed him of this lower ceiling height one year earlier. After Levy refused to release Johnson from the contract, Johnson filed a complaint in the federal district court alleging breach of contract in that the Levy Organization failed to construct ten foot ceilings throughout the entire condominium unit and failed to timely complete the unit.

On February 23, 1984, Northbrook Bank ("Northbrook") filed a motion seeking to intervene in the action. Johnson had given the Levy Organization a letter of credit issued by Northbrook in the amount of $118,000 in lieu of an earnest money deposit. The Levy Organization presented this letter to Northbrook on February 3, 1984 and demanded payment. In its motion, Northbrook sought to interplead the proceeds represented in the letter of credit as the bank was in a quandry as to whether it should transfer the funds to Levy or hold the funds because of the contractual dispute. Northbrook's motion requested that if the court determined that the Levy Organization was entitled to the funds, then Northbrook also asked permission for leave to intervene in order that it might file a counterclaim against Johnson for payment on the letter of credit. On March 13, 1984, the district court allowed Northbrook to intervene only insofar as to allow it to interplead the funds represented in the letter of credit. The court tentatively refused to grant Northbrook's motion to intervene to file its counterclaim at that time, although the court did state "I would think the counterclaim can come in since you have been intruded in this case because of your relationship with Johnson and the issuance of the letter of credit. So, whatever claims you do have, I think perhaps this is the forum to deal with them...." District Court Hearing March 27, 1984 at page 6. Northbrook's motion to file a counterclaim remained pending since the district court never specifically filed an order in the court docket disallowing its claims.

Johnson and Levy subsequently filed motions for summary judgment. Johnson contended that the price schedule attached to the property report containing the footnote reference to "10' ceiling" was part of the Purchase Agreement; thus, under the Purchase Agreement the Levy Organization was required to construct ten foot ceilings throughout his entire condominium unit. Johnson argued that Levy failed to substantially perform since forty-five percent of the condominium unit (the kitchen, foyer, hallways and bathrooms) did not have ten foot ceilings. Johnson also asserted that a question of fact existed as to the reasonableness of Levy's excuse for the three month delay in the completion of the condominium unit. The Levy Organization filed a motion for summary judgment contending that the property report was not part of the contract and that the all-inclusive Purchase Agreement did not require Levy to build ten foot ceilings

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throughout the entire condominium unit. The Levy Organization contended that Johnson received the benefit of his bargain as the major living areas, the bedrooms, living room and dining room had ten foot ceilings. Levy also asserted that the Purchase Agreement provided that the August 3, 1983 completion date was only an estimate, and that the Purchase Agreement clearly recited that rescission on the part of the purchaser was available only if the closing date did not occur on or before December 31, 1985.

The trial court, on November 1, 1984, entered its summary judgment decision in favor of Levy in the court...

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