Bond Drug Co. of Ill. v. Amoco Oil Co.

• Decision Date: 08 June 2001
• Docket Number: No. 1-00-0961.,1-00-0961.
• Citation: 751 N.E.2d 586,323 Ill. App.3d 190,256 Ill.Dec. 196
• Parties: BOND DRUG COMPANY OF ILLINOIS, Plaintiff-Appellee, v. AMOCO OIL COMPANY, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

751 N.E.2d 586

323 Ill. App.3d 190

256 Ill.Dec. 196

BOND DRUG COMPANY OF ILLINOIS, Plaintiff-Appellee, v. AMOCO OIL COMPANY, Defendant-Appellant.

No. 1-00-0961.

Appellate Court of Illinois, First District, Sixth District.

June 8, 2001.

Rehearing Denied July 9, 2001.

Gerard D. Kelly, Sidley & Austin, Chicago, for Appellant.

James K. Gardner, Neal, Gerber & Eisenberg, Chicago, for Appellee.

Justice BUCKLEY delivered the opinion of the court:

This case arises out of a 1984 real estate transaction in which defendant-appellant Amoco Oil Company (Amoco) agreed to transfer a service station site to plaintiff-appellee Bond Drug Company of Illinois (Bond) in exchange for properties worth $1,175,000. When Amoco failed to comply with the terms of the parties' agreement, Bond sued for specific performance and Amoco counterclaimed for rescission. On cross-motions for summary judgment, Judge Hourihane entered judgment in favor of Amoco, denied Bond's motion, and rescinded the contract. On appeal, this court reversed summary judgment in favor of Amoco, reversed the denial of Bond's motion for summary judgment, and remanded the case with directions for the trial court "to conduct another hearing and reconsider Bond's motion and the relief requested, taking into account what is stated herein." Bond Drug Co. v. Amoco Oil Co., 274 Ill.App.3d 630, 636, 211 Ill.Dec. 78, 654 N.E.2d 540 (1995). On remand, the trial court granted Bond's motion for summary judgment and ordered specific performance of the contract. Amoco now appeals and raises the following issues: (1) whether the trial court complied with this court's mandate; (2) whether paragraph 17 of the exchange agreement applies to the environmental contamination on the premises; (3) whether the exchange agreement should be rescinded due to mutual mistake of fact; (4) whether enforcement of the agreement is unconscionable; and (5) whether the trial court properly ordered specific performance on remand.

I. BACKGROUND

On December 21, 1984, Amoco entered into a contract (the Exchange Agreement) with Bond concerning a parcel of real estate owned by Amoco located at the corner of Fairbanks and Ohio Streets (the Premises) in Chicago. At the time, the Premises was occupied by an Amoco gas station pursuant to an Amoco lease agreement and contained underground gasoline storage tanks. Bond, a subsidiary and real estate arm of Walgreen Company (Walgreen), wanted to acquire the Premises as a site for a Walgreen drug store.

The Exchange Agreement provided that Bond would deposit the purchase price of $1,175,000 into an escrow account; that the escrow funds would thereafter be used by Bond to acquire property or properties as designated by Amoco in exchange for the Premises; that the exchange property or properties would have an aggregate value of approximately $1,175,000; that the final closing under the Exchange Agreement was to take place two years after Bond deposited the $1,175,000 in the escrow account; and that at the final closing Amoco would convey title to the Premises to Bond and Amoco would receive any amount of money remaining in the escrow account. In addition, paragraph 17 of the Exchange Agreement provided that if zoning, building, fire or health code violations were found to exist on the Premises prior to Bond taking title and possession, Amoco would correct them.

After executing the Exchange Agreement, Bond paid $100,000 to Amoco's gasoline station lessee of the Premises for a waiver of the lessee's right of first refusal on any sale of the Premises by Amoco. On October 7, 1985, Bond deposited the $1,175,000 into the escrow account. In 1986, Amoco designated property it desired in Wauwatosa, Wisconsin, which was purchased by Bond for Amoco with funds from the escrow account. Amoco has since had use and possession of that tract for a gas station. Bond has not purchased any other properties under the Exchange Agreement and the remainder of Bond's funds remain in the escrow account.

In September 1987, shortly before the final closing under the Exchange Agreement, Amoco notified Bond that Amoco wanted to test the Premises for groundwater contamination that might have been caused by leaking underground gasoline storage tanks. Thereafter, because of Amoco's requests, the final closing was repeatedly deferred. On May 27, 1988, Amoco found that there was environmental contamination on the Premises that would have to be corrected. On April 17, 1989, pursuant to the Illinois Environmental Protection Act (EPA) (415 ILCS 5/57 et seq. (West 1996)), the Illinois Environmental Protection Agency (IEPA) sent Amoco a notice of discharge or release of petroleum into the environment at the Premises caused by leaking underground gasoline storage tanks.

On November 17, 1989, Amoco advised Bond that it would not convey the Premises to Bond as provided in the Exchange Agreement and that it considered the Exchange Agreement terminated because of the unexpected cost of having to correct the Premises contamination.¹ Attempts by Bond to persuade Amoco to fulfill the terms of the Exchange Agreement failed. On July 23, 1990, Bond filed an action against Amoco seeking specific performance of the Exchange Agreement. On August 27, 1990, Amoco answered and asserted a counterclaim for rescission based on mutual mistake and impossibility. Both parties filed motions for summary judgment. The trial court granted summary judgment in favor of Amoco and denied Bond's motion for summary judgment. Bond appealed. On appeal, this court reversed the trial court's decision as to both Amoco's and Bond's summary judgment motions and remanded the case. Bond Drug Co. v. Amoco Oil Co., 274 Ill.App.3d 630, 211 Ill.Dec. 78, 654 N.E.2d 540 (1995) (hereinafter Bond I).

Bond I decided the following issues. First, with respect to whether paragraph 17 of the Exchange Agreement applied to the environmental contamination on the Premises, Bond I held "[t]he plain language of paragraph 17 requires Amoco to correct all health code violations of any governmental authority that exist on the Premises" and that "EPA violations due to leakage from underground gasoline storage tanks causing environmental contamination are clearly health code violations." Bond I, 274 Ill.App.3d at 633-34, 211 Ill. Dec. 78, 654 N.E.2d 540. Second, with respect to whether the trial court erred in awarding rescission of the Exchange Agreement due to a mutual mistake of fact, Bond I held "[t]here was no mutual mistake of fact in this case. Rather than a mutual mistake of fact, this case involves a unilateral mistake in the cost to be incurred for performance of the contract" and "is not a basis for rescission." Bond I, 274 Ill.App.3d at 635, 211 Ill.Dec. 78, 654 N.E.2d 540. Finally, with respect to whether the court correctly ruled that the Exchange Agreement should not be enforced because enforcement would be unconscionable, we held that the doctrine of unconscionability did not apply and stated:

"No equitable principle, including unconscionability, will compel the cancellation of a valid contract merely because one of the parties thereto will possibly or probably sustain a loss. Where the parties to an instrument are competent to contract with each other, and there is no question of fraud, neither can be relieved from his agreement on the ground that he did not use good business judgment in entering into the contract. [Citation.] Moreover, Amoco is required to bear the cost of correcting the contamination from the underground gasoline storage tanks pursuant to EPA regulations whether or not the Exchange Agreement is enforced.

In addition, if the Exchange Agreement is enforced according to its terms, Bond will merely receive what it is supposed to receive under the Exchange Agreement. It will not receive a windfall or some type of serendipitous benefit. This is especially true since Bond deposited the total purchase price in an escrow account, paid Amoco's lessee of the Premises $100,000 for a waiver of first refusal with respect to purchasing the Premises, and prior to the scheduled closing Bond allowed Amoco to use a portion of the escrow funds to acquire the exchange tract for another gas station site. Thus, there is nothing unconscionable about enforcing the Exchange Agreement." Bond I, 274 Ill.App.3d at 636, 211 Ill.Dec. 78, 654 N.E.2d 540.

Bond I concluded:

"[T]he summary judgment in favor of Amoco is reversed. The denial of Bond's motion for summary judgment is also reversed. The trial court is to conduct another hearing and reconsider Bond's motion and the relief requested, taking into account what is stated herein. The case is remanded for further proceedings consistent with this opinion." Bond I, 274 Ill.App.3d at 636, 211 Ill.Dec. 78, 654 N.E.2d 540.

Appeal to the Illinois Supreme Court was denied. See Bond Drug Co. v. Amoco Oil Co., 164 Ill.2d 558, 214 Ill.Dec. 317, 660 N.E.2d 1266 (1995).

On remand, the case came before Judge Stephen A. Schiller. The parties appeared before Judge Schiller for the first time on February 28, 1996. Bond argued that all the trial judge had left to do was enter a summary judgment order in its favor and "to shape the order." Amoco argued that the judge was to review our determination with regard to the issue of unconscionability, which the judge refused to do. Judge Schiller determined that our opinion foreclosed his determination of many of the issues on the summary judgment and that he was left "to consider the relief requested." Nevertheless, the judge granted the parties the opportunity to file supplemental briefs on Bond's original summary judgment motion.

The next hearing took place before Judge Schiller on June 18, 1996. At the hearing, the judge asked Amoco which factual issues survived the determinations made in Bond I. Amoco responded that the remaining issues of fact were unconscionability and rescission based on a mutual mistake. After considering the supplemental briefs, the additional...