Cohen Development Co. v. Jmj Properties, Inc.

• Decision Date: 24 January 2003
• Docket Number: No. 01-3443.,01-3443.
• Parties: COHEN DEVELOPMENT COMPANY, an Illinois corporation, Plaintiff-Appellant, v. JMJ PROPERTIES, INC., a Michigan corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

317 F.3d 729

COHEN DEVELOPMENT COMPANY, an Illinois corporation, Plaintiff-Appellant, v. JMJ PROPERTIES, INC., a Michigan corporation, Defendant-Appellee.

No. 01-3443.

United States Court of Appeals, Seventh Circuit.

Argued May 31, 2002.

Decided January 24, 2003.

COPYRIGHT MATERIAL OMITTED

Stephen A. Kouri (argued), Vonachen, Lawless, Trager & Slevin, Peoria, IL, for Plaintiff-Appellant.

James J. Manning, Heyl, Royster, Voelker & Allen, Peoria, IL, Kevin B. Even (argued), Culver, Sheridan, Knowlton, Even & Funks, Muskegon, MI, Defendant-Appellee.

Before WOOD, Jr., COFFEY, and ROVNER, Circuit Judges.

ILANA DIAMOND ROVNER, Circuit Judge.

Cohen Development Company ("CDC") and JMJ Properties, Inc. failed to jointly acquire a piece of property in Albertville, Minnesota, on which they hoped to develop an outlet mall. CDC then sued JMJ, in part, for breach of a contract that the parties allegedly had entered into to acquire the land. Following a bench trial, the district court held that CDC failed to prove that the parties had entered into an enforceable agreement, and entered judgment in favor of JMJ. CDC appeals, and we affirm.

BACKGROUND

1. Facts

CDC, a family-owned business, develops, owns, and manages shopping centers and hotels. In 1994 Leslie Cohen, then Executive Vice President of CDC, identified an approximately 135-acre parcel of property along Interstate 94 in Albertville that he thought was the "last great" site in the Midwest for the development of a retail outlet mall and complementary development. In January 1995 CDC entered an Option Agreement with the property's owners, Judith and Bernard Roden, that gave CDC the exclusive opportunity to purchase the property for $733,848. The Option Agreement initially expired May 1, 1995, but gave CDC the right to extend its option in six-month intervals through November 1, 1997. After acquiring the option, CDC developed a master plan for the property under which 60 acres would be developed as an outlet shopping center and the remaining 75 acres for complimentary retail, light industrial, and warehouse use. Because, as Cohen testified at trial, CDC policy was to develop shopping centers on a nonrecourse basis, that is, without personal financial liability to CDC's principals, he was interested in finding a partner to develop the outlet portion of the property.

A. The Parties' Original Purchase Agreement

In September 1995 Cohen attended a semiannual convention held by Value Retail News ("VRN"), an industry trade organization for developers of outlet malls, where he was introduced to James Morse, Jr., the president of JMJ. Cohen and Morse discussed CDC's interest in "flipping" or selling 60 acres of the Roden property for the development of a retail mall while retaining the remaining 75 acres. Morse and Cohen reached a handshake deal for CDC to sell 60 acres to JMJ once it acquired the Roden property, and on October 24, 1995, CDC and JMJ executed a Purchase Agreement memorializing their understanding. Under the Agreement, which was valid for one year, JMJ agreed to purchase from CDC 60 acres of the Roden property for $1,050,000, subject to certain contingencies, and to pay CDC earnest money of $5,000 per month during the term of the Agreement. The parties amended the Agreement in March 1996 to provide that JMJ would by July 1, 1996, designate specifically in writing the land it would purchase (that designation was necessary because at the time the Agreement was signed, CDC and JMJ had allowed the boundary of the 60 acres to "float" within the entire 135-acre parcel due to wetland mitigation issues). In August JMJ identified the parcel it would purchase.

During 1996 JMJ attempted to pre-lease space in the outlet mall (before developers begin construction on a mall, they prefer to have 50-70% of the planned store space pre-leased). Leasing progressed slowly, however, and in June and July 1996 Morse and Cohen discussed extending the Purchase Agreement so that JMJ would have extra time to market the property. At another VRN conference in the fall of 1996, Cohen presented to Morse a second amendment to extend the Purchase Agreement. Morse reviewed the draft with his attorneys but rejected it in a November 11 letter to Cohen because the changes and additions it made to the original Purchase Agreement were "too substantial to consider." Around this time Cohen also met with the Rodens to try to extend the Option Agreement beyond November 1997, but they refused. JMJ and CDC failed to agree to an extension of the Purchase Agreement, and it expired in November 1996. Although CDC and JMJ continued to negotiate after the Agreement expired, CDC also explored options with other developers to purchase the Roden property. Overtures made in January 1997 to Insignia Commercial Investments Group, for instance, proved unsuccessful.

B. The Alleged 1997 Agreement

In a February 1997 telephone conversation, Morse informed Cohen that the Rodens would not sign another option agreement with CDC, but he believed they would do so with JMJ. In an April 3 letter to Morse, Cohen noted that the Purchase Agreement had expired in November 1996 and stated that "you [Morse] and I have discussed the potential ways our companies... may now be able to reach a new agreement," but noted that "each time we sent you a written agreement, you tell me you have reconsidered the terms of our verbal understanding, have `changed your mind', or otherwise refused to proceed." Cohen further asked Morse to "provide to [CDC] a carefully considered offer in writing, one with which you are comfortable," and stated:

I trust you agree that time is of the essence in determining, for each of us, the future coarse [sic] of the development and ownership of this project. I think we have been most patient in the past several months in waiting for a formalized agreement, and I do not see how we can protract this process much further. Accordingly, I ask that you provide a red-line or summary of what we can later incorporate into a more formal written agreement.

On April 8 Morse responded to Cohen's letter. He explained that with CDC's cooperation he could secure a long-term option on the Roden property, and that the parties would then have what they originally agreed to:

At this point, I believe our best course of action would be to determine how to secure a longer term option without either of us losing our previously agreed upon development interests. This can be accomplished, however, your full cooperation will be a necessity. Allow me to go make the business deal on the land and you will have what was originally agreed to, as will we. The only difference being we have a long-term option.

Although this letter was written on JMJ letterhead and contained Morse's signature, Morse did not sign the letter himself. CDC did not introduce at trial any evidence to establish who actually signed the letter, although Cohen testified that he believed it was signed by Morse's secretary.

On May 6, Cohen responded to Morse's letter, stating that "we have agreed to accept your [April 8, 1997] offer." He also summarized his understanding of the deal, which was that CDC would allow JMJ to reach an agreement with the Rodens to purchase their property, and JMJ would then transfer 75 acres and $225,000 to CDC:

It is our understanding that we will allow you to make the business deal on the property, as you proposed. In so doing, you and I will each end up with the respective interests previously agreed upon, as follows: immediately upon your purchase of the property, you will retain sixty acres for your retail development and will then convey, or cause to be conveyed to us, to us [sic] the residual seventy five acres along with a $225,000 net cash profit.

Cohen testified at trial that in a subsequent telephone conversation, Morse assured Cohen that they would proceed according to the understanding outlined in Cohen's May 6 letter. After Cohen's May 6 letter, CDC refrained from contacting the Rodens to either exercise or extend its Option, though it did discuss the Roden property with other developers and investors in case the agreement with JMJ fell through.

C. Further Discussions Between JMJ and CDC in Fall 1997

In September 1997 Morse informed Cohen that JMJ and the Rodens had agreed to a two-year option agreement for the Roden property, under which JMJ would pay the Rodens $20,000 per year earnest money for the right to purchase the property for $900,000. Morse also told Cohen that he believed that JMJ owed CDC $225,000 (the net profit CDC would have realized if JMJ had purchased the 60 acres for $1,050,000 as contemplated under the parties' original Purchase Agreement) and that he wanted to put a formal agreement together to accommodate a transaction between JMJ and CDC. In October Morse faxed a letter to Cohen stating that if all went well, he would execute the option agreement with the Rodens by October 10, 1997. He further stated that "of course, simultaneous to this, you and I must execute an agreement whereby you will receive from me 75 ± acres of the 135 ± acres for $1.00." Morse enclosed a draft agreement for Cohen's review, noting that JMJ and CDC had entered into the October 1995 Purchase Agreement on the basis of the Option Agreement held by CDC to purchase the Roden property and that CDC's Option Agreement was due to expire on November 1, 1997. It further stated that CDC and JMJ had "agreed to certain changes in their prior relationship and certain revisions to their mutual undertakings" and provided the following terms: 1) CDC would not seek to renew, extend, or revise its Option Agreement with the Rodens; 2) JMJ would exert its best efforts to obtain a new two-year option agreement from the Rodens, and CDC would transfer its right, title, and interest in its 1995 Option Agreement to JMJ; 3) JMJ would waive its right to seek specific performance of the 1995 Purchase Agreement as long as CDC did not default on...