Czarobski v. Lata

• Decision Date: 25 January 2008
• Docket Number: No. 104469.,104469.
• Citation: 882 N.E.2d 536,227 Ill.2d 364
• Parties: Edward J. CZAROBSKI et al., Appellees, v. Grzegorz LATA et al., Appellants.
• Court: Illinois Supreme Court

882 N.E.2d 536

227 Ill.2d 364

Edward J. CZAROBSKI et al., Appellees, v. Grzegorz LATA et al., Appellants.

No. 104469.

Supreme Court of Illinois.

January 25, 2008.

John L. Janczur, Peter A. Radosz, of Kokoszka & Janczur, P.C., Chicago, for appellants.

Gerald R. Czarobski, Chicago, for appellees.

OPINION

Justice FITZGERALD delivered the judgement of the court, with opinion:

Plaintiffs, Edward and Annette Czarobski, purchased a home from defendants, Grzegorz and Anna Lata. After plaintiffs learned that the real estate taxes on the home were more than the credits they received at closing, they filed an action in the circuit court of Cook County against defendants seeking money damages based on a reproration. The circuit court granted defendants' section 2-619 motion to dismiss (735 ILCS 5/2-619 (West 2006)), accepting defendants' argument that the merger doctrine precluded recovery by plaintiffs. The appellate court reversed the judgment of the circuit court, holding that the merger doctrine did not apply to plaintiffs' cause of action, and remanded the cause to the circuit court for further proceedings. 371 Ill.App.3d 346, 308 Ill. Dec. 836, 862 N.E.2d 1039. For the reasons discussed below, we affirm the judgment of the appellate court.

BACKGROUND

In June 2005, plaintiffs and defendants entered into a real estate contract for the purchase and sale of certain residential property located in Orland Park, Illinois. The contract provided for proration of real estate taxes as follows:

"Prorations of general taxes shall be on the basis of 105% of the last ascertainable bill. If said bill [is] based on a partial assessment or on an unimproved basis for improved property, a written agreement (with escrow) for final proration when the complete assessment information is available from the County Assessor shall be signed at closing by the parties hereto."

At the September 14, 2005, closing, plaintiffs received a real estate tax credit of $3,025.92 for 2004, and a credit of $4,076.08 for 2005. The credits were based on the 2003 real estate tax figure, as shown on the title commitment, prorated according to the above contract provision. After closing, the final 2004 tax bill issued, disclosing a tax liability of $7,876.59, substantially more than the $3,025.92 credit plaintiffs received at closing.

According to the allegations of plaintiffs' complaint, upon receipt of the 2004 tax bill, investigation revealed that the 2003 tax figure was based on a partial assessment.¹ Plaintiffs' position was summed up in an October 12, 2005, letter from plaintiffs' attorney to defendants' attorney, which was attached to the complaint. The letter stated:

"Enclosed is a copy of the tax bill that just came out * * *. As you can see, taxes went up quite a bit. We checked with the county to find out why. They tell us that the 2003 bill was based on a partial assessment. No one had disclosed that fact to us at or prior to closing. In these types of situations, under the contract we should have entered into a re-proration agreement.

The amount due from your client to mine for 2004 taxes is $4,850.67 (the actual bill of $7,876.50 less the credit * * *of $3,025.92).

The amount due from your client to mine for the reprorated 2005 taxes is $3,780.93 (10,627.43 x 105% = 11,158.80/365 x 257 = 7,857.01-4,076.08* * *). The total due then [is] $8,631.60."

Plaintiffs alleged that the discrepancy in the taxes was "either a mutual mistake of fact, or was known by the defendants and not disclosed by them." Plaintiffs sought damages of $8,631.60, plus court costs.

Defendants answered the complaint, generally denying that plaintiffs were entitled to a reproration. Defendants also asserted, as an affirmative defense, that they "had no knowledge that any real estate taxes, past or present, were based on a partial assessment," and that defendants gave to plaintiffs "what they believe was a proper real estate tax credit at the time of closing based upon the available information and per the contract."

Defendants also filed a motion to dismiss under section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 2006)). Defendants argued that under the merger doctrine the real estate contract merged into the deed, thus precluding recovery by plaintiffs. Although plaintiffs argued that mutual mistake and fraudulent concealment are recognized exceptions to the merger doctrine, defendants argued that this court had never sanctioned a broad mutual mistake exception and that, in any event, this court's opinion in Lenzi v. Morkin, 103 Ill.2d 290, 82 Ill.Dec. 644, 469 N.E.2d 178 (1984), controlled. The circuit court granted defendants' motion to dismiss with prejudice. Plaintiffs appealed.

The appellate court reversed the judgment of the circuit court. 371 Ill.App.3d at 351, 308 Ill.Dec. 836, 862 N.E.2d 1039. The appellate court distinguished Lenzi because the merger doctrine was not at issue in that case, and held that the doctrine does not apply to plaintiffs' action for real estate taxes. 371 Ill.App.3d at 348-51, 308 Ill.Dec. 836, 862 N.E.2d 1039. We allowed defendants' petition for leave to appeal. See 210 Ill.2d R. 315.

ANALYSIS

A motion for involuntary dismissal under section 2-619 admits the legal sufficiency of the plaintiff's claim but asserts "affirmative matter" outside of the pleading that defeats the claim. Wallace v. Smyth, 203 Ill.2d 441, 447, 272 Ill.Dec. 146, 786 N.E.2d 980 (2002); 735 ILCS 5/2-619(a)(9) (West 2006). The purpose of a section 2-619 motion is to dispose of issues of law and easily proved issues of fact early in the litigation. Van Meter v. Darien Park District, 207 Ill.2d 359, 367, 278 Ill.Dec. 555, 799 N.E.2d 273 (2003). Invocation of the merger doctrine is an affirmative matter properly raised in a section 2-619 motion. See Neppl v. Murphy, 316 Ill.App.3d 581, 585-86, 249 Ill.Dec. 736, 736 N.E.2d 1174 (2000). When ruling on such a motion, the court must construe the pleadings and supporting documents in the light most favorable to the nonmoving party. Van Meter, 207 Ill.2d at 367-68, 278 Ill.Dec. 555, 799 N.E.2d 273. On appeal from a section 2-619 motion, the reviewing court "must consider whether the existence of a genuine issue of material fact should have precluded the dismissal or, absent such an issue of fact, whether dismissal is proper as a matter of law." Kedzie & 103rd Currency Exchange, Inc. v. Hodge, 156 Ill.2d 112, 116-17, 189 Ill.Dec. 31, 619 N.E.2d 732 (1993). Our review proceeds de novo. Van Meter, 207 Ill.2d at 368, 278 Ill.Dec. 555, 799 N.E.2d 273.

The doctrine of "merger by deed" (also referred to as simply the "merger doctrine" or "merger rule") is well established in our case law. Under this doctrine, all prior agreements between a buyer and a seller are merged in the deed upon its acceptance. Daniels v. Anderson, 162 Ill.2d 47, 63, 204 Ill.Dec. 666, 642 N.E.2d 128 (1994); Petersen v. Hubschman Construction Co., 76 Ill.2d 31, 38, 27 Ill.Dec. 746, 389 N.E.2d 1154 (1979); Chicago Title & Trust Co. v. Wabash-Randolph Corp., 384 Ill. 78, 87, 51 N.E.2d 132 (1943); Trapp v. Gordon, 366 Ill. 102 110, 7 N.E.2d 869 (1937). The deed supersedes the provisions of the real estate contract and becomes the only binding instrument between the parties. Daniels, 162 Ill.2d at 63, 204 Ill.Dec. 666, 642 N.E.2d 128; Trapp, 366 Ill. at 110, 7 N.E.2d 869. The merger doctrine evolved to protect the security of land titles (Petersen, 76 Ill.2d at 39, 27 Ill.Dec. 746, 389 N.E.2d 1154), and brings finality to real estate contracts. See B. Goldman & V. Berghel, Common Law Doctrine of Merger: The Exceptions Are the Rule, 13 U. Balt. L.Rev. 19, 20 (1983).

This court has recognized an exception or qualification to the merger rule where the contract contains provisions that delivery of the deed does not fulfill. As to those provisions, the contract is not merged in the deed, and the contract remains in force until the contract has been fully performed. Daniels, 162 Ill.2d at 63, 204 Ill.Dec. 666, 642 N.E.2d 128; Petersen, 76 Ill.2d at 39, 27 Ill.Dec. 746, 389 N.E.2d 1154; Chicago Title & Trust Co., 384 Ill. at 87, 51 N.E.2d 132; Trapp, 366 Ill. at 110, 7 N.E.2d 869. Illinois courts have applied this exception where, for example, the contract created an easement that was not referenced in the deed (Daniels, 162 Ill.2d at 64, 204 Ill.Dec. 666, 642 N.E.2d 128); the contract expressly warranted the condition of the heating system at closing (Neppl, 316 Ill.App.3d at 591, 249 Ill.Dec. 736, 736 N.E.2d 1174); and the contract called for construction of a building on the conveyed property (Brownell v. Quinn, 47 Ill.App.2d 206, 209, 197 N.E.2d 721 (1964)). In each instance, the court determined that the contractual provision was an independent or collateral undertaking, incidental to the main purpose of the agreement, and did not merge with the deed.

Plaintiffs, however, do not rely upon this exception to the merger rule, but upon two exceptions recognized by our appellate court: mutual mistake or misrepresentation when the deed was delivered. See Beal v. Schewe, 291 Ill.App.3d 204, 211, 225 Ill.Dec. 516, 683 N.E.2d 1019 (1997) (recognizing mutual mistake and misrepresentation exceptions to merger rule); Batler, Capitel & Schwartz v. Tapanes, 164 Ill.App.3d 427, 429, 115 Ill.Dec. 530, 517 N.E.2d 1216 (1987) (same); Hagenbuch v. Chapin, 149 Ill.App.3d 572, 576-77, 102 Ill.Dec. 886, 500 N.E.2d 987 (1986) (recognizing exception to merger doctrine where the parties were mutually mistaken about the parcel's acreage).

Plaintiffs direct our attention to Holec v. Heartland Builders, Inc., 234 Ill.App.3d 253, 175 Ill.Dec. 558, 600 N.E.2d 489 (1992), which the appellate court here found persuasive. In Holec, the Second District held that the merger doctrine did not apply where the parties were mutually mistaken about the latest assessed valuation, and the buyer was entitled to a judgment for the difference in the taxes. Holec, 234...