Dawdy v. Sample, 4-88-0214

• Decision Date: 09 January 1989
• Docket Number: No. 4-88-0214,4-88-0214
• Parties: , 127 Ill.Dec. 299 Carl W. DAWDY and Connie M. Dawdy, Plaintiffs-Counterdefendants-Appellants and Cross-Appellees, v. Lester SAMPLE and Phyllis Sample, Defendants-Counterplaintiffs-Appellees and Cross-Appellants.
• Court: United States Appellate Court of Illinois

Page 1128

532 N.E.2d 1128

178 Ill.App.3d 118, 127 Ill.Dec. 299

Carl W. DAWDY and Connie M. Dawdy Plaintiffs-Counterdefendants-Appellants and Cross-Appellees, v. Lester SAMPLE and Phyllis Sample Defendants-Counterplaintiffs-Appellees and Cross-Appellants.

No. 4-88-0214.

Appellate Court of Illinois Fourth District.

Jan. 9, 1989.

Gustine & Theivagt, Ltd., Carrollton (Charles E. Theivagt, of counsel), for plaintiffs-counterdefendants-appellants and cross-appellees.

Moore and Goetten, Jerseyville (Norbert J. Goetten, of counsel), for defendants-counterplaintiffs-appellees and cross-appellants.

Presiding Justice McCULLOUGH delivered the opinion of the court:

Plaintiffs appeal a trial court order which found a mutual breach of contract, dissolved a joint venture, split assets of the venture, rendered an accounting, and resolved damages issues. Plaintiffs contend the trial court's determination that a mutual breach occurred is contrary to the manifest weight of the evidence, that the trial court erred in dividing the property and ordering incidental relief, that they were entitled to specific performance of their agreement with defendants, that the trial court's award of damages on one sale was erroneous, and the trial court's determination that no breach of contract had occurred in connection with the sale of lot 19 was contrary to the manifest weight of the evidence.

Defendants cross-appeal. They contend plaintiffs' argument exceeds the scope of their notice of appeal, plaintiffs had a duty to mitigate damages, and the trial court's determination of a mutual breach of the escrow agreement was contrary to the manifest weight of the evidence.

We affirm in part, vacate in part, and remand.

Testimony in the instant case principally came from plaintiff, Carl Dawdy (Dawdy), and defendant, Lester Sample (Sample). Two contracts are disputed. The primary dispute concerns an agreement to convey an undivided one-half interest in a 10-acre parcel of ground (Escrow Agreement). A secondary dispute occurred over the sale of an individual lot within the 10-acre parcel (lot 19).

Carl and Connie Dawdy purchased a 10-acre tract of ground in Greenfield in 1979. They divided the property into 25 lots and planned to develop the property for residential use. The property is called Dawdy's North Addition. Dawdy is a building contractor. He builds three to four homes per year and planned to build the homes on Dawdy's North Addition. After Dawdy had begun initial development of the tract, he sold lot 19 to defendants in 1982. The agreement on this sale states that the Samples, defendants, paid $3,000 down and a balance of $5,460 was due on or before May 1, 1983, if the sewer line, water line, and street were completed. Dawdy testified that he had constructed the utility lines and graded the road. He put oversized rock on it and then smaller rock. He finished in September of 1983. Dawdy understood that the balance of the payment for the lot was to be in cash and used to help complete the road. However, the Samples never paid him in cash.

Because he was not paid in cash, Dawdy testified he was unable to pay a subcontractor, Western Asphalt Company, who had provided rock. Carrying charges accrued on his account with Western Asphalt Company. In count III of his second-amended complaint, Dawdy requested the difference between the interest charged on the Escrow Agreement and that charged on the account with Western Asphalt ($693.94) as damages. Dawdy admitted that the road was not completely finished until 1984.

Sample stated that he did not know anything about Dawdy's dealings with Western Asphalt Company. In April 1983, Sample asked Dawdy about the utility lines and roads for lot 19 because nothing had been done.

Sample handled the paperwork for the sale of lot 19. When he received the abstract, he believed there would not be any way for Dawdy to convey clear title to lot 19. He discovered the property was mortgaged, had two years delinquent taxes, and several mechanic liens against it. Dawdy admitted that the bank had contacted him about foreclosing on the 10-acre parcel. Sample stated he told Dawdy the only way to clear title to lot 19 was to pay off all of the liens on the 10-acre property. Sample admitted, however, that he did not seek a release from the bank for lot 19.

The parties then entered negotiations which resulted in the Escrow Agreement, executed April 15, 1983. Dawdy testified Sample was to pay off all of the liens in exchange for one-half interest in the 10-acre parcel. Sample testified that he acquired the entire 10-acre plot, less properties previously sold, by paying off all the indebtedness and releasing a lien on Dawdy's parents' lot.

The documents relating to the property show that the Dawdys sold Dawdy's North Addition and a house on Melissa Street to the Samples for $70,829.16, the amount of the liens against the property on April 15, 1983. A warranty deed was filed on that date. In the real estate Escrow Agreement the Samples agreed to sell the Dawdys an undivided one-half interest in Dawdy's North Addition for $35,914.58. Between April 15, 1983, and April 14, 1984, the principal accrued interest at 11 3/4%. After April 14, 1984, the interest rate was to be changed in line with the rate charged by the Carrollton Bank. The purchase price and any accrued interest were to be paid from the sale of lots to third parties. The Dawdys' one-half of the sales price was to be credited against the balance owed Sample on the indebtedness. All parties expected to profit from their joint effort to develop the subdivision.

The Escrow Agreement states the real estate taxes and insurance are to be split equally. All maintenance and improvement costs were to be split equally. The lots were sold subject to Dawdy's right to construct homes upon them. The Escrow Agreement further stated that if the Dawdys failed to pay their portion of the tax assessments or insurance, the Samples could make the payment and add that amount plus interest to the principal of the debt. In the event of a default by the Dawdys, the Escrow Agreement stated the Samples could consider the entire balance immediately due, proceed by any appropriate manner to recover the balance, or foreclose the contract as a mortgage.

In December 1983, Dawdy went to Sample's office concerning the lot 19 sale. On December 31, 1983, the balance of the purchase price on lot 19 was credited against the balance due on the Escrow Agreement. Dawdy did not object to the credit. The street was not brought up to city standards until August of 1984.

The first sale under the Escrow Agreement was a house on Melissa Street in Greenfield. This sale occurred in June 1983. Sample negotiated the sale. He stated that he and Dawdy had agreed to accept $20,000 for the Melissa Street property. The owner of the Melissa Street property wanted to trade his house ($40,000 value) for the Melissa Street house ($24,900 value). Sample stated he and Dawdy discussed the proposed trade and the difference due to the purchasers. They agreed to a credit of $11,000 against Dawdy's debt on the Escrow Agreement with Sample taking the risk of resale.

Dawdy stated the conversation never occurred. Sample did not inform him of the trade or of the $24,900 sale price for the Melissa Street property. He only learned of the discrepancy after suit had been instituted.

The Melissa Street home was sold for $24,900. Dawdy's account on the Escrow Agreement was credited with $11,000 for the sale of the home. Under the terms of the Escrow Agreement, he should have been credited for half of the sales price. All of the 1982 real estate taxes were charged to Dawdy. Under the terms of the Escrow Agreement, only one-half of the taxes should have been charged to him. Sample admitted that the taxes were not correctly apportioned However, he asserted the oral agreement changed the terms of the Escrow Agreement. The trial court found for plaintiff on this dispute, which is not an issue on appeal.

Sample provided an end-of-the-year accounting to Dawdy's bookkeeper in 1983 and 1984. The accountings listed taxes, insurance, and maintenance expenses. They showed credits for sales. Dawdy stated he did not know whether Sample sent the accounting directly to him or to his bookkeeper. He did, however, use them for tax purposes. Dawdy testified Sample did not directly send him any bills, nor did he discuss the accountings.

In May 1985, Sample went to Dawdy to discuss finances. Both parties agree Sample told Dawdy he needed some monetary contribution of expenses for the subdivision. Dawdy stated he agreed to contribute if money became available to him, but no money became available. Dawdy testified no specific bills or amounts were discussed during the May meeting. Dawdy never asked how much money he owed and did not ask for the actual bills. Dawdy stated he understood all expenses were to be financed by Sample and his portion paid through the sale of the lots. Dawdy stipulated at trial that the language of the Escrow Agreement was contrary to his understanding of the method of payment.

On September 24, 1985, Dawdy received a letter from Sample. The letter states the 1983 and 1984 expenses were in default. It suggested Dawdy returned the Escrow Agreement marked "null and void." The letter does not contain an itemized list of the amounts due. Dawdy testified that prior to September 1985, Sample never billed him for taxes, insurance, repairs, or improvements.

The accounting statements sent to the tax preparer were itemized and showed that Dawdy's one-half of the expenses for 1983 and 1984 were added to the principal amount due under the Escrow Agreement. Dawdy admitted that he never asked Sample how much he owed nor offered to pay specific bills.

Sample testified that after Dawdy failed to make any payment in response to May 1985 conversation, he sent the September letter to cancel the Escrow Agreement. On November...