Greer Properties, Inc. v. LaSalle Nat. Bank
Decision Date | 15 June 1989 |
Docket Number | No. 107486 and O,No. 88-2188,107486 and O,88-2188 |
Citation | 874 F.2d 457 |
Parties | GREER PROPERTIES, INC., a Delaware corporation, Plaintiff-Appellant, v. LaSALLE NATIONAL BANK, a national banking corporation acting as trustee u/t/ald Orchard West Venture, an Illinois General Partnership, Defendants-Appellees. |
Court | U.S. Court of Appeals — Seventh Circuit |
Robert J. Trizna, Trizna & Lepri, Chicago, Ill., for plaintiff-appellant.
Louis R. Hegeman, and Jay D. Stein, Gould & Ratner, Chicago, Ill., for defendants-appellees.
Before WOOD, Jr., POSNER, and FLAUM, Circuit Judges.
This is a contracts case arising from efforts to develop a piece of commercial real estate located near the Edens Expressway in Skokie, Illinois. Four local developers formed a partnership called Old Orchard West Venture ("Old Orchard") and acquired the real estate parcel in 1984. Legal title to the real estate is held in the name of LaSalle National Bank ("LaSalle"), as trustee. In 1987, Old Orchard and LaSalle ("Sellers") entered into a contract to sell the property to plaintiff-appellant Greer Properties, Inc. ("Greer"), a wholly-owned subsidiary of the Marriott Corporation. 1 The Sellers terminated the contract prior to the closing and Greer brought this action in federal district court, claiming the termination was improper. The district court entered summary judgment for the defendants and Greer appeals.
Plaintfff-appellant Greer is a Delaware corporation. Defendant-appellee Old Orchard is an Illinois partnership and defendant-appellee LaSalle is a national bank with its principal place of business in Illinois. The case involves a contract to purchase real estate for $1,250,000. The district court had jurisdiction under 28 U.S.C. Sec. 1332. We review this case under 28 U.S.C. Sec. 1291.
William Hoag, Albert Scherb, Jr., Kyle Ahrberg, and Michael Klonoski are the four developers who formed Old Orchard. The affairs of the partnership were managed primarily by William Hoag. Old Orchard purchased the property in January, 1984 for $700,721.70, intending to develop the parcel by constructing, leasing, and managing a building on it. In 1986, unable to fulfill its development plan, Old Orchard commenced efforts to sell the property outright or to construct a building on it for a predetermined tenant. Two buyers expressed serious interest in the property: G.D. Searle Co. ("Searle"), which maintained its corporate headquarters on the adjoining real estate, and Marriott Corporation, which wanted to construct a motel on the property.
The Sellers agreed to sell the property to Searle and entered into a contract on February 16, 1987. Searle promised to pay approximately $1,100,000. The contract between Searle and the Sellers allowed Searle to terminate the agreement if the soil of the property was contaminated by environmental waste. Searle hired an environmental consulting firm to study the condition of the property. The firm reported that cleaning up the contamination would cost in excess of $500,000. Because of the extensive contamination, Searle requested that the Sellers reduce the contract price. The Sellers refused and Searle exercised its right to terminate the contract.
The Sellers then began negotiating with Marriott Corporation through its real estate subsidiary, Greer. The parties entered into a contract on July 31, 1987. The Sellers agreed to sell the property to Greer for $1,250,000. As part of the contract, the Sellers were required to remove the environmental contamination at their own expense. The Sellers were also allowed to terminate the contract if the cost of the clean-up became "economically impracticable." The pertinent section of the contract states:
Seller is currently having a study conducted to determine the existing soil condition ("Soils Study").... Seller further agrees to take all action recommended by the Soils Study and the Illinois Environmental Protection Agency to bring the soil into compliance with all local, state and federal ordinances, laws or regulations and shall use its best efforts to have all such work completed prior to Closing; provided, however, that if the cost of such clean-up work will, in Seller's best business judgment, be economically impracticable, then Seller, at its option, may terminate this Contract....
Greer had been advised that Searle had found contaminants on the property, but Greer was not told of the cost estimates contained in the Searle report. In September 1987, after the contract had been signed, Hoag informed Greer of his own cost estimates for the clean-up--between $60,000 and $100,000. Hoag testified that he did not believe the estimate made in the Searle study; he felt the high estimate of the clean-up cost was a negotiating tactic used by Searle to get the Sellers to lower their price.
The Sellers retained a soil consultant to study the nature and extent of the contamination. In mid-September, the consultant estimated the cost of the clean-up at between $100,000 and $200,000. The parties disagree about whether the Sellers informed Greer at that time of their conclusion that the contract had been rendered economically impracticable by the escalating cost of the clean-up. Without formally notifying Greer that they intended to terminate the contract, the Sellers entered into a new round of negotiations with Searle following the receipt of the consultant's report and a purchase price of $1,455,000 was proposed. A draft contract containing this price was sent by Searle to the Sellers on October 7, 1987. On that same date, Sellers received a final report from their soil consultant, estimating the clean-up costs at between $190,000 and $240,000. On October 8, 1987, the Sellers formally terminated the contract with Greer by sending the required written notice. After the termination, the Sellers indicated to Greer that Greer could still buy the property if it increased the purchase price by $250,000. Greer never made the higher offer. After terminating the contract, the Sellers cleaned up the property at a cost of $251,825.
On December 31, 1987, Greer filed a complaint in the United States District Court for the Northern District of Illinois, Eastern Division, seeking specific performance of the contract and money damages. The Sellers answered the complaint and filed a counterclaim seeking a declaratory judgment that their termination of the contract was proper. The Sellers also filed a motion for summary judgment on their counterclaim. The district court granted the Sellers' motion for summary judgment, concluding that no genuine issue of material fact existed and that Sellers were entitled to judgment as a matter of law. The district court found that, under Illinois law, the language of the contract gave the Sellers broad discretion to terminate upon receipt of the soil consultant's study. The court rejected Greer's contention that the Sellers terminated the contract in bad faith so they could sell the property to Searle, finding that the Sellers had decided to end their contract with Greer before reopening negotiations with Searle. Greer appeals this entry of summary judgment, arguing that the district court erred in finding that the clean-up cost made performance economically impracticable. Greer also states that genuine issues of material fact exist as to whether the Sellers were acting in bad faith when they terminated the contract.
Summary judgment was entered by the district court in favor of the Sellers. Summary judgment shall be entered if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). See Matthiessen v. North Chicago Community High School Dist., 857 F.2d 404, 406 (7th Cir.1988). We review de novo the district court's entry of summary judgment. Colan v. Cutler-Hammer, Inc., 812 F.2d 357, 360 (7th Cir.) (per curiam), cert. denied, --- U.S. ----, 108 S.Ct. 79, 98 L.Ed.2d 42 (1987). The possibility that a factual dispute may exist is not enough by itself to justify reversing an entry of summary judgment. Posey v. Skyline Corp., 702 F.2d 102, 106 (7th Cir.), cert. denied, 464 U.S. 960, 104 S.Ct. 392, 78 L.Ed.2d 336 (1983). A genuine issue of material fact exists when "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). If there are doubts as to the existence of a material fact, these doubts should be resolved in favor of the nonmoving party and the grant of summary judgment should be reversed. DeValk Lincoln Mercury, Inc. v. Ford Motor Corp., 811 F.2d 326, 329 (7th Cir.1987). See also Anderson, 477 U.S. at 251-52, 106 S.Ct. at 2512 ( ).
Applying this standard to the district court's decision, we address Greer's first contention. Greer argues that the district court erred by finding that the contract's termination provision gave the Sellers broad discretion in determining whether the cost of the clean-up made the sale economically impracticable. The district...
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