Hallmark & Johnson Properties, Ltd. v. Gadea

• Decision Date: 29 August 1991
• Docket Number: No. 1-90-1293,1-90-1293
• Citation: 218 Ill.App.3d 921,161 Ill.Dec. 534,578 N.E.2d 1180
• Court: United States Appellate Court of Illinois
• Parties: , 161 Ill.Dec. 534 HALLMARK & JOHNSON PROPERTIES, LTD., Plaintiff-Appellant, v. Antonio A. GADEA, Defendant-Appellee.

Page 1180

578 N.E.2d 1180

218 Ill.App.3d 921, 161 Ill.Dec. 534

HALLMARK & JOHNSON PROPERTIES, LTD., Plaintiff-Appellant, v. Antonio A. GADEA, Defendant-Appellee.

No. 1-90-1293.

Appellate Court of Illinois First District, Fourth Division.

Aug. 29, 1991.

Barry E. Morgen and Sheldon G. Perl, Chicago, for plaintiff-appellant.

Vincent A. Lavieri, Kovitz Shifrin & Waitzman, Arlington Heights, for defendant-appellee.

Justice McMORROW delivered the opinion of the court:

Plaintiff, Hallmark & Johnson Properties, Ltd., brought an action against defendant, Antonio A. Gadea, for payment of a $40,000 real estate broker's commission. On appeal, plaintiff contends that the trial court erred in granting summary judgment for defendant.

On March 30, 1988, plaintiff, a real estate broker, and defendant entered into a cooperative listing agreement for the sale of a 44-unit apartment building owned by defendant. The agreement as subsequently amended provided that $875,000 would be the sales price of the building and that plaintiff would be paid a commission of $40,000. Defendant also agreed

"[t]o accept a Purchase Money Note and Trust Deed, or execute Installment Agreement for Warranty Deed, or accept a Junior Purchase Money Note and Trust Deed in the amount of $100,000--$150,000 * * *."

Defendant further agreed to pay the $40,000 broker's commission

"in the event Broker produces a Purchaser ready, willing and able to purchase the premises on the terms herein provided * * * at the time of execution and delivery of deed or installment agreement for deed, whichever occurs sooner, and Broker is authorized to deduct the commission and expenses from the earnest money deposit at such time."

On or about August 31, 1988, defendant signed a real estate sales contract to sell the property to Lyle T. and Debra L. Berkson and their daughter, Frances Rotman, (the Berksons) for $865,000, with an initial payment of $30,000 in earnest money, to be increased to 10% of the purchase price within 15 days of acceptance of the contract. Defendant subsequently agreed to accept the $30,000 as the total amount of earnest money. The earnest money was to be held in escrow by plaintiff.

Paragraph 3 of the contract, entitled "Mortgage Contingency" provided:

"This contract is contingent upon Purchaser securing within 60 days of acceptance hereof a commitment for a fixed rate mortgage, or an adjustable mortgage * * * for $648,750.00, the interest rate * * * not to exceed 10.88% per annum, amortized over 25 years, payable monthly, * * *. If Purchaser does not obtain such commitment, Purchaser shall notify seller in writing within said number of days. If Seller is not so notified, it shall be conclusively presumed that Purchaser has secured such commitment or will purchase said property without mortgage financing. If Seller is so notified, Seller or broker may, within an equal number of additional days, secure a mortgage commitment for Purchaser upon the same terms, and said commitment may be given by Seller as well as a third party. Purchaser shall furnish all requested credit information and sign customary papers relating to the application and securing of such commitment. If Purchaser notifies Seller as above provided, and neither Purchaser, Seller nor Broker secures such commitment as above provided, this contract shall be null and void and all earnest money shall be returned to Purchaser and Seller shall not be liable for any sales commission."

Because defendant did not have legal counsel when he signed the real estate contract, plaintiff's agent, Richard Dawidiuk, recommended to defendant that he employ attorney L. Sanford Blustin to represent him. According to Blustin's deposition, defendant told Blustin that defendant wanted the fullest possible protection of the second mortgage he agreed to hold. Blustin therefore prepared a rider to the contract which stated in paragraphs one and two that defendant would hold a second mortgage of $151,250 at 9.5%, and that the actual down payment would be $65,000. Paragraph 3 of the Rider provided,

"It is agreed by the parties hereto, that this property which is presently in a land trust with the Ravenswood Bank, will be transferred to the buyers, at the closing of this deal; however, at the same time and simultaneously, the buyers will issue an assignment of their beneficial interest to the seller as security for the said aforementioned second mortgage."

The rider was signed by the parties on August 31, 1988. Between September 6 and September 27, Blustin and the Berksons' attorney, George Skuros, exchanged correspondence regarding the contract and various modifications to it, none of which related to the issue of financing.

On October 19, Donald Hannon, a mortgage broker hired by the Berksons, sent the Berksons a letter and a loan commitment from Citicorp Savings of Illinois for $650,000. The commitment stated that the Berksons' loan application had been approved "subject to the terms and conditions herein." Among those terms and conditions was a paragraph which stated,

"No secondary financing and no transfer of title or of the beneficial interest in Land Trust will be allowed. Any violation will be a default under the loan."

The commitment also provided that the borrowers, the Berksons, assign their beneficial interest in the property to Citicorp. Finally, the commitment stated,

"Lender may terminate this commitment if, except as may be otherwise provided In his letter accompanying the loan commitment, Hannon advised the Berksons that "[w]hile the commitment requests an Assignment of the Beneficial Interest, the bank will not take it as collateral. A letter from you stating that you accept this commitment 'subject to the bank not taking an Assignment of the Beneficial Interest' will be accepted by the bank." Copies of the loan commitment and Hannon's letter were telefaxed to plaintiff on October 19, 1988. Sometime later, Hannon verbally assured Blustin that he would see to it that Citicorp did not ask for the assignment of the beneficial interest.

[161 Ill.Dec. 537] herein, (a) the facts presented to Lender relating to the loan have been or are misrepresented to the Borrower."

In early November, Blustin spoke to Hannon and Skuros regarding the provision in the Citicorp loan commitment prohibiting a second mortgage. Blustin was concerned that Citicorp would refuse to make the loan, or would later "call it in" if it learned of the second mortgage defendant agreed to hold. Blustin advised Hannon that defendant wanted his mortgage to be recorded simultaneously with the Citicorp mortgage. Hannon told Blustin that the usual procedure was to record the second mortgage two or three weeks later; and Skuros informed Blustin that the Berksons did not want Citicorp to learn of the second mortgage because it was prohibited under the terms of the loan commitment. Defendant's accountant opined that defendant's interests would not be adequately protected if there was a two or three week delay in recording the second mortgage. On November 16, 1988, Blustin advised Dawidiuk and Skuros by telephone that defendant insisted that Citicorp be made aware that there would be a second mortgage on the property and that the first and second mortgages be recorded simultaneously. On November 17, Blustin sent a letter to Skuros restating defendant's position with respect to informing Citicorp of his mortgage and the simultaneous recording of both mortgages.

On November 29, Skuros sent a letter to defendant regarding defendant's "additional demands." Skuros proposed that the second mortgage temporarily be placed on the Berksons' personal residence, and that ten business days after the closing, the mortgage be transferred to the subject property. According to Skuros,

"[t]his will allow you full protection under the contract and will bypass the need to notify the lender of our additional mortgage. This protection will be in addition to the assignment of the beneficial interest over to you."

Skuros contended that this was "an adequate solution to eliminate any fears you may have," and stated that defendant's failure to cooperate with the proposal would result in Skuros declaring a breach of the contract. A copy of Skuros' letter was sent to Laura Knapp, another of plaintiff's agents.

On December 6, 1988, Blustin met with defendant, Hannon, Skuros, Dawidiuk and Knapp to discuss defendant's concerns regarding the transaction. Hannon stated that he did not believe that Citicorp would learn of the second mortgage, but if they found out and raised any objection he, Hannon, guaranteed that he would secure a first mortgage elsewhere. Blustin advised defendant that the assignment of the beneficial interest to him would adequately safeguard his rights and recommended he agree to the Berksons' proposals. Defendant responded that he wanted to think about the matter for a few days.

On December 14, 1988, Blustin sent a letter to Skuros in which he restated that defendant was willing to consummate the transaction and to hold a second mortgage as long as that mortgage was recorded immediately after closing. Blustin also advised Skuros that if the Berksons did not agree to proceed with the closing by December 19, defendant would declare that they were in default of the contract and that it was null and void. Skuros responded that...