Hamming v. Murphy

• Decision Date: 06 May 1980
• Docket Number: No. 79-286,79-286
• Parties: , 39 Ill.Dec. 435 Rosemary HAMMING, Plaintiff, Counter-Defendant, Appellant, v. Thomas MURPHY and Margaret Murphy, Defendants, Counter-Plaintiffs, Appellees.
• Court: United States Appellate Court of Illinois

Page 1026

404 N.E.2d 1026

83 Ill.App.3d 1130, 39 Ill.Dec. 435

Rosemary HAMMING, Plaintiff, Counter-Defendant, Appellant, v. Thomas MURPHY and Margaret Murphy, Defendants Counter-Plaintiffs, Appellees.

No. 79-286.

Appellate Court of Illinois, Second District.

May 6, 1980.

Fuqua, Winter & Assoc., Ltd., Bernard N. Winter and W. P. Anderson, Waukegan, for plaintiff, counter-defendant, appellant.

Thomas P. Stepanich, Waukegan, for defendants, counter-plaintiffs, appellees.

NASH, Justice:

Plaintiff, Rosemary Hamming, appeals from a judgment which denied rescission of a real estate purchase contract with the defendants, Thomas Murphy and Margaret Murphy, and found in favor of defendants on their counterclaim for possession of the property and liquidated damages.

This action arose out of the purchase by plaintiff from defendants of certain lakefront property located in Wauconda, Illinois. It was improved by a four-unit apartment building, a second building containing two efficiency apartments, docks, boat house, beach, and a fast food restaurant known as "Snappy Snacks". In accordance with the terms of their preliminary option agreement, plaintiff took possession of the property on May 12, 1976, and was by its terms permitted to operate the restaurant facility until either June 15, 1976, or until the earlier execution of the purchase contract if she decided to exercise the option. During this period of time plaintiff discovered a number of defects in the condition of the property and its equipment and defendant then deposited $3,000 under an escrow agreement to be applied to necessary repairs. On June 8, 1976, the parties entered into the installment contract which is the subject of this action and, in accordance with its terms, plaintiff paid $30,000 as earnest money against the total purchase price of $185,000, the balance of which was to be paid in installments amortized over a 25-year period. Thereafter, however, plaintiff failed to make the additional $10,000 earnest payment or any of the installment payments required by the contract. On November 12, 1976, defendant sent to her a letter in which he declared the contract forfeited demanding possession within 30 days. This action by plaintiff seeking to rescind the contract followed.

As a basis for its rescission, plaintiff alleged she had been induced to enter into the agreement with defendant by misrepresentations made by him and his real estate agent as to the permitted uses under the existing zoning of the property, its condition, and the profitability of the restaurant portion of it. Both plaintiff and her daughter, Carol Pizzitero, testified in trial that during negotiations for the purchase of the property Mrs. Murphy had represented: (1) that the premises and its appliances, particularly the snack shop equipment, were in good working order; (2) that all zoning "red tape" had been taken care of so as to permit construction of apartments over the boathouse structure; (3) that a heater could be installed in the boathouse; and (4) that the snack shop, a seasonal business, had grossed $40,000 during the previous summer resulting in the receipt of $4,000 in rent by defendants under the 10 percent rental agreement held with the prior lessee of the restaurant. Plaintiff further testified that when she had requested defendant to show her the business records of the restaurant defendant informed her that the former lessee would not produce his account books as he feared a rent increase. That party, however, when called to testify in trial stated that his actual receipts for the previous summer season had required him to pay a rental of only $1,470.60 to defendant, suggesting an income of $14,706. When called as adverse witnesses, defendants denied making any of the representations attributed to them, including the statements as to the profitability of the restaurant.

The record also discloses that plaintiff had 16 years of business experience, had previously managed a similar fast-food restaurant, and, under the preliminary possession agreement between the parties, had operated this restaurant over the Memorial Day holiday.

At the close of plaintiff's case the trial court, sitting without a jury, entered judgment for defendant on plaintiff's complaint for rescission of the contract and, after considering further evidence, entered judgment for defendants on their counterclaim awarding them $30,000 in liquidated damages as provided by the contract. The court found that the plaintiff could not reasonably rely on any representation made by defendants concerning either the existing zoning laws or their application to the property. It also found that plaintiff was well aware, according to her own testimony, that there were certain defects in the premises and equipment before entering into the contract and, in fact, that provisions had been made by the parties at that time for correction of those deficiencies. As to the remaining claim of misrepresentation of profitability, the court found that Mrs. Hamming did not rely upon any such representation. It concluded that she must have been aware of, or at least alerted to, the falsity of any statements made by defendant as, according to her testimony, almost everything said about the property was determined by her to be untrue before entering into the agreement. In addition, the court noted she was experienced in business matters, had the opportunity to operate this restaurant over one of the major holidays, and, therefore, would be aware of its income producing capabilities.

It is well established that the factual findings of a trial court sitting without a jury will not be disturbed on review unless against the manifest weight of the evidence. (Pensgard v. Powers (1972), 8 Ill.App.3d 646, 290 N.E.2d 642.) The weight to be given to conflicting evidence and the credibility to be accorded the witnesses is within the province of the trial court. (Pensgard v. Powers ; see Banks v. Gregory (1959), 16 Ill.2d 227, 157 N.E.2d 12.) Such determinations will not be overturned on appeal when the record of a case is sufficient to support it. Greene v. City of Chicago (1977), 48 Ill.App.3d 502, 6 Ill.Dec. 696, 363 N.E.2d 378, aff'd 73 Ill.2d 100, 22 Ill.Dec. 507, 382 N.Ed.2d 1205.

A misrepresentation to be the basis of a charge of fraud must contain the following elements: (1) it must be a statement of material fact, as opposed to opinion; (2) it must be untrue; (3) the party making the statement must know or believe it to be untrue; (4) the person to whom the statement is made must believe and rely on it, and have a right to do so; (5) it must have been made for the purpose of inducing the other party to act; and (6) the reliance by the person to whom the statement is made must lead to his injury. (Mother Earth, Ltd. v. Strawberry Camel, Ltd. (1979), 72 Ill.App.3d 37, 48, 28 Ill.Dec. 226, 390 N.E.2d 393, 403.) While the trial court did not specifically determine whether or not the representations attributed to defendant were made by him, it did conclude that, if made, plaintiff did not act in reliance thereon as to either the condition of the premises or the profitability of the business. In our view these findings are well supported by the evidence and we will not disturb them.

It is not disputed that prior to entering into the contract plaintiff was aware that the basement needed repair; that the water heater did not function; that an exhaust fan failed to operate; that the ice machine leaked; and that the plumbing was worn and leaked. The parties had in fact entered into the escrow agreement we earlier described under which defendants provided $3,000 towards making needed repairs. As stated in Broberg v. Mann :

"(T)he person asserting that he acted to his detriment in reliance upon a fraudulent misrepresentation must establish his right to rely thereon. He may not enter into a transaction closing his eyes to available information, and then charge he has been deceived by the words or conduct of the other party." (1965), 66 Ill.App.2d 134, 141, 213 N.E.2d 89, 92.

In considering plaintiff's contention she relied upon a misrepresentation of the restaurant income, we note she was an experienced business woman, had previously managed a similar restaurant, and had an opportunity to operate this restaurant, albeit for a short time, before deciding to purchase it. Under the circumstances of this case, the evidence was sufficient to warrant the finding by the trial court that plaintiff was not induced to act in reliance on any representation of profitability made by defendant but made her decision to purchase the property was based upon her knowledge of its operation and business experience. An analogous situation was presented in Schmidt v. Landfield (1960), 20 Ill.2d 89, 94, 169 N.E.2d 229, 232, where the court held:

"(A) party is not justified in relying on representations made when he has ample opportunity to ascertain the truth of the representations before he acts. When he is afforded the opportunity of knowing the truth of the representations he is chargeable with knowledge; and if he does not avail himself of the means of knowledge open to him he cannot be heard to say he was deceived by misrepresentations."

We do not suggest that an experienced business person may not justifiably rely on false statements of profitability made by one with superior knowledge of the facts as circumstances may well exist permitting such reliance. (MacAuley v. Rickel (1968), 96 Ill.App.2d 283, 238 N.E.2d 603; Mother Earth, Ltd. v. Strawberry Camel, Ltd. (1979), 72 Ill.App.3d 37, 28 Ill.Dec. 226, 390 N.E.2d 393; see Soules v. General Motors Corp. (1980), 79 Ill.2d 282, 37 Ill.Dec. 597, 402 N.E.2d 599.) In the circumstances of the present case, however, we cannot say that the trial court's finding on the matter of reliance was against the manifest weight of the evidence.

Plaintiff further contends that the trial court...