Lundberg v. Church Farm, Inc.

• Decision Date: 31 December 1986
• Docket Number: No. 2-85-1030,2-85-1030
• Citation: 151 Ill.App.3d 452,502 N.E.2d 806
• Parties: , 104 Ill.Dec. 309 Vern LUNDBERG and Gail Lundberg, d/b/a Pam Dee L. Farm, Plaintiffs-Appellees, v. CHURCH FARM, INC., a Corporation, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

Page 806

502 N.E.2d 806

151 Ill.App.3d 452, 104 Ill.Dec. 309

Vern LUNDBERG and Gail Lundberg, d/b/a Pam Dee L. Farm, Plaintiffs-Appellees, v. CHURCH FARM, INC., a Corporation, Defendant-Appellant.

No. 2-85-1030.

Appellate Court of Illinois,

Second District.

Dec. 31, 1986.

Murphy, Timm, Lennon, Spesia & Ayers, Joliet, for defendant-appellant.

Alexander & Cicero, P.C., Rockford, Peter Alexander, Rockford, for plaintiffs-appellees.

Justice UNVERZAGT delivered the opinion of the court:

Defendant, Church Farm, Inc., appeals from the judgment of the circuit court of Winnebago County awarding the plaintiffs $147,000 following a jury verdict in their favor in this breach of contract action.

The facts in this case can fairly be summarized as follows. Gilbert Church and a silent partner are the sole owners of defendant Church Farm, Inc. (Church Farm), a corporation located in Manteno and engaged in the business of breeding thoroughbred race horses. Gil Church also owns an unrelated business called Acme Propane, Inc. (Acme). Plaintiffs, Vern and Gail Lundberg, also breed thoroughbred race horses as Pam Dee L. Farm in Rockford. Herb Bagley was the farm manager at Church Farm. Church Farm purchased a very well bred stallion called Imperial Guard for approximately $700,000, and in February, 1982, Gil Church placed a full center-page ad in the Racing Form, a publication directed to the horse breeding and racing community, advertising Imperial Guard for breeding and/or syndication. The ad listed the cost of breeding rights, convertible to a single syndication share, as $50,000, and directed all inquiries to "Herb Bagley, Manager".

Vern Lundberg spoke with Herb Bagley by telephone frequently and met with him several times at Church Farm to discuss Imperial Guard. On April 10, 1982, Lundberg and Bagley executed two agreements, intended as a single contract, on preprinted forms. The first document, the breeding rights package, entitled the buyer to three breeding rights to Imperial Guard in the 1982 and 1983 breeding seasons, subject to approval of the mares "by CHURCH FARMS, INC. where IMPERIAL GUARD stands, or his proper representative." The package was to convert to one share upon the syndication of Imperial Guard in 1984. (Upon syndication, ownership of the horse would be divided into 40 shares, so that an owner of one share essentially would own a 1/40th interest in the horse, and would be entitled to name one of approximately 40 mares to be bred to the stallion each year.) In addition, Herb Bagley added the following language by hand to the signature page of the breeding rights package:

"I Herbert F. Bagley here by agree to guarantee to Vern Lundberg 6 live foals in the first two years of this contract.

H. Bagley."

The price of the package was $50,000--$25,000 due immediately, and $25,000 due on January 15, 1983, with 12% interest. The breeding rights package contained signature lines for both Gilbert Church (CHURCH FARM, INC. Gilbert G. Church, Pres.) and Herb Bagley (Herbert F. Bagley Farm Mgr.) as sellers. Bagley signed his own signature line, and wrote "Gilbert G. Church by H. Bagley" on Church's line. Vern Lundberg also signed the document.

The second document, the syndicate agreement, provided that the horse would "stand" at Church Farm, Inc. unless and until 50% of the shareholders voted to move him elsewhere. The other provisions of that document are not relevant here. The syndicate agreement provided only one signature line for the seller which read "CHURCH FARM, INC." Herb Bagley signed on this line as "Church Farm Inc. H. Bagley Mgr." Vern Lundberg and a witness also signed this document. Vern Lundberg then gave Bagley a $25,000 check which was deposited in Church Farm's account by Gil Church's secretary at Acme, where Church Farm's records were kept.

During the 1982 breeding season, Lundberg bred four mares to Imperial Guard, which resulted in the birth of one live foal. Late in 1982, between the 1982 and 1983 breeding seasons, Gil Church moved Imperial Guard to Oklahoma without giving notice to the plaintiffs. When the Lundbergs learned of the move, they complained to Church, who offered to transport their mares to Oklahoma with his own, although they would have to pay their own transportation costs. In addition, he offered to pay the $500 "chute fee" charged in Oklahoma for unloading horses. The Lundbergs refused. The horse remained in Oklahoma over their objection throughout the 1983 breeding season. The Lundbergs did not pay the $25,000 due on the contract in January, 1983, claiming that Church breached the contract by moving the horse. They filed suit in September 1983. Church Farm filed a counterclaim for the remaining payment.

At trial, Gil Church testified as an adverse witness that he had approved the ad listing Bagley as manager, that Bagley was in fact his farm manager and had lived on the farm, but was authorized only to present the preprinted contracts to potential buyers. Bagley was not authorized to sign the contracts for Church Farm or to change or add terms. Church admitted that the only way potential buyers would know how to contact him (Church) as owner, would be if Herb Bagley told them to do so. He stated that Bagley had left his employment for unrelated reasons shortly after the Lundberg contract was signed. He testified that six or seven breeding rights packages had been sold to other purchasers on the preprinted forms, but that no terms had been added or changed on those contracts and they were signed by Church himself, not Bagley. He was able to produce only two of those documents, however, stating that he had not kept copies of the others. He stated that, while he knew Lundberg and Bagley had signed a contract, he assumed that it contained only the preprinted terms and did not see the signed documents until the Lundbergs filed suit. In addition, he stated that in 1983 and 1984, he sold six syndicate shares in Imperial Guard for $125,000 each.

Vern Lundberg testified that he dealt exclusively with Herb Bagley, and never met or saw Church until five months after the contract was signed. He testified that Bagley lived on Church Farm and was the only person there to deal with. Most of Lundberg's testimony related to statements made to him by Bagley, who was not called as a witness by either party. Bagley told Lundberg that, because the horse was to be registered in Illinois, he preferred Illinois purchasers and would therefore guarantee six live foals to Lundberg, regardless of how many mares would have to be bred to Imperial Guard in the 1982 and 1983 seasons to accomplish that. In addition, he told Lundberg that the horse was to remain in Illinois until syndication in 1984 and that the contract language requiring approval of mares by "CHURCH FARMS, INC. where IMPERIAL GUARD stands," guaranteed that the horse would remain at Church Farm. Bagley also told Lundberg that he (Bagley) was the syndicate manager.

Each party called a horse breeding expert as a witness. Both experts stated that the term "stands" simply refers to the place the horse is located. Plaintiffs' expert stated that a manager in the business ordinarily has authority to negotiate and sign contracts for the owners. Defendant's expert stated that a manager does not necessarily have that authority. She also stated that a general manager usually has more authority than a farm manager. Plaintiffs' expert valued five foals sired by Imperial Guard at between $40,000 and $50,000, cumulatively, while defendant's expert valued them at between $10,000 and $30,000, cumulatively, and valued Imperial Guard at only $100,000.

Defendant raises four arguments on appeal: (1) that Vern Lundberg's testimony regarding out-of-court statements made to him by Herb Bagley was inadmissible hearsay; (2) that admission of testimony regarding Bagley's guarantee that Imperial Guard would remain in Illinois violated the parol evidence rule; (3) that the jury's verdict was contrary to the manifest weight of the evidence, and (4) that the court's instructions to the jury were incomplete and improper. We affirm the circuit court's decision.

Defendant first argues that out-of-court statements made by an adverse party's agent are not admissible under the admission exception to the hearsay rule unless the proponent first conclusively establishes that the declarant was in fact the agent of an adverse party and that the statements made were within the scope of his authority. See Chmieleski v. Venture Stores, Inc. (1982), 106 Ill.App.3d 312, 62 Ill.Dec. 422, 436 N.E.2d 4; Kapelski v. Alton &amp Southern R.R. (1976), 36 Ill.App.3d 37, 343 N.E.2d 207.

Hearsay is "testimony of an out-of-court statement offered to establish the truth of the matter asserted therein, and resting for its value upon the credibility of the out-of-court asserter." (People v. Rogers (1980), 81 Ill.2d 571, 577, 44 Ill.Dec. 254, 411 N.E.2d 223; People v. Camp (1984), 128 Ill.App.3d 223, 228-29, 83 Ill.Dec. 514, 470 N.E.2d 54.) If the statement is offered to demonstrate something other than the truth of the matter asserted, its value does not rest on the credibility of the declarant, and the testimony is admissible. (128 Ill.App.3d 223, 230, 83 Ill.Dec. 514, 470 N.E.2d 54; Reynolds v. Alton & Southern Ry. Co. (1983), 115 Ill.App.3d 88, 98, 70 Ill.Dec. 929, 450 N.E.2d 402.) One authority states that "the fact that the statement was made is relevant for its effect on the listener without regard to the truth of the matter asserted." Cleary & Graham's Handbook of Illinois Evidence, § 801.5, at 517 (4th ed. 1984).

The intentions of the parties are clearly relevant in the formation of a contract. (See, e.g., Hackett v. Ashley (1979), 71 Ill.App.3d 179, 186-87, 27 Ill.Dec. 434, 389 N.E.2d 246.) And where the state of mind of the declarant (71 Ill.App.3d 179, 186-87, 27 Ill.Dec. 434, 389 N.E.2d 246), or of the listener (see, Heller v. Jonathan Investments, Inc. (1985), ...