Niemoth v. Kohls
| Citation | 524 N.E.2d 1085,121 Ill.Dec. 37,171 Ill.App.3d 54 |
| Decision Date | 20 May 1988 |
| Docket Number | 87-0099,Nos. 86-3559,s. 86-3559 |
| Parties | , 121 Ill.Dec. 37 Earl J. NIEMOTH, Individually, and Create Acquisitions, Inc., an Illinois corporation, Plaintiffs-Appellants, Cross-Appellees, v. Larry KOHLS, Robert Lutton, and Ebco Realty and Management Company, an Illinois corporation, Defendants-Appellees, Cross-Appellants. |
| Court | United States Appellate Court of Illinois |
Ira J. Bornstein, Harvey J. Barnett & Associates, Ltd., of counsel, Chicago, for plaintiffs-appellants, cross-appellees.
Bernard L. Rivkin, Braun & Rivkin, Ltd., of counsel, Chicago, for defendants-appellees, cross-appellants.
This appeal arises out of an action brought by plaintiffs, Earl J. Niemoth and Create Acquisitions, Inc. (hereinafter referred to as Niemoth), to recover damages against defendants, Larry Kohls, Robert Lutton and Ebco Realty and Management Company, based upon breach of contract, fraud, and negligent misrepresentation concerning Niemoth's purchase of a realty management business from defendants, and defendants' counterclaim to recover the amount allegedly owed by Niemoth to defendants for the purchase of the business. The circuit court of Cook County entered judgment in defendants' favor on both Niemoth's third amended complaint and defendants' counterclaim, and Niemoth appeals therefrom. Defendants have cross-appealed from the trial court's refusal to allow them to amend their counterclaim after judgment was entered to include a request for attorney fees. For the reasons set forth below, we affirm.
On September 28, 1981, Niemoth purchased the assets of Ebco, which consisted of 37 contracts to manage real estate properties on behalf of condominium associations (valued at $350,000), from defendants Larry Kohls and Robert Lutton, the owners of Ebco. Niemoth formed Create Acquisitions, Inc., to acquire and run the business, which continued to do business under the name of Ebco. According to the terms of the parties' buy-sell agreement, Niemoth purchased Ebco's assets for $400,000: he was required to pay $1,000 as earnest money, deposit $49,000 in an escrow account to be distributed upon closing, and thereafter to make monthly payments of $4,790.79, minus prorations for certain expenses paid by Niemoth on debts incurred by defendants prior to the sale of the business. If the amount of the prorations exceeded the amount of the first payment, Niemoth was to deduct them from subsequent payments. Niemoth also executed a promissory note in the amount of $300,000, pledging as collateral his beneficial interest in a land trust which held title to his condominium.
Pursuant to the agreement, Niemoth's first payment was due October 15, 1981. When he failed to make the payment, defendants, on November 9, notified Niemoth that they were instituting foreclosure proceedings on his note and would hold a sale of his condominium on December 7. On November 13, Niemoth informed defendants by letter that pursuant to the parties' buy-sell agreement he was entitled to offset $49,457, representing liabilities incurred by defendants prior to the sale of Ebco, against his first 10 monthly note payments. Niemoth thus did not make a payment on November 15 and, on December 4, he filed a "Complaint for Injunction and Other Relief" in the circuit court of Cook County, seeking to stop the sale of his condominium and requesting damages arising out of defendants' alleged breach of contract in "misrepresenting the liabilities of Ebco."
On January 27, 1982, the court entered a temporary restraining order, but conditioned it upon the monthly payment of $3,000 by Niemoth to defendants. Subsequently, based on Niemoth's failure to make the monthly payment to defendants in a timely manner (for which he was held in contempt and assessed $2,000 payable to defendants for attorney fees), the court, on April 29, 1982, ordered him to make the payments directly to the Internal Revenue Service on behalf of defendants. On May 1, 1984, trial commenced on Niemoth's third amended complaint and defendants' counterclaim. On June 3, 1986, the trial court entered judgment in defendants' favor in the amount of $355,244 pursuant to their counterclaim for the balance due under the parties' buy-sell agreement. The court also ordered, based on its findings that although defendants breached the parties' agreement, those breaches were not "substantial," that Niemoth receive credit for the termination charges of Ebco's preexisting computerized telephone system, as well as credit for two management contracts to the date of their expiration which defendants warranted were in existence at the time of the sale but which in fact had been previously cancelled. The court also ordered that Niemoth receive credit, upon proof of payment by him, for any miscellaneous debts of defendants. The court further granted a directed judgment for defendants on Niemoth's fraud count concerning the termination of two additional management contracts, holding that they were legally terminated by the owners. After entry of its order, the court denied a subsequent motion filed by defendants seeking to amend their counterclaim to include a request for attorney fees.
On appeal, Niemoth contends that: (1) the trial court's findings of fact are contrary to the manifest weight of the evidence; (2) the court improperly granted a directed judgment for defendants on his third amended complaint fraud count; (3) defendants breached the parties' agreement "first" and were therefore barred from recovering on their counterclaim; (4) the trial court incorrectly held that the breaches by defendants which it found to exist were not material breaches; and (5) defendant Kohls breached the agreement by terminating two of the management contracts after the sale of Ebco's assets. In defendants' cross-appeal, the sole issue raised concerns their alleged right to attorney fees.
It is well settled that it is within the province of a trial court to determine the credibility of witnesses, the weight to be accorded their testimony, and to resolve inconsistencies and conflicts. A reviewing court will not substitute its judgment for that of the trial court unless its findings are against the manifest weight of the evidence. (MBL (USA) Corp. v. Diekman (1983), 112 Ill.App.3d 229, 67 Ill.Dec. 938, 445 N.E.2d 418.) Here, we first observe that although Niemoth's manifest weight of the evidence argument encompasses all issues raised by him, it centers around the intended function of an "Annualized Pro Forma Income Statement" prepared by Robert Galgan, the vice president of Ebco prior to the sale of its assets. Niemoth contends that the pro forma statement represented Ebco's income and expenses for the past 12 months of actual operation of Ebco. In support of his contention, he relies on paragraph 2 of the parties' buy-sell agreement entitled "Representations and Warrantees [sic] of Seller and Purchaser," which states as follows:
Niemoth reasons that since the agreement required the 1980 and 1981 operating statements to "approximate" the "pro forma" statement, the pro forma was intended to be representative of the past financial status of Ebco during 1980 and 1981. Because the operating statements showed a large net loss, as opposed to the $86,000 profit indicated on Galgan's pro forma statement, Niemoth argues that the pro forma did not "approximate" Ebco's true financial status and therefore defendants breached the parties' agreement with respect to the warranties provision.
Niemoth further asserts that defendants' failure to inform him of Ebco's financial operating losses for the previous two years, by providing him with pertinent documents or otherwise, also was a breach of the disclosure warranty of paragraph 11, which provides as follows:
"Disclosure--The Sellers represent that they have made a full and complete disclosure of all relevant factors concerning the financial status of the Corporation, including its expenses and income."
In light of the foregoing, Niemoth contends that defendants breached the parties' agreement first--"before the ink was even dry." Niemoth also argues these points in support of his contentions that the trial court improperly granted defendants a directed judgment on his fraud count, improperly entered judgment in favor of defendants on their counterclaim, and improperly held that defendants' breaches of the parties' agreement were not substantial.
Defendants, on the other hand, contend that the pro forma statement was merely a future projection of Ebco's expenses and income and, therefore, not actionable as a fraudulent misrepresentation nor as a breach of warranty pursuant to their agreement that the operating statements approximate the pro forma statement. In support thereof, they point out that the figures in the pro forma were based upon Ebco's current bills (2 to 3 months) which were multiplied by a certain number to project the anticipated operating expenses and income for the year following Niemoth's purchase of Ebco's assets. Accordingly, defendants assert that the pro forma statement was intended to reflect their opinions solely as to anticipated expenses and income--not factual admissions or warranties of Ebco's past financial profit and loss history.
We first note that because the parties claim that each other has misstated the evidence presented in the record, we have necessarily carefully reviewed the some 2,500-page transcript and find the following facts relevant to the disposition of this issue.
At trial, it was established that Niemoth is an experienced businessman, having earned a Masters degree from the...
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