Schwaner v. Belvidere Medical Bldg. Partnership

• Decision Date: 18 May 1987
• Docket Number: Nos. 2-86-0296 and 2-86-0348,s. 2-86-0296 and 2-86-0348
• Citation: 155 Ill.App.3d 976,508 N.E.2d 522,108 Ill.Dec. 361
• Parties: , 108 Ill.Dec. 361, 4 UCC Rep.Serv.2d 785 Robert W. SCHWANER, John Pavlopoulos, Nick Scarlatis, and M. Paul Dommers, Plaintiffs-Appellees, v. BELVIDERE MEDICAL BUILDING PARTNERSHIP, Lester G. Detterbeck, Lawrence B. Irwin, and Andrea D. Hall, Defendants-Appellants.
• Court: United States Appellate Court of Illinois

Page 522

508 N.E.2d 522

155 Ill.App.3d 976, 108 Ill.Dec. 361,

4 UCC Rep.Serv.2d 785

Robert W. SCHWANER, John Pavlopoulos, Nick Scarlatis, and M Paul Dommers, Plaintiffs-Appellees, v. BELVIDERE MEDICAL BUILDING PARTNERSHIP, Lester G Detterbeck, Lawrence B. Irwin, and Andrea D. Hall Defendants-Appellants.

Nos. 2-86-0296 and 2-86-0348.

Appellate Court of Illinois Second District.

May 18, 1987.

Holmstrom & Green, Bradley T. Kock, Kim M. Casey, Rockford, for defendants-appellants.

Early Collison Tousey & Regan, John F. Early, Rita Farrell Sullivan, Elgin, for plaintiffs-appellees.

Presiding Justice LINDBERG delivered the opinion of the court:

Defendants, Belvidere Medical Building Partnership and the individual partners, Lester G. Detterbeck, Lawrence B. Irwin and Andrea D. Hall, appeal from a $91,813.70 summary judgment entered in favor of M. Paul Dommers. We have allowed the parties' motion to dismiss as to all plaintiffs except Dr. M. Paul Dommers, the only plaintiff remaining in the case. Defendants further appeal the denial of their motions to reconsider and for leave to file an amended counterclaim. Plaintiff appeals from the order denying attorney fees. The issues raised on appeal are: (1) whether the trial court erred in granting plaintiff's motion for summary judgment; (2) whether the trial court erred in denying defendants' motions to reconsider and for leave to file an amended complaint; and (3) whether the trial court erred in denying plaintiffs' motion for attorney fees. We affirm in part, reverse in part and remand.

This action arises from four promissory notes totalling $250,000 given by defendants to four individuals including plaintiff, M. Paul Dommers, as part of the purchase price for a medical office building in Belvidere. In 1981, plaintiff and the other partners of the Belvidere Medical and Office Building Partnership executed a written contract for sale of the building to defendants. The contract was negotiated by plaintiff on behalf of the sellers, and Lawrence Irwin on behalf of the buyers, defendants herein. The contract provided inter alia:

"PURCHASE PRICE: The price is $1,300,000.00 payable as follows:

(a) $30,000.00 upon execution of this contract;

(b) The payment of $270,000.00 at the time of closing;

(c) The payment of $1,000,000.00 at the time of closing.

The price allocation for the purchase price is as follows:

(a) Building--$900,000.00;

(b) Improvements--$200,000.00;

(c) Lease Guarantee--$115,000.00;

(d) Finance Guarantee--$85,000.00."

The contract further provided:

"This contract is further contingent upon the SELLER [Belvidere Medical and Professional Building Partnership] providing PURCHASER a second mortgage in the amount of $250,000.00, with interest not to exceed 12% per annum, to be amortized over 29 years, payable monthly, with no loan costs."

The buyer's executed four promissory notes in favor of the buyer's as security for the $250,000 second mortgage. Each promissory note, including that given to plaintiff, provided the following:

"In case of any default in the payment of any installment, the holder of this note may, without notice, declare the entire balance immediately due and payable, and thereafter said balance shall bear interest at the rate of 17% per year."

The note was secured by a trust deed for the real estate occupied by the medical building and was personally guaranteed by each one of the buyers.

Further, the note contained the following provision:

"The monthly payments of this obligation shall be abated in the event that a 1980 or 1981 tax bill is issued on the property underlying the Belvidere Medical and Professional Building until such time as the amount of the tax bill or bills is credited. The 1981 tax bill shall be prorated as of July 24, 1981. The undersigned shall use the funds so abated in the payment of said taxes."

Defendants did not receive a real estate tax bill for the year 1981. Lawrence Irwin in his deposition testified that he and the other defendants were told that the medical building, the subject of the transaction, "was a nontaxed building because it was on the hospital's [St. Joseph Hospital of Belvidere's] land." Eventually in 1983, defendants were apprised of the fact that the building and the underlying real estate were sold for nonpayment of real estate taxes. This information was communicated to defendants two months prior to the expiration of the period of redemption. Defendants then exercised their right to redeem the real estate by paying the entire amount of delinquent real estate taxes plus a substantial penalty. Real estate taxes for the year 1981 were $22,244.16 plus a penalty assessment of $8,010.90. The sellers' prorated portion of the taxes without penalty was $12,431.70.

The other provisions of the sale contract which are the subject of this case are:

"REPRESENTATIONS BY SELLER: The SELLER warrants and represents as follows:

(a) The water, sewer, plumbing, heating and electrical systems in the building and covered corridor on the premises are in working order and the roof is free from leaks;

* * *

* * *

CONTINGENCIES: This agreement is specifically contingent upon execution of the following leases with two month security deposits paid in advance on or before the date of closing:

* * *

* * *

(b) Paul Dommers' lease of 2,515 square feet at $12.00 a square foot for a five year term, with yearly cost of living increases;

(c) American Institute of Orthomolecular Research, Inc. lease with a personal guarantee of Tom Jaunch of 3,689 square feet at $12.00 a square foot for a five year term, with yearly cost of living increases.

* * *

* * *

Failure to meet any of these contingencies renders this agreement null and void and purchaser's deposit or earnest money shall be returned forthwith."

The contract also contained an integration clause.

Plaintiff and defendants, through Lawrence B. Irwin, closed on the sale of the building on July 24, 1981. The closing statement provided inter alia:

"Seller hereby warrants and represents that all building expenses incurred on or before the date of closing will be paid by seller. Buyer represents and warrants that they will pay all building expenses incurred after the closing. Seller further represents and warrants that there are no contractual expenses extending beyond closing."

Contrary to this warranty given at the time of closing, there were outstanding bills on the property in the amount of $16,946.96 owed to Commonwealth Edison, which defendants paid.

On November 14, 1981, defendant, Lawrence Irwin, wrote a letter to plaintiff's attorney informing him that because of the Commonwealth Edison outstanding bills which defendants had decided to pay in $2,000 monthly installments, the monthly installments on the notes would be reduced by a similar amount. According to defendants, this amounted to $0 being owed to plaintiff until the outstanding Commonwealth Edison debt would be discharged. Plaintiff did not respond directly to this letter. On April 25, 1983, plaintiff, through his attorney, sent defendants a letter informing them they were in default of the note, and, therefore, the acceleration clause was invoked and the notes were called.

On August 22, 1983, the now-dismissed plaintiffs, Schwaner, Pavlopoulos and Scarlatis, filed a complaint in the circuit court of Winnebago County alleging that defendants defaulted on their notes and demanding judgment against defendants. Plaintiff Dommers was added to the action in an amended complaint filed January 20, 1984. On October 6, 1983, defendants filed a three-count counterclaim. Count I of the counterclaim alleged a breach of the sales contract in that, despite plaintiffs-counterdefendants' express warranty, that there were no outstanding utility bills at the time of closing, defendants-counterplaintiffs had to satisfy outstanding Commonwealth Edison bills. Defendants-counterplaintiffs also alleged that the building had to undergo major repairs, and that they had to pay considerable sums of money for these repairs in contravention to plaintiffs-counterdefendants' contract warranty that various systems in the building were in good working order. Count II of the counterclaim was for misrepresentation or fraud. In count III, defendants-counterplaintiffs alleged that had they been aware of the misrepresentations and the consequential detrimental cash flow, they would not have entered into the transaction, and, therefore, they prayed for a judgment of rescission of the contract. Also, on October 6, 1983, defendants filed affirmative defenses to original plaintiffs' complaint based on: (1) failure of consideration; (2) the contention that the transaction was either void or voidable as a matter of law; and (3) a right to set off.

On February 14, 1985, plaintiff filed a motion for summary judgment on the amended complaint and on defendants' affirmative defenses and counterclaim. The deposition of defendant, Lawrence Irwin, was incorporated by reference. The motion was supported by affidavit by plaintiff, Dr. M. Paul Dommers. Defendants filed an answer and accompanying exhibits consisting of the sales contract, the trust deed, the notes and the leases.

On November 14, 1985, the trial court granted plaintiff's motion for summary judgment on all counts and ordered that plaintiff's counsel submit a draft order showing a computation of the damages including attorney fees. On December 12, 1985, defendants filed an objection to the proposed judgment order and motions to reconsider and for leave to file an amended counterclaim. Count I of the proposed amended counterclaim for fraud in the inducement included additional allegations regarding certain contingencies contained in the sales contract, specifically the lease with the American Institute of Orthomolecular Research (Orthomolecular). Defendants-counterplaintiffs alleged that Orthomolecular defaulted under the lease agreement soon after the closing leaving...