Terracom Development Group, Inc. v. Coleman Cable & Wire Co.

• Decision Date: 06 July 1977
• Docket Number: No. 76-1278,76-1278
• Citation: 365 N.E.2d 1028,50 Ill.App.3d 739
• Parties: , 8 Ill.Dec. 642 TERRACOM DEVELOPMENT GROUP, INC., a corporation, Plaintiff-Appellant, v. COLEMAN CABLE AND WIRE COMPANY, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 1028

365 N.E.2d 1028

50 Ill.App.3d 739, 8 Ill.Dec. 642

TERRACOM DEVELOPMENT GROUP, INC., a corporation, Plaintiff-Appellant, v. COLEMAN CABLE AND WIRE COMPANY, Defendant-Appellee.

No. 76-1278.

Appellate Court of Illinois, First District, First Division.

July 6, 1977.

Donald L. Johnson and William Biederman, Chicago (Marks, Katz, Walker & Blatt, Chicago, of counsel), for plaintiff-appellant.

Peter C. John, Chicago (Isham, Lincoln & Beale, Chicago, of counsel), for defendant-appellee.

GOLDBERG, Presiding Justice.

Terracom Development Group, Inc. (plaintiff) brought action to require Coleman Cable and Wire Company (defendant) to perform specifically an alleged contract for the sale of real estate by defendant. At the conclusion of plaintiff's case, the trial judge entered judgment in favor of defendant. Plaintiff appeals.

The evidence shows that defendant owned a large parcel of improved industrial real estate in River Grove, Illinois. On November 24, 1975, defendant retained the services of a broker to sell the property for $3 million dollars as part of a transaction whereby a buyer would lease the property back to defendant. The agreement contained a general statement of acceptable terms for the proposed lease such as rental of $1.20 per square foot computed on a basis of 280,000 square feet with rent adjustment after 10 years in event of change in the Consumer Price Index; defendant to accept a second mortgage in the amount of $800,000 with interest only payable annually at 9 percent and with cancellation of the mortgage in the event defendant should default on the lease.

The services of the broker were rendered by Rodger Chenore who brought the matter to the attention of plaintiff. On November 26, 1975, Richard C. Haskell, vice president of plaintiff, addressed a letter to the broker stating, "we are prepared to enter into a binding contract on the following terms and conditions." The letter stated that if defendant was in accord with these conditions "please have them acknowledge below and we will proceed immediately to have a standard form contract drawn up and executed." The letter contained statements concerning a number of items of importance in a transaction of this type and magnitude including price, provision for the net lease back to defendant; a first purchase money mortgage to be obtained by plaintiff as buyer with a second mortgage of $800,000 with interest at 7 percent per annum payable monthly, due 10 years and 6 months from date of closing and also provisions for closing, broker's commission and other such matters. The letter closed with the statement, "In the event that this offer is acceptable to the sellers, please have them acknowledge on the space below and we will proceed to draw a formal contract." The offer was to be accepted within 8 days. The document as written was never formally accepted by defendant.

It would be virtually impossible, and it is unnecessary, to detail in this opinion each and all of the steps taken by both sides in this rather complicated transaction. The negotiations continued between the parties for a number of months, until February 1976. There were many meetings between the parties and their attorneys and many documents and revised drafts passed between them. The broker also played an active role in the negotiations. The details of these various proposals varied from time to time. For example, it is apparent, as above noted, that there were variations between the agency agreement of November 24, 1975, and the letter addressed to the broker by plaintiff on November 26, 1975. These variations and others of greater or lesser importance continued throughout the negotiations which ensued.

On December 11, 1975, after the 8-day period specified in plaintiff's letter of November 26, 1975, defendant, acting by Ted E. Gaty, its president, wrote to Rodger Chenore, the broker, and stated that defendant was prepared to accept the offer in plaintiff's letter of November 26, 1975, upon several conditions. The letter set forth various conditions relating to price of the premises; the net lease; the mortgage provisions; the broker's commission and certain of the closing costs. This letter also contained certain language here reproduced in full:

"This letter of intent is not binding upon us in any way nor is the conditional offer contained herein binding upon us except to the extent that it reflects our intent to enter into a definitive written agreement with respect to the sale of the property described above upon the terms and conditions herein contained. This letter of intent is expressly conditioned upon our entering into a mutually satisfactory definitive written agreement in the form satisfactory to our counsel.

"Unless the definitive written agreement referred to above is duly executed in writing and signed by the parties on or before January 15, 1976, regardless of the reason for such agreement not having been so executed, neither party shall be under any obligation to the other irrespective of this letter and irrespective of any negotiations, agreements, or understandings heretofore or hereafter existing between the parties, it being understood that no contractual relationship shall exist between the parties unless and until the definitive agreement shall have been executed in writing.

"If the foregoing is acceptable, please sign a copy of this letter enclosed for that purpose, return it to us, and we will instruct our counsel to prepare a draft of the definitive agreement for review by your counsel and for discussion by both of us."

This letter was signed by defendant and the broker but was never signed by plaintiff.

On December 12, 1975, plaintiff wrote defendant that plaintiff was prepared to accept the "counter proposal (sic) dated December 11, 1975 * * *" subject to certain changes such as modification of the interest rate and a change in the disposition of the rental increase at the beginning of the tenth year of the lease. This letter was duly signed by Richard C. Haskell, vice president of plaintiff, and on December 15, 1975, was signed as "Accepted" by Ted E. Gaty, president of defendant. The testimony before the trial court brought out all of these documents and many more which passed between the parties and their attorneys and also brought out various oral negotiations that continued from time to time. However, as we view the situation before us, the contractual rights of these parties should be and they are governed by the so-called counterproposal of defendant, dated December 11, 1975, as amended and accepted by the letter from plaintiff, dated December 12, 1975, including acceptance of the latter document by defendant on December 15, 1975. In view of the importance of defendant's letter, dated December 11, 1975, it is necessary to consider its legal significance.

The courts of Illinois have had previous occasions to deal with agreements of this type in which the contracting parties specifically provide that the preliminary documents signed by them are not binding upon either except to the extent that such documents evidence the intention of the parties not to be bound to any agreement until both have executed a mutually satisfactory definitive agreement. This is virtually the language contained in the letter of December 11, 1975, with the further statement, "that no contractual relationship shall exist between the parties unless and until the definitive agreement shall have been executed in writing." In Baltimore & Ohio Southwestern R.R. Co. v. People ex rel. Allen (1902), 195 Ill. 423, 428, 63 N.E. 262, 263, the supreme court quoted the following language from 7 American and English Encyclopedia of Law, p. 140 (2d ed. 1898):

" 'Where the parties make the reduction of the agreement to writing, and its signature by them, a condition precedent to its completion, it will not be a contract until that is done. And this is true although all the terms of the contract have been agreed upon. But where the parties have assented to all the terms of the contract, the mere reference to a future contract in writing will not negative the existence of a present contract.' "

This early statement of the law is not the last enunciation of the principle by the courts of Illinois. In Brunette v. Vulcan Materials Co. (1970), 119 Ill.App.2d 390, 256 N.E.2d 44, leave to appeal denied, 43 Ill.2d 397, this court considered a suit for specific performance of an alleged contract for sale of real estate. The court affirmed a ruling of the circuit court dismissing the action. ¹ The parties exchanged a number of letters during which defendant, the alleged seller, referred to the need of approval of the agreement by its corporate board of directors, the execution of articles of agreement and the fact that the sale was subject to the drafting of an acceptable contract. After describing this interchange of correspondence "as mere steps in a chain of negotiations" and stating that the law applicable thereto was clear, this court held (119 Ill.App.2d 390, 395, 256 N.E.2d 44, 46):

"Where the reduction of an agreement to writing and its formal execution is viewed by the parties as a condition precedent to the vesting of rights and duties, there can be no contract until then, even if the actual terms have been agreed upon. Baltimore & Ohio S.W. Ry. Co. v. People ex rel. Allen, 195 Ill. 423, 63 N.E. 262; Calo, Inc. v. AMF Pinspotters, Inc., 31 Ill.App.2d 2, 176 N.E.2d 1; Stephens v. Nixon, 338 Ill.App. 275, 86 N.E.2d 278."

More recently we note the citation of Baltimore & Ohio Southwestern R.R. Co. by this court in S. N. Nielsen Co. v. Nat'l Heat & Power Co. (1975), 32 Ill.App.3d 941, 946, 337 N.E.2d 387. There, this court approved dismissal by the trial court of an action for damages upon an alleged contract. The situation involved a letter of intent sent by a general contractor to a proposed subcontractor which stated, "Formal contract will be issued in the...