Wiczer v. Wojciak

• Decision Date: 31 March 2015
• Docket Number: No. 1–12–3753.,1–12–3753.
• Citation: 30 N.E.3d 670
• Parties: Elliot S. WICZER and Wiczer and Zelmar, LLC, Plaintiffs, v. Larry WOJCIAK, Details, LLC, George Pappas, Steven Kolber, Steven Winokur, Timothy Opfer, James Stuckmann, and Michael Krabbe, Defendants (Steven Kolber, Steven Winokur, Timothy Opfer, James Stuckmann, and Details, LLC, Cross–Plaintiffs–Appellees, v. Larry Wojciak, Cross–Defendant–Appellant).
• Court: United States Appellate Court of Illinois

30 N.E.3d 670

Elliot S. WICZER and Wiczer and Zelmar, LLC, Plaintiffs

v.Larry WOJCIAK, Details, LLC, George Pappas, Steven Kolber, Steven Winokur, Timothy Opfer, James Stuckmann, and Michael Krabbe, Defendants (Steven Kolber, Steven Winokur, Timothy Opfer, James Stuckmann, and Details, LLC, Cross–Plaintiffs–Appellees

v. Larry Wojciak, Cross–Defendant–Appellant).

No. 1–12–3753.

Appellate Court of Illinois, First District, Third Division.

March 31, 2015.

Foreman Friedman, PA, of Northbrook (John M. Sheldon, of counsel), for appellant.

Bruce R. Entman, of Buffalo Grove, for appellees.

OPINION

Presiding Justice PUCINSKI delivered the judgment of the court, with opinion.

¶ 1 At issue in this case is the disposition of earnest money held by plaintiff Elliot Wiczer pursuant to the sale of assets and real estate by cross-plaintiff-appellee, Details, LLC (Details), which is an Illinois limited liability company. Details is a car wash business and also owns the real estate at the site of the car wash. Plaintiff Elliot Wiczer was at all relevant times an attorney licensed in Illinois and held the funds. Plaintiff Wiczer & Zelmar, LLC, is a law firm in which Wiczer is a partner. Defendant and cross-defendant-appellant Larry Wojciak sought to purchase Details. Plaintiff Wiczer was the attorney for Wojciak and “Details Acquisition, LLC,” which was an entity to be formed by Wojciak and listed as the purchaser. Attorney Bernard Wiczer was also Wojciak's and Details Acquisition's attorney. Cross-plaintiff-appellees Steven Kolber, Steven Winokur, Timothy Opfer, and James Stuckmann were all members of Details and individual depositors of the funds held by Wiczer.

¶ 2 An escrow agreement was executed by the individual Details member defendants but not by Details, LLC, and was not executed by Wojciak individually or on behalf of any entity owned or managed by him. This escrow agreement provided that Details, LLC, would provide the earnest money, even though it was the seller, because the business was in distress and owed more money than Wojciak was willing to pay for the property and the business. The individual Details member defendants deposited the earnest money with Wiczer as temporary escrow agent. The asset purchase agreement for the real estate and car wash business was executed later and was executed by Details, LLC, as seller, and by Wojciak on behalf of “Details Acquisition, LLC,” an entity not in existence at that time and later formed under another name, as the buyer. The asset purchase agreement provided that the buyer would deposit all of the earnest money in accordance with an escrow agreement to be attached to the contract, but no escrow agreement was ever attached to the contract. Wojciak canceled the contract and the transaction never closed. Wojciak did not deposit any of the earnest money held by Wiczer. The circuit court ordered that Wiczer return the earnest money to the individual Details defendants who had deposited the earnest money. Wojciak claims entitlement to the funds under the escrow agreement.

¶ 3 We hold that the asset purchase agreement was properly executed by the buyer and seller and it incorporated by reference an escrow agreement, but (1) the escrow agreement was never fully executed by the correct parties to the transaction; (2) the terms of the escrow agreement conflicted with the escrow provision in the asset purchase agreement; and (3) the conditions of the escrow were never satisfied. Thus, there was no effective earnest money escrow agreement, yet the individual Details member defendants deposited earnest money in escrow and there was no breach of the sales contract, as the buyer decided to cancel the contract. Under these circumstances, the correct result is that the escrow funds must be returned to the depositors as the circuit court ordered.

¶ 4 BACKGROUND

¶ 5 In the spring of 2009, Wojciak learned of the Details car wash owners' intention to sell the car wash business and the real estate on which the business operated. Wojciak contacted Details' managing partner, Michael Krabbe, and met with Krabbe at the car wash and discussed the status of the car wash and its multiple financial problems, the finances of the company and the possibility of Wojciak purchasing the car wash. In late June or early July of 2009, Wojciak met with Krabbe and the Details defendant members because of his knowledge of the car wash's financial problems. According to Winokur's testimony, Details was about a month or two behind on its debt financed through Barrington Bank and Trust. Details was indebted to Barrington Bank And Trust for $2.15 million for financing the car wash. Wojciak and the Details defendants agreed upon the purchase price of $2.15 million, which would cover the debt. Wojciak only offered to pay $1,750,000, however, and so the Details defendants agreed to pay $400,000 in earnest money to cover the difference, to limit their exposure on the Barrington Bank And Trust note. Although this circumstance was unusual in that the sellers, as opposed to the buyer, were making an earnest money deposit, Wojciak wanted to ensure that the sale closed. On July 2, 2009, Wojciak and Details entered into a letter of intent contemplating the possibility that the parties would enter into written agreements. The letter of intent also provided for an escrow deposit and an escrow closing with Ticor Title Insurance Company.

¶ 6 The earnest money escrow agreement (escrow agreement) was prepared before the asset purchase agreement. The escrow agreement is attached to and incorporated in the cross-plaintiff-appellees' cross-complaint and in the Wojciak first amended counter-cross-complaint. The seller in the escrow agreement was specified as “Details, LLC,” and the buyer was specified as “Details Acquisition, LLC,” and Illinois limited liability company “in formation,” to be formed by Wojciak. The escrow holder was listed as Ticor Title Insurance Company. Other parties to the escrow agreement were the parties' respective attorneys. Details Acquisition LLC was never formed by Wojciak. The temporary escrow holder was Elliot Wiczer. Attorney Barry Rosenbloom represented Details and its members Kolber, Winokur, Opfer, and Stuckmann, and reviewed the escrow agreement, reviewed the escrow agreement with the Details member defendants, and advised them to sign the escrow agreement.

¶ 7 Only the Details individual members Kolber, Winokur, Opfer, and Stuckmann signed the escrow agreement, in their individual capacities. Details did not execute the escrow agreement. No Details member signed on behalf of Details. Upon receipt of executed signature pages to the escrow agreement, Rosenbloom forwarded them to Wiczer. Wojciak himself, however, did not execute the escrow agreement. “Details Acquisition, LLC,” also did not execute the escrow agreement. Ticor Title Insurance Company did not execute the escrow agreement.

¶ 8 The escrow agreement required deposit of earnest money in escrow by the seller and return of the earnest money to the buyer, instead of the seller, if the transaction did not close. Section III of the escrow agreement provided the following regarding earnest money:

“Seller deposits herewith as an initial Earnest Money deposit the sum of $300,000.00 cash. Seller will deposit the additional sum of $100,000.00 as Earnest Money hereunder. Purchaser will deposit the balance of the purchase price, $1,750,000.00, plus or minus prorations from Purchaser's Credit Facility pursuant to the terms hereof and the Agreement.”

¶ 9 Section V(C) sets forth the following:

“C. Upon receipt of notice from Purchasers' Counsel that Purchaser has received the Environmental Phase I Audit and such other documents as may be required by the Agreement and is ready to close, Escrowee shall at once record the following documents in the order as follows:

1. First record the Seller's Deed;

2. Second record the First Mortgage and such other of Purchaser's Credit Facility Documents as require recording; and

3. Third record releases of existing indebtedness on Seller's assets being sold.” (Emphases added.)

¶ 10 Section V(H) of the escrow agreement provided the following:

“H. If Purchaser's counsel fails to give the notice required pursuant to Paragraph C of this Section V by September 30, 2009, this Escrow shall terminate and the respective recorded and unrecorded documents deposited shall be returned to the respective depositor and Purchaser and Seller shall proceed in accordance with Paragraph XIV of the Agreement. The Earnest Money deposit less escrow fees charged shall be paid to Purchaser. ” (Emphases added.)

¶ 11 According to plaintiff Wiczer, the reason for the provision that Wojciak would keep the earnest money if the transaction did not close was because Wojciak indicated he was concerned from the start that the car wash purchase was “problematic” and he wanted protection to at least cover his expenses. Also according to Wiczer, Wojciak would not proceed to the asset purchase agreement until the defendant Details members had signed the escrow agreement and Wiczer had received the required deposits.

¶ 12 Rosenbloom, attorney for the member defendants, Kolber, Winokur, Opfer and Stuckmann, indicated that the deal was structured in this manner, where the Details member defendant sellers would pay $400,000 in earnest money, because they owed their bank $400,000 more than Wojciak was willing to pay for the business and they wanted to mitigate their losses and sell the business and the real estate.

¶ 13 The Details defendants each paid a portion of the $400,000 based on their respective ownership percentages. The parties indicate that the following was the breakdown of the amounts initially paid for the earnest money: Kolber contributed $100,000; Winokur contributed $100,000; Opfer contributed $62,500; Stuckmann contributed $62,500. According to the copy of the escrow agreement executed by the Details defendants, George Pappas, another member of Details, LLC, also...