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Gould v. Stelter





APPEAL from the Superior Court of Cook County; the Hon. JOHN J. LUPE, Judge, presiding.


The primary question in this case is the extent to which the doctrine of mutuality of remedy in specific performance cases survives today.

The case is before us on the pleadings. The amended complaint for specific performance contains two counts. Count 1 alleges that Rose Gould, the plaintiff, entered into a written contract whereby she agreed to purchase and Norman W. and Almira Stelter agreed to sell a tract of land for a total consideration of $49,500. Five thousand dollars was to be paid at once, and $9,000 when title was accepted by the purchaser. The balance was to be paid in three annual installments, evidenced and secured by the purchaser's notes and trust deed. Plaintiff paid $14,000 to the agent of the Stelters, but they refused to deliver the deed called for by the contract. The relief requested is that the Stelters be directed to execute a deed in accordance with the contract.

Count 2 adopts the allegations of count 1, and contains additional allegations. Summarized, its additional paragraphs allege: Chris Gregory and the other named defendants are the actual owners of the property, and the Stelters hold title as their nominees. The defendant R.A. Schulze, a real-estate broker, is the agent of the owners. In 1948 Nathan Manilow, also joined as a defendant, executed and delivered to the plaintiff a general power of attorney under which the plaintiff had frequently executed documents in her own name, but on behalf of Manilow. The actual owners of the property had authorized Schulze to sell it, and Schulze negotiated terms of sale satisfactory to Manilow and to the owners. Manilow advised Schulze that the purchaser shown in the contract should be the City National Bank of Chicago, as trustee. The sellers prepared such a contract, dated August 31, 1953, and it was executed by the Stelters.

On September 24, 1953, Schulze brought the contract to Manilow. At Manilow's suggestion the name of the plaintiff was substituted as purchaser instead of the City National Bank of Chicago, as trustee, and the date of the contract was changed to September 24, 1953. Manilow instructed the plaintiff, in the presence of Schulze, to sign the contract as purchaser, and the plaintiff did so. On many occasions since the contract was signed Manilow had "repeated his acceptance, adoption and ratification of said contract, most recently by filing a counterclaim in this action." The defendants knew that Manilow was principal and that the plaintiff was his agent and attorney in fact. Fourteen thousand dollars has been paid on behalf of Manilow to Schulze, as agent of the actual owners, and Manilow stands ready, as soon as a deed is ready for delivery, to obtain the trust deed called for by the contract. After the contract was executed by the plaintiff and before the owners had refused to convey, Manilow arranged to have the property subdivided and developed for home building purposes, and he has sustained substantial damages because of the delay in performance of the contract.

On information and belief count 2 alleges that the contract was delivered by Schulze to Chris Gregory, one of the actual owners who was acting for himself and the other owners; that Gregory accepted the document and ordered a report of title from the Chicago Title and Trust Company, which was subsequently received and delivered to Schulze; that Schulze advised Manilow that the report showed clear title subject only to stock objections, and Manilow advised Schulze that he was prepared to close the deal. It also alleges on information and belief that the actual owners thereafter received offers from others to purchase the property for amounts greatly in excess of the price provided by the contract, and for that reason they concluded that they had made a bad bargain and have refused to perform.

The relief prayed in count 2 was that the Stelters be directed to execute to the plaintiff or to Manilow the warranty deed called for by the contract; and that judgment be entered against the Stelters and the actual owners in favor of the plaintiff or Manilow in the sum of $100,000 for damages by reason of the defendants' delay in performing the contract; in the alternative, that judgment be entered against Schulze and the actual owners and in favor of the plaintiff or Manilow in the sum of $400,000 for damages arising from the breach of the contract and for punitive damages.

Manilow filed an amended counterclaim which adopted the allegations of count 2 of the amended complaint, and prayed for the same relief.

The Stelters and the actual owners moved to dismiss count 2 of the complaint, and the counterclaim, upon the ground that the power of attorney authorized the plaintiff to contract in Manilow's name, and not in her own name; that Manilow was therefore not bound by the contract, and that because he was not bound there was an absence of mutuality of remedy which precludes recovery. Upon this motion count 2 of the amended complaint, and the amended counterclaim, were dismissed "for want of equity with prejudice." The trial court has certified that there is no just reason for delaying enforcement of the order of dismissal, or appeal from it. (Ill. Rev. Stat. 1957, chap. 110, par. 50.) The plaintiff and Manilow appeal directly to this court. A freehold is involved.

Section 2 of the Statute of Frauds provides that "No action shall be brought to charge any person upon any contract for the sale of lands * * * unless such contract or some memorandum or note thereof shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized in writing, signed by such party." (Ill. Rev. Stat. 1957, chap. 59, par. 2.) In support of the motions to dismiss it is pointed out that Manilow did not sign the contract, and it is urged that the power of attorney that he executed did not authorize the plaintiff to sign contracts in his behalf in her own name. Because Manilow was not bound by the contract from its inception, it is argued that mutuality of remedy did not exist, and the contract can not be specifically enforced by him. And since Manilow, the principal, has no standing in equity, the plaintiff, as his agent, likewise has no standing.

As we view the case it is unnecessary to determine whether the power of attorney from Manilow authorized the plaintiff to sign the contract in her own name, and we turn at once to the contention that specific performance will not lie unless that remedy was available to both parties at the time the contract was executed. That doctrine, stated by Lord Justice Fry in 1858, was embraced in Gage v. Cummings, 209 Ill. 120, and there applied to defeat specific performance: "`A contract to be specifically enforced by the court must be mutual, that is to say, such that it might, at the time it was entered into, have been enforced by either of the parties against the other of them. Whenever, therefore, whether from personal incapacity, the nature of the contract or any other cause, the contract is incapable of being enforced against one party, that party is equally incapable of enforcing it against the other, though its execution in the latter way might in itself be free from the difficulty attending its execution in the former.' Fry on Specific Performance, sec. 286."

From time to time Gage v. Cummings, 209 Ill. 120, has been distinguished on extremely narrow grounds. (See Gibson v. Brown, 214 Ill. 330; Cohen v. Segal, 253 Ill. 34.) Its underlying basis seems to have been clearly repudiated in Ullsberger v. Meyer, 217 Ill. 262. Nevertheless, its doctrine has been revived from time to time, most recently in Wloczewski v. Kozlowski, 395 Ill. 402, upon which the vendors in the present case rely heavily, and in which mutuality of remedy was one of three grounds upon which decision rested. See 15 U. of C.L.R. 143; 17 U. of C.L.R. 409, 415.

Although the doctrine has occasionally been applied to defeat the enforcement of contracts, it has, in Illinois as elsewhere, been riddled by exceptions. The assignee of the purchaser may enforce performance of the contract. (Lewis v. McCreedy, 378 Ill. 264; Espadron v. Davis, 385 Ill. 304.) When the contract has been signed only by the vendor, the act of the purchaser in filing suit for specific performance renders the contract mutual. (Laegeler v. Bartlett, 10 Ill.2d 478; Estes v. Furlong, 59 Ill. 298.) The vendor who has no title at the time of the sale, or even at the time of the filing of the bill, may be forced to convey the title that he later acquires. (Mason v. Caldwell, 5 Gilm. 196, 208.) When a vendor lacks the title that he contracted to convey, specific performance is allowed with a corresponding abatement of the purchase price. (Kuhn v. Eppstein, 219 Ill. 154.) A contract contingent upon the purchaser's ability to secure a loan may be specifically enforced. (Kovacs v. Krol, 385 Ill. 593; Nyder v. Champlin, 401 Ill. 317.) Illustrations could be multiplied of instances in which specific performance has been allowed, although that remedy was not available to both parties when the contract was executed. This enumeration, however, is sufficient to show that the exceptions have cut so deep that no rule in the terms stated by Lord Justice Fry can be said to exist in Illinois.

The defense of lack of mutuality of remedy as enunciated by Lord Justice Fry has been rejected in almost all jurisdictions. (Epstein v. Gluckin, 233 N.Y. 490, 135 N.E. 861; Zelleken v. Lynch, 80 Kan. 746, 104 P. 563; Vanzandt v. Heilman, 54 N.M. 97, 214 P.2d 864; see cases collected, 22 A.L.R.2d 508.) Perhaps no doctrine has ever drawn heavier fire from legal scholars. (Ames, Mutuality in Specific Performance, (1903) 3 Col. L. Rev. 1; Cook, The Present Status of the Lack of Mutuality Rule, (1927) 36 Yale L.J. 897; Durfee, Mutuality in Specific Performance, (1921-2) 20 Mich. L. Rev. 289; Langdell, note, (1887-8) 1 Harv. L. Rev. 104; Simpson, 50 ...

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