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Ross v. Danter Associates

NOVEMBER 22, 1968.




Appeal from the Circuit Court of Rock Island County, Fourteenth Judicial Circuit; the Hon. A.J. SCHEINEMAN, Judge, presiding. Judgment affirmed.


In this action for damages of breach of contract, the Circuit Court of Rock Island County sitting without a jury, entered judgment in favor of Plaintiffs, Harold Ross and Sylvia Ross, against Danter Associates, Inc., Defendant, for $84,839.42 from which judgment the defendant appeals.

Defendant is engaged in the design, construction and development of real estate projects. In April, 1964, Robert Daniels, President of defendant corporation and a resident of St. Louis, Missouri, commenced discussions with the plaintiffs, residents of Rock Island, concerning the development and construction of a Travelodge motel and restaurant. Prior thereto Daniels had constructed other motels for the Travelodge Company. In May, 1964, a letter of intent was executed by the parties preliminary to the negotiations and execution of the arrangements incident to the development of a tract of land in Rock Island County for a motel and restaurant. Thereafter plaintiffs exercised options on four parcels of land in Moline, Illinois, upon which the motel and restaurant were to be constructed. The parcels were purchased for $140,000 and title was taken in the names of the plaintiffs. On November 6, 1964, the contract which is the subject of this litigation, was executed. It provided in great detail that the defendant would construct two buildings on the property of plaintiffs, one a freestanding restaurant together with the equipment therefor, and the second a motel building for which the plaintiffs agreed to pay to the defendant $412,000. Neither of the buildings was ever constructed and this action for breach of contract was filed by the plaintiffs in July, 1965.

In seeking to reverse the judgment of the trial court, defendant argues first, that as a matter of law, the plaintiffs were not ready and willing to perform their obligations under the contract, second, that defendant had performed and was ready, willing and able to perform all its obligations under the contract, third, that the court erred in denying defendant the right of surrebuttal, fourth, that the court erred with respect to the application of rules regarding damages and fifth, that the judgment of the court was improperly entered in favor of Sylvia Ross since she had not signed the contract.

Defendant first argues the trial court erred in failing to hold as a matter of law that plaintiffs were not "willing and ready" to perform their obligations under the contract as alleged in their complaint which allegation they were bound to prove. This argument is based in part upon a provision in the contract. After providing for progress payments the contract provides "All payments subject to requirements of interim financing disbursement agreement." Defendant argues first, plaintiffs had failed to comply with the requirements of the interim financing agreement, second, that plaintiffs could not comply with such requirements and third that plaintiffs failed to prove their financial ability to carry out their obligations under the contract.

Plaintiffs had discussed and arranged for a loan to finance the project with the Moline National Bank in the amount of $412,000, the amount which plaintiffs agreed to pay to defendant. The proposed loan was both a construction or interim financing loan as well as a long-term loan. In addition to the security of a first lien, the bank among other things, required the assignment of the lease between plaintiffs and Travelodge, the assignment of plaintiffs' interest in a joint venture which would operate the motel and restaurant, a contractor's performance bond and the approval of such documents by the bank or its attorney as they related to the security interest of the bank.

On January 7, 1965, pursuant to a request for a progress payment made by Daniels in behalf of defendant, a meeting was held in the offices of the Moline National Bank. The request for a progress payment was in the amount of $34,809 and was made up largely of engineering and architectural expenses. In addition, it included cost of site preparation, demolition of a small building, miscellaneous disbursements and $5,000 which defendant had deposited with an equipment supplier for equipment as selected by plaintiffs. The sum of $31,327 was disbursed by the bank and paid to defendant, the bank retaining ten percent until completion of the job as is customary. At this meeting, Daniels had a contractor's surety bond which had been approved by a commercial surety in favor of Peterson Roberts Construction Company, which bond had not been executed by the construction company. Daniels expected the surety bond to be executed by Peterson Roberts but, in fact, it was not so executed and no other contractor's surety bond was ever executed or delivered to the plaintiffs or the bank. At this meeting the President of the bank indicated that no future disbursements would be made from the loan fund until there had been compliance with the bank's requirements, which statement was confirmed by letter of the same date. No additional request for progress payments was ever made by defendant.

[1-4] Admittedly, the financing requirements of the bank had not been completed and according to the argument of the defendant, such fact is fatal to the plaintiffs' right to recover. We agree with the general principle cited by the defendant that a plaintiff must allege and prove performance of all conditions precedent and a tender or offer to perform those conditions which are concurrent or mutual and further, we agree with the general proposition that where two parties to a contract are in default neither can recover. Cincinnati, I. & W.R. Co. v. Baker, 130 Ill. App. 414, and 17 Am Jur2d, Contracts, § 358, page 797. However, we do not regard any of the cases cited by defendant as authority for holding that the provision in question is either a condition precedent or a mutual condition. According to the terms of the contract, defendant's obligation to perform was independent of any obligation on the part of the plaintiffs either prior to or contemporaneous with the completion of requirements of the interim financing. Even if such were not the case, we believe the defendant by its conduct either waived or excused any further efforts by plaintiffs to complete the financing arrangement. The defendant requested and accepted a progress payment disbursed by the lending agency with full knowledge that the financing requirements had not been concluded. Furthermore, the defendant never secured and executed a contractor's performance bond. In our view plaintiffs were amply justified in concluding from defendant's conduct that further action in completing the financing arrangement would indeed have been useless action.

Defendant also argues in respect to the willingness and readiness of the plaintiffs to perform their contract, that the plaintiffs could not comply with the bank's financing requirements and since they needed a loan they were not in a position to perform their obligation. Further according to defendant, plaintiffs failed to introduce evidence as to their ability to perform their obligation. Initially we note that defendant is in a rather anomalous position. In effect, defendant is suggesting that a project which it proposed and promoted is financially unsound. Admittedly, the lease and joint venture agreements were not finalized. However, they were substantially completed. Defendant has called to our attention many irregularities and areas of incompleteness in the agreements and concludes, therefore, that the requirements of the bank could not be satisfied. However, the President of the bank and its attorney each testified that the construction loan was progressing in normal fashion and neither indicated any likelihood or probability that the loan would not be concluded in due course. In this connection defendant's attorney made an offer to introduce into evidence certain documents pertaining to the operation of the restaurant-motel for the purpose of asking the President of the bank whether such documents had been assigned to the bank. The trial court declined such offer and its ruling is assigned as error. We find no error in the court's ruling. The President of the bank had already testified that no documents respecting the operation of the motel and restaurant had been assigned to the bank and, therefore, identification of the documents for such purpose would have been cumulative and of no particular assistance to the court. In addition, except for a supplemental joint venture agreement, the other documents were not relevant to the issues since there was no contention that their assignment was a requirement of the bank.

As indicated above, we believe there is ample evidence that plaintiffs could have secured a loan in the amount required. The value of plaintiffs' land was substantial and their equity in the completed project would have been substantial. We believe that a sufficient showing was made regarding plaintiffs' financial ability to carry out their obligation under the contract.

The next question which we will consider is which of the parties breached the contract. Defendant claims it was ready, willing and able to perform the contract but was prevented from so doing by the plaintiffs. The plaintiffs, on the other hand, contended that defendant refused to construct the buildings and supply the equipment as agreed.

The main thrust of plaintiffs' evidence is that after the execution of the contract, the defendant learned the two buildings and restaurant equipment could not be constructed and supplied in Moline for the agreed price. As a consequence, the defendant proposed to build a combined restaurant and motel unit. In its turn the defendant attempted to prove by the evidence that the two buildings and equipment could be constructed and supplied for the price agreed upon and that its offer to do so had been declined by plaintiffs.

The defendant has made several assignments of error respecting evidence and in order to consider such errors a brief summary of the evidence relating thereto is required.

The defendant was not in the business of actual construction and it appears that it expected Peterson Roberts Construction Company of Rock Island to undertake the actual construction. Peterson Roberts never agreed to do this. After many complaints of plaintiffs that work had not commenced as provided by the contract, defendant telegraphed plaintiffs as follows: "In view of apparent inability to negotiate with suppliers, it is our decision to build Moline structures with our own construction company, bonding same as required by Ross and Bank. Plan to commence work Tuesday or Wednesday; will confirm details verbally. . . ." A contract dated March 1, 1965, between defendant and Buckley Construction Company was introduced as an exhibit by defendant in support of his contention that the contract could be performed within the price agreed. Whether such contract did contemplate performance in accord with the contract between plaintiffs and defendant is a controverted issue. Buckley, President of Buckley Construction Company, came to Moline shortly after the middle of March for the purpose of commencing the construction, according to the testimony of Daniels. Buckley stayed a few days and further, according to Daniels, Buckley called Daniels and stated that plaintiffs would not go ahead with the building. Harold Van Der Kamp, attorney for plaintiffs, who handled most of the transactions during the negotiations, testified that Buckley had called at his office shortly after the middle of March, 1965. At such meeting, according to Van Der Kamp, Buckley indicated he would build only a combined restaurant and motel building, that his contract did not include equipment for the restaurant, that Buckley Construction wanted a contract directly with plaintiffs and that the progress payment made to defendant should be refunded. Since Buckley did not testify, defendant argues Van Der Kamp's testimony should have been excluded since the statements were hearsay. We find no merit to such contention. In its telegram defendant referred to Buckley Construction Company as "our" construction company and ...

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