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Tolbird v. Howard

DECEMBER 2, 1968.




Appeal from the Circuit Court of Sangamon County; the Hon. JERRY S. RHODES, Judge, presiding. Affirmed in part, reversed in part, and remanded with directions.


Judgment was entered in favor of the defendants, James M. Howard and Alma R. Howard, herein called buyers, and against the plaintiffs, Jerry Tolbird and Lora Tolbird, herein called sellers, in the Magistrates' Division, Circuit Court of Sangamon County, in an action upon a promissory note for down payment on a real estate contract, and to recover past due installments upon such contract.

The complaint is based upon two documents which represent the terms of sale of a house and lot in Illiopolis, Illinois. Both documents are dated July 10, 1966. The defendants, buyers, signed a judgment note for $552 in favor of the plaintiffs, sellers, which note bore an endorsement that it was due January 1, 1967. The buyers and sellers signed a contract to purchase the property for the sum of $20,469.78 in monthly installments of $184, which were to include principal and interest at 6% per annum, interest to be calculated upon a direct reduction basis. The first installment was due July 15, 1966. The contract provided: "If not sooner paid, the entire amount of principal and interest shall be due and payable June 15, 1986."

The contract provided that in case of default of more than 30 days, "Sellers, at their option, may declare this contract to be null and void, and he may take repossession of said above described real estate immediately thereafter; No notice, either in writing or orally, need be given by Sellers in case of default; In such event all installment payments previously made by Buyers shall be retained by Sellers as and for rental payments and all liquidated damages under this Contract."

The contract provided: "That Buyers agree to carry said insurance premiums hereafter until the purchase price is paid, for the protection of Sellers, in whose names said insurance shall be carried." At the time of closing the contract with all persons present, except Lora Tolbird, the following clause was added to the end of the above quoted clause, at the buyers' request: "Payable to all parties as their interests may appear."

The answer of the buyers to Count II, which is the suit for past due installments on the contract, admits the signing of the contract, the making of the first installment payment of $184 on July 15, 1966, and the failure to make any additional payments. The answer denies performance by sellers, and sets up the following special defenses: (1) that sellers have repossessed the premises and retained the rentals paid as liquidated damages; (2) that sellers failed to furnish proof of ownership of the property; (3) that sellers fraudulently induced buyers to believe sellers were owners of the property; (4) that buyers cannot be in default until June 15, 1986. On the trial the additional defense was made that the insertion of the addition to the insurance clause was a material alteration which rendered the contract unenforceable.

Since there are questions of law, mixed questions of law and fact, defenses which, if sustained, are a permanent bar to the suit and a defense that bringing the suit is premature, the simple judgment that sellers take nothing by their suit leaves much to be desired.

The judgment that sellers take nothing by their suit would appear to be final and to indicate that the trial court found that the contract was unenforceable, rather than that the suit was premature. However, buyers pursue the point in their briefs in this court. Reading the contract as a whole, we cannot subscribe to the position that no recovery could be had prior to June 15, 1986. The contract, as noted, provided for monthly installments, provided a 30-day grace period on default, and provided for an election to retake possession and retain payments as liquidated damages. The position that no suit could be brought until June 15, 1986, would mean that no payments were legally due until June 15, 1986. We find this to be inconsistent with the allowance of a grace period of 30 days, "in case of default of any payment." (Emphasis supplied.)

[2-5] The defense of material alteration of the contract in reference to the addition to the insurance clause was not pleaded, and under Ill Rev Stats c 110, § 43(4), was not available as a defense. See also Parker v. Dameika, 372 Ill. 235, 23 N.E.2d 52; Burke v. Burke, 12 Ill.2d 483, 147 N.E.2d 373. Again, we are unable to determine whether this defense was considered. The evidence clearly shows that buyers requested the insertion of the clause and that it was for their benefit. The law does not permit the one who alters a contract to avoid it on that account, but confers the right of avoidance upon the non-consenting party. See Alteration of Instruments, 2 ILP, 24, 31. Since there is no evidence that Lora Tolbird, a party-plaintiff seeking to enforce the contract, dissented from the provision, we cannot find that there is a proper dissenting party. Additionally, under the circumstances, we do not believe that the sellers could claim any proceeds of insurance in excess of the balance due upon the contract. Therefore, the alteration could not be a material alteration. McCrystall v. Connor, 331 Ill. 107 at 123, 162 N.E. 375. See also, Cities Service Oil Co. v. Viering, 404 Ill. 538, p 547, 89 N.E.2d 392.

We cannot agree with the defense that sellers elected to forfeit the contract and retain payments made as liquidated damages. The evidence shows that subsequent to a telephone conversation about August 15, 1966, when the buyer advised seller he was moving, the seller wrote the buyer that this would not void the contract, and that sale of the house would be the buyer's responsibility. A declaration of forfeiture should be evidenced by a clear declaration of the seller. Brown v. Jurczak, 397 Ill. 532, 74 N.E.2d 821. The form of the contract gives an election to terminate. In the absence of an election, the contract would remain in force. The evidence is that buyer, James Howard, received the letter from Jerry Tolbird, seller, advising him that the contract was not void, and the sale of the house was Howard's responsibility. He also received a letter dated January 6, 1967, from Tolbird's attorney, demanding payments due under the contract. On January 9, 1967, the Howard's attorney wrote Tolbird's attorney, stating that it was his understanding that the Tolbirds had exercised their option under Section 3 of the contract to terminate it. The letter further stated that, even considering the contract in force, there could be no default prior to June 15, 1986. The complaint was filed February 3, 1967. The evidence shows that about one week after the August, 1966, letter advising Howard that the contract was not void, Howard mailed the keys to Jerry Tolbird. Tolbird went to the house and found it vacant. He closed some windows and some doors, and later had a plumber shut the water off. The next communication between the parties was the letter from Tolbird's attorney to Howard demanding payment.

It is contended that the action of closing up the house and turning the water off, together with a failure to return the keys and a lack of communication for six months constituted the exercise of an election to forfeit.

The contract contained no acceleration clause as to the entire principal on default, and accordingly payments would accrue at $184 per month. The down payment note of $552 was due January 1, 1967. Jerry Tolbird testified that during the telephone conversation in August, Howard said he would pay the $552 in January, but would not make any more payments. Howard says the $552 note was discussed in the August, 1966, telephone conversation and he, Howard, said, if he owed it, he would pay it.

The foregoing circumstances do not constitute anything more than actions to protect a security interest in property. They do not constitute the clear election to forfeit required by the law. We do not think that the buyers' actions show that they thought the contract was terminated by the election of the sellers, but rather that buyers did not intend to perform the contract. Since the note, if due, was not payable until January 1, 1967, and since only $184 per month accrued as a liability, we do not find that waiting until January 6, 1967, to demand payment of the note and the accrued installments was an abandonment of a position that the contract was still in force. On this issue we are concerned with the intention of the sellers. The sellers made no move to rent the house, or to resell the house, or otherwise exercise dominion over it. Their only declared intentions were that the contract was not void, and that the payments were due.

We hold that the contract was not terminated by election of the sellers. Again, we do not know the determination of the trial court on this issue.

Examining the defense that sellers fraudulently induced buyers to believe that sellers were the owners of the property, so far as the evidence shows, there is an abstract showing title in the sellers subject to a mortgage to Lincoln Douglas Savings and Loan for ...

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