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Webster v. Hochberg

FEBRUARY 10, 1969.




Appeal from the Circuit Court of Cook County, County Department, Chancery Division; the Hon. DANIEL A. COVELLI, Judge, presiding. Judgments affirmed.


Plaintiffs-Appellees, commenced this action in the Circuit Court of Cook County seeking the rescission of a contract by which they had agreed to purchase real estate and a nursing home business operated thereon, owned and operated by the Defendants-Appellants, Paul Hochberg and Ann Hochberg. The defendants filed their answer denying the allegations of the complaint and in addition filed a counterclaim against the plaintiffs for breach of contract. Philip Karlin, the broker in the transaction filed a counterclaim against the defendants seeking to collect a real estate commission which counterclaim was denied by the defendants in a separate answer. The cause was referred to a Master in Chancery, who, after hearing extensive evidence, filed his Master's report recommending that the complaint for rescission and the counterclaim for breach of contract be dismissed and further recommended that the $5,000 earnest money down payment paid to the real estate broker by the plaintiffs be forfeited and retained by the real estate broker as his commission. Objections to the Master's report were filed by plaintiffs and sustained by the trial court. Thereupon the trial court decreed that the contract was rescinded and that the plaintiffs were entitled to recover $5,000 earnest money payment. Further, the trial court denied the counterclaim of defendants for damages for breach of contract and also entered judgment in favor of the real estate broker and against the defendants for $13,000, the amount of the real estate commission. Defendants have appealed these actions of the trial court.

Prior to July 11, 1962, the defendants Paul and Ann Hochberg, owned the premises known as 1936 West Belmont Avenue, Chicago, Illinois, which premises were improved with a building used as a nursing home. The defendants owned all the shares of stock in the Belmont Rest Home, Inc., which operated the nursing home under a license duly issued by the Board of Health of the City of Chicago.

On July 11, 1962, the plaintiffs entered into a written contract with the defendants for the sale of the Belmont street property for a total consideration of $261,000. By an attachment to the contract the plaintiffs also agreed to purchase the defendants' shares of stock in the Belmont Rest Home, Inc. for a consideration of $10,000. At the time of the execution of the contract, the plaintiffs paid Philip Karlin, the real estate broker in the transaction, $5,000 as an earnest money down payment, the contract of purchase further providing that the transfer would be completed on July 31, 1962, at which time the plaintiffs were required to make an additional payment with the balance to be payable in deferred installments. On July 31, 1962, the date set for the closing, plaintiffs notified defendants that they were rescinding the contract on account of the fraud of defendants and the failure of defendants to permit the plaintiffs to examine the books and records of the Belmont Rest Home, Inc. The defendants refused to return or authorize the return of the plaintiffs' $5,000 earnest money down payment and these proceedings resulted.

In their complaint plaintiffs allege that they are entitled to rescind the contract because of the fraud of defendants and the failure of the defendants to permit them to examine the books and records. These allegations were denied by defendants and in their counterclaim they sought incidental damages for breach of contract, the damages sought being attorney's fees, title costs and broker's commission in the event they were found liable to pay such commission. The real estate broker's counterclaim alleged that he was entitled to a broker's commission because he was the procuring cause of the sale and that he was entitled to such commission regardless of the outcome of the litigation between the plaintiffs and defendants.

Defendants first argue that the trial court erred in reversing the recommendations of the Master in holding that they were guilty of fraud and allowing plaintiffs to rescind their purchase contract.

The charge of fraud is based on the additional agreement relating to the purchase of the shares of stock of the Belmont Rest Home, Inc. Although such agreement is referred to as a "Rider" both parties concede that the rider and agreement for purchase of land are a single contract.

The complaint alleges that the representations contained in paragraphs 1 and 2 of the rider were false and fraudulent. They provided:

"1. Sellers represent and warrant to the Purchaser:

"(a) The corporation has been duly incorporated and is in good standing under the laws of the State of Illinois and is authorized to operate the nursing home now located in Chicago, Illinois.

"(b) The corporation possesses all licenses, permits, authorizations and orders required for the operation of a nursing home under the `Nursing Homes, Sheltered Care Homes and Homes for the Aged Act' of the State of Illinois, and all requirements of any and all governmental agencies having jurisdiction over nursing homes and the property upon which the same is located.

"(c) That the corporation has complied, and is in compliance with the act and with all rules and regulations issued thereunder and that there are no pending lawsuits or notices relating to fire, zoning, building or health code violations re the premises in question and the operation of the business in the within premises.

"(d) That the nursing home complies in all respects with the act and the rules and ...

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