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Anderson v. Long Grove Country Club Estates

JUNE 23, 1969.

ROY C. ANDERSON, ET AL., PLAINTIFFS-APPELLEES,

v.

LONG GROVE COUNTRY CLUB ESTATES, INC., ET AL., DEFENDANTS-APPELLANTS. LONG GROVE COUNTRY CLUB ESTATES, INC., A CORPORATION, COUNTERCLAIMANT-APPELLANT,

v.

ROY C. ANDERSON, ET AL., COUNTERDEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Lake County, Nineteenth Judicial Circuit; the Hon. PHILIP W. YAGER, Judge, presiding. Judgment affirmed. MR. JUSTICE DAVIS DELIVERED THE OPINION OF THE COURT.

Rehearing denied July 30, 1969.

This is an action brought by the plaintiffs to recover damages for the alleged breach by the defendant of a contract for the sale of certain real estate. While there are several parties plaintiff and defendant, including corporate entities for purpose of the contracts in question, for the sake of simplicity we will refer to the plaintiffs as "seller" and the defendants as "buyer" without differentiating between the individual and corporate parties.

The matter was tried before the court without a jury. The court found that the buyer had breached the contract, and it awarded damages to the seller and dismissed the buyer's counterclaim. The buyer then appealed to this court. The complex factual background, when reduced to the essentials necessary to an understanding of the issues and their determination, is as follows:

Some time in 1961, the buyer's real estate firm received a listing from the seller for 337 acres of his land at a gross price of $2,500 per acre. The seller, who owned a total of 508 acres, had indicated to the buyer that he proposed to build a golf course adjacent to this land. Shortly thereafter, the buyer advised the seller that the asking price was too high and in a letter dated January 23, 1962, he outlined a rough draft of a proposal to the seller.

Under this proposition, the buyer would allow the seller to participate in the overall potential profit of the subdivision without losing his capital gain status or right to report the sale on an installment basis. He suggested that, with existing development costs, the break-even price on lots would be $5,000; that initially, lots not on the golf course would be offered at $5,000 and lots on the golf course at $6,000 to $7,000; and that after the subdivision was started, and the golf course available, the lots would sell at an average of $9,000.

The buyer explained in his letter that he arrived at the figure from the knowledge that a home builder is willing to pay from 20 to 25% of the total home value for the site; and that he estimated from the restrictions the parties had discussed, that home values would range from $40,000 to $60,000. He stated that there was the additional unknown factor of what extra a homeowner would pay for a "golf course location." From this, the buyer concluded that his estimate of average lot price was probably conservative.

The buyer pointed out that the draft of the proposed agreement had a base lot price of $2,000 to the seller, plus a 40% bonus of that portion of the resale price over $5,000; and that based upon the anticipated average value of $9,000 per lot, the seller's gross return would be approximately $1,070,000, or roughly, a quarter of a million more than his present asking price of $2,500 per acre. This letter was the genesis of the agreements to follow.

On April 30, 1962, the first of the agreements outlining the relationship of the parties was executed. This provided that the seller would sell 337 of his 508 acres to the buyer at a base purchase price of $640,000, assuming the land could be subdivided into 320 lots. The purchase price was to be paid as follows:

$15,000 on or before August 31, 1962 50,000 " " " December 31, 1962 285,000 " " " April 1, 1963 72,500 " " " April 1, 1964 72,500 " " " April 1, 1965 72,500 " " " April 1, 1966 72,500 " " " April 1, 1967

In addition to the base price, the buyer was to pay to the seller, upon the resale of the lots, the additional sum of 40% of the gross sales price of each lot in excess of $5,000. The complete control of the resale was to be in the buyer, however, and no agency or joint venture was intended. The buyer was given the right to prepay any or all amounts, with certain limitations only in the year 1962. Title to individual lots was to be conveyed to the buyer as payments were made, at the rate of one lot per $2,000.

The buyer was to undertake the annexation of the property into the Village of Long Grove, and to assume all of the costs and obligations of subdividing the property. The seller's only obligation in this regard was to obtain a survey so that accurate legal descriptions could be procured of the property which the seller was retaining, and the remaining property which was subject to the agreement.

The agreement further provided that upon completion of the platting, annexation into and zoning by the Village and the survey, an escrow would be entered into with the Chicago Title and Trust Company to implement the undertakings. Under the terms of the escrow, the monies to be paid by the buyer to the seller pursuant to the agreement were to go through the escrow; the title to the property was to be in Chicago Title and Trust Company, as Trustee, and it was to convey the lots out to the buyer, or his nominee, at the rate of one lot per $2,000 paid on the base purchase price; and in the event there was a default by the buyer, the title to the property still in the name of Chicago Title and Trust Company, as Trustee, was to be held or conveyed back to the seller. The agreement provided that if the buyer defaulted in any of the buyer's undertakings and the same were not cured within 30 days, the seller would then have the right, upon notice to the buyer, to terminate all of the buyer's rights, and all prior payments would be forfeited.

Another agreement was also executed on April 30, 1962, under which the seller recited that he proposed to develop the 171 acres, which were not sold to the buyer, as a golf club, and that it would be beneficial to both parties to develop the golf club and the residential subdivision simultaneously. The agreement provided that the seller would engage the golf course architect upon the initial payment of $15,000 being made, as provided in the contract of sale, and that the seller would commence construction on the golf course upon the payment of the December 15, 1962, and April 1, 1963, installments. Nothing was specified with reference to membership of lot owners in the club; however, it was stated that the buyer was to construct certain lakes on the land which he purchased; that the lot owners, adjoining the lakes for which the buyer paid the entire cost, would have the exclusive use thereof; and that the lakes, wherein the buyer shared the cost with the seller, would be available to golf club members, guests and invitees.

Thereafter, negotiations commenced with the Village of Long Grove which finally, in the fall of 1962, resulted in an agreement under which only 271 lots — as opposed to the contemplated 320 — could be developed on the subject property after annexation. This meant, of course, that the seller could anticipate receiving substantially less for his land. Also, he was advised that ...


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