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Farley v. Kissell Co.

FEBRUARY 22, 1974.




APPEAL from the Circuit Court of Cook County; the Hon. JACQUES F. HEILINGOETTER, Judge, presiding.


This is an appeal by third party plaintiff from a judgment entered in favor of the third party defendant on an action brought for interference with contractual relations.

The original cause of action was brought by J. Raymond Kunz & Associates, Inc. (Kunz), against James Farley and Floyd Farley (Buyers) for commissions earned as the result of obtaining an interim construction loan from the Walter E. Heller Company (Heller). Buyers thereafter filed a third party action against The Kissell Company (Kissell), a mortgage banking corporation, for interference with contractual relations. With the exception of the third party suit the actions were settled. James Farley withdrew his third party claim against Kissell and Kunz adopted the third party pleadings of the Farleys against Kissell. The trial court found in favor of Kissell and only Floyd Farley has taken an appeal.

On November 12, 1964, the Merchants National Bank and Trust Company of Indianapolis (Merchants), acting as "Trustee" for James Farley and his father, Floyd Farley, entered into a 30-day option contract with Emmanuel and Alta Nell Farley (Sellers), to purchase property located in Marion County, Indiana, for development of an apartment complex (Pine Grove). Because of inter-family disputes Merchants was used as "Trustee" in order to hide Floyd's identity from that of his brother Emmanuel. Prior to this time, Sellers, who had obtained a permanent loan commitment from Massachusetts Mutual Life Insurance Company (Mass. Mutual) for $2,600,000, were going to develop the property themselves. However, they apparently had difficulty in obtaining the necessary interim financing and, as a result, the November 12 agreement was entered into with Merchants. The closing of the option contract was conditioned, among other things, upon merchantable title in the Sellers and an assignment from the Sellers to the Buyers of the end-loan commitment from Mass. Mutual. In addition, the Sellers were to obtain proper zoning and approval for water and sewer connections.

On December 8, 1964, a new agreement was executed between Merchants and Sellers modifying the original agreement and extending the option indefinitely. It stated, in part, that although up to the date of the modification the end-loan commitment had not been assigned, the parties were to continue to expend their efforts to effect the assignment and, if the parties were unsuccessful, the Sellers would then enter into an "association" with the Buyers for a one-quarter interest in the project in order to assure the Buyers of adequate long term financing.

On February 1, 1965, while attempts to obtain an assignment of the end loan apparently continued, James Farley, as agent for Floyd Farley, obtained an interim construction loan commitment through Kunz from Heller in the amount of $1,950,000. Ultimate funding of this commitment was subject, in pertinent part, to the following conditions:

a. The end loan commitment from Mass. Mutual was to be in full force and effect and assigned to Heller;

b. The borrowers were to present documents and certification that counsel for Heller would require; and

c. Heller was to reserve the right to approve the contractors working on the project and that performance or payment bonds with approved surities would be furnished.

The Heller commitment was accepted by the borrowers on February 22, 1965, after payment by them of a $10,000 standby fee.

On March 1, 1965, a further modification of the previous agreements of November 12, 1964, and December 8, 1964, was agreed upon between the Sellers, James Farley as agent, and Merchants. The agreement acknowledged that the Buyers had obtained the aforementioned interim loan commitment and that James Farley was to continue to take the necessary steps for the funding of this commitment and assign the same to Sellers. However, if funding was not begun by March 12, 1965, Sellers would be free to proceed with the Pine Grove project alone.

While negotiations continued between the Sellers and Buyers, the Sellers undertook to obtain their own interim construction financing to develop the property themselves. The record indicates that Sellers, armed with the Mass. Mutual end loan commitment, approached Kissell sometime in the first quarter of 1965 and sought to secure interim financing. In the trial court, James Farley testified that he spoke with Kissell's employee, David Huncilman, in April, 1965, regarding the proposed loan commitment to Sellers and informed Huncilman that he and third party plaintiff, Floyd Farley, had an interest in the Pine Grove property which Kissell was interfering with. However, James Farley indicated that he never specifically discussed the nature of the arrangements regarding his contract with Sellers, but did show Huncilman the original option contract, the December 8 modification, and the Heller commitment letter.

Huncilman, although not a witness in the trial court, gave deposition testimony in suits filed in the Indiana State and Federal courts (discussed below) in which he stated that Emmanuel Farley approached him early in 1965 in regard to a construction loan and that he in turn informed his superiors. He further stated that James Farley contacted him after the Sellers had executed a loan agreement with Kissell and told him that he had an interest in the Pine Grove property. Huncilman also stated that he never saw the option contract or its modification. In the Indiana State court suit, Huncilman testified that as late as July 1965 he had no knowledge of the existence of any contracts between the Sellers and the Buyers, nor did he have any knowledge of pending negotiations between them. Huncilman did express his knowledge of the existence of a 60-day option contract on a parcel in the Pine Grove Development owned by "Mitchell", and in his testimony made reference to the Buyers' option with Sellers which he believed to have expired.

James Dossman, at the time of the transaction, was a branch manager for Kissell and, while not a witness in the trial court, gave deposition testimony in the Indiana Federal court suit stating that he became aware of a dispute between Sellers and Buyers sometime in June 1965 and that James Farley came to Kissell's office on numerous occasions between June and December of 1965 claiming to have an interest in Pine Grove. Dossman felt, however, that the crux of James Farley's complaint revolved around the Mitchell property option. Dossman, moreover, did not see any documents concerning agreements between the Sellers, Buyers and Merchants. A memo in the Kissell files dated May 13, 1965, indicates that Kissell was aware of an option contract between Sellers and Buyers, but that Huncilman, the author of the memo, believed the option was to have lasted only 30 days ...

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