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Neal v. Lacob

JULY 25, 1975.




APPEAL from the Circuit Court of Cook County; the Hon. SAMUEL B. EPSTEIN, Judge, presiding.


Plaintiff brought this action seeking rescission of a contract. Defendant counterclaimed, seeking an accounting and money damages. The trial court found that the contract was unconscionable and consequently held that it "should be declared null and void" and that the counterclaim should be dismissed for want of equity. It is defendant's basic contention on appeal that the court's finding of unconscionability is unsupported by the record.

In September 1967 plaintiff, an automobile dealer, entered into the contract which is the subject matter of this dispute. In consideration for lending plaintiff $5000 and guaranteeing a $15,000 line of credit at the Independence Bank of Chicago, it was agreed:

"1. That ROBERT NEAL so long as he continues to engage either directly or indirectly by his agents or servants in the business of selling automobiles either by way of corporations or individually or partnership agrees to furnish SEYMOUR LACOB a new JAGUAR automobile for his use at no expense to SEYMOUR LACOB; said auto to be returned to ROBERT NEAL each fall.

2. That in the event that SEYMOUR LACOB is not available to take delivery of said automobile (JAGUAR) then ROBERT NEAL is to furnish said auto to SEYMOUR LACOB'S family.

3. That ROBERT NEAL is to pay SEYMOUR LACOB his assigns, agents or family the sum of TWENTY FIVE DOLLARS ($25.00) for each new automobile as floor planned & guaranteed sold by said ROBERT NEAL or his agents; in the event that said ROBERT NEAL ceases selling new automobiles then the sum of $25.00 to be paid as directed for the sale of used automobiles sold.

4. That provision number 3 shall remain in effect so long as ROBERT NEAL either directly or indirectly remains in the business of selling autos.

5. That ROBERT NEAL shall proceed to pay the FIVE THOUSAND DOLLARS indebtedness commencing OCTOBER 1, 1968 at the rate of $400.00 per month until paid in full.

6. That the aforementioned loans shall be secured by ROBERT NEAL by liens on all autos presently owned by ROBERT NEAL; said loan further secured by all furniture, tools and assets concurrently situated at COMPETITION MOTORS, LTD., 7729 S. Cottage Grove Ave, Chicago, Illinois."

It is undisputed that from 1967 until the end of 1971, plaintiff, with only minor variations, agreed to by defendant, performed his obligations under the contract. On May 1, 1973, plaintiff filed his complaint seeking rescission of the contract. His action was predicated on the allegation that the contract was "unconscionable, usurious and inequitable." Defendant filed a counterclaim which alleged that the contract was in actuality a "joint-venture agreement" and that he was entitled to an accounting and money judgment.

At trial plaintiff testified in his own behalf that he is the president of Bob Neal Pontiac-Toyota, an automobile dealership located in Chicago. At the time of trial he was 41 years old and had been in the automobile business for 13 years. Prior to his entry into the automobile business, he had been a teacher in the Chicago School System for 6 years. He holds a college degree. Plaintiff first met defendant in June 1967 when, pursuant to an "oral proposition," he delivered a Jaguar Roadster sports car to defendant's home. It was plaintiff's proposal that if defendant loaned him $7000 at 10% interest, he would give defendant use of the car. Defendant told him that he would think about it. In September 1967 plaintiff was invited to defendant's home. Defendant informed him that he had a counterproposal which he thought would be acceptable. Defendant then typed up the instrument which is the subject matter of the instant case. Although it was not what plaintiff had in mind, "it appeared to be satisfactory." When he read the contract, plaintiff pointed out to defendant that he wanted defendant to "participate in profits of new cars sold [only] insofar as they were guaranteed and floor planned by him." Defendant agreed and in longhand added to paragraph 3 of the contract, which required that $25 be paid to him for "each new car sold by" plaintiff, the words "as floor planned & guaranteed." *fn1

Plaintiff spent 3 to 5 minutes reading the contract and then signed it. He knew that defendant was an attorney. Defendant had not done any legal work for him prior to the execution of the contract. Subsequent to plaintiff's signing the contract, defendant on occasion handled some legal matters for him. Defendant did not bill him for these services. Defendant lent him $5000 which he repaid with interest. In October 1967 defendant submitted to Independence National Bank "documentation" to guarantee for plaintiff a $15,000 line of credit. This line of credit was terminated 2 1/2 years later. Subsequent to October 1967 plaintiff applied for and received, without benefit of defendant's guarantee, an additional line of credit. In May 1968 plaintiff delivered to defendant a new Jaguar which defendant returned in September of that year. Again in the spring of 1969 he delivered to defendant a Jaguar which was returned in the fall. In 1970 and 1971 he delivered new Triumph TR-6 Convertibles to defendant. In 1972 he delivered a TVR two-seater sports car. Title for all these cars remained with plaintiff while they were in the possession of defendant.

Plaintiff did not learn that defendant was contending that he was a "joint-venturer" until the filing of the counterclaim. Defendant never asked to share in the profits and losses of the business.

On cross-examination plaintiff testified that prior to signing the contract he had several telephone conversations with defendant during which the possibility of defendant guaranteeing a $15,000 line of credit was discussed. Defendant had originally contacted him in response to a 1967 newspaper advertisement for the sale of a Jaguar automobile. During the course of their discussions, plaintiff told defendant that without a guarantor the Independence National Bank would not extend him a line of credit. With a line of credit from the bank he could carry a larger inventory of cars. Plaintiff was satisfied with the contract when he signed it. He entered into it "willingly." At that time he did not think it was unfair that he would be required to furnish defendant or defendant's family a Jaguar for as long as he remained in the business of selling automobiles. The cars were delivered in the spring and returned by defendant in the fall. Plaintiff was able to sell the cars used by defendant. It is "possible" that he made a profit on these sales. In 1968 defendant lent him $3000. He repaid the loan. Plaintiff "lived up" to the contract until ...

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