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Middle E. Trading v. Mercantile Fin. Corp.





APPEAL from the Circuit Court of Cook County; the Hon. JOSEPH M. WOSIK, Judge, presiding.


Rehearing denied June 9, 1977.

Plaintiff, Middle East Trading & Marine Service, Inc. (Middle East), brought an action upon its option agreement for the purchase of an oceangoing vessel from defendant, Mercantile Financial Corporation (Mercantile). Count I of the amended complaint alleged breach of contract, and count II alleged unjust enrichment. The option agreement was executed and was to be performed in the State of Louisiana. After a trial without jury, judgment was awarded on June 27, 1975, in favor of Middle East and against Mercantile on count I for $98,975; and, in the alternative, on count II for $86,984.66. On appeal Mercantile contends that Middle East is not entitled to damages because upon the alleged breach of contract, Middle East failed to tender performance or otherwise put Mercantile in default, as allegedly required by Louisiana law; that Mercantile was excused from performance under the contract by reason of impossibility caused by Middle East; that the judgment for unjust enrichment is without legal basis; and that Middle East's recovery, if any, is limited to an out-of-pocket amount. We modify the amount and affirm the judgment of the trial court on count I. We do not reach the issue of unjust enrichment as to count II. The pertinent facts follow.

On January 14, 1970, Middle East, a Panamanian corporation with offices in Beirut, Lebanon, and Mercantile, a Delaware corporation with offices in New Orleans and Chicago, entered into an option agreement in New Orleans for the sale of an oceangoing tug, the Lee Reuben, then located in New Orleans. Under the terms of the agreement, the purchaser, Middle East, or its nominee was granted an exclusive option to purchase the vessel on or before July 7, 1970, for the sum of $316,025. Upon exercise of the option, credit against the purchase price was to be given for $35,000 previously paid to Mercantile, and also for sums paid by Middle East according to the schedule set forth in the agreement. The schedule provided for payments, until the option was exercised, of $5000 each on January 15, February 1, February 15, March 1, April 1, May 1, June 1 and July 1, 1970. Failure to make any payment within two days after the due date would result in termination of the agreement and forfeiture of sums paid thereunder, and of the $35,000 previously paid. To exercise its option, Middle East was to notify Mercantile by certified letter. Mercantile was then to deliver the act of sale *fn1 within two days after receipt of the letter, at which time Middle East was to deliver and pay the full amount due.

Also on January 14, 1970, an agreement was executed between Mercantile and Crown Well Service, Inc. (Crown Well), a corporation which the testimony disclosed had been acquired by the principals of Middle East. The agreement provided that in consideration of granting Middle East the aforementioned option to purchase, Crown Well released Mercantile of its obligations under an earlier option agreement. Crown Well also thereby released in Mercantile's favor, and for Middle East, the sum of $35,000 previously paid to Mercantile by Crown Well, which "constitutes the $35,000 credit granted to Middle East" in its option agreement with Mercantile.

On May 25, 1970, Middle East and Syrian Trading & Development Center (Syrian), a Lebanese corporation, entered into an agreement whereby Middle East agreed to exercise its option to purchase the vessel in favor of Syrian, and Syrian agreed to pay Middle East $350,000 upon delivery of the title documents.

After a total of $30,000 was paid by Middle East directly to Mercantile according to schedule in the option agreement, Middle East notified Mercantile by certified letter dated May 28, 1970, that it wished to exercise the option in favor of Syrian. Middle East also therein notified Mercantile that it had learned that Mercantile was not the owner of record of the vessel, that it assumed Mercantile could transfer title, and that it assumed that Mercantile would be in a position to comply with all applicable laws of the United States.

In a certified letter dated May 29, 1970, Middle East requested that Mercantile produce evidence of approval pursuant to "Section 88 [sic] of Title 46 [of the] United States Code, [which] provides that a sale or agreement to sell a vessel owned in whole or in part by citizens of the United States and documented under the laws of the United States to any person who is not a citizen of the United States, without the approval of the Secretary of Commerce, is unlawful." See 46 U.S.C. § 808 (1965).

On the afternoon of June 2, 1970, the parties to the option agreement met at the United States Coast Guard Office pursuant to Mercantile's notice that it would be prepared to deliver title to the vessel, and that the "pay-off" figure was $268,580.74. Neither title nor purchase price was then or thereafter transferred between the parties.

On June 2, Mercantile telegraphed Middle East that at the June 2 meeting Mercantile had tendered in accordance with the option agreement, and that Middle East had refused to meet the option price; and further, that if the option price was not received by 10 a.m. on June 3, Mercantile would consider Middle East in default. Middle East then telegraphed Mercantile that it was Mercantile's obligation to provide good title for the vessel, to satisfy all liens, and to obtain governmental clearance for the sale to the nominee; and further, that if Mercantile failed to perform these obligations by 5 p.m. on June 3, Middle East would hold Mercantile in default. By letter dated June 3, Middle East notified Mercantile that Mercantile was in default, and demanded return of all payments and credits received by Mercantile pursuant to the option agreement, together with interest and compensation for damages.

On June 3, Mercantile by letter offered to deliver to Middle East a bill of sale for the vessel. The letter further stated that since Mercantile had not been furnished with information necessary for application to the Maritime Administration of the Department of Commerce, the bill of sale would be made subject to approval by the Maritime Administration.

On June 4, Middle East supplied Mercantile with additional information concerning Syrian, stating that it was Syrian's intention to register the vessel in Latikia, Syria. The letter containing the information stated that the information was sent in response to Mercantile's request, and that Middle East still considered Mercantile in default. In another letter dated June 4, Middle East rejected Mercantile's June 3 offer of a bill of sale subject to subsequent governmental approval, again stating that Mercantile was in default under the January 14 agreement.

On June 14, the Department of State denied Mercantile's request for a munitions control license, stating that current policy prohibited such a transaction insofar as Syria had broken diplomatic relations with the United States.

On June 20, Mercantile telegraphed Middle East that since the Department of State denied Mercantile's request for a munitions control license, it was impossible to obtain approval from the Maritime Administration to place the vessel in Syrian's name; therefore Mercantile demanded that Middle East continue its option payments immediately, or Mercantile would consider the option payments previously made as forfeited. No further payments were made by Middle East.

On December 7, 1970, the Lee Reuben was sold by Mercantile in New Orleans to Escanaba Towing ...

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