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Development Management v. Interstate Realty

OPINION FILED JUNE 2, 1978.

DEVELOPMENT MANAGEMENT GROUP, INC., PLAINTIFF-APPELLEE,

v.

INTERSTATE REALTY, INC., ET AL., DEFENDANTS-APPELLANTS.



APPEAL from the Circuit Court of Cook County; the Hon. SYLVESTER C. CLOSE, Judge, presiding. MR. JUSTICE WILSON DELIVERED THE OPINION OF THE COURT:

Plaintiff, Development Management Group, Inc. (hereinafter "DMG"), brought this action against defendants, Interstate Realty, Inc. (hereinafter "Interstate"), and L.J. Sheridan & Company (hereinafter "Sheridan"), for damages arising from an alleged breach of contract. At the conclusion of defendants' case in the bench trial below, plaintiff moved for a directed finding and the motion was granted. Judgment for plaintiff was entered upon the motion. Defendants' post-trial motion was subsequently denied. This appeal was taken from the judgment and the order denying the post-trial motion. We reverse and remand. The pertinent facts follow.

On July 3, 1973, DMG and Interstate executed a contract for the sale of an apartment building owned by Interstate and managed by Heil, Heil, Smart & Golee, Inc. (hereinafter "Heil"). Listed on the contract as real estate brokers were defendant Sheridan and Urban Search Corporation (hereinafter "Urban Search"). Sheridan held the purchaser's (DMG's) $5,000 earnest money. One paragraph of the contract provides for forfeiture of the earnest money to the seller if DMG terminates the contract. This paragraph also provides that the earnest money shall be returned to DMG if the contract is terminated and DMG is not culpable. Another paragraph — paragraph 19 — presents a condition precedent to plaintiff's obligation to purchase the building in question, viz., a satisfactory inspection of the building prior to closing. This paragraph also provides for return of the earnest money and termination of the contract if the condition is not fulfilled. The parties agreed at the time of execution that the building would be inspected on July 10, 1973.

Accompanied by the janitor, a Heil employee, six people inspected the building on July 10: Peter Mills, the president of Interstate; Richard M. MacDonald, a Heil employee; Thomas Gallagher, a DMG employee; Ronald E. Traub, a real estate broker employed by Urban Search; Susan Chein, an Urban Search employee; and Clarence Ruckner, an "MAI" appraiser. It is uncontested that nine of the 11 apartments in the building were inspected that day. Gallagher, who was DMG's Director of Operations, testified on behalf of the plaintiff that the janitor tried to get into the two apartments not inspected but was unsuccessful. According to Gallagher, no one inspecting on behalf of DMG stated that they were satisfied with the condition of the building after inspecting the nine apartments. He added that he did not consider the inspection completed that day.

MacDonald, who managed the building in question for his employer, Heil, testified on behalf of the defendants that the nine apartments were thoroughly inspected over a period of about two hours. Upon finding two apartments locked, the janitor searched for keys to them. His search was fruitless. MacDonald heard Traub tell Mills in the presence of all who had inspected that it was unnecessary to see the remaining two units. MacDonald added that no one mentioned returning for a subsequent inspection of the two apartments they had not seen.

Mills, the president of Interstate, testified that he put the building in question up for sale through his broker, Sheridan. When the contract was executed on July 3, 1973, the inspection date was agreed upon and the purchaser's president, Louis R. Silverman, stated that he would send an engineer, a decorator and an appraiser to inspect the building on that date. On July 10, 1973, Traub told Mills that he was DMG's broker; Chein told Mills that she was DMG's decorator; Gallagher told Mills that he was DMG's structural engineer; and Ruckner told Mills that he represented DMG for purposes of an appraisal. When he discovered that the tenants in two of the 11 apartments were not at home, Mills advised the group that, if necessary, he would get a ladder and gain entrance to the two units, but he requested that they all wait until the tenants returned. After discussion, Gallagher, Traub, Chein and Ruckner stated that the inspection had been satisfactory and that there was no need to see the other two apartments because they were satisfied with the building. Mills specifically asked each of them whether the inspection satisfied the contractual requirement and completed the necessary inspection of the building. Each replied that inspection of the remaining apartments was not necessary.

A few days later Mills received a letter from Traub with an Urban Search letterhead requesting a July 16, 1973, inspection of one of the two apartments which had not been viewed and a re-inspection, on the same date, of three of the apartments which had been examined. Mills discussed this request with Interstate's attorney, Russell M. Pelton, Jr., and concluded that Traub was requesting a courtesy re-inspection since the inspectors had been satisfied with the building on the 10th. Because the right to inspect expired on the 15th, Mills arranged for a Saturday, July 14, re-inspection. DMG thereupon advised him that its personnel could not attend that day. Mills then scheduled a July 16 re-inspection. On the 16th, Traub, Chein and Gallagher viewed only the two units they had not inspected on the 10th. At this time Mills asked Traub to confirm that this courtesy re-inspection would not extend the time within which DMG could withdraw from the contract. Traub told Mills not to worry and said:

"* * * this is not going to extend the contract * * *.

Tomorrow is the last day."

On July 25, 1973, Mills received notice from Silverman, the president of DMG, that the purchaser was not satisfied with the building. The notice contained a request for the return of DMG's earnest money. The parties subsequently exchanged several letters but DMG never appeared at the closing on the building. The earnest money was not returned to DMG and it brought suit for the $5,000, plus interest.

At the close of defendants' case, counsel for DMG moved for a directed finding in plaintiff's favor and the court granted the motion. This appeal followed.

OPINION

I

The threshold issue in the case before us is whether the trial judge followed the proper procedure in reaching his decision to grant plaintiff's motion for a directed finding at the close of defendants' case. After the motion was made, the judge entertained argument by both counsel and then found for plaintiff. Plaintiff's counsel thereupon raised the subject of interest on the $5,000. Defendants' counsel protested and asked for permission to make additional argument on plaintiff's motion for a directed finding. Thereafter the following colloquy took place.

"THE COURT: Well, this is not a jury trial. Counsel, don't ask for a finding at the conclusion of all of the evidence calling upon the Court to rule upon the matters as a matter of law. I haven't arrived at the point of weighing the evidence in the case as you mentioned. I'd much prefer that, but Counsel asked me to rule on his motion; and I have ruled on his motion. Clearly, if I were to reopen it and hear your argument as to all of the ...


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