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Spangler v. Holthusen

OPINION FILED JUNE 19, 1978.

JOHN J. SPANGLER ET AL., PLAINTIFFS AND COUNTERDEFENDANTS-APPELLEES AND CROSS-APPELLANTS,

v.

GEORGE W. HOLTHUSEN, DEFENDANT AND COUNTERPLAINTIFF-APPELLANT AND CROSS-APPELLEE.



APPEAL from the Circuit Court of Lee County; the Hon. THOMAS E. HORNSBY, Judge, presiding.

MR. JUSTICE NASH DELIVERED THE OPINION OF THE COURT:

Plaintiffs, John J. Spangler and Helen C. Spangler, appeal from an order of the Circuit Court of Lee County finding they had breached an agreement to sell real estate to defendant, George W. Holthusen. Defendant appeals from that portion of the order which assessed no damages in favor of defendant as a result of plaintiffs' breach of the contract. Defendant has also filed a motion in this court, pursuant to Supreme Court Rule 366 (Ill. Rev. Stat. 1973, ch. 110A, par. 366), for leave to amend his complaint to seek a decree of specific performance of the contract in issue should we determine he is not entitled to money damages for plaintiffs' breach. We have taken that motion with the case.

Plaintiffs' cross-appeal arises from a complaint filed by them in which the Spanglers, owners of the farm which is the subject of this case, sought specific performance of and a declaratory judgment on an installment land sale contract entered into between them and Holthusen on December 10, 1973. They also sought damages alleged to have arisen from Holthusen's claimed breach of the contract. Defendant Holthusen, thereafter, filed a separate action against the Spanglers in which he sought damages for an alleged loss of profits arising from their claimed breach of the same contract. The cases were consolidated for trial and the parties now each appeal from portions of the order and judgment entered by the trial court.

The contract provided for the sale by the Spanglers of their 247-acre farm in Lee County to Holthusen for $140,000. It included some take-out privileges by Holthusen but limited payments toward the purchase price to $15,000 each year. It provided for a closing of the transaction on March 1, 1974, and for a written notice by sellers if they chose to cancel the contract in the event of a default by the purchaser. On December 24, 1973, two weeks after executing this contract and without informing the Spanglers, Holthusen entered into a written agreement to sell or assign his interest in the Spanglers' farm to Leslie Richardson for the sum of $293,250 with possession of the farm to be delivered to Richardson by April 30, 1974. It is the $153,250 loss of profit on that sale which Holthusen seeks to recover from the Spanglers as a result of their claimed breach of the land sale contract.

In their cross-appeal, the Spanglers contend the trial court erred in its finding they breached the contract with Holthusen. This was an installment land sale contract entered into by the parties on December 10, 1973, at which time Holthusen made a $5,000 down payment to be held by the real estate broker until the transaction was closed on March 1, 1974. On the March 1 date, Holthusen was to make a further payment of $20,000 and receive possession of the farm and the Spanglers were to deliver a warranty deed for the farm to an escrow agent to be ultimately delivered to Holthusen when he had completed the payments provided for in the contract, but not before March 1984. The closing of the transaction on March 1, however, was extended by agreement of the parties to March 15 but, while the Spanglers did then appear at their attorney's for that purpose, Holthusen failed to do so or to make the $20,000 payment due at that time. Through their attorneys, the Spanglers agreed to extend the closing date to March 23, 1974, and, there still being certain disagreements to resolve then, it was again postponed. On April 17 Holthusen caused his check for $20,000 to be delivered to the Spanglers' attorney, together with other documents pertinent to the completion of the transaction, and the parties all met on April 24 for that purpose. At that time the Spanglers declined to accept Holthusen's uncertified check and the parties met again on April 26 whereupon Holthusen tendered $20,000 in cash which was also refused by the Spanglers.

The Spanglers contend Holthusen breached the contract by his failure to make the $20,000 payment on March 15 when it was due and that such breach became substantial when he continued to fail to tender payment of that sum until April 17 thus justifying the Spanglers to consider the contract terminated. (6 Corbin on Contracts § 1253 (1962).) They suggest title objections which had been raised by Holthusen's attorney and prevented the March 15 closing (certain pipe-line easements and the regulations of a soil conservation district affecting the subject property) were not unusual objections and could have been readily checked, but, although Holthusen could easily have done so, he failed to do so before the closing. The Spanglers assert that by reason of the unwarranted delay occasioned by Holthusen they were entitled to be compensated for damages sustained by them and they sought to renegotiate certain terms of the contract with Holthusen to that end. The Spanglers believed the contract should be adjusted to provide for lost interest they had sustained on the $20,000 payment to have been made by Holthusen on March 15, to recovery of the further interest paid by them on a loan for the purchase of another farm which they had intended to finance with Holthusen's $20,000 payment and for costs incurred by them in commencing spring plowing when it appeared that this transaction might not be carried out.

Holthusen contends, however, it was the Spanglers who breached the contract as the closing delays had either been agreed to by the parties or not caused by him. He notes, too, that the contract provided for a remedy should the purchaser fail to comply with its terms whereby the seller could then declare the contract cancelled or forfeited by giving written notice thereof to the purchaser. In that event, at the expiration of 30 days after such notice the agreement would be at an end if, in the intervening period, its terms had not been complied with by the purchaser. The Spanglers concede they did not exercise that provision for termination of the contract. Holthusen also points out that his title objections were recognized by the Spanglers' attorney as matters which must necessarily be cleared up and that in a letter to Holthusen's attorney on April 1, Spanglers' attorney informed him that some of the objections had been waived and the balance would follow. This letter also asked that a new closing date be determined and that Holthusen remit the $20,000 payment required by the contract. Thereafter, on April 17, Holthusen did cause his $20,000 check and other documents requested by Spanglers' attorney to be sent to him. While Holthusen also argues that the Spanglers actually wished to avoid the sale to him under the contract as they believed they could sell the farm to another party for a price $40,000 to $50,000 more than he had agreed to pay, that contention has no support in the evidence. We note, too, that the Spanglers commenced this action against defendant on December 12, 1974, for specific performance of their agreement with Holthusen or damages; it is not realistic to expect them to have taken that action if the more profitable opportunity to sell their farm had been possible.

While we are persuaded from the evidence in this case that the Spanglers declined to complete the sale of the property to Holthusen because they sought to recover losses sustained by them as a result of the delayed closing which they believed were attributable to him, it is apparent the Spanglers had no basis on which to do so. The first delay in closing occurred on March 1, 1974, and was occasioned by the Spanglers who were taking a trip abroad; on March 15, the date to which all parties had agreed to extend the closing, apparently valid title objections were still to be settled; on April 17, when requested, Holthusen did tender his check for the closing payment of $20,000 and it was accepted without objection by Spanglers' attorney; on April 24, for the first time, the Spanglers objected to the personal check. On April 26, however, the Spanglers also refused to accept the $20,000 payment in cash then tendered by Holthusen and declined to complete the sale of the farm to him in accordance with the contract.

• 1, 2 As the Spanglers correctly argue, a material or total breach of the contract by Holthusen would entitle them to seek compensation for damages sustained and, in addition, would be a proper cause excusing the Spanglers from further performance of their contractual duties. (Anderson v. Long Grove Country Club Estates, Inc. (1969), 111 Ill. App.2d 127, 139, 249 N.E.2d 343, 349; see also 35 Ill. L. & Prac. Vendor and Purchaser § 161 (1958).) Nor was the termination or forfeiture remedy provided for in the contract exclusive; it left the Spanglers with the right to seek any other legal remedy available to them. (Anderson, 111 Ill. App.2d 127, 140, 249 N.E.2d 343, 350.) The availability of the notice provision as a means to terminate the contract, however, and the failure of the Spanglers to exercise it upon the claimed default of Holthusen on March 15, 1974, or at any other time thereafter, is pertinent to a determination of whether there was a contract between the parties subject to being breached by the Spanglers on April 26, 1974, as found by the trial court. If the Spanglers had not earlier terminated the contract, their refusal to complete the transaction with Holthusen on April 26 must be considered in that light. John Spanglers testified he considered the contract had been forfeited by Holthusen by his failure to make the $20,000 payment on March 15 and that a new agreement then had to be negotiated between the parties. The Spanglers were apparently willing to proceed under the terms of the contract but with additions to it requiring Holthusen to recompense them for the losses they believed were caused by the delay in closing. When Holthusen declined to do so on April 26, the Spanglers refused to proceed with this transaction. It was not until this action was filed in December of 1974 that the Spanglers brought any claim against Holthusen and they then sought both specific performance of the contract and damages for its breach.

• 3 We believe that the Spanglers were obliged to communicate to Holthusen their election to terminate the contract if they considered that he breached it on March 15; the contract provided the purchaser was entitled to such notice and the chance to avoid forfeiture of the contract by coming into compliance with it. (See Kelly v. Germania Savings & Loan Association (1963), 28 Ill.2d 591, 595, 192 N.E.2d 813, 816; Kirkpatrick v. Petreikis (1976), 44 Ill. App.3d 575, 358 N.E.2d 679.) "Any act by the injured party indicating an attempt to continue will operate as a conclusive election, not depriving him of his right of action from the breach which has already taken place, but depriving him of any excuse for ceasing performance on his own part." 17 Am.Jur.2d Contracts § 447 (1964).

• 4 From our examination of the record we find no basis upon which the Spanglers could consider that Holthusen materially or substantially breached the contract so as to excuse further performance by them. We conclude, as did the trial court, that the contract was in full force and effect on April 26, 1974, and that the Spanglers breached it by their failure to complete the transaction at that time.

After the trial court determined the Spanglers breached the contract, Holthusen contends the court erred in denying him recovery of damages sustained as a result thereof and suggests he is entitled to the $150,250 loss of profits suffered when he was unable to resell the Spanglers' farm to Leslie Richardson pursuant to his contract with Richardson.

• 5 The circumstances under which lost profits might be a proper element of damages when sustained because of an inability to resell real estate after a breach by the initial vendor of his contract to sell the property has not been discussed directly in the Illinois cases we have seen. The parties both argue from the general rules relating to damages for breach of contract as they relate to lost profits arising from other subject matters and we perceive no reason for application of a different rule in this case. (See Annot., 11 A.L.R. 3d 719, 721-22 (1967); 5 Corbin on Contracts § 1015 (1964); 15 Ill. L. & Prac. Damages § 33 (1968).) As formulated in the early case of Hadley v. Baxendale (1854), 9 Exch. 341, 156 Eng. Rep. 145, 5 E.R.C. 502, recovery of lost profits may be allowed as an element of damages for breach of contract where both parties, at the time of the making of the contract, contemplated that such profits would be lost if the contract were breached. Similarly, in Snell v. Cottingham (1874), 72 Ill. 161, a claim was brought against a party for the recovery of $44,000 as damages for interest lost on a bond issue which would have been saved if he had completed his construction project in the time required by his contract. In rejecting such a measure of damages in that case, the court stated:

"We do not understand upon what principle the rule of damages contended for can be maintained. How can it be said, the damages resulting from the non-performance of a contract between parties can be measured by a mere private agreement between others, to which they are strangers? It is, no doubt, true, if the road had been completed by the 1st day of January, 1872, appellants would have obtained a rebate of the interest on the total amount of the construction bonds; but if it was intended to hold appellees responsible in case of non-performance of their contract, according to the terms of their private agreement with the lessee of the road, they should have made it a part of the contract that damages should be so measured. Although appellees may have known there was such an agreement between appellants and the lessee, they will not be presumed to have contracted with reference to any such mode of ascertaining the damages, and in the absence of any special contract they are bound by no such rule. Had it been known it was expected appellees would be held responsible for such extraordinary damages, it is hardly probable ...


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