APPEAL from the Circuit Court of Ogle County; the Hon. F.
LAWRENCE LENZ, Judge, presiding.
MR. JUSTICE LINDBERG DELIVERED THE OPINION OF THE COURT:
This action was brought in the Circuit Court of Ogle County by plaintiff Sarah Dodson to recover a $3,000 earnest money deposit held in escrow by defendant John Nink, a real estate broker, pursuant to a contract for sale of real estate owned by defendants Thomas and Nancy Chaplin. After a bench trial, the circuit court entered an order permitting plaintiff to recover the $3,000 earnest money deposit in its entirety, ruling that a condition precedent contained in the contract never occurred and that the contract was not enforceable. Defendants have appealed. The primary issue presented for review is whether the trial court erred in failing to find that plaintiff had defaulted on the sales agreement.
After examining the record and considering the arguments presented by the parties, we are of the opinion that the judgment of the circuit court should be affirmed.
The salient facts are essentially uncontroverted. Plaintiff contracted to purchase real estate from defendants Thomas and Nancy Chaplin for $34,900. Pursuant to the terms of this agreement (hereinafter, the "Chaplin contract"), plaintiff deposited $3,000 in earnest money with John Nink, the broker who arranged the sale of the Chaplin property. The contract, however, was expressly conditioned upon the "ability" of plaintiff to complete the sale of her own house located at 224 Jeffrey in Rochelle, Illinois, for not less than $28,000 or for such amount that would be acceptable to her within 90 days of the contract.
Approximately two weeks later, plaintiff found prospective purchasers for her property through her own brokers and entered into a contract to sell her Jeffrey Avenue home for $28,000 with Michael and Jacquelyn Morrison. This sales contract ("the Morrison contract") stated in part as follows:
"This offer is contingent upon the ability of buyer to:
(a) Obtain VA (Veteran's Administration) mortgage loan of not less the $28,000 due in not less that 30 years with interest at not more than 8 1/2% and with a firm commitment to be obtained by or for Buyer or this contingency removed within 90 days of the acceptance of this offer. Seller shall not be required to incur additional expense by reason of FHA or VA inspections unless otherwise provided herein. Loan discount, if any, to be paid by Seller not to exceed 2%. Buyer shall make all efforts that are reasonably possible to obtain said loan."
In addition to these terms, both the Chaplin contract and the Morrison contract specified that "[i]f any contingency cannot be carried out, this offer shall become void and all money paid or obligations given by Buyer shall be returned to him."
The Morrisons later secured a letter of commitment from the Veterans' Administration for a mortgage loan in the amount specified in the contract. However, the VA required that certain repairs to the house be completed as a prerequisite to the issuance of the loan itself. Although the repairs were not major, they were apparently quite numerous. These included, inter alia, the replacing of rotted flooring in the kitchen and bath, painting the garage, repairing the gutters and downspouts, and fixing screens in the basement. The statement of reasonable value furnished by the VA specifically provided that "persons buying previously occupied homes must look to the sellers to correct any defects." Hence, the VA would not loan the mortgage money unless the required repairs were first completed, and the burden of making these repairs rested with plaintiff under the terms of the VA commitment.
Plaintiff refused to have her house repaired. Her reason for refusing to do so was the subject of considerable conflicting testimony at trial, and eventually developed into the main factual issue in the case. Plaintiff testified that she first learned of the VA repair requirement when the brokers participating in the sales, John Nink and Mary Lou Dickerson, told her that the house had to be repaired. Plaintiff said she was unwilling to undertake any repairs because she was told that they would be expensive, and at the time she did not have the money. In addition, the contract to sell her own house contained an express provision that the seller was not required to incur any additional expense as a result of an FHA or VA inspection. Plaintiff also expressed concern at the inconvenience to her if the house was repaired while she was still living there.
On the other hand, defendants characterized plaintiff's refusal to repair the house as arbitrary and unreasonable. Two of the brokers involved in the transactions, Mary Lou Dickerson and John Nink, both testified that they offered to assume the expense of the repairs, but said that plaintiff refused. According to Mrs. Dickerson, plaintiff responded to the offer by saying that nothing needed to be done to the property. Defendant Nink testified that he was familiar with the Dodson property, and that in his opinion only an afternoon was required for the necessary repairs. In reply to the broker's offer to assume the cost of the repairs, plaintiff testified that she had no assurances that they would do as they had claimed.
In any event, the house was never repaired. In a letter dated November 23, 1977, defendants demanded that plaintiff close the contract to purchase the Chaplin property or forfeit the $3,000 earnest money deposit. Defendants claimed in the letter that the contingency in this contract that plaintiff sell her own house was met when she entered into the contract with the Morrisons on September 16, 1977. Plaintiff took the position that this contingency did not occur. In a letter to defendant Nink, dated December 6, 1977, plaintiff's counsel stated:
"As you are aware, she [plaintiff] did receive an offer to purchase the Jeffrey real estate, but this offer was contingent upon the ability of the buyer to obtain VA financing, and also provided that the seller shall not be required to incur additional expense by reason of FHA or VA inspections.
As you know, the VA commitment was contingent upon certain repairs being made, and as such is not a firm and binding commitment, and it is our position that the contract to purchase real estate by the Morrisons was not completed on or before the closing date, ...