APPEAL from the Circuit Court of Stephenson County; the Hon.
LAWRENCE A. SMITH, JR., Judge, presiding.
MR. JUSTICE SEIDENFELD DELIVERED THE OPINION OF THE COURT:
Plaintiff was awarded judgment in the amount of $7,550 based upon defendant's check (payment on which was stopped) given as "earnest money" in connection with an agreement for the purchase of real estate. The defendant, who repudiated the agreement, appeals, claiming mistake and misrepresentation. He contends that the judgment amounts to a forfeiture on inequitable grounds; and that plaintiff would be entitled only to actual damages, which were not proved.
1 The posture of this case is somewhat different from the ordinary litigation against defaulting purchasers which seeks a forfeiture of money paid on installment contracts to purchase real estate. Here, plaintiff sued on a check after the drawee-bank refused to honor it, and the provisions of the Uniform Commercial Code must be considered. Although the payee of a check may qualify as a holder in due course (Ill. Rev. Stat. 1977, ch. 26, par. 3-302(2)), the payee's knowledge of the existence of a defense to the instrument would prevent him from acquiring this status. (Ill. Rev. Stat. 1977, ch. 26, par. 3-302(1).) The recited section requires that the holder take for value and in good faith as well as without notice of a defense. A holder takes the instrument for value "to the extent that the agreed consideration has been performed * * *" (Ill. Rev. Stat. 1977, ch. 26, par. 3-303(a)). The Uniform Commercial Code provides that when the signature on the instrument is established, as it is here, "production of the instrument entitles a holder to recover on it unless the defendant establishes a defense"; but if defendant establishes a defense the burden shifts to the holder to establish that he is a holder in due course. (Ill. Rev. Stat. 1977, ch. 26, par. 3-307(2).) The want or failure of consideration is a defense against any person not having the rights of a holder in due course with exceptions not here involved. (See Ill. Rev. Stat. 1977, ch. 26, par. 3-408.) Bamberg was not a holder in due course because the conveyance of the real estate which was the agreed consideration for the $7,550 check remained, at all times, executory (see Ill. Rev. Stat. 1977, ch. 26, par. 3-303(a); see also Ill. Ann. Stat., ch. 26, par. 3-303, Illinois Code Comment, at 155 (Smith-Hurd 1963)). Whether the defense of failure of consideration is available against Bamberg as a holder, although not one in due course, is then considered.
It is implicit in the judgment order that the trial judge must have found that the plaintiff's failure to convey the premises to the defendant was due to the defendant's repudiation of the contract on September 19, 1977, and that this was without excuse. In this appeal the defendant takes the position that the transaction was "tainted by mistake, misrepresentation, misunderstanding, and other irregularities" which would make it inequitable to permit the plaintiff to, in effect, forfeit the "earnest money," particularly when there was no proof that the plaintiff had suffered any actual damages nor that the defendant received any part of the consideration for the agreement. The evidence must therefore be reviewed to determine whether the judgment is against the manifest weight of the evidence.
On September 10, 1977, the plaintiff held a public auction of certain of his real estate which was conducted by auctioneer John Balbach. The defendant was the only one to make an offer. On September 10, the defendant signed a short "offer to purchase" which described property:
"Mr. & Mrs. Charles Bamberg property consisting of approx. 2.2 acres located in Sec. 13 Twp. 27 N Range 7 east of the 4th P.M. including all existing buildings & permanent fixtures"
for a purchase price of $75,500, with "$7550 as earnest money." In this connection defendant gave plaintiff a check for $7550, also dated September 10, 1977. It appears from the record that Tract D consisting of .017 acres located to the south of the main property was included in the sale, although property both to the right and left and below Tract D, owned by the Bambergs, was not included. The controversy principally turns on questions of what representations were made as to the uses that can be made of Tract D.
Griffin testified to a number of conversations with the plaintiff during the negotiations for the sale. He said that he and Bamberg had several conversations with reference to Tract D; that he told Bamberg that it would make a difference in the price he would pay if he could place a mobile home on the small parcel and if he were able to sell the small tract separately. He said he indicated both to Bamberg and to Balbach that he was purchasing all the land in question for resale, and that he would like to place a trailer on Tract D but was concerned about zoning regulations. Griffin said that he stated these intentions to Mr. Bamberg on several occasions and was assured that a mobile home could be placed there; that, in fact, Bamberg had told him, possibly four times, that the zoning would allow a mobile home, that it was "easy to get it zoned"; but that when he checked with the zoning officer on Monday after signing the agreement on Saturday, he was told that Tract D was not large enough to qualify for a trailer use and that he thereupon stopped payment on his check. He further testified that both Bamberg and Balbach promised to hold his check until he had had the opportunity to check on the zoning.
Griffin's wife also testified to being present on two occasions when, she said, Bamberg told her and her husband that it would be possible to put a trailer on the property with the permission of the zoning officer and that Bamberg said he would have no problem getting the permission because he knew some members of the zoning commission.
Mr. Washburn, the zoning officer, testified that he had indicated to the defendant that Tract D had an area of only about 7500 square feet and that under the Stephenson County zoning ordinance it was necessary for a tract of land to consist of at least 20,000 square feet. Washburn also testified that there was an obstacle to taking land away from Tract C, which borders Tract D immediately to the north; for if 12,500 square feet were taken away from Tract C and added to Tract D in order to meet the county zoning requirements, Tract C would then be in violation of the plat act. (Ill. Rev. Stat. 1977, ch. 109.) Washburn testified that in his judgment there would be no way that property lines could be readjusted in order to allow the placement of a trailer on Tract D unless the entire acreage was replatted.
The testimony of Bamberg, who was approximately 80 years old, is rambling and somewhat self-contradictory. Bamberg testified on cross-examination:
"Q. Did you ever talk about that parcel with Mr. Griffin?
A. That didn't go with the place but I give him that. It wouldn't be no good to me.
Q. Did he ever ask you about what capabilities that land had?
A. I'll tell you the truth, I did tell him that he could build a mobile home and that would take one part of the parcel to make it.
Q. I'm interested in what you said. What did you tell Mr. Griffin about the mobile home?
A. We surveyed the thing over and he could make one and he said I wanted to build one for myself he said.
Q. You discussed the fact of that ...