APPEAL from the Circuit Court of Cook County; the Hon. RAYMOND
K. BERG, Judge, presiding.
MR. JUSTICE LORENZ DELIVERED THE OPINION OF THE COURT:
Rehearing denied January 11, 1980.
Plaintiffs brought an action to cancel an agreement which granted defendant an unrestricted option to purchase their stock in Tollway Arlington National Bank (TANB). They also sought injunctive relief to prevent him from transferring into his name the stock, which he held as collateral for a loan made by him to them. Defendant filed a counterclaim for specific performance of the option agreement. In denying defendant's claim for specific performance, the trial court ruled that the option agreement was null and void, because (a) defendant's attempted exercise of his option was ineffective, and (b) defendant failed to tender payment for the stock before the allotted time expired. In addition, the trial court ruled that specific performance was unavailable because the option agreement was vague on material terms and mutuality of remedy was not present. Defendant appeals from that order.
At trial, the evidence consisted of a stipulation of facts, exhibits, and the testimony of defendant. A summary follows.
Plaintiffs owned more than 51% of the outstanding shares of TANB on May 7, 1976. They also owned the beneficial interest in a land trust which held title to the real estate and building in which TANB was located. On May 10, 1976, the parties entered into an agreement dated May 7, 1976, whereby defendant loaned them $450,000 for a period of eight months at 8 3/4% interest per year. As collateral, plaintiffs deposited 51% of the common stock of TANB with defendant, and defendant received an unrestricted option to purchase from them 1,583 shares of TANB at $300 per share to be exercised within eight months of May 10. The exact language of the agreement granting the option follows:
"Sellers represent that they own or control 1583 shares representing approximately 53% of the outstanding stock of said Bank and hereby grant to Purchaser an unrestricted option to purchase such shares at $300 per share. The option shall be effective on this date and shall remain effective for a period of 8 months, from the date hereof and in the event that the option is not exercised, then the stock pledged as collateral will be returned to Sellers upon payment by Sellers of the then outstanding loan balance."
The agreement further provided that upon exercise of the option: plaintiffs would grant TANB a five-year lease at $5100 per month or at a rental acceptable to comptroller of the currency; defendant would purchase the remaining shares of TANB stock at $300 per share if plaintiffs so desired; plaintiffs would repurchase any loans made by TANB which were in default or listed as "Substandard"; and defendant could use the principal and interest on the loan as part of the purchase price. As of May 10, 1976, TANB occupied all of the first floor and a portion of the basement of the building owned by plaintiffs, and the rent was $5,100 per month.
From May 10, 1976, to December 9, 1976, the parties engaged in a series of meetings and correspondence to negotiate the terms of the lease referred to in the May 10 agreement. However, these negotiations failed to produce a lease agreement.
A letter dated December 9, 1976, from defendant to plaintiffs, attempted to exercise the stock option: "* * * I hereby serve notice of exercise of option to purchase the controlling shares in Tollway Arlington National Bank under the terms of our agreement dated May 7, 1976." It further stated what defendant considered to be the terms of the May 10 agreement. Specifically, the letter stated the rent should be $4,000 per month consistent with the request of the comptroller of currency; rental for the renewal periods of the lease would be arrived at by the agreement of the parties or by arbitration; any additional shares that defendant would be required to buy should be made available to him within the next 30 days; and plaintiffs would be required to repurchase all loans listed as "doubtful" or "loss" by the comptroller of currency. Each of these explanatory statements was prefaced by the qualification as being consistent with the May 10, 1976, agreement.
Additional negotiations took place between December 9, 1976, and April 13, 1977. They involved the details of the proposed lease and plaintiffs' obligation to repurchase substandard loans of TANB. Both sides expressed an interest in expediting an amicable closing of the deal. Consistent with this interest, defendant indicated his willingness to fulfill his part of the agreement in his letters of February 4, March 2, March 9 and April 4, 1977. At no time during this period did the plaintiffs contend that defendant's letter of December 9, 1976, was ineffective as an exercise of his option, or request tender of the purchase price of the stock, or assert that the May 10 agreement was unenforceable. On the contrary, on February 24, 1977, plaintiffs transferred 10 shares of TANB stock to defendant and then elected him to the board of directors.
From the time of the May 10, 1976, agreement to January 1, 1977, TANB occupied the first floor and part of the basement of the building owned by plaintiffs. This arrangement was maintained under an informal lease agreement between them and TANB. In January 1977 plaintiffs and TANB negotiated and executed a formal lease which reduced the amount of space to be occupied by TANB. Although this lease was executed after defendant's purported exercise of his option to become the majority shareholder of TANB, he stated that he was not informed of the execution of the lease. On April 13, 1977, a letter sent to defendant by plaintiffs mentioned briefly and for the first time possible questions as to the enforceability of the May 10 agreement.
On September 20, 1977, plaintiffs tendered a cashier's check in the amount of $514,008 to defendant as payment of their loan and the interest. He refused to accept the tender and three days later, directed TANB to transfer title to the remaining 1,548 shares into his name. In response, plaintiffs instituted this action for injunctive relief.
On appeal defendant contends that he effectively exercised his option on December 9, 1976, and is therefore entitled to specific performance of the May 10 agreement. The trial court ruled that his purported acceptance of the option was conditional and therefore, not an effective exercise of the option, but a counteroffer. Thus, the first issue is whether ...