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Farwell Construction Co. v. Ticktin

OPINION FILED MARCH 7, 1980.

FARWELL CONSTRUCTION COMPANY, PLAINTIFF-APPELLEE AND CROSS-APPELLANT,

v.

HAROLD J. TICKTIN ET AL., DEFENDANTS-APPELLANTS AND CROSS-APPELLEES.



APPEAL from the Circuit Court of Cook County; the Hon. JAMES C. MURRAY, Judge, presiding.

MR. PRESIDING JUSTICE SULLIVAN DELIVERED THE OPINION OF THE COURT:

Rehearing denied June 6, 1980.

In this action for damages because of the anticipatory breach of an agreement to purchase real estate and the plans for an apartment complex, plaintiff was awarded $154,202.76. On appeal, defendants contend that (1) the trial court misconstrued the warranty provision in the agreement; (2) as a matter of law, plaintiff was not entitled to recover since it was not ready, willing and able to perform under the contract; (3) the trial judge incorrectly believed that an opinion of this court in a prior appeal required him to make a finding of anticipatory breach; (4) since the parties disagreed as to the interpretation of the contract, defendants did not commit an anticipatory breach as a matter of law; (5) plaintiff cannot recover because it was not yet entitled to performance at the time of the alleged repudiation; (6) recovery could not be had because the contract could not have been performed by either party in any event; (7) the trial court erred in its determination of damages; and (8) the trial court erred in amending the judgment after defendants had filed a notice of appeal. In a cross-appeal, plaintiff asserted that the damages were less than it was entitled to and that it was improperly denied prejudgment interest.

It appears that sometime in 1971, defendants were seeking to construct an apartment complex known as "Brush Hill Apartments" in Naperville, Illinois. Defendants retained an architectural firm to develop plans for the complex and also sought mortgage insurance from the Federal Housing Administration (FHA). They submitted a set of plans dated June 11, 1971, to the FHA, as was required to obtain insurance and, on August 30, 1971, the FHA informed them via a "site planner's memo" that the June 11 plan was "acceptable for feasibility processing subject to" 11 changes which would have to be incorporated in the plans. Defendants' architects accordingly developed several revisions culminating in a site plan bearing the most recent revision date of May 30, 1972.

Sometime in the spring of 1972, Richard Fanslow, president of plaintiff, met with Ticktin regarding the possible purchase of defendants' property and plans. Concerning this meeting, Fanslow testified that Ticktin showed him the original set of plans and said that they were approved by the FHA with the exception of the items specified in the FHA site planner's memo; that he (Fanslow) voiced his opinion that the plans would not be acceptable to FHA; that Ticktin then affirmatively said the plans were approved except for items 3 and 7 on the memo; that he (Fanslow) reiterated his belief that FHA would not consent to the deletion of the other items in the memo; and that Ticktin said FHA had given consent to delete the other objections.

Ticktin testified also that on August 19, 1972, he flew to Washington, D.C., to finalize an agreement for equity financing with American Housing Partners. No agreement was reached, however, and immediately afterward he returned to the airport to meet Fanslow and his attorney, who had also flown to Washington, D.C. The three went to a restaurant for lunch where Fanslow's attorney produced for signing the two documents giving rise to the instant litigation. One was an option contract granting plaintiff the option to purchase the property and all plans for the apartment complex prepared as of that date for $340,000, and the other was a letter containing a warranty agreement. The letter, in pertinent part, stated that defendants undertook to

"(1) warrant and represent to you that the Plans entitled `Brush Hill Apartments, December ____, 1971' drawn by Weinper & Balaban, Inc. have been approved by FHA and meet FHA's MPS requirements; and

(2) agree with you that in the event FHA, prior to initial endorsement by FHA of the insured mortgage note, requires any changes, refinements or modifications in said Plans which shall increase construction costs by more than Twenty Thousand ($20,000.00) Dollars, the undersigned [defendant] shall pay to you at the initial endorsement the full amount of any such increased construction costs in excess of Twenty Thousand ($20,000.00) Dollars."

Fanslow testified that at this luncheon meeting Ticktin said "all the items were approved and the drawings"; that Ticktin was worried about items 3 and 7 on the August 30 FHA memo; that Ticktin wrote on the letter a clause excluding those items from the warranty and stated, "Let's make those exclusions, and I feel very comfortable that I will get everything else approved"; and that he (Fanslow) responded "fine." He also testified with respect to the handwritten revision that "[Ticktin said the] drawings were approved on that date except for the exception letter. And he said everything else could be waived except for items 3 and 7 — that is dated, the August 31 letter date. That is the reason they are excluded from that document." The warranty letter was introduced into evidence, and it bore the inscription "except items 3 & 7 in FHA's letter dated August 31, 1971," which was written in after paragraph (1) and initialed by both parties. In addition, Ticktin also testified that at this meeting he expressed concern that "Exhibit A," which was attached to the grant of option and which described the property covered by the option, was not sufficiently clear. He asked Fanslow's attorney if the property could be more fully described, and the attorney then added (in his handwriting) the phrase, "and not reduce the number of buildings in said Resubdivision as per site plan dated 1/25/72 revised to 5/30/72 by Weinper and Balaban, Inc.," which apparently clarified matters in the minds of the parties.

On November 10, 1972, Ticktin sent plaintiff a letter wherein it exercised the option and also stated, "the Plans referred to in [the warranty] letter do not meet F.H.A.'s M.P.S. requirements, and the construction cost of meeting F.H.A.'s requirements will be in excess of Twenty-Thousand ($20,000) Dollars. We shall advise you of the exact amount of such additional costs when a closing date is established and shall expect payment thereof at the initial endorsement of the F.H.A. mortgage." Plaintiff then sent a letter dated January 29, 1973, which proposed a closing date of February 8, 1973, and asked that the parties meet on February 5 at the offices of Pioneer National Title Insurance Company to establish an escrow. In addition, the letter listed 12 items which plaintiff claimed were required to be added to the original plans by the FHA. It was stated that items 1 through 8 were required by the FHA outright, and items 9 through 12 were necessary to bring the project into compliance with the Naperville Building Code. The letter also set forth the additional costs totaling $147,069.76.

Ticktin responded in a letter dated February 1, 1973, agreeing to the dates for escrow and closing but denying that plaintiff was entitled to any payments, stating:

"It is our opinion that you are not entitled to [the credits] and in passing we wish to point out to you some of the reasons for your nonentitlement. Credits 1-8 were items of construction as shown in plans drawn by Weinper & Balaban dated December ____, 1971 and revised through May 31, 1972 which were in the F.H.A.'s and your possession on or before June 30, 1972 and were all part of plans referred to as `Brush Hill Apartment, December ____, 1971 drawn by Weinper & Balaban,' in our letter agreement of August 17, 1972. Credits 9-12 were required by the City of Naperville and have nothing to do with the MPS of the F.H.A. to which the letter agreement of August 17, 1972, is directed."

At this point, it should be noted that it is apparently undisputed that items 1 through 8 did not appear in the original plans but were incorporated in the May 31, 1972 revisions.

The record indicates that during this period of time, Ticktin and Fanslow had 5 to 10 conversations. Fanslow specifically testified to one telephone conversation concerning the payments under the warranty where Ticktin "told me that he was never going to pay it and I should go `F' myself." Ticktin admitted making this statement. Fanslow also testified to a conversation held with Ticktin at Pioneer Title where he "refused to acknowledge any of" the items and "[j]ust would not agree" to them.

At any rate, it appears that Ticktin was present at Pioneer Title on February 5, 1973, to set up the escrow, but Fanslow did not attend. The next day, Ticktin wrote another letter to Fanslow stating that he would nonetheless attend the February 8 closing. On that date, Ticktin appeared, but again Fanslow did not.

Plaintiff then filed suit on February 15, 1973, for specific performance of the contract. Upon learning that defendants no longer held title to the property, plaintiff filed an amended complaint for damages alleging an anticipatory breach of the contract and defendants counterclaimed, alleging that plaintiff had exercised the option and breached the agreement. The trial court found, however, that the option was never in fact exercised and, accordingly, entered judgment against plaintiff in its action and against defendants on the counterclaim. Plaintiff appealed, and this court held that plaintiff had in fact exercised the option and remanded for finding on the questions of breach of contract and damages. (Farwell Construction Co. v. Ticktin (1978), 59 Ill. App.3d 954, 376 N.E.2d 621.) On remand, the trial court, while not receiving further testimony, considered the arguments of counsel and, on November 13, 1978, entered an order finding defendants had anticipatorily breached the contract and that plaintiff was entitled to the claimed credits for items 1 through 8 but not 9 through 12. The court entered judgment for $124,133 and costs, from which on December 5 defendants filed a notice of appeal. Plaintiff then filed a post-trial motion on December 8 to modify the judgment to correct errors made in the calculation of damages. The trial court, on December 14, amended its order to increase damages to $154,202.76 and costs but denied other aspects of the post-trial motion and, from those denials, plaintiff cross-appealed on December 15. Defendants also filed a second notice of appeal on December 27 from the amended judgment.

OPINION

Initially, we note that the crucial question here concerns which set of plans was covered by the warranty letter. The letter itself refers to "the Plans entitled `Brush Hill Apartment, December ____, 1971' drawn by Weinper & Balaban, Inc.," but it appears that the only plans bearing such a date are for the recreation area of the complex only, and both parties apparently agree that the warranty was not intended to cover this set of plans. Plaintiff's position is that the warranty referred to the original set of plans covering the entire complex and drawn earlier in 1971, and that defendants' refusal to honor the agreement as warranting such original plans was an anticipatory breach. Defendants argue, on the other hand, that the warranty covered the May 31, 1972, revised site plan and that they were therefore justified in refusing to perform in accordance with plaintiff's interpretation.

I.

Thus, defendants' first contention is that the trial court erred in construing the warranty letter as referring to the original site plan. In this regard, we note that in construing a contract, the paramount objective is to ascertain the intent of the parties (Standard Steel & Wire Corp. v. Chicago Capital Corp. (1975), 26 Ill. App.3d 915, 326 N.E.2d 33; Industrial Commodity Corp. v. E.J. Brach & Sons (1968), 92 Ill. App.2d 163, 235 N.E.2d 857), and this is ordinarily determined from the language embodied in the final agreement (Martindell v. Lake Shore National Bank (1958), 15 Ill.2d 272, 154 N.E.2d 683; LaSalle National Insurance Co. v. Executive Auto Leasing Co. (1970), 121 Ill. App.2d 430, 257 N.E.2d 508). However, if the contract language is ambiguous, extrinsic evidence as to prior and contemporaneous transactions and facts may be considered to ascertain the parties' intent. (Kenny Construction Co. v. Metropolitan Sanitary District of Greater Chicago (1971), 52 Ill.2d 187, 288 N.E.2d 1, appeal after remand (1974), 56 Ill.2d 516, 309 N.E.2d 221; Arthur Rubloff & Co. v. Comco Corp. (1978), 63 Ill. App.3d 362, 380 N.E.2d 15; Standard Steel & Wire Corp. v. Chicago Capital Corp.) Further, the construction or interpretation of a clause in a contract is a question of law (Illinois Valley Asphalt, Inc. v. La Salle National Bank (1977), 54 Ill. App.3d 317, 369 N.E.2d 525) to be determined by a reviewing court unrestrained by the trial court's judgment (Arthur Rubloff & Co. v. Comco Corp.).

In the case at bar, we think it is clear (as the trial court found) that the parties intended that the warranty letter cover the original site plan. Fanslow and Ticktin discussed the FHA's objections to these plans, which were set forth in the FHA memo when they first met in the spring of 1972. With respect to this meeting, Fanslow testified that Ticktin showed him the original site plan; that he (Fanslow) told Ticktin that in his opinion the plans would not be acceptable to FHA; and that Ticktin stated that the FHA had given consent to delete the objections, with the exception of items 3 and 7 in the FHA memo. Thus, it appears that even at this point Fanslow was concerned about the acceptability of the original plans and, at the actual signing of the agreements on August 17 when his attorney produced the warranty letter he had drafted, Fanslow testified that Ticktin wrote an inscription on the warranty letter excluding items 3 and 7 on the FHA list, explaining, "Let's make those exclusions, and I feel very comfortable that I will get everything else approved." In the light thereof, we think it clear that the parties were focusing upon the FHA memo which listed objections to the original set of plans and, thus, the reasonable conclusion is that in executing the warranty letter which referred to that memo, the parties had the original site plan in mind.

Defendants point to numerous facts which they claim support their position that the letter was intended to cover the revised set of plans rather than the original. First, they point out that the May 30, 1972, revisions were spread upon the table at the time the warranty letter and grant of option were signed. This fact is not particularly persuasive, however, in view of the fact that numerous documents, including the original set of plans and FHA's objections thereto, were also there. Second, defendants refer us to the last page of the option contract on which Fanslow's attorney inscribed a reference to the revised site plan. We note, however, that with respect to the events giving rise to this inscription, Ticktin testified that he was "worried that [the option] only describe[d] a number of square feet that they were going to get and I did not want to be in the situation being left with my parcel of land interspersed in various parcels in their parcel of land, and possibly landlocked"; that he "asked if it would be possible to more fully describe the property that they are talking about"; and that Fanslow's attorney consented and wrote in the phrase referring to the revised site plan. Thus, we think it is clear that the handwritten amendment was made solely for the purpose of identifying certain property involved in the grant of option and was not directly related to the improvements in the warranty letter, which was a separate document. Third, defendants argue that the letter warrants that the plans in question "have been approved by FHA"; that both parties knew the original plans had not been so approved; and that therefore the parties could not have intended the warranty to cover the original set of plans. We are not persuaded by this argument, since Fanslow specifically testified that Ticktin told him at their meeting in the spring of 1972 that FHA agreed to delete most of their objections in the site planner's memo and had approved the original site plan. Fourth, defendants assert their position is supported by the fact that the option contract entitled plaintiff to receive "all plans and specifications prepared as of this day or hereafter" and they urge that the warranty must therefore refer to the most recent existing plans. We disagree, since under that line of reasoning any future plans prepared "hereafter" would also be covered by the warranty, and this unquestionably was not intended. Finally, defendants say that because the original plans were unrevised and incomplete, it would be "unthinkable" for them to guarantee such plans. We are not in a position to ascertain what was "unthinkable" but we can make a determination whether the record supports the court's implicit finding that the warranty letter was intended to cover the original set of plans and, as discussed above, we believe there is convincing evidence to support such finding.

• 1 Defendants also assert that we should construe the warranty letter against plaintiff to cover the revised plans, because plaintiff's attorney drafted the document. We realize that under the doctrine of contra proferentem, ambiguities are to be construed against the party who drafted the contract (Ellerman v. Clark Products, Inc. (1978), 67 Ill. App.3d 848, 384 N.E.2d 940; Pescaglia v. Gianessi (1973), 9 Ill. App.3d 582, 295 N.E.2d 148), but we think this rule is "[a]t best * * * a secondary rule of interpretation, a `last resort' which may be invoked after all of the ordinary interpretative guides have been exhausted" (Hurd v. Illinois Bell Telephone Co. (N.D. Ill. 1955), 136 F. Supp. 125, 134, aff'd (7th Cir. 1956), 234 F.2d 942, cert. denied sub nom. Seybold v. Western Electric Co. (1956), 352 U.S. 918, 1 L.Ed.2d 124, 77 S.Ct. 216; see also Bowler v. Metropolitan Sanitary District (1969), 117 Ill. App.2d 237, 254 N.E.2d 144; Vogel v. Melish (1964), 46 Ill. App.2d 465, 196 N.E.2d 402, aff'd (1964), 31 Ill.2d 620, 203 N.E.2d 411; 17 Am. Jr. 2d Contracts § 276 (1964); 12 Ill. L. & Prac. Contracts § 221 (1955)). In the instant case, we believe our efforts to ascertain the intent of the parties by means of extrinsic evidence has yielded a convincing result and, accordingly, have no need to utilize this "last resort" rule of construction.

II.

Defendants next point out that plaintiff contended it was entitled to credits 9 through 12, which were required by the city of Naperville; that the trial court found that plaintiff was not entitled to such credits; that plaintiff was thus not "ready, willing and able" to perform the contract in accordance with the court's interpretation of it; and that plaintiff therefore cannot recover for anticipatory breach. Defendants cite no law in support of this theory; but, in any event, we view this argument as ignoring the seminal question in this litigation — namely, the identity of the plans covered by the warranty. Plaintiff's position was that the agreement as properly interpreted warranted the original set of plans, while defendant contended that the warranty covered the May 30, 1972, revisions. The trial court properly determined that defendants' interpretation of the contract was correct. Thus, plaintiff was in fact "ready, willing and able" to perform the contract according to the proper interpretation. ...


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