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Illini Federal Sav. & Loan Ass'n v. Childers

OPINION FILED SEPTEMBER 25, 1980.

ILLINI FEDERAL SAVINGS AND LOAN ASSOCIATION, PLAINTIFF-APPELLANT,

v.

CARL CHILDERS, JR., ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of St. Clair County; the Hon. ALVIN H. MAEYS, JR., Judge, presiding.

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

This case of first impression in Illinois presents the question of whether forfeiture of an installment contract for the sale of land serves to discharge guarantors of part of the purchase price where the contract provides that the liabilities of the guarantors "shall remain notwithstanding any forfeiture."

Plaintiff, Illini Federal Savings and Loan Association (hereafter referred to as "Illini"), brought an action against the defendants, Carl Childers, Jr. (also spelled "Childres" at times in the record), Ben A. Parrish, Edward H. Davis, James H. Lewis and Charlotte A. Lewis, as guarantors of an amount plaintiff alleged was due under an installment contract for the sale of land between plaintiff as seller and Landcare, Inc., a Tennessee corporation (hereafter referred to as "Landcare") as buyer. The buyer is not a party to this cause. The installment contract gave the seller the right to declare a forfeiture of the rights of the buyer in the event of the buyer's default and provided in such an event both for the buyer's forfeiture of payments made under the contract and for the seller's retention of them as liquidated damages. Upon the buyer's subsequent failure to continue making payments as they became due, plaintiff brought this action against defendants as guarantors for the amount of the monthly installments then outstanding and unpaid by the buyer. Later plaintiff declared a forfeiture and took possession of the premises. After plaintiff's declaration of forfeiture defendants moved for summary judgment. Granting the motion, the trial court found that "because the installment contract for the sale of real estate was disaffirmed, the contract of guaranty entered into by the defendants was also terminated, as the subject of the contract for guaranty was no longer in existence." From the court's order that the "termination of the installment contract for the sale of land also served to discharge defendants, the guarantors, of that contract," plaintiff appeals.

Under this contract for deed, designated as "Articles of Agreement for Deed," Landcare agreed to purchase from Illini for $550,000 certain real property in Williamson County improved with a Travelodge Motel. Landcare paid $50,000 initially; it was to pay the balance of $500,000 in equal monthly installments of $3,728, including interest on the unpaid balance, together with the sum of one-twelfth of assessed taxes and insurance premiums. Installment payments were to be applied first to escrow for taxes and insurance, then to interest and finally to principal. Title would, of course, remain in Illini until the balance had been paid, at which time it would pass to Landcare. The contract further provided, as indicated above, that upon default of an installment, at the election of Illini,

"* * * should any such default or breach continue for sixty (60) days, Seller shall serve a `thirty day demand for strict compliance' on Buyer and should Buyer fail to cure said default or defaults in full Seller shall have the right to declare a forfeiture of all rights of the Buyer under this agreement and after such forfeiture and determination, the Buyer shall forfeit all payments hereunder and such payments shall be retained by the Seller as liquidated damages of the Seller and in such event the Seller shall have the right to re-enter and take possession of the premises."

A subsequent paragraph of the contract provides,

"It is further expressly agreed between the parties hereto that the remedy of forfeiture herein given to the Seller shall not be exclusive of any other remedy, but that the Seller shall in case of default or breach, or for any reason herein contained shall have every other remedy given by this Agreement and by law or equity, and shall have the right to maintain and prosecute any and every such remedy, contemporaneously or otherwise, with the exercise of the right of forfeiture, or any other right herein given. More specifically, all the remedies available may be prosecuted against the Buyer, except that the other signatories by agreeing to this contract, agree that the liabilities expressed in 5e of the sales contract attached as Exhibit A shall remain notwithstanding any forfeiture and if paid by reason of judicial action or demand shall not operate as a prepayment if said contract has not been forfeited." (Emphasis added.)

The articles of agreement for deed were in furtherance of a "Contract to Purchase Real Estate," paragraph e of which provides,

"Dr. Ben Parrish and Carl Childres, Jr., will guarantee the amount by which the loan at any time exceeds $450,000.00 subject to maximum liability of $50,000.00. James H. and Charlotte A. Lewis will jointly and severally guarantee the sum of $50,000.00 of the loan. Edward H. Davis will guarantee the sum of $50,000.00 of the loan. These individuals also guarantee the performance of all the borrowers' [sic] obligations as described herein and in the Article of Agreement for Deed, this guarantee being limited to the amounts as set out above, *."

The paragraph is typewritten except for the final comma and the asterisk, which are handwritten. At the bottom of the page appears the following, also handwritten: "* except that said liability of Dr. Ben Parrish and Carl Childers, Jr. [sic] shall terminate at such time as the loan balance reaches $450,000.00" By "loan" the parties to the contract appear to refer to the $500,000 balance of the purchase price. Paragraph a, in which the term appears, is preceded as follows: "5. The terms of the Bond for Deed Contract are:". Paragraphs b through i set forth further terms of that contract. Under a customary bond for deed the buyer does not acquire title until he has paid the stated consideration. There is no suggestion in the contract that Illini would advance to Landcare the amount of the balance of the consideration or that Landcare would repay such a sum. Nor is there any suggestion in the record that such a transaction did, in fact, occur.

On the final page of the Articles of Agreement for Deed, the following appears beneath the signatures of the agents of the parties to the contract:

"— Guaranty —

The undersigned guarantors having read this Articles of Agreement for Deed, the security agreement and attached exhibits, hereby guarantee the covenants therein contained to the extent as described in the sales contract marked Exhibit A in the same manner as if their names were read into this document in place of Landcare, Incorporated subject however to the limits of liability expressly provided."

There follow the signatures of the five defendants, who were, according to Illini in its brief, shareholders of Landcare, Incorporated. James H. Lewis, who signed the articles of agreement for deed for Landcare was also its president. The only other signatures appearing on these two instruments are those relating to attestation and ...


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