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Chicago Title & Trust Co. v. Ceco Corp.

OPINION FILED DECEMBER 23, 1980.

CHICAGO TITLE & TRUST COMPANY, TRUSTEE, ET AL., PLAINTIFFS-APPELLANTS,

v.

THE CECO CORPORATION ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Cook County; the Hon. NATHAN M. COHEN, Judge, presiding.

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

Rehearing denied January 22, 1981.

Plaintiffs, Chicago Title and Trust Company and E.N. Maisel and Associates, brought this action in the circuit court of Cook County against defendants, Ceco Corporation and Burlington Northern, Inc., seeking specific performance of a contract for the sale of real property allegedly entered into between plaintiffs and Ceco Corporation. At the conclusion of plaintiffs' case-in-chief, the trial court, sitting without a jury, granted defendants' motion for judgment. From this judgment, plaintiffs appeal.

We affirm.

The principal parties involved in this action are E.N. Maisel and Associates and Ceco Corporation. We will refer to these parties as the Maisel Partnership and Ceco. Essentially, the Maisel Partnership alleged it had entered into a contract with Ceco to buy real property owned by Ceco and located in the Town of Cicero. Chicago Title and Trust and the Burlington Northern, Inc., play only a peripheral role. Chicago Title and Trust was to be the land trustee of the property holding it in trust for the benefit of the Maisel Partnership. Burlington Northern is a buyer of the property from Ceco and purchased the property with alleged knowledge of Ceco's dealings with the Maisel Partnership, and thus Burlington's rights apparently are subject to the outcome of this case.

The events leading up to the filing of this action span a period of a year and a half and involve many meetings, telephone conversations, and written correspondence between the representatives of the Maisel Partnership and Ceco. We will set out here the Maisel Partnership's evidence in chronological order, listing the important dates and the events which occurred on those dates.

March 1977 to February 1978

The Maisel Partnership becomes interested in purchasing Ceco's property. At the time the Ceco property has on it an abandoned building and an office building used by Ceco. The Maisel Partnership represents to Ceco that it is in the business of developing shopping centers and, in particular, in the business of developing K-Mart stores. (The Maisel Partnership has developed K-Mart stores for many years though neither has ever been obligated to the other until the Maisel Partnership has acquired the necessary property and leased it to K-Mart.) Ceco represents to the Maisel Partnership that it is interested in selling the property and moving its offices elsewhere.

The Maisel Partnership does preliminary studies of the property to see if it is suitable for a shopping center. It draws up preliminary plans and K-Mart examines the property and tells the Maisel Partnership it would be favorable for K-Mart to lease part of the property if the Maisel Partnership can develop the property as planned and acquire the other businesses necessary to fill the shopping center.

The Maisel Partnership and Ceco begin negotiations for the sale. However, some substantial problems exist, among which is the present zoning of the property. The applicable zoning ordinance of the Town of Cicero does not allow a shopping center on the land. The Maisel Partnership does not want the property unless it can get the zoning it needs. The parties tentatively agree to draw up a contract which will include a provision allowing the Maisel Partnership to opt out of the contract if the necessary zoning change cannot be obtained while simultaneously requiring substantial efforts to be made by the Maisel Partnership to get the zoning change so that the Maisel Partnership does not have a one-sided bargain. Other problems include the price and terms of payment and the length of time that Ceco can continue to occupy the property.

The Maisel Partnership's attorney drafts a contract. It sets out all the necessary elements of such a contract including closing requirements, title insurance, escrow accounts, survey requirements, soil testing contingencies, etc. It also includes the zoning contingency allowing the Maisel Partnership to opt out of the contract if the zoning change is not acquired within a reasonable time. The draft does not include an agreed price to be paid but has blanks for filling this in. The draft is sent to Ceco.

February 28, 1978

A meeting is held between representatives of the Maisel Partnership and Ceco. Among those attending are attorney David Malfar for the Maisel Partnership, Elmer Gustafson, who is chairman of the board and chief executive officer for Ceco, and the individual real estate agents for the two parties.

Gustafson tells Malfar that he has seen the contract and it appears to be satisfactory but wants to know why there is no price quoted in the contract. Malfar explains that the Maisel Partnership has previously dealt with the real estate agent representing Ceco and suffered a bad experience. The Maisel Partnership was negotiating through this agent to buy a piece of property from the Victor Comptometer Company. After extensive negotiations, the Maisel Partnership finally quoted a price and thereafter the Victor Company suddenly received various offers at a higher price. Malfar says he believes the real estate agent used the quoted price for bid-shopping and he does not want the Maisel Partnership to suffer the same experience again.

Upon hearing this, Gustafson assures Malfar he is dealing with honorable and reliable people. Malfar asks Gustafson that if they reach agreement as to price does Gustafson have the power to bind Ceco to the sale. Gustafson says he does and he considers the contract to be satisfactory, though the language will have to be gone over by Ceco's lawyers.

Malfar then asks whether Gustafson has tried to sell the property to the Burlington Northern which owns property next to the Ceco property and seems to be a natural candidate as a buyer. Gustafson says he has but Burlington is not interested.

After further discussion, Malfar says the Maisel Partnership will pay $3.8 million in two installments. Gustafson agrees to this. The parties then discuss many of the details of the contract and agree to some changes. Towards the end of the meeting, Gustafson asks how Malfar will proceed with the zoning. Malfar explains his normal procedure for obtaining zoning changes. Gustafson tells Malfar that his method is too slow, that he, Gustafson, knows how the town board works and he can get it done much faster than Malfar proposes.

After further discussion, Malfar agrees to change the zoning contingency in a particular manner and tells Gustafson that the Maisel Partnership will be ready, after the contract is signed, to proceed with the zoning hearings before the town board at any time and in any manner Gustafson wants. Gustafson tells him, "Fine," put the necessary changes in the contract "and we have got a deal."

March 1, 1978, to April 18, 1978

Malfar meets with Hugh King, an attorney with Jenner and Block. Ceco has retained Jenner and Block to assist it in making the final agreement. Malfar and King discuss a second draft of the contract that has been prepared by Malfar. The new contract has the parties agreeing to cooperate with each other and use their best efforts to obtain the zoning change. The contract allows the Maisel Partnership 270 days in which to obtain the zoning change. The 270 days is to begin to run after certain preliminary matters required by the contract are carried out. If zoning is not obtained within the 270 days both parties have the right to terminate the contract unless, in the alternative, the buyer elects to waive the zoning contingency and buy the property or pay certain sums to extend the 270-day period.

King tells Malfar that he has made a cursory study of the contract and is concerned about the zoning contingency. He believes it gives the Maisel Partnership a free option. He wants a specific zoning standard drafted so that if that standard is approved by the town board, the Maisel Partnership will be bound. He also says that he wants language in the contract giving Ceco the option to participate in the zoning hearings. Malfar agrees to do this.

On March 10, 1978, the Ceco board of directors passes a resolution authorizing management to sell the property to the Maisel Partnership for $3.8 million. Thereafter, Gustafson calls Malfar to ask him how things are progressing. Malfar refuses to discuss anything with Gustafson because he has talked to King, Ceco's attorney from Jenner and Block, and he does not believe it is proper for him to talk to another attorney's client without that attorney's permission. Gustafson criticizes his attorneys and says he thinks the attorneys are moving too slow.

Thereafter, Malfar drafts a proposed zoning standard detailing all the zoning changes needed. He meets with King to discuss the standard. King objects to some of the particular items listed and Malfar explains their necessity. No specific agreement is reached.

In the middle of April, Malfar is contacted by a Jenner and Block attorney who asks Malfar if the transaction can be made a tax-free exchange. The plan is to have the Maisel Partnership buy other property that Ceco wants, and the Maisel Partnership will then transfer this property to Ceco in return for Ceco's property. By doing this, Ceco will not have to pay a capital gains tax ...


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