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Barrett v. Lawrence

OPINION FILED NOVEMBER 12, 1982.

KATHLEEN D. BARRETT, PLAINTIFF-APPELLANT,

v.

WALTER LAWRENCE ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. Anthony J. Scotillo, Judge, presiding.

JUSTICE ROMITI DELIVERED THE OPINION OF THE COURT:

Plaintiff entered into a contract to purchase a condominium. While several payments were made, title has not yet passed to plaintiff. She filed suit to force defendants to put the monies paid in escrow, as required by section 24 of the Condominium Property Act (Ill. Rev. Stat. 1979, ch. 30, par. 324). The trial court denied the petition, ruling (1) that the statute was not applicable and (2) that plaintiff unduly delayed in asserting her demand for the escrow account. We reverse the judgment of the trial court, holding that: (1) since title under the original contract was to pass within a year, the fact that the contract was later amended to provide for passage within a year of the amendment but more than a year after the date of the original contract did not take the contract out of the scope of the statute; (2) plaintiff had no duty to require defendants to comply with the statute, especially since defendants failed to show plaintiff was aware of defendants' violation of the statute until shortly before suit was filed; and (3) an injunction is the proper remedy where a seller refuses or fails to establish the escrow account required by statute.

Plaintiff entered into a contract with the defendant on March 18, 1981, to purchase a condominium. Plaintiff was to pay $1,000 upon execution of the contract, and $7,000 on April 1, 1981, both sums to be held by the broker and paid to the sellers on the date possession was delivered. She was to pay $3,850 upon the date possession was delivered, and the principal balance of $79,650 with 13% interest was to be paid in installments, with the final payment due on December 1, 1981, at which time title would be conveyed to plaintiff. All of the earnest money was to be deposited in an interest-bearing escrow account, the interest to be paid to plaintiff. There was no provision in the contract stating that defendants did not intend to comply with the statutory requirement that all payments on the purchase price be placed in escrow.

On December 7, 1981, this contract was amended. The amendment provided that the final date for payment and thus the date for the conveyance of title was to be extended to January 1, 1982, and thereafter without further action of the parties to April 1, 1982. In return it was agreed that the sums paid each month after the date of the amendment were to be treated as payment of interest, not principal, and defendants were to have the right to mortgage the property.

In January 1982, plaintiff filed suit for rescission of the contract. On January 22 her attorneys wrote defendants' attorney asking the identity of the escrow agent and the current balance and its amount of interest in the account. The record does not disclose whether the letter was answered, but plaintiff apparently discovered that no escrow account had been established, despite the fact it was required by statute. Accordingly, on April 15, 1982, plaintiff filed a motion to compel the establishment of the escrow account required by statute. Defendants in their response contended: (1) because of the amendment extending the date for conveyance of title, the contract did not fall within the scope of the statute; (2) an order compelling them to establish an escrow account would cause them undue hardship because they had paid brokerage commissions, attorney fees, title, transfer taxes and other costs relating to the sale; (3) plaintiff was barred by laches because she never requested that an escrow account be established; in fact, defendants contended that plaintiff knew there was no escrow account although there was absolutely no proof to this effect; and (4) plaintiff had an adequate remedy at law. The trial court denied the motion on the grounds that (1) the statute was not intended to apply to the facts here and (2) there was undue delay by plaintiff in asserting the demand to establish the escrow account.

Section 24 of the Condominium Property Act (Ill. Rev. Stat. 1979, ch. 30, par. 324) provides:

"Any deposit, payment or advance in the payment of the purchase price for a unit, received by the developer or his agent other than a payment made for extra work ordered in writing by the purchaser of a unit, shall be held in an escrow account until title is conveyed to the purchaser. The escrow funds shall be segregated in a separate account designated for this purpose. For all contracts entered into after the effective date of this amendatory Act of 1979, the escrow account shall bear interest at 5% per year, all such interest to be credited to the purchaser on the purchase price of the unit. Where the deposits are being held by a real estate broker duly licensed under the laws of Illinois, the funds may be placed in the broker's regular escrow account. Escrow funds shall not be subject to attachment by any creditor of a purchaser or of the developer or by the holder of a lien against any portion of the property.

The provisions of this Section shall not apply to any payment received on account for the purchase of a completed condominium unit under articles of agreement for deed, installment agreement for deed, or lease with option to purchase, if the agreement provides for conveyance of title more than one year after the date of execution of the agreement."

The agreement of March 18, 1981, provided for the transfer of title on December 1, 1981, less than a year after the execution of the agreement. The agreement of December 7, 1981, provided for the transfer of title at the latest by April 1, 1982, less than one year after the execution of that agreement.

I

• 1 Defendants contend that the amendment did not create a new agreement but simply extended the time of the old agreement. Therefore, since the date of the only contract made, according to defendants, was March 18, 1981, the final agreed date for transfer of title was more than one year after the date of execution of the contract and the statute is inapplicable. (Both sides appear to assume that the condominium was completed when the contract was executed since it is clear that the statute is applicable to all uncompleted units regardless of the delay before passage of title.) However, the law is to the contrary. An agreement when changed by the mutual consent of the parties becomes a new agreement which takes the place of the old. (Mahaffey v. Wisconsin Central Ry. Co. (1909), 147 Ill. App. 43; Beacon Terminal Corp. v. Chemprene, Inc. (1980), 75 A.D.2d 350, 429 N.Y.S.2d 715, appeal denied (1980), 51 N.Y.2d 706, 433 N.Y.S.2d 1026; 17A C.J.S. Contracts sec. 379 (1963); 17 Am.Jur.2d Contracts sec. 470 (1964); and see Folstad v. Farmers Insurance Exchange (1973), 297 Minn. 496, 210 N.W.2d 238; La Canin v. Automobile Insurance Co. (E.D.N.Y. 1941), 41 F. Supp. 1021 (both holding that while it is axiomatic that a newly enacted statute does not control and alter a pre-existing contract, it is applicable where the contract is modified after the statute's enactment).) As the court in Mahaffey stated:

"It is contended by defendant with reference to the addition to the Wisconsin bill of lading made in Chicago: `These words do not make a new contract. They simply change the old one. A new agreement is not established by them, but an existing agreement is "changed at Chicago."' We understand that an agreement when changed, by the mutual consent of the parties, becomes a new agreement. An agreement changed is not the old or prior agreement but a new one. When there is a change the minds of the parties have met again and by the fact of the change a new agreement arises. The minds of the parties may thus meet upon the terms of the old agreement with but the slightest change, yet the agreement then made is a new one. If the parties to a Wisconsin contract, partially performed, come together in Illinois, make some changes in their contract and then reaffirm it the new contract is an Illinois contract." (147 Ill. App. 43, 46.)

It follows, therefore, that at no time was the agreed-upon date for transfer of title more than a year after the execution of the pertinent contract.

• 2 Accordingly, we hold that the statute is clearly applicable and defendants are required by the statute to put "any deposit, payment or advance in the payment of the purchase price" in an escrow account bearing interest at 5%, such interest to be credited to the purchaser on the purchase price of the unit. For this reason we need not address the question whether, since the sellers were obligated to put the funds in escrow before December 7, 1981, if the amendment on that date had extended the time for transfer to a ...


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