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Forman v. Benson





Appeal from the Circuit Court of Lee County; the Hon. Thomas E. Hornsby, Judge, presiding.


Rehearing denied March 31, 1983.

Defendant, Art Benson, appeals from an order of the circuit court of Lee County granting plaintiff Eric Forman specific performance of an installment contract to purchase commercial real estate owned by defendant. The following issues are raised on appeal: (1) Whether the trial court erred in applying a standard of reasonableness to the defendant's approval of plaintiff's credit report; (2) whether the trial court's finding that defendant accepted the offer to purchase was against the manifest weight of the evidence, and (3) whether specific performance was properly granted.

On March 23, 1981, the plaintiff, a chiropractor, executed an offer to purchase certain real estate in Dixon, Illinois, owned by the defendant, an electrician and a refrigeration and heating repairman. The offer was communicated the same day to the defendant at a conference attended by the defendant and three realtors. One of the realtors was Ken Burnell, with whom the defendant had listed the property. The other realtors attending the conference were Cheryl Blackorby and Bill Blackorby, spouses who are partners in another real estate firm. The plaintiff was a client of the Blackorbys, who had been assisting him for the previous several months in his search for a commercial building suitable for use as a chiropractic clinic.

The conference at which the offer was communicated took place in the office of the realtor, Ken Burnell. The terms of the offer were explained to defendant by Cheryl Blackorby. The offer proposed to purchase the property for $125,000, to be paid over a 10-year period. Payments were to be based upon a 30-year amortization rate at 9% interest. Plaintiff was to take possession of the property on September 1, 1981.

Before signing the agreement, defendant expressed concern over the plaintiff's credit worthiness, stating that he "didn't know him from a load of hay." Plaintiff's credit was of special significance to the defendant, since defendant was essentially "acting as a loan company" for plaintiff's benefit. As an assurance to the defendant, Mrs. Blackorby suggested that the contract be made subject to a favorable credit report. This suggestion eased defendant's feelings about the credit, and Ken Burnell thereafter added the following handwritten statement to the offer:

"Subject to seller's approving buyer's credit report, oral on March 24, 1981, and written when ready."

The meaning of this statement was not explained in any detail at the time it was inserted by Mr. Burnell. However, it was uncontroverted that the clause was inserted for defendant's benefit. The contract was subsequently signed by defendant, and $1,000 was deposited by the plaintiff as earnest money.

Ken Burnell, defendant's realtor, testified on behalf of plaintiff Forman. Mr. Burnell stated that defendant indicated to him that he would approve the contract if plaintiff had a good credit report. Mrs. Blackorby also indicated that defendant said he would accept the contract if the credit report was favorable. However, it was defendant's understanding and belief that he would be given time to examine the credit documents, evaluate them and make a decision.

The day after the offer and acceptance was executed, Mrs. Blackorby telephoned the defendant and advised him that an excellent oral credit report had been received. She further told defendant that a written report would be ready in a few days. Defendant sounded agreeable to the oral report and stated he would pick up the written report when it arrived. On Friday, March 27, 1981, Mrs. Blackorby received the written credit report, as well as a personal financial statement prepared by the plaintiff and a letter from Dixon National Bank stating it would lend $35,000 to plaintiff. Mrs. Blackorby gave these documents to defendant that day, explaining the credit report in detail. Defendant stated the report "looks real good," and that he would have his attorney review it and begin the title work on the property.

Between Friday, March 27, 1981, and May 14, 1981, the plaintiff and defendant discussed the pending sale on three occasions. Those occasions took place in the latter part of April, at which time additional financial material, including copies of income tax returns, were furnished at the defendant's request. During those conversations the parties also discussed increases in the purchase price and the interest rate on the contract, as well as retention by the seller of certain personal property on the premises. Plaintiff testified that the seller wanted to raise the purchase price and interest rate, while the defendant testified that, prior to his rejection of the contract he did mention a different price but not in terms of an ultimatum.

On May 14, 1981, the defendant, through the office of Ken Burnell, furnished a written statement rejecting plaintiff's credit and directing the realtor to refund the $1,000 deposit. Plaintiff attempted to discuss the matter further with the defendant, apparently making another offer as an inducement to complete the contract without litigation. Although defendant went to plaintiff's office to discuss another offer, no other offer was accepted by him. In July of 1981 the plaintiff brought this action seeking specific performance of the agreement. On September 1, 1981, plaintiff was ready and able to pay the balance of the down payment, complete the other obligations required by the installment agreement and take possession of the premises. The defendant denied the demand for possession under the terms of the agreement.

The defendant testified that he rejected the credit information because the plaintiff had liabilities of $80,000 and liquid assets of only $24,000. When defendant sought additional information, he was furnished with a corporate tax return showing a $2,000 loss for the tax year. Based on this information, defendant believed the plaintiff was "just breaking even." He had asked for the additional information because he believed the information furnished in the credit bureau report was not very significant. Defendant has had no prior experience as a bank or loan officer.

Thomas Schmidt, loan officer with a local savings and loan association, testified on behalf of the plaintiff. His testimony was uncontroverted to the effect that the plaintiff had an excellent credit rating. Based upon the credit application and credit report of the plaintiff, the savings and loan association would not have hesitated to ...

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