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Spagat v. Schak





Appeal from the Circuit Court of Du Page County; the Hon. John S. Teschner, Judge, presiding.


The defendant, Donald S. Schak, appeals from the judgment entered on July 25, 1983, in the circuit court of Du Page County which awarded the plaintiffs, Martin Spagat and Beau Monde Associates Ltd., $900,000 for breach of contract, $75,000 for return of moneys paid and $93,416 in prejudgment interest. The plaintiffs cross-appeal from the trial court's denial of punitive damages on count V of their complaint for fraud.

The case arises out of a March 19, 1979, real estate contract for the sale of an apartment complex to the plaintiffs for $6.5 million. The fee title to the property had been severed, with the defendant holding fee title to the improvements and a leasehold in the land and Property Capital Trust, a real estate investment trust, holding fee title to the land. The court, after finding that the contract was for the sale of both fee titles, held that the defendant wilfully breached the contract by failing to obtain the fee title to the land and by negotiating to sell his improvements and leasehold estate to a third party while the contract was still in effect. The defendant raises several issues on appeal.

On March 19, 1979, the plaintiff, Martin Spagat, and the defendant, Donald S. Schak, executed a real estate sales contract for the Beau Monde Apartments, a 279-unit apartment complex located in Lisle for the price of $6.5 million. The purchaser was listed as, "First Bank of Oak Park Trust #11636, Martin Spagat, beneficiary of and agent for remaining beneficiaries," although it is undisputed that this trust never came into being. The seller was listed as, "Devon Bank Trust 2120 and Donald S. Schak, sole beneficiary." The contract was signed by Spagat and Schak individually, and Spagat gave Schak $25,000 as earnest money.

The closing date under the contract was April 20, 1979, but two later amendments extended it to August 15, 1979. In early August Martin Spagat formed an oral partnership called Beau Monde Associates Ltd. to purchase the apartment complex. The partners were himself, John Kusmiersky, Neil Tyson and Matthew Spagat. On August 15, 1979, Martin Spagat and Donald Schak executed a third amendment to the contract which increased the earnest money from $25,000 to $50,000 and extended the closing date to January 2, 1980. Spagat also orally agreed to assign to the partnership whatever rights he had in the contract. On August 28, 1979, a fourth amendment was executed which put into writing that Spagat had conveyed to the association all of his right, title and interest in the contract and on September 17, 1979, a certificate of limited partnership for Beau Monde Associates Ltd. was recorded in Du Page County.

On January 25, 1980, the parties executed a fifth amendment which again extended the closing and also required the plaintiffs to pay the defendant $10,000 then and $5,000 each month thereafter until the closing. The parties stipulated that the plaintiffs made all of the required payments, totaling $75,000.

In February or early March of 1981, Schak requested a loan confirmation from Spagat. On March 2, 1981, Kusmiersky obtained written confirmation of his $1.9 million loan from Abacus Mortgage Investment Company, and Spagat delivered the confirmation letter to Schak on the same day.

On April 1, 1981, Martin Spagat, Donald Schak and George Bigelow, a representative from Property Capital Trust, met in Spagat's office to try to agree on a price for Schak's purchase of the fee title to the land from Property Capital Trust. Bigelow stated that his investors would probably accept $950,000 to $1,000,000 for the property. This was far in excess of Schak's March 2, 1981, offer to purchase the property for $675,000, and no agreement for the sale of the fee title was reached.

On the final closing date of April 15, 1981, two full years after the closing date set in the original contract, Schak had not obtained the fee title to the land nor obtained a mortgage subordination as required by the escrow instructions. The plaintiffs, aware that the defendant could not perform the contract, did not make a formal offer of the purchase price.

On May 4, 1981, Spagat received a letter from James Kemp, Schak's attorney, claiming that the plaintiffs were in breach of contract but extending the closing date to May 26, 1981. This led to a meeting between the parties at Kemp's office, where a settlement was discussed. While Spagat testified that he thought a settlement of $250,000 in his favor had been reached, Schak vehemently denied any such settlement agreement at trial.

In June or July of 1981, Schak sold his interest in the property, the fee title to the improvements and a 65-year leasehold on the land, to Anthony Navilio for $6.5 million. While Schak testified that he began negotiations for this deal in July of 1981, Navilio's attorney, Lenard Blum, testified that negotiations started in mid-April, probably between April 15 and 18.

The plaintiffs presented Eugene Stunard as an expert witness. He testified that the fair market value of the apartment complex (fee title to the land and the improvements) from April 15, 1981, through September of 1981 was $7.4 million. Schak offered no evidence on the issue of damages.

• 1 On appeal the defendant first argues that the court erred in finding an enforceable contract between the parties because the agreement lacked consideration, violated the statute of frauds and was too uncertain to be enforceable. We need not reach the merits of these arguments, however, since they are affirmative defenses and were waived by the defendant's failure to raise them in his answer.

Under section 2-613(d) of our Code of Civil Procedure (Ill. Rev. Stat. 1981, ch. 110, par. 2-613(d), formerly Ill. Rev. Stat. 1981, ch. 110, par. 43(4)), if a defendant wishes to assert an affirmative defense at trial, he is required to specifically plead it so that the plaintiff is not taken by surprise. If he fails to do so, he is deemed to have waived the defense, and it cannot be considered even if the evidence suggests the existence of the defense. Parker v. Dameika (1939), 372 Ill. 235; Economy Truck Sales & Service, Inc. v. Granger (1965), 61 Ill. App.2d 111; Terminal Freezers, Inc. v. Roberts Frozen Foods, Inc. (1976), 41 Ill. App.3d 981; M. Loeb Corp. v. Brychek (1981), 98 Ill. App.3d 1122.

• 2 The defendant argues he has not waived these defenses, relying on J. & R. Electric Co. v. Edward P. Allison Co. (1970), 125 Ill. App.2d 123, and Ricke v. Ricke (1980), 83 Ill. App.3d 1115. Neither case is applicable here. In J. & R. Electric the court held that the grounds urged for reversal were asserted in the defendant's motion to dismiss and were implicit in the defendant's answer and therefore ...

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