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Peters & Fulk Realtors, Inc. v. Shah





Appeal from the Circuit Court of Cook County; the Hon. William R. Quinlan, Judge, presiding.


Plaintiff, Peters & Fulk Realtors, Inc., is a real estate broker. Defendant, Arvind Shah, is alleged to be the purchaser of certain real estate in Cook County. The seller, who is not a party to this litigation, notified defendant that he was in default under the terms of their sale contract. The defendant-purchaser responded that the contract was null and void on its face and demanded that his earnest money promissory note be returned.

Defendant executed a promissory note payable to the plaintiff-broker in the sum of $150,000. The due date on the face of the note was "2 days after acceptance of contract on Euclid Center." The alleged contract, dated September 23, 1980, between the seller and the defendant, as purchaser, provided in part as follows:

"4. PURCHASE PRICE: The purchase price is $1,680,000.00.

5. INITIAL EARNEST MONEY: Purchaser has paid the initial earnest money * * * in the sum of $150,000.00 to Century 21 Peters and Fulk Realtor as escrowee. If any portion of the initial earnest money has been deposited in the form of a promissory note, said note must be redeemed by the Purchaser within 2 days after the acceptance of the contract. Failure of the Purchaser to redeem the note shall constitute a default. [The] Earnest money and this agreement shall be held by Century 21-Peters and Fulk Realtor, as Escrowee, for the benefit of the parties hereto.

If a dispute arises between the Seller and the Purchaser as to whether a default has occurred, Realtor shall hold the earnest money and pay it out, less commission, if any as agreed in writing by Seller and Purchaser and in the event that agreement cannot be reached by Seller and Purchaser within thirty (30) days after written notice to the Realtor that such a dispute has arisen the parties agree that the Realtor may deposit the funds with the Clerk of the Circuit Court."

The pertinent provisions of the rider attached to and made part of the September 23, 1980, contract state as follows:


The purchase price shall be paid as follows:

a. $300,000.00 at the time of execution of a final contract to purchase and delivery of possession of the premises, leaving an unpaid balance of $1,380,000.00.

7-a In the event that the purchaser elects to do so, he may exchange his 85 acres farm property in Joliet, Illinois area on December 31, 1982 for a credit against the purchase price in the amount hereafter agreed to between the parties before executing the final contract."

The sale was not completed. On October 10, 1980, the seller notified defendant that he was in default for his failure to redeem the note within two days after acceptance. The seller declared "the agreement to be null and void" and further stated: "Under these circumstances we are placing the property on the market for sale." Defendant responded that "[a]s previously advised, the purported contract dated September 23, 1980 was obviously void on its face. Accordingly, we repeat our earlier demand that the earnest money note dated September 18, 1980 be returned immediately."

On December 23, 1980, plaintiff confessed judgment on the note with the contract and riders attached. Thereafter, the judgment was opened and defendant filed an answer and affirmative defenses. Defendant then filed a motion for summary judgment to which plaintiff responded. After a hearing, the trial court granted defendant's motion for summary judgment and dismissed plaintiff's complaint with prejudice. The trial court stated: "I have not affirmatively found anybody's rights as to whether or not there was a valid underlying contract." The court decided that "there was no material issue of fact" and that based on Shelton v. Sulek (1955), 5 Ill. App.2d 186, 125 N.E.2d 313, plaintiff had no standing to bring this action. Plaintiff appeals.

Plaintiff argues that the trial court erred by granting summary judgment to defendant on the basis of Shelton. In Shelton, defendant-purchaser made a written offer to purchase real estate. Pursuant to terms of that offer, he executed a promissory note for an earnest money deposit payable to the real estate broker, who was to act as escrowee. The offer was accepted, but the following day defendant served a written notice of withdrawal and requested return of the earnest money deposit. Thereafter, plaintiff-real estate broker obtained a judgment ...

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