Appeal from the Circuit Court of Lake County; the Hon. Harry
D. Strouse, Jr., Judge, presiding.
JUSTICE HOPF DELIVERED THE OPINION OF THE COURT:
Plaintiffs, James and Joyce Juzwik, as heirs of the estate of Genevieve Juzwik, appeal from an order of the circuit court of Lake County which, at the close of plaintiffs' case, entered a judgment against them and in favor of defendant, Edmund A. Juzwik. Plaintiffs had brought suit for an alleged breach of a contract in which defendant guaranteed payment of the principal and interest due to Genevieve Juzwik upon certain obligations. The contract required defendant to act on the guarantee after he received written notice of any default by the primary debtor. On appeal, plaintiffs assert that a lack of formal demand at the time of default in 1971 should not bar their recovery when defendant had actual notice of the default, and that the demand when made was timely.
Defendant was divorced from Genevieve Juzwik in 1969. In keeping with the terms of the decree of divorce, pursuant to which defendant was to transfer to Genevieve certain assets, the parties entered into a memorandum of agreement. The agreement included a schedule of assets, but stated that Genevieve had no knowledge of their value, except as represented by defendant. Therefore, defendant guaranteed to his ex-wife the payment of principal and interest due upon each of the listed assets. The guarantee provision read:
"In the event of the making of default in respect of the payment of principal or any installment of interest or the performance of any other covenant on the part of the maker upon any of the obligations aforesaid, the said Edmund Juzwik covenants and agrees that he will, within 45 days from and after the furnishing to him on the part of the said Genevieve Juzwik of written notice of the occurrence of such default, directed by registered mail of the United States to his last-known address, provided that the person defaulting has not cured said default and made the said obligation current within said 45-day period, either do or cause to be done at his option, one of the following acts in satisfaction of such default * * *."
The agreement then provided that defendant could cure any default by making a cash payment equal to the face value of the obligation plus accrued and unpaid interest, or by delivering a substitute security of comparable value. Defendant also agreed to pay any reasonable attorney fees incurred in enforcing the agreement.
Among the items listed in the schedule accompanying the agreement was a chattel mortgage on two aircraft and associated items from Canadian Voyageur, Ltd. This item had an unpaid principal balance of $52,000 and provided an annual income of $3,380. Interest payments were due on the 15th of each month; principal payments of $3,000 were due on the 15th day of June and November in each year, with the final payment of the unpaid balance of principal and interest to be made on December 15, 1974.
In March 1970, defendant assigned to Genevieve Juzwik all of his right, title and interest in the Canadian Voyageur chattel mortgage. Genevieve then assigned all of her interest in the mortgage to a trust at the First National Bank of Lake Forest.
The last time Canadian Voyageur made a payment toward principal was in June 1971, and the last payment of interest was in August 1971. On May 1, 1972, a trust officer of the First National Bank of Lake Forest wrote defendant in an attempt to determine the current balance due on the chattel mortgage. The bank had been advised by the attorney for Canadian Voyageur that defendant had received seven overdue payments owed on the chattel mortgage, and the bank sought by its letter to ascertain if this was in fact the case. Defendant returned the bank's letter with handwritten notations indicating that he did not verify the payments listed by the bank. Defendant stated that the payments he received from Canadian Voyageur were made for a different purpose and did not in any way apply to the mortgage. Defendant also stated:
"You must have received a November payment. If not, why steps have not been taken to collect same or why was I not notified before this. You also verified this mtg [sic] originally. If payments are not made as required you should take steps to foreclose mtg [sic]. I refuse to be a party to this in as much [sic] as you failed to advise me in proper time of any default."
Following this exchange of correspondence, defendant took no action with respect to the mortgage because, he testified, he had no formal notice of any default.
On February 5, 1975, an attorney for Genevieve Juzwik wrote to defendant, advising him that the chattel mortgage, calling for the payment of the balance of principal and interest on January 1, 1975, was in default. The attorney demanded that defendant either make a cash payment equal to the face value of the mortgage plus accrued and unpaid interest, or deliver a substitute security of comparable value. Defendant testified that he had suffered a stroke at about this time, and did not recall whether he had received this letter. On November 22, 1978, Mrs. Juzwik's attorney again wrote to defendant regarding the chattel mortgage. This letter indicated that defendant had made a response to the attorney's 1975 letter.
On December 1, 1978, defendant responded to the most recent correspondence as follows:
"In reply to your letter of Nov. 22nd, I direct your attention to my letter in response to yours of 2/5/75 which referred to the provision in the decree that I must be notified within 30 days of any default. This was not done in sufficient time so that steps could be taken to take possession of the mortgaged equipment; in this case aircraft.
By the time your office notified me, the equipment was removed and could not be repossessed. Furthermore, the Canadian mortgage law requirement was not met by your ...