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Bachewicz v. American National Bank





Appeal from the Appellate Court for the First District; heard in that court on appeal from the Circuit Court of Cook County, the Hon. Albert Green, Judge, presiding.


Rehearing denied April 1, 1986.

Following a bench trial in the circuit court of Cook County, the plaintiffs, B&B Investment Company and its individual partners, were awarded a total of $632,063.80 in damages, plus interest, in their action for breach of a contract to convey real estate. The appellate court agreed that a valid contract for the sale of the property had been formed but struck the greater part of the damages award as unsupported by the evidence. (126 Ill. App.3d 298.) We allowed the plaintiffs' petition for leave to appeal (94 Ill.2d R. 315(a)), and that brought before us as well (see 87 Ill.2d R. 318(a)) the argument by one of the owners that no binding contract for sale ever came into existence.

The property in question is a 21-story, 90-unit residential building located at 5601 North Sheridan Road in Chicago. The Statesman Limited Partnership (Statesman) acquired the beneficial interest in the property in 1973 and later that year assigned half the interest to another limited partnership, 5601 North Sheridan Associates (Associates). Following that, Statesman and Associates operated the building as a joint venture; legal title to the property remained in the American National Bank, as trustee of an Illinois land trust. In 1977, after failed negotiations among B&B Investment Company (B&B), Associates, and Statesman, B&B submitted to Associates an offer to buy the property, and Associates accepted the offer, subject to its acceptance by Statesman. Associates purported to invoke a deadlock provision in the owners' joint venture agreement; under the provision, Statesman's consent to the sale could result if it did not elect instead to buy out Associates' interest in the property. Statesman did nothing in the time allowed, and B&B then went ahead with its arrangements to purchase the property. Denying that a valid contract had arisen, Statesman later acquired Associates' interest in the property and eventually sold the building to a third party for more than B&B had offered.

The plaintiffs originally brought an action in October 1977 to compel specific performance of the purported contract, and the complaint was dismissed on Statesman's motion. The appellate court reversed, holding that the deadlock provision in the joint venture agreement could have provided Associates with the necessary authority to enter into a binding contract for the sale of the entire property. (75 Ill. App.3d 252.) On remand, the circuit judge found that a valid, enforceable contract had arisen and awarded the plaintiffs damages of $599,767 as the difference between the contract price and the fair market value of the property at the time of the breach. The court also awarded the plaintiffs incidental damages totaling $32,296.80 and prejudgment interest. Associates had been dismissed as a defendant in B&B's suit. In a related action that had been consolidated for trial, the court awarded a real estate brokerage commission of $95,000. On appeal, the appellate court affirmed the holding that a valid, enforceable contract had come into existence but, over a dissent, reversed the major part of the damages award as unsupported by the evidence. (126 Ill. App.3d 298.) The appellate court let stand the award of incidental damages. The court also affirmed the award of the brokerage commission; that action is not a part of this appeal.

Statesman argues that it never became bound by an agreement to convey the property to B&B. Determinative of this question is the parties' joint-venture agreement. Paragraph 9 of the agreement contained two provisions concerning the transfer of interests in the property. The first provision gave a preemptive right, or right of first refusal, in the event that one of the joint venturers received an offer for its interest alone; the provision allowed the other partnership 30 days in which to agree to purchase that interest on the same terms offered by the outsider. Paragraph 9 of the joint-venture agreement also contained a deadlock provision, of relevance here. It provided:

"In the event an offer is received for the purchase of the entire apartment building, and the parties cannot agree whether to accept said offer, the party who desires to accept said offer shall so advise the other party in writing. Thereafter, said other party shall have thirty (30) days within which to either consent to the sale as proposed by such third party or may, within said thirty (30) day period, elect in writing to purchase the interest of the party desiring to sell for an amount equal to the proportionate share of the offer which would have been received by the party desiring to sell its interest in the apartment building. Failure to make an election within the thirty (30) day period shall be deemed to be a consent to such proposed sale, and the parties shall thereafter proceed to consummate such sale, and both parties agree to execute all necessary documents to complete such sale."

A co-owner of real estate generally is not bound by another owner's agreement to convey the entire property (Dineff v. Wernecke (1963), 27 Ill.2d 476; Madia v. Collins (1951), 408 Ill. 358), though he may be bound if the other, acting as an agent, has the necessary authority (Penner v. Frisch (1978), 57 Ill. App.3d 947). To satisfy the Statute of Frauds, the agent's authority would have to be in a writing signed by the party to be charged. (Ill. Rev. Stat. 1983, ch. 59, par. 2.) Partnership principles govern joint ventures (Burtell v. First Charter Service Corp. (1979), 76 Ill.2d 427), for a joint venture essentially is a partnership carried on for a single enterprise (Smith v. Metropolitan Sanitary District (1979), 77 Ill.2d 313).

In finding the existence of an enforceable contract for the conveyance of the property, the appellate court concluded that Associates, as an agent, was acting in furtherance of the joint venture's business in conditionally accepting B&B's offer to purchase the entire property and that Statesman's acceptance of the offer was effected by operation of the deadlock provision in the joint-venture agreement. A review of the evidence supports Statesman's argument, however, that it did not become bound under the deadlock provision by Associates' purported agreement to sell the property to B&B.

Late in 1976 Allan Bachewicz, a general partner of plaintiff B&B, learned that the building in question was for sale. He initially submitted an offer to purchase the property in February 1977, proposing to pay a total of $700,000, in a combination of cash and a promissory note, and to assume liability under the existing mortgage, which at that time stood at about $1.1 million. The offer was considered and rejected later that month. At that time Bachewicz met with Milton Schraiber or David Ziegler, who were the two general partners of the Statesman group, and with William Wilkow, who was one of the general partners of Associates; the other general partners of Associates were William Wilkow's father, Mendel, and an uncle, Joseph. Also attending the meeting in February were Richard Marmor, an employee of William Wilkow, and two real estate brokers involved in the sale. Associates found B&B's offer acceptable but Statesman did not, preferring that more cash be paid at closing. An alternative proposal grew out of this meeting, involving the trade of another piece of property, but it too proved unsuccessful.

William Wilkow was eager to sell Associates' interest in the property, and late in May 1977 he sent to the various parties a memorandum expressing some frustration at their inability to reach an agreement and inviting them to meet on a specific date to discuss the matter further. It appears from the record that a meeting was held early in June 1977, though not on the date that Wilkow had suggested. Bachewicz, William Wilkow, and Schraiber or Ziegler attended. Bachewicz decided to make an all-cash offer — all the money would be paid at closing — and he believed that there was general agreement to this plan. Following the meeting, Bachewicz submitted to the parties a draft of a contract, dated June 10, 1977. This was never adopted. Bachewicz was told that the Statesman group again was dissatisfied with the amount of cash that it would be receiving at closing. Finally, a real estate agent learned that William Wilkow's employee, Richard Marmor, had discovered a joint venture agreement that might prove to be helpful. Bachewicz then submitted to Associates a written offer, with a cover date of June 29, 1977, for the purchase of the entire property. It was conditionally accepted by William Wilkow's father, Mendel Wilkow. In a letter to B&B dated July 6, 1977, Mendel Wilkow wrote:

"The undersigned as 50% beneficial owner of the above property herewith accepts your offer to purchase the above property dated June 29, 1977, a copy of which is attached hereto as Exhibit A (the `Offer'), subject to a condition precedent: the acceptance of the Offer by The Statesman, an Illinois Limited Partnership, being the remaining 50% beneficial owner of the above property, which acceptance may be express or implied and within the time therefor allowed, pursuant to paragraph 9 of that certain Agreement between the undersigned and The Statesman, dated in 1972, a copy of which is attached hereto as exhibit B.

Our acceptance shall be deemed effective coincident with time of acceptance by The Statesman as aforesaid."

Though Bachewicz had been told, before he submitted the offer, that the joint-venture agreement might be helpful, he had not previously seen it. On the same day that Mendel Wilkow sent to B&B notice of Associates' conditional acceptance of the offer, Marmor sent a ...

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