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Pelz v. Streator National Bank

OPINION FILED JULY 28, 1986.

R. PETER PELZ ET AL., PLAINTIFFS-APPELLEES,

v.

STREATOR NATIONAL BANK, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Marshall County; the Hon. James M. Bumgarner, Judge, presiding.

JUSTICE BARRY DELIVERED THE OPINION OF THE COURT:

Defendant, Streator National Bank, appeals from summary judgment entered by the circuit court of Marshall County in favor of plaintiffs, R. Peter and Carol Pelz, for breach-of-contract damages and attorney fees and costs totaling $39,810.26.

Plaintiffs sued to recover the balance due on an installment contract for the sale of commercial property located in Toluca, Illinois. An agreement for warranty deed was entered into on May 1, 1980, between plaintiffs, as sellers, and Virginia and Merlin Elliott, as buyers. The agreement recites that the purchase price is $30,000, payable by a down payment of $5,000 and in monthly installments thereafter of $358.68. Standard terms for default and acceleration of the balance due upon default at the seller's option are set forth. In the event of litigation upon default, the seller is entitled to recover costs of suit and reasonable attorney fees. The parties' rights of assignment also appear in standard form, allowing the buyers the right to assign their interest only upon the sellers' written consent. The agreement is binding on the parties' "heirs, devisees, legatees, personal representatives, successors and assigns."

Defendant bank was the assignee of the Elliotts' interest pursuant to an assignment dated October 13, 1981. Plaintiffs' signed consent to assignment appears on the last page of the four-page assignment document. The document, prepared by counsel for the bank and duly recorded by the defendant bank, is the primary source of the dispute before us. It states, in pertinent part:

"[W]hereas the undersigned, Merlin Elliot [sic] and Virginia Elliot [sic], desire to assign their Buyers' interest in said Installment Contract to the Streator National Bank, Streator, Illinois, for financing purposes,

NOW, THEREFORE, in consideration of a loan which the Streator National Bank, Streator, Illinois, has made to the Buyers in the above described Installment Contract, and in consideration of all future loans to be made to them by said Streator National Bank, Streator, Illinois, and in consideration of other good and valuable consideration received by said Buyers from the Streator National Bank, Streator, Illinois, receipt of which is hereby acknowledged, the said Merlin Elliot [sic] and Virginia Elliot [sic] hereby sell, convey, assign, and set over to the Streator National Bank, Streator, Illinois, all their right, title and interest as Buyers in the above described Installment Contract with R. Peter Pelz and Carol Pelz, this assignment to remain in full force and effect until expressly canceled in writing by said Streator National Bank, Streator, Illinois.

This assignment is made for security purposes only and in the event Merlin Elliott and Virginia Elliott shall repay the loan or loans from the Streator National Bank, Streator, Illinois, for which this assignment is given as security, according to the terms of said loan or loans, then, when the terms of said loan or loans have been fully satisfied by said borrowers, the said Streator National Bank, Streator, Illinois, shall release this assignment in writing. In the event the said Merlin Elliott and Virginia Elliott shall default in any of the payments due from them to the Streator National Bank, Streator, Illinois, on the loan or loans hereinabove referred to, then the Streator National Bank, Streator, Illinois, may deem this assignment to be in full force and effect and consider itself as the vendee under said Installment Contract with R. Peter Pelz and Carol Pelz, hereinabove described. It being understood that the deed contemplated by said Installment Contract has been executed and is now held in escrow, in order to fully protect the Streator National Bank, Streator, Illinois, assignee under this instrument Merlin Elliott and Virginia Elliot [sic] have made, executed, acknowledged and delivered to the Streator National Bank, Streator, Illinois, together with this assignment, a warranty deed conveying to the Streator National Bank, Streator, Illinois, the above described real estate, and in the event the deed contemplated by the aforesaid Installment Contract is delivered while this assignment is still outstanding, naming Merlin Elliot [sic] and Virginia Elliot [sic], as grantees, the Streator National Bank, Streator, Illinois, may use the warranty deed last hereinabove referred to from the said Merlin Elliot [sic] and Virginia Elliot [sic] to convey the title to the Streator National Bank, Streator, Illinois, in fulfillment of this assignment.

The purpose of the aforesaid arrangement is simply to render the Streator National Bank, Streator, Illinois, secure in its loan or loans to the said Merlin Elliot [sic] and Virginia Elliot [sic] and to place the Streator National Bank, Streator, Illinois, in position to take title to the above described real estate if necessary in the event of default in the repayment of said loans.

In the event the said Merlin Elliot [sic] and Virginia Elliot [sic] shall fail to make the payments due on the aforesaid Installment Contract as said payments become due, or shall otherwise fail to perform any of the covenants entered into by them in said Installment Contract dated May 1, 1980, such as providing necessary insurance coverage, paying taxes, etc., so that a default in the terms of said Installment Contract dated May 1, 1980, appears imminent, the Streator National Bank, Streator, Illinois, may make the installment payments provided in said Installment Contract to R. Peter Pelz and Carol Pelz, and may provide insurance, pay taxes, or take any other steps necessary to fulfil the Buyers' obligations under said Installment Contract dated May 1, 1980, in order to keep said Installment Contract in full force and effect, and in the event the Streator National Bank, Streator, Illinois, shall pay any such installments, or make any expenditures for insurance, taxes, or otherwise, to keep said Installment Contract dated May 1, 1980, in full force and effect, Merlin Elliot [sic] and Virginia Elliot [sic] shall immediately reimburse the Streator National Bank, Streator, Illinois, for such expenditures, upon demand, and upon failure so to do, the Streator National Bank, Streator, Illinois, shall be deemed the vendee under said Installment Contract dated May 1, 1980, and if and when the deed contemplated by said Installment Contract and now held in escrow is delivered, the Streator National Bank, Streator, Illinois, may use the above described warranty deed from Merlin Elliot [sic] and Virginia Elliot [sic] to complete the conveyance of the title to said Streator National Bank, Streator, Illinois."

The Elliotts made their last installment payment to the plaintiffs in November 1982. They filed a petition in bankruptcy in December 1982. Defendant bank caused the trustee in bankruptcy to obtain an order of abandonment of the property. The Elliotts' debts to the plaintiffs and the bank were discharged by an order of February 23, 1983.

The bank paid to plaintiffs the installment payments due for December 1982 through February 1983 and then defaulted. Plaintiffs' demands for installment payments due thereafter were ignored. After the Elliotts' discharge in bankruptcy, the bank requested that its insurance agency issue a liability and casualty policy for the property in its name but later allowed the policy to expire. It notified the tenants in possession of the property that it was the acting landlord and collected rent from the three tenants, apparently from December 1982 until July 1983. Plaintiffs thereafter took over payments for insurance and property taxes, but received no rent from any of the tenants.

Plaintiff introduced proof of contract damages of $29,494.91 for the balance due on the contract. Attorney fees and costs of $10,315.35 were awarded by the court after hearing testimony on reasonableness of the time spent on the case by plaintiffs' attorneys and the existing one-third contingent-fee agreement as compared to customary hourly fees.

In this appeal, defendant raises several issues: (1) whether the assignment instrument is unenforceable against the bank because it violates the Statute of Frauds; (2) whether the trial court erred by finding the terms of the installment contract enforceable against the bank as assignee of the vendees' interest because the assignment instrument is by law in the nature of a mortgage subject only to the remedy of foreclosure; (3) whether the trial court erred by not requiring plaintiffs to tender into court a deed and evidence of merchantable title; and (4) whether the trial court erred as a matter of law in awarding damages for the balance due on the installment contract without regard to the market value of the property at the time of breach. We affirm.

• 1 The bank's contention that the assignment instrument violates the Statute of Frauds is not well taken. First, the defense has been waived for failure to plead it as an affirmative defense. (Haas v. Cravatta (1979), 71 Ill. App.3d 325, 389 N.E.2d 226.) Second, assuming arguendo that it has not been waived, the bank is nonetheless estopped to deny the assignment by its conduct in preparing it, duly recording it and performing pursuant to its terms. Welsh v. Jakstas (1948), 401 Ill. 288, 82 N.E.2d 53.

• 2 The next issue presented for our review is not novel to our court, but the body of case law addressing it is sparse, indeed. We are asked to determine whether the assignment here rendered the bank liable for the balance due on the installment contract entered into between the assignor/purchasers (the Elliotts) and the vendors (plaintiffs Pelz). It is settled law in this State that "[a]n executory contract for the purchase of real estate may be assigned, and the interest that is acquired is protected in a court of law." In re Estate ...


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