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04/13/87 Leo Palen Et Al., v. Cullom Capital Woodworking

April 13, 1987

LEO PALEN ET AL., PLAINTIFFS-APPELLANTS

v.

CULLOM CAPITAL WOODWORKING, INC., ET AL., DEFENDANTS-APPELLEES



APPELLATE COURT OF ILLINOIS, FOURTH DISTRICT

506 N.E.2d 1062, 154 Ill. App. 3d 685, 107 Ill. Dec. 171 1987.IL.487

Appeal from the Circuit Court of Livingston County; the Hon. William T. Caisley, Judge, presiding.

APPELLATE Judges:

JUSTICE KNECHT delivered the opinion of the court. GREEN and LUND, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE KNECHT

The Livingston County circuit court granted summary judgment for the defendants, finding they could not be held liable for damages resulting from breach of a contract for deed once plaintiffs opted to declare the contract forfeited. We affirm.

On April 27, 1981, plaintiffs entered into a contract for deed with defendant Cullom Capital Woodworking, Inc. (Corporation). Pursuant to a contract provision, defendants Ivan Stoller and Phillip Thames, primary stockholders in the Corporation, personally guaranteed the Corporation's performance of the contract. This guaranty appeared at the bottom of the last page of the primary contract.

The purchase price of the property was $45,000; a $1,000 down payment with the balance due May 1, 1986. During the course of the contract, the Corporation was to make monthly interest payments of $500. If the buyer failed to make these monthly payments, the contract allowed the sellers to declare buyer in default and accelerate the balance due. Should the buyer default, the sellers also had the option under the contract "to treat this Agreement as at an end and to reenter and regain possession of said premises as if this Agreement had never been made."

The buyer fell three months in arrears on the interest payments. Plaintiffs elected to accelerate payment of the balance due under the contract. On August 7, 1985, plaintiffs filed suit to collect the balance due, interest, attorney fees, and costs. This complaint also sought to recover on the personal guaranty executed by defendants Stoller and Thames.

On February 28, 1986, prior to trial, plaintiffs notified the Corporation of their intention to declare the contract forfeited and to regain possession of real estate. Plaintiffs ultimately regained possession of the property and sold it to a third party for some $18,000. The record indicates the guarantor defendants were not only aware of the forfeiture, but wished it to occur.

Defendants filed a motion for summary judgment arguing the plaintiffs could not seek damages pursuant to the contract for deed and the accompanying guaranty after having declared the contract forfeited. The circuit court granted the defendants' motion.

On appeal, plaintiffs concede their actions in declaring the contract forfeited precluded any recovery under the contract from the corporate defendant. However, apparently theorizing the contract forfeiture was a "modification" of the agreement, made with the guarantor's knowledge and consent, plaintiffs argue they are still entitled to collect damages from the guarantors. Plaintiffs also contend the guaranty represents an obligation completely independent of the primary agreement, permitting plaintiffs to enforce the guaranty despite forfeiting the contract.

Generally, a vendor's election to declare a contract for deed forfeited precludes the vendor from obtaining damages for breach of the contract. (Herrington v. McCoy (1982), 105 Ill. App. 3d 527, 434 N.E.2d 67; Morey v. Huston (1967), 85 Ill. App. 2d 195, 228 N.E.2d 544.) If a vendor declares the contract forfeited after filing suit to recover damages under the contract, the vendor abandons the suit for contractual remedies. (Bruno Benedetti & Sons, Inc. v. O'Malley (1984), 124 Ill. App. 3d 500, 464 N.E.2d 292; Morey v. Huston (1967), 85 Ill. App. 2d 195, 228 N.E.2d 544.) Although the language of a guaranty agreement ultimately determines a specific guarantor's liability, the general rule is that discharge, satisfaction, or extinction of the principal obligation also ends the liability of the guarantor. Mazur v. Stein (1942), 314 Ill. App. 529, 41 N.E.2d 979; see also Perino v. Protect-All-Shelters, Inc. (1970), 128 Ill. App. 2d 477, 262 N.E.2d 349.

Although these general principles would preclude plaintiffs from recovering damages pursuant to the guaranty, plaintiffs argue the present ...


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