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10/27/87 Commonwealth Eastern v. James L. Williams

October 27, 1987




Before closing on the property, Williams had no idea (no formal estimates) what the rehabilitation costs were going to be. Based on his own experience, Williams felt that the rehabilitation work would require between $70,000 and $100,000. Williams did not tell Jersey about this estimated price range until after the closing on the property took place.


516 N.E.2d 515, 163 Ill. App. 3d 103, 114 Ill. Dec. 360 1987.IL.1592

Appeal from the Circuit Court of Cook County; the Hon. Richard L. Curry, Judge, presiding.


JUSTICE STAMOS delivered the opinion of the court. HARTMAN and BILANDIC, JJ., concur.


In July 1982, the defendant-appellant, James L. Williams (Williams), signed a contract to purchase real estate. The plaintiff-appellee, Jersey Mortgage Company (Jersey), financed $109,000 of the $110,000 purchase price. After several months, Williams defaulted on his mortgage payments. Jersey then filed a complaint against Williams for mortgage foreclosure. Williams filed a two-count counterclaim and affirmative defense; Jersey moved for summary judgment. The trial court granted Jersey's motion for summary judgment on November 20, 1986. On December 22, 1986, Williams filed notice of this appeal. At oral argument, Jersey advised the court that Commonwealth Eastern Mortgage Company had bought out Jersey and that Jersey is now known as the Commonwealth Eastern Mortgage Company. The court then ordered that the caption of this opinion be amended to reflect the change.

In or around July 1982, Williams signed a contract to purchase an eight-unit building located at 5115 South Drexel Avenue in Chicago (the property). The contract contained a financing contingency clause. Williams sought to secure financing from Jersey. Williams dealt with Jersey's agent, Robert Cross (Cross), when Williams applied for the loan. Williams first met Cross at the real estate broker's office, where Cross assisted Williams in completing the loan application. The purchase price of the property was $110,000; Williams put $1,000 down and Jersey financed the additional $109,000.

The next time that Williams met Cross, they were at the Veterans Administration . The VA had agreed to insure the loan for a three-unit, but not for an eight-unit, building. The VA sent Williams a certificate of commitment dated October 1, 1982, regarding the loan. Cross and Williams then had to go to the VA to see if the VA would insure the mortgage at a higher funding because of the money that would be required to convert the eight-unit building into a three-unit building. The VA advised Williams that he had several options. One of the options involved the sellers' escrow. This option did not work. Nevertheless, the VA insured the loan on the condition that Williams would convert the building into three units. It was at this point in time that the issue of additional funding arose. Williams would have to obtain additional financing in order to pay for the construction work necessary to convert the building from eight units to three units.

At the meeting with the VA officer, Cross allegedly told or indicated to Williams "that there should be no problem getting additional funding, securing the business with the second mortgage in order to do the work." During Williams' deposition, the following exchange took place when Williams was questioned as to the alleged additional funding:

"Q. Did he [Cross] give you a specific dollar amount that they would finance you for?

A. I don't recall a specific dollar amount.

Q. Were any terms of that additional refinancing discussed such as, the interest rate?

A. No. That it would be secured by a second mortgage on the property.

Q. Were you told by Mr. Cross specifically what rehabilitation activities that they would extend this credit for?

A. No. We didn't get in to specifics. The whole object of rehabilitation was to meet the VA's approval as a three-flat building.

Q. Did he [Cross] say that the company would offer you credit or did he say they would assist you in procuring additional credit?

A. The indication was that Jersey Mortgage would furnish the money."

Williams never received anything in writing from Cross in regard to the conversation that they had had about the additional financing. Williams, likewise, did not send anything to Cross indicating that it was Williams' understanding that Jersey was to provide him with additional financing. Williams met Cross at the VA at least one more time "to discuss the loan and find ways of financing -- closing on the property." Williams then talked to Cross on the phone regarding the possibilities in terms of financing. In more than one conversation, Cross advised Williams that Williams would be able to get some kind of second mortgage on the property. No specifics on the loan, however, were discussed. Furthermore, Cross and Williams did not talk about ...

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