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05/05/88 Thomas G. Hay Et Al., v. Rudolph Albrecht

May 5, 1988

THOMAS G. HAY ET AL., PLAINTIFFS AND COUNTERDEFENDANTS-APPELLANTS

v.

RUDOLPH ALBRECHT, JR., ET AL., DEFENDANTS AND COUNTERPLAINTIFFS-APPELLEES (STATE BANK OF WINSLOW, DEFENDANT-APPELLEE)



APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

523 N.E.2d 211, 169 Ill. App. 3d 120, 119 Ill. Dec. 743 1988.IL.689

Appeal from the Circuit Court of Jo Daviess County; the Hon. Harold D. Nagel, Judge, presiding.

APPELLATE Judges:

JUSTICE DUNN delivered the opinion of the court. INGLIS, J., concurs. PRESIDING JUSTICE LINDBERG, specially Concurring.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE DUNN

Plaintiffs, Judith and Thomas Hay, filed a complaint for rescission of an installment contract to purchase a 200-acre farm from defendants, Rojean and Rudolph Albrecht. The Albrechts assigned the contract to defendant, State Bank of Winslow, as security for certain loans. The Hays sought rescission on the basis that there was a house on the farm and the contract did not comply with section 2 of "An Act relating to installment contracts to sell dwelling structures" (Act) (Ill. Rev. Stat. 1985, ch. 29, par. 8.22). The Albrechts filed a counter-claim for specific performance and reformation of the contract so that it would comply with section 2 of the Act. The trial court granted the relief requested by the Albrechts and refused to rescind the contract. On appeal, plaintiffs contend that they were entitled to rescission as a matter of law.

Section 2 of the Act states as follows:

"After the effective date of this Act, any installment contract for the sale of a dwelling structure shall be voidable at the election of the buyer unless there is attached to the contract or incorporated therein a certificate of compliance, or in the absence of such a certificate (i) an express written warranty that no notice from any city, village or other governmental authority of a dwelling Code violation which existed in the dwelling structure before the installment contract was executed had been received by the contract seller, his principal or his agent within 10 years of the date of execution of the installment contract, or, (ii) if any such notice of violation had been received, a list of all such notices so received with a detailed statement of all violations referred to in such notice. The requirements of this section cannot be waived by the buyer or seller." (Ill. Rev. Stat. 1985, ch. 29, par. 8.22.)

Section 1 of the Act defines a certificate of compliance as an affidavit executed by the contract seller stating that the dwelling structure has been inspected by an inspector of the municipality or county where it is located in the 30 days prior to the execution of the contract and that, as of the date of the execution of the contract, the structure is not in violation of any dwelling code. (Ill. Rev. Stat. 1985, ch. 29, par. 8.21.) It is undisputed that the installment contract in question did not comply with section 2.

Defendants asserted at trial that section 2 of the Act is not applicable to the installment contract between the Hays and the Albrechts because the house on the farm was only an incidental part of the agreement. Defendants argued that if this provision is applicable, reformation of the agreement should be granted so it would comply with section 2. Defendants' reformation argument was based upon the following language in the agreement.

"The parties intend to contract in conformity with all applicable laws and ordinances in effect at this date. Any provisions hereof which violate such law or ordinance in whole or in part, is amended so far as necessary to remove the discrepancy. All implied provisions thereof are adopted. Any mandatory provisions prescribed thereby shall be supplied by construction or reformation, as fully as a court of equity is able to do so."

Defendants also raised the affirmative defense of laches at trial, noting that the installment contract was executed on April 19, 1982, but plaintiffs did not file their action for rescission until April 20, 1987.

Under the terms of the agreement between the Hays and the Albrechts, the purchase price for the farm was $300,000. The Hays agreed to make a down payment of $54,000 and were given a credit of $10,625 for a debt they agreed to assume. The remaining sum of $235,375 was to be paid in installments over a period of 10 years at an interest rate of 10%.

It is undisputed from the trial testimony of Thomas Hay and Rudolph Albrecht that the condition of the buildings on the farm had deteriorated substantially since April 19, 1982, especially the barn. Thomas Hay testified that, at his request, Dale DeVries of P & D Appraisal Company appraised the farm in April 1987. According to this appraisal, the farm was worth $135,000. Hay admitted that his decision to seek rescission had nothing to do with any dwelling code violations and that he eventually intended to have all the buildings on the farm bulldozed. Rudolph Albrecht testified that he received no notices from any governmental authority concerning dwelling code violations for the house on the farm in the 10-year period prior to the execution of the installment agreement. The trial Judge denied plaintiffs' claim for rescission and granted the Albrechts' counterclaim for reformation, adding a provision to the contract which expressly warrants that the Albrechts and their principals or agents did not receive any notices of dwelling code violations from any governmental ...


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