APPELLATE COURT OF ILLINOIS, FIFTH DISTRICT
523 N.E.2d 688, 169 Ill. App. 3d 238, 119 Ill. Dec. 932 1988.IL.732
Appeal from the Circuit Court of Madison County; the Hon. Paul E. Riley, Judge, presiding.
JUSTICE KARNS delivered the opinion of the court. LEWIS and CALVO, JJ., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE KARNS
Plaintiffs Wilma Maguire, Michael Maguire and Judyth Harlan filed a two-count complaint in the circuit court of Madison County seeking rescission of a contract for the purchase of a restaurant. Count I alleged actual or constructive fraud and count II sought relief under the Consumer Fraud and Deceptive Business Practices Act (Ill. Rev. Stat. 1981, ch. 121 1/2, par. 261 et seq.). Defendants James and Jean Holcomb filed a five-count counterclaim against the corporate plaintiff, Sunray Restaurant, Inc., and the individual plaintiffs, seeking possession of the real estate that was the subject of the transaction along with money damages for waste.
The trial court granted defendants' motion to dismiss count II of the complaint on grounds that the Act did not apply. The court thereafter entered summary judgment for the defendants as to the issue of possession. Following a bench trial, the court entered judgment for the defendants pursuant to section 2-1110 of the Illinois Code of Civil Procedure (Ill. Rev. Stat. 1983, ch. 110, par. 2-1110). The court then heard evidence on defendants' counterclaim and entered judgment against the corporate plaintiff only in the amount of $5,535.43. Plaintiffs appeal the dismissal of count II of their complaint and the judgment in favor of the defendants on count I. Defendants appeal the trial court's ruling that only the corporate plaintiff was liable for damage to the property.
On April 30, 1982, the individual plaintiffs entered into a memorandum of agreement with the Holcombs to purchase a restaurant known as the Sunray Cafe. The plaintiffs formed a corporation, Sunray Restaurant, Inc., which entered into a contract for the purchase of real estate and personal property comprising the restaurant business and several adjoining parcels of land. At the time of the transaction, Wilma Maguire, the mother of plaintiffs Michael Maguire and Judyth Harlan, was a 61-year-old widow employed at the Granite City Area Support Center. Michael Maguire was a 27-year-old college graduate. He had attended Southern Illinois University at Edwardsville in 1975 and 1976 and graduated from Eastern Illinois University in 1978 with a bachelor's degree in psychology. He was employed as a bartender/bouncer at the Music Room tavern in Wood River, Illinois, at the time of the transaction. Judyth Harlan was a high school graduate, approximately 37 years of age, and had a variety of work experience. None of the plaintiffs had any practical experience in business or restaurant management.
James Holcomb was approximately 60 years old at the time of the transaction. He had a bachelor's degree in business and an advanced degree in education. He had been employed for several years in the accounting department of the Olin Mathieson Corporation and had previously served as an academic advisor at Southern Illinois University at Edwardsville. In addition to owning and operating the Sunray Cafe, he was involved in numerous business activities.
Mrs. Maguire had been acquainted with Mr. Holcomb for approximately 10 or 15 years. She and her late husband had been occasional customers of the Sunray Cafe. Mrs. Maguire was also a long-term social acquaintance of Mrs. Holcomb. Additionally, Mr. Holcomb had been Michael Maguire's academic advisor while he was at SIU-E.
In early 1982 Mrs. Maguire learned that the Sunray Cafe was for sale. Desiring to provide a source of permanent employment for her children, she contacted Mrs. Holcomb, who referred her to the real estate agent handling the property. Mrs. Maguire and Michael Maguire went to the realtor's office, where they were shown a recapitulation of the cafe's income statements for the years 1976-81. Several subsequent meetings took place between the Maguires, Mr. Holcomb, and the real estate agent. At no time did the plaintiffs' bring an accountant or attorney to look over the financial records of the business.
The purchase price of the restaurant was $275,000, with a down payment of $30,000 and the balance to be paid in semi-annual installments of $6,125 plus interest at the rate of 12% per annum. At the end of five years a balloon payment of $183,750 was to be due and payable in full. The balance due on the contract was secured by a retention of title to the real estate and certain stocks and bonds of Mrs. Maguire.
The record indicates that the principal and interest payment was approximately $40,000 for the first year; approximately $39,000 for the 2nd year; and approximately $38,000 for the third year. An examination of the cafe's income statements for the past five years indicates that the highest net profit for the period was $37,015, which occurred in 1976. Profits have declined substantially since then. It is evident from these figures that the proceeds from the restaurant operation would be insufficient to retire the debt. At trial, Mr. Holcomb maintained that he pointed this fact out to the plaintiffs on several occasions, while plaintiffs maintained that it was their understanding that the loan had been structured so that the restaurant could carry it.
Plaintiffs first defaulted in the payment due on August 1, 1983. On August 7, 1983, a payment of $14,597 was made toward the total amount due of $20,457.50. Mrs. Maguire also supplied a personal check for $2,500 and a $3,000 credit was given for the release of three lots which were also part of the contract. The payment due on November 1, 1983, was satisfied by the surrender of the securities Mrs. Maguire had pledged as collateral, plus a promissory note ...