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11/23/88 Dale Gordon Et Al., v. Donald W. Bauer Et Al.

November 23, 1988





532 N.E.2d 855, 177 Ill. App. 3d 1073, 127 Ill. Dec. 26 1988.IL.1693

Appeal from the Circuit Court of Effingham County; the Hon. Richard G. Hodson, Judge, presiding.


JUSTICE CALVO delivered the opinion of the court. HARRISON, P.J., and WELCH, J., concur.


Defendants, Donald W. Bauer and Lauretta Bauer, farmers, entered into a real estate listing agreement with third-party defendant C. W. Schafer, a licensed real estate broker doing business as Schafer Real Estate (Schafer), to sell two pieces of farmland owned by the Bauers. Plaintiffs, Dale L. Gordon and Ethel I. Gordon, also farmers, subsequently entered into two contracts with the Bauers to buy both tracts of land. The parties scheduled closing for April 30, 1983, but they never consummated the transaction. The Gordons initiated suit against the Bauers for specific performance and damages after the Bauers informed the Gordons that they did not intend to close. The Bauers filed a third-party complaint seeking damages against Schafer alleging, among other things, breach of fiduciary duty. Schafer counterclaimed against the Bauers for his brokerage commission. After nine days of a 19-day bench trial, the Gordons moved to dismiss that part of their complaint seeking specific performance and elected to pursue only their damage claims. The trial court allowed the motion, subsequently found in favor of the Gordons and awarded them damages in the amount of $19,972.23. The trial court also found in favor of Schafer and awarded him $10,500. The Bauers appeal pro se and present 13 issues for review. For efficiency, we will address these issues in a somewhat different order than raised by the Bauers in their brief.

The first five issues revolve around the trial court's decision to allow the Gordons to continue the trial in equity on the damage claims after they voluntarily dismissed the specific performance claims. The Gordons initially filed a three-count complaint. They later amended their complaint to include a fourth count. Counts I and II prayed for specific performance of the two contracts to sell the two pieces of real estate. In counts III and IV, the Gordons restated their allegations set forth in counts I and II and prayed in equity for various damages they incurred as a result of the Bauers' failure to perform. In the middle of trial, the Gordons moved to dismiss counts I and II of their complaint. The trial court granted the dismissal, and further allowed the Gordons to proceed with the trial in equity on counts III and IV, the damage claims.

The Gordons alleged in count III that they incurred substantial penalties for the Bauers' failure to comply with the payment-in-kind program administered through the Shelby County Agriculture Stabilization and Conservation Service by the United States Department of Agriculture. They also alleged that the Bauers' refusal to close the transactions caused a delay in the farming of the two pieces of real estate. The Gordons then prayed for $25,000 in damages which included attorney fees.

The Gordons alleged in count IV that in order to purchase the real estate in question, they secured a commitment for a loan from the John Hancock Mutual Life Insurance Company (John Hancock). As part of that commitment, the Gordons paid a nonrefundable $2,250 to John Hancock which they lost as a result of the Bauers' failure to close the transaction. Thus, the Gordons prayed for $2,250 in damages.

In their motion to dismiss counts I and II, the Gordons alleged that due to the dramatic decline in the value of farm real estate during the two years between the execution of the contracts and the trial, the market value of the real estate at the time of trial was substantially lower than the contract price of the property; thus, specific performance was no longer a viable remedy for them. The Gordons attached to their motion the affidavit of plaintiff, Dale Gordon, a farmer for approximately 15 years, who attested to the dramatic decline in farm real estate in general and to the decline in value of the two pieces of real estate which were the subjects of the contracts.

At the close of trial, the Gordons, with the trial court's approval, amended counts III and IV of their complaint to conform to the proofs. The Gordons alleged in their amendments that the Bauers had agreed to sell them the wheat crop growing on the real estate at the time of the sale and that the Bauers retained, harvested and sold the wheat crop. The Gordons alleged that their damages included not only the loss of the wheat crop, but also attorney fees in the amount of $15,000, the loss of benefits under the PIK program and the loss of a diversion payment under the basic program (a farm program, similar to the PIK program, also administered by the ASCS).

In awarding judgment for the Gordons, the trial court found that the contracts were enforceable, that the Gordons were ready, willing and able to close the transactions on April 30, 1983, and that the Bauers breached the contracts. The court then awarded the Gordons the following damages: $2,250 for the deposit to John Hancock, $712.50 for the title insurance commitment fee, $1,453.69 for the penalty assessed by the ASCS for violation of the PIK program, $1,596.75 in lost diversion payments under the basic program, $8,921.50 in lost PIK benefits, $3,606.45 in net interest incurred on the sum borrowed to finance the purchases after the Gordons mitigated the damages by earning interest on said sum while holding it a reasonable time in an effort to effectuate a closing, and $1,431.34 representing the difference between the contract price and the actual sale price obtained for the wheat harvest.

The Bauers initially allege that after the trial court allowed the Gordons to dismiss the specific performance counts of the complaint, the court was then without subject matter jurisdiction to hear the remaining damage claims. The Bauers point out that the Gordons' complaint alleged an action in equity because the specific performance counts were equitable remedies. They also rightly contend that the Gordons pled the damage counts as actions in equity, as incidental relief to the specific performance remedies. The Gordons did not plead the damage claims as actions at law for breach of contract, as alternative relief to the specific performance remedies.

The Bauers point to case law which holds that

"[where] the [complaint] seeks equitable relief and the evidence establishes the right to that relief, the court will retain jurisdiction for all purposes connected with the subject matter of the suit and establish purely legal rights and grant legal remedies which would otherwise be beyond the scope of its authority [citation] but where the [complaint] is dismissed as to the portion founded on the right to equitable relief and only legal rights remain to be ascertained and passed upon, the jurisdiction of the court must fail unless some equitable ground appears for retaining jurisdiction. [Citations.]" (Patterson v. Patterson (1911), 251 Ill. 153, 182-83, 95 N.E. 1051, 1063.)

(See Alter v. Moellenkamp (1961), 23 Ill. 2d 506, 511, 179 N.E.2d 4, 6-7; Turek v. Mahoney (1950), 407 Ill. 476, 483, 95 N.E.2d 330, 334; Yonan v. Oak Park Federal Savings & Loan Association (1975), 27 Ill. App. 3d 967, 976, 326 N.E.2d 773, 780; Illinois Minerals Co. v. Miller (1946), 327 Ill. App. 596, 604, 65 N.E.2d 44, 47.) Moreover, the Bauers point to authority which holds that "the withdrawal of a pleading removes it from consideration, and leaves the issues in the same status as though the withdrawn pleading had never been filed." (Blazina v. Blazina (1976), 42 Ill. App. 3d 159, 164, 356 N.E.2d 164, 168.) The Bauers, therefore, contend that because the damage claims were incidental to or based on the specific performance claims, and because the Gordons dismissed the specific performance claims, the court, under its equity jurisdiction, had no authority to award the incidental relief. The Bauers then argue that the court in effect awarded legal damages because it did not have jurisdiction to grant equitable damages. The Bauers assert that the court could not award damages at law because the Gordons did not pray for damages at law. The Bauers argue that the only way the Gordons could have obtained relief was to file a separate action at law for damages.

The trial court ruled that the damage claims were equitable claims. The court pointed out that if it found in favor of the Gordons at the close of trial, it could award not only specific performance of the contracts, but also the damages asserted in counts III and IV as well. The court noted that the damages pled would only make the Gordons whole; that awarding both specific performance and damages would not give the Gordons double recovery. The trial court then held that because the damages were equitable, it had the authority, as a court of equity, to hear the case and grant or deny the damages. The Bauers insist that although the damages were originally pled as equitable relief, the court actually awarded legal damages because it lost jurisdiction in equity to award damages when it dismissed the specific performance claims which provided the basis for the equitable damages.

We agree with the holding of the trial court, however, that it had jurisdiction in equity to award the damages and that the damages constituted equitable relief even after the court dismissed the specific performance counts. In an action for the breach of a contract for the sale of land, the injured party can sue for specific performance or for damages for breach of contract. (Arnold v. Leahy Home Building Co. (1981), 95 Ill. App. 3d 501, 509, 420 N.E.2d 699, 705.) If a party sues for specific performance, however, that party can also seek, and the equity court may award, other relief, including monetary damages, that will make the party whole. (Arnold, 95 Ill. App. 3d at 509, 420 N.E.2d at 705.) The court in Rotogravure Service, Inc. v. R.W. Borrowdale Co. (1979), 77 Ill. App. 3d 518, 527, 395 N.E.2d 1143, 1150, noted:

"Our circuit courts have 'original jurisdiction of all justiciable matters . . ..' (Ill. Const. 1970, art. VI, § 9.) Therefore, the trial court hearing [equitable] matters has full jurisdiction to award such legal damages as have resulted from delay in the performance of the contract in addition to decreeing specific performance."

The Arnold court pointed out that

"[although] such compensation is often referred to by the courts as 'damages,' some authorities suggest that it should more properly be considered as equitable compensation in the nature of an accounting between the parties rather than legal damages, inasmuch as the court in awarding specific performance is confirming the contract and erasing the breach. [Citation.] Under this view, the compensation awarded as incident to a decree for specific performance is not for breach of contract and is therefore not legal damages." (Arnold, 95 Ill. App. 3d at 509, 420 N.E.2d at 705.)

The type of damages prayed for by the Gordons constituted relief which, when combined with specific performance, would make the Gordons whole. The Gordons' voluntary dismissal of the specific ...

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