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10/02/89 the American National Bank v. Arthur Richoz Et Al.

October 2, 1989





545 N.E.2d 550, 189 Ill. App. 3d 775, 136 Ill. Dec. 1026 1989.IL.1586

Appeal from the Circuit Court of De Kalb County; the Hon. Rex F. Meilinger, Judge, presiding.


PRESIDING JUSTICE UNVERZAGT delivered the opinion of the court. NASH and DUNN, JJ., concur.


Defendants, Arthur and Joan Richoz, appeal from an order of the trial court which granted summary judgment in favor of plaintiff, the American National Bank in De Kalb. Defendants also appeal from an order which dismissed their counterclaim against plaintiff. On appeal, defendants contend that (1) based on the affirmative defense of either impossibility or commercial frustration, they established a genuine issue of material fact which precluded summary judgment; and (2) the trial court improperly dismissed their counterclaim on the basis that they lacked standing.

As the parties are well familiar with the facts of this case, we shall recite only those facts which are essential to the Disposition of the issues raised on appeal. This case involves the execution of four notes by defendants, Arthur and Joan Richoz, Wayne Miller, and Joseph Beck, in favor of plaintiff. Miller and Beck were engaged in a restaurant business with an adjoining health club operation, Olympic Health and Racquet Club (Olympic), which were organized as two separate corporations. Miller and Beck set up Fitness II Enterprises, Inc. (Fitness II), to operate Olympic, and plaintiff provided the initial financing for the setup of Fitness II. After experiencing some financial hardships, Miller and Beck sought additional investors and convinced Arthur and Joan Richoz to purchase stock in Fitness II.

Miller and Arthur Richoz went to plaintiff to discuss additional loans and were told, through its president, Richard Willey, that plaintiff was unwilling to put additional funds into Fitness II because it had previously provided substantial financing for Olympic's operation. Plaintiff stated that it would only loan funds on the basis of the personal credit of Arthur and Joan Richoz. Arthur Richoz indicated that because Miller and Beck were also involved in the operations, he wanted them obligated on the notes. Arthur and Joan Richoz executed four notes as principal obligors, and Miller and Beck signed those notes personally, not in a corporate capacity. Soon after the notes were executed, Fitness II experienced further financial difficulties and fell farther behind on its corporate obligations to plaintiff which included the notes at issue in this case. Even though several meetings of all the investors were conducted, Fitness II failed to make payments on its corporate obligations to plaintiff. Plaintiff then presented final deadlines to all the parties which the stockholders and corporation failed to meet. On April 6, 1986, defendants entered into an agreement for the sale of Olympic for $130,000 to Tim Raines, a representative of Vinra Associates. On June 11, 1986, when plaintiff believed that certain unauthorized individuals were in possession of Olympic, it entered the premises and changed the locks to the health club. As a result of plaintiff's action, the sale of Olympic to Vinra Associates was not completed. Eventually, plaintiff sold Olympic for $45,000.

A notice of default was given on the personal obligations of defendants Arthur and Joan Richoz, and defendants refinanced some investment property to pay approximately $60,000 on their obligations. Plaintiff then set off certain bank accounts of defendants to further reduce defendants' indebtedness, but defendants were still unable to meet their obligations on the notes. On January 6, 1987, plaintiff brought suit to recover $28,612.84 due on four notes defendants personally executed. Although Miller and Beck were named defendants in that complaint, this appeal concerns only the claims made against Arthur and Joan Richoz.

In their answer to plaintiff's complaint, defendants raised the affirmative defense of impossibility based on plaintiff's conduct of changing Olympic's locks. Additionally, defendants filed a counterclaim which alleged that plaintiff intentionally interfered with the contractual relationship between defendants and Vinra Associates. Plaintiff filed a motion to dismiss the counterclaim, and the trial court granted plaintiff's motion, finding that defendants lacked standing to bring their counterclaim. Plaintiff then filed a motion for summary judgment which was granted. From the entry of summary judgment in plaintiff's favor, defendants filed a timely notice of appeal.

In their first appellate contention, defendants assert that the trial court improperly granted plaintiff's motion for summary judgment because they raised a factual question with respect to whether plaintiff made it impossible for defendants to honor their obligations under the four notes. Defendants claim that their performance was rendered impossible when plaintiff changed Olympic's locks thereby spoiling defendants' attempt to sell the health club to Vinra Associates.

A motion for summary judgment should be granted only when the pleadings, depositions, and admissions on file together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. (Ill. Rev. Stat. 1987, ch. 110, par. 2-1005(c); Purtill v. Hess (1986), 111 Ill. 2d 229, 240; Addison State Bank v. National Maintenance Management, Inc. (1988), 174 Ill. App. 3d 857, 859.) In determining the existence of a genuine issue of material fact, we must consider the pleadings, depositions, admissions, exhibits, and affidavits on file in the case and must construe them strictly against the movant and liberally in favor of the opponent. Purtill, 111 Ill. 2d at 240.

It is well settled that where the parties, by their own conduct and positive undertaking, create a duty or charge upon themselves, they must abide by the contract and make the promise good, and subsequent contingencies not provided against in the contract, which render performance impossible, do not bring the contract to an end. (Leonard v. Autocar Sales & Service Co. (1945), 392 Ill. 182, 187; Semrow v. Harmswood Stables North, Inc. (1981), 100 Ill. App. 3d 219, 226; Mouhelis v. Thomas (1981), 95 Ill. App. 3d 181, 183.) An exception to this general rule is where the continued existence of a particular person or thing is so necessary to the performance of a contract that, by law, it is implied as a condition of the contract that the death of that person or destruction of that thing shall excuse performance. Leonard, 392 Ill. at 189; Semrow, 100 Ill. App. 3d at 226; Mouhelis, 95 Ill. App. 3d at 183.

The subject matter of the contract at issue here was the funds loaned to defendants pursuant to the terms of plaintiff's notes. There has been no destruction of the subject matter of the contract between plaintiff and defendants. Although the Olympic health club may have been rendered useless to defendants because plaintiff locked them out, the health club was not an essential element of defendants' contract with plaintiff, and plaintiff's act of changing ...

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