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05/05/94 MICHAEL KERTON AND PETER DEVORE v.

May 5, 1994

MICHAEL KERTON AND PETER DEVORE, PLAINTIFFS AND COUNTERDEFENDANTS-APPELLANTS,
v.
LUTHERAN CHURCH EXTENSION FUND, DEFENDANTS AND COUNTERPLAINTIFFS-APPELLEES.



Appeal from the Circuit Court of Lake County. No. 91-CH-548. Honorable John G. Radosevich, Judge, Presiding.

Released for Publication June 8, 1994.

Colwell, Doyle, PECCARELLI

The opinion of the court was delivered by: Colwell

JUSTICE COLWELL delivered the opinion of the court:

Before closing on the purchase of a vacant parcel of property, plaintiffs, Michael Kerton and Peter DeVore, notified defendant of their objection to a right-of-way for natural gas pipeline and brought an action requesting the return of their earnest money. Defendant denied the existence of any defect in title and counterclaimed that plaintiffs' objection was untimely. The trial court ruled that plaintiff's objection was timely, but thatthe right-of-way for pipeline was a permissible exception and condition of title and not subject to objection by plaintiffs.

On appeal, plaintiffs maintain that the trial court erred in failing to interpret the contract as a whole, in failing to examine extrinsic evidence to determine the intent of the parties, and in ruling that the exercise of the right-of-way agreement did not make the defendant's title unmerchantable. We reverse.

On February 15, 1991, plaintiffs, as buyers, and defendant, as seller, entered into a contract for the sale of approximately 20 acres of real estate located in Lake County, Illinois. Paragraph 7(a) of the contract provided that, within 21 days from the date of execution of the contract, defendant was to furnish plaintiffs with a commitment for title insurance. Paragraph 7(b) gave plaintiffs 15 working days after receipt of the title commitment to notify defendant of any conditions in the title that were not acceptable to plaintiffs. Plaintiffs paid $9,000 in earnest money.

First American Title Insurance Company (First American) issued a commitment for title insurance that was received in the office of plaintiffs' attorney on February 28, 1991. On the same day, plaintiffs' attorney requested from the title officer for First American a copy of the right-of-way agreement listed as an exception in the title commitment. Plaintiffs' attorney received the right-of-way agreement on March 11, 1991, and, on the same date, requested from the title officer a copy of a survey of the property showing the exact location of the pipeline.

Plaintiffs' attorney received the plat of survey on March 21, 1991, and, on March 22, sent a letter to defendant stating that the right-of-way agreement was an unacceptable condition of title, because it effectively removed 2.3 acres from the site. Plaintiffs offered to purchase the "useable acreage," reduced to 17.7 acres, at a modified price; if this was unacceptable to defendant, plaintiffs gave notice that they would declare the contract null and void and request the immediate return of their earnest money.

On August 2, 1991, plaintiffs filed a complaint in interpleader requesting the return of their earnest money pursuant to the provisions of the contract. On September 26, 1991, defendant filed an answer, denying that any defects in title existed that needed to be cured. With its answer, defendant filed a counterclaim, asserting that plaintiffs had failed to notify defendant, in writing, within 15 working days from the date of delivery of the title commitment of any conditions of title disclosed therein that were not acceptable and, consequently, plaintiffs were deemed to have approved conditions affecting title disclosed by the commitment. Defendants claimed that they were entitled to the earnest money as liquidated damages for plaintiffs' breach of the contract.

Both parties filed motions for summary judgment, which were denied by the trial court. On July 8, 1992, the trial court ruled for defendant, finding that the title commitment provided by defendant was not complete until March 21, 1991, and notice was timely made by plaintiffs' attorney of plaintiffs' objections to the title commitment, but that the right-of-way was a permissible exception and condition of title pursuant to paragraph 7(a) of the contract and not subject to objection.

The trial court denied plaintiffs' motion to vacate or modify judgment, stating that it was unwilling to examine the intent of the parties when entering the contract or the argument that the right-of-way agreement effectively foreclosed use of 2.3 acres of the property making defendant's title unmerchantable. This appeal ensued.

The first issue raised by plaintiffs is whether the trial court erred in failing to interpret the contract as a whole and in holding that the right-of-way for the gas pipelines was a permissible exception and condition of title pursuant to paragraph 7(a) and not subject to objection by plaintiffs.

The primary objective in construing a contract is to give effect to the parties' intent, and to discover this intent the various contract provisions must be viewed as a whole. ( Robert S. Pinzur, Ltd. v. The Hartford (1987), 158 Ill. App. 3d 871, 876, 110 Ill. Dec. 961, 511 N.E.2d 1281.) Words derive meaning from their context, and contracts must be viewed as a whole by examining each part in light of the other parts. ( Board of Trade v. Dow Jones & Co. (1983), 98 Ill. 2d 109, 122-23, 74 Ill. Dec. 582, 456 N.E.2d 84; Pinzur, 158 Ill. App. 3d at 876.) Contract language must not be rejected as meaningless or surplusage ( Grigoleit, Inc. v. Board of Trustees of the Sanitary District (1992), 233 Ill. App. 3d 606, 615, 174 Ill. Dec. 505, 599 N.E.2d 51); it is presumed that the terms and provisions of a contract are purposely inserted and that the language was not employed idly ( Szczerbaniuk v. Memorial Hospital (1989), 180 Ill. App. 3d 706, 713, 129 Ill. Dec. 454, ...


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