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12/29/95 FRANKLIN POINT v. HARRIS TRUST AND SAVINGS

December 29, 1995

FRANKLIN POINT, INC., PLAINTIFF-APPELLANT,
v.
HARRIS TRUST AND SAVINGS BANK, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County. Honorable Albert Green, Judge Presiding.

Petition for Leave to Appeal Denied April 3, 1996.

The Honorable Justice McNULTY delivered the opinion of the court: T. O'brien, J., concurs. Cousins, P.j., dissents.

The opinion of the court was delivered by: Mcnulty

The Honorable Justice McNULTY delivered the opinion of the court:

Plaintiff Franklin Point, Inc. (FPI), brought a breach of contract action, seeking specific performance in count I and damages in count II, against defendant Harris Trust and Savings Bank (Harris Bank). The trial court granted Harris Bank's motion to dismiss count I of FPI's complaint and denied FPI's request for leave to amend its complaint. We reverse and remand to give FPI an opportunity to amend its complaint.

On July 30, 1990, FPI and Harris Bank entered into a written contract pursuant to which Harris Bank agreed to build and occupy an office building at an eight-acre, multi-use commercial real estate development located near Chicago's downtown, called Franklin Point. Harris Bank agreed to purchase a certain parcel of land in the development for approximately $11,500,000. Harris Bank agreed that by July 30, 1993, it would commence construction on that land of a high-rise office building containing not more than 1,200,000 square feet and not less than 800,000 square feet. The contract stressed the importance of Harris Bank's building as an anchor of the Franklin Point development.

Harris Bank paid FPI approximately $11,500,000 for the sale of the property, but Harris Bank failed to begin construction of the high-rise office building by July 30, 1993. No other part of Franklin Point was developed. FPI brought suit against Harris Bank for specific performance and damages. The trial court dismissed FPI's claim for specific performance on the basis that "Illinois law is well-settled that specific performance of construction projects is forbidden as a matter of law." The trial court also denied with prejudice FPI's request for leave to file an amended complaint.

FPI appeals, contending that specific performance is not forbidden in all construction contracts and is appropriate in this particular case since: (1) the parties contractually agreed to a dispute resolution mechanism regarding approval of construction plans and designs that would avoid judicial supervision of the building process; (2) Harris Bank was bound contractually to follow a set of detailed development guidelines when building its office building; and (3) Harris Bank expressly agreed in the contract that specific performance is an appropriate remedy.

The trial court dismissed FPI's claim for specific performance, finding that construction contracts could not be specifically enforced under any set of circumstances. We are unwilling to agree with such a broad assertion that specific performance can never be granted in a construction case. In Klingbeil v. Becklenberg (1928), 249 Ill. App. 39, 43, the court stated in dictum that "while the general rule is stated to be that a court of equity will not specifically enforce a contract for the construction of a building, yet there are exceptions to this rule, and in a proper case such a contract will be specifically enforced."

Since Klingbeil, Illinois courts of review have upheld trial court decisions refusing to grant specific performance of contracts to construct a building in several cases. These courts denied specific performance not simply on the basis that a construction contract was involved, but rather after making a determination that the courts would have to become involved with prolonged and continuous oversight of the construction process. In Yonan v. Oak Park Federal Savings & Loan Association (1975), 27 Ill. App. 3d 967, 326 N.E.2d 773, for example, the court, after conducting an evidentiary hearing, denied plaintiff's request for specific performance of the construction of a building, finding that specific performance would require a succession of acts and the protracted personal supervision, special skill, judgment and direction of the trial court. Similarly, in Besinger v. National Tea Co. (1966), 75 Ill. App. 2d 395, 221 N.E.2d 156, the court denied specific performance, stating that although the lease set forth the type of building to be constructed, the purpose for which it would be used, and a standard of quality and workmanship which it must meet, it did not specify the design of the building, the nature and quality of the construction materials or the nature and quality of the heating, lighting, or plumbing systems. Due to the adversarial nature of the parties' relationship, the court found it unlikely that the parties would be able to agree on these matters without the court's intervention.

In Bezin v. Ginsburg (1980), 91 Ill. App. 3d 555, 415 N.E.2d 9, 47 Ill. Dec. 284, the plaintiff sought to have rebuilt a building defendant had torn down. The court denied plaintiff's request for specific performance on the basis that ordering the rebuilding of the building would force the court to become an expert in the methods and skills of the construction industry and involve the court in constant and prolonged supervision over the construction process through supplementary proceedings designed to assure that the order was being carried out by a party who obviously had no desire to carry it out. See also Roston Investments v. Opus Corp. (N.D. Ill. September 13, 1990), No. 90-C-2524 (the court dismissed plaintiff's claim for specific performance, holding that an award of specific performance would involve detailed, ongoing supervision by the court which Illinois forbids as a matter of law).

As other courts have recognized, specific performance of a construction contract should not be denied simply because it involves the construction of a building. In Grayson-Robinson Stores, Inc. v. Iris Construction Corp. (1960), 8 N.Y.2d 133, 137, 168 N.E.2d 377, 378, 202 N.Y.S.2d 303, 305, the majority found specific performance appropriate where the plans and specifications for the building were completed or practically complete. The majority explained that "there is no hard and fast rule against applying the remedy of specific performance to [building construction] contracts, especially when the parties have by agreement provided for just that remedy." 8 N.Y.2d at 137, 168 N.E.2d at 378, 202 N.Y.S. at 305.

In City Stores Co. v. Ammerman (D.C. Cir. 1867), 266 F. Supp. 766, aff'd (1968), 129 U.S. App. D.C. 322, 394 F.2d 950, the court found specific performance appropriate and enforced an option that required a party to construct a building. The court found that the standards to be followed in construction of the store were set out in the leases with specific particularity, making design and approval of the store a fairly simple matter if the parties dealt with each other in good faith. The court noted that specific performance should not be denied merely on the generic subject matter of the contract, but should instead involve a weighing of the need for ongoing judicial supervision with the importance of enforcement to the plaintiff.

Thus we view the critical inquiry in the instant case to be not simply whether FPI is seeking specific performance of a construction contract, but rather, whether if specific performance is granted, the court will be required to become involved in prolonged supervision of the building's construction if disputes arise. If the trial court will not be required to become embroiled in continuing disputes ...


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