APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. HONORABLE EDWIN M. BERMAN, JUDGE PRESIDING.
Presiding Justice Campbell delivered the opinion of the court: Buckley, J., and Wolfson, J., concur.
The opinion of the court was delivered by: Campbell
PRESIDING JUSTICE CAMPBELL delivered the opinion of the court:
Plaintiffs-counterdefendants George Voutiritsas and Harry Giotis (plaintiffs), along with their former partners Gene Shapiro (Shapiro) and Benjamin Steiner (Steiner), brought an action for declaratory judgment and other relief against defendant-counterplaintiff Intercounty Title Company of Illinois (ITC), regarding the sale of certain property located at 205 West Randolph, Chicago, and with respect to the parties' rights and obligations under section 9-506 of the Uniform Commercial Code (UCC). 810 ILCS 5/9-506 (West 1992). *fn1 ITC brought a counterclaim against plaintiffs for breach of a title indemnity agreement and personal undertakings and, alternatively, for a deficiency judgment pursuant to section 9-504 of the UCC. 810 ILCS 5/9-504 (West 1992).
On September 14, 1993, the trial court entered a final order with regard to plaintiffs' third amended complaint *fn2, finding that plaintiffs failed to tender any amount to ITC to redeem a purchase money note, and that ITC's sale of the note and trust deed was commercially reasonable. The trial court further found against ITC on all counts of its counterclaim. However, upon ITC's motion for reconsideration, the trial court entered a memorandum opinion and order on April 11, 1994, vacating its finding as to the commercial reasonableness of the UCC sale, concluding that ITC's sale of the note and trust deed was commercially unreasonable. The trial court further denied ITC's motion for reconsideration of its counterclaim, and denied plaintiffs' request for damages.
ITC now appeals from the September 14, 1993, and April 11, 1994, orders of the trial court. On appeal, ITC contends that: (1) the trial court erred in applying Article 9 of the UCC to the obligations of the parties; (2) the trial court erred in finding that ITC's UCC sale of the note and trust deed was commercially unreasonable; and (3) ITC is entitled to the remaining proceeds from the Certificate of Error.
In their cross-appeal, plaintiffs contend that the trial court erred as follows: (1) entering its order of June 1, 1988, granting partial summary judgment in favor of ITC, and finding that plaintiffs were bound by the actions of former partners Steiner and Shapiro regarding certain dealings with ITC; (2) entering its order of September 14, 1993, finding that plaintiffs failed to make tender and that tender was not excused; (3) entering its order of April 14, 1994, finding that no value was established for the $3 million note secured by a junior mortgage on the property; and (4) entering its interlocutory order of June 28, 1989, striking and dismissing count I of plaintiffs' third amended complaint for conversion with prejudice. Plaintiffs further contend that: ITC breached its fiduciary duty to plaintiffs; ITC tortiously interfered in the contract between plaintiffs and the purchasers; and the trial court erred in excluding evidence of proposed settlement negotiations at trial.
The record reveals the following relevant facts. Prior to December 13, 1985, plaintiffs, together with Steiner and Shapiro created the Venture 205 Partnership (partnership) to acquire property known as 205 West Randolph Street, Chicago (the property). At that time, the property was encumbered by a first mortgage in the then outstanding sum of approximately $12,000,000 (first mortgage) and by general real estate tax delinquencies for the years 1981, 1982, 1983 and 1984 exceeding $1,000,000.
On or about September 30, 1985, the partnership entered into a contract to sell the property (purchase agreement) to Harold S. Kloosterman and George Comfort & Sons (purchasers), for $16,000,000. The purchase price was to be satisfied by the purchasers' assumption of the first mortgage, and the purchaser's delivery to the partnership of a non-recourse purchase money note in the amount of $3,000,000 (note), secured by a second deed of trust (trust deed). The purchase agreement required the partnership to provide the purchasers with a title insurance policy insuring title to the property in favor of the purchasers, free and clear of all delinquent real estate taxes.
However, at the time of sale, the partnership discovered that the cost of redeeming the delinquent real estate taxes exceeded the amount of funds available at closing, because the taxes in dispute for 1981 had been purchased by a tax buyer in connection with the buyer's purchase of delinquent 1983 taxes. In addition, the partnership was awaiting a final decision on a Certificate of Error Proceeding with respect to the 1981 taxes.
In order to complete the sale, the partnership requested that ITC issue a title policy insuring over the delinquent taxes. In return, the partnership promised to reimburse ITC for any funds it expended. Plaintiffs deposited with ITC $786,395.69 to be applied toward the tax redemption. In addition, plaintiffs executed a title indemnity escrow agreement (T.I.), indemnifying and holding ITC harmless from all risks, costs, expenses and attorneys fees which ITC might incur by virtue of issuing the title policy according to the partnership's request. The terms of the T.I. provided that plaintiffs, along with Steiner and Shapiro (sellers), agreed to discharge, satisfy or remove the exceptions, including the taxes, on or before January 15, 1987. In addition, in the event the tax liability increased due to lapse of time or otherwise, the sellers were required to furnish ITC with additional deposits whenever ITC requested them to do so. Plaintiffs also assigned to ITC the note and trust deed to be received by the partners from the purchaser, and executed personal undertakings (PUs) whereby each partner pledged in his individual capacity to reimburse ITC and pledged his interest in the note as security.
Thereafter, the partnership closed the sale of the property and deposited the net sale proceeds of $786,395.69 into the T.I. fund along with the note, assignment and trust deed.
After the sale of the property, the purchasers made sporadic payments under the note, which were deposited directly into ITC's T.I. account. The purchasers made no further payments after October 1986.
As of January 15, 1987, the delinquent taxes remained unpaid. On February 17, 1987, Laurence W. Capriotti, ITC's president (Capriotti), sent written notice advising the partnership that a shortfall existed in the T.I. fund in the amount of $609,223.83, and demanding that the partnership deposit that sum by February 24, 1987, to permit payment of the delinquent real estate taxes on February 26, 1987. On February 26, 1987, Richard Ungaretti (Ungaretti), plaintiffs' attorney, wrote to Capriotti, stating his belief that the assignment, T.I. and PUs did not afford ITC a security interest in the note and trust deed, and instructing ITC to reimburse itself from the proceeds of the note for any corporate funds expended by ITC in redeeming the taxes.
On February 26, 1987, ITC redeemed the majority of the delinquent real estate taxes, advancing $609,223.83 of its own funds. ITC recorded the assignment and sent written notice to the partnership advising them of ITC's expenditure of funds and requesting that the partnership satisfy its obligations under the T.I. and PUs. By letter dated March 3, 1987, ITC's attorney, Allen Brown (Brown), advised plaintiffs that ITC had redeemed the taxes by tendering the $1,041,106.20 in plaintiffs' advance fund and $609,223.83 of ITC corporate funds to the Clerk of Cook County. However, in that letter, Brown claimed both that ITC had the right to be reimbursed for its out-of-pocket expenditure in redeeming the taxes, and that ITC "owned" the note, and would foreclose on the purchasers and would seek a deficiency judgment against the partnership for any amount less than the $3,000,000 face value of the note obtained from that foreclosure. On September 27, 1987, ITC paid the remainder of the delinquent real estate taxes listed as exceptions on the Indemnity Escrow, expending an additional $26,156 of its own funds.
ITC maintained that it owned the note and trust deed under the terms of the T.I. and the PUs. However, in an effort to defeat plaintiffs' claims that ITC was not the outright owner of the note and trust deed, and thus not entitled to commence foreclosure proceedings on these instruments, ITC sent plaintiffs notice that it would conduct a UCC public sale of their interest in the note on May 20, 1987.
ITC advertised a public sale for three weeks in the Chicago Tribune as follows:
NOTICE IS HEREBY GIVEN that on the 20th Day of May 1987 at the offices of Intercounty Title Company of Illinois, 120 West Madison Street, Chicago, Illinois, Suite 400, Intercounty Title Company of Illinois will offer the right, title and interest of Harry Giotis and George N. Voutiritsas in and to a certain note dated December 13, 1985, in the amount of $3,000,000 as secured by American National Bank and Trust Company of Chicago as Trustee under Trust Agreement dated November 21, 1985 and known as Trust Number 66061
Said Note is currently in default and is subject to litigation now pending in the Circuit Court of Cook County [docket number]
George N. Voutiritsas and Harry Giotis have claimed an aggregate 60% legal or equitable interest in said Note. They have also claimed that Intercounty Title * * * is a secured party having a security interest in said Note. Intercounty Title Company * * * steadfastly denies that it is a secured party and states that it is the absolute 100% legal and equitable owner to said Note having full legal and equitable title to said Note. Nonetheless in order to extinguish whatever claims exist which are asserted to be to the interest of Intercounty Title Company * * * in said Note, Intercounty Title Company * * * hereby offers for sale to the highest bidder on the 20th day of May, 1987 at the hour of 10:00 a.m. at the offices of Intercounty Title * * * whatever legal or equitable interest [plaintiffs] or either of them or both of them may have in and to said Note.
The successful bidder will be required to deposit 25% of the bid price by cashier's check or certified check upon the conclusion of the sale, and must pay for and acquire said 60% interest in said Note no later than 48 hours after said sale is consummated Intercounty Title * * * reserves the right to bid at the sale.
PLEASE TAKE NOTICE THAT INTERCOUNTY TITLE COMPANY OF ILLINOIS DENIES THAT HARRY GIOTIS AND GEORGE N. VOUTIRITSAS HAVE ANY INTEREST IN SAID NOTE. THE SUCCESSFUL BIDDER SHOULD KNOW THAT WHATEVER RIGHT, TITLE AND INTEREST THEY ACQUIRE WILL BE CONTESTED IN THE PROCEEDING NOW PENDING IN THE CIRCUIT COURT OF COOK COUNTY ENTITLED GEORGE N. VOUTIRITSAS ET AL. V. INTERCOUNTY TITLE COMPANY OF ILLINOIS 87 CH 02453."
The advertisement concluded by identifying the person to contact for additional information.
On May 18, 1987, plaintiffs filed a petition for preliminary injunction requesting that the trial court enjoin ITC from holding the UCC sale. The trial court denied plaintiffs' petition, and allowed ITC to conduct the UCC sale of plaintiffs' purported interest in the Note. On May 20, 1987, ITC held the UCC sale. ITC was the only bidder at the sale, and bid $350,000. The only other person who ...