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July 11, 1996


Appeal from Circuit Court of McLean County. No. 94L57. Honorable Ronald C. Dozier, Judge Presiding.

As Corrected August 29, 1996. As Modified on Denial of Rehearing June 24, 1997.

Honorable James A. Knecht, J., Honorable Robert W. Cook, P.j., Honorable Frederick S. Green, J., Concurring. Justice Knecht delivered the opinion of the court.

The opinion of the court was delivered by: Knecht


The Honorable Justice KNECHT delivered the opinion of the court: Defendant Virgil Kuntz appeals the trial court's judgment awarding plaintiff Bill Kruse, d/b/a Kruse Auction House, $16,474 for the sale of farm equipment to Kuntz, as well as attorney fees. Kruse cross-appeals the trial court's denial of prejudgment interest. We affirm in part, reverse in part, and remand.

In December 1993, Kruse conducted an auction sale at which Kuntz was the highest bidder for farm equipment. Kuntz bid $106,901.50 for the equipment and paid that amount with a check drawn on his account at Busey Bank in Leroy, Illinois. The check was returned for insufficient funds. In January 1994, Kuntz signed a written statement whereby he agreed to pay Kruse the full amount due for the equipment by February 1, 1994, plus interest, damages, and attorney fees. Although Kuntz made partial payments, he failed to pay the full amount by the stated date. Kruse filed suit, seeking full recovery of the amount owed plus court costs, attorney fees, and prejudgment interest. Kuntz filed a counterclaim seeking rescission of the auction sale contract on the ground of mutual mistake. He alleged the parties had entered into the contract on the mistaken belief Busey Bank had made a verbal loan commitment to Kuntz and would honor a check drawn in excess of the amount in his account. Kruse also filed a third-party complaint against Busey Bank, which was later dismissed.

In August 1994, Kruse filed a motion for summary judgment. Kuntz then filed a cross-motion for summary judgment. In February 1995, the trial court granted Kruse's motion for summary judgment and denied Kuntz' motion for summary judgment. Kruse filed a motion to vacate the judgment and modify the amount of the judgment. The trial court granted the motion, finding Kuntz had paid most of the debt already. The trial court entered a modified judgment awarding Kruse $11,861.50 for the remaining unpaid debt, $4,112.50 in attorney fees and costs, plus a $500 penalty, for a total of $16,474. Kuntz filed a post-trial motion requesting the trial court reverse its decision on the grounds Kruse's claim based on the auction sale contract was barred by the statement Kuntz signed in January 1994. The motion also asked the trial court to deny Kruse attorney fees on the basis Kruse's attorney had failed to submit his time records to the court. Kruse in turn filed a post-trial motion seeking an award of prejudgment interest to him. The trial court denied the motions of both parties, and now both parties appeal.

Kuntz first asserts the trial court erred in granting summary judgment for Kruse on the unpaid amount of the auction sale contract. Kuntz contends Kruse's complaint sought to recover only on the auction sale contract, but Illinois law bars this claim because the statement signed by him in January 1994 was a "settlement agreement." Kruse appears to also view the statement as a "settlement agreement," but asserts Illinois law allows the aggrieved party to a settlement agreement to elect to proceed on the settlement agreement or the original contract. That the parties take different positions in this regard is understandable given Illinois courts have made contradictory statements regarding the issue.

Two separate lines of cases exist in Illinois, each without comment on the other, on the issue of the effect of a settlement agreement on the rights of an aggrieved party to bring suit under the original contract rather than the settlement agreement. One line of cases declares, in the absence of mistake or fraud, a settlement agreement is conclusive on the parties as to all matters therein. A valid compromise is in the nature of a contract and operates as a merger of all included claims, as well as a bar thereto. After compromising disputed claims, a plaintiff's only remedy is based upon the settlement contract itself. See, e.g., Towne v. Town of Libertyville, 190 Ill. App. 3d 563, 570, 546 N.E.2d 810, 815, 137 Ill. Dec. 865 (1989); In re Marriage of Wilder, 122 Ill. App. 3d 338, 357-58, 461 N.E.2d 447, 460, 77 Ill. Dec. 824 (1983). This line can be traced back to the declaration of our supreme court in Bingham v. Browning, 197 Ill. 122, 136, 64 N.E. 317, 321 (1902), quoting Farmers' Bank v. Blair, 44 Barb. 641, 652-53 (N.Y. App. Div. 1865):

"'Compromises are to be encouraged because they promote peace, and when there is no fraud and the parties meet on equal terms and adjust their differences, the court will not overlook the compromise but will hold the parties concluded by the settlement.'"

The other line of cases, however, declares if a party to a settlement agreement breaches and the breach goes to an essential element of the compromise agreement and in effect amounts to a refusal to perform or an abandonment, the other party may elect to regard the agreement as rescinded and proceed on the original cause of action, or may sue on the agreement for the breach. See, e.g., Berry v. Oak Park Hospital, 256 Ill. App. 3d 11, 19, 628 N.E.2d 1159, 1165, 195 Ill. Dec. 695 (1993). When the citations for this proposition are traced back, the rule seems to have been derived by implication from Trapkus v. Edstrom's, Inc., 140 Ill. App. 3d 720, 725, 489 N.E.2d 340, 345, 95 Ill. Dec. 119 (1986). Trapkus did not involve a settlement agreement, but the court there stated the general rule a contract may be rescinded where a material breach has occurred. One other case also concluded breach of a settlement agreement allows the aggrieved party to elect to sue under either the settlement agreement or the original contract, but that case cited as support cases from other jurisdictions only. Hopkins v. Holt, 194 Ill. App. 3d 788, 796-97, 551 N.E.2d 400, 406, 141 Ill. Dec. 407 (1990).

Here, Kuntz asserts the trial court should have dismissed Kruse's complaint because his claim on the auction sale contract was barred by the "settlement agreement." Kruse responds he had the option of electing to proceed on either the settlement agreement" or the auction sale contract. Each party cites only to that line of cases supporting its position. We could join with one line of cases over the other, but we believe that is unnecessary. A reviewing court is not bound by reasons given by the trial court for its judgment, and a trial court judgment may be affirmed upon any ground warranted in the record regardless whether it was relied on by the trial court. Material Service Corp. v. Department of Revenue, 98 Ill. 2d 382, 457 N.E.2d 9, 75 Ill. Dec. 219 (1983).

Here, what the parties each refer to as the "settlement agreement" appears to be no such thing. The untitled typed ...

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