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Krilich v. American National Bank and Trust Co. of Chicago

October 10, 2002

ROBERT R. KRILICH, PLAINTIFF AND COUNTERDEFENDANT-APPELLEE,
v.
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO DEFENDANT-APPELLANT
(BONGI DEVELOPMENT CORPORATION, DEFENDANT AND COUNTERPLAINTIFF-APPELLANT).
ROBERT R. KRILICH, PLAINTIFF AND COUNTERDEFENDANT-APPELLEE,
v.
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, DEFENDANT-APPELLANT
(BONGI DEVELOPMENT CORPORATION, DEFENDANT AND COUNTERPLAINTIFF-APPELLANT).
ROBERT R. KRILICH, PLAINTIFF AND COUNTERDEFENDANT-APPELLEE AND THIRD-PARTY PLAINTIFF-APPELLANT,
v.
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, DEFENDANT-APPELLANT
(BONGI DEVELOPMENT CORPORATION, DEFENDANT AND COUNTERPLAINTIFF-APPELLANT; VIOLA LORENTZ, AS ADM'R OF THE ESTATE OF ARTHUR LORENTZ, AND MARY BURKE, GENE NAUERT, HERBERT MAIER, MAURICE FRISHMAN, JOHN JOYCE, WILLIAM LANGE, AND EDWARD M. WHITE, THIRD-PARTY DEFENDANTS-APPELLEES).



Appeal from the Circuit Court of Du Page County. No. 98-L-673 Honorable Stanley C. Austin, Judge, Presiding, Honorable Kenneth Moy Judge, Presiding, Honorable Hollis L. Webster, Judge, Presiding.

The opinion of the court was delivered by: Justice Byrne

These consolidated appeals arise from a real estate contract between plaintiff, Robert R. Krilich, and defendant Bongi Development Corporation (Bongi). Krilich filed two motions to dismiss Bongi's multiple counterclaims and affirmative defenses, the trial court granted the motions, and Bongi appeals the dismissals. Krilich appeals an unrelated order in which the trial court dismissed his claim for indemnification against his former joint venturers. We affirm.

FACTS

On January 5, 1973, Krilich entered into a joint venture agreement (the Carol Stream Joint Venture Agreement) with Arthur Lorentz, Mary Burke, Gene Nauert, Herbert Maier, Maurice Frishman, John Joyce, William Lange, and Edward M. White (collectively, the joint venturers). The purpose of the joint venture was to purchase and develop residential real estate.

On June 29, 1988, acting on behalf of the joint venture, Krilich agreed to sell Bongi certain property in the Village of North Barrington for $1,237,500. The North Barrington parcel consisted of 15 lots of a subdivision, and the parties intended for Bongi to build a single-family residence on each lot. Pursuant to the North Barrington contract, Bongi was to pay Krilich $900,000 at closing and pay the remaining $337,500 pursuant to a promissory note. The contract further provides in relevant part:

"WHEREAS, [Bongi] intends to complete the zoning of the Subdivision by the Village at [Bongi's] sole cost and expense to enable [Bongi] to construct single-family residences.

8. Conditions Precedent. [Bongi's] obligation to consummate the Purchase of the Property shall be contingent upon fulfillment of the following conditions precedent ('Conditions Precedent') hereinafter described:

a. Tests and Inspections. Within ten (10) days from the date hereof, [Krilich] shall deliver to [Bongi] all soil test borings, engineering studies, toxicity tests or other documentation that [Krilich] may have relating to the Property and if complete, [Bongi] shall have twenty (20) days from the date hereof to determine the acceptability of such reports. In the event the results of such tests and studies disclose that the Property is not suitable to permit the construction of improvements on the Property in accordance with [Bongi's] Intended Development, then upon written notice to [Krilich] within said twenty (20) day period, [Bongi] may terminate this Agreement. Thereafter, this Agreement shall be null and void and the parties shall have no further rights or liabilities hereunder. [Bongi's] failure to so notify [Krilich] in writing within said twenty (20) day period shall be construed as meaning that [Bongi] is conclusively satisfied with the results of the tests received by [Bongi] from [Krilich] and waives its right under this paragraph to terminate this Agreement.

b. Final Approval. [Bongi's] Intended Development will require adoption by the Village of an ordinance approving the subdivision of the Subdivision into fifteen (15) lots; the final approval of [Bongi's] engineering plans for the Subdivision, and approval by all staff members and Village committees of a Development Plan materially consistent with the Preliminary Development Plan; and [Bongi] receiving all necessary approvals and permits from all units of government having jurisdiction over the Property ***. The aforesaid approval process is hereinafter referred to as 'Final Approval.' [Bongi] shall file applications for Final Approval as soon as practicable and will thereafter diligently and in good faith take the steps necessary for consideration by the Village and other units of government having jurisdiction over the Property of a grant of such approval."

On July 15, 1988, Krilich and Bongi closed the sale and Bongi executed a $337,500 promissory note as planned. On or about that date, Krilich and Bongi modified the North Barrington contract to require Krilich to pay one-half of the cost of soil importations and certain other corrective measures. The parties also renewed the first promissory note in the form of a second note.

On February 8, 1991, Krilich and Bongi executed a second modification of the North Barrington contract and a third promissory note. The second modification voided the first modification, thereby eliminating Krilich's duty to pay the costs described therein. The third note consolidated the principal and the interest that Bongi owed and increased the interest rate.

On August 10, 1998, Krilich sued defendants Bongi and American National Bank and Trust Company (American) for breach of the third promissory note. On January 13, 1999, Bongi filed an answer, affirmative defenses, and three counterclaims. Bongi's original counterclaims state causes of action for misrepresentation, fraud, and breach of contract. In each of the counterclaims, Bongi alleges the following:

"In said Contract and during and after negotiations, KRILICH misrepresented the following material facts to BONGI:

(A) That on said real estate as set forth in the [NORTH] BARRINGTON CONTRACT, BONGI could construct fifteen (15) single family residences;

(B) That the real estate constituting the purchase was of a size sufficient to create individual septic fields for each of fifteen (15) lots and further that the content, quality, consistency and capacity of the soil was suitable for the construction of septic fields sufficient for the construction of fifteen (15) single family residences.

(C) That subdivision and other approvals from the Village of North Barrington, the County of Lake and other governmental bodies would be a routine matter and could be completed within a period of several months after closing."

The counterclaims further allege that Krilich intentionally deceived Bongi, Bongi reasonably relied upon the statements, and Bongi incurred substantial damages when it could not obtain zoning approval for the project. Bongi's pleadings also allege that Krilich failed to pay the amounts due under the first contract modification.

On March 30, 1999, Krilich filed a motion to dismiss the misrepresentation and fraud counterclaims under section 2--619 of the Code of Civil Procedure (Code) (735 ILCS 5/2--619 (West 1998)). Krilich conceded that he made the statements as alleged. However, he argued that Bongi unreasonably relied upon the statements because (1) they were statements of law, (2) they were statements of future facts, and (3) Bongi waived its contractual right to cancel the agreement upon the occurrence of the events that allegedly caused Bongi's damages. On June 8, 1999, Judge Austin granted the motion to dismiss the misrepresentation and fraud counterclaims.

More than a year later, Bongi filed two additional affirmative defenses, alleging that (1) the North Barrington contract was unenforceable because Krilich used duress and business compulsion while negotiating the second modification of the original agreement and (2) Bongi was entitled to a setoff against any amount that Krilich might recover because Krilich had breached the first contract modification. Bongi also amended the counterclaims to include a second breach of contract count based on the duress allegation.

Specifically, Bongi alleges that Krilich employed duress and business compulsion during the negotiations of the second contract modification by threatening to breach the parties' Covington Cove contract, an unrelated residential real estate development contract executed on May 18, 1988. Pursuant to the Covington Cove contract, Krilich was to sell Bongi 153 "fully improved lots" in the Village of Carol Stream. The agreement required Krilich to complete certain public subdivision improvements, and Bongi alleges that Krilich coerced Carl Bongiovanni, Bongi's president, to execute the second modification of the North Barrington contract by delaying completion of the improvements and withholding a letter of credit for the Covington Cove project. Bongi contends that Krilich knew that Bongi owed more than $5 million on outstanding mortgage loans on the Covington Cove project and that any delays in the construction would threaten the project. Bongi seeks at least $5 million on the duress counterclaim.

Krilich filed a motion to dismiss the two new affirmative defenses and the new counterclaim. The motion contained an affidavit prepared by Dennis Taheny, Krilich's former attorney, in which he stated that, on November 12, 1990, Taheny sent Bongiovanni and his attorney, Keith Wenk, a draft of the proposed second modification of the North Barrington contract.

On June 13, 2001, Judge Moy granted the motion, concluding that Bongi had failed to state a claim of duress because (1) Bongiovanni had the benefit of counsel during the three-month negotiation of the second modification, (2) a mere threat to breach a contract is not economic duress, and (3) public policy considerations supported the dismissal of the duress allegations. Bongi timely filed a notice of appeal, and we docketed the case under appeal No. 2--01--0921. Bongi subsequently filed a second proper notice of appeal of the dismissal of the misrepresentation and fraud counterclaims, and we docketed the case under appeal No. 2--01--1235.

On March 26, 2001, Krilich filed a third-party complaint in which he alleged that the joint venture agreement required the remaining joint venturers to indemnify him for any liability he might incur on behalf of the joint venture as a result of his litigation against Bongi. Pursuant to section 2--619 of the Code, the joint venturers filed a motion to dismiss Krilich's third-party complaint for indemnification. On November 20, 2001, Judge Webster granted the motion, concluding that the joint venturers' contractual duty to indemnify Krilich for Bongi's counterclaims was terminated ...


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