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Karris v. US Equities Development

September 12, 2007

NICHOLAS A. KARRIS, PLAINTIFF-APPELLANT AND CROSS-APPELLEE,
v.
US EQUITIES DEVELOPMENT, INC.; U.S. EQUITIES REALTY, INC.; 95TH AND STONY ISLAND I, LLC; 95TH AND STONY ISLAND II, LLC, DEFENDANTS-APPELLEES AND CROSS-APPELLANTS, (JOHNNY YOUNG, ANDRES SON AND ROBERT WISLOW, DEFENDANTS).



Appeal from the Circuit Court of Cook County. No. 04 CH 4408. Honorable David R. Donnersberger, Judge Presiding.

The opinion of the court was delivered by: Justice Cunningham

Published opinion

The plaintiff, Nicholas A. Karris (Karris), appeals from the orders of the circuit court of Cook County granting summary judgment to the defendants-appellants, US Equities Development, Inc, US Equities Realty, Inc., 95th & Stony Island I, LLC and 95th & Stony Island II, LLC (defendants),*fn1 on counts I and II of his complaint seeking specific performance of a contract for the sale of a developed property (subject property). There were no other counts. Counts I and II, respectively, sought specific performance of sale of the subject property for $25,850,000 and $25,333,000 (98% of $25,850,000). On appeal, Karris contends that the trial court misapplied the law when it granted summary judgment on counts I and II and asks this court to reverse and remand the cause for trial on the merits. The defendants cross-appeal from the order of the trial court denying a prior motion to dismiss count II of the complaint. The defendants contend that the sale of the subject property to a third party mooted Karris's claim for specific performance of his alleged right to control the sale.

BACKGROUND

Our factual summary is based on the parties' pleadings, briefs, affidavits, depositions, and exhibits. In January 1995, World Premier Properties, Inc. (World Premier) and two bank trusts controlled by Karris entered into a purchase agreement (Purchase Agreement). The Purchase Agreement provided that Karris would sell certain real property located at 95th and Stony Island Avenue in Chicago to World Premier and World Premier would develop the property. The Purchase Agreement provided that Karris would receive up to half of the sale proceeds in a deferred payment after the subject property was sold.

In late 1997 and early 1998, World Premier and Karris negotiated an amendment to the Purchase Agreement and finalized the amendment on January 23, 1998. The parties refer to this amendment as the "1998 ROFO Amendment." The 1998 ROFO Amendment modified and replaced the earlier deferred payment plan with a detailed formula to calculate the deferred payment due to Karris. The 1998 ROFO Amendment also provided that, in the event that World Premier desired to sell all or substantially all of the subject property before it paid Karris the balance of the deferred payment, World Premier would offer Karris a right of first offer (ROFO) to purchase the subject property. The price, terms and closing date would be determined by World Premier in its sole discretion. After receiving the ROFO notice, Karris would have 20 days to agree to purchase the subject property or deliver a written counteroffer to World Premier. In the event of a counteroffer, the parties would have an additional 10 days to negotiate the terms of a sale. If the parties still did not agree, Karris would be deemed to have rejected the ROFO, and within 240 days of the failed ROFO negotiation date, the subject property could be sold to a third-party buyer.

After the execution of the 1998 ROFO Amendment but before the closing, 95th & Stony I, LLC (Stony I) and 95th & Stony II, LLC (Stony II), acquired World Premier's interests under the Purchase Agreement and became the owners of the property and the new "Buyer[s]" under the 1998 ROFO Amendment.*fn2 Stony I and Stony II are owned in part by US Equities. The actual closing of the sale of the vacant land under the Purchase Agreement occurred on November 23, 1998. Thereafter, the defendants developed the property and Stony Island Plaza was built and leased. Pursuant to the closing, Karris received $300,000 in cash and $2.5 million in TIF bonds (City of Chicago "Tax Increment Financing" bonds). Because Karris is only seeking an equitable remedy of specific performance in this case, there is no issue regarding the monetary amount allegedly due Karris for the sale of his vacant land.

On January 8, 2004, Stony I sent the ROFO notice with the base price (purchase price) to Karris to sell certain portions of the subject property to Karris on terms described in the notice. The ROFO notice informed Karris that if he did not exercise his ROFO, the subject property would be sold to a third party. On January 28, 2004, Karris's attorney sent a response letter to Stony I stating that the January 8, 2004 ROFO notice was invalid. However, the letter stated that Karris was willing to purchase the property, or a portion thereof, "subject to a reasonable opportunity to analyze the acquisition, the Project costs and the calculation of the Deferred Purchase Price." This letter further stated that Karris was unwilling to pay the brokerage commission and that "[h]e would be willing to purchase *** at the price of $25,850,000, minus the brokerage commission." Stony I treated Karris's January 28, 2004 letter as a counteroffer. Then on February 4, 2004, Stony I sent another letter to Karris with a counteroffer of its own and extended the additional 10-day period under the 1998 ROFO Amendment by two days until February 9, 2004. When Karris did not accept that counteroffer proposal by the deadline, Stony I informed Karris on February 10, 2004, that it considered Karris's inaction as a rejection of Stony I's February 4 counteroffer. Stony I informed Karris that it intended to proceed with a sale to a third party.

Thereafter, on March 11, 2004, Karris filed a two-count complaint against the defendants in the chancery division and recorded a lis pendens notice against the subject property.*fn3 Count I sought specific performance of the sale of the subject property for $25,850,000 from Karris's alleged acceptance of the January 8, 2004 ROFO notice. Count II sought specific performance pursuant to paragraph 13 of the 1998 ROFO Amendment, which would allow Karris to purchase the subject property for $25,333,000 or 98% of $25,850,000. Essentially, the underlying issue in count II was whether Karris or Stony I had the right to market the subject property within 240 days after the ROFO negotiation had failed.

On March 31, 2004, the defendants filed a motion for summary judgment on both counts. On May 18, 2004, the trial court entered an order granting the defendants' summary judgment motion against count I but denied the summary judgment motion against count II. The trial court determined that, under the facts presented, no enforceable contract was formed and therefore Karris had no right to specific performance under count I. Subsequently, on October 22, 2004, the defendants filed their second motion for summary judgment on count II under a new theory that Karris's alleged right to market the subject property within 240 days from the failed ROFO negotiation date had expired on or about October 5, 2004, and therefore the specific performance issue became moot. While waiting for an adjudication on the second motion for summary judgment on count II, on December 20, 2004, the defendants filed a motion to dismiss count II. The defendants stated that the subject property in the case was sold to a third party on December 17, 2004, and the sale rendered Karris's relief under count II moot. The trial court summarily denied that motion to dismiss on February 24, 2005.

On May 6, 2005, after a hearing, the trial court entered an order granting the defendants' second motion for summary judgment on count II. The trial court determined that Karris's alleged right to market the subject property for 240 days from the failed ROFO negotiation had expired on or about October 5, 2004, because Karris failed to take steps to toll the period. The court held that because Karris's alleged right had expired, the specific performance under count II became moot and summary judgment in favor of the defendants was proper.

Karris timely appealed the trial court's granting of the defendants' motions for summary judgment on both counts I and II. As an alternative basis for affirmance, the defendants cross-appealed the trial court's denial of the defendants' earlier motion to dismiss count II. Jurisdiction is proper under Illinois Supreme Court Rules 301 and 303 because final judgment was entered on both counts of the complaint. 134 Ill. 2d Rs. 301, 303.

ANALYSIS

There are essentially three issues in this case: (1) whether the trial court properly granted summary judgment in favor of the defendants on the claim of specific performance of a contract to purchase real property in count I of Karris's complaint where the trial court concluded that the parties failed to agree to terms for Karris's purchase of the developed property; (2) whether the trial court properly granted summary judgment in favor of the defendants on the claim for specific performance of an alleged contractual right in count II of Karris's complaint where the trial court concluded that the alleged right was for a finite period and had expired, rendering the claim moot; and (3) whether the trial court erred in denying the defendants' original motion to dismiss the specific performance claim in count II of ...


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