United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Johnson Coleman, United States District Court Judge
plaintiffs, Randall Ewing and Yasmany Gomez, brought this
action against defendant 1645 W. Farragut, LLC
(“Farragut”) based on a failed agreement to
modify and purchase the property located at 1645 West
Farragut Avenue in Chicago, Illinois. Defendants subsequently
filed a counterclaim against Ewing and Gomez, asserting a
claim for breach of contract and seeking liquidated damages
or, alternatively, actual damages. Ewing and Gomez now move
this Court to dismiss that counterclaim for failure to state
a claim. For the reasons set forth herein, that motion 
is granted in part and denied in part.
following facts are taken from the counterclaim and are
accepted as true for the purpose of ruling on the present
motion. Farragut is the owner of the property located at 1645
West Farragut Avenue, which Farragut was renovating to market
and sell. On April 17, 2016, the parties executed a written
contract in which Ewing and Gomez agreed to purchase the
property for $1, 175, 000.00.
the execution of the contract, Ewing, Gomez, and Farragut
discussed several possible alterations to the property. On
May 2, 2016, the parties modified the April 17, 2016 contract
(the “Modification”). The Modification, which
identified the “Purchaser(s) as “Randall Ewing
and Yasmany Gomez, ” provided in pertinent part that:
This Agreement is contingent upon the ability of Purchaser to
secure, by August 15, 2016, a mortgage commitment for $940,
000.00, or such lesser sum as Purchaser shall accept . . . .
Purchaser shall make timely application or applications for
and shall make every reasonable effort to obtain such
commitment, and shall take no action or omission after the
date hereof which would tend to damage Purchaser's
creditworthiness or ability to pay such mortgage loan.
Purchaser shall provide a copy of said commitment to Seller.
If Purchaser is unable to obtain such firm commitment,
Purchaser shall notify Seller thereof in writing by 5:00 p.m.
on the date set forth immediately above. . . . If Seller is
so notified, Seller may, at Seller's option, within sixty
(60) days after such notice, secure a commitment on behalf of
Purchaser on the same terms as above. Purchaser agrees to pay
an application fee and to furnish Seller all requested credit
information and to sign customary papers relating to the
application for securing of said commitment. . . . Should
Purchaser not close for any reason, not through fault of
Seller, including inability to obtain a mortgage and
Purchaser has made selections, upgrades and/or change orders,
Seller reserves the right to back-charge the earnest money,
prior to releasing the balance to Purchaser in order to
rectify, if necessary, Purchaser's selections. A party
causing delay in the loan approval process shall not have the
right to terminate under this paragraph.
Modification also contained a default provision providing
Time is of the essence of this Agreement. In any action with
respect to this contract, the Parties are free to pursue any
legal remedies at law or in equity. If Purchaser materially
defaults on any of the terms and conditions contained in this
Purchase and Sale Agreement, then all payments made by
Purchaser shall be retained by Seller as liquidated damages,
and not as a penalty, and this Agreement shall thereupon
become null and void.
August 15, 2016, Ewing and Gomez informed Farragut that they
were unable to obtain a financing commitment. Farragut
subsequently sent notice that it was exercising its
contractual right to obtain financing. Farragut provided
Ewing and Gomez with contact information for four mortgage
brokers. One of those brokers informed Ewing that it could
provide him with a loan in his name only (due to Gomez's
credit score), but that the title to the property could name
both him and Gomez. Ewing declined to obtain this loan and,
receiving no further offers, sent Farragut formal notice to
cancel the contract under the mortgage contingency clause.
Farragut, in turn, rejected this attempt to cancel the
contract and declared Ewing and Gomez in default.
and Ewing filed suit against Farragut, asserting that
Farragut had made certain fraudulent misrepresentations, or,
alternatively, that the parties had been mistaken regarding
Farragut's ability to modify the house. Farragut, in
turn, filed the present counterclaim alleging that Ewing and
Gomez breached the contract by failing to seek financing in
motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) tests the legal sufficiency of the complaint, not
the merits of the allegations. The allegations must contain
sufficient factual material to raise a plausible right to
relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544,
569 n.14, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Although
Rule 8 does not require a plaintiff to plead particularized
facts, the complaint must contain factual “allegations
that raise a right to relief above the speculative
level.” Arnett v. Webster, 658 F.3d 742,
751-52 (7th Cir. 2011). Put differently, Rule 8 “does
not require ‘detailed factual allegations, ' but it
demands more than an unadorned,
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct.
1937, 173 L.Ed.2d 868 (2009), see also Fed. R. Civ.
P. 8(a). When ruling on a motion to dismiss, the Court must
accept all well-pleaded factual allegations as true and draw
all reasonable inferences in the plaintiff's favor.
Park v. Ind. Univ. Sch. of Dentistry, 692 F.3d 828,
830 (7th Cir. 2012).
and Gomez first contend that the Modification does not allow
Farragut's claim for liquidated damages. The
Modification's default provision provides that if the
Purchaser defaults “all payments made by Purchaser
shall be retained by Seller as liquidated damages, and not as
a penalty.” Although the modification does not define
“payments, ” there is nothing to suggest that it
does not encompass earnest payments. Ewing and Gomez,
however, assert that the default provision is inconsistent
with the mortgage provision, which provides that
“[s]hould Purchaser not close for any reason, not
through fault of Seller, including inability to obtain a
mortgage and Purchaser has made selections, upgrades and/or
change orders, Seller reserves the right to back-charge the
earnest money, prior to releasing the balance to Purchaser in
order to rectify, if necessary, Purchaser's
selections.” The Court agrees that these provisions
seemingly conflict. The mortgage provision, however, governs
a situation where the Purchaser fails to close for any
reason, while the default provision governs a situation where
the purchaser defaults on a term or provision of the
contract. Here, it is alleged that Ewing ...