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Morse v. Donati

Court of Appeals of Illinois, Second District

August 8, 2019

HARTWELL P. MORSE III and DEBORAH B. MORSE, Plaintiffs-Appellants,

          Appeal from the Circuit Court of Du Page County. No. 15-CH-2123 Honorable Bonnie M. Wheaton, Judge, Presiding.

          JUSTICE ZENOFF delivered the judgment of the court, with opinion. Justices Hutchinson and Hudson concurred in the judgment and opinion.



         ¶ 1 Plaintiffs, Hartwell P. Morse III and Deborah B. Morse, sued defendants, Anthony Donati and Concetta Donati, for breach of contract arising from a real estate transaction. In appeal No. 2-18-0328, plaintiffs appeal the judgment of the circuit court of Du Page County awarding them only $3608 plus costs. In appeal No. 2-18-0686, plaintiffs appeal the order denying Hartwell's petition for attorney fees. This court consolidated the appeals. We now affirm.

         ¶ 2 I. BACKGROUND

         ¶ 3 Plaintiffs owned property commonly known as 282 Stonegate in Clarendon Hills (the property). The property was encumbered by two mortgages. Chase Bank held the first mortgage. PNC Bank (the bank) held the second mortgage. Plaintiffs defaulted on both mortgages.

         ¶ 4 In August 2015, plaintiffs entered into a contract for the sale of the property to defendants for $410, 000. That contract contained a "short sale addendum," meaning that plaintiffs were selling the property for less than they owed. The sale was contingent upon plaintiffs' obtaining the bank's consent.[1] On September 22, 2015, the bank agreed to the short sale, provided that the bank received all of the proceeds and that plaintiffs received $0 at closing. The bank also agreed not to pursue a deficiency judgment against plaintiffs.

         ¶ 5 On December 21, 2015, defendants refused to close, because of a dispute with their lender. On December 28, 2015, Hartwell, an attorney, filed suit on behalf of himself and Deborah against defendants, for specific performance. On April 12, 2016, plaintiffs sold the property to Susan Kolinger for $375, 000, $35, 000 less than defendants' contract price. That sale was also a short sale that was approved by the bank on the same terms as outlined above. On July 28, 2016, plaintiffs filed an amended one-count complaint against defendants for breach of contract. Defendants, in their original and amended answers, denied that plaintiffs were damaged.

         ¶ 6 On July 26, 2017, plaintiffs filed a motion for summary judgment. Before that motion was heard, plaintiffs filed a 43-page motion (omnibus motion) seeking $35, 000 in discovery sanctions against defendants and their counsel. On August 11, 2017, defendants filed a cross-motion for partial summary judgment, arguing that plaintiffs suffered no damages as a result of the sale to Kolinger. Plaintiffs then filed a second motion for sanctions against defendants on the ground that the defenses raised in defendants' cross-motion for summary judgment had not been disclosed in response to plaintiffs' interrogatories. Defendants did not file responses to either motion for sanctions. Those motions were continued for hearing to November 29, 2017, along with the cross-motions for summary judgment.

         ¶ 7 At the beginning of the hearing, Hartwell stated that he was putting the sanctions motions aside and would be arguing the merits of plaintiffs' summary-judgment motion. The court then twice inquired whether Hartwell was arguing the motions for sanctions or the motion for summary judgment. Hartwell replied: "The motion for sanctions, Your Honor, is not being argued at this moment. I put that aside." He never returned to the motions for sanctions, and the court did not rule on them.

         ¶ 8 The court found that defendants breached the contract. However, the court ruled that whether plaintiffs sustained damages was an issue of fact, to be resolved at trial. Prior to trial, attorney Gregory Vacala filed his appearance as cocounsel for plaintiffs.

         ¶ 9 On March 23, 2018, plaintiffs filed a motion to bar defendants' "anticipated defenses" at trial, as a discovery sanction. That motion referenced the omnibus motion, but it did not specifically incorporate it. Vacala argued that defendants had not raised as an affirmative defense plaintiffs' failure to mitigate damages, or the so-called "short-sale defense." The court ruled that damages had earlier been explored and argued "at great length" and that plaintiffs were not taken by surprise.

         ¶ 10 At the bench trial on April 2, 2018, Hartwell was the only witness. He testified that the sale to defendants was a short sale, for which plaintiffs would not receive any money at closing. Hartwell admitted that the bank would have been entitled to the additional $35, 000 if defendants had closed. Hartwell then detailed the expenses that he claimed plaintiffs incurred between the breach on December 21, 2015, and the Kolinger closing on April 12, 2016 (the breach period). In all, plaintiffs claimed damages of $48, 881.70. Hartwell admitted that he had no paid receipts or canceled checks for many of the utility bills and other charges for which plaintiffs demanded reimbursement. Hartwell testified that he was required to pay $1658.93 toward Col dwell Banker's brokerage fees at closing. Hartwell also claimed that Chase Bank and the bank charged an additional $10, 239 in interest during the breach period. Hartwell admitted that plaintiffs did not pay any of that interest.

         ¶ 11 Defendants argued that plaintiffs were not damaged, because the bank suffered the $35, 000 loss. To counter that argument, plaintiffs contended that the "collateral source rule" should apply to allow plaintiffs to recover damages despite having no out-of-pocket loss. The collateral-source rule, generally applied in tort cases, provides that an injured party who receives benefits from a collateral source, such as an insurance company, may still recover full damages from the tortfeasor. Robert Hernquist, Arthur v. Catour: An Examination of the Collateral Source Rule in Illinois, 38 Loy. U. Chi. L.J. 169, 175 (2006). Defendants argued that the bank bore the loss and was not a collateral source. The court declined to apply the collateral-source rule.

         ¶ 12 The court found that plaintiffs proved out-of-pocket damages of $3608 plus costs. The court arrived at that figure by adding the amounts of the bills paid during the breach period to the $1658.93 that plaintiffs paid at closing. The court attributed the additional $1658.93 to title charges occasioned by the interest that Chase Bank billed during the breach period. The court entered its written judgment on April 16, 2018. The court also gave the parties 30 days to file petitions for attorney fees. Vacala filed a fee petition for $6428.80, and Hartwell filed a fee petition for $82, 500. Defendants filed a fee petition for $10, 950. On August ...

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