Opinion
NO. 4-12-0681
04-24-2013
NASER BEKTESOSKI, Plaintiff-Appellant, v. KANAL JEET SINGH and AMAN PREETKAUR, Defendants-Appellees.
NOTICE
This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).
Appeal from
Circuit Court of
Logan County
No. 12LM2
Honorable
Thomas W. Funk,
Judge Presiding.
PRESIDING JUSTICE STEIGMANN delivered the judgment of the court.
Justices Appleton and Knecht concurred in the judgment.
ORDER
¶ 1 Held: The appellate court affirmed the trial court's finding that defendants had not waived specific contractual provisions in connection with the sale of commercial property, but it reversed the portion of the total damages the court awarded to the defendants for lost profits. ¶ 2 In January 2012, plaintiff, Naser Bektesoski, sued defendants, Kanal Jeet Singh and Aman Preetkaur, seeking their eviction from a commercial property defendants purchased from Bektesoski because they later failed to make monthly installment payments. ¶ 3 In February 2012, defendants filed a countersuit for damages, claiming that because Bektesoski did not disclose that the purchased property was subject to a mortgage, a tax lien, and environmental contamination, they suffered damages when a third party terminated its plans to purchase the property. ¶ 4 Following a March 2012 hearing on the parties' respective filings, the trial court found that (1) Bektesoski was entitled to possession of the property because defendants failed to make monthly payments as contracted and (2) defendants were entitled to $168,891 in damages because Bektesoski failed to comply with a contractual provision that required him to produce a title commitment in a timely manner. ¶ 5 In April 2012, Bektesoski filed a motion to reconsider, which the trial court later denied. In so doing, however, the court allowed the parties to present written argument concerning Bektesoski's claim during that hearing that defendants had waived the contractual provision the court relied on to award them damages. ¶ 6 In June 2012, the trial court entered a written order, reaffirming its denial of Bektesoski's motion to reconsider and finding that defendants had not waived contractual provisions that required Bektesoski to provide a title commitment and ensure the property complied with environmental regulations. ¶ 7 Bektesoski appeals, arguing that the trial court erred by (1) finding that defendants had not waived a contractual provisions that required Bektesoski to deliver a timely title commitment and ensure the purchased property complied with environmental regulations and (2) awarding defendants damages. Because we disagree with Bektesoski's first argument but agree only that the court erred by awarding defendants damages for lost profits, we affirm in part and reverse in part.
¶ 8 I. BACKGROUND
¶ 9 A. The Pertinent Portions of the Parties' Contractual Agreement and the
Circumstances That Prompted the Parties' Respective Lawsuits
¶ 10 On March 6, 2010, Bektesoski sold his gas station to defendants for $345,000. Defendants made a $150,000 down payment and agreed to pay Bektesoski the remaining balance in monthly installments over a 20-year period. Bektesoski retained the deed to the land and assets defendants sought to acquire until they satisfied their financial obligation. The parties also agreed, in pertinent part, to the following contractual provisions:
"2.3 DEFAULT, FORFEITURE, REPOSSESSION: In case of failure of [defendants] to pay any or more installments *** and if [defendants] *** permit any such installments to remain due for *** [14] days, or more, ***, then [Bektesoski] shall have the right to treat this contract as at an end and re-enter and regain possession of said premises as if this contract had never been made, ***. Upon termination of this contract, all moneys paid *** by [defendants] may be retained by [Bektesoski] as liquidated damages[.](The exceptions omitted in section 2.5 above are not at issue in this appeal.) Defendants sent monthly installments payments of $1,400 to Bektesoski from April 2010 to October 2011.
* * *
2.5 TITLE EVIDENCE. [Bektesoski] agrees to provide [defendants], within [10] days of execution hereof, a commitment to issue a Guaranty Policy *** for [$345,000], subject only to the following:
* * *
[Defendants], within [5] days after receiving such title evidence, deliver to [Bektesoski] a report in writing specifying any objections made to the title. In case such title evidence is not delivered to [defendants] within a reasonable time or material objections made to the title in such report are not cured within [30] days after such report is so delivered, this Contract shall, at [defendants] option, be void and all monies paid shall be returned to [defendants]. ***
* * *
6.1 COMPLIANCE WITH ENVIRONMENTAL LAWS. The Premises owned by [Bektesoski] has been and continues to be owned by [Bektesoski] in compliance with all environmental laws. To the best knowledge and belief of [Bektesoski], the real estate being sold is not now in violation of any [e]nvironmental [l]aws."
¶ 11 B. The Respective Suits Filed by the Parties
¶ 12 In January 2012, Bektesoski filed a "verified complaint in forcible entry [and] detainer and ejectment," seeking termination of the March 2010 real estate contract. Specifically, Bektesoski sought to repossess the gas station from defendants and receive an award of $8,081 for delinquent installment payments. ¶ 13 In February 2012, defendants filed a counterclaim, requesting damages in excess of $175,000. Specifically, defendants asserted that Casey's General Store (Casey's) terminated a conditional agreement to buy the gas station for $370,000 because an August 2011 title search of the property revealed (1) a $100,000 mortgage payable to Ag-Land FS, Incorporated (FS), and (2) a $185,668 tax lien from the Illinois Department of Revenue that was recorded in May 2011. In addition, defendants appended to their counterclaim an October 2011 environmental report provided by Casey's that showed (1) in 2001, the gas station experienced a "gasoline release," which generated "20-day and 45-day reports," (2) a 2008 gasoline release that was addressed in a July 2009 "No Further Remediation" letter, and (3) an August 2011 corrective action plan pertaining to the gas station that the Illinois Environmental Protection Agency had yet to address. The report also described the results of water and soil testing performed on the gas station, noting that four of six soil samples and both water samples exceeded contamination levels for various hazardous chemicals.
¶ 14 C. The Evidence Presented at the March 2012 Hearing
on the Parties' Respective Filings
¶ 15 Initially, we note that because this appeal concerns specific contractual provisions and damages, we limit our discussion to the evidence presented concerning those topics.
¶ 16 1. Bektesoski's Testimony
¶ 17 Bektesoski testified that during his numerous negotiations with Singh about the gas station purchase and in the days immediately prior to that sale, they had not discussed Bektesoski's commitment to issue a guaranty policy and no one asked him to provide one. Bektesoski stated that (1) "from day one" he told Singh about the money he owed to FS, which was approximately $40,000 just prior to the purchase of the gas station and (2) he would pay the debt before the 20-year installment-payment-maturity date. Bektesoski also stated that although he owned the gas station prior to 2007, he had no knowledge of the 2008 gasoline spill because the leak originated from an underground tank. Bektesoski explained that before the sale, he told Singh about the 2001 environmental contamination, explaining that the previous owner "took some tanks out" and that he may need to later extract soil samples from the gas station property.
¶ 18 2. Singh's Testimony
¶ 19 Singh testified that he did not receive a title commitment from Bektesoski as required by section 2.5 of the contract, but he acquired a title search dated August 29, 2011, in connection with the unsuccessful sale of the gas station to Casey's. That title search revealed a $100,000 mortgage and $185,668 tax lien levied against the gas station. ¶ 20 Singh admitted that, in March 2010—when the parties entered into the real estate contract—he did not have a discussion with Bektesoski about selling the gas station and agreed that a later sale of the gas station could result in a loss, a profit, or no financial gain. Singh confirmed that October 2011 was the last time he sent an installment payment to Bektesoski because of the undisclosed environmental violations, adding that prior to the March 2010 gas-station purchase, Bektesoski told him that the gas station was in compliance with all environmental regulations. Singh acknowledged that Bektesoski told him about the FS debt, but Bektesoski did not disclose that the debt was a mortgage. Singh noted that it was not until 2011 that Bektesoski informed him that the previous owner was going to take soil samples of various sections of the gas station.
¶ 21 3. The Trial Court's Findings
¶ 22 Following the presentation of the aforementioned evidence and argument, the trial court later entered a written order, finding as follows: (1) Bektesoski was entitled to the gas-station property because defendants had breached their contractual obligation to make monthly installments payments and (2) defendants were entitled to $168,891 in damages because of Bektesoski's "failure to cure the title defect in that there is and has been a mortgage on the property." With regard to the award of damages, the court determined that defendants were entitled to a refund of their $150,000 down payment, $25,200 for monthly installment payments they had made, $25,000 for lost profits on the unsuccessful sale of the gas station to Casey's, and $4,391 for attorney fees. The court however, offset that total award by $35,700, which the court calculated by multiplying the 25 1/2 months defendants possessed the gas station by the fair market rental value of $1,400 per month.
¶ 23 D. Bektesoski's Motion To Reconsider and the Trial
Court's Consideration of That Motion
¶ 24 In April 2012, Bektesoski filed a motion to reconsider. At a May 2012 hearing on that motion, Bektesoski's counsel argued that the trial court erred by finding that he had breached section 2.5 of the contractual agreement. In support of that argument, counsel cited section 5.3 of the contractual agreement, which provided, as follows:
"5.3 OWNERSHIP. [Bektesoski] is the owner of all the assets to be sold hereunder, free and clear from any conditional sales contracts of any kind other than mortgages[,] which can be satisfied out of the Purchase Price and released at the time whenRelying on that provision, Bektesoski's counsel argued, in pertinent part, as follows:
[defendants] pay[] the balance due under this Contract."
"The terms of the contract had reserved to *** Bektesoski[] the right to satisfy any mortgages with the money received from the sale of the property. So, I think it's difficult [that] while a mortgage existed at that time, it was clearly going away. And I don't think it could be considered [a] defect by any means."(The record shows that Bektesoski was paying down the FS mortgage with the monthly installment payments defendants had made.) ¶ 25 In response to the trial court's question regarding Bektesoski's interpretation of section 2.5 of the contract, counsel responded that he believed section 2.5 required both parties "to act in their own best interest in attempting to conclude the sale." In this instance, counsel suggested that "laches and/or waiver" should be considered when interpreting section 2.5 to prevent its operation 18 months after executing the contract. ¶ 26 Defendants' counsel argued that they had complied with section 2.5 of the contract by stating their timely objections to the mortgage and tax lien on the gas station property when they received the August 2011 title search, which Bektesoski did not resolve within 30 days. When the trial court inquired about Bektesoski's waiver argument, counsel responded that section 2.5 of the contract did not include a contractual provision that would have rendered that section unenforceable after a certain date. ¶ 27 On this evidence, the trial court denied Bektesoski's motion to reconsider but requested written briefs from the parties concerning Bektesoski's waiver argument.
¶ 28 E. The Trial Court's Memorandum of Decision
¶ 29 In June 2012, after receiving written briefs from the parties, the trial court entered a written order, finding that defendants had not waived section 2.5 of the contract—pertaining to Bektesoski's obligation to provide a title commitment—because Bektesoski failed to provide clear evidence that defendants intended to waive that provision. In so finding, the court also determined that defendants had not waived section 6.1 of the contract, pertaining to environmental compliance. The court then reaffirmed its denial of Bektesoski's motion to reconsider. ¶ 30 This appeal followed.
¶ 31 II. ANALYSIS
¶ 32 A. The Trial Court's Waiver Determination
¶ 33 1. The Standard of Review
¶ 34 In Galesburg Clinic Ass'n v. West, 302 Ill. App. 3d 1016, 1019-20, 706 N.E.2d 1035, 1037 (1999), the appellate court succinctly outlined the appropriate standard of review, as follows:
"In the context of a breach of contract, waiver is the express or implied voluntary and intentional relinquishment of a known and existing right. [Citation.] Waiver is a question of fact when the facts necessary to support waiver are disputed or reasonable minds could draw different inferences from the evidence. [Citation.] The factual findings of a trial court will not be overturned unless they are against the manifest weight of the evidence. [Citation.] Although waiver may be implied, the act relied on to consti-
tute the waiver must be clear, unequivocal[,] and decisive."
¶ 35 2. Bektesoski's Title Commitment Claim
¶ 36 Bektesoski argues that the trial court erred by finding that defendants had not waived a contractual provision that required him to deliver a timely title commitment. We disagree. ¶ 37 In support of his argument, Bektesoski relies on Whalen v. K Mart Corp., 166 Ill. App. 3d 339, 519 N.E.2d 991 (1988), and Geier v. Hamer Enterprises, Inc., 226 Ill. App. 3d 372, 589 N.E.2d 711 (1992). In both those cases, the appellate court affirmed the trial court's finding that the respective contractors implicitly waived a contractual provision, requiring a subcontractor to obtain and deliver proof of insurance before beginning work because the contractor allowed the work to begin without the requisite liability protection. Whalen, 166 Ill. App. 3d at 344, 519 N.E.2d at 994; Geier, 226 Ill. App. 3d at 391, 589 N.E.2d 723. ¶ 38 Defendants respond that Whalen and Geier are inapposite because the contracts at issue in those cases, as opposed to the contract in this case, contained a condition precedent—that is, a condition that "must be performed either before a contract becomes effective or which is to be performed by one party to an existing contract before the other party is obligated to perform." (Internal quotation marks omitted.) Regency Commercial Associates, LLC v. Lopax, Inc., 373 Ill. App. 3d 270, 282, 869 N.E.2d 310, 321-22 (2007). ¶ 39 In support of their contention, defendants rely on Batterman v. Consumers Illinois Water Co., 261 Ill. App. 3d 319, 634 N.E.2d 1235 (1994). The issue before the appellate court in Batterman, 261 Ill. App. 3d at 321, 634 N.E.2d at 1236, concerned whether the contractor had waived a contractual provision that required the subcontractor to obtain insurance. In that case, the contractor allowed the subcontractor to perform the work without obtaining the required coverage and paid the subcontractor after he completed the work. Batterman, 261 Ill. App. 3d at 320, 634 N.E.2d at 1236. In reversing the trial court's finding that the contractor had waived the insurance provision, the appellate court distinguished Whalen and Geier, noting that "[t]he doctrine of implied waiver was narrowly applied in those cases and should be strictly limited to the facts presented in those cases." Batterman, 261 Ill. App. 3d at 321, 634 N.E.2d at 1236. Specifically, the appellate court stated, as follows:
"In the case at bar, the contract provides only that [the subcontractor] must obtain insurance. There is no provision requiring [the subcontractor] to provide proof of insurance to [the contractor] prior to the commencement of work on the project. Nor is there a provision allowing [the contractor] to withhold payment if acceptable insurance is not provided. Since [the contractor] did not have these powers under the contract, the failure to exercise such powers cannot be viewed as indicating that strict compliance with the contract would not be required." Batterman, 261 Ill. App. 3d at 321-22, 634 N.E.2d at 1236-37.The court stated further that to conclude otherwise would "set a dangerous precedent" in that "[i]t would allow a party to a contract to succeed in shirking its contractual responsibilities unless and until the other party to the contract notices the defect in performance." Batterman, 261 Ill. App. 3d at 322, 634 N.E.2d at 1237. ¶ 40 Bektesoski acknowledges Batterman but claims it is not applicable, implying that a condition precedent existed in this case because defendants could have halted or delayed the purchase if Bektesoski failed to provide the required title commitment. As we have previously outlined, section 2.5 of the contract required Bektesoski to simply provide defendants "a commitment to issue a Guaranty Policy *** for [$345,000]" within 10 days of closing the real estate transaction or alternatively, "within a reasonable time[.]" Contrary to Bektesoski's claim, the plain language of that section did not create a condition precedent because it neither required Bektesoski to obtain the title commitment before the real estate contract could become effective nor obligated defendants to perform. Instead, the provision provided defendants various alternative options that were available to them based on Bektesoski's compliance with the provision or, as in this case, his admitted noncompliance. Thus, we find the analysis in Batterman persuasive and applicable. ¶ 41 In this case, Bektesoski essentially claims that because defendants waited for 18 months before invoking the provisions of section 2.5 of their agreement, they either expressly or implicitly waived that provision. The trial court considered and rejected that argument, stating as follows:
"The Court cannot find there is proof in the record that a waiver occurred. The mere fact that [defendants] proceeded to the closing cannot provide the proof that [Bektesoski] must provide. At best, the lack of action at the closing is neutral, as is the rest of the record in this case, as to the issue of whether [defendants] waived the required title commitment."Given our standard of review, we conclude that the court's finding in this regard was not against the manifest weight of the evidence.
¶ 42 3. Bektesoski's Environmental Compliance Claim
¶ 43 Bektesoski also argues that the trial court erred by finding that defendants had not waived a contractual provision that required him to ensure the purchased property complied with environmental regulations. We disagree. ¶ 44 We note that in their respective supplemental briefs to the trial court following the May 2012 hearing on Bektesoski's motion to reconsider—in which the court requested that the parties address Bektesoski's waiver claim—the parties argued only their respective positions regarding waiver of the title commitment provision. Indeed, the record in this case does not show that either party argued waiver of section 6.1 of the contract regarding the property's compliance with environmental regulations. Thus, because Bektesoski failed to provide evidence that defendants expressly waived that provision or, alternatively, clear, unequivocal, and decisive evidence that they did so implicitly, we agree with the court's finding that "[t]here is even less proof that [defendants] waived the requirement that the property be in compliance with 'all environment[al] laws.' " Accordingly, we reject Bektesoski's clam in this regard as well.
¶ 45 B. The Trial Court's Award of Damages
¶ 46 Bektesoski also argues that the trial court erred by awarding defendants damages. We agree only that the court erred by awarding defendants damages for lost profits. ¶ 47 In his brief to this court, Bektesoski first contends that the trial court erred by awarding defendants damages for his breach of section 2.5 of the contract because he was complying with section 5.3 of the contract, which we note was the same argument that the court considered and rejected at the May 2012 hearing on Bektesoski's motion to reconsider. Specifi- cally, Bektesoski asserts that "it is unlikely that the existence of a mortgage which was being resolved by payments from the [defendants] could be considered a defect by any means." ¶ 48 To the extent that Bektesoski challenges the trial court's finding that he breached section 2.5 of the contract, we reject that claim because the record shows that Bektesoski admitted he did not provide defendants a title commitment—as he contractually agreed to do—because defendants did not request that document from him. Here, the parties contractually agreed that one possible consequence for Bektesoski's failure to comply with section 2.5 was to void the contract and "all monies paid shall be returned to [defendants]." In this regard, the court awarded defendants their $150,000 down payment, $25,200 for monthly installment payments they had made, $25,000 for lost profits on the unsuccessful sale of the gas station to Casey's, and $4,391 for attorney fees. ¶ 49 Bektesoski next contends that the trial court erred by awarding defendants their $150,000 down payment because defendants failed to honor their contractual obligation to make monthly installment payments. Citing section 2.3 of the contract, Bektesoski posits that the defendants' down payment should have been awarded to him as liquidated damages. Although we agree with Bektesoski that defendants also breached the contractual agreement when they stopped sending monthly installment payments, we disagree that Bektesoski was entitled to that down payment. See InsureOne Independent Insurance Agency, LLC v. Hallberg, 2012 IL App (1st) 092385, ¶ 33, 976 N.E.2d 1014 (Absent a material breach, a breach of contract by one party does not justify the noncompliance of the other party's contractual obligations as both may be guilty of breaches, which could entitle each to separate damages). Here the trial court awarded Bektesoski $35,700 in liquidated damages, which the court calculated by multiplying the 25 and 1/2 months defendants possessed the gas station by the fair market rental value of $1,400 per month, in accordance with section 2.3 of the contract. ¶ 50 Bektesoski also contends that the trial court erred by awarding defendants $25,000 in damages for lost profits because he did not contemplate that defendants would later attempt to sell the gas station for a profit. Specifically, Bektesoski posits that "[i]t is simply incorrect to award damages that were not contemplated by the parties' contract at the time of the original purchase." We agree. ¶ 51 To recover lost profits, the aggrieved party must prove (1) their loss of profits within a reasonable degree of certainty, (2) the other party's wrongful act resulted in the loss, and (3) the profits were reasonably foreseeable at the time the contract was entered into. Mandel v. Hernandez, 404 Ill. App. 3d 701, 706, 936 N.E.2d 1079, 1084 (2010). ¶ 52 In this case, the record shows that in March 2010—when the parties entered into the real estate contract—neither party discussed the possibility that defendants would later sell the gas station for a profit. Indeed, as to the issue of reasonably foreseeable profits at the time the parties entered into their contractual agreement, Singh acknowledged that a later sale of the gas station could result in a loss, a profit, or no financial gain. Thus, because defendants have failed to meet their burden of proof that profits were reasonably foreseeable at the time the contract was entered into, we conclude that the trial court erred by awarding defendants damages for lost profits. Accordingly, we reverse that portion of the court's damages award.
¶ 53 III. CONCLUSION
¶ 54 For the reasons stated, we affirm in part and reverse in part. ¶ 55 Affirmed in part and reversed in part.