SIXTH DIVISION

										June 21, 2002

No. 1-99-1691

WILLIAM C. COUGHLIN AND 			)	Appeal from the

PAMELA COUGHLIN,				)	Circuit Court of

							)	Cook County.

	Plaintiffs-Appellants,		)	

							)

v.							)	No. 97 L 6519

							)

NUALA GUSTAFSON,				)	The Honorable

							)	David G. Lichtenstein,

	Defendant-Appellee.			)	Presiding Judge.

	JUSTICE BUCKLEY delivered the opinion of the court:

	This appeal arises from summary judgment entered in favor of

defendant Nuala Gustafson and against plaintiffs William Coughlin

and Pamela Coughlin on plaintiffs' four-count complaint which

alleged breach of a real estate sales contract, violation of the

Residential Real Property Disclosure Act (the Disclosure Act) (765

ILCS 77/1 et seq. (West 1998)), negligence in the removal of fuel oil tanks and cleaning of contaminated areas, and breach of implied

warranties of habitability.  Plaintiffs concede that summary judgment-

ment was proper as to count IV; therefore, we address only the

propriety of summary judgment on counts I through III.  The issues

on appeal are:  (1) whether the merger doctrine bars plaintiffs'

breach of contract action; (2) whether the merger doctrine bars plaintiffs' action under the Disclosure Act; (3) whether there are

genuine issues of material fact which preclude summary judgment on

plaintiffs' action under the Disclosure Act; and (4) whether there

are genuine issues of material fact which preclude summary judgment

as to defendant's alleged negligence.  For the reasons that follow,

we reverse and remand for further proceedings.

	I.  Background

	On February 27, 1996, plaintiffs entered into a real estate

sales contract with defendant to purchase defendant's home located

at 129 South Old Creek Road, Palos Park, Illinois.

	The contract contained, inter alia, a home inspection rider, which gave plaintiffs the right to have the property inspected by a

certified home inspection service of their choice.  The rider pro-

vided:

		"If said condition report reveals any structural-

tual mechanical, and electrical defect(s) for

which the cost of correcting any said

defect(s) shall exceed $1,000.00, the Seller

shall have the following options, to wit: (A)

effecting the necessary correction of said

defect(s), (B) negotiating the cost of

correcting said defect(s) with Buyer or (C)

declaring this agreement null and void.

			In the event Seller does not exercise any

of these options and, in the further event,

that the Buyer does not waive said defect[s],

the Buyer shall have the right to declare this agreement null and void.  Should either party

to this agreement make such a declaration, any

deposit made by the Buyer shall be refunded in

full."

Also, attached to the contract was a rider entitled, "Rider #5,

Seller's Representations," which provided:

		"The Seller represents to the Buyer that all

mechanical equipment, heating and cooling

equipment, water heaters and softeners, sep-

tic, plumbing, electrical systems, kitchen

equipment remaining with the premises, and any

miscellaneous mechanical personal property to

be transferred to the Buyer shall be in

operating condition at the time of closing. 

In the absence of written notice of any

deficiency from the Buyer prior to closing, it

shall be concluded that the condition of the

above equipment is satisfactory to the Buyer

and the Seller shall have no further responsi-

bility with reference thereto."

	The language below the signature line on Rrider #No. 5 states

"Certification that roof and foundation are waterproof."  The last

paragraph on Rrider #No. 5 provides:  "Seller will provide written

verification from the appropriate governmental authority that the

tanks [oil] remaining in crawl space are not in violation of any

ordinance or statute."

	The contract also provides:

		"Seller, at his expense, prior to closing, shall obtain and deliver to Buyer a water test

performed or acceptable to the county in which

the property is located, and a septic system

test indicating that the system is in proper

operating condition and in compliance with

applicable state, county and local statutes. 

Such tests shall be performed not more than 60

days prior to the closing date.

			If either of said written test reports

indicate that the water is not potable, that

the septic system is not in proper operating

condition, or that the systems are not in

compliance with the relevant statutes, Seller

shall have the option to make the necessary

repairs and bring the system[s] into compli-

ance prior to the closing date.  In the event

Seller elects not to make the necessary

repairs, then this Contract, at the option of

Buyer, shall become null and void, and all

earnest money shall be refunded to Buyer."

	On March 10, 1996, a representative of HouseMaster of America,

a home inspection service retained by plaintiffs, inspected the

property.  The report issued to plaintiffs included the following

observations of the crawl space:  "(2) oil, (2) water tanks noted

in crawl.  Heavy smell of oil.  (Saturated with oil) on floor. 

Recommend evaluation by Health Department."  Plaintiff William

Coughlin attended the inspection and, on March 11, 1996, wrote a

letter to defendant's attorney stating that he had personally been in the basement, had seen the oil residue, and had smelled the

petroleum odor.  Plaintiffs requested that defendant remove the

fuel tanks and have any contaminated areas cleaned professionally

prior to purchase.  Plaintiffs gave defendant the name of E.R.I.

General Contracting to perform the job and defendant subsequently

engaged their services.

	On May 23, 1996, Carl's Septic Service, Inc., inspected the

septic system and issued a report finding, "[s]eptic field lines

are leaking at ends."  The parties agreed that defendant would

place $1,000 of the proceeds of the sale in an escrow account to

ensure the repair of the septic system.  In a letter dated June 3,

1996, Carl's Septic Service, Inc., informed plaintiff William

Coughlin that the cost of repairing the septic system would range

from $8,000 to $9,000.  

	With regard to the roof, defendant stated at her deposition

that she contacted a roofer to obtain certification that the roof

was waterproof but he could not come out before the closing.  She

stated that she informed plaintiffs of this fact.  She further

stated that she did not agree to furnish certification after

closing.

	The closing took place on June 3, 1996.  The record contains

no evidence that plaintiffs gave written notice to defendant of any

remaining deficiency.  There is no evidence that plaintiffs

exercised their right to declare the contract null and void,

refused to go through with the closing, or objected to the closing

in any way.

	On June 2, 1997, plaintiffs filed a four-count complaint

against defendant and E.R.I. General Contracting.  Count I of the complaint alleged that defendant breached the terms of the written

real estate contract by failing to provide certification that the

roof and foundation were waterproof and that the septic system was

in operating condition.  Count II alleged that defendant failed to

disclose material defects in the septic system, roof, and founda-

tion in violation of the Disclosure Act (765 ILCS 77/1 et seq. (West 1998)).  Count III alleged that defendant was negligent in her

removal of the underground oil tanks and in cleaning the areas

contaminated by fuel oil.  Count IV alleged that defendant was

guilty of violation of implied warranties of habitability.  On

January 12, 1999, defendant filed a motion for summary judgment as

to all counts.  On April 1, 1999, the trial court granted plain-

tiffs' oral motion to nonsuit E.R.I. General Contracting and, in

addition, granted defendant's motion for summary judgment.  As to

counts I and II of the complaint, the trial court found as follows:

		"Plaintiff[s'] contract claim [count I] and

'statutory claim' [count II] must fail because

on the face of this record it is clear that

the terms of the written contract were met. 

Plaintiffs accepted an escrow fund and elected

to close when they were not obligated to do

so, with full knowledge of the state of

affairs at the subject property.  Indeed, even

now plaintiffs have not sought recovery

against the escrow fund.  On this record it is

clear that the contract has merged into the

deed exchanged for good and valuable conside- ration."

As to count III, the trial court found:

		"Plaintiffs' 'negligence' claim [count III] is

somewhat obscure.  Plaintiffs seek relief

against both [defendant] and E.R.I. General

Contracting for asserted negligence in remov-

ing oil tanks from the property.  The record

makes clear however, that [defendant's] duties

to plaintiffs in this regarded [sic], if any, were contoured by the written contract between

the parties.  E.R.I. General Contracting owed

duties in this regard not to plaintiffs, but

to defendant."

Plaintiffs now appeal as to counts I through III.

	II. Discussion

	A.  Standard of Review

	Summary judgment is proper only when the pleadings, together

with any depositions, admissions, or affidavits on file demonstrate

that there is no genuine issue of material fact and that the moving

party is entitled to judgment as a matter of law.  735 ILCS 5/2-

1005(c) (West 1998)); Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90 (1992).  Summary judgment is a drastic measure and should only be granted if the movant's right to

judgment is clear and free from doubt.  Purtill v. Hess, 111 Ill. 2d 229, 240 (199886).  The standard of review on appeal from a grant

of summary judgment is de novo.  See Outboard Marine Corp., 154 Ill. 2d at 102.

	B. Breach of Contract

	Plaintiffs first contend that the trial court erred in

granting summary judgment on count I of their complaint because

defendant breached the written real estate contract by failing to

provide certifications that the roof and foundation are waterproof

and that the septic system is in proper operating condition.  We

find that the trial court erred in holding that the merger doctrine

bars plaintiffs' breach of contract claim.

	The doctrine of merger provides that in the absence of an

express clause in a contract, all agreements between a buyer and a

seller of real estate merge into the deed when it is delivered to

the buyer at closing.  See Ollivier v. Alden, 262 Ill. App. 3d 190, 195 (1994).  Although the doctrine is not favored by modern courts,

it has not been rejected by Illinois courts.  See Krajcir v. Egidi, 305 Ill. App. 3d 613, 623 (1999).  Nevertheless, it is not without

its exceptions.  Our supreme court explained in Petersen v. Hubschman Construction Co., 76 Ill. 2d 31, 39 (1979):

		"In Illinois, however, certain exceptions to

the merger doctrine have been created.  Rea-

soning that the merger doctrine evolved solely

to protect the security of land titles, the

Illinois courts have held that when the deed

embraced and contained all of the subjects of

the executory contract, the contract merged

with the deed.  However, an executory agree-

ment for the performance of separate and

distinct provisions did not merge with the

deed.  The prior contract is superseded only as to such of its provisions as are covered by

the conveyance made pursuant to its terms." 

Petersen, 76 Ill. 2d at 39.

Because executory agreements for the performance of separate and

distinct contract provisions are not fulfilled by delivery of the

deed, it is not merged into the deed and remains open for perfor-

mance.  See Krajcir, 305 Ill. App. 3d at 623.  These separate and distinct provisions have been described as "collateral to and

independent of the provisions in the subsequent deed."  Harris Trust & Savings Bank v. Chicago Title & Trust Co., 84 Ill. App. 3d 280, 284 (1980).

	Recently, this court, in Neppl v. Murphy, 316 Ill. App. 3d 581 (2000), addressed the applicability of the merger doctrine to

representations in a real estate contract warranting that the

heating system would be in operating condition at the time of

closing.  The trial court granted defendant-seller's motion to

dismiss plaintiff-buyer's breach of a sales contract action based

on the merger doctrine.  Plaintiff-buyer appealed.  On appeal, this

court recognized that the threshold issue in determining whether

the merger doctrine applies in a given case is "whether the

contractual provision at issue is collateral to and independent of

the provisions in the subsequent deed."  Neppl, 316 Ill. App. 3d at 587.  The provision at issue in Neppl read:

		"Seller warrants to Buyer that all fixtures,

systems and personal property included in this

Contract shall be in operating condition at

possession ***."  Neppl, 316 Ill. App. 3d at 582.  

This court, relying on Lanterman v. Edwards, 294 Ill. App. 3d 3510 (1998), held that this provision was an express warranty of the

quality of the heating system and, as such, did not merge into the

deed.  Neppl, 316 Ill. App. 3d at 589.  The Neppl court recognized that:

		"Generally, warranties as to quality, in

comparison with requirements of conveyancing,

touch upon aspects other than the conveyance

itself and are incidental to the main purpose

of the deed, which is to transfer good title." 

Neppl, 316 Ill. App. 3d at 587, citing Lanterman, 294 Ill. App. 3d at 353. 

Thus, because delivery of the deed would not constitute performance

of the provision, the court determined it was incidental to the

main purpose of the contract, i.e., conveyance of real estate, and the doctrine of merger did not apply.  Neppl, 316 Ill. App. 3d at 589.  

	Applying Neppl to the facts in the instant case leads to the conclusion that defendant's warranties as to the condition of the

roof, foundation and septic system were collateral to the delivery

of the deed and, thus, not affected by merger.  

	In addition, courts have also noted that whether and to what

extent the sales contract merges into the deed upon delivery to the

buyer is also a matter of the parties' intent.  See, e.g., Daniels v. Anderson, 162 Ill. 2d 47 (1994).  This intent is evidenced by the language of the instruments and the surrounding circumstances. 

Trapp v. Gordon, 366 Ill. 102, 111 (1937).  Here, there is evidence the parties anticipated their agreements would survive the closing.  For example, at the closing, the defendant agreed to place $1,000

in escrow as a sign of good faith to repair or replace the septic

tanks.  Certainly such an agreement made at closing presupposes

that it necessarily must survive past the time of closing.

	Accordingly, we hold that the merger doctrine does not bar

plaintiffs' breach of contract action.  We also find that because

there are genuine issues of fact concerning the extent of these

warranties and obligations and whether the contract was breached,

summary judgment was improperly granted as to count I.

	C.  Failure to Disclose Material Defects

	Plaintiffs next contend that the trial court erred in granting

summary judgment on count II.  Plaintiffs' assert that the merger

doctrine is inapplicable to causes of action brought under the

Disclosure Act and, in addition, that there are genuine issues of

material fact which preclude summary judgment.

	The purpose of the Disclosure Act is to provide prospective

buyers with information about material defects known to the seller

concerning the property.  See 765 ILCS 77/25, 35 (West 1998). 

Under the Disclosure Act, the seller is required to complete and

deliver the disclosure report to the prospective buyer before the

signing of a written agreement that would require the buyer to

accept a transfer of the property.  See 765 ILCS 77/20 (West 1998). 

Section 55 provides that "[a] person who knowingly violates or

fails to perform any duty prescribed by any provision of this Act

or who discloses any information on the Residential Real Property

Disclo-sure Report that he knows to be false shall be liable in the

amount of actual damages and court costs, and the court may award

reason-able attorney fees incurred by the prevailing party."  765 ILCS 77/55 (West 1998).  Section 25 provides, however, that the

seller is not liable for any error, inaccuracy or omission made

without the seller's knowledge, or where the error, inaccuracy or

omission "was based on a reasonable belief that a material defect

or other matter not disclosed had been corrected."  765 ILCS

77/25(a)(West 1998).  

	We first address plaintiffs' contention that the merger

doctrine does not apply to violations of the Disclosure Act.  The

trial court's reasoning behind its grant of summary judgment to

defendant on this count is not apparent from the face of the order. 

The court simply stated as to both count I (breach of contract) and

count II (violation of Disclosure Act) that "[o]n this record it is

clear that the contract has merged into the deed exchanged for good

and valuable consideration."  Thus, it appears that the court found

the merger doctrine barred both counts, including the count

alleging violations of the Disclosure Act.  This court's research,

however, has not turned up a case which applied the merger doctrine

as a bar to a claim under the Disclosure Act.  Moreover, the lan-

guage of the Disclosure Act itself does not support such a

conclusion.  Section 60 of the Disclosure Act provides that:  "No action

for violation of this Act may be commenced later than one year from

the earlier of the date of possession, date of occupancy, or date

of recording of an instrument of conveyance of the residential real

property."  765 ILCS 77/650 (West 1998).  Applica-tion of the

doctrine of merger would operate as a bar to all actions brought

under the Disclosure Act after the conveyance of the property. 

Such a result is certainly inconsistent with the express language

of section 60 of the Disclosure Act.  Accordingly, we find that merger is not a bar to actions under the Disclosure Act.

	Having disposed of the issue of merger, we now address whether

there are genuine issues of material fact  thatwhich preclude summary

judgment on count II of the complaint, which alleges that defendant

violated the Disclosure Act by failing to disclose material defects in the basement foundation, the septic system, and the roof.

	In the case at bar, disclosure number four on the report given

by defendant to plaintiffs reads:  "I am aware of material defects

in the basement or foundation."  Defendant placed a check mark in

the "no" column next to that statement.  Disclosure number five

reads:  "I am aware of leaks or material defects in the roof,

ceilings or chimney."  Defendant placed a check mark in the "no"

column next to that statement.  Disclosure number 13 reads:  "I am

aware of material defects in the septic, sanitary sewer or other

disposal systems."  Again, defendant placed a check mark in the no

column next to that statement.  Finally, disclosure number 20

reads: "I am aware of underground fuel storage tanks on the

property."  Defendant placed a check mark in the "yes" column next

to that statement and added the following:  "fuel tanks are being

drained and chemically cleaned out and floor underneath tanks to be

chemically cleaned."  

	Plaintiffs contend that defendant knowingly violated the

Disclosure Act because at her deposition she acknowledged that she

was aware of septic defects, yet she failed to disclose them on the

form.  In a addition, plaintiffs argue that it is a question of

fact as to whether defendant was aware of defects in the roof and

foundation and failed to disclose them.

	In her motion for summary judgment, defendant made no specific argument directed at her alleged violation of the Disclosure Act. 

Instead, she argued merger and also that plaintiffs had actual

notice of all the material defects.  As already stated, merger does

not bar plaintiffs' action under the Disclosure Act.  As to the

issue of plaintiffs' alleged actual notice, we find that it does

not support a finding of summary judgment in defendant's favor.  

	The case of Woods v. Pence, 303 Ill. App. 3d 573 (1999), is instructive on the issues before us.  In Woods, plaintiff-buyers filed a complaint against defendant-sellers alleging that sellers

violated the Disclosure Act by falsely representing that they were

not aware of any leaks or material defects in the roof.  Woods, 303 Ill. App. 3d at 576.  The trial court granted summary judgment in

favor of defendant-sellers.  On appeal, the Third District

reversed.  The court found that summary judgment was improper

because there were questions of fact as to whether sellers knew

their statement was false.  Woods, 303 Ill. App. 3d at 576; see also Connor v. Merrill Lynch Realty, Inc., 220 Ill. App. 3d 522 (1991) (whether defendant's statement regarding flooding of

basement was knowingly false was question of fact).  In addition,

the court found that it was a question of fact whether defendant's

good-faith belief that the defect had been corrected was

reasonable.  Woods, 303 Ill. App. 3d at 577; see also Robinson v. Econ-O-Corporation, Inc., 62 Ill. App. 3d 958 (1978) (reasonable belief is a question of fact).  Here, there are many questions of

fact remaining.  There are questions as to the existence of

defects, defendant's alleged knowledge of defects, and any good-

faith belief that defendant may have had regarding whether the

alleged defects had been corrected.  Accordingly, we find that summary judgment is not appropriate.

	Moreover, we reject defendant's inference that plaintiffs'

actual notice of any alleged problems is a bar to their cause of

action under the Disclosure Act.  In Woods, the court specifically noted as follows in response to sellers' assertion in that case

that buyers had notice of water damage to the residence:

		"[T]he fact that plaintiffs were aware of

water damage to the residence does not pre-

clude liability.  While the disclosure report

is not a substitute for inspections or warran-

ties, buyers are entitled to rely on the

truthfulness of the statements contained

therein.  [Citation.]  A seller who knowingly

makes a false statement is subject to liabil-

ity under the Act; no exception is made because of a buyer's knowledge of the defect.  [Citation.] We believe, however, that a

buyer's knowledge of a defect may be relevant

to the amount of damages awarded to a

successful plaintiff.  Section 55 [of the Dis-

closure Act] provides for an award of actual

damages.  [Citation.]  Presumably, any defect

of which the buyer was aware would be

reflected, to a greater or lesser extent, in

the purchase price of the house, thereby

reducing those damages."  (Emphasis added.) 

Woods, 303 Ill. App. 3d at 577.

Therefore, although the fact that plaintiffs herein conducted an inspection and were aware of at least the defects in the septic

system, it is of no consequence to the viability of the cause of

action.

	Accordingly, we find that summary judgment on count II should

be reversed.

	D.  Negligence

	Finally, plaintiffs contend that the trial court improperly

granted summary judgment on their negligence claim.

	Plaintiffs allege in count III of their complaint that after

inspecting the premises, they notified defendant that the under-

ground fuel tanks would have to be removed and the contaminated

areas cleaned.  According to the complaint, defendant agreed to do

so.  Also according to the complaint, defendant and E.R.I. General

Contracting undertook to remove the tanks and clean the floor and

that both did so negligently.  

	In her motion for summary judgment, defendant alleged she was

never involved in the removal of oil tanks from the premises. 

However, this is contradicted by her response to the following

allegation contained in response to plaintiffs' request to admit:

		"Prior to the sale of the improved property

located at 129 South Old Creek Road, Palos

Park, Illinois, to Plaintiffs, Defendant

Gustafson personally participated in the clean

up of oil from the floor of the crawl space."

Defendant admitted the allegation.  Accordingly, we find that there

are genuine issues of fact on plaintiffs' negligence action which

preclude summary judgment.  

	III. Conclusion

	Based on the foregoing, we hereby reverse the trial court's

grant of summary judgment as to counts I, II, and III.  The case is

remanded for further proceedings.

	Reversed and remanded.

	Gallagher, P.J., and Campbell, P.J., concur.