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Matched Legal Cases: ['§ 22', '§ 90', '§ 62', 'art, 17', '§ 585', '§ 140']

| Dovenmuehle Inc. v. K-Way Associates
Dovenmuehle Inc. v. K-Way Associates
DOVENMUEHLE, INC., AN ILLINOIS CORPORATION, PLAINTIFF-APPELLEE,v.K-WAY ASSOCIATES, A NEW YORK LIMITED PARTNERSHIP, FREDERICK W. KRETZER, WILLIAM KRETZER, MURRAY S. LEVINE AND DONALD LEVINE, DEFENDANTS-APPELLANTS
Schnackenberg, Kiley and Cummings, Circuit Judges. Schnackenberg, Circuit Judge (dissenting in part and concurring in part).
The findings, reflecting the record, reveal these facts: Prior to March 1963, defendants planned to erect two shopping centers in Arizona. They had acquired Hayden Plaza East in Tempe and had obtained an option to purchase Hayden Plaza West in Phoenix. They also had entered into a lease with Woolco, F.W. Woolworth Company's leasing corporation, providing for Woolco and Woolworth to be a major tenant of both shopping centers.
On June 3, 1963, Dovenmuehle wrote K-Way and agreed to make either the $3,525,000 or $4,400,000 mortgage "On the basis of compliance by K-Way Associates with the conditions set forth" in New York Life's May 31, 1963, attached letter to Dovenmuehle. Dovenmuehle agreed to supply "interim construction funds" to K-Way when the conditions of New York Life's May 31 commitment were fulfilled by K-Way. In its letter to K-Way, Dovenmuehle adverted to New York Life's requirement of a cash deposit of $22,200 and a $22,200 promissory note. In this connection, Dovenmuehle specifically referred K-Way to the liquidated damages provision contained in New York Life's May 31, 1963, commitment. Dovenmuehle's letter also stated that its service fee in procuring New York Life's commitment would be $44,400 (1% of the loan) plus travel expenses and counsel fees and disbursements. Dovenmuehle required from K-Way a $22,200 check and a $22,200 note, both payable to New York Life. The check and note were in turn to be deposited with New York Life under the liquidated damage provision contained in its May 31, 1963, commitment to Dovenmuehle. Defendants accepted the Dovenmuehle commitment on June 6, 1963, and sent Dovenmuehle the prescribed check and note payable to New York Life. On June 10, 1963, Dovenmuehle in turn accepted the New York Life commitment.*fn1
From January through March 1964, defendants admitted that they would be unable to meet the conditions of the 1963 commitment before its May 1, 1964, expiration date. On March 24, 1964, K-Way requested Dovenmuehle to negotiate an increase in the mortgage commitment to $4,865,000 and an extension until November 15, 1964.
$46,400.00 (or 1% of the loan) for
Dovenmuehle's services in
procuring the commitments
935.11 for Dovenmuehle travel ex-
10,000.00 for services of Doven-
muehle's outside counsel
454.58 for disbursements of out-
$57,789.69
Defendants rely on Calo, Inc. v. AMF Pinspotters, Inc., 31 Ill.App.2d 2, 176 N.E.2d 1 (1961), but there the nonsigning offerees were held bound because offer. Here, as seen, the District Court's their acts showed their acceptance of the contrary finding is permissible on this record. Banking-Trading Corporation v. Floete, 257 F.2d 765, 769 (2d Cir. 1958). In the two other Illinois cases relied upon by defendants, the parties had signed the contracts with the intention of binding themselves. See First National Bank of Elgin v. Husted, 57 Ill.App.2d 227, 205 N.E.2d 780 (1965), and Fink v. Schleuter, 206 Ill. App. 159 (1917). As stated in 1 Williston on Contracts (3d Ed.1957) § 22a, the courts should "guard against abuse of this doctrine [implying consent] as a means of thrusting contracts upon people."
Since we are not disturbing the District Court's conclusion that the March 1963 applications were not contracts, we need not consider defendants' ensuing argument that under these "contracts" they had only agreed to pay Dovenmuehle a service fee of 1% of the loans and nothing else to Dovenmuehle or New York Life.
Defendants urge that even under the Dovenmuehle commitment letter of April 29, 1964, accepted by K-Way on May 1, 1964, they were not obligated to pay both a 1% liquidated damage fee to New York Life and a 1% service fee (plus various expenses) to Dovenmuehle. Defendants certainly intended to deposit $46,400 with New York Life as liquidated damages, for they transmitted a $22,200 check and a $22,200 note, both payable to New York Life, to Dovenmuehle for transmittal to New York Life.*fn2 As to the additional $2,000, defendants sent Dovenmuehle a check in that amount, and Dovenmuehle agreed in its April 29, 1964, commitment letter to forward its $2,000 check to New York Life for the balance of the liquidated damage obligation. These deposits were in compliance with the plain terms of the April 29, 1964, Dovenmuehle commitment letter as accepted by defendants on May 1. That letter stated:
Conceding that they were bound to pay a 1% service fee to Dovenmuehle,*fn3 defendants nevertheless contend that their acceptance of the April 29 commitment did not bind them to pay anything else to Dovenmuehle. This contention is punctured by the following language of the April 29 Dovenmuehle commitment accepted by defendants:
"All fees and expenses specifically required by the New York Life Insurance Company are to be paid by the borrower [K-Way], with the total of such fees and expenses not to exceed $2,500.*fn4 The fee to be paid by K-Way Associates to Dovenmuehle, Inc. for its services in procuring the initial commitment and the subsequent increase, as indicated by the attached New York Life Insurance Company commitment, will be $46,400. In addition, all travel expenses of Dovenmuehle, Inc. personnel in connection with this transaction, both to Phoenix and to New York, are to be paid by the borrower. In addition thereto, the borrower agrees to pay for the services of Dovenmuehle, Incorporated's outside counsel, Frank C. Bernard, the sum of $10,000 plus all his disbursements including, but not limited to, telephone calls, travel expenses, mimeographing and photostating."
The April 29 letter required defendants to deposit $46,400 with New York Life as potential liquidated damages. The defendants satisfied this obligation.*fn5 The April 29 letter also obligated them to pay plaintiffs a service fee of 1% on the loans committed, namely, $46,400, as well as certain travel expenses of Dovenmuehle's personnel, and the $10,000 fee of Dovenmuehle's outside counsel, together with his disbursements. Having only paid the $46,400 liquidated damages held by New York Life, the defendants must now pay Dovenmuehle the other obligations which they assumed on May 1st. These total $57,789.69.*fn6
In Count I of their counterclaim, defendants have sued to recover $400,000 for allegedly higher construction costs because Dovenmuehle did not provide a $200,000 "front money" Hayden Plaza East construction loan and a subsequent $4,400,000 construction loan. The trial court was entitled to credit Mr. Hoppe's denials of promising such funds or of urging defendants to commence construction. He testified that one of the reasons Dovenmuehle reduced its service fee from 2% to 1% was because defendants intended to do their own construction financing. Defendants admit that Dovenmuehle "helped arrange the $200,000 temporary construction loan" obtained from the First National Bank of Albuquerque in April or May 1963. They used Dovenmuehle's and New York Life's 1963 commitments to obtain a $4,400,000 construction loan from the Valley National Bank of Phoenix in August 1963. Furthermore, in May 1963, Dovenmuehle had obtained for defendants a $4,400,000 mortgage commitment from New York Life, increased to $4,640,000 in April 1964. This amount was held available to defendants for almost eighteen months, until November 17, 1964. Since the March 1, 1963 applications never became contracts, defendants could not assume that the final commitments from New York Life and Dovenmuehle would not impose any conditions with respect to leases at the two shopping centers. Such conditions would certainly be normal in connection with loans of this magnitude and were not negated in Dovenmuehle's May 9, 1963, letter to the First National Bank of Albuquerque supporting defendants' request for a $200,000 Hayden Plaza East construction loan.*fn7 According to defendants' brief, construction started in April 1963, so that there was no reliance on the May 9th letter, and Dovenmuehle's June 3, 1963, commitment letter advised defendants that it would not supply interim construction funds until New York Life's leasing and other conditions were fulfilled by defendants. Furthermore, experienced businessmen like K-Way's partners could foresee that it might take a few months to process the applications. Only defendants' failure to provide the required leases prevented it from procuring this money from New York Life. The record does not support their charges that Dovenmuehle breached any commitment to them. Therefore, Wheeler v. White, 398 S.W.2d 93 (Tex.Sup.Ct.1965), is inapplicable.
Count I of the counterclaim is based on a promissory estoppel theory entitling the promisee to recover if the promise induced detrimental action. See 1 Restatement of the Law of Contracts, § 90. However, the trial court could properly credit Hoppe's denials of promises of Dovenmuehle construction loans. Additionally, Illinois requires fraud or intent to deceive before there can be recovery under a promissory estoppel theory. Hughes v. Encyclopedia Brittanica, Inc., 1 Ill.App.2d 514, 521, 117 N.E.2d 880 (1954), leave to appeal denied; Bredemann v. Vaughan Mfg. Co., 40 Ill.App.2d 232, 249, 188 N.E.2d 746 (1963). Defendants adduced no such proof. Accordingly, the dismissal of Count I of the counterclaim was justified.*fn8 The other two Counts of the counterclaim have been abandoned.
About March 1, 1963, William J. Hoppe, board vice-chairman of Dovenmuehle, and Frederick W. Kretzer (hereinafter referred to as "Kretzer"), and Donald Levine (sometimes herein referred to as "Levine"), met at Phoenix, Arizona, and Hoppe stated that an appraisal of K-Way's land there had been procured and that it was sufficient to justify a $500,000 loan. Kretzer and Levine stated that $500,000 "front money" was promptly required to pick up K-Way's option on the Hayden Plaza West and to start construction to meet Woolco's*fn1 lease occupancy date. They then also discussed permanent financing which would eventually total $5,100,000. Answering an inquiry by Kretzer and Levine, Hoppe told them that Dovenmuehle's charges for procuring the loan would be 1% thereof, to be deposited with Dovenmuehle, which would "convert" to its fee for producing the loan, whether or not the loan was completed by K-Way. About three days later, Hoppe returned with two printed Dovenmuehle documents, each dated March 1, 1963, entitled "Application for Loan", and addressed to Dovenmuehle.*fn2 Both applications provided that "major leases will be assigned as additional collateral" and contained the following agreement as to Dovenmuehle's compensation for its services in producing the loans:
On or about April 23, 1963, Dovenmuehle sent K-Way two New York Life Insurance Company mortgage loan applications -- one for a loan of $2,600,000 on Hayden Plaza East and the other for a loan of $2,100,000 on Hayden Plaza West. Dovenmuehle signed said applications as broker and K-Way signed as applicant.
In May, 1963, with the assistance of Dovenmuehle, K-Way obtained a $200,000 temporary construction loan from the First National Bank in Albuquerque. In connection therewith, on May 9, 1963, Hoppe wrote that bank, inter alia :
It is the contention of defendants that they undertook construction in April, 1963, on the promise of financing by Dovenmuehle, that they relied on the documents of March 1, 1963 that their total obligation to Dovenmuehle would be for a 1% service fee and that the loan would be conditioned upon execution of mortgages by K-Way and the assignment of major leases as additional collateral security. Defendants point out that on June 3, 1963 the circumstances were that the Woolco store was under actual construction by them and they had merely a temporary $200,000 construction loan made by the First National Bank of Albuquerque, when they were induced to pay Dovenmuehle $44,*fn4003 and sign its commitment letter of June 3, 1963. In that letter, among other things, plaintiff promised a $4,440,000 loan and, for the first time, it conditioned its promise of financing to defendants upon their assuming the extensive leasing requirements and additional undertakings required of it by the lender, New York Life. These included plaintiff's travel expenses, the fees and expenses of the lender (New York Life), not to exceed $2500, and the services of plaintiff's outside counsel, not to exceed $7,500.
It was not until many months later (April 29, 1964) that Hoppe, as vicechairman of Dovenmuehle, issued another commitment letter to K-Way, to make a loan of $4,640,000 conditioned on the same lease requirements as New York Life required of Dovenmuehle in its letter to Dovenmuehle on April 28, 1964. The April 29, 1964 letter to K-Way contained the assertion again that the conditions attached to the New York Life commitment (although addressed to Dovenmuehle) applied to K-Way, including all fees and expenses up to $2500. This letter was "accepted" by Levine who signed it on May 1, 1964 and K-Way then paid $2,000 to Dovenmuehle, making its total payments $46,400.
Dovenmuehle in its letter made claim against K-Way for a fee of $46,400 for its services, and also for travel expenses of $935 for Dovenmuehle personnel, $10,000 for services of "our outside counsel" and the latter's disbursements of $454. In closing the letter Dovenmuehle said it would give a release of the mortgage*fn4 of record and assign the leases, upon payment of said sums, if K-Way paid an additional $100 for the release.
"* * * However, 'It is not necessary that the signature of a party to a contract should appear at the end thereof; if his name is written by him in any part of the contract, or at the top or right or left hand, with intention to sign or for the purpose of authenticating the instrument, it is sufficient to bind him unless subscription is required by law.' 17 C.J.S. Contracts § 62 b, page 736; McConnell v. Brillhart, 17 Ill. 354, 360 (1856)."
and Williston on Contracts (1957, 3d Ed., Vol. 4 § 585) which states:
"In fact, it has been held that 'No special formality in the execution of the writing is necessary, provided it is signed for the purpose of giving it authenticity as an agreement.' * * *" (pp. 156-157.)
"At which point, I [Levine] asked him, 'Would it be safe for us to go ahead with construction?'
"Mr. Hoppe said to me, 'I will take care of the financing end; that is my problem. It is safe for you to commence construction. Go ahead and take care of your Woolco commitments.'"*fn5
The equitable theory of promissory estoppel, which has been recognized in Illinois since before Beatty v. Western College, 177 Ill. 280, 292, 52 N.E. 432 (1898), embraces factual situations such as that existing in the case at bar. Some of such situations have been recognized in Rosenberg, Inc., v. Carson, Pirie, Scott Co., 28 Ill.2d 573, 584, 192 N.E.2d 823 (1963), and Bondy v. Samuels, 333 Ill. 535, 545, at 547, 165 N.E. 181, at 186 (1929), where the court said:
The recent case of Wheeler v. White, 398 S.W.2d 93 (1965)*fn6 decided by the Supreme Court of Texas, is by coincidence factually similar to the case at bar. Plaintiff Wheeler, the owner of a tract of land in Port Arthur, Texas, desiring to build a shopping center thereon, entered into a written agreement with defendant White, whereby White was to obtain for Wheeler a $70,000 loan from a third party, or provide it himself, and be paid $5,000 for obtaining the loan, and 5% commission on rentals received from tenants whom he secured for the building. After the contract was signed, White assured Wheeler that the money would be available and urged him to proceed with the necessary task of demolishing the buildings presently on the site, and that, in the event the money was unobtainable elsewhere, he would make the loan himself. Pursuant to such promises Wheeler proceeded to raze the old building and prepare the land for the new structure. Later he was told by White that there would be no loan and Wheeler made reasonable efforts to obtain the loan himself but was unsuccessful.
'A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.'"
"It is available only for protection, and cannot be used as a weapon of assault * * * It is akin to the principle involved in the limitation of actions, and does its work of justice and repose where the statute cannot be invoked."*fn7
Dickerson was referred to as "a very carefully considered opinion" in Wehrman v. Conklin, 155 U.S. 314, 327, 15 S. Ct. 129, 39 L. Ed. 167 (1894), and it was followed in Glus v. Brooklyn Eastern Dist. Terminal, 359 U.S. 231, 234, 3 L. Ed. 2d 770, 79 S. Ct. 760, notes 6 and 10, 359 U.S. 231, 79 S. Ct. 760, 3 L. Ed. 2d 770 (1958).
This court should not countenance the perpetration of such a manifest injustice as appears in the record before us. An examination of that record reveals that, even if the court should find in the document of April 29, 1964 sued upon, any factual or legal basis supporting plaintiff's demands on defendants for additional compensation, it would be required, in order to avoid a fraudulent effect, to hold that plaintiff is estopped to assert such facts and theories. Plaintiff's failure to meet its promise to make loans at a cost not to exceed $48,000,*fn8 in reliance upon which promise defendants commenced construction of their shopping centers, entitles defendants to the benefit of the defense of promissory estoppel. (See Wheeler v. White, supra. Cf. 1 Williston on Contracts, 3rd Ed. § 140, p. 614.)