Opinion ID: 780630
Heading Depth: 2
Heading Rank: 3

Heading: Further Discussions Between JMJ and CDC in Fall 1997

Text: 14 In September 1997 Morse informed Cohen that JMJ and the Rodens had agreed to a two-year option agreement for the Roden property, under which JMJ would pay the Rodens $20,000 per year earnest money for the right to purchase the property for $900,000. Morse also told Cohen that he believed that JMJ owed CDC $225,000 (the net profit CDC would have realized if JMJ had purchased the 60 acres for $1,050,000 as contemplated under the parties' original Purchase Agreement) and that he wanted to put a formal agreement together to accommodate a transaction between JMJ and CDC. In October Morse faxed a letter to Cohen stating that if all went well, he would execute the option agreement with the Rodens by October 10, 1997. He further stated that of course, simultaneous to this, you and I must execute an agreement whereby you will receive from me 75 ± acres of the 135 ± acres for $1.00. Morse enclosed a draft agreement for Cohen's review, noting that JMJ and CDC had entered into the October 1995 Purchase Agreement on the basis of the Option Agreement held by CDC to purchase the Roden property and that CDC's Option Agreement was due to expire on November 1, 1997. It further stated that CDC and JMJ had agreed to certain changes in their prior relationship and certain revisions to their mutual undertakings and provided the following terms: 1) CDC would not seek to renew, extend, or revise its Option Agreement with the Rodens; 2) JMJ would exert its best efforts to obtain a new two-year option agreement from the Rodens, and CDC would transfer its right, title, and interest in its 1995 Option Agreement to JMJ; 3) JMJ would waive its right to seek specific performance of the 1995 Purchase Agreement as long as CDC did not default on any of its terms; and 4) if JMJ successfully exercised an option agreement with the Rodens and acquired the 135 acres of property, it would transfer 75 acres of the property to CDC for $1.00. 15 On October 24, 1997, Cohen wrote Morse back, stating that CDC accept[s] the new agreement for [the Roden property] which you sent to me. Cohen did not, however, sign and return the proposed agreement — rather, he told Morse that [t]here remains some minor `clean-up' language and exhibits which our counsel will provide in a follow-up letter next week, all of which will assist your final revision of our Agreement for immediate signature. CDC's attorneys sent various suggested revisions to Morse, but no finalized agreement was ever signed by both JMJ and CDC. On October 31, Cohen sent a letter to the Rodens advising them that CDC would not exercise its Option to purchase their land; CDC's Option expired the following day. On November 5, JMJ entered into an option agreement with the Rodens to purchase an approximately 105-acre portion of their land for $850,000. JMJ exercised the option in April 1999. It did not sell any of the land to CDC, but instead developed an outlet mall on the property without CDC's involvement. 2. District Court Proceedings 16 In December 1999 CDC (an Illinois corporation) filed this diversity suit against JMJ (a Michigan corporation), Morse (a Michigan citizen), and the Rodens (Minnesota citizens, who were subsequently dismissed) seeking a declaratory judgment setting forth the parties' rights to the Rodens' land and asserting that JMJ and Morse had committed fraud against CDC, breached fiduciary duties they owed to CDC, and tortiously interfered with CDC's business relationships. 1 Morse passed away during the pendency of the suit. In June 2000 CDC amended its complaint against JMJ and Morse's estate (which was later voluntarily dismissed), substituting a breach of contract claim for the declaratory judgment action. 17 The district court held a bench trial in November 2000 and granted judgment in favor of JMJ in August 2001. At trial CDC argued that the exchange of letters between itself and JMJ on April 8 and May 6, 1997, evidenced a valid contract between the parties. JMJ argued that the parties had not reached an agreement and that the letters did not meet the requirements of the Illinois Frauds Act, 740 ILCS 80/2. The district court agreed with JMJ, finding that there was no final, enforceable written agreement between [CDC and JMJ that] satisfies the Frauds Act. The court concluded that even if the exchange of letters in Spring 1997 did establish a valid written contract between the parties, the agreement it contained was no longer recognized as effective by the parties in September 1997. In reaching this conclusion, the court relied upon the communications between Cohen and Morse in September in which both acknowledged the need to enter a formal agreement regarding the Roden property; the court found that these communications reflected that neither JMJ nor CDC believed they had a finalized agreement at that time. Thus, the court found, the evidence showed that JMJ did not intend to be bound by the Spring 1997 exchange of letters. The court additionally concluded that the parties did not reach such a formal agreement because Cohen never signed the draft sent by Morse but rather proposed substantive changes to it that were not agreed to by JMJ. Thus, CDC's breach of contract claim was barred by the statute of frauds. 18 The court also rejected CDC's argument that the statute of frauds was inapplicable because CDC had fully performed the alleged Spring 1997 agreement by not contacting the Rodens either to extend the Option Agreement or to exercise its Option to purchase the property. The court found that any performance by CDC was completely illusory because CDC had continued to pursue a purchase of the property independent of JMJ and had not contacted the Rodens for reasons other than its supposed agreement with JMJ.