Court Opinion

ID: 3143370
Source: CourtListenerOpinion
Date Created: 2015-10-22 17:59:02.866077+00
Date Added: 2024-06-11T11:54:57.281220
License: Public Domain

NO. 4-07-0061           Filed 2/26/08

                       IN THE APPELLATE COURT

                             OF ILLINOIS

                           FOURTH DISTRICT

GENE JANNUSCH and MARTHA JANNUSCH,      )    Appeal from
           Plaintiffs-Appellants,       )    Circuit Court of
           v.                           )    McLean County
LINDSEY NAFFZIGER and LOUANN            )    No. 05L198
NAFFZIGER,                              )
           Defendants-Appellees.        )    Honorable
                                        )    Charles G. Reynard,
                                        )    Judge Presiding.
_________________________________________________________________

          JUSTICE COOK delivered the opinion of the court:

          Plaintiffs, Gene Jannusch and his wife, Martha, brought

this action for breach of an oral contract against defendants,

Lindsey Naffziger and her mother, Louann Naffziger.    Following a

bench trial, the trial court found in favor of defendants.

Plaintiffs appeal.    We reverse and remand with directions.

                            I. BACKGROUND

          Plaintiffs operated a business, Festival Foods, which

served concessions to the general public at festivals and events

throughout Illinois and Indiana from late April to late October

each year.   The assets of the business included a truck and

servicing trailer and equipment such as refrigerators and freez-

ers, roasters, chairs and tables, fountain service and signs and

lighting equipment.

          Defendants were interested in purchasing the concession

business, met several times with plaintiffs, and observed the
business in operation.   Gene testified that on August 13, 2005,

plaintiffs entered into an oral agreement to sell Festival Foods

to defendants for $150,000.   For the $150,000, defendants would

receive the truck and trailer, all necessary equipment, and the

opportunity to work at event locations secured by plaintiffs.

Defendants paid $10,000 immediately, with the balance to be paid

when defendants received their loan money from the bank.   Defen-

dants took possession of Festival Foods the next day and operated

Festival Foods for the remainder of the 2005 season.   Gene

acknowledged that the insurance and titles to the truck and

trailer remained in his name because he had not yet received the

purchase price from defendants.

          Louann acknowledged testifying during a deposition that

an oral agreement to purchase Festival Foods for $150,000 existed

but later testified she could not recall specifically making an

oral agreement on any particular date.   Lindsey testified she and

Louann met with plaintiffs on August 13, 2005, and paid the

$10,000 for the right to continue to purchase the business

because plaintiffs had another interested buyer.   She also stated

that the parties agreed defendants would run Festival Foods as

they pursued buying the business.   According to Lindsey, Gene

suggested the parties sign something and she replied that defen-

dants were "in no position to sign anything" because they had not

received any loan money from the bank and did not have an attor-

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ney.   The following week, Lindsey consulted with an attorney

regarding the legal aspects of buying and owning a business.     She

asked the attorney to prepare a contract for the purchase.

Ultimately, the bank approved defendants for a loan.   Lindsey

admitted taking possession of Festival Foods, receiving the

income from the business, purchasing inventory, replacing equip-

ment, paying taxes on the business and paying employees.

           Defendants operated six events, three in Indiana and

three in Illinois.   Gene attended the first two festivals in

Valparaiso and Auburn, Indiana, with defendants, who paid him $10

an hour and paid for his lodging.   Gene and Louann testified that

plaintiffs' minimal involvement with the operations after August

13 was merely as advisors to defendants, who were unfamiliar with

this type of business.   Two days after the business season ended,

defendants returned Festival Foods to the storage facility where

it had been stored by Gene.   Gene testified he had canceled his

lease with the storage facility, telling the owner that he had

sold his business.   Someone at the storage facility called Gene

and reported that Festival Foods had been returned.    Thereafter

Gene attempted to sell Festival Foods, but was unsuccessful.

Lindsey testified one of the reasons defendants returned Festival

Foods was because the income from the events they operated was

lower than expected.   She stated Gene specifically asked defen-

dants to run certain events for him and he ran the events where

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he was present.    She testified Gene asked for the trailer back,

stating he needed it "so he could make money on it for the end of

the year," and that Gene stated he did not have money to buy back

the inventory.

          The trial court first held that the Uniform Commercial

Code (UCC) (810 ILCS 5/1-101 et seq. (West 2004)) governed the

issues raised in this case, rejecting defendants' argument that a

sale of goods was not involved.    The trial court then found that

there was a contract formed but that the evidence was insuffi-

cient to establish by a preponderance of the evidence that there

was a meeting of the minds as to what that agreement was.   "If

this is an agreement to reach an agreement, I suspect that the

action for the price must fail."

                            II. ANALYSIS

          Where there are no questions as to the facts essential

to a purported contract, the existence of the contract is a

question of law.    Magee v. Garreau, 332 Ill. App. 3d 1070, 1076,

774 N.E.2d 441, 446 (2002).   In general, the construction or

interpretation of a contract is a matter to be determined by the

court as a question of law.    Avery v. State Farm Mutual Automo-

bile Insurance Co., 216 Ill. 2d 100, 129, 835 N.E.2d 801, 821

(2005).

                        A. Application of UCC

          Defendants argue the UCC should not apply because this

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case involves the sale of a business rather than just the sale of

goods.   The "predominant purpose" test is used to determine

whether a contract for both the sale of goods and the rendition

of services falls within the scope of article 2 of the UCC.     810

ILCS 5/2-101 through 2-725 (West 2004).    A contract that is

primarily for services, with the sale of goods being incidental,

will not fall within the scope of article 2.     Belleville Toyota,

Inc. v. Toyota Motor Sales, U.S.A., Inc., 199 Ill. 2d 325, 352-

53, 770 N.E.2d 177, 194-95 (2002).     "[W]hether the contract was

predominantly for goods or services is generally a question of

fact."   Heuerman v. B&M Construction, Inc., 358 Ill. App. 3d
1157, 1165, 833 N.E.2d 382, 389 (2005).    Certainly significant

tangible assets were involved in this case.     Cf. Fink v.

DeClassis, 745 F. Supp. 509, 516 (N.D. Ill. 1990) (intangible

assets accounted for $1 million of the total purchase price of

$1.2 million).   The evidence presented in this case was suffi-

cient to support the conclusion that the proposed agreement was

predominantly one for the sale of goods.

                       B. Statute of Frauds

           The UCC requires that contracts for the sale of goods

in excess of $500 be in writing.   810 ILCS 5/2-201(1) (West

2004).   However, a contract is enforceable even though it does

not meet the requirements of subsection (1) if it is valid in

other respects and "the party against whom enforcement is sought

                               - 5 -
admits in his pleading, testimony[,] or otherwise in court that a

contract for sale was made."   810 ILCS 5/2-201(3)(b) (West 2004).

Also, an oral contract for the sale of goods which has been

partially performed is enforceable.    Hartbarger v. SCA Services,

Inc., 200 Ill. App. 3d 1000, 1017, 558 N.E.2d 596, 606-07 (1990);

see 810 ILCS 5/2-201(3)(c) (West 2004) (an oral contract is

enforceable "with respect to goods for which payment has been

made and accepted or which have been received and accepted").

                    C. Formation of Contract

          Under the UCC:

               "(1) A contract for sale of goods may be

          made in any manner sufficient to show agree-

          ment, including conduct by both parties which

          recognizes the existence of such a contract.

               (2) An agreement sufficient to constitute

          a contract for sale may be found even though

          the moment of its making is undetermined.

               (3) Even though one or more terms are

          left open a contract for sale does not fail

          for indefiniteness if the parties have in-

          tended to make a contract and there is a

          reasonably certain basis for giving an appro-

          priate remedy."   810 ILCS 5/2-204 (West 2004).

          Defendants argue that nothing was said in the contract

                               - 6 -
about allocating a price for good will, a covenant not to com-

pete, allocating a price for the equipment, how to release liens,

what would happen if there was no loan approval, and other

issues.   Defendants argue these are essential terms for the sale

of a business and the Internal Revenue Service requires that

parties allocate the sales price.    "None of these items were even

discussed much less agreed to.    There is not an enforceable

agreement when there are so many essential terms missing."

           "A contract may be enforced even though some contract

terms may be missing or left to be agreed upon, but if the

essential terms are so uncertain that there is no basis for

deciding whether the agreement has been kept or broken, there is

no contract."   Academy Chicago Publishers v. Cheever, 144 Ill. 2d
24, 30, 578 N.E.2d 981, 984 (1991).       In Cheever, the widow of

John Cheever signed an agreement to publish a collection of

Cheever's short stories.   Cheever, 144 Ill. 2d at 27, 578 N.E.2d

at 982.   The Illinois Supreme Court held there was no valid and

enforceable contract because there was no agreement as to the

length and content of the book, who would decide which stories to

include, the criteria used by the publisher in determining

whether the manuscript was "satisfactory," or other terms.

Cheever, 144 Ill. 2d at 29-30, 578 N.E.2d at 984.       "[I]n fact,

all they had really agreed to was a tentative title (The Uncol-

lected Stories of John Cheever)."        Dawson v. General Motors

                                 - 7 -
Corp., 977 F.2d 369, 373 (7th Cir. 1992).

           The essential terms were agreed upon in this case.     The

purchase price was $150,000, and the items to be transferred were

specified.   No essential terms remained to be agreed upon; the

only action remaining was the performance of the contract.

Defendants took possession of the items to be transferred and

used them as their own.    "Rejection of goods must be within a

reasonable time after their delivery or tender.     It is ineffec-

tive unless the buyer seasonably notifies the seller."     810 ILCS

5/2-602(1) (West 2004).    Defendants paid $10,000 of the purchase

price.   The fact that defendants were disappointed in the income

from the events they operated is not inconsistent with the

existence of a contract.

           The trial court noted that "the parties have very very

different views about what transpired in the course of the

contract[-]formation discussions."      It is not necessary that the

parties share a subjective understanding as to the terms of the

contract; the parties' conduct may indicate an agreement to the

terms.   Steinberg v. Chicago Medical School, 69 Ill. 2d 320, 330-

31, 371 N.E.2d 634, 640 (1977).    The conduct in this case is

clear.   Parties discussing the sale of goods do not transfer

those goods and allow them to be retained for a substantial

period before reaching agreement.    Defendants replaced equipment,

reported income, paid taxes, and paid Gene for his time and

                                - 8 -
expenses, all of which is inconsistent with the idea that defen-

dants were only "pursuing buying the business."      An agreement to

make an agreement is not an agreement, but there was clearly more

than that here.

          The trial court believed it was significant that

Lindsey told Gene that defendants were "in no position to sign

anything" because they had not received any loan money from the

bank and did not have any attorney.      "The fact that a formal

written document is anticipated does not preclude enforcement of

a specific preliminary promise."     Dawson, 977 F.2d at 374 (1992).

Defendants' loan was eventually approved, they did consult with

an attorney, and defendants remained in possession of and contin-

ued to operate Festival Foods.    The parties' agreement could have

been fleshed out with additional terms, but the essential terms

were agreed upon.   Louann admitted there was an agreement to

purchase Festival Foods for $150,000 but could not recall specif-

ically making an oral agreement on any particular date.      "An

agreement sufficient to constitute a contract for sale may be

found even though the moment of its making is undetermined."       810

ILCS 5/2-204(2) (West 2004).    Returning the goods at the end of

the season was not a rejection of plaintiffs' offer to sell, it

was a breach of contract.

                            III. CONCLUSION

          We conclude there was an agreement to sell Festival

                                 - 9 -
Foods for the price of $150,000 and that defendants breached that

agreement.   We reverse the circuit court's judgment and remand

for the entry of an order consistent with this opinion.

          Reversed and remanded with directions.

          MYERSCOUGH and STEIGMANN, JJ., concur.

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