Chapman v. Engel ( 2007 )

SECOND DIVISION
March 27, 2007
No. 1-06-0791
TODD J. CHAPMAN and WENDI L. CHAPMAN, ) Appeal from the
) Circuit Court of
Plaintiffs-Counterdefendants- ) Cook County.
Appellants, )
)
v. )
)
ROBERT S. ENGEL and LINDA R. ENGEL, )
) Honorable
Defendants-Counterplaintiffs- ) Thomas Hogan,
Appellees. ) Judge Presiding.
PRESIDING JUSTICE WOLFSON delivered the opinion of the
court:
We are called on to construe a fee-shifting provision in a
home purchase contract, no simple matter considering the way the
bench trial concluded.
Each side claimed the other materially breached the
contract. The trial court held neither one of them did, although
the plaintiffs did get back the earnest money they sued for.
Plaintiffs contend they should be awarded attorney fees and
costs because they were the “prevailing Party” as that term is
used in the contract. The trial court held they were not
entitled to fees and costs because they were not the prevailing
parties. We affirm the trial court’s conclusion, although our
reason is not the same.
FACTS
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The Chapmans entered into a real estate contract for the
purchase of the Engels’ home for $550,000. The Chapmans tendered
$55,000 in earnest money to Coldwell Banker, the listing broker.
The parties were scheduled to close on August 15, 2002. The
Chapmans conducted a final walk-through of the property the
morning before closing, as authorized by the contract. During
the walk-through, the Chapmans noticed the house was not in the
same condition as it had been when the contract was signed. The
Chapmans requested either a credit or escrow of money so the
house could be repaired. At the closing, the parties attempted
to negotiate a resolution. The contract was terminated when the
parties could not reach an agreement.
Following the termination of the contract, the Chapmans
demanded the release of the earnest money. The Engels made their
own claim to the earnest money, which remained in the Coldwell
Banker account. On October 2, 2002, the Chapmans filed a lawsuit
against the Engels. Count I of the complaint was a declaratory
judgment action, which sought an order from the trial court
declaring the contract was properly terminated, directing the
Engels to release the Chapmans’ earnest money and awarding the
Chapmans their attorney fees and costs in bringing the suit.
Count II of the complaint alleged the Engels breached the
contract by not having the home in the same condition at closing
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as it was when the contract was signed.
The Engels filed a counterclaim, seeking recovery of the
earnest money as liquidated damages for the Chapmans’ alleged
breach of contract. The Engels also sought an award of
reasonable attorney fees and costs. While the litigation was
pending, the Engels sold their house to a third party for
$520,000.
On December 18, 2003, the Chapmans filed a motion for
partial summary judgment, contending the Engels were entitled to
only $30,000 of the earnest money--the difference between what
the Engels eventually sold the house for and the amount the
Chapmans agreed to pay. In response, the Engels contended they
were entitled to the full $55,000 as liquidated damages. In
their reply brief in support of summary judgment, the Chapmans
contended the Engels could not recover liquidated damages because
the contract did not contain a liquidated damages provision.
The trial court denied the Chapmans’ motion, finding there
were questions of fact precluding any dispositive ruling. The
Engels were granted leave to file an amended counterclaim, which
sought the recovery of actual damages in the event liquidated
damages were unavailable.
Prior to trial, the Chapmans filed several motions in
limine. Motion in limine #2 sought to bar the Engels from
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presenting evidence and argument regarding liquidated damages.
The trial court denied the Chapmans’ motion in limine, but
informed the Engels that they had to elect a remedy before trial.
The Engels elected to pursue actual damages. As a result, on
November 12, 2005, the trial court ordered the Engels to
“immediately take all actions appropriate and necessary to cause
Coldwell Banker to release [the Chapmans] $55,000 in earnest
money.” Following a bench trial, the court dismissed both the
Chapmans’ complaint and the Engels’ counterclaim with prejudice.
On December 22, 2005, the Chapmans filed a petition for
attorney fees and costs, requesting reimbursement for fees up to
the day the trial court ordered the Engels to release the earnest
money. The “attorney fees” provision in the contract signed by
the parties provided for the payment of legal fees and costs to
the prevailing party “in the event of default” by either party.
Because the trial court ordered the release of the earnest money,
the Chapmans contend they were the prevailing party in the
litigation.
During a hearing on the motion for fees, the trial court
noted it was “perplexed” by the Chapmans’ position that they were
the prevailing party. The trial court denied the Chapmans’
motion, saying: “I do not think [the Chapmans] were the
prevailing party as contemplated by the contract.” The Chapmans
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appealed.
DECISION
Ordinarily, the losing party in a lawsuit cannot be required
to pay attorney fees to the winning party. Saltiel v. Olsen, 85
Ill. 2d 484, 488, 426 N.E.2d 1204 (1981). But there is an
exception to the rule: provisions in contracts for award of
attorney fees will be enforced by the courts. Abdul-Karim v.
First Federal Savings and Loan Association, 101 Ill. 2d 400, 411-
12, 462 N.E.2d 488 (1984). These are “fee-shifting” provisions.
Wildman, Harold, Allen and Dixon v. Gaylord, 317 Ill. App. 3d
590, 594, 740 N.E.2d 501 (2000).
Here, the home purchase contract entered into by the parties
did contain a fee and costs provision:
“In the event of default by Seller or Buyer,
the Parties are free to pursue any legal
remedies at law or in equity. The prevailing
Party in litigation shall be entitled to
collect reasonable attorney fees and costs
from the losing Party as ordered by a court
of competent jurisdiction.”
Our decision in this case turns on the precise wording of
the fee-shifting provision in the contract. There is no factual
dispute. Our task is to interpret the contract, a question of
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law calling for de novo review of the trial court’s decision.
Erlenbush v. Largent, 353 Ill. App. 3d 949, 952, 819 N.E.2d 1186(2004); Gallagher v. Lenart, 367 Ill. App. 3d 293, 301, 854
N.E.2d 800 (2006). We may affirm the trial court’s decision on
any basis supported by the record, regardless of whether the
trial court relied on that ground when it made its decision. See
Home Insurance Co. v. Cincinnati Insurance Co., 213 Ill. 2d 307,
315, 821 N.E.2d 269 (2005).
We are required to strictly construe a contractual provision
for attorney fees. Grossinger Motorcorp, Inc. v. American
National Bank and Trust, 240 Ill. App. 3d 737, 752, 607 N.E.2d
1337 (1993). That is, we construe the fee-shifting provision “to
mean nothing more–-but also nothing less–-than the letter of the
text.” Erlenbush, 353 Ill. App. 3d at 952. For example, we have
held a fee-shifting provision tied to an action to “enforce” a
lease does not apply in a declaratory judgment claim asking that
the parties’ rights under the lease be declared. The reason?
Declaring rights is not the same as enforcing obligations.
Powers v. Rockford Stop-N-Go, Inc., 326 Ill. App. 3d 511, 516,
761 N.E.2d 237 (2002); Arrington v. Walter E. Heller
International Corp., 30 Ill. App. 3d 631, 642, 333 N.E.2d 50(1975).
The battleground staked out by the parties at trial and in
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this court has to do with the question of whether the Chapmans
were prevailing parties in the litigation. We see no need to
reach that issue. The fee-shifting provision in the parties’
contract requires a “default by Seller or Buyer” before the
identity of the prevailing party makes any difference. That is
the contract the parties entered into and that is the contract we
must strictly construe. See Grossinger Motorcorp, Inc., 240 Ill.
App. 3d at 752.
Nothing in the Chapman-Engel home purchase contract defines
or explains “default.” However, a contract term is not ambiguous
merely because it is undefined in a contract. Hunt v. Farmers
Insurance Exchange, 357 Ill. App. 3d 1076, 1079, 831 N.E.2d 1100(2005). “If an undefined term has a ‘plain, ordinary, and
popular meaning,’ there is no ambiguity and the term should be
enforced as written.” Hunt, 357 Ill. App. 3d at 1079, quoting
Chatham Corp. v. Dann Insurance, 351 Ill. App. 3d 353, 358, 812
N.E.2d 483 (2004).
The plain, ordinary, and popular meaning of the word
“default” is: “The omission or failure to perform a legal or
contractual duty.” Black’s Law Dictionary 428 (7th ed.1999).
The term is not ambiguous. “Breach of contract” is defined as:
“Violation of a contractual obligation, either by failing to
perform one’s own promise or by interfering with another party’s
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promise.” Black’s Law Dictionary 182 (7th ed.1999). In light of
the similarities between the definitions of “default” and “breach
of contract,” we find the terms have substantially the same
meaning in this case.
Here, the trial court specifically found neither side
breached the contract when it dismissed both the Chapmans’ and
the Engels’ contract claims with prejudice after a bench trial.
See Kostecki v. Dominick’s Finer Foods, Inc. of Illinois, 361
Ill. App. 3d 362, 374, 836 N.E.2d 837 (2005) (when an involuntary
dismissal is “with prejudice,” the judgment is a final
adjudication on the merits under Supreme Court Rule 273 (134 Ill.
2d R. 273)). The trial court’s decision in this case may be
logically inconsistent, but it is legally consistent, and that is
acceptable. See Redmond v. Socha, 216 Ill. 2d 622, 650, 837
N.E.2d 883 (2005) (“no authority for the proposition that a
verdict or verdicts in a civil case must be without any
conceivable flaw in logic, only that they must be legally
consistent.”)
The trial court’s judgment, in effect, determined neither
party defaulted under the contract, a necessary condition for the
fee-shifting provision to apply. Not only was the required
triggering event in the fee-shifting provision not proved in this
case, the trial court specifically found it never happened. In
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fact, the trial court correctly observed in denying the Chapmans’
fee petition, it believed “everyone was operating under the
assumption that in order for the Chapmans to succeed on their
claim for attorney fees, they needed a determination that there
was or there had been a material breach.”
Because neither party breached the contract, we find neither
the Chapmans nor the Engels defaulted under the contract. Since
we are bound by the rules of strict construction, we find the
fee-shifting provision did not apply in this case. Accordingly,
we need not consider whether the Chapmans were the “prevailing
Party” under the fee-shifting provision.
CONCLUSION
We affirm the trial court’s judgment.
Affirmed.
HOFFMAN, and HALL, JJ., concur.
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