Chapman v. Engel

• Court: Appellate Court of Illinois
• Decided: March 27, 2007
• Docket: 1-06-0791 Rel
• Status: Published

Opinion

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 1-06-0791

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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