George Street Acquisitions, LLC v. Parikh Family Companies

2024 IL App (2d) 230096-U

• Court: Appellate Court of Illinois
• Decided: March 14, 2024
• Docket: 2-23-0096
• Status: Unpublished

Opinion

2024 IL App (2d) 230096-U No. 2-23-0096 Order filed March 14, 2024

NOTICE: This order was filed under Supreme Court Rule 23(b) and is not precedent except in the limited circumstances allowed under Rule 23(e)(1). ______________________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT ______________________________________________________________________________

GEORGE STREET ACQUISITIONS, LLC, ) Appeal from the Circuit Court 5M RE, INC. d/b/a 5M Real Estate, Inc., ) of Lake County. and MARK J. REITER, ) ) Plaintiffs and Counterdefendants- ) Appellants, ) ) v. ) No. 19-CH-626 ) PARIKH FAMILY COMPANIES, ) ELMHURST LAKE APARTMENT, LLC, ) PARK TERRACE PARTNERSHIP ) APARTMENTS, LLC, KERNEL PARIKH ) PROPERTIES, LLC-GPS I SERIES, ) VIRENDRA PARIKH PROPERTIES, LLC- ) GPS I SERIES, KERNEL PARIKH ) PROPERTIES, LLC-ROYAL CLUB SERIES, ) VIRENDRA PARIKH PROPERTIES, LLC- ) ROYAL CLUB SERIES, P & S PARTNER- ) SHIP, INC., REGENCY VILLAGE PART- ) NERSHIP, INC., REGENCY HOMES & ) DEVELOPMENT CO., and PARIKH ) FAMILY INVESTMENT MANAGEMENT ) CORPORATION, ) ) Honorable Defendants and Counterplaintiffs- ) Janelle K. Christensen, Appellees. ) Judge, Presiding. ______________________________________________________________________________

JUSTICE SCHOSTOK delivered the judgment of the court. Justices Hutchinson and Mullen concurred in the judgment. 2024 IL App (2d) 230096-U

ORDER

¶1 Held: In this case involving a real estate transaction that never closed, the trial court did not err in denying the plaintiffs’ claims for specific performance and breach of the covenant of good faith and fair dealing, or in granting damages in favor of the defendants for the violation of the contract’s confidentiality provision.

¶2 In 2018, the parties entered a real estate contract to purchase multiple parcels of real estate.

The transaction never closed. In April 2021, the plaintiffs, George Street Acquisitions, LLC

(George Street), 5M RE Inc. d/b/a 5M Real Estate Inc. (5M Real Estate), and Mark Reiter, filed a

multi-count complaint for, in relevant part, specific performance and breach of the covenant of

good faith and fair dealing. The defendants, Parikh Family Companies, Elmhurst Lake Apartment

LLC, Park Terrace Partnership Apartments LLC, Kernel Parikh Properties LLC-GPS I Series,

Virendra Parikh Properties LLC-GPS I Series, Kernel Parikh Properties LLC-Royal Club Series,

Virendra Parikh Properties LLC-Royal Club Series, P & S Partnership Inc., Regency Village

Partnership Inc., Regency Homes & Development Co., and Parikh Family Investment

Management Corporation, filed a counterclaim, in relevant part, for breach of the contract’s

confidentiality provision. Following a bench trial, the trial court entered an order finding in favor

of the defendants on all these claims. The plaintiffs appeal from this order. We affirm.

¶3 I. BACKGROUND

¶4 Mark Reiter and his brother, Marty, are the owners of 5M Real Estate and George Street.

George Street was created solely for the transactions at issue and became a legal entity on

September 25, 2018. Reiter was a licensed real estate broker. Kernel Parikh (KP) and Virendra

Parikh (Raja), who are brothers, are the owners of all the defendant entities. These entities owned

an expansive portfolio of real estate, including apartment buildings. KP had been in the business

-2- 2024 IL App (2d) 230096-U

of developing, building, managing, and selling apartment units for 35 years. KP had a master’s

degree in architecture and Raja was a licensed professional engineer.

¶5 In 2018, Reiter approached KP with a potential buyer for the Regency Village apartments,

an apartment complex in Elmhurst. KP later advised Reiter that he wanted to sell all of the

apartment buildings in his portfolio. Reiter’s buyer was not interested in the entire portfolio.

¶6 In August 2018, Reiter sent KP a proposed agreement offering $70 million for KP’s entire

portfolio. The contract identified the purchaser as George Street. KP and Raja ultimately agreed

to sell their portfolio for $75 million. Reiter, as the broker of 5M Real Estate, and KP, as president

of the Parikh Family Companies, executed a commission agreement which provided that, if a sales

contract was signed within a specified time frame, 5M Real Estate would receive a 3% commission

at closing. Reiter intended to place this commission into the deal as the plaintiffs’ equity

contribution. They later executed a supplement to the commission agreement. The supplement

provided that the commission was dependent on the sale closing within a certain time frame and

that Reiter agreed to obtain prior written consent from KP before disclosing any rent rolls or

financial information to any other party.

¶7 A. The Agreement

¶8 On October 5, 2018, the parties executed a purchase and sale agreement (the Agreement)

for the subject properties. The Agreement identified the buyer as George Street and Reiter as a

member of George Street. It was structured as an equity deal, meaning that the plaintiffs would

be purchasing an entity that owned the real property at issue, rather than directly transferring

ownership of each individual property.

¶9 Section 1.1(h) of the Agreement provided:

-3- 2024 IL App (2d) 230096-U

“(h) Due Diligence Period: The period ending ninety (90) days after the Date of

this Agreement. At or during any date or time of the Due Diligence Period, Seller(s) may

alter the corporate or LLC ownership of the subject sale properties, for Seller’s tax and/or

family ownership purposes, prior to Closing. Attached, for information of the Parties

hereto, is a preliminary draft of Seller’s estate and tax attorney’s "Parikh - Outline of Plan

to Sell the Real Estate Portfolio", attached hereto as Schedule 1.3 (consisting of 3 pages).

The allocation between the various Properties of the Purchase Price by Seller’s estate and

tax counsel may be assigned or directed at any time before Closing, subject to Purchaser’s

approval, which shall not be unreasonably withheld, conditioned, or delayed. Purchaser

may extend the Due Diligence Period for one (1) period of thirty (30) days, provided

Purchaser deposits an additional $100,000.00 (One Hundred Thousand and 00/100 Dollars)

with the Escrow Agent not later than two (2) days after the expiration of the Due Diligence

Period.”

Section 1.1(g) of the Agreement defined earnest money as “$50,000.00 (Initial Earnest Money),

and any additional deposit of Earnest Money Required herein, plus interest thereon.” Section 1.1(i)

stated that the financing period was the period ending 90 days after the date of the Agreement.

Section 1.1(j) stated that the closing date was to be held 30 days after the expiration of the due

diligence period.

¶ 10 Section 1.3 of the Agreement provided:

“Earnest Money. The Initial Earnest Money, in immediately available federal

funds, evidencing Purchaser’s good faith to perform Purchaser’s obligations under

this Agreement, shall be deposited by Purchaser with the Escrow Agent not later

than two (2) business days after the full execution of this Agreement. Upon

-4- 2024 IL App (2d) 230096-U

Purchaser’s satisfactory conclusion of the Due Diligence Period, as may be

extended as set forth in Article 1.1(h), Purchaser shall deposit with the Escrow

Agent, as Additional Earnest Money, the sum equal to an amount which will

increase the total Earnest Money to 2% of the Purchase Price (in Par. 1.1(f) hereof),

being $1,500,000.00. The Earnest Money shall be applied to the Purchase Price at

Closing. In the event that Purchaser fails to timely deposit the Initial Earnest

Money, or the Additional Earnest Money, if applicable, with the Escrow Agent,

this Agreement shall be of no force and effect. If this Agreement terminates prior

to the deposit of the Additional Earnest Money, pursuant to any express right of

Seller or Purchaser to terminate this Agreement, (subject to Par. 2.5 hereof) the

Earnest Money shall be refunded to Purchaser immediately upon request, and all

further rights and obligations of the parties under this Agreement shall terminate.

However, upon deposit of the Additional Earnest Money, and absent any breach of

this Agreement by Seller, all of the Earnest Money (i) shall then be non-refundable

in the event of a termination, breach or default of this Agreement by Purchaser, and

(ii) shall then be Sellers’ funds as (a) a part of the Purchase Price paid by Purchaser

at Closing, or (b) as liquidated damages payable to Seller, if Purchaser does not

proceed to Closing. ***.”

While this final version of the Agreement did not give a specific day when the additional earnest

money had to be paid, one earlier draft stated that it was to be paid on the 60th day of the due

diligence period and another draft stated that it was due on the 90th day of the due diligence period.

¶ 11 Section 2.2 of the Agreement provided that the parties agreed that the property information,

such as the rent rolls, would be maintained in strict confidence. It further stated that the buyer and

-5- 2024 IL App (2d) 230096-U

seller acknowledged, in the event of a breach of confidentiality, “that there may be no adequate

remedy at law and that either Party shall have the right to seek injunctive relief.” It further provided

that:

“The Purchaser shall be entitled to disclose confidential information to potential investors

and financing sources, provided each such investor or financing source executes a non-

disclosure agreement.”

This section also included a liquidated damages clause such that if the broker violated the terms

and conditions of confidentiality, and the transaction did not close, the broker would pay the sum

of $25,000 as liquidated damages to be split equally between buyer and seller.

¶ 12 Section 2.5 of the Agreement provided that buyer could terminate the Agreement during

the due diligence period and receive a refund of its earnest money, minus half the cost for any

preliminary title commitments and surveys. Section 8.2 provided that if the seller defaulted, the

buyer could seek return of its earnest money or pursue a claim for specific performance but could

not pursue a claim for damages. Section 10.9 of the Agreement provided that time was of the

essence in the performance of the Agreement.

¶ 13 The Agreement had schedules attached. Schedule 1.2 listed all the properties for sale and

the corporate entities that owned each property. Schedule 1.3 outlined the structure of the equity

sale and included a diagram of the transaction. Specifically, Schedule 1.3 identified the entities

that owned the subject property, provided that those entities would transfer their interests in the

properties to a new entity, Parikh Holding LLC, and that the members of Parikh Holding would

then sell their membership interest in Parikh Holding to George Street. The sale proceeds would

be transferred into a new entity, Parikh Investments, LLC.

-6- 2024 IL App (2d) 230096-U

¶ 14 On December 6, 2018, the Agreement was split into two separate contracts. The first

contract, which we will still refer to as the “Agreement,” was for $74.5 million and involved the

equity sale of the apartment buildings owned by the defendants. The second contract (the ancillary

contract) was for $500,000 and involved the sale of all the remaining real property, which included

land and some houses. The purpose of the split was to allow the plaintiffs to obtain financing.

The defendants’ attorney, Don Russ, needed to prepare a new Schedule 1.3 for each of the split

contracts. He provided those on December 29, 2018. The record demonstrates that, in a December

10, 2018, email from the defendants’ attorney, James Bakk, to KP and Raja, Bakk wrote “And, the

issue regarding the non-refundability of the $1.35 earnest money after the expiration of the Due

Diligence period” has been made clear in both of the contracts.

¶ 15 B. Post-Agreement Actions and Correspondence

¶ 16 Also on December 6, 2018, the plaintiffs executed a term sheet with their lenders, Pensam

Funding, Inc. (Pensam) and Equitrust Life Insurance Company (Equitrust). The term sheet

contained preliminary terms and conditions of the loan in response to 5M Real Estate’s loan

application for $72.4 million. The term sheet stated that it did not represent a formal or binding

agreement by the lender. Ray Cleeman was the contact for Pensam and Brad Feine was the contact

for Equitrust. The loan included about $9 million to finance the plaintiffs’ plan to renovate the

properties. 5M Real Estate’s equity partner in this transaction was Castlerock. Sebastian Barsh

was the contact person for Castlerock. Castlerock and 5M Real Estate’s joint venture was called

5M Rock Holdings, LLC. The record indicates that 5M Rock Holdings was planning to provide

about $15 million in equity and the rest of the purchase price for the transaction was being financed

through the lenders.

-7- 2024 IL App (2d) 230096-U

¶ 17 On December 31, 2018, the plaintiffs exercised the one time right, under section 1.1(h) of

the Agreement, to extend the due diligence period for 30 days and made the requisite $100,000

earnest money deposit. At that point, the due diligence period was to end on February 5, 2019.

On January 10, 2019, the plaintiffs advised the defendants that its’ lenders wanted to use a different

structure for the equity sale of the properties. It essentially made modifications to how the entities

would be transferred upon closing. On January 17, 2019, the defendants agreed to the new

structure and Russ was to update the Schedule 1.3s accordingly.

¶ 18 By January 28, 2019, Russ had not provided the updated schedules. On that date, however,

the plaintiffs’ attorney, Cory Faulkner, sent a proposed amendment to the Agreement that included,

in part, new changes to how the entities would be transferred upon closing and a new provision

whereby KP and Raja would provide personal indemnity for any claims related to the subject

properties being sold. The amendment also included an “additional contingency” that essentially

allowed the plaintiffs to back out of the deal at any time up to the closing date if the plaintiffs could

not obtain financing on terms that would permit what was contemplated by paragraph 4 of the

proposed amendment. It also added a place to the signature pages of the Agreement for KP and

Raja to sign “individually” under a statement that “the undersigned herby join in this Amendment

to evidence their agreement to the terms of the ‘Indemnity’ Paragraph of this Amendment.” In the

email, Faulkner requested another two week extension to the due diligence period, such that it

would end on February 19, 2019 (rather than February 5).

¶ 19 On January 31, 2019, Bakk sent Faulkner an email with the updated Schedule 1.3s attached.

Bakk also stated:

-8- 2024 IL App (2d) 230096-U

“Insofar as the amendment #1 to the contracts *** Don Russ advises that this amendment

would undo everything in the Schedule 1.3 Outlines + Charts to the contracts, which I can

assure you would not be acceptable to my clients.

To allow for some discussion (including Don Russ), my clients accept your requested

extension of the Due Diligence/Financing period to 2/19/19.”

The record shows that on February 5, 2019, Bakk emailed Faulkner a written and executed

extension to the due diligence period, extending it to February 19.

¶ 20 On February 4, 2019, Faulkner sent a revised amendment via email. He agreed that the

closing should take place in accordance with the revised schedules sent on January 31. He stated

that he removed the provisions from the proposed amendment that he believed were objectionable.

This revised amendment essentially removed language that Faulkner believed would conflict with

the new Schedule 1.3s but also expanded the personal indemnity language.

¶ 21 On February 7, 2019, Faulkner sent a follow-up email to Bakk and Russ asking whether

the revised amendment addressed their concerns and stating that, if not, “please feel free to redline

any language you would like removed or changed.” Having no response, Faulkner sent another

email on February 11 stating, “We need to have the amendment agreed to and executed before we

can finalize everything with our lender, as a significant portion of the loan items *** are dependent

on the sale structure.” Faulkner received an email response from Russ stating that he was out of

town for a meeting and that he would “get with [Bakk] later this week.”

¶ 22 On February 12, 2019, Faulkner sent a third email requesting a response to the amendment

and stating, “We are running up against our financing contingency date on [February 19], and we

cannot finalize the loan documents, until the amendment is agreed to and executed. *** We are

-9- 2024 IL App (2d) 230096-U

using our best efforts to get this closed, but we are in a difficult position while the terms of the

amendment remain outstanding.”

¶ 23 On February 14, 2019, Faulkner sent a fourth email, which stated, “Everyone on our side

is ready to push to the finish line when we have the signed amendment, but at this point, we are

going to need beyond Tuesday to finalize the loan.” He then requested another two-week extension

of the due diligence and financing contingencies. Bakk responded by email that same day. He

sent a revised amendment. In relevant part, it removed the language related to personal indemnity

and eliminated the additional contingency, which allowed the plaintiffs to cancel up until the

closing date with no penalty if appropriate financing was not obtained. It also removed the

signature lines where KP and Raja were supposed to sign “individually.” The email closed with:

“This revised Amendment is acceptable to Sellers, so let me know if it’s good to go ***.” Bakk

did not respond to the request for another extension.

¶ 24 On February 15, 2019, at 4:46 p.m., Bakk forwarded additional changes to the amendment

that Bakk received from Russ. There was again no response to the request for another extension

of the due diligence or financing contingencies. Russ had made minor additional changes to the

revised amendment. The changes were shown on the clean copy of the revised amendments that

Bakk had sent to Faulkner. However, the place for KP and Raja to sign “individually” reappeared

on Russ’s version of the revised amendment.

¶ 25 On February 18, 2019, at 4:45 p.m., Faulkner sent Bakk an email asking him to extend the

due diligence period for two weeks—until March 5, 2019. At 6:42 p.m., Faulkner sent an email

to Bakk and Russ with another revised amendment. Faulkner’s revisions added the personal

indemnity language back into the amendment.

- 10 - 2024 IL App (2d) 230096-U

¶ 26 On February 19, 2019, at 7:42 a.m., Bakk sent Faulkner an email that stated any extensions

or amendment requests needed to be handled by Russ. At 5:49 p.m., having been unable to contact

Russ, Faulkner sent Bakk and Russ the following email:

“Please note that buyer reserves all rights to terminate the contract and receive a full refund

of its earnest money in the event an extension is not agreed to hereafter.

It remains our intention to proceed with the contract, if the extension is granted, and this

shall not be taken as our expression of intent to terminate the contract while the proposed

extension is pending.”

The due diligence period ended that day and the plaintiffs did not deposit the additional earnest

money as called for by section 1.3 of the Agreement.

¶ 27 On February 20, 2019, Faulkner sent an email to Bakk and Russ still pursuing an extension

to the due diligence period and noting that the plaintiffs had been acting in good faith to resolve

the issues related to the amendment. Faulkner stated that, “We need a resolution of the extension

request to determine how to move this transaction forward.” Later that day, Bakk sent the

following response:

“Regarding your client’s [third] extension request *** the sellers have not and will not

grant another extension ***. The Sellers thereby accept your client’s termination of the

subject $74.5M and $500K contracts. Sorry things did not work out.”

¶ 28 The record indicates that, thereafter, the plaintiffs did not try to get a refund of the earnest

money already paid. Rather, on February 24, 2019, the plaintiffs, the lenders, and the equity

partners had an “all hands on deck meeting.” They determined that they could close the transaction

without an amendment. The transaction never closed and the plaintiffs filed this suit.

- 11 - 2024 IL App (2d) 230096-U

¶ 29 On April 9, 2021, the plaintiffs filed their first amended six-count complaint. The plaintiffs

alleged claims for specific performance (count I), damages for lost rent and income (count II), and

fraud (count VI). The plaintiffs also alleged three claims for breach of contract. Count III sought

damages for breach of the Agreement and the ancillary contract. Count IV alleged a breach of

contract based on a breach of the implied covenant of good faith and fair dealing. Count V alleged

a claim for breach of the commission agreement.

¶ 30 As is relevant to the arguments raised on appeal, we note that, in count I, the plaintiffs

alleged that they were entitled to specific performance because the defendants improperly

terminated the Agreement on February 20, 2019, the defendants waived the time is of the essence

provision, and because the plaintiffs were ready, willing, and able to perform their obligations

under the Agreement and ancillary contract. In count IV, the plaintiffs alleged that the defendants

acted in bad faith in failing to negotiate the proposed amendment to the Agreement in a reasonable

manner and in failing to notify the plaintiffs within a reasonable time that they would not grant

another extension to the due diligence period. The plaintiffs further alleged that, had they been

informed that there would be no extension and that the defendants did not agree to Faulkner’s

February 18th redline changes to the proposed amendment, they would have been able to timely

deposit the additional earnest money and proceed to closing. In count V, the plaintiffs alleged that

the defendants breached the Agreement and the ancillary contract to avoid paying Reiter his

commission and that, because Reiter fully performed under the commission agreement, the

defendants were still required to pay it. In count IV of the counterclaim, the defendants alleged

that the plaintiffs breached section 2.2 of the Agreement, the confidentiality provision, and that

they were entitled to damages.

- 12 - 2024 IL App (2d) 230096-U

¶ 31 The defendants filed an answer, affirmative defenses, and counterclaims. As

counterclaims, the defendants alleged that the plaintiffs breached: the implied covenant of good

faith and fair dealing (count I); fiduciary duties (count II); the Consumer Fraud and Deceptive

Business Practices Act (815 ILCS 505/2 (West 2018) (count III); and the confidentiality provisions

of the Agreement and ancillary contract (count IV). The defendant also requested specific

performance of the contractual requirement to return all confidential documents since the closing

did not occur (count V). Count V of the counterclaim was later withdrawn because the documents

were returned.

¶ 32 On July 6, 2021, following a hearing on the parties cross-motions for summary judgment,

the trial court granted summary judgment in favor of the defendants on all of the plaintiffs’ claims

and summary judgment in favor of the plaintiffs on all of the defendants’ counterclaims except

count IV, alleging a breach of the Agreement’s confidentiality provision. On September 30, 2021,

the trial court granted the plaintiffs’ motion to reconsider and reinstated count I (specific

performance), count IV (breach of the covenant of good faith and fair dealing), and count V (breach

of the compensation agreement) of the plaintiffs’ complaint. The matter proceeded to trial on those

counts and on count IV (breach of confidentiality) of the defendants’ counterclaim.

¶ 33 C. Trial Testimony

¶ 34 A two-week bench trial commenced on August 15, 2022. At trial, Faulkner testified that

the Agreement was split into two contracts to accommodate financing. Faulkner acknowledged

sending a revised amendment on February 4, 2019, that included more with regards to

representations and warranties based on the equity nature of the transaction. It also included

personal indemnification from KP and Raja to indemnify the purchasers and the related entities

from any liabilities that might pass to the purchasers after closing. Faulkner testified that he never

- 13 - 2024 IL App (2d) 230096-U

received any subsequent communications informing him that KP and Raja would never agree to

personal indemnification or reiterating that time was of the essence.

¶ 35 Faulkner further testified that, in addition to his emails, he also left a voicemail for Russ

on February 11. He was trying to get the amendment resolved. Faulkner requested another two-

week extension to the due diligence period. On February 14, he received redlines to the

amendment from Bakk but there was no response as to extending the due diligence period.

Faulkner testified that the email did not express that the defendants refused any kind of personal

indemnification. Faulkner acknowledged that Bakk’s redlines eliminated any language regarding

personal indemnity and removed the signature lines at the end of the amendment designated for

KP and Raja to sign individually. Faulkner testified that he never received a response from the

defendants regarding his request for another extension to the due diligence period.

¶ 36 Faulkner acknowledged that Russ had also sent revisions to the amendment on February

15. Russ’s version included the signature lines for KP and Raja to sign individually. Faulkner

believed that, because Russ did not remove the signature lines, the defendants had essentially

agreed to personal indemnification.

¶ 37 Faulkner testified that, when he was granted previous extensions to the due diligence

period, it was handled by Bakk. However, on February 19, he received an email from Bakk stating

that any amendment or extension requests needed to be handled by Russ. Faulkner sent Russ a

couple emails that day but received no response from Russ. He received a response from Russ’s

assistant that stated Russ was out of town on the 18th and 19th and would be in meetings all day

on those days. The assistant also said that she sent Russ an email explaining the urgency of the

extension request. Faulkner testified that he was contacting everyone to try to reach Russ to

resolve the amendment and extension request prior to February 19 but he was unsuccessful. On

- 14 - 2024 IL App (2d) 230096-U

the evening of February 19, he sent an email stating that the plaintiffs reserved the right to cancel

the contract and receive a full refund of the earnest money if the defendants did not agree to a due

diligence extension.

¶ 38 Faulkner testified that he sent two more emails on February 20, expressing that the

plaintiffs still wanted to proceed with the transaction. Bakk sent a response stating that the

defendants would not grant an extension and that the “Sellers thereby accept your client’s

termination” of the Agreement and the ancillary contract. Thereafter, Faulkner and Reiter

continued to try to reach out to the defendants to resolve the issues and proceed with the

transaction. Faulkner, Reiter, and the lenders had an “all hands on deck” conference call on

February 24, 2019. After discussions, everyone agreed, including the lenders, to proceed with the

closing of the Agreement as it was written and to forgo the requested amendment. Faulkner

testified that if the defendants had timely denied the extension request and any amendments, the

plaintiffs could have had the “all hands on deck” conference call sooner and proceeded to close.

¶ 39 Faulkner testified that he did not believe the defendants had the right to terminate the

contract on February 20. He believed that the additional earnest money was not due until a

reasonable time after the conclusion of the due diligence period. However, the record also shows

that, on December 10, 2018, Faulkner wrote an email to Bakk, which stated, in part, that “[w]e are

all in agreement that the full amount of the earnest money will become non-refundable after the

Due Diligence Period” and that “the full $1,500,000 will be non-refundable as of the last day of

the Due Diligence Period.”

¶ 40 Reiter testified that the plaintiffs were ready and able to pay the additional earnest money

on February 19, 2019. Reiter stated that, in February 2019, the defendants never told anyone that

that KP and Raja would never agree to personal indemnity. Reiter said there were multiple phone

- 15 - 2024 IL App (2d) 230096-U

calls and emails trying to get a response from the defendants about the amendment. By February

18, they still had not received a response. Reiter tried to call KP and Raja multiple times on

February 19 to get a response but they did not answer.

¶ 41 Reiter further testified that the plaintiffs had an operating agreement with Castlerock and

Castlerock was going to provide the additional earnest money. Castlerock’s attorney told him

multiple times that Castlerock had access to the necessary funds. Reiter testified that the

understanding between all the parties was that the additional earnest money was due within a

reasonable time after the conclusion of the due diligence period. Reiter identified an email he

received from his equity partner, Sebastian Barsh, on January 31, 2019, wherein Barsh stated that

the additional earnest money was ready for deposit. Reiter acknowledged that Barsh also stated

that the additional earnest money was conditioned on the plaintiffs being squared away with their

loans and an operating agreement.

¶ 42 On February 22, 2019, in a text message exchange with Barsh, Reiter suggested that they

wire the additional earnest money to keep the Agreement and ancillary contract enforceable. Barsh

responded that he was not sure whether there was an enforceable contract and he did not deposit

the additional earnest money. Reiter further testified that, on February 28, 2019, plaintiffs and

their equity partners exchanged multiple emails and reached a strategy for closing without any

amendment. He also acknowledged that he provided information regarding the Agreement to

multiple individuals when he was trying to find lenders and equity investors. When doing so, he

was acting in his capacity as a buyer, not a broker. He could not recall whether he procured any

non-disclosure agreements before he provided the information.

¶ 43 Sebastian Barsh testified that he was the owner of Castlerock Properties. Castlerock

developed and invested in real estate. Castlerock did not have any assets. Castlerock entered into

- 16 - 2024 IL App (2d) 230096-U

an operating agreement for a joint venture with 5M Real Estate to purchase the subject property

owned by the defendants. He had two investors, Ryan Daube and Owen Schnaper, who were also

supplying funds through Castlerock to purchase the subject property. He acknowledged that, under

the operating agreement with 5M Real Estate, Castlerock was responsible for supplying the

additional earnest money ($1.35 million). Daube specifically was supplying the additional earnest

money. Daube had supplied the $100,000 of earnest money that was paid when they exercised the

contractual right to extend the due diligence period for 30 days. He testified that, as of January

31, 2019, it was Castlerock’s intention to move forward with depositing the additional earnest

money and that the money was available. The additional funds Castlerock was supplying at closing

were also available.

¶ 44 Barsh acknowledged that he received an unexpected email from Bakk on February 20,

2019, saying that the deal was off. He testified that everyone involved in the purchase was

surprised and trying to figure out what was going on. After the email from Bakk, he sent an email

to the plaintiffs stating that he would not be depositing the additional earnest money. Barsh

testified that this was because he was worried that if the deal was in limbo, the earnest money

could get stuck. He believed the defendants were not acting in good faith. At the time of his

testimony, he was still interested in being an equity partner in the transaction.

¶ 45 On cross-examination, Barsh acknowledged that he did not have anything in writing from

Daube or Schnaper stating that either agreed to be personally responsible for depositing the

additional earnest money. Castlerock, Barsh, Daube, and Schnaper could have walked away from

the deal at any time. They had no obligation. At any point, they could have decided not to deposit

the additional earnest money. Initially, he did not pay the additional earnest money because it

seemed like the deal would not move forward unless the defendants signed an amendment and he

- 17 - 2024 IL App (2d) 230096-U

did not want the money to be held up in escrow for a long time. After receiving the Bakk email

terminating the Agreement, he did not want to deposit the additional earnest money because he

was again worried that he would not get it back if the deal did not close. Barsh acknowledged that

Castlerock was to deposit $12.5 million in an escrow account to be used to fund the subject deal.

The money was never deposited in an escrow account.

¶ 46 Barsh identified a January 4, 2019, email he sent to Reiter. In that email he wrote that they

were almost through the due diligence period and there was nothing from the lenders showing that

they were aware it was an equity deal or that the lenders would even allow it. He wrote, “If we

didn’t know the lender had no clue or hasn’t given express written consent to permit the equity

deal we probably wouldn’t have wired the 100k already.” Barsh also identified a January 9, 2019,

email he sent to Reiter. In that email, he stated that the lenders were opposed to closing in an

equity structure. Barsh testified that he learned this from Cleeman, who was the only person from

the lender’s side with which he spoke.

¶ 47 Barsh acknowledged that he received an email from Reiter on November 9, 2018, that

included an attachment called “Lake County Confidential Offering Memorandum.” Reiter

informed him that he had sent the information about the deal to over 100 groups. Barsh

acknowledged that he received the agreement without signing a nondisclosure agreement (NDA).

Barsh spoke with a couple others about the deal and he also did not obtain NDAs before doing so.

In 2020, after the deal was no longer alive, Reiter asked Barsh to sign and back date an NDA.

Barsh signed one but did not back date it. Barsh acknowledged that, on February 20, 2019, Reiter

sent him an email stating that the Agreement could be kept enforceable if the additional earnest

money was paid. Barsh responded that he was not sure they had something that was enforceable

in court and that they needed to figure out what was really going on.

- 18 - 2024 IL App (2d) 230096-U

¶ 48 The record indicates that the joint venture between Castlerock and 5M Real Estate was

called 5M Rock Holdings, LLC. On February 18, 2019, Castlerock and 5M Real Estate executed

an operating agreement for 5M Rock Holdings. The operating agreement did not identify which

equity member was responsible for paying the additional earnest money. In an email chain dated

February 28, 2019, Barsh wrote that it was inconceivable that Bakk did not understand why the

buyers needed personal indemnification but that he was still willing to deposit the additional

earnest money if Reiter provided personal indemnity that would cover any potential risk associated

with moving forward on the transaction.

¶ 49 Bakk testified that he was involved with the original negotiation of the Agreement. It was

originally an asset transaction but, at the request of the defendants, it became an equity transaction.

An equity transaction involved the sale of the entities that owned the subject real estate and it saved

the defendants millions of dollars in federal recapture taxes. Bakk acknowledged that, although

the Agreement was signed on October 5, 2018, the initial earnest money was not deposited until

October 11, 2018, because the escrow account was not set up in time to meet the contractual two-

day deadline and the defendants agreed to the extension. The original 90-day due diligence period

ended in the beginning of January. The plaintiffs exercised their contractual right to one 30-day

extension of the due diligence period and timely deposited the required additional $100,000 of

earnest money. The extension included the financing contingency too. Bakk acknowledged that

the first two extensions of the due diligence period were agreed through communication between

him and Faulkner.

¶ 50 On January 10, 2019, Bakk received a request from Faulkner to make some modifications

to the equity structure of the deal. Russ and the defendants agreed on January 17, 2019, to the

requested modification. The requested modification required Russ to redo the Schedule 1.3s. In

- 19 - 2024 IL App (2d) 230096-U

Bakk’s mind, no other changes were needed before closing. However, on January 28, 2019,

Faulkner sent an email stating that the plaintiffs needed another extension to the due diligence

period because they still had not received revised schedules from Russ. Bakk replied three days

later that the defendants agreed to a two-week extension, to February 19, 2019. Bakk prepared a

document stating as such, had it signed by the defendants, and emailed it to Faulkner. Bakk

testified that the extension was agreed to because the defendants were negotiating in good faith

and attempting to close on both contracts.

¶ 51 Bakk testified that Faulkner’s January 10 email also requested other modifications to the

Agreement, specifically, personal indemnification from KP and Raja, and for an extension on the

closing date. Bakk testified that Faulkner had tried to include a personal indemnity provision in

one of the original drafts of the Agreement. At that time, which was prior to October 5, 2018,

Bakk told Faulkner that KP and Raja would never agree to personal indemnity. Bakk responded

to Faulkner on January 31, 2019, stating that the new proposed amendment to the Agreement was

not acceptable. He informed Faulkner on January 31, February 4, and on February 14, that the

defendants would not accept an amendment that included personal indemnity. Faulkner told him

that the plaintiffs needed the proposed amendment in order to get financing.

¶ 52 Bakk testified that, on February 14, 2019, he sent an email with a redlined and clean copy

of the proposed amendment to which the defendants would agree. He sent another email on

February 15 with changes proposed by Russ. The February 15 version included the signature lines

for the indemnity provisions even though the signature lines were crossed out on the February 14

version Bakk sent. Bakk stated that he forgot to remove the signature lines from the February 15

version. (The record shows that Russ also testified at trial and corroborated that the inclusion of

the personal indemnity signature lines was an oversight.) Thereafter, Faulkner continued to seek

- 20 - 2024 IL App (2d) 230096-U

personal indemnity and an extension to the due diligence period. Bakk testified that when Faulkner

sent another revised amendment on February 18, 2019, Faulkner had changed most of the

provisions back to what was sent on February 4, which Bakk had already told him were

unacceptable.

¶ 53 Finally, Bakk testified that, as of February 14, 2019, he did not know if the defendants

would have agreed to another extension of the due diligence period because he did not know

whether the plaintiffs were going to agree to redlined amendment that was acceptable to the

defendants. The defendants were intending to close up until the end of the day on February 19,

2019, as long as the plaintiffs paid the additional earnest money. Bakk testified that the additional

earnest money was nonrefundable at the conclusion of the due diligence period.

¶ 54 Brad Feine testified that Equitrust did not issue written loan commitments. Equitrust

generally finalized loans about one or two days before closing. Feine acknowledged that, on

February 19, 2019, he sent an email to Pensam which stated, “They are waiting on execution of

the first amendment to the [Agreement] before they put [earnest] money down hard. Likely won’t

be today.” He was referring to the buyers and the sellers. Putting money down hard meant that

once you put the earnest money down, you could not get it back—it was nonrefundable. Feine

acknowledged that, as of February 19, 2019, there was an open item on Equitrust’s loan checklist—

equity verification. Since the lenders were only providing funding of $63.5 million, Equitrust

needed to verify that the plaintiffs had the remaining necessary funds to provide at closing.

Equitrust had requested financial statements from the plaintiffs but had not received them.

¶ 55 D. Trial Court’s Ruling

¶ 56 At the close of trial, the trial court requested that each side provide a statement of facts and

written closing arguments. On February 23, 2023, the trial court entered a written memorandum

- 21 - 2024 IL App (2d) 230096-U

opinion and judgment. The trial court first addressed whether the additional earnest money was

due prior to the expiration of the due diligence period or within a reasonable time following the

expiration. The contractual language stated that “[u]pon purchaser’s satisfactory conclusion of the

Due Diligence Period *** purchaser shall deposit” the additional earnest money. The trial court

determined that the word “upon” was ambiguous because various dictionary definitions included

“on” and “immediately,” but also “thereafter” or “very soon after.” The trial court thus turned to

parole evidence to determine when the additional earnest money was due. The trial court noted

that email communications between the parties during the period that the contract was pending all

indicated that the additional earnest money would be non-refundable after the due diligence period.

The trial court also noted that, under the Agreement, the initial earnest money was due two days

after the Agreement was signed, and the contractual right to extend the due diligence period for 30

days required an earnest money payment of $100K within two days after the expiration of the due

diligence period. The trial court noted, however, that the provision requiring the payment of the

additional earnest money of $1.35 million did not include any similar two-day provision. The trial

court concluded that “if the earnest money is non-refundable after the Due Diligence period

expired on February 19th, logic dictates that Buyer had to deposit the additional earnest money on

or before the expiration of the Due Diligence period.” The trial court thus held that “upon” meant

that the additional earnest money was to be paid no later than February 19, 2019.

¶ 57 The trial court denied the plaintiffs’ claim for specific performance, finding that the

plaintiffs had not shown they were ready, willing, and able to deposit the additional earnest money

on February 19, 2019. The trial court found that the plaintiffs did not disclose the equity structure

of the Agreement to the lenders until January “and then the lenders baulked [sic] and demanded

an amendment to the [Agreement] to cure their perceived defect.” Barsh elected not to pay the

- 22 - 2024 IL App (2d) 230096-U

additional earnest money because he was not sure whether the parties would reach an agreement

regarding the amendment and thus whether the lending would come through. Further, the trial

court noted that Barsh and the other lenders were not contractually bound to provide the equity or

financing. The trial court noted that Daube and Schaper did not testify at trial and there was no

evidence that they had committed to providing the additional earnest money. The trial court also

noted that the lenders’ decision to finance the transaction without an amendment five days after

the due diligence period was irrelevant as the additional earnest money was due on February 19th

and was not paid.

¶ 58 The trial court then addressed the plaintiffs’ argument that the defendants waived the

contractual time is of the essence clause and thus waived the February 19 due diligence deadline.

The trial court found this argument to be without merit. The trial court noted that the parties agreed

to the two-day extension for payment of the initial earnest money because the escrow account had

not been set up. The trial court also noted that the plaintiffs exercised the contractual right to one

30-day extension of the due diligence period and paid another $100,000 in earnest money. The

trial found that, if the plaintiffs really believed that the defendants waived the time is of the essence

by allowing the two-day extension for the initial earnest money, they would not have paid the extra

earnest money. The trial court also found that the defendants did not waive the time is of the

essence clause of the contract by granting an additional two-week extension, from February 5 to

February 19. The trial court noted that the defendants did not let the due diligence period lapse,

and then grant an extension. Rather, the defendants timely granted the request for the extension

and set the new due date of February 19. The trial court stated that if the plaintiffs really believed

the defendants waived the time is of essence clause, they would not have continually reached out

seeking agreement to an extension. The trial court also found telling that, after the additional

- 23 - 2024 IL App (2d) 230096-U

earnest money was not paid on February 19, the defendants terminated the Agreement the next

day. The trial court concluded that the defendants did nothing to lull the plaintiffs into believing

that it would grant another due diligence extension.

¶ 59 The trial court denied the plaintiffs’ claim for breach of the covenant of good faith and fair

dealing. The trial court found credible Bakk’s testimony that he told the plaintiffs when

negotiating the original October 2018 Agreement that the defendants would never agree to

personal indemnity. The trial court also noted that Barsh’s January 4, 2019, email indicated that,

as of that date, Reiter had not informed the lenders that the sale was structured as an equity deal.

The trial court found that this was why “the lenders balked which caused [the plaintiffs] to

scramble to try and renegotiate the [Agreement] terms.” The trial court found that the plaintiffs

were on notice that personal indemnity was not acceptable as of January 31, 2019, when Bakk

informed them of this. The trial court found that the plaintiffs should have had their “all hands on

deck call” at this time and not five days after the due diligence period ended. The trial court

concluded that the defendants exercised the discretion to not extend the due diligence period

reasonably and with proper motive.

¶ 60 The trial court acknowledged that the defendants never responded to the request for an

extension but found that this was not a breach of the covenant of good faith as the plaintiffs were

well aware by February 19 that the defendants would not agree to personal indemnity. The trial

court noted that the deal did not end because the defendants did not respond to the requests for an

extension. Rather, the deal ended because the plaintiffs failed to pay the additional earnest money

to secure the right to move forward with the deal. The trial court found that, even if the defendants

were ultimately happy that the deal fell through, the termination of the deal rested on the plaintiffs’

failure to timely secure proper financing from its lenders.

- 24 - 2024 IL App (2d) 230096-U

¶ 61 The trial court also denied the plaintiffs’ claim for breach of the commission agreement.

The trial court found that Reiter was not entitled to the commission because the deal fell through

and the defendants did not act in bad faith.

¶ 62 As to the defendants’ counterclaim for breach of the confidentiality of the Agreement, the

trial court noted that the Agreement clearly required Reiter to obtain non-disclosure agreements

from potential lenders and investors before providing confidential information. The trial court

found that Reiter failed to comply with this requirement and even requested one lender to postdate

a confidentiality agreement. The trial court thus found in favor of the defendants and awarded

$25,000 in damages. Following the trial court’s ruling, the plaintiffs filed a timely notice of appeal.

¶ 63 II. ANALYSIS

¶ 64 A. Specific Performance

¶ 65 The plaintiffs’ first contention on appeal is that it was entitled to specific performance of

the subject contracts for two reasons: (1) the defendants breached the Agreement; or (2) the

plaintiffs were ready, willing, and able to perform on the Agreement but were prevented from

doing so by the defendants’ actions. “Generally, a party will be entitled to specific performance

of a contract for conveyances of real estate only upon establishing either that the party has

performed according to the terms of the contract or that the party was ready, willing and able to

perform but was prevented, and thus excused from doing so by the acts or conduct of the other

party.” Omni Partners v. Down, 246 Ill. App. 3d 57, 63 (1993). Specific performance is an

equitable remedy that may only be “exercised upon consideration of all the facts and circumstances

of a particular case.” Id. at 62. A trial court’s decision to grant or deny such relief will not be

disturbed absent an abuse of discretion. Id.

¶ 66 1. Breach of the Agreement

- 25 - 2024 IL App (2d) 230096-U

¶ 67 The plaintiffs argue that they were entitled to specific performance because the defendants

breached the Agreement by improperly terminating it when the additional earnest money was not

paid on February 19, 2019. Paragraph 1.3 of the Agreement provided that the additional earnest

money was due “[u]pon [the plaintiffs] satisfactory conclusion of the Due Diligence Period.” The

trial court found that the term “upon” was ambiguous and interpreted it to mean that the additional

earnest money was due on or before February 19. On appeal, the plaintiffs concede that the term

“upon” is ambiguous but argue that the parole evidence does not support the trial court’s

interpretation of that term.

¶ 68 In so arguing, the plaintiffs cite an email from Bakk to KP and Raja, wherein he wrote,

“And, the issue regarding the non-refundability of the $1.5 earnest money after the expiration of

the Due Diligence period has been clear in Par, 5.2(e) [of the ancillary contract] and in Par. 5.2(d)

[of the Agreement].” (Emphasis added.) The plaintiffs argue that this email meant that the

additional earnest money was not due until after the due diligence period expired. The plaintiffs

also point out that preliminary drafts of the Agreement specified that the additional earnest money

was due on the 60th day of the due diligence period and another specified that it was due on the

90th day of that period. The plaintiffs assert that since the final version of the Agreement did not

list a specific due date, the parties intended that the additional earnest money would be due within

a reasonable time after the expiration of the due diligence period. Accordingly, the plaintiffs argue

that the defendants breached the Agreement by terminating it on February 20th rather than

allowing the plaintiffs a reasonable amount of time to pay the additional earnest money and that

the only equitable remedy is specific performance.

¶ 69 In construing a contract, our primary objective is to give effect to the intent of the parties.

Thompson v. Gordon, 241 Ill. 2d 428, 441 (2001). If the provisions of a contract are unambiguous,

- 26 - 2024 IL App (2d) 230096-U

we ascertain the parties’ intent from the language chosen in the contract. Id. However, if the

contract language is ambiguous, a court can consider extrinsic evidence to determine the parties’

intent. Id. A contract is ambiguous if it can reasonably be interpreted as having more than one

meaning or its language is indefinite in expression. West Bend Mutual Insurance Company v.

Athens Construction Company, Inc., 2015 IL App (1st) 140006, ¶ 27. The determination of

whether a contract is ambiguous is a question of law for a court to decide. Meyer v. Marilyn

Miglin, Inc., 273 Ill. App. 3d 882, 888 (1995). If a contract is ambiguous and the trial court uses

extrinsic evidence to determine the parties’ intent, the interpretation of the language is a question

of fact (Chicago Principals Association v. Board of Education, 84 Ill. App. 3d 1095, 1099 (1980)),

and, as a result, the trial court’s decision will not be reversed unless it is against the manifest weight

of the evidence (Chicago Investment Corp. v. Dolins, 107 Ill. 2d 120, 124 (1985)).

¶ 70 In the present case, we agree that the contract is ambiguous because its language regarding

the due date of the additional earnest money is indefinite in expression. The Agreement specified

that the initial earnest money was due two days after the execution of the Agreement, and another

$100,000 in earnest money was due two days after the expiration of the due diligence period if the

plaintiffs exercised the contractually provided one-time extension. However, with respect to the

$1.35 million in additional earnest money due at the expiration of the due diligence period, there

was no definite time frame set forth in the Agreement as to when it is due other than stating it was

due “upon” the satisfactory conclusion of the due diligence period. We agree with the trial court

that the word “upon” is ambiguous. As noted by the trial court, dictionary definitions of upon

include both “thereafter” (Merriam-Webster Online Dictionary, https://www.merriam-

webster.com/dictionary/upon (last visited Feb. 20, 2023)) as well as “on,” “immediately,” and

“very soon after” (Dictionary.com, https://dictionary.com/browse/upon (last visited Feb. 20,

- 27 - 2024 IL App (2d) 230096-U

2023)). As we agree that there is an ambiguity, we review the trial court’s resolution of the

ambiguity under the manifest weight standard. Chicago Investment Corp., 107 Ill. 2d at 124.

¶ 71 Here, the trial court’s resolution was not against the manifest weight of the evidence. Email

communications between the parties indicated that the additional earnest money would be non-

refundable at the expiration of the due diligence period. In a December 10, 2018, email, Bakk

wrote that the earnest money was non-refundable after the expiration of the due diligence period.

In an email on that same date, Faulkner wrote that the additional earnest money would be non-

refundable “as of the last day” of the due diligence period. If the earnest money was non-

refundable at these times, that necessarily implied that it was required to be paid prior to the last

day of the due diligence period or before that period ended. The earlier drafts of the Agreement,

specifying that it was due on the 60th day or the 90th day of the due diligence period, support this

interpretation. Both of those time frames were within the due diligence period, not a reasonable

time after it ended. The failure to include a specific day could reasonably be interpreted to mean

that the additional earnest money could be paid at any time during the due diligence period but

that it was not non-refundable until after the due diligence period expired. Prior to that time, the

plaintiffs could terminate the Agreement under the conditions of paragraph 2.5 and receive a full

refund of the earnest money.

¶ 72 Moreover, we agree with the trial court’s reasoning that, since the Agreement specified

two-day windows for payment of the initial earnest money and the earnest money for the

contractually provided 30-day extension, the parties’ failure to include a specific due date after the

expiration of the due diligence period for payment of the additional earnest money shows that it

was to be paid during the due diligence period. If it was to be paid within a certain time after the

due diligence period expired, the parties could have written that explicit term into the Agreement.

- 28 - 2024 IL App (2d) 230096-U

The plaintiffs cite to an email dated October 5, 2018, from Faulkner to Bakk in which Faulkner

wrote that the earnest money was to increase to $1.5 million “after the expiration of the Due

Diligence Period.” However, this conflicts with the above correspondence relating to when the

earnest money became non-refundable. It is the trial court’s responsibility to resolve conflicts in

the evidence (Williams v. Cahill, 258 Ill. App. 3d 822, 825 (1994)) and even based on the October

2018 email, we cannot say the trial court’s determination was against the manifest weight of the

evidence.

¶ 73 2. Ready, Willing and Able

¶ 74 The plaintiffs next argue that they were entitled to specific performance because they were

ready, willing, and able to pay the additional earnest money but were prevented from doing so by

the defendants’ silence and deception in not responding to the plaintiffs’ request for an extension

to the due diligence period. The plaintiffs also argue that the testimony at trial established that

Castlerock was contractually obligated to provide the funds for the additional earnest money and

that the additional earnest money and the funds needed for closing were available as of the end of

January 2019.

¶ 75 In determining whether a party was ready, willing, and able to perform its obligations under

a contract, this court has held:

“A buyer is financially “able” if he is shown to have sufficient funds on hand or the ability

to command the necessary funds within the required time. *** A purchaser is not shown

to have financial ability if he is depending upon third persons who are in no way bound to

furnish the funds. *** Nor is it sufficient if the purchaser merely contemplates a scheme

or plan to raise the needed funds, if the plan is “wholly problematical.” Nelson v. Bolton,

72 Ill. App. 3d 519, 525-26 (1979).

- 29 - 2024 IL App (2d) 230096-U

Generally, the standard of review applied regarding a judgment from a bench trial is whether the

order or judgment is against the manifest weight of the evidence. Reliable Fire Equipment Co. v.

Arredondo, 2011 IL 111871, ¶ 12. “A decision is against the manifest weight of the evidence only

when an opposite conclusion is apparent or when the findings appear to be unreasonable, arbitrary,

or not based on the evidence.” Eychaner v. Gross, 202 Ill. 2d 228, 252 (2002).

¶ 76 In the present case, the evidence supports a determination that the plaintiffs were not ready,

willing, and able to pay the additional earnest money. Barsh testified that there was nothing in

writing obligating Castlerock, Daube, or Schnaper to pay the additional earnest money. Barsh also

testified that he did not want to pay the additional earnest money when he learned that the plaintiffs

were still finalizing the loan documents to include an amendment requested by the lenders. In that

regard, Faulkner’s emails requesting personal indemnity from KP and Raja indicated that

finalizing the loan depended on the execution of the amendment. Bakk testified that when the

Agreement was originally negotiated he informed Faulkner that the defendants would never agree

to personal indemnity. Further, the amendment sought by the plaintiffs included an additional

contingency, such that if the plaintiffs could not secure financing, they had until the date of closing

to terminate the Agreement and receive a full refund of all the earnest money. The inference is

that the plaintiffs were still unsure if they could secure financing. Accordingly, the evidence

showed that, as of February 19, 2019, the plaintiffs were still requesting changes to the Agreement

and the financing was dependent on the requested modifications. In the absence of a final

amendment that satisfied the lenders, Barsh was not ready to pay the additional earnest money.

Based on this evidence, we cannot say the trial court’s determination, that the plaintiffs were not

ready, willing, and able to execute the Agreement, was against the manifest weight of the evidence.

- 30 - 2024 IL App (2d) 230096-U

¶ 77 In so ruling, we note that the plaintiffs rely on Barsh’s testimony that, as of January 31,

2019, Castlerock had the funds to pay the additional earnest money and intended to do so.

However, this ignores Barsh’s later testimony, that when the parties were not reaching agreement

on the requested amendment, Barsh did not want to pay the additional earnest money because he

feared he would lose it if the Agreement fell through. The plaintiffs also cite to the February 15,

2019, operating agreement of 5M Rock Holdings. However, while the operating agreement stated

that the “equity member” was responsible for paying the additional earnest money, the equity

member was not identified in that agreement. Further, the plaintiffs cite evidence of the “all hands

on deck call” where the lenders and the plaintiffs agreed that they could move forward on the

Agreement in the absence of an amendment. However, this call was five days after the additional

earnest money was due and was, therefore, too late.

¶ 78 The plaintiffs next argue that the defendants’ actions excused them from performing under

the Agreement. Specifically, the plaintiffs contend that the defendants’ failure to inform them that

they would not agree to personal indemnity and would not extend the due diligence period left

them in limbo which was why they did not pay the additional earnest money. This argument is

unpersuasive. We agree with the trial court that the defendants made it very clear that KP and

Raja would not agree to the request for personal indemnity. Bakk testified that he informed

Faulkner during the initial contract negotiations that the defendants would not agree to personal

indemnity and, at trial, he testified that he again refuted the requests for personal indemnity on

January 31, February 4, and on February 14. Further, the absence of any response to a request for

an extension, especially as the due diligence period was coming to an end, was essentially

indicative that the defendants would not agree to an extension. At that point, the trial court’s

- 31 - 2024 IL App (2d) 230096-U

finding that the plaintiffs needed to pay the additional earnest money to secure their right to move

forward with the agreement was not against the manifest weight of the evidence.

¶ 79 Moreover, the contract was signed on October 5, 2018, and the contract was originally

structured as an equity transaction. There was no evidence from the plaintiffs as to why they were

proposing changes to the Agreement to accommodate the equity structure over three months later.

In fact, in an email dated January 4, 2019, Barsh stated that he was unhappy with Faulkner because

this was an equity deal, the term sheet with the lender did not support that, and it was unclear if

the lender would even allow it. On January 9, Barsh sent an email indicating that the lender was

opposed to closing in an equity structure. Clearly the last-minute need for contract amendments

cannot be placed at the feet of the defendants.

¶ 80 The plaintiffs argue that they were misled because Bakk knew as of February 14 that the

defendants would not agree to an extension of the due diligence period. However, Bakk did not

specifically testify to this. He testified that, “in practical terms,” as of February 14, 2019, the

defendants would not agree to an extension because he did not know if the plaintiffs were going

to agree to the proposed amendment as modified by the defendants. The implication was that if

the plaintiffs had agreed to the defendants’ modifications of the proposed amendment (to exclude

personal indemnity), the defendants may have agreed to an extension.

¶ 81 In arguing that they were misled by the defendants’ failure to respond to the extension

request, the plaintiffs cite Omni Partners v. Down, 246 Ill. App. 3d 57 (1993). In Omni, the parties

entered a written real estate contract that provided closing would take place by March 1, 1989. Id.

at 58. On March 6, 1989, the seller forwarded a survey to the buyer and requested that they arrange

for a closing on the property. Id. at 59. Thereafter, the buyer repeatedly requested that the parties

set a closing date. Id. at 60, 64. The closing never occurred and the buyers filed a complaint for

- 32 - 2024 IL App (2d) 230096-U

specific performance of the contract. Id. at 58. The trial court granted the request for specific

performance and this court affirmed. Id. We held that the seller waived the March 1 closing date

when she, rather than sending a letter of default, sent a letter on March 6 requesting to set a closing

date. Id. at 64. Based on the plaintiff’s repeated requests thereafter to set a closing date, this court

held that the trial court’s determination that the buyer was ready, willing, and able to consummate

the transaction was not against the manifest weight of the evidence. Id. This court held:

“We believe that, in failing to demand strict performance on March 1 and in failing

to give [buyer] a specific closing date while [buyer] was willing to close at all relevant

times after the March 6 letter indicating waiver of the condition, [buyer] was prevented

from performing and should be legally excused from doing so. [Seller’s] overall conduct

by silence, accommodation or acquiescence lulled [buyer] into a false sense of security,

and therefore [buyer] could not be in material breach of the contract.” Id. at 65.

¶ 82 The plaintiffs’ reliance on Omni is unpersuasive. The defendants in the present case did

not lull the plaintiffs into a false sense of security. The evidence showed that the plaintiffs were

repeatedly informed that the defendants would not agree to KP and Raja providing personal

indemnity. Further, previous requests for extensions were agreed to by the parties and timely

granted. The evidence showed that Bakk wrote an email on January 31, 2019, granting an

extension of the due diligence period from February 5th to the 19th. As February 19 approached,

the failure to have a response or written extension should not have lulled the plaintiffs into a false

sense of security. Rather, it should have been clear that an extension was not being granted. In

Omni, the seller made affirmative representations that it still wanted to close on the contract. Here,

unlike Omni, the defendants did not make any affirmative representations that they would agree to

the amendment as written by the plaintiffs or that they would extend the due diligence period.

- 33 - 2024 IL App (2d) 230096-U

Accordingly, the evidence does not support a finding that the plaintiffs were lulled into a false

sense of security.

¶ 83 3. Waiver of “Time is of the Essence” Provision of the Agreement

¶ 84 The plaintiffs next argue that the defendants waived the time is of the essence provision of

the Agreement because they had waived the timing provisions more than once. The plaintiffs note

that the defendants allowed for a late deposit of the original earnest money and they also agreed to

extend the due diligence period to February 19, 2019. The plaintiffs assert that the defendants’

silence as to the request for another extension was thus deceptive and that the defendants should

not be allowed to enforce the provision.

¶ 85 “The extent to which a ‘time is of the essence’ provision in a contract will be strictly

enforced depends upon the intention of the parties as determined primarily by the language used

viewed under the circumstances surrounding the agreement as they reflect on the meaning of the

words.” Hart v. Lyons, 106 Ill. App. 3d 803, 805 (1982). A “time is of the essence” clause can be

waived if the parties’ conduct is inconsistent with enforcement of the provision. Id. “The mere

extension of [a deadline], absent some evidence of modification of the ‘time is of the essence’

provision, does not [generally] operate to waive that clause in a contract.” Id. at 806. A trial

court’s determination on this issue will be reversed only if it is against the manifest weight of the

evidence. Id. at 805.

¶ 86 In the present case, the trial court’s conclusion that the defendants did not waive the time

is of the essence clause was not against the manifest weight of the evidence. It is true that the

original earnest money was paid two days late. However, Bakk testified that this was because the

escrow account had not been set up on time and that the two-day extension was by agreement of

the parties. Further, when the plaintiffs exercised their right to a one-time extension of the due

- 34 - 2024 IL App (2d) 230096-U

diligence period, the contractually required payment of $100,000 of earnest money was timely

paid. Finally, when the parties agreed to another extension of the due diligence period, to February

19, 2019, the parties agreed to that extension on January 31 and Bakk sent an email to Faulkner

specifically granting the requested extension. All the extensions were thus contractually provided

or by agreement of the parties. As noted by the trial court, it is also significant that the previous

extensions were agreed to prior to end of the due diligence period. The defendants did not let the

due diligence period lapse and then grant extensions. Accordingly, nothing in the defendants’

conduct amounted to an express or implied waiver of the deadline on the due diligence period or

the time is of the essence clause.

¶ 87 B. Breach of the Covenant of Good Faith and Fair Dealing

¶ 88 The plaintiffs next argue that, even if not entitled to specific performance, they are entitled

to damages for the defendants’ breach of the covenant of good faith and fair dealing. As a related

matter, the plaintiffs argue that the trial court erred in finding that the exculpatory clause in the

Agreement limiting damages to specific performance (paragraph 8.2), precluded monetary

damages for the defendants alleged breach. The plaintiffs assert that exculpatory clauses are not

enforceable when one of the parties has acted in bad faith. Accordingly, the plaintiffs assert that

if we hold that the trial court erred in finding no bad faith, that we should also hold that the

Agreement does not preclude monetary damages.

¶ 89 A covenant of good faith and fair dealing is implicit in every contract as a matter of law.

The Reserve at Woodstock, LLC v. City of Woodstock, 2011 IL App (2d) 100676, ¶ 42. The

obligation of good faith and fair dealing “is essentially used as a construction aid in determining

the intent of the parties where an instrument is susceptible of two conflicting constructions.”

Resolution Trust Corp. v. Holtzman, 248 Ill. App. 3d 105, 112 (1993). “Disputes involving the

- 35 - 2024 IL App (2d) 230096-U

exercise of good faith arise when one party is given broad discretion in performing its obligations

under the contract.” Id. Under this doctrine, a party with contractual discretion must exercise the

discretion reasonably and with proper motive, not arbitrarily, capriciously, or in a manner that is

inconsistent with the parties’ reasonable expectations. Id.

¶ 90 The meaning of “good faith” can vary depending on the context. Schwinder v. Austin Bank

of Chicago, 348 Ill. App. 3d 461, 474 (2004) (citing Restatement (Second) of Contracts § 205,

comment a, at 100 (1981)). Good faith is acting in a way that is consistent with the justified

expectations of the other party. Bad faith can be characterized as conduct that “ ‘violate[s]

community standards of decency, fairness or reasonableness.’ ” Id. A trial court’s factual finding

as to whether a party performed in good faith on a contract will not be reversed unless it is against

the manifest weight of the evidence. See Midwest Television, Inc. v. Oloffson, 298 Ill. App. 3d

548, 558 (1998) (applying manifest-weight standard to trial court’s determination of good-faith

performance on a contract).

¶ 91 In the present case, the plaintiffs argue that the defendants acted in bad faith in refusing to

agree to an indemnity provision and in refusing to respond to the request for an extension of the

due diligence period. The plaintiffs assert that by failing to respond to the extension request, the

defendants led them on and prevented them from making an informed decision as to how to

proceed with the contract. The plaintiffs assert that the defendants had the discretion to extend the

due diligence period and to agree to personal indemnity but the defendants exercised such

discretion in bad faith.

¶ 92 At the outset, we note that the plaintiffs have failed to cite any part of the Agreement that

is ambiguous or unclear with respect to the issues of indemnity or extensions to the due diligence

period. Absent such ambiguity, the implied covenant is inapplicable. Resolution Trust Corp., 248

- 36 - 2024 IL App (2d) 230096-U

Ill. App. 3d at 112; see also Seip v. Rogers Raw Materials Fund, L.P., 408 Ill. App. 3d 434, 444

(2011) (duty of good faith and fair dealing is not an independent source of duties to a contract’s

parties but is rather used as a construction aid in determining the parties’ intent where an instrument

is susceptible to two conflicting constructions). Moreover, the discretion to amend the Agreement

to include personal indemnity or grant an extension to the due diligence period is generally not the

type of discretion that gives rise to the implied covenant of good faith and fair dealing. Id.

¶ 93 Nonetheless, even if the implied covenant could be applied, we cannot say that the trial

court’s determination was against the manifest weight of the evidence. The record belies the

plaintiff’s assertion that the defendants led them on in order to run out the clock on the due

diligence period. Bakk testified that, during the original contract negotiations, he informed the

plaintiffs that the defendants would never agree to a personal indemnity provision. When Faulkner

sent them the proposed amendment, which included personal indemnity, such provisions were

struck out by Bakk and Russ. Faulkner sent another revision that continued to include the personal

indemnity provision. As of February 15, Faulkner was on notice that the personal indemnity

provision was again being stricken. Instead of accepting this fact, Faulkner sent another revised

amendment on February 18 that added the personal indemnity language back into the Agreement’s

proposed amendment. The evidence demonstrates that the defendants made it clear on numerous

occasions that personal indemnity was not acceptable to them.

¶ 94 Moreover, the record supports the trial court’s determination that the last-minute request

for an amendment to include personal indemnity was due to the plaintiffs’ delay in notifying their

lenders. A January 4, 2019, email written by Barsh indicated that the plaintiffs had failed to inform

the lenders of the equity structure of the Agreement. When the lenders expressed disapproval, the

plaintiffs needed to renegotiate the contract terms. Thus, the evidence supports a conclusion that

- 37 - 2024 IL App (2d) 230096-U

the defendants did not lead the plaintiffs on. Rather, the plaintiffs were trying to force an issue

that was clearly not acceptable to the defendants. As noted by the trial court, the plaintiffs could

have had an “all hands on deck call” prior to the expiration of the due diligence period and accepted

the amended contract without personal indemnity.

¶ 95 The plaintiffs also argue that the defendants acted in bad faith when, on the last day of due

diligence period, Bakk directed Faulkner to contact Russ to discuss the extension. When Faulkner

reached out to Russ, Russ never responded. While this is true, we still cannot say that the trial

court’s determination that this did not constitute bad faith was against the manifest weight of the

evidence. The trial court found, and the evidence supported, that the plaintiffs were unable to

secure financing with their lenders and were thus trying to renegotiate the contract at the last

minute. The plaintiffs could have accepted the defendants’ final version of the amendment, paid

the additional earnest money, and secured the right to move forward with the deal. Bakk

essentially testified that, had the plaintiffs agreed to the amendment, it was possible the defendants

would have granted an extension. But in the absence of an agreement, there was no point in

granting an extension. It is well settled that the trier of fact is in a superior position to observe

witnesses, judge their credibility, and determine the weight their testimony should receive.

Battaglia v. 736 N. Clark Corp., 2015 IL App (1st) 142437, ¶ 23. The trial court specifically found

Bakk’s testimony credible and we decline to disturb its determination. The evidence supports the

trial court’s determination that the defendants exercised discretion not to extend the due diligence

period reasonably and with proper motive. As we affirm the trial court’s finding that the

defendants did not breach the covenant of good faith and fair dealing, we need not address the

plaintiffs’ contention that the Agreement did not preclude monetary damages.

¶ 96 C. Liquidated Damages

- 38 - 2024 IL App (2d) 230096-U

¶ 97 The plaintiffs’ final contention on appeal is that the trial court erred in finding that Reiter

violated the confidentiality provision of the Agreement and awarding the defendants $25,000 in

liquidated damages. The plaintiffs argue that the confidentiality provision in the Agreement only

allowed for liquidated damages when the violation was by a broker. The plaintiffs assert that

Reiter was acting in his role as buyer and that the only remedy under the Agreement was injunctive

relief. Alternatively, the plaintiffs argue that, because the Agreement provided that liquidated

damages would be split evenly between the buyer and the seller, the defendants were only entitled

to $12,500 in liquidated damages.

¶ 98 The defendants argue that Reiter wore two hats in this transaction. He was identified as

the principal of 5M Rock Holdings, which was identified as the “Broker” in the agreement. He

was also the principal of George Street. The defendants argue that the evidence showed that Reiter

did not always obtain non-disclosure agreements before providing confidential information and

that it did not matter who he was acting on behalf of. The defendants also argue that Reiter’s

wrongdoing does not entitle him to half of the liquidated damages and that the trial court’s ruling

should be affirmed.

¶ 99 The resolution of this issue requires us to interpret section 2.2 of the Agreement. The

interpretation of any contract is a question of law and is subject to de novo review. Gallagher v.

Lenart, 226 Ill. 2d 208, 219 (2007). As stated above, the primary goal of contract interpretation is

to give effect to the intent of the parties. Thompson, 241 Ill. 2d at 441. In determining the intent

of the parties, a court must consider the document as a whole and not focus on isolated portions of

the document. Premier Title Co. v. Donahue, 328 Ill. App. 3d 161, 164 (2002). If the language

of a contract is clear and unambiguous, the intent of the parties must be determined solely from

- 39 - 2024 IL App (2d) 230096-U

the language of the contract itself, which should be given its plain and ordinary meaning, and the

contract should be enforced as written. Thompson, 241 Ill. 2d at 441.

¶ 100 In the present case, there was substantial evidence that Reiter sent out confidential

information without first obtaining non-disclosure agreements. Barsh testified that he received

confidential information related to the properties being sold and that, after the Agreement fell

through, Reiter attempted to have him back date a non-disclosure agreement. Further, the record

shows that when Reiter sent the confidential information to Barsh via email, Reiter also stated in

the email that he had sent the information to “+100” groups and that Barsh had the green light to

send it to any others that might be interested. At trial, Reiter did not deny sending out confidential

information to potential lenders, he testified only that, when he did so, it was in his role as buyer,

not as broker.

¶ 101 The plain language of section 2.2 of the Agreement states that, in the event of a breach of

the confidentiality provision, buyer and seller agree that “there may be no adequate remedy at law”

and that either party shall have the right to seek injunctive relief. We disagree with the plaintiffs’

assertion that this language limits damages for the buyer or seller to injunctive relief. Rather, this

language merely provides that injunctive relief is an available option if there is no adequate remedy

at law. Section 2.2 of the Agreement also stated that if a broker violated the confidentiality

provision, the buyers and sellers were entitled to $25,000 as liquidated damages, to be divided

evenly between them. This language shows that the parties contemplated that a reasonable award

of damages for breach of the confidentiality provision was liquidated damages of $25,000. A

liquidated damages provision provides parties with a reasonable predetermined damages amount

where actual damages may be difficult to ascertain. Hickox v. Bell, 195 Ill. App. 3d 976, 987-88

(1990).

- 40 - 2024 IL App (2d) 230096-U

¶ 102 In the present case, the plaintiffs do not argue that $25,000 was not a reasonable amount

of damages. They argue only that because Reiter acted in his role as buyer, the damages were

limited to injunctive relief. We hold that Reiter clearly violated the confidentiality provision of

the Agreement, that the provision did not limit recovery to only injunctive relief, and that the

parties, when making the contract, contemplated that $25,000 was a reasonable amount of

damages. Here the trial court awarded that amount based on Reiter’s breach. While the plaintiffs

argue that the Agreement required the liquidated damages to be split between the parties, it is well

settled that “[a] party who materially breaches a contract cannot take advantage of the terms of the

contract that benefit him.” MHM Services Inc. v. Assurance Company of America, 2012 IL App

(1st) 112171, ¶ 48 (citing James v. Lifeline Mobile Medics, 341 Ill. App. 3d 451, 455 (2003)).

Accordingly, we affirm the trial court’s damages award.

¶ 103 III. CONCLUSION

¶ 104 For the reasons stated, we affirm the judgment of the circuit court of Lake County.

¶ 105 Affirmed.

- 41 -