Bysom Enterprises, Ltd. v. Peter Carlton Enterprises, Ltd.

Citations: 641 N.E.2d 838; 204 Ill. Dec. 408; 267 Ill. App. 3d 1Docket: 1— 92—2665

Court: Appellate Court of Illinois; October 31, 1994; Illinois; State Appellate Court

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Bysom Enterprises, Ltd. filed a breach of contract action against Peter Carlton Enterprises, Ltd., Robert C. Aulston, William C. Goodall, and Peter Carlton Properties, collectively referred to as PCP, seeking damages related to a purchase agreement for eight Popeye's franchise restaurants. The agreement, executed on August 31, 1987, included a clause stating that PCP would sell personal property in "as is" condition without warranties. Bysom, having acquired the restaurants on November 30, 1987, later discovered that an AT&T telephone system was leased, not owned, by PCP, resulting in Bysom purchasing it for $3,812.63.

Under the agreement, PCP warranted that they would convey merchantable title to the property and indemnify Bysom against liabilities due to their fault. The transaction was subject to the Bulk Sales provisions of the UCC, requiring Bysom to file a Bulk Sales Notice to protect against creditors' claims. PCP provided a list of creditors but failed to include the State of Illinois and the City of Chicago. Consequently, Bysom did not file the necessary notices.

As a result, Bysom was later notified by the State of Illinois of a tax liability of $2,179.78 incurred prior to the closing, and by the City of Chicago for $28,907.72 in delinquent taxes, leading to a lawsuit. The Appellate Court affirmed the summary judgment in favor of Bysom, noting the lack of proper notice and the breach of contract by PCP.

Buyers and PCP entered into a Reproration Agreement as part of the Purchase Agreement, which involved recalculating the 1987 real estate taxes for two franchise locations after PCP obtained separate tax identification numbers. The Reproration Agreement stipulated that the Buyers received credits for 1987 taxes, but due to the inclusion of property not conveyed to them, the credits needed to be recomputed to reflect only the property sold. Payments under the Agreement would accrue interest at 10% per year and include attorneys' fees for enforcement actions.

Following the reassessment of taxes, Bysom claimed that PCP owed $11,704.65 and $9,306.75 for the Reproration Franchises but faced refusal from PCP, leading to a lawsuit. Bysom sought summary judgment, supported by an affidavit and tax bill documentation, while PCP's opposition lacked legal citations and was based on general assertions of factual disputes. PCP's counter-affidavit raised unsupported claims regarding knowledge of delinquent taxes and liability limitations.

The trial court found that PCP's opposition did not provide sufficient evidentiary facts to counter Bysom's claims and ruled that the telephone system was included in the sale. It determined that PCP breached its warranty regarding tax payments and was liable under the Reproration Agreement, awarding Bysom $34,900.13 for the breach of warranty and $21,011.40 plus interest and attorneys' fees for the Reproration Agreement. PCP's claim of trial court abuse of discretion was rejected, as the summary judgment standard does not allow for such discretion.

A trial judge may grant summary judgment under section 2-1005 of the Code of Civil Procedure if the submitted documents demonstrate no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Summary judgment is a significant legal action that should be granted only when the moving party's right is unequivocal. The judge's role is to assess the evidence to determine if factual disputes exist, with the appellate court required to reverse decisions if there are genuine factual disputes or legal misinterpretations. Courts must interpret the record against the moving party and in favor of the opponent.

In this case, PCP challenged the trial court’s ruling on the Reproration Agreement, arguing that Bysom improperly included 1989 real estate bills to establish PCP’s liability for 1987 taxes. The court found that the 1989 bills were appropriate as they reflected the separation of the Reproration Franchises, and PCP failed to provide evidence disputing Bysom's calculations. PCP's mere assertions were insufficient to create a material issue of fact. The court concluded that Bysom had accurately recalculated the taxes based on the Reproration Agreement.

PCP also claimed that Bysom's supporting affidavit did not comply with Supreme Court Rule 191(a) but did not object to it, leading to a waiver of any complaints regarding the affidavit. Additionally, PCP argued that individual defendants were not liable under the Reproration Agreement because they did not sign it personally. However, this argument was not raised in the lower court, resulting in waiver for appeal. Moreover, PCP had admitted that the individual defendants were bound by the Reproration Agreement in their answer to Bysom's complaint. The court noted that the Reproration Agreement and the Purchase Agreement were executed simultaneously, treating them as a single contract.

PCP raised several ancillary issues regarding the Reproration Agreement that were not previously addressed in its opposition to summary judgment, resulting in a waiver of these matters. The trial court correctly granted summary judgment on this agreement. PCP contends that the trial court erred in favoring Bysom on the claim of breach of Paragraph 11(b) of the Purchase Agreement, which stipulates that all taxes must be paid and current. Bysom provided tax assessments from the City and State as evidence. The trial court, focusing on the explicit terms of Paragraph 11(b), determined there was a breach of warranty as a matter of law. On appeal, PCP argued that Bysom did not prove the elements of a breach of express warranty. However, PCP failed to contest these elements in the trial court, leading to a waiver of this argument. PCP's claim that Paragraph 11(b) was not part of the basis of the bargain is considered frivolous, as the presence of warranties in the Purchase Agreement serves as prima facie evidence of their inclusion. PCP has not presented any evidence to counter the claims established by the agreement. PCP also attempted to argue that Bysom's negligence in failing to file a Bulk Sales Notice absolved them of liability; however, this argument is irrelevant as it misapplies the case law from Frazer v. A.F. Munsterman, which pertains to strict liability and does not relate to contractual warranties. Although it is acknowledged that Bysom is jointly and severally liable for taxes due to the lack of filing the notice, this does not negate PCP's breach of warranty regarding tax payments. Consequently, Bysom is entitled to reimbursement for the tax liabilities owed to the State and the amounts paid to the City as damages for breach of contract.

PCP indemnified Bysom for any liabilities arising from the sale due to PCP's misrepresentation regarding the payment of taxes. The fault lies with PCP, as their warranty that all taxes had been paid was false. Had this misrepresentation not occurred, Bysom would not have faced liability for failing to file a bulk sales notice. The Purchase Agreement’s warranties and indemnifications prevent shifting tax responsibility to Bysom. PCP contends that Paragraph 16 of the Purchase Agreement limits remedies for warranty breaches, stipulating a $50,000 escrow for material breaches. However, the language is clear and does not indicate that Paragraph 16 serves as the sole remedy. A warranty concerning tax payments is inherently not limited by time, as tax liabilities are fixed and were not discoverable within the 90-day period due to PCP's false warranty. Bysom's liability only became evident after assessments were issued against it, while Paragraph 11(b) of the Agreement implied those taxes did not exist. Additionally, Paragraph 11(g) provides broad indemnification for tax liabilities without a time limit. PCP's arguments regarding res judicata and collateral estoppel, based on prior adjudications against Bysom, were not raised in the trial court and are thus waived on appeal. Consequently, Paragraph 11(g) affirms PCP's liability for back taxes, and the trial court correctly granted summary judgment on the breach of warranty claim. PCP also argued against the trial court's ruling that a telephone system, which Bysom began receiving bills for after taking title, was included in the sale under Paragraph 6 of the Purchase Agreement.

The trial court determined that PCP had disclosed multiple leases in the Purchase Agreement, thus excluding those items from Paragraph 6's scope. Since the telephone system was not listed as excluded, it was deemed included under Paragraph 6, leading to an award to Bysom for its purchase price based on the warranty of title in Paragraph 11(a). Summary judgment can rely on circumstantial evidence in the absence of conflicting inferences. Although PCP argued that the telephone system was not explicitly mentioned in the Purchase Agreement or the Bills of Sale, the sale was a bulk transaction, implying that all items not specifically excluded were included. The trial court highlighted that Paragraph 7 of the Purchase Agreement explicitly excluded certain leased properties. Additionally, creditor lists provided by PCP did not mention AT&T, and the Bills of Sale for personal property indicated that the transfer included all equipment, unless specifically excluded. The conclusion drawn is that PCP intended for the phones to be part of the personal property transfer. The decision was affirmed, with CAMPBELL, P.J. and MANNING, J. concurring.