Crown Life Insurance Company v. American National Bank and Trust Company of Chicago, Tri-Centers Properties, Ltd., Etc., Cross-Plaintiff/appellee v. Earle W. Aronson, Cross-Defendant/appellant

Citations: 35 F.3d 296; 1994 U.S. App. LEXIS 25135Docket: 93-4026

Court: Court of Appeals for the Seventh Circuit; September 13, 1994; Federal Appellate Court

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Crown Life Insurance Company filed a foreclosure suit against Earle W. Aronson and Tri-Centers Properties, Ltd. concerning the sale of three Illinois shopping centers purchased by a Land Trust in 1986, with financing from Crown Life. The Trust sold the properties to Aronson in 1991 for $4,300,000, with payment structured in installments. After initially making payments, Aronson defaulted in June 1992, leading Tri-Centers to default on its mortgage to Crown Life. In response to the payment cessation, Crown Life initiated foreclosure proceedings and appointed a receiver.

Tri-Centers asserted a cross-claim against Aronson, arguing that his default terminated the sales contract. The district court ruled in favor of Crown Life, granting a foreclosure judgment in December 1992 and later granting summary judgment in favor of Tri-Centers against Aronson in May 1993. Aronson's attempt to file a counterclaim was denied due to being late. Ultimately, the court ordered Aronson to pay Tri-Centers $1,855,178.06, which he is now appealing. The case highlights the financial obligations stemming from the sale and the consequences of defaulting on contractual payments.

On July 23, 1992, Crown Life initiated foreclosure proceedings on shopping centers by filing a lawsuit. The district court appointed Grubb, Ellis Co. as receiver, which took possession of the properties on July 27, 1992. The Land Trust and Tri-Centers did not regain possession. In September 1992, Tri-Centers answered Crown Life's complaint and filed a cross-claim to forfeit its contract with Aronson. In October 1992, the court issued a default order against Aronson and the Land Trustee, terminating their interests in the properties. Recognizing the futility of regaining possession, Tri-Centers opted to seek damages from Aronson for breach of contract instead of forfeiture.

On December 22, 1992, the court issued a judgment for foreclosure and allowed Tri-Centers to amend its cross-claim, which was filed on January 13, 1993. Tri-Centers alleged that Aronson had stopped making payments due under the sales contract since May 1992 and had failed to remedy this default, thus entitling Tri-Centers to accelerate the remaining balance.

Aronson's sole defense was that Tri-Centers' damage claim was barred by the doctrine of election of remedies, asserting the contract had been voided. In May 1993, the court granted Tri-Centers summary judgment on liability, rejecting Aronson's defense and ruling that the sales contract permitted pursuing multiple remedies. The court found no threat of double recovery or detrimental reliance by Aronson on Tri-Centers' earlier actions, which did not constitute an election of remedies.

On July 30, 1993, the court dismissed two further defenses from Aronson and granted a motion for prove-up of damages, determining Aronson owed the difference between the amount due under the installment contract and the $2.2 million paid by Crown Life at the foreclosure sale. Aronson's request to file a counterclaim was denied in October 1993 due to its lateness. A judgment of $1,855,178.06 was entered against Aronson in November 1993, leading to his appeal.

Aronson contends that Tri-Centers forfeited the contract and is thus barred from claiming money damages under the doctrine of election of remedies. However, Judge Moran noted that the contract explicitly allows for cumulative remedies, stating that the election of one remedy does not preclude pursuing others. Tri-Centers is permitted to seek multiple remedies as the contract delineates distinct and cumulative rights. Aronson failed to present any case law supporting his argument against this provision in Illinois law.

Moreover, even if the election of remedies doctrine applied, Tri-Centers did not actually elect a remedy since no forfeiture occurred; they merely sought a declaration of forfeiture without accepting any benefits from that remedy. Aronson asserted that Tri-Centers elected forfeiture by surrendering keys to a receiver, but this argument was waived due to his failure to raise it earlier. He also did not provide legal support for his claim that relinquishing property to a receiver constituted an election of remedy.

Aronson further claimed he was not responsible for Tri-Centers' default to Crown Life, but evidence showed Tri-Centers relied on funds from Aronson to meet mortgage obligations. The district court’s finding that Aronson’s nonpayment contributed to Tri-Centers' default was not erroneous.

Lastly, Aronson attempted to file a four-count counterclaim against Tri-Centers after the deadline, which the district court rightly denied. Courts have discretion to reject late counterclaims, and compulsory counterclaims are waived if not filed with the initial answer. No justification was found for Aronson's delayed filing.

The Court reviewed Aronson's claims of error and found them to lack merit, affirming the final judgment awarding Tri-Centers $1,855,178.06. The Land Trust and Tri-Centers are considered interchangeable in this context. Aronson did not challenge the district court's damage calculation on appeal. He argued that, according to Bruno Benedetti, Sons, Inc. v. O'Malley, a cumulative remedies clause should not apply after a contract has been forfeited. However, the district court correctly noted that the Bruno Benedetti decision was based on a specific contract provision that rendered the agreement "null and void" upon forfeiture, which is not present in the current case. Thus, Bruno Benedetti does not establish a blanket prohibition against applying cumulative remedies after forfeiture.