2015 IL App (1st) 123753
No. 1-12-3753
THIRD DIVISION
March 31, 2015
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST JUDICIAL DISTRICT
______________________________________________________________________________
ELLIOT S. WICZER and WICZER AND )
ZELMAR, LLC, )
)
Plaintiffs, )
)
v. )
)
LARRY WOJCIAK, DETAILS, LLC, GEORGE ) Appeal from the Circuit Court
PAPPAS, STEVEN KOLBER, STEVEN ) of Cook County.
WINOKUR, TIMOTHY OPFER, JAMES )
STUCKMANN, and MICHAEL KRABBE, )
) No. 09 CH 41384
Defendants )
)
(Steven Kolber, Steven Winokur, Timothy Opfer, ) The Honorable
James Stuckmann, and Details, LLC, ) LeRoy K. Martin, Jr.,
) Judge Presiding.
Cross-Plaintiffs-Appellees; )
)
Larry Wojciak, )
)
Cross-Defendant-Appellant). )
______________________________________________________________________________
PRESIDING JUSTICE PUCINSKI delivered the judgment of the court, with opinion.
Justices Lavin and Hyman concurred in the judgment and opinion.
OPINION
¶1 At issue in this case is the disposition of earnest money held by plaintiff Elliot Wiczer
pursuant to the sale of assets and real estate by cross-plaintiff-appellee, Details, LLC (Details),
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which is an Illinois limited liability company. Details is a car wash business and also owns the
real estate at the site of the car wash. Plaintiff Elliot Wiczer was at all relevant times an attorney
licensed in Illinois and held the funds. Plaintiff Wiczer & Zelmar, LLC, is a law firm in which
Wiczer is a partner. Defendant and cross-defendant-appellant Larry Wojciak sought to purchase
Details. Plaintiff Wiczer was the attorney for Wojciak and "Details Acquisition, LLC," which
was an entity to be formed by Wojciak and listed as the purchaser. Attorney Bernard Wiczer was
also Wojciak's and Details Acquisition's attorney. Cross-plaintiff-appellees Steven Kolber,
Steven Winokur, Timothy Opfer, and James Stuckmann were all members of Details and
individual depositors of the funds held by Wiczer.
¶2 An escrow agreement was executed by the individual Details member defendants but not
by Details, LLC, and was not executed by Wojciak individually or on behalf of any entity owned
or managed by him. This escrow agreement provided that Details, LLC, would provide the
earnest money, even though it was the seller, because the business was in distress and owed more
money than Wojciak was willing to pay for the property and the business. The individual Details
member defendants deposited the earnest money with Wiczer as temporary escrow agent. The
asset purchase agreement for the real estate and car wash business was executed later and was
executed by Details, LLC, as seller, and by Wojciak on behalf of "Details Acquisition, LLC," an
entity not in existence at that time and later formed under another name, as the buyer. The asset
purchase agreement provided that the buyer would deposit all of the earnest money in
accordance with an escrow agreement to be attached to the contract, but no escrow agreement
was ever attached to the contract. Wojciak canceled the contract and the transaction never closed.
Wojciak did not deposit any of the earnest money held by Wiczer. The circuit court ordered that
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Wiczer return the earnest money to the individual Details defendants who had deposited the
earnest money. Wojciak claims entitlement to the funds under the escrow agreement.
¶3 We hold that the asset purchase agreement was properly executed by the buyer and seller
and it incorporated by reference an escrow agreement, but (1) the escrow agreement was never
fully executed by the correct parties to the transaction; (2) the terms of the escrow agreement
conflicted with the escrow provision in the asset purchase agreement; and (3) the conditions of
the escrow were never satisfied. Thus, there was no effective earnest money escrow agreement,
yet the individual Details member defendants deposited earnest money in escrow and there was
no breach of the sales contract, as the buyer decided to cancel the contract. Under these
circumstances, the correct result is that the escrow funds must be returned to the depositors as the
circuit court ordered.
¶4 BACKGROUND
¶5 In the spring of 2009, Wojciak learned of the Details car wash owners' intention to sell
the car wash business and the real estate on which the business operated. Wojciak contacted
Details' managing partner, Michael Krabbe, and met with Krabbe at the car wash and discussed
the status of the car wash and its multiple financial problems, the finances of the company and
the possibility of Wojciak purchasing the car wash. In late June or early July of 2009, Wojciak
met with Krabbe and the Details defendant members because of his knowledge of the car wash's
financial problems. According to Winokur's testimony, Details was about a month or two behind
on its debt financed through Barrington Bank and Trust. Details was indebted to Barrington
Bank And Trust for $2.15 million for financing the car wash. Wojciak and the Details defendants
agreed upon the purchase price of $2.15 million, which would cover the debt. Wojciak only
offered to pay $1,750,000, however, and so the Details defendants agreed to pay $400,000 in
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earnest money to cover the difference, to limit their exposure on the Barrington Bank And Trust
note. Although this circumstance was unusual in that the sellers, as opposed to the buyer, were
making an earnest money deposit, Wojciak wanted to ensure that the sale closed. On July 2,
2009, Wojciak and Details entered into a letter of intent contemplating the possibility that the
parties would enter into written agreements. The letter of intent also provided for an escrow
deposit and an escrow closing with Ticor Title Insurance Company.
¶6 The earnest money escrow agreement (escrow agreement) was prepared before the asset
purchase agreement. The escrow agreement is attached to and incorporated in the cross-plaintiff-
appellees' cross-complaint and in the Wojciak first amended counter-cross-complaint. The seller
in the escrow agreement was specified as "Details, LLC," and the buyer was specified as "Details
Acquisition, LLC," and Illinois limited liability company "in formation," to be formed by
Wojciak. The escrow holder was listed as Ticor Title Insurance Company. Other parties to the
escrow agreement were the parties' respective attorneys. Details Acquisition LLC was never
formed by Wojciak. The temporary escrow holder was Elliot Wiczer. Attorney Barry
Rosenbloom represented Details and its members Kolber, Winokur, Opfer, and Stuckmann, and
reviewed the escrow agreement, reviewed the escrow agreement with the Details member
defendants, and advised them to sign the escrow agreement.
¶7 Only the Details individual members Kolber, Winokur, Opfer, and Stuckmann signed the
escrow agreement, in their individual capacities. Details did not execute the escrow agreement.
No Details member signed on behalf of Details. Upon receipt of executed signature pages to the
escrow agreement, Rosenbloom forwarded them to Wiczer. Wojciak himself, however, did not
execute the escrow agreement. "Details Acquisition, LLC," also did not execute the escrow
agreement. Ticor Title Insurance Company did not execute the escrow agreement.
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¶8 The escrow agreement required deposit of earnest money in escrow by the seller and
return of the earnest money to the buyer, instead of the seller, if the transaction did not close.
Section III of the escrow agreement provided the following regarding earnest money:
"Seller deposits herewith as an initial Earnest Money deposit the sum of
$300,000.00 cash. Seller will deposit the additional sum of $100,000.00 as Earnest
Money hereunder. Purchaser will deposit the balance of the purchase price,
$1,750,000.00, plus or minus prorations from Purchaser's Credit Facility pursuant to
the terms hereof and the Agreement."
¶9 Section V(C) sets forth the following:
"C. Upon receipt of notice from Purchasers' Counsel that Purchaser has received
the Environmental Phase I Audit and such other documents as may be required by the
Agreement and is ready to close, Escrowee shall at once record the following
documents in the order as follows:
1. First record the Seller's Deed;
2. Second record the First Mortgage and such other of Purchaser's Credit
Facility Documents as require recording; and
3. Third record releases of existing indebtedness on Seller's assets being
sold." (Emphases added.)
¶ 10 Section V(H) of the escrow agreement provided the following:
"H. If Purchaser's counsel fails to give the notice required pursuant to Paragraph C
of this Section V by September 30, 2009, this Escrow shall terminate and the respective
recorded and unrecorded documents deposited shall be returned to the respective
depositor and Purchaser and Seller shall proceed in accordance with Paragraph XIV of
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the Agreement. The Earnest Money deposit less escrow fees charged shall be paid to
Purchaser." (Emphases added.)
¶ 11 According to plaintiff Wiczer, the reason for the provision that Wojciak would keep the
earnest money if the transaction did not close was because Wojciak indicated he was concerned
from the start that the car wash purchase was "problematic" and he wanted protection to at least
cover his expenses. Also according to Wiczer, Wojciak would not proceed to the asset purchase
agreement until the defendant Details members had signed the escrow agreement and Wiczer had
received the required deposits.
¶ 12 Rosenbloom, attorney for the member defendants, Kolber, Winokur, Opfer and
Stuckmann, indicated that the deal was structured in this manner, where the Details member
defendant sellers would pay $400,000 in earnest money, because they owed their bank $400,000
more than Wojciak was willing to pay for the business and they wanted to mitigate their losses
and sell the business and the real estate.
¶ 13 The Details defendants each paid a portion of the $400,000 based on their respective
ownership percentages. The parties indicate that the following was the breakdown of the
amounts initially paid for the earnest money: Kolber contributed $100,000; Winokur contributed
$100,000; Opfer contributed $62,500; Stuckmann contributed $62,500. According to the copy of
the escrow agreement executed by the Details defendants, George Pappas, another member of
Details, LLC, also contributed $75,000, as indicated on his signature page, thus totaling
$400,000.
¶ 14 The asset purchase agreement, on the other hand, required deposit of the earnest money
in escrow by the buyer and return to the buyer if the transaction did not close. On September 3,
2009, Details entered into the written asset purchase agreement. A copy of the asset purchase
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agreement is attached to and incorporated in both the cross-complaint for declaratory judgment
and the first amended counter-cross-complaint filed by Wojciak. The seller is specified as
Details, LLC, and the purchaser is specified as "Details Acquisition, LLC" an Illinois limited
liability company "to be formed."
¶ 15 Wojciak signed the asset purchase agreement on behalf of "Details Acquisition, LLC," as
its manager. Michael Krabbe signed the asset purchase agreement on behalf of Details, LLC, as
its manager. At this time, "Details Acquisition, LLC" had still not been formed. Wojciak
eventually formed an LLC by a different name.
¶ 16 The fourth paragraph in the recitals of the asset purchase agreement provided as follows:
"Buyer and Seller wish to enter into this Agreement to more fully provide for and
to consummate the transactions contemplated by the Letter of Intent, the terms and
conditions of which shall be replaced and superseded by the terms and conditions set
forth in this Agreement."
¶ 17 Section III of the asset purchase agreement provides that Wiczer would be the "temporary
escrow agent" and provides the following regarding the purchase price, the earnest money, and
the party who would be required to pay the earnest money:
"A. Purchase Price. The purchase price for the Purchased Assets shall be
$2,150,000.00 (Purchase Price). The Purchase Price shall be increased or dec[r]eased
by the proration of customary proratable items such as real estate taxes, insurance,
prepaid expenses and similar items as set forth in Article III.F.
B. Payments at the Closing. Buyer shall pay the preliminary Purchase Price at the
Closing as follows:
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1. The sum of $400,000 shall be paid to Elliot S. Wiczer (Temporary Escrow
Agent) and thereafter to Ticor Title Insurance Company (Escrow Agent), to be
held, administered, and disbursed in accordance with the terms of the escrow
agreement, in the form attached as Exhibit III.B. (Escrow Agreement), to be
executed and delivered by the parties simultaneous with the execution of this
Agreement.
2. The balance of the Purchase Price not held in Escrow shall be paid to or for
the benefit of Seller pursuant to Seller's Credit Facility and as directed by Seller."
¶ 18 Section IX(B)(2) of the asset purchase agreement regarding conditions precedent to the
buyer's obligation to close provides that "[e]ach document required to be delivered by Seller
must have been delivered, and each of the other covenants and obligations of Seller in this
Agreement must have been performed and complied with in all material respects."
¶ 19 Section X(B)(2) regarding conditions precedent to the seller's obligation to close
similarly provides that "[e]ach document required to be delivered and payment required to be
made by Buyer must have been delivered or made, and each of the other covenants and
obligations of Buyer in this Agreement must have been performed and complied with in all
material respects."
¶ 20 The asset purchase agreement also contained an integration clause in section XIV(I):
"I. Entire Agreement and Modification. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter and constitutes (along
with the documents referred to in this Agreement) a complete and exclusive statement of
the terms of the agreement between the parties with respect to its subject matter. This
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Agreement may not be amended except by a written agreement executed by the party to
be charged with the amendment."
¶ 21 The termination provision of the asset purchase agreement, section XII, provides as
follows:
"A. Termination Events. This Agreement may, by notice given prior to or at the
Closing, be terminated
(1) by either Buyer or Seller if a material Breach of any provision of this
Agreement has been committed by the other party and such Breach has not been
waived;
(2) by (a) Buyer if any of the conditions in Article IX have not been satisfied as of
the Closing Date or if satisfaction of such a condition is or becomes impossible (other
than through the failure of Buyer to comply with its obligations under this
Agreement) and Buyer has not waived such condition on or before the Closing Date;
or (b) Seller if any of the conditions in Article X have not been satisfied as of the
Closing Date or if satisfaction of such a condition is or becomes impossible (other
than through the failure of Seller to comply with its obligations under this
Agreement) and Seller has not waived such condition on or before the Closing Date;
(3) by Buyer if Buyer is not satisfied, in its sole discretion, with the results of its
due diligence investigation of Seller;
(4) by mutual Consent of Buyer and Seller; or
(5) by either Buyer or Seller if the Closing has not occurred (other than through
the failure of any party seeking to terminate this Agreement to comply fully with its
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obligations under this Agreement) on or before September 30,[] 2009, unless the
parties hereto expressly agree in writing to extend that date.
B. Effect of Termination. Each party's right of termination under Section XII.A.
is in addition to any other rights it may have under this Agreement or otherwise, and
the exercise of a right of termination will not be an election of remedies. If this
Agreement is terminated pursuant to Section XII.A., all further obligations of the
parties under this Agreement will terminate, except that the obligations in the Escrow
will survive; provided, however, that if this Agreement is terminated by a party
because of a Breach by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement are not satisfied as a result of the
other party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such termination
unimpaired."
¶ 22 The escrow agreement is not attached to the asset purchase agreement. There are no
exhibits attached to the asset purchase agreement.
¶ 23 Wiczer received the executed escrow agreement with the Details defendants' signatures,
along with some of their checks. Around the time the asset purchase agreement was executed,
Wiczer received the remaining earnest money deposit checks from the Details defendants
through Rosenbloom, totaling $400,000. Of this total, $325,000 was in Wiczer's Interest on
Lawyers Trust Account (IOLTA).
¶ 24 On October 9, 2009, Wiczer forwarded an email to Rosenbloom, attorney for Details and
the Details defendants, that Wojciak was providing notice of his intention to not consummate the
transaction. On October 15, 2009, an assistant to Bernard Wiczer forwarded to Rosenbloom an
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email, along with a draft of the escrow agreement, requesting that Rosenbloom sign and return
the draft so that Wiczer "can make the deposit at Ticor." On October 22, 2009, Rosenbloom
forwarded to Wiczer correspondence acknowledging termination of the transaction and
demanding return of the earnest money to him on behalf of his clients, Kolber, Winokur, Opfer,
and Stuckmann. Wojciak made a demand for return of the earnest money to him instead. Wiczer
also made a demand on behalf of Wojciak for reimbursement of costs and expenses in the
amount of $98,250.
¶ 25 On October 26, 2009, plaintiffs filed a complaint for interpleader, seeking guidance from
the circuit court regarding the proper disposition of the funds held by Wiczer. Plaintiffs Wiczer
and Wiczer & Zelmar, LLC, allege in their complaint that upon the termination of the transaction
a dispute arose between defendants Kolber, Winokur, Opfer, Stuckmann, Pappas, and Larry
Wojciak and plaintiffs regarding the disposition of those funds, each party claiming the right to
the entirety of the funds. Cross-plaintiffs and cross-defendant Wojciak filed cross-complaints
seeking a declaration that the funds were to be given to them, respectively.
¶ 26 Cross-plaintiffs and cross-defendant Wojciak filed motions for summary judgment. On
December 22, 2010, the circuit court entered an order which provided, in relevant part:
"1. Cross-Plaintiffs' Motion for Summary Judgment is granted in part in that the
Court has determined that based on the documents submitted, there is no genuine issue of
material fact as to the fact that the escrow agreement being signed by the members of
Seller does not constitute Seller's signature on said agreement.
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2. The remainder of Cross-Plaintiffs' summary judgment motion and Wojciak's
Cross-Motion are denied. The Court makes no finding as to Seller's performance (or lack
thereof) under the escrow agreement ***." 1
¶ 27 The parties did not appeal this order.
¶ 28 The matter was then reassigned to the Judge LeRoy K. Martin, Jr., who presided over the
trial of this matter. Trial took place on November 13, 2012, November 14, 2012, and November
15, 2012.
¶ 29 At trial, Barry Rosenbloom, attorney for the Details member defendants Winokur, Opfer,
Kolber, and Stuckmann, was asked whether the escrow agreement signed by the parties, Wojciak
Exhibit 3, was the escrow agreement referred to by the asset purchase agreement and he
responded, "Yes."
¶ 30 On November 28, 2012, the court rendered its decision in favor of cross-plaintiffs Kolber,
Winokur, Opfer and Stuckmann on counts I and II of their cross-complaint against Wojciak, but
granted judgment in Wojciak's favor on count III of the cross-complaint. The trial court ruled
that count IV of the cross-complaint was moot. The trial court found that Wiczer was acting as
the temporary escrow agent and would deliver the escrow money to Ticor but the escrow
agreement did not govern because it was "never carried out." According to the trial court, "the
failure to deliver the money to Ticor obviates us having any escrow agreement that Mr. Wojciak
could make a valid claim to the money under." The trial court further found that the signatures of
Kolber, Winokur, Opfer and Stuckmann on the escrow agreement did not constitute the signature
of Details. Pursuant to the trial court's order, Wiczer was ordered to deliver the remaining
$325,000 of the escrow funds in his IOLTA account to each of the cross-plaintiffs, in accordance
1
We note that a copy of this order is not in the record but a copy of the order was attached to
cross-plaintiffs-appellees' brief and is not disputed by plaintiffs in reply.
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with the respective amount of their deposits. On December 18, 2012, Wojciak timely filed a
notice of appeal.
¶ 31 ANALYSIS
¶ 32 Wojciak argues that the trial court erred as a matter of law in entering judgment in the
Details defendants' favor. Wojciak argues that he is entitled to keep the earnest money under the
asset purchase agreement and the escrow agreement the Details defendants signed because the
asset purchase agreement incorporated the escrow agreement by reference and Details executed
the escrow agreement. The Details defendants and cross-plaintiffs-appellees argue that though
the individual Details defendants signed the escrow agreement, the escrow agreement was not
executed by Details, LLC, which was the actual seller, Wojciak, or Ticor as the escrow holder,
and the conditions were not fulfilled; therefore, the escrow agreement is not binding and has no
effect, as if it never existed.
¶ 33 The standard of review of a judgment after a bench trial is whether the judgment is
against the manifest weight of the evidence. Chicago's Pizza, Inc. v. Chicago's Pizza Franchise
Ltd. USA, 384 Ill. App. 3d 849, 859 (2008). A judgment is against the manifest weight of the
evidence only if the opposite conclusion is apparent or when the trial court's findings appear to
be arbitrary, unreasonable, or not based on the evidence. Yellow Book Sales & Distribution Co. v.
Feldman, 2012 IL App (1st) 120069, ¶ 36. The interpretation of contracts generally is subject to
a de novo standard of review, but the factual findings that inform this interpretation are given
deference on review and are to be reversed only where they are against the manifest weight of
the evidence. Asset Recovery Contracting, LLC v. Walsh Construction Co. of Illinois, 2012 IL
App (1st) 101226, ¶ 74. Where the trial court has determined the construction of a contract as a
matter of law, this court's standard of review is de novo and we may interpret the contract
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independently of the trial court's judgment. Pennsylvania Life Insurance Co. v. Pavlick, 265 Ill.
App. 3d 526, 529 (1994). See also Village of Palatine v. Palatine Associates, LLC, 2012 IL App
(1st) 102707, ¶ 44 (same). The court here entered judgment based on its interpretation of the
contract. Thus, we review the court's judgment independently and de novo.
¶ 34 We begin at the outset by summarizing the nature of escrow agreements and clarifying
that they are not stand-alone contracts and must be read in conjunction with the underlying sales
contract. "An escrow is defined as a written instrument that, by its terms, imports a legal
obligation and that is deposited by the grantor with a third party to be kept until the performance
of a condition or happening of an event, at which time it is to be delivered to the grantee."
Albrecht v. Brais, 324 Ill. App. 3d 188, 191 (2001) (citing Merchants National Bank of Aurora v.
Frazier, 329 Ill. App. 191 (1946)). Escrow instructions constituting part of the same transaction
must be construed together, although executed separately. See Estate of Reinhold v. Mansfield,
90 Ill. App. 3d 224, 228 (1980). "The escrow agreement does not stand alone and must be read in
conjunction with the underlying contract to resolve disputes as to the proper operation of the
escrow." Estate of Reinhold, 90 Ill. App. 3d at 228 (citing West Lands Construction Co. v.
Calhan, 124 Ill. App. 2d 453 (1970)). "An escrow document is in no way a substitution for the
original contract but is merely an auxiliary instrument created to help implement or execute the
primary agreement." Hakala v. Illinois Dodge City Corp., 64 Ill. App. 3d 114, 121 (1978).
Questions involving the proper operation of escrow may be resolved by resort to consideration of
the escrow agreement in conjunction with the underlying contract. First National Bank of
Thomasboro v. Lachenmyer, 131 Ill. App. 3d 914, 917 (1985) (citing Estate of Reinhold, 90 Ill.
App. 3d 224). We thus look to the underlying sales contract in this case, the asset purchase
agreement.
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¶ 35 When construing a contract, the court's primary objective is to give effect to the intent of
the parties, as revealed by the language used in the agreement. Lease Management Equipment
Corp. v. DFO Partnership, 392 Ill. App. 3d 678, 685 (2009) (citing Gallagher v. Lenart, 226 Ill.
2d 208, 232-33 (2007)). If the language of an agreement is facially unambiguous, then courts
interpret the contract as a matter of law without the use of extrinsic evidence. Air Safety, Inc. v.
Teachers Realty Corp., 185 Ill. 2d 457, 462 (1999). However, if the language of the contract is
susceptible to more than one meaning, then an ambiguity is present, and parol evidence may be
admitted to aid the trier of fact in resolving the ambiguity. Air Safety, Inc., 185 Ill. 2d at 462-63.
In determining whether an ambiguity exists, the court applies the four corners rule and looks to
the language of the agreement alone. Air Safety, Inc., 185 Ill. 2d at 462. Whether an ambiguity is
present in a contract is a matter of law subject to de novo review. Gassner v. Raynor
Manufacturing Co., 409 Ill. App. 3d 995, 1006 (2011).
¶ 36 "It is a fundamental principle of contract law that 'an instrument may incorporate all or
part of another instrument by reference.' " Unifund CCR Partners v. Shah, 407 Ill. App. 3d 737,
743 (2011) (quoting Provident Federal Savings & Loan Ass'n v. Realty Centre, Ltd., 97 Ill. 2d
187, 192-93 (1983)). "However, the reference must demonstrate 'an intention to incorporate the
document and make it part of the contract.' " Shah, 407 Ill. App. 3d at 743 (quoting Arneson v.
Board of Trustees, 210 Ill. App. 3d 844, 849-50 (1991)). Contracts which specifically
incorporate other documents by reference are to be construed as a whole with those other
documents. Kirschenbaum v. Northwestern University, 312 Ill. App. 3d 1017, 1029 (2000).
¶ 37 On this point, we agree with Wojciak. The asset purchase agreement indeed incorporated
by reference an escrow agreement. The asset purchase contract also required as a condition
precedent that the escrow agreement be attached and delivered simultaneously with the asset
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purchase agreement, but no escrow agreement is attached. There is thus a facial ambiguity within
the four corners of the asset purchase agreement, and so we may consider parol evidence in
resolving this ambiguity. The asset purchase agreement does not specify a particular escrow
agreement by date, yet there is only one escrow document that was executed by any of the
relevant parties, and that is the escrow document executed by Kolber, Winokur, Opfer,
Stuckmann, and Pappas. For cross-plaintiffs Kolber, Winokur, Opfer, and Stuckmann to argue
that "[t]he Escrow Agreement never existed and cannot ever exist" is disingenuous, considering
that the asset purchase agreement specifically incorporates an escrow agreement by reference,
and cross-plaintiffs Kolber, Winokur, Opfer, and Stuckmann each signed an escrow document.
At trial, Details' attorney, Barry Rosenbloom, admitted that this escrow document was the same
escrow agreement referenced throughout the asset purchase agreement.
¶ 38 There is a lack of recent precedent on this particular factual scenario, where a contract
references another contract to be attached, but the contract referenced is not actually attached.
Long-standing precedent holds that "[w]here a party to a contract has actual knowledge of the
terms of a clause that is incorporated by reference as an attachment, but is not actually attached,
the clause must be considered to be a part of the contract so that the contract is given the effect
intended by the parties." Burns v. Ford Motor Co., 29 Ill. App. 3d 585, 591 (1974) (held same,
even where it was "not clear that the omission was accidental").
¶ 39 There are two problems with the escrow document in this case, however. First, Kolber,
Winokur, Opfer, and Stuckmann executed the escrow agreement in their individual capacities,
and not on behalf of Details, LLC, which was the actual seller under the asset purchase
agreement. Wojciak argues that "the Details Defendants agreed to a provision that, after the fact,
they decided they were no longer willing to comply with." The problem here is that the Details
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member defendants were not the sellers; Details, LLC was. The circuit court's order of December
22, 2010 granting in part cross-plaintiffs Kolber, Winokur, Opfer and Stuckmann's motion for
summary judgment ruled as a matter of law that the signatures by the individual Details member
defendants did not constitute the signature of Details, LLC. Wojciak did not appeal this order.
Even had Wojciak appealed, however, we would readily determine that the individual member
defendants' signatures in their individual capacities does not constitute the signature of the entity.
The asset purchase agreement required execution of the escrow agreement by the relevant
parties: "to be executed and delivered by the parties simultaneous with the execution of this
Agreement." Unless signed by the parties, the escrow does not supersede the original contract,
merge the original contract into it or otherwise affect the contract of the parties. Hakala v.
Illinois Dodge City Corp., 64 Ill. App. 3d 114, 121 (1978). The Details member defendants
signed the escrow agreement only in their individual capacities. No one signed the escrow
agreement on behalf of Details, LLC. Thus, the seller, Details, LLC, did not agree to the
provisions in the escrow agreement.
¶ 40 Second, the terms of the escrow agreement contradict the escrow provision in the asset
purchase agreement. The escrow agreement required deposit of earnest money in escrow by the
seller but return of the earnest money to the buyer, instead of the seller, if the transaction did not
close. The asset purchase agreement, on the other hand, required deposit of the earnest money in
escrow by the buyer and return to the buyer if the transaction did not close. "A valid escrow
agreement requires an agreement between a grantor and a grantee as to the conditions of deposit,
delivery of the deposited item to the escrowee, and communication of the agreed upon conditions
to the escrowee." Melrose Park National Bank v. Carr, 249 Ill. App. 3d 9, 14 (1993) (citing
Johansson v. United States, 336 F.2d 809 (5th Cir. 1964)). Here, even had the escrow agreement
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been executed by Details, LLC, its terms conflict with the escrow provision in the asset purchase
agreement. The escrow agreement provides that the seller would provide the earnest money,
while the asset purchase agreement provides that the buyer would provide the earnest money.
Wojciak and Details, LLC executed only the asset purchase agreement, which provided that the
earnest money would be paid by Wojciak (as a promoter on behalf of an entity to be formed).
There was no meeting of the minds regarding the earnest money to be deposited in escrow and
no agreement.
¶ 41 Further, the conditions of the escrow were not satisfied. The money was held by Wiczer
only as temporary escrowee and the escrow holder never executed the escrow document. Further,
Wojciak himself never executed the escrow document. The escrow document was not executed
and delivered simultaneously with the asset purchase agreement, which was a condition
precedent to the escrow agreement being effective as integrated into the asset purchase
agreement. Wojciak canceled the contract sales contract without any breach.
¶ 42 "Where the conditions of the escrow have been satisfied, the escrowee is under an
obligation to deliver the subject matter deposited with him to the grantee or obligee, whereas if
the conditions of the escrow are not met, the escrowee must return the subject matter to the
depositor." Columbia Homes, Inc. v. Sirois, 115 Ill. App. 3d 651, 653 (1983). Under the
circumstances in this case, the earnest money is rightfully returned to the depositors.
¶ 43 CONCLUSION
¶ 44 We hold that the asset purchase agreement incorporated by reference the escrow
agreement, but (1) the escrow agreement was never fully executed by the correct parties to the
transaction and (2) the terms of the escrow agreement conflicted with the escrow provision in the
underlying asset purchase agreement. There thus was no effective escrow agreement. Under
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1-12-3753
these circumstances, the only rightful result is that the escrow funds must be returned to the
depositors as the circuit court ordered.
¶ 45 Affirmed.
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