Morse v. Donati
136 N.E.3d 1043
Ill. App. Ct.2019Background
- Plaintiffs Hartwell and Deborah Morse contracted to sell their mortgaged Clarendon Hills home to defendants for $410,000 as a short sale contingent on lender approval; the lender (PNC) agreed to accept proceeds and forgive the sellers’ debt, with sellers to receive $0 at closing.
- Defendants refused to close on December 21, 2015; plaintiffs later sold to a different buyer for $375,000 (a $35,000 lower price) in another short sale approved on the same lender terms.
- Plaintiffs sued defendants for breach of contract, seeking damages equal to the $35,000 difference and later claimed other out-of-pocket expenses totaling about $48,882; at bench trial Hartwell (the seller and an attorney) was the sole witness.
- The trial court found breach but awarded only $3,608 (including $1,658.93 paid at closing) plus costs, concluding plaintiffs did not prove compensable out-of-pocket loss; the court declined to apply the collateral-source rule.
- Plaintiffs’ discovery-sanctions motions were effectively abandoned at summary-judgment hearing; plaintiffs also sought to bar defendants’ “short-sale defense,” which the trial court denied; the court awarded limited attorney fees to plaintiffs’ cocounsel and denied Hartwell’s large fee petition.
- Plaintiffs appealed the damages award and denial of Hartwell’s fee petition; the appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper measure of damages for breach where sale was a short sale | Plaintiffs: entitled to $35,000 difference between contract prices; collateral-source rule should allow recovery despite no out-of-pocket loss | Defendants: lender absorbed loss; sellers had no actual loss to recover | Court: Affirmed trial court; collateral-source rule inapplicable; plaintiffs must show actual out-of-pocket loss and did not |
| Applicability of the collateral-source rule to short-sale debt forgiveness | Plaintiffs: lender’s forgiveness is a collateral source that should not reduce damages to put sellers in same position as a non-short-sale seller | Defendants: lender’s forgiveness was not a collateral benefit to plaintiffs but a commercial arrangement and not collateral to the sales contract | Held: Collateral-source rule (a tort doctrine) does not apply; lender absorbed the loss and the short-sale agreement was integral to the transaction |
| Discovery sanctions / motion to bar defenses | Plaintiffs: defendants failed to disclose defenses; court should bar the short-sale/no-damages defense or sanction | Defendants: they denied damages in pleadings; plaintiffs abandoned earlier sanctions motions and had notice damages were disputed | Held: Plaintiffs abandoned earlier sanctions motions; denial of motion to bar was not an abuse of discretion because denial of damages was not an undisclosed affirmative defense |
| Attorney fees award to Hartwell | Hartwell: sought substantial fees; contends award should be vacated if damages are adjusted | Defendants: opposed large fee award | Held: Because plaintiffs are not entitled to additional damages, the denial of Hartwell’s fee petition is affirmed |
Key Cases Cited
- Arthur v. Catour, 216 Ill. 2d 72 (Ill. 2005) (explaining collateral-source rule and its usual tort context)
- Wills v. Foster, 229 Ill. 2d 393 (Ill. 2008) (discussing collateral source, liens, and subrogation concerns)
- Muranyi v. Turn Verein Frisch-Auf, 308 Ill. App. 3d 213 (Ill. App. Ct. 1999) (collateral-source rule prevents reduction of tort damages for independent benefits)
- Royal's Reconditioning Corp. v. Royal, 293 Ill. App. 3d 1019 (Ill. App. Ct. 1997) (bench-trial damages review: reversal only if against manifest weight of evidence)
- Wanderer v. Plainfield Carton Corp., 40 Ill. App. 3d 552 (Ill. App. Ct. 1976) (measure of contract damages: make plaintiff whole, not better off)