Wiczer v. Wojciak
30 N.E.3d 670
Ill. App. Ct.2015Background
- Details, LLC (seller) owned a car wash and real estate; individual members (Kolber, Winokur, Opfer, Stuckmann, Pappas) advanced $400,000 in earnest money to attorney Elliot Wiczer (temporary escrow agent).
- An escrow agreement (prepared before the asset purchase agreement) was signed only by the individual members in their personal capacities; Details, LLC, Ticor (named escrowee), and buyer Wojciak (or the to-be-formed buyer LLC) did not sign.
- The later asset purchase agreement, signed by Details, LLC (seller) and Wojciak on behalf of an entity to be formed (buyer), incorporated an escrow agreement by reference and required the buyer to deposit $400,000 as earnest money and to attach the escrow agreement as an exhibit — but no escrow exhibit was attached.
- The escrow agreement’s written terms conflicted with the asset purchase agreement: the escrow agreement stated the seller would deposit the earnest money and that the earnest money would be returned to the buyer if the deal failed; the asset purchase agreement required the buyer to deposit and retain return rights.
- The buyer cancelled the transaction before closing; the trial court found there was no effective escrow agreement and ordered Wiczer to return the funds to the individual depositors. The appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the asset purchase agreement incorporated the escrow agreement and made it binding | Wojciak: the asset purchase agreement incorporated the escrow agreement by reference, so its terms govern | Details defendants: escrow never properly executed by the correct parties, so it is not binding | Incorporated by reference but incorporation alone did not create an effective escrow because the escrow was never properly executed/delivered as required |
| Whether signatures by individual members bound Details, LLC | Wojciak: members signed escrow; their signatures bind Details | Details defendants: signatures were in individual capacities and not on behalf of Details, LLC | Signatures in individual capacities do not bind the corporate seller; Details did not execute the escrow |
| Whether escrow terms were enforceable despite conflict with the asset purchase agreement | Wojciak: escrow document (signed by members) is the incorporated agreement and entitles him to the funds | Details defendants: escrow terms conflict with the asset purchase agreement (who deposits and who gets returned funds) — no meeting of the minds | The escrow’s terms conflicted with the asset purchase agreement; no meeting of minds on key points, so escrow was ineffective |
| Proper disposition of the earnest money after termination | Wojciak: he is entitled to keep the earnest money under escrow/contract terms | Details defendants: no effective escrow; funds should return to depositors | Because no effective escrow existed and conditions were not satisfied, escrowee must return funds to depositors; trial court order affirmed |
Key Cases Cited
- Albrecht v. Brais, 324 Ill. App. 3d 188 (explains nature of escrow instruments and that they operate to effect delivery upon conditions)
- Estate of Reinhold v. Mansfield, 90 Ill. App. 3d 224 (escrow instructions forming part of same transaction must be construed together)
- Hakala v. Illinois Dodge City Corp., 64 Ill. App. 3d 114 (escrow document is auxiliary to, not a substitute for, the primary contract)
- Air Safety, Inc. v. Teachers Realty Corp., 185 Ill. 2d 457 (if contract language is unambiguous, interpret as written; ambiguity permits parol evidence)
- Burns v. Ford Motor Co., 29 Ill. App. 3d 585 (a referenced but unattached document known to the parties may be incorporated by reference)
- Unifund CCR Partners v. Shah, 407 Ill. App. 3d 737 (incorporation by reference requires an intention to make the other document part of the contract)