Forman v. Benson

446 N.E.2d 535 (1983)

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Nature of the Case

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Facts

P executed an offer to purchase real estate owned by D. The offer was communicated the same day to D at a conference attended by D and three realtors. The offer proposed to purchase the property for $125,000, to be paid over a 10-year period. Payments were to be based upon a 30-year amortization rate at 9% interest. P was to take possession of the property on September 1, 1981. Before signing, D expressed concern over P's creditworthiness. The agent present suggested that the contract be made subject to a favorable credit report. The listing agent thereafter added the following handwritten statement to the offer: 'Subject to seller's approving buyer's credit report, oral on March 24, 1981, and written when ready.' D signed, and $ 1,000 was deposited by P as earnest money. The day after the offer and acceptance was executed an agent telephoned D and advised him that an excellent oral credit report had been received. She further told D that a written report would be ready in a few days. That agent received the report on March 27, 1981, as well as a personal financial statement prepared by P and a letter from Dixon National Bank stating it would lend $ 35,000 to P. When given the reports, D stated the report 'looks real good,' and that he would have his attorney review it and begin the title work on the property. Additional discussion occurred during which D talked about a higher price. On May 14, 1981, D rejected P's credit directing the realtor to refund the $1,000 deposit. P sued seeking specific performance of the agreement. D testified that he rejected the credit information because the plaintiff had liabilities of $80,000 and liquid assets of only $24,000. A corporate tax return showed a $2,000 loss for the tax year. D believed P was 'just breaking even.'

A loan officer with a local savings and loan association testified that P had an excellent credit rating and the savings and loan association would not have hesitated to extend credit to P. The trial court held D to a standard of reasonableness and found the rejection was unreasonable. It ordered specific performance and D appealed.