No. 3--04--0233

IN THE

APPELLATE COURT OF ILLINOIS

THIRD DISTRICT

A.D., 2005

JUSTICE HOLDRIDGE delivered the Opinion of the court:

The plaintiff, Andrew Chapman, filed a small claimscomplaint against the defendant, Anchor Lumber, seeking torecover real estate taxes paid on a parcel of real estate boughtby the plaintiff. The plaintiff alleged that the partiesmiscalculated the real estate tax amount due to a mutual mistakeof material fact. The circuit court entered judgment for theplaintiff. The defendant appealed, contending that (1) thecontract merged into the deed, making the calculation of the realestate taxes final and barring the plaintiff's cause of action;and (2) the parties intended the real estate tax proration at thetime of closing to be final, thereby barring the plaintiff fromseeking a reproration of the taxes one year after closing. Wevacate the circuit court's order and remand with directions toenter judgment for the defendant.

FACTS

On March 11, 2003, the plaintiff filed a small claimscomplaint against the defendant, alleging that a mutual mistakeoccurred in the calculation of taxes for a parcel of real estatepurchased by the plaintiff. The defendant purchased the propertyfrom an individual who constructed a house on the property. Theplaintiff signed the contract on December 9, 2001, and thedefendant signed on December 14, 2001. The parties closed onFebruary 1, 2002, and the parties prorated the 2001-02 realestate taxes to the closing date in the amount of $180.46.

The contract contained the following provision regarding theprorating of real estate taxes:

"PRORATIONS AND ADJUSTMENTS: The following items shall beprorated at closing as of the date of delivery ofpossession:

Prorations:

(a) Real estate taxes, based on the most recent taxinformation available, which, in the absence of fraud, shallbe final."

The plaintiff's attorney, the defendant's attorney, and the titlecompany's attorney all failed to call the assessor's office priorto the closing date to determine whether the $180.46 in realestate taxes was calculated according to the "most recent taxinformation available." The taxes were calculated according to a"new construction" assessment rate.

Trial testimony revealed that the property in fact was not a"new construction." On September 5, 2001, the property had beenreassessed from "new construction" to "substantially completed"as of April 1, 2001. This assessment became final onNovember 17, 2001, was entered into the assessor's officecomputer, and became a matter of public record. The newassessment was published in the local newspaper on February 8,2002, one week after the parties closed on the sale.

At trial, the plaintiff argued that the parties wereoperating under a mutual mistake of material fact. Accordingly,the defendant was indebted to the plaintiff for the amount ofreal estate taxes actually paid by the plaintiff, which totaled$4,168.58. The defendant argued that, by the terms of thecontract, the prorated tax amount was final as of the closingdate and any loss due to miscalculation fell upon the plaintiff.

The circuit court agreed with the plaintiff, finding thatthe parties intended the plaintiff would pay a proportionateburden of the taxes from the date he received title, with allother taxes to be borne by the defendant. Further, the courtfound that the parties were operating under a mutual mistake ofmaterial fact. Accordingly, the court ordered the parties torecalculate the taxes according to the new assessment. OnFebruary 6, 2004, the court entered judgment for the plaintiff inthe amount of $3,783.13, reflecting the recalculation minus aportion covered by the title guarantee company's policy. Thedefendant appealed.

ANALYSIS

The defendant argues that the contract merged into the deed,making the calculation of the real estate taxes final and barringthe plaintiff's cause of action. The plaintiff argues that thecontract does not merge into the deed because an exception to themerger doctrine applies when the parties were operating under amutual mistake at the deed's conveyance.

If the terms of a real estate contract are fulfilled by theconveyance of the deed, the two documents merge and the deedbecomes the only binding instrument. Daniels v. Anderson, 162Ill. 2d 47, 642 N.E.2d 128 (1994). However, an exception existswhen there are provisions within the contract that the conveyanceof the deed does not fulfill. Daniels, 162 Ill. 2d 47, 642N.E.2d 128. Such provisions are considered independentagreements that remain in effect until performed, thus preventinga merger of the contract and the deed. Daniels, 162 Ill. 2d 47,642 N.E.2d 128.

This court crafted another exception to the merger doctrinein cases in which misrepresentation or mutual mistake existedwith regard to acreage at the time of the deed's conveyance. Hagenbuch v. Chapin, 149 Ill. App. 3d 572, 500 N.E.2d 987 (1986). Hagenbuch is distinguishable, however, because the alleged mutualmistake in this case occurred in regard to the proration of realestate taxes, not in regard to acreage.

The second district expanded Hagenbuch to include all casesof mutual mistake: "[the merger doctrine does not] apply when theevidence clearly and convincingly proves that a misrepresentationor mutual mistake existed when the deed was delivered." Batler,Capitel & Schwartz v. Tapanes, 164 Ill. App. 3d 427, 429, 517N.E.2d 1216, 1218 (1987); see also Holec v. Heartland Builders,Inc., 234 Ill. App. 3d 253, 600 N.E.2d 489 (1992).

Our supreme court has never sanctioned the mutual mistakeexception to the merger doctrine in any form. The only exceptionthey have sanctioned is for independent contractual agreementsnot fulfilled by the deed's conveyance. See Daniels, 162 Ill. 2d47, 642 N.E.2d 128.

One district of the State appellate court is not bound tofollow the decision of another district absent a compellingreason and similar factual circumstances. In re Will CountyGrand Jury, 152 Ill. 2d 381, 604 N.E.2d 929 (1992). Because oursupreme court has not sanctioned a broad mutual mistake exceptionto the merger doctrine, we find no compelling reason to followthe second district's holdings in Batler and Holec. Accordingly,unless this case falls within the exception for independentcontractual agreements not fulfilled by the deed's conveyance,the contract merges into the deed and operates to preclude theplaintiff's cause of action.

In Batler, the second district analyzed its facts in accordwith the independent contractual agreements exception, holdingthat a proration of real estate taxes contract provision couldnot fit within the exception without proof of such from theplaintiff. Batler, 164 Ill. App. 3d 427, 517 N.E.2d 1216. Theplaintiff in this case has not proved that the proration of realestate taxes provision was intended to be an independentcontractual provision, nor do we find any evidence in the recordsuggesting that the parties intended the provision to constitutean agreement independent of the deed's conveyance. See Batler,164 Ill. App. 3d 427, 429, 517 N.E.2d 1216, 1218. Accordingly,the exception for independent contractual agreements notfulfilled by the deed's conveyance does not apply in this case. We therefore hold that the parties' contract merged into thedeed, thus precluding the plaintiff's cause of action.

We vacate the order of the circuit court of Rock IslandCounty and remand with directions to enter judgment for thedefendant.

Order vacated and remanded with directions.

SLATER, P. J., and MCDADE, J., concur.