author: JUSTICE LINN PRESIDING JUSTICE JIGANTI,

text:
    KEDZIE AND 103rd CURRENCY EXCHANGE, INC., Plaintiff-Appellant, v. BEULAH M. HODGE, Defendant-Appellee (Fred Fentress, Defendant).
    First District (4th Division)
    No. 1—91—0851
    Opinion filed May 14, 1992.

      JIGANTI, P.J., dissenting.
    Williams, Rutstein, Goldfarb, Sibrava & Midura, Ltd., of Chicago, and Gerald R. Slutsky, of Northbrook (Scott A. Slutsky and John C. Sibrava, of counsel), for appellant.
    Mayer, Brown & Platt, of Chicago (Franklin P. Auwarter and Kathleen H. Gorr, of counsel), for appellee.
   JUSTICE LINN

delivered the opinion of the court:

Plaintiff Kedzie & 103rd Street Currency Exchange, Inc., cashed a check for defendant Fred Fentress (who is not a party to this appeal). Defendant Beula M. Hodge, drawer of the check, notified her bank to stop payment on the check when Fentress, engaged to perform plumbing services, did not appear at her home to begin work. As a holder in due course, plaintiff sought damages from Hodge. The trial court, however, granted Hodge’s motion to dismiss, based on the defense of illegality, pursuant to section 2— 619 of the Illinois Code of Civil Procedure (Ill. Rev. Stat. 1989, ch. 110, par. 2—619) and section 3—305 of Illinois’ codification of the Uniform Commercial Code (Ill. Rev. Stat. 1989, ch. 26, par. 3—305).

Plaintiff states the issue as whether a holder in due course of a check takes the check free from the defense of illegality, where the drawer of the check issued it as a partial advance payment for plumbing services to be rendered, but the payee was not licensed as a plumber.

We affirm.

Background

Plaintiff, an Illinois corporation doing business as a currency exchange, filed suit after the $500 check it had cashed for Fentress was returned marked “payment stopped.” Hodge had made out the check to “Fred Fentress — A-OK Plumbing” as partial payment, in advance, for plumbing services at her residence. When he failed to appear on the date work was to begin, Hodge directed her bank to stop payment on the check. Fentress, in the meantime, cashed the check at plaintiff currency exchange, endorsing the back as “Fred Fentress A-OK Plumbing Sole Owner.” Plaintiff obtained a default judgment against Fentress.

Hodge filed a motion to dismiss the action as to her, asserting the defense of illegality. She had discovered that Fentress was not a licensed plumber listed with either the State or Chicago. Under “An Act in relation to the licensing and regulation of plumbers ***” (Plumbers Licensing Act or Act) (Ill. Rev. Stat. 1989, ch. 111, par. 1101 et seq.), plumbers must obtain a license before practicing their trade. A violation of the Act is a Class B misdemeanor for the first offense. (Ill. Rev. Stat. 1989, ch. 111, par. 1128.) According to Hodge, the plumbing contract was illegal and void; therefore, plaintiff took the check subject to the illegality defense. The trial court agreed and entered judgment in favor of Hodge.

Opinion

Under the Uniform Commercial Code (UCC), commercial instruments including checks are meant to be freely negotiable, and to that end, a holder in due course will take the instrument free from “all defenses of any party to the instrument with whom the holder has not dealt except *** [such] other incapacity, or duress, or illegality of the transaction, as renders the obligation of the party a nullity.” Ill. Rev. Stat. 1989, ch. 26, par. 3—305(2)(b).

Comment 6 to UCC section 3 — 305 explains that the question of illegality is a matter of State law, and if under the law governing the contract the effect of the illegality is to make the obligation entirely null and void, the defense is good. See Ill. Ann. Stat., ch. 26, par. 3—305, UCC Comment, at 184 (Smith-Hurd 1963).

The dispositive issue before us, therefore, is whether under Illinois law the contract between Hodge and the plumber was null and void. If so, the defense of illegality was properly asserted and applied in this case. If the underlying obligation was merely voidable, however, the defense fails.

In support of its position that the illegality defense is ineffective in this case, plaintiff relies on what it describes as two lines of cases. The first line, according to plaintiff, holds that the defense can only be asserted where an applicable statute makes the negotiable instrument itself void. The second line of cases holds that the defense can be asserted only where the applicable statute makes the underlying contract void. According to plaintiff’s rationale, therefore, the only way the illegality defense could prevail in the pending case would be if the plumbers’ licensing statute expressly declared that checks drafted as payment for unlicensed plumbing services were void or that contracts entered into in violation of the Act were null and void.

In support of its argument that a statute must declare the negotiable instrument void, plaintiff cites two pre-UCC Illinois cases, Town of Eagle v. Kohn (1876), 84 Ill. 292, and Pope v. Hanke (1894), 155 Ill. 617, 40 N.E. 839. In Eagle (84 Ill. at 296), the court stated that “unless it has been so expressly declared by the legislature, illegality of consideration will be no defense in an action at the suit of a bona fide holder, without notice of the illegality.” (Emphasis in original.) In Eagle, however, the commercial paper in issue was not a product of illegality, and the court’s actual ruling is of limited relevance to this case. The plaintiffs, purchasers of bonds issued to finance a railroad project, were attempting to collect upon the interest warrants of the bonds. The town as issuer and payor of the bonds interposed as a defense the fact that the conditions of the bonds had not been met by the railroad company. The conditions, incorporated as part of the legislation enabling the bonds to be issued, expressly stated that the bonds would be not valid or binding until such conditions were satisfied. The court noted that ordinarily, conditions of a bond would not be a. defense against a bona fide indorser without notice. The court also remarked that the transaction was not illegal, nor were the bonds declared void by the statute. Nevertheless, the court held that because of the peremptory language stating that the bonds would not be valid and binding obligations until the conditions were satisfied, they would be treated as invalid and unenforceable at the time they were presented because the conditions had not been met.

In Pope, the court held that a note given as part of a gambling transaction would be considered of no force or effect, even as against a holder who took the note in good faith without knowledge of its illegality, because the legislature had expressly declared such instruments null and void. This is still the law today, as the gambling legislation provides that all “promises, notes, bills *** made, given *** or executed *** in violation of *** this Article are null and void.” (Ill. Rev. Stat. 1989, ch. 38, par. 28—7(a).) The court in Pope expressed concern that free negotiability of instruments would be threatened if courts could hold instruments void for illegality without an express declaration from the legislature declaring them void.

Hodge maintains, and we agree, that Pope and Eagle do not defeat her ability to raise the illegality defense in the pending case because the Illinois legislature, by adopting section 3 — 305 of the UCC, has expressly declared that illegality is an available defense against a holder in due course, as long as the effect of the illegality is to render the obligation sued upon null and void. That requires consideration of all relevant authority, including case precedent. We cannot fairly assume an additional requirement that before the defense can be used against a holder in due course, there must be an express statutory provision that declares a particular category of contracts or negotiable instruments void. We do agree, however, that Illinois courts should not apply the illegality defense against holders in due course unless the illegal transaction is of the type that wholly nullifies the contract and thereby renders the instrument subject to the illegality defense.

In this State, the legislature has passed extensive legislation relating to the licensing of many trades and professions, recognizing that the regulation of these professions is essential to the public health, safety, and welfare. For example, the Plumbers Licensing Act, in its declaration of purpose and policy, states:

“§1. It has been established by scientific evidence that improper plumbing can adversely affect the health of the public. [Examples omitted]. Faulty plumbing is potentially lethal and can cause widespread disease and an epidemic of disastrous consequences.
To protect the health of the public it is essential that plumbing be installed by persons who have proven their knowledge of the sciences of pneumatics and hydraulics and their skill in installing plumbing.
*** [T]his Act is therefore declared to be essential to the public interest.” Ill. Rev. Stat. 1989, ch. 111, par. 1101.

In furtherance of the legislative goals of providing standards and protecting the public health, the Act provides that one who attempts to practice plumbing without a license may suffer substantial penalties, including criminal prosecution and fines. By judicial construction, the unlicensed plumber also forfeits his right to compensation for (illegal) services rendered. In Wright v. Baird (1928), 249 Ill. App. 90, the court held that an unlicensed plumber could not recover a fee for his fully performed services because the contract violated the Plumbers Licensing Act. In reaching this conclusion, the court rejected the argument that such a result could not occur unless the licensing statute expressly declared such contracts illegal. Cf. Pascal P. Paddock, Inc. v. Glennon (1964), 32 Ill. 2d 51, 203 N.E.2d 421 (Mechanic’s lien would be enforced against owners of swimming pool, even though there was a question whether the unlicensed status of plumber precluded enforcement, where the plumbing equalled only 5½% of the construction contract price; company’s supervising official, who was licensed, oversaw plumbing work; and owners failed to establish that workers on the job were not supervised apprentices).

In another licensing case, the court noted, “In Illinois, generally, a statute which declares an act illegal and which imposes a penalty for its violation renders a contract for the performance of such an act void and unenforceable.” (T.E.C. & Associates, Inc. v. Alberto-Culver Co. (1985), 131 Ill. App. 3d 1085, 1095, 476 N.E.2d 1212 (Nonlicensed employment agency could not recover payment for services where licensing statute made violation of statute a criminal offense).) The court in T.E.C., like that in Wright v. Baird, held that the licensing statute need not expressly declare a contract made in violation of its provisions to be illegal in order for the court to find it illegal. See also Keenan v. Tuma (1926), 240 Ill. App. 448, 456 (Employment contract for services of unlicensed architect provided for illegal consideration and was therefore a nullity); E & B Marketing Enterprises, Inc. v. Ryan (1991), 209 Ill. App. 3d 626, 629, 528 N.E.2d 339, 341-42 (“[Sjtatute need not expressly declare a particular contract void to render it illegal under the regulatory scheme of the statute”) (voiding a contract that provided for physician fee-splitting); Leoris v. Dicks (1986), 150 Ill. App. 3d 350, 353, 501 N.E.2d 901, appeal denied (1987), 115 Ill. 2d 542, 511 N.E.2d 429 (contract made in contravention of public policy against certain types of attorney fee-splitting would be deemed void and unenforceable); Tovar v. Paxton Community Memorial Hospital (1975), 29 Ill. App. 3d 218, 330 N.E.2d 247 (contract between unlicensed physician and hospital for performance of physician services held to be illegal and void); Nutri-Pro, Inc. v. Phelps (1988), 172 Ill. App. 3d 505, 526 N.E.2d 891 (Illinois law holds that contracts in direct contravention of statutory purpose are not enforceable even though the statute itself inflicts a penalty and does not expressly declare related contracts void); see also Federal Land Bank v. Walker (1991), 212 Ill. App. 3d 420, 571 N.E.2d 242, appeal denied (1991), 141 Ill. 2d 539, 580 N.E.2d 112.

The cited cases clearly defeat plaintiff’s argument that the contract in question is not void unless the Plumbers Licensing Act or other legislation expressly declares it to be. Courts can and do declare contracts void all the time. The more precise question, however, is whether a contract is truly “void” instead of merely “voidable,” the distinction being that a voidable contract can be ratified and enforced by the obligor, although not by the wrongdoer, while the void contract cannot be. (See Restatement of Contracts §475, Comment b (1932).) According to plaintiff, the rights of a holder in due course, as an innocent third party, cannot be defeated unless the obligation is truly void.

The primary case plaintiff relies on is Bankers Trust Co. v. Litton Systems, Inc. (2d Cir. 1979), 599 F.2d 488, 491, a case applying New York law to a contract allegedly induced by commercial bribery. The court held that the subject matter of the contract itself (equipment leasing) was not illegal; therefore, the illegality defense could not be asserted against the banks which held an assignment of equipment leases. As holders in due course, the banks’ rights to collect under the leases were not defeated by the fact that the leases had been obtained by commercial bribery.

We agree that it is critical to determine whether a particular transaction is void or voidable when the rights of holders in due course are involved. As the Bankers Trust court noted, the relevant New York cases on illegal contracts induced by commercial bribery did not involve holders in due course and therefore it could be assumed that the authors of the opinions were using the term “void” loosely in characterizing the contracts before them. We also acknowledge that in the Illinois cases cited above, the illegal nature of the contracts was discussed in the context of a party attempting to seek compensation for performing services in violation of licensing laws or in violation of public policy. Accordingly, the fact that the courts used the term “void” to describe the contracts may not be conclusive on the question whether the rights of a holder in due course are extinguished by that characterization. See concurring and dissenting opinions in Vedder v. Spellman (Wash. 1971), 78 Wash. 2d 834, 480 P.2d 207 (affirming judgment for defendant homeowner who stopped payment on check given to plaintiff home repairman; noting contract should not be viewed as void ab initio for all purposes).

Unlike the Bankers Trust court, however, we do not so readily assume that the authors of the Illinois licensing cases were imprecise in their use of the term “void.” If contracts made in violation of licensing laws are merely voidable by the obligor, presumably they can be enforced or ratified by the obligor. In the pending case, we do not believe a contract made in violation of the plumbing licensing statute could be specifically performed or ratified, by Hodge or anyone else. To permit ratification of a criminal act, one that violates a strongly expressed legislative policy, would further no legal or equitable goal. Consequently, the contract made in violation of the Act must be viewed as a legal nullity.

Not all acts that violate a statute form the basis of an illegality defense against a holder in due course, however, and it may be difficult at times to distinguish those that do from those that do not. (Compare Worthen Bank & Trust Co. v. United Underwriters Sales Corp. (1971), 251 Ark. 454, 474 S.W.2d 899 (contracts in violation of law governing the licensing of foreign corporations to do business in Arkansas are considered void ab initio), with Salitan v. Carter, Ealey & Dinwiddie (Mo. App. 1960), 332 S.W.2d 11 (under State statute, contracts of nonlicensed foreign corporations are not completely void but merely unenforceable until such time as the foreign corporation complies with Missouri law); see also Logen v. Panuska (Minn. 1980), 293 N.W.2d 359 (contract in violation of blue sky law does not defeat right of holder in due course to collect payment) (two judges dissenting); Middle Georgia Livestock Sales v. Commercial Bank & Trust Co. (1971), 123 Ga. App. 733, 182 S.E.2d 533 (holder in due course of checks for purchase of stolen cattle could not recover against maker of check who had no knowledge of theft; if the thing for which the note is given is outlawed, so is the note standing on such foundation outlawed).) At least one State takes the view that a contract which violates a business statute or regulation is not void unless made so by the express terms of the act and, if the statute provides a penalty for its violation, such penalty is the exclusive remedy and the courts will not imply an intent to void a negotiable instrument arising out of such violation. Stegall v. Kynaston (1980), 26 Wash. App. 731, 613 P.2d 1214.

We could find no Illinois case that has ruled upon the precise illegality defense before this court, in the context of the rights of a holder in due course. At least two other jurisdictions, however, have determined that contracts in violation of trade or professional licensing laws are null and void even when holders in due course are involved. Columbus CheckCashiers, Inc. v. Stiles (1990), 56 Ohio App. 3d 159, 565 N.E.2d 883 (Check-cashing firm could not recover against homeowner who issued check to unlicensed contractor; contract was held illegal and void based upon violation of Ohio licensing law); Wilson v. Steele (1989), 211 Cal. App. 3d 1053, 259 Cal. Rptr. 851 (Contractor’s unlicensed status is a defect which may be asserted against a holder in due course).

In Wilson v. Steele, the assignee of a note given in consideration for the services of an unlicensed home remodeling contractor attempted to enforce the note against its maker. Under California’s licensing statute, the unlicensed contractor could not bring an action to collect his fees without alleging and proving he was duly licensed. The court in Wilson found that the effect of this provision was to make the contract for unlicensed services illegal and void. The court went on to hold that the defense of illegality could be asserted, therefore, against the holder in due course.

Plaintiff attempts to distinguish Wilson on the ground that the California statute expressly provides that an unlicensed contractor may not bring or maintain any action for collection on a contract unless he is licensed. In its brief, plaintiff comments, “Such a provision is virtually identical to a provision that deems the contract void.” According to plaintiff, since the Illinois Act does not have a similar provision, a different result should obtain.

We disagree. In Wright v. Baird the court construed the licensing act’s prohibitions as meaning that an unlicensed plumber could not collect any compensation, even though the statute did not so state in those words. In Illinois, therefore, the law by judicial construction equates with the California statute’s express provision. Since plaintiff agrees that such provision is virtually identical to one deeming the contract void, we conclude that the illegality defense asserted here rendered the contract void, not voidable. Hence, under the UCC, the defense is good against a holder in due course.

As a matter of policy, plaintiff argues that it is unfair to expect a currency exchange to police the negotiable instruments it receives to ferret out possible illegalities in the underlying contracts. While the argument is reasonable enough, the same could be made for all of the defenses which defeat the rights of holders in due course. The currency exchange does not have a way to ascertain if a check has been drafted under duress, if it represents a gambling debt, or if it is the check of one without legal capacity to be bound. The so-called “real” defenses are nonetheless valid and cut off the rights of the innocent holder of the instrument to obtain recourse against makers or endorsers of the instrument in question. Currency exchanges are in the business of cashing checks and undertake the attendant risks.

We conclude that the illegality defense asserted in this case is of the type to render the obligation a nullity under section 3 — 305 of the Code. Therefore, we affirm the trial court’s dismissal of the action against Hodge, as maker of the check.

Affirmed.

JOHNSON, J., concurs.

PRESIDING JUSTICE JIGANTI,

dissenting:

This appeal brings into question the defense of illegality as asserted against the plaintiff, a holder in due course. The defendant was the drawer of a check. She issued the check as partial advance payment to a plumbing contractor. It is asserted on appeal that the plumbing contractor was unlicensed and the contract was therefore illegal and not merely voidable, but void. The majority holds that in fact it was void and not merely voidable. It reasons that the regulatory statute concerning plumbers enacts criminal sanctions for practicing plumbing without a license and that the contract therefore “violates a strongly expressed legislative policy, [and] would further no legal or equitable goal.” (234 Ill. App. 3d at 1024.) I suggest that a contrary result should prevail and respectfully dissent.

Even as between the original parties criminal sanctions do not necessarily mean that a contract is void or unenforceable. (Charter Finance Co. v. Henderson (1975), 60 Ill. 2d 323, 326 N.E.2d 372.) The majority’s mechanical approach to this issue seems to suggest that even if the plumbing contractor had completed the work, it not only would not be entitled to the contract price but could not even bring a restitutionary action for the reasonable value of its services. Cf. Restatement (Second) of Contracts §§197, 198, 199 (Restitution) (1981).

Whatever may be visited upon the original parties aside, this transaction involves a holder in due course. Bankers Trust Co. v. Litton Systems, Inc. (2d Cir. 1979), 599 F.2d 488, treats with the issue of the distinction between the original parties to the contract and holders in due course. In Bankers Trust, the court found that under New York law the alleged illegality in the situation before it, that is, a contract induced by bribery, rendered the contract between the parties void. However, as to a holder in due course it was merely voidable. The Bankers Trust court reasoned that the basic policy that would render a bribery induced contract void is discussed in section 598, Comment a, of the Restatement of Contracts, which states that courts deny relief because the plaintiff is a wrongdoer and not because they favor the defendant. Where an innocent third party, the holder in due course here, is suing on an illegal contract, the policy argument is inapplicable. Restatement of Contracts §598, Comment a (1932).

Illinois addressed this issue in the case of McGregor v. Lamont (1922), 225 Ill. App. 451. There the defendant asserted that he was induced to enter into a contract for the purchase of stock by false and fraudulent representations and asserted this as a defense against a holder in due course. The court held in favor of the holder in due course, adopting the position of what it stated was the weight of authority that while the instrument might be void as between the parties, it was not void against the holder in due course.

I believe that we should follow McGregor and Bankers Trust. The statement of the majority that to allow the holder in due course to recover “would further no legal or equitable goal” is not well taken. (234 Ill. App. 3d at 1024.) In my judgment, the holding unreasonably burdens commerce by inhibiting check cashers from freely accepting checks in an ostensible ordinary commercial transaction.


source: Caselaw Access Project

author: JUSTICE GORDON

license: Public Domain

text:
    JOHN BURNS CONSTRUCTION COMPANY, Plaintiff-Appellant, v. THE CITY OF CHICAGO, Defendant-Appellee.
    First District (5th Division)
    No. 1—89—1090
    Opinion filed September 11, 1992.

      Robert D. Boyle, Morgan E Murphy, and Morgan F. Murphy III, all of Murphy & Boyle, Chartered, of Chicago, for appellant.
    Kelly R. Welsh, Corporation Counsel, of Chicago (Ruth Moscovitch and Michelle Hutchinson, Assistant Corporation Counsel, of counsel), for appellee.
   JUSTICE GORDON

delivered the opinion of the court:

Plaintiff John Bums Construction Company appeals from a trial court order dismissing its complaint pursuant to section 2 — 615 of the Code of Civil Procedure (Ill. Rev. Stat. 1989, ch. 110, par. 2—615) for failure to state a cause of action against defendant the City of Chicago, in this suit where plaintiff seeks damages for delay in a construction project due to the city’s failure to timely acquire the necessary rights-of-way and easements. On appeal, plaintiff contends that the complaint states a cause of action for breach of contract, notwithstanding the contract’s “no damages for delay” clause.

Plaintiff filed its complaint on September 4, 1986. On April 9, 1987, the city filed a motion to strike and dismiss, based on the “no damages for delay” clause and on the procedural ground that the contract required that all disputes be presented to the purchasing agent.

On May 19, 1987, the trial court struck the complaint with leave to amend in order “to bring this cause within any exception to the rule that no damages for delay clauses are enforceable.”

On June 16, 1987, plaintiff filed a first amended complaint, adding allegations regarding the city’s “reckless indifference” to its obligations, and breach of an “affirmative obligation.”

On July 7, 1987, the city filed a motion to dismiss the first amended complaint. On October 9, 1987, the trial court struck the city’s motion to dismiss, with leave to amend, in an agreed order.

On November 30, 1987, plaintiffs filed a second amended complaint which was ultimately stricken with prejudice on motion of the city and which is the subject of this appeal.

The second amended complaint contains the following allegations. In August 1982, the city issued its requirements for bidding and specifications for a monolithic sewer construction project. Plaintiff, a general contractor, submitted a bid, and on February 3, 1983, the city awarded the contract to plaintiff. “The date for commencement of the project was established as February 14, 1983.”

Plaintiff subsequently “submitted a critical path schedule to the city, which the city approved prior to the commencement date of the project.” Plaintiff “believes the schedule shows that upon the commencement date, [plaintiff] would begin construction at the site of the Conrail property and that all of the sewer construction work was to be completed prior to December 1, 1983.” The city “promised to acquire the necessary easements so as to allow plaintiff *** complete access to the construction site upon the commencement date in order that [plaintiff] could proceed with its projected schedule of construction.”

The complaint alleges further that the city “failed to acquire the needed easement to the Conrail property *** until April 18, 1983, more than two months after the scheduled date of commencement.” On February 17, 1983, at a “pre-construction meeting” held three days after the scheduled commencement date, the city first informed plaintiff that the easements had not yet been acquired.

The complaint alleges that plaintiff successfully completed the project on time despite the city’s failure “to comply with the requirements of the contract.”

Count I of the complaint alleges that the acquisition of the easements was “essential for [plaintiff] to begin construction in the manner contemplated in their critical path schedule.” The city “had actual knowledge of [plaintiff’s] overwhelming need to have access to the Conrail property by the commencement date.” The complaint alleges further:

“19. That the city’s failure to acquire the easements, given its knowledge and obligation under the contract, betokens a wanton and reckless indifference to the legal obligation of the city pursuant to the written contract.
20. That the city’s wanton and reckless indifference toward its obligation to acquire the easements to the Conrail property is recognized as an exception to the enforceability of the exculpatory no-damage-for-delay clause contained in the contract.
21. That as a result of the city’s reckless indifference to timely acquire the easements *** [plaintiff] suffered damages including, but not limited to substantial increased material, leasing and labor costs, increased overhead and equipment costs, lost profits and other financial loss in the sum of Two Million Two Hundred Thousand Dollars.”

Count II of the complaint alleges that the city had a “fundamental, affirmative duty, pursuant to an express written contractual duty *** to acquire easements to the Conrail property, thereby allowing [plaintiff] to commence construction, at that site, immediately upon the commencement date of February 14, 1983,” and that the city failed in this “fundamental obligation.” The city’s “failure to disclose or warn” plaintiff prior to February 17, 1983, of its inability to acquire the easements “betokens a wanton and reckless indifference to their legal obligations.”

“28. That the city’s wanton and reckless indifference toward its implied duty to disclose or warn [plaintiff] of the city’s inability or potential inability to acquire the easements to the Conrail property is recognized as an exception to the enforceability of the exculpatory no-damage-for-delay clause contained in the contract.”

In the contract documents attached as an exhibit to the complaint, the “General Conditions” include a provision that “time is of the essence of contract.” In regard to damages for delay, the contract provides:

“16. PROVISION RELATIVE TO DELAY.
Should the Contractor be obstructed or delayed in the commencement, prosecution or completion of the work under this contract by any act or delay of the City or by order of the Commissioner, howsoever issued, then the time herein fixed for the completion of said work will be extended for a period equivalent to the time lost by reason of such acts or delays of the City or orders of the Commissioner.
* * *
It is further expressly understood and agreed that the Contractor shall not be entitled to any damages or compensation from the City, or be reimbursed for any loss or expense on account of any delay or delays resulting from any of the causes aforesaid.”

In March 1988, the city filed a motion to dismiss the second amended complaint. An agreed order entered by Judge Hoffman on September 14, 1988, provided that defendant would withdraw its motion to dismiss plaintiff’s second amended complaint. On September 26, 1988, the city filed a new motion to dismiss the second amended complaint, arguing only that the no damages for delay clause precluded recovery.

On January 23, 1989, the court entered an order striking the second amended complaint with prejudice and dismissing the cause. The court filed a memorandum opinion, stating that the “only delay caused to plaintiff was a 2 month pre-construction delay which is precisely the type of occurrence which Plaintiff agreed to exculpate the City from.” Moreover, the court found that the “Second Amended Complaint is devoid of any specific allegations supporting the conclusion that Defendant was grossly negligent or acted in bad faith in acquiring the easement.” The court held that plaintiff could not correct the deficiencies and had been afforded ample opportunity to do so.

On February 22, 1989, plaintiff filed an emergency motion for reconsideration, and a request for leave to amend the complaint. Plaintiff attached a third amended complaint which added count III, introducing “an additional recognized exception to the enforceability of the No-Damage-For-Delay clause,” based on the city’s alleged breach of a fundamental obligation under the contract to provide easements by the commencement date. On March 22, 1989, the court denied plaintiff’s motion for reconsideration.

At the hearing on the motion for reconsideration, plaintiff argued that no discovery had yet been conducted, and that it had been trying to contact individuals involved in the construction in 1983. “To date, John Bums still doesn’t know what happened.” It argued further that even if discovery had been allowed, under a section 2 — 615 motion, it could not have submitted any of the discovery. However, plaintiff argued that “with the aid of discovery,” it could “define information that will lead us to the city’s reckless indifference to our rights under this contract. And therefore, we have asked that the court’s order as to dismissing this case with prejudice be amended or be vacated in order to allow John Bums to conduct discovery to find out what actually happened in this matter.”

On April 21, 1989, plaintiff filed a notice of appeal from the January 23 and March 22,1989, orders.

Opinion

Plaintiff contends that its second amended complaint properly alleges a cause of action for breach of contract, and therefore the trial court erred in dismissing the complaint for failure to state a cause of action pursuant to section 2 — 615 of the Code of Civil Procedure. Ill. Rev. Stat. 1989, ch. 110, par. 2 — 615.

An action should not be dismissed with prejudice unless it clearly appears that no set of facts could be proved under the pleadings which would entitle plaintiff to recover. (Central States, Southeast & Southwest Areas Pension Fund v. Gaylur Products, Inc. (1978), 66 Ill. App. 3d 709, 713, 384 N.E.2d 123.) Where plaintiff has alleged the facts supporting his claim with as much precision as might reasonably be expected, facts rather than conclusions have been alleged. People ex rel. Scott v. College Hills Corp. (1982), 91 Ill. 2d 138, 435 N.E.2d 463.

In the present case, the complaint alleges that defendant delayed the date of commencement for two months. The city “had actual knowledge of [plaintiff’s] overwhelming need to have access to the Conrail property by the commencement date.” Plaintiff “believes the [critical path] schedule shows that upon the commencement date, [plaintiff] would begin construction at the site of the Conrail property.” The complaint alleges further that the city’s failure to acquire the easements “betokens a wanton and reckless indifference to” the contractual obligations, and that the city breached a “fundamental obligation” under the contract.

The city, however, points to the “no damages for delay” language in the contract.

Illinois courts have consistently recognized the validity of “no damages for delay” clauses. See, e.g., Bates & Rogers Construction Corp. v. Greeley & Hansen (1985), 109 Ill. 2d 225, 486 N.E.2d 902; Herlihy Mid-Continent Co. v. Sanitary District (1945), 390 Ill. 160, 60 N.E.2d 882; Ryan Co. v. Sanitary District (1945), 390 Ill. 173, 60 N.E.2d 889; Underground Construction Co. v. Sanitary District (1937), 367 Ill. 360, 11 N.E.2d 361; Gust K. Newberg, Inc. v. Illinois State Toll Highway Authority (1987), 153 Ill. App. 3d 918, 506 N.E.2d 658; M.A. Lombard & Son Co. v. Public Building Comm’n (1981), 101 Ill. App. 3d 514, 428 N.E.2d 889. See generally 13 Am. Jur. 2d Building & Construction Contracts §52 (1964).

Neither party, however, can hide behind a “no damages for delay” clause.

“Neither party can rely unreasonably on the no-damages clause. The contractor cannot sit idly, comforted by the thought that he will either get his rights-of-way on time and earn a profit on the contract or, if delayed, obtain damages merely on account of the delay. On the other hand, the public authority cannot allow its employees to remain idle on the comfortable assumption that the no-damages clause is to be taken literally.” Southern Gulf Utilities, Inc. v. Boca Ciega Sanitary District (Fla. App. 1970), 238 So. 2d 458, 459.

Illinois has recognized several exceptions which would, under the proper facts, prevent the bar of that clause. See Bates & Rogers Construction Corp. v. Greeley & Hansen, 109 Ill. 2d 225, 486 N.E.2d 902 (no damages for delay clause enforceable in the absence of an allegation of bad faith or gross negligence); L.K. Comstock & Co. v. Morse/ UBM Joint Venture (1987), 153 Ill. App. 3d 475, 505 N.E.2d 1253 (Illinois recognizes bad faith; unreasonable duration of delay; delay not within contemplation of parties; delay attributable to inexcusable ignorance or incompetence of engineer), citing Bates & Rogers Construction Corp. v. North Shore Sanitary District (1980), 92 Ill. App. 3d 90, 95, 414 N.E.2d 1274, affeal from remand (1984), 128 Ill. App. 3d 962, 471 N.E.2d 915, affd (1985), 109 Ill. 2d 225, 486 N.E.2d 902. See generally Annot., 74 A.L.R.3d 187 (1976) (including the L.K. Comstock & Co. exceptions as “widely recognized exceptions”).

In the trial court, plaintiff argued that it needed to conduct discovery in order to be more specific in its allegations relating to the relevant exceptions to the “no damages for delay” clause. Plaintiff argued that “with the aid of discovery,” it could “define information that will lead us to the city’s reckless indifference to our rights under this contract. And therefore, we have asked that the court’s order dismissing this case with prejudice be amended or be vacated in order to allow John Bums to conduct discovery to find out what actually happened in this matter.”

We agree that this case should not be decided on the basis of the single pleading before us at this time. The precise reasons for the two-month delay in commencement of work under this contract are not within plaintiff’s knowledge. Plaintiff is not required to allege facts with precision where the necessary information is within the defendant’s knowledge and plaintiff has not had the benefit of discovery. Plaintiff must be given the opportunity to have the benefit of discovery and further develop the facts in this case. (See Sherman v. Field Clinic (1979), 74 Ill. App. 3d 21, 25, 392 N.E.2d 154.)

“To require plaintiffs, without benefit of discovery, to include in their complaint sufficient factual detail to permit a determination of these questions from the face of the complaint is both unrealistic and unnecessary.” (Sherman v. Field Clinic, 74 Ill. App. 3d at 25.)

Similarly, in Central States, Southeast & Southwest Areas Pension Fund v. Gaylur Products (66 Ill. App. 3d at 715-16), the court stated:

“Defendant contends that the allegations of a unity of interest and ownership, that Weiner is the alter ego of the corporation and that his use of the corporate funds were fraudulent, are mere conclusions unsupported by facts. Evidence to support or overcome these allegations is principally within the defendant’s knowledge. It can be ascertained by discovery.
Further, as has been stated, ‘there is no clear distinction between statements of “evidentiary facts,” “ultimate facts” and “conclusions of law.” ’ (2 Nichols, Illinois Civil Practice §777 (1961).) The allegations here complained of would appear to be as factual as they could be made under the circumstances.”

See generally 3 R. Michael, Illinois Practice §23.4, at 310 (1989), stating:

“Many cases exemplify the principle that a plaintiff is not required to allege facts with precision where the necessary information to do so is within the knowledge and control of the defendant and is unknown to the plaintiff. As one court explained, this rule assists a plaintiff who may be unable to discover the information needed to draft a detailed complaint before filing and recognizes the reality that a defendant who has most of the pertinent information in his possession does not have to rely primarily on the facts in the complaint to formulate an answer and prepare for trial.”

Accord Holton v. Resurrection Hospital (1980), 88 Ill. App. 3d 655, 410 N.E.2d 969.

Consequently, with these principles in mind, the allegations in the second amended complaint are sufficient to state a claim that comes within the umbrella of the recognized exceptions to the “no damage for delay” provisions in the contract. The third amended complaint which plaintiff unsuccessfully sought to file even more sharply purports to fall within these exceptions. Plaintiff at this juncture should not be required to plead those factual underpinnings to support his cause of action which are largely subjective and wholly within the possession of the defendant, without first being permitted sufficient discovery to ascertain those facts.

Therefore, at this stage of the pleadings, we cannot say there is no set of facts which could be developed through discovery under the pleading at issue here which would permit plaintiff to recover under an exception to the “no damages for delay” clause. Therefore, dismissal of this cause on the basis of defendant’s section 2 — 615 motion (Ill. Rev. Stat. 1991, ch. 110, par. 2 — 615) is, at best, premature.

Moreover, it would seem that under the circumstances of this case, plaintiff’s right to maintain this action in the face of the “no damages for delay” provision should more appropriately be determined pursuant to section 2 — 619 or section 2 — 1005 (Ill. Rev. Stat. 1991, ch. 110, pars. 2—619, 2—1005), which permit the submission of extrinsic facts, rather than under section 2 — 615, which is limited to the pleadings. See Southern Gulf Utilities, Inc. v. Boca Ciega Sanitary District, 238 So. 2d at 459 (court reverses dismissal of complaint, finding complaint states a cause of action for damages caused by the knowing delay of the public authority “which transcends mere lethargy or bureaucratic bungling”; complaint alleged that owner “negligently, wilfully apd for a long time, after Plaintiff commenced work under [the] contract, did not take the reasonable and necessary steps” to acquire rights-of-way); Ace Stone, Inc. v. Township of Wayne (1966), 47 N.J. 431, 440, 438, 221 A.2d 515, 520 (summary judgment for defendant reversed and cause remanded “to enable the parties to introduce such oral and documentary evidence as may be available and relevant in aid of” determining “whether the [no damages for delay] language used in the contract ***, when considered in the full light of [the parties’] relations and objectives, and the attendant circumstances, contemplated” no damages; court found it unfortunate that there was no evidence in the record to shed light on whether “the parties actually contemplated, by the no-damage clause, the barring of claims not only for ordinary delays in the course of construetion, but also for delays resulting from the failure seasonably to provide rights of way”); Forward Industries, Inc. v. Rolm of New York Corp. (1986), 123 A.D.2d 374, 378, 506 N.Y.S.2d 453, 456 (court reversed trial court order denying defendant’s motion for summary judgment dismissing the complaint, because a question of fact existed as to whether the cause of the delay was due to the defendant’s negligence or breach of its affirmative duties under the contract, and thus “legal significance of the no-damage-for-delay clause will have to await a trial”); Hawley v. Orange County Flood Control District (1963), 211 Cal. App. 2d 708, 717, 27 Cal. Rptr. 478, 484 (judgment of nonsuit for defendant reversed where question of whether the construction contract’s no damages for delay clause was intended to prevent recovery by the plaintiff-contractor “under the peculiar circumstances here *** [involves] a factual question requiring the weighing of all the facts presented”). See generally Note, “No Damage” Clauses in Construction Contracts: A Critique, 3 Wash. Law Rev. 471, 485 (“periods of reasonable (or foreseeable) ‘delay’ may arise as an implied term of the contract, based on custom or general experience in the industry”). Cf. Johnson v. Gila County (Ariz. 1919), 185 R 929 (demurrer properly sustained where statute made it clear that defendant-county had right to build highway over railroad’s right-of-way but railroad — not county — was at fault in blocking plaintiff-contractor’s access (no exculpatory clause)).

Notwithstanding our holding here, we note that plaintiff faces difficult. obstacles in this case. If plaintiff agreed to the exculpatory clause and the price at which it bid may have reflected the possibility that delays could occur, the courts will be inclined to hold plaintiff to the plain words of the bargain it made. (See Bates & Rogers Construction Co. v. Greeley & Hansen, 109 Ill. 2d 225, 486 N.E.2d 902 (summary judgment for defendant upheld).) However the exculpatory clause will be construed strictly to prevent unconscionable results which may arise from its enforcement. (J.F. Edwards Construction Co. v. Illinois State Toll Highway Authority (1975), 34 Ill. App. 3d 929, 935, 340 N.E.2d 572; see generally 13 Am. Jur. 2d Building & Construction Contracts §52, at 55 n.8 (1964).) Plaintiff also has to confront the fact that it finished the work within the time specified by the contract. (See Loughman Cabinet Co. v. C. Iber & Sons, Inc. (1977), 46 Ill. App. 3d 873, 361 N.E.2d 379 (plaintiff not entitled to recover damages because delay was beyond defendant’s control, and plaintiff completed work within the extended time period provided in the contract); Peckham Road Co. v. New York (1969), 32 A.D.2d 139, 300 N.Y.S.2d 174, aff'd (1971), 28 N.Y.2d 734, 321 N.Y.S.2d 117, 269 N.E.2d 826.) Moreover, the court may also take into consideration whether the plaintiff knew at the time the contract was made that the easements had not yet been acquired (see Christhilf v. Mayor & City Council (1927), 152 Md. 204, 136 A. 527; Peckham Road Co. v. New York, 32 A.D.2d 139, 300 N.Y.S.2d 174), as well as the further fact that the three-day delay between the commencement date and the notice given at the preconstruction conference may have engendered minimal damages. (See W.C. James, Inc. v. Phillips Petroleum Co. (10th Cir. 1973), 485 F.2d 22, 24 (delays occasioned by failure to acquire rights-of-way and materials were minimal).) However, to dismiss plaintiff’s claim at this juncture without permitting further factual development through discovery was premature.

Finally, defendant argues that the suit is barred by plaintiff’s failure to submit the dispute to the purchasing agent for resolution. The general conditions state that “any dispute concerning a question of fact arising under this contract which is not disposed of shall be decided after hearing by the Purchasing Agent, who shall reduce his decision to writing ***. The decision of the Purchasing Agent shall be final and binding.”

Defendant raised this point before the trial court in its motion to strike and dismiss the original complaint, dated April 9, 1987. The city included the point in its subsequent motion to dismiss, dated July 7, 1987. The city also raised the point in its motion to strike and dismiss the second amended complaint. However, on September 14, 1988, the court gave the city “leave to withdraw, and [it] does withdraw, its section 2 — 615 motion to dismiss plaintiff’s second amended complaint” and to file a new motion to dismiss. On September 26, 1988, the city filed its new motion to dismiss the second amended complaint, which argued only that the “no damages for delay” clause precluded recovery. It would appear, therefore, that the city quite deliberately deleted its argument that plaintiff failed to exhaust its administrative remedies. Having abandoned the argument before the trial court, defendant has waived the argument for purposes of appeal. See Robins v. Lasky (1984), 123 Ill. App. 3d 194, 198, 462 N.E.2d 774.

For the foregoing reasons, the judgment of the circuit court of Cook County is reversed and the cause is remanded for further proceedings consistent with the holdings contained herein.

Reversed and remanded.

McNULTY, P.J., and LORENZ, J., concur.


author: JUSTICE GORMAN

text:
      In re MARRIAGE OF LUANNE SISUL, Petitioner-Appellant, and JAMES JEROME SISUL, Respondent-Appellee.
    Third District
    No. 3—91—0974
    Opinion filed September 15, 1992.
    Olivero & Olivero, of Peru (Lisa Olivero, of counsel), for appellant.
    Donald R. Rayfield, of Pierson, Maloney & Rayfield, of Princeton (Matthew A. Maloney, of counsel), for appellee.
   JUSTICE GORMAN

delivered the opinion of the court:

In this dissolution action, appellant was awarded rehabilitative maintenance for a period of one year. The maintenance would automatically terminate at that time unless she petitioned the court for an extension. On appeal, she argues that the award should not automatically terminate, but instead should be reviewed. We agree and reverse.

Luanne and Jerome Sisul were married in 1967. Jerome petitioned for dissolution in 1987. The couple had four children, two of whom are still minors. The only issue contested on appeal is maintenance.

The evidence shows that one month after the parties were marriéd, Luanne was seriously injured in an automobile accident. As a result, she sustained permanent injuries, including frequent headaches, vision problems, impaired memory, the need for greater than average sleep and partial paralysis of the left side of her body. Luanne does hold a degree in teaching but did not work during the marriage. She is not presently under a doctor’s care nor has she been for several years. Her physician has informed her that her condition is permanent and will not improve.

After the parties separated, Luanne did some substitute teaching and worked for a few weeks at a nursing home. At the time of the maintenance hearing, Luanne was employed as a telemarketer, soliciting magazine subscriptions over the phone. Jerome is an attorney with the Attorney General’s office in Chicago.

At the hearing, the trial court stated that Luanne should receive $500 per month as periodic, rehabilitative maintenance for one year. The judge stated that the award would be reviewed on June 24, 1992, which was one year after the hearing.

When the judgment for dissolution was drafted, it stated that maintenance would automatically terminate unless Luanne petitioned for extension before the end of the year. Luanne filed written objections to that provision as well as to certain others. The trial court granted some of Luanne’s objections by interlineation, but denied that objection.

Luanne appeals, claiming that the maintenance award should not automatically terminate, but instead should merely be reviewable.

Section 504(b) of the Illinois Marriage and Dissolution of Marriage Act (the Act) grants the circuit court the authority to make maintenance awards of limited duration. (Ill. Rev. Stat. 1991, ch. 40, par. 504(b).) The circuit court’s decision on the matter will not be overturned on appeal unless the court’s findings and conclusions were against the manifest weight of the evidence, thus showing an abuse of discretion. In re Marriage of Courtright (1989), 185 Ill. App. 3d 74, 540 N.E.2d 1027.

The Act delineates several factors that the court must consider when determining the amount and duration of maintenance awards. Among these are the time necessary to acquire sufficient education or training to enable the party seeking maintenance to find appropriate employment, and the age and physical and emotional condition of both parties. Ill. Rev. Stat. 1991, ch. 40, par. 504(b).

One objective of the Act is to encourage a formerly dependent spouse to become financially independent in the future, if possible. (In re Marriage of Wilder (1983), 122 Ill. App. 3d 338, 461 N.E.2d 447.) However, the trial court should bear in mind that financial independence does not mean the ability to merely meet one’s minimum requirements, but entails the ability to earn an income which will provide a standard of living similar to that enjoyed during the marriage. Courtright, 185 Ill. App. 3d at 77, 540 N.E.2d at 1029; In re Marriage of Ingrassia (1986), 140 Ill. App. 3d 826, 489 N.E.2d 386.

An award of maintenance must be made on the basis of the circumstances disclosed by the evidence at the time of the hearing. (In re Marriage of Hellwig (1981), 100 Ill. App. 3d 452, 426 N.E.2d 1087.) The trial court must not engage in speculation as to the future condition of the parties. In re Marriage of Hart (1989), 181 Ill. App. 3d 1066, 537 N.E.2d 829.

The evidence at the hearing revealed that Luanne suffers from severe, permanent injuries. Luanne does hold a valid teaching certificate. At the time of the hearing, she was 45 years old and had not worked outside the home since before their marriage in 1967. Luanne has not driven an automobile since her accident and is dependent on other people to provide her with transportation. Since the parties separated, Luanne has made some efforts to find employment, but by the time of the hearing had not obtained a job which would provide her with an income sufficient to provide a standard of living similar to that enjoyed in the marriage.

There is nothing in the record to support the assumption that she will be self-sufficient within one year after the dissolution. Under the circumstances, we find that the most appropriate solution is for the trial court to retain jurisdiction so that it can reevaluate the relevant circumstances of the parties and make such modifications in the award of maintenance as may be appropriate in the future. Time-limited maintenance which is reviewable at a certain date in the future has been widely accepted by Illinois courts as a logical, practical and fair way to handle maintenance awards. See, e.g., In re Marriage of Teauseau (1989), 185 Ill. App. 3d 22, 540 N.E.2d 820; Hart, 181 Ill. App. 3d at 1069, 537 N.E.2d at 831.

Accordingly, we reverse that part of the trial court’s judgment which provides that the maintenance shall automatically terminate in June 1992. We remand the cause for the limited purpose of allowing the trial court to review the maintenance award in light of our findings in this opinion. The remainder of the trial court’s judgment is affirmed.

Affirmed in part; reversed in part and remanded.

STOUDER and HAASE, JJ., concur.


author: JUSTICE DOYLE

text:
    DAVID TANNENBAUM, Plaintiff-Appellant, v. MARGARET A. FLEMING, Defendant-Appellee.
    Second District
    No. 2—91—1277
    Opinion filed September 16, 1992.
    David Tannenbaum, of Beach Park, appellant pro se.

    Myron J. Hall, of Myron J. Hall, Ltd., of Waukegan, for appellee.
   JUSTICE DOYLE

delivered the opinion of the court;

Plaintiff, David Tannenbaum, pro se, filed an amended small claims complaint in the circuit court of Lake' County alleging $1,203.44 in damages arising from an automobile accident with defendant, Margaret A. Fleming. The trial court granted defendant’s motion to dismiss and subsequently denied plaintiff’s motion to vacate the order of dismissal. Plaintiff then filed this timely appeal.

At the outset, we note that neither party has presented arguments within the context of the small claims rules (see 134 Ill. 2d Rules 281 through 289). Ordinarily a party’s failure to argue an issue might be considered waiver; however, this court may, in the exercise of its responsibility for a just result, disregard considerations of waiver and decide the issue on grounds not properly argued by the parties. (Hux v. Raben (1967), 38 Ill. 2d 223, 225; Midwest Bank & Trust Co. v. Village of Lakewood (1983), 113 Ill. App. 3d 962, 973.) We will consider, therefore, whether, in the context of the small claims rules, plaintiff’s complaint properly notified defendant of plaintiff’s alleged status as subrogee and, if so, whether his complaint stated a legally cognizable cause of action.

On July 8, 1991, plaintiff, pro se, filed a one-page small claims form complaint in the circuit court of Lake County alleging that defendant was indebted to him in the amount of $1,203.44 for damages, that plaintiff demanded payment and defendant refused to pay. The complaint further included the parties’ respective addresses and telephone numbers. After advising the court of an apparent difficulty with service of process, the trial court granted plaintiff leave to utilize a special process server and to file an amended complaint.

Plaintiff’s “first amended complaint” alleged that on July 3, 1990, plaintiff was driving a 1982 Ford LTD automobile that was owned by Rachel E. Foerster and that “defendant struck the vehicle.” The remaining allegations stated that, as a result of the accident, the Ford LTD’s market value was decreased by $1,100; that Foerster incurred out-of-pocket costs of $30 for towing and $73.44 as an insurance surcharge; and, as a result of these losses, plaintiff was indebted to Foerster in the amount of $1,203.44. Attached to the complaint as an exhibit was an unsworn letter from Foerster to plaintiff enumerating the above losses and demanding prompt payment thereof.

Defendant, apparently without leave of court (see 134 Ill. 2d R. 287), filed a motion to dismiss plaintiff’s complaint pursuant to section 2—615 of the Civil Practice Law (Ill. Rev. Stat. 1991, ch. 110, par. 2—615), alleging that plaintiff lacked standing to bring suit and that plaintiff failed to state a legally cognizable cause of action. In response to defendant’s motion, plaintiff filed his “Objections to Defendant’s Motion to Dismiss” wherein he stated that he was not the owner of the car, but that he borrowed it and “was held responsible for the damages caused by the defendant.” Attached to his objections was an affidavit by Rachel Foerster stating that plaintiff had paid her $1,203 for the damages arising out of plaintiff’s use of her automobile. The trial court granted defendant’s motion with prejudice as to plaintiff’s claim for damages to his own property and without prejudice as to any other claim. Although the record is unclear, it appears that the trial court’s order would have allowed plaintiff to amend his complaint to allege his standing as subrogee. Instead, plaintiff chose to stand on his amended complaint, and the trial court subsequently denied his motion to vacate the order granting dismissal. Plaintiff then appealed.

On appeal, plaintiff contends that the trial court’s order granting defendant’s motion to dismiss with prejudice demonstrated the court’s “prejudice and bias towards” him. After providing a string of quotes on the law of subrogation, plaintiff concludes, in light of the quoted law and the fact that he attached an affidavit of Rachel Foerster to his “Objections to Defendant’s Motion to Dismiss” and later attached, to his motion to vacate, an assignment of rights signed by Rachel Foerster, that he had standing to bring suit as a subrogee. Defendant responds that plaintiff’s complaint was properly dismissed because it failed to allege sufficient facts showing: (1) a legal duty or breach thereof; or (2) the existence of the right to subrogation. In support of his argument, defendant directs our attention to section 2 — 403 of the Civil Practice Law (Ill. Rev. Stat. 1991, ch. 110, par. 2—403), which outlines technical pleading requirements for subrogees, and case law that recites pleading requirements for a negligence claim. Initially, we note that none of the cases cited by defendant were decided in the context of the small claims rules, and, accordingly, we find them unpersuasive.

It is well established that fact pleading is required in Illinois (Adkins v. Sarah Bush Lincoln Health Center (1989), 129 Ill. 2d 497, 518) and that a complaint at law must allege sufficient facts to bring a plaintiff’s claim within the scope of a legally cognizable cause of action (Adkins, 129 Ill. 2d at 518; Teter v. Clemens (1986), 112 Ill. 2d 252, 256). Our supreme court, however, has established relaxed pleading requirements for small claims. (See, e.g., 134 Ill. 2d R. 282.) The basic principle underlying the small claims provisions is that litigants with a minimum of legal expertise should be allowed to present their grievances to the trial court (Megan v. L.B. Foster Co. (1971), 1 Ill. App. 3d 1036, 1040) and that they should be provided with an expeditious, simplified and inexpensive procedure for the resolution of disputes involving small amounts (Darwin Co. v. Sweeney (1982), 110 Ill. App. 3d 331, 334).

If a complaint in a small claims action clearly notifies the defendant of the plaintiff’s claim, it states a cause of action. (Miner v. Bray (1987), 160 Ill. App. 3d 241, 243.) For example, in Griffin v. Billberry (1971), 1 Ill. App. 3d 219, 221-22, the court held that a small claims complaint for negligence was not required to set forth facts which raise a duty, show a breach of that duty and resulting injury provided the complaint clearly notified defendant of the nature of plaintiff’s claim. See also Megan, 1 Ill. App. 3d at 1038-39.

In the present case, in light of the relaxed pleading requirements and the purpose underlying the small claims provisions, we conclude that plaintiff should be allowed to present his claim to the trial court. Although plaintiff’s complaint does not meet the statutory requirements of section 2 — 403 or the well-established rule of fact pleading, it is our opinion that requiring a pro se litigant in a small claims action to adhere strictly to technical rules of pleading runs counter to the spirit and intent of the small claims rules. After taking into consideration plaintiff’s original complaint, his first amended complaint and the affidavit of Rachel Foerster which was attached to plaintiff’s objections to defendant’s motion, we conclude that defendant was sufficiently notified of the nature of plaintiff’s claim. Although plaintiff’s amended complaint alleged only a conclusion that he was indebted to Foerster for damages arising from the auto accident and that the vehicle was owned by Foerster, when considered in conjunction with Foerster’s affidavit that plaintiff paid her and the fact that defendant raised the issue of plaintiff’s standing in her motion to dismiss, it is apparent that defendant was clearly notified that plaintiff was attempting to allege a right as subrogee to bring suit. We emphasize that we have determined only that plaintiff has properly notified defendant of his alleged status, and we make no determination as to whether plaintiff is a bona fide subrogee. Additionally, plaintiff’s allegations that he was involved in an automobile accident with defendant and that he incurred damages as a result are sufficient to state a cause of action for negligence in small claims. See Billberry, 1 Ill. App. 3d at 221-22.

As noted in a similar context: “the small claims rules *** were designed to allow pro se litigants to obtain resolution of disputes in a quick, simple, and informal manner, unbridled by the technicalities and legal niceties which normally obtain in court proceedings.” (Darwin, 110 Ill. App. 3d at 334.) Therefore, we hold that plaintiff should be entitled to have his claim alleging his status as subrogee heard before the trial court, and, accordingly, reverse that part of the order dismissing plaintiff’s claim without prejudice.

Although, in the conclusion section of his brief, plaintiff requests this court to reverse “the trial court’s dismissal with prejudice,” it is apparent from his brief that the focus of plaintiff’s appeal is on his status as subrogee. Therefore, it is unnecessary to consider whether the amended complaint set forth allegations sufficient to give plaintiff standing as an owner. However, it is evident from the allegations of plaintiff’s complaint and the Foerster affidavit that he was not the owner of the vehicle and thus lacks standing in that regard. Therefore, the trial court’s dismissal with prejudice of plaintiff’s claim for recovery as an owner of the vehicle was proper. We find no support in the record for plaintiff’s assertion that the trial court harbored “prejudice and bias” toward him.

For the foregoing reasons, we affirm that portion of the circuit court’s order granting defendant’s motion to dismiss with prejudice, and we reverse with respect to the remaining portion of the order, thus reinstating plaintiff’s complaint.

Affirmed in part; reversed in part.

BOWMAN and NICKELS, JJ., concur.


text:
    HARRY OLSEN et al., Plaintiffs-Appellants and Cross-Appellees, v. JAMES V. CELANO, JR., et al., Defendants-Appellees and Cross-Appellants (Thomas J. Pitts, Defendant).
    Second District
    No. 2—91—1087
    Opinion filed September 30, 1992.

      Cary S. Fleischer, of Chuhak, Tecson, Kienlen, Feinberg, Grasso & Josephson, of Chicago, for appellants.
    Howard C. Goode, of Northbrook, for appellees.
   JUSTICE DOYLE

delivered the opinion of the court:

Plaintiffs, Harry Olsen and Draper & Kramer, Inc., appeal from a judgment entered in favor of defendants, James V. Celano, Jr., Marina Enterprises and Prairie Cove Marina, at the close of plaintiffs’ case during a bench trial. Defendant, Thomas J. Pitts, was not served with summons, did not participate in the proceedings before the trial court, and is not a party to this appeal. The sole issue raised by plaintiffs on appeal is whether the trial court erred in granting defendants’ motion for a directed finding at the close of plaintiffs’ case based on its determination that plaintiffs were barred by Wisconsin law from recovering a commission for the sale of real estate located in Wisconsin. Defendants have cross-appealed from the trial court’s order denying their motion for sanctions against plaintiffs.

Plaintiffs filed an amended complaint seeking a commission from defendants for the sale of real estate. They alleged that Olsen was an agent of Draper & Kramer, Inc., an Illinois corporation authorized to transact business involving real estate leasing, management and sales. They further alleged that defendant Prairie Cove Marina was a limited partnership consisting of the remaining defendants and other limited partners. They alleged that the limited partnership was the owner of property located in Wisconsin. Plaintiffs alleged that they brought together Dennis Heck and U.S. Coastal Development Company, as prospective purchasers, and defendants, as prospective sellers of the property. Plaintiff Olsen and defendants entered into an agreement which provided that defendants would pay plaintiffs a commission equaling 6% of the purchase price of the property if a purchase agreement was entered into between U.S. Coastal Development Company and defendants.

Plaintiffs further alleged that a contract for the sale of the property was signed on November 14, 1989. A copy of the contract was attached to the amended complaint and stated that U.S. Coastal Development Company, a Michigan corporation, agreed to purchase the property located in Pleasant Prairie, Wisconsin, from Prairie Cove Partners Limited Partnership, an Illinois limited partnership, for the purchase price of $3,100,000. Plaintiffs alleged that the sale was closed in May 1990, but that, despite repeated demands, defendants refused to pay plaintiffs the commission due. Plaintiffs, therefore, sought judgment against defendants in the amount of $186,000.

Defendants filed an answer to the amended complaint. As a first affirmative defense, they alleged that plaintiffs were not the procuring cause of the transaction. As a second affirmative defense, they alleged that plaintiff Olsen was not licensed as a real estate broker in Wisconsin.

At trial, Olsen testified that he was a real estate broker and had been licensed in the State of Illinois since 1975. He was not licensed in Wisconsin. He was associated with Draper & Kramer from 1983 until January 1990. He testified that he met Dennis Heck, owner of U.S. Coastal Development Company, in Michigan in 1987 or 1988. Heck’s company was in the business of developing marinas. Heck asked Olsen to help him find marina opportunities near metropolitan Chicago.

Olsen testified that he contacted people and investigated many different areas in an attempt to locate potential properties for Heck. A tour was scheduled for January 12, 1989, to show Heck properties which he might be interested in purchasing. On that date, Olsen and Heck toured Prairie Cove Marina in Wisconsin. Thomas Pitts and his associate were present during the tour. This was the first time Heck had seen that property.

That afternoon, Pitts gave Olsen a business card which stated that Pitts and Celano were co-owners of the property. Olsen testified that he and Pitts spoke privately that day concerning a commission. Olsen subsequently had a number of telephone conversations with Pitts. Olsen identified two letters from Pitts addressed to him. A letter dated January 24, 1989, stated that Pitts “would entertain an offer at $1.5 million plus a full commission of 6% to you as a broker.” A letter dated February 23,1989, stated:

“As I indicated verbally already, I will agree to pay your firm a fee equal to six percent of the sale price for the Prairie Cove Marina in the event an offer is found acceptable, and a sale concludes with U.S. Intercoastal d/b/a Denny Heck.”

Olsen testified that the letters were faxed to him in Illinois. He also stated that the 6% figure was agreed upon on the telephone.

Olsen also identified a written offer, dated February 23, 1989, in which U.S. Coastal Development Company offered to purchase the property for $1,800,000. The offer stated that it would be the sellers’ responsibility to pay any commission due to Draper & Kramer. Olsen testified that a meeting was held concerning the offer on February 23, 1989, at the property in Wisconsin. At the meeting, Celano rejected the offer. Olsen had some contact with Pitts’ office in March regarding the possible sale of the property to Heck. After that, Olsen did not hear from Pitts. Olsen eventually spoke to Heck in the latter part of 1989 and became aware that the property was being sdld to Heck. Olsen was not involved in drafting the contract for the sale of the property to U.S. Coastal Development Company. Prior to the closing on the sale of the property, Olsen contacted Celano about his commission. The closing took place, but Olsen did not receive a commission.

During cross-examination, Olsen identified a written agreement for a 6% commission, dated February 23, 1989, which was signed by Pitts. Olsen testified that Pitts signed the agreement at the meeting in Wisconsin.

James Celano was called as an adverse witness by plaintiffs. He testified that he was an Illinois resident until June 1991 and that his place of business was in Illinois. He stated that he entered into an agreement to buy Pitts’ interest in the subject property on March 24, 1989. He then formed a limited partnership which owned the marina property. The sale to U.S. Coastal Development Company was closed on June 1,1990, at the marina in Wisconsin.

Following this testimony, defendants orally moved for a directed finding. The court stated:

“[I]t’s *** clear from the evidence that this is a Wisconsin transaction. Under all of the case law in so far as applicable law, the law to apply to this case is the law of the State of Wisconsin. Wisconsin has a clear and unequivocal public policy concerning recovery by brokers who are not licensed in the State of Wisconsin. *** Under the State of Wisconsin law, *** the plaintiff cannot recover either in quantum meruit or as a broker under any agreement. And to allow recovery under Wisconsin law in quantum meruit would defeat the public policy concerning brokers. And therefore, I find, at the close of the plaintiff’s case, I find in favor of the defendant and against the plaintiff.”

A written order granting judgment in favor of defendants was entered August 1, 1991.

On August 5, 1991, defendants filed a motion for sanctions. They alleged that plaintiffs’ amended complaint contained allegations which were untrue and unsupported by any evidence. They also alleged that plaintiffs and their attorneys should have known that they had no right to a real estate brokerage commission as Olsen was not licensed as a real estate broker or salesperson in Wisconsin. Defendants sought $9,322 in legal fees and costs. Following a hearing on August 26,1991, defendants’ motion was denied.

Plaintiffs subsequently filed a timely notice of appeal from the judgment for defendants, and defendants have cross-appealed seeking reversal of the order denying their motion for sanctions. Defendants have also filed a motion with this court seeking sanctions on appeal pursuant to Supreme Court Rule 375(b) (134 Ill. 2d R. 375(b)). We have ordered the motion taken with the case.

Plaintiffs argue on appeal that the trial court erred in entering judgment for defendants based upon Wisconsin law pertaining to real estate brokers. They first argue that the relevant Wisconsin statute applies only to actions brought in the State of Wisconsin. They also contend, in the alternative, that Wisconsin law should not apply to this situation.

We initially conclude that the Wisconsin statute pertaining to brokerage commissions does apply to plaintiffs’ cause of action to recover a real estate commission. In Frankel v. Allied Mills, Inc. (1938), 369 Ill. 578, 582, the supreme court held that the validity of a contract for a commission for the sale of real estate is determined by the law of the State where the contract is made or is to be performed. In that case, the real estate was located in Illinois, but the contract to pay a real estate commission to the Illinois broker was made in New York. The court concluded that New York law governing real estate brokerage contracts controlled. Frankel, 369 Ill. at 583-84.

Here, the trial court found that this was a Wisconsin contract. We conclude that this factual finding was not against the manifest weight of the evidence. Olsen testified that he discussed payment of a commission with Pitts in Wisconsin on January 12, 1989, when he brought Heck there to tour the property. An agreement to pay a 6% commission was subsequently signed by Pitts in Wisconsin on February 23, 1989. The sale of the property was closed in Wisconsin on June 1, 1990. Therefore, the trial court could reasonably determine, based upon the evidence, that the contract to pay a commission for the sale of real estate was made and was to be performed in Wisconsin. Based upon Frankel, we look to Wisconsin law to determine the validity of the contract.

In arguing that Illinois law should apply, plaintiffs rely on Scott/Hubbard Co. v. Sika Chemical Corp. (N.D. Ill. 1988), 694 F. Supp. 1311. Scott/Hubbard was a diversity action seeking recovery of a finder’s fee for the acquisition of a corporation. The Federal district court stated that Illinois law requires that a court apply the “most significant contacts” approach in all choice-of-law disputes involving contracts. (Scott/Hubbard, 694 F. Supp. at 1313.) We recognize that we recently noted that the most significant contacts rule applies in contract actions where the parties have neglected to make an effective choice of law. (Jakubik v. Jakubik (1991), 208 Ill. App. 3d 119, 123.) “Contacts to be evaluated in connection with applying this principle include the place of contracting, negotiation, performance, location of the subject matter of the contract, and the domicile, residence, place of incorporation and business of the parties.” Illinois Tool Works, Inc. v. Sierracin Corp. (1985), 134 Ill. App. 3d 63, 69; see also Scott/Hubbard, 694 F. Supp. at 1313-14.

Plaintiffs argue that, based upon this test, Illinois law should apply. They contend that Illinois is the place of contracting. They point out that a broker agreement was sent by Pitts to Olsen in Illinois and that the contract between the buyer and seller provided that it would be construed in accordance with Illinois law and that the obligations created were performable in Northbrook, Illinois. They also point out that the parties to the lawsuit are all Illinois residents, noting that Celano and the other partners in the limited partnership are all Illinois residents. They conclude that Illinois has the most significant relationship with the contract and the parties.

Having determined that the contract was made in Wisconsin, the issue of its enforceability may be resolved under the rule in Frankel without reference to the significant contacts test. As previously discussed, there is ample evidence to support the trial court’s apparent finding that the contract to pay a real estate commission was made in Wisconsin. The fact that Pitts faxed letters from Wisconsin to Illinois confirming this agreement does not transform a contract made in Wisconsin into an Illinois contract. Also, the fact that the contract between the buyer and seller stated that it was to be construed in accordance with Illinois law is immaterial as that is not the contract plaintiffs are seeking to enforce. They are seeking to enforce the contract to pay their commission which the trial court found was entered into in Wisconsin. The court in Scott/Hubbard specifically recognized that the two agreements must be reviewed separately and that the State chosen by the buyer and seller to govern the acquisition agreement does not determine which State’s law governs the contract between the real estate broker and the seller. Scott/Hubbard, 694 F. Supp. at 1314.

If a contract is void under the law of the State where it was made it will not be enforced in Illinois courts even though it would have been valid if made in Illinois. Frankel, 369 Ill. at 582.

Sections 452.03 and 452.20 of the Wisconsin Statutes, relating to real estate practice, provide:

“No person may engage in or follow the business or occupation of, or advertise or hold himself or herself out as, or act temporarily or otherwise as a broker or salesperson without a license.” (Wis. Stat. §452.03 (1989).)

And:

“No person engaged in the business or acting in the capacity of a broker, salesperson or time-share salesperson within this state may bring or maintain an action in the courts of this state for the collection of a commission or compensation for the performance of any act mentioned in this chapter without alleging and proving that he or she was a duly licensed broker, salesperson or registered time-share salesperson at the time the alleged cause of action arose.” Wis. Stat. §452.20 (1989).

Based upon the latter statute, Wisconsin courts have held that, where the broker acted as a broker in Wisconsin but was not licensed in Wisconsin, an agreement for the payment of a commission to the broker was invalid from its inception. (Chapman Co. v. Service Broadcasting Corp. (1971), 52 Wis. 2d 32, 38, 187 N.W.2d 794, 797; Kemmerer v. Roscher (1960), 9 Wis. 2d 60, 63, 100 N.W.2d 314, 317.) Federal courts, construing Wisconsin law, have determined that an Illinois broker, not licensed in Wisconsin, could not recover a commission for the sale of real estate located in Wisconsin. Reed v. Kelly (7th Cir. 1949), 177 F.2d 473, 475-76; George Nangen & Co. v. Kenosha Auto Transport Corp. (E.D. Wis. 1965), 238 F. Supp. 157, 159. But cf. Paulson v. Shapiro (7th Cir. 1973), 490 F.2d 1, 4 (Illinois broker could maintain action for commission for sale of property located in Wisconsin where he established by filing a sworn statement that all negotiations occurred in Illinois and Tennessee and that he had not acted in the capacity of a real estate broker within the State of Wisconsin).

In this cause, the facts support a conclusion that Olsen was acting as a “broker” in Wisconsin. He arranged to bring Heck to Wisconsin to tour the property to attempt to negotiate a sale of the property for a commission. (See Wis. Stat. §452.01(2)(a) (1989).) There is no dispute that Olsen had an Illinois broker’s license but did not have a Wisconsin broker’s license. Plaintiffs argue, however, that Wisconsin, in section 452.20, only precludes a broker unlicensed in Wisconsin from bringing an action for the collection of a commission “in the courts of this state.” (See Wis. Stat. §452.20 (Supp. 1991).) They contend that, while they could not maintain this action in Wisconsin, the statute does not bar such an action in the courts of Illinois. Again, we disagree with plaintiffs.

The supreme court in Frankel v. Allied Mills, Inc. (1938), 369 Ill. 578, denied a plaintiff recovery under similar circumstances. In Frankel, the contract for the commission was made in New York, where the Illinois broker was not licensed. New York, as Wisconsin has here, had a statute which forbade any person from acting, even temporarily, as a real estate broker without a license and forbade any unlicensed person from bringing an action “in any court in that State” to recover compensation for services rendered as a broker. (Frankel, 369 Ill. at 582.) The court held, as previously noted, that New York law applied to the transaction and then held that, as the brokerage contract was void and invalid in New York, it would not be enforced in Illinois. Frankel, 369 Ill. at 583-84.

We conclude that Frankel is on point and must be followed in this cause. As Olsen was not licensed in Wisconsin and the contract for a real estate commission was made in Wisconsin, it was invalid from its inception and could not be enforced in Illinois. We note that the holding of Frankel follows the general rule that a brokerage contract which is invalid as not in compliance with the law of the place of the contract is unenforceable everywhere. (See Gold v. Wolpert (7th Cir. 1989), 876 F.2d 1327.) As Frankel is controlling authority on this issue, plaintiffs’ reliance on a Wisconsin case involving a different, inapplicable statute, Schroeder v. Ajax Corp. (1976), 71 Wis. 2d 828, 239 N.W.2d 342, and a Washington case, In re Estate of Stoddard, (1962), 60 Wash. 2d 263, 373 P.2d 116, is misplaced. We additionally note that Stoddard is inapposite. The court in Stoddard held that Washington’s statute precluding recovery of a commission by a broker not licensed in Washington did not apply because the contract for a commission was executed in Oregon. (Stoddard, 60 Wash. 2d at 267, 373 P.2d at 119.) The facts of Stoddard, therefore, are not analogous to the facts here. We conclude that the trial court properly entered judgment in favor of defendants.

In their cross-appeal, defendants argue that the trial court erred in denying their motion for sanctions. They contend that plaintiffs’ cause of action was without merit because it was obvious and well known to plaintiffs and their attorney that the action could not be maintained because “all relevant events occurred in Wisconsin” and Olsen did not have a Wisconsin real estate broker’s license. Defendants also point out other problems they perceive with plaintiffs’ cause of action against them. Defendants additionally claim that plaintiffs’ amended complaint included allegations which were untrue and unsupported by any evidence introduced at trial.

The decision whether to award attorney fees and expenses as sanctions rests within the sound discretion of the trial court and will not be reversed on appeal absent a clear abuse of discretion. (Monahan v. Village of Hinsdale (1991), 210 Ill. App. 3d 985, 995.) The fact that the trial court found the facts to be ultimately adverse to the pleadings is not enough to warrant an award of attorney fees. Monahan, 210 Ill. App. 3d at 995.

In this cause, we conclude that the trial court did not abuse its discretion in denying defendants’ motion for sanctions. While plaintiffs’ amended complaint may have been inartfully drafted, we conclude, as we did in Monahan, that there is no evidence that plaintiffs’ pleadings contained intentionally false allegations. (See Monahan, 210 Ill. App. 3d at 996.) We note that one of the “untrue” allegations defendants have pointed out is plaintiffs’ allegation that the seller of the property, Prairie Cove, was an Illinois limited partnership. There certainly was a basis for this allegation as the contract for the sale of the property stated that the seller was an Illinois limited partnership. Defendants did not provide documentation that the limited partnership was, in fact, a Wisconsin limited partnership until they filed their motion for sanctions against plaintiffs.

We also conclude that plaintiffs did not file a frivolous lawsuit warranting sanctions. Testimony at trial and documentary evidence established that this transaction involved contacts with Illinois. Plaintiffs did have a basis for arguing that Illinois law applied. (See Coldwell Banker & Co. v. Karlock (7th Cir. 1982), 686 F.2d 596, 601-02.) As noted, the fact that the trial court found otherwise and determined that the Wisconsin statute controlled does not mean that sanctions are warranted. We also note that there was a factual basis for plaintiffs’ cause of action. It is undisputed that Olsen was the first to show the property to Heck, whose company ultimately purchased the property. It is also undisputed that there was a documented agreement between Pitts and Olsen for the payment of a 6% commission if Heck’s company, U.S. Coastal Development Company, purchased the property.

Defendants have also filed a motion with this court seeking sanctions on appeal pursuant to Supreme Court Rule 375(b) (134 Ill. 2d R. 375(b)). They essentially contend that sanctions are warranted on appeal based upon the same arguments they raised to assert that sanctions should have been imposed by the trial court. For the same reasons that we have already rejected those arguments, we decline to hold that this appeal is “not reasonably well grounded in fact and not warranted by existing law or a good-faith argument for the extension, modification, or reversal of existing law” and frivolous. 134 Ill. 2d R. 375(b); see Colvett v. L. Karp & Sons, Inc. (1991), 211 Ill. App. 3d 731, 734.

For the foregoing reasons, the judgment of the circuit court of Lake County is affirmed, and defendants’ motion for sanctions on appeal is denied.

Affirmed.

BOWMAN and NICKELS, JJ., concur.