author: JUSTICE LINN

text:
    WILLIAM McMAHON, Plaintiff-Appellant, v. CHICAGO MERCANTILE EXCHANGE, Defendant-Appellee.
    First District (4th Division)
    No. 1 — 90—1542
    Opinion filed November 14, 1991.

      Tenenbaum & Senderowitz, of Chicago (Stephen J. Senderowitz and Ellen Barron Feldman, of counsel), for appellant.
    Freeman, Freeman & Salzman, P.C., of Chicago (Jerrold E. Salzman and Scott R. Williamson, of counsel), for appellee.
   JUSTICE LINN

delivered the opinion of the court:

Plaintiff, William McMahon, brought an action in the circuit court of Cook County against defendant, the Chicago Mercantile Exchange (Exchange). Plaintiff sought a declaration determining his rights under an Exchange membership program, and damages for tortious interference with business opportunity and breach of contract.

At the close of a bench trial, the court entered judgment for the Exchange. Plaintiff appeals, assigning error to the trial court’s findings and judgment.

We affirm the judgment of the trial court.

Background

I

The parties agree on most of the trial court’s findings of fact. To better understand plaintiff’s claims, those findings included a review of the Exchange and its rules, and of the Exchange’s membership rights program.

A

The Chicago Mercantile Exchange is regulated by the Commodity Futures Trading Commission (CFTC) pursuant to the Commodity Exchange Act. (See generally 7 U.S.C. §1 et seq. (1988).) The Exchange and its several divisions serve as an exchange for the trading of futures and options contracts.

The Exchange is governed by the Board of Governors (Board). The Board may adopt, alter, amend, or repeal Exchange rules, except where the rulemaking power is reserved to Exchange members via referendum. Exchange rules govern the number of Exchange members and the expansion of memberships; requirements for membership; conduct, fees, and dues of members; and the sale and transfer of memberships with their accompanying rights and interests.

Only Exchange members may trade on the Exchange floor. The extent of a person’s trading rights depends on the type of membership that the trader holds. To become an Exchange member, a person must acquire a membership, must be found qualified and eligible by the Exchange, and must be elected to membership by the Board of Governors.

B

A person may buy a membership pursuant to the requirements and procedures under Exchange Rules 103 through 110. During 1981 through 1985, a person could have acquired a membership also by participating in the Exchange’s membership rights program. The program was designed in part to expand Exchange membership by 25% during the four-year period. The program was approved by the Board of Governors and adopted by Exchange members on April 28, 1981. The program became effective when it was approved by the CFTC on July 27, 1981.

The program created dividends labelled “Membership Rights” (MRs). The MRs were issued to owners of Exchange memberships on a pro rata basis on the date of the program’s adoption, April 28, 1981. These MRs could then be sold or leased. Each MR entitled the holder to a prescribed amount or level of trading privileges. The holder of multiple MRs gained additional trading privileges. If a person accumulated four MRs in the same division of the Exchange, he would receive, upon application, a full Exchange membership.

For example, on April 28, 1981, the Exchange’s international monetary market division had 650 members. On that date, the Exchange issued one MR to each member and auctioned an additional two MRs in the division. As a result, the monetary market had a total of 652 MRs, which could ultimately be combined into 163 full memberships, i.e., an increase of 25%.

The Exchange created a “Membership Rights Committee” (MR Committee) to oversee the program. The committee could investigate matters, and advise and assist the Board, in connection with the program. However, neither the MR Committee nor the Exchange’s membership department could alter or amend the MR program’s rules. Such power, as was generally the case, was vested in the Board of Governors or reserved for Exchange members.

Exchange Rules 151 through 153 governed the requirements for MR applicants, transfers of MRs, and the ultimate conversion of MRs to full memberships. Rule 151 provided that an MR applicant had to meet the same requirements as an applicant for an Exchange full membership, and was subject to all applicable Exchange rules. Rule 152 provided that MRs could be sold or transferred privately among members, but only in accordance with Exchange rules for the sale or transfer of full memberships, specifically including the posting of the transaction and, in case of a sale, the deposit of the proceeds with the Exchange. Rule 153 provided that once four MRs were combined to create a full membership, the MRs were cancelled.

Under the Exchange’s bid and offer procedure, an MR holder who wished to sell an MR could submit a formal offer to the membership department. The offer stated the price at which he would sell. Conversely, a member who wished to buy an MR could submit a formal bid to the membership department. The bid stated the price at which he would buy. The bid must have been guaranteed by a clearing member of the Exchange, or a certified or cashier’s check must have been deposited with and made payable to the Exchange for the full purchase price.

The membership department posted on its office bulletin board the amount of the highest bid to buy, the amount of the lowest offer to sell, and the most recent price of an MR sold between members through the auction process. The membership department matched the bids and offers submitted. When an agreement or “match” occurred between a bid and an offer, the department would notify the buyer and the seller.

Within two business days of notification of a match, the buyer of an MR or full membership must deposit a transfer fee with the Exchange. The buyer must also deposit, if he did not do so earlier, the full purchase price. The buyer must then apply for membership. Until the application and payment requirements are met, the buyer cannot receive the privileges attached to the MR.

The MR program did not include a means to force or ensure the conversion of the final MRs at the program’s conclusion. An MR holder was on notice that his MR would expire worthless if not combined with three others by the close of the program.

As stated earlier, the Exchange adopted the MR program and issued MRs on April 28, 1981. In anticipation of approval by the CFTC, the Exchange distributed MRs to membership owners in May 1981. Beginning May 12, the Exchange allowed MRs to be bought or transferred and began the process of qualification for new memberships.

The CFTC approved the MR program on Thursday, July 23, 1981. The next day, the Exchange reported to its members that the program had received Commission approval, and that all qualified MR holders could begin trading on Monday, July 27. Exchange Rule 154 set the MR program term as follows: “MRs shall expire four years from the issuance date unless sooner converted into Exchange memberships.” The rule identified Monday, July 27, 1981, as the effective date of the program; the Exchange interpreted this date to be the “issuance date” for determining the program’s final day. The date that fell “four years from” Monday, July 27, 1981, was Saturday, July 27, 1985. The Exchange was not open for business on that day; nor was it open on any Saturday, Sunday, or holiday during the program’s term.

Prior to the expiration of the MR program, the MR committee notified all Exchange members and MR holders that the program would end on Friday, July 26, 1985, at the close of business at 5 p.m. The notice further stated that all MRs would expire worthless at that time, unless sooner converted into full memberships. Notice of the program’s termination date appeared in several sources: an Exchange publication since May 1, 1984; weekly membership postings since April 1, 1985; letters dated June 10, 1985, sent by registered mail to MR holders; and in special executive reports since June 21, 1985. It is undisputed that plaintiff received notice of the MR program’s termination date.

II

In the case at bar, plaintiff owns a full membership in the Exchange’s international monetary market division. Thus, on or about May 7, 1981, he received one MR. During this time of MR distribution, neither Brian Elliott nor Charles Howard owned a membership; thus, neither received an MR from the Exchange. During this time, Elliott leased a membership. In September 1981, Elliott bought a full membership in the monetary market. In November 1982, Charles Howard bought an MR for $53,000 and, in January 1983, was elected to membership, entitling him to trade.

Approximately four years elapsed from plaintiff’s receipt of his first MR. On July 14, 1985, twelve days prior to the expiration of the MR program, plaintiff bought a second MR for $37,000. On July 18, plaintiff submitted to the Exchange two formal bids to buy two MRs for $36,000 apiece. On Wednesday, July 24, one of these bids matched.

As a result of these transactions, on Thursday, July 25, 1985, the day before the last day of the MR program, only four monetary market MRs remained that had not been converted into a full membership. Plaintiff held three MRs and had extended a formal bid to buy a fourth for $36,000. Charles Howard held the remaining MR. For several months, he had extended a formal offer to sell his MR for $40,000.

On Thursday morning, July 25, Susan Bergquist of the Exchange staff telephoned plaintiff at his home and suggested that he negotiate with another MR holder to acquire a fourth MR. She did not reveal Howard’s identity to plaintiff. Bergquist telephoned Howard on another line, and relayed the bids and offers between plaintiff and Howard. The negotiation proceeded until Howard offered to sell at $37,000 and plaintiff bid to buy at $36,000. At that time, plaintiff stopped the telephone negotiation so that he could travel to the Exchange’s office.

On Thursday afternoon, plaintiff arrived at the membership department’s office. Department staff gave to plaintiff Howard’s name and telephone number, and informed plaintiff that he and Howard were the sole remaining MR holders. Likewise, Exchange personnel gave to Howard plaintiff’s name and telephone number, and informed Howard that plaintiff had three MRs. The membership department told plaintiff to negotiate directly with Howard.

On Thursday afternoon, plaintiff and Howard negotiated directly via telephone. They disagree on what transpired. Plaintiff testified that he and Howard eventually agreed on a purchase price of $37,000, but that Howard had “deferred final negotiation” until the following day. Howard, however, testified that they did not agree on a purchase price; Howard offered to sell at $37,000, but plaintiff bid only $35,000. Howard then bid $35,000 for each of plaintiff’s three MRs. Plaintiff refused and repeated his bid of $35,000 for Howard’s MR. Howard refused; plaintiff hung up.

On Friday, July 26, 1985, the last day of the MR program, Howard privately sold his MR to Brian Elliott for $40,000. The sale was documented; Elliott applied for a membership and had the sale guaranteed as Exchange rules required. Howard was paid pursuant to the contract.

Elliott submitted to the membership department a formal offer to sell his MR for $60,000. The department contacted plaintiff and informed him of Elliott’s offer to sell; plaintiff rejected the offer. The positions of plaintiff and Elliott were reflected by the membership department’s formal postings on Friday, July 26, 1985: Elliott’s offer to sell his MR for $60,000; plaintiff’s bid to buy an MR, raised from $35,000 on Thursday to $37,000 on Friday morning, and lowered to $36,500 by Friday afternoon; plaintiff’s offer to sell each of his MRs for $38,000; and Elliott’s bid to buy three MRs for $25,000 apiece.

The membership department arranged a meeting between plaintiff and Elliott at its offices prior to 5 p.m. Present at the meeting were MR committee chairperson Michael Savoca, and committee staff members Susan Bergquist and Paula Voigt. Elliott arrived at the meeting at approximately 4:30 p.m.; plaintiff arrived at approximately 4:50 p.m. Savoca advised plaintiff and Elliott that the Exchange’s official clock would determine when 5 p.m. arrived. It is undisputed that everyone in the room acted with the knowledge that the MR program would end at 5 p.m. After some negotiation, plaintiff bid $38,000 for Elliott’s MR, or, alternatively, offered to sell his three MRs to Elliott for the same price. Elliott rejected plaintiff’s bid and offer. Plaintiff and Elliott did not reach an agreement by 5 p.m. Consequently, the four MRs, not being combined, expired worthless.

On Monday, July 29, 1985, Elliott went to the membership department’s office and stated that he would buy plaintiff’s three MRs for $38,000 apiece. Plaintiff agreed to sell at this price. The department prepared the paperwork, which included a request to the Exchange’s Board of Governors to waive the termination provisions of the MR program. It was necessary to obtain the Board’s waiver before plaintiff and Elliott could make the sale. The evidence is controverted regarding whether plaintiff returned his completed forms to the membership department on that Monday, or the next day, Tuesday, July 30. However, it is undisputed that Elliott did not obtain a guarantor’s signature until Tuesday, July 30.

On August 7, 1985, the Exchange’s Board of Governors denied the request of plaintiff and Elliott to waive the MR program's termination date. The Board subsequently denied their request for reconsideration.

On May 15, 1987, plaintiff filed in the trial court a complaint against the Exchange; on February 28, 1989, he filed a three-count amended complaint. In count I, plaintiff sought a declaration determining his rights under the MR program.

In count II, plaintiff sought damages for tortious interference with prospective business opportunity. He alleged that the Exchange interfered with his “opportunity to purchase Charles Howard’s MR at $37,000 and thereafter prevented that purchase from being consummated by acquiescing in and permitting Brian Elliott to demand $60,000 for the last MR of Charles Howard on the last day of the MR program as declared by the [Exchange].”

In count III, plaintiff sought damages for breach of contract. Plaintiff claimed that the Exchange’s rules constituted a contract between him and the Exchange. He alleged several instances where the Exchange breached the contract.

The trial court denied cross-motions for summary judgment and held a bench trial. On April 27, 1990, the trial court entered judgment for the Exchange. The court found, inter alia, that the Exchange properly terminated the MR program on Friday, July 26, 1985; that plaintiff and Howard never matched at $37,000; and that even if the program should have concluded on Monday, July 29, plaintiff and Elliott did not complete a sale because Elliott’s forms were not completed in accordance with Exchange rules. The trial court also found that plaintiff failed to prove that the Exchange tortiously interfered with his prospective business opportunity. Plaintiff appeals.

Opinion

I

Plaintiff assigns error to the trial court’s conclusion that the Exchange properly terminated the MR program on Friday, July 26, 1985. We state at the outset the underlying legal principles. It is quite settled that a stock or commodity exchange has the power to adopt and enforce reasonable rules to govern its members, including the admission of members and the control of business transactions between members. The constitution and rules of an exchange constitute a contract between all members of the exchange with each other and with the exchange itself. Even in the absence of an express, written consent to be bound by an exchange’s rules, every exchange member impliedly consents to be so governed by virtue of his admission and by his acceptance of the benefits of membership. Consequently, an exchange’s constitution and rules are binding on members and in their dealings with each other. (Brown v. Gilligan, Will & Co. (S.D.N.Y. 1968), 287 F. Supp. 766, 769 (and authorities cited therein); Fayette Tobacco Warehouse Co. v. Lexington Tobacco Board of Trade (Ky. App. 1957), 299 S.W.2d 640, 642-43; 73 Am. Jur. 2d Stock & Commodity Exchanges §7 (1974); 33 C.J.S. Exchanges §§3, 10(b) (1942); C. Meyer, The Law of Stockbrokers & Stock Exchanges §7 (1931).) Illinois courts have long recognized these principles. Board of Trade v. Nelson (1896), 162 Ill. 431, 438-39, 44 N.E. 743, 745; Geldermann, Inc. v. Stathis (1988), 177 Ill. App. 3d 414, 418-19, 532 N.E.2d 366, 368.

A

Plaintiff initially contends that, as a matter of law, the MR program did not terminate until Monday, July 29, 1985. He points to section 1.11 of “An Act to revise the law in relation to the construction of the statutes,” which states as follows:

“§1.11. The time within which any act provided by law is to be done shall be computed by excluding the first day and including the last, unless the last day is Saturday or Sunday or is a holiday ***, and then it shall also be excluded. If the day succeeding such Saturday, Sunday or holiday is also a holiday or a Saturday or Sunday then such succeeding day shall also be excluded.” (Ill. Rev. Stat. 1985, ch. 1, par. 1012.)

Plaintiff argues that since the MR program’s termination date fell on Saturday, July 27, 1985, the statute shifted the termination date to Monday, July 29.

We cannot accept plaintiff’s argument. Although the statute provides a general rule to compute time, it does not apply to all situations. The parties to a contract are free to include any terms they choose, as long as those terms are not against public policy or do not contravene some positive rule of law. Such a contract is binding on both parties, and it is the duty of a court to construe and enforce the contract as made. Nabor v. Occidental Life Insurance Co. (1979), 78 Ill. App. 3d 288, 292, 396 N.E.2d 1267, 1270-71, citing Soucie ex rel. Ziems v. Illinois Agricultural Mutual Insurance Co. (1944), 323 Ill. App. 456, 462-63, 56 N.E.2d 55, 58-59; accord A.A. Conte, Inc. v. Campbell-Lowrie-Lautermilch Corp. (1985), 132 Ill. App. 3d 325, 329, 477 N.E.2d 30, 33.

It is true that, in the absence of language to the contrary, a court considers laws and statutes in existence at the time a contract is executed as part of the contract as though they were expressly incorporated therein. The existing laws, statutes, and ordinances become implied terms of the contract as a matter of law. “By entering into such an agreement, and by not specially excluding or modifying the effects of the various laws, the contracting parties are deemed to have accepted these laws as part of their agreement.” (Emphasis added.) (S&D Service, Inc. v. 915-925 W. Schubert Condominium Association (1985), 132 Ill. App. 3d 1019, 1023, 478 N.E.2d 478, 483.) The time computation statute is one such law that could be construed as an implied term of a contract. (See Providence Insurance Co. v. La Salle National Bank (1983), 118 Ill. App. 3d 720, 724, 455 N.E.2d 238, 241.) Indeed, the application of such a statute to a contract is generally approved, when the contract does not give a different meaning or plainly show a different intention. 86 C.J.S. Time §14(10), at 897 (1954).

In the case at bar, however, the MR committee did specially exclude the effect of the time computation statute on the contract at issue, i.e., the MR program. The committee announced that the program would end on Friday, July 26, 1985, at the close of business at 5 p.m. We hold that the MR committee’s announcement was sufficient to exclude the effect of the time computation statute on the MR program.

Pursuing this contention, plaintiff argues that the exchange failed to follow its own procedures in terminating the MR program on Friday, July 26, 1985. Plaintiff also argues that the Exchange, by terminating the program on Friday, breached the contract between him and the Exchange. In support of these arguments, plaintiff points to the following uncontested facts: the MR committee announced the program’s termination date; the committee lacked the power to create, alter, or amend the program’s rules; and that such power was vested in the Exchange’s Board of Governors or reserved for Exchange members.

The trial court held that when the MR committee set the program’s termination date at Friday, July 26, 1985, the committee did not alter or amend the MR program’s rules, or otherwise engage in ultra vires rulemaking. Rather, the court concluded that the committee simply interpreted the program’s duly enacted rules, which the committee was indisputably empowered to do.

We agree. Of course, the termination date of the MR program required interpretation. As Professor Williston explained:

“The fact that a contract has been put into express words does not prevent the meaning and legal operation of those words from being affected by their factual [operation]: *** [L]anguage, though seemingly plain and clear, will not bear a literal interpretation if this leads to an absurd result ***.” (4 S. Williston, Williston on Contracts §610B, at 533 (3d ed. 1961).)

In the case at bar, the rules of the MR program provided that the program would end on Saturday, July 27, 1985. Since the Exchange is closed on Saturdays, a literal reading of the program rules would have led to an absurd result.

We further conclude that the MR committee was empowered to interpret the program rules to avoid the absurd result. “If there is a reasonable doubt of the meaning of the rules the exchange will be permitted to construe them, although the exchange may not say that they import something different from their obvious meaning.” (Meyer, The Law of Stockbrokers & Stock Exchanges §7, at 85 (1931).) Since the program rules did not have an “obvious meaning” regarding the program’s termination date, the MR committee was empowered to construe them. It is quite settled that courts allow exchanges discretion in interpreting the meaning of exchange rules. (Shultz v. Securities & Exchange Comm’n (7th Cir. 1980), 614 F.2d 561, 571 (and cases cited therein).) Therefore, we uphold the trial court’s conclusions that the MR committee properly set the MR program’s termination date at Friday, July 26, 1985, and that by so doing, the Exchange did not breach its contract with plaintiff.

B

Plaintiff further contends that the Exchange deprived him of due process when it set the MR program’s termination date at Friday, July 26, 1985. Plaintiff argues that the Exchange’s action deprived him of his right to buy or sell MRs up to “the last minute of the last day of the fourth year of the program.”

The trial court concluded that the Exchange accorded plaintiff due process and we agree. Although the Exchange’s action may have affected plaintiff’s economic and property interests, thereby triggering due process protections, it is settled that “voluntary associations [need not] accord their members all of the due process protections provided in the Federal Constitution.” (Head v. Lutheran General Hospital (1987), 163 Ill. App. 3d 682, 693, 516 N.E.2d 921, 928, citing Siqueira v. Northwestern Memorial Hospital (1985), 132 Ill. App. 3d 293, 299, 477 N.E.2d 16, 20-21.) Rather, a voluntary association must simply treat its members in accordance with its rules and rudimentary due process, i.e., the association must act fairly and impartially, and without denial of essential rights. Siqueira, 132 Ill. App. 3d 293, 477 N.E.2d 16; Rosee v. Board of Trade (1976), 43 Ill. App. 3d 203, 236, 356 N.E.2d 1012, 1034.

In the case at bar, plaintiff indisputably received notice of the Friday, July 26, 1985, termination date. Further, plaintiff received a hearing before the Board of Governors pursuant to his request to waive the termination date. We conclude that the Exchange accorded plaintiff adequate due process.

We additionally note that the trial court alternatively found that even if the MR program should have terminated on Monday, July 29, 1985, plaintiff and Elliott did not complete a sale on that date because Elliott’s forms were not completed in accordance with Exchange rules. The evidence was controverted whether plaintiff completed the required forms by Monday, July 29. However, it was undisputed that Elliott did not obtain a guarantor’s signature until Tuesday, July 30. Although plaintiff assigns error to this finding, we need not address this issue because we have concluded that the MR program was properly terminated on Friday, July 26, 1985.

Further, if we did address this issue, it would suffice to note that the Monday transaction between plaintiff and Elliott was not an absolute and unconditional contract to be fulfilled under all circumstances. Rather, their agreement was subject to the rules and requirements of the Exchange and of the Exchange’s Board of Governors. This condition, therefore, became an integral part of their agreement. See Thomson v. Thomson (1925), 315 Ill. 521, 529-30, 146 N.E. 451, 455; accord Meyer, The Law of Stockbrokers & Stock Exchanges §28, at 171-72 (1931).

However, plaintiff counters with the argument that the Exchange waived compliance with the termination date by accepting the required forms from plaintiff and Elliott on Monday, July 29, 1985. This argument lacks merit. Of course, the Exchange did not waive compliance with the termination date. Indeed, the paperwork that the Exchange accepted from plaintiff and Elliott included a signed, formal request to the Exchange’s Board of Governors to waive the termination date. This formal request to the Board to waive the termination date is quite inconsistent with plaintiff’s present argument. (See Nelson v. Union Wire Rope Corp. (1964), 31 Ill. 2d 69, 115, 199 N.E.2d 769, 794.) It cannot logically be argued that the Exchange’s mere acceptance of the paperwork constituted a waiver of the termination date, when that paperwork included a written request that the Board grant that exact waiver, which the Board subsequently denied. We agree with the trial court that since plaintiff and Elliott did not meet all of the Exchange’s requirements by Monday, July 29, 1985, then they did not complete a sale prior to the expiration of the MR program.

II

Plaintiff next assigns error to the trial court’s conclusion that he failed to prove that the Exchange tortiously interfered with his prospective business opportunity. We initially note our standard of review. Especially in cases involving contradictory evidence, the trial judge, sitting as the trier of fact, is in a position superior to a reviewing court to observe the conduct of the witnesses while testifying and to determine their credibility, and to weigh the evidence and determine the preponderance thereof. A reviewing court will not set aside these determinations because the trial court believed or credited one group of witnesses and did not credit the other group. We may not overturn a judgment merely because we might disagree with it or might, had we been the fact finder, have come to a different conclusion. Commonwealth Edison Co. v. Department of Revenue (1989), 179 Ill. App. 3d 968, 975, 535 N.E.2d 30, 35.

As a result of these principles, a reviewing court will not disturb a trial court’s findings unless they are against the manifest weight of the evidence. A finding is against the manifest weight of the evidence when an opposite conclusion is clearly apparent. Indeed, we have held that it will not suffice to show that the record will support a contrary decision; rather, we will affirm if the record contains any evidence to support the trial court’s judgment. Trident Industrial Products Cory. v. American National Bank & Trust Co. (1986), 149 Ill. App. 3d 857, 865, 501 N.E.2d 273, 279-80; Tomaso v. Plum Grove Bank (1985), 130 Ill. App. 3d 18, 23, 473 N.E.2d 588, 592.

The tort of interference with prospective advantage or business opportunity is closely allied with the tort of interference with contractual relations. Both torts “recognize that a person’s business relationships constitute a property interest and as such are entitled to protection from unjustified tampering by another.” (Belden Cory. v. Internorth, Inc. (1980), 90 Ill. App. 3d 547, 551, 413 N.E.2d 98, 101.) The elements of the tort are: (1) the plaintiff has a reasonable expectancy of entering into a business relationship; (2) the defendant knows of the expectancy; (3) the defendant interferes and prevents the realization of the business relationship; and (4) the defendant’s interference actually damages the plaintiff. (Bank Computer Network Corp. v. Continental Illinois National Bank & Trust Co. (1982), 110 Ill. App. 3d 492, 500, 442 N.E.2d 586, 592; Belden, 90 Ill. App. 3d at 552, 413 N.E.2d at 101-02.) In the case at bar, the trial court found that plaintiff failed to prove the third and fourth elements: that the Exchange purposely interfered with and defeated plaintiff’s business expectancy, i.e., his efforts to either buy an MR or sell his three MRs; or that the Exchange actually harmed him.

In his appellate brief, plaintiff alleges five instances where the Exchange interfered with his business expectancy. First, plaintiff alleges that the Exchange “abandoned its rules” by disclosing to Howard that plaintiff held the three remaining MRs, “thereby allowing a squeeze [sic] to occur.” The trial court found that plaintiff could not point to any rule that the Exchange violated by disclosing the information to Howard. Second, plaintiff alleges that the Exchange interfered with his business expectancy when it forced him to deal directly with Howard. The trial court found that Exchange rules permitted private transfers of MRs. Additionally, no one forced plaintiff to negotiate with Howard; plaintiff could have refused. Third, plaintiff alleges that the Exchange refused to “consummate” the sale between him and Howard when plaintiff agreed to pay Howard’s offer of $37,000 on Thursday, July 25, 1985. The trial court found that plaintiff and Howard never matched that Thursday, either at the Exchange offices or in their subsequent private negotiation. The record contains evidence to support the trial court’s findings, and we cannot say that opposite conclusions are clearly apparent.

Plaintiff fourthly alleges that the Exchange interfered with his business expectancy when it failed to adopt a “fail-safe plan *** to ensure full conversion of all remaining MRs” at the conclusion of the MR program. The trial court found that the Exchange had no such duty. We agree. There is no private cause of action for damages against an exchange for its failure to amend its rules. See Sam Wong & Son, Inc. v. New York Mercantile Exchange (2d Cir. 1984), 735 F.2d 653, 666-70.

Plaintiff fifthly alleges that the Exchange failed to prevent “the illegal price manipulation,” or “squeeze,” by Elliott. The trial court correctly found that this allegation failed for several alternative reasons. The trial court found, inter alia, that the Exchange’s failure to prevent the alleged squeeze did not violate the pertinent section of the Commodity Exchange Act (see 7 U.S.C. §7 (1988)); that an MR was not a commodity; and that it was equally as necessary for Elliott to deal with plaintiff as it was for plaintiff to deal with Elliott. (See generally Cargill, Inc. v. Hardin (8th Cir. 1971), 452 F.2d 1154; Apex Oil Co. v. DiMauro (S.D.N.Y. 1989), 713 F. Supp. 587, 601-03.) We uphold the trial court’s determination that plaintiff did not prove his claim of tortious interference with prospective economic advantage.

Ill

Plaintiff lastly claims that the Exchange breached its contract with him on various occasions. He alleged that: (1) the Exchange breached the contract by terminating the MR program on Friday, July 26, 1985, instead of Monday, July 29; (2) the Exchange imposed a “punishment” not prescribed by the rules by denying “his right to redeem his MRs”; (3) the Exchange breached its bid and offer procedure by failing to “consummate” the agreement between himself and Howard; and (4) the Exchange breached “its obligations to prevent manipulation, squeezing, and illiquidity of markets” by knowingly permitting these activities to occur.

Plaintiff initially argues that the trial court failed to address his breach of contract claim. We disagree. It was not necessary for the trial court to specially address plaintiff’s breach of contract claim. A trial court need not make any findings of fact, and the failure to make a specific finding is not a ground for reversal. Rather, in reviewing a judgment, we will assume that all issues and controverted facts were found in favor of the prevailing party. The question before us is not whether the trial court made a specific finding, but whether its final determination is supported by the evidence. Nemeth v. Banhalmi (1984), 125 Ill. App. 3d 938, 959, 466 N.E.2d 977, 992.

In the case at bar, a cursory review of the allegations contained in plaintiff’s breach of contract claim reveals that the trial court had addressed all of them in the context of his other claims. Referring to his second allegation, we repeat that plaintiff’s “right” to redeem his MRs was subject to the rules of the Exchange. As a result, plaintiff’s failure to comply with those rules simply precluded a sale and did not constitute a punishment. Additionally, our disposition of plaintiff’s contentions obviates the need to discuss his arguments regarding damages.

For the foregoing reasons, the judgment of the circuit court of Cook County is affirmed.

Affirmed.

JIGANTI, P.J., and McMORROW, J., concur.


source: Caselaw Access Project

author: PRESIDING JUSTICE RAKOWSKI

license: Public Domain

text:
    THE PEOPLE OF THE STATE OF ILLINOIS, Plaintiff-Appellee, v. MARK VON PERBANDT, Defendant-Appellant.
    First District (6th Division)
    No. 1 — 89—2375
    Opinion filed November 15, 1991.

      Michael J. Pelletier and Manuel S. Serritos, both of State Appellate Defender’s Office, of Chicago, for appellant.
    Jack O’Malley, State’s Attorney, of Chicago (Renee G. Goldfarb and Kevin Sweeney, Assistant State’s Attorneys, of counsel), for the People.
   PRESIDING JUSTICE RAKOWSKI

delivered the opinion of the court:

After a jury trial defendant-appellant Mark Von Perbandt was sentenced to a term of imprisonment of 60 years following his murder conviction in 1980. Defendant brought a direct appeal from that conviction; judgment and sentence were affirmed via a Rule 23 order (People v. Von Perbandt (1st Dist. 1982), No. 1 — 80—1962). In July of 1989, defendant filed, pro se, a petition for post-conviction relief, alleging that the jury which convicted him had received improper instructions and that defendant’s trial counsel had denied defendant the right to testify on his own behalf. In August of 1989, the trial court dismissed defendant’s petition without holding an evidentiary hearing. Defendant appeals this dismissal, realleging the above issues.

Defendant was charged in 1979 with the murder of Richard O’Neil. Following a jury trial, defendant was found guilty, and on June 12, 1979, defendant was sentenced to a term of imprisonment of 60 years. On appeal, defendant alleged: (1) that he was deprived of a fair trial through the improper admission of evidence and the prosecutor’s comments regarding said evidence during closing argument; (2) that defendant’s trial counsel was incompetent; and (3) that defendant’s sentence had been improperly imposed. By way of a Rule 23 order, defendant’s conviction and sentence were affirmed.

On July 28, 1989, defendant filed, pro se, a petition for post-conviction relief alleging, inter alia, (1) that the jury had been improperly instructed on the lesser-included offense of voluntary manslaughter, and (2) that defendant was “denied the right to testify in his own defense by his trial counsel.” As to this latter allegation, the post-conviction petition read as follows:

“The Petitioner, Mark Von Perbandt was denied the right to testify in his own defense by his trial counsel in that said trial counsel unilaterally informed Petitioner Mark Von Perbandt that he could NOT testify in his own behalf. No one, other than the Defendant himself, may waive this right to testify. *** In Petitioner’s case this was particularly significant as his testimony was essential to establish the manslaughter defense presented at trial. * * * Mark Von Perbandt wanted to testify at trial in order to repudiate [a statement of petitioner’s to law enforcement personnel]. However his trial counsel refused to allow him the opportunity to do so, and Mr. Von Perbandt did not know that he could override his attorney’s decision in this area.”

On August 1, 1989, the trial court denied defendant’s petition as “frivolous and without merit.”

The first issue we address is whether the post-conviction claim that defendant was prohibited by trial counsel from testifying on his own behalf sufficiently alleged a constitutional violation so as to require further proceedings under the post-conviction act. In the case of People v. Sanders (1991), 209 Ill. App. 3d 366, 373, 568 N.E.2d 200, the court discussed the statute under which defendant sought review of his claims. The court observed:

“An action brought under the Post-Conviction Hearing Act [ ] [citation] is not an appeal; rather, it is a collateral attack on a judgment of conviction. The purpose of the proceeding is to resolve allegations that constitutional violations occurred at trial, when those allegations were not, or could not have been, adjudicated previously. [Citation.]
The petitioner in a post-conviction proceeding is not entitled to an evidentiary hearing as of right; rather, the Act permits summary dismissal of a nonmeritorious petition. [Citation.] The petitioner has the burden to establish a substantial deprivation of constitutional rights [citation]; the petition must set forth facts that show the denial. [Citation.] This court will not disturb the trial court’s determination absent manifest error. [Citation.] Error, to be ‘manifest,’ must be clearly evident, clear, plain, and indisputable. [Citation.]” 209 Ill. App. 3d at 373.

The court in People v. Lawrence (1991), 211 Ill. App. 3d 135, 137, 569 N.E.2d 1175, recently set forth with specificity the post-conviction process:

“The Act provides a three-step process for adjudication of petitions for post-conviction relief. [Citation.] The first step requires the trial court consider the petition to determine whether it is frivolous or patently without merit. If so, the petition is dismissed [citation]. If the court decides the petition is not frivolous and patently without merit, the court must appoint counsel to represent the defendant, if indigent. [Citations.]”

The Lawrence court further observed that “[t]o survive dismissal at the first stage of a post-conviction proceeding, the petition need only contain a statement which presents the gist of a meritorious constitutional claim.” 211 Ill. App. 3d at 138.

Petitioner relies on the case of People v. Dredge (1986), 148 Ill. App. 3d 911, 500 N.E.2d 445, in support of his argument that it was error for the trial court to dismiss his petition, at the first stage, as frivolous and without merit. In Dredge, the court observed that it is recognized that a criminal defendant’s prerogative to testify at his or her trial is a fundamental right which only the defendant can waive, and that the exercise of this right is not a strategic or tactical decision for trial counsel. (148 Ill. App. 3d at 913.) In Dredge, while the exact wording of the petition is not set forth, the court stated that defendant alleged that his trial counsel was ineffective because, inter alia, counsel “did not allow her to testify on her own behalf.” 148 Ill. App. 3d at 912.

The Dredge court further observed:

“[i]n determining the particularity with which a pro se petitioner for post-conviction relief must state alleged deprivations of constitutional rights in her petition, we note that such petitioners are often persons of limited education. [Citations.] Therefore, we conclude that in order to withstand dismissal at the first stage of post-conviction proceedings, a petition for post-conviction relief need only contain a simple statement which presents the gist of a claim for relief ***. Requiring pro se petitioners to state their claims in greater detail than this would have the practical effect of depriving many such persons of their right of meaningful access to the courts. [Citation.]” 148 Ill. App. 3d at 913.

Acknowledging that the defendant’s allegation of deprivation of the right to testify was conclusory and unsworn, the Dredge court observed that the petition was verified and held that “[verification], coupled with the fact that defendant’s allegation that she was deprived of her right to testify at her trial is uncontradicted by anything appearing in the trial record, is sufficient to require the circuit court to appoint counsel to represent defendant [and to proceed in accord with the act.]” 148 Ill. App. 3d at 913.

In response, the State argues that “when a defendant asserts that he was denied his right to testify at trial, he must claim that during trial he asked his attorney to testify and that his attorney refused to grant the request.” According to the State, the petition in this case does not establish that defendant actually asked his trial counsel to testify during the trial and that defendant’s trial counsel refused to accommodate defendant in this regard. The State cites several cases in support of this argument. In People v. Brown (1973), 54 Ill. 2d 21, 294 N.E.2d 285, the Illinois Supreme Court held that the defendant’s post-conviction petition alleged that defendant’s trial counsel “refused to permit” defendant to testify in defendant’s own defense. The court noted:

“Neither in the post-conviction petition in this case, with its reference to conversations which took place between the defendant and his attorney well in advance of the beginning of the trial, nor in the supporting affidavit, is there any statement that the defendant, when the time came for him to testify, told his lawyer that he wanted to do so despite advice to the contrary. In the absence of a contemporaneous assertion by the defendant of his right to testify, the trial judge properly denied an evidentiary hearing.” 54 Ill. 2d at 24.

People v. Berry (1988), 172 Ill. App. 3d 256, 526 N.E.2d 502, also cited by the State, did not involve a post-conviction proceeding, but rather involved a direct appeal. People v. Knox (1978), 58 Ill. App. 3d 761, 374 N.E.2d 957, did not involve a post-conviction hearing either, and the court observed that “[t]he record does not support either [defendant’s] contention that he was prevented from testifying or that an evidentiary hearing on this question was required.” (58 Ill. App. 3d at 767.) Finally, in People v. Sanders, a post-conviction case, the court rejected defendant’s claim that his trial counsel’s refusal to allow defendant to testify was ineffective representation, as defendant’s claim was not supported by the record (relying on Knox and Berry). The Sanders case, however, involved a State appeal of a granting of the petition, where counsel had been appointed and an evidentiary hearing had taken place.

It is important to note that the act was amended in 1983, so that at the initial stage, the circuit court makes the determination of frivolity or lack of merit without State input. (See Dredge, 148 Ill. App. 3d at 912-13.) Thus, it is clear that a minimal amount of specificity is required of a petitioner at this stage. In People v. White (1987), 152 Ill. App. 3d 404, 504 N.E.2d 520, which the parties have not cited, the court was faced with a similar claim to petitioner’s, and stated “[a]nother contention which we determine to be neither ‘frivolous’ nor ‘patently without merit’ is quite simple. Defendant alleged that his trial counsel was incompetent for failing to advise him ‘of his fundamental right to testify in his own behalf.’ As the record stood at the time the petition was dismissed, this allegation was not refuted.” (152 Ill. App. 3d at 408.) From a reading of Dredge and White, we hold that the rule advocated by the State should not be applied to the first stage of the post-conviction proceeding, where very little detail appears to be required of the petitioner. In holding that petitioner did in fact present a claim that was not “frivolous,” or “patently without merit,” we emphasize that under the amended act, it is at the next stage of the proceedings, after appointment of counsel and opportunity to amend, that the sufficiency of the petition is to be challenged. Our holding does not consider the issue of whether, given Brown and the other cases the State cites, defendant’s petition as currently worded would withstand challenge at a later point in proceedings under the act. We do, however, hold that this case should be remanded for such further proceedings under the act.

Next, we briefly address whether the trial court erred in dismissing defendant’s post-conviction petition based on the fact that the jury at defendant’s trial was erroneously instructed on the lesser-included offense of voluntary manslaughter. Defendant requests that this court refuse to follow People v. Flowers (1990), 138 Ill. 2d 218, 561 N.E.2d 674, where our supreme court held that the holding of People v. Reddick (1988), 123 Ill. 2d 184, 526 N.E.2d 141, does not apply retroactively to defendant’s post-conviction proceeding. Defendant calls our attention to the fact that a number of Federal courts have held contrary to Flowers. We cannot, however, depart from the holding in Flowers, as a decision of our supreme court is the law of our State, binding upon both the circuit and appellate courts. (See Friendship Manor of the Branch of King’s Daughters & Sons, Inc. v. Department of Revenue (1980), 91 Ill. App. 3d 91, 95, 414 N.E.2d 525.) Thus, the Reddick holding may not be applied to petitioner’s post-conviction claim.

Accordingly, the dismissal of petitioner’s post-conviction petition is reversed, and the cause remanded for proceedings not inconsistent with this opinion.

Reversed and remanded.

EGAN and LaPORTA, JJ., concur.


author: JUSTICE CAMPBELL

text:
    THE PEOPLE OF THE STATE OF ILLINOIS ex rel. A.M. et al., Minors, Appellant, v. HERLINDA M. et al., Respondents-Appellees.
    First District (1st Division)
    No. 1 — 89—1376
    Opinion filed October 28, 1991.

      Patrick T. Murphy, Public Guardian, of Chicago (Kathleen G. Kennedy, of counsel), for appellants.
    No brief filed for appellees.
   JUSTICE CAMPBELL

delivered the opinion of the court:

Appellant, the public guardian of Cook County, appeals a judgment of the circuit court of Cook County denying the public guardian attorney fees for its representation of minors as a guardian ad litem (GAL). For the reasons which follow, we dismiss the appeal.

Araceli M., born on November 16, 1977, and her sister, Linda, born on December 4, 1980, are the two youngest of five children in the M. family. On October 16, 1985, the State filed a petition for an adjudication of wardship regarding Araceli and Linda M. That same day, the parents retained private counsel and the court appointed M.L. Goodman as GAL to represent the minors. The court then proceeded to find probable cause that the minors had been abused and neglected and that it was an urgent and immediate necessity that a temporary custodian for the children be appointed. The court placed the minors in the temporary custody of the Department of Children and Family Services (DCFS).

On October 18, 1985, the court entered a protective order requiring the parents to provide care for the children and cooperate with DCFS requests; prohibiting the father from having contact with or touching the minors; and barring the mother from letting the father into her home. This protective order was later amended on November 17 and December 5,1985.

The State moved to vacate the protective order on January 17, 1986, alleging that the parents had failed to comply with it. After the parties stipulated to probable cause and urgent and immediate necessity, the State’s request was granted. The minors were again placed in the temporary custody of DCFS, and the case was continued pending clinical evaluation of the parents and the minors.

On April 22, 1986, following admissions and stipulations by the parents, the court found abuse based on an injurious environment and ordered a supplemental social investigation.

On August 14, 1986, the GAL petitioned the court to terminate the father’s visits with the minors, alleging that the father “perpetrated sexually-oriented acts” on the minors and behaved in a way that the minors needed “further counseling and even psychiatric hospitalization.” The same day, the parents, represented by newly substituted counsel, petitioned to vacate the findings and admissions of April 22,1986. The parents’ petition was granted on August 27,1986.

The court entered an agreed order on September 3, 1986, suspending the father’s visitation rights without prejudice, allowing weekly supervised visits by the mother and requiring DCFS to refer the mother for counseling. Five days later, the State again petitioned for wardship of the minors on the grounds that the minors were subject to abuse and neglect. The mother filed a motion for a bill of particulars. In October 1986, the court heard motions concerning the admissibility of the results of the father’s polygraph examination at the upcoming adjudication of wardship.

In November 1986, following a trial, the court found the minors had been abused. On January 22, 1987, the court entered a dispositional order adjudicating the minors as wards of the court and placing them in the guardianship of DCFS. According to the public guardian’s brief, on February 2, 1987, the presiding judge of the juvenile division of the circuit court ordered that the public guardian be appointed as attorney and GAL in all cases where M.L. Goodman had been appointed previously.

On June 26, 1987, Sandra Y. Jones petitioned for supplemental relief, alleging that the mother focused affection on some of the children while blaming others and that the father remained in the vicinity of the supervised visits. The mother filed a motion for a bill of particulars; Sandra Y. Jones supplied said bill on July 10, 1987, and an amended bill the following month. The July bill indicates that Sandra Y. Jones is associated with the office of the public guardian. The public guardian, as GAL, later supplied additional documents requested by the mother.

The court entered an agreed order on the petition for supplemental relief on August 13, 1987, which: continued the hearing on the petition; required an agency named Special Persons in Need (SPIN) to assess the family and report to the parties’ counsel by September 15, 1987; ordered the parents to sign releases of information to SPIN; ordered SPIN to provide biweekly written reports to the parties; allowed the mother to visit the minors under SPIN’S supervision; and ordered the parents to undergo alcohol abuse assessments.

On March 28, 1988, a new attorney filed his appearance for the father. Thirty-one days later, the mother filed a petition for a rule to show cause why DCFS should not be held in contempt for failing to provide her with supervised visitation. The petition alleged that the court had heard during a progress report on the agreed order that SPIN wished to be released from its supervision of the mother’s visits and that the GAL was not going to proceed with a supplemental petition to terminate parental visitation.

On May 19, 1988, the GAL subpoenaed Dr. Bonnie Benzies of the Elgin Mental Health Center for a deposition to be held the next day.

On August 21, 1988, the GAL moved to vacate the August 13, 1987, agreed order, stating that SPIN had completed the required assessment. Two days later, the mother filed a supplemental petition for a rule to show cause why DCFS should not be held in contempt for failure to provide her with a guardian’s report.

The court entered an agreed order in October 1988 which continued hearing the minors’ supplemental petition pending further evaluation, allowed the father to have therapeutic visits with the minors in furtherance of said evaluation, ordered SPIN to provide supervised visits with the mother and required SPIN and a therapist involved in the case to coordinate the assessment visits.

On November 22, 1988, the GAL filed a motion for attorney fees, which states in its entirety:

“NOW COMES the attorney for the minor respondent and respectfully ask that this Court, pursuant to sec. 806 — 9 of ch. 37 of the Ill. Rev. Stat., order the parents in this case, after a proper hearing, to pay the Office of the Cook County Public Guardian reasonable attorney’s fees in an amount of no less than $100.00 per hour for the time that office has spent representing their child.”

In conjunction with the motion, the GAL also filed interrogatories and a notice to produce documents relating to the parents’ income and their contracts with their own attorneys. The answer to the interrogatories indicated that the parents had paid approximately $2,300 to their attorneys and owed approximately $14,500 in attorney fees; that the father’s annual salary was approximately $27,000; and that they owned a home in Chicago which they had purchased in December 1981 for approximately $22,900.

Subsequently, on April 25, 1989, prior to a hearing on the motion for attorney fees, the GAL filed its amended motion for attorney fees, which states in its entirety:

“NOW COMES the attorney for the minor respondent and respectfully ask that this Court, pursuant to sec. 2 — 17(5) of the Juvenile Court Act ch. 37 of the Ill. Rev. Stat. [Ill. Rev. Stat. 1987, ch. 37, par. 802 — 17(5)], order the parents in this case, after a proper hearing, to pay the Office of the Cook County Public Guardian reasonable attorney’s fees in an amount of no less than $100.00 per hour for the time that office has spent representing their child.”

At a hearing on the motion, the trial court asked the GAL what it would do with the monies if the court ordered that the parents pay the fees. The GAL replied that monies collected would be deposited in a general fund specifically set up by the Cook County treasurer. In denying the motion, the trial court held that section 2 — 17(5) of the Act applied only to private attorneys and not to the public guardian’s office. Appellant’s timely appeal followed.

Although no appellee’s brief has been filed, we are not precluded from reviewing the case. (First Capitol Mortgage Corp. v. Talandis Construction Corp. (1976), 63 Ill. 2d 128, 345 N.E.2d 493.) Nevertheless, before reaching any question which may be raised concerning the legal sufficiency of the fee motion, we have a duty to consider our jurisdiction and to dismiss an appeal if jurisdiction is wanting, even when neither party raises the issue. (Ferguson v. Riverside Medical Center (1985), 111 Ill. 2d 436, 440, 490 N.E.2d 1252, 1253; Voiland v. Warsawsky (1989), 182 Ill. App. 3d 332, 334, 538 N.E.2d 764, 765.) During the oral argument in this matter, this court asked counsel whether the denial of attorney fees was a final and appealable order. This court then ordered the public guardian to submit a supplemental memorandum on the jurisdictional basis for this appeal, which we have received and will consider in passing upon our authority to hear the merits of this appeal.

Initially, we recognize that jurisdictionally, juvenile abuse and neglect proceedings are somewhat unusual. The juvenile court may retain jurisdiction over a wardship or guardianship proceeding until the minor involved is 21 years old or until the guardianship is no longer in the best interest of the minor. (See Ill. Rev. Stat. 1987, ch. 37, par. 802 — 31.) Supplemental proceedings regarding the guardianship may be initiated by the parties (see Ill. Rev. Stat. 1987, ch. 37, par. 802— 13) or by the court sua sponte (see Ill. Rev. Stat. 1987, ch. 37, par. 802 — 28). Given the fluid nature of such proceedings, it is perhaps not surprising that there are special rules governing appeals in this area of the law. See, e.g., 134 Ill. 2d Rules 304(b)(1), 306(a)(l)(v).

In its initial brief, the public guardian asserted that this court had jurisdiction under Illinois Supreme Court Rule 303 (134 Ill. 2d R. 303), which provides for appeals from final judgments in civil cases. However, the record shows that this matter was transferred to the guardianship calendar on June 23, 1989, after hearing a progress report subsequent to the denial of the public guardian’s fee motion on April 25, 1989. Based on the record, we conclude that the denial of the fee motion was not appealable under Rule 303. We note that none of the cases cited by the public guardian in support of jurisdiction are Rule 303 cases.

The case relied upon by the public guardian in arguing that the denial of fees is a final judgment or order, In re James J. (1989), 193 Ill. App. 3d 75, 549 N.E.2d 834, aff’d (1991), 142 Ill. 2d 1, 566 N.E.2d 1345, involved the finality of a dismissal of a petition for adjudication of wardship under Rule 301 as made applicable to a juvenile case pursuant to Rule 660(b). The dismissal of a petition for adjudication of wardship in James J., while purporting to be a dismissal without prejudice, was entered because the trial court believed it lacked authority to order the State’s Attorney’s office to prosecute the claim. It was therefore clear in James J. that the order had the effect of terminating the proceedings; had this court held the order to be unappealable, the minors would have been completely unable to challenge the order. In this case, the record shows that the denial of the fee request did not terminate the proceedings. Under the facts and circumstances in the record, the public guardian cannot appeal this order under Rules 301 and 303.

In its supplemental memorandum, the public guardian argues that the judgment is appealable under Rule 304 (134 Ill. 2d R. 304), which governs appeals from final judgments that do not dispose of an entire proceeding. Rule 304(a) provides that in general, an appeal from a final judgment as to fewer than all the claims or parties may be taken only if the trial court has made an express written finding that there is no just reason for delaying enforcement or appeal of the judgment. (134 Ill. 2d R. 304(a).) There is no such written finding in this case.

The public guardian argues that a Rule 304(a) finding is not required in this case due to the distinction our courts generally have made between a fee claim brought as part of the principal action and one brought after the principal action has been decided. (See, e.g., Servio v. Paul Roberts Auto Sales, Inc. (1991), 211 Ill. App. 3d 751, 759-60, 570 N.E.2d 662, 666-67 (and cases cited therein).) The argument is misplaced. Cases such as Servio stand for the proposition that the judgment on the merits may be appealed without a Rule 304(a) finding despite a pending fee claim; they do not speak to the appealability of the fee claim itself.

The public guardian next argues that the denial of its fee request is appealable under Rule 304(b)(1), which states that a special finding is not required for an order “entered in the administration of an estate, guardianship, or similar proceeding which finally determines a right or status of a party.” (134 Ill. 2d R. 304(b)(1).) In In re Estate of Kime (1981), 95 Ill. App. 3d 262, 419 N.E.2d 1246, which involved the administration of an estate, this court discussed the purpose of Rule 304(b)(1), stating:

“A central reason behind making the time for appeal of such orders mandatory, and not optional, is that certainty as to some issues is a necessity during the lengthy procedure of estate administration. Little imagination is needed to conjure up the intolerable consequences of permitting a party, at his option, to wait until an estate administration is concluded before appealing an order, entered perhaps several years previously, which denied a motion to remove an executor or allowed a claim against the estate. In such circumstances, were an appellant successful, then the entire administration might have to be begun again. Thus, in the interests of efficiency and the sound and practical administration of estates, orders in estate proceedings must be appealed within 30 days from entry when they finally determine the right or status of a party, even though they are preliminary to a final settlement of estate proceedings.” (Kime, 95 Ill. App. 3d at 268, 419 N.E.2d at 1250.)

The Kime court’s emphasis on efficiency and practicality dovetails with one of the more general purposes of Rule 304 — the prevention of piecemeal appeals. See, e.g., Ariola v. Nigro (1958), 13 Ill. 2d 200, 148 N.E.2d 787.

Here, the public guardian asserts that “[i]t is not practical for the children’s attorney to wait until all of the children in the case become 21 years old and the Juvenile Court proceedings are finally closed to obtain attorney fees.” However, as the public guardian has suggested in its supplemental memorandum, a fee request is not an ordinary claim like a claim against an estate. Rather, fee requests are generally collateral or incidental to the principal action. Servio, 211 Ill. App. 3d at 759-60, 570 N.E.2d at 666-67.

We do not believe that the denial of the fee request in this case is the type of decision contemplated by Rule 304(b)(1) as interpreted by Kime. There is no danger that the trial court’s denial of fees will cause the entire proceeding to be relitigated. After all, the very reason fee requests are deemed to be collateral is that the issues involved in adjudicating such requests largely lie outside the issues involved in the principal action. See Town of Libertyville v. Bank of Waukegan (1987), 152 Ill. App. 3d 1066, 1073, 504 N.E.2d 1305, 1310.

Moreover, the public guardian’s supplemental memorandum argues that its fee request is incidental to the adjudication of wardship entered on January 22, 1987 (instead of incidental to the entire proceeding). Assuming, arguendo, that this argument is correct, we note that the record indicates that the public guardian did not move for attorney fees until November 22, 1988. If it is impractical for the public guardian to defer its fee request until the jurisdiction of the trial court is terminated, it seems strange that the public guardian deferred its request for almost two years from the date of the dispositional order.

In addition, this court is unable to determine from the record that the fee request at issue is collateral to the dispositional order. The public guardian has failed to affirmatively demonstrate from the record on appeal that it was involved in the case at the time the dispositional order was entered. Indeed, the public guardian’s brief states that Patrick T. Murphy was not appointed in this case until February 2, 1987 — 11 days after the entry of the dispositional order. The record does not contain an order making said appointment. The first document in the record which identifies the office of the public guardian was the bill of particulars filed in July 1987. That bill identifies Sandra Y. Jones as being associated with the public guardian; her name first appears in the record on the supplemental petition filed in June 1987. The record does not indicate that the original GAL in this case was employed by the office of the public guardian. It is therefore possible that even if the fee request could be collateral to less than the entire proceeding, the fee request at issue may be collateral to proceedings after the dispositional order, rather than the proceedings leading up to the order.

Furthermore, the public guardian fails to identify any time it could have properly brought its fee request other than as collateral to the dispositional order. The plain language of section 2 — 17(5) of the Act authorizes the trial court to award attorney fees to a GAL, but is silent on the issue of when such fees are to be awarded. The public guardian has not cited any circuit court rule or court order governing the proper time for filing a fee request in this case.

We recognize that the supreme court rules regarding the right to appeal are to be liberally construed (Parks v. McWhorter (1985), 106 Ill. 2d 181, 185, 478 N.E.2d 324, 325-26), but Rule 304 is to be liberally construed in order to effectuate its overall purpose of preventing piecemeal appeals. See Hawthorn-Mellody Farms Dairy, Inc. v. Elgin, Joliet & Eastern Ry. Co. (1958), 18 Ill. App. 2d 154, 151 N.E.2d 393.

For all of the aforementioned reasons, we dismiss the appeal for want of jurisdiction.

Appeal dismissed.

BUCKLEY and O’CONNOR, JJ., concur.


author: JUSTICE DiVITO

text:
    ROYAL INSURANCE COMPANY, Plaintiff-Appellee, v. PROCESS DESIGN ASSOCIATES, INC., et al., Defendants-Appellants.
    First District (2nd Division)
    No. 1 — 90—2549
    Opinion filed October 29, 1991.

      Hinshaw & Culbertson and Schiff, Hardin & Waite, both of Chicago (D. Kendall Griffith, Kevin R. Sido, Terrence K. McGrath, Mark C. Friedlander, and Brent J. Graber, of counsel), for appellant Process Design Associates, Inc.
    Hinshaw & Culbertson, of Chicago (D. Kendall Griffith, Kevin R. Sido, and Terrence K. McGrath, of counsel), for appellant General Accident Insurance Company of America.
    Kiesler & Berman, of Chicago (Robert L. Kiesler and Patti M. Deuel, of counsel), for appellee.
   JUSTICE DiVITO

delivered the opinion of the court:

Plaintiff Royal Insurance Company (Royal) brought suit against defendants Process Design Associates, Inc. (Process), and General Accident Insurance Company of America (GA), seeking a declaratory judgment that it was not contractually obligated to provide a defense or insurance coverage to Process. All parties moved for summary judgment; the circuit court granted Royal’s motion.

Process and GA appeal the court’s award of summary judgment on behalf of Royal and the court’s denial of their motions for summary judgment and their motion to reconsider, raising in issue (1) whether Royal failed to make a timely reservation of rights or file a timely declaratory judgment action; (2) whether Royal is estopped from asserting the professional liability exclusion in its policy because it failed to adequately inform Process of an alleged conflict of interest in its defense of Process; and (3) whether Royal owed primary insurance coverage to Process. Royal cross-appeals from that part of the court’s judgment ordering that Royal share defense costs.

In February 1981, Process, an engineering firm, entered into a contract with Domtar Industries, Inc., in which it agreed “to provide design engineering services” at one of Domtar’s construction sites. During the course of construction, two employees of Diamond Contractors, which furnished tools and labor at the construction site, were injured in two separate incidents at the site and each subsequently brought a separate personal injury lawsuit against Process.

On the dates of the injuries, Process was insured by both Royal and GA. Process’ policy with Royal, a comprehensive general liability insurance policy, provided $1 million coverage for each occurrence and provided for all expenses incurred by Royal in its legal defense of Process. The policy also stated:

“The insurance afforded by this policy is primary insurance, except when stated to apply in excess of or contingent upon
the absence of other insurance. ***
* * *
It is agreed that the insurance does not apply to bodily injury or property damage arising out of the rendering or of the failure to render any professional services by or for the named insured, including
(1) the preparation of or approval of maps, plans, opinions, reports, surveys, designs or specifications and
(2) supervisory, inspection or engineering services.”

In addition to its comprehensive general liability insurance with Royal, Process was insured by GA with an “architects and engineers professional liability insurance” policy, providing coverage of damage claims arising from Process’ professional services. This policy included a $50,000 deductible applicable to each claim, and further stated:

“This insurance shall be excess insurance over any other valid and collectible insurance available to the Insured whether such other insurance is stated to be primary, contributing, excess, contingent or otherwise, unless such other insurance specifically applies as excess insurance over the Limits of Liability provided in this Policy.”

In December 1983, the two Diamond employees, Nick Babich and Robert Boskovich, each filed separate complaints against Process and others to recover for their injuries, alleging violations of the Illinois Structural Work Act (Ill. Rev. Stat. 1989, ch. 48, par. 60) and common law negligence.

In January 1984, Process tendered its defense of both underlying lawsuits to Royal, and Royal accepted. On March 26, 1984, Royal sent a letter to Process stating that Royal was defending Process because the two complaints were based upon negligence. Royal further advised Process, though, that should the complaints be amended to include allegations of professional negligence or should a third-party action be filed, “there may be a question whether or not [Royal] would continue” Process’ defense due to the professional liability exclusion in its policy. Royal advised Process to contact its present professional liability insurance carrier about the “possibility” that that carrier would become involved.

On March 29, 1984, GA’s agent sent a letter to Process confirming that Royal was properly defending the lawsuits because neither complaint contained allegations of professional negligence.

On May 25, 1984, a handwritten note by a Royal claim representative stated that he told the attorney representing Process “to file a bill of particulars or narrow down allegations so we can tender to” the professional liability carrier.

Royal’s claim manager wrote to Process’ attorney on February 27, 1985, stating that a substantial amount of discovery needed to be done in conjunction with the lawsuits, and further, its “policy contains a professional liability exclusion, however, by virtue of this contract it would appear that our burden would be that of negligence as opposed to any professional negligence.”

On April 16, 1986, another handwritten note by a Royal claim representative stated that the professional liability exclusion was not applicable because the Structural Work Act was involved.

On May 7, 1987, a Royal territorial claims specialist wrote an office memorandum stating that he found it proper, based upon the deposition of Philip Rockenbach, Process’ site construction manager, to involve Process’ professional liability carrier. The memo stated:

“I find it proper *** to involve the Professional Liability Carrier. The facts as stated by Rockenbach put us 50/50. *** He also relates to his basic responsibility of seeing that the contractors complied with the specifications as drawn up by [Process]. It is my feeling that this relates directly to the wording of the exclusion.
The purchase order to our insured for services covers ‘To ensure work done according to drawing and specifications.’ This may be a fine line but why not try to involve the other carrier.”

Royal again wrote to Process on August 24, 1987, concerning the personal injury lawsuits. In that letter, Royal referred to its March 26,1984, letter and stated:

“On March 26, 1984, [a Royal employee] wrote to you regarding potential allegations regarding professional services rendered by your company in the course of its operations at Domtar. At that time he requested that you place your professional liability carrier on notice of this incident. ***
Discovery in this case has developed to a point where it becomes clear that there is evidence that the role played by Process Design Associates and Phil Rockenbach appears to come clearly within the exclusion cited by [Royal’s employee] in his original letter of March 26, 1984.
We, therefore, request that you once again place your professional liability carriers on notice and request that they undertake and assume the defense of Process Design Associates ***. Recent court decisions lead us to believe that this litigation should be more properly handled and defended by your professional liability carrier.”

In response to Royal’s August 24, 1987, letter, GA’s agent wrote to Royal stating that it had never received a copy of Royal’s letter of March 26, 1984. GA’s agent requested a copy of both the letter and the insurance policy issued to Process in order that GA could review the matter.

On April 15, 1988, GA’s agent again wrote to Royal; GA refused Royal’s tender of the defense of the personal injury lawsuits against Process, stating that

“[W]e believe you are estopped from asserting any policy defenses due to your failure to issue a timely reservation of rights letter or initiate a timely declaratory judgment action. Since you have already defended Process Design for approximately three years, we believe that Process Design would be prejudiced by your withdrawing your defense at this time.”

Thereafter, on September 15, 1988, Royal filed its original complaint for declaratory judgment, requesting a finding that Royal afforded no coverage to Process in either of the pending personal injury lawsuits; that Royal be excused from further defense of Process; that GA be estopped from denying coverage for both indemnity and defense; and that GA reimburse Royal for the costs incurred by Royal in defending the underlying lawsuits. Royal’s complaint alleged that the work performed by Process at Domtar’s site was professional in nature; thus, by virtue of the professional liability exclusion in its policy, Royal provided no coverage to Process in the underlying lawsuits. Royal’s complaint further averred that GA wrongfully declined coverage of Process and was therefore estopped from asserting any policy defenses. Additionally, the complaint alleged that GA was the primary carrier for Process.

In response, GA and Process filed motions for summary judgment, arguing that Royal was estopped from asserting any policy defenses because it failed to make a timely reservation of rights. Specifically, Process maintained that Royal’s March 26, 1984, letter did not constitute a proper reservation of rights because it did not contain an express disclaimer of liability; it did not inform Process of Royal’s intention to defend the lawsuits under a reservation of rights; and the contingencies addressed by the letter (namely, the filing of any amendments or cross-complaints) never occurred. Process further contended that, because it was prejudiced by having been induced to surrender the defense of the lawsuits, Royal should be estopped from denying coverage. Lastly, Process argued that Royal was barred from raising any policy defenses because it failed to inform Process of an existing conflict of interest. In addition to incorporating all the allegations in Process’ summary judgment motion, GA’s motion alleged that its policy was strictly that of an excess insurer.

Thereafter, Royal filed a cross-motion for summary judgment, asserting that its policy exclusion applied and that GA was estopped from raising any policy defenses based upon its wrongful rejection of Process’ defense.

On August 15, 1989, the circuit court denied GA’s and Process’ summary judgment motion and granted, in part, Royal’s summary judgment motion. The court ordered that Royal and GA share defense costs in the two personal injury suits and that Royal continue to defend the suits. The court, however, did not rule as to either Royal’s or GA’s obligation to indemnify Process.

After the court’s order, GA and Process filed a motion to reconsider; both GA and Process contended that documents never before produced by Royal provided a basis for rehearing. The motion to reconsider further stated that the underlying lawsuits had settled, and thus, GA and Process requested a ruling that GA was not responsible for the indemnification of the lawsuits.

Royal then filed a supplemental motion for summary judgment and a response to Process’ and GA’s motion to reconsider. There, Royal stated that the Babich suit had settled for $78,000 and the Boskovich suit had settled for $54,000; further, Royal stated that it had expended $31,507.77 in defending the suits on behalf of Process. Royal requested that the court deny the motion to reconsider; find that Royal owed no obligation to indemnify Process; and order GA to reimburse it in whole for the settlements.

On August 1, 1990, the circuit court found that Royal properly reserved its rights regarding the defense of the personal injury lawsuits. The court further found that Royal owed no coverage under its policy issued to Process and that GA, as Process’ professional liability carrier, owed primary coverage to Process. Correspondingly, the court denied Process’ and GA’s motion for reconsideration. The court further ordered that Royal and GA share in the defense of the lawsuits; that GA reimburse Royal $15,753.88, half the amount expended by Royal in defense of the suits; and that GA pay to Royal the amounts of the settlements, totaling $132,000.

Process and GA appeal the court’s denial of their summary judgment motions and their motion to reconsider. Royal cross-appeals from that part of the judgment ordering that Royal must share in the costs of Process’ defense.

I

Process and GA (jointly, defendants) initially contend that Royal did not properly reserve its rights under its insurance policy. Specifically, defendants maintain that Royal’s letter of March 26, 1984, did not constitute a reservation of rights. Defendants further argue that Royal failed to timely file a declaratory judgment action.

Royal responds by maintaining that its March 26, 1984, letter, although admittedly not “award-winning prose,” operated as a proper reservation of rights.

In a case such as this, where an insurer believes a policy does not provide coverage, it has two clear options: the insurer must either defend under a reservation of rights, or secure a declaratory judgment as to its rights and obligations “before trial or settlement of the underlying action.” (Northbrook Property & Casualty Insurance Co. v. United States Fidelity & Guaranty Co. (1986), 150 Ill. App. 3d 479, 484, 501 N.E.2d 817; Nandorf, Inc. v. CNA Insurance Cos. (1985), 134 Ill. App. 3d 134, 136, 479 N.E.2d 988.) The reservation of rights is a means by which the insurer seeks to suspend the operation of estoppel doctrines; when an insurer defends a claim against its insured under a proper reservation of rights, the insured cannot then so easily claim that it was prejudiced by the insurer’s conflict of interest. See Cowan v. Insurance Co. of North America (1974), 22 Ill. App. 3d 883, 889-90, 318 N.E.2d 315; Apex Mutual Insurance Co. v. Christner (1968), 99 Ill. App. 2d 153, 240 N.E.2d 742.

Such a reservation of rights must, therefore, adequately inform the insured of the rights which the insurer intends to reserve, “for it is only when the insured is adequately informed of the potential policy defense that he can intelligently choose between retaining his own counsel or accepting the tender of defense counsel from the insurer.” (Cowan v. Insurance Co. of North America, 22 Ill. App. 3d at 896.) Accordingly, bare notice of a reservation of rights is insufficient; the notice must make specific reference to the policy defense which ultimately may be asserted and to the potential conflict of interest. (Cowan v. Insurance Co. of North America, 22 Ill. App. 3d at 896; Popovich v. Gonzales (1972), 4 Ill. App. 3d 227, 280 N.E.2d 757.) If the insurer has adequately informed the insured of its election to proceed under a reservation of rights, and the insured accepts the insurer’s tender of defense counsel, the insurer has not breached its duty of loyalty and is not estopped from asserting policy defenses. Cowan v. Insurance Co. of North America, 22 Ill. App. 3d at 896.

In the instant case, Royal urges that its letter of March 26, 1984, operated as a proper reservation of rights. In that letter, Royal informed Process that it was presently defending it through a law firm “by virtue of the fact that the Complaint at the present time is one of negligence.” The letter continued, though, to advise Process that “should the Complaint be amended or there be a Third Party Cross-Complaint, in which it would be indicated that professional services were rendered by your company ***, there may be a question as to whether or not we would continue with the defense.” (Emphasis added.) Royal quoted its policy’s professional liability exclusion and stated that if allegations of professional negligence “are included in an Amended Complaint, if filed, we want you to know that there is a possibility that your professional liability carrier would become involved.” (Emphasis added.)

Although Royal’s March 26, 1984, letter informed Process of the policy’s professional liability exclusion and Royal’s intention of invoking that exclusion if an amended complaint or cross-claim alleging professional negligence were filed, Royal’s letter did not unequivocally and clearly inform Process of its intention of reserving that defense under all circumstances. Not only did the letter base the possibility of raising the professional liability exclusion on contingencies which never occurred (the filing of a cross-claim or amended complaint alleging professional negligence), the letter did so in terms which were irresolute. Royal wrote of the “possibility” that the professional liability carrier would become involved and stated that there “may be a question” whether it would continue Process’ defense.

In Popovich v. Gonzales (1972), 4 Ill. App. 3d 227, 280 N.E.2d 757, the plaintiff brought suit to recover for injuries sustained in a collision between two cars, one of which was the defendant’s. The defendant’s insurer retained attorneys to defend the action; however, the defendant left town before trial commenced. An investigation by the insurer revealed the defendant’s new address; the defendant, however, never responded to communications nor did he appear at the trial. Thereafter, the plaintiff obtained a $4,000 judgment against him and sought payment from his insurer. The defendant’s insurer denied liability, pursuant to an exclusion in the policy, because of his failure to cooperate in the defense of the lawsuit.

The Popovich court held that the letter sent to the defendant by his insurer, stating that his failure to respond to the insurer’s counsel “may be considered” a lack of cooperation under the terms of the policy and thus, the insurer “can” refuse to satisfy the judgment against him, did not constitute an unequivocal reservation of rights, but rather was only a “warning.” See Popovich v. Gonzales, 4 Ill. App. 3d at 230.

Although Popovich is not precisely on point, it is illustrative of what is not a proper reservation of rights. Like the letter in Popovich, Royal’s letter to Process operated only as a warning of future contingencies which, in the instant case, never occurred. Based upon the equivocal nature of Royal’s March 26, 1984, letter, we find that Royal did not reserve all its rights and defenses, particularly its professional liability defense.

II

Defendants next contend that Process was prejudiced by the existence of a conflict of interest, arguing that the professional liability exclusion in Royal’s policy specifically exempted Royal from indemnifying Process if the proofs in the underlying cases indicated that Process had acted in its professional capacity. Thus, defendants maintain, Royal’s interest would have been served equally by a finding that Process was liable in its performance of professional services as by a finding of no liability. Accordingly, defendants urge that Royal be estopped from invoking its policy defense of professional liability. In response, Royal maintains that no such conflict of interest existed.

As stated previously, if the insurer has adequately informed the insured of its intention of reserving its rights, and the insured then accepts the tender of defense counsel, the insurer has not breached its duty of loyalty and is not estopped from denying its obligation to indemnify. (Cowan v. Insurance Co. of North America, 22 Ill. App. 3d at 896.) Where there is a conflict of interest, though, an insurer is generally estopped to assert a defense of noncoverage where the insurer undertakes to defend its insured in the underlying suit without reserving its rights. (Allstate Insurance Co. v. Carioto (1990), 194 Ill. App. 3d 767, 777, 551 N.E.2d 382. See Western Casualty & Surety Co. v. Brochu (1985), 105 Ill. 2d 486, 499-500, 475 N.E.2d 872; Maryland Casualty Co. v. Peppers (1976), 64 Ill. 2d 187, 195, 355 N.E.2d 24.) A conflict of interest which may prejudice the insured exists, if, when comparing the allegations of the complaint to the policy terms, the interest of the insurer would be furthered by providing a less than vigorous defense to those allegations. Nandorf Inc. v. CNA Insurance Cos., 134 Ill. App. 3d at 137.

Prejudice resulting from a conflict of interest, though, will not be presumed and the burden of establishing it rests with the insured and must be proved by clear, concise, and unequivocal evidence. (Western Casualty & Surety Co. v. Brochu, 105 Ill. 2d at 500.) However, if, by the insurer’s assumption of the defense the insured has been induced to surrender his right to control his own defense, he has suffered a prejudice which will support a finding that the insurer is estopped to deny policy coverage. (Maryland Casualty Co. v. Peppers, 64 Ill. 2d at 196.) Nevertheless, an insurer’s interest in negating policy coverage does not in itself give rise to a conflict of interest. Shelter Mutual Insurance Co. v. Bailey (1987), 160 Ill. App. 3d 146, 513 N.E.2d 490.

In the instant case, defendants urge that Process was prejudiced by Royal’s assumption of its defense. Defendants maintain that, not only did Royal not advise Process of its intention of reserving the professional negligence exclusion, but Royal then undertook Process’ defense for over three years while attempting to find a way in which Process might be found professionally negligent, thereby relieving Royal of liability. For support, defendants point to the several letters and memos written by Royal which indicate that, throughout its defense of Process, it was working towards discovering a way to invoke its professional liability exclusion, thus immunizing itself from liability to Process. In addition, defendants allege that, for the more than three years that Royal controlled Process’ defense, Royal had the opportunity to “mold” discovery in its behalf.

For support, defendants rely upon Maryland Casualty Co. v. Peppers (64 Ill. 2d 187, 355 N.E.2d 24), where the court described the conflict of interest which arose in that case:

“In the personal injury action if [the insured] is held responsible, it would be to his interest to be found negligent, which, under the policy of his insurance, would place the financial loss on [the insurer], On the other hand it would be to [the insurer’s] interest to have a determination that [the insured] intentionally injured Mims, which, by the terms of the policy, would relieve [the insurer] of the obligation to pay the judgment.” (Maryland Casualty Co. v. Peppers, 64 Ill. 2d at 197.)

According to the Peppers court, such a conflict created “serious ethical questions” which would prohibit an attorney from representing both the insurer’s and the insured’s interests. (Maryland Casualty Co. v. Peppers, 64 Ill. 2d at 198.) The court in Peppers, however, noted that the insured in that case retained his own counsel and was, at all times, represented by his own attorney. Maryland Casualty Co. v. Peppers, 64 Ill. 2d at 196.

Unlike the insured in Peppers, Process did not retain its own counsel; however, like the insurer in Peppers, Royal would have benefitted from a finding that would have adversely affected Process. Specifically, Royal would have benefitted by a finding of professional liability, while such a finding would have subjected Process to noncoverage by Royal and a $50,000 deductible on GA’s policy.

Royal responds that no conflict of interest existed because the underlying complaints never made any allegations of professional negligence; thus, Royal maintains, when comparing the allegations of the complaints to the terms of its policy, its interests would not have been furthered by a less than vigorous defense to the specific allegations in the complaints. (See Nandorf, Inc. v. CNA Insurance Cos., 134 Ill. App. 3d at 137.) Royal’s actions during the three years that it accepted the defense of Process, however, belie its argument; Royal clearly attempted to tender the defense of Process to GA, specifically by finding a way that Process could be found professionally negligent.

Furthermore, Royal’s reliance upon Fidelity & Casualty Co. v. Envirodyne Engineers, Inc. (1983), 122 Ill. App. 3d 301, 461 N.E.2d 471, in arguing that no conflict of interest existed between Royal and Process, is misplaced. In that case, the insurer exercised its options to defend under a reservation of rights and to file a declaratory judgment action. Distinguishing other fact situations, the Envirodyne court stated:

“A related but different situation may arise when the insurer defends its insured in the underlying action but does not either defend under a reservation of rights or file a declaratory judgment proceeding. If the insurer later contests the issue of coverage, it may be estopped from denying its own liability under the policy. (See Apex Mutual Insurance Co. v. Christner (1968), 99 Ill. App. 2d 153, 240 N.E.2d 742.)” Fidelity & Casualty Co. v. Envirodyne Engineers, Inc., 122 Ill. App. 3d at 306 n.l.

The facts of the instant case fall squarely within the “different situation” described by the Envirodyne court. Here, Royal failed to properly advise Process of its intention to reserve the professional liability defense; further, Royal did not file a declaratory judgment action until after it had defended Process for over three years. Moreover, Royal’s defense of Process was tainted by the benefit Royal would derive from a finding that Process was professionally negligent, a finding that would not be salutary for Process. The attorney retained by Royal to represent Process was thus at cross-purposes with Process.

In light of the several memos and letters that Royal wrote over the course of the three years it defended the underlying lawsuits, we find that Royal was indeed attempting to hand the defense of Process over to GA through the use of its professional liability exclusion. Consequently, we hold that, based upon Royal’s failure to properly reserve its rights and its failure to advise Process of the conflict of interest, Royal is estopped from now claiming that it is not obligated to indemnify Process. See Apex Mutual Insurance Co. v. Christner (1968), 99 Ill. App. 2d 153, 240 N.E.2d 742.

Ill

Defendants lastly contend, in the alternative, that the court erred in finding that GA owed Process primary insurance coverage. Royal responds by maintaining that GA wrongfully declined Process’ coverage and thus is estopped from claiming that its policy provided only excess coverage.

Underlying the rule that the primary insurer, and not the excess carrier, has the duty to defend its insured, is the recognition that there is a distinction in the nature of the types of coverage. Primary insurance is coverage whereby liability attaches immediately upon the happening of the occurrence that gives rise to liability; excess insurance provides coverage whereby liability attaches only after a predetermined amount of primary coverage has been exhausted. Northbrook Property & Casualty Insurance Co. v. United States Fidelity & Guaranty Co. (1986), 150 Ill. App. 3d 479, 483, 501 N.E.2d 817; Maryland Casualty Co. v. Chicago & North Western Transportation Co. (1984), 126 Ill. App. 3d 150, 156, 466 N.E.2d 1091.

Royal essentially contends that GA knew Process was an engineering firm and thus, knew that professional negligence likely was invoked by the underlying suits. Accordingly, Royal argues that GA is estopped from asserting that it is the excess insurance carrier because it was on notice that it should defend Process. Royal, however, fails to explain why, if it was so apparent that Process’ actions at the construction site were based upon the performance of its professional duties, Royal did not advise Process of its intention to reserve that defense or institute declaratory judgment proceedings.

In the instant case, the underlying complaints alleged facts which required Royal to defend Process. (La Rotunda v. Royal Globe Insurance Co. (1980), 87 Ill. App. 3d 446, 451, 408 N.E.2d 928 (“An insurer which contracts to defend its insured must defend any action brought against the insured if the complaint sets forth allegations that bring the claim within or potentially within the risks covered by the policy”).) The complaints were never amended nor were third-party complaints ever filed prior to settlement. It was only after discovery that Royal attempted to shift the responsibility of Process’ defense to GA. Because Royal failed to reserve its professional liability defense and because of the apparent conflict of interest with Process, it cannot now argue that it was not the primary insurer. Accordingly, the circuit court erred in finding that GA’s policy afforded primary coverage.

Because we find that, based upon Royal’s failure to properly reserve its rights or to notify Process of the conflict of interest, the circuit court erred in not granting defendants’ motions for summary judgment, we need not address the issue raised by Royal’s cross-appeal.

For the foregoing reasons, we reverse the judgment of the circuit court of Cook County and remand the cause to the circuit court with orders to grant GA’s and Process’ motions for summary judgment.

Reversed and remanded with directions.

HARTMAN and McCORMICK, JJ., concur.

      Royal’s further contention that, because GA accepted Process’ tender of the defense of another personal injury case which arose out of a different accident at the Domtar construction site, it should have accepted the tender of the defense of the two underlying lawsuits, is meritless.