author: JUSTICE CERDA

text:
    WILTON L. BATTLES, JR., et al., Plaintiffs-Appellants, v. LA SALLE NATIONAL BANK et al., Defendants-Appellees.—WILTON L. BATTLES et al., Plaintiffs-Appellees, v. GERALD E. ANDERSON, Defendant-Appellant.
    First District (3rd Division)
    Nos. 1 — 90—3216, 1—90—3370, 1 — 90—3451 cons.
    Opinion filed December 30, 1992.
    Rehearing denied February 5, 1993.

      Donald L. Johnson, of Chicago, for Wilton L. Battles, Jr., and William P. Rizzo.
    Robert Habib, of Chicago, for Gerald E. Anderson and La Salle National Bank et al.

   JUSTICE CERDA

delivered the opinion of the court:

Plaintiffs, Wilton L. Battles, Jr., and William P. Rizzo, sued defendant, Gerald E. Anderson, for breach of fiduciary duty for selling their partnership real estate to a third party. Defendant’s defense was that the partnership had previously been terminated by mutual agreement of all three partners. Prior to trial, defendant moved for summary judgment on the grounds that Illinois law requires an accounting and a full review of partnership affairs before an action at law can be heard. The trial court denied the motion and the case was tried before a jury.

The jury held defendant liable and awarded plaintiff Battles $60,000 and plaintiff Rizzo $50,000 in compensatory damages. The jury awarded punitive damages in the amount of $0.

Plaintiffs appeal the trial court’s denial of their motion for a new trial on damages only. Defendant appeals the trial court’s denial of his motion for a judgment notwithstanding the verdict in which he renewed his argument that the case should never have gone to trial since an accounting was required. The appeal involves count II of a multicount complaint, which alleges that defendant breached his fiduciary duty to plaintiffs. We affirm both appeals.

At issue is whether a partner may sue another partner without requesting a final accounting where the damages sought were for breach of fiduciary duty in disposing of partnership property.

The initial facts are undisputed. In January 1981, plaintiffs entered into an oral agreement with defendant concerning the development of property in Des Plaines, Illinois. The oral partnership agreement provided:

(1) The three parties would become equal shareholders of Dolphin Land Development Corporation (Dolphin), which was used as nominee to obtain options;

(2) Plaintiffs would acquire options to three parcels of property and would do the work necessary to have the property rezoned, including the land planning, architectural plans, preparation of plans for the property as developed, traffic studies, engineering studies, plans, and the zoning presentation to the municipality;

(3) Defendant would provide the money necessary to acquire the property and advance the funds to pay for the preliminary plans and studies;

(4) The partnership would obtain a construction loan for an office building once the parcels were assembled and rezoned;

(5) The three partners would seek tenants for the building themselves and through brokers;

(6) Each partner would have an ownership interest of one-third and that each would share in the profits and losses equally; and

(7) Before plaintiffs would receive any profits or other distributions, defendant would be reimbursed for the money he advanced to acquire the property and to pay for the preliminary costs and expenses.

On March 17, 1981, Dolphin distributed 333 shares of stock to each partner and one share to William P. O’Keefe. Through the Dolphin entity, plaintiffs acquired options on the parcels in Des Plaines on behalf of the partnership. The property was successfully rezoned in the fall of 1982.

The remaining facts are contested. According to plaintiffs, defendant informed them in the summer of 1982 that he wanted a new lawyer, Paul Rosenblum, to represent the partnership. Plaintiffs agreed, and Rosenblum became the partnership’s attorney in September 1982. Defendant claims that Rosenblum represented him individually, not the partnership.

Rosenblum testified that he initially became involved with the Dolphin project when he participated in negotiations of a joint venture agreement with a savings and loan institution. Later, he was involved in the closing transactions of the three parcels. He also testified, however, that he told plaintiffs that he represented only-defendant and that they should obtain their own counsel to represent their interest in the negotiations. In contrast, Rizzo testified that Rosenblum did not tell him at the meeting that he represented only defendant and that plaintiffs had a right to obtain their own attorney.

On January 18, 1983, Rosenblum sent a letter to defendant and Battles advising that the property’s closing was imminent and its escrow had been opened. Defendant then set up a meeting with the three partners in Rosenblum’s law office regarding the property’s acquisition and development. According to Battles, defendant told him that the meeting was to discuss the final details of a pending financing arrangement. Battles testified that Rosenblum and defendant informed him and Rizzo at the January 19 meeting that they had to sign a memorandum of understanding (Memorandum) in order to get the financing to close on the first parcel. Plaintiffs contend that defendant and Rosenblum explained that defendant had to be in sole control of the property’s title in order for the partnership to acquire the money to close on the first optioned parcel. According to plaintiffs, defendant and Rosenblum represented that the execution of the Memorandum would not affect plaintiffs’ interest in the partnership or the property owned by the partnership and that defendant would be acting for and on behalf of the partnership. Relying on those representations, plaintiffs signed the Memorandum.

The Memorandum provided that plaintiffs assigned all their rights in the property to defendant. Plaintiffs testified that they never intended or agreed to give up their property or partnership rights. Defendant denies that he had made false representations to plaintiffs regarding the reason they should sign the Memorandum, which defendant maintains dissolved the partnership.

In defendant’s response to plaintiffs’ appeal, he asserts that Rosenblum testified at trial that the Memorandum was used to protect Battles against a $40,000 judgment by Golf Mill State Bank and was presented to the bank with Battles’ knowledge in the pending citation proceedings. The record indicates, however, that Rosenblum stated that he sent a letter to defendant, with copies to Battles, proposing to send Golf Mill State Bank a copy of the Memorandum, which negates plaintiffs’ having any future interest in the property’s development. Rosenblum testified that he did not remember whether the bank had obtained a judgment against Battles. In addition, Rizzo testified that Battles’ financial problems with the bank were discussed in a general way at the January 19 meeting, but he did not know about a judgment.

Regarding the January 19 meeting, Rosenblum testified that his impression was that plaintiffs knowingly relinquished any interest they had in the property. According to Rosenblum, he prepared the Memorandum during the meeting and neither plaintiff objected. Rosenblum further testified that defendant clearly stated he would not invest any more money in this project unless he had sole control.

Rosenblum denied telling plaintiffs that the document was merely required in order to tell Merchants National Bank that defendant was the sole owner so that financing could be obtained. Furthermore, Rosenblum testified, after January 19, 1983, defendant was free to negotiate with anyone he chose in the sale of the property.

Also on January 19, 1983, Rosenblum drafted an instrument by which Dolphin assigned all its contract rights to the partnership property to the Merchants National Bank of Aurora, as trustee under trust number 344. Plaintiffs testified that this assignment was made in reliance on the statements and promises of defendant and Rosenblum.

At that same meeting, Battles agreed that the $4,500 real estate commission due him on the purchase of partnership property would be used for the partnership’s benefit. Battles testified that he would not have contributed his commission to the deal if he were giving up his rights in the partnership. When a closing occurred on one of the parcels in February 1983, the commission went toward the purchase price and Rosenblum’s legal fees.

After January 19, 1983, Rosenblum and other attorneys of his law firm were involved with Battles and defendant in negotiations with potential lenders, potential joint venture partners, and in search of tenants for the development. On March 25, 1983, Rosenblum sent a letter to Hugo Tagli, who was the attorney for the sellers of the second parcel. The letter was an option agreement between defendant and the seller. Copies of the letter went to defendant and Battles, but only defendant got the agreement. Rosenblum sent letters about the option to defendant with a copy to Battles on April 6, 1983, and April 15, 1983. On April 28, 1983, Rosenblum sent Battles copies of the executed option agreements on the remaining two parcels. During the fall of 1983, Rosenblum stopped sending Battles copies of his correspondence with defendant regarding the parcels.

Throughout 1983 and until June 20, 1984, plaintiffs and defendant attempted to secure tenants and a construction loan for their proposed building. Battles testified that he had about 27 meetings after January 19, 1983, regarding the development. Nineteen of those meetings included defendant. At those meetings, Battles and defendant held themselves out as partners to lenders, brokers, mortgage bankers, prospective tenants, and others by expressly stating that they were partners with regard to the property.

Stephan Pojman, a real estate and mortgage loan broker, testified that he worked with Battles and defendant in 1983 to obtain a loan commitment for the Dolphin project. During a meeting in March 1983, Battles and defendant represented that they were partners. When Battles was out of the room, defendant complained to Pojman that he was a one-third partner yet he was expected to come up with all the money for the venture.

Jay Wheeler, vice-president of First Interstate Mortgage Company, testified that he met with Battles and defendant in March 1983 regarding the Dolphin project. At the meeting, both men told Wheeler that they were partners. Wheeler was informed that Battles was handling the zoning and planning while defendant was the financial partner. On June 13, 1983, Wheeler sent a letter to both men exploring potential financing for the project.

On February 28, 1984, Rosenblum advised the subsequent purchaser that he should promptly pay the creditors and strike whatever deal was necessary with plaintiffs. The purchaser then closed on the first of the three parcels. The remaining two parcels closed later in 1984. Rosenblum prepared the documents for the purchase of defendant’s interest in the property.

In June 1984, the partnership began receiving rental income, which Battles collected and deposited in Dolphin’s checking account. Defendant claims that he had no knowledge of the existence of those rental incomes.

Plaintiffs testified that they were not aware that defendant had made agreements to sell the property and options until June 20, 1984, when defendant informed them that he had conveyed his interest in the partnership property. At first, plaintiffs were happy that defendant sold his one-third interest to a financial source because they thought it meant that they finally could go ahead with the project. However, when Battles asked defendant for the purchaser’s phone number so that he could call his new partner, defendant refused. The meeting then came to an abrupt end.

After the meeting, plaintiffs obtained a new attorney, Tobin Richter, and gave the subsequent purchaser notice of their legal interest in the property. Richter testified that defendant informed him that he conveyed the property to a third party to shield it from his wife, who had sued him for divorce.

On July 31, 1984, plaintiffs filed a lawsuit against several defendants for a constructive trust. Count II of plaintiffs’ fifth amended complaint made claims against defendant for breach of his fiduciary duty to plaintiffs. During discovery, plaintiffs learned that defendant had let the options on the other two parcels lapse. Then, a short time later, he picked up the options at the same price to which the partnership had agreed.

On May 29, 1990, defendant filed a motion for summary judgment and a supporting memorandum of law in which he argued that a general partner cannot sue another general partner in Illinois until a final accounting of the partnership has been obtained. Since plaintiffs had not requested a final accounting, defendant maintained that the lawsuit was premature. Plaintiffs responded that a partner could sue another partner where the damages sought belonged to the partner and not the firm. The trial court denied the summary judgment.

Neil King, a real estate appraiser, testified as an expert witness for plaintiffs. King stated that the property had a fair market value at the time of trial of $2,548 million. Because of the relationship of the property to adjoining landlocked property, King opined that the property value increased to $3.8 million. King admitted on cross-examination, however, that the owner of the adjoining property was unable to get the necessary zoning and had no plans to obtain the property.

At the close of plaintiffs’ case in chief, defendant moved for a directed verdict on the grounds that there was insufficient evidence for the jury to determine damages and that sections 38 and 40 of the Uniform Partnership Act (Ill. Rev. Stat. 1987, ch. 106½, pars. 38, 40) provided that there could only be a distribution of assets after the creditors, including the creditor partner, had been paid. The trial court denied the directed verdict.

The case went to the jury on the issue of whether defendant had breached his fiduciary duty as a partner and, if so, what damages would be awarded. The jury awarded Battles $60,000 and Rizzo $50,000 in compensatory damages. They also signed a verdict form awarding punitive damages to both plaintiffs, but filled in the amount of the award as $0.

Defendant filed a motion for a judgment notwithstanding the verdict, claiming that the lawsuit was fatally premature because a full review of partnership affairs was absolutely required to determine whether defendant’s actions caused plaintiffs any damage. Plaintiffs filed a motion for a new trial on the damages only. Both motions were denied and this appeal followed.

The main issue raised by defendant on appeal is whether this lawsuit is premature because Illinois law requires an accounting of the partnership affairs before damages can be determined. Initially, plaintiffs reply that the denial of defendant’s summary judgment motion is not reviewable by this court because it merged into the trial.

When an issue raised in a denied motion for summary judgment is then decided at trial, the order denying the summary judgment is merged into the judgment entered at trial and is generally not appealable. (Carpenter v. Mobile World, Inc. (1990), 194 Ill. App. 3d 830, 838.) The rationale for this rule is that it would be unjust to the prevailing party, who won a judgment after the evidence was more completely presented. In re Marriage of Adams (1988), 174 Ill. App. 3d 595, 607.

In this case, however, the issue of whether an accounting was necessary was a question of law that was not before the jury. The jury entered its verdict on the issue of whether defendant breached a fiduciary duty and the damages to be awarded. The summary judgment denial did not merge into the judgment because the trial did not deal with the issue raised in the motion for summary judgment. Therefore, the trial court’s denial of the motion for summary judgment is properly reviewable by this court.

Before considering the main issue, we point out that both parties raise several arguments that either contain no cites to the record or are not supported by evidence in the record. Therefore, we do not consider those arguments.

The main issue is whether this lawsuit is premature because there was no prior accounting of the partnership affairs. Generally, a partner cannot sue a copartner on a matter concerning the partnership until there has been a final settlement of the partnership accounts. (See Frink v. Ryan (1841), 4 Ill. 322, 326; Schlossberg v. Corrington (1980), 80 Ill. App. 3d 860, 866; Marcus v. Green (1973), 13 Ill. App. 3d 699; Mayhew v. Craig (1929), 253 Ill. App. 238, 241.) The rationale behind this rule is that the resolution of disputes between partners on partnership matters usually entails a complete accounting in order to ascertain that the partner who claims some amount from his copartner is not liable to his copartner in connection with other partnership debts. Mayhew, 253 Ill. App. at 241.

This rule has been explained in several ways. In Marcus (13 Ill. App. 3d at 708-09), the court listed numerous exceptions to the rule that made the rule inapplicable, including when the joint property has been wrongfully destroyed or converted or when one partner has been guilty of fraud that results in defeating the rights of the complaining party. The court in Balcor Income Properties, Ltd. v. Arlen Realty, Inc. (1981), 95 Ill. App. 3d 700, 702, expressed that a partner or partnership can bring an action against a copartner only if the plaintiff’s claim can be decided without a full review of the partnership accounts.

We find that an accounting is not necessary in this case. The lawsuit can be resolved without a full review of the partnership’s accounts. The partnership agreement was that defendant would advance any necessary funds and that plaintiffs would contribute their time and expertise in obtaining the zoning and other pertinent matters. It was only when the partnership was making a profit that defendant would have been entitled to be reimbursed. Before the partnership could make a profit, however, defendant wrongfully transferred all the partnership’s interest to a third party, thus causing a wrongful termination of the partnership. Furthermore, the jury considered all the relevant financial data when it determined the damages for defendant’s breach of fiduciary duty.

We disagree with defendant’s assertion that the dissolution of the partnership occurred when the Memorandum was signed. There was no dissolution because after the Memorandum was signed, defendant held out to the world that plaintiffs were his partners. A partner’s conduct is considered wrongful when it is done in derogation of the duties imposed by the partnership agreement or by virtue of the nature of the partnership itself. (Monteleone v. Monteleone (1986), 147 Ill. App. 3d 265, 269-70.) Parenthetically, we observe that defendant did not appeal the jury verdict finding that he breached his fiduciary duty to plaintiffs.

Defendant asserts that his rights are covered by section 38(2) of the Partnership Act. (See Monteleone, 147 Ill. App. 3d at 269.) This section of the Act provides in relevant part:

“(2) When dissolution is caused in contravention of the partnership agreement the rights of the partners shall be as follows:
(a) Each partner who has not caused dissolution wrongfully shall have,
* * *
II. The right, as against each partner who has caused the dissolution wrongfully, to damages for breach of the agreement.
(b) The partners who have not caused the dissolution wrongfully, if they all desire to continue the business in the same name, either by themselves or jointly with others, may do so, during the agreed term for the partnership and for that purpose may possess the partnership property, provided they secure the payment by bond approved by the court, or pay to any partner who has caused the dissolution wrongfully, the value of his interest in the partnership at the dissolution, less any damages recoverable under clause (2a II) of this section, and in like manner indemnify him against all present or future partnership liabilities.
(c) A partner who has caused the dissolution wrongfully shall have:
* * *
II. If the business is continued under paragraph (2b) of this section the right as against his co-partners and all claiming through them in respect of their interests in the partnership, to have the value of his interest in the partnership, less any damages caused to his co-partners by the dissolution, ascertained and paid to him in cash, or the payment secured by bond approved by the court, and to be released from all existing liabilities of the partnership; but in ascertaining the value of the partner’s interest the value of the good will of the business shall not be considered.” Ill. Rev. Stat. 1987, ch. 106½, par. 38(2).

However, because plaintiffs did not continue the partnership after discovering that defendant had wrongfully transferred all the partnership rights to a third party and because there was no dissolution after the Memorandum was signed, section 38(2) of the Partnership Act does not apply.

In their cross-appeal, plaintiffs assert that the trial court erred in denying their motion for a new trial on damages only. Since the jury awarded both plaintiffs compensatory damages and found defendant liable for punitive damages, but assessed those damages at $0, plaintiffs argue that the jury disregarded the jury instructions. Plaintiffs do not raise the inadequacy of the compensatory damages, but only the inadequacy of the punitive damages. They argue that the assessment of $0 in punitive damages makes a mockery of the verdict.

To be inadequate, the damages must be clearly against the manifest weight of the evidence in that the size of the award is a result of passion or prejudice, where the amount is palpably inadequate, or where the jury disregarded proven elements of damages. (Barr v. Groll (1991), 208 Ill. App. 3d 318, 322.) Even though punitive damages can be awarded when a wrongful act involves a violation of a fiduciary duty (Home Savings & Loan Association v. Schneider (1985), 108 Ill. 2d 277, 284), the amount of any such award does not have to be proportionate to the compensatory damages. (Hazelwood v. Illinois Central Gulf R.R. (1983), 114 Ill. App. 3d 703, 711.) The amount of punitive damages is a matter for the jury’s sound discretion. Warren v. LeMay (1986), 142 Ill. App. 3d 550, 581.

A challenged jury verdict must be examined to ascertain the jury’s intention in returning the verdict. (Anderson v. Smith (1980), 91 Ill. App. 3d 938, 940.) If the verdict is supported by the pleadings and evidence, it must be liberally construed and may be molded into form unless it is unclear or there is doubt as to its meaning. (Anderson, 91 Ill. App. 3d at 940.) Moreover, in Illinois, punitive damages are not favored. Hammond v. North American Asbestos Corp. (1983), 97 Ill. 2d 195, 211.

The jury determined that defendant wrongfully terminated the partnership and awarded specific compensatory damages to both plaintiffs. Although the jury signed a verdict form that found for both plaintiffs and against defendant on the question of punitive damages, which they assessed in the sum of $0, it is clear that the jury intended that no punitive damages be awarded. Since punitive damages are not favored, the jury did not abuse its discretion in awarding $0 in punitive damages. Therefore, the trial court did not err in denying plaintiffs’ motion for a new trial on damages only.

Based on the foregoing, we affirm the circuit court’s denial of defendant’s motion for a judgment notwithstanding the verdict and plaintiffs’ motion for a new trial on damages only.

Affirmed.

RIZZI and GREIMAN, JJ., concur.


source: Caselaw Access Project

author: JUSTICE RIZZI

license: Public Domain

text:
    THE PEOPLE OF THE STATE OF ILLINOIS, Respondent-Appellee, v. DAVID ALLEN, Petitioner-Appellant.
    First District (3rd Division)
    No. 1 — 91—0123
    Opinion filed December 30, 1992.
    Rita A. Fry, Public Defender, of Chicago (Beth I. Solomon, Assistant Public Defender, of counsel), for appellant.
    Jack O’Malley, State’s Attorney, of Chicago (Renee Goldfarb, Guy L. Miller, and Sandra Z. Nueschen, Assistant State’s Attorneys, of counsel), for the People.
   JUSTICE RIZZI

delivered the opinion of the court:

Petitioner, David Allen, appeals from an order of the circuit court dismissing his petition for post-conviction relief brought pursuant to the Post-Conviction Hearing Act. (Ill. Rev. Stat. 1989, ch. 38, par. 122 — 1 et seq.) Petitioner was convicted of one count of first degree murder (Ill. Rev. Stat. 1985, ch. 38, par. 9 — 1), two counts of attempted murder (Ill. Rev. Stat. 1985, ch. 38, pars. 8 — 4, 9 — 1) and one count of armed robbery (Ill. Rev. Stat. 1985, ch. 38, par. 18 — 2) in a jury trial and sentenced to an extended term of natural life imprisonment and three consecutive terms of 30 years’ imprisonment. Direct appeal of petitioner’s convictions was affirmed by this court on March 31, 1992. (See People v. Allen (1992), 228 Ill. App. 3d 149, 592 N.E.2d 447.) In the present case, petitioner filed a petition for post-conviction relief alleging, inter alia, that he did not receive effective assistance of counsel when his trial attorney failed to request and produce a fingerprint analysis. Within 30 days after the filing and docketing of the petition, the trial court dismissed the petition on the grounds that it was frivolous, without merit and lacking a constitutional issue. The sole issue on appeal is whether the trial court erred when it summarily dismissed petitioner’s post-conviction petition. We affirm.

Any person imprisoned in the penitentiary may file a petition for post-conviction relief asserting that there was a substantial denial of his constitutional rights in the proceeding which resulted in his conviction. (Ill. Rev. Stat. 1989, ch. 38, par. 122 — 1.) In order to obtain an evidentiary hearing pursuant to a post-conviction petition, a petitioner must make a substantial showing, supported by affidavits, records or other evidence containing specific facts, that his constitutional rights have been violated. (People v. Barr (1990), 200 Ill. App. 3d 1077, 1080, 558 N.E.2d 778, 780.) Within 30 days after the filing and docketing of such petition, the trial court may dismiss the petition on the grounds that it is frivolous or patently without merit. (Ill. Rev. Stat. 1989, ch. 38, par. 122 — 2.1(a)(2).) The decision of the trial court to deny an evidentiary hearing on a post-conviction petition is discretionary, and that decision will not be disturbed on appeal absent an abuse of discretion. People v. Dean (1992), 226 Ill. App. 3d 465, 467, 589 N.E.2d 888, 890.

Petitioner argues that his petition contains sufficient factual allegations to support a meritorious constitutional claim. After reviewing the petition for post-conviction relief and the record of the case in its entirety, we find that the trial court did not abuse its discretion when it dismissed the petition as frivolous and without merit.

Accordingly, the judgment of the circuit court is affirmed.

Affirmed.

TULLY and CERDA, JJ., concur.


text:
      In re ESTATE OF THOMAS F. KELLY, SR., Deceased (Thomas S. Chuhak, Adm’r with the Will Annexed, Respondent-Appellee, v. Thomas F. Kelly, Jr., et al., Claimants-Appellants).—THOMAS F. KELLY, JR., Plaintiff-Appellant, v. WABASH PUBLISHING COMPANY, INC., et al., Defendants-Appellees.
    First District (3rd Division)
    Nos. 1 — 91—0536, 1—91—0804 cons.
    Opinion filed December 30, 1992.

      Jerome H. Torshen, Abigail K. Spreyer, and Steven P. Garmisa, all of Chicago, for appellant Thomas F. Kelly, Jr.
    James D. Murphy and Gary W. Seyring, both of Chicago, for appellant Estate of Patricia W. Kelly.
    Walter P. Dahl and James E. Dahl, both of Chicago, for appellee Thomas S. Chuhak.
    Robert A. Filpi, of Chicago, for other appellees.
   JUSTICE RIZZI

delivered the opinion of the court:

Claimants, Thomas E Kelly, Jr. (Junior), and the estate of Patricia W. Kelly, deceased, brought claims in the circuit court against respondent, the estate of Thomas F. Kelly, Sr., deceased, asserting ownership of certain stock certificates found in the possession of Thomas F. Kelly, Sr. (Senior), at the time of his death. Thereafter, Junior brought another action in the circuit court seeking declaratory, injunctive and other equitable relief against defendants, Wabash Publishing Company, Inc., Balboa Realty Corporation, Premiere Publishing Company, Inc., Berk Publishing Company, Inc., Thomas S. Chuhak, administrator with will annexed of the estate of Thomas F. Kelly, Sr., Kathleen Morrison and Collette Condon, co-executors of the estate of Patricia W. Kelly, Grace Kelly (Grace), Anamarie Kelly Stoppa (Anamarie) and Alberto Stoppa, to recover his rightful percentage of ownership in the aforementioned corporations (chancery action). In addition, Grace filed an application for a surviving spouse’s award pursuant to section 15 — 1 of the Probate Act of 1975 (Ill. Rev. Stat. 1987, ch. ÍKPA, par. 15 — 1) against the estate of Thomas F. Kelly, Sr. The actions were consolidated for trial. Following a bench trial, the trial court denied claimants’ claims against the estate of Thomas F. Kelly, Sr., and entered judgment in the chancery action in favor of defendants. The trial court also granted Grace’s application for a surviving spouse’s award.

On appeal, claimants contend that (1) the denial of their claims and the entry of judgment in favor of the estate of Thomas F. Kelly, Sr., and defendants is contrary to the manifest weight of the evidence; (2) the order granting Grace’s application for a surviving spouse’s award is not supported by the pleadings or evidence; (3) the trial court erred when it based its ruling on personal knowledge of facts not admitted into evidence; (4) the trial court erred when it failed to properly apply conclusive judicial admissions; (5) the trial court erred when it failed to apply the doctrine of contemporaneous construction; (6) the trial court erred when it precluded testimony pursuant to the Dead Man’s Act (Ill. Rev. Stat. 1989, ch. 110, par. 8— 201); (7) the trial court erred when it based its ruling on inadmissible hearsay testimony; and (8) the trial court erred when it failed to shift the burden of persuasion pursuant to section 8 — 105 of the Illinois Uniform Commercial Code (Ill. Rev. Stat. 1985, ch. 26, par. 8 — 105). We reverse and remand.

In 1956, Senior, Junior and George Kelly (George) registered as a partnership doing business under the assumed name “Illinois Sports News” with the State of Illinois. In 1964, Senior, Junior and George incorporated the partnership into four separate corporations, Wabash Publishing Company, Balboa Realty Corporation, Premiere Publishing Company and Berk Publishing Company (Kelly corporations). In 1968, Senior and Junior purchased George’s shares in the Kelly corporations. In 1969 and 1970, all outstanding shares in the Kelly corporations were redeemed and new stock certificates were issued in the names of Junior, Patricia, Grace and Anamarie. When the new certificates were distributed, Senior directed Junior, Patricia, Grace and Anamarie to endorse the certificates in blank and return them to him. They complied, and the certificates were placed in the corporate safe where they remained until 1986. In July 1986, Patricia died. In October 1986, Senior removed the stock certificates from the corporate safe, declared himself sole shareholder of the Kelly corporations and reissued the shares of the corporations in his name. In November 1988, Senior died. Thereafter, claimants brought this consolidated action in the circuit court asserting their rightful percentage of ownership in the Kelly corporations. In addition, Grace filed an application for a surviving spouse’s award: Following a bench trial, the trial court ruled that Junior, Patricia, Grace and Anamarie were merely “fronts” for Senior’s ownership of the Kelly corporations and entered judgment on all claims against claimants and in favor of the estate of Thomas F. Kelly, Sr., and defendants. The trial court also granted Grace’s application for a surviving spouse’s award and entered judgment in favor of Grace and against the estate of Thomas F. Kelly, Sr., in the amount of $150,000. This appeal followed.

Claimants first contend that the denial of their claims and the entry of judgment in favor of the estate of Thomas F. Kelly, Sr., and defendants is contrary to the manifest weight of the evidence. A person in possession of an investment security which has been endorsed in blank is entitled to recover on the security unless a defense or defeet going to the validity of the security is established. (Ill. Rev. Stat. 1985, ch. 26, pars. 1 — 201(20), 8 — 105.) At trial, claimants advanced the. defense that Senior is not the rightful owner of shares in the Kelly corporations issued in their names because they neither sold nor made valid inter vivos gifts of these shares to him. The trial court ruled, however, that claimants failed to establish this defense. After reviewing the record, we find that claimants established this defense by clear and convincing evidence. Accordingly, the denial of claimants’ claims and the entry of judgment in favor of the estate of Thomas F. Kelly, Sr., and defendants is contrary to the manifest weight of the evidence.

After Senior and Junior purchased George’s shares in the Kelly corporations, they each owned approximately one-half of the shares in Wabash Publishing Company, Balboa Realty Corporation and Premiere Publishing Company. Senior also owned two-thirds of the shares in Berk Publishing Company while Junior owned the remaining one-third. In 1969 and 1970, all outstanding shares in the Kelly corporations were redeemed and new stock certificates were issued in the names of Junior, Patricia, Grace and Anamarie. The estate of Patricia W. Kelly argues that Senior and Junior made valid inter vivos gifts of 20% of the shares in the Kelly corporations to Patricia when the new certificates were issued in her name and distributed to her. Junior further argues that Senior contemporaneously made a gift of 300 shares in Berk Publishing Company to him at this time. Junior acknowledges that he made a gift of 10% of the shares in the Kelly corporations to Patricia when the shares were redeemed and reissued in 1969 and 1970. Senior, however, denies that he made a gift of his shares in the Kelly corporations to anyone at anytime.

A gift is a voluntary, gratuitous transfer of property by one to another where the donor manifests an intent that there be a present and irrevocable transfer of title to the subject matter of the gift, including relinquishment of all present and future dominion and control of the subject matter of the gift, and the donor absolutely and irrevocably delivers the subject matter of the gift to the donee. (Little City Foundation v. Capsonic Group, Inc. (1992), 231 Ill. App. 3d 122, 125-26, 596 N.E.2d 146, 148.) The record here establishes by clear and convincing evidence that Senior intended to irrevocably transfer title of his shares in the Kelly corporations to Junior, Patricia, Grace and Anamarie when the new stock certificates were issued and distributed to them. While Senior contends that he never relinquished absolute dominion and control over his shares, filings with the Internal Revenue Service, the United States Postal Service as well as the corporate minutes and records of the Kelly corporations evince Senior’s irrevocable delivery of his shares to Junior, Patricia, Grace and Anamarie. We, therefore, conclude that Senior made valid inter vivos gifts of 300 shares in Berk Publishing Company to Junior, 20% of the shares in each of the Kelly corporations to Grace and Anamarie, and 10% of the shares in each of the Kelly corporations to Patricia when the shares were redeemed and reissued in 1969 and 1970.

Claimants argue that they never relinquished ownership of the shares of the Kelly corporations issued in their names because they neither sold nor made valid inter vivos gifts of the shares. We agree. Senior does not contend that he is a bona fide purchaser of claimants’ shares. (See Ill. Rev. Stat. 1985, ch. 26, par. 8 — 302.) Moreover, it is plain that claimants did not make valid inter vivos gifts of their shares to Senior when they endorsed the stock certificates in blank and returned them to him because they continued to vote their shares, receive dividends and otherwise maintain dominion and control of the shares between 1970 and 1986. (See In re Estate of Heilman (1976), 37 Ill. App. 3d 390, 396-97, 345 N.E.2d 536, 541; In re Estate of Waggoner (1955), 5 Ill. App. 2d 130, 140-41, 125 N.E.2d 154, 159 (no delivery of subject matter of gift where donor continues to vote shares or receive dividends).) We therefore hold that claimants established the following ownership of shares in the Kelly corporations as of July 7,1986:

Claimants next contend that the order granting Grace’s application for a surviving spouse’s award in the amount of $150,000 is not supported by the pleadings or evidence. We agree. The record does not contain specific facts upon which the trial court could make a determination of Grace’s present or future financial needs or the condition of the estate of Thomas F. Kelly, Sr. (Ill. Rev. Stat. 1987, ch. 110½, pars. 15 — 1, 15 — 3; In re Estate of Caffrey (1983), 120 Ill. App. 3d 917, 921, 458 N.E.2d 1147, 1150.) Furthermore, we are unable to determine from the record the reasonableness of the award. We therefore hold that the order granting Grace’s application for a surviving spouse’s award in the amount of $150,000 is vacated without prejudice for further proceedings.

Accordingly, the judgment of the circuit court is reversed and the case is remanded for further proceedings in accordance with what is stated herein.

Reversed and remanded.

TULLY and CERDA, JJ., concur.


text:
    JONATHAN P. ARNOLD, Plaintiff-Appellee, v. MARIA THURSTON et al., Defendants (The Department of Transportation et al., Appellants).
    First District (3rd Division)
    No. 1 — 91—1557
    Opinion filed December 30, 1992.
    Roland W. Burris, Attorney General, of Springfield (Rosalyn B. Kaplan, Solicitor General, and Jan E. Hughes, Assistant Attorney General, of Chicago, of counsel), for appellants.
    McBride, Baker & Coles, of Chicago (Robert W. Queeney and Thomas R. Stilp, of counsel), for appellee.
   JUSTICE CERDA

delivered the opinion of the court:

Appellants, Illinois Department of Transportation (IDOT), and Nancy Zaczek, assistant chief counsel for IDOT, appeal from an order compelling them to comply with the subpoena duces tecum of plaintiff, Jonathan P. Arnold, and finding them in contempt of court for failure to comply. Appellants argue that they failed to comply with the subpoena because they had a statutory duty to maintain the confidentiality of accident reports in their possession. We reverse.

On May 17, 1989, plaintiff issued a subpoena duces tecum to IDOT for:

“Any and all information including the IDOT Report No. 3657317 relating to an accident involving Jonathan P. Arnold and Maria Thurston on August 14, 1986 at the intersection of Sacramento Blvd. and Polk Street in Chicago.”

The subpoena was issued in plaintiff’s lawsuit against defendants, Maria Thurston and the City of Chicago.

Plaintiff filed a motion to compel based on IDOT’s statement that the documents would not be produced because they were allegedly confidential pursuant to the Illinois Vehicle Code (Ill. Rev. Stat. 1991, ch. 951/2, pars. 11 — 408,11—412).

Plaintiff filed a motion to compel production of these documents. Plaintiff argued the following. He desired the report for impeachment purposes. Thurston testified in her deposition that she came to a complete stop before entering the intersection even though there was no stop sign. She also testified that after the accident she retained counsel to sue the City of Chicago. Her “past actions to sue” were inconsistent with the testimony that she stopped. She also testified that she made an accident investigation report while hospitalized.

The trial court ordered that IDOT comply with the subpoena, including documents and reports that may be claimed as confidential or privileged. IDOT moved to vacate the order to produce. The motion was denied.

Plaintiff moved for entry of an order for a rule to show cause based on IDOT’s failure to produce the documents. The motion was granted. Upon IDOT’s refusal to comply with the production order, IDOT’s counsel was found in contempt of court. IDOT was ordered to pay $20 a day until it complied with the production order. The order was stayed pending compliance or appeal.

IDOT and its counsel, Zaczek, appealed from the production order, the order denying the motion to vacate, and the contempt order.

Appellants argue that the trial court erred because IDOT had a statutory duty to maintain the confidentiality of the accident reports in its possession. Appellants refer to section 11 — 412 of the Illinois Vehicle Code, which provides:

“All required written motor vehicle accident reports and supplemental reports shall be without prejudice to the individual so reporting and shall be for the confidential use of the Department and the Secretary of State and, in the case of second division vehicles operated under certificate of convenience and necessity issued by the Illinois Commerce Commission, of the Commission, except that the Administrator or the Secretary of State or the Commission may disclose the identity of a person involved in a motor vehicle accident when such identity is not otherwise known or when such person denies his presence at such motor vehicle accident and the Department shall disclose the identity of the insurance carrier, if any, upon demand. The Department may furnish copies of its written accident reports to federal and State agencies that are engaged in highway safety research and studies. Reports furnished to any agency other than the Secretary of State or the Illinois Commerce Commission may be used only for statistical or analytical purposes and shall be held confidential by that agency. No such written report shall be used as evidence in any trial, civil or criminal, arising out of a motor vehicle accident, except that the Administrator shall furnish upon demand of any person who has, or claims to have, made such a written report, or upon demand of any court, a certifícate showing that a specified written accident report has or has not been made to the Administrator solely to prove a compliance or a failure to comply with the requirement that such a written report be made to the Administrator.
The Department of Transportation at its discretion may provide for in-depth investigations of accidents involving Department employees. A written report describing the preventability of such an accident may be prepared to enhance the safety of Department employees. Such reports and any opinions expressed in the review of the accident as to the preventability of the accident shall be for the privileged use of the Department and held confidential and shall not be obtainable or used in any civil or criminal proceeding.” Ill. Rev. Stat. 1991, ch. 951/2, par. 11-412.

Appellants also argue the following. The Code also provides that a driver of a vehicle involved in an accident resulting in injury or death or in which damage exceeds $500 shall forward a written report of the accident to IDOT. (Ill. Rev. Stat. 1991, ch. 951/2, par. 11 — 406.) Section 11 — 412, quoted above, provides that these reports shall be without prejudice to the reporting individual and will be for the confidential use of IDOT and the Secretary of State. The report cannot be used as evidence in any trial arising out of a motor vehicle accident.

Appellants further argue the following. The legislature intended that accident reports not be used for any purpose. Use of the accident report for impeachment purposes is inconsistent with the legislative mandate that the reports are to be without prejudice to the reporting individual. The statute provides for only one occasion (the furnishing of a certificate showing that the report had or had not been made) when IDOT was to comply with a court order to produce information. Even in that instance, the report remains confidential.

Plaintiff responds as follows. The statute does not preclude discovery of the report. IDOT had the burden of showing that it was exempt from the discovery rules. The statute distinguishes between reports that cannot be used as evidence and reports that are not obtainable.

The parties discuss Cox v. Yellow Cab Co. (1973), 16 Ill. App. 3d 665, 306 N.E.2d 738. In Cox, plaintiff in a personal injury action appealed from the trial court’s refusal to direct defendant taxicab company to produce the written statement made by the driver of a taxicab. Defendant argued that the statement was the driver’s report to the Department of Public Works and Buildings of the State of Illinois (apparently the predecessor of IDOT) as required by section 11 — 406 of the Illinois Vehicle Code (Ill. Rev. Stat. 1971, ch. 951lz, par. 11— 406) and that the confidential report could not be used as evidence in any trial arising out of an accident (Ill. Rev. Stat. 1971, ch. 951/2, par. 11 — 412). The court noted that it did not know if the statement was a report to the insurance carrier or to the Department. (Cox, 16 Ill. App. 3d at 669.) But the court held that the statement bore upon the driver’s credibility, was relevant to plaintiff’s case, and plaintiff was entitled to see the statement. Cox, 16 Ill. App. 3d at 669.

The Illinois Supreme Court affirmed in an opinion that noted that the record did not reveal whether defendant ever forwarded the statement to the Illinois Division of Highways. (Cox v. Yellow Cab Co. (1975), 61 Ill. 2d 416, 420, 337 N.E.2d 15.) The court held that production of the statement should have been required in the absence of facts proving the existence of any privilege. Cox, 61 Ill. 2d at 420.

Unlike Cox, in the present case there is no question whether the accident report was filed with IDOT. The issue, then, is whether production was prohibited by the statute.

Section 11 — 412 provides that the required accident report is confidential and cannot be used as evidence. There are two limited exceptions to the confidentiality provision for the cases of disclosing the identity of a person involved in a motor vehicle accident and disclosing the identity of any insurance carrier. In contrast, IDOT reports are stated to be privileged and not obtainable. Although the provision on the required accident report does not explicitly state that the documents either are not obtainable or are privileged, the intent appears to be that the documents are confidential and are not to be disclosed.

Even if the statute were not construed in this manner, Supreme Court Rule 201(b)(2) would apply to prevent the report’s discovery because the statute provides that the report may not be used as evidence at a trial. The rule, which neither party discusses, provides that “[a]ll matters that are privileged against disclosure on the trial *** are privileged against disclosure through any discovery procedure.” 134 Ill. 2d R. 201(b)(2).

The order compelling appellants to comply with the subpoena duces tecum is reversed on the basis that the accident report was not discoverable.

In addition, the contempt order is reversed. See Howard v. Forbes (1989), 185 Ill. App. 3d 148, 153, 541 N.E.2d 685 (a contempt judgment was vacated where the motivation for the refusal to comply with a subpoena duces tecum was solely to permit appellate review of the question presented).

The judgment of the trial court is reversed, and the cause is remanded.

Reversed and remanded.

RIZZI and TULLY, JJ., concur.


text:
    CHRISTINE JONES et al., Plaintiffs-Appellees, v. H.S. WEAVERS UNDERWRITING AGENCY, Intervenor for University of Chicago Hospitals, Defendant-Appellant.
    First District (3rd Division)
    No. 1 — 91—2187
    Opinion filed December 30, 1992.

      Robert B. Blasio and Linda L. McCarty, both of Chicago, for appellant.
    Dennis M. Feinberg, of Chicago, for appellees.
   JUSTICE RIZZI

delivered the opinion of the court:

Plaintiffs, Christine Jones and Willie Jones, brought this action in the circuit court seeking enforcement of a court-approved settlement order against defendant, H.S. Weavers Underwriting Agency, intervenor for University of Chicago Hospitals. Following a hearing, the trial court granted plaintiffs’ petition and ordered University of Chicago Hospitals to tender the consideration refund issued by the underwriter of the structured settlement annuity to plaintiffs. On appeal, defendant contends that (1) the trial court erred as a matter of law when it ruled that plaintiffs were entitled to the consideration refund; and (2) the trial court erred when it considered parol evidence while interpreting the parties’ settlement agreement. We reverse and remand with directions.

Plaintiffs initially brought an action in the circuit court for personal injuries allegedly caused by University of Chicago Hospitals and other named physicians. On January 31, 1991, the parties entered into a settlement agreement (Settlement Agreement) releasing University of Chicago Hospitals from all past, present and future claims in exchange for an immediate cash payment of $1,586,100 and future periodic payments to plaintiffs guaranteed by the purchase of a structured settlement annuity underwritten by Prudential Life Insurance Company (Prudential). Later that day, the trial court entered an order approving the settlement pursuant to Circuit Court Rule 6.4 (Settlement Order). Circuit Court of Cook County Rule 6.4.

Pursuant to the Settlement Agreement, University of Chicago Hospitals immediately tendered payment to plaintiffs and Prudential. Before Prudential received payment, however, the purchase price of the annuity decreased due to volatile interest rate fluctuations caused by the Persian Gulf War. Thereafter, Prudential issued a consideration refund to University of Chicago Hospitals in the amount of $125,398. After being notified of the existence of the consideration refund, plaintiffs filed a petition to enforce the Settlement Order claiming they were entitled to the consideration refund. Following a hearing, the trial court granted plaintiffs’ petition and ordered University of Chicago Hospitals to tender the consideration refund to plaintiffs. This appeal followed.

Defendant first contends that the trial court erred as a matter of law when it ruled that plaintiffs were entitled to the consideration refund. Interpretation of a settlement agreement is a question of law subject to de novo review by this court. (Chester v. State Farm Mutual Auto Insurance Co. (1992), 227 Ill. App. 3d 320, 325-26, 591 N.E.2d 488, 492; Northern Trust Co. v. Brentwood North Nursing & Rehabilitation Center, Inc. (1992), 225 Ill. App. 3d 1039, 1042, 588 N.E.2d 467, 470.) When two or more instruments are executed by the same parties in the course of the same transaction, the instruments will be considered together and construed with reference to one another. (First National Bank v. Lively (1991), 211 Ill. App. 3d 1, 5, 569 N.E.2d 1247, 1250.) Because the Settlement Agreement and Order here are not subject to more than one interpretation when considered jointly, it is unnecessary to consider parol or extrinsic evidence to determine the intent of the parties. See Quality Lighting, Inc. v. Benjamin (1992), 227 Ill. App. 3d 880, 887, 592 N.E.2d 377, 382.

Defendant argues that the language of the Settlement Agreement establishes that the parties intended for plaintiffs to release defendant from all past, present and future claims in exchange for an immediate cash settlement of $1,586,100 and future periodic payments from the structured settlement annuity. We agree. The Settlement Agreement, which represents the final and complete expression of the parties’ settlement arrangement and sets forth in explicit detail the terms and conditions of the release, contains the following relevant provisions:

“In consideration of the release set forth above, [University of Chicago Hospitals] agree to pay to the individuals named below the sums outlined in this Section 2:
2.1. Payments due at the time of settlement as follows: $1,586,100.00 to Willie Jones, individually, and as temporary guardian of the person of Christine Jones, a disabled person, and Dennis M. Feinberg, attorney.
2.2. Periodic payments made payable to the American National Bank as guardian of the estate of Christine Jones, a disabled person (the ‘Payee’), according to the schedule as follows (the ‘Periodic Payments’):
$6,000.00 payable monthly beginning March 1, 1991, for the life of Christine Jones, guaranteed twenty years (240 payments), increasing at 4% compounded annually;
$200,000.00 guaranteed lump sum payable March 1, 1995;
$300,000.00 guaranteed lump sum payable March 1, 2000;
$400,000.00 guaranteed lump sum payable March 1, 2005.”

After considering the Settlement Agreement and Order together, it is plain that the parties intended the stream of future periodic payments from the annuity, rather than its present cost or cash value, to constitute the underlying consideration of the settlement. While plaintiffs assert that the controlling factor in their decision to execute the Settlement Agreement was the specific dollar amount of the settlement, the Settlement Agreement fails to mention either the present cost of the annuity or the total consideration paid to plaintiffs by defendant for the release. The only reference here to cash value of the annuity or total consideration paid for the release is contained in the Settlement Order, which was prepared by plaintiffs’ attorney merely as a summary of the Settlement Agreement in order to apprise the court of the terms of the settlement pursuant to Circuit Court Rule 6.4. Based on the language of the Settlement Agreement, we hold that the parties intended for plaintiffs to release defendants from all past, present and future claims in exchange for an immediate cash settlement in the amount of $1,586,100 and future periodic payments from the structured settlement annuity. We, therefore, conclude that the trial court erred as a matter of law when it ruled that plaintiffs were entitled to the consideration refund. Under the circumstances, we do not address defendant’s other arguments.

Accordingly, the judgment of the circuit court is reversed and the case is remanded for the entry of an order in accordance with this opinion.

Reversed and remanded with directions.

GREIMAN, P.J., and CERDA, J., concur.


author: PRESIDING JUSTICE GREIMAN

text:
    ROBERT J. ROELS, Plaintiff-Appellant, v. DREW INDUSTRIES, INC., Defendant-Appellee.
    First District (3rd Division)
    No. 1 — 91—3258
    Opinion filed December 30, 1992.

      Robert F. Fuchs and Steven M. Ruffalo, both of Fuchs & Rosalli, Ltd., of Chicago, for appellant.
    Marc P. Seidler and Fredric A. Cohen, both of Rudnick & Wolfe, of Chicago, for appellee.
   PRESIDING JUSTICE GREIMAN

delivered the opinion of the court:

Plaintiff Robert Roels appeals the trial court’s dismissal of his action to recover damages resulting from defendant Drew Industries’ breach of the terms of a written instrument guaranteeing plaintiff’s rights under an employment contract entered into with defendant’s wholly owned subsidiary. The trial court granted defendant’s motion to dismiss pursuant to section 2 — 619 of the Illinois Code of Civil Procedure (Ill. Rev. Stat. 1989, ch. 110, par. 2 — 619) and denied plaintiff’s subsequent motion to reconsider.

The trial court believed that the subsidiary’s merger with another corporation released defendant from performance under the guaranty. Plaintiff argues on appeal that a change in the corporate structure of his employer did not discharge the defendant guarantor where the defendant’s risk of exposure was not materially altered, and the trial court erred when it granted defendant’s section 2 — 619 motion to dismiss where defendant failed to provide an affidavit or testimony supporting its affirmative defenses where such defenses were founded on certain disputed facts.

On December 12, 1984, plaintiff sold defendant his 50% of the shares in Sandberg Manufacturing Company (Sandberg Corporation I), making defendant the sole shareholder of Sandberg Corporation I. On January 9, 1985, plaintiff entered into a written employment agreement with Sandberg Corporation. I in which he agreed, inter alia, to serve as president and director of Sandberg Corporation I for five years, through January 31, 1990, in exchange for: $80,000 per year, a limited cost-of-living increase, a 5% override of pretax profits, four weeks’ vacation, an automobile, and health and life insurance. The agreement also contained a provision prohibiting plaintiff from competing with the employer for five years after termination of the agreement.

On the final signature page of the employment agreement, this guarantee executed by the defendant is set out:

“Guarantee
For valuable consideration, the receipt and adequacy of which is hereby acknowledged, Drew National Corporation, a Delaware corporation, parent of the Company, does hereby guarantee the full and prompt payment and performance of all obligations of the Company contained in the foregoing Employment Agreement for the term thereof.”

Plaintiff asserts that defendant’s attorneys drafted and prepared the employment agreement and guarantee, but defendant does not admit this fact, and the authorship of the provision is immaterial since we are not called upon to construe any ambiguities.

On April 7, 1987, Drew sold all of its shares in Sandberg Corporation I, its wholly owned subsidiary, to JAF Enterprises (JAF). On that same day, Sandberg was merged into JAF, the surviving corporation, and JAF filed an amendment to its articles of incorporation changing its name to “Sandberg Manufacturing Company,” the same name as Sandberg Corporation I. (We refer to the merged Sandberg/JAF company as Sandberg Corporation II.) While defendant retained no interest in Sandberg Corporation II, plaintiff remained as president of the merged company until March 29,1989.

On or about April 1, 1989, all of Sandberg Corporation II’s assets were sold to Strombecker Corporation, and plaintiff worked for that company until January 31, 1990. Plaintiff’s duties under Strombecker were to consolidate Sandberg Corporation II’s assets and operation into the Strombecker facilities. Sandberg Corporation II remained a corporate shell until it was dissolved on October 26, 1989.

Plaintiff contends that between October 1988 and January 31, 1990, under the terms of the employment agreement, plaintiff was due $30,319 which Sandberg Corporation II refused to pay. When plaintiff demanded this sum of defendant, both orally and in writing, pursuant to the guaranty in the 1985 employment agreement, defendant rejected his request. Plaintiff then filed this action alleging that when he was employed by Sandberg Corporation II and Strombecker, he did not receive the amounts promised in salary and perquisites under the 1985 employment agreement, which obligation defendant guaranteed.

Defendant filed a section 2 — 619 motion to dismiss plaintiff’s complaint, presumably pursuant to subsection (a)(9) (Ill. Rev. Stat. 1989, ch. 110, par. 2 — 619(a)(9)), which primarily alleged that because defendant’s sale of the stock of Sandberg Corporation I to JAF, the merger of Sandberg Corporation I into JAF “materially altered the nature of Drew’s [defendant’s] guarantee and substantially increased the risk and burden thereof without Drew’s consent and thereby discharged Drew’s guarantee,” and which the trial court granted.

Section 11.50 of the Business Corporation Act governs the rights and obligations of a corporate merger. (Ill. Rev. Stat. 1989, ch. 32, par. 11.50.) This section provides, inter alia, that a surviving or new corporation formed under a plan of merger or consolidation is “subject to all of the duties and liabilities of a corporation organized under this Act” and “shall thenceforth be responsible and liable for all of the liabilities and obligations of each of the corporations so merged or consolidated.” Ill. Rev. Stat. 1989, ch. 32, pars. 11.50(a)(3), (a)(5).

Accordingly, after the April 7 sale, merger and name change, Sandberg Corporation II remained liable on the employment contract of January 9,1985.

We consider now whether the merger and attendant transfer of the employment contract to the new corporation affect the liability of the defendant under the guaranty.

While Illinois recognizes the general principle of nonassignability of guaranties, that rule is not applied mechanically; rather, the facts of each case determine whether the policy underlying the rule applies. Second National Bank v. Diefendorf (1878), 90 Ill. 396, 407; Harris Trust & Savings Bank v. Stephans (1981), 97 Ill. App. 3d 683, 686, 422 N.E.2d 1136; Claude Southern Corp. v. Henry’s Drive-In, Inc. (1964), 51 Ill. App. 2d 289, 304, 201 N.E.2d 127; Essex International, Inc. v. Clamage (7th Cir. 1971), 440 F.2d 547, 550.

Thus, a guarantor is not released unless the essentials of the original contract have been changed and the performance required of the principal is materially different from that first contemplated. Alton Banking & Trust Co. v. Sweeney (1985), 135 Ill. App. 3d 96, 101, 481 N.E.2d 769; Harris Trust, 97 Ill. App. 3d at 687; Claude Southern, 51 Ill. App. 2d at 304; Bernardi Brothers, Inc. v. Great Lakes Distributing Inc. (7th Cir. 1983), 712 F.2d 1205, 1207; Essex, 440 F.2d at 550.

It is clear that a mere change in the name of the debtor without a change in legal status does not release a guarantor from liability. (Scovill Manufacturing Co. v. Cassidy (1916), 275 Ill. 462, 114 N.E. 181; Alton, 135 Ill. App. 3d at 102; Bernardi, 712 F.2d at 1207.) The seventh circuit in Essex applied Illinois law to establish this standard:

“[A] merger or consolidation involving the creditor corporation does not necessarily discharge a guarantor any more than a mere change in corporate name does. Unless there is some material change in the business dealings between the debtor and the creditor-guarantee and some increase in the risk undertaken by the guarantor, the obligation of the guarantor is not discharged.” Essex, 440 F.2d at 550.

Whether a guarantor is exposed to an increase in the risk it originally undertook is a key variable in determining whether there has been a material change in the guaranty agreement. (United States Shoe Corp. v. Hackett (7th Cir. 1986), 793 F.2d 161, 162; Bernardi, 712 F.2d at 1207; Essex, 440 F.2d at 550; Firstsouth, F.A. v. La Salle National Bank (N.D. Ill. 1988), 699 F. Supp. 1248, 1250.) A guarantor takes a risk in exchange for a benefit; when events beyond the guarantor’s control dramatically increase the risk, the assumptions upon which the contract was founded are undercut. (United States Shoe, 793 F.2d at 162.) The principle that a substantial increase in risk discharges the guaranty rests on the assumption that guarantors would not ordinarily tolerate a substituted increase in risk without seeking something in return. United States Shoe, 793 F.2d at 163.

Defendant cites International Paper Co. v. Grossman (N.D. Ill. 1982), 541 F. Supp. 1236, for the proposition that a guarantor is discharged by the debtor’s merger into another corporation and the resulting termination of the debtor’s existence, and Teledyne Mid-America Corp. v. H O H Corp. (9th Cir. 1973), 486 F.2d 987, for the proposition that a guaranty may not be extended to debts of entities other than the entity whose obligations were expressly guaranteed.

We reject defendant’s rigid interpretation of these cases. In International Paper, the president and chief shareholder of the debtor executed a personal guaranty for trade payables. After the guarantor resigned as president of the debtor corporation and transferred the controlling interest of shares in that corporation, the corporation merged with another and the surviving corporation sought recovery of $200,000 in trade payables that it had amassed since the merger. Similarly in Teledyne, a husband and wife had executed personal guaranties for trade payables at a time when they were majority shareholders. In both International Paper (541 F. Supp at 1241) and Teledyne (486 F.2d at 990), the court determined that the guarantors could not be expected to assume an increased risk for the corporation or where the corporation’s new corporate managers significantly expanded that corporate debt.

United States Shoe properly distinguishes International Paper by determining that the guaranty is terminated or extinguished only where the merger fundamentally alters the risk of the guaranty.

Transfer or assignment of the employment contract to the survivor corporation neither increased nor materially altered the risk of the defendant-guarantor. The 1985 contract establishes an $80,000-per-year salary with a cost of living increase based upon a United States government index and limited to no more than 10% of the annual salary and additional employment perquisites. At all times during the contract period, the sums due plaintiff were within the scope of defendant’s reasonably anticipated liability under the guaranty.

We also note that insofar as the change of ownership in Sandberg Corporation I, it is the defendant that transferred its stock to JAF, the threshold event that allowed the merger and subsequent name change.

While we do not determine that the mere sale of stock is an assent to a change in the guaranty, where a guarantor assents to a change in the contract, he will not be released. Claude, 51 Ill. App. 2d at 303.

A guarantor’s liability is not to be varied or extended beyond the terms of the guaranty. Citicorp Savings v. Ascher (1990), 196 Ill. App. 3d 570, 574, 554 N.E.2d 409; Lincoln Park Federal Savings & Loan Association v. Carrane (1989), 192 Ill. App. 3d 188, 191, 548 N.E.2d 636; Exchange National Bank v. Bergman (1987), 153 Ill. App. 3d 470, 473, 505 N.E.2d 1236; Lawndale Steel Co. v. Appel (1981), 98 Ill. App. 3d 167, 174, 423 N.E.2d 957.

Accordingly, it seems clear that the guaranty is in effect from the execution of the contract in January 1985 through April 1989, when the assets were sold to Strombecker. After that date, plaintiff was employed by Strombecker as previously noted.

In the present case, the defendant provided an absolute guaranty of payment under the terms of plaintiff’s employment contract. The language of the guaranty is not ambiguous or uncertain. It provides that defendant “guarantee[s] the full and prompt payment and performance of all obligations of the company contained in the foregoing employment agreement for the term thereof.”

Defendant chose not to condition its guaranty in any way except with regard to the obligations of the plaintiff to fulfill his obligations under the employment agreement. Where a guarantor offers an absolute guaranty, it is the guarantor’s unconditional promise to be immediately liable upon the principal’s default, without any notice or agreement by the guarantor. Western National Bank v. Moenning (1991), 224 Ill. App. 3d 67, 74, 586 N.E.2d 412; Irving Tanning Co. v. American Classic, Inc. (N.D. Ill. 1990), 736 F. Supp. 161, 163-64.

While a few cases state that a guarantor’s obligation is merely coextensive with that of the principal (State Bank v. Benzing (1943), 383 Ill. 40, 54-55, 48 N.E.2d 333; Mercantile Trust Co. v. Kastor (1916), 273 Ill. 332, 342-43, 112 N.E. 988; Dormeyer v. Haffa (1951), 343 Ill. App. 177, 180-81, 98 N.E.2d 532), it has been held that only guaranties of performance expressly incorporate the terms and conditions of the principal obligation, whereas guaranties of payment are not limited in the same way. Newman-Green, Inc. v. Alfonzo-Larrain R. (N.D. Ill. 1985), 605 F. Supp. 793, 799.

In the case at bar, defendant’s guaranty is one of both performance and payment. Thus, although the principal obligor is no longer in existence, the guaranty may still continue. We cannot say that the parties did not contemplate just such a circumstance where the employing company would cease to remain in business, become bankrupt, or otherwise be unable to provide plaintiff with employment. Nor can we determine from the record whether the plaintiff’s employment contract was a significant and substantial asset that enhanced the purchase price at the time of the transfer of the stock from defendant to JAF.

Therefore, we find that the defendant is likewise liable under the guaranty for the performance of the contract during the period subsequent to the sale of assets from April 1989 until January 31, 1990. It is well established that the proper measure of damages for breach of an employment contract is the sum agreed to be paid under the contract, less what the employee earned or could have earned. (Bessler v. Board of Education of Chartered School District No. 150 (1977), 69 Ill. 2d 191, 198, 370 N.E.2d 1050; Doherty v. Schipper & Block (1911), 250 Ill. 128, 132, 95 N.E.2d 74; Lewis v. Loyola University (1986), 149 Ill. App. 3d 88, 94, 500 N.E.2d 47; Ashe v. Sunshine Broadcasting Corp. (1980), 90 Ill. App. 3d 97, 100, 412 N.E.2d 1142.) Thus, the measure of damages may differ from the agreed sum for the period in which plaintiff was employed by Strombecker, since any salary received from that company would be in mitigation of plaintiff’s damages under the contract.

Since we have considered the issue of defendant’s exoneration, which is denied unless defendant can raise other factual matters by way of answer, the question of the appropriate attachments or affidavits to the section 2 — 619 motion to dismiss is moot.

For all of the foregoing reasons, the trial court’s decision is reversed and this case is remanded for trial.

Reversed and remanded.

TULLY and CERDA, JJ., concur.


author: JUSTICE McCORMICK

text:
    CHERYL ALMGREN, Plaintiff-Appellant, v. RUSH-PRESBYTERIAN-ST. LUKE’S MEDICAL CENTER, Defendant-Appellee.
    First District (2nd Division)
    No. 1 — 89—3263
    Opinion filed December 8, 1992.

      Karlin & Fleisher (Joel M. Kaplan and Charles E. Tannen, of counsel) and David A. Novoselsky & Associates (David A. Novoselsky and Tammy A. Koester, of counsel), both of Chicago, for appellant.
    French, Kezelis & Kominiarek, P.C., of Chicago (Richard G. French, Russell P. Veldenz, and Randall J. Gudmundson, of counsel), for appellee.
   JUSTICE McCORMICK

delivered the opinion of the court:

Cheryl Almgren sued Rush-Presbyterian-St. Luke’s Medical Center for malpractice based in part on the acts of Dr. Renee Mehlinger, a psychiatric resident who treated plaintiff at the hospital. Plaintiff brings an interlocutory appeal from an order permitting defendant’s attorneys to have private discussions with Dr. Mehlinger.

On March 30, 1986, Dr. Mehlinger issued a pass to plaintiff, who was then a psychiatric in-patient in defendant’s care, authorizing plaintiff to leave the hospital. According to the complaint, while plaintiff was out on the pass, she wandered aimlessly in a psychotic state until she was struck by a Chicago Transit Authority (CTA) train in a subway station. She suffered severe injuries.

Plaintiffs attorney scheduled a deposition of Dr. Mehlinger, and prior to the deposition, defendant sought leave to conduct an ex parte interview of Dr. Mehlinger. The trial court granted defendant’s motion, staying enforcement of the order pending this appeal.

The parties agreed that this court has jurisdiction over the interlocutory appeal under the Mental Health and Developmental Disabilities Confidentiality Act (hereinafter Act) (Ill. Rev. Stat. 1991, ch. 91V2, par. 801 et seq.), which provides that any court order permitting or disallowing a therapist’s disclosure of communications with a client “shall be considered a final order for purposes of appeal and shall be subject to interlocutory appeal.” (Ill. Rev. Stat. 1991, ch. 911/2, par. 810(b).) We questioned jurisdiction sua sponte in light of Kmoch v. Klein (1991), 214 Ill. App. 3d 185, 573 N.E.2d 267. In that case, the Appellate Court, Second District, found that the Act’s provision for interlocutory appeal was an unconstitutional infringement upon the supreme court’s rulemaking power. (Kmoch, 214 Ill. App. 3d at 194.) The parties have submitted supplemental briefs. Since the case involves a challenge to the constitutionality of a State statute, we notified the Attorney General of the State of Illinois, who decided not to brief the issue. We find that the Act does not conflict with supreme court, rules since orders appealable under the Act are also appealable under Supreme Court Rule 307(a)(1) (134 Ill. 2d R. 307(a)(1)), which permits interlocutory appeals from orders granting or denying injunctions.

This court looks to the substance and effect of an order, not its form, to determine whether it is an appealable injunctive order. (In re a Minor (1989), 127 Ill. 2d 247, 260, 537 N.E.2d 292.) In In re Marriage of Lombaer (1990), 200 Ill. App. 3d 712, 558 N.E.2d 388, the trial court ordered the deposition of the petitioner’s treating psychiatrist, and the petitioner took an interlocutory appeal. The appellate court found that it had jurisdiction to hear the appeal under Rule 307(aXl) because the order effectively enjoined the petitioner from asserting her therapist-patient privilege. Lombaer, 200 Ill. App. 3d at 721.

The court in Kmoch rejected the reasoning of Lombaer based on People ex rel. Scott v. Silverstein (1981), 87 Ill. 2d 167, 429 N.E.2d 483. In Silverstein a defendant subpoenaed a reporter and the trial court denied the reporter’s motion to quash. The reporter appealed and our supreme court found that it did not have jurisdiction under Supreme Court Rule 301 (73 Ill. 2d R. 301) to hear the appeal. The court noted that the parties did not argue that Rule 307 applied. (Scott, 87 Ill. 2d at 171.) The court stated that discovery orders are not made appealable under Rule 307, explaining that “¡preliminary orders in a pending case are not appealable because they are reviewable on appeal from the final order.” (Scott, 87 Ill. 2d at 171.) The court did not attempt to define when an order with injunctive effect which also affected discovery would constitute a nonappealable discovery order and when it would constitute an injunction appealable under Rule 307.

Subsequently, in In re a Minor, the court explained that Rule 307 does not permit appeals from “[ojrders of the circuit court which can be properly characterized as ‘ministerial,’ or ‘administrative’ — because they regulate only the procedural details of litigation before the court.” (In re a Minor, 127 Ill. 2d at 262.) The court held that when such ministerial orders have injunctive effect, they “may be considered noninjunctive because they *** do not affect the relationship of the parties in their everyday activity apart from the litigation, and are therefore distinguishable from traditional forms of injunctive relief.” In re a Minor, 127 Ill. 2d at 262.

Thus, orders are ministerial discovery orders, and not appealable, when they have no effect apart from the litigation, and when they are effectively reviewable on appeal from the final judgment. If an order has injunctive effect on the parties apart from its effect on the litigation, and that effect cannot be undone if the order is erroneous, the order is not merely a preliminary discovery order, but rather an appealable injunction.

The plaintiff’s privilege in this case cannot be effectively restored on review from the final judgment after trial. If this court lacks jurisdiction to consider her privilege now, defense counsel will conduct the ex parte interview with Dr. Mehlinger, in which Dr. Mehlinger may disclose information she gained from plaintiff in confidence because of the therapist-patient relationship. Once the doctor has made such disclosure permitted by the trial court’s order, nothing this court can do can ever restore the complete confidentiality so essential to an effective treatment relationship between the therapist and her patient. See Laurent v. Brelji (1979), 74 Ill. App. 3d 214, 217, 392 N.E.2d 929.

Neither can plaintiff here appeal from the order in the manner suggested in Silverstein for obtaining review of discovery orders. The court there reminded the parties that “an order cast in terms of a contempt proceeding imposing sanctions is a final and appealable order and has been held to be an appropriate method for testing pretrial discovery orders.” (Silverstein, 87 Ill. 2d at 171-72.) While the order here prevents plaintiff from asserting her therapist-patient privilege, there are no acts plaintiff can take in defiance of the order, no matter how contemptuous of the court, to obtain review of the court’s order in a contempt proceeding.

Therefore, the grounds asserted in Silverstein for denying appeal from preliminary discovery orders do not apply to this case. The order is not merely an administrative order which, if it is in error, this court can effectively correct on review from the final judgment; rather, once the therapist discloses the substance of her confidential conversations with her patient to any person outside of the therapeutic relationship, this court is powerless to undisclose the information. The order effectively enjoins plaintiff from asserting her therapist-patient privilege, and in the order the court denied plaintiff’s request for an order which would have effectively enjoined defendant from conducting ex parte discussions with plaintiff’s psychiatrist. Following Lombaer, we find that the injunctive effect renders this order appeal-able under Rule 307(a)(1). Insofar as Kmoch is inconsistent with Lombaer, we decline to follow Kmoch.

The reasoning we apply here is generally applicable to orders reviewable under section 10(b) of the Act. Any order permitting disclosure of a patient’s confidences would in effect grant an injunction preventing the patient from asserting the privilege, and it would effectively deny an injunction preventing the therapist from disclosing the confidences. The order would not be effectively reviewable from a final judgment because the court cannot undisclose the confidences once disclosed. Hence, any order made reviewable under section 10(b) of the Act would be reviewable under Rule 307, so the statute does not conflict with the rules. “Where *** a legislative enactment expresses a public policy determination, having as its basis something other than the promotion of efficient judicial administration, our court has sought to reconcile conflicts between rules of the court and the statute.” (People v. Walker (1988), 119 Ill. 2d 465, 475, 519 N.E.2d 890.) We hold that when the Act and the rules are properly understood, the Act does not conflict with the rules, so the Act is constitutional. (See In re Marriage of Lentz (1980), 79 Ill. 2d 400, 403 N.E.2d 1036.) Accordingly, we have jurisdiction to review the trial court’s order.

Plaintiff contends that the order permitting the private interview must be reversed under the reasoning of Petrillo v. Syntex Laboratories, Inc. (1986), 148 Ill. App. 3d 581, 499 N.E.2d 952. The plaintiff in that case sued a drug manufacturer, and defendant sought ex parte interviews with the physicians who treated plaintiff for the condition allegedly caused by defendant’s drug. The court found:

“[Pjublic policy strongly favors the confidentiality of the physician-patient relationship and thereby prohibits, because of the threat posed to the sanctity of that relationship, extra-judicial, ex parte discussion of a patient’s medical confidences.” (Petrillo, 148 Ill. App. 3d at 588.)

Although plaintiff there waived his physician-patient privilege by filing a suit in which his mental or physical condition was at issue, the waiver was

“obviously and necessarily limited *** only to the release of his medical information (relative to the lawsuit) pursuant to the methods of discovery authorized by Supreme Court Rule 201 (a) (87 Ill. 2d R. 201(a)).” (Emphasis in original.) (Petrillo, 148 Ill. App. 3d at 591.)

The court held that “discussions between defense counsel and a plaintiff’s treating physician should be pursuant to the rules of discovery only.” Petrillo, 148 Ill. 3d at 610.

In this case, unlike Petrillo, a statute specifically governs disclosure of plaintiff’s mental condition, including information Dr. Mehlinger has received about that condition from any source. Defendant argues that it is permitted to discuss plaintiff’s condition with Dr. Mehlinger, without plaintiff’s consent or presence, under sections 9 and 10 of the Act. Section 9 of the Act permits a therapist to disclose otherwise privileged communications to:

“(3) an attorney or advocate consulted by a therapist or agency which provides services concerning the therapist’s or agency’s legal rights or duties in relation to the recipient and the services being provided.” Ill. Rev. Stat. 1991, ch. 91½, par. 809.

Defendant is no longer providing services to plaintiff, so the requested consultation cannot “concer[n] *** services being provided.” This section provides no support for defendant’s claim.

Disclosure for purposes of litigation, as opposed to disclosure for the continuing provision of services, is governed by section 10, which states:

“(a) Except as provided herein, in any civil *** proceeding or in any proceeding preliminary thereto, a recipient *** has the privilege *** to prevent the disclosure of the recipient’s record or communications.
(1) Records and communications may be disclosed in a civil *** proceeding in which the recipient introduces his mental condition or any aspect of his services received for such condition as an element of his claim ***, if and only to-the extent the court in which the proceedings have been brought *** finds, after in camera examination of testimony or other evidence, that it is *** admissible [and] that other satisfactory evidence is demonstrably unsatisfactory as evidence of the facts sought to be established by such evidence ***.
* * *
(3) In the event of *** an action filed by a recipient *** for injury caused in the course of providing services to such recipient, the therapist *** whose actions are alleged to have been the cause of injury may disclose pertinent records and communications to *** attorneys engaged to *** provide representation in connection with such matter ***, and may testify as to such records or communication in any *** discovery proceeding for the purpose of preparing and presenting a defense against such claim or action.
* * *
(b) Before a disclosure is made under subsection (a), any party to the proceeding or any other interested person may request an in camera review of the record or communications to be disclosed.” Ill. Rev. Stat. 1991, ch. 91½, par. 810.

This section, as it pertains to this case, restates Petrillo: It establishes defendant’s undisputed right to discovery of information from Dr. Mehlinger through appropriate court-supervised discovery channels. Plaintiff waived her right to bar defendant from communicating with Dr. Mehlinger when she filed suit alleging negligence in Dr. Mehlinger’s care for her. (Pritchard v. Swedish-American Hospital (1989), 191 Ill. App. 3d 388, 547 N.E.2d 1279.) This waiver gives Rush the right to formal discovery from Dr. Mehlinger. (See Pritchard, 191 Ill. App. 3d 388; Petrillo, 148 Ill. App. 3d 581.) The statute provides no support for a special right to a private interview with Dr. Mehlinger.

Insofar as defendant relies upon plaintiff’s introduction of her mental condition into the case within the meaning of subparagraph (a)(1), the statute provides that the court must examine in camera all matters that Dr. Mehlinger will disclose prior to their disclosure in the civil proceeding. The subparagraph allows no separate right to a private disclosure, and the section allows no disclosures at all apart from the express exceptions listed in subparagraph (a). Subparagraph (a)(1) pertains to disclosures to be made by the therapist as a witness at trial; it does not directly pertain to defendant’s request.

Subparagraph (a)(3) pertains to disclosures to be made by a therapist when the patient has filed a suit alleging that the therapist’s acts have caused the patient harm. The statute provides that the therapist “may disclose pertinent records and communications to *** attorneys engaged to *** provide representation in connection with such matter.” (Ill. Rev. Stat. 1991, ch. 91½, par. 810(a)(3).) This permitted disclosure remains subject to subparagraph (b), which provides that prior to disclosure under subparagraph (a), plaintiff has the right to request in camera review of the record or communications to be disclosed.

By making all disclosures permitted in subparagraph (a) subject to the right to request in camera review, the legislature established a further protection for the privacy of the patient’s conversations with her therapist. The treating therapist possibly has information about plaintiff patient which is unrelated to the patient’s case but potentially damaging to the patient. The statute establishes plaintiff patient’s right to protection from unlimited disclosure from the therapist to the attorney representing the party opposing the patient. This protection is meaningless if the trial court may refuse to review the communications to be disclosed, or protect the patient in any manner, despite the possibility of the disclosure of matters harmful to the patient and unrelated to the case she has filed. Unless the court creates other safeguards to prevent disclosure to defendant’s attorney of irrelevant matters potentially damaging to the patient, the court should not refuse a request for in camera review.

Dr. Mehlinger was plaintiff’s therapist within the meaning of the Act. (Ill. Rev. Stat. 1991, ch. 91½, par. 802(9).) The Act establishes plaintiff’s right to prevent disclosure from Dr. Mehlinger to defendant’s attorney of information unrelated to the case but potentially damaging to plaintiff. That right cannot be protected if defendant’s attorney is permitted private discussions with Dr. Mehlinger. The trial court could deny plaintiff’s request for in camera review of disclosures made by Dr. Mehlinger to defense counsel, while achieving the purposes of the statute, if it found some other means of protecting plaintiff’s right to limit disclosure of potentially damaging matters. Thus, the trial court could permit plaintiff, or her attorney, to be present at all discussions between defense counsel and Dr. Mehlinger, and order Dr. Mehlinger not to respond to any questions to which plaintiff objects until the court can decide whether the answer would compromise her right to prevent disclosure of irrelevant, potentially damaging matters. If the court chooses to provide no other protection, under the statute it must review all disclosures Dr. Mehlinger makes in camera, by requiring defense counsel to communicate with Dr. Mehlinger only through the court.

Defendant argues that it would be “helpless to act” in this case if it were “prohibited from communicating” with Dr. Mehlinger. Plaintiff does not seek to prohibit such communication; she asks only for a restriction of such communication to formal discovery. Defendant in this case, as in Petrillo, does not point to any information it could obtain from private discussions with Dr. Mehlinger which it could not obtain through formal discovery. Defendant contends that an ex parte conversation will be “conducive to spontaneity and candor in a way depositions and formal discovery can never be.” The Act is specifically designed to prevent too much spontaneity and candor in any therapist’s discussions regarding a patient. Also, as the court stated in Petrillo:

“[N]ot one court has found it necessary to permit ex parte conferences in order that the truth may be ascertained in a civil dispute. A rule barring ex parte conferences, therefore, does not stand in the way of discovering the truth; it merely regulates the discovery process so as to protect the confidential relationship existing between a patient and his treating physician. No ‘truth’ is kept out of court, for the treating physician, as we stated above, is free to testify as to his opinions and conclusions regarding the mental or physical condition placed at issue.” Petrillo, 148 Ill. App. 3d at 606.

Defendant maintains that it needs the ex parte conferences to test its theories without divulging work product, and the conferences will be conducive to early settlement because they will aid in evaluating the case. The Petrillo court considered and rejected both of these arguments. Merely hearing the questions and answers at a deposition does not impermissibly allow plaintiffs to discover defense counsel’s work product. (Petrillo, 148 Ill. App. 3d at 598.) It is not the ex parte conference itself, but rather the information learned in the conference, which facilitates early settlement, and defendant can obtain that information through formal discovery. Petrillo, 148 Ill. App. 3d at 601.

Defendant argues that Petrillo does not apply because plaintiff seeks to hold defendant liable, under a theory of respondeat superior, for Dr. Mehlinger’s acts. Defendant asks this court to identify Dr. Mehlinger as the real client of defendant’s attorney, so that denying it the right to private discussions with Dr. Mehlinger, under Petrillo and the Act, would be tantamount to denying Dr. Mehlinger the right to private discussions with her own attorney.

A hospital, like any corporation, can act only through its employees. The law identifies a corporation with various employees for various purposes. The acts of all employees performed in the course of employment are considered acts of the corporation when the corporation is sued in tort. When an attorney discusses potential litigation with employees of a corporation, only discussions between attorneys and members of the corporation’s control group are protected by the attorney-client privilege under Illinois law. (Consolidation Coal Co. v. Bucyrus-Erie Co. (1982), 89 Ill. 2d 103, 432 N.E.2d 250.) Federal law extends the protection of the attorney-client privilege considerably further:

“[A]n employee of a corporation, though not a member of its control group, is sufficiently identified with the corporation so that his communication to the corporation’s attorney is privileged where the employee makes the communication at the direction of his superiors in the corporation and where the subject matter upon which the attorney’s advice is sought by the corporation and dealt with in the communication is the performance by the employee of the duties of his employment.” Harper & Row Publishers, Inc. v. Decker (7th Cir. 1970), 423 F. 2d 487, 491-92, aff’d Decker v. Harper & Row Publishers, Inc. (1971), 400 U.S. 348, 27 L. Ed. 2d 433, 91 S. Ct. 479, quoted in Consolidation Coal, 89 Ill. 2d at 115.

Our supreme court expressly rejected this test. (Consolidation Coal, 89 Ill. 2d at 117-18.) Illinois law identifies an employee with the corporation, for purposes of the attorney-client privilege,

“if the employee *** is in a position to control or even to take a substantial part in a decision about any action which the corporation may take upon the advice of the attorney, or if he is an authorized member of a body or group which has that authority.” (City of Philadelphia v. Westinghouse Electric Corp. (E.D. Pa. 1962), 210 F. Supp. 483, 485, quoted in Consolidation Coal, 89 Ill. 2d at 114.)

Our supreme court clarified that “an employee whose advisory role to top management in a particular area is such that a decision would not normally be made without his advice or opinion *** is properly within the control group.” Consolidation Coal, 89 Ill. 2d at 120.

Dr. Mehlinger has never been a member of defendant’s control group. Under Illinois law, she is not sufficiently identified with defendant for her conversations with defendant’s attorney to be protected by attorney-client privilege. Similarly, we cannot identify her as the real client of defendant’s attorney for this case, so that disallowing ex parte communications between defendant’s attorney and Dr. Mehlinger does not deprive Dr. Mehlinger, or defendant, of the right to private consultation with counsel. We express no opinion as to the proper result if the rights established by the Act directly conflicted with the right to private consultations with one’s own attorney.

Defendant argues that its right to private discussions with Dr. Mehlinger is established by Ritter v. Rush-Presbyterian-St. Luke’s Medical Center (1988), 177 Ill. App. 3d 313, 317-18, 532 N.E.2d 327, where the court stated:

“When a patient seeks to hold a hospital vicariously liable for the negligence or malpractice of an employee-physician, exclusion of the hospital from the physician-patient privilege would, we believe, and as Rush argues, effectively prevent the hospital from defending itself by barring communication with the physician for whose conduct the hospital is allegedly liable.”

The defendant in that case privately interviewed five of plaintiff’s treating physicians before trial, and plaintiff moved to exclude their testimony due to the violation of the physician-patient privilege. The trial court granted the motion and the appellate court affirmed, finding exclusion of the testimony to be an appropriate sanction for the violation. In the quoted statement the court distinguished the facts of Ritter from hypothetical facts which would have affected the court’s reasoning; since the statement relates to facts not present in Ritter, it is strictly obiter dicta.

In Deberry v. Sherman Hospital Association (N.D. Ill. July 29, 1991), No. 90 — C—1173, the Federal district court without discussion relied upon the dicta in Ritter as an accurate statement of Illinois law, finding that attorneys for defendant hospital had a right to private conferences with the employees whose alleged acts were the basis of the malpractice suit against the hospital. The Federal memorandum opinion and the dicta in Ritter do not have the binding force of Petrillo or the Act, which did not pertain to either Ritter or Deberry.

We recognize that defense counsel’s job is rendered more difficult by requiring counsel to restrict contact with Dr. Mehlinger to formal discovery. Plaintiff waived her physician-patient privilege when she filed suit against defendant, but under Petrillo and the Act, the waiver is only partial, permitting defendant only formal discovery from Dr. Mehlinger, and plaintiff has the right to insist upon court supervision of all communications pertaining to this case between defendant and Dr. Mehlinger. Since defendant has failed to show any meaningful distinction between this case and Petrillo, and because the Act by its own terms restricts discovery even where the therapist’s actions allegedly caused the patient’s injuries, defendant is not permitted to hold private discussions with Dr. Mehlinger. The trial court’s order must be reversed and the case remanded for court-supervised formal discovery.

Reversed and remanded.

HARTMAN, P.J., and SCARIANO, J., concur.